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AMERISAFE Announces 2013 Third Quarter Results

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DERIDDER, La., Oct. 31, 2013 (GLOBE NEWSWIRE) -- AMERISAFE, Inc. (Nasdaq:AMSF), a specialty provider of hazardous workers' compensation insurance, today announced results for the third quarter ended September 30, 2013.

Summary of Results (dollars in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 % Change 2013 2012 % Change
Net premiums earned $81,596 $72,425 12.7% $243,288 $211,948 14.80%
Net investment income 6,947 6,801 2.1% $20,266 20,320 (0.3%)
Net realized gains (losses) on investments (654) 985 NM (1,921) 2,913 NM
Net income 9,699 7,121 36.2% 26,194 20,127 30.1%
Diluted earnings per share 0.52 0.38 36.8% 1.39 1.08 28.7%
Operating net income 10,124 6,481 56.2% 27,443 18,234 50.5%
Operating earnings per share 0.54 0.35 54.3% 1.47 0.98 50.0%
Book value per share 21.67 20.46 5.9% 21.67 20.46 5.9%
Net combined ratio 92.5% 98.5% 93.6% 99.4%
Return on average equity 9.8% 7.7% 8.9% 7.4%

Commenting on these results, Allen Bradley, AMERISAFE's Chairman and Chief Executive Officer, stated, "In line with our expectations, evidence of stressed balance sheets and a more challenging workers' compensation marketplace due to the weak pricing environment of prior years is beginning to surface. For us, the evidence represents an opportunity to expand our margins, our book of business and long term profitability for shareholders. We believe third quarter results reflect these attributes. With our focus on risk selection and pricing, AMERISAFE remains well positioned in a business that requires disciplined growth. As such, we remain confident in our ability to deliver attractive returns to our shareholders."

Insurance Results (in thousands)
Three Months Ended Nine Months Ended
September 30, % September 30, %
2013 2012 Change 2013 2012 Change
Gross Premium Written $86,137 $77,283 11.5% $281,075 $247,683 13.5%
Net Premium Earned 81,596 72,425 12.7% 243,288 211,948 14.8%
Loss & LAE 57,046 53,851 5.9% 169,860 162,414 4.6%
Underwriting & Other 18,472 16,495 12.0% 57,012 46,557 22.5%
Policyholder dividends 38 945 NM 980 1,659 NM
Underwriting profit (pre-tax) 6,040 1,134 NM 15,436 1,318 NM
Insurance Ratios:
Current accident year loss ratio 73.2% 76.5% 73.2% 76.5%
Prior accident year loss ratio (3.3%) (2.1%) (3.4%) 0.1%
Net loss ratio 69.9% 74.4% 69.8% 76.6%
Net underwriting expense ratio 22.6% 22.8% 23.4% 22.0%
Net dividend ratio 0.0% 1.3% 0.4% 0.8%
Net combined ratio 92.5% 98.5% 93.6% 99.4%

  • Gross premiums written continued to grow in the third quarter. Voluntary premiums written increased 14.3% in the quarter and 14.4% for the nine months ended September 30, 2013 compared to the same periods in 2012. Additionally, payroll audits and related premium adjustments for policies written in previous periods increased premiums $0.7 million in the third quarter and $10.4 million in the nine months ended September 30, 2013. In 2012, these premium adjustments grew premium $3.1 million in the third quarter and $13.0 million for the nine months ended September 30.
  • The current accident year loss ratio for the third quarter remained at 73.2%. During the quarter, the Company experienced favorable loss development, which reduced loss and loss adjustment expenses by $2.7 million, primarily attributable to accident years 2009 and prior.
  • For the third quarter, the underwriting expense ratio declined to 22.6% from 22.8% a year ago primarily driven by the growth in premium earned. For the nine months, the expense ratio rose to 23.4% compared to 22.0% for the same time period in 2012. The increase in the underwriting expense ratio during the nine-month period mainly resulted from higher premium taxes and premium based assessments.
  • The effective tax rate for the three and nine months ended September 30, 2013 was 22.1% and 23.4% compared to 20.9% and 17.7%, respectively, for the year ago periods. The increase resulted from a lower ratio of tax-free investment income to pre-tax income in 2013 compared to 2012.

President and Chief Operating Officer, Janelle Frost noted, "The combined ratio this quarter reflects our continued underwriting discipline and prudent approach to the market. Loss and loss adjustment expenses benefited from favorable development of prior accident years, and the current accident year ratio remained consistent with the first half of the year as frequency trends remained positive. Pricing also increased quarter over quarter which spurred top line growth of 11.5% percent. In addition, our expense ratio decreased in part due to management of operating costs at lower levels than growth in earned premium. In all, we are pleased with the operating results this quarter.

Investment Results (in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 % Change 2013 2012 % Change
Net investment income $6,947 $6,801 2.2% $20,266 $20,320 (0.3%)
Net realized gains (losses) on investments (pre-tax) (654) 985 NM (1,921) 2,913 NM
Pre-tax investment yield 2.9% 3.1% 2.9% 3.1%
Tax equivalent yield (1) 3.9% 4.5% 3.9% 4.5%
(1) The tax equivalent yield is calculated using the effective interest rate and a 35% marginal tax rate.

