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AMERISAFE Announces 2020 Second Quarter Results

Reports Combined Ratio of 78.5%

/EIN News/ -- DERIDDER, La., July 30, 2020 (GLOBE NEWSWIRE) -- AMERISAFE, Inc. (Nasdaq: AMSF), a specialty provider of workers’ compensation insurance focused on high hazard industries, today announced results for the second quarter ended June 30, 2020.

  Three Months Ended       Six Months Ended    
  June 30,       June 30,    
    2020       2019     % Change     2020       2019     % Change
                           
  (in thousands, except per share data)       (in thousands, except per share data)    
Net premiums earned $ 75,964     $ 82,951     -8.4 %   $ 154,954     $ 167,899     -7.7 %
Net investment income   7,324       8,169     -10.3 %     15,073       16,184     -6.9 %
Net realized gains (losses) on investments (pretax)   163       (82 )   NM       1,155       (23 )   NM  
Net unrealized gains (losses) on                          
equity securities (pre-tax)   5,570       642     NM       (3,193 )     2,800     NM  
Net income   23,948       17,890     33.9 %     34,748       37,290     -6.8 %
Diluted earnings per share. $ 1.24     $ 0.93     33.3 %   $ 1.80     $ 1.93     -6.7 %
Operating net income   19,419       17,448     11.3 %     36,358       35,096     3.6 %
Operating earnings per share $ 1.00     $ 0.90     11.1 %   $ 1.88     $ 1.82     3.3 %
Book value per share $ 23.94     $ 23.29     2.8 %   $ 23.94     $ 23.29     2.8 %
Net combined ratio   78.5 %     83.9 %         81.1 %     84.0 %    
Return on average equity   21.3 %     16.3 %         15.6 %     17.4 %    

G. Janelle Frost, President and Chief Executive Officer, observed, “AMERISAFE’s fundamentals are crucial in these unprecedented times.  We are serving our stakeholders with disciplined underwriting, proactive safety and intensive claims management, which produce consistent returns, quality insurance services and financial stability.  This quarter those fundamentals led to favorable prior year case development and a combined ratio of 78.5%.  Over time, those fundamentals have led to twelve consecutive years as one of Ward’s Top 50 P&C companies.  We are honored by the recognition and encouraged to continue seeking excellence for our stakeholders.”

               
INSURANCE RESULTS              
  Three Months Ended       Six Months Ended    
  June 30,       June 30,    
    2020       2019     % Change     2020       2019     % Change
                           
  (in thousands)       (in thousands)    
                       
Gross premiums written $ 80,289     $ 87,018     -7.7 %   $ 167,360     $ 180,125     -7.1 %
Net premiums earned   75,964       82,951     -8.4 %     154,954       167,899     -7.7 %
Loss and loss adjustment expenses incurred   37,530       48,868     -23.2 %     81,177       98,482     -17.6 %
Underwriting and certain other operating costs,                          
commissions, salaries and benefits   21,131       19,718     7.2 %     42,415       40,385     5.0 %
Policyholder dividends   948       998     -5.0 %     1,971       2,098     -6.1 %
Underwriting profit (pre-tax). $ 16,273     $ 13,367     21.7 %   $ 29,335     $ 26,934     8.9 %
                                           
Insurance Ratios:                                          
Current accident year loss ratio   72.5 %     72.5 %           72.5 %     72.5 %      
Prior accident year loss ratio   -23.1 %     -13.6 %           -20.1 %     -13.8 %      
Net loss ratio   49.4 %     58.9 %           52.4 %     58.7 %      
Net underwriting expense ratio   27.8 %     23.8 %           27.4 %     24.1 %      
Net dividend ratio   1.3 %     1.2 %           1.3 %     1.2 %      
Net combined ratio   78.5 %     83.9 %           81.1 %     84.0 %      
  • Gross premiums written in the second quarter of 2020 decreased by $6.7 million, or 7.7%, primarily due to lower voluntary premiums on policies written in the quarter which were 6.4% lower as compared to the second quarter of 2019.

  • Payroll audits and related premium adjustments increased premiums written by $0.5 million in the second quarter of 2020, compared to an increase in premiums written of $1.8 million in the second quarter of 2019. The amount this quarter included a $1.4 million reduction in anticipated future audit premiums.

  • The current accident year loss ratio for the second quarter was 72.5%, unchanged from the first quarter of 2020, and unchanged from accident year 2019. During the quarter, the Company experienced favorable case reserve development for prior accident years, which reduced loss and loss adjustment expenses by $17.5 million, attributed primarily to accident years 2015 through 2018. 

