AMERISAFE, Inc. (Ticker: AMSF) "The Best
is Yet to Come"
By: Brendan Duffy, student at Marquette University
Disclosure: The AIM Equity Fund currently holds
this position. This article was written by myself, and it expresses my own
opinions. I am not receiving compensation for it and I have no business
relationship with any company whose stock is mentioned in this article.
Brief Firm Overview: Amerisafe currently
operates as an insurance holding company. This micro-cap company provides
insurance to companies that partake in dangerous lines of work such as;
construction, trucking, logging, agriculture, oil and gas, maritime and
sawmills. The company provides workers’ compensation insurance in 30 states and
the District of Columbia. Amerisafe is headquartered in Deridder, LA and was
founded in 1985.
Summary:
·
As of June 3rd
2015 AMERISAFE announced that their CFO had accepted a position with another
company and resigned all positions at AMERISAFE. After a short search process
AMSF appointed Neal Fuller who was previously Senior Vice President and CFO of
Seabright holdings, Inc.
·
On February 26, 2015 the company announced that C.
Allen Bradley, executive chairman, will retire on April 22. Bradly has been
with the company since 1994 and has held a number of different positions. He
was most recently the CEO from 2003 to 2015. Ms. Janelle Soft has been prepping
to step into his role from her position of COO. When asked about the transition
Mr. Bradley said, “After serving years as CFO, Janelle Frost’s transition to
the CEO role of AMERISAFE began when she was promoted to Chief operation
officer in 2013. When I announced my retirement in March 2015, I agreed to
remain until September 2016 to assist her in the transition to CEO.” That
transition has gone well enough that Mr. Bradley will retire five months before
scheduled.
·
Hedge funds are coming for AMSF. Capstone Asset Management, Isthmus Partners
LLC, State Board of Administration of Florida Retirement System, California
State Teachers Retirement System and lastly, TFS Capital all significantly
increased their position in the company’s stock.
AMERISAFE, Inc. (NYSE: AMSF) the AIM fund
initiated coverage for AMERISAFE on October 9, 2015. At the time the company
was thought to have an opportunity for market penetration in different regions
in the US. The company currently operates in 30 states and Washington D.C., but
is licensed to operate in 17 more states. The company has shown no signs of
growth into these new areas.
The company was
pitched in a time of decreasing unemployment rates from 7% in Q3 2014 to 5.5%
in Q3 2015, but now is seeing unemployment rates as high as 8.7%. This has not
had much effect on the stock because most of their revenue is recurring. Last
year their retention rate was above 90%.
What has the Stock done lately? The stock reached its
52 week high on October 29, 2015 after releasing earnings. Since then the stock
has moved steadily down to about the $50 mark and that did not move after the
company reported positive news in their 4th Quarter earnings. The
company has been held for less than a year.
Source: FactSet
Takeaway
I believe that
Amerisafe is still a good stock for the AIM portfolio even with the management
changes. The new CEO was groomed by Mr. Allen Bradley and the company is
confidant going forward. The driver of geographic expansion still remains in
play and I believe the company will capitalize on that market space in due
time. The stock has been steady as $50 dollars and I remain confidant with the
$60.43 price target. The Factset consensus is $60.67.
