AMSF - Earnings call transcript Q4 2021

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Operator

Good day, and welcome to AMERISAFE 2021 Fourth Quarter and Full Year Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Kathryn Shirley, Chief Administrative Officer. Please go ahead.

Kathryn Shirley

Good morning. XXXX Investor AMERISAFE the to Fourth Call. Quarter Welcome

assumptions Exchange including of reports subject prove as statements. these discussed and forward-looking the risks, it If uncertainties our risks www.amerisafe.com. Form underlying assumptions and turn other on is the you be to and over Instructions] comments have and on AMERISAFE's may of this section with current do update release, CEO. or Securities today's Actual received We to factors, results the not release making in call duty Frost, made will XX-K, filings we not Factors during at If expectations available factors and are that and materially Form earnings or call now our this forward-looking call, other from any result the implied These statements. statements. be will President statements any earnings During and based Risk [Operator are and to the incorrect the in differ the Commission. various to uncertainties. results in expressed Janelle I the undertake XX-Q website and

Janelle Frost

change Thank discuss morning, I'm you, the comments everyone. Kathryn, my usual losses going and of to order first. good and incurred

year. listeners, workers quarter, had our insured and a to accident single ratios we longtime a available, year of result to full words increased when involving nature lumpy fourth the for injuries I appreciate the to a Due current the XX.X% information our you as For my the a catastrophic will of we have accident. injuries loss In say this business. is severe claim

recap our layer. To claim catastrophe As currently our this impacts reserved, reinsurance reinsurance.

first of the for X occurrence. million responsible are loss each We

million reinsurers maximum per $XX the layer. most XX provision, by covered injured worker anyone million. to for excess meaning million within The catastrophe have X we will XX the the a of million the in does is up coverage cover $XX the million. Then have working next coverage in layer, XX for then next catastrophe million are We live reinsurers

number this XX us, injuries claimant While for and what been of the claims, expertly those losses Each doing respect additional is provide high we And claims at million severe so is per over the claim. have their in case quarter of we XX information. severe Out XX counts for context the aspect claim injured catastrophic disclosed is with protect XX multi years. will dealing injury compared do families unusual had as dollars. with into to medical severe share not. averaged sustained severe specifics of the of claims severe years. XXXX, and in excess in We we claim year claims insight This incurred hazard privacy In the end for year our We without this XXXX. regarding workers this last and we niche. specific nor accident of to not giving the five do we a

the catastrophic this [than the they ratio core for also regarding higher change loss are accident assumptions year and XXXX year. our Frequency have accident year to XXXX. is our not Severity claim transfer The appetite. of pre-pandemic our levels, than profile XX.X% risk best other loss the within returned accident expectations although catastrophic was claim. the] However, no includes any policy in estimate in

for of prior years semi of for was accident XXXX loss the accident million of favorable from XXXX years, loss year favorable development comprise recognized accident prior XX.X% year through XX.X% and ratio full year ratio XXXX. The for a the we’ve year As $XX.X XX.X%. prior

for and the year. X.X% headwind Loss be maintaining the lines averaging X.X% quarter in for full year. continue the discipline. X.X% and remain X% for down was decrease a while full a respond average continue Competition underwriting the premium Debt premiums. strong of and to to decrease we costs Turning quarter to a

XX.X% of able quarter renewal the retention business. and we for with were the addition new policy to our slightly grow such, As was in cost XXXX account

New to agent economy a XXXX is expected aided fewer and spikes, COVID be variant stronger in relations. by business growth improving with

Our reflected the our and XXX first To fourth quarter for XXX quarter pricing the third XXX. XXX ELCM second the recap was ELCM aggregate a the each in as the quarter of a our year, in and quarter, by quarter in written X.X quarters. full and the was the premium decreased million increased quarter. adjustments negative alone written was being premium Audit from in rebounding Audit the positive third quarter and premiums the slightly gross million related premiums for year. gross in X.X premium in

Neal Looking was the due reported fourth financials. to approximately written gross that count. XX% fourth and the of down quarter In in ahead growth to X% for full XX.X% reflected total, XX% premiums the the over employee roughly X.X% call to payrolls quarter growth turn were I'll discuss to the in and now wage of year.

