10-Q 1 amsf-20220930.htm 10-Q 10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

 

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

or

 

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

FOR THE TRANSITION PERIOD FROM TO

Commission File Number:

001-12251

 

AMERISAFE, INC.

(Exact Name of Registrant as Specified in Its Charter)

 

 

Texas

 

75-2069407

(State of Incorporation)

 

(I.R.S. Employer Identification Number)

 

 

 

2301 Highway 190 West, DeRidder, Louisiana

 

70634

(Address of Principal Executive Offices)

 

(Zip Code)

 

Registrant’s telephone number, including area code: (337) 463-9052

 

 

Securities registered pursuant to Section 12(b) of the Act:

 

 

Title of each class

 

Trading Symbol(s)

 

Name of each exchange on which registered

Common

 

AMSF

 

NASDAQ

 

Indicate by check mark whether the Registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files). Yes No

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

Accelerated filer

 

Non-accelerated filer

 

 

Smaller reporting company

 

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of October 21, 2022, there were 19,155,873 shares of the Registrant’s common stock, par value $0.01 per share, outstanding.

 

 


TABLE OF CONTENTS

 

 

 

 

Page

 

 

 

No.

 

 

 

 

FORWARD-LOOKING STATEMENTS

3

 

 

 

 

PART I - FINANCIAL INFORMATION

 

 

 

 

 

Item 1

 

Financial Statements

4

 

 

 

 

Item 2

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

21

 

 

 

 

Item 3

 

Quantitative and Qualitative Disclosures About Market Risk

27

 

 

 

 

Item 4

 

Controls and Procedures

27

 

 

 

 

PART II - OTHER INFORMATION

 

 

 

 

 

Item 2

 

Unregistered Sales of Equity Securities and Use of Proceeds

28

 

 

 

 

Item 6

 

Exhibits

29

 

2


FORWARD-LOOKING STATEMENTS

This report contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and 21E of the Securities Exchange Act of 1934. You should not place undue reliance on these statements. These forward-looking statements include statements that reflect the current views of our senior management with respect to our financial performance and future events with respect to our business and the insurance industry in general. Statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “forecast,” “estimate,” “may,” “should,” “anticipate” and similar statements of a future or forward-looking nature identify forward-looking statements. Forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause our actual results to differ materially from those indicated in these statements. We believe that these factors include, but are not limited to, the following:

the cyclical nature of the workers’ compensation insurance industry;
increased competition on the basis of types of insurance offered, premium rates, coverage availability, payment terms, claims management, safety services, policy terms, overall financial strength, financial ratings and reputation;
changes in relationships with independent agencies (including retail and wholesale brokers and agents);
general economic conditions, including recession, inflation, performance of financial markets, interest rates, unemployment rates and fluctuating asset values;
developments in capital markets that adversely affect the performance of our investments;
technology breaches or failures, including those resulting from a malicious cyber attack on the Company or its policyholders and service providers;
decreased level of business activity of our policyholders caused by decreased business activity generally, and in particular in the industries we target;
greater frequency or severity of claims and loss activity than our underwriting, reserving or investment practices anticipate based on historical experience or industry data;
adverse developments in economic, competitive, judicial or regulatory conditions within the workers’ compensation insurance industry;
loss of the services of any of our senior management or other key employees;
the impact of pandemics on the business operations of our insurance subsidiaries and policyholders, the value of our investments, and our revenues, results of operations and cash flows;
changes in regulations, laws, rates, rating factors, or taxes applicable to the Company, its policyholders or the agencies that sell its insurance;
changes in current accounting standards or new accounting standards;
changes in legal theories of liability under our insurance policies;
changes in rating agency policies, practices or ratings;
changes in the availability, cost or quality of reinsurance and the failure of our reinsurers to pay claims in a timely manner or at all;
the effects of U.S. involvement in hostilities with other countries and large-scale acts of terrorism, or the threat of hostilities or terrorist acts; and
other risks and uncertainties described from time to time in the Company’s filings with the Securities and Exchange Commission (SEC).

The foregoing factors should not be construed as exhaustive and should be read together with the other cautionary statements in this report, and under the caption “Risk Factors” in Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2021. If one or more events related to these or other risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may differ materially from what we anticipate.

3


PART I - FINANCIAL INFORMATION

Item 1. Financial Statements.

AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

(in thousands, except share data)

 

 

 

 

September 30, 2022

 

 

December 31, 2021

 

 

 

(unaudited)

 

 

 

 

Assets

 

 

 

 

 

 

Investments:

 

 

 

 

 

 

Fixed maturity securities—held-to-maturity, at amortized cost net of allowance
   for credit losses of $
255 and $195 in 2022 and 2021, respectively,
   (fair value $
479,911 and $575,850 in 2022 and 2021, respectively)

 

$

514,610

 

 

$

549,231

 

Fixed maturity securities—available-for-sale, at fair value
   (amortized cost $
351,118, allowance for credit losses of $0 in 2022
   and amortized cost $
324,597, allowance for credit losses of $0 in 2021)

 

 

325,891

 

 

 

341,769

 

Equity securities, at fair value
   (cost $
50,394 and $44,175 in 2022 and 2021, respectively)

 

 

57,375

 

 

 

64,140

 

Short-term investments

 

 

36,927

 

 

 

57,431

 

Total investments

 

 

934,803

 

 

 

1,012,571

 

Cash and cash equivalents

 

 

90,952

 

 

 

70,722

 

Amounts recoverable from reinsurers
   (net of allowance for credit losses of $
404 and $440 in 2022 and 2021, respectively)

 

 

117,968

 

 

 

120,561

 

Premiums receivable
   (net of allowance for credit losses of $
4,677 and $4,386 in 2022 and 2021, respectively)

 

 

137,012

 

 

 

135,100

 

Deferred income taxes

 

 

26,227

 

 

 

14,384

 

Accrued interest receivable

 

 

8,772

 

 

 

8,080

 

Property and equipment, net

 

 

7,380

 

 

 

6,459

 

Deferred policy acquisition costs

 

 

18,275

 

 

 

17,059

 

Federal income tax recoverable

 

 

2,154

 

 

 

6,414

 

Other assets

 

 

15,953

 

 

 

11,374

 

Total assets

 

$

1,359,496

 

 

$

1,402,724

 

Liabilities and shareholders’ equity

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Reserves for loss and loss adjustment expenses

 

$

716,196

 

 

$

745,278

 

Unearned premiums

 

 

128,093

 

 

 

121,092

 

Amounts held for others

 

 

47,670

 

 

 

42,915

 

Policyholder deposits

 

 

36,864

 

 

 

39,383

 

Insurance-related assessments

 

 

18,751

 

 

 

16,850

 

Accounts payable and other liabilities

 

 

38,778

 

 

 

37,883

 

Payable for investments purchased

 

 

125

 

 

 

 

Total liabilities

 

 

986,477

 

 

 

1,003,401

 

Shareholders’ equity:

 

 

 

 

 

 

Common stock: voting—$0.01 par value authorized shares—50,000,000
   in 2022 and 2021;
20,678,572 and 20,622,304 shares issued; and 19,159,171
   and
19,364,054 shares outstanding in 2022 and 2021, respectively

 

 

207

 

 

 

206

 

Additional paid-in capital

 

 

219,988

 

 

 

217,458

 

Treasury stock, at cost (1,519,401 and 1,258,250 shares in 2022 and 2021,
   respectively)

 

 

(34,606

)

 

 

(22,370

)

Accumulated earnings

 

 

207,394

 

 

 

190,492

 

Accumulated other comprehensive income (loss), net

 

 

(19,964

)

 

 

13,537

 

Total shareholders’ equity

 

 

373,019

 

 

 

399,323

 

Total liabilities and shareholders’ equity

 

$

1,359,496

 

 

$

1,402,724

 

 

See accompanying notes.

4


AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

(in thousands, except share and per share data)

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Gross premiums written

 

$

68,212

 

 

$

67,185

 

 

$

220,463

 

 

$

222,423

 

Ceded premiums written

 

 

(2,553

)

 

 

(2,407

)

 

 

(7,837

)

 

 

(7,410

)

Net premiums written

 

$

65,659

 

 

$

64,778

 

 

$

212,626

 

 

$

215,013

 

Net premiums earned

 

$

67,790

 

 

$

67,626

 

 

$

205,625

 

 

$

208,260

 

Net investment income

 

 

6,983

 

 

 

6,049

 

 

 

19,581

 

 

 

19,362

 

Net realized gains (losses) on investments

 

 

585

 

 

 

(8

)

 

 

2,402

 

 

 

1,490

 

Net unrealized gains (losses) on equity securities

 

 

(4,082

)

 

 

(771

)

 

 

(12,984

)

 

 

8,026

 

Fee and other income

 

 

104

 

 

 

149

 

 

 

352

 

 

 

415

 

Total revenues

 

 

71,380

 

 

 

73,045

 

 

 

214,976

 

 

 

237,553

 

Expenses

 

 

 

 

 

 

 

 

 

 

 

 

Loss and loss adjustment expenses incurred

 

 

37,725

 

 

 

29,661

 

 

 

115,792

 

 

 

101,601

 

Underwriting and certain other operating costs

 

 

7,426

 

 

 

6,503

 

 

 

