Year-to-Date Operating Earnings(1) of $65.8 Million and Net Income of $69.5 Million
Book Value per Share of $10.74, Up 11.9% since Year-end 2009
Financial Highlights
-
Shareholders' equity increased 12.1% from year-end 2009 and included a first quarter 2010 $10.4 million pre-tax ($6.8 million after-tax) retrospective gain on purchase related to the American Capital Acquisition Corporation (ACAC) investment
-
Gross written premium of $408.6 million, up 51.2%, and net earned premium of $196.3 million, up 43.5% from second quarter 2009
-
Operating earnings (1) of $35.1 million up 10.4% from second quarter 2009
-
Operating EPS (1) of $0.58 compared to $0.53 in the second quarter 2009
-
Net income of $30.8 million up 15.1% from second quarter 2009
-
EPS of $0.51 compared to $0.45 in the second quarter 2009
-
Combined ratio of 85.7% compared to 79.6% in second quarter 2009
-
Annualized return on equity of 19.8% and operating (1) return on equity of 22.6% for the quarter
-
Results for the quarter include $5.9 million, or $3.9 million net of tax, in equity income of unconsolidated subsidiaries, largely related to the ACAC equity-method investment
-
YTD gross written premium of $746.9, million up 38.9%, and net earned premium of $344.4 million, up 27.9% over the first half of 2009
-
YTD operating earnings (1) of $65.8 million up 6.3% from first half of 2009
-
YTD operating EPS (1) of $1.09 compared with $1.03 in the first half of 2009
-
YTD net income of $69.5 million up 36.5% from first half 2009
-
YTD EPS of $1.15 compared with $0.85 in the first half 2009
- Book value per share of $10.74, up from $9.60 at year-end 2009
NEW YORK, Aug. 3, 2010 (GLOBE NEWSWIRE) -- AmTrust Financial Services, Inc. (Nasdaq:AFSI) today reported net income of $30.8 million for the second quarter of 2010, an increase of 15.1% from $26.8 million in the second quarter of 2009. Earnings per diluted share totaled $0.51 in the quarter, up 14.0% from $0.45 in the same period last year.
Record operating earnings (1) totaled $35.1 million for the quarter, or $0.58 per diluted share, compared with $31.8 million, or $0.53 per diluted share, in the second quarter of 2009.
For the first half of 2010, net income totaled $69.5 million, up 36.5% from the first half of 2009. Earnings per diluted share of $1.15 increased 35.6% from $0.85 during the first six months of 2009. These results included a $10.4 million pre-tax gain ($6.8 million after-tax) relating to the March 1, 2010 investment in ACAC. Operating earnings in the first half of 2010 totaled $65.8 million, or $1.09 per share, compared with $61.9 million, or $1.03 per share in the same period last year.
"We continue to deliver strong results for our shareholders through disciplined underwriting, sound investing and prudent capital management," said Barry Zyskind, President and Chief Executive Officer of AmTrust Financial Services, Inc. "This solid momentum gives us confidence as we look ahead and work to continue to produce strong returns for our shareholders."
Second Quarter 2010 Results
Total revenue of $246.5 million increased $63.7 million, or 34.9%, from $182.8 million in the second quarter of 2009. Gross written premium of $408.6 million rose $138.4 million, or 51.2%, from second quarter 2009. Net written premium of $196.3 million increased $59.3 million, or 43.2%, from $137.1 million in the second quarter of 2009. Net earned premium of $196.3 million increased $59.5 million, or 43.5%, from $ 136.8 million in the second quarter of 2009. Commission and other revenues of $50.2 million increased $4.2 million, or 9.2%, from second quarter 2009, and represented 20.4% of total revenue. The combined ratio totaled 85.7% compared with 79.6% in the second quarter of 2009. In addition to organic growth, results include the benefit of the full-quarter effect of the ACAC transaction as well as other acquisitions.
Ceding commission, primarily related to the quota-share reinsurance agreement with Maiden Holdings, Ltd. (Maiden), totaled $33.0 million, up 2.1% from $32.3 million a year ago. During the quarter, AmTrust ceded $112.5 million of gross written premium and $106.3 million of earned premium to Maiden compared to $90.1 million of gross written premium and $87.6 million of earned premium in the second quarter of 2009.
Total service and fee income of $9.1 million increased 19.9% from $7.6 million in the second quarter of 2009 and included $2.9 million from related parties compared with $1.9 million in the second quarter of 2009.
Investment income, excluding net realized gains and losses, totaled $14.7 million, up 6.4% from $13.8 million in the second quarter of 2009. Results reflect after-tax net realized investment losses of $4.3 million on certain fixed income and equity investments compared with losses of $5.0 million in the second quarter of 2009.
