AMSF AMERISAFE Inc

Reports Return on Equity of 11.8% for the Quarter

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, 2023.

Three Months Ended Nine Months Ended September 30, September 30,

2023

 

2022

 

% Change

 

2023

 

2022

 

% Change

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

$

66,634

 

$

67,790

 

-1.7

%

$

201,413

 

$

205,625

 

-2.0

%

Net investment income

 

8,105

 

 

6,983

 

16.1

%

 

23,262

 

 

19,581

 

18.8

%

Net realized gains on investments (pre-tax)

 

5,133

 

 

585

 

NM

 

 

5,466

 

 

2,402

 

NM

 

Net unrealized losses on equity securities (pre-tax)

 

(7,309

)

 

(4,082

)

NM

 

 

(3,892

)

 

(12,984

)

NM

 

Net income

 

9,961

 

 

11,361

 

-12.3

%

 

42,927

 

 

34,824

 

23.3

%

Diluted earnings per share

$

0.52

 

$

0.59

 

-11.9

%

$

2.23

 

$

1.80

 

23.9

%

Operating net income (loss)

 

11,680

 

 

14,124

 

-17.3

%

 

41,684

 

 

43,184

 

-3.5

%

Operating earnings per share

$

0.61

 

$

0.73

 

-16.4

%

$

2.17

 

$

2.23

 

-2.7

%

Book value per share

$

17.51

 

$

19.47

 

-10.1

%

$

17.51

 

$

19.47

 

-10.1

%

Net combined ratio

 

90.6

%

 

85.4

%

 

86.1

%

 

84.1

%

Return on average equity

 

11.8

%

 

12.0

%

 

17.5

%

 

12.0

%

G. Janelle Frost, President and Chief Executive Officer, commented, “Robust payroll audits coupled with growth in policy count led to top-line growth this quarter. We were able to maintain a strong operating ROAE of 13.2% and combined ratio of 90.6%, despite some infrequent items that impacted our expenses this quarter. Our underwriting expertise continues to drive AMERISAFE’s strong returns and balance sheet position.”

INSURANCE RESULTS

Three Months Ended Nine Months Ended September 30, September 30,

2023

 

2022

 

% Change

 

2023

 

2022

% Change

(in thousands) (in thousands)   Gross premiums written

$

70,840

 

$

68,212

 

3.9

%

$

225,031

 

$

220,463

 

2.1

%

Net premiums earned

 

66,634

 

 

67,790

 

-1.7

%

 

201,413

 

 

205,625

 

-2.0

%

Loss and loss adjustment expenses incurred

 

37,154

 

 

37,725

 

-1.5

%

 

111,808

 

 

115,792

 

-3.4

%

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

 

22,371

 

 

19,585

 

14.2

%

 

59,325

 

 

54,611

 

8.6

%

Policyholder dividends

 

804

 

 

640

 

25.6

%

 

2,225

 

 

2,517

 

-11.6

%

Underwriting profit (pre-tax)

$

6,305

 

$

9,840

 

-35.9

%

$

28,055

 

$

32,705

 

-14.2

%

  Insurance Ratios: Current accident year loss ratio

 

71.0

%

 

71.0

%

 

71.0

%

 

71.0

%

Prior accident year loss ratio

 

-15.2

%

 

-15.4

%

 

-15.5

%

 

-14.7

%

Net loss ratio

 

55.8

%

 

55.6

%

 

55.5

%

 

56.3

%

Net underwriting expense ratio

 

33.6

%

 

28.9

%

 

29.5

%

 

26.6

%

Net dividend ratio

 

1.2

%

 

0.9

%

 

1.1

%

 

1.2

%

Net combined ratio

 

90.6

%

 

85.4

%

 

86.1

%

 

84.1

%

• Voluntary premiums on policies written in the third quarter were 1.1% higher than the third quarter of 2022, primarily due to policy count growth.
• Payroll audits and related premium adjustments increased premiums written by $5.6 million in the third quarter of 2023, compared to an increase of $3.4 million in the third quarter of 2022.
• Ceded premiums increased $1.6 million in the third quarter of 2023 as compared to the third quarter of 2022 as we purchased higher levels of reinsurance coverage at generally higher prices in 2023.
• The loss ratio for the third quarter was 55.8%, fairly flat as compared to 55.6% in the third quarter of 2022. During the quarter, the Company experienced favorable net loss reserve development for prior accident years, which reduced loss and loss adjustment expenses by $10.2 million, primarily from accident years 2016 through 2021.
• For the quarter ended September 30, 2023, the underwriting expense ratio was 33.6% compared to 28.9% in the same quarter in 2022 primarily due to a decrease of $1.6 million in profit sharing reinsurance commission, a $0.6 million increase in commission expense and $0.4 million increase in regulatory assessments and fees.

