Meadowbrook Insurance Group, Inc. Sued by Investor
Robbins LLP announce that an investor of Meadowbrook Insurance Group, Inc. (NYSE: MIG) (“Meadowbrook”) has filed a complaint in the U.S. District Court for the Southern District of New York. The complaint alleges that the company and certain of its officers and directors violated the Securities Exchange Act of 1934 between July 30, 2012 and August 8, 2013 (the “Class Period”). Meadowbrook operates as a commercial insurance underwriter and insurance administration services company.
Meadowbrook Accused of Making False and Misleading Statements
According to the complaint, Meadowbrook made false and/or misleading statements and/or failed to disclose information regarding the company’s business, operations, and prospects. Specifically, the complaint alleges that, throughout the Class Period, the company and certain of its officers and directors misrepresented and failed to disclose that: (i) Meadowbrook’s financial stability was seriously impaired; (ii) Meadowbrook failed to maintain a capital position sufficient to sustain its ongoing insurance operations; (iii) Meadowbrook was in breach of certain financial covenants related to its credit facilities; and (iv) Meadowbrook failed to maintain adequate internal and financial controls over outstanding claims, asset impairment charges, and maintenance of a sufficient capital position. As a result of these false and misleading statements and omissions, Meadowbrook shares traded at artificially inflated prices during the Class Period.
Meadowbrook Stock Price Drops on Negative Credit Review and Goodwill Impairment
On October 19, 2012, according to the complaint, the ratings agency A.M. Best Company (“A.M. Best”) announced a review of the financial strength rating and issuer credit rating of Meadowbrook’s Insurance Company subsidiaries, with negative implications. On August 2, 2013, A.M. Best downgraded Meadowbrook’s financial strength rating. Then, on August 9, 2013, Meadowbrook announced that it was unable to timely file its Quarterly Report on Form 10-Q with the U.S. Securities and Exchange Commission for the quarter ended June 30, 2013. Finally, on August 14, 2013, Meadowbrook announced that it would take a non-cash impairment of goodwill of $115.4 million in the three months ended June 30, 2013, eliminating nearly all of the company’s goodwill on its balance sheet and causing the company to violate financial covenants applicable to certain credit facilities. On this news, Meadowbrook shares fell to $6.36 on August 15, 2013, down nearly 29% from a Class Period high of $8.90 reached on July 26, 2013
If you invested in Meadowbrook and would like to discuss your shareholder rights, please contact attorney Darnell R. Donahue at (800) 350-6003 or you can complete the form below and we will contact you directly.