  • As of September 30, 2013, the carrying value of AMERISAFE's investment portfolio, including cash and cash equivalents, was $978.3 million and the fair value of the portfolio was $1.0 billion.

Capital Management

  • The Company paid its third consecutive quarterly dividend of $0.08 per share on September 27th, 2013. On October 28th, the Company's Board of Directors declared a quarterly cash dividend of $0.08 per share, payable on December 27th, 2013 to shareholders of record as of December 13th, 2013.
  • During the quarter, no shares were repurchased under the share repurchase plan. Since beginning this plan, the Company repurchased a total of 1,258,250 shares for $22.4 million, or an average per share price of $17.78. On October 28th, the Company's Board of Directors voted to extend the current authorization from December 31, 2013 to December 31, 2014 and increase the authorization from $24.4 million to $25.0 million.

Supplemental Information
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
Net income $9,699 $7,121 $26,194 $20,127
Less: Net realized capital gains (loss) (654) 985 (1,921) 2,913
Tax effect (1) 229 (345) 672 (1,020)
Operating net income (2) 10,124 6,481 27,443 18,234
Avg shareholders' equity (3) $396,614 $367,794 $390,967 $360,788
Less: Avg OCI (2,149) 3,390 154 3,165
Adjusted average shareholders' equity 398,763 364,404 390,813 357,623
Diluted weighted average common shares 18,758,346 18,580,083 18,730,729 18,583,079
Diluted earnings per common share $0.52 $0.38 $1.39 $1.08
Operating earnings per common share (2) $0.54 $0.35 $1.47 $0.98
Return on average equity (4) 9.8% 7.7% 8.9% 7.4%
Operating return on average equity (2) 10.2% 7.1% 9.4% 6.8%
(in thousands, except share and per share data)
(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 equity and operating earnings per share are non-GAAP financial measures. Management believes investor's 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 adjusted shareholders' equity.
(4) Return on average equity is calculated by dividing the annualized net incomeby the average shareholders' equity.

Conference Call Information

AMERISAFE has scheduled a conference call for November 1, 2013, 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 720-545-0027 at least 10 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 8, 2013. To access the replay, dial 855-859-2056 or 404-537-3406 and use the conference ID 77177695.

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 and will remain available for approximately 60 days 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 and agriculture among others. 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, 2012. 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.

AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
(unaudited) (unaudited)
Revenues:
Gross premiums written $86,137 $77,283 $281,075 $247,683
Ceded premiums written (4,519) (4,032) (13,576) (11,907)
Net premiums written $81,618 $73,251 $267,499 $235,776
Net premiums earned $81,596 $72,425 $243,288 $211,948
Net investment income 6,947 6,801 20,266 20,320
Net realized gains (losses) on investments (654) 985 (1,921) 2,913
Fee and other income 114 163 393 484
Total revenues 88,003 80,374 262,026 235,665
Expenses:
Loss and LAE 57,046 53,851 169,860 162,414
Underwriting & Other 18,472 16,495 57,012 46,557
Interest expense -- 80 -- 566
Policyholder dividends 38 945 980 1,659
Total expenses 75,556 71,371 227,852 211,196
Income before taxes 12,447 9,003 34,174 24,469
Income tax expense 2,748 1,882 7,980 4,342
Net income $9,699 $7,121 $26,194 $20,127
AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Statements of Income (cont.)
Three Months Ended Nine Months Ended
September 30, September 30,
2013 2012 2013 2012
(in thousands, except share and per share amounts)
Basic EPS:
Net income, as reported $9,699 $7,121 $26,194 $20,127
Less allocated income to unvested shares 27 6 74 12
Net income available to common shareholders $9,672 $7,115 $26,120 $20,115
Basic weighted average common shares 18,395,971 18,173,062 18,343,901 18,154,768
Basic earnings per common share $0.53 $0.39 $1.42 $1.11
Diluted EPS:
Net income available to common shareholders - diluted $9,673 $7,116 $26,122 $20,116
Diluted weighted average common shares:
Weighted average common shares 18,395,971 18,173,062 18,343,901 18,154,768
Stock options and performance shares 362,375 407,021 386,828 428,311
Diluted weighted average common shares 18,758,346 18,580,083 18,730,729 18,583,079
Diluted earnings per common share $0.52 $0.38 $1.39 $1.08
AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Balance Sheet
(in thousands)
September 30, December 31,
2013 2012
(unaudited)
Assets
Investments $861,516 $808,116
Cash and cash equivalents 116,778 92,676
Amounts recoverable from reinsurers 77,835 101,352
Premiums receivable, net 172,002 141,950
Deferred income taxes 34,672 29,521
Deferred policy acquisition costs 21,085 18,419
Other assets 28,671 28,912
Total Assets $1,312,559 $1,220,946
Liabilities and Shareholders' Equity
Liabilities:
Reserves for loss and loss adjustment expenses $609,042 $570,450
Unearned premiums 164,739 140,528
Insurance-related assessments 28,887 22,244
Other liabilities 109,179 106,502
Total shareholders' equity 400,712 381,222
Total liabilities and shareholders' equity $1,312,559 $1,220,946

CONTACT: Michael Grasher, EVP & CFO AMERISAFE, Inc. 337-463-9052

Source:AMERISAFE, Inc.