x
|
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
For the quarterly period ended June 30, 2011 |
¨
|
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)
|
Large accelerated filer
¨
|
Accelerated filer
x
|
|
Non-accelerated filer
¨
|
Smaller reporting company
¨
|
|
(Do not check if a smaller reporting company)
|
|
Page
|
||
PART I
|
FINANCIAL INFORMATION
|
3
|
Item 1.
|
Unaudited Financial Statements:
|
|
Condensed Consolidated Balance Sheets as of June 30, 2011 and December 31, 2010 (audited)
|
3
|
|
Condensed Consolidated Statements of Income — Three and six months ended June 30, 2011 and 2010
|
4
|
|
Condensed Consolidated Statements of Cash Flows — Three and six months ended June 30, 2011 and 2010
|
5
|
|
Notes to Condensed Consolidated Financial Statements
|
6
|
|
Item 2.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
30
|
Item 3.
|
Quantitative and Qualitative Disclosures About Market Risk
|
52
|
Item 4.
|
Controls and Procedures
|
54
|
PART II
|
OTHER INFORMATION
|
54
|
Item 1.
|
Legal Proceedings
|
54
|
Item 1A.
|
Risk Factors
|
54
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
54
|
Item 3.
|
Defaults Upon Senior Securities
|
54
|
Item 4.
|
(Removed and Reserved)
|
54
|
Item 5.
|
Other Information
|
54
|
Item 6.
|
Exhibits
|
55
|
Signatures
|
56
|
June 30,
2011
|
December 31,
2010
|
|||||||
(Amounts in Thousands)
|
(Unaudited)
|
(Audited)
|
||||||
ASSETS
|
||||||||
Investments:
|
||||||||
Fixed maturities, available-for-sale, at market value (amortized cost $1,191,390; $1,192,844)
|
$
|
1,222,419
|
$
|
1,208,813
|
||||
Equity securities, available-for-sale, at market value (cost $19,204; $18,577)
|
19,367
|
17,412
|
||||||
Short-term investments
|
98,480
|
32,137
|
||||||
Equity investment in unconsolidated subsidiary – related party
|
86,633
|
77,136
|
||||||
Other investments
|
22,008
|
21,514
|
||||||
Total investments
|
1,448,907
|
1,357,012
|
||||||
Cash and cash equivalents
|
256,446
|
201,949
|
||||||
Accrued interest and dividends
|
10,050
|
7,979
|
||||||
Premiums receivable, net
|
877,047
|
727,561
|
||||||
Reinsurance recoverable (related party $426,930; $386,932)
|
1,006,410
|
775,432
|
||||||
Prepaid reinsurance premium (related party $320,720; $283,899)
|
507,999
|
484,960
|
||||||
Prepaid expenses and other assets
|
495,296
|
163,905
|
||||||
Federal income tax receivable
|
2,009
|
10,269
|
||||||
Deferred policy acquisition costs
|
258,557
|
224,671
|
||||||
Property and equipment, net
|
44,779
|
30,889
|
||||||
Goodwill
|
107,731
|
106,220
|
||||||
Intangible assets
|
120,366
|
91,606
|
||||||
|
$
|
5,135,597
|
$
|
4,182,453
|
||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Liabilities:
|
||||||||
Loss and loss expense reserves
|
$
|
1,688,737
|
$
|
1,263,537
|
||||
Unearned premiums
|
1,212,703
|
1,024,965
|
||||||
Ceded reinsurance premiums payable (related party $152,869; $95,629)
|
310,894
|
266,314
|
||||||
Reinsurance payable on paid losses
|
10,855
|
11,343
|
||||||
Funds held under reinsurance treaties
|
55,324
|
3,217
|
||||||
Securities sold but not yet purchased, at market
|
141
|
8,847
|
||||||
Securities sold under agreements to repurchase, at contract value
|
211,867
|
347,617
|
||||||
Accrued expenses and other current liabilities
|
296,406
|
195,060
|
||||||
Deferred income taxes
|
67,428
|
9,883
|
||||||
Note payable on collateral loan – related party
|
167,975
|
167,975
|
||||||
Revolving credit facility
|
98,200
|
—
|
||||||
Secured term loan
|
10,413
|
—
|
||||||
Non-interest bearing note payable – net of unamortized discount of $303; $600
|
7,197
|
14,400
|
||||||
Term loan
|
—
|
6,667
|
||||||
Junior subordinated debt
|
123,714
|
123,714
|
||||||
Total liabilities
|
4,261,854
|
3,443,539
|
||||||
Commitments and contingencies
|
||||||||
Redeemable non-controlling interest
|
600
|
600
|
||||||
Stockholders’ equity:
|
||||||||
Common stock, $.01 par value; 100,000 shares authorized, 84,713 and 84,314 issued in 2011 and 2010, respectively; 59,913 and 59,565 outstanding in 2011 and 2010, respectively
|
847
|
844
|
||||||
Preferred stock, $.01 par value; 10,000 shares authorized
|
—
|
—
|
||||||
Additional paid-in capital
|
554,994
|
548,731
|
||||||
Treasury stock at cost; 24,800 and 24,816 shares in 2011 and 2010, respectively
|
(300,365
|
)
|
(300,489
|
)
|
||||
Accumulated other comprehensive income (loss)
|
16,404
|
(266
|
)
|
|||||
Retained earnings
|
553,478
|
467,694
|
||||||
Total AmTrust Financial Services, Inc. equity
|
825,358
|
716,514
|
||||||
Non-controlling interest
|
47,785
|
21,800
|
||||||
Total stockholders’ equity
|
873,143
|
738,314
|
||||||
|
$
|
5,135,597
|
$
|
4,182,453
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Revenues:
|
||||||||||||||||
Premium income:
|
||||||||||||||||
Net written premium
|
$
|
375,681
|
$
|
196,394
|
$
|
609,700
|
$
|
385,808
|
||||||||
Change in unearned premium
|
(127,399
|
)
|
(133
|
)
|
(161,080
|
)
|
(41,447
|
)
|
||||||||
Net earned premium
|
248,282
|
196,261
|
448,620
|
344,361
|
||||||||||||
Ceding commission – primarily related party
|
35,414
|
32,958
|
71,098
|
65,206
|
||||||||||||
Service and fee income (related parties – three months $4,459; $2,880 and six months $7,898; $5,548)
|
24,542
|
9,121
|
49,731
|
17,087
|
||||||||||||
Net investment income
|
13,167
|
14,686
|
27,359
|
28,285
|
||||||||||||
Net realized gain (loss) on investments
|
616
|
(6,544
|
)
|
1,031
|
(4,759
|
)
|
||||||||||
Total revenues
|
322,021
|
246,482
|
597,839
|
450,180
|
||||||||||||
Expenses:
|
||||||||||||||||
Loss and loss adjustment expense
|
170,008
|
121,510
|
298,704
|
211,331
|
||||||||||||
Acquisition costs and other underwriting expenses
|
89,580
|
79,579
|
170,814
|
140,925
|
||||||||||||
Other
|
18,564
|
9,336
|
38,760
|
15,570
|
||||||||||||
Total expenses
|
278,152
|
210,425
|
508,278
|
367,826
|
||||||||||||
Income before other income (expense), income taxes and equity in earnings of unconsolidated subsidiaries
|
43,869
|
36,057
|
89,561
|
82,354
|
||||||||||||
Other income (expense):
|
||||||||||||||||
Foreign currency gain
|
2,520
|
755
|
2,236
|
38
|
||||||||||||
Interest expense
|
(4,334
|
)
|
(3,063
|
)
|
(8,088
|
)
|
(6,635
|
)
|
||||||||
Net gain on investment in life settlement contracts
|
22,638
|
—
|
41,524
|
—
|
||||||||||||
Total other income (expense)
|
20,824
|
(2,308
|
)
|
35,672
|
(6,597
|
)
|
||||||||||
Income before income taxes and equity in earnings of unconsolidated subsidiaries
|
64,693
|
33,749
|
125,233
|
75,757
|
||||||||||||
Provision for income taxes
|
12,126
|
8,839
|
24,468
|
24,007
|
||||||||||||
Income before equity earnings of unconsolidated subsidiaries and non-controlling interest
|
52,567
|
24,910
|
100,765
|
51,750
|
||||||||||||
Equity in earnings of unconsolidated subsidiaries – related parties
|
4,077
|
5,913
|
7,200
|
17,773
|
||||||||||||
Net income
|
56,644
|
30,823
|
107,965
|
69,523
|
||||||||||||
Net income attributable to non-controlling interest of subsidiaries
|
(6,482
|
)
|
—
|
(12,620
|
)
|
—
|
||||||||||
Net income attributable to AmTrust Financial Services, Inc.
|
50,162
|
30,823
|
95,345
|
69,523
|
||||||||||||
Earnings per common share:
|
||||||||||||||||
Basic earnings per common share
|
$
|
0.84
|
$
|
0.52
|
$
|
1.60
|
$
|
1.17
|
||||||||
Diluted earnings per common share
|
$
|
0.81
|
$
|
0.51
|
$
|
1.55
|
$
|
1.15
|
||||||||
Dividends declared per common share
|
$
|
0.08
|
$
|
0.07
|
$
|
0.16
|
|
$
|
0.14
|
|||||||
Net realized gain (loss) on investments:
|
||||||||||||||||
Total other-than-temporary impairment loss
|
$
|
(345
|
)
|
$
|
(12,007
|
)
|
$
|
(345
|
)
|
$
|
(17,145
|
)
|
||||
Portion of loss recognized in other comprehensive income
|
—
|
—
|
—
|
—
|
||||||||||||
Net impairment losses recognized in earnings
|
(345
|
)
|
(12,007
|
)
|
(345
|
)
|
(17,145
|
)
|
||||||||
Other net realized gain on investments
|
961
|
5,463
|
1,376
|
12,386
|
||||||||||||
Net realized investment gain (loss)
|
$
|
616
|
$
|
(6,544
|
)
|
$
|
1,031
|
$
|
(4,759
|
)
|
Six Months Ended June 30,
|
||||||||
2011
|
2010
|
|||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$
|
107,965
|
$
|
69,523
|
||||
Adjustments to reconcile net income to net cash provided by operating activities:
|
||||||||
Depreciation and amortization
|
31,764
|
7,945
|
||||||
Equity earnings and gain on investment in unconsolidated subsidiaries
|
(7,200
|
)
|
(17,773
|
)
|
||||
Gain on investment in life settlement contracts
|
(41,524
|
)
|
—
|
|||||
Realized gain marketable securities
|
(1,376
|
)
|
(12,386
|
)
|
||||
Non-cash write-down of marketable securities
|
345
|
17,145
|
||||||
Discount on notes payable
|
298
|
450
|
||||||
Stock compensation expense
|
2,827
|
1,860
|
||||||
Bad debt expense
|
4,167
|
3,510
|
||||||
Foreign currency (gain) loss
|
(2,236
|
)
|
(38
|
)
|
||||
Changes in assets - (increase) decrease:
|
||||||||
Premiums and note receivables
|
(130,990
|
)
|
(162,419
|
)
|
||||
Reinsurance recoverable
|
(82,829
|
)
|
(53,216
|
)
|
||||
Deferred policy acquisition costs, net
|
(33,886
|
)
|
(42,340
|
)
|
||||
Prepaid reinsurance premiums
|
(23,039
|
)
|
(35,907
|
)
|
||||
Prepaid expenses and other assets
|
(35,908
|
)
|
(739
|
)
|
||||
Changes in liabilities - increase (decrease):
|
||||||||
Reinsurance premium payable
|
44,580
|
94,480
|
||||||
Loss and loss expense reserve
|
57,179
|
62,671
|
||||||
Unearned premiums
|
165,925
|
88,653
|
||||||
Funds held under reinsurance treaties
|
52,107
|
(70
|
)
|
|||||
Deferred tax liability, net
|
(20,344
|
)
|
(4,170
|
)
|
||||
Accrued expenses and other current liabilities
|
87,070
|
(10,896
|
)
|
|||||
Net cash provided in operating activities
|
174,895
|
6,283
|
||||||
Cash flows from investing activities:
|
||||||||
Net (purchases) sales of securities with fixed maturities and short term investments
|
(72,409
|
)
|
95,734
|
|||||
Net (purchases) sales of equity securities
|
(176
|
) |
4,502
|
|||||
Net (purchases) sales of other investments
|
(451
|
)
|
(577
|
)
|
||||
Investment in ACAC
|
—
|
(53,055
|
)
|
|||||
Acquisition of and capitalized premiums for life settlement contracts
|
(26,504
|
)
|
—
|
|||||
Acquisition of subsidiaries, net of cash obtained
|
30,874
|
(3,553
|
)
|
|||||
Purchase of property and equipment
|
(18,315
|
)
|
(1,677
|
)
|
||||
Net cash (used in) provided by investing activities
|
(86,981
|
)
|
41,374
|
|||||
Cash flows from financing activities:
|
||||||||
Repurchase agreements, net
|
(135,750
|
)
|
65,478
|
|||||
Revolving credit facility borrowings
|
98,200
|
—
|
||||||
Secured loan agreement borrowings
|
10,800
|
—
|
||||||
Secured loan agreement repayment
|
(387
|
)
|
—
|
|||||
Term loan payment
|
(6,667
|
) |
(6,667
|
)
|
||||
Capital contribution to subsidiary
|
12,515
|
—
|
||||||
Stock option exercise and other
|
3,563
|
790
|
||||||
Dividends distributed on common stock
|
(9,551
|
)
|
(7,713
|
)
|
||||
Non-interest bearing note payment
|
(7,500
|
)
|
(7,500
|
)
|
||||
Debt financing fees
|
(1,394
|
)
|
—
|
|||||
Net cash (used in) provided by financing activities
|
(36,171
|
)
|
44,388
|
|
||||
Effect of exchange rate changes on cash
|
2,754
|
(9,446
|
)
|
|||||
Net increase in cash and cash equivalents
|
54,497
|
82,599
|
||||||
Cash and cash equivalents, beginning of the period
|
201,949
|
233,810
|
||||||
Cash and cash equivalents, end of the period
|
$
|
256,446
|
$
|
316,409
|
||||
Supplemental Cash Flow Information
|
||||||||
Income tax payments
|
$
|
6,280
|
$
|
7,258
|
||||
Interest payments on debt
|
6,566
|
8,434
|
1.
