Participants

Gerry Frost; President, Chief Operating Officer; Amerisafe Inc

Anastasios Omiridis; Chief Financial Officer, Executive Vice President; Amerisafe Inc

Mark Hughes; Analyst; Truist Securities

Matt Carletti; Analyst; Citizens JMP

Bob Farnham; Analyst; Janney Montgomery Scott LLC

Presentation

Operator

Good day and welcome to the Amerisafe Fourth Quarter 2024 earnings call. Today's conference is being recorded. At this time, I like to turn the conference over to Miss Catherine Shirley. Please go ahead, ma'am.

Good morning. Welcome to Amerisafe 2024 Fourth quarter investor call. If you have not received the earnings release, it is available on our website at Amerisafe.com. This call is being recorded. A replay of today's call will be available. Details on how to access the replay are in the earnings release.
During this call, we will be making forward-looking statements. These statements are based on current expectations and assumptions that are subject to various risks and uncertainties.
Actual results may differ materially from the results expressed or implied in these statements if the underlying assumptions prove to be incorrect or as the results of risk, uncertainties, and other factors, including factors discussed in the earnings release in the comments made during today's call and in the risk factor section of our Form 10K, Form 10Qs, and other reports and filings with the Securities and Exchange Commission, we do not undertake any duty to update any forward-looking statement. I will now turn the call over to Janelle Frost, Amerisafe's President and CEO.

Gerry Frost

Thank you, Catherine, and good morning everyone. We are pleased to share AmeriSafe's results for both the fourth quarter and the full year of 2024. A key priority throughout the year has been top line growth with consistent underwriting margin, which is reflected in our gross premiums increase of 3.9% for the fourth quarter and 3.1% for the full year.
Voluntary premiums on policies written rose by 8.5% in the fourth quarter and 4.6% for the year compared to 2023, while our enforced policy count grew 9.6%. Strong premium retention and robust new business production were the primary drivers for this growth, underscoring our commitment to profitable growth in the competitive landscape.
Despite industry-wide headwinds, including rate reductions and declining wage inflation, our ability to identify and capitalize on profitable opportunity is a testament to the expertise and collaboration of our team.
We are improving our agent relationships, protecting our policyholders, and caring for injured workers. Our focus led to a combined ratio of 88.7% and an ROE of 20.2%. This success is the direct result of collaboration across our organization and the empowerment of our employees to foster a sales-driven culture.
From frontline teams of underwriting, sales and safety to the back end support of claims and premium audit and operational functions such as regulatory, IT, and finance, every department played a role in driving growth. Our employees have embraced the challenge of competing in a dynamic PNC market where workers' compensation is aligned as a line remains attractive to carriers.
For the full year, our accident year loss ratio remains steady at 71%, consistent with the prior year, and we anticipate maintaining that level in 2025. Additionally, we recognize favorable development from prior accident years of $9.7 million in the quarter and $34.9 million for the full year 2024.
On capital management front, Amerisafe's board of directors has approved a 5.4% increase in our regular dividends to $0.39 per share.
Looking ahead, we remain focused on top line growth, confident that our ability to identify and ensure profitable high risk high hazard risks will continue to offset broader market challenges. With strong policy retention and a disciplined approach to growth, Amerisafe remains committed to delivering exceptional value to our shareholders.
With that, I'll turn the call over to Andy to discuss the financials.