Loss and loss adjustment expense totaled $121.5 million, an increase of $44.9 million from $76.6 million in the second quarter of 2009, and resulted in a loss ratio of 61.9% compared with 56.0% for the second quarter of 2009.
Acquisition costs and other underwriting expense of $79.6 million increased $15.0 million from the second quarter of 2009. Acquisition costs and other underwriting expenses less ceding commissions totaled $46.6 million compared with $32.3 million in the year ago quarter. The expense ratio of 23.8% remained relatively stable compared to 23.6% in the second quarter of 2009.
Year-to-Date 2010 Results
Total revenue of $450.2 million increased $95.2 million, or 26.8%, from $355.0 million in the first half of 2009. Gross written premium of $746.9 million rose $209.1 million, or 38.9%. Net written premium of $385.8 million increased $112.5 million, or 41.2%, from $273.3 million. Net earned premium of $344.4 million increased $75.1 million, or 27.9%. Commission and other revenues of $105.8 million increased $20.0 million, or 23.4%, and represented 23.5% of total revenue. The combined ratio totaled 83.4% compared with 79.6%. The above results include the benefit of organic growth, acquisitions and the ACAC transaction.
Ceding commission, primarily related to the quota-share reinsurance agreement with Maiden, totaled $65.2 million, up 8.9% from $59.9 million a year ago. During the first six months of 2010, AmTrust ceded $226.6 million of gross written premium and $208.7 million of earned premium to Maiden compared to $177.6 million of gross written premium and $183.3 million of earned premium in the same period in 2009.
Total service and fee income of $17.1 million increased 13.5% from $15.1 million in the first half of 2009 and included $5.5 million from related parties compared with $3.8 million in the first half of 2009.
Investment income excluding net realized gains and losses totaled $28.3 million, up 1.8% from $27.8 million in the first half of 2009. Results reflect after-tax net realized investment losses of $3.1 million on certain fixed income and equity investments compared with losses of $11.0 million in the first half of 2009.
Loss and loss adjustment expense totaled $211.3 million, an increase of $59.8 million from $151.5 million in the first half of 2009, and resulted in a loss ratio of 61.4% compared with 56.3% for the first half of 2009.
Acquisition costs and other underwriting expense of $140.9 million increased $18.2 million from $122.7 million in the first half of 2009. Acquisition costs and other underwriting expenses less ceding commissions totaled $75.7 million compared with $62.9 million in the first half of 2009. The expense ratio of 22.0% improved from 23.3% in the first half of 2009.
Total assets of $3.8 billion increased 11.8% from $3.4 billion as of December 31, 2009. Shareholders' equity of $638.6 million increased 12.1% from $569.4 million at year-end 2009 and included a $10.4 million pre-tax gain ($6.8 million after-tax) on purchase related to the investment in ACAC in connection with it's acquisition of GMAC's personal lines businesses. During the quarter, the Board of Directors declared a quarterly dividend of $0.07 per share. As of June 30, 2010, the Company's long-term debt-to-capitalization ratio was 19.1% compared with 22.5% at year-end 2009.
(1) References to operating earning, operating EPS, and operating return on equity are non-GAAP financial measures defined by the Company as results excluding net realized investment gains and losses on securities and gain on acquisition. 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 August 3, 2010 at 9 a.m. ET, the Company will host a conference call and audio webcast that may be accessed as follows:
| Toll Free: | 877.755.7421 |
| Toll Call (Outside the U.S.): | 973.200.3087 |
| Webcast registration: | http://ir.amtrustgroup.com/events.cfm |
