AMERISAFE Announces 2010 Third Quarter Results
Board Extends Share Repurchase Program
DERIDDER, La., Nov. 4, 2010 /PRNewswire-FirstCall/ -- AMERISAFE, Inc. (Nasdaq: AMSF), a specialty writer of hazardous workers' compensation insurance, today announced results for the third quarter ended September 30, 2010.
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||
2010 |
2009 |
% |
2010 |
2009 |
% |
||
(in thousands, except per share data) |
|||||||
Net premiums earned |
$54,412 |
$58,133 |
(6.4)% |
$162,452 |
$ 193,926 |
(16.2)% |
|
Net investment income |
6,569 |
6,877 |
(4.5)% |
19,784 |
21,231 |
(6.8)% |
|
Net realized gains (losses) on investments (pre-tax) |
(561) |
1,956 |
(128.7)% |
2,284 |
1,999 |
14.3% |
|
Net income |
4,358 |
15,071 |
(71.1)% |
26,059 |
39,834 |
(34.6)% |
|
Diluted earnings per share |
$ 0.23 |
$ 0.74 |
(68.9)% |
$ 1.36 |
$ 1.95 |
(30.3)% |
|
Book value per share |
$17.26 |
$ 15.94 |
8.3% |
$ 17.26 |
$ 15.94 |
8.3% |
|
Net combined ratio |
101.7% |
79.3% |
93.4% |
84.0% |
|||
Return on average equity |
5.5% |
19.3% |
11.2% |
17.8% |
|||
Commenting on these results, Allen Bradley, AMERISAFE's Chairman and Chief Executive Officer, stated, "We are disappointed with our third quarter results, which reflect increasing claims frequency and severity in the quarter. I am concerned that state-mandated loss costs and premiums may not accurately reflect the claims trends in some of the states in which we operate. We have launched a number of initiatives relating to underwriting and pricing to further improve our risk selection and ensure that we are pricing those risks appropriately."
Insurance Results
Three Months Ended |
Nine Months Ended |
||||||
2010 |
2009 |
% |
2010 |
2009 |
% |
||
(in thousands) |
|||||||
Gross premiums written |
$52,197 |
$ 55,119 |
(5.3)% |
$ 176,281 |
$ 207,085 |
(14.9)% |
|
Net premiums earned |
54,412 |
58,133 |
(6.4)% |
162,452 |
193,926 |
(16.2)% |
|
Loss and loss adjustment expenses incurred |
46,660 |
33,358 |
39.9% |
117,998 |
120,647 |
(2.2)% |
|
Underwriting and certain other operating costs, |
8,357 |
12,535 |
(33.3)% |
33,201 |
41,778 |
(20.5)% |
|
Policyholder dividends |
252 |
201 |
25.4% |
726 |
523 |
38.8% |
|
Underwriting profit (loss) (pre-tax) |
(857) |
12,039 |
(107.1)% |
10,527 |
30,978 |
(66.0)% |
|
Insurance Ratios: |
|||||||
Current accident year loss ratio |
95.5% |
69.0% |
81.2% |
69.0% |
|||
Prior accident year loss ratio |
(9.7)% |
(11.6)% |
(8.6)% |
(6.8)% |
|||
Net loss ratio |
85.8% |
57.4% |
72.6% |
62.2% |
|||
Net underwriting expense ratio |
15.4% |
21.6% |
20.4% |
21.5% |
|||
Net dividend ratio |
0.5% |
0.3% |
0.4% |
0.3% |
|||
Net combined ratio |
101.7% |
79.3% |
93.4% |
84.0% |
|||
- Gross premiums written declined in the three and nine month periods. Voluntary premiums written decreased 13.8% in the quarter and 11.5% for the nine months ended September 30, 2010 compared to the same periods in 2009. Additionally, payroll audits and related premium adjustments for policies written in previous periods reduced premiums $6.6 million in the third quarter and $24.7 million in the nine months ended September 30, 2010. In 2009, these premium adjustments reduced premium $13.2 million in the third quarter and $20.9 million for the nine months ended September 30.
- In the third quarter, the Company increased the current accident year loss ratio for 2010 from 74.0% to 81.2%. Frequency and severity of claims were the primary factors. Severity was driven by fewer medical only claims and extended duration. However, during the quarter the Company experienced favorable case development for prior accident years which reduced loss and loss adjustment expenses by $5.3 million. Accident years 2005, 2006 and 2007 were the primary contributors to the favorable development, partially offset by unfavorable development in accident year 2009.
