In its concerted effort to enhance shareholders’ value, the board of directors of AmTrust Financial Services, Inc. (AFSI) approved a new buyback program authorizing the company to repurchase upto $150 million worth of shares.
This approval comes after a hiatus of six years. The earlier approval dates back to Nov 2007, where the board authorized AmTrust Financial to buy back 3 million shares. The company bought back 0.77 million from its authorization through 2013 and is left with 2.23 million shares to be bought back. The recent approval hence not only covers up the remaining earlier authorization but leaves the company with room for additional repurchases.
The news boosted investors’ sentiment, as was evident in the share price increase. Shares of AmTrust Financial increased 1.3% to close at $33.12 yesterday.
The new authorization by AmTrust Financial is duly supported by the company’s solid financial position, with cash and cash equivalents of $485.5 million at third quarter-end (up 17% from 2012-end level) and cash from operations in the first nine months amounting to $604.8 million (up 50% year over year). Retained earnings also stood solid at $538.2 million. A sustained solid operational performance continues to cushion AmTrust Financial’s sturdy financial position. The company delivered earnings surprises in the last 4 quarters with an average beat of 11.7%.
Several insurers are in the news presently for approving share repurchase authorizations, in an intention to boost the bottom line and enhance shareholders’ value. While Unum Group (UNM) has a new $750 million share repurchase authorization through Jun 12, 2015, AXIS Capital Holdings Limited (AXS) has a $750 million buyback authorization through Dec 31, 2014. Another insurer, W.R. Berkley Corp. (WRB) announced that its board of directors has increased its share repurchase authorization to 10 million shares.
With respect to AmTrust Financial, there was no earnings momentum over the last 60 days leaving the Zacks Consensus Estimate for 2014 unchanged at $3.67. With the approval of the new buyback authorization that in due course should favorably impact the bottom line, we expect analysts to raise their estimates. AmTrust Financial presently carries a Zacks Rank #1 (Strong Buy).