Earnings call transcript: AMERISAFE Q2 2025 results show mixed performance

AMERISAFE Inc. (AMSF) reported its financial results for the second quarter of 2025, revealing a mixed performance. The company posted earnings per share (EPS) of $0.53, slightly missing the forecast of $0.55, marking a negative earnings surprise of 3.64%. Revenue came in at $79.7 million, narrowly missing the expected $79.87 million. Despite these misses, AMERISAFE’s stock price rose by 6.08% to $46.23 in aftermarket trading, buoyed by strong product and operational updates. The company maintains an impressive 10.7% dividend yield and, according to InvestingPro analysis, trades near its Fair Value, suggesting balanced market pricing.

Key Takeaways

• AMERISAFE reported Q2 2025 net income of $14 million, up from $11 million in Q2 2024.
• Gross written premiums increased by 4.3%, reaching $79.7 million.
• The company maintained a high renewal retention rate of 93.8%.
• Stock price surged by 6.08% in aftermarket trading despite earnings miss.
• The company is focusing on enhancing agent effectiveness and scalability.

Company Performance

AMERISAFE demonstrated robust performance in Q2 2025, with net income rising to $14 million from $11 million in the same period last year. The company’s focus on improving ease of doing business and agent effectiveness contributed to a 3.4% growth in policy count. Despite a reduction in the number of agents, AMERISAFE maintained a high renewal retention rate of 93.8%, reflecting strong customer loyalty.

Financial Highlights

• Revenue: $79.7 million (4.3% increase YoY)
• EPS: $0.53 (compared to $0.57 in Q2 2024)
• Gross written premiums: $79.7 million (4.3% increase)
• Net investment income: $6.7 million (10.2% decrease YoY)
• Book value per share: $13.96 (3.3% increase YTD)

Earnings vs. Forecast

AMERISAFE’s Q2 2025 EPS of $0.53 fell short of the $0.55 forecast, resulting in a negative surprise of 3.64%. Revenue also narrowly missed expectations, coming in at $79.7 million versus the forecasted $79.87 million. This marks a slight deviation from previous quarters, where AMERISAFE had generally met or exceeded analyst expectations.

Market Reaction

Despite the earnings miss, AMERISAFE’s stock saw a significant increase of 6.08% in aftermarket trading, reaching $46.23. This positive market reaction may be attributed to the company’s strategic focus on product innovation and operational efficiency, as well as its strong balance sheet and consistent underwriting profitability. With a beta of 0.38, AMERISAFE demonstrates lower volatility compared to the broader market, making it an attractive option for stability-focused investors.

Outlook & Guidance

Looking ahead, AMERISAFE anticipates maintaining its full-year expense ratio in line with previous years. The company is closely monitoring potential market cycle shifts, including changes in NCCI medical severity and California loss costs. AMERISAFE remains committed to risk selection and strengthening agent relationships to sustain its competitive edge.

Executive Commentary

CEO Janelle Frost highlighted the company’s achievements, stating, "We are pleased with this quarter’s continued top line growth and industry-leading operating ROE of 14.9%." She also emphasized the importance of maintaining a low average of claims per adjuster, which stands at below 50.

Risks and Challenges

• Potential changes in California’s loss costs could impact profitability.
• Decreases in net investment income may affect overall earnings.
• Industry-wide increases in medical severity could pressure margins.
• Maintaining high renewal retention rates in a competitive market.
• Managing operational costs amidst policy count growth.

Q&A

During the earnings call, analysts inquired about new business growth and construction sector trends. AMERISAFE addressed potential pressures on the loss ratio and reaffirmed its ongoing capital management strategies, highlighting the company’s proactive approach to navigating industry challenges.

Full transcript - AMERISAFE Inc (AMSF) Q2 2025:

Conference Operator: Good day, and welcome to the Amerisafe Second Quarter twenty twenty five Earnings Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Kathryn Shirley. Please go ahead.

Kathryn Shirley, Investor Relations, Amerisafe: Thank you, operator, and good morning, everyone. Welcome to the Amerisafe twenty twenty five second 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 intended to fall within the Safe Harbor provided under the securities laws. 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 a result of risks, uncertainties and other factors, including factors discussed in the earnings release, in the comments made during today’s call and in the Risk Factors section of our Form 10 ks, Form 10 Qs 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.

