Delaware
|
001-33143
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04-3106389
|
||
(State or other jurisdiction
|
(Commission
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IRS Employer
|
||
of incorporation)
|
File Number)
|
Identification No.)
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59 Maiden Lane, 6th Floor, New York, New York
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10038
|
|
(Address of principal executive offices)
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(Zip Code)
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o
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Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
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o
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Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
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o
|
Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
|
o
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Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.133-4 (c))
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Item 2.02
|
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
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Item 9.01
|
FINANCIAL STATEMENTS AND EXHIBITS.
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(a)
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Not applicable.
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(b)
|
Not applicable.
|
(c)
|
Not applicable.
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(d)
|
Exhibits.
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Exhibit Number | Description |
99.1
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Press release dated November 1, 2011.
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AmTrust Financial Services, Inc.
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|||
(Registrant) | |||
Date: November 1, 2011
|
By:
|
/s/ Stephen Ungar | |
Stephen Ungar
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|||
Secretary
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|||
·
|
Operating diluted EPS (1) of $0.68 ($0.06 attributable to gain on life settlement contracts) compared to $0.58 in the third quarter 2010
|
·
|
Annualized operating return on equity of 20.3%(1) and annualized return on equity of 16.9%
|
·
|
Gross written premium of $561.2 million, up 65.5%, and net earned premium of $288.8 million, up 51.3% from third quarter 2010
|
·
|
Commission and other revenues of $84.6 million, up 7.4% from third quarter 2010
|
·
|
Operating earnings (1) of $42.2 million, up 18.1% from third quarter 2010
|
·
|
Net income of $35.1 million compared to $39.3 million from third quarter 2010
|
·
|
Diluted EPS of $0.57 compared to $0.64 in the third quarter 2010
|
·
|
Combined ratio of 89.3% compared to 86.3% in the third quarter 2010
|
·
|
YTD annualized operating return on equity of 23.8%(1) and annualized return on equity of 22.4%
|
·
|
YTD gross written premium of $1.56 billion, up 44.0%, and net earned premium of $737.5 million, up 37.8% over the first nine months of 2010
|
·
|
YTD operating earnings(1) of $138.8 million, up 33.6% from the first nine months of 2010
|
·
|
YTD operating diluted EPS(1) of $2.25 ($0.39 attributable to gain on life settlement contracts) compared with $1.72 in the first nine months of 2010
|
·
|
YTD net income of $130.4 million, up 19.9% from the first nine months of 2010
|
·
|
YTD diluted EPS of $2.12 compared with $1.80 in the first nine months of 2010
|
·
|
YTD combined ratio of 89.0% compared to 84.4% in the first nine months of 2010
|
·
|
Book value per share of $13.97, up from $12.03 at year-end 2010
|
Toll-Free Dial-in:
|
877.755.7421
|
Toll Dial-in (Outside the U.S):
|
973.200.3087
|
AmTrust Financial Services, Inc.
