NEW YORK, Feb. 18, 2009 (GLOBE NEWSWIRE) -- 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 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: * Quarterly basic operating earnings per share was $0.54 ($0.43 in 2007) * Quarterly basic earnings per share was $0.42 ($0.38 in 2007) * 2008 basic operating earnings per share was $2.08 ($1.45 in 2007) * 2008 basic earnings per share was $1.38 ($1.50 in 2007) * Return on equity on operating earnings for three months ended December 31, 2008 was 33.1% * Return on equity on operating earnings for 2008 was 32.3% * Book value per share was $6.54 as of December 31, 2008 ($6.51 as of December 31, 2007) * The combined ratio for the fourth quarter was 77.3% (75.4% in 2007) * The combined ratio for the year ended December 31, 2008 was 74.4% (83.2% in 2007)
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.
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 $377 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.
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.
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 $112.5 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.
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.
The AmTrust Financial Services, Inc. logo is available at http://www.globenewswire.com/newsroom/prs/?pkgid=3280
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.
AmTrust Financial Services, Inc.
Income Statement
(in thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
----------------------- -----------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
Gross premium
written $ 293,550 $ 246,434 $1,110,574 $ 839,391
========== ========== ========== ==========
Premium income
Net premium written $ 165,985 $ 126,457 $ 554,913 $ 419,881
Change in
unearned premium (32,579) (13,121) (115,816) 24,355
---------- ---------- ---------- ----------
133,406 113,336 439,097 444,236
Ceding commission
(primarily related
party) 22,952 19,797 115,474 62,842
Commission and
fee income 5,567 3,680 28,978 20,368
Investment
income, net 14,486 12,561 57,598 50,887
Net realized gains
(losses) (11,345) (4,304) (64,585) 4,644
Other investment
gain (loss) on
managed assets -- (3,836) (2,900) (6,053)
---------- ---------- ---------- ----------
31,660 27,898 134,565 132,688
---------- ---------- ---------- ----------
Total revenue 165,066 141,234 573,662 576,924
---------- ---------- ---------- ----------
Loss and loss
adjustment expense 71,910 65,289 238,303 276,986
Acquisition costs
and other
underwriting
expenes 54,175 40,010 203,747 155,366
Other 3,958 3,764 17,318 13,816
---------- ---------- ---------- ----------
130,043 109,063 459,368 446,168
---------- ---------- ---------- ----------
Income from
continuing
operations 35,023 32,171 114,294 130,756
Other income
(expense):
Foreign currency
gain (loss) 2,041 54 2,700 129
Interest expense (4,547) (3,104) (16,399) (10,089)
---------- ---------- ---------- ----------
(2,506) (3,050) (13,699) (9,960)
---------- ---------- ---------- ----------
Income from
continuing
operations before
provision for
income taxes 32,517 29,121 100,595 120,796
Provision for
income taxes 7,563 10,125 20,567 36,709
Minority interest
in net loss of
subsidiary -- (3,836) (2,900) (6,053)
---------- ---------- ---------- ----------
Net income available
to common
shareholders $ 24,954 $ 22,832 $ 82,928 $ 90,140
========== ========== ========== ==========
Operating
earnings(1) $ 32,328 $ 25,630 $ 124,908 $ 87,121
========== ========== ========== ==========
Earnings per
common share:
Basic earnings
per share $ 0.42 $ 0.38 $ 1.38 $ 1.50
Diluted earnings
per share $ 0.41 $ 0.38 $ 1.37 $ 1.49
Basic operating
earnings per share $ 0.54 $ 0.43 $ 2.08 $ 1.45
Weighted average
number of basic
shares outstanding 60,009 59,956 59,991 59,958
Weighted average
number of diluted
shares outstanding 60,281 60,796 60,671 60,674
Combined ratio 77.3% 75.4% 74.4% 83.2%
AmTrust Financial Services, Inc.
Balance Sheet Highlights
(in thousands)
(Unaudited)
December 31,
-----------------------
2008 2007
---------- ----------
Cash, cash equivalents and investments $1,361,440 $1,289,600
Premiums receivables 410,051 257,756
Goodwill and intangible assets 102,425 53,232
Total assets 3,115,705 2,322,794
Loss and loss expense reserves 1,014,059 775,392
Unearned premium 759,915 527,758
Trust preferred securities 123,714 123,714
Total stockholders' equity $ 392,548 $ 390,386
AmTrust Financial Services, Inc.
Non-GAAP Financial Measure
(in thousands, except per share data)
(Unaudited)
Three Months Ended Year Ended
December 31, December 31,
----------------------- -----------------------
2008 2007 2008 2007
---------- ---------- ---------- ----------
Reconciliation of
net income to
operating earnings:
Net income $ 24,954 $ 22,832 $ 82,928 $ 90,140
Less: Net realized
gains (losses) net
of taxes (7,374) (2,798) (41,980) 3,019
---------- ---------- ---------- ----------
Operating
earnings(1) $ 32,328 $ 25,630 $ 124,908 $ 87,121
========== ========== ========== ==========
Operating earnings
per common share:
Basic earnings
per share $ 0.54 $ 0.43 $ 2.08 $ 1.45
Diluted earnings
per share $ 0.54 $ 0.42 $ 2.06 $ 1.44
(1) Net operating income is a non-GAAP financial measure defined by
the Company as net income excluding realized investment gains and
losses, net of tax, which provides a useful indicator of trends
in the Company's underlying operations.
AFSI-F