AMERISAFE Announces 2017 Second Quarter Results

Reports Combined Ratio of 81.9%

/EIN News/ -- DERIDDER, La., July 27, 2017 (GLOBE NEWSWIRE) -- AMERISAFE, Inc. (Nasdaq:AMSF), a specialty provider of hazardous workers’ compensation insurance, today announced results for the second quarter ended June 30, 2017.

  Three Months Ended     Six Months Ended    
  June 30,     June 30,    
    2017     2016   % Change
    2017     2016   % Change  
  (in thousands, except per share data)     (in thousands, except per share data)    
Net premiums earned $   82,749   $   90,728   -8.8 %   $   173,661   $   186,689   -7.0 %  
Net investment income     7,471       6,201   20.5 %       14,181       12,245   15.8 %  
Net realized gains (losses) on                
investments (pre-tax)     (388 )     545   NM         (569 )     793   NM    
Net income     15,481       16,639   -7.0 %       29,005       40,896   -29.1 %  
Diluted earnings per share $   0.81   $   0.87   -6.9 %   $   1.51   $   2.13   -29.1 %  
Operating net income     15,733       16,285   -3.4 %       29,375       40,381   -27.3 %  
Operating earnings per share $   0.82   $   0.85   -3.5 %   $   1.53   $   2.11   -27.5 %  
Book value per share $   25.02   $   25.83   -3.1 %   $   25.02   $   25.83   -3.1 %  
Net combined ratio   81.9 %   80.4 %       84.4 %   75.5 %    
Return on average equity   13.1 %   13.7 %       12.4 %   17.2 %    
                                 
                                 

G. Janelle Frost, President and Chief Executive Officer, stated, “AMERISAFE’s combined ratio of 81.9% in the second quarter was the result of our emphasis on risk selection with appropriate pricing and prudent reserving.  Our focus has been consistent as competition intensified.  In the second quarter, carriers sought out workers’ compensation premiums to offset deteriorating results in other commercial lines. At the same time, loss costs continued to decline.  Such conditions are why AMERISAFE’s underwriting discipline is critical to providing returns to shareholders and long-term financial stability for our policyholders.”

Insurance Results

  Three Months Ended     Six Months Ended    
  June 30,     June 30,    
    2017     2016   % Change     2017     2016   % Change  
  (in thousands)     (in thousands)    
                 
Gross premiums written $   87,039   $   103,224   -15.7 %   $   182,117   $   203,606   -10.6 %  
Net premiums earned     82,749       90,728   -8.8 %       173,661       186,689   -7.0 %  
Loss and loss adjustment expenses incurred      46,428       49,171   -5.6 %       102,644       95,887   7.0 %  
Underwriting and certain other operating costs,               
  commissions, salaries and benefits     20,183       22,561   -10.5 %       41,405       42,695   -3.0 %  
Policyholder dividends     1,163       1,216   -4.4 %       2,534       2,306   9.9 %  
Underwriting profit (pre-tax). $   14,975   $   17,780   -15.8 %   $   27,078   $   45,801   -40.9 %  
                                 
Insurance Ratios:                
Current accident year loss ratio    69.0 %   67.9 %       69.0 %   67.9 %    
Prior accident year loss ratio    -12.9 %   -13.7 %       -9.9 %   -16.5 %    
Net loss ratio    56.1 %   54.2 %       59.1 %   51.4 %    
Net underwriting expense ratio    24.4 %   24.9 %       23.8 %   22.9 %    
Net dividend ratio    1.4 %   1.3 %       1.5 %   1.2 %    
Net combined ratio   81.9 %   80.4 %       84.4 %   75.5 %    
 
 
  • Gross premiums written in the quarter decreased by $16.2 million, or 15.7%, primarily due to lower voluntary premiums written and $4.1 million in lower payroll audits.  Voluntary premium for policies written during the quarter ended June 30, 2017 declined by 11.6% compared with the second quarter of 2016. 

  • Payroll audits and related premium adjustments decreased premiums written by $2.6 million in the second quarter of 2017, compared to an increase of $1.5 million in the second quarter of 2016.

  • The current accident year loss ratio for the second quarter was 69.0%, an increase of 1.1 percentage points from 67.9% in 2016.  During the quarter, the Company experienced favorable loss development for prior accident years which reduced loss and loss adjustment expenses by $10.7 million, mostly attributable to accident years 2015, 2014 and 2013.  These results reflect improved trends for both claims closing and severity of claims and by favorable case reserve development on claims that were closed during the quarter.

