Document
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, 2016

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 x
 
Accelerated filer o
 
 
 
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 1, 2016, the number of the Registrant's Common Stock ($.01 par value) outstanding was 86,131,861.






INDEX
 
 
Page
PART I - Financial Information
 
 
 
 
 
 
Condensed Consolidated Balance Sheets as of September 30, 2016 (unaudited) and December 31, 2015 (audited)
 
 
 
 
Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2016 and 2015 (unaudited)
 
 
 
 
Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended September 30, 2016 and 2015 (unaudited)
 
 
 
 
Condensed Consolidated Statements of Changes in Shareholders' Equity for the nine months ended September 30, 2016 and 2015 (unaudited)
 
 
 
 
Condensed Consolidated Statements of Cash Flows for the nine months ended September 30, 2016 and 2015 (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
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, 2016 (Unaudited)
 
December 31, 2015
(Audited)
ASSETS
 
 
 
Investments:
 
 
 
Fixed maturities, available-for-sale, at fair value (amortized cost 2016: $3,660,873; 2015: $3,562,864)
$
3,748,342


$
3,508,088

Fixed maturities, held-to-maturity, at amortized cost (fair value 2016: $798,081; 2015: $598,975)
759,973

 
607,843

Other investments, at fair value (cost 2016: $10,860; 2015: $10,816)
12,268


11,812

Total investments
4,520,583


4,127,743

Cash and cash equivalents
67,459


89,641

Restricted cash and cash equivalents
366,563


242,859

Accrued investment income
33,884


32,288

Reinsurance balances receivable, net (includes $220,555 and $147,365 from related parties in 2016 and 2015, respectively)
535,015


377,318

Reinsurance recoverable on unpaid losses
97,070


71,248

Loan to related party
167,975


167,975

Deferred commission and other acquisition expenses, net (includes $388,099 and $341,025 from related parties in 2016 and 2015, respectively)
451,698


397,548

Goodwill and intangible assets, net
80,135


81,920

Other assets
147,580


115,038

Total assets
$
6,467,962

 
$
5,703,578

LIABILITIES
 
 
 
Reserve for loss and loss adjustment expenses (includes $1,676,647 and $1,443,639 from related parties in 2016 and 2015, respectively)
$
2,759,518


$
2,510,101

Unearned premiums (includes $1,204,853 and $1,077,460 from related parties in 2016 and 2015, respectively)
1,571,435


1,354,572

Accrued expenses and other liabilities
150,741


135,897

Liability for securities purchased
78,581


3,976

Senior Notes - principal amount
362,500


360,000

Less unamortized issuance costs
11,172

 
10,067

Senior notes, net
351,328

 
349,933

Total liabilities
4,911,603

 
4,354,479

Commitments and Contingencies


 


EQUITY
 
 
 
Preference shares
315,000


480,000

Common shares ($0.01 par value: 87,178,902 and 74,735,785 shares issued in 2016 and 2015, respectively; 86,128,999 and 73,721,140 shares outstanding in 2016 and 2015, respectively)
872


747

Additional paid-in capital
747,203


579,178

Accumulated other comprehensive income (loss)
123,876


(23,767
)
Retained earnings
373,340


316,184

Treasury shares, at cost (1,049,903 and 1,014,645 shares in 2016 and 2015, respectively)
(4,991
)

(4,521
)
Total Maiden shareholders’ equity
1,555,300

 
1,347,821

Noncontrolling interest in subsidiaries
1,059


1,278

Total equity
1,556,359

 
1,349,099

Total liabilities and equity
$
6,467,962

 
$
5,703,578


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,
 
 
2016

2015

2016

2015
Revenues:
 
 
 
 
 
 
 
 
Gross premiums written
 
$
706,854


$
628,501


$
2,259,290


$
2,136,935

Net premiums written
 
$
690,653


$
599,153


$
2,133,911


$
2,025,754

Change in unearned premiums
 
7,625


59,367


(182,060
)

(180,495
)
Net premiums earned
 
698,278

 
658,520

 
1,951,851

 
1,845,259

Other insurance revenue
 
2,345


2,177


8,696


9,408

Net investment income
 
35,666


32,843


107,291


96,260

Net realized gains on investment
 
1,900


1,216


4,511


2,327

Total other-than-temporary impairment losses
 


(1,060
)



