Attached files
| file | filename |
|---|---|
| EX-99.1 - EXHIBIT 99.1 - Atlas Financial Holdings, Inc. | q22016pressrelease.htm |
| 8-K - 8-K - Atlas Financial Holdings, Inc. | a8-kreq22016earningsrelease.htm |
Nasdaq: AFH
2016 Second Quarter
Conference Call
August 2, 2016
August 2, 2016 Atlas Financial Holdings, Inc. 2016 Second Quarter Conference Call 2
Statements in this presentation, including the information set forth as to the future financial or operating performance of Atlas Financial Holdings, Inc., American Country
Insurance Company, American Service Insurance Company, Gateway Insurance Company and/or Global Insurance Company of New York (collectively, “Atlas”), that are not
current or historical factual statements may constitute “forward looking” information within the meaning of securities laws. Such forward looking statements involve known
and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of Atlas, or industry results, to be materially different
from any future results, performance or achievements expressed or implied by such forward looking statements. When used in this presentation, such statements may
include, among other terms, such words as “may,” “will,” “expect,” “believe,” “plan,” “anticipate,” “intend,” “estimate” and other similar terminology. These statements
reflect current expectations, estimates and projections regarding future events and operating performance and speak only as to the date of this presentation. Readers
should not place undue importance on forward looking statements and should not rely upon this information as of any other date. These forward looking statements
involve a number of risks and uncertainties. Some of the factors facing Atlas that could cause actual results to differ materially from those expressed in or underlying such
forward looking statements include: (i) market fluctuations, changes in interest rates or the need to generate liquidity; (ii) access to capital; (iii) recognition of future tax
benefits on realized and unrealized investment losses; (iv) managing expansion effectively; (v) conditions affecting the industries in which we operate; (vi) competition from
industry participants; (vii) attracting and retaining independent agents and brokers; (viii) comprehensive industry regulation; (ix) our holding company structure; (x) our
ratings with A.M. Best; (xi) new claim and coverage issues; (xii) claims payments and related expenses; (xiii) reinsurance arrangements; (xiv) credit risk; (xv) our ability to
retain key personnel; (xvi) our ability to replace or remove management or Directors; (xvii) future sales of common shares; (xviii) public company challenges; and (xix)
failure to effectively execute our business plan. The foregoing list of factors is not exhaustive. See also “Risk Factors” listed in the Company’s most recent registration
statement filed with the SEC. Many of these issues can affect Atlas’ actual results and could cause the actual results to differ materially from those expressed or implied in
any forward looking statements made by, or on behalf of, Atlas. Readers are cautioned that forward looking statements are not guarantees of future performance, and
should not place undue reliance on them. In formulating the forward looking statements contained in this presentation, it has been assumed that business and economic
conditions affecting Atlas will continue substantially in the ordinary course. These assumptions, although considered reasonable at the time of preparation, may prove to be
incorrect.
When discussing our business operations, we may use certain terms of art which are not defined under U.S. GAAP. In the event of any unintentional difference between
presentation materials and our GAAP results, investors should rely on the financial information in our public filings.
