x
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QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|
¨
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TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
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Delaware
|
04-3106389
|
|
(State or other jurisdiction of
|
(IRS Employer Identification No.)
|
|
incorporation or organization)
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||
59 Maiden Lane, 6th Floor, New York, New York
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10038
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|
(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
¨
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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:
|
3 | |
Condensed Consolidated Balance Sheets as of September 30, 2011 and December 31, 2010 (audited)
|
3 | ||
Condensed Consolidated Statements of Income — Three and nine months ended September 30, 2011 and 2010
|
4 | ||
Condensed Consolidated Statements of Cash Flows — Three and nine months ended September 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
|
32 | |
Item 3.
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Quantitative and Qualitative Disclosures About Market Risk
|
56 | |
Item 4.
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Controls and Procedures
|
58 | |
PART II
|
OTHER INFORMATION
|
58 | |
Item 1.
|
Legal Proceedings
|
58 | |
Item 1A.
|
Risk Factors
|
59 | |
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
59 | |
Item 3.
|
Defaults Upon Senior Securities
|
59 | |
Item 4.
|
(Removed and Reserved)
|
59 | |
Item 5.
|
Other Information
|
59 | |
Item 6.
|
Exhibits
|
60 | |
Signatures
|
61 |
September 30,
2011
|
December 31,
2010
|
|||||||
(Amounts in Thousands)
|
(Unaudited)
|
(Audited)
|
||||||
ASSETS
|
||||||||
Investments:
|
||||||||
Fixed maturities, available-for-sale, at market value (amortized cost $1,391,104; $1,192,844)
|
$ | 1,412,164 | $ | 1,208,813 | ||||
Equity securities, available-for-sale, at market value (cost $38,409; $18,577)
|
32,119 | 17,412 | ||||||
Short-term investments
|
164,815 | 32,137 | ||||||
Equity investment in unconsolidated subsidiary – related party
|
86,165 | 77,136 | ||||||
Other investments
|
21,204 | 21,514 | ||||||
Total investments
|
1,716,467 | 1,357,012 | ||||||
Cash and cash equivalents
|
320,863 | 201,949 | ||||||
Accrued interest and dividends
|
10,997 | 7,979 | ||||||
Premiums receivable, net
|
847,410 | 727,561 | ||||||
Reinsurance recoverable (related party $458,855; $386,932)
|
1,043,065 | 775,432 | ||||||
Prepaid reinsurance premium (related party $346,586; $283,899)
|
541,125 | 484,960 | ||||||
Prepaid expenses and other assets
|
289,707 | 163,905 | ||||||
Federal income tax receivable
|
22,394 | 10,269 | ||||||
Deferred policy acquisition costs
|
277,520 | 224,671 | ||||||
Property and equipment, net
|
57,071 | 30,889 | ||||||
Goodwill
|
142,547 | 106,220 | ||||||
Intangible assets
|
150,183 | 91,606 | ||||||
$ | 5,419,349 | $ | 4,182,453 | |||||
LIABILITIES AND STOCKHOLDERS’ EQUITY
|
||||||||
Liabilities:
|
||||||||
Loss and loss expense reserves
|
$ | 1,782,953 | $ | 1,263,537 | ||||
Unearned premiums
|
1,274,562 | 1,024,965 | ||||||
Ceded reinsurance premiums payable (related party $147,171; $95,629)
|
296,593 | 266,314 | ||||||
Reinsurance payable on paid losses
|
16,145 | 11,343 | ||||||
Funds held under reinsurance treaties
|
50,149 | 3,217 | ||||||
Securities sold but not yet purchased, at market
|
55,620 | 8,847 | ||||||
Securities sold under agreements to repurchase, at contract value
|
343,905 | 347,617 | ||||||
Accrued expenses and other current liabilities
|
263,563 | 195,060 | ||||||
Deferred income taxes
|
85,106 | 9,883 | ||||||
Note payable on collateral loan – related party
|
167,975 | 167,975 | ||||||
Revolving credit facility
|
33,200 | — | ||||||
Secured term loan
|
10,256 | — | ||||||
Non-interest bearing note payable – net of unamortized discount of $221; $600
|
7,279 | 14,400 | ||||||
Term loan
|
— | 6,667 | ||||||
Junior subordinated debt
|
123,714 | 123,714 | ||||||
Total liabilities
|
4,511,020 | 3,443,539 | ||||||
Commitments and contingencies
|
||||||||
Redeemable non-controlling interest
|
600 | 600 | ||||||
Stockholders’ equity:
|
||||||||
Common stock, $.01 par value; 100,000 shares authorized, 84,768 and 84,381 issued in 2011 and 2010, respectively; 59,968 and 59,565 outstanding in 2011 and 2010, respectively
|
848 | 844 | ||||||
Preferred stock, $.01 par value; 10,000 shares authorized
|
— | — | ||||||
Additional paid-in capital
|
556,465 | 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)
|
(2,207 | ) | (266 | ) | ||||
Retained earnings
|
583,175 | 467,694 | ||||||
Total AmTrust Financial Services, Inc. equity
|
837,916 | 716,514 | ||||||
Non-controlling interest
|
69,813 | 21,800 | ||||||
Total stockholders’ equity
|
907,729 | 738,314 | ||||||
$ | 5,419,349 | $ | 4,182,453 |
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
2011
|
2010
|
2011
|
2010
|
|||||||||||||
Revenues:
|
||||||||||||||||
Premium income:
|
||||||||||||||||
Net written premium
|
$ | 321,903 | $ | 182,837 | $ | 931,603 | $ | 568,644 | ||||||||
Change in unearned premium
|
(33,055 | ) | 8,048 | (194,135 | ) | (33,398 | ) | |||||||||
Net earned premium
|
288,848 | 190,885 | 737,468 | 535,246 | ||||||||||||
Ceding commission – primarily related party
|
40,732 | 37,903 | 111,830 | 103,109 | ||||||||||||
Service and fee income (related parties – three months $4,189; $3,323 and nine months $12,089; $8,871)
|
28,815 | 22,418 | 78,546 | 39,505 | ||||||||||||
Net investment income
|
14,456 | 10,952 | 41,815 | 39,237 | ||||||||||||
Net realized gain (loss) on investments
|
550 | 7,460 | 1,581 | 2,701 | ||||||||||||
Total revenues
|
373,401 | 269,618 | 971,240 | 719,798 | ||||||||||||
Expenses:
|
||||||||||||||||
Loss and loss adjustment expense
|
185,352 | 120,432 | 484,056 | 331,763 | ||||||||||||
Acquisition costs and other underwriting expenses
|
113,270 | 82,152 | 284,084 | 223,077 | ||||||||||||
Other
|
24,045 | 20,210 | 62,805 | 35,780 | ||||||||||||
Total expenses
|
322,667 | 222,794 | 830,945 | 590,620 | ||||||||||||
Income before other income (expense), income taxes and equity in earnings of unconsolidated subsidiaries
|
50,734 | 46,824 | 140,295 | 129,178 | ||||||||||||
Other income (expense):
|
||||||||||||||||
Foreign currency loss
|
(4,063 | ) | (141 | ) | (1,827 | ) | (103 | ) | ||||||||
Interest expense
|
(3,946 | ) | (3,410 | ) | (12,034 | ) | (10,045 | ) | ||||||||
Bargain purchase on Majestic transaction
|
2,665 | — | 2,665 | — | ||||||||||||
Net gain on investment in life settlement contracts
|
6,822 | 11,855 | 48,346 | 11,855 | ||||||||||||
Total other income (expense)
|
1,478 | 8,304 | 37,150 | 1,707 | ||||||||||||
Income before income taxes and equity in earnings of unconsolidated subsidiaries
|
52,212 | 55,128 | 177,445 | 130,885 | ||||||||||||
Provision for income taxes
|
13,182 | 13,935 | 29,508 | 37,942 | ||||||||||||
Income before equity earnings of unconsolidated subsidiaries and non-controlling interest
|
39,030 | 41,193 | 147,937 | 92,943 | ||||||||||||
Equity in earnings (loss) of unconsolidated subsidiaries – related parties
|
(447 | ) | 4,030 | 6,753 | 21,803 | |||||||||||
Net income
|
38,583 | 45,223 | 154,690 | 114,746 | ||||||||||||
Net income attributable to non-controlling interest of subsidiaries
|
3,487 | (5,927 | ) | 24,249 | 5,927 | |||||||||||
Net income attributable to AmTrust Financial Services, Inc.
|
35,096 | 39,296 | 130,441 | 108,819 | ||||||||||||
Earnings per common share:
|
||||||||||||||||
Basic earnings per common share
|
$ | 0.59 | $ | 0.65 | $ | 2.18 | $ | 1.82 | ||||||||
Diluted earnings per common share
|
$ | 0.57 | $ | 0.64 | $ | 2.12 | $ | 1.80 | ||||||||
Dividends declared per common share
|
$ | 0.09 | $ | 0.07 | $ | 0.25 | $ | 0.21 | ||||||||
Net realized gain (loss) on investments:
|
||||||||||||||||
Total other-than-temporary impairment loss
|
$ | — | $ | (4,051 | ) | $ | (345 | ) | $ | (21,196 | ) | |||||
Portion of loss recognized in other comprehensive income
|
— | — | — | — | ||||||||||||
Net impairment losses recognized in earnings
|
— | (4,051 | ) | (345 | ) | (21,196 | ) | |||||||||
Other net realized gain on investments
|
550 | 11,511 | 1,926 | 23,897 | ||||||||||||
Net realized investment gain (loss)
|
$ | 550 | $ | 7,460 | $ | 1,581 | $ | 2,701 |
Nine Months Ended September 30,
|
||||||||
(in thousands)
|
2011
|
2010
|
||||||
Cash flows from operating activities:
|
||||||||
Net income
|
$ | 154,690 | $ | 114,746 | ||||
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
|
||||||||
Depreciation and amortization
|
40,151 | 12,632 | ||||||
Equity earnings and gain on investment in unconsolidated subsidiaries
|
(6,753 | ) | (21,803 | ) | ||||
Gain on investment in life settlement contracts
|
(48,346 | ) | (11,855 | ) | ||||
Realized gain marketable securities
|
(1,926 | ) | (23,897 | ) | ||||
Acquisition gain on Majestic renewal rights transaction
|
(2,665 | ) | — | |||||
Non-cash write-down of marketable securities
|
345 | 21,196 | ||||||
Discount on notes payable
|
379 | 610 | ||||||
Stock compensation expense
|
4,182 | 2,682 | ||||||
Bad debt expense
|
4,717 | 4,532 | ||||||
Foreign currency (gain) loss
|
1,827 | 103 | ||||||
Changes in assets - (increase) decrease:
|
||||||||
Premiums and note receivables
|
(98,569 | ) | (98,621 | ) | ||||
Reinsurance recoverable
|
(120,897 | ) | (123,012 | ) | ||||
Deferred policy acquisition costs, net
|
(52,849 | ) | (32,710 | ) | ||||
Prepaid reinsurance premiums
|
(56,165 | ) | (18,268 | ) | ||||
Prepaid expenses and other assets
|
(64,722 | ) | (32,712 | ) | ||||
Deferred tax asset
|
— | 6,631 | ||||||
Changes in liabilities - increase (decrease):
|
||||||||
Reinsurance premium payable
|
30,279 | 85,165 | ||||||
Loss and loss expense reserve
|
204,265 | 118,672 | ||||||
Unearned premiums
|
223,600 | 68,211 | ||||||
Funds held under reinsurance treaties
|
(4,783 | ) | 799 | |||||
Deferred tax liability, net
|
(42,207 | ) | — | |||||
Accrued expenses and other current liabilities
|
67,770 | (76,767 | ) | |||||
Net cash provided by(used in) in operating activities
|
232,323 | (3,666 | ) | |||||
Cash flows from investing activities:
|
||||||||
Net (purchases) sales of securities with fixed maturities and short term investments
|
(88,449 | ) | 96,429 | |||||
Net (purchases) sales of equity securities
|
(18,852 | ) | 23,654 | |||||
Net (purchases) sales of other investments
|
(544 | ) | (1,646 | ) | ||||
Acquisition of Majestic, net of cash obtained
|
27,314 | — | ||||||
Investment in ACAC
|
— | (53,055 | ) | |||||
Acquisition of and capitalized premiums for life settlement contracts
|
(43,847 | ) | (12,510 | ) | ||||
Acquisition of intangible assets and subsidiaries, net of cash obtained
|
(4,535 | ) | (11,125 | ) | ||||
Receipt of life settlement contract proceeds
|
10,530 | — | ||||||
Purchase of property and equipment
|
(33,055 | ) | (9,315 | ) | ||||
Net cash (used in) provided by investing activities
|
(151,438 | ) | 32,432 | |||||
Cash flows from financing activities:
|
||||||||
Repurchase agreements, net
|
(3,712 | ) | 65,682 | |||||
Revolving credit facility borrowings
|
123,200 | — | ||||||
Revolving credit facility payment
|
(90,000 | ) | — | |||||
Secured loan agreement borrowings
|
10,800 | — | ||||||
Secured loan agreement payment
|
(544 | ) | — | |||||
Term loan payment
|
(6,667 | ) | (10,000 | ) | ||||
Capital contributions to subsidiaries
|
23,764 | 6,255 | ||||||
Stock option exercise and other
|
3,680 | 1,124 | ||||||
Dividends distributed on common stock
|
(14,327 | ) | (11,879 | ) | ||||
Non-interest bearing note payment
|
(7,500 | ) | (7,500 | ) | ||||
Debt financing fees
|
(1,368 | ) | — | |||||
Net cash provided by financing activities
|
37,326 | 43,682 | ||||||
Effect of exchange rate changes on cash
|
703 | (2,730 | ) | |||||
Net increase in cash and cash equivalents
|
118,914 | 69,718 | ||||||
Cash and cash equivalents, beginning of the period
|
201,949 | 233,810 | ||||||
Cash and cash equivalents, end of the period
|
$ | 320,863 | $ | 303,528 | ||||
Supplemental Cash Flow Information
|
||||||||
Income tax payments
|
$ | 13,792 | $ | 24,457 | ||||
Interest payments on debt
|
10,098 | 8,672 |
1.
|
Basis of Reporting
|
|
a)
|
The non-controlling interest related to income on life settlement contracts is now presented on a pre-tax basis and the provision for income taxes has been reduced by an equivalent amount;
|
|
b)
|
The Company made a purchase price adjustment to goodwill in the amount of approximately $36,000 related to its purchase accounting for Warrantech, which was acquired during the three months ended September 30, 2010. The adjustment related to an increase in deferred tax and other liabilities due to non-deductibility of certain goodwill and intangible assets.
