AMERISAFE, Inc. Aktie

Good day, and welcome to the AMERISAFE First Quarter 2026 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Kathryn Shirley, Chief Administrative Officer. Please go ahead.

Thank you, operator, and good afternoon, everyone. Welcome to the AMERISAFE 2026 first quarter investor. If you have not received the earnings release, it is available on our website at amerisafe.com. Today, 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 law. 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 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-K, Form 10-Q and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statements.

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

Thank you, Kathryn, and good afternoon. We are pleased with our solid start to 2026, marked by continued growth, disciplined execution and attractive underwriting performance. During the quarter, we grew net premiums earned by 9%. We also delivered a combined ratio of 93.2% and produced operating earnings of $0.50 per share. These results reflect steady operating momentum amongst the competitive backdrop facing the workers' compensation industry.

The workers' compensation market remains competitive and continues to operate in a prolonged soft pricing environment amid persistent industry headwinds, such as claims severity and economic uncertainty. At the same time, workers' compensation remains the most consistently profitable line within the P&C industry, supported by long-term claim development and stable capital structures. In this environment, sustained success depends on appropriately priced risk selection and deep industry experience.

At AMERISAFE, our differentiated approach to servicing high hazard industries continues to support consistent returns across the cycle. Our eighth consecutive quarter of premium growth, continued improvement in our expense ratio and favorable prior year loss development underscores the strength of our operating model and the dedication of our team. We believe these fundamentals position us well to navigate current market conditions while continuing to create long-term value for our shareholders.

I'll now turn the call over to Vincent to walk through the details of our growth and underwriting performance for the quarter.

Thanks, Janelle. In the first quarter of 2026, gross premiums written were $88.5 million compared to $83.8 million in the first quarter of 2025, increasing 5.6%. Retention for policies for which we offered renewal was 92.4% in the quarter, and pricing remains strong, helping offset continued downward pressure in file loss costs. New business opportunities continue to grow despite steady competition. Together, new and renewal voluntary premium increased 8.2% in the quarter, reflecting ongoing investments in distribution effectiveness and recognition of our commitment to delivering outstanding safety and claim services to our policyholders.

In-force policy count increased 1.7% in the quarter and 9.5% since Q1 2025. Audit premium and related adjustments remained positive, adding $3.7 million in the quarter compared to $5 million in the first quarter of 2025. And net earned premiums were $75.1 million in the quarter growing 9% year-over-year. While we don't usually comment on policyholder dividends, I do want to give some color since it was seemingly an outlier for this quarter. If you look at recent quarter history, you'll see that there is some variability in this ratio quarter-to-quarter, albeit in a relatively small range.

In last year's first quarter, the dividend ratio was 0.9%, while in the subsequent quarter, Q2 2025, it was 1.8%. We have not changed our policyholder dividend strategy or plans. And this first quarter result was within our expectations. In the few states where we do offer policyholder dividends as a competitive tool. The ultimate outcome depends upon individual policyholder experience for policies in the quarter being evaluated. With recent policy count growth it is not unexpected that more policyholders could qualify for dividends.

And finally, back to the routine and update on payroll growth. We continue to see positive wage growth in our targeted classes of business, coming in at 4.5% for the quarter, while headcount change was essentially flat. We believe continued payroll growth across our targeted industries indicates relatively healthy business activity despite ongoing economic uncertainty.

Further payroll growth and in particular, wage growth and help offset ongoing pressure on rates, both from competition and filed loss costs. That concludes the overview of premium results.

I will hand the call back to Janelle for more information on claims, investments and other financial metrics.

Thank you, Vince.

Next quarter, I'll have the pleasure of passing the financial remarks off to Guillermo Ramos, our new CFO. Until then, bear with me 1 more time as I bloom the financial results with other operational commentary. The current accident year loss ratio was 72% for the quarter compared to 72% for the accident year 2025 at 12 months, but 71% at the first quarter of 2025. As we've discussed over the last 2 quarters, continued rate pressure and general high claim severity are creating modest upward pressure on the current accident year.

That said, large claim losses incurred can be lumpy. We ended the first quarter of the current accident year with no claims with incurred value over $1 million compared to 2 in the first quarter of accident year 2025. As for prior accident years, we had $7.6 million or 10.1 points of favorable development in the quarter compared to $8.7 million or 12.7 points in the prior year quarter resulting in a net loss ratio of 61.9% for the quarter.

The impact of favorable prior year development to the net loss ratio quarter over prior year quarter is influenced by the growth in net premiums earned. To round out the combined ratio, total underwriting and other expenses were $22.3 million for the quarter, resulting in an expense ratio of 29.7% compared to 29.9% a year ago. This marks the third consecutive year-over-year improvement, reflecting disciplined expense management and continued operating leverage as our strategic growth initiatives drive growth in net premiums earned.

During the first quarter of 2026, net income was $8.1 million or $0.43 per diluted share, while operating net income was $9.5 million or $0.50 per diluted share. This compares to net income of $8.9 million or $0.47 per diluted share and operating net income of $11.4 million or $0.60 per diluted share in the first quarter of 2025. The effective tax rate for the quarter was 19.8% compared to 20.2% in the prior year quarter.

Turning to our investment portfolio. Net investment income decreased 0.8% to $6.6 million due to lower average investable assets. However, new many yields were favorable during the quarter with the yield on new investments increasing 174 basis points in comparison to the portfolio roll off, driving our tax equivalent yield to 3.9% or 7 basis points higher than the first quarter of 2025.

The portfolio remains high quality, carrying an average AA- credit rating and a duration of 4.4 years. Asset allocation was largely unchanged with the portfolio composition being 61% municipals, 24% combined corporate bonds, 3% U.S. treasuries and agencies, 7% equities and 5% in cash. Approximately 43% of our portfolio is designated as held to maturity during a net unrealized loss position of $7.9 million at quarter end.

As a reminder, these held-to-maturity securities are carried at amortized costs, and therefore, unrealized gains and losses on these securities are not reflected in our book value.

Also during the quarter, we repurchased nearly 120,000 shares common stock under the company's share repurchase program at an average cost of $33.60 per share for a total of $4 million. The remaining outstanding share repurchase authorization under the program as of March 31 is $12.9 million. Overall, our capital position is strong, supported by high-quality balance sheet, solid reserve position and prudent investment strategy. At quarter end, we held approximately $774 million in cash and invested assets.

Finally, a couple of other topics. Book value per share at quarter end was $13.18 and we will file our 10-Q on Thursday, April 23, after market close.

With that, we'll open the call up for questions.

[Operator Instructions] And we'll take our first question from Mark Hughes with Truist.

Janelle, how did you see inflation in the quarter? It sounds like the medical inflation, claims inflation, it sounds like the large claims were negligible. But any observations, yes about any marginal changes?

