EX-99.1 2 dex991.htm PRESS RELEASE

Press Release

Exhibit 99.1

FOR IMMEDIATE RELEASE		NEWS RELEASE
		Contacts:		G. Janelle Frost, EVP & CFO AMERISAFE, Inc. 337-463-9052 Ken Dennard, Managing Partner Karen Roan, Sr.VP DRG&E / 713-529-6600

AMERISAFE ANNOUNCES 2010 SECOND QUARTER RESULTS

DeRidder, LA – August 4, 2010 - AMERISAFE, Inc. (Nasdaq: AMSF), a specialty writer of hazardous workers’ compensation insurance, today announced results for the second quarter ended June 30, 2010.

		Three Months Ended June 30,											Six Months Ended June 30,
		2010				2009				% Change			2010				2009				% Change
		(in thousands, except per share data)
Net premiums earned		$	52,982			$	65,792			(19.5	)%		$	108,040			$	135,793			(20.4	)%
Net investment income			6,675				6,982			(4.4	)%			13,215				14,354			(7.9	)%
Net realized gains on investments (pre-tax)			293				17							2,845				43
Net income			10,424				13,701			(23.9	)%			21,701				24,763			(12.4	)%
Diluted earnings per share		$	0.54			$	0.67			(19.4	)%		$	1.13			$	1.21			(6.6	)%
Book value per share		$	17.01			$	15.10			12.7	%		$	17.01			$	15.10			12.7	%
Net combined ratio			87.3	%			83.3	%						89.4	%			86.0	%
Return on average equity			13.3	%			18.6	%						14.0	%			17.0	%

Commenting on these results, Allen Bradley, AMERISAFE’s Chairman, President and Chief Executive Officer, stated, “Industry and economic conditions remain challenging. While the competitive landscape has improved, some aggressive competitors continue to price their products at less than profitable levels even as claims frequency and costs are beginning to increase. At the same time the continued economic doldrums result in reduced payrolls and thus

premiums. Lower approved loss costs in many jurisdictions exacerbate the drop in premium. Even with these compound pressures we’ve generated a solid return on equity and commensurate growth in book value as we remain committed to underwriting and expense discipline.”

Insurance Results

		Three Months Ended June 30,											Six Months Ended June 30,
		2010				2009				% Change			2010				2009				% Change
		(in thousands)
Gross premiums written		$	62,993			$	72,537			(13.2	)%		$	124,084			$	151,966			(18.3	)%
Net premiums earned			52,982				65,792			(19.5	)%			108,040				135,793			(20.4	)%
Loss and loss adjustment expenses incurred			33,711				40,219			(16.2	)%			71,338				87,289			(18.3	)%
Underwriting and certain other operating costs, commissions and salaries and benefits			12,347				14,475			(14.7	)%			24,844				29,243			(15.0	)%
Policyholder dividends			210				141			48.9	%			474				322			47.2	%
Underwriting profit (pre-tax)			6,714				10,957			(38.7	)%			11,384				18,939			(39.9	)%
Insurance Ratios:
Current accident year loss ratio			75.5	%			69.0	%						74.0	%			69.0	%
Prior accident year loss ratio			(11.9	)%			(7.9	)%						(8.0	)%			(4.7	)%
Net loss ratio			63.6	%			61.1	%						66.0	%			64.3	%
Net underwriting expense ratio			23.3	%			22.0	%						23.0	%			21.5	%
Net dividend ratio			0.4	%			0.2	%						0.4	%			0.2	%
Net combined ratio			87.3	%			83.3	%						89.4	%			86.0	%

• Gross premiums written declined in the three and six month periods. Voluntary premiums written decreased 6.7% in the quarter and 10.6% for the six months ended June 30, 2010 compared to the same periods in 2009. Additionally, payroll audits and related premium adjustments for policies written in previous periods reduced premiums $9.2 million in the second quarter and $18.1 million in the six months ended June 30, 2010. In 2009, these premium adjustments reduced premium $5.4 million in the second quarter and $7.7 million for the six months ended June 30.

• In the second quarter, the Company increased the current accident year loss ratio for 2010 from 72.5% to 74.0% as a result of increased frequency of claims on a declining premium base. However, during the quarter the Company experienced favorable case development

for prior accident years which reduced loss and loss adjustment expenses by $6.3 million. Accident years 2006 and 2007 were the primary contributors to the favorable development.

