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, 2008

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. 001-33143

Maiden Holdings, Ltd.

(Exact name of registrant as specified in its charter)
 
Bermuda
 
04-3106389
(State or other jurisdiction of
incorporation or organization)
 
(IRS Employer Identification No.)

48 Par-la-Ville Road, Suite 1141 HM11
 
HM11
(Address of principal executive offices)
 
(Zip Code)

(441) 292-7090
(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 is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨ Accelerated Filer ¨ Non-accelerated filer x

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 August 15, 2008, the Registrant had one class of Common Stock ($.01 par value), of which 59,550,000 shares were issued and outstanding.



INDEX

   
Page
   
 
PART I
FINANCIAL INFORMATION
 
   
 
Item 1.
Consolidated Financial Statements:
 
   
 
 
Consolidated Balance Sheets as of September 30, 2008 (Unaudited) and December 31, 2007
3
   
 
 
Consolidated Statements of Income for the three months ended September 30, 2008 and 2007, nine months ended September 30, 2008 and period from May 31, 2007 (inception) to September 30, 2007 (Unaudited)
4
   
 
 
Consolidated Statements of Cash Flows for the nine months ended September 30, 2008 and period from May 31, 2007 (inception) to September 30, 2007 (Unaudited)
5
   
 
 
Consolidated Statements of Changes in Shareholders’ Equity for the nine months ended September 30, 2008 and period from May 31, 2007 (inception) to September 30, 2007 (Unaudited)
6
     
 
Notes to Consolidated Financial Statements (Unaudited)
7
   
 
Item 2.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
18
     
Item 3.
Quantitative and Qualitative Disclosures About Market Risk
29
     
Item 4.
Controls and Procedures
30
     
PART II
OTHER INFORMATION
 
     
Item 2.
Unregistered Sales of Equity Securities and Use of Proceeds
31
     
Item 4.
Submission of Matters to a vote of Security Holders
31
     
Item 6.
Exhibits
32
     
 
Signatures
 
 
2


PART 1 - FINANCIAL INFORMATION
  Item 1. Financial Statements
 
MAIDEN HOLDINGS, LTD.
CONSOLIDATED BALANCE SHEETS
(in thousands (000’s), except per share data)


   
(Unaudited)
September 30, 2008
 
December 31, 2007
 
Assets
     
   
 
Fixed maturities, available-for-sale, at fair value (amortized cost $749,798 ; $488,765)
 
$
687,186
 
$
474,789
 
Other investments, at fair value (cost $10,315; $15,176)
   
10,071
   
15,656
 
Total investments
   
697,257
   
490,445
 
Cash and cash equivalents
   
82,443
   
35,729
 
Accrued investment income
   
5,423
   
3,204
 
Reinsurance balances receivable, net (primarily with related parties - see note 8)
   
98,779
   
27,990
 
Loan to related party (see note 8)
   
167,975
   
113,542
 
Prepaid expenses and other assets
   
420
   
454
 
Deferred commission and other acquisition costs (primarily with related parties - see note 8)
   
88,615
   
44,215
 
Furniture and equipment, net
   
63
   
29
 
                 
Total Assets
 
$
1,140,975
 
$
715,608
 
Liabilities and Shareholders’ Equity
             
Liabilities
             
Loss and loss adjustment expense reserves (primarily with related parties - see note 8)
 
$
123,621
 
$
38,508
 
Unearned premiums (primarily with related parties - see note 8)
   
267,799
   
137,166
 
Accrued expenses and other liabilities
   
4,670
   
2,589
 
Due to broker
   
5,656
   
-
 
Securities sold under agreements to repurchase, at contract value
   
260,775
   
-
 
                 
Total Liabilities
   
662,521
   
178,263
 
             
Shareholders’ Equity:
           
Common shares, $0.01 par value; 100,000,000 shares authorized, 59,550,000 issued and outstanding
   
596
   
596
 
Additional paid-in capital
   
530,258
   
529,647
 
Accumulated other comprehensive loss
   
(62,856
)
 
(13,496
)
Retained earnings
   
10,456
   
20,598
 
Total Shareholders’ Equity
   
478,454
   
537,345
 
Total Liabilities and Shareholders’ Equity
 
$
1,140,975
 
$
715,608
 
 
See accompanying notes to the unaudited consolidated financial statements.

3


MAIDEN HOLDINGS, LTD.
CONSOLIDATED STATEMENTS OF INCOME
(in thousands (000’s), except per share data)
(Unaudited)

 
 
For the Three
Months Ended
September 30,
2008
 
For the Three
Months Ended
September 30,
2007
 
For the Nine
Months Ended
September 30,
2008
 
Period from
May 31, 2007
(inception) to
September 30,
2007
 
                   
Revenues:
                 
Premium income:
                 
Net premiums written (primarily with related parties - see note 8)
 
$
113,187
 
$
190,801
 
$
386,870
 
$
190,801
 
Change in unearned premiums
   
408
   
(127,835
)
 
(130,631
)
 
(127,835
)
Net earned premium
   
113,595
   
62,966
   
256,239
   
62,966
 
Net investment income
   
8,974
   
7,503
   
24,346
   
7,562
 
Net realized investment gains(loss)
   
(42,538
)
 
87
   
(42,375
)
 
87
 
Total revenues
   
80,031
   
70,556
   
238,210
   
70,615
 
Expenses:
                       
Loss and loss adjustment expenses (primarily with related parties - see note 8)
   
66,915
   
37,667
   
148,362
   
37,667
 
Commission and other acquisition expenses (primarily with related parties - see note 8)
   
38,299
   
20,307
   
85,057
   
20,307
 
Salaries and benefits
   
673
   
211
   
1,820
   
211
 
Foreign exchange loss
   
359
   
1
   
364
   
1
 
Other operating expenses
   
1,301
   
1,030
   
3,816
   
1,166
 
Total expenses
   
107,547
   
59,216
   
239,419
   
59,352
 
                           
Net income (loss)
 
$
(27,516
)
$
11,340
   
(1,209
)
$
11,263
 
                           
Basic and diluted earnings (loss) per common share
 
$
(0.46
)
$
0.20
   
(0.02
)
$
0.25
 
Dividends declared per common share
 
$
0.05
 
$
0.025
   
0.15
 
$
0.025
 
 
See accompanying notes to the unaudited consolidated financial statements.

