Nov 7, 2008
Executives
Karen Roan – IR, DRG&E Allen Bradley – Chairman, President and CEO Geoff Banta – EVP and COO Janelle Frost – EVP and CFO
Analysts
Matt Carletti – Fox-Pitt Kelton Mark Hughes – SunTrust Mark Lane – William Blair & Company Michael Nannizzi – Oppenheimer Mike Grasher – Piper Jaffray Seth [ph] – TimesSquare Capital Alfred Hunger [ph] – Sidoti Ron Bobman – Capital Returns
Operator
Ladies and gentlemen, thank you for standing by and welcome to the Amerisafe third quarter 2008 earnings conference call. Join today’s presentation all parties will be in listen-only mode.
Following the presentation the conference will be opened for question. (Operator instructions) This conference is being recorded today Friday, November 7, 2008.
I would now like to turn the conference over to Mr. Karen Roan of DRG&E.
Please go ahead ma’am
Karen Roan
Thank you Nick. Good morning everyone.
We appreciate you’re joining us for Amerisafe’s conference call to review 2008 third quarter results. We’d also like to welcome our Internet participants as this call is being simulcast live over the web.
Before I turn the call to management, I have the normal details to cover. If you could have received an email of the earnings release yesterday afternoon but occasionally there are technical difficulties so if you didn’t receive your release or you would like to be placed on the email distribution list, please call our office at DRG&E and that number is 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 and that address is www.Amerisafe.com.
There will be a telephonic recorded replay available for seven days until November 14. Details on how to access that feature are in the yesterday’s press release.
Please note that information on this call speaks only as of today, November 7, 2008 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 this conference call that are not historical facts, including statements accompanied by words such as will, believe, anticipate, expect, estimate or 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 upon 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 the result of risks, uncertainties and other factors including, but not limited to, the factors set forth in the company’s filings with the Securities & Exchange Commission including Amerisafe’s 10-K for the year ended December 31, 2007 and future and other filings.
Amerisafe cautions that you do not place undue reliance on forward-looking statements contained in the 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 SEC. Now, I will turn over the call to Allen Bradley the company’s Chairman, President and Chief Executive Officer.
Allen Bradley
Thank you, Ken and good morning ladies and gentlemen. Thank you for joining us for our quarterly investor conference call.
Before I began today’s comments I have the distinguish pleasure of starting off our call by introducing our new Chief Operating Officer, Geoff Banta and new Chief Financial Officer, Janelle Frost, who are come joining me today. I would like to congratulate Jeff and Janelle on their promotions.
Both we have been invaluable to Amerisafe over the last several years. And will now be able to make even greater contributions to the success of the Amerisafe.
Industry extraordinary environment of asset deterioration the loading last ratios and rising expenses ratios. Amerisafe third quarter results were excellent through focus on disciplined this selection and pricing, cautious investing and careful reserve estimation and clients handling.
Amerisafe is continued to generate superior returns. During the soft market cycle of the last few years many carriers describe to support and maintain top line growth by aggressively pricing there business and establishing an expensive infrastructure.
That behavior has resulted in higher accident year combined ratios and the potential in the future or Edward prior result. Predominately, as result of loss on investment portfolios and natural capacities.
The U.S. property in casually industries estimated excess capital of 60 billion to 70 billion in January of 2008 as now pretty much of operated of that reason alone I believe the marketplace is transiting to a period of a formal pricing.
On the industries attention is being concentrated on financial market crises. And the resulting impact of their capacity.
Prudent underwriters have begun to form pricing because of they understand that action is necessary to provide reasonable and consistent shareholder returns. We are beginning to see fans that attitude is becoming more prevalent in the marketplace.
It’s support of that position consider the following with respect to Amerisafe. To the first time since the first quarter of 2007 we had a sequential quarter increase in our effective.
That increase went from 1.45 or 145% of the anticipate loss to 1.46. Not much of a move, but it is significant because of its direction.
