AmTrust Financial Services' CEO Discusses Q2 2012 Results - Earnings Call Transcript

AmTrust Financial Services, Inc. (AFSI)

Q2 2012 Earnings Call

August 6, 2012, 09:00 am ET

Executives

Hilly Gross - VP, Investor Relations

Barry Zyskind - President & CEO

Ron Pipoly - CFO

Analysts

Randy Binner - FBR

Mark Hughes - SunTrust

Ken Billingsley - BGB Securities

Matthew Heimermann - JPMorgan

Adam Klauber - William Blair

Bob Farnam - KBW

Presentation

Operator

Good day ladies and gentlemen, and welcome to the AmTrust Financial second quarter year 2012 earnings conference call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions) As a reminder, this conference call is being recorded.

I would now like to introduce your host for today's conference, Hilly Gross, Vice President of Investor Relations for AmTrust. You may begin.

Hilly Gross

Good morning and thank you. And thank you everyone for taking the time out to join us with this, our second quarter earnings conference call at AmTrust Financial. With me this morning are Mr. Barry Zyskind, President and CEO of AmTrust and Mr. Ron Pipoly, Chief Financial Officer of AmTrust and as always we are delighted to acknowledge the presence of Mr. Michael Saxon, Chief Operating Officer of AmTrust and Ms. Beth Malone, Senior Vice President of Investor Relations and Corporate Development.

Before I introduce Mr. Zyskind and Mr. Pipoly to give you the overview and analysis of the second quarter results, I would need your indulgence to read into directly the obligatory [power rep] on forward-looking statements. Since this morning during this conference call will contain certain forward-looking statements that are intended to be covered by the Safe Harbor’s created by the Private Securities Litigation Reform Act of 1995.

All statements other than statements of historical fact included in this presentation are forward-looking statements including statements accompanied by words such as, could, believe, expect, anticipate, intend, estimate, plan, project and continue or future or conditional word such as will, would, should, could or may. These statements include the plans and objectives of the management for future operations including those relating to future growth of the company’s business activities and availabilities of funds and are based on current expectations that involved assumptions that are difficult or impossible to predict accurately many of which are beyond the control of the company. There can be no assurance that actual developments will be consistent with our assumptions.

Actual results may differ materially from those expressed or implied in these statements as a result of significant risks and uncertainties including the factors set forth in the company’s filings with the Securities and Exchange Commission including its Annual Report on Form 10-K and its quarterly reports on Form 10-Q. The projections and statements in this presentation speak only as of the date of this presentation and the company undertakes no obligation to update or revise any forward-looking statement whether as a result of new information, future developments or otherwise except as may be required by law.

Having dispensed with the lingual niceties, it is now pleasure to call upon AmTrust’s CEO and President Mr. Barry Zyskind. Barry?

Barry Zyskind

Thank you and good morning. I am pleased to report that AmTrust had a strong second quarter in 2012 with growth in each of our segments. The Small Commercial Business segment is writing a wave of improving pricing particularly workers compensation. The positive topline growth momentum is also benefiting from the strength of acquisition, major acquisitions including Majestic last year and more recently BTIS.

In our Specialty Program segment, a favorable pricing environment coupled with the success of our underwriting teams contributed to the topline growth. Specialty risk and extended warranty continues to experience gains in our targeted markets both domestically and internationally. Recent acquisitions including the purchase of the Captive Insurance agency’s Case New Holland combined the geographic and product expansions continued to create excellent opportunities for growth.

Our fees and services reported double digit growth benefiting from acquisitions and increased demand of our services. The higher margin business contributes to our strong ROE. We expect to continue growing our fees and services business.

In terms of acquisitions, we believe we are well positioned with our capital and infrastructure to take advantage of the opportunities that increasingly present themselves across all of our segments. The prospect for building on a profitable success through acquisition has never been more favorable in our opinion. We continue to see a lot of deal flow based on many of the things that are happening in the current marketplace.

In summary, our performance this quarter is a source of prime to everyone in our organization. We are confident we will continue to build shareholder value.

With that, I would like to turn the call over to Ron Pipoly for more detailed comments on the quarter.

Ron Pipoly

Thank you Barry, good morning. The second quarter of 2012 is the second consecutive quarter with gross written premium in excess of $600 million. Unless otherwise noted, my comments this morning will evolve around a discussion of our results this quarter compared with the second quarter of last year.

Gross written premium was $637.4 million, an increase of $79 million or 14.1% from the second quarter of last year. The second quarter of 2011 had a total of $45 million of one-time gross written premium events. Without consideration of these events, the increase in premium would have been a $124 million or 24.1%. We experienced growth in all four of our segments during the quarter.

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