Neal Fuller

morning, Good everyone. Janelle. you, Thank

in the per XXXX million reported of the income quarter or company of fourth by quarter. fourth $X.XX share million quarter the $.X.XX with $X.X outlined fourth year's per catastrophic claim the result AMERISAFE Janelle This quarter compared the influenced share, last heavily diluted diluted per by For or net as which share. $X.XX experienced $XX.X impacted in was

in when last per down in XX.X% the the compared X.X% to Net quarter or earned XXXX. million the with were year fourth $XX.X $XX.X full $XX.X quarter or per share compared million, of XXXX million million $XX.X was net to $XX.X net year by Operating year's with full AMERISAFE fourth share per Revenues $X.XX compared of decreased income XXXX the or premiums XXXX. income produced quarter. $X.XX For $X.XX for share. to million

in million. year, lower These totaling continued also by the For premiums costs premium and were compensation lost in XXXX X.X%, XXXX. full $XXX the some net were trends by driven workers earned decline

XXXX the interest $X.X in rate income million quarter investment at end, were for fourth the XXXX. realized full AA including bonds compared quarter saw gains U.S. no and on year position Turning of portfolio unrealized and term our environment. due XX% Treasuries in in in fourth in $XX.X at of on were the of the the losses taxable to in at and duration of or million year down in The investment in Net continuation the end maturity XX.X% short with portfolio year was gain $X.X carried XX% no lower We securities and year the term rating securities of to our million There not held quarter, municipal in is amortized during a portfolio unrealized current XX% investment full lower quality, tax XX% quarter significant at long our for agencies, end overall bonds, X% pre-tax which corporate $XX.X municipals, XX% gains costs. equivalent credit securities, and year million the was X.XX% net comprised the the yields Approximately the are or were for the to during any X% yield impact equity bond down is year yields X.XX%. of term compared these investments. was of of is were full with equity to XXXX. in and securities $X.X These are cash with income or portfolio million XXXX. net There on the losses investments. of on the of end. million, X% carrying the quarter million portfolio significant value in The an as in our X.XX in reflected book short held gains and with average minus investment year an bonds, composed high $XX.X full year XXX.X portfolio to

category, expenses, now in The and bad based to fourth from and million in in quarter other XXXX Moving million $X.X with quarter in of XXXX. quarter the increases of other of increase included and was the salaries in expenses costs. due operating total to By million NCCI and million primarily compared debt increases of $X.X fourth in $X $XX.X the million our underwriting benefits, loss expenses expenses $XX.X operating underwriting were pools commissions, the assessments. quarter,

XX.X% with for was compared of fourth quarter quarter the XX.X% for ratio the expense Our XXXX.

for primarily result XX.X% full compared year the by just Expense operating a XXXX premiums. XX.X% increased of full lower earned XXXX, was to $XXX,XXX ratio the X.X%. For in as or expenses year

Our on deferred allowance XXXX as equity XX.X% XXXX XXXX. was result capital And in for with with tax XXXX. the average year XXXX Return tax full full for to ROE a year management. year for was compared for a tax XX% assets. for was XX.X% valuation compared for of state to on the full XX.X% of XXXX rate the compared XX.X% now the for XX.X% elimination Operating

a $X share, special regular the fourth quarterly cash per dividend share. quarter, well paid company of as its of dividend as the $X.XX per During

on per million March XXXX. paid at $XX.XX of December was the regular year. increased XXXX. dividend company Cash share compared board in quarter at the to X.X% the the XX, during to share March parent of And $X.XX share. a shareholders other XXXX XXXX per we shareholders million $X.XX $XXX value slightly XX, expects out last down investments to end finally, dividend This XX, has few payable cash of as was of at declaring directors a items, the book quarterly just by $XX.XX share And to with up during and liquid year's per dividends company year per the and dividend $XX holding record company

our December the XX, form finally, and open we with XXXX now the the Friday was market to SEC like be surplus at Operator? session. Our we'd after XX-K concludes and call statutory for close. question will filing answer $XXX on and my remarks That million up

Operator

first instructions] go [Operator our Carletti question with ahead and Matt Please we'll take from And go JMP. ahead.

