American insurers not only need to increase customers by selling more policies, but also need to earn from their investments. A fluctuating underwriting and weak investment yield boost financial and operating risks. Although the pricing environment and industry demand has witnessed some improvement, the new policies the Fed will execute will certainly impose changes in the asset allocation of these firms. Which insurance companies will better handle this new context?
Here, I take a look at three America-based insurers and try to figure this out.
The company’s first-quarter performance improved in year-over-year terms thanks to higher premiums and investment income, which improved the top line and underwriting profit. Net income grew 5.2% to $8.8 million and total revenue was $86.5 million, up 9.9% from $78.7 million in the prior-year quarter.
Despite the economic turmoil, policy renewals have been consistent for Amerisafe, Inc. (NASDAQ:AMSF), averaging 91.5%. This enhanced employer loyalty and policy retention is backed by the company’s specialized knowledge and extensive experience. Hence, Amerisafe, Inc. (NASDAQ:AMSF) enjoys a more stable business than many of its peers. After a period of negative growth, Amerisafe, Inc. (NASDAQ:AMSF) managed to improve its top line, which grew 13.1% in 2011 and 14.5% in 2012. If this trend continues, investors will see bigger profits ahead.
Plus, the company makes more investment income from its premiums compared to most of the industry, as the time period between the receipt of premiums and the ultimate settlement of claims is much longer than most competitors’ business lines.
I am sure that Amerisafe, Inc. (NASDAQ:AMSF)’s prudent capital management, risk-free balance sheet, and financial strength will provide decent long-term growth.
The company’s first quarter EPS of $1.69 lagged the year-ago quarter’s earnings of $1.74. Operating earnings decreased 2.9% to $790 million. AFLAC Incorporated (NYSE:AFL) is experiencing poor financial performance and a disappointing sales outlook for its primary products in Japan, which represents 78% of total revenue. An unfavorable dollar/yen exchange rate has punished the company, producing lower premiums and investment income in the country. On the other side, the U.S. operations show some improvement, showing healthy capital ratios and reduced expenses.
AFLAC Incorporated (NYSE:AFL)’s top line remains sufficiently exposed to a harsh operating environment.