Riding on a strong growth momentum, shares of AmTrust Financial Services Inc. (AFSI) reached a new 52-week high at $47.10 on May 22. This specialty property-casualty insurer’s shares rose about 7.5% since the company reported first-quarter 2014 results on May 1, with a positive earnings surprise of 33.3%.
The momentum of this Zacks Rank #1 (Strong Buy) stock is fueled by prudent risk and debt management as well as an improved operating leverage and capital position, all paving the way for efficient capital deployment.
Yesterday’s closing price represents a strong one-year return of about 57.4% against 18.7% clocked by the Nasdaq index. Average volume of shares traded over the last three months stands at approximately 588K.
AmTrust Financial reported first-quarter 2014 operating earnings per share (EPS) of $1.24, which exceeded the Zacks Consensus Estimate of 94 cents. EPS was also 67% higher than the year-ago quarter figure of 74 cents.
Results reflected an 89% year-over-year accretion in top line, which more than offset the increase in underwriting and acquisition expenses, overall resulting in improved combined ratio, margins and cash flow.
The consistent price appreciation of this stock also mirrors the rally in the insurance industry, which has seen about 60% participants gaining yesterday. Conservative investment strategies and disciplined capital management have also been cushioning muted investment returns for AmTrust Financial.
The ongoing economic recovery along with improvement in claims paying-ability, inorganic growth and market demand should further help the company strengthen its competitive edge in the upcoming quarters.
Given its history of resilient growth and equally strong core growth outlook, we believe AmTrust Financial can be an ideal pick for your portfolio if you are considering investment in insurance stocks. Over the medium- to long term, we expect this stock to hit new highs and generate healthy returns.
Other insurers that are worth a look include Atlas Financial Holdings Inc. (AFH), Aspen Insurance Holdings Ltd. (AHL) and Allied World Assurance Company Holdings AG (AWH). All these stocks sport the same Zacks Rank as AmTrust Financial.