Amerisafe, Inc. (AMSF - Free Report) has been exhibiting a strong operating performance, which reflects on its better-than-expected underwriting results for the past many years. The results were driven by a favorable prior-year reserve development.
Amerisafe’s experience dates back 34 years as a specialty provider of workers’ compensation insurance for small-to-midsize employers in high-hazard industries. During this pandemic, those industries appear to be less affected than main street businesses, such as retail and hospitality.
Therefore, in the second quarter of 2020, the company’s gross premiums written were down 7.7% year over year. The business yields higher premium owing to inherent workplace dangers associated with such policies.
The company is known for its balance sheet strength, operational efficiency, neutral business profile and appropriate enterprise risk management.
Amerisafe also flaunts a competitive edge in specialized underwriting expertise as is evident from its combined ratios, which are at more favorable levels than its peers. The company’s combined ratio has stayed below 100% since 2006, except in 2011, which indicates underwriting profitability. The company’s focus on loss control and safety programs as well as active claims management generated solid underwriting results.
Further, the company boasts an efficient operating platform. Through extensive cost-management initiatives, Amerisafe executes one of the most efficient operations in the workers’ compensation industry. This enabled the company to maintain its operating return on equity at 20%, which is above the industry’s ROE of 12%.
Additionally, Amerisafe has limited exposure to COVID-19 in its voluntary book of business. Thus, the company doesn’t expect much claims related to the pandemic, though its top line may remain under pressure.
Moreover, the company’s capital management policy via acquisitions, steady quarterly dividends and annual payouts since 2014 along with share buybacks boosted its shareholder value.
In the past year, the stock has lost 2.7% compared with the industry’s decline of 26.6%.
The stock has seen the Zacks Consensus Estimate for current-year earnings being revised 1.8% upward over the past 30 days.
Amerisafe currently has a Zacks Rank #2 (Buy). Some other top-ranked stocks in the insurance space are Employers Holdings Inc. (EIG - Free Report) , Aflac Incorporated (AFL - Free Report) and The Allstate Corp. (ALL - Free Report) . While both Employer Holdings and Allstate currently sport a Zacks Rank #1 (Strong Buy), Aflac carries the same Zacks Rank as Amerisafe at present.
You can see the complete list of today’s Zacks #1 Rank stocks here.
Earnings of Allstate and Aflac beat estimates in each of the last four quarters by 25.24% and 10.92%, respectively.
Meanwhile, Employer Holdings' bottom line beat estimates in two of the trailing four quarters (missing the mark in the other two), the average earnings surprise being 42.56%.
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