Amerisafe Inc (AMSF) 2011 Q1 法說會逐字稿

Good morning, ladies and gentlemen. Thank you for standing by. Welcome to the AMERISAFE's First Quarter Earnings Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the presentation, the conference will be opened for questions. (Operator instructions)

This conference is being recorded May 3, 2011.

I would now like to turn the conference over to [Ben Vernon]. Please go ahead, sir.

Thank you, Alicia, and good morning, everyone. We appreciate your joining us for AMERISAFE's conference call to review 2011 first quarter results. We'd also like to welcome our Internet participants as this call is being simulcast over the Web.

Before I turn the call over to management, I have the normal housekeeping details to cover. You could've received an e-mail of the earnings release yesterday afternoon, but occasionally there are technical difficulties, so if you did not receive your e-mail with the release or if you would like to be placed on the e-mail distribution list, please call 713-529-6600.

Also, there will be a replay of today's call. It will be available via Webcast by going to the Company's website at www.AMERISAFE.com. There will also be a telephonic recorded replay available for seven days, and details on how to access that feature are in the earnings release.

Please note that information on this call speaks only as of today, May 3, 2011, and therefore, you are advised that time-sensitive information may no longer be accurate as of the time of any replay listening.

Also, statements made in the press release or in the conference call that are not historical facts, including statements accompanied by words such as will, believe, anticipate, expect, estimate, or other similar words are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 regarding AMERISAFE's plans and performance.

These statements are based on management's estimates, assumptions, and projections as of the date of this call and are not guarantees of future performance. Actual results may differ from the results expressed or implied in these statements as a result of risks, uncertainties, and other factors, including but not limited to, the factors set forth in the Company's filings with the Securities and Exchange Commission, including AMERISAFE's 10-K for the year ended December 31, 2010 and future and other filings.

AMERISAFE cautions that you do not place undue reliance upon forward-looking statements contained in this release or in this conference call.

AMERISAFE does not undertake any obligation to update or publicly revise any forward-looking information or statements to reflect future events, information, or circumstances that may arise after the date of the release and call.

For further information, please see the Company's filings with the Securities and Exchange Commission.

Now, with that behind us, I'd like to turn the call over to Allen Bradley, the Company's Chairman and Chief Executive Officer. Allen?

Thanks, Ben.

Good morning, ladies and gentlemen, and thank you for joining us for our First Quarter 2011 Conference Call. As usual, I'll make a few comments about the quarter before turning it over to Geoff Banta, our President and Chief Operating Officer, who will then, in turn, introduce Janelle Frost, our Chief Financial Officer, for additional details.

2011 began with a significant increase in gross premiums written. Improvements and audit adjustments, coupled with the business from the renewal rights and assumption agreement with the former Coop Mutual Insurance Company drove the top line to a healthy 16.8% year-over-year increase in gross premiums written and a 20.1% increase on a net written basis. At the same time, policies written during the quarter had increased pricing, and we believe that the marketplace shows that pricing is firming.

While there is still excess capacity in the marketplace, as the calendar year of combined ratios rise, we see a number of carriers that are being less aggressive at pursuing high-hazard risk. Additionally, while the demand for our products is clearly not robust, we do note an uptick in work activity for our insured employers.

Across the worker's compensation industry, underwriting margins are under significant pressure, and AMERISAFE is not immune from that trend. However, AMERISAFE has continued to report an underwriting profit, driven largely by favorable prior-year developments.

Going forward, we expect to see greater opportunities to write profitable business as the flight from the high hazard space accelerates and the economy continues to improve. The combined impact of an improved competitive landscape and increased pricing should become apparent as the current policy year unfolds.

Now, I'm going to turn it over to Geoff for an update on operations.

Thank you, Allen, and good morning, everyone.

I'll make a few comments about our operational performance and trends before turning things over to Janelle to present a summary of our financials.

I'll begin by discussing our top line.

As Allen noted, gross premiums written were up strongly in the first quarter by 16.8% year over year. The increase was due mainly to a year-over-year improvement in negative premium adjustments. These adjustments, made up of audits, cancellations, and endorsements, have now improved for seven straight months year over year and were actually net positive in February and March.

Additionally, our deck sheet work comp premium was up by 2.5% in the first quarter year over year as we wrote and assumed approximately 4 million of premium from Coop Mutual.

