Atlas Financial (AFH) Q4 Loss Widens, 2018 Guidance Issued

Atlas Financial Holdings, Inc. (NASDAQ:AFH) reported fourth-quarter 2017 operating loss of $5.57 per share, wider than the Zacks Consensus Estimate of a loss of $3.91. The metric was also wider than the loss of $2.27, incurred in the year-ago quarter.

Atlas Financial Holdings, Inc. Price, Consensus and EPS Surprise

Behind the Headlines

Atlas Financial’s revenues rose 28.3% year over year to $59 million on 29.8% higher net premiums. However, a 4.2% year-over-year decline in net investment income and nearly 45% drop in other income limited this upside. The top line met the Zacks Consensus Estimate.

Gross premiums written of $54.2 million increased 4.3%, driven by higher premiums written in livery/limousine in California and New Jersey, para-transit in Texas and taxi in Pennsylvania, partially offset by lower premiums written in para-transit in New Jersey and New York, taxi in Louisiana, and in all lines in Minnesota and Michigan.

The company’s total expenses escalated 82.6% year over year to nearly $127 million due to a rise in net claims incurred, acquisition costs, interest costs and other underwriting expenses.

Atlas Financial’s underwriting loss of $69.1 million is wider than $25 million loss suffered in the prior-year quarter. Combined ratio deteriorated 6380 basis points (bps) year over year to 220.3%.

Financial Update

Atlas Financial exited 2017 with cash and cash equivalents of $45.6 million, up 52.5% from 2016-end level.

Total assets of Atlas Financial grew 13.9% from year-end 2016 to $482.5 million as of Dec 31, 2017.

Debt level increased 25% from year-end 2016 to nearly $24 million as of Dec 31, 2017.

Total shareholders’ equity decreased 28.8% from year-end 2016 to $90.6 million.

Book value was $7.42 per share as of Dec 31, 2017, down nearly 30% from year-end 2016.

Atlas Financial’s return on average common equity was (35.7%) in 2017, comparing unfavorably with 1.9% in 2016.

The gross annualized investment yield on cash and cash equivalents was 0.3%, expanding 20 basis points in fourth-quarter 2017. This increase was driven by higher interest rates on certain new accounts and more balances in accounts earning greater interest.

2018 Guidance

Atlas expects to write more than $300 million in premiums and the combined ratio to hover around 80% in 2018. Net earnings per share are estimated to exceed $2.

Zacks Rank

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

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

Performance of Other Insurers

Among other players from the insurance industry that have reported fourth-quarter earnings so far, the bottom line of The Progressive Corporation (NYSE:PGR) , The Travelers Companies, Inc. (NYSE:TRV) and RLI Corp. (NYSE:RLI) beat the respective Zacks Consensus Estimate.

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