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Why Is Amerisafe (AMSF) Up 8% Since Last Earnings Report?

·3 min read

It has been about a month since the last earnings report for Amerisafe (AMSF). Shares have added about 8% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Amerisafe due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

AMERISAFE Beats Q4 Earnings Estimates, Hikes Dividend

AMERISAFE reported fourth-quarter 2020 earnings of $1.22 per share, which outpaced the Zacks Consensus Estimate by 52.5%. However, the bottom line declined 28.2% year over year. The company’s premiums partially benefited from payroll audits and related premium adjustments. However, its results were dampened by lower revenues and elevated costs.

Quarter in Detail

AMERISAFE’s operating revenues slumped 8.9% year over year to $82 million due to reduced net premiums earned and weak net investment income. Nevertheless, the top line surpassed the consensus mark by 1.6%.

Gross premiums written declined 10.8% year over year to $63.1 million on account of softer voluntary premiums in policies stemming from persistent fall in approved loss costs across the company’s states of operation. Pre-tax underwriting profit of $22.1 million plunged 33.6% year over year.

Net investment income fell 10% year over year to $7.2 million as a result of reduced interest rates on fixed income securities.

Total expenses of $52.6 million escalated 7.3% from the prior-year quarter due to higher loss and loss adjustment expenses incurred, and underwriting and other operating costs. Net combined ratio of 70.4% deteriorated 1080 basis points (bps) year over year.

Dividend Hike

Concurrent with fourth-quarter 2020 earnings release, AMERISAFE’s board of directors approved a 7.4% rise in the quarterly dividend. The company will now pay out a dividend of 29 cents per share compared with the prior payout of 27 cents. The dividend will be paid out on Mar 26, 2021, to shareholders of record as of Mar 12.

Financial Update

The company exited the fourth quarter with cash and cash equivalents of $61.8 million, which improved nearly 41% from the level at 2019 end. Total assets as of Dec 31, 2020 slid 1.5% to $1.5 billion from the level at 2019 end. Shareholders’ equity was $438.8 million, up 2% from 2019-end level.

As of Dec 31, 2020, book value per share came in at $22.70, which grew 1.8% from the level at 2019 end. Operating return on average adjusted equity of 21.4% contracted 860 bps year over year.

Full-Year Update

For 2020, the company’s revenues totaled $339.5 million, which fell 8.3% year over year. Full-year earnings per share was $4.25, which declined 7.6% year over year. Operating return on average adjusted equity for the year came in at 19.7%, which contracted 180 bps year over year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

VGM Scores

At this time, Amerisafe has a poor Growth Score of F, however its Momentum Score is doing a lot better with a B. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. Notably, Amerisafe has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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