Number two, at the same time our voluntary workers compensation business written during the quarter without considering audit adjustments increase slightly over the same quarter of last year. Thirdly, new business submissions were up without a geographical expansion.
We bound new policies in the quarter at a rate of 8.9% by policy account and 18.7% by premium volume over the third quarter of 2007. Our renewal retention remains high at 92% by policy account and 81% by premium dollars.
We have seen then lastly we have seen some increases in new business subdivisions on account with expiring AIG policies, as well as from carries in it’s recent entry into the as it is industry workplace is currently being reconsider. Our point is at the marketplace is changing, while it’s unclear at this point as to the speed and degree of change.
I believe improvement in pricing is probable. This pricing improvement in the marketplace must be measured against the slowdown of the national economy that will impact payroll in consequently workers compensation premium.
Nevertheless, I am cautiously optimistic about the underwriting environment as it impact some narrow site in the near-term. At this point, I’m going to turn it over to our new Chief Operations Officer, Geoff Banta, for some operational metrics.
Geoff Banta
Thanks you Allen and good morning everyone. I’ll make several comments about our overall company performance entrance before turning the presentation over to Janelle.
I Join Allen and stating that we are pleased with our third quarter results especially given the current state of the economy and over the workers compensation market. We believe that are focused on risk selection and adequate pricing in our experience in the high hazard sub segment of the market has enable us to continue to generate prior year returns even in the face of the current soft market cycle.
Maintaining in this focus as resulted in lower return premiums, but decreased in those ridings as begun to slow. In the first and second quarters of this year, our gross premiums return decline 10.5% and 8.8% respectively, while that same metric declined only 6.6% in the third quarter.
As Allen mentioned at his opening comments, in the third quarter our pricing has measured by our effective LCM was 1.46% or a 146% of the approved loss in the states that used that mechanism for pricing. This is the first time in six quarters that we have seen our effective LCM increased over a proceeding quarter.
At the same time we saw this rise in pricing we also wrote 1.2% more in voluntary workers comp premium in the third quarter, which could be a signal that pricing has beginning to firm in the industry as a whole if not at Amerisafe. Regarding business on the books enforce payroll was up by 5.1% and policies enforce increased 3.7% as of September 30.
While enforce premium showed a decrease of 2.4% this is mostly the result of the country wide trend to a decreasing loss cost. While most of the state mandated rate decreases have been justified by regulatory reforms and decreasing loss frequency.
We believe that increasing medical cost which showed no signs of a bating as well as flattening of downward frequency trends will soon bring an end to this period of decreasing loss cost. Regarding losses the third quarter was the fourth consecutive quarter in which we took down reserves for prior accident years.
For the third quarter our favorable development totaled $6.6 million. This favorable development reflects the continual improvement of our claims management and adjudication process, and we continue to see favorable trends in claim closing patterns and case incurred development especially in the more recent accident years.
These trends may indicate that further favorable prior year development will occur. However, we are still in a soft market where pricing under pressure and we are in the business of ensuring hazardous occupations.
Average severities in our market niche tend to be both high and volatile. So, we will always exercise caution in reducing prior year reserves and do so only when we feel such action is prudent and appropriate.
In addition to favorable reserve development our expense management efforts continue to produce benefits. Even as our net premiums earned dropped 10.5% in the third quarter versus the prior years third quarter, our expense ration increased by only 0.4 percentage points, the 20.3% from 19.9%.
Actual expenses quarter-over-quarter decreased 8.7%. Our competitively low expense ratio reflects the impact of our aggressive focus on expenses as well as 2008 working layer reinsurance treaty which access and offset to overall expenses.
Janelle will talk in more detail about the performance of our invested assets, but I would tell you that we incur $2.9 million in net realized losses in the third quarter, most of that the result of other-than-temporary impairments. Our pre-tax investment yield was a respectable 4% per annum as of September 30 and we believe that the less side of our balance sheet is well under control even than this period of unprecedented asset deterioration with the financial services industry.