|
Basis of Reporting
|
2.
|
Recent Accounting Pronouncements
|
(Amounts in Thousands)
|
Original or
amortized
cost
|
Gross
unrealized
gains
|
Gross
unrealized
losses
|
Market
value
|
||||||||||||
Preferred stock
|
$
|
6,029
|
$
|
357
|
$
|
42
|
$
|
6,344
|
||||||||
Common stock
|
13,175
|
1,456
|
1,608
|
13,023
|
||||||||||||
U.S. treasury securities
|
92,204
|
1,928
|
328
|
93,804
|
||||||||||||
U.S. government agencies
|
18,224
|
1,651
|
—
|
19,875
|
||||||||||||
Municipal bonds
|
84,923
|
1,214
|
821
|
85,316
|
||||||||||||
Corporate bonds:
|
||||||||||||||||
Finance
|
425,108
|
13,295
|
9,500
|
428,903
|
||||||||||||
Industrial
|
50,663
|
2,241
|
56
|
52,848
|
||||||||||||
Utilities
|
39,177
|
2,019
|
126
|
41,070
|
||||||||||||
Commercial mortgage backed securities
|
1,568
|
111
|
—
|
1,679
|
||||||||||||
Residential mortgage backed securities:
|
||||||||||||||||
Agency backed
|
470,641
|
18,658
|
131
|
489,168
|
||||||||||||
Non-agency backed
|
7,868
|
848
|
4
|
8,712
|
||||||||||||
Asset-backed securities
|
1,014
|
30
|
—
|
1,044
|
||||||||||||
|
$
|
1,210,594
|
$
|
43,808
|
$
|
12,616
|
$
|
1,241,786
|
(Amounts in Thousands)
|
Amortized
Cost
|
Fair Value
|
||||||
Due in one year or less
|
$
|
8,544
|
$
|
8,774
|
||||
Due after one through five years
|
172,070
|
172,512
|
||||||
Due after five through ten years
|
403,511
|
413,724
|
||||||
Due after ten years
|
126,174
|
126,806
|
||||||
Mortgage backed securities
|
481,091
|
500,603
|
||||||
Total fixed maturities
|
$
|
1,191,390
|
$
|
1,222,419
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Fixed maturities
|
$
|
12,302
|
$
|
11,666
|
$
|
25,976
|
$
|
23,370
|
||||||||
Equity maturities
|
120
|
32
|
286
|
359
|
||||||||||||
Cash and cash equivalents
|
966
|
1,910
|
1,572
|
2,755
|
||||||||||||
Note receivable – related party
|
—
|
1,204
|
—
|
2,049
|
||||||||||||
13,388
|
14,812
|
27,834
|
28,533
|
|||||||||||||
Less: Investment expenses and interest expense on securities sold under agreements to repurchase
|
221
|
126
|
475
|
248
|
||||||||||||
$
|
13,167
|
$
|
14,686
|
$
|
27,359
|
$
|
28,285
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Equity securities
|
$
|
345
|
$
|
1,467
|
$
|
345
|
$
|
6,605
|
||||||||
Fixed maturities
|
-
|
10,540
|
-
|
10,540
|
||||||||||||
345
|
12,007
|
345
|
17,145
|
Less Than 12 Months
|
12 Months or More
|
Total
|
||||||||||||||||||||||||||||||
(Amounts in Thousands)
|
Fair
Market
Value
|
Unrealized
Losses
|
No. of
Positions
Held
|
Fair
Market
Value
|
Unrealized
Losses
|
No. of
Positions
Held
|
Fair
Market
Value
|
Unrealized
Losses
|
||||||||||||||||||||||||
Common and preferred stock
|
$
|
948
|
$
|
581
|
7
|
$
|
4,665
|
$
|
1,069
|
58
|
$
|
5,613
|
$
|
1,650
|
||||||||||||||||||
U.S. treasury securities
|
51,590
|
328
|
8
|
—
|
—
|
—
|
51,590
|
328
|
||||||||||||||||||||||||
Municipal bonds
|
51,387
|
821
|
15
|
—
|
—
|
—
|
51,387
|
821
|
||||||||||||||||||||||||
Corporate bonds:
|
||||||||||||||||||||||||||||||||
Finance
|
116,309
|
2,768
|
28
|
94,203
|
6,732
|
13
|
210,512
|
9,500
|
||||||||||||||||||||||||
Industrial
|
7,871
|
56
|
4
|
—
|
—
|
—
|
7,871
|
56
|
||||||||||||||||||||||||
Utilities
|
23,401
|
126
|
3
|
—
|
—
|
—
|
23,401
|
126
|
||||||||||||||||||||||||
Commercial Mortgage backed securities
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
—
|
||||||||||||||||||||||||
Residential mortgage backed securities:
|
||||||||||||||||||||||||||||||||
Agency backed
|
112,605
|
131
|
11
|
—
|
—
|
—
|
112,605
|
131
|
||||||||||||||||||||||||
Non-agency backed
|
—
|
—
|
—
|
25
|
4
|
1
|
25
|
4
|
||||||||||||||||||||||||
Total temporarily impaired securities
|
$
|
364,111
|
$
|
4,811
|
76
|
$
|
98,893
|
$
|
7,805
|
72
|
$
|
463,004
|
$
|
12,616
|
(Amounts in Thousands)
|
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Assets:
|
||||||||||||||||
U.S. treasury securities
|
$
|
93,804
|
$
|
93,804
|
$
|
—
|
$
|
—
|
||||||||
U.S. government agencies
|
19,875
|
—
|
19,875
|
—
|
||||||||||||
Municipal bonds
|
85,316
|
—
|
85,316
|
—
|
||||||||||||
Corporate bonds:
|
||||||||||||||||
Finance
|
428,903
|
—
|
428,903
|
—
|
||||||||||||
Industrial
|
52,848
|
—
|
52,848
|
—
|
||||||||||||
Utilities
|
41,070
|
—
|
41,070
|
—
|
||||||||||||
Commercial mortgage backed securities
|
1,679
|
—
|
1,679
|
—
|
||||||||||||
Residential mortgage backed securities:
|
||||||||||||||||
Agency backed
|
489,168
|
—
|
489,168
|
—
|
||||||||||||
Non-agency backed
|
8,712
|
—
|
8,712
|
—
|
||||||||||||
Asset-backed securities
|
1,044
|
—
|
1,044
|
—
|
||||||||||||
Equity securities
|
19,367
|
19,367
|
—
|
—
|
||||||||||||
Short term investments
|
98,480
|
98,480
|
—
|
—
|
||||||||||||
Other investments
|
22,008
|
—
|
—
|
22,008
|
||||||||||||
Life settlement contracts
|
108,710
|
—
|
—
|
108,710
|
||||||||||||
$
|
1,470,984
|
$
|
211,651
|
$
|
1,128,615
|
$
|
130,718
|
|||||||||
Liabilities:
|
||||||||||||||||
Equity securities sold but not yet purchased, market
|
$
|
141
|
$
|
141
|
$
|
—
|
$
|
—
|
||||||||
Securities sold under agreements to repurchase, at contract value
|
211,867
|
—
|
211,867
|
—
|
||||||||||||
Life settlement contract profit commission
|
9,267
|
—
|
—
|
9,267
|
||||||||||||
|
$
|
221,275
|
$
|
141
|
$
|
211,867
|
$
|
9,267
|
(Amounts in
Thousands)
|
Balance as of
March 31,
2011
|
Net income
|
Other
comprehensive
income
|
Purchases
and
issuances
|
Sales and
settlements
|
Net
transfers
into (out of)
Level 3
|
Balance as of
June 30,
2011
|
|||||||||||||||||||||
Other investments
|
$
|
22,512
|
$
|
—
|
$
|
(875
|
)
|
$
|
786
|
$
|
(415
|
)
|
$
|
—
|
$
|
22,008
|
||||||||||||
Life settlement contracts
|
63,686
|
33,842
|
—
|
11,182
|
—
|
—
|
108,710
|
|||||||||||||||||||||
Life settlement contract profit commission
|
(5,589
|
)
|
(3,678
|
)
|
—
|
—
|
—
|
—
|
(9,267
|
)
|
||||||||||||||||||
Total
|
$
|
80,609
|
$
|
30,164
|
$
|
(875
|
)
|
$
|
11,968
|
$
|
(415
|
)
|
$
|
—
|
$
|
121,451
|
(Amounts in
Thousands)
|
Balance as of
December 31,
2010
|
Net income
|
Other
comprehensive
income
|
Purchases
and
issuances
|
Sales and
settlements
|
Net
transfers
into (out of)
Level 3
|
Balance as of
June 30,
2011
|
|||||||||||||||||||||
Other investments
|
$
|
21,514
|
$
|
661
|
$
|
(377
|
)
|
$
|
866
|
$
|
(656
|
)
|
$
|
—
|
$
|
22,008
|
||||||||||||
Life settlement contracts
|
22,155
|
57,962
|
—
|
28,593
|
—
|
—
|
108,710
|
|||||||||||||||||||||
Life settlement contract profit commission
|
(4,711
|
)
|
(4,556
|
)
|
—
|
—
|
—
|
—
|
(9,267
|
)
|
||||||||||||||||||
Total
|
$
|
38,958
|
$
|
54,067
|
$
|
(377
|
)
|
$
|
29,459
|
$
|
(656
|
)
|
$
|
—
|
$
|
121,451
|
(Amounts in
Thousands)
|
Balance as of
March 31,
2010
|
Net income
|
Other
comprehensive
income
|
Purchases
and
issuances
|
Sales and
settlements
|
Net
transfers
into (out of)
Level 3
|
Balance as of
June 30,
2010
|
|||||||||||||||||||||
Other investments
|
$
|
14,019
|
$
|
—
|
$
|
(685
|
)
|
$
|
108
|
$
|
(119
|
)
|
$
|
—
|
$
|
13,323
|
||||||||||||
Derivatives
|
(353
|
)
|
133
|
—
|
—
|
—
|
—
|
(220
|
)
|
|||||||||||||||||||
Total
|
$
|
13,666
|
$
|
133
|
$
|
(685
|
)
|
$
|
108
|
$
|
(119
|
)
|
$
|
—
|
$
|
13,103
|
(Amounts in
Thousands)
|
Balance as of
December 31,
2009
|
Net income
|
Other
comprehensive
income
|
Purchases
and
issuances
|
Sales and
settlements
|
Net
transfers
into (out of)
Level 3
|
Balance as of
June 30,
2010
|
|||||||||||||||||||||
Other investments
|
$
|
12,746
|
$
|
277
|
$
|
296
|
$
|
123
|
$
|
(119
|
)
|
$
|
—
|
$
|
13,323
|
|||||||||||||
Derivatives
|
(1,893
|
)
|
133
|
—
|
—
|
1,540
|
—
|
(220
|
)
|
|||||||||||||||||||
Total
|
$
|
10,853
|
$
|
410
|
$
|
296
|
$
|
123
|
$
|
1,421
|
$
|
—
|
$
|
13,103
|
|
•
|
Equity and Fixed Income Investments:
Fair value disclosures for these investments are disclosed above in this note. The carrying values of cash, short term investments and investment income accrued approximate their fair values;
|
|
•
|
Premiums Receivable:
The carrying values reported in the accompanying balance sheets for these financial instruments approximate their fair values due to the short term nature of the asset;
|
|
•
|
Subordinated Debentures and Debt:
The carrying values reported in the accompanying balance sheets for these financial instruments approximate fair value. Fair value was estimated using projected cash flows, discounted at rates currently being offered for similar notes.
