x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
¨
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
Delaware
|
04-3106389
|
(State
or other jurisdiction of
|
(IRS
Employer Identification No.)
|
incorporation
or organization)
|
|
59
Maiden Lane, 6th Floor,
New York, New York
|
10038
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Large
accelerated filer ¨
|
Accelerated
filer x
|
Non-accelerated
filer ¨
|
Smaller
reporting company ¨
|
(Do
not check if a smaller reporting company)
|
Page
|
||
PART
I
|
FINANCIAL
INFORMATION
|
|
Item
1.
|
Unaudited
Financial Statements:
|
3
|
Condensed
Consolidated Balance Sheets as of March 31, 2010 and December 31, 2009
(audited)
|
3
|
|
Condensed
Consolidated Statements of Income — Three months ended March 31, 2010 and
2009
|
4
|
|
Condensed
Consolidated Statements of Cash Flows — Three months ended March 31, 2010
and 2009
|
5
|
|
Notes
to Condensed Consolidated Financial Statements
|
6
|
|
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
24
|
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
40
|
Item
4.
|
Controls
and Procedures
|
42
|
PART
II
|
OTHER
INFORMATION
|
|
Item
1.
|
Legal
Proceedings
|
43
|
Item
1A.
|
Risk
Factors
|
43
|
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
43
|
Item
3.
|
Defaults
Upon Senior Securities
|
43
|
Item
4.
|
(Removed
and Reserved)
|
43
|
Item
5.
|
Other
Information
|
43
|
Item
6.
|
Exhibits
|
43
|
Signatures
|
44
|
(Amounts in Thousands)
|
March 31,
2010
|
December 31,
2009
|
||||||
(Unaudited)
|
||||||||
ASSETS
|
||||||||
Investments:
|
||||||||
Fixed
maturities, available-for-sale, at market value (amortized cost
$1,131,887; $1,080,914)
|
$ | 1,145,817 | $ | 1,085,362 | ||||
Equity
securities, available-for-sale, at market value (cost $55,894;
$60,639)
|
54,239 | 50,355 | ||||||
Short-term
investments
|
2,467 | 31,265 | ||||||
Equity
investment in unconsolidated subsidiaries – related
parties
|
56,213 | 1,288 | ||||||
Other
investments
|
14,019 | 12,746 | ||||||
Total
investments
|
1,272,755 | 1,181,016 | ||||||
Cash
and cash equivalents
|
215,442 | 233,810 | ||||||
Accrued
interest and dividends
|
6,263 | 7,617 | ||||||
Premiums
receivable, net
|
565,759 | 495,871 | ||||||
Note
receivable – related party
|
23,244 | 23,224 | ||||||
Reinsurance
recoverable
|
351,423 | 349,695 | ||||||
Reinsurance
recoverable – related party
|
321,145 | 293,626 | ||||||
Prepaid
reinsurance premium
|
141,176 | 148,425 | ||||||
Prepaid
reinsurance premium – related party
|
273,817 | 262,128 | ||||||
Prepaid
expenses and other assets
|
70,626 | 85,108 | ||||||
Federal
income tax receivable
|
— | 364 | ||||||
Deferred
policy acquisition costs
|
207,696 | 180,179 | ||||||
Deferred
income taxes
|
2,611 | 7,615 | ||||||
Property
and equipment, net
|
15,339 | 15,858 | ||||||
Goodwill
|
52,903 | 53,156 | ||||||
Intangible
assets
|
60,358 | 62,672 | ||||||
|
$ | 3,580,557 | $ | 3,400,364 | ||||
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
||||||||
Liabilities:
|
||||||||
Loss
and loss expense reserves
|
$ | 1,108,002 | $ | 1,091,944 | ||||
Unearned
premiums
|
914,538 | 871,779 | ||||||
Ceded
reinsurance premiums payable
|
95,217 | 75,032 | ||||||
Ceded
reinsurance premium payable – related party
|
120,097 | 86,165 | ||||||
Reinsurance
payable on paid losses
|
147 | 1,238 | ||||||
Funds
held under reinsurance treaties
|
601 | 690 | ||||||
Securities
sold but not yet purchased, at market
|
17,821 | 16,315 | ||||||
Securities
sold under agreements to repurchase, at contract value
|
226,449 | 172,774 | ||||||
Accrued
expenses and other current liabilities
|
157,882 | 180,325 | ||||||
Federal
tax payable
|
4,868 | — | ||||||
Derivatives
liabilities
|
353 | 1,893 | ||||||
Note
payable on collateral loan – related party
|
167,975 | 167,975 | ||||||
Non
interest bearing note payable – net of unamortized discount of
$1,132; $1,372
|
21,368 | 21,128 | ||||||
Term
loan
|
16,667 | 20,000 | ||||||
Junior
subordinated debt
|
123,714 | 123,714 | ||||||
Total
liabilities
|
2,975,699 | 2,830,972 | ||||||
Commitments
and contingencies
|
||||||||
Stockholders’
equity:
|
||||||||
Common
stock, $.01 par value; 100,000 shares authorized, 84,217 and 84,179 issued
in 2010 and 2009, respectively; 59,352 and 59,314 outstanding in 2010 and
2009, respectively
|
842 | 842 | ||||||
Preferred
stock, $.01 par value; 10,000 shares authorized
|
— | — | ||||||
Additional
paid-in capital
|
545,085 | 543,977 | ||||||
Treasury
stock at cost; 24,865 and 24,866 shares in 2010 and 2009,
respectively
|
(300,889 | ) | (300,889 | ) | ||||
Accumulated
other comprehensive loss
|
(10,415 | ) | (17,020 | ) | ||||
Retained
earnings
|
370,235 | 342,482 | ||||||
Total
stockholders’ equity
|
604,858 | 569,392 | ||||||
|
$ | 3,580,557 | $ | 3,400,364 |
Three Months Ended March 31,
|
||||||||
(Amounts
in Thousands)
|
2010
|
2009
|
||||||
Revenues:
|
||||||||
Premium
income:
|
||||||||
Net
written premium
|
$
|
189,414
|
$
|
136,179
|
||||
Change
in unearned premium
|
(41,314
|
)
|
(3,756
|
)
|
||||
Net
earned premium
|
148,100
|
132,423
|
||||||
Ceding
commission – primarily from related party
|
32,248
|
27,591
|
||||||
Service
and fee income
|
5,300
|
5,572
|
||||||
Service
and fee income – related party
|
2,666
|
1,882
|
||||||
Net
investment income
|
13,599
