AMERISAFE Announces 2012 Fourth Quarter And Year-End Results

DERIDDER, La., Feb. 27, 2013 (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, 2012.
  Three Months Ended December 31, Twelve Months Ended December 31,
  2012 2011 % Change 2012 2011 % Change
  (in thousands, except per share data)
Net premiums earned $ 78,741 $ 66,211  18.9% $ 290,689 $ 251,015  15.8%
Net investment income  6,698  6,702  (0.1)%  27,018  26,340  2.6%
Net realized gains on investments (pre-tax)  66  1,468  (95.5)%  2,979  2,228  33.7%
Net income  9,226  8,073  14.3%  29,353  24,181  21.4%
Diluted earnings per share $ 0.50 $ 0.44  13.6% $ 1.58 $ 1.29  22.5%
Operating net income  9,183  5,943  54.5%  27,417  21,291  28.8%
Operating earnings per share $ 0.49 $ 0.32  53.1% $ 1.48 $ 1.14  29.8%
Book value per share $ 20.88 $ 19.25  8.5% $ 20.88 $ 19.25  8.5%
Net combined ratio  92.6%  98.4%    97.5%  100.4%  
Return on average equity  9.8%  9.4%    8.0%  7.1%  

Commenting on these results, Allen Bradley, AMERISAFE's Chairman and Chief Executive Officer, stated, "The workers' compensation marketplace continues to harden. Loss costs and rate increases, coupled with a lessened underwriting appetite for workers' compensation accounts by many carriers, continues to provide AMERISAFE with the opportunity to increase premium volume with higher pricing and better expected margins."

Quarterly Cash Dividend

The Company's Board of Directors declared its first quarterly cash dividend of $0.08 per share, payable on March 28, 2013 to shareholders of record as of March 14, 2013. The Board intends to consider the payment of a regular cash dividend each calendar quarter.   On an annualized basis, the cash dividend is currently expected to be $0.32 per share.

Insurance Results
  Three Months Ended  December 31, Twelve Months Ended  December 31,
  2012 2011 % Change 2012 2011 % Change
  (in thousands)
             
Gross premiums written $ 81,140 $ 62,128  30.6%  $328,823  $272,101 20.8%
Net premiums earned  78,741  66,211  18.9%  290,689  251,015 15.8%
Loss and loss adjustment expenses incurred  57,489  49,627 15.8%  219,903 189,706 15.9%
Underwriting and certain other operating costs, commissions and salaries and benefits  14,876  15,017  (0.9)%  61,433  60,825  1.0%
Policyholder dividends 544  474  14.8%  2,203  1,464  50.5%
Underwriting profit (loss) (pre-tax) 5,832 1,093  433.6% 7,150  (980)  829.6%
             
Insurance Ratios:            
Current accident year loss ratio  76.5%  78.2%    76.5%  78.2%  
Prior accident year loss ratio  (3.5)%  (3.2)%    (0.9)%  (2.6)%  
Net loss ratio  73.0%  75.0%    75.6%  75.6%  
Net underwriting expense ratio 18.9% 22.7%   21.1% 24.2%  
Net dividend ratio 0.7% 0.7%   0.8% 0.6%  
Net combined ratio 92.6% 98.4%   97.5% 100.4%  
  • Voluntary premiums written increased 25.0% in the quarter and 14.9% for the year ended December 31, 2012 compared to the same periods in 2011. Additionally, payroll audits and related premium adjustments for policies written in previous periods increased premiums $7.9 million in the fourth quarter and $20.9 million in the year ended December 31, 2012. In 2011, these premium adjustments increased premium $3.8 million in the fourth quarter and $5.9 million for the year ended December 31.  
  • The current accident year loss ratio for the fourth quarter was 76.5%. During the quarter the Company experienced $2.7 million of favorable prior year development, primarily attributable to accident year 2008. In total, prior accident year development for year ended December 31, 2012 was a favorable $2.5 million, compared to a favorable $6.6 million for the same period in 2011.  
  • For the year ended December 31, 2012, the underwriting expense ratio was 3.1 percentage points lower than the prior year. The primary contributors to the decrease were efficiencies gained by maintaining general operating costs at a level equivalent to the prior year as earned premium increased and recognition of higher experience rated commissions. Level general operating costs resulted in a 1.6 percentage point decrease in the underwriting expense ratio in 2012. Our experience rated commissions offset the expense ratio by 3.8 percentage points in the year ended December 31, 2012 compared to 2.3 percentage points in 2011.  
  • The effective tax rate for the year ended December 31, 2012 was 21.0% compared to 11.6% in the same period in 2011. The increase was driven by tax‑exempt investment income reflecting a smaller percentage of pre-tax income in the year ended December 31, 2012 compared to the same period in 2011. Also in 2011, there was a decrease in the effective rate from a change in the valuation allowance related to capital loss carry forwards.

Geoff Banta, President and Chief Operating Officer, noted, "We experienced another quarter of premium growth with stronger pricing, while maintaining our healthy policy retention levels. Additionally, our claims frequency for the 2012 accident year continued its downward trend and prior accident years developed favorably. Overall, we are pleased with our fourth quarter underwriting results."

Investment Results

  Three Months Ended  December 31, Twelve Months Ended  December 31,
  2012 2011 % Change 2012 2011 % Change
  (in thousands)
Net investment income $ 6,698 $ 6,702 (0.1)% $ 27,018 $ 26,340  2.6%
Net realized gains on investments (pre-tax) 66 1,468 (95.5)% 2,979 2,228 33.7%
Pre-tax investment yield 3.0% 3.2%   3.1% 3.1%  
Tax equivalent yield (1) 4.3% 4.6%   4.3% 4.6%  
________________________________            
(1) The tax equivalent yield is calculated using the effective interest rate and a 35% marginal tax rate.            
  • As of December 31, 2012, the carrying value of AMERISAFE's investment portfolio, including cash and cash equivalents, was $900.8 million and the fair value of the portfolio was $944.9 million.

