2014 Net Income Rises 23.0%
Increases Regular Dividend 25.0%
DERIDDER, La., Feb. 26, 2015 (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, 2014.
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Three Months Ended December 31, |
Twelve Months Ended December 31, |
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| 2014 | 2013 | % Change | 2014 | 2013 | % Change | |
| (in thousands, except per share data) | ||||||
| Net premiums earned | $ 97,070 | $ 86,695 | 12.0% | $ 375,747 | $329,983 | 13.9% |
| Net investment income | $ 7,166 | $ 6,763 | 6.0% | $ 27,214 | $ 27,029 | 0.7% |
| Net realized gains (losses) on investments (pre-tax) | $ 516 | $ 710 | NM | $ 697 | $ (1,211) | NM |
| Net income | $ 16,865 | $ 17,443 | -3.3% | $ 53,666 | $ 43,637 | 23.0% |
| Diluted earnings per share | $ 0.89 | $ 0.92 | -3.3% | $ 2.84 | $ 2.32 | 22.4% |
| Operating net income | $ 16,530 | $ 16,982 | -2.7% | $ 53,213 | $ 44,424 | 19.8% |
| Operating earnings per share | $ 0.87 | $ 0.90 | -3.3% | $ 2.81 | $ 2.37 | 18.6% |
| Book value per share | $ 23.65 | $ 22.41 | 5.5% | $ 23.65 | $ 22.41 | 5.5% |
| Net combined ratio | 83.4% | 80.0% | 87.9% | 90.0% | ||
| Return on average equity | 15.1% | 17.1% | 12.4% | 10.9% | ||
Allen Bradley, AMERISAFE's Chairman and Chief Executive Officer, commented, "The workers' compensation industry is poised to record an underwriting profit for only the third time in 25 years. This outcome results from more disciplined underwriting and risk selection. Pricing in our markets is flattening but near cycle peaks. Despite pockets of increased competition, the high hazard market remains attractive in terms of pricing, favorable loss trends and improved economic conditions."
| Insurance Results | ||||||||||||
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Three Months Ended December 31, |
Twelve Months Ended December 31, |
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| 2014 | 2013 | % Change | 2014 | 2013 | % Change | |||||||
| (in thousands) | ||||||||||||
| Gross premiums written | $ 90,334 | $ 91,102 | -0.8% | $ 393,819 | $ 372,177 | 5.8% | ||||||
| Net premiums earned | $ 97,070 | $ 86,695 | 12.0% | $ 375,747 | $ 329,983 | 13.9% | ||||||
| Loss and loss adjustment expenses incurred | 59,346 | 59,113 | 0.4% | 244,916 | 228,973 | 7.0% | ||||||
| Underwriting and certain other operating costs, commissions, salaries and benefits | 21,553 | 10,104 | 113.3% | 84,963 | 67,116 | 26.6% | ||||||
| Policyholder dividends | 51 | 62 | -17.7% | 391 | 1,042 | -62.5% | ||||||
| Underwriting profit (pre-tax) | $ 16,120 | $ 17,416 | -7.4% | $ 45,477 | $ 32,852 | 38.4% | ||||||
| Insurance Ratios: | ||||||||||||
| Current accident year loss ratio | 71.5% | 73.2% | 71.5% | 73.2% | ||||||||
| Prior accident year loss ratio | -10.3% | -5.0% | -6.3% | -3.8% | ||||||||
| Net loss ratio | 61.1% | 68.2% | 65.2% | 69.4% | ||||||||
| Net underwriting expense ratio | 22.2% | 11.7% | 22.6% | 20.3% | ||||||||
| Net dividend ratio | 0.1% | 0.1% | 0.1% | 0.3% | ||||||||
| Net combined ratio | 83.4% | 80.0% | 87.9% | 90.0% | ||||||||
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Voluntary premiums written declined 2.8% in the quarter but rose 4.7% for the year ended December 31, 2014 compared to the same periods in 2013. Payroll audits and related premium adjustments for policies written in previous periods increased premiums $4.5 million in the fourth quarter and $16.8 million in the year ended December 31, 2014. In 2013, these premium adjustments increased premiums $3.2 million in the fourth quarter and $13.6 million for the full year.
