Current Report
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UNITED
STATES
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SECURITIES
AND EXCHANGE COMMISSION
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Washington,
D.C. 20549
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FORM
8-K
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CURRENT
REPORT
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Pursuant
to Section 13 OR 15(d) of the Securities Exchange Act of
1934
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Date
of Report (Date of Earliest Event
Reported) February
18, 2009
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AmTrust
Financial Services, Inc.
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(Exact
name of registrant as specified in its
charter)
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Delaware
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001-33143
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04-3106389
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(State
or other jurisdiction
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(Commission
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IRS
Employer
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of
incorporation)
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File
Number)
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Identification
No.)
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59
Maiden Lane, 6
th
Floor, New York, New York
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10038
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(Address
of principal executive offices)
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(Zip
Code)
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Registrant’s
telephone number, including area code
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(212)
220-7120
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Check the
appropriate box below if the Form 8-K filing is intended to simultaneously
satisfy the filing obligation of the registrant under any of the following
provisions (
see
General Instruction A.2. below):
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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
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Pre-commencement
communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR
240.14d-2(b))
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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
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RESULTS
OF OPERATIONS AND FINANCIAL
CONDITION
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On
February 18, 2009, AmTrust Financial Services, Inc. issued a press release
announcing its results of operations for the fourth quarter ended December 31,
2008 and the scheduling of a conference call on February 19, 2009 with respect
thereto. A copy of the press release is attached as Exhibit 99.1 to
this Form 8-K and is furnished as Exhibit 99.1 to this report.
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Item
9.01
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FINANCIAL
STATEMENTS AND EXHIBITS.
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(a)
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Not
applicable.
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(b)
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Not
applicable.
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(c)
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Not
applicable.
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(d)
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Exhibits.
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Exhibit
Number
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Description
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99.1
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Press
release dated February 18,
2009.
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SIGNATURES
Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.
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AmTrust Financial Services,
Inc.
(Registrant)
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Date: February
18, 2009
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By:
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/s/ Stephen Ungar | |
| Stephen Ungar | |||
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Secretary
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For
more information, please contact:
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EXHIBIT
99.1
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AmTrust
Financial Services, Inc.
Investor
Relations
Devora
Goldenberg
212.220.7120
ext. 7041
IR@amtrustgroup.com
For
immediate release
February 18,
2008
AmTrust
Financial Services, Inc. Reports Fourth Quarter
Operating
Earnings of $32.3 million and Net Income of $25.0 million
(New York)
– AmTrust Financial
Services, Inc. (NASDAQ: AFSI) today reported operating earnings of $32.3 million
for the fourth quarter of 2008. Operating earnings is a non-GAAP
financial measure defined by the Company as net income, excluding realized
investment gains and losses, net of tax. Gross written
premium for the fourth quarter of 2008 was $293.6 million and net income was
$25.0 million. For the year ended December 31, 2008, the Company
reported gross written premium of $1.1 billion, operating earnings of $124.9
million and net income of $82.9 million.
During
the fourth quarter of 2008, the Company incurred a realized loss on an after-tax
basis of $7.4 million on its investment portfolio. The realized loss
was primarily related to other than temporary impairments of equity
investments.
Fourth
Quarter Overview:
Gross
written premium in the fourth quarter 2008 increased by $47.2 million to $293.6
million or 19.2% from $246.4 million in the fourth quarter of
2007. The Company
(more)
page
2 of 7
reported
operating earnings of $32.3 million or basic operating earnings per share of
$0.54 for the fourth quarter of 2008, an increase of 26.1% from the fourth
quarter of 2007. Net income for the fourth quarter 2008 was $25.0 million, or
$0.42 basic earnings per share.