|
Aggregate
|
|||||||||||||||||
Liquidation
|
Aggregate
|
Per
|
|||||||||||||||
Amount of
|
Liquidation
|
Aggregate
|
Annum
|
||||||||||||||
(Amounts in Thousands)
|
Trust
|
Amount of
|
Principal
|
Stated
|
Interest
|
||||||||||||
Preferred
|
Common
|
Amount
|
Maturity
|
Rate of
|
|||||||||||||
Name of Trust
|
Securities
|
Securities
|
of Notes
|
of Notes
|
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 in 2015.
|
|
(2)
|
The interest rate will change to LIBOR plus 3.30% after the fifth anniversary in 2011.
|
|
(3)
|
The interest rate will change to LIBOR plus 3.00% after the fifth anniversary in 2012.
|
(Amounts in Thousands)
|
2011
|
2012
|
2013
|
2014
|
2015
|
Thereafter
|
||||||||||||||||||
Junior subordinated debt
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
—
|
$
|
123,714
|
||||||||||||
Revolving credit facility
|
—
|
—
|
—
|
98,200
|
—
|
—
|
||||||||||||||||||
Secured loan
|
395
|
977
|
1,021
|
1,068
|
1,116
|
5,836
|
||||||||||||||||||
Promissory note
|
—
|
7,197
|
—
|
—
|
—
|
—
|
||||||||||||||||||
Total
|
$
|
395
|
$
|
8,174
|
$
|
1,021
|
$
|
99,268
|
$
|
1,116
|
$
|
129,550
|
6.
|
Acquisition Costs and Other Underwriting Expenses
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Policy acquisition expenses
|
$
|
56,499
|
$
|
50,122
|
$
|
103,316
|
$
|
75,413
|
||||||||
Salaries and benefits
|
31,969
|
23,062
|
59,891
|
48,415
|
||||||||||||
Other insurance general and administrative expenses
|
1,112
|
6,395
|
7,607
|
17,097
|
||||||||||||
$
|
89,580
|
$
|
79,579
|
$
|
170,814
|
$
|
140,925
|
7.
|
Earnings Per Share
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Amounts in Thousands except per share)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Basic earnings per share:
|
||||||||||||||||
Net income attributable to AmTrust Financial Services, Inc. shareholders
|
$
|
50,162
|
$
|
30,823
|
$
|
95,345
|
$
|
69,523
|
||||||||
Less: Net income allocated to participating securities and redeemable non-controlling interest
|
39
|
26
|
64
|
32
|
||||||||||||
Net income allocated to AmTrust Financial Services, Inc. common shareholders
|
$
|
50,123
|
$
|
30,797
|
$
|
95,281
|
$
|
69,491
|
||||||||
Weighted average common shares outstanding – basic
|
59,880
|
59,486
|
59,766
|
59,412
|
||||||||||||
Less: Weighted average participating shares outstanding
|
36
|
50
|
42
|
27
|
||||||||||||
Weighted average common shares outstanding - basic
|
59,844
|
59,436
|
59,724
|
59,385
|
||||||||||||
Net income per AmTrust Financial Services, Inc. common share - basic
|
$
|
0.84
|
$
|
0.52
|
$
|
1.60
|
$
|
1.17
|
||||||||
Diluted earnings per share:
|
||||||||||||||||
Net income attributable to AmTrust Financial Services, Inc. shareholders
|
$
|
50,162
|
$
|
30,823
|
$
|
95,345
|
$
|
69,523
|
||||||||
Less: Net income allocated to participating securities and redeemable non-controlling interest
|
39
|
26
|
64
|
32
|
||||||||||||
Net income allocated to AmTrust Financial Services, Inc. common shareholders
|
$
|
50,123
|
$
|
30,797
|
$
|
95,281
|
$
|
69,491
|
||||||||
Weighted average common shares outstanding – basic
|
59,844
|
59,436
|
59,724
|
59,385
|
||||||||||||
Plus: Dilutive effect of stock options, other
|
1,778
|
920
|
1,670
|
887
|
||||||||||||
Weighted average common shares outstanding – dilutive
|
61,622
|
60,356
|
61,394
|
60,272
|
||||||||||||
Net income per AmTrust Financial Services, Inc. common shares – diluted
|
$
|
0.81
|
$
|
0.51
|
$
|
1.55
|
$
|
1.15
|
8.
|
Share Based Compensation
|
2011
|
2010
|
|||||||||||||||
(Amounts in Thousands Except per Share)
|
Shares
|
Weighted
Average
Exercise Price
|
Shares
|
Weighted
Average
Exercise Price
|
||||||||||||
Outstanding at beginning of period
|
4,127
|
$
|
10.46
|
4,168
|
$
|
10.12
|
||||||||||
Granted
|
175
|
14.98
|
141
|
13.35
|
||||||||||||
Exercised
|
(333
|
)
|
9.40
|
(101
|
)
|
7.50
|
||||||||||
Cancelled or terminated
|
(65
|
)
|
16.48
|
(32
|
)
|
12.08
|
||||||||||
Outstanding end of period
|
3,904
|
$
|
10.68
|
4,176
|
$
|
10.24
|
9.
|
Comprehensive Income and Shareholder Equity
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Net income attributable to AmTrust
|
$
|
50,162
|
$
|
30,823
|
$
|
95,345
|
$
|
69,523
|
||||||||
Unrealized holding gain (loss)
|
7,128
|
(4,253
|
)
|
10,400
|
3,744
|
|||||||||||
Reclassification adjustment
|
498
|
6,252
|
1,751
|
10,407
|
||||||||||||
Foreign currency translation
|
679
|
(3,300
|
)
|
4,519
|
(8,847
|
)
|
||||||||||
Comprehensive income
|
$
|
58,467
|
$
|
29,522
|
$
|
112,015
|
$
|
74,827
|
(Amounts in thousands)
|
AmTrust
|
Non-Controlling
Interests
|
Total
|
|||||||||
Beginning Balance, January 1, 2011
|
$ | 716,514 | $ | 21,800 | $ | 738,314 | ||||||
Net income
|
95,345 | 12,620 | 107,965 | |||||||||
Unrealized holding gains and reclassification
|
12,151 | — | 12,151 | |||||||||
Foreign currency translation
|
4,519 | — | 4,519 | |||||||||
Comprehensive income
|
112,015 | 12,620 | 124,635 | |||||||||
Capital contribution
|
— | 13,365 | 13,365 | |||||||||
Dividends
|
(9,561 | ) | — | (9,561 | ) | |||||||
Share exercises and compensation, other
|
6,390 | — | 6,390 | |||||||||
Ending Balance, June 30, 2011
|
$ | 825,358 | $ | 47,785 | $ | 873,143 |
10.
|
Income Taxes
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Income before provision for income taxes, equity in earnings of unconsolidated subsidiaries
|
$
|
64,693
|
$
|
33,749
|
$
|
125,233
|
$
|
75,757
|
||||||||
Equity in earnings of unconsolidated subsidiaries
|
4,077
|
5,913
|
7,200
|
17,773
|
||||||||||||
Non-controlling interest
|
(6,482
|
)
|
—
|
(12,620
|
)
|
—
|
||||||||||
$
|
62,288
|
$
|
39,662
|
$
|
119,813
|
$
|
93,530
|
|||||||||
Income taxes at statutory rates
|
$
|
21,801
|
$
|
13,882
|
$
|
41,934
|
$
|
32,736
|
||||||||
Effect of income not subject to U.S. taxation
|
(9,693
|
)
|
(5,724
|
)
|
(17,336
|
)
|
(8,969
|
)
|
||||||||
Other, net
|
18
|
681
|
(130
|
)
|
240
|
|||||||||||
Provision for income taxes as shown on the Condensed Consolidated Statements of Income
|
$
|
12,126
|
$
|
8,839
|
$
|
24,468
|
$
|
24,007
|
||||||||
GAAP effective tax rate
|
19.5
|
%
|
22.3
|
%
|
20.4
|
%
|
25.7
|
%
|
11.
|
Related Party Transactions
|
(Amounts in Thousands)
|
June 30,
2011
|
December 31,
2010
|
||||||
Assets and liabilities:
|
||||||||
Reinsurance recoverable
|
$
|
426,930
|
$
|
386,932
|
||||
Prepaid reinsurance premium
|
320,720
|
283,899
|
||||||
Ceded reinsurance premiums payable
|
(152,869
|
)
|
(95,629
|
)
|
||||
Note payable
|
(167,975
|
)
|
(167,975
|
)
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Results of operations:
|
|
|||||||||||||||
Premium written – ceded
|
$
|
(213,919
|
)
|
$
|
(112,465
|
)
|
$
|
(340,641
|
)
|
$
|
(226,557
|
)
|
||||
Change in unearned premium – ceded
|
77,227
|
6,166
|
90,013
|
17,855
|
||||||||||||
Earned premium - ceded
|
$
|
(136,692
|
)
|
$
|
(106,299
|
)
|
$
|
(250,628
|
)
|
$
|
(208,702
|
)
|
||||
Ceding commission on premium written
|
$
|
44,160
|
$
|
36,124
|
$
|
83,885
|
$
|
71,104
|
||||||||
Ceding commission – deferred
|
(9,796
|
)
|
(2,925
|
)
|
(13,712
|
)
|
(5,898
|
)
|
||||||||
Ceding commission – earned
|
$
|
34,364
|
$
|
33,199
|
$
|
70,173
|
$
|
65,206
|
||||||||
Incurred loss and loss adjustment expense – ceded
|
$
|
98,957
|
$
|
64,274
|
$
|
181,064
|
$
|
135,446
|
||||||||
Interest expense on collateral loan
|
472
|
25
|
958
|
507
|
12.
|
Acquisitions
|
13.
|
Investment in Life Settlements
|
(Amounts in thousands, except Life Settlement Contracts)
Remaining life expectancy as of June 30, 2011
|
Number of Life
Settlement
Contracts
|
Fair Value
|
Face Value
|
|||||||||
0-1
|
—
|
$
|
—
|
$
|
—
|
|||||||
1-2
|
—
|
—
|
—
|
|||||||||
2-3
|
—
|
—
|
—
|
|||||||||
3-4
|
1
|
6,355
|
10,000
|
|||||||||
4-5
|
3
|
8,848
|
20,000
|
|||||||||
Thereafter
|
190
|
93,507
|
1,245,933
|
|||||||||
Total
|
194
|
$
|
108,710
|
$
|
1,275,933
|
(Amounts in thousands)
|
Premiums Due on
Life Settlement
Contracts
|
Premiums
Due
on Premium
Finance
Loans
|
Total
|
|||||||||
2011
|
$
|
17,322
|
$
|
2,706
|
$
|
20,028
|
||||||
2012
|
20,907
|
4,149
|
25,056
|
|||||||||
2013
|
22,647
|
4,311
|
26,958
|
|||||||||
2014
|
23,534
|
4,680
|
28,214
|
|||||||||
2015
|
24,949
|
5,030
|
29,979
|
|||||||||
Thereafter
|
497,466
|
170,114
|
667,580
|
|||||||||
Total
|
$
|
606,825
|
$
|
190,990
|
$
|
797,815
|
14.
|
Contingent Liabilities
|
15.
