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Why Is Amerisafe (AMSF) Down 6.5% Since Last Earnings Report?

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It has been about a month since the last earnings report for Amerisafe (AMSF - Free Report) . Shares have lost about 6.5% in that time frame, underperforming the S&P 500.

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

AMERISAFE's Q1 Earnings Beat Estimates

AMERISAFE reported first-quarter 2023 adjusted earnings of 83 cents per share, which outpaced the Zacks Consensus Estimate by 25.8% and our estimate of 56 cents per share. The bottom line improved 1.2% year over year.

Operating revenues improved 4.1% year over year to $76.8 million. The top line beat the consensus mark by 3.2% and was higher than our estimate of $71.4 million.

The quarterly results gained momentum due to a significant increase in premiums, fees and other income and net investment income. However, the positives were partially offset by deteriorating underwriting results and an elevated expense level.

Q1 Performance

Net premiums earned by AMERISAFE amounted to $69.2 million, which increased 2.4% year over year in the first quarter. The growth was aided by positive audit premiums, despite rate declines. The figure beat the Zacks Consensus Estimate by 4.6% and our estimate of $64.7 million.

Net investment income of $7.4 million increased 21.6% year over year due to growing yields on fixed-income and cash securities. The figure beat the consensus mark by 2.6% and our estimate of $6.6 million.

Fees and other income climbed 74.3% year over year to $0.2 million in the quarter under review, beating the Zacks Consensus Estimate by 55.5% and our estimate of $0.1 million.

AMERISAFE’s pre-tax underwriting profit of $12.3 million declined 9.3% year over year.

Total expenses increased 5.1% year over year to $56.9 million in the first quarter, attributable to higher loss and loss adjustment expenses incurred and underwriting and other operating costs. However, the figure was lower than our estimate of $58.1 million.

The net combined ratio of 82.2% deteriorated 210 basis points (bps) year over year. The figure was lower than the consensus mark of 89% and our estimate of 89.8%.

Financial Update (as of Mar 31, 2023)

AMERISAFE exited the first quarter with cash and cash equivalents of $41.2 million, which decreased from $61.5 million at 2022-end.

Total assets of $1,288.3 million increased from $1,269.3 million at 2022-end.

Shareholders' equity rose 4.9% from 2022-end to $332.9 million.

Book value per share tumbled 15.1% year over year to $17.38 in the first quarter.

Return on average equity improved 390 bps year over year to 21.3% in the quarter under review.

Dividend Update

On Apr 25, 2023, its board of directors declared a quarterly cash dividend of 34 cents per share. The dividend will be paid out on Jun 23, 2023, to its shareholders of record as of Jun 16, 2023.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates.

The consensus estimate has shifted 8.33% due to these changes.

VGM Scores

At this time, Amerisafe has a poor Growth Score of F, however its Momentum Score is doing a lot better with a C. Following the exact same course, the stock was allocated a grade of C on the value side, putting it in the middle 20% 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 upward for the stock, and the magnitude of these revisions looks promising. It comes with little surprise Amerisafe has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.


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