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AMERISAFE Announces 2016 Second Quarter Results

DERIDDER, La., July 28, 2016 (GLOBE NEWSWIRE) -- AMERISAFE, Inc. (Nasdaq:AMSF), a specialty provider of hazardous workers’ compensation insurance, today announced results for the second quarter ended June 30, 2016.

Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 % Change
2016 2015 % Change
(in thousands, except per share data) (in thousands, except per share data)
Net premiums earned$90,728 $95,569 -5.1% $186,689 $190,356 -1.9%
Net investment income 6,201 6,890 -10.0% 12,245 13,723 -10.8%
Net realized gains (losses) on investments (pre-tax) 545 (2,617) NM 793 (2,558) NM
Net income 16,639 14,319 16.2% 40,896 29,449 38.9%
Diluted earnings per share$0.87 $0.75 16.0% $2.13 $1.54 38.3%
Operating net income 16,285 16,020 1.7% 40,381 31,112 29.8%
Operating earnings per share$0.85 $0.84 1.2% $2.11 $1.63 29.4%
Book value per share$25.83 $24.87 3.9% $25.83 $24.87 3.9%
Net combined ratio 80.4% 83.6% 75.5% 84.2%
Return on average equity 13.7% 12.3% 17.2% 12.8%

G. Janelle Frost, President and Chief Executive Officer, said, “The workers’ compensation market is increasingly competitive. Our industry was profitable in 2015 which has spurred interest for companies which previously de-emphasized workers’ compensation. AMERISAFE remains unwavering both in our disciplined underwriting focus on our market niche and in producing consistent, superior results. This quarter’s combined ratio of 80.4% is a result of that commitment.”

Insurance Results

Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 % Change 2016 2015 % Change
(in thousands) (in thousands)
Gross premiums written $ 103,224 $ 106,022 -2.6% $ 203,606 $ 206,811 -1.5%
Net premiums earned 90,728 95,569 -5.1% 186,689 190,356 -1.9%
Loss and loss adjustment expenses incurred 49,171 57,304 -14.2% 95,887 117,310 -18.3%
Underwriting and certain other operating costs, commissions, salaries and benefits 22,561 22,082 2.2% 42,695 42,452 0.6%
Policyholder dividends 1,216 438 NM 2,306 653 NM
Underwriting profit (pre-tax)$ 17,780 $ 15,745 12.9% $ 45,801 $ 29,941 53.0%
Insurance Ratios:
Current accident year loss ratio 67.9% 69.8% 67.9% 69.8%
Prior accident year loss ratio -13.7% -9.8% -16.5% -8.2%
Net loss ratio 54.2% 60.0% 51.4% 61.6%
Net underwriting expense ratio 24.9% 23.1% 22.9% 22.3%
Net dividend ratio 1.3% 0.5% 1.2% 0.3%
Net combined ratio 80.4% 83.6% 75.5% 84.2%

  • Gross premiums written in the quarter decreased by $2.8 million, or 2.6% due to lower payroll audits of $3.0 million, offset in part by positive premium growth for voluntary policies. Payroll audits and related premium adjustments increased premiums written by $1.5 million in the second quarter of 2016, compared with $4.5 million in the second quarter of 2015.
  • Voluntary premium for policies written during the quarter ended June 30, 2016 increased 1.1% compared with the second quarter of 2015.
  • The current accident year loss ratio for the second quarter was 67.9%, a decrease of 1.9 percentage points from 69.8% in the second quarter of 2015. During the quarter, the Company experienced favorable loss development for prior accident years which reduced loss and loss adjustment expenses by $12.4 million, mostly attributable to accident years 2014, 2013 and accident years 2009 and prior. These results reflect improved trends for both closing claims and claims severity and were driven by favorable case reserve development on claims that were closed during the quarter.
  • For the quarter ended June 30, 2016, the underwriting expense ratio was 24.9% compared to 23.1% in the same quarter in 2015. The increase in the quarter was due to lower earned premiums as well as higher bad debt and compensation expense compared with last year’s second quarter.
  • The effective tax rate for the quarter ended June 30, 2016 was 32.4% compared with 28.8% for the second quarter of 2015. The increase in the tax rate resulted from a higher proportion of underwriting income to tax-exempt income relative to the second quarter of 2015.

Investment Results

Three Months Ended Six Months Ended
June 30, June 30,
2016 2015 % Change 2016 2015 % Change
(in thousands) (in thousands)
Net investment income $6,201 $6,890 -10.0% $12,245 $13,723 -10.8%
Net realized gains (losses) on investments (pre-tax) 545 (2,617) NM 793 (2,558) NM
Pre-tax investment yield 2.1% 2.4% 2.1% 2.5%
Tax-equivalent yield (1) 3.3% 3.6% 3.3% 3.6%
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(1) The tax equivalent yield is calculated using the effective interest rate and a 35% marginal tax rate.

