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Amerisafe, Inc. (AMSF)

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We are upgrading our recommendation on Amerisafe, Inc. (AMSF) to Outperform, based on the consistent top-line growth and sound financial position witnessed in the first quarter, where earnings considerably surpassed the Zacks Consensus Estimate based on higher-than-expected premiums and investment income that drove the top line, underwriting results, book value per share, ROE and combined ratio.

Prudent capital management, expanded share repurchase plan and affirmation of a strong financial strength rating point to decent long-term growth. Employers engaged in hazardous industries pay substantially higher than average rates for workers compensation insurance due to the inherent workplace danger. Amerisafe has a history of profitable underwriting in these industries.

Our six-month target price of $33.00 per share equates to about 19.1x our earnings estimate for 2012. With no dividend supplement, this target price implies a total expected of 18.3% over that period, which is consistent with our Outperform recommendation.

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