AmTrust Financial Services, ($AFSI) Investor Settlement

AmTrust Financial Services has reached a tentative settlement to resolve investor claims that it misstated revenue, earnings, and internal controls, especially in its warranty and fee business.

Outline:

In August 2010, AmTrust acquired Warrantech, a business that became a major part of its fee generation. Through 2014, 2015, and 2016, the company reported strong growth while allegedly recognizing some warranty administration revenue too early and mishandling other accounting items. On February 27 and March 16, 2017, AmTrust disclosed accounting errors, material weaknesses, and a formal restatement. The case moved to a tentative settlement.

Timeline:

• August 2010: AmTrust acquired Warrantech through its subsidiary, AMT Warranty Corp.

• November 12, 2015: AmTrust completed a common stock offering that raised $320 million.

• September 27, 2016: AmTrust completed a preferred stock offering that raised $287.5 million.

• February 27, 2017: AmTrust disclosed accounting errors, delayed its annual report, and said it had identified material weaknesses in internal control over financial reporting.

• March 16, 2017: AmTrust announced that financial statements for 2014, 2015, and portions of 2016 should be restated and should no longer be relied upon.

• April 4, 2017: AmTrust filed its 2016 annual report and restated financial results for 2012 through 2016.

• April 11, 2017: The Wall Street Journal reported that the FBI, SEC, and NYDFS were investigating AmTrust’s accounting practices.

• April 2026: AmTrust agrees to a settlement to resolve an investor lawsuit related to these events.

Background:

AmTrust is a specialty property and casualty insurer whose business included workers’ compensation, specialty risk, and extended warranty coverage. During the years at issue, the company reported rapid growth, raised capital in public offerings, and expanded through acquisitions.

A major part of the dispute involved the company’s warranty and fee business. After acquiring Warrantech, AmTrust made that operation a significant source of service and fee income, and company executives later described it as a major part of AmTrust’s fee generation.

Investors say AmTrust’s reported growth was overstated because the company recognized part of its warranty administration revenue upfront instead of over the life of the contracts. The case also challenged how AmTrust handled bonus expenses, deferred acquisition costs, software costs, foreign currency items, interest expense, and intercompany transactions.

In early 2017, AmTrust began revealing that its accounting had significant problems. The company first disclosed corrections and material weaknesses, then announced that key financial statements and related communications should no longer be relied upon, and later filed restated financials reaching back to 2012.

The case also says AmTrust’s internal and disclosure controls were not effective. Reported government investigations added to the pressure after the accounting issues became public. The matter has now moved to a tentative settlement.

What Can Investors Expect Now?

AmTrust Financial Services has reached a tentative settlement to resolve investor claims that it misstated revenue, earnings, and internal controls, especially in its warranty and fee business.

If you were damaged due to this situation, you can file for a payout and get your share of the settlement. You can check if you are eligible and other details in the FAQ section.