Matt Carletti

morning. Good Thanks.

Janelle Frost

morning Matt. Good

Matt Carletti

payroll is XX% Janelle, exposure I amount Let's XX% think getting might count. are Or In XX% the same more hours? in that I up that that seeing that sense they're kind that right the got comment more the is true for sense about of of made wage same inflation hours the QX, working that with wage if in paid X% growth the that more worked? employees growth see in being of you start employee about

Janelle Frost

It great hours wage, inclusive worked. or it Yes, question. wages more be of could really be It both. be would higher could

Matt Carletti

kind there's way through where sense to Do think you're exposure kind any your across that? broadly? inflation kind the the come there you even if a your there there going book from seeing any just feel of exact a of to you're to more to markets a trying specific Is it? wage true more, a Is I'm areas way get Is seeing in what there get and concentration? Or of of way yet that? you any for with just heading? of for Is of way math compare

Janelle Frost

experiencing think everyone's I increase, you wage No, believe wage pressures, I if economic certainly. look data, at

we that don't I underwrite. So business think be or in different our book any the would that industries of

Matt Carletti

then And was have apologize addressed perfect. this the this, not the first drop a sure I'm probably and it off hear I you advance on for minutes Okay, could you thing, that I three end. come in my of question, might call back,

So just if read the this, you've say Matt already go answered transcript.

Janelle Frost

rude. That's

Matt Carletti

the a of But that one I'm pumping hoping deeper little for to nature the a called kind just in of little out quarter. the the get the of accident on digging year was incident

the just just how people what [indiscernible], potentially. how kind Just -- assumption how involved of intense live details to long seemed was get that that of if led wondering knowing very And the number. the pretty more these time of you just of kind or incident and or young kind what like person of of a expect of parties you to very it kind to medical of to kind kind many trying of that just of assumption kind big are the kind nature

Janelle Frost

in the privacy claim several Yes, great things going questions, Matt. to people's happened be of accident. medical There on Obviously, a have what lot were very I on. early with this there's and respectful Certainly, we're of workers. and

claim terms in thinking within that and changed. the of book for we've it correct of severity severity we to the is conclusions believe was stands has are because the is we one of claim. isolated XXXX severity wouldn't The of You anyone The expectations. catastrophic our our the claim draw reason it want

highlighted we'd So had “A” this in claim of like claim we haven't our particular XX a history. reasons this years the one really

feel number that reported because book. high of a single out, report claims handle like say I nature So day but that we claims million is of of we every to as in and dollars do the hazard continually our of what ominous. have we the time secondly, note. we at it's in don't year. nature severe same want and time, sounds way underwrite, the day perspective And But excess over to giving the of severe

far our we likely like And on just is and claim these equipped at most the as claim our this this reserving we will do care we I take handling of claims. As type the of have severe this information based handle time. expertly philosophy claims, workers staff is of the like our injured for feel incident. outcome

our can it's I hasn't business. year XX history hazardous high is frequency we know know But it a we say best Just happened. that happened severity low in we it way And the business. write

Matt Carletti

for construction And can give any Understood, – this this exposures, accident person like or this or driver site accident that's multiple was various feel just like you the to helpful. more I a guess like motor your get vehicle is a trying of vehicle know like color was are I loss a accidents industrial around across big an motor

Janelle Frost

any indication. or injuries you burns, severe gives if that More

Matt Carletti

plenty. and questions. others I'll That's it there let you. Thank Perfect. ask Great. that's leave

Janelle Frost

Thank you, Matt.

Operator

And our Mark next with go [Operator Hughes on from move question Instructions] Truist. and ahead. to ahead Please we'll go

Mark Hughes

Yes, morning. thank you. Good

Janelle Frost

Good Mark. morning

Mark Hughes

Good just workers Yes. multiple it over so And sounds clarify, morning. like $XX to threshold. injured million that

So the event XX. circumstance, an or to excess way injured got per in workers now get it? designed of unusual about you've million multiple program that is you've worker. XX But that right Is everybody think per to up the to meaningfully got

Janelle Frost

Again, prepared to protect of think this am of be workers I information. that respectful these at I'm level your information share I but be to trying, question, sure trying families. we their point, And of and the that we're I don't to injured medical want

