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AMERISAFE Announces 2012 Third Quarter Results

AMERISAFE, Inc. Logo

DERIDDER, La., Nov. 1, 2012 (GLOBE NEWSWIRE) -- AMERISAFE, Inc. (Nasdaq:AMSF), a specialty provider of hazardous workers' compensation insurance, today announced results for the third quarter ended September 30, 2012.

Three Months Ended
September 30,
Nine Months Ended
September 30,
2012 2011 % Change 2012 2011 % Change
(in thousands, except per share data)
Net premiums earned $72,425 $64,454 12.4% $211,948 $184,804 14.7%
Net investment income 6,801 6,495 4.7% 20,320 19,638 3.5%
Net realized gains on investments (pre-tax) 985 512 92.4% 2,913 760 NM
Net income 7,121 4,884 45.8% 20,127 16,108 25.0%
Diluted earnings per share $0.38 $0.26 46.2% $1.08 $0.86 25.6%
Operating net income 6,481 4,372 48.2% 18,234 15,348 18.8%
Operating earnings per share $0.35 $0.23 52.2% $0.98 $0.82 19.5%
Book value per share $20.46 $18.84 8.6% $20.46 $18.84 8.6%
Net combined ratio 98.50% 102.3% 99.4% 101.1%
Return on average equity 7.70% 5.7% 7.4% 6.4%

Financial data for 2011 was revised to reflect an adjustment for the retrospective adoption of a new accounting standard for policy acquisition costs. Financial data presented in this report for the three and nine months ended September 30, 2011 has been adjusted to reflect a change for the estimate of liability for state guaranty fund assessments.

Commenting on these results, Allen Bradley, AMERISAFE's Chairman and Chief Executive Officer, stated, "During the third quarter we have observed more signs of disruption in the workers' compensation markets. Carriers have either withdrawn from the market or significantly limited their underwriting appetite. We believe AMERISAFE is well-positioned to take advantage of these opportunities to grow our business profitably thereby increasing shareholder value."

Insurance Results
Three Months Ended
September 30,
Nine Months Ended
September 30,
2012 2011 % Change 2012 2011 % Change
(in thousands)
Gross premiums written $77,283 $65,698 17.6% $247,683 $209,973 18.0%
Net premiums earned 72,425 64,454 12.4% 211,948 184,804 14.7%
Loss and loss adjustment expenses incurred 53,851 49,327 9.2% 162,414 140,079 15.9%
Underwriting and certain other operating costs, commissions and salaries and benefits 16,495 16,350 0.9% 46,557 45,808 1.6%
Policyholder dividends 945 271 NM 1,659 990 67.6%
Underwriting profit (loss) (pre-tax) 1,134 (1,494) 176.0% 1,318 (2,073) 163.6%
Insurance Ratios:
Current accident year loss ratio 76.5% 78.2% 76.5% 78.2%
Prior accident year loss ratio (2.1)% (1.7)% 0.1% (2.4)%
Net loss ratio 74.4% 76.5% 76.6% 75.8%
Net underwriting expense ratio 22.8% 25.4% 22.0% 24.8%
Net dividend ratio 1.3% 0.4% 0.8% 0.5%
Net combined ratio 98.5% 102.3% 99.4% 101.1%
  • Voluntary premiums written increased 16.6% in the quarter and 12.1% for the nine months ended September 30, 2012 compared to the same periods in 2011. Additionally, payroll audits and related premium adjustments for policies written in previous periods increased premiums $3.1 million in the third quarter and $13.0 million in the nine months ended September 30, 2012. In 2011, these premium adjustments increased premium $2.5 million in the third quarter and $2.1 million for the nine months ended September 30.
  • The current accident year loss ratio for the third quarter remained at 76.5%, same as the first and second quarters of 2012. During the quarter the Company experienced $1.6 million of favorable development for prior accident years which decreased loss and loss adjustment expenses. Accident years 2010 and 2011 experienced minor favorable development of less than $0.1 million. In total, prior accident year development for the nine months ended September 30, 2012 was an unfavorable $0.2 million, compared to a favorable $4.4 million for the same period in 2011.
  • The expense ratio in the third quarter and for the nine months ended September 30, 2012 decreased mainly through efficiencies gained by maintaining level general operating costs as earned premium grew and gaining a higher benefit from experience-rated commissions on our reinsurance treaties.
  • The effective tax rate for the nine months ended September 30, 2012 was 17.7% compared to 9.7% in the same period in 2011. The increase was driven by the lower ratio of tax-free investment income to pre-tax income in the nine month ended September 30, 2012 compared to the same period in 2011.

Geoff Banta, President and Chief Operating Officer, noted, "We experienced double-digit growth in premiums written for the seventh straight quarter, and both pricing and premium retention continue to be very strong. Also, our claims frequency is trending downward and overall loss development for prior years was favorable this quarter. We are pleased with these positive indications and believe our strategy for operating in today's volatile workers' compensation market is producing results."

