• AMERISAFE Announces 2018 Fourth Quarter and Year-End Results

    Source: Nasdaq GlobeNewswire / 27 Feb 2019 21:30:23   Europe/London

    DERIDDER, La., Feb. 27, 2019 (GLOBE NEWSWIRE) -- AMERISAFE, Inc. (Nasdaq: AMSF), a specialty provider of workers’ compensation insurance focused on high hazard industries, today announced results for the fourth quarter and year ended December 31, 2018.

                
     Three Months Ended   Twelve Months Ended  
     December 31,   December 31,  
      2018   2017  % Change  2018   2017  % Change
                          
     (in thousands, except per share data)    (in thousands, except per share data)   
    Net premiums earned$88,837  $87,377  1.7% $350,326  $346,156  1.2%
    Net investment income 8,056   7,312  10.2%  30,452   29,281  4.0%
    Net realized gains (losses) on investments, pretax (65)  114  NM   (1,536)  (647) 137.4%
    Net income (1) 18,806   649  NM   71,632   46,231  54.9%
    Diluted earnings per share (1)$0.98  $0.03  NM  $3.71  $2.40  54.6%
    Operating net income 20,711   13,195  57.0%  74,495   59,272  25.7%
    Operating earnings per share$1.07  $0.69  55.1% $3.86  $3.08  25.3%
    Book value per share$21.26  $22.10  -3.8% $21.26  $22.10  -3.8%
    Net combined ratio 81.0%  88.3%     82.9%  84.7%   
    Return on average equity 17.3%  0.6%     17.2%  10.5%   
                          
    (1)  For 2017, includes $12.6 million, or $0.66 per share, of additional income tax expense related to the impact of tax legislation requiring net deferred tax assets to be revalued at the new federal corporate tax rate of 21%.
     

    G. Janelle Frost, President and Chief Executive Officer, stated, “For policyholders the AMERISAFE value proposition hinges on our service.  We work with our insureds to evaluate risk, enhance safety, and intensively manage claims for best outcomes.  The service provided by our experienced employees has positioned AMERISAFE for consistent financial stability and strong returns for our shareholders.  We are pleased 2018 was no exception, with the Company reporting a combined ratio of 82.9% and a return on average equity of 17.2% in the midst of a soft, highly competitive market.”


    Insurance Results

                
     Three Months Ended   Twelve Months Ended  
     December 31,   December 31,  
      2018   2017  % Change  2018   2017  % Change
                          
     (in thousands)   (in thousands)  
                
    Gross premiums written$75,328  $81,115  -7.1% $351,696  $350,267  0.4%
    Net premiums earned 88,837   87,377  1.7%  350,326   346,156  1.2%
    Loss and loss adjustment expenses incurred 52,055   58,286  -10.7%  204,891   209,324  -2.1%
    Underwriting and certain other operating costs,                     
    commissions, salaries and benefits 18,979   18,090  4.9%  81,133   78,776  3.0%
    Policyholder dividends 858   761  12.7%  4,148   4,868  -14.8%
    Underwriting profit (pre-tax)$16,945  $10,240  65.5% $60,154  $53,188  13.1%
                          
    Insurance Ratios:                     
    Current accident year loss ratio 71.5%  75.0%     71.5%  70.5%   
    Prior accident year loss ratio -12.9%  -8.3%     -13.0%  -10.0%   
    Net loss ratio 58.6%  66.7%     58.5%  60.5%   
    Net underwriting expense ratio 21.4%  20.7%     23.2%  22.8%   
    Net dividend ratio 1.0%  0.9%     1.2%  1.4%   
    Net combined ratio 81.0%  88.3%     82.9%  84.7%   
                
    • Voluntary premiums for policies written during the quarter ended December 31, 2018 decreased $6.1 million, or 7.9%, compared with the fourth quarter of 2017.  For the full year 2018, voluntary premiums written decreased 1.5%, compared with 2017.

    • Payroll audits and related premium adjustments increased premiums written by $2.3 million in the fourth quarter of 2018, compared with $2.1 million in the fourth quarter of 2017.  The fourth quarter of 2018 included a one-time $2.3 million reduction in other adjustments due to an error by the Pennsylvania Workers Compensation Rating Bureau in setting rates for a portion of 2018.  For the full year, payroll audits and related premium adjustments totaled $7.3 million in 2018 compared with $0.6 million in 2017, an increase of $6.7 million.

