AMERISAFE Q3 2026 Earnings Call Transcript

AMERISAFE (NASDAQ:AMSF) reported third-quarter financial results on Thursday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

AMERISAFE reported a decrease in net income to $7.2 million ($0.39 per share) from $13.8 million ($0.72 per share) year-over-year, despite a 3% increase in net premiums earned.

The company experienced intensified competition in the workers’ compensation market, leading to a 4.5% decline in gross written premiums and challenges in new premium growth, particularly in select states.

AMERISAFE maintained a strong renewal retention rate of 92.3% and achieved $6.9 million in favorable reserve development, attributed to proactive claims management.

Despite higher total underwriting and other expenses, the company improved its portfolio yields with net investment income increasing to $6.6 million.

Management emphasized a continued focus on disciplined underwriting and capital management amid competitive pressures and noted challenges with medical inflation and audit premiums.

Full Transcript

Kathryn Shirley (Executive Vice President, Chief Administrative Officer & Secretary)

Thank you, operator, and good morning, everyone. Welcome to the AMERISAFE 2026 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 result of risks, uncertainties and other factors, including factors discussed in the earnings release, in the comments made during today’s call and in the risk factors section of our Form 10-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 statement.

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

Janelle Frost (Chief Executive Officer)

Thank you, Katherine, and good morning, everyone. Joining me today are Guillermo Ramos, our Chief Financial Officer, and Vincent Gagliano, our Chief Risk Officer. AMERISAFE continues to demonstrate the disciplined underwriting, reserve strength and capital management that have defined our company throughout multiple market cycles. While competitive pressures in workers’ compensation were elevated, the quarter reinforced several key strengths of our franchise.

We grew policy count, we achieved strong renewal retention, we generated favorable reserve development and maintained exceptional balance sheet strength. These results reflect both the resilience of our business model and the value of our specialized approach to serving hazardous industries. Our strategy emphasizes risk selection, pricing discipline and long-term profitability. The workers’ compensation marketplace is increasingly competitive, with some carriers prioritizing premium growth over underwriting returns. Our approach remains unchanged: preserve underwriting integrity through the cycle to create superior value for our shareholders. We believe this positions AMERISAFE exceptionally well to capitalize on opportunities as market conditions evolve.

During the quarter, net premiums earned increased 3% year over year, supported by continued growth in policy count. Strong retention of existing accounts. Voluntary premium on policies written in the quarter grew 0.8%, led by continued strong pricing. We renewed 92.3% of the policies for which we offered renewal. However, competition intensified in the quarter in select states, which slowed our new premium growth. Turning to losses, our current accident-year loss ratio remains at 72%. We continue to monitor frequency, severity and medical trends closely. As we’ve discussed in previous quarters, medical inflation remains an area of focus for the workers’ compensation industry. Through the third quarter, both frequency and severity for the current accident year were in line with the prior accident year, with growth in claims reported exceeding premium growth.

Our claims team continues to demonstrate their expertise in actively managing claims and finding opportunities to resolve them effectively and efficiently. We experienced $6.9 million of favorable reserve development during the quarter, primarily from accident years 2023 and prior. We attribute that favorable development to our proactive claims handling and the consistent approach our team takes from the time a claim is reported through resolution.

Our ability and experience in handling severe claims and our reserve strength continue to be distinguishing characteristics for AMERISAFE. We remain confident in our long-term outlook for our business and our ability to create sustainable value for shareholders through disciplined underwriting, prudent capital management and operational excellence. And with that, I turn the call over to Guillermo.

Guillermo Ramos (Chief Financial Officer)

Thank you, Janelle. Good morning, everyone. For the third quarter of 2026, AMERISAFE reported net income of $7.2 million, or $0.39 per diluted share, and operating net income of $7.4 million, or $0.40 per diluted share. For reference, in the third quarter of 2025, net income was $13.8 million, or $0.72 per diluted share, and operating net income was $10.6 million, or $0.55 per diluted share. Turning to premiums, gross written premiums decreased 4.5% to $76.7 million from $80.3 million in the third quarter of 2025. Payroll audit and related adjustments reduced premiums by $1.6 million this quarter, compared with a $2.5 million increase in the prior-year quarter. Despite the unfavorable audit and related premium adjustments during the quarter, net premiums earned increased 3% to $73.3 million from $71.2 million, supported by strong premium production in recent quarters.

