Boenning & Scattergood analyst Robert Farnam downgraded Atlas Financial Holdings Inc. to "neutral" after the company announced a significant loss reserve charge for the fourth quarter of 2017.
The reserve charge, which was uncovered following the year-end reserve review, largely relates to commercial auto claims that occurred in 2015 and prior, Farnam wrote. The charge is broad-based and indicates that Atlas is not as immune as previously thought to the commercial auto issues plaguing the industry at large, the analyst said.
Farnam also noted that there was a general belief that after three clean quarters in 2017, the company had resolved reserve concerns after it booked a large reserve charge in the fourth quarter of 2016. But the fourth-quarter 2017 announcement proved otherwise, he wrote. The company's book value per share could decline more than 33% as a result of the charge, Farnam said.
He downgraded his EPS estimate for 2018 to $1.65 from $2.37, and his 2019 prediction to $1.85 from $2.62.
