AMSF AMERISAFE Inc

Reports $15.6 Million of Net Income, Return on Equity of 18.6% and Net Combined Ratio of 85.4% for the quarter

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, 2023.

 

Three Months Ended

Six Months Ended

June 30,

June 30,

2023

2022

% Change

2023

2022

% Change

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

$

65,598

 

$

70,279

 

-6.7

%

$

134,779

 

$

137,835

 

-2.2

%

Net investment income

 

7,724

 

 

6,485

 

19.1

%

 

15,157

 

 

12,598

 

20.3

%

Net realized gains on investments (pre-tax)

 

75

 

 

1,079

 

-93.0

%

 

333

 

 

1,817

 

-81.7

%

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

 

2,048

 

 

(9,942

)

NM

 

 

3,417

 

 

(8,902

)

NM

 

Net income

 

15,627

 

 

6,132

 

154.8

%

 

32,966

 

 

23,463

 

40.5

%

Diluted earnings per share

$

0.81

 

$

0.32

 

153.1

%

$

1.72

 

$

1.21

 

42.1

%

Operating net income (loss)

 

13,950

 

 

13,134

 

6.2

%

 

30,004

 

 

29,060

 

3.2

%

Operating earnings per share

$

0.73

 

$

0.68

 

7.4

%

$

1.56

 

$

1.50

 

4.0

%

Book value per share

$

17.76

 

$

19.95

 

-11.0

%

$

17.76

 

$

19.95

 

-11.0

%

Net combined ratio

 

85.4

%

 

86.7

%

 

83.9

%

 

83.4

%

Return on average equity

 

18.6

%

 

6.3

%

 

20.0

%

 

12.0

%

 

G. Janelle Frost, President and Chief Executive Officer commented, “AMERISAFE’s results in the second quarter reflect the Company’s disciplined approach to the high-hazard workers’ compensation market. Continued competition and rate decreases impacted top-line growth, while the combined ratio of 85.4% and annualized ROE of 18.6% remain industry-leading. Our long tenure, coupled with underwriting expertise and strong balance sheet position AMERISAFE for solid performance and long-term shareholder value creation.”

 

INSURANCE RESULTS

Three Months Ended

Six Months Ended

June 30,

June 30,

2023

2022

% Change

2023

2022

% Change

(in thousands)

(in thousands)

  Gross premiums written

$

71,704

 

$

74,460

 

-3.7

%

$

154,191

 

$

152,251

 

1.3

%

Net premiums earned

 

65,598

 

 

70,279

 

-6.7

%

 

134,779

 

 

137,835

 

-2.2

%

Loss and loss adjustment expenses incurred

 

35,645

 

 

40,326

 

-11.6

%

 

74,654

 

 

78,067

 

-4.4

%

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

 

19,972

 

 

19,913

 

0.3

%

 

36,954

 

 

35,026

 

5.5

%

Policyholder dividends

 

490

 

 

688

 

-28.8

%

 

1,421

 

 

1,877

 

-24.3

%

Underwriting profit (pre-tax)

$

9,491

 

$

9,352

 

1.5

%

$

21,750

 

$

22,865

 

-4.9

%

  Insurance Ratios: Current accident year loss ratio

 

71.0

%

 

71.0

%

 

71.0

%

 

71.0

%

Prior accident year loss ratio

 

-16.7

%

 

-13.6

%

 

-15.6

%

 

-14.4

%

Net loss ratio

 

54.3

%

 

57.4

%

 

55.4

%

 

56.6

%

Net underwriting expense ratio

 

30.4

%

 

28.3

%

 

27.4

%

 

25.4

%

Net dividend ratio

 

0.7

%

 

1.0

%

 

1.1

%

 

1.4

%

Net combined ratio

 

85.4

%

 

86.7

%

 

83.9

%

 

83.4

%

 

• Voluntary premiums on policies written in the quarter were 2.3% lower than the second quarter of 2022, primarily due to continued declines in approved loss costs in the states in which we write business. The average decline in approved loss costs for the second quarter of 2023 versus the second quarter of 2022 was approximately 7.5%.
• Payroll audits increased $0.2 million for the second quarter of 2023 as compared to the second quarter of 2022, offset by $1.0 million in related premium adjustments, which includes endorsements, cancellations, earned-but-unbilled and certain regulatory accruals.

