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May 17, 2011
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Yesterday, Amerisafe Inc. (AMSF) announced that rating agency A.M. Best has upgraded its financial strength ratings (FSR) while affirming the positive outlook.
Accordingly, the rating agency promoted the FSR of “A” from “A-” for Amerisafe and its subsidiaries, including American Interstate Insurance Company, Silver Oak Casualty, Inc. and American Interstate Insurance Company of Texas. The rating carries an excellent status and is the third highest of A.M. Best’s 15 rating levels.
The strong FSR has been assigned on the back of Amerisafe’s intense market penetration, disciplined claims management and improved pricing that enriched operating experience in the workers' compensation market for high hazard risks, also surviving the challenging financial crisis.
These factors have helped the company in building an exceptional capital position while also generating strong operating profitability over the past few years, thereby topping the peer group.
Earnings Recap
Amerisafe’s first quarter earnings of 35 cents modestly lagged the Zacks Consensus Estimate of 39 cents and 45 cents in the year-ago quarter. Results declined owing to low underwriting profits coupled with higher-than-expected expenses, which significantly deteriorated both the combined ratio and the operating ROE.
However, the top line witnessed decent growth on higher premiums earned and marginal investment income. Nevertheless, improved book value, prudent capital management, extended share repurchase plan and a strong financial strength rating augur well for a decent mid- to long-term growth.
Overall, though the pricing environment has witnessed some improvement, the company is expected to face uncertainty for the next few quarters as the market weakness continues to hurt payrolls. Hence, the second quarter earnings results are expected to be 39 cents, down 25.8% year over year, according to the Zacks Consensus Estimate.
On Monday, the shares of Amerisafe closed at $22.28, down 1.1%, on the NASDAQ Stock Exchange.
Read the full analyst report on "AMSF"
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