AmTrust Financial Closes AmeriHealth Casualty Buyout
AmTrust Financial Services, Inc. AFSI closed the acquisition of AmeriHealth Casualty Insurance Company from Independence Health Group, Inc. The property and casualty (P&C) insurer paid about $92.8 million in cash for the buyout. Notably, the transaction has been funded with existing working capital. The acquisition expands the acquirer’s presence in Pennsylvania and New Jersey.
AmeriHealth Casualty offers fully insured workers’ compensation insurance and operates mainly in Pennsylvania and New Jersey. The acquired company caters to small-to-medium sized businesses and municipalities. AmTrust Financial is optimistic about buyout as the transaction will enable it to diversify its presence in the areas where AmeriHealth Casualty operates. This, in turn, will help the Zacks Rank #5 (Strong Sell) P&C insurer to strengthen its position as one of the largest workers’ compensation carriers in the North and Northeast region of the United States.
AmTrust Financial is also set to benefit from AmeriHealth Casualty’s solid leadership team and robust book of business. This should allow AmTrust Financial to increase its focus on delivering a high standard of workers’ compensation coverage, going forward. Interestingly, AmeriHealth Casualty generated gross written premium of about $116 million in 2015. We believe that AmeriHealth Casualty’s operational strength will drive overall growth for the acquirer.
Independence Health Group will retain CompServices, Inc., which is its third party administrator (TPA) for workers’ compensation business. Notably, CompServices will provide TPA services to its self-insured customers as well as to AmTrust Financial, in accordance with the terms of this transaction.
Shares of AmTrust Financial gained 3.67% since the release of fourth-quarter 2016 results, outperforming the Zacks categorized Property and Casualty industry’s growth of 0.43%. Solid growth, both in the bottom line and the top line, contributed to the outperformance. Robust premium growth and net investment income were responsible for the improvement. Moving ahead, strong capital management and strategic initiatives undertaken by the company are expected to drive the stock higher.
Stocks to Consider
Some better-ranked stocks from the insurance industry include American Financial Group, Inc. AFG, Everest Re Group, Ltd. RE and Selective Insurance Group, Inc. SIGI. Each of these stocks sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
American Financial offers P&C insurance products in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 6.45%.
Everest Re offers reinsurance and insurance products. The company delivered positive surprises in three of the last four quarters with an average beat of 43.49%.
Selective Insurance provides insurance products and services in the United States. The company delivered a positive surprise in one of the last four quarters but with an average negative surprise of 4.53%.
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