EX-99.1 2 v066800_ex99-1.htm



For more information, please contact:

AmTrust Financial Services, Inc.
Mr. Hilly Gross Mr. Ronald Pipoly, Jr.
Vice President, Investor Relations Chief Financial Officer
212.220.7120 x7023 216.328.6116
hgross@amtrustgroup.com rpipoly@amtrustgroup.com
 

For immediate release
February 22, 2007
 
AmTrust Financial Services, Inc. Reports Record Fourth Quarter Net Income of $17.4 million

(New York) - AmTrust Financial Services, Inc. (NASDAQ: AFSI) today reported net income of $17.4 million and revenues of $120.2 million for the fourth quarter 2006. For the year ended December 31, 2006 the Company reported net income of $48.9 million and revenues of $384.0 million. “We are very pleased with our fourth quarter and year-end financials, reflecting strong growth, a responsible underwriting philosophy and diligent cost controls”, stated Barry Zyskind, president and chief executive officer.

Fourth Quarter Overview:

The Company reported $17.4 million in net income, or $0.29 per share, for the quarter ended December 31, 2006.

Fourth Quarter and Year Ended 2006 Highlights:

 
·
Net income from continuing operations up 82.7% for the fourth quarter of 2006 compared to the fourth quarter of 2005
 
·
Net income from continuing operations up 136.0% for year ended December 31, 2006 compared to the year ended December 31, 2005
 
·
Quarterly earnings per share was $0.29
 
·
Year ended December 31, 2006 earnings per share was $0.87
 
·
Annualized quarterly return on equity for the fourth quarter was 21.0%
 
·
Book value per share was $5.69 (as of December 31, 2006)
 
·
GAAP combined ratio for the fourth quarter was 91.1%
 
·
GAAP combined ratio for the year was 91.9%
 
 
Fourth Quarter and Year Ended 2006 Results:

Revenue and comprehensive earnings:

Net revenue in the fourth quarter 2006 increased by $54.8 million or 83.8% to $120.2 million from $65.4 million in the fourth quarter 2005. Net revenue for the year ended December 31, 2006 increased by $143.4 million or 59.6% to $384.0 million from $240.6 million for the year ended December 31, 2005.

Net earned premium in the fourth quarter 2006 increased by $45.4 million or 78.4%, to $103.2 million from $57.9 million in the fourth quarter 2005. Net earned premium for the year ended December 31, 2006 increased by $113.0 million or 52.3% to $329.0 from $216.0 million for the year ended December 31, 2005. The increase is primarily attributable to premium growth achieved through the successful integration of business acquired in renewal rights transactions as well as internal growth.

Net investment income including realized gains and losses in the fourth quarter 2006 increased by $8.7 million or 189.1% to $13.3 million from $4.6 million in the fourth quarter 2005. Net investment income including realized gains for the year ended December 31, 2006 increased by $26.0 million or 158.5% to $42.4 million from $16.4 million for the year ended December 31, 2005. The primary reasons for the increase in investment income were the Company’s successful liquidation of a subsidiary which generated $80.0 million in the second half of 2005 and the Company’s February 2006 private placement, which generated net proceeds of approximately $166.0 million. In addition, for the year ended December 31, 2006, the Company generated $168.5 million of positive cash flow from operations.

Comprehensive earnings, which include after-tax unrealized gains/loss from the investment portfolio, was $58.1 million , or $1.03 per share for the year ended December 31, 2006 compared to $10.4 million for the year ended December 31, 2005 or $0.38 per share.
 
 
Expenses:

The Company’s loss ratio for the quarter ended December 31, 2006 was 62.1% compared to 58.7% for the quarter ended December 31, 2005. The Company’s loss ratio for the year ended December 31, 2006 was 63.9% compared to 65.7% for the year ended December 31, 2005. The Company continues to see stable trends in its loss ratio.

Policy Acquisition Expense, Salaries and Benefits Expense and Other Insurance General and Administrative Expense for the year ended 2006 increased by $29.2 million to $92.4 from $63.2 million for the year ended December 31, 2005. Despite the increase, the expense ratio for the year ended December 31, 2006 decreased to 28.1% from 29.3% for the year ended December 31, 2005.

The decrease is the result of the Company’s ability to leverage its current infrastructure.

Interest expense in the fourth quarter 2006 increased to $1.7 million from $1.1 million in the fourth quarter of 2005. The increase is the result of the issuance by the Company in July 2006 of $30.0 million of trust preferred securities.

Other Matters:

Shareholders Equity as of December 31, 2006 increased to $341.0 million from $118.4 million as of December 31, 2005. The increase was due in large measure to the issuance of 25.6 million shares of common stock in a private placement, which generated net proceeds of approximately $166.0 million as well as earnings for the year ended December 31, 2006. In connection with the private placement, the Company converted its outstanding preferred shares into 10.3 million shares of common stock.

As of December 31, 2006 the Company’s debt-to-equity ratio was 24.2%. The Company’s debt relates to three trust preferred securities offerings in which the Company participated in 2005 and 2006.
 
 
Conference Call:

On Friday, February 23, 2007 at 10a.m. ET, the company will hold a conference call that can be accessed as follows:

Dial-in: 800.819.9193

In order to participate in the conference call, you must register at:
 
 http://ir.amtrustgroup.com

A live broadcast of the call will be available on-line at the above website. An on-line replay will follow shortly after the call.

