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Reasons for Betting on Amerisafe (AMSF) to Boost Portfolio

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Amerisafe, Inc. (AMSF - Free Report) has been exhibiting a strong operating performance, reflected by better-than-expected underwriting results for the past many years. The results were driven by a favorable prior-year reserve development.

This presently Zacks Rank #2 (Buy) stock has seen the Zacks Consensus Estimate for current-year earnings being revised 15.3% upward over the past 60 days, which reflects analysts’optimism.  Earnings estimate for 2021 has also moved 4.3% north over the same time period. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Amerisafe has 34 years of operating history to its credit as a specialty provider of workers’ compensation insurance for small to midsize employers engaged in high-hazard industries. Amid this pandemic, those industries appear to be less impacted than businesses like retail and hospitality. The high-risk insurance business is able to rake in higher premiums owing to inherent workplace dangers associated with workers' compensation policy.

The company is known for its balance sheet strength, strong operating performance, neutral business profile and appropriate enterprise risk management.

It 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 its active claims management generated solid underwriting results.

Amerisafe also boasts a robust operating platform. Through its extensive cost-containment initiatives, the company executes one of the most efficient operations in the workers’ compensation industry. This, in turn, enabled it to maintain its operating return on equity at 20%, which is above the industry’s ROE of 12%.

The company also has limited exposure to COVID-19 in its voluntary book of business. Thus, it doesn’t expect much pandemic-related claims even though the top line may remain under pressure.

Also, the company’s capital management policy via acquisitions, steady dividend and annual payouts since 2014 along with share buybacks has boosted shareholders’ value.

In the past six months, the stock has lost 4.6% against the industry’s growth of 31%. 

This price performance looks muted in comparison to other movements in the same space as all three companies, namely Aflac Inc. (AFL - Free Report) , Employers Holdings Inc. (EIG - Free Report) and Unum Group (UNM - Free Report) have gained 8.11%, 22.2% and 37.5%, respectively, during the same time frame

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