No. No marginal changes from what we talked about at year-end, Mark. Medical efficient is real. We are living it. We are reserving properly for it. I still feel I'll stick by what I said at year-end. I still feel fee schedules are doing their job and helping us contain costs. But I also think in CCI recognizing last year, this time last year, the medical inflation was -- medical severity was up 6% eye-opening to the industry. I think CEOs have been talking about it for a while. And we're just a few weeks away from seeing what that number was for 2025 current CCI as well. So I would expect but there's continued pressure on medical inflation industry-wide, not just with our severe claims.

Yes. What do you think they'll say, I guess our observation was it seemed like 2024 and 2025 or not starting off in as good a shape as some of the older accident years? Do you have any observations about what you've seen in the industry data..

Yes. That's a great point, Mark. I think when you look at even in CCI last year and their data had each accident year combined ratio seemed to be worsening, getting closer and closer to that 100% combined ratio for the industry. So I mean, I think they're industry-wide, we're seeing a deterioration in those results. And you're right, accident year '24 and '25 for the industry as a whole. I think there is definitely pressure there. But when you're talking 12 years of declining rates, I think that's a natural progression, right, that there's going to be pressure there.

Even though frequency for the industry has continued to go down, medical inflation and the severity on claims has ticked up I mean in a declining rate environment. So I think there's going to be continued pressure for the industry on those accident year combined ratio. So it would be very interesting to see on an accident year basis, what those projections are reported versus, I guess, projected, but also how much that affects the calendar year, like how much favorable development the industry has experienced from older accident years. To your point, that those accident years '22 and prior versus what's developing or what emergence we've seen out of '24 and '25.

Yes. How about NCCI loss costs. I think you've shared kind of the recent experience in some of the updates you've been getting, what does that trend look like?

Mark, this is Vince. We're still looking at mid-single-digit decreases for the year. Most states have already put in their filings for 2026. Just to give you some sense of the range in our 5 biggest states, they range from down almost 9% to down 1.2% and everything in between with a few outliers.

Understood. And then Janelle, I don't know if you gave any specifics on payroll. I think you might have done that in the past, kind of payroll growth or headcount growth, any statistics there you can share?

Its Vince, I'm going to jump in for Janelle. I've got it right in front of -- we're seeing payroll growth across all of our major classes to varying degrees. But it's predominantly wage growth, as we mentioned in the prepared remarks. Headcount growth has been flat to slightly down, different quarters, it varies quite a bit, but -- across all industries, payroll growth continues to be positive.

[Operator Instructions] And we will take our next question from David Sumar with Citizens JMP.

This is David on for Matt. I just had one question. For the voluntary premium growth, are there any certain industries or areas of the market that are driving growth more than others right now?

No. I would say it's been pretty steady across our book of business, which is 1 of the things that we've actually been happy to see as we've had these strategic initiatives to grow policy count into grow premium that the changes that we've made have been serving us across industries, across states. In other words, we don't see pockets of what's working here. It's not working there. It's been pretty prolific throughout the book of business.

So -- even if you look at the 10-K last year, which last year was when our growth initiatives really started taking root in terms of the numbers we reported. If you look at the 10-K and the shift between industry groups or even the ships among the states, there's really not a lot of change over '24, '25 over '24.

And that held true in the first quarter as well.

We will take our next question from Bob Farnam with Brean Capital.

One question. I have one broad question and one specific question. So the specific question is you talked about the duration of your assets for years. I'm just -- a little over 4 years. So I just wanted to know kind of how does that compare to the duration of your liabilities?

Great question. Yes. So our average duration on our portfolio -- on our molality is between 3 and 4 years. So as you know.

Which is surprising.

SP-3 I'm sorry, go ahead.

Again, I'd say that's kind of surprising. People think of all right, workers' comp writers would have a longer duration of claims. So is that...

Yes. I appreciate you asking as one of my favorite subjects. So the way we handle claims in you -- thank you, Bob. The way we handle claims is different than the industry. We really focus on -- I've talked about this numerous times, but our high-touch model involves our claims adjusters getting in quickly, establishing relationships, getting those reserves put up quickly. And then working with our injured workers, working with medical providers, finding ways to close and settle these claims as quickly as we can to the benefit of the injured worker to the benefit of the policyholder and ultimately to the benefit of AMERISAFE and that helps shorten our duration on our claims on these severe claims.

So we know that we're lower than the average bear as they say in the industry, but that's part of our operating model, and that's how we manage claims.

Cool. All right. And the broader one, I've been covering workers' comp for quite a while. You obviously have as well. And I would have said maybe 5 or 6 years ago, I thought that frequency would have bottomed.

[indiscernible]

And here we go -- and he would keep going. I was like, "All right, we put you down again. read that again. you've done again. When is this going to end? And what do you think is driving -- you could only do so much safety and risk services and things like that, that I just -- I don't know where it is about...

I would agree with you, Bob. I guess partly a degree, it matters on how you're measuring frequency right. So if you're measuring it per $1 million of payroll or $1 million of premium. But every way you look at it right now, it's still on the decline. A couple of things I think factor into that. I agree with you. Is the workplace safer. Absolutely. I think the mix of jobs that we have, although the fact that our economy is shifting is more towards services, I think that impacts the overall frequency because again, you're talking broadly, not just what AMERISAFE rights but broadly, right?

So I think the type of jobs, the types of workforce that we have that's somewhat influencing that number. If you look at if you're looking at really long-term trends, I think our economy has shifted more from manufacturing and those types of jobs to more service-related jobs. So that kind of -- I think that's contributing somewhat to the frequency. But I happen to agree with you, if you would have asked me 3 or 4 years ago, even for the industry. Now you're talking about AMERISAFE specific for the industry, I would have said, well, it's got to reach at some point. I mean people are going to have accidents. We're all humans. But yet whether you measure it on payroll or premium, as of from now, it's down.

Yes. I just remember you talking about it a long time ago and saying, yes, frequency can't drop down to 0. So it's going to end at some point. Man, you guys keep the pricing

[indiscernible]

And we will take our next question from Mark Hughes with Truist.

Yes. Kane, you all have been doing very well on the top line growth and if you touched on this earlier in the call, forgive me. But the -- I think I've asked before about how sustainable this is whether some initiatives you put in place and kind of have potentially run their course or whether there's always something new and you continue to bear fruit with your distribution strategies. I'm just sort of curious if there's any remarks you have about kind of what's keeping the momentum going forward..

Yes. Let me start with the name here at AMERISAFE is executing. We -- and I've talked about this before, 3 years ago, probably at this point, dating back maybe longer now. We started putting together this growth strategy and how we want to be very thoughtful and very measured about that growth strategy. and the team here is just executing. And the fact that, to the question earlier, the fact that it's been prolific across our industry classes across our states, I totally believe it is sustainable. Is it linear? No.

