Amerisafe's (AMSF) Q4 Earnings Miss As Revenues Decline

Amerisafe Inc. (NASDAQ:AMSF) reported fourth-quarter 2017 operating earnings per share of 69 cents, missing the Zacks Consensus Estimate by 16.9%. Also, earnings slumped 33.7% year over year due to a decline in revenues.

Quarter in Detail

Amerisafe’s total operating revenues decreased 3.7% from the prior-year quarter to $94.9 million, but surpassed the Zacks Consensus Estimate by 2.3%.

Gross written premiums in the quarter were up 0.6% to $81.1 million, primarily due to increase in payroll audits and related premium adjustments, partly offset by declines in voluntary premiums.

AMERISAFE, Inc. Price, Consensus and EPS Surprise

AMERISAFE, Inc. Price, Consensus and EPS Surprise | AMERISAFE, Inc. Quote

Net investment income decreased 6.9% year over year to $7.3 million. This was mainly due to increase in the value of an investment in a limited partnership hedge fund in the year-ago quarter.

Total expenses came in at $77.14 million, up 9% from the year-ago quarter led by higher loss and loss adjustments incurred, and underwriting and other operating costs.

Net combined ratio, a measure of profitability (lower the better) was 88.3%, deteriorating 1150 basis points (bps) year over year.

The company incurred a one-time non-cash charge of $12.6 million in the fourth quarter, on account of estimated impact of revaluation of its net deferred tax assets pursuant to the Tax Reform Act enacted in December.

Financial Update

Amerisafe exited the quarter with cash and cash equivalents of $55.56 million, down 5.7% year over year.

As of Dec 31, 2017, total shareholders’ equity was $425.4 million, down 6.7% from the year-ago quarter.

Operating return on equity was 11.4%, down 530 bps year over year.
Book value per share as of Dec 31, 2017 was $22.10, down 6.8% from the prior-year quarter.

Dividend Hike, Share Repurchase Nil

On Feb 22, 2018, the company increased its regular quarterly dividend by 10% to 22 cents per share. This increased dividend will be payable on Mar 23, 2018 to shareholders of record as of Mar 9, 2018.

During the quarter, no shares were repurchased under the company’s share repurchase plan.

Our Take

Amerisafe’s results reflect continued suffering from softness in workers compensation market, which has been pressurizing revenues since the past three years. Increase in expenses is a drag on margins. However, its efficient claims management, favorable loss and frequency trends, prudent reserve analytics and improved operating leverage should be fruitful for the company.

Zacks Rank

Amerisafe carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other Companies in the Finance Sector

Among the other firms in the accident and health sector that have reported fourth-quarter earnings so far, Employers Holdings, Inc. (NYSE:EIG) , Aflac Inc. (NYSE:AFL) and Unum Group (NYSE:UNM) beat their respective Zacks Consensus Estimate by 89.29%, 3.23% and 4.63%, respectively.

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