x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF
1934
|
|
For
the quarterly period ended June 30,
2007
|
o
|
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, 6
th
Floor, New York, New York
|
10038
|
|
(Address
of principal executive offices)
|
(Zip
Code)
|
PART
I
|
FINANCIAL
INFORMATION
|
Page
|
||
|
|
|
||
Item
1.
|
Unaudited
Financial Statements:
|
|
||
|
|
|
||
|
Condensed
Consolidated Balance Sheets as of June 30, 2007 and December 31,
2006
|
3
|
||
|
|
|
||
|
Condensed
Consolidated Statements of Income
|
4
|
||
|
—
Three and six months ended June 30, 2007 and 2006
|
|
||
|
|
|
||
|
Condensed
Consolidated Statements of Cash Flows
|
5
|
||
|
—
Six months ended June 30, 2007 and 2006
|
|
||
|
|
|
||
Notes
to Condensed Consolidated Financial Statements
|
6
|
|||
|
|
|
||
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
18
|
||
|
|
|
||
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
32
|
||
|
|
|
||
Item
4T.
|
Controls
and Procedures
|
34
|
||
|
|
|
||
PART
II
|
OTHER
INFORMATION
|
|
||
Item
4.
|
Submission
of Matters to a Vote of Security Holders
|
35
|
||
|
|
|
||
Exhibits
|
36
|
|||
|
|
|
||
|
Signatures
|
37
|
Assets
|
June
30,
2007
|
|
December
31,
2006
|
||||
Investments:
|
(Unaudited)
|
|
|||||
Fixed
maturities, held-to-maturity, at amortized cost (fair value $365,172;
$363,690)
|
$
|
363,404
|
$
|
366,551
|
|||
Fixed
maturities, available-for-sale, at market value (amortized cost
$317,888;
$91,368)
|
318,583
|
93,168
|
|||||
Equity
securities, available-for-sale, at market value (cost $112,257;
$90,637)
|
119,706
|
94,482
|
|||||
Short-term
investments
|
95,513
|
196,140
|
|||||
Other
investments
|
25,021
|
13,936
|
|||||
Total
investments
|
922,227
|
764,277
|
|||||
Cash
and cash equivalents
|
130,005
|
59,916
|
|||||
Assets
under management
|
25,495
|
23,494
|
|||||
Accrued
interest and dividends
|
11,788
|
6,138
|
|||||
Premiums
receivable, net
|
239,257
|
147,779
|
|||||
Note
receivable - related party
|
20,336
|
-
|
|||||
Reinsurance
recoverable
|
52,273
|
44,127
|
|||||
Funds
held with reinsured companies
|
426
|
266
|
|||||
Prepaid
reinsurance premiums
|
97,604
|
72,439
|
|||||
Federal
tax receivable
|
2,532
|
-
|
|||||
Prepaid
expenses and other assets
|
14,932
|
12,129
|
|||||
Deferred
policy acquisition costs
|
73,175
|
43,064
|
|||||
Deferred
tax asset
|
12,074
|
9,542
|
|||||
Property
and equipment, net
|
11,450
|
11,175
|
|||||
Goodwill
|
5,841
|
2,163
|
|||||
Intangible
assets
|
34,535
|
27,206
|
|||||
$
|
1,653,950
|
$
|
1,223,715
|
||||
Liabilities
and Stockholders’ Equity
|
|||||||
Liabilities:
|
|||||||
Loss
and loss expense reserves
|
$
|
385,961
|
$
|
295,805
|
|||
Unearned
premiums
|
451,995
|
323,155
|
|||||
Ceded
reinsurance premiums payable
|
44,260
|
23,028
|
|||||
Reinsurance
payable on paid losses
|
2,256
|
2,004
|
|||||
Federal
income tax payable
|
-
|
1,477
|
|||||
Funds
held under reinsurance treaties
|
9,853
|
9,948
|
|||||
Securities
sold but not yet purchased, at market
|
36,502
|
38,323
|
|||||
Securities
sold under agreements to repurchase, at contract value
|
86,075
|
-
|
|||||
Accrued
expenses and other current liabilities
|
106,607
|
80,712
|
|||||
Other
liabilities
|
2,045
|
2,814
|
|||||
Junior
subordinated debt
|
123,714
|
82,476
|
|||||
Total
liabilities
|
1,249,268
|
859,742
|
|||||
Commitments
and contingencies
|
|||||||
Minority
Interest
|
25,495
|
23,494
|
|||||
Stockholders’
equity:
|
|||||||
Common
stock, $.01 par value; 100,000,000 shares authorized, 59,959,000
issued
and outstanding in 2007 and 2006
|
600
|
600
|
|||||
Additional
paid-in capital
|
239,723
|
238,938
|
|||||
Accumulated
other comprehensive income
|
1,446
|
3,705
|
|||||
Retained
earnings
|
137,418
|
97,236
|
|||||
Total
stockholders’ equity
|
379,187
|
340,479
|
|||||
$
|
1,653,950
|
$
|
1,223,715
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
||||||||||||
2007
|
|
2006
|
|
|
2007
|
|
|
2006
|
|||||
Revenues:
|
|||||||||||||
Premium
income:
|
|||||||||||||
Net
premium written
|
$
|
163,522
|
$
|
97,991
|
$
|
324,141
|
$
|
208,744
|
|||||
Change
in unearned premium
|
(33,102
|
)
|
(25,556
|
)
|
(75,029
|
)
|
(66,499
|
)
|
|||||
Net
earned premium
|
130,420
|
72,435
|
249,112
|
142,245
|
|||||||||
Commission
and fee income
|
4,292
|
4,229
|
8,782
|
6,115
|
|||||||||
Net
investment income
|
13,234
|
6,086
|
24,625
|
11,421
|
|||||||||
Net
realized gain on investments
|
4,962
|
4,515
|
11,022
|
6,091
|
|||||||||
Other
investment income on managed assets
|
2,191
|
-
|
1,901
|
-
|
|||||||||
Total
revenues
|
155,099
|
87,265
