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Amerisafe's Q1 Earnings Lags Ests, Better Y/Y

Zacks Equity Research

Amerisafe Inc.’s (AMSF) first-quarter 2014 operating earnings per share of 56 cents lagged the Zacks Consensus Estimate of 63 cents but outpaced the prior-year quarter figure of 47 cents by 19.1%. Consequently, operating net income jumped 18.7% year over year to $10.5 million.

Reported results reflect higher premiums and lower-than-expected decline in investment income that shored up the top line as well as the underwriting results. In addition, improved investment portfolio and favourable reserves drove the book value of the shares, return on equity (:ROE) and combined ratio. These were partially offset by slightly higher loss and loss adjustment expenses (:LAE) along with lower investment yields.

Amerisafe’s total revenue stood at $96.2 million, up 11.1% over the prior-year quarter. The top line also exceeded the Zacks Consensus Estimate of $95 million. Gross premiums written for the quarter were $105.7 million, reflecting a 6.7% year-over-year expansion.

The uptick was driven by payroll audits and related premium adjustments for policies written in previous periods. These adjustments increased premiums by $3.3 million in the reported quarter.

Furthermore, voluntary premiums written climbed 9.3% over the prior-year quarter, whereas net premiums earned increased 11.9% to $89.2 million. Net investment income, which represented about 7% of total revenue, was almost flat at $6.7 million.

Meanwhile, insurance loss and loss adjusted expenses (:LAE) climbed 9.5% year over year to $61.3 million (or about 69% of net premiums earned). However, total expenses increased 9.8% year over year to $82.8 million, while net underwriting expense ratio slightly weakened to 23.9% from 23.7% in the year-ago quarter, due to a 13.2% uptick in underwriting and operating costs partially offset by higher premiums.

Subsequently, underwriting profit surged 51.1% to $6.5 million from $4.3 million in the year-ago quarter. Even net combined ratio for the reported quarter improved to 92.7% from 94.7% in the prior-year quarter.

The favorable loss development for prior accident years reduced expenses by $2.5 million. Consequently, the current accident year loss ratio was 71.5%, down from 73.2% in the prior-year quarter.

Financial Update

Amerisafe exited the reported quarter with operating ROE of 10% that improved from 9.2% in the year-ago quarter. Additionally, book value per share came in at $22.54 as on Mar 31, 2014, up 6.3% from $21.20 at prior period-end.

As on Mar 31, 2014, Amerisafe’s investment portfolio, including cash and investments, stood at $1.02 billion, slightly higher than $1.0 billion at 2013-end. Moreover, fair value of the portfolio stood at $1.0 billion, at par with the 2013-end level. Total shareholders’ equity stood at $420.6 million at Mar 2014-end, up from $416.8 million at 2013-end.

Share Repurchase Update

On Oct 31, 2013, the board of Amerisafe extended the company’s share repurchase program to $25 million, to be executed through Dec 2014. However, no shares were bought back during the whole of 2012 and 2013 as well as in the reported quarter.

Since the initiation of its share repurchase program, the company has bought back about 1.26 million shares for $22.4 million, at an average price of $17.78.

Dividend Update

On Apr 29, 2014, the board of Amerisafe declared a regular quarterly dividend of 12 cents per share, payable on Jun 26, 2014, to shareholders of record as on Jun 12.

On Mar 28, 2014, Amerisafe paid its first extraordinary cash dividend of 50 cents per share and a regular quarterly dividend of 12 cents to shareholders of record as on Mar 14.

In Feb 2014, the regular quarterly dividend was hiked by 50% from the prior 8 cents. The company had initiated dividend payouts in Mar 2013.


Along with Amerisafe, ACE Ltd. (ACE), Primerica Inc. (PRI) and Protective Life Corp. (PL), all carry a Zacks Rank #2 (Buy) and are worth considering.

Read the Full Research Report on AMSF
Read the Full Research Report on ACE
Read the Full Research Report on PL
Read the Full Research Report on PRI

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