Maiden Holdings, Ltd. Announces First Quarter 2018 Financial Results

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| Source: Maiden Holdings, Ltd.

Highlights for the First Quarter Ended March 31, 2018

  • Net income attributable to Maiden common shareholders of $13.7 million, or $0.16 per diluted common share, compared with net income attributable to Maiden common shareholders of $20.5 million, or $0.23 per diluted common share in the first quarter of 2017;
  • Non-GAAP operating earnings(11) of $16.8 million, or $0.20 per diluted common share, compared with non-GAAP operating earnings of $22.6 million, or $0.26 per diluted common share, in the first quarter of 2017;
  • Annualized return on average common equity of 7.6% compared to 7.9% in the first quarter of 2017;
  • Annualized non-GAAP return on average common equity of 9.3% compared to 8.7% in the first quarter of 2017;
  • Combined ratio(10) of 101.8% compared to 100.9% in the first quarter of 2017; and
  • Book value per common share(1) was $8.34 at March 31, 2018 compared to $9.25 at December 31, 2017 reflecting unrealized movements in the company’s investment portfolio.

HAMILTON, Bermuda, May 09, 2018 (GLOBE NEWSWIRE) -- Maiden Holdings, Ltd. (NASDAQ:MHLD) (“Maiden” or “the Company”) today reported first quarter 2018 net income attributable to Maiden common shareholders of $13.7 million or $0.16 per diluted common share compared to net income attributable to Maiden common shareholders of $20.5 million or $0.23 per diluted common share in the first quarter of 2017.  Non-GAAP operating earnings(11) were $16.8 million, or $0.20 per diluted common share compared with a non-GAAP operating earnings of $22.6 million, or $0.26 per diluted common share in the first quarter of 2017.

Commenting on the Company’s results, President and Chief Executive Officer, Art Raschbaum said, “We are pleased to start the year with a profitable first quarter. Underwriting results primarily reflect the impact of higher initial current year loss ratios, a modest level of adverse development and higher G&A expenses. Revenue in the quarter was influenced by a continued moderation of premium from our largest client, AmTrust, and in the Diversified segment from several accounts terminated over the last 12 months.  Business development in the quarter was strong across the Diversified segment which should favorably impact future quarters.  We remain committed to maintaining disciplined underwriting and enhancing profitability. As previously announced, our Board of Directors has retained BoA Merrill Lynch to assist the Company in evaluating strategic alternatives to enhance value and the Company continues to be actively engaged in this process but has no further update at this time.”

Consolidated Results for the First Quarter Ended March 31, 2018

In the first quarter of 2018, gross premiums written decreased to $852.6 million from $923.4 million primarily due to non-renewals and re-underwriting of certain Diversified contracts conducted in both 2017 and in early 2018. Net premiums written totaled $849.3 million in the first quarter of 2018, a decrease of 5.7% compared to $900.5 million in the first quarter of 2017.  Net premiums earned were $685.4 million in the first quarter of 2018 compared to $709.5 million in the first quarter of 2017, representing a decrease of 3.4%.

Net loss and loss adjustment expenses of $473.3 million compared to $480.6 million in the first quarter of 2017.  The loss ratio(6) in the first quarter of 2018 was 68.6% compared to 67.4% reported in the first quarter of 2017.

Commission and other acquisition expenses decreased 6.0% to $208.6 million in the first quarter of 2018, compared to $222.0 million in the first quarter of 2017 reducing the commission and other acquisition expense ratio to 30.3% from 31.1%, respectively.  General and administrative expenses for the first quarter of 2018 totaled $20.0 million compared with $17.4 million in the first quarter of 2017 primarily due to higher audit, legal and other professional fees and technology-related expenses. The general and administrative expense ratio(8) in the first quarter of 2018 increased to 2.9% compared to 2.4% in the first quarter of 2017, while the expense ratio(9) was 33.2% in the first quarter of 2018 compared with 33.5% in the same quarter last year.

The combined ratio(10) for the first quarter of 2018 totaled 101.8% compared with 100.9% in the first quarter of 2017.

