AmTrust Falls as GeoInvesting Challenges Accounting

AmTrust Financial Services Inc. (AFSI), the insurer that bought an auto warranty business from Ally Financial Inc., fell the most since April after GeoInvesting challenged the company’s accounting.

AmTrust dropped $2.57, or 6.7 percent, to $35.73 at 11:18 a.m. in New York, paring its gain for the year to 37 percent.

The insurer may be taking advantage of discrepancies in U.S. and Luxembourg accounting practices to minimize losses reported in Securities and Exchange Commission filings, according to a report today from GeoInvesting, a website that provides research to subscribers. GeoInvesting in 2011 questioned the accounting of Yuhe International Inc. (YUII), a Chinese chicken breeder that subsequently lost most of its market value.

“Short sellers have the winning position in AmTrust,” GeoInvesting said. Investors “should take careful note of the discussions of consolidation of earnings and valuation of assets that could result in large losses and regulatory scrutiny for the company.”

AmTrust may also be assigning unrealistically high valuations to life-settlement contracts, according to the report. The deals let investors buy insurance policies from individuals and pay the premiums until the people die, at which point the company collects the benefits.

Elizabeth Malone, a spokeswoman for the New York-based insurer, had no immediate comment on the report.

To contact the reporters on this story: Zachary Tracer in New York at ztracer1@bloomberg.net; Joshua Fineman in New York at jfineman@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net

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