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Why Is Amerisafe (AMSF) Up 6.1% Since Last Earnings Report?

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A month has gone by since the last earnings report for Amerisafe (AMSF - Free Report) . Shares have added about 6.1% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Amerisafe due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

AMERISAFE Earnings Break Even in Q4, Revenues Lag

AMERISAFE reported break-even fourth-quarter 2021 earnings per share against the Zacks Consensus Estimate of 86 cents and prior-year quarter’s earnings of $1.22 per share.

AMSF’s results were affected by declining rates leading to a fall in net premiums earned. Escalating costs led to dismal results. Catastrophic claim reported in the fourth quarter dampened the company’s underwriting results. Despite several headwinds, higher fee and other income partly benefited AMERISAFE’s revenues.

Quarter in Detail

AMERISAFE’s operating revenues amounted to $74 million, which fell nearly 10% year over year due to reduced net premiums earned and weaker net investment income. The top line missed the consensus mark by 1.2%.

Net premiums earned of $67.7 million tumbled 9.3% year over year in the fourth quarter due to persistently lower approved loss costs amid the states wherein the company operates, which resulted in reduced voluntary premiums. Nevertheless, payroll audits and related premium adjustments partly drove the premiums of the company.

Meanwhile, AMSF’s net investment income dropped 16% year over year to $6.1 million stemming from reduced interest rates on fixed income securities.

AMERISAFE incurred a pre-tax underwriting loss of $8.7 million in the quarter under review, which came in against the year-ago quarter’s underwriting income of $22.1 million.

Total expenses of $76.4 million escalated 45.3% year over year due to higher loss and loss adjustment expenses incurred and increased underwriting and other operating costs.

Net combined ratio of AMERISAFE deteriorated 4,250 basis points (bps) year over year to 112.9% in the fourth quarter.

Financial Update (as of Dec 31, 2021)

AMSF exited the fourth quarter with cash and cash equivalents of $70.7 million, which increased 14.5% from the 2020-end level.

Total assets were $1.4 billion, which decreased 4.6% from the figure at 2020 end.

Shareholders’ equity of $399.3 million slipped 9% from the level as of Dec 31, 2020.

Book value per share declined 9.2% year over year to $20.62.

Dividend Hike Announced

Concurrent with the fourth-quarter earnings release, AMERISAFE’s board of directors approved a 6.9% rise in the quarterly dividend. AMSF will now pay out a dividend of 31 cents per share compared with the prior payout of 29 cents. The increased dividend will be paid out on Mar 25, 2022, to shareholders of record as of Mar 11.

Full-Year Update

For 2021, AMSF’s revenues declined 6.9% year over year to $315.9 million. Full-year earnings per share was $2.82, which slumped 33.6% year over year.

Operating return on average adjusted equity for 2021 came in at 13.6%, which contracted 610 bps year over year.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed a downward trend in fresh estimates.

The consensus estimate has shifted -12.98% due to these changes.

VGM Scores

Currently, Amerisafe has a poor Growth Score of F, a grade with the same score on the momentum front. Charting a somewhat similar path, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of this revision indicates a downward shift. It's no surprise Amerisafe has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.


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