Net investment income was $42.9 million in the first quarter of 2018 compared to $42.2 million in the first quarter of 2017.  As of March 31, 2018, the average yield on the fixed income portfolio was 3.18% while the average duration of investable assets was 4.7 years.

Diversified Reinsurance Segment

  For the Three Months Ended March 31,  
($ in thousands) 2018 2017 Change in (%)
Gross premiums written $278,712  $332,045  (16.1)%
Net premiums written $274,953  $327,496  (16.0)%
Net premiums earned $194,134  $201,842  (3.8)%
       
Underwriting Ratios     % Point Change
Net loss and LAE ratio(6) 68.6% 67.5% 1.1 
Commission and other acquisition expense ratio(7) 25.9% 28.2% (2.3)
General and administrative expense ratio(8) 5.1% 4.2% 0.9 
Expense ratio(9) 31.0% 32.4% (1.4)
Combined ratio(10) 99.6% 99.9% (0.3)

Gross premiums written and net premiums written decreased by 16.1% and 16.0%, respectively, in the first quarter of 2018 primarily as a result of non-renewals and re-underwriting of certain contracts in 2017 and during the first quarter of 2018, with one large terminated account having returned premium of $17.5 million. Net premiums earned decreased by 3.8% in the first quarter of 2018 due to non-renewals and other underwriting actions taken as mentioned above.  The segment’s combined ratio was 99.6% in the first quarter of 2018 compared to 99.9% in the same period last year due to lower adverse prior year loss development. The combined ratio also reflects higher initial current year loss ratios for premiums earned during the period.

AmTrust Reinsurance Segment

  For the Three Months Ended March 31,  
($ in thousands) 2018 2017 Change in (%)
Gross premiums written $573,928  $591,382  (3.0)%
Net premiums written $574,380  $573,052  0.2%
Net premiums earned $491,298  $507,642  (3.2)%
       
Underwriting Ratios     % Point Change
Net loss and LAE ratio(6) 68.7% 67.3% 1.4 
Commission and other acquisition expense ratio(7) 32.0% 32.3% (0.3)
General and administrative expense ratio(8) 0.2% 0.2%  
Expense ratio(9) 32.2% 32.5% (0.3)
Combined ratio(10) 100.9% 99.8% 1.1 

Gross premiums written decreased 3.0% during the first quarter of 2018 and reflects reductions in the Small Commercial and Program businesses. Net premiums written increased by 0.2% in the first quarter of 2018 largely due to a reduction in the utilization of retrocessional capacity in 2018 compared to 2017. Net premiums earned in the segment decreased by 3.2% compared to the same period in 2017 mainly due to the decline in net premiums written in the AmTrust quota share.  The segment experienced adverse prior year development of $8.5 million for the first quarter of 2018 largely from General Liability, with a smaller contribution from Commercial Auto Liability, primarily driven by accident years 2015 and 2016.  The segment combined ratio was 100.9% in the first quarter of 2018 compared to 99.8% in the same period in 2017 primarily due to higher initial current year loss ratios for premiums earned during the period slightly offset by a comparatively smaller amount of adverse prior period loss development.

Other Financial Matters

  • Total assets increased to $6.8 billion at March 31, 2018 compared to $6.6 billion at year-end 2017.   Shareholders' equity was $1.16 billion at March 31, 2018 compared to $1.23 billion at year end 2017.
  • Book value per common share(1) was $8.34 at March 31, 2018 compared to $9.25 at December 31, 2017. In the first quarter of 2018, the Company recognized unrealized losses in its fixed income investment portfolio of $68.3 million which represents a decrease of $0.82 in book value per common share.
  • During the first quarter of 2018, the Board of Directors declared dividends of $0.15 per common share, $0.515625 per Series A preference shares, $0.445313 per Series C preference shares and $0.418750 per Series D preference shares. 

(1)(11) Please see the Non-GAAP Financial Measures table for additional information on these non-GAAP financial measures and reconciliation of these measures to GAAP measures.

(6)(7)(8)(9)(10) Loss ratio, commission and other acquisition expense ratio, general and administrative expense ratio, expense ratio and combined ratio are non-GAAP operating metrics. Please see the additional information on these measures under Non-GAAP Financial Measures tables.