• The effective tax rate for the quarter ended September 30, 2023, was 19.2% compared with 15.5% for 2022. The rate was higher than last year due to a decrease in the proportion of tax-exempt interest income relative to underwriting profit.

INVESTMENT RESULTS

Three Months Ended Nine Months Ended September 30, September 30,

2023

 

2022

 

% Change

 

2023

 

2022

 

% Change

(in thousands) (in thousands) Net investment income

$

8,105

 

$

6,983

 

16.1

%

$

23,262

 

$

19,581

 

18.8

%

Net realized gains on investments (pre-tax)

 

5,133

 

 

585

 

NM

 

 

5,466

 

 

2,402

 

NM

 

Net unrealized losses on equity securities (pre-tax)

 

(7,309

)

 

(4,082

)

NM

 

 

(3,892

)

 

(12,984

)

NM

 

Pre-tax investment yield

 

3.4

%

 

2.7

%

 

3.3

%

 

2.5

%

Tax-equivalent yield (1)

 

3.8

%

 

3.2

%

 

3.8

%

 

3.2

%

___________________

(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, 2023, increased 16.1% to $8.1 million from $7.0 million in the third quarter of 2022, due to higher yields on cash and fixed-income securities.
• Net realized gains on investments were $5.1 million in the third quarter, primarily due to a realized gain on an equity security.
• Net unrealized losses on equity securities were $7.3 million in the third quarter as a result of generally unfavorable equity market returns during the quarter.
• As of September 30, 2023, the carrying value of AMERISAFE’s investment portfolio, including cash and cash equivalents, was $948.3 million.

CAPITAL MANAGEMENT

In an accompanying news release, the Company announced a special cash dividend of $3.50 per share, payable on December 15, 2023, to shareholders of record as of December 1, 2023.

During the third quarter of 2023, the Company paid a regular quarterly cash dividend of $0.34 per share on September 22, 2023, which represented a 9.7% increase in the quarterly dividend compared with 2022. On October 24, 2023, the Company’s Board of Directors declared a quarterly cash dividend of $0.34 per share, payable on December 15, 2023, to shareholders of record as of December 1, 2023.

Book value per share at September 30, 2023 was $17.51, an increase of 5.7% from $16.57 at December 31, 2022.

SUPPLEMENTAL INFORMATION

Three Months Ended Nine Months Ended September 30, September 30,

2023

 

2022

 

2023

 

2022

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

$

9,961

 

$

11,361

 

$

42,927

 

$

34,824

 

Less: Net realized gains on investments

 

5,133

 

 

585

 

 

5,466

 

 

2,402

 

Net unrealized losses on equity securities

 

(7,309

)

 

(4,082

)

 

(3,892

)

 

(12,984

)

Tax effect (1)

 

457

 

 

734

 

 

(331

)

 

2,222

 

Operating net income (2)

$

11,680

 

$

14,124

 

$

41,684

 

$

43,184

 

  Average shareholders’ equity (3)

$

338,225

 

$

379,004

 

$

326,658

 

$

386,171

 

Less: Average accumulated other comprehensive loss

 

(16,232

)

 

(14,419

)

 

(17,096

)

 

(3,214

)

Average adjusted shareholders’ equity (2)

$

354,457

 

$

393,423

 

$

343,754

 

$

389,385

 

  Diluted weighted average common shares

 

19,223,588

 

 

19,269,346

 

 

19,217,606

 

 

19,340,898

 

  Return on average equity (4)

 

11.8

%

 

12.0

%

 

17.5

%

 

12.0

%

Operating return on average adjusted equity (2)

 

13.2

%

 

14.4

%

 

16.2

%

 

14.8

%

Diluted earnings per share

$

0.52

 

$

0.59

 

$

2.23

 

$

1.80

 

Operating earnings per share (2)

$

0.61

 

$

0.73

 

$

2.17

 

$

2.23

___________________

(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 26, 2023 at 10:30 AM Eastern Time to discuss the results for the quarter and comment on future periods. To participate in the conference call, dial 323-794-2551 (Conference Code 1991265) 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 the “Investor Relations Home” page of the “Investors” section of the Company’s website (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 the same website location.

