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AMERISAFE INC (AMSF)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 2025 was operationally solid but mixed vs expectations: operating EPS of $0.60 modestly beat S&P Global consensus, while total revenues missed on lower net investment income and equity marks; GAAP diluted EPS was $0.47 as unrealized equity losses flowed through earnings . EPS (Primary/operating) actual $0.60 vs $0.597*; revenue actual $72.60M vs $76.78M*; combined ratio 89.1% (vs 87.3% LY) .
  • Top-line drivers stayed healthy: gross written premium +4.6% YoY to $83.8M, voluntary premiums +7.1% YoY; audits contributed $5.0M (down YoY as wage inflation moderates) .
  • Underwriting remained disciplined: current accident-year LR held at 71%; favorable prior-year development of $8.7M aided a 58.3% net loss ratio; expense ratio rose to 29.9% on growth investments (management expects full-year below 30%) .
  • Capital and income: net investment income fell 9.7% YoY (smaller portfolio post-special dividend), equity marks were -$3.2M; book value per share rose to $13.69 (+1.3% QoQ) and a $0.39 dividend was declared for June 20 .
  • Potential stock catalysts: path to sub-30% expense ratio, continued favorable reserve development, sustained policy retention with agency engagement, and any rebuilding activity tailwinds in SE footprint vs risk from continued state rate declines, medical/physician cost pressure, and tariff scenarios .

What Went Well and What Went Wrong

  • What Went Well

    • Sustained premium growth with disciplined underwriting: “Gross written premiums grew 4.6%... driven by consistent new business gains and strong premium retention… Premiums on policies we wrote in the quarter grew 7.1%” (CEO) .
    • Favorable reserve development continued: $8.7M net favorable development (primarily AY 2020–2021), supporting a 58.3% loss ratio; frequency favorable and severity “relatively modest” outlook (CEO) .
    • Capital/ROAE resilience: Operating ROAE 17.1% with book value per share up to $13.69 QoQ, and portfolio quality (avg AA-, 4.48-year duration) intact (CFO) .

  • What Went Wrong

    • Revenue and GAAP EPS pressure from markets: net investment income -9.7% YoY and -$3.2M unrealized equity loss weighed on total revenues and GAAP EPS .
    • Expense ratio ticked up: underwriting expense ratio rose to 29.9% on growth investments and timing, though management expects full-year to settle below 30% (CFO) .
    • Rate headwinds persist: state loss costs continue to trend down mid-single digits, with a 6–8% average decrease expected across NCCI states, keeping pricing pressure elevated (CEO) .

Financial Results

Actuals versus prior periods (oldest → newest)

MetricQ3 2024Q4 2024Q1 2025
Total Revenues ($USD Millions)$78.70 $74.03 $72.60
Net Premiums Earned ($USD Millions)$67.05 $66.51 $68.89
Net Investment Income ($USD Millions)$7.49 $6.91 $6.65
Diluted EPS (GAAP)$0.75 $0.69 $0.47
Operating EPS (Primary/Non-GAAP)$0.58 $0.67 $0.60
Net Loss Ratio (%)58.4% 56.4% 58.3%
Underwriting Expense Ratio (%)31.7% 29.7% 29.9%
Net Combined Ratio (%)90.9% 86.1% 89.1%
Return on Avg Equity (%)18.6% 18.5% 13.8%

Consensus vs actuals (S&P Global; asterisked)

MetricQ3 2024 Estimate*Q3 2024 ActualQ4 2024 Estimate*Q4 2024 ActualQ1 2025 Estimate*Q1 2025 Actual
Revenue ($USD Millions)$75.32*$78.70 $77.37*$74.03 $76.78*$72.60
Primary EPS (Operating)$0.58*$0.58 $0.623*$0.67 $0.597*$0.60

Note: Values retrieved from S&P Global.*

KPIs and operating drivers

KPIQ3 2024Q4 2024Q1 2025
Gross Premiums Written ($USD Millions)$74.94 $62.70 $83.78
Voluntary Premiums on Policies Written (YoY)+8.8% +8.5% +7.1%
Payroll Audits Contribution ($USD Millions)$4.0 $2.5 $5.0
Policy Retention (Policy Count)93.6% 94.1% 93.1%
Favorable PY Development ($USD Millions)$8.5 $9.7 $8.7
Book Value per Share ($)$16.50 $13.51 $13.69
Investment Portfolio Carrying Value incl. Cash ($USD Millions)$899.2 $832.8 $825.8
Effective Tax Rate (%)19.5% 19.7% (FY) 20.2%

Segment breakdown: Not applicable (monoline workers’ compensation).

