Good day, ladies and gentlemen, and welcome to the AMERISAFE, Inc. third quarter earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions on how to participate will be given at that time. If anyone requires operator assistance during the call, please press star and then zero on your touchtone telephone. As a reminder, today's conference call is being recorded. It is my pleasure to turn the conference over to your host, Janelle Frost.
Good morning. Welcome to the AMERISAFE third quarter 2011 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, and the 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 could materially differ because of factors discussed in today's release, in comments made during this call, and in the Risk Factors 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 statements. I will turn the call over to Allen Bradley, AMERISAFE's Chairman and CEO.
Thanks, Janelle. Good morning, ladies and gentlemen. Thank you for joining us for our third quarter conference call. As usual, I am going to make a few comments about the quarter before turning it over to Geoff Banta, our President and Chief Operating Officer, who in turn will reintroduce Janelle Frost, our Chief Financial Officer, for additional details. The significant increases in gross premiums written during 2011 continued at an accelerated pace during the third quarter. Continuing improvement in audit adjustments on policies written in prior periods, coupled with an increase in premiums on policies written during the quarter combined, to push our gross premiums written up 25.9%. Relative to pricing, our effective LCM for voluntary workers' compensation in the quarter matched the highest effective LCM we have seen since the third quarter of 2007.
There was welcome news on the loss front as well, as both frequency and severity moved favorably during the quarter. Jeff will provide more information on pricing and claims following my comments. Finally, there are noticeable changes in the competitive landscape as a number of carriers are adjusting pricing and reevaluating their appetite for workers' compensation risk. While this change is not universal, the evidence of the change is far more than anecdotal. While the market is not hard, I would say that it is firming. Let me pass the microphone over to Jeff for more comments on our business operations. Jeff?
Thank you, Allen, and good morning, everyone. I'll make a few comments myself about our operational performance and trends before turning the presentation over to Janelle to present details on our financial performance. I'll begin by discussing our top line. As Allen mentioned, our gross premiums written were up strongly in the third quarter by 25.9% year-over-year. Year to date, our top line is up 19.1%. The third quarter increase in top line was due mainly to year-over-year increases in payroll audits and related premium adjustments. These adjustments have now improved for four straight quarters year-over-year. Also contributing to our growth in the third quarter was a 7.8% increase for premium on policies written during the quarter, what we term Dec Sheet premium.
This was our largest year-over-year increase since the first quarter of 2007 and was especially good news for us because we experienced this organic growth while also increasing our pricing. We also benefited from markedly higher renewal retention and higher average premium on our new business. Relative to our renewal business, our third quarter premium retention was 97.6% versus 76.5% in the third quarter of 2010. Our 2011 third quarter premium retention rate is the highest we've experienced since 2002, and we believe it is evidence of increased payrolls of our insureds and overall firming of prices in our high-hazard niche. Our policy retention, meanwhile, was 92.2% in the 2011 third quarter, just slightly lower than the third quarter of 2010, which was 93.2%. As mentioned above, our average premium also increased in the third quarter from $25,600 to an average of $30,800.
The increase was due to several large new business accounts we were successful in writing to a substantial increase in average payroll for renewal business and to increased pricing for both new and renewal business. Relative to pricing, our effective LCM for voluntary work comp in the second quarter was 1.50 or 150% of the approved loss costs of the states that use that mechanism for pricing. This compared to 1.42 in the third quarter of 2010. We have now had year-over-year pricing increases in all three quarters of 2011. Our year-to-date ELCM at a 1.48 is the highest since year-to-date 2007. In terms of losses, our third quarter results revealed a welcome slowing of growth case incurred loss development. I will review our results by three accident year groupings, 2009 and prior, 2010, and 2011.
For accident years 2009 and prior, the news continues to be positive as we experience substantial favorable case development for those years, especially in accident years 2007, 2008, and 2009. The fact that these more recent accident years developed favorably is evidence of our conservative approach to setting case reserves and bodes well for the future. We have now experienced favorable development for 2009 and prior for four consecutive quarters. Our 2010 accident year has been a more difficult one in terms of growth case incurred development since the inception of that accident year, due mainly to an increase in the frequency of lost time claims. However, third quarter development for the 2010 accident year was minimal, was actually developed favorably in the month of September.
