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AMERISAFE Announces 2021 Third Quarter Results

Reports Combined Ratio of 71.5%

Declares an Extraordinary Dividend of $4.00 Per Share

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, 2021.

Three Months Ended

 

 

 

Nine Months Ended

 

 

September 30,

 

 

 

September 30,

 

 

 

2021

 

 

 

2020

 

 

% Change

 

 

2021

 

 

 

2020

 

 

% Change

(in thousands, except per share data)

 

 

 

(in thousands, except per share data)

 

 

Net premiums earned

$

67,626

 

$

74,771

 

-9.6

%

$

208,260

 

$

229,725

 

-9.3

%

Net investment income

 

6,049

 

 

7,063

 

-14.4

%

 

19,362

 

 

22,136

 

-12.5

%

Net realized gains (losses) on investments (pretax)

(8

)

309

NM

1,490

1,464

1.8

%

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

 

(771

)

 

844

 

NM

 

 

8,026

 

 

(2,349

)

NM

 

Net income

 

19,136

 

 

23,353

 

-18.1

%

 

62,215

 

 

58,101

 

7.1

%

Diluted earnings per share

$

0.99

 

$

1.21

 

-18.2

%

$

3.21

 

$

3.00

 

7.0

%

Operating net income

 

19,751

 

 

22,442

 

-12.0

%

 

54,697

 

 

58,800

 

-7.0

%

Operating earnings per share

$

1.02

 

$

1.16

 

-12.1

%

$

2.82

 

$

3.04

 

-7.2

%

Book value per share

$

24.80

 

$

24.93

 

-0.5

%

$

24.80

 

$

24.93

 

-0.5

%

Net combined ratio

 

71.5

%

 

72.8

%

 

76.9

%

 

78.4

%

Return on average equity

 

16.1

%

 

19.8

%

 

18.1

%

 

17.0

%

G. Janelle Frost, President and Chief Executive Officer, noted, “We were pleased with this quarter’s results as we were able to maintain strong renewal retention and find new business opportunities in a declining rate environment. In addition, claim severity trends for prior accident years continued to show improvement as our claims handling practices reach favorable outcomes.”

INSURANCE RESULTS

Three Months Ended

 

 

 

Nine Months Ended

 

 

September 30,

 

 

 

September 30,

 

 

 

2021

 

 

 

2020

 

 

% Change

 

 

2021

 

 

 

2020

 

 

% Change

(in thousands)

 

 

 

(in thousands)

 

 

 
Gross premiums written

$

67,185

 

$

72,648

 

-7.5

%

$

222,423

 

$

240,008

 

-7.3

%

Net premiums earned

 

67,626

 

 

74,771

 

-9.6

%

 

208,260

 

 

229,725

 

-9.3

%

Loss and loss adjustment expenses incurred

 

29,661

 

 

39,789

 

-25.5

%

 

101,601

 

 

120,966

 

-16.0

%

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

 

17,915

 

 

13,902

 

28.9

%

 

55,337

 

 

56,317

 

-1.7

%

Policyholder dividends

 

733

 

 

714

 

2.7

%

 

3,200

 

 

2,685

 

19.2

%

Underwriting profit (pre-tax)

$

19,317

 

$

20,366

 

-5.2

%

$

48,122

 

$

49,757

 

-3.3

%

 
Insurance Ratios:
Current accident year loss ratio

 

72.0

%

 

72.5

%

 

72.0

%

 

72.5

%

Prior accident year loss ratio

 

-28.1

%

 

-19.3

%

 

-23.2

%

 

-19.8

%

Net loss ratio

 

43.9

%

 

53.2

%

 

48.8

%

 

52.7

%

Net underwriting expense ratio

 

26.5

%

 

18.6

%

 

26.6

%

 

24.5

%

Net dividend ratio

 

1.1

%

 

1.0

%

 

1.5

%

 

1.2

%

Net combined ratio

 

71.5

%

 

72.8

%

 

76.9

%

 