Fourth Quarter and 2008
Highlights
:
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•
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Quarterly
basic operating earnings per share was $0.54 ($0.43 in
2007)
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•
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Quarterly
basic earnings per share was $0.42 ($0.38 in 2007)
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•
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2008
basic operating earnings per share was $2.08 ($1.45 in
2007)
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•
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2008
basic earnings per share was $1.38 ($1.50 in 2007)
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•
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Return
on equity on operating earnings for three months ended December 31, 2008
was 33.1%
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•
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Return
on equity on operating earnings for 2008 was 32.3%
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•
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Book
value per share was $6.54 as of December 31, 2008 ($6.51 as of December
31, 2007)
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•
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The
combined ratio for the fourth quarter was 77.3% (75.4% in
2007)
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•
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The
combined ratio for the year ended December 31, 2008 was 74.4% (83.2% in
2007)
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Fourth
Quarter and Year-End 2008 Results:
Revenue
:
Gross
written premium for the fourth quarter was $293.6, an increase of 19.2% or $47.2
million from $246.4 million in the fourth quarter 2007. Gross written
premium for the year ended December 31, 2008 increased by $271.2 million or
32.3% to $1.1 billion from $839.4 million for the year ended December 31,
2007. The increases were attributable to both organic growth
and the continued successful integration of our recent
acquisitions.
(more)
page
3 of 7
Net
written premium (gross written premium less cessions for reinsurance, including
cessions to Maiden Insurance Company (Maiden)) in the fourth quarter of 2008
increased by $39.5 million or 31.2%, to $166.0 million from $126.5 million in
the fourth quarter of 2007 and net earned premium for the fourth quarter of 2008
increased by $20.1 million or 17.7%, to $133.4 million from $113.3 million in
the fourth quarter 2007.
For the
year ended December 31, 2008, net written premium increased $135.0 million or
32.2% to $554.9 million from $419.9 million for the year ended December 31, 2007
and net earned premium for 2008 decreased by $5.1 million or 1.2%, to $439.1
million from $444.2 million in 2007. The decrease resulted primarily
from the effect of a full year of cessions to Maiden in 2008.
As
previously disclosed, the Company entered into a reinsurance agreement with
Maiden effective July 1, 2007. Under the terms of this reinsurance
agreement, the Company ceded approximately $379 million and $248 million of
written premium to Maiden in 2008 and 2007, respectively.
The
Company’s agreement with Maiden generated $23.6 million and $19.0 million of
earned ceding commission for the fourth quarters of 2008 and 2007, respectively.
The Company earned $112.5 million of ceding commission from Maiden during 2008
compared to $59.1 million during 2007. The agreement continues to enable the
Company to leverage its balance sheet, increase its writings, decrease its
expense ratio and, most importantly, increase its return on equity.
Commission
and fee income (exclusive of ceding commission from Maiden) for the fourth
quarter 2008 increased by $1.9 million or 51.4% to $5.6 million from $3.7
million for the fourth quarter 2007. Commission and fee income for
the year ended December 31, 2008 increased by $8.6 million or 42.2% to $29.0
million from $20.4 million for the year ended December 31, 2007. The
increase in both periods was attributable primarily to reinsurance brokerage
fees from Maiden and servicing carrier fees resulting from assigned risk
servicing carrier appointments in three additional states in 2008.
(more)
page
4 of 7
Net
investment income, excluding realized gains and losses in the fourth quarter
2008, was $14.5 million compared to $12.6 million in the fourth quarter
2007. Average invested assets for the three months ended December 31,
2008 was approximately $1.4 billion compared to $1.3 billion for the three
months ended December 31, 2007. Net investment income, excluding
realized gains and losses for the year ended December 31, 2008, increased by
13.2% to $57.6 million from $50.9 million for the year ended December 31,
2008. During the year ended December 31, 2008 the Company realized
investment losses of $42.0 million on an after-tax basis.
Expenses:
The
Company’s loss ratio for the quarter ended December 31, 2008 was 53.9% compared
to 57.6% for the quarter ended December 31, 2007. The Company’s loss
ratio for the year ended December 31, 2008 was 54.3% compared to 62.4% for the
year ended December 31, 2007.
Acquisition
Costs and Other Underwriting Expenses less Ceding Commission Revenue for the
three months ended December 31, 2008 increased by $11.0 million to $31.2 million
from $20.2 million for the three months ended December 31, 2007. The
increase resulted, primarily, from increased premium writings in
2008. The expense ratio for the three months ended December 31, 2008
increased to 23.4% from 17.8% for the three months ended December 31,
2007.