|
2.
|
Recent Accounting Pronouncements
|
(Amounts in Thousands)
|
Original or
amortized
cost
|
Gross
unrealized
gains
|
Gross
unrealized
losses
|
Market
value
|
||||||||||||
Preferred stock
|
$ | 6,029 | $ | - | $ | (1,605 | ) | $ | 4,424 | |||||||
Common stock
|
32,380 | 1,019 | (5,704 | ) | 27,695 | |||||||||||
U.S. treasury securities
|
37,828 | 2,586 | - | 40,414 | ||||||||||||
U.S. government agencies
|
27,695 | 2,146 | (1 | ) | 29,840 | |||||||||||
Municipal bonds
|
272,883 | 6,219 | (743 | ) | 278,359 | |||||||||||
Corporate bonds:
|
||||||||||||||||
Finance
|
493,020 | 8,901 | (25,423 | ) | 476,498 | |||||||||||
Industrial
|
99,132 | 3,971 | (2,284 | ) | 100,819 | |||||||||||
Utilities
|
38,537 | 1,732 | (1,142 | ) | 39,127 | |||||||||||
Commercial mortgage backed securities
|
1,541 | 98 | - | 1,639 | ||||||||||||
Residential mortgage backed securities:
|
||||||||||||||||
Agency backed
|
408,124 | 24,603 | (48 | ) | 432,679 | |||||||||||
Non-agency backed
|
11,633 | 463 | (34 | ) | 12,062 | |||||||||||
Asset-backed securities
|
711 | 16 | - | 727 | ||||||||||||
$ | 1,429,513 | $ | 51,754 | $ | (36,984 | ) | $ | 1,444,283 |
(Amounts in Thousands)
|
Amortized
Cost
|
Fair Value
|
||||||
Due in one year or less
|
$ | 18,763 | $ | 18,767 | ||||
Due after one through five years
|
251,196 | 243,955 | ||||||
Due after five through ten years
|
467,721 | 470,272 | ||||||
Due after ten years
|
231,415 | 232,064 | ||||||
Mortgage backed securities
|
422,009 | 447,106 | ||||||
Total fixed maturities
|
$ | 1,391,104 | $ | 1,412,164 |
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Fixed maturities
|
$ | 13,601 | $ | 9,462 | $ | 39,577 | $ | 32,832 | ||||||||
Equity maturities
|
141 | 51 | 427 | 410 | ||||||||||||
Cash and cash equivalents
|
1,075 | 1,102 | 2,647 | 3,857 | ||||||||||||
Note receivable – related party
|
- | 563 | - | 2,612 | ||||||||||||
14,817 | 11,178 | 42,651 | 39,711 | |||||||||||||
Less: Investment expenses and interest expense on securities sold under agreements to repurchase
|
361 | 226 | 836 | 474 | ||||||||||||
$ | 14,456 | $ | 10,952 | $ | 41,815 | $ | 39,237 |
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Equity securities
|
$ | — | $ | 4,051 | $ | 345 | $ | 10,656 | ||||||||
Fixed maturities
|
— | — | — | 10,540 | ||||||||||||
$ | — | $ | 4,051 | $ | 345 | $ | 21,196 |
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
|
$ | 20,971 | $ | (4,831 | ) | 41 | $ | 6,714 | $ | (2,478 | ) | 6 | $ | 27,685 | $ | (7,309 | ) | |||||||||||||||
U.S. treasury securities
|
805 | (1 | ) | 2 | - | - | - | 805 | (1 | ) | ||||||||||||||||||||||
Municipal bonds
|
100,313 | (743 | ) | 25 | - | - | - | 100,313 | (743 | ) | ||||||||||||||||||||||
Corporate bonds:
|
||||||||||||||||||||||||||||||||
Finance
|
230,145 | (11,606 | ) | 86 | 86,720 | (13,817 | ) | 11 | 316,865 | (25,423 | ) | |||||||||||||||||||||
Industrial
|
35,146 | (2,284 | ) | 16 | - | - | - | 35,146 | (2,284 | ) | ||||||||||||||||||||||
Utilities
|
27,893 | (1,142 | ) | 4 | - | - | - | 27,893 | (1,142 | ) | ||||||||||||||||||||||
Residential mortgage backed securities:
|
||||||||||||||||||||||||||||||||
Agency backed
|
25,889 | (48 | ) | 10 | - | - | - | 25,889 | (48 | ) | ||||||||||||||||||||||
Non-agency backed
|
$ | 3,749 | $ | (28 | ) | 2 | $ | 22 | $ | (6 | ) | 1 | $ | 3,771 | $ | (34 | ) | |||||||||||||||
Total temporarily impaired securities
|
$ | 444,911 | $ | (20,683 | ) | 186 | $ | 93,456 | $ | (16,301 | ) | 18 | $ | 538,367 | $ | (36,984 | ) |
Remaining Life of Notional Amount
(1)
|
||||||||||||||||||||
(Amounts in Thousands)
|
One
Year
|
Two Through
Five Years
|
Six Through
Ten Years
|
After Ten
years
|
Total
|
|||||||||||||||
Interest rate swaps
|
$ | — | $ | 30,000 | $ | 40,000 | $ | — | $ | 70,000 |
(Amounts in Thousands)
|
Total
|
Level 1
|
Level 2
|
Level 3
|
||||||||||||
Assets:
|
||||||||||||||||
U.S. treasury securities
|
$ | 40,414 | $ | 40,414 | $ | — | $ | — | ||||||||
U.S. government agencies
|
29,840 | — | 29,840 | — | ||||||||||||
Municipal bonds
|
278,359 | — | 278,359 | — | ||||||||||||
Corporate bonds:
|
||||||||||||||||
Finance
|
476,498 | — | 476,498 | — | ||||||||||||
Industrial
|
100,819 | — | 100,819 | — | ||||||||||||
Utilities
|
39,127 | — | 39,127 | — | ||||||||||||
Commercial mortgage backed securities
|
1,639 | — | 1,639 | — | ||||||||||||
Residential mortgage backed securities:
|
||||||||||||||||
Agency backed
|
432,679 | — | 432,679 | — | ||||||||||||
Non-agency backed
|
12,062 | — | 12,062 | — | ||||||||||||
Asset-backed securities
|
727 | — | 727 | — | ||||||||||||
Equity securities
|
32,119 | 32,119 | — | — | ||||||||||||
Short term investments
|
164,815 | 164,815 | — | — | ||||||||||||
Other investments
|
21,204 | — | — | 21,204 | ||||||||||||
Life settlement contracts
|
121,666 | — | — | 121,666 | ||||||||||||
$ | 1,715,968 | $ | 237,348 | $ | 1,371,750 | $ | 142,870 | |||||||||
Liabilities:
|
||||||||||||||||
Equity securities sold but not yet purchased, market
|
$ | 124 | $ | 124 | $ | — | $ | — | ||||||||
U.S. treasury securities sold but not yet purchased , market
|
55,496 | 55,496 | — | — | ||||||||||||
Securities sold under agreements to repurchase, at contract value
|
343,905 | — | 343,905 | — | ||||||||||||
Life settlement contract profit commission
|
12,636 | — | — | 12,636 | ||||||||||||
412,161 | 55,620 | 343,905 | 12,636 |
(Amounts in
Thousands)
|
Balance as of
June 30,
2011
|
Net income
|
Other
comprehensive
income
|
Purchases
and
issuances
|
Sales and
settlements
|
Net
transfers
into (out of)
Level 3
|
Balance as of
September 30,
2011
|
|||||||||||||||||||||
Other investments
|
$ | 22,008 | $ | — | $ | (1,348 | ) | $ | 5,672 | $ | (5,128 | ) | $ | — | $ | 21,204 | ||||||||||||
Life settlement contracts
|
108,710 | 17,188 | — | 6,298 | (10,530 | ) | — | 121,666 | ||||||||||||||||||||
Life settlement contract profit commission
|
(9,267 | ) | (3,369 | ) | — | — | — | — | (12,636 | ) | ||||||||||||||||||
Total
|
$ | 121,451 | $ | 13,819 | $ | (1,348 | ) | $ | 11,970 | $ | (15,658 | ) | $ | — | $ | 130,234 |
(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
September 30,
2011
|
|||||||||||||||||||||
Other investments
|
$ | 21,514 | $ | 661 | $ | (1,725 | ) | $ | 6,538 | $ | (5,784 | ) | $ | — | $ | 21,204 | ||||||||||||
Life settlement contracts
|
22,155 | 75,209 | — | 34,832 | (10,530 | ) | — | 121,666 | ||||||||||||||||||||
Life settlement contract profit commission
|
(4,711 | ) | (7,925 | ) | — | — | — | — | (12,636 | ) | ||||||||||||||||||
Total
|
$ | 38,958 | $ | 67,945 | $ | (1,725 | ) | $ | 41,370 | $ | (16,314 | ) | $ | — | $ | 130,234 |
(Amounts in
Thousands)
|
Balance as of
June 30,
2010
|
Net income
|
Other
comprehensive
income
|
Purchases
and
issuances
|
Sales and
settlements
|
Net
transfers
into (out of)
Level 3
|
Balance as of
September 30,
2010
|
|||||||||||||||||||||
Other investments
|
$ | 13,323 | $ | 6 | $ | — | $ | 2,432 | $ | (81 | ) | $ | — | $ | 15,680 | |||||||||||||
Life settlement contracts
|
— | 10,592 | — | 6,433 | — | — | 17,025 | |||||||||||||||||||||
Life settlement contract profit commission
|
— | — | — | — | — | — | — | |||||||||||||||||||||
Derivatives
|
(220 | ) | (64 | ) | — | — | — | — | (284 | ) | ||||||||||||||||||
Total
|
$ | 13,103 | $ | 10,534 | $ | — | $ | 14,941 | $ | (81 | ) | $ | — | $ | 38,497 |
(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
September 30,
2010
|
|||||||||||||||||||||
Other investments
|
$ | 12,746 | $ | 283 | $ | 296 | $ | 2,555 | $ | (200 | ) | $ | — | $ | 15,680 | |||||||||||||
Life settlement contracts
|
— | 10,592 | — | 6,433 | — | — | 17,025 | |||||||||||||||||||||
Life settlement contract profit commission
|
— | (4,711 | ) | — | — | — | — | (4,711 | ) | |||||||||||||||||||
Derivatives
|
(1,893 | ) | 1,609 | — | — | — | — | (284 | ) | |||||||||||||||||||
Total
|
$ | 10,853 | $ | 12,484 | $ | 296 | $ | 15,064 | $ | (200 | ) | $ | — | $ | 27,710 |
|
•
|
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
|
3.647 | (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
|
— | — | — | 33,200 | — | — | ||||||||||||||||||
Secured loan
|
238 | 977 | 1,021 | 1,068 | 1,116 | 5,836 | ||||||||||||||||||
Promissory note
|
— | 7,279 | — | — | — | — | ||||||||||||||||||
Total
|
$ | 238 | $ | 8,256 | $ | 1,021 | $ | 34,268 | $ | 1,116 | $ | 129,550 |
6.
|
Acquisition Costs and Other Underwriting Expenses
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Policy acquisition expenses
|
$ | 76,944 | $ | 52,761 | $ | 180,260 | $ | 128,174 | ||||||||
Salaries and benefits
|
27,418 | 24,956 | 87,309 | 73,371 | ||||||||||||
Other insurance general and administrative expenses
|
8,908 | 4,435 | 16,515 | 21,532 | ||||||||||||
$ | 113,270 | $ | 82,152 | $ | 284,084 | $ | 223,077 |
7.
|
Earnings Per Share
|
Three Months Ended September 30,
|
Nine Months Ended September 30,
|
|||||||||||||||
(Amounts in Thousands except per share)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Basic earnings per share:
|
||||||||||||||||
Net income attributable to AmTrust Financial Services, Inc. shareholders
|
$ | 35,096 | $ | 39,296 | $ | 130,441 | $ | 108,819 | ||||||||
Less: Net income allocated to participating securities and redeemable non-controlling interest
|
16 | 427 | 80 | 454 | ||||||||||||
Net income allocated to AmTrust Financial Services, Inc. common shareholders
|
$ | 35,080 | $ | 38,869 | $ | 130,361 | $ | 108,365 | ||||||||
Weighted average common shares outstanding – basic
|
59,987 | 59,540 | 59,842 | 59,455 | ||||||||||||
Less: Weighted average participating shares outstanding
|
32 | 50 | 40 | 35 | ||||||||||||
Weighted average common shares outstanding - basic
|
59,955 | 59,490 | 59,802 | 59,420 | ||||||||||||
Net income per AmTrust Financial Services, Inc. common share - basic
|
$ | 0.59 | $ | 0.65 | $ | 2.18 | $ | 1.82 | ||||||||
Diluted earnings per share:
|
||||||||||||||||
Net income attributable to AmTrust Financial Services, Inc. shareholders
|
$ | 35,096 | $ | 39,296 | $ | 130,441 | $ | 108,819 | ||||||||
Less: Net income allocated to participating securities and redeemable non-controlling interest
|
16 | 427 | 80 | 454 | ||||||||||||
Net income allocated to AmTrust Financial Services, Inc. common shareholders
|
$ | 35,080 | $ | 38,869 | $ | 130,361 | $ | 108,365 | ||||||||
Weighted average common shares outstanding – basic
|
59,955 | 59,490 | 59,802 | 59,420 | ||||||||||||
Plus: Dilutive effect of stock options, other
|
1,929 | 885 | 1,703 | 850 | ||||||||||||
Weighted average common shares outstanding – dilutive
|
61,884 | 60,375 | 61,505 | 60,270 | ||||||||||||
Net income per AmTrust Financial Services, Inc. common shares – diluted
|
$ | 0.57 | $ | 0.64 | $ | 2.12 | $ | 1.80 |
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
|
235 | 16.84 | 241 | 13.76 | ||||||||||||
Exercised
|
(388 | ) | 9.61 | (135 | ) | 7.71 | ||||||||||
Cancelled or terminated
|
(65 | ) | 16.48 | (96 | ) | 10.45 | ||||||||||
Outstanding end of period
|
3,909 | $ | 10.86 | 4,178 | $ | 10.40 |
9.
