Earnings call transcript Q1 2023

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Operator

Good day, and welcome to the AMERISAFE 2023 First Quarter Earnings Call. Today's conference is being recorded.

At this time, I'd like to turn the presentation over to Ms. Kathryn Shirley. Please go ahead, ma'am.

Kathryn Shirley

morning. Good AMERISAFE Investor the first XXXX to call. quarter Welcome

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

will I the to over Frost, President turn and call AMERISAFE's CEO. Janelle now

Janelle Frost

workers' written AMERISAFE's XX.X%, approach of premiums with first ROE has quarter strong Thank gross the of morning, performance Kathryn, an a maintaining good high and pricing combined while to year We a ratio results. navigate pressure tenure of us started solid X%, to allowed market everyone. XX.X%. and reporting operating growth the in hazard risk you, selection pricing compensation disciplined long and competition and and

than premiums offset X% grew topline During the quarter, audit positive more rate declines. as

ELCM quarter XXX. as a Our overall was this by measured our pricing

steady a for in to despite renewals offer first largely with experience our XX% see strong quarter, policies we We line in continue competition. retention recent the retention with

At tailwind. same forward, premiums look remain and remain we a to pressures to the anticipate time, we a anticipated declines competitive rate are headwind. audit As

flatten. growth begin quarter-over-quarter should comparisons However, to the

year accident prior The with Moving loss XX%. to ratio year the losses. at steady remained

outcomes primarily resulting $XX.X XX.X years released practices quarter, our were handling the of prior During loss favorable claims These or in better XXXX. expected ratio reserves points. from accident year than through XXXX development (ph) drove million

and expectations. can it was within trends both isolating trending be the frequency when slightly to Frequency loss line severity on with of of below our lumpy severity that previous repeating It year. As trends claims and relates quarters. par bears accident

As claims. has of given case practice, historical been our nature particularly include our long anticipated severe inflation, tail reserves medical the

the volatility is Our economic balance as positioned sheet this were quarter. conservatively by impacted minimally we

remains a position in $X Our and and with strong financial investments position cash, no billion debt. roughly solid outstanding reserve

We expect challenging. remain our market to dynamics

shareholders. However, our in retain given to hazard to tenure balance while our sheet, niche delivering are business robust long high experience returns we policyholders of well-positioned attract strong and and our

that, With Andy the I financials. discuss our turn to to call over will

Andy Omiridis

Thank Janelle, to good you. and morning everyone.

million income or For million reported million with of share. income operating per of operating the share. diluted XXXX $X.XX $X.XX in first quarter line $XX.X $X.XX net diluted million of is net largely $XX.X or This per of QX $XX.X and diluted income diluted or per or income $XX.X of and share XXXX net AMERISAFE net share per $X.XX

a in QX quarter million X% versus were growing XXXX, the million premiums written $XX.X on Gross $XX.X in basis. year-over-year

Rates the with a benefited pressure. $X.X X.X% audit million. Payroll continue the rate decrease to average the During decline approved in basis. costs of due continued by premiums related year-over-year quarter, decreased quarter voluntary to X.X% adjustments and loss primarily on premium

from accident year. with favorable loss XX.X%, quarter in offset $XX.X reflects resulting primarily was the in strong our The accident XXXX the what booked quarter ratio to loss in net The top remains years line in through previous year million some the pressures. growth line ratio which XX% Wage was in was XXXX. loss development for

underwriting in an XX.X% of in compared first expense expenses total of XXXX. with quarter ratio other million Our XX.X% resulting $XX the quarter, were the in and

