AMERISAFE Announces 2015 Third Quarter Results

by | Oct 28, 2015 | Globe Newswire

Net Income Grows 33.1%

Declares Extraordinary Dividend of $3.00 per share

DERIDDER, La., Oct. 28, 2015 (GLOBE NEWSWIRE) — AMERISAFE, Inc. (Nasdaq:AMSF), a specialty provider of hazardous workers’ compensation insurance, today announced results for the third quarter ended September 30, 2015.

                 
  Three Months Ended     Nine Months Ended    
  September 30,     September 30,    
    2015     2014   % Change   2015     2014   % Change  
  (in thousands, except per share data)  
Net premiums earned $   90,504   $   95,928     -5.7 %   $   280,860   $  278,677     0.8 %  
Net investment income     6,923       6,495     6.6 %       20,646       20,048     3.0 %  
Net realized gains (losses) on                
  investments  (pre-tax)      40       (152 ) NM       (2,518 )     181   NM  
Net income      17,940       13,479     33.1 %       47,389       36,801     28.8 %  
Diluted earnings per share   $   0.94   $   0.71     32.4 %   $   2.48   $   1.95     27.2 %  
Operating net income      17,914       13,578     31.9 %       49,026       36,683     33.6 %  
Operating earnings per share   $   0.94   $   0.72     30.6 %   $   2.57   $   1.94     32.5 %  
Book value per share  $   25.69   $   23.85     7.7 %   $   25.69   $   23.85     7.7 %  
Net combined ratio    79.1 %   86.4 %       82.6 %   89.5 %    
Return on average equity    14.9 %   12.2 %       13.5 %   11.3 %    
                 

Commenting on these results, Allen Bradley, AMERISAFE’s Executive Chairman, stated, “In the quarter, the workers’ compensation market continued to gradually transition to a more competitive environment.  Pricing is decreasing very slowly driven largely by lower loss costs as opposed to aggressive carrier discounting.  A continuing economic recovery has increased exposures and premium which largely has offset lower loss costs and rates.  On the claims side, both frequency and severity appear to be muted at this time.”

Insurance Results

               
  Three Months Ended   Nine Months Ended    
  September 30,   September 30,    
    2015     2014   % Change   2015     2014   % Change  
  (in thousands)  
               
Gross premiums written  $   91,061   $   93,962     -3.1 % $   297,872   $   303,485     -1.8 %  
Net premiums earned      90,504       95,928     -5.7 %     280,860       278,677     0.8 %  
Loss and loss adjustment expenses incurred      48,942       61,822     -20.8 %     166,252       185,570     -10.4 %  
Underwriting and certain other operating costs,             
  commissions, salaries and benefits     22,267       21,027     5.9 %     64,719       63,410     2.1 %  
Policyholder dividends      371       139   NM     1,024       340   NM  
Underwriting profit (pre-tax)     18,924       12,940     46.2 %     48,865       29,357     66.5 %  
               
Insurance Ratios:              
Current accident year loss ratio    69.8 %   71.5 %     69.8 %   71.5 %    
Prior accident year loss ratio    -15.7 %   -7.1 %     -10.6 %   -4.9 %    
Net loss ratio    54.1 %   64.4 %     59.2 %   66.6 %    
Net underwriting expense ratio    24.6 %   21.9 %     23.0 %   22.8 %    
Net dividend ratio    0.4 %   0.1 %     0.4 %   0.1 %    
Net combined ratio    79.1 %   86.4 %     82.6 %   89.5 %    
               