|
295,442
|
165,872
|
|||||||||
Expenses:
|
|||||||||||||
Loss
and loss adjustment expense
|
84,999
|
46,884
|
159,556
|
90,658
|
|||||||||
Policy
acquisition expenses
|
17,447
|
8,149
|
32,030
|
16,472
|
|||||||||
Salaries
and benefits
|
9,921
|
6,614
|
18,933
|
11,732
|
|||||||||
Other
insurance general and administrative expense
|
5,004
|
6,256
|
12,578
|
13,039
|
|||||||||
Other
underwriting expenses
|
3,427
|
4,850
|
6,540
|
5,826
|
|||||||||
Total
expenses
|
120,798
|
72,753
|
229,637
|
137,727
|
|||||||||
Operating
income from continuing operations
|
34,301
|
14,512
|
65,805
|
28,145
|
|||||||||
Other
income (expenses):
|
|||||||||||||
Foreign
currency gain (loss)
|
629
|
(113
|
)
|
119
|
(15
|
)
|
|||||||
Loss
from equity investment
|
(215
|
)
|
-
|
(215
|
)
|
-
|
|||||||
Interest
expense
|
(2,531
|
)
|
(1,030
|
)
|
(4,335
|
)
|
(2,243
|
)
|
|||||
Total
other expenses
|
(2,117
|
)
|
(1,143
|
)
|
(4,431
|
)
|
(2,258
|
)
|
|||||
Income
from continuing operations before provision for income taxes and
minority
interest
|
32,184
|
13,369
|
61,374
|
25,887
|
|||||||||
Provision
for income taxes
|
8,597
|
3,816
|
16,599
|
7,075
|
|||||||||
Minority
interest in net income of subsidiary
|
2,191
|
-
|
1,901
|
-
|
|||||||||
Income
from continuing operations
|
$
|
21,396
|
$
|
9,553
|
$
|
42,874
|
$
|
18,812
|
|||||
Discontinued
operations:
|
|||||||||||||
Gain
from discontinued operations
|
-
|
250
|
-
|
250
|
|||||||||
Income
from discontinued operations
|
-
|
250
|
-
|
250
|
|||||||||
Net
income
|
21,396
|
9,803
|
42,874
|
19,062
|
|||||||||
Basic
earnings per common share
|
|||||||||||||
Income
from continuing operations
|
$
|
0.36
|
$
|
0.16
|
$
|
0.72
|
$
|
0.36
|
|||||
Income
from discontinued operations
|
-
|
-
|
-
|
-
|
|||||||||
Net
income
|
$
|
0.36
|
$
|
0.16
|
$
|
0.72
|
$
|
0.36
|
|||||
Diluted
earnings per common share
|
|||||||||||||
Income
from continuing operations
|
$
|
0.35
|
$
|
0.16
|
$
|
0.71
|
$
|
0.36
|
|||||
Income
from discontinued operations
|
-
|
-
|
-
|
-
|
|||||||||
Net
income
|
$
|
0.35
|
$
|
0.16
|
$
|
0.71
|
$
|
0.36
|
|||||
Dividends
declared per common share
|
$
|
0.025
|
-
|
$
|
0.045
|
-
|
|
Six
Months Ended June 30,
|
||||||
Cash
flows from operating activities:
|
2007
|
2006
|
|||||
Net
income from continuing operations
|
$
|
42,874
|
$
|
19,062
|
|||
Adjustments
to reconcile net income from continuing operations to net cash
provided by
operating activities of continuing operations:
|
|||||||
Depreciation
and amortization
|
1,986
|
1,379
|
|||||
Realized
gain on marketable securities
|
(11,022
|
)
|
(6,091
|
)
|
|||
Bad
debt expense
|
569
|
1,192
|
|||||
Foreign
currency (gain) loss
|
(119
|
)
|
15
|
||||
Non-cash
stock compensation expense
|
785
|
251
|
|||||
Income
from discontinued operations
|
-
|
(250
|
)
|
||||
Changes
in assets - (increase) decrease:
|
|||||||
Premiums
receivable
|
(72,087
|
)
|
(46,121
|
)
|
|||
Reinsurance
recoverable
|
(8,076
|
)
|
(5,863
|
)
|
|||
Deferred
policy acquisition costs, net
|
(20,969
|
)
|
(15,227
|
)
|
|||
Prepaid
reinsurance premiums
|
(20,811
|
)
|
(10,253
|
)
|
|||
Prepaid
expenses and other assets
|
(8,541
|
)
|
(6,765
|
)
|
|||
Deferred
tax asset
|
(2,532
|
)
|
(2,327
|
)
|
|||
Receivable
from discontinued operations
|
-
|
1,729
|
|||||
Changes
in liabilities - increase (decrease):
|
|||||||
Ceded
reinsurance premium payable
|
21,116
|
(221
|
)
|
||||
Accrued
expenses and other current liabilities
|
15,710
|
12,134
|
|||||
Loss
and loss expense reserve
|
80,146
|
44,530
|
|||||
Unearned
premiums
|
97,428
|
79,254
|
|||||
Funds
held under reinsurance treaties
|
(95
|
)
|
7,458
|
||||
Net
cash provided in operating activities
|
116,362
|
73,886
|
|||||
Cash
flows from investing activities:
|
|||||||
Net
(purchases) of securities with fixed maturities
|
(112,475
|
)
|
(180,469
|
)
|
|||
Net
(purchases) of equity securities
|
(12,858
|
)
|
(27,581
|
)
|
|||
Net
(purchases) of other investments
|
(10,401
|
)
|
(88
|
)
|
|||
Note
receivable - related party
|
(18,000
|
)
|
-
|
||||
Acquisition
of a subsidiary, net of cash obtained
|
(11,436
|
)
|
-
|
||||
Acquisition
of renewal rights and goodwill
|
(1,055
|
)
|
(8,022
|
)
|
|||
Purchase
of property and equipment
|
(646
|
)
|
(2,491
|
)
|
|||
Net
cash used in investing activities
|
(166,871
|
)
|
(218,651
|
)
|
|||
Cash
flows from financing activities:
|
|||||||
Issuance
of junior subordinated debentures
|
40,000
|
-
|
|||||
Reverse
repurchase agreements
|
86,075
|
-
|
|||||
Issuance
of common stock
|
-
|
256
|
|||||
Additional
paid-in-capital
