10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)

x
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2015

o
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _________ to _________

Commission File No. 001-34042

MAIDEN HOLDINGS, LTD.
(Exact name of registrant as specified in its charter)

Bermuda
(State or other jurisdiction of
incorporation or organization)
98-0570192
(IRS Employer
Identification No.)
 
 
131 Front Street, Hamilton, Bermuda
(Address of principal executive offices)
HM12
(Zip Code)

(441) 298-4900
(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o
 
Accelerated filer x
 
 
 
Non-accelerated filer o (Do not check if a smaller reporting company)
 
Smaller reporting company o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act). Yes o No x

As of November 2, 2015, the number of the Registrant's Common Stock ($.01 par value) outstanding was 73,690,640.






INDEX
 
 
Page
PART I - Financial Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II - Other Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2



PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars, except share and per share data)
 
September 30, 2015 (Unaudited)
 
December 31, 2014
(Audited)
ASSETS
 
 
 
Investments:
 
 
 
Fixed maturities, available-for-sale, at fair value (amortized cost 2015: $3,291,365; 2014: $3,379,864)
$
3,288,510


$
3,456,904

Fixed maturities, held-to-maturity, at amortized cost (fair value 2015: $610,994; 2014: $0)
608,510

 

Other investments, at fair value (cost 2015: $10,725; 2014: $10,862)
11,472


12,571

Total investments
3,908,492


3,469,475

Cash and cash equivalents
117,551


108,119

Restricted cash and cash equivalents
315,504


284,381

Accrued investment income
30,398


27,524

Reinsurance balances receivable, net (includes $233,869 and $267,490 from related parties in 2015 and 2014, respectively)
492,685


512,996

Reinsurance recoverable on unpaid losses (includes $2,421 and $3,845 from related parties in 2015 and 2014, respectively)
93,116


75,873

Loan to related party
167,975


167,975

Deferred commission and other acquisition expenses, net (includes $337,472 and $285,227 from related parties in 2015 and 2014, respectively)
428,817


372,487

Goodwill and intangible assets, net
87,343


87,336

Other assets
114,625


57,926

Total assets
$
5,756,506

 
$
5,164,092

LIABILITIES
 
 
 
Reserve for loss and loss adjustment expenses (includes $1,424,599 and $1,167,041 from related parties in 2015 and 2014, respectively)
$
2,538,217


$
2,271,292

Unearned premiums (includes $1,123,326 and $914,087 from related parties in 2015 and 2014, respectively)
1,439,637


1,207,757

Accrued expenses and other liabilities
112,805


83,877

Liability for securities purchased
84,065



Senior notes
360,000


360,000

Total liabilities
4,534,724

 
3,922,926

Commitments and Contingencies


 


EQUITY
 
 
 
Preference shares
315,000


315,000

Common shares ($0.01 par value: 74,705,285 and 73,900,889 shares issued in 2015 and 2014, respectively; 73,690,640 and 72,932,702 shares outstanding in 2015 and 2014, respectively)
747


739

Additional paid-in capital
584,036


578,445

Accumulated other comprehensive income
23,007


95,293

Retained earnings
301,796


255,084

Treasury shares, at cost (1,014,645 and 968,187 shares in 2015 and 2014, respectively)
(4,521
)

(3,867
)
Total Maiden shareholders’ equity
1,220,065

 
1,240,694

Noncontrolling interest in subsidiaries
1,717


472

Total equity
1,221,782

 
1,241,166

Total liabilities and equity
$
5,756,506

 
$
5,164,092

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

3


MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands of U.S. dollars, except per share data)


 
 
For the Three Months Ended September 30,

For the Nine Months Ended September 30,
 
 
2015

2014

2015

2014
Revenues:
 
 
 
 
 
 
 
 
Gross premiums written
 
$
628,501


$
622,861


$
2,136,935


$
1,905,251

Net premiums written
 
$
599,153


$
605,456


$
2,025,754


$
1,856,268

Change in unearned premiums
 
59,367


(13,014
)

(180,495
)

(212,700
)
Net premiums earned
 
658,520

 
592,442

 
1,845,259

 
1,643,568

Other insurance revenue
 
2,177


2,423


9,408


10,427

Net investment income
 
32,843


29,520


96,260


85,469

Net realized gains on investment
 
1,216


310


2,327


975

Total other-than-temporary impairment losses
 
(1,060
)

(1,189
)

(1,060
)

(1,189
)
Portion of loss recognized in other comprehensive income (loss)
 

 

 

 

Net impairment losses recognized in earnings
 
(1,060
)
 
(1,189
)
 
(1,060
)
 
