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, 2017
Commission file number:
001-12251
AMERISAFE, INC.
(Exact Name of Registrant as Specified in Its Charter)
Texas |
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75-2069407 |
(State of Incorporation) |
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(I.R.S. Employer Identification Number) |
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2301 Highway 190 West, DeRidder, Louisiana |
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70634 |
(Address of Principal Executive Offices) |
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(Zip Code) |
Registrant’s telephone number, including area code: (337) 463-9052
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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post 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. (Check one):
Large accelerated filer |
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☒ |
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Accelerated filer |
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☐ |
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Non-accelerated filer |
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☐ (Do not check if a smaller reporting company) |
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Smaller reporting company |
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☐ |
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Emerging growth company |
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☐ |
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 24, 2017, there were 19,244,023 shares of the Registrant’s common stock, par value $.01 per share, outstanding.
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Page |
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No. |
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3 |
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PART I - FINANCIAL INFORMATION |
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Item 1 |
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4 |
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Item 2 |
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Management’s Discussion and Analysis of Financial Condition and Results of Operations |
21 |
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Item 3 |
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26 |
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Item 4 |
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26 |
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PART II - OTHER INFORMATION |
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Item 2 |
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27 |
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Item 6 |
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28 |
2
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:
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the cyclical nature of the workers’ compensation insurance industry; |
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• |
general economic conditions, including recession, inflation, performance of financial markets, interest rates, unemployment rates and fluctuating asset values; |
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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; |
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• |
changes in relationships with independent agencies; |
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• |
developments in capital markets that adversely affect the performance of our investments; |
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• |
technology breaches or failures, including those resulting from a malicious cyber attack on the Company or its policyholders and medical providers; |
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• |
decreased level of business activity of our policyholders caused by decreased business activity generally, and in particular in the industries we target; |
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• |
greater frequency or severity of claims and loss activity, including as a result of natural or man-made catastrophic events, than our underwriting, reserving or investment practices anticipate based on historical experience or industry data; |
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• |
adverse developments in economic, competitive, judicial or regulatory conditions within the workers’ compensation insurance industry; |
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• |
loss of the services of any of our senior management or other key employees; |
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• |
changes in regulations, laws, rates, or rating factors applicable to the Company, its policyholders or the agencies that sell its insurance; |
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• |
changes in legal theories of liability under our insurance policies; |
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• |
changes in rating agency policies, practices or ratings; |
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• |
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; |
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• |
decreased demand for our insurance; |
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• |
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 |
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• |
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 included 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, 2016. 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
AMERISAFE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share data)
|
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September 30, 2017 |
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December 31, 2016 |
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(unaudited) |
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Assets |
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Investments: |
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Fixed maturity securities—held-to-maturity, at amortized cost (fair value $610,151 and $568,931 in 2017 and 2016, respectively) |
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$ |
598,658 |
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$ |
562,434 |
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Fixed maturity securities—available-for-sale, at fair value (cost $462,892 and $479,871 in 2017 and 2016, respectively) |
|
|
467,256 |
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479,097 |
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Equity securities—available-for-sale, at fair value (cost $7,499 and $0 in 2017 and 2016, respectively) |
|
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7,801 |
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33 |
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Short-term investments |
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69,526 |
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29,580 |
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Other investments |
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|
1,280 |
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13,330 |
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Total investments |
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1,144,521 |
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1,084,474 |
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Cash and cash equivalents |
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80,378 |
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|
|
58,936 |
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Amounts recoverable from reinsurers |
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|
84,958 |
|
|
|
83,666 |
|
Premiums receivable, net of allowance |
|
|
185,497 |
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|
|
183,005 |
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Deferred income taxes |
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31,572 |
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33,811 |
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Accrued interest receivable |
|
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11,235 |
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11,360 |
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Property and equipment, net |
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6,320 |
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|
6,636 |
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Deferred policy acquisition costs |
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20,906 |
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19,300 |
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Other assets |
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17,861 |
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37,668 |
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Total assets |
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$ |
1,583,248 |
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$ |
1,518,856 |
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Liabilities and shareholders’ equity |
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Liabilities: |
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Reserves for loss and loss adjustment expenses |
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$ |
755,026 |
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$ |
742,776 |
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Unearned premiums |
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165,820 |
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162,028 |
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Reinsurance premiums payable |
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— |
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28 |
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Amounts held for others |
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35,604 |
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31,974 |
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Policyholder deposits |
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48,003 |
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|
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49,130 |
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Insurance-related assessments |
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30,293 |
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31,742 |