- The underwriting expense ratio for both the quarter and nine months ended September 30, 2010 was down from the prior year periods. In the quarter, the Company benefited from rate reductions for certain loss-based assessments and lower fixed costs.
Geoff Banta, President and Chief Operating Officer, noted, "Recent claims experience has moved us to increase the current accident year loss ratio. We believe that we are taking the appropriate steps to maintain underwriting profitability. Prior year claims developed favorably, our policy retention rate remains high at 93%, and we have been successful in holding the line on expenses.
"Going forward, we will continue to work to improve our risk selection and pricing, keeping AMERISAFE in a position to take advantage of opportunities as market conditions improve in our industry."
Investment Results
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||||
2010 |
2009 |
% |
2010 |
2009 |
% |
||
(in thousands) |
|||||||
Net investment income |
$ 6,569 |
$ 6,877 |
(4.5)% |
$ 19,784 |
$ 21,231 |
(6.8)% |
|
Net realized gains (losses) on investments (pre-tax) |
(561) |
1,956 |
(128.7)% |
2,284 |
1,999 |
14.3% |
|
Pre-tax investment yield |
3.3% |
3.4% |
3.3% |
3.5% |
|||
Tax equivalent yield (1) |
4.6% |
4.7% |
4.6% |
4.7% |
|||
________________________________ |
|||||||
(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 $806.1 million and the fair value of the portfolio was $841.3 million at September 30, 2010.
Supplemental Information
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||
2010 |
2009 |
2010 |
2009 |
||
Shares repurchased |
213,318 |
— |
612,466 |
— |
|
Average price of shares repurchased, including commissions |
$17.51 |
— |
$16.94 |
— |
|
Effective tax rate |
10.5% |
27.2% |
18.4% |
26.1% |
|
- The Board has renewed the Company's previously authorized share repurchase program for one year, to December 31, 2011. In addition, the Board authorized a new limit of up to $25 million effective October 1, 2010. As of September 30, 2010, AMERISAFE had spent approximately $10.4 million on its share repurchase program.
- The ratio of tax-free investment income to pre-tax income, coupled with changes in the valuation allowance resulted in a significant drop in the effective tax rate from prior periods.
Reconciliation of GAAP and Non-GAAP measures
Three Months Ended September 30, |
Nine Months Ended September 30, |
||||
2010 |
2009 |
2010 |
2009 |
||
(in thousands, except share and per share data) |
|||||
Net income |
$ 4,358 |
$ 15,071 |
$ 26,059 |
$ 39,834 |
|
Less: Net realized capital gains (losses) |
(561) |
1,956 |
2,284 |
1,999 |
|
Tax effect (1) |
(1) |
(7) |
(11) |
(22) |
|
Operating net income (2) |
4,920 |
13,122 |
23,786 |
37,857 |
|
Average shareholders' equity (3) |
$ 317,301 |
$ 311,774 |
$ 310,310 |
$ 299,273 |
|
Less: Average other comprehensive income (loss) |
271 |
(1,114) |
1,569 |
1,332 |
|
Adjusted average shareholders' equity |
317,030 |
310,660 |
308,741 |
297,941 |
|
Diluted weighted average common shares |
18,982,574 |
19,273,287 |
19,155,258 |
19,247,406 |
|
Portion allocable to common shareholders (4) |
100.0% |
94.1% |
100.0% |
94.1% |
|
Return on average equity (5) |
5.5% |
19.3% |
11.2% |
17.8% |
|
Operating return on average equity (2) |
6.2% |
16.9% |
10.3% |
16.9% |
|
Diluted earnings per common share |
$ 0.23 |
$ 0.74 |
$ 1.36 |
$ 1.95 |
|
Operating earnings per common share (2) |
$ 0.26 |
$ 0.64 |
$ 1.24 |
$ 1.85 |
|
________________________________ |
|||||
(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 increased tax expense by $0.2 million for the three months ended and decreased tax expense by $0.8 million for the nine months ended September 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 November 5, 2010, at 10:30 a.m. Eastern Time. To participate in the conference call dial 480-629-9772 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 12, 2010. To access the replay, dial 303-590-3030 and use the pass code 4373781#.
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.