Conference Call
Maiden’s President and Chief Executive Officer, Art Raschbaum and Chief Financial Officer, Karen Schmitt will review these results on Thursday, May 10, 2018 via teleconference and live audio webcast beginning at 8:30 a.m. ET.

To participate in the conference call, please access one of the following at least five minutes prior to the start time: U.S. Callers: 1.877.734.5373, Outside U.S. Callers: 1.973.200.3059, Conference ID: 9075799, Webcast: http://www.maiden.bm/news_events 

A replay of the conference call will be available beginning at 11:30 a.m. ET on May 10, 2018 through 11:30 a.m. ET on May 18, 2018. To listen to the replay, please dial toll free: 1.855.859.2056 (U.S. Callers) or toll: 1.404.537.3406 (callers outside the U.S.) and enter the Conference ID: 9075799; or access http://www.maiden.bm/news_events

About Maiden Holdings, Ltd.

Maiden Holdings, Ltd. is a Bermuda-based holding company formed in 2007.  Through its subsidiaries, which are each rated A-  (excellent) by A.M. Best, the Company is focused on providing non-catastrophic, customized reinsurance products and services to small and mid-size insurance companies in the United States and Europe. As of March 31, 2018, Maiden had $6.8 billion in assets and shareholders' equity of $1.2 billion.

Forward Looking Statements

This release contains "forward-looking statements" which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on the Company's current expectations and beliefs concerning future developments and their potential effects on the Company. There can be no assurance that actual developments will be those anticipated by the Company. Actual results may differ materially from those projected as a result of significant risks and uncertainties, including non-receipt of the expected payments, changes in interest rates, effect of the performance of financial markets on investment income and fair values of investments, developments of claims and the effect on loss reserves, accuracy in projecting loss reserves, the impact of competition and pricing environments, changes in the demand for the Company's products, the effect of general economic conditions and unusual frequency of storm activity, adverse state and federal legislation, regulations and regulatory investigations into industry practices, developments relating to existing agreements, heightened competition, changes in pricing environments, and changes in asset valuations. Additional information about these risks and uncertainties, as well as others that may cause actual results to differ materially from those projected is contained in Item 1A. Risk Factors in the Company's Annual Report on Form 10-K for the year ended December 31, 2017 as updated in periodic filings with the SEC. However these factors should not be construed as exhaustive. Forward-looking statements speak only as of the date they are made and the Company undertakes no obligation to update or revise any forward-looking statement that may be made from time to time, whether as a result of new information, future developments or otherwise, except as required by law. 

CONTACT:

Bill Horning, Senior Vice President, Investor Relations
Maiden Holdings, Ltd.
Phone: 856.359.2532
E-mail: bhorning@maiden.bm




Maiden Holdings, Ltd.
Consolidated Balance Sheets 
(in thousands (000's), except per share data)
 
   March 31, 2018  December 31, 2017
    (Unaudited)  (Audited)
 Assets     
 Fixed maturities, available-for-sale, at fair value (Amortized cost 2018: $4,034,021 ; 2017: $4,027,993)$  3,984,733   $  4,044,370  
 Fixed maturities, held-to-maturity, at amortized cost (Fair value 2018: $1,069,980; 2017: $1,125,626)   1,071,361      1,097,801  
 Other investments   6,426      6,600  
 Total investments   5,062,520      5,148,771  
 Cash and cash equivalents   73,276      67,919  
 Restricted cash and cash equivalents   87,761      123,584  
 Accrued investment income   36,010      34,993  
 Reinsurance balances receivable, net   548,218      345,043  
 Reinsurance recoverable on unpaid losses   114,499      117,611  
 Loan to related party   167,975      167,975  
 Deferred commission and other acquisition expenses, net   475,496      439,597  
 Goodwill and intangible assets, net   75,121      75,583  
 Other assets   116,433      123,113  
 Total Assets$  6,757,309   $  6,644,189  
 Liabilities and  Equity     
 Liabilities     
 Reserve for loss and loss adjustment expenses$  3,616,610   $  3,547,248  
 Unearned premiums   1,629,870      1,477,038  
 Accrued expenses and other liabilities   97,851      132,795  
 Senior notes - principal amount   262,500      262,500  
 Less: unamortized debt issuance costs   7,966      8,018  
 Senior notes, net   254,534      254,482  
 Total Liabilities   5,598,865      5,411,563  
 Commitments and Contingencies     
 Equity     
 Preference Shares   465,000      465,000  
 Common shares   879      877  
 Additional paid-in capital   749,054      748,113  
 Accumulated other comprehensive (loss) income   (62,915)    13,354  
 Retained earnings   36,727      35,472  
 Treasury shares, at cost   (30,835)    (30,642)
 Total Maiden Shareholders’ Equity   1,157,910      1,232,174  
 Noncontrolling interest in subsidiaries   534      452  
 Total Equity   1,158,444      1,232,626  
 Total Liabilities and Equity$  6,757,309   $  6,644,189  
       