|
13,991
|
||||||
Net
realized gain (loss) on investments
|
1,785
|
(9,238
|
)
|
|||||
Total
revenues
|
203,698
|
172,221
|
||||||
Expenses:
|
||||||||
Loss
and loss adjustment expense
|
89,821
|
74,915
|
||||||
Acquisition
costs and other underwriting expenses
|
61,346
|
58,154
|
||||||
Other
|
6,234
|
5,194
|
||||||
Total
expenses
|
157,401
|
138,263
|
||||||
Income
before other income (expense), income taxes and equity in earnings (loss)
of unconsolidated investment
|
46,297
|
33,958
|
||||||
Other
income (expenses):
|
||||||||
Foreign
currency gain (loss)
|
(717
|
)
|
33
|
|||||
Interest
expense
|
(3,572
|
)
|
(4,171
|
)
|
||||
Total
other expenses
|
(4,289
|
)
|
(4,138
|
)
|
||||
Income
before provision for income taxes and equity in earnings (loss) of
unconsolidated investment
|
42,008
|
29,820
|
||||||
Provision
for income taxes
|
(11,510
|
)
|
(5,256
|
)
|
||||
Income
before equity in earnings of unconsolidated investment
|
30,498
|
24,564
|
||||||
Equity
in earnings (loss) of unconsolidated investment – related
parties
|
1,410
|
(402
|
)
|
|||||
Net
income
|
$
|
31,908
|
$
|
24,162
|
||||
Earnings
per common share:
|
||||||||
Basic
- EPS
|
$
|
0.54
|
$
|
0.40
|
||||
Diluted
- EPS
|
0.53
|
0.40
|
||||||
Dividends
declared per share
|
$
|
0.07
|
$
|
0.05
|
||||
Net
Realized Gain (Loss) on Investments:
|
||||||||
Total
other-than-temporary impairment losses
|
$
|
(5,138
|
)
|
$
|
(1,427
|
)
|
||
Portion
of loss recognized in other comprehensive income
|
-
|
-
|
||||||
Net
impairment losses recognized in earnings
|
(5,138
|
)
|
(1,427
|
)
|
||||
Other
net realized gain (loss) on investments
|
6,923
|
(7,811
|
)
|
|||||
Net
realized investment gain (loss)
|
$
|
1,785
|
$
|
(9,238
|
)
|
Three Months Ended March 31,
|
||||||||
(Amounts
in Thousands)
|
2010
|
2009
|
||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$
|
31,908
|
$
|
24,162
|
||||
Adjustments
to reconcile net income to net cash provided by operating
activities:
|
||||||||
Depreciation
and amortization
|
3,391
|
3,120
|
||||||
Realized
(gain) loss marketable securities
|
(6,923
|
)
|
7,811
|
|||||
Non-cash
write-down of marketable securities
|
5,138
|
1,427
|
||||||
Discount
on notes payable
|
240
|
313
|
||||||
Stock
compensation expense
|
825
|
671
|
||||||
Bad
debt expense
|
1,935
|
1,005
|
||||||
Foreign
currency loss (gain)
|
717
|
(33
|
)
|
|||||
Changes
in assets - (increase) decrease:
|
||||||||
Premiums
receivable
|
(71,823
|
)
|
28,234
|
|||||
Reinsurance
recoverable
|
(1,728
|
)
|
(36,150
|
)
|
||||
Reinsurance
recoverable – related party
|
(27,519
|
)
|
(23,726
|
)
|
||||
Deferred
policy acquisition costs, net
|
(27,517
|
)
|
(17,911
|
)
|
||||
Prepaid
reinsurance premiums
|
7,249
|
(1,550
|
)
|
|||||
Prepaid
reinsurance premiums – related party
|
(11,689
|
)
|
9,878
|
|||||
Prepaid
expenses and other assets
|
16,180
|
18,984
|
|
|||||
Deferred
tax asset
|
5,004
|
(3,027
|
)
|
|||||
Changes
in liabilities - increase (decrease):
|
||||||||
Reinsurance
premium payable
|
20,185
|
(6,787
|
)
|
|||||
Reinsurance
premium payable – related party
|
33,932
|
(3,611
|
)
|
|||||
Loss
and loss expense reserve
|
16,058
|
80,342
|
||||||
Unearned
premiums
|
42,759
|
(5,642
|
)
|
|||||
Funds
held under reinsurance treaties
|
(89
|
)
|
647
|
|||||
Accrued
expenses and other current liabilities
|
(16,258
|
)
|
(2,680
|
)
|
||||
Net
cash provided in operating activities
|
21,975
|
75,477
|
||||||
Cash
flows from investing activities:
|
||||||||
Net
(purchases) sales of securities with fixed maturities
|
(32,316
|
)
|
(46,090
|
)
|
||||
Net
(purchases) sales of equity securities
|
3,884
|
(1,628
|
)
|
|||||
Net
sales (purchases) of other investments
|
(356
|
)
|
850
|
|||||
Equity
investment in unconsolidated subsidiary
|
(53,055
|
)
|
-
|
|||||
Acquisition
of renewal rights and goodwill
|
-
|
(2,462
|
)
|
|||||
Purchase
of property and equipment
|
(766
|
)
|
(2,107
|
)
|
||||
Net
cash (used in) provided by investing activities
|
(82,609
|
)
|
(51,437
|
)
|
||||
Cash
flows from financing activities:
|
||||||||
Repurchase
agreements, net
|
53,675
|
(36,140
|
)
|
|||||
Repayment
of note payable
|
(3,333
|
)
|
(3,333
|
)
|
||||
Repurchase
of shares
|
-
|
(5,492
|
)
|
|||||
Option
exercise
|
283
|
-
|
||||||
Dividends
distributed on common stock
|
(3,559
|
)
|
(3,005
|
)
|
||||
Net
cash provided by financing activities
|
47,066
|
(47,970
|
)
|
|||||
Effect
of exchange rate changes on cash
|
(4,800
|
)
|
(2,836
|
)
|
||||
Net
decrease in cash and cash equivalents
|
(18,368
|
)
|
(26,766
|
)
|
||||
Cash
and cash equivalents, beginning of the period
|
233,810
|
192,053
|
||||||
Cash
and cash equivalents, end of the period
|
$
|
215,442
|
$
|
165,287
|
||||
Supplemental
Cash Flow Information
|
||||||||
Income
tax payments
|
$
|
423
|
$
|
952
|
||||
Interest
payments on debt
|
2,563
|
4,428
|
|
1.
|
Basis of
Reporting
|
|
2.
|
Recent Accounting
Pronouncements
|
|
3.
|
Investments
|
(Amounts in Thousands)
|
Original or
amortized
cost
|
Gross
unrealized
gains
|
Gross
unrealized
losses
|
Market
value
|
||||||||||||
Preferred
stock
|
$
|
5,621
|
$
|
104
|
$
|
(487
|
)
|
$
|
5,238
|
|||||||
Common
stock
|
50,273
|
6,053
|
(7,325
|
)
|
49,001
|
|||||||||||
U.S.
treasury securities
|
80,521
|
488
|
(401
|
)
|
80,608
|
|||||||||||
U.S.