|
Income Statement
|
(in thousands, except per share data)
|
(Unaudited)
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||||||
Gross written premium
|
$ | 561,222 | $ | 339,084 | $ | 1,563,711 | $ | 1,085,957 | ||||||||||||
Premium income
|
||||||||||||||||||||
Net written premium
|
$ | 321,903 | $ | 182,837 | $ | 931,603 | $ | 568,644 | ||||||||||||
Change in unearned premium
|
(33,055 | ) | 8,048 | (194,135 | ) | (33,398 | ) | |||||||||||||
Net earned premium
|
288,848 | 190,885 | 737,468 | 535,246 | ||||||||||||||||
Ceding commission (primarily related party)
|
40,732 | 37,903 | 111,830 | 103,109 | ||||||||||||||||
Service and fee income
|
28,815 | 22,418 | 78,546 | 39,505 | ||||||||||||||||
Investment income, net
|
14,456 | 10,952 | 41,815 | 39,237 | ||||||||||||||||
Net realized gains (loss)
|
550 | 7,460 | 1,581 | 2,701 | ||||||||||||||||
Commission and other revenues
|
84,553 | 78,733 | 233,772 | 184,552 | ||||||||||||||||
Total revenue
|
373,401 | 269,618 | 971,240 | 719,798 | ||||||||||||||||
Loss and loss adjustment expense
|
185,352 | 120,432 | 484,056 | 331,763 | ||||||||||||||||
Acquisition costs and other underwriting expense
|
113,270 | 82,152 | 284,084 | 223,077 | ||||||||||||||||
Other expense
|
24,045 | 20,210 | 62,805 | 35,780 | ||||||||||||||||
322,667 | 222,794 | 830,945 | 590,620 | |||||||||||||||||
Income before other, provision for income taxes, equity in earnings
|
||||||||||||||||||||
of unconsolidated subsidiaries and non-controlling interest
|
50,734 | 46,824 | 140,295 | 129,178 | ||||||||||||||||
Other income (expense):
|
||||||||||||||||||||
Foreign currency gain (loss)
|
(4,063 | ) | (141 | ) | (1,827 | ) | (103 | ) | ||||||||||||
Interest expense
|
(3,946 | ) | (3,410 | ) | (12,034 | ) | (10,045 | ) | ||||||||||||
Bargain purchase on Majestic transaction
|
2,665 | - | 2,665 | - | ||||||||||||||||
Income from life settlement contracts
|
6,822 | 11,855 | 48,346 | 11,855 | ||||||||||||||||
1,478 | 8,304 | 37,150 | 1,707 | |||||||||||||||||
Income before provision for income taxes, equity in earnings
|
52,212 | 55,128 | 177,445 | 130,885 | ||||||||||||||||
of unconsolidated subsidiaries and non-controlling interest
|
||||||||||||||||||||
Provision for income taxes
|
(13,182 | ) | (13,935 | ) | (29,508 | ) | (37,942 | ) | ||||||||||||
Equity in earnings of unconsolidated subsidiaries (related parties)
|
(447 | ) | 4,030 | 6,753 | 21,803 | |||||||||||||||
Non-controlling interest
|
(3,487 | ) | (5,927 | ) | (24,249 | ) | (5,927 | ) | ||||||||||||
Net income
|
$ | 35,096 | $ | 39,296 | $ | 130,441 | $ | 108,819 | ||||||||||||
Operating earnings (3)
|
$ | 42,199 | $ | 35,736 | $ | 138,755 | $ | 103,846 | ||||||||||||
Earnings per common share:
|
||||||||||||||||||||
Basic earnings per share
|
$ | 0.59 | $ | 0.65 | $ | 2.18 | $ | 1.82 | ||||||||||||
Diluted earnings per share
|
$ | 0.57 | $ | 0.64 | $ | 2.12 | $ | 1.80 | ||||||||||||
Operating diluted earnings per share (4)
|
$ | 0.68 | $ | 0.58 | $ | 2.25 | $ | 1.72 | ||||||||||||
Weighted average number of basic shares outstanding
|
59,955 | 59,490 | 59,802 | 59,420 | ||||||||||||||||
Weighted average number of diluted shares outstanding
|
61,884 | 60,375 | 61,505 | 60,270 | ||||||||||||||||
Combined ratio
|
89.3 | % | 86.3 | % | 89.0 | % | 84.4 | % | ||||||||||||
Return on equity
|
16.9 | % | 23.5 | % | 22.4 | % | 22.9 | % | ||||||||||||
Operating return on equity (5)
|
20.3 | % | 21.1 | % | 23.8 | % | 21.4 | % | ||||||||||||
Reconciliation of net realized losses:
|
||||||||||||||||||||
Other-than-temporary investment impairments
|
$ | - | $ | (4,051 | ) | $ | (345 | ) | $ | (21,196 | ) | |||||||||
Impairments recognized in other comprehensive income
|
- | - | - | - | ||||||||||||||||
- | (4,051 | ) | (345 | ) | (21,196 | ) | ||||||||||||||
Net realized gains on sale of investments
|
550 | 11,511 | 1,926 | 23,897 | ||||||||||||||||
Net realized gains
|
$ | 550 | $ | 7,460 | $ | 1,581 | $ | 2,701 |
AmTrust Financial Services, Inc.
