Date of Report (Date of Earliest Event Reported) | May 8, 2017 |
Delaware | 001-33143 | 04-3106389 | ||
(State or other jurisdiction | (Commission | (IRS Employer | ||
of incorporation) | File Number) | Identification No.) |
59 Maiden Lane, 43rd Floor, New York, New York | 10038 | |
(Address of principal executive offices) | (Zip Code) |
Registrant’s telephone number, including area code | (212) 220-7120 |
(Former name or former address, if changed since last report.) |
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.133-4 (c)) |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter) Emerging growth company o |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. o |
Item 2.02 | RESULTS OF OPERATIONS AND FINANCIAL CONDITION. |
Item 9.01 | FINANCIAL STATEMENTS AND EXHIBITS. |
(a) | Not applicable. |
(b) | Not applicable. |
(c) | Not applicable. |
(d) | Exhibits. |
Exhibit Number | Description | ||
99.1 | Press release dated May 8, 2017. |
AmTrust Financial Services, Inc. | |
(Registrant) |
Date | May 8, 2017 |
/s/ Stephen Ungar | |
Stephen Ungar | |
Senior Vice President, General Counsel and Secretary |
• | First quarter gross written premium of $2.3 billion and net earned premium of $1.2 billion, up 17.2% and 13.8%, respectively, from the first quarter 2016(2) |
• | First quarter service and fee income of $137.5 million, up 6.7% from the first quarter 2016(2) |
• | First quarter net income attributable to common stockholders of $22.6 million, or $0.13 per diluted share, compared to $84.0 million, or $0.47 per diluted share, in the first quarter 2016(2) |
• | First quarter operating earnings(1) of $55.7 million, or $0.32 per diluted share, compared to $122.9 million, or $0.69 per diluted share, in the first quarter 2016(2) |
• | First quarter combined ratio of 95.6%, compared with 91.9%, in the first quarter 2016(2) |
• | First quarter catastrophe losses of $25.3 million (pre-tax), compared to $2.0 million (pre-tax) in the first quarter of 2016 |
Series | Rate | Dividend | ||
A | 6.750% | $0.421875 | ||
B | 7.250% | $0.453125 | ||
C | 7.625% | $0.476563 | ||
D | 7.500% | $0.468750 | ||
E | 7.750% | $0.484375 | ||
F | 6.950% | $0.434375 |
CONTACT: | AmTrust Financial Services, Inc. |
Chief Communications Officer & SVP Corporate Affairs | |
Chaya Cooperberg | |
chaya.cooperberg@amtrustgroup.com | |
(646) 458-3332 |
AmTrust Financial Services, Inc. Income Statements (in thousands, except per share data) (Unaudited) | |||||||||
Three Months Ended March 31, | |||||||||
2017 | 2016 (2) | ||||||||
As Restated | |||||||||
Gross written premium | $ | 2,266,280 | $ | 1,933,074 | |||||
Net written premium | $ | 1,344,066 | $ | 1,220,679 | |||||
Change in unearned premium | (121,534 | ) | (146,397 | ) | |||||
Net earned premium | 1,222,532 | 1,074,282 | |||||||
Service and fee income | 137,496 | 128,805 | |||||||
Net investment income | 63,325 | 49,415 | |||||||
Net realized gain on investments | 8,615 | 7,975 | |||||||
Other revenue | 209,436 | 186,195 | |||||||
Total revenue | 1,431,968 | 1,260,477 | |||||||
Loss and loss adjustment expense | 840,334 | 715,073 | |||||||
Acquisition costs and other underwriting expense | 328,215 | 272,468 | |||||||
Other expense | 162,853 | 129,267 | |||||||
Total expense | 1,331,402 | 1,116,808 | |||||||
Income before other income (expense), provision for income taxes, equity in earnings of unconsolidated subsidiaries and non-controlling interest | 100,566 | 143,669 | |||||||
Other income (loss): | |||||||||
Interest expense | (23,601 | ) | (15,874 | ) | |||||
Gain on life settlement contracts net of profit commission | 8,610 | 10,730 | |||||||
Foreign currency loss | (17,968 | ) | (38,233 | ) | |||||
Gain on acquisition | — | 9,678 | |||||||
Total other income (loss) | (32,959 | ) | (33,699 | ) | |||||
Income before provision for income taxes, equity in earnings of unconsolidated subsidiaries and non-controlling interest | 67,607 | 109,970 | |||||||
Provision for income taxes | 21,356 | 18,960 | |||||||
Equity in earnings of unconsolidated subsidiaries (related parties) | 3,957 | 5,776 | |||||||
