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AMERISAFE Announces 2018 Second Quarter Results

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DERIDDER, La., Aug. 01, 2018 (GLOBE NEWSWIRE) -- AMERISAFE, Inc. (NASDAQ:AMSF), a specialty provider of hazardous workers' compensation insurance, today announced results for the second quarter ended June 30, 2018. 

               
  Three Months Ended     Six Months Ended  
  June 30,     June 30,  
    2018        2017       % Change        2018       2017
     % Change  
  (in thousands, except per
share data)
    (in thousands, except per
share data)
     
Net premiums earned $   88,995     $   82,749     7.5%     $   176,305     $   173,661     1.5%  
Net investment income     7,303         7,471     -2.2%         14,512         14,181     2.3%  
Net realized losses on investments, pretax     (1,111 )       (388 )   NM         (1,142 )       (569 )   NM  
Net income     16,956         15,481     9.5%         33,125         29,005     14.2%  
Diluted earnings per share $   0.88     $   0.81     8.6%     $   1.72     $   1.51     13.9%  
Operating net income     17,774         15,733     13.0%         34,275         29,375     16.7%  
Operating earnings per share $   0.92     $   0.82     12.2%     $   1.78     $   1.53     16.3%  
Book value per share $   23.11     $   25.02     -7.6%     $   23.11     $   25.02     -7.6%  
Net combined ratio   83.6%       81.9%         84.7%       84.4%    
Return on average equity   15.5%       13.1%         15.2%       12.4%    
               

G. Janelle Frost, President and Chief Executive Officer, commented, "Encouraged by reporting of the third straight year of underwriting profitability for the industry, competition in the workers' compensation market remained aggressive in the second quarter. However, AMERISAFE's niche focus provided some protection, and we responded to market conditions with a slight decrease in pricing. Our responsiveness resulted in record policy retention, which aided in offsetting premium decreases from loss costs declines.  In addition, strong payroll audits and favorable case reserve development were essential to underwriting profitability, which resulted in an 83.6% combined ratio for the quarter."     

             
INSURANCE RESULTS 
             
  Three Months Ended   Six Months Ended  
  June 30,   June 30,  
    2018     2017   % Change           2018     2017   % Change  
  (in thousands)           (in thousands)    
             
Gross premiums written $ 93,702   $ 87,039   7.7%         $ 191,044   $ 182,117   4.9%  
Net premiums earned   88,995     82,749   7.5%           176,305     173,661   1.5%  
Loss and loss adjustment expenses incurred   52,076     46,428   12.2%           105,238     102,644   2.5%  
Underwriting and certain other operating costs,            
commissions, salaries and benefits   21,282     20,183   5.4%           41,548     41,405   0.3%  
Policyholder dividends   1,092     1,163   -6.1%           2,425     2,534   -4.3%  
Underwriting profit (pre-tax) $ 14,545   $ 14,975   -2.9%         $ 27,094   $ 27,078   0.1%  
                                       
Insurance Ratios:                                      
Current accident year loss ratio   71.5%     69.0%       71.5%     69.0%    
Prior accident year loss ratio   -13.0%     -12.9%       -11.8%     -9.9%    
Net loss ratio   58.5%     56.1%       59.7%     59.1%    
Net underwriting expense ratio   23.9%     24.4%       23.6%     23.8%    
Net dividend ratio   1.2%     1.4%       1.4%     1.5%    
Net combined ratio   83.6%     81.9%       84.7%     84.4%    
                                       
  • Gross premiums written in the quarter increased by $6.7 million, or 7.7%, due to higher payroll audits and related premium adjustments offset by lower voluntary premiums written.

  • Voluntary premium for policies written during the quarter ended June 30, 2018 decreased by $0.4 million, or 0.5%, compared with the second quarter of 2017.

  • Payroll audits and related premium adjustments increased premiums written by $3.8 million in the second quarter of 2018, compared to a decrease in premiums written of $2.6 million in the second quarter of 2017.  These adjustments led to the 7.7% increase in gross premiums written in the quarter.

  • The current accident year loss ratio for the second quarter was 71.5%, unchanged from the first quarter of 2018, and an increase of 1.0 percentage point from the 70.5% ratio for the full year 2017. During the quarter, the Company experienced favorable loss development for prior accident years, which reduced loss and loss adjustment expenses by $11.6 million, attributable to accident years 2016, 2015, 2013 and 2012 and prior.   These results largely reflect favorable case reserve development on claims during the quarter.

  • For the quarter ended June 30, 2018, the underwriting expense ratio was 23.9% compared with 24.4% in the same quarter in 2017. The decrease in the ratio in the quarter was due to higher net earned premiums compared with last year's second quarter.   Underwriting and other expenses were $1.1 million higher in the second quarter of 2018 compared to 2017, largely due to higher commission expense and premium taxes.

  • The effective tax rate for the quarter ended June 30, 2018 was 19.0% compared with 30.1% for the second quarter of 2017. The decrease is largely due to the new federal corporate tax rate of 21% on underwriting profits and taxable bond income. 
                                 
INVESTMENT RESULTS
                                 
  Three Months Ended
      Six Months Ended
     
  June 30,
      June 30,
     
    2018     2017   % Change     2018     2017   %
Change
 
  (in thousands)
      (in thousands)
     
Net investment income $   7,303   $   7,471   -2.2%   $   14,512   $   14,181   2.3%  
Net realized losses on                                 
investments (pre-tax)     (1,111 )     (388 ) NM       (1,142 )     (569 ) NM  
Net unrealized gains (losses) on                                 
equity securities (pre-tax)     76       -    NM       (314 )     -    NM  
Pre-tax investment yield   2.5%     2.6%         2.4%     2.4%      
Tax-equivalent yield (1)   2.9%     3.3%         2.9%     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 ended June 30, 2018, decreased 2.2% to $7.3 million from $7.5 million in the second quarter of 2017, largely due to the increase in value of an investment in a limited partnership hedge fund in last year's second quarter.

