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AMERISAFE (AMSF) Down 10.6% Since Earnings Report: Can It Rebound?
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A month has gone by since the last earnings report for AMERISAFE, Inc. (AMSF - Free Report) . Shares have lost about 10.6% in that time frame, underperforming the market .
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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 Q1 Earnings Lag Estimates on Lower Premiums
AMERISAFE reported first-quarter 2017 operating earnings per share of $0.71, missing the Zacks Consensus Estimate by 21%. Results also fared very poorly compared with the year-ago earnings of $1.26 per share. Earnings were affected by lower revenues stemming from a decline in premiums as the company slashed prices in order to counter a soft and competitive market.
Quarter in Detail
AMERISAFE’s total operating revenue decreased 4.7% year over year to $97.5 million. The top line also came in a bit below the Zacks Consensus Estimate of $98 million.
The company’s insurance segment reported a 5.3% decline in gross premiums written to $95.1 million, primarily due to $4.4 million in lower payroll audits and slightly lower voluntary premiums written. Net premiums earned also fell 5.3% year over year to $90.9 million.
Net investment income, which accounted for almost 8% of total revenue, increased 11% year over year to $6.7 million. The improvement was largely due to the decline in the value of an investment in a limited partnership hedge fund last year.
Insurance loss adjustment expenses increased 20.3% year over year to $56.2 million. Total expense of $78.8 million increased 16.1% year over year.
Underwriting profit plunged 56.8% year over year to $12.1 million. Also, net combined ratio deteriorated 1580 basis points to 86.6% due to a higher net loss and underwriting expense ratio. The underwriting ratio deteriorated due to lower net premiums earned as well as slightly higher compensation, insurance assessment and premium tax expense compared with the year-ago quarter.
Financial Update
AMERISAFE exited the quarter with cash and cash equivalents of $39.4 million, down 33% from year-end 2016 levels. As of Mar 31, 2017, total shareholders’ equity was $467.1 million compared with $456 million at the end of 2016.
Operating return on equity was 11.8%, down 900 basis points year over year. Book value per share as of Mar 31, 2017 was $24.29, up 2.4% from the year-end 2016 level.
Dividend and Share Repurchase Update
During the quarter, no shares were bought back under the repurchase plan. A day before the earnings release, the company declared a quarterly cash dividend of 20 cents per share, payable on Jun 23, 2017 to shareholders of record as of Jun 9, 2017.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter. In the past month, the consensus estimate has shifted downward by 26.9% due to these changes.
At this time, the stock has an average Growth Score of 'C', however its momentum is doing a bit better with a 'B'. Charting a somewhat similar path, 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 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.
Outlook
Estimates have been trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #5 (Strong Sell). We are expecting a below average return from the stock in the next few months.
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AMERISAFE (AMSF) Down 10.6% Since Earnings Report: Can It Rebound?
A month has gone by since the last earnings report for AMERISAFE, Inc. (AMSF - Free Report) . Shares have lost about 10.6% in that time frame, underperforming the market .
Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? 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 Q1 Earnings Lag Estimates on Lower Premiums
AMERISAFE reported first-quarter 2017 operating earnings per share of $0.71, missing the Zacks Consensus Estimate by 21%. Results also fared very poorly compared with the year-ago earnings of $1.26 per share. Earnings were affected by lower revenues stemming from a decline in premiums as the company slashed prices in order to counter a soft and competitive market.
Quarter in Detail
AMERISAFE’s total operating revenue decreased 4.7% year over year to $97.5 million. The top line also came in a bit below the Zacks Consensus Estimate of $98 million.
The company’s insurance segment reported a 5.3% decline in gross premiums written to $95.1 million, primarily due to $4.4 million in lower payroll audits and slightly lower voluntary premiums written. Net premiums earned also fell 5.3% year over year to $90.9 million.
Net investment income, which accounted for almost 8% of total revenue, increased 11% year over year to $6.7 million. The improvement was largely due to the decline in the value of an investment in a limited partnership hedge fund last year.
Insurance loss adjustment expenses increased 20.3% year over year to $56.2 million. Total expense of $78.8 million increased 16.1% year over year.
Underwriting profit plunged 56.8% year over year to $12.1 million. Also, net combined ratio deteriorated 1580 basis points to 86.6% due to a higher net loss and underwriting expense ratio. The underwriting ratio deteriorated due to lower net premiums earned as well as slightly higher compensation, insurance assessment and premium tax expense compared with the year-ago quarter.
Financial Update
AMERISAFE exited the quarter with cash and cash equivalents of $39.4 million, down 33% from year-end 2016 levels. As of Mar 31, 2017, total shareholders’ equity was $467.1 million compared with $456 million at the end of 2016.
Operating return on equity was 11.8%, down 900 basis points year over year. Book value per share as of Mar 31, 2017 was $24.29, up 2.4% from the year-end 2016 level.
Dividend and Share Repurchase Update
During the quarter, no shares were bought back under the repurchase plan. A day before the earnings release, the company declared a quarterly cash dividend of 20 cents per share, payable on Jun 23, 2017 to shareholders of record as of Jun 9, 2017.
How Have Estimates Been Moving Since Then?
In the past month, investors have witnessed a downward trend in fresh estimates. There has been one revision lower for the current quarter. In the past month, the consensus estimate has shifted downward by 26.9% due to these changes.
AMERISAFE, Inc. Price and Consensus
AMERISAFE, Inc. Price and Consensus | AMERISAFE, Inc. Quote
VGM Scores
At this time, the stock has an average Growth Score of 'C', however its momentum is doing a bit better with a 'B'. Charting a somewhat similar path, 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 'C'. If you aren't focused on one strategy, this score is the one you should be interested in.
Based on our scores, the stock is more suitable for momentum investors than those looking for value and growth.
Outlook
Estimates have been trending downward for the stock. The magnitude of this revision also indicates a downward shift. It's no surprise that the stock has a Zacks Rank #5 (Strong Sell). We are expecting a below average return from the stock in the next few months.