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AMERISAFE Inc. Reports Operating Results (10-Q)

May 04, 2010 | About:
10qk

10qk

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AMERISAFE Inc. (AMSF) filed Quarterly Report for the period ended 2010-03-31.

Amerisafe Inc. has a market cap of $331.6 million; its shares were traded at around $17.54 with a P/E ratio of 8.4 and P/S ratio of 1.2. Amerisafe Inc. had an annual average earning growth of 47.5% over the past 5 years.AMSF is in the portfolios of Chuck Royce of Royce& Associates, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

Gross Premiums Written. Gross premiums written for the quarter ended March 31, 2010 were $61.1 million, compared to $79.4 million for the same period in 2009, a decrease of 23.1%. The decrease was attributable to an $11.5 million decrease in annual premiums on voluntary policies written during the period, a $6.6 million decrease in premiums resulting from payroll audits and related premium adjustments for policies written in previous quarters and a $0.2 million decrease in assumed premiums from mandatory pooling arrangements. The decrease from payroll audits and related premium adjustments includes a $1.2 million decrease in earned but unbilled (EBUB) premium.

Loss and Loss Adjustment Expenses Incurred. Loss and loss adjustment expenses (LAE) incurred totaled $37.6 million for the three months ended March 31, 2010, compared to $47.1 million for the same period in 2009, a decrease of $9.4 million, or 20.1%. The current accident year losses and LAE incurred were $39.9 million, or 72.5% of net premiums earned, compared to $48.3 million for the first quarter of 2009. We recorded favorable prior accident year development of $2.3 million in the first quarter of 2010, compared to $1.2 million in the same period of 2009, as further discussed below in Prior Year Development. Our net loss ratio was 68.3% in the first quarter of 2010, compared to 67.2% in the same period of 2009.

Underwriting and Certain Other Operating Costs, Commissions and Salaries and Benefits. Underwriting and certain other operating costs, commissions and salaries and benefits for the quarter ended March 31, 2010 were $12.5 million, compared to $14.8 million for the same period in 2009, a decrease of 15.4%. This decrease was primarily due to a $1.4 million decrease in commission expense, a $1.2 million decrease in insurance-related assessments, a $0.4 million decrease in premium taxes and a $0.2 million decrease in legal and professional expenses. Offsetting these expense reductions were a $0.4 million decrease in experience-rated commissions from our 2009 reinsurance agreement and a $0.3 million decrease in income from the commutation of certain reinsurance contracts. Salaries and benefits increased $0.2 million in the first quarter of 2010 as compared to the same period in 2009. Our expense ratio was 22.7% in the first quarter of 2010 compared to 21.1% in the first quarter of 2009.

Income tax expense. Income tax expense for the three months ended March 31, 2010 was $2.3 million, compared to $3.8 million for the same period in 2009. The decrease was primarily attributable to a decrease in our effective tax rate to 17.2% for the quarter ended March 31, 2010, compared to 25.8% for the same period in 2009. The effective rate for 2010 included a one-time reduction of $0.9 million for the change in valuation allowance for deferred tax assets. The securities sold in the first quarter of 2010 were impaired in the fourth quarter of 2008. At the time of impairment, tax expense was increased to establish a valuation allowance for deferred taxes. In the first quarter of 2010, the allowance was reduced, thereby tax expense was reduced. Pre-tax income decreased to $13.6 million for the three months ended March 31, 2010, compared to $14.9 million for the same period in 2009.

Net cash provided by operating activities was $1.6 million for the three months ended March 31, 2010, which represented an $11.8 million decrease from $13.4 million in net cash provided by operating activities for the three months ended March 31, 2009. This decrease in operating cash was attributable to a $9.8 million decrease in premiums collected, a $5.5 million increase in expense disbursements, a $1.3 million increase in policyholder dividends paid and a $0.4 million decrease in net investment income. Offsetting these decreases in operating cash flow were a $2.8 million decrease in federal income taxes paid, a $1.5 million increase in reinsurance recoveries and a $0.6 million decrease in losses paid.

Net cash provided by investing activities was $0.4 million for the three months ended March 31, 2010, compared to net cash used in investing activities of $16.2 million for the same period in 2009. Cash provided by sales and maturities of investments totaled $39.3 million for the three months ended March 31, 2010, compared to $29.2 million for the same period in 2009. A total of $38.4 million in cash was used to purchase investments in the three months ended March 31, 2010, compared to $44.9 million in purchases for the same period in 2009.

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