On Wednesday, AMERISAFE (NASDAQ:AMSF) discussed second-quarter financial results during its earnings call. The full transcript is provided below.

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Summary

AMERISAFE reported a 7.9% increase in gross written premiums to $86 million, reflecting strong audit premium production and a 11.4% rise in net premiums earned.

The company achieved a return on average equity of 23.5% and maintained a current accident year loss ratio of 72%, with favorable reserve development of $7.3 million from prior accident years.

Net income for the second quarter was $14.6 million, or $0.78 per diluted share, with operating net income of $8.3 million, or $0.44 per diluted share, influenced by a one-time bad debt write-off of $700,000.

Investment income decreased by 2.4% due to lower average investable assets, but the tax-equivalent book yield increased to 3.9%.

The company repurchased 181,000 shares at an average price of $30.58 per share, returning $5.6 million to shareholders, and maintained a statutory surplus of $200.8 million.

AMERISAFE remains focused on profitable growth, underwriting discipline, and capital strength, despite challenges from rate reductions and medical cost increases in the workers' compensation market.

Full Transcript

OPERATOR

Good day and welcome to the AMERISAFE second quarter 2026 earnings call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Kathryn Shirley, Chief Administrative Officer. Please go ahead.

Kathryn Shirley — Executive Vice President, Chief Administrative Officer & Secretary

Thank you, operator, and good morning, everyone. Welcome to the AMERISAFE 2026 second 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 a result of risks, uncertainties, and other factors, including factors discussed in the earnings release, in the comments made during today's call, and in the risk factors section of our Form 10-K, Form 10-Qs, 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 — President & CEO

Thank you, Kathryn, and good morning, everyone. With me on the call today is Guillermo Ramos, our Chief Financial Officer, and Vincent Gagliano, our Chief Risk Officer. We appreciate your interest in AMERISAFE and look forward to discussing our second quarter 2026 results. The workers' compensation market remains profitable, but the industry continues to observe a gradual softening environment. Rate reductions, increasing medical costs, moderating reserve redundancies, and heightened competition continue to pressure industry-wide results.

Despite those dynamics, AMERISAFE's specialized underwriting expertise, focus on high hazard industries, and disciplined pricing strategy continue to differentiate our results in the marketplace. The second quarter reflected continued strength in our underlying business. We delivered our ninth consecutive quarter of premium growth, generated a return on average equity of 23.5%, and continued to grow policy count despite a highly competitive market.

Net premiums earned increased 11.4% compared to the prior-year quarter, supported by strong renewal retention of over 93%, growth in policy count, and favorable audit premium activity. Gross premiums written increased 7.9%, while voluntary premiums on policies written in the quarter increased 5.7% year over prior-year quarter. We were also encouraged by payroll audit activity during the quarter. Audit premiums and related adjustments contributed $4.1 million to premiums written, substantially above the prior-year period.

Payroll growth among our insureds remains healthy, reflecting continued economic activity across many of the industries we serve. Our current accident year loss ratio remains 72%. Claim frequency was up from the prior accident year at six months, returning closer to 2023 levels. The severity was down from the prior accident year at six months. As for prior years, we recognized $7.3 million of favorable reserve development during the quarter from accident years '23 and prior.

Favorable development remains solidly positive and reflects the continued quality of our reserve position. Looking ahead, we remain focused on balancing profitable growth, underwriting discipline, operating efficiency, capital strength, and long-term shareholder value creation. While the market environment presents its challenges, we believe AMERISAFE is well positioned due to our strong customer retention, specialized expertise, financial strength, and exceptional employee culture.

With that, I'll turn the call over to Guillermo to discuss the financial results.

Guillermo Ramos — Chief Financial Officer

Thank you, Janelle, and good morning to everyone. For the second quarter of 2026, AMERISAFE reported net income of $14.6 million, or $0.78 per diluted share, and operating net income of $8.3 million, or $0.44 per diluted share. For reference, in the second quarter of 2025, net income was $14 million, or $0.73 per diluted share, and operating net income was $10 million, or $0.53 per diluted share. Turning to premiums, gross written premiums increased 7.9% to $86 million from $79.7 million in the second quarter of 2025.