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Federal income tax payable |
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1,909 |
|
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4,017 |
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Accounts payable and other liabilities |
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41,827 |
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31,510 |
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Payable for investments purchased |
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9,821 |
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9,501 |
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Total liabilities |
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1,088,303 |
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1,062,706 |
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Shareholders’ equity: |
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Common stock: voting—$0.01 par value authorized shares—50,000,000 in 2017 and 2016; 20,502,273 and 20,488,385 shares issued and 19,244,023 and 19,230,135 shares outstanding in 2017 and 2016, respectively |
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204 |
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204 |
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Additional paid-in capital |
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209,622 |
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208,390 |
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Treasury stock at cost (1,258,250 shares in 2017 and 2016) |
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(22,370 |
) |
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(22,370 |
) |
Accumulated earnings |
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304,456 |
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270,418 |
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Accumulated other comprehensive income (loss), net |
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3,033 |
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(492 |
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Total shareholders’ equity |
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494,945 |
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456,150 |
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Total liabilities and shareholders’ equity |
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$ |
1,583,248 |
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$ |
1,518,856 |
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See accompanying notes.
4
AMERISAFE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except share and per share data)
(unaudited)
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Three Months Ended |
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Nine Months Ended |
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September 30, |
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September 30, |
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2017 |
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2016 |
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2017 |
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2016 |
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Revenues |
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Gross premiums written |
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$ |
87,035 |
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$ |
88,837 |
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$ |
269,152 |
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$ |
292,443 |
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Ceded premiums written |
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(1,992 |
) |
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(2,945 |
) |
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(6,581 |
) |
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(8,046 |
) |
Net premiums written |
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$ |
85,043 |
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$ |
85,892 |
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$ |
262,571 |
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$ |
284,397 |
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Net premiums earned |
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$ |
85,118 |
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$ |
89,918 |
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$ |
258,779 |
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$ |
276,607 |
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Net investment income |
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7,788 |
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|
8,006 |
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21,969 |
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20,251 |
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Net realized gains (losses) on investments |
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(192 |
) |
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181 |
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(761 |
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|
974 |
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Fee and other income |
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90 |
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|
101 |
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284 |
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|
272 |
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Total revenues |
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92,804 |
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98,206 |
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|
280,271 |
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298,104 |
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Expenses |
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Loss and loss adjustment expenses incurred |
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48,394 |
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50,526 |
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|
151,038 |
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|
146,413 |
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Underwriting and certain other operating costs |
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7,218 |
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8,104 |
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23,363 |
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25,325 |
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Commissions |
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6,030 |
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6,362 |
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18,424 |
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|
19,731 |
|
Salaries and benefits |
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|
6,033 |
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|
6,298 |
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|
18,899 |
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|
18,403 |
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Policyholder dividends |
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|
1,573 |
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|
|
889 |
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|
4,107 |
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|
|
3,195 |
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Total expenses |
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|
69,248 |
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|
72,179 |
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|
|
215,831 |
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|
213,067 |
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Income before income taxes |
|
|
23,556 |
|
|
|
26,027 |
|
|
|
64,440 |
|
|
|
85,037 |
|
Income tax expense |
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|
6,979 |
|
|
|
8,131 |
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18,858 |
|
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|
26,245 |
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Net income |
|
$ |
16,577 |
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$ |
17,896 |
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$ |
45,582 |
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$ |
58,792 |
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Net income available to common shareholders |
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$ |
16,577 |
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$ |
17,896 |
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$ |
45,582 |
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$ |
58,792 |
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Earnings per share |
|
|
|
|
|
|
|
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|
|
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|
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|
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Basic |
|
$ |
0.86 |
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$ |
0.94 |
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|
$ |
2.38 |
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$ |
3.08 |
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Diluted |
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$ |
0.86 |
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$ |
0.93 |
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$ |
2.37 |
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$ |
3.06 |
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Shares used in computing earnings per share |
|
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Basic |
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|
19,171,912 |
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|
|
19,121,947 |
|
|
|
19,161,529 |
|
|
|
19,092,298 |
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Diluted |
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|
19,236,114 |
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|
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19,190,191 |
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|
|
19,235,955 |
|
|
|
19,186,398 |
|
Cash dividends declared per common share |
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$ |
0.20 |
|
|
$ |
0.18 |
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$ |
0.60 |
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$ |
0.54 |
|
See accompanying notes.
