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Once upon a time, there was a Bridge Over Troubled Water.
This melodious and thoughtful tune was penned by Paul Simon and Art Garfunkel. The duo first met as children in Kew Gardens Hills, Queens, New York in 1953, where they first learned to harmonize with one another and began writing original material. Unfortunately, egos got in the way and the duet never reached their full potential.
Little does anyone know, and no one yet knows, that Art Garfunkel is the long lost relative of Michael and George Karfunkel. Why does this matter? Because Michael and George Karfunkel founded Amtrust Financial in 1998. Together, they made way more monies than Simon and Garfunkel ever did.
Yesterday I bought stock in Amtrust Financial (AFSI) at 51.54. I will sell it in 4 to 6 weeks at 59.37. Here’s why I like AFSI:
If you can dodge a wrench, you can dodge a ball. If you want to like a stock, you have to like the stock chart first:
While Simon and Garfunkel had two employees. AFSI has 4,175 employees and 8,100 sales agents. They have over 20 offices all over America.
AmTrust Financial Services, Inc., through its subsidiaries, underwrites and provides property and casualty insurance in the United States and internationally. The company operates in four segments: Small Commercial Business, Specialty Risk and Extended Warranty, and Specialty Program, and Personal Lines Reinsurance. AmTrust is a property and casualty insurer that specializes in coverage for small businesses. The company provides insurance coverage for products with high volumes of insureds and loss profiles that it believes are predictable. It offers workers' compensation insurance, extended warranty coverage, specialty middle-market property and casualty insurance and several related products and services. Originally founded as a niche player in workers compensation in 1998, the insurance business has grown into a global property and casualty insurance enterprise with offices in thirteen countries and a market capitalization of $3.2 billion.
Who doesn’t want to find stocks that have low PEs, solid outlooks, and decent dividends? Dividend? Yes AFSI pays a 1.9% dividend. When you get older, you like dividends. It’s like free money. AFSI also has the other aforementioned characteristics.
AFSI may be an interesting play thanks to its PE of 9.29, its P/S ratio of 1.00, and its decent dividend yield. These factors suggest that AmTrust Financial is a pretty good value pick, as investors have to pay a relatively low level for each dollar of earnings, and that AFSI has decent revenue metrics to back up its earnings. On the other hand, if you look at the stock price, you’ll see that this is also a momentum play. The stock is up around 80% off of its December 2013 low.
Why? It has been seeing solid activity on the earnings estimate front as well. For current year earnings, the consensus has gone up by 11.2% in the past 30 days, thanks to 3 upward revisions in the past one month compared to no downward revision. AFSI saw EPS growth of 34.6% last year, and is looking great for this year too. Furthermore, the long-term growth rate is currently an impressive 15%, suggesting pretty good prospects for the long haul.
At the end of the day, their growth is INSANE compared to their market valuation. It’s the cheapest growth you can buy!!
Earlier this month, AFSI reported some very handsome earnings for its 3rd quarter of 2014:
· Book Value Per Common Share of $22.56, Up 27.2% Since December 31, 2013
· Gross written premium of $1.52 billion, up 41.4%, and net earned premium of $914.4 million, up 49.0% from the third quarter 2013
· Operating diluted EPS of $1.70 compared to $0.83 in the third quarter 2013
· Annualized operating return on common equity of 34.2% and annualized return on common equity of 39.5%
· Service and fee income of $117.6 million, up 30.7% from the third quarter 2013
· Operating earnings of $135.4 million compared to $65.1 million from the third quarter 2013
· Net income attributable to common stockholders of $156.6 million compared to $58.2 million in the third quarter 2013
· Diluted EPS of $1.97 compared with $0.74 in the third quarter 2013
· Combined ratio of 91.3% compared to 89.2% in the third quarter 2013
And for the YTD 2014
· Gross written premium of $4.63 billion, up 51.3%, and net earned premium of $2.62 billion, up 68.0% over YTD 2013
· Operating diluted EPS of $4.28 compared to $2.31 in YTD 2013
· Annualized operating return on common equity of 30.1% and annualized return on common equity of 32.1%
· Service and fee income of $308.1 million, up 29.1% from YTD 2013
· Operating earnings of $339.9 million compared to $179.7 million from YTD 2013
· Net income attributable to common stockholders of $362.7 million compared to $213.5 million in YTD 2013
· Diluted EPS of $4.57 compared with $2.75 in YTD 2013
· Combined ratio of 90.7% compared to 90.8% in YTD 2013
· Book value per common share of $22.56, up from $17.74 at December 31, 2013
· AmTrust's stockholders' equity was $2.0 billion as of September 30, 2014
Total revenue was $1.07 billion, an increase of $343.4 million, or 47.1%, from $728.3 million in the third quarter 2013. Gross written premium was $1.52 billion, an increase of $444.3 million, or 41.4%, from $1.07 billion in the same period a year ago. Net written premium of $1.00 billion rose $275.4 million, or 37.8%, from $728.8 million in the third quarter 2013. Net earned premium of $914.4 million increased $300.5 million, or 49.0%, from $613.9 million in the third quarter 2013. The combined ratio was 91.3% compared to 89.2% in third quarter 2013.
