Atlas Financial Holdings, Inc. AFH reported fourth-quarter 2014 operating income of 33 cents per share, outperforming the Zacks Consensus Estimate of 26 cents by 26.9%. Earnings also surged 50% year over year on higher revenues.
Including net realized gains, other income and net tax adjustments, net income came in at $9.5 million or 77 cents per share compared with $2.2 million or 22 cents per share in the year-ago quarter.
Behind the Headlines
Atlas Financial generated $28.4 million in revenues, improving 35.6% year over year on higher net premiums earned (up 33%), net investment income (up 114%) and net investment gains (up significantly). However, revenues lagged the Zacks Consensus Estimate of $29 million by 2.1%.
Gross premiums written rose 19.4% to $26.4 million including a 54.1% increase in core commercial auto business which was written in 40 states in the reported quarter.
The company’s total expenses increased 32.3% year over year to $24.8 million due to a rise in net claims incurred, acquisition costs, other underwriting expenses and higher expenses incurred due to acquisitions.
Atlas Financial’s underwriting income was $3.2 million, improving 80.8% from the year-ago quarter. Combined ratio improved 310 basis points (bps) year over year to 88.4%. The improvement in the combined ratio was driven by an improvement of 160 bps in the loss ratio due to incremental opportunities to leverage the company’s expertise in the claims area along with the implementation of increased rates. The acquisition cost ratio and other underwriting expense ratio also improved by 60 bps each.
Full-Year Highlights
Atlas Financial reported 2014 earnings per share of $1.56 compared with 74 cents a year ago.
The company reported total revenue of $101.6 million up 37.3% year over year. However, results missed the Zacks Consensus Estimate of $102 million by 0.4%.
Financial Update
Atlas Financial exited 2014 with cash and cash equivalents of $36.6 million, compared with $9.8 million reported at 2013-end. The increase was due to the company’s completion of its public offering in May 2014.
Total assets of Atlas Financial increased 29.5% to $283.9 million as of Dec 31, 2014.
Total shareholders equity increased 71.7% to $109.4 million from 2013 end.
Book value was $9.08 per share as of Dec 31, 2014, rising 38.8% from 2013-end.
Atlas Financial’s return on average common equity excluding the benefit from income taxes was 13.7% as of Dec 31, 2014.
Update in Acquisition of Global Liberty
On Oct 17 2014, Atlas Financial inked a deal to acquire New York-based Global Liberty Insurance Company for $24.7 million for shares and equity.
Outlook for 2015
Atlas Financial expects to increase its market share to 20% of the addressable market, including $2 billion subset of the commercial auto insurance market.
Currently, Atlas Financial carries a Zacks Rank #3 (Hold).
Performance of Other Property and Casualty Insurers
Other players such as Allied World Assurance Company Holdings, AG AWH, Endurance Specialty Holdings Ltd. ENH and Arch Capital Group Ltd. ACGL reported favorable fourth-quarter earnings which were above the Zacks Consensus Estimate by 109.7%, 9.4% and 8.5%, respectively.
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