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Amerisafe (AMSF) Q1 Earnings Top Estimates on Lower Expenses

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Amerisafe Inc. AMSF reported first-quarter 2018 operating earnings per share of 86 cents, beating the Zacks Consensus Estimate by 17.8%. Earnings were up 21% year over year.

The bottom line was driven by an increase in net investment income and a decline in total expenses.

AMERISAFE, Inc. Price, Consensus and EPS Surprise

AMERISAFE, Inc. Price, Consensus and EPS Surprise | AMERISAFE, Inc. Quote

Quarter in Detail

Amerisafe’s total operating revenues decreased 3.2% from the prior-year quarter to $94.6 million, but surpassed the Zacks Consensus Estimate by 2.2%.

Gross written premiums in the quarter were up 2.4% year over year to $97.3 million, primarily due to higher voluntary premiums written, payroll audits and related premium adjustments.

Net investment income increased 7.4% year over year to $7.2 million. This was mainly due to an increase in the value of an investment in a limited partnership hedge fund in the year-ago quarter.

Total expenses came in at $74.8 million, down 5.1% from the year-ago quarter due to lower loss and loss adjustments incurred, and underwriting and other operating costs.

Net combined ratio, a measure of profitability (lower the better) was 85.6% compared with 86.6% in the year-ago quarter.

Financial Update

Amerisafe exited the quarter with cash and cash equivalents of $36.1 million, down 35.1% year over year.

As of Mar 31, 2018, total shareholders’ equity was $432.1 million, up 1.6% from Dec 31, 2017.

Operating return on equity was 15.4%, up 360 bps year over year.

Book value per share as of Mar 31, 2018 was $22.43, up 1.5% from Dec 31, 2017.

Dividend and Share Repurchase Update

On Apr 24, the company declared its quarterly dividend of 22 cents per share.  This dividend is payable Jun 22, to its shareholders of record as of Mar 8.

During the quarter, no shares were repurchased under the company’s share repurchase plan.

Bottom Line

Amerisafe’s topline growth reflect continued suffering from softness in the workers compensation market, which has been putting pressure on revenues for the past three years. However, its efficient claims management, favorable loss and frequency trends, prudent reserve analytics and improved operating leverage should be helpful for the company.

Zacks Rank and Stock to Consider

Amerisafe carries a Zacks Rank #4 (Sell). A better-ranked stock in the same space is Unum Group UNM with a Zacks Rank #2 (Buy). The stock beat estimates in each of the four reported quarters, with an average positive surprise of 3.85%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Peer Performance

Among the other firms in the accident and health sector that have reported first-quarter earnings so far, Employers Holdings, Inc. EIG and Aflac Inc. AFL beat their respective Zacks Consensus Estimate by 76% and 8.25%.

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