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Atlas Financial (AFH) Q4 Earnings Miss Estimates, Premiums Up

Zacks Equity Research

Atlas Financial Holdings, Inc. AFH reported fourth-quarter 2018 operating loss per share of $3.48 against the Zacks Consensus Estimate of earnings of 42 cents.  However, the loss narrowed from $5.57 incurred in the year-ago quarter.

The quarter benefited from improved premiums and lower expenses.

Behind the Headlines

Gross premiums written increased 6.5% year over year to $57.7 billion. Gross premiums written grew in its core business across 24 states.

Operating revenues of $52.1 million declined 11.8% year over year and were almost in line with the Zacks Consensus Estimate. Lower net premiums earned as well as net investment income resulted in the downside.

Net investment income suffered due to lower returns on equity method investments and less interest income from collateral loans due to loan pay-offs though higher interest income on fixed income securities portfolio limited the downside.

Total expense of $94.2 million decreased 25.8% year over year driven by lower net claims incurred and decline in acquisition costs.

Atlas Financial’s underwriting loss was $39.6 million, narrower than 69.1 million incurred in the year-ago quarter.  Combined ratio improved 4480 basis points (bps) to 175.5%.

Atlas Financial Holdings, Inc. Price, Consensus and EPS Surprise

Atlas Financial Holdings, Inc. Price, Consensus and EPS Surprise | Atlas Financial Holdings, Inc. Quote

Full-Year Highlights

Operating loss per share was $1.71, narrower than year-ago loss of $3.62.  Operating revenues of $221.1 million improved 0.1% from 2017.

In-force premium was $286.1 million, up 6.6% from 2017 end level.

Combined ratio of 109.8% improved 1270 bps.

Financial Update

Atlas Financial exited 2018 with total investments of $165.7 million, down 16.3% year over year. Cash and cash equivalents totaled $34.9 million, down 23.5% form 2017 end level.

Notes payable of $24.3 million inched up 0.9% year over year.

Atlas Financial exited 2018 with total shareholders’ equity of $48.8 billion, down 46.1% year over year.

As of Dec 31, 2018, book value per share was $4.08, down 45% year over year attributable to $3.06 change in reserve estimates, 10 cents goodwill impairment and $1.68 establishment of a valuation allowance against deferred tax assets.

Return on equity was negative 46.1% in 2018 compared with negative 35.6% in 2017.

Zacks Rank

Atlas Financial currently has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Performance of Other P&C Insurers

Among other players from the insurance industry, which have already reported fourth-quarter earnings, The Travelers Companies, Inc. TRV and RLI Corp. RLI outpaced the respective Zacks Consensus Estimate, while The Progressive Corporation’s PGR earnings missed the same.

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