(1,060
)
Portion of loss recognized in other comprehensive income (loss)
 

 

 

 

Net impairment losses recognized in earnings
 

 
(1,060
)
 

 
(1,060
)
Total revenues
 
738,189

 
693,696

 
2,072,349


1,952,194

Expenses:
 
 
 
 
 
 
 
 
Net loss and loss adjustment expenses
 
466,751


444,172


1,297,361


1,236,505

Commission and other acquisition expenses
 
206,706


197,639


587,501


551,678

General and administrative expenses
 
16,952


16,453


49,738


48,951

Interest and amortization expenses
 
6,856


7,266


21,314


21,796

Accelerated amortization of senior note issuance cost
 




2,345



Amortization of intangible assets
 
616


710


1,846


2,130

Foreign exchange and other gains
 
(687
)

(1,427
)

(6,474
)

(4,062
)
Total expenses
 
697,194

 
664,813

 
1,953,631

 
1,856,998

Income before income taxes
 
40,995

 
28,883

 
118,718

 
95,196

Income tax expense
 
199

 
368

 
1,206

 
1,636

Net income
 
40,796

 
28,515

 
117,512

 
93,560

Loss attributable to noncontrolling interest
 
56


69


166


116

Net income attributable to Maiden shareholders
 
40,852

 
28,584

 
117,678

 
93,676

Dividends on preference shares
 
(9,023
)
 
(6,085
)

(27,723
)

(18,253
)
Net income attributable to Maiden common shareholders
 
$
31,829

 
$
22,499

 
$
89,955

 
$
75,423

Basic earnings per share attributable to Maiden common shareholders
 
$
0.42


$
0.31

 
$
1.20

 
$
1.03

Diluted earnings per share attributable to Maiden common shareholders
 
$
0.40


$
0.30

 
$
1.15

 
$
0.99

Dividends declared per common share
 
$
0.14

 
$
0.13

 
$
0.42

 
$
0.39


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,
 
 
2016

2015
 
2016
 
2015
Net income
 
$
40,796

 
$
28,515

 
$
117,512

 
$
93,560

Net unrealized holding gains (losses) on available-for-sale fixed maturities arising during the period
 
8,888

 
(17,191
)
 
155,052

 
(80,725
)
Adjustment for reclassification of net realized (gains) losses recognized in net income
 
(1,202
)

(11
)

578


(5
)
Foreign currency translation adjustment
 
(2,730
)
 
(741
)
 
(7,927
)
 
8,316

Other comprehensive income (loss), before tax
 
4,956

 
(17,943
)
 
147,703

 
(72,414
)
Income tax benefit (expense) related to components of other comprehensive income
 
11

 
18

 
(28
)
 
82

Other comprehensive income (loss), after tax
 
4,967

 
(17,925
)
 
147,675

 
(72,332
)
Comprehensive income
 
45,763

 
10,590

 
265,187

 
21,228

Net loss attributable to noncontrolling interest
 
56

 
69

 
166

 
116

Other comprehensive (income) loss attributable to noncontrolling interest
 
(17
)
 
(1
)
 
(32
)
 
46

Comprehensive loss attributable to noncontrolling interest
 
39

 
68

 
134

 
162

Comprehensive income attributable to Maiden shareholders
 
$
45,802

 
$
10,658

 
$
265,321

 
$
21,390


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,

2016

2015
Preference shares
 
 
 
 
Beginning balance
 
$
480,000

 
$
315,000

Less: mandatory conversion of Preference Shares - Series B
 
(165,000
)
 

Ending balance
 
315,000

 
315,000

Common shares
 
 
 
 
Beginning balance
 
747

 
739

Exercise of options and issuance of shares
 
4

 
8

Shares issued on mandatory conversion of Preference Shares - Series B
 
121

 

Ending balance
 
872

 
747

Additional paid-in capital
 
 
 
 
Beginning balance
 
579,178

 
578,445

Exercise of options and issuance of common shares
 
662

 
3,072

Share-based compensation expense
 
2,625

 
2,519

Mandatory conversion of Preference Shares - Series B
 
164,879

 

Others
 
(141
)
 

Ending balance
 
747,203

 
584,036

Accumulated other comprehensive income
 
 
 
 
Beginning balance
 
(23,767
)
 
95,293

Change in net unrealized gains (losses) on investments, net
 
155,602

 
(80,648
)
Foreign currency translation adjustments
 
(7,959
)
 
