AMERISAFE recently announced that CEO Allen Bradley will be transitioning into a new role as Executive Chairman of the Board and that G. Janelle Frost will be succeeding him at the company. Louisiana Comp Blog reached out to Bradley to discuss his career, his thoughts about the workers’ comp system at large and what he loves about Louisiana after a storied and varied career in and out of workers’ comp.
Comp Blog: AMERISAFE recently announced that G. Janelle Frost will be succeeding you as Chief Executive Officer at AMERISAFE as you had expressed an interest in retiring. You will now be serving as Executive Chairman of the Board until September 2016. How did you arrive at the decision to wind down your career?
Allen Bradley: Succession planning is probably one of the most important responsibilities of the Board of Directors, if not the most important. Every company needs to have a plan just as a business continuity issue. In fact, our Board has been talking about it dating back to 2007. In the case of a planned retirement like my own, the Board wanted to make sure that leadership development was happening in our organization and also that it was happening at the proper rate. Our Board had asked that I provide the company with adequate advance notice of my desire to retire and to consider a transitional role to provide support to the incoming Chief Executive Officer. I believe the transitional plan we worked out will provide that continuity.
Comp Blog: What made Ms. Frost an ideal candidate for the CEO position?
Bradley: Our Board used both internal and external resources to assess potential candidates, but the preference of the Board outright was to promote someone from within if at all possible because that candidate is already going to have knowledge of the culture here and is already a part of the history. In this case, Janelle has actually been here two years longer than I have! I’ll have been with AMERISAFE 21 years in September 2015, Janelle has been with the company 23 years, although she’s 20 years my junior!
As for what made her the ideal candidate, she was a front runner from the very beginning. Janelle was actually promoted to Chief Financial Officer in 2008 and really excelled in handling the perils of a publicly traded company, which involves handling a constituency of investors.
In her 23 years of experience with the company, Janelle has served in many important positions including staff accountant, senior account, Treasurer, Controller, Chief Financial Officer, Chief Operations Officer and President. As CFO from 2008 until 2013 she traveled the country many times and made innumerable presentations to our shareholders, analysts and other stakeholders. Her promotion to COO and President made her the ideal candidate to become CEO and President.
As Executive Chairman and Chairman of the Board of Directors, my responsibilities will be more external to the Company’s operations primarily dealing with shareholders, analysts, A M Best and strategic issues and, of course, supporting Janelle.
Comp Blog: What has changed the most since you’ve been in the workers’ compensation industry in Louisiana?
Bradley: There have been many changes to the workers’ compensation industry in Louisiana over the course of my career. AMERISAFE began as a specialty workers’ compensation writer for the logging industry almost 29 years ago. At that time there was virtually no voluntary market for those types of risks in Louisiana and in the southeastern portion of the United States. Our company provided an alternative to the Assigned Risk Program.
One of the things that I witnessed and see as a vast improvement in the overall system in Louisiana was the passage in 1991 of the LWCC legislation and thus the creation of the LWCC as a competitive state fund to discharge that residual market responsibility. That revitalized the market here in Louisiana and I think LWCC has done a particularly marvelous job carrying out their mission.
Another positive note, the trend over the last 20 or 30 years in Louisiana (and across the country) has been a decline in claims frequency measured either by payroll or earned premium. The workplace has become much safer. Claim severity however has continued to rise largely driven by medical cost inflation and increased utilization of medical services. Despite these improvements, Louisiana‘s workers’ compensation costs for employers remain higher than surrounding states. However, there has been significant improvement within the program here in Louisiana. Louisiana is a better place to do business than many people give it credit for.
Comp Blog: Can elaborate on that business angle, why is Louisiana a great place to do business?
Bradley: Because AMERISAFE conducts business in over 30 states, and is licensed in 17 others, I feel that I have some perspective on this issue. The Commissioner of Insurance and his office, along with the Louisiana Workforce Commission and other stakeholders in the workers’ compensation industry here have worked diligently to improve the Louisiana system. As a result, loss costs are trending downward.