A replay of the conference call will be available starting at 12:00 p.m. ET on Tuesday, August 3, 2010 through Tuesday, August 10, 2010 by dialing toll-free 800.642.1687 or toll 706.645.9291 and entering Passcode 88050705. You may also access a replay of the webcast at 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 projected as a result of significant risks and uncertainties, including, but not limited to, non-receipt of the expected payments, changes in interest rates, effect of the performance of financial markets on investment income and fair values of investments, development of claims and the effect on loss reserves, accuracy in projecting loss reserves, the impact of competition and pricing environments, changes in the demand for the Company's products, the effect of general economic conditions, adverse state and federal legislation, regulations and regulatory investigations into industry practices, developments relating to existing agreements, 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 or revise any forward-looking statements, whether as a result of new information, future developments or otherwise, 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 June 30, | Six Months Ended June 30, | |||
| 2010 | 2009 | 2010 | 2009 | |
| Gross written premium | $408,641 | $270,229 | $746,872 | $537,756 |
| Premium income | ||||
| Net premium written | $196,393 | $137,120 | $385,807 | $273,299 |
| Change in unearned premium | (132) | (317) | (41,446) | (4,073) |
| 196,261 | 136,803 | 344,361 | 269,226 | |
| Ceding commission (primarily related party) | 32,958 | 32,278 | 65,206 | 59,869 |
| Service and fee income | 6,241 | 5,711 | 11,539 | 11,282 |
| Service and fee income (related party) | 2,880 | 1,896 | 5,548 | 3,779 |
| Investment income, net | 14,686 | 13,799 | 28,285 | 27,790 |
| Net realized gains (losses) | (6,544) | (7,709) | (4,759) | (16,947) |
| 50,221 | 45,975 | 105,819 | 85,773 | |
| Total revenue | 246,482 | 182,778 | 450,180 | 354,999 |
| Loss and loss adjustment expense | 121,510 | 76,585 | 211,331 | 151,500 |
| Acquisition costs and other underwriting expense | 79,579 | 64,587 | 140,925 | 122,741 |
| Other | 9,336 | 5,774 | 15,570 | 10,968 |
| 210,425 | 146,946 | 367,826 | 285,209 | |
|
Income before other, provision for income taxes and equity in earnings (loss) of unconsolidated subsidiaries |
36,057 | 35,832 | 82,354 | 69,790 |
| Other income (expense): | ||||
| Foreign currency gain | 755 | 611 | 38 | 644 |
| Interest expense | (3,063) | (4,007) | (6,635) | (8,178) |
| (2,308) | (3,396) | (6,597) | (7,534) | |
|
Income before provision for income taxes and equity in earnings (loss) of unconsolidated subsidiaries |
33,749 | 32,436 | 75,757 | 62,256 |
| Provision for income taxes | (8,839) | (5,448) | (24,007) | (10,704) |
|
Equity in earnings (loss) of unconsolidated subsidiaries (related party)(1) |
5,913 | (217) | 17,773 | (619) |
| Net income | $30,823 | $26,771 | $69,523 | $50,933 |
| Operating earnings(2) | $35,077 | $31,782 | $65,824 | $61,949 |
| Earnings per common share: | ||||
| Basic earnings per share | $0.52 | $0.45 | $1.17 | $0.86 |
| Diluted earnings per share | $0.51 | $0.45 | $1.15 | $0.85 |
| Diluted operating earnings per share(3) | $0.58 | $0.53 | $1.09 | $1.03 |
| Weighted average number of basic shares outstanding | 59,436 | 59,338 | 59,385 | 59,551 |
| Weighted average number of diluted shares outstanding | 60,356 | 59,735 | 60,272 | 59,863 |
| Combined ratio | 85.7% | 79.6% | 83.4% | 79.6% |
| Return on Equity | 19.8% | 24.4% | 22.4% | 23.4% |
| Operating return on equity(4) | 22.6% | 28.9% | 21.2% | 28.5% |
| Reconciliation of net realized losses: | ||||
| Other-than-temporary investment impairments | $(12,007) | $(10,786) | $(17,145) | $(12,213) |
| Impairments recognized in other comprehensive income | -- | -- | -- | -- |
| (12,007) | (10,786) | (17,145) | (12,213) | |
| Net realized gains (losses) on sale of investments | 5,463 | 3,077 | 12,386 | (4,734) |
| Net realized gains (losses) | $(6,544) | $(7,709) | $(4,759) | $(16,947) |
| AmTrust Financial Services, Inc. | ||
| Balance Sheet Highlights | ||
| (in thousands) | ||
| (Unaudited) | ||
|
June 30, 2010 |
December 31, 2009 |
|
| Cash, cash equivalents and investments | $1,514,490 | $1,414,824 |
| Premiums receivables | 654,780 | 495,871 |
| Goodwill and intangible assets | 125,705 | 115,828 |
| Total assets | 3,802,582 | 3,400,364 |
| Loss and loss expense reserves | 1,154,615 | 1,091,944 |
| Unearned premium | 960,432 | 871,779 |
| Trust preferred securities | 123,714 | 123,714 |
| Total stockholders' equity | $638,552 | $569,392 |
| AmTrust Financial Services, Inc. | ||||
| Segment Information | ||||
| (in thousands, except percentages) | ||||