Anastasios Omiridis

Thank you, Janelle, and good morning to everyone.
For the fourth quarter of 2024, Amerisafe reported net income of $13.2 million or $0.69 per diluted share and operating net income of $12.8 million or $0.67 per diluted share. During the fourth quarter of 2023, net income was $19.2 million or $1 per diluted share and operating net income of $14.3 million or $0.74 per diluted share. The lower net income was primarily driven by lower net unrealized gains on equity securities.
For the full year net income was $55.4 million and net operating income was $48.4 million compared with $62.1 million and $55.9 million respectively in 2023. Gross written premiums were $62.7 million in the quarter and $294.1 million for the year, growing 3.9% and 3.1% respectively.
Net premiums earned were $66.5 million in the quarter and $270.6 million for the year, growing 1.2% and 1.3% respectively.
Overall, strong premium retention and new business production were the primary drivers of top line growth for both the quarter and year, reflecting an organizational focus on growing profitable sales despite competitive market conditions.
Our total underwriting and other expenses were $19.8 million in the quarter, a 4% increase compared with $19 million recognized in the fourth quarter of 2023. This increase resulted in an expense ratio of 29.7% compared with 28.9% in the fourth quarter of 2023. The increase was primarily the result of slightly lower earned premium growth in relation to other operating expenses. For the full year, the expense ratio was 29.6%. Compared with 29.3% in 2023.
For the year, our tax rate was 19.7% unchanged from the prior year.
Turning to our investment portfolio for the fourth quarter and full year net investment income decreased 14.4% to $6.9 million and 6.8% to $29.2 million respectively. This was due to the decrease in investable assets following the payment of the special dividend in December.
For the quarter, the yield on new investments increased approximately 42 basis points, driving our tax equivalent book yield to 3.8% or 11 basis points higher than the fourth quarter of 2023.
Realized losses for the portfolio and securities sold were $400,000 in the quarter compared with a gain of $1 million during the fourth quarter of 2023.
The investment portfolio is high quality carrying an average minus credit rating with a duration of 4.4 years. The composition of the portfolio is 62% in municipal bonds, 22% in corporate bonds, 3% in US treasuries and agencies, 7% in equity securities, and 6% in cash and other investments. Approximately 56% of our bond portfolios comprised of health and maturity securities.
And due to the notable increase in rates during the quarter, the net unrealized loss was $13.3 million at quarter end. As a as a reminder, these health to maturity securities are carried at advertised cost and therefore unrealized gains or losses on these securities are not reflected in our book value.
Our capital position is strong with a high quality balance sheet, solid loss reserve position, and conservative investment portfolio. At quarter end, Amerisafe carried roughly $830 million in investments, cash and cash equivalents. And finally, just a couple of other topics.
Book value per share was $13.51 after paying the special dividend in December 2024, a decrease in book value of 11.6% from year end 2023. Operating return on average equity was 17.5% for the quarter and 17.1% for the full year. We will be filing our Form 10k with the SEC tomorrow, February 28, after the market close. With that, I would like to open the call for the question-and-answer portion of the call, operator.

Question and Answer Session

Operator

(Operator Instructions)
We'll now take a question from Mark Hughes with Truist.

Mark Hughes

Yeah, thanks. Good morning.
Janelle, the policy on growth, I think you said 9.6%. Could you put that in the context of what you've experienced in recent quarters?
And could you also talk about the what the average size for policy has been, how that has trended over the last few quarters?

Gerry Frost

Yeah, great, but I believe mark the 9.6% that I quoted was for the year that's on in the workspace, not just the quarters that was for the entire year. And how does that compare? So I'm sorry. (multiple speakers)

Mark Hughes

Oh, I was going to, sorry to interrupt, but how was that in the fourth quarter?

Gerry Frost

Great question. I don't have that in front of me actually. I only I only got the year-to-date. Let me think about it.

Mark Hughes

I guess the year-over-year is 9.6%, but.

Anastasios Omiridis

3.6%.

Gerry Frost

Yeah, policy growth in the fourth quarter was 2.6%.

Mark Hughes

Okay. And that's a sequential number.

Gerry Frost

Yes.

Mark Hughes

Okay.
Very good. And then, sorry for interrupting you were saying I think I'd asked about size as well.

Gerry Frost

Yeah, so the size of policy, our average policy size for 2024 was slightly lower than 2023, but still holding strong, we're certainly were, we're boosted by stronger payrolls, coming into the year we knew that going into 2024 that we were seeing payroll growth, in the fourth quarter we saw some slowing in terms of. Average wages, if you recall the last the first three quarters of 2024, we were seeing somewhere around 7% each quarter. It dropped to 4% in the fourth quarter of 2024, not a complete surprise, obviously, but we were trending higher than national averages and now we're starting to see some moderation there.

Mark Hughes

Okay.
How about the renewal rate. The pricing measure that shall not be named we don't, have that, which is perfectly fine, but generally speaking, this quarter I think you had undertaken a strategy of being a little more active on renewal rate, was that a contributor this quarter? Is that, kind of run its course or how much was that an impact on the top line?

Gerry Frost

Right. Yes, it certainly was impactful to the quarter into the full year actually, but, for the quarter, our policy retention was 94.1% on a policy basis and a premium basis, 88%. So strong renewals.

