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Can Amerisafe Grow on the Back of Rising Net Premiums?

Zacks Equity Research
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Amerisafe Inc. AMSF remains well poised for growth, given the constant rise in its net premium.  This provider of workers' compensation insurance to small to mid-sized employers in hazardous industries has constantly witnessed rise in its net premium between 2010 and 2015 at a CAGR of 11.42%. Although the metric decreased in 2016 and 2017, the same is back on the growth path, increasing by 1.5% in the first six months of 2018, which in turn has boosted its revenues.

Additionally, net investment income of the company inched up 2.3% on average between 2014 and 2017. In the first six months of 2018, the metric increased by 2.3% as well.

The Zacks Consensus Estimate for current-year earnings per share is pegged at $3.35, representing a year-over-year increase of 8.8% on 0.76% higher revenues of $378.7 million. The company has been enjoying a solid balance sheet for the past several years. It has been generating increasing cash flow from operation for quite some time.

The company doesn’t have any long-term debt, which shows that it has a disciplined capital management. Its risk-based capital ratio also exceeds the minimum capital requirements.

Moreover, the company’s noticeable increase in return on equity (ROE) between 2012 and 2017 deserves mention as well. Its trailing 12-month ROE of 14.3% remains higher than the industry’s ROE of 12.4%, reflecting Amerisafe’s efficiency in using shareholders’ funds.

Amerisafe boasts an encouraging earnings surprise history, with an average beat of 9.99% in three out of trailing four quarters. This highlights the company’s operational excellence.

In May, the company’s ratings were upgraded by the credit rating giant A.M., reflecting strong balance sheet, favorable operating performance and neutral business profile as well as an exceptional enterprise risk management. Amerisafe’s efficient claims management, good underwriting results, favorable loss and frequency trends, prudent reserve analytics, and better operating leverage bode well.

Shares of the company rallied 5.1% in a year’s time, outperforming the industry’s growth of 3.1%. The company currently has a Zacks Rank #2 (Buy).


Stocks to Consider

A few other top-ranked stocks from the insurance sector are The Progressive Corporation PGR, RenaissanceRe Holdings Ltd. RNR and Athene Holding Ltd. ATH.

The Progressive Corporation provides personal and commercial auto insurance, residential property insurance, and other specialty property-casualty insurance and related services, primarily in the United States. The company currently flaunts a Zacks Rank #1. It managed to pull off an average four-quarter positive surprise of 9.19%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

RenaissanceRe provides reinsurance and insurance coverages in the United States and internationally. With a Zacks Rank of 1, the company came up with a positive earnings surprise of 31.16% over three out of the trailing four quarters.

Athene issues, reinsures and acquires retirement savings products in the United States, the District of Columbia, and Germany. It currently holds a Zacks Rank of 1. The company managed to deliver an average four-quarter beat of 15.03%.

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