GlobeNewswire Inc | Feb 24, 2021 04:30PM EST

February 24, 2021

Reports $86.6 Million of Net Income in 2020Increases quarterly dividend by 7.4%

DERIDDER, La., Feb. 24, 2021 (GLOBE NEWSWIRE) -- AMERISAFE, Inc. (Nasdaq: AMSF), a specialty provider of workers compensation insurance focused on high hazard industries, today announced results for the fourth quarter and year ended December 31, 2020.

Three Months Ended Twelve Months Ended December 31, December 31, 2020 2019 % Change 2020 2019 % Change (in thousands, except per (in thousands, except per share data) share data)Netpremiums $ 74,702 $ 82,277 -9.2 % $ 304,427 $ 332,888 -8.5 %earnedNetinvestment 7,228 8,035 -10.0 % 29,364 32,483 -9.6 %incomeNetrealizedgains (332 ) (53 ) NM 1,132 (80 ) NM (losses) oninvestments(pretax)Netunrealized gains onequitysecurities 6,553 1,593 NM 4,204 4,758 NM (pre-tax)Net income 28,501 34,014 -16.2 % 86,602 92,690 -6.6 %Dilutedearnings $ 1.47 $ 1.76 -16.5 % $ 4.47 $ 4.80 -6.9 %per shareOperating 23,586 32,797 -28.1 % 82,387 88,994 -7.4 %net incomeOperatingearnings $ 1.22 $ 1.70 -28.2 % $ 4.25 $ 4.60 -7.6 %per shareBook value $ 22.70 $ 22.29 1.8 % $ 22.70 $ 22.29 1.8 %per shareNetcombined 70.4 % 59.6 % 76.3 % 76.6 % ratioReturn onaverage 24.8 % 30.3 % 19.9 % 22.1 % equity

G. Janelle Frost, President and Chief Executive Officer, noted, Insurance is all about risk, and 2020 was unparalleled in terms of risks converging in one year. A global pandemic, natural disasters, and a recession, coupled with a soft workers compensation market, made 2020 a unique challenge. We successfully met this challenge through our employees dedication to service and the strong foundation built over years of discipline in underwriting and claims management. For the year, this culminated in a combined ratio of 76.3%, slightly better than 2019, and a return on average equity of 19.9%.

INSURANCE RESULTS

Three Months Ended Twelve Months Ended December 31, December 31, 2020 2019 % 2020 2019 % Change Change (in thousands) (in thousands) Grosspremiums $ 63,082 $ 70,706 -10.8 % $ 303,090 $ 333,460 -9.1 %writtenNet premiums 74,702 82,277 -9.2 % 304,427 332,888 -8.5 %earnedLoss andlossadjustment 36,260 33,535 8.1 % 157,226 176,342 -10.8 %expensesincurredUnderwriting and certain other operating costs,commissions,salaries and 15,589 14,681 6.2 % 71,906 74,351 -3.3 %benefitsPolicyholder 768 797 -3.6 % 3,453 4,160 -17.0 %dividendsUnderwritingprofit $ 22,085 $ 33,264 -33.6 % $ 71,842 $ 78,035 -7.9 %(pre-tax) Insurance Ratios:Currentaccident 72.5 % 72.5 % 72.5 % 72.5 % year lossratioPrioraccident -24.0 % -31.7 % -20.9 % -19.5 % year lossratioNet loss 48.5 % 40.8 % 51.6 % 53.0 % ratioNetunderwriting 20.9 % 17.8 % 23.6 % 22.3 % expenseratioNet dividend 1.0 % 1.0 % 1.1 % 1.3 % ratioNet combined 70.4 % 59.6 % 76.3 % 76.6 % ratio