  • For the quarter ended June 30, 2017, the underwriting expense ratio was 24.4% compared to 24.9% in the same quarter in 2016.  The decrease in the quarter was due to lower loss based assessments and lower commissions compared with last year’s second quarter. 

  • The effective tax rate for the quarter ended June 30, 2017 was 30.1% compared with 32.4% for the second quarter of 2016.  The decrease in the tax rate resulted from a lower proportion of underwriting income to tax-exempt income relative to the second quarter of 2016.

Investment Results

  Three Months Ended     Six Months Ended    
  June 30,     June 30,    
    2017     2016   % Change     2017     2016   % Change  
  (in thousands)     (in thousands)    
Net investment income $   7,471   $   6,201   20.5 %   $   14,181   $   12,245   15.8 %  
Net realized gains (losses) on                 
investments (pre-tax)      (388 )     545   NM         (569 )     793   NM    
Pre-tax investment yield    2.6 %   2.1 %       2.4 %   2.1 %    
Tax-equivalent yield (1)   3.3 %   3.2 %       3.3 %   3.2 %    
               

(1) The tax equivalent yield is calculated using the effective interest rate and the appropriate marginal tax rate. 

  • Net investment income for the quarter ending June 30, 2017, increased 20.5% to $7.5 million from $6.2 million in the second quarter of 2016, largely due to a significant decline  in value of an investment in a limited partnership hedge fund in last year’s second quarter.  The change in value of this investment is recorded in investment income each quarter.
  • As of June 30, 2017, the carrying value of AMERISAFE’s investment portfolio, including cash and cash equivalents, was $1.2 billion.  

Capital Management

The company paid a regular quarterly cash dividend of $0.20 per share on June 23, 2017.  On July 25, 2017 the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per share, payable on September 22, 2017 to shareholders of record as of September 8, 2017.

Book value per share at June 30, 2017 was $25.02, an increase of 5.5% from $23.72 as of December 31, 2016.  During the quarter, no shares were repurchased under the Company’s share repurchase plan. 

Supplemental Information

  Three Months Ended   Six Months Ended
  June 30,   June 30,
    2017     2016       2017     2016  
  (in thousands, except share and per share data)
           
Net income  $   15,481   $   16,639     $   29,005   $   40,896  
Less: Net realized gains (losses) on investments .     (388 )     545         (569 )     793  
Tax effect (1)     136       (191 )       199       (278 )
Operating net income (2)   $   15,733   $   16,285     $   29,375   $   40,381  
                           
Average shareholders’ equity (3)  $   474,247   $   487,350     $   468,771   $   474,964  
Less: Average accumulated other comprehensive income      1,438       6,845         962       5,448  
Average adjusted shareholders’ equity  $   472,809   $   480,505     $   467,809   $   469,516  
                           
Diluted weighted average common shares.     19,227,960       19,184,984         19,227,997       19,178,893  
           
Return on average equity (4)    13.1 %   13.7 %     12.4 %   17.2 %
Operating return on average adjusted equity (2)    13.3 %   13.6 %     12.6 %   17.2 %
Diluted earnings per share  $   0.81   $   0.87     $   1.51   $   2.13  
Operating earnings per share (2)  $   0.82   $   0.85     $   1.53   $   2.11  
           

(1) The tax effect of net realized capital gains is calculated assuming an annual tax rate of 35%.

(2) Operating net income, operating return on average adjusted equity and operating earnings per share are non-GAAP financial measures.  Management believes that investors’ understanding of core operating performance is enhanced by AMERISAFE’s disclosure of these financial measures.

(3) Average shareholders’ equity is calculated by taking the average of the beginning and ending shareholders’ equity.

(4) Return on average equity is calculated by dividing the annualized net income by the average shareholders’ equity.

Conference Call Information
AMERISAFE has scheduled a conference call for July 28, 2017, at 10:30 a.m. Eastern Time to discuss the results for the quarter, as well as the outlook for future periods.  To participate in the conference call dial 877-225-7695 (Domestic) or 720-545-0027 (International) at least ten minutes before the call begins and ask for the AMERISAFE conference call.  A replay of the call will be available approximately two hours after the live broadcast ends and will be accessible through August 4, 2017.  To access the replay, dial 855-859-2056 or 404-537-3406 and use the pass code 46153972#.

Investors, analysts and the general public will also have the opportunity to listen to the conference call over the Internet by visiting http://www.amerisafe.com.  To listen to the live call on the web, please visit the website at least fifteen minutes before the call begins to register, download and install any necessary audio software.  For those who cannot listen to the live webcast, an archive will be available shortly after the call at http://www.amerisafe.com.

