AMSF - Earnings call transcript Q2 2022

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Operator

Good day and welcome to the AMERISAFE 2022 Second Quarter Earnings Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Vincent Gagliano, Chief Risk Officer. Please go ahead, sir.

Vincent Gagliano

morning. Good AMERISAFE investor the second XXXX to call. quarter Welcome

call the it www.amerisafe.com. how is you of call have earnings on to release, received not today’s replay are A at If access available the Details in earnings our being recorded. be replay will available. is the on This release. website

may are the statements results differ these this uncertainties. current expectations on our the and Factors this do we be will duty filings based results Commission. and will other the call call, from factors, statements discussed as over any in uncertainties today’s prove risks CEO. not to making XX-K, earnings assumptions materially are and Form be with turn subject that Exchange forward-looking expressed any the During Actual statement. release, other during and in the various incorrect, section Frost, the or Risk risks, results President forward-looking call underlying in statements. These implied reports AMERISAFE’s of We XX-Qs Janelle to to and undertake made factors including of the or assumptions and Form and and now update Securities in to I comments if

Janelle Frost

good you, news. continues Thank and morning, to Vincent, Inflation everyone. dominate financial

it the AMERISAFE. and be discussing ways I helpful workers’ thought quarter’s industry compensation inflation would Before results, to impacts discuss three

audit labor shortage their continues which reported insurers pressures growth is on as payroll to insurers brought inflationary based by payroll. positive and leads revenue our to in wage premium a a growth by see First, AMERISAFE payroll ultimately for reports, potential premium. Wage is increase. payrolls revenue monthly tailwind about

policies payrolls the analysis of second renewed grew our on X.X% based quarter, during the quarter. During those

lead compensation averages limiting uses care passes to could reserve I medical our exposure in claims. trends consumers. increased practices, the and unfavorable development claims. rise labor claims, as inflation diligently AMERISAFE loss long-term we health open on recent on therefore, open Industry-wide, and increased costs industry this end to work ratios cost believe will to above workers’ Second, our close

fixed for in provide carriers. that rates Third, income more made growing impact yields, quarters. investment be new rising attractive premium income quarter Neal the at during To are audit of gross negatively the areas was robust portfolios the by upside declines X% interest audited future written outcomes. The and – written for much of of down this in three far premium his driven will anticipated payroll grew led and positive investments to financial written metrics key by is specific and quarter the influenced first impacts income quarter, our can adjustments. premiums AMERISAFE impacts remarks. other quarter. In policies in financial year Higher-than-expected X.X%, insurance principally but quarter Premiums policies name over XXXX prior summarize, prepared audit costs. reaching, the directly driven of inflation loss this I the AMERISAFE

strong overall current the from frequency claim with for accident expectations, claims claims quarter than XXXX. year as and XXXX. Despite the accident loss the the end above for XX lower $X year This quarter. X of year the the losses, X and XXXX of at with Coupled first pricing trends ELCM, offered in policies XXX remained pricing severity full prior to years at had within of XX X XX%. compares the months accident to. reflected our remained remaining incurred with for for We continuing, months. million ratio the current the the Continuing with by XX.X% second down competition reported were Our favorable for retained of pressures renewal we quarter, we XXX, counts

is that quarter’s the XXXX by occur. losses quarter now seasonality XXXX. shown $X.X which is development the discuss favorable in over Our is Further, of year to to investments there as XXXX, to large reduced XXXX, turn points. and quarters were Accident accident This XX.X million I ratio has favorable loss attributing we’ve the the Neal primarily percentage year no history loss adjusted development call XXXX. to will first ratio capital expenses, the for management. ultimate case

Neal Fuller

Janelle you, and Thank morning everyone. good

second million $XX.X million The Net the in decrease diluted Operating $X.X by with Revenues second the with per $X.X net compared our in $X.XX driven year’s $XX.X income equity our reported decline equity per $X.XX securities AMERISAFE earned unrealized the share XXXX. second second share For to primarily equity the lower, this or quarter of income X.X% from was in second year. with recent in or declines or securities diluted compared in a premiums improvement $X.XX $XX quarter net million $XX.X quarter last $X.XX with gains quarters. in million from income $XX.X quarter second or gains the compared were year’s compared per came in quarter. increased impacted last was quarter share million million of million for significant and at trend Revenues net in on in last of last XXXX, $XX.X $XX.X million year’s a year’s million per decrease in quarter. securities. share, by in

expected fourth the yield as driven increase. third securities year-over-year compared comparisons. quarter of way portfolio for income in income Turning fixed to the was to Net our lower X.X% is on continued On rates of through net in our decrease quarter continues impact note, decreased The to $X.X as million the portfolio. on $X.X million quarter by second work their grow with the positive the a second interest income to XXXX. investment investment they and the investment

