AMERISAFE INC - FORM 8-K - EX-99.1

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8-K - FORM 8-K - AMERISAFE INC	d621099d8k.htm

Exhibit 99.1

NEWS RELEASE

Contact: Michael Grasher, EVP & CFO
AMERISAFE, Inc.
337-463-9052

AMERISAFE ANNOUNCES 2013 THIRD QUARTER RESULTS

Declares Quarterly Cash Dividend

DeRidder, LA—October 31, 2013—AMERISAFE, Inc. (Nasdaq: AMSF), a specialty provider of hazardous workers’ compensation insurance, today announced results for the third quarter ended September 30, 2013.

Summary of Results (dollars in thousands, except per share data)


	Three Months Ended									Nine Months Ended
	September 30,									September 30,
	2013			2012			% Change			2013			2012			% Change
Net premiums earned	$	81,596		$	72,425			12.7	%	$	243,288		$	211,948			14.8	%
Net investment income		6,947			6,801			2.1	%	$	20,266			20,320			(0.3	%)
Net realized gains (losses) on investments		(654	)		985			NM			(1,921	)		2,913			NM
Net income		9,699			7,121			36.2	%		26,194			20,127			30.1	%
Diluted earnings per share		0.52			0.38			36.8	%		1.39			1.08			28.7	%
Operating net income		10,124			6,481			56.2	%		27,443			18,234			50.5	%
Operating earnings per share		0.54			0.35			54.3	%		1.47			0.98			50.0	%
Book value per share		21.67			20.46			5.9	%		21.67			20.46			5.9	%
Net combined ratio		92.5	%		98.5	%					93.6	%		99.4	%
Return on average equity		9.8	%		7.7	%					8.9	%		7.4	%

Commenting on these results, Allen Bradley, AMERISAFE’s Chairman and Chief Executive Officer, stated, “In line with our expectations, evidence of stressed balance sheets and a more challenging workers’ compensation marketplace due to the weak pricing environment of prior years is beginning to surface. For us, the evidence represents an opportunity to expand our margins, our book of business and long term profitability for shareholders. We believe third quarter results reflect these attributes. With our focus on risk selection and pricing, AMERISAFE remains well positioned in a business that requires disciplined growth. As such, we remain confident in our ability to deliver attractive returns to our shareholders.”

Insurance Results (in thousands)


	Three Months Ended									Nine Months Ended
	September 30,						%			September 30,						%
	2013			2012			Change			2013			2012			Change
Gross Premium Written	$	86,137		$	77,283			11.5	%	$	281,075		$	247,683			13.5	%
Net Premium Earned		81,596			72,425			12.7	%		243,288			211,948			14.8	%
Loss & LAE		57,046			53,851			5.9	%		169,860			162,414			4.6	%
Underwriting & Other		18,472			16,495			12.0	%		57,012			46,557			22.5	%
Policyholder dividends		38			945			NM			980			1,659			NM
Underwriting profit (pre-tax)		6,040			1,134			NM			15,436			1,318			NM
Insurance Ratios:
Current accident year loss ratio		73.2	%		76.5	%					73.2	%		76.5	%
Prior accident year loss ratio		(3.3	%)		(2.1	%)					(3.4	%)		0.1	%

Net loss ratio		69.9	%		74.4	%					69.8	%		76.6	%
Net underwriting expense ratio		22.6	%		22.8	%					23.4	%		22.0	%
Net dividend ratio		0.0	%		1.3	%					0.4	%		0.8	%

Net combined ratio		92.5	%		98.5	%					93.6	%		99.4	%

•

Gross premiums written continued to grow in the third quarter. Voluntary premiums written increased 14.3% in the quarter and 14.4% for the nine months ended September 30, 2013 compared to the same periods in 2012. Additionally, payroll audits and related premium adjustments for policies written in previous periods increased premiums $0.7 million in the third quarter and $10.4 million in the nine months ended September 30, 2013. In 2012, these premium adjustments grew premium $3.1 million in the third quarter and $13.0 million for the nine months ended September 30.

•

The current accident year loss ratio for the third quarter remained at 73.2%. During the quarter, the Company experienced favorable loss development, which reduced loss and loss adjustment expenses by $2.7 million, primarily attributable to accident years 2009 and prior.

•

For the third quarter, the underwriting expense ratio declined to 22.6% from 22.8% a year ago primarily driven by the growth in premium earned. For the nine months, the expense ratio rose to 23.4% compared to 22.0% for the same time period in 2012. The increase in the underwriting expense ratio during the nine-month period mainly resulted from higher premium taxes and premium based assessments.

•

The effective tax rate for the three and nine months ended September 30, 2013 was 22.1% and 23.4% compared to 20.9% and 17.7%, respectively, for the year ago periods. The increase resulted from a lower ratio of tax-free investment income to pre-tax income in 2013 compared to 2012.

President and Chief Operating Officer, Janelle Frost noted, “The combined ratio this quarter reflects our continued underwriting discipline and prudent approach to the market. Loss and loss adjustment expenses benefited from favorable development of prior accident years, and the current accident year ratio remained consistent with the first half of the year as frequency trends remained positive. Pricing also increased quarter over quarter which spurred top line growth of 11.5% percent. In addition, our expense ratio decreased in part due to management of operating costs at lower levels than growth in earned premium. In all, we are pleased with the operating results this quarter.

Investment Results (in thousands)


	Three Months Ended									Nine Months Ended
	September 30,									September 30,
	2013			2012			% Change			2013			2012			% Change
Net investment income	$	6,947		$	6,801			2.2	%	$	20,266		$	20,320			(0.3	%)
Net realized gains (losses) on investments (pre-tax)		(654	)		985			NM			(1,921	)		2,913			NM
Pre-tax investment yield		2.9	%		3.1	%					2.9	%		3.1	%
Tax equivalent yield (1)		3.9	%		4.5	%					3.9	%		4.5	%

(1)	The tax equivalent yield is calculated using the effective interest rate and a 35% marginal tax rate.

