Attached files
file | filename |
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EX-32.2 - EXHIBIT 32.2 - Maiden Holdings, Ltd. | q32015exhibit322.htm |
EX-31.2 - EXHIBIT 31.2 - Maiden Holdings, Ltd. | q32015exhibit-312.htm |
EX-32.1 - EXHIBIT 32.1 - Maiden Holdings, Ltd. | q32015exhibit-321.htm |
EX-31.1 - EXHIBIT 31.1 - Maiden Holdings, Ltd. | q32015exhibit-311.htm |
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the quarterly period ended September 30, 2015
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
For the transition period from _________ to _________
Commission File No. 001-34042
MAIDEN HOLDINGS, LTD.
(Exact name of registrant as specified in its charter)
Bermuda (State or other jurisdiction of incorporation or organization) | 98-0570192 (IRS Employer Identification No.) |
131 Front Street, Hamilton, Bermuda (Address of principal executive offices) | HM12 (Zip Code) |
(441) 298-4900
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer o | Accelerated filer x | |
Non-accelerated filer o (Do not check if a smaller reporting company) | Smaller reporting company o |
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act). Yes o No x
As of November 2, 2015, the number of the Registrant's Common Stock ($.01 par value) outstanding was 73,690,640.
INDEX | ||
Page | ||
PART I - Financial Information | ||
PART II - Other Information | ||
2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars, except share and per share data)
September 30, 2015 (Unaudited) | December 31, 2014 (Audited) | ||||||
ASSETS | |||||||
Investments: | |||||||
Fixed maturities, available-for-sale, at fair value (amortized cost 2015: $3,291,365; 2014: $3,379,864) | $ | 3,288,510 | $ | 3,456,904 | |||
Fixed maturities, held-to-maturity, at amortized cost (fair value 2015: $610,994; 2014: $0) | 608,510 | — | |||||
Other investments, at fair value (cost 2015: $10,725; 2014: $10,862) | 11,472 | 12,571 | |||||
Total investments | 3,908,492 | 3,469,475 | |||||
Cash and cash equivalents | 117,551 | 108,119 | |||||
Restricted cash and cash equivalents | 315,504 | 284,381 | |||||
Accrued investment income | 30,398 | 27,524 | |||||
Reinsurance balances receivable, net (includes $233,869 and $267,490 from related parties in 2015 and 2014, respectively) | 492,685 | 512,996 | |||||
Reinsurance recoverable on unpaid losses (includes $2,421 and $3,845 from related parties in 2015 and 2014, respectively) | 93,116 | 75,873 | |||||
Loan to related party | 167,975 | 167,975 | |||||
Deferred commission and other acquisition expenses, net (includes $337,472 and $285,227 from related parties in 2015 and 2014, respectively) | 428,817 | 372,487 | |||||
Goodwill and intangible assets, net | 87,343 | 87,336 | |||||
Other assets | 114,625 | 57,926 | |||||
Total assets | $ | 5,756,506 | $ | 5,164,092 | |||
LIABILITIES | |||||||
Reserve for loss and loss adjustment expenses (includes $1,424,599 and $1,167,041 from related parties in 2015 and 2014, respectively) | $ | 2,538,217 | $ | 2,271,292 | |||
Unearned premiums (includes $1,123,326 and $914,087 from related parties in 2015 and 2014, respectively) | 1,439,637 | 1,207,757 | |||||
Accrued expenses and other liabilities | 112,805 | 83,877 | |||||
Liability for securities purchased | 84,065 | — | |||||
Senior notes | 360,000 | 360,000 | |||||
Total liabilities | 4,534,724 | 3,922,926 | |||||
Commitments and Contingencies | |||||||
EQUITY | |||||||
Preference shares | 315,000 | 315,000 | |||||
Common shares ($0.01 par value: 74,705,285 and 73,900,889 shares issued in 2015 and 2014, respectively; 73,690,640 and 72,932,702 shares outstanding in 2015 and 2014, respectively) | 747 | 739 | |||||
Additional paid-in capital | 584,036 | 578,445 | |||||
Accumulated other comprehensive income | 23,007 | 95,293 | |||||
Retained earnings | 301,796 | 255,084 | |||||
Treasury shares, at cost (1,014,645 and 968,187 shares in 2015 and 2014, respectively) | (4,521 | ) | (3,867 | ) | |||
Total Maiden shareholders’ equity | 1,220,065 | 1,240,694 | |||||
Noncontrolling interest in subsidiaries | 1,717 | 472 | |||||
Total equity | 1,221,782 | 1,241,166 | |||||
Total liabilities and equity | $ | 5,756,506 | $ | 5,164,092 |
See accompanying notes to the unaudited Condensed Consolidated Financial Statements.
