AMERISAFE Announces 2016 Fourth Quarter and Year-End Results

2016 Net Income Grows 10.5%
Increases Regular Dividend 11.1%

DERIDDER, La., Feb. 22, 2017 (GLOBE NEWSWIRE) -- AMERISAFE, Inc. (Nasdaq:AMSF), a specialty provider of hazardous workers’ compensation insurance, today announced results for the fourth quarter and year ended December 31, 2016.

Three Months Ended Twelve Months Ended
December 31, December 31,
2016 2015 % Change 2016 2015 % Change
(in thousands, except per
share data)
(in thousands, except per
share data)
Net premiums earned $92,097 $95,034 -3.1% $368,704 $375,894 -1.9%
Net investment income 7,855 7,256 8.3% 28,106 27,902 0.7%
Net realized gains (losses) on
investments (pre-tax) (1,468) 24 NM (494) (2,494)NM
Net income 19,073 23,073 -17.3% 77,865 70,462 10.5%
Diluted earnings per share$0.99 $1.21 -18.2% $4.05 $3.69 9.8%
Operating net income 20,027 23,057 -13.1% 78,186 72,083 8.5%
Operating earnings per share$1.04 $1.20 -13.3% $4.07 $3.77 8.0%
Book value per share$23.72 $23.73 0.0% $23.72 $23.73 0.0%
Net combined ratio 76.8% 71.5% 77.0% 79.8%
Return on average equity 15.8% 19.5% 17.1% 15.6%

G. Janelle Frost, President and Chief Executive Officer commented, “Underwriting margins across the industry continued to be pressured this quarter as competition increased and rates decreased. We are at a point in the underwriting cycle where the choice to remain focused on underwriting margins and sustainability is essential to providing long-term returns to shareholders. AMERISAFE’s financial results this quarter are reflective of our focus over an extended period of time. Risk selection, appropriate product pricing and claims handling ultimately led to combined ratios of 76.8% this quarter and 77.0% for the year. Based on these results and our capital strength, AMERISAFE is well-positioned for the softening market cycle.”

Insurance Results

Three Months Ended
Twelve Months Ended
December 31,
December 31,
2016 2015 % Change 2016 2015 % Change
(in thousands)
(in thousands)
Gross premiums written$80,612 $88,657 -9.1% $373,055 $386,529 -3.5%
Net premiums earned 92,097 95,034 -3.1% 368,704 375,894 -1.9%
Loss and loss adjustment expenses incurred 52,618 48,321 8.9% 199,031 214,573 -7.2%
Underwriting and certain other operating costs,
commissions, salaries and benefits 17,135 19,394 -11.6% 80,594 84,113 -4.2%
Policyholder dividends 1,021 277 NM 4,216 1,301 NM
Underwriting profit (pre-tax)$21,323 $27,042 -21.1% $84,863 $75,907 11.8%
Insurance Ratios:
Current accident year loss ratio 67.9% 69.8% 67.9% 69.8%
Prior accident year loss ratio -10.8% -19.0% -13.9% -12.7%
Net loss ratio 57.1% 50.8% 54.0% 57.1%
Net underwriting expense ratio 18.6% 20.4% 21.9% 22.4%
Net dividend ratio 1.1% 0.3% 1.1% 0.3%
Net combined ratio 76.8% 71.5% 77.0% 79.8%

  • Voluntary premiums for policies written during the quarter ended December 31, 2016 decreased $5.6 million, or 6.8%, compared with the fourth quarter of 2015. This decrease was largely attributable to the loss of three large accounts in the fourth quarter totaling $4.7 million in estimated annual premium. For 2016, voluntary premiums written decreased 2.3%, compared with 2015.
  • Payroll audits and related premium adjustments increased premiums written by $1.2 million in the fourth quarter of 2016, compared with $3.3 million in the fourth quarter of 2015. For the full year, these premium adjustments totaled $8.0 million in 2016 compared with $12.2 million in 2015, a decrease of $4.2 million.
  • The current accident year loss ratio for the fourth quarter was 67.9%, unchanged from prior quarters in 2016, and a decrease of 1.9 percentage points from the fourth quarter of 2015. During the quarter, the Company experienced favorable loss development for prior accident years which reduced loss and loss adjustment expenses by $9.9 million, mostly attributable to accident years 2014, 2013, and 2012. In total, prior accident year development for the year ended December 31, 2016 resulted in favorable development of $51.3 million, compared with favorable development of $47.8 million in 2015. These results reflect improved trends for both closing claims and claims severity and were driven largely by favorable case reserve development on claims that were closed during the year.
  • For the quarter ended December 31, 2016, the underwriting expense ratio was 18.6% compared to 20.4% in the same quarter in 2015. The decrease was largely due to lower premium based assessments and premium taxes in the fourth quarter compared to the same quarter a year ago. For the year ended December 31, 2016, the underwriting expense ratio was 21.9%, a decrease compared with 22.4% in 2015.
  • The effective tax rate for the year ended December 31, 2016 was 31.0% compared with 30.2% for 2015. The increase in the tax rate was due to improvement in our underwriting margins which created a higher proportion of underwriting income to tax-exempt investment income relative to 2015.