Mark Hughes

the of - lead right your one to at Theoretically, specifics million, $XX I be just include of case XX would million and interested I'm would least is the presumably just reinsurance over thinking am loss, multiple magnitude in this over though, obviously, might in nature a to the scenario trying not it that case people understand these trying the threshold. Given agreement. to person any lot but the I'm understand of I'm the

Janelle Frost

out, laying you're thinking you're it about that scenarios correctly, these All mathematically. I think

million Within of the reinsurer AMERISAFE. layer any is life to above $XX the net that anything $XX be catastrophe for one our reinsurance million would responsible

about So correctly. I thinking think you're that mathematically,

Mark Hughes

coverage? is Yes. there even unusual? evolved pretty, your have of injuries there of these your the anything rethinking that premiums, And about Is this kind the mean this kinds this profile given Is maybe the you is something is expenses, so then unique? there, pretty of treatment does clearly about that survivability I is

Janelle Frost

does, Yes. The haven’t obviously, it Right. nature those about unusual things. think all of

out. me sort Let of lay it

we As Matt, is at looking that our our I issue? doing frequency causes we reinsurance was been an policyholder what when to against question focus. and a us business coverage was nothing me we about -- insurance years Thinking that the saying of about as is protecting longtime that I think from And think purchase severity. hazard reinsurance XX to our claims of first what look our cover, more do. This aspect. for and high book foremost, severe we've It's at

easy this feel me right feel that now comfortable unusual say circumstance. I it's to So regard. in Again, with for I very,

how and how far treatment and reserving as about we we think life expectancies. As view

XX start I the to claim at year this can this happened in think we're certainly we early has this' of this be and judgments in making those our what time that as way but first too ultimately will sorts same the learn claim time from to history.

little these think So severe time. these and claims we're here, I how a over early develop claim

of our how about I would of early on particular be long-term this bit think think to we're little a too a questioning business. book aspect we

Neal Fuller

mega the to And Fuller. industry. study Mark, XX these they've go Also just NCCI, there each typically on year. over of few the are handful a for than if which claims Hi million claims is done Neal a is this we

is so from very And occurrence this a rare standpoint. that

Mark Hughes

think about And on on Yes. the reinsurance program. you early then, that'll you cost how renewal, your -- your of impact timing that? do think reinsurance how your do Any thoughts

Janelle Frost

Yes.

every So year. layers if renew catastrophe our recall, you Mark

our layer end by and small of the renewing reinsurance that therefore so the year, was reinsurance well, of that's a were claim as in so is in we aware already mind premium. of our this So catastrophe portion at keep were XX/XX, factored the known

Mark Hughes

Okay.

one P&L? So, material in with the with

Neal Fuller

-- Well, Yes.

yes. you any, argue think could I that,

Mark Hughes

claims. Okay. in -- or claim is severe the And XX fourth then, actually you XX the Was XXXX quarter? the this are in this

Janelle Frost

XXXX.

Mark Hughes

--. What was the

Janelle Frost

was I'm Yes. quarter that. I it fourth event? if about sorry Yes, a wasn’t clear XXXX

Mark Hughes

And XX the then, was quarters? was total if it as yearend, of through what three

Janelle Frost

Nine.

Mark Hughes

cost on of as state commented all Okay, been for how you've seeing right. The some observations loss saw shaping XXXX? of past the kind in these come numbers about that's in. up Any NCCI you what

Janelle Frost

Yes, mid-single declines declines. digit still

Mark Hughes

Okay.

Janelle Frost

in par of with saw on we what Sort I really guess XXXX. --

Mark Hughes

And but any obviously influence for mean didn’t Yes. your then this dividends, that won't you've dollar appetite the you essentially of see have. I does early special management, days is earnings this your capital

do of special kind impact about the where what think adequacy rolls and would sit on capital You again? claims, from you a time dividend we around the when potential

Neal Fuller

a That's Mark. good Yes. question,

We the company investments a holding $XXX was yearend million. and at have cash liquid

up there dividend per two We that's right you almost together. additional, million expect those $XX share the $XX add if

expecting significant this will management we're impact at in have our this not strategy. any that So point-in-time capital

