DERIDDER, La., Feb. 27 /PRNewswire-FirstCall/ -- AMERISAFE, Inc. today announced results for the fourth quarter and year ended December 31, 2006.
Gross premiums written in the fourth quarter totaled $76.6 million, an increase of 28.2% over gross premiums written of $59.7 million in the fourth quarter of 2005. Fourth quarter revenues totaled $96.5 million, a 31.9% increase over revenues of $73.2 million in the prior year period. Net investment income increased to $7.3 million in the fourth quarter from $4.9 million for the same period in 2005. Net income in the fourth quarter was $14.0 million compared to net income of $5.4 million in the 2005 fourth quarter. Included in net income for the fourth quarter of 2006 were net realized gains of $4.8 million, compared to $935,000 in the fourth quarter of 2005.
For the year ended December 31, 2006, gross premiums written totaled $332.5 million, a 14.3% increase over gross premiums written of $290.9 million in 2005. For the full year, revenues totaled $332.7 million, a 20.4% increase over revenues of $276.3 million in 2005. Net investment income for the year increased to $25.4 million from $16.9 million in 2005. Net income for the year ended December 31, 2006 was $37.4 million compared to $5.9 million for 2005. In 2005, AMERISAFE recorded pre-tax loss and loss adjustment expenses (LAE) of $8.7 million for claims occurring in prior years, and $13.2 million relating to the commutation of reinsurance contracts with Converium Reinsurance (North America).
The following events impacted AMERISAFE's 2006 fourth quarter and year end results:
* Favorable prior year loss development of $2.2 million recorded in the
2006 fourth quarter, increasing net income by $1.4 million.
* An increase in gross premiums written and earned of $5.3 million for
earned but unbilled ("EBUB") premium at year end. Including the
effects of related losses and expenses, this had the effect of
increasing net income by $712,000.
* Net realized gains of $4.8 million from the sale of AMERISAFE's entire
equity portfolio in the 2006 fourth quarter as a result of the
previously announced strategic review of AMERISAFE's investment
management and related policies, increasing net income by $3.1 million
in the fourth quarter. For the full year 2006, the equity portfolio
sale resulted in a $3.5 million gain, after giving effect to the
$1.3 million loss reported in the 2006 third quarter, and increased
net income by $2.3 million.
* A $5.2 million accrual in the fourth quarter for dividends payable to
Florida policyholders pursuant to a statutory formula based on
AMERISAFE's underwriting results over a consecutive three-year period
ended December 31, 2006, decreasing net income by $3.4 million.
* Professional fees and related expenses of $1.1 million associated with
the secondary public offering completed in the fourth quarter,
reducing 2006 net income by $734,000, of which $537,000 was recognized
in the fourth quarter.
In anticipation of its initial public offering, AMERISAFE effected a 72- for-one reverse stock split effective as of October 27, 2005, reducing the number of then-outstanding shares of common stock to 299,774 shares. On November 23, 2005, AMERISAFE completed its initial public offering, issuing 8.0 million shares of its common stock at $9.00 per share. Upon completion of the IPO, holders of AMERISAFE's Series A preferred stock exchanged the outstanding shares of this series of preferred stock for 9.1 million shares of common stock. As a result of the exchange of Series A preferred stock for shares of the Company's common stock, under the terms of AMERISAFE's articles of incorporation, holders of the Company's outstanding convertible preferred stock are no longer entitled to receive dividends. At December 31, 2006, there were 18,705,098 shares of common stock outstanding, including 1,214,771 common shares issued upon conversion of 250,000 shares of Series C preferred stock immediately prior to the completion of our secondary offering on November 21, 2006.
In the fourth quarter of 2006, diluted earnings per share allocable to common shareholders were $0.70 compared to $0.39 in the same period of 2005. Weighted average diluted shares outstanding for the fourth quarter of 2006 were 18,138,866 shares compared to 7,669,752 shares in the fourth quarter of 2005. For the full year 2006, diluted earnings per share allocable to common shareholders were $1.88 compared to $(1.25) in 2005. Weighted average diluted shares outstanding for 2006 were 17,594,736 compared to 2,129,492 shares in 2005.
