AmTrust Financial Services Inc., the insurer that bought an auto-warranty business from Ally Financial Inc., plunged in New York trading after GeoInvesting challenged the company’s accounting.
AmTrust dropped $6.05, or 16 percent, to $32.24 at 2:10 p.m. in New York, paring its gain for the year to 24 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 Thursday 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, led by CEO Barry Zyskind, 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 comment on the report.
Maiden Holdings Ltd., which counts Zyskind as chairman, also declined, falling 12 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.
(Editors: Dan Kraut, Steven Crabill)