(more)
page
5 of 7
Acquisition
Costs and Other Underwriting Expenses less Ceding Commission Revenue for the
year ended December 31, 2008 decreased by $4.2 million to $88.3 million from
$92.5 million for the year ended December 31, 2007. The decrease was
primarily the result of $114.4 million of ceding commission from Maiden
recognized in 2008 compared to $59.1 million in 2007, offsetting increases to
acquisition costs and other underwriting expenses from increased premium
writings. As a result, the expense ratio for the year ended December
31, 2008 decreased to 20.1% from 20.8% for the year ended December 31,
2007.
Other Matters
:
Shareholders’
Equity as of December 31, 2008 increased to $392.5 million from $390.4 million
as of December 31, 2007. During the quarter, the Board of Directors
declared a quarterly dividend of $0.05 per share. During the year
ended December 31, 2008 the Board declared dividends in total of $0.18 per
share.
As of
December 31, 2008 the Company’s debt-to-capitalization ratio was
32.0%. During the second quarter of 2008, the Company entered into a
three-year $40 million term loan, which was reduced as of December 31, 2008 to
$33.3 million. Additionally, the Company’s has $123.7 million of
30-year trust preferred securities.
(more)
page
6 of 7
Conference
Call:
On
February 19, 2008 at 10 a.m. ET, the Company will hold a conference call that
can be accessed as follows:
Toll-free
Dial-in: 877.718.5111
Toll
Dial-in (Int’l Callers): 719.325.4806
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 888.203.1112 or
719.457.0820. Enter replay passcode 4038905.
About
AmTrust Financial Services, Inc.
AmTrust
Financial Services, Inc., headquartered in New York City, is a multinational
insurance 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.
(more)
page
7 of 7
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.
AFSI-F
###
AmTrust
Financial Services, Inc.
Income
Statement
(in
thousands, except per share data)
(Unaudited)
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Three
Months Ended December 31,
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Year
Ended December 31,
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2008
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2007
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2008
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2007
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Gross
premium written
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$ | 293,550 | $ | 246,434 | $ | 1,110,574 | $ | 839,391 | ||||||||||||
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Premium
income
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Net
premium written
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$ | 165,985 | $ | 126,457 | $ | 554,913 | $ | 419,881 | ||||||||||||
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Change
in unearned premium
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(32,579 | ) | (13,121 | ) | (115,816 | ) | 24,355 | |||||||||||||
| 133,406 | 113,336 | 439,097 | 444,236 | |||||||||||||||||
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Ceding
commission (primarily related party)
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22,952 | 19,797 | 115,474 | 62,842 | ||||||||||||||||
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Commission
and fee income
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5,567 | 3,680 | 28,978 | 20,368 | ||||||||||||||||
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Investment
income, net
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14,486 | 12,561 | 57,598 | 50,887 | ||||||||||||||||
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Net
realized gains (losses)
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(11,345 | ) | (4,304 | ) | (64,585 | ) | 4,644 | |||||||||||||
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Other
investment gain (loss) on managed assets
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- | (3,836 | ) | (2,900 | ) | (6,053 | ) | |||||||||||||
| 31,660 | 27,898 | 134,565 | 132,688 | |||||||||||||||||
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Total
revenue
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165,066 | 141,234 | 573,662 | 576,924 | ||||||||||||||||
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Loss
and loss adjustment expense
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71,910 | 65,289 | 238,303 | 276,986 | ||||||||||||||||
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Acquisition
costs and other underwriting expenes
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54,175 | 40,010 | 203,747 | 155,366 | ||||||||||||||||
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Other
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3,958 | 3,764 | 17,318 | 13,816 | ||||||||||||||||
| 130,043 | 109,063 | 459,368 | 446,168 | |||||||||||||||||
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Income
from continuing operations
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35,023 | 32,171 | 114,294 | 130,756 | ||||||||||||||||
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Other
income (expense):
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Foreign
currency gain (loss)
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2,041 | 54 | 2,700 | 129 | ||||||||||||||||
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Interest
expense
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(4,547 | ) | (3,104 | ) | (16,399 | ) | (10,089 | ) | ||||||||||||
| (2,506 | ) | (3,050 | ) | (13,699 | ) | (9,960 | ) | |||||||||||||
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Income
from continuing operations before provision for income
taxes
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32,517 | 29,121 | 100,595 | 120,796 | ||||||||||||||||
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Provision
for income taxes
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7,563 | 10,125 | 20,567 | 36,709 | ||||||||||||||||
