Q2 2015 10Q
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 June 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 July 31, 2015, the number of the Registrant's Common Stock ($.01 par value) outstanding was 73,588,978.






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)
 
June 30, 2015 (Unaudited)
 
December 31, 2014 (Audited)
ASSETS
 
 
 
Investments:
 
 
 
Fixed maturities, available-for-sale, at fair value (Amortized cost 2015: $3,809,978; 2014: $3,379,864)
$
3,823,873


$
3,456,904

Other investments, at fair value (Cost 2015: $10,995; 2014: $10,862)
12,321


12,571

Total investments
3,836,194


3,469,475

Cash and cash equivalents
57,376


108,119

Restricted cash and cash equivalents
251,749


284,381

Accrued investment income
29,351


27,524

Reinsurance balances receivable, net (includes $302,258 and $267,490 from related parties in 2015 and 2014, respectively)
600,229


512,996

Reinsurance recoverable on unpaid losses (includes $3,251 and $3,845 from related parties in 2015 and 2014, respectively)
91,382


75,873

Loan to related party
167,975


167,975

Deferred commission and other acquisition expenses, net (includes $358,843 and $285,227 from related parties in 2015 and 2014, respectively)
443,193


372,487

Goodwill and intangible assets, net
88,045


87,336

Other assets
98,583


57,926

Total assets
$
5,664,077

 
$
5,164,092

LIABILITIES
 
 
 
Reserve for loss and loss adjustment expenses (includes $1,330,145 and $1,167,041 from related parties in 2015 and 2014, respectively)
$
2,459,293


$
2,271,292

Unearned premiums (includes $1,139,088 and $914,087 from related parties in 2015 and 2014, respectively)
1,483,882


1,207,757

Accrued expenses and other liabilities
135,185


83,877

Senior notes
360,000


360,000

Total liabilities
4,438,360

 
3,922,926

Commitments and Contingencies


 


EQUITY
 
 
 
Preference shares
315,000


315,000

Common shares ($0.01 par value:74,603,623 and 73,900,889 shares issued in 2015 and 2014, respectively; 73,588,978 and 72,932,702 shares outstanding in 2015 and 2014, respectively)
746


739

Additional paid-in capital
582,612


578,445

Accumulated other comprehensive income
40,933


95,293

Retained earnings
288,884


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
1,223,654

 
1,240,694

Noncontrolling interest in subsidiaries
2,063


472

Total equity
1,225,717

 
1,241,166

Total liabilities and equity
$
5,664,077

 
$
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 June 30,

For the Six Months Ended June 30,
 
 
2015

2014

2015

2014
Revenues:
 
 
 
 
 
 
 
 
Gross premiums written
 
$
674,168


$
560,008


$
1,508,434


$
1,282,390

Net premiums written
 
$
629,618


$
540,920


$
1,426,601


$
1,250,812

Change in unearned premiums
 
(20,198
)

(9,024
)

(239,862
)

(199,686
)
Net premiums earned
 
609,420

 
531,896

 
1,186,739

 
1,051,126

Other insurance revenue
 
2,252


2,842


7,231


8,004

Net investment income
 
35,157


28,107


63,417


55,949

Net realized gains on investment
 
242


577


1,111


665

Total revenues
 
647,071

 
563,422

 
1,258,498


1,115,744

Expenses:
 
 
 
 
 
 
 
 
Net loss and loss adjustment expenses
 
414,927


351,157


792,333


702,501

Commission and other acquisition expenses
 
175,697


157,402


354,039


303,484

General and administrative expenses
 
16,301


15,302


32,498


30,130

Interest and amortization expenses
 
7,266


7,266


14,530


15,426

Accelerated amortization of Junior Subordinated Debt discount and issuance cost
 






28,240

Amortization of intangible assets
 
710


819


1,420


1,638

Foreign exchange and other losses (gains)
 
5,191


(934
)

(2,635
)