Total underwriting and other expenses were $23.8 million compared to $22.1 million in the third quarter of 2025, resulting in an expense ratio of 32.5% compared with 31.1% a year ago. The increase was driven by increased insurance-related assessments, higher compensation cost and higher commission expense. Our effective tax rate for the quarter was 20% compared to 21% in the prior-year quarter. The decrease was due to a higher proportion of income from tax-exempt investments.

Turning to investments, net investment income was $6.6 million in the quarter, an increase of $0.6 million from the third quarter of 2025. The reinvestment rate environment remained favorable, with yields on new investments exceeding portfolio roll-off yields by approximately 146 basis points. As a result, the tax-equivalent book yield increased to 4%, up 9 basis points from the third quarter of 2025. Our portfolio remains conservatively positioned, carrying an average AA- credit rating and a duration of 4.7 years.

At quarter end, we held approximately $753 million in investments, cash and cash equivalents. The portfolio was comprised of 58% municipal bonds, 25% corporate bonds, 3% U.S. Treasuries and agencies, 9% equity securities and 5% cash and cash equivalents. Approximately 41% of the portfolio was classified as held to maturity and carried a net unrealized loss position of $23.8 million. As a reminder, these securities are carried at amortized cost and therefore unrealized gains and losses are not reflected in reported book value.

Our diversified equity holdings recorded a modest unrealized loss of $0.2 million, compared to a $4.1 million unrealized gain in the prior-year quarter. Statutory surplus was $208.4 million at quarter end compared to $217.8 million at year-end 2025. Book value per share decreased to 12.8, down 4.8% year to date. During the quarter, we repurchased approximately 5,000 shares at an average price of 30.18 per share, representing $0.2 million returned to shareholders.

Overall, the quarter reflected growth in earned premiums and continued improvement in portfolio yields, partially offset by unfavorable audit premium adjustments and higher expenses. We remain focused on disciplined underwriting, profitable premium production and improving operating leverage while maintaining a conservative investment portfolio and a prudent approach to capital management. Lastly, we will file a Form 10-Q with the SEC tomorrow, October 30, 2026, after the market close.

With that, I would like to turn the call over to the operator for questions.

OPERATOR

Thank you, sir. If you would like to ask a question, please signal by pressing star-one on your telephone keypad. If you’re using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star-one to ask a question. We’ll pause for just a moment to allow everyone an opportunity to signal. We will now take our first question from Mark Hughes with Truist Securities.

Mark Hughes (Analyst at Truist Securities)

Yeah, thank you very much. Janelle, I think you talked on the last call about frequency being up through the six months. I think you said on the call just a second ago that growth in claims reported is exceeding premium growth. Have you seen any change in that trajectory? Is it accelerating as you go through the year? Is that a function of premiums being down rather than claims being up? I guess measured against headcount or payroll or something like that.

Just a little more on what’s going on. Frequency would be great.

Janelle Frost (Chief Executive Officer)

Yeah. Good morning, Mark. Let me start with: absolute recorded claim counts are up. So I would love to say, oh, it’s really all premium-related, but that is not true. However, at the same time our reported claims are up, we’ve written more policies. Right. We have more policies in force. Our in-force policies have grown 4% year over year from an in-force basis. So yes, absolute claim counts are up. I think you’ll see that when we file the 10-Q earlier today.

But you’ll also keep in mind we have more policies in force. That being said, there’s certainly pressure on that denominator in terms of premium. As you know, we came into this year expecting mid- to high-single-digit rate declines. That has been the experience. The rate filings that are now in force that are going to be, I guess for now and for 2027, more of the same. So we were—I think everybody in the industry was thinking the rate of decline would slow, but that really hasn’t necessarily been the case.

So that puts pressure on frequency.

Mark Hughes (Analyst at Truist Securities)

When you talk about the rate filings, any specific numbers there? I think sometimes you talked about kind of the recent trend. It sounds like you’re seeing—if you say more of the same, is that mid- to upper-single digits? Is that what I heard you say?

Janelle Frost (Chief Executive Officer)

If you look at the latest charts that are out there, the lowest decline is North Carolina, down 10.8%. And I think there are three states that have increases: Oregon, California and Nevada. And Nevada was an administrative change, so I don’t know, I wouldn’t really count that one as much. But everyone else is a decline. So I think on average we’re still looking in that 5% to 6% range for loss cost declines going into 2027—into the 2027 premium year.

Mark Hughes (Analyst at Truist Securities)

Yeah. And in your judgment you’re saying that the industry was hoping for better or thought it would be better?

