Reports Net Combined Ratio of 85.4%

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, 2022.

Three Months Ended

 

 

 

Nine Months Ended

 

 

September 30,

 

 

 

September 30,

 

 

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

(in thousands, except per share data) (in thousands, except per share data) Net premiums earned

$

67,790

 

$

67,626

 

0.2

%

$

205,625

 

$

208,260

 

-1.3

%

Net investment income

 

6,983

 

 

6,049

 

15.4

%

 

19,581

 

 

19,362

 

1.1

%

Net realized gains (losses) on investments (pre-tax)

 

585

 

 

(8

)

NM

 

 

2,402

 

 

1,490

 

61.2

%

Net unrealized gains (losses) on equity securities (pre-tax)

 

(4,082

)

 

(771

)

NM

 

 

(12,984

)

 

8,026

 

NM

 

Net income

 

11,361

 

 

19,136

 

-40.6

%

 

34,824

 

 

62,215

 

-44.0

%

Diluted earnings per share

$

0.59

 

$

0.99

 

-40.4

%

$

1.80

 

$

3.21

 

-43.9

%

Operating net income

 

14,124

 

 

19,751

 

-28.5

%

 

43,184

 

 

54,697

 

-21.0

%

Operating earnings per share

$

0.73

 

$

1.02

 

-28.4

%

$

2.23

 

$

2.82

 

-20.9

%

Book value per share

$

19.47

 

$

24.80

 

-21.5

%

$

19.47

 

$

24.80

 

-21.5

%

Net combined ratio

 

85.4

%

 

71.5

%

 

84.1

%

 

76.9

%

Return on average equity

 

12.0

%

 

16.1

%

 

12.0

%

 

18.1

%

G. Janelle Frost, President and Chief Executive Officer, noted, “Operating earnings for the quarter were strong, further enhanced by insureds’ payroll growth increasing premium and favorable loss development. In this highly competitive market, we are focused on the difference AMERISAFE makes for our agents, policyholders and injured workers.”

INSURANCE RESULTS

Three Months Ended

 

 

 

Nine Months Ended

 

 

September 30,

 

 

 

September 30,

 

 

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

(in thousands) (in thousands)   Gross premiums written

$

68,212

 

$

67,185

 

1.5

%

$

220,463

 

$

222,423

 

-0.9

%

Net premiums earned

 

67,790

 

 

67,626

 

0.2

%

 

205,625

 

 

208,260

 

-1.3

%

Loss and loss adjustment expenses incurred

 

37,725

 

 

29,661

 

27.2

%

 

115,792

 

 

101,601

 

14.0

%

Underwriting and certain other operating costs, commissions, salaries and benefits

 

19,585

 

 

17,915

 

9.3

%

 

54,611

 

 

55,337

 

-1.3

%

Policyholder dividends

 

640

 

 

733

 

-12.7

%

 

2,517

 

 

3,200

 

-21.3

%

Underwriting profit (pre-tax)

$

9,840

 

$

19,317

 

-49.1

%

$

32,705

 

$

48,122

 

-32.0

%

  Insurance Ratios: Current accident year loss ratio

 

71.0

%

 

72.0

%

 

71.0

%

 

72.0

%

Prior accident year loss ratio

 

-15.4

%

 

-28.1

%

 

-14.7

%

 

-23.2

%

Net loss ratio

 

55.6

%

 

43.9

%

 

56.3

%

 

48.8

%

Net underwriting expense ratio

 

28.9

%

 

26.5

%

 

26.6

%

 

26.6

%

Net dividend ratio

 

0.9

%

 

1.1

%

 

1.2

%

 

1.5

%

Net combined ratio

 

85.4

%

 

71.5

%

 

84.1

%

 

76.9

%

  • Gross written premiums in the quarter were higher by $1.0 million, or 1.5%, compared with the third quarter of 2021. Voluntary premiums were lower by 5.6% compared to the third quarter of 2021.
  • Payroll audits and related premium adjustments were $5.5 million higher than the third quarter of 2021. Audits and other adjustments increased premiums written by $3.4 million in the third quarter of 2022, compared to a decrease in premiums written of $2.1 million in the third quarter of 2021. The increase was due to payroll audits occurring on policy years in which payrolls were less affected by the COVID-19 pandemic.
  • The current accident year loss ratio for the third quarter was 71.0%, one point lower than the 72.0% ratio initially set for accident year 2021. During the quarter, the Company experienced favorable net loss development for prior accident years, which reduced loss and loss adjustment expenses by $10.4 million, primarily from accident years 2020 through 2017.
  • For the quarter ended September 30, 2022, the underwriting expense ratio was 28.9% compared with 26.5% in the same quarter in 2021. The increase was primarily due to a contingent profit sharing commission benefit in last year’s third quarter.
  • The effective tax rate for the quarter ended September 30, 2022 was 15.5%, lower than 22.6% in the third quarter of 2021 due to a higher proportion of income from tax-exempt investments.