| (Unaudited) | ||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||
| 2010 | 2009 | 2010 | 2009 | |
| Gross written premium | ||||
| Small Commercial Business | $107,600 | $109,141 | $230,302 | $236,611 |
| Specialty Risk and Extended Warranty | 197,470 | 92,635 | 349,644 | 175,343 |
| Specialty Program | 77,712 | 68,453 | 132,367 | 125,802 |
| Personal Lines Reinsurance | 25,860 | -- | 34,560 | -- |
| $408,642 | $270,229 | $746,873 | $537,756 | |
| Net written premium | ||||
| Small Commercial Business | $56,052 | $54,332 | $117,490 | $124,791 |
| Specialty Risk and Extended Warranty | 74,216 | 47,254 | 160,265 | 85,513 |
| Specialty Program | 40,266 | 35,534 | 73,493 | 62,995 |
| Personal Lines Reinsurance | 25,860 | -- | 34,560 | -- |
| $ 196,394 | $137,120 | $385,808 | $273,299 | |
| Net earned premium | ||||
| Small Commercial Business | $65,260 | $61,497 | $124,864 | $119,588 |
| Specialty Risk and Extended Warranty | 86,587 | 43,944 | 138,351 | 84,619 |
| Specialty Program | 35,061 | 31,362 | 71,793 | 65,019 |
| Personal Lines Reinsurance | 9,353 | -- | 9,353 | -- |
| $196,261 | $136,803 | $344,361 | $269,226 | |
| Loss Ratio | ||||
| Small Commercial Business | 60.3% | 60.3% | 59.6% | 60.6% |
| Specialty Risk and Extended Warranty | 62.4% | 44.4% | 61.6% | 44.1% |
| Specialty Program | 63.5% | 63.7% | 63.8% | 64.1% |
| Personal Lines Reinsurance | 62.5% | -- | 62.5% | -- |
| Total | 61.9% | 56.0% | 61.4% | 56.3% |
| Expense Ratio | ||||
| Small Commercial Business | 26.9% | 27.7% | 24.5% | 26.3% |
| Specialty Risk and Extended Warranty | 19.0% | 14.0% | 16.8% | 15.1% |
| Specialty Program | 27.3% | 29.2% | 26.4% | 28.7% |
| Personal Lines Reinsurance | 32.5% | -- | 32.5% | -- |
| Total | 23.8% | 23.6% | 22.0% | 23.4% |
| Combined Ratio | ||||
| Small Commercial Business | 87.2% | 88.0% | 84.1% | 86.9% |
| Specialty Risk and Extended Warranty | 81.4% | 58.4% | 78.4% | 59.3% |
| Specialty Program | 90.8% | 92.9% | 90.2% | 92.8% |
| Personal Lines Reinsurance | 95.0% | -- | 95.0% | -- |
| Total | 85.7% | 79.6% | 83.4% | 79.6% |
| AmTrust Financial Services, Inc. | ||||||||||
| Non-GAAP Financial Measures | ||||||||||
| (in thousands, except per share data) | ||||||||||
| (Unaudited) | ||||||||||
| Three Months Ended June 30, | Six Months Ended June 30, | |||||||||
| 2010 | 2009 | 2010 | 2009 | |||||||
| Reconciliation of net income to operating earnings: | ||||||||||
| Net income | $30,823 | $26,771 | $69,523 | $50,933 | ||||||
| Less: Net realized gains (losses) net of taxes/other | (4,254) | (5,011) | (3,093) | (11,016) | ||||||
| Gain on investment in unconsolidated subsidiary net of tax (1) | -- | -- | 6,792 | -- | ||||||
| Operating earnings (2) | $35,077 | $31,782 | $65,824 | $61,949 | ||||||
| Reconciliation of diluted earnings per share to diluted operating earnings per share: | ||||||||||
| Diluted earnings per share | $0.51 | $0.45 | $1.15 | $0.85 | ||||||
| Less: Net realized gains (losses) net of taxes | (0.07) | (0.08) | (0.05) | (0.18) | ||||||
| Gain on investment in unconsolidated subsidiary | -- | -- | 0.11 | -- | ||||||
| Diluted operating earnings per share (3) | $0.58 | $0.53 | $1.09 | $1.03 | ||||||
| Reconciliation of return on equity to operating return on equity: | ||||||||||
| Return on equity | 19.8% | 24.4% | 22.4% | 23.4% | ||||||
| Less: Net realized gains (losses) net of taxes | (2.8)% | (4.5)% | (1.0)% | (5.1)% | ||||||
| Gain on investment in unconsolidated subsidiary | -- | -- | 2.2% | -- | ||||||
| Operating return on equity (4) | 22.6% | 28.9% | 21.2% | 28.5% | ||||||
| (1) Equity in earnings (loss) of unconsolidated subsidiaries (related party) includes a retrospective gain on investment related to ACAC of $10,450 and an after tax amount of $6,792. | ||||||||||
| (2) Operating earnings is a non-GAAP financial measure defined by the Company as net income excluding realized investment gains and losses, net of tax and gain on investment in unconsolidated subsidiary 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 excluding realized investment gains and losses, net of tax and gain on investment in unconsolidated subsidiary 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 excluding realized investment gains and losses, net of tax and gain on investment in unconsolidated subsidiary 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. | ||||||||||