|
||||||||
Balance Sheet Highlights
|
||||||||
(in thousands)
|
||||||||
(Unaudited)
|
||||||||
September 30,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
Cash, cash equivalents and investments
|
$ | 2,037,330 | $ | 1,558,961 | ||||
Premiums receivables
|
847,410 | 727,561 | ||||||
Goodwill and intangible assets
|
292,730 | 197,826 | ||||||
Total assets
|
5,419,349 | 4,182,453 | ||||||
Loss and loss expense reserves
|
1,782,953 | 1,263,537 | ||||||
Unearned premium
|
1,274,562 | 1,024,965 | ||||||
Trust preferred securities
|
123,714 | 123,714 | ||||||
AmTrust's stockholders' equity
|
$ | 837,916 | $ | 716,514 |
AmTrust Financial Services, Inc.
|
|||||||||||||||||||||||||||||
Non-GAAP Financial Measures
|
|||||||||||||||||||||||||||||
(in thousands, except per share data)
|
|||||||||||||||||||||||||||||
(Unaudited)
|
|||||||||||||||||||||||||||||
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
||||||||||||||||||||||||||||
2011
|
2010
|
2011
|
2010
|
||||||||||||||||||||||||||
Reconciliation of net income to operating earnings:
|
|||||||||||||||||||||||||||||
Net income
|
$ | 35,096 | $ | 39,296 | $ | 130,441 | $ | 108,819 | |||||||||||||||||||||
Less: Net realized gains (loss) net of tax
|
358 | 4,849 | 1,028 | 1,756 | |||||||||||||||||||||||||
Gain on investment in unconsolidated subsidiary net of tax (1)
|
(2,349 | ) | - | (2,349 | ) | 6,792 | |||||||||||||||||||||||
Gain on Majestic transaction net of tax (2)
|
1,732 | - | 1,732 | - | |||||||||||||||||||||||||
Foreign currency transaction gain ( loss)
|
(4,063 | ) | (141 | ) | (1,827 | ) | (103 | ) | |||||||||||||||||||||
Non cash amortization of certain intangible assets
|
(2,781 | ) | (1,148 | ) | (6,898 | ) | (3,472 | ) | |||||||||||||||||||||
Operating earnings (3)
|
$ | 42,199 | $ | 35,736 | $ | 138,755 | $ | 103,846 | |||||||||||||||||||||
Reconciliation of diluted earnings per share to diluted operating earnings per share:
|
|||||||||||||||||||||||||||||
Diluted earnings per share
|
$ | 0.57 | $ | 0.64 | $ | 2.12 | $ | 1.80 | |||||||||||||||||||||
Less: Net realized gains (loss) net of tax
|
- | 0.08 | 0.02 | 0.03 | |||||||||||||||||||||||||
Gain on investment in unconsolidated subsidiary net of tax
|
(0.04 | ) | - | (0.04 | ) | 0.11 | |||||||||||||||||||||||
Gain on Majestic transaction net of tax
|
0.03 | - | 0.03 | - | |||||||||||||||||||||||||
Foreign currency transaction gain and loss
|
(0.06 | ) | - | (0.03 | ) | - | |||||||||||||||||||||||
Non cash amortization of certain intangible assets
|
(0.04 | ) | (0.02 | ) | (0.11 | ) | (0.06 | ) | |||||||||||||||||||||
Operating diluted earnings per share (4)
|
$ | 0.68 | $ | 0.58 | $ | 2.25 | $ | 1.72 | |||||||||||||||||||||
Reconciliation of return on equity to operating return on equity:
|
|||||||||||||||||||||||||||||
Return on equity
|
16.9 | % | 23.5 | % | 22.4 | % | 22.9 | % | |||||||||||||||||||||
Less: Net realized gains (loss) net of tax
|
0.1 | % | 2.8 | % | 0.2 | % | 0.3 | % | |||||||||||||||||||||
Gain on investment in unconsolidated subsidiary net of tax
|
(1.1 | ) % | - | % | (0.4 | ) % | 1.4 | % | |||||||||||||||||||||
Gain on Majestic transaction net of tax
|
0.8 | % | - | % | 0.3 | % | - | % | |||||||||||||||||||||
Foreign currency transaction gain and loss
|
(1.9 | ) % | - | % | (0.3 | ) % | - | % | |||||||||||||||||||||
Non cash amortization of certain intangible assets
|
(1.3 | ) % | (0.4 | ) % | (1.2 | ) % | (0.7 | ) % | |||||||||||||||||||||