XXX out securities of portfolio. yield new points sold During the or the higher than approximately the months first the basis X our on investments maturing of was year,

in was basis the portfolio year X our pretax the ago. X.XX% During on of the month portfolio the were of on the U.S. remains the investment is the XXXX. over quarter, in Realized during substantial loss X% tax municipal portfolio X% July, high XX% a of with held-to-maturity XX% credit with quarter quarter points of and the million portfolio in end. The in bonds; XXX sold XX these in duration at quality, yield which was million securities. are cash Approximately of compared And gains portfolio now an from in investment of was taxable the equity The at quarter, this end million The in unrealized X.XX% equivalent X% for $X.X up quarter, of bond on average rating during with of difference securities; X.XX% points. yield up AA- from basis XX% our securities X quarter includes ago. $XX.X agencies; bonds second and with end in carrying X.X comprised rates munis; also and in position net and second other investments. treasuries the corporate the XX% year $X.X at rise bonds,

amortized these reflected a and securities are on or carried losses gains unrealized value. at held-to-maturity As therefore, costs, reminder, not in securities these book are

Moving now operating to expenses.

to other expenses in with XXXX. $X.X commissions total and increase the were second underwriting the year. costs. By primarily of million salaries assessments higher with million million category, included the due loss-based, second million quarter $X.X of the and in $XX.X Our last expenses The insurance-related during quarter quarter quarter and in $XX.X was compared XXXX of underwriting million and other compared $X.X benefits,

of a of result was year. expense quarter compared in our last for the increase As quarter the with expenses, ratio the in XX.X% XX.X% second

a income repurchase XX.X% for compared for to year. with rate XX.X% capital was the a finally, the paid quarter XX, the of $X.XX company quarterly of for underwriting management, the quarter versus repurchased ROE to the $XX.X in at shares due Also declared a company million last second cash XXXX, of $X.X $X.XX In capital largely remaining second value the last of payable regular items. million, its quarter in Board share year-end. at was dividend Operating equity XX, September management, record dividend was as XXXX. cash to XX, XXXX, tax-exempt X.X% other of on was the XX.X%. quarter Return a tax authorization proportion $XX.XX, this $XX.XX of XXXX down share of as for Book quarter. quarterly of share And And just on income per XXXX. Our quarter, X, second from the X.X%. per its quarter, leaving on year’s of total per June June September compared the for higher shareholders in quarter couple share during

like to our close. XX, for my Operator? was surplus $XXX finally, at open million be statutory the the at later up concludes will we the December SEC question-and-answer XXXX. Form And we up after from $XXX remarks, and XX-Q would with That Our market end, today, quarter then filing call the now million session.

Operator

JMP. [Operator question ahead. go sir. will our take from Carletti We Instructions] you, from Thank Please now first Matt

Matt Carletti

Hey, thanks. Good morning.

Janelle Frost

Good morning, Matt.

Neal Fuller

Matt. morning, Good

Matt Carletti

I AMERISAFE they view just particularly particularly the Janelle, costs the your expectations and drive some the of workers’ open comment appreciate comments on us claims you on as – AMERISAFE’s point, commonly the claims versus you think little we for more industry? expand bit? about medical the and kind comp, of how differences of that a inflation the for tail comp maybe Can remind what on loss and an industry that And impacts about workers’ important of tail you between industry. can

Janelle Frost

certainly. Yes,

claims of two to talk it reported about will just number us. is ways. So I in One

have and about holding still calls that to talked we be that We seems levels on now have back not several to pre-pandemic bounced true.

