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AmTrust: A Strong Buy

Zacks Equity Research

On Oct 15, Zacks Investment Research upgraded AmTrust Financial Services Inc. (AFSI) to a Zacks Rank #1 (Strong Buy).

Why the Upgrade?

AmTrust has been experiencing rising earnings estimates on the back of improved market trends following its robust second-quarter 2013 results. Moreover, strong capitalization and improved agency acquisitions are deemed impressive.

Additionally, this specialty property-casualty insurer delivered positive earnings surprises in the last 4 quarters with an average beat of 11.6%. AmTrust also outperformed the year-to-date Nasdaq, which posted an increase of 28.2% against the robust return of 42.4% clocked by the company.

On Aug 6, AmTrust reported second-quarter 2013 operating earnings per share of 86 cents, which outpaced both the Zacks Consensus Estimate of 76 cents and the year-ago quarter number of 64 cents.

A year-over-year robust growth of 60.6% in net earned premiums along with 86.3% surge in commission and other revenues boosted the top line, margins and bottom line. Although higher underwriting and acquisition expenses deteriorated the combined ratio, capital position remained sturdy with appreciated asset-base, book value per share and return on equity (:ROE).

AmTrust consistently focuses on achieving a diversified product portfolio through inorganic growth strategies. Such strategies also enable it to navigate through the current market volatility and tap healthy market opportunities. Alongside, AmTrust’s creditworthiness, prudent risk management and effective capital deployment, as reflected by the recent dividend appreciation, score well with the ratings agencies and investors.

Based on AmTrust’s fundamental strength and prudent capital management, the Zacks Consensus Estimate for 2013 rose 3.0% to $3.05 per share in the last 60 days. Moreover, the Most Accurate Estimate for AmTrust’s 2013 earnings stands at $3.23 a share, resulting in a positive Earnings ESP of 5.9%.

Meanwhile, the estimate for 2014 inched up 1.1% to $3.45 over the last 60 days. Furthermore, no downward revision in estimates was witnessed for both the years.

Other Stocks to Consider

Apart from AmTrust, other outperforming insurers in the industry include Allied World Assurance Co. Holdings AG (AWH), Everest Re (RE) and Markel Corp. (MKL). All these stocks carry a Zacks Rank #1 (Strong Buy).

Read the Full Research Report on RE
Read the Full Research Report on MKL
Read the Full Research Report on AFSI
Read the Full Research Report on AWH

Zacks Investment Research