For our current accident year, 2011, the news was also encouraging in the third quarter as we experienced year-over-year decreases in reported claims and claim frequency. While we remain cautiously optimistic about our 2011 year, it is entirely too early to make a confident call on where the year will end up, especially since our loss experience is sensitive to large losses. Finally, for all accident years, we continue to live in a difficult environment for claims management, one characterized by medical cost inflation, increased medical and pharmaceutical utilization, and decreasing opportunities for injured employees to return to work, all of which have caused our overall claims duration to lengthen. We believe these factors will continue to challenge our claims operations and put pressure on claims costs into the foreseeable future.
In response, we are continuing to push our pricing, tighten our underwriting criteria, and aggressively manage our claims toward expedient settlement and closure. With that, I will turn the presentation over to Janelle to present details on our financials.
Thank you, Jeff. For the third quarter of 2011, AMERISAFE reported net income of $6.7 million, or $0.36 per share, compared to $4.4 million or $0.23 per share in the third quarter of 2010. Our gross premiums written grew 25.9%, not only with less negative audit and related adjustments, but with 7.8% growth in premiums for policies written in the quarter. Net premiums earned increased 18.5% from the year ago quarter. Our net investment income totaled $6.5 million in the third quarter, down 1.1% from the year ago quarter. Average invested assets were $830 million compared to an average of $804 million in the third quarter of 2010. The tax equivalent yield on our investment portfolio was 4.6% for the third quarters of 2011 and 2010. In total, revenue for the third quarter of 2011 was $71.7 million, up 18.5% from the year ago period.
Our current accident year loss ratio was 78.2% for 2011 compared to 95.5% for the third quarter of 2010 and 81.8% for the full year of 2010. Our incurred loss and loss adjustment expenses totaled $49.3 million for the quarter, which included $1.1 million of favorable prior year development. Accident years 2009 and prior experienced favorable development of $2.5 million, offset by $1.4 million of unfavorable development for accident year 2010. This compares to loss and loss adjustment expenses of $46.7 million in the last year's third quarter, which included $5.3 million of favorable prior year development. In total, our net loss ratio for the third quarter of 2011 was 76.5%, compared to 85.8% for the third quarter of 2010. Total underwriting and other expenses increased to $13.6 million in the third quarter of 2011 from $8.4 million in the third quarter of 2010.
The 2011 third quarter expense components included $4.8 million of salaries and benefits, $4.8 million of commissions, and $4 million of underwriting and other costs. The expense ratio increased to 21.1% from 15.4% in the same quarter a year ago. In the third quarter of 2011, assessment expense was favorably impacted by a $2.7 million change in estimated premium-based assessments. In 2010, we experienced large rate reduction in certain loss-based assessments. In addition, the expense ratio was impacted by 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 third quarter of 2011, experience-rated commission offset our underwriting expense ratio by two percentage points compared to 4.3 percentage points in the third quarter of 2010.
In total, our combined ratio was 98% for the third quarter versus 101.7% for the same period in 2010. Return on average equity for the third quarter of 2011 was 7.9%, and book value per share at September 30th was $18.74, an increase of 8.6% from September 30th of 2010. Finally, our statutory surplus was $305 million after paying a $10 million dividend in the third quarter to the holding company. Cash at the holding company is held for our share repurchase program, retiring debt, and future acquisitions. As previously announced, we retired $10 million of our $36 million debt in the third quarter. Also, the board of directors renewed our share repurchase program through December 31st, 2012, with an authorized limit up to $25 million, effective October 1st, 2011. In the third quarter, we repurchased nearly 358,000 shares at an average price of $18.99, including commissions.
Since the plan's inception, we have repurchased 1.2 million shares at an average price of $17.75, including commissions. That concludes my prepared remarks on the financials. We will now turn the call back to Allen.
Thanks, Janelle. Over the past three years of conference calls, we have commented on three factors that have impacted the workers' compensation market. Those factors are loss cost, demand for our product, and competition. Over the last three years, we have commented on the fact that lower loss cost and rates in virtually every jurisdiction has suppressed premiums written. We have also bemoaned the fact that there was a lack of demand for our product, driven by issues in our national economy. We have also been facing aggressive pricing from numerous competitors as the marketplace for workers' compensation has shrunk because of the other two factors. The impact of these three factors is clearly changing. First, loss cost and rates are beginning to rise in several jurisdictions.
