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AMERISAFE Announces 2017 Second Quarter Results

DERIDDER, La., July 27, 2017 (GLOBE NEWSWIRE) -- AMERISAFE, Inc. (Nasdaq:AMSF), a specialty provider of hazardous workers’ compensation insurance, today announced results for the second quarter ended June 30, 2017.

Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 % Change
2017 2016 % Change
(in thousands, except per share data) (in thousands, except per share data)
Net premiums earned$ 82,749 $ 90,728 -8.8% $ 173,661 $ 186,689 -7.0%
Net investment income 7,471 6,201 20.5% 14,181 12,245 15.8%
Net realized gains (losses) on
investments (pre-tax) (388) 545 NM (569) 793 NM
Net income 15,481 16,639 -7.0% 29,005 40,896 -29.1%
Diluted earnings per share$ 0.81 $ 0.87 -6.9% $ 1.51 $ 2.13 -29.1%
Operating net income 15,733 16,285 -3.4% 29,375 40,381 -27.3%
Operating earnings per share$ 0.82 $ 0.85 -3.5% $ 1.53 $ 2.11 -27.5%
Book value per share$ 25.02 $ 25.83 -3.1% $ 25.02 $ 25.83 -3.1%
Net combined ratio 81.9% 80.4% 84.4% 75.5%
Return on average equity 13.1% 13.7% 12.4% 17.2%

G. Janelle Frost, President and Chief Executive Officer, stated, “AMERISAFE’s combined ratio of 81.9% in the second quarter was the result of our emphasis on risk selection with appropriate pricing and prudent reserving. Our focus has been consistent as competition intensified. In the second quarter, carriers sought out workers’ compensation premiums to offset deteriorating results in other commercial lines. At the same time, loss costs continued to decline. Such conditions are why AMERISAFE’s underwriting discipline is critical to providing returns to shareholders and long-term financial stability for our policyholders.”

Insurance Results

Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 % Change 2017 2016 % Change
(in thousands) (in thousands)
Gross premiums written$ 87,039 $ 103,224 -15.7% $ 182,117 $ 203,606 -10.6%
Net premiums earned 82,749 90,728 -8.8% 173,661 186,689 -7.0%
Loss and loss adjustment expenses incurred 46,428 49,171 -5.6% 102,644 95,887 7.0%
Underwriting and certain other operating costs,
commissions, salaries and benefits 20,183 22,561 -10.5% 41,405 42,695 -3.0%
Policyholder dividends 1,163 1,216 -4.4% 2,534 2,306 9.9%
Underwriting profit (pre-tax).$ 14,975 $ 17,780 -15.8% $ 27,078 $ 45,801 -40.9%
Insurance Ratios:
Current accident year loss ratio 69.0% 67.9% 69.0% 67.9%
Prior accident year loss ratio -12.9% -13.7% -9.9% -16.5%
Net loss ratio 56.1% 54.2% 59.1% 51.4%
Net underwriting expense ratio 24.4% 24.9% 23.8% 22.9%
Net dividend ratio 1.4% 1.3% 1.5% 1.2%
Net combined ratio 81.9% 80.4% 84.4% 75.5%

  • Gross premiums written in the quarter decreased by $16.2 million, or 15.7%, primarily due to lower voluntary premiums written and $4.1 million in lower payroll audits. Voluntary premium for policies written during the quarter ended June 30, 2017 declined by 11.6% compared with the second quarter of 2016.

  • Payroll audits and related premium adjustments decreased premiums written by $2.6 million in the second quarter of 2017, compared to an increase of $1.5 million in the second quarter of 2016.

  • The current accident year loss ratio for the second quarter was 69.0%, an increase of 1.1 percentage points from 67.9% in 2016. During the quarter, the Company experienced favorable loss development for prior accident years which reduced loss and loss adjustment expenses by $10.7 million, mostly attributable to accident years 2015, 2014 and 2013. These results reflect improved trends for both claims closing and severity of claims and by favorable case reserve development on claims that were closed during the quarter.

  • For the quarter ended June 30, 2017, the underwriting expense ratio was 24.4% compared to 24.9% in the same quarter in 2016. The decrease in the quarter was due to lower loss based assessments and lower commissions compared with last year’s second quarter.

  • The effective tax rate for the quarter ended June 30, 2017 was 30.1% compared with 32.4% for the second quarter of 2016. The decrease in the tax rate resulted from a lower proportion of underwriting income to tax-exempt income relative to the second quarter of 2016.