As a general rule, Louisiana’s workers’ compensation laws are fairly understandable and straightforward. Our greatest challenge as a state system lies in the dispute resolution process. The impact of an inefficient dispute resolution process manifests itself in our longer average claim duration and higher prescription medication utilization than in surrounding states, or the national average for that matter. There have been efforts to address these concerns, but they are still areas of significant potential improvement.
Comp Blog: Can you tell us about your involvement with the state Legislature and the regulatory atmosphere in the state over the course of your career?
Bradley: I had the honor of serving two terms in the Legislature. Although I received my degree in Government from Southeastern Louisiana University, I got an education on how government really works during those two terms. I had the opportunity to work with some remarkable leaders and the very competent Legislative staff.
I think I was most surprised during that period of my career to find that lobbying firms provide needed research and background on proposed legislation. I had started my career in the Legislature with a somewhat negative view of that profession.
As for specifics, I served as a member of the Education Committee, Agriculture Committee, and as a member, and later Chairman, of the House Committee on Civil Law and Procedure. My tenure on the State Bond Commission provided insight into both state and local financing.
Over the years watching the legislative process, I have come to the conclusion that legislation is often presented as a “silver bullet” that will solve a major issue. Of course, that does not work. There are other states that have addressed things like physician dispensing, opioid abuse, and prescription drug formularies in an attempt to fix a problem once and for all, but there are many pieces to these puzzles. What we need to do in Louisiana is look at other states that have been successful and go forward unafraid and assess our own processes through that lens. That approach requires preparation, persuasion and persistence.
Comp Blog: What else could you tell us about serving in the Legislature and how that experience informed your understanding of your community?
Bradley: It strikes me now, looking back on it, that the legislative process was much more congenial and collegial than it is today. There was not much Republican versus Democrat infighting and partisanship, it was really about issues at the time that I served. It seems that there was a more cooperative spirit at that time, but I will say that since I’m no longer closely involved in it, that perceived difference may be as much in the representation of today’s politics as in the actuality.
I am truly thankful for the service of those persons that serve in legislative office. Most people have no idea how hard their legislators work during the legislative session. Serving in the Legislature gives one a unique opportunity to observe the cultural differences between areas within the state. Legislators generally reflect the collective personalities of their districts. Serving in Baton Rouge gives one a keen appreciation of the cultural diversity in our state. Understanding that diversity helps one understand the perspective of a given geographical area or group of people toward legislation or governmental action.
Comp Blog: Did you hold any other positions or work in any other fields?
Bradley: Yes, from 1976 until joining AMERISAFE in 1994, I practiced law here in DeRidder. It was a small town general practice involving tort litigation, (usually on the plaintiff side) some criminal defense work, real estate, civil litigation, and later in my career, some insurance regulatory and defense work. I served one term on the DeRidder City Council and was Chairman of the local hospital’s Board of Directors.
Upon joining AMERISAFE, I served as Executive Vice President of Morris Temple & Company and Mor-Tem Risk Management, which were an independent insurance agency and an independent claims management firm, respectively. In 1996 I became General Counsel and Corporate Secretary of AMERISAFE, Inc. In 1997, AMERISAFE was sold to a private equity firm, Welsh, Carson, Anderson & Stowe of New York. In August 2000, I was promoted to lead the Underwriting & Safety Services at the Company (while keeping the GC job). In November 2002, I became President and Chief Operating Officer and then CEO in 2003.
I guess you can get a lawyer to do anything!
Comp Blog: How do you see workers’ comp changing in the next ten years, either in Louisiana or nationally?
Bradley: The last few years, really since 2009, the state has been struggling with fiscal issues and budgetary constraints. That is the primary role of the Legislature, and it should be, but that struggle has taken attention away from other necessary changes, including within the workers’ comp system. So we’ll see where that takes us, but as I said, the dispute resolution process and the prescription drug costs are two areas that could use improvement.
As for future issues, I think there are two things that you’re going to see on a national level coming up in the next decade. Generally speaking, opt-out programs are a major issue. They’re beginning to discussed more frequently, and in that context you’ve got exclusive remedy and how that works in those systems. The other big general issue that I think is going to get some play on a national level is health care delivery and the impact of the ACA, particularly in those states that did not expand Medicaid and what that may do in terms of health care availability.
