Current Report
UNITED
STATES
SECURITIES
AND EXCHANGE COMMISSION
Washington,
D.C. 20549
FORM
8-K
CURRENT
REPORT
Pursuant
to Section 13 OR 15(d) of the Securities Exchange Act of 1934
Date of
Report (Date of Earliest Event
Reported)
November 3,
2009
AmTrust
Financial Services, Inc.
(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
(212)
220-7120
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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¨
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Written
communications pursuant to Rule 425 under the Securities Act (17 CFR
230.425)
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¨
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Soliciting
material pursuant to Rule 14a-12 under the Exchange Act (17 CFR
240.14a-12)
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¨
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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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¨
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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
November 3, 2009, AmTrust Financial Services, Inc. issued a press release
announcing its results of operations for the third quarter ended September 30,
2009 and the scheduling of a conference call on November 4, 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 November 3,
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.
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(Registrant)
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||
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Date
November 3,
2009
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||
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/s/
Stephen Ungar
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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
Hilly
Gross
Ellen
Taylor
212.220.7120
IR@amtrustgroup.com
For
immediate release
November 3, 2009
AmTrust
Financial Services, Inc. Reports Third Quarter Operating Earnings
of
$31.8
million and Net Income of $24.2 million
Book
Value per Share of $9.03 Increased 12.4% During the Quarter and 38.1% Year to
Date
(New York)
– AmTrust Financial
Services, Inc. (NASDAQ: AFSI) today reported operating earnings of $31.8 million
for the third quarter of 2009. Operating earnings is a non-GAAP
financial measure defined by the Company as net income, excluding realized
investment gains and losses, net of tax. During the third quarter of
2009, book value per share increased 12.4% to $9.03 per share. Gross
written premium for the third quarter of 2009 was $295.9 million and net income
was $24.2 million. For the nine months ended September 30, 2009 the
Company reported gross written premium of $833.7 million, operating earnings of
$93.7 million and net income of $75.2 million.
During
the third quarter of 2009, the Company incurred a realized loss on an after-tax
basis of $7.6 million on its investment portfolio. The realized loss
related to certain fixed income and equity investments.
Third Quarter and Nine Months
Highlights
:
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·
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Quarterly
diluted operating earnings per share of $0.53 ($0.64 in
2008)
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·
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Quarterly
diluted earnings per share of $0.40 ($0.15 in
2008)
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(more)
Page
2 of 6
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·
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Nine
months ended September 30, 2009 diluted operating earnings per share of
$1.56 ($1.52 in 2008)
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·
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Nine
months ended September 30, 2009 diluted earnings per share of $1.25 ($0.95
in 2008)
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·
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25.1%
annualized operating return on equity during the
quarter
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·
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Book
value per share of $9.03 as of September 30, 2009 ($6.54 as of December
31, 2008)
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·
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Combined
ratio for the third quarter of 78.0% (58.0% in
2008)
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·
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Combined
ratio for the nine months ended September 30, 2009 of 79.1% (73.1% in
2008)
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·
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Closed
CyberComp
TM
renewal rights transaction early September
2009
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Third
Quarter Overview:
Total
revenue in the third quarter increased by $74.3 million to $182.0 million, or
69.0%, from $107.7 million in the third quarter of 2008. The Company reported
operating earnings of $31.8 million or diluted operating earnings per share of
$0.53 for the third quarter of 2009. Net income for the third quarter of 2009
was $24.2 million, or $0.40 diluted earnings per share.
Third
Quarter and Nine Months Results:
Revenue
:
Total
revenue for the third quarter of 2009 increased $74.3 million or 69.0% to $182.0
million from $107.7 million for the third quarter of 2008. Net
premium earned increased $53.0 million or 57.4% to $145.3 million during the
third quarter of 2009 from $92.3 million during the third quarter of
2008. Gross written premium in the third quarter of 2009 increased by
$14.7 million to $295.9 million from $281.2 million for the third quarter of
2008.