4


MAIDEN HOLDINGS, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands (000’s), except per share data)
(Unaudited)

   
 
For the Nine Months
Ended
September 30, 2008
 
Period from
May 31, 2007
(inception) to
September 30,
2007
 
Cash flows from operating activities:
         
Net income (loss)
 
$
(1,209
)
$
11,263
 
Adjustments to reconcile net income to net cash provided by operating activities :
             
Depreciation
   
18
   
1
 
Net realized gain on sales of investments
   
(163
)
 
(87
)
Other than temporary impairment on investments
   
42,538
   
-
 
Foreign exchange loss on revaluation
   
356
   
-
 
Amortization of bond premium and discount
   
(2,040
)
 
(135
)
Amortization of share-based compensation expense
   
611
   
137
 
Changes in assets - (increase) decrease:
             
Reinsurance balances receivable
   
(71,145
)
 
(113,114
)
Accrued investment income
   
(2,219
)
 
(3,210
)
Deferred commission and other acquisition costs
   
(44,400
)
 
(41,227
)
Prepaid expenses and other assets
   
34
   
(574
)
Changes in liabilities - increase (decrease):
             
Accrued expenses and other liabilities
   
(897
)
 
1,646
 
Loss and loss adjustment expense reserves
   
85,113
   
21,514
 
Unearned premiums
   
130,633
   
127,835
 
Net cash provided by operating activities
   
137,230
   
4,049
 
Cash flows from investing activities:
             
Purchases of investments:
             
Purchases of fixed-maturity securities
   
(379,010
)
 
(414,152
)
Purchases of other investments
   
(340
)
 
-
 
Sale of investments:
             
Proceeds from sales of fixed-maturity securities
   
-
   
49,377
 
Proceeds from maturities and calls on fixed maturity investments
   
88,499
   
861
 
Purchase of furniture and equipment
   
(52
)
 
(25
)
Loan to related party
   
(54,433
)
 
-
 
Net cash used in investing activities
   
(345,336
)
 
(363,939
)
Cash flows from financing activities:
             
Repurchase agreements, net
   
260,775
   
-
 
Common shares issuance
   
-
   
529,919
 
Dividend paid
   
(5,955
)
 
-
 
Net cash provided by financing activities
   
254,820
   
529,919
 
Net increase in cash and cash equivalents
   
46,714
   
170,029
 
Cash and cash equivalents, beginning of period
   
35,729
   
-
 
Cash and cash equivalents, end of period
 
$
82,443
 
$
170,029
 

See accompanying notes to the unaudited consolidated financial statements. 

5


MAIDEN HOLDINGS, LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
 (in thousands (000’s), except per share data)
(Unaudited)

For the Period
from May 31, 2007 (inception)
to September 30, 2007
 
Common
Shares
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Total
Shareholders’
Equity
 
Balance at May 31, 2007  
 
$
-
 
$
-
 
$
-
 
$
-
 
$
-
 
Shares issued, net  
   
596
   
529,323
               
529,919
 
                                 
Net income  
   
-
   
-
   
-
   
11,263
   
11,263
 
Net unrealized losses  
   
-
   
-
   
(4,700
)
 
-
   
(4,700
)
Comprehensive Income
                           
6,563
 
Share based compensation  
   
-
   
137
   
-
   
-
   
137
 
Dividends to shareholders  
   
-
   
-
   
-
   
(1,489
)
 
(1,489
)
Balance at September 30, 2007 
 
$
596
 
$
529,460
 
$
(4,700
)
$
9,774
 
$
535,130
 


For the Nine Months Ended
September 30, 2008  
 
Common Shares
 
Additional
Paid-In
Capital
 
Accumulated
Other
Comprehensive
Loss
 
Retained
Earnings
 
Total
Shareholders’
Equity
 
Balance at December 31, 2007  
 
$
596
 
$
529,647
 
$
(13,496
)
$
20,598
 
$
537,345
 
   
                       
Net loss  
   
-
               
(1,209
)
 
(1,209
)
Net unrealized losses  
   
-
         
(49,360
)
 
-
   
(49,360
)
Comprehensive Income
                           
(50,569
)
Share based compensation  
   
-
   
611
             
611
 
Dividends to shareholders  
   
-
               
(8,933
)
 
(8,933
)
   
   
 
   
 
   
 
   
 
        
Balance at September 30, 2008 
 
$
596
 
$
530,258
 
$
(62,856
)
$
10,456
 
$
478,454
 

See accompanying notes to the unaudited consolidated financial statements.

6


Notes to Consolidated Financial Statements
(in thousands (000’s), except per share data)
 (Unaudited)

1.
Basis of Presentation — Summary of Significant Accounting Policies
 
The accompanying unaudited interim consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X and, therefore, do not include all of the information and footnotes required by GAAP for complete financial statements. These interim statements should be read in conjunction with the financial statements and notes thereto included in the Maiden Holdings, Ltd. (“Maiden” or the “Company”) Annual Report to Security Holders for the year ended December 31, 2007, previously filed with the Securities and Exchange Commission (“SEC”) on May 15, 2008. The balance sheet at December 31, 2007 has been derived from the audited consolidated financial statements at that date but does not include all of the information and footnotes required by GAAP for complete financial statements.
 
These interim 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.

A detailed description of the Company’s significant accounting policies and management judgments is located in the audited consolidated financial statements for the year ended December 31, 2007, included in the Company’s Form ARS filed with the SEC.

All significant inter-company transactions and accounts have been eliminated in the consolidated financial statements. 
 
2.
Recent Accounting Pronouncements
 
In October 2008, the Financial Accounting Standards Board (“FASB”) issued FASB Staff Position (“FSP”) 157-3, Determining the Fair Value of a Financial Asset When the Market For That Asset Is Not Active (FSP 157-3), with an immediate effective date, including prior periods for which financial statements have not been issued.  FSP 157-3 amends FASB 157 to clarify the application of fair value in inactive markets and allows for the use of management’s internal assumptions about future cash flows with appropriately risk-adjusted discount rates when relevant observable market data does not exist.  The objective of FASB 157 has not changed and continues to be the determination of the price that would be received in an orderly transaction that is not a forced liquidation or distressed sale at the measurement date.  The adoption of FSP 157-3 in the third quarter did not have a material effect on the Company’s results of operations, financial position or liquidity.

In June 2008, the FASB issued FSP No. 03-6-1, “Determining Whether Instruments Granted in Share-Based Payment Transactions are Participating Securities” (“FSP 03-6-1”).  FSP 03-6-1 clarifies that unvested share-based payment awards that contain nonforfeitable rights to dividends or dividend equivalents (whether paid or unpaid) are participating securities and are to be included in the computation of earnings per share under the two-class method described in Statement of Financial Accounting Standards No. 128 (“SFAS No. 128”), “Earnings Per Share.” This FSP is effective for financial statements issued for fiscal years beginning after December 15, 2008 and requires all presented prior-period earnings per share data to be adjusted retrospectively.  We are currently evaluating the impact, if any, that FSP 03-6-1 will have on our consolidated financial statements.