In terms of renewal business, our results have been very healthy. In the first quarter, our policy retention at 92.6% was the highest first quarter rate since 2004. Our average written premium for renewals was also up year over year in the first quarter for the first time since 2008. As a result of the strength of our policy retention, our in-force policy count was flat during the first quarter in spite of a drop-off in new business, a drop-off, by the way, which was not unexpected given that we began taking aggressive steps in the latter half of 2010 to strengthen both underwriting and pricing.

Speaking of pricing, our effective LCM for voluntary work comp in the first quarter was 1.48, or 148% of the approved loss costs of the states that use that mechanism for pricing. This was up from 1.43 in the fourth quarter of 2010 and represents the third consecutive quarter of pricing increases and the highest pricing level since the third quarter of 2007.

In terms of losses, our first quarter results benefited from favorable overall development in accident years prior to 2011. Accidents years 2009 and prior are developing extremely well, but 2010 had higher-than-normal quarter five development due to some severe losses that experienced adverse changes in medical conditions. As a result, in the first quarter, we added 6.5 points to our year-end 2010 accident year loss ratio.

Our 2011 accident year has begun with higher frequency but lower severity than 2010. As a result, we have made an initial estimate for 2011 that assumes similar losses but higher premium when compared to our 2010 accident year.

If we are correct, 2011 will become the third consecutive year in which AMERISAFE has posted accident year loss ratios higher than 70%. We firmly believe that our results and the results of the industry as a whole are being significantly impacted by the cumulative effects of deficient loss costs and increases in claims duration and that the full impact of these factors won't really be known until the 2012/2013 calendar years. In the meantime, we are going to continue to push our pricing, tighten our underwriting, and adjust claims as aggressively as we have in the past.

And with that, I will turn to Janelle to present details on our financials.

Thank you, Geoff, and good morning, everyone.

For the first quarter of 2011, AMERISAFE reported net income of $6.6 million, or $0.35 per share, compared to $11.3 million, or $0.58 per share, in the first quarter of 2010.

As Geoff discussed, gross premiums written rose 16.8% primarily attributable to less negative audit and related adjustments.

Also, we completed the previously announced renewal rights and assumption agreement with Cooperative Mutual in the first quarter of 2011. Net premiums earned increased 9.1% from the year-ago quarter.

Our net investment income totaled $6.5 million in both the first quarter of 2011 and 2010.

Average invested assets were $825.2 million, compared to an average of $803.1 million in the first quarter of 2010.

The tax equivalent yield on our investment portfolio was 4.6% compared to 4.7% in the first quarter of 2010.

In total, revenue for the first quarter of 2011 was $67 million, up 4% from $64.4 million in the year-ago period.

Our current accident year loss ratio for the quarter was 77% compared to [62.5%] a year ago and 81.8% for the full year of 2010.

Our incurred loss and loss adjustment expenses totaled $44.2 million for the quarter, which included $2.1 million of favorable prior-year development, primarily attributable to accident years 2006, 2007, and 2008. We did experience unfavorable development for accident year 2010 in the quarter.

This compares to loss and loss adjustment expenses of $37.6 million in last year's first quarter, which included $2.3 million of favorable prior-year development.

In total, our net loss ratio for the first quarter of 2011 was 73.5% compared to 68.3% for the first quarter of 2010.

Total underwriting and other expenses increased 16.5% to $14.6 million compared to $12.5 million in the first quarter of 2010.

The 2011 first quarter expense component included $5.1 million of salaries and benefits, $4.3 million of commissions, and $5.2 million of underwriting and other costs.

The expense ratio increased to $24.2 million from $22.7 million in the same quarter a year ago. The primary reason for the higher expense ratio is lower experience-rated commission related to our 2011 first layer reinsurance.

As you may recall, these commissions act as an offset to our expenses, and in the first quarter of 2011, experience-rated commission offset our underwriting expense ratio by 2.2 percentage points compared to 4.3 percentage points in the first quarter of 2010.

In total, our combined ratio was 98.3% for the first quarter versus 91.5% for the same period in 2010.

Return on average equity for the first quarter of 2011 was 8.1% compared to 14.7% for the first quarter of 2010.

Book value per share at March 31, 2011 was $18.05, an increase of 9.5% compared to $16.49 in the first quarter a year ago.