Total
revenue for the nine months ended September 30, 2009 was $536.4 million, an
increase of 31.2% from the nine months ended September 30, 2008. Net
premium earned increased $108.8 million or 35.6% to $414.5 million during the
nine months ended September 30, 2008. Gross written premium for the
nine months ended September 30, 2009 increased by $16.7 million to $833.7
million from $817.0 million for the nine months ended September 30,
2008.
(more)
Page
3 of 6
Third
quarter 2009 net written premium (gross written premium less cessions for
reinsurance, including cessions to Maiden Insurance Company (Maiden)) increased
$27.9 million or 20.0% to $167.3 million from $139.4 million in the third
quarter of 2008. For the nine months ended September 30, 2009, net
written premium increased $51.7 million or 13.2% to $440.6 million from $388.9
million for the nine months ended September 30, 2008.
Under the
terms of a reinsurance agreement with Maiden, the Company ceded approximately
$269.7 million and $353.6 million of written premium during the nine months
ended September 30, 2009 and 2008, respectively. This agreement with
Maiden generated $27.4 million and $37.1 million of earned ceding commission for
the third quarter of 2009 and 2008, respectively, and $87.2 million and $92.5
million of earned ceding commission for the nine months ended September 30, 2009
and 2008, respectively. As previously disclosed, on September 30,
2009 the parties agreed to extend the agreement until June 30,
2013. 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 third
quarter 2009 decreased by $1.7 million or 19.5% to $7.0 million from $8.7
million for the third quarter 2008. Commission and fee income for the
nine months ended September 30, 2009 decreased by $1.4 million or 5.9% to $22.0
million from $23.4 million for the nine months ended September 30,
2008.
Net
investment income, excluding realized gains and losses in the third quarter
2009, was $14.1 million compared to $15.4 million in the third quarter
2008. Net investment income, excluding realized gains and losses for
the nine months ended September 30, 2009, was $41.3 million compared to $43.1
million for the nine months ended September 30, 2008. During the
three months ended September 30, 2009 and 2008, the Company realized investment
losses of $7.6 million and $29.8 million, respectively, on an after-tax
basis. For the nine months ended September 30, 2009 and 2008, the
Company realized investment losses of $18.6 million and $34.6 million,
respectively, on an after-tax-basis.
(more)
Page
4 of 6
Expenses:
The
Company’s loss ratio for the third quarter of 2009 was 53.4% compared to 40.2%
for the third quarter of 2008. The Company’s loss ratio for the nine
months ended September 30, 2009 was 55.3% compared to 54.4% for the nine months
ended December 31, 2008. The third quarter 2008 and year to date loss
ratios reflect the third quarter release of $15.0 million of loss reserves
related to prior accident years.
Acquisition
Costs and Other Underwriting Expenses less Ceding Commission Revenue for the
three months ended September 30, 2009 increased by $19.4 million to $35.8
million from $16.4 million for the three months ended September 30,
2008. The expense ratio for the three months ended
September 30, 2009 increased to 24.6% from 17.8% for the three months ended
September 30, 2008.
Acquisition
Costs and Other Underwriting Expenses less Ceding Commission Revenue for the
nine months ended September 30, 2009 increased by $41.6 million to $98.7 million
from $57.1 million for the nine months ended September 30, 2008. As a
result, the expense ratio for the nine months ended September 30, 2009 increased
to 23.8% from 18.7% for the nine months ended September 30, 2008.
The
expense ratio for both the quarterly and nine month 2008 comparative periods was
positively impacted by the cession of assumed unearned premium in the amount of
$78.2 million in connection with the acquisition of Unitrin Business Insurance
in the second quarter 2008.
(more)
Page
5 of 6
Other Matters
:
Shareholders’
Equity as of September 30, 2009 increased to $535.6 million from $392.5 million
as of December 31, 2008. During the quarter, the Board of Directors
declared a quarterly dividend of $0.06 per share.
