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AMERISAFE Announces 2014 Second Quarter Results

AMERISAFE, Inc. Logo

DERIDDER, La., July 30, 2014 (GLOBE NEWSWIRE) -- AMERISAFE, Inc. (Nasdaq:AMSF), a specialty provider of hazardous workers' compensation insurance, today announced results for the second quarter ended June 30, 2014.

Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 % Change 2014 2013 % Change
(in thousands, except per share data)
Net premiums earned $ 93,516 $ 81,983 14.1% $ 182,749 $ 161,692 13.0%
Net investment income 6,845 6,649 2.9% 13,553 13,319 1.8%
Net realized gains (losses) on investments (pre-tax) 232 (1,291) NM 333 (1,267) NM
Net income 12,773 7,644 67.1% 23,322 16,495 41.4%
Diluted earnings per share $ 0.68 $ 0.41 65.9% $ 1.23 $ 0.88 39.8%
Operating net income 12,622 8,483 48.8% 23,106 17,319 33.4%
Operating earnings per share $ 0.67 $ 0.45 48.9% $ 1.22 $ 0.93 31.2%
Book value per share $ 23.26 $ 21.29 9.3% $ 23.26 $ 21.29 9.3%
Net combined ratio 89.4% 93.8% 91.0% 94.2%
Return on average equity 11.9% 7.8% 10.9% 8.5%

Allen Bradley, AMERISAFE's Chairman and Chief Executive Officer, commented, "The workers' compensation market remains attractive in terms of pricing but lethargic in terms of exposure expansion in certain industries. We remain hopeful that employment in construction and other basic industries will accelerate in the remainder of the year."

Insurance Results

Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 % Change 2014 2013 % Change
(in thousands)
Gross premiums written $ 103,820 $ 95,815 8.4% $ 209,523 $ 194,938 7.5%
Net premiums earned 93,516 81,983 14.1% 182,749 161,692 13.0%
Loss and loss adjustment expenses incurred 62,463 56,813 9.9% 123,748 112,814 9.7%
Underwriting and certain other operating costs, commission and salaries and benefits 21,012 19,663 6.9% 42,383 38,540 10.0%
Policyholder dividends 88 388 NM 201 942 NM
Underwriting profit (pre-tax) $ 9,953 $ 5,119 94.4% $ 16,417 $ 9,396 74.7%
Insurance Ratios:
Current accident year loss ratio 71.5% 73.2% 71.5% 73.2%
Prior accident year loss ratio (4.7%) (3.9%) (3.8%) (3.4%)
Net loss ratio 66.8% 69.3% 67.7% 69.8%
Net underwriting expense ratio 22.5% 24.0% 23.2% 23.8%
Net dividend ratio 0.1% 0.5% 0.1% 0.6%
Net combined ratio 89.4% 93.8% 91.0% 94.2%

  • Voluntary premium for policies written during the quarter increased by 8.2% compared to the prior year quarter.
  • Gross premiums written in the quarter increased by $8.0 million due to a combination of the higher voluntary premium as well as positive payroll audits and related premium adjustments for policies written in previous periods. Payroll audits and related premium adjustments increased premiums written by $4.4 million in the second quarter of 2014.
  • In the quarter, the Company experienced favorable loss development for prior accident years which reduced loss and loss adjustment expenses by $4.4 million, primarily attributable to accident years 2010 and prior. Our calendar year loss ratio was 66.8%, a 2.5 percentage point improvement from the second quarter of 2013, reflecting improved pricing and favorable frequency trends.
  • For the quarter ended June 30, 2014, the underwriting expense ratio declined to 22.5%, 1.5 percentage points lower than the prior year, as compensation expenses drove controllable costs lower. Offsetting these benefits were higher insurance related assessments along with lower ceding commission and contingent profit commission accruals resulting from our 2014 reinsurance treaty.
  • The effective tax rate for the three months ended June 30, 2014 was 25.1% compared to 28.2% for the second quarter of 2013.

G. Janelle Frost, President and Chief Operating Officer, noted, "Favorable pricing and frequency trends continued this quarter resulting in an 89.4% combined ratio. Favorable prior year loss development and controlled fixed costs as premium grew also benefitted the results this quarter. These benefits were a direct result of our emphasis on claims management and prudent cost administration which are fundamental to the Amerisafe business model."

Investment Results

Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 % Change 2014 2013 % Change
(in thousands)
Net investment income $ 6,845 $ 6,649 2.9% $ 13,553 $ 13,319 1.8%
Net realized gains (losses) on investments (pre-tax) 232 (1,291) NM 333 (1,267) NM
Pre-tax investment yield 2.6% 2.9% 2.6% 2.9%
Tax equivalent yield (1) 3.7% 4.2% 3.7% 4.2%
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(1) The tax equivalent yield is calculated using the effective interest rate and a 35% marginal tax rate.

