Attached files
| file | filename |
|---|---|
| 8-K - FORM 8-K - Amtrust Financial Services, Inc. | v311182_8k.htm |
AmTrust Financial Services, Inc. Reports First Quarter Operating Earnings(1) of $44.0 Million and Net Income of $39.1 Million
Book Value Per Share of $15.91, Up 7.4% Since December 31, 2011
First Quarter 2012 Financial Highlights
| · | Operating diluted EPS (1) of $0.71 compared to $0.76 in the first quarter 2011; life settlement contracts had no impact on operating earnings per diluted share in the first quarter 2012 compared to a gain of $0.18 earnings per diluted share in the first quarter of 2011 |
| · | Annualized operating return on equity(1) of 19.0% and annualized return on equity of 16.9% |
| · | Gross written premium of $601.7 million, up 35.5%, and net earned premium of $314.0 million, up 56.7% from first quarter 2011 |
| · | Commission and other revenues of $100.2 million, up 32.7% from first quarter 2011 |
| · | Operating earnings (1) of $44.0 million compared to $47.2 million in the first quarter 2011; first quarter 2012 results include gains on life settlement contracts of $50 thousand compared to a gain of $10.7 million in the first quarter of 2011 |
| · | Net income of $39.1 million compared to $45.2 million from first quarter 2011 |
| · | Diluted EPS of $0.63 compared to $0.74 in the first quarter 2011 |
| · | Combined ratio of 88.5% compared to 86.9% in the first quarter 2011 |
| · | Book value per share of $15.91, up 7.4% from $14.82 as of December 31, 2011 |
NEW YORK, May 1, 2012 (GLOBE NEWSWIRE) -- AmTrust Financial Services, Inc. (Nasdaq:AFSI) (“the Company”) today reported first quarter 2012 operating earnings (1) of $44.0 million, or $0.71 per diluted share, compared to $47.2 million, or $0.76 per diluted share, in the first quarter of 2011. Net income totaled $39.1 million, or $0.63 per diluted share, for the first quarter of 2012 compared to $45.2 million, or $0.74 per diluted share, in the first quarter of 2011. First quarter 2012 results included gains of $50 thousand from life settlement contracts, which had no impact on diluted earnings per share, compared to $10.7 million, or $0.18 earnings per diluted share, for first quarter 2011.
First Quarter 2012 Results
Total revenue of $414.2 million increased $138.4 million, or 50.2%, from $275.8 million in the first quarter of 2011. Gross written premium of $601.7 million rose $157.7 million, or 35.5%, from the first quarter in 2011. Net written premium of $359.8 million increased $125.8 million, or 53.7%, from $234.0 million in the first quarter in 2011. Net earned premium of $314.0 million increased $113.7 million, or 56.7%, from $200.3 million in the first quarter of 2011.
Commission and other revenues of $100.2 million increased $24.7 million, or 32.7%, from the first quarter of 2011 and represented 24.2% of total revenue. The combined ratio totaled 88.5% compared with 86.9% in the first quarter of 2011.
Ceding commissions, primarily related to the reinsurance agreements with Maiden Holdings, Ltd. ("Maiden"), totaled $46.3 million, up 29.7% from $35.7 million a year ago. During the quarter, AmTrust ceded $190.9 million of gross written premium and $166.3 million of earned premium to Maiden compared to $126.7 million of gross written premium and $113.9 million of earned premium ceded in the first quarter of 2011.
Total service and fee income of $40.5 million increased 60.9% from $25.2 million in the first quarter of 2011 and included $6.1 million from related parties compared with $3.4 million in the first quarter of 2011.
Investment income, excluding net realized gains and losses, totaled $14.5 million, an increase of 2.3% from $14.2 million in the first quarter of 2011. In addition, first quarter 2012 results include net realized investment losses of $1.1 million, or $0.7 million after-tax, on certain fixed income and equity investments compared with a gain of $0.4 million, or $0.3 million after-tax, in the first quarter of 2011.
Loss and loss adjustment expense totaled $199.9 million, an increase of $71.2 million from $128.7 million in the first quarter of 2011 and resulted in a loss ratio of 63.7% compared with 64.2% for the first quarter of 2011.
