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Why Is Amerisafe (AMSF) Down 2.2% Since Last Earnings Report?

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A month has gone by since the last earnings report for Amerisafe (AMSF). Shares have lost about 2.2% in that time frame, underperforming the S&P 500.

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

AMERISAFE Q2 Earnings Beat, Rise Y/Y on Lower Expenses

AMERISAFE’s second-quarter 2021 earnings of $1.04 per share outpaced the Zacks Consensus Estimate by 42.47%. The bottom line rose 4% year over year, courtesy of lower expenses, partly offset by a decline in premium.

Top-Line Decline

Operating revenues dropped 7.3% year over year to $77 million and missed the Zacks Consensus Estimate by 1.8% as well. Lower premium written as well as a weak net investment income induced this downfall.    

Net premiums written declined 8.2% year over year to $71.2 million on account of lower voluntary premiums, partly offset by an increase in payroll audits and a higher related premium adjustment. Pre-tax underwriting profit of $17.9 million rose 9.4% year over year.

Net investment income fell 8.1% year over year to $6.73 million due to reduced interest rates on fixed income securities.

Lower Expenses Save the Bottom Line

Total expenses of $52 million were down 13% from the prior-year quarter’s level owing to lower policyholder dividends, underwriting expenses as well as loss expenses. Net combined ratio (a measure of insurer’s profitability) of 74.4% improved 410 basis points (bps) year over year. Lower the combined ratio, the better.

Operating return on average equity was 20.8 %, down 50 basis points year over year, reflecting weaker profitability.

As of Jun 30, 2021, book value per share came in at $57.54, down 6.8% year over year.

Financial Update (as of Jun 30, 2021)

The company exited the second quarter with cash and cash equivalents of $57.54 million, down nearly 46% from the level at 2020 end. Total assets were up 2.7% to $1.5 billion from the level at 2020 end. Shareholders’ equity was $468.4 million, up 6.7% from the 2020-end level.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in estimates revision.

VGM Scores

Currently, Amerisafe has a poor Growth Score of F, however its Momentum Score is doing a bit better with a D. 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 F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. Notably, Amerisafe has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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