(1,072
)
Total expenses
 
620,092

 
531,012

 
1,192,185

 
1,080,347

Income before income taxes
 
26,979

 
32,410

 
66,313

 
35,397

Income tax expense
 
468

 
495

 
1,268

 
1,421

Net income
 
26,511

 
31,915

 
65,045

 
33,976

Loss (income) attributable to noncontrolling interest
 
92


(27
)

47


(66
)
Net income attributable to Maiden shareholders
 
26,603

 
31,888

 
65,092

 
33,910

Dividends on preference shares
 
(6,084
)
 
(6,084
)

(12,168
)

(12,168
)
Net income attributable to Maiden common shareholders
 
$
20,519

 
$
25,804

 
$
52,924

 
$
21,742

Basic earnings per share attributable to Maiden common shareholders
 
$
0.28


$
0.35

 
$
0.72

 
$
0.30

Diluted earnings per share attributable to Maiden common shareholders
 
$
0.27


$
0.34

 
$
0.69

 
$
0.29

Dividends declared per common share
 
$
0.13

 
$
0.11

 
$
0.26

 
$
0.22


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 June 30,
 
For the Six Months Ended June 30,
 
 
2015

2014
 
2015
 
2014
Comprehensive (loss) income:
 
 
 
 
 
 
 
 
Net income
 
$
26,511

 
$
31,915

 
$
65,045

 
$
33,976

Other comprehensive (loss) income, before tax
 
 
 
 
 
 
 
 
Net unrealized holding (losses) gains on available-for-sale fixed maturities arising during the period
 
(56,670
)
 
53,322

 
(63,611
)
 
91,398

Adjustment for reclassification of net realized (gains) losses recognized in net income
 
(66
)

418


83


347

Foreign currency translation adjustment
 
(9,878
)
 
643

 
9,057

 
477

Other comprehensive (loss) income, before tax
 
(66,614
)
 
54,383

 
(54,471
)
 
92,222

Income tax benefit (expense) related to components of other comprehensive income
 
57

 
(14
)
 
64

 
(59
)
Other comprehensive (loss) income, after tax
 
(66,557
)
 
54,369

 
(54,407
)
 
92,163

Comprehensive (loss) income
 
(40,046
)
 
86,284

 
10,638

 
126,139

Net loss (income) attributable to noncontrolling interest
 
92

 
(27
)
 
47

 
(66
)
Other comprehensive (income) loss attributable to noncontrolling interest
 
(8
)
 
3

 
47

 
3

Comprehensive loss (income) attributable to noncontrolling interest
 
84

 
(24
)
 
94

 
(63
)
Comprehensive (loss) income attributable to Maiden shareholders
 
$
(39,962
)
 
$
86,260

 
$
10,732

 
$
126,076



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 Six Months Ended June 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
 
7

 
2

Ending balance
 
746

 
738

Additional paid-in capital
 
 
 
 
Beginning balance
 
578,445

 
574,522

Exercise of options and issuance of common shares
 
2,619

 
324

Share based compensation expense
 
1,548

 
965

Ending balance
 
582,612

 
575,811

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
 
(63,464
)
 
91,686

Foreign currency translation adjustments
 
9,104

 
480

Ending balance
 
40,933

 
117,950

Retained earnings
 
 
 
 
Beginning balance
 
255,084

 
211,602

Net income attributable to Maiden shareholders
 
65,092

 
33,910

Dividends on preference shares
 
(12,168
)
 
(12,168
)
Dividends on common shares
 
(19,124
)
 
(16,049
)
Ending balance
 
288,884

 
217,295

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
 
(25
)
 
(31
)
(Loss) income attributable to noncontrolling interest
 
(47
)
 
66

Foreign currency translation adjustments
 
(47
)
 
(3
)
Ending balance
 
2,063

 
484

Total equity
 
$
1,225,717

 
$
1,223,411


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 Six Months Ended June 30,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
 
Net income
 
$
65,045

 
$
33,976

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization of intangibles
 
1,956

 
2,202

Net realized gains on investment
 
(1,111
)
 
(665
)
Foreign exchange and other gains
 
(2,635
)
 