Overall and in spite of numerous external challenges for the third quarter of 2008, insurance professionals of Amerisafe produce net income growth of 13%, of still a return on average equity of 20.5% and a combined ratio of 79.4%. We are extremely proud of these results and with that I will turn the presentation over to Janelle Frost.
Janelle Frost
Thank you, Jeff and good morning everyone. Let me begin by saying we are pleased to report net income for the third quarter of 2008 was $13.4 million, this was a 13% increase over the third quarter of 2007.
Now onto the components of earnings, as Jeff mentioned in the third quarter of 2008, we experienced a 6.6% decline in gross premiums return. Net premiums earned decreased by 10.5% from the year ago quarter.
As all of you know, earnings always lag riding and our decreased earned premium in the third quarter was the result of written premium decreases from the prior fourth quarters. Our net investment income was 2.7% lower than the same revenue component in the third quarter of 2007, mainly due to decreased yields on our invested assets.
Additionally, – we had net realized losses of $2.9 million resulting from the sales equity securities and other than temporary impairment of securities and asset back securities. In total, revenue in the third quarter of 2008 was 13.6% lower than the same period in 2007.
Offsetting these revenue decreases, were decreases in losses and underwriting expenses. Our incurred loss and loss adjust mix in this decreased 23.6% from last year’s third quarter.
Our net loss ratio declined to 58.9% from 69% in the third quarter of 2007. Our 58.9% overall loss ratio, includes a current accident year loss ratio 68.1% and faceable prior development of 9.2%.
The favorable prior year loss development was primarily from more recent accident years including 2006 and 2007. In those recent years, we have seen marked decreased in open clients, as well as favorable case incurred development.
Under writing expenses also decreased in the third quarter of 2008 to $14.5 million from $15.9 million in the third quarter of 2007. However, due to our lower premium earnings in the third quarter 2008, our underwriting expense ratio actually increased from the same year ago period, the 20.3% from 19.9%.
As it has been the case throughout 2008 our total underwriting expenses have benefited form the effects of the experienced rated commissions for certain of our 2008 reinsurance agreement, such commissions acting as offsets to our expenses. In total our combined ratio was 79.4% in the third quarter of 2008 versus 89.2% over the same period in 2007.
In terms of earnings per share our third quarter 2008 diluted earnings per share allocable to common shareholder were $0.65 compared to $0.58 for the third quarter in 2007. Excluding net realized gains and losses our operating earnings per share were $0.75 in the third quarter of 2008 compared to $0.58 in the third quarter of 2007.
Book value per share was $13.31 at the end of the third quarter representing a growth of 14.2% in book value per share through September 30, 2008. This book value calculation includes the after-tax effect of unrealized losses incurred in our equity portfolio during this quarter.
That concludes my prepared remarks on the financials. I will now turn the discussion back over Allen.
Allen Bradley
Thanks Janelle. Last quarter I noted that of the $126 billion the property and cash of the industry had added to surplus from 2005 to 2007.
81% of that those contributions to surplus came from investment art. Now, the industry is giving back much of those investment gains as a result of write downs on this investment.
Natural disasters have taken a share of the industry surplus that has been accumulated. But I don’t believe that’s the complete story, we are only priced in underwritten business of the past few years is beginning to manifest itself and I will predict well erode more capital in the coming quarters.
Many believe that political rate suppression in the workers compensation industry will exacerbate those market problems. This industry has gone from a discussion of excess capital to one of required capital at best it’s an unsettling environment.
If you follow the mirror safe very long you will know that how we approach underwriting and this selection. You try the illustrate these points I referred to low the head fusion statues.
The illustrate I added to, in keeping with the political season and in my prepared remarks today with the call. The sign we had it’s the economy it was reportedly hang over the desk of the historic political status is James Carvil in the little lock headquarter of the 1992, Clinton presidential camping.
The purposes and design is to keep worker focused and as decided in that home message, as to the principle concern of the voters. Currently is various effective well without reference to the lack of intelligence perhaps the appropriate sign the those of insurance industry should be it’s the underwriting the count.
