Last10K.com

Amerisafe Inc (AMSF) SEC Filing 10-Q Quarterly report for the period ending Sunday, March 31, 2019

Amerisafe Inc

CIK: 1018979 Ticker: AMSF

Exhibit 99.1

 

LOGO

  

LOGO

 

Neal A. Fuller, EVP & CFO

AMERISAFE

337.463.9052

AMERISAFE ANNOUNCES 2019 FIRST QUARTER RESULTS

Reports Combined Ratio of 84.0%

DeRidder, LA – May 1, 2019 - AMERISAFE, Inc. (

Nasdaq: AMSF), a specialty provider of workers’ compensation insurance focused on high hazard industries, today announced results for the first quarter ended March 31, 2019.

 

     Three Months Ended        
     March 31,        
     2019     2018     % Change  
     (in thousands, except
per share data)
       

Net premiums earned

   $ 84,948     $ 87,310       -2.7

Net investment income

     8,015       7,209       11.2

Net realized gains (losses) on investments, pretax

     59       (31     NM  

Net income

     19,400       16,169       20.0

Diluted earnings per share

   $ 1.01     $ 0.84       20.2

Operating net income

     17,649       16,502       7.0

Operating earnings per share

   $ 0.91     $ 0.86       5.8

Book value per share

   $ 22.33     $ 22.43       -0.4

Net combined ratio

     84.0     85.6  

Return on average equity

     18.5     15.1  

G. Janelle Frost, President and Chief Executive Officer, said, “We are pleased with the first quarter results. A return on equity of 18.5% and a combined ratio of 84.0% resulted from AMERISAFE’s methodical approach to a prolonged soft cycle in workers’ compensation insurance. Continued declines in underlying loss costs kept insurers highly competitive, while payroll growth benefited revenue in the quarter.”


The following information was filed by Amerisafe Inc (AMSF) on Wednesday, May 1, 2019 as an 8K 2.02 statement, which is an earnings press release pertaining to results of operations and financial condition. It may be helpful to assess the quality of management by comparing the information in the press release to the information in the accompanying 10-Q Quarterly Report statement of earnings and operation as management may choose to highlight particular information in the press release.

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF

THE SECURITIES EXCHANGE ACT OF 1934

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2019

Commission File Number:

001-12251

 

AMERISAFE, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Texas

 

75-2069407

(State of Incorporation)

 

(I.R.S. Employer Identification Number)

 

 

 

2301 Highway 190 West, DeRidder, Louisiana

 

70634

(Address of Principal Executive Offices)

 

(Zip Code)

Registrant’s telephone number, including area code: (337) 463-9052

 

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

 Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

 

 

 

Non-accelerated filer

 

  

  

Smaller reporting company

 

 

 

 

 

 

 

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes       No  

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common

 

AMSF

 

NASDAQ

As of April 30, 2019, there were 19,274,980 shares of the Registrant’s common stock, par value $0.01 per share, outstanding.

 

 

 

 


TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

No.

 

 

 

 

FORWARD-LOOKING STATEMENTS

3

 

 

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

Item 1

 

Financial Statements

4

 

 

 

 

Item 2

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

 

 

 

 

Item 3

 

Quantitative and Qualitative Disclosures About Market Risk

24

 

 

 

 

Item 4

 

Controls and Procedures

25

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

Item 2

 

Unregistered Sales of Equity Securities and Use of Proceeds

26

 

 

 

 

Item 6

 

Exhibits

26

 

2


FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934. You should not place undue reliance on these statements. These forward-looking statements include statements that reflect the current views of our senior management with respect to our financial performance and future events with respect to our business and the insurance industry in general. Statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “forecast,” “estimate,” “may,” “should,” “anticipate” and similar statements of a future or forward-looking nature identify forward-looking statements. Forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to, the following:

 

the cyclical nature of the workers’ compensation insurance industry;

 

increased competition on the basis of types of insurance offered, premium rates, coverage availability, payment terms, claims management, safety services, policy terms, overall financial strength, financial ratings and reputation;

 

general economic conditions, including recession, inflation, performance of financial markets, interest rates, unemployment rates and fluctuating asset values;

 

changes in relationships with independent agencies;

 

developments in capital markets that adversely affect the performance of our investments;

 

technology breaches or failures, including those resulting from a malicious cyber attack on the Company or its policyholders and medical providers;

 

decreased level of business activity of our policyholders caused by decreased business activity generally, and in particular in the industries we target;

 

greater frequency or severity of claims and loss activity than our underwriting, reserving or investment practices anticipate based on historical experience or industry data;