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The current accident year loss ratio for the fourth quarter was 71.5%. During the quarter the Company experienced $10.0 million of favorable prior year development, primarily attributable to accident years 2010 and 2012. In total, prior accident year development for year ended December 31, 2014 resulted in favorable development of $23.7 million, compared to favorable development of $12.6 million in 2013.
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During the fourth quarter of 2014, the underwriting expense ratio increased to 22.2% from 11.7%. The increase reflects a year over year rise in non-controllable expenses due to the reversal of a contingent profit commission accrual in 2014 of $2.8 million, lower ceding commissions of $0.5 million in 2014 and fourth quarter 2013 accrual adjustments of $3.2 million resulting from bad debt expense and retaliatory tax accruals. For the year ended December 31, 2014, the underwriting expense ratio increased 230bps from the prior year to 22.6%. Growth in premium earned helped to offset operating expenses which grew due to the change in our 2014 reinsurance treaty, which yielded lower profit and ceding commissions.
- The effective tax rate for the year ended December 31, 2014 rose to 27.2% compared to 26.3% in the same period in 2013. The increase resulted from continued improvement in our underwriting margins which created a higher proportion of underwriting income to tax-exempt investment income relative to 2013.
Janelle Frost, President and Chief Operating Officer, noted, "This year's outstanding results were driven by disciplined underwriting and favorable loss development. We continued our focus on managing pricing in an increasingly competitive market. At the same time, prior accident year case development resulted in another positive quarter in terms of loss experience. Prior year losses combined with continued favorable trends and expense management were evident in the quarter and full year operating results."
| Investment Results | ||||||
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Three Months Ended December 31, |
Twelve Months Ended December 31, |
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| 2014 | 2013 | % Change | 2014 | 2013 | % Change | |
| (in thousands) | ||||||
| Net investment income | $ 7,166 | $ 6,763 | 6.0% | $ 27,214 | $ 27,029 | 0.7% |
| Net realized gains (losses) on investments (pre-tax) | $ 516 | $ 710 | NM | $ 697 | $ (1,211) | NM |
| Pre-tax investment yield | 2.6% | 2.7% | 2.6% | 2.8% | ||
| Tax-equivalent yield (1) | 3.5% | 3.9% | 3.5% | 3.9% | ||
| ________________________________ | ||||||
| (1) The tax equivalent yield is calculated using the effective interest rate and a 35% marginal tax rate. | ||||||
- As of December 31, 2014, the carrying value of AMERISAFE's investment portfolio, including cash and cash equivalents, was $1.1 billion. The fair value of the portfolio was $1.1 billion.
Capital Management
On February 24, 2015, the Company's Board of Directors increased the regular quarterly dividend from $0.12 per share to $0.15 per share, a 25.0% increase, payable on March 27, 2015 to shareholders of record as of March 13, 2015.
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.
| Non-GAAP Financials | ||||
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Three Months Ended December 31, |
Twelve Months Ended December 31, |
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| 2014 | 2013 | 2014 | 2013 | |
| (in thousands, except share and per share data) | ||||
| Net income | $ 16,865 | $ 17,443 | $ 53,666 | $ 43,637 |
| Less: Net realized capital gains (losses) | 516 | 710 | 697 | (1,211) |
| Tax effect (1) | (181) | (249) | (244) | 424 |
| Operating net income (2) | $ 16,530 | $ 16,982 | $ 53,213 | $ 44,424 |
| Average shareholders' equity (3) | $ 447,726 | $ 408,763 | $ 431,891 | $ 399,018 |
| Less: Average other comprehensive income (loss) | 2,444 | (3,483) | (743) | (658) |
| Adjusted average shareholders' equity | $ 445,282 | $ 412,246 | $ 432,634 | $ 399,676 |
| Diluted weighted average common shares | 18,994,995 | 18,796,566 | 18,928,504 | 18,748,809 |
| Return on average equity (4) | 15.1% | 17.1% | 12.4% | 10.9% |
| Operating return on average equity (2) | 14.8% | 16.5% | 12.3% | 11.1% |
| Diluted earnings per common share | $ 0.89 | $ 0.92 | $ 2.84 | $ 2.32 |
| Operating earnings per common share (2) | $ 0.87 | $ 0.90 | $ 2.81 | $ 2.37 |
| ________________________________ | ||||
| (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 each non-GAAP financial measures. 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 27, 2015, 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 877-225-7695 (International 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 5, 2015. To access the replay, dial 855-859-2056 or 404-537-3406 and use the pass code 62929175.