That’s a message Andrew that’s a message that the employees and management of Amerisafe understand very clear. We will happy to try to answer questions.
Operator
(Operator instructions) our first question comes from the line of Matt Carletti with Fox-Pitt Kelton. Please go ahead.
Matt Carletti – Fox-Pitt Kelton
Hi, good morning guys. Quick couple of question for your first is Allen in your opening comments your briefly made a comment about AIG it say a little bit.
I guess increased business flow from then given what’s going on, can you provide a little more color there certain geography is it that certain area that you focus in that you are seeing are that more of an cost of board.
Allen Bradley
Its more of an across the board submission although there are been some areas where AIG is little bit more competitive then others. Let me just make this comments AIG is the probably the most you bid with us competitors that we would have in terms of high asset workers competition they are underwriters that will assume risk and a lot of as it this industry in fact essentially all of the asset industries.
So, it’s not surprising that we would see an opportunity to look at some accounts. Trucking is one area construction but also oil and gas and a number of the types of risk that we raise.
I will tell you, we did not monitoring, do not monitor the submissions that are exposures from that our expiring policies from AIG that I can tell you that we did start monitoring the bound policies in the middle of September and it was not in significant in term of impact on our September.
Matt Carletti – Fox-Pitt Kelton
Okay that’s helpful and just one of the question; I apologize if missed in the commentary. The industry loss data for the quarter and how it year-over-year?
Allen Bradley
The payroll and premium.
Matt Carletti – Fox-Pitt Kelton
Yes.
Allen Bradley
Or the 4 to 930 Matt.
Matt Carletti – Fox-Pitt Kelton
Yes.
Allen Bradley
Okay, 930 to payroll was $4 billion and the in-force premium was $282 million, but the track was voluntary. The change by the way would be ensured payroll when up 5.1% and in-force premium was down 2.24%.
Matt Carletti – Fox-Pitt Kelton
Okay, thanks very much and congrats again on a really nice quarter and with health environment.
Allen Bradley
Thanks Matt.
Operator
Thank you. Our next question comes from the line of Mark Hughes with SunTrust; please go ahead.
Mark Hughes – SunTrust
Thank you very much. The premium orders in the fourth quarter of last year had kind of a negative impact, where you anticipate seems like a job numbers today where pretty negative.
If you factor that in the income statement, you think adequately?
Allen Bradley
Well, with respect to the audit premium in the third quarter compared to last year. Do you have those numbers Janelle?
Janelle Frost
It’s down approximately $5.3 million.
Allen Bradley
It was decrease over $5.3 million that’s why – and then that actually is narrow and then it was in the first quarter and second quarter. So, we’re seeing a narrowing of that and I think you could probably expect to see some of that narrows we go forward.
As employers adjust their expectations what their payroll is going to be going forward.
Mark Hughes – SunTrust
So, if that less of an impact on the fourth quarter then Q3?
Allen Bradley
That’s what I would anticipate on these as well.
Mark Hughes – SunTrust
Okay and how were the expenses tight from the reinsurance 3-D some of the underlying expense level and then in part of that will that structure continue to through 2009?
Janelle Frost
Yes, we experience higher commission as part of a three year programs. So, we will benefit from that each quarter though 2010.
Allen Bradley
Right and without taking the multiyear reinsurance program into effect or into account Mark what you can – we expect expense levels to be fairly the same.
Mark Hughes – SunTrust
Alright, okay. Then one question if I may the Allen you gave some numbers earlier regarding the 3Q the run rate 8.9% by policy count and 18% by premium, could you repeat that point please?
Allen Bradley
Sure, that was those numbers are voluntary workers comp new business and in the third quarter we bound 8.9% more new policies and those new policies in that quarter caused due to an 18.7% increase over the new business premium written in the third quarter of ’07.
Mark Hughes – SunTrust
Okay, thank you.
Operator
Thank you. Our next question comes from the line of Mark Lane with William Blair & Company.
Please go ahead.
Mark Lane – William Blair & Company
Good morning.
