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Amerisafe Inc (AMSF) SEC Filing 8-K Material Event for the period ending Thursday, July 30, 2020

Amerisafe Inc

CIK: 1018979 Ticker: AMSF

Exhibit 99.1

 

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Neal A. Fuller, EVP & CFO

AMERISAFE

337.463.9052

AMERISAFE ANNOUNCES 2020 SECOND QUARTER RESULTS

Reports Combined Ratio of 78.5%

DeRidder, LA – July 30, 2020 - AMERISAFE, Inc. (Nasdaq: AMSF), a specialty provider of workers’ compensation insurance focused on high hazard industries, today announced results for the second quarter ended June 30, 2020.

 

     Three Months Ended           Six Months Ended        
     June 30,           June 30,        
     2020     2019     % Change     2020     2019     % Change  
     (in thousands, except per
share data)
          (in thousands, except per
share data)
       

Net premiums earned

   $ 75,964     $ 82,951       -8.4   $ 154,954     $ 167,899       -7.7

Net investment income

     7,324       8,169       -10.3     15,073       16,184       -6.9

Net realized gains (losses) on investments (pretax)

     163       (82     NM       1,155       (23     NM  

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

     5,570       642       NM       (3,193     2,800       NM  

Net income

     23,948       17,890       33.9     34,748       37,290       -6.8

Diluted earnings per share

   $ 1.24     $ 0.93       33.3   $ 1.80     $ 1.93       -6.7

Operating net income

     19,419       17,448       11.3     36,358       35,096       3.6

Operating earnings per share

   $ 1.00     $ 0.90       11.1   $ 1.88     $ 1.82       3.3

Book value per share

   $ 23.94     $ 23.29       2.8   $ 23.94     $ 23.29       2.8

Net combined ratio

     78.5     83.9       81.1     84.0  

Return on average equity

     21.3     16.3       15.6     17.4  

G. Janelle Frost, President and Chief Executive Officer, observed, “AMERISAFE’s fundamentals are crucial in these unprecedented times. We are serving our stakeholders with disciplined underwriting, proactive safety and intensive claims management, which produce consistent returns, quality insurance services and financial stability. This quarter those fundamentals led to favorable prior year case development and a combined ratio of 78.5%. Over time, those fundamentals have led to twelve consecutive years as one of Ward’s Top 50 P&C companies. We are honored by the recognition and encouraged to continue seeking excellence for our stakeholders.”


INSURANCE RESULTS

 

     Three Months Ended           Six Months Ended        
     June 30,           June 30,        
     2020     2019     % Change     2020     2019     % Change  
     (in thousands)           (in thousands)        

Gross premiums written

   $ 80,289     $ 87,018       -7.7   $ 167,360     $ 180,125       -7.1
  

 

 

   

 

 

     

 

 

   

 

 

   

Net premiums earned

     75,964       82,951       -8.4     154,954       167,899       -7.7

Loss and loss adjustment expenses incurred

     37,530       48,868       -23.2     81,177       98,482       -17.6

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

     21,131       19,718       7.2     42,415       40,385       5.0

Policyholder dividends

     948       998       -5.0     1,971       2,098       -6.1
  

 

 

   

 

 

     

 

 

   

 

 

   

Underwriting profit (pre-tax)

   $ 16,273     $ 13,367       21.7   $ 29,335     $ 26,934       8.9
  

 

 

   

 

 

     

 

 

   

 

 

   

Insurance Ratios:

            

Current accident year loss ratio

     72.5     72.5       72.5     72.5  

Prior accident year loss ratio

     -23.1     -13.6       -20.1     -13.8  
  

 

 

   

 

 

     

 

 

   

 

 

   

Net loss ratio

     49.4     58.9       52.4     58.7  

Net underwriting expense ratio

     27.8     23.8       27.4     24.1  

Net dividend ratio

     1.3     1.2       1.3     1.2  
  

 

 

   

 

 

     

 

 

   

 

 

   

Net combined ratio

     78.5     83.9       81.1     84.0  
  

 

 

   

 

 

     

 

 

   

 

 

   

 

   

Gross premiums written in the second quarter of 2020 decreased by $6.7 million, or 7.7%, primarily due to lower voluntary premiums on policies written in the quarter which were 6.4% lower as compared to the second quarter of 2019.

 

   

Payroll audits and related premium adjustments increased premiums written by $0.5 million in the second quarter of 2020, compared to an increase in premiums written of $1.8 million in the second quarter of 2019. The amount this quarter included a $1.4 million reduction in anticipated future audit premiums.

 

   

The current accident year loss ratio for the second quarter was 72.5%, unchanged from the first quarter of 2020, and unchanged from accident year 2019. During the quarter, the Company experienced favorable case reserve development for prior accident years, which reduced loss and loss adjustment expenses by $17.5 million, attributed primarily to accident years 2015 through 2018.