INVESTMENT RESULTS

Three Months Ended

 

 

 

Nine Months Ended

 

 

September 30,

 

 

 

September 30,

 

 

2022

 

2021

 

% Change

 

2022

 

2021

 

% Change

(in thousands) (in thousands) Net investment income

$

6,983

 

$

6,049

 

15.4

%

$

19,581

 

$

19,362

 

1.1

%

Net realized gains (losses) on investments (pre-tax)

 

585

 

 

(8

)

NM

 

 

2,402

 

 

1,490

 

61.2

%

Net unrealized gains (losses) on equity securities (pre-tax)

 

(4,082

)

 

(771

)

NM

 

 

(12,984

)

 

8,026

 

NM

 

Pre-tax investment yield

 

2.7

%

 

2.1

%

 

2.5

%

 

2.2

%

Tax-equivalent yield (1)

 

3.2

%

 

2.5

%

 

3.2

%

 

2.5

%

(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, 2022, increased 15.4% to $7.0 million from $6.0 million in the third quarter of 2021, due to higher yields on fixed income securities.
  • Due to increases in interest rates, the market value of our bond portfolio declined during the quarter.
  • Due to declines in the equity markets, the market value of the equity securities in our investment portfolio decreased by $4.1 million during the quarter, compared to a decrease of $0.8 million in the third quarter of 2021. These changes in market value are reflected in net income.
  • As of September 30, 2022, the carrying value of AMERISAFE’s investment portfolio, including cash and cash equivalents, was $1.0 billion.

CAPITAL MANAGEMENT

In an accompanying news release, the Company announced a special cash dividend of $4.00 per share, payable on December 16, 2022, to shareholders of record as of December 2, 2022.

During the third quarter of 2022, the Company paid a regular quarterly cash dividend of $0.31 per share on September 23, 2022. On October 25, 2022 the Board of Directors also declared a quarterly cash dividend of $0.31 per share, payable December 16, 2022 to shareholders of record as of December 2, 2022.

During the third quarter of 2022, the Company repurchased 139,559 shares at an average cost (including commissions) of $46.83 per share for a total of $6.5 million. The remaining outstanding share repurchase authorization as of September 30, 2022 is $12.8 million.

Book value per share at September 30, 2022 was $19.47, a decrease of 5.6% from $20.62 at December 31, 2021.

SUPPLEMENTAL INFORMATION

Three Months Ended

 

Nine Months Ended

September 30,

 

September 30,

2022

 

2021

 

2022

 

2021

(in thousands, except share and per share data)   Net income

$

11,361

 

$

19,136

 

$

34,824

 

$

62,215

 

Less: Net realized gains (losses) on investments

 

585

 

 

(8

)

 

2,402

 

 

1,490

 

Net unrealized gains (losses) on equity securities

 

(4,082

)

 

(771

)

 

(12,984

)

 

8,026

 

Tax effect (1)

 

734

 

 

164

 

 

2,222

 

 

(1,998

)

Operating net income (2)

$

14,124

 

$

19,751

 

$

43,184

 

$

54,697

 

  Average shareholders’ equity (3)

$

379,004

 

$

474,261

 

$

386,171

 

$

459,486

 

Less: Average accumulated other comprehensive income (loss)

 

(14,419

)

 

15,924

 

 

(3,214

)

 

18,003

 

Average adjusted shareholders’ equity (2)

$

393,423

 

$

458,337

 

$

389,385

 

$

441,483

 

  Diluted weighted average common shares

 

19,269,346

 

 

19,407,918

 

 

19,340,898

 

 

19,392,939

 

  Return on average equity (4)

 

12.0

%

 

16.1

%

 

12.0

%

 