Investment Results

Three Months Ended Twelve Months Ended
December 31, December 31,
2016 2015 % Change 2016 2015 % Change
(in thousands) (in thousands)
Net investment income$7,855 $7,256 8.3% $28,106 $27,902 0.7%
Net realized gains (losses) on
investments (pre-tax) (1,468) 24 NM (494) (2,494)NM
Pre-tax investment yield 2.7% 2.6% 2.5% 2.5%
Tax-equivalent yield (1) 3.2% 3.3% 3.2% 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 ending December 31, 2016, increased 8.3% to $7.9 million from $7.3 million in the fourth quarter of 2015, largely due to the increase in value of an investment in a limited partnership hedge fund where the change in value is recorded in investment income each quarter. For the full year 2016, net investment income was $28.1 million compared with $27.9 million for 2015.
  • Net realized losses for the quarter were $1.5 million compared to minimal gains in the fourth quarter of 2015. The Company sold certain securities at a loss to offset gains from earlier in the year and to achieve a tax benefit relating to expiring realized tax gains from 2013.
  • As of December 31, 2016, the carrying and fair value of AMERISAFE’s investment portfolio, including cash and cash equivalents, was $1.1 billion.

Capital Management
On February 21, 2017 the Company’s Board of Directors increased the regular quarterly dividend from $0.18 per share to $0.20 per share, an 11.1% increase, payable on March 24, 2017 to shareholders of record as of March 10, 2017.

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

Supplemental Information

Three Months EndedTwelve Months Ended
December 31,December 31,
2016 2015 2016 2015
(in thousands, except share and per share data)
Net income$19,073 $23,073 $77,865 $70,462
Less: Net realized gains (losses) on investments (1,468) 24 (494) (2,494)
Tax effect (1) 514 (8) 173 873
Operating net income (2)$20,027 $23,057 $78,186 $72,083
Average shareholders’ equity (3)$482,947 $472,279 $455,066 $450,475
Less: Average accumulated other comprehensive income 3,052 2,974 1,048 2,699
Average adjusted shareholders’ equity$479,895 $469,305 $454,018 $447,776
Diluted weighted average common shares 19,210,635 19,137,418 19,203,650 19,119,186
Return on average equity (4) 15.8% 19.5% 17.1% 15.6%
Operating return on average adjusted equity (2) 16.7% 19.7% 17.2% 16.1%
Diluted earnings per share$0.99 $1.21 $4.05 $3.69
Operating earnings per share (2)$1.04 $1.20 $4.07 $3.77
________________________________

(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 Thursday February 23, 2017, at 10:30 a.m. Eastern Time to discuss the results for the quarter and year, 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 March 3, 2017. To access the replay, dial 855-859-2056 or 404-537-3406 and use the pass code 57497526#.

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, 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 EndedTwelve Months Ended
December 31,December 31,
2016 2015 2016 2015
(unaudited)(unaudited)
Revenues:
Gross premiums written$ 80,612 $ 88,657 $ 373,055 $ 386,529
Ceded premiums written (2,261) (1,911) (10,307) (11,228)
Net premiums written $ 78,351 $ 86,746 $ 362,748 $ 375,301
Net premiums earned $ 92,097 $ 95,034 $ 368,704 $ 375,894
Net investment income 7,855 7,256 28,106 27,902
Net realized gains (losses) on investments (1,468) 24 (494) (2,494)
Loss on disposal of assets - (640) (1) (664)
Fee and other income 74 86 347 316
Total revenues 98,558 101,760 396,662 400,954
Expenses:
Loss and loss adjustment expenses incurred 52,618 48,321 199,031 214,573
Underwriting and other operating costs 17,135 19,394 80,594 84,113
Policyholder dividends 1,021 277 4,216 1,301
Total expenses 70,774 67,992 283,841 299,987
Income before taxes 27,784 33,768 112,821 100,967
Income tax expense 8,711 10,695 34,956 30,505
Net income $ 19,073 $ 23,073 $ 77,865 $ 70,462


AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Statements of Income (cont.)
(in thousands, except per share amounts)
Three Months EndedTwelve Months Ended
December 31,December 31,
2016 2015 2016 2015
(unaudited)(unaudited)
Basic EPS:
Net income$19,073 $23,073 $77,865 $70,462
Basic weighted average common shares 19,146,047 19,028,352 19,105,806 18,941,077
Basic earnings per share$1.00 $1.21 $4.08 $3.72
Diluted EPS:
Net income$19,073 $23,073 $77,865 $70,462
Diluted weighted average common shares:
Weighted average common shares 19,146,047 19,028,352 19,105,806 18,941,077
Stock options and performance shares 64,588 109,066 97,844 178,109
Diluted weighted average common shares 19,210,635 19,137,418 19,203,650 19,119,186
Diluted earnings per share$0.99 $1.21 $4.05 $3.69


AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
December 31, December 31,
2016 2015
(unaudited)
Assets
Investments $1,084,474 $1,045,152
Cash and cash equivalents 58,936 69,481
Amounts recoverable from reinsurers 83,666 91,077
Premiums receivable, net 183,005 185,364
Deferred income taxes 33,811 29,905
Deferred policy acquisition costs 19,300 20,412
Other assets 55,664 60,654
$1,518,856 $1,502,045
Liabilities and Shareholders’ Equity
Liabilities:
Reserves for loss and loss adjustment expenses$742,776 $718,033
Unearned premiums 162,028 167,983
Insurance-related assessments 31,742 32,329
Other liabilities 126,160 129,719
Shareholders’ equity 456,150 453,981
Total liabilities and shareholders’ equity $1,518,856 $1,502,045


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

Source:AMERISAFE, Inc.