Mark Hughes

And then your reserve gains, I think you had some gains from 2022 earlier in the year and you described this quarter also reserve gains from older acting years including 2022. Any observations about the post-COVID years '21, '22, just kind of how they're shaping up?

Gerry Frost

Yeah, those are going to be good accident years for the 9.7% favorable development or $9.7million of favorable development we had this quarter. A million dollars of it was from '22 $1.5 million was from '21 $1.6 million from '20, and then 2019 and prior was $5.6 million.
So, we're obviously seeing even from the more green years we're seeing favorable taste development come out of those accident years.

Mark Hughes

Yeah, and then maybe one more of the seated premium. It was a little elevated in this quarter. I think it was a little higher in the fourth quarter of last year, but even compared to that it's up. Year-over-year, if we think about, I guess number one, why was that and then number 2. For 2025 should it be kind of back in the Yeah, I see it is around 6% normally of gross premiums written.

Anastasios Omiridis

Mark, it's Andy, good morning to you. So, you're right, the question was a little bit higher. I think that's because of the growth that we saw in the quarter and of course in Q4, we always go back and make sure that if there's any trope needed, it's done, but overall it's really based on the growth that we're seeing in the policy count coming through voluntary deck and you know just as far as 2025, I think it's fair to say that. Every quarter isn't linear, so I think the 6% you're saying is probably correct, but it's right around that number.

Mark Hughes

Yeah, okay. Very good. I had a couple more, but I'll jump back in the queue.
Thank you.

Gerry Frost

Thank you, Mark.

Operator

And as a reminder, that is one if you would like to ask a question. We'll now take a question from Matt Carletti with Citizens JMP.

Matt Carletti

Hey, good morning.

Gerry Frost

Morning, Matt.

Matt Carletti

First question is, you talked a bit about, what we're seeing the voluntary growth really pick up kind of back half of the year and I think we've talked a bit about how, it's been pretty intentional, kind of interacting with your agencies and.
Trying to be easy to do business with and one of the aspects you pointed to I think was last call was kind of the idea of like you know getting them just to not think of you as like the roofing company and that you write other high hazard, kind of class codes and things like that have you seen that in the growth that's come through that that there is an expanded kind of maybe appetite by the agency and that. Some cases you might have been pigeonholed to a particular type of risk and and that's broadening and that's driving the growth or is it or is it something else?

Gerry Frost

Well, that is a great question. We certainly have, to your point, really have been making sure our agency base understands the value proposition of AmeriSafe, particularly our safety and claim services, and then two, what our appetite is, so making sure that is easily accessible to our agents, both through our TSMs and both through digital platforms as well, but mostly.
Excuse me, getting our TSMs in front of agents or reiterating, what do you have in your book, Mr. Agent, that sits in the mirror saves risk appetite and give us an opportunity. So the question to is that attribute to a growth? I would say yes. Could I put percentages around that? Probably no.
But I will say this, we are trying to be sure that we are being more effective with the agents that we have appointed. So, increasing the percentage of our agents that are submitting business to us and more importantly increasing the number of agents that have a bind with us, those are two numbers internally that we're really focused on, so driving home the appetite is part of that equation certainly.

Matt Carletti

Okay, perfect. And then second question, got a latter part of last year, a couple hurricanes came through, areas of the country that you have a lot of business, have you seen any of, I guess, has any of the growth we saw in Q4 kind of been a result of kind of that that reconstruction if you will, or would you expect to see any of that maybe as we go forward I know it can take time for that to come through.

Gerry Frost

Yeah, you're right, Matt. It does take time. It certainly hasn't shown up an audit premium yet because obviously we haven't audited those policies that would have been affected during those time periods, we do look at the monthly reporting that our policyholders are sending into us and we, we've seen some.
A little bit of increase if I look at Florida, Georgia, and the Carolinas, but nothing that I can point to and say, yeah, that's definitely hurricane-related business. I think it's more normal course of business. So I don't know that I can quantify if any of that's particular to storms.

Matt Carletti

Okay, great, thank you very much for the call I appreciate it.

Gerry Frost

Thank you, Matt.

Operator

And once again, that is one, if you would like to ask a question.
We'll now take a question from Bob Farnham with Janney.

Bob Farnham

Hey there, good morning. I, I'd just like to maybe expand a little bit on that question about the kind of the expansion of your new business, and I just wanted to know, are you looking at adding additional class codes as you're expanding or you really just focusing on stuff that you already write?

