We issued an updated research report on Amerisafe, Inc. AMSF on Jun 30, 2015.
Amerisafe is a renowned name in its industry in terms of profitable underwriting, as reflected by a solid operating and financial performance in the last couple of years. Despite the economic turmoil, the policy renewal rates of the company on voluntary business had been stable. Meanwhile, Amerisafe’s workers’ compensation insurance business is paying off well. This is because employers engaged in hazardous industries pay substantially higher-than-average rates for workers’ compensation insurance due to the inherent workplace danger.
Amerisafe has been experiencing top-line growth for quite some time, driven by higher premiums earned. The company has also been witnessing consistent favorable growth of book value per share. This is primarily owing to several factors such as higher premiums paid by the policyholders, the strategy of employing a proactive and disciplined approach in underwriting capabilities, and prudent capital management. Other significant growth measures such as return on equity (ROE), combined ratio and net loss ratio have also been witnessing consistent and noticeable improvement.
Amerisafe has a risk-free balance sheet. Armed with a strong cash and investment portfolio, the company enjoys fair liquidity and capital flexibility. Additionally, increased cash flow has been cushioning operating leverage. Adequate excess capital has been making way for dividend hikes and share repurchases that in turn, have been boosting investor confidence.
Although the economy is showing signs of recovery, certain concerns still linger. One such is a marked increase in the level of unemployment. These macro factors have also hampered the company’s investment portfolio, which has been generating lower income over the last few years.
The company operates on a geographically-diverse base and is licensed to provide workers’ compensation insurance in 30 U.S. states along with the District of Columbia. However, the majority of its voluntary in-force premiums are derived from the six states in which it generated 5.0% or more of its gross premiums written. Unfavorable changes in economic conditions affecting these states could have an adverse effect on both the results of operations and financial condition of the company.
In Apr 2015, the company reported first-quarter 2015 earnings that surpassed the Zacks Consensus Estimate and improved year over year on solid underwriting results.
Amerisafe currently holds a Zacks Rank #2 (Buy). Investors interested in the insurance space may consider stocks like Prudential Financial, Inc. PRU, Cigna Corp. CI and Ping An Insurance (Group) Company of China, Ltd. PNGAY. All three stocks have the same Zacks Rank as Amerisafe.
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