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Operator: Good day, and welcome to the AMERISAFE First 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.

Kathryn Shirley: Thank you, operator, and good morning, everyone. Welcome to the AMERISAFE 2025 first 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-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: Thank you, Kathryn, and good morning, everyone. We are pleased with this quarter’s results, both financially and operationally. We continue on our track of adding incremental growth with an attractive underwriting margin. Importantly, we have done so within our existing geographic footprint and risk appetite and building on the power of relationships with our agents, policyholders and injured workers. Before I discuss the results for the quarter, I will comment on the environment in which we operate. There is a strong competitive — there is strong competition now driven by declining workers’ compensation rates and turmoil amongst other property and casualty lines. Then there’s the economy. News headlines lately highlight the level of uncertainty, tariffs, inflation, recession, interest rates.

I will not be so bold as to predict what will happen, but we like most companies evaluate the risk of our — to our business directly and to our customers. In the most simplistic of terms, those economic conditions, which impact payrolls have the potential to influence our premium. Examples are unemployment, general economic slowdown, project delays, wage inflation. If history were my guide, our niche industries fared well in prior mild shallow recessions. This is something we monitor closely, but it does not change the course we are currently pursuing. Now back to our results. Gross written premiums grew 4.6% over the first quarter of 2024, which was driven by consistent new business gains and strong premium retention. Premiums on policies we wrote in the quarter grew 7.1% over the prior year quarter.

We continue to see strong retention in policies for which we offer renewal with 93.1% retention in the first quarter as well as further policy count growth. Premium growth was partially offset by slowing payroll audits and other premium adjustments, which contributed $5 million to top line in the quarter versus $6.4 million in the year ago quarter. This was not unexpected as we discussed in previous quarters with the moderation in wage inflation. As indicated on our last earnings call, our current accident year loss ratio was in line with the prior accident year at 71%. Looking forward, we expect frequency to remain favorable, which we experienced this quarter and severity trends to be relatively modest. The company experienced $8.7 million in favorable development on prior accident years, primarily from accident years 2020 and 2021.

We attribute our favorable case development into our proactive claims handling. And with that, I’ll turn the call over to Andy to discuss the financials.

Anastasios Omiridis: Thank you, Janelle, and good morning to everyone. For the first quarter of 2025, AMERISAFE reported 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 comparison, during the first quarter of 2024, net income was $16.9 million or $0.88 per diluted share and operating net income of $13.3 million or $0.69 per diluted share. The lower net income was primarily driven by lower valuations across our equity holdings, which resulted in a net unrealized loss on equity securities of $3.2 million during the quarter, compared to an unrealized gain on equity securities of $4.8 million in the first quarter of 2024. Gross written premiums increased by 4.6% to $83.8 million in the quarter compared with $80.1 million in the first quarter of 2024.

Net premiums earned increased 60 basis points to $68.9 million compared to $68.4 million in the first quarter of 2024. Overall, strong new business production and improved premium retention were the primary drivers of continued top line growth, highlighting our focus on expanding profitable sales despite a competitive market environment. Our total underwriting and other expenses were $20.6 million in the quarter, a $1.9 million increase compared with $18.7 million recognized in the first quarter of 2024. This increase resulted in an expense ratio of 29.9% compared with 27.3% in the first quarter of 2024. The increase in expenses is primarily driven by ongoing investments in the business to support top line growth. Timing differences between the initial expense outlay and the recognition of premium contributed to an elevated expense ratio.

For the quarter, our tax rate was 20.2% compared to 18.4% in the first quarter of 2024, which was largely due to an increase in the proportion of underwriting income versus tax exempt investment income. Turning to our investment portfolio. For the first quarter, net investment income decreased 9.7% to $6.7 million, driven by a decrease in investable assets following the payment of the special dividend. For the quarter, the yield on new investments exceeded portfolio roll off by 296 basis points, driving our tax equivalent book yield to 3.85% or 10 basis points higher than the first quarter of 2024. The investment portfolio is high quality, carrying an average AA- credit rating with a duration of 4.48 years. The composition of the portfolio is 62% in municipal bonds, 22% in corporate bonds, 3% in U.S. treasuries and agencies, 7% in equity securities and 6% in cash and other investments.

Approximately 54% of our bond portfolio is classified as held-to-maturity securities, which maintained a net unrealized loss of $13.3 million as of quarter end. As a reminder, the held-to-maturity securities are carried at amortized costs, and therefore, unrealized gains or losses on these securities are not reflected in our book value. Our capital position is strong with a high quality balance sheet, solid loss reserve position and conservative investment portfolio. At quarter end, AMERISAFE carried roughly $826 million in investments, cash and cash equivalents. And finally, just a couple of other topics. Book value per share was $13.69 and operating return on average equity was 17.1%. Our statutory surplus was $243.6 million at quarter end, up 3.6% from $235.1 million at December 31, 2024.