In the first quarter, we also repurchased nearly 160,000 shares at an average price of $17.98, including commissions. As of March 31, 2011, we had spent approximately $15 million on our share repurchase program, leaving 20.4 million left authorized.

Finally, our statutory surplus was 304 million after paying a $22 million dividend to the holding company, [as the] holding company is held for share repurchase program, retiring debt, or future acquisitions.

That concludes my prepared remarks on the financials. We now turn the discussion back to Allen.

Thanks, Janelle.

Over the past few years, those of you who have been following our quarterly calls are familiar with the portrait we have described in terms of the worker's compensation marketplace.

Repeatedly, we have described the marketplace as one beset with multi-year loss cost declines, intense competition, increasing claims severity, all occurring during a weakening economic environment.

That portrait was one of a decidedly gothic tint. We were not intending to be overly pessimistic but rather provide you an honest opinion and picture of how we saw the marketplace.

We now believe that landscape is changing. Pricing, as demonstrated by our effective LCM, is rising. Loss costs are beginning to rise after seven consecutive years of declines. Economic conditions, while not vibrant, were improving, and most importantly, the financial results of the worker's compensation line reflect the poor choices made during the prolonged soft market.

All of these factors are the pigments of a new portrait, one that is brighter and portrays greater opportunity for those who are positioned to take advantage of the circumstances.

With the solid balance sheet and established distribution network and excess operational capacity, AMERISAFE is well positioned to take advantage of these circumstances, and we do intend to seize this opportunity.

As I cautioned to you last quarter, we do not expect these opportunities to result in an immediate short-term benefit but rather to form the foundation for a sustained period of expansion for this company.

Now, Operator, let's open the call for questions.

Thank you, sir. Ladies and gentlemen, we will now begin the question-and-answer session. (Operator instructions)

Our first question comes from the line of Mike Grasher with Piper Jaffray. Please go ahead.

Good morning, everyone.

Morning, Mike.

Hey, Mike.

A question for Geoff and a follow-up to it. I guess with regard to the accident year loss ratio, it sounds like it remains a pretty fluid situation. Are you seeing trends, though, that suggest some stabilization in here or maybe to keep the accident year loss ratio at this level and away from the higher levels we saw in the last two quarters of 2010?

Mike, which accident year are you specifically asking about?

Well, on a quarterly basis, if you look at 2010, the accident year's loss ratios came in at 95.5, 83.4, and now this quarter, we're at 77.

Yes, 2011 and 2010 are tracking fairly similar in terms of incurred losses. 2011 has a slightly higher frequency, but because of mix of claims, the average severities in 2011 are lower.

They're very similar in a lot of ways. They both started fairly robustly. But the one thing that is really positive for us is -- and, obviously, those loss years are impacted by lower than -- I mean the experience is impacted by lower than what we think are reasonable loss costs. But what gives us some degree of optimism is that earned premium is up 9.1% for the 2011 accident year. So the denominator is going to play an important role, and we'll just have to keep watching whether 2011 continues to track with 2010. But both were loss years that were hotter than we were used to.

Yes, and it may be unfair to compare '11 to '10 just yet , I guess, given that we're only three months into it but --.

True, but I was thinking in terms of first quarter versus first quarter, Mike, so it is somewhat apples to apples.

Okay. And then I guess the other -- the follow-up to that would be sort of how much does the current environment impact your thinking around the accident year loss ratio from the standpoint of the claim duration? If you look at the change in your accident year assumptions and you see what the job outlook is, I mean does that sort of keep you -- or how much does it keep you (inaudible) with keeping that accident year higher?

Well, we are still concerned about duration. It still is elongating. As Allen mentioned, there are some economic indicators out there that say that -- well, and we know that employment is released again. The figures are released again this Friday. But the economic environment is improving, albeit incrementally, and we do expect that to -- I won't speak for Allen, but I expect that to calm down and get to the point where we're not nearly as concerned about that factor in our 2011.

I think it will start easing, but it definitely began -- or we began to see the duration increases in 2009, and the big issue is going to be return to work and how much temporary total disability -- how much temporary total disability causes us to continue to keep claims that would normally have been closed in 2008 and prior on the books in 2009, 2010, and 2011.

Allen, would you --?

Right. Mike, the real disappointing part about 2010 were the negative audit premiums, which came through for time periods that were not exactly matched up with the loss periods. That cycle has clearly changed, and as we've mentioned on previous calls, we expect that to continue for another 12 to 15 months.