3
MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands of U.S. dollars, except per share data)
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Revenues: | ||||||||||||||||
Gross premiums written | $ | 628,501 | $ | 622,861 | $ | 2,136,935 | $ | 1,905,251 | ||||||||
Net premiums written | $ | 599,153 | $ | 605,456 | $ | 2,025,754 | $ | 1,856,268 | ||||||||
Change in unearned premiums | 59,367 | (13,014 | ) | (180,495 | ) | (212,700 | ) | |||||||||
Net premiums earned | 658,520 | 592,442 | 1,845,259 | 1,643,568 | ||||||||||||
Other insurance revenue | 2,177 | 2,423 | 9,408 | 10,427 | ||||||||||||
Net investment income | 32,843 | 29,520 | 96,260 | 85,469 | ||||||||||||
Net realized gains on investment | 1,216 | 310 | 2,327 | 975 | ||||||||||||
Total other-than-temporary impairment losses | (1,060 | ) | (1,189 | ) | (1,060 | ) | (1,189 | ) | ||||||||
Portion of loss recognized in other comprehensive income (loss) | — | — | — | — | ||||||||||||
Net impairment losses recognized in earnings | (1,060 | ) | (1,189 | ) | (1,060 | ) | (1,189 | ) | ||||||||
Total revenues | 693,696 | 623,506 | 1,952,194 | 1,739,250 | ||||||||||||
Expenses: | ||||||||||||||||
Net loss and loss adjustment expenses | 444,172 | 399,815 | 1,236,505 | 1,102,316 | ||||||||||||
Commission and other acquisition expenses | 197,639 | 166,246 | 551,678 | 469,730 | ||||||||||||
General and administrative expenses | 16,453 | 15,430 | 48,951 | 45,560 | ||||||||||||
Interest and amortization expenses | 7,266 | 7,266 | 21,796 | 22,692 | ||||||||||||
Accelerated amortization of Junior Subordinated Debt discount and issuance cost | — | — | — | 28,240 | ||||||||||||
Amortization of intangible assets | 710 | 820 | 2,130 | 2,458 | ||||||||||||
Foreign exchange and other gains | (1,427 | ) | (483 | ) | (4,062 | ) | (1,555 | ) | ||||||||
Total expenses | 664,813 | 589,094 | 1,856,998 | 1,669,441 | ||||||||||||
Income before income taxes | 28,883 | 34,412 | 95,196 | 69,809 | ||||||||||||
Income tax expense | 368 | 486 | 1,636 | 1,907 | ||||||||||||
Net income | 28,515 | 33,926 | 93,560 | 67,902 | ||||||||||||
Loss (income) attributable to noncontrolling interest | 69 | (43 | ) | 116 | (109 | ) | ||||||||||
Net income attributable to Maiden shareholders | 28,584 | 33,883 | 93,676 | 67,793 | ||||||||||||
Dividends on preference shares | (6,085 | ) | (6,085 | ) | (18,253 | ) | (18,253 | ) | ||||||||
Net income attributable to Maiden common shareholders | $ | 22,499 | $ | 27,798 | $ | 75,423 | $ | 49,540 | ||||||||
Basic earnings per share attributable to Maiden common shareholders | $ | 0.31 | $ | 0.38 | $ | 1.03 | $ | 0.68 | ||||||||
Diluted earnings per share attributable to Maiden common shareholders | $ | 0.30 | $ | 0.36 | $ | 0.99 | $ | 0.67 | ||||||||
Dividends declared per common share | $ | 0.13 | $ | 0.11 | $ | 0.39 | $ | 0.33 |
See accompanying notes to the unaudited Condensed Consolidated Financial Statements.
4
MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(in thousands of U.S. dollars)
For the Three Months Ended September 30, | For the Nine Months Ended September 30, | |||||||||||||||
2015 | 2014 | 2015 | 2014 | |||||||||||||
Comprehensive income: | ||||||||||||||||
Net income | $ | 28,515 | $ | 33,926 | $ | 93,560 | $ | 67,902 | ||||||||
Other comprehensive income (loss), before tax | ||||||||||||||||
Net unrealized holding (losses) gains on available-for-sale fixed maturities arising during the period | (17,191 | ) | (47,735 | ) | (80,725 | ) | 43,498 | |||||||||
Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred tax | — | — | — | — | ||||||||||||
Adjustment for reclassification of net realized (gains) losses recognized in net income | (11 | ) | 26 | (5 | ) | 538 | ||||||||||
Foreign currency translation adjustment | (741 | ) | 16,953 | 8,316 | 17,430 | |||||||||||
Other comprehensive (loss) income, before tax | (17,943 | ) | (30,756 | ) | (72,414 | ) | 61,466 | |||||||||
Income tax benefit (expense) related to components of other comprehensive income | 18 | 7 | 82 | (52 | ) | |||||||||||
Other comprehensive (loss) income, after tax | (17,925 | ) | (30,749 | ) | (72,332 | ) | 61,414 | |||||||||
Comprehensive income | 10,590 | 3,177 | 21,228 | 129,316 | ||||||||||||
Net loss (income) attributable to noncontrolling interest | 69 | (43 | ) | 116 | (109 | ) | ||||||||||
Other comprehensive (income) loss attributable to noncontrolling interest | (1 | ) | 42 | 46 | 45 | |||||||||||
Comprehensive loss (income) attributable to noncontrolling interest | 68 | (1 | ) | 162 | (64 | ) | ||||||||||
Comprehensive income attributable to Maiden shareholders | $ | 10,658 | $ | 3,176 | $ | 21,390 | $ | 129,252 |
See accompanying notes to the unaudited Condensed Consolidated Financial Statements.