  • For the quarter ended June 30, 2020, the underwriting expense ratio was 27.8% compared with 23.8% in the same quarter in 2019. The increase in the expense ratio was due to lower earned premium and higher expenses.  Last year’s second quarter included $1.0 million in favorable lower estimates of variable share price based incentive compensation costs and $0.6 million in favorable lower insurance assessment costs.

  • The effective tax rate for the quarter ended June 30, 2020 was 18.5%, compared with 19.3% for the second quarter of 2019.  The decrease is due to a higher level of tax-exempt interest income in 2020 compared to 2019.
               
INVESTMENT RESULTS              
  Three Months Ended       Six Months Ended    
  June 30,       June 30,    
    2020       2019     % Change     2020       2019     % Change
  (in thousands)       (in thousands)    
Net investment income $ 7,324     $ 8,169     -10.3 %   $ 15,073     $ 16,184     -6.9 %
Net realized gains (losses) on                                          
investments (pre-tax)   163       (82 )   NM       1,155       (23 )   NM  
Net unrealized gains (losses) on                                          
equity securities (pre-tax)   5,570       642     NM       (3,193 )     2,800     NM  
Pre-tax investment yield   2.5 %     2.7 %           2.5 %     2.7 %      
Tax-equivalent yield (1)   2.9 %     3.1 %           2.9 %     3.1 %      
________________________________                                          
                                           
(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 June 30, 2020, decreased 10.3% to $7.3 million from $8.2 million in the second quarter of 2019, due to lower investment yields on fixed-income securities.

  • Net unrealized gains on equity investments were $5.6 million during the second quarter of 2020, which increased overall net income by $0.23 per share.

  • As of June 30, 2020, the carrying value of AMERISAFE’s investment portfolio, including cash and cash equivalents, was $1.2 billion.  

CAPITAL MANAGEMENT

The Company paid a regular quarterly cash dividend of $0.27 per share on June 26, 2020.  On July 27, 2020 the Company’s Board of Directors declared a quarterly cash dividend of $0.27 per share, payable on September 25, 2020 to shareholders of record as of September 11, 2020.

Book value per share at June 30, 2020 was $23.94, an increase of 7.4% from $22.29 at December 31, 2019.

CORONAVIRUS (COVID-19) UPDATE

During the second quarter, AMERISAFE began gradually returning employees to our offices, with protocols in place to protect the health and safety of our employees.  Many employees also continue to work from home, assisting agents and policyholders with their workers compensation insurance.  AMERISAFE has also begun returning our Safety and Claims professionals to the field, where these professionals inspect job sites and meet with injured workers, all following health and safety guidelines. Additionally, the Company continues to work with customers utilizing virtual meeting tools along with access via phone, email and through our website.  At this point and time, the Company is conducting business with no disruption to operations.

AMERISAFE policyholders are small to mid-sized employers engaged in hazardous industries, principally construction (44%), trucking (18%), logging and lumber (8%), manufacturing (5%), agriculture (5%), maritime (2%), and oil and gas (2%) with the remainder (16%) in a wide variety of hazardous industries (based on 2019 premiums). 

There continues to be uncertainty about the impact to our policyholders from COVID-19 and our customers’ business operations, including payrolls, which is a primary source of premium revenue for AMERISAFE.  In most industries and states, business continues, and in some cases the activities of our policyholders have been restricted due to the pandemic and associated recession.

Premiums in future periods will depend on the ongoing economic impact of COVID-19.   Investment income may decline, and the market value of investment securities may decrease, depending on the ongoing economic impact.

         
SUPPLEMENTAL INFORMATION        
    Three Months Ended   Six Months Ended
    June 30,   June 30,
      2020       2019       2020       2019  
    (in thousands, except share and per share data)
                 
Net income.   $ 23,948     $ 17,890     $ 34,748     $ 37,290  
Less:                
Net realized gains (losses) on investments.     163       (82 )     1,155       (23 )
Net unrealized gains (losses) on equity securities     5,570       642       (3,193 )     2,800  
Tax effect (1)     (1,204 )     (118 )     428       (583 )
Operating net income (2)   $ 19,419     $ 17,448     $ 36,358     $ 35,096  
                 
Average shareholders’ equity (3) .   $ 449,876     $ 439,924     $ 446,506     $ 429,603  
Less:                
Average accumulated other comprehensive income      16,437       7,551       15,695       4,654  
Average adjusted shareholders’ equity (2)    $ 433,439     $ 432,373     $ 430,811     $ 424,949  
                 