Operating return on equity (5)
|
20.3 | % | 21.1 | % | 23.8 | % | 21.9 | % |
(1)
|
In 2011, the Company recorded its final purchase price adjustment related to ACAC’s 2010 purchase of GMAC’s consumer property and casualty insurance business. The Company originally recorded an after tax gain of $6,792 related to this acquisition in 2010. ACAC finalized its purchase price accounting in 2011 and the impact of the Company’s gain on acquisition was reduced by $2,349 on an after tax basis. As required under GAAP, the Company has recorded this adjustment in 2011 and included it as part of equity in earnings of unconsolidated subsidiaries (related parties), which was $(477) and $6,753 for the three and nine months ended September 30, 2011. This purchase price adjustment is not included in the Company’s calculation of operating earnings.
|
||||||||||||||||||
|
|||||||||||||||||||
(2)
|
The Company recorded a gain of $2,665 and after tax gain of $1,732 related to the renewal rights transaction with Majestic insurance.
|
||||||||||||||||||
(3)
|
Operating earnings is a non-GAAP financial measure defined by the Company as net income less after-tax realized investment gains and losses, gain on investment in unconsolidated subsidiary net of tax, certain mortization expense and foreign currency transaction gain or loss and should not be considered an alternative to net income. The Company's management believes that operating earnings is a useful indicator of trends in the Company's underlying operations because it provides a more meaningful representation of Company's earnings power. The Company's measure of operating earnings may not be comparable to similarly titled measures used by other companies.
|
||||||||||||||||||
(4)
|
Diluted operating earnings per share is a non-GAAP financial measure defined by the Company as net income less after-tax net realized investment gains and losses, gain on investment in unconsolidated subsidiary net of tax, certain amortization expense and foreign currency transaction gain or loss divided by the weighted average diluted shares outstanding for the period and should not be considered an alternative to diluted earnings per share. The Company's management believes that diluted operating earnings per share is a useful indicator of trends in the Company's underlying operations because it provides a more meaningful representation of the Company’s earnings power. The Company's measure of diluted operating earnings per share may not be comparable to similarly titled measures used by other companies.
|
||||||||||||||||||
(5)
|
Operating return on equity is a non-GAAP financial measure defined by the Company as net income less net after-tax realized investment gains and losses, gain on investment in unconsolidated subsidiary net of tax, certain amortization expense and foreign currency transaction gain or loss divided by the average shareholders' equity for the period and should not be considered an alternative to return on equity. The Company's management believes that operating return on equity is a useful indicator of trends in the Company's underlying operations because it provides a more meaningful representation of the Company’s earnings power. The Company's measure of operating return on equity may not be comparable to similarly titled measures used by other companies.
|
AmTrust Financial Services, Inc.