|
Segments
|
(Amounts in Thousands)
|
Small
Commercial
Business
|
Specialty Risk
and Extended
Warranty
|
Specialty
Program
|
Personal
Lines
Reinsurance
|
Corporate
and Other
|
Total
|
||||||||||||||||||
Three months ended June 30, 2011:
|
||||||||||||||||||||||||
Gross written premium
|
$
|
174,607
|
$
|
265,502
|
$
|
93,354
|
$
|
24,999
|
$
|
—
|
$
|
558,462
|
||||||||||||
Net written premium
|
113,221
|
185,178
|
52,283
|
24,999
|
—
|
375,681
|
||||||||||||||||||
Change in unearned premium
|
(39,187
|
)
|
(75,547
|
)
|
(12,145
|
)
|
(520
|
)
|
—
|
(127,399
|
)
|
|||||||||||||
Net earned premium
|
74,034
|
109,631
|
40,138
|
24,479
|
—
|
248,282
|
||||||||||||||||||
Ceding commission - primarily related party
|
13,570
|
13,787
|
8,057
|
—
|
—
|
35,414
|
||||||||||||||||||
Loss and loss adjustment expense
|
(49,927
|
)
|
(76,053
|
)
|
(28,362
|
)
|
(15,666
|
)
|
—
|
(170,008
|
)
|
|||||||||||||
Acquisition costs and other underwriting expenses
|
(31,653
|
)
|
(31,658
|
)
|
(18,314
|
)
|
(7,955
|
)
|
(89,580
|
)
|
||||||||||||||
(81,580
|
)
|
(107,711
|
)
|
(46,676
|
)
|
(23,621
|
)
|
—
|
(259,588
|
)
|
||||||||||||||
Underwriting income
|
6,024
|
15,707
|
1,519
|
858
|
—
|
24,108
|
||||||||||||||||||
Service and fee income
|
5,177
|
14,904
|
1
|
—
|
4,460
|
24,542
|
||||||||||||||||||
Investment income and realized gain (loss)
|
7,059
|
4,491
|
1,902
|
331
|
—
|
13,783
|
||||||||||||||||||
Other expenses
|
(4,713
|
)
|
(10,488
|
)
|
(2,732
|
)
|
(631
|
)
|
—
|
(18,564
|
)
|
|||||||||||||
Interest expense
|
(1,150
|
)
|
(2,394
|
)
|
(625
|
)
|
(165
|
)
|
—
|
(4,334
|
)
|
|||||||||||||
Foreign currency gain
|
—
|
2,520
|
—
|
—
|
—
|
2,520
|
||||||||||||||||||
Gain on life settlement contracts
|
6,045
|
12,464
|
3,259
|
870
|
—
|
22,638
|
||||||||||||||||||
Provision for income taxes
|
(3,452
|
)
|
(6,990
|
)
|
(605
|
)
|
(237
|
)
|
(842
|
)
|
(12,126
|
)
|
||||||||||||
Equity in earnings of unconsolidated subsidiaries – related party
|
—
|
—
|
—
|
—
|
4,077
|
4,077
|
||||||||||||||||||
Non-controlling interest
|
(1,693
|
)
|
(3,610
|
)
|
(942
|
)
|
(237
|
)
|
—
|
(6,482
|
)
|
|||||||||||||
Net income attributable to AmTrust Financial Services, Inc.
|
$
|
13,297
|
$
|
26,604
|
$
|
1,777
|
$
|
789
|
$
|
7,695
|
$
|
50,162
|
(Amounts in Thousands)
|
Small
Commercial
Business
|
Specialty Risk
and Extended
Warranty
|
Specialty
Program
|
Personal
Lines
Reinsurance
|
Corporate
and Other
|
Total
|
||||||||||||||||||
Three months ended June 30, 2010:
|
||||||||||||||||||||||||
Gross written premium
|
$
|
107,600
|
$
|
197,470
|
$
|
77,712
|
$
|
25,860
|
$
|
—
|
$
|
408,642
|
||||||||||||
Net written premium
|
56,052
|
74,216
|
40,266
|
25,860
|
—
|
196,394
|
||||||||||||||||||
Change in unearned premium
|
9,208
|
12,371
|
(5,205
|
)
|
(16,507
|
)
|
—
|
(133
|
)
|
|||||||||||||||
Net earned premium
|
65,260
|
86,587
|
35,061
|
9,353
|
—
|
196,261
|
||||||||||||||||||
Ceding commission - primarily related party
|
12,954
|
12,927
|
7,077
|
—
|
—
|
32,958
|
||||||||||||||||||
Loss and loss adjustment expense
|
(39,347
|
)
|
(54,064
|
)
|
(22,253
|
)
|
(5,846
|
)
|
—
|
(121,510
|
)
|
|||||||||||||
Acquisition costs and other underwriting expenses
|
(30,541
|
)
|
(29,338
|
)
|
(16,660
|
)
|
(3,040
|
)
|
—
|
(79,579
|
)
|
|||||||||||||
(69,888
|
)
|
(83,402
|
)
|
(38,913
|
)
|
(8,886
|
)
|
—
|
(201,089
|
)
|
||||||||||||||
Underwriting income
|
8,326
|
16,112
|
3,225
|
467
|
—
|
28,130
|
||||||||||||||||||
Service and fee income
|
2,978
|
3,261
|
—
|
—
|
2,882
|
9,121
|
||||||||||||||||||
Investment income and realized gain (loss)
|
3,096
|
2,584
|
1,873
|
589
|
—
|
8,142
|
||||||||||||||||||
Other expenses
|
(2,933
|
)
|
(3,736
|
)
|
(1,967
|
)
|
(700
|
)
|
—
|
(9,336
|
)
|
|||||||||||||
Interest expense
|
(928
|
)
|
(1,174
|
)
|
(689
|
)
|
(272
|
)
|
—
|
(3,063
|
)
|
|||||||||||||
Foreign currency gain
|
—
|
755
|
—
|
—
|
—
|
755
|
||||||||||||||||||
Provision for income taxes
|
(2,737
|
)
|
(4,692
|
)
|
(627
|
)
|
(23
|
)
|
(760
|
)
|
(8,839
|
)
|
||||||||||||
Equity in earnings of unconsolidated subsidiaries – related party
|
—
|
—
|
—
|
—
|
5,913
|
5,913
|
||||||||||||||||||
Net income attributable to AmTrust Financial Services, Inc.
|
$
|
7,802
|
$
|
13,110
|
$
|
1,815
|
$
|
61
|
$
|
8,035
|
$
|
30,823
|
(Amounts in Thousands)
|
Small
Commercial
Business
|
Specialty Risk
and Extended
Warranty
|
Specialty
Program
|
Personal
Lines
Reinsurance
|
Corporate
and Other
|
Total
|
||||||||||||||||||
Six months ended June 30, 2011:
|
||||||||||||||||||||||||
Gross written premium
|
$
|
315,323
|
$
|
493,250
|
$
|
143,330
|
$
|
50,586
|
$
|
—
|
$
|
1,002,489
|
||||||||||||
Net written premium
|
190,872
|
289,725
|
78,517
|
50,586
|
—
|
609,700
|
||||||||||||||||||
Change in unearned premium
|
(54,977
|
)
|
(95,517
|
)
|
(7,609
|
)
|
(2,977
|
)
|
—
|
(161,080
|
)
|
|||||||||||||
Net earned premium
|
135,895
|
194,208
|
70,908
|
47,609
|
—
|
448,620
|
||||||||||||||||||
Ceding commission - primarily related party
|
31,895
|
26,686
|
12,517
|
—
|
—
|
71,098
|
||||||||||||||||||
Loss and loss adjustment expense
|
(86,690
|
)
|
(133,477
|
)
|
(48,067
|
)
|
(30,470
|
)
|
—
|
(298,704
|
)
|
|||||||||||||
Acquisition costs and other underwriting expenses
|
(66,409
|
)
|
(58,306
|
)
|
(30,626
|
)
|
(15,473
|
)
|
—
|
(170,814
|
)
|
|||||||||||||
(153,099
|
)
|
(191,783
|
)
|
(78,693
|
)
|
(45,943
|
)
|
—
|
(469,518
|
)
|
||||||||||||||
Underwriting income
|
14,691
|
29,111
|
4,732
|
1,666
|
—
|
50,200
|
||||||||||||||||||
Service and fee income
|
10,418
|
31,410
|
5
|
—
|
7,898
|
49,731
|
||||||||||||||||||
Investment income and realized gain (loss)
|
12,809
|
10,006
|
4,505
|
1,070
|
—
|
28,390
|
||||||||||||||||||
Other expenses
|
(12,025
|
)
|
(19,509
|
)
|
(5,163
|
)
|
(2,063
|
)
|
—
|
(38,760
|
)
|
|||||||||||||
Interest expense
|
(2,509
|
)
|
(4,071
|
)
|
(1,077
|
)
|
(431
|
)
|
—
|
(8,088
|
)
|
|||||||||||||
Foreign currency gain
|
—
|
2,236
|
—
|
—
|
—
|
2,236
|
||||||||||||||||||
Gain on life settlement contracts
|
12,882
|
20,900
|
5,532
|
2,210
|
—
|
41,524
|
||||||||||||||||||
Provision for income taxes
|
(7,086
|
)
|
(13,693
|
)
|
(1,667
|
)
|
(479
|
)
|
(1.543
|
)
|
(24,468
|
)
|
||||||||||||
Equity in earnings of unconsolidated investment – related party
|
—
|
—
|
—
|
—
|
7,200
|
7,200
|
||||||||||||||||||
Non-controlling interest
|
(3,915
|
)
|
(6,352
|
)
|
(1,681
|
)
|
(672
|
)
|
—
|
(12,620
|
)
|
|||||||||||||
Net income
|
$
|
25,265
|
$
|
50,038
|
$
|
5,186
|
$
|
1,301
|
$
|
13,555
|
$
|
95,345
|
(Amounts in Thousands)
|
Small
Commercial
Business
|
Specialty Risk
and Extended
Warranty
|
Specialty
Program
|
Personal
Lines
Reinsurance
|
Corporate
and Other
|
Total
|
||||||||||||||||||
Six months ended June 30, 2010:
|
||||||||||||||||||||||||
Gross written premium
|
$
|
230,302
|
$
|
349,644
|
$
|
132,367
|
$
|
34,560
|
$
|
—
|
$
|
746,873
|
||||||||||||
Net written premium
|
117,490
|
160,265
|
73,493
|
34,560
|
—
|
385,808
|
||||||||||||||||||
Change in unearned premium
|
7,374
|
(21,914
|
)
|
(1,700
|
)
|
(25,207
|
)
|
—
|
(41,447
|
)
|
||||||||||||||
Net earned premium
|
124,864
|
138,351
|
71,793
|
9,353
|
—
|
344,361
|
||||||||||||||||||
Ceding commission - primarily related party
|
34,180
|
20,830
|
10,196
|
—
|
—
|
65,206
|
||||||||||||||||||
Loss and loss adjustment expense
|
(74,435
|
)
|
(85,224
|
)
|
(45,826
|
)
|
(5,846
|
)
|
—
|
(211,331
|
)
|
|||||||||||||
Acquisition costs and other underwriting expenses
|
(64,722
|
)
|
(44,049
|
)
|
(29,114
|
)
|
(3,040
|
)
|
—
|
(140,925
|
)
|
|||||||||||||
(139,157
|
)
|
(129,273
|
)
|
(74,940
|
)
|
(8,886
|
)
|
—
|
(352,256
|
)
|
||||||||||||||
Underwriting income
|
19,887
|
29,908
|
7,049
|
467
|
—
|
57,311
|
||||||||||||||||||
Service and fee income
|
5,552
|
5,987
|
—
|
—
|
5,548
|
17,087
|
||||||||||||||||||
Investment income and realized gain (loss)
|
9,752
|
7,867
|
5,102
|
805
|
—
|
23,526
|
||||||||||||||||||
Other expenses
|
(5,125
|
)
|
(6,583
|
)
|
(2,983
|
)
|
(879
|
)
|
—
|
(15,570
|
)
|
|||||||||||||
Interest expense
|
(2,185
|
)
|
(2,805
|
)
|
(1,271
|
)
|
(374
|
)
|
—
|
(6,635
|
)
|
|||||||||||||
Foreign currency gain
|
—
|
38
|
—
|
—
|
—
|
38
|
||||||||||||||||||
Provision for income taxes
|
(8,835
|
)
|
(10,905
|
)
|
(2,503
|
)
|
(6
|
)
|
(1,758
|
)
|
(24,007
|
)
|
||||||||||||
Equity in earnings of unconsolidated investment – related party
|
—
|
—
|
—
|
—
|
17,773
|
17,773
|
||||||||||||||||||
Net income
|
$
|
19,046
|
$
|
23,507
|
$
|
5,394
|
$
|
13
|
$
|
21,563
|
$
|
69,523
|
(Amounts in Thousands)
|
Small
Commercial
Business
|
Specialty Risk
and Extended
Warranty
|
Specialty
Program
|
Personal
Lines
Reinsurance
|
Corporate
and
other
|
Total
|
||||||||||||||||||
As of June 30, 2011:
|
||||||||||||||||||||||||
Fixed assets
|
$
|
13,892
|
$
|
22,538
|
$
|
5,965
|
$
|
2,384
|
$
|
—
|
$
|
44,779
|
||||||||||||
Goodwill and intangible assets
|
85,833
|
127,441
|
14,823
|
—
|
—
|
228,097
|
||||||||||||||||||
Total assets
|
2,061,692
|
2,205,550
|
716,114
|
152,241
|
—
|
5,135,597
|
||||||||||||||||||
As of December 31, 2010:
|
||||||||||||||||||||||||
Fixed assets
|
$
|
9,839
|
$
|
13,386
|
$
|
5,694
|
$
|
1,970
|
$
|
—
|
$
|
30,889
|
||||||||||||
Goodwill and intangible assets
|
87,001
|
95,737
|
15,088
|
—
|
—
|
197,826
|
||||||||||||||||||
Total assets
|
1,581,946
|
1,716,980
|
741,835
|
141,692
|
—
|
4,182,453
|
|
·
|
Small Commercial Business. We provide workers’ compensation, commercial package and other commercial insurance lines produced by wholesale agents, retail agents and brokers in the United States.