But we're shooting for that mid-single-digit range, and we've been hitting that. And I like I said, kudos to the AMERISAFE employees for really executing and taking this idea of adding small incremental growth and not changing our risk profile and sticking to our knitting and being who we want to be and executing on that PAUSE kudos to them for executing on that. So I truly believe that is sustainable. The momentum there, the attitude is there, the strategy is there.

Yes. And this is a trivial question, but why did you move the call to the afternoon.

Great question, actually scheduling conflicts. So thank you for asking. I apologize if it is inconvenient.

Yes. Okay. So next time, it will be 1030 again?

Yes, we will go back to our normal schedule.

And this concludes today's question-and-answer session. I would now like to turn the call back to Janelle Frost, CEO, for closing comments.

Thoughtful and measured growth with pricing adequacy continues to be the anchor for our performance even amidst the competitive pressures of the workers' compensation market. Our results this quarter reflect the strength of these fundamentals, supported by a strong balance sheet that positions Amerita well across the market. We remain confident in our strategy and committed to consistent execution to deliver sustainable underwriting profitability and long-term shareholder value. Thank you for joining us today.

This does conclude today's call. Thank you for your participation. You may now disconnect.

Good day, and welcome to the AMERISAFE Fourth Quarter 2025 Earnings Call. Today's conference is being recorded.

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

Thank you, operator, and good morning, everyone. Welcome to the AMERISAFE 2025 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 intended to fall within the safe harbor provided by 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 and the comments made during today's call and in the Risk Factors section of our Form 10-K, 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.

Thank you, Kathryn, and good morning, everyone. We are pleased to close out 2025 with a strong ROE of 18.5% and a combined ratio of 91.3%. These returns are hard fought in a competitive environment. We are in a prolonged soft market with workers' compensation carriers facing 12 consecutive years of rate decline. Under those constraints, understanding risk, pricing them appropriately and managing the cost of claims are essential to sustained underwriting profitability.

At AMERISAFE, our specialized underwriting for niche industries, our focus on safety services for our policyholders and personalized claims management are producing consistent returns and are also why we are noted as a disciplined underwriter.

I will now turn the call over to Vincent to share the success of our incremental growth strategy.

Thank you, Janelle, and good morning. In the fourth quarter of 2025, gross premium written grew 11.7% compared to 3.9% growth in the fourth quarter of 2024. This is our seventh consecutive quarter of top line growth. For the full year, GPW increased 6.7%. Voluntary premium, the primary component of GPW increased 10.5% in the quarter and 10.2% for the full year compared to 4.6% in 2024. This growth is across states and classes and most importantly, within our existing geographical footprint and risk appetite.

As we've discussed in numerous prior quarters, our focused efforts on deepening relationships with the right agents who target our classes and recognize our value proposition continue to fuel increased new business opportunities despite steady competition. And our commitment to servicing our policyholders with outstanding safety and claim services support strong renewal retention in both policy count and premiums.

Retention for policies for which we offered renewal was 93.7% for the quarter, which we feel is a very strong result in this competitive environment. Renewal retention along with the new business growth, increased in-force policy count by 10.2% for the year.

Audit premium and adjustments, another important component of GPW remains positive, adding $3.5 million in the quarter compared to $2.5 million in the fourth quarter of 2024. For the full year, audit premium and adjustments contributed $12.6 million to GPW compared to $20.2 million in 2024. The year-over-year audit premium decrease is consistent with the recent moderating trend as expected and discussed in prior quarters. The sustained growth in GPW is beginning to meaningfully reflect in net premiums earned, which was $73.6 million in the quarter and $283 million for the year, growing 10.7% and 4.6%, respectively.

Turning briefly to components of premium, payroll growth remains positive in our classes of business with the majority continuing to come from wage growth, which was 6.1% in the fourth quarter and consistent with recent prior quarter's trend. Wage growth is a tailwind for premium growth. Meanwhile, filed rates continue to see downward pressure. Though the average rate of decline has been decreasing overall, we still expect rate change to be in the negative mid-single-digit range based upon 2026 filings to date.

That concludes the overview of premium results. I will hand the call back to Janelle for more information on claims and other financial metrics.

Thank you, Vincent. Turning back to my CFO days, allow me to share the details of our claims and other pertinent financial results. The current accident year loss ratio was 72% for the full year, which is an increase from 71% in the first 3 quarters and from the previous year. Last quarter on this call, we discussed the upper pressure on the loss ratio from continued rate pressure. In addition, severity is up.

We ended the accident year with 25 claims with incurred value over $1 million compared to 18 at the end of accident year 2024. I do not think it's shocking when looking at absolute dollars that the cost of claims continue to increase and that more claims reached the $1 million threshold. Nonetheless, severity is up, and we adjusted our accident year loss ratio accordingly.

As for prior accident years, we had $7.6 million of favorable development in the quarter or a favorable 10.4% and $33.9 million of favorable development for the full year or a favorable 12%. Combined with the current accident year, we reported a loss ratio of 64.5% for the quarter and 60% for the year compared to 56.4% and 58.1%, respectively, in 2024.

To round out the combined ratio, the expense ratio was 29.2% for the quarter and 30.4% for the full year. Our total underwriting and other expenses were $21.5 million. We improved operating scale in the quarter as net earned premium increased with our growth strategy. During the fourth quarter of 2025, net income was $10.4 million or $0.55 per diluted share and operating net income was $9.8 million or $0.51 per diluted share.

For the full year, net income was $47.1 million and net operating income was $41.8 million compared to $55.4 million and $48.4 million, respectively, in 2024. Our effective tax rate for the full year was 19.9% compared to 19.7% in the prior year.

Turning to our investment portfolio. Net investment income increased 2.5% to $7.1 million in the fourth quarter and decreased 7.6% to $27 million for the full year. For the quarter, the yield on new investments increased, driving our tax equivalent book yield to 3.83% or 3 basis points higher than the fourth quarter of 2024.

The investment portfolio is high quality, carrying an average AA- credit rating with a duration of 4.3 years. The composition of the portfolio is 60% municipal, 21% corporate bonds, 3% U.S. treasuries and agencies, 8% equities and 8% in cash and other investments. Approximately 44% of our bond portfolio is comprised of held-to-maturity securities, and the net unrealized loss was $5.5 million at quarter end. As a reminder, held-to-maturity securities are carried at amortized costs, therefore, unrealized gains and losses on these securities are not reflected in our book value.

Our capital position is strong with a high-quality balance sheet, solid reserve position and conservative investment portfolio. At quarter end, AMERISAFE carried roughly $797 million in cash and invested assets. And finally, just a couple of other topics. Book value per share was $13.39 after paying the special dividend in December of 2025. We will file our 10-K Friday, February 27 after market close.

With that, I'll open the call up for question and answers. Operator?

[Operator Instructions] We'll now take our first question from Matt Carletti with Citizens.