Investment Results
Three Months Ended
September 30,
Nine Months Ended
September 30,
2012 2011 % Change 2012 2011 % Change
(in thousands)
Net investment income $6,801 $6,495 4.7% $20,320 $19,638 3.5%
Net realized gains on investments (pre-tax) 985 512 2,913 760
Pre-tax investment yield 3.1% 3.1% 3.1% 3.1%
Tax equivalent yield (1) 4.5% 4.6% 4.5% 4.6%
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(1) The tax equivalent yield is calculated using the effective interest rate and a 35% marginal tax rate.
  • As of September 30, 2012, the carrying value of AMERISAFE's investment portfolio, including cash and cash equivalents, was $882.6 million and the fair value of the portfolio was $929.1 million.

Supplemental Information

During the quarter, no shares were repurchased under the share repurchase plan. Since beginning of this plan, the Company has repurchased a total of 1,258,250 shares for $22.4 million, or an average per share price of $17.78, including commissions. On October 30, 2012, the Board of Directors extended the share repurchase program through December 31, 2013.

Three Months Ended
September 30,
Nine Months Ended
September 30,
2012 2011 2012 2011
(in thousands, except share and per share data)
Net income $7,121 $4,884 $20,127 $16,108
Less: Net realized capital gains 985 512 2,913 760
Tax effect (1) (345) (1,020)
Operating net income (2) 6,481 4,372 18,234 15,348
Average shareholders' equity (3) $367,794 $340,471 $360,788 $334,462
Less: Average other comprehensive income (loss) 3,390 569 3,165 615
Adjusted average shareholders' equity 364,404 339,902 357,623 333,847
Diluted weighted average common shares 18,583,980 18,708,721 18,576,405 18,766,733
Return on average equity (4) 7.7% 5.7% 7.4% 6.4%
Operating return on average adjusted equity (2) 7.1% 5.2% 6.8% 6.1%
Diluted earnings per common share $0.38 $0.26 $1.08 $0.86
Operating earnings per common share (2) $0.35 $0.23 $0.98 $0.82
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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, and management believes that 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 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 2, 2012, 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 9, 2012. To access the replay, dial 855-859-2056 or 404-537-3406 and use the pass code 38108465#.

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 and agriculture. AMERISAFE actively markets workers' compensation insurance in 35 states and the District of Columbia.

The AMERISAFE, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=9767

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, 2011. 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
September 30,
Nine Months Ended
September 30,
2012 2011 2012 2011
(unaudited)
Revenues:
Gross premiums written $77,283 $65,698 $247,683 $209,973
Ceded premiums written (4,032) (3,517) (11,907) (10,487)
Net premiums written $73,251 $62,181 $235,776 $199,486
Net premiums earned $72,425 $64,454 $211,948 $184,804
Net investment income 6,801 6,495 20,320 19,638
Net realized gains on investments 985 512 2,913 760
Fee and other income 163 282 484 551
Total revenues 80,374 71,743 235,665 205,753
Expenses:
Loss and loss adjustment expenses incurred 53,851 49,327 162,414 140,079
Underwriting and other operating costs 16,495 16,350 46,557 45,808
Interest expense 80 277 566 1,036
Policyholder dividends 945 271 1,659 990
Total expenses 71,371 66,225 211,196 187,913
Income before taxes 9,003 5,518 24,469 17,840
Income tax expense 1,882 634 4,342 1,732
Net income $7,121 $4,884 $20,127 $16,108
AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Statements of Income (cont.)
(in thousands, except share and per share amounts)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2012 2011 2012 2011
(unaudited)
Basic EPS:
Net income $7,121 $4,884 $20,127 $16,108
Basic weighted average common shares 18,173,062 18,294,040 18,154,690 18,306,516
Basic earnings per share $0.39 $0.27 $1.11 $0.88
Diluted EPS:
Net income $7,121 $4,884 $20,127 $16,108
Diluted weighted average common shares:
Weighted average common shares 18,173,062 18,294,040 18,154,690 18,306,516
Stock options 409,382 405,207 408,108 451,613
Restricted stock 1,363 9,474 9,281 8,604
Long-term incentive stock 173 4,326
Diluted weighted average common shares 18,583,980 18,708,721 18,576,405 18,766,733
Diluted earnings per common share $0.38 $0.26 $1.08 $0.86
AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
September 30, December 31,
2012 2011
(unaudited)
Assets
Investments $813,274 $805,974
Cash and cash equivalents 69,345 45,536
Amounts recoverable from reinsurers 98,154 96,212
Premiums receivable, net 143,202 121,223
Deferred income taxes 31,417 30,048
Deferred policy acquisition costs 18,830 16,578
Other assets 28,633 28,402
$1,202,855 $1,143,973
Liabilities and shareholders' equity
Liabilities:
Reserves for loss and loss adjustment expenses $564,243 $538,214
Unearned premiums 142,527 118,699
Insurance-related assessments 22,190 19,071
Subordinated debt securities 25,780
Other liabilities 101,756 92,772
Total shareholders' equity 372,139 349,437
Total liabilities and shareholders' equity $1,202,855 $1,143,973
CONTACT: G. Janelle Frost, EVP & CFO AMERISAFE, Inc. 337-463-9052

Source:AMERISAFE, Inc.