Troubled AmTrust in $300m capital raise to support insurance units

New York-based insurance holding company AmTrust Financial Services said that it plans to raise gross proceeds of $300 million through a private placement.

The property/casualty insurer 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, according to analysts at Keefe, Bruyette & Woods.

Through the announced investment, AmTrust, wants to enhance its balance sheet and capital base, according to a statement. AmTrust intends to direct the proceeds from the private placement to the company's insurance subsidiaries to support their financial strength, continued organic growth, and writing of business. The transaction is expected to close on May 26, 2017.

Members of the Karfunkel family are the sole participants in the private placement.

"Members of the Karfunkel family chose to make this investment because they believe strongly in the company's future," said Barry Zyskind, chairman and CEO of AmTrust. "Since its founding in 1998, AmTrust has grown from an entrepreneurial start-up into one of the largest specialty property and casualty insurers in the US, with an expanding global presence.

“The capital contribution gives AmTrust a higher capital base to support our business platform and organic growth opportunities. In addition to enhancing our balance sheet and capital base, this sizeable investment of $300 million should also provide confidence to all of our stakeholders that we are well capitalized to grow and write business. We remain committed to continuing to support growth and maintain confidence in AmTrust."

Today’s stories

Munich Re and Aviva invest in insurtech start-up Neos

The Hanover poaches senior Zurich Insurance exec to lead specialty

Zurich combines North America units to "simplify" structure

The Hartford appoints P&C chief underwriting officer

Willis Towers Watson names health and benefits leader in US

Guardian Life elects new board directors

Did you enjoy reading this story?  Sign up to our free daily newsletters and get stories like this sent straight to your inbox.