AmTrust Financial Services, Inc.’s (AFSI - Free Report) affiliate, AmTrust Title Insurance Company recently received rating action from the credit rating giant, A.M. Best. The rating agency assigned a Financial Strength Rating of A- (Excellent) and a Long-Term Issuer Credit Rating of “a-" to the property and casualty insurer’s unit. The outlook for the abovementioned ratings remained stable. Shares gained 0.8% in the last trading session.
AmTrust Title’s supportive risk-adjusted capitalization level, in-depth expertise of its management team, and the building and implementation of the unit’s improved business plan following the purchase by the parent, are represented by the assigned ratings. In addition, the ratings represent the unrestricted support provided to the unit by the P&C insurer and its affiliates within the organization.
However, AmTrust Title’s minimal profile in the title insurance market, the concentration of its business in the state of New York, and intense competition in the commercial title space, on which the unit plans to focus, can offset the positive rating factors.
The credit rating giant expects the unit to maintain its risk-adjusted capitalization levels, which will provide support to its liabilities, while generating operational performance in line with the affiliate’s plans. This expectation is also reflected by the assigned ratings.
AmTrust Title’s performance not being in line with the business plan, as set out by the rating agency in key areas like premium growth beyond expectations or high level of losses or expenses, leading to deterioration of surplus, could result in negative rating action. Also, a change in the financial condition of the unit’s parent, AmTrust Financial, could lead to negative rating action.
Rating affirmations or upgrades from credit rating agencies play an important role in retaining investors’ confidence in the stock as well as maintaining credit worthiness in the market. Hence, such ratings are expected to help the company write more business, going forward.
Currently, AmTrust Financial carries a Zacks Rank #3 (Hold).
Stocks to Consider
Some better-ranked stocks from the same space that warrant a look are Alleghany Corporation (Y - Free Report) , First American Financial Corporation (FAF - Free Report) and Arch Capital Group Ltd. (ACGL - Free Report) . Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Alleghany Corporation deals with Property & Casualty reinsurance and insurance businesses in the U.S. and internationally. The company delivered positive surprises in three of the last four quarters, with an average beat of 20.52%.
First American Financial, offering financial services, delivered positive surprises in all of the last four quarters, with an average beat of 14.32%.
Arch Capital offers property, casualty, and mortgage insurance and reinsurance products worldwide. It delivered positive surprises in all of the last four quarters, with an average beat of 9.27%.
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