5
MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
(in thousands of U.S. dollars)
For the Nine Months Ended September 30, | 2015 | 2014 | ||||||
Preference shares | ||||||||
Beginning balance | $ | 315,000 | $ | 315,000 | ||||
Ending balance | 315,000 | 315,000 | ||||||
Common shares | ||||||||
Beginning balance | 739 | 736 | ||||||
Exercise of options and issuance of shares | 8 | 3 | ||||||
Ending balance | 747 | 739 | ||||||
Additional paid-in capital | ||||||||
Beginning balance | 578,445 | 574,522 | ||||||
Exercise of options and issuance of common shares | 3,072 | 462 | ||||||
Share-based compensation expense | 2,519 | 2,454 | ||||||
Ending balance | 584,036 | 577,438 | ||||||
Accumulated other comprehensive income | ||||||||
Beginning balance | 95,293 | 25,784 | ||||||
Change in net unrealized (losses) gains on investments, net of reclassification adjustment and deferred income tax expense | (80,648 | ) | 43,984 | |||||
Foreign currency translation adjustments | 8,362 | 17,475 | ||||||
Ending balance | 23,007 | 87,243 | ||||||
Retained earnings | ||||||||
Beginning balance | 255,084 | 211,602 | ||||||
Net income attributable to Maiden shareholders | 93,676 | 67,793 | ||||||
Dividends on preference shares | (18,253 | ) | (18,253 | ) | ||||
Dividends on common shares | (28,711 | ) | (24,079 | ) | ||||
Ending balance | 301,796 | 237,063 | ||||||
Treasury shares | ||||||||
Beginning balance | (3,867 | ) | (3,801 | ) | ||||
Shares repurchased for treasury | (654 | ) | (66 | ) | ||||
Ending balance | (4,521 | ) | (3,867 | ) | ||||
Noncontrolling interest in subsidiaries | ||||||||
Beginning balance | 472 | 452 | ||||||
Acquisition of subsidiary | 1,710 | — | ||||||
Dividend paid to noncontrolling interest | (303 | ) | (42 | ) | ||||
(Loss) income attributable to noncontrolling interest | (116 | ) | 109 | |||||
Foreign currency translation adjustments | (46 | ) | (45 | ) | ||||
Ending balance | 1,717 | 474 | ||||||
Total equity | $ | 1,221,782 | $ | 1,214,090 |
See accompanying notes to the unaudited Condensed Consolidated Financial Statements.
6
MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands of U.S. dollars)
For the Nine Months Ended September 30, | 2015 | 2014 | ||||||
Cash flows from operating activities: | ||||||||
Net income | $ | 93,560 | $ | 67,902 | ||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||
Depreciation and amortization of intangibles | 2,958 | 3,306 | ||||||
Net realized gains on investment | (2,327 | ) | (975 | ) | ||||
Net impairment losses recognized in earnings | 1,060 | 1,189 | ||||||
Foreign exchange and other gains | (4,062 | ) | (1,555 | ) | ||||
Amortization of share-based compensation expense, bond premium and discount, debt discount and issuance costs and accelerated amortization of Junior Subordinated Debt discount and issuance cost | 4,119 | 35,032 | ||||||
Changes in assets – (increase) decrease: | ||||||||
Reinsurance balances receivable, net | 14,093 | 35,514 | ||||||
Reinsurance recoverable on unpaid losses | (17,374 | ) | 1,857 | |||||
Accrued investment income | (3,110 | ) | (1,943 | ) | ||||
Deferred commission and other acquisition expenses | (57,838 | ) | (65,235 | ) | ||||
Other assets | (64,512 | ) | 17,510 | |||||
Changes in liabilities – increase (decrease): | ||||||||
Reserve for loss and loss adjustment expenses | 291,123 | 224,519 | ||||||
Unearned premiums | 238,726 | 202,624 | ||||||
Accrued expenses and other liabilities | 28,942 | (12,773 | ) | |||||
Net cash provided by operating activities | 525,358 | 506,972 | ||||||
Cash flows from investing activities: | ||||||||
Purchases of fixed maturities – available-for-sale | (1,095,162 | ) | (599,440 | ) | ||||
Purchases of other investments | (144 | ) | (6,551 | ) | ||||
Proceeds from sales of fixed maturities – available-for-sale | 116,093 | 114,007 | ||||||
Proceeds from maturities and calls of fixed maturities | 467,910 | 236,372 | ||||||
Proceeds from redemption of other investments | 344 | 679 | ||||||
Decrease (increase) in restricted cash and cash equivalents, net | 41,022 | (143,485 | ) | |||||
Other, net | (715 | ) | (853 | ) | ||||
Net cash used in investing activities | (470,652 | ) | (399,271 | ) | ||||
Cash flows from financing activities: | ||||||||
Repayment of Junior Subordinated Debt | — | (152,500 | ) | |||||
Common share issuance | 3,080 | 465 | ||||||
Dividends paid to common shareholders | (28,616 | ) | (24,050 | ) | ||||
Dividends paid to preference shareholders | (18,253 | ) | (18,253 | ) | ||||
Net cash used in financing activities | (43,789 | ) | (194,338 | ) | ||||
Effect of exchange rate changes on foreign currency cash | (1,485 | ) | (814 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 9,432 | (87,451 | ) | |||||
Cash and cash equivalents, beginning of period | 108,119 | 139,833 | ||||||
Cash and cash equivalents, end of period | $ | 117,551 | $ | 52,382 |
See accompanying notes to the unaudited Condensed Consolidated Financial Statements.