In May 2008, the FASB issued FASB Statement No. 163 (“SFAS 163”), “Accounting for Financial Guarantee Insurance Contracts”, an interpretation of SFAS Statement No. 60. SFAS 163 requires that an insurance enterprise recognize a claim liability prior to an event of default (insured event) when there is evidence that credit deterioration has occurred in an insured financial obligation. SFAS 163 also clarifies how Statement 60 applies to financial guarantee insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities. Those clarifications will increase comparability in financial reporting of financial guarantee insurance contracts by insurance enterprises. SFAS 163 also requires expanded disclosures about financial guarantee insurance contracts. SFAS 163 is effective for financial statements issued for fiscal years and interim periods beginning after December 15, 2008. We are currently evaluating the impact, if any, that SFAS 163 will have on our consolidated financial statements.

In May 2008, the FASB issued FASB Statement No. 162 (“SFAS 162”), “The hierarchy of Generally Accepted Accounting Principles”. SFAS 162 identifies the sources of accounting principles and the framework for selecting the principles used in the preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles) in the United States. This Statement shall be effective 60 days following the SEC’s approval of the Public Company Accounting Oversight Board (PCAOB) amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The Company does not believe the adoption will have a material impact on its financial condition or results of operations.

In March 2008, the FASB issued FASB Statement No. 161 (“SFAS 161”), “Disclosures about Derivative Instruments and Hedging Activities ”. SFAS 161 requires companies with derivative instruments to disclose information that should enable financial-statement users to understand how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under FASB Statement No. 133 “Accounting for Derivative Instruments and Hedging Activities” and how derivative instruments and related hedged items affect a company's financial position, financial performance and cash flows. SFAS 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008. We are currently evaluating the impact, if any, that SFAS 161 will have on our consolidated financial statements.

7


3.
Investments

The original or amortized cost, estimated fair value and gross unrealized gains and losses of available-for-sale fixed maturities and other investments as of September 30, 2008 and December 31, 2007, are as follows:
 
(a) Available-for-Sale Fixed Maturities and Other Investments

 September 30, 2008  
 
Original or amortized
cost  
 
Gross unrealized
gains  
 
Gross unrealized
losses  
 
Fair
value
 
Fixed Maturities:
                 
U.S. Agency - mortgage backed securities
 
$
410,399
 
$
3,983
 
$
(3,417
)
$
410,965
 
Corporate fixed maturities  
   
339,399
   
196
   
(63,374
)
 
276,221
 
Total available for sale fixed maturities
   
749,798
   
4,179
   
(66,791
)
 
687,186
 
Other investments
   
10,315
   
-
   
(244
)
 
10,071
 
 Total investments 
 
$
760,113
 
$
4,179
 
$
(67,035
)
$
697,257
 
  
December 31, 2007
 
Original or
amortized
cost
 
  Gross unrealized
gains  
 
Gross unrealized
losses  
 
Fair
value
 
Fixed Maturities:
                 
U.S. Agency - mortgage backed securities  
 
$
204,363
 
$
660
 
$
-
 
$
205,023
 
Corporate fixed maturities
   
284,402
   
445
   
(15,081
)
 
269,766
 
Total available for sale fixed maturities  
   
488,765
   
1,105
   
(15,081
)
 
474,789
 
Other investments
   
15,176
   
480
   
-
   
15,656
 
Total investments  
 
$
503,941
 
$
1,585
 
$
(15,081
)
$
490,445
 

  (b) Investment Income
 
Net investment income was derived from the following sources:  

 
 
For the Three Months
Ended September 30,
2008
 
For the Three
Months Ended
September 30,
2007
 
For the Nine
Months Ended
September 30,
2008
 
Period from May
31, 2007
(inception) to
September 30,
2007
 
Fixed maturities
 
$
9,394
 
$
3,822
 
$
23,362
 
$
3,822
 
Cash and cash equivalents
   
441
   
4,169
   
1,824
   
4,228
 
Loan to related party
   
1,481
   
-
   
3,766
   
-
 
 
   
11,316
   
7,991
   
28,952
   
8,050
 
Less:
                         
Investment expenses
   
(290
)
 
(488
)
 
(1,103
)
 
(488
)
Interest expense on securities sold under agreements to repurchase
   
(2,052
)
 
-
   
(3,503
)
 
-
 
   
$
8,974
 
$
7,503
 
$
24,346
 
$
7,562
 

8


(c) Other-Than-Temporary Impairment
 
We review our investment portfolio for impairment on a quarterly basis. Impairment of investments results in a charge to operations when a fair value decline below cost is deemed to be other-than-temporary. As of September 30, 2008, we reviewed our portfolio to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of investments.  During the three months and nine months ended September 30, 2008, the Company recognized other than temporary impairment on Lehman Brothers Inc. and Washington Mutual, Inc. fixed income securities and other investments of $17,376, $19,961 and $5,201, respectively. Other than those mentioned above, there were no other-than-temporary declines in the fair values of investments held in our investment portfolio. 
 
The tables below summarize the gross unrealized losses of our available-for-sale securities and other investments as of September 30, 2008:  

   
Less than 12 months
 
12 months or more
 
Total
 
 
 
Fair 
value
 
Unrealized
losses
 
Fair 
value
 
Unrealized
Losses
 
Fair 
value
 
Unrealized
losses
 
Available-for-sale securities:
                         
U.S. Agency mortgage backed securities
 
$
115,819
   
(2,371
)
$
58,645
   
(1,045
)
$
174,464
   
(3,417
)
Corporate fixed maturities
   
103,922
   
(19,856
)
 
158,025
   
(43,518
)
 
261,947
   
(63,374
)
     
219,741
   
(22,227
)
 
216,670
   
(44,564
)
 
436,411
   
(66,791
)
Other investments
 
$
4,756
   
(244
)
$
-
   
-
 
$
4,756
   
(244
)
Total temporarily impaired available-for-sale securities and other investments
 
$
224,497
   
(22,471
)
$
216,670
   
(44,564
))
$
441,167
   
(67,035
)

As of September 30, 2008, there were approximately 35 securities in an unrealized loss position with a fair value of $441.2 million. Of these securities, there are 23 securities that have been in an unrealized loss position for 12 months or greater with a fair value of $216.7 million.

