2016 Net Income Grows 10.5%
Increases Regular Dividend 11.1%

DERIDDER, La., Feb. 22, 2017 (GLOBE NEWSWIRE) — AMERISAFE, Inc. (Nasdaq:AMSF), a specialty provider of hazardous workers’ compensation insurance, today announced results for the fourth quarter  and year ended December 31, 2016.

  Three Months Ended     Twelve Months Ended  
  December 31,     December 31,  
    2016     2015   % Change   2016     2015   % Change
  (in thousands, except per
share data)
    (in thousands, except per
share data)
 
Net premiums earned  $ 92,097   $ 95,034   -3.1 %   $ 368,704   $ 375,894   -1.9 %
Net investment income   7,855     7,256   8.3 %     28,106     27,902   0.7 %
Net realized gains (losses) on              
investments  (pre-tax)   (1,468 )   24   NM       (494 )   (2,494 ) NM  
Net income    19,073     23,073   -17.3 %     77,865     70,462   10.5 %
Diluted earnings per share $ 0.99   $ 1.21   -18.2 %   $ 4.05   $ 3.69   9.8 %
Operating net income   20,027     23,057   -13.1 %     78,186     72,083   8.5 %
Operating earnings per share $ 1.04   $ 1.20   -13.3 %   $ 4.07   $ 3.77   8.0 %
Book value per share $ 23.72   $ 23.73   0.0 %   $ 23.72   $ 23.73   0.0 %
Net combined ratio   76.8 %   71.5 %       77.0 %   79.8 %  
Return on average equity   15.8 %   19.5 %       17.1 %   15.6 %  

G. Janelle Frost, President and Chief Executive Officer commented, “Underwriting margins across the industry continued to be pressured this quarter as competition increased and rates decreased.  We are at a point in the underwriting cycle where the choice to remain focused on underwriting margins and sustainability is essential to providing long-term returns to shareholders.  AMERISAFE’s financial results this quarter are reflective of our focus over an extended period of time.  Risk selection, appropriate product pricing and claims handling ultimately led to combined ratios of 76.8% this quarter and 77.0% for the year.  Based on these results and our capital strength, AMERISAFE is well-positioned for the softening market cycle.”

Insurance Results

  Three Months Ended
        Twelve Months Ended
     
  December 31,
        December 31,
     
    2016       2015     % Change       2016       2015     % Change  
  (in thousands)
        (in thousands)
     
                                           
Gross premiums written $ 80,612     $ 88,657     -9.1 %   $ 373,055     $ 386,529     -3.5 %
Net premiums earned   92,097       95,034     -3.1 %     368,704       375,894     -1.9 %
Loss and loss adjustment expenses incurred   52,618       48,321     8.9 %     199,031       214,573     -7.2 %
Underwriting and certain other operating costs,                                          
commissions, salaries and benefits   17,135       19,394     -11.6 %     80,594       84,113     -4.2 %
Policyholder dividends   1,021       277     NM       4,216       1,301     NM  
Underwriting profit (pre-tax) $ 21,323     $ 27,042     -21.1 %   $ 84,863     $ 75,907     11.8 %
                                           
Insurance Ratios:                                          
Current accident year loss ratio   67.9 %     69.8 %       67.9 %     69.8 %  
Prior accident year loss ratio   -10.8 %     -19.0 %       -13.9 %     -12.7 %  
Net loss ratio   57.1 %     50.8 %       54.0 %     57.1 %  
Net underwriting expense ratio   18.6 %     20.4 %       21.9 %     22.4 %  
Net dividend ratio   1.1 %     0.3 %       1.1 %     0.3 %  
Net combined ratio   76.8 %     71.5 %       77.0 %     79.8 %  
                                   