    • The current accident year loss ratio for the fourth quarter was 71.5%, unchanged from the first three quarters of 2018, and an increase of 1.0 percentage point from 70.5% for the full year 2017.  During the quarter, the Company experienced favorable case development for prior accident years which reduced loss and loss adjustment expenses by $11.5 million. Accident years 2015, 2016, as well as 2009 and 2011 were the primary contributors to the favorable development.  In total, prior accident year favorable development for the year ended December 31, 2018 was $45.6 million, compared with favorable development of $34.8 million in 2017.  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, 2018, the underwriting expense ratio was 21.4% compared to 20.7% in the same quarter in 2017.  The increase was due to higher premium-based assessments in the fourth quarter compared to the same quarter a year ago.  For the year ended December 31, 2018, the underwriting expense ratio was 23.2%, compared with 22.8% in 2017.

    • The effective tax rate for the quarter ended December 31, 2018 was 17.4%. Excluding the impact of revaluing deferred tax assets in the fourth quarter of 2017, the effective tax rate for the full year 2018 was 18.2% compared with 28.4% for 2017.  The decrease in the rate was due to the new lower federal corporate tax rate of 21% compared with 35% in 2017.


    Investment Results

                
     Three Months Ended   Twelve Months Ended  
     December 31,   December 31,  
      2018   2017  % Change  2018   2017  % Change
                          
     (in thousands)   (in thousands)  
    Net investment income $8,056  $7,312  10.2% $30,452  $29,281  4.0%
    Net realized gains (losses) on                     
    investments (pre-tax)  (65)  114  NM   (1,536)  (647) 137.4%
    Net unrealized losses on                     
    equity securities (pre-tax)  (2,347)  -  NM   (2,088)  -  NM 
    Pre-tax investment yield  2.7%  2.4%     2.6%  2.5%   
    Tax-equivalent yield (1)  3.2%  2.9%     3.2%  2.9%   
    ________________________________            
    (1) The tax equivalent yield is calculated using the effective interest rate and the appropriate marginal tax rate effective January 1, 2018. 
     
    • Net investment income for the quarter ending December 31, 2018, increased 10.2% to $8.1 million from $7.3 million in the fourth quarter of 2017, due to higher yields on investment securities.  For the full year 2018, net investment income was $30.5 million compared with $29.3 million for 2017, an increase of 4.0%.
    • Net unrealized losses on equity investments were $2.3 million for the fourth quarter of 2018, which reduced overall net income by $0.10 per share.
    • As of December 31, 2018, the carrying and fair value of AMERISAFE’s investment portfolio, including cash and cash equivalents, was $1.2 billion.  

    Capital Management

    In an accompanying announcement, the Company’s Board of Directors increased the regular quarterly dividend 14% from $0.22 per share to $0.25 per share, payable on March 22, 2019 to shareholders of record as of March 8, 2019.


    Supplemental Information

            
     Three Months Ended Twelve Months Ended
     December 31, December 31,
      2018   2017   2018   2017 
                    
     (in thousands, except share and per share data)
            
    Net income$18,806  $649  $71,632  $46,231 
    Less: Impact of tax reform legislation -   (12,620)  -   (12,620)
    Less:               
    Net realized gains (losses) on investments (65)  114   (1,536)  (647)
    Net unrealized losses on equity securities (2,347)  -   (2,088)  - 
    Tax effect (1) 507   (40)  761   226 
    Operating net income (2)$20,711  $13,195  $74,495  $59,272 
                    
    Average shareholders’ equity (3)$434,379  $460,184  $417,593  $440,787 
    Less:               
    Average accumulated other comprehensive income (loss) (2,517)  3,323   1,390   1,560 
    Average adjusted shareholders’ equity$436,896  $456,861  $416,203  $439,227 
                    
    Diluted weighted average common shares 19,284,923   19,246,150   19,293,082   19,245,866 
                    
    Return on average equity (4) 17.3%  0.6%  17.2%  10.5%
    Operating return on average adjusted equity (2) 19.0%  11.4%  17.9%  13.3%
    Diluted earnings per share$0.98  $0.03  $3.71  $2.40 
    Operating earnings per share (2)$1.07  $0.69  $3.86  $3.08 
    ________________________________               
    (1) The tax effect of net realized capital gains was calculated assuming an annual tax rate of 35% in 2017 and 21% in 2018.
     
