AMERISAFE, Inc.

Good day, everyone, and welcome to the AmeriSafe 2020 Third Quarter Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Catherine Shirley, Chief Administrator, Officer. Please go ahead.

Good morning. Welcome to the AmeriSafe 2020 Third Quarter Investor Call. If you have not received the earnings release, It is available on our website at www.amerisave.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. 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 result of risk, uncertainties, and other factors, including the impact of the COVID-19 pandemic on the business and operations of the company and our policyholders and the market value of the securities in our investment portfolio. Other factors that may affect our results are discussed in today's earnings release. in the comments made during this call, and in the risk factor 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.

Thank you, Catherine, and good morning, everyone. We are now nine months into a global pandemic. The long-term impact to workers' compensation rates is yet to be determined. While there are plenty of opinions regarding what will influence ultimate costs, I believe there is not enough pandemic-specific or identified trends to influence near-term loss costs. Therefore, declining loss costs can continue to pressure the industry's revenue and support robust competition. An important distinction is that competition varies by state, given that workers' compensation is a state-regulated financial product. Two factors influencing the variation between states are approved loss costs and the mix of industries underwriting in any given state. To illustrate the differences in state markets, consider the latest approved loss costs, which ranged from a 20% decrease in Virginia to a 9% increase in Hawaii. Industry mix is also impactful. Unemployment increases were more heavily weighted towards service and hospitality industries, which were not where AmeriSafe writes business. State mandates related to stay-at-home orders and essential business operations temporarily impacted payrolls, and for some businesses, altered their long-term business outlook. For the states we actively market, competition remained robust in the third quarter. Our ELCM is one measure of AmeriSafe's response to competition. Our ELCM for the third quarter was a 159, down from a 162 in the third quarter of 2019. The resulting premiums for policies written in the quarter were down 10.7%. Loss cost changes were the primary driver. Based on our states and industries, our loss costs were down 7.8% on average. Voluntary policy count in the quarter was down only 2%, supported by healthy policy retention of 94.6%. New business was suppressed, in part due to disruption to the distribution network. The pandemic hampered independent agents' ability to prospect new business, which impacted our premiums during the quarter. Less robust payrolls from policies written in prior quarters also impacted our quarterly revenue slightly. Payroll audit premiums were positive in the quarter. However, audit premium and other adjustments were $0.9 million lower than the third quarter of 2019. In total, our gross premiums written were down 12.1% from the quarter. Turning to losses incurred, our loss and LAE ratio for the quarter was 53.2%, down slightly from the third quarter of 2019. Our current accident year loss ratio remained at 72.54%, the same as the first two quarters of 2020 and the full year of 2019. Frequency trends were favorable, with reported claim counts in the quarter down 18% from the third quarter of 2019 and below our expectations for the accident year. However, I will take this opportunity to circle back to industry mix. AmeriSafe's operating model focuses on high-severity, low-frequency industries. Severity for the current accident year has been within our expectation, and we still have one quarter to go. The timing of severe accidents is not particular to any given quarter. We continue to reach favorable outcomes for prior year claims attributable to our extensive claims management and aided by lower claim counts. Case reserve changes led to overall favorable development of 14.4 million or a 19.3 basis points decrease in the loss ratio. Accident years to note were Accident Year 2018 with $2.6 million of favorable development, Accident Year 2017 with $4.8 million of favorable development, and Accident Year 2014 with $2.9 million of favorable development. Before I turn the call over to Neil to discuss expenses and other financial metrics, I would like to conclude my prepared remarks by reiterating our strong value to shareholders. Earnings and our ability to pay dividends are founded in our long-term commitment to underwriting disciplines throughout the insurance cycle. We remain dedicated to our mission of providing quality insurance product while profitably serving our stakeholders. I now turn the call over to Neal.