|
Comprehensive Income and Shareholder Equity
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
(Amounts in thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Net income attributable to AmTrust
|
$ | 35,096 | $ | 39,296 | $ | 130,441 | $ | 108,819 | ||||||||
Unrealized holding gain (loss)
|
(7,917 | ) | 7,649 | 2,483 | 9,882 | |||||||||||
Reclassification adjustment
|
(5,667 | ) | 7,521 | (3,916 | ) | 19,439 | ||||||||||
Foreign currency translation
|
(5,027 | ) | 7,348 | (508 | ) | (1,499 | ) | |||||||||
Comprehensive income
|
$ | 16,485 | $ | 61,404 | $ | 128,500 | $ | 136,231 |
(Amounts in thousands)
|
AmTrust
|
Non-Controlling
Interests
|
Total
|
|||||||||
Beginning Balance, January 1, 2011
|
$ | 716,514 | $ | 21,800 | $ | 738,314 | ||||||
Net income
|
130,441 | 24,249 | 154,690 | |||||||||
Unrealized holding gains and reclassification
|
(1,433 | ) | - | (1,433 | ) | |||||||
Foreign currency translation
|
(508 | ) | - | (508 | ) | |||||||
Comprehensive income
|
128,500 | 24,249 | 152,749 | |||||||||
Capital contribution
|
- | 23,764 | 23,764 | |||||||||
Dividends
|
(14,960 | ) | - | (14,960 | ) | |||||||
Share exercises and compensation, other
|
7,862 | - | 7,862 | |||||||||
Ending Balance, September 30, 2011
|
$ | 837,916 | $ | 69,813 | $ | 907,729 |
10.
|
Income Taxes
|
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Income before provision for income taxes, equity in earnings of unconsolidated subsidiaries
|
$ | 52,212 | $ | 55,128 | $ | 177,445 | $ | 130,885 | ||||||||
Equity in earnings (loss) of unconsolidated subsidiaries
|
(447 | ) | 4,030 | 6,753 | 21,803 | |||||||||||
Non-controlling interest
|
(3,487 | ) | (5,927 | ) | (24,249 | ) | (5,927 | ) | ||||||||
$ | 48,278 | $ | 53,231 | $ | 159,949 | $ | 146,761 | |||||||||
Income taxes at statutory rates
|
$ | 16,897 | $ | 18,631 | $ | 55,982 | $ | 51,366 | ||||||||
Effect of income not subject to U.S. taxation
|
(5,471 | ) | (3,703 | ) | (28,100 | ) | (12,672 | ) | ||||||||
Other, net
|
1,756 | (993 | ) | 1,626 | (752 | ) | ||||||||||
Provision for income taxes as shown on the Condensed Consolidated Statements of Income
|
$ | 13,182 | $ | 13,935 | $ | 29,508 | $ | 37,942 | ||||||||
GAAP effective tax rate
|
27.3 | % | 26.2 | % | 18.4 | % | 26.1 | % |
11.
|
Related Party Transactions
|
(Amounts in Thousands)
|
September 30,
2011
|
December 31,
2010
|
||||||
Assets and liabilities:
|
||||||||
Reinsurance recoverable
|
$ | 458,855 | $ | 386,932 | ||||
Prepaid reinsurance premium
|
346,586 | 283,899 | ||||||
Ceded reinsurance premiums payable
|
(147,171 | ) | (95,629 | ) | ||||
Note payable
|
(167,975 | ) | (167,975 | ) |
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Results of operations:
|
||||||||||||||||
Premium written – ceded
|
$ | (173,218 | ) | $ | (109,457 | ) | $ | (513,859 | ) | $ | (336,014 | ) | ||||
Change in unearned premium – ceded
|
13,008 | (11,122 | ) | 103,022 | 6,733 | |||||||||||
Earned premium - ceded
|
$ | (160,210 | ) | $ | (120,579 | ) | $ | (410,838 | ) | $ | (329,281 | ) | ||||
Ceding commission on premium written
|
$ | 48,339 | $ | 33,855 | $ | 132,224 | $ | 104,959 | ||||||||
Ceding commission – deferred
|
(6,557 | ) | 4,048 | (20,269 | ) | (1,851 | ) | |||||||||
Ceding commission – earned
|
$ | 41,782 | $ | 37,903 | $ | 111,955 | $ | 103,108 | ||||||||
Incurred loss and loss adjustment expense – ceded
|
$ | 94,371 | $ | 78,694 | $ | 275,434 | $ | 214,140 | ||||||||
Interest expense on collateral loan
|
473 | 475 | 1,431 | 982 |
|
12.
|
Acquisitions
|
|
13.
|
Investment in Life Settlements
|
(Amounts in thousands, except Life Settlement Contracts)
Remaining life expectancy as of September 30, 2011
|
Number of Life
Settlement
Contracts
|
Fair Value
|
Face Value
|
|||||||||
0-1
|
— | $ | — | $ | — | |||||||
1-2
|
— | — | — | |||||||||
2-3
|
1 | 6,487 | 10,000 | |||||||||
3-4
|
1 | 2,579 | 5,000 | |||||||||
4-5
|
4 | 14,431 | 30,000 | |||||||||
Thereafter
|
217 | 98,170 | 1,396,933 | |||||||||
Total
|
223 | $ | 121,667 | $ | 1,441,933 |
(Amounts in thousands)
(Premiums due are between October 1 and September 30)
|
Premiums Due on
Life Settlement
Contracts
|
Premiums
Due
on Premium
Finance
Loans
|
Total
|
|||||||||
2011
|
$ | 19,525 | $ | 2,478 | $ | 22,003 | ||||||
2012
|
23,554 | 3,251 | 26,805 | |||||||||
2013
|
24,942 | 3,421 | 28,363 | |||||||||
2014
|
25,794 | 3,777 | 29,571 | |||||||||
2015
|
29,006 | 4,584 | 33,590 | |||||||||
Thereafter
|
519,561 | 132,121 | 651,682 | |||||||||
Total
|
$ | 642,382 | $ | 149,632 | $ | 792,014 |
|
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 September 30, 2011:
|
||||||||||||||||||||||||
Gross written premium
|
$ | 145,418 | $ | 256,493 | $ | 132,621 | $ | 26,690 | $ | - | $ | 561,222 | ||||||||||||
Net written premium
|
79,070 | 149,238 | 66,905 | 26,690 | - | 321,903 | ||||||||||||||||||
Change in unearned premium
|
10,807 | (22,454 | ) | (19,958 | ) | (1,450 | ) | - | (33,055 | ) | ||||||||||||||
Net earned premium
|
89,877 | 126,784 | 46,947 | 25,240 | - | 288,848 | ||||||||||||||||||
Ceding commission - primarily related party
|
16,312 | 14,928 | 9,492 | - | - | 40,732 | ||||||||||||||||||
Loss and loss adjustment expense
|
(55,721 | ) | (83,102 | ) | (30,376 | ) | (16,153 | ) | - | (185,352 | ) | |||||||||||||
Acquisition costs and other underwriting expenses
|
(42,074 | ) | (39,187 | ) | (23,806 | ) | (8,203 | ) | - | (113,270 | ) | |||||||||||||
(97,795 | ) | (122,289 | ) | (54,182 | ) | (24,356 | ) | - | (298,622 | ) | ||||||||||||||
Underwriting income
|
8,394 | 19,423 | 2,257 | 884 | - | 30,958 | ||||||||||||||||||
Service and fee income
|
6,347 | 18,413 | 5 | - | 4,050 | 28,815 | ||||||||||||||||||
Investment income and realized gain (loss)
|
6,590 | 4,956 | 2,997 | 463 | - | 15,006 | ||||||||||||||||||
Other expenses
|
(7,432 | ) | (9,857 | ) | (6,386 | ) | (370 | ) | - | (24,045 | ) | |||||||||||||
Interest expense
|
(1,219 | ) | (1,556 | ) | (1,136 | ) | (35 | ) | - | (3,946 | ) | |||||||||||||
Foreign currency loss
|
- | (4,063 | ) | - | - | - | (4,063 | ) | ||||||||||||||||
Gain on life settlement contracts
|
2,096 | 1,705 | 3,358 | (337 | ) | - | 6,822 | |||||||||||||||||
Bargain purchase on Majestic transaction
|
2,665 | - | - | - | - | 2,665 | ||||||||||||||||||
Provision for income taxes
|
(4,205 | ) | (7,344 | ) | (488 | ) | (188 | ) | (957 | ) | (13,182 | ) | ||||||||||||
Equity in earnings (loss) of unconsolidated subsidiaries – related party
|
- | - | - | - | (447 | ) | (447 | ) | ||||||||||||||||
Non-controlling interest
|
(1,072 | ) | (888 | ) | (1,693 | ) | 166 | - | (3,487 | ) | ||||||||||||||
Net income attributable to AmTrust Financial Services, Inc.
|
$ | 12,164 | $ | 20,789 | $ | (1,086 | ) | $ | 583 | $ | 2,646 | $ | 35,096 |
(Amounts in Thousands)
|
Small
Commercial
Business
|
Specialty Risk
and Extended
Warranty
|
Specialty
Program
|
Personal
Lines
Reinsurance
|
Corporate
and Other
|
Total
|
||||||||||||||||||
Three months ended September 30, 2010:
|
||||||||||||||||||||||||
Gross written premium
|
$ | 107,838 | $ | 146,155 | $ | 60,568 | $ | 24,523 | $ | — | $ | 339,084 | ||||||||||||
Net written premium
|
56,386 | 78,377 | 23,551 | 24,523 | — | 182,837 | ||||||||||||||||||
Change in unearned premium
|
8,029 | 2,524 | 3,828 | (6,333 | ) | — | 8,048 | |||||||||||||||||
Net earned premium
|
64,415 | 80,901 | 27,379 | 18,190 | — | 190,885 | ||||||||||||||||||
Ceding commission - primarily related party
|
16,400 | 14,578 | 6,925 | — | — | 37,903 | ||||||||||||||||||
Loss and loss adjustment expense
|
(39,245 | ) | (50,584 | ) | (19,235 | ) | (11,368 | ) | — | (120,432 | ) | |||||||||||||
Acquisition costs and other underwriting expenses
|
(32,899 | ) | (29,482 | ) | (13,860 | ) | (5,911 | ) | — | (82,152 | ) | |||||||||||||
(72,144 | ) | (80,066 | ) | (33,095 | ) | (17,279 | ) | — | (202,584 | ) | ||||||||||||||
Underwriting income
|
8,671 | 15,413 | 1,209 | 911 | — | 26,204 | ||||||||||||||||||
Service and fee income
|
9,124 | 9,971 | — | — | 3,323 | 22,418 | ||||||||||||||||||
Investment income and realized gain (loss)
|
7,390 | 6,356 | 3,645 | 1,021 | — | 18,412 | ||||||||||||||||||
Other expenses
|
(6,515 | ) | (8,456 | ) | (3,781 | ) | (1,458 | ) | — | (20,210 | ) | |||||||||||||
Interest expense
|
(1,083 | ) | (1,417 | ) | (628 | ) | (282 | ) | — | (3,410 | ) | |||||||||||||
Foreign currency loss
|
— | (141 | ) | — | — | — | (141 | ) | ||||||||||||||||
Gain on life settlement contracts
|
3,857 | 4,983 | 2,241 | 774 | — | 11,855 | ||||||||||||||||||
Provision for income taxes
|
(5,463 | ) | (6,813 | ) | (565 | ) | (280 | ) | (814 | ) | (13,935 | ) | ||||||||||||
Equity in earnings of unconsolidated subsidiaries – related party
|
— | — | — | — | 4,030 | 4,030 | ||||||||||||||||||
Non-controlling interest
|
(1,928 | ) | (2,491 | ) | (1,121 | ) | (387 | ) | — | (5,927 | ) | |||||||||||||
Net income attributable to AmTrust Financial Services, Inc.
|
$ | 14,053 | $ | 17,405 | $ | 1,000 | $ | 299 | $ | 6,539 | $ | 39,296 |
(Amounts in Thousands)
|
Small
Commercial
Business
|
Specialty Risk
and Extended
Warranty
|
Specialty
Program
|
Personal
Lines
Reinsurance
|
Corporate
and Other
|
Total
|
||||||||||||||||||
Nine months ended September 30, 2011:
|
||||||||||||||||||||||||
Gross written premium
|
$ | 460,741 | $ | 749,743 | $ | 275,951 | $ | 77,276 | $ | - | $ | 1,563,711 | ||||||||||||
Net written premium
|
269,942 | 438,963 | 145,422 | 77,276 | - | 931,603 | ||||||||||||||||||
Change in unearned premium
|
(44,170 | ) | (117,971 | ) | (27,567 | ) | (4,427 | ) | - | (194,135 | ) | |||||||||||||
Net earned premium
|
225,772 | 320,992 | 117,855 | 72,849 | - | 737,468 | ||||||||||||||||||
Ceding commission - primarily related party
|
48,207 | 41,614 | 22,009 | - | - | 111,830 | ||||||||||||||||||
Loss and loss adjustment expense
|
(142,411 | ) | (216,579 | ) | (78,443 | ) | (46,623 | ) | - | (484,056 | ) | |||||||||||||
Acquisition costs and other underwriting expenses
|
(108,483 | ) | (97,493 | ) | (54,432 | ) | (23,676 | ) | - | (284,084 | ) | |||||||||||||
(250,894 | ) | (314,072 | ) | (132,875 | ) | (70,299 | ) | - | (768,140 | ) | ||||||||||||||
Underwriting income
|
23,085 | 48,534 | 6,989 | 2,550 | - | 81,158 | ||||||||||||||||||
Service and fee income
|
16,765 | 49,823 | 10 | - | 11,948 | 78,546 | ||||||||||||||||||
Investment income and realized gain (loss)
|
19,399 | 14,962 | 7,502 | 1,533 | - | 43,396 | ||||||||||||||||||
Other expenses
|
(19,457 | ) | (29,366 | ) | (11,549 | ) | (2,433 | ) | - | (62,805 | ) | |||||||||||||
Interest expense
|
(3,728 | ) | (5,627 | ) | (2,213 | ) | (466 | ) | - | (12,034 | ) | |||||||||||||
Foreign currency loss
|
- | (1,827 | ) | - | - | - | (1,827 | ) | ||||||||||||||||
Gain on life settlement contracts
|
14,978 | 22,605 | 8,890 | 1,873 | - | 48,346 | ||||||||||||||||||
Bargain purchase on Majestic transaction
|
2,665 | - | - | - | - | 2,665 | ||||||||||||||||||
Provision for income taxes
|
(8,932 | ) | (16,480 | ) | (1,601 | ) | (508 | ) | (1,987 | ) | (29,508 | ) | ||||||||||||
Equity in earnings of unconsolidated investment – related party
|
6,753 | 6,753 | ||||||||||||||||||||||
Non-controlling interest
|
(7,513 | ) | (11,338 | ) | (4,459 | ) | (939 | ) | - | (24,249 | ) | |||||||||||||
Net income attributable to AmTrust Financial Services, Inc.