Safe Harbor
2
August 2, 2016 Atlas Financial Holdings, Inc. 2016 Second Quarter Conference Call 3 3
Atlas Key Takeaways / Snapshot
NASDAQ: AFH At 6/30/2016 At 12/31/2015
Corporate Headquarters Elk Grove Village, IL (Chicago suburb)
Core Target Markets Taxi / Limo / Livery / Paratransit
Cash and Investments $240.3 million $233.3 million
Total Assets $413.1 million $411.3 million
Total Atlas Shareholders’ Equity $143.0 million $129.6 million
Common Shares Outstanding
(includes Restricted Share Units)
12,045,519 12,045,519
Book Value Per Outstanding
Common Share
$11.27 $10.15
• Earnings per common share diluted for the second
quarter of 2016 were $0.38, representing a $0.07
or 22.6% increase from second quarter 2015
• Annualized return on equity (“ROE”) was 14.0% in
the second quarter 2016 compared to 13.2% in
the prior year period
• Book value per common share on June 30, 2016
was $11.27, compared to $10.15 at December 31,
2015 and $9.48 at June 30, 2015
• Company reiterates $260 to $290 million premium
forecast for full year 2016 and emphasis on
underwriting profit versus top line growth
August 2, 2016 Atlas Financial Holdings, Inc. Second Quarter Conference Call 4
• Gross written premiums
increased 3.8% to $48.4
million
• Results remain on track for
previously announced
premium guidance during
seasonally lowest premium
quarter
• In-force premium at June 30,
2016 was $219.8, compared
to $210.6 million at
12/31/2015, and $186.2
million at 6/30/15
Premium Growth
Recapping 2016
Financial Expectations
Forecast of $260 to $290
million in gross premiums
written in 2016, with
emphasis on underwriting
profit as priority
Expense ratio is a range of
24.5% to 26.5%
Exceed P&C industry Return
on Equity (“ROE”) by 500 –
1,000 bps
P&C Industry average
ROE was approximately
8% in the past year based
on data from SNL
Financial
AFH ROACE(1) for Q2
2016 was 14.7%
(annualized)
2016 Q2 Financial and Operating Highlights
4
• Underwriting income
increased by 28% to $6.4
million
• Combined ratio improved by
2.2 pts. To 84.8%
• 13th consecutive quarter of
CR under 95%
• 8th straight under 90%
• 2nd straight under 85%
Improving
Underwriting
Performance
• Book value per share
improved to $11.27, a YoY
increase of 18.9%
• Annualized return on
average common equity(1)
("ROACE") was 14.7% for the
quarter ended June 30, 2016
Book Value / ROE
(1) Return on average common equity (ROACE)=(net
income - preferred dividends)/average common
equity; this formula is non-U.S. GAAP measure.
August 2, 2016 Atlas Financial Holdings, Inc. 2016 Second Quarter Conference Call 5 5
% Increase 3.8% 21.4% 18.9%
2016 Q2 Financial and Underwriting Highlights
$46.6
$48.4
$45.5
$46.0
$46.5
$47.0
$47.5
$48.0
$48.5
$49.0
Q2 2015 Q2 2016
Gross Written Premium
$6.4
$7.5
$5.8
$6.0
$6.2
$6.4
$6.6
$6.8
$7.0
$7.2
$7.4
$7.6
Q2 2015 Q2 2016
Income from Operating Activities
Before Tax
$0.31
$0.38
$0.00
$0.05
$0.10
$0.15
$0.20
$0.25
$0.30
$0.35
$0.40
Q2 2015 Q2 2016
Earnings per Common Share Diluted
$9.48
$11.27
$8.50
$9.00
$9.50
$10.00
$10.50
$11.00
$11.50
Q2 2015 Q2 2016
Book Value per Common Share
22.6%
Premium
Growth
GPW increased by 3.8% to $48.4
million in seasonably lowest GPW
quarter
• GPW increased 3.5% in core
commercial auto business
• Overall premium shifted toward
limo / paratransit during period
Strong Underwriting
Results
Combined ratio improved by 2.2
percentage points year-over-year to
84.8%
Book Value
Growth
Atlas has increased book value in each of
the past 15 quarters
• $11.27 at 6/30/2016 compared to
$10.15 at 12/31/2015 and $9.48 at
6/30/2015
$ in millions except per share data
August 2, 2016 Atlas Financial Holdings, Inc. 2016 Second Quarter Conference Call 6
Consistent Quarterly Year/Year Margin Improvement Since 2013 U.S. IPO
6
Combined Operating Ratio (“COR”)
63.9% 62.3% 59.2% 58.8%
30.5%
28.4%
27.8% 26.0%
2 0 1 3 2 0 1 4 2 0 1 5 Q 2 2 0 1 6
Loss & LAE Ratio Underwriting Expense Ratio
75%
80%
85%
90%
95%
100%
Q1 Q2 Q3 Q4
2013 2014 2015 2016
Three Month Periods Ended
30-Jun-16 30-Jun-15
Loss ratio 58.8 % 58.8 %
Underwriting expense ratio 26.0 % 28.2 %
Combined Operating Ratio 84.8 % 87.0 %
August 2, 2016 Atlas Financial Holdings, Inc. 2016 Second Quarter Conference Call 7
GWP Historically Driven by Second Half Financial Results
• Increased livery and para-transit premiums during the second quarter / with some intermediate declines in
vehicles in force in the traditional taxi business moderating growth
Note: Atypically high due to
Q1 ’15 including partial
Global Liberty GWP
August 2, 2016 Atlas Financial Holdings, Inc. 2016 Second Quarter Conference Call 8
Gross Written Premium: In-force
8
At June 30, 2016, in-force premium was $219.8 million and the Company’s gross unearned premium reserve was $112.4 million.
