AMERISAFE, Inc. ( AMSF Quick Quote AMSF - Free Report) is well-poised to grow due to rising audit premiums and net investment income. Given the company’s experience in the high-hazard business, it expects to retain policyholders and attract new business in the future.
AMERISAFE, with a market cap of $986.9 million, is a leading specialty provider of workers’ compensation insurance, which markets and underwrites its insurance through subsidiaries. The company focuses on providing coverage to small to mid-sized employers engaged in hazardous industries. It primarily operates in trucking, logging, construction, agriculture, maritime and other industries.
Zacks Rank & Price Rally
AMERISAFE currently carries a Zacks Rank #2 (Buy). Its shares gained 5.3% in the quarter-to-date period compared with the
industry’s 0.3% rise. Image Source: Zacks Investment Research Return on Equity (ROE)
ROE, a measure reflecting how efficiently a company utilizes shareholders’ money, was 16.9% in the trailing 12 months, better than the industry’s average of 15.2%.
The Zacks Consensus Estimate for AMERISAFE’s 2023 earnings is pegged at $2.90 per share. It has witnessed two upward estimate revisions in the past 30 days against none in the opposite direction. The company beat earnings estimates in each of the last four quarters.
The consensus estimate for 2023 revenues is pegged at $303.8 million, indicating 1.5% growth from the prior-year reported figure.
Due to its vast experience as a provider of workers’ compensation insurance in hazardous industries and a disciplined risk selection approach, AMERISAFE fetches higher premiums. A rebounding economy, a decline in COVID-variant spikes and enhanced agent relations are likely to support its new business growth. Strong audit premiums are expected to drive premium revenues in the future.
Net investment income is expected to gain from higher income from higher yields on fixed maturity securities and cash and cash equivalents. The metric increased 21.6% in the first quarter.
The company’s strong financial flexibility, with no debt and an increasing operating cash flow, is impressive. In the first quarter, the company generated an operating cash flow of $13.5 million, up 89.2% from the prior-year figure.
The company’s financial flexibility allows it to engage in shareholder-friendly moves. The company handsomely returns capital to investors through share repurchases and dividends. It did not repurchase any shares in the first quarter but paid a quarterly cash dividend of 34 cents per share. Its dividend yield matched that of the industry at 2.6%. As of Mar 31, 2023, $12.6 million was left under the authorized share buyback program.
A Risk to Keep an Eye On
There are a few factors that are impeding growth of AMSF. The company faces stiff market competition, which somewhat affects its pricing. Also, product concentration risks and elevated expenses level are concerning.
Total expenses increased 5.1% year over year to $56.9 million in the first quarter. This can affect its future operations. Nevertheless, a systematic and strategic plan will drive AMSF’s long-term growth.
Other Key Picks
Some other top-ranked stocks in the broader
finance space are Unum Group ( UNM Quick Quote UNM - Free Report) , RLI Corp. ( RLI Quick Quote RLI - Free Report) and Reinsurance Group of America, Incorporated ( RGA Quick Quote RGA - Free Report) . Each of these companies presently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here .
The bottom line of Unum Group outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, the average surprise being 18.6%. The consensus mark for UNM’s 2023 earnings has moved 9.3% north in the past 30 days.
The bottom line of RLI outpaced the Zacks Consensus Estimate in each of the trailing four quarters, the average surprise being 43.5%. The consensus mark for RLI’s 2023 earnings has moved 6.6% north in the past 30 days.
The bottom line of Reinsurance Group of America outpaced the Zacks Consensus Estimate in three of the trailing four quarters and missed once, the average surprise being 56.9%. The consensus mark for RGA’s 2023 earnings has moved 12.5% north in the past 30 days.