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U.S.-based short-seller Muddy Waters has taken aim at Canadian insurer Manulife Financial Corp.

Carson Block, the firm’s head of research, says in a report published Thursday that Manulife’s life insurance subsidiary has just concluded a trial that could “significantly damage” the company and could lead to “billions of dollars of losses.”

Muddy Waters says the trial involves one of Manulife’s insurance contracts purchased by a hedge fund called Mosten Investment LP. The judge’s decision is expected by the end of the year.

The research firm says Mosten argues that it can deposit an unlimited amount of money with Manulife through the contract and receive an annualized guaranteed return of at least 4%—terms that could “financially cripple” the Canadian insurer.

Shares of Manulife were down nearly 3% on the Toronto Stock Exchange at midday after Muddy Waters announced its short position in Manulife.

Manulife responded in a press release, saying it disagreed with the conclusions of Muddy Waters and believed Mosten’s position is legally unfounded.

“We firmly believe that the consumers purchasing universal life policies, and the insurers issuing these policies, never intended to have the policies function as deposit or securities contracts,” the release said. “We have a sound, highly rated global franchise.”

Further, Manulife said it expects to prevail in the matter, which won’t affect business operations or its ability to meet obligations to customers, vendors and other stakeholders.