Deridder, LA – AMERISAFE, Inc. (Nasdaq:AMSF), a specialty provider of hazardous workers’ compensation insurance recently announced results for the fourth quarter and year ended December 31, 2014.
Allen Bradley, AMERISAFE’s Chairman and Chief Executive Officer, commented, “The workers’ compensation industry is poised to record an underwriting profit for only the third time in 25 years. This outcome results from more disciplined underwriting and risk selection. Pricing in our markets is flattening but near cycle peaks. Despite pockets of increased competition, the high hazard market remains attractive in terms of pricing, favorable loss trends and improved economic conditions.”
Insurance Results
Voluntary premiums written declined 2.8% in the quarter but rose 4.7% for the year ended December 31, 2014 compared to the same periods in 2013. Payroll audits and related premium adjustments for policies written in previous periods increased premiums $4.5 million in the fourth quarter and $16.8 million in the year ended December 31, 2014. In 2013, these premium adjustments increased premiums $3.2 million in the fourth quarter and $13.6 million for the full year.
The current accident year loss ratio for the fourth quarter was 71.5%. During the quarter the Company experienced $10.0 million of favorable prior year development, primarily attributable to accident years 2010 and 2012. In total, prior accident year development for year ended December 31, 2014 resulted in favorable development of $23.7 million, compared to favorable development of $12.6 million in 2013.
During the fourth quarter of 2014, the underwriting expense ratio increased to 22.2% from 11.7%. The increase reflects a year over year rise in non-controllable expenses due to the reversal of a contingent profit commission accrual in 2014 of $2.8 million, lower ceding commissions of $0.5 million in 2014 and fourth quarter 2013 accrual adjustments of $3.2 million resulting from bad debt expense and retaliatory tax accruals. For the year ended December 31, 2014, the underwriting expense ratio increased 230bps from the prior year to 22.6%. Growth in premium earned helped to offset operating expenses which grew due to the change in our 2014 reinsurance treaty, which yielded lower profit and ceding commissions.
The effective tax rate for the year ended December 31, 2014 rose to 27.2% compared to 26.3% in the same period in 2013. The increase resulted from continued improvement in our underwriting margins which created a higher proportion of underwriting income to tax-exempt investment income relative to 2013.
Janelle Frost, President and Chief Operating Officer, noted, “This year’s outstanding results were driven by disciplined underwriting and favorable loss development. We continued our focus on managing pricing in an increasingly competitive market. At the same time, prior accident year case development resulted in another positive quarter in terms of loss experience. Prior year losses combined with continued favorable trends and expense management were evident in the quarter and full year operating results.”
Investment Results
As of December 31, 2014, the carrying value of AMERISAFE’s investment portfolio, including cash and cash equivalents, was $1.1 billion. The fair value of the portfolio was $1.1 billion.
Capital Management
On February 24, 2015, the Company’s Board of Directors increased the regular quarterly dividend from $0.12 per share to $0.15 per share, a 25.0% increase, payable on March 27, 2015 to shareholders of record as of March 13, 2015.
During the quarter, no shares were repurchased under the share repurchase plan. Since the beginning of this plan, the Company has repurchased a total of 1,258,250 shares for $22.4 million, or an average per share price of $17.78, including commissions.
The complete earnings release is available here: AMERISAFE 2014 Fourth Quarter and Year-End Results
Source: AMERISAFE