X – claims Our months at of still frequency lower number the claim years. prior reported count, compared to count accident is

well To well. that a in or AMERISAFE decreases activity happens us. impacts what benefiting pretty how base our insured With pretty activity. your insured inflation has point of our recessions about be that, whether or performed should – certainly that’s claim So, increases terms historically, there recession during done

AMERISAFE’s numbers years. probably to in I you that think less We the duration. But fluctuation Recession, was than Certainly, I but on the years you X probably is think it claims, to recession. would the haven’t the were think with average a X.X haven’t was, of less I story. somewhere duration in headed duration industry-wide And I different Great that’s counts than related X industry-wide, say that which seen latest mild in terms question a when at of where is years that’s about large in claim looked years. X.X

front really of claims. the from job reported the on on we closing do benefiting then end are we just duration think claims. And point, side, fewer having to I your good So a

counts Our to open drop. continue claim

healthy. Our claim very closure are rates

feel we good that. So really about

Matt Carletti

then concentrations trends rest have as out stick Great. in by where notable very particular you guys on you focuses, the the say different seeing inflation any And notable industry helpful. That’s kind are inflation, point any some seeing Do the book? on wage keeping trends, industries? of particularly of versus

Janelle Frost

and I that of a we kind way with seeing are are Matt, it growth industry our the we will of is wage But the in growth across that seeing groups. little sort bit. segregate board if and logging. the follow And we seeing trucking, – terms what in lumber it at particularly look it roofing, are you our business, see of and sort in we – mix tracks construction of particularly in of

of considerable wage think in growth itself. that a We growth of coming to a know am wage the a picture that say have were reported or didn’t X.X% and saw that’s try a growth. we quarter, employees from to versus quarter we And wage where it for I was that better, that if quarter give policies actual We I in of And was second last new quite happy seen reported astonished actual and payrolls out clearer trend blip XXXX. we versus X.X%.

last just growth. quarter, X.X% wage in quarter So, X.X% this

side count. The employee other is that of

was that X.X%, quarter, X.X%. quarter, this last So,

coming that to from our employees, groups. still to be new growth know, that about is And seems again, consistent So to – you question it across our as pretty amounts industry-specific, not be which preference. large of seems industry your

Matt Carletti

very the housekeeping, helpful. seem miss and you one, it. just to seem What Last to I LCM always in tell That’s Great. quarter? it was always the

Janelle Frost

XXX.

Matt Carletti

answers. Great. Appreciate it. you Thank the for Awesome. all

Janelle Frost

Matt. you, Thank

Neal Fuller

Matt. Thanks,

Operator

from Mark Hughes Truist. ahead. We question go will our take Please next from now

Mark Hughes

thank morning. Yes, you. Good

Janelle Frost

morning, Mark. Good

Mark Hughes

the it. looking of in cost at that’s Do loss that NCCI kind didn’t trending? you speaking on you how number, that footprint happen have if generally I release, to see your put The

Janelle Frost

Right.

don’t I X.X%. for So in last I the of is front quarter, me, second that correct XX% historical quarter? for believe the was decline. And Neal, that have

Neal Fuller

out a the May expect symposium be their loss expects NCCI to insurance X.X% did they And in down NCCI put cost XXXX. – for projection Yes. annual at

in trends similar It’s different we seeing are although we high of So the business, than book hazard. book slightly of a NCCI’s our all are book.

Mark Hughes

the XX% information does that... where So quarter second does represent got or in you the

Janelle Frost

question. great That’s a

the in represents that were cost XX% the the of effective declines that for the all cost was that effective XX%. quarter, quarter states decline loss So, had loss the declines

Mark Hughes

at a quarters of sample to country that’s four least maybe what rolling So as get whole. the do a to kind

the is but latest this So, maybe skewed. information, it

Janelle Frost

Right.

NCCI overall saying was Neal X.X%. why projects So

Mark Hughes

Yes, yes.

a still the That’s XX%. Okay. of pretty big number

Janelle Frost

It is.