Janelle Frost, President and CEO, Amerisafe: Thank you, Katherine, and good morning, everyone. I am pleased to begin today’s call highlighting our continued success in growing premiums by increasing policy count, exhibiting pricing discipline, and strong renewal retention. Our risk selection coupled with working more effectively with our agents generated 12.8% growth in voluntary premiums for policies written in the quarter. Our in force policy count grew 3.4 in the quarter, supported by new business growth and 93.8% renewal retention. These accomplishments took place in a competitive market where workers’ compensation remains the most profitable in the property and casualty space.

According to NCCI, the industry’s combined ratio remained below 100% for 2024. However, it did not improve over 2023 unlike the other P and C lines which are getting rate increases. Workers’ compensation approved loss costs on average are down mid single digits with California being a significant outlier with an 8.7% increase. While AMERISAFE only has ancillary exposure in California, we cannot ignore the potential for this dramatic increase to signal a shift in the cycle. Another potential sign for a shift was NCCI’s reported six percent increase in medical severity for 2024.

Regardless if the market remains soft or begins to harden, Amerisafe is well positioned both operationally and with a strong balance sheet to respond and generate consistent underwriting profitability. As for Amerisafe’s loss experience, frequency was down compared to 2024 and severity trends are within our expectations. Our current accident year loss ratio was 71% as of the end of the second quarter. In addition, we had $8,600,000 of favorable development in the quarter as our claims team continues to demonstrate expertise in finding opportunities to close claims effectively and efficiently. This quarter accident years 2020 and prior drove most of the favorable case development.

Further, on 07/23/2025, our Board of Directors approved the reauthorization of a $25,000,000 share repurchase program replacing the prior program. Since the inception of our initial program in February, we have repurchased approximately 1,750,000.00 shares at an average cost of $25.69 per share, totaling $44,800,000 In addition, the company’s Board of Directors declared a regular quarterly cash dividend of $0.39 per share payable on 09/26/2025 to shareholders of record as of 09/12/2025. These ongoing capital management strategies reflect our confidence in the long term value of our business and our commitment to delivering to shareholder returns. I’ll now turn the call over to Andy to discuss financial results surrounding our underwriting profitability and investments.

Andy, CFO, Amerisafe: Thank you, Janelle, good morning, everyone. For the second quarter of twenty twenty five, Amerisafe reported net income of 14,000,000 or $0.73 per diluted share and operating net income of $10,000,000 or $0.53 per diluted share. During the second quarter of twenty twenty four, net income was $11,000,000 or $0.57 per diluted share and operating net income was $11,100,000 or $0.58 per diluted share. The higher reported net income was primarily driven by stronger valuations across our equity holdings, which resulted in a net unrealized gain on equity securities of $1,800,000 during the quarter, in addition to $3,100,000 of realized gains also primarily from equity securities. Gross written premiums were $79,700,000 in the quarter compared with $76,400,000 in Q2 of twenty twenty four, increasing 4.3%.

Audit premiums continued to moderate, which increased the top line by $1,500,000 compared with $7,300,000 in the year ago period. Despite the audit premium headwinds, voluntary premium growth on policies written in the quarter was 12.8% fueled by new business production and strong retention. Our total underwriting and other expenses were $21,700,000 in the quarter compared with $20,400,000 recognized in the prior year quarter. This increase resulted in an expense ratio of 31.3% compared with 29.8% in the year ago quarter. The expense ratio reflects ongoing investment in AMERISAFE’s growth.

Further, audit premium, which is earned immediately has declined in comparison to the prior year, but is still a material contributor to net premiums earned, while voluntary premiums are earned over time creating an expense premium mismatch that elevates the ratio. Lastly, 100 basis points of the current quarter’s expense ratio is due to increase in insurance based assessments. We anticipate the full year expense ratio to be in line with previous years. Our effective tax rate was 20.1% compared to 20% in the prior year quarter. Turning to our investment portfolio.

In the second quarter, net investment income decreased 10.2% to $6,700,000 driven by a decrease in investable assets following the payment of the special dividend. At quarter end, we had approximately $8.00 $7,000,000 in investments, cash and cash equivalents compared to $884,000,000 at 06/30/2024. On a consecutive quarter basis, net investment income increased by 60 basis points. The reinvestment rate environment remained strong this quarter with yields on new investments exceeding portfolio roll off by two thirty basis points contributing to a tax equivalent book yield of 3.85 compared to 3.79% in the second quarter of twenty twenty four. Our investment portfolio remains high quality carrying an average AA- credit rating with a duration of four point five years.