78.4

%

  • Voluntary premiums were $3.2 million lower, or 4.6%, compared with the third quarter of 2020, due to continued reductions in approved state loss costs, which were 7.0% lower on average for policies we renewed during the quarter.
  • Payroll audits and related premium adjustments were $3.2 million lower than last year’s third quarter, decreasing premiums written by $2.1 million in the third quarter of 2021, compared with an increase of $1.1 million in the same period in 2020.
  • The current accident year loss ratio for the third quarter was 72.0%, unchanged from the first six months of 2021, and one half point lower than 2020. During the quarter, the Company experienced favorable case reserve development for prior accident years, which reduced loss and loss adjustment expenses by $19.0 million, primarily from accident years 2015 through 2019.
  • For the quarter ended September 30, 2021, the underwriting expense ratio was 26.5% compared with 18.6% in the same quarter in 2020. The increase in the expense ratio was primarily due to a benefit in last year’s third quarter of $5.7 million from the termination of an assessment related to a multiple injury fund.
  • The effective tax rate for the quarter ended September 30, 2021 was 22.6%, compared with 18.5% in the third quarter of 2020, due to a higher proportion of income from underwriting and taxable investment income.

INVESTMENT RESULTS

Three Months Ended

 

 

 

Nine Months Ended

 

 

September 30,

 

 

 

September 30,

 

 

 

2021

 

 

 

2020

 

 

% Change

 

 

2021

 

 

 

2020

 

 

% Change

(in thousands)

 

 

 

(in thousands)

 

 

Net investment income

$

6,049

 

$

7,063

 

-14.4

%

$

19,362

 

$

22,136

 

-12.5

%

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

 

(8

)

 

309

 

NM

 

 

1,490

 

 

1,464

 

1.8

%

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

 

(771

)

 

844

 

NM

 

 

8,026

 

 

(2,349

)

NM

 

Pre-tax investment yield

 

2.1

%

 

2.3

%

 

2.2

%

 

2.5

%

Tax-equivalent yield (1)

 

2.5

%

 

2.8

%

 

2.5

%

 

2.8

%

 

(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, 2021, decreased 14.4% to $6.0 million from $7.1 million in the third quarter of 2020, due to lower investment yields on fixed-income securities.
  • As of September 30, 2021, the carrying value of AMERISAFE’s investment portfolio, including cash and cash equivalents, was $1.2 billion.

CAPITAL MANAGEMENT

In an accompanying news release, the Company announced a special cash dividend of $4.00 per share, payable on November 17, 2021, to shareholders of record as of November 10, 2021.

In addition, the Company’s Board of Directors declared a regular quarterly cash dividend of $0.29 per share, payable on December 17, 2021 to shareholders of record as of December 3, 2021.

Book value per share at September 30, 2021 was $24.80, an increase of 9.3% from $22.70 at December 31, 2020.

SUSTAINABILITY DISCLOSURES

The Company recently published additional sustainability disclosures for investors. These disclosures, which follow the Sustainability Accounting Standards Board (SASB) and Task Force on Climate-related Financial Disclosures (TCFD) format, can be found on our website at www.amerisafe.com under Sustainability.

SUPPLEMENTAL INFORMATION

Three Months Ended

 

Nine Months Ended

September 30,

 

September 30,

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

(in thousands, except share and per share data)

 
Net income

$

19,136

 

$

23,353

 

$

62,215

 

$

58,101

 

Less:
Net realized gains (losses) on investments

 

(8

)

 

309

 

 

1,490

 

 

1,464

 

Net unrealized gains (losses) on equity securities

 

(771

)

 

844

 

 

8,026

 

 

(2,349

)

Tax effect (1)

 

164

 

 

(242

)

 

(1,998

)

 

186

 

Operating net income (2)

$

19,751

 

$

22,442

 

$

54,697

 

$

58,800

 

 
Average shareholders’ equity (3)

$

474,261

 

$

472,353

 

$

459,486

 

$

456,063

 

Less:
Average accumulated other comprehensive income

 

15,924

 

 

19,545

 

 

18,003

 

 

16,062

 

Average adjusted shareholders’ equity (2)

$

458,337

 

$

452,808

 

$

441,483

 

$

440,001

 

 
Diluted weighted average common shares

 

19,407,918

 

 

19,358,682

 

 

19,392,939

 

 

19,345,952

 

 
Return on average equity (4)

 

16.1

%

 

19.8

%

 

18.1

%

 

17.0

%

Operating return on average adjusted equity (2)

 

17.2

%

 

19.8

%

 

16.5

%

 

17.8

%

Diluted earnings per share

$

0.99

 

$

1.21

 

$

3.21

 

$

3.00

 

Operating earnings per share (2)

$

1.02

 

$

1.16

 

$

2.82

 

$

3.04

 

 

(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 Thursday, October 28, 2021, 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 2096837) 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, 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, 2020. 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.