Gerry Frost

We are focusing on things that we already write, I talk about it in terms of hazard groups, A to G, we specialize in EFNG and still over 80% of our enforced policies are EFNG. So even with our new business growth, that is our focus area. We haven't added necessarily classes of business. It's really about penetrating the markets that we're in and being more effective about that.

Bob Farnham

Right, okay, that that's what I thought, and it just, kind of a qualitative view on reserves, how much of your kind of open claimed inventory is related to claims that are that are 10 years or older? I'm trying to get an idea of kind of how how long claims can stay open and kind of what you the average duration of your liabilities is is kind of what I'm getting at.

Gerry Frost

Yeah, if I look at accident years and I'll use the same sort of the same accident years that we put in the 10K, where we have 2023, 2022, it goes in this is prior to 2019, I would, say 99%of the claims that were reported to us are closed, so very small percentages are open.
And some are open for, there are some states that we can't, tech technically close the claim just for medical reasons and so they're open for medical only, but we're done with the indemnity portion of the claim. Yeah, 99% of those claims, I would say are closed for those that would for that prior to 2019.

Bob Farnham

Okay, so it's, so it sounds like relative to the overall workers' comp industry, your claims closures. Seem to be more quick than maybe the average for the industry. Is that inaccurate?

Gerry Frost

I believe so, and I totally give the credit to my claims organization. It is definitely in the way that Amerisafe handles claims. We still use, we call it good old fashioned claims adjusting. We meet with people, we take written statements, we manage those claims intensely, and we keep those low inventories per field case manager.
I can't stress that enough. I know that that is unique to AmeriSafe, on average across many, field case managers, on average they have less than 50 claims per adjuster.
When you think about that, they are really, they really have the opportunity to make a difference in these claims, know these claims, and that's how we're able to close them and find resolutions, getting maximum medical improvement, return those injured workers to work as quickly as we can because they have the opportunity and the means to which to close those claims.

Bob Farnham

Great, alright, thanks for being interested now.

Gerry Frost

Thank you, Bob.

Operator

And once again, that is one, if you would like to ask a question. We'll now take a follow up from Mark Hughes with Trust.

Mark Hughes

Yeah, thanks, you talked about the payroll one of the concepts that's come up from time-to-time is kind of the next job in construction do you have any view on the construction industry and the prospects there?

Gerry Frost

Look, I feel, I mean this is the world according to, but my opinion is that at least for our insured base, the economy seems to be supporting their work pretty well. I mean, we're still seeing strong payroll growth there.
We, we're finding opportunities, we think about all the things, all the headlines that I read every day, and we always contemplate how does that affect our book of business. We think about tariffs and what that could mean the construction as a whole, I know people talk about steel and those types of things, not that we're completely isolated from that, but you also think about small to mid-sized employers.
I do think we have some buffer around those types of impacts to the industry as a whole, so not immune but made somewhat insulated, I would think, immigration is again a question we've been asked about particularly regarding our construction and agriculture book.
For Amerisafe, I don't have a way of quantifying from the premium side of things, how many of our workers are non-documented workers, but I certainly we know from a claim's perspective we do have injured workers that are non-documented workers, but from a client's perspective, they are entitled to the same benefits every other worker is entitled to.
So if I play that through in my mind, what happens, for non-documented workers, particularly in our construction book or our agriculture book, could it be influential to the labor force, perhaps, but again, these are small and mid-size employers, so even if it is influential in terms of maybe less resilient labor force, perhaps that also could lead to higher wages if those jobs are replaced. With documented workers. So headline wise, those are the things I think about in terms of our industries.
Stands the economy as it stands, but I mean as of right now, obviously these things change every day, but as of right now I feel pretty strongly that our construction book and even our entire book has a bright future for 2025.

Mark Hughes

Yeah, how about the large claims for the year?

Gerry Frost

Yeah, so, you're going to laugh when I say this, Mark, but, it's been a while since I've had to use this word, but it's lumpy, so we ended the year with 18 claims.
Over a million dollars and when you look comparatively to 2023, which was a record year in terms of a low number, nine, I harken back to my lumpy word. 18 is not that unusual. I look at the five-year average of where we were at 12 months because obviously claims develop after an accident at the end of an accident year.
But if I look at the five-year average at 12 months, we average around 15, so 18 is not. Too far off of the average, but compared to 2023, that number certainly you look at it and you go, wow, that's a change. But when you look at the book as a whole, it's really not that that much of a frequency of severity. It's just there were 18 claims.
If I look at how they occurred or what industries they incurred in, it very much mirrors our book of business. And even the types of injury have been are very consistent with what we've seen in terms of the types of injuries, obviously falls and slips being the number one cause of loss. For those larger claims, and that's true for '24.

