US fee business sale boosts AmTrust Q1 results

New York-based AmTrust Financial Services reported a net income increase to $675.9 million in the first quarter of 2018 compared to $50.2 million in the same period a year ago.

The improvement resulted primarily from the $724.1 million (pre-tax) gain on the transfer of AmTrust’s US-based fee business.

In March 2018, the property/casualty insurer closed the transfer of a 51 percent equity interest in certain of its US-based fee businesses to private equity firm Madison Dearborn Partners.

In the first quarter of 2018, AmTrust’s net earned premiums grew to $1.35 billion from $1.22 billion in the same period a year ago. At the same time, total losses and expenses increased to $1.61 billion from $1.37 billion over the period.

A group of investors is taking AmTrust private in order to fix its profitability issues. AmTrust needs to address financial controls as well as pricing and reserve adequacy issues.

Private equity firm Stone Point Capital, the Karfunkel Family, and the CEO of AmTrust Financial Services Barry Zyskind are acquiring the insurer in a transaction valued at approximately $2.7 billion.

AmTrust, which specializes in coverage for small businesses, reported a net loss of $348.9 million for 2017 after a net profit of $430.4 million in 2016.

AmTrust’s expenses grew to $6.41 billion in 2017 from $4.94 billion in 2016, driven primarily by an increase in loss and loss adjustment expenses. The company registered a loss ratio of 80.8 percent for 2017 compared to 67.3 percent in 2016. Included in the 2017 figure was $419.0 million of prior-period adverse reserve development primarily in its small commercial business and specialty programme segments, which has led to re-underwriting, rate changes, and/or termination of certain specialty programs that generated the prior period adverse reserve development, according to the annual report. In addition, the increase was partially attributable to catastrophe losses and related reinstatement and accelerated premiums of $109.4 million.

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