• The underwriting expense ratio for both the quarter and six months ended June 30, 2010 was up slightly from the prior year periods primarily as a result of lower earned premiums. As a result of intensive expense management, fixed costs were down for the three and six months ended June 30, 2010 compared to prior year periods.

Geoff Banta, President and Chief Operating Officer, noted, “Expense ratios continue to be negatively impacted by the decline in earned premiums while increasing claims frequency is putting upward pressure on our current year loss ratio. As a positive, we are continuing to experience favorable prior year loss development as our reserves as originally estimated have proven to be redundant. Also, unlike 2009, our gross written premiums grew slightly in this quarter compared to the first quarter of 2010.

“We have shown that we can manage our business effectively through a competitive market compounded by a deeply suppressed economy. However, these conditions can’t and won’t continue indefinitely. We are confident the AMERISAFE team has the determination and discipline to continue to effectively and prudently manage our business in the near term. As conditions improve our financial strength and resource capacity will enable us to take full advantage of a growing economy in a more positive environment. In the meantime, we will continue to pursue opportunities in select markets while avoiding irrational pricing and risk selection.”

Investment Results

		Three Months Ended June 30,											Six Months Ended June 30,
		2010				2009				% Change			2010				2009				% Change
		(in thousands)
Net investment income		$	6,675			$	6,982			(4.4	)%		$	13,215			$	14,354			(7.9	)%
Net realized gains on investments (pre-tax)			293				17							2,845				43
Pre-tax investment yield			3.3	%			3.5	%						3.3	%			3.6	%
Tax equivalent yield (1)			4.7	%			5.0	%						4.7	%			5.0	%

(1) The tax equivalent yield is calculated using the effective interest rate and a 35% marginal tax rate.

• The carrying value of AMERISAFE’s investment portfolio, including cash and cash equivalents, was $801.7 million and the fair value of the portfolio was $827.3 million at June 30, 2010.

Supplemental Information

		Three Months Ended June  30,							Six Months Ended June 30,
		2010				2009			2010				2009
Shares repurchased			329,109			—				399,148			—
Average price of shares repurchased, including commissions		$	16.72			—			$	16.63			—
Effective tax rate			22.5	%		25.0	%			19.8	%		25.4	%

• As previously announced, the Company’s Board of Directors has authorized a share repurchase program. The program authorizes a limit of up to $25 million and, unless extended, will expire on December 31, 2010. As of June 30, 2010, AMERISAFE had spent approximately $6.6 million on its share repurchase program.

• Income tax expense in 2010 was decreased for the change in the valuation allowance related to the previously impaired securities and a larger percentage of tax-exempt pre-tax income. The decrease from the valuation allowance was $0.1 million, or 0.7 percentage points for the second quarter and $1.0 million, or 3.6 percentage points for the six months ended June 30. This did not impact operating net income.

		Three Months Ended June 30,								Six Months Ended June 30,
		2010				2009				2010				2009
		(in thousands, except share and per share data)
Net income		$	10,424			$	13,701			$	21,701			$	24,763
Less: Net realized capital gains			293				17				2,845				43
Tax effect (1)			(9	)			(6	)			(10	)			(15	)
Operating net income (2)			10,140				13,690				18,866				24,735
Average shareholders’ equity (3)		$	313,501			$	295,192			$	309,408			$	290,773
Less: Average other comprehensive income (loss)			258				(536	)			1,430				627
Adjusted average shareholders’ equity			313,243				295,728				307,978				290,146
Diluted weighted average common shares			19,160,004				19,242,089				19,238,093				19,237,286
Portion allocable to common shareholders (4)			100.0	%			94.1	%			100.0	%			94.1	%
Return on average equity (5)			13.3	%			18.6	%			14.0	%			17.0	%
Operating return on average equity (2)			13.0	%			18.5	%			12.3	%			17.1	%
Diluted earnings per common share		$	0.54			$	0.67			$	1.13			$	1.21
Operating earnings per common share (2)		$	0.53			$	0.67			$	0.98			$	1.21

(1) The tax effect of net realized capital gains is calculated assuming an annual tax rate of 35% plus the change in valuation allowance for deferred taxes. The change in valuation allowance decreased tax expense by $0.1 million and $1.0 million, respectively for the three months and six months ended June 30, 2010.