Growth benefited from strong audit premium production, which contributed $4.1 million during the quarter compared with $1.5 million in the second quarter of 2025. Net premiums earned increased 11.4% to $77.3 million from $69.4 million in the second quarter of 2025, reflecting continued success in our organic growth initiatives. Total underwriting and other expenses were $24.6 million compared to $21.7 million in the second quarter of 2025, resulting in an expense ratio of 31.8% compared with 31.3% a year ago.

The increase was driven by one-time items, which we don't expect to recur. Our effective tax rate for the quarter was 20.1%, unchanged from the prior-year quarter. Turning to investments, net investment income was $6.5 million in the quarter, a decrease of 2.4% from the second quarter of 2025, primarily reflecting lower average investable assets following capital return to shareholders through dividends and share repurchases. The investment rate environment remained favorable, with yields on new investments exceeding portfolio roll-off yields by approximately 91 basis points.

As a result, the tax-equivalent book yield increased to 3.9%, up 6 basis points from the second quarter of 2025. Our portfolio remains conservatively positioned, carrying an average AA credit rating and a duration of 4.2 years. At quarter end, we held approximately $771 million in investments, cash, and cash equivalents. The portfolio was comprised of 60% municipal bonds, 20% corporate bonds, 3% U.S. Treasuries and agencies, 8% equity securities, and 9% cash and cash equivalents.

Approximately 43% of the portfolio was classified as held to maturity and carried a net unrealized loss position of $5.6 million. The unrealized gain on equity securities was $8.1 million compared to $1.8 million in the prior-year quarter, reflecting continued strength in the U.S. equity markets. Statutory surplus was $200.8 million at quarter end compared with $217.8 million at year-end 2025. Book value per share increased to $13.49, up 0.7% year to date.

During the quarter, we repurchased approximately 181,000 shares at an average price of $30.58 per share, representing $5.6 million returned to shareholders. Overall, we remain encouraged by the continued momentum in premium growth, the strength of our balance sheet, and our ability to consistently return capital to shareholders while maintaining financial flexibility. Lastly, we will file our Form 10-Q with the SEC tomorrow, July 23, 2026, after the market closes.

With that, I would like to turn the call over to the operator for questions.

OPERATOR

Thank you. If you would like to signal with questions, please press star one on your touchtone telephone. If you're joining us today using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, that is star one if you would like to signal with questions. We'll go ahead and take a question from Mark Hughes with Truist.

Mark Hughes — Analyst, Truist Securities

Yeah, good morning.

Janelle Frost — President & CEO

Good morning, Mark.

Mark Hughes — Analyst, Truist Securities

How would any kind of general description of the competition this quarter versus earlier quarters, and here I'm thinking of just looking at these results from Travelers and Chubb, where they seem to be growing their workers' comp business despite a lot of the market data that suggests it's still slowly declining. I think you talked about gradual softening. Are you seeing bigger players stepping up, or is that just some quarterly variability?

Vincent Gagliano — Executive Vice President, Chief Risk Officer

Mark, this is Vince. I wouldn't attribute it specifically to bigger players. Competition definitely remains intense. I think that's a word we've used previously. I would say in the quarter we have seen a little more aggression from some of our regular competitors, particularly with package carriers.

Mark Hughes — Analyst, Truist Securities

Okay, understood. How about the audit activity? I think you touched on it, Janelle. I don't know if there's any statistics on payroll. I think you provided some in the past, and I'm sorry if I missed it if you did on this call, but it seemed like the audit activity was quite strong or stronger this quarter. Any comments there?

Janelle Frost — President & CEO

Yeah, Mark, you're absolutely right. The audit activity was pretty robust this quarter. Pleasant to hear. That speaks to, I think, the economies of the industries that we insure. You know, we saw roughly 4, 4 and a half, 4.7% of that was wage growth, wage change. So that was a real positive number. And the employee count is still, you know, still a smaller percentage of the 5% that we saw in the quarter. So still not, I would say, seeing an uptick in terms of new employee counts on an insured basis.

