A.M. Best Revises Outlook to Positive for Ratings of Maiden Holdings Ltd. and Its Subsidiaries

A.M. Best has revised the outlook to positive from stable and affirmed the financial strength rating (FSR) of A- (Excellent) and issuer credit ratings (ICR) of “a-” of the property/casualty subsidiaries of Maiden Holdings, Ltd. (Maiden Holdings) (Hamilton, Bermuda) [NASDAQ: MHLD], also known as Maiden Group (Maiden). Concurrently, A.M. Best has revised the outlook to positive from stable and affirmed the ICR of “bbb-” of Maiden Holdings and the debt rating of “bb” on its preferred stock. A.M. Best has also revised the outlook to positive from stable and affirmed the ICR and senior debt ratings of “bbb-” of Maiden Holdings North America, Ltd. (Maiden NA) (Delaware), a direct, wholly owned subsidiary of Maiden Holdings. Maiden NA’s senior notes are fully and unconditionally guaranteed by Maiden Holdings.

Additionally, A.M. Best has affirmed the FSR of A- (Excellent) and ICR of “a-” of Maiden Specialty Insurance Company (MSIC) (Raleigh, NC). The outlook for this rating is stable. (See below for a detailed listing of companies and ratings.)

The revised outlook reflects Maiden’s consistently profitable underwriting and operating performance within its niche market segments, serving small- to medium-size insurance companies underwriting traditional lines of business. This helps distinguish Maiden from other reinsurers that have a greater proportion of their book of business in higher volatility segments such as catastrophe-exposed property reinsurance. Maiden’s non-cat property and casualty book is a well-diversified, low-volatility portfolio that generates more predictable and profitable performance, and has generated very consistent underwriting and operating returns. In addition, Maiden’s ratings also reflect its strong risk-adjusted capitalization, due in part to capital contributions from Maiden Holdings and the operational benefits that Maiden derives as a quota share partner with AmTrust Financial Services, Inc.’s (AFSI) Bermuda reinsurance subsidiary, AmTrust International Insurance, Ltd. (AII), and National General Holding Corporation (NGHC). The NGHC quota share was terminated effective Aug. 1, 2013, and it is currently in run-off.

Partially offsetting these positive rating factors are the continuing execution risk faced by Maiden in achieving its business plans, the competitive environment in its core reinsurance markets and its client concentration, as AFSI and NGHC account for approximately 63% of the group’s 2013 total gross premiums.

Maiden Holdings’ adjusted debt-to-total capital, excluding accumulated other comprehensive income (AOCI) of 27.1% and adjusted debt-to-total tangible capital (excluding AOCI) of 28.8% at March 31, 2014, were within A.M. Best’s guidelines for the company’s ratings. In addition, Maiden Holdings’ interest coverage ratio remains adequate for its ratings. Additionally, Maiden Holdings paid off the remaining balance of their trust preferreds in January 2014, which will lower the group’s cost of capital and improve earnings going forward.

The ratings of MSIC reflect its run-off status following the 100% quota share reinsurance arrangement of Maiden’s excess and surplus unit, including the transfer of MSIC staff and underwriting platform to Brit Insurance.

Key rating factors that may lead to positive rating actions include the organization producing operating results that exceed its peers for an extended period, along with the strengthening of its risk-adjusted capitalization. Factors that may lead to negative rating actions include a trend of increasingly deteriorating underwriting and operating performance to a level below the group’s peers, or an erosion of surplus that causes a significant decline in risk-adjusted capitalization.

The FSR of A- (Excellent) and ICRs of “a-” have been affirmed and the outlook revised to positive from stable for the following property/casualty subsidiaries of Maiden Holdings, Ltd.:

• Maiden Reinsurance Ltd.

• Maiden Reinsurance North America

The FSR of A- (Excellent) and ICR of “a-” have been affirmed with a stable outlook for Maiden Specialty Insurance Company.

The following debt ratings have been affirmed, and the outlook revised to positive from stable:

Maiden Holdings, Ltd.—

-- “bb” on $150 million 8.25% preferred stock

-- “bb” on $165 million 7.25% mandatory convertible preferred stock, due 2016

Maiden Holdings North America, Ltd. (guaranteed by Maiden Holdings, Ltd.)—

-- “bbb-” on $100 million 8.0% senior unsecured notes, due 2042

-- “bbb-“ on $107 million 8.25% senior unsecured notes, due 2041

-- “bbb-” on $152 million 7.75% senior unsecured notes, due 2043

The following indicative ratings under the shelf registration have been affirmed and the outlook revised to positive from stable:

Maiden Holdings North America, Ltd. (guaranteed by Maiden Holdings, Ltd.)—

-- “bbb-” on senior unsecured debt

-- “bb+” on subordinated debt

-- “bb” on junior subordinated debt

-- “bb” on preferred stock

The methodology used in determining these ratings is Best’s Credit Rating Methodology, which provides a comprehensive explanation of A.M. Best’s rating process and contains the different rating criteria employed in the rating process. Best’s Credit Rating Methodology can be found at www.ambest.com/ratings/methodology.

A.M. Best Company is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com.

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