While it's not uniform across all states, and while the rate of increase is less than what we believe is warranted, the trend is clearly upward. If past experience is reliable, there will be several years of loss cost and rate increases to follow. Second, demand. While the demand of our product is not robust and the employment figures are not particularly encouraging, we do see larger audited payrolls than anticipated from expiring policies and have reason to believe that current policies will enjoy greater payrolls than experienced over the last few years. Finally, and most importantly, the competitive landscape is indeed changing. Multiple years of irrational competition on ever-diminishing loss cost has resulted in very poor performance in the workers' compensation line across the nation. These poor results are causing many underwriters to reexamine their approach to workers' compensation, appetite, and pricing.
High-severity risks are usually the starting points for these reexaminations. I would tell you, I believe at this point that those reexaminations have apparently reached an action level. I would be remiss if I didn't point out to you that an exacerbating factor in these underwriting results is the marked decline in net investment income, even as invested assets are climbing. For several quarters now, we have suggested that market improvement was occurring in the high-hazard segment of the workers' compensation line. Nothing that occurred in the third quarter altered our opinion at all on that subject. As President Nixon was often quoted as saying, let me be perfectly clear. First, workers' compensation rates are not at levels that we would characterize as fully adequate. Second, there is still some irrational competition in the marketplace. Thirdly, the demand for workers' compensation is not, as I would characterize, robust.
However, we do believe that the opportunity to expand our business profitably exists now, and hopefully, that will improve in the future. Operator, if you would, please open the call for questions.
Thank you. Ladies and gentlemen, if you would like to queue up to ask a question, please press star then one on your touchtone keypad. Our first question comes from Mike Grasher of Piper Jaffray. Your line is open.
Oh, thanks. Good morning, everyone.
Morning.
Hi, Mike.
Morning, Mike.
Jeff, question around your commentary. Did you mention what the volume of new submissions were, or how much higher they were sort of year-over-year or year-to-date?
I did not, our submissions are up. The conversion of those submissions continues to be a challenge as we're raising rates, our submissions are very healthy.
Would you say they're up sort of 10%, 20%, 5%? Any perspective there?
Five to 10, Mike.
That's helpful. The unfavorable development that occurred in 2010, was this more or less a one-time severity event, or was it more to do with lost time? Where would the open claim, the duration of the open claim is out there a little bit longer, something we should be concerned about going forward?
Well, no. I would say 2010 was a combination of quite an uptick in frequency from 2009 and then some pretty severe losses of a frequency of severity. Those two combined to make that a very tough year. From a ratio standpoint, Mike, that was exacerbated from the fact that our premiums were lower.
Sure.
Much of the premium we're enjoying now was from audits that should have, on a true earn basis, would have applied to the 2010 policy year and increased the denominator.
Okay.
Made the ratio better than it was. There's no doubt 2010 had unusual frequency, and especially frequency of severity, over $500,000 claims.
Okay. Appreciate that. Then just a final question here. Allen, you mentioned sort of three areas or three reasons why it's getting better. Just to comment on a fourth maybe, and talk about the change in reform that's going on in numerous states. How does that sort of change your appetite in terms of, if not entering new territories, going back into old ones?
Good question, Mike. There are states that have been problematic because of the structure of the workers' compensation claims process and otherwise. Illinois is an example. Oklahoma is an example. Kansas is an example. All three of those states have passed major reforms. I'm not sure that Illinois has made enough of a change to change our appetite with respect to that state. Kansas and Oklahoma would bear a more stringent review, I would have to say. As you know, the combined ratio for the industry last year was about 118. That's a workers' compensation line nationally. That will force even more consideration, and we're seeing that through some of the data we've received from the PCI on the early proposals for changes in 2012 in states.
We will look at those to see whether or not they make sense for us to reenter or maybe reallocate premium. I'll give you a perfect example. There's been some reforms maintained in Florida, and they just raised the rates for 2012 by 8.9%, but they have not removed the excess profits tax or dividend. Limiting your underwriting upside to 5% while not limiting your underwriting downside still is not overly attractive to us.
Okay. Stay tuned for more.
Stay tuned for more. It's an ever-changing environment. The direction is positive. Whether it be rate increases that make up for a bad structure or they change the structure, one of those two has to occur in a number of jurisdictions.
Mike, one more thing, I think you understand this very well. If we feel a state is still on the way to decreasing their loss costs, we can still quote in a state like that, but our effective LCM, our ability to schedule debit, is going to be much more aggressive to get to the price we want in states like that.
That's a good point.
Understood. Thank you.
Thank you. Our next question comes from Mark Hughes of SunTrust. Your line is open.