|
$ | 37,262 | $ | 71,286 | $ | 3,569 | $ | 1,610 | $ | 16,714 | $ | 130,441 |
(Amounts in Thousands)
|
Small
Commercial
Business
|
Specialty Risk
and Extended
Warranty
|
Specialty
Program
|
Personal
Lines
Reinsurance
|
Corporate
and Other
|
Total
|
||||||||||||||||||
Nine months ended September 30, 2010:
|
||||||||||||||||||||||||
Gross written premium
|
$ | 338,140 | $ | 495,799 | $ | 192,935 | $ | 59,083 | $ | — | $ | 1,085,957 | ||||||||||||
Net written premium
|
173,875 | 238,642 | 97,044 | 59,083 | — | 568,644 | ||||||||||||||||||
Change in unearned premium
|
15,404 | (19,390 | ) | 2,128 | (31,540 | ) | — | (33,398 | ) | |||||||||||||||
Net earned premium
|
189,279 | 219,252 | 99,172 | 27,543 | — | 535,246 | ||||||||||||||||||
Ceding commission - primarily related party
|
50,580 | 35,408 | 17,121 | — | — | 103,109 | ||||||||||||||||||
Loss and loss adjustment expense
|
(113,680 | ) | (135,808 | ) | (65,061 | ) | (17,214 | ) | — | (331,763 | ) | |||||||||||||
Acquisition costs and other underwriting expenses
|
(97,621 | ) | (73,531 | ) | (42,974 | ) | (8,951 | ) | — | (223,077 | ) | |||||||||||||
(211,301 | ) | (209,339 | ) | (108,035 | ) | (26,165 | ) | — | (554,840 | ) | ||||||||||||||
Underwriting income
|
28,558 | 45,321 | 8,258 | 1,378 | — | 83,515 | ||||||||||||||||||
Service and fee income
|
14,676 | 15,958 | — | — | 8,871 | 39,505 | ||||||||||||||||||
Investment income and realized gain (loss)
|
17,142 | 14,223 | 8,747 | 1,826 | — | 41,938 | ||||||||||||||||||
Other expenses
|
(11,640 | ) | (15,039 | ) | (6,764 | ) | (2,337 | ) | — | (35,780 | ) | |||||||||||||
Interest expense
|
(3,268 | ) | (4,222 | ) | (1,899 | ) | (656 | ) | — | (10,045 | ) | |||||||||||||
Foreign currency loss
|
— | (103 | ) | — | — | — | (103 | ) | ||||||||||||||||
Gain on life settlement contracts
|
3,857 | 4,983 | 2,241 | 774 | — | 11,855 | ||||||||||||||||||
Provision for income taxes
|
(14,298 | ) | (17,718 | ) | (3,068 | ) | (286 | ) | (2,572 | ) | (37,942 | ) | ||||||||||||
Equity in earnings of unconsolidated investment – related party
|
— | — | — | — | 21,803 | 21,803 | ||||||||||||||||||
Non-controlling interest
|
(1,928 | ) | (2,491 | ) | (1,121 | ) | (387 | ) | — | (5,927 | ) | |||||||||||||
Net income attributable to AmTrust Financial Services, Inc.
|
$ | 33,099 | $ | 40,912 | $ | 6,394 | $ | 312 | $ | 28,102 | $ | 108,819 |
(Amounts in Thousands)
|
Small
Commercial
Business
|
Specialty Risk
and Extended
Warranty
|
Specialty
Program
|
Personal
Lines
Reinsurance
|
Corporate
and
other
|
Total
|
||||||||||||||||||
As of September 30, 2011:
|
||||||||||||||||||||||||
Fixed assets
|
$ | 17,681 | $ | 26,685 | $ | 10,494 | $ | 2,211 | $ | — | $ | 57,071 | ||||||||||||
Goodwill and intangible assets
|
118,363 | 159,676 | 14,691 | - | — | 292,730 | ||||||||||||||||||
Total assets
|
2,131,828 | 2,286,620 | 868,081 | 132,820 | — | 5,419,349 | ||||||||||||||||||
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 GMACI personal lines business, pursuant to a quota share reinsurance agreement (“Personal Lines Quota Share”) with the GMACI 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 GMACI
|
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 which premium is payable in installments, 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
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Gross written premium
|
$ | 561,222 | $ | 339,084 | $ | 1,563,711 | $ | 1,085,957 | ||||||||
Net written premium
|
$ | 321,903 | $ | 182,837 | $ | 931,603 | $ | 568,644 | ||||||||
Change in unearned premium
|
(33,055 | ) | 8,048 | (194,135 | ) | (33,398 | ) | |||||||||
Net earned premium
|
288,848 | 190,885 | 737,468 | 535,246 | ||||||||||||
Ceding commission – primarily related party
|
40,732 | 37,903 | 111,830 | 103,109 | ||||||||||||
Service and fee income (related parties – three months $4,191; $3,323 and nine months $12,809; $8,871)
|
28,815 | 22,418 | 78,546 | 39,505 | ||||||||||||
Net investment income
|
14,456 | 10,952 | 41,815 | 39,237 | ||||||||||||
Net realized gain (loss) on investments
|
550 | 7,460 | 1,581 | 2,701 | ||||||||||||
Total revenues
|
373,401 | 269,618 | 971,240 | 719,798 | ||||||||||||
Loss and loss adjustment expense
|
185,352 | 120,432 | 484,056 | 331,763 | ||||||||||||
Acquisition costs and other underwriting expenses
|
113,270 | 82,152 | 284,084 | 223,077 | ||||||||||||
Other
|
24,045 | 20,210 | 62,805 | 35,780 | ||||||||||||
Total expenses
|
322,667 | 222,794 | 830,945 | 590,620 | ||||||||||||
Income before other income (expense), income taxes and equity in earnings of unconsolidated subsidiaries
|
50,734 | 46,824 | 140,295 | 129,178 | ||||||||||||
Other income (expense):
|
||||||||||||||||
Foreign currency (loss) gain
|
(4,063 | ) | (141 | ) | (1,827 | ) | (103 | ) | ||||||||
Interest expense
|
(3,946 | ) | (3,410 | ) | (12,034 | ) | (10,045 | ) | ||||||||
Bargain purchase on Majestic transaction
|
2,665 | — | 2,665 | — | ||||||||||||
Gain on investment in life settlement contracts
|
6,822 | 11,855 | 48,346 | 11,855 | ||||||||||||
Total other income (expense)
|
1,487 | 8,304 | 37,150 | 1,707 | ||||||||||||
Income before income taxes and equity in earnings of unconsolidated subsidiaries
|
52,212 | 55,128 | 177,445 | 130,885 | ||||||||||||
Provision for income taxes
|
13,182 | 13,935 | 29,508 | 37,942 | ||||||||||||
Income before equity earnings of unconsolidated subsidiaries and non-controlling interest
|
39,030 | 41,193 | 147,937 | 92,943 | ||||||||||||
Equity in earnings of unconsolidated subsidiaries – related parties
|
(447 | ) | 4,030 | 6,753 | 21,803 | |||||||||||
Net income
|
38,583 | 45,223 | 154,690 | 114,746 | ||||||||||||
Non-controlling interest
|
(3,487 | ) | (5,927 | ) | (24,249 | ) | (5,927 | ) | ||||||||
Net income attributable to AmTrust Financial Services, Inc.
|
$ | 35,096 | $ | 39,296 | $ | 130,441 | $ | 108,819 | ||||||||
Key measures:
|
||||||||||||||||
Net loss ratio
|
64.2 | % | 63.1 | % | 65.6 | % | 62.0 | % | ||||||||
Net expense ratio
|
25.1 | % | 23.2 | % | 23.4 | % | 22.4 | % | ||||||||
Net combined ratio
|
89.3 | % | 86.3 | % | 89.0 | % | 84.4 | % | ||||||||
Net realized loss on investments:
|
||||||||||||||||
Total other-than-temporary impairment loss
|
$ | — | $ | (4,051 | ) | $ | (345 | ) | $ | (21,196 | ) | |||||
Portion of loss recognized in other comprehensive income
|
— | — | — | — | ||||||||||||
Net impairment losses recognized in earnings
|
— | (4,051 | ) | (345 | ) | (21,196 | ) | |||||||||
Other net realized gain on investments
|
550 | 11,511 | 1,926 | 23,897 | ||||||||||||
Net realized investment gain (loss)
|
$ | 550 | $ | 7,460 | $ | 1,581 | $ | 2,701 |
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Gross written premium
|
$ | 145,418 | $ | 107,838 | $ | 460,741 | $ | 338,140 | ||||||||
Net written premium
|
79,070 | 56,386 | 269,942 | 173,875 | ||||||||||||
Change in unearned premium
|
10,808 | 8,029 | (44,170 | ) | 15,404 | |||||||||||
Net earned premium
|
89,877 | 64,415 | 225,772 | 189,279 | ||||||||||||
Ceding commission – primarily related party
|
16,312 | 16,400 | 48,207 | 50,580 | ||||||||||||
Loss and loss adjustment expense
|
55,721 | 39,245 | 142,411 | 113,680 | ||||||||||||
Acquisition costs and other underwriting expenses
|
42,074 | 32,899 | 108,483 | 97,621 | ||||||||||||
Total expenses
|
97,795 | 72,144 | 250,894 | 211,301 | ||||||||||||
Underwriting income
|
$ | 8,394 | $ | 8,671 | $ | 23,085 | $ | 28,558 | ||||||||
Key measures:
|
||||||||||||||||
Net loss ratio
|
62.0 | % | 60.9 | % | 63.1 | % | 60.1 | % | ||||||||
Net expense ratio
|
28.7 | % | 25.6 | % | 26.7 | % | 24.9 | % | ||||||||
Net combined ratio
|
90.7 | % | 86.5 | % | 89.8 | % | 85.0 | % | ||||||||
Reconciliation of net expense ratio:
|
||||||||||||||||
Acquisition costs and other underwriting expenses
|
$ | 42,074 | $ | 32,899 | $ | 108,483 | $ | 97,621 | ||||||||
Less: ceding commission revenue – primarily related party
|
16,312 | 16,400 | 48,207 | 50,580 | ||||||||||||
25,762 | 16,499 | 60,276 | 47,041 | |||||||||||||
Net earned premium
|
$ | 89,879 | $ | 64,415 | $ | 225,772 | $ | 189,279 | ||||||||
Net expense ratio
|
28.7 | % | 25.6 | % | 26.7 | % | 24.9 | % |
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Gross written premium
|
$ | 256,493 | $ | 146,155 | $ | 749,743 | $ | 495,799 | ||||||||
Net written premium
|
149,238 | 78,377 | 438,963 | 238,642 | ||||||||||||
Change in unearned premium
|
(22,454 | ) | 2,524 | (117,971 | ) | (19,390 | ) | |||||||||
Net earned premium
|
126,784 | 80,901 | 320,992 | 219,252 | ||||||||||||
Ceding commission – primarily related party
|
14,928 | 14,578 | 41,614 | 35,408 | ||||||||||||
Loss and loss adjustment expense
|
83,102 | 50,584 | 216,579 | 135,808 | ||||||||||||
Acquisition costs and other underwriting expenses
|
39,187 | 29,482 | 97,493 | 73,531 | ||||||||||||
Total expenses
|
122,289 | 80,066 | 314,072 | 209,339 | ||||||||||||
Underwriting income
|
$ | 19,423 | $ | 15,413 | $ | 48,534 | $ | 45,321 | ||||||||
Key measures:
|
||||||||||||||||
Net loss ratio
|
65.5 | % | 62.5 | % | 67.5 | % | 61.9 | % | ||||||||
Net expense ratio
|
19.1 | % | 18.4 | % | 17.4 | % | 17.4 | % | ||||||||
Net combined ratio
|
84.7 | % | 80.9 | % | 84.9 | % | 79.3 | % | ||||||||
Reconciliation of net expense ratio:
|
||||||||||||||||
Acquisition costs and other underwriting expenses
|
$ | 39,187 | $ | 29,482 | $ | 97,493 | $ | 73,531 | ||||||||
Less: ceding commission revenue – primarily related party
|
14,928 | 14,578 | 41,614 | 35,408 | ||||||||||||
24,259 | 14,904 | 55,879 | 38,123 | |||||||||||||
Net earned premium
|
$ | 126,784 | $ | 80,901 | $ | 320,992 | $ | 219,252 | ||||||||
Net expense ratio
|
19.1 | % | 18.4 | % | 17.4 | % | 17.4 | % |
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Gross written premium
|
$ | 132,621 | $ | 60,568 | $ | 275,951 | $ | 192,935 | ||||||||
Net written premium
|
66,905 | 23,551 | 145,422 | 97,044 | ||||||||||||
Change in unearned premium
|
(19,958 | ) | 3,828 | (27,567 | ) | 2,128 | ||||||||||
Net earned premium
|
46,947 | 27,379 | 117,855 | 99,172 | ||||||||||||
Ceding commission – primarily related party
|
9,492 | 6,925 | 22,009 | 17,121 | ||||||||||||
Loss and loss adjustment expense
|
30,376 | 19,235 | 78,443 | 65,061 | ||||||||||||
Acquisition costs and other underwriting expenses
|
23,806 | 13,860 | 54,432 | 42,974 | ||||||||||||
Total expenses
|
54,182 | 33,095 | 132,875 | 108,035 | ||||||||||||
Underwriting income
|
$ | 2,257 | $ | 1,209 | $ | 6,989 | $ | 8,258 | ||||||||
Key measures:
|
||||||||||||||||
Net loss ratio
|
64.7 | % | 70.3 | % | 66.6 | % | 65.6 | % | ||||||||
Net expense ratio
|
30.5 | % | 25.3 | % | 27.5 | % | 26.1 | % | ||||||||
Net combined ratio
|
95.2 | % | 95.6 | % | 94.1 | % | 91.7 | % | ||||||||
Reconciliation of net expense ratio:
|
||||||||||||||||
Acquisition costs and other underwriting expenses
|
$ | 23,806 | $ | 13,860 | $ | 54,432 | $ | 42,974 | ||||||||
Less: ceding commission revenue – primarily related party
|
9,492 | 6,925 | 22,009 | 17,121 | ||||||||||||
14,314 | 6,935 | 32,023 | 25,853 | |||||||||||||
Net earned premium
|
$ | 46,947 | $ | 27,379 | $ | 117,855 | $ | 99,172 | ||||||||
Net expense ratio
|
30.5 | % | 25.3 | % | 27.5 | % | 26.1 | % |
Three Months Ended
September 30,
|
Nine Months Ended
September 30,
|
|||||||||||||||
(Amounts in Thousands)
|
2011
|
2010
|
2011
|
2010
|
||||||||||||
Gross written premium
|
$ | 26,690 | $ | 24,523 | $ | 77,276 | $ | 59,083 | ||||||||
Net written premium
|
26,690 | 24,523 | 77,276 | 59,083 | ||||||||||||
Change in unearned premium
|
(1,450 | ) | (6,333 | ) | (4,427 | ) | (31,540 | ) | ||||||||
Net earned premium
|
25,240 | 18,190 | 72,849 | 27,543 | ||||||||||||
Loss and loss adjustment expense
|
16,153 | 11,368 | 46,623 | 17,214 | ||||||||||||
Acquisition costs and other underwriting expenses
|
8,203 | 5,911 | 23,676 | 8,951 | ||||||||||||
Total expenses
|
24,356 | 17,279 | 70,299 | 26,165 | ||||||||||||
Underwriting income
|
$ | 884 | $ | 911 | $ | 2,550 | $ | 1,378 | ||||||||
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 | % |
Nine Months Ended September 30,
|
||||||||
(Amounts in Thousands)
|
2011
|
2010
|
||||||
Cash and cash equivalents provided by (used in):
|
||||||||
Operating activities
|
$ | 232,323 | $ | (3,666 | ) | |||
Investing activities
|
(151,438 | ) | 32,432 | |||||
Financing activities
|
37,326 | 43,682 |
September 30,
|
December 31,
|
|||||||
2011
|
2010
|
|||||||
(Amounts in Thousands)
|
||||||||
Selected Assets:
|
||||||||
Cash
|
$ | 320,863 | $ | 201,949 | ||||
Investments
|
1,716,467 | 1,357,012 | ||||||
Prepaid and other assets
|
289,707 | 163,905 | ||||||
Goodwill and intangible assets
|
292,730 | 197,826 | ||||||
Selected Liabilities:
|
||||||||
Loss and loss expense reserves
|
$ | 1,782,953 | $ | 1,263,537 | ||||
Deferred income taxes
|
85,106 | 9,883 |
September 30, 2011
|
December 31, 2010
|
|||||||||||||||
(Amounts in Thousands)
|
Carrying
Value
|
Percentage of
Portfolio
|
Carrying
Value
|
Percentage of
Portfolio
|
||||||||||||
Cash and cash equivalents
|
$ | 320,863 | 16.6 | % | $ | 201,949 | 13.8 | % | ||||||||
Time and short-term deposits
|
164,815 | 8.5 | 32,137 | 2.2 | ||||||||||||
U.S. treasury securities
|
40,414 | 2.1 | 82,447 | 5.6 | ||||||||||||
U.S. government agencies
|
29,840 | 1.5 | 7,162 | 0.5 | ||||||||||||
Municipals
|
278,359 | 14.4 | 66,676 | 4.6 | ||||||||||||