Allen Bradley
Good morning Mark.
Mark Lane – William Blair & Company
I had a couple, can you – do you have any data that you could give us on what you think the ’06 and ’07 give outlook to accident year loss ratios are with the end of the third quarter? You mention that some of the projection this quarter the favorable the development was ’06 and ’07.
Where do we stand on accident year loss ratios right now for ’06 and ’07?
Janelle Frost
Sure, I will give you that. I will tell you that our open claim inventory has decreased 12% from the September of 2007 and that said that we have over 13,000 reported claims, I am just using 2006 and 2007 as one example combined 13,000 open claims and less than 1,500 of those are still open.
Mark Lane – William Blair & Company
Okay.
Allen Bradley
And that is declining Mark at a rate faster than we would normally have effected and we attribute that to some initiatives in the claims department and making sure those claims have closed out. The other thing that quite frankly is driving that is that the incurred the settlements in the resolution of claims have been incurred or in a fashion that was lower than our established reserves.
Mark Lane – William Blair & Company
Do you – can you tell us how much of the favorable development year-to-date is attached to the ’07 accident here?
Janelle Frost
I can tell you that our ultimate ratio right now for – accident year 2007 and this is loss and DCC we have including the effect of AO is 56.2% and 2006 would be 55.9%.
Allen Bradley
At the original once where..
Janelle Frost
I don’t have an information with…
Mark Lane – William Blair & Company
Okay. I can follow-up after.
So, Allen the second I wanted to debt the state of the market are anything but, other exact it is play out this scenario is the wide prices with go up, but if you look at your results you be exceed expectation from almost three years you can have record result this year, your balance sheet is in better shape and never been you are bring down reserve from the most recent prior accent you. What motivation does Amerisafe have to aggressively push on pricing.
Allen Bradley
We’re not going aggressively push on pricing. What we are seeing is that other we are aggressively pushing on pricing active way from…
Mark Lane – William Blair & Company
I mean moving rates off, I mean what motivation do you have the move rate up. I mean it’s the market moves that late find but I mean why would you be motivated increase your pricing given the results you had the last 2 to 3 years.
Allen Bradley
Well, first of all we believe that the underline medical cost and declaims is accelerating and I would think of that with respect to the pricing of our business we feel that pricing the accounts appropriately because of the risk charge necessary in the severity land would be appropriate. I believe you going to see the underline cost of for worker comp periods and I am taking about reinsurance cost raising and periods over the last few years primary periods, have been reducing there dependence on reinsurance and taking more of their balance sheet I think that’s going reverse and reinsures is result of investment losses as well of natural capacities are going to push up that prices that’s going to move whole market.
Mark Lane – William Blair & Company
Would above lost cost you mentioned that expectations without note some potential reversal and lost some point.
Allen Bradley
Yes, I think that needs to happened I thing its going to happen however I mean if California saving indication for the indicate a 16% necessary increase in last half and 5% increase was approved that would give me some concerned that may be write surprising of the last cost as we flow through the marketplace. Mark let me as you consider of the situation in Florida the commission approved of 18.6% reduction in the administrative pricing in that state.
Mark Lane – William Blair & Company
After the NCCI.
Allen Bradley
4.5 points higher than the NCCI’s recommendation and even after the Florida Supreme Court had declared unconstitutional the principal reform in the 2003 workers compensation reform. I know the commissions were asked to the NCCI to go back and prepare a law only filing, but at best that would need to be submitted until March of 2009 where those lower premiums were going to be in place in January.
Though, this will disconnect there that makes us wanted to reconsider, capital allocation in the state of Florida. I think there is some points some moving around in the marketplace.
Mark Lane – William Blair & Company
Okay, I will follow-up on that loss development question. Thanks.
Operator
Thank you. Our next question comes from the line of Michael Nannizzi with Oppenheimer.
Please go ahead.
Michael Nannizzi – Oppenheimer
Sure, thanks. So, one question I have is about just a little bit about the trucking business.
