Business Overview
Maiden Holdings, Ltd. (NASDAQ:MHNC) is a Bermuda-based holding company that creates shareholder value by actively managing and allocating its assets and capital, primarily in the insurance and related financial services industries. The company's business strategy has evolved significantly in recent years, as it has navigated the challenges of a diversified reinsurance portfolio and sought to optimize its operations for long-term success.Maiden Holdings operates through two reportable segments: Diversified Reinsurance and AmTrust Reinsurance. The Diversified Reinsurance segment consists of a portfolio of predominantly property and casualty reinsurance business, focusing on regional and specialty property and casualty insurance companies located primarily in Europe. This segment also includes transactions entered into by the company's Genesis Legacy Solutions (GLS) subsidiary, which specialized in providing legacy services to small insurance entities.
The AmTrust Reinsurance segment includes all business ceded to Maiden Reinsurance by AmTrust, primarily the quota share reinsurance agreement (AmTrust Quota Share) between Maiden Reinsurance and AmTrust's wholly owned subsidiary, AmTrust International Insurance, Ltd. (AII), as well as the European hospital liability quota share reinsurance contract (European Hospital Liability Quota Share) with AmTrust's wholly owned subsidiaries, AmTrust Europe Limited (AEL) and AmTrust International Underwriters DAC (AIU DAC). Both the AmTrust Quota Share and the European Hospital Liability Quota Share are currently in run-off.
In addition to its reinsurance operations, Maiden Holdings also has short-term income protection business written on a primary basis by its wholly owned subsidiaries, Maiden Life Försäkrings AB (Maiden LF) and Maiden General Försäkrings AB (Maiden GF), in the Scandinavian and Northern European markets. The company's wholly owned subsidiary, Maiden Global Holdings, Ltd. (Maiden Global), is a licensed intermediary in the United Kingdom and had previously operated internationally by providing branded auto and credit life insurance products through insurer partners, particularly those in Europe and other global markets (IIS business).
Financials
For the full year 2023, Maiden Holdings reported annual net income of $55,432,000 and annual revenue of $58,132,000. The company's annual operating cash flow was -$195,928,000, and its annual free cash flow was also -$195,928,000.In the first quarter of 2024, Maiden Holdings reported net income of $1,459,000, compared to a net loss of $11,328,000 in the same period of 2023. Gross premiums written increased to $8,323,000 in Q1 2024, up from $836,000 in Q1 2023. Net premiums earned also increased to $12,408,000 in Q1 2024, compared to $9,002,000 in Q1 2023.
The company's underwriting results showed an improvement, with an underwriting loss of $7,524,000 in Q1 2024, compared to an underwriting loss of $8,253,000 in Q1 2023. This was primarily due to favorable prior year reserve development in the Diversified Reinsurance segment, which offset adverse prior year loss development in the AmTrust Reinsurance segment.
Diversified Reinsurance Segment
The Diversified Reinsurance segment reported an underwriting loss of $272,000 in Q1 2024, compared to an underwriting loss of $1,989,000 in the same period of 2023. This improvement was driven by favorable prior year reserve development in the GLS and other runoff business lines, which offset the underwriting loss in the International business.Gross premiums written in the Diversified Reinsurance segment increased by 28.9% to $8,828,000 in Q1 2024, compared to $6,849,000 in Q1 2023, primarily due to growth in Credit Life programs written by Maiden LF and Maiden GF. Net premiums earned also increased by 20.3% to $8,991,000 in Q1 2024, compared to $7,471,000 in the same period of 2023.
AmTrust Reinsurance Segment
The AmTrust Reinsurance segment reported an underwriting loss of $7,252,000 in Q1 2024, compared to an underwriting loss of $6,264,000 in Q1 2023. This increase in underwriting loss was primarily due to higher adverse prior year loss development under the European Hospital Liability Quota Share.Net premiums written in the AmTrust Reinsurance segment decreased to -$505,000 in Q1 2024, compared to -$6,013,000 in Q1 2023. The negative premiums reflect the termination of the AmTrust Quota Share and the European Hospital Liability Quota Share as of January 1, 2019, which has resulted in no new business written under these contracts since 2018. Net premiums earned increased to $3,417,000 in Q1 2024, compared to $1,531,000 in the same period of 2023, primarily due to lower negative premium adjustments during the first quarter of 2024.
Investments and Capital Management
Maiden Holdings' investment portfolio produced significantly higher returns in Q1 2024, with total investment return included in earnings of $17,056,000, compared to $10,499,000 in the same period of 2023. This was driven by a combination of higher yields on certain fixed income assets and strengthening returns on the company's alternative investment portfolio, which increased by 5.8% during Q1 2024 and produced a positive net return of 3.4%.As of March 31, 2024, the company's alternative investments, which include private equity funds, private credit funds, and other privately held investments, accounted for 53.0% of its total cash and investments, up from 51.3% as of December 31, 2023. The company's allocation to alternative investments has increased as it seeks to enhance the income and total returns of its investment portfolio.
Maiden Holdings has also been actively managing its capital, repurchasing 352,111 common shares at an average price of $1.91 per share during Q1 2024 under its authorized share repurchase plan. The company's remaining authorization for common share repurchases was $70.9 million as of March 31, 2024.
Outlook
In May 2024, Maiden LF and Maiden GF entered into a renewal rights transaction with AmTrust Nordic AB, a Swedish unit of AmTrust, which is expected to cover the majority of their primary business written in Sweden, Norway, and other Nordic countries. The company anticipates entering into additional renewal rights agreements with other AmTrust entities for certain business written by Maiden GF and Maiden LF in the United Kingdom and Ireland.These transactions are part of Maiden Holdings' broader plan to divest its IIS businesses, as the company evaluates the strategic value of Maiden LF and Maiden GF in relation to their ongoing growth and profitability prospects, regulatory capital requirements, and ability to create shareholder value in excess of the company's target return on capital levels. The company expects to enter into additional transactions to either sell or wind-up Maiden GF and Maiden LF during 2024.