 

adverse developments in economic, competitive, judicial or regulatory conditions within the workers’ compensation insurance industry;

 

loss of the services of any of our senior management or other key employees;

 

changes in regulations, laws, rates, rating factors, or taxes applicable to the Company, its policyholders or the agencies that sell its insurance;

 

changes in current accounting standards or new accounting standards;

 

changes in legal theories of liability under our insurance policies;

 

changes in rating agency policies, practices or ratings;

 

changes in the availability, cost or quality of reinsurance and the failure of our reinsurers to pay claims in a timely manner or at all;

 

the effects of U.S. involvement in hostilities with other countries and large-scale acts of terrorism, or the threat of hostilities or terrorist acts; and

 

other risks and uncertainties described from time to time in the Company’s filings with the Securities and Exchange Commission (“SEC”).

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements in this report, including under the caption “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2018. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate.

 

 

3


PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

 

 

 

March 31, 2019

 

 

December 31, 2018

 

 

 

(unaudited)

 

 

 

 

 

Assets

 

 

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

 

 

Fixed maturity securities—held-to-maturity, at amortized cost (fair value

   $615,217 and $616,772 in 2019 and 2018, respectively)

 

$

604,056

 

 

$

613,878

 

Fixed maturity securities—available-for-sale, at fair value (cost $464,740 and

   $479,772 in 2019 and 2018, respectively)

 

 

471,254

 

 

 

478,730

 

Equity securities, at fair value (cost $20,769 and $19,962 in 2019

   and 2018, respectively)

 

 

21,615

 

 

 

18,651

 

Short-term investments

 

 

64,708

 

 

 

14,231

 

Total investments

 

 

1,161,633

 

 

 

1,125,490

 

Cash and cash equivalents

 

 

34,895

 

 

 

40,344

 

Amounts recoverable from reinsurers

 

 

111,182

 

 

 

112,006

 

Premiums receivable, net of allowance

 

 

174,310

 

 

 

162,478

 

Deferred income taxes

 

 

20,057

 

 

 

21,852

 

Accrued interest receivable

 

 

10,917

 

 

 

10,197

 

Property and equipment, net

 

 

6,041

 

 

 

6,258

 

Deferred policy acquisition costs

 

 

20,433

 

 

 

19,734

 

Other assets

 

 

19,514

 

 

 

17,572

 

Total assets

 

$

1,558,982

 

 

$

1,515,931

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

Reserves for loss and loss adjustment expenses

 

$

800,580

 

 

$

798,409

 

Unearned premiums

 

 

155,026

 

 

 

149,296

 

Amounts held for others

 

 

42,468

 

 

 

41,388

 

Policyholder deposits

 

 

46,586

 

 

 

46,795

 

Insurance-related assessments

 

 

28,802

 

 

 

28,258

 

Federal income tax payable

 

 

7,660

 

 

 

3,412

 

Accounts payable and other liabilities

 

 

39,249

 

 

 

38,611

 

Payable for investments purchased

 

 

8,206

 

 

 

 

Total liabilities

 

 

1,128,577

 

 

 

1,106,169

 

Shareholders’ equity:

 

 

 

 

 

 

 

 

Common stock:  voting—$0.01 par value authorized shares—50,000,000

   in 2019 and 2018; 20,533,230 and 20,528,230 shares issued and 19,274,980

   and 19,269,980  shares outstanding in 2019 and 2018, respectively

 

 

205

 

 

 

205

 

Additional paid-in capital

 

 

211,700

 

 

 

211,431

 

Treasury stock, at cost (1,258,250 shares in 2019 and 2018)

 

 

(22,370

)

 

 

(22,370

)

Accumulated earnings

 

 

235,908

 

 

 

221,328

 

Accumulated other comprehensive income (loss), net

 

 

4,962

 

 

 

(832

)

Total shareholders’ equity

 

 

430,405

 

 

 

409,762

 

Total liabilities and shareholders’ equity

 

$

1,558,982

 

 

$

1,515,931

 

 

See accompanying notes.