|
-
|
166,023
|
|||||
Repayment
of mortgage note - discontinued operations
|
-
|
(25,000
|
)
|
||||
Foreign
currency translation
|
(2,259
|
)
|
-
|
||||
Debt
financing fees
|
(820
|
)
|
-
|
||||
Dividends
distributed on common stock
|
(2,398
|
)
|
-
|
||||
Net
cash provided by financing activities
|
120,598
|
141,279
|
|||||
Net
increase in cash and cash equivalents
|
70,089
|
(3,486
|
)
|
||||
Cash
and cash equivalents, beginning of the period
|
59,916
|
115,847
|
|||||
Cash
and cash equivalents, end of the period
|
$
|
130,005
|
$
|
112,361
|
|||
Supplemental
Cash Flow Information
|
|||||||
Income
tax payments
|
$
|
22,790
|
$
|
16,111
|
|||
Interest
payments on debt
|
4,179
|
2,260
|
Original
or
amortized
cost
|
Gross
unrealized
gains
|
Gross
unrealized
losses
|
Market
value
|
||||||||||
Preferred
stock
|
$
|
750
|
$
|
118
|
$
|
-
|
$
|
868
|
|||||
Common
stock
|
111,507
|
15,692
|
(8,361
|
)
|
118,838
|
||||||||
Fixed
maturities
|
317,888
|
5,274
|
(4,579
|
)
|
318,583
|
||||||||
|
$
|
430,145
|
$
|
21,084
|
$
|
(12,940
|
)
|
$
|
438,289
|
|
Amortized
cost
|
Unrealized
gains
|
Unrealized
losses
|
Fair
value
|
|||||||||
Obligations
of U.S. Treasury, Government Corporations and agencies
|
$
|
308,778
|
|
|
$
|
(2,820
|
)
|
$
|
310,951
|
||||
Mortgage-backed
securities
|
54,626
|
833
|
(1,238
|
)
|
54,221
|
||||||||
|
$
|
363,404
|
$
|
5,826
|
$
|
(4,058
|
)
|
$
|
365,172
|
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||
Fixed
maturities
|
$
|
8,236
|
$
|
3,293
|
$
|
16,166
|
$
|
6,325
|
|||||
Equity
securities
|
952
|
826
|
1,440
|
926
|
|||||||||
Cash
and cash equivalents
|
3,691
|
2,052
|
6,175
|
4,255
|
|||||||||
Note
receivable - related party
|
505
|
-
|
1,258
|
-
|
|||||||||
|
13,384
|
6,171
|
25,039
|
11,506
|
|||||||||
Less:
Investment expenses
|
150
|
85
|
414
|
85
|
|||||||||
|
$
|
13,234
|
$
|
6,086
|
$
|
24,625
|
$
|
11,421
|
|
Less
than 12 months
|
12
months or more
|
Total
|
||||||||||||||||
|
Fair
market value
|
|
Unrealized
losses
|
Fair
market value
|
Unrealized
losses
|
Fair
market value
|
Unrealized
losses
|
||||||||||||
Available-for-sale
securities:
|
|
|
|
|
|
|
|||||||||||||
Common
stock
|
$
|
30,236
|
$
|
(4,141
|
)
|
$
|
6,676
|
$
|
(4,220
|
)
|
$
|
36,912
|
$
|
(8,361
|
)
|
||||
Fixed
maturities
|
155,232
|
(4,112
|
)
|
17,320
|
(467
|
)
|
172,552
|
(4,579
|
)
|
||||||||||
Total
temporarily impaired securities available-for-sale
securities
|
$
|
185,468
|
$
|
(8,253
|
)
|
$
|
23,996
|
$
|
(4,687
|
)
|
$
|
209,464
|
$
|
(12,940
|
)
|
|
Less
than 12 months
|
12
months or more
|
Total
|
||||||||||||||||
Fair
market value
|
Unrealized
losses
|
|
Fair
market value
|
|
Unrealized
losses
|
Fair
market value
|
Unrealized
losses
|
||||||||||||
Held-to-maturity
securities:
|
|
|
|
|
|
|
|||||||||||||
Obligations
of U.S. Treasury, Government corporations and agencies
|
$
|
122,906
|
$
|
(1,719
|
)
|
$
|
152,653
|
$
|
(1,101
|
)
|
$
|
275,559
|
$
|
(2,820
|
)
|
||||
Mortgage-backed
securities
|
40,645
|
(786
|
)
|
13,980
|
(452
|
)
|
54,625
|
(1,238
|
)
|
||||||||||
Total
temporarily impaired — held-to-maturity securities
|
$
|
163,551
|
$
|
(2,505
|
)
|
$
|
166,633
|
$
|
(1,553
|
)
|
$
|
330,184
|
$
|
(4,058
|
)
|
|
Original
or
amortized
cost
|
Gross
unrealized
gains
|
Gross
unrealized
losses
|
Market
value
|
|||||||||
Common
stock - long
|
$
|
23,067
|
$
|
2,165
|
$
|
(1,301
|
)
|
$
|
23,931
|
||||
Common
stock - short
|
(3,385
|
)
|
154
|
(301
|
)
|
(3,532
|
)
|
||||||
Total
|
$
|
19,682
|
$
|
2,319
|
$
|
(1,602
|
)
|
$
|
20,399
|
Investment
income
|
|
Net
realized gain (loss)
|
|
Net
unrealized gain (loss)
|
Total
|
||||||||
Equity
securities
|
$
|
31
|
$
|
559
|
$
|
1,599
|
$
|
2,189
|
|||||
Cash
and cash equivalents
|
57
|
-
|
-
|
57
|
|||||||||
|
88
|
559
|
1,599
|
2,246
|
|||||||||
Less:
Investment expenses
|
(55
|
)
|
-
|
-
|
(55
|
)
|
|||||||
$
|
33
|
$
|
559
|
$
|
1,599
|
$
|
2,191
|
|
Investment
income
|
Net
realized gain (loss)
|
|
Net
unrealized gain (loss)
|
|
Total
|
|||||||
Equity
securities
|
$
|
105
|
$
|
1,124
|
$
|
588
|
$
|
1,817
|
|||||
Cash
and cash equivalents
|
193
|
-
|
-
|
193
|
|||||||||
|
298
|
1,124
|
588
|
2,010
|
|||||||||
Less:
Investment expenses
|
(109
|
)
|
-
|
-
|
(109
|
)
|
|||||||
|
$
|
189
|
$
|
1,124
|
$
|
588
|
$
|
1,901
|
Name
of Trust
|
Aggregate
Liquidation
Amount
of
Trust
Preferred
Securities
|
|
Aggregate
Liquidation
Amount
of
Common
Securities
|
|
Aggregate
Principal
Amount
of
Notes
|
|
Stated
Maturity
of
Notes
|
Per
Annum
Interest
Rate
of
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.
