Introduction
Amerisafe, Inc. is a specialty provider of workers’ compensation insurance focused on small to mid-sized employers engaged in hazardous industries, principally construction, trucking, logging and lumber, agriculture, manufacturing, telecommunications, and maritime. Since commencing operations in 1986, we have gained significant experience underwriting the complex workers’ compensation exposures inherent in these industries.
Asset Structure Analysis
Amerisafe ‘s total assets were $1.23 billion as of December 31, 2023, slightly down from $1.27 billion as of December 31, 2022.
Total investments were $857.8 million as of December 31, 2023, accounting for 70% of total assets.
Cash and cash equivalents were $38.7 million as of December 31, 2023, making up 3.1% of total assets.
Amounts recoverable from reinsurers were $130 million as of December 31, 2023, representing 10.6% of total assets.
Premiums receivable were $132.9 million as of December 31, 2023, constituting 10.8% of total assets.
Liquidity and Solvency
Total liabilities were $936.7 million with the debt ratio of 76.2% as of December 31, 2023.
Of total liabilities, Reserves for loss and loss adjustment expenses were $674 million.
Reserves for loss and loss adjustment expenses are provisions that are accrued. Insurance companies estimate potential future losses and related adjustment expenses and set aside reserves accordingly. These reserves are gradually amortized as actual claims are paid.
We think the debt ratio is overvalued , because its debt is very elastic.
Profitability Analysis
Amerisafe ‘s total revenues were $306.9 million, $294.7 million and $316 million in 2023, 2022 and 2021, respectively.
Net income was $62.1 million, $55.6 million and $65.8 million in 2023, 2022 and 2021, respectively.
The net profit margin was 20.2%, 18.9% and 20.8% in 2023, 2022 and 2021, respectively.
Total shareholders’ equity was $292.5 million and $317.4 million in 2023, 2022 and 2021, respectively.
The ROE was 21.2% and 17.5% in 2023 and 2022, respectively.
Cash Flow Analysis
Net cash provided by operating activities was $29.8 million, $28.2 million and $38 million in 2023, 2022 and 2021, respectively.
Dividends to shareholders were $93.3 million, $100 million and $99.9 million in 2023, 2022 and 2021, respectively.
Amerisafe ‘s operating performance in the six months ended to June 30, 2024 and the six months ended to June 30, 2023.
Amerisafe ‘s revenues were $156.3 million and $154.1 million in the six months ended to June 30, 2024 and the six months ended to June 30, 2023.
Net income was $27.9 million and $33 million in the six months ended to June 30, 2024 and the six months ended to June 30, 2023.
Conclusion
Looking at Amerisafe’s past performance, it appears that its revenue growth has reached a bottleneck.
In terms of net profit margin and return on equity (ROE), the company performs very well.
Based on the average level of net cash provided by operating activities, the average net cash flow from operations should exceed $60 million.
If the net cash provided by operating activities is more than $60 million, the company’s valuation of $931 million is reasonable.
The dividend payout is quite generous.
Amerisafe returned capital to shareholders by selling some of its held investments.
We estimate that Amerisafe’s stock price of $48.80 per share is reasonable.
Disclaimer: The content is for reference only and does not constitute investment advice.