5
AMERISAFE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(in thousands)
(unaudited)
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
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September 30, |
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September 30, |
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||||||||||
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2017 |
|
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2016 |
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2017 |
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2016 |
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Net income |
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$ |
16,577 |
|
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$ |
17,896 |
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$ |
45,582 |
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$ |
58,792 |
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Other comprehensive income: |
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|
|
|
|
|
|
|
|
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|
|
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Unrealized gain (loss) on securities, net of tax |
|
|
617 |
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(1,713 |
) |
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|
3,525 |
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|
|
4,009 |
|
Comprehensive income |
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$ |
17,194 |
|
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$ |
16,183 |
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$ |
49,107 |
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$ |
62,801 |
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See accompanying notes.
6
AMERISAFE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
(in thousands, except share data)
(unaudited)
|
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Common Stock |
|
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Additional Paid-In Capital |
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Treasury Stock |
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Accumulated Earnings |
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Accumulated Other Comprehensive Income (Loss) |
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Total |
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Shares |
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Amounts |
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Shares |
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Amounts |
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Balance at December 31, 2016 |
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|
20,488,385 |
|
|
$ |
204 |
|
|
$ |
208,390 |
|
|
|
(1,258,250 |
) |
|
$ |
(22,370 |
) |
|
$ |
270,418 |
|
|
$ |
(492 |
) |
|
$ |
456,150 |
|
Comprehensive income |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
45,582 |
|
|
|
3,525 |
|
|
|
49,107 |
|
Restricted common stock issued |
|
|
13,888 |
|
|
|
— |
|
|
|
396 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
396 |
|
Share-based compensation |
|
|
— |
|
|
|
— |
|
|
|
836 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
836 |
|
Dividends to shareholders |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(11,544 |
) |
|
|
— |
|
|
|
(11,544 |
) |
Balance at September 30, 2017 |
|
|
20,502,273 |
|
|
$ |
204 |
|
|
$ |
209,622 |
|
|
|
(1,258,250 |
) |
|
$ |
(22,370 |
) |
|
$ |
304,456 |
|
|
$ |
3,033 |
|
|
$ |
494,945 |
|
See accompanying notes.
7
AMERISAFE, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)
|
|
Nine Months Ended September 30, |
|
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|
|
2017 |
|
|
2016 |
|
||
Operating activities |
|
|
|
|
|
|
|
|
Net income |
|
$ |
45,582 |
|
|
$ |
58,792 |
|
Adjustments to reconcile net income to net cash provided by operating activities: |
|
|
|
|
|
|
|
|
Depreciation |
|
|
760 |
|
|
|
884 |
|
Net amortization of investments |
|
|
10,815 |
|
|
|
12,306 |
|
Deferred income taxes |
|
|
342 |
|
|
|
(532 |
) |
Net realized (gains) losses on investments |
|
|
761 |
|
|
|
(959 |
) |
Net realized losses on disposal of assets |
|
|
2 |
|
|
|
1 |
|
Share-based compensation |
|
|
1,283 |
|
|
|
1,143 |
|
Changes in operating assets and liabilities: |
|
|
|
|
|
|
|
|
Premiums receivable, net |
|
|
(2,492 |
) |
|
|
(15,623 |
) |
Accrued interest receivable |
|
|
125 |
|
|
|
(263 |
) |
Deferred policy acquisition costs |
|
|
(1,606 |
) |
|
|
49 |
|
