On Dec 21, we issued an updated research report on Amerisafe Inc. (AMSF Quick QuoteAMSF - Free Report) . Amerisafe is a specialty provider of workers’ compensation insurance. The company has been capitalizing on its strong underwriting results since 2011 and has improved both in terms of revenues and margins through organic and inorganic growth strategies. Impressive management practices, better product pricing, effective loss control and active claims management system have helped the company achieve operational excellence.

With solid operating and financial performance in the last few years, Amerisafe has acquired a strong position in the workers' compensation market. Also, the company specializes in insuring employers engaged in hazardous industries.

Shares of Amerisafe have seen favorable price movement since the beginning of the year. Year to date, the stock has gained 21.51% compared with 20.27% gained by the Zacks categorized Accident and Health Insurance industry. This reflects shareholders’ confidence on the stock. We note that the company remains committed to enhancing investors’ value through continued dividend payouts and share buybacks. This has also helped it to generate positive return on equity (ROE), which improved 280 basis points to 16.3% at the end of the first nine months of 2016 signaling at the company’s future earnings visibility.

YTD PRICE CHART

However, the persistently soft interest rate has been limiting the company’s net investment income. During the first nine months of 2016, Amerisafe’s net investment declined nearly 2% from the prior-year period. Also, the company’s product concentration and adverse reserve development might limit earnings growth.

Amerisafe has been witnessing an increase in total expenses since 2011. The trend was observed in the third quarter as well, wherein the company incurred a 0.8% year-over-year increase in the total expenses. Going ahead, a fluctuating pricing cycle and sluggish investment yield are likely to increase financial and operating risks. Hence, it remains to be seen how the company performs in the upcoming quarters.

Zacks Rank and Stocks to Consider

Amerisafe presently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks from the insurance industry that warrant a look include Alleghany Corporation , First American Financial Corporation (FAF Quick QuoteFAF - Free Report) and Arch Capital Group Ltd. (ACGL Quick QuoteACGL - Free Report) . Each of these stocks sports a Zacks Rank #1(Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Alleghany Corporation deals in Property & Casualty reinsurance and insurance businesses in the U.S. and internationally. The company recorded positive surprises in three of the last four quarters with an average beat of 20.52%.

First American Financial is a leading provider of title insurance and settlement services to the real estate and mortgage industries in the U.S. The company beat estimates in all the trailing four quarters with an average beat of 14.32%

Arch Capital offers property, casualty, and mortgage insurance and reinsurance products worldwide. It posted positive surprises in all of the last four quarters with an average beat of 9.27%.

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