AMERISAFE Announces 2020 Third Quarter Results

Rhea-AI Summary

AMERISAFE, Inc. (Nasdaq: AMSF) announced a $3.50 per share extraordinary dividend and reported a net combined ratio of 72.8% for Q3 2020. Despite a 9.6% decline in net premiums earned at $74.8 million, net income increased 9.2% year-over-year to $23.4 million, resulting in diluted earnings per share of $1.21. The company experienced a 14.5% drop in net investment income and gross premiums written were 12.1% lower. AMERISAFE maintained a strong capital position despite challenges from Hurricanes Laura and Delta.

Positive

• Net income increased 9.2% to $23.4 million.
• Diluted earnings per share rose to $1.21, up 9.0% year-over-year.
• Announced an extraordinary dividend of $3.50 per share.
• Return on average equity was 19.8%, up from 18.6%.

Negative

• Net premiums earned dropped 9.6% to $74.8 million.
• Net investment income decreased 14.5% to $7.1 million.
• Gross premiums written declined by 12.1%.

Declares an Extraordinary Dividend of $3.50 Per Share 
Reports Combined Ratio of 72.8%

DERIDDER, La., Oct. 28, 2020 (GLOBE NEWSWIRE) -- AMERISAFE, Inc. (Nasdaq: AMSF), a specialty provider of workers’ compensation insurance focused on high hazard industries, today announced results for the third quarter ended September 30, 2020.

	Three Months Ended											Nine Months Ended
	September 30,											September 30,
		2020				2019			% Change				2020				2019			% Change
	(in thousands, except per share data)											(in thousands, except per share data)
Net premiums earned	$	74,771			$	82,712			-9.6	%		$	229,725			$	250,611			-8.3	%
Net investment income		7,063				8,264			-14.5	%			22,136				24,448			-9.5	%
Net realized gains (losses) on investments (pretax)		309				(4	)		NM				1,464				(27	)		NM
Net unrealized gains (losses) on
equity securities (pre-tax)		844				365			131.2	%			(2,349	)			3,165			NM
Net income		23,353				21,386			9.2	%			58,101				58,676			-1.0	%
Diluted earnings per share	$	1.21			$	1.11			9.0	%		$	3.00			$	3.04			-1.3	%
Operating net income		22,442				21,101			6.4	%			58,800				56,197			4.6	%
Operating earnings per share	$	1.16			$	1.09			6.4	%		$	3.04			$	2.91			4.5	%
Book value per share	$	24.93			$	24.29			2.6	%		$	24.93			$	24.29			2.6	%
Net combined ratio		72.8	%			78.4	%						78.4	%			82.1	%
Return on average equity		19.8	%			18.6	%						17.0	%			17.8	%

G. Janelle Frost, President and Chief Executive Officer, noted, “AMERISAFE continued to see loss cost declines and robust competition in the states we actively market and hazard classes we underwrite.  These conditions suppressed premium, with policy count written in the quarter only down slightly.  However, AMERISAFE’s profitability remained strong. Our focus on managing expenses benefitted this quarter from a loss assessment change.  We also continued to reach favorable outcomes on prior year claims.  Our underwriting profit, along with investment returns, produced a 19.8% return on average equity for the quarter, and a strong capital position supported an extraordinary dividend for shareholders.”

INSURANCE RESULTS

	Three Months Ended											Nine Months Ended
	September 30,											September 30,
		2020				2019			% Change				2020				2019			% Change
	(in thousands)											(in thousands)
Gross premiums written	$	72,648			$	82,629			-12.1	%		$	240,008			$	262,754			-8.7	%
Net premiums earned		74,771				82,712			-9.6	%			229,725				250,611			-8.3	%
Loss and loss adjustment expenses incurred		39,789				44,325			-10.2	%			120,966				142,807			-15.3	%
Underwriting and certain other operating costs,
commissions, salaries and benefits		13,902				19,285			-27.9	%			56,317				59,670			-5.6	%
Policyholder dividends		714				1,265			-43.6	%			2,685				3,363			-20.2	%
Underwriting profit (pre-tax)	$	20,366			$	17,837			14.2	%		$	49,757			$	44,771			11.1	%
Insurance Ratios:
Current accident year loss ratio		72.5	%			72.5	%						72.5	%			72.5	%
Prior accident year loss ratio		-19.3	%			-18.9	%						-19.8	%			-15.5	%
Net loss ratio		53.2	%			53.6	%						52.7	%			57.0	%
Net underwriting expense ratio		18.6	%			23.3	%						24.5	%			23.8	%
Net dividend ratio		1.0	%			1.5	%						1.2	%			1.3	%
Net combined ratio		72.8	%			78.4	%						78.4	%			82.1	%