Total service and fee income of $117.6 million increased $27.6 million, or 30.7%, from $90.0 million in third quarter of 2013 and included $14.7 million from related parties in the third quarter 2014 compared with $11.7 million in the third quarter 2013.
Total assets of approximately $13.22 billion increased $1.94 billion, or 17.2%, from $11.28 billion at December 31, 2013. Total cash, cash equivalents and investments of $5.23 billion increased $645.9 million, or 14.1%, from $4.59 billion as of December 31, 2013. AmTrust's stockholder's equity of $2.0 billion increased 38.0% from $1.44 billion at December 31, 2013.
As of September 30, 2014, the Company's long-term debt-to-capitalization ratio was 22.9% compared with 28.0% as of December 31, 2013. During the three months ended September 30, 2014, the Board of
Directors declared cash dividends totaling $0.20 per share on its common stock.
Impressed? The stock trades at just 9x 12-month forward earnings, below the industry median of 13.8x. Over the last 12 months, the company has generated 24% ROE compared to 7% for the industry.
One of the fears that has hung over insurance stocks is the threat of rising interest rates. Since insurers hold a lot of fixed income investments in their portfolios, rising rates would decrease the value of these securities. However, AmTrust's interest rate risk is relatively low. The duration of their portfolio is only about 5 years, so unless the interest rate spike is severe they’ll be able to restructure their investment ladder without really getting rattled.
While some insurers acquire wide-ranging businesses across multiple product lines, AmTrust sticks to its knitting. They look to acquire nonvolatile, lower-hazard businesses. Like the tortoise said, slow and steady wins the race. With an improving U.S. economy and better projected commercial insurance pricing, AmTrust Financial has set itself up to reap the rewards of a disciplined yet ambitious growth strategy. Their growth rates are accelerating thanks to a better operating and pricing environment, especially in the commercial business.
How do they do it? They have proprietary systems that offer competitively lower processing costs. They have significant tech capacity that allows for generation of fees through outsourcing of IT services. Their product mix allows for diversification among their already lower volatility businesses (workers comp, warranty commercial auto, commercial liability). Their small commercial business focuses on small businesses and niche products (lumber, transportation, auto service) that target specific industries and classes with specialized forms and proprietary ratings.
They are constantly challenging their agents to maintain brand value and continually appoint new agents who focus on writing Amtrust products. Their strategy of growing service and fee revenue is a good one as it offers attractive margins, unconstrained cash flows and requires limited capital. The fee business performance has almost doubled since 2012.
They have been beating the drum successfully on the acquisition front so obviously management knows what rollups work for them and their formula has been successful. There’s no reason to believe that anything is going to change this.
AmTrust Financial is a relatively young insurance business with only a 15-year long track record. However, the property and casualty insurance company has grown enormously in terms of assets, equity, net operating earnings and written premiums and has a lot more room to grow in the future, especially outside the United States.
The stock has a 50-day moving average of $47.65 and a 200-day moving average of $43.85. The company has a market cap of $3.82 billion.
On average, ANAL-ysts predict that Amtrust Financial Services will post $5.39 earnings per share for the current fiscal year and $5.46 for 2015. How insane is that? With the growth they have been experiencing, there’s no question that earnings are going to be $7.13 per share for 2015. If you take the existing PE of 9.3 and multiply it by $7.13, you get a stock price of $66.31, which is well past my target sell price.
So here’s to you Mrs. Robinson. I’m going to take the money I make on AFSI and buy some Christmas presents…..you?
