AmTrust Reports Fourth Quarter 2016 Net Income, Reflecting Strengthening Of Reserves

By: Jeff Hatch

February 27, 2017

AmTrust Financial Services, Inc. (Nasdaq:AFSI) ("the Company" or "AmTrust") today announced fourth quarter 2016 net income attributable to common stockholders of $98.7 million, or $0.57 per diluted share, compared to $59.7 million, or $0.35 per diluted share in the fourth quarter 2015. For the fourth quarter 2016, operating earnings was $66.3 million, or $0.38 per diluted share, compared to $115.7 million, or $0.67 per diluted share, in the fourth quarter 2015. The decrease in net income attributable to common stockholders and operating earnings reflects a reserve charge of $65.0 million, or approximately $0.24 per diluted share, primarily related to strengthening of prior year loss and loss adjustment reserves in our Specialty Program segment.
 
"Our fourth quarter caps a strong year in which we completed and integrated several strategic acquisitions, delivered higher investment returns, achieved record revenue, strengthened our balance sheet through preferred stock issuances, returned more than $262 million of capital to shareholders in the form of common share repurchases and dividends, and produced book value per share of $15.15 at year-end, an increase of over 17% from a year ago," said Barry Zyskind, Chairman and Chief Executive Officer, AmTrust. "We are very pleased with the underlying operational performance of our business in the fourth quarter and in 2016, a year in which we continued to maintain high levels of policy retention and maintain underwriting discipline. While our expense ratio was elevated in the fourth quarter, due largely to business mix as well as higher costs related to increased year-end resources, expenses were otherwise in line with our net earned premium growth."
 
"Our combined ratio of 95.5% in the fourth quarter reflects our continued profitability, particularly in our two largest segments, Small Commercial Business and Specialty Risk and Extended Warranty, but we are strengthening prior year loss and loss adjustment reserves in our Specialty Program segment following extensive internal actuarial reviews. As we have noted in the past, this segment has underperformed relative to our expectations, which led us to install new leadership and to adjust our approach to writing programs for commercial auto, general liability, and workers' compensation. We are confident that we are adequately reserved on our consolidated book of business. We have a solid foundation to build upon in 2017, and are committed to creating shareholder value through disciplined growth and steady returns."
 
Fourth Quarter 2016 Results
 
Total revenue was $1.42 billion, an increase of $219.4 million, or 18%, from $1.20 billion in the fourth quarter 2015. Gross written premium was $1.91 billion, an increase of $299.8 million, or 19%, from $1.61 billion in the fourth quarter 2015. Net written premium was $1.15 billion, an increase of $81 million, or 8%, compared to $1.07 billion in the fourth quarter 2015. Net earned premium was $1.22 billion, an increase of $157.7 million, or 15%, from $1.06 billion in the fourth quarter 2015. The combined ratio was 95.5% compared to 91.9% in fourth quarter 2015.
 
Full Year 2016 Results
 
Total revenue was $5.45 billion, an increase of $837.7 million, or 18%, from $4.62 billion in 2015. Gross written premium was $7.95 billion, an increase of $1,149.7 million, or 17%, from $6.80 billion in 2015. Net written premium was $4.85 billion, an increase of $591.3 million, or 14%, from $4.26 billion in 2015. Net earned premium of $4.67 billion increased $646.2 million, or 16%, from $4.02 billion in 2015. The combined ratio was 92.1% compared to 91.1% in 2015.
 
A summary of results is listed below along with a link to the earnings release. 
 
Financial Highlights
 
Fourth Quarter and Full Year 2016 Highlights
 
Fourth quarter gross written premium of $1.91 billion and net earned premium of $1.22 billion, up 19% and 15%, respectively, from the fourth quarter 2015
Fourth quarter service and fee income of $151.0 million, up 26% from the fourth quarter 2015
Fourth quarter net income attributable to common stockholders of $98.7 million, or $0.57 per diluted share, compared to $59.7 million, or $0.35 per diluted share, in the fourth quarter 2015
Fourth quarter operating earnings of $66.3 million, or $0.38 per diluted share, compared to $115.7 million, or $0.67 per diluted share, in the fourth quarter 2015
Current period net income attributable to common stockholders and operating earnings include a reserve charge of $65.0 million, or approximately $0.24 per diluted share;
Fourth quarter and full year combined ratio of 95.5% and 92.1%, respectively
Full year 2016 capital returned to shareholders of $262.4 million, including $152.3 million of common share repurchases
 
