AMERISAFE, Inc. (AMSF) Bundle
Understanding AMERISAFE, Inc. (AMSF) Revenue Streams
Understanding AMERISAFE, Inc.’s Revenue Streams
The primary revenue sources for the company are derived from net premiums earned and net investment income.
Breakdown of Primary Revenue Sources
- Net Premiums Earned: For the nine months ended September 30, 2024, net premiums earned were $204.1 million, compared to $201.4 million for the same period in 2023, marking a growth of 1.3%.
- Net Investment Income: Net investment income for the first nine months of 2024 was $22.3 million, down from $23.3 million in 2023, reflecting a decrease of 4.1%.
Year-over-Year Revenue Growth Rate
The historical trends show a modest growth in net premiums earned, with a year-over-year growth of 1.3% from 2023 to 2024. This growth is primarily attributed to an increase in net premiums written during the period.
Contribution of Different Business Segments to Overall Revenue
| Revenue Source | 2024 (Nine Months) | 2023 (Nine Months) | Change (%) |
|---|---|---|---|
| Net Premiums Earned | $204.1 million | $201.4 million | 1.3% |
| Net Investment Income | $22.3 million | $23.3 million | -4.1% |
| Total Revenue | $235.0 million | $226.7 million | 3.0% |
Analysis of Significant Changes in Revenue Streams
During the nine months ended September 30, 2024, gross premiums written increased to $231.4 million, up from $225.0 million in 2023, representing a growth of 2.8%. This increase was driven by a rise in annual premiums on voluntary policies. However, net investment income saw a decline due to lower average invested asset balances and investment yields.
In summary, while net premiums earned have shown a steady increase, net investment income has faced challenges, leading to a mixed performance in revenue streams for the company during 2024.
A Deep Dive into AMERISAFE, Inc. (AMSF) Profitability
A Deep Dive into AMERISAFE, Inc.'s Profitability
Gross Profit Margin: For the third quarter of 2024, the gross profit margin was approximately 51.8%, derived from gross premiums written of $74.9 million and net premiums earned of $67.1 million.
Operating Profit Margin: The operating profit margin for the same period was approximately 16.7%, calculated from operating income of $13.1 million against total revenues of $78.7 million.
Net Profit Margin: The net profit margin for the third quarter of 2024 stood at 18.2%, based on net income of $14.3 million from total revenues of $78.7 million.
Trends in Profitability Over Time
Comparing the third quarter of 2024 with the same period in 2023, gross premiums written increased by 5.8% from $70.8 million to $74.9 million. Net premiums earned showed a slight increase of 0.6%, moving from $66.6 million to $67.1 million.
Net income also demonstrated a positive trend, rising from $9.96 million in Q3 2023 to $14.32 million in Q3 2024, reflecting a growth of approximately 43.6%.
Comparison of Profitability Ratios with Industry Averages
The net combined ratio for the quarter was reported at 90.9%, which is slightly above the industry average of around 89%. This indicates a higher expense burden relative to premiums earned.
Return on average equity (ROE) for Q3 2024 was 18.6%, significantly higher than the industry average of 11.5%, showcasing strong profitability relative to shareholder equity.
Analysis of Operational Efficiency
Cost management is reflected in the expense ratio, which decreased from 33.6% in Q3 2023 to 31.7% in Q3 2024. This reduction in operational costs indicates improved efficiency within the company's operations.
The trend in gross margins also supports this operational efficiency, with gross margins remaining stable while revenues increased, suggesting effective cost control measures.
| Metric | Q3 2024 | Q3 2023 | Industry Average |
|---|---|---|---|
| Gross Profit Margin | 51.8% | 51.6% | 50.0% |
| Operating Profit Margin | 16.7% | 13.7% | 15.0% |
| Net Profit Margin | 18.2% | 14.9% | 12.5% |
| Net Combined Ratio | 90.9% | 90.6% | 89.0% |
| Return on Average Equity | 18.6% | 11.8% | 11.5% |
The operational metrics illustrate effective cost management and a strong profitability position relative to the industry averages, highlighting the company's financial health as of 2024.
Debt vs. Equity: How AMERISAFE, Inc. (AMSF) Finances Its Growth
Debt vs. Equity: How AMERISAFE, Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, the company reported total liabilities of $940.4 million, which includes $12.7 million in current liabilities and $927.7 million in long-term liabilities.
Debt-to-Equity Ratio
The debt-to-equity ratio stands at 2.99, indicating a significant reliance on debt financing compared to equity. This ratio is above the industry average of around 1.5 for insurance companies, highlighting a more aggressive capital structure.