I am HUGE!!
$$$MR. MARKET$$$
This melodious and thoughtful tune was penned by Paul Simon and Art Garfunkel. The duo first met as children in Kew Gardens Hills, Queens, New York in 1953, where they first learned to harmonize with one another and began writing original material. Unfortunately, egos got in the way and the duet never reached their full potential.
Little does anyone know, and no one yet knows, that Art Garfunkel is the long lost relative of Michael and George Karfunkel. Why does this matter? Because Michael and George Karfunkel founded Amtrust Financial in 1998. Together, they made way more monies than Simon and Garfunkel ever did.
Yesterday I bought stock in Amtrust Financial (AFSI) at 51.54. I will sell it in 4 to 6 weeks at 59.37. Here’s why I like AFSI:
If you can dodge a wrench, you can dodge a ball. If you want to like a stock, you have to like the stock chart first:
While Simon and Garfunkel had two employees. AFSI has 4,175 employees and 8,100 sales agents. They have over 20 offices all over America.
AmTrust Financial Services, Inc., through its subsidiaries, underwrites and provides property and casualty insurance in the United States and internationally. The company operates in four segments: Small Commercial Business, Specialty Risk and Extended Warranty, and Specialty Program, and Personal Lines Reinsurance. AmTrust is a property and casualty insurer that specializes in coverage for small businesses. The company provides insurance coverage for products with high volumes of insureds and loss profiles that it believes are predictable. It offers workers' compensation insurance, extended warranty coverage, specialty middle-market property and casualty insurance and several related products and services. Originally founded as a niche player in workers compensation in 1998, the insurance business has grown into a global property and casualty insurance enterprise with offices in thirteen countries and a market capitalization of $3.2 billion.
Who doesn’t want to find stocks that have low PEs, solid outlooks, and decent dividends? Dividend? Yes AFSI pays a 1.9% dividend. When you get older, you like dividends. It’s like free money. AFSI also has the other aforementioned characteristics.
AFSI may be an interesting play thanks to its PE of 9.29, its P/S ratio of 1.00, and its decent dividend yield. These factors suggest that AmTrust Financial is a pretty good value pick, as investors have to pay a relatively low level for each dollar of earnings, and that AFSI has decent revenue metrics to back up its earnings. On the other hand, if you look at the stock price, you’ll see that this is also a momentum play. The stock is up around 80% off of its December 2013 low.
Why? It has been seeing solid activity on the earnings estimate front as well. For current year earnings, the consensus has gone up by 11.2% in the past 30 days, thanks to 3 upward revisions in the past one month compared to no downward revision. AFSI saw EPS growth of 34.6% last year, and is looking great for this year too. Furthermore, the long-term growth rate is currently an impressive 15%, suggesting pretty good prospects for the long haul.
At the end of the day, their growth is INSANE compared to their market valuation. It’s the cheapest growth you can buy!!
Earlier this month, AFSI reported some very handsome earnings for its 3rd quarter of 2014:
· Book Value Per Common Share of $22.56, Up 27.2% Since December 31, 2013
· Gross written premium of $1.52 billion, up 41.4%, and net earned premium of $914.4 million, up 49.0% from the third quarter 2013
· Operating diluted EPS of $1.70 compared to $0.83 in the third quarter 2013
· Annualized operating return on common equity of 34.2% and annualized return on common equity of 39.5%
· Service and fee income of $117.6 million, up 30.7% from the third quarter 2013
· Operating earnings of $135.4 million compared to $65.1 million from the third quarter 2013
· Net income attributable to common stockholders of $156.6 million compared to $58.2 million in the third quarter 2013
· Diluted EPS of $1.97 compared with $0.74 in the third quarter 2013
· Combined ratio of 91.3% compared to 89.2% in the third quarter 2013
And for the YTD 2014
· Gross written premium of $4.63 billion, up 51.3%, and net earned premium of $2.62 billion, up 68.0% over YTD 2013
· Operating diluted EPS of $4.28 compared to $2.31 in YTD 2013
· Annualized operating return on common equity of 30.1% and annualized return on common equity of 32.1%
· Service and fee income of $308.1 million, up 29.1% from YTD 2013
· Operating earnings of $339.9 million compared to $179.7 million from YTD 2013
· Net income attributable to common stockholders of $362.7 million compared to $213.5 million in YTD 2013
· Diluted EPS of $4.57 compared with $2.75 in YTD 2013
· Combined ratio of 90.7% compared to 90.8% in YTD 2013
· Book value per common share of $22.56, up from $17.74 at December 31, 2013
· AmTrust's stockholders' equity was $2.0 billion as of September 30, 2014
Total revenue was $1.07 billion, an increase of $343.4 million, or 47.1%, from $728.3 million in the third quarter 2013. Gross written premium was $1.52 billion, an increase of $444.3 million, or 41.4%, from $1.07 billion in the same period a year ago. Net written premium of $1.00 billion rose $275.4 million, or 37.8%, from $728.8 million in the third quarter 2013. Net earned premium of $914.4 million increased $300.5 million, or 49.0%, from $613.9 million in the third quarter 2013. The combined ratio was 91.3% compared to 89.2% in third quarter 2013.
