It's debatable if the fiduciary standard is 'higher' than suitability. But the better question might be, who's holding the bar?
Second Quarter 2012
NEW YORK, Aug. 6, 2012 (GLOBE NEWSWIRE) -- AmTrust Financial Services, Inc. (Nasdaq:AFSI) ("the Company") today reported second quarter 2012 operating earnings (1) of $45.4 million, or $0.72 per diluted share, compared to $49.4 million, or $0.80 per diluted share, in the second quarter of 2011. Net income totaled $40.4 million, or $0.64 per diluted share, for the second quarter of 2012 compared to $50.2 million, or $0.81 per diluted share, in the second quarter of 2011.
During the first six months of 2012, net income totaled $79.4 million, down 16.7% from $95.3 million in the first half of 2011. Earnings per diluted share totaled $1.27 in the first six months of 2012, a decrease of 18.1% from $1.55 in the same period a year ago. Operating earnings (1) totaled $89.4 million, or $1.43 per diluted share, a decrease of 7.5% from $96.6 million, or $1.57 per diluted share, in the first six months of 2011.
Second Quarter 2012 Results
Total revenue of $430.6 million increased $108.6 million, or 33.7%, from $322.0 million in the second quarter of 2011. Gross written premium of $637.4 million rose $78.9 million, or 14.1%, from $558.5 million in the second quarter of 2011. Net written premium of $391.6 million increased $15.9 million, or 4.2%, from $375.7 million in the second quarter in 2011. Net earned premium of $334.0 million increased $85.7 million, or 34.5%, from $248.3 million in the second quarter of 2011.
Commission and other revenues of $96.6 million increased $22.9 million, or 31.0%, from $73.7 million in the second quarter of 2011 and represented 22.4% of total revenue. The combined ratio totaled 88.9% compared with 90.3% in the second quarter of 2011.
Ceding commissions, primarily related to the reinsurance agreements with Maiden Holdings, Ltd. ("Maiden"), totaled $44.6 million, up 25.8% from $35.4 million a year ago. During the quarter, AmTrust ceded $196.4 million of gross written premium and $170.0 million of earned premium to Maiden compared to $213.9 million of gross written premium and $136.7 million of earned premium ceded in the second quarter of 2011.
Total service and fee income of $33.0 million increased 34.5% from $24.5 million in the second quarter of 2011 and included $6.9 million from related parties compared with $4.5 million in the second quarter of 2011.
Investment income, excluding net realized gains and losses, totaled $16.3 million, an increase of 23.5% from $13.2 million in the second quarter of 2011. In addition, second quarter 2012 results include net realized investment gains of $2.7 million, or $1.8 million after-tax, on certain fixed income and equity investments compared with $0.6 million, or $0.4 million after-tax, in the second quarter of 2011.
In the second quarter 2012, net gain on life settlements including non-controlling interest was $2.0 million, which included a net benefit of $10.0 million from mortality events. Operating earnings (1) included gain on life settlement contracts of $1.1 million, net of non-controlling interest.
Loss and loss adjustment expense totaled $211.8 million, an increase of $41.8 million from $170.0 million in the second quarter of 2011 and resulted in a loss ratio of 63.4% compared with 68.5% for the second quarter of 2011.
Acquisition costs and other underwriting expenses of $129.7 million increased $40.1 million from $89.6 million in the second quarter of 2011. Acquisition costs and other underwriting expenses less ceding commissions totaled $85.2 million compared with $54.2 million in the second quarter of 2011. The expense ratio was 25.5%, up from 21.8% in the second quarter of 2011.
Other expenses of $32.3 million increased $13.8 million from $18.6 million in the second quarter of 2011.
Year-to-Date 2012 Results
Total revenue of $844.8 million increased $247.0 million, or 41.3%, from $597.8 million YTD 2011. Gross written premium of $1.2 billion rose $236.6 million, or 23.6%, from $1.0 billion YTD 2011. Net written premium of $751.4 million increased $141.7 million, or 23.2%, from $609.7 million YTD 2011. Net earned premium of $648.0 million increased $199.4 million, or 44.4%, from $448.6 million in the second quarter of 2011.
Commission and other revenues of $196.8 million increased $47.6 million, or 31.9%, from $149.2 million YTD 2011 and represented 23.3% of total revenue. The combined ratio totaled 88.7% compared with 88.8% YTD 2011.