The composition of the portfolio is 62% in municipal bonds, 21% in corporate bonds, 4% in U. S. Treasuries and agencies, 7% in equity securities and 6% in cash and other investments. Approximately 50% of the portfolio is classified as held to maturity. As a reminder, these securities are carried at amortized cost and therefore unrealized gains and losses are not reflected in our reported book value.

Our capital position is strong with a high quality balance sheet, solid loss reserve position and conservative investment portfolio. During the second quarter, the company repurchased 63,000 shares at an average cost of $44.55 totaling $2,800,000 And finally, couple of other topics. Book value per share increased to $13.96 up 3.3% year to date. Statutory surplus was $257,000,000 compared to $235,000,000 at year end 2024. And lastly, we will be filing our 10 Q with the SEC later today after the close of the market.

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

Conference Operator: Thank If you’re using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We’ll pause for just a moment to allow everyone an opportunity to signal. We will now take our first question from Mark Hughes with Truist.

Mark Hughes, Analyst, Truist: Yes, thank you. Good morning. Good morning, Chanel.

Janelle Frost, President and CEO, Amerisafe: Good morning, Mark. Good morning.

Mark Hughes, Analyst, Truist: Good morning. 13%, pretty impressive. You described it in the usual way, good retention and strong new business, but could you give something as gooder or stronger than last quarter? So I’m just sort of curious what you saw in the quarter that drove that business.

Janelle Frost, President and CEO, Amerisafe: Yes, Mark. I’ll start by saying this. Shout out to the AmeriSafe team. The employees have truly been focused on ease of doing business, agent effectiveness and creating scalability. I’ve been talking about it for probably look back and see how many earnings calls now and they really are seeing the fruits of their labor.

Coming into this year and at the end of last year, we said we were looking for small incremental growth. We are achieving that. We’ve grown policy count 5.8% since year end, 3.4% in the quarter. But yet sticking to our knitting, sticking to our risk selection process, starting from the beginning of the sales process with our sales folks on the ground, working with agents, making sure that we are working with the right agents that fit Amerisafe’s profile onto safety being part of that process. Still, you know, 93% of our accounts are still getting that pre quote safety inspection or safety visit with our safety folks out on the ground visiting with prospects, understanding those risks, providing that information back to my underwriters.

And then our underwriters do what they do best in terms of risk selection, understanding risk, pricing it appropriately. I know we don’t give pricing information anymore on this call, but I’ll say this about our risk selection process. If I look at that in force policy count, 83 to 85% of that is still within those hazard groups E, S, and G, which is where we consider our specialty, where we consider our sweet spot. So that’s a very long answer to say that I just feel like all of those things collectively are coming together with the intention of finding ways to address this very competitive market that we’re in. For the longest time, Amerisafe probably took more of a defensive position in terms of the market price.

And now we look at the stock market has been gone for I think we’re in our tenth maybe tenth or eleventh year of approved loss cost continuing to go down with some improvement. And we’re not in double digit declines anymore. We’re mid single digits. But finding a way to respond to that market and still keep our risk selection profile and what we know we want to underwrite to in terms of profitability top of mind and finding ways to get that done.

Mark Hughes, Analyst, Truist: Very good. How about the average policy size? I think policy count up 6%, written up 13%. And I know that’s kind of apples and oranges, but any change in the average policy size?

Janelle Frost, President and CEO, Amerisafe: A slight change, I would say. Again, proved loss costs, I think, are down mid single digits, so in that five to six range. I do know I can say this. I know that wage inflation, at least for this past quarter, wages were up roughly around 5%. And even NCCI mentioned for 2024 that wage growth did not exceed the loss cost changes.

For the longest time, we were receiving premium dollars basically quasi rate from just wage inflation stand alone. That has sort of balanced out now in terms of wage growth being somewhere around the 5% range, loss cost being in that 5% to 6% range. So the average premium size may have changed ever so slightly, maybe slightly down, but our sweet spot is still in that 25% to thirty five percent one thousand dollars range.

Mark Hughes, Analyst, Truist: Got you. What about medical inflation and maybe I’ll just a general comment there and then the Medicare fee schedules, whether any of these updates are impacting your view on inflation. Think there’s a lot of detail that I assume folks are still working through, but maybe some of the reimbursement arrangements for specialists, maybe they’ve gone up. Just curious if you have any observations there.