8,362

Ending balance
 
123,876

 
23,007

Retained earnings
 
 
 
 
Beginning balance
 
316,184

 
255,084

Net income attributable to Maiden shareholders
 
117,678

 
93,676

Dividends on preference shares
 
(27,723
)
 
(18,253
)
Dividends on common shares
 
(32,799
)
 
(28,711
)
Ending balance
 
373,340

 
301,796

Treasury shares
 
 
 
 
Beginning balance
 
(4,521
)
 
(3,867
)
Shares repurchased for treasury
 
(470
)
 
(654
)
Ending balance
 
(4,991
)
 
(4,521
)
Noncontrolling interest in subsidiaries
 
 
 
 
Beginning balance
 
1,278

 
472

Change in minority interest
 
(54
)
 
1,710

Dividend paid to noncontrolling interest
 
(31
)
 
(303
)
Loss attributable to noncontrolling interest
 
(166
)
 
(116
)
Foreign currency translation adjustments
 
32

 
(46
)
Ending balance
 
1,059

 
1,717

Total equity
 
$
1,556,359

 
$
1,221,782


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,
 
2016
 
2015
Cash flows from operating activities:
 
 
 
 
Net income
 
$
117,512

 
$
93,560

Adjustments to reconcile net income to net cash provided by operating activities:
 
 
 
 
Depreciation and amortization
 
16,841

 
7,077

Net realized gains on investment
 
(4,511
)
 
(2,327
)
Net impairment losses recognized in earnings
 

 
1,060

Foreign exchange and other gains
 
(6,474
)
 
(4,062
)
Changes in assets – (increase) decrease:
 
 
 
 
Reinsurance balances receivable, net
 
(154,091
)
 
14,093

Reinsurance recoverable on unpaid losses
 
(26,281
)
 
(17,374
)
Accrued investment income
 
(1,537
)
 
(3,110
)
Deferred commission and other acquisition expenses
 
(49,713
)
 
(57,838
)
Other assets
 
(32,027
)
 
(64,512
)
Changes in liabilities – increase (decrease):
 
 
 
 
Reserve for loss and loss adjustment expenses
 
250,937

 
291,123

Unearned premiums
 
204,752

 
238,726

Accrued expenses and other liabilities
 
10,749

 
29,596

Net cash provided by operating activities
 
326,157

 
526,012

Cash flows from investing activities:
 
 
 
 
Purchases of fixed maturities – available-for-sale
 
(732,001
)
 
(1,095,162
)
Purchases of other investments
 
(167
)
 
(144
)
Proceeds from sales of fixed maturities – available-for-sale
 
101,923

 
116,093

Proceeds from maturities and calls of fixed maturities
 
442,490

 
467,910

Proceeds from redemption of other investments
 
572

 
344

(Increase) decrease in restricted cash and cash equivalents, net
 
(103,685
)
 
41,022

Other, net
 
(521
)
 
(715
)
Net cash used in investing activities
 
(291,389
)
 
(470,652
)
Cash flows from financing activities:
 
 
 
 
Senior notes issuance, net of issuance costs
 
106,424

 

Redemption of 2011 senior notes
 
(107,500
)
 

Common share issuance
 
666

 
3,080

Repurchase of common shares for treasury
 
(470
)
 
(654
)
Dividends paid to common shareholders
 
(31,062
)
 
(28,616
)
Dividends paid to preference shareholders
 
(27,723
)
 
(18,253
)
Net cash used in financing activities
 
(59,665
)
 
(44,443
)
Effect of exchange rate changes on foreign currency cash
 
2,715

 
(1,485
)
Net (decrease) increase in cash and cash equivalents
 
(22,182
)
 
9,432

Cash and cash equivalents, beginning of period
 
89,641

 
108,119

Cash and cash equivalents, end of period
 
$
67,459

 
$
117,551


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. ("Maiden Holdings") 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, 2015. Certain reclassifications have been made for 2015 to conform to the 2016 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, 2015 with the exception of the following:

Transition related to Accounting Standards Update ("ASU") No. 2015-03: Simplifying the Presentation of Debt Issuance Costs

Effective January 1, 2016, the Company adopted the new guidance under ASU 2015-03 which requires that debt issuance costs be presented as a direct deduction from the related debt liability rather than as an asset in the balance sheet. The amortization of such costs is reported as an interest expense. The Company applied this new guidance retrospectively to all prior periods presented. The adoption of this new guidance reduced the December 31, 2015 audited consolidated total assets and total liabilities by $10,067, respectively, representing the amount of unamortized issuance costs related to our Senior Notes which was previously presented as part of other assets. There was no impact on the net income, related per-share amounts or the retained earnings for the periods affected by the adoption of this guidance.