7
MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)
1. Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Maiden Holdings, Ltd. and its subsidiaries (the "Company" or "Maiden") and have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP" or "U.S. GAAP") for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. All significant inter-company transactions and accounts have been eliminated.
These interim unaudited Condensed Consolidated Financial Statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim period and all such adjustments are of a normal recurring nature. The results of operations for the interim period are not necessarily indicative, if annualized, of those to be expected for the full year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
These unaudited Condensed Consolidated Financial Statements, including these notes, should be read in conjunction with the Company's audited Consolidated Financial Statements, and related notes thereto, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014.
Certain reclassifications have been made for 2014 to conform to the 2015 presentation and have no impact on net income and total equity previously reported.
2. Significant Accounting Policies
There have been no material changes to our significant accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2014 with the exception of the following:
Investments - Fixed maturities
Fixed maturities are classified as either available-for-sale ("AFS") or held-to-maturity ("HTM"). The AFS portfolio is reported at fair value. The HTM portfolio includes securities for which we have the ability and intent to hold to maturity or redemption and is reported at amortized cost.
Recently Issued Accounting Standards Not Yet Adopted
Simplifying the Presentation of Debt Issuance Costs
In April 2015 the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-03 which changes the presentation of debt issuance costs in financial statements. Under this new guidance, the Company will be required to present such cost in the balance sheet as a direct deduction from the related debt liability rather than as an asset. The amortization of such costs shall be reported as an interest expense. For public business entities, this guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning December 15, 2015. Early adoption is permitted and the Company will be required to apply this new guidance retrospectively to all prior periods presented. The Company will also be required, in the year of adoption (and in interim periods within that year) to provide certain disclosures about the change in accounting principle, including the nature of and reason for the change, the transition method, a description of the prior-period information that has been retrospectively adjusted and the effect of the change on the financial line items (that is, debt issuance cost asset and the debt liability). The Company is evaluating the impact of this new guidance on its consolidated results of operations and financial condition.
Disclosures about Short-Duration Contracts
In May 2015 the FASB issued ASU 2015-09 which is aimed at providing users of financial statements with more transparent information about an insurance entity’s initial claim estimates and subsequent adjustments to those estimates, methodologies and judgments in estimating claims, and the timing, frequency and severity of claims. The new disclosures are required for short-duration insurance contracts issued by insurers. For public business entities, this guidance will be effective for annual periods beginning after December 15, 2015, and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted and should be applied retrospectively by providing comparative disclosures for each period presented. As this guidance is disclosure-related only, the adoption of this guidance is not expected to have a material impact on the Company’s statements of operations and financial position.
8
MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)
2. Significant Accounting Policies (continued)
Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)
In May 2015 the FASB issued ASU No. 2015-07 which removes the requirement to categorize all investments for which fair value is measured using the net asset value per share practical expedient within the fair value hierarchy. ASU 2015-07 also removes the requirement to make certain disclosures for investments that are eligible to be measured at fair value using the net asset value per share practical expedient, unless the entity has elected to measure the fair value using that practical expedient. For public business entities, this guidance will be effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. A reporting entity should apply the amendments retrospectively to all periods presented. Earlier application is permitted. As this guidance is disclosure-related only, the adoption of this guidance is not expected to have a material impact on the Company’s statements of operations and financial position.
3. Segment Reporting
The Company currently has two reportable segments: Diversified Reinsurance and AmTrust Reinsurance. Refer to "Business - Our Reportable Segments" section included under Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2014 for a detailed discussion about these segments.
The Company evaluates segment performance based on segment profit separately from the results of our investment portfolio. General and administrative expenses are allocated to the segments on an actual basis except salaries and benefits where management’s judgment is applied. The Company does not allocate general corporate expenses to the segments. In determining total assets by reportable segment, the Company identifies those assets that are attributable to a particular segment such as reinsurance balances receivable, reinsurance recoverable on unpaid losses, deferred commission and other acquisition expenses, loans, goodwill and intangible assets, restricted cash and cash equivalents and investments and prepaid reinsurance premiums. All remaining assets are allocated to Corporate. Fee-generating business is considered part of the underwriting operations of the Company and is reported as "Other insurance revenue" in the unaudited Condensed Consolidated Statements of Income.