  • As of June 30, 2018, 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 $0.22 per share on June 22, 2018.  On July 31, 2018, the Company's Board of Directors declared a quarterly cash dividend of $0.22 per share, payable on September 21, 2018 to shareholders of record as of September 7, 2018.

Book value per share at June 30, 2018 was $23.11, an increase of 4.6% from $22.10 at December 31, 2017. 

         
SUPPLEMENTAL INFORMATION
         
  Three Months Ended Six Months Ended
  June 30, June 30,
    2018       2017       2018       2017  
  (in thousands, except share and per share data)
         
Net income $ 16,956     $ 15,481     $ 33,125     $ 29,005  
Less:                              
Net realized losses on investments   (1,111 )     (388 )     (1,142 )     (569 )
Net unrealized gains (losses) on equity securities   76       -       (314 )     -  
Tax effect (1)   217       136       306       199  
Operating net income (2) $ 17,774     $ 15,733     $ 34,275     $ 29,375  
                               
Average shareholders' equity (3) $ 438,730     $ 474,247     $ 435,407     $ 468,771  
Less:                              
Avg. accumulated other comprehensive income (loss)   (2,160 )     1,438       765       962  
Average adjusted shareholders' equity $ 440,890     $ 472,809     $ 434,642     $ 467,809  
                               
Diluted weighted average common shares   19,266,735       19,227,960       19,275,883       19,227,997  
                               
Return on average equity (4)   15.5%       13.1%       15.2%       12.4%  
Operating return on average adjusted equity (2)   16.1%       13.3%       15.8%       12.6%  
Diluted earnings per share $ 0.88     $ 0.81     $ 1.72     $ 1.51  
Operating earnings per share (2) $ 0.92     $ 0.82     $ 1.78     $ 1.53  
                               
                               

(1) The tax effect of net realized losses on investments and net unrealized gains (losses) on equity securities is calculated with an effective tax rate of 21% for 2018 and 35% for 2017.

(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 August 2, 2018, 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 10, 2018. To access the replay, dial 855-859-2056 or 404-537-3406 and use the pass code 5490189#.

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, 2017. 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 Six Months Ended
  June 30, June 30,
    2018       2017       2018       2017  
  (unaudited) (unaudited)
Revenues:                              
Gross premiums written $   93,702     $   87,039     $   191,044     $   182,117  
Ceded premiums written     (2,369 )       (2,198 )       (4,699 )       (4,589 )
Net premiums written $   91,333     $   84,841     $   186,345     $   177,528  
                               
Net premiums earned $   88,995     $   82,749     $   176,305     $   173,661  
Net investment income     7,303         7,471         14,512         14,181  
Net realized losses on investments     (1,111 )       (388 )       (1,142 )       (569 )
Net unrealized gains (losses) on equity securities     76         -          (314 )       -   
Fee and other income     117         93         194         194  
Total revenues     95,380         89,925         189,555         187,467  
                               
Expenses:                              
Loss and loss adjustment expenses incurred     52,076         46,428         105,238         102,644  
Underwriting and other operating costs     21,282         20,183         41,548         41,405  
Policyholder dividends     1,092         1,163         2,425         2,534  
Total expenses     74,450         67,774         149,211         146,583  
                               
Income before taxes     20,930         22,151         40,344         40,884  
Income tax expense     3,974         6,670         7,219         11,879  
Net income $   16,956     $   15,481     $   33,125     $   29,005  
                               
                               
                               
AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Statements of Income (cont.)
(in thousands, except per share amounts) 
         
  Three Months Ended Six Months Ended
  June 30, June 30,
    2018       2017       2018       2017  
  (unaudited) (unaudited)
Basic EPS:        
Net income $   16,956     $   15,481     $   33,125     $   29,005  
                               
Basic weighted average common shares    19,208,601        19,162,049        19,197,925        19,156,250  
Basic earnings per share $   0.88     $   0.81     $   1.73     $   1.51  
         
Diluted EPS:        
Net income $   16,956     $   15,481     $   33,125     $   29,005  
                               
Diluted weighted average common shares:                              
  Weighted average common shares    19,208,601        19,162,049        19,197,925        19,156,250  
  Stock options and restricted stock     58,134         65,911         77,958         71,747  
  Diluted weighted average common shares    19,266,735        19,227,960        19,275,883        19,227,997  
                               
Diluted earnings per  share $   0.88     $   0.81     $   1.72     $   1.51  
                               


       
AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
           
    June 30,   December 31,  
    2018   2017  
    (unaudited)      
Assets          
Investments $ 1,167,040 $ 1,130,314  
Cash and cash equivalents   21,176   55,559  
Amounts recoverable from reinsurers   98,961   90,133  
Premiums receivable, net   189,892   174,234  
Deferred income taxes   19,891   19,262  
Deferred policy acquisition costs   21,601   20,251  
Other assets   35,720   28,483  
  $ 1,554,281 $ 1,518,236  
       
Liabilities and Shareholders' Equity      
Liabilities:      
Reserves for loss and loss adjustment expenses $ 783,601 $ 771,845  
Unearned premiums   167,310   157,270  
Insurance-related assessments   30,070   28,246  
Other liabilities   127,909   135,452  
       
Shareholders' equity   445,391   425,423  
Total liabilities and shareholders' equity $ 1,554,281 $ 1,518,236  
       

Contact:

Neal A. Fuller, EVP & CFO
AMERISAFE
337.463.9052

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