|
The
interest rate will change to LIBOR plus 3.30% after the fifth
anniversary.
|
|
(3)
|
The
interest rate will change to LIBOR plus 3.00% after the fifth
anniversary.
|
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||
Income
from continuing operations
|
$
|
21,396
|
$
|
9,553
|
$
|
42,874
|
$
|
18,812
|
|||||
Income
from discontinued operations
|
-
|
250
|
-
|
250
|
|||||||||
Net
income available to common shareholders
|
$
|
21,396
|
$
|
9,803
|
$
|
42,874
|
$
|
19,062
|
|||||
Weighted
average number of common shares outstanding - basic
|
59,959
|
59,943
|
59,959
|
52,289
|
|||||||||
Potentially
dilutive shares:
|
|||||||||||||
Dilutive
shares from stock-based compensation
|
576
|
-
|
338
|
-
|
|||||||||
Weighted
average number of common shares outstanding - dilutive
|
60,535
|
59,943
|
60,297
|
52,289
|
|||||||||
Basic
earnings per common share:
|
|||||||||||||
Income
from continuing operations
|
$
|
0.36
|
$
|
0.16
|
$
|
0.72
|
$
|
0.36
|
|||||
Income
from discontinued operations
|
-
|
-
|
-
|
-
|
|||||||||
Net
income available to common shareholders
|
$
|
0.36
|
$
|
0.16
|
$
|
0.72
|
$
|
0.36
|
|||||
Diluted
earnings per common share:
|
|||||||||||||
Income
from continuing operations
|
$
|
0.35
|
$
|
0.16
|
$
|
0.71
|
$
|
0.36
|
|||||
Income
from discontinued operations
|
-
|
-
|
-
|
-
|
|||||||||
Net
income available to common shareholders
|
$
|
0.35
|
$
|
0.16
|
$
|
0.71
|
$
|
0.36
|
|
Number
of Shares
|
Amount
Per Share
|
|||||
Outstanding,
December 31, 2005
|
-
|
||||||
Granted
|
1,175
|
$
|
7.00
|
||||
Outstanding,
June 30, 2006
|
1,175
|
$
|
7.00
|
||||
|
|||||||
Outstanding,
December 31, 2006
|
2,390
|
$
|
7.00-7.50
|
||||
Granted
|
160
|
10.56-10.77
|
|||||
Exercised
|
-
|
-
|
|||||
Cancelled
|
(34
|
)
|
7.50
|
||||
Outstanding,
June 30, 2007
|
2,516
|
$
|
7.00-10.77
|
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||
Net
income
|
$
|
21,396
|
$
|
9,803
|
$
|
42,874
|
$
|
19,062
|
|||||
Unrealized
holding gain
|
(1,489
|
)
|
(6,057
|
)
|
(5,320
|
)
|
(1,371
|
)
|
|||||
Reclassification
adjustment
|
1,826
|
629
|
4,494
|
757
|
|||||||||
Foreign
currency translation
|
(1,943
|
)
|
3,056
|
(1,433
|
)
|
3,541
|
|||||||
Comprehensive
income
|
$
|
19,790
|
$
|
7,431
|
$
|
40,615
|
21,989
|
|
Three
Months Ended June 30,
|
Six
Months Ended June 30,
|
|||||||||||
|
2007
|
2006
|
2007
|
2006
|
|||||||||
Income
from continuing operations before provision for income taxes and
minority
interest
|
$
|
32,184
|
$
|
13,369
|
$
|
61,374
|
$
|
25,887
|
|||||
Less:
minority interest
|
2,191
|
-
|
1,901
|
-
|
|||||||||
Income
from continuing operations after minority interest before provision
for
income taxes
|
$
|
29,993
|
$
|
13,369
|
$
|
59,473
|
$
|
25,887
|
|||||
Income
taxes at statutory rates
|
$
|
10,498
|
$
|
5,013
|
$
|
20,816
|
$
|
9,192
|
|||||
Effect
of income not subject to US taxation
|
(1,501
|
)
|
(1,197
|
)
|
(2,990
|
)
|
(2,117
|
)
|
|||||
Other,
net
|
(400
|
)
|
-
|
(1,227
|
)
|
-
|
|||||||
Provision
for income taxes as shown on the consolidated statements of
earnings
|
$
|
8,597
|
$
|
3,816
|
$
|
16,599
|
$
|
7,075
|
|||||
GAAP
effective tax rate
|
28.7
|
%
|
28.5
|
%
|
27.9
|
%
|
27.3
|
%
|
|
Workers’
compensation
|
Specialty
risk
and
extended
warranty
|
Specialty
middle-market
property and
casualty
insurance
|
Corporate
and
other
|
Total
|
|||||||||||
Three
months ended June 30, 2007
|
||||||||||||||||
Gross
written premium
|
$
|
78,306
|
$
|
69,329
|
$
|
62,385
|
$
|
-
|
$
|
210,020
|
||||||
Earned
premium
|
65,911
|
33,327
|
31,182
|
-
|
130,420
|
|||||||||||
Investment
income and other revenues
|
7,750
|
2,931
|
7,515
|
2,191
|
20,387
|
|||||||||||
Fee