The following tables summarize our reporting segment's underwriting results and the reconciliation of our reportable segments and Other category's underwriting results to our consolidated net income:
9
MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)
3. Segment Reporting (continued)
For the Three Months Ended September 30, 2015 | Diversified Reinsurance | AmTrust Reinsurance | Other | Total | ||||||||||||
Gross premiums written | $ | 174,307 | $ | 454,194 | $ | — | $ | 628,501 | ||||||||
Net premiums written | $ | 163,710 | $ | 435,443 | $ | — | $ | 599,153 | ||||||||
Net premiums earned | $ | 193,207 | $ | 465,313 | $ | — | $ | 658,520 | ||||||||
Other insurance revenue | 2,177 | — | — | 2,177 | ||||||||||||
Net loss and loss adjustment expenses | (142,468 | ) | (297,780 | ) | (3,924 | ) | (444,172 | ) | ||||||||
Commission and other acquisition expenses | (51,714 | ) | (146,008 | ) | 83 | (197,639 | ) | |||||||||
General and administrative expenses | (9,010 | ) | (752 | ) | — | (9,762 | ) | |||||||||
Underwriting income (loss) | $ | (7,808 | ) | $ | 20,773 | $ | (3,841 | ) | $ | 9,124 | ||||||
Reconciliation to net income | ||||||||||||||||
Net investment income and realized gains on investment | 34,059 | |||||||||||||||
Net impairment losses recognized in earnings | (1,060 | ) | ||||||||||||||
Interest and amortization expenses | (7,266 | ) | ||||||||||||||
Amortization of intangible assets | (710 | ) | ||||||||||||||
Foreign exchange and other gains | 1,427 | |||||||||||||||
Other general and administrative expenses | (6,691 | ) | ||||||||||||||
Income tax expense | (368 | ) | ||||||||||||||
Net income | $ | 28,515 | ||||||||||||||
Net loss and loss adjustment expense ratio (1) | 72.9 | % | 63.9 | % | 67.2 | % | ||||||||||
Commission and other acquisition expense ratio (2) | 26.5 | % | 31.4 | % | 29.9 | % | ||||||||||
General and administrative expense ratio (3) | 4.6 | % | 0.2 | % | 2.5 | % | ||||||||||
Combined ratio (4) | 104.0 | % | 95.5 | % | 99.6 | % |
10
MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)
3. Segment Reporting (continued)
For the Three Months Ended September 30, 2014 | Diversified Reinsurance | AmTrust Reinsurance | Other | Total | ||||||||||||
Gross premiums written | $ | 236,864 | $ | 385,923 | $ | 74 | $ | 622,861 | ||||||||
Net premiums written | $ | 219,576 | $ | 385,923 | $ | (43 | ) | $ | 605,456 | |||||||
Net premiums earned | $ | 233,022 | $ | 359,065 | $ | 355 | $ | 592,442 | ||||||||
Other insurance revenue | 2,423 | — | — | 2,423 | ||||||||||||
Net loss and loss adjustment expenses | (166,342 | ) | (233,166 | ) | (307 | ) | (399,815 | ) | ||||||||
Commission and other acquisition expenses | (56,878 | ) | (109,241 | ) | (127 | ) | (166,246 | ) | ||||||||
General and administrative expenses | (8,683 | ) | (695 | ) | (193 | ) | (9,571 | ) | ||||||||
Underwriting income (loss) | $ | 3,542 | $ | 15,963 | $ | (272 | ) | $ | 19,233 | |||||||
Reconciliation to net income | ||||||||||||||||
Net investment income and realized gains on investment | 29,830 | |||||||||||||||
Net impairment losses recognized in earnings | (1,189 | ) | ||||||||||||||
Interest and amortization expenses | (7,266 | ) | ||||||||||||||
Amortization of intangible assets | (820 | ) | ||||||||||||||
Foreign exchange and other gains | 483 | |||||||||||||||
Other general and administrative expenses | (5,859 | ) | ||||||||||||||
Income tax expense | (486 | ) | ||||||||||||||
Net income | $ | 33,926 | ||||||||||||||
Net loss and loss adjustment expense ratio (1) | 70.7 | % | 64.9 | % | 67.2 | % | ||||||||||
Commission and other acquisition expense ratio (2) | 24.2 | % | 30.4 | % | 27.9 | % | ||||||||||
General and administrative expense ratio (3) | 3.6 | % | 0.3 | % | 2.7 | % | ||||||||||
Combined ratio (4) | 98.5 | % | 95.6 | % | 97.8 | % |
11
MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)
3. Segment Reporting (continued)
For the Nine Months Ended September 30, 2015 | Diversified Reinsurance | AmTrust Reinsurance | Other | Total | ||||||||||||
Gross premiums written | $ | 631,294 | $ | 1,505,642 | $ | (1 | ) | $ | 2,136,935 | |||||||
Net premiums written | $ | 602,693 | $ | 1,423,060 | $ | 1 | $ | 2,025,754 | ||||||||
Net premiums earned | $ | 570,694 | $ | 1,274,563 | $ | 2 | $ | 1,845,259 | ||||||||
Other insurance revenue | 9,408 | — | — | 9,408 | ||||||||||||
Net loss and loss adjustment expenses | (417,846 | ) | (811,016 | ) | (7,643 | ) | (1,236,505 | ) | ||||||||
Commission and other acquisition expenses | (152,332 | ) | (399,291 | ) | (55 | ) | (551,678 | ) | ||||||||
General and administrative expenses | (27,737 | ) | (2,261 | ) | — | (29,998 | ) | |||||||||