  • Gross premiums written in the quarter decreased by $2.9 million, or 3.1%.  Premiums on voluntary policies written during the quarter increased $2.0 million, or 2.4%. Payroll audits and related premium adjustments had no impact on premiums in the third quarter of 2015, compared with a $4.6 million positive impact in the third quarter of 2014.  
  • Net premiums earned in the quarter decreased by $5.4 million, or 5.7%.  The decrease was attributable to the decline in premium audits and an increase in ceded premiums of $1.8 million due to ceded losses during the quarter on our reinsurance treaty.   
  • In the quarter, the Company experienced favorable loss development for prior accident years which reduced loss and loss adjustment expenses by $14.2 million, mostly attributable to accident years 2009, 2010, 2012, and 2013.  Our calendar year loss ratio was 54.1%, a 10.3 percentage point improvement from the third quarter of 2014, reflecting improved trends on frequency and favorable case reserve development.
  • For the quarter ended September 30, 2015, the underwriting expense ratio was 2.7 percentage points higher than the prior year.  The increase was primarily due to lower reinsurance contingent profit commissions, which typically act as an offset to expenses.
  • The effective tax rate for the three months ended September 30, 2015 was 30.7% compared to 30.3% for the third quarter of 2014.  The increase was driven by the mix of improved underwriting profitability and tax exempt investment income. 

G. Janelle Frost, President and Chief Executive Officer, said, “AMERISAFE reported strong earnings this quarter resulting from our commitment to our underwriting discipline.  We believe our management of pricing through changes in the market, coupled with our claims management, benefited both our policyholders and our shareholders.  Policyholders benefited from lower pricing while receiving the same exceptional service we are known for.  At the same time, we have underwritten profitable business, which over a period of time, has allowed our Board of Directors to return capital to our shareholders.”

Investment Results

 

               
  Three Months Ended   Nine Months Ended    
  September 30,   September 30,    
    2015     2014   % Change   2015     2014   % Change  
  (in thousands)  
Net investment income  $   6,923   $   6,495     6.6 % $   20,646   $   20,048     3.0 %  
Net realized gains (losses) on               
  investments (pre-tax)      40       (152 ) NM     (2,518 )     181   NM  
Pre-tax investment yield    2.4 %   2.4 %     2.4 %   2.6 %    
Tax-equivalent yield (1)   3.5 %   3.5 %     3.5 %   3.5 %    
________________________________            
               
(1)  The tax equivalent yield is calculated using the effective interest rate and a 35% marginal tax rate.   
               
  • As of September 30, 2015, the carrying and fair value of AMERISAFE’s investment portfolio, including cash and cash equivalents, was $1.1 billion.  Average invested assets increased 5.5% from September 30, 2014. 

Capital Management

The Company paid a regular quarterly cash dividend of $0.15 per share on September 25, 2015.  On October 27, 2015, the Company’s Board of Directors declared a quarterly cash dividend of $0.15 per share payable on December 28, 2015 to shareholders of record as of December 14, 2015. The Board intends to consider the payment of a regular cash dividend each calendar quarter.

On October 27, 2015 the Company’s Board of Directors declared an extraordinary dividend of $3.00 per share payable on December 28, 2015 to shareholders of record on December 14, 2015.

During the quarter, no shares were repurchased under the share repurchase plan.  On October 27, 2015, the Company’s Board of Directors reauthorized the share repurchase program with a limit of $25.0 million.  Unless reauthorized, the program will expire on December 31, 2016. 

Supplemental Information

  Three Months Ended Nine Months Ended
  September 30, September 30,
    2015     2014     2015     2014  
  (in thousands, except share and per share data)
         
Net income  $   17,940   $   13,479   $   47,389   $   36,801  
Less: Net realized capital gains (losses)     40       (152 )     (2,518 )     181  
Tax effect (1)      (14 )     53       881       (63 )
Operating net income (2)       17,914       13,578       49,026       36,683  
         
Average shareholders’ equity (3)      481,687       441,984       468,772       432,649  
Less: Average other comprehensive income (loss)      2,706       2,020       3,085       (1,109 )
Average adjusted shareholders’ equity      478,981       439,964       465,687       433,758  
         
Diluted weighted average common shares       19,096,259       18,929,777       19,088,140       18,905,880  
         
Return on average equity (4)    14.9 %   12.2 %   13.5 %   11.3 %
Operating return on average adjusted equity (2)   15.0 %   12.3 %   14.0 %   11.3 %
Diluted earnings per common share  $   0.94   $   0.71   $   2.48   $   1.95  
Operating earnings per common share (2)  $   0.94   $   0.72   $   2.57   $   1.94  
________________________________        
         
(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 October 29, 2015, at 10:30 a.m. Eastern Time to discuss the results for the quarter and 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 November 6, 2015.  To access the replay, dial 855-859-2056 or 404-537-3406 and use the pass code 51821708.