|
|
·
|
Specialty Risk and Extended Warranty. We provide 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 States, United Kingdom and Europe, and certain property, casualty and specialty liability risks in the United States and Europe, including general liability, employers’ liability and professional and medical liability.
|
|
·
|
Specialty Program. 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.
|
|
·
|
Personal Lines Reinsurance. We reinsure 10% of the net premiums of the GMAC personal lines business, pursuant to a quota share reinsurance agreement (“Personal Lines Quota Share”) with the GMAC personal lines insurance companies.
|
Company
|
A.M.
Best Rated
|
Coverage Type Offered
|
Coverage
Market
|
Domiciled
|
||||
Technology Insurance Company, Inc. (“TIC”)
|
A (Excellent)
|
Small commercial, middle market property & casualty, specialty risk & extended warranty and reinsurance for GMAC
|
United States
|
New Hampshire
|
||||
Rochdale Insurance
Company (“RIC”)
|
A (Excellent)
|
Small commercial, middle market property & casualty and specialty risk & extended warranty
|
United States
|
New York
|
||||
Wesco Insurance Company (“WIC”)
|
A (Excellent)
|
Small commercial, middle market property & casualty and specialty risk & extended warranty
|
United States
|
Delaware
|
||||
Associated Industries Insurance Company, Inc. (“AIIC”)
|
A (Excellent)
|
Workers’ compensation
|
United States
|
Florida
|
||||
Milwaukee Casualty Insurance Company (“MCIC”)
|
A (Excellent)
|
Small Commercial Business
|
United States
|
Wisconsin
|
||||
Security National Insurance Company (“SNIC”)
|
A (Excellent)
|
Small Commercial Business
|
United States
|
Texas
|
||||
AmTrust Insurance Company of Kansas, Inc. (“AICK”)
|
A (Excellent)
|
Small Commercial Business
|
United States
|
Kansas
|
||||
AmTrust Lloyd’s Insurance Company (“ALIC”)
|
A (Excellent)
|
Small Commercial Business
|
United States
|
Texas
|
||||
AmTrust International Underwriters Limited (“AIU”)
|
A (Excellent)
|
Specialty Risk and Extended Warranty
|
European
Union
|
Ireland
|
||||
AmTrust Europe, Ltd. (“AEL”)
|
A (Excellent)
|
Specialty Risk and Extended Warranty
|
European
Union
|
England
|
||||
AmTrust International Insurance Ltd. (“AII”)
|
A (Excellent)
|
Reinsurance for consolidated subsidiaries
|
United States
and European
Union
|
Bermuda
|
|
•
|
Product warranty registration and service — Our Specialty Risk and Extended Warranty business generates fee revenue for product warranty registration and claims handling services provided to unaffiliated third parties.
|
|
•
|
Servicing carrier — We act as a servicing carrier for the Alabama, Arkansas, Illinois, Indiana, Georgia and Kansas workers’ compensation assigned risk plans. In addition, we also offer claims adjusting and loss control services for fees to unaffiliated third parties.
|
|
•
|
Management services — We provide services to insurance consumers, traditional insurers and insurance producers by offering flexible and cost effective alternatives to traditional insurance tools in the form of various risk retention groups and captive management companies, as well as management of workers’ compensation and commercial property programs.
|
|
•
|
Installment and reinstatement fees — We recognize fee income associated with the issuance of workers’ compensation policies for installment fees, in jurisdictions where it is permitted and approved, and reinstatement fees, which are fees charged to reinstate a policy after it has been cancelled for non-payment, in jurisdictions where it is permitted and approved.
|
|
•
|
Broker services — We provide brokerage services to Maiden in connection with our reinsurance agreements for which we receive a fee.
|
|
•
|
Asset management services — We currently manage the investment portfolios of Maiden and ACAC for which we receive a management fee.
|
|
•
|
Information technology services — We provide information technology services to ACAC and its affiliates for a fee.
|
|
•
|
Policy acquisition expenses comprise commissions directly attributable to those agents, wholesalers or brokers that produce premiums written on our behalf. In most instances, we pay commissions based on collected premium, which reduces our credit risk exposure associated with producers in case a policyholder does not pay a premium. We pay state and local taxes, licenses and fees, assessments and contributions to various state guaranty funds based on our premiums or losses in each state. Surcharges that we may be required to charge and collect from insureds in certain jurisdictions are recorded as accrued liabilities, rather than expense.
|
|
•
|
Salaries and benefits expenses are those salaries and benefits expenses for employees that are directly involved in the origination, issuance and maintenance of policies, claims adjustment and accounting for insurance transactions. We classify salaries and benefits associated with employees that are involved in fee generating activities as other expenses.
|
|
•
|
General and administrative expenses are comprised of other costs associated with our insurance activities, such as federal excise tax, postage, telephones and internet access charges, as well as legal and auditing fees and board and bureau charges.
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Gross written premium
|
$ | 558,462 | $ | 408,642 | $ | 1,002,489 | $ | 746,873 | ||||||||
Net written premium
|
$ | 375,681 | $ | 196,394 | $ | 609,700 | $ | 385,808 | ||||||||
Change in unearned premium
|
(127,399 | ) | (133 | ) | (161,080 | ) | (41,447 | ) | ||||||||
Net earned premium
|
248,282 | 196,261 | 448,620 | 344,361 | ||||||||||||
Ceding commission – primarily related party
|
35,414 | 32,958 | 71,098 | 65,206 | ||||||||||||
Service and fee income (related parties – three months $4,459; $2,880 and six months $7,898; $5,548)
|
24,542 | 9,121 | 49,731 | 17,087 | ||||||||||||
Net investment income
|
13,167 | 14,686 | 27,359 | 28,285 | ||||||||||||
Net realized gain (loss) on investments
|
616 | (6,544 | ) | 1,031 | (4,759 | ) | ||||||||||
Total revenues
|
322,021 | 246,482 | 597,839 | 450,180 | ||||||||||||
Loss and loss adjustment expense
|
170,008 | 121,510 | 298,704 | 211,331 | ||||||||||||
Acquisition costs and other underwriting expenses
|
89,580 | 79,579 | 170,814 | 140,925 | ||||||||||||
Other
|
18,564 | 9,336 | 38,760 | 15,570 | ||||||||||||
Total expenses
|
278,152 | 210,425 | 508,278 | 367,826 | ||||||||||||
Income before other income (expense), income taxes and equity in earnings of unconsolidated subsidiaries
|
43,869 | 36,057 | 89,561 | 82,354 | ||||||||||||
Other income (expense):
|
||||||||||||||||
Foreign currency gain
|
2,520 | 755 | 2,236 | 38 | ||||||||||||
Interest expense
|
(4,334 | ) | (3,063 | ) | (8,088 | ) | (6,635 | ) | ||||||||
Gain on acquisition of life settlement contracts
|
22,638 | — | 41,524 | — | ||||||||||||
Total other income (expense)
|
20,824 | (2,308 | ) | 35,672 | (6,597 | ) | ||||||||||
Income before income taxes and equity in earnings of unconsolidated subsidiaries
|
64,693 | 33,749 | 125,233 | 75,757 | ||||||||||||
Provision for income taxes
|
12,126 | 8,839 | 24,468 | 24,007 | ||||||||||||
Income before equity earnings of unconsolidated subsidiaries and non-controlling interest
|
52,567 | 24,910 | 100,765 | 51,750 | ||||||||||||
Equity in earnings of unconsolidated subsidiaries – related parties
|
4,077 | 5,913 | 7,200 | 17,773 | ||||||||||||
Net income
|
56,644 | 30,823 | 107,965 | 69,523 | ||||||||||||
Non-controlling interest
|
(6,482 | ) | — | (12,620 | ) | — | ||||||||||
Net income attributable to AmTrust Financial Services, Inc.