Supplemental Information

During the quarter, no shares were repurchased under the share repurchase plan. Since the beginning of this plan, the Company has repurchased a total of 1,258,250 shares for $22.4 million, or an average per share price of $17.78, including commissions. On October 30, 2012, the Board of Directors extended the share repurchase program through December 31, 2013.
  Three Months Ended  December 31, Twelve Months Ended  December 31,
  2012 2011 2012 2011
  (in thousands, except share and per share data)
Net income $ 9,226 $ 8,073 $ 29,353 $ 24,181
Less: Net realized capital gains 66 1,468 2,979 2,228
Tax effect of gains (1)  (23)  (514)  (1,043)  (780)
Valuation allowance (1)  —  1,176  —  1,442
Operating net income (2)  9,183  5,943  27,417  21,291
         
Average shareholders' equity (3) $ 376,681 $ 344,820 $ 365,330 $ 339,079
Less: Average other comprehensive income.  3,547  2,229  2,597  1,240
Adjusted average shareholders' equity 373,134 342,591  362,733  337,839
Diluted weighted average common shares 18,602,759 18,492,088 18,575,133 18,700,982
         
Return on average equity (4)  9.8%  9.4%  8.0%  7.1%
Operating return on average equity (2)  9.8%  6.9%  7.6%  6.3%
Diluted earnings per common share  $ 0.50  $ 0.44 $ 1.58 $ 1.29
Operating earnings per common share (2)  $ 0.49  $ 0.32 $ 1.48 $ 1.14
         
(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 adjusted equity and operating earnings per share are non-GAAP financial measures, and management believes that investor's 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 28, 2013, at 10:30 a.m. Eastern Time, to discuss the fourth quarter results and the outlook for future periods. To participate in the conference call dial 720-545-0027 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 7, 2013. To access the replay, dial 855-859-2056 or 404-537-3406 and use the pass code 94677394#.

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 35 states and the District of Columbia.

The AMERISAFE, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=9767

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, 2011. 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 December 31, Twelve Months Ended  December 31,
  2012 2011 2012 2011
  (unaudited)
Revenues:        
Gross premiums written  $ 81,140  $ 62,128  $ 328,823  $ 272,101
Ceded premiums written  (4,398)  (3,394)   (16,305)   (13,881)
 Net premiums written  $ 76,742  $ 58,734  $312,518  $258,220
         
Net premiums earned  $ 78,741  $ 66,211  $ 290,689  $ 251,015
Net investment income  6,698  6,702  27,018  26,340
Net realized gains on investments  66  1,468  2,979  2,228
Fee and other income  78  529  562  1,080
 Total revenues  85,583  74,910  321,248  280,663
         
Expenses:        
Loss and loss adjustment expenses incurred  57,489  49,627  219,903  189,706
Underwriting and other operating costs  14,876  15,017  61,433  60,825
Interest expense  —  275  566  1,311
Policyholder dividends  544  474  2,203  1,464
 Total expenses  72,909  65,393  284,105  253,306
         
Income before taxes  12,674  9,517  37,143  27,357
Income tax expense  3,448  1,444  7,790  3,176
 Net income  $ 9,226  $ 8,073  $ 29,353  $ 24,181
       
       
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,  
  2012 2011 2012 2011
  (unaudited)  
Basic EPS:          
Net income $ 9,226 $ 8,073 $  29,353 $  24,181  
           
Basic weighted average common shares 18,200,394 18,082,974 18,166,175 18,250,173  
Basic earnings per share  $ 0.51  $ 0.45  $ 1.62  $ 1.32  
           
Diluted EPS:          
Net income  $ 9,226  $ 8,073 $ 29,353 $ 24,181  
           
Diluted weighted average common shares:          
 Weighted average common shares 18,200,394 18,082,974 18,166,175 18,250,173  
 Stock options 392,724 405,120  390,829  439,737  
 Restricted stock  3,995  3,994  11,895  11,072  
 Long-term incentive stock  5,646  —  6,234  —  
 Diluted weighted average common shares 18,602,759 18,492,088 18,575,133 18,700,982  
           
Diluted earnings per common share $ 0.50  $   0.44  $ 1.58 $ 1.29  
           
           
AMERISAFE, INC. AND SUBSIDIARIES Consolidated Balance Sheets (in thousands)    
     
  December 31, December 31,
  2012 2011
  (unaudited)  
Assets    
Investments  $ 808,116  $ 805,974
Cash and cash equivalents  92,676  45,536
Amounts recoverable from reinsurers   101,352   96,212
Premiums receivable, net  141,950  121,223
Deferred income taxes  29,521  30,048
Deferred policy acquisition costs  18,419  16,578
Other assets  28,912  28,402
   $ 1,220,946  $ 1,143,973
     
Liabilities and shareholders' equity    
Liabilities:    
Reserves for loss and loss adjustment expenses  $ 570,450  $ 538,214
Unearned premiums  140,528  118,699
Insurance-related assessments  22,244  19,071
Subordinated debt securities  —  25,780
Other liabilities  106,502  92,772
     
Total shareholders' equity  381,222  349,437
Total liabilities and shareholders' equity  $ 1,220,946  $ 1,143,973
CONTACT: G. Janelle Frost, EVP & CFO         AMERISAFE, Inc.         337-463-9052

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