  • Net investment income for the quarter ending June 30, 2016, declined 10.0% to $6.2 million from $6.9 million in the second quarter of 2015, largely due to the decline in value of an investment in a limited partnership hedge fund where the change in value is recorded in investment income each quarter.
  • As of June 30, 2016, the carrying and fair 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 $0.18 per share on June 24, 2016. On July 26, 2016 the Company’s Board of Directors declared a quarterly cash dividend of $0.18 per share, payable on September 23, 2016 to shareholders of record as of September 9, 2016.

During the quarter, no shares were repurchased under the Company’s share repurchase plan.

Supplemental Information

Three Months EndedSix Months Ended
June 30,June 30,
2016 2015 2016 2015
(in thousands, except share and per share data)
Net income $16,639 $14,319 $40,896 $29,449
Less: Net realized gains (losses) on investments 545 (2,617) 793 (2,558)
Tax effect (1) (191) 916 (278) 895
Operating net income (2) $ 16,285 $ 16,020 $ 40,381 $ 31,112
Average shareholders’ equity (3) $487,350 $467,226 $474,964 $459,883
Less: Average other comprehensive income 6,845 2,840 5,448 2,431
Average adjusted shareholders’ equity$ 480,505 $ 464,386 $ 469,516 $ 457,452
Diluted weighted average common shares 19,184,984 19,080,065 19,178,893 19,069,949
Return on average equity (4) 13.7% 12.3% 17.2% 12.8%
Operating return on average adjusted equity (2) 13.6% 13.8% 17.2% 13.6%
Diluted earnings per share$0.87 $0.75 $2.13 $1.54
Operating earnings per share (2) $0.85 $0.84 $2.11 $1.63
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(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 Friday July 29, 2016, 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 5, 2016. To access the replay, dial 855-859-2056 or 404-537-3406 and use the pass code 40448258#.

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, agriculture and oil and gas. 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 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, 2015. 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,
2016 2015 2016 2015
(unaudited)(unaudited)
Revenues:
Gross premiums written $ 103,224 $ 106,022 $ 203,606 $ 206,811
Ceded premiums written (2,550) (2,549) (5,101) (5,085)
Net premiums written $ 100,674 $ 103,473 $ 198,505 $ 201,726
Net premiums earned $ 90,728 $ 95,569 $ 186,689 $ 190,356
Net investment income 6,201 6,890 12,245 13,723
Net realized gains (losses) on investments 545 (2,617) 793 (2,558)
Fee and other income 89 94 171 203
Total revenues 97,563 99,936 199,898 201,724
Expenses:
Loss and loss adjustment expenses incurred 49,171 57,304 95,887 117,310
Underwriting and other operating costs 22,561 22,082 42,695 42,452
Policyholder dividends 1,216 438 2,306 653
Total expenses 72,948 79,824 140,888 160,415
Income before taxes 24,615 20,112 59,010 41,309
Income tax expense 7,976 5,793 18,114 11,860
Net income $ 16,639 $ 14,319 $ 40,896 $ 29,449



AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Statements of Income (cont.)
(in thousands, except per share amounts)
Three Months EndedSix Months Ended
June 30,June 30,
2016 2015 2016 2015
(unaudited)(unaudited)
Basic EPS:
Net income $ 16,639 $ 14,319 $ 40,896 $ 29,449
Basic weighted average common shares 19,096,718 18,917,229 19,077,328 18,882,693
Basic earnings per share $ 0.87 $ 0.76 $ 2.14 $ 1.56
Diluted EPS:
Net income $ 16,639 $ 14,319 $ 40,896 $ 29,449
Diluted weighted average common shares
Weighted average common shares 19,096,718 18,917,229 19,077,328 18,882,693
Stock options and performance shares 88,266 162,836 101,565 187,256
Diluted weighted average common shares 19,184,984 19,080,065 19,178,893 19,069,949
Diluted earnings per share $ 0.87 $ 0.75 $ 2.13 $ 1.54

AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
June 30,December 31,
2016 2015
(unaudited)
Assets
Investments $ 1,108,909 $ 1,045,152
Cash and cash equivalents 70,155 69,481
Amounts recoverable from reinsurers 94,256 91,077
Premiums receivable, net 208,235 185,364
Deferred income taxes 26,531 29,905
Deferred policy acquisition costs 20,675 20,412
Other assets 66,008 60,654
$ 1,594,769 $ 1,502,045
Liabilities and Shareholders’ Equity
Liabilities:
Reserves for loss and loss adjustment expenses $ 725,549 $ 718,033
Unearned premiums 179,800 167,983
Insurance-related assessments 36,478 32,329
Other liabilities 156,995 129,719
Shareholders’ equity 495,947 453,981
Total liabilities and shareholders’ equity $ 1,594,769 $ 1,502,045

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

Source:AMERISAFE, Inc.