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 Catherine 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 a result of risk, uncertainties, and other factors, including factors discussed in the earnings release, in the comments made during today's call, and in the risk 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, Catherine, 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 and quarter at 71%. Frequency remains at historically low levels, while severity continues to notch 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 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 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 remained 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 and 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 an average AA- credit rating with a duration of 4.3 years. The composition of the portfolio is 61% in 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, an 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.

Thank you. if you are dialed in via the telephone and would like to ask a question please signal by pressing star 1 on your telephone keypad if you are using a speakerphone please make sure your mute function is turned off to allow your signal to reach our equipment again press star 1 to ask a question and our first question is going to come from Matt Carletti please go ahead hey thanks good morning good morning matt good morning janelle i was open maybe to start off um obviously voluntary premium growth has been kind of solid double digits for a couple quarters now which is a great kind of um emerging trend could you talk a little bit about where you're seeing

success kind of where that where that growth is coming from if it's kind of any particular areas or 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.

You know, we have grown policy count.

You know, in the quarter, over second quarter, we grew policy count roughly 2.7 percent. On a year-to-year basis, it's more like 11 percent 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% a very healthy number I think actually that was the same number we had prior year quarter and so good even in this crazy competitive market that we're in we're able to maintain those accounts that we we want to maintain through a lot of collaborative effort from the AmeriSafe employees so I can't emphasize that enough you know we have a season 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 a merit-safe 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 claim family experience. You know, from a renewal retention standpoint, I truly believe the way we handle claims benefits us from a renewal 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. You know, 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.

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. um you talked a little bit about the special dividend uh at the outset 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 um maybe an output of that is the expression of your guys's confidence in the kind of the durability of that growth for that growth going forward and that that's where you'd prefer to you know allocate capital versus giving it back 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, you know, 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 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 toward that organic growth.

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

Thank you, Matt. And once again, if you'd like to ask a question, please press star one on your telephone keypad. And our next question is going to come from Marcus 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?

I look at it.

It is going up, but it's at one. I mean you know from our standpoint I don't think it's really changed it's you know it's I think it's increased a little bit but it's right at one yeah and then what would you see is kind of the upper bound you know kind of comfortably where would you be able to take that I would say about 1.5 mark okay um the What's the latest on medical inflation?

You know, there's been quite a few articles. AMBES actually put out a segment report on workers' compensation, and they, you know, 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 in workers' compensation is probably abating that to some degree for workers' compensation, much more than it is for non-workers 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 they saw in medical inflation. Something certainly we're keeping our eyes on, and 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 or 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 healthcare industry so in terms of some services being available so those are the things we're watching out for yeah what's been the latest trend in terms of the approved state loss costs the most recent ones any trend there great great question. So we have, I think, four states that had increases, Missouri, DC, 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, you know, because they survey agents and asked 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% were basically seeing no change. So that would say, if that's an accurate, you know, depiction of what agents are seeing or what's actually happening in the marketplace, that would lead you to believe that carriers are being relatively disciplined about, well, okay, 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.

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

Right, yeah. So, wage growth in the quarter, we saw about 6.7%. 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.

Yeah. What was the wage last quarter? Wage growth?

5.7.

Okay.

So, yeah, if I look at the last four 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 losses over a million dollars.

That's year to date?

Year to date, 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'll go to my favorite saying, unfortunately, these things are lumpy. I never know what quarters they're going to happen in. And I'll also say this, when we file the queue later today, I believe, you'll look at claim counts. Reported claim counts on a year-to-date basis are ever so slightly up, 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 that.

Yeah. 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. You know, 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.

Yeah.

Any thoughts when we think about audit premium? Obviously, that's led to just a little bit of 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's talking about jobs, jobs, jobs, and we've seen these headlines of major layoffs. I feel our industry groups, being the skilled laborers, are somewhat protected from The types of layoffs that we seem to be seeing nationwide, a lot of those are at least being anecdotally being pointed to things like, oh, AI is helping us gain efficiencies, et cetera, et cetera, and that's why we're lowering headcount. 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.

Yeah. Yeah. Okay. And then last standard question.

How about the construction in market, the next job being important? Any observations there?

Yeah, based on the payrolls that are being reported to us and the fact that, you know, 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.

Yeah, yeah. Okay. Well, thank you very much. Appreciate it, Janelle. Thank you.

And once again, if you would like to ask a question, please press star one on your telephone keypad.

And our next question is going to come from Bob Barnum from Jamie. me there good morning I you know there was a market you asked the question about the claims claims counts you know given the growth and top line in the graph and the number of policies like I actually had a question on your claim staff I mean did you have you increased claim staff to be able to handle an influx of more claims even though I understand that the frequencies down so it really hasn't happened yet but I'm just kind of curious how your claim staff is situated in case claims do start to increase?

No, we have not really increased the number of claim 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 claim 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 then try to dial back up so the number of claims um staff has not changed okay yeah yeah i figured they have i mean i understand they have a you know a lower volume of claims they already handled so i didn't i didn't i wasn't surprised that they would be able to handle it in house but uh just just curious um 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've ever been looking at this point.

We are constantly looking. We have a committee here that is always looking at class codes and 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. So I would always say that we are continually considering that. nothing on the near horizon.

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 that have an impact?

Yeah, very, very appropriate. They are updated somewhat regularly. And of course, a lot of them are based on, there's a lot of things based off Medicare Medicaid so however how often that gets updated and plus it also there's also a political side to that if I can say you know 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 say workers comp doesn't seem to be at the top of anyone's agenda because there's so many other things happening in the PNC space, particularly with homeowners and auto, that legislators are more apt to try to find solutions for. And workers' comp's 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.

Yeah, it kind of makes sense. Don't fix what's not broken at this point.

Okay, that's it for me. Thanks for the color.

Thank you, Bob. 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.