Maybe let's start with kind of what you're observing with kind of frequency of severity. Can you just help us with -- I know these sorts of claims can be pretty lumpy at times. This kind of -- was there a frequency that kind of took place towards the end of the year? Or was this a little bit more over the year? And then as you look at those 25 claims, maybe like similarities within them that you noticed? Or were they pretty broad spread across whether it be areas of your book or injury types, that sort of stuff?

Yes. So I'll start with -- let's talk about overall frequency for a moment. So we obviously had 7 -- I think 7.8 million -- 7.8% increase in reported claims in 2025. Now compare that to, as Vincent mentioned, policy growth of 10.2%. So frequency is right on par with what we expected for the overall book. To your point about the 25 claims, yes, I would call that a frequency of severity. So 25 claims, as you mentioned, that it can be lumpy.

What I can say about the 25 claims, if you look at average severity of those claims is actually lower than 2025 was even though 2025 only had 18 claims. The claims are consistent in terms of if I look at the cause of loss or even the industry groups, which the claim came from, it very much mirrors the entire book. So there wasn't something specific to a particular class or type of injury that made those claims stand out more so than the rest of our book of business.

As I mentioned in my prepared remarks, sometimes we think about -- we've always used $1 million as a threshold, right, in reporting those claims. But obviously, over the years, as medical severity upticks or just severity overall upticks year over year over year, the $1 million in 2025 is not the same as $1 million in 2022, for example. We like to keep that measure consistent just so we can compare it. But nonetheless, there were 25. We can -- I consider that a frequency of severity enough so that we felt like it was appropriate to take the loss ratio show up a point.

That makes sense. Maybe I can just switch to the growth for a minute, which is great. Can you just give us a little more color on -- I mean, obviously, you've talked a bit in the past about very concerted efforts that you're making in terms of driving that growth. Are there particular areas of the book that you're seeing particular success? Or is it more broad-based across the book? And whether that be geographies, areas of exposure, however you want to look at it?

Yes. We're excited because the growth that we're seeing is across the book. I mentioned we're going to file the 10-K on Friday. When you see the 10-K, you'll notice the industry classes, there's not a lot of shift in the mix there in terms of 47% of our book is still construction followed by trucking, logging lumber, agriculture, no real shifts there.

If you look at the top 10 states, I think if you compare 2024, '25, I think the top 10 are still the same states. There may be a little shift in the 5, 6 and 7. But all in all, the top 10 states are exactly the same.

Vince, do you want to add anything about industry groups or state specific?

Yes, sure. Janelle mentioned the 10-K being released Friday. We -- the industry groups, we report on construction, trucking, logging, agriculture, manufacturing. Those are internal groupings of classifications. There's a grouping that's going to show up in the 10-K this year called services. It's -- we consider that ancillary to our primary industries. It's historically been in the, I'd call it, the dreaded other category of premium, but there's been enough growth in the underlying components of that in the last couple of years to warrant breaking that out of other.

So services is going to appear on the list. It's not because there's necessarily been shocking growth, but it is an area we're having success in. We've also had a little bit of increased success in the agriculture space. And part of that's dependent upon individual states where we're seeing growth.

Yes. So for example, Vincent mentioned, we're going to have that services line. It went from 5.3% of the book in 2024 to 5.8%. So not a significant change, whereas agriculture did go from 6% to 7.3% of the book.

Okay. Okay. That's helpful. One last one, if I could. Maybe Janelle, ask you to put your CFO hat back on. Just on the favorable development you saw in the quarter. Any color you can give on accident years or kind of what drove it? Was it just kind of claims closures or something else?

Yes. No, it's closing and settling claims. So the accident years were roughly $0.5 million in 2022, $1 million in 2021 and then [ $20 million ] in prior with the remainder [indiscernible] something...

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

Janelle, the -- is it fair to say the uptick in the current accident year, it's essentially you got more large claims than you had expected or was assumed in your 71% loss number, but it's just normal volatility. Yes.

Yes. It's definitely, obviously, an increase in frequency of severity enough that we felt using the loss ratio was the appropriate measure.

Yes. So when we think about 2026, if it was just kind of a tough year, it's lumpy, you've always made that point. And every time you had a lump, it's always dropped back down. So what's the 2026 loss pick back to 71%?

Great question. I don't know exactly what lies for 2026 as of yet. But I'll say this, and we talked about it on the call last quarter as well. There's pressure -- there was pressure on that 71%. And then having that frequency and severity is what pushed us towards, hey, let's move this up to 72%. And as Vincent mentioned in his prepared remarks, the loss costs -- the underlying loss costs are still mid-single digits. That adds pressure to that loss ratio. So at this point, I'm inclined with the 72% to keep the 72% for 2026.

Okay. And then the favorable development was down a little bit year-over-year relative to earned premium. You've been running kind of steady year-over-year heretofore. Was that influenced by this frequency and severity issue? Or was this just -- it kind of maybe changed your mindset a little bit? Or is this...

No, very good point. That is not related to the frequency of severity in 2025. That is just simply the claims that we closed or settled in that particular quarter, which also can sometimes be lumpy. But no, not related to the large claims for 2025.

So you wouldn't necessarily ascribe any being to that. It's just a little variability.

Yes, which I would -- that's not unexpected in my...

Okay. Yes, the alternative being, you've had great reserve development and maybe it's just not as easy as it used to be, so to speak.

Nothing's changed in our reserving practices. The way we -- and I always like to -- I think I said this on every call just because it's so essential to who we are as a company. We rely heavily on those case reserves and nothing has changed in the reserving practices that establishes those case reserves.

Yes. Any observations about underlying medical inflation? I think you said the 25 claims were actually lower severity, even though above $1 million. Is there some more medical involvement that's kind of bumped more over $1 million?

Yes. The -- certainly, the medical inflation that -- or the medical pressure that we see are the same ones we talked about on the last 2 calls, home health because again, the severity of the industry -- injuries that we deal with, there's normally a home health component of some kind with these claims. So there's still a tremendous amount of cost pressure for home health.

And then DME, which for us is I'm thinking more in terms of prosthetics. So obviously, we unfortunately have a lot of [ NPTs ] or people that have to require prosthetics, and the cost of prosthetics is certainly under pressure.

Yes. Very good. Any -- no inflection though, nothing obvious around medical inflation, the sustained pressure, but...

I wish. I wish that were the case, but no. And when I say I wish, I wish it was easing on the medical side, but I don't see that happening. Nothing on a macro basis that I see moving that needle.

Yes. And competition, I think you said relatively steady.

Yes, Mark, I would say that's a fair description of it.

And then evergreen question about the next construction job are important for your policyholders. Anything changed there?

No. We -- the individual economies, if I want to term it that way, for the industries that we insure seem to be holding up well. And as Vince mentioned, the wage growth numbers that we're seeing, it's higher than national average. So I feel like that speaks well to the jobs are there. They have the employees that they need because we're not really seeing an uptick in employee count. So that bodes well, I think, for our insured base.

