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AmTrust Financial Services, Inc. Reports First Quarter 2013 Operating Earnings(1) of $57.2 Million and Net Income of $64.2



AmTrust Financial Services, Inc. Reports First Quarter 2013 Operating
Earnings(1) of $57.2 Million and Net Income of $64.2 Million

Book Value Per Share of $17.45, Up 2.5% Since December 31, 2012

Financial Highlights

First Quarter 2013

  * Gross written premium of $943.9 million, up 56.9%, and net earned premium
    of $408.0 million, up 29.9% from the first quarter 2012
  * Operating diluted EPS^(1)(2) of $0.81 compared to $0.64 in the first
    quarter 2012
  * Annualized operating return on equity^(1) of 19.7% and annualized return
    on equity of 22.2%
  * Service and fee income of $60.5 million, up 49.3% from the first quarter
    2012
  * Operating earnings^(1) of $57.2 million compared to $44.0 million from the
    first quarter 2012
  * Net income of $64.2 million compared to $39.1 million from the first
    quarter 2012
  * Diluted EPS of $0.91 compared with $0.57 in the first quarter 2012
  * Combined ratio of 89.5% compared to 88.5% in the first quarter 2012
  * Book value per share of $17.45, up from $17.03 at December 31, 2012
  * Shareholders' equity was $1.17 billion as of March 31, 2013

NEW YORK, May 1, 2013 (GLOBE NEWSWIRE) -- AmTrust Financial Services, Inc.
(Nasdaq:AFSI) ("the Company") today reported first quarter 2013 operating
earnings^(1) of $57.2 million, or $0.81 per diluted share, an increase of
29.9%, compared to $44.0 million, or $0.64 per diluted share, in the first
quarter of 2012. During the three months ended March 31, 2013, net income
totaled $64.2 million, an increase of 64.3% from $39.1 million in the first
quarter 2012. Earnings per diluted share^(2) totaled $0.91 for the first
quarter 2013, an increase of 59.6% from $0.57 in the first quarter 2012. First
quarter 2013 annualized operating return on equity was 19.7% compared to 19.0%
in the first quarter 2012.

First Quarter 2013 Results

Total revenue was $567.8 million, an increase of $153.6 million, or 37.1%,
from $414.2 million in the first quarter 2012. Gross written premium of $943.9
million rose $342.2 million, or 56.9%, from $601.7 million in the same period
a year ago. Net written premium was $532.1 million, an increase of $172.3
million, or 47.9%, from $359.8 million in the first quarter 2012. Net earned
premium of $408.0 million increased $94.0 million, or 29.9%, from $314.0
million in the first quarter 2012.

Commission and other revenues of $159.9 million increased $59.7 million, or
59.6%, from $100.2 million for first quarter 2012 and represented 28.2% of
total revenue in first quarter 2013. The combined ratio totaled 89.5% compared
with 88.5% in first quarter 2012.

Ceding commissions, primarily related to the reinsurance agreements with
Maiden Holdings, Ltd. ("Maiden"), totaled $64.0 million, up 38.2% from $46.3
million in the first quarter 2012. During the three months ended March 31,
2013, AmTrust ceded $305.8 million of gross written premium and $227.7 million
of earned premium to Maiden compared to $190.9 million of gross written
premium and $166.3 million of earned premium ceded in the first quarter 2012.

Total service and fee income of $60.5 million increased $20.0 million, or
49.3%, from $40.5 million in first quarter of 2012 and included $10.5 million
from related parties in the first quarter 2013, compared with $6.1 million in
the first quarter 2012. Service and fee income in first quarter 2013 benefited
from the contribution of First Nonprofit Companies, Inc. and Car Care
(Holdings) Limited, which were acquired on December 31, 2012 and February 28,
2013, respectively.

Investment income, excluding net realized gains and losses, totaled $18.1
million, an increase of 24.6% from $14.5 million in the first quarter of 2012.
In addition, first quarter 2013 results included net realized investment gains
of $17.3 million, or $11.2 million after-tax, on certain fixed income and
equity investments compared with a loss of $1.1 million, or $0.7 million
after-tax, in the first quarter of 2012.

In the first quarter 2013, net loss on life settlements including
non-controlling interest was $1.1 million compared to a gain of $90,000 in the
first quarter of 2012. Operating earnings^(1) included loss on life settlement
contracts of $0.6 million, net of non-controlling interest, or $0.01 per
diluted share, compared to a gain of $53,000, net of non-controlling interest
in the first quarter of 2012.

Loss and loss adjustment expense totaled $272.3 million in the first quarter
2013, an increase of $72.4 million from $199.9 million in the first quarter
2012 and resulted in a loss ratio of 66.7% compared with 63.7% for the first
quarter 2012.

