AmTrust swings to loss in Q2

AmTrust Financial Services has posted a net loss of $96.9 million for the second quarter of 2018 after a net profit of $29.1 million in the same period of 2017 as the  company goes private.

The decrease primarily resulted from higher expenses in 2018 compared to 2017. In addition, the 2017 second quarter included a non-recurring $69.5 million (pre-tax) gain from the sale of the majority of AmTrust’s equity investment in National General Holdings (NGHC), the company said.

AmTrust’s combined ratio deteriorated to 106.1 percent in the second quarter of 2018 from 101.2 percent in the same period of 2017.

In 2018, AmTrust continued to observe adverse trends in its small commercial business and specialty programme automobile liability line of business. In particular, severity trends have exceeded AmTrust’s and the overall industry's prior expectations, the company said in a statement.

“We continue to monitor ongoing operational and actuarial diagnostics to determine if our ongoing initiative to re-underwrite this portfolio has been effective,” the company added.

“Our small commercial business and specialty programme workers' compensation portfolio has offset part of the development observed in commercial auto. In particular, our underwriting initiatives to monitor class code exposure mix and favourable claims operational diagnostics have demonstrated improvement in this portfolio. It is possible that the continuation of these trends could result in future adverse or favourable development that would be significant to our results of operations, liquidity and capital resources,” the company said.

AmTrust, which specializes in the coverage for small businesses is in the process of being taken private. CEO Barry Zyskind had previously argued that as a private enterprise AmTrust will be able to focus on long-term decisions, without the emphasis on short-term results. AmTrust wants to address financial controls as well as pricing and reserve adequacy issues.

In the second quarter of 2018, AmTrust experienced adverse development on prior accident years of $16.0 million compared to $73.1 million in the same period a year ago.

Service and fee income decreased 70.7 percent year on year to $49.3 million in the second quarter of 2018.

The 2017 second quarter included $79.9 million generated by entities as part of the transfer of AmTrust’s US-based fee business.

Net earned premiums fell 6.8 percent year on year to $1.29 billion in the second quarter of 2018.

The decrease primarily resulted from the decline in gross written premiums in AmTrust’s specialty programme segment combined with a lower retention rate during the second quarter of 2018, the company said.

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