• Ceded premiums increased $1.2 million in the second quarter of 2023 as compared to the second quarter of 2022 as we purchased higher levels of reinsurance coverage at generally higher prices in 2023.
• The loss ratio for the second quarter was 54.3%, compared to 57.4% in the second 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 $10.9 million, primarily from accident years 2018 through 2021.
• For the quarter ended June 30, 2023, the underwriting expense ratio was 30.4% compared with 28.3% in the same quarter in 2022. However, expense dollars were flat for the second quarter of 2023 as compared to the second quarter of 2022, with the increased expense ratio this quarter driven by the decline in earned premiums.

• The effective tax rate for the quarter ended June 30, 2023, was 20.1% compared with 13.9% 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

Six Months Ended

June 30,

June 30,

2023

2022

% Change

2023

2022

% Change

(in thousands)

(in thousands)

Net investment income

$

7,724

 

$

6,485

 

19.1

%

$

15,157

 

$

12,598

 

20.3

%

Net realized gains on investments (pre-tax)

 

75

 

 

1,079

 

-93.0

%

 

333

 

 

1,817

 

-81.7

%

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

 

2,048

 

 

(9,942

)

NM

 

 

3,417

 

 

(8,902

)

NM

 

Pre-tax investment yield

 

3.2

%

 

2.5

%

 

3.2

%

 

2.4

%

Tax-equivalent yield (1)

 

3.6

%

 

2.9

%

 

3.6

%

 

2.9

%

________________________________

(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, 2023, increased 19.1% to $7.7 million from $6.5 million in the second quarter of 2022, due to higher yields on cash and fixed-income securities.
• Net unrealized gains on equity securities were $2.0 million in the second quarter as a result of generally favorable equity market returns during the quarter.
• As of June 30, 2023, the carrying value of AMERISAFE’s investment portfolio, including cash and cash equivalents, was $962.7 million.

CAPITAL MANAGEMENT

During the second quarter of 2023, the Company paid a regular quarterly cash dividend of $0.34 per share on June 23, 2023 which represented a 9.7% increase in the quarterly dividend compared with 2022. On July 25, 2023 the Company’s Board of Directors declared a quarterly cash dividend of $0.34 per share, payable on September 22, 2023 to shareholders of record as of September 8, 2023.

Book value per share at June 30, 2023 was $17.76, an increase of 7.2% from $16.57 at December 31, 2022.

SUPPLEMENTAL INFORMATION

Three Months Ended

Six Months Ended

June 30,

June 30,

2023

2022

2023

2022

(in thousands, except share and per share data)

  Net income

$

15,627

 

$

6,132

 

$

32,966

 

$

23,463

 

Less: Net realized gains on investments

 

75

 

 

1,079

 

 

333

 

 

1,817

 

Net unrealized gains (losses) on equity securities

 

2,048

 

 

(9,942

)

 

3,417

 

 

(8,902

)

Tax effect (1)

 

(446

)

 

1,861

 

 

(788

)

 

1,488

 

Operating net income (2)

$

13,950

 

$

13,134

 

$

30,004

 

$

29,060

 

  Average shareholders’ equity (3)

$

336,711

 

$

390,131

 

$

329,000

 

$

392,156

 

Less: Average accumulated other comprehensive income (loss)

 

(10,792

)

 

(4,409

)

 

(12,964

)

 

2,332

 

Average adjusted shareholders’ equity (2)

$

347,503

 

$

394,540

 

$

341,964

 

$

389,824

 

  Diluted weighted average common shares

 

19,196,755

 

 

19,332,168

 

 

19,200,377

 

 

19,367,085

 

  Return on average equity (4)

 

18.6

%

 

6.3

%

 

20.0

%

 

12.0

%

Operating return on average adjusted equity (2)

 

16.1

%

 

13.3

%

 

17.5

%

 

14.9

%

Diluted earnings per share

$

0.81

 