 Book value per common share(1)$  8.34   $  9.25  
       
 Common shares outstanding 83,118,237   82,974,895 


Maiden Holdings, Ltd.
Consolidated Statements of Income
(in thousands (000's), except per share data)
(Unaudited)
      
 For the Three Months Ended March 31, 
 2018 2017
Revenues:     
Gross premiums written$  852,640   $  923,427  
Net premiums written$  849,333   $  900,548  
Change in unearned premiums (163,901)  (191,064)
Net premiums earned 685,432   709,484 
Other insurance revenue 3,726   3,781 
Net investment income 42,870   42,157 
Net realized gains on investment  357   885 
Total revenues 732,385   756,307 
Expenses:     
Net loss and loss adjustment expenses 473,324   480,569 
Commission and other acquisition expenses  208,614   222,029 
General and administrative expenses 19,950   17,414 
Total expenses 701,888   720,012 
      
Non-GAAP income from operations(2)   30,497      36,295  
      
Other expenses:     
Interest and amortization expenses (4,829)  (6,856)
Amortization of intangible assets (462)  (533)
Foreign exchange losses (2,407)  (1,921)
Total other expenses (7,698)  (9,310)
      
Income before income taxes   22,799      26,985  
Less: income tax expense 456   484 
      
Net income   22,343      26,501  
Add: net (income) loss attributable to noncontrolling interest (71)  22 
Net income attributable to Maiden    22,272      26,523  
Dividends on preference shares(3) (8,545)  (6,033)
Net income attributable to Maiden common shareholders$  13,727   $  20,490  
      
Basic earnings per common share attributable to Maiden shareholders$  0.17   $  0.24  
Diluted earnings  per common share attributable to Maiden shareholders$  0.16   $  0.23  
Dividends declared per common share$  0.15   $  0.15  
Annualized return on average common equity 7.6%  7.9%
      
Weighted average number of common shares - basic 83,040,413   86,350,850 
Adjusted weighted average number of common shares and assumed conversions - diluted 83,318,542   87,436,604 
      


Maiden Holdings, Ltd.
Supplemental Financial Data - Segment Information
(in thousands (000's))
(Unaudited)
                 
                 
For the Three Months Ended March 31, 2018 Diversified Reinsurance  AmTrust Reinsurance  Other  Total 
Gross premiums written $278,712   $573,928   $-   $852,640  
Net premiums written $274,953   $574,380   $-   $849,333  
Net premiums earned $194,134   $491,298   $-   $685,432  
Other insurance revenue  3,726    -    -    3,726  
Net loss and loss adjustment expenses ("loss and LAE")  (135,612)   (337,307)   (405)   (473,324) 
Commissions and other acquisition expenses  (51,298)   (157,316)   -    (208,614) 
General and administrative expenses(4)  (10,119)   (920)   -    (11,039) 
Underwriting income (loss)(5)  $831   $(4,245)  $(405)  $(3,819) 
                 
Reconciliation to net income                
Net investment income and realized gains on investment              43,227  
Interest and amortization expenses              (4,829) 
Amortization of intangible assets              (462) 
Foreign exchange losses              (2,407) 
Other general and administrative expenses(4)              (8,911) 
Income tax expense              (456) 
Net income             $22,343  
                 