Janelle Frost (Chief Executive Officer)

I think we said early on this year that we thought the rate—we were expecting the rate of the declines to slow. And when I talk about the declines, the loss cost, and they really didn’t slow; they more stabilized would be probably the better term.

Mark Hughes (Analyst at Truist Securities)

Yeah. Is that because NCCI is looking in the rearview mirror, or it’s because that’s what’s happening in the marketplace?

Janelle Frost (Chief Executive Officer)

Well, you know, NCCI is using the data that companies are reporting in. So yeah, that data is 18 months old, but they apply trend factors to that as well. I think it depends on individual company experience and what we’re going to see in terms of what companies are experiencing in the here and now in terms of frequency, severity and reserve development for more recent accident years.

Mark Hughes (Analyst at Truist Securities)

Yeah. And when you say you have more policies, I think your policy size—correct me if I’m wrong—has shrunk a little bit with the competitive dynamic in the market. If you looked at it on a headcount or payroll basis, is it—

Janelle Frost (Chief Executive Officer)

From the average account size, if that’s what you’re referring to, I would say it’s relatively flat.

Mark Hughes (Analyst at Truist Securities)

Okay. Yeah. Okay, then how about the audit premium? This is the first negative result in a while. What’s driving that? Are there any particular industries and markets where you’re seeing more influence?

Janelle Frost (Chief Executive Officer)

Yeah, I’ll give some color and then I’ll pass it off to Vince to give you a little bit more detail. You know, the audit premium in the quarter. Let me be very clear. Even though I know we talked about the decrease compared to the prior-year quarter, audit premiums themselves remained positive. Meaning our insured base, their expected payrolls were higher than what they were when they originally estimated for that premium year, or that policy year.

So I want to be very clear that they remain positive. They were lower, considerably lower than the third quarter of last year. So when I read into that, I think about what does that mean for the economy of our insured base and is there something happening there? We have seen a slowing of the wage growth itself. I think for the quarter we saw—Vince can give more detail—but I think it was like 4.1% in total, and that really wasn’t new employee count. I don’t think this comes as a surprise to anyone. I think small- to mid-size employers are experiencing the pressures on wages given the margin compression they’re experiencing with things that are happening.

I still believe that there is a positive economic outlook for the people that we insure. There is definitely a labor shortage, so that speaks to potential higher wages, but at the same time there’s margin compression. Obviously things happening with oil prices and diesel and gasoline are impactful to our industries. So I think employers are being cautious about wage growth. But I believe, as we talked about before, particularly during the COVID years, we talked about, is the next job there? I believe the next job is there. We haven’t seen or heard of project delays and those types of things. So I still feel like that’s economically a positive for AMERISAFE going forward. Vince can talk about the quarter specifically and industries.

Vincent Gagliano (Executive VP, Chief Risk Officer)

Yeah, Mark, good morning. I’ll start with industries. We do not see any material change in any specific industries’ audit premium patterns. The color I would add to the quarter is more about just the mechanics of premium audit. Keep in mind, we’re auditing policies that were written over a year ago. We also don’t control the timing necessarily of when those audits come through or whether they’ll be bigger or smaller than usual. I can tell you we did have a couple unusually large negative audits in the quarter that, on a small audit premium base, do move the number significantly.

We also had cancellation premium that, while it wasn’t out of the norm, it was robust, I’d say. And coming in on top of low audit premium, it really just created a pretty negative look for audit and adjustments for the quarter. We were a little surprised in general, but I will also say that our Q3 audit and adjustment premium is typically our lowest of the year if we look back over about 10 years of history.

Mark Hughes (Analyst at Truist Securities)

Is that cancellation premium? Is that a little more shopping around?

Vincent Gagliano (Executive VP, Chief Risk Officer)

Yeah. Yeah, certainly. Competition is intensifying. We’re having to battle more and more to keep the accounts we have, much less write new business.

Mark Hughes (Analyst at Truist Securities)

As you said last quarter, you saw maybe some of the package carriers are getting a little more aggressive in the market. Any observations about what is happening this quarter, the intensity versus three or six months ago, and then whether it is the same players doing the same thing?

Vincent Gagliano (Executive VP, Chief Risk Officer)

It is the same players. I think we’ve reached a point where we’re comfortable saying we’re seeing some irrational behavior.

Janelle Frost (Chief Executive Officer)

And we haven’t used that term in a while. No, we kind of debated who would say it. Yeah. Competition is intense. Some days, Mark, I feel like we’re fighting for every single account. It’s not quite that bad, but we see some really bizarre things happening out there where it’s apparent to us that some competitors are just chasing premium over profitability. So that’s where we draw the line. And it’s tough for us to walk away, but sometimes we just think if we can’t write it profitably, that’s what we’re going to do.