August 2, 2016 Atlas Financial Holdings, Inc. 2016 Second Quarter Conference Call 9
Geographic Diversification
9 9
NY, 26.2%
IL,
[VALUE]
CA,
[VALUE]
NV,
[VALUE]
MI,
[VALUE]
MI, 4.7%
VA, 4.2%
WA, 3.9%
LA,
[VALUE]
OR,
[VALUE]
Other,
24.1%
NY, 28.0%
IL, [VALUE]
CA,
[VALUE] NV,
[VALUE]
MI,
[VALUE]
MN, 7.7%
TX, 3.8%
VA, 2.8%
LA,
[VALUE]
OR,
[VALUE]
Other,
24.2%
New York $12,649 $13,054
California 6,808 5,022
Minnesota 3,543 2,860
Louisiana 2,579 1,806
Texas 2,449 2,785
Michigan 2,273 3,580
Virginia 2,013 1,773
Washington 1,886 1,289
Ohio 1,362 1,402
Ill inois 1,108 1,701
Other 11,683 11,303
Total $48,353 $46,575
24.1% 24.2%
100.0% 100.0%
3.9% 2.8%
2.8% 3.0%
2.3% 3.7%
5.1% 6.0%
4.7% 7.7%
4.2% 3.8%
14.1% 10.8%
7.3% 6.1%
5.3% 3.9%
26.2% 28.0%
Quarter Ended June 30, 2016 Quarter Ended June 30, 2015
Nationwide market share is estimated at approximately 10%,
with proportionate share forecast at 20%
Gross premium writ en by state (in $000)
August 2, 2016 Atlas Financial Holdings, Inc. 2016 Second Quarter Conference Call 10
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Jan-1
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May-1
6
Operating Activities: Underwriting
(commercial business only: excludes Global Liberty)
10
Bound/Application Ratio
Current target of 52%. Market conditions continue
to show support for mid single digit rate increases
(magnitude varies by geography.
Note: From Q4 ’15 forward, data is compiled from
the newly launched AtlasX (Duck Creek) policy
system. The basis for hit ratio now includes
additional submission information (not only
commercial auto accounts that are quoted) – as a
result, the numerator is approximately 15% higher
than previously measured. As indicated last
quarter our go-forward target was adjusted based
on this change of measurement and expected
market conditions.
August 2, 2016 Atlas Financial Holdings, Inc. 2016 Second Quarter Conference Call 11
Operating Activities: Underwriting
(commercial business only: excludes Global Liberty)
Renewal Retention (Policy Count)
New Business Submissions (Monthly Vehicles Submitted)
Target of 85% based on current market conditions.
High single digit rate increases appear to have pushed tolerance
levels in near-term, price elastic is being monitored closesly.
