AMERISAFE Announces 2010 Second Quarter Results

News provided by

AMERISAFE, Inc.

Aug 04, 2010, 04:05 ET

DERIDDER, La., Aug. 4 /PRNewswire-FirstCall/ -- AMERISAFE, Inc. (Nasdaq: AMSF), a specialty writer of hazardous workers' compensation insurance, today announced results for the second quarter ended June 30, 2010.

Three Months Ended
June 30,

Six Months Ended
June 30,

2010

2009

% Change

2010

2009

% Change

(in thousands, except per share data)

Net premiums earned

$52,982

$65,792

(19.5)%

$108,040

$  135,793

(20.4)%

Net investment income

6,675

6,982

(4.4)%

13,215

14,354

(7.9)%

Net realized gains on investments (pre-tax)

293

17

2,845

43

Net income

10,424

13,701

(23.9)%

21,701

24,763

(12.4)%

Diluted earnings per share

$  0.54

$   0.67

(19.4)%

$     1.13

$      1.21

(6.6)%

Book value per share

$17.01

$ 15.10

12.7%

$   17.01

$    15.10

12.7%

Net combined ratio

87.3%

83.3%

89.4%

86.0%

Return on average equity

13.3%

18.6%

14.0%

17.0%

Commenting on these results, Allen Bradley, AMERISAFE's Chairman, President and Chief Executive Officer, stated, "Industry and economic conditions remain challenging. While the competitive landscape has improved, some aggressive competitors continue to price their products at less than profitable levels even as claims frequency and costs are beginning to increase. At the same time the continued economic doldrums result in reduced payrolls and thus premiums.  Lower approved loss costs in many jurisdictions exacerbate the drop in premium.  Even with these compound pressures we've generated a solid return on equity and commensurate growth in book value as we remain committed to underwriting and expense discipline."

Insurance Results

Three Months Ended
June 30,

Six Months Ended
June 30,

2010

2009

% Change

2010

2009

% Change

(in thousands)







Gross premiums written

$62,993

$  72,537

(13.2)%

$  124,084

$  151,966

(18.3)%

Net premiums earned

52,982

65,792

(19.5)%

108,040

135,793

(20.4)%

Loss and loss adjustment expenses incurred

33,711

40,219

(16.2)%

71,338

87,289

(18.3)%

Underwriting and certain other operating costs,
commissions and salaries and benefits

12,347

14,475

(14.7)%

24,844

29,243

(15.0)%

Policyholder dividends

210

141

48.9%

474

322

47.2%

Underwriting profit (pre-tax)

6,714

10,957

(38.7)%

11,384

18,939

(39.9)%







Insurance Ratios:





Current accident year loss ratio

75.5%

69.0%

74.0%

69.0%

Prior accident year loss ratio

(11.9)%

(7.9)%

(8.0)%

(4.7)%

Net loss ratio

63.6%

61.1%

66.0%

64.3%

Net underwriting expense ratio

23.3%

22.0%

23.0%

21.5%

Net dividend ratio

0.4%

0.2%

0.4%

0.2%

Net combined ratio

87.3%

83.3%

89.4%

86.0%

  • Gross premiums written declined in the three and six month periods.  Voluntary premiums written decreased 6.7% in the quarter and 10.6% for the six months ended June 30, 2010 compared to the same periods in 2009.   Additionally, payroll audits and related premium adjustments for policies written in previous periods reduced premiums $9.2 million in the second quarter and $18.1 million in the six months ended June 30, 2010.  In 2009, these premium adjustments reduced premium $5.4 million in the second quarter and $7.7 million for the six months ended June 30.  
  • In the second quarter, the Company increased the current accident year loss ratio for 2010 from 72.5% to 74.0% as a result of increased frequency of claims on a declining premium base.  However, during the quarter the Company experienced favorable case development for prior accident years which reduced loss and loss adjustment expenses by $6.3 million.  Accident years 2006 and 2007 were the primary contributors to the favorable development.  
  • The underwriting expense ratio for both the quarter and six months ended June 30, 2010 was up slightly from the prior year periods primarily as a result of lower earned premiums.  As a result of intensive expense management, fixed costs were down for the three and six months ended June 30, 2010 compared to prior year periods.

