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Amerisafe's (AMSF) Q4 Earnings Miss as Revenues Decline
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Amerisafe Inc. (AMSF - Free Report) reported fourth-quarter 2017 operating earnings per share of 69 cents, missing the Zacks Consensus Estimate by 16.9%. Also, earnings slumped 33.7% year over year due to a decline in revenues.
Quarter in Detail
Amerisafe’s total operating revenues decreased 3.7% from the prior-year quarter to $94.9 million, but surpassed the Zacks Consensus Estimate by 2.3%.
Gross written premiums in the quarter were up 0.6% to $81.1 million, primarily due to increase in payroll audits and related premium adjustments, partly offset by declines in voluntary premiums.
Net investment income decreased 6.9% year over year to $7.3 million. This was mainly due to increase in the value of an investment in a limited partnership hedge fund in the year-ago quarter.
Total expenses came in at $77.14 million, up 9% from the year-ago quarter led by higher loss and loss adjustments incurred, and underwriting and other operating costs.
Net combined ratio, a measure of profitability (lower the better) was 88.3%, deteriorating 1150 basis points (bps) year over year.
The company incurred a one-time non-cash charge of $12.6 million in the fourth quarter, on account of estimated impact of revaluation of its net deferred tax assets pursuant to the Tax Reform Act enacted in December.
Financial Update
Amerisafe exited the quarter with cash and cash equivalents of $55.56 million, down 5.7% year over year.
As of Dec 31, 2017, total shareholders’ equity was $425.4 million, down 6.7% from the year-ago quarter.
Operating return on equity was 11.4%, down 530 bps year over year. Book value per share as of Dec 31, 2017 was $22.10, down 6.8% from the prior-year quarter.
Dividend Hike, Share Repurchase Nil
On Feb 22, 2018, the company increased its regular quarterly dividend by 10% to 22 cents per share. This increased dividend will be payable on Mar 23, 2018 to shareholders of record as of Mar 9, 2018.
During the quarter, no shares were repurchased under the company’s share repurchase plan.
Our Take
Amerisafe’s results reflect continued suffering from softness in workers compensation market, which has been pressurizing revenues since the past three years. Increase in expenses is a drag on margins. However, its efficient claims management, favorable loss and frequency trends, prudent reserve analytics and improved operating leverage should be fruitful for the company.
Performance of Other Companies in the Finance Sector
Among the other firms in the accident and health sector that have reported fourth-quarter earnings so far, Employers Holdings, Inc. (EIG - Free Report) , Aflac Inc. (AFL - Free Report) and Unum Group (UNM - Free Report) beat their respective Zacks Consensus Estimate by 89.29%, 3.23% and 4.63%, respectively.
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Amerisafe's (AMSF) Q4 Earnings Miss as Revenues Decline
Amerisafe Inc. (AMSF - Free Report) reported fourth-quarter 2017 operating earnings per share of 69 cents, missing the Zacks Consensus Estimate by 16.9%. Also, earnings slumped 33.7% year over year due to a decline in revenues.
Quarter in Detail
Amerisafe’s total operating revenues decreased 3.7% from the prior-year quarter to $94.9 million, but surpassed the Zacks Consensus Estimate by 2.3%.
Gross written premiums in the quarter were up 0.6% to $81.1 million, primarily due to increase in payroll audits and related premium adjustments, partly offset by declines in voluntary premiums.
AMERISAFE, Inc. Price, Consensus and EPS Surprise
AMERISAFE, Inc. Price, Consensus and EPS Surprise | AMERISAFE, Inc. Quote
Net investment income decreased 6.9% year over year to $7.3 million. This was mainly due to increase in the value of an investment in a limited partnership hedge fund in the year-ago quarter.
Total expenses came in at $77.14 million, up 9% from the year-ago quarter led by higher loss and loss adjustments incurred, and underwriting and other operating costs.
Net combined ratio, a measure of profitability (lower the better) was 88.3%, deteriorating 1150 basis points (bps) year over year.
The company incurred a one-time non-cash charge of $12.6 million in the fourth quarter, on account of estimated impact of revaluation of its net deferred tax assets pursuant to the Tax Reform Act enacted in December.
Financial Update
Amerisafe exited the quarter with cash and cash equivalents of $55.56 million, down 5.7% year over year.
As of Dec 31, 2017, total shareholders’ equity was $425.4 million, down 6.7% from the year-ago quarter.
Operating return on equity was 11.4%, down 530 bps year over year.
Book value per share as of Dec 31, 2017 was $22.10, down 6.8% from the prior-year quarter.
Dividend Hike, Share Repurchase Nil
On Feb 22, 2018, the company increased its regular quarterly dividend by 10% to 22 cents per share. This increased dividend will be payable on Mar 23, 2018 to shareholders of record as of Mar 9, 2018.
During the quarter, no shares were repurchased under the company’s share repurchase plan.
Our Take
Amerisafe’s results reflect continued suffering from softness in workers compensation market, which has been pressurizing revenues since the past three years. Increase in expenses is a drag on margins. However, its efficient claims management, favorable loss and frequency trends, prudent reserve analytics and improved operating leverage should be fruitful for the company.
Zacks Rank
Amerisafe carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Performance of Other Companies in the Finance Sector
Among the other firms in the accident and health sector that have reported fourth-quarter earnings so far, Employers Holdings, Inc. (EIG - Free Report) , Aflac Inc. (AFL - Free Report) and Unum Group (UNM - Free Report) beat their respective Zacks Consensus Estimate by 89.29%, 3.23% and 4.63%, respectively.
Zacks Top 10 Stocks for 2018
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2018?
Last year's 2017 Zacks Top 10 Stocks portfolio produced double-digit winners, including FMC Corp. and VMware which racked up stellar gains of +67.9% and +61%. Now a brand-new portfolio has been handpicked from over 4,000 companies covered by the Zacks Rank. Don’t miss your chance to get in on these long-term buys.
Access Zacks Top 10 Stocks for 2018 today >>