Investment Results

Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 % Change 2017 2016 % Change
(in thousands) (in thousands)
Net investment income$ 7,471 $ 6,201 20.5% $ 14,181 $ 12,245 15.8%
Net realized gains (losses) on
investments (pre-tax) (388) 545 NM (569) 793 NM
Pre-tax investment yield 2.6% 2.1% 2.4% 2.1%
Tax-equivalent yield (1) 3.3% 3.2% 3.3% 3.2%

(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 June 30, 2017, increased 20.5% to $7.5 million from $6.2 million in the second quarter of 2016, largely due to a significant decline in value of an investment in a limited partnership hedge fund in last year’s second quarter. The change in value of this investment is recorded in investment income each quarter.
  • As of June 30, 2017, 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 $0.20 per share on June 23, 2017. On July 25, 2017 the Company’s Board of Directors declared a quarterly cash dividend of $0.20 per share, payable on September 22, 2017 to shareholders of record as of September 8, 2017.

Book value per share at June 30, 2017 was $25.02, an increase of 5.5% from $23.72 as of December 31, 2016. During the quarter, no shares were repurchased under the Company’s share repurchase plan.

Supplemental Information

Three Months Ended Six Months Ended
June 30, June 30,
2017 2016 2017 2016
(in thousands, except share and per share data)
Net income $ 15,481 $ 16,639 $ 29,005 $ 40,896
Less: Net realized gains (losses) on investments . (388) 545 (569) 793
Tax effect (1) 136 (191) 199 (278)
Operating net income (2) $ 15,733 $ 16,285 $ 29,375 $ 40,381
Average shareholders’ equity (3) $ 474,247 $ 487,350 $ 468,771 $ 474,964
Less: Average accumulated other comprehensive income 1,438 6,845 962 5,448
Average adjusted shareholders’ equity $ 472,809 $ 480,505 $ 467,809 $ 469,516
Diluted weighted average common shares. 19,227,960 19,184,984 19,227,997 19,178,893
Return on average equity (4) 13.1% 13.7% 12.4% 17.2%
Operating return on average adjusted equity (2) 13.3% 13.6% 12.6% 17.2%
Diluted earnings per share $ 0.81 $ 0.87 $ 1.51 $ 2.13
Operating earnings per share (2) $ 0.82 $ 0.85 $ 1.53 $ 2.11

(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 July 28, 2017, 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 4, 2017. To access the replay, dial 855-859-2056 or 404-537-3406 and use the pass code 46153972#.

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, 2016. 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,
2017 2016 2017 2016
(unaudited)(unaudited)
Revenues:
Gross premiums written $ 87,039 $ 103,224 $ 182,117 $ 203,606
Ceded premiums written (2,198) (2,550) (4,589) (5,101)
Net premiums written $ 84,841 $ 100,674 $ 177,528 $ 198,505
Net premiums earned $ 82,749 $ 90,728 $ 173,661 $ 186,689
Net investment income 7,471 6,201 14,181 12,245
Net realized gains (losses) on investments (388) 545 (569) 793
Fee and other income 93 89 194 171
Total revenues 89,925 97,563 187,467 199,898
Expenses:
Loss and loss adjustment expenses incurred 46,428 49,171 102,644 95,887
Underwriting and other operating costs 20,183 22,561 41,405 42,695
Policyholder dividends 1,163 1,216 2,534 2,306
Total expenses 67,774 72,948 146,583 140,888
Income before taxes 22,151 24,615 40,884 59,010
Income tax expense 6,670 7,976 11,879 18,114
Net income $ 15,481 $ 16,639 $ 29,005 $ 40,896
AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Statements of Income (cont.)
(in thousands, except per share amounts)
Three Months EndedSix Months Ended
June 30,June 30,
2017 2016 2017 2016
(unaudited)(unaudited)
Basic EPS:
Net income$ 15,481 $ 16,639 $ 29,005 $ 40,896
Basic weighted average common shares 19,162,049 19,096,718 19,156,250 19,077,328
Basic earnings per share $ 0.81 $ 0.87 $ 1.51 $ 2.14
Diluted EPS:
Net income $ 15,481 $ 16,639 $ 29,005 $ 40,896
Diluted weighted average common shares:
Weighted average common shares 19,162,049 19,096,718 19,156,250 19,077,328
Stock options and performance shares 65,911 88,266 71,747 101,565
Diluted weighted average common shares 19,227,960 19,184,984 19,227,997 19,178,893
Diluted earnings per share$ 0.81 $ 0.87 $ 1.51 $ 2.13



AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30,December 31,
2017 2016
(unaudited)
Assets
Investments $ 1,120,630 $ 1,084,474
Cash and cash equivalents 53,967 58,936
Amounts recoverable from reinsurers 84,147 83,666
Premiums receivable, net 190,646 183,005
Deferred income taxes 31,943 33,811
Deferred policy acquisition costs 20,882 19,300
Other assets 57,272 55,664
$ 1,559,487 $ 1,518,856
Liabilities and Shareholders’ Equity
Liabilities:
Reserves for loss and loss adjustment expenses $ 749,759 $ 742,776
Unearned premiums 165,895 162,028
Insurance-related assessments 31,801 31,742
Other liabilities 130,640 126,160
Shareholders’ equity 481,392 456,150
Total liabilities and shareholders’ equity $ 1,559,487 $ 1,518,856


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

Source:AMERISAFE, Inc.