The tables below summarize the gross unrealized losses of our available-for-sale securities and other investments as of December 31, 2007:
 
   
Less than 12 months
 
12 months or more
 
Total
 
   
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
Losses
 
Fair
value
 
Unrealized
losses
 
Available-for-sale securities:
 
     
 
   
 
     
 
 
 
 
 
     
 
U.S. Agency mortgage backed securities
 
$
-
   
-
 
$
-
   
-
 
$
-
   
-
 
Corporate fixed maturities
   
249,233
   
(15,081
)
 
-
   
-
   
249,233
   
(15,081
)
     
249,233
   
(15,081
)
 
-
   
-
   
249,233
   
(15,081
)
Other investments
 
$
-
   
-
 
$
-
   
-
 
$
-
   
-
 
Total temporarily impaired available-for-sale securities and other investments
 
$
249,233
   
(15,081
)
$
-
   
-
 
$
249,233
   
(15,081
)


As of September 30, 2007, there were approximately 18 securities in an unrealized loss position with a fair value of $249.2 million. None of these securities have been in an unrealized loss position for 12 months or greater.

(d) Other
 
The Company enters into repurchase agreements. The agreements are accounted for as collateralized borrowing transactions and are recorded at contract amounts. The Company receives cash or securities, that it invests or holds in short term or fixed income securities. As of September 30, 2008, there were $260,775 principal amount outstanding at interest rates between 2.5% and 3.8%. Interest expense associated with these repurchase agreements was $2,052 and $3,503 for the three and nine months ended September 30, 2008, respectively; out of which $259 was accrued as of September 30, 2008. The Company has approximately $260,775 of collateral pledged in support of these agreements.

9


4.
Fair Value of Financial Instruments
 
The Company’s estimates of fair value for financial assets and financial liabilities are based on the framework established in SFAS 157. The framework is based on the inputs used in valuation and gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in the SFAS 157 hierarchy is based on whether the significant inputs into the valuation are observable. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Company’s significant market assumptions. The three levels of the hierarchy are as follows:

·
Level 1 - Unadjusted quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access.
·
Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.
·
Level 3 - Valuations based on models where significant inputs are not observable. The unobservable inputs reflect the Company’s own assumptions about the assumptions that market participants would use.

            For investments that have quoted market prices in active markets, the Company uses the quoted market prices as fair value and includes these prices in the amounts disclosed in the Level 1 hierarchy.   The Company receives the quoted market prices from third party, nationally, recognized pricing services (“pricing service”).  When quoted market prices are unavailable, the Company utilizes a pricing service to determine an estimate of fair value.  The fair value estimates are included in the Level 2 hierarchy (approximately 98.6% of total investment portfolio).  The Company will challenge any prices for its investments which are considered to not represent fair value.    If quoted market prices and an estimate from a pricing service is unavailable, the Company produces an estimate of fair value based on dealer quotations for recent activity in positions with the same or similar characteristics to that being valued or through consensus pricing of a pricing service.  Depending on the level of observable inputs, the Company will then determine if the estimate is Level 2 or Level 3 hierarchy.  The Company bases its estimates of fair values for assets on the bid price as it represents what a third party market participant would be willing to pay in an arm’s length transaction.

Fixed Maturities (Available for Sale).  The Company utilizes a pricing service to estimate fair value measurements for approximately 89% of its fixed maturities.  The pricing service utilizes market quotations for fixed maturity securities that have quoted market prices in active markets.  Since fixed maturities other than U.S. treasury securities generally do not trade on a daily basis, the pricing service prepares estimates of fair value measurements using relevant market data, benchmark curves, sector groupings and matrix pricing.  The pricing service utilized by the Company has indicated they will only produce an estimate of fair value if there is verifiable information to produce a valuation.  As the fair value estimates of most fixed maturity investments are based on observable market information rather than market quotes, the estimates of fair value other than U.S. Treasury securities are included in Level 2 of the hierarchy.   The Company’s Level 2 investments include obligations of U.S. government agencies and, corporate debt securities.  Additionally, for approximately 11% of the Company’s fixed maturities the Company utilized dealer quotes based on recent activity, consensus pricing through a pricing services’ proprietary methodology or a methodology using yield spreads of comparable fixed maturities with similar yield spreads of comparable bonds of the same issuer.     

                Other investments. The Company has $10,071 or approximately 1.4% of its investment portfolio in limited partnerships or hedge funds where the fair value estimate is determined by a fund manager based on recent filings, operating results, balance sheet stability, growth and other business and market sector fundamentals. Due to the significant unobservable inputs in these valuations, the Company includes the estimate in the amount disclosed in Level 3.  The Company has determined that its investments in Level 3 securities are not material to its financial position or results of operations.

Fair Value Hierarchy

The following table presents the level within the fair value hierarchy at which the Company’s financial assets and financial liabilities are measured on a recurring basis as of September 30, 2008:

 
 
  Total
 
Level 1
 
Level 2
 
Level 3  
 
Assets:
 
       
 
     
 
     
 
     
 
Available-for-sale fixed maturities
 
$
687,186
 
$
-
 
$
687,186
 
$
-
 
Other investments
   
10,071
   
-
   
-
   
10,071
 
 
 
$
697,257
 
$
-
 
$
687,186
 
$
10,071
 
Liabilities:
                 
Securities sold under agreements to repurchase, at contract value
   
(260,775
)
 
-
   
(260,775
)
 
-
 
  
 
$
436,482
 
$
-
 
$
426,411
 
$
10,071
 
 

10

 
The following table provides a summary of changes in fair value of the Company’s Level 3 financial assets as of September 30, 2008:

 
 
Three Months
Ended
September 30,
2008
 
Nine Months
Ended September
30, 2008
 
Beginning balance
 
$
12,134
 
$
15,656
 
Total net losses for the period included in:
         
Net loss
   
(5,201
)
 
(5,201
)
Other comprehensive income (loss)
   
3,107
   
(724
)
Purchases, sales, issuances and settlements, net
   
31
   
340
 
Net transfers into (out of) Level 3
   
-
   
-
 
Ending balance as of September 30, 2008
 
$
10,071
 
$
10,071
 


5.
Earnings Per Share

The following is a summary of the elements used in calculating basic and diluted earnings per share:
 
 
 
Three Months
Ended
September 30,
2008
 
Three Months
Ended
September 30,
2007
 
Nine Months
Ended
September
30, 2008
 
Period from may
31, 2007 (inception)
to September 30,
2007
 
Net income available to common shareholders
 
$
(27,516
)
$
11,340
 
$
(1,209
)
$
11,263
 
 
                 
Weighted average number of common shares outstanding - basic
   
59,550,000
   
57,716,859
   
59,550,000
   
44,184,968
 
Potentially dilutive securities:
                 
Warrants
   
-
   
-
   
-
   
-
 
Share options
   
-
   
-
   
-
   
-
 
Weighted average number of common shares outstanding - diluted
   
59,550,000
   
57,716,859
   
59,550,000
   
44,184,968
 
                           
Basic and diluted earnings per common share:
 
$
(0.46
)
$
0.20
 
$
(0.02
)
$
0.25
 
 
As of September 30, 2008, the total weighted-average of 4,050,000 warrants and 893,529 share options were excluded from diluted earnings per share as they were anti-dilutive.
 