(1,189
)
Total revenues
 
693,696

 
623,506

 
1,952,194


1,739,250

Expenses:
 
 
 
 
 
 
 
 
Net loss and loss adjustment expenses
 
444,172


399,815


1,236,505


1,102,316

Commission and other acquisition expenses
 
197,639


166,246


551,678


469,730

General and administrative expenses
 
16,453


15,430


48,951


45,560

Interest and amortization expenses
 
7,266


7,266


21,796


22,692

Accelerated amortization of Junior Subordinated Debt discount and issuance cost
 






28,240

Amortization of intangible assets
 
710


820


2,130


2,458

Foreign exchange and other gains
 
(1,427
)

(483
)

(4,062
)

(1,555
)
Total expenses
 
664,813

 
589,094

 
1,856,998

 
1,669,441

Income before income taxes
 
28,883

 
34,412

 
95,196

 
69,809

Income tax expense
 
368

 
486

 
1,636

 
1,907

Net income
 
28,515

 
33,926

 
93,560

 
67,902

Loss (income) attributable to noncontrolling interest
 
69


(43
)

116


(109
)
Net income attributable to Maiden shareholders
 
28,584

 
33,883

 
93,676

 
67,793

Dividends on preference shares
 
(6,085
)
 
(6,085
)

(18,253
)

(18,253
)
Net income attributable to Maiden common shareholders
 
$
22,499

 
$
27,798

 
$
75,423

 
$
49,540

Basic earnings per share attributable to Maiden common shareholders
 
$
0.31


$
0.38

 
$
1.03

 
$
0.68

Diluted earnings per share attributable to Maiden common shareholders
 
$
0.30


$
0.36

 
$
0.99

 
$
0.67

Dividends declared per common share
 
$
0.13

 
$
0.11

 
$
0.39

 
$
0.33


See accompanying notes to the unaudited Condensed Consolidated Financial Statements.
 


4



MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(in thousands of U.S. dollars)


 
 
For the Three Months Ended September 30,
 
For the Nine Months Ended September 30,
 
 
2015

2014
 
2015
 
2014
Comprehensive income:
 
 
 
 
 
 
 
 
Net income
 
$
28,515

 
$
33,926

 
$
93,560

 
$
67,902

Other comprehensive income (loss), before tax
 
 
 
 
 
 
 
 
Net unrealized holding (losses) gains on available-for-sale fixed maturities arising during the period
 
(17,191
)
 
(47,735
)
 
(80,725
)
 
43,498

Portion of other-than-temporary impairment losses recognized in other comprehensive income, net of deferred tax
 

 

 

 

Adjustment for reclassification of net realized (gains) losses recognized in net income
 
(11
)

26


(5
)

538

Foreign currency translation adjustment
 
(741
)
 
16,953

 
8,316

 
17,430

Other comprehensive (loss) income, before tax
 
(17,943
)
 
(30,756
)
 
(72,414
)
 
61,466

Income tax benefit (expense) related to components of other comprehensive income
 
18

 
7

 
82

 
(52
)
Other comprehensive (loss) income, after tax
 
(17,925
)
 
(30,749
)
 
(72,332
)
 
61,414

Comprehensive income
 
10,590

 
3,177

 
21,228

 
129,316

Net loss (income) attributable to noncontrolling interest
 
69

 
(43
)
 
116

 
(109
)
Other comprehensive (income) loss attributable to noncontrolling interest
 
(1
)
 
42

 
46

 
45

Comprehensive loss (income) attributable to noncontrolling interest
 
68

 
(1
)
 
162

 
(64
)
Comprehensive income attributable to Maiden shareholders
 
$
10,658

 
$
3,176

 
$
21,390

 
$
129,252



See accompanying notes to the unaudited Condensed Consolidated Financial Statements.



5


MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
(in thousands of U.S. dollars)

For the Nine Months Ended September 30,

2015

2014
Preference shares
 
 
 
 
Beginning balance
 
$
315,000

 
$
315,000

Ending balance
 
315,000

 
315,000

Common shares
 
 
 
 
Beginning balance
 
739

 
736

Exercise of options and issuance of shares
 
8

 
3

Ending balance
 
747

 
739

Additional paid-in capital
 
 
 
 
Beginning balance
 
578,445

 
574,522

Exercise of options and issuance of common shares
 
3,072

 
462

Share-based compensation expense
 
2,519

 
2,454

Ending balance
 
584,036

 
577,438

Accumulated other comprehensive income
 
 
 
 
Beginning balance
 
95,293

 
25,784

Change in net unrealized (losses) gains on investments, net of reclassification adjustment and deferred income tax expense
 
(80,648
)
 