0%
20%
40%
60%
80%
100%
120%
Ja
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0
1000
2000
3000
4000
5000
6000
7000
8000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
New Vehicles (incls Expiring) Prior Year
Vehicles In Force
-
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Actual Prior Year
August 2, 2016 Atlas Financial Holdings, Inc. 2016 Second Quarter Conference Call 12
Operating Leverage (Actual through Q2 2016)
$25 mil
equity raise
12
$15.5 mil
Debt
Begin use of
Quota Share
Reinsurance
$24 $43
$49
$59 $66
$74
$85 $94
$101 $108
$111
$133
$148
$162
$179 $178 $177
$50 $49 $52 $51 $53 $52 $53 $54
$61 $62 $63
$81
$104 $112
$118 $122
$129
0.48
0.86
0.94
1.15
1.24
1.42
1.6
1.73 1.66
1.76 1.76
1.64
1.42 1.44
1.51 1.46
1.37
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
1.8
2.0
$0
$25
$50
$75
$100
$125
$150
$175
$200
$225
$250
Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
NWP Surplus NWP Core: Surplus (right axis)
$24
$43 $49
$59 $66
$74
$85
$94 $101
$108 $111
$133
$148
$162
$179 $178 $177
$38 $40 $40
$50 $50 $54
$62 $65
$94 $97
$107 $111 $114
$119 $122
$129 $136
0.63
1.07
1.22 1.17
1.32
1.38 1.38
1.44
1.07 1.11 1.03
1.2
1.3
1.37
1.47
1.38
1.30
0.0
0.2
0.4
0.6
0.8
1.0
1.2
1.4
1.6
$0
$20
$40
$60
$80
$100
$120
$140
$160
$180
$200
Q2 2012 Q3 2012 Q4 2012 Q1 2013 Q2 2013 Q3 2013 Q4 2013 Q1 2014 Q2 2014 Q3 2014 Q4 2014 Q1 2015 Q2 2015 Q3 2015 Q4 2015 Q1 2016 Q2 2016
NWP GAAP Common Equity NWP Core: GAAP Common Equity (Right Axis)
m
ill
io
n
s
m
ill
io
n
s
STATUTORY
GAAP
Financial Highlights
13
August 2, 2016 Atlas Financial Holdings, Inc. 2016 Second Quarter Conference Call 14
Q2 2016 Financial Highlights (comparisons to prior year period)
• Gross premium written increased by 3.8% to $48.4 million, which included an increase of 3.5% in our core
commercial auto business
• In-force premium at June 30, 2016 was $219.8 million, compared to $210.6 million at December 31, 2015
• The combined ratio for the second quarter of 2016 improved by 2.2 percentage points to 84.8%
• Underwriting income for the second quarter of 2016 improved to $6.4 million, compared to $5.0 million
• Earnings per common share diluted for the second quarter of 2016 were $0.38, representing a $0.07 or
22.6% increase from second quarter 2015
• Book value per common share on June 30, 2016 was $11.27, compared to $10.15 at December 31, 2015 and
$9.48 at June 30, 2015
• Net income for the second quarter of 2016 was $4.9 million, or $0.38 per common share diluted, compared
to $3.9 million, or $0.31 per common share diluted
• Annualized return on average common equity was 14.7% in the second quarter of 2016 compared to 13.7%
in 2015
1
14
(1) This is a Non-GAAP Financial Measurement which is defined in our August 1, 2016 Press Release
August 2, 2016 Atlas Financial Holdings, Inc. 2016 Second Quarter Conference Call 15 15
Detailed Impact of Changes to Book Value per Common Share
Book value per common share of $11.27 increased by $1.12 relative to December 31, 2015 as follows:
$0.75 increase related to net income after tax and before items below;
$0.02 increase related to the change in net realized investment gains after tax;
($0.01) decrease related to the preferred share dividend liquidation;
$0.26 increase related to the change in unrealized gains/losses after tax;
$0.07 increase related to share based compensation; and
$0.03 increase related to benefit inured from the acquisition of subsidiaries.