government agencies
|
66,330
|
925
|
—
|
67,255
|
||||||||||||
Municipal
bonds
|
36,049
|
1,093
|
(170
|
)
|
36,972
|
|||||||||||
Corporate
bonds and other bonds:
|
||||||||||||||||
Finance
|
387,700
|
9,054
|
(16,240
|
)
|
380,514
|
|||||||||||
Industrial
|
65,760
|
3,345
|
(135
|
)
|
68,970
|
|||||||||||
Utilities
|
30,478
|
888
|
(459
|
)
|
30,907
|
|||||||||||
Commercial
mortgage backed securities
|
2,254
|
91
|
-
|
2,345
|
||||||||||||
Residential
mortgage backed securities:
|
||||||||||||||||
Agency
backed
|
451,952
|
14,498
|
-
|
466,450
|
||||||||||||
Non-agency
backed
|
7,916
|
752
|
(10
|
)
|
8,658
|
|||||||||||
Asset-backed
securities
|
2,927
|
211
|
-
|
3,138
|
||||||||||||
|
$
|
1,187,781
|
$
|
37,502
|
$
|
(25,227
|
)
|
$
|
1,200,056
|
(Amounts
in Thousands)
|
2010
|
2009
|
||||||
Cash
and short term investments
|
$
|
845
|
$
|
1,804
|
||||
Fixed
maturities
|
11,704
|
11,882
|
||||||
Equity
securities
|
327
|
188
|
||||||
Note
receivable - related party
|
845
|
812
|
||||||
13,721
|
14,686
|
|||||||
Less:
|
||||||||
Investment
expenses and interest expense on securities sold under agreement to
repurchase
|
122
|
695
|
||||||
$
|
13,599
|
$
|
13,991
|
(Amounts
in Thousands)
|
2010
|
2009
|
||||||
Equity
securities
|
$
|
5,138
|
$
|
1,427
|
||||
Fixed
maturity securities
|
—
|
—
|
||||||
|
$
|
5,138
|
$
|
1,427
|
(Amounts in Thousands)
|
Less Than 12 Months
|
12 Months or More
|
Total
|
|||||||||||||||||||||||||||||
|
Fair
Market
Value
|
Unrealized
Losses
|
No. of
Positions
Held
|
Fair
Market
Value
|
Unrealized
Losses
|
No. of
Positions
Held
|
Fair
Market
Value
|
Unrealized
Losses
|
||||||||||||||||||||||||
Common
and preferred stock
|
$
|
6,910
|
$
|
(4,130
|
)
|
9
|
$
|
16,829
|
$
|
(3,682
|
)
|
99
|
$
|
23,739
|
$
|
(7,812
|
)
|
|||||||||||||||
U.S.
treasury securities
|
61,388
|
(355
|
)
|
19
|
810
|
(46
|
)
|
1
|
62,198
|
(401
|
)
|
|||||||||||||||||||||
Municipal
bonds
|
9,618
|
(165
|
)
|
1
|
347
|
(5
|
)
|
1
|
9,965
|
(170
|
)
|
|||||||||||||||||||||
Corporate
bonds and other bonds:
|
||||||||||||||||||||||||||||||||
Finance
|
91,023
|
(1,059
|
)
|
16
|
174,248
|
(15,181
|
)
|
31
|
265,271
|
(16,240
|
)
|
|||||||||||||||||||||
Industrial
|
17,621
|
(131
|
)
|
3
|
496
|
(4
|
)
|
1
|
18,117
|
(135
|
)
|
|||||||||||||||||||||
Utilities
|
14,205
|
(306
|
)
|
2
|
1,930
|
(153
|
)
|
2
|
16,135
|
(459
|
)
|
|||||||||||||||||||||
Residential
mortgage backed securities:
|
||||||||||||||||||||||||||||||||
Non-agency
backed
|
—
|
—
|
—
|
23
|
(10
|
)
|
1
|
23
|
(10
|
)
|
||||||||||||||||||||||
Total
temporarily impaired securities
|
$
|
200,765
|
$
|
(6,146
|
)
|
50
|
$
|
194,683
|
$
|
(19,081
|
)
|
136
|
$
|
395,448
|
$
|
(25,227
|
)
|
(Amounts in Thousands)
|
Remaining Life of Notional Amount (1)
|
||||||||||||||
One Year
|
Two Through
Five Years
|
Six Through
Ten Years
|
After Ten
Years
|
Total
|
|||||||||||
Interest
rate swaps
|
$
|
—
|
$
|
16,667
|
$
|
—
|
$
|
—
|
$
|
16,667
|
|||||
Credit
default swaps
|
—
|
2,000
|
—
|
—
|
2,000
|
||||||||||
|
$
|
—
|
$
|
18,667
|
$
|
—
|
$
|
—
|
$
|
18,667
|
|
(1)
|
Notional amount is not
representative of either market risk or credit risk and is not recorded in
the consolidated balance
sheet.
|
|
4.
|
Fair Value of Financial
Instruments
|
(Amounts
in Thousands)
|
Total
|
Level
1
|
Level
2
|
Level
3
|
||||||||||||
Assets:
|
||||||||||||||||
U.S.
treasury securities
|
$
|
80,608
|
$
|
80,608
|
$
|
-
|
$
|
-
|
||||||||
U.S.
government agencies
|
67,255
|
-
|
67,255
|
-
|
||||||||||||
Municipal
bonds
|
36,972
|
-
|
36,972
|
-
|
||||||||||||
Corporate
bonds and other bonds:
|
||||||||||||||||
Finance
|
380,514
|
-
|
380,514
|
-
|
||||||||||||
Industrial
|
68,970
|
-
|
68,970
|
-
|
||||||||||||
Utilities
|
30,907
|
-
|
30,907
|
-
|
||||||||||||
Commercial
mortgage backed securities
|
2,345
|
-
|
2,345
|
-
|
||||||||||||
Residential
mortgage backed securities:
|
||||||||||||||||
Agency
backed
|
466,450
|
-
|
466,450
|
-
|
||||||||||||
Non-agency
backed
|
8,658
|
-
|
8,658
|
-
|
||||||||||||
Asset-backed
securities
|
3,138
|
-
|
3,138
|
-
|
||||||||||||
Equity
securities
|
54,239
|
54,239
|
-
|
-
|
||||||||||||
Other
investments
|
14,019
|
-
|
-
|
14,019
|
||||||||||||
$
|
1,214,075
|
$
|
134,847
|
$
|
1,065,209
|
$
|
14,019
|
|||||||||
Liabilities:
|
||||||||||||||||
Equity
securities sold but not yet purchased, market
|
$
|
1,021
|
$
|
1,021
|
$
|
-
|
$
|
-
|
||||||||
Corporate
financial bonds sold but not yet purchased, market
|
16,800
|
-
|
16,800
|
-
|
||||||||||||
Securities
sold under agreements to repurchase, at contract value
|
226,449
|
-
|
226,449
|
-
|
||||||||||||
Derivatives
|
353
|
-
|
-
|
353
|
||||||||||||
|
$
|
244,623
|
$
|
1,021
|
$
|
243,249
|
$
|
353
|
(Amounts
in Thousands)
|
Assets
|
Liabilities
|
Total
|
|||||||||
Beginning
balance as of January 1, 2010
|
$
|
12,746
|
$
|
(1,893
|
)
|
$
|
10,853
|
|||||
Total
net gains (losses) included in:
|
||||||||||||
Net
income
|
277
|
-
|
277
|
|||||||||
Other
comprehensive loss
|
981
|
-
|
981
|
|||||||||
Purchases
and issuances
|
-
|
-
|
-
|
|||||||||
Sales
and settlements
|
15
|
1,540
|
1,555
|
|||||||||
Net
transfers into (out of) Level 3
|
-
|
-
|
-
|
|||||||||
Ending
balance as of March 31, 2010
|
$
|
14,019
|
$
|
(353
|
)
|
$
|
13,666
|
|
•
|
Equity and
Fixed Income Investments: Fair value
disclosures for these investments are disclosed above in this note. The
carrying values of cash, short term investments and investment income
accrued approximate their fair
values;
|
|
•
|
Premiums
Receivable:
The carrying values reported in the accompanying balance
sheets for these financial instruments approximate their fair values due
to the short term nature of the
asset;
|
|
•
|
Subordinated
Debentures and Debt:
The carrying values reported in the accompanying balance
sheets for these financial instruments approximate fair value. Fair value
was estimated using projected cash flows, discounted at rates currently
being offered for similar
notes.