Geoff Banta, President and Chief Operating Officer, noted, "Expense ratios continue to be negatively impacted by the decline in earned premiums while increasing claims frequency is putting upward pressure on our current year loss ratio. As a positive, we are continuing to experience favorable prior year loss development as our reserves as originally estimated have proven to be redundant.  Also, unlike 2009, our gross written premiums grew slightly in this quarter compared to the first quarter of 2010.

"We have shown that we can manage our business effectively through a competitive market compounded by a deeply suppressed economy. However, these conditions can't and won't continue indefinitely. We are confident the AMERISAFE team has the determination and discipline to continue to effectively and prudently manage our business in the near term.  As conditions improve our financial strength and resource capacity will enable us to take full advantage of a growing economy in a more positive environment. In the meantime, we will continue to pursue opportunities in select markets while avoiding irrational pricing and risk selection."  

Investment Results

Three Months Ended
June 30,

Six Months Ended
June 30,

2010

2009

% Change

2010

2009

% Change

(in thousands)

Net investment income

$  6,675

$  6,982

(4.4)%

$  13,215

$  14,354

(7.9)%

Net realized gains on investments
   (pre-tax)

293

17

2,845

43

Pre-tax investment yield

3.3%

3.5%

3.3%

3.6%

Tax equivalent yield (1)

4.7%

5.0%

4.7%

5.0%







(1) The tax equivalent yield is calculated using the effective interest rate and a 35% marginal tax rate.  
  • The carrying value of AMERISAFE's investment portfolio, including cash and cash equivalents, was $801.7 million and the fair value of the portfolio was $827.3 million at June 30, 2010.  

Supplemental Information

Three Months Ended
June 30,

Six Months Ended
June 30,

2010

2009

2010

2009

Shares repurchased

329,109

—

399,148

—

Average price of shares repurchased, including commissions

$16.72

—

$16.63

—

Effective tax rate

22.5%

25.0%

19.8%

25.4%

  • As previously announced, the Company's Board of Directors has authorized a share repurchase program.  The program authorizes a limit of up to $25 million and, unless extended, will expire on December 31, 2010.  As of June 30, 2010, AMERISAFE had spent approximately $6.6 million on its share repurchase program.
  • Income tax expense in 2010 was decreased for the change in the valuation allowance related to the previously impaired securities and a larger percentage of tax-exempt pre-tax income.  The decrease from the valuation allowance was $0.1 million, or 0.7 percentage points for the second quarter and $1.0 million, or 3.6 percentage points for the six months ended June 30. This did not impact operating net income.

Three Months Ended
June 30,

Six Months Ended
June 30,

2010

2009

2010

2009

(in thousands, except share and per share data)

Net income

$     10,424

$     13,701

$     21,701

$   24,763

Less: Net realized capital gains

293

17

2,845

43

Tax effect (1)

(9)

(6)

(10)

(15)

Operating net income (2)

10,140

13,690

18,866

24,735





Average shareholders' equity (3)

$  313,501

$ 295,192

$  309,408

$ 290,773

Less: Average other comprehensive income (loss)

258

(536)

1,430

627

Adjusted average shareholders' equity

313,243

295,728

307,978

290,146

Diluted weighted average common shares

19,160,004

19,242,089

19,238,093

19,237,286

Portion allocable to common shareholders (4)

100.0%

94.1%

100.0%

94.1%





Return on average equity (5)

13.3%

18.6%

14.0%

17.0%

Operating return on average equity (2)

13.0%

18.5%

12.3%

17.1%

Diluted earnings per common share

$      0.54

$       0.67

$       1.13

$        1.21

Operating earnings per
    common share (2)

$      0.53

$      0.67

$      0.98

$        1.21





(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.  The change in valuation allowance decreased tax expense by $0.1 million and $1.0 million, respectively for the three months and six months ended June 30, 2010.

(2) Operating net income, operating return on average 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, including redeemable preferred stock for the same period used in determining the numerator.  On December 31, 2009, the Company redeemed all outstanding shares of its Series C and D redeemable preferred stock for $25.9 million.

(4) The portion allocable to common shareholders relates to the two-class method of calculating earnings per share.  

(5) Return on average equity is calculated by dividing the annualized net income by the average shareholders' equity, including redeemable preferred stock for the applicable period.