The net combined ratio for the fourth quarter of 2006 was 87.1% compared to 96.7% for the same period in 2005. Loss and loss adjustment expenses for the fourth quarter of 2006 totaled $49.5 million, or 58.7% of net premiums earned, compared to $48.4 million, or 72.1% of net premiums earned for the same period in 2005. The decrease in the loss and loss adjustment expense ratio in 2006 was the result of decrease in the current accident year loss ratio, from 71.0% in 2005 to 67.3% in 2006, and $2.2 million of favorable prior year loss development discussed above. Total underwriting expenses, including commissions and salaries and benefits, for the fourth quarter were $18.5 million, or 22.0% of net premiums earned, compared to $17.0 million, or 25.3% of net premiums earned, for the fourth quarter of 2005.
The net combined ratio for 2006 was 92.4% compared to 104.2% for 2005. Loss and loss adjustment expenses in 2006 totaled $199.5 million, or 66.6% of net premiums earned, compared to $204.1 million, or 79.5% of net premiums earned in 2005. Total underwriting expenses, including commissions and salaries and benefits, for 2006 were $71.3 million, or 23.8% of net premiums earned, compared to $63.4 million, or 24.7% of net premiums earned, for 2005.
Allen Bradley, AMERISAFE's Chairman, President and Chief Executive Officer, stated, "We are extremely pleased with our 2006 results. Strong top line growth combined with excellent underwriting results and steady returns on our growing invested asset base contributed to record earnings in 2006. We benefited from favorable prior year loss development as well as decreased frequency of severe claims in 2006 compared to prior years, resulting in a significantly lower net loss ratio. At the same time, we continue to prudently reserve for loss and loss adjustment expenses.
"We also continued our aggressive management of expenses, recording lower expense ratios for both the fourth quarter and the full year, in spite of the expenses we incurred related to the secondary offering in the fourth quarter. We did experience an increase in our dividend ratio as a result of the dividend accrual required in Florida. However, based on the nature of the accrual and our underwriting results in Florida during the past two years, we do not anticipate that we will need to accrue dividends under the Florida statute in 2007.
"Finally, in 2006 we generated a return on average shareholders' equity of 22.6%, which further confirms the strategic advantage of our niche focus on high hazard classes. We are confident that our strategic focus will provide opportunities to further increase revenues and net income, and produce attractive returns for our shareholders in 2007," concluded Bradley.
Outlook
AMERISAFE expects gross premiums written for 2007 to range between $350 million and $360 million, representing 7-10% growth over 2006 results, not including the effect of EBUB premiums recorded in the fourth quarter of 2006. The Company also expects a combined ratio of 95% or better and a return on average equity of 16% or better in 2007. AMERISAFE calculates return on average equity by dividing annualized net income by the average of shareholders' equity, including redeemable preferred stock, for the applicable period. AMERISAFE's long-term financial objective is to produce a return on equity of at least 15%.
Conference Call Information
AMERISAFE has scheduled a conference call for tomorrow, Wednesday, February 28, 2007 at 10:00 a.m. Eastern Time to discuss the Company's results for the fourth quarter and full year 2006 and to comment on management's outlook for future periods. To participate in the conference call dial 303-205-0033 at least 10 minutes before the call begins and ask for the AMERISAFE conference call. A replay of the call will be available shortly after the live broadcast ends and will be accessible through March 14, 2007. To access the replay, dial 303-590-3000 and use the pass code 11083646#.
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 15 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 and will remain available for approximately 60 days 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, agriculture, oil and gas, maritime and sawmills. AMERISAFE markets workers' compensation insurance in 31 states and the District of Columbia.
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. Actual results may differ materially from the results expressed or implied in these statements as the result of risks, uncertainties and other factors including, but not limited to, 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, 2005. 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
Condensed Consolidated Statements of Income
(in thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
(unaudited) (unaudited)
Revenues:
Gross premiums written $76,571 $59,709 $332,491 $290,891
Ceded premiums written (5,881) (6,611) (19,950) (21,541)
Net premiums written $70,690 $53,098 $312,541 $269,350
Net premiums earned $84,331 $67,198 $299,303 $256,568
Net investment income 7,251 4,897 25,383 16,882
Net realized gains
on investments 4,808 935 7,389 2,272
Fee and other income 95 135 645 561
Total revenues 96,485 73,165 332,720 276,283
Expenses:
Loss and loss adjustment
expenses incurred 49,495 48,431 199,484 204,056
Underwriting and other
operating costs 18,549 16,969 71,288 63,384
Interest expense 917 782 3,496 2,844
Policyholder dividends 5,443 (447) 6,006 4
Total expenses 74,404 65,735 280,274 270,288
Income before taxes 22,081 7,430 52,446 5,995
Income tax expense 8,042 2,025 15,088 65
Net income 14,039 5,405 37,358 5,930
Preferred dividends --- (1,451) --- (8,593)
Net income (loss) available
to common shareholders $14,039 $3,954 $37,358 $(2,663)
AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Statements of Income (cont.)