This XXXX included quarter out by $X.X Association. $X.X included sharing assessments a the two increase return fees. million these is professional of reinsurance the of Reinsurance from of the a quarter million Minnesota profit commission, and first the balance After while increase netting commissions items, driven in

to on Turning points The reinvestment increased previous income million year to cash to net increase XXX the basis maturity fixed securities. higher rates driving the from first new investment equivalent was year. prior on XX.X% basis million on $X.X approximately X.XX% our driven yield investment Yield quarter. the quarter, portfolio. In in higher as increased higher investments by XX than $X.X well yields or tax book points, our as

quality an carrying which a in composition investment in cash rating and high XX% have securities taxable of The four AA bond portfolio is X% is a our the of duration minus Approximately, corporate with bonds, treasuries XX% bonds, of comprised held-to-maturity X% and includes in in credit of we portfolio investments. munis, average other The portfolio XX% securities. US municipal and equity in is X% XX% in agencies, years.

cash was position book grew with X.X% position Since return operating to $X investment and in year highlight out quality At conservative carried XX.X%. $XX.XX is value equivalents. high strong reserve equity portfolio. capital average billion a quarter end, roughly and loss Our to end, balance cash on investments, AMERISAFE sheet and

With for Operator? open that, to question-and-answer the the call the portion of would like call. I

Operator

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

Matt Carletti

morning. Good Hey.

Janelle Frost

morning, Good Matt.

Matt Carletti

bit math you what talked rate of that exposure you're accident able that expectations might But of it about might with even of with seeing then puzzle loss doing? kind kind inflation through Janelle, and the of you ratios kind act severity calculus think wage cost also and on and to of your your kind kind how loss of isn't be like and just of and of se? little the to I towards frequency a us hoping year you walk per the just much specifically growth though bit of get was and eye loss a that of just impact that are might how what mental kind an costs loss there, about piece is and environment, how kind

Janelle Frost

a at That's Matt. Right. way it, good to look

with in about I not loss but to pre-pandemic premium a good I news. wonderful say the Safer payrolls, about trends of It still about a frequency, record, payroll dollars all so which but terms When not So seeing good, levels, we're I'll to That's like when employers to second. to in things. the start I claim safer workplaces I'll tend frequency talk talk get rebound talking broken themselves. right. this, sounds reported is counts

though cover to losses, down those frequency first our premium measure to less XXXX. has been So dollars of even we've slightly quarter collected even even compared

seen just we which Now granted, is not one reported and trend the the make, claims in definitely rebound a quarter standpoint. benefiting us is but haven't frequency from

quarter make. standpoint, first From a quarter again, one severity is trend not for the a severity

For the was quarter, first on quarter par severity pretty XXXX much severity accident with was year. where first for of the

a of I always about on severity given concerns taken over of does where a long-term of talked come view medical that the how feel inflation our times we've long calls, is in these medical like influence period As numerous we've nature time. long our inflation. very tail claims,

pick. ultimate that loss So our ratio I very feel from comfortable about

their look I say in claims think terms cost replace, and in the could on many to do years they about the to that that years credit from of And managers from initial enough basis, these give case case then how put really and that they out to knee be going reserving now, into now, how those five field reserves. they even us claim what replacement and are cannot XX of factored my case

credit them think they So individual about how review to for and claims.

Andy's about that premium to remarks, he right, the audits acting of question the line where sort your you're added $X.X payrolls, mentioned absolutely top To for as quarter. prepared in million

continue We growth. see payroll to

we number if reflecting think out how payrolls the a originally them those ago X.X% of to to we how originally turned So and estimated be. actual that estimated compared about how what to you payrolls to year estimated wrote we regarded that's be, them Andy's had policies

policies in that or were time So you in the effect, about work We're XXXX. think that activity that period. happened talking