  • As of June 30, 2014, the carrying and fair value of AMERISAFE's investment portfolio, including cash and cash equivalents, was $1.1 billion.

Capital Management

During the quarter, the Company paid a regular quarterly cash dividend of $0.12 per share on June 26, 2014. On July 29, 2014, the Company's Board of Directors declared a quarterly cash dividend of $0.12 per share, payable on September 26, 2014 to shareholders of record as of September 12, 2014.

During the quarter, no shares were repurchased under the share repurchase plan. A $25.0 million authorization remains in place. Since beginning the plan, the Company has repurchased a total of 1,258,250 shares for $22.4 million for an average per share price of $17.78, including commissions.

Supplemental Information

Three Months Ended Six Months Ended
June 30, June 30,
2014 2013 2014 2013
(in thousands, except share and per share data)
Net income $ 12,773 $ 7,644 $ 23,322 $ 16,495
Less: Net realized capital gains (losses) 232 (1,291) 333 (1,267)
Tax effect (1) (81) 452 (117) 443
Operating net income (2) 12,622 8,483 23,106 17,319
Average shareholders' equity (3) 428,031 391,107 426,149 386,869
Less: Average other comprehensive income (loss) 453 404 (1,167) 677
Adjusted average shareholders' equity 427,578 390,703 427,316 386,192
Diluted weighted average common shares 18,894,885 18,712,299 18,885,384 18,713,776
Return on average equity (4) 11.9% 7.8% 10.9% 8.5%
Operating return on average equity (2) 11.8% 8.7% 10.8% 9.0%
Diluted earnings per common share $ 0.68 $ 0.41 $ 1.23 $ 0.88
Operating earnings per common share (2) $ 0.67 $ 0.45 $ 1.22 $ 0.93
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(1) The tax effect of net realized capital gains is calculated assuming an annual tax rate of 35% plus the change in valuation allowance for deferred taxes.

(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 31, 2014, 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 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 7, 2014. To access the replay, dial 855-859-2056 or 404-537-3406 and use the pass code 76701223.

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, 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, 2013. 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,
2014 2013 2014 2013
(unaudited) (unaudited)
Revenues:
Gross premiums written $ 103,820 $ 95,815 $ 209,523 $ 194,938
Ceded premiums written (3,493) (4,576) (6,832) (9,057)
Net premiums written $ 100,327 $ 91,239 $ 202,691 $ 185,881
Net premiums earned $ 93,516 $ 81,983 $ 182,749 $ 161,692
Net investment income 6,845 6,649 13,553 13,319
Net realized gains (losses) on investments 232 (1,291) 333 (1,267)
Fee and other income 31 170 162 279
Total revenues 100,624 87,511 196,797 174,023
Expenses:
Loss and loss adjustment expenses incurred 62,463 56,813 123,748 112,814
Underwriting and other operating costs 21,012 19,663 42,383 38,540
Policyholder dividends 88 388 201 942
Total expenses 83,563 76,864 166,332 152,296
Income before taxes 17,061 10,647 30,465 21,727
Income tax expense 4,288 3,003 7,143 5,232
Net income $ 12,773 $ 7,644 $ 23,322 $ 16,495
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,
2014 2013 2014 2013
(unaudited) (unaudited)
Basic EPS:
Net income $ 12,773 $ 7,644 $ 23,322 $ 16,495
Basic weighted average common shares 18,600,186 18,353,174 18,566,235 18,317,452
Basic earnings per share $ 0.69 $ 0.42 $ 1.26 $ 0.90
Diluted EPS:
Net income 12,773 7,619 23,322 16,455
Diluted weighted average common shares:
Weighted average common shares 18,600,186 18,353,174 18,566,235 18,317,452
Stock options and performance shares 294,699 359,125 319,149 396,324
Diluted weighted average common shares 18,894,885 18,712,299 18,885,384 18,713,776
Diluted earnings per common share $ 0.68 $ 0.41 $ 1.22 $ 0.88
AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
June 30, December 31,
2014 2013
(unaudited)
Assets
Investments $ 964,636 $ 878,775
Cash and cash equivalents 98,818 123,077
Amounts recoverable from reinsurers 85,512 75,326
Premiums receivable, net 205,113 171,579
Deferred income taxes 33,542 33,645
Deferred policy acquisition costs 21,809 19,171
Other assets 30,287 27,428
$ 1,439,717 $ 1,329,001
Liabilities and Shareholders' Equity
Liabilities:
Reserves for loss and loss adjustment expenses $ 657,276 $ 614,557
Unearned premiums 184,238 164,296
Insurance-related assessments 32,137 25,428
Other liabilities 130,582 107,906
Total shareholders' equity 435,484 416,814
Total liabilities and shareholders' equity $ 1,439,717 $ 1,329,001

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

Source:AMERISAFE, Inc.