To view AmTrust Financial Services’ Q4 earnings release, visit the Investor Relations section at http://ir.amtrustgroup.com or click on the following link: http://ir.amtrustgroup.com/releasedetail.cfm?ReleaseID=1014558 

Filed Under: AmTrust, earnings, financial, profitability, Q4, services, Warrantech

Extended-Service Contracts Help Build a Comfort Zone – and Long-Term Relationships – with Customers

By: Jeff Hatch

February 21, 2017

The following is an excerpt from an article by Jeff Crider, which appeared in the 2017 Jan./Feb. issue of RVBusiness. The full article can be found at: http://bit.ly/2m9hhac
 
“The quality of RVs in general has improved, but there are more and more gadgets,” said Joe Suttera, Warrantech’s vice president of specialty products. “From a warranty standpoint, there is certainly a lot more risk than there ever has been when it comes to these units.”
 
The continued growth of the RV industry in 2017 is good news not only for the nation’s RV manufacturers, aftermarket suppliers and retail dealers, but also for the companies selling extended-service contracts to this emerging wave of RV consumers.
   In fact, the extended-service-contract business is booming, companies told RVBusiness, due to this sustained increase in the sales of new and used towable and motorized RVs. 
   Indeed, the industry is currently experiencing its eighth consecutive year of growth, with wholesale shipments of new RVs expected to increase 4.4% in 2017 to 438,000 units, according to projections by Richard Curtin of the University of Michigan’s Consumer Survey Research Center.
   That continuous flow of new- and used-vehicle sales creates huge opportunities for dealers to sell their customers extended-service contracts, the cost of which is typically added to the vehicle loan at the time of purchase. 
   Regardless of whether their RV is new or used, consumers want to have peace of mind knowing that unexpected repair costs will be covered when their vehicle’s warranty runs out. While manufacturers provide different types of warranties to cover things that can malfunction in the mechanical and living areas of an RV, warranties only last for specific periods of time. Extended-service contracts have been designed to extend warranty protections for additional periods of time with varying levels of coverage and cost. 
   Extended-service contracts are also available to cover things that are not typically covered by factory warranties such as roadside assistance, tire-and-wheel coverage and paint-and-fabric coverage.
   Millennials, in particular, are in tune with the latest innovations in technology and they want it to work. 
   Extended-service contracts can cover these items after the warranties expire to give consumers peace of mind with their RV purchases, regardless of whether they have new or used vehicles.
   Bill Gilman, senior vice president of sales for Warrantech, an AmTrust Financial Company based in Bedford, Texas, said there were more “fit and fitness issues” with RVs back in 2007 when the RV industry was struggling through the Great Recession. The downturn forced many RV manufacturers out of business. But while the quality of today’s RVs has significantly improved from 2007, Warrantech and other extended-service contract providers see plenty of potential risks to cover.
   “The quality of RVs in general has improved, but there are more and more gadgets,” said Joe Suttera, Warrantech’s vice president of specialty products. “Now you’re covering 50-inch flat-screen TVs, full walk-in showers. From a warranty standpoint, there is certainly a lot more risk than there ever has been when it comes to these units.”
   As one might expect, companies that provide extended-service contracts closely monitor their claims reports so that they can price their contracts accordingly. They also monitor feedback from RV dealers and periodically either update their extended-service contracts to cover new products or develop entirely new types of extended-service contracts for dealers to sell. 
   Extended-service contract companies offer a variety of educational programs and increasingly sophisticated electronic programs to expedite contract sales and claims processing. 
   But the time to make the initial pitch to consumers is in the F&I process when they’re purchasing their new or used RVs. That’s when dealers have an opportunity to educate their customers so that they know the differences between warranties and extended-service contracts. 
 
Warrantech Automotive, an AmTrust Group Co.
Bedford, Texas  
Product offering: Warrantech markets exclusionary and stated extended-service contracts using the CampersEdge brand name. The company covers motorhomes valued at up to $5000,000 and with up to 100,000 miles. It also covers towable units valued at up to $150,000 and that are up to 15 years old. The company also offers specialty contracts for RV technical assistance; 24/7 roadside assistance; windshield repairs; painting and interior; tire and wheel coverage; as well as key/remote replacement coverage. Warrantech also provides Towbusters coverage with 24-hour emergency towing, roadside assistance, lost key and lockout service, map routing assistance and theft as well as hit-and-run protection. The company also offers guaranteed asset protection (GAP) coverage. 
Key contact: Bill Gilman, senior vice president of sales, (210) 788-2555 or bill.gilman@amtrustgroup.com
 

Filed Under: AmTrust, CampersEdge, contract, extended, RV, RVBusiness, service, Towbusters

AmTrust Announces Net Income For The Third Quarter 2016

By: Jeff Hatch

November 03, 2016

Warrantech’s parent company, AmTrust Financial Services, Inc. (AFSI) today announced third quarter 2016 net income attributable to common stockholders was $103.6 million, or $0.60 per diluted share, compared to $182.7 million, or $1.09 per diluted share, in the third quarter 2015. 