And finally, we will be filing our Form 10-Q with the SEC today, April 30th, after the market closed. With that, I would like to open the call for the question-and-answer portion. Operator?

Kathryn Shirley: Operator, we’re ready for Q&A.

Operator: My apologies. [Operator Instructions]. Our first question is going to come from Matt Carletti at Citizens.

Janelle Frost: Good morning, Matt.

Matt Carletti: Good morning. Just a few questions. One is, do you have handy the kind of the audit premium impact on the year ago second quarter and third quarter too, if you have it? Just trying to get a feel for, obviously, voluntary is seeing a nice rebound, but kind of what we’re up against in terms of just the kind of reported number?

Janelle Frost: Yes, I appreciate that. So I’ll just kind of give the four quarters of last year. First quarter was $6.4 million, as I stated earlier, second quarter was $7.3 million, third quarter was $4 million, and fourth quarter was $2.5 million.

Matt Carletti: All right. Super helpful. Thank you. And then kind of staying on top line, as kind of last fall happened and Helene hit and Milton hit, it sure seemed like those were — your construction exposure, trucking exposure kind of in your wheelhouse there in terms of the rebuild as well as states that you have pretty big market shares in. I know those things can take time to develop, but are you seeing anything in terms of work activity or otherwise that would lead you to believe that you’re kind of benefiting from what’s going on to recover from those events?

Janelle Frost: Yes. Matt, we — if I look at audit premium and if I think about the audit premium that we recognized this quarter, that would have been policies that were effective date starting in the fourth quarter of 2023. So when I look at those the states for the hurricanes that you specifically announced — you talked about Florida, Georgia, the Carolinas. We did see a slight increase in the audit premium for, what I would call, rebuilding classifications in North Carolina and Georgia, not as much in Florida, but we did see a little bit of a bump there.

Matt Carletti: Okay. Helpful. And then one last one, if I could. Just can you help us with the — help us think through kind of the impact of potential tariffs on your business? And I know that might be impossible given we don’t know what that picture is going to look like. But I’m thinking more along the lines of like — to the extent of like medical equipment and medicine and things like that to get your workers back to kind of maximum medical improvement. If you’ve done any analysis just on what that impact should be or if we shouldn’t even be worried about it?

Janelle Frost: No, it’s a great question, and I can speculate with everyone else in the industry, I suppose. Again, putting premiums aside, to your point about medical, if you think about the things that could be impacted by tariffs, I would go to pharmacy and probably durable medical equipment. For the workers’ compensation industry as a whole, that’s probably about 15% of medical costs. So if there’s somehow that impactful tariffs somehow impacting those two, there could be a slight uptick in medical from that perspective. For AMERISAFE, we probably run a little bit higher than that 15% just because of the durable medical equipment, in particular, with the types of injuries that we have. However, I don’t know that it’d be that meaningful.

I think the real question is going to be is the cost-pass through or not, right? And I think that’s the same thing everybody is worried about even on the construction side with premiums. If the tariffs do in fact, somehow impact the construction industry, but the construction industry can pass those costs off to the end customer, then it’s less impactful to our premiums. If the construction companies as a whole bear the brunt of that or it delays projects, then it could be impactful to premium. So that’s my speculation for what it’s worth.

Matt Carletti: All right. That’s super helpful. Thank you for the color. Always appreciate it.

Janelle Frost: You’re welcome.

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

Mark Hughes: Yes, thanks. Good morning.

Janelle Frost: Good morning, Mark.

Mark Hughes: Janelle, you mentioned competition in your remarks. Was there any change in that competitive dynamic in the first quarter?

Janelle Frost: No, there really hasn’t been. We closely monitor what’s happening in the other lines of business, even though we’re a monoline and we write workers’ compensation. Certainly, what’s happening in the rate environment. And even with the distribution network in the other lines of business is impactful to us. And there really hasn’t been a shift good or bad in the level of competition, not at this point.

Mark Hughes: Yes. Andy, the — you’re talking about the expense ratio being impacted by elevated costs to support growth. Did you quantify that? And would you expect that to persist into coming quarters?

Anastasios Omiridis: So Mark, here’s — so the — as I said earlier in my — what I was speaking, it’s roughly about $1.9 million increase over last year. And that is related to, again, investing for scale. I think as we see go through the year, we should see the costs flatten out or moderate because we do assume we will be below 30 for the year. But again, the investment does have a timing delay before we see the premium.

Mark Hughes: Yes. And Janelle, you shared maybe some of the state loss cost update that you’ve seen lately? Are you — do you have any specifics on that? And do you notice any kind of trend in those state-by-state numbers?