Amounts held by others |
|
|
27,848 |
|
|
|
1,016 |
|
Other assets |
|
|
(5,131 |
) |
|
|
(2,929 |
) |
Reserves for loss and loss adjustment expenses |
|
|
12,250 |
|
|
|
18,243 |
|
Unearned premiums |
|
|
3,792 |
|
|
|
7,790 |
|
Reinsurance balances |
|
|
(1,320 |
) |
|
|
(11,892 |
) |
Amounts held for others and policyholder deposits |
|
|
2,503 |
|
|
|
6,557 |
|
Accounts payable and other liabilities |
|
|
6,813 |
|
|
|
8,285 |
|
Net cash provided by operating activities |
|
|
102,327 |
|
|
|
82,868 |
|
Investing activities |
|
|
|
|
|
|
|
|
Purchases of investments held-to-maturity |
|
|
(149,981 |
) |
|
|
(102,830 |
) |
Purchases of investments available-for-sale |
|
|
(86,615 |
) |
|
|
(161,482 |
) |
Purchases of short-term investments |
|
|
(53,789 |
) |
|
|
(12,132 |
) |
Proceeds from maturities of investments held-to-maturity |
|
|
112,715 |
|
|
|
136,896 |
|
Proceeds from sales and maturities of investments available-for-sale |
|
|
82,270 |
|
|
|
75,470 |
|
Proceeds from sales and maturities of short-term investments |
|
|
17,610 |
|
|
|
8,033 |
|
Proceeds from redemptions of other investments |
|
|
9,000 |
|
|
|
— |
|
Purchases of property and equipment |
|
|
(446 |
) |
|
|
(1,091 |
) |
Net cash used in investing activities |
|
|
(69,236 |
) |
|
|
(57,136 |
) |
Financing activities |
|
|
|
|
|
|
|
|
Proceeds from stock option exercises |
|
|
— |
|
|
|
837 |
|
Tax benefit from share-based payments |
|
|
— |
|
|
|
976 |
|
Dividends to shareholders |
|
|
(11,649 |
) |
|
|
(10,414 |
) |
Net cash used in financing activities |
|
|
(11,649 |
) |
|
|
(8,601 |
) |
Change in cash and cash equivalents |
|
|
21,442 |
|
|
|
17,131 |
|
Cash and cash equivalents at beginning of period |
|
|
58,936 |
|
|
|
69,481 |
|
Cash and cash equivalents at end of period |
|
$ |
80,378 |
|
|
$ |
86,612 |
|
See accompanying notes.
8
AMERISAFE, INC. AND SUBSIDIARIES
NOTES TO UNAUDITED CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(unaudited)
Note 1. Basis of Presentation
AMERISAFE, Inc. (the “Company”) is an insurance holding company incorporated in the state of Texas. The accompanying unaudited condensed consolidated financial statements include the accounts of AMERISAFE and its subsidiaries: American Interstate Insurance Company (“AIIC”) and its insurance subsidiaries, Silver Oak Casualty, Inc. (“SOCI”) and American Interstate Insurance Company of Texas (“AIICTX”), Amerisafe Risk Services, Inc. (“RISK”) and Amerisafe General Agency, Inc. (“AGAI”). AIIC and SOCI are property and casualty insurance companies organized under the laws of the state of Nebraska. AIICTX is a property and casualty insurance company organized under the laws of the state of Texas. RISK, a wholly owned subsidiary of the Company, is a claims and safety service company currently servicing only affiliated insurance companies. AGAI, a wholly owned subsidiary of the Company, is a general agent for the Company. AGAI sells insurance, which is underwritten by AIIC, SOCI and AIICTX, as well as by nonaffiliated insurance carriers. The assets and operations of AGAI are not significant to that of the Company and its consolidated subsidiaries.
The terms “AMERISAFE,” the “Company,” “we,” “us” or “our” refer to AMERISAFE, Inc. and its consolidated subsidiaries, as the context requires.
The Company provides workers’ compensation insurance for small to mid-sized employers engaged in hazardous industries, principally construction, trucking, logging and lumber, manufacturing, and agriculture. Assets and revenues of AIIC represent at least 95% of comparable consolidated amounts of the Company for each of 2017 and 2016.
In the opinion of management of the Company, the accompanying unaudited condensed consolidated financial statements contain all adjustments (consisting of normal recurring accruals) necessary to present fairly the financial position, the results of operations and cash flows for the periods presented. The unaudited condensed consolidated financial statements have been prepared in accordance with the instructions to Form 10-Q under the Securities Exchange Act of 1934 and therefore do not include all information and footnotes to be in conformity with accounting principles generally accepted in the United States (“GAAP”). The results for the interim periods are not necessarily indicative of the results of operations that may be expected for the year. The unaudited condensed consolidated financial statements contained herein should be read in conjunction with our Annual Report on Form 10-K for the year ended December 31, 2016.
