• AMERISAFE Announces 2018 Second Quarter Results

    Source: Nasdaq GlobeNewswire / 01 Aug 2018 16:30:30   America/New_York

    DERIDDER, La., Aug. 01, 2018 (GLOBE NEWSWIRE) -- AMERISAFE, Inc. (Nasdaq:AMSF), a specialty provider of hazardous workers’ compensation insurance, today announced results for the second quarter ended June 30, 2018. 

            
     Three Months Ended  Six Months Ended 
     June 30,  June 30, 
      2018    2017    % Change    2018   2017
       % Change 
     (in thousands, except per
    share data)
      (in thousands, except per
    share data)
       
    Net premiums earned$  88,995  $  82,749  7.5%  $  176,305  $  173,661  1.5% 
    Net investment income   7,303     7,471  -2.2%     14,512     14,181  2.3% 
    Net realized losses on investments, pretax   (1,111)    (388) NM     (1,142)    (569) NM 
    Net income   16,956     15,481  9.5%     33,125     29,005  14.2% 
    Diluted earnings per share$  0.88  $  0.81  8.6%  $  1.72  $  1.51  13.9% 
    Operating net income   17,774     15,733  13.0%     34,275     29,375  16.7% 
    Operating earnings per share$  0.92  $  0.82  12.2%  $  1.78  $  1.53  16.3% 
    Book value per share$  23.11  $  25.02  -7.6%  $  23.11  $  25.02  -7.6% 
    Net combined ratio 83.6%   81.9%    84.7%   84.4%  
    Return on average equity 15.5%   13.1%    15.2%   12.4%  
            

    G. Janelle Frost, President and Chief Executive Officer, commented, “Encouraged by reporting of the third straight year of underwriting profitability for the industry, competition in the workers’ compensation market remained aggressive in the second quarter. However, AMERISAFE’s niche focus provided some protection, and we responded to market conditions with a slight decrease in pricing. Our responsiveness resulted in record policy retention, which aided in offsetting premium decreases from loss costs declines.  In addition, strong payroll audits and favorable case reserve development were essential to underwriting profitability, which resulted in an 83.6% combined ratio for the quarter.”     

           
    INSURANCE RESULTS 
           
     Three Months Ended Six Months Ended 
     June 30, June 30, 
      2018  2017 % Change     2018  2017 % Change 
     (in thousands)     (in thousands)  
           
    Gross premiums written$93,702 $87,039 7.7%    $191,044 $182,117 4.9% 
    Net premiums earned 88,995  82,749 7.5%     176,305  173,661 1.5% 
    Loss and loss adjustment expenses incurred 52,076  46,428 12.2%     105,238  102,644 2.5% 
    Underwriting and certain other operating costs,      
    commissions, salaries and benefits 21,282  20,183 5.4%     41,548  41,405 0.3% 
    Policyholder dividends 1,092  1,163 -6.1%     2,425  2,534 -4.3% 
    Underwriting profit (pre-tax)$14,545 $14,975 -2.9%    $27,094 $27,078 0.1% 
                        
    Insurance Ratios:                   
    Current accident year loss ratio 71.5%  69.0%   71.5%  69.0%  
    Prior accident year loss ratio -13.0%  -12.9%   -11.8%  -9.9%  
    Net loss ratio 58.5%  56.1%   59.7%  59.1%  
    Net underwriting expense ratio 23.9%  24.4%   23.6%  23.8%  
    Net dividend ratio 1.2%  1.4%   1.4%  1.5%  
    Net combined ratio 83.6%  81.9%   84.7%  84.4%  
                        
    • Gross premiums written in the quarter increased by $6.7 million, or 7.7%, due to higher payroll audits and related premium adjustments offset by lower voluntary premiums written.

    • Voluntary premium for policies written during the quarter ended June 30, 2018 decreased by $0.4 million, or 0.5%, compared with the second quarter of 2017.