Can you talk about the industry break down of that business? What sort of loads are those insured truckers carrying for the most part?
Geoff Banta
I would love to give you the details. I don’t have it at my hand.
Let me give you what I can tell you out top on my mind.
Michael Nannizzi – Oppenheimer
That would be great.
Geoff Banta
The majority of our trucking businesses long haul trucking. Most trucking class has fallen two class codes.
In most states 729 and 728, 729 is long haul of trucking, 728 is short haul. There are other class codes that deal with partial delivery and other things.
We tend just to focus on the long haul and we tend to focus on haul loads as opposed to less than haul loads. We like folks that are trying to price accounts appropriately by un-averaging the accounts into, what do you haul, and how do you haul, and how do you get it on the truck, how do you get it off the truck.
Which means lowering our exposure to the flat debt operations and writing more in the drawbacks operations refrigerated truckers and in certain situations tanking operations? The trucking class code is an average based upon the number of mile driven and there are a whole bunch of exposure differences among the types of trucks that drive more than 300 miles on a day and so we tried to – in terms of pricing and risk selection on average those and address the exposures that a particular company had.
Michael Nannizzi – Oppenheimer
Okay. I guess I was thinking terms of are you carrying a lot of construction materials I know, fuel or other liquids or refrigeration I was thinking in terms of…
Geoff Banta
Our important products?
Michael Nannizzi – Oppenheimer
Yes.
Geoff Banta
It is general freight largely, but tankers are also sorts of things.
Michael Nannizzi – Oppenheimer
Right.
Geoff Banta
Including fuel oil and then the gasoline has your disruptions, but I can’t give you a breakdown by that…
Michael Nannizzi – Oppenheimer
Grant.
Geoff Banta
Okay you have that sort of information, but don’t have to think it.
Michael Nannizzi – Oppenheimer
Got it. Okay, that’s alright.
Allen Bradley
But, Mike like and we have spoken to you about this and like just about all peaks of our marketing business model, the more we obviously long hauls only one class code, but the more we do the more variety of and types of these we ensure assuming we get the right rate, the more we are insulated from secular deep – depression in the economics. Let us say for take for oil or for that is not a very good example, but you know that went again.
Michael Nannizzi – Oppenheimer
Yes, I know. I understand.
Okay, that’s fair and also do you have the – on the investment portfolio, would you said, that there was OTTI in the equity security? So did you sell some of equity fund that you hold?
Or did you just – did you sell fixed income securities?
Janelle Frost
We sold some of the individual equities that we were holdings.
Michael Nannizzi – Oppenheimer
Okay so, not the funds?
Janelle Frost
No sir.
Geoff Banta
No.
Michael Nannizzi – Oppenheimer
Okay and then the remainder, so was any of the impairment that you recorded. Did any of that result from fixed income security or was that also equities?
Janelle Frost
Out of $2.9 million, $2.5 million was our subprime exposure.
Michael Nannizzi – Oppenheimer
Okay.
Allen Bradley
We impaired a 2006 vintage, subprime asset backed.
Michael Nannizzi – Oppenheimer
Got it, okay. Okay, great thank you.
Geoff Banta
Thanks, Mike.
Operator
Thank you. Our next question comes from the line of Mike Grasher with Piper Jaffray.
Please go ahead.
Mike Grasher – Piper Jaffray
Thank you, congratulation on the quarter.
Janelle Frost
Thank you.
Geoff Banta
Thanks, Mike.
Mike Grasher – Piper Jaffray
A couple of follow-up questions, first of all Allen, can you point to any state or highlight any states that maybe you are not experiencing the political suppression and then you do expect to see some rates moving up and specifically I guess, looking at some of your larger states Georgia, North Carolina, Virginia?
Allen Bradley
North Carolina, Virginia, North Carolina just approved I want to say it was a 4.4% decrease, but when you see states move in relatively small increments that to me just reflects what going on in the marketplace and it generally consistent with what the accelerates in the NCCI or the statistically recommended the states. Those make sense to me, I don’t refer to that even if it still going down as political way expression that appeared to be just about slapping.