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 on the business and operations of the Company and our policyholders and the market value of our investment portfolio. Additional 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. 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,

2023

 

2022

 

2023

 

2022

(unaudited) (unaudited) Revenues: Gross premiums written

$

70,840

 

$

68,212

 

$

225,031

 

$

220,463

 

Ceded premiums written

 

(4,112

)

 

(2,553

)

 

(12,256

)

 

(7,837

)

Net premiums written

$

66,728

 

$

65,659

 

$

212,775

 

$

212,626

 

  Net premiums earned

$

66,634

 

$

67,790

 

$

201,413

 

$

205,625

 

Net investment income

 

8,105

 

 

6,983

 

 

23,262

 

 

19,581

 

Net realized gains on investments

 

5,133

 

 

585

 

 

5,466

 

 

2,402

 

Net unrealized losses on equity securities

 

(7,309

)

 

(4,082

)

 

(3,892

)

 

(12,984

)

Fee and other income

 

77

 

 

104

 

 

488

 

 

352

 

Total revenues

 

72,640

 

 

71,380

 

 

226,737

 

 

214,976

 

  Expenses: Loss and loss adjustment expenses incurred

 

37,154

 

 

37,725

 

 

111,808

 

 

115,792

 

Underwriting and other operating costs

 

22,371

 

 

19,585

 

 

59,325

 

 

54,611

 

Policyholder dividends

 

804

 

 

640

 

 

2,225

 

 

2,517

 

Provision for investment related credit loss expense (benefit)

 

(16

)

 

(21

)

 

(51

)

 

60

 

Total expenses

 

60,313

 

 

57,929

 

 

173,307

 

 

172,980

 

  Income before taxes

 

12,327

 

 

13,451

 

 

53,430

 

 

41,996

 

Income tax expense

 

2,366

 

 

2,090

 

 

10,503

 

 

7,172

 

Net income

$

9,961

 

$

11,361

 

$

42,927

 

$

34,824

 

    Three Months Ended Nine Months Ended September 30, September 30,

2023

2022

2023

2022

(unaudited) (unaudited) Basic EPS: Net income

$

9,961

 

$

11,361

 

$

42,927

 

$

34,824

 

  Basic weighted average common shares

 

19,164,854

 

 

19,198,320

 

 

19,145,432

 

 

19,267,602

 

Basic earnings per share

$

0.52

 

$

0.59

 

$

2.24

 

$

1.81

 

  Diluted EPS: Net income

$

9,961

 

$

11,361

 

$

42,927

 

$

34,824

 

  Diluted weighted average common shares: Weighted average common shares

 

19,164,854

 

 

19,198,320

 

 

19,145,432

 

 

19,267,602

 

Restricted stock and RSUs

 

58,734

 

 

71,026

 

 

72,174

 

 

73,296

 

Diluted weighted average common shares

 

19,223,588

 

 

19,269,346

 

 

19,217,606

 

 

19,340,898

 

  Diluted earnings per share

$

0.52

 

$

0.59

 

$

2.23

 

$

1.80

 

AMERISAFE, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands)

  September 30, December 31,

2023

2022

(unaudited) Assets Investments

$

889,019

$

888,987

Cash and cash equivalents

 

59,249

 

61,469

Amounts recoverable from reinsurers

 

127,687

 

125,677

Premiums receivable, net

 

144,445

 

121,713

Deferred income taxes

 

25,683

 

22,794

Deferred policy acquisition costs

 

18,796

 

17,401

Other assets

 

31,757

 

31,238

$

1,296,636

$

1,269,279

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

$

684,348

$

696,037

Unearned premiums

 

126,338

 

114,976

Insurance-related assessments

 

18,295

 

17,653

Other liabilities

 

131,772

 

123,181

  Shareholders’ equity

 

335,883

 

317,432

Total liabilities and shareholders’ equity

$

1,296,636

$

1,269,279

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20231025993985/en/

Andy Omiridis, EVP, Chief Financial Officer AMERISAFE 337.463.9052