Mark Hughes

Yes. at either the the in point first say early case, XXXX, can you kind recognizing this look see? at have Do or then the Anything taken quarter you XXXX you just do policies look at and of a about whole what is you this it. XXXX

Janelle Frost

Yes. at we look accident a XXXX. No, whole as the year for

So if of Severity industry whole, the are counts – you short a XXXX was expectations. claim for within remembering, history AMERISAFE. same as for dropped

know, you measure. we always As try to

a about get let of for ground us outcomes to first quarter severity solid the on with claims, like our the Given we this how kind are the long-term bit are feeling we and and age wait and have, particular outlooks people consistent being of little claims where adjust for hence, to that pattern. medical those a we

Mark Hughes

Yes. in XXXX And Should be accident fruitful assume it’s is of as evaluate the count think that terms that year? I going pretty anomalous drop. we you that claims to

Janelle Frost

Time would tell.

but AMERISAFE now just the for you was I’m of COVID, whole, is to going far, the that impact industry as non-COVID-related and or on everyone so knock here doesn’t of claims and claims. impactful If right that necessarily it even the to feeling obviously health stress to outcomes than the beginning on back other of the was and that medical number XXXX, for COVID right reported harken now. going wood seem not it the be feel care a one put impact concerns industry for how to which say

far reported COVID-specific as than think had us. to XX as I claims, we less

aspect, good about felt XXXX. that from we So really

Mark Hughes

Yes.

anticipating? On seeing how are the of or medical are in you your just inflation, much book actually you that

Janelle Frost

are We anticipating.

trying health, calls we talked sheet. it any nursing and everyone seeing I few costs liability We something anticipating clear book. the balance are experiencing on front what are be Certainly, our have sheet It’s we anticipating. about don’t to just and home have is a just no, metrics think in a can’t I impacting – of the industry’s be last terms are trend we large what in on balance or in we our will that of but

better I feels closed simply claims. think AMERISAFE it about because we

Mark Hughes

XX% doesn’t it rearview decline the the having do mirror. help Yes. NCCI I in the guess

are You anticipating inflation.

Janelle Frost

Mark. agree more, I could not

Mark Hughes

up would up the be yes. Yes, I a bit, doesn’t it like but and eased fair? guess that wised if competition case good, sound then everybody that’s either. Is that

Janelle Frost

know wise don’t want say absolutely. know I You you what, to up. if

I think very They using are seeing data-driven. what they are data. NCCI the is in

the the anticipating up ultimately that’s in a XXX, and not shown pricing thus ratio difference people if data look more going I versus anticipating the accident to to NCCI but NCCI and industry what’s that’s what’s mean, a thinks at experiencing I the are year what be reports you experiencing reflecting XXXX, come. think think in carriers their you carriers – are and reported XXX. actually between at even combined far. of I look

Mark Hughes

audit yes. the still premium? going taking that’s that quarters? Yes, there shouldn’t for there? of reason what’s into first next conservative their what are why going on several the continue Is think folks on the it about you and a to or I Is XXXX pretty payrolls. How are quarter dynamic some the account

Janelle Frost

ball, goes continue crystal we quarters for but a I would Yes, have see few I going. positive to payroll don’t think next would the

was quarter you we If playing that our were you the forward, about was, were, the XXXX and to just insurers pretty your robust. if – think think economy still economy point, where first where

don’t of in inflationary in terms tailwind believe I premium. they both think were pressures audit us that working. anticipated a for insurers I the Our

Mark Hughes

still the that’s X% wage predicate your coming just inflation had X%, that what going for point still than to today through hot And pretty that the is months ago. – Yes. growth few is probably anticipated more is in the folks a and about

I editorial presume an that. that any wouldn’t make with but disagree will We comment, of you

Janelle Frost

I growth Wall quarter. benefit Street and in about the of I pace I don’t. the terms a growth in mean, in headline saw today near don’t. the wage I record Journal

Mark Hughes

Yes, the making we better people is Fed yes. funny that money, Well, doesn’t like headline too that. much are the since stop

alright. Okay,

am good the there. I all answers. Appreciate think I

Janelle Frost

Thank Appreciate you, Mark. it.

Neal Fuller

Mark. Thanks

Operator

appears additional to would It back I further no any time, the At Frost or this closing to like questions. conference there are for turn Janelle remarks.

Janelle Frost

such carriers today. you Thank you Thank I this want to dedication Honors our to us for consecutive serving this year. for joining stakeholders. opportunity congratulate named team today. XX Top happened to XXth the for P&C of because joining AMERISAFE take being us Ward’s only to as on the your

Operator

Thank call. your you today’s participation. concludes for This

disconnect. now may You

AMERISAFE (AMSF) 31 Jul 222022 Q2 Earnings call transcript