Underwriting income (loss) | $ | (17,813 | ) | $ | 61,995 | $ | (7,696 | ) | $ | 36,486 | ||||||
Reconciliation to net income | ||||||||||||||||
Net investment income and realized gains on investment | 98,587 | |||||||||||||||
Net impairment losses recognized in earnings | (1,060 | ) | ||||||||||||||
Interest and amortization expenses | (21,796 | ) | ||||||||||||||
Amortization of intangible assets | (2,130 | ) | ||||||||||||||
Foreign exchange and other gains | 4,062 | |||||||||||||||
Other general and administrative expenses | (18,953 | ) | ||||||||||||||
Income tax expense | (1,636 | ) | ||||||||||||||
Net income | $ | 93,560 | ||||||||||||||
Net loss and loss adjustment expense ratio (1) | 72.0 | % | 63.6 | % | 66.7 | % | ||||||||||
Commission and other acquisition expense ratio (2) | 26.3 | % | 31.3 | % | 29.7 | % | ||||||||||
General and administrative expense ratio (3) | 4.8 | % | 0.2 | % | 2.7 | % | ||||||||||
Combined ratio (4) | 103.1 | % | 95.1 | % | 99.1 | % |
12
MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)
3. Segment Reporting (continued)
For the Nine Months Ended September 30, 2014 | Diversified Reinsurance | AmTrust Reinsurance | Other | Total | ||||||||||||
Gross premiums written | $ | 729,154 | $ | 1,176,957 | $ | (860 | ) | $ | 1,905,251 | |||||||
Net premiums written | $ | 681,690 | $ | 1,176,957 | $ | (2,379 | ) | $ | 1,856,268 | |||||||
Net premiums earned | $ | 635,251 | $ | 988,913 | $ | 19,404 | $ | 1,643,568 | ||||||||
Other insurance revenue | 10,427 | — | — | 10,427 | ||||||||||||
Net loss and loss adjustment expenses | (439,329 | ) | (645,358 | ) | (17,629 | ) | (1,102,316 | ) | ||||||||
Commission and other acquisition expenses | (164,850 | ) | (298,236 | ) | (6,644 | ) | (469,730 | ) | ||||||||
General and administrative expenses | (28,104 | ) | (1,847 | ) | (580 | ) | (30,531 | ) | ||||||||
Underwriting income (loss) | $ | 13,395 | $ | 43,472 | $ | (5,449 | ) | $ | 51,418 | |||||||
Reconciliation to net income | ||||||||||||||||
Net investment income and realized gains on investment | 86,444 | |||||||||||||||
Net impairment losses recognized in earnings | (1,189 | ) | ||||||||||||||
Interest and amortization expenses | (22,692 | ) | ||||||||||||||
Accelerated amortization of Junior Subordinated Debt discount and issuance cost | (28,240 | ) | ||||||||||||||
Amortization of intangible assets | (2,458 | ) | ||||||||||||||
Foreign exchange and other gains | 1,555 | |||||||||||||||
Other general and administrative expenses | (15,029 | ) | ||||||||||||||
Income tax expense | (1,907 | ) | ||||||||||||||
Net income | $ | 67,902 | ||||||||||||||
Net loss and loss adjustment expense ratio (1) | 68.0 | % | 65.3 | % | 66.6 | % | ||||||||||
Commission and other acquisition expense ratio (2) | 25.5 | % | 30.2 | % | 28.4 | % | ||||||||||
General and administrative expense ratio (3) | 4.4 | % | 0.1 | % | 2.8 | % | ||||||||||
Combined ratio (4) | 97.9 | % | 95.6 | % | 97.8 | % |
(1) Calculated by dividing net loss and loss adjustment expenses by net premiums earned and other insurance revenue. | ||||||||
(2) Calculated by dividing commission and other acquisition expenses by net premiums earned and other insurance revenue. | ||||||||
(3) Calculated by dividing general and administrative expenses by net premiums earned and other insurance revenue. | ||||||||
(4) Calculated by adding together the net loss and loss adjustment expense ratio, commission and other acquisition expense ratio and general and administrative expense ratio. |
13
MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)
3. Segment Reporting (continued)
The following tables summarize the total assets of our reportable segments including the reconciliation to our consolidated assets at September 30, 2015 and December 31, 2014:
September 30, 2015 | Diversified Reinsurance | AmTrust Reinsurance | Total | |||||||||
Total assets - reportable segments | $ | 1,653,714 | $ | 3,356,927 | $ | 5,010,641 | ||||||
Corporate assets | — | — | 745,865 | |||||||||
Total Assets | $ | 1,653,714 | $ | 3,356,927 | $ | 5,756,506 |
December 31, 2014 | Diversified Reinsurance | AmTrust Reinsurance | Total | |||||||||
Total assets - reportable segments | $ | 1,624,664 | $ | 2,640,488 | $ | 4,265,152 | ||||||
Corporate assets | — | — | 898,940 | |||||||||
Total Assets | $ | 1,624,664 | $ | 2,640,488 | $ | 5,164,092 |
The following tables set forth financial information relating to net premiums written and earned by major line of business and reportable segment for the three and nine months ended September 30, 2015 and 2014:
For the Three Months Ended September 30, | 2015 | 2014 | ||||||||||||
