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AmTrust Financial (AFSI) Q3 Earnings Miss, Revenues Down Y/Y

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AmTrust Financial Services, Inc. reported third-quarter 2018 net loss of 43 cents, missing the Zacks Consensus Estimate of earnings of 31 cents. However, the loss narrowed year over year.

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

Behind the Headlines

Operating revenues decreased 4% year over year to $1.6 billion attributable to significant drop in service and fee income as well as other income.

Total earned premiums increased 19.5% to $1.4 million on increase in gross written premiums in Small Commercial Business and Specialty Risk and Extended Warranty segments, and a higher retention rate.

Net investment income increased 14.2% to $69.8 million on higher average invested assets.

Total expenses declined 12.5% to $1.6 billion due to lower loss and loss adjustment expenses as well as a decrease in other expense.

Combined ratio improved 2690 basis points (bps) from the year-ago quarter to 107.5%. Expense ratio deteriorated 460 bps to 32.9%.

Segment Update

Small Commercial Business: Net earned premiums grew 18.4% year over year to $646.5 million driven by increase in gross written premiums primarily in commercial package and excess and surplus lines of business, as well as higher retention. Combined ratio improved 3040 bps to 107.7%.

Specialty Risk and Extended Warranty: Net earned premiums surged nearly 60% year over year to $685.2 million driven by increased gross written premiums resulting from acquisition of ANV Holdings B.V. Combined ratio improved 1250 bps to 100.2%.

Specialty Program: Net premiums earned dropped 48.3% year over year to $93.5 million due to termination of certain workers' compensation and general liability programs in 2017. Combined ratio improved 2220 bps to 159.1%.

Financial Update

As of Sep 30, 2018, investments totaled $9.3 billion, up 13.5% from 2017-end level.

Cash and cash equivalents of $993.9 million decreased 20% from 2017-end level.

Debt of $1.3 billion at third-quarter end deteriorated 2.8% from 2017-end level.

Shareholders’ equity of $3.4 billion increased 6.7% from 2017-end level.

Cash from operations was $359.7 million in the first nine months of 2018, against cash outflow of $74.2 million in year-ago period.

Performance of Other Insurers

Among other insurers that have reported third-quarter earnings, earnings of MGIC Investment Corporation (MTG - Free Report) , Radian Group Inc. (RDN - Free Report) and CNO Financial Group (CNO - Free Report) beat the respective third-quarter estimates.

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