AMERISAFE’s Earnings Call: Balancing Growth and Challenges

AMERISAFE, Inc. ((AMSF)) has held its Q1 earnings call. Read on for the main highlights of the call.

The recent earnings call for AMERISAFE, Inc. painted a mixed picture for the company. On one hand, there was significant growth in gross written premiums and strong policy retention, indicating positive operational performance. On the other hand, the financial results were tempered by a notable decrease in net income, increased expenses, and a higher tax rate. The call highlighted both achievements and challenges, reflecting a balanced outlook for the company.

Gross Written Premiums Growth

AMERISAFE reported a 4.6% growth in gross written premiums over the first quarter of 2024, driven by consistent new business gains and strong premium retention. Notably, premiums on policies written in the quarter grew by 7.1% compared to the prior year quarter, showcasing the company’s ability to attract and retain clients effectively.

Strong Policy Retention

The company achieved an impressive 93.1% retention rate in the first quarter, indicating strong policyholder loyalty and satisfaction. This high retention rate underscores the effectiveness of AMERISAFE’s customer service and policy offerings in maintaining client relationships.

Favorable Development on Prior Accident Years

AMERISAFE experienced $8.7 million in favorable development on prior accident years, primarily from 2020 and 2021. This positive outcome is attributed to proactive claims handling, which has allowed the company to manage past liabilities efficiently.

Investment Portfolio Performance

The company’s investment portfolio maintained a high quality with an average AA- credit rating. The yield on new investments exceeded the portfolio roll-off by 296 basis points, demonstrating prudent investment strategies that contribute positively to the company’s financial health.

Decrease in Net Income

Net income for the first quarter of 2025 was $8.9 million, a significant decrease from $16.9 million in the first quarter of 2024. This decline was primarily driven by lower valuations across equity holdings, resulting in a net unrealized loss on equity securities of $3.2 million.

Increased Underwriting and Other Expenses

Total underwriting and other expenses rose to $20.6 million, marking a $1.9 million increase compared to the first quarter of 2024. This increase resulted in an expense ratio of 29.9%, up from 27.3% in the previous year, indicating rising operational costs.

Decrease in Net Investment Income

Net investment income decreased by 9.7% to $6.7 million, primarily due to a decrease in investable assets following the payment of a special dividend. This decline highlights the impact of strategic financial decisions on the company’s income streams.

Higher Tax Rate

The company’s tax rate increased to 20.2% from 18.4% in the first quarter of 2024. This rise was largely due to an increase in the proportion of underwriting income versus tax-exempt investment income, affecting the overall tax burden.

Forward-Looking Guidance

During the earnings call, AMERISAFE provided forward-looking guidance, reporting a 4.6% increase in gross written premiums to $83.8 million compared to the same quarter in 2024. Despite challenges from declining workers’ compensation rates and economic uncertainties, the company remains optimistic about its growth prospects. The retention rates on renewals remained strong at 93.1%, and favorable development from prior accident years contributed $8.7 million. However, net income for the quarter was down from the previous year, primarily due to a net unrealized loss on equity securities.

In summary, AMERISAFE’s earnings call reflected a balanced sentiment, with significant achievements in premium growth and policy retention offset by challenges in net income and rising expenses. The company’s strategic focus on maintaining a high-quality investment portfolio and proactive claims handling are positive indicators for future performance, despite the current financial hurdles.