Commercial mortgage back securities
|
1,639 | 0.1 | 2,076 | 0.1 | ||||||||||||
Residential mortgage backed securities:
|
||||||||||||||||
Agency backed
|
432,679 | 22.4 | 546,098 | 37.4 | ||||||||||||
Non-agency backed
|
12,062 | 0.6 | 8,591 | 0.6 | ||||||||||||
Asset backed securities
|
727 | 0.1 | 2,687 | 0.2 | ||||||||||||
Corporate bonds
|
616,444 | 32.0 | 493,076 | 33.8 | ||||||||||||
Preferred stocks
|
4,424 | 0.2 | 7,037 | 0.5 | ||||||||||||
Common stocks
|
27,695 | 1.5 | 10,375 | 0.7 | ||||||||||||
$ | 1,929,961 | 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 | $ | 10,656 | ||||
Fixed maturity securities
|
- | 10,540 | ||||||
$ | 345 | $ | 21,196 |
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
|
$ | 1,279,369 | $ | (132,795 | ) | (10.3 | )% | |||||
100 basis point increase
|
1,344,873 | (67,291 | ) | (5.2 | ) | |||||||
No change
|
1,412,164 | — | — | |||||||||
100 basis point decrease
|
1,476,072 | 63,908 | 7.6 | |||||||||
200 basis point decrease
|
1,544,279 | 132,115 | 10.2 |
Hypothetical Change in Interest Rates
|
Fair Value
|
Estimated
Change in
Fair Value
|
Hypothetical
Percentage
Increase
(
Decrease) in
Shareholders’
Equity
|
|||||||||
(Amounts in Thousands)
|
||||||||||||
5% increase
|
$ | 33,725 | $ | 1,606 | 0.1 | % | ||||||
No change
|
32,119 | — | — | |||||||||
5 % decrease
|
30,513 | (1,606 | ) | (0.1 | ) |
Exhibit
Number
|
Description
|
|
10.1
|
Form of Incentive Stock Option Agreement, amended and restated effective November 1, 2011.
|
|
10.2
|
Form of Non-qualified Stock Option Agreement for Non-Employee Directors, amended and restated effective November 1, 2011.
|
|
10.3
|
Form of Restricted Stock Agreement, amended and restated effective November 1, 2011.
|
|
10.4
|
Form of Restricted Stock Unit Agreement, amended and restated effective November 1, 2011.
|
|
31.1
|
Certification of the Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a), for the quarter ended September 30, 2011.
|
|
31.2
|
Certification of the Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a), for the quarter ended September 30, 2011.
|
|
32.1
|
Certification of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, for the quarter ended September 30, 2011.
|
|
32.2
|
Certification of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, for the quarter ended September 30, 2011.
|
|
101.1
|
The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2011, formatted in XBRL (Extensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at September 30, 2011 and December 31, 2010; (ii) the Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2011 and 2010; (iii) the Consolidated Statements of Cash Flows for the nine months ended September 30, 2011 and 2010; 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: November 9, 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
|
Award of Stock Options
|
You have been granted an Option (the “
Option
”), subject to the terms and conditions of this Agreement and the Plan, to purchase
____________ shares of the Company’s Stock.
|
|
Exercise Price
|
The exercise price with respect to your Option is $xx.xx per share, such exercise price payable on terms and conditions and in a form as determined by the Compensation Committee in its sole discretion consistent with the terms of the Plan and this Award Agreement.
|
|
Grant Date
|
The effective date of this grant is ________ ____, 20__.
|
|
Term
|
The term of your Option will expire at the close of business on the 10th anniversary of the Grant Date. Your Option will expire earlier if your Employment with the Company terminates, as described below.
|
|
Vesting
|
Your Option shall vest as follows: (i) 25% on the first anniversary of the Grant Date, and (ii) the remaining 75% will vest in 12 equal quarterly installments of 6.25% each every 3 months thereafter, until fully vested 48 months after the Grant Date.
This Option is only exercisable before it expires and then only with respect to the vested portion of the Option. You may exercise this Option, in whole or in part, to purchase a whole number of vested shares in accordance with the Plan and this Agreement.
Except as provided in this Agreement, or in any other agreement between you and the Company, no additional Options will vest after your Employment has terminated.
|
|
Tax Matters (Incentive Stock Option)
|
The Option granted hereby is intended to qualify as an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended (the “
Code
”). Notwithstanding the foregoing, the Option will not qualify as an “incentive stock option,” among other events, (i) if you dispose of the Stock acquired pursuant to the Option at any time during either of the two year period following the date of this Agreement or the one year period following the date on which the Option is exercised; (ii) except in the event of the Participant’s death or disability, as defined in Section 22(e)(3) of the Code, if the Participant is not employed by the Company (or any affiliate) at all times during the period beginning on the date of this Agreement and ending on the day three (3) months before the date of exercise of the Option; or (iii) to the extent the aggregate fair market value (determined as of the time the Option is granted) of the Common Stock subject to “incentive stock options” which become exercisable for the first time in any calendar year exceeds $100,000. To the extent that the Option does not qualify as an “incentive stock option,” it shall not affect the validity of the Option and shall constitute a separate non-qualified stock option.
|
Termination of Employment
|
If your Employment (as defined below) terminates for any reason, other than retirement, death, Disability or Cause, then your Option will expire at the close of business at Company headquarters on the 90th day after your termination date (or the next business day if the 90th day after your termination date falls on a weekend or holiday).
“
Employment
” means that you are currently (i) an employee of the Company, (ii) are a member of the Company’s Board of Directors, or (iii) are otherwise providing services to the Company.
|
|
Termination for
Cause
|
If your Employment is terminated for Cause (as defined below), then you shall immediately forfeit all rights to your Option and the Option shall expire immediately upon your termination.
For purposes of this Agreement, “
Caus
e” shall mean
(a) willful misconduct or gross negligence;
(b) conviction of a felony or conviction of a crime involving moral turpitude;
(c) any act constituting fraud or the misappropriation or embezzlement of money or other property of the Company; and
(d) any willful act or course of conduct constituting an abuse of office or authority which has a material adverse impact on the Company’s reputation or financial condition.
|
|
Retirement
|
If you have been employed by the Company for at least five years and your Employment terminates due to your: (i) retirement on or after your sixty-fifth birthday; or (ii) retirement on or after your fifty-fifth birthday with the consent of the Company, your Option will automatically vest as to the number of Options that would have vested had you remained in Employment for the 12-month period immediately following your retirement and your Option will expire at the close of business at Company headquarters on the date 12 months after the date of your retirement (or the next business day if the date 12 months after the date of your retirement falls on a weekend or holiday).
|
|
Death
|
If your Employment terminates because of your death, your Option will automatically vest as to the number of Options that would have vested had you remained in Employment for the 12-month period immediately following your death and your Option will expire at the close of business at Company headquarters on the date 12 months after the date of death (or the next business day if the date 12 months after the date of death falls on a weekend or holiday).
If you die during the 90-day period in connection with a regular termination of Employment described above, and a vested portion of your Option has not yet been exercised, then your Option will instead expire on the date 12 months after your termination date.
During the 12-month period above, your estate or heirs may exercise the vested portion of your Option.
|
Disability
|
If your Employment terminates because of your Disability (defined below), your Option will automatically vest as to the number of Options that would have vested had you remained in Employment for the 12-month period immediately following your Disability and your Option will expire at the close of business at Company headquarters on the date 12 months after the date of termination (or the next business day if the date 12 months after the date of termination falls on a weekend or holiday).
For purposes of this Agreement, “
Disability
” shall mean the award holder is unable to perform the duties of their service (or other services) (i) for a period of 90 consecutive days, or (ii) any 120 days during any consecutive 12-month period.
|
|
Termination without Cause within 12 Months of Change in Control
|
Notwithstanding anything contained in this Agreement to the contrary, if your Employment with the Company (or any affiliate) is terminated by the Company without Cause within 12 months following the effective date of a “Change of Control,” the Board of Directors may accelerate the vesting of all or any portion of your Option that is unvested.
For purposes of this Agreement: “
Change in Control
” shall mean:
(i) any “person” (as such term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”), including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act) other than Barry Zyskind, George Karfunkel, Michael Karfunkel, any of their lineal descendants, any trust or charitable foundation controlled by any of them or their lineal descendants, any subsidiary or any employee benefit plan of the Company or a subsidiary or former subsidiary, is or becomes a beneficial owner, directly or indirectly, of stock of the Company representing 50% of more of the total voting power of the Company’s then outstanding stock;
(ii) a tender offer (for which a filing has been made with the Securities and Exchange Commission (the “
SEC
”) that purports to comply with the requirements of Section 14(d) of the Exchange Act, and the corresponding SEC rules) is made for the stock of the Company. In case of a tender offer described in this paragraph (ii), the “Change of Control” will be deemed to have occurred any time during the offer when the person (using the definition in (i) above) making the offer owns or has accepted for payment stock of the Company with 50% or more of the total voting power of the Company's outstanding stock; or
(iii) individuals who were the Board’s nominees for election as directors of the Company immediately prior to a meeting of the stockholders of the Company involving a contest for the election of directors shall not constitute a majority of the Board following the election.
|
Notice of Exercise
|
When you wish to exercise this Option, you must notify the Company in writing. Such exercise will only become effective upon the Company’s receipt of such written instructions.
|
|
Recapture Rights
|
In the event that you violate any of your obligations pursuant to the Confidentiality, Non-Competition, or Non-Solicitation provisions of this Agreement, you agree to return, within five days of receipt of written demand from the Company, any gains you realize from the exercise of all or any portion of the Option within the 12 months immediately preceding such violation, and any remaining portion of your Option shall be immediately forfeited, whether vested or unvested.
|
|
Confidentiality
|
During your Employment, you will have access to confidential or proprietary data or information of the Company (and its affiliates) and its operations. You agree that you will not at any time divulge or communicate the Confidential Information (defined below) to any person, nor shall you direct any employee to divulge or communicate to any person (other than to a person bound by confidentiality obligations similar to those contained herein and other than as necessary in performing your duties hereunder), or use to the detriment of the Company (or any of its affiliates) or for the benefit of any other person, any Confidential Information. This restriction shall survive your Employment hereunder, whether by the normal expiration thereof or otherwise.
The term
“Confidential Information”
shall mean all information, whether or not reduced to written or recorded form, that is related to the Company and that is not generally known or accessible to members of the public and/or competitors of the Company nor intended for general dissemination, whether furnished by the Company or compiled by the employee, including, without limitation, relating to the Company’s (or any affiliate’s) financial performance, customers, existing or proposed future projects, prospects, or business strategies, personnel information, financial information, customer lists, supplier lists, trade secrets, information regarding operations, systems, services, know-how, computer and any other processed or collated data, computer programs, pricing, marketing and advertising data.
