AmTrust Financial Services Inc. AFSI posted second-quarter 2015 operating net earnings of $1.55 per share that surpassed both the Zacks Consensus Estimate and the year-ago quarter result by 15.7%.
The improvement was driven by a significant growth in the top line.
Including extraordinary items, reported net income was $84 cents per share, down 36.8% year over year due to the adverse effect of foreign currency translation.
AmTrust’s total revenue increased 9.8% year over year to $1.11 billion. The upside can be largely attributed to 8.2% increase in net earned premiums, a 10.7% rise in service and fee income and an 11.3% improvement in investment income.
The gross written premiums came in at $1.68 billion in the reported quarter, which translates into a year-over-year improvement of 16.3%.
However, total expenses increased 10.5% year over year to $975.3 million due to higher loss and loss adjusted expenses along with a rise in acquisition, underwriting and other expenses.
The combined ratio improved 40 basis points (bps) year over year to 90.5%. However, expense ratio deteriorated 80 bps to 24.6%.
Financial Update
At the end of the second quarter, AmTrust held cash and cash equivalents of $6.64 billion, up from $5.67 billion at the end of 2014. Total assets grew 15% to $15.97 billion from $13.85 billion at the end of 2014, whereas shareholder equity rose 21% to $2.47 billion from $2.04 billion at year-end 2014.
Long-term debt-to-capitalization ratio of AmTrust came in at 27.3%, thereby reflecting a deterioration of 20 bps from that as of Dec 31, 2014.
Additionally, the book value per share grew 7.4% to $24.05 as of Jun 30, 2015 from $22.34 as of Dec 31, 2014. Operating return on equity declined to 26.3% from 28% in the year-ago quarter.
Zacks Rank
AmTrust Financial holds a Zacks Rank #2 (Buy).
Performance of Other Property and Casualty Insurers
The bottom line at each of RLI Corporation RLI, The Travelers Companies Inc. TRV and Progressive Corp. PGR outperformed their respective Zacks Consensus Estimate in the second quarter.
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