For the third quarter 2016, operating earnings was $126.3 million, or $0.73 per diluted share, compared to $150.9 million, or $0.89 per diluted share, in the third quarter 2015. Annualized return on common equity was 15.9% for the third quarter 2016 compared to 35.4% for the third quarter 2015. Third quarter 2016 annualized operating return on common equity was 19.4% compared to 29.2% in the third quarter 2015.

"We delivered a solid performance in the third quarter, with strong investment results, higher service and fee income, and growth in gross written premiums, compared with the same period a year ago," said Barry Zyskind, Chairman, President and Chief Executive Officer, AmTrust. "Our performance reflects a full quarter's contribution from Republic Companies, as well as continued strong policy retention and disciplined underwriting of new business in our small commercial business segment, as demonstrated by our stable loss ratio. The top-line results of our specialty risk and extended warranty segment reflect the impact of the decline in the British pound relative to the third quarter a year ago, and we are pleased with the underlying performance of this segment."

Mr. Zyskind also stated, "We are optimistic about our organic growth prospects, given our differentiated model in workers' compensation and commercial lines products in the U.S., as well as opportunities in our warranty insurance offering globally. We remain focused on building a portfolio of business that leverages our proprietary technology and our efficient operating structure to enhance shareholder returns."

Third Quarter 2016 Results

Total revenue was $1.41 billion, an increase of $181.3 million, or 15%, from $1.23 billion in the third quarter 2015. Gross written premium was $2.03 billion, an increase of $253.3 million, or 14%, from $1.78 billion in the third quarter 2015. Net written premium was $1.22 billion, an increase of $73.1 million, or 6%, compared to $1.14 billion in the third quarter 2015. Net earned premium was $1.20 billion, an increase of $150.8 million, or 14%, from $1.05 billion in the third quarter 2015. The combined ratio was 91.5% compared to 92.6% in third quarter 2015.

A summary of Q3 results is listed below along with a link to the earnings release. 

Financial Highlights

Third Quarter 2016

Gross written premium of $2.03 billion, up 14.2% compared to $1.78 billion in the third quarter 2015
Net earned premium of $1.20 billion, up 14.4% from $1.05 billion in the third quarter 2015 
Net income attributable to common stockholders of $103.6 million compared to $182.7 million in the third quarter 2015
Operating earnings of $126.3 million compared to $150.9 million in the third quarter 2015
Diluted EPS of $0.60 compared to $1.09 in the third quarter 2015
Operating diluted EPS of $0.73 compared to $0.89 in the third quarter 2015
Service and fee income of $146.6 million, up 16% from $126.1 million in the third quarter 2015
Combined ratio of 91.5% compared to 92.6% in the third quarter 2015
Weighted average diluted shares outstanding of 173.1 million, up 3% compared to 168.3 million in the third quarter 2015

To view AmTrust Financial Services’ Q3 earnings release, visit the Investor Relations section at http://ir.amtrustgroup.com or click on the following link: http://ir.amtrustgroup.com/releasedetail.cfm?ReleaseID=997294 

Filed Under: AmTrust, earnings, Financial, gross, income, premium, Q3, quarter, third, Warrantech, written

AmTrust Financial Services Wins The GWSCA’s “Innovation in Warranty” Award

By: Jeff Hatch

September 23, 2016

Yesterday at the Third Annual GWSCA Conference on Warranty and Service Contracts in Chicago, Illinois, Warrantech’s parent company, AmTrust Financial Services, Inc., won the award for “Innovation in Warranty” for its “Complete” program. 
 
Complete is a comprehensive protection plan program developed for Microsoft’s OEM and third-party devices sold via Microsoft’s numerous sales channels, including their brick and mortar store locations, their online store, distribution partners, and resellers worldwide. In 2009, the Complete program launched in one Microsoft store. Today, AmTrust is the exclusive provider of Microsoft Complete in 60 countries, with plans that cover Surface Pro, Surface Book, Surface Hub, Xbox, Band, HoloLens and all third-party OEM PC products sold by Microsoft.
 
