Amerisafe Ends 2012 on a High Note

Amerisafe Inc.'s ( AMSF - Analyst Report ) fourth-quarter operating earnings of 49 cents breezed past the Zacks Consensus Estimate by 25.6%. Results were up 53.1% year over year from 32 cents earned in the year-ago quarter.

Including net realized capital gains of $0.04 million, Amerisafe reported net income of 50 cents in the fourth quarter, up 13.6% year over year.

Quarterly Operational Update

Total revenues increased 14.2% year over year to $85.6 million in the fourth quarter. This was driven by strong improvement in net premiums earned (up 18.9% year over year). It surpassed the Zacks Consensus Estimate of $83 million.

Net premiums written in the quarter increased 30.7% year over year to $76.7 million. Voluntary premiums written in the quarter increased 25.0% year over year. Payroll audits and related premium adjustments for policies written in previous periods increased premiums by $7.9 million compared to an increase in premium by $3.8 million in the year-ago quarter.

Net investment income decreased 0.1% year over year to $6.7 million

Total expenses of $72.9 million in the quarter showed an increase of 11.5% year over year driven by higher loss and loss adjustment expenses (up 15.8% year over year) and policyholder dividends (up 14.8% year over year).

In the fourth quarter, underwriting profit for Amerisafe was $5.8 million, up 433.6% year over year.

The accident year 2008 contributed a favorable prior year development of $2.7 million. Consequently, the current accident year loss ratio was 76.5%, down 170 basis points from 78.2% reported in the year-ago quarter.

Net combined ratio improved 580 basis points year over year to 92.6%.

Full Year Highlights

Adjusted earnings of $1.48 per share improved 29.8% year over year.

Including net realized capital gains of $1.9 million, Amerisafe reported net income of $1.58 cents in the 2012, up 22.5% year over year.

Total revenues for full year 2012 increased 14.5% year over year to $321.2 million.

Underwriting profit in 2012 was $7.2 million compared with an underwriting loss of $0.98 million in 2011.

For the year ending Dec 31, 2012, the prior accident year development was $2.5 million, down 62.1% year over year. Current accident year loss ratio for 2012 was 76.5%, down 170 basis points from 78.2% reported in the year-ago quarter.

Net combined ratio improved 290 basis points year over year to 97.5% in 2012.

Dividend Update

The company initiated a cash dividend policy with intention to pay a dividend every quarter. The board of directors declared its first quarterly cash dividend of 8 cents per share payable on Mar 28, 2013 to shareholders of record as of Mar 14, 2013. The cash dividend is currently expected to be 32 cents per share on a yearly basis.

Financial Position

Amerisafe exited 2012 with cash and cash equivalents worth $92.7 million, up 103.5% year over year.

The investment portfolio of the company improved 0.3% year over year to $808.1 million in 2012.

As of Dec 31, 2012, total assets of the company were $1.2 billion, up 6.7% year over year.

Shareholders’ equity increased 9.1% year over year to $381.2 million at 2012 end.

Performance of Few Other Accident and Health Insurers

Unum Group ( UNM - Analyst Report ) reported fourth-quarter 2012 operating income of 82 cents per share, beating the Zacks Consensus Estimate of 77 cents. Earnings improved 5.1% year over year.

Aflac Inc.’s ( AFL - Analyst Report ) fourth-quarter 2012 operating earnings per share of $1.48 came in line with the Zacks Consensus Estimate and were slightly ahead of the year-ago quarter’s earnings of $1.45. Operating earnings edged up 2.0% year over year to $697 million. A weak yen/dollar exchange rate had a negative impact of 4 cents per share on the operating earnings.

Employers Holdings Inc. ( EIG - Snapshot Report ) reported fourth-quarter 2012 adjusted earnings of 6 cents per share, down 86.4% year over year. Results were also below the Zacks Consensus Estimate of 8 cents.

Zacks Rank

Amerisafe currently carries a Zacks Rank #3 (Hold).