2015 Net Income Grows 31.3%
Increases Regular Dividend 20.0%
DERIDDER, La., Feb. 24, 2016 (GLOBE NEWSWIRE) -- AMERISAFE, Inc. (Nasdaq:AMSF), a specialty provider of hazardous workers’ compensation insurance, today announced results for the fourth quarter and year ended December 31, 2015.
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||
| 2015 | 2014 | % Change | 2015 | 2014 | % Change | |||||||||||||||
| (in thousands, except per share data) | ||||||||||||||||||||
| Net premiums earned | $ | 95,034 | $ | 97,070 | -2.1 | % | $ | 375,894 | $ | 375,747 | 0.0 | % | ||||||||
| Net investment income | 7,256 | 7,166 | 1.3 | % | 27,902 | 27,214 | 2.5 | % | ||||||||||||
| Net realized gains (losses) on investments (pre-tax) | 24 | 516 | NM | (2,494 | ) | 697 | NM | |||||||||||||
| Net income | 23,073 | 16,865 | 36.8 | % | 70,462 | 53,666 | 31.3 | % | ||||||||||||
| Diluted earnings per share | $ | 1.21 | $ | 0.89 | 36.0 | % | $ | 3.69 | $ | 2.84 | 29.9 | % | ||||||||
| Operating net income | 23,057 | 16,530 | 39.5 | % | 72,083 | 53,213 | 35.5 | % | ||||||||||||
| Operating earnings per share | $ | 1.20 | $ | 0.87 | 37.9 | % | $ | 3.77 | $ | 2.81 | 34.2 | % | ||||||||
| Book value per share | $ | 23.73 | $ | 23.65 | 0.3 | % | $ | 23.73 | $ | 23.65 | 0.3 | % | ||||||||
| Net combined ratio | 71.5 | % | 83.4 | % | 79.8 | % | 87.9 | % | ||||||||||||
| Return on average equity | 19.5 | % | 15.1 | % | 15.6 | % | 12.4 | % | ||||||||||||
Allen Bradley, AMERISAFE’s Executive Chairman, commented, “Early projections of the 2015 underwriting results for workers’ compensation market suggest a 96% combined ratio. If accurate, that marks the second consecutive year of an underwriting profit, a rare occurrence in this line of business. Markedly lower investment yields have played the major role in bringing about the underwriting discipline necessary to produce these results. More recently, a slowing national economy coupled with excess capital in the industry has moved the market to a slightly more competitive posture. It remains to be seen if low investment yields compel underwriters to maintain a disciplined approach to pricing and risk selection.”
Insurance Results
| Three Months Ended | Twelve Months Ended | |||||||||||||||||||||||
| December 31, | December 31, | |||||||||||||||||||||||
| 2015 | 2014 | % Change | 2015 | 2014 | % Change | |||||||||||||||||||
| (in thousands) | ||||||||||||||||||||||||
| Gross premiums written | $ | 88,657 | $ | 90,334 | -1.9 | % | $ | 386,529 | $ | 393,819 | -1.9 | % | ||||||||||||
| Net premiums earned | 95,034 | 97,070 | -2.1 | % | 375,894 | 375,747 | 0.0 | % | ||||||||||||||||
| Loss and loss adjustment expenses incurred | 48,321 | 59,346 | -18.6 | % | 214,573 | 244,916 | -12.4 | % | ||||||||||||||||
| Underwriting and certain other operating costs, commissions, salaries and benefits | 19,394 | 21,553 | -10.0 | % | 84,113 | 84,963 | -1.0 | % | ||||||||||||||||
| Policyholder dividends | 277 | 51 | NM | 1,301 | 391 | NM | ||||||||||||||||||
| Underwriting profit (pre-tax) | 27,042 | 16,120 | 67.8 | % | 75,907 | 45,477 | 66.9 | % | ||||||||||||||||
| Insurance Ratios: | ||||||||||||||||||||||||
| Current accident year loss ratio | 69.8 | % | 71.5 | % | 69.8 | % | 71.5 | % | ||||||||||||||||
| Prior accident year loss ratio | -19.0 | % | -10.3 | % | -12.7 | % | -6.3 | % | ||||||||||||||||
| Net loss ratio | 50.8 | % | 61.1 | % | 57.1 | % | 65.2 | % | ||||||||||||||||
| Net underwriting expense ratio | 20.4 | % | 22.2 | % | 22.4 | % | 22.6 | % | ||||||||||||||||
| Net dividend ratio | 0.3 | % | 0.1 | % | 0.3 | % | 0.1 | % | ||||||||||||||||
| Net combined ratio | 71.5 | % | 83.4 | % | 79.8 | % | 87.9 | % | ||||||||||||||||