|
|
5.
|
Debt
|
Aggregate
|
|||||||||||||||||
Liquidation
|
Aggregate
|
Per
|
|||||||||||||||
Amount of
|
Liquidation
|
Aggregate
|
Annum
|
||||||||||||||
(Amounts in Thousands)
|
Trust
|
Amount of
|
Principal
|
Stated
|
Interest
|
||||||||||||
Preferred
|
Common
|
Amount
|
Maturity
|
Rate of
|
|||||||||||||
Name of Trust
|
Securities
|
Securities
|
of Notes
|
of Notes
|
Notes
|
||||||||||||
AmTrust
Capital Financing Trust I
|
$ | 25,000 | $ | 774 | $ | 25,774 |
3/17/2035
|
8.275 | % (1) | ||||||||
AmTrust
Capital Financing Trust II
|
25,000 | 774 | 25,774 |
6/15/2035
|
7.710 |
(1)
|
|||||||||||
AmTrust
Capital Financing Trust III
|
30,000 | 928 | 30,928 |
9/15/2036
|
8.830 |
(2)
|
|||||||||||
AmTrust
Capital Financing Trust IV
|
40,000 | 1,238 | 41,238 |
3/15/2037
|
7.930 |
(3)
|
|||||||||||
Total
trust preferred securities
|
$ | 120,000 | $ | 3,714 | $ | 123,714 |
|
(1)
|
The interest rate will change to
three-month LIBOR plus 3.40% after the tenth anniversary in 2015.
|
|
(2)
|
The interest rate will change to
LIBOR plus 3.30% after the fifth anniversary in 2011.
|
|
(3)
|
The interest rate will change to
LIBOR plus 3.00% after the fifth anniversary in 2012.
|
(Amounts
in Thousands)
|
2010
|
2011
|
2012
|
2013
|
2014
|
Thereafter
|
||||||||||||||||||
Junior
subordinated debt
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
123,714
|
||||||||||||
Term
loan
|
10,000
|
6,667
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Promissory
note
|
6,969
|
7,037
|
7,362
|
—
|
—
|
—
|
||||||||||||||||||
Total
|
$
|
16,969
|
$
|
13,704
|
$
|
7,362
|
$
|
—
|
$
|
—
|
$
|
123,714
|
|
6.
|
Acquisition Costs and Other
Underwriting Expenses
|
(Amounts
in Thousands)
|
2010
|
2009
|
||||||
Policy
acquisition expenses
|
$
|
25,291
|
$
|
29,248
|
||||
Salaries
and benefits
|
25,353
|
19,281
|
||||||
Other
insurance general and administrative expense
|
10,702
|
9,625
|
||||||
$
|
61,346
|
$
|
58,154
|
|
7.
|
Earnings Per
Share
|
(Amounts
in Thousands Except per Share)
|
2010
|
2009
|
||||||
Net
income available to common shareholders
|
$
|
31,908
|
$
|
24,162
|
||||
Weighted
average number of common shares outstanding - basic
|
59,333
|
59,767
|
||||||
Potentially
dilutive shares:
|
||||||||
Dilutive
shares from stock-based compensation
|
854
|
233
|
||||||
Weighted
average number of common shares outstanding - dilutive
|
60,187
|
60,000
|
||||||
Net
income - basic earnings per share
|
$
|
0.54
|
$
|
0.40
|
||||
Net
income – diluted earnings per share
|
$
|
0.53
|
$
|
0.40
|
|
8.
|
Share Based
Compensation
|
2010
|
2009
|
|||||||||||
(Amounts in Thousands Except per Share)
|
Number of
Shares
|
Amount per
Share
|
Number of
Shares
|
Amount per
Share
|
||||||||
Outstanding
beginning of period
|
4,168
|
$
|
7.00-15.02
|
3,728
|
$
|
7.00-15.02
|
||||||
Granted
|
54
|
12.82-14.25
|
85
|
9.65
|
||||||||
Exercised
|
(38
|
)
|
7.50
|
—
|
—
|
|||||||
Cancelled
or terminated
|
(10
|
)
|
7.50-14.55
|
(8
|
)
|
7.50
|
||||||
Outstanding
end of period
|
4,174
|
$
|
7.00-15.02
|
3,805
|
$
|
7.00-15.02
|
|
9.
|
Comprehensive
Income
|
(Amounts
in Thousands)
|
Three Months Ended March 31,
|
|||||||
2010
|
2009
|
|||||||
Net
Income
|
$
|
31,908
|
$
|
24,162
|
||||
Unrealized
holding gain (loss)
|
7,997
|
|
(14,970
|
)
|
||||
Reclassification
adjustment
|
4,155
|
8,414
|
||||||
Foreign
currency translation
|
(5,547
|
)
|
(840
|
)
|
||||
Comprehensive
Income
|
$
|
38,513
|
$
|
16,766
|
|
10.
|
Income
Taxes
|
(Amounts
in Thousands)
|
Three Months Ended
March 31,
|
|||||||
2010
|
2009
|
|||||||
Income
before provision for income taxes and equity in earnings of unconsolidated
investment
|
$
|
42,008
|
$
|
29,820
|
||||
Income
taxes at statutory rates
|
14,702
|
10,437
|
||||||
Effect
of income not subject to U.S. taxation
|
(3,244
|
)
|
(5,353
|
)
|
||||
Other,
net
|
52
|
172
|
||||||
Provision
for income taxes as shown on the Condensed Consolidated Statements of
Income
|
$
|
11,510
|
$
|
5,256
|
||||
GAAP
effective tax rate
|
27.4
|
%
|
17.6
|
%
|
|
11.