 

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For the quarter ended June 30, 2020, the underwriting expense ratio was 27.8% compared with 23.8% in the same quarter in 2019. The increase in the expense ratio was due to lower earned premium and higher expenses. Last year’s second quarter included $1.0 million in favorable lower estimates of variable share price based incentive compensation costs and $0.6 million in favorable lower insurance assessment costs.

 

   

The effective tax rate for the quarter ended June 30, 2020 was 18.5%, compared with 19.3% for the second quarter of 2019. The decrease is due to a higher level of tax-exempt interest income in 2020 compared to 2019.

INVESTMENT RESULTS

 

     Three Months Ended           Six Months Ended        
     June 30,           June 30,        
     2020     2019     % Change     2020     2019     % Change  
     (in thousands)           (in thousands)        

Net investment income

   $ 7,324     $ 8,169       -10.3   $ 15,073     $ 16,184       -6.9

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

     163       (82     NM       1,155       (23     NM  

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

     5,570       642       NM       (3,193     2,800       NM  

Pre-tax investment yield

     2.5     2.7       2.5     2.7  

Tax-equivalent yield (1)

     2.9     3.1       2.9     3.1  

 

(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 June 30, 2020, decreased 10.3% to $7.3 million from $8.2 million in the second quarter of 2019, due to lower investment yields on fixed-income securities.

 

   

Net unrealized gains on equity investments were $5.6 million during the second quarter of 2020, which increased overall net income by $0.23 per share.

 

   

As of June 30, 2020, the carrying value of AMERISAFE’s investment portfolio, including cash and cash equivalents, was $1.2 billion.

 

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CAPITAL MANAGEMENT

The Company paid a regular quarterly cash dividend of $0.27 per share on June 26, 2020. On July 27, 2020 the Company’s Board of Directors declared a quarterly cash dividend of $0.27 per share, payable on September 25, 2020 to shareholders of record as of September 11, 2020.

Book value per share at June 30, 2020 was $23.94, an increase of 7.4% from $22.29 at December 31, 2019.

CORONAVIRUS (COVID-19) UPDATE

During the second quarter, AMERISAFE began gradually returning employees to our offices, with protocols in place to protect the health and safety of our employees. Many employees also continue to work from home, assisting agents and policyholders with their workers compensation insurance. AMERISAFE has also begun returning our Safety and Claims professionals to the field, where these professionals inspect job sites and meet with injured workers, all following health and safety guidelines. Additionally, the Company continues to work with customers utilizing virtual meeting tools along with access via phone, email and through our website. At this point and time, the Company is conducting business with no disruption to operations.

AMERISAFE policyholders are small to mid-sized employers engaged in hazardous industries, principally construction (44%), trucking (18%), logging and lumber (8%), manufacturing (5%), agriculture (5%), maritime (2%), and oil and gas (2%) with the remainder (16%) in a wide variety of hazardous industries (based on 2019 premiums).

There continues to be uncertainty about the impact to our policyholders from COVID-19 and our customers’ business operations, including payrolls, which is a primary source of premium revenue for AMERISAFE. In most industries and states, business continues, and in some cases the activities of our policyholders have been restricted due to the pandemic and associated recession.

Premiums in future periods will depend on the ongoing economic impact of COVID-19. Investment income may decline, and the market value of investment securities may decrease, depending on the ongoing economic impact.

 

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SUPPLEMENTAL INFORMATION

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2020     2019     2020     2019  
     (in thousands, except share and per share data)  

Net income

   $ 23,948     $ 17,890     $ 34,748     $ 37,290  

Less:

        

Net realized gains (losses) on investments

     163       (82     1,155       (23

Net unrealized gains (losses) on equity securities

     5,570       642       (3,193     2,800  

Tax effect (1)

     (1,204     (118     428       (583
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating net income (2)

   $ 19,419     $ 17,448     $ 36,358     $ 35,096  
  

 

 

   

 

 

   

 

 

   

 

 

 

Average shareholders’ equity (3)

   $ 449,876     $ 439,924     $ 446,506     $ 429,603  

Less:

        

Average accumulated other comprehensive income

     16,437       7,551       15,695       4,654  
  

 

 

   

 

 

   

 

 

   

 

 

 

Average adjusted shareholders’ equity (2)

   $ 433,439     $ 432,373     $ 430,811     $ 424,949  
  

 

 

   

 

 

   

 

 

   

 

 

 

Diluted weighted average common shares

     19,335,707       19,306,953       19,335,748       19,316,276  

Return on average equity (4)

     21.3     16.3     15.6     17.4

Operating return on average adjusted equity (2)

     17.9     16.1     16.9     16.5

Diluted earnings per share

   $ 1.24     $ 0.93     $ 1.80     $ 1.93  

Operating earnings per share (2)

   $ 1.00     $ 0.90     $ 1.88     $ 1.82  

 

(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.