19,100

 

 

 

19,769

 

Commissions

 

 

5,422

 

 

 

5,173

 

 

 

16,083

 

 

 

15,956

 

Salaries and benefits

 

 

6,737

 

 

 

6,239

 

 

 

19,428

 

 

 

19,612

 

Policyholder dividends

 

 

640

 

 

 

733

 

 

 

2,517

 

 

 

3,200

 

Provision for investment related credit loss expense (benefit)

 

 

(21

)

 

 

15

 

 

 

60

 

 

 

(102

)

Total expenses

 

 

57,929

 

 

 

48,324

 

 

 

172,980

 

 

 

160,036

 

Income before income taxes

 

 

13,451

 

 

 

24,721

 

 

 

41,996

 

 

 

77,517

 

Income tax expense

 

 

2,090

 

 

 

5,585

 

 

 

7,172

 

 

 

15,302

 

Net income

 

$

11,361

 

 

$

19,136

 

 

$

34,824

 

 

$

62,215

 

Earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.59

 

 

$

0.99

 

 

$

1.81

 

 

$

3.22

 

Diluted

 

$

0.59

 

 

$

0.99

 

 

$

1.80

 

 

$

3.21

 

Shares used in computing earnings per share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

19,198,320

 

 

 

19,344,636

 

 

 

19,267,602

 

 

 

19,328,041

 

Diluted

 

 

19,269,346

 

 

 

19,407,918

 

 

 

19,340,898

 

 

 

19,392,939

 

Cash dividends declared per common share

 

$

0.31

 

 

$

0.29

 

 

$

0.93

 

 

$

0.87

 

 

See accompanying notes.

5


AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in thousands)

(unaudited)

 

 

 

Three Months Ended

 

 

Nine Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

Net income

 

$

11,361

 

 

$

19,136

 

 

$

34,824

 

 

$

62,215

 

Other comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized loss on debt securities, net of tax

 

 

(11,090

)

 

 

(1,876

)

 

 

(33,501

)

 

 

(6,033

)

Comprehensive income

 

$

271

 

 

$

17,260

 

 

$

1,323

 

 

$

56,182

 

 

See accompanying notes.

6


AMERISAFE, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Three Months Ended September 30, 2022 and 2021

(in thousands, except share data)

(unaudited)

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Treasury Stock

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

 

 

 

 

Shares

 

 

Amounts

 

 

Capital

 

 

Shares

 

 

Amounts

 

 

Earnings

 

 

Loss

 

 

Total

 

Balance at June 30, 2022

 

 

20,676,474

 

 

$

207

 

 

$

219,744

 

 

 

(1,379,842

)

 

$

(28,071

)

 

$

201,983

 

 

$

(8,874

)

 

$

384,989

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,361

 

 

 

 

 

 

11,361

 

Other comprehensive
   income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized
   losses on debt
   securities, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(11,090

)

 

 

(11,090

)

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

271

 

Common stock issued

 

 

2,098

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Purchase of treasury stock

 

 

 

 

 

 

 

 

 

 

 

(139,559

)

 

 

(6,535

)

 

 

 

 

 

 

 

 

(6,535

)

Share-based compensation

 

 

 

 

 

 

 

 

244

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

244

 

Dividends to shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,950

)

 

 

 

 

 

(5,950

)

Balance at September 30, 2022

 

 

20,678,572

 

 

$

207

 

 

$

219,988

 

 

 

(1,519,401

)

 

$

(34,606

)

 

$

207,394

 

 

$

(19,964

)

 

$

373,019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

Additional
Paid-In

 

 

Treasury Stock

 

 

Accumulated

 

 

Accumulated
Other
Comprehensive

 

 

 

 

 

 

Shares

 

 

Amounts

 

 

Capital

 

 

Shares

 

 

Amounts

 

 

Earnings

 

 

Income

 

 

Total

 

Balance at June 30, 2021

 

 

20,622,304

 

 

$

206

 

 

$

217,165

 

 

 

(1,258,250

)

 

$

(22,370

)

 

$

256,503

 

 

$

16,862

 

 

$

468,366

 

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,136

 

 

 

 

 

 

19,136

 

Other comprehensive
   income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Change in unrealized
   gains on debt
   securities, net of tax

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,876

)

 

 

(1,876

)

Comprehensive income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

17,260

 

Share-based compensation

 

 

 

 

 

 

 

 

146

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

146

 

Dividends to shareholders

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(5,616

)

 

 

 

 

 

(5,616

)

Balance at September 30, 2021

 

 

20,622,304

 

 

$

206

 

 

$

217,311

 

 

 

(1,258,250

)

 

$

(22,370

)

 

$

270,023

 

 

$

14,986