Investors seek damages from Maiden over “misleading” AmTrust statements

13-02-2019

Investors who purchased or acquired securities in Bermuda reinsurer Maiden Holdings in a certain time period are seeking to recover damages in a class action lawsuit. It alleges they were misled by the company and some of its former officers on the nature of Maiden's underwriting and risk management practices relating to reinsurance agreements with AmTrust.

As a result of the defendant's alleged wrongful acts and omissions - and the decline in the market value of Maiden Holding's securities - the plaintiff and other class members are arguing they suffered significant losses and damages.

Throughout the class period - March 4, 2014 and November 9, 2018 - the defendants are accused of making materially false and misleading statements regarding Maiden's business, operational and compliance policies.

Specifically, the defendants are said to have failed to disclose the nature of Maiden's underwriting and risk management policies and practices - as well as the risk of its reinsurance portfolio - were poorer than represented.

Maiden is also alleged to have failed to employ sufficient underwriting and risk management protocols and had largely abdicated its responsibility to ensure its AmTrust Reinsurance segment priced policies in proportion with the risk assumed by Maiden - as a result, its public statements are alleged to have been materially false and misleading at all relevant times.

The class action states that as AmTrust was Maiden's largest and most important client, it was especially critical that Maiden appropriately assesses and discloses to investors the potential risk and liabilities of the AmTrust policies that it reinsurers and that Maiden appropriately accounts these risks in its pricing and loss reserves.

On February 27, 2018, Maiden posted a net loss net loss of $133.6 million and a net adverse development of $171 million attributed to the company’s workers’ compensation line of its AmTrust Reinsurance segment and from two accounts in its commercial auto line of business within the diversified reinsurance segment. As a result, Maiden's stock price fell by 16 percent.

On August 9, it suffered a net loss of $5.9 million for the quarter and also disclosed that the company had suffered an adverse prior year loss development of $28.4 million in its AmTrust Reinsurance segment. As a result, the stock price fell a further 41 percent.

Then, on November 9, Maiden posted a $308.8 million net loss and a $210.4 million adverse prior year loss development in the AmTrust segment. Maiden also sold its business assets that had resulted in an impairment loss of $74.2 million. The stock price fell nearly 32 percent as a result.

The plaintiff and class are now seeking to recover damages allegedly caused by the defendant's violation of the federal securities laws and to pursue remedies under the Securities Exchange Act of 1934.

Maiden, AmTrust, Lawsuit, Reinsurance, Bermuda

Bermuda Re