Recently Issued Accounting Standards Not Yet Adopted

Disclosures about Short-Duration Contracts

In May 2015, the Financial Accounting Standards Board ("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 will not have a material impact on the Company’s statements of operations and financial position.

Recognition and Measurement of Financial Assets and Financial Liabilities

In January 2016, the FASB issued ASU 2016-01 that will change how entities measure certain equity investments and present changes in the fair value of financial liabilities measured under the fair value option that are attributable to their own credit. The new guidance also changes certain disclosure requirements and other aspects of current U.S. GAAP. It does not change the guidance for classifying and measuring investments in debt securities and loans. Under the new guidance, entities will have to measure many equity investments at fair value and recognize any changes in fair value in net income unless the investments qualify for the new practicability exception. This includes investments in partnerships, unincorporated joint ventures and limited liability companies that do not result in consolidation and are not accounted for under the equity method. Entities will no longer be able to recognize unrealized holding gains and losses on equity securities they classify today as available for sale ("AFS") in Accumulated Other Comprehensive Income ("AOCI"). They also will no longer be able to use the cost method of accounting for equity securities that do not have readily determinable fair values. The guidance is effective for annual periods beginning after December 15, 2017, including interim periods within those fiscal years. The Company is evaluating the impact of this new guidance on its consolidated results of operations and financial condition.



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)

Accounting for Leases

In February 2016, the FASB issued final Accounting Standards Codification ("ASC") 842 guidance that requires lessees to put most leases on their balance sheets but recognize expenses on their income statement in a manner similar to today's accounting. The guidance also eliminates today's real-estate-specific provisions for all entities. All entities classify leases to determine how to recognize lease-related revenue and expense. The U.S. GAAP standard is effective for public business entities and certain not-for-profit entities and employee benefit plans for annual periods beginning after December 15, 2018, and interim periods within those years. Early adoption is permitted for all entities. The Company is evaluating the impact of this new guidance on its consolidated results of operations and financial condition.

Improvements to Employee Share-Based Payment Accounting

In March 2016, the FASB issued ASU 2016-09 guidance that outlines changes for certain aspects of share-based payments to employees, such as accounting for forfeitures, which applies to the Company. Under the new guidance, the entities can elect to either estimate the number of awards that are expected to vest or account for forfeitures when they occur. The guidance is effective for public business entities for fiscal year beginning after December 15, 2016, and interim periods within those fiscal years. Early adoption is permitted for all entities, in any annual or interim period for which financial statements haven't been issued or made available for issuance, but all of the guidance must be adopted in the same period. The Company is evaluating the impact of this new guidance on its consolidated results of operations and financial condition.

Accounting for Measurement of Credit Losses on Financial Instruments

In June 2016, the FASB issued ASU 2016-13 guidance that changes the impairment model for most financial assets and certain other instruments that are not measured at fair value through net income. The standard will replace today's "incurred loss" approach with an "expected loss" model for instruments measured at amortized cost and require entities to record allowances for available-for-sale debt securities rather than reduce the carrying amount, as they do today under the other-than-temporary impairment model. It also simplifies the accounting model for purchased credit-impaired debt securities and loans. Entities will apply the standard's provisions as a cumulative effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective. The guidance is effective for public business entities for annual periods beginning after December 15, 2019, and interim periods therein. The Company is evaluating the impact of this new guidance on its consolidated results of operations and financial condition.

Classification of Certain Cash Receipts and Cash Payments

In August 2016, the FASB issued ASU 2016-15 guidance to clarify how entities should classify certain cash receipts and cash payments on the statement of cash flows. The new guidance amends ASC 230 Statement of Cash Flows, a principles based requiring judgment to determine the appropriate classification of cash flow as operating, investing or financing activities which created diversity in how certain cash receipts and cash payments were classified. The new guidance clarifies that if a receipt or payment has aspects of more than one class of cash flows and cannot be separated, the classification will depend on the predominant source or use. While the new guidance attempts to clarify how the predominance principle should be applied, judgment will still be required. The guidance is effective for public business entities for annual periods beginning after December 15, 2017 and interim periods therein. Early adoption is permitted. Entities will have to apply the guidance retrospectively, but if it is impracticable to do so for an issue, the amendments related to that issue would be applied prospectively. The Company is evaluating the impact of this new guidance on its consolidated results of operations and financial condition.