18.1

%

Operating return on average adjusted equity (2)

 

14.4

%

 

17.2

%

 

14.8

%

 

16.5

%

Diluted earnings per share

$

0.59

 

$

0.99

 

$

1.80

 

$

3.21

 

Operating earnings per share (2)

$

0.73

 

$

1.02

 

$

2.23

 

$

2.82

 

_____________

(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 27, 2022, 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 323-701-0225 (Conference Code 3095655) 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 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, logging and lumber, agriculture, and manufacturing. 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. 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, 2021. 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,

2022

 

2021

 

2022

 

2021

(unaudited) (unaudited) Revenues: Gross premiums written

$

68,212

 

$

67,185

 

$

220,463

 

$

222,423

 

Ceded premiums written

 

(2,553

)

 

(2,407

)

 

(7,837

)

 

(7,410

)

Net premiums written

$

65,659

 

$

64,778

 

$

212,626

 

$

215,013

 

  Net premiums earned

$

67,790

 

$

67,626

 

$

205,625

 

$

208,260

 

Net investment income

 

6,983

 

 

6,049

 

 

19,581

 

 

19,362

 

Net realized gains (losses) on investments

 

585

 

 

(8

)

 

2,402

 

 

1,490

 

Net unrealized gains (losses) on equity securities

 

(4,082

)

 

(771

)

 

(12,984

)

 

8,026

 

Fee and other income

 

104

 

 

149

 

 

352

 

 

415

 

Total revenues

 

71,380

 

 

73,045

 

 

214,976

 

 

237,553

 

  Expenses: Loss and loss adjustment expenses incurred

 

37,725

 

 

29,661

 

 

115,792

 

 

101,601

 

Underwriting and other operating costs

 

19,585

 

 

17,915

 

 

54,611

 

 

55,337

 

Policyholder dividends

 

640

 

 

733

 

 

2,517

 

 

3,200

 

Provision for investment related credit loss expense (benefit)

 

(21

)

 

15

 

 

60

 

 

(102

)

Total expenses

 

57,929

 

 

48,324

 

 

172,980

 

 

160,036

 

  Income before taxes

 

13,451

 

 

24,721

 

 

41,996

 

 

77,517

 

Income tax expense

 

2,090

 

 

5,585

 

 

7,172

 

 

15,302

 

Net income

$

11,361

 

$

19,136

 

$

34,824

 

$

62,215

 

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,

2022

 

2021

 

2022

 

2021

(unaudited) (unaudited) Basic EPS: Net income

$

11,361

$

19,136

$

34,824

$

62,215

  Basic weighted average common shares

 

19,198,320

 

19,344,636

 

19,267,602

 

19,328,041

Basic earnings per share

$

0.59

$

0.99

$

1.81

$

3.22

  Diluted EPS: Net income

$

11,361

$

19,136

$

34,824

$

62,215

  Diluted weighted average common shares: Weighted average common shares

 

19,198,320

 

19,344,636

 

19,267,602

 

19,328,041

Restricted stock and restricted stock units

 

71,026

 

63,282

 

73,296

 

64,898

Diluted weighted average common shares

 

19,269,346

 

19,407,918

 

19,340,898

 

19,392,939

  Diluted earnings per share

$

0.59

$

0.99

$

1.80

$

3.21

AMERISAFE, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands)

 

September 30,

 

December 31,

2022

 

2021

(unaudited) Assets Investments

$

934,803

$

1,012,571

Cash and cash equivalents

 

90,952

 

70,722

Amounts recoverable from reinsurers

 

117,968

 

120,561

Premiums receivable, net

 

137,012

 

135,100

Deferred income taxes

 

26,227

 

14,384

Deferred policy acquisition costs

 

18,275

 

17,059

Other assets

 

34,259

 

32,327

$

1,359,496

$

1,402,724

  Liabilities and Shareholders’ Equity Liabilities: Reserves for loss and loss adjustment expenses

$

716,196

$

745,278

Unearned premiums

 

128,093

 

121,092

Insurance-related assessments

 

18,751

 

16,850

Other liabilities

 

123,437

 

120,181

  Shareholders’ equity

 

373,019

 

399,323

Total liabilities and shareholders’ equity

$

1,359,496

$

1,402,724

 

Andy Omiridis, EVP & CFO AMERISAFE 337.463.9052

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