revenue
|
2,398
|
1,794
|
-
|
100
|
4,292
|
|||||||||||
Operating
income from continuing operations
|
14,090
|
6,650
|
11,270
|
2,291
|
34,301
|
|||||||||||
Interest
expense
|
1,085
|
784
|
662
|
-
|
2,531
|
|||||||||||
Income
taxes
|
3,662
|
2,058
|
2,848
|
29
|
8,597
|
|||||||||||
Income
from continuing operations
|
9,165
|
4,538
|
7,622
|
71
|
21,396
|
|||||||||||
Three
months ended June 30, 2006
|
||||||||||||||||
Gross
written premium
|
$
|
59,241
|
$
|
24,756
|
$
|
29,735
|
$
|
-
|
$
|
113,732
|
||||||
Earned
premium
|
49,934
|
9,280
|
13,219
|
2
|
72,435
|
|||||||||||
Investment
income and other revenues
|
7,400
|
2,288
|
738
|
175
|
10,601
|
|||||||||||
Fee
revenue
|
1,707
|
2,522
|
-
|
-
|
4,229
|
|||||||||||
Operating
income from continuing operations
|
10,605
|
2,764
|
968
|
175
|
14,512
|
|||||||||||
Interest
expense
|
539
|
223
|
268
|
-
|
1,030
|
|||||||||||
Income
taxes
|
2,862
|
705
|
192
|
57
|
3,816
|
|||||||||||
Income
from continuing operations
|
7,188
|
1,738
|
509
|
118
|
9,553
|
|
Workers’
compensation
|
|
Specialty
risk
and
extended
warranty
|
Specialty
middle-market
property and
casualty
insurance
|
Corporate
and
other
|
|
Total
|
|||||||||
Six
months ended June 30, 2007
|
|
|||||||||||||||
Gross
written premium
|
$
|
168,102
|
$
|
117,271
|
$
|
114,320
|
$
|
-
|
$
|
399,693
|
||||||
Earned
premium
|
131,120
|
58,027
|
59,965
|
-
|
249,112
|
|||||||||||
Investment
income and other revenues
|
17,804
|
7,016
|
10,827
|
1,901
|
37,548
|
|||||||||||
Fee
revenue
|
5,040
|
3,495
|
-
|
247
|
8,782
|
|||||||||||
Operating
income from continuing operations
|
33,349
|
15,200
|
15,108
|
2,148
|
65,805
|
|||||||||||
Interest
expense
|
2,045
|
1,214
|
1,076
|
-
|
4,335
|
|||||||||||
Income
taxes
|
8,632
|
3,957
|
3,941
|
69
|
16,599
|
|||||||||||
Income
from continuing operations
|
22,576
|
9,936
|
10,184
|
178
|
42,874
|
|||||||||||
Six
months ended June 30, 2006
|
||||||||||||||||
Gross
written premium
|
$
|
128,470
|
$
|
45,184
|
$
|
63,356
|
$
|
-
|
$
|
237,010
|
||||||
Earned
premium
|
99,479
|
24,597
|
18,169
|
-
|
142,245
|
|||||||||||
Investment
income and other revenues
|
11,832
|
3,658
|
1,182
|
840
|
17,512
|
|||||||||||
Fee
revenue
|
3,654
|
2,461
|
-
|
-
|
6,115
|
|||||||||||
Operating
income from continuing operations
|
20,082
|
5,808
|
1,415
|
840
|
28,145
|
|||||||||||
Interest
expense
|
1,231
|
402
|
610
|
- |
2,243
|
|||||||||||
Income
taxes
|
5,150
|
1,476
|
219
|
230
|
7,075
|
|||||||||||
Income
from continuing operations
|
13,685
|
3,930
|
585
|
612
|
18,812
|
|
Workers’
compensation
|
Specialty
risk
and
extended
warranty
|
Specialty
middle-market
property and
casualty
insurance
|
Corporate
and
other
|
Total
|
|||||||||||
As
of June 30, 2007
|
||||||||||||||||
Fixed
assets
|
$
|
5,401
|
$
|
3,208
|
$
|
2,841
|
$
|
-
|
$
|
11,450
|
||||||
Goodwill
and intangible assets
|
18,501
|
13,079
|
8,796
|
-
|
40,376
|
|||||||||||
Total
assets
|
812,204
|
384,869
|
431,382
|
25,495
|
1,653,950
|
|||||||||||
As
of June 30, 2006
|
||||||||||||||||
Fixed
assets
|
$
|
5,909
|
$
|
1,927
|
$
|
2,928
|
$
|
-
|
$
|
10,764
|
||||||
Goodwill
and intangible assets
|
16,369
|
2,500
|
9,934
|
-
|
28,803
|
|||||||||||
Total
assets
|
621,192
|
224,598
|
48,774
|
25,000
|
919,564
|
·
|
Workers’
compensation for small businesses (average premium less than $5,000
per
policy) in the United States;
|
·
|
Specialty
risk and extended warranty 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 Kingdom, certain other European Union
countries and the United States;
and
|
·
|
Specialty
middle-market property and casualty insurance. 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.
