) first-quarter 2012 operating earnings per share of 45 cents
outpaced the Zacks Consensus Estimate of 33 cents and the
prior-year quarter's earnings of 35 cents, primarily on lower share
count. Consequently, operating net income escalated 28.6% year over
year to $8.4 million.
Including net realized gains of $1.8 million against $0.1
million in the year-ago period, reported net income soared to $9.6
million or 52 cents per share, compared with $6.6 million or 35
cents in the prior-year quarter.
Reported results reflect higher premiums written and earned that
shored up the top line, underwriting results and investment
portfolio. These factors also drove the capital position, book
value of the shares and return on equity (ROE), while also
improving combined ratio and other profitability metrics. However,
the positives were mitigated by higher-than-expected loss and loss
adjustment expenses (LAE) and tax expense along with lower
The accident years prior to 2010 primarily contributed to the
favourable development, reducing LAE by $1.6 million. This also
helped the current accident year loss ratio to be 76.5%, slightly
down from 77.0% from the prior-year quarter.
Amerisafe's total revenue for the reported quarter was $78.7
million, up 17.5% from $67.0 million in the prior-year quarter,
edging past the Zacks Consensus Estimate of $74.0 million. Gross
premiums written for the quarter were $84.9 million, reflecting an
18.9% year-over-year surge. The uptick was driven by payroll audits
and related premium adjustments for policies written in previous
periods. These adjustments increased premiums by $5.4 million in
the reported quarter, while they reduced premiums by $0.1 million
in the year-ago quarter.
Furthermore, voluntary premiums written climbed 11.3% year over
year in the reported quarter. Besides, net premiums earned
increased 16.1% from the year-ago quarter to $69.8 million. Net
investment income, which represented about 9% of total revenue, was
$6.9 million for the reported quarter, thereby improving 6.2% from
the prior-year quarter. Subsequently, underwriting profit jumped to
$2.8 million against $1.0 million in the year-ago quarter.
Conversely, insurance loss and loss adjusted expenses (LAE)
increased 17.2% year over year to $51.8 million (or about 66% of
net premiums earned). As a result, total expenses climbed 12.9%
year over year to $67.2 million, while net underwriting expense
ratio decreased to 21.1% from 24.2% in the year-ago quarter due to
flattish growth in underwriting and operating costs. Even net
combined ratio for the reported quarter improved to 96.0% from
98.3% in the prior-year quarter.
Amerisafe exited the reported quarter with ROE of 10.8% that
rose from 8.0% in year-ago quarter. Operating ROE also improved to
9.5% from 7.9% in prior-year period. Moreover, book value per share
came in at $19.78 as on March 31, 2012, up 8.4% from $18.24 in the
As on March 31, 2012, Amerisafe's fair value of the portfolio,
including cash and investments, stood at $868.7 million compared
with $890.7 million at the end of 2011. However, the investment
portfolio improved to $908.1 million at March 2012-end versus
$806.0 million at 2011-end.
Total shareholders' equity stood at $359.1 million at the end of
March 2012, up from $349.4 million at the end of 2011. No shares
were repurchased during the reported quarter.
Amerisafe is expected to face an uncertain environment for the
next few quarters as the economic fragility continues to hurt
payrolls, which could further fade underwriting results. However,
though the pricing environment is somewhat improving now, it fails
to drive adequate growth owing to challenging industry trends and
robust price competition fuelled by excess capacity and muted
demand. Nevertheless, an improved book value, ROE, prudent capital
management, expanded share repurchase plan and a strong financial
strength rating augur a decent mid- to long-term growth. Amerisafe
SeaBright Insurance Holdings
Employers Holders Inc.
) in its industry space.
Currently, Amerisafe carries a Zacks Rank #2, implying a
short-term Buy rating and a long-term Neutral stance.
AMERISAFE INC (AMSF): Free Stock Analysis
EMPLOYERS HLDGS (EIG): Free Stock Analysis
SEABRIGHT INSUR (SBX): Free Stock Analysis
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