4


AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share data)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

Revenues

 

 

 

 

 

 

 

 

Gross premiums written

 

$

93,107

 

 

$

97,342

 

Ceded premiums written

 

 

(2,430

)

 

 

(2,330

)

Net premiums written

 

$

90,677

 

 

$

95,012

 

Net premiums earned

 

$

84,948

 

 

$

87,310

 

Net investment income

 

 

8,015

 

 

 

7,209

 

Net realized gains (losses) on investments

 

 

59

 

 

 

(31

)

Net unrealized gains (losses) on equity securities

 

 

2,158

 

 

 

(390

)

Fee and other income

 

 

10

 

 

 

77

 

Total revenues

 

 

95,190

 

 

 

94,175

 

Expenses

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses incurred

 

 

49,614

 

 

 

53,162

 

Underwriting and certain other operating costs

 

 

7,552

 

 

 

7,846

 

Commissions

 

 

6,368

 

 

 

6,494

 

Salaries and benefits

 

 

6,747

 

 

 

5,926

 

Policyholder dividends

 

 

1,100

 

 

 

1,333

 

Total expenses

 

 

71,381

 

 

 

74,761

 

Income before income taxes

 

 

23,809

 

 

 

19,414

 

Income tax expense

 

 

4,409

 

 

 

3,245

 

Net income

 

$

19,400

 

 

$

16,169

 

Earnings per share

 

 

 

 

 

 

 

 

Basic

 

$

1.01

 

 

$

0.84

 

Diluted

 

$

1.01

 

 

$

0.84

 

Shares used in computing earnings per share

 

 

 

 

 

 

 

 

Basic

 

 

19,229,134

 

 

 

19,187,136

 

Diluted

 

 

19,298,036

 

 

 

19,262,237

 

Cash dividends declared per common share

 

$

0.25

 

 

$

0.22

 

 

See accompanying notes.

5


AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

Net income

 

$

19,400

 

 

$

16,169

 

Other comprehensive income:

 

 

 

 

 

 

 

 

Unrealized gain (loss) on debt securities, net of tax

 

 

5,992

 

 

 

(5,848

)

Change in deferred tax valuation allowance

 

 

(198

)

 

 

 

Comprehensive income

 

$

25,194

 

 

$

10,321

 

 

  

See accompanying notes.

6


AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

(in thousands, except share data)

(unaudited)

 

 

 

Common Stock

 

 

Additional

Paid-In

 

 

Treasury Stock

 

 

Accumulated

 

 

Accumulated

Other

Comprehensive

 

 

 

 

 

 

 

Shares

 

 

Amounts

 

 

Capital

 

 

Shares

 

 

Amounts

 

 

Earnings

 

 

Income (Loss)

 

 

Total

 

Balance at December 31, 2018

 

 

20,528,230

 

 

$

205

 

 

$

211,431

 

 

 

(1,258,250

)

 

$

(22,370

)

 

$

221,328

 

 

$

(832

)

 

$

409,762

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impact of adoption of

   ASU 2016-02

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,400

 

 

 

 

 

 

19,400

 

Other comprehensive

   income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized

   losses, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

5,992

 

 

 

5,992

 

Change in deferred tax

   valuation allowance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(198

)

 

 

(198

)

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,194

 

Common stock issued upon

   exercise of options

 

 

5,000

 

 

 

 

 

 

20

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

20

 

Share-based compensation

 

 

 

 

 

 

 

 

249

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

249

 

Dividends to shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(4,819

)

 

 

 

 

 

(4,819

)

Balance at March 31, 2019

 

 

20,533,230

 

 

$

205

 

 

$

211,700

 

 

 

(1,258,250

)

 

$

(22,370

)

 

$

235,908

 

 

$

4,962

 

 

$

430,405

 

 

See accompanying notes.

7


AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in thousands)

(unaudited)

 

 

 

Three Months Ended March 31,

 

 

 

2019

 

 

2018

 

Operating activities

 

 

 

 

 

 

 

 

Net income

 

$

19,400

 

 

$

16,169

 

Adjustments to reconcile net income to net cash provided by operating activities:

 

 

 

 

 

 

 

 

Depreciation

 

 

241

 

 

 

222

 

Net amortization of investments

 

 

2,347

 

 

 

3,151

 

Deferred income taxes

 

 

5

 

 

 

264

 

Net realized (gains) losses on investments

 

 

(59

)

 

 

31

 

Net unrealized (gains) losses on equity securities

 

 

(2,158

)

 

 

390

 

Share-based compensation

 

 

565

 

 

 

18

 

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Premiums receivable, net

 

 

(11,832

)

 

 

(12,564

)

Accrued interest receivable

 

 

(720

)

 

 

(697

)

Deferred policy acquisition costs

 

 

(699

)

 

 

(1,036

)

Amounts held by others

 

 

 

 

 

(7,855

)

Other assets

 

 

(998

)

 

 

2,438

 