Net premiums written | Total | % of Total | Total | % of Total | ||||||||||
Diversified Reinsurance | ||||||||||||||
Property | $ | 29,574 | 4.9 | % | $ | 36,991 | 6.1 | % | ||||||
Casualty | 101,191 | 16.9 | % | 149,067 | 24.6 | % | ||||||||
Accident and Health | 12,918 | 2.2 | % | 7,061 | 1.2 | % | ||||||||
International | 20,027 | 3.3 | % | 26,457 | 4.4 | % | ||||||||
Total Diversified Reinsurance | 163,710 | 27.3 | % | 219,576 | 36.3 | % | ||||||||
AmTrust Reinsurance | ||||||||||||||
Small Commercial Business | 231,416 | 38.6 | % | 211,986 | 35.0 | % | ||||||||
Specialty Program | 86,612 | 14.5 | % | 57,035 | 9.4 | % | ||||||||
Specialty Risk and Extended Warranty | 117,415 | 19.6 | % | 116,902 | 19.3 | % | ||||||||
Total AmTrust Reinsurance | 435,443 | 72.7 | % | 385,923 | 63.7 | % | ||||||||
Other | — | — | % | (43 | ) | — | % | |||||||
$ | 599,153 | 100.0 | % | $ | 605,456 | 100.0 | % |
14
MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)
3. Segment Reporting (continued)
For the Three Months Ended September 30, | 2015 | 2014 | ||||||||||||
Net premiums earned | Total | % of Total | Total | % of Total | ||||||||||
Diversified Reinsurance | ||||||||||||||
Property | $ | 39,593 | 6.0 | % | $ | 45,030 | 7.6 | % | ||||||
Casualty | 115,646 | 17.6 | % | 150,876 | 25.5 | % | ||||||||
Accident and Health | 14,093 | 2.1 | % | 9,001 | 1.5 | % | ||||||||
International | 23,875 | 3.6 | % | 28,115 | 4.7 | % | ||||||||
Total Diversified Reinsurance | 193,207 | 29.3 | % | 233,022 | 39.3 | % | ||||||||
AmTrust Reinsurance | ||||||||||||||
Small Commercial Business | 257,296 | 39.1 | % | 202,151 | 34.1 | % | ||||||||
Specialty Program | 80,302 | 12.2 | % | 40,654 | 6.9 | % | ||||||||
Specialty Risk and Extended Warranty | 127,715 | 19.4 | % | 116,260 | 19.6 | % | ||||||||
Total AmTrust Reinsurance | 465,313 | 70.7 | % | 359,065 | 60.6 | % | ||||||||
Other | — | — | % | 355 | 0.1 | % | ||||||||
$ | 658,520 | 100.0 | % | $ | 592,442 | 100.0 | % |
For the Nine Months Ended September 30, | 2015 | 2014 | ||||||||||||
Net premiums written | Total | % of Total | Total | % of Total | ||||||||||
Diversified Reinsurance | ||||||||||||||
Property | $ | 128,482 | 6.3 | % | $ | 126,680 | 6.8 | % | ||||||
Casualty | 359,530 | 17.8 | % | 428,648 | 23.1 | % | ||||||||
Accident and Health | 53,483 | 2.7 | % | 32,178 | 1.7 | % | ||||||||
International | 61,198 | 3.0 | % | 94,184 | 5.1 | % | ||||||||
Total Diversified Reinsurance | 602,693 | 29.8 | % | 681,690 | 36.7 | % | ||||||||
AmTrust Reinsurance | ||||||||||||||
Small Commercial Business | 857,617 | 42.3 | % | 663,766 | 35.8 | % | ||||||||
Specialty Program | 262,068 | 12.9 | % | 145,162 | 7.8 | % | ||||||||
Specialty Risk and Extended Warranty | 303,375 | 15.0 | % | 368,029 | 19.8 | % | ||||||||
Total AmTrust Reinsurance | 1,423,060 | 70.2 | % | 1,176,957 | 63.4 | % | ||||||||
Other | 1 | — | % | (2,379 | ) | (0.1 | )% | |||||||
Total | $ | 2,025,754 | 100.0 | % | $ | 1,856,268 | 100.0 | % |
15
MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)
3. Segment Reporting (continued)
For the Nine Months Ended September 30, | 2015 | 2014 | ||||||||||||
Net premiums earned | Total | % of Total | Total | % of Total | ||||||||||
Diversified Reinsurance | ||||||||||||||
Property | $ | 112,878 | 6.1 | % | $ | 128,458 | 7.8 | % | ||||||
Casualty | 350,549 | 19.0 | % | 398,148 | 24.2 | % | ||||||||
Accident and Health | 41,361 | 2.2 | % | 29,261 | 1.8 | % | ||||||||
International | 65,906 | 3.6 | % | 79,384 | 4.9 | % | ||||||||
Total Diversified Reinsurance | 570,694 | 30.9 | % | 635,251 | 38.7 | % | ||||||||
AmTrust Reinsurance | ||||||||||||||
Small Commercial Business | 734,731 | 39.8 | % | 537,810 | 32.7 | % | ||||||||
Specialty Program | 210,690 | 11.4 | % | 118,459 | 7.2 | % | ||||||||
Specialty Risk and Extended Warranty | 329,142 | 17.9 | % | 332,644 | 20.2 | % | ||||||||
Total AmTrust Reinsurance | 1,274,563 | 69.1 | % | 988,913 | 60.1 | % | ||||||||
Other | 2 | — | % | 19,404 | 1.2 | % | ||||||||
$ | 1,845,259 | 100.0 | % | $ | 1,643,568 | 100.0 | % |
4. Investments
(a) Fixed Maturities and Other Investments
During the third quarter of 2015, we designated fixed maturities with a total fair value of $608,722 as HTM reflecting our intent to hold these securities to maturity. The net unrealized holding gain at the designation date continues to be reported in the carrying value of the HTM securities and is amortized through Other Comprehensive Income over the remaining life of the securities using the effective interest method in a manner consistent with the amortization of any premium or discount.