Yeah, thank you. Good morning.
Good morning, Mark.
The gross profit growth, very nice in the quarter. Any sense of how that was distributed in terms of end market? High risk versus low risk, construction versus transportation, that sort of thing?
Yeah. That's a good question, Mark. We're seeing the greatest increase in farm, construction, and oil and gas. I can tell you, I usually don't single out certain states, but it is, I think, an important point that one of the largest levels of growth was in Nebraska, which is a big agribusiness state. If you remember, Nebraska was the home state of Co-op Mutual, with whom we did the deal last year. That's starting to gain some traction for us in the farm area. Otherwise, oil and gas is pretty healthy, and construction is healthy.
Oil and gas, does that tend to be smaller firms?
It tends to be oil field service business, not 6205, 35 over the whole drilling. They're not large firms. You have a lot of trucking associated with the oil and gas. You have companies that pump, gauge, site preparation-
Site preparation, yeah.
Those sort of things, as well as a lot of related businesses in drilling wells, water wells, and laying pipeline and the like.
Right. The audit premium trends, can you give us a sense of kind of the year-over-year impact on the business as you might anticipate it next quarter or two versus what we've seen lately?
I can tell you, Mark, that, we've said this for several quarters, it's going to begin to diminish over some period of time. I would look for a continued improvement for the next one to two quarters. Beyond that, it gets to be speculation. The audit adjustments are made up of three component parts. Premium audits, cancellations, and endorsements. The premium audit side of it is the one with the largest gain, indicating that payrolls are up. That I'm not so sure is going to change a whole lot. I do think it's going to start to normalize over the next quarter or two.
Got you. Then the final question, just claims frequency. I don't know whether you touched on this earlier. I got on just a little bit late, moderation and frequency this quarter or this year versus what you'd seen in prior quarters or last year. Any more detail you can provide? Is it the underlying economy? Is it some sort of Well, I'll leave it at that.
Frequency has declined at a very gradual level, we've seen marked frequency decreases, at least this year, in large losses, especially in the third quarter. Payroll, as you heard, is robust and going up. Payroll frequency has been aided by the increase in that denominator. Premium is increasing. Pure claim counts, the numerator, which increased substantially in 2010, have leveled off in 2011. In 2011, as we level off on claim counts an increase in earned premium and payroll, we're seeing a decrease in frequency. Just not, I wouldn't say a huge decrease yet, but a consistent decrease in our frequency, both premium and payroll.
How much of that might be underwriting decisions you've made?
Well, I might take a swing at that one, Mark. We think a lot of it is.
Yes.
If you recall, in the second and third quarter of last year, we talked about initiatives we were launching that were designed to lower the frequencies. We were concerned about that on an absolute basis as well as on a relative basis on claims per $1 million of premium. We do see improvement from those initiatives. It's kind of been helped that the market's changing because then you can still write business, and the retention of those accounts that you want to write has gone up and maintained on a policy count basis and gone up on a premium basis as the economy's recovered. One other point I want to make relative to your earlier question. If you recall, in the third quarter of 2010, we had to remark about the increase in severity, where we had 11 claims in that quarter over a half million dollars.
To change in that, our business can be lumpy in this regard, I want to make sure that we don't declare victory right now for the entire year. We only experienced five claims in the third quarter over $1 million.
Over 500.
Over 500,000. I'm sorry. Over 500,000 as opposed to 11 over 500,000 in the same period last year. A certain part of that is the lumpiness of our business, but you drop that 50%, that's encouraging. Now, if we can just hold on to that in the fourth quarter, we'll have to talk to you in February about that.
Great. Thank you.
Thank you.
Thank you. Our next question is from Matthew Carletti of JMP Securities. Your line is open.
Thanks. Good morning, everyone.
Morning.
Allen, my first question just relates to M&A. It just seems to me that we're probably at the point, at least for a lot of peers of, we'll call it, peak pain in the cycle. If you're a little smaller and don't have a big premium base, you might have an expense issue in addition to a loss issue. Can you comment just on your outlook as you see it, M&A broadly within workers' comp and then specifically AMERISAFE's appetite to participate in it?