So in a way, in 2011, we are now recording premium for exposures that we had in 2010, and that lack of perfect matching between the premium and the losses is one thing that negatively impacted the 2011 and will be a benefit to -- negatively impacted 2010 and will be a benefit to 2011.

And, Mike, one more point. Last year at NCCI -- and I think you were there -- we saw for the first time since I can remember a presentation specifically dealing with temporary total disability, and the actuaries down there at NCCI tend to be very conservative in terms of calling a trend a trend. They like to see a lot of data. And to me that was quite telling that they provided a special presentation on an emerging, a beginning trend in TTD that they were seeing. I fully expect they'll repeat that presentation and things will have deteriorated, but that's something you ought to watch if you're looking on the NCC website after the Annual Issues Symposium is completed.

Okay. Well, thank you very much. That's helpful.

Thank you. Our next question comes from the line of Mark Hughes with SunTrust. Please go ahead.

Thank you very much. The assumption agreement had a nice contribution this quarter. Any expectations you can share regarding future quarters? Was there any unusual seasonality in that business? Should that repeat over the subsequent three quarters?

Right. The agreement with Austin Mutual/Coop Mutual was as follows -- that beginning January 1, we had a renewal rights transaction where we had the opportunity to renew the business that had been with Coop Mutual.

The assumption portion of that agreement actually commenced March 1, 2011 and was for the remaining policies for the stub periods left on those policies, which would be scattered through the remaining part of the year.

I think this probably fully accounts for the Coop Mutual transaction, so anything that you see subsequent to it would just be renewal of policies that come up as they expire should we be the successful bidder on that.

I think probably sort of an interesting question is going to be if, as anticipated, the NCCI reports Thursday of this week that the worker's compensation line has recorded 117 or thereabouts percent combined ratio for the calendar year. There may be a great deal more renewal rights transactions or more business available in the marketplace. That's well above the action level for worker's comp even in normal investing times and certainly not in times where the investment yields are as low as they are today.

Right.

Mark, one more thing about that, if you think about the way we book our business, when that assumed business that Allen talked about came on our books at 3/1, we put that on as estimated premium for the remainder of the policy period.

So to the extent that business picks up in [agri] business and we get some audit premium from that, that still could have an impact. But otherwise, Allen is exactly correct. Unless we do another transaction, that ought to be pretty much it for the year for Coop.

Okay. And then do you have the dollar figure for the reserve strengthening for the 2010 accident year?

Sure. It was -- the adverse development for accident year 2010 for the quarter was $13.8 million.

Oh, big number.

It was.

Not historically big, but still a number we weren't quite prepared for.

Right, sure. Thank you.

Thank you. Our next question comes from the line of Beth Malone with Wunderlich. Please go ahead.

Okay, thank you. The pricing environment, as you point out, seems to be improving, or you believe it's going to be improving. How important is it that these companies that are going to be challenged by this 117 -- all these risk transfers, do you think that that's going to be an important part of the capacity leaving the market, or is this just as a consequence of the pricing environment?

Well, Beth, the high hazard market, as we have watched the cycles through our 25 years of operation, has been -- which by the way, Saturday was our 25th anniversary -- the high hazard market tends to be sort of a leading indicator in terms of a hardening market and the trailing indicator in terms of a softening market. It's the last place people get in during a soft market and the first place they get out during a hard market.

I think that we've gone through a time period where we've had seven consecutive years of loss cost reductions, and because of the shrinkage of the amount of property and casualty business written in the country, there'd been -- the universe of P&C carriers have been fighting over a smaller pie, and it's been a typical competitive cycle where the pricing's gone below realistic levels.

The long-tail lines have clearly indicated a deterioration in their performance, so I think that there will be diminished capacity. I think we're in the capital destruction phase of the worker's comp business.

For those carriers that are multi-line writers that have been using worker's comp as a loss leader, I think that's losing a lot of luster, and I say that because of the actions we see of competitors leaving the marketplace.

And it's not all a question of just the pricing. It's a question of how our pricing compares to other people that are quoting on the same account, and I would have to tell you as compared to 12 months ago, our pricing, which has been well above the market, Geoff, I'd say 20 or 30% above the market --.

Yes.