|
$ | 50,162 | $ | 30,823 | $ | 95,345 | $ | 69,523 | ||||||||
Key measures:
|
||||||||||||||||
Net loss ratio
|
68.5 | % | 61.9 | % | 66.6 | % | 61.4 | % | ||||||||
Net expense ratio
|
21.8 | % | 23.8 | % | 22.2 | % | 22.0 | % | ||||||||
Net combined ratio
|
90.3 | % | 85.7 | % | 88.8 | % | 83.4 | % | ||||||||
Net realized loss on investments:
|
||||||||||||||||
Total other-than-temporary impairment loss
|
$ | (345 | ) | $ | (12,007 | ) | $ | (345 | ) | $ | (17,145 | ) | ||||
Portion of loss recognized in other comprehensive income
|
— | — | — | — | ||||||||||||
Net impairment losses recognized in earnings
|
(345 | ) | (12,007 | ) | (345 | ) | (17,145 | ) | ||||||||
Other net realized gain on investments
|
961 | 5,463 | 1,376 | 12,386 | ||||||||||||
Net realized investment gain (loss)
|
$ | 616 | $ | (6,544 | ) | $ | 1,031 | $ | (4,759 | ) |
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Gross written premium
|
$ | 174,607 | $ | 107,600 | $ | 315,323 | $ | 230,302 | ||||||||
Net written premium
|
113,221 | 56,052 | 190,872 | 117,490 | ||||||||||||
Change in unearned premium
|
(39,187 | ) | 9,208 | (54,977 | ) | 7,374 | ||||||||||
Net earned premium
|
74,034 | 65,260 | 135,895 | 124,864 | ||||||||||||
Ceding commission – primarily related party
|
13,570 | 12,954 | 31,895 | 34,180 | ||||||||||||
Loss and loss adjustment expense
|
49,927 | 39,347 | 86,690 | 74,435 | ||||||||||||
Acquisition costs and other underwriting expenses
|
31,653 | 30,541 | 66,409 | 64,722 | ||||||||||||
Total expenses
|
81,580 | 69,888 | 153,099 | 139,157 | ||||||||||||
Underwriting income
|
$ | 6,024 | $ | 8,326 | $ | 14,691 | $ | 19,887 | ||||||||
Key measures:
|
||||||||||||||||
Net loss ratio
|
67.4 | % | 60.3 | % | 63.8 | % | 59.6 | % | ||||||||
Net expense ratio
|
24.4 | % | 26.9 | % | 25.4 | % | 24.5 | % | ||||||||
Net combined ratio
|
91.9 | % | 87.2 | % | 89.2 | % | 84.1 | % | ||||||||
Reconciliation of net expense ratio:
|
||||||||||||||||
Acquisition costs and other underwriting expenses
|
$ | 31,653 | $ | 30,541 | $ | 66,409 | $ | 64,722 | ||||||||
Less: ceding commission revenue – primarily related party
|
13,570 | 12,954 | 31,895 | 34,180 | ||||||||||||
18,083 | 17,587 | 34,514 | 30,542 | |||||||||||||
Net earned premium
|
$ | 74,034 | $ | 65,260 | $ | 135,895 | $ | 124,864 | ||||||||
Net expense ratio
|
24.4 | % | 26.9 | % | 25.4 | % | 24.5 | % |
Three Months Ended June
30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Gross written premium
|
$
|
265,502
|
$
|
197,470
|
$
|
493,250
|
$
|
349,644
|
||||||||
Net written premium
|
185,178
|
74,216
|
289,725
|
160,265
|
||||||||||||
Change in unearned premium
|
(75,547
|
)
|
12,371
|
(95,517
|
)
|
(21,914
|
)
|
|||||||||
Net earned premium
|
109,631
|
86,587
|
194,208
|
138,351
|
||||||||||||
Ceding commission – primarily related party
|
13,787
|
12,927
|
26,686
|
20,830
|
||||||||||||
Loss and loss adjustment expense
|
76,053
|
54,064
|
133,477
|
85,224
|
||||||||||||
Acquisition costs and other underwriting expenses
|
31,658
|
29,338
|
58,306
|
44,049
|
||||||||||||
Total expenses
|
107,711
|
83,402
|
191,783
|
129,273
|
||||||||||||
Underwriting income
|
$
|
15,707
|
$
|
16,112
|
$
|
29,111
|
$
|
29,908
|
||||||||
Key measures:
|
||||||||||||||||
Net loss ratio
|
69.4
|
%
|
62.4
|
%
|
68.7
|
%
|
61.6
|
%
|
||||||||
Net expense ratio
|
16.3
|
%
|
19.0
|
%
|
16.3
|
%
|
16.8
|
%
|
||||||||
Net combined ratio
|
85.7
|
%
|
81.4
|
%
|
85.0
|
%
|
78.4
|
%
|
||||||||
Reconciliation of net expense ratio:
|
||||||||||||||||
Acquisition costs and other underwriting expenses
|
$
|
31,658
|
$
|
29,338
|
$
|
58,306
|
$
|
44,049
|
||||||||
Less: ceding commission revenue – primarily related party
|
13,787
|
12,927
|
26,686
|
20,830
|
||||||||||||
17,871
|
16,411
|
31,620
|
23,219
|
|||||||||||||
Net earned premium
|
$
|
109,631
|
$
|
86,587
|
$
|
194,208
|
$
|
138,351
|
||||||||
Net expense ratio
|
16.3
|
%
|
19.0
|
%
|
16.3
|
%
|
16.8
|
%
|
Three Months Ended June
30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Gross written premium
|
$
|
93,354
|
$
|
77,712
|
$
|
143,330
|
$
|
132,367
|
||||||||
Net written premium
|
52,283
|
40,266
|
78,517
|
73,493
|
||||||||||||
Change in unearned premium
|
(12,145
|
)
|
(5,205
|
)
|
(7,609
|
)
|
(1,700
|
)
|
||||||||
Net earned premium
|
40,138
|
35,061
|
70,908
|
71,793
|
||||||||||||
Ceding commission – primarily related party
|
8,057
|
7,077
|
12,517
|
10,196
|
||||||||||||
Loss and loss adjustment expense
|
28,362
|
22,253
|
48,067
|
45,826
|
||||||||||||
Acquisition costs and other underwriting expenses
|
18,314
|
16,660
|
30,626
|
29,114
|
||||||||||||
Total expenses
|
46,676
|
38,913
|
78,693
|
74,940
|
||||||||||||
Underwriting income
|
$
|
1,519
|
$
|
3,225
|
$
|
4,732
|
$
|
7,049
|
||||||||
Key measures:
|
||||||||||||||||
Net loss ratio
|
70.7
|
%
|
63.5
|
%
|
67.8
|
%
|
63.8
|
%
|
||||||||
Net expense ratio
|
25.6
|
%
|
27.3
|
%
|
25.5
|
%
|
26.4
|
%
|
||||||||
Net combined ratio
|
96.2
|
%
|
90.8
|
%
|
93.3
|
%
|
90.2
|
%
|
||||||||
Reconciliation of net expense ratio:
|
||||||||||||||||
Acquisition costs and other underwriting expenses
|
$
|
18,314
|
$
|
16,660
|
$
|
30,626
|
$
|
29,114
|
||||||||
Less: ceding commission revenue – primarily related party
|
8,057
|
7,077
|
12,517
|
10,196
|
||||||||||||
10,257
|
9,583
|
18,109
|
18,918
|
|||||||||||||
Net earned premium
|
$
|
40,138
|
$
|
35,061
|
$
|
70,908
|
$
|
71,793
|
||||||||
Net expense ratio
|
25.6
|
%
|
27.3
|
%
|
25.5
|
%
|
26.4
|
%
|
Three Months Ended June 30,
|
Six Months Ended June 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Gross written premium
|
$
|
24,999
|
$
|
25,860
|
$
|
50,586
|
$
|
34,560
|
||||||||
Net written premium
|
24,999
|
25,860
|
50,586
|
34,560
|
||||||||||||
Change in unearned premium
|
(520
|
)
|
(16,507
|
)
|
(2,977
|
)
|
(25,207
|
)
|
||||||||
Net earned premium
|
24,479
|
9,353
|
47,609
|
9,353
|
||||||||||||
Loss and loss adjustment expense
|
15,666
|
5,846
|
30,470
|
5,846
|
||||||||||||
Acquisition costs and other underwriting expenses
|
7,955
|
3,040
|
15,473
|
3,040
|
||||||||||||
Total expenses
|
23,621
|
8,886
|
45,943
|
8,886
|
||||||||||||
Underwriting income
|
$
|
858
|
$
|
467
|
$
|
1,666
|
$
|
467
|
||||||||
Key measures:
|
||||||||||||||||
Net loss ratio
|
64.0
|
%
|
62.5
|
%
|
64.0
|
%
|
62.5
|
%
|
||||||||
Net expense ratio
|
32.5
|
%
|
32.5
|
%
|
32.5
|
%
|
32.5
|
%
|
||||||||
Net combined ratio
|
96.5
|
%
|
95.0
|
%
|
96.5
|
%
|
95.0
|
%
|
Six Months Ended June 30,
|
||||||||
(Amounts in Thousands)
|
2011
|
2010
|
||||||
Cash and cash equivalents provided by (used in):
|
||||||||
Operating activities
|
$
|
174,895
|
$
|
6,283
|
||||
Investing activities
|
(86,981
|
)
|
41,374
|
|||||
Financing activities
|
(36,171
|
)
|
44,388
|
|
June 30,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
|
(Amounts in Thousands)
|
|||||||
Selected Assets:
|
|
|
||||||
Prepaid expenses and other assets
|
$
|
495,296
|
$
|
163,905
|
||||
Intangible assets
|
120,366
|
91,606
|
||||||
Selected Liabilities:
|
|
|||||||
Accrued expenses and other current liabilities
|
$
|
296,406
|
$
|
195,060
|
||||
Deferred income taxes
|
67,428
|
9,883
|
June 30, 2011
|
December 31, 2010
|
|||||||||||||||
(Amounts in Thousands)
|
Carrying
Value
|
Percentage of
Portfolio
|
Carrying
Value
|
Percentage of
Portfolio
|
||||||||||||
Cash and cash equivalents
|
$
|
256,446
|
16.1
|
%
|
$
|
201,949
|
13.8
|
%
|
||||||||
Time and short-term deposits
|
98,480
|
6.2
|
32,137
|
2.2
|
||||||||||||
U.S. treasury securities
|
93,804
|
5.9
|
82,447
|
5.6
|
||||||||||||
U.S. government agencies
|
19,875
|
1.2
|
7,162
|
0.5
|
||||||||||||
Municipals
|
85,316
|
5.3
|
66,676
|
4.6
|
||||||||||||
Commercial mortgage back securities
|
1,679
|
0.1
|
2,076
|
0.1
|
||||||||||||
Residential mortgage backed securities:
|
||||||||||||||||
Agency backed
|
489,168
|
30.6
|
546,098
|
37.4
|
||||||||||||
Non-agency backed
|
8,712
|
0.5
|
8,591
|
0.6
|
||||||||||||
Asset backed securities
|
1,044
|
0.1
|
2,687
|
0.2
|
||||||||||||
Corporate bonds
|
522,821
|
32.8
|
493,076
|
33.8
|
||||||||||||
Preferred stocks
|
6,344
|
0.4
|
7,037
|
0.5
|
||||||||||||
Common stocks
|
13,023
|
0.8
|
10,375
|
0.7
|
||||||||||||
$
|
1,596,712
|
100.0
|
%
|
$
|
1,460,311
|
100.0
|
%
|
|
•
|
the current fair value compared to amortized cost;
|
|
•
|
the length of time the security’s fair value has been below its amortized cost;
|
|
•
|
specific credit issues related to the issuer such as changes in credit rating, reduction or elimination of dividends or non-payment of scheduled interest payments;
|
|
•
|
whether management intends to sell the security and, if not, whether it is not more than likely than not that the Company will be required to sell the security before recovery of its amortized cost basis;
|
|
•
|
the financial condition and near-term prospects of the issuer of the security, including any specific events that may affect its operations or earnings;
|
|
•
|
the occurrence of a discrete credit event resulting in the issuer defaulting on material outstanding obligations or the issuer seeking protection under bankruptcy laws; and
|
|
•
|
other items, including company management, media exposure, sponsors, marketing and advertising agreements, debt restructurings, regulatory changes, acquisitions and dispositions, pending litigation, distribution agreements and general industry trends.
|
(Amounts in thousands)
|
2011
|
2010
|
||||||
Equity securities
|
$
|
345
|
$
|
6,605
|
||||
Fixed maturity securities
|
—
|
10,540
|
||||||
$
|
345
|
$
|
17,145
|
Hypothetical Change in Interest Rates
|
Fair Value
|
Estimated
Change in
Fair Value
|
Hypothetical Percentage
Increase (Decrease) in
Shareholders’ Equity
|
|||||||||
(Amounts in Thousands)
|
||||||||||||
200 basis point increase
|
$
|
1,098,079
|
$
|
(124,340
|
)
|
(9.8)
|
%
|
|||||
100 basis point increase
|
1,154,743
|
(67,676
|
)
|
(5.3)
|
||||||||
No change
|
1,222,419
|
—
|
—
|
|||||||||
100 basis point decrease
|
1,239,541
|
17,122
|
1.3
|
|||||||||
200 basis point decrease
|
1,325,901
|
103,482
|
8.1
|
Hypothetical Change in Interest Rates
|
Fair Value
|
Estimated
Change in
Fair Value
|
Hypothetical
Percentage
Increase
(
Decrease) in
Shareholders’
Equity
|
|||||||||
(Amounts in Thousands)
|
||||||||||||
5% increase
|
$
|
20,335
|
$
|
968
|
0.1
|
%
|
||||||
No change
|
19,367
|
—
|
—
|
|||||||||
5 % decrease
|
18,399
|
(968
|
)
|
(0.1
|
)
|
Exhibit
Number
|
Description
|
|
10.1
|
Waiver and Amendment No. 1 to Credit Agreement, dated June 30, 2011, among the Company, JPMorgan Chase Bank, N.A., as Administrative Agent, and the lending institutions party thereto (incorporated by reference to Exhibit 10.1 to the Company’s Current Report on Form 8-K (No. 001-33143) filed on July 5, 2011).
|
|
10.2
|
Endorsement No. 1 to the Amended and Restated Quota Share Reinsurance Agreement, dated July 26, 2011, between AmTrust International Insurance, Ltd. and Maiden Insurance Company Ltd.
|
|
10.3
|
Quota Share Reinsurance Agreement, dated April 1, 2011, among AmTrust Europe Ltd., AmTrust International Underwriters Limited, and Maiden Insurance Company Ltd., as amended by Endorsement No.1 to the Quota Share Reinsurance Agreement, dated July 26, 2011, among AmTrust Europe Ltd., AmTrust International Underwriters Limited, and Maiden Insurance Company 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, 2011.
|
|
31.2
|
Certification of the Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a), for the quarter ended June 30, 2011.
|
|
32.1
|
Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, for the quarter ended June 30, 2011.
|
32.2
|
Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, for the quarter ended June 30, 2011.
|
|
101.1
|
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended June 30, 2011, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Income; (iii) the Consolidated Statements of Cash Flows; and (iv) the Notes to Unaudited Condensed Consolidated Financial Statements, tagged as blocks of text (submitted electronically herewith).
|
|
In accordance with Rule 406T of Regulation S-T, the XBRL related information in Exhibit 101.1 to this Quarterly Report on Form 10-Q shall not be deemed to be “filed” for purposes of Section 18 of the Exchange Act, or otherwise subject to the liability of that section, and shall not be part of any registration statement or other document filed under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.
|
AmTrust Financial Services, Inc.
|
||
(Registrant)
|
||
Date: August 4, 2011
|
/s/ Barry D. Zyskind
|
|
Barry D. Zyskind
President and Chief Executive Officer
|
||
/s/ Ronald E. Pipoly, Jr.
|
||
Ronald E. Pipoly, Jr.