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&L / 713-529-6600 |
||
- Tables to follow -
AMERISAFE, INC. AND SUBSIDIARIES Consolidated Statements of Income (in thousands) |
|||||
Three Months Ended |
Nine Months Ended |
||||
2010 |
2009 |
2010 |
2009 |
||
(unaudited) |
|||||
Revenues: |
|||||
Gross premiums written |
$ 52,197 |
$ 55,119 |
$ 176,281 |
$ 207,085 |
|
Ceded premiums written |
(5,334) |
(4,051) |
(14,576) |
(14,115) |
|
Net premiums written |
$ 46,863 |
$ 51,068 |
$ 161,705 |
$ 192,970 |
|
Net premiums earned |
$ 54,412 |
$ 58,133 |
$ 162,452 |
$ 193,926 |
|
Net investment income |
6,569 |
6,877 |
19,784 |
21,231 |
|
Net realized gains (losses) on investments |
(561) |
1,956 |
2,284 |
1,999 |
|
Fee and other income |
118 |
242 |
495 |
1,083 |
|
Total revenues |
60,538 |
67,208 |
185,015 |
218,239 |
|
Expenses: |
|||||
Loss and loss adjustment expenses incurred |
46,660 |
33,358 |
117,998 |
120,647 |
|
Underwriting and other operating costs |
8,357 |
12,535 |
33,201 |
41,778 |
|
Interest expense |
400 |
417 |
1,160 |
1,411 |
|
Policyholder dividends |
252 |
201 |
726 |
523 |
|
Total expenses |
55,669 |
46,511 |
153,085 |
164,359 |
|
Income before taxes |
4,869 |
20,697 |
31,930 |
53,880 |
|
Income tax expense |
511 |
5,626 |
5,871 |
14,046 |
|
Net income |
$ 4,358 |
$ 15,071 |
$ 26,059 |
$ 39,834 |
|
AMERISAFE, INC. AND SUBSIDIARIES Consolidated Statements of Income (cont.) (in thousands, except share and per share amounts) |
|||||
Three Months Ended |
Nine Months Ended |
||||
2010 |
2009 |
2010 |
2009 |
||
(unaudited) |
|||||
Basic EPS: |
|||||
Net income available to common shareholders |
$ 4,358 |
$ 15,071 |
$ 26,059 |
$ 39,834 |
|
Portion allocable to common shareholders |
100.0% |
94.1% |
100.0% |
94.1% |
|
Net income allocable to common shareholders |
$ 4,358 |
$ 14,178 |
$ 26,059 |
$ 37,468 |
|
Basic weighted average common shares |
18,528,110 |
18,862,044 |
18,711,097 |
18,854,169 |
|
Basic earnings per share |
$ 0.24 |
$ 0.75 |
$ 1.39 |
$ 1.99 |
|
Diluted EPS: |
|||||
Net income allocable to common shareholders |
$ 4,358 |
$ 14,178 |
$ 26,059 |
$ 37,468 |
|
Diluted weighted average common shares: |
|||||
Weighted average common shares |
18,528,110 |
18,862,044 |
18,711,097 |
18,854,169 |
|
Stock options |
448,304 |
397,835 |
437,779 |
382,675 |
|
Restricted stock |
6,160 |
13,408 |
6,382 |
10,562 |
|
Diluted weighted average common shares |
18,982,574 |
19,273,287 |
19,155,258 |
19,247,406 |
|
Diluted earnings per common share |
$ 0.23 |
$ 0.74 |
$ 1.36 |
$ 1.95 |
|
AMERISAFE, INC. AND SUBSIDIARIES Consolidated Balance Sheets (in thousands) |
|||
September 30, |
December 31, |
||
2010 |
2009 |
||
(unaudited) |
|||
Assets |
|||
Investments |
$ 751,253 |
$ 737,297 |
|
Cash and cash equivalents |
54,816 |
63,188 |
|
Amounts recoverable from reinsurers |
97,611 |
81,878 |
|
Premiums receivable, net |
143,224 |
151,570 |
|
Deferred income taxes |
32,898 |
28,489 |
|
Deferred policy acquisition costs |
18,651 |
18,128 |
|
Deferred charges |
3,323 |
3,030 |
|
Other assets |
33,642 |
35,229 |
|
$ 1,135,418 |
$ 1,118,809 |
||
Liabilities and shareholders' equity |
|||
Liabilities: |
|||
Reserves for loss and loss adjustment expenses |
$ 541,319 |
$ 534,655 |
|
Unearned premiums |
121,753 |
122,500 |
|
Insurance-related assessments |
34,360 |
40,072 |
|
Subordinated debt securities |
36,090 |
36,090 |
|
Other liabilities |
83,694 |
83,075 |
|
Total shareholders' equity |
318,202 |
302,417 |
|
Total liabilities and shareholders' equity |
$ 1,135,418 |
$ 1,118,809 |
|
SOURCE AMERISAFE, Inc.
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