|
Related Party
Transactions
|
(Amounts
in Thousands)
|
March 31,
2010
|
December 31,
2009
|
||||||
Assets
and liabilities:
|
||||||||
Reinsurance
recoverable
|
$ | 321,145 | $ | 293,626 | ||||
Prepaid
reinsurance premium
|
273,817 | 262,128 | ||||||
Ceded
reinsurance premiums payable
|
(120,097 | ) | (86,165 | ) | ||||
Note
payable
|
(167,975 | ) | (167,975 | ) |
(Amounts
in Thousands)
|
Three Months Ended March 31,
|
|||||||
|
2010
|
2009
|
||||||
Results
of operations:
|
||||||||
Premium
written – ceded
|
$
|
(114,092
|
)
|
$
|
(87,480
|
)
|
||
Change
in unearned premium – ceded
|
11,689
|
(6,971
|
)
|
|||||
Earned
premium – ceded
|
$
|
(102,403
|
)
|
$
|
(94,451
|
)
|
||
Ceding
commission on premium written
|
$
|
34,980
|
$
|
27,553
|
||||
Ceding
commission – deferred
|
(2,973
|
)
|
(435
|
)
|
||||
Ceding
commission – earned
|
$
|
32,007
|
$
|
27,118
|
||||
Incurred
loss and loss adjustment expense – ceded
|
$
|
71,172
|
$
|
71,205
|
||||
Interest
expense on collateral loan
|
476
|
570
|
|
(i)
|
the
Company provides ACAC and its affiliates information technology
development services at a price of cost plus 20%. In addition, once a new
system to be developed by the Company is implemented and ACAC or its
affiliates begin using the system in its operations, the Company will be
entitled to an additional fee for use of the systems in the amount of
1.25% of gross premiums of ACAC and its affiliates. The Company recorded
approximately $215 of fee income for the three months ended March 31, 2010
related to this agreement. The terms and conditions of the above are
subject to regulatory approval.
|
|
(ii)
|
the
Company manages the assets of ACAC and its subsidiaries for a quarterly
fee equal to 0.05% of the average aggregate value of the assets under
management for the preceding quarter if the average aggregate value for
the preceding quarter is $1,000,000 or less and 0.0375% of the average
aggregate value of the assets under management for the preceding quarter
if the average aggregate value for that quarter is more than $1,000,000.
As a result of this agreement, the Company earned approximately $141 of
investment management fees for the three months ended March 31, 2010. The
terms and conditions of the above are subject to final regulatory
approval, which is pending.
|
|
(iii)
|
ACAC is providing the Company
with access to its agency sales force to distribute the Registrant’s
products, and ACAC and the Trust will use their best efforts to have said
agency sales team appointed as the Registrant’s
agents.
|
|
(iv)
|
ACAC will grant the Company a
right of first refusal to purchase or to reinsure commercial auto
insurance business acquired from GMAC in connection with the
Acquisition.
|
|
(v)
|
the Company, effective March 1,
2010, reinsures 10% of the net premiums of the GMAC personal lines
business, pursuant to a 50% quota share reinsurance agreement (“Personal
Lines Quota Share”) with the GMAC personal lines insurance companies, as
cedents, and the Company, MK Re, Ltd., a Bermuda reinsurer which is a
wholly-owned subsidiary of the Trust, and Maiden Insurance Company, Ltd.,
as reinsurers. The Company has a 20% participation in the Personal Lines
Quota Share, by which it receives 10% of net premiums of the personal
lines business. The Personal Lines Quota share provides that the
reinsurers, severally, in accordance with their participation percentages,
shall receive 50% of the net premium of the GMAC personal lines insurance
companies and assume 50% of the related net losses. The Personal Lines
Quota Share has an initial term of three years and shall renew
automatically for successive three year terms unless terminated by written
notice not less than nine months prior to the expiration of the current
term. Notwithstanding the foregoing, the Company’s participation in the
Personal Lines Quota Share may be terminated by the personal lines
insurance companies on 60 days written notice in the event the Company
becomes insolvent, is placed into receivership, its financial condition is
impaired by 50% of the amount of its surplus at the inception of the
Personal Lines Quota Share or latest anniversary, whichever is greater, is
subject to a change of control, or ceases writing new and renewal
business. The personal lines insurance companies also may terminate the
agreement on nine months written notice following the effective date of
initial public offering or private placement of stock by ACAC or a
subsidiary. The Company may terminate its participation in the Personal
Lines Quota Share on 60 days written notice in the event the personal
lines companies are subject to a change of control, cease writing new and
renewal business, effect a reduction in their net retention without the
Company’s consent or fails to remit premium as required by the terms of
the Personal Lines Quota Share. The Personal Lines Quota Share provides
that the reinsurers pay a provisional ceding commission equal to 32.5% of
ceded earned premium, net of premiums ceded by the personal lines
companies for inuring reinsurance, subject to adjustment. The ceding
commission is subject to adjustment to a maximum of 34.5% if the loss
ratio for the reinsured business is 60.5% or less and a minimum of 30.5%
if the loss ratio is 64.5% or higher. We believe that the terms,
conditions and pricing of the Personal Lines Quota Share have been
determined by arm’s length negotiations and reflect current market terms
and conditions. As a result of this agreement, the Company assumed $8,700
of business from GMAC. The terms and conditions of the above are subject
to final regulatory approval, which is
pending.
|
|
12.
|
Acquisitions
|
|
13.
|
Contingent
Liabilities
|
|
14.
