Reports $92.7 Million Net Income in 2019

DERIDDER, La., Feb. 19, 2020 (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, 2019.

	Three Months Ended											Twelve Months Ended
	December 31,											December 31,
		2019				2018			% Change				2019				2018			% Change
	(in thousands, except per share data)											(in thousands, except per share data)
Net premiums earned	$	82,277			$	88,837			-7.4	%		$	332,888			$	350,326			-5.0	%
Net investment income		8,035				8,056			-0.3	%			32,483				30,452			6.7	%
Net realized losses on investments, pretax		(53	)			(65	)		-18.5	%			(80	)			(1,536	)		NM
Net income		34,014				18,806			80.9	%			92,690				71,632			29.4	%
Diluted earnings per share	$	1.76			$	0.98			79.6	%		$	4.80			$	3.71			29.4	%
Operating net income		32,797				20,711			58.4	%			88,994				74,495			19.5	%
Operating earnings per share	$	1.70			$	1.07			58.9	%		$	4.60			$	3.86			19.2	%
Book value per share	$	22.29			$	21.26			4.8	%		$	22.29			$	21.26			4.8	%
Net combined ratio		59.6	%			81.0	%						76.6	%			82.9	%
Return on average equity		30.3	%			17.3	%						22.1	%			17.2	%

G. Janelle Frost, President and Chief Executive Officer, noted, “The current soft market is unique in its challenges given the state of the property and casualty industry.  AMERISAFE is a specialist, and our distinctive approach to workers’ compensation produced another year of excellent financial results.  We reported a combined ratio of 76.6% and a return on average equity of 22.1% in 2019, the fourth year of workers’ compensation rate declines.  For AMERISAFE, less than anticipated average loss severity for prior years offset the impact of lower premiums.”

INSURANCE RESULTS
	Three Months Ended											Twelve Months Ended
	December 31,											December 31,
		2019				2018			% Change				2019				2018			% Change
	(in thousands)											(in thousands)
Gross premiums written	$	70,706			$	75,328			-6.1	%		$	333,460			$	351,696			-5.2	%
Net premiums earned		82,277				88,837			-7.4	%			332,888				350,326			-5.0	%
Loss and loss adjustment expenses incurred		33,535				52,055			-35.6	%			176,342				204,891			-13.9	%
Underwriting and certain other operating costs,
commissions, salaries and benefits		14,681				18,979			-22.6	%			74,351				81,133			-8.4	%
Policyholder dividends		797				858			-7.1	%			4,160				4,148			0.3	%
Underwriting profit (pre-tax)	$	33,264			$	16,945			96.3	%		$	78,035			$	60,154			29.7	%
Insurance Ratios:
Current accident year loss ratio		72.5	%			71.5	%						72.5	%			71.5	%
Prior accident year loss ratio		-31.7	%			-12.9	%						-19.5	%			-13.0	%
Net loss ratio		40.8	%			58.6	%						53.0	%			58.5	%
Net underwriting expense ratio .		17.8	%			21.4	%						22.3	%			23.2	%
Net dividend ratio		1.0	%			1.0	%						1.3	%			1.2	%
Net combined ratio		59.6	%			81.0	%						76.6	%			82.9	%

• Gross premiums written in the fourth quarter of 2019 decreased by $4.6 million, or 6.1%, compared with the fourth quarter of 2018, primarily due to continued declines in approved loss costs in the states in which we write business.  For the full year, gross written premiums decreased by 5.2%. 
  
  
• Voluntary premiums on policies written in the quarter were 8.2% lower than the fourth quarter of 2018, and 6.9% lower for the full year.
  
  
• Payroll audits and related premium adjustments increased premiums written by $4.0 million in the fourth quarter of 2019, compared to $2.3 million in the fourth quarter of 2018.  For the full year 2019, audits and related premium adjustments added $12.3 million to premiums, compared to $7.3 million in 2018, an increase of $5.0 million. 
  
  
• The current accident year loss ratio for the fourth quarter was 72.5%, unchanged from the first three quarters of 2019, and an increase of 1.0 percentage point from the 71.5% ratio for the full year 2018. During the quarter, the Company experienced favorable net loss reserve development for prior accident years, which reduced loss and loss adjustment expenses by $26.1 million, primarily from accident years 2014 through 2017.  For the full year, the company experienced favorable development on prior accident years of $65.0 million, compared with $45.6 million in 2018. The Company attributes its lower claim severities for prior years to benign medical inflation and its claims handling.  The Company anticipates that its current accident year loss ratio will be unchanged for 2020, unless there are unforeseen changes in macro conditions.    
  
  
• For the quarter ended December 31, 2019, the underwriting expense ratio was 17.8% compared with 21.4% in the same quarter in 2018. The decrease in the expense ratio in the fourth quarter was primarily due to the end of an assessment related to a multiple injury fund, which lowered expenses by $3.5 million.  For the year ended December 31, 2019, the underwriting expense ratio was 22.3%, compared with 23.2% in 2018.
  
  
• The effective tax rate for the quarter ended December 31, 2019 was 20.8%, compared with 17.4% for the fourth quarter of 2018.  The effective tax rate for the full year 2019 was 19.8% compared with 18.2% for 2018.  Both rates increased in the quarter and year end period, due to increased taxable income from stronger underwriting profitability and lower expenses.