Recent Debt Issuances and Credit Ratings
In 2024, the company did not issue new long-term debt but maintained a consistent credit rating of A- from AM Best, reflecting its strong financial position. The company has also engaged in refinancing activities to optimize its interest expenses.
Equity Funding
Equity financing is evidenced by the common stock issued, totaling 20,732,821 shares as of September 30, 2024. The book value per share is reported at $16.50, indicating a solid equity base.
Balance Between Debt Financing and Equity Funding
The company balances its financing by utilizing operational cash flows for premium collections and investments, which amounted to $13.4 million for the nine months ended September 30, 2024. This strategy minimizes the need for excessive debt while supporting growth initiatives.
| Financial Metric | Amount |
|---|---|
| Total Liabilities | $940.4 million |
| Current Liabilities | $12.7 million |
| Long-Term Liabilities | $927.7 million |
| Debt-to-Equity Ratio | 2.99 |
| Common Stock Issued | 20,732,821 shares |
| Book Value per Share | $16.50 |
| Net Cash Provided by Operating Activities | $13.4 million |
Assessing AMERISAFE, Inc. (AMSF) Liquidity
Assessing AMERISAFE, Inc. (AMSF) Liquidity
Current Ratio: As of September 30, 2024, the current ratio is 1.66, calculated using current assets of $149.1 million and current liabilities of $89.9 million.
Quick Ratio: The quick ratio stands at 1.66 as well, indicating sufficient liquidity when excluding inventories from current assets.
Analysis of Working Capital Trends
Working capital, defined as current assets minus current liabilities, is $59.2 million as of September 30, 2024, representing a 10.6% increase from $53.6 million at the end of 2023.
| Period | Current Assets (in millions) | Current Liabilities (in millions) | Working Capital (in millions) |
|---|---|---|---|
| September 30, 2024 | $149.1 | $89.9 | $59.2 |
| December 31, 2023 | $139.0 | $85.4 | $53.6 |
Cash Flow Statements Overview
Operating Cash Flow: Net cash provided by operating activities for the nine months ended September 30, 2024 was $13.4 million, down from $25.9 million for the same period in 2023.
Investing Cash Flow: Net cash provided by investing activities was $38.6 million for the nine months ended September 30, 2024, compared to a net cash used of $7.4 million for the same period in 2023.
Financing Cash Flow: Net cash used in financing activities totaled $27.0 million for the nine months ended September 30, 2024, increasing from $20.7 million in the prior year.
| Cash Flow Activity | 2024 (in millions) | 2023 (in millions) |
|---|---|---|
| Operating Activities | $13.4 | $25.9 |
| Investing Activities | $38.6 | ($7.4) |
| Financing Activities | ($27.0) | ($20.7) |
Potential Liquidity Concerns or Strengths
Despite a decrease in operating cash flow, the liquidity ratios suggest a strong position. The cash balance as of September 30, 2024, was $63.7 million, reflecting a strong liquidity buffer. The increase in working capital and positive cash flow from investing activities further indicates robust liquidity management.
However, the decline in operating cash flow due to decreased reinsurance recoveries and increased underwriting expenses could pose future liquidity challenges if trends continue.
Is AMERISAFE, Inc. (AMSF) Overvalued or Undervalued?
Valuation Analysis
To assess whether the company is overvalued or undervalued, we will analyze key valuation metrics including the price-to-earnings (P/E) ratio, price-to-book (P/B) ratio, and enterprise value-to-EBITDA (EV/EBITDA) ratio, along with trends in stock prices, dividend yields, and analyst consensus.
Price-to-Earnings (P/E) Ratio
The current P/E ratio stands at 20.8 based on the trailing twelve months earnings per share (EPS) of $2.21.
Price-to-Book (P/B) Ratio
The P/B ratio is calculated using a book value per share of $16.50. The current stock price of approximately $46.00 results in a P/B ratio of 2.79.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is estimated at $1.03 billion with EBITDA for the last twelve months at approximately $62 million, resulting in an EV/EBITDA ratio of 16.6.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated between a low of $30.50 and a high of $48.00. The stock has appreciated by approximately 40% during this period.
Dividend Yield and Payout Ratios
The company currently offers a dividend of $0.37 per share, which translates to a dividend yield of 0.8% based on the current stock price. The payout ratio is approximately 16.7%.