In addition, a telephonic replay will be available for seven days and can be accessed by dialing 719.457.0820 or 888.203.1112. Enter replay passcode 1271994.

About AmTrust Financial Services, Inc.

AmTrust Financial Services, Inc., headquartered in New York City, is a multinational specialty property and casualty 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.

Forward Looking Statement:

This news release contains “forward-looking statements” which 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 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 Company undertakes no obligation to publicly update any forward-looking statements.
 
 
###


AmTrust Financial Services, Inc.      
Income Statement      
(in thousands, except per share data)      
                      
   
Year Ended December 31,   
  
 Three Months Ended December 31,
  
   
2006
  
 2005
  
 2006
  
 2005
  
                      
                      
 Gross Written Premium
  
$
526,074
  
$
286,131
 
$
153,071
 
$
57,950
 
                           
Revenue:
                         
Premium Income 
                          
Net Premiums Written
  
$
436,314
  
$
259,213
 
$
121,971
 
$
55,470
 
Change in Unearned Premium
    
107,302
   
43,183
   
18,730
   
(2,414
)
     
329,012
   
216,030
   
103,241
   
57,884
 
                           
Fee Income
    
12,403
   
8,196
   
3,468
   
2,924
 
Finance and Interest Income
    
27,583
   
11,534
   
8,623
   
3,328
 
Net Realized Gains
    
14,783
   
4,875
   
4,648
   
1,285
 
Other
    
244
   
-
   
244
   
-
 
     
55,013
   
24,605
   
16,983
   
7,537
 
                           
Total Revenue
    
384,025
   
240,635
   
120,224
   
65,421
 
                           
Loss and Loss Adjustment Expense
    
210,140
   
142,006
   
64,132
   
33,971
 
Policy Acquisition Expenses
    
43,302
   
30,082
   
16,195
   
7,230
 
Salaries and Benefits
    
28,277
   
13,903
   
8,531
   
3,278
 
Other insurance General and administrative expense
    
20,804
   
19,257
   
5,216
   
7,494
 
Other Underwriting Expenses
    
10,561
   
5,805
   
1,688
   
2,125
 
Other
    
244
   
-
   
244
   
-
 
     
313,328
   
211,053
   
96,006
   
54,098
 
                           
Income from Continuing operations
   
70,697
   
29,582
   
24,218
   
11,323
 
                           
Other Income (Expense)
                          
Foreign Currency Gain
    
833
   
388
   
376
   
388
 
Interest Expense
    
(5,326
)
  
(2,784
)
  
(1,673
)
  
(1,050
)
     
(4,493
)
  
(2,396
)
  
(1,297
)
  
(662
)
                           
                           
Income from Continuing Operations before Provision for Income Taxes
   
66,204
   
27,186
   
22,921
   
10,661
 
                           
Provision for Income taxes
    
17,779
   
6,666
   
5,721
   
1,247
 
                           
                           
Net income from continuing operations
    
48,425
   
20,520
   
17,200
   
9,414
 
                           
Foreign currency gain on discontinued operations
    
-
   
21,745
   
-
   
1,173
 
Gain (loss) from discontinued operations
    
431
   
(4,706
)
  
181
   
(1,247
)
     
431
   
17,039
   
181
   
(74
)
                           
Net Income
    
48,856
   
37,559
   
17,381
   
9,340
 
                           
Preferred Stock Dividends
    
-
   
(1,200
)
  
-
   
-
 
                           
Net income available to common shareholders
  
$
48,856
  
$
36,359
 
$
17,381
 
$
9,340
 
                           
Earnings per common share
                          
Income (Loss) from Continuing Operations
  
$
0.86
  
$
0.80
 
$
0.29
 
$
0.39
 
Income (Loss) from Discontinued Operations
    
0.01
   
0.71
   
-
   
-
 
   
$
0.87
  
$
1.51
 
$
0.29
 
$
0.39
 
                           
Weighted average number of shares outstanding
   
56,315
   
24,089
   
59,959
   
24,089
 
                           
                           
                           
Combined Ratio
    
91.9
%
  
95.0
%
  
91.1
%
  
89.8
%
Annualized Return on Equity (1)
    
21.1
%
  
17.3
%
  
20.8
%
  
20.8
%
Earnings Per Share
  
$
0.87
  
$
1.51
 
$
0.29
 
$
0.39
 
Comprehensive Earnings Per Share
  
$
1.03
  
$
0.38
 
$
0.34
 
$
0.24
 
 
(1) - Calculated by dividing by net income without currency gain and discontinued operations by the average shareholders' equity. The calculations have been annualized
 
 

AmTrust Financial Services, Inc.
Balance Sheet Highlights
(in thousands)
 
   
December 31,
  
   
2006
  
2005
  
           
Invested assets
  
$
725,954
  
$
299,965
  
Cash and cash equivalents
    
59,917
   
115,847
 
Premiums receivables
    
147,779
   
81,070
 
Intangible assets
    
27,256
   
20,752
 
Total Assets
    
1,185,953
   
612,890
 
Loss and loss expense reserves
    
295,805
   
168,007
 
Unearned premium
    
323,155
   
156,802
 
Junior subordinate debt
    
82,476
   
51,548
 
Total Stockholders' equity
  
$
341,040
  
$
118,411