Is now in a competitive state where it was not before. So I think it's all those factors together. But usually for smaller carriers, when the NCCI meets and gives their outlook for the industry, that carries a lot of weight with a lot of carriers, particularly the smaller carriers in the marketplace.

Beth, if I could add to what Allen just said, I think sometimes when we say prices are increased, some folks assume that that's new business only, and some of the -- the underwriting and pricing actions we took in 2010 were for both new and renewal business, and what is promising to me is that even with increased pricing, new business did fall off, as we expected, but not as badly as it fell off a year ago, and a year ago, we were actually decreasing prices.

And renewals -- just about every measure of renewal health is up even with increased pricing actions. So that gives us great cause for optimism that this -- that something is happening in the marketplace in the way of the -- that may point to the end of the soft market, especially, as Allen pointed out, in our high hazard niches.

Okay. And then a question on the reserve development that you experienced in 2010 that you saw in 2011. I guess the way I think about it is does that suggest that when you put that business on the books, the circumstances subsequently changed with that business, that there were events that occurred in that book that you hadn't anticipated? Because otherwise, wouldn't you have priced it higher to begin with and set aside more reserves to begin with?

I don't know if I'd go to that extent. This underwriting and pricing is art, not science, but I would say that the severe claims have been the ones that have really kind of dogged us.

How you price severe claims into -- I mean it's just not that precise, that one or two or three or four claims where somebody falls -- and these are real examples -- somebody falls 50 feet and lives, somebody appears to be recovering nicely and then is deemed a paraplegic.

I mean those things in a business like ours where we're not a large carrier and especially in our situation where we've lost $100 million of premium in the last, what, Allen, four years?

Four years.

Those things have a bigger impact when you compare them with a lower denominator. And I think it's really this lumpiness we've talked about and this unpredictability of these large losses that tend to cause us to miss in terms of approximating what our future development would be more than did we price it incorrectly.

Okay. All right. And is it that kind of fluctuation that also is the catalyst that gets the less -- you know, these fringe participants in the market to leave the market eventually?

Absolutely.

Yes.

Absolutely.

Okay. All right. Thank you.

Beth, think of it this way, and this is one of the cases -- I don't want to be too specific about it in the interest of the privacy of the claimant -- but the injured worker, which was injured, I want to say, back in August or September --.

September.

Was diagnosed as having a significant injury but at least a potential for full recovery. And then two-and-a-half months into the year this year, all of a sudden, he's diagnosed as a complete paraplegic, which comes as a shock to everyone. And that changes the dynamic of that case in terms of medical expenses dramatically.

And as a matter of fact -- and this is quite unusual -- as far as the 2010 accident year, Beth, that ends up being our largest claim now.

Okay. All right. Well, thank you.

Thank you.

Thank you. Our next question comes from the line of Bijan Moazami with FBR Capital Markets. Please go ahead.

Good morning. Allen, you mentioned that the LCM is going up. Would you be kind enough to put some numbers on that?

Sure. The LCM for the quarter was 1.48, or 148% of the loss cost, and let me give you some sequential numbers. The second quarter of 2010, it was 1.41. The third quarter, it was 1.42. The fourth quarter, it was 1.43. And the first quarter, it's 1.48. And we intend to continue to push it within the bounds of reason.

Okay. Where do you see the most price increases?

We see the most price increases or where we can actually get the greatest price increases, quite frankly, in states we're not too interested in writing.

California and Florida.

We're not in California, and you can't adjust your pricing in Florida, so but I would say that would fall into the -- Illinois. I would say it would also be in certain sectors, such as trucking, as opposed to maybe construction, roofing, oil and gas, ag. Some of those are the ones that are seeing the most movements.

But there is a state component as you have certain states who have reduced loss cost or perhaps have hostile sort of environments, but I think you've probably heard a number of carriers indicate that they're not terribly excited about Illinois' worker's comp environment, and we share that. So we have restricted dramatically our writing there.

It's not just a question of whether we can get a rate. We can get a rate in Illinois, but it probably needs to be 200% of the loss cost in order to give you a reasonable expectation for producing a profit.

Hey, Bijan, let's take trucking, for example. I'd like to make a distinction between -- and we don't know exactly what our competitors are doing. We have ways of finding out in general and anecdotally, but we've noticed in trucking a few competitors, and not small competitors, just saying we're out of this state. We'll take a state that may not be doing well in trucking, and we'll say can we subsegment this. It can't be the whole trucking industry in that state that is going south. There has got to be a way to drill down and figure out segments that are still performing well, and that's the approach we take.

