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AmTrust Upped to Strong Buy - Analyst Blog

Posted
7/5/2013 6:37:00 PM
By: Zacks.com
Referenced Stocks:AFSI;ASI;HCI;HTH

On Jul 5, 2013, Zacks Investment Research upgraded AmTrust Financial Services Inc. ( AFSI ) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

AmTrust has been witnessing rising estimates on the back of improved first quarter 2013 results. The company's pliant underwriting platform and improved inorganic growth warrant optimism in this stock. Additionally, this global specialty property-casualty insurer delivered positive earnings surprises in all of the last 4 quarters with an average beat of 9.1%.

On May 1, AmTrust reported first-quarter 2013 operating earnings per share of 81 cents, remarkably beating the Zacks Consensus Estimate of 73 cents and the year-ago quarter figure of 64 cents.

The upside was primarily attributable to 37.1% top-line growth, which was driven by a 29.9% upsurge in net earned premiums along with significantly higher commissions, service and fee income. Even net investment income escalated 24.8%, although higher loss and loss adjusted expenses coupled with underwriting expenses were partial dampeners.

Additionally, we believe that the recent acquisitions of Sequoia Insurance and Mutual Holdings coupled with ratings affirmation bode well for future growth prospects. AmTrust also maintains a healthy balance sheet and adequate liquidity, with a modest debt-to-capital ratio of 17% at the end of May 2013 and sturdy interest coverage ratios, despite its inorganic growth strategy. An efficient capital deployment via dividend payouts and share buybacks further instill confidence among investors.

Based on Endurance's fundamental strength and underwriting profitability, the Zacks Consensus Estimate for 2013 rose 0.6% to $3.23 per share in the last 60 days. The estimate for 2014 is pegged at $3.73, up 1.9% in the last 60 days. Meanwhile, no downward revision in estimates was witnessed for both the years.

Moreover, the Most Accurate Estimate for AmTrust's 2013 earnings stands at $3.25 a share, resulting in a positive Earnings ESP (Read: Zacks Earnings ESP: A Better Method ) of 0.62%.

Other Insurers Worth a Look

Apart from Endurance, other stocks that are outperforming in the insurance sector include Hilltop Holdings Inc. ( HTH ), HCI Group Inc. ( HCI ) and American Safety Insurance Holdings Ltd. ( ASI ). All these stocks carry a Zacks Rank #1 (Strong Buy).



AMTRUST FIN SVC (AFSI): Free Stock Analysis Report

AMER SAFETY INS (ASI): Free Stock Analysis Report

HCI GROUP INC (HCI): Free Stock Analysis Report

HILLTOP HLDGS (HTH): Free Stock Analysis Report

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Zacks Investment Research