Ratings agency A.M. Best upgraded its view on Insco Dico
Group's subsidiaries, all of which were acquired by
AmTrust Financial Services Inc.
) last week for $88.7 million. AmTrust funded the deal with its
present working capital.
Accordingly, A.M. Best lifted its financial strength rating
(FSR) to "A" from "A-" and the issuer credit ratings (ICRs) to
"a" from "a-" for Developers Surety and Indemnity Co.
(Developers) and its sub-wing - Indemnity Co. of California
(Indemnity). Both the companies are subsidiaries of Insco Dico
Group and have been acquired by AmTrust. The outlook for all
ratings remains stable.
The ratings validate the successful merger of Developers and
Indemnity units with AmTrust. The deal not only boosts AmTrust's
strategy to tap the growing domestic surety bond market but also
promises to enhance its operations with new insurance products, a
value-added distribution network and unique industry
Armed with a strong capital and cash flow position, AmTrust
has been aggressively growing on the back of suitable
acquisitions. Earlier this week, the company also announced its
intention to buy the renewal rights and assets of the commercial
lines insurance operations of
Tower Group International Inc.
) for about $125 million.
In connection with this agreement, Tower Group also sought an
alliance with Bermuda-based reinsurer - ACP Re Ltd, whereby the
latter will merge with Tower Group for $172.1 million.
Accordingly, the founder of AmTrust has built a trust, which is
the controlling stake holder in ACP Re. The deal is likely to
culminate by mid-2014, upon receipt of regulatory approvals.
Last month, the company also completed the acquisition of
Sagicor Europe Ltd. These acquisitions are expected to be
accretive to AmTrust's earnings in 2014 and beyond.
Alongside, the recent approval of its first stock repurchase
program since 2007, worth $150 million, justifies AmTrust's
adequate liquidity. Even the markets have apparently reacted
positively to the company's capital and operational
Subsequently, AmTrust has received upward estimate revisions
for both 2013 and 2014 in the last 30 days. Accordingly, the
Zacks Consensus Estimate rose 2.9% and 5.1% to $3.19 per share
and $3.72 a share in 2013 and 2014, respectively. Rising
estimates also showcase an upward pressure on the stock in the
near term, justifying its Zacks Rank #2 (Buy).
Other insurers that warrant a look include
Allied World Assurance Co. Holdings AG
Platinum Underwriters Holdings Inc.
). Both these stocks sport a Zacks Rank #1 (Strong Buy).
AMTRUST FIN SVC (AFSI): Free Stock Analysis
ALLIED WORLD AS (AWH): Free Stock Analysis
PLATINUM UNDRWT (PTP): Free Stock Analysis
TOWER GRP INTL (TWGP): Free Stock Analysis
To read this article on Zacks.com click here.