As of
September 30, 2009, the Company’s debt-to-capitalization ratio was 23.9% down
from 32.0% from the year ended 2008. During the second quarter of
2008, the Company entered into a three-year $40.0 million term loan, which has
been reduced as of September 30, 2009 to $23.3 million. Additionally,
the Company has $123.7 million of long-term trust preferred
securities.
Conference
Call:
On
November 4, 2009 at 10 a.m. ET, the Company will host a conference call and
audio webcast that may be accessed as follows:
Toll-free
(Within the U.S.): 877.397.0291
Toll Call
(Outside the U.S.): 719.325.4759
Webcast
registration:
http://ir.amtrustgroup.com
A replay
of the call and webcast will be available at approximately 1:00 p.m. ET
Wednesday, November 4, 2009 through Wednesday, November 11, 2009. To listen to
the replay please dial 888.203.1112 (Within the U.S.) or 719.457.0820 (Outside
the U.S.) and enter replay passcode 3891402 or access
http://ir.amtrustgroup.com
.
(more)
Page
6 of 6
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.
Forward
Looking Statements
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 except as may be
required by law. Additional information about these risks and
uncertainties, as well as others that may cause actual results to differ
materially from those projected, is contained in Item 1A. Risk Factors in the
Company’s Annual Report on Form 10-K for the period ended December 31,
2008.
AFSI-F
###
Income
Statement
(in
thousands, except per share data)
(Unaudited)
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Three Months Ended September
30,
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Nine Months Ended September
30,
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|||||||||||||||
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2009
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2008
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2009
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2008
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|||||||||||||
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Gross
written premium
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$ | 295,942 | $ | 281,206 | $ | 833,698 | $ | 817,024 | ||||||||
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Premium
income
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||||||||||||||||
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Net
premium written
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$ | 167,317 | $ | 139,429 | $ | 440,616 | $ | 388,928 | ||||||||
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Change
in unearned premium
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(22,025 | ) | (47,096 | ) | (26,098 | ) | (83,237 | ) | ||||||||
| 145,292 | 92,333 | 414,518 | 305,691 | |||||||||||||
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Ceding
commission (primarily related party)
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27,369 | 37,116 | 87,238 | 92,522 | ||||||||||||
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Commission
and fee income
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6,951 | 8,749 | 22,012 | 23,411 | ||||||||||||
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Investment
income, net
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14,079 | 15,391 | 41,250 | 43,112 | ||||||||||||
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Net
realized losses
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(11,653 | ) | (45,885 | ) | (28,600 | ) | (53,240 | ) | ||||||||
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Other
investment gain (loss) on managed assets
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- | - | - | (2,900 | ) | |||||||||||
| 36,746 | 15,371 | 121,900 | 102,905 | |||||||||||||
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Total
revenue
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182,038 | 107,704 | 536,418 | 408,596 | ||||||||||||
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Loss
and loss adjustment expense
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77,531 | 37,094 | 229,031 | 166,393 | ||||||||||||
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Acquisition
costs and other underwriting expense
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63,154 | 53,549 | 185,895 | 149,572 | ||||||||||||
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Other
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5,764 | 6,062 | 16,732 | 13,360 | ||||||||||||
| 146,449 | 96,705 | 431,658 | 329,325 | |||||||||||||
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Income
from continuing operations
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35,589 | 10,999 | 104,760 | 79,271 | ||||||||||||
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Other
income (expense):
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||||||||||||||||
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Foreign
currency gain (loss)
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552 | 515 | 1,196 | 659 | ||||||||||||
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Interest
expense
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(3,813 | ) | (3,682 | ) | (11,991 | ) | (11,852 | ) | ||||||||
| (3,261 | ) | (3,167 | ) | (10,795 | ) | (11,193 | ) | |||||||||
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Income
from continuing operations before provision for income
taxes
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32,328 | 7,832 | 93,965 | 68,078 | ||||||||||||
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Provision
for income taxes
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8,107 | (1,529 | ) | 18,811 | 13,004 | |||||||||||
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Minority
interest in net loss of subsidiary
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- | - | - | (2,900 | ) | |||||||||||
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Net
income available to common shareholders
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$ | 24,221 | $ | 9,361 | $ | 75,154 | $ | 57,974 | ||||||||
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Operating
