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Q4 2008 AMTRUST FINANCIAL SERVICES INC Earnings Conference Call - Final.

Article Excerpt
OPERATOR: Good morning, everyone, and welcome to the AmTrust Financial Services fourth-quarter and year-end 2008 earnings conference call. Today's call is being recorded. At this time, I would like to turn the conference call over to Mr. Hilly Gross, Vice President of Investor Relations. Please go ahead, sir.

HILLY GROSS, VP - IR, AMTRUST: Thank you and good morning. And it is my pleasure to welcome you to this, our fourth-quarter earnings conference call. Before I introduce to you both Barry Zyskind, President and CEO of AmTrust Financial Services, and Mr. Ron Pipoly, Chief Financial Officer of AmTrust, I would, by your leave, read into the record a statement on forward-looking statements.

This morning's conference call, which may contain forward-looking statements which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995, the forward-looking statements are based on the Company's current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that actual developments will be those anticipated by the Company. Actual results may differ materially from those projected as a result of significant risks and uncertainties, including nonreceipt of the expected payments; changes in interest rates affecting the performance of financial markets on investment income; and fair values of investments, developments of claims and the effect on loss reserves; accuracy in projecting loss reserves; the impact of competition and pricing environments; changes in the demand of the Company's products; the effects of general economic conditions; adverse state and federal legislation, regulations and regulatory investigations into industry practices; developments relating to existing agreements; heightened competition; changes in pricing environments; and changes in asset valuations. The Company undertakes no obligation to publicly update any forward-looking statements.

Having read that into the record, it is now my pleasure to introduce to you AmTrust's President and Chief Executive Officer, Mr. Barry Zyskind. Barry?

BARRY ZYSKIND, PRESIDENT, CEO, AMTRUST: Thank you, Hilly, and good morning. I am pleased to report that AmTrust had a profitable fourth quarter and a very strong year in 2008, with strong operating earnings and continued premium growth. Gross written premiums for the fourth quarter was $294 million, an increase of 19% over fourth quarter 2007. Gross written premium for 2008 was $1.1 billion, an increase of 32%. Our operating earnings for the fourth quarter was $32 million, an increase of 26% over the fourth quarter of 2007. Operating earnings for the year were $125 million, a 44% increase. Our net income for the quarter $25 million and for the year was $83 million. Our balance sheet is solid. Our cash flows and liquidity are strong.

Our small commercial business segment continues to perform well. We grew by 49% for the year. With the acquisition of UBI from Unitrin, we are continuing to diversify and expand our product.

In addition, as mentioned on previous call, we continue to see solid growth from our relationship with [CardinalComp]. Through this strategic agreement with CardinalComp, we have been able to further expand our presence in New York and other parts of the Northeast, where we have had a successful history of doing business. We will continue to explore additional opportunities to grow this segment in other geographic areas as well.

Because we primarily focus on small businesses, we continue to see positive trends in our small workers' comp activities. We monitor claims very carefully. In terms of payrolls, which are the basis of workers' comp premiums, we have seen only a small decrease, and the frequency and severity of these claims are stable. We attribute these strong components to our focus on small businesses and niche markets. We also continue to see very strong renewal rates.

Our middle-market program has done well, and we have established new programs which we believe will grow significantly in a hardening market. We are well-positioned to take advantage of opportunities that present themselves as a result of the current dislocation in certain areas of the insurance market.

Our specialty risk and extended warranty segment continues to perform well through the establishment of new programs both in the United States and Europe. Although writings decreased for the quarter due to the currency exchange and decreased sales of some of our customers, this segment grew for the year by 36%. We continue to aggressively add new customers. And through this, we believe that this segment will continue to grow and experience strong results in 2009 and beyond. We have expanded our teams in this segment, and feel we are uniquely positioned to take advantage of opportunities as competitors experience challenges in the market.

In all segment lines, as we successfully grow our business, we continue to be focused and disciplined. For the year, we have successfully grown all of our segments. Our diversified platform allows us to quickly recognize and take advantage of market opportunities...

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