Net income | 50,208 | 96,786 | |||||||
Net income attributable to redeemable non-controlling interest and non-controlling interest of subsidiaries | (11,005 | ) | (4,017 | ) | |||||
Net income attributable to AmTrust Financial Services, Inc. | $ | 39,203 | $ | 92,769 | |||||
Dividends on preferred stock | (16,571 | ) | (8,791 | ) | |||||
Net income attributable to AmTrust common stockholders | $ | 22,632 | $ | 83,978 | |||||
Operating earnings(1) attributable to AmTrust common stockholders | $ | 55,739 | $ | 122,886 | |||||
AmTrust Financial Services, Inc. Income Statements (in thousands, except per share data) (Unaudited) | |||||||||
Three Months Ended March 31, | |||||||||
2017 | 2016 (2) | ||||||||
As Restated | |||||||||
Earnings per common share: | |||||||||
Basic earnings per share | $ | 0.13 | $ | 0.48 | |||||
Diluted earnings per share | $ | 0.13 | $ | 0.47 | |||||
Operating diluted earnings per share (1) | $ | 0.32 | $ | 0.69 | |||||
Weighted average number of basic shares outstanding | 170,864 | 175,585 | |||||||
Weighted average number of diluted shares outstanding | 172,692 | 177,927 | |||||||
Combined ratio | 95.6 | % | 91.9 | % | |||||
Return on common equity | 3.8 | % | 14.7 | % | |||||
Operating return on equity (1) | 9.4 | % | 21.6 | % | |||||
Net realized gain on investments: | |||||||||
Total other-than-temporary impairment loss | $ | — | $ | — | |||||
Portion of loss recognized in other comprehensive income | — | — | |||||||
Net impairment losses recognized in earnings | — | — | |||||||
Net realized gain recognized on available for sale securities | 11,630 | 5,272 | |||||||
Net unrealized gain (loss) on trading securities and other investments | (3,015 | ) | 2,703 | ||||||
Net realized investment gain | $ | 8,615 | $ | 7,975 |
AmTrust Financial Services, Inc. Balance Sheets Highlights (in thousands, except book value per common share) | |||||||||
March 31, 2017 | December 31, 2016 | ||||||||
(Unaudited) | (Audited) | ||||||||
Cash, cash equivalents and investments | $ | 9,826,971 | $ | 9,235,666 | |||||
Premium receivables, net | 2,946,344 | 2,802,167 | |||||||
Goodwill and intangible assets | 1,251,262 | 1,243,125 | |||||||
Loss and loss adjustment expense reserves | 10,630,162 | 10,140,716 | |||||||
Unearned premium | 5,199,465 | 4,880,066 | |||||||
Debt | 1,306,701 | 1,234,900 | |||||||
Preferred stock | 913,750 | 913,750 | |||||||
AmTrust's stockholders' equity | 3,296,455 | 3,269,103 | |||||||
Book value per common share | $ | 13.91 | $ | 13.81 |
AmTrust Financial Services, Inc. Non-GAAP Financial Measures (in thousands, except per share data) (Unaudited) | |||||||||
Three Months Ended March 31, | |||||||||
2017 | 2016 (2) | ||||||||
As Restated | |||||||||
Reconciliation of net income attributable to AmTrust common stockholders to operating earnings (1): | |||||||||
Net income attributable to AmTrust common stockholders | $ | 22,632 | $ | 83,978 | |||||
Less: Net realized gain on investments | 8,615 | 7,975 | |||||||
Non-cash amortization of intangible assets | (19,091 | ) | (10,612 | ) | |||||
Non-cash interest on convertible senior notes | (1,648 | ) | (1,537 | ) | |||||
Foreign currency loss | (17,968 | ) | (38,233 | ) | |||||
Gain on acquisition | — | 9,678 | |||||||
Tax effect of adjustments reflected above (3) | (3,015 | ) | (6,179 | ) | |||||
Operating earnings (1) attributable to AmTrust common stockholders | $ | 55,739 | $ | 122,886 | |||||
Reconciliation of diluted earnings per share to diluted operating earnings per share (1): | |||||||||
Diluted earnings per share | $ | 0.13 | $ | 0.47 | |||||
Less: Net realized gain on investments | 0.05 | 0.05 | |||||||
Non-cash amortization of intangible assets | (0.11 | ) | (0.06 | ) | |||||
Non-cash interest on convertible senior notes | (0.01 | ) | (0.01 | ) | |||||
Foreign currency loss | (0.10 | ) | (0.22 | ) | |||||
Gain on acquisition | — | 0.06 | |||||||
Tax effect of adjustments reflected above (3) | (0.02 | ) | (0.04 | ) | |||||
Operating diluted earnings per share (1) | $ | 0.32 | $ | 0.69 | |||||