  • Voluntary premiums for policies written during the quarter ended December 31, 2016 decreased $5.6 million, or 6.8%, compared with the fourth quarter of 2015.  This decrease was largely attributable to the loss of three large accounts in the fourth quarter totaling $4.7 million in estimated annual premium.  For 2016, voluntary premiums written decreased 2.3%, compared with 2015.
  • Payroll audits and related premium adjustments increased premiums written by $1.2 million in the fourth quarter of 2016, compared with $3.3 million in the fourth quarter of 2015.  For the full year, these premium adjustments totaled $8.0 million in 2016 compared with $12.2 million in 2015, a decrease of $4.2 million.
  • The current accident year loss ratio for the fourth quarter was 67.9%, unchanged from prior quarters in 2016, and a decrease of 1.9 percentage points from the fourth quarter of 2015.  During the quarter, the Company experienced favorable loss development for prior accident years which reduced loss and loss adjustment expenses by $9.9 million, mostly attributable to accident years 2014, 2013, and 2012.  In total, prior accident year development for the year ended December 31, 2016 resulted in favorable development of $51.3 million, compared with favorable development of $47.8 million in 2015.  These results reflect improved trends for both closing claims and claims severity and were driven largely by favorable case reserve development on claims that were closed during the year.
  • For the quarter ended December 31, 2016, the underwriting expense ratio was 18.6% compared to 20.4% in the same quarter in 2015.  The decrease was largely due to lower premium based assessments and premium taxes in the fourth quarter compared to the same quarter a year ago.  For the year ended December 31, 2016, the underwriting expense ratio was 21.9%, a decrease compared with 22.4% in 2015.
  • The effective tax rate for the year ended December 31, 2016 was 31.0% compared with 30.2% for 2015.  The increase in the tax rate was due to improvement in our underwriting margins which created a higher proportion of underwriting income to tax-exempt investment income relative to 2015.

Investment Results

  Three Months Ended     Twelve Months Ended  
  December 31,     December 31,  
    2016     2015   % Change     2016     2015   % Change
  (in thousands)     (in thousands)  
Net investment income $ 7,855   $ 7,256   8.3 %   $ 28,106   $ 27,902   0.7 %
Net realized gains (losses) on              
investments (pre-tax)   (1,468 )   24   NM       (494 )   (2,494 ) NM  
Pre-tax investment yield   2.7 %   2.6 %       2.5 %   2.5 %  
Tax-equivalent yield (1)   3.2 %   3.3 %       3.2 %   3.3 %  
________________________________            

(1) The tax equivalent yield is calculated using the effective interest rate and the appropriate marginal tax rate. 

  • Net investment income for the quarter ending December 31, 2016, increased 8.3% to $7.9 million from $7.3 million in the fourth quarter of 2015, largely due to the increase in value of an investment in a limited partnership hedge fund where the change in value is recorded in investment income each quarter.  For the full year 2016, net investment income was $28.1 million compared with $27.9 million for 2015.
  • Net realized losses for the quarter were $1.5 million compared to minimal gains in the fourth quarter of 2015.  The Company sold certain securities at a loss to offset gains from earlier in the year and to achieve a tax benefit relating to expiring realized tax gains from 2013.
  • As of December 31, 2016, the carrying and fair value of AMERISAFE’s investment portfolio, including cash and cash equivalents, was $1.1 billion.  

Capital Management
On February 21, 2017 the Company’s Board of Directors increased the regular quarterly dividend from $0.18 per share to $0.20 per share, an 11.1% increase, payable on March 24, 2017 to shareholders of record as of March 10, 2017.

During the quarter and year, no shares were repurchased under the Company’s share repurchase plan. 

Supplemental Information

  Three Months Ended Twelve Months Ended
  December 31, December 31,
    2016     2015     2016     2015  
  (in thousands, except share and per share data)
         
Net income $ 19,073   $ 23,073   $ 77,865   $ 70,462  
Less: Net realized gains (losses) on investments   (1,468 )   24     (494 )   (2,494 )
Tax effect (1)   514     (8 )   173     873  
Operating net income (2) $ 20,027   $ 23,057   $ 78,186   $ 72,083  
                         
Average shareholders’ equity (3) $ 482,947   $ 472,279   $ 455,066   $ 450,475  
Less: Average accumulated other comprehensive income   3,052     2,974     1,048     2,699  
Average adjusted shareholders’ equity $ 479,895   $ 469,305   $ 454,018   $ 447,776  
                         
Diluted weighted average common shares   19,210,635     19,137,418     19,203,650     19,119,186  
                         
Return on average equity (4)   15.8 %   19.5 %   17.1 %   15.6 %
Operating return on average adjusted equity (2)   16.7 %   19.7 %   17.2 %   16.1 %
Diluted earnings per share $ 0.99   $ 1.21   $ 4.05   $ 3.69  
Operating earnings per share (2) $ 1.04   $ 1.20   $ 4.07   $ 3.77  
________________________________        

(1) The tax effect of net realized capital gains is calculated assuming an annual tax rate of 35%.

