Given the critical sustainability factor in the current sluggish economic recovery, we are downgrading Amerisafe Inc. (AMSF) to Underperform. The company’s fourth quarter earnings were substantially lower than the Zacks Consensus Estimate.

The downside was primarily a result of a year-over-year decrease in the top line due to the soft insurance market conditions as a whole, as well as an increase in expenses. In addition, the combined ratio and operating ROE significantly deteriorated from the year-ago quarter.

Though the pricing environment is now improving somewhat, the company is expected to face an uncertainty for the next few quarters as the market weakness continues to hurt payrolls.Zacks Investment Research