But the wages are still slightly above, I guess, the nationwide averages that we've been seeing. So I view that as a positive sign. You know, if you look at what NCCI put out in May, they clearly indicated, to your point, your first question that Vince was talking about with the level of competition, net premiums written for the industry was flat for 2025. So I think carriers that are looking to find ways to grow are going to have to find that in either new business opportunities, or if they're banking on payrolls helping boost that.

I think most carriers are thinking, and it appears based on what they put out there, that wage inflation is sort of compensating for the loss cost declines that we've been seeing. For 2025, rates were down roughly 5%. Wages were up 4.3% for the industry as a whole. So I think it's sort of an offset. So carriers that are looking to grow are going to have to find new business opportunities because I think whatever they're going to get from wage inflation is basically going to compensate for the rate decreases that we're seeing.

Right. So the fact that we're seeing a little bit higher than that from our insured group I think speaks favorably for future audit premium for AMERISAFE.

Mark Hughes — Analyst, Truist Securities

Understood. Guillermo, you mentioned a one-time item in the expense ratio. Did you call out what that was and how much it was?

Guillermo Ramos — Chief Financial Officer

Yeah, it was related to a write-off that we had to do, and it is just a one-time from an older account.

Mark Hughes — Analyst, Truist Securities

Yeah, so bad debt, is that correct?

Guillermo Ramos — Chief Financial Officer

That is correct.

Mark Hughes — Analyst, Truist Securities

And you say how much?

Guillermo Ramos — Chief Financial Officer

The total for the bad debt was approximately $700,000.

Janelle Frost — President & CEO

As you can imagine, Mark, that's a large account for us. That's not our typical. Our average policy size. This was an older policy, pre-2023, that's been in dispute for some time and concluded in the quarter.

Mark Hughes — Analyst, Truist Securities

Yeah. Very good or very bad, I guess.

Janelle Frost — President & CEO

Yes, yes, I agree, Mark, I agree.

Mark Hughes — Analyst, Truist Securities

Not so very bad. Just nature of the business. And then thinking about either Vince or Janelle, thinking about the growth. You know, your ex-audit still is very healthy. It's been decelerating a little bit. You've talked about more aggression and competition. I know you've talked about some initiatives in the past to be more assertive when it came to renewal pricing. And I wonder if you could talk about kind of where you are in that cycle. You know, some of these strategies, have they been successful and you're kind of in the second half of that ball game, or is this, you know, there are new strategies that you're developing?

Vincent Gagliano — Executive Vice President, Chief Risk Officer

Mark, I'll jump in first and Janelle can clean up whatever mess I create. You know, the strategy's not changed. It all starts with the sales initiatives we launched several years ago—making sure we're working with the right agencies, making sure they understand our risk appetite. Those initiatives are producing fruit and doing well. I don't know if I could call what part of the ball game they're in. That'd probably be risky.

Janelle Frost — President & CEO

But Mark was obviously influenced by World Cup because he said second half rather than innings.

Mark Hughes — Analyst, Truist Securities

It was innings. A couple.

Janelle Frost — President & CEO

Exactly. He's got World Cup fever. I love it.

Vincent Gagliano — Executive Vice President, Chief Risk Officer

Yeah. So those strategies are still producing. Mark, you know our company so well. We're going to prioritize profitable growth over simply growth. So with new business, we continue to be selective and disciplined. Renewal retention is a big part of our strategy—making sure we're retaining the accounts we want at a healthy price—and that continues to go well. So we still feel good about our mid-single-digit growth trajectory in terms of sustaining that going forward.

Mark Hughes — Analyst, Truist Securities

Very good. And then, Janelle, the count of large losses through the six months. Okay. And then I'm probably six months.

Janelle Frost — President & CEO

Last year we were at 10.