43,984

Foreign currency translation adjustments
 
8,362

 
17,475

Ending balance
 
23,007

 
87,243

Retained earnings
 
 
 
 
Beginning balance
 
255,084

 
211,602

Net income attributable to Maiden shareholders
 
93,676

 
67,793

Dividends on preference shares
 
(18,253
)
 
(18,253
)
Dividends on common shares
 
(28,711
)
 
(24,079
)
Ending balance
 
301,796

 
237,063

Treasury shares
 
 
 
 
Beginning balance
 
(3,867
)
 
(3,801
)
Shares repurchased for treasury
 
(654
)
 
(66
)
Ending balance
 
(4,521
)
 
(3,867
)
Noncontrolling interest in subsidiaries
 
 
 
 
Beginning balance
 
472

 
452

Acquisition of subsidiary
 
1,710

 

Dividend paid to noncontrolling interest
 
(303
)
 
(42
)
(Loss) income attributable to noncontrolling interest
 
(116
)
 
109

Foreign currency translation adjustments
 
(46
)
 
(45
)
Ending balance
 
1,717

 
474

Total equity
 
$
1,221,782

 
$
1,214,090


See accompanying notes to the unaudited Condensed Consolidated Financial Statements.


6


MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands of U.S. dollars)
For the Nine Months Ended September 30,
 
2015
 
2014
Cash flows from operating activities:
 
 
 
 
Net income
 
$
93,560

 
$
67,902

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization of intangibles
 
2,958

 
3,306

Net realized gains on investment
 
(2,327
)
 
(975
)
Net impairment losses recognized in earnings
 
1,060

 
1,189

Foreign exchange and other gains
 
(4,062
)
 
(1,555
)
Amortization of share-based compensation expense, bond premium and discount, debt discount and issuance costs and accelerated amortization of Junior Subordinated Debt discount and issuance cost
 
4,119

 
35,032

Changes in assets – (increase) decrease:
 
 
 
 
Reinsurance balances receivable, net
 
14,093

 
35,514

Reinsurance recoverable on unpaid losses
 
(17,374
)
 
1,857

Accrued investment income
 
(3,110
)
 
(1,943
)
Deferred commission and other acquisition expenses
 
(57,838
)
 
(65,235
)
Other assets
 
(64,512
)
 
17,510

Changes in liabilities – increase (decrease):
 
 
 
 
Reserve for loss and loss adjustment expenses
 
291,123

 
224,519

Unearned premiums
 
238,726

 
202,624

Accrued expenses and other liabilities
 
28,942

 
(12,773
)
Net cash provided by operating activities
 
525,358

 
506,972

Cash flows from investing activities:
 
 
 
 
Purchases of fixed maturities – available-for-sale
 
(1,095,162
)
 
(599,440
)
Purchases of other investments
 
(144
)
 
(6,551
)
Proceeds from sales of fixed maturities – available-for-sale
 
116,093

 
114,007

Proceeds from maturities and calls of fixed maturities
 
467,910

 
236,372

Proceeds from redemption of other investments
 
344

 
679

Decrease (increase) in restricted cash and cash equivalents, net
 
41,022

 
(143,485
)
Other, net
 
(715
)
 
(853
)
Net cash used in investing activities
 
(470,652
)
 
(399,271
)
Cash flows from financing activities:
 
 
 
 
Repayment of Junior Subordinated Debt
 

 
(152,500
)
Common share issuance
 
3,080

 
465

Dividends paid to common shareholders
 
(28,616
)
 
(24,050
)
Dividends paid to preference shareholders
 
(18,253
)
 
(18,253
)
Net cash used in financing activities
 
(43,789
)
 
(194,338
)
Effect of exchange rate changes on foreign currency cash
 
(1,485
)
 
(814
)
Net increase (decrease) in cash and cash equivalents
 
9,432

 
(87,451
)
Cash and cash equivalents, beginning of period
 
108,119

 
139,833

Cash and cash equivalents, end of period
 
$
117,551

 
$
52,382


See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

7

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)



1. Basis of Presentation

The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Maiden Holdings, Ltd. and its subsidiaries (the "Company" or "Maiden") and have been prepared in accordance with generally accepted accounting principles in the United States ("GAAP" or "U.S. GAAP") for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. All significant inter-company transactions and accounts have been eliminated.

These interim unaudited Condensed Consolidated Financial Statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim period and all such adjustments are of a normal recurring nature. The results of operations for the interim period are not necessarily indicative, if annualized, of those to be expected for the full year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

These unaudited Condensed Consolidated Financial Statements, including these notes, should be read in conjunction with the Company's audited Consolidated Financial Statements, and related notes thereto, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2014.

