AMERISAFE Stock Down 5.3% Since Q2 Earnings Miss

AMERISAFE, Inc.'s AMSF shares have lost 5.3% since it reported second-quarter 2024 results on Jul 29. Investors may have been worried about weakness in underwriting results inducing a deterioration in the net combined ratio. An elevated operating expense level, resulting from an increase in loss and loss adjustment expenses incurred, underwriting and other operating costs and policyholder dividends, also contributed to the downside. Improved audit premiums partially offset the negatives.

AMSF reported second-quarter adjusted earnings per share of 58 cents, which missed the Zacks Consensus Estimate by 4.9%. Moreover, the bottom line dipped 20.5% year over year.

Operating revenues improved 3.4% year over year to $76 million. The top line beat the consensus mark by 2.4%.

Q2 Performance

Net premiums earned of $68.6 million improved 4.6% year over year in the quarter under review and outpaced the Zacks Consensus Estimate of $66 million. The metric benefited from improved contributions from payroll audits and related premium adjustments as a result of persistent payroll strength.

Net investment income dipped 3.6% year over year to $7.4 million due to a reduced portfolio size. However, this was partially offset by improved reinvestment rates. The metric fell short of the consensus mark of $7.8 million. Fee and other losses were $75 million.

AMERISAFE reported a pre-tax underwriting profit of $6.5 million, which declined 31.2% year over year.

Total expenses escalated 10.7% year over year to $62.1 million in the second quarter.

Operating net income of $11.1 million decreased 20.2% year over year.

The net combined ratio deteriorated 510 basis points (bps) year over year to 90.5% and came higher than the consensus mark of 90%. The metric suffered due to a deteriorating net loss ratio.

Financial Update (as of Jun 30, 2024)

AMERISAFE exited the second quarter with cash and cash equivalents of $30.6 million, which declined 20.9% from the 2023-end level.

Total assets of $1.2 billion increased 0.4% from the figure in 2023-end.

Shareholders' equity of $301 million grew 2.9% from the 2023-end level.

Book value per share was $15.78 as of Jun 30, 2024, which improved 3.3% from the 2023-end figure.

Return on average equity deteriorated 400 bps year over year to 14.6% in the quarter under review.

Dividend Update

Management announced a quarterly cash dividend of 37 cents per share, which will be paid out on Sep 20, 2024, to its shareholders of record as of Sep 6.

Zacks Rank

AMERISAFE currently carries a Zacks Rank #4 (Sell).

Performances of Other Insurers

Of the insurance industry players that have reported second-quarter 2024 results so far, the bottom-line results of Marsh & McLennan Companies, Inc. MMC, Brown & Brown, Inc. BRO and Kinsale Capital Group, Inc. KNSL beat the Zacks Consensus Estimate.

Marsh & McLennan reported second-quarter 2024 adjusted earnings per share of $2.41, which beat the Zacks Consensus Estimate by 0.8%. The bottom line advanced 10% year over year.  Consolidated revenues rose 6% year over year to $6.2 billion. The figure also improved 6% on an underlying basis.  The top line, however, fell short of the consensus mark by 1%. MMC's adjusted operating income was $1.72 billion, which grew 11% year over year. Adjusted operating margin improved 130 bps year over year to 29%.

The Risk and Insurance Services segment's revenues were $4.02 billion, which advanced 8% year over year and 7% on an underlying basis. Adjusted operating income advanced 12% year over year to $1.34 billion. Revenues of Marsh, a unit within the segment, improved 8% year over year and 7% on an underlying basis to $3.27 billion. In the United States/Canada, underlying revenues grew 6% year over year. International operations also witnessed underlying revenue growth of 7%.  

Brown & Brown's second-quarter adjusted earnings of 93 cents per share beat the Zacks Consensus Estimate by 6.8%. The bottom line increased 17.7% year over year. Total revenues of $1.2 billion beat the consensus estimate by 3.3%. The top line improved 12.5% year over year. The upside can be primarily attributed to commission and fees, which grew 11.4% year over year to $1.1 billion. 

Organic revenues improved 10% to $1 billion. Investment income more than doubled year over year to $22 million. Adjusted EBITDAC was $420 million, up 17.3% year over year. EBITDAC margin expanded 150 bps year over year to 35.7%. 

Kinsale Capital delivered second-quarter net operating earnings of $3.75 per share, which outpaced the Zacks Consensus Estimate by 6.5%. The bottom line increased 30.4% year over year.  Operating revenues jumped 45.1% year over year to $378 million. Revenues beat the consensus estimate of $377 million. Gross written premiums of $529.8 million rose 20.9% year over year. Net written premiums climbed 17.9% year over year to $430.2 million. 

Net investment income increased 48.3% year over year to $35.8 million. Kinsale Capital's underwriting income was $76.1 million, which grew 23.6% year over year. The combined ratio deteriorated 100 bps to 77.7% in the quarter under review. The expense ratio deteriorated 10 bps to 21.1, while the loss ratio deteriorated 60 bps to 56.6.

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