About AMERISAFE
AMERISAFE, Inc. is a specialty provider of workers’ compensation insurance focused on small to mid-sized employers engaged in hazardous industries, principally construction, trucking, logging and lumber, manufacturing, and agriculture.  AMERISAFE actively markets workers’ compensation insurance in 27 states. 

Forward Looking Statements
Statements made in this press release 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 on management’s estimates, assumptions and projections as of the date of this release and are not guarantees of future performance and include statements regarding management’s views and expectations of the workers’ compensation market, the Company’s growth opportunities, underwriting margins and actions by competitors.  Actual results may differ materially from the results expressed or implied in these statements if the underlying assumptions prove to be incorrect or as the results of risks, uncertainties and other factors including the factors set forth in the Company’s filings with the Securities and Exchange Commission, including AMERISAFE’s Annual Report on Form 10-K for the year ended December 31, 2016.  AMERISAFE cautions you not to place undue reliance on the forward-looking statements contained in this release.  AMERISAFE does not undertake any obligation to publicly update or revise any forward-looking statements to reflect future events, information or circumstances that arise after the date of this release.

- Tables to follow -

                                                                                           

AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands)
         
  Three Months Ended Six Months Ended
  June 30, June 30,
    2017     2016     2017     2016  
  (unaudited) (unaudited)
Revenues:        
Gross premiums written  $   87,039   $   103,224   $   182,117   $   203,606  
Ceded premiums written      (2,198 )     (2,550 )     (4,589 )     (5,101 )
Net premiums written  $   84,841   $   100,674   $   177,528   $   198,505  
                         
Net premiums earned  $   82,749   $   90,728   $   173,661   $   186,689  
Net investment income      7,471       6,201       14,181       12,245  
Net realized gains (losses) on investments     (388 )     545       (569 )     793  
Fee and other income     93       89       194       171  
Total revenues     89,925       97,563       187,467       199,898  
                         
Expenses:        
Loss and loss adjustment expenses incurred      46,428       49,171       102,644       95,887  
Underwriting and other operating costs      20,183       22,561       41,405       42,695  
Policyholder dividends     1,163       1,216       2,534       2,306  
Total expenses     67,774       72,948       146,583       140,888  
                         
Income before taxes      22,151       24,615       40,884       59,010  
Income tax expense      6,670       7,976       11,879       18,114  
Net income  $   15,481   $   16,639   $   29,005   $   40,896  
                         
         
         
         
         
AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Statements of Income (cont.)
(in thousands, except per share amounts)
         
  Three Months Ended Six Months Ended
  June 30, June 30,
    2017     2016     2017     2016  
  (unaudited) (unaudited)
Basic EPS:        
Net income $   15,481   $   16,639   $   29,005   $   40,896  
                         
Basic weighted average common shares     19,162,049       19,096,718       19,156,250       19,077,328  
Basic earnings per share  $   0.81   $   0.87   $   1.51   $   2.14  
         
Diluted EPS:        
Net income  $   15,481   $   16,639   $   29,005   $   40,896  
                         
Diluted weighted average common shares:        
Weighted average common shares      19,162,049       19,096,718       19,156,250       19,077,328  
Stock options and performance shares     65,911       88,266       71,747       101,565  
Diluted weighted average common shares     19,227,960       19,184,984       19,227,997       19,178,893  
         
Diluted earnings per  share $   0.81   $   0.87   $   1.51   $   2.13  



AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
     
  June 30, December 31,
    2017     2016
  (unaudited)  
Assets    
Investments   $   1,120,630   $   1,084,474
Cash and cash equivalents       53,967       58,936
Amounts recoverable from reinsurers      84,147       83,666
Premiums receivable, net      190,646       183,005
Deferred income taxes       31,943       33,811
Deferred policy acquisition costs       20,882       19,300
Other assets       57,272       55,664
  $   1,559,487   $   1,518,856
           
Liabilities and Shareholders’ Equity    
Liabilities:    
Reserves for loss and loss adjustment expenses  $   749,759   $   742,776
Unearned premiums       165,895       162,028
Insurance-related assessments       31,801       31,742
Other liabilities      130,640       126,160
     
Shareholders’ equity       481,392       456,150
Total liabilities and shareholders’ equity  $   1,559,487   $   1,518,856


Contact:	
                    Neal A Fuller, EVP & CFO
                    AMERISAFE, Inc.
                    337-463-9052
                    

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