Mark Hughes — Analyst, Truist Securities

Yeah. I'm not sure if Matt's in the queue, but I'll steal another one, too. And anything on medical inflation? I saw something maybe on TikTok or just one of these internet memes, and it was looking at inflation over the last 25 years. And, of course, healthcare, hospital, it's always at the top of the list. So just anything on that front that you would call out,

Janelle Frost — President & CEO

Yeah, I'm not on social media, but I would—whatever source that was—we definitely see it in terms of hospitalizations and doctors associated with hospitalizations. We definitely see medical inflation there. You know, we still take a long-term approach. I mean, for the industry in 2025, medical inflation, not wage-adjusted, was up 4%, severity was up 4%. That's, you know, and that's compared to, I think, what most people have been thinking the last couple of years—2% and 3%.

So it's real, it's happening. Average severities are, for the most part across accident years, higher for us at six months. If I compare accident year '26 to accident year '25 at six months, our average severity was actually slightly lower. And I would love to say that's a trend, but it's six months, so I'll take it for what it's worth. But I think as an industry, everyone recognizes that there's pressure there from a medical inflation standpoint.

And that's why, you know, we are such big proponents of fee schedules and having vendors and third parties adherent to those fee schedules because it does help contain costs. When you get things that are outside of fee schedules, that's when you really start experiencing medical inflation.

Mark Hughes — Analyst, Truist Securities

Yeah. Thank you very much.

Janelle Frost — President & CEO

Thank you, Mark.

OPERATOR

As a reminder, if you would like to signal with questions, it is star one on your touchtone telephone. Again, that is star one. Our next question comes from Matt Carletti with Citizens JMP.

Matt Carletti — Analyst, Citizens JMP

Hi, thanks.

Janelle Frost — President & CEO

Good morning. Good morning, Matt.

Matt Carletti — Analyst, Citizens JMP

Janelle, I want to get your thoughts. I know you don't operate in California, but recently the insurance commissioner, Lara, approved an advisory kind of 10% rate increase. And I think there's kind of been—if you look over history, if you look over history—California kind of tends to lead the national workers' comp markets. So I want to just kind of get your thoughts on what you make of that. I know California is dealing with some of its own kind of California-specific cumulative trauma issues.

How much you might attribute it to that versus broader issues in workers' comp, and just kind of your views on what that might mean for some of your markets down the road.

Janelle Frost — President & CEO

I agree with you, Matt, that certainly the cumulative trauma trends seem to be unique to California at this point. Fingers crossed it stays that way, right, for everyone. So that's certainly part of the 10%. But I also believe that some of that is recognition of the industry-wide trends that we're seeing, the ones that I was just talking about—medical inflation, average severity—things are not getting cheaper and yet rates continue to go down. Now, I have to acknowledge the industry's remaining profitable, so there is that. But nonetheless, medical inflation is there and present, average severities are up for the industry as a whole, and yet we still are seeing mid-single-digit rate decreases. As you mentioned, California being 10. I don't want to talk about Nevada going down 32 because they had a structural change there. But if I take Nevada out of the equation, New Mexico was down 15.

I mean, so that's the range of what we're seeing. There's still a lot of fluctuation there. But all the '26 rate filings are done for now. So in a couple of months we're going to start seeing what 2027 is going to look like. But based on the early indications, it looks relatively pretty the same—maybe a slight decline in the rate of reduction—but still reduction. So that's not surfacing enough in either the data, the loss experience, or the profitability that it's going to move the rate environment at this point, which I think we all want to see.

So I think individually companies are using their flexibility wherever they can to get price, to get rate, to offset all of those things that I just talked about.

Matt Carletti — Analyst, Citizens JMP

Super helpful, thank you very much.

Janelle Frost — President & CEO

You're welcome.

OPERATOR

And once again, if you would like to signal with questions, please press star one. Again, that is star one. We'll pause for just a moment. And that does conclude the question and answer session. I'll now turn the conference back over to Janelle Frost, President and CEO, for closing comments.

Janelle Frost — President & CEO

To close, we are pleased with the continued strength of our core business. As we move through the remainder of 2026, our focus has remained unchanged: profitable growth, operational excellence, strong capital management, and long-term value creation for our shareholders. Thank you for joining us today.

OPERATOR

Well, thank you. That does conclude today's conference. We do thank you for your participation and have an excellent day.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company's SEC filings and official press releases. Corporate participants' and analysts' statements reflect their views as of the date of this call and are subject to change without notice.