You understand the Company intends to maintain the confidentiality of the Confidential Information notwithstanding that employees of the Company may have free access to the information for the purpose of performing their duties with the Company, and notwithstanding that employees not expressly bound by agreements similar to this agreement may have access to such information for job purposes. You acknowledge that Confidential Information need not be marked as such to preserve the confidential nature of the information.
|
Non-Competition
|
You acknowledge that (a) in the course of your Employment with the Company and its affiliates, you have, and will continue to, become familiar with the Company’s and its affiliates’ trade secrets, methods of doing business, business plans and other valuable confidential and proprietary information concerning the Company, its affiliates, their customers and business partners and that your services have been and will be of special, unique and extraordinary value to the Company and its affiliates. In consideration thereof and of this Award, during your Employment with the Company or an affiliate and for a period of one (1) year thereafter, you shall not, without the Company’s prior written approval, become engaged, directly or indirectly, as a director, officer, employee or 5% or more stockholder or equity interest owner in, partner in, or consultant to, any business that is directly competitive with the business of the Company (or any affiliate) in any area or region where the Company (or any affiliate) conducts business (“
Competition
”). Notwithstanding the foregoing, you shall not be deemed to be in Competition with the Company if you provide evidence satisfactory to the Company, in its sole and absolute discretion, that you: (i) work in a separate division, department or unit that does not compete with the business of the Company (or any affiliate); and (ii) will not have contact with the division, department or unit that does compete with the business of the Company (or any affiliate). If you received your Option grant as a non-employee member of the Company’s Board of Directors, this provision will not apply to you unless your Employment is terminated for Cause (as defined above) or for cause pursuant to the Company’s Certificate of Incorporation.
|
|
Non-Solicitation
|
During Employment and for a period of two (2) years thereafter, you shall not, without the prior written consent of the Company, directly or indirectly, on your own behalf or on behalf of any other person, firm, corporation or business entity: (a) induce or attempt to induce any agent, broker, affinity group or policyholder of the Company (or any affiliate), or any prior agent, affinity group or policyholder that was an agent, affinity group or policyholder within twelve (12) months of such contact, to withdraw, decrease or cancel its business with the Company (or any affiliate) or otherwise terminate any written or oral agreement or understanding or other relationship with the Company (or any affiliate); (b) solicit or attempt to solicit, service or attempt to service, or for the purpose of obtaining the business of any agent, broker, affinity group or policyholder of the Company (or any affiliate), or any prior agent, affinity group or policyholder that was an agent, broker, affinity group or policyholder within twelve (12) months of such contact, to the extent the business solicited is similar to, or competitive with, the business of the Company (or any affiliate), engage in discussions or other communications with (regardless of who initiates such discussions or communications) any person, firm or entity that was an actual or prospective agent, broker, affinity group or policyholder of the Company during any part of the twelve (12) month period immediately preceding termination of Employment if you participated, directly or indirectly, in the solicitation or servicing of that agent, broker, affinity group or policyholder or prospective agent, broker, affinity group or policyholder, or supervised or managed those who did, during your Employment with the Company at any time during such twelve (12) month period immediately preceding your termination of Employment; (c) solicit or attempt to solicit, hire or attempt to hire, or communicate with, any person who is an employee, individual consultant or independent contractor of the Company (or any affiliate), or any prior employee, individual consultant or independent contractor that was an employee, consultant or independent contractor within twelve (12) months of such contact, with the purpose or intent of attracting such person from the employ of the Company (or any affiliate); or (d) induce or attempt to induce any person who is an employee, individual consultant or independent contractor of the Company (or any affiliate) to terminate or limit his or her Employment or other relationship with the Company (or any affiliate), or any prior employee, individual consultant or independent contractor that was an employee, individual consultant or independent contractor within twelve (12) months of such contact.
|
Form of Payment
|
Upon exercise of your Option, you must submit payment of the Option price for the shares you are purchasing. Payment may be made via (i) cash; (ii) a “cashless” exercise, by which you deliver an irrevocable direction to a licensed securities broker to sell Stock and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Option price and any applicable withholding taxes; or (iii) as otherwise permitted by the Administrator.
“
Administrator
” shall mean one or more officers or employees of the Company to whom the Committee may delegate the authority execute and distribute Award Agreements or other documents evidencing or relating to Awards granted by the Committee under the Plan, to maintain records relating to Awards, to process or oversee the issuance of Stock under Awards, to interpret and administer the terms of Awards and to take such other actions as may be necessary or appropriate for the administration of the Plan and of Awards under the Plan, other that those specified in Section 3(b)(i) – (iii) of the Plan.
|
|
Withholding Taxes
|
In the event that the Company determines that any federal, state, local or foreign tax or withholding payment is required relating to the exercise or sale of shares arising from this grant, the Company shall have the right to require such payments from you, or withhold such minimum statutory amounts from other payments due to you from the Company. Payment of your withholding or other taxes may be made via one of the forms of payment for exercise set forth above, or as otherwise determined by the Administrator.
|
|
Transfer of Option
|
The Option is non-transferable by you. Any attempt by you to transfer this Option will result in the Option becoming invalid, except upon your death by the laws of descent and distribution.
|
|
No Employment Rights
|
Neither your Option nor this Agreement give you the right to be retained by the Company in any capacity and your Employment may be terminated at any time and for any reason.
|
|
Shareholder Rights
|
You have no rights as a shareholder of the Company unless and until the Stock relating to your exercise has been issued (or an appropriate book entry has been made). Except as described in the Plan, no adjustments are made for dividends or other rights if the applicable record date occurs before your Stock is issued (or an appropriate book entry has been made).
|
|
Applicable Law
|
This Agreement shall be governed by the laws of the State of Delaware, with consent to jurisdiction by you in the State of New York.
|
|
Data Privacy
|
To administer the Plan, the Company may process personal data about you. Such data includes the information provided in this Agreement, other appropriate personal and financial data about you such as home address and business addresses and other contact information, payroll information and any other information deemed appropriate by the Company to facilitate the administration of the Plan.
By accepting this award, you consent to the Company’s processing of such personal data and the transfer of such data outside the country in which you work or are employed, including, with respect to non-U.S. residents, to the United States, to transferees who shall include the Company and other persons designated by the Company to administer the Plan.
|
|
Consent to Electronic Delivery
|
Certain statutory materials relating to the Plan may be delivered to you in electronic form. By accepting this grant, you consent to electronic delivery and acknowledge receipt of these materials, including the Plan and the Plan prospectus.
|
Award of Stock Options
|
You have been granted an Option (the “
Option
”), subject to the terms and conditions of this Agreement and the Plan, to purchase
____________ shares of the Company’s Stock.
|
|
Exercise Price
|
The exercise price with respect to your Option is $xx.xx per share, such exercise price payable on terms and conditions and in a form as determined by the Compensation Committee in its sole discretion consistent with the terms of the Plan and this Award Agreement.
|
|
Grant Date
|
The effective date of this grant is ________ ____, 20__.
|
|
Term
|
The term of your Option will expire at the close of business on the 10th anniversary of the Grant Date. Your Option will expire earlier if your Employment with the Company terminates, as described below.
|
|
Vesting
|
Your Option shall vest 100% on the first anniversary of the Grant Date.
This Option is only exercisable before it expires and then only with respect to the vested portion of the Option. You may exercise this Option, in whole or in part, to purchase a whole number of vested shares in accordance with the Plan and this Agreement.
Except as provided in this Agreement, or in any other agreement between you and the Company, no additional Options will vest after your Employment has terminated.
|
|
Termination of Employment
|
If your Employment (as defined below) terminates for any reason, other than retirement, death, Disability or Cause, then your Option will expire at the close of business at Company headquarters on the 90th day after your termination date (or the next business day if the 90th day after your termination date falls on a weekend or holiday).
“
Employment
” means that you are currently (i) an employee of the Company, (ii) are a member of the Company’s Board of Directors, or (iii) are otherwise providing services to the Company.
|
Termination for
Cause
|
If your Employment is terminated for Cause (as defined below), then you shall immediately forfeit all rights to your Option and the Option shall expire immediately upon your termination.
For purposes of this Agreement, “
Caus
e” shall mean
(a) willful misconduct or gross negligence;
(b) conviction of a felony or conviction of a crime involving moral turpitude;
(c) any act constituting fraud or the misappropriation or embezzlement of money or other property of the Company; and
(d) any willful act or course of conduct constituting an abuse of office or authority which has a material adverse impact on the Company’s reputation or financial condition.
|
|
Retirement
|
If you have been a member of the Company’s Board of Directors for at least five years and your Employment terminates due to your: (i) retirement on or after your sixty-fifth birthday; or (ii) retirement on or after your fifty-fifth birthday with the consent of the Company, your Option will automatically vest as to the number of Options that would have vested had you remained in Employment for the 12-month period immediately following your retirement and your Option will expire at the close of business at Company headquarters on the date 12 months after the date of your retirement (or the next business day if the date 12 months after the date of your retirement falls on a weekend or holiday).
|
|
Death
|
If your Employment terminates because of your death, your Option will automatically vest as to the number of Options that would have vested had you remained in Employment for the 12-month period immediately following your death and your Option will expire at the close of business at Company headquarters on the date 12 months after the date of death (or the next business day if the date 12 months after the date of death falls on a weekend or holiday).
If you die during the 90-day period in connection with a regular termination of Employment described above, and a vested portion of your Option has not yet been exercised, then your Option will instead expire on the date 12 months after your termination date.
During the 12 month period above, your estate or heirs may exercise the vested portion of your Option.
|
|
Disability
|
If your Employment terminates because of your Disability (defined below), your Option will automatically vest as to the number of Options that would have vested had you remained in Employment for the 12 month period immediately following your Disability and your Option will expire at the close of business at Company headquarters on the date 12 months after the date of termination (or the next business day if the date 12 months after the date of termination falls on a weekend or holiday).
For purposes of this Agreement, “
Disability
” shall mean the award holder is unable to perform the duties of their service (or other services) (i) for a period of 90 consecutive days, or (ii) any 120 days during any consecutive 12 month period.
|
Termination without Cause within 12 Months of Change in Control
|
If your Employment with the Company (or any affiliate) is terminated by the Company without Cause within 12 months following the effective date of a “Change of Control”, the Board of Directors may accelerate the vesting all or any portion of your Option.
For purposes of this Agreement: “
Change in Control
” shall mean:
(i) any “person” (as such term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”), including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act) other than Barry Zyskind, George Karfunkel, Michael Karfunkel, any of their lineal descendants, any trust or charitable foundation controlled by any of them or their lineal descendants, any subsidiary or any employee benefit plan of the Company or a subsidiary or former subsidiary, is or becomes a beneficial owner, directly or indirectly, of stock of the Company representing 50% of more of the total voting power of the Company’s then outstanding stock;
(ii) a tender offer (for which a filing has been made with the Securities and Exchange Commission (the “
SEC
”) that purports to comply with the requirements of Section 14(d) of the Exchange Act, and the corresponding SEC rules) is made for the stock of the Company. In case of a tender offer described in this paragraph (ii), the “Change of Control” will be deemed to have occurred any time during the offer when the person (using the definition in (i) above) making the offer owns or has accepted for payment stock of the Company with 50% or more of the total voting power of the Company's outstanding stock; or
(iii) individuals who were the Board’s nominees for election as directors of the Company immediately prior to a meeting of the stockholders of the Company involving a contest for the election of directors shall not constitute a majority of the Board following the election.
|
|
Notice of Exercise
|
When you wish to exercise this Option, you must notify the Company in writing. Such exercise will only become effective upon the Company’s receipt of such written instructions.
|
|
Recapture Rights
|
In the event that you violate any of your obligations pursuant to the Confidentiality, Non-Competition, or Non-Solicitation provisions of this Agreement, you agree to return, within five days of receipt of written demand from the Company, any gains you realize from the exercise of all or any portion of the Option within the 12 months immediately preceding such violation, and any remaining portion of your Option shall be immediately forfeited, whether vested or unvested.
|
Confidentiality
|
During your Employment, you will have access to confidential or proprietary data or information of the Company (and its affiliates) and its operations. You agree that you will not at any time divulge or communicate the Confidential Information (defined below) to any person, nor shall you direct any employee to divulge or communicate to any person (other than to a person bound by confidentiality obligations similar to those contained herein and other than as necessary in performing your duties hereunder), or use to the detriment of the Company (or any of its affiliates) or for the benefit of any other person, any Confidential Information. This restriction shall survive your Employment hereunder, whether by the normal expiration thereof or otherwise.
The term
“Confidential Information”
shall mean all information, whether or not reduced to written or recorded form, that is related to the Company and that is not generally known or accessible to members of the public and/or competitors of the Company nor intended for general dissemination, whether furnished by the Company or compiled by the employee, including, without limitation, relating to the Company’s (or any affiliate’s) financial performance, customers, existing or proposed future projects, prospects, or business strategies, personnel information, financial information, customer lists, supplier lists, trade secrets, information regarding operations, systems, services, know-how, computer and any other processed or collated data, computer programs, pricing, marketing and advertising data.
You understand the Company intends to maintain the confidentiality of the Confidential Information notwithstanding that employees of the Company may have free access to the information for the purpose of performing their duties with the Company, and notwithstanding that employees not expressly bound by agreements similar to this agreement may have access to such information for job purposes. You acknowledge that Confidential Information need not be marked as such to preserve the confidential nature of the information.
|
|
Non-Competition
|
You acknowledge that (a) in the course of your Employment with the Company and its affiliates, you have, and will continue to, become familiar with the Company’s and its affiliates’ trade secrets, methods of doing business, business plans and other valuable confidential and proprietary information concerning the Company, its affiliates, their customers and business partners and that your services have been and will be of special, unique and extraordinary value to the Company and its affiliates. In consideration thereof and of this Award, during your Employment with the Company or an affiliate and for a period of one (1) year thereafter, you shall not, without the Company’s prior written approval, become engaged, directly or indirectly, as a director, officer, employee or 5% or more stockholder or equity interest owner in, partner in, or consultant to, any business that is directly competitive with the business of the Company (or any affiliate) in any area or region where the Company (or any affiliate) conducts business (“
Competition
”). Notwithstanding the foregoing, you shall not be deemed to be in Competition with the Company if you provide evidence satisfactory to the Company, in its sole and absolute discretion, that you: (i) work in a separate division, department or unit that does not compete with the business of the Company (or any affiliate); and (ii) will not have contact with the division, department or unit that does compete with the business of the Company (or any affiliate). If you received your Option grant as a non-employee member of the Company’s Board of Directors, this provision will not apply to you unless your Employment is terminated for Cause (as defined above) or for cause pursuant to the Company’s Certificate of Incorporation.
|
Non-Solicitation
|
During Employment and for a period of two (2) years thereafter, you shall not, directly or indirectly, on your own behalf or on behalf of any other person: (a) induce or attempt to induce any agent, broker, affinity group or policyholder of the Company (or any affiliate), or any prior agent, affinity group or policyholder that was an agent, affinity group or policyholder within twelve (12) months of such contact, to withdraw, decrease or cancel its business with the Company (or any affiliate) or otherwise terminate any written or oral agreement or understanding or other relationship with the Company (or any affiliate); (b) solicit the business of any agent, broker, affinity group or policyholder of the Company (or any affiliate), or any prior agent, affinity group or policyholder that was an agent, affinity group or policyholder within twelve (12) months of such contact, to the extent the business solicited is similar to, or competitive with, the business of the Company (or any affiliate); (c) solicit or attempt to solicit, or hire or attempt to hire, or communicate with any person who is an employee, individual consultant or independent contractor of the Company (or any affiliate), or any prior employee, individual consultant or independent contractor that was an employee, consultant or independent contractor within twelve (12) months of such contact; or (d) induce or attempt to induce any person who is an employee, individual consultant or independent contractor of the Company (or any affiliate) to terminate or limit his or her employment or other relationship with the Company (or any affiliate), or any prior employee, individual consultant or independent contractor that was an employee, individual consultant or independent contractor within twelve (12) months of such contact.
|
|
Form of Payment
|
Upon exercise of your Option, you must submit payment of the Option price for the shares you are purchasing. Payment may be made via (i) cash; (ii) a “cashless” exercise, by which you deliver an irrevocable direction to a licensed securities broker to sell Stock and to deliver all or part of the sale proceeds to the Company in payment of the aggregate Option price and any applicable withholding taxes; or (iii) as otherwise permitted by the Administrator.
