AMERISAFE(US:AMSF)2023-10-26 20:33Financial Data and Key Metrics Changes - In Q3 2023, AMERISAFE reported net income of $10 million or $0.52 per diluted share, compared to $11.4 million or $0.59 per diluted share in Q3 2022, indicating a decrease in net income [8][9] - The combined ratio for the quarter was 90.6%, and return on average equity was 11.8% [5] - Gross written premiums increased to $70.8 million, a 3.9% year-over-year growth from $68.2 million in Q3 2022 [8][9] - The expense ratio rose to 33.6% from 28.9% in the same quarter last year, primarily due to increased underwriting and other expenses [9] Business Line Data and Key Metrics Changes - The accident year loss ratio remained steady at 71%, with favorable prior year development of $10.2 million, contributing 15.2% loss ratio points [6] - Payroll audit and related premium adjustments increased premiums written by $5.6 million, compared to an increase of $3.4 million in Q3 2022 [8] Market Data and Key Metrics Changes - The overall workers' compensation market remained stable, with declining rates partially offset by wage inflation [5] - Wage inflation was reported at 5.9%, down from previous quarters but still higher than the industry average [17] Company Strategy and Development Direction - AMERISAFE's strategy focuses on maintaining underwriting discipline and high retention rates, achieving a 95% retention rate for renewal policies [5] - The company declared a special dividend of $3.50, reflecting operational excellence and commitment to shareholder value [7] - A new Chief Sales Officer was appointed to enhance relationships with agents and improve business processes [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the potential impact of medical inflation on workers' compensation but noted no significant data indicating a widespread effect [13] - The company is closely monitoring the economic environment and claims trends, particularly in the construction sector, which remains resilient [27] - Management expressed confidence in the company's capital position and the potential for future growth, while also considering strategic options such as mergers and acquisitions [30] Other Important Information - The investment portfolio showed a net investment income increase of 16.1% to $8.1 million, driven by higher yields [10] - Book value per share increased by 5.7% from year-end 2022, reaching $17.51 [12] Q&A Session Summary Question: ELCM number - The ELCM number was reported as 150 [12] Question: Impact of medical inflation on workers' compensation - Management believes medical inflation will eventually affect the workers' compensation system but lacks significant data to confirm this [13][14] Question: Top line growth support - Growth in policy count and audit premiums contributed to the top line, despite rate declines [16] Question: Large claims count - The company reported eight claims over $1 million, down from eleven the previous year [18] Question: Reinsurance treaties and profit sharing - Adverse development from older treaties caused a reduction in profit sharing, but it did not impact overall net aggregate development [20] Question: Development of COVID years claims - Claims from the COVID years are developing within expectations, with no significant deviations noted [22] Question: Construction end market outlook - Payrolls in the construction sector remain strong, indicating resilience despite potential downturns in commercial construction [27] Question: Capital position and special dividend - The special dividend reflects excess capital built from profitable underwriting, with no current plans to leverage debt [30] Question: Loss cost trends - NCCI's latest loss cost average is around 7.5%, while AMERISAFE's effective loss costs for the quarter averaged around 5% [32]