Amerisafe (AMSF) Tops Q4 EPS by 95c

Amerisafe (NASDAQ: AMSF) reported Q4 EPS of $1.76, $0.95 better than the analyst estimate of $0.81.

G. Janelle Frost, President and Chief Executive Officer, noted, “The current soft market is unique in its challenges given the state of the property and casualty industry. AMERISAFE is a specialist, and our distinctive approach to workers’ compensation produced another year of excellent financial results. We reported a combined ratio of 76.6% and a return on average equity of 22.1% in 2019, the fourth year of workers’ compensation rate declines. For AMERISAFE, less than anticipated average loss severity for prior years offset the impact of lower premiums.”

• Gross premiums written in the fourth quarter of 2019 decreased by $4.6 million, or 6.1%, compared with the fourth quarter of 2018, primarily due to continued declines in approved loss costs in the states in which we write business. For the full year, gross written premiums decreased by 5.2%.
• Voluntary premiums on policies written in the quarter were 8.2% lower than the fourth quarter of 2018, and 6.9% lower for the full year.
• Payroll audits and related premium adjustments increased premiums written by $4.0 million in the fourth quarter of 2019, compared to $2.3 million in the fourth quarter of 2018. For the full year 2019, audits and related premium adjustments added $12.3 million to premiums, compared to $7.3 million in 2018, an increase of $5.0 million.
• The current accident year loss ratio for the fourth quarter was 72.5%, unchanged from the first three quarters of 2019, and an increase of 1.0 percentage point from the 71.5% ratio for the full year 2018. During the quarter, the Company experienced favorable net loss reserve development for prior accident years, which reduced loss and loss adjustment expenses by $26.1 million, primarily from accident years 2014 through 2017. For the full year, the company experienced favorable development on prior accident years of $65.0 million, compared with $45.6 million in 2018. The Company attributes its lower claim severities for prior years to benign medical inflation and its claims handling. The Company anticipates that its current accident year loss ratio will be unchanged for 2020, unless there are unforeseen changes in macro conditions.
• For the quarter ended December 31, 2019, the underwriting expense ratio was 17.8% compared with 21.4% in the same quarter in 2018. The decrease in the expense ratio in the fourth quarter was primarily due to the end of an assessment related to a multiple injury fund, which lowered expenses by $3.5 million. For the year ended December 31, 2019, the underwriting expense ratio was 22.3%, compared with 23.2% in 2018.
• The effective tax rate for the quarter ended December 31, 2019 was 20.8%, compared with 17.4% for the fourth quarter of 2018. The effective tax rate for the full year 2019 was 19.8% compared with 18.2% for 2018. Both rates increased in the quarter and year end period, due to increased taxable income from stronger underwriting profitability and lower expenses.

For earnings history and earnings-related data on Amerisafe (AMSF) click here.

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