Intra-Entity Assets Other Than Inventory

In October 2016, the FASB issued ASU 2016-16 guidance that will require entities to recognize the income tax effects of intercompany sales and transfers of assets other than inventory as expense or benefit, in the period in which the transfer occurs as opposed to being deferred the income tax effects until the intercompany asset has been sold to an outside party, according to the current guidance in effect. The new guidance will require companies to defer the income tax effects only of intercompany transfers of inventory. The companies will be required to apply a modified retrospective approach with a cumulative catch-up adjustment to opening retained earnings in the period of adoption. In addition, companies will record deferred tax balances with an offset to opening retained earnings for amounts they haven't recognized under the new guidance. If a valuation allowance is necessary on the date of the adoption, that allowance will be recorded with an offset to opening retained earnings. The new guidance is effective for public business entities for annual periods beginning after December 15, 2017 and interim periods therein. Early adoption is permitted. The Company is evaluating the impact of this new guidance on its consolidated results of operations and financial condition.







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

The Company currently has two reportable segments: Diversified Reinsurance and AmTrust Reinsurance. Our Diversified Reinsurance segment consists of a portfolio of predominantly property and casualty reinsurance business focusing on regional and specialty property and casualty insurance companies primarily located in the U.S. and Europe. Our AmTrust Reinsurance segment includes all business ceded to Maiden Reinsurance Ltd. ("Maiden Bermuda") by subsidiaries of AmTrust Financial Services, Inc. ("AmTrust"), primarily the AmTrust Quota Share and the European Hospital Liability Quota Share. Please refer to "Note 7. Related Party Transactions" for additional information. In addition to our reportable segments, the results of operations of the former NGHC Quota Share segment and the remnants of the U.S. excess and surplus ("E&S") business have been included in the "Other" category.

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.

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:
For the Three Months Ended September 30, 2016

Diversified Reinsurance

AmTrust Reinsurance

Other

Total
Gross premiums written
 
$
186,750

 
$
520,104

 
$

 
$
706,854

Net premiums written

$
179,092


$
511,561


$


$
690,653

Net premiums earned

$
175,141


$
523,137


$


$
698,278

Other insurance revenue

2,345






2,345

Net loss and loss adjustment expenses ("LAE")

(132,396
)

(334,310
)

(45
)

(466,751
)
Commission and other acquisition expenses

(39,868
)

(166,836
)

(2
)

(206,706
)
General and administrative expenses

(9,038
)

(759
)



(9,797
)
Underwriting income (loss)

$
(3,816
)

$
21,232


$
(47
)

$
17,369

Reconciliation to net income












Net investment income and realized gains on investment










37,566

Interest and amortization expenses
 
 
 
 
 
 
 
(6,856
)
Amortization of intangible assets










(616
)
Foreign exchange and other gains










687

Other general and administrative expenses










(7,155
)
Income tax expense










(199
)
Net income










$
40,796














Net loss and LAE ratio (1)

74.6
%

63.9
%

 

66.6
%
Commission and other acquisition expense ratio (2)

22.5
%

31.9
%

 

29.5
%
General and administrative expense ratio (3)

5.1
%

0.1
%

 

2.4
%
Combined ratio (4)

102.2
%

95.9
%

 

98.5
%









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, 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 LAE
 
(142,468
)
 
(297,780
)
 
(3,924
)
 
(444,172
)
Commission and other acquisition expenses
 
(51,714
)
 
(146,008
)
 
83

 
(197,639
)
General and administrative expenses
 
(8,218
)
 
(656
)
 

 
(8,874
)
Underwriting income (loss)
 
$
(7,016
)
 
$
20,869

 
$
(3,841
)
 
$
10,012

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
 
 
 
 
 
 
 
(7,579
)
Income tax expense
 
 
 
 
 
 
 
(368
)
Net income
 
 
 
 
 
 
 
$
28,515

 
 
 
 
 
 
 
 
 
Net loss and LAE 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)
 