|
Segments
|
(Amounts in Thousands)
|
Small
Commercial
Business
|
Specialty Risk
and Extended
Warranty
|
Specialty
Program
|
Personal
Lines
Reinsurance
|
Corporate
and Other
|
Total
|
||||||||||||||||||
Three
months ended March 31, 2010:
|
||||||||||||||||||||||||
Gross
written premium
|
$ | 122,702 | $ | 152,174 | $ | 54,655 | $ | 8,700 | $ | — | $ | 338,231 | ||||||||||||
Net
written premium
|
61,438 | 86,049 | 33,227 | 8,700 | — | 189,414 | ||||||||||||||||||
Change
in unearned premium
|
(1,834 | ) | (34,285 | ) | 3,505 | (8,700 | ) | — | (41,314 | ) | ||||||||||||||
Net
earned premium
|
59,604 | 51,764 | 36,722 | — | — | 148,100 | ||||||||||||||||||
Ceding
commission - primarily related party
|
21,226 | 7,903 | 3,119 | — | — | 32,248 | ||||||||||||||||||
Loss
and loss adjustment expense
|
(35,088 | ) | (31,160 | ) | (23,573 | ) | — | — | (89,821 | ) | ||||||||||||||
Acquisition
costs and other underwriting expenses
|
(34,181 | ) | (14,711 | ) | (12,454 | ) | — | — | (61,346 | ) | ||||||||||||||
(69,269 | ) | (45,871 | ) | (36,027 | ) | — | — | (151,167 | ) | |||||||||||||||
Underwriting
income
|
11,561 | 13,796 | 3,824 | — | — | 29,181 | ||||||||||||||||||
Service
and fee income
|
2,574 | 2,726 | — | — | 2,666 | 7,966 | ||||||||||||||||||
Investment
income and realized gain (loss)
|
6,656 | 5,283 | 3,229 | 216 | — | 15,384 | ||||||||||||||||||
Other
expenses
|
(2,192 | ) | (2,847 | ) | (1,016 | ) | (179 | ) | — | (6,234 | ) | |||||||||||||
Interest
expense
|
(1,257 | ) | (1,631 | ) | (582 | ) | (102 | ) | — | (3,572 | ) | |||||||||||||
Foreign
currency loss
|
— | (717 | ) | — | — | — | (717 | ) | ||||||||||||||||
Provision
for income taxes
|
(4,752 | ) | (4,551 | ) | (1,495 | ) | 18 | (730 | ) | (11,510 | ) | |||||||||||||
Equity
in earnings of unconsolidated investment – related parties
|
— | — | — | — | 1,410 | 1,410 | ||||||||||||||||||
Net
income
|
$ | 12,590 | $ | 12,059 | $ | 3,960 | $ | (47 | ) | $ | 3,346 | 31,908 |
(Amounts in Thousands)
|
Small
Commercial
Business
|
Specialty Risk
and Extended
Warranty
|
Specialty
Program
|
Corporate
and
other
|
Total
|
|||||||||||||||
Three
months ended March 31, 2009:
|
||||||||||||||||||||
Gross
written premium
|
$
|
127,470
|
$
|
82,708
|
$
|
57,349
|
$
|
—
|
$
|
267,527
|
||||||||||
Net
written premium
|
70,459
|
38,259
|
27,461
|
—
|
136,179
|
|||||||||||||||
Change
in unearned premium
|
(12,368
|
)
|
2,416
|
6,196
|
—
|
(3,756
|
)
|
|||||||||||||
Net
earned premium
|
58,091
|
40,675
|
33,657
|
—
|
132,423
|
|||||||||||||||
Ceding
commission - primarily related party
|
19,776
|
6,027
|
1,788
|
—
|
27,591
|
|||||||||||||||
Loss
and loss adjustment expense
|
(35,394
|
)
|
(17,818
|
)
|
(21,703
|
)
|
—
|
(74,915
|
)
|
|||||||||||
Acquisition
costs and other underwriting expenses
|
(34,154
|
)
|
(12,703
|
)
|
(11,297
|
)
|
—
|
(58,154
|
)
|
|||||||||||
(69,548
|
)
|
(30,521
|
)
|
(33,000
|
)
|
—
|
(133,069
|
)
|
||||||||||||
Underwriting
income
|
8,319
|
16,181
|
2,445
|
—
|
26,945
|
|||||||||||||||
Service
and fee income
|
3,489
|
2,138
|
—
|
1,827
|
7,454
|
|||||||||||||||
Investment
income and realized gain (loss)
|
2,369
|
1,464
|
920
|
—
|
4,753
|
|||||||||||||||
Other
expenses
|
(2,661
|
)
|
(1,427
|
)
|
(1,106
|
)
|
—
|
(5,194
|
)
|
|||||||||||
Interest
expense
|
(2,137
|
)
|
(1,146
|
)
|
(888
|
)
|
—
|
(4,171
|
)
|
|||||||||||
Foreign
currency gain
|
—
|
33
|
—
|
—
|
33
|
|||||||||||||||
Provision
for income taxes
|
(1,641
|
)
|
(3,058
|
)
|
(231
|
)
|
(326
|
)
|
(5,256
|
)
|
||||||||||
Equity
in loss of unconsolidated investment – related party
|
—
|
—
|
—
|
(402
|
)
|
(402
|
)
|
|||||||||||||
Net
income
|
$
|
7,738
|
$
|
14,185
|
$
|
1,140
|
$
|
1,099
|
$
|
24,162
|
(Amounts in Thousands)
|
Small
Commercial
Business
|
Specialty Risk
and Extended
Warranty
|
Specialty
Program
|
Personal Lines
Reinsurance
|
Corporate and
other
|
Total
|
||||||||||||||||||
As
of March 31, 2010:
|
||||||||||||||||||||||||
Fixed
assets
|
$ | 5,393 | $ | 7,005 | $ | 2,501 | $ | 440 | $ | — | $ | 15,339 | ||||||||||||
Goodwill
and intangible assets
|
80,089 | 17,656 | 15,516 | — | — | 113,261 | ||||||||||||||||||
Total
assets
|
1,549,492 | 1,345,673 | 641,272 | 44,120 | — | 3,580,557 | ||||||||||||||||||
As
of December 31, 2009:
|
||||||||||||||||||||||||
Fixed
assets
|
$ | 6,471 | $ | 5,788 | $ | 3,599 | $ | — | $ | — | $ | 15,858 | ||||||||||||
Goodwill
and intangible assets
|
80,849 | 19,319 | 15,660 | — | — | 115,828 | ||||||||||||||||||
Total
assets
|
1,582,247 | 1,001,347 | 816,770 | — | — | 3,400,364 |
|
·
|
Small Commercial
Business. We provide workers’ compensation, commercial package
and other commercial insurance lines produced by wholesale agents, retail
agents and brokers in the United
States.
|
|
·
|
Specialty Risk and Extended
Warranty. We provide coverage for consumer and commercial goods and custom
designed coverages, such as accidental damage plans and payment protection
plans offered in connection with the sale of consumer and commercial
goods, in the United States, United Kingdom and Europe, and certain
property, casualty and specialty liability risks in the United States
and Europe.
|
|
·
|
Specialty Program. We write
commercial insurance for homogeneous, narrowly defined classes of
insureds, requiring an in-depth knowledge of the insured’s industry
segment, through general and other wholesale
agents.
|
|
·
|
Personal Lines Reinsurance. We
reinsure 10% of the net premiums of the GMAC personal lines business,
pursuant to a quota share reinsurance agreement (“Personal Lines Quota
Share”) with the GMAC personal lines insurance companies. See discussion
below related to ACAC
investment.
|
Company
|
A.M.
