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On Jun 20, 2013, Zacks Investment Research upgraded Amerisafe Inc. (AMSF - Analyst Report) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Amerisafe has been experiencing rising earnings estimates on the back of improved results in the past two quarters. Moreover, the company’s strong underwriting capabilities as well as improved capital position and coverage ratios have been impressive, also reflected by the dividend initiated early this year.

The long-term expected earnings growth rate for this specialty provider of workers' compensation insurance is pegged at 11.0%, higher than peer average of 10.1%.

On May 1, Amerisafe reported first-quarter 2013 operating earnings per share of 47 cents, which came at par with the Zacks Consensus Estimate but higher than the prior-year quarter number of 45 cents.

Results were supported by 9.9% growth in operating revenues, driven by higher premiums and underwriting results. Although operating expenses and net investment income deteriorated, combined ratio improved to 94.7% from 96.0% in the year-ago quarter. Even book value per share increased 7.2% at Mar 2013-end.

Overall, Amerisafe is well positioned to capitalize on the changing market dynamics, wherein the workers' compensation market remains firm as carriers re-evaluate their positions, thereby enhancing the company’s fundamental growth. The pricing environment and industry demand has also improved, as reflected by higher premiums and profitability.

Moreover, prudent capital management, expanded share repurchase plan, dividend initiation and affirmation of a strong financial strength rating augur decent long-term growth.The creditworthiness of the company also helps retain investors’ confidence on the stock.

Based on Amerisafe’s fundamental strength and underwriting profitability, the Zacks Consensus Estimate for 2013 rose 3.0% to $2.04 per share in the last 60 days. The estimate for 2014 is pegged at $2.48, up 6.9% in the last 60 days. Meanwhile, no downward revision in estimates was witnessed for both the years.

Other Stocks to Consider

Apart from Amerisafe, other stocks that are outperforming in the insurance sector include Hilltop Holdings Inc. (HTH - Analyst Report), Montpelier Re Ltd. (MRH - Analyst Report) and Markel Corp. (MKL - Snapshot Report). All these stocks carry a Zacks Rank #1 (Strong Buy).

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