Maybe I'll compare it to a sledgehammer versus a scalpel, but that's what we try to do. I mean occasionally it gets so bad, like three years ago, Illinois construction, where we just said we're out of here as far as new business, but most times we try to say where -- there's got to be some good in there, as well, and let's cut it as intelligently as we can rather than just leave.

Great. On the Coop Mutual, what percentage of the business you ended up renewing, and should we expect some more renewal rate transactions going forward?

I don't have the percentage, Bijan, but I would tell you it was very high. I would say 75 to 85%.

I would (inaudible). That's an estimate, but I know that's what it was through the first -- somewhere near first couple of months. I haven't gone back and looked at it.

And the cost of those kind of renewal rate transaction, it's obviously going to go the expense ratio. So should we make some adjustments to that going forward?

It's simply a -- there's no upfront cost to that transaction. It's just a matter if we renewed the policy, they get an additional commission, so, for example, if our average commission was 7% or 6.5%, they would get double that for only those policies that we renew. So if there was no upfront cost, if we didn't write the policy, there was no -- we didn't pay anything for that book of business.

All right. But is it three years or five years?

Three.

Three.

And it's a declining over the three years.

It's tiered.

It's tiered down. And, by the way, by way of advertisement, if you know of any others, we are interested in looking at them.

I'm sure I can come up with a few. Thank you so much.

I'm sure you could.

Thank you. Our next question comes from the line of Matt Carletti with JMP Securities. Please go ahead.

Okay, good morning.

Good morning, Matt.

Hey, Matt.

Hey. I just wanted to go back and follow on Beth's question about the 2010 strengthening. I mean how much of it, just kind of rough ballpark, was kind of what you mentioned, kind of those cases that just kind of at some point in time get more severe? So I'll call it a case adjustment as opposed to IBNR adjustments.

Probably 60 or 70% of that, Matt.

Okay.

These were big cases where we had changes in medical conditions or the like.

And then by the sounds of it, it's probably just a handful of cases?

It is, definitely is.

Okay. And then my next question goes -- is on the expense ratio. So it's 24% in the first quarter, and if I understood kind of the commentary right, in large part driven by the change in the reinsurance structure. Is that a level we should carry it at going forward, you know, maybe coming down a little bit as the kind of the renewals work their way through at the co-op?

Oh, that's a very good question. The expense ratio, obviously coming into this year, we've -- I think we were very good about preparing everyone there was going to be pressure on the expense ratio.

Obviously, the difference when you're comparing it to first quarter of last year is the experience rated commission. Our fixed costs are actually down. So, yeah, I think as premium -- as net premiums earned increases year over year, hopefully, that will alleviate some of the pressure on the expense ratio.

Okay. You can -- I think if you go and see the difference on a percentage basis between gross and net this year and compare it between gross and net last year, you'll see the difference in the way the program is structured.

Okay. Then last --.

(Inaudible) premium, but we don't get the benefit to the expense ratios.

Right. And then, lastly, on the tax rate, it was 11% in the quarter. I know it's kind of mix of taxable versus non-taxable.

Correct.

Is that -- have you kind of tried to accrue it for the year in the sense that we should think of a more kind of normalized -- you've been running kind of 20ish on a go-forward, or is it going to be a lower amount than that?

That's a really tough call. You were absolutely right that what drives it to such a low number of 11.5% is the fact that of our taxes and income compared to what we made on the underwriting side, so as our underwriting margins increase, obviously the tax rate will go up. Predicting that at this point in the first quarter is just too difficult for us to do.

Okay. But I mean there's not a --.

Well, I should say this. Our level of taxes and income really hasn't changed all that much from last year as far as the actual dollars.

Got you. Okay.

Hey, Matt?

Yes?

Maybe if you declared -- because I know you're always interested in the tax rate, maybe if you declared to Janelle that she's got a safe harbor in whatever she says, she'd guess.

I'm always willing to do that. All right. Thanks a lot, guys. Best of luck. Thank you.

Thank you.

Thank you. (Operator instructions)

Our next question is a follow-up question from the line of Mike Grasher with Piper Jaffray. Please go ahead.

Thank you. Just a couple of additional questions here. With the storm activity that went through the Southeast, is that an opportunity for you to sort of help put that region back together?