 

 

AMERISAFE, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(in thousands)

 

Three Months Ended

 

Nine Months Ended

September 30,

 

September 30,

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

(unaudited)

 

(unaudited)

Revenues:
Gross premiums written

$

67,185

 

$

72,648

 

$

222,423

 

$

240,008

 

Ceded premiums written

 

(2,407

)

 

(2,473

)

 

(7,410

)

 

(7,928

)

Net premiums written

$

64,778

 

$

70,175

 

$

215,013

 

$

232,080

 

 
Net premiums earned

$

67,626

 

$

74,771

 

$

208,260

 

$

229,725

 

Net investment income

 

6,049

 

 

7,063

 

 

19,362

 

 

22,136

 

Net realized gains (losses) on investments

 

(8

)

 

309

 

 

1,490

 

 

1,464

 

Net unrealized gains (losses) on equity securities

 

(771

)

 

844

 

 

8,026

 

 

(2,349

)

Gain (loss) on disposal of assets

 

-

 

 

-

 

 

21

 

 

(29

)

Fee and other income

 

149

 

 

18

 

 

394

 

 

309

 

Total revenues

 

73,045

 

 

83,005

 

 

237,553

 

 

251,256

 

 
Expenses:
Loss and loss adjustment expenses incurred

 

29,661

 

 

39,789

 

 

101,601

 

 

120,966

 

Underwriting and other operating costs

 

17,915

 

 

13,902

 

 

55,337

 

 

56,317

 

Policyholder dividends

 

733

 

 

714

 

 

3,200

 

 

2,685

 

Provision for investment related credit loss
expense (benefit)

 

15

 

 

(69

)

 

(102

)

 

(13

)

Total expenses

 

48,324

 

 

54,336

 

 

160,036

 

 

179,955

 

 
Income before taxes

 

24,721

 

 

28,669

 

 

77,517

 

 

71,301

 

Income tax expense

 

5,585

 

 

5,316

 

 

15,302

 

 

13,200

 

Net income

$

19,136

 

$

23,353

 

$

62,215

 

$

58,101

 

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,

 

2021

 

 

 

2020

 

 

 

2021

 

 

 

2020

 

(unaudited)

 

(unaudited)

Basic EPS:
Net income

$

19,136

 

$

23,353

 

$

62,215

 

$

58,101

 

 
Basic weighted average common shares

 

19,344,636

 

 

19,299,921

 

 

19,328,041

 

 

19,282,263

 

Basic earnings per share

$

0.99

 

$

1.21

 

$

3.22

 

$

3.01

 

 
Diluted EPS:
Net income

$

19,136

 

$

23,353

 

$

62,215

 

$

58,101

 

 
Diluted weighted average common shares:
Weighted average common shares

 

19,344,636

 

 

19,299,921

 

 

19,328,041

 

 

19,282,263

 

Restricted stock and stock options

 

63,282

 

 

58,761

 

 

64,898

 

 

63,689

 

Diluted weighted average common shares

 

19,407,918

 

 

19,358,682

 

 

19,392,939

 

 

19,345,952

 

 
Diluted earnings per share

$

0.99

 

$

1.21

 

$

3.21

 

$

3.00

 

 

 

AMERISAFE, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands)

 

September 30,

 

December 31,

 

2021

 

 

 

2020

 

(unaudited)
Assets
Investments

$

1,034,187

 

$

1,088,744

 

Cash and cash equivalents

 

123,128

 

 

61,757

 

Amounts recoverable from reinsurers

 

108,394

 

 

105,803

 

Premiums receivable, net

 

154,517

 

 

156,760

 

Deferred income taxes

 

14,738

 

 

13,665

 

Deferred policy acquisition costs

 

18,580

 

 

17,810

 

Other assets

 

26,379

 

 

26,316

 

$

1,479,923

 

$

1,470,855

 

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

$

720,789

 

$

760,561

 

Unearned premiums

 

136,013

 

 

129,260

 

Insurance-related assessments

 

18,907

 

 

17,995

 

Other liabilities

 

124,058

 

 

124,223

 

 
Shareholders’ equity

 

480,156

 

 

438,816

 

Total liabilities and shareholders’ equity

$

1,479,923

 

$

1,470,855

 

 

Contacts

Neal A. Fuller, EVP & CFO

AMERISAFE

337.463.9052

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