earnings
(1)
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$ | 31,795 | $ | 39,186 | $ | 93,744 | $ | 92,580 | ||||||||
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Earnings
per common share:
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||||||||||||||||
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Basic
earnings per share
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$ | 0.41 | $ | 0.16 | $ | 1.26 | $ | 0.97 | ||||||||
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Diluted
earnings per share
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$ | 0.40 | $ | 0.15 | $ | 1.25 | $ | 0.95 | ||||||||
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Basic
operating earnings per share
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$ | 0.54 | $ | 0.65 | $ | 1.58 | $ | 1.54 | ||||||||
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Weighted
average number of basic shares outstanding
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59,342 | 59,995 | 59,475 | 59,985 | ||||||||||||
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Weighted
average number of diluted shares outstanding
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59,988 | 60,816 | 59,911 | 60,906 | ||||||||||||
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Combined
ratio
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78.0 | % | 58.0 | % | 79.1 | % | 73.1 | % | ||||||||
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Reconciliation
of net realized losses:
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||||||||||||||||
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Other-than-temporary
investment impairments
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$ | (3,147 | ) | $ | (36,662 | ) | $ | (15,360 | ) | $ | (44,633 | ) | ||||
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Impairments
recognized in other comprehensive income
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- | - | - | - | ||||||||||||
| (3,147 | ) | (36,662 | ) | (15,360 | ) | (44,633 | ) | |||||||||
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Net
realized gains (losses) on sale of investments
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(8,506 | ) | (9,223 | ) | (13,240 | ) | (8,607 | ) | ||||||||
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Net
realized losses
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$ | (11,653 | ) | $ | (45,885 | ) | $ | (28,600 | ) | $ | (53,240 | ) | ||||
AmTrust
Financial Services, Inc.
Balance
Sheet Highlights
(in
thousands)
(Unaudited)
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September 30, 2009
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December 31, 2008
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|||||||
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Cash,
cash equivalents and investments
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$ | 1,464,501 | $ | 1,361,440 | ||||
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Premiums
receivables
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417,647 | 419,577 | ||||||
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Goodwill
and intangible assets
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108,421 | 102,425 | ||||||
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Total
assets
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3,315,702 | 3,143,893 | ||||||
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Loss
and loss expense reserves
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1,060,059 | 1,014,059 | ||||||
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Unearned
premium
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790,452 | 759,915 | ||||||
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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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$ | 535,622 | $ | 392,548 | ||||
Non-GAAP
Financial Measure
(in
thousands, except per share data)
(Unaudited)
|
Three Months Ended September 30,
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Nine Months Ended September 30,
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|||||||||||||||
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2009
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2008
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2009
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2008
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|||||||||||||
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||||||||||||||||
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Reconciliation
of net income to operating earnings:
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||||||||||||||||
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Net
income
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$ | 24,221 | $ | 9,361 | $ | 75,154 | $ | 57,974 | ||||||||
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Less:
Net realized gains (losses) net of taxes
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(7,574 | ) | (29,825 | ) | (18,590 | ) | (34,606 | ) | ||||||||
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Operating
earnings
(1)
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$ | 31,795 | $ | 39,186 | $ | 93,744 | $ | 92,580 | ||||||||
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Operating
earnings per common share:
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||||||||||||||||
|
Basic
earnings per share
|
$ | 0.54 | $ | 0.65 | $ | 1.58 | $ | 1.54 | ||||||||
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Diluted
earnings per share
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$ | 0.53 | $ | 0.64 | $ | 1.56 | $ | 1.52 | ||||||||
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(1)
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Operating
earnings is a non-GAAP financial measure defined by the Company as net
income excluding realized investment gains and losses, net of tax 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. The
Company's measure of operating earnings may not be comparable to similarly
titled measures used by other
companies.
|