Total service and fee income of $117.6 million increased $27.6 million, or 30.7%, from $90.0 million in third quarter of 2013 and included $14.7 million from related parties in the third quarter 2014 compared with $11.7 million in the third quarter 2013.
Total assets of approximately $13.22 billion increased $1.94 billion, or 17.2%, from $11.28 billion at December 31, 2013. Total cash, cash equivalents and investments of $5.23 billion increased $645.9 million, or 14.1%, from $4.59 billion as of December 31, 2013. AmTrust's stockholder's equity of $2.0 billion increased 38.0% from $1.44 billion at December 31, 2013.
As of September 30, 2014, the Company's long-term debt-to-capitalization ratio was 22.9% compared with 28.0% as of December 31, 2013. During the three months ended September 30, 2014, the Board of
Directors declared cash dividends totaling $0.20 per share on its common stock.
Impressed? The stock trades at just 9x 12-month forward earnings, below the industry median of 13.8x. Over the last 12 months, the company has generated 24% ROE compared to 7% for the industry.
One of the fears that has hung over insurance stocks is the threat of rising interest rates. Since insurers hold a lot of fixed income investments in their portfolios, rising rates would decrease the value of these securities. However, AmTrust's interest rate risk is relatively low. The duration of their portfolio is only about 5 years, so unless the interest rate spike is severe they’ll be able to restructure their investment ladder without really getting rattled.
While some insurers acquire wide-ranging businesses across multiple product lines, AmTrust sticks to its knitting. They look to acquire nonvolatile, lower-hazard businesses. Like the tortoise said, slow and steady wins the race. With an improving U.S. economy and better projected commercial insurance pricing, AmTrust Financial has set itself up to reap the rewards of a disciplined yet ambitious growth strategy. Their growth rates are accelerating thanks to a better operating and pricing environment, especially in the commercial business.
How do they do it? They have proprietary systems that offer competitively lower processing costs. They have significant tech capacity that allows for generation of fees through outsourcing of IT services. Their product mix allows for diversification among their already lower volatility businesses (workers comp, warranty commercial auto, commercial liability). Their small commercial business focuses on small businesses and niche products (lumber, transportation, auto service) that target specific industries and classes with specialized forms and proprietary ratings.
They are constantly challenging their agents to maintain brand value and continually appoint new agents who focus on writing Amtrust products. Their strategy of growing service and fee revenue is a good one as it offers attractive margins, unconstrained cash flows and requires limited capital. The fee business performance has almost doubled since 2012.
They have been beating the drum successfully on the acquisition front so obviously management knows what rollups work for them and their formula has been successful. There’s no reason to believe that anything is going to change this.
AmTrust Financial is a relatively young insurance business with only a 15-year long track record. However, the property and casualty insurance company has grown enormously in terms of assets, equity, net operating earnings and written premiums and has a lot more room to grow in the future, especially outside the United States.
The stock has a 50-day moving average of $47.65 and a 200-day moving average of $43.85. The company has a market cap of $3.82 billion.
On average, ANAL-ysts predict that Amtrust Financial Services will post $5.39 earnings per share for the current fiscal year and $5.46 for 2015. How insane is that? With the growth they have been experiencing, there’s no question that earnings are going to be $7.13 per share for 2015. If you take the existing PE of 9.3 and multiply it by $7.13, you get a stock price of $66.31, which is well past my target sell price.
So here’s to you Mrs. Robinson. I’m going to take the money I make on AFSI and buy some Christmas presents…..you?
I am HUGE!!
$$$MR. MARKET$$$
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