(1,072
)
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
 
592

 
32,773

Changes in assets – (increase) decrease:
 
 
 
 
Reinsurance balances receivable, net
 
(93,244
)
 
(110,604
)
Reinsurance recoverable on unpaid losses
 
(15,410
)
 
(16,093
)
Accrued investment income
 
(2,086
)
 
(1,113
)
Deferred commission and other acquisition expenses
 
(71,668
)
 
(55,090
)
Other assets
 
(45,573
)
 
17,008

Changes in liabilities – increase (decrease):
 
 
 
 
Reserve for loss and loss adjustment expenses
 
209,199

 
145,959

Unearned premiums
 
281,771

 
189,872

Accrued expenses and other liabilities
 
50,945

 
(1,630
)
Net cash provided by operating activities
 
377,781

 
235,523

Cash flows from investing activities:
 
 
 
 
Purchases of fixed maturities – available-for-sale
 
(884,863
)
 
(217,904
)
Purchases of other investments
 
(144
)
 
(6,134
)
Proceeds from sales of fixed maturities – available-for-sale
 
86,498

 
109,963

Proceeds from maturities and calls of fixed maturities
 
370,441

 
133,006

Proceeds from redemption of other investments
 
74

 
510

Decrease (increase) in restricted cash and cash equivalents
 
29,775

 
(144,185
)
Other, net
 
(594
)
 
(656
)
Net cash used in investing activities
 
(398,813
)
 
(125,400
)
Cash flows from financing activities:
 
 
 
 
Repayment of Junior Subordinated Debt
 

 
(152,500
)
Common share issuance
 
2,626

 
326

Dividends paid to common shareholders
 
(19,043
)
 
(16,035
)
Dividends paid to preference shareholders
 
(12,168
)
 
(12,168
)
Net cash used in financing activities
 
(28,585
)
 
(180,377
)
Effect of exchange rate changes on foreign currency cash
 
(1,126
)
 
438

Net decrease in cash and cash equivalents
 
(50,743
)
 
(69,816
)
Cash and cash equivalents, beginning of period
 
108,119

 
139,833

Cash and cash equivalents, end of period
 
$
57,376

 
$
70,017


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.

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 final 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 particularly related to products such as auto, homeowners or health insurance. 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. The Company is evaluating the impact of this new guidance on its consolidated results of operations and financial condition.

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.

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)

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. The retrospective approach requires that an investment for which fair value is measured using the net asset value per share practical expedient be removed from the fair value hierarchy in all periods presented in an entity’s financial statements. 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. Other operating expenses allocated to the segments are called General and Administrative expenses which 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. 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, reinsurance recoverable on paid losses and funds withheld (which are presented as part of other assets in the unaudited Condensed Consolidated Balance Sheets). 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. To the extent that these fees are generated from underlying insurance contracts sold to third parties that are subsequently ceded under quota share reinsurance contracts to Maiden Reinsurance Ltd. ("Maiden Bermuda"), a proportionate share of the fee is offset against the related acquisition expense.

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 June 30, 2015

Diversified Reinsurance

AmTrust Reinsurance

Other

Total
Gross premiums written
 
$
151,646

 
$
522,522

 
$

 
$
674,168

Net premiums written

$
144,785


$
484,833


$


$
629,618

Net premiums earned

$
184,803


$
424,617


$


$
609,420

Other insurance revenue

2,252






2,252

Net loss and loss adjustment expenses

(142,992
)

(270,142
)

(1,793
)

(414,927
)
Commission and other acquisition expenses

(42,412
)

(133,147
)

(138
)

(175,697
)
General and administrative expenses

(9,407
)

(762
)



(10,169
)
Underwriting (loss) income

$
(7,756
)

$
20,566


$
(1,931
)

$
10,879

Reconciliation to net income












Net investment income and realized gains on investment










35,399

Interest and amortization expenses
 
 
 
 
 
 
 
(7,266
)
Amortization of intangible assets










(710
)
Foreign exchange and other losses










(5,191
)
Other general and administrative expenses










(6,132
)
Income tax expense










(468
)
Net income










$
26,511














Net loss and loss adjustment expense ratio (1)

