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AMERISAFE (AMSF) Stock Down 10% Despite Q1 Earnings Beat

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AMERISAFE, Inc.’s (AMSF - Free Report) shares have declined 10% since it reported first-quarter 2024 results on Apr 24. Despite an earnings beat, investors may have been worried about weakness in underwriting results inducing a deterioration in the net combined ratio. An elevated operating expense level, resulting from an increase in loss and loss adjustment expenses incurred, underwriting and other operating costs and policyholder dividends, also contributed to the downside.

AMSF reported first-quarter adjusted earnings per share (EPS) of 69 cents, which surpassed the Zacks Consensus Estimate by 4.6%. However, the bottom line dropped 16.9% year over year.

Operating revenues slid 1.3% year over year to $76 million. The top line beat the consensus mark by 1%.

AMERISAFE, Inc. Price, Consensus and EPS Surprise

AMERISAFE, Inc. Price, Consensus and EPS Surprise

AMERISAFE, Inc. price-consensus-eps-surprise-chart | AMERISAFE, Inc. Quote

Q1 Performance

Net premiums earned of $68.4 million slipped 1.1% year over year in the quarter under review but outpaced the Zacks Consensus Estimate of $68 million. The metric was hurt by lower contributions from payroll audits and related premium adjustments as a result of moderated wage inflation levels.

Despite higher reinvestment rates, net investment income dipped 0.9% year over year to $7.4 million and fell short of the consensus mark of $8 million. Fee and other income dropped 37.6% year over year.

AMERISAFE reported a pre-tax underwriting profit of $8.7 million, which fell 29.2% year over year.

Total expenses escalated 5% year over year to $59.7 million in the first quarter.

Operating net income of $13.3 million decreased 17% year over year.

The net combined ratio deteriorated 510 basis points (bps) year over year to 87.3% but came lower than the consensus mark of 90.5%. The metric suffered due to a deteriorating net underwriting expense ratio and net loss ratio.

Financial Update (as of Mar 31, 2024)

AMERISAFE exited the first quarter with cash and cash equivalents of $33.4 million, which declined 13.7% from the 2023-end level.

Total assets of $1.2 billion increased 1.1% from the figure in 2023 end.

Shareholders' equity of $301.1 million grew 3% from the 2023-end level.

Book value per share was $15.74 as of Mar 31, 2024, which advanced 3% from the 2023-end figure.

Return on average equity improved 150 bps year over year to 22.8% in the quarter under review.

Dividend Update

Management announced a quarterly cash dividend of 37 cents per share, which will be paid out on Jun 21, 2024, to its shareholders of record as of Jun 14, 2024.

Zacks Rank

AMERISAFE currently carries a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Insurers

Of the insurance industry players that have reported first-quarter 2024 results so far, the bottom-line results of Chubb Limited (CB - Free Report) , RLI Corp. (RLI - Free Report) and W. R. Berkley Corporation (WRB - Free Report) beat the respective Zacks Consensus Estimate.

Chubb reported first-quarter 2024 core operating income of $5.41 per share, which outpaced the Zacks Consensus Estimate by 2.3%. The bottom line increased 22.7% year over year. Net premiums written improved 14.1% year over year to $12.2 billion in the quarter. Net investment income of CB was $1.4 billion, up 25.7% year over year.

Property and Casualty (P&C) underwriting income was $1.4 billion, up 16.7% year over year. Global P&C underwriting income, excluding Agriculture, was $1.3 billion, up 10.9%. The P&C combined ratio improved 30 bps on a year-over-year basis to 86%. The North America Commercial P&C Insurance segment’s net premiums written increased 9.4% year over year to $4.7 billion while the Overseas General Insurance unit generated net premiums written of $3.8 billion (up 17.5% year over year).

RLI’s first-quarter 2024 operating earnings of $1.89 per share beat the Zacks Consensus Estimate, as well as the year-ago number by 16%. Operating revenues for the reported quarter were $394 million, up 17.6% year over year, driven by 17% higher net premiums earned and 21.3% higher net investment income. The top line, however, missed the consensus estimate by 0.1%. Gross premiums written of RLI increased 13% year over year to $468 million.

Net investment income increased 21% year over year to $32.8 million. The investment portfolio’s total return was 1.8% in the quarter. Underwriting income of $77.7 million increased 16%. The combined ratio deteriorated 60 bps year over year to 78.5.

W.R. Berkley reported first-quarter 2024 operating income of $1.56 per share, which beat the Zacks Consensus Estimate of $1.46 by 6.9%. The bottom line improved 56% year over year. Its net premiums written were a record $2.9 billion, up 10.7% year over year. Operating revenues were $3.2 billion, up 11.6% year over year. The top line beat the consensus estimate by 0.2%.

WRB’s net investment income surged 43.2% to a record $319.8 million, driven by a 63.2% increase in the core portfolio.  Pre-tax underwriting income increased 31.8% to $309 million. The consolidated combined ratio (a measure of underwriting profitability) improved 180 bps year over year to 88.8. Net premiums in the Insurance segment increased 11.9% year over year to $2.4 billion in the quarter, while net premiums written in the Reinsurance & Monoline Excess segment increased 4.2% year over year to $405.6 million.

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