AMERISAFE Announces 2010 Fourth Quarter and Year-End Results

Mar 03, 2011, 16:05 ET from AMERISAFE, Inc.

DERIDDER, La., March 3, 2011 /PRNewswire/ -- AMERISAFE, Inc. (Nasdaq: AMSF), a specialty provider of hazardous workers' compensation insurance, today announced results for the fourth quarter ended December 31, 2010.

Three Months Ended

December 31,

Twelve Months Ended

December 31,

2010

2009

% Change

2010

2009

% Change

(in thousands, except per share data)

Net premiums earned

$56,429

$56,970

(1.0)%

$218,881

$  250,896

(12.8)%

Net investment income

6,458

6,783

(4.8)%

26,242

28,014

(6.3)%

Net realized gains on investments (pre-tax)

165

34

385.3%

2,449

2,033

20.5%

Net income

7,294

6,597

10.6%

33,353

46,431

(28.2)%

Diluted earnings per share

$  0.39

$   0.28

39.3%

$     1.75

$      2.22

(21.2)%

Book value per share

$17.72

$ 16.00

10.8%

$   17.72

$    16.00

10.8%

Net combined ratio

92.6%

96.7%

93.3%

86.9%

Return on average equity

9.1%

8.5%

10.6%

16.0%

Commenting on these results, AMERISAFE Chairman and Chief Executive Officer Allen Bradley stated, "In the fourth quarter, our gross premiums written showed a year-over-year increase for the first time since 2008.  In addition, pricing improved slightly from the third quarter.  However, the industry environment remains challenging, with robust price competition fueled by excess capacity and muted demand."

Insurance Results

Three Months Ended

December 31,

Twelve Months Ended

December 31,

2010

2009

% Change

2010

2009

% Change

(in thousands)

Gross premiums written

$52,143

$  49,369

5.6%

$  228,424

$  256,454

(10.9)%

Net premiums earned

56,429

56,970

(1.0)%

218,881

250,896

(12.8)%

Loss and loss adjustment expenses incurred

39,390

42,669

(7.7)%

157,388

163,316

(3.6)%

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

12,758

12,179

4.8%

45,959

53,957

(14.8)%

Policyholder dividends

108

247

(56.3)%

834

770

8.3%

Underwriting profit (pre-tax)

4,173

1,875

122.6%

14,700

32,853

(55.3)%

Insurance Ratios:

Current accident year loss ratio

83.5%

90.2%

81.8%

73.8%

Prior accident year loss ratio

(13.7)%

(15.3)%

(9.9)%

(8.7)%

Net loss ratio

69.8%

74.9%

71.9%

65.1%

Net underwriting expense ratio

22.6%

21.4%

21.0%

21.5%

Net dividend ratio

0.2%

0.4%

0.4%

0.3%

Net combined ratio

92.6%

96.7%

93.3%

86.9%

  • Gross premiums written increased for the quarter in comparison to the same period in the previous year.  This growth was driven by less negative payroll audits and related premium adjustments for policies written in previous periods.  These adjustments reduced premiums written $2.5 million in the fourth quarter of 2010 compared to a reduction of $8.2 million in the fourth quarter of 2009.        
  • In the fourth quarter, the Company increased the current accident year loss ratio for 2010 from 81.2% to 81.8%.  Claims frequency increased in 2010.  Severity was lower compared to 2009, but considerably higher than in years prior to 2009.  During the quarter the Company experienced favorable case development for prior accident years, which reduced loss and loss adjustment expenses by $7.7 million.  Accident years 2006, 2007 and 2008 were the primary contributors to the favorable development.  
  • The underwriting expense ratio continued to be competitive in the fourth quarter.  In the quarter, the Company updated forfeiture assumptions for certain stock options granted in November 2005, resulting in additional non-cash compensation expense of $1.2 million.  Offsetting this expense were lower fixed costs.  

Geoff Banta, President and Chief Operating Officer, noted, "After seven straight quarters of premium declines, we were pleased to see a 5.6% increase in fourth quarter premium, especially given the fact that we had begun increasing our pricing late in the third quarter.  We will continue to increase pricing and toughen underwriting in those subsegments of our business that performed poorly in 2009 and 2010."

Investment Results

Three Months Ended

December 31,

Twelve Months Ended

December 31,

2010

2009

% Change

2010

2009

% Change

(in thousands)

Net investment income

$  6,458

$  6,783

(4.8)%

$  26,242

$  28,014

(6.3)%

Net realized gains (losses) on investments (pre-tax)

165

34

385.3%

2,449

2,033

20.5%

Pre-tax investment yield

3.2%

3.3%

3.2%

3.5%

Tax equivalent yield (1)

4.4%

4.8%

4.4%

4.8%

(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 $826.5 million and the fair value of the portfolio was $846.6 million at December 31, 2010.  

Supplemental Information

Three Months Ended

December 31,

Twelve Months Ended

December 31,

2010

2009

2010

2009

Shares repurchased

96,142

708,608

Average price of shares repurchased, including commissions

$17.98

$17.08

Effective tax rate

30.5%

22.2%

21.4%

25.5%

  • The Board renewed the Company's previously authorized share repurchase program for one year, to December 31, 2011.  As of December 31, 2010, AMERISAFE had spent approximately $12.1 million on its share repurchase program, leaving $23.3 million of the authorized amount remaining.
  • For the year, the ratio of tax-free investment income to pre-tax income, coupled with changes in the valuation allowance resulted in a drop in the effective tax rate from 2009.

