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AmTrust Financial (AFSI) Projects Q3 Cat Loss Estimates

Zacks

AmTrust Financial Services, Inc. AFSI recently announced pre-tax catastrophe loss estimates emanating from inclement weather events in third-quarter 2017. The company projects catastrophe loss between $40 million and $65 million.

The losses stemmed from Hurricanes Harvey, Irma, Maria and Mexico tremors and were attributable to contracts bound by AmTrust at Lloyd’s. The company at Lloyd’s is entitled to a multi-event catastrophe coverage for losses in excess of $10 million per event.

The Zacks Consensus Estimate for the third quarter is currently pegged at 30 cents per share, reflecting a year-over-year slump of 58.9%. We expect the estimates to move downward as analysts incorporate impact of catastrophe losses.

To compensate the loss effect, AmTrust Financial maintains comprehensive catastrophe reinsurance coverage. As of Jul 1, it had coverage for losses in excess of $20 million with per event limit of $830 million. Again in August, the company had signed a new quota share reinsurance contract to lower exposure to catastrophe losses.

Being a property and casualty insurer, AmTrust Financial cannot escape the disasters caused by natural calamities. The last reported quarter too has largely suffered due to such a loss. Combined ratio deteriorated 990 basis points. Underwriting results in the soon-to-be reported quarter will also be hampered owing to catastrophes.

Shares of AmTrust Financial have lost 8.6% since the onset of the third quarter, underperforming the industry’s increase of 7.2%. The stock has seen the Zacks Consensus Estimate for third-quarter 2017 earnings being revised nearly 35% downward over the last 60 days. Catastrophes affecting underwriting results will possibly be a drag on the share price.

AmTrust Financial carries a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Recently, American Financial Group, Inc. AFG calculates catastrophe loss of about $105 million or 95 cents per share post-tax. Chubb Limited CB expects $200 million post-tax cat losses from Maria, $24 million from Mexican earthquakes, $520 million from Harvey and between $640 million and $760 million from Irma. HCI Group, Inc. HCI projects loss between $100 million and $300 million.

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