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AmTrust Financial Upped to Strong Buy

Zacks Equity Research

On Dec 24, Zacks Investment Research upgraded AmTrust Financial Services, Inc. (AFSI)
to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?
AmTrust Financial has been witnessing rising earnings estimates on the back of strong third-quarter 2013 results and completion of the Sagicor Europe Limited acquisition. Moreover, this property and casualty insurer delivered positive earnings surprises in the last 4 quarters with an average beat of 11.7%. The long-term expected earnings growth rate for this stock is 15%.    

AmTrust Financial reported third-quarter non-GAAP earnings per share of 84 cents, surpassing the Zacks Consensus Estimate by 12.2% and the year-ago earnings of 66 cents by 25.8%.

The outperformance was aided by increase in revenues coupled with decline in expenses.

Total revenue improved 58.5% year-over-year, driven by higher net earned premium and investment income.

Combined ratio improved 60 basis points to 89.6% in the third quarter of 2013.

Operating return on common equity was 21.0% comparing favorably with 18.8% in the year-ago quarter.

Book value of $17.08 as on Sep 30, 2013 increased 10.3% from 2012 end-level.

The wholly-owned subsidiaries of AmTrust Financial closed the acquisition of Sagicor Europe Limited and its wholly-owned subsidiaries (:SEL), including Sagicor at Lloyd's Limited, from Sagicor Financial Corporation for £56 million.

The Zacks Consensus Estimate for 2013 inched 0.3% to $3.10 per share as most of the estimates were revised higher over the last 60 days. The current estimate is within the guidance range provided by AmTrust Financial. For 2014, 2 of 5 estimates were revised higher over the same time frame, lifting the Zacks Consensus Estimate by 0.9% to $3.54 per share.

Other Stocks to Consider

Other players in the property and casualty industry, which look attractive at current levels, include Alleghany Corporation (Y), Allied World Assurance Company Holdings, AG (AWH) and Cincinnati Financial Corp. (CINF). All the stocks share the same Zacks Rank as AmTrust Financial.

Read the Full Research Report on CINF
Read the Full Research Report on Y
Read the Full Research Report on AFSI
Read the Full Research Report on AWH

Zacks Investment Research