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
Adopted Accounting Guidance
In March 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2016-09, Compensation – Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The new guidance requires that all tax effects related to share-based payments be made through the income statement at the time of settlement as opposed to recognizing excess tax benefits in additional paid-in capital. It also requires the cash flows resulting from share-based payments to be included as an operating activity. In addition to the changes, the guidance permits reporting entities to elect to estimate forfeitures related to share-based payments or recognize them as they occur. The threshold to qualify for equity classification has also been revised to permit withholding up to the maximum statutory tax rates in the applicable jurisdictions. The adoption of this new guidance in the first quarter of 2017 did not have a material impact on our financial condition and results of operations.
Prospective Accounting Guidance
In May 2014, the FASB Issued ASU 2014-09 (Topic 606): Revenue from Contracts with Customers. The guidance revises the criteria for revenue recognition and requires that the revenue recognized reflect the transfer of promised goods or services to customers in an amount that represents the consideration to which the entity expects to be entitled in exchange for those goods or services. The standard is effective for us in the first quarter of 2018. Revenue from insurance contracts is excluded from the scope of the new guidance and as a result, adoption of this guidance is not expected to have a material impact on our financial condition and results of operations.
9
In January 2016, the FASB issued ASU 2016-01, Financial Instruments – Overall (Subtopic 825-10): Recognition and Measurement of Financial Assets and Financial Liabilities. This guidance requires fair value measurement for equity investments (not including those that result in consolidation of the investee or use the equity method of accounting) and the recognition of changes in fair value to be presented as a component of net income. The guidance also revises the disclosure requirements related to fair value changes of liabilities presented in comprehensive income, eliminates disclosure related to the methods and assumptions underlying fair value for financial instruments measured at amortized cost, and simplifies impairment assessments for equity investments without readily determinable fair values. This standard is effective for us in the first quarter of 2018. Based on the equity investments currently held by the Company, there would not be a material impact on the Company's financial condition and results of operations if the new guidance were to be adopted in the current accounting period. The impact on the Company's results of operations and financial position at the date of adoption of the updated guidance will be determined by the equity investments held by the Company and the economic conditions at that time.
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Under current guidance for lessees, leases are only included on the balance sheet if certain criteria, classifying the contract as a capital lease, are met. The new guidance requires a lessee to recognize a lease liability and a right of use asset for all leases extending beyond twelve months. The new guidance is effective for us in the first quarter of 2019. Upon adoption, leases will be recognized and measured at the beginning of the earliest period presented using a modified retrospective approach. Adoption of the guidance is not expected to have a material effect on the Company’s consolidated financial statements as the Company does not have any significant leases.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses. The new guidance replaces the methodology of credit loss impairment which currently delays the recognition of credit losses until a probable loss has been incurred. The new guidance requires credit losses for securities measured at amortized cost to be determined using current expected credit loss estimates. These estimates are to be derived from historical, current and reasonable supporting forecasts, including prepayments and estimates, and will be recorded through a valuation allowance account that will run through the income statement. The same method will be used for available-for-sale securities, but the valuation allowance will be limited to the amount by which the fair value is below amortized cost. The standard is effective for us in the first quarter of 2020. The Company will continue to monitor the impact as the implementation date approaches.
All other issued but not yet effective accounting and reporting standards as of September 30, 2017 are either not applicable to the Company or are not expected to have a material impact on the Company.
Note 2. Stock Options and Restricted Stock
As of September 30, 2017, the Company has three equity incentive plans: the AMERISAFE 2005 Equity Incentive Plan (the “2005 Incentive Plan”), the AMERISAFE Non-Employee Director Restricted Stock Plan (the “Restricted Stock Plan”) and the AMERISAFE 2012 Equity and Incentive Compensation Plan (the “2012 Incentive Plan”). In connection with the approval of the 2012 Incentive Plan by the Company’s shareholders, no further grants will be made under the 2005 Incentive Plan. All grants made under the 2005 Incentive plan continue in effect, subject to the terms and conditions of the 2005 Incentive Plan. See Note 12 to our consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2016 for additional information regarding the Company’s incentive plans.
