OREANDA-NEWS. July 29, 2016. 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%   
________________________________       
(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 
________________________________    
(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