                 
Net loss and LAE ratio(6)  68.6%   68.7%       68.6% 
Commission and other acquisition expense ratio(7)  25.9%   32.0%       30.3% 
General  and administrative expense ratio(8)  5.1%   0.2%       2.9% 
Expense ratio(9)  31.0%   32.2%       33.2% 
Combined ratio(10)  99.6%   100.9%       101.8% 
                 
                 
                 
                 
For the Three Months Ended March 31, 2017 Diversified Reinsurance  AmTrust Reinsurance  Other  Total 
Gross premiums written $332,045   $591,382   $-   $923,427  
Net premiums written $327,496   $573,052   $-   $900,548  
Net premiums earned $201,842   $507,642   $-   $709,484  
Other insurance revenue  3,781    -    -    3,781  
Net loss and LAE  (138,649)   (341,631)   (289)   (480,569) 
Commissions and other acquisition expenses  (57,945)   (164,084)   -    (222,029) 
General and administrative expenses(4)  (8,730)   (805)   -    (9,535) 
Underwriting income (loss)(5)  $299   $1,122   $(289)  $1,132  
                 
Reconciliation to net income                
Net investment income and realized gains on investment              43,042  
Interest and amortization expenses              (6,856) 
Amortization of intangible assets              (533) 
Foreign exchange losses              (1,921) 
Other general and administrative expenses(4)              (7,879) 
Income tax expense              (484) 
Net income             $26,501  
                 
Net loss and LAE ratio(6)  67.5%   67.3%       67.4% 
Commission and other acquisition expense ratio(7)  28.2%   32.3%       31.1% 
General  and administrative expense ratio(8)  4.2%   0.2%       2.4% 
Expense ratio(9)  32.4%   32.5%       33.5% 
Combined ratio(10)  99.9%   99.8%       100.9% 
                 


Maiden Holdings, Ltd. 
Non - GAAP Financial Measures 
(in thousands (000's), except per share data) 
(Unaudited) 
        
  For the Three Months Ended March 31,  
  2018 2017 
Non-GAAP operating earnings attributable to Maiden common shareholders(11) $16,818  $22,638  
Non-GAAP basic operating earnings per common share attributable to Maiden shareholders $0.20  $0.26  
Non-GAAP diluted operating earnings per common share attributable to Maiden shareholders $0.20  $0.26  
Annualized non-GAAP operating return on average common equity(12)  9.3%  8.7% 
        
Reconciliation of net income attributable to Maiden common shareholders
to non-GAAP operating earnings attributable to Maiden common shareholders:
       
Net income attributable to Maiden common shareholders$13,727  $20,490  
Add (subtract)      
Net realized gains on investment (357)  (885) 
Foreign exchange losses 2,407   1,921  
Amortization of intangible assets 462   533  
Divested excess and surplus ("E&S") business and NGHC run-off 405   289  
Non-cash deferred tax expense 174   290  
Non-GAAP operating earnings attributable to Maiden common shareholders(11)$  16,818   $  22,638   
        
Weighted average number of common shares - basic 83,040,413   86,350,850  
Adjusted weighted average number of common shares and assumed conversions - diluted 83,318,542   87,436,604  
        
Reconciliation of diluted earnings per common share attributable to Maiden shareholders to non-GAAP
diluted operating earnings per common share attributable to Maiden shareholders:
       
Diluted earnings per common share attributable to Maiden shareholders$0.16  $0.23  
Add (subtract)      
Net realized gains on investment -   (0.01) 
Foreign exchange losses 0.03   0.02  
Amortization of intangible assets 0.01   0.01  
Non-cash deferred tax expense -   0.01  
Non-GAAP diluted operating earnings per common share attributable to Maiden shareholders $  0.20   $  0.26   
        
Reconciliation of net income attributable to Maiden to non-GAAP income from operations:       
Net income attributable to Maiden$22,272  $26,523  
Add (subtract)      
Foreign exchange losses 2,407   1,921  
Amortization of intangible assets 462   533  
Interest and amortization expenses 4,829   6,856  
Income tax expense 456   484  
Net income (loss) attributable to noncontrolling interest 71   (22) 
Non-GAAP income from operations(2)$  30,497   $  36,295   
        


