Amerisafe Inc. (AMSF) said on Monday that it will redeem all of its 250,000 outstanding convertible stock of Series C and Series D, effective Dec 31, 2009.
 
Amerisafe will pay $103.50 per preferred stock or a total of $25.9 million in redeeming all of the outstanding shares. The redemption will be funded by the company’s available cash.
 
The total outstanding shares of preferred stock are convertible into 1.2 million common shares. The redemption provides for a cash payment equivalent to $21.30 per common stock.
 
According to the Amerisafe management, the redemption is beneficial as this will be accretive to both earnings per share and return on equity in 2010 and beyond. Also, the redemption provides greater financial flexibility as it eliminates the existing prohibition on paying cash dividends and repurchasing common stock.
 
Amerisafe Inc.’s third-quarter earnings of 74 cents per share came in substantially ahead of the Zacks Consensus Estimate of 54 cents. This also compares favorably with the earnings of 65 cents in the prior-year quarter.
 
Despite an 11.9% year-over-year decrease in top line, results for the quarter benefited from solid expense management, which helped reduce expenses by 18.7%. An almost stable pricing environment was also observed during the quarter.
 
Though Amerisafe is expected to face an uncertain environment for the next few quarters as the recession continues to hurt payrolls, the pricing environment is now improving somewhat. Furthermore, improved premium retention, prudent capital management, cost containment measures and a strong financial strength rating augur a decent mid-term growth.
Read the full analyst report on “AMSF”
Zacks Investment Research