During the nine months ended September 30, 2017, the Company granted 7,434 and 6,454 shares of restricted common stock to executive officers and non-employee directors, respectively. The market value of the restricted shares granted totaled $0.7 million. During the nine months ended September 30, 2016, the Company granted 27,077 and 5,952 shares of restricted common stock to executive officers and non-employee directors, respectively. The market value of the restricted shares granted totaled $1.9 million.
During the nine months ended September 30, 2017, no options to purchase shares of common stock were exercised. During the nine months ended September 30, 2016, options to purchase 68,879 shares of common stock were exercised. In connection with these exercises, the Company received $0.8 million of stock option proceeds.
The Company recognized share-based compensation expense of $0.3 million in the quarters ended September 30, 2017 and 2016. The Company recognized share-based compensation expense of $1.3 million in the nine months ended September 30, 2017 and $1.1 million for the same period of 2016.
10
The Company computes earnings per share (“EPS”) in accordance with FASB Accounting Standards Codification (“ASC”) Topic 260, Earnings Per Share. The Company has no participating unvested common shares which contain nonforfeitable rights to dividends and applies the treasury stock method in computing basic and diluted earnings per share.
Basic EPS is calculated by dividing income available to common shareholders by the weighted-average number of common shares outstanding during the period.
The diluted EPS calculation includes potential common shares assumed issued under the treasury stock method, which reflects the potential dilution that would occur if any outstanding options or warrants were exercised or restricted stock becomes vested, and includes the “if converted” method for participating securities if the effect is dilutive.
|
|
Three Months Ended |
|
|
Nine Months Ended |
|
||||||||||
|
|
September 30, |
|
|
September 30, |
|
||||||||||
|
|
2017 |
|
|
2016 |
|
|
2017 |
|
|
2016 |
|
||||
|
|
(in thousands, except share and per share amounts) |
|
|||||||||||||
Basic EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders - basic |
|
$ |
16,577 |
|
|
$ |
17,896 |
|
|
$ |
45,582 |
|
|
$ |
58,792 |
|
Basic weighted average common shares |
|
|
19,171,912 |
|
|
|
19,121,947 |
|
|
|
19,161,529 |
|
|
|
19,092,298 |
|
Basic earnings per common share |
|
$ |
0.86 |
|
|
$ |
0.94 |
|
|
$ |
2.38 |
|
|
$ |
3.08 |
|
Diluted EPS: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income available to common shareholders - diluted |
|
$ |
16,577 |
|
|
$ |
17,896 |
|
|
$ |
45,582 |
|
|
$ |
58,792 |
|
Diluted weighted average common shares: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average common shares |
|
|
19,171,912 |
|
|
|
19,121,947 |
|
|
|
19,161,529 |
|
|
|
19,092,298 |
|
Stock options and restricted stock |
|
|
64,202 |
|
|
|
68,244 |
|
|
|
74,426 |
|
|
|
94,100 |
|
Diluted weighted average common shares |
|
|
19,236,114 |
|
|
|
19,190,191 |
|
|
|
19,235,955 |
|
|
|
19,186,398 |
|
Diluted earnings per common share |
|
$ |
0.86 |
|
|
$ |
0.93 |
|
|
$ |
2.37 |
|
|
$ |
3.06 |
|
Note 4. Investments
The gross unrealized gains and losses on, and the amortized cost and fair value of, those investments classified as held-to-maturity at September 30, 2017 are summarized as follows:
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
||||
|
|
(in thousands) |
|
|||||||||||||