Maiden Holdings, Ltd. 
Non - GAAP Financial Measures 
(in thousands (000's), except per share data) 
(Unaudited) 
        
        
        
  March 31, 2018 December 31, 2017 
Investable assets:      
Total investments$5,062,520 $5,148,771 
Cash and cash equivalents 73,276  67,919 
Restricted cash and cash equivalents 87,761  123,584 
Loan to related party 167,975  167,975 
Total investable assets(13)$5,391,532  $5,508,249  
        
  March 31, 2018 December 31, 2017 
Capital:      
Preference shares$465,000 $465,000 
Common shareholders' equity 692,910  767,174 
Total Maiden shareholders' equity 1,157,910  1,232,174 
2016 Senior Notes 110,000  110,000 
2013 Senior Notes 152,500  152,500 
Total capital resources(14)$1,420,410  $1,494,674  
        
        
        
(1) Book value per common share is calculated using Maiden common shareholders’ equity (shareholders' equity excluding the aggregate liquidation value of our preference shares) divided by the number of common shares outstanding. 
        
(2) Non-GAAP income from operations is a non-GAAP financial measure defined by the Company as net income attributable to Maiden excluding foreign exchange and other gains and losses, amortization of intangible assets, interest and amortization expenses, income tax expense and net income or loss attributable to noncontrolling interest and should not be considered as an alternative to net income.  The Company’s management believes that non-GAAP income from operations is a useful measure of the Company’s underlying earnings fundamentals based on its underwriting and investment income before financing costs. This income from operations enables readers of this information to more clearly understand the essential operating results of the Company. The Company’s measure of non-GAAP income from operations may not be comparable to similarly titled measures used by other companies. 
        
(3) Dividends on preference shares consist of $3,094 paid to Preference shares - Series A for the three months ended March 31, 2018 and 2017, $2,939 paid to Preference shares - Series C for the three months ended March 31, 2018 and 2017, and $2,512 and $0 paid to Preference shares - Series D for the three months ended March 31, 2018 and 2017, respectively. 
        
(4) Underwriting related general and administrative expenses is a non-GAAP measure and includes expenses which are segregated for analytical purposes as a component of underwriting income. 
        
(5) Underwriting (loss) income is a non-GAAP measure and is calculated as net premiums earned plus other insurance revenue less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities. Management believes that this measure is important in evaluating the underwriting performance of the Company and its segments. This measure is also a useful tool to measure the profitability of the Company separately from the investment results and is also a widely used performance indicator in the insurance industry. 
        
(6) Calculated by dividing net loss and LAE by the sum of net premiums earned and other insurance revenue. 
        
(7) Calculated by dividing commission and other acquisition expenses by the sum of net premiums earned and other insurance revenue. 
        
(8) Calculated by dividing general and administrative expenses by the sum of net premiums earned and other insurance revenue. 
        
(9) Calculated by adding together the commission and other acquisition expense ratio and general and administrative expense ratio. 
        
(10) Calculated by adding together the net loss and LAE ratio and the expense ratio. 
        
(11) Non-GAAP operating earnings is a non-GAAP financial measure defined by the Company as net income attributable to Maiden common shareholders excluding realized and unrealized investment gains and losses, foreign exchange and other gains and losses, amortization of intangible assets, divested E&S business and NGHC run-off and non-cash deferred tax expense and should not be considered as an alternative to net income. The Company's management believes that non-GAAP operating earnings is a useful indicator of trends in the Company's underlying operations. The Company's measure of non-GAAP operating earnings may not be comparable to similarly titled measures used by other companies. 
        
(12) Non-GAAP operating return on average common equity is a non-GAAP financial measure. Management uses non-GAAP operating return on average common shareholders' equity as a measure of profitability that focuses on the return to Maiden common shareholders. It is calculated using non-GAAP operating earnings attributable to Maiden common shareholders divided by average Maiden common shareholders' equity. 
        
(13) Investable assets is the total of the Company's investments, cash and cash equivalents and loan to a related party. 
        
(14) Total capital resources is the sum of the Company's principal amount of debt and Maiden shareholders' equity.