$1.12 total change from December 31, 2015 book value per common share
As of: (in '000s, except for shares and per share data) June 30, 2016 December 31, 2015
Atlas shareholders' equity $ 142,958 $ 129,622
Less: Preferred stock in equity 6,539 6,941
Less: Accumulated dividends on preferred stock 622 460
Common equity $ 1135,797 $ 122,221
Participative shares:
Common shares outstanding 12,023,295 12,015,888
Restricted stock units (RSUs) 22,224 29,631
Total participative shares 12,045,519 12,045,519
Book value per participative share outstanding $ 11.27 $ 10.15
August 2, 2016 Atlas Financial Holdings, Inc. 2016 Second Quarter Conference Call 16
• Attractive investment leverage
• Credit Facility:
– $5 million one-year revolver, LIBOR + 2.75% ($2.4 million drawn)
– $30 million five-year draw facility, LIBOR + 4.5% ($15.5 million drawn)
Acquisitions with adverse development protection
($ in millions) June 30, 2016 December 31, 2015
Cash and Investments $240.3 $233.3
Total Assets $413.1 $411.3
Claim Reserves (Gross of Reinsurance) (1) (2) (3) $112.5 $127.0
Unearned Premiums $112.4 $108.2
Atlas Shareholders’ Equity $143.0 $129.6
16
(1) Atlas’ purchase of American Country and American Service included $10 million limit of adverse development protection
(90% quota share after $1 million) based on reserves as of September 30, 2010, which has not been utilized.
(2) Gateway Acquisition included $2 million of adverse development protection
(3) Recently acquired Global Liberty included $4 million of adverse development protection
Strong Balance Sheet with Availability of Capital to Support Growth
August 2, 2016 Atlas Financial Holdings, Inc. 2016 Second Quarter Conference Call 17
Investment Portfolio
Conservative Investment Approach
• Emphasize preservation of capital, market liquidity to support
payment of liabilities and diversification of risk
• Investment duration re-positioned to match core commercial auto
reserve liabilities (3.2 years)
Investment Portfolio
• As of June 30, 2016, total investments equaled $217.9 million, of
which fixed income consisted of 84.7%
• Predominantly corporate and government bonds
• Average S&P rating of AA
• 29.3% AAA
• 85.5% A or better
17
Government
21%
Corporate
30%
Mortgage
Backed
25%
Other Asset
Backed
9%
Other
Investments
13%
Equities
2%
Investment Portfolio (6/30/2016) (1)
(1) Investment portfolio is the combination of the portfolios of American Country Insurance Company, American Service Insurance Company, Inc., Gateway Insurance Company, and Global Liberty Insurance Co. of New York
Credit ratings of fixed income securities portfolio (in '000s)
As of: June 30, 2016 December 31, 2015
Amount % of Total Amount % of Total
AAA/Aaa $ 54,137 29.3 % $ 44,110 24.0 %
AA/Aa 76,517 41.7 % 83,116 45.2 %
A/A 27,128 14.7 % 28,765 15.7 %
BBB/Baa 25,991 14.1 % 26,512 14.4 %
BB 715 0.4 % 1,270 0.7 %
B 84 — % — — %
Total Fixed Income Securities $ 184,572 100.0 % $ 183,773 100.0 %
August 2, 2016 Atlas Financial Holdings, Inc. 2016 Second Quarter Conference Call 18
Outlook for 2H 2016
Favorable Outlook
• Goal is to maximize ROE potential in the current
cycle
– Strong operating margins
– Efficient and scalable capital structure
– Operating leverage
18
Core Goal: Across market cycles, our objective is to exceed industry ROE by 500 to 1,000 bps
Remain proactive to changing market dynamics
– mobile app dispatch, more cars carrying
people / items, in-vehicle technology
Company has implemented measures to manage its
operating leverage to match that of its business,
with the objective of self-funding
– $35 Million Line of credit from Fifth Third Bank
– Quota share reinsurance
– Implies approximate 25-40% growth rate year over year from 2015 / or 25% - 50% growth rate in 2H 2016
– Some quarterly shifting of business from traditional taxi premiums to black car / TNCs
– Reduced average vehicles per policy expected due to larger percentage of owner operators
– $400 to $450 million in written premium is proportionate share
– Continued market share expansion in existing states
Reiterates $260 to $290 million premium forecast for full year 2016
Emphasis on underwriting margin versus top-line growth
August 2, 2016 Atlas Financial Holdings, Inc. 2016 Second Quarter Conference Call 19
Nasdaq: AFH
For Additional Information
At the Company:
Scott Wollney
Chief Executive Officer
swollney@atlas-fin.com
847-700-8600
Investor Relations:
The Equity Group Inc.
Adam Prior
Senior Vice President
APrior@equityny.com
212-836-9606
19