|
||||||||||||||||
Segment Information
|
||||||||||||||||
(in thousands, except percentages)
|
||||||||||||||||
(Unaudited)
|
||||||||||||||||
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Gross written premium
|
||||||||||||||||
Small Commercial Business
|
$ | 145,418 | $ | 107,838 | $ | 460,741 | $ | 338,140 | ||||||||
Specialty Risk and Extended Warranty
|
256,493 | 146,155 | 749,743 | 495,799 | ||||||||||||
Specialty Program
|
132,621 | 60,568 | 275,951 | 192,935 | ||||||||||||
Personal Lines Reinsurance
|
26,690 | 24,523 | 77,276 | 59,083 | ||||||||||||
$ | 561,222 | $ | 339,084 | $ | 1,563,711 | $ | 1,085,957 | |||||||||
Net written premium
|
||||||||||||||||
Small Commercial Business
|
$ | 79,070 | $ | 56,386 | $ | 269,942 | $ | 173,875 | ||||||||
Specialty Risk and Extended Warranty
|
149,238 | 78,377 | 438,963 | 238,642 | ||||||||||||
Specialty Program
|
66,905 | 23,551 | 145,422 | 97,044 | ||||||||||||
Personal Lines Reinsurance
|
26,690 | 24,523 | 77,276 | 59,083 | ||||||||||||
$ | 321,903 | $ | 182,837 | $ | 931,603 | $ | 568,644 | |||||||||
Net earned premium
|
||||||||||||||||
Small Commercial Business
|
$ | 89,877 | $ | 64,415 | $ | 225,772 | $ | 189,279 | ||||||||
Specialty Risk and Extended Warranty
|
126,784 | 80,901 | 320,992 | 219,252 | ||||||||||||
Specialty Program
|
46,947 | 27,379 | 117,855 | 99,172 | ||||||||||||
Personal Lines Reinsurance
|
25,240 | 18,190 | 72,849 | 27,543 | ||||||||||||
$ | 288,848 | $ | 190,885 | $ | 737,468 | $ | 535,246 | |||||||||
Loss Ratio
|
||||||||||||||||
Small Commercial Business
|
62.0 | % | 60.9 | % | 63.1 | % | 60.1 | % | ||||||||
Specialty Risk and Extended Warranty
|
65.5 | % | 62.5 | % | 67.5 | % | 61.9 | % | ||||||||
Specialty Program
|
64.7 | % | 70.3 | % | 66.6 | % | 65.6 | % | ||||||||
Personal Lines Reinsurance
|
64.0 | % | 62.5 | % | 64.0 | % | 62.5 | % | ||||||||
Total
|
64.2 | % | 63.1 | % | 65.6 | % | 62.0 | % | ||||||||
Expense Ratio
|
||||||||||||||||
Small Commercial Business
|
28.7 | % | 25.6 | % | 26.7 | % | 24.9 | % | ||||||||
Specialty Risk and Extended Warranty
|
19.1 | % | 18.4 | % | 17.4 | % | 17.4 | % | ||||||||
Specialty Program
|
30.5 | % | 25.3 | % | 27.5 | % | 26.1 | % | ||||||||
Personal Lines Reinsurance
|
32.5 | % | 32.5 | % | 32.5 | % | 32.5 | % | ||||||||
Total
|
25.1 | % | 23.2 | % | 23.4 | % | 22.4 | % | ||||||||
Combined Ratio
|
||||||||||||||||
Small Commercial Business
|
90.7 | % | 86.5 | % | 89.8 | % | 84.9 | % | ||||||||
Specialty Risk and Extended Warranty
|
84.7 | % | 80.9 | % | 84.9 | % | 79.3 | % | ||||||||
Specialty Program
|
95.2 | % | 95.6 | % | 94.1 | % | 91.7 | % | ||||||||
Personal Lines Reinsurance
|
96.5 | % | 95.0 | % | 96.5 | % | 95.0 | % | ||||||||
Total
|
89.3 | % | 86.3 | % | 89.0 | % | 84.4 | % |
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