Reserves for loss and loss adjustment expenses

 

 

2,171

 

 

 

5,453

 

Unearned premiums

 

 

5,730

 

 

 

7,702

 

Reinsurance balances

 

 

824

 

 

 

(4,040

)

Amounts held for others and policyholder deposits

 

 

871

 

 

 

402

 

Accounts payable and other liabilities

 

 

4,588

 

 

 

2,618

 

Net cash provided by operating activities

 

 

20,276

 

 

 

12,666

 

Investing activities

 

 

 

 

 

 

 

 

Purchases of investments held-to-maturity

 

 

(26,174

)

 

 

(17,925

)

Purchases of investments available-for-sale

 

 

(10,394

)

 

 

(28,510

)

Purchases of equity securities

 

 

(807

)

 

 

 

Purchases of short-term investments

 

 

(64,320

)

 

 

(28,688

)

Proceeds from maturities of investments held-to-maturity

 

 

40,578

 

 

 

19,127

 

Proceeds from sales and maturities of investments available-for-sale

 

 

26,365

 

 

 

25,004

 

Proceeds from sales and maturities of short-term investments

 

 

13,959

 

 

 

4,000

 

Purchases of property and equipment

 

 

(22

)

 

 

(868

)

Net cash used in investing activities

 

 

(20,815

)

 

 

(27,860

)

Financing activities

 

 

 

 

 

 

 

 

Proceeds from stock option exercises

 

 

20

 

 

 

68

 

Finance lease purchases

 

 

(12

)

 

 

 

Dividends to shareholders

 

 

(4,918

)

 

 

(4,361

)

Net cash used in financing activities

 

 

(4,910

)

 

 

(4,293

)

Change in cash and cash equivalents

 

 

(5,449

)

 

 

(19,487

)

Cash and cash equivalents at beginning of period

 

 

40,344

 

 

 

55,559

 

Cash and cash equivalents at end of period

 

$

34,895

 

 

$

36,072

 

 

See accompanying notes.

8


AMERISAFE, INC. AND SUBSIDIARIES

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

(unaudited)

 

 

Note 1. Basis of Presentation

AMERISAFE, Inc. (the “Company”) is an insurance holding company incorporated in the state of Texas. The accompanying unaudited consolidated financial statements include the accounts of AMERISAFE and its subsidiaries: American Interstate Insurance Company (“AIIC”) and its insurance subsidiaries, Silver Oak Casualty, Inc. (“SOCI”) and American Interstate Insurance Company of Texas (“AIICTX”), Amerisafe Risk Services, Inc. (“RISK”) and Amerisafe General Agency, Inc. (“AGAI”). AIIC and SOCI are property and casualty insurance companies organized under the laws of the state of Nebraska. AIICTX is a property and casualty insurance company organized under the laws of the state of Texas. RISK, a wholly owned subsidiary of the Company, is a claims and safety service company currently servicing only affiliated insurance companies. AGAI, a wholly owned subsidiary of the Company, is a general agent for the Company. AGAI sells insurance, which is underwritten by AIIC, SOCI and AIICTX, as well as by nonaffiliated insurance carriers. The assets and operations of AGAI are not significant to that of the Company and its consolidated subsidiaries.

The terms “AMERISAFE,” the “Company,” “we,” “us” or “our” refer to AMERISAFE, Inc. and its consolidated subsidiaries, as the context requires.

The Company provides workers’ compensation insurance for small to mid-sized employers engaged in hazardous industries, principally construction, trucking, logging and lumber, manufacturing, agriculture, maritime, and oil and gas. Assets and revenues of AIIC and its subsidiaries represent at least 95% of comparable consolidated amounts of the Company for each of the three months ended March 31, 2019 and 2018.

In the opinion of management of the Company, the accompanying unaudited consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, the results of operations and cash flows for the periods presented. The unaudited consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q under the Securities Exchange Act of 1934 and therefore do not include all information and footnotes to be in conformity with accounting principles generally accepted in the United States (“GAAP”). The results for the interim periods are not necessarily indicative of the results of operations that may be expected for the year. The unaudited consolidated financial statements contained herein should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2018.

The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of our assets, liabilities, revenues and expenses and related disclosures.  Some of the estimates result from judgments that can be subjective and complex and, consequently, actual results in future periods might differ from these estimates.