Acquisition costs and other underwriting expense of $156.8 million increased
$32.8 million from $124.0 million for the first quarter 2012. Acquisition
costs and other underwriting expenses less ceding commissions totaled $92.9
million compared with $77.8 million in the first quarter 2012. The expense
ratio was 22.8%, down from 24.8% in the first quarter 2012.

Other expense of $52.2 million increased $16.5 million from $35.6 million in
the first quarter 2012.

Total assets of $8.1 billion increased $642.2 million, or 8.7%, from $7.4
billion at December 31, 2012. Total cash, cash equivalents and investments of
$3.0 billion increased $263 million, or 9.7%, from $2.7 billion as of December
31, 2012. Shareholders' equity of $1.2 billion increased 2.7% from $1.1
billion at December 31, 2012.

During the first quarter of 2013, the Board of Directors declared a $0.14 per
share cash dividend, which represented a 40% increase over its prior quarterly
cash dividend. As of March 31, 2013, the Company's long-term
debt-to-capitalization ratio was 20.5% compared with 20.9% as of December 31,
2012.

Subsequent event

On April 19, 2013, the Company completed the acquisition of Sequoia Insurance
Company and it subsidiaries ("Sequoia") for approximately $60 million. In
2012, Sequoia wrote $140 million of gross written premium, primarily in
western states with the majority of the business written in California.

^(1) References to operating earnings, operating diluted EPS, and operating
return on equity are Non-GAAP financial measures defined by the Company as net
income, diluted earnings per share and return on equity excluding after-tax
net realized investment gain or loss on securities, non-cash amortization of
certain intangible assets, non-cash interest on convertible senior notes net
of tax and foreign currency transaction gain or loss. Please see the Non-GAAP
Financial Measures table at the end of this release for important information
about the use of these Non-GAAP measures and their reconciliation to GAAP.

^(2) In September 2012, the Company paid a ten percent stock dividend. As a
result, prior year's weighted average common shares outstanding, diluted
shares outstanding, earnings per share, diluted earnings per share and
operating diluted earnings per share have been adjusted. The dividend resulted
in a reduction in basic earnings per share and diluted earnings per share of
$0.06 and diluted operating earnings per share of $0.07 for the three months
ended March 31, 2012. 

Conference Call:

On May 1, 2013 at 9:00 AM ET, CEO Barry Zyskind and CFO Ron Pipoly will review
these results as well as discuss the Company's outlook on the
property/casualty pricing environment via a conference call and webcast that
may be accessed as follows:

Toll-Free Dial-in:   877.755.7421

Toll Dial-in (Outside the U.S):   973.200.3087

Webcast registration: http://ir.amtrustgroup.com/events.cfm

A replay of the conference call will be available at approximately 12:00 p.m.
ET Wednesday, May 1, 2013 through May 8, 2013. To listen to the replay, please
dial 855.859.2056 (within the U.S.) or 404.537.3406 (outside the U.S.) and
enter replay passcode 47794624, or access
http://ir.amtrustgroup.com/events.cfm.

About AmTrust Financial Services, Inc.

AmTrust Financial Services, Inc., headquartered in New York City, is a
multinational insurance holding company, which, through its insurance
carriers, offers specialty property and casualty insurance products, including
workers' compensation, commercial automobile and general liability; extended
service and warranty coverage. For more information about AmTrust, visit
www.amtrustgroup.com, or call AmTrust toll-free at 855.327.2223.

Forward Looking Statements

This news release contains "forward-looking statements" that are made pursuant
to the safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. The forward-looking statements are based on the Company's current
expectations and beliefs concerning future developments and their potential
effects on the Company. There can be no assurance that actual developments
will be those anticipated by the Company. Actual results may differ materially
from those expressed or implied in these statements as a result of significant
risks and uncertainties, including, but not limited to, non-receipt of
expected payments from insureds or reinsurers, changes in interest rates, a
downgrade in the financial strength ratings of our insurance subsidiaries, the
effect of the performance of financial markets on our investment portfolio,
our estimates of the fair value of our life settlement contracts, development
of claims and the effect on loss reserves, accuracy in projecting loss
reserves, the cost and availability of reinsurance coverage, the effects of
emerging claim and coverage issues, changes in the demand for our products,
our degree of success in integrating acquired businesses, the effect of
general economic conditions, state and federal legislation, regulations and
regulatory investigations into industry practices, risks associated with
conducting business outside the United States, developments relating to
existing agreements, disruptions to our business relationships with Maiden
Holdings, Ltd., American Capital Acquisition Corporation, or third party
agencies and warranty administrators, breaches in data security or other
disruptions involving our technology, heightened competition, changes in
pricing environments, and changes in asset valuations. The forward-looking
statements contained in this news release are made only as of the date of this
release. The Company undertakes no obligation to publicly update any
forward-looking statements except as may be required by law. Additional
information about these risks and uncertainties, as well as others that may
cause actual results to differ materially from those projected, is contained
in the Company's filings with the Securities and Exchange Commission,
including its annual report on Form 10-K and its quarterly reports on Form
10-Q.

