AMERISAFE, Inc. (AMSF) Earnings

Management highlights

- Overall Market & Core Business Performance - The broader workers' compensation market remains profitable but is experiencing gradual softening, with industry results pressured by rate reductions, rising medical costs, moderating reserve redundancies, and heightened competition - Amerisafe delivered its ninth consecutive quarter of premium growth, with a 23.5% return on average equity, and grew policy count despite intense competition - Renewal retention exceeded 93%, and favorable payroll audit activity contributed $4.1 million to gross written premiums, substantially above the $1.5 million contribution in Q2 2025, reflecting healthy payroll growth among insureds and continued economic activity in served industries - Favorable prior-year reserve development totaled $7.3 million from accident years 2023 and prior, indicating a solid, high-quality reserve position - Claim frequency increased slightly from the prior accident year at six months, returning to near 2023 levels, while claim severity decreased from the prior accident year - Investment & Capital Position - The investment portfolio remains conservatively positioned, with an average AA- credit rating and 4.2 year duration; total cash, cash equivalents, and investments were $771 million at quarter end - Yields on new investments exceed portfolio roll-off yields by approximately 91 basis points, pushing the tax equivalent book yield up 6 basis points YoY to 3.9% - The company returned capital to shareholders via dividends and share repurchases, repurchasing approximately 181,000 shares during the quarter - Strategic Priorities - Management maintains a core focus on balancing profitable growth, underwriting discipline, operating efficiency, capital strength, and long-term shareholder value creation - The company differentiates itself through specialized underwriting expertise for high-hazard industries and disciplined pricing strategies

Guidance

- Management reaffirmed its expectation of sustaining a mid-single digit premium growth trajectory, supported by ongoing sales and retention initiatives - Early indications for 2027 rate levels point to a continued gradual declining trend, with a potential slight slowdown in the rate of reduction but still net negative rate changes overall - No material changes to long-term strategic guidance were announced, and core priorities of profitable growth and shareholder value creation remain unchanged

Segment performance

Amerisafe operates solely as a specialized workers' compensation insurance provider focused on high-hazard industries, with no separate reported product segments. For the second quarter 2026: gross written premiums increased 7.9% year-over-year to $86 million; net premiums earned increased 11.4% YoY to $77.3 million; net income was $14.6 million ($0.78 per diluted share), compared to $14 million ($0.73 per diluted share) in Q2 2025; operating net income was $8.3 million ($0.44 per diluted share), compared to $10 million ($0.53 per diluted share) in Q2 2025. Net investment income was $6.5 million, a 2.4% decrease YoY. Total underwriting and other expenses were $24.6 million, with an expense ratio of 31.8% (up from 31.3% YoY), and the current accident year loss ratio held at 72%. Statutory surplus was $200.8 million at quarter end, and book value per share increased 0.7% year-to-date to $13.49.

Risks & headwinds

- Industry-wide risks include continued gradual market softening, downward rate pressure, rising medical inflation driving higher claim severity, and heightened competition that pressures growth and profitability - Competition has grown more aggressive from existing competitors, particularly package carriers, as larger industry-wide net written premiums are flat, leading carriers to pursue new growth opportunities more aggressively - Medical inflation for hospital and physician services associated with claims is a persistent, recognized pressure point for the entire industry - Unrealized losses exist on the held-to-maturity portion of the investment portfolio, totaling $5.6 million at quarter end - A one-time $700,000 bad debt write-off was recorded in the quarter from an older large disputed pre-2023 account, representing isolated credit risk

Analyst Q&A

• Q: The analyst asked if larger competitors are increasing competition in workers' compensation, given that major peers like Travelers and Chubb posted growth despite broader industry softening, and for comment on the strength of Q2 audit premium activity. /

  A: Management noted competition is already intense, and there was slightly more aggression from regular competitors (especially package carriers) but not an increase driven specifically by large players. Stronger audit activity reflected 4.7% wage growth among Amerisafe's insureds, above the industry average of 4.3%, which offsets industry-wide 5% rate declines and supports future premium growth for the firm. New employee count growth remained modest among insureds. /

• Q: The analyst asked about the one-time expense that increased the quarterly expense ratio, and for an update on the firm's growth and pricing strategy amid heightened competition. /

  A: The one-time expense was a $700,000 bad debt write-off for a large pre-2023 account that concluded a long dispute. Management confirmed the core growth strategy is unchanged: sales initiatives focused on aligned agencies and clear risk appetite are performing well, profitable growth is prioritized over unprofitable top-line growth, and the firm expects to sustain its mid-single digit premium growth trajectory, with strong retention of desired accounts at appropriate pricing. /

• Q: The analyst asked for an update on medical inflation trends and large loss frequency through the first half of 2026. /

  A: Management confirmed medical inflation for hospital and related physician services is real and running at 4% for the industry, up from recent 2-3% levels. The firm had 7 large losses in the first half of 2026, down from 10 in the first half of 2025. While industry severity is rising, Amerisafe saw slightly lower average severity for accident year 2026 at six months, and the firm controls costs by enforcing fee schedule adherence with vendors. /

• Q: The analyst asked for comment on California's recently approved 10% workers' compensation rate increase, and if this could signal a shift for national rate trends, given California's historical tendency to lead national market moves. /

  A: Management noted that a large portion of California's increase addresses state-specific cumulative trauma issues, which are not broadly present in other markets. Part of the increase also reflects industry-wide trends of rising medical inflation and higher average severity that have not yet been fully priced into broader market rates. Management expects 2027 national rates will still see declines, with only a potential slight reduction in the pace of those declines. /