Okay. Broadly, we have had two years, 110 combined ratio in 2009, then 118 in 2010 on combined ratios. With the drop in investment income, the shrinkage of the overall market, as you know, on a net premiums written basis from 2005 to 2010, the market shrank from $47.8 billion to $33.8 billion. For smaller carriers, and particularly on rated carriers or single state writers, they have certain fixed cost structures. That decline alone has put pressure on the expense ratio. The decline in the loss cost and the competitive environment have pushed up the loss ratio as well, so that the combined ratios for many of those companies has soared into the 130 and 140 range. Will cause stress. It will cause, in my opinion, some small companies to fail or to have to seek other alternatives to continue in existence or to move forward.
You have other companies that write it as an ancillary line. As you know from the NCCI data, they were making profits in commercial auto, in commercial property, in commercial multi-peril, and some of the opportunities to make money in those lines has now subsided. They are having to reevaluate whether they want to write business at 118 to subsidize that. We're seeing a lot of retrenching there. We're seeing people trying to offload books of business involving workers' comp. I do think there'll be a lot of opportunity. It's not unusual for this time in the cycle. We're in the pain cycle. The cheating phase has passed. You can no longer pass it on loss ratios. It's beginning to show up in the losses themselves. The opportunity will be there. As far as AMERISAFE's appetite, we do have an appetite for that.
We like the opportunity to acquire books of business on a renewal rights transactions and also perhaps on a corpus transaction if the situation's right. Our filters, however, and our approach to our business is not one that leads us away from the severity nature of the business. We are not ready to get into some lines that we don't understand. We would prefer existing jurisdictions because it allows us to maximize our existing infrastructure, although we're not opposed to a geographical expansion. It's just got to be the right situation to do that. It also causes us to reflect carefully on opportunities that we have to make sure that they allow us to give the right returns to our shareholders. We do have an appetite for that. There is a lot of interest in it now.
Most of the companies we monitor on that, which is about 34, 35 companies now, are very small ones you're not familiar with, I wouldn't think. Certainly not publicly traded companies, but we see a great deal of stress in the market, and that stress indicates it's going to be an opportunity for AMERISAFE.
All right, thanks. That's really helpful. Then if I could have those two quick numbers questions, either for, I guess, Jeff or Janelle, probably. One is the 2010, the minimal amount of adverse development. Can you quantify that?
$1.4 million.
Yeah, $1.4 million. Then last one is, I apologize for missing it, the LCM in the quarter. I caught the nine months, but not the quarter.
The quarter was 1.50.
It was the same as the second quarter, Matt.
All right, great. Congrats on a great quarter.
Thank you.
Thank you.
Thank you. I would like to remind everyone, if you wish to queue up to ask a question, please press star then one on your touch tone keypad. Our next question is from Randy Binner of FBR Capital Markets. Your line is open.
Great, thanks. Just want to follow up on, I think it was Mark Hughes who was asking about kind of both premium and payroll audit trends by state and product line, and I think he mentioned Nebraska and Florida. The core states that you operate in were not mentioned. Just interested how those both kind of premium trend and payroll audits developing in your core states of Louisiana, Georgia, North Carolina, and also what product types are working best in those states.
Randy, this is Allen. Good morning. The audit adjustments are by definition on expired policies. You can pretty much follow where we wrote our premium, and that's where the audit adjustments have followed, and those would be Louisiana, Georgia, Pennsylvania, North Carolina, Virginia, those states. As far as industries, I think that's the same as what Jeff indicated. Our opportunities were writing forward construction, trucking, oil and gas, and agriculture because those are more robust areas, or at least construction is coming off of an incredibly low number. You run into that. It will follow basically where we wrote premium in 2010 and 2009, because that's where our policies are.
Randy, you mentioned our sort of core states, and most of those, as you know, are in the Southeast. Again, the Southeast typifies what we're seeing around the whole country, which is that for most of our states, we're seeing very healthy growth while we're increasing pricing. Even in our large states. That really is a good sign for our future.
Great. That's helpful. Just to jump over on investment yield. If you provided, I guess I missed it, but did you provide the new money yield in the quarter? I guess, any thoughts on how to deal with the low reinvestment environment, if at all? I mean, if you're going to stick with the same strategy or think about different potential investment strategies.
This is Janelle. I'd say our new money yield is somewhere around 3%, somewhere like that. As far as change in our portfolio, you'll notice as you've been following our filings, our municipal exposure has decreased slightly. Not that we are opposed to municipals, we've just been de-emphasizing those, and our corporate exposure has gone up. We have started, as you recall, a few quarters back, started an available-for-sale portfolio, and that has grown as well as the company still has a large amount of cash and short terms.
