AmTrust Financial Services Inc. (AFSI) announced the sale of 3 million shares of its common stock in its underwritten public offering, thereby helping the company to increase its capital as well as enhance its liquidity position. At a sale price of $52.00 per share, the company sold 3 million shares and expects net proceeds of $150 million prior to offering expenses.
Following the announcement on Jan 7, shares of AmTrust Financial fell 3.6% in the last trading session, closing at $52.05 on Thursday.
Moreover, AmTrust Financial has granted the underwriter an option for 30 days to buy additional 0.45 million shares at the same price per share. The whole offering is expected to close on Jan 13, 2015. For this, the company appointed Morgan Stanley & Co. LLC of Morgan Stanley (MS) as the sole book-running manager.
AmTrust Financial intends to utilize the net proceeds of this offering for general corporate purposes, including working capital, capital expenditures and strategic investments.
The increase in the capital will provide liquidity and stability to the balance sheet of AmTrust Financial, although dilution of shares may weigh on the earnings per share.
Estimate Revision Trend
Over the last 60 days, 1 out of 3 analysts covering the stock have lowered their estimates for the fourth quarter of 2014, while 1 upward revision was also observed. Presently, the Zacks Consensus Estimate for fourth quarter operating earnings is $1.22 per share, up 52.5% from the year-ago quarter.
With respect to earnings performance, the property and casualty insurer has been delivering positive surprises in all of the last four quarters, with an average beat of 42.7%.
Riding on the strength of solid financials, along with AmTrust Financial’s initiatives to strengthen its balance sheet, we expect analysts to raise the estimates thereby putting an upward pressure on the performance of the stock in the near term.
Currently, AmTrust Financial holds a Zacks Rank #2 (Buy).
Other Stocks to Consider
Better-ranked insurance stocks like The Allstate Corporation (ALL) and Hallmark Financial Services Inc. (HALL) sport a Zacks Rank #1 (Strong Buy).
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