    (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 28, 2019, 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 7, 2019.  To access the replay, dial 855-859-2056 or 404-537-3406 and use the pass code 4089884#.

    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.  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 Twelve Months Ended
     December 31, December 31,
      2018   2017   2018   2017 
                    
     (unaudited) (unaudited)
        
    Revenues:       
    Gross premiums written$75,328  $81,115  $351,696  $350,267 
    Ceded premiums written (2,362)  (2,288)  (9,344)  (8,869)
    Net premiums written$72,966  $78,827  $342,352  $341,398 
            
    Net premiums earned$88,837  $87,377  $350,326  $346,156 
    Net investment income 8,056   7,312   30,452   29,281 
    Net realized gains (losses) on investments. (65)  114   (1,536)  (647)
    Net unrealized losses on equity securities (2,347)  -   (2,088)  - 
    Fee and other income 188   134   599   418 
    Total revenues 94,669   94,937   377,753   375,208 
            
    Expenses:       
    Loss and loss adjustment expenses incurred 52,055   58,286   204,891   209,324 
    Underwriting and other operating costs 18,979   18,090   81,133   78,776 
    Policyholder dividends 858   761   4,148   4,868 
    Total expenses 71,892   77,137   290,172   292,968 
            
    Income before taxes 22,777   17,800   87,581   82,240 
    Income tax expense (1) 3,971   17,151   15,949   36,009 
    Net income$18,806  $649  $71,632  $46,231 
            

    (1)  For 2017, includes $12.6 million of additional income tax expense related to the impact of tax legislation requiring net deferred tax assets to be revalued at the new federal corporate tax rate of 21%.


    AMERISAFE, INC. AND SUBSIDIARIES
    Consolidated Statements of Income (cont.)
    (in thousands, except per share amounts)

     Three Months Ended Twelve Months Ended
     December 31, December 31,
      2018   2017   2018  2017 
                   
     (unaudited) (unaudited)    
    Basic EPS:              
    Net income$18,806  $649  $71,632 $46,231 
                   
    Basic weighted average common shares 19,223,189   19,177,261   19,208,978  19,165,489 
    Basic earnings per share$0.98  $0.03  $3.73 $2.41 
                   
    Diluted EPS:              
    Net income$18,806  $649  $71,632 $46,231 
                   
    Diluted weighted average common shares:              
    Weighted average common shares 19,223,189   19,177,261   19,208,978  19,165,489 
    Stock options and restricted stock 61,734   68,889   84,104  80,377 
    Diluted weighted average common shares 19,284,923   19,246,150   19,293,082  19,245,866 
                   
    Diluted earnings per share $0.98  $0.03  $3.71 $2.40 
                   
                   

    AMERISAFE, INC. AND SUBSIDIARIES
    Consolidated Balance Sheets
    (in thousands)

        
     December 31, December 31,
     2018 2017
     (unaudited)  
    Assets   
    Investments $1,125,490 $1,130,314
    Cash and cash equivalents 40,344  55,559
    Amounts recoverable from reinsurers  112,006  90,133
    Premiums receivable, net  162,478  174,234
    Deferred income taxes  21,852  19,262
    Deferred policy acquisition costs  19,734  20,251
    Other assets  34,027  28,483
     $1,515,931 $1,518,236
          
    Liabilities and Shareholders’ Equity     
    Liabilities:     
    Reserves for loss and loss adjustment expenses $798,409 $771,845
    Unearned premiums  149,296  157,270
    Insurance-related assessments  28,258  28,246
    Other liabilities  130,206  135,452
          
    Shareholders’ equity  409,762  425,423
    Total liabilities and shareholders’ equity $1,515,931 $1,518,236
          
          

     

    Neal A. Fuller, EVP & CFO
    AMERISAFE
    337.463.9052

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