Certain reclassifications have been made for 2014 to conform to the 2015 presentation and have no impact on net income and total equity previously reported.

2. Significant Accounting Policies

There have been no material changes to our significant accounting policies as described in our Annual Report on Form 10-K for the year ended December 31, 2014 with the exception of the following:

Investments - Fixed maturities

Fixed maturities are classified as either available-for-sale ("AFS") or held-to-maturity ("HTM"). The AFS portfolio is reported at fair value. The HTM portfolio includes securities for which we have the ability and intent to hold to maturity or redemption and is reported at amortized cost.

Recently Issued Accounting Standards Not Yet Adopted

Simplifying the Presentation of Debt Issuance Costs

In April 2015 the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2015-03 which changes the presentation of debt issuance costs in financial statements. Under this new guidance, the Company will be required to present such cost in the balance sheet as a direct deduction from the related debt liability rather than as an asset. The amortization of such costs shall be reported as an interest expense. For public business entities, this guidance will be effective for fiscal years, and interim periods within those fiscal years, beginning December 15, 2015. Early adoption is permitted and the Company will be required to apply this new guidance retrospectively to all prior periods presented. The Company will also be required, in the year of adoption (and in interim periods within that year) to provide certain disclosures about the change in accounting principle, including the nature of and reason for the change, the transition method, a description of the prior-period information that has been retrospectively adjusted and the effect of the change on the financial line items (that is, debt issuance cost asset and the debt liability). The Company is evaluating the impact of this new guidance on its consolidated results of operations and financial condition.

Disclosures about Short-Duration Contracts

In May 2015 the FASB issued ASU 2015-09 which is aimed at providing users of financial statements with more transparent information about an insurance entity’s initial claim estimates and subsequent adjustments to those estimates, methodologies and judgments in estimating claims, and the timing, frequency and severity of claims. The new disclosures are required for short-duration insurance contracts issued by insurers. For public business entities, this guidance will be effective for annual periods beginning after December 15, 2015, and interim periods within annual periods beginning after December 15, 2016. Early adoption is permitted and should be applied retrospectively by providing comparative disclosures for each period presented. As this guidance is disclosure-related only, the adoption of this guidance is not expected to have a material impact on the Company’s statements of operations and financial position.

8

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)


2. Significant Accounting Policies (continued)

Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)

In May 2015 the FASB issued ASU No. 2015-07 which removes the requirement to categorize all investments for which fair value is measured using the net asset value per share practical expedient within the fair value hierarchy. ASU 2015-07 also removes the requirement to make certain disclosures for investments that are eligible to be measured at fair value using the net asset value per share practical expedient, unless the entity has elected to measure the fair value using that practical expedient. For public business entities, this guidance will be effective for fiscal years beginning after December 15, 2015, and interim periods within those fiscal years. A reporting entity should apply the amendments retrospectively to all periods presented. Earlier application is permitted. As this guidance is disclosure-related only, the adoption of this guidance is not expected to have a material impact on the Company’s statements of operations and financial position.

3. Segment Reporting

The Company currently has two reportable segments: Diversified Reinsurance and AmTrust Reinsurance. Refer to "Business - Our Reportable Segments" section included under Item 1 of our Annual Report on Form 10-K for the year ended December 31, 2014 for a detailed discussion about these segments.

The Company evaluates segment performance based on segment profit separately from the results of our investment portfolio. General and administrative expenses are allocated to the segments on an actual basis except salaries and benefits where management’s judgment is applied. The Company does not allocate general corporate expenses to the segments. In determining total assets by reportable segment, the Company identifies those assets that are attributable to a particular segment such as reinsurance balances receivable, reinsurance recoverable on unpaid losses, deferred commission and other acquisition expenses, loans, goodwill and intangible assets, restricted cash and cash equivalents and investments and prepaid reinsurance premiums. All remaining assets are allocated to Corporate. Fee-generating business is considered part of the underwriting operations of the Company and is reported as "Other insurance revenue" in the unaudited Condensed Consolidated Statements of Income.