6.

The Company’s 2007 Share Incentive Plan (the “Plan”) provides for grants of options and restricted shares. The total number of shares currently reserved for issuance under the Plan is 2,800,000 common shares. The Plan is administered by the Compensation Committee of the Board of Directors. Exercise prices of options will be established at or above the fair market value of the Company’s common shares at the date of grant. Under the 2007 Share Incentive Plan, unless otherwise determined by the compensation committee and provided in an award agreement, 25% of the options will become exercisable on the first anniversary of the grant date, with an additional 6.25% of the options vesting each quarter thereafter based on the grantee’s continued employment over a four-year period, and will expire ten years after grant date.

Share Options
 
The fair value of each option grant is separately estimated for each vesting date. The fair value of each option is amortized into compensation expense on a straight-line basis between the grant date for the award and each vesting date. The Company has estimated the fair value of all share option awards as of the date of the grant by applying the Black-Scholes-Merton multiple-option pricing valuation model. The application of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense. The adoption of SFAS No. 123R’s fair value method has resulted in share-based expense (a component of salaries and benefits) in the amount of approximately $219 and $611 for the three and nine months ended September 30, 2008, respectively. The share-based expense was $137 for the three months ended September 30, 2007 and for the period from May 31, 2007 (inception) to September 30, 2007.

11

 
The key assumptions used in determining the fair value of options granted in 2008 and a summary of the methodology applied to develop each assumption are as follows:

Assumptions :
 
2008
 
Volatility
   
29.8
%
Risk-free interest rate
   
3.30
%
Weighted average expected lives in years
   
6.1 years
 
Forfeiture rate
   
0
%
Dividend yield rate
   
1
%
 
Expected Price Volatility - This is a measure of the amount by which a price has fluctuated or is expected to fluctuate. At the times the Company granted options, there was no external market for the Company’s common shares. Thus, it was not possible to use actual experience to estimate the expected volatility of the price of the common shares in estimating the value of the options granted. As a substitute for such estimate, the Company used the historical volatility of companies in the industry in which the Company operates.
 
Risk-Free Interest Rate - This is the U.S. Treasury rate for the week of the grant having a term equal to the expected life of the option. An increase in the risk-free interest rate will increase compensation expense. 

Expected Lives - This is the period of time over which the options granted are expected to remain outstanding giving consideration to vesting schedules, historical exercise and forfeiture patterns. The Company uses the simplified method outlined in SEC Staff Accounting Bulletin No. 107 to estimate expected lives for options granted during the period as historical exercise data is not available and the options meet the requirements set out in the Bulletin. Options granted have a maximum term of ten years. An increase in the expected life will increase compensation expense.

Forfeiture Rate - This is the estimated percentage of options granted that are expected to be forfeited or cancelled before becoming fully vested. An increase in the forfeiture rate will decrease compensation expense.

The following schedule shows all options granted, exercised, expired and exchanged under the Plan for the three months ended September 30, 2008:

 
 
Number of
Share Options  
 
Weighted
Average Exercise
Price  
 
Weighted Average
Remaining Contractual
Term
 
Outstanding, June 30, 2008
   
962,000
 
$
10.00
   
9.3 years
 
Granted
   
-
   
-
   
-
 
Exercised
   
-
   
-
   
-
 
Cancelled
   
-
   
-
   
-
 
Outstanding, September 30, 2008
   
962,000
 
$
10.00
   
9.01 years
 
 
The following schedule shows all options granted, exercised, expired and exchanged under the Plan for the nine months ended September 30, 2008:
 
 
 
Number of Share
Options  
 
Weighted
Average Exercise
Price  
 
Weighted Average
Remaining Contractual
Term
 
Outstanding, December 31, 2007
   
716,000
 
$
10.00
   
9.1 years
 
Granted
   
246,000
   
10.00
   
9.46 years
 
Exercised
   
-
   
-
       
Cancelled
   
-
   
-
       
Outstanding, September 30, 2008
   
962,000
 
$
10.00
   
9.01 years
 

The weighted average grant date fair value was $3.30 for all options outstanding at September 30, 2008. There was approximately $2,252 of total unrecognized compensation cost related to non-vested share-based compensation arrangements as of September 30, 2008.
 
7.   Dividend Declared
 
A dividend was declared on June 4, 2008. The Company’s Board of Directors approved a quarterly cash dividend of $0.05 per common share payable to shareholders of record as of July 1, 2008. The dividend was paid on July 15, 2008.

On July 31, 2008, the Company’s Board of Directors approved a quarterly cash dividend of $0.05 per common share. This dividend was paid on October 13, 2008 to shareholders of record on October 2, 2008.

12

 
8.   Related Party Transactions

The Founding Shareholders of Maiden, Michael Karfunkel, George Karfunkel and Barry Zyskind, are also the principal shareholders, and, respectively, the Chairman of the Board of Directors, a Director, and the Chief Executive Officer and Director of AmTrust. The following describes transactions between the Company and AmTrust.