The original or amortized cost, estimated fair value and gross unrealized gains and losses of investment in fixed maturities and other investments as of September 30, 2015 and December 31, 2014 are as follows:
September 30, 2015 | Original or amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | ||||||||||||
AFS fixed maturities: | ||||||||||||||||
U.S. treasury bonds | $ | 6,654 | $ | 405 | $ | (3 | ) | $ | 7,056 | |||||||
U.S. agency bonds – mortgage-backed | 1,302,878 | 24,516 | (3,892 | ) | 1,323,502 | |||||||||||
U.S. agency bonds – other | 28,705 | 739 | — | 29,444 | ||||||||||||
Non-U.S. government and supranational bonds | 33,650 | — | (4,142 | ) | 29,508 | |||||||||||
Commercial mortgage-backed securities | 123,944 | 3,203 | (6 | ) | 127,141 | |||||||||||
Collateralized loan obligations | 53,411 | 49 | (341 | ) | 53,119 | |||||||||||
Corporate bonds | 1,679,952 | 46,375 | (73,507 | ) | 1,652,820 | |||||||||||
Municipal bonds | 62,171 | 3,749 | — | 65,920 | ||||||||||||
Total AFS fixed maturities | 3,291,365 | 79,036 | (81,891 | ) | 3,288,510 | |||||||||||
HTM fixed maturities: | ||||||||||||||||
Corporate bonds | 608,510 | 5,181 | (2,697 | ) | 610,994 | |||||||||||
Total HTM fixed maturities | 608,510 | 5,181 | (2,697 | ) | 610,994 | |||||||||||
Other investments | 10,725 | 1,072 | (325 | ) | 11,472 | |||||||||||
Total investments | $ | 3,910,600 | $ | 85,289 | $ | (84,913 | ) | $ | 3,910,976 |
16
MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)
4. Investments (continued)
December 31, 2014 | Original or amortized cost | Gross unrealized gains | Gross unrealized losses | Fair value | ||||||||||||
AFS fixed maturities: | ||||||||||||||||
U.S. treasury bonds | $ | 8,937 | $ | 423 | $ | — | $ | 9,360 | ||||||||
U.S. agency bonds – mortgage-backed | 1,313,834 | 19,197 | (10,588 | ) | 1,322,443 | |||||||||||
U.S. agency bonds – other | 7,213 | 775 | — | 7,988 | ||||||||||||
Non-U.S. government and supranational bonds | 54,467 | 304 | (3,128 | ) | 51,643 | |||||||||||
Commercial mortgage-backed securities | 52,337 | 2,443 | — | 54,780 | ||||||||||||
Corporate bonds | 1,831,431 | 89,243 | (25,295 | ) | 1,895,379 | |||||||||||
Municipal bonds | 62,153 | 3,666 | — | 65,819 | ||||||||||||
Short-term investments | 49,492 | — | — | 49,492 | ||||||||||||
Total AFS fixed maturities | 3,379,864 | 116,051 | (39,011 | ) | 3,456,904 | |||||||||||
Other investments | 10,862 | 1,709 | — | 12,571 | ||||||||||||
Total investments | $ | 3,390,726 | $ | 117,760 | $ | (39,011 | ) | $ | 3,469,475 |
The contractual maturities of our fixed maturities are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or repay obligations with or without prepayment penalties.
AFS fixed maturities | HTM fixed maturities | |||||||||||||||
September 30, 2015 | Amortized cost | Fair value | Amortized cost | Fair value | ||||||||||||
Maturity | ||||||||||||||||
Due in one year or less | $ | 116,221 | $ | 116,438 | $ | — | $ | — | ||||||||
Due after one year through five years | 513,002 | 523,065 | 68,026 | 68,395 | ||||||||||||
Due after five years through ten years | 1,122,293 | 1,081,898 | 540,484 | 542,599 | ||||||||||||
Due after ten years | 59,616 | 63,347 | — | — | ||||||||||||
1,811,132 | 1,784,748 | 608,510 | 610,994 | |||||||||||||
U.S. agency bonds – mortgage-backed | 1,302,878 | 1,323,502 | — | — | ||||||||||||
Commercial mortgage-backed securities |