Mark Hughes

Yeah, okay, then anything on the medical inflation front. Either from cost or ability to access certain services in case of lack of capacity because reimbursement rates are too low any changes there you've noted.

Gerry Frost

No real development other than what we've shared over the last couple of quarters. Home health is still probably the one I focus on the most simply because it's such a big component of our larger claims. Home health is a big component of those costs.
So we certainly are paying attention to that, but nothing new other than that, than those things, in terms of reimbursement rate.
No, we certainly are monitoring the loss costs or the rates that are being approved by the states and how that could or could not be impactful, but there's, it's been a wide range if you look at the loss costs that have been approved for one, one or the ones that we know about for 2025 at this point, I think the highest.
A 19% decrease in Maine and the or the I say the high, the low, the decrease and then the the largest increase I think we've seen is 6.5% in Nevada, but there's there's a wide range there in the loss costs that are being approved so.
How medical costs will influence or how the reimbursement rates will influence that on a go forward basis I guess time will tell, but I don't, I can't think of anything in those rate filings that were specific to medical fee schedules being adjusted to the degree that it was a highlight in the rate filing. I don't recall that it's been more just experience.

Mark Hughes

Yeah, did you, have you averaged up the rate filings if you look at the recent trend is yeah, the average.

Gerry Frost

Yeah, I shouldn't, I don't think I have to this, but it's a decrease, of in somewhere around the mid single digit range.

Mark Hughes

Yeah, how was that? How was that mid-year or this time last year?

Gerry Frost

So, for 20, that's a good point. In 2023 we're a little, we were sort of upper single digits, so more in the 8% to 9% depending, I think we said somewhere in the range of 7% to 9%.
Yeah. For 2023, so it's a well ever so slight improvement if you're trying to get me to give you great news about rates, there you go.

Mark Hughes

Hey, it's an inflection. The trend.

Gerry Frost

(laughter) Yeah.

Mark Hughes

And then anything on the audit front is that, we're just kind of progressing through that earlier period of wage inflation and so as you do the audits on the look back, it's kind of naturally tapering. Is that a way to think about it.
Maybe the audits just naturally from a macro perspective, you you'll see a deceleration there.

Gerry Frost

Yeah, I believe we'll see a deceleration or a moderation. I don't, I don't see again looking forward to (225) based on what I know today, I don't see audit premium turning negative. I think it still remains positive. I think, the new employee count still been averaging between that 1% and 2% of the you know the things that we've been seeing each quarter and then there's been wage inflation. I don't think there's, I don't foresee that flipping to be negative.
But certainly, the year over year comparisons get tough, are going to get tougher and tougher, and there'll be a deceleration from that standpoint, but standalone audit premium I believe will still remain positive in 2025.

Mark Hughes

Yeah, and then any instances of any competitors getting a more aggressive, for workers' comp premium, it seems like you're holding your own and then some in terms of policy count and premium growth, so you wouldn't know it by looking at it in that sense, but I'm just sort of curious whether you've seen any changes.

Gerry Frost

It is very competitive, Mark. If that's a change, probably not, but as the other PNC lines have not yet rectified their issues in terms of overall results, workers' compensation remains attractive.
And so as long as the combined ratios for the industry remain attractive, we will have competitors and we will have competitors, dipping into the high hazard space, but that's a reality that we are prepared to face.

Mark Hughes

Yeah, I zipping into high hazard is probably a bad approach.

Gerry Frost

You're asking me for advice, yes, I would say that. (laughter)

Mark Hughes

That's super dangerous. You need to stay away. Any early thoughts on loss pick for 2025?

Gerry Frost

Yeah, I, as of right now, I believe we're going to hold at 71.

Mark Hughes

Okay. Very good, thank you for all the answers.

Operator

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

Gerry Frost

Profitable incremental growth is the focus goal for the AmeriSafe team, one that we delivered on in 2024 and are well positioned for 2025.
Thank you for joining us today.

Operator

And once again that does conclude today's conference. We thank you all for your participation. You may not disconnect.