(in thousands, except per share amounts)
Three Months Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
(unaudited) (unaudited)
Basic EPS:
Net income (loss) available
to common shareholders $14,039 $3,954 $37,358 $(2,663)
Portion allocable
to common shareholders 90.9% 75.7% 88.6% 100.0%
Net income (loss) allocable
to common shareholders $12,761 $2,992 $33,099 $(2,663)
Basic weighted average
common shares 18,046,929 7,558,980 17,579,829 2,129,492
Basic earnings (loss)
per share $0.71 $0.40 $1.88 $(1.25)
Diluted EPS:
Net income (loss) allocable
to common shareholders $12,761 $2,992 $33,099 $(2,663)
Diluted weighted average
common shares:
Weighted average
common shares 18,046,929 7,558,980 17,579,829 2,129,492
Stock options 79,285 140,772 --- ---
Restricted stock 12,652 --- 14,907 ---
Diluted weighted average
common shares 18,138,866 7,699,752 17,594,736 2,129,492
Diluted earnings (loss)
per common share $0.70 $0.39 $1.88 $(1.25)
AMERISAFE, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(in thousands)
December 31,
2006 2005
(unaudited)
Assets
Investments $638,780 $533,618
Cash and cash equivalents 26,748 49,286
Amounts recoverable from reinsurers 109,603 122,562
Premiums receivable, net 144,384 123,934
Deferred income taxes 29,466 22,413
Deferred policy acquisition costs 18,486 16,973
Deferred charges 3,548 3,182
Other assets 23,131 20,352
$994,146 $892,320
Liabilities, redeemable preferred stock
and shareholders' equity
Liabilities:
Reserves for loss
and loss adjustment expenses $519,178 $484,485
Unearned premiums 137,761 124,524
Insurance-related assessments 40,886 35,135
Subordinated debt securities 36,090 36,090
Other liabilities 76,447 64,740
Redeemable preferred stock 25,000 50,000
Total shareholders' equity 158,784 97,346
Total liabilities, redeemable preferred
stock and shareholders' equity $994,146 $892,320
AMERISAFE, INC. AND SUBSIDIARIES
Selected Insurance Ratios
Three Months Ended Year Ended
December 31, December 31,
2006 2005 2006 2005
(unaudited) (unaudited)
Current accident year loss ratio (1) 61.3% 72.1% 67.3% 71.0%
Prior accident year loss ratio (2) (2.6)% 0.0% (0.7)% 8.5%
Net loss ratio 58.7% 72.1% 66.6% 79.5%
Net underwriting expense ratio (3) 22.0% 25.3% 23.8% 24.7%
Net dividend ratio (4) 6.4% (0.7)% 2.0% 0.0%
Net combined ratio (5) 87.1% 96.7% 92.4% 104.2%
Return on average equity (6) 31.6% 18.3% 22.6% 5.0%
(1) The current accident year loss ratio is calculated by dividing loss
and loss adjustment expenses incurred for the current accident year
by the current year's net premiums earned.
(2) The prior accident year loss ratio is calculated by dividing the
change in loss and loss adjustment expenses incurred for prior
accident years by the current year's net premiums earned.
(3) The net underwriting expense ratio is calculated by dividing
underwriting and certain other operating costs, commissions and
salaries and benefits by the current year's net premiums earned.
(4) The net dividend ratio is calculated by dividing policyholder
dividends by the current year's net premiums earned. For the three
months and year ended December 31, 2006, includes $5.2 million of
dividends accrued under Florida law pursuant to a formula based on
underwriting results from policies written in Florida in a
consecutive three-year period.
(5) The net combined ratio is the sum of the net loss ratio, the net
underwriting expense ratio and the net dividend ratio.
(6) Return on average equity is calculated by dividing the annualized
net income by the average shareholders' equity, including
redeemable preferred stock, for the applicable period.
Contacts: Geoff Banta, EVP & CFO
AMERISAFE, Inc.
337-463-9052
Ken Dennard, Managing Partner
Karen Roan, Sr. VP
DRG&E / 713-529-6600