One other one there, just to kind of get a sense of it, Allen, in your comments, you had mentioned that lower investment yields were pressuring insurers, which is obviously true. How much do you, how much do you think some of your smaller competitors actively incorporate the low current yield environment into their underwriting, if at all?
I think it is incorporated into their decisions. For smaller carriers, sometimes it's hard to maybe see a great large picture because you're only writing in one state or maybe two states or three states. The overall impact is when the combined ratio comes up, and then your investment income won't cover it, and you get into capital destruction. We're seeing that among small carriers. If it doesn't change your attitude toward underwriting, you won't be with us for long.
That's fair. I guess in talking with smaller insurance companies, it seems there's kind of a split between people who, when it comes down to pricing a policy on an account that they say, "We just underwrite it for what its combined ratio will be versus what the potential investment income will be." It sounds like you're saying that you're seeing more of that yield expectation work its way into actual underwriting.
I think their expectations of what it would produce in terms of underwriting have been flawed, and that the actual underwriting results do not reach their expectation. I will also tell you, I don't think underwriters, as a general rule, the line underwriters that make day-to-day decisions on accounts ever consider investment income. I think some of their assumptions about expense ratios may be flawed. If you drop $14 billion out of the market, out of a $47, $48 billion market, you're going to have to make pretty radical expense reductions, or there's going to be a serious impact on your combined ratio.
That's all helpful. Thanks for the color.
Thank you. Our next question comes from Mark Hughes of SunTrust. Your line is open.
Thank you. The expense ratio is pretty low this quarter. I don't know if you touched on this earlier, but this 21.5% is lower than what has been the recent norm. Anything to that, and what might we expect going forward?
Yes. What happened in the third quarter, of course, this happens continually throughout the year, we had a change in the estimate on our premium-based assessments, which, as I said, was $2.7 million in the quarter. We continually have change in estimates. However, when it's significant to a quarter, I feel it's appropriate to bring it to light. If you recall, in the third quarter of last year, we had a similar change, but it was on loss-based assessments. This year to a lesser degree, I suppose, which is why when you compare the two ratios, quarter-over-quarter, 2011 is still higher, but lower than, as you point out, our run rate. That is a little bit of an anomaly in the third quarter, which is why we pointed out we don't want to think that that was a factoring in.
I will say also at the same time, we've kept our fixed costs flat. Actually, they were a little bit lower year to date over 2010. Any change we have is minimal.
Okay. A part of that, Mark, too, is greater premium.
That's right.
Exactly. The persistence in the quarter, either on a policy or a premium basis, I think you provided those numbers, but I'm not sure that I got them.
Let me. Here I've got that. 97.6% on a premium basis versus 76.5%. On an account basis, 92.2% in 2011, 93.2% in 2010. You're probably thinking that's a heck of an increase on a premium retention rate, that speaks to our increased payrolls and increased pricing.
Now, is that on the basis of the ones you want to keep, or does that include folks that you kick out the door?
That includes the ones we want to keep.
Okay. All right. You paid down some debt this quarter with a stock price, at least today, maybe like 1.3 times book. What's your thoughts going forward in terms of capital use? Pay down more debt? Continue to buy back shares?
Our attitude, I don't know that we'll buy back any debt or pay back off any more debt. We may. It's $26.1 million. The leverage, the debt to capital ratios are very low. The stock repurchase program, our philosophy toward that has not really changed. We look a couple of quarters out and try not to dilute our shareholders. We'll continue to follow that same opportunity, and when there's an opportunistic chance to buy stock back, we'll do so. With the expanding premium base, that does improve the leverage issue somewhat. As long as M&A is in our horizon and something we're considering, we want to be sure that we have dollars at the holding company and access to additional dollars in order to make those acquisitions.
Right. Yep. Okay. Thank you.
Thank you, Mark.
Thank you. Our next question comes from Mike Grasher of Piper Jaffray. Your line is open.
Okay. No, my question was addressed. Thank you very much.
Thank you. In that case, I would like to turn the program back to Allen for any concluding remarks.
Well, thank you, ladies and gentlemen, for joining us this morning. We appreciate your time. On a personal note, I want to take one opportunity. My father is here, as always, for the calls, and Saturday, he'll be 92. Happy birthday, Dad. Thank you, ladies and gentlemen.
Ladies and gentlemen, thank you for joining today's conference. This does conclude the program, and you may now disconnect.