Best Rated
|
Coverage Type Offered
|
Coverage
Market
|
Domiciled
|
||||
Technology
Insurance Company,
Inc. (“TIC”)
|
A-
(Excellent)
|
Small
commercial, middle market property & casualty, specialty risk &
extended warranty and reinsurance for GMAC
|
United
States
|
New
Hampshire
|
||||
Rochdale
Insurance
Company
(“RIC”)
|
A-
(Excellent)
|
Small
commercial, middle market property & casualty and specialty risk &
extended warranty
|
United
States
|
New
York
|
||||
Wesco
Insurance Company (“WIC”)
|
A-
(Excellent)
|
Small
commercial, middle market property & casualty and specialty risk &
extended warranty
|
United
States
|
Delaware
|
||||
Associated
Industries Insurance Company, Inc. (“AIIC”)
|
Unrated
|
Workers’
compensation
|
United
States
|
Florida
|
||||
Milwaukee
Casualty Insurance Company (“MCIC”)
|
A-
(Excellent)
|
Small
Commercial Business
|
United
States
|
Wisconsin
|
||||
Security
National Insurance Company (“SNIC”)
|
A-
(Excellent)
|
Small
Commercial Business
|
United
States
|
Texas
|
||||
AmTrust
Insurance Company of Kansas, Inc. (“AICK”)
|
A-
(Excellent)
|
Small
Commercial Business
|
United
States
|
Kansas
|
||||
Trinity
Lloyd’s Insurance Company (“TLIC”)
|
A-
(Excellent)
|
Small
Commercial Business
|
United
States
|
Texas
|
||||
AmTrust
International Underwriters Limited (“AIU”)
|
A-
(Excellent)
|
Specialty
Risk and Extended Warranty
|
European
Union
|
Ireland
|
||||
IGI
Insurance Company, Ltd. (“IGI”)
|
A-
(Excellent)
|
Specialty
Risk and Extended Warranty
|
European
Union
|
England
|
||||
AmTrust
International Insurance
Ltd. (“AII”)
|
A-
(Excellent)
|
Reinsurance
for consolidated subsidiaries
|
United
States
and
European
Union
|
Bermuda
|
Three Months Ended
March 31,
|
||||||||
2010
|
2009
|
|||||||
(Amounts
in Thousands)
|
||||||||
Gross
written premium
|
$ | 338,231 | $ | 267,527 | ||||
Net
written premium
|
$ | 189,414 | $ | 136,179 | ||||
Change
in unearned premium
|
(41,314 | ) | (3,756 | ) | ||||
Net
earned premium
|
148,100 | 132,423 | ||||||
Ceding
commission – primarily related party
|
32,248 | 27,591 | ||||||
Service
and fee income
|
5,300 | 5,571 | ||||||
Service
and fee income – related parties
|
2,666 | 1,883 | ||||||
Net
investment income
|
13,599 | 13,991 | ||||||
Net
realized (loss) gain on investments
|
1,785 | (9,238 | ) | |||||
Total
revenue
|
203,698 | 172,221 | ||||||
Loss
and loss adjustment expense
|
89,821 | 74,915 | ||||||
Acquisition
costs and other underwriting expenses
|
61,346 | 58,154 | ||||||
Other
|
6,234 | 5,194 | ||||||
157,401 | 138,263 | |||||||
Income
before other income (expense), income taxes and equity earnings of
unconsolidated investment
|
46,297 | 33,958 | ||||||
Other
income (expense):
|
||||||||
Foreign
currency loss
|
(717 | ) | 33 | |||||
Interest
expense
|
(3,572 | ) | (4,171 | ) | ||||
Total
other expense
|
(4,289 | ) | (4,138 | ) | ||||
Income
before other income (expense), income taxes and equity earnings of
unconsolidated investment
|
42,008 | 29,820 | ||||||
Provision
for income taxes
|
(11,510 | ) | (5,256 | ) | ||||
Income
before equity in earnings of unconsolidated investment
|
30,498 | 24,564 | ||||||
Equity
in earnings (loss) of unconsolidated investment - related
parties
|
1,410 | (402 | ) | |||||
Net
income
|
$ | 31,908 | $ | 24,162 | ||||
Key
measures:
|
||||||||
Net
loss ratio
|
60.6 | % | 56.6 | % | ||||
Net
expense ratio
|
19.6 | % | 23.1 | % | ||||
Net
combined ratio
|
80.3 | % | 79.7 | % |
Three Months Ended
March 31,
|
||||||||
2010
|
2009
|
|||||||
(Amounts in Thousands)
|
||||||||
Gross
written premium
|
$ | 122,702 | $ | 127,470 | ||||
Net
written premium
|
61,438 | 70,459 | ||||||
Change
in unearned premium
|
(1,834 | ) | (12,368 | ) | ||||
Net
earned premium
|
59,604 | 58,091 | ||||||
Ceding
commission revenue
|
21,226 | 19,776 | ||||||
Loss
and loss adjustment expense
|
35,088 | 35,394 | ||||||
Acquisition
costs and other underwriting expenses
|
34,181 | 34,154 | ||||||
69,269 | 69,548 | |||||||
Net
earned premiums less expenses included in combined ratio (Underwriting
income)
|
$ | 11,561 | $ | 8,319 | ||||
Key
Measures:
|
||||||||
Net
loss ratio
|
58.9 | % | 60.9 | % | ||||
Net
expense ratio
|
21.7 | % | 24.7 | % | ||||
Net
combined ratio
|
80.6 | % | 85.7 | % | ||||
Reconciliation
of net expense ratio:
|
||||||||
Acquisition
costs and other underwriting expenses
|
34,181 | 34,154 | ||||||
Less:
ceding commission revenue
|
21,226 | 19,776 | ||||||
12,955 | 14,378 | |||||||
Net
earned premium
|
59,604 | 58,091 | ||||||
Net
expense ratio
|
21.7 | % | 24.7 | % |
Three Months Ended March 31,
|
||||||||
2010
|
2009
|
|||||||
(Amounts in Thousands)
|
||||||||
Gross
written premium
|
$ | 152,174 | $ | 82,708 | ||||
Net
written premium
|
86,049 | 38,259 | ||||||
Change
in unearned premium
|
(34,285 | ) | 2,416 | |||||
Net
earned premiums
|
51,764 | 40,675 | ||||||
Ceding
commission revenue
|
7,903 | 6,027 | ||||||
Loss
and loss adjustment expense
|
31,160 | 17,818 | ||||||
Acquisition
costs and other underwriting expenses
|
14,711 | 12,703 | ||||||
45,871 | 30,521 | |||||||
Net
earned premiums less expenses included in combined ratio (Underwriting
income)
|
$ | 13,796 | $ | 16,181 | ||||
Key
Measures:
|
||||||||
Net
loss ratio
|
60.2 | % | 43.8 | % | ||||
Net
expense ratio
|
13.2 | % | 16.4 | % | ||||
Net
combined ratio
|
73.3 | % | 60.2 | % | ||||
Reconciliation
of net expense ratio:
|
||||||||
Acquisition
costs and other underwriting expenses
|
14,711 | 12,703 | ||||||
Less:
ceding commission revenue
|
7,903 | 6,027 | ||||||
6,808 | 6,676 | |||||||
Net
earned premium
|
51,764 | 40,675 | ||||||
Net
expense ratio
|
13.2 | % | 16.4 | % |
(Unaudited)
|
||||||||