Each wage reporting we of what forward-looking previous quarter know we growth the you and trying a been well, picture of in payroll saying, double-digit as are give increases. we've been have or a And bit little growth quarter. seeing to that

quarter, Third XX.X%, it was fourth first quarter quarter XX%. XXXX, XX%,

for bodes of in us see continuing audit premium. terms So well robust that we to pretty think

increasing Now, XXXX. in we've obviously, first the premiums comparative started of bit get -- a little year-over-year to is audit tougher quarter going really seen it increasing the because that

adding to and And so, to or but underlying flatten, would premium. loss will quarter-over-quarter your payroll growth line, the less the these rate those as we to still the tend cost comparisons certainly top be are to dollars rate impactful about that point our get

was all a your did long-winded answer, questions? answer It I

Matt Carletti

kind doing do getting you hours or about for I growth we thing much of wage you, versus more exact you're -- same so on have feel more exposure, for increased that guess, true same Very sort how that helpful. is working a more employees And just as of worked are that payroll paid of it? one growth, think exposure just more person

Janelle Frost

was I that knew reported worked us of activity, right. hours, the would of the I ideal, quarter, wage absolute don't saw workers growth. that. the I into If been quarter which don't XX% know transparency to growth, I have that XX% be that would XX% same in we Yeah. first hours know have fourth wage extended

have been could higher or more workers hours. higher So, wages same

lines of see, more count roofing, group, The most broken look, industry across we them. down our but construction across, benign, other Matt, it's little in when the than so look been industry of been a book to has we maritime wage it, and payroll our which in growth. bit groups, pretty at relatively like I had maybe really in saw really robust when we Obviously, new strong employee for really that's by increase

even can't I to particular So, industries. down isolate it

small it's think midsize employers economies to these for really. the just I

Matt Carletti

sense. have the QX what on we of that from audit that makes the about number, you quarter? a to was going in hit something we And quarter and is, baseline dollars the then you it the question, do so in to follow-up second have I ask millions think benefit premiums That going that my was as as actually the 'XX, just of

Janelle Frost

for was Yeah. of second was XXXX, million, the quarter $X.X million. it $X.X It

Matt Carletti

and color much to the the I congrats Perfect. very year. That's on had. you Wonderful. Thank start all nice a for Great.

Janelle Frost

Thank you, Matt.

Operator

our [Operator with question Instructions] We now from take Truist. Hughes Mark next will

Mark Hughes

Yeah. Thank you. Good morning.

Janelle Frost

Mark. morning, Good

Mark Hughes

your to Janelle. morning, Good mental wanted further. little math explore a I

Janelle Frost

Absolutely.

Mark Hughes

you I next on have job, that? construction on the I said what's are customers headwind you’re that, or about focused any the the always think what's question, feeling a any about five that do you've latest it talked was on hadn't of the issue, sort

Janelle Frost

really looks great. I I base would of If my well, strictly construction it Right. payrolls, vibe in reported say, book been my what's

in You're to market of certainly right next see could I to the terms not regional them our impact that the being small of of am credit look available there, being and do from mid-sized credit to the that absolutely like. the naive in terms headlines in tightening what banks. of their employers terms lines lines we job credit small about in

But businesses, okay, is you're working we yet, I they back haven't one small our work going steady the and there that recession, harken bigger job again throughout. COVID-related was work to so now, activity in employers, mid-sized but it next really was, of the the our to seen had be for to concerns

bid I So on point guess of not all going to project, the to going quarters payrolls maybe that little few there unless headlines or be the is groups. be I difficult somehow recession from bit makes complete or we coming more credit still a it a where have those is a industry we about next that the read robust there recession. think next tightens job to to

Our tend mild what bode we to in industry well recession. call groups

pretty well. that So about I feel comfortable as

Mark Hughes

by their continued Maybe the can the existing backlog we then on new they'll time have and recessions Yeah. backlog. the start work on over, to

Janelle Frost

That would great. be

Mark Hughes

the million any Hope, large losses $X Yeah. plus? in quarter,

Janelle Frost

had we in case reserves quarter. We two, had the million with two over $X claims

Mark Hughes

Okay.

this was Is quarter wishful the in seeing sixes. looks moderating that it You it's plus the costs and kind release, bit, a like or of high that? is little how I think NCCI a seven loss thinking last are give you and