Well, Mike, of course, those were horrible tragedies and impacted actually some of our employees. None lost homes, but there were many without electricity and that had damage.

We are -- have a significant book of business in the Southeastern United States, and we are engaged insuring people that are engaged in construction and the trucking of goods. And as terrible as it is, these types of storms generate economic activity, work activity as a recovery and the reconstruction phase or recovery portion ends and the reconstruction phase begins, so we would expect that there would be some increased work activity there.

There may be some short-term drop-off in business on certain accounts if they suffered some damage to their part of the business, but there would clearly be [technical difficulty] and there'll be a lot of roofing involved in that.

Okay.

Yes, I would expect some work activity out of it.

Mike, I don't know if you know it, but usually we've already gotten (inaudible) and one of the states is North Carolina.

We normally in a very tough disaster we get a request from the applicable state department to grant concessions and delays without penalty of premium payments while insureds are trying to recover. We don't expect from a cash or collection basis for that to be significant at this time, but that happens, as well. This is a big impact on the business.

They'll issue a moratorium, Mike, that says you can't cancel anybody for nonpayment until a certain date, and we're very familiar with that with hurricanes and the like, so we see that quite a bit. It's not unusual.

Right, okay. And then with the growth from the quarter, and I think Janelle mentioned the dividend -- I think it was 24 million -- I'm looking at the risk to capital now about 0.72, and you feel like the market's changing a little bit, opportunities that are out there. How are you thinking about capital right now, particularly with the share repurchase authorization in place?

Our appetite for share repurchase has not changed. As we've said, our major goal is to not dilute the common shareholder. The Company has been fortunate enough since the end of February that the stock price has been trading at 52-week highs, so there hasn't been a lot of activity on that front.

As far as the dividend up from the insurance companies to the holding company, that's a practice we've been doing for the last couple of years. As we know, as a whole, though, the Company has over $52 million of cash. I will say -- and this is going to be in our Q -- that our Board just last week voted that we are going to retire our $10 million traunch of trust-preferred securities. If you remember on our balance sheet --.

Right.

(Multiple speakers) -- dollar debt, so we're going to retire the $10 million truanch, which is -- the interest rate there, I think, is 4.10 plus LIBOR.

(Inaudible).

So we're going to retire that. Now, that won't be -- it'll actually be probably a third quarter event because we can't do it until they are [intrastate], which I think -- I believe is in July.

Okay. Thanks very much.

Thanks, Mike.

Thank you. Our next question comes from the line of [Paul Sagal] with Columbia Management. Please go ahead.

Good morning.

Morning.

Earlier on this year, you had noted that AIG had been leaving your end of the market. Do you have other specific examples of companies that are going?

Yes. Ace has signaled at a number of areas that they are retracting, particularly in writing mono line worker's comp. We have seen pricing increases from Liberty and some of its subsidiaries. We've seen pricing increases from CNA, Hartford. We don't compete a lot with Travelers, but we hear of movements they're making in the marketplace.

We see more of it, Paul, from the larger carriers than we are seeing from the small ones and particularly from the small mono lines. And so from our underwriters' perspective, they look out and say, well, there's still plenty of competition, because there is plenty of competition. Our average policy size is the small to midsize employer. But that's why I think when the results of the year and the outlook from NCCI comes out this week, that will make a difference.

If it doesn't, then there's going to be a lot of activity by the Departments of Insurance scattered across this country because there's no way that companies can continue to function at a 1.17 or higher combined ratio for -- in the extended period of time.

Especially not with these investment yields.

Good point. Good point. And the investment yields are a real problem right now.

Okay, thank you.

Thanks, Paul.

Thank you.

Thank you. Mr. Bradley, I show no further questions in this time. Please continue with any closing comments.

Just very briefly, we want to thank all of you for your interest in AMERISAFE. Over the past few years, we've had a loyal base of shareholders that have stood by AMERISAFE as we chose to not chase the premium dollar during extremely soft market. We do see that environment changing and look forward to regaining some premium volume opportunistically as the market transitions.

Thank you very much.

Ladies and gentlemen, this concludes the AMERISAFE's First Quarter Earnings Conference Call. If you'd like to listen to a replay of today's conference, please dial 1-303-590-3030 and enter the access code of 4430703, followed by the pound sign. Thank you for your participation. You may now disconnect.