AMERISAFE Announces 2022 Third Quarter Results

About this update from Amerisafe, Inc.

Reports Net Combined Ratio of 85.4% DERIDDER, La. --(BUSINESS WIRE)-- 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, 2022 . Three Months Ended Nine Months Ended September 30 , September 30 , 2022 2021 % Change 2022 2021 % Change (in thousands, except per share data) (in thousands, except per share data) Net premiums earned $ 67,790 $ 67,626 0.2 % $ 205,625 $ 208,260 -1.3 % Net investment income 6,983 6,049 15.4 % 19,581 19,362 1.1 % Net realized gains (losses) on investments (pre-tax) 585 (8 ) NM 2,402 1,490 61.2 % Net unrealized gains (losses) on equity securities (pre-tax) (4,082 ) (771 ) NM (12,984 ) 8,026 NM Net income 11,361 19,136 -40.6 % 34,824 62,215 -44.0 % Diluted earnings per share $ 0.59 $ 0.99 -40.4 % $ 1.80 $ 3.21 -43.9 % Operating net income 14,124 19,751 -28.5 % 43,184 54,697 -21.0 % Operating earnings per share $ 0.73 $ 1.02 -28.4 % $ 2.23 $ 2.82 -20.9 % Book value per share $ 19.47 $ 24.80 -21.5 % $ 19.47 $ 24.80 -21.5 % Net combined ratio 85.4 % 71.5 % 84.1 % 76.9 % Return on average equity 12.0 % 16.1 % 12.0 % 18.1 % G. Janelle Frost , President and Chief Executive Officer, noted, “Operating earnings for the quarter were strong, further enhanced by insureds’ payroll growth increasing premium and favorable loss development. In this highly competitive market, we are focused on the difference AMERISAFE makes for our agents, policyholders and injured workers.” INSURANCE RESULTS Three Months Ended Nine Months Ended September 30 , September 30 , 2022 2021 % Change 2022 2021 % Change (in thousands) (in thousands) Gross premiums written $ 68,212 $ 67,185 1.5 % $ 220,463 $ 222,423 -0.9 % Net premiums earned 67,790 67,626 0.2 % 205,625 208,260 -1.3 % Loss and loss adjustment expenses incurred 37,725 29,661 27.2 % 115,792 101,601 14.0 % Underwriting and certain other operating costs, commissions, salaries and benefits 19,585 17,915 9.3 % 54,611 55,337 -1.3 % Policyholder dividends 640 733 -12.7 % 2,517 3,200 -21.3 % Underwriting profit (pre-tax) $ 9,840 $ 19,317 -49.1 % $ 32,705 $ 48,122 -32.0 % Insurance Ratios: Current accident year loss ratio 71.0 % 72.0 % 71.0 % 72.0 % Prior accident year loss ratio -15.4 % -28.1 % -14.7 % -23.2 % Net loss ratio 55.6 % 43.9 % 56.3 % 48.8 % Net underwriting expense ratio 28.9 % 26.5 % 26.6 % 26.6 % Net dividend ratio 0.9 % 1.1 % 1.2 % 1.5 % Net combined ratio 85.4 % 71.5 % 84.1 % 76.9 % Gross written premiums in the quarter were higher by $1.0 million , or 1.5%, compared with the third quarter of 2021. Voluntary premiums were lower by 5.6% compared to the third quarter of 2021. Payroll audits and related premium adjustments were $5.5 million higher than the third quarter of 2021. Audits and other adjustments increased premiums written by $3.4 million in the third quarter of 2022, compared to a decrease in premiums written of $2.1 million in the third quarter of 2021. The increase was due to payroll audits occurring on policy years in which payrolls were less affected by the COVID-19 pandemic. The current accident year loss ratio for the third quarter was 71.0%, one point lower than the 72.0% ratio initially set for accident year 2021. During the quarter, the Company experienced favorable net loss development for prior accident years, which reduced loss and loss adjustment expenses by $10.4 million , primarily from accident years 2020 through 2017. For the quarter ended September 30, 2022 , the underwriting expense ratio was 28.9% compared with 26.5% in the same quarter in 2021. The increase was primarily due to a contingent profit sharing commission benefit in last year’s third quarter. The effective tax rate for the quarter ended September 30, 2022 was 15.5%, lower than 22.6% in the third quarter of 2021 due to a higher proportion of income from tax-exempt investments. INVESTMENT RESULTS Three Months Ended Nine Months Ended September 30 , September 30 , 2022 2021 % Change 2022 2021 % Change (in thousands) (in thousands) Net investment income $ 6,983 $ 6,049 15.4 % $ 19,581 $ 19,362 1.1 % Net realized gains (losses) on investments (pre-tax) 585 (8 ) NM 2,402 1,490 61.2 % Net unrealized gains (losses) on equity securities (pre-tax) (4,082 ) (771 ) NM (12,984 ) 8,026 NM Pre-tax investment yield 2.7 % 2.1 % 2.5 % 2.2 % Tax-equivalent yield (1) 3.2 % 2.5 % 3.2 % 2.5 % (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, 2022 , increased 15.4% to $7.0 million from $6.0 million in the third quarter of 2021, due to higher yields on fixed income securities. Due to increases in interest rates, the market value of our bond portfolio declined during the quarter. Due to declines in the equity markets, the market value of the equity securities in our investment portfolio decreased by $4.1 million during the quarter, compared to a decrease of $0.8 million in the third quarter of 2021. These changes in market value are reflected in net income. As of September 30, 2022 , the carrying value of AMERISAFE’s investment portfolio, including cash and cash equivalents, was $1.0 billion . CAPITAL MANAGEMENT In an accompanying news release, the Company announced a