Chief Financial Officer
|
“A.
|
This Agreement shall remain in effect until July 1, 2014, and shall automatically renew for successive three-year periods thereafter, unless the Reinsurer or Company elects to terminate this Agreement effective as of July 1, 2014 or as of the expiration of any successive three-year period. If the Reinsurer or Company elects to so terminate this Agreement, it shall give written notice to the other party hereto not less than nine months prior to either July 1, 2014 or the expiration of any successive three-year period.”
|
“A.
|
The Reinsurer will timely fund or provide security for its share of the Obligations (as defined below) by:
|
|
1.
|
transferring to the Company assets (the "Reinsurer Trust Assets") for deposit into one or more trust accounts established or to be established by Company for the sole benefit of such Affiliate (each, a “Trust Account”) with a trustee (the “Trustee”), which Trustee shall be at the time a Trust Account is established, and shall continue to be, a member of the Federal Reserve System and shall not be a parent, subsidiary or affiliate of the Reinsurer, Company or such Affiliate, pursuant to a trust agreement meeting the applicable requirements of the jurisdictions having regulatory authority over each applicable Affiliate (each a “Trust Agreement”);
|
|
2.
|
delivering one or more clean, unconditional and irrevocable letters of credit to such Affiliate (each, a "Letter of Credit") in form and substance satisfying the requirements of the jurisdictions having regulatory authority over such Affiliate; and/or
|
|
3.
|
requesting that the Company cause such Affiliate to withhold Subject Premium in lieu of remitting Affiliate Subject Premium to the Company (the "Subject Withheld Funds", together with any other Affiliate Subject Premium that shall be withheld under an Underlying Reinsurance Agreement, the “Withheld Funds”) in accordance with the terms of the Underlying Reinsurance Agreement with such Affiliate.
|
“C.
|
The Reinsurer shall allow the Company a commission on all Subject Premium ceded hereunder and attributable to Covered Business determined in accordance with the provisions of Schedule B to this Agreement. The Company shall allow the Reinsurer return commission on return premiums at the rate in effect when the return premiums were originally ceded to the Reinsurer. It is expressly agreed that the ceding commission allowed the Company includes provision for all commissions, taxes, assessments (other than assessments based on losses of an Affiliate, as a ceding company under an Underlying Reinsurance Agreement) and all other expenses of whatever nature of the Company and Affiliates, except loss adjustment expenses.”
|
A.
|
The Reinsurer shall allow the Company a provisional 31% commission on all Subject Premium ceded hereunder and attributable to Covered Business (excluding UBI related business as described in Paragraph C. below), which shall be subject to the following adjustment:
|
|
1.
|
Greater than or equal to 42% of the total ceded premium for Covered Business for those three quarters, the commission for the subject quarter shall be reduced from 31% to 30%;
|
|
2.
|
Greater than or equal to 38% of the total ceded premium for Covered Business for those three quarters but less than 42%, the commission for the subject quarter shall be reduced from 31% to 30.5%.
|
B.
|
The Company shall include its calculation of the percentage of ceded premium for Covered Business attributable to Specialty Risk and Extended Warranty business with its quarterly report to the Reinsurer in accordance with Article VII of the Agreement.
|
C.
|
The Reinsurer shall allow the Company a 34.375% commission on Subject Premium related to Retail Commercial Package Business.”
|
AMTRUST INTERNATIONAL INSURANCE, LTD.
|
|
By:
|
/s/ Michael Bott
|
Dated:
|
July 26, 2011
|
MAIDEN INSURANCE COMPANY LTD.
|
|
By:
|
/s/ David A. Lamneck
|
Dated:
|
July 26, 2011
|
Quota Share Reinsurance Contract
|
Reinsured
|
AmTrust Europe Limited, Nottingham, England and/or AmTrust International Underwriters Limited, Eire.
|
|
Principal Address
|
Market Square House
St. James’s Street
Nottingham
NG1 6FG
United Kingdom
|
|
Preamble
|
Whereas the Reinsured underwrite certain business and are desirous of reinsuring a proportion of such business, being all policies and/or contracts. Now therefore it is agreed that this Contract shall indemnify the Reinsured, subject to the following terms and conditions.
The titles allocated to the clauses listed under Conditions are intended solely for the convenience of reference and will not affect the meaning, interpretation, construction or effect of this Contract.
|
|
Type
|
Quota Share Treaty.
|
|
Class and Period of Business
|
This Contract shall cover all policies classified by the Reinsured as Medical Malpractice, including associated liability coverages and policies covering physician defense costs, written or renewed by the Reinsured on or after 2nd April 2011.
This Contract will also cover all such policies written or renewed by the Reinsured on or before 1
st
April 2011 at the sole option of the Reinsured (the “Inforce Option”), such option to be exercised by June 30, 2011.
This Contract shall remain in effect continuously thereafter unless the Reinsurer or Reinsured elects to terminate this Contract effective as of April 1, 2012 or any April 2 thereafter. If the Reinsurer or Reinsured elects to so terminate this Contract, it shall give written notice to the other party hereto not less than four months prior to the termination date. Termination shall be on a run-off basis, with runoff to include the full original term of multi-year policies. In the alternative, the Reinsured in its sole option may elect to cut off the Reinsurer’s liabilities and return the associated unearned premium, with such cut-off to occur either as of the date of termination or as of the first anniversary date of each multi-year policy that falls on or after the termination date.
|
|
Treaty Detail
|
The Reinsured shall cede and the Reinsurer shall accept by way of reinsurance a Quota Share Percentage of the business stated in ‘Class and Period of Business’.
The percentage Quota Share Cession to the Reinsurer shall be Forty per cent (40%). Cessions to AmTrust International Insurance Ltd. shall be deemed retained by the Reinsured.
The maximum limit of liability attaching hereunder shall be:
|
EUR 5,000,000 (Five Million Euros) or currency equivalent (on a 100% (One Hundred Percent) basis) per original claim any one original policy.
The Reinsured may submit risks that are not otherwise subject to this Contract, including but not limited to risks with limits greater than EUD 5,000,000, to the Reinsurer for Special Acceptance (“Acceptance”). Such risks, if accepted by the Reinsurer in its sole judgment, will be subject to the terms of this Contract except to the extent that such terms are modified in the Acceptance. For any such risks, the Reinsurer shall confirm its Acceptance in writing, along with any modification of the Contract terms for such Acceptance. The Reinsurer’s written confirmation of the Acceptance will become part of the Contract.
It is agreed that the liability of the Reinsurer on all business ceded hereunder shall commence and cease simultaneously with that of the original Policies and shall follow the original terms, clauses, conditions and settlements of the said Policies,
subject to the terms and conditions of this Contract.
|
||
Original Net Premium
|
In respect of the risks ceded hereunder the Reinsured shall pay to the Reinsurer their proportion of the Original Net Premiums.
Original Net Premium shall mean the gross premium written by the Reinsured on business protected hereunder during the period of this Contract less taxes, cancellations, returned premiums and original commissions.
|
|
Territorial Scope
|
The territorial scope of this Contract shall be as provided in the risks ceded hereunder for insureds located in Italy.
|
|
Commission
|
The Reinsurer shall allow the Reinsured a Fixed Commission of 3.5% (Three and one half Percent) on Original Net Premium ceded hereunder.
The Reinsurer shall further allow the Reinsured a Profit Share on Original Net Premiums ceded hereunder, being in addition to the 3.5% Fixed Commission.
The Profit Share will apply separately to each twelve month period this Contract remains in effect (“Contract Year”) and will be adjusted quarterly, the first adjustment to be made 1
st
April 2013. Reinsured’s Profit Share is 50% of the amount by which Incurred Net Loss Ratio is below 65% of the Original Net Premium. For purposes of calculating profit share, multi-year policies shall be split into individual years so that the maximum original policy period in a Contract Year shall be 12 months plus odd time not exceeding 18 months in all. In the event that the Reinsured exercises its Inforce Option as described above, the premium and losses reinsured under that option will be combined with the first Contract Year for the calculation of the Profit Share. The first Contract Year will be- April 2, 2011 through March 31, 2012, both days inclusive, and subsequent Contract Years will begin April 1 of each year).
“Incurred Net Loss Ratio” shall be defined as net paid and outstanding Losses (inclusive of IBNR as established by the Reinsured after consultation with the Reinsurer), being paid and outstanding Losses (“Losses” being further defined under the Loss Settlement Clause) less third party recoveries, divided by Original Net Premium (as defined above) for risks attaching during the Contract Year, as a percentage.
|
|
Brokerage
|
1.25% on Original Net Premium ceded.
|
Accounts
|
Accounts of the transactions between the Reinsured and the Reinsurer hereunder both in respect of premiums and Losses and all items relative to these risks, separately for each Contract Year, shall be rendered by the Reinsured to the Reinsurer quaterly and received by the Reinsuer within 30 (Thirty) days after the end of each quarter. After receipt of the account by the Reinsurer the balance due hereon shall be paid within 30 (Thirty) days thereafter.
The Reinsured shall provide a full individual claim listing quarterly for each of the risks ceded hereunder.
|
|
Cash Loss Limit
|
Should any claim payment hereunder in respect of any loss to this Contract exceed EUR 50,000 (Fifty thousand Euros) (for 100%) or currency equivalent then the Reinsured may request special payment by the Reinsurer of the relative amount of such Cash Claim on submission in writing of full loss details. Amounts falling to the share of the Reinsurer will be due immediately (and in any event within 30 days).
|
|
Reinsurer Contract Documentation
|
This document details the contract terms entered into by the Reinsurer and constitutes the contract document.
With the exception of Contract Endorsements, which may become necessary to formalise any amendments or alterations to this Contract, no further evidence of cover will be issued.
|
|
Security
|
The Reinsurer will post security equal to 100% of the ceded unearned premium and outstanding Losses including IBNR/ calculated by the Reinsured at 75% confidence factor immediately upon being asked to do so and adjusted quarterly. Security shall only be required if the Reinsurer’s Bests rating is reduced to lower than A minus stable or if the Reinsurer’s surplus is less than $600,000,000.
|
|
Conditions
|
Reinsurance Clause
It is agreed that the liability of the Reinsurer on all business ceded hereunder shall commence and cease simultaneously with that of the original policies and shall follow the original terms of the said policies, subject to the terms of this Contract.
|
|
Offset Clause
The Reinsured and the Reinsurer, each at its option, may offset any balance or balances, whether on account of premiums, claims and losses, loss expenses or salvages due from one party to the other under this Contract.
|
||
Loss Settlement Clause
“Losses” as defined herein include all loss settlements made or to be made by the Reinsured, provided the same are within the terms of the original policies, - including loss adjustment costs and expenses allocable to a specific claim incurred by the Reinsured in the investigation, appraisal, adjustment, settlement, litigation, defence or appeal of a specific claim. Losses shall be unconditionally binding upon the Reinsurer and amounts falling to the share of the Reinsurer shall be payable by them upon reasonable evidence of the amount paid being given by the Reinsured.
|
||
Currency Conversion Clause
For the purpose of this Contract currencies other than the currency in which this Contract is written shall be converted into that currency at the rates of exchange used in the Reinsured’s books or where there is a specific remittance for a loss settlement at the rates of exchange used in making such remittance.
|
Inspection Clause
For as long as either party remains under any liability hereunder the Reinsured shall, upon request by the Reinsurer, make available at the Reinsured’s head office or wherever the same may be located, for inspection at any reasonable time by such representatives as may be authorised by the Reinsurer for that purpose, all non-privileged information (meaning information which would not breach an applicable privilege by being shared) relating to business reinsured hereunder in the Reinsured’s possession or under its control and the said representatives may arrange for copies to be made at the Reinsurer’s expense of any of the records containing such information as they may require.
If required by the Reinsured, the Reinsurer agrees to enter into a confidentiality agreement prior to undertaking any inspection of records. This would provide that all terms and conditions of this Contract and any information provided in the course of inspection shall be kept confidential by the Reinsurer as against third parties, unless the disclosure is in line with those scenarios detailed in the “Confidentiality” Clause.
|
||
Confidentiality Clause
The Reinsurer shall regard the transactions under this Contract as strictly confidential and shall not at any time, during its currency or thereafter, make any use, either directly or indirectly, of the information afforded of the business and connections of the Reinsured which shall or may in any way operate to the prejudice or detriment of the latter.