And how about anything on the sustainability of growth? I think you put some new initiatives in place, you've been refining your distribution network. I think in some cases, you've been experimenting or pushing a little bit more with renewal premium and getting some very satisfactory results. Are we going to be lapping any of that stuff such that this really nice period of strong growth, maybe less achievable in 2026 or there's always -- there's sustained momentum?

Mark, I'll jump in on that. You've hit on the cornerstones of the growth efforts, the increased effectiveness with agencies. I'll expand on that specifically. In the last 4 years, we've reduced our contracted agency count by over 1/3, but yet we're getting more opportunities and more binds. And I think that speaks to evidence of that effectiveness in terms of improving those relationships.

On the processing side and operations, we're just really executing well on all of our fundamentals. The collaboration we spoke about in past calls between sales, safety and underwriting is operating at a high, I'd say, sustainable level. We still have competition to deal with. But to the extent we're in control of the opportunities coming in and our ability to convert them, I think the trend is sustainable.

[Operator Instructions] We'll now take a question from Bob Farnam with Brean Capital.

I just have kind of one topic I want to talk about, and that's undocumented workers. So looking at your class codes, you think, all right, there may be some proportion of your employees that you're insuring are undocumented. I'm not sure if that proportion has changed over the last year or so. So I'm just trying to get a feel for if that's the case and if there's more documented workers and less undocumented, do you foresee any change in kind of claims patterns because of that?

Yes. Let me think about -- let me talk about from the premium side, the employee count side. We haven't seen any shift that we can account or that we can point to and say that is because of undocumented workers. So no major change there. And as Vincent mentioned, our agriculture book actually grew in 2025.

From a claims perspective, it's quite interesting. Obviously, we know we have claimants that are undocumented workers as far as how we handle that claim, how we address that claim, how we try to close and settle that claim, no different than any other claim in our book of business.

What we do find is that on occasion, when it's an undocumented worker and they have a desire to return to their home country, that can actually accelerate maybe a little bit in terms of being able to close or settle that claim. But all in all, undocumented workers, I would consider to be a wash necessarily in terms of are we collecting the premium for their payrolls? I believe the answer is yes. Has that changed for us given everything that's happening and we read in the national news? I would say no. And it doesn't change our approach in terms of how we handle the claim.

Okay. Great. I just wanted some color on that, and that works for me.

Yes, something -- it's a great question, and it's definitely something that we are monitoring to see if it could be impactful to the book. But as of end of 2025 and where I sit today, I could say no, it's not impactful.

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

AMERISAFE is well positioned to sustain our growth and underwriting profitability by relying on our expertise in turning risk into opportunity. Thank you for joining us today.

And once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect.

Good day, and welcome to the AMERISAFE Third Quarter 2025 Earnings Call. Today's conference is being recorded.

At this time, I'd like to turn the conference over to Kathryn Shirley. Please go ahead.

Thank you, operator, and good morning, everyone. Welcome to the AMERISAFE 2025 Third 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 the results of risks, uncertainties and other factors including factors discussed in the earnings release and the comments made during today's call and in the Risk Factors section of our Form 10-K, 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.

Thank you, Kathryn, and good morning. We are pleased that our growth strategy in this competitive market is yielding a healthy 20.5% return on average equity and a 90.6% combined ratio for the quarter. Our continued success in the market reflects the strength of the AMERISAFE value proposition.

At our core, we are a profitable underwriter, focused on knowing our risk, pricing them appropriately and servicing our policyholders and their workers. In doing so, we are a better carrier for our agents and create long-term value for our shareholders.

This is our sixth consecutive quarter of top line growth. Voluntary premiums on policies written in the quarter grew 10.6%. Combined with audit premiums, our gross premiums written grew 7.2% and net earned grew 6.2% over the third quarter of 2024. We are seeing the compound benefits of disciplined underwriting, robust new business production and strong renewal performance.

Turning to losses. Our accident year loss ratio was in line with the prior year end quarter at 71%. Frequency remains at historically low levels, while severity continues to not higher on a year-over-year basis. We are confident that our claims handling practices, coupled with upfront risk selection remain consistent and disciplined in the current environment. Thus, the company experienced $8.9 million of favorable reserve development on prior accident years, primarily accident years 2020 and prior.

In addition to announcing the quarterly results, we also announced the Board of Directors declared both a regular quarterly dividend of $0.39 per share, and a $1 special dividend payable on December 12, 2025, to shareholders as of record as of December 5, 2025.

The Board takes a comprehensive approach when evaluating capital deployment, considering both the regular quarterly dividend, share repurchases and any special dividend within the broader framework of AMERISAFE's capital position operating performance and future growth opportunities. This balanced strategy ensures that we continue to reward shareholders while maintaining the flexibility to invest in the business and support long-term value creation.

Our capital management philosophy remains consistent. Profitability drives capital and capital is deployed with discipline. We are proud of our track record. Over the past 13 years, AMERISAFE has declared nearly $50 per share in total dividends, including $12.68 in regular dividends and $37.25 in special dividends per share. Along with managing capital, the continued investment we are making in our people and technology is reflected in our solid top line growth at industry-leading returns, delivering long-term value to our shareholders.

With that, I'll turn the call over to Andy to discuss the financials.

Thank you, Janelle, and good morning to everyone. For the third quarter of 2025, AMERISAFE reported net income of $13.8 million or $0.72 per diluted share and operating net income of $10.6 million or $0.55 per diluted share. During the third quarter of 2024, net income was $14.3 million or $0.75 per diluted share and operating net income was $11.1 million or $0.58 per diluted share.

Gross written premiums were $80.3 million in the quarter compared with $74.9 million in Q3 of 2024, increasing 7.2%. Audit premiums increased the top line by $2.5 million compared with $4 million in the prior year quarter. Despite the audit premium headwinds, voluntary premium grew -- growth of 10.6%, fueled by new business production and strong retention is driving top line growth.

Our total underwriting and other expenses were $22.1 million in the quarter compared with $21.3 million in the prior year quarter, which resulted in an expense ratio of 31.1% compared with 31.7% in the prior year quarter. The expense ratio reflects ongoing investment in AMERISAFE's growth as we see elevated opportunity in our target markets. Our effective tax rate was 21% compared with -- to 19.5% in the prior year quarter.

Turning to our investment portfolio. In the third quarter, net investment income decreased 12.3% to $6.6 million, driven by a decrease in average investable assets following the payment of the special dividend in the fourth quarter of 2024. At quarter end, we held approximately $817 million in investments cash and cash equivalents compared to $899 million at September 30, 2024.

