Amerisafe Inc.’s (AMSF - Analyst Report) first-quarter 2013 operating earnings per share of 47 cents came at par with the Zacks Consensus Estimate but exceeded the prior-year quarter’s earnings by 2 cents. Consequently, operating net income climbed 5.2% year over year to $8.8 million.
Operating net income excluded after-tax net realized gains of $0.016 million against $1.2 million in the year-ago period. Including these, reported net income fell to $8.9 million or 47 cents per share, compared with $9.6 million or 52 cents a share in the prior-year quarter.
Reported results reflect higher premiums that shored up the top line as well as the underwriting results. In addition, improved investment portfolio and capital position drove the book value of the shares, return on equity (ROE) and combined ratio. However, the positives were substantially offset by higher-than-expected underwriting, loss and loss adjustment expenses (LAE) along with lower investment yields.
Amerisafe’s total revenue for the reported quarter was $86.5 million, up 9.9% from $78.7 million in the prior-year quarter. However, it lagged the Zacks Consensus Estimate of $89 million.
Gross premiums written for the quarter were $99.1 million, reflecting a 16.7% year-over-year expansion. The uptick was driven by payroll audits and related premium adjustments for policies written in previous periods. These adjustments increased premiums by $6.0 million in the reported quarter, while the same had boosted premiums by $5.4 million in the year-ago quarter.
Furthermore, voluntary premiums written jumped 16.1% year over year in the reported quarter. In addition, net premiums earned increased 14.2% from the year-ago quarter to $79.7 million. Net investment income, which represented about 8% of total revenue, was $6.7 million for the reported quarter, down 2.9% from the prior-year quarter.
Conversely, insurance loss and loss adjusted expenses (LAE) increased 8.1% year over year to $56.0 million (or about 70% of net premiums earned). As a result, total expenses grew 12.2% year over year to $75.4 million, while net underwriting expense ratio deteriorated to 23.7% from 21.1% in the year-ago quarter, due to 28.6% growth in underwriting and operating costs, partially offset by higher premiums.
Subsequently, underwriting profit surged $4.3 million from $2.8 million in the year-ago quarter. Even net combined ratio for the reported quarter improved to 94.7% from 96.0% in the prior-year quarter.
Amerisafe exited the reported quarter with operating ROE of 9.2% that slipped from 9.5% in year-ago quarter. Additionally, book value per share came in at $21.20 as on Mar 31, 2013, up 7.2% from $19.25 at the end of the year-ago quarter.
As on Mar 31, 2013, Amerisafe’s investment portfolio, including cash and investments, stood at $918.7 million compared with $900.8 million at the end of 2012. Moreover, fair value of the portfolio improved to $959.4 million versus $944.9 million at 2012-end. Total shareholder equity stood at $389.7 million at the end of Mar 2013, up from $381.2 million at the end of 2012.
Share Repurchase Update
On Oct 30, 2012, the board of Amerisafe protracted the company’s share repurchase program through Dec 2013. Since the initiation of its share repurchase program, the company has bought back about 1.26 million shares for $22.4 million, at an average price of $17.78.
However, no shares were repurchased during the reported quarter, while the company had $24.4 million of shares available for repurchases as of Mar 31, 2013.
On Feb 27, 2013, the board of Amerisafe announced its first regular quarterly dividend of 8 cents a share, which was paid on Mar 28, 2013 to shareholders of record on Mar 14, 2013.
Along with Amerisafe, strong performers of the insurance sector include Employers Holdings Inc. (EIG - Snapshot Report) , Hilltop Holdings Inc. (HTH - Analyst Report) and Navigators Group Inc. (NAVG - Snapshot Report) . All the stocks carry a Zacks Rank #1 (Strong Buy).