AFSI-F

                                       

AmTrust Financial Services, Inc.
Income Statement
(in thousands, except per share data)
(Unaudited)
 
                                                  Three Months Ended March 31,
                                                  2013           2012
Gross written premium                             $943,922       $601,687
                                                                  
Net written premium                               $532,106       $359,777
Change in unearned premium                        (124,112)      (45,753)
Net earned premium                                407,994        314,024
Ceding commission (primarily related party)       63,958         46,274
Service and fee income                            60,513         40,538
Investment income, net                            18,095         14,518
Net realized gains (loss)                         17,284         (1,148)
Commission and other revenues                     159,850        100,182
Total revenue                                     567,844        414,206
Loss and loss adjustment expense                  272,256        199,929
Acquisition costs and other underwriting expense  156,820        124,025
Other expense                                     52,152         35,639
Total expenses                                    481,228        359,593
Income before other, provision for income taxes,
equity in earnings of unconsolidated subsidiaries 86,616         54,613
and non-controlling interest
Other income (expense):                                           
Interest expense                                  (7,361)        (7,091)
Net (loss) gain on life settlement contracts      (1,076)        90
Foreign currency gain                             1,272          421
Total other income (expenses)                     (7,165)        (6,580)
Income before provision for income taxes, equity
in earnings of unconsolidated subsidiaries and    79,451         48,033
non-controlling interest
Provision for income taxes                        17,660         11,177
Equity in earnings of unconsolidated subsidiaries 1,551          2,364
(related parties)
Net income                                        63,342         39,220
Non-controlling interest                          876            (134)
Net income attributable to AmTrust Financial      $64,218        $39,086
Services, Inc.
Operating earnings attributable to AmTrust        $57,160        $43,999
Financial Services, Inc. ^(1)
Earnings per common share:                                        
Basic earnings per share                          $0.95          $0.59
Diluted earnings per share                        $0.91          $0.57
Operating diluted earnings per share ^(2)         $0.81          $0.64
Weighted average number of basic shares           67,041         66,366
outstanding
Weighted average number of diluted shares         70,555         68,393
outstanding
Combined ratio                                    89.5%          88.5%
Return on equity                                  22.2%          16.9%
Operating return on equity ^(3)                   19.7%          19.0%
Reconciliation of net realized losses:                            
Other-than-temporary investment impairments       $—             $—
Impairments recognized in other comprehensive     —              —
income
                                                  —              —
Net realized gains on sale of investments         17,284         (1,148)
Net realized gains                                $17,284        $(1,148)

 
 
AmTrust Financial Services, Inc.
Balance Sheet Highlights
(in thousands)
(Unaudited)
 
                                       March 31, 2013 December 31, 2012
Cash, cash equivalents and investments $2,959,170     $2,696,402
Premiums receivables                   1,311,530      1,251,262
Goodwill and intangible assets         544,467        514,967
Total assets                           8,059,428      7,417,237
Loss and loss expense reserves         2,580,121      2,426,400
Unearned premium                       2,147,986      1,773,593
Trust preferred securities             123,714        123,714
Convertible senior notes               161,941        161,218
AmTrust's stockholders' equity         1,174,731      1,144,121
Book value per share                   $17.45         $17.03

 
 
AmTrust Financial Services, Inc.
Non-GAAP Financial Measures
(in thousands, except per share data)
(Unaudited)
 
