AMERISAFE, Inc. (Nasdaq: AMSF), a specialty writer of high hazard workers' compensation insurance, today announced results for the fourth quarter and year ended December 31, 2007.
Net income in the fourth quarter was $18.6 million compared to net income of $14.0 million in the 2006 fourth quarter, an increase of 32.6%. Pre-tax income for the fourth quarter of 2007 included realized capital gains of $20,000 and $9.5 million of favorable prior year loss development. Pre-tax income for the fourth quarter of 2006 included realized capital gains of $4.8 million and $2.2 million of favorable prior year loss development. Net investment income increased to $7.9 million in the fourth quarter from $7.3 million for the same period last year, an increase of 9.3%. The Company's return on average equity for the 2007 fourth quarter was 33.1% compared to 31.6% for the same period in 2006.
Gross premiums written in the fourth quarter of 2007 were $61.8 million, a decrease of 19.2%, compared to $76.6 million in the fourth quarter of 2006. The decrease was primarily a result of lower 2007 endorsements and audit premium, when compared to 2006, which the Company attributes to reduced business activity among its insured employers. Fourth quarter revenues totaled $82.4 million, a 14.6% decrease, compared to revenues of $96.5 million in the prior year period.
Net income for 2007 was $50.2 million compared to $37.4 million for 2006, an increase of 34.4%. In 2007 on a pre-tax basis, the Company recorded $9.5 million of favorable prior year loss development, income of $3.7 million from reinsurance commutations, and $147,000 of realized capital gains. Pre-tax net income for 2006 included $2.2 million of favorable prior year loss development and realized capital gains of $7.4 million. Net investment income increased to $30.2 million for the year ended December 31, 2007 from $25.4 million in 2006, an increase of 19.0%. The Company's return on average equity for the year was 24.1%, compared to 22.6% for 2006.
For the full year ended December 31, 2007, gross premiums written totaled $327.8 million, a 1.4% decrease from gross premiums written of $332.5 million for 2006. Revenues for 2007 totaled $338.3 million, a 1.7% increase over revenues of $332.7 million last year.
In the fourth quarter of 2007, diluted earnings per share allocable to common shareholders were $0.92 compared to $0.70 in the same period of 2006. Weighted average diluted shares outstanding for the fourth quarter of 2007 were 19,067,749 shares compared to 18,138,866 shares in the fourth quarter of 2006. For the full year 2007, diluted earnings per share allocable to common shareholders were $2.47 compared to $1.88 for 2006. Weighted average diluted shares outstanding for 2007 were 19,079,380 shares compared to 17,594,736 shares for 2006.
The net combined ratio for the fourth quarter of 2007 was 73.0% compared to 87.1% for the same period in 2006. Loss and loss adjustment expenses for the fourth quarter of 2007 were $37.9 million, or 51.0% of net premiums earned, compared to $49.5 million, or 58.7% of net premiums earned, for the same period in 2006. Total underwriting expenses for the fourth quarter of 2007 were $17.7 million, or 23.8% of net premiums earned, compared to $18.5 million, or 22.0% of net premiums earned, for the fourth quarter 2006.
The net combined ratio for the full year 2007 was 85.9% compared to 92.4% for 2006. Loss and loss adjustment expenses for 2007 were $198.5 million, or 64.7% of net premiums earned, compared to $199.5 million, or 66.6% of net premiums earned, for 2006. Total underwriting expenses were $65.5 million, or 21.3% of net premiums earned, for 2007 compared to $71.3 million, or 23.8% of net premiums earned, for 2006. Underwriting expenses for 2007 were reduced by $3.7 million, or 1.2% of net premiums earned, as the result of the reinsurance commutations effected in the 2007 second and third quarters.
At year-end, the Company's investment portfolio, including cash, exceeded $759 million, up $93.5 million from the end of 2006. Amounts recoverable from reinsurers at year-end were $76.9 million, a decrease of $32.7 million from December 31, 2006.
Commenting on these results, Allen Bradley, AMERISAFE's Chairman, President and Chief Executive Officer, stated, "2007 was a record year for AMERISAFE. We continued to produce high quality business, and losses were significantly lower than expected. In addition, prior year loss development was favorable, and our open claims inventory at the end of the year was the lowest in a decade."
"As in 2007, the marketplace continues to be challenging. Lower loss costs have resulted in lower rates in a number of states. We are also experiencing increased competition as some market participants are pricing policies at levels that we do not believe adequately reflect the risk incurred. Compounding these issues is a noted decrease in business activity among our insureds, as measured by reported payrolls. We expect these market conditions to continue through 2008, which will put pressure on our gross premiums written, but we intend to continue to price our policies to earn an acceptable underwriting profit, as we have done in prior years." -- AMERISAFE, Inc.
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