AmTrust divests further while posting Q3 loss

Specialty property/casualty insurer AmTrust Financial Services is further divesting assets to strengthen its capital position while reporting a loss for the third quarter.

The New York-based insurer posted a net loss attributable to common stockholders of $174.7 million for the third quarter of 2017 compared to a net income of $80.7 million in the same period a year ago.

The net loss includes $326.9 million of losses ceded to AmTrust’s adverse development cover, partially offset by a $186.8 million gain on the sale of a policy management system to National General Holdings.

The operating loss in the third quarter was $7.5 million compared to operating earnings of $106.0 million in the same period a year ago, primarily reflecting net catastrophe losses of $54 million.

The combined ratio increased to 134.4 percent from 93.2 percent over the period.

AmTrust had caused concerns among stakeholders after it  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.

To strengthen its capital position, AmTrust has completed a $300 million capital raise through a private placement to support its insurance units.

In addition to the sale of personal lines policy management system to National General, AmTrust is selling a portion of US fee businesses to Madison Dearborn Partners in order to raise further capital.

"Over the past seven months, we have fundamentally transformed the company's balance sheet,” said CEO Barry Zyskind.

“The initiatives we took earlier this year, including a capital raise of $300 million and the sale of the personal lines policy management system to National General Holdings for $200 million, have significantly strengthened our capital base."

"Earlier this week, we announced we have entered into a strategic transaction with Madison Dearborn Partners for a portion of our US fee business, with a total enterprise value of $1.15 billion. We will receive gross cash proceeds of approximately $950 million at closing (subject to post-closing purchase price adjustments, final tax and indebtedness calculations).”

“This transaction, upon close in the first half of 2018, will establish the strongest capital base in AmTrust's history and position our company to continue to grow as a premier multinational property and casualty insurer," Zyskind added.

Overall, gross written premium decreased 2.1 percent year on year to $2.0 billion in the third quarter of 2017.

AmTrust offers specialty property/casualty insurance products, including workers' compensation, commercial automobile, general liability and extended service and warranty coverage through its primary insurance subsidiaries.

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