(2) Operating net income, operating return on average equity and operating earnings per share are non-GAAP financial measures, and management believes that investor’s 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, including redeemable preferred stock for the same period used in determining the numerator. On December 31, 2009, the Company redeemed all outstanding shares of its Series C and D redeemable preferred stock for $25.9 million.

(4) The portion allocable to common shareholders relates to the two-class method of calculating earnings per share.

(5) 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.

Conference Call Information

AMERISAFE has scheduled a conference call for August 5, 2010, at 10:00 a.m. Eastern Time. To participate in the conference call dial 480-629-9723 at least 10 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 August 12, 2010. To access the replay, dial 303-590-3030 and use the pass code 4324991#.

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 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 and agriculture. AMERISAFE actively markets workers’ compensation insurance in 30 states and the District of Columbia. The Company’s financial strength rating is “A-” (Excellent) by A.M. Best.

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. Actual results may differ materially from the results expressed or implied in these statements as the results 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, 2009. 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 June 30,								Six Months Ended June 30,
		2010				2009				2010				2009
		(unaudited)
Revenues:
Gross premiums written		$	62,993			$	72,537			$	124,084			$	151,966
Ceded premiums written			(4,603	)			(4,870	)			(9,242	)			(10,064	)
Net premiums written		$	58,390			$	67,667			$	114,842			$	141,902
Net premiums earned		$	52,982			$	65,792			$	108,040			$	135,793
Net investment income			6,675				6,982				13,215				14,354
Net realized gains on investments			293				17				2,845				43
Fee and other income			145				705				377				841
Total revenues			60,095				73,496				124,477				151,031
Expenses:
Loss and loss adjustment expenses incurred			33,711				40,219				71,338				87,289
Underwriting and other operating costs			12,347				14,475				24,844				29,243
Interest expense			385				383				760				994
Policyholder dividends			210				141				474				322
Total expenses			46,653				55,218				97,416				117,848
Income before taxes			13,442				18,278				27,061				33,183
Income tax expense			3,018				4,577				5,360				8,420
Net income		$	10,424			$	13,701			$	21,701			$	24,763

AMERISAFE, INC. AND SUBSIDIARIES

Consolidated Statements of Income (cont.)

(in thousands, except share and per share amounts)

		Three Months Ended June 30,								Six Months Ended June 30,
		2010				2009				2010				2009
		(unaudited)
Basic EPS:
Net income available to common shareholders		$	10,424			$	13,701			$	21,701			$	24,763
Portion allocable to common shareholders			100.0	%			94.1	%			100.0	%			94.1	%
Net income allocable to common shareholders		$	10,424			$	12,887			$	21,701			$	23,292
Basic weighted average common shares			18,720,748				18,855,200				18,804,093				18,850,168
Basic earnings per share		$	0.56			$	0.68			$	1.15			$	1.24
Diluted EPS:
Net income allocable to common shareholders		$	10,424			$	12,887			$	21,701			$	23,292
Diluted weighted average common shares:
Weighted average common shares			18,720,748				18,855,200				18,804,093				18,850,168
Stock options			435,082				375,937				430,707				377,930
Restricted stock			4,174				10,952				3,293				9,188
Diluted weighted average common shares			19,160,004				19,242,089				19,238,093				19,237,286
Diluted earnings per common share		$	0.54			$	0.67			$	1.13			$	1.21

AMERISAFE, INC. AND SUBSIDIARIES

Consolidated Balance Sheets (in thousands)

		June 30,			December 31,
		2010			2009
		(unaudited)
Assets
Investments		$	751,584		$	737,297
Cash and cash equivalents			50,138			63,188
Amounts recoverable from reinsurers			94,263			81,878
Premiums receivable, net			158,585			151,570
Deferred income taxes			31,306			28,489
Deferred policy acquisition costs			19,330			18,128
Deferred charges			3,341			3,030
Other assets			31,907			35,229
		$	1,140,454		$	1,118,809
Liabilities and shareholders’ equity
Liabilities:
Reserves for loss and loss adjustment expenses		$	531,948		$	534,655
Unearned premiums			129,301			122,500
Insurance-related assessments			42,264			40,072
Subordinated debt securities			36,090			36,090
Other liabilities			84,452			83,075
Total shareholders’ equity			316,399			302,417
Total liabilities and shareholders’ equity		$	1,140,454		$	1,118,809

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