Amerisafe, Inc.’s (AMSF) fourth quarter operating earnings of 32 cents per share came in substantially short of the Zacks Consensus Estimate of 58 cents. This also compares unfavorably with the earnings of 94 cents in the prior-year quarter. Results for the reported quarter exclude net realized after-tax capital gains and losses.
Results deteriorated due to a year-over-year decrease in top line and an increase in expenses. For the reported quarter, the adjustment of current accident year loss ratio resulted in an additional loss and loss adjustment expense of $12.1 million. The current accident year loss ratio adjustment was primarily driven by severe claims occurring in the fourth quarter of 2009.
Amerisafe’s results for the year-ago quarter included $9.3 million of favorable prior year loss development and $2.2 million of Florida policyholder dividend expense.
Amerisafe’s total revenues for the quarter were $64.0 million, flat compared to the prior-year quarter. Gross premiums written for the quarter were $49.4 million, down 24.2% from $65.1 million in the year-ago quarter. Voluntary premiums for policies written in the quarter decreased 11.8%, the effect of which was compounded by negative payroll audits and related premium adjustments for policies written in previous quarters.
Net income for the reported quarter was $6.6 million or 28 cents per share, compared to $5.7 million or 28 cents in the prior-year quarter. Excluding net realized after-tax capital gains and losses, operating net income was $6.6 million, compared to $19.1 million in the prior-year quarter. Pre-tax income for the reported quarter included $8.7 million of favorable prior year loss development. Amerisafe also adjusted the current accident year loss ratio for the full year from 69.0% to 73.8%.
For 2009, Amerisafe’s net income was $46.4 million or $2.22 per share, compared to $43.8 million or $2.15 in the previous year. Excluding net realized after-tax capital gains and losses, operating net income for the full year was $44.4 million or $2.17 per share, compared to $59.1 million or $2.90 in the previous year.
Net investment income, which represented 10.6% of total revenue – was $6.8 million for the fourth quarter of 2009, down 15.9% from $8.1 million in the prior-year quarter.
Net loss and loss adjustment expenses (LAE) increased 14.8% year-over-year to $42.7 million (or 74.9% of net premiums earned) from $37.2 million (or 51.8% of net premiums earned) in the prior-year quarter.
Net combined ratio for the reported quarter increased to 96.7% from 73.7% in the prior-year quarter. Return on average equity (ROE) for the quarter was 8.5%, compared to 8.4% in the prior-year quarter. Operating ROE for the reported quarter was 8.5%, compared to 27.8% in the prior-year quarter.
Share Repurchase Update
Concurrent with the earnings release, the Board of Directors of Amerisafe authorized the repurchase of up to $25 million worth of shares of Amerisafe’s common stock. The program will expire on Dec 31, 2010.
Though Amerisafe is expected to face an uncertain environment for the next few quarters as the recession 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.
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