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Current Accident-Year Loss RatioFY 2025Maintain ~71% (Q4 call) Maintain ~71% (Q1 commentary) Maintained
Underwriting Expense RatioFY 2025Within historical ranges (2024: 29.6%) “Below 30%” expected for FY 2025 (CFO) Improved (lower)
Regular Dividend per ShareQuarterlyRaised to $0.39 on Feb 26; payable Mar 21, 2025 $0.39 declared for payment June 20, 2025 Maintained

Earnings Call Themes & Trends

TopicQ3 2024 (Prior-2)Q4 2024 (Prior-1)Q1 2025 (Current)Trend
Competitive/rate environmentStrong competition; rate declines continue; agency engagement driving growth Comp remains intense; retention strong; policy count +2.6% seq; rate decreases still upper single digits No change in competition; state loss cost declines averaging 6–8% Persistent headwind
Agency engagement/new businessEmployee-led efficiency and appetite clarity; 93.6% renewal retention New business/retention key growth drivers Continued new business momentum and strong retention Sustained
Audit premiumPositive but moderating vs LY; $4.0M in Q3 $2.5M; moderation expected into 2025 $5.0M; YoY down vs 1Q24 as wage inflation moderates Moderating YoY
Medical inflation/fee schedulesMonitoring provider fee schedules; Florida changes noted Watching home health costs; varied state loss costs Physician billing pressure noted; potential tariff impact on pharmacy/DME Mild upward pressure
Investment income/portfolioNew money yield ~5%; high-quality AA- portfolio NII down post-special dividend; AA- portfolio; 4.4y duration NII -9.7% YoY; AA- portfolio; 4.48y duration Lower NII YoY
Large losses13 YTD >$1M at Q3 18 for 2024 (5-yr avg ~15) 2 in Q1 (below trend) Benign this quarter

Management Commentary

  • Strategy and market positioning (CEO): “We continue on our track of adding incremental growth with an attractive underwriting margin… within our existing geographic footprint and risk appetite” .
  • Growth drivers (CEO): “Premiums on policies we wrote in the quarter grew 7.1% over the prior year quarter… strong retention… and further policy count growth.” .
  • Loss trends (CEO): “We expect frequency to remain favorable… severity trends to be relatively modest… experienced $8.7 million in favorable development on prior accident years” .
  • Expense ratio outlook (CFO): “We should see the costs flatten out or moderate… we will be below 30 for the year.” .
  • Investment portfolio (CFO): “Tax equivalent book yield [is] 3.85%… portfolio is high quality, average AA-, duration 4.48 years” .

Q&A Highlights

  • Audit premium cadence from 2024: $6.4M (Q1), $7.3M (Q2), $4.0M (Q3), $2.5M (Q4); Q1 2025 audits $5.0M (reflects moderating wage inflation) .
  • Tariffs scenario analysis: potential modest impact via pharmacy/DME (~15% of industry medical costs; AMSF “a little bit higher” due to injury mix), with pass-through dynamics key; potential construction impacts depend on cost pass-through and project timing (CEO) .
  • Expense ratio trajectory: ~+$1.9M YoY in expenses tied to growth investments; management expects FY expense ratio <30% despite timing effects (CFO) .
  • State loss cost trends: continued declines averaging 6–8%; range from ~0.5% to nearly 14% decreases (CEO) .
  • Medical costs: increased physician billing noted; company using repricing and fee schedules to manage; two large claims in Q1 (below typical trend) (CEO) .

Estimates Context

  • Q1 2025: Operating EPS $0.60 vs $0.597* (slight beat); revenue $72.60M vs $76.78M* (miss). The revenue shortfall largely reflects lower net investment income (-9.7% YoY) and negative equity marks (-$3.2M) .
  • Prior quarters: Q4 2024 operating EPS beat ($0.67 vs $0.623*), revenue miss ($74.03M vs $77.37M*); Q3 2024 operating EPS in line ($0.58 vs $0.58*), revenue beat ($78.70M vs $75.32M*) .
    Note: Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Core underwriting remains disciplined (AY LR ~71%, favorable PYD $8.7M) supporting sub-90s combined ratio despite higher expense ratio; management guides FY expense ratio below 30% .
  • Growth levers are working: voluntary premiums +7.1% YoY, strong retention (~93%), and agency engagement continue to offset rate headwinds and moderating audit premium tailwinds .
  • Earnings quality mixed by market marks: GAAP EPS pressured by -$3.2M equity marks and lower NII post-special dividend; operating EPS better reflects underwriting core and modestly beat consensus .
  • Macro/rate headwinds ongoing: state loss cost declines (6–8%) and competitive intensity persist; watch for cost discipline and pricing execution to preserve margins .
  • Medical inflation watch items: physician billing pressure and potential tariff effects on pharmacy/DME merit monitoring, though management sees limited impact near term .
  • Capital return steady: regular dividend at $0.39 maintained; book value per share rose to $13.69 QoQ; portfolio quality (AA-, ~4.5y) intact .
  • Near-term setup: delivery on sub-30% expense ratio, continued favorable development, and sustained growth/retention could support multiple and sentiment; revenue sensitivity to investment income/equity marks is the key swing factor .

Appendix: Other Relevant Press Releases (Q1 2025)

  • Earnings release schedule: April 29 (post-close) release; April 30 call at 10:30 AM ET .
  • Dividend increase announcement (pre-Q1): regular dividend raised 5.4% to $0.39 (effective for Mar 21 payment) .
  • Q1 dividend declaration: $0.39 per share payable June 20, 2025 (declared April 29) .