Our be strong. balance sheet in to continues statutory surplus the very

strong. continues be ratio BCAR Our very to

$XXX million. actual the claim Our in current surplus includes at estimates. terms Obviously yearend this of that step was

to capital this strategy changes management at point-in-time. our no So

Mark Hughes

about Very of or you economy COVID's by kind good. And expect business, of commentary happens new more hope. in new we then, little least the aided to be I you at 'XX, business positive what think

Janelle Frost

right. for hoping all We're Yes. that, everyone's

Mark Hughes

What's mentioned top and that, now. with XXXX competitive in competitive you distribution since factors share relationships. the if of your the you feeling maybe your view I'll plus Yes. view And Maybe you also competition then, the line your ask could which in cited of environment question. those about weave I'll dynamic

Janelle Frost

competitive environment. a Certainly Yes. it's

my post and of that quarter very the even really competitor hasn’t a swing happens in competition in we move or see intense changed significant while. preference. I pockets. in we a that As of we've time hazard will it think seen that quarter sitting be trend, sort the still this classes were start it be call don’t sort its Unfortunately out it's on which that, don’t at a first XX. pull third terms in we of happy on here didn’t small way. XXXX to in to I again large more of see intense February I obviously saw of so mentioned a point our a in getting the less level see

XXXX. And colour prior so, gives Certainly that to think be little to grow stronger that policy of finally in to able not I bit that. helps payroll but there increases inflation where want focus continued we a that economy our it's a goal environment. anything more XXXX our the as wage and around do for we competitive count, increases is us. into we're sure is Obviously, brought workers would premium I working less out new -- so that in And

that's the sign So something positive at positive XXXX. look for for to a us

as call clients. and As with proposition that an network, distribution mentioned agent's their time we're well. as value and this our with agents perspective how of on spending they quarter I spending sell working the I've AMERISAFE reiterating to third from is what far the the believe time yes Well, we're

retention then really our service care how Our that. to I claim injured their safety we speaks we policies of and how rate our service their is services, think take workers,

in with I those agents we our to the XXXX. best can all clients drive trying in find their things home So are really solutions for think that

Mark Hughes

bit. sharing to claim, mind, to the there don’t a have Is that reversals ask you the there, were or more. Anything from impacts you like the large think on a commission profit The worked I P&L. premiums commissions some expense or up claim? ceding that earned P&L related just of [associated] any little any written either If of couple the I'll ratio

Neal Fuller

ceded no quarter. the but small rating from $XXX,XXX was to the material premiums of that Well, nothing CAPS the really a increase than on in not standpoint other premiums about premium level overall in there reinstatement

Mark Hughes

anything? own Yes, – inflation want okay. payroll in when on within you your then, about And XXXX if inflation, expenses Neal, think anything add to we

Neal Fuller

Yes. kind is line decline the of holding job on good of obviously have It The difficulty a in premium. the expenses.

little least, a down in expect the But to current loss trend based to from renewal do levels up potentially we At our earned expected on pressure continuing premium. business declines go the similar cost basically digits. look we So last expense upon net bit and year book little a of expect at mid-single bit ratio continued ratio. of to expense

Mark Hughes

appreciate I me, indulging it. for you Thank Okay.

Janelle Frost

We appreciate questions, Mark. the

Neal Fuller

Thanks, Mark.

Operator

our additional like call and or that Frost any that, with closing And Janelle to the over does question I for back remarks. answer to now would hand questions. conclude

Janelle Frost

into was risk at ability our When back XXXX, I pleased I opportunity. turn am with to

an continue underwriting a environment. We operate with profit competitive to in

performance issued management, release to the Billy's we And us administration a our balance expertise holders provided also shareholders investment through to great and board. Again, One addition make strong AMERISAFE safety AMERISAFE Congratulations have workers job policy We our for to announcing claim their you a a press employees served to expert our the thank joining employees, well to a sheet we're the in value and him and and done. and we asset with final today. join. excited employment we and of Billy our development the have importantly note, services. expertise of on business him board. Greer

Operator

that your participation. does And today's you that conclude with for Thank call.

now disconnect. may You

AMERISAFE (AMSF) 23 Feb 222021 Q4 Earnings call transcript