The following tables summarize our reporting segment's underwriting results and the reconciliation of our reportable segments and Other category's underwriting results to our consolidated net income:


9

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)


3. Segment Reporting (continued)

For the Three Months Ended September 30, 2015

Diversified Reinsurance

AmTrust Reinsurance

Other

Total
Gross premiums written
 
$
174,307

 
$
454,194

 
$

 
$
628,501

Net premiums written

$
163,710


$
435,443


$


$
599,153

Net premiums earned

$
193,207


$
465,313


$


$
658,520

Other insurance revenue

2,177






2,177

Net loss and loss adjustment expenses

(142,468
)

(297,780
)

(3,924
)

(444,172
)
Commission and other acquisition expenses

(51,714
)

(146,008
)

83


(197,639
)
General and administrative expenses

(9,010
)

(752
)



(9,762
)
Underwriting income (loss)

$
(7,808
)

$
20,773


$
(3,841
)

$
9,124

Reconciliation to net income












Net investment income and realized gains on investment










34,059

Net impairment losses recognized in earnings
 
 
 
 
 
 
 
(1,060
)
Interest and amortization expenses
 
 
 
 
 
 
 
(7,266
)
Amortization of intangible assets










(710
)
Foreign exchange and other gains










1,427

Other general and administrative expenses










(6,691
)
Income tax expense










(368
)
Net income










$
28,515














Net loss and loss adjustment expense ratio (1)

72.9
%

63.9
%

 

67.2
%
Commission and other acquisition expense ratio (2)

26.5
%

31.4
%

 

29.9
%
General and administrative expense ratio (3)

4.6
%

0.2
%

 

2.5
%
Combined ratio (4)

104.0
%

95.5
%

 

99.6
%



10

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)


3. Segment Reporting (continued)
For the Three Months Ended September 30, 2014
 
Diversified Reinsurance
 
AmTrust Reinsurance
 
Other
 
Total
Gross premiums written
 
$
236,864

 
$
385,923

 
$
74

 
$
622,861

Net premiums written
 
$
219,576

 
$
385,923

 
$
(43
)
 
$
605,456

Net premiums earned
 
$
233,022

 
$
359,065

 
$
355

 
$
592,442

Other insurance revenue
 
2,423

 

 

 
2,423

Net loss and loss adjustment expenses
 
(166,342
)
 
(233,166
)
 
(307
)
 
(399,815
)
Commission and other acquisition expenses
 
(56,878
)
 
(109,241
)
 
(127
)
 
(166,246
)
General and administrative expenses
 
(8,683
)
 
(695
)
 
(193
)
 
(9,571
)
Underwriting income (loss)
 
$
3,542

 
$
15,963

 
$
(272
)
 
$
19,233

Reconciliation to net income
 
 
 
 
 
 
 
 
Net investment income and realized gains on investment
 
 
 
 
 
 
 
29,830

Net impairment losses recognized in earnings
 
 
 
 
 
 
 
(1,189
)
Interest and amortization expenses
 
 
 
 
 
 
 
(7,266
)
Amortization of intangible assets
 
 
 
 
 
 
 
(820
)
Foreign exchange and other gains
 
 
 
 
 
 
 
483

Other general and administrative expenses
 
 
 
 
 
 
 
(5,859
)
Income tax expense
 
 
 
 
 
 
 
(486
)
Net income
 
 
 
 
 
 
 
$
33,926

 
 
 
 
 
 
 
 
 
Net loss and loss adjustment expense ratio (1)
 
70.7
%
 
64.9
%
 
 
 
67.2
%
Commission and other acquisition expense ratio (2)
 
24.2
%
 
30.4
%
 
 
 
27.9
%
General and administrative expense ratio (3)
 
3.6
%
 
0.3
%
 
 
 
2.7
%
Combined ratio (4)
 
98.5
%
 
95.6
%
 
 
 
97.8
%

11

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)


3. Segment Reporting (continued)

For the Nine Months Ended September 30, 2015

Diversified Reinsurance

AmTrust Reinsurance

Other

Total
Gross premiums written

$
631,294


$
1,505,642


$
(1
)

$
2,136,935

Net premiums written

$
602,693


$
1,423,060


$
1


$
2,025,754

Net premiums earned

$
570,694


$
1,274,563


$
2


$
1,845,259

Other insurance revenue

9,408






9,408

Net loss and loss adjustment expenses

(417,846
)

(811,016
)

(7,643
)

(1,236,505
)
Commission and other acquisition expenses

(152,332
)

(399,291
)

(55
)

(551,678
)
General and administrative expenses

(27,737
)

(2,261
)



(29,998
)
Underwriting income (loss)

$
(17,813
)

$
61,995


$
(7,696
)

$
36,486

Reconciliation to net income












Net investment income and realized gains on investment










98,587

Net impairment losses recognized in earnings










(1,060
)
Interest and amortization expenses










(21,796
)
Amortization of intangible assets










(2,130
)
Foreign exchange and other gains










4,062

Other general and administrative expenses










(18,953
)
Income tax expense










(1,636
)
Net income










$
93,560














Net loss and loss adjustment expense ratio (1)

72.0
%

63.6
%

 

66.7
%
Commission and other acquisition expense ratio (2)

26.3
%

31.3
%

 