INVESTMENT RESULTS
	Three Months Ended											Twelve Months Ended
	December 31,											December 31,
		2019				2018			% Change				2019				2018			% Change
	(in thousands)											(in thousands)
Net investment income	$	8,035			$	8,056			-0.3	%		$	32,483			$	30,452			6.7	%
Net realized losses on investments (pre-tax)		(53	)			(65	)		-18.5	%			(80	)			(1,536	)		NM
Net unrealized gains (losses) on equity securities (pre-tax)		1,593				(2,347	)		NM				4,758				(2,088	)		NM
Pre-tax investment yield		2.7	%			2.7	%						2.8	%			2.6	%
Tax-equivalent yield (1)		3.1	%			3.2	%						3.1	%			3.2	%
________________________________
(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 December 31, 2019, decreased 0.3% to $8.0 million from $8.1 million in the fourth quarter of 2018, due to a slightly smaller investment portfolio.  For the full year 2019, net investment income was $32.5 million compared with $30.5 million for 2018, an increase of 6.7%, due to slightly higher yields on fixed income securities.
  
  
• As of December 31, 2019, the carrying 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 8% from $0.25 per share to $0.27 per share, payable on March 27, 2020 to shareholders of record as of March 13, 2020.

SUPPLEMENTAL INFORMATION
		Three Months Ended								Twelve Months Ended
		December 31,								December 31,
			2019				2018				2019				2018
		(in thousands, except share and per share data)
Net income		$	34,014			$	18,806			$	92,690			$	71,632
Less:
Net realized losses on investments			(53	)			(65	)			(80	)			(1,536	)
Net unrealized gains (losses) on equity securities			1,593				(2,347	)			4,758				(2,088	)
Tax effect (1)			(323	)			507				(982	)			761
Operating net income (2)		$	32,797			$	20,711			$	88,994			$	74,495
Average shareholders’ equity (3)		$	449,472			$	434,379			$	419,989			$	417,593
Less:
Average accumulated other comprehensive income (loss)			12,413				(2,517	)			5,690				1,390
Average adjusted shareholders’ equity		$	437,059			$	436,896			$	414,299			$	416,203
Diluted weighted average common shares			19,321,394				19,284,923				19,329,238				19,293,082
Return on average equity (4)			30.3	%			17.3	%			22.1	%			17.2	%
Operating return on average adjusted equity (2)			30.0	%			19.0	%			21.5	%			17.9	%
Diluted earnings per share		$	1.76			$	0.98			$	4.80			$	3.71
Operating earnings per share (2)		$	1.70			$	1.07			$	4.60			$	3.86
________________________________

(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%.
(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 February 20, 2020, at 10:30 a.m. Eastern Time to discuss the results for the quarter and comment on future periods.  To participate in the conference call, dial 323-794-2423 (Conference Code 1019192) at least ten minutes before the call begins.

Investors, analysts and the general public will also have the opportunity to listen to the conference call over the Internet by visiting the “Investor Relations Home” page of the “Investors” section of the Company’s website (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 the same website location.

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,
			2019				2018				2019				2018
		(unaudited)								(unaudited)
Revenues:
Gross premiums written		$	70,706			$	75,328			$	333,460			$	351,696
Ceded premiums written			(2,191	)			(2,362	)			(8,995	)			(9,344	)
Net premiums written		$	68,515			$	72,966			$	324,465			$	342,352
Net premiums earned		$	82,277			$	88,837			$	332,888			$	350,326
Net investment income			8,035				8,056				32,483				30,452
Net realized losses on investments			(53	)			(65	)			(80	)			(1,536	)
Net unrealized gains (losses) on equity securities			1,593				(2,347	)			4,758				(2,088	)
Fee and other income			87				188				321				599
Total revenues			91,939				94,669				370,370				377,753
Expenses:
Loss and loss adjustment expenses incurred			33,535				52,055				176,342				204,891
Underwriting and other operating costs			14,681				18,979				74,351				81,133
Policyholder dividends			797				858				4,160				4,148
Total expenses			49,013				71,892				254,853				290,172
Income before taxes			42,926				22,777				115,517				87,581
Income tax expense			8,912				3,971				22,827				15,949
Net income		$	34,014			$	18,806			$	92,690			$	71,632
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,
			2019				2018				2019				2018
		(unaudited)								(unaudited)
Basic EPS:
Net income		$	34,014			$	18,806			$	92,690			$	71,632
Basic weighted average common shares			19,263,723				19,223,189				19,248,657				19,208,978
Basic earnings per share		$	1.77			$	0.98			$	4.82			$	3.73
Diluted EPS:
Net income		$	34,014			$	18,806			$	92,690			$	71,632
Diluted weighted average common shares:
Weighted average common shares			19,263,723				19,223,189				19,248,657				19,208,978
Stock options and restricted stock			57,671				61,734				80,581				84,104
Diluted weighted average common shares			19,321,394				19,284,923				19,329,238				19,293,082
Diluted earnings per share		$	1.76			$	0.98			$	4.80			$	3.71

AMERISAFE, INC. AND SUBSIDIARIES Consolidated Balance Sheets (in thousands)
	December 31,			December 31,
	2019			2018
	(unaudited)
Assets
Investments	$	1,125,018		$	1,125,490
Cash and cash equivalents		43,813			40,344
Amounts recoverable from reinsurers		95,913			112,006
Premiums receivable, net		157,953			162,478
Deferred income taxes		17,513			21,852
Deferred policy acquisition costs		19,048			19,734
Other assets		33,648			34,027
	$	1,492,906		$	1,515,931
Liabilities and Shareholders’ Equity
Liabilities:
Reserves for loss and loss adjustment expenses	$	772,887		$	798,409
Unearned premiums		140,873			149,296
Insurance-related assessments		22,967			28,258
Other liabilities		125,964			130,206
Shareholders’ equity		430,215			409,762
Total liabilities and shareholders’ equity	$	1,492,906		$	1,515,931

Neal A. Fuller, EVP & CFO
AMERISAFE
337.463.9052

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