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AmTrust Financial (AFSI) Q1 Earnings Miss, Revenues Beat

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AmTrust Financial Services, Inc. reported first-quarter 2017 operating net earnings of 32 cents per share, which missed the Zacks Consensus Estimate of 64 cents by 50%. Also, the bottom line plunged 53.6% from the year-ago quarter.

Higher catastrophe losses in the personal lines business of Republic Companies (included in the Small Commercial Business segment), prior-year adverse development related to a discontinued general liability program in the Specialty Program segment, higher professional service fees and an increased effective tax rate, were primarily responsible for the deterioration.

Behind the First-Quarter Headlines

AmTrust Financial’s total revenue of $1.4 billion increased 13.6% from the year-ago quarter. Higher service and fee income as well as strong investment performance drove the upside. Moreover, the top line beat the Zacks Consensus Estimate.

Net investment income jumped 28.1% from the prior-year quarter to $63.3 million.

Total expenses increased 19.2% year over year to $1.3 billion. Higher loss and loss adjusted expenses (LAE), acquisition costs and other underwriting expenses as well as other expenses resulted in the increase of total expenses.

Combined ratio deteriorated 370 basis points (bps) from the year-ago quarter to 95.6%. Expense ratio also deteriorated 160 bps to 26.9%.

AmTrust Financial Services, Inc. Price, Consensus and EPS Surprise

 

AmTrust Financial Services, Inc. Price, Consensus and EPS Surprise | AmTrust Financial Services, Inc. Quote

Financial Update

At the end of the first quarter, AmTrust Financial had cash, cash equivalents and investments of $9.8 billion, up 6.4% from $9.2 billion at year-end 2016. Total assets grew 5.8% to $23.9 billion from $22.6 billion at year-end 2016. Shareholder equity inched up 0.8% to $3.3 billion from the 2016-end level.

The long-term debt-to-capitalization ratio of AmTrust Financial was 28.6%, reflecting a deterioration of 90 bps from Dec 31, 2016.

Additionally, book value per share grew to $13.91 as of Mar 31, 2017 from $13.81 as of Dec 31, 2016. Operating return on equity deteriorated to 9.4% from 21.6% from the prior-year quarter.

Zacks Rank

AmTrust Financial carries a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other P&C Insurers

Among other players from the same space that have reported their first-quarter earnings so far, the bottom line at The Progressive Corporation (PGR - Free Report) , The Travelers Companies, Inc. (TRV - Free Report) and RLI Corp. (RLI - Free Report) missed their respective Zacks Consensus Estimate.

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