•

As of September 30, 2013, the carrying value of AMERISAFE’s investment portfolio, including cash and cash equivalents, was $978.3 million and the fair value of the portfolio was $1.0 billion.

Capital Management

•

The Company paid its third consecutive quarterly dividend of $0.08 per share on September 27^th, 2013. On October 28^th, the Company’s Board of Directors declared a quarterly cash dividend of $0.08 per share, payable on December 27^th, 2013 to shareholders of record as of December 13^th, 2013.

•

During the quarter, no shares were repurchased under the share repurchase plan. Since beginning this plan, the Company repurchased a total of 1,258,250 shares for $22.4 million, or an average per share price of $17.78. On October 28^th, the Company’s Board of Directors voted to extend the current authorization from December 31, 2013 to December 31, 2014 and increase the authorization from $24.4 million to $25.0 million.

Supplemental Information


	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
Net income	$	9,699		$	7,121		$	26,194		$	20,127
Less: Net realized capital gains (loss)		(654	)		985			(1,921	)		2,913
Tax effect (1)		229			(345	)		672			(1,020	)

Operating net income (2)		10,124			6,481			27,443			18,234

Avg shareholders’ equity (3)	$	396,614		$	367,794		$	390,967		$	360,788
Less: Avg OCI		(2,149	)		3,390			154			3,165

Adjusted average shareholders’ equity		398,763			364,404			390,813			357,623

Diluted weighted average common shares		18,758,346			18,580,083			18,730,729			18,583,079
Diluted earnings per common share	$	0.52		$	0.38		$	1.39		$	1.08
Operating earnings per common share (2)	$	0.54		$	0.35		$	1.47		$	0.98
Return on average equity (4)		9.8	%		7.7	%		8.9	%		7.4	%
Operating return on average equity (2)		10.2	%		7.1	%		9.4	%		6.8	%
(in thousands, except share and per share data)

(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 equity and operating earnings per share are non-GAAP financial measures. Management believes 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 adjusted 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 November 1, 2013, at 10:30 a.m. Eastern Time to discuss the results for the quarter 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 November 8, 2013. To access the replay, dial 855-859-2056 or 404-537-3406 and use the conference ID 77177695.

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, manufacturing and agriculture among others. AMERISAFE actively markets workers’ compensation insurance in 30 states and the District of Columbia.

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, 2012. 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,
	2013			2012			2013			2012
	(unaudited)						(unaudited)
Revenues:
Gross premiums written	$	86,137		$	77,283		$	281,075		$	247,683
Ceded premiums written		(4,519	)		(4,032	)		(13,576	)		(11,907	)

Net premiums written	$	81,618		$	73,251		$	267,499		$	235,776

Net premiums earned	$	81,596		$	72,425		$	243,288		$	211,948
Net investment income		6,947			6,801			20,266			20,320
Net realized gains (losses) on investments		(654	)		985			(1,921	)		2,913
Fee and other income		114			163			393			484

Total revenues		88,003			80,374			262,026			235,665
Expenses:
Loss and LAE		57,046			53,851			169,860			162,414
Underwriting & Other		18,472			16,495			57,012			46,557
Interest expense		—			80			—			566
Policyholder dividends		38			945			980			1,659

Total expenses		75,556			71,371			227,852			211,196
Income before taxes		12,447			9,003			34,174			24,469
Income tax expense		2,748			1,882			7,980			4,342

Net income	$	9,699		$	7,121		$	26,194		$	20,127

AMERISAFE, INC. AND SUBSIDIARIES

Consolidated Statements of Income (cont.)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2013		2012		2013		2012
	(in thousands, except share and per share amounts)
Basic EPS:
Net income, as reported	$	9,699	$	7,121	$	26,194	$	20,127
Less allocated income to unvested shares		27		6		74		12

Net income available to common shareholders	$	9,672	$	7,115	$	26,120	$	20,115

Basic weighted average common shares		18,395,971		18,173,062		18,343,901		18,154,768
Basic earnings per common share	$	0.53	$	0.39	$	1.42	$	1.11
Diluted EPS:
Net income available to common shareholders—diluted	$	9,673	$	7,116	$	26,122	$	20,116

Diluted weighted average common shares:
Weighted average common shares		18,395,971		18,173,062		18,343,901		18,154,768
Stock options and performance shares		362,375		407,021		386,828		428,311

Diluted weighted average common shares		18,758,346		18,580,083		18,730,729		18,583,079
Diluted earnings per common share	$	0.52	$	0.38	$	1.39	$	1.08

AMERISAFE, INC. AND SUBSIDIARIES

Consolidated Balance Sheet

(in thousands)


	September 30,		December 31
	2013		2012
	(unaudited)
Assets
Investments	$	861,516	$	808,116
Cash and cash equivalents		116,778		92,676
Amounts recoverable from reinsurers		77,835		101,352
Premiums receivable, net		172,002		141,950
Deferred income taxes		34,672		29,521
Deferred policy acquisition costs		21,085		18,419
Other assets		28,671		28,912

Total Assets	$	1,312,559	$	1,220,946

Liabilities and Shareholders’ Equity Liabilities:
Reserves for loss and loss adjustment expenses	$	609,042	$	570,450
Unearned premiums		164,739		140,528
Insurance-related assessments		28,887		22,244
Other liabilities		109,179		106,502
Total shareholders’ equity		400,712		381,222

Total liabilities and shareholders’ equity	$	1,312,559	$	1,220,946

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AMERISAFE INC - FORM 8-K - EX-99.1 - October 31, 2013

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