special cash dividend of $4.00 per share, payable on December 16, 2022 , to shareholders of record as of December 2, 2022 . During the third quarter of 2022, the Company paid a regular quarterly cash dividend of $0.31 per share on September 23, 2022 . On October 25, 2022 the Board of Directors also declared a quarterly cash dividend of $0.31 per share, payable December 16, 2022 to shareholders of record as of December 2, 2022 . During the third quarter of 2022, the Company repurchased 139,559 shares at an average cost (including commissions) of $46.83 per share for a total of $6.5 million . The remaining outstanding share repurchase authorization as of September 30, 2022 is $12.8 million . Book value per share at September 30, 2022 was $19.47 , a decrease of 5.6% from $20.62 at December 31, 2021 . SUPPLEMENTAL INFORMATION Three Months Ended Nine Months Ended September 30 , September 30 , 2022 2021 2022 2021 (in thousands, except share and per share data) Net income $ 11,361 $ 19,136 $ 34,824 $ 62,215 Less: Net realized gains (losses) on investments 585 (8 ) 2,402 1,490 Net unrealized gains (losses) on equity securities (4,082 ) (771 ) (12,984 ) 8,026 Tax effect (1) 734 164 2,222 (1,998 ) Operating net income (2) $ 14,124 $ 19,751 $ 43,184 $ 54,697 Average shareholders’ equity (3) $ 379,004 $ 474,261 $ 386,171 $ 459,486 Less: Average accumulated other comprehensive income (loss) (14,419 ) 15,924 (3,214 ) 18,003 Average adjusted shareholders’ equity (2) $ 393,423 $ 458,337 $ 389,385 $ 441,483 Diluted weighted average common shares 19,269,346 19,407,918 19,340,898 19,392,939 Return on average equity (4) 12.0 % 16.1 % 12.0 % 18.1 % Operating return on average adjusted equity (2) 14.4 % 17.2 % 14.8 % 16.5 % Diluted earnings per share $ 0.59 $ 0.99 $ 1.80 $ 3.21 Operating earnings per share (2) $ 0.73 $ 1.02 $ 2.23 $ 2.82 _____________ (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. CONFERENCE CALL INFORMATION AMERISAFE has scheduled a conference call for October 27, 2022 , 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 3095655) 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 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, 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. 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, 2021 . 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 , 2022 2021 2022 2021 (unaudited) (unaudited) Revenues: Gross premiums written $ 68,212 $ 67,185 $ 220,463 $ 222,423 Ceded premiums written (2,553 ) (2,407 ) (7,837 ) (7,410 ) Net premiums written $ 65,659 $ 64,778 $ 212,626 $ 215,013 Net premiums earned $ 67,790 $ 67,626 $ 205,625 $ 208,260 Net investment income 6,983 6,049 19,581 19,362 Net realized gains (losses) on investments 585 (8 ) 2,402 1,490 Net unrealized gains (losses) on equity securities (4,082 ) (771 ) (12,984 ) 8,026 Fee and other income 104 149 352 415 Total revenues 71,380 73,045 214,976 237,553 Expenses: Loss and loss adjustment expenses incurred 37,725 29,661 115,792 101,601 Underwriting and other operating costs 19,585 17,915 54,611 55,337 Policyholder dividends 640 733 2,517 3,200 Provision for investment related credit loss expense (benefit) (21 ) 15 60 (102 ) Total expenses 57,929 48,324 172,980 160,036 Income before taxes 13,451 24,721 41,996 77,517 Income tax expense 2,090 5,585 7,172 15,302 Net income $ 11,361 $ 19,136 $ 34,824 $ 62,215 AMERISAFE, INC. AND SUBSIDIARIES Consolidated Statements of Income (cont.) (in thousands, except per share amounts) Three Months Ended Nine Months Ended September 30 , September 30 , 2022 2021 2022 2021 (unaudited) (unaudited) Basic EPS: Net income $ 11,361 $ 19,136 $ 34,824 $ 62,215 Basic weighted average common shares 19,198,320 19,344,636 19,267,602 19,328,041 Basic earnings per share $ 0.59 $ 0.99 $ 1.81 $ 3.22 Diluted EPS: Net income $ 11,361 $ 19,136 $ 34,824 $ 62,215 Diluted weighted average common shares: Weighted average common shares 19,198,320 19,344,636 19,267,602 19,328,041 Restricted stock and restricted stock units 71,026 63,282 73,296 64,898 Diluted weighted average common shares 19,269,346 19,407,918 19,340,898 19,392,939 Diluted earnings per share $ 0.59 $ 0.99 $ 1.80 $ 3.21 AMERISAFE, INC. AND SUBSIDIARIES Consolidated Balance Sheets (in thousands) September 30 , December 31 , 2022 2021 (unaudited) Assets Investments $ 934,803 $ 1,012,571 Cash and cash equivalents 90,952 70,722 Amounts recoverable from reinsurers 117,968 120,561 Premiums receivable, net 137,012 135,100 Deferred income taxes 26,227 14,384 Deferred policy acquisition costs 18,275 17,059 Other assets 34,259 32,327 $ 1,359,496 $ 1,402,724 Liabilities and Shareholders’ Equity Liabilities: Reserves for loss and loss adjustment expenses $ 716,196 $ 745,278 Unearned premiums 128,093 121,092 Insurance-related assessments 18,751 16,850 Other liabilities 123,437 120,181 Shareholders’ equity 373,019 399,323 Total liabilities and shareholders’ equity $ 1,359,496 $ 1,402,724 View source version on businesswire.com : https://www.businesswire.com/news/home/20221026005644/en/ Andy Omiridis , EVP & CFO AMERISAFE 337.463.9052 Source: AMERISAFE, Inc.

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