Acquisition costs and other underwriting expenses of $124.0 million increased $42.8 million from the first quarter of 2011. Acquisition costs and other underwriting expenses less ceding commissions totaled $77.8 million compared with $45.6 million in the first quarter of 2011. The expense ratio was 24.8%, up from 22.7% in the first quarter of 2011.
Other expenses of $35.6 million increased $15.4 million from $20.2 million in the first quarter of 2011.
Total assets of $6.1 billion increased 7.0% from $5.7 billion at December 31, 2011 and included a $160.0 million, or 7.7%, increase in cash, cash equivalents and investments to $2.2 billion. Shareholders' equity of $962.0 million increased 8.0% from $890.6 million at year-end 2011.
(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 gains and losses on securities, non-cash amortization of certain intangible assets, non-cash interest expenses associated with convertible senior notes, net of tax and foreign currency transaction gain and 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.
Conference Call:
On May 1, 2012 at 9 a.m. ET, CEO Barry Zyskind and CFO Ron Pipoly will review these results 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 Tuesday, May 1, 2012 through May 8, 2012. To listen to the replay, please dial 800.585.8367 (within the U.S.) or 404.537.3406 (outside the U.S.) and enter replay passcode 73849221, 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 866.203.3037.
The AmTrust Financial Services, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3280
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, successful integration of 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, difficulties with technology or data security, 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
| CONTACT: | AmTrust Financial Services, Inc. |
| Investor Relations | |
| Elizabeth Malone CFA | |
| beth.malone@amtrustgroup.com | |
| 646.458.7924 | |
| Hilly Gross | |
| hilly.gross@amtrustgroup.com | |
| 646.458.7925 |
| AmTrust Financial Services, Inc. |
| Income Statement |
| (in thousands, except per share data) |
| (Unaudited) |
| Three Months Ended March 31, | ||||||||||||
| 2012 | 2011 | |||||||||||
| Gross written premium | $ | 601,687 | $ | 444,027 | ||||||||
| Premium income: | ||||||||||||
| Net written premium | $ | 359,777 | $ | 234,019 | ||||||||
| Change in unearned premium | (45,753 | ) | (33,681 | ) | ||||||||
| Net earned premium | 314,024 | 200,338 | ||||||||||
| Ceding commission (primarily related party) | 46,274 | 35,684 | ||||||||||
| Service and fee income | 40,538 | 25,189 | ||||||||||
| Investment income, net | 14,518 | 14,192 | ||||||||||
| Net realized gain (loss) | (1,148 | ) | 415 | |||||||||
| Commission and other revenues | 100,182 | 75,480 | ||||||||||
| Total revenue | 414,206 | 275,818 | ||||||||||
| Loss and loss adjustment expense | 199,929 | 128,696 | ||||||||||
| Acquisition costs and other underwriting expense | 124,025 | 81,234 | ||||||||||
| Other expense | 35,639 | 20,196 | ||||||||||
| 359,593 | 230,126 | |||||||||||
| Income before other, provision for income taxes, equity in earnings of unconsolidated subsidiaries and non-controlling interest | 54,613 | 45,692 | ||||||||||
| Other income (expense): | ||||||||||||
| Interest expense | (7,091 | ) | (3,754 | ) | ||||||||
| Foreign currency gain (loss) | 421 | (284 | ) | |||||||||
| Net gain (loss) on life settlement contracts | 90 | 18,886 | ||||||||||
| (6,580 | ) | 14,848 | ||||||||||
| Income before provision for income taxes, equity in earnings | ||||||||||||
| of unconsolidated subsidiaries and non-controlling interest | 48,033 | 60,540 | ||||||||||
| Provision for income taxes(1) | (11,177 | ) | (9,037 | ) | ||||||||
| Equity in earnings of unconsolidated subsidiary (related party)(1) | 2,364 | 1,819 | ||||||||||
| Net income | 39,220 | 53,322 | ||||||||||