Conference Call Information

AMERISAFE has scheduled a conference call for August 5, 2010, at 10:00 a.m. Eastern Time.  To participate in the conference call dial 480-629-9723 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 August 12, 2010.  To access the replay, dial 303-590-3030 and use the pass code 4324991#.

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 30 states and the District of Columbia.  The Company's financial strength rating is "A-" (Excellent) by A.M. Best.

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.  Actual results may differ materially from the results expressed or implied in these statements as the results of risks, uncertainties and other factors including, but not limited to, 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, 2009.  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.

Contacts:

G. Janelle Frost, EVP & CFO

AMERISAFE, Inc.

337-463-9052



Ken Dennard, Managing Partner

Karen Roan, Sr.VP

DRG&E  /  713-529-6600


- Tables to follow -

AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Statements of Income
(in thousands)

Three Months Ended
June 30,

Six Months Ended
June 30,

2010

2009

2010

2009

(unaudited)

Revenues:


Gross premiums written

$  62,993

$  72,537

$  124,084

$  151,966

Ceded premiums written

(4,603)

(4,870)

(9,242)

(10,064)

   Net premiums written

$ 58,390

$ 67,667

$ 114,842

$141,902





Net premiums earned

$  52,982

$  65,792

$  108,040

$  135,793

Net investment income

6,675

6,982

13,215

14,354

Net realized gains on investments

293

17

2,845

43

Fee and other income

145

705

377

841

   Total revenues

60,095

73,496

124,477

151,031





Expenses:



Loss and loss adjustment expenses incurred

33,711

40,219

71,338

87,289

Underwriting and other operating costs

12,347

14,475

24,844

29,243

Interest expense

385

383

760

994

Policyholder dividends

210

141

474

322

   Total expenses

46,653

55,218

97,416

117,848





Income before taxes

13,442

18,278

27,061

33,183

Income tax expense

3,018

4,577

5,360

8,420

   Net income

$  10,424

$  13,701

$  21,701

$    24,763





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

Three Months Ended
June 30,

Six Months Ended
June 30,

2010

2009

2010

2009

(unaudited)

Basic EPS:



Net income available to common
shareholders

$     10,424

$     13,701

$  21,701

$     24,763





Portion allocable to common shareholders

100.0%

94.1%

100.0%

94.1%





Net income allocable to common
shareholders

$       10,424

$    12,887

$  21,701

$     23,292





Basic weighted average common shares

18,720,748

18,855,200

18,804,093

18,850,168

Basic earnings per share

$      0.56

$      0.68

$      1.15

$      1.24





Diluted EPS:



Net income allocable to common
shareholders

$      10,424

$    12,887

$   21,701

$  23,292





Diluted weighted average common shares:



    Weighted average common shares

18,720,748

18,855,200

18,804,093

18,850,168

    Stock options

435,082

375,937

430,707

377,930

    Restricted stock

4,174

10,952

3,293

9,188

    Diluted weighted average common shares

19,160,004

19,242,089

19,238,093

19,237,286





Diluted earnings per common share

$           0.54

$  0.67

$  1.13

$  1.21

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

June 30,

December 31,

2010

2009

(unaudited)

Assets

Investments

$        751,584

$        737,297

Cash and cash equivalents

50,138

63,188

Amounts recoverable from reinsurers

94,263

81,878

Premiums receivable, net

158,585

151,570

Deferred income taxes

31,306

28,489

Deferred policy acquisition costs

19,330

18,128

Deferred charges

3,341

3,030

Other assets

31,907

35,229

$     1,140,454

$     1,118,809



Liabilities and shareholders' equity

Liabilities:

Reserves for loss and loss adjustment expenses

$        531,948

$        534,655

Unearned premiums

129,301

122,500

Insurance-related assessments

42,264

40,072

Subordinated debt securities

36,090

36,090

Other liabilities

84,452

83,075



Total shareholders' equity

316,399

302,417

Total liabilities and shareholders' equity

$     1,140,454

$     1,118,809

SOURCE AMERISAFE, Inc.

WANT YOUR COMPANY'S NEWS FEATURED ON PRNEWSWIRE.COM?

icon3
440k+
Newsrooms &
Influencers
icon1
9k+
Digital Media
Outlets
icon2
270k+
Journalists
Opted In
GET STARTED