On Jun 28, 2014, Zacks Investment Research downgraded
) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Amerisafe has witnessed sharp downward estimate revisions since it
reported first-quarter 2014 earnings that lagged the Zacks
Consensus Estimate. Shares of this insurer have declined 5.2% since
it reported first-quarter results to close at $40.31 in the last
trading session. Given the absence of any significant near-term
growth catalyst amid a moderate growth momentum, it has more
On Apr 30, Amerisafe reported first-quarter earnings per share of
56 cents, missing the Zacks Consensus Estimate by 11%. However,
earnings increased year over year due to higher premiums and
lower-than-expected decline in investment income.
Amerisafe incurred higher loss and loss adjustment expenses (LAE)
compared with the prior-year quarter. Total expenses also increased
from the first quarter of 2013 and underwriting expense ratio
weakened due to higher underwriting and operating costs. These
offset the positive impacts of the improvement in top line .
Additionally, the sharp increase of unemployment in the economy has
hampered the investment portfolio of Amerisafe. The aforementioned
factors may also have hindered share buybacks in all of 2012 and
2013. Given the current economic volatility, any significant
improvement is unlikely in the near future.
Moreover, higher underwriting expenses also withheld the desired
underwriting profitability of Amerisafe. Although combined ratio
showed some year over year improvement it deteriorated sequentially
by 1270 basis points.
The Zacks Consensus Estimate for 2014 decreased 7.8% to $2.47 per
share over the last 60 days. For 2015, most of the estimates were
revised downward over the last 60 days, sinking the Zacks Consensus
Estimate by 7.2% to $2.98 per share.
Other Stocks to Consider
Better-ranked players in the insurance space that look attractive
at current levels include
China Life Insurance Co. Ltd.
Lincoln National Corp.
). All these stocks have a Zacks Rank #2 (Buy).
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AMERISAFE INC (AMSF): Free Stock Analysis
LINCOLN NATL-IN (LNC): Free Stock Analysis
CHINA LIFE INS (LFC): Free Stock Analysis
UNUM GROUP (UNM): Free Stock Analysis Report
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