Virginia, North Carolina; the two States that have been very good States to do business and Alaska has been a good State to business and Minnesota was constant, those areas have been – these States we’ve seen dramatic improvement in our book of business and the marketplace in Texas. Louisiana has been a stable state, I don’t know just may or who, I don’t have any information has who is considering moving up loss costs.
I will tell this that medical cost inflation according to all reporting groups continues to increase.
Mike Grasher – Piper Jaffray
Right.
Allen Bradley
And the process of making rates as we would looking mechanism that tries to address to frequency and severity and I think there is an over reaction by frankly in some of the rate decreases. So, if the question is why do you want to push up your pricing, it is because we think the loss cost maybe a too aggressively trend.
Do you understand?
Mike Grasher – Piper Jaffray
Yes.
Allen Bradley
That they are not making allowances for the cost of medical inflation, which includes utilization costs as well as prescription medications, DMEs, physiotherapy and chiropractic services all of those, which are showing pressure in the NCCI at 6% in 2007 growth in those cost. 59% of the claims according to the NCCI nationally, our dollars are go up for medical expenses, only 41% is for wager placement.
Mike Grasher – Piper Jaffray
Okay and then you talking about the economy and the impact over the – we need to way in terms of the change in the rate environment versus the state of the economy. Can you give us an update in terms of the your book of business from I guess the construction being the largest part?
Just much of your book is it, I have the numbers from year-end and then breaking it out in terms of the type of construction?
Allen Bradley
I don’t have that, here I will tell you that, at the last time I’ll saw those number, there was a slight decrease in the construction components and there were some other areas of increases that offset that. I don’t think it was trucking.
I think there were some in the logging, some in the oil and gas, some in agriculture, some in the Maritime services and then in the other area which involves fabrication and iron and steel work which by the way on this part of the world on a large part of where we do businesses related to the oil and gas industry.
Mike Grasher – Piper Jaffray
Okay, now that’s helpful. This is my follow-up question –.
Allen Bradley
I wish to add those numbers Mike I am sorry. I don’t have those.
Mike Grasher – Piper Jaffray
Okay, that was part of my follow-up was what is the offsetting the predictable reduction in construction –?
Allen Bradley
And the other thing that I think is important, I wan to make sure it’s not lost on anyone here today is that. We are seeing a shrinkage in the number of people that are participating in the hazardous area, hazardous workers compensation area and that is why I am cautiously optimistic that despite the job losses that our piece of the path may become vigor.
We may increase our market penetration.
Mike Grasher – Piper Jaffray
Interesting. Okay, thank you very much.
Allen Bradley
Thank you.
Operator
Thank you. Our next question comes from the line of Seth [ph] with TimesSquare Capital.
Please go ahead.
Seth – TimesSquare Capital
Hi, thank you. First congratulations on a continuing to grew book value while it looks like the industry seems to tend to be destroying it.
First question I have for you was on just I want to follow up on the competitive landscape. I was curious if you could please comment on any change in the recent behavior, you may be witnessing in terms of some of the smaller single state writers and as well as may be some of the state funds and geographies where those our competitor to Amerisafe?
Allen Bradley
That’s a very good question, Seth, and let me just start off by answering it. They didn’t get the email that the capital has been destroyed.
I will have to say that with respect to our public competitors, we see a divergence in the responsibility the prudence and the activity of public competitors versus the single state writers, self insurance funds and the like of private carriers they are much more aggressive and that is something that is continuing on at this point. You are beginning to see at least some anecdotal comments in the marketplace that some of those people that felt they like long haul trucking or they would like to forestry or explosive.
So, our oil and gas business have indicated that is not proceeding well with it. So, we are seeing a bit of slowing in that, but I can tell you they are not nearly as cautious as a public companies.
Seth – TimesSquare Capital
Okay that’s helpful and my other question was on the investment portfolio. I was curious if you could share roughly what average pretax investment yield you obtaining on new money that has been put to work?