4.2
%
 
0.1
%
 
 
 
2.5
%
Combined ratio (4)
 
103.6
%
 
95.4
%
 
 
 
99.6
%

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, 2016
 
Diversified Reinsurance
 
AmTrust Reinsurance
 
Other
 
Total
Gross premiums written
 
$
667,388

 
$
1,591,902

 
$

 
$
2,259,290

Net premiums written
 
$
626,522

 
$
1,507,389

 
$

 
$
2,133,911

Net premiums earned
 
$
538,152

 
$
1,413,699

 
$

 
$
1,951,851

Other insurance revenue
 
8,696

 

 

 
8,696

Net loss and LAE
 
(395,718
)
 
(898,703
)
 
(2,940
)
 
(1,297,361
)
Commission and other acquisition expenses
 
(139,895
)
 
(447,604
)
 
(2
)
 
(587,501
)
General and administrative expenses
 
(26,717
)
 
(2,308
)
 

 
(29,025
)
Underwriting income (loss)
 
$
(15,482
)
 
$
65,084

 
$
(2,942
)
 
$
46,660

Reconciliation to net income
 
 
 
 
 
 
 
 
Net investment income and realized gains on investment
 
 
 
 
 
 
 
111,802

Interest and amortization expenses
 
 
 
 
 
 
 
(21,314
)
Accelerated amortization of senior note issuance cost
 
 
 
 
 
 
 
(2,345
)
Amortization of intangible assets
 
 
 
 
 
 
 
(1,846
)
Foreign exchange and other gains
 
 
 
 
 
 
 
6,474

Other general and administrative expenses
 
 
 
 
 
 
 
(20,713
)
Income tax expense
 
 
 
 
 
 
 
(1,206
)
Net income
 
 
 
 
 
 
 
$
117,512

 
 
 
 
 
 
 
 
 
Net loss and LAE ratio (1)
 
72.4
%
 
63.5
%
 
 
 
66.2
%
Commission and other acquisition expense ratio (2)
 
25.6
%
 
31.7
%
 
 
 
30.0
%
General and administrative expense ratio (3)
 
4.8
%
 
0.2
%
 
 
 
2.5
%
Combined ratio (4)
 
102.8
%
 
95.4
%
 
 
 
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 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 LAE
 
(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
 
(25,976
)
 
(2,200
)
 

 
(28,176
)
Underwriting income (loss)
 
$
(16,052
)
 
$
62,056

 
$
(7,696
)
 
$
38,308

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
 
 
 
 
 
 
 
(20,775
)
Income tax expense
 
 
 
 
 
 
 
(1,636
)
Net income
 
 
 
 
 
 
 
$
93,560

 
 
 
 
 
 
 
 
 
Net loss and LAE 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)
 
4.5
%
 
0.2
%
 
 
 
2.7
%
Combined ratio (4)
 
102.8
%
 
95.1
%
 
 
 
99.1
%
(1) Calculated by dividing net loss and LAE 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 LAE ratio, commission and other acquisition expense ratio and general and administrative expense ratio.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The following tables summarize the total assets of our reportable segments including the reconciliation to our consolidated assets at September 30, 2016 and December 31, 2015:
September 30, 2016
 
Diversified
Reinsurance
 
AmTrust
Reinsurance
 
Total
Total assets - reportable segments
 
$
1,929,455

 
$
3,937,523

 
$
5,866,978

Corporate assets
 

 

 
600,984

Total Assets
 
$
1,929,455

 
$
3,937,523

 
$
6,467,962

December 31, 2015
 
Diversified
Reinsurance
 
AmTrust
Reinsurance
 
Total
Total assets - reportable segments
 
$
1,644,541

 
$
3,178,859

 
$
4,823,400

Corporate assets
 

 

 
880,178

Total Assets
 
$
1,644,541

 
$
3,178,859

 
$
5,703,578



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 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, 2016 and 2015:
For the Three Months Ended September 30,
 
2016

2015
Net premiums written
 
Total
 
% of Total
 
Total
 
% of Total
Diversified Reinsurance
 
 
 
 
 
 
 
 
Property
 
$
30,606

 
4.4
%
 
$
29,574

 
4.9
%
Casualty
 
115,360

 
16.7
%
 
101,191

 
16.9
%
Accident and Health
 
14,845

 
2.2
%
 
12,918

 
2.2
%
International
 
18,281

 
2.6
%
 
20,027

 
3.3
%
Total Diversified Reinsurance
 
179,092

 
25.9
%
 
163,710

 
27.3
%
AmTrust Reinsurance
 
 
 