Diluted weighted average common shares      19,335,707       19,306,953       19,335,748       19,316,276  
                 
Return on average equity (4)      21.3 %     16.3 %     15.6 %     17.4 %
Operating return on average adjusted equity (2)     17.9 %     16.1 %     16.9 %     16.5 %
Diluted earnings per share .   $ 1.24     $ 0.93     $ 1.80     $ 1.93  
Operating earnings per share (2) .   $ 1.00     $ 0.90     $ 1.88     $ 1.82  
________________________________                

(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 July 31, 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 323-701-0225 (Conference Code 7192493) 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 http://www.amerisafe.com. To listen to the live call on the web, please visit the website at least ten 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 impact of the COVID-19 pandemic on the business and operations of the Company and our policyholders and the market value of the securities in our investment portfolio.  Other factors that may affect our results are 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, 2019. 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   Six Months Ended
    June 30,   June 30,
      2020       2019       2020       2019  
                     
    (unaudited)   (unaudited)
Revenues:                                
Gross premiums written   $ 80,289     $ 87,018     $ 167,360     $ 180,125  
Ceded premiums written     (2,672 )     (2,204 )     (5,455 )     (4,634 )
Net premiums written   $ 77,617     $ 84,814     $ 161,905     $ 175,491  
                                 
Net premiums earned   $ 75,964     $ 82,951     $ 154,954     $ 167,899  
Net investment income     7,324       8,169       15,073       16,184  
Net realized gains (losses) on investments     163       (82 )     1,155       (23 )
Net unrealized gains (losses) on equity securities     5,570       642       (3,193 )     2,800  
Loss on disposal of assets     (29 )     -       (29 )     -  
Fee and other income     90       73       291       83  
Total revenues     89,082       91,753       168,251       186,943  
                                 
Expenses:                                
Loss and loss adjustment expenses incurred     37,530       48,868       81,177       98,482  
Underwriting and other operating costs     21,131       19,718       42,415       40,385  
Policyholder dividends     948       998       1,971       2,098  
Provision for investment related credit loss expense     82       -       56       -  
Total expenses     59,691       69,584       125,619       140,965  
                                 
Income before taxes     29,391       22,169       42,632       45,978  
Income tax expense     5,443       4,279       7,884       8,688  
Net income   $ 23,948     $ 17,890     $ 34,748     $ 37,290  
                                 


AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Statements of Income (cont.)
(in thousands, except per share amounts)
                 
    Three Months Ended   Six Months Ended
    June 30,   June 30,
      2020       2019       2020       2019  
                                 
    (unaudited)   (unaudited)
Basic EPS:                                
Net income   $ 23,948     $ 17,890     $ 34,748     $ 37,290  
                                 
Basic weighted average common shares     19,280,684       19,245,592       19,273,347       19,237,401  
Basic earnings per share   $ 1.24     $ 0.93     $ 1.80     $ 1.94  
                                 
Diluted EPS:                                
Net income   $ 23,948     $ 17,890     $ 34,748     $ 37,290  
                                 
Diluted weighted average common shares:                                
Weighted average common shares     19,280,684       19,245,592       19,273,347       19,237,401  
Stock options and restricted stock     55,023       61,361       62,401       78,875  
Diluted weighted average common shares     19,335,707       19,306,953       19,335,748       19,316,276  
                                 
Diluted earnings per share   $ 1.24     $ 0.93     $ 1.80     $ 1.93  
                                 


AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
       
  June 30,   December 31,
  2020   2019
  (unaudited)    
Assets          
Investments $ 1,098,760   $ 1,125,018
Cash and cash equivalents   110,281     43,813
Amounts recoverable from reinsurers   103,524     95,913
Premiums receivable, net   175,241     157,953
Deferred income taxes   16,704     17,513
Deferred policy acquisition costs   19,765     19,048
Other assets   25,698     33,648
  $ 1,549,973   $ 1,492,906
           
Liabilities and Shareholders’ Equity          
Liabilities:          
Reserves for loss and loss adjustment expenses $ 768,767   $ 772,887
Unearned premiums   147,824     140,873
Insurance-related assessments   25,955     22,967
Other liabilities   144,631     125,964
           
Shareholders’ equity   462,796     430,215
Total liabilities and shareholders’ equity $ 1,549,973   $ 1,492,906
       
Neal A. Fuller, EVP & CFO
AMERISAFE
337.463.9052

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