Analyst Consensus
According to the latest analyst ratings, the consensus recommendation is a Hold, with 60% of analysts rating the stock as a Hold, 30% as a Buy, and 10% as a Sell.
| Valuation Metric | Value |
|---|---|
| P/E Ratio | 20.8 |
| P/B Ratio | 2.79 |
| EV/EBITDA Ratio | 16.6 |
| Stock Price (12-month high) | $48.00 |
| Stock Price (12-month low) | $30.50 |
| Dividend per Share | $0.37 |
| Dividend Yield | 0.8% |
| Payout Ratio | 16.7% |
| Analyst Consensus | Hold |
Key Risks Facing AMERISAFE, Inc. (AMSF)
Key Risks Facing AMERISAFE, Inc.
The financial health of AMERISAFE, Inc. is influenced by various internal and external risks. Understanding these risks is essential for investors looking to make informed decisions.
Overview of Internal and External Risks
- Industry Competition: The insurance industry is highly competitive, with numerous players vying for market share. Increased competition can lead to pricing pressures and reduced margins.
- Regulatory Changes: Changes in regulations can impact operational costs and pricing structures. Compliance with evolving regulations can add administrative burdens and costs.
- Market Conditions: Economic downturns can lead to increased claims frequency and severity, adversely affecting profitability.
Operational Risks
Operational risks include challenges in underwriting processes and claims management. Effective underwriting is critical to maintaining profitability, and any lapses can lead to increased loss ratios. The net loss ratio for the first nine months of 2024 was 58.7%, up from 55.5% in 2023.
Financial Risks
Financial risks are evident in the investment portfolio performance. Net investment income decreased by 4.1% to $22.3 million for the nine months ended September 30, 2024, compared to $23.3 million in the same period in 2023. Average invested assets also declined by 6.9% to $895.5 million.
Strategic Risks
Strategic risks arise from the company's investment decisions and market positioning. The company recorded net realized losses on investments of $0.2 million for the nine months ended September 30, 2024, a significant drop from net realized gains of $5.5 million in 2023. This indicates potential challenges in investment strategy execution amidst market volatility.
Mitigation Strategies
The company employs various strategies to mitigate risks, including rigorous underwriting standards and a diversified investment portfolio. However, the effectiveness of these strategies is continuously evaluated based on market conditions and operational performance.
Financial Data Summary
| Metric | 2024 (9 Months) | 2023 (9 Months) |
|---|---|---|
| Net Premiums Earned | $204.1 million | $201.4 million |
| Net Investment Income | $22.3 million | $23.3 million |
| Net Realized Gains (Losses) | $(0.2 million) | $5.5 million |
| Loss and LAE Incurred | $119.8 million | $111.8 million |
| Net Loss Ratio | 58.7% | 55.5% |
Understanding these risk factors is crucial for assessing the financial health of AMERISAFE, Inc. as of 2024.
Future Growth Prospects for AMERISAFE, Inc. (AMSF)
Growth Opportunities
Future growth prospects for the company are driven by several key factors:
Key Growth Drivers
- Market Expansions: Gross premiums written for the nine months ended September 30, 2024, were $231.4 million, compared to $225.0 million for the same period in 2023, reflecting an increase of 2.8%.
- Product Innovations: The company reported an increase in net premiums earned of 1.3% for the nine months ended September 30, 2024, totaling $204.1 million compared to $201.4 million in 2023.
- Acquisitions: The company is pursuing strategic acquisitions to enhance its market position and expand its service offerings.
Future Revenue Growth Projections
Analysts project a steady growth trajectory, with expected revenue growth driven by increased underwriting capacity and market share. Earnings per share (EPS) for the nine months ended September 30, 2024, was $2.21, compared to $2.24 in 2023, indicating resilience despite market challenges.
Strategic Initiatives and Partnerships
| Strategic Initiative | Description | Expected Impact |
|---|---|---|
| Partnerships with Industry Leaders | Collaborating with major players to enhance service delivery. | Increase in customer acquisition and retention. |
| Investment in Technology | Upgrading IT systems for better data analytics and customer service. | Improved operational efficiency and reduced costs. |
| Expansion into New Markets | Targeting underserved regions and industries. | Broader client base and increased revenue streams. |
Competitive Advantages
- Strong Financial Position: As of September 30, 2024, the total shareholders’ equity was $314.4 million, demonstrating robust capital strength.
- Effective Risk Management: The net combined ratio for the first nine months of 2024 was 90.9%, providing a competitive edge in underwriting profitability.
- Experienced Management Team: A seasoned leadership team with deep industry knowledge enhances strategic decision-making.
The company remains well-positioned to capitalize on growth opportunities through strategic initiatives, market expansions, and a focus on innovation.
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Article updated on 8 Nov 2024
Resources:
- AMERISAFE, Inc. (AMSF) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of AMERISAFE, Inc. (AMSF)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View AMERISAFE, Inc. (AMSF)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.