|
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||
|
2007
|
|
2006
|
2007
|
2006
|
||||||||
Gross
written premium
|
$
|
210,020
|
$
|
113,732
|
$
|
399,693
|
$
|
237,010
|
|||||
|
|||||||||||||
Net
premium written
|
$
|
163,522
|
$
|
97,991
|
$
|
324,141
|
$
|
208,744
|
|||||
Change
in unearned premium
|
(33,102
|
)
|
(25,556
|
)
|
(75,029
|
)
|
(66,499
|
)
|
|||||
Net
earned premium
|
130,420
|
72,435
|
249,112
|
142,245
|
|||||||||
Commission
and fee income
|
4,292
|
4,229
|
8,782
|
6,115
|
|||||||||
Net
investment income
|
13,234
|
6,086
|
24,625
|
11,421
|
|||||||||
Net
realized gains on investments
|
4,962
|
4,515
|
11,022
|
6,091
|
|||||||||
Other
investment income on managed assets
|
2,191
|
-
|
1,901
|
-
|
|||||||||
Total
revenue
|
155,099
|
87,265
|
295,442
|
165,872
|
|||||||||
|
|||||||||||||
Loss
and loss adjustment expense
|
84,999
|
46,884
|
159,556
|
90,658
|
|||||||||
Policy
acquisition expenses
|
17,447
|
8,149
|
32,030
|
16,472
|
|||||||||
Salaries
and benefits
|
9,921
|
6,614
|
18,933
|
11,732
|
|||||||||
Other
insurance general and administrative expense
|
5,004
|
6,256
|
12,578
|
13,039
|
|||||||||
Other
underwriting expenses
|
3,427
|
4,850
|
6,540
|
5,826
|
|||||||||
|
120,798
|
72,753
|
229,637
|
137,727
|
|||||||||
Operating
income from continuing operations
|
34,301
|
14,512
|
65,805
|
28,145
|
|||||||||
|
|||||||||||||
Other
income (expense):
|
|||||||||||||
Foreign
currency gain (loss)
|
629
|
(113
|
)
|
119
|
(15
|
)
|
|||||||
Loss
from equity investment
|
(215
|
)
|
-
|
(215
|
)
|
-
|
|||||||
Interest
expense
|
(2,531
|
)
|
(1,030
|
)
|
(4,335
|
)
|
(2,243
|
)
|
|||||
Total
other expense
|
(2,117
|
)
|
(1,143
|
)
|
(4,431
|
)
|
(2,258
|
)
|
|||||
Income
from continuing operations before provision for income taxes and
minority
interest
|
32,184
|
13,369
|
61,374
|
25,887
|
|||||||||
|
|||||||||||||
Provision
for income taxes
|
8,597
|
3,816
|
16,599
|
7,075
|
|||||||||
Minority
interest in net loss of subsidiary
|
2,191
|
-
|
1,901
|
-
|
|||||||||
Net
income from continuing operations
|
$
|
21,396
|
$
|
9,553
|
$
|
42,874
|
$
|
18,812
|
|||||
Gain
from discontinued operations
|
-
|
250
|
-
|
250
|
|||||||||
Net
income
|
$
|
21,396
|
$
|
9,803
|
$
|
42,874
|
$
|
19,062
|
|||||
Key
Measures:
|
|||||||||||||
Net
loss ratio
|
65.2
|
%
|
64.7
|
%
|
64.0
|
%
|
63.7
|
%
|
|||||
Net
expense ratio
|
24.8
|
%
|
29.0
|
%
|
25.5
|
%
|
29.0
|
%
|
|||||
Net
combined ratio
|
90.0
|
%
|
93.7
|
%
|
89.6
|
%
|
92.7
|
%
|
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||
|
2007
|
|
2006
|
2007
|
|
2006
|
|||||||
Gross
premium written
|
$
|
78,306
|
$
|
59,241
|
$
|
168,102
|
$
|
128,470
|
|||||
|
|||||||||||||
Net
premium written
|
67,462
|
51,097
|
152,926
|
114,596
|
|||||||||
Change
in unearned premium
|
(1,551
|
)
|
(1,163
|
)
|
(21,806
|
)
|
(15,117
|
)
|
|||||
Net
premium earned
|
65,911
|
49,934
|
131,120
|
99,479
|
|||||||||
|
|||||||||||||
Loss
and loss adjustment expense
|
41,557
|
29,295
|
80,381
|
59,301
|
|||||||||
Policy
acquisition expenses
|
9,444
|
6,139
|
18,684
|
13,928
|
|||||||||
Salaries
and benefits
|
5,384
|
4,777
|
10,232
|
8,205
|
|||||||||
Other
insurance general and administrative expense
|
2,638
|
5,000
|
6,908
|
9,119
|
|||||||||
|
59,023
|
45,211
|
116,205
|
90,553
|
|||||||||
Net
premiums earned less expenses included in combined ratio
|
$
|
6,888
|
$
|
4,723
|
$
|
14,915
|
$
|
8,926
|
|||||
|
|||||||||||||
Key
Measures:
|
|||||||||||||
Net
loss ratio
|
63.0
|
%
|
58.7
|
%
|
61.3
|
%
|
59.6
|
%
|
|||||
Net
expense ratio
|
26.5
|
%
|
31.9
|
%
|
27.3
|
%
|
31.4
|
%
|
|||||
Net
combined ratio
|
89.5
|
%
|
90.5
|
%
|
88.6
|
%
|
91.0
|
%
|
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||
|
2007
|
|
2006
|
|
2007
|
|
2006
|
||||||
Gross
premium written
|
$
|
69,329
|
$
|
24,756
|
$
|
117,271
|
$
|
45,184
|
|||||
|
|||||||||||||
Net
premium written
|
52,491
|
21,145
|
90,802
|
37,379
|
|||||||||
Change
in unearned premium
|
(19,164
|
)
|
(11,865
|
)
|
(32,775
|
)
|
(12,783
|
)
|
|||||
Net
premium earned
|
33,327
|
9,280
|
58,027
|
24,596
|
|||||||||
|
|||||||||||||
Loss
and loss adjustment expense
|
24,102
|
10,069
|
42,012
|
20,675
|
|||||||||
Policy
acquisition expenses
|
2,394
|
-
|
2,394
|
-
|
|||||||||
