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, 2015.
Allen Bradley, AMERISAFE’s Executive Chairman, commented, “Early projections of the 2015 underwriting results for workers’ compensation market suggest a 96% combined ratio. If accurate, that marks the second consecutive year of an underwriting profit, a rare occurrence in this line of business. Markedly lower investment yields have played the major role in bringing about the underwriting discipline necessary to produce these results. More recently, a slowing national economy coupled with excess capital in the industry has moved the market to a slightly more competitive posture. It remains to be seen if low investment yields compel underwriters to maintain a disciplined approach to pricing and risk selection.”
Gross premiums written in the quarter decreased by 1.9% compared with last year’s fourth quarter, and for 2015 were 1.9% lower than in 2014. Premiums on voluntary policies written during the quarter decreased by $0.5 million, or 0.6%. For the full year 2015, gross premiums on voluntary policies written were $2.5 million lower, or 0.7% compared to 2014. Payroll audits and related premium adjustments for policies written in prior periods were $3.3 million in the fourth quarter and $12.2 million in the year ended December 31, 2015. In 2014, these premium adjustments totaled $4.5 million in the fourth quarter and $16.8 million for the full year.
The current accident year loss ratio for the fourth quarter was 69.8%, unchanged from prior quarters in 2015. During the quarter, the Company experienced favorable loss development for prior accident years which reduced loss and loss adjustment expenses by $18.0 million, mostly attributable to accident years 2012, 2013, and years 2008 and prior. In total, prior accident year development for the year ended December 31, 2015 resulted in favorable development of $47.8 million, compared with favorable development of $23.7 million in 2014. These results reflect improved trends on frequency and were driven largely by favorable case reserve development on claims that were closed during the year.
For the quarter ended December 31, 2015, the underwriting expense ratio was 20.4% compared to 22.2% in the same quarter in 2014. The decrease in the quarter was due to lower contingent profit sharing commission expense compared with last year’s fourth quarter when there was an additional $2.8 million of this expense. For the year ended December 31, 2015, the underwriting expense ratio was 22.4%, a slight decrease compared with 22.6% in 2014.
The effective tax rate for the year ended December 31, 2015 was 30.2% compared with 27.2% for 2014. The increase in the tax rate resulted from continued improvement in our underwriting margins which created improved profitability and a higher proportion of underwriting income to tax-exempt income relative to 2014.
Return on average equity was 19.5% for the fourth quarter and 15.6% for the year ended December 31, 2015, compared to 15.1% for the fourth quarter of 2014 and 12.4% for 2014.
G. Janelle Frost, President and Chief Executive Officer, noted, “We are pleased with our financial results for the year. AMERISAFE performed well during the softening cycle. Operationally, we continued to execute on our model of extensive claims handling, expense control, and equally important, maintaining our underwriting discipline in a declining rate environment. Our capital management activities also demonstrated our commitment to our shareholders. Both our combined ratio of 79.8% and return on average equity of 15.6% are the result of our focus on our niche market combined with the expertise, experience and dedication of our employees.”
The complete results release is available here: AMERISAFE 2015 Fourth Quarter and Year-End Results