Amerisafe Upped to Strong Buy - Analyst Blog

On Mar 18, Zacks Investment Research upgraded Amerisafe Inc. AMSF by a notch to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

Amerisafe has been experiencing rising earnings estimates on the back of strong fourth-quarter 2013 results and a significant growth momentum. Additionally, this workers' compensation insurance provider outperformed the 6-month Nasdaq index, which posted growth of 14.3% against a robust return of 27% clocked by the company.

On Feb 26, Amerisafe reported fourth-quarter 2013 operating earnings per share of 90 cents, which outpaced the Zacks Consensus Estimate of 55 cents, delivering a positive earnings surprise of 63.6%. Furthermore, the result significantly outpaced the year-ago quarter number of 49 cents.

Strong double-digit top-line growth, higher investment income   and reduced total expenses marked the highlights of the quarter. Higher premiums, favorable reserves and lower-than-expected growth in loss and loss adjusted expenses also boosted underwriting profits, margins and the bottom line. Moreover, capital position remained sturdy with appreciated investment portfolio, return on equity (ROE) and book value per share.

Along with intense focus on improving underwriting results and ROE, Amerisafe efficient capital deployment initiatives and strong creditworthiness score well with the ratings agencies. Last month, the company also hiked its regular dividend payout by 50%, boosting investors' confidence in the stock.

Based on Amerisafe's fundamental strength and prudent risk management, the Zacks Consensus Estimate for 2014 moved north by 1.5% to $2.67 per share over the last 30 days. Meanwhile, the estimate for 2015 rose 8.1% to $3.19 a share during the same period.

Moreover, the Most Accurate Estimate for Amerisafe's 2014 and 2015 earnings stands at $2.70 and $3.32 a share, resulting in an Earnings ESP of +1.1% and +4.1%, respectively. Furthermore, no downward revision in estimates was witnessed for both the years.

Other Stocks to Consider

Investors eyeing the insurance industry may also consider other top-ranked players such as Global Indemnity Plc GBLI, EMC Insurance Group Inc. EMCI and Navigators Group Inc. NAVG. All these stocks sport the same Zacks Rank as Amerisafe.