Janelle Frost, President and CEO, Amerisafe: Yeah. As I said in my opening remarks, you know, NCCI reported for 2024 medical severity had gone six percent. Now, they do a workers’ comp medical index and that number was two point eight percent up. So the remainder of that NCCI really attributed to the utilization, which I think is something everybody in the industry has been talking about for some time now and how we view that, what is actually happening, and then how we view that in terms of reserves. Going back to my claims team, I feel like this is where they shine the most in terms of how they initially set up those reserves, how they view those claims on a long term basis.

We haven’t really changed our view, again, because we use long term averages when we think about medical severity, so we have not changed our reserving practices in terms of some of the noise that I think people are starting to see in the data. Probably two years ago we were talking about home health as an example of just pockets of medical costs where we were seeing inflation. Right? It was harder to find providers in certain parts of the country and then we were able to find providers the rates had gone up significantly. I think there are in the industry, again, pockets of where we’re seeing that.

Probably a little bit more surgical procedures in terms of maybe increased hospitalizations. Nothing that I can point to in our particular data right now that would say that I feel like we need to change our reserving practices. Again, kudos to my claims team because they really have taken a long term view of that. And we have a very consistent book of injury types and the severity of our injuries. Are not many things that we haven’t seen at this point, for lack of a term, knock on wood.

I don’t need that to happen today. So I feel very confident in our case reserving process.

Mark Hughes, Analyst, Truist: Very good. Any stats on new business, like new business production year over year in the quarter? I know that’s something you haven’t historically disclosed.

Janelle Frost, President and CEO, Amerisafe: Yes. I hear you. We’re very excited about the new business growth, not a number I would necessarily want to put out there because of my competitors listening to this call. But we are having success. And I’ll say this.

If you look and I’ll try to back into what I mean in terms of the new business growth. I mentioned renewal retention at ninety three point eight percent and that was on a policy count basis. And yet policy count grew 3.4% in the quarter. So you can back into that math. But I’ll say this, as far as new business and talking about initially when I said ease of doing business and having more effective relationships with our agents.

If you look at our agent count, at the end of twenty twenty three, 2,200 agents. At the end of twenty twenty four, roughly 1,700 agents. By second quarter, we were down to almost 1,500 agents, yet policy count has gone up. So I think that speaks to how we’ve been able to find new business and be more effective with fewer agents.

Mark Hughes, Analyst, Truist: The addition by subtraction method. I’ll ask one final question. Construction, what’s the vibe in construction?

Janelle Frost, President and CEO, Amerisafe: Great question. We’re still seeing wage growth there in terms of the payrolls that are being reported to us. Interestingly enough, this past quarter, we did not see an increase in new employee count. We actually saw maybe even a slight decrease. So something we’re keeping our eye on there.

That can go a couple of different ways. Obviously, feel like new employees tend to drive up claim counts, tend to drive up frequency. So if we have our druthers, we’d rather extend work hours. And anecdotally, we’re hearing that. We’re hearing things about extended work hours, same employees working longer hours.

My thought process behind it, particularly in construction and our agriculture book of business, is somehow immigration and undocumented workers affecting those numbers to be seen. But it was an interesting data point for this particular quarter. So if you think about it in terms of let’s play that through and say, okay, well, is immigration or something to do with immigration. So not adding on incremental staff, new workers, extended work hours could be good for frequency. If indeed those workers do get if undocumented workers do get replaced with higher wage earners, that could be a boost in premium dollars.

At the same time, if they’re replaced with higher wage earners and they’re new to that industry, it could also drive up frequency. So I gave you a lot of different scenarios there, but I definitely think that impacts or has the potential to impact construction and our agriculture books in particular.

Mark Hughes, Analyst, Truist: Very good. Appreciate it.

Janelle Frost, President and CEO, Amerisafe: Thank you, Mark.

Conference Operator: We will go next to Bob Farnam with Janney.

Bob Farnam, Analyst, Janney: Hey, there. Good morning. Just I think one more question in lines of kind of what Mark was asking about. I just wanted to know in terms of caseload per claim personnel. Didn’t know if there’s been any changes to the caseloads over the last few years.

Janelle Frost, President and CEO, Amerisafe: No, sir. Great question, and good morning, Bob. We’re still at below 50 claims on average per adjuster, so no shifts there.

Bob Farnam, Analyst, Janney: Okay. And you’ve been at the 71% active year loss ratio assumption for a few years now. Given the changes in the loss cost, am I right to assume that there’s been some upward pressure there that, if anything, that might go up at some point in the future?

