AmTrust Financial Services Inc., the insurer that bought an auto-warranty business from Ally Financial Inc., plunged after GeoInvesting challenged the company’s accounting.
AmTrust dropped $4.63, or 12 percent, to $33.67 at 4 p.m. in New York, paring its gain for the year to 29 percent. Barry Zyskind, the insurer’s CEO, said the company has “never been stronger” and was being targeted by investors who profit when the stock falls.
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., 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.
Zyskind said the company has clarified its accounting for the life-settlements portfolio in conference calls and public filings and consolidates the results of insurance subsidiaries, including reinsurers in Luxembourg. Acquisitions there were made with the approval of Luxembourg insurance authorities, according to the statement.
“We are growing successfully in very attractive insurance markets in our workers’ compensation insurance business, extended warranty operations and international business,” Zyskind said in AmTrust’s statement. “Recent negative articles that individuals have distributed are false and misleading and are being distributed with the intention of manipulating the shares of AmTrust.”
Maiden Holdings Ltd., which counts Zyskind as chairman, also declined, falling 8 percent. Maiden Holdings said in its most recent annual report that AmTrust is its largest customer. Noah Fields of Maiden Holdings’ investor relations department didn’t immediately return a message seeking comment.