- Gross premiums written in the quarter decreased by 1.9% compared with last year’s fourth quarter, and for 2015 were 1.9% lower than in 2014. Premiums on voluntary policies written during the quarter decreased by $0.5 million, or 0.6%. For the full year 2015, gross premiums on voluntary policies written were $2.5 million lower, or 0.7% compared to 2014. Payroll audits and related premium adjustments for policies written in prior periods were $3.3 million in the fourth quarter and $12.2 million in the year ended December 31, 2015. In 2014, these premium adjustments totaled $4.5 million in the fourth quarter and $16.8 million for the full year.
- The current accident year loss ratio for the fourth quarter was 69.8%, unchanged from prior quarters in 2015. During the quarter, the Company experienced favorable loss development for prior accident years which reduced loss and loss adjustment expenses by $18.0 million, mostly attributable to accident years 2012, 2013, and years 2008 and prior. In total, prior accident year development for the year ended December 31, 2015 resulted in favorable development of $47.8 million, compared with favorable development of $23.7 million in 2014. These results reflect improved trends on frequency and were driven largely by favorable case reserve development on claims that were closed during the year.
- For the quarter ended December 31, 2015, the underwriting expense ratio was 20.4% compared to 22.2% in the same quarter in 2014. The decrease in the quarter was due to lower contingent profit sharing commission expense compared with last year’s fourth quarter when there was an additional $2.8 million of this expense. For the year ended December 31, 2015, the underwriting expense ratio was 22.4%, a slight decrease compared with 22.6% in 2014.
- The effective tax rate for the year ended December 31, 2015 was 30.2% compared with 27.2% for 2014. The increase in the tax rate resulted from continued improvement in our underwriting margins which created improved profitability and a higher proportion of underwriting income to tax-exempt income relative to 2014.
- Return on average equity was 19.5% for the fourth quarter and 15.6% for the year ended December 31, 2015, compared to 15.1% for the fourth quarter of 2014 and 12.4% for 2014.
G. Janelle Frost, President and Chief Executive Officer, noted, “We are pleased with our financial results for the year. AMERISAFE performed well during the softening cycle. Operationally, we continued to execute on our model of extensive claims handling, expense control, and equally important, maintaining our underwriting discipline in a declining rate environment. Our capital management activities also demonstrated our commitment to our shareholders. Both our combined ratio of 79.8% and return on average equity of 15.6% are the result of our focus on our niche market combined with the expertise, experience and dedication of our employees.”
Investment Results
| Three Months Ended | Twelve Months Ended | ||||||||||||||||||||||||
| December 31, | December 31, | ||||||||||||||||||||||||
| 2015 | 2014 | % Change | 2015 | 2014 | % Change | ||||||||||||||||||||
| (in thousands) | |||||||||||||||||||||||||
| Net investment income | $ | 7,256 | $ | 7,166 | 1.3 | % | $ | 27,902 | $ | 27,214 | 2.5 | % | |||||||||||||
| Net realized gains (losses) on investments (pre-tax) | 24 | 516 | NM | (2,494 | ) | 697 | NM | ||||||||||||||||||
| Pre-tax investment yield | 2.6 | % | 2.6 | % | 2.5 | % | 2.6 | % | |||||||||||||||||
| Tax-equivalent yield (1) | 3.5 | % | 3.5 | % | 3.5 | % | 3.5 | % | |||||||||||||||||
| ________________________________ | |||||||||||||||||||||||||
(1) The tax equivalent yield is calculated using the effective interest rate and a 35% marginal tax rate.