76.4
%

63.6
%

 

67.8
%
Commission and other acquisition expense ratio (2)

22.7
%

31.4
%

 

28.7
%
General and administrative expense ratio (3)

5.0
%

0.2
%

 

2.7
%
Combined ratio (4)

104.1
%

95.2
%

 

99.2
%







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 June 30, 2014
 
Diversified Reinsurance
 
AmTrust Reinsurance
 
Other
 
Total
Gross premiums written
 
$
188,103

 
$
372,024

 
$
(119
)
 
$
560,008

Net premiums written
 
$
170,474

 
$
372,024

 
$
(1,578
)
 
$
540,920

Net premiums earned
 
$
202,682

 
$
324,926

 
$
4,288

 
$
531,896

Other insurance revenue
 
2,842

 

 

 
2,842

Net loss and loss adjustment expenses
 
(134,324
)
 
(211,779
)
 
(5,054
)
 
(351,157
)
Commission and other acquisition expenses
 
(56,758
)
 
(98,510
)
 
(2,134
)
 
(157,402
)
General and administrative expenses
 
(9,641
)
 
(653
)
 
(203
)
 
(10,497
)
Underwriting income (loss)
 
$
4,801

 
$
13,984

 
$
(3,103
)
 
$
15,682

Reconciliation to net income
 
 
 
 
 
 
 
 
Net investment income and realized gains on investment
 
 
 
 
 
 
 
28,684

Interest and amortization expenses
 
 
 
 
 
 
 
(7,266
)
Amortization of intangible assets
 
 
 
 
 
 
 
(819
)
Foreign exchange gains
 
 
 
 
 
 
 
934

Other general and administrative expenses
 
 
 
 
 
 
 
(4,805
)
Income tax expense
 
 
 
 
 
 
 
(495
)
Net income
 
 
 
 
 
 
 
$
31,915

 
 
 
 
 
 
 
 
 
Net loss and loss adjustment expense ratio (1)
 
65.4
%
 
65.2
%
 
 
 
65.7
%
Commission and other acquisition expense ratio (2)
 
27.6
%
 
30.3
%
 
 
 
29.4
%
General and administrative expense ratio (3)
 
4.7
%
 
0.2
%
 
 
 
2.9
%
Combined ratio (4)
 
97.7
%
 
95.7
%
 
 
 
98.0
%

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 Six Months Ended June 30, 2015

Diversified Reinsurance

AmTrust Reinsurance

Other

Total
Gross premiums written

$
456,987


$
1,051,448


$
(1
)

$
1,508,434

Net premiums written

$
438,983


$
987,617


$
1


$
1,426,601

Net premiums earned

$
377,487


$
809,250


$
2


$
1,186,739

Other insurance revenue

7,231






7,231

Net loss and loss adjustment expenses

(275,378
)

(513,236
)

(3,719
)

(792,333
)
Commission and other acquisition expenses

(100,618
)

(253,283
)

(138
)

(354,039
)
General and administrative expenses

(18,727
)

(1,509
)



(20,236
)
Underwriting (loss) income

$
(10,005
)

$
41,222


$
(3,855
)

$
27,362

Reconciliation to net income












Net investment income and realized gains on investment










64,528

Interest and amortization expenses










(14,530
)
Amortization of intangible assets










(1,420
)
Foreign exchange and other gains










2,635

Other general and administrative expenses










(12,262
)
Income tax expense










(1,268
)
Net income










$
65,045














Net loss and loss adjustment expense ratio (1)

71.6
%

63.4
%

 

66.3
%
Commission and other acquisition expense ratio (2)

26.2
%

31.3
%

 

29.7
%
General and administrative expense ratio (3)

4.8
%

0.2
%

 

2.7
%
Combined ratio (4)

102.6
%

94.9
%

 

98.7
%

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 Six Months Ended June 30, 2014