(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 February 23, 2017, at 10:30 a.m. Eastern Time to discuss the results for the quarter and year, as well as the outlook for future periods.  To participate in the conference call dial 877-225-7695 (Domestic) or 720-545-0027 (International) at least ten minutes before the call begins and ask for the AMERISAFE conference call.  A replay of the call will be available approximately two hours after the live broadcast ends and will be accessible through March 3, 2017.  To access the replay, dial 855-859-2056 or 404-537-3406 and use the pass code 57497526#.

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 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 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. 

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 factors 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, 2015.  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 Twelve Months Ended
  December 31, December 31,
    2016     2015     2016     2015  
  (unaudited) (unaudited)  
Revenues:        
Gross premiums written $   80,612   $   88,657   $   373,055   $   386,529  
Ceded premiums written      (2,261 )     (1,911 )     (10,307 )     (11,228 )
Net premiums written  $   78,351   $   86,746   $   362,748   $   375,301  
                         
Net premiums earned  $   92,097   $   95,034   $   368,704   $   375,894  
Net investment income      7,855       7,256       28,106       27,902  
Net realized gains (losses) on investments     (1,468 )     24       (494 )      (2,494 )
Loss on disposal of assets     –        (640 )     (1 )     (664 )
Fee and other income      74       86       347       316  
Total revenues     98,558       101,760       396,662       400,954  
                         
Expenses:                        
Loss and loss adjustment expenses incurred      52,618       48,321       199,031       214,573  
Underwriting and other operating costs     17,135       19,394       80,594       84,113  
Policyholder dividends      1,021       277       4,216       1,301  
Total expenses      70,774       67,992       283,841       299,987  
                         
Income before taxes      27,784       33,768       112,821       100,967  
Income tax expense      8,711       10,695       34,956       30,505  
Net income  $   19,073   $   23,073   $   77,865   $   70,462  
                         

AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Statements of Income (cont.)
(in thousands, except per share amounts)
 
  Three Months Ended Twelve Months Ended
  December 31, December 31,
    2016     2015     2016     2015
  (unaudited) (unaudited)  
Basic EPS:        
Net income $ 19,073   $ 23,073   $ 77,865   $ 70,462
                       
Basic weighted average common shares   19,146,047     19,028,352     19,105,806     18,941,077
Basic earnings per share $ 1.00   $ 1.21   $ 4.08   $ 3.72
                       
Diluted EPS:                      
Net income $ 19,073   $ 23,073   $ 77,865   $ 70,462
                       
Diluted weighted average common shares:                      
Weighted average common shares   19,146,047     19,028,352     19,105,806     18,941,077
Stock options and performance shares   64,588     109,066     97,844     178,109
Diluted weighted average common shares   19,210,635     19,137,418     19,203,650     19,119,186
                       
Diluted earnings per  share $ 0.99   $ 1.21   $ 4.05   $ 3.69
                       

AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
 
  December 31,   December 31,
    2016     2015
  (unaudited)  
Assets    
Investments  $ 1,084,474   $ 1,045,152
Cash and cash equivalents    58,936     69,481
Amounts recoverable from reinsurers    83,666     91,077
Premiums receivable, net     183,005     185,364
Deferred income taxes     33,811     29,905
Deferred policy acquisition costs     19,300     20,412
Other assets    55,664     60,654
  $ 1,518,856   $ 1,502,045
           
Liabilities and Shareholders’ Equity          
Liabilities:          
Reserves for loss and loss adjustment expenses $ 742,776   $ 718,033
Unearned premiums     162,028     167,983
Insurance-related assessments     31,742     32,329
Other liabilities     126,160     129,719
           
Shareholders’ equity    456,150     453,981
Total liabilities and shareholders’ equity   $ 1,518,856   $ 1,502,045
           

CONTACT: Contact:
Neal A Fuller, EVP & CFO
AMERISAFE, Inc.
337-463-9052
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