Quota Share Reinsurance Agreement

Effective July 1, 2007, the Company and AmTrust entered into a master agreement, as amended, by which they caused AmTrust’s Bermuda reinsurance subsidiary, AmTrust International Insurance, Ltd. (“AII”) and Maiden Insurance Company Ltd. (“Maiden Insurance”) to enter into the Reinsurance Agreement by which (a) AII retrocedes to Maiden Insurance an amount equal to 40% of the premium written by the AmTrust Ceding Insurers, net of the cost of unaffiliated inuring reinsurance (and in the case of AmTrust’s U.K. insurance subsidiary, IGI Insurance Company Limited (“IGI”), net of commissions) and 40% of losses and (b) AII transferred to Maiden Insurance 40% of the AmTrust Ceding Insurers’ unearned premium reserves, effective as of July 1, 2007, with respect to the current lines of business, excluding risks for which the AmTrust Ceding Insurers’ net retention exceeds $5,000 (“Covered Business”). AmTrust also has agreed to cause AII, subject to regulatory requirements, to reinsure any insurance company which writes Covered Business in which AmTrust acquires a majority interest to the extent required to enable AII to cede to Maiden Insurance 40% of the premiums and losses related to such Covered Business. The Agreement further provides that AII receives a ceding commission of 31% of ceded written premiums. The Reinsurance Agreement has an initial term of three years and will automatically renew for successive three year terms thereafter, unless either AII or Maiden Insurance notifies the other of its election not to renew not less than nine months prior to the end of any such three year term. In addition, either party is entitled to terminate on thirty days notice or less upon the occurrence of certain early termination events, which include a default in payment, insolvency, change in control of AII or Maiden Insurance, run-off, or a reduction of 50% or more of the shareholders’ equity of Maiden Insurance or the combined shareholders’ equity of AII and the AmTrust Ceding Insurers.
 
On June 11, 2008, the Company and AmTrust amended the Reinsurance Agreement to add Retail Commercial Package Business to the Covered Business as a consequence of AmTrust’s acquisition of Unitrin Business Insurance (UBI). Under the amendment, AmTrust's subsidiaries cede, upon collection, to Maiden 100% of $82.2 million of unearned premium (net of inuring reinsurance) from the acquisition of UBI's in-force book of business. Additionally, AmTrust cedes to Maiden 40% of net premium written, effective as of June 1, 2008. Maiden will pay to AmTrust a ceding commission of 34.375% on the unearned premium cession and the Retail Commercial Package Business.

The Company recorded approximately $36,908 and $82,524 of ceding commission expense for the three and nine months ended September 30, 2008, respectively as a result of this transaction.
 
Other Reinsurance Agreement

Effective January 1, 2008 the Company and AmTrust entered into an agreement to reinsure a 45% participation in the $9 million in excess of $1 million layer of AmTrust's workers' compensation excess of loss program. This layer provides reinsurance to AmTrust for losses per occurrence in excess of $1 million up to $10 million, subject to an annual aggregate deductible of $1.25 million. This participation was sourced through a reinsurance intermediary via open market placement in which competitive bids were solicited by an independent broker. The remaining 55% participation was placed with a single carrier.

The following is the effect on the Company’s balance sheet as of September 30, 2008 and December 31, 2007 and the results of operations for the three and nine months ended September 30, 2008 related to the Reinsurance Agreements with AmTrust:
 
Assets and (liabilities):
 
September 30,
2008
 
December 31,
2007
 
Loan to related party
 
$
167,975
 
$
113,542
 
Reinsurance balances receivable, net
   
84,197
   
27,891
 
Accrued interest on loan to related party
   
1,481
   
240
 
Deferred commission and other acquisition costs
   
81,223
   
42,501
 
Loss and loss adjustment expense reserves
   
(121,475
)
 
(38,485
)
Unearned premiums
   
(246,465
)
 
(137,099
)

Results of operations:
 
Three Months
Ended
September 30,
2008
 
Three Months
Ended
September 30,
2007
 
Nine Months
Ended
September 30,
2008
 
Period from May
31, 2007
(inception) to
September 30,
2007
 
Net premium written - assumed
 
$
102,674
 
$
190,801
 
$
361,632
 
$
190,801
 
Change in unearned premium - assumed
   
8,654
   
(127,835
)
 
(109,365
)
 
(127,835
)
Net earned premium - assumed
   
111,328
   
62,966
   
252,267
   
62,966
 
 
                       
Commission and other acquisition costs on premium written
   
33,570
   
61,534
   
120,113
   
61,534
 
Commission and other acquisition costs- deferred
   
3,617
   
(41,227
)
 
(37,008
)
 
(41,227
)
Ceding commission expensed
   
37,187
   
20,307
   
83,105
   
20,307
 
 
                         
Loss and loss adjustment expense
   
65,664
   
37,667
   
146,084
   
37,667
 
 
                         
Interest income on loan to related party
   
1,481
   
-
   
3,766
   
-
 
 
13


The Reinsurance Agreement requires that Maiden Insurance provide to AII sufficient collateral to secure its proportional share of AII’s obligations to the U.S. AmTrust Ceding Insurers. The amount of the collateral, in the form of a loan at September 30, 2008 was $167,975 and the accrued interest was $1,481. AII is required to return to Maiden Insurance any assets of Maiden Insurance in excess of the amount required to secure its proportional share of AII’s collateral requirements, subject to certain deductions.

Reinsurance Brokerage Agreements

Effective July 1, 2007, the Company entered into a reinsurance brokerage agreement with AII Reinsurance Broker Ltd., a subsidiary of AmTrust. Pursuant to the brokerage agreement, AII Reinsurance Broker Ltd. provides brokerage services relating to the Reinsurance Agreement for a fee equal to 1.25% of the premium reinsured from AII. The brokerage fee is payable in consideration of AII Reinsurance Broker Ltd.’s brokerage services. AII Reinsurance Broker Ltd. is not the Company’s exclusive broker. AII Reinsurance Broker Ltd. may, if mutually agreed, also produce reinsurance for the Company from other ceding companies, and in such cases the Company will negotiate a mutually acceptable commission rate. The Company recorded approximately $1,381 and $3,131 of reinsurance brokerage expense for the three and nine months ended September 30, 2008, respectively and deferred reinsurance brokerage of $3,003 as at September 30, 2008 as a result of this agreement. In comparison, the Company recorded approximately $787 of reinsurance brokerage expense for the three months ended September 30, 2007 and for the period from May 31, 2007 (inception) to September 30, 2007 and deferred reinsurance brokerage of $1,598 as at September 30, 2007 as a result of this agreement


Effective April 1, 2008, the Company entered into brokerage services agreements with IGI Intermediaries Limited and IGI Inc (IGI), both subsidiaries of AmTrust. Pursuant to the brokerage services agreements, IGI provides marketing services to us which includes providing marketing material to potential policyholders, providing us with market information on new trends and business opportunities and referring new brokers and potential policyholders to us. A fee equal to IGI‘s costs in providing such services plus 8% is payable in consideration of IGI’s marketing services. The Company recorded approximately $401 and $811 as expense, which is included in other operating expenses, for the three and nine months ended September 30, 2008.