29.7
%
General and administrative expense ratio (3)

4.8
%

0.2
%

 

2.7
%
Combined ratio (4)

103.1
%

95.1
%

 

99.1
%

12

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)


3. Segment Reporting (continued)

For the Nine Months Ended September 30, 2014

Diversified Reinsurance

AmTrust Reinsurance

Other

Total
Gross premiums written
 
$
729,154

 
$
1,176,957

 
$
(860
)
 
$
1,905,251

Net premiums written

$
681,690


$
1,176,957


$
(2,379
)

$
1,856,268

Net premiums earned

$
635,251


$
988,913


$
19,404


$
1,643,568

Other insurance revenue

10,427






10,427

Net loss and loss adjustment expenses

(439,329
)

(645,358
)

(17,629
)

(1,102,316
)
Commission and other acquisition expenses

(164,850
)

(298,236
)

(6,644
)

(469,730
)
General and administrative expenses

(28,104
)

(1,847
)

(580
)

(30,531
)
Underwriting income (loss)

$
13,395


$
43,472


$
(5,449
)

$
51,418

Reconciliation to net income

 
 
 
 
 
 
 
Net investment income and realized gains on investment

 
 
 
 
 

86,444

Net impairment losses recognized in earnings
 
 
 
 
 
 
 
(1,189
)
Interest and amortization expenses

 
 
 
 
 

(22,692
)
Accelerated amortization of Junior Subordinated Debt discount and issuance cost

 
 
 
 
 

(28,240
)
Amortization of intangible assets

 
 
 
 
 

(2,458
)
Foreign exchange and other gains

 
 
 
 
 

1,555

Other general and administrative expenses

 
 
 
 
 

(15,029
)
Income tax expense

 
 
 
 
 

(1,907
)
Net income

 
 
 
 
 

$
67,902



 
 
 
 
 

 
Net loss and loss adjustment expense ratio (1)

68.0
%

65.3
%

 

66.6
%
Commission and other acquisition expense ratio (2)

25.5
%

30.2
%

 

28.4
%
General and administrative expense ratio (3)

4.4
%

0.1
%

 

2.8
%
Combined ratio (4)

97.9
%

95.6
%

 

97.8
%

(1) Calculated by dividing net loss and loss adjustment expenses by net premiums earned and other insurance revenue.
(2) Calculated by dividing commission and other acquisition expenses by net premiums earned and other insurance revenue.
(3) Calculated by dividing general and administrative expenses by net premiums earned and other insurance revenue.
(4) Calculated by adding together the net loss and loss adjustment expense ratio, commission and other acquisition expense ratio and general and administrative expense ratio.


13

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)


3. Segment Reporting (continued)

The following tables summarize the total assets of our reportable segments including the reconciliation to our consolidated assets at September 30, 2015 and December 31, 2014:
September 30, 2015
 
Diversified
Reinsurance
 
AmTrust
Reinsurance
 
Total
Total assets - reportable segments
 
$
1,653,714

 
$
3,356,927

 
$
5,010,641

Corporate assets
 

 

 
745,865

Total Assets
 
$
1,653,714

 
$
3,356,927

 
$
5,756,506


December 31, 2014
 
Diversified
Reinsurance
 
AmTrust
Reinsurance
 
Total
Total assets - reportable segments
 
$
1,624,664

 
$
2,640,488

 
$
4,265,152

Corporate assets
 

 

 
898,940

Total Assets
 
$
1,624,664

 
$
2,640,488

 
$
5,164,092


The following tables set forth financial information relating to net premiums written and earned by major line of business and reportable segment for the three and nine months ended September 30, 2015 and 2014:
For the Three Months Ended September 30,
 
2015

2014
Net premiums written
 
Total
 
% of Total
 
Total
 
% of Total
Diversified Reinsurance
 
 
 
 
 
 
 
 
Property
 
$
29,574

 
4.9
%
 
$
36,991

 
6.1
 %
Casualty
 
101,191

 
16.9
%
 
149,067

 
24.6
 %
Accident and Health
 
12,918

 
2.2
%
 
7,061

 
1.2
 %
International
 
20,027

 
3.3
%
 
26,457

 
4.4
 %
Total Diversified Reinsurance
 
163,710

 
27.3
%
 
219,576

 
36.3
 %
AmTrust Reinsurance
 
 
 
 
 
 
 
 
Small Commercial Business
 
231,416

 
38.6
%
 
211,986

 
35.0
 %
Specialty Program
 
86,612

 
14.5
%
 
57,035

 
9.4
 %
Specialty Risk and Extended Warranty
 
117,415

 
19.6
%
 
116,902

 
19.3
 %
Total AmTrust Reinsurance
 
435,443

 
72.7
%
 
385,923

 
63.7
 %
Other
 

 
%
 
(43
)
 