Ceding commissions, primarily related to the reinsurance agreements with Maiden, totaled $90.8 million, up 27.7% from $71.1 million a year ago. During the first six months, AmTrust ceded $387.3 million of gross written premium and $336.3 million of earned premium to Maiden compared to $340.6 million of gross written premium and $250.6 million of earned premium ceded YTD 2011.
Total service and fee income of $73.5 million increased 47.9% from $49.7 million YTD 2011 and included $13.0 million from related parties compared with $7.9 million YTD 2011.
Investment income, excluding net realized gains and losses, totaled $30.9 million, an increase of 12.8% from $27.4 million YTD 2011. In addition, YTD 2012 results included net realized investment gains of $1.6 million, or $1.0 million after-tax, on certain fixed income and equity investments compared with $1.0 million, or $0.7 million after-tax, YTD 2011.
Loss and loss adjustment expense totaled $411.7 million, an increase of $113.0 million from $298.7 million YTD 2011 and resulted in a loss ratio of 63.5% compared with 66.6% YTD 2011.
Acquisition costs and other underwriting expenses of $253.7 million increased $82.9 million from $170.8 million YTD 2011. Acquisition costs and other underwriting expenses less ceding commissions totaled $162.9 million compared with $99.7 million YTD 2011. The expense ratio was 25.1%, up from 22.2% YTD 2011.
Other expenses of $68.0 million increased $29.2 million from $38.8 million YTD 2011.
Total assets of $6.3 billion increased 10.8% from $5.7 billion at December 31, 2011 and included a $306.1 million, or 14.7%, increase in cash, cash equivalents and investments to $2.4 billion. Shareholders' equity of $999.5 million increased 12.2% from $890.6 million at year-end 2011.
During the first six months of 2012, the Board of Directors declared two quarterly dividends of $0.09 and $0.10 per share. As of June 30, 2012, the Company's long-term debt-to-capitalization ratio was 23.0% compared with 23.9% from year-end 2011.
(1) References to operating earnings, operating diluted EPS, and operating return on equity are non-GAAP financial measures defined by the Company as net income, diluted earnings per share and return on equity excluding after-tax net realized investment gains and losses on securities, non-cash amortization of certain intangible assets, non-cash interest on convertible senior notes, net of tax and foreign currency transaction gain and loss. Please see the Non-GAAP Financial Measures table at the end of this release for important information about the use of these non-GAAP measures and their reconciliation to GAAP.
On August 6, 2012 at 9 a.m. ET, CEO Barry Zyskind and CFO Ron Pipoly will review these results via a conference call and webcast that may be accessed as follows:
Toll-Free Dial-in: 877.755.7421
Toll Dial-in (Outside the U.S): 973.200.3087
Webcast registration: http://ir.amtrustgroup.com/events.cfm
A replay of the conference call will be available at approximately 12:00 p.m. ET Monday, August 6, 2012 through Monday, August 13, 2012. To listen to the replay, please dial 800.585.8367 (within the U.S.) or 404.537.3406 (outside the U.S.) and enter replay passcode 15067182, or access http://ir.amtrustgroup.com/events.cfm.
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.
The AmTrust Financial Services, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3280
Forward Looking Statements
This news release contains "forward-looking statements" that 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 expressed or implied in these statements as a result of significant risks and uncertainties, including, but not limited to, non-receipt of expected payments from insureds or reinsurers, changes in interest rates, a downgrade in the financial strength ratings of our insurance subsidiaries, the effect of the performance of financial markets on our investment portfolio, our estimates of the fair value of our life settlement contracts, development of claims and the effect on loss reserves, accuracy in projecting loss reserves, the cost and availability of reinsurance coverage, the effects of emerging claim and coverage issues, changes in the demand for our products, our degree of success in integrating acquired businesses, the effect of general economic conditions, state and federal legislation, regulations and regulatory investigations into industry practices, risks associated with conducting business outside the United States, developments relating to existing agreements, disruptions to our business relationships with Maiden Holdings, Ltd., American Capital Acquisition Corporation, or third party agencies and warranty administrators, difficulties with technology or breaches in data security, heightened competition, changes in pricing environments, and changes in asset valuations. The forward-looking statements contained in this news release are made only as of the date of this release. 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 the Company's filings with the Securities and Exchange Commission, including its annual report on Form 10-K and its quarterly reports on Form 10-Q.
CONTACT: AmTrust Financial Services, Inc.
Elizabeth Malone CFA