Amerisafe Tops Zacks View – Analyst Blog

Results benefited due primarily 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 $2.3 million.

 

Amerisafe’s total revenues for the quarter were $64.4 million, down 17.0% from $77.5 million in the prior-year quarter. Gross premiums written for the quarter were $61.1 million, down 23.1% from $79.4 million in the year-ago quarter. Gross premiums declined primarily as a result of a 14.3% decline in Voluntary premiums for policies written in the quarter, the effect of which was compounded by negative payroll audits and related premium adjustments for policies written in previous quarters.

 

Net premiums earned declined 21.3% from the year-ago quarter to $55.1 million. As a result, underwriting expense ratio increased to 22.7% from 21.1% in the year-ago quarter.

 

Net income for the reported quarter was $11.3 million, compared with $11.1 million in the prior-year quarter.

Net investment income, which represented 10.2% of total revenue, was $6.5 million for the first quarter of 2010, down 11.3% from $7.4 million in the prior-year quarter.

 

Net loss and  LAE decreased 20.1% year-over-year to $37.6 million (or 68.3% of net premiums earned) from $47.1 million (or 67.2% of net premiums earned) in the prior-year quarter.

 

Net combined ratio for the reported quarter increased to 91.5% from 88.6% in the prior-year quarter. Return on average equity (ROE) for the quarter was 14.7%, compared with 15.7% in the prior-year quarter.

 

Book value came in at $16.49 per share as on March 31, 2010, up 15.3% from $14.30 in the prior-year quarter.

 

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.

Though Amerisafe is expected to face an uncertain environment for the next few quarters  as the state of economy continues to hurt payrolls, the pricing environment is now improving somewhat. Furthermore, the claim frequency has continued to fall and Amerisafe has continued its excellent expense management. Also, the premium retention has increased significantly and the company continues to gain market share.