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Minority
interest in net loss of subsidiary
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- | (3,836 | ) | (2,900 | ) | (6,053 | ) | |||||||||||||
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Net
income available to common shareholders
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$ | 24,954 | $ | 22,832 | $ | 82,928 | $ | 90,140 | ||||||||||||
| Operating earnings (1) | $ | 32,328 | $ | 25,630 | $ | 124,908 | $ | 87,121 | ||||||||||||
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Earnings
per common share:
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Basic
earnings per share
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$ | 0.42 | $ | 0.38 | $ | 1.38 | $ | 1.50 | ||||||||||||
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Diluted
earnings per share
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$ | 0.41 | $ | 0.38 | $ | 1.37 | $ | 1.49 | ||||||||||||
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Basic
operating earnings per share
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$ | 0.54 | $ | 0.43 | $ | 2.08 | $ | 1.45 | ||||||||||||
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Weighted
average number of basic shares outstanding
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60,009 | 59,956 | 59,991 | 59,958 | ||||||||||||||||
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Weighted
average number of diluted shares outstanding
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60,281 | 60,796 | 60,671 | 60,674 | ||||||||||||||||
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Combined
ratio
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77.3 | % | 75.4 | % | 74.4 | % | 83.2 | % | ||||||||||||
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AmTrust
Financial Services, Inc.
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Balance
Sheet Highlights
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(in
thousands)
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(Unaudited)
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December
31,
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2008
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2007
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Cash,
cash equivalents and investments
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$ | 1,361,440 | $ | 1,289,600 | ||||
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Premiums
receivables
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410,051 | 257,756 | ||||||
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Goodwill
and intangible assets
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102,425 | 53,232 | ||||||
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Total
assets
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3,115,705 | 2,322,794 | ||||||
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Loss
and loss expense reserves
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1,014,059 | 775,392 | ||||||
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Unearned
premium
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759,915 | 527,758 | ||||||
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Trust
preferred securities
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123,714 | 123,714 | ||||||
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Total
stockholders' equity
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$ | 392,548 | $ | 390,386 | ||||
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AmTrust
Financial Services, Inc.
Non-GAAP
Financial Measure
(in
thousands, except per share data)
(Unaudited)
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||||||||||||||||||||
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Three
Months Ended December 31,
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Year
Ended December 31,
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|||||||||||||||||||
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2008
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2007
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2008
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2007
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Reconciliation
of net income to operating earnings:
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Net
income
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$ | 24,954 | $ | 22,832 | $ | 82,928 | $ | 90,140 | ||||||||||||
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Less:
Net realized gains (losses) net of taxes
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(7,374 | ) | (2,798 | ) | (41,980 | ) | 3,019 | |||||||||||||
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Operating
earnings
(1)
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$ | 32,328 | $ | 25,630 | $ | 124,908 | $ | 87,121 | ||||||||||||
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Operating
earnings per common share:
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Basic
earnings per share
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$ | 0.54 | $ | 0.43 | $ | 2.08 | $ | 1.45 | ||||||||||||
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Diluted
earnings per share
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$ | 0.54 | $ | 0.42 | $ | 2.06 | $ | 1.44 | ||||||||||||
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(1)
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Net
operating income is a non-GAAP financial measure defined by the Company as
net
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||||||||||||
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income
excluding realized investment gains and losses, net of tax, which
provides
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a
useful indicator of trends in the Company's underlying
operations.
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