AmTrust Financial Services, Inc. (Nasdaq:AFSI) ("the Company") today announced solid profit growth for the first quarter ended March 31, 2015. Operating earnings(1) were $121.4 million, or $1.45 per diluted share, an increase of 24.6%, compared to $97.4 million, or $1.24 per diluted share, in the first quarter of 2014. First quarter 2015 net income attributable to common stockholders grew to $154.7 million, or $1.85 per diluted share, an increase of 54.9% from $99.9 million, or $1.27 per diluted share, in the first quarter 2014. First quarter 2015 annualized operating return on common equity(1)was 26.1% compared to 27.8% in the first quarter 2014. Annualized return on common equity was 33.3% for the first quarter of 2015 compared to 28.5% for the first quarter of 2014.
Financial Highlights
First Quarter 2015
o Gross written premium of $1.73 billion, up 16.0% after excluding from first quarter 2014 the impact of $174 million of non-recurring gross written premium related to the Cut Through Reinsurance Agreement with Tower Group International, Ltd.
o Net earned premium of $949.4 million, up 14.5% from first quarter 2014
o Operating diluted EPS(1) of $1.45 ($0.07 attributable to gain on life settlements) compared to $1.24 ($0.02 attributable to gain on life settlements) in the first quarter 2014
o Diluted EPS of $1.85 compared with $1.27 in the first quarter 2014
o Annualized operating return on common equity(1) of 26.1% and annualized return on common equity of 33.3%
o Service and fee income of $112.9 million, up 24.1% from the first quarter 2014
o Operating earnings(1) of $121.4 million compared to $97.4 million from the first quarter 2014
o Net income attributable to common stockholders of $154.7 million compared to $99.9 million in the first quarter 2014
o Combined ratio of 89.0% compared to 89.9% in the first quarter 2014
o Book value per common share of $24.00, up from $22.34 at December 31, 2014
o AmTrust's stockholders' equity was $2.46 billion as of March 31, 2015
First Quarter 2015 Results
Total revenue was $1.11 billion, an increase of $0.16 billion, or 16.6%, from $0.95 billion in the first quarter 2014. Gross written premium was $1.73 billion, an increase of $0.24 billion, or 16.0%, from $1.49 billion in the same period a year ago after excluding from the first quarter 2014 $174 million in non-recurring gross written premium from the Cut Through Reinsurance Agreement with Tower Group International, Ltd. in first quarter 2014. In addition, first quarter 2015 gross written premium was negatively impacted by $36.5 million due to declines in European currencies. Net written premium was $1.04 billion compared to $1.13 billion in the first quarter 2014. Net earned premium of $949.4 million increased $120.3 million, or 14.5%, from $829.1 million in the first quarter 2014. The combined ratio was 89.0% compared to 89.9% in first quarter 2014.
Total service and fee income of $112.9 million increased $21.9 million, or 24.1%, from $91.0 million in first quarter of 2014 and included $17.4 million from related parties in the first quarter 2015 compared with $12.2 million in the first quarter 2014.
Investment income, excluding net realized gains and losses, totaled $34.6 million, an increase of 21.2% from $28.5 million in the first quarter of 2014. In addition, first quarter 2015 results included net realized investment gains of $15.7 million, or $10.2 million after-tax, on certain fixed income and equity investments compared with net realized investment gains of $5.4 million, or $3.5 million after-tax, in the first quarter of 2014.
Loss and loss adjustment expense totaled $613.3 million in the first quarter 2015, compared to $558.6 million in the first quarter 2014, and resulted in a loss ratio of 64.6% compared with 67.4% for the first quarter 2014.
Acquisition costs and other underwriting expense of $231.7 million increased $45.1 million from $186.6 million for the first quarter 2014. The expense ratio was 24.4%, an increase from 22.5% in the first quarter 2014. Ceding commissions, primarily related to the reinsurance agreements with Maiden Holdings, Ltd. ("Maiden"), totaled $118.7 million, up 34.7% from $88.1 million in the first quarter 2014. During the three months ended March 31, 2015, AmTrust ceded $528.3 million of gross written premium and $399.7 million of earned premium to Maiden compared to $408.6 million of gross written premium and $312.7 million of earned premium ceded in the first quarter 2014.
Other expense of $98.5 million increased $10.9 million, or 12.4%, from $87.6 million in the first quarter 2014.
Total assets of approximately $14.81 billion increased $0.96 billion, or 7.0%, from $13.85 billion at December 31, 2014. Total cash, cash equivalents and investments of $5.97 billion increased $0.31 billion, or 5.4%, from $5.66 billion as of December 31, 2014. AmTrust's stockholder's equity of $2.46 billion increased 20.9% from $2.04 billion at December 31, 2014.
As of March 31, 2015, the Company's long-term debt-to-capitalization ratio was 19.4%, compared with 27.1% as of December 31, 2014.
During the three months ended March 31, 2015, the Company issued an aggregate of 3.45 million shares of Common Stock in an underwritten public offering. The net proceeds from the offering were approximately $172.5 million. In addition, on March 19, 2015, the Company completed the sale of 7.3 million of its depository shares, each representing 1/40th interest in a share of its 7.50% Non-Cumulative Preferred Stock, Series D. The net proceeds from the sale of depository shares were approximately $176.5 million.
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