Visionary leadership, strong management, robust technology platforms, efficient operations, and focused client management are among the key attributes driving the success of AmTrust in support of Microsoft Complete.
 
AmTrust has worked diligently and rapidly to facilitate Complete sales in all the territories in which hardware is being sold. In less than 18 months from initial launch, they rolled out Complete in 60 countries and expanded the product offerings to include all Microsoft OEM products. They’ve developed unique mobile applications to market, sell and register smartphone insurance policies with Microsoft Mobile, formerly known as NOKIA. 
 
The Global Warranty and Service Contract Association (GWSCA) serves the warranty and service contract communities worldwide. Founded and operated by industry professionals who volunteer their time and talents, GWSCA provides programs, resources and services that develop and enhance the knowledge, capabilities and performance of its constituency, both individuals and organizations. In this way, GWSCA fosters and promotes industry wide innovation and advancement towards excellence.
 
AmTrust Financial Services, Inc. is a financial holding company with 27 insurance companies operating globally and providing small business insurance, unique risk, and warranty and specialty risk solutions. All their insurance carriers are “A” rated by A.M. Best. AmTrust is a publically traded company trading under the symbol “AFSI” on NASDAQ.
 
AmTrust underwrote $6.8 billion in Gross Written Premium in 2015 and has assets in excess of $17 billion. They have offices in more than 40 locations and operate in more than 50 countries. In 2014, AmTrust was ranked 63rd in Fortune magazine’s Fastest Growing Companies. In the same year, Forbes named AmTrust as one of the best run companies (insurance). Warranty Week, the leading online authority in the warranty industry identified AmTrust as the most ‘warranty-centric’ company.
 
Congratulations to AmTrust Financial on this impressive accomplishment. For more information about the company and their services, visit amtrustgroup.com

Filed Under: AmTrust, Award, Complete, Financial, GWSCA, Innovation, Warrantech, Warranty

New Program Offers Certified Pre-Owned Cars With A Warranty

By: Jeff Hatch

August 11, 2016

The following story and broadcast appeared on WSPA 7 News, a CBS affiliate in South Carolina. To view the video or read the original article, visit: http://wspa.com/2016/08/11/a-brake-for-used-car-buyers-new-program-offers-certified-per-owned-cars-with-a-warranty/ 
 
We get a lot of calls from viewers who bought a used car, “as is,” only to have it break down shortly after. When dealers won’t fix it, drivers are out of luck.
 
Now a new certified pre-owned program that’s spreading across the country has made it to the Upstate. There’s only one local dealership in that program so far because it’s so stringent. So we looked into the benefit for consumers, and whether there is a cost involved.
 
“Our program bases a lot on statistics. We know that if you do 125-point inspection on a car, the odds of it breaking down go down to minuscule,” said William Carr with AmTrust/Warrantech.
 
The warranty backers have teamed up with the National Independent Automobile Dealers Association to support the certification program.
 
In addition to that thorough inspection, each vehicle will also get a Carfax report, recall check and come with a warranty of at least 3 months/3,000 miles, or 10yr/100k powertrain.
 
“By giving the consumer a better product, in the long run we’ll sell more cars. So I think it’s a win win,” said Darla Booher, the owner of Deal Depot in Greer, Spartanburg and Duncan.
Her dealerships are the only active members right now. And as such, those lots will have to abide by a strict code of conduct.
 
“There is a very stringent standard that deals not just with the inspections but with the entire running of a car lot. Recently an upstate dealer had to exit the program because they couldn’t live up to the standards of the program,” said Carr.
 
There are about 80 dealerships across the country involved in this program, with about 5 new ones added each week. In fact one in Greenville is coming on board before the end of the summer.
 
Administrators say the program cost for inspections and the warranty are minimal. But of course it begged the question, is that passed along to consumers?
 
“No, there’s absolutely not additional cost to the consumer,” said Booher.
 
In fact, when it comes to the warranty, it’s illegal for a dealer to charge for that or it becomes a service contract.
 
One word of caution, as a consumer you want to make sure that there’s no bait and switch. If a car is advertised as certified, the dealers should not offer to take off the certification for a lower price. That’s illegal.
 
The NIADA Certified program performs quarterly inspections to make sure all dealers are continuously compliant.

Filed Under: AmTrust, automobile, Carfax, CBS, certified, CPO, dealer, NIADA, pre-owned, program, Warrantech, WSPA

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