The reinvestment rate environment remains fairly strong with some moderation compared to the second quarter of 2025. Yields on new investments exceeded portfolio roll-off by 77 basis points, driving the portfolio tax equivalent book yield to 3.9%, relatively flat versus the third quarter of 2024. The yield on cash held in money market funds ended the quarter at 4% compared to 4.8% at the end of the prior year quarter. The unrealized gain for the equity securities was $4.1 million compared to $3.9 million in the prior year quarter. Both periods were driven by strength in the U.S. equity market.

Our investment portfolio remains high quality, carrying a double an average AA minus credit rating with a duration of 4.3 years. The composition of the portfolio is 61% of municipal bonds, 21% in corporate bonds, 3% in U.S. treasuries and agencies, 7% in equity securities and 8% in cash and other investments. Approximately 45% of the portfolio is classified as held to maturity, which maintains a net unrealized loss position of $7.6 million. As a reminder, these securities are carried at amortized costs, 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 third quarter, the company repurchased roughly 31,000 shares at average cost of $43.72 per share totaling $1.3 million.

And finally, a couple of other topics. Book value per share increased to $14.47, up 7.1% year-to-date. Statutory surplus was $259 million compared to $235.1 million at year-end 2024. Lastly, we will be filing our Form 10-Q with the SEC later today, October 30, 2025, after the close of the market.

With that, I'd like to turn the call over to the operator for the question-and-answer portion. Operator?

[Operator Instructions] And our first question is going to come from Matt Carletti.

Janelle, I was hoping maybe to start off, obviously, voluntary premium growth has been kind of solid double digits for a couple of quarters now, which is a great kind of emerging trend. Could you talk a little bit about where you're seeing success where that growth is coming from, if it's kind of any particular areas? Or maybe it's just more broad-based and it's pretty evenly across kind of all aspects of your business?

Thank you for noticing. And I'm also pleased to say it's more broad-based. We have grown policy count in the quarter over second quarter, we grew policy count roughly 2.7%. On a year-to-year basis, it's more like 11% year-over-year for policy count. So we're growing policy count, which is very important.

Our insured payrolls are expanding as well, which is also a positive and particularly in this market when you read all of the headlines about things that are happening in unemployment and wage growth expectations. Our skilled labor jobs in our high-hazard industries are faring pretty well, so that helps support premiums in terms of payroll growth.

We're seeing still very strong retention on a renewal basis for the quarter. Our renewal retention for the policies for which we offered renewal was 93.6%, and very healthy number. I think actually, that was the same number we had prior year quarter, so good. Even in this crazy competitive market that we're in, we're able to maintain those accounts that we want to maintain through a lot of collaborative effort from the AMERISAFE employees. So I can't emphasize that enough.

We have a seasoned sales staff the way we utilize our safety services as part of the risk selection process is truly a value add, not only for our underwriters and helping our underwriters understand the risk and price the risk appropriately. But I'll say a value-add for our policyholders and their agents. The fact that, that is an AMERISAFE contact that they have and that builds relationships with those policyholders and with those agents. So it's critical to what we do, and it's unique to AMERISAFE. So I think that's huge on our part.

And then I can't -- I certainly can't not mention our claims handling experience. From a renewal retention standpoint, I truly believe the way we handle claims benefits us from a renewals perspective. If you've had a claim and it's handled by an AMERISAFE employee, we handle it, I think, the right way, and we treat those injured workers well, and that's meaningful to a policyholder. So all of those things together, I think, is really adding to the growth effort in terms of just the amount of collaboration that we're having.

We've really been focused on ease of doing business, speed to market and it's just compounding and bearing fruit now in those growth numbers. And I'll caveat that by saying all without -- we're not adding -- we haven't added class codes. We haven't added -- we haven't expanded geographically. It's really market penetration and better serving -- better working with our agents.

Great. And then if I kind of try to tie it one step further. So as I look at your business, like, I mean, financially kind of earnings returns have been strong for many years now and really unchanged if you want to look at ROE or something like that. So really strong kind of where the business is. you talked a little bit about the special dividend at the outside of the call and it is a little bit smaller than kind of some of the previous years.

So would I be correct to kind of interpret that maybe an output of that is expression of your guys' confidence in the kind of the durability of that growth or that growth going forward and that that's where you'd prefer to allocate capital versus giving it back to those growth opportunities are there?

Well said, Mr. Carletti, that is exactly what you should infer into the dividend. I mean I'm excited about the dollar dividend by no question. But I think it definitely infers that we believe what we have going here in terms of our growth strategy is not short-lived that I believe it has longevity. And we've said since the very beginning when we started paying out the special dividend, part of the reason that we were returning that capital to shareholders is because we had internally made the decision. It wasn't the right time to really pour that into organic growth because we wanted that growth to be profitable growth.

So now we've had these quarters of top line growth, and it's starting to flow through on the earnings. And so that dividend, we're using that capital and deploying that capital towards that organic growth.

Fantastic. I'm glad I put those puzzle pieces together okay. Thanks for the color.

[Operator Instructions] And our next question is going to come from Mark Hughes from Truist.

Janelle or I'll say, Andy, in the spirit of the question about the special dividend and the growth opportunities. How do you view your leverage now? And how much flexibility do you have on the balance sheet? And this would be underwriting leverage.

It is going up, but it's at $1. I mean from our standpoint, I don't think it's really changed. It's -- I think it's increased a little bit, but it's right at $1.

Yes. And then what would you see as kind of the upper bound kind of comfortably where would you be able to take that.

I would say about $1.5 mark.

Okay. The -- what's the latest on medical inflation.

There's been quite a few articles. AM Best actually put out a segment report on workers' compensation, and they spoke to medical inflation. Certainly, everyone has their eye on it. we're not immune to medical inflation. At the same time, I believe the fee schedules and the fee structure and workers' compensation is probably abating that to some degree for workers' compensation much more than it is for nonworkers' compensation things people are seeing in their health care renewals and those kinds of things. So I do think we have some relief from the fee schedules in terms of medical inflation.

Utilization is something -- and I think we talked about this on the last call, utilization is something NCCI sort of pointed to when they talked about the 6% increase based on medical inflation, something certainly we're keeping our eyes on, particularly home health, I've been talking about for a number of years, and I'll continue to talk about home health.

But even in terms of physician visits, what we've kind of noticed a little bit more PA visits, our physician assistance visits, which sometimes lead to additional visits because a doctor has to sign off on a release of a patient. So we're just keeping our eye on that. I don't know if there's anything that's more anecdotal than in the data yet, but utilization is something we want to keep our eye on since the fee schedules seem to be doing their job, and we know that there is a shortage in the health care industry, so in terms of some services being available. So those are the things we're watching out for.

Yes. What's been latest trend in terms of the approved state loss costs, the most recent ones, any trend there?

Great question. So we have, I think, 4 states that head increases, Missouri, D.C., Nevada, California, and we talked about California on the last call. Those are the ones that I think had increases. On average, what we're seeing and most of the loss costs for 2026 are already in and approved. And what we're seeing is pretty steady state mid-single-digit declines.