Diversified Reinsurance

AmTrust Reinsurance

Other

Total
Gross premiums written
 
$
492,290

 
$
791,034

 
$
(934
)
 
$
1,282,390

Net premiums written

$
462,114


$
791,034


$
(2,336
)

$
1,250,812

Net premiums earned

$
402,229


$
629,848


$
19,049


$
1,051,126

Other insurance revenue

8,004






8,004

Net loss and loss adjustment expenses

(272,987
)

(412,192
)

(17,322
)

(702,501
)
Commission and other acquisition expenses

(107,972
)

(188,995
)

(6,517
)

(303,484
)
General and administrative expenses

(19,421
)

(1,152
)

(402
)

(20,975
)
Underwriting income (loss)

$
9,853


$
27,509


$
(5,192
)

$
32,170

Reconciliation to net income

 
 
 
 
 
 
 
Net investment income and realized gains on investment

 
 
 
 
 

56,614

Interest and amortization expenses

 
 
 
 
 

(15,426
)
Accelerated amortization of junior subordinated debt discount and issuance cost

 
 
 
 
 

(28,240
)
Amortization of intangible assets

 
 
 
 
 

(1,638
)
Foreign exchange gains

 
 
 
 
 

1,072

Other general and administrative expenses

 
 
 
 
 

(9,155
)
Income tax expense

 
 
 
 
 

(1,421
)
Net income

 
 
 
 
 

$
33,976



 
 
 
 
 

 
Net loss and loss adjustment expense ratio (1)

66.5
%

65.4
%

 

66.3
%
Commission and other acquisition expense ratio (2)

26.3
%

30.0
%

 

28.7
%
General and administrative expense ratio (3)

4.8
%

0.2
%

 

2.8
%
Combined ratio (4)

97.6
%

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 June 30, 2015 and December 31, 2014:
June 30, 2015
 
Diversified
Reinsurance
 
AmTrust
Reinsurance
 
Total
Total assets - reportable segments
 
$
1,732,820

 
$
3,123,278

 
$
4,856,098

Corporate assets
 

 

 
807,979

Total Assets
 
$
1,732,820

 
$
3,123,278

 
$
5,664,077


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 six months ended June 30, 2015 and 2014:
For the Three Months Ended June 30,
 
2015

2014
Net premiums written
 
Total
 
% of Total
 
Total
 
% of Total
Diversified Reinsurance
 
 
 
 
 
 
 
 
Property
 
$
30,394

 
4.8
%
 
$
27,087

 
5.0
 %
Casualty
 
86,808

 
13.8
%
 
107,827

 
19.9
 %
Accident and Health
 
10,458

 
1.7
%
 
7,895

 
1.5
 %
International
 
17,125

 
2.7
%
 
27,665

 
5.1
 %
Total Diversified Reinsurance
 
144,785

 
23.0
%
 
170,474

 
31.5
 %
AmTrust Reinsurance
 
 
 
 
 
 
 
 
Small Commercial Business
 
303,000

 
48.1
%
 
198,023

 
36.6
 %
Specialty Program
 
100,876

 
16.0
%
 
56,329

 
10.4
 %
Specialty Risk and Extended Warranty
 
80,957

 
12.9
%
 
117,672

 
21.8
 %
Total AmTrust Reinsurance
 
484,833

 
77.0
%
 
372,024

 
68.8
 %
Other
 

 
%
 
(1,578
)
 
(0.3
)%
 
 
$
629,618

 
100.0
%
 
$
540,920

 
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 June 30,
 
2015
 
2014
Net premiums earned
 
Total
 
% of Total
 
Total
 
% of Total
Diversified Reinsurance
 
 
 
 
 
 
 
 
Property
 
$
32,662

 
5.4
%
 
$
42,602

 
8.0
%
Casualty
 
115,965

 
19.0
%
 
125,385

 
23.6
%
Accident and Health
 
15,067

 
2.5
%
 
11,374

 
2.1
%
International
 
21,109

 
3.5
%
 
23,321

 
4.4
%
Total Diversified Reinsurance
 
184,803

 
30.4
%
 
202,682

 
38.1
%
AmTrust Reinsurance
 
 
 