 %
 
 
$
599,153

 
100.0
%
 
$
605,456

 
100.0
 %

14

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)


3. Segment Reporting (continued)
For the Three Months Ended September 30,
 
2015
 
2014
Net premiums earned
 
Total
 
% of Total
 
Total
 
% of Total
Diversified Reinsurance
 
 
 
 
 
 
 
 
Property
 
$
39,593

 
6.0
%
 
$
45,030

 
7.6
%
Casualty
 
115,646

 
17.6
%
 
150,876

 
25.5
%
Accident and Health
 
14,093

 
2.1
%
 
9,001

 
1.5
%
International
 
23,875

 
3.6
%
 
28,115

 
4.7
%
Total Diversified Reinsurance
 
193,207

 
29.3
%
 
233,022

 
39.3
%
AmTrust Reinsurance
 
 
 
 
 
 
 
 
Small Commercial Business
 
257,296

 
39.1
%
 
202,151

 
34.1
%
Specialty Program
 
80,302

 
12.2
%
 
40,654

 
6.9
%
Specialty Risk and Extended Warranty
 
127,715

 
19.4
%
 
116,260

 
19.6
%
Total AmTrust Reinsurance
 
465,313

 
70.7
%
 
359,065

 
60.6
%
Other
 

 
%
 
355

 
0.1
%
 
 
$
658,520

 
100.0
%
 
$
592,442

 
100.0
%
    
For the Nine Months Ended September 30,
 
2015

2014
Net premiums written
 
Total

% of Total

Total

% of Total
Diversified Reinsurance
 
 
 
 
 
 
 
 
Property
 
$
128,482

 
6.3
%
 
$
126,680

 
6.8
 %
Casualty
 
359,530

 
17.8
%
 
428,648

 
23.1
 %
Accident and Health
 
53,483

 
2.7
%
 
32,178

 
1.7
 %
International
 
61,198

 
3.0
%
 
94,184

 
5.1
 %
Total Diversified Reinsurance
 
602,693

 
29.8
%
 
681,690

 
36.7
 %
AmTrust Reinsurance
 
 
 
 
 
 
 
 
Small Commercial Business
 
857,617

 
42.3
%
 
663,766

 
35.8
 %
Specialty Program
 
262,068

 
12.9
%
 
145,162

 
7.8
 %
Specialty Risk and Extended Warranty
 
303,375

 
15.0
%
 
368,029

 
19.8
 %
Total AmTrust Reinsurance
 
1,423,060

 
70.2
%
 
1,176,957

 
63.4
 %
Other
 
1

 
%
 
(2,379
)
 
(0.1
)%
Total
 
$
2,025,754

 
100.0
%
 
$
1,856,268

 
100.0
 %

15

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)


3. Segment Reporting (continued)
For the Nine Months Ended September 30,
 
2015
 
2014
Net premiums earned
 
Total
 
% of Total
 
Total
 
% of Total
Diversified Reinsurance
 
 
 
 
 
 
 
 
Property
 
$
112,878

 
6.1
%
 
$
128,458

 
7.8
%
Casualty
 
350,549

 
19.0
%
 
398,148

 
24.2
%
Accident and Health
 
41,361

 
2.2
%
 
29,261

 
1.8
%
International
 
65,906

 
3.6
%
 
79,384

 
4.9
%
Total Diversified Reinsurance
 
570,694

 
30.9
%
 
635,251

 
38.7
%
AmTrust Reinsurance
 
 
 
 
 
 
 
 
Small Commercial Business
 
734,731

 
39.8
%
 
537,810

 
32.7
%
Specialty Program
 
210,690

 
11.4
%
 
118,459

 
7.2
%
Specialty Risk and Extended Warranty
 
329,142

 
17.9
%
 
332,644

 
20.2
%
Total AmTrust Reinsurance
 
1,274,563

 
69.1
%
 
988,913

 
60.1
%
Other
 
2

 
%
 
19,404

 
1.2
%
 
 
$
1,845,259

 
100.0
%
 
$
1,643,568

 
100.0
%
    

4. Investments

(a) Fixed Maturities and Other Investments

During the third quarter of 2015, we designated fixed maturities with a total fair value of $608,722 as HTM reflecting our intent to hold these securities to maturity. The net unrealized holding gain at the designation date continues to be reported in the carrying value of the HTM securities and is amortized through Other Comprehensive Income over the remaining life of the securities using the effective interest method in a manner consistent with the amortization of any premium or discount.