- As of December 31 2015, the carrying and fair value of AMERISAFE’s investment portfolio, including cash and cash equivalents, was $1.1 billion.
Capital Management
On February 23, 2016, the Company’s Board of Directors increased the regular quarterly dividend from $0.15 per share to $0.18 per share, a 20.0% increase, payable on March 28, 2016 to shareholders of record as of March 14, 2016.
During the quarter and year, no shares were repurchased under our share repurchase plan.
Supplemental Information
| Three Months Ended | Twelve Months Ended | |||||||||||||||
| December 31, | December 31, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| (in thousands, except share and per share data) | ||||||||||||||||
| Net income | $ | 23,073 | $ | 16,865 | $ | 70,462 | $ | 53,666 | ||||||||
| Less: Net realized capital gains (losses) | 24 | 516 | (2,494 | ) | 697 | |||||||||||
| Tax effect (1) | (8 | ) | (181 | ) | 873 | (244 | ) | |||||||||
| Operating net income (2) | 23,057 | 16,530 | 72,083 | 53,213 | ||||||||||||
| Average shareholders’ equity (3) | 472,279 | 447,726 | 450,475 | 431,891 | ||||||||||||
| Less: Average other comprehensive income (loss) | 2,974 | 2,444 | 2,699 | (743 | ) | |||||||||||
| Average adjusted shareholders’ equity | 469,305 | 445,282 | 447,776 | 432,634 | ||||||||||||
| Diluted weighted average common shares | 19,137,418 | 18,994,995 | 19,119,186 | 18,928,504 | ||||||||||||
| Return on average equity (4) | 19.5 | % | 15.1 | % | 15.6 | % | 12.4 | % | ||||||||
| Operating return on average adjusted equity (2) | 19.7 | % | 14.8 | % | 16.1 | % | 12.3 | % | ||||||||
| Diluted earnings per common share | $ | 1.21 | $ | 0.89 | $ | 3.69 | $ | 2.84 | ||||||||
| Operating earnings per common share (2) | $ | 1.20 | $ | 0.87 | $ | 3.77 | $ | 2.81 | ||||||||
| ________________________________ | ||||||||||||||||
(1) The tax effect of net realized capital gains is calculated assuming an annual tax rate of 35%.
(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 25, 2016, at 10:30 a.m. Eastern Time to discuss the results for the quarter and year end, 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 March 3, 2016. To access the replay, dial 855-859-2056 or 404-537-3406 and use the pass code 38532184#.