Reconciliation of return on common equity to operating return on common equity (1): : | |||||||||
Return on common equity | 3.8 | % | 14.7 | % | |||||
Less: Net realized gain on investments | 1.5 | % | 1.4 | % | |||||
Non-cash amortization of intangible assets | (3.2 | )% | (1.9 | )% | |||||
Non-cash interest on convertible senior notes | (0.3 | )% | (0.3 | )% | |||||
Foreign currency loss | (3.1 | )% | (6.8 | )% | |||||
Gain on acquisition | — | % | 1.7 | % | |||||
Tax effect of adjustments reflected above (3) | (0.5 | )% | (1.0 | )% | |||||
Operating return on common equity (1) | 9.4 | % | 21.6 | % |
(1) | References to operating earnings attributable to AmTrust common stockholders ("Operating Earnings"), operating diluted earnings per share ("EPS"), and operating return on common equity are non-GAAP financial measures. Operating earnings is defined by the Company as net income attributable to AmTrust common stockholders less net realized gain on investments, non-cash amortization of intangible assets, non-cash interest on convertible senior notes, foreign currency loss, gain on acquisition and the income tax impact on certain of these aforementioned adjustments. Operating Earnings should not be considered an alternative to net income. Operating diluted earnings per share is defined by the Company as Operating Earnings divided by the weighted average diluted shares outstanding for the period and should not be considered an alternative to diluted earnings per share. Operating return on common equity is defined by the Company as Operating Earnings divided by the average common equity for the period and should not be considered an alternative to return on common equity. The Company believes Operating Earnings, operating diluted earnings per share, and operating return on common equity are more relevant measures of the Company's profitability because Operating Earnings, operating diluted earnings per share, and operating return on common equity contain the components of net income upon which the Company's management has the most influence and excludes factors outside management's direct control and non-recurring items. The Company's measure of Operating Earnings, operating diluted earnings per share, and operating return on common equity may not be comparable to similarly titled measures used by other companies. |
(2) | In connection with the preparation, review and audit of the Company's consolidated financial statements required to be included in its Annual Report on Form 10-K for the year ended December 31, 2016, management identified certain errors in the Company's historical financial statements, resulting in a conclusion by the Audit Committee of the Company's Board of Directors, in consultation with management and the Company's current and former independent registered public accounting firms, that the Company's previously issued consolidated financial statements for the first three quarters of fiscal year 2016 needed to be restated. The Restatement corrects errors primarily related to: (1) upfront recognition of the portion of warranty contract revenue associated with administration services, instead of recognizing the revenue over the life of the contract; and (2) bonuses that were expensed in the year paid but that should have been accrued as earned based on ASC 270, Interim Reporting, and ASC 450, Contingencies. The Company has also identified other adjustments that have been corrected as part of this Restatement. The table below summarizes the effects of the Restatement adjustments recorded to the previously reported three month period ended March 31, 2016: |
Three Months Ended March 31, 2016 | |||||||||
(In thousands, except for share information) | As Restated | As Previously Reported | |||||||
Service and fee income | $ | 128,805 | $ | 144,201 | |||||
Total revenue | 1,260,477 | 1,275,873 | |||||||
Acquisition costs and other underwriting expense | 272,468 | 264,634 | |||||||
Other expense | 129,267 | 128,186 | |||||||
Total expense | 1,116,808 | 1,107,893 | |||||||
