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AMERISAFE (AMSF) Q2 Earnings Beat, Rise Y/Y on Lower Expenses
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AMERISAFE, Inc.’s (AMSF - Free Report) second-quarter 2021 earnings of $1.04 per share outpaced the Zacks Consensus Estimate by 42.47%. The bottom line rose 4% year over year, courtesy of lower expenses, partly offset by a decline in premium.
Operating revenues dropped 7.3% year over year to $77 million and missed the Zacks Consensus Estimate by 1.8% as well. Lower premium written as well as a weak net investment income induced this downfall.
Net premiums written declined 8.2% year over year to $71.2 million on account of lower voluntary premiums, partly offset by an increase in payroll audits and a higher related premium adjustment. Pre-tax underwriting profit of $17.9 million rose 9.4% year over year.
Net investment income fell 8.1% year over year to $6.73 million due to reduced interest rates on fixed income securities.
Lower Expenses Save the Bottom Line
Total expenses of $52 million were down 13% from the prior-year quarter’s level owing to lower policyholder dividends, underwriting expenses as well as loss expenses. Net combined ratio (a measure of insurer’s profitability) of 74.4% improved 410 basis points (bps) year over year. Lower the combined ratio, the better.
Operating return on average equity was 20.8 %, down 50 basis points year over year, reflecting weaker profitability.
As of Jun 30, 2021, book value per share came in at $57.54, down 6.8% year over year.
Financial Update (as of Jun 30, 2021)
The company exited the second quarter with cash and cash equivalents of $57.54 million, down nearly 46% from the level at 2020 end. Total assets were up 2.7% to $1.5 billion from the level at 2020 end. Shareholders’ equity was $468.4 million, up 6.7% from the 2020-end level.
Our Take
AMERISAFE's revenues remained under pressure due to soft pricing. Its product concentration due to an intense focus on workers' compensation insurance line reduces diversification benefits. Low interest rates, which weigh on investment income, are yet another headwind.
The company’s niche presence in high-hazard risk insurance makes it a specialized player. It has a clean balance sheet with no debt, which provides plenty of financial flexibility to fund operations and meet its financial obligations. The company's strong cash flows enable it to engage in shareholder-friendly moves through dividend hikes. Shares of the company have underperformed its industry in a year, falling 1.2% against the industry’s growth of 18.4%.
Zacks Rank and Some Other Winners
Amerisafe carries a Zacks Rank #3 (Hold), currently.
Earnings of other companies in the insurance space including The Hartford Insurance Services Group, Inc. (HIG - Free Report) , Aflac Inc. (AFL - Free Report) and W.R.Berkley Corp. (WRB - Free Report) beat the second-quarter estimates by 75.2%, 25.2% and 21.9%, respectively.
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AMERISAFE (AMSF) Q2 Earnings Beat, Rise Y/Y on Lower Expenses
AMERISAFE, Inc.’s (AMSF - Free Report) second-quarter 2021 earnings of $1.04 per share outpaced the Zacks Consensus Estimate by 42.47%. The bottom line rose 4% year over year, courtesy of lower expenses, partly offset by a decline in premium.
AMERISAFE, Inc. Price, Consensus and EPS Surprise
AMERISAFE, Inc. price-consensus-eps-surprise-chart | AMERISAFE, Inc. Quote
Top-Line Decline
Operating revenues dropped 7.3% year over year to $77 million and missed the Zacks Consensus Estimate by 1.8% as well. Lower premium written as well as a weak net investment income induced this downfall.
Net premiums written declined 8.2% year over year to $71.2 million on account of lower voluntary premiums, partly offset by an increase in payroll audits and a higher related premium adjustment. Pre-tax underwriting profit of $17.9 million rose 9.4% year over year.
Net investment income fell 8.1% year over year to $6.73 million due to reduced interest rates on fixed income securities.
Lower Expenses Save the Bottom Line
Total expenses of $52 million were down 13% from the prior-year quarter’s level owing to lower policyholder dividends, underwriting expenses as well as loss expenses. Net combined ratio (a measure of insurer’s profitability) of 74.4% improved 410 basis points (bps) year over year. Lower the combined ratio, the better.
Operating return on average equity was 20.8 %, down 50 basis points year over year, reflecting weaker profitability.
As of Jun 30, 2021, book value per share came in at $57.54, down 6.8% year over year.
Financial Update (as of Jun 30, 2021)
The company exited the second quarter with cash and cash equivalents of $57.54 million, down nearly 46% from the level at 2020 end. Total assets were up 2.7% to $1.5 billion from the level at 2020 end. Shareholders’ equity was $468.4 million, up 6.7% from the 2020-end level.
Our Take
AMERISAFE's revenues remained under pressure due to soft pricing. Its product concentration due to an intense focus on workers' compensation insurance line reduces diversification benefits. Low interest rates, which weigh on investment income, are yet another headwind.
The company’s niche presence in high-hazard risk insurance makes it a specialized player. It has a clean balance sheet with no debt, which provides plenty of financial flexibility to fund operations and meet its financial obligations. The company's strong cash flows enable it to engage in shareholder-friendly moves through dividend hikes. Shares of the company have underperformed its industry in a year, falling 1.2% against the industry’s growth of 18.4%.
Zacks Rank and Some Other Winners
Amerisafe carries a Zacks Rank #3 (Hold), currently.
Earnings of other companies in the insurance space including The Hartford Insurance Services Group, Inc. (HIG - Free Report) , Aflac Inc. (AFL - Free Report) and W.R.Berkley Corp. (WRB - Free Report) beat the second-quarter estimates by 75.2%, 25.2% and 21.9%, respectively.
You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.