AmTrust Financial Q1 Earnings Soar, Shares Surge - Analyst Blog


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AmTrust Financial Services Inc . ( AFSI ) kept its positive surprise streak alive with first quarter 2014 earnings released on May 1. Shares of the property and property casualty insurer gained about 11% to close at $43.00 in the next trading session.

Quarterly operating net earnings of $1.24 per share surpassed the Zacks Consensus Estimate by 33% and surged nearly 67% on a year-over-year basis. The improvement was primarily driven by significant improvement in the top line (on both organic and inorganic routes).

Including extraordinary items, reported net income escalated 19% year over year to $1.27 per share.

AmTrust's total revenue leaped 89% year over year to $954 million. The improvement largely came on the back of net earned premiums that nearly doubled year over year, a 50% increase in service and fee income, and a 57% jump in investment income. The top line also outperformed the Zacks Consensus Estimate of $722 million.

For fourth straight quarters, AmTrust has surpassed $1 billion in gross written premium. The reported quarter's gross written premium was $1.67 billion, up 76.5% year over year.

While service and fee income benefitted from growth in core businesses, a huge level of invested assets supported the improvement in investment income.

However, total expenses also increased nearly twofold year over year to $833 million. The rise resulted from higher loss and loss adjusted expenses (LAE) along with raised acquisition, underwriting and other expenses.

Combined ratio improved 140 basis points to 89.9% against 91.3% in the year-ago quarter. Expense ratio also improved 210 basis points to 22.5%.

Financial Update

At the end of the first quarter, AmTrust held cash and cash equivalents of $4.89 billion, up from $4.59 billion at 2013 end. Total assets swelled to $12.2 billion from $11.3 billion at 2013 end, whereas shareholder equity rose to $1.58 billion from $1.44 billion at the end of Dec 2013.

Long-term debt-to-capitalization ratio of AmTrust came in at 26.2%, reflecting an improvement of 180 basis points from Dec 31, 2013.

Additionally, book value per share grew 9.1% to $19.48 as of March 31, 2014 from $17.85 at Dec 31, 2013. Operating return on equity also improved to 27.8% from 19.6% in the year ago quarter.

Zacks Rank & Peers

AmTrust Financial carries a Zacks Rank #3 (Hold). Other property and casualty insurers such as ACE Limited ( ACE ), Montpelier Re Holdings Ltd . ( MRH ) and PartnerRe Ltd . ( PRE ) outperformed their respective Zacks Consensus Estimate in the first quarter of 2014. These are also better-ranked stocks each with a Zacks Rank #2 (Buy).

ACE LIMITED (ACE): Free Stock Analysis Report

AMTRUST FIN SVC (AFSI): Free Stock Analysis Report

MONTPELIER RE (MRH): Free Stock Analysis Report

PARTNERRE LTD (PRE): Free Stock Analysis Report

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Zacks Investment Research

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

This article appears in: Investing , Business , Earnings , Stocks
More Headlines for: ACE , AFSI , MRH , PRE

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