• Gross premiums written in the third quarter of 2020 decreased by $10.0 million, or 12.1%, primarily due to lower voluntary premiums on policies written in the quarter which were 10.7% lower as compared to the third quarter of 2019. The primary driver of lower premiums were lower state rates, which were 7.8% lower on average than in the third quarter of 2019.
• Payroll audits and related premium adjustments increased premiums written by $1.1 million in the third quarter of 2020, compared to an increase in premiums written of $2.0 million in the third quarter of 2019.
• The current accident year loss ratio for the third quarter was 72.5%, unchanged from the first half 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 $14.4 million, attributed primarily to accident years 2014 through 2018.  
• For the quarter ended September 30, 2020, the underwriting expense ratio was 18.6% compared with 23.3% in the same quarter in 2019. The decrease in the expense ratio in the third quarter was due to the early termination of an assessment related to a state multiple injury fund, which lowered expenses by $5.7 million. Without the assessment change, the expense ratio would have been 26.2% for the third quarter of 2020.
• The effective tax rate for the quarter ended September 30, 2020 was 18.5%, compared with 19.6% for the third quarter of 2019. The decrease was due to a higher proportion of tax-exempt income in 2020 compared to 2019.
  

INVESTMENT RESULTS

	Three Months Ended											Nine Months Ended
	September 30,											September 30,
		2020				2019			% Change				2020				2019			% Change
	(in thousands)											(in thousands)
Net investment income	$	7,063			$	8,264			-14.5	%		$	22,136			$	24,448			-9.5	%
Net realized gains (losses) on
investments (pre-tax)		309				(4	)		NM				1,464				(27	)		NM
Net unrealized gains (losses) on
equity securities (pre-tax)		844				365			131.2	%			(2,349	)			3,165			NM
Pre-tax investment yield		2.3	%			2.7	%						2.5	%			2.7	%
Tax-equivalent yield (1)		2.8	%			3.1	%						2.8	%			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 September 30, 2020, decreased 14.5% to $7.1 million from $8.3 million in the third quarter of 2019, due to lower investment yields on fixed-income securities.
• As of September 30, 2020, the carrying value of AMERISAFE’s investment portfolio, including cash and cash equivalents, was $1.2 billion.
  

CAPITAL MANAGEMENT

In an accompanying press release the Company announced a special cash dividend of $3.50 per share, payable on November 18, 2020, to shareholders of record as of November 11, 2020.

In addition, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.27 per share, payable on December 18, 2020 to shareholders of record as of December 4, 2020.

Book value per share at September 30, 2020 was $24.93, an increase of 11.8% from $22.29 at December 31, 2019.

HURRICANES LAURA AND DELTA

On August 27, 2020 the DeRidder area in Southwest Louisiana was significantly impacted by Hurricane Laura (category 4) with winds of 150 miles per hour at landfall. There was widespread damage to homes, trees, and the power infrastructure of the area. AMERISAFE’s business continuity plans were in place including internet and IT system redundancies, and our ability to operate on generator power. The storm impacted nearly half of our employee base. Our dedicated employees, both in DeRidder and throughout the country, were able to continue to serve our customers without significant disruption to business operations, despite their personal circumstances. Aided by volunteers throughout the community and electrical professionals from throughout the country, recovery efforts continued and most power was restored to the community within two weeks, although rebuilding and roofing repairs continue.

On October 9, 2020 the DeRidder area was again impacted, this time by Hurricane Delta (category 2) with winds of 100 miles per hour at landfall. AMERISAFE’s employees once again rose to the occasion, continuing to serve our customers with minimal disruption to ongoing operations. The impact of this storm was again significant to the power infrastructure of the area, and recovery efforts continue to restore power and internet services to the community.

G. Janelle Frost noted, “The back to back hurricanes amid the ongoing COVID-19 pandemic, challenged AMERISAFE in ways we did not imagine. In these trying times, our employees and our community remained resilient. I am continually impressed with our employees and their ability to focus and provide outstanding results for AMERISAFE’s stakeholders. We want to thank all the first responders, electrical professionals, loggers, and volunteers who have helped to rebuild our community. We also want to thank our field employees who donated supplies and delivered them to the DeRidder community from across the country.”