 
 
 
 
 
Small Commercial Business
 
314,677

 
45.6
%
 
231,416

 
38.6
%
Specialty Program
 
98,895

 
14.3
%
 
86,612

 
14.5
%
Specialty Risk and Extended Warranty
 
97,989

 
14.2
%
 
117,415

 
19.6
%
Total AmTrust Reinsurance
 
511,561

 
74.1
%
 
435,443

 
72.7
%
 
 
$
690,653

 
100.0
%
 
$
599,153

 
100.0
%
For the Three Months Ended September 30,
 
2016
 
2015
Net premiums earned
 
Total
 
% of Total
 
Total
 
% of Total
Diversified Reinsurance
 
 
 
 
 
 
 
 
Property
 
$
29,921

 
4.3
%
 
$
39,593

 
6.0
%
Casualty
 
105,893

 
15.2
%
 
115,646

 
17.6
%
Accident and Health
 
18,436

 
2.6
%
 
14,093

 
2.1
%
International
 
20,891

 
3.0
%
 
23,875

 
3.6
%
Total Diversified Reinsurance
 
175,141

 
25.1
%
 
193,207

 
29.3
%
AmTrust Reinsurance
 
 
 
 
 
 
 
 
Small Commercial Business
 
320,596

 
45.9
%
 
257,296

 
39.1
%
Specialty Program
 
89,856

 
12.9
%
 
80,302

 
12.2
%
Specialty Risk and Extended Warranty
 
112,685

 
16.1
%
 
127,715

 
19.4
%
Total AmTrust Reinsurance
 
523,137

 
74.9
%
 
465,313

 
70.7
%
 
 
$
698,278

 
100.0
%
 
$
658,520

 
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 Nine Months Ended September 30,
 
2016
 
2015
Net premiums written
 
Total
 
% of Total
 
Total
 
% of Total
Diversified Reinsurance
 
 
 
 
 
 
 
 
Property
 
$
123,991

 
5.8
%
 
$
128,482

 
6.3
%
Casualty
 
365,332

 
17.1
%
 
359,530

 
17.8
%
Accident and Health
 
68,140

 
3.2
%
 
53,483

 
2.7
%
International
 
69,059

 
3.2
%
 
61,198

 
3.0
%
Total Diversified Reinsurance
 
626,522

 
29.3
%
 
602,693

 
29.8
%
AmTrust Reinsurance
 


 


 
 
 
 
Small Commercial Business
 
983,601

 
46.1
%
 
857,617

 
42.3
%
Specialty Program
 
268,193

 
12.6
%
 
262,068

 
12.9
%
Specialty Risk and Extended Warranty
 
255,595

 
12.0
%
 
303,375

 
15.0
%
Total AmTrust Reinsurance
 
1,507,389

 
70.7
%
 
1,423,060

 
70.2
%
Other
 

 
%
 
1

 
%
 
 
$
2,133,911

 
100.0
%
 
$
2,025,754

 
100.0
%

For the Nine Months Ended September 30,
 
2016
 
2015
Net premiums earned
 
Total
 
% of Total
 
Total
 
% of Total
Diversified Reinsurance
 
 
 
 
 
 
 
 
Property
 
$
103,023

 
5.3
%
 
$
112,878

 
6.1
%
Casualty
 
313,736

 
16.1
%
 
350,549

 
19.0
%
Accident and Health
 
55,788

 
2.8
%
 
41,361

 
2.2
%
International
 
65,605

 
3.4
%
 
65,906

 
3.6
%
Total Diversified Reinsurance
 
538,152

 
27.6
%
 
570,694

 
30.9
%
AmTrust Reinsurance
 


 


 


 


Small Commercial Business
 
864,699

 
44.3
%
 
734,731

 
39.8
%
Specialty Program
 
251,543

 
12.9
%
 
210,690

 
11.4
%
Specialty Risk and Extended Warranty
 
297,457

 
15.2
%
 
329,142

 
17.9
%
Total AmTrust Reinsurance
 
1,413,699

 
72.4
%
 
1,274,563

 
69.1
%
Other
 

 
%
 
2

 
%
 
 
$
1,951,851

 
100.0
%
 
$
1,845,259

 
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)