I did look at the CIAB study because they survey agents and ask them what they're seeing in terms of their clients' renewals. And I noticed -- and they haven't put their third quarter data out, but in their second quarter data, more than 50%, we're basically seeing no change. So that would say, if that's an accurate depiction of what agents are seeing or what's actually happened in the marketplace, that would lead you to believe that carriers are being relatively disciplined about the loss cost may be down in terms of the absolute loss cost. But what they're using in terms of their average pricing is sort of flat, at least based on that agent survey. So that's a sign of, I would speak to relative discipline in the marketplace.

Yes. You'd mentioned your insured payrolls are expanding. Any specific comments on wage growth how wage growth is compared to in 3Q last few quarters?

Right. So wage growth in the quarter, we saw about 6.7%. As the total was about 8.9%. 6.7% was actual wage changes and a new employee count was 2%. So I was happy to see that 2% in new employee count. If you recall, last quarter, it was actually slightly negative and I wondered, okay, is this a blip? Or is this a data point in terms of is there something happening with integration with our particular employee base, but it sort of bounced back to norms this quarter, so I feel pretty confident about that, that was just a blip last quarter.

Yes. What was the wage last quarter, wage growth?

5.7%. Yes, if I look at the last 4 quarters, it was 5.5%, 6.3%, 5,7%, 6. 7%.

Okay. Very good. How about the large losses in the quarter?

We ended the quarter with 17 large loss is over $1 million.

That's year-to-date?

Year-to-date, yes.

Yes. That's up a little bit, isn't it.

I think at this point last year, we were at 13, if I recall correctly for 2024, but then we had an uptick in the fourth quarter. Again, I I'll go to my favorite saying, unfortunately, these things are lumpy. I never know what quarter they're going to happen in. And I'll also say this, when you -- when we file the Q later today, I believe, you'll look at claim counts.

Reported claim counts on a year-to-date basis are ever so slightly up. And -- but I think it's a pretty remarkable number when you think about how much we've grown policy count, yet the claim counts really haven't varied very much. So I think that speaks to what I was saying earlier about frequency is low. I mean there's no denying there.

Yes. And then anything on the competitive front, Brand X talking more about getting into high hazard?

Great question. It is still extremely competitive. We haven't -- there hasn't been a lot of movement in terms of competitors either increasing or decreasing their appetite. I think we see it occasionally in a particular class, maybe in a given state, but it's usually because maybe they've had a bad experience in that particular state or class code. That's actually one of the selling points for AMERISAFE with our agents is the fact that we are so consistent about our approach. We've been doing this since 1986. And if you look at our footprint and the classes of business that we underwrite, there's a lot of stability there. And that's actually, to me, one of the value propositions for agents for AMERISAFE.

Yes. Any thoughts when we think about audit premium. Obviously, that's led to some just a little bit of a headwind in terms of the written premium but corrected for that, obviously, you've been up double digits. If you're seeing a little more wage growth, is that a positive for audit premium? Or should that continue to moderate, what are the puts and takes there?

That's a really interesting way to look at it. This is just my take on it. I do feel that the wage growth numbers that we're seeing now, speak well to future audit premium. At the same time, I have to be very cognizant of all the things that are happening in the economy right now with inflation and everybody is talking about jobs, jobs, jobs, and we're seeing these headlines of major layoffs.

I feel our industry groups being the skilled labor is somewhat protected from the types of layoffs that we seem to be seeing nationwide. A lot of those are at least being anecdotally been pointed to things like AI is helping us gain efficiencies, et cetera, et cetera, and that's why we're lowering head count. But I do think companies are looking for efficiencies as well.

That being said, with skilled labor jobs, a little bit of a different story there. So if we can maintain the wage growth, it should bear well for future audit premium moderating, I would think, over time.

Yes. Yes. Okay. And then last cantered question. How about the construction end market, the next job being important, any observations there?

Yes. Based on the payrolls that are being reported to us and the fact that I'll point to that new employee count number kind of bouncing back to normal, the economies for our insured base are holding up really well as of right now.

[Operator Instructions] And our next question is going to come from Bob Farnam from Janney.

There was -- Mark Hughes asked the question about the claims count, given the growth in the top line in the graph and the number of policies. Actually, I had a question on your claims staff. I mean did you -- have you increased claims staff to be able to handle an influx of more claims, even though I understand that the frequency down it really hasn't happened yet, but I'm just kind of curious how your claims staff is situated in case claims do start to increase.

No, we have not really increased the number of claims staff, but I'll backtrack on that a little bit to say we run a very lean organization. But at the same time, when our claim counts were dipping down, we also did not decrease our claims staff because of the expertise they bring to the table and we want to keep those inventories really low, that's not something that we felt like we should dial down and dial back -- and then try to dial back up. So the number of claims staff has not changed.

Okay. I figured they have -- I mean I understand they have a lower volume of claims they already handled. So I didn't -- I wasn't surprised that they will be able to handle it in-house, but just curious.

Do you guys -- are you actively looking to expand into any other states? And if so, what's causing you not to at this point? I'm just kind of curious if you're even looking at this point.

We are constantly looking. We have a committee here that is always looking at geographies of where we're not and maybe where we should be or where we are and maybe we're not having a great experience, whatever the case may be. And so I would always say that we are continually considering that, nothing on the near horizon.

Right. Okay. And the last question I had was on the fee schedules. Obviously, it sounds like that's helping to contain medical costs. I just didn't know, on average, how long do fee schedules stay in place before they're renewed? And do you see that fee schedules are renewed, will they have an impact?

Yes, very, very appropriate. They are updated somewhat regularly. And of course, a lot of them are based off -- there's a lot of things based off Medicare and Medicaid. So however, how often that gets updated. And plus it also there's also a political side to that. If I can say if workers' compensation becomes an issue in any given state, legislatively, they will get involved to make some things happen.

And as of right now, and I'll knock on this wooden desk, I say workers' comp doesn't seem to be at the top of anyone's agenda because there are so many other things happening in the P&C space, particularly with homeowners and auto, that legislators are more apt to try to find solutions for and workers' comp has been pretty kind of steady state. So I think employers are relatively happy with the things that are happening. Carriers are pretty much satisfied with the way things are happening. So as of right now, it doesn't seem to be on the top, at least to my knowledge, on the top of any legislative agendas in a large way that would cause the fee schedules to change.

Yes. No, it can make sense. Don't fix what's not broken at this point.

And there appears to be no further questions in the queue at this time. I'd now like to turn the conference back over to Janelle Frost, CEO, for any additional or closing remarks.

Thank you. We are pleased with this quarter's results and the successes we're having in adding small incremental growth while maintaining the standards that make AMERISAFE a profitable underwriter of high hazard workers' compensation. Thank you for joining us today.