                                        Three Months Ended March 31,
                                        2013                2012
Reconciliation of net income
attributable to AmTrust Financial
Services, Inc. to operating earnings                         
attributable to AmTrust Financial
Services, Inc.:
Net income attributable to AmTrust      $64,218             $39,086
Financial Services, Inc.
Less: Net realized gains (loss) net of  11,235              (746)
tax
Non cash amortization of certain        (4,979)             (4,190)
intangible assets
Non cash interest on convertible senior (470)               (398)
notes net of tax
Foreign currency transaction gain       1,272               421
Operating earnings attributable to      $57,160             $43,999
AmTrust Financial Services, Inc. ^ (1)
Reconciliation of diluted earnings per
share to diluted operating earnings per                      
share:
Diluted earnings per share              $0.91               $0.57
Less: Net realized gain (loss) net of   0.16                (0.01)
tax
Non cash amortization of certain        (0.07)              (0.06)
intangible assets
Non cash interest on convertible senior (0.01)              (0.01)
notes net of tax
Foreign currency transaction gain       0.02                0.01
(loss)
Operating diluted earnings per share ^  $0.81               $0.64
(2)
Reconciliation of return on equity to                        
operating return on equity:
Return on equity                        22.2%               16.9%
Less: Net realized gain (loss) net of   4.0%                (0.3)%
tax
Non cash amortization of certain        (1.8)%              (1.8)%
intangible assets
Non cash interest on convertible senior (0.2)%              (0.2)%
notes net of tax
Foreign currency transaction gain       0.5%                0.2%
(loss)
Operating return on equity ^ (3)        19.7%               19.0%
  
(1) Operating earnings is a non-GAAP financial measure defined by the Company
as net income less after-tax realized investment gain (loss), certain
amortization expense, non-cash interest on convertible senior notes net of tax
and foreign currency transaction gain and should not be considered an
alternative to net income. The Company's management believes that operating
earnings is a useful indicator of trends in the Company's underlying
operations because it provides a more meaningful representation of the
Company's earnings power. The Company's measure of operating earnings may not
be comparable to similarly titled measures used by other companies.
(2) Diluted operating earnings per share is a non-GAAP financial measure
defined by the Company as net income less after-tax realized investment gain
(loss), certain amortization expense, non-cash interest on convertible senior
notes net of tax and foreign currency transaction gain divided by the weighted
average diluted shares outstanding for the period and should not be considered
an alternative to diluted earnings per share. The Company's management
believes that diluted operating earnings per share is a useful indicator of
trends in the Company's underlying operations because it provides a more
meaningful representation of the Company's earnings power. The Company's
measure of diluted operating earnings per share may not be comparable to
similarly titled measures used by other companies.
(3) Operating return on equity is a non-GAAP financial measure defined by the
Company as net income less after-tax realized investment gain (loss), certain
amortization expense, non-cash interest on convertible senior notes net of tax
and foreign currency transaction gain (loss) divided by the average
shareholders' equity for the period and should not be considered an
alternative to return on equity. The Company's management believes that
operating return on equity is a useful indicator of trends in the Company's
underlying operations because it provides a more meaningful representation of
the Company's earnings power. The Company's measure of operating return on
equity may not be comparable to similarly titled measures used by other
companies.

 
AmTrust Financial Services, Inc.
Segment Information
(in thousands, except percentages)
(Unaudited)
 
                                     Three Months Ended March 31,
                                     2013           2012
Gross written premium                                
Small Commercial Business            $375,849       $232,351
Specialty Risk and Extended Warranty 328,329        234,089
Specialty Program                    209,092        104,638
Personal Lines Reinsurance           30,652         30,609
                                     $943,922       $601,687
Net written premium                                  
Small Commercial Business            $173,740       $118,890
Specialty Risk and Extended Warranty 184,442        141,161
Specialty Program                    143,272        69,117
Personal Lines Reinsurance           30,652         30,609
                                     $532,106       $359,777
Net earned premium                                   
Small Commercial Business            $126,600       $92,328
Specialty Risk and Extended Warranty 141,154        135,573
Specialty Program                    111,478        59,661
Personal Lines Reinsurance           28,762         26,462
                                     $407,994       $314,024
Loss Ratio:                                          
Small Commercial Business            66.6%          64.1%
Specialty Risk and Extended Warranty 65.9%          61.5%
Specialty Program                    67.8%          67.4%
Personal Lines Reinsurance           67.5%          64.5%
Total                                66.7%          63.7%
Expense Ratio:                                       
Small Commercial Business            25.0%          27.9%
Specialty Risk and Extended Warranty 16.9%          19.1%
Specialty Program                    25.6%          30.2%
Personal Lines Reinsurance           30.5%          30.5%
Total                                22.8%          24.8%
Combined Ratio:                                      
Small Commercial Business            91.6%          92.1%
Specialty Risk and Extended Warranty 82.8%          80.6%
Specialty Program                    93.4%          97.5%
Personal Lines Reinsurance           97.9%          95.0%
Total                                89.5%          88.5%

CONTACT: AmTrust Financial Services, Inc.
        
         Investor Relations
         Elizabeth Malone CFA
         beth.malone@amtrustgroup.com
         646.458.7924
        
         Hilly Gross
         New York, New York
         hilly.gross@amtrustgroup.com
         646.458.7925

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