AMSF Q4 2024: Guides 71% Loss Ratio, Sees 2.6% Policy Growth
- Strong Policy Growth and Retention: The firm demonstrated 9.6% annual policy count growth with 2.6% sequential growth in Q4, complemented by robust renewals—94.1% policy retention on a policy basis and 88% on a premium basis—indicating strong customer loyalty and sustained demand.
- Focused Core Strategy: By concentrating on its specialized ES&G workers' comp book, which represents over 80% of in-force policies, the company emphasizes its core expertise rather than diluting its focus with additional class codes, supporting profitable growth.
- Efficient Claims Management: The company’s claims process is highly effective, with approximately 99% of claims pre-2019 closed, underscoring its ability to control loss costs, optimize claims resolution, and contribute positively to profitability.
- Lower Sequential Policy Growth: Fourth quarter policy count growth was only 2.6% compared to a 9.6% full-year increase, indicating potential deceleration in new business momentum.
- Decline in Average Policy Size: The average policy size for 2024 was slightly lower than in 2023, with fourth quarter payroll growth dropping from about 7% in earlier quarters to 4%, suggesting softer premium quality.
- Elevated Ceded Premium: Ceded premium levels were higher in the quarter, which could pressure underwriting margins despite being partially driven by overall growth, potentially impacting profitability.
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Loss Ratio Outlook
Q: What is the loss ratio expectation for 2025?
A: Management expects to maintain a loss ratio at 71% moving into 2025, underscoring stable underwriting discipline. -
Policy Growth
Q: How did policy count and size perform?
A: Yearly policy count grew 9.6%, but in Q4 growth was 2.6%; average policy size was slightly lower than last year yet remained strong. -
Medical Inflation
Q: What are the trends in medical inflation?
A: Medical cost trends are moderating, with rate filings showing mid-single-digit decreases, a notable 6.5% increase in Nevada contrasted with a 19% decrease in Maine, indicating a modest improvement versus prior highs. -
Large Claims
Q: How many large claims occurred this year?
A: The year ended with 18 claims exceeding $1 million, which is only modestly above our 5-year average of roughly 15, reflecting consistent severity management. -
Renewals
Q: How did renewal rates impact the quarter?
A: With a policy retention rate of 94.1% and premium retention of 88%, our active renewal strategy has significantly bolstered top-line performance. -
Reserve Gains
Q: How were reserve gains distributed across past accident years?
A: Q4 favorable development totaled $9.7 million, derived from prior years (from $1.0M in 2022 to $5.6M from 2019 and earlier), demonstrating prudent reserve management. -
Ceded Premium
Q: Why was ceded premium higher in Q4?
A: The elevated ceded premium was primarily due to the strong growth in business volume and subsequent true-ups, with expectations to stabilize around 6% in 2025. -
Competition
Q: Are competitors getting more aggressive in pricing?
A: Competition remains robust in the workers’ comp space, yet our focused risk appetite and consistent results help us maintain a competitive edge. -
New Business
Q: Is new business expanding beyond existing risks?
A: We continue to grow within our core high-hazard market by enhancing agent relations, rather than expanding into new classes, which aligns with our disciplined strategy. -
Claims Closure
Q: How efficient is our claims closure process?
A: Nearly 99% of claims reported prior to 2019 are closed, reflecting our hands‑on claim management approach that minimizes open liabilities. -
Construction Outlook
Q: What is the construction industry’s outlook?
A: Our construction segment is buoyed by strong payroll growth and a resilient market, despite broader industry challenges. -
Audit Premium
Q: What is the trend in audit premium?
A: Audit premiums are expected to moderate but remain positive in 2025, reflecting a natural deceleration from earlier elevated rates. -
Hurricane Impact
Q: Did hurricanes drive Q4 growth?
A: While there was some regional uptick in areas like Florida and Georgia, no definitive hurricane‐related business surge was identified; the results reflect normal market conditions. -
Business Focus
Q: Will additional class codes be added?
A: We continue to focus solely on our core classes, particularly ES&G, with over 80% of in-force policies in that segment, rather than diversifying into new classes.
Research analysts covering AMERISAFE.