Comp Blog: Could you expand on both of those general issues? For instance, opt-out in Texas is controversial as an exported concept and the ACA is a hot button issue everywhere right now.
Bradley: Texas has had an opt-out program for many years and Oklahoma just passed legislation for an opt-out program of their own. Both of these have elements that, compared to the other, are more restrictive in some ways and more aggressive in others. Now that Tennessee has introduced legislation about opt-out and that conversation is happening, I think we’re going to see more discussion about what opt-out means for workers’ comp. The ultimate question is: Should there be other methods to provide replacement wages and medical treatment for injured employees other than workers compensation?
One thing is for sure, courts are different from state to state and legislatures are different from state to state. Although they borrow ideas from each other all the time, the outcomes in each judicial system after a law of that magnitude is passed vary considerably. The relevance of workers’ comp could ultimately be challenged by these programs and that is obviously a concern for our industry.
Comp Blog: So how about health care?
Bradley: That’s really where exclusive remedy comes in and the recent decisions in Florida dealing with that are significant. We need to be asking ourselves, “How do we deal with benefit levels and health care in this environment?”
As for the availability of health care for injured workers and the impact of the ACA, there are two schools of thought. Some point to the beneficial effects for the workers’ comp system in Massachusetts after that state passed mandatory statewide health care. The cost curve for medical treatments was favorably impacted and proponents maintain that non-work related injuries were then reported under the health insurance programs available.
The second school of thought focuses on this sheer volume of new, insured patients with access to health care and the correspondingly stable or shrinking number of healthcare providers. These prognosticators term the new demand for healthcare services as a ”tsunami” that will overwhelm the health care delivery system, particularly in rural areas and in states that did not expand Medicaid after the passage of the national legislation. These individuals argue that the demand for services will cause extraordinary delays in treatment, which will in turn occasion the use of more medicines, more indemnity payments, slower recovery and duration expansion.
Currently, I have the honor of serving on the Board of the National Council on Compensation Insurance [NCCI] and from listening to the leadership there, no one is sure about which way this is going to come down, except that it will have a definite impact.
Comp Blog: What was the highlight of your career with AMERISAFE?
Bradley: I’ve been very fortunate to have the opportunity to work with AMERISAFE and move up through it.
I think the highlight of my career was the experience of going public in 2005 and the aftermath of that event. For a number of reasons, the IPO was a challenging transaction. We were able to get the initial public offering completed but with only minimal participation and the pricing came in at the low end of the underwriters’ range at nine dollars.
Since then, watching the company grow and be successful from a performance and investor perspective has been very rewarding. According to Ward’s Financial, AMERISAFE has been one of the top 50 P&C companies for the last five or six years. A.M. Best has upgraded the company to an “A” rating. In 2014, we finished the year with a statutory combined ratio of 87.1 percent return on equity to our investors; on a GAAP basis was 12.4. Since going public, AMERISAFE produced a compound annual growth of book value including the return of capital of 15.6 percent. As a result, the stock has responded exceptionally well, trading in the low $40s range now.
So of course, I’m very pleased with that but I would be quick to point out that I didn’t do all that! There’s a lot more people pulling on that rope than me, I just get to be the spokesperson and have the privilege to tell the story that the managers, claims people, underwriters and everyone else built.
Comp Blog: Do you have a professional philosophy that you sums up how you work?
Bradley: What drives me is a lack of satisfaction in being average or even just slightly better than average. Our goal is always to try to be the best and to do so in an ethical and appropriate way.
Comp Blog: What is your favorite thing about Louisiana and Louisiana businesses?
Bradley: Louisiana is such a culturally diverse state, there are so many interesting people and stories. But I think the greatest thing about Louisiana is that people here have a positive outlook about our collective future and there’s a lot of pride in the state. Whether that pride is displayed in support for LSU sports, or Cajun heritage, or our New Orleans traditions, or in the forests of North Louisiana: people in this state know that Louisiana is a special and exceptional place to live and do business.