States and political subdivisions |
|
$ |
430,470 |
|
|
$ |
10,348 |
|
|
$ |
(573 |
) |
|
$ |
440,245 |
|
Corporate bonds |
|
|
121,942 |
|
|
|
498 |
|
|
|
(192 |
) |
|
|
122,248 |
|
U.S. agency-based mortgage-backed securities |
|
|
10,928 |
|
|
|
750 |
|
|
|
(2 |
) |
|
|
11,676 |
|
U.S. Treasury securities and obligations of U.S. government agencies |
|
|
33,672 |
|
|
|
642 |
|
|
|
(94 |
) |
|
|
34,220 |
|
Asset-backed securities |
|
|
1,646 |
|
|
|
132 |
|
|
|
(16 |
) |
|
|
1,762 |
|
Totals |
|
$ |
598,658 |
|
|
$ |
12,370 |
|
|
$ |
(877 |
) |
|
$ |
610,151 |
|
11
The gross unrealized gains and losses on, and the cost or amortized cost and fair value of, those investments classified as available-for-sale at September 30, 2017 are summarized as follows:
|
|
Cost or Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Fixed maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and political subdivisions |
|
$ |
236,666 |
|
|
$ |
6,229 |
|
|
$ |
(1,243 |
) |
|
$ |
241,652 |
|
Corporate bonds |
|
|
151,339 |
|
|
|
699 |
|
|
|
(54 |
) |
|
|
151,984 |
|
U.S. agency-based mortgage-backed securities |
|
|
13,408 |
|
|
|
8 |
|
|
|
(748 |
) |
|
|
12,668 |
|
U.S. Treasury securities and obligations of U.S. government agencies |
|
|
61,479 |
|
|
|
71 |
|
|
|
(598 |
) |
|
|
60,952 |
|
Total fixed maturity |
|
|
462,892 |
|
|
|
7,007 |
|
|
|
(2,643 |
) |
|
|
467,256 |
|
Equity securities |
|
|
7,499 |
|
|
|
302 |
|
|
|
— |
|
|
|
7,801 |
|
Other investments |
|
|
1,000 |
|
|
|
280 |
|
|
|
— |
|
|
|
1,280 |
|
Totals |
|
$ |
471,391 |
|
|
$ |
7,589 |
|
|
$ |
(2,643 |
) |
|
$ |
476,337 |
|
The gross unrealized gains and losses on, and the amortized cost and fair value of, those investments classified as held-to-maturity at December 31, 2016 are summarized as follows:
|
|
Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
||||
|
|
(in thousands) |
|
|||||||||||||
States and political subdivisions |
|
$ |
394,875 |
|
|
$ |
7,622 |
|
|
$ |
(3,014 |
) |
|
$ |
399,483 |
|
Corporate bonds |
|
|
143,858 |
|
|
|
423 |
|
|
|
(265 |
) |
|
|
144,016 |
|
Commercial mortgage-backed securities |
|
|
70 |
|
|
|
— |
|
|
|
— |
|
|
|
70 |
|
U.S. agency-based mortgage-backed securities |
|
|
9,967 |
|
|
|
948 |
|
|
|
— |
|
|
|
10,915 |
|
U.S. Treasury securities and obligations of U.S. government agencies |
|
|
11,737 |
|
|
|
746 |
|
|
|
(67 |
) |
|
|
12,416 |
|
Asset-backed securities |
|
|
1,927 |
|
|
|
163 |
|
|
|
(59 |
) |
|
|
2,031 |
|
Totals |
|
$ |
562,434 |
|
|
$ |
9,902 |
|
|
$ |
(3,405 |
) |
|
$ |
568,931 |
|
The gross unrealized gains and losses on, and the cost or amortized cost and fair value of, those investments classified as available-for-sale at December 31, 2016 are summarized as follows:
|
|
Cost or Amortized Cost |
|
|
Gross Unrealized Gains |
|
|
Gross Unrealized Losses |
|
|
Fair Value |
|
||||
|
|
(in thousands) |
|
|||||||||||||
Fixed maturity: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
States and political subdivisions |
|
$ |
231,168 |
|
|
$ |
4,340 |
|
|
$ |
(3,215 |
) |
|
$ |
232,293 |
|
Corporate bonds |
|
|
182,350 |
|
|
|
436 |
|
|
|
(271 |
) |
|
|
182,515 |
|
U.S. agency-based mortgage-backed securities |
|
|
10,428 |
|
|
|
17 |
|
|
|
(1,103 |
) |
|
|
9,342 |
|
U.S. Treasury securities and obligations of U.S. government agencies |
|
|
55,925 |
|
|
|
— |
|
|
|
(978 |
) |
|
|
54,947 |
|
Total fixed maturity |
|
|
479,871 |
|
|
|
4,793 |
|
|
|
(5,567 |
) |
|
|
479,097 |
|
Equity securities |
|
|
— |
|
|
|
33 |
|
|
|
— |
|
|
|
33 |
|
Other investments |
|
|
10,000 |
|
|
|
3,330 |
|
|
|
— |
|
|