AmTrust earns $76m through National General Holdings divestment

Troubled AmTrust Financial Services said June 9 that it has entered into agreements to sell 10,586,000 shares it owns in specialty personal lines insurer National General Holdings (NGHC) for approximately $211.7 million.

AmTrust has agreed to sell the stake through separate, privately negotiated purchase agreements with unaffiliated third parties.

The pre-tax gain on the sale of the shares will be approximately $76 million, pending AmTrust's proportional share of NGHC's earnings through the date of the sale.

The specialty property and casualty insurer will invest the funds from the sale in accordance with “both the company's overall corporate investment guidelines as well as individual subsidiary's investment guidelines.”

"We are taking the initiative to sell National General shares in order to simplify our balance sheet and investment portfolio composition,” said Adam Karkowsky, executive vice president and chief financial officer of AmTrust.

“Our investment in National General has delivered meaningful returns, as National General's business has grown over the past several years.

“We appreciate the opportunity that our former Chairman Michael Karfunkel provided us to participate as a co-investor in NGHC's equity."

AmTrust had delayed its 2016 consolidated financial statements and said that the company's 2014 and 2015 financial reports would be restated.

Shareholder rights law firm Robbins Arroyo filed a class action complaint against AmTrust. In the filing, the law firm accuses AmTrust officials of falsely attesting to the accuracy of the financial statements, to the disclosure of any material changes to the company's internal controls over financial reporting, and to the disclosure of all fraud.

AmTrust should take a reserve charge “in the hundreds of millions of dollars” and commit to “much-improved disclosure” in order to restore investor confidence, analysts at Keefe, Bruyette & Woods suggested.

Since then, AmTrust has completed a $300 million capital raise through a private placement to support its insurance units.

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