Salaries
and benefits
|
1,855
|
906
|
4,086
|
2,029
|
|||||||||
Other
insurance general and administrative expense
|
605
|
(323
|
)
|
1,980
|
1,659
|
||||||||
|
28,956
|
10,652
|
50,472
|
24,363
|
|||||||||
Net
premiums earned less expenses included in combined ratio
|
$
|
4,371
|
$
|
(1,372
|
)
|
$
|
7,555
|
$
|
233
|
||||
|
|||||||||||||
Key
Measures:
|
|||||||||||||
Net
loss ratio
|
72.3
|
%
|
108.5
|
%
|
72.4
|
%
|
84.1
|
%
|
|||||
Net
expense ratio
|
14.6
|
%
|
6.3
|
%
|
14.6
|
%
|
15.0
|
%
|
|||||
Net
combined ratio
|
86.9
|
%
|
114.8
|
%
|
87.0
|
%
|
99.1
|
%
|
|
Three
Months Ended
June
30,
|
Six
Months Ended
June
30,
|
|||||||||||
|
2007
|
|
2006
|
|
2007
|
2006
|
|||||||
Gross
premium written
|
$
|
62,385
|
$
|
29,735
|
$
|
114,320
|
$
|
63,356
|
|||||
|
|||||||||||||
Net
premium written
|
43,570
|
25,748
|
80,413
|
56,769
|
|||||||||
Change
in unearned premium
|
(12,388
|
)
|
(12,529
|
)
|
(20,448
|
)
|
(38,600
|
)
|
|||||
Net
premiums earned
|
31,182
|
13,219
|
59,965
|
18,169
|
|||||||||
|
|||||||||||||
Loss
and loss adjustment expense
|
19,340
|
7,520
|
37,163
|
10,682
|
|||||||||
Policy
acquisition expenses
|
5,609
|
2,009
|
10,952
|
2,544
|
|||||||||
Salaries
and benefits
|
2,682
|
931
|
4,614
|
1,499
|
|||||||||
Other
insurance general and administrative expense
|
1,762
|
1,579
|
3,690
|
2,261
|
|||||||||
|
29,393
|
12,039
|
56,419
|
16,986
|
|||||||||
Net
premiums earned less expenses included in combined ratio
|
$
|
1,789
|
$
|
1,180
|
$
|
3,546
|
$
|
1,183
|
|||||
|
|||||||||||||
Key
Measures:
|
|||||||||||||
Net
loss ratio
|
62.0
|
%
|
56.9
|
%
|
62.0
|
%
|
58.8
|
%
|
|||||
Net
expense ratio
|
32.2
|
%
|
34.2
|
%
|
32.1
|
%
|
34.7
|
%
|
|||||
Net
combined ratio
|
94.3
|
%
|
91.1
|
%
|
94.1
|
%
|
93.5
|
%
|
|
Six
Months Ended
June
30,
|
||||||
|
2007
|
|
2006
|
||||
Cash
and cash equivalents provided by (used in):
|
|
|
|||||
Operating
activities
|
$
|
116,362
|
$
|
73,886
|
|||
Investing
activities
|
(166,871
|
)
|
(218,651
|
)
|
|||
Financing
activities
|
120,598
|
141,279
|
|||||
Change
in cash and cash equivalents
|
$
|
70,089
|
$
|
(3,486
|
)
|
|
June
30, 2007
|
December
31, 2006
|
|||||||||||
|
Carrying
Value
|
Percentage
of Portfolio
|
Carrying
Value
|
Percentage
of Portfolio
|
|||||||||
|
|
|
|
|
|||||||||
Cash
and cash equivalents
|
$
|
130,005
|
12.7
|
%
|
$
|
59,916
|
7.4
|
%
|
|||||
Time
and short-term deposits
|
95,513
|
9.3
|
196,140
|
24.2
|
|||||||||
U.S.
treasury securities
|
13,462
|
1.3
|
22,799
|
2.8
|
|||||||||
U.S.
government agencies
|
295,316
|
28.7
|
288,325
|
35.6
|
|||||||||
Mortgage
backed securities
|
54,626
|
5.3
|
55,427
|
6.8
|
|||||||||
Corporate
bonds
|
318,583
|
31.0
|
93,168
|
11.5
|
|||||||||
Common
stock
|
118,837
|
11.6
|
94,042
|
11.6
|
|||||||||
Preferred
stocks
|
868
|
0.1
|
439
|
0.1
|
|||||||||
Investment
portfolio, gross
|
$
|
1,027,210
|
100.0
|
%
|
$
|
810,256
|
100.0
|
%
|
|||||
Securities
sold but not yet purchased
|
(36,502
|
)
|
(38,323
|
)
|
|||||||||
Securities
sold under agreements to repurchase
|
(86,075
|
)
|
-
|
||||||||||
Investment
portfolio, net
|
$
|
904,633
|
$
|
771,933
|
Hypothetical
Change in Interest Rates
|
Fair
Value
|
Estimated
Change
in
Fair
Value
|
Carrying
Value
|
Estimated
Change
in
Carrying
Value
|
Hypothetical
Percentage
(Increase)
Decrease
in
Shareholders’
Equity
|
|||||||||||
($
in thousands)
|
||||||||||||||||
200
basis point increase
|
$
|
621,077
|
$
|
(62,678
|
)
|
$
|
—
|
$
|
(33,055
|
)
|
(2.8
|
)%
|
||||
100
basis point increase
|
605,762
|
(32,993
|
)
|
—
|
(17,434
|
)
|
(1.1
|
)
|
||||||||
No
change
|
683,755
|
—
|
681,987
|
—
|
—
|
|||||||||||
100
basis point decrease
|
703,445
|
19,690
|
—
|
15,647
|
0.9
|
|||||||||||
200
basis point decrease
|
740,905
|
37,460
|
—
|
32,087
|
1.9
|
Fair
Value
|
|
Estimated
Change in Fair Value
|
|
Carrying
Value
|
|
Estimated
Change in Carrying Value
|
|
Hypothetical
Percentage Increase (Decrease) in Shareholders
Equity
|
||||||||
($
in thousands)
|
||||||||||||||||
5%
increase
|
$
|
125,691
|
$
|
5,985
|
$
|
5,985
|
1.6
|
%
|
||||||||
No
change
|
119,706
|
$
|
119,706
|
|||||||||||||
5%
decrease
|
113,721
|
(5,985
|
)
|
(5,985
|
)
|
-1.6
|
%
|
(a) |
The
annual meeting of the shareholders was held on June 14,
2007.
