Operator
Good day, and welcome to the AmeriSafe 4th Quarter 2025 Earnings Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Ms. Catherine Shirley. Please go ahead, ma'am.
Speaker 1
Thank you, Operator, and good morning, everyone. Welcome to the AmeriSafe 2025 4th 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 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 statements. I will now turn the call over to Janelle Frost, AmeriSafe's President and CEO.
Thank you, Catherine. 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 percent compared to 3.9 percent 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 percent. 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 supports 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 enforced 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 you is beginning to meaningfully reflect in net premium 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 quarters 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 three 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 values 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 reach the million-dollar 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 percent, and 33.9 million of favorable development for the full year, or a favorable 12 percent. Combined with the current accident year, we reported a loss ratio of 64.5 percent for the quarter and 60 percent for the year, compared to 56.4 percent and 58.1 percent, 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% from 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 of a yield to 3.83% or three basis points higher than the fourth quarter of 2024. The investment portfolio is high quality, carrying an average AA minus credit rating with a duration of 4.3 years. The composition of the portfolio is 60% municipals, 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 health and maturity securities, and the net unrealized loss was $5.5 million at quarter ends. As a reminder, health and 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 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 27th after market closed. With that, I'll open the call up for question and answers. Operator?
Operator
Thank you. And if you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow our signal to reach our equipment. Once again, that is star one if you would like to ask a question. We'll now I'll take our first question from Matt Carletti with Citizens.
Thanks. Good morning, Janelle.
Let's see. Maybe let's start with kind of what you're observing with kind of frequency of severity. Can you help us with, you know, I know these sorts of claims can be pretty lumpy at times. Was 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, say, 25 claims, any, like, similarities within them that you noticed, or were they pretty broad spread across, whether it be, you know, areas of your book or injury types, that sort of stuff?
Yeah, so I'll start with, let's talk about overall frequency for a moment. So we obviously had 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 expect to be for the overall book. To your point about the 25 claims, yeah, I would call that a frequency of severity. So 25 claims, as you mentioned, that it can be lumpy. What I can say about those 25 claims, if you look at the average severity of those claims, it's 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 claims 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 a million dollars as a threshold, right, in reporting those claims. But, you know, obviously over the years, as I said, medical severity upticks or just severity overall upticks year over year over year, the million dollars, a million dollars in 2025 is not the same as a million dollars in 2022, for example. But 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 right to show up a point.
That makes sense. Maybe I can just switch to the growth for a minute, which was which is great. This gives a little more color on. I mean, obviously, you've talked a bit in the past about, you know, very concerted effort that you're making in terms of, you know, driving that growth. Are there particular areas of the book that you're you're seeing particular success or is it more broad based across the book? and, you know, whether that be geographies, you know, areas of exposure, you know, however you want to look at it.
Yeah, you know, we're excited because the growth that we're seeing is across the book. You know, I mentioned we're going to file the 10K on Friday. When you see the 10K, you'll notice the industry classes. There's not a lot of shift in the mix there in terms of, you know, 47% of our books 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 20, 24, and 25, I think the top 10 are still the same states. There may be a little shift in the 5, 6, and 7 spots, but all in all, the top 10 states are exactly the same. Since, do you want to add anything about industry groups or states specifically?
Yeah, sure. Janelle mentioned the 10K 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 10K this year called services. 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 years to warrant breaking that out of other. So services are 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.
Yeah 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 a half million in 2022, a million in 2021, and then 20 and prior with the remainder. Got it. Perfect.
Very helpful. Thank you so much.
Operator
And as a reminder, that is star one if you would like to ask a question. We'll now take our next question from Mark Hughes with Truist.
Yeah, thanks. Good morning.
Good morning, Janelle, 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% a loss number, but it's just normal volatility. Yeah.
Yeah. It's definitely, I would say, an increase in frequency of severity, enough that we felt moving the loss ratio was the appropriate measure.
Yeah. 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've had a lump, it's always drop back down um so what's the 2026 loss pick back to 71 great question um 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 of severity is what you know pushed us towards hey let's move this up to 72 and as vincent mentioned in his prayer remarks, 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 7D2 to keep the 7D2 for 2026.
Okay. And then the favorable development, it was down a little bit year over year relative to earned premium. You'd been running kind of steady year over year, heretofore. Was that influenced by this frequency of severity issue, or was this just it kind of maybe changed your mindset a little bit, or was 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 meaning to that. It's just a little variability.
Yeah, which I would expect. That's not unexpected in my mind.
Okay. Yeah, the alternative being you've had great reserve development and maybe it's just not is as easy as it used to be, so to speak.
Nothing's changed in our reserving practices. The way we, and, you know, and I always like to, I think I say this on every call just because it's so essential to who we are as a company. You know, we rely heavily on those case reserves, and nothing's changed in the reserving practices that establishes those case reserves.
Yeah. Any observations about underlying medical inflation? I think you said the 25 claims were actually lower severity, even though above a million. Is there some more medical involvement, you know, that's kind of bumped more over a million?
Yeah, certainly the medical inflation or the medical pressure that we see are the same ones we've talked about on the last two calls. home health, 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, I'm thinking more in terms of prosthetics. So obviously we unfortunately have a lot of amputees or people that have to require prosthetics And the cost of prosthetics is certainly under pressure.
Yeah, very good. Any no inflections, 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. I see moving that needle.
Yeah. And competition, I think you said relatively steady. Yeah, Mark, I would say that's a fair description of it. And then the evergreen question about the next construction job are important for your policyholders. Anything change there?
No. So 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 counts.
So that bodes well, I think, for our insured base. then how about any anything on the sustainability of growth i think you've 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 you know this really nice period of strong growth, maybe less achievable in 2026, or there's always 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 four years, we've reduced our contracted agency count by over a third, 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've 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.
Okay, appreciate that. Thank you.
Operator
We'll now take – as a reminder, Star, one, if you would like to ask a question. We'll now take a question from Bob Fardin with Brain Capital.
Hey there, and good morning. I just have kind of one topic I want to talk about, and that's undocumented workers. So looking at your class codes, you'd 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 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 what 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.
I just wanted some color on that That works for me. Thanks.
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 should say, no, it's not impactful.
Operator
Thank you, Bob. And if 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 in underwriting profitability by relying on our expertise in turning risk into opportunity. Thank you for joining us today.
Operator
And once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect.