Mark Hughes (Analyst at Truist Securities)

Yeah, I’ve got a few more. I’m happy to drop off if that makes sense. So I’ll say thanks and put myself in the queue. But if there’s not much more of a queue, then don’t let the call end before I come back.

OPERATOR

I believe there is.

Mark Hughes (Analyst at Truist Securities)

Okay. All right.

OPERATOR

Thank you.

Mark Hughes (Analyst at Truist Securities)

Yeah, I’m dominating. I apologize.

Janelle Frost (Chief Executive Officer)

We’ll speak soon.

Mark Hughes (Analyst at Truist Securities)

Okay. All right, thanks.

OPERATOR

And once again, ladies and gentlemen, it is Star One. If you had a question, we will go next to David Samar with Citizens.

David Samar (Analyst at Citizens)

This is David on for Matt. Good morning. So just on large losses, are you able to kind of let us know where you stand versus last year?

Janelle Frost (Chief Executive Officer)

Yeah, just a year ago at quarter-end, for the year we would have had 18 claims over a million dollars. Last year, third quarter we were at 17 and we ended the year with 25. So we’re at 18 through the first nine months.

David Samar (Analyst at Citizens)

Thank you. And on the expense ratio, obviously it was a little bit higher this quarter driven by those assessments. Were there any states or areas with outsized assessments that you can kind of point out for us?

Guillermo Ramos (Chief Financial Officer)

Yeah, well, first of all, what I would like just to mention is that, yeah, the expense ratio was higher, but it has to do as well with the earned premium. So we need to take a look at the denominator. Okay. And there were three states that had those assessments. The biggest one was Delaware.

David Samar (Analyst at Citizens)

And then I guess lastly, just kind of digging a little further on the competitive environment. Voluntary growth slowed just a bit. Is this kind of the new normal that we should expect or is there anything else to comment on there?

Janelle Frost (Chief Executive Officer)

No, I don’t expect that to be a new normal. Vince was talking about—certainly we saw the level of competition notch up a bit, if that’s the right term to use, in the third quarter. But, you know, we compete every day. My expectation is, as we started this year, we said we were shooting for mid-single-digit growth for the year. That outlook, or that expectation for me, has not changed.

David Samar (Analyst at Citizens)

Okay, thank you.

Janelle Frost (Chief Executive Officer)

You’re welcome.

OPERATOR

Once again, Star One if you had a question, we will return to Mark Hughes with Truist Securities.

Janelle Frost (Chief Executive Officer)

Welcome back, Mark.

Mark Hughes (Analyst at Truist Securities)

Yeah, thank you very much. Janelle, how about the medical inflation? Anything there? One theory on a little higher frequency was maybe just overall pressure on medical costs—more people with high-deductible plans that may find it more convenient to work through the comp system with health issues rather than their health plans. What do you think about that?

Janelle Frost (Chief Executive Officer)

A really interesting point, Mark, because when we talk about medical inflation and we look at our book, and even if you look across industry data, a lot of companies have talked about the inflation increase in hospitalization and hospital costs. I think that’s a direct correlation to exactly what you’re talking about—just the experience that everyone in the country is experiencing on the health care front, what hospitals are experiencing with lower reimbursement rates, what employers are experiencing in terms of their own health insurance cost and benefit.

I mean, it’s all interconnected, it’s all related. And that’s probably where, other than home health—because I will continue to beat that drum for AMERISAFE because I do think it’s not unique to us, but given the severity of our injuries that’s certainly important to us—hospitalization and hospital costs are probably where we’re seeing the greatest pressure.

Mark Hughes (Analyst at Truist Securities)

Yep. Okay. Yeah, I think that was it for me.

Janelle Frost (Chief Executive Officer)

Okay. Appreciate it. I’m sorry I cut you off. If you just had one.

Mark Hughes (Analyst at Truist Securities)

I thought, oh my gosh, we’ve already gone through them. What am I? What am I?

Janelle Frost (Chief Executive Officer)

David beat you to the punch on the large losses. So we’ll give him credit. You’ll get credit for that.

Mark Hughes (Analyst at Truist Securities)

Yeah. Well, let me ask you this. You mentioned the point about irrational and kind of contemplated whether to use that word. What are the ramifications of that? If somebody said, gosh, people are starting to be irrational, what does that make you think about as you’re running the business?