-- Voluntary premiums on policies written in the quarter were 7.9% lower than the fourth quarter of 2019, primarily due to continued declines in approved loss costs in the states in which we write business. For the full year, voluntary premiums decreased by 7.6%. -- Payroll audits and related premium adjustments increased premiums written by $1.3 million in the fourth quarter of 2020, compared to $4.0 million in the fourth quarter of 2019. For the full year 2020, audits and related premium adjustments added $6.4 million to premiums, compared to $12.3 million in 2019, a decrease of $5.9 million. -- The current accident year loss ratio for the fourth quarter was 72.5%, unchanged from the first three quarters of 2020, and for the full year 2019. During the quarter, the Company experienced favorable net loss reserve development for prior accident years, which reduced loss and loss adjustment expenses by $17.9 million, primarily from accident years 2014 through 2018. For the full year, the company experienced favorable development on prior accident years of $63.5 million, compared with $65.0 million in 2019. The Company attributes its lower claim severities for prior years to benign medical inflation and its claims handling. The Company estimates that its current accident year loss ratio will be 72.0% for 2021, unless there are unforeseen changes in macro conditions. -- For the quarter ended December 31, 2020, the underwriting expense ratio was 20.9% compared with 17.8% in the same quarter in 2019. The increase in the expense ratio in the fourth quarter was primarily due to the prior-year period when the end of an assessment related to a multiple injury fund lowered expenses by $3.5 million. For the year ended December 31, 2020, the underwriting expense ratio was 23.6%, compared with 22.3% in 2019. -- The effective tax rate for the quarter ended December 31, 2020 was 20.0%, compared with 20.8% for the fourth quarter of 2019. The effective tax rate for the full year 2020 was 19.0% compared with 19.8% for 2019. Both rates decreased in the quarter and full year period, due to increased tax-exempt income relative to underwriting profitability.

INVESTMENT RESULTS

Three Months Ended Twelve Months Ended December 31, December 31, 2020 2019 % Change 2020 2019 % Change (in thousands) (in thousands) Net investment $ 7,228 $ 8,035 -10.0 % $ 29,364 $ 32,483 -9.6 %incomeNet realizedgains (losses) oninvestments (332 ) (53 ) NM 1,132 (80 ) NM (pre-tax)Net unrealized gains onequitysecurities 6,553 1,593 NM 4,204 4,758 NM (pre-tax)Pre-taxinvestment 2.4 % 2.7 % 2.5 % 2.8 % yieldTax-equivalent 2.9 % 3.1 % 2.9 % 3.1 % yield (1)

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(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 December 31, 2020, decreased 10.0% to $7.2 million from $8.0 million in the fourth quarter of 2019, due to lower interest rates on fixed income securities. For the full year 2020, net investment income was $29.4 million compared with $32.5 million for 2019, a decrease of 9.6%, due to lower yields on fixed income securities. -- As of December 31, 2020, the carrying value of AMERISAFEs investment portfolio, including cash and cash equivalents, was $1.2 billion.

CAPITAL MANAGEMENT

In an accompanying announcement, the Companys Board of Directors increased the regular quarterly dividend 7.4% from $0.27 per share to $0.29 per share, payable on March 26, 2021 to shareholders of record as of March 12, 2021.

SUPPLEMENTAL INFORMATION

Three Months Ended Twelve Months Ended December 31, December 31, 2020 2019 2020 2019 (in thousands, except share and per share data) Net income $ 28,501 $ 34,014 $ 86,602 $ 92,690 Less: Net realizedgains (losses) (332 ) (53 ) 1,132 (80 )on investmentsNet unrealizedgains on 6,553 1,593 4,204 4,758 equitysecuritiesTax effect (1) (1,306 ) (323 ) (1,121 ) (982 )Operating net $ 23,586 $ 32,797 $ 82,387 $ 88,994 income (2) Averageshareholders? $ 460,363 $ 449,472 $ 434,516 $ 419,989 equity (3)Less: Averageaccumulatedother 20,466 12,413 16,615 5,690 comprehensiveincomeAverageadjusted $ 439,897 $ 437,059 $ 417,901 $ 414,299 shareholders?equity (2) Dilutedweighted 19,380,109 19,321,394 19,363,809 19,329,238 average commonshares Return onaverage equity 24.8 % 30.3 % 19.9 % 22.1 %(4)Operatingreturn onaverage 21.4 % 30.0 % 19.7 % 21.5 %adjustedequity (2)Dilutedearnings per $ 1.47 $ 1.76 $ 4.47 $ 4.80 shareOperatingearnings per $ 1.22 $ 1.70 $ 4.25 $ 4.60 share (2)

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(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 AMERISAFEs 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 February 25, 2021, 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 646-828-8143 (Conference Code 8160061) 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 the Investor Relations Home page of the Investors section of the Companys website ( 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 the same website location.