Asset Management Agreement

Effective July 1, 2007, the Company entered into an asset management agreement with AII Insurance Management Limited (“AIIM”), an AmTrust subsidiary, pursuant to which AIIM has agreed to provide investment management services to Maiden Insurance. Pursuant to the asset management agreement, AIIM provides investment management services for an annual fee equal to 0.35% of average invested assets plus all costs incurred. Effective April 1, 2008, the investment management services annual fee has been reduced to 0.20%. The Company recorded approximately $254 and $970 of investment management fees for the three and nine months ended September 30, 2008, respectively as a result of this agreement. In comparison, the Company recorded approximately $470 of investment management fees for the three months ended September 30, 2007 and for the period from May 31, 2007 (inception) to September 30, 2007, respectively as a result of this agreement.

9.
 
The Company currently operates two business segments, Reinsurance - AmTrust Quota Share and Reinsurance - Other. The Company evaluates segment performance based on segment profit and includes an allocation of investment income based on the average investment return on the actual cash generated by the segment as the Company does not manage its investment portfolio by segment. Other expenses are allocated 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. The following tables summarize business segments as follows:   

 Three Months Ended September 30, 2008
 
Reinsurance - AmTrust Quota
Share
 
Reinsurance -
Other
 
Corporate
and other
 
Total
 
Revenues
                 
Net premium written
 
$
102,673
 
$
10,514
 
$
-
 
$
113,187
 
Earned premium
   
110,495
   
3,100
   
-
   
113,595
 
Investment income and other revenues
   
1,523
   
12
   
7,439
   
8,974
 
Other than temporary impairment losses
   
-
   
-
   
(42,538
)
 
(42,538
)
Total revenues
   
112,018
   
3,112
   
(35,099
)
 
80,031
 
Expenses
                 
Loss and loss adjustment expenses
   
65,664
   
1,251
   
-
   
66,915
 
Commission and other acquisition expenses
   
36,908
   
1,391
   
-
   
38,299
 
Other expenses
   
258
   
856
   
1,219
   
2,333
 
Total expenses
   
102,830
   
3,498
   
1,219
   
107,547
 
Net income (loss)
 
$
9,188
 
$
(386
)
$
(36,318
)
$
(27,516
)
 
14

 
 Nine Months Ended September 30, 2008
 
Reinsurance - AmTrust Quota
Share
 
Reinsurance -
Other
 
Corporate
and other
 
Total
 
Revenues
                 
Net premium written
 
$
353,690
 
$
33,180
 
$
-
 
$
386,870
 
Earned premium
   
250,531
   
5,708
   
-
   
256,239
 
Investment income and other revenues
   
3,904
   
12
   
20,593
   
24,509
 
Other than temporary impairment losses
   
-
          
(42,538
)
 
(42,538
)
Total revenues
   
254,435
   
5,720
   
(21,945
)
 
238,210
 
Expenses
                 
Loss and loss adjustment expenses
   
146,084
   
2,278
   
-
   
148,362
 
Commission and other acquisition expenses
   
82,523
   
2,534
   
-
   
85,057
 
Other expenses
   
635
   
1,485
   
3,880
   
6,000
 
Total expenses
   
229,242
   
6,297
   
3,880
   
239,419
 
Net income (loss)
 
$
25,193
 
$
(577
)
$
(25,825
)
$
(1,209
)
 
 Three Months Ended to September 30, 2007
 
Reinsurance -
AmTrust
Quota Share
 
Reinsurance -
Other
 
Corporate
and other
 
Total
 
Revenues
                 
Net premium written
 
$
190,801
 
$
-
 
$
-
 
$
190,801
 
Earned premium
   
62,966
   
-
   
-
   
62,966
 
Investment income and other revenues
   
-
   
-
   
7,590
   
7,590
 
Other than temporary impairment losses
   
-
   
-
   
-
   
-
 
Total revenues
   
62,966
   
-
   
7,590
   
70,556
 
Expenses
                 
Loss and loss adjustment expenses
   
37,667
   
-
   
-
   
37,667
 
Commission and other acquisition expenses
   
20,307
   
-
   
-
   
20,307
 
Other expenses
   
5
   
-
   
1,237
   
1,242
 
Total expenses
   
57,979
   
-
   
1,237
   
59,216
 
Net income (loss)
 
$
4,987
 
$
-
 
$
6,353
 
$
11,340
 
 

 Period from May 31, 2007 (inception) to September 30, 2007
 
Reinsurance -
AmTrust Quota
Share
 
 Reinsurance -
Other
 
Corporate
and other
 
Total  
 
Revenues
                    
Net premium written
 
$
190,801
 
$
-
 
$
-
 
$
190,801
 
Earned premium
   
62,966
   
-
   
-
   
62,966
 
Investment income and other revenues
   
-
   
-
   
7,649
   
7,649
 
Other than temporary impairment losses
   
-
   
-
   
-
   
-
 
Total revenues
   
62,966
   
-
   
7,649
   
70,615
 
Expenses
                         
Loss and loss adjustment expenses
   
37,667
   
-
   
-
   
37,667
 
Commission and other acquisition expenses
   
20,307
   
-
   
-
   
20,307
 
Other expenses
   
5
   
-
   
1,373
   
1,378
 
Total expenses
   
57,979
   
-
   
1,373
   
59,352
 
Net income (loss)
 
$
4,987
 
$
-
 
$
6,276
 
$
11,263
 
 
15


 
 
Reinsurance - AmTrust Quota
Share
 
Reinsurance -
Other 
 
Corporate and
Other
 
Total  
 
As of September 30, 2008
     
   
 
   
 
 
 
Reinsurance balances receivable
 
$
79,642
 
$
19,137
 
$
-
 
$
98,779
 
Deferred commission and other acquisition costs
   
79,144
   
9,471
   
-
   
88,615
 
Loan to related party
   
167,975
   
-
   
-
   
167,975
 
Corporate and other assets
   
13,243
   
-
   
772,363
   
785,606
 
Total assets
 
$
340,004
 
$
28,608
 
$
772,363
 
$
1,140,975
 

 
 
Reinsurance -
AmTrust Quota
Share
 
Reinsurance -
Other
 
Corporate and
Other
 
Total
 
As of December 31, 2007
     
   
 
   
 
   
 
Reinsurance balances receivable
 
$
27,990
 
$
-
 
$
-
 
$
27,990
 
Deferred commission and other acquisition costs
   
44,215
   
-
   
-
   
44,215
 
Loan to related party
   
113,542
   
-
   
-
   
113,542
 
Corporate and other assets
   
-
   
-
   
529,861
   
529,861
 
Total assets
 
$
185,747
 
$
-
 
$
529,861
 
$
715,608
 

The following tables set forth financial information relating to gross and net premiums written and earned by major line of business for the three and nine months ended September 30, 2008 and 2007:

