Release Date: July 30, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AMERISAFE Inc (AMSF, Financial) reported a year-over-year gross premiums written growth of 6.6% in the quarter.
- The company achieved a strong policy retention rate of 93.3%.
- AMERISAFE Inc (AMSF) experienced $8.1 million in favorable development on prior accident years, primarily from 2020, 2021, and 2022.
- The company's investment portfolio remains high quality, with an average AA- credit rating and a duration of 3.9 years.
- AMERISAFE Inc (AMSF) declared a regular quarterly cash dividend of $0.37 per share.
Negative Points
- Net income for the second quarter of 2024 was $11 million, down from $15.6 million in the second quarter of 2023.
- Net investment income decreased by 3.6% to $7.4 million due to a lower asset base compared to the prior year.
- Total underwriting and other expenses increased to $20.4 million from $20 million in the second quarter of 2023.
- The expense ratio for the quarter was 29.8%, slightly higher than the 30.4% in the prior year.
- The company is facing continued rate softening in the workers' compensation market, which remains highly competitive.
Q & A Highlights
Q: Can you expand on the growth in the quarter and the sustainability of recent efforts and investments in agency relationships?
A: This is our fourth quarter of either slight growth in voluntary deck premium or relatively flat. We've made a concerted effort with our employees and agents to make the pipeline more efficient and build on agent relationships. We've seen voluntary debt growth of 2.7% in the quarter and policy count growth for the last five quarters, indicating our efforts are generating business growth. β Gerry Frost, President, CEO, Director
Q: What was the ELCM (Expected Loss Cost Multiplier) in the quarter?
A: The ELCM was 148. β Gerry Frost, President, CEO, Director
Q: How are medical inflation and fee schedules impacting costs?
A: Fee schedules have generally contained costs, but there is pressure from providers regarding reimbursement rates for workers' compensation. We are monitoring this closely as it could impact our cost structure. β Gerry Frost, President, CEO, Director
Q: Can you provide details on the approved loss costs and any trends in new state data?
A: The overall approved loss cost is around an 8% to 9% decrease for the year 2024, which aligns with industry predictions. The industry accident year combined ratios are below 100%, indicating profitability but with some deterioration. β Gerry Frost, President, CEO, Director
Q: How are large claims trending through the first six months?
A: We have had four claims over $1 million in the first six months. The frequency of severity in terms of million-dollar claims has not been high. β Gerry Frost, President, CEO, Director
Q: Why was reserve development lower this quarter compared to previous quarters?
A: Reserve development is not linear and depends on individual cases. Despite being lower than last year, $8 million in favorable development is still a healthy number. Our reserving philosophy remains unchanged. β Gerry Frost, President, CEO, Director
Q: How is the construction end market performing?
A: Our insureds are working, contributing to favorable audit premiums and wage inflation within our industry groups. Wage inflation was around 6% for the quarter, primarily from increased wages rather than new employees. β Gerry Frost, President, CEO, Director
Q: What is driving the increase in the expense ratio for the first six months?
A: The increase is due to further investments in sales and underwriting. Expenses are expected to level off, returning to our annual expense ratio range. β Anastasios Omiridis, CFO, Executive Vice President
Q: Where is the policy count growth coming from?
A: Policy count growth is attributed to pipeline efficiency and better handling of agency relationships. It is not specific to any distribution network, industry group, or state. β Gerry Frost, President, CEO, Director
Q: How are you gauging the outlook on severity, especially with changes in reimbursement schedules like in Florida?
A: We are closely monitoring changes like Florida's adjustments to physician and surgical procedure charges. Our claims adjusters quickly reflect these changes in initial case reserves, which helps in pricing and maintaining our loss ratio. β Gerry Frost, President, CEO, Director
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