 
 
 
 
 
Small Commercial Business
 
252,444

 
41.4
%
 
177,054

 
33.3
%
Specialty Program
 
73,378

 
12.0
%
 
44,952

 
8.5
%
Specialty Risk and Extended Warranty
 
98,795

 
16.2
%
 
102,920

 
19.3
%
Total AmTrust Reinsurance
 
424,617

 
69.6
%
 
324,926

 
61.1
%
Other
 

 
%
 
4,288

 
0.8
%
 
 
$
609,420

 
100.0
%
 
$
531,896

 
100.0
%
    
For the Six Months Ended June 30,
 
2015

2014
Net premiums written
 
Total

% of Total

Total

% of Total
Diversified Reinsurance
 
 
 
 
 
 
 
 
Property
 
$
98,908

 
6.9
%
 
$
89,689

 
7.2
 %
Casualty
 
258,339

 
18.1
%
 
279,581

 
22.4
 %
Accident and Health
 
40,565

 
2.9
%
 
25,117

 
2.0
 %
International
 
41,171

 
2.9
%
 
67,727

 
5.4
 %
Total Diversified Reinsurance
 
438,983

 
30.8
%
 
462,114

 
37.0
 %
AmTrust Reinsurance
 
 
 
 
 
 
 
 
Small Commercial Business
 
626,201

 
43.9
%
 
451,780

 
36.1
 %
Specialty Program
 
175,456

 
12.3
%
 
88,127

 
7.0
 %
Specialty Risk and Extended Warranty
 
185,960

 
13.0
%
 
251,127

 
20.1
 %
Total AmTrust Reinsurance
 
987,617

 
69.2
%
 
791,034

 
63.2
 %
Other
 
1

 
%
 
(2,336
)
 
(0.2
)%
Total
 
$
1,426,601

 
100.0
%
 
$
1,250,812

 
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 Six Months Ended June 30,
 
2015
 
2014
Net premiums earned
 
Total
 
% of Total
 
Total
 
% of Total
Diversified Reinsurance
 
 
 
 
 
 
 
 
Property
 
$
73,285

 
6.2
%
 
$
83,428

 
8.0
%
Casualty
 
234,903

 
19.8
%
 
247,272

 
23.5
%
Accident and Health
 
27,268

 
2.3
%
 
20,260

 
1.9
%
International
 
42,031

 
3.5
%
 
51,269

 
4.9
%
Total Diversified Reinsurance
 
377,487

 
31.8
%
 
402,229

 
38.3
%
AmTrust Reinsurance
 
 
 
 
 
 
 
 
Small Commercial Business
 
477,435

 
40.2
%
 
335,659

 
31.9
%
Specialty Program
 
130,388

 
11.0
%
 
77,805

 
7.4
%
Specialty Risk and Extended Warranty
 
201,427

 
17.0
%
 
216,384

 
20.6
%
Total AmTrust Reinsurance
 
809,250

 
68.2
%
 
629,848

 
59.9
%
Other
 
2

 
%
 
19,049

 
1.8
%
 
 
$
1,186,739

 
100.0
%
 
$
1,051,126

 
100.0
%


4. Investments

(a) Fixed Maturities and Other Investments

The original or amortized cost, estimated fair value and gross unrealized gains and losses of available-for-sale ("AFS") fixed maturities and other investments as of June 30, 2015 and December 31, 2014 are as follows:
June 30, 2015
 
Original or
amortized cost
 
Gross
unrealized gains
 
Gross
unrealized losses
 
Fair value
AFS fixed maturities:
 
 
 
 
 
 
 
 
U.S. treasury bonds
 
$
8,938

 
$
423

 
$

 
$
9,361

U.S. agency bonds – mortgage-backed
 
1,382,563

 
16,078

 
(10,389
)
 
1,388,252

U.S. agency bonds – other
 
26,706

 
731

 
(85
)
 
27,352

Non-U.S. government and supranational bonds
 
39,910

 