And this concludes today's call. Thank you for your participation. You may now disconnect.

Good day, and welcome to the AMERISAFE Second Quarter 2025 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.

Thank you, operator, and good morning, everyone. Welcome to the AMERISAFE 2025 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 the result of risks, uncertainties and other factors including factors discussed in the earnings release and the comments made during today's call and in the Risk Factors section of our Form 10-K, 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 statements.

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

Thank you, Kathryn, 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&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 with NCCI's reported 6% 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 loss experience, frequency was down compared to second quarter of 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 $8.6 million of favorable development in the quarter as our claims team continues to demonstrate expertise and finding opportunities to close claims effectively and efficiently. This quarter, accident years 2020 and prior drove most of the favorable case development.

Further, on July 23, 2025, our Board of Directors approved the reauthorization of a $25 million share repurchase program, replacing the prior program. Since the inception of our initial program in February of 2010, we have repurchased approximately 1.75 million shares at an average cost of $25.69 per share, totaling $44.8 million.

In addition, the company's Board of Directors declared a regular quarterly cash dividend of $0.39 per share payable on September 26, 2025, to shareholders of record as of September 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 investment.

Thank you, Janelle, and good morning, everyone.

For the second quarter of 2025, AMERISAFE reported net income of $14 million or $0.73 per diluted share and operating net income of $10 million or $0.53 per diluted share. During the second quarter of 2024, net income was $11 million or $0.57 per diluted share and operating net income was $11.1 million 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 $1.8 million during the quarter, in addition to $3.1 million of realized gains, also primarily from equity securities.

Gross written premiums were $79.7 million in the quarter compared with $76.4 million in Q2 of 2024, increasing 4.3%. Audit premiums continued to moderate, which increased the top line by $1.5 million compared with $7.3 million 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 $21.7 million in the quarter compared with $20.4 million 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 $6.7 million, driven by a decrease in investable assets following the payment of the special dividend.

At quarter end, we had approximately $807 million in investments cash and cash equivalents compared to $884 million at June 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 230 basis points, contributing to a tax equivalent book yield of 3.85%, compared to 3.79% in the second quarter of 2024.

Our investment portfolio remains high quality, carrying an average AA- credit rating with a duration of 4.5 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 and totaling $2.8 million. And finally, a couple of other topics.

Book value per share increased to $13.96, up 3.3% year-to-date. Statutory surplus was $257 million compared to $235 million 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?

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

13% pretty impressive. You described it in the usual way, good retention and strong new business, but could you give something is good or stronger than last quarter. So just sort of curious what you saw in the quarter that drove that business?

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 on to safety being part of that process.

Still, 93% of our accounts are still getting that pre-cost safety inspection, our 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 underwriting 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, ES and G, which is where we consider our specialty, where we consider our sweet spot.

So that's a very long answer to the 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 soft market has been gone for -- I think we're in our 10th -- maybe 10th or 11th year of approved loss costs continuing to go down with some improvement, we're not in double-digit declines anymore. We're at 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.

Very good. How about the average policy size, I think policy count up 6%, written up 13%. I know that's kind of apples and oranges, but any change in the average policy size?

A slight change, I would say, again, improved loss costs, I think, are down mid-single digits over in that 5% to 6% 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 35% -- $1,000 range.

Got you. How 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.

I 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?

Yes. As I said in my opening remarks, NCCI reported for 2024, medical severity had gone up 6%. Now they do a workers' comp medical index, and that number was 2.8% up.

So the remainder of that, they really -- 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.

We -- probably 2 years ago, we're 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 we 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, there's not many things that we haven't seen at this point for lack of better term, knock on wood. I don't need that to happen today. So I feel very confident in our case reserving process.

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 disclose...

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 my competitors listen 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 real retention at 93.8%, 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 making -- and having more effective relationships with our agents. If you look at our agent count at the end of 2023, 2,200 agents at the end of 2024, roughly 1,700 agents. By second quarter, we were down to an almost 1,600 agents, yet policy count has gone up.

So that -- I think that speaks to how we've been able to find new business and be more effective with fewer agents.

The addition by subtraction traction method.

I'll ask you 1 final question. Construction. What's the vibe in construction?

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. If new -- obviously, we feel like new employees tend to drive up claim counts tend to drive that frequency. So we -- if we have our druthers, we'd rather extend work hours. And anecdotally, we're hearing that. We're hearing things about extended work our same employees working longer hours.

My thought process behind it, particularly in construction and our agriculture book of business is somehow integration 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 it 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 replaced -- 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 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.

[Operator Instructions] We will go next to Bob Farnam with Janney.

Just I think 1 more question in line with kind of what Mark was asking about.

I just wanted to know in terms of case load per claim personnel. I don't know if there's been any changes to the case loads over the last few years.

No, sir. Great question, Bob.

We're still below -- we're still at below 50 claims per -- on average per adjuster, so no shifts there.

Okay. And you've been at the 71% accident year loss ratio assumption for a few years now. Given the changes in the loss cost, is it -- 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?

I think that's a good assumption. There's definitely pressure there. As to your point, as the loss cost continue to be decline, one of the things -- one of the beauties, I think, of AMERISAFE, again, shout out to the claims department. And 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 was like I throw that out there just in case -- in case something changes. But if continued trends happen in terms of loss costs themselves, definitely pressure there.

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?

Bob, it's Andy. Right now we looked at the buyback. So of course, we want to buy back our stock at the right time. So we did good to the Board, as Janelle said, and it was reauthorized up to $25 million.

And then again, the inquiries is how we balance out, does that mean to have any kind of patients 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.

Okay. All right. Got it. And last question that I had here was -- so it sounds like the expense ratio this year is going to be 30-ish, 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?

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.

And the historical range, you don't expect any changes at least for now without getting any...

No. And if I can add just 1 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 the historical range.

We'll return next to Mark Hughes with Truist.

Yes. Just 1 follow-up. The policyholder dividends were up a bit in the quarter. What drove that?

Mark, I mean the policyholder dividend is some of our policyholders did qualify for it. And it isn't linear. It's lumpy. So if you recollect or even from last year, it goes up and down each quarter.

So that's all I can say is there's really not any spike. It's just that we had more policies qualified for the policyholder dividends.

Yes. Is that -- could 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 reflection of better loss experience and that's what's driving it? How to think about that?

It's probably a combination of both, Mark. I'll say this about policyholder dividends. For AMERISAFE, it's really made up of 3 states: Florida, which happens to be our largest state. There's something you can read into that, Wisconsin and Virginia.

And so some of -- obviously, in Florida, as you know, is an administrative pricing state. So policyholder dividend is certainly a way to compete, but it also involves loss experience.

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...

One could say that.

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.

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.

Thank you. Ladies and gentlemen, that will conclude today's call. We thank you for your participation. You may disconnect at this time.