   
Three Months Ended
September 30, 2008
 
Three Months Ended
September 30, 2007
 
Nine months ended
September 30, 2008
 
Period from May 31, 2007
(inception) to September
30, 2007
 
 
 
Total
 
% of
Total
 
Total
 
% of Total
 
Total
 
% of
Total
 
Total
 
% of Total
 
Gross and net premiums written
 
     
                     
   
 
 
 
Reinsurance - AmTrust Quota Share
 
 
                     
 
     
Workers Compensation
 
$
30,174
   
29.39
$
78,913
   
41.36
$
103,231
   
29.18
%
$
78,913
   
41.36
%
Specialty Middle Market Property & Casualty
   
9,091
   
8.85
%
 
27,229
   
14.27
%
 
30,572
   
8.64
%
 
27,229
   
14.27
%
Specialty Risk and Extended Warranty
   
49,844
   
48.54
%
 
84,659
   
44.37
%
 
119,519
   
33.79
%
 
84,659
   
44.37
%
Unitrin Business Insurance (UBI)
   
13,564
   
13.22
%
 
-
   
-
   
100,368
   
28.39
%
 
-
   
-
 
Total Reinsurance - AmTrust Quota Share
 
$
102,673
   
100.00
%
$
190,801
   
100.00
%
$
353,690
   
100.00
%
$
190,801
   
100.00
%
Reinsurance - Other
   
10,514
   
-
   
-
   
-
   
33,180
   
-
   
-
   
-
 
   
$
113,187
   
100.00
%
$
190,801
   
100.00
%
$
386,870
   
100.00
%
$
190,801
   
100.00
%
Gross and net premiums earned
                                             
Reinsurance - AmTrust Quota Share
                                                 
Workers Compensation
 
$
32,156
   
29.10
%
$
28,870
   
45.85
%
$
96,440
   
38.49
%
$
28,870
   
45.85
%
Specialty Middle Market Property & Casualty
   
10,961
   
9.91
%
 
8,057
   
12.80
%
 
30,265
   
12.08
%
 
8,057
   
12.80
%
Specialty Risk and Extended Warranty
   
29,657
   
26.84
%
 
26,039
   
41.35
%
 
72,661
   
29.00
%
 
26,039
   
41.35
%
Unitrin Business Insurance (UBI)
   
37,721
   
34.15
%
 
-
   
-
   
51,165
   
20.43
%
 
-
   
-
 
Total AmTrust Quota Share
 
$
110,495
   
100.00
%
$
62,966
   
100.00
%
$
250,531
   
100.00
%
$
62,966
   
100.00
%
Reinsurance - Other
   
3,100
   
-
   
-
   
-
   
5,708
   
-
   
-
   
-
 
   
$
113,595
   
100.00
%
$
62,966
   
100.00
%
$
256,239
   
100.00
%
$
62,966
   
100.00
%
 
16


10.
Subsequent Events

a)
On October 14, 2008, a hedge fund that the Company had invested in decided to close and liquidate its investments and return cash to shareholders in stages over an 18 month period. The fund was also a shareholder in the Company, we agreed to receive our shares from the fund, in lieu of the cash that the Company would have received upon the redemption of 90% of its investment in the fund. As a result of this transaction the Company received 962,336 shares at the valuation price of $3.95 per share. The Company will be holding these shares as Treasury Shares.

b)
On November 3, 2008, the Company acquired the reinsurance operations of GMAC Insurance (GMACI), including its book of assumed reinsurance business. As part of the transaction the Company’s wholly owned subsidiary Maiden Holdings North America, Ltd. (“Maiden NA”) acquired GMAC RE LLC, the reinsurance managing general agent writing business on behalf of Motors Insurance Corporation and the renewal rights for the business written by GMAC RE for approximately $100 million, which was paid in cash. The Company’s wholly owned subsidiary, Maiden Insurance has assumed the outstanding loss reserves associated with the GMAC RE business (approximately $750 million as of September 30, 2008) along with unearned premium of around $200 million.

In connection with the transaction Maiden NA also entered into an agreement to acquire two licensed insurance companies, GMAC Direct Insurance Company (“GMAC Direct”) and Integon Specialty Insurance Company (“Integon”). Consummation of the acquisition of these insurance companies is subject to regulatory approval. The consideration for GMAC Direct is $5.0 million plus an amount equal to the policyholders’ surplus as of the closing date and for Integon it is $3.2 million plus an amount equal to the policyholders’ surplus as of the closing date.

Maiden Insurance received approximately $402.6 million in cash and $544.7 million in US government and agencies fixed maturity investments in trust accounts for the benefit of the cedents as the initial transfer amounts in connection with the transaction. Within 30 days of the closing the actual amounts as of the closing date shall be calculated and if different from the initial amounts a further transfer will be received or paid by Maiden Insurance.

In support of the transaction the Company plans to raise additional equity of approximately $260 million through a rights offering to existing shareholders. Should the rights offering generate less than the planned $260 million the founding shareholders have committed equity funds which will be utilized as a backstop up to the full $260 million.

c)
On November 12, 2008, the Company’s Board of Directors approved a quarterly cash dividend of $0.05 per common share. This dividend is payable January 15, 2009 to shareholders of record on January 2, 2009.

17


Item 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Unless otherwise indicated or unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to “we,” “us,” “our” and similar expressions are references to Maiden Holdings and its consolidated subsidiary.

The following is a discussion and analysis of our results of operations for the three and nine month periods ended September 30, 2008 and our financial condition as of September 30, 2008. This discussion and analysis should be read in conjunction with the attached unaudited interim consolidated financial statements and related notes and the audited consolidated financial statements and related notes contained in our Annual Report to Security Holders for the year ended December 31, 2007, previously filed with the Securities and Exchange Commission (“SEC”) on May 15, 2008.

This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, (the “Exchange Act”). We intend that the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 apply to these forward-looking statements. Forward-looking statements are not statements of historical fact but rather reflect our current expectations, estimates and predictions about future results and events. These forward looking statements may use words such as “anticipate,” “believe,” “estimate,” “expect,” “intend,” “predict,” “project” and similar expressions as they relate to us or our management. When we make forward-looking statements, we are basing them on management’s beliefs and assumptions, using information currently available to us. These forward-looking statements are subject to risks, uncertainties and assumptions. Factors that could cause such forward-looking statements not to be realized (which are described in more detail included or incorporated by reference herein and in other documents filed by us with the SEC) include, but are not limited to:
 
claims development;