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, manufacturing, agriculture and oil and gas. 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 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, 2014. 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, | ||||||||||||||||
| 2015 | 2014 | 2015 | 2014 | ||||||||||||||
| (unaudited) | (unaudited) | ||||||||||||||||
| Revenues: | |||||||||||||||||
| Gross premiums written | $ | 88,657 | $ | 90,334 | $ | 386,529 | $ | 393,819 | |||||||||
| Ceded premiums written | (1,911 | ) | (3,138 | ) | (11,228 | ) | (13,793 | ) | |||||||||
| Net premiums written | $ | 86,746 | $ | 87,196 | $ | 375,301 | $ | 380,026 | |||||||||
| Net premiums earned | $ | 95,034 | $ | 97,070 | $ | 375,894 | $ | 375,747 | |||||||||
| Net investment income | 7,256 | 7,166 | 27,902 | 27,214 | |||||||||||||
| Net realized gains (losses) on investments | 24 | 516 | (2,494 | ) | 697 | ||||||||||||
| Loss on disposal of assets | (639 | ) | - | (664 | ) | - | |||||||||||
| Fee and other income | 85 | 134 | 316 | 361 | |||||||||||||
| Total revenues | 101,760 | 104,886 | 400,954 | 404,019 | |||||||||||||
| Expenses: | |||||||||||||||||
| Loss and loss adjustment expenses incurred | 48,321 | 59,346 | 214,573 | 244,916 | |||||||||||||
| Underwriting and other operating costs | 19,394 | 21,553 | 84,113 | 84,963 | |||||||||||||
| Policyholder dividends | 277 | 51 | 1,301 | 391 | |||||||||||||
| Total expenses | 67,992 | 80,950 | 299,987 | 330,270 | |||||||||||||
| Income before taxes | 33,768 | 23,936 | 100,967 | 73,749 | |||||||||||||
| Income tax expense | 10,695 | 7,071 | 30,505 | 20,083 | |||||||||||||
| Net income | $ | 23,073 | $ | 16,865 | $ | 70,462 | $ | 53,666 | |||||||||
| 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, | |||||||||||||||
| 2015 | 2014 | 2015 | 2014 | |||||||||||||
| (unaudited) | (unaudited) | |||||||||||||||
| Basic EPS: | ||||||||||||||||
| Net income | $ | 23,073 | $ | 16,865 | $ | 70,462 | $ | 53,666 | ||||||||
| Basic weighted average common shares | 19,028,352 | 18,773,461 | 18,941,077 | 18,646,128 | ||||||||||||
| Basic earnings per share | $ | 1.21 | $ | 0.90 | $ | 3.72 | $ | 2.88 | ||||||||
| Diluted EPS: | ||||||||||||||||
| Net income | $ | 23,073 | $ | 16,865 | $ | 70,462 | $ | 53,666 | ||||||||
| Diluted weighted average common shares: | ||||||||||||||||
| Weighted average common shares | 19,028,352 | 18,773,461 | 18,941,077 | 18,646,128 | ||||||||||||
| Stock options and performance shares | 109,066 | 221,534 | 178,109 | 282,376 | ||||||||||||
| Diluted weighted average common shares | 19,137,418 | 18,994,995 | 19,119,186 | 18,928,504 | ||||||||||||
| Diluted earnings per common share | $ | 1.21 | $ | 0.89 | $ | 3.69 | $ | 2.84 | ||||||||
| AMERISAFE, INC. AND SUBSIDIARIES | ||||||||
| Consolidated Balance Sheets | ||||||||
| December 31, | December 31, | |||||||
| 2015 | 2014 | |||||||
| (unaudited) | ||||||||
| Assets | ||||||||
| Investments | $ | 1,045,152 | $ | 1,016,333 | ||||
| Cash and cash equivalents | 69,481 | 90,956 | ||||||
| Amounts recoverable from reinsurers | 91,077 | 85,888 | ||||||
| Premiums receivable, net | 185,364 | 178,917 | ||||||
| Deferred income taxes | 29,905 | 31,231 | ||||||
| Deferred policy acquisition costs | 20,412 | 19,649 | ||||||
| Other assets | 60,654 | 34,246 | ||||||
| $ | 1,502,045 | $ | 1,457,220 | |||||
| Liabilities and Shareholders’ Equity | ||||||||
| Liabilities: | ||||||||
| Reserves for loss and loss adjustment expenses | $ | 718,033 | $ | 687,602 | ||||
| Unearned premiums | 167,983 | 168,576 | ||||||
| Insurance-related assessments | 32,329 | 29,315 | ||||||
| Other liabilities | 129,719 | 124,759 | ||||||
| Shareholders’ equity | 453,981 | 446,968 | ||||||
| Total liabilities and shareholders’ equity | $ | 1,502,045 | $ | 1,457,220 | ||||