Janelle Frost

slowing a It's been would the funny, Yeah. saying so decline. appreciate we've for long. We of

the May. slowing that what NCCI industry-wide asked results in of put will a the of we bit regard, I out see, rate terms for little guess decline. So the of in got couple weeks in We'll a in we

anticipate higher, So we'll higher, that as ratio, been to in back a every terms see the bit how year The this bit I the little last industry industry. up for case that of harken to loss we creeping few year little fared data. the be year, accident a well years, it's the

Mark Hughes

a say higher, When little negative? a or negative more it's up creeping little less you

Janelle Frost

ratio about for are combined, see going where some ratio X the it been year, industry you XXX think ratio. it's a year terms if of each or accident XXXX. year point if we'll so the that The still what look companies I at XXX Approaching loss reporting whole, combined but ratio in they you was know accident even year, or combined the as up a last for approaching the report a combined redundancies,

Mark Hughes

Yeah.

Janelle Frost

So decline and stay what's or the going flatten. whether that's rates ultimately to to drive bold let's be continue

Mark Hughes

have broadly thoughts Yeah. more loss process NCCI whether development sector, the trends any come loss but Any the if around you what's wait part about the to I of wonder for your across development? happening observations that's on know maybe out, if don't I or you

Janelle Frost

Yeah.

as is for the really that much. a certainly seeing all I the of don't I that's benefits It's happened think whole think frequency. changed industry declining AMERISAFE.

Severity it's for what's to as the I happen severity. the think going to happening mark industry. question with is

medical fantastic, who and think better to claims of of I on through just but spending that have particularly anyone survivability deal is you thinking of adds and severity technology claims. the about comp to injuries inflation, which the that people with severe space, we the innovation a types survive ultimate obviously medical healthcare, workers those in lot and time alone, talk

inflation. not those should. fact that that in think into also get terms be claims. about themselves, medical to injured has be a associated is best-in-class to severity just with to rates is I continued they that be to of workers The just these price tend factored continues that And tag as care the the means -- But higher

Mark Hughes

Yeah.

tougher, competition, steady of QX back when mentioned little that the littler XXXX versus any a maybe easier? You've shading half you on think about

Janelle Frost

new but the really business. to to continue if hustling able some quarter, in that's the in have struggles, word new We to of other to business. lines totally get I'm for No. that were business going attribute growth that just employees our right the Agents all

be had So it's that where am to everyone agencies going no really going out luxury comp it particularly so lines, auto their that's the that, which obscure liability coverage, workers' where they're shopping product happen, coming to in dealing company everyone am I matter comp pricing have right really of for with the they've they're something workers' decreases all unless the about find of call to if going don't find comp the coverage, workers' now, coverage. I

time. love AMERISAFE, haven't a of we're would with have. get seen quite more So, but influx point, kudos the doing see to we some what your competitive we really to requires, shift requires to to it large We business, environment have that that opportunities a to in new and

Mark Hughes

as Have the relevant you -- hogging not sorry this be and in comp, may workers here. I'm for call

Janelle Frost

You're fine.

Mark Hughes

to of or for relevant comp, observations this have to Yeah. your being because know same appointments able agents might is access in get guess could like maybe you some as in travelers or of relationship the end-up if the beneficial I bigger kind that? being that maybe agents of have they group that interested markets that they're is just see Do narrowing around isn't list. of don't workers with past competitors anything but working I Hartford,

Janelle Frost

haven't I Mark. not, have anything that. seen like I

Mark Hughes

idea. an is That Okay.

Janelle Frost

It is.

right. You're

Mark Hughes

Yeah.

Thank it. Okay. for Well, All me. you. Appreciate good that's right.

Janelle Frost

Thank you, Mark.

