AMERISAFE Announces 2018 First Quarter Results

Reports Combined Ratio of 85.6%

DERIDDER, La., April 25, 2018 (GLOBE NEWSWIRE) -- AMERISAFE, Inc. (Nasdaq:AMSF), a specialty provider of hazardous workers’ compensation insurance, today announced results for the first quarter ended March 31, 2018.

	Three Months Ended
	March 31,
		2018			2017		% Change
	(in thousands, except per share data)
Net premiums earned	$	87,310		$	90,912		-4.0	%
Net investment income		7,209			6,710		7.4	%
Net realized losses on investments, pretax		(31	)		(181	)	NM
Net unrealized losses on equity securities, pretax		(390	)		-		NM
Net income		16,169			13,524		19.6	%
Diluted earnings per share	$	0.84		$	0.70		20.0	%
Operating net income		16,502			13,642		21.0	%
Operating earnings per share	$	0.86		$	0.71		21.1	%
Book value per share	$	22.43		$	24.29		-7.7	%
Net combined ratio		85.6	%		86.6	%
Return on average equity		15.1	%		11.7	%

G. Janelle Frost, President and Chief Executive Officer, noted, “Our results this quarter demonstrate our ability to maintain discipline while navigating a competitive workers’ compensation environment.  Pricing pressure continued as approved loss costs declined and carriers aggressively search for premium.  AMERISAFE, however, focused on retaining and serving our valued policyholders through risk selection, proactive safety expertise, and claims management.”

Insurance Results

	Three Months Ended
	March 31,
		2018				2017		% Change
	(in thousands)
Gross premiums written	$	97,342			$	95,078		2.4	%
Net premiums earned		87,310				90,912		-4.0	%
Loss and loss adjustment expenses incurred		53,162				56,216		-5.4	%
Underwriting and certain other operating costs,
commissions, salaries and benefits		20,266				21,222		-4.5	%
Policyholder dividends		1,333				1,371		-2.8	%
Underwriting profit (pre-tax)	$	12,549			$	12,103		3.7	%
Insurance Ratios:
Current accident year loss ratio		71.5	%			69.0	%
Prior accident year loss ratio		-10.6	%			-7.2	%
Net loss ratio		60.9	%			61.8	%
Net underwriting expense ratio		23.2	%			23.3	%
Net dividend ratio		1.5	%			1.5	%
Net combined ratio		85.6	%			86.6	%

• Gross premiums written in the quarter increased by $2.3 million, or 2.4%, due to higher voluntary premiums written and higher payroll audits and related premium adjustments. 

• Voluntary premium for policies written during the quarter ended March 31, 2018 increased by $1.4 million, or 1.6%, compared with the first quarter of 2017.

• Payroll audits and related premium adjustments increased premiums written by $3.3 million in the first quarter of 2018, compared to $2.2 million in the first quarter of 2017.

• The current accident year loss ratio for the first quarter was 71.5%, an increase of 1.0 percentage points from the 70.5% ratio for the full year 2017.  During the quarter, the Company experienced favorable loss development for prior accident years, which reduced loss and loss adjustment expenses by $9.3 million, largely attributable to accident years 2015 and 2014.  These results reflect improved trends for both claims closing, severity of claims and favorable case reserve development on claims that were closed during the quarter.

• For the quarter ended March 31, 2018, the underwriting expense ratio was 23.2% compared to 23.3% in the same quarter in 2017.  The decrease in the quarter was due to lower compensation and insurance assessment expense compared with last year’s first quarter. 

• The effective tax rate for the quarter ended March 31, 2018 was 16.7% compared with 27.8% for the first quarter of 2017.  The decrease is due to the new federal corporate tax rate of 21% on underwriting profits and taxable bond income.

Investment Results

	Three Months Ended
	March 31,
		2018			2017		% Change
	(in thousands)
Net investment income	$	7,209		$	6,710		7.4%
Net realized losses on
investments (pre-tax)		(31	)		(181	)	NM
Net unrealized losses on equity
securities (pre-tax)		(390	)		-		NM
Pre-tax investment yield		2.4	%		2.3	%
Tax-equivalent yield (1)		2.9	%		3.4	%

(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 March 31, 2018, increased 7.4% to $7.2 million from $6.7 million in the first quarter of 2017, largely due to the decrease in value of an investment in a limited partnership hedge fund in last year’s first quarter.
• As of March 31, 2018, 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 $0.22 per share on March 23, 2018.  The $0.22 per share cash dividend reflects a 10% increase from the regular quarterly cash dividend of $0.20 paid in 2017.  On April 24, 2018, the Company’s Board of Directors declared a quarterly cash dividend of $0.22 per share, payable on June 22, 2018 to shareholders of record as of June 8, 2018.