SUPPLEMENTAL INFORMATION

	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2020				2019				2020				2019
	(in thousands, except share and per share data)
Net income	$	23,353			$	21,386			$	58,101			$	58,676
Less:
Net realized gains (losses) on investments		309				(4	)			1,464				(27	)
Net unrealized gains (losses) on equity securities		844				365				(2,349	)			3,165
Tax effect (1)		(242	)			(76	)			186				(659	)
Operating net income (2)	$	22,442			$	21,101			$	58,800			$	56,197
Average shareholders’ equity (3)	$	472,353			$	459,086			$	456,063			$	439,246
Less:
Average accumulated other comprehensive income		19,545				11,378				16,062				5,892
Average adjusted shareholders’ equity (2)	$	452,808			$	447,708			$	440,001			$	433,354
Diluted weighted average common shares		19,358,682				19,302,551				19,345,952				19,320,199
Return on average equity (4)		19.8	%			18.6	%			17.0	%			17.8	%
Operating return on average adjusted equity (2)		19.8	%			18.9	%			17.8	%			17.3	%
Diluted earnings per share	$	1.21			$	1.11			$	3.00			$	3.04
Operating earnings per share (2)	$	1.16			$	1.09			$	3.04			$	2.91
________________________________

(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 October 29, 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 2623310) 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 recent hurricanes on our policyholders and employees, and on the Company’s business and financial results, 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								Nine Months Ended
	September 30,								September 30,
		2020				2019				2020				2019
	(unaudited)								(unaudited)
Revenues:
Gross premiums written	$	72,648			$	82,629			$	240,008			$	262,754
Ceded premiums written		(2,473	)			(2,170	)			(7,928	)			(6,804	)
Net premiums written	$	70,175			$	80,459			$	232,080			$	255,950
Net premiums earned	$	74,771			$	82,712			$	229,725			$	250,611
Net investment income		7,063				8,264				22,136				24,448
Net realized gains (losses) on investments		309				(4	)			1,464				(27	)
Net unrealized gains (losses) on equity securities		844				365				(2,349	)			3,165
Loss on disposal of assets		-				(2	)			(29	)			(2	)
Fee and other income		18				153				309				236
Total revenues		83,005				91,488				251,256				278,431
Expenses:
Loss and loss adjustment expenses incurred		39,789				44,325				120,966				142,807
Underwriting and other operating costs		13,902				19,285				56,317				59,670
Policyholder dividends		714				1,265				2,685				3,363
Provision for investment related credit loss benefit		(69	)			-				(13	)			-
Total expenses		54,336				64,875				179,955				205,840
Income before taxes		28,669				26,613				71,301				72,591
Income tax expense		5,316				5,227				13,200				13,915
Net income	$	23,353			$	21,386			$	58,101			$	58,676
AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Statements of Income (cont.)
(in thousands, except per share amounts)
	Three Months Ended								Nine Months Ended
	September 30,								September 30,
		2020				2019				2020				2019
	(unaudited)								(unaudited)
Basic EPS:
Net income	$	23,353			$	21,386			$	58,101			$	58,676
Basic weighted average common shares		19,299,921				19,256,069				19,282,263				19,243,689
Basic earnings per share	$	1.21			$	1.11			$	3.01			$	3.05
Diluted EPS:
Net income	$	23,353			$	21,386			$	58,101			$	58,676
Diluted weighted average common shares:
Weighted average common shares		19,299,921				19,256,069				19,282,263				19,243,689
Stock options and restricted stock		58,761				46,482				63,689				76,510
Diluted weighted average common shares		19,358,682				19,302,551				19,345,952				19,320,199
Diluted earnings per share	$	1.21			$	1.11			$	3.00			$	3.04

AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)

	September 30,			December 31,
		2020			2019
	(unaudited)
Assets
Investments	$	1,125,393		$	1,125,018
Cash and cash equivalents		88,168			43,813
Amounts recoverable from reinsurers		97,955			95,913
Premiums receivable, net		171,128			157,953
Deferred income taxes		17,014			17,513
Deferred policy acquisition costs		19,237			19,048
Other assets		27,926			33,648
	$	1,546,821		$	1,492,906
Liabilities and Shareholders’ Equity
Liabilities:
Reserves for loss and loss adjustment expenses	$	759,912		$	772,887
Unearned premiums		143,228			140,873
Insurance-related assessments		20,902			22,967
Other liabilities		140,869			125,964
Shareholders’ equity		481,910			430,215
Total liabilities and shareholders’ equity	$	1,546,821		$	1,492,906

FAQ

What was the extraordinary dividend declared by AMSF?

AMERISAFE declared an extraordinary dividend of $3.50 per share.

What was AMSF's net income for Q3 2020?

AMERISAFE's net income for Q3 2020 was $23.4 million.

How much did AMSF's net premiums earned change in Q3 2020?

Net premiums earned by AMSF decreased by 9.6%, totaling $74.8 million.

What is the net combined ratio reported by AMSF?

AMERISAFE reported a net combined ratio of 72.8% for Q3 2020.

What was the diluted earnings per share for AMSF?

The diluted earnings per share for AMSF in Q3 2020 was $1.21.