Janelle Frost: Unfortunately, the trend is still declining rates. Yes, we’re still seeing — I think we talked about coming into 2025, what we were expecting mid-single digits, 6% — somewhere between 6% and 8%, we’re still seeing the same things. If you look, there’s a great chart put out there that shows all the approved — our latest approved rate I’ll say, decreases because I think there were two increases out across all of the states. But it varies in degree. I think the smallest was like 0.5% decrease and then the largest being a nearly 14% decrease. So it still varies. But on average, somewhere in that 6% to 8% range decrease in case I need to clarify.

Mark Hughes: Okay. Yes. And then anything on the medical inflation front. You mentioned some of the maybe potential tariff impacts, but on an underlying basis, any changes?

Janelle Frost: We are seeing some increases, particularly coming out of physician care. That seems to be one that we’re kind of monitoring a little bit in terms of — I wouldn’t even say specific states, just overall, there’s certainly an increase there. I’m assuming that’s more to do with labor costs than anything else, not tariffs at this point, but we’ll wait and see what happens in terms of, like I mentioned before, pharmacy and durable medical costs, medical equipment.

Mark Hughes: Yes. Is that physician impact? Is that utilization? Or is that some kind of fee schedule impact?

Janelle Frost: Yes. No, great question. And what I was referring to is actual bills coming in the door. So not necessarily utilization, actually what the doctors are charging us.

Mark Hughes: Yes. And as — isn’t that largely tied to kind of state fee schedules, isn’t there?

Janelle Frost: Yes, there’s fee schedules. And certainly, we do medical repricing as well as does everyone in the industry going through those bills and looking at the particular codes that we’re charged for. But just — if we look at what we’re being charged, that does seem to be escalating some and we’re obviously negotiating that and using fee schedules as best we can.

Mark Hughes: Yes. You got those deep pockets. Anything you see in the stat data as you look at the industry, your judgments about loss costs or inflation or reserve adequacy? I know we’ll get the NCCI data here pretty soon. But anything you see in the industry numbers that caught your eye this time around?

Janelle Frost: Yes. You’re spot on. You took the words right out of my mouth. NCCI is a couple of weeks away. So we’ll certainly see what their opinion is in terms of the industry’s overall redundancy. I would suspect that the overall redundancy for the industry should be declining. It’s really the degree of declining because, again loss costs are coming out annually, they’re still seeing rate decreases and they’re basing that off premium and loss data that they’re collecting from the individual carriers. So the rate — the rate of the decreases may have slowed slightly. Therefore, I would assume that means the industry’s decline — the industry’s overall redundancy should be deteriorating. And plus, if you think about the years that the redundancies have been generated from those what we would call older accident years now, that should be waning a little bit for the industry.

So the question would be, does the industry feel as confident in the more current accident years as they did in those pre-COVID accident years. And I think the industry as a whole would say that’s probably not the case. But we’ll see what happens. The data tells its own story. So we’ll see what was being collected and what’s reported.

Mark Hughes: Yes. If I remember properly, you provided wage specifics, maybe increases in payroll versus increases in wages or average wage?

Janelle Frost: Right. Our indications are that our wage inflation is still trending a little bit above the national average. I think the national average right now is somewhere around 4%. So our wage inflation indications are that we’re slightly above that. We do feel like maybe we’ve had a little bit of increase in new employee count. One quarter, we’ll see, if I look at it compared to not sequential quarter, but prior year quarter, same quarter prior year. It would look like we may have a little bit of increase in employee count, but the wage inflation is still trending above the national average.

Mark Hughes: Yes. And then am I thinking properly that your ELCM is a thing of the past, which is perfect good time?

Janelle Frost: As far as our public disclosure, yes, we believe — I believe that, that is competitive information.

Mark Hughes: Yes. Well, it was a beautiful thing while…

Janelle Frost: Thank you, Mark. I appreciate that.

Mark Hughes: Would you consult Alan on that decision?

Janelle Frost: I did not. He probably would say, come on, Janelle, you’ve been doing it that long. Why do I change now? We’re all better at data. We’re all better at data now than we were in the way back in the gap. So I do feel like that’s competitive information.

Mark Hughes: Yes. Understood. And then one final one, large losses in the quarter.

Janelle Frost: Two.

Mark Hughes: Two, okay. So kind of below trend…

Janelle Frost: Right.

Mark Hughes: Yes, okay. All right. Thank you very much.

Janelle Frost: Thank you.

Operator: And this will conclude our Q&A session. I will now turn it over to Janelle Frost, CEO for closing remarks.

Janelle Frost: This quarter was another data point in our success — the success of our strategy and ability to create long-term value for our shareholders. We remain competitive and profitable by executing on our service-focused strategy from the beginning of the agent experience to risk selection to protecting our policyholders and their injured workers. This is who we are, turning risk into opportunity through the performance and experience of our employees. Thank you for joining us today.

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