Book value per share at March 31, 2018 was $22.43, an increase of 1.5% from $22.10 as of December 31, 2017.  During the quarter, no shares were repurchased under the Company’s share repurchase plan. 

Supplemental Information

	Three Months Ended
	March 31,
		2018			2017
Net income	$	16,169		$	13,524
Less:
Net realized losses on investments		(31	)		(181	)
Net unrealized losses on equity securities		(390	)		-
Tax effect (1)		88			63
Operating net income (2)	$	16,502		$	13,642
Average shareholders’ equity (3)	$	428,746		$	461,626
Less:
Average accumulated other comprehensive income (loss)		688			(16	)
Average adjusted shareholders’ equity	$	428,058		$	461,642
Diluted weighted average common shares		19,262,237			19,230,125
Return on average equity (4)		15.1	%		11.7	%
Operating return on average adjusted equity (2)		15.4	%		11.8	%
Diluted earnings per share	$	0.84		$	0.70
Operating earnings per share (2)	$	0.86		$	0.71

(1) The tax effect of net realized losses on investments and net unrealized losses on equity securities is calculated assuming an annual tax rate of 21% for 2018 and 35% for 2017.

(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 April 26, 2018, at 10:30 a.m. Eastern Time to discuss the results for the quarter, as well as the outlook for future periods.  To participate in the conference call dial 877-225-7695 (Domestic) or 720-545-0027 (International) at least ten 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 May 4, 2018.  To access the replay, dial 855-859-2056 or 404-537-3406 and use the pass code 5252258#.

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 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 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, 2017.  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
	March 31,
		2018			2017
	(unaudited)
Revenues:
Gross premiums written	$	97,342		$	95,078
Ceded premiums written		(2,330	)		(2,391	)
Net premiums written	$	95,012		$	92,687
Net premiums earned	$	87,310		$	90,912
Net investment income		7,209			6,710
Net realized losses on investments		(31	)		(181	)
Net unrealized losses on equity securities		(390	)		-
Fee and other income		77			101
Total revenues		94,175			97,542
Expenses:
Loss and loss adjustment expenses incurred		53,162			56,216
Underwriting and other operating costs		20,266			21,222
Policyholder dividends		1,333			1,371
Total expenses		74,761			78,809
Income before taxes		19,414			18,733
Income tax expense		3,245			5,209
Net income	$	16,169		$	13,524
	Three Months Ended
	March 31,
		2018			2017
	(unaudited)
Basic EPS:
Net income	$	16,169		$	13,524
Basic weighted average common shares		19,187,136			19,150,400
Basic earnings per share	$	0.84		$	0.71
Diluted EPS:
Net income	$	16,169		$	13,524
Diluted weighted average common shares:
Weighted average common shares		19,187,136			19,150,400
Stock options and restricted stock		75,101			79,725
Diluted weighted average common shares		19,262,237			19,230,125
Diluted earnings per  share	$	0.84		$	0.70

AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets

	March 31,		December 31,
	2018		2017
	(unaudited)
Assets
Investments	$	1,134,793		$	1,130,314
Cash and cash equivalents		36,072			55,559
Amounts recoverable from reinsurers		94,173			90,133
Premiums receivable, net		186,798			174,234
Deferred income taxes		20,499			19,262
Deferred policy acquisition costs		21,287			20,251
Other assets		37,043			26,722
	$	1,530,665		$	1,516,475
Liabilities and Shareholders’ Equity
Liabilities:
Reserves for loss and loss adjustment expenses	$	777,298		$	771,845
Unearned premiums		164,972			157,270
Insurance-related assessments		28,389			28,246
Other liabilities		127,938			135,452
Shareholders’ equity		432,068			425,423
Total liabilities and shareholders’ equity	$	1,530,665		$	1,518,236

 

Contact:
                    Neal A Fuller, EVP & CFO
                    AMERISAFE, Inc.
                    337-463-9052