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 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 and assumptions 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, 2013. 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, |
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| 2014 | 2013 | 2014 | 2013 | |
| (unaudited) | (unaudited) | |||
| Revenues: | ||||
| Gross premiums written | $ 90,334 | $ 91,102 | $ 393,819 | $ 372,177 |
| Ceded premiums written | (3,138) | (4,849) | (13,793) | (18,425) |
| Net premiums written | $ 87,196 | $ 86,253 | $ 380,026 | $ 353,752 |
| Net premiums earned | $ 97,070 | $ 86,695 | $ 375,747 | $ 329,983 |
| Net investment income | 7,166 | 6,763 | 27,214 | 27,029 |
| Net realized gains (losses) on investments | 516 | 710 | 697 | (1,211) |
| Fee and other income | 134 | 141 | 361 | 534 |
| Total revenues | $ 104,886 | $ 94,309 | $ 404,019 | $ 356,335 |
| Expenses: | ||||
| Loss and loss adjustment expenses incurred | $ 59,346 | $ 59,113 | $ 244,916 | $ 228,973 |
| Underwriting and other operating costs | 21,553 | 10,104 | 84,963 | 67,116 |
| Policyholder dividends | 51 | 62 | 391 | 1,042 |
| Total expenses | $ 80,950 | $ 69,279 | $ 330,270 | $ 297,131 |
| Income before taxes | $ 23,936 | $ 25,030 | $ 73,749 | $ 59,204 |
| Income tax expense | 7,071 | 7,587 | 20,083 | 15,567 |
| Net income | $ 16,865 | $ 17,443 | $ 53,666 | $ 43,637 |
| 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, |
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| 2014 | 2013 | 2014 | 2013 | |
| (unaudited) | (unaudited) | |||
| Basic EPS: | ||||
| Net income | $ 16,865 | $ 17,443 | $ 53,666 | $ 43,637 |
| Basic weighted average common shares | 18,773,461 | 18,459,486 | 18,646,128 | 18,373,033 |
| Basic earnings per share | $ 0.90 | $ 0.94 | $ 2.88 | $ 2.37 |
| Diluted EPS: | ||||
| Net income | $ 16,865 | $ 17,364 | $ 53,666 | $ 43,495 |
| Diluted weighted average common shares: | ||||
| Weighted average common shares | 18,773,461 | 18,459,486 | 18,646,128 | 18,373,033 |
| Stock options and performance shares | 221,534 | 337,080 | 282,376 | 375,776 |
| Diluted weighted average common shares | 18,994,995 | 18,796,566 | 18,928,504 | 18,748,809 |
| Diluted earnings per common share | $ 0.89 | $ 0.92 | $ 2.84 | $ 2.32 |
| AMERISAFE, INC. AND SUBSIDIARIES | ||
| Consolidated Balance Sheets | ||
| (in thousands) | ||
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December 31, 2014 |
December 31, 2013 |
|
| (unaudited) | ||
| Assets | ||
| Investments | $ 1,016,333 | $ 878,775 |
| Cash and cash equivalents | 90,956 | 123,077 |
| Amounts recoverable from reinsurers | 85,888 | 75,326 |
| Premiums receivable, net | 178,917 | 171,579 |
| Deferred income taxes | 31,231 | 33,645 |
| Deferred policy acquisition costs | 19,649 | 19,171 |
| Other assets | 34,246 | 27,428 |
| $ 1,457,220 | $ 1,329,001 | |
| Liabilities and Shareholders' Equity | ||
| Liabilities: | ||
| Reserves for loss and loss adjustment expenses | $ 687,602 | $ 614,557 |
| Unearned premiums | 168,576 | 164,296 |
| Insurance-related assessments | 29,315 | 25,428 |
| Other liabilities | 124,759 | 107,906 |
| Shareholders' equity | 446,968 | 416,814 |
| Total liabilities and shareholders' equity | $ 1,457,220 | $ 1,329,001 |