“
Administrator
” shall mean one or more officers or employees of the Company to whom the Committee may delegate the authority execute and distribute Award Agreements or other documents evidencing or relating to Awards granted by the Committee under the Plan, to maintain records relating to Awards, to process or oversee the issuance of Stock under Awards, to interpret and administer the terms of Awards and to take such other actions as may be necessary or appropriate for the administration of the Plan and of Awards under the Plan, other that those specified in Section 3(b)(i) – (iii) of the Plan.
|
|
Withholding Taxes
|
In the event that the Company determines that any federal, state, local or foreign tax or withholding payment is required relating to the exercise or sale of shares arising from this grant, the Company shall have the right to require such payments from you, or withhold such minimum statutory amounts from other payments due to you from the Company. Payment of your withholding or other taxes may be made via one of the forms of payment for exercise set forth above, or as otherwise determined by the Administrator.
|
|
Transfer of Option
|
The Option is non-transferable by you. Any attempt by you to transfer this Option will result in the Option becoming invalid, except upon your death by the laws of descent and distribution.
|
No Employment Rights
|
Neither your Option nor this Agreement give you the right to be retained by the Company in any capacity and your Employment may be terminated at any time and for any reason.
|
|
Shareholder Rights
|
You have no rights as a shareholder of the Company unless and until the Stock relating to your exercise has been issued (or an appropriate book entry has been made). Except as described in the Plan, no adjustments are made for dividends or other rights if the applicable record date occurs before your Stock is issued (or an appropriate book entry has been made).
|
|
Applicable Law
Data Privacy
|
This Agreement shall be governed by the laws of the State of Delaware, with consent to jurisdiction by you in the State of New York.
To administer the Plan, the Company may process personal data about you. Such data includes the information provided in this Agreement, other appropriate personal and financial data about you such as home address and business addresses and other contact information, payroll information and any other information deemed appropriate by the Company to facilitate the administration of the Plan.
By accepting this award, you consent to the Company’s processing of such personal data and the transfer of such data outside the country in which you work or are employed, including, with respect to non-U.S. residents, to the United States, to transferees who shall include the Company and other persons designated by the Company to administer the Plan.
|
|
Consent to Electronic Delivery
|
Certain statutory materials relating to the Plan may be delivered to you in electronic form. By accepting this grant, you consent to electronic delivery and acknowledge receipt of these materials, including the Plan and the Plan prospectus.
|
|
Non-Qualified Stock Option
|
This Option is not intended to be an “incentive stock option” under Section 422 of the Internal Revenue Code of 1986, as amended, and will be interpreted accordingly.
|
Award of Restricted Stock
|
You have been granted ________ shares of Restricted Stock, subject to the terms and conditions of this Agreement and the Plan.
|
||
Grant Date
|
The effective date of this grant of Restricted Stock is _______ ____, 20__ (“
Grant Date
”).
|
||
Vesting
|
Your award of Restricted Stock shall vest in four equal installments of 25% on each of the first, second, third and fourth anniversaries of the Grant Date, provided you remain in Service (as defined below) on the vesting date.
“
Service
” means that you are currently an employee of the Company, are a member of the Company’s Board of Directors, or are otherwise providing services to the Company.
|
||
Restricted Stock Ownership and Transferability
|
Subject to the restrictions set forth in the Plan and this Agreement, the Award holder shall possess all incidents of ownership of the Restricted Stock granted hereunder, including the right to receive dividends with respect to such Restricted Stock and the right to vote such Restricted Stock.
Restricted Stock may not be transferred, assigned, pledged or hypothecated, whether by operation of law or otherwise (except by the laws of descent and distribution) nor may shares of Restricted Stock be made subject to execution, attachment or similar process.
|
||
Forfeiture of Unvested
Restricted Stock
|
Except as specifically provided in this Agreement or as may be provided in other agreements between you and the Company, no additional shares of Restricted Stock will vest after your Service has terminated for any reason and you will forfeit to the Company all of the Restricted Stock not yet vested or with respect to which all applicable restrictions and conditions have not lapsed.
|
||
Retirement
|
If you have been employed by the Company for at least five years and your Service terminates due to your: (i) retirement on or after your sixty-fifth birthday; or (ii) retirement on or after your fifty-fifth birthday with the consent of the Company, the Restricted Stock granted under this Agreement will automatically vest as to the number of Restricted Stock that would have vested had you remained in Service for the 12 month period immediately following your retirement.
|
Death
|
If your Service terminates because of your death, the Restricted Stock granted under this Agreement will automatically vest as to the number of Restricted Stock that would have vested had you remained in Service for the 12 month period immediately following your death.
|
||
Disability
|
If your Service terminates because of your Disability (as defined below), the Restricted Stock granted under this Agreement will automatically vest as to the number of Restricted Stock that would have vested had you remained in Service for the 12 month period immediately following your termination for Disability.
For purposes of this Agreement, “
Disability
” shall mean the Award holder is unable to perform the duties of their Service (or other services) (i) for a period of 90 consecutive days, or (ii) any 120 days during any consecutive 12 month period.
|
||
Termination For Cause
|
If your Service is terminated for Cause (as defined below), then you shall immediately forfeit all rights to your vested (but undelivered) and unvested Restricted Stock and this award shall immediately terminate.
For purposes of this Agreement, “
Caus
e” shall mean (a) willful misconduct or gross negligence; (b) conviction of a felony or conviction of a crime involving moral turpitude; (c) any act constituting fraud or the misappropriation or embezzlement of money or other property of the Company; and (d) any willful act or course of conduct constituting an abuse of office or authority which has a material adverse impact on the Company’s reputation or financial condition.
|
||
Termination without Cause within 12 Months of Change in Control
|
If your Service with the Company (or any affiliate) is terminated by the Company without Cause within 12 months following the effective date of a “Change of Control,” the Board of Directors may accelerate the vesting of any award of Restricted Stock held by you.
For purposes of this Agreement: “
Change in Control
” shall mean:
(i) any “person” (as such term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”), including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act) other than Barry Zyskind, George Karfunkel, Michael Karfunkel, any lineal descendants, any trust or charitable foundation controlled by any of them or their lineal descendants, any subsidiary or any employee benefit plan of the Company or a subsidiary or former subsidiary, is or becomes a beneficial owner, directly or indirectly, of stock of the Company representing 50% of more of the total voting power of the Company’s then outstanding stock;
(ii) a tender offer (for which a filing has been made with the Securities and Exchange Commission (the “
SEC
”) that purports to comply with the requirements of Section 14(d) of the Exchange Act, and the corresponding SEC rules) is made for the stock of the Company. In case of a tender offer described in this paragraph (ii), the “Change of Control” will be deemed to have occurred any time during the offer when the person (using the definition in (i) above) making the offer owns or has accepted for payment stock of the Company with 50% or more of the total voting power of the Company's outstanding stock; or
(iii) individuals who were the Board’s nominees for election as directors of the Company immediately prior to a meeting of the stockholders of the Company involving a contest for the election of directors shall not constitute a majority of the Board following the election.
|
Certificate; Book Entry Form; Legend
|
The Company shall issue the shares of Restricted Stock either (i) in certificate form or (ii) in book entry form, registered in the name of the Award holder, with legends, or notations, as applicable, referring to the terms, conditions, and restrictions applicable to the Award. Any certificate issued for Restricted Stock prior to vesting will be inscribed with the following legend:
“The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) relating to Restricted Stock contained in the AmTrust Financial Services, Inc. 2010 Omnibus Incentive Plan and an Agreement entered into between the registered owner and AmTrust Financial Services, Inc. Copies of such Plan and Agreement are on file at the principal office of AmTrust Financial Services, Inc.”
|
||
Escrow
|
Any Restricted Stock issued pursuant to this Award shall be held by the Company in escrow for the benefit of the Award recipient. Upon vesting, a certificate for the vested shares shall be issued to the Award holder free of the restrictive legend.
|
||
Vesting: Delivery of Shares
|
Upon vesting, restrictions related to the vested shares of Restricted stock shall lapse and the Company shall, as applicable, either remove the notations on such vested shares issued in book-entry form or deliver to the Award holder or their personal representative a stock certificate representing the number of shares of Stock, free of any restrictive legend, equal to the number of vested shares. If certificates representing such Restricted Stock had previously been delivered to you, you shall return such certificates to the Company, complete with any necessary signatures or instruments of transfer prior to the issuance by the Company of shares of Stock without the restrictive legend.
|
Recapture Rights
|
In the event that you violate any of your obligations pursuant to the Confidentiality, Non-Competition, or Non-Solicitation provisions of this Agreement, you agree to return to the Company, within five days of receipt of written demand from the Company, any gains you realize from the sale of all or any portion of the Restricted Stock during the 12 months immediately preceding such violation, and any remaining unsold portion of your Restricted Stock shall be immediately and totally forfeited.
|
||
Confidentiality
|
During your Service, you will have access to confidential or proprietary data or information of the Company (and its affiliates) and its operations. You agree not to at any time divulge or communicate the Confidential Information (defined below) to any person, nor shall you direct any employee to divulge or communicate to any person (other than to a person bound by confidentiality obligations similar to those contained herein and other than as necessary in performing your duties hereunder), or use to the detriment of the Company (or any of its affiliates) or for the benefit of any other person, any Confidential Information. This restriction shall survive your Service hereunder, whether by the normal expiration thereof or otherwise.
The term
“Confidential Information”
shall mean all information, whether or not reduced to written or recorded form, that is related to the Company and that is not generally known or accessible to members of the public and/or competitors of the Company nor intended for general dissemination, whether furnished by the Company or compiled by the employee, including, without limitation, relating to the Company’s (or any affiliate’s) financial performance, customers, existing or proposed future projects, prospects, or business strategies, personnel information, financial information, customer lists, supplier lists, trade secrets, information regarding operations, systems, services, know-how, computer and any other processed or collated data, computer programs, pricing, marketing and advertising data.
You understand the Company intends to maintain the confidentiality of the Confidential Information notwithstanding that employees of the Company may have free access to the information for the purpose of performing their duties with the Company, and notwithstanding that employees not expressly bound by agreements similar to this agreement may have access to such information for job purposes. You acknowledge that Confidential Information need not be marked as such to preserve the confidential nature of the information.
|
Non-Competition
|
You acknowledge that (a) in the course of your Service with the Company and its affiliates, you have, and will continue to, become familiar with the Company’s and its affiliates’ trade secrets, methods of doing business, business plans and other valuable confidential and proprietary information concerning the Company, its affiliates, their customers and business partners and that your services have been and will be of special, unique and extraordinary value to the Company and its affiliates. In consideration thereof and of this Award, during your Service with the Company or an affiliate and for a period of one (1) year thereafter, you shall not, without the Company’s prior written approval, become engaged, directly or indirectly, as a director, officer, employee or 5% or more stockholder or equity interest owner in, partner in, or consultant to, any business that is directly competitive with the business of the Company (or any affiliate) in any area or region where the Company (or any affiliate) conducts business (“
Competition
”). Notwithstanding the foregoing, you shall not be deemed to be in Competition with the Company if you provide evidence satisfactory to the Company, in its sole and absolute discretion, that you: (i) work in a separate division, department or unit that does not compete with the business of the Company (or any affiliate); and (ii) will not have contact with the division, department or unit that does compete with the business of the Company (or any affiliate). If you received your Restricted Stock grant as a non-employee member of the Company’s Board of Directors, this provision will not apply to you unless your Service is terminated for Cause (as defined above) or for cause pursuant to the Company’s Certificate of Incorporation.
|
||
Non-Solicitation
|
During Service and for a period of two (2) years thereafter, you shall not, without the prior written consent of the Company, directly or indirectly, on your own behalf or on behalf of any other person, firm, corporation or business entity: (a) induce or attempt to induce any agent, affinity group or policyholder of the Company (or any affiliate), or any prior agent, affinity group or policyholder that was an agent, broker, affinity group or policyholder within twelve (12) months of such contact, to withdraw, decrease or cancel its business with the Company (or any affiliate) or otherwise terminate any written or oral agreement or understanding or other relationship with the Company (or any affiliate); (b) solicit or attempt to solicit, service or attempt to service, or for the purpose of obtaining the business of any customer of the Company (or any affiliate), or any prior agent, affinity group or policyholder that was an agent, broker, affinity group or policyholder within twelve (12) months of such contact, to the extent the business solicited is similar to, or competitive with, the business of the Company (or any affiliate),
engage in discussions or other communications with (regardless of who initiates such discussions or communications) any person, firm or entity that was an actual or prospective
agent, broker, affinity group or policyholder of the Company
during any part of the twelve (12) month period immediately preceding termination of Service if you participated, directly or indirectly, in the solicitation or servicing of that
agent, broker, affinity group or policyholder
or prospective
agent, broker, affinity group or policyholder
, or supervised or managed those who did, during your Service with the Company at any time during such twelve (12) month period immediately preceding
your
termination of Service; (c) solicit or attempt to solicit, hire or attempt to hire, or communicate with, any person who is an employee, individual consultant or independent contractor of the Company (or any affiliate), or any prior employee, individual consultant or independent contractor that was an employee, consultant or independent contractor within twelve (12) months of such contact,
with
the purpose or intent of attracting
such
person from the employ of the Company (or any affiliate
)
; or (d) induce or attempt to induce any person who is an employee, individual consultant or independent contractor of the Company (or any affiliate) to terminate or limit his or her Service or other relationship with the Company (or any affiliate), or any prior employee, individual consultant or independent contractor that was an employee, individual consultant or independent contractor within twelve (12) months of such contact.
|
No Right to Employment
|
Neither your Restricted Stock nor this Agreement give you the right to be retained by the Company in any capacity and your Service may be terminated at any time and for any reason.
|
||
Shareholder Rights
|
You have no rights as a shareholder unless and until the Stock relating to the Restricted Stock has been issued to you (or an appropriate book entry has been made). Except as described in the Plan or herein, no adjustments are made for dividends or other rights if the applicable record date occurs before your Stock is issued (or an appropriate book entry has been made). If the Company pays a dividend on its Stock, you will, however, be entitled to receive a cash payment equal to the per-share dividend paid on the Stock times the number of Restricted Stock that you hold as of the record date for the dividend.
|
||
Applicable Law
|
This Agreement shall be governed by the laws of the State of Delaware, with consent to jurisdiction by you in the State of New York.
|
||
Data Privacy
|
To administer the Plan, the Company may process personal data about you. Such data includes the information provided in this Agreement, other appropriate personal and financial data about you such as home address and business addresses and other contact information, payroll information and any other information deemed appropriate by the Company to facilitate the administration of the Plan.