The restrictions as outlined in the Clause shall not apply to communication or disclosures that the Reinsurer is required to make to its statutory auditors, retrocessionaires, associates, legal counsel, arbitrators involved in any arbitration procedures under this Contract or disclosures required upon subpoena or other duly issued order of a court of other governmental agency or regulatory authority.
|
||
Follow the Fortunes
A. Any business ceded hereunder is subject to the terms and conditions of the Reinsured’s Original Policy or Policies and automatically follows all changes in coverage and all endorsements made a part of such policy or policies. Should any regulatory or other legal restriction of any state require modification of any subject policy to which this Contract applies, the liability of the Reinsurer will follow that of the Reinsured.
B. Nothing herein will in any manner create any obligations or establish any rights against the Reinsurer in favour of any third parties or any persons not parties to this Contract except as provided in the Insolvency Clause.
|
||
Errors and Omissions Clause
Any inadvertent error or omission on the part of either the Reinsured or the Reinsurer shall not relieve either party from any liability which would have attached hereunder, provided that such error or omission is rectified immediately upon discovery.
|
Special Termination Clause
The Reinsurer may terminate this Contract in the event of any of the following (clauses 1 through 5 below, collectively, the “Reinsured Special Termination Events”) by written notice to the Reinsured no later than thirty (30) days (or in the case of a Reinsured Special Termination Event described in subsection (1) below, ten (10) days) following actual knowledge of the applicable Reinsured Special Termination Event by the Reinsurer:
1) the Reinsured is thirty (30) or more days in arrears on payment due to the Reinsurer under this Contract, and has not cured such breach within thirty (30) days following written notice thereof from the Reinsurer (unless the amount not so paid is the subject of a good faith dispute) (a “Reinsured Payment Default”);
2) the Reinsured has ceased writing new or renewal business and has elected to run off its existing business or an insurance or other regulatory authority has ordered such party to cease writing new or renewal business;
3) the Reinsured has become insolvent, or has been placed into liquidation or receivership (whether voluntary or involuntary), or there have been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, or trustee in bankruptcy or other agent known by whatever name, to take possession of its assets or control of its operations
4) a Reinsured Change of Control has occurred. For purposes of this Agreement, a “Reinsured Change of Control” will be deemed to occur with respect to the Reinsured when either (a) an individual person, corporation or other entity, or a group of commonly controlled persons, corporations or entities, acquires, including through merger, directly or indirectly, more than fifty percent (50%) of the voting securities of the Reinsured or obtains the power to vote (directly or through proxies) more than fifty percent (50%) of the voting securities of the Reinsured, except if such individual person, corporation or other entity is under common control with such Reinsured, or (b) AmTrust Financial Services, Inc. (“AmTrust”) no longer directly or indirectly controls the power to vote more than fifty percent (50%) of the voting securities of the Reinsured;
provided
that in no event shall the acquisition, including through merger, of more than fifty percent (50%) of the voting securities of AmTrust or of the power to vote (directly or through proxies) more than fifty percent (50%) of the voting securities of AmTrust, or the merger, combination or amalgamation of AmTrust into any person, or similar transaction pursuant to which AmTrust shall not be the surviving entity, be deemed a " Reinsured Change of Control"; or
5) the combined shareholders' equity of the Reinsured and the Affiliates is reduced to 50% or less of the amount of such shareholders’ equity at either the inception of this Contract or at the latest renewal or anniversary date of this Contract.
Termination as a result of a Reinsured Payment Default shall be effective upon not less than ten (10) days prior written notice from the Reinsurer to the Reinsured, and termination as a result of any other Reinsured Special Termination Event shall be effective upon not less than thirty (30) days prior written notice from the Reinsurer to the Reinsured. For greater certainty, the Reinsurer may not terminate this Contract as a result of a Reinsured Special Termination Event unless such event is continuing on the date it delivers its notice of termination to the Reinsured.
The Reinsured may terminate this Contract, in the event of any of the following (clauses 1 through 6 below, collectively, the “Reinsurer Special Termination Events”) by written notice to the Reinsurer no later than thirty (30) days (or in the case of a Reinsurer Special Termination Event described in subsection (1) below, ten (10) days) following actual knowledge of the applicable Reinsurer Special Termination Event by the Reinsured:
|
1) the Reinsurer is thirty (30) or more days in arrears on payment due to the Reinsured under this Contract and the Reinsurer has not cured such breach within thirty (30) days following written notice thereof from the Reinsured (unless the amount not so paid is the subject of a good faith dispute) (a “Reinsurer Payment Default”);
2) the Reinsurer has ceased writing new or renewal business and has elected to run off its existing business or an insurance or other regulatory authority has ordered the party to cease writing new or renewal business;
3) the Reinsurer has become insolvent, or has been placed into liquidation or receivership (whether voluntary or involuntary), or there have been instituted against it proceedings for the appointment of a receiver, liquidator, rehabilitator, conservator, or trustee in bankruptcy or other agent known by whatever name, to take possession of its assets or control of its operations;
4) a Reinsurer Change of Control has occurred. For purposes of this Agreement, a “Reinsurer Change of Control” will be deemed to occur when either (a) an individual person, corporation or other entity, or a group of commonly controlled persons, corporations or entities, acquires, including through merger, directly or indirectly, more than fifty percent (50%) of the voting securities of the Reinsurer or obtains the power to vote (directly or through proxies) more than fifty percent (50%) of the voting securities of the Reinsurer, except if such individual person, corporation or other entity is under common control with the Reinsurer or (b) Maiden Holdings, Ltd. no longer directly or indirectly controls the power to vote more than fifty percent (50%) of the voting securities of the Reinsurer;
5) the Reinsurer's shareholders' equity is reduced to 50% or less of the amount of its shareholders’ equity at either the inception of this Contract or at the latest renewal or anniversary date of this Contract; or
6)
T
he Reinsurer fails to maintain an A.M. Best rating of A- (Stable) or better.
Termination as a result of a Reinsurer Payment Default shall be effective upon not less than ten (10) days prior written notice from the Reinsured to the Reinsurer, and termination as a result of any other Reinsurer Special Termination Event shall be effective upon not less than thirty (30) days prior written notice from the Reinsured to the Reinsurer. For greater certainty, the Reinsured may not terminate this Contract as a result of a Reinsurer Special Termination Event unless such event is continuing on the date the applicable Reinsured delivers its notice of termination to the Reinsurer.
Following the effective date of the termination of this Contract as described in this termination clause all reinsurance hereunder shall remain in force until the expiration date, anniversary date, or prior termination date of all Policies included therein, unless, not later than thirty (30) days following such effective date of termination of this Contract, the Reinsured shall elect that the Reinsurer shall not be liable for any Losses that occur, accrue or arise on or after the effective date of termination. If the Reinsured shall make such election, within thirty (30) days following the date of such election, the Reinsurer shall return to the Reinsured the unearned premium applicable to such Policies in force at the time and date of termination, less the unearned portion of the ceding commission paid thereon.
|
Intermediary Clause
All communications and notices served in accordance with any of the provisions of this Contract shall be addressed to the party concerned through the offices of AII Reinsurance Broker Ltd., Hamilton, Bermuda who are hereby recognised by all parties as the Intermediary.
|
||
Amendments Clause
It is understood and agreed that any mutually agreed modifications to this Contract (whether by Addendum/Endorsement or other written correspondence) shall be binding on both parties and shall be deemed to form a part of this Contract, and attached hereto.
|
||
Arbitration
|
All disputes and differences arising under or in connection with this Contract shall be referred to arbitration under ARIAS Arbitration Rules.
The Arbitration Tribunal shall consist of three arbitrators, one to be appointed by the Claimant, one to be appointed by the Respondent and the third to be appointed by the two appointed arbitrators.
The third member of the Tribunal shall be appointed as soon as practicable (and no later than 28 days) after the appointment of the two party-appointed arbitrators. The Tribunal shall be constituted upon the appointment of the third arbitrator.
The Arbitrators shall be persons (including those who have retired) with not less than ten years’ experience of insurance or reinsurance within the industry or as lawyers or other professional advisers serving the industry.
Where a party fails to appoint an arbitrator within 14 days of being called upon to do so or where the two party-appointed arbitrators fail to appoint a third within 28 days of their appointment, then upon application ARIAS (UK) will appoint an arbitrator to fill the vacancy. At any time prior to the appointment by ARIAS (UK) the party or arbitrators in default may make such appointment.
The Tribunal may in its sole discretion make such orders and directions as it considers to be necessary for the final determination of the matters in dispute. The Tribunal shall have the widest discretion permitted under the law governing the arbitral procedure when making such orders or directions.
The seat of arbitration shall be London, England.
The proper law of this Contract shall be the law of England.
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Non-Waiver
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The failure of the Reinsured or the Reinsurer to insist on compliance with this Contract or to exercise any right or remedy hereunder shall not constitute a waiver of any rights or remedy contained herein nor estop either party from thereafter demanding full and complete compliance nor prevent either party from exercising such rights or remedy in the future.
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No Third Party Rights
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Nothing in this Contract, express or implied, is intended to or shall confer upon any person, other than the parties hereto, any rights, benefits or remedies of any nature whatsoever under or by reason of this Contract.
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Right to Associate
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The Reinsurer shall have the right, but not the obligation, to associate at its own expense in the defense or settlement of all claims impacting this Contract, and the Reinsured shall cooperate with the Reinsurer in this regard. However, nothing in this clause shall over-ride the provisions of the Loss Settlements Clause.
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Choice of Law & Jurisdiction
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The validity, construction and performance of this Contract shall be governed by the law of England and Wales and the Courts of England and Wales shall have exclusive jurisdiction in any dispute hereunder.
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AmTrust Europe, Limited
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BY:
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/s/ Jeremy Cadle
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Dated
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April 1, 2011
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AmTrust International Underwriters, Limited
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BY:
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/s/ Edward Bennett, CEO
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Dated
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April 1, 2011
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Maiden Insurance Company, Limited
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BY:
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/s/ David A. Lamneck, Senior Vice President
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Dated
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April 1, 2011
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1)
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The section entitled “Class and Period of Business” of this Contract shall be deleted and the following substituted therefor:
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2)
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The section entitled “Commission” of this Contract shall be deleted and the following substituted therefor:
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3)
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The section entitled “Conditions” of this Contract shall be amended by the inclusion of the following subsection directly after the subsection entitled “Loss Settlement Clause”:
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4)
|
The section entitled “Security” of this Contract shall be deleted and the following substituted therefor:
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5)
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The name of the Reinsurer shall be corrected to “Maiden Insurance Company Ltd.” in all places it appears in the Contract.
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AmTrust Europe, Limited
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BY:
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/s/ Jeremy Cadle
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Dated
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July 26, 2011
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AmTrust International Underwriters, Limited
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BY:
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/s/ Ronan Conboy
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Dated
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July 26, 2011
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Maiden Insurance Company Ltd.
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BY:
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/s/ David A. Lamneck
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Dated
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July 26, 2011
|
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1.
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I have reviewed this Quarterly Report on Form 10-Q of AmTrust Financial Services, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
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(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
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(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
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(c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
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(d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
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5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
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|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
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|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
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Dated: August 4, 2011
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By:
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/s/ Barry Zyskind
|
Barry Zyskind
|
||
President and Chief Executive Officer
(Principal Executive Officer)
|
|
1.
|
I have reviewed this Quarterly Report on Form 10-Q of AmTrust Financial Services, Inc.;
|
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
(a)
|
designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
(b)
|
designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
(c)
|
evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
(d)
|
disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of the annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
(a)
|
all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
(b)
|
any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Dated: August 4, 2011
|
By:
|
/s/ Ronald Pipoly
|
Ronald Pipoly
|
||
Chief Financial Officer
(Principal Financial and Accounting Officer)
|
|
1.
|
The Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: August 4, 2011
|
By:
|
/s/ Barry Zyskind
|
Barry Zyskind
President and Chief Executive Officer
(Principal Executive Officer)
|
|
1.
|
The Quarterly Report on Form 10-Q for the quarter ended June 30, 2011 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
|
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: August 4, 2011
|
By:
|
/s/ Ronald Pipoly
|
Ronald Pipoly
Chief Financial Officer
(Principal Financial and Accounting Officer)
|