Allen Bradley
New money, gotcha. We’re getting 4% on average new money is the low that of course and I don’t know the average that on the new money.
Sorry.
Seth – TimesSquare Capital
Okay, so, it sounds like a slightly below maybe what the current – be not materially?
Allen Bradley
Yes.
Seth – TimesSquare Capital
Okay.
Allen Bradley
I don’t think materially, no.
Seth – TimesSquare Capital
Super. Thanks very much and keep up your work.
Operator
Thank you. Our next question comes from the line of Alfred Hunger [ph] with Sidoti; please go ahead.
Alfred Hunger – Sidoti
Hi, good morning.
Allen Bradley
Good morning Alfred.
Janelle Frost
Good morning.
Alfred Hunger – Sidoti
Allen, you guys wish to revise your ROE budget for ’08, haven’t seen to 21 from 15. Is this the new long-term ROE for us going forward?
Allen Bradley
That’s for 2008.
Alfred Hunger – Sidoti
So, for ’09 should we estimate the low or to mid-point of that?
Allen Bradley
We will give guidance for 2008 at the end of…
Alfred Hunger – Sidoti
‘09
Allen Bradley
I mean for 2009 at the end of 2008.
Alfred Hunger – Sidoti
Okay, alright. Thanks so much.
Allen Bradley
Okay, thank you Alfred.
Operator
Thank you. (Operator instructions) our next question comes from the line of Ron Bobman with Capital Returns; please go ahead.
Ron Bobman – Capital Returns
Hi, good morning everybody and congrats.
Janelle Frost
Thank you.
Allen Bradley
Thanks Ron.
Ron Bobman – Capital Returns
I’m sure on the next call; you will have that new money in finger tips as I knew team of promoted.
Janelle Frost
Thank you.
Ron Bobman – Capital Returns
Congrats on it Ron.
Allen Bradley
It’s very important matter
Ron Bobman – Capital Returns
I said another investing question, any apatite for putting new money to work, I guess that matter sort of maturing money to work at these widening spread levels or is that sort of I think in store practices that we make our money underwriting and we’re going to do the short today, if?
Allen Bradley
Well, we’re always – there are some good opportunities out there Ron and we are definitely partial especially in this crazy environment toward municipals, but there are some good spreads there to and where would constantly looking for opportunities, that we think our safe and we had are giving some one would say have normally high yields that the current time especially in the secondary market.
Ron Bobman – Capital Returns
That the buyers will maintain toward the short duration.
Allen Bradley
It well
Ron Bobman – Capital Returns
And certain I don’t, of-curse not of whole did you but we would take at 12 months or 24 months and compared sort of a pie chart of where invested assets are spread amongst. Where might be see the mix change on the invested asset, if you were to go that past and making some changes are is it really probably not liquidity change materially?
Allen Bradley
I know nobody will change materially of course at this point activities are not very attractive in terms what I have object these in terms of return, but that would cash tough to look at that for and have some might be would look like.
Ron Bobman – Capital Returns
Okay, thanks a lot, best of luck continues.
Allen Bradley
But Ron if you know the answer, recall?
Ron Bobman – Capital Returns
More than with 24 months,
Allen Bradley
Sort it is been hard to judge it 24 hours and –
Operator
Thank you, ladies and gentleman, that does concludes the question-and-answer session. I would now like to turn the call over to management for concluding remark.
Allen Bradley
Thank you very much for joining us today. I think that is clear that, the marketplace we believe the marketplace is changing and there is opportunity in the marketplace and we will continue to concentrate on underwriting and worry about improving the margins and maintaining the margins that we have been able to experience for the last few years.
Thank you very much.
Operator
Thank you ladies and gentleman. That does conclude the Amerisafe third quarter 2008 earning conference call.
This call is available for replay and I would like to access the replay system you may dialing 303-590-3000 and entering the pass code number of 11121238. The number again 303-590-3000 and 11121238, thank you again for you participation.
You may now disconnect.