Janelle Frost, President and CEO, Amerisafe: I think that’s a good assumption. There’s definitely pressure there, to your point, as loss costs continue to be declined. One of the beauties, I think, of Amerisafe again, shout out to my claims department in the way we think about reserving and we put those reserves up to ultimate relatively quickly, it does help us in terms of how we price our product and how we think about profitability on the risk selection side of things. But there’s no question in terms of just the absolute number of claims and the claims dollars that we’re having to spend that there’s pressure on that 71% on a go forward basis. Unless something changes in the marketplace.

I’d throw that out there just in case. Yeah. Unless something changes. Yeah. In case something changes.

But if continued trends happen in terms of loss costs themselves, definitely pressure there.

Bob Farnam, Analyst, Janney: Right. Okay. And in terms of capital management, how are you balancing kind of share repurchases versus the special dividend? Is there any thought process behind how much you’re allocating to each?

Andy, CFO, Amerisafe: Bob, it’s Andy. How are you? Right now, we looked at the buyback. So of course, we want to buy back our stock at the right time. So we did go to the Board, as Janelle said, and it was reauthorized up to $25,000,000 And then again, if the inquiry is how we balance out, does that mean it have any connotations towards the special dividend?

We assume there will be a special dividend. The recommendation is there, and there is capital sufficiency. I mean, that’s probably the best way I can answer it for you.

Bob Farnam, Analyst, Janney: Okay. All right. Got it. Last question I had here was so it sounds like the expense ratio this year is going to be 30ish, maybe a little under. Do you have a kind of a long term target that you want to keep your expense ratio around?

I’m not sure if it’s at 30 or above or below.

Andy, CFO, Amerisafe: So for the sake of not being too forward looking, what we assume is, and for this year as well, that we will be within the range that we have been historically.

Bob Farnam, Analyst, Janney: And the historical range, you don’t expect any changes, at least for now, without getting into

Andy, CFO, Amerisafe: No. Fourth if I can add just one other. If you look at the quarter, we’re at 31.3%. Look at the year, we’re at 30.6. So again, the assumption is that we’ll be within historical range.

Bob Farnam, Analyst, Janney: Okay. All right. Thanks for the color.

Conference Operator: We’ll return next to Mark Hughes with Truist.

Mark Hughes, Analyst, Truist: Yes, just one follow-up. The policyholder dividends were up a bit in the quarter. What drove that?

Andy, CFO, Amerisafe: Mark, I mean, the policyholder dividend is, you know, some of our policyholders did qualify for it. And it isn’t linear. It’s lumpy. So if you recollect even from last year, it goes up and down each quarter. So, you know, that’s all I can say is there’s really not any spike.

It’s just that we had more policies qualify for the policyholder dividends.

Mark Hughes, Analyst, Truist: Yes. Is that can it be interpreted as a competitive issue that on some policies you are motivated to pay out higher dividends from a competitive standpoint? Or is it a reflection of better loss experience and that’s what’s driving it? How to think about that?

Janelle Frost, President and CEO, Amerisafe: It’s probably a combination of both, Mark. I’ll say this about policyholder dividends. For Amerisafe, it’s really made up of three states: Florida, which happens to be our largest state. There’s something you can read into that Wisconsin and Virginia. And so obviously in Florida, as you know, is administrative pricing state, so policyholder dividends is certainly a way to compete.

But it also involves loss experience.

Mark Hughes, Analyst, Truist: Yes. Would one say maybe Florida rates being flat this year instead of down that there is a little more competition by way of policyholder dividends? Is that a

Janelle Frost, President and CEO, Amerisafe: did say that.

Mark Hughes, Analyst, Truist: Okay. All right. I think I just said it. Very good. Okay.

All right. Thank you. Appreciate it.

Janelle Frost, President and CEO, Amerisafe: Thank you, Mark.

Conference Operator: It appears there are no further questions at this time. I’ll turn the call back to Janelle Frost, CEO, for any additional or closing remarks.

Janelle Frost, President and CEO, Amerisafe: We are pleased with this quarter’s continued top line growth and industry leading operating ROE of 14.9% supported by our investment in our people and technology and delivering on our commitment to our stakeholders. Thank you for joining us today.

Conference Operator: Thank you. Ladies and gentlemen, that will conclude today’s call. We thank you for your participation. You may disconnect.

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