Adopted Accounting Guidance

 

In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842).  The new guidance requires a lessee to recognize a lease liability and a right of use asset for all leases extending beyond twelve months.  This standard was effective for us beginning in the first quarter of 2019. We elected the new transition method under the transition guidance within the new standard. Therefore, prior comparative periods are not adjusted.  We also elected the package of practical expedients, which among other things, allows us to carryforward the historical lease classification.  We made an accounting policy election not to recognize lease assets and lease liabilities for short-term operating leases. Adoption of the new guidance resulted in the Company recognizing right-of-use assets of $0.4 million and lease liabilities of $0.3 million. The cumulative effect adjustment to the opening balance of retained earnings was minimal. Adoption of this new guidance did not have a material effect on the Company’s consolidated financial statements as the Company does not have any significant leases.  

 

Prospective Accounting Guidance

In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses.  The new guidance replaces the methodology of credit loss impairment, which currently, delays the recognition of credit losses until a probable loss has been incurred.  The new guidance requires credit losses for securities measured at amortized cost to be determined using current expected credit loss estimates.  These estimates are to be derived from historical, current and reasonable supporting forecasts, including prepayments and estimates, and will be recorded through a valuation account.  The same method will be used for available-for-sale securities, but the valuation account will be limited to the amount by which the fair value is below amortized cost.  The standard is effective for us in the first quarter of 2020.  Implementation of the new guidance requires a modified retrospective approach without restatement, which means the first cumulative adjustment required will be a charge to retained earnings, with subsequent changes in the valuation account reported in the income statement.  The financial statement impact will be determined by the nature of the portfolio held and the economic conditions at the time of implementation.

9


The Company has formed an internal working group to evaluate the new standard and develop an implementation strategy.  The group has researched data, developed models and methodologies and is working toward implementation.  The Company will continue to monitor and evaluate the financial impact as the implementation date approaches.

All other issued but not yet effective accounting and reporting standards as of March 31, 2019 are either not applicable to the Company or are not expected to have a material impact on the Company.

 

 

Note 2. Stock Options and Restricted Stock

As of March 31, 2019, the Company has three equity incentive plans: the AMERISAFE 2005 Equity Incentive Plan (the “2005 Incentive Plan”), the AMERISAFE Non-Employee Director Restricted Stock Plan (the “Restricted Stock Plan”) and the AMERISAFE 2012 Equity and Incentive Compensation Plan (the “2012 Incentive Plan”). In connection with the approval of the 2012 Incentive Plan by the Company’s shareholders, no further grants will be made under the 2005 Incentive Plan.  All grants made under the 2005 Incentive plan will continue in effect, subject to the terms and conditions of the 2005 Incentive Plan. See Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2018 for additional information regarding the Company’s incentive plans.

During the three months ended March 31, 2019 and 2018, options to purchase 5,000 and 15,000 shares of common stock were exercised, respectively. In connection with these exercises, the Company received minimal stock option proceeds in the current year and $0.1 million of stock option proceeds in the same period of 2018.  

The Company recognized share-based compensation expense of $0.6 million in the quarter ended March 31, 2019 and $17.8 thousand in the quarter ended March 31, 2018.  

 

 

Note 3. Earnings Per Share

The Company computes earnings per share (“EPS”) in accordance with FASB Accounting Standards Codification (“ASC”) Topic 260, Earnings Per Share. The Company has no participating unvested common shares which contain nonforfeitable rights to dividends and applies the treasury stock method in computing basic and diluted earnings per share.

Basic EPS is calculated by dividing net income by the weighted-average number of common shares outstanding during the period.

The diluted EPS calculation includes potential common shares assumed issued under the treasury stock method, which reflects the potential dilution that would occur if any outstanding options were exercised or restricted stock becomes vested.

 

 

 

Three Months Ended

 

 

 

March 31,

 

 

 

2019

 

 

2018

 

 

 

(in thousands, except share and per share amounts)

 

Basic EPS:

 

 

 

 

 

 

 

 

Net income

 

$

19,400

 

 

$

16,169

 

Basic weighted average common shares

 

 

19,229,134

 

 

 

19,187,136

 

Basic earnings per common share

 

$

1.01

 

 

$

0.84

 

Diluted EPS:

 

 

 

 

 

 

 

 

Net income

 

$

19,400

 

 

$

16,169

 

Diluted weighted average common shares:

 

 

 

 

 

 

 

 

Weighted average common shares

 

 

19,229,134

 

 

 

19,187,136

 

Stock options and restricted stock

 

 

68,902

 

 

 

75,101

 

Diluted weighted average common shares

 

 

19,298,036

 

 

 

19,262,237

 

Diluted earnings per common share

 

$

1.01

 

 