$

0.32

 

$

1.72

 

$

1.21

 

Operating earnings per share (2)

$

0.73

 

$

0.68

 

$

1.56

 

$

1.50

 

_________________________ (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 July 28, 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 2247599) 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

Six Months Ended

June 30,

June 30,

2023

2022

2023

2022

(unaudited)

(unaudited)

Revenues: Gross premiums written

$

71,704

 

$

74,460

 

$

154,191

 

$

152,251

 

Ceded premiums written

 

(3,965

)

 

(2,725

)

 

(8,144

)

 

(5,284

)

Net premiums written

$

67,739

 

$

71,735

 

$

146,047

 

$

146,967

 

  Net premiums earned

$

65,598

 

$

70,279

 

$

134,779

 

$

137,835

 

Net investment income

 

7,724

 

 

6,485

 

 

15,157

 

 

12,598

 

Net realized gains on investments

 

75

 

 

1,079

 

 

333

 

 

1,817

 

Net unrealized gains (losses) on equity securities

 

2,048

 

 

(9,942

)

 

3,417

 

 

(8,902

)

Fee and other income

 

214

 

 

135

 

 

411

 

 

248

 

Total revenues

 

75,659

 

 

68,036

 

 

154,097

 

 

143,596

 

  Expenses: Loss and loss adjustment expenses incurred

 

35,645

 

 

40,326

 

 

74,654

 

 

78,067

 

Underwriting and other operating costs

 

19,972

 

 

19,913

 

 

36,954

 

 

35,026

 

Policyholder dividends

 

490

 

 

688

 

 

1,421

 

 

1,877

 

Provision for investment related credit loss expense (benefit)

 

(16

)

 

(14

)

 

(35

)

 

81

 

Total expenses

 

56,091

 

 

60,913

 

 

112,994

 

 

115,051

 

  Income before taxes

 

19,568

 

 

7,123

 

 

41,103

 

 

28,545

 

Income tax expense

 

3,941

 

 

991

 

 

8,137

 

 

5,082

 

Net income

$

15,627

 

$

6,132

 

$

32,966

 

$

23,463

 

 

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,

2023

2022

2023

2022

(unaudited)

(unaudited)

Basic EPS: Net income

$

15,627

$

6,132

$

32,966

$

23,463

  Basic weighted average common shares

 

19,139,735

 

19,273,934

 

19,135,564

 

19,302,805

Basic earnings per share

$

0.82

$

0.32

$

1.72

$

1.22

  Diluted EPS: Net income

$

15,627

$

6,132

$

32,966

$

23,463

  Diluted weighted average common shares: Weighted average common shares

 

19,139,735

 

19,273,934

 

19,135,564

 

19,302,805

Restricted stock and RSUs

 

57,020

 

58,234

 

64,813

 

64,280

Diluted weighted average common shares

 

19,196,755

 

19,332,168

 

19,200,377

 

19,367,085

  Diluted earnings per share

$

0.81

$

0.32

$

1.72

$

1.21

 

AMERISAFE, INC. AND SUBSIDIARIES

Consolidated Balance Sheets

(in thousands)

 

June 30,

December 31,

2023

2022

(unaudited)

Assets Investments

$

928,730

$

888,987

Cash and cash equivalents

 

33,922

 

61,469

Amounts recoverable from reinsurers

 

122,721

 

125,677

Premiums receivable, net

 

141,943

 

121,713

Deferred income taxes

 

23,437

 

22,794

Deferred policy acquisition costs

 

18,927

 

17,401

Other assets

 

29,235

 

31,238

$

1,298,915

$

1,269,279

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

$

684,613

$

696,037

Unearned premiums

 

126,244

 

114,976

Insurance-related assessments

 

18,015

 

17,653

Other liabilities

 

129,476

 

123,181

  Shareholders’ equity

 

340,567

 

317,432

Total liabilities and shareholders’ equity

$

1,298,915

$

1,269,279

 

View source version on businesswire.com: https://www.businesswire.com/news/home/20230727611522/en/

Andy Omiridis, EVP & CFO AMERISAFE 337.463.9052