By accepting this award, you consent to the Company’s processing of such personal data and the transfer of such data outside the country in which you work or are employed, including, with respect to non-U.S. residents, to the United States, to transferees who shall include the Company and other persons designated by the Company to administer the Plan.
|
||
Consent to Electronic Delivery
|
Certain statutory materials relating to the Plan may be delivered to you in electronic form. By accepting this grant, you consent to electronic delivery and acknowledge receipt of these materials, including the Plan and the Plan prospectus.
|
||
Award of RSUs
|
You have been granted ________ RSUs, subject to the terms and conditions of this Agreement and the Plan.
|
||
Grant Date
|
The effective date of this grant of RSUs is _______ ____, 20__ (“
Grant Date
”).
|
||
Vesting
|
RSUs shall vest in four equal installments of 25% on each of the first, second, third and fourth anniversaries of the Grant Date, provided you remain in Service (as defined below) on the vesting date.
“
Service
” means that you are currently an employee of the Company, are a member of the Company’s Board of Directors, or are otherwise providing services to the Company.
|
||
RSU Transferability
|
RSUs may not be transferred, assigned, pledged or hypothecated, whether by operation of law or otherwise, nor may the RSUs be made subject to execution, attachment or similar process.
|
||
Forfeiture of Unvested
RSUS
|
Except as specifically provided in this Agreement or as may be provided in other agreements between you and the Company, no additional RSUs will vest after your Service has terminated for any reason and you will forfeit to the Company all of the RSUs that have not yet vested or with respect to which all applicable restrictions and conditions have not lapsed.
|
||
Retirement
|
If you have been employed by the Company for at least five years and your Service terminates due to your: (i) retirement on or after your sixty-fifth birthday; or (ii) retirement on or after your fifty-fifth birthday with the consent of the Company, the RSUs granted under this Agreement will automatically vest as to the number of RSUs that would have vested had you remained in Service for the 12 month period immediately following your retirement.
|
||
Death
|
If your Service terminates because of your death, the RSUs granted under this Agreement will automatically vest as to the number of RSUs that would have vested had you remained in Service for the 12 month period immediately following your death.
|
Disability
|
If your Service terminates because of your Disability (as defined below), the RSUs granted under this Agreement will automatically vest as to the number of RSUs that would have vested had you remained in Service for the 12 month period immediately following your termination for Disability.
For purposes of this Agreement, “
Disability
” shall mean the Award holder is unable to perform the duties of their Service (or other services) (i) for a period of 90 consecutive days, or (ii) any 120 days during any consecutive 12 month period.
|
||
Termination For Cause
|
If your Service is terminated for Cause (as defined below), then you shall immediately forfeit all rights to your vested (but undelivered) and unvested RSUs and this award shall immediately terminate.
For purposes of this Agreement, “
Caus
e” shall mean (a) willful misconduct or gross negligence; (b) conviction of a felony or conviction of a crime involving moral turpitude; (c) any act constituting fraud or the misappropriation or embezzlement of money or other property of the Company; and (d) any willful act or course of conduct constituting an abuse of office or authority which has a material adverse impact on the Company’s reputation or financial condition.
|
||
Termination without
Cause within 12 Months of
Change in Control
|
If your Service with the Company (or any affiliate) is terminated by the Company without Cause within 12 months following the effective date of a “Change of Control,” the Board of Directors may accelerate the vesting of all or any portion of this RSUs award.
For purposes of this Agreement: “
Change in Control
” shall mean:
(i) any “person” (as such term is used in Section 13(d) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “
Exchange Act
”), including any syndicate or group deemed to be a “person” under Section 13(d)(3) of the Exchange Act) other than Barry Zyskind, George Karfunkel, Michael Karfunkel, any of their lineal descendants, any trust or charitable foundation controlled by any of them or their lineal descendants, any subsidiary or any employee benefit plan of the Company or a subsidiary or former subsidiary, is or becomes a beneficial owner, directly or indirectly, of stock of the Company representing 50% of more of the total voting power of the Company’s then outstanding stock;
(ii) a tender offer (for which a filing has been made with the Securities and Exchange Commission (the “
SEC
”) that purports to comply with the requirements of Section 14(d) of the Exchange Act, and the corresponding SEC rules) is made for the stock of the Company. In case of a tender offer described in this paragraph (ii), the “Change of Control” will be deemed to have occurred any time during the offer when the person (using the definition in (i) above) making the offer owns or has accepted for payment stock of the Company with 50% or more of the total voting power of the Company's outstanding stock; or
(iii) individuals who were the Board’s nominees for election as directors of the Company immediately prior to a meeting of the stockholders of the Company involving a contest for the election of directors shall not constitute a majority of the Board following the election.
|
Share Delivery Pursuant to Vested Units; Withholding Tax
|
On the vesting date (or as soon as practicable thereafter but in no event beyond 2½ months after the end of the calendar year in which the shares vest), at the Company’s option, (i) a brokerage account in your name will be credited with Stock representing the number of shares that vested under this grant (the “
Vesting Shares
”), or (ii) the Company shall physically deliver the Vesting Shares. If the vesting date is not a trading day, the Stock will be delivered on the next trading day. The Company will determine the number of the Vesting Shares necessary to cover the statutory minimum amount of federal, state, local, and foreign taxes that the Company is required to withhold with respect to the RSU vesting, rounding up
to the nearest whole Share of Stock (the “
Withholding Shares
”).
|
||
By accepting this award of RSUs, you irrevocably (i) instruct the Company to deliver the Vesting Shares to your account; and (ii) authorize and direct the Company to withhold or otherwise reacquire from you the Withholding Shares at the time of vesting to be used to fund the payment of the withholding taxes. You further acknowledge that this irrevocable written instruction is intended to constitute an instruction pursuant to Rule 10b5-1 of the Exchange Act.
|
|||
The purchase price for the vested Stock is deemed paid by your prior services to the Company.
Withholding shall only be applicable to employees of the Company.
|
|||
Recapture Rights
|
In the event that you violate any of your obligations pursuant to the Confidentiality, Non-Competition, or Non-Solicitation provisions of this Agreement, you agree to return to the Company, within five days of receipt of written demand from the Company, any gains you realize from the sale of all or any portion of the RSUs during the 12 months immediately preceding such violation, and any remaining unsold portion of your RSUs shall be immediately and totally forfeited.
|
Confidentiality
|
During your Service, you will have access to confidential or proprietary data or information of the Company (and its affiliates) and its operations. You agree that you will not at any time divulge or communicate the Confidential Information (defined below) to any person, nor shall you direct any employee to divulge or communicate to any person (other than to a person bound by confidentiality obligations similar to those contained herein and other than as necessary in performing your duties hereunder), or use to the detriment of the Company (or any of its affiliates) or for the benefit of any other person, any Confidential Information. This restriction shall survive your Service hereunder, whether by the normal expiration thereof or otherwise.
The term
“Confidential Information”
shall mean all information, whether or not reduced to written or recorded form, that is related to the Company and that is not generally known or accessible to members of the public and/or competitors of the Company nor intended for general dissemination, whether furnished by the Company or compiled by the employee, including, without limitation, relating to the Company’s (or any affiliate’s) financial performance, customers, existing or proposed future projects, prospects, or business strategies, personnel information, financial information, customer lists, supplier lists, trade secrets, information regarding operations, systems, services, know-how, computer and any other processed or collated data, computer programs, pricing, marketing and advertising data.
You understand the Company intends to maintain the confidentiality of the Confidential Information notwithstanding that employees of the Company may have free access to the information for the purpose of performing their duties with the Company, and notwithstanding that employees not expressly bound by agreements similar to this agreement may have access to such information for job purposes. You acknowledge that Confidential Information need not be marked as such to preserve the confidential nature of the information.
|
||
Non-Competition
|
You acknowledge that (a) in the course of your Service with the Company and its affiliates, you have, and will continue to, become familiar with the Company’s and its affiliates’ trade secrets, methods of doing business, business plans and other valuable confidential and proprietary information concerning the Company, its affiliates, their customers and business partners and that your services have been and will be of special, unique and extraordinary value to the Company and its affiliates. In consideration thereof and of this Award, during your Service with the Company or an affiliate and for a period of one (1) year thereafter, you shall not, without the Company’s prior written approval, become engaged, directly or indirectly, as a director, officer, employee or 5% or more stockholder or equity interest owner in, partner in, or consultant to, any business that is directly competitive with the business of the Company (or any affiliate) in any area or region where the Company (or any affiliate) conducts business (“
Competition
”). Notwithstanding the foregoing, you shall not be deemed to be in Competition with the Company if you provide evidence satisfactory to the Company, in its sole and absolute discretion, that you: (i) work in a separate division, department or unit that does not compete with the business of the Company (or any affiliate); and (ii) will not have contact with the division, department or unit that does compete with the business of the Company (or any affiliate). If you received your RSU grant as a non-employee member of the Company’s Board of Directors, this provision will not apply to you unless your Service is terminated for Cause (as defined above) or for cause pursuant to the Company’s Certificate of Incorporation.
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Non-Solicitation
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During Service and for a period of two (2) years thereafter, you shall not, without the prior written consent of the Company, directly or indirectly, on your own behalf or on behalf of any other person, firm, corporation or business entity: (a) induce or attempt to induce any agent, affinity group or policyholder of the Company (or any affiliate), or any prior agent, broker, affinity group or policyholder that was an agent, affinity group or policyholder within twelve (12) months of such contact, to withdraw, decrease or cancel its business with the Company (or any affiliate) or otherwise terminate any written or oral agreement or understanding or other relationship with the Company (or any affiliate); (b) solicit or attempt to solicit, service or attempt to service, or for the purpose of obtaining the business of any agent, broker, affinity group or policyholder of the Company (or any affiliate), or any prior agent, affinity group or policyholder that was an agent, affinity group or policyholder within twelve (12) months of such contact, to the extent the business solicited is similar to, or competitive with, the business of the Company (or any affiliate), engage in discussions or other communications with (regardless of who initiates such discussions or communications) any person, firm or entity that was an actual or prospective agent, broker, affinity group or policyholder of the Company during any part of the twelve (12) month period immediately preceding termination of Service if you participated, directly or indirectly, in the solicitation or servicing of that agent, broker, affinity group or policyholder or prospective agent, broker, affinity group or policyholder, or supervised or managed those who did, during your Service with the Company at any time during such twelve (12) month period immediately preceding your termination of Service; (c) solicit or attempt to solicit, hire or attempt to hire, or communicate with, any person who is an employee, individual consultant or independent contractor of the Company (or any affiliate), or any prior employee, individual consultant or independent contractor that was an employee, consultant or independent contractor within twelve (12) months of such contact, with the purpose or intent of attracting such person from the employ of the Company (or any affiliate); or (d) induce or attempt to induce any person who is an employee, individual consultant or independent contractor of the Company (or any affiliate) to terminate or limit his or her Service or other relationship with the Company (or any affiliate), or any prior employee, individual consultant or independent contractor that was an employee, individual consultant or independent contractor within twelve (12) months of such contact.
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No Right to Employment
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Neither your RSUs nor this Agreement give you the right to be retained by the Company in any capacity and your Service may be terminated at any time and for any reason.
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Shareholder Rights
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You have no rights as a shareholder unless and until the Stock relating to the RSUs has been issued to you (or an appropriate book entry has been made). Except as described in the Plan or herein, no adjustments are made for dividends or other rights if the applicable record date occurs before your Stock is issued (or an appropriate book entry has been made).
You will not be entitled to any dividends on any unvested RSUs.
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Applicable Law
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This Agreement shall be governed by the laws of the State of Delaware, with consent to jurisdiction by you in the State of New York.
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Data Privacy
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To administer the Plan, the Company may process personal data about you. Such data includes the information provided in this Agreement, other appropriate personal and financial data about you such as home address and business addresses and other contact information, payroll information and any other information deemed appropriate by the Company to facilitate the administration of the Plan.
By accepting this award, you consent to the Company’s processing of such personal data and the transfer of such data outside the country in which you work or are employed, including, with respect to non-U.S. residents, to the United States, to transferees who shall include the Company and other persons designated by the Company to administer the Plan and the Plan prospectus.
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Consent to Electronic Delivery
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Certain statutory materials relating to the Plan may be delivered to you in electronic form. By accepting this grant, you consent to electronic delivery and acknowledge receipt of these materials, including the Plan.
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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.
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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)
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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)
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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)
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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)
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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.
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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)
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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)
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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: November 9, 2011
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By:
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/s/ Barry Zyskind
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Barry Zyskind
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President and Chief Executive Officer
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(Principal Executive Officer)
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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.
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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)
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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)
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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)
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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)
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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
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5.
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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)
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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)
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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: November 9, 2011
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By:
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/s/ Ronald Pipoly
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Ronald Pipoly
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Chief Financial Officer
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(Principal Financial and Accounting Officer)
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1.
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The Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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2.
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: November 9, 2011
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By:
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/s/ Barry Zyskind
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Barry Zyskind
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President and Chief Executive Officer
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(Principal Executive Officer)
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1.
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The Quarterly Report on Form 10-Q for the quarter ended September 30, 2011 (the “Report”) fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
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The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: November 9, 2011
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By:
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/s/ Ronald Pipoly
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Ronald Pipoly
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Chief Financial Officer
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(Principal Financial and Accounting Officer)
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