DeRidder, LA – AMERISAFE, Inc. (Nasdaq: AMSF) recently announced results for the fourth quarter and year ended December 31, 2021.
G. Janelle Frost, President and Chief Executive Officer, stated, “Our specialty is underwriting and servicing high-hazard workers’ compensation and in 2021, our strength in those specialties counterbalanced slow economic growth, strong competition, declining rates, and a variety of pandemic-related uncertainties. We were responsive to the competitive environment, while applying disciplined pricing, and continued our long-held commitment to personalized claims management. Despite experiencing our first catastrophic claim, we are pleased to report a combined ratio of 85.7% and a return on average equity of 15.7% for 2021.”
Voluntary premiums on policies written in the quarter were 9.4% lower than the fourth quarter of 2020, primarily due to continued declines in approved loss costs in the states in which we write business. For the full year, voluntary premiums decreased by 6.3%.
Payroll audits and related premium adjustments increased premiums written by $0.1 million in the fourth quarter of 2021, compared to $1.3 million in the fourth quarter of 2020. For the full year 2021, audits and related premium adjustments reduced premiums by $1.2 million, compared to an increase in premiums of $6.4 million in 2020.
As a result of information just developed on a fourth quarter catastrophic claim, the Company increased its accident year loss ratio from 72.0% to 80.7% for the full year. This claim involved several individuals who were severely injured in the same incident. The Company’s catastrophic reinsurance program covers amounts up to $10 million per individual, but amounts greater than $10 million per individual are retained by the Company. As a result, AMERISAFE has increased its net estimate after reinsurance for this loss by $24 million and has increased its net accident year loss ratio. As with all AMERISAFE claims, this reserve will be evaluated periodically as the claim develops. This is the first catastrophic claim on the Company’s catastrophe reinsurance layer in our history.
During the quarter, the Company experienced favorable net loss reserve development for prior accident years, which reduced loss and loss adjustment expenses by $13.6 million, primarily from accident years 2019 through 2016. For the full year, the company experienced favorable development on prior accident years of $61.9 million, compared with $63.5 million in 2020. The Company currently is estimating that its current accident year loss ratio will be 71.0% for 2022.
For the quarter ended December 31, 2021, the underwriting expense ratio was 24.7% compared with 20.9% in the same quarter in 2020, as a result of lower earned premium, increased bad debt from NCCI pools and increased loss- based assessments. For the year ended December 31, 2021, the underwriting expense ratio was 26.1%, compared with 23.6% in 2020, largely due to lower earned premium as underwriting and other expenses for the full year were largely unchanged.
The effective tax rate for the full year 2021 was 17.2% compared with 19.0% for 2020. The rate was lower than last year due to an increase in the proportion of tax-exempt interest income relative to underwriting profit and also due to a reduction in a valuation allowance on deferred state tax assets.
The complete results release is available here: AMERISAFE 2021 Fourth Quarter and Year-end Results