 

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CONFERENCE CALL INFORMATION

AMERISAFE has scheduled a conference call for July 31, 2020, 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 7192493) 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, manufacturing, and agriculture. AMERISAFE actively markets workers’ compensation insurance in 27 states.

 

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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 including the impact of the COVID-19 pandemic on the business and operations of the Company and our policyholders and the market value of the securities in our investment portfolio. 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, 2019. 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 -

 

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AMERISAFE, INC. AND SUBSIDIARIES

Consolidated Statements of Income

(in thousands)

 

     Three Months Ended     Six Months Ended  
     June 30,     June 30,  
     2020     2019     2020     2019  
     (unaudited)     (unaudited)  

Revenues:

        

Gross premiums written

   $ 80,289     $ 87,018     $ 167,360     $ 180,125  

Ceded premiums written

     (2,672     (2,204     (5,455     (4,634
  

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums written

   $ 77,617     $ 84,814     $ 161,905     $ 175,491  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net premiums earned

   $ 75,964     $ 82,951     $ 154,954     $ 167,899  

Net investment income

     7,324       8,169       15,073       16,184  

Net realized gains (losses) on investments

     163       (82     1,155       (23

Net unrealized gains (losses) on equity securities

     5,570       642       (3,193     2,800  

Loss on disposal of assets

     (29     —         (29     —    

Fee and other income

     90       73       291       83  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenues

     89,082       91,753       168,251       186,943  
  

 

 

   

 

 

   

 

 

   

 

 

 

Expenses:

        

Loss and loss adjustment expenses incurred

     37,530       48,868       81,177       98,482  

Underwriting and other operating costs

     21,131       19,718       42,415       40,385  

Policyholder dividends

     948       998       1,971       2,098  

Provision for investment related credit loss expense

     82       —         56       —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Total expenses

     59,691       69,584       125,619       140,965  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before taxes

     29,391       22,169       42,632       45,978  

Income tax expense

     5,443       4,279       7,884       8,688  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 23,948     $ 17,890     $ 34,748     $ 37,290  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

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AMERISAFE, INC. AND SUBSIDIARIES

Consolidated Statements of Income (cont.)

(in thousands, except per share amounts)

 

     Three Months Ended      Six Months Ended  
     June 30,      June 30,  
     2020      2019      2020      2019  
     (unaudited)      (unaudited)  

Basic EPS:

           

Net income

   $ 23,948      $ 17,890      $ 34,748      $ 37,290  
  

 

 

    

 

 

    

 

 

    

 

 

 

Basic weighted average common shares

     19,280,684        19,245,592        19,273,347        19,237,401  

Basic earnings per share

   $ 1.24      $ 0.93      $ 1.80      $ 1.94  

Diluted EPS:

           

Net income

   $ 23,948      $ 17,890      $ 34,748      $ 37,290  
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted weighted average common shares:

           

Weighted average common shares

     19,280,684        19,245,592        19,273,347        19,237,401  

Stock options and restricted stock

     55,023        61,361        62,401        78,875  
  

 

 

    

 

 

    

 

 

    

 

 

 

Diluted weighted average common shares

     19,335,707        19,306,953        19,335,748        19,316,276  

Diluted earnings per share

   $ 1.24      $ 0.93      $ 1.80      $ 1.93  

 

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AMERISAFE, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands)

 

     June 30,      December 31,  
     2020      2019  
     (unaudited)         

Assets

     

Investments

   $ 1,098,760      $ 1,125,018  

Cash and cash equivalents

     110,281        43,813  

Amounts recoverable from reinsurers

     103,524        95,913  

Premiums receivable, net

     175,241        157,953  

Deferred income taxes

     16,704        17,513  

Deferred policy acquisition costs

     19,765        19,048  

Other assets

     25,698        33,648  
  

 

 

    

 

 

 
   $ 1,549,973      $ 1,492,906  
  

 

 

    

 

 

 

Liabilities and Shareholders’ Equity

     

Liabilities:

     

Reserves for loss and loss adjustment expenses

   $ 768,767      $ 772,887  

Unearned premiums

     147,824        140,873  

Insurance-related assessments

     25,955        22,967  

Other liabilities

     144,631        125,964  

Shareholders’ equity

     462,796        430,215  
  

 

 

    

 

 

 

Total liabilities and shareholders’ equity

   $ 1,549,973      $ 1,492,906  
  

 

 

    

 

 

 

# # #

 

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Ticker: AMSF
CIK: 1018979
Form Type: 8-K Corporate News
Accession Number: 0001193125-20-204263
Submitted to the SEC: Thu Jul 30 2020 6:59:34 PM EST
Accepted by the SEC: Thu Jul 30 2020
Period: Thursday, July 30, 2020
Industry: Fire Marine And Casualty Insurance
Events:
  1. Earnings Release
  2. Financial Exhibit

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