 
(4,724
)
 
35,186

Commercial mortgage-backed securities
 
103,422

 
1,693

 
(189
)
 
104,926

Collateralized loan obligations
 
6,773

 

 

 
6,773

Corporate bonds
 
2,167,515

 
63,908

 
(56,601
)
 
2,174,822

Municipal bonds
 
62,165

 
3,050

 

 
65,215

Short-term investments
 
11,986

 

 

 
11,986

Total AFS fixed maturities
 
3,809,978

 
85,883

 
(71,988
)
 
3,823,873

Other investments
 
10,995

 
1,326

 

 
12,321

Total investments
 
$
3,820,973

 
$
87,209

 
$
(71,988
)
 
$
3,836,194


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.
June 30, 2015
 
Amortized cost
 
Fair value
 
% of Total fair value
Maturity
 
 
 
 
 
 
Due in one year or less
 
$
122,419

 
$
121,913

 
3.2
%
Due after one year through five years
 
566,236

 
595,529

 
15.6
%
Due after five years through ten years
 
1,582,394

 
1,557,025

 
40.7
%
Due after ten years
 
46,171

 
49,455

 
1.3
%
 
 
2,317,220

 
2,323,922

 
60.8
%
Mortgage-backed
 
1,485,985

 
1,493,178

 
39.0
%
Asset-backed
 
6,773

 
6,773

 
0.2
%
Total AFS fixed maturities
 
$
3,809,978

 
$
3,823,873

 
100.0
%

The following tables summarize fixed maturities and other investments in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:
 
 
Less than 12 Months
 
12 Months or more
 
Total
June 30, 2015
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
AFS fixed maturities
 
 
 
 
 
 
 
 
 
 
 
 
U.S. agency bonds – mortgage-backed
 
$
509,048

 
$
(4,659
)
 
$
189,302

 
$
(5,730
)
 
$
698,350

 
$
(10,389
)
U.S. agency bonds – other
 
$
9,416

 
$
(85
)
 
$

 
$

 
$
9,416

 
$
(85
)
Non–U.S. government and supranational bonds
 
32,526

 
(4,171
)
 
2,661

 
(553
)
 
35,187

 
(4,724
)
Commercial mortgage-backed securities
 
51,449

 
(189
)
 

 

 
51,449

 
(189
)
Corporate bonds
 
851,885

 
(47,476
)
 
134,967

 
(9,125
)
 
986,852

 
(56,601
)
Total temporarily impaired AFS fixed maturities
 
1,454,324

 
(56,580
)
 
326,930

 
(15,408
)
 
1,781,254

 
(71,988
)

17

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)

As of June 30, 2015, there were approximately 216 securities in an unrealized loss position with a fair value of $1,781,254 and unrealized losses of $71,988. Of these securities, there are 35 securities that have been in an unrealized loss position for 12 months or greater with a fair value of $326,930 and unrealized losses of $15,408.
 
 
Less than 12 Months
 
12 Months or more
 
Total
December 31, 2014
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
AFS fixed maturities
 
 
 
 
 
 
 
 
 
 
 
 
U.S. agency bonds – mortgage-backed
 
$
84,264

 
$
(806
)
 
$
441,601

 
$
(9,782
)
 
$
525,865

 
$
(10,588
)
Non–U.S. government and supranational bonds
 
43,712

 
(2,822
)
 
2,522

 
(306
)
 
46,234

 
(3,128
)
Corporate bonds
 
397,173

 
(14,485
)
 
143,894

 
(10,810
)
 
541,067

 
(25,295
)
Total temporarily impaired AFS fixed maturities
 
$
525,149

 
$
(18,113
)
 
$
588,017

 
$
(20,898
)
 
$
1,113,166

 
$
(39,011
)

As of December 31, 2014, there were approximately 141 securities in an unrealized loss position with a fair value of $1,113,166 and unrealized losses of $39,011. Of these securities, there are 46 securities that have been in an unrealized loss position for 12 months or greater with a fair value of $588,017