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AmTrust shares rise after getting Icahn on board with new go-private deal price

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AmTrust shares rise after getting Icahn on board with new go-private deal price

AmTrust Financial Services Inc. shares rallied during a week that saw its planned go-private deal get briefly derailed, only to be put back on track days later.

Insurance companies tracked closely with the broader market as the SNL U.S. Insurance Index increased 2.37% to 1,010.32, while the S&P 500 added 2.41% to 2,770.37 for the five-day trading week ending June 7.

AmTrust was forced to temporarily put its go-private deal on hold early in the week after determining that it did not receive sufficient support from minority shareholders. But on June 7, AmTrust announced that it came to an agreement with activist investor Carl Icahn, who had led a proxy battle against the transaction because he believed it undervalued the insurer.

The revised merger's terms will see the acquisition price raised by $1.25 per share to $14.75. While that increase satisfied Icahn, Czech investment company Arca Capital remained unhappy with the deal, calling it "one of the biggest non-transparent cash-out mergers in the history of Wall Street," in an email to S&P Global Market Intelligence. Arca in a separate public statement intimated that it would be happier with a purchase price of more than $22 per share.

While AmTrust's shares remain far from where Arca wants them to be, they have neared the new takeout price. The stock rose 3.26% on June 7, and was higher by 8.98% for the week to close at $14.56.

Genworth Financial Inc. shares outperformed many of their insurance peers during a week where it officially opted to move forward under a revised merger plan with China Oceanwide Holdings Ltd.

The companies in May announced that they were planning to proceed with their combination without the "unstacking" of Genworth Life & Annuity Insurance Co. from under Genworth Life Insurance Co. That plan was made official following the submission of an amended Form A to the Delaware Department of Insurance. The amendment begins afresh the process by which China Oceanwide seeks approval from the state insurance commission of its acquisition of Genworth Life Insurance.

Genworth's stock climbed 8.14% to $3.72.

Bond insurers MBIA Inc., and Assured Guaranty Ltd. saw their shares go up amid a new tentative agreement between Puerto Rico creditors.

Court filings unveiled this week showed that Puerto Rico's sales tax-backed COFINA debt and general obligation debt creditors have opted to settle a long-running dispute over which group has rightful claims on sales tax revenues in the commonwealth. The two sides had spent about a year in court battling over future sales tax revenues; COFINA bonds themselves rallied following the news, according to news reports.

MBIA shares climbed 11.00% to $9.08 for the week and Assured Guaranty added 4.34% to close at $37.03. Fellow bond insurer Ambac Financial Group Inc. rose 7.12% to $19.85.

Mortgage insurance companies were also up across the board with Essent Group Ltd. rising 8.96%, NMI Holdings Inc. gaining 6.91% and Radian Group Inc. climbing 4.72%.

The Federal Housing Administration finally has a new commissioner in the form of now-former Radian board member Brian Montgomery. This will be Montgomery's second time leading the agency, having previously headed it from 2005 to 2009.

Lindsey Johnson, president and executive director of trade organization U.S. Mortgage Insurers, said in a statement released in late May that she was confident that Montgomery would be a "champion for a robust housing finance system that strikes the appropriate balance between the conventional market backed by private capital and government-backed FHA loans."

She added that Montgomery should focus on making sure that the FHA "is not overexposing taxpayers to undue mortgage risk."

A number of property and casualty companies saw their stocks slip during morning trading June 6 after a report surfaced that Amazon.com Inc. was considering entering the home insurance space.

The cash Amazon has at its disposal, coupled with its vast logistical network, may have led some to believe that this could be a major development in the insurance industry. Keefe Bruyette & Woods analyst Meyer Shields in a research note said that any such entry into homeowners insurance by Amazon would not be overly disruptive. He did say, however, that pricing in the space could be "particularly pressured" if Amazon looks at insurance as a loss leader while it tries to boost its penetration into the industry.

Most of the P&C companies that saw their shares briefly fall after the news report came out later made up most, if not all, the ground they lost that same day.