| Non-controlling interest(1) | (134 | ) | (8,139 | ) | ||||||||
| Net income attributable to Amtrust Financial Services, Inc. | $ | 39,086 | $ | 45,183 | ||||||||
| Operating earnings attributable to Amtrust Financial Services, Inc.(2) | $ | 43,999 | $ | 47,167 | ||||||||
| Earnings per common share: | ||||||||||||
| Basic earnings per share | $ | 0.65 | $ | 0.76 | ||||||||
| Diluted earnings per share | $ | 0.63 | $ | 0.74 | ||||||||
| Operating diluted earnings per share(3) | $ | 0.71 | $ | 0.76 | ||||||||
| Weighted average number of basic shares outstanding | 60,286 | 59,565 | ||||||||||
| Weighted average number of diluted shares outstanding | 62,319 | 60,732 | ||||||||||
| Combined ratio | 88.5 | % | 86.9 | % | ||||||||
| Return on equity | 16.9 | % | 24.4 | % | ||||||||
| Operating return on equity(4) | 19.0 | % | 25.4 | % | ||||||||
| Reconciliation of net realized losses: | ||||||||||||
| Other-than-temporary investment impairments | $ | - | $ | - | ||||||||
| Impairments recognized in other comprehensive income | - | - | ||||||||||
| - | - | |||||||||||
| Net realized gains on sale of investments | (1,148 | ) | 415 | |||||||||
| Net realized gains | $ | (1,148 | ) | $ | 415 | |||||||
| AmTrust Financial Services, Inc. |
| Balance Sheet Highlights |
| (in thousands) |
| (Unaudited) |
| March 31, | December 31, | |||||||
| 2012 | 2011 | |||||||
| Cash, cash equivalents and investments | $ | 2,238,747 | $ | 2,078,525 | ||||
| Premiums receivables | 1,012,605 | 932,992 | ||||||
| Goodwill and intangible assets, net | 368,512 | 314,616 | ||||||
| Total assets | 6,104,571 | 5,678,747 | ||||||
| Loss and loss expense reserves | 1,968,588 | 1,879,175 | ||||||
| Unearned premium | 1,459,034 | 1,366,170 | ||||||
| Trust preferred securities | 123,714 | 123,714 | ||||||
| Convertible senior notes | 159,113 | 138,506 | ||||||
| AmTrust's stockholders' equity | $ | 962,042 | $ | 890,563 | ||||
| Book value per share | $ | 15.91 | $ | 14.82 | ||||
| AmTrust Financial Services, Inc. |
| Non-GAAP Financial Measures |
| (in thousands, except per share data) |
| (Unaudited) |
| Three Months Ended March 31, | ||||||||
| 2012 | 2011 | |||||||
| Reconciliation of net income attributable to AmTrust Financial Services, Inc. | ||||||||
| to operating earnings attributable to AmTrust Financial Services, Inc.: | ||||||||
| Net income attributable to Amtrust Financial Services, Inc. | $ | 39,086 | $ | 45,183 | ||||
| Less: Net realized gains (loss) net of tax | (746 | ) | 270 | |||||
| Foreign currency transaction gain (loss) | 421 | (284 | ) | |||||
| Non cash interest on convertible senior notes net of tax | (398 | ) | - | |||||
| Non cash amortization of certain intangible assets | (4,190 | ) | (1,970 | ) | ||||
| Operating earnings attributable to AmTrust Financial Services, Inc.(2) | $ | 43,999 | $ | 47,167 | ||||
| Reconciliation of diluted earnings per share to diluted operating earnings per share: | ||||||||
| Diluted earnings per share | $ | 0.63 | $ | 0.74 | ||||
| Less: Net realized gains (loss) net of tax | (0.01 | ) | - | |||||
| Foreign currency transaction gain (loss) | 0.01 | - | ||||||
| Non cash interest convertible senior notes net of tax | (0.01 | ) | - | |||||
| Non cash amortization of certain intangible assets | (0.07 | ) | (0.02 | ) | ||||
| Operating diluted earnings per share(3) | $ | 0.71 | $ | 0.76 | ||||
| Reconciliation of return on equity to operating return on equity: | ||||||||
| Return on equity | 16.9 | % | 24.4 | % | ||||
| Less: Net realized gains (loss) net of tax | (0.3 | )% | 0.1 | % | ||||
| Foreign currency transaction gain (loss) | 0.2 | % | (0.1 | )% | ||||
| Non cash interest convertible senior notes net of tax | (0.2 | )% | - | % | ||||
| Non cash amortization of certain intangible assets | (1.8 | )% | (1.0 | )% | ||||
| Operating return on equity(4) | 19.0 | % | $ | 25.4 | % | |||
