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Amerisafe Shares Improve on Q3 Earnings Beat

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Shares of Amerisafe, Inc. (AMSF - Free Report) has improved 2.2% since it reported a 54.3% improvement in its third-quarter 2013 operating earnings per share to 54 cents on Oct 31. Results were also ahead of the Zacks Consensus Estimate of 48 cents per share. Moreover, operating net income climbed 56.2% year over year to $10.1 million.

Including after-tax net realized losses of $0.7 million against an after-tax net realized gain of $0.99 million in the year-ago period, net income stood at $9.6 million or 52 cents per share, compared with $7.1 million or 38 cents per share, respectively, in the prior-year quarter.

Reported results reflect higher premiums that shored up the top line as well as the underwriting results. However, the positives were partially offset by insurance loss and loss adjustment expenses (LAE).

Amerisafe’s total revenues for the reported quarter were$88 million, up 9.5% from the prior-year quarter. However, revenues lagged the Zacks Consensus Estimate of $93 million. Gross premiums written for the quarter were $86.1 million, reflecting an 11.5%year-over-year expansion. The uptick was driven by payroll audits and related premium adjustments for policies written in previous periods. These adjustments increased premiums by $0.7 million in the reported quarter, while the same had boosted premiums by $3.1 million in the year-ago quarter. A sequential improvement in pricing in the workers compensation market also aided the upside.

Furthermore, voluntary premiums written by Amerisafe jumped 14.3% year over year in the reported quarter. In addition, net premiums earned increased 12.7 % from the year-ago quarter to $81.6 million. Net investment income, which represented about 7.9% of total revenue, was $6.9 million for the reported quarter, up 2.1% from the prior-year quarter.

Conversely, insurance loss and loss adjusted expenses (LAE) increased 5.9% year over year to $57 million (or about 69.9% of net premiums earned). As a result, total expenses of Amerisafe grew 5.9% year over year to $75.6 million, while net underwriting expense ratio improved to 22.6% from 22.8% in the year-ago quarter, due to an improvement in premiums earned.

Financial Update

Cash and cash equivalents as of Sep 30, 2013 were $116.8 million, up from $92.7 million at year end 2012. Amerisafe’s total assets as of Sep 30, 2013, were $1.3 billion, up from $1.2 billion at Dec 31, 2012. Shareholders’ equity stood at $1.3 billion at the end of the first nine months of 2013, compared to $1.2 billion at year end 2012.

Capital Deployment

Amerisafe’s Board declared a cash dividend of 8 cents a share on Oct 28, 2013. Meanwhile, the company did not buy back any shares during the third quarter. The Board has extended the ongoing share buyback program through Dec 2013. Since the initiation of the program, Amerisafe has bought back about 1.26 million shares for $22.4 million.

Performance of Other Insurers

On Oct 29, 2013, AFLAC Inc. (AFL - Free Report) reported in line third-quarter 2013 operating earnings of $1.47 per share.

On Oct 22, 2013, ACE Limited reported third-quarter 2013 operating net income of $2.49 per share, ahead of the Zacks Consensus Estimate of $2.21.

On Oct 28, 2013, Montpelier Re Holdings Ltd. reported third-quarter 2013 operating net income of $1.38 per share, beating the Zacks Consensus Estimate of 74 cents by a significant 86%.

Zacks Rank

Amerisafe currently carries a Zacks Rank #2 (Buy).

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