|
(b) |
All
of the Company's director nominees, Barry D. Zyskind, Michael Karfunkel,
George Karfunkel, Donald T. DeCarlo, Abraham Gulkowitz, Isaac Neuberger
and Jay J. Miller, were elected. There was no solicitation in opposition
to the Company's nominees.
|
(c) |
Matters
voted on at the meeting and the number of votes
cast:
|
1. |
Election
of directors to serve until the 2008 Annual Meeting of Shareholders
or
until their successors have been duly elected or appointed and
qualified:
|
Voted
For
|
Withhold
Authority
|
56,701,753
|
232,696
|
Voted
For
|
Withhold
Authority
|
52,943,636
|
3,991,086
|
Voted
For
|
Withhold
Authority
|
56,701,654
|
233,088
|
Voted
For
|
Withhold
Authority
|
56,657,185
|
277,537
|
Voted
For
|
Withhold
Authority
|
56,776,447
|
158,275
|
Voted
For
|
Withhold
Authority
|
56,762,666
|
172,056
|
Voted
For
|
Withhold
Authority
|
56,776,428
|
158,294
|
2. |
To
approve
the
AmTrust Financial Services, Inc. 2007 Executive Performance
Plan:
|
Voted
For
|
Voted
Against
|
Abstentions
|
50,225,891
|
490,154
|
0
|
3. |
To
approve
the
AmTrust Financial Services, Inc. 2007 Executive Performance
Plan:
|
Voted
For
|
Voted
Against
|
Abstentions
|
50,285,954
|
429,291
|
0
|
4. |
Ratification
of the appointment of BDO Seidman, LLP as Independent
Auditor for the year
ended December 31,
2007:
|
Voted
For
|
Voted
Against
|
Abstentions
|
56,909,947
|
24,375
|
0
|
Exhibit
Number
|
|
Description
|
|
|
|
2.1
|
Agreement
for stock purchase by and among Associated Industries of Florida
Holding
Trust, The Other Stockholders of AIIS, Associated Industries Insurance
Services, Inc., Associated Industries of Florida, Inc. and AmTrust
Financial Services, Inc. dated as of June 25, 2007.
|
|
|
||
2.2
|
Master
Agreement dated July 3, 2007 between AmTrust Financial Services,
Inc. and
Maiden Holdings, Ltd.
|
|
|
|
|
31.1
|
|
Certification
of the Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a),
for the quarter ended June 30, 2007.
|
|
|
|
31.2
|
|
Certification
of the Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a),
for the quarter ended June 30, 2007.
|
|
|
|
32.1
|
|
Certification
of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350,
for
the quarter ended June 30, 2007.
|
|
|
|
32.2
|
|
Certification
of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350,
for
the quarter ended June 30, 2007.
|
AmTrust
Financial Services, Inc.
(Registrant)
|
||
|
|
|
/s/ Barry
D. Zyskind
|
||
Barry
D. Zyskind
President
and Chief Executive Officer
|
Date:
August 14, 2007
|
/s/ Ronald
E. Pipoly, Jr.
|
|
Ronald
E. Pipoly, Jr.
Chief
Financial Officer
|
AMTRUST FINANCIAL SERVICES, INC. | ||
|
|
|
By: | /s/ Stephen Ungar | |
Name:
Stephen Ungar
|
||
Title: Secretary |
MAIDEN HOLDINGS, LTD. | ||
|
|
|
By: | /s/ Bentzion Turin | |
Name:
Bentzion Turin
|
||
Title: Chief Operating Officer |
Dated: August
14, 2007
|
By: |
/s/
Barry Zyskind
|
Barry
Zyskind
|
||
President
and Chief Executive Officer
(Principal
Executive
Officer)
|
Dated: August
14, 2007
|
By: |
/s/
Ronald Pipoly
|
Ronald
Pipoly
|
||
Chief
Financial Officer
(Principal
Financial and Accounting
Officer)
|
|
(a)
|
the
Report fully complies with the requirements of section 13(a) and
15(d) of the Securities Exchange Act of 1934;
and
|
|
(b)
|
the
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
By: |
/s/
Barry Zyskind
|
|
Barry
Zyskind
|
||
President
and Chief Executive Officer
(Principal
Executive
Officer)
|
|
(a)
|
the
Report fully complies with the requirements of section 13(a) and
15(d) of the Securities Exchange Act of 1934;
and
|
|
(b)
|
the
information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the
Company.
|
By: |
/s/
Ronald Pipoly
|
|
Ronald
Pipoly
|
||
Chief
Financial Officer
(Principal
Financial
and Accounting
Officer)
|