    • Payroll audits and related premium adjustments increased premiums written by $3.8 million in the second quarter of 2018, compared to a decrease in premiums written of $2.6 million in the second quarter of 2017.  These adjustments led to the 7.7% increase in gross premiums written in the quarter.

    • The current accident year loss ratio for the second quarter was 71.5%, unchanged from the first quarter of 2018, and an increase of 1.0 percentage point from the 70.5% ratio for the full year 2017. During the quarter, the Company experienced favorable loss development for prior accident years, which reduced loss and loss adjustment expenses by $11.6 million, attributable to accident years 2016, 2015, 2013 and 2012 and prior.   These results largely reflect favorable case reserve development on claims during the quarter.

    • For the quarter ended June 30, 2018, the underwriting expense ratio was 23.9% compared with 24.4% in the same quarter in 2017. The decrease in the ratio in the quarter was due to higher net earned premiums compared with last year’s second quarter.   Underwriting and other expenses were $1.1 million higher in the second quarter of 2018 compared to 2017, largely due to higher commission expense and premium taxes.

    • The effective tax rate for the quarter ended June 30, 2018 was 19.0% compared with 30.1% for the second quarter of 2017. The decrease is largely due to the new federal corporate tax rate of 21% on underwriting profits and taxable bond income. 
                     
    INVESTMENT RESULTS
                     
     Three Months Ended
       Six Months Ended
       
     June 30,
       June 30,
       
      2018  2017 % Change  2018  2017 %
    Change
     
     (in thousands)
       (in thousands)
       
    Net investment income$  7,303 $  7,471 -2.2% $  14,512 $  14,181 2.3% 
    Net realized losses on                 
    investments (pre-tax)   (1,111)   (388)NM    (1,142)   (569)NM 
    Net unrealized gains (losses) on                 
    equity securities (pre-tax)   76    -  NM    (314)   -  NM 
    Pre-tax investment yield 2.5%  2.6%    2.4%  2.4%   
    Tax-equivalent yield (1) 2.9%  3.3%    2.9%  3.3%   
                     
                     

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

    • Net investment income for the quarter ended June 30, 2018, decreased 2.2% to $7.3 million from $7.5 million in the second quarter of 2017, largely due to the increase in value of an investment in a limited partnership hedge fund in last year’s second quarter.

    • As of June 30, 2018, 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 $0.22 per share on June 22, 2018.  On July 31, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.22 per share, payable on September 21, 2018 to shareholders of record as of September 7, 2018.

    Book value per share at June 30, 2018 was $23.11, an increase of 4.6% from $22.10 at December 31, 2017. 

         
    SUPPLEMENTAL INFORMATION
         
     Three Months EndedSix Months Ended
     June 30,June 30,
      2018   2017   2018   2017 
     (in thousands, except share and per share data)
         
    Net income$16,956  $15,481  $33,125  $29,005 
    Less:               
    Net realized losses on investments (1,111)  (388)  (1,142)  (569)
    Net unrealized gains (losses) on equity securities 76   -   (314)  - 
    Tax effect (1) 217   136   306   199 
    Operating net income (2)$17,774  $15,733  $34,275  $29,375 
                    
    Average shareholders’ equity (3)$438,730  $474,247  $435,407  $468,771 
    Less:               
    Avg. accumulated other comprehensive income (loss) (2,160)  1,438   765   962 
    Average adjusted shareholders’ equity$440,890  $472,809  $434,642  $467,809 
                    
    Diluted weighted average common shares 19,266,735   19,227,960   19,275,883   19,227,997 
                    
    Return on average equity (4) 15.5%   13.1%   15.2%   12.4% 
    Operating return on average adjusted equity (2) 16.1%   13.3%   15.8%   12.6% 
    Diluted earnings per share$0.88  $0.81  $1.72  $1.51 
    Operating earnings per share (2)$0.92  $0.82  $1.78  $1.53 
                    
                    

    (1) The tax effect of net realized losses on investments and net unrealized gains (losses) on equity securities is calculated with an effective tax rate of 21% for 2018 and 35% for 2017.