Income before other income (expense), provision for income taxes, equity in earnings of unconsolidated subsidiaries and non-controlling interest | 143,669 | 167,980 | |||||||
Interest expense | (15,874 | ) | (17,700 | ) | |||||
Foreign currency loss | (38,233 | ) | (35,673 | ) | |||||
Income before provision for income taxes, equity in earnings of unconsolidated subsidiaries and non-controlling interest | 109,970 | 135,015 | |||||||
Provision for income taxes | 18,960 | 27,726 | |||||||
Net income | 96,786 | 113,065 | |||||||
Net income attributable to AmTrust Financial Services, Inc. | 92,769 | 109,048 | |||||||
Net income attributable to AmTrust common stockholders | 83,978 | 100,257 | |||||||
Operating earnings(1) attributable to AmTrust common stockholders | 122,886 | 136,604 | |||||||
Basic earnings per share | $ | 0.48 | $ | 0.57 | |||||
Diluted earnings per share | $ | 0.47 | $ | 0.56 | |||||
Operating diluted earnings per share(1) | $ | 0.69 | $ | 0.77 | |||||
Return on common equity | 14.7 | % | 16.2 | % | |||||
Operating return on common equity(1) | 21.6 | % | 22.1 | % |
(3) | The Company calculated the income tax effect of certain adjustments using the U.S. federal statutory income tax rate of 35%. Specifically, realized gain on investments is predominantly U.S. sourced and, therefore, is subject to tax at 35%. In addition, gain on acquisition is both U.S. and foreign sourced gain that is ultimately subject to tax at 35%. The Company does not report non-cash amortization of intangible assets, non-cash interest on convertible senior notes, or foreign currency loss net of tax. |
AmTrust Financial Services, Inc. Segment Information (in thousands, except percentages) (Unaudited) | |||||||||
Three Months Ended March 31, | |||||||||
2017 | 2016 | ||||||||
As Restated | |||||||||
Gross written premium | |||||||||
Small Commercial Business | $ | 1,257,285 | $ | 1,066,132 | |||||
Specialty Risk and Extended Warranty | 732,442 | 529,446 | |||||||
Specialty Program | 276,553 | 337,496 | |||||||
$ | 2,266,280 | $ | 1,933,074 | ||||||
Net written premium | |||||||||
Small Commercial Business | $ | 658,979 | $ | 624,528 | |||||
Specialty Risk and Extended Warranty | 510,208 | 337,833 | |||||||
Specialty Program | 174,879 | 258,318 | |||||||
$ | 1,344,066 | $ | 1,220,679 | ||||||
Net earned premium | |||||||||
Small Commercial Business | $ | 553,625 | $ | 504,094 | |||||
Specialty Risk and Extended Warranty | 473,490 | 321,841 | |||||||
Specialty Program | 195,417 | 248,347 | |||||||
$ | 1,222,532 | $ | 1,074,282 | ||||||
Loss Ratio: | |||||||||
Small Commercial Business | 68.2 | % | 66.0 | % | |||||
Specialty Risk and Extended Warranty | 66.0 | % | 65.5 | % | |||||
Specialty Program | 76.9 | % | 69.0 | % | |||||
Total | 68.7 | % | 66.6 | % | |||||
Expense Ratio: | |||||||||
Small Commercial Business (2) | 27.9 | % | 26.5 | % | |||||
Specialty Risk and Extended Warranty (2) | 25.0 | % | 22.7 | % | |||||
Specialty Program (2) | 28.2 | % | 26.6 | % | |||||
Total | 26.9 | % | 25.3 | % | |||||
Combined Ratio: | |||||||||
Small Commercial Business (2) | 96.1 | % | 92.5 | % | |||||
Specialty Risk and Extended Warranty (2) | 91.0 | % | 88.2 | % | |||||
Specialty Program (2) | 105.1 | % | 95.6 | % | |||||
Total | 95.6 | % | 91.9 | % |
&%P+S$N,"\ /#]X<&%C:V5T(&)E9VEN/2?ON[\G(&ED
M/2=7-4TP37!#96AI2'IR95-Z3E1C>FMC.60G/SX-"CQX.GAM<&UE=&$@>&UL
M;G,Z>#TB861O8F4Z;G,Z;65T82\B('@Z>&UP=&L](EA-4"!T;V]L:VET(#,N
M,"TR."P@9G)A;65W;W)K(#$N-B(^#0H)/')D9CI21$8@>&UL;G,Z $S%F+P)'*"
M\25#-%.2HK)C<\(U1">3H[,V%U1D=,/2X@@F@PD*&!F$E$5&I+16TU4H&O+C
M\\34Y/1E=865I;7%U>7U9G:&EJ:VQM;F]C='5V=WAY>GM\?7Y_ @JF!78J[%78J[%78J[%78J[%78J
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MS-/]DN9W\G<)/'(
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M_5X]'T6]U66,RQV4+SM&I +!!6@)S68',1_G.SS9."!E_-89J'YT:#:Z7I
ML\-I/>:IJD0F@TJ"CR(IK3U&%>/*FW%6;_)S.AV9,R()$8P_C<&?:*4Q&0
MD,8XN+^=LR.NX8P,HF)R'AX?YN[.OISJP"
MI0T^('
*.TG%S&;=D4EU!6C
H<+#4Z:.8 2OTGB3_,=R$@F\EZ7+YQ@\V-+.-1MX#;)$&3T"A#"I7A
MSY?&?]V9D#4R&(X]N$GB_I..=-$Y1DWX@.'^BG^8[D)!-Y+TN7SC!YL:6<:C
M;P&V2(,GH%"&%2O#GR^,_P"[,R!J9#$<>W"3Q?TG'.FB
7-!L_+^
MB6NCV;R26UHI6-YBK2$,Q<\BJHO5OY<.;,