The original or amortized cost, estimated fair value and gross unrealized gains and losses of investment in fixed maturities and other investments as of September 30, 2015 and December 31, 2014 are as follows:
September 30, 2015
 
Original or
amortized cost
 
Gross
unrealized gains
 
Gross
unrealized losses
 
Fair value
AFS fixed maturities:
 
 
 
 
 
 
 
 
U.S. treasury bonds
 
$
6,654

 
$
405

 
$
(3
)
 
$
7,056

U.S. agency bonds – mortgage-backed
 
1,302,878

 
24,516

 
(3,892
)
 
1,323,502

U.S. agency bonds – other
 
28,705

 
739

 

 
29,444

Non-U.S. government and supranational bonds
 
33,650

 

 
(4,142
)
 
29,508

Commercial mortgage-backed securities
 
123,944

 
3,203

 
(6
)
 
127,141

Collateralized loan obligations
 
53,411

 
49

 
(341
)
 
53,119

Corporate bonds
 
1,679,952

 
46,375

 
(73,507
)
 
1,652,820

Municipal bonds
 
62,171

 
3,749

 

 
65,920

Total AFS fixed maturities
 
3,291,365

 
79,036

 
(81,891
)
 
3,288,510

HTM fixed maturities:
 
 
 
 
 
 
 
 
Corporate bonds
 
608,510

 
5,181

 
(2,697
)
 
610,994

Total HTM fixed maturities
 
608,510

 
5,181

 
(2,697
)
 
610,994

Other investments
 
10,725

 
1,072

 
(325
)
 
11,472

Total investments
 
$
3,910,600

 
$
85,289

 
$
(84,913
)
 
$
3,910,976


16

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)


4. Investments (continued)

December 31, 2014
 
Original or
amortized cost
 
Gross
unrealized gains
 
Gross
unrealized losses
 
Fair value
AFS fixed maturities:
 
 
 
 
 
 
 
 
U.S. treasury bonds
 
$
8,937

 
$
423

 
$

 
$
9,360

U.S. agency bonds – mortgage-backed
 
1,313,834

 
19,197

 
(10,588
)
 
1,322,443

U.S. agency bonds – other
 
7,213

 
775

 

 
7,988

Non-U.S. government and supranational bonds
 
54,467

 
304

 
(3,128
)
 
51,643

Commercial mortgage-backed securities
 
52,337

 
2,443

 

 
54,780

Corporate bonds
 
1,831,431

 
89,243

 
(25,295
)
 
1,895,379

Municipal bonds
 
62,153

 
3,666

 

 
65,819

Short-term investments
 
49,492

 

 

 
49,492

Total AFS fixed maturities
 
3,379,864

 
116,051

 
(39,011
)
 
3,456,904

Other investments
 
10,862

 
1,709

 

 
12,571

Total investments
 
$
3,390,726

 
$
117,760

 
$
(39,011
)
 
$
3,469,475


The contractual maturities of our fixed maturities are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or repay obligations with or without prepayment penalties.
 
 
AFS fixed maturities
 
HTM fixed maturities
September 30, 2015
 
Amortized cost
 
Fair value
 
Amortized cost
 
Fair value
Maturity
 
 
 
 
 
 
 
 
Due in one year or less
 
$
116,221

 
$
116,438

 
$

 
$

Due after one year through five years
 
513,002

 
523,065

 
68,026

 
68,395

Due after five years through ten years
 
1,122,293

 
1,081,898

 
540,484

 
542,599

Due after ten years
 
59,616

 
63,347

 

 

 
 
1,811,132

 
1,784,748

 
608,510

 
610,994

U.S. agency bonds – mortgage-backed
 
1,302,878

 
1,323,502

 

 

Commercial mortgage-backed securities
 
123,944

 
127,141

 

 

Collateralized loan obligations
 
53,411

 
53,119

 

 

Total fixed maturities
 
$
3,291,365

 
$
3,288,510

 
$
608,510

 
$
610,994



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)

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
September 30, 2015
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
Fixed maturities
 
 
 
 
 
 
 
 
 
 
 
 
U.S. treasury bonds
 
$
1,133

 
$
(3
)
 
$

 
$

 
$
1,133

 
$
(3
)
U.S. agency bonds – mortgage-backed
 
124,702

 
(520
)
 
164,168

 
(3,372
)
 
288,870

 
(3,892
)
Non–U.S. government and supranational bonds
 
4,948

 
(143
)
 
24,561

 
(3,999
)
 
29,509

 
(4,142
)
Commercial mortgage-backed securities
 
2,990

 
(6
)
 

 

 
2,990

 
(6
)
Collateralized loan obligations
 
32,578