$

0.84

 

 

 

10


Note 4. Investments

The gross unrealized gains and losses on, and the amortized cost and fair value of, those investments classified as held-to-maturity at March 31, 2019 are summarized as follows:

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair

Value

 

 

 

(in thousands)

 

States and political subdivisions

 

$

431,247

 

 

$

10,468

 

 

$

(242

)

 

$

441,473

 

Corporate bonds

 

 

102,774

 

 

 

520

 

 

 

(155

)

 

 

103,139

 

U.S. agency-based mortgage-backed securities

 

 

9,824

 

 

 

396

 

 

 

(56

)

 

 

10,164

 

U.S. Treasury securities and obligations of U.S.

   government agencies

 

 

59,210

 

 

 

352

 

 

 

(140

)

 

 

59,422

 

Asset-backed securities

 

 

1,001

 

 

 

24

 

 

 

(6

)

 

 

1,019

 

Totals

 

$

604,056

 

 

$

11,760

 

 

$

(599

)

 

$

615,217

 

 

The gross unrealized gains and losses on, and the amortized cost and fair value of, those investments classified as available-for-sale at March 31, 2019 are summarized as follows:

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair

Value

 

 

 

(in thousands)

 

States and political subdivisions

 

$

220,749

 

 

$

6,710

 

 

$

(395

)

 

$

227,064

 

Corporate bonds

 

 

170,375

 

 

 

1,465

 

 

 

(217

)

 

 

171,623

 

U.S. agency-based mortgage-backed securities

 

 

12,462

 

 

 

 

 

 

(180

)

 

 

12,282

 

U.S. Treasury securities and obligations

   of U.S. government agencies

 

 

61,154

 

 

 

40

 

 

 

(909

)

 

 

60,285

 

Totals

 

$

464,740

 

 

$

8,215

 

 

$

(1,701

)

 

$

471,254

 

 

The gross unrealized gains and losses on, and the cost of equity securities at March 31, 2019 are summarized as follows:

 

 

 

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair

Value

 

 

 

(in thousands)

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic common stock

 

$

20,769

 

 

$

846

 

 

$

 

 

$

21,615

 

Total equity securities

 

$

20,769

 

 

$

846

 

 

$

 

 

$

21,615

 

 

The gross unrealized gains and losses on, and the amortized cost and fair value of, those investments classified as held-to-maturity at December 31, 2018 are summarized as follows:

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair

Value

 

 

 

(in thousands)

 

States and political subdivisions

 

$

445,922

 

 

$

5,109

 

 

$

(2,084

)

 

$

448,947

 

Corporate bonds

 

 

91,762

 

 

 

62

 

 

 

(455

)

 

 

91,369

 

U.S. agency-based mortgage-backed securities

 

 

8,102

 

 

 

327

 

 

 

(80

)

 

 

8,349

 

U.S. Treasury securities and obligations

   of U.S. government agencies

 

 

67,042

 

 

 

340

 

 

 

(339

)

 

 

67,043

 

Asset-backed securities

 

 

1,050

 

 

 

22

 

 

 

(8

)

 

 

1,064

 

Totals

 

$

613,878

 

 

$

5,860

 

 

$

(2,966

)

 

$

616,772

 

 

11


The gross unrealized gains and losses on, and the amortized cost and fair value of, those investments classified as available-for-sale at December 31, 2018 are summarized as follows:

 

 

 

Amortized

Cost

 

 

Gross

Unrealized

Gains

 

 

Gross

Unrealized

Losses

 

 

Fair

Value

 

 

 

(in thousands)

 

States and political subdivisions

 

$

231,848

 

 

$

3,515

 

 

$

(2,118

)

 

$

233,245

 

Corporate bonds

 

 

173,904

 

 

 

243

 

 

 

(933

)

 

 

173,214

 

U.S. agency-based mortgage-backed securities

 

 

12,835

 

 

 

 

 

 

(320

)

 

 

12,515

 

U.S. Treasury securities and obligations

   of U.S. government agencies

 

 

61,185

 

 

 

 

 

 

(1,429

)

 

 

59,756

 

Totals

 

$

479,772

 

 

$

3,758

 

 

$

(4,800

)

 

$

478,730

 

 

The gross unrealized gains and losses on, and the cost of equity securities at December 31, 2018 are summarized as follows:

 

 

 

Cost

 

 

Gross

Gains

 

 

Gross

Losses

 

 

Fair

Value

 

 

 

(in thousands)

 

Equity securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Domestic common stock

 

$

19,962