Operator

Bob We'll question now Janney. from take our Farnam next with

Bob Farnam

your medical question, are inflation One there. using for Hi, your what you Good assumption in morning. reserves, reserves? so

Janelle Frost

Yeah.

take a long-term reserves terms means inflation, to about long-term be were to when on of highXsingle -- ultimate a but pick individual said, our credit of XXXX they my on we field of on even case case digit two for reserves, in (ph), it a so more the reserve like doing think factor this do to what or that medical ways. really XXXX I the continue and I'll We tends in give in each basis, our basis. approach, different mid we overall importantly, case XXXX realities case we think again managers, XXXX like -- I When

using even, I health, health My any health a managers as case are factoring labor that's home field my a home few reserves. an for into certainly long-term calls a shortage for it's call about talked there company example, in is having to deal component. last maybe ago, that On with that case challenge

Now, make we get the sure the reality terms outcome something is want in we shifts regard, to to that could likely they're most that currently, then be seeing if but reserving beneficial in in now. that of future, our case that us

Bob Farnam

Right.

future the portends putting as inflation out not you that the if so, reserves, as favorable well reserve And that that strong. you're assumptions wasn't inflation for as inflation robust as development find into is actual

Janelle Frost

with I would that statement. agree

Bob Farnam

And Okay. probably is have more getting asking. Mark about the I second what along was usually question with

know in I word, ratio any a are is XXX So I many profitability of industry cost combined where you as year will turns confidence is or not but time. to line and overshoot XXX profitability, if into the but don’t approaching industries don't be confident in comp that loss I a terms a accident sites years the XXX, doesn't past was over workers right in near know know, XXX the going? the great declines term the that the how

Janelle Frost

paid out, out those and to correctly you have and then collect right a a happens, And that's you the question. estimated it paying say loss that premium book put their swing. History rates to where that the claims reserves. getting right, didn't are so declining dollars realization we great using ultimately exactly started take companies have That's and period claims start of getting you have a would their the to and rates Yes. what up where we and

right, whole, in those you have AMERISAFE swings those what declines. a we an a rates, like of individual happened, look better, the like the obviously as for like the and the as what then about back, to you kinds our and but if industry industry prices environments managing for underwriting adverse rate of other risk, of it you tend an feel very development had company we terms period when discipline, then get of we that's that's because typically declining do way we're good ideally And our right

prior as large more years? don't about be as better are low underwriters -- so. hear that think Will as something past. that peaks the don't I values a as was it swing, data, disciplined be be which will lot underwriting, and I people the think in and to industry the The in has a of really high cash done flow was I

still So and the maybe, the alive like as think peaks values maybe as maybe I -- well. and high. cycle market said, is the aren't is the still But I low

So other approaches getting as AMERISAFE industry unprofitable level hope compensation, that appetite do we is to multi-line to particularly workers severe contracting we think I into hope the carriers see compensation workers for their see, what where and know had workers contracting their success. rate capital compensation, are appetite. more from they utilizing they just their don't will to I that but have and away walk completely pursue lines they getting where

lose For lot over competitive COVID, really just year in fluctuation hasn't would maybe of in now, hardening there the fluctuation seen two of I competition two but us, say, where which been even a a for we a consideration lot it years let's with haven't time a of “a be levels. years, track market”, of

Bob Farnam

imply of AMERISAFE's that kind that ratio what was that an to didn't be mean combined was driving That is of industry. my going I was up going to high, Yeah. more question,

profitable because competition pulling might when anymore. wondering Just back the not it's start

color. think I yeah, a you that provided and good So, answered

So thanks.

Janelle Frost

Thank you.

Operator

to or further like Frost the conference appears comments. there no any hand And Ms. over it questions, back closing I'd are for additional to telephone

Janelle Frost

joining the our we strive team in and enhance pleased start agents, the injured strong for forward success and our Equally, continued our the to we're a was quarter service us as today. XXXX year, First Thank workers. look quarter's results. with you AMERISAFE to for to policyholders

Operator

thank today's We conclude all that participation. you And for conference. does your

may now You disconnect.

AMERISAFE (AMSF) 27 Apr 232023 Q1 Earnings call transcript