    (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 August 2, 2018, 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 10, 2018. To access the replay, dial 855-859-2056 or 404-537-3406 and use the pass code 5490189#.

    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, 2017. 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 EndedSix Months Ended
     June 30,June 30,
      2018   2017   2018   2017 
     (unaudited)(unaudited)
    Revenues:               
    Gross premiums written$  93,702  $  87,039  $  191,044  $  182,117 
    Ceded premiums written   (2,369)    (2,198)    (4,699)    (4,589)
    Net premiums written$  91,333  $  84,841  $  186,345  $  177,528 
                    
    Net premiums earned$  88,995  $  82,749  $  176,305  $  173,661 
    Net investment income   7,303     7,471     14,512     14,181 
    Net realized losses on investments   (1,111)    (388)    (1,142)    (569)
    Net unrealized gains (losses) on equity securities   76     -      (314)    -  
    Fee and other income   117     93     194     194 
    Total revenues   95,380     89,925     189,555     187,467 
                    
    Expenses:               
    Loss and loss adjustment expenses incurred   52,076     46,428     105,238     102,644 
    Underwriting and other operating costs   21,282     20,183     41,548     41,405 
    Policyholder dividends   1,092     1,163     2,425     2,534 
    Total expenses   74,450     67,774     149,211     146,583 
                    
    Income before taxes   20,930     22,151     40,344     40,884 
    Income tax expense   3,974     6,670     7,219     11,879 
    Net income$  16,956  $  15,481  $  33,125  $  29,005 
                    
                    
                    
    AMERISAFE, INC. AND SUBSIDIARIES
    Consolidated Statements of Income (cont.)
    (in thousands, except per share amounts) 
         
     Three Months EndedSix Months Ended
     June 30,June 30,
      2018   2017   2018   2017 
     (unaudited)(unaudited)
    Basic EPS:    
    Net income$  16,956  $  15,481  $  33,125  $  29,005 
                    
    Basic weighted average common shares  19,208,601    19,162,049    19,197,925    19,156,250 
    Basic earnings per share$  0.88  $  0.81  $  1.73  $  1.51 
         
    Diluted EPS:    
    Net income$  16,956  $  15,481  $  33,125  $  29,005 
                    
    Diluted weighted average common shares:               
      Weighted average common shares  19,208,601    19,162,049    19,197,925    19,156,250 
      Stock options and restricted stock   58,134     65,911     77,958     71,747 
      Diluted weighted average common shares  19,266,735    19,227,960    19,275,883    19,227,997 
                    
    Diluted earnings per  share$  0.88  $  0.81  $  1.72  $  1.51 
                    


        
    AMERISAFE, INC. AND SUBSIDIARIES
    Consolidated Balance Sheets
          
      June 30, December 31, 
      2018 2017 
      (unaudited)   
    Assets     
    Investments$1,167,040$1,130,314 
    Cash and cash equivalents 21,176 55,559 
    Amounts recoverable from reinsurers 98,961 90,133 
    Premiums receivable, net 189,892 174,234 
    Deferred income taxes 19,891 19,262 
    Deferred policy acquisition costs 21,601 20,251 
    Other assets 35,720 28,483 
     $1,554,281$1,518,236 
        
    Liabilities and Shareholders’ Equity   
    Liabilities:   
    Reserves for loss and loss adjustment expenses$783,601$771,845 
    Unearned premiums 167,310 157,270 
    Insurance-related assessments 30,070 28,246 
    Other liabilities 127,909 135,452 
        
    Shareholders’ equity 445,391 425,423 
    Total liabilities and shareholders’ equity$1,554,281$1,518,236 
        

    Contact:

    Neal A. Fuller, EVP & CFO
    AMERISAFE
    337.463.9052

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