Maiden Holdings, Ltd. (NASDAQ:MHLD) ("Maiden" or the "Company")
today reported first quarter 2020 net income of $20.9 million or
$0.25 per diluted common share, compared to a net loss of $36.6
million or $0.44 per diluted common share in the first quarter of
2019.
Non-GAAP operating earnings(5) were $3.1 million or $0.04 per
diluted common share for the three months ended March 31, 2020,
compared to a non-GAAP operating loss of $27.6 million or $0.33 per
diluted common share for the same period in 2019.
Maiden's book value per common share(1) was $0.24 at March 31,
2020 compared to $0.51 at December 31, 2019. On a non-GAAP basis,
adjusted for the unamortized deferred gain on retroactive
reinsurance recognized as of March 31, 2020 of $113.0 million, the
adjusted book value per common share(2) was $1.59 at March 31,
2020. Book value per common share on both a GAAP and non-GAAP basis
was adversely affected by $44.1 million or $0.53 per share in
unrealized losses on fixed income investments during the first
quarter 2020, largely the result of elevated volatility in the
financial markets brought about by the global COVID-19
pandemic.
Commenting on the first quarter of 2020 financial results,
Lawrence F. Metz, Maiden’s President and Co-Chief Executive Officer
said, "We are pleased to report our first quarterly profit in two
years. As our loss experience continues to moderate and we continue
to reduce our operating expenses, we remain focused on sustaining
and increasing Maiden’s profitability. We are fortunate in these
turbulent times that the application of government restrictions in
the United States, Bermuda and Europe have not substantially
affected our operations. We believe that we have immaterial
exposure to claims from the COVID-19 pandemic, and we have taken
all necessary actions to ensure the safety and security of our
employees as our contingency plans have allowed us to operate
effectively in a virtual environment."
Patrick J. Haveron, Maiden’s Co-Chief Executive Officer and
Chief Financial Officer added, "We are pleased to have completed
our first quarter on a strong note after the re-domestication of
Maiden Reinsurance Ltd. from Bermuda to Vermont. We were able to
capture realized investment gains ahead of the market volatility in
March which both contributed to the strong quarterly result and
reduced the impact to book value from COVID-19 related market
volatility. Prior year loss experience was benign during the first
quarter and while the loss development of our run-off portfolio
will require further maturity to fully emerge, recent trends have
been less adverse, although there is no guarantee these trends will
persist. We remain comfortable that the amount of limit available
in our LPT/ADC with Enstar is sufficient and with nearly $2.6
billion in investable assets and a strong capital position now
restored, we are working to identify strategies to deploy those
assets and capital to create value for our shareholders.”
Consolidated Results for the Quarter
Ended March 31, 2020
Net income for the three months ended March 31, 2020 was $20.9
million compared to a net loss of $36.6 million for the same period
in 2019. The net improvement in results for the three months ended
March 31, 2020 compared to the same period in 2019 was primarily
due to the following:
- net income from continuing operations of $20.9 million compared
to net loss from continