AmTrust Financial Upped to a Strong Buy - Analyst Blog


On May 9, Zacks Investment Research upgraded AmTrust Financial Services Inc. ( AFSI ) to a Zacks Rank #1 (Strong Buy) from a Zacks Rank #3 (Hold).

Why the Upgrade?

AmTrust Financial has been experiencing rising earnings estimates on the back of robust first-quarter 2014 results. Consistently improving organic growth, diversified product portfolio and healthy capital position have also been fueling improved market trends.

Additionally, this specialty property-casualty insurer outperformed the one-year Nasdaq index that had projected growth of 18.5%, by yielding a return of 46.7%. AmTrust Financial also delivered positive earnings surprises in the last 4 quarters with an average beat of 21.8%.

On May 1, AmTrust Financial reported first-quarter 2014 operating earnings per share of $1.24, which outpaced the Zacks Consensus Estimate of 94 cents by about 33.3% as well as the year-ago quarter figure of 74 cents by 67%.

The year-over-year top -line growth of 89% stemmed from net earned premiums that increased two fold, 50% ascent in service and fee income and 57% growth in investment income. Despite higher underwriting and acquisition expenses, combined ratio and margins witnessed improvement.

Meanwhile, AmTrust Financial's prudent risk and debt management is reflected by its long-term leverage that improved by180 basis points from 2013-end to 26.2% at Mar 2014-end. This is particularly impressive given the higher number of acquisitions of late. An appreciated cash position, book value per share and return on equity (ROE) further paved the way for a 43% dividend hike and continue to inspire investors and ratings agencies.

Based on AmTrust Financial's fundamental strength and prudent capital management, the Zacks Consensus Estimate for 2014 rose 6.8% to $4.22 per share in the last 30 days. Meanwhile, the estimate for 2015 moved north by 5% to $4.85 during the same period.

Moreover, the Most Accurate Estimate for AmTrust Financial's 2014 and 2015 earnings stands at $4.71 and $5.08 a share, resulting in an Earnings ESP of +11.6% and +4.7%, respectively. Furthermore, no downward revision in estimates was witnessed for both the years.

Other Stocks to Consider

Apart from AmTrust Financial, other top-ranked insurers in the industry include Aspen Insurance Holdings Ltd. ( AHL ), Atlas Financial Holdings Inc. ( AFH ) and Endurance Specialty Holdings Ltd. ( ENH ). All these stocks sport the same Zacks Rank as AmTrustFinancial.

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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 The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: AFH , AFSI , AHL , ENH

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