4. Investments

(a) Fixed Maturities and Other Investments

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, 2016 and December 31, 2015 are as follows:
September 30, 2016
 
Original or
amortized cost
 
Gross
unrealized gains
 
Gross
unrealized losses
 
Fair value
AFS fixed maturities:
 
 
 
 
 
 
 
 
U.S. treasury bonds
 
$
5,183

 
$
317

 
$

 
$
5,500

U.S. agency bonds – mortgage-backed
 
1,572,387

 
34,128

 
(737
)
 
1,605,778

U.S. agency bonds – other
 
4,256

 
362

 

 
4,618

Non-U.S. government and supranational bonds
 
35,579

 
264

 
(3,181
)
 
32,662

Asset-backed securities
 
205,534

 
7,306

 
(49
)
 
212,791

Corporate bonds
 
1,775,739

 
75,202

 
(31,688
)
 
1,819,253

Municipal bonds
 
62,195

 
5,545

 

 
67,740

Total AFS fixed maturities
 
3,660,873

 
123,124

 
(35,655
)
 
3,748,342

Held-to-maturity ("HTM") fixed maturities:
 
 
 
 
 
 
 
 
Corporate bonds
 
759,973

 
38,941

 
(833
)
 
798,081

Total HTM fixed maturities
 
759,973

 
38,941

 
(833
)
 
798,081

Other investments
 
10,860

 
1,408

 

 
12,268

Total investments
 
$
4,431,706

 
$
163,473

 
$
(36,488
)
 
$
4,558,691

December 31, 2015
 
Original or
amortized cost
 
Gross
unrealized gains
 
Gross
unrealized losses
 
Fair value
AFS fixed maturities:
 
 
 
 
 
 
 
 
U.S. treasury bonds
 
$
5,714

 
$
312

 
$
(16
)
 
$
6,010

U.S. agency bonds – mortgage-backed
 
1,471,782

 
15,399

 
(10,190
)
 
1,476,991

U.S. agency bonds – other
 
23,734

 
577

 

 
24,311

Non-U.S. government and supranational bonds
 
35,128

 

 
(4,584
)
 
30,544

Asset-backed securities
 
165,719

 
1,174

 
(1,089
)
 
165,804

Corporate bonds
 
1,798,610

 
38,070

 
(97,012
)
 
1,739,668

Municipal bonds
 
62,177

 
2,583

 

 
64,760

Total AFS fixed maturities
 
3,562,864

 
58,115

 
(112,891
)
 
3,508,088

HTM fixed maturities:
 
 
 
 
 
 
 
 
Corporate bonds
 
607,843

 
3,458

 
(12,326
)
 
598,975

Total HTM fixed maturities
 
607,843

 
3,458

 
(12,326
)
 
598,975

Other investments
 
10,816

 
1,091

 
(95
)
 
11,812

Total investments
 
$
4,181,523

 
$
62,664

 
$
(125,312
)
 
$
4,118,875


During the second quarter of 2016, we designated additional fixed maturities with a total fair value of $155,538 as HTM reflecting our intent to hold these securities to maturity. The net unrealized holding gain of $15,770 at the designation date was 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 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.

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)
 
 
AFS fixed maturities
 
HTM fixed maturities
September 30, 2016
 
Amortized cost
 
Fair value
 
Amortized cost
 
Fair value
Maturity
 
 
 
 
 
 
 
 
Due in one year or less
 
$
124,653

 
$
120,322

 
$

 
$

Due after one year through five years
 
483,935

 
486,485

 
223,261

 
226,753

Due after five years through ten years
 
1,260,222

 
1,308,224

 
531,624

 
566,140

Due after ten years
 
14,142

 
14,742

 
5,088

 
5,188

 
 
1,882,952

 
1,929,773

 
759,973

 
798,081

U.S. agency bonds – mortgage-backed
 
1,572,387

 
1,605,778

 

 

Asset-backed securities
 
205,534

 
212,791

 

 

Total fixed maturities
 
$
3,660,873

 
$
3,748,342

 
$
759,973

 
$
798,081


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, 2016
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
Fixed maturities
 
 
 
 
 
 
 
 
 
 
 
 
U.S. agency bonds – mortgage-backed
 
$
13,029

 
$
(27
)
 
$
54,566