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 AMERISAFEs plans and performance. These statements are based on managements estimates, assumptions and projections as of the date of this release and are not guarantees of future performance and include statements regarding managements views and expectations of the workers compensation market, the Companys 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 impact of the COVID-19 pandemic on the business and operations of the Company and our policyholders and the market value of our investment portfolio. Additional factors that may affect our results are set forth in the Companys filings with the Securities and Exchange Commission, including AMERISAFEs Annual Report on Form 10-K. 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 SUBSIDIARIESConsolidated Statements of Income(in thousands) Three Months Ended Twelve Months Ended December 31, December 31, 2020 2019 2020 2019 (unaudited) (unaudited)Revenues: Gross premiums $ 63,082 $ 70,706 $ 303,090 $ 333,460 writtenCeded premiums (2,348 ) (2,191 ) (10,276 ) (8,995 )writtenNet premiums $ 60,734 $ 68,515 $ 292,814 $ 324,465 written Net premiums $ 74,702 $ 82,277 $ 304,427 $ 332,888 earnedNet investment 7,228 8,035 29,364 32,483 incomeNet realizedgains (losses) (332 ) (53 ) 1,132 (80 )on investmentsNet unrealizedgains on equity 6,553 1,593 4,204 4,758 securitiesFee and other 70 87 350 321 incomeTotal revenues 88,221 91,939 339,477 370,370 Expenses: Loss and lossadjustment 36,260 33,535 157,226 176,342 expensesincurredUnderwriting andother operating 15,589 14,681 71,906 74,351 costsPolicyholder 768 797 3,453 4,160 dividendsProvision forinvestment (14 ) - (27 ) - related creditloss benefitTotal expenses 52,603 49,013 232,558 254,853 Income before 35,618 42,926 106,919 115,517 taxesIncome tax 7,117 8,912 20,317 22,827 expenseNet income $ 28,501 $ 34,014 $ 86,602 $ 92,690

AMERISAFE, INC. AND SUBSIDIARIESConsolidated Statements of Income (cont.)(in thousands, except per share amounts) Three Months Ended Twelve Months Ended December 31, December 31, 2020 2019 2020 2019 (unaudited) (unaudited)Basic EPS: Net income $ 28,501 $ 34,014 $ 86,602 $ 92,690 Basicweightedaverage 19,309,055 19,263,723 19,288,996 19,248,657 commonsharesBasicearnings $ 1.48 $ 1.77 $ 4.49 $ 4.82 per share Diluted EPS:Net income $ 28,501 $ 34,014 $ 86,602 $ 92,690 Dilutedweightedaverage commonshares:Weightedaverage 19,309,055 19,263,723 19,288,996 19,248,657 commonsharesStockoptionsand 71,054 57,671 74,813 80,581 restrictedstockDilutedweightedaverage 19,380,109 19,321,394 19,363,809 19,329,238 commonshares Dilutedearnings $ 1.47 $ 1.76 $ 4.47 $ 4.80 per share

AMERISAFE, INC. AND SUBSIDIARIESConsolidated Balance Sheets(in thousands) December 31, December 31, 2020 2019 (unaudited) Assets Investments $ 1,088,744 $ 1,125,018 Cash and cash equivalents 61,757 43,813 Amounts recoverable from reinsurers 105,803 95,913 Premiums receivable, net 156,760 157,953 Deferred income taxes 13,665 17,513 Deferred policy acquisition costs 17,810 19,048 Other assets 26,316 33,648 $ 1,470,855 $ 1,492,906 Liabilities and Shareholders? Equity Liabilities: Reserves for loss and loss adjustment expenses $ 760,561 $ 772,887 Unearned premiums 129,260 140,873 Insurance-related assessments 17,995 22,967 Other liabilities 124,223 125,964 Shareholders? equity 438,816 430,215 Total liabilities and shareholders? equity $ 1,470,855 $ 1,492,906

Neal A. Fuller, EVP & CFOAMERISAFE337.463.9052