Amerisafe Inc.’s (AMSF) second quarter earnings of 54 cents per share came in substantially ahead of the Zacks Consensus Estimate of 45 cents. However, this compares unfavorably with the earnings of 67 cents in the prior-year quarter.
Results benefited primarily due to substantial net realized gains on investments and lower expenses. However, the top line was down on a year-over-year basis as a result of lower net premiums earned and reduced investment income.
The accident years 2004, 2006 and 2007 primarily contributed to favorable development, reducing loss and loss adjustment expenses (LAE) by $6.3 million.
Amerisafe’s total revenues for the quarter were $60.1 million, down 18.2% from $73.5 million in the prior-year quarter. Gross premiums written for the quarter were $63.0 million, down 13.1% from $72.5 million in the year-ago quarter. Gross premiums declined primarily as a result of decline in Voluntary premiums for policies written in the quarter, the effect of which was accentuated by negative payroll audits and related premium adjustments for policies written in the previous quarters.
Net premiums earned declined 19.5% from the year-ago quarter to $53.0 million. As a result, its underwriting expense ratio increased to 23.0% from 21.5% in the year-ago quarter.
Net income for the reported quarter was $10.4 million, compared with $13.7 million in the prior-year quarter.
Net investment income, which represented 11.1% of total revenue, was $6.7 million for the reported quarter, down 4.4% from $7.0 million in the prior-year quarter.
Net loss and LAE decreased 16.2% year over year to $33.7 million (or 63.6% of net premiums earned) from $40.2 million (or 61.1% of net premiums earned) in the prior-year quarter. As a result, total expenses decreased 15.4% year over year to $46.7 million.
Net combined ratio for the reported quarter increased to 87.3% from 83.3% in the prior-year quarter. Return on average equity (ROE) for the quarter was 13.3%, compared with 18.6% in the prior-year quarter.
Book value came in at $17.01 per share as on June 30, 2010, up 12.6% from $15.10 in the prior-year quarter.
As on June 30, 2010, Amerisafe held cash and investments of $801.7 million as compared with $800.5 million as on December 31, 2009. Total shareholders’ equity was recorded at $316.4 million, at the end of the June 30, 2010.
Share Repurchase Update
During the reported quarter, Amerisafe repurchased approximately 329.1 million shares, at $16.72 per share, for about $5.5 million. As of June 30, 2010, Amerisafe had spent approximately $6.6 million on its share repurchase program that authorises to buy back shares up to $25 million. Unless extended, this share repurchase program is scheduled to expire on December 31, 2010.
On April 29, 2010, rating agency A.M. Best Co. affirmed the financial strength rating of "A-" (Excellent) and issuer credit ratings (ICR) of “a-” of Amerisafe Insurance Group and its members. The ratings reflect the company’s excellent capitalization, strong operating profitability and its established market presence.
Amerisafe is expected to face an uncertain environment for the next few quarters as the state of economy continues to hurt payrolls, and though the pricing environment is now improving somewhat, it fails to drive growth for the company. However, the claim frequency has continued to fall and Amerisafe has retained its excellent expense management. Also, the premium retention has increased significantly and the company continues to gain market share.
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The accident years 2004, 2006 and 2007 primarily contributed to favorable development, reducing loss and loss adjustment expenses (LAE) by $6.3 million.
Amerisafe’s total revenues for the quarter were $60.1 million, down 18.2% from $73.5 million in the prior-year quarter. Gross premiums written for the quarter were $63.0 million, down 13.1% from $72.5 million in the year-ago quarter. Gross premiums declined primarily as a result of decline in Voluntary premiums for policies written in the quarter, the effect of which was accentuated by negative payroll audits and related premium adjustments for policies written in the previous quarters.
Net premiums earned declined 19.5% from the year-ago quarter to $53.0 million. As a result, its underwriting expense ratio increased to 23.0% from 21.5% in the year-ago quarter.
Net income for the reported quarter was $10.4 million, compared with $13.7 million in the prior-year quarter.
Net investment income, which represented 11.1% of total revenue, was $6.7 million for the reported quarter, down 4.4% from $7.0 million in the prior-year quarter.
Net loss and LAE decreased 16.2% year over year to $33.7 million (or 63.6% of net premiums earned) from $40.2 million (or 61.1% of net premiums earned) in the prior-year quarter. As a result, total expenses decreased 15.4% year over year to $46.7 million.
Net combined ratio for the reported quarter increased to 87.3% from 83.3% in the prior-year quarter. Return on average equity (ROE) for the quarter was 13.3%, compared with 18.6% in the prior-year quarter.
Book value came in at $17.01 per share as on June 30, 2010, up 12.6% from $15.10 in the prior-year quarter.
As on June 30, 2010, Amerisafe held cash and investments of $801.7 million as compared with $800.5 million as on December 31, 2009. Total shareholders’ equity was recorded at $316.4 million, at the end of the June 30, 2010.
Share Repurchase Update
During the reported quarter, Amerisafe repurchased approximately 329.1 million shares, at $16.72 per share, for about $5.5 million. As of June 30, 2010, Amerisafe had spent approximately $6.6 million on its share repurchase program that authorises to buy back shares up to $25 million. Unless extended, this share repurchase program is scheduled to expire on December 31, 2010.
On April 29, 2010, rating agency A.M. Best Co. affirmed the financial strength rating of "A-" (Excellent) and issuer credit ratings (ICR) of “a-” of Amerisafe Insurance Group and its members. The ratings reflect the company’s excellent capitalization, strong operating profitability and its established market presence.
Amerisafe is expected to face an uncertain environment for the next few quarters as the state of economy continues to hurt payrolls, and though the pricing environment is now improving somewhat, it fails to drive growth for the company. However, the claim frequency has continued to fall and Amerisafe has retained its excellent expense management. Also, the premium retention has increased significantly and the company continues to gain market share.
AMERISAFE INC (AMSF): Free Stock Analysis Report
Zacks Investment Research
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