Janelle Frost (Chief Executive Officer)

Yeah. You know, we really internally talked about do we use the word or not, because we’ve seen—and I’ve talked about this on prior calls—we’ve seen anecdotally on different accounts where we thought, how are they charging that? When we lose something to a competitor, how are they charging that? And sometimes if it’s a multiline carrier, it’s a little bit hard for us to compare apples and apples. Granted, that is true, but I would say the anecdotes were more plentiful this quarter than in the past, and so that’s why I feel comfortable using the word irrational.

There definitely was a shift that we saw in the quarter. It’s the best way for me to say it. And I should also say this, and I don’t think we commented on this earlier: it wasn’t just pricing. We saw what I would call irrational commission structures, and in states where you compete on dividends, dividends. So it was all related to how do you win the account from a pricing perspective—whether it’s commission, the rate itself, or dividends. We just saw an uptick in that in the third quarter, and so that’s why I would say irrational.

And compare and contrast that to AMERISAFE, because again, we compete every day, so I don’t want to make this all about the competition. This is how AMERISAFE behaves in the marketplace: we’re not—as Vincent said—we’re not chasing that price. We want to win the account. We want to win the account under AMERISAFE’s value proposition—what we offer the policyholder, what we offer the agent—but more importantly, what’s going to produce long-term profitable growth for AMERISAFE.

It’s a balance of all of those things. You know, Guillermo was talking about the expense ratio, and if you look at—and I know this isn’t information that’s anywhere published—but if you look at our expense ratio, and again, certainly the audit premium hurt the expense ratio this particular quarter. But even if I look at it on a year-to-date basis, we’re gaining operational efficiencies in what I would call fixed cost or non-variable costs. So that’s something we’ve really been focused on as we try to find these ways to create ease of doing business.

At the same time, are we managing that expense ratio? And we’re definitely making progress there on a year-to-date basis. I feel comfortable about that. But going to the variable cost, if I look at our commission expense on a year-to-date basis, we’re 10 basis points higher than we were last year at this point in time. So we’re not—I mean, I think we find creative ways in rewarding those agencies and those policyholders that do bring us profitable business, but at the same time not using it as a premium grab.

Mark Hughes (Analyst at Truist Securities)

Yeah, I have a question. This is a general question we’ve been thinking about: when you look at some of the package writers, you’ll see the profitability, say in their property—the commercial multiperil property or non-liability—will be very high. At the same time, the profitability in the liability portion of it is abysmal. And I wonder the extent to which the same thing is happening here in comp, that everybody’s pursuing the package but the profit allocation is subject to a lot of discretion.

You know, we’re just trying to figure out why would you write package business where you get the property at 50 and the GL at 120 combined? If you look at it on a direct underwriting basis, it doesn’t make sense. Or maybe it does. We’re trying to figure out why that happens. But I wonder if you have any comments on that.

Vincent Gagliano (Executive VP, Chief Risk Officer)

Yeah, I don’t know that I have the why behind that. I can say from a workers’ comp perspective, and a package carrier, why write the comp at maybe something that breaks even is because it’s a long-tail line, right? And where the interest rates are, where interest rates are now, you can make money off of the cash flow portion of that. So maybe that hundred combined in workers’ comp is still more profitable than that hundred combined in property, to your point.

Yeah, if that gives you any color. But I can only—again, I can only really speak about it in terms of what it means to the workers.

Mark Hughes (Analyst at Truist Securities)

Yeah, exactly. Okay. All right. Well, I’m glad we’ve had this time together. I appreciate all your help.

Vincent Gagliano (Executive VP, Chief Risk Officer)

Me too. Mark, nice talking to you.

OPERATOR

And ladies and gentlemen, with no other questions holding, I’d like to turn the call back to CEO Janelle Frost for any additional or closing remarks.

Janelle Frost (Chief Executive Officer)

AMERISAFE has successfully navigated workers’ compensation cycles for decades by remaining disciplined when markets become increasingly competitive. That discipline continues today. Our recent AM Best rating affirmation reflects our underwriting discipline, prudent reserving, strong capitalization and long-term focus on execution. The same fundamentals that continue to drive our performance. We believe these strengths position us well to serve our policyholders, create sustainable value for shareholders and navigate current market conditions.

We are operating from a position of strength with a team that remains intensely focused on underwriting profitability. Thank you for your continued support of AMERISAFE.

OPERATOR

Thank you, ladies and gentlemen. That will conclude today’s call. We thank you for your participation. You may disconnect at this time.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.