Three Months Ended
March 31,
|
||||||||
2010
|
2009
|
|||||||
(Amounts in Thousands)
|
||||||||
Gross
written premium
|
$ | 54,655 | $ | 57,349 | ||||
Net
written premium
|
33,227 | 27,461 | ||||||
Change
in unearned premium
|
3,505 | 6,196 | ||||||
Net
earned premium
|
36,732 | 33,657 | ||||||
Ceding
commission revenue
|
3,119 | 1,788 | ||||||
Loss
and loss adjustment expense
|
23,573 | 21,703 | ||||||
Acquisition
costs and other underwriting expenses
|
12,454 | 11,297 | ||||||
36,027 | 33,000 | |||||||
Net
earned premiums less expenses included in combined ratio (Underwriting
income)
|
$ | 3,824 | $ | 2,445 | ||||
Key
Measures:
|
||||||||
Net
loss ratio
|
64.2 | % | 64.5 | % | ||||
Net
expense ratio
|
25.4 | % | 28.3 | % | ||||
Net
combined ratio
|
89.6 | % | 92.7 | % | ||||
Reconciliation
of net expense ratio:
|
||||||||
Acquisition
costs and other underwriting expenses
|
12,454 | 11,297 | ||||||
Less:
ceding commission revenue
|
3,119 | 1,788 | ||||||
9,335 | 9,509 | |||||||
Net
earned premium
|
36,732 | 33,657 | ||||||
Net
expense ratio
|
25.4 | % | 28.3 | % |
(Unaudited)
|
||||||||
Three Months Ended
March 31,
|
||||||||
2010
|
2009
|
|||||||
(Amounts in Thousands)
|
||||||||
Gross
written premium
|
$
|
8,700
|
$
|
-
|
||||
Net
written premium
|
8,700
|
-
|
||||||
Change
in unearned premium
|
(8,700
|
)
|
-
|
|||||
Net
earned premium
|
-
|
-
|
||||||
Ceding
commission revenue
|
-
|
-
|
||||||
Loss
and loss adjustment expense
|
-
|
-
|
||||||
Acquisition
costs and other underwriting expenses
|
-
|
-
|
||||||
-
|
-
|
|||||||
Net
earned premiums less expenses included in combined ratio (Underwriting
income)
|
$
|
-
|
$
|
-
|
Three Months Ended
March 31,
|
||||||
(Amounts in Thousands)
|
2010
|
2009
|
||||
Cash
and cash equivalents provided by (used in):
|
||||||
Operating
activities
|
$
|
21,975
|
$
|
75,477
|
||
Investing
activities
|
(82,609
|
)
|
(51,437
|
)
|
||
Financing
activities
|
47,066
|
(47,970
|
)
|
March 31, 2010
|
December 31, 2009
|
||||||||||
(Amounts in Thousands)
|
Carrying
Value
|
Percentage of
Portfolio
|
Carrying
Value
|
Percentage of
Portfolio
|
|||||||
Cash
and cash equivalents
|
$
|
215,442
|
15.2
|
% |
$
|
233,810
|
16.7
|
% | |||
Time
and short-term deposits
|
2,467
|
0.2
|
31,265
|
2.2
|
|||||||
U.S.
treasury securities
|
80,521
|
5.7
|
124,143
|
8.9
|
|||||||
U.S.
government agencies
|
67,255
|
4.7
|
47,424
|
3.4
|
|||||||
Municipals
|
36,972
|
2.6
|
27,268
|
1.9
|
|||||||
Commercial
mortgage back securities
|
2,345
|
0.2
|
3,359
|
0.2
|
|||||||
Residential
mortgage backed securities:
|
|||||||||||
Agency
backed
|
466,450
|
32.9
|
481,731
|
34.4
|
|||||||
Non-agency
backed
|
8,658
|
0.6
|
8,632
|
0.6
|
|||||||
Asset
backed securities
|
3,138
|
0.2
|
3,619
|
0.3
|
|||||||
Corporate
bonds
|
480,391
|
33.9
|
389,186
|
27.8
|
|||||||
Preferred
stocks
|
5,238
|
0.4
|
5,110
|
0.4
|
|||||||
Common
stocks
|
49,001
|
3.4
|
45,245
|
3.2
|
|||||||
$
|
1,417,878
|
100.0
|
% |
$
|
1,400,792
|
100.0
|
% |
|
•
|
the current fair value compared
to amortized cost;
|
|
•
|
the length of time the security’s
fair value has been below its amortized
cost;
|
|
•
|
specific credit issues related to
the issuer such as changes in credit rating, reduction or elimination of
dividends or non-payment of scheduled interest
payments;
|
|
•
|
whether management intends to
sell the security and, if not, whether it is not more than likely than not
that the Company will be required to sell the security before recovery of
its amortized cost
basis;
|
|
•
|
the financial condition and
near-term prospects of the issuer of the security, including any specific
events that may affect its operations or earnings;
and
|
|
•
|
the occurrence of a discrete
credit event resulting in the issuer defaulting on a material outstanding
obligation or the issuer seeking protection under bankruptcy
laws.
|
(Amounts in thousands)
|
2010
|
2009
|
||||||
Equity
securities
|
$
|
5,138
|
$
|
1,427
|
||||
Fixed
maturity securities
|
—
|
—
|
||||||
$
|
5,138
|
$
|
1,427
|
Hypothetical Change in Interest Rates
|
Fair Value
|
Estimated
Change in
Fair Value
|
Hypothetical Percentage
(Increase)Decrease in
Shareholders’ Equity
|
|||||||||
(Amounts in Thousands)
|
||||||||||||
200
basis point increase
|
$ | 1,072,802 | $ | (73,015 | ) | (12.1 | )% | |||||
100
basis point increase
|
1,110,094 | (35,723 | ) | (5.9 | ) | |||||||
No
change
|
1,145,817 | — | — | |||||||||
100
basis point decrease
|
1,175,973 | 30,156 | 5.0 | |||||||||
200
basis point decrease
|
1,201,264 | 55,447 | 9.2 |
Hypothetical Change in Interest Rates
|
Fair Value
|
Estimated
Change in
Fair Value
|
Hypothetical
Percentage
(Increase)
Decrease in
Shareholders’
Equity
|
|||||||||
|
(Amounts
in Thousands)
|
|||||||||||
5%
increase
|
$ | 56,951 | $ | 2,712 | 0.4 | |||||||
No
change
|
54,239 | — | — | |||||||||
5 %
decrease
|
51,527 | (2,712 | ) | (0.4 | )% |
Exhibit
Number
|
Description
|
|
31.1
|
Certification
of the Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a),
for the quarter ended March 31, 2010.
|
|
31.2
|
Certification
of the Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a),
for the quarter ended March 31, 2010.
|
|
32.1
|
Certification
of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, for
the quarter ended March 31, 2010.
|
|
32.2
|
Certification
of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, for
the quarter ended March 31,
2010.
|
AmTrust
Financial Services, Inc.
|
||
(Registrant)
|
||
Date:
May 10, 2010
|
/s/ Barry
D. Zyskind
|
|
Barry
D. Zyskind
President
and Chief Executive Officer
|
||
/s/ Ronald
E. Pipoly, Jr.
|
||
Ronald
E. Pipoly, Jr.
Chief
Financial
Officer
|