Reconciliation of GAAP and Non-GAAP measures

Three Months Ended

December 31,

Twelve Months Ended

December 31,

2010

2009

2010

2009

(in thousands, except share and per share data)

Net income

$       7,294

$      6,597

$     33,353

$    46,431

Less: Net realized capital gains (losses)

165

34

2,449

2,033

Tax effect (1)

23

11

12

(11)

Operating net income (2)

7,106

6,552

30,892

44,409

Average shareholders' equity (3)

$  321,713

$  311,346

$   313,820

$   290,345

Less: Average other comprehensive income (loss)

338

2,274

1,497

1,787

Adjusted average shareholders' equity

$   321,375

$   309,072

$   312,323

$   288,558

Diluted weighted average common shares

18,883,302

19,318,883

19,095,320

19,268,295

Portion allocable to common shareholders (4)

100.0%

94.1%

100.0%

94.1%

Return on average equity (5)

9.1%

8.5%

10.6%

16.0%

Operating return on average equity (2)

8.8%

8.5%

9.9%

15.4%

Diluted earnings per common share

$      0.39

$       0.28

$       1.75

$        2.22

Operating earnings per common share (2)

$      0.38

$      0.32

$      1.62

$        2.17

(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.

(2) Operating net income, operating return on average equity and operating earnings per share are non-GAAP financial measures, and 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, 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 March 4, 2011, at 9:30 a.m. Eastern Time.  To participate in the conference call dial 480-629-9692 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 March 11, 2011.  To access the replay, dial 303-590-3030 and use the pass code 4403882 #.

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 33 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

December 31,

Twelve Months Ended

December 31,

2010

2009

2010

2009

(unaudited)

Revenues:

Gross premiums written

$  52,143

$  49,369

$  228,424

$  256,454

Ceded premiums written

(5,973)

(6,043)

(20,549)

(20,158)

  Net premiums written

$ 46,170

$ 43,326

$207,875

$236,296

Net premiums earned

$  56,429

$  56,970

$  218,881

$  250,896

Net investment income

6,458

6,783

26,242

28,014

Net realized gains (losses) on investments

165

34

2,449

2,033

Fee and other income

89

185

584

1,268

  Total revenues

63,141

63,972

248,156

282,211

Expenses:

Loss and loss adjustment expenses incurred

39,390

42,669

157,388

163,316

Underwriting and other operating costs

12,758

12,179

45,959

53,957

Interest expense

388

399

1,548

1,810

Policyholder dividends

108

247

834

770

  Total expenses

52,644

55,494

205,729

219,853

Income before taxes

10,497

8,478

42,427

62,358

Income tax expense

3,203

1,881

9,074

15,927

Net income

7,294

6,597

33,353

46,431

Redemption premium

(875)

(875)

Net income available to common shareholders

$    7,294

$    5,722

$33,353

$45,556

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

Three Months Ended December 31,

Twelve Months Ended December 31,

2010

2009

2010

2009

(unaudited)

Basic EPS:

Net income available to common shareholders

$       7,294

$      5,722

$  33,353

$  45,556

Portion allocable to common shareholders

100.0%

94.1%

100.0%

94.1%

Net income allocable to common shareholders

$        7,294

$      5,385

$  33,353

$  42,869

Basic weighted average common shares

18,417,784

18,878,092

18,637,167

18,860,197

Basic earnings per share

$          0.40

$        0.29

$      1.79

$      2.27

Diluted EPS:

Net income allocable to common shareholders

$        7,294

$     5,385

$   33,353

$   42,869

Diluted weighted average common shares:

    Weighted average common shares

18,417,784

18,878,092

18,637,167

18,860,197

    Stock options

460,428

438,165

448,790

396,254

    Restricted stock

5,090

2,626

9,363

11,844

    Diluted weighted average common shares

18,883,302

19,318,883

19,095,320

19,268,295

Diluted earnings per common share

$          0.39

$        0.28

$      1.75

$         2.22

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

December 31,

December 31,

2010

2009

(unaudited)

Assets

Investments

$        765,537

$        737,297

Cash and cash equivalents

60,966

63,188

Amounts recoverable from reinsurers

95,133

81,878

Premiums receivable, net

122,618

151,570

Deferred income taxes

31,512

28,489

Deferred policy acquisition costs

17,400

18,128

Deferred charges

2,936

3,030

Other assets

32,032

35,229

$     1,128,134

$     1,118,809

Liabilities and shareholders' equity

Liabilities:

  Reserves for loss and loss adjustment expenses

$        532,204

$        534,655

  Unearned premiums

111,494

122,500

  Insurance-related assessments

33,898

40,072

  Subordinated debt securities

36,090

36,090

  Other liabilities

89,225

83,075

Total shareholders' equity

325,223

302,417

Total liabilities and shareholders' equity

$     1,128,134

$     1,118,809

SOURCE AMERISAFE, Inc.



RELATED LINKS

http://www.amerisafe.com