2017 has been a terrible year so far for AmTrust Financial Services (AFSI).
First, it restated five years’ worth of earnings, reducing profits earned in that time by $310 million.
If that weren’t bad enough, things got even worse just one week later.
An article in The Wall Street Journal stated that secret recordings were used in conjunction with an SEC inquiry into the company, for questionable accounting practices.
AmTrust issued a response, and has insisted its books are clean, but the damage has been done. The stock has lost nearly half its value year-to-date.
On the surface, AmTrust looks like an attractive dividend stock. It is one of 416 stocks with a 5%+ dividend yield.
And, it is a Dividend Achiever, a group of 264 stocks with 10+ years of consecutive dividend increases.
While there is a great deal of headline risk hanging over the company right now, it could be a bargain, if the SEC issues are much-ado-about-nothing.
Business Overview
AmTrust is a property and casualty insurer. It operates in the following business segments:
- Small Commercial Business (40% of 2016 revenue)
- Specialty Risk & Extended Warranty (28% of 2016 revenue)
- Specialty Program (17% of 2016 revenue)
- Service & Fee Income (10% of 2016 revenue)
- Investment Income (5% of 2016 revenue)
The company’s primary insurance products are workers’ compensation, commercial auto and property coverage, and warranty insurance.
AmTrust went public in 2006. In the 11 years since, it has grown into a company with 125 offices in 70 countries, with almost $8 billion in annual premiums written.
It generated 81% of 2016 gross written premiums in the U.S. last year, but it is expanding its geographic diversification. The company sees growth potential in Europe and Southeast Asia.
AmTrust’s commercial business is its most important segment.
(Click on image to enlarge)
Source:Â April 2017 Investor Presentation, page 18