| (1) | Prior year amounts have been reclassed to present the Company's non-controlling interest related to income on life settlement contracts on a pre-tax basis and the provision | |||||||||||||||||||||
| for income taxes has been reduced for an equivalent amount. Additionally, prior year amounts have been reclassed to present the Company's income from life settlement | ||||||||||||||||||||||
| contracts included in its 21.25% ownership percentage of ACAC on a net basis. The impact of these reclasses reduced the Company's provision for income taxes by $3,305, | ||||||||||||||||||||||
| reduced equity in earnings of unconsolidated subsidiaries by $1,304 and increased non-controlling interest by $2,001. There was no overall impact on net income attributable to | ||||||||||||||||||||||
| AmTrust Financial Services, Inc. | ||||||||||||||||||||||
| (2) | Operating earnings is a non-GAAP financial measure defined by the Company as net income less realized investment gain (loss) net of tax, foreign currency transaction gain (loss), | |||||||||||||||||||||
| non cash interest on convertible senior notes net of tax and non cash amortization of certain intangible assets 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. | ||||||||||||||||||||||
| (3) | Diluted operating earnings per share is a non-GAAP financial measure defined by the Company as net income less realized investment gain (loss) net of tax, foreign currency | |||||||||||||||||||||
| transaction gain (loss), non cash interest on convertible senior notes net of tax and non cash amortization of certain intangible assets 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. | ||||||||||||||||||||||
| (4) | Operating return on equity is a non-GAAP financial measure defined by the Company as net income less realized investment gain (loss) net of tax, foreign currency transaction gain | |||||||||||||||||||||
| (loss), non cash interest on convertible senior notes net of tax and non cash amortization of certain intangible assets 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, | ||||||||
| 2012 | 2011 | |||||||
| Gross written premium | ||||||||
| Small Commercial Business | $ | 232,351 | $ | 140,716 | ||||
| Specialty Risk and Extended Warranty | 234,089 | 227,748 | ||||||
| Specialty Program | 104,638 | 49,976 | ||||||
| Personal Lines Reinsurance | 30,609 | 25,587 | ||||||
| $ | 601,687 | $ | 444,027 | |||||
| Net written premium | ||||||||
| Small Commercial Business | $ | 118,890 | $ | 77,651 | ||||
| Specialty Risk and Extended Warranty | 141,161 | 104,547 | ||||||
| Specialty Program | 69,117 | 26,234 | ||||||
| Personal Lines Reinsurance | 30,609 | 25,587 | ||||||
| $ | 359,777 | $ | 234,019 | |||||
| Net earned premium | ||||||||
| Small Commercial Business | $ | 92,328 | $ | 61,861 | ||||
| Specialty Risk and Extended Warranty | 135,573 | 84,577 | ||||||
| Specialty Program | 59,661 | 30,770 | ||||||
| Personal Lines Reinsurance | 26,462 | 23,130 | ||||||
| $ | 314,024 | $ | 200,338 | |||||
| Loss Ratio | ||||||||
| Small Commercial Business | 64.1 | % | 59.4 | % | ||||
| Specialty Risk and Extended Warranty | 61.5 | % | 67.9 | % | ||||
| Specialty Program | 67.4 | % | 64.0 | % | ||||
| Personal Lines Reinsurance | 64.5 | % | 64.0 | % | ||||
| Total | 63.7 | % | 64.2 | % | ||||
| Expense Ratio | ||||||||
| Small Commercial Business | 27.9 | % | 26.6 | % | ||||
| Specialty Risk and Extended Warranty | 19.1 | % | 16.3 | % | ||||
| Specialty Program | 30.2 | % | 25.5 | % | ||||
| Personal Lines Reinsurance | 30.5 | % | 32.5 | % | ||||
| Total | 24.8 | % | 22.7 | % | ||||
| Combined Ratio | ||||||||
| Small Commercial Business | 92.1 | % | 86.0 | % | ||||
| Specialty Risk and Extended Warranty | 80.6 | % | 84.2 | % | ||||
| Specialty Program | 97.5 | % | 89.6 | % | ||||
| Personal Lines Reinsurance | 95.0 | % | 96.5 | % | ||||
| Total | 88.5 | % | 86.9 | % | ||||