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, manufacturing, oil and gas and agriculture.  AMERISAFE actively markets workers’ compensation insurance in 30 states and the District of Columbia. 

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 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, 2014.  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 Nine Months Ended  
  September 30, September 30,  
    2015     2014     2015     2014    
  (unaudited) (unaudited)  
Revenues:          
Gross premiums written  $   91,061   $   93,962   $   297,872   $   303,485    
Ceded premiums written      (4,232 )     (3,823 )     (9,317 )     (10,655 )  
Net premiums written $   86,829   $   90,139   $   288,555   $   292,830    
           
Net premiums earned  $   90,504   $   95,928   $   280,860   $   278,677    
Net investment income      6,923       6,495       20,646       20,048    
Net realized gains (losses) on investments     40       (152 )     (2,518 )     181    
Fee and other income      3       65       206       227    
Total revenues      97,470       102,336       299,194       299,133    
           
Expenses:          
Loss and loss adjustment expenses incurred      48,942       61,822       166,252       185,570    
Underwriting and other operating costs      22,267       21,027       64,719       63,410    
Policyholder dividends      371       139       1,024       340    
Total expenses      71,580       82,988       231,995       249,320    
           
Income before taxes      25,890       19,348       67,199       49,813    
Income tax expense      7,950       5,869       19,810       13,012    
Net income  $   17,940   $   13,479   $   47,389   $   36,801    
           
           
AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Statements of Income (cont.)
(in thousands, except per share amounts)		  
           
           
  Three Months Ended Nine Months Ended  
  September 30, September 30,  
    2015     2014     2015     2014    
  (unaudited) (unaudited)  
Basic EPS:      
Net income  $   17,940   $   13,479   $   47,389   $   36,801    
           
Basic weighted average common shares      18,968,718       18,676,033       18,911,675       18,603,227    
Basic earnings per share  $   0.95   $   0.72   $   2.51   $   1.98    
           
Diluted EPS:          
Net income      17,940       13,479       47,389       36,801    
           
Diluted weighted average common shares:          
  Weighted average common shares      18,968,718       18,676,033       18,911,675       18,603,227    
  Stock options and performance shares     127,541       253,744       176,465       302,653    
  Diluted weighted average common shares      19,096,259       18,929,777       19,088,140       18,905,880    
           
Diluted earnings per common share  $   0.94   $   0.71   $   2.48   $   1.95    
           

 

AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
     
     
  September 30, December 31,
    2015     2014  
  (unaudited)  
Assets    
Investments  $   1,048,930   $   1,016,333  
Cash and cash equivalents       99,899       90,956  
Amounts recoverable from reinsurers      91,092       85,888  
Premiums receivable, net       194,086       178,917  
Deferred income taxes       31,688       31,231  
Deferred policy acquisition costs       21,089       19,649  
Other assets       65,756       34,246  
      1,552,540       1,457,220  
     
Liabilities and Shareholders’ Equity    
Liabilities:    
Reserves for loss and loss adjustment expenses  $   720,710   $   687,602  
Unearned premiums       176,270       168,576  
Insurance-related assessments       33,531       29,315  
Other liabilities       131,453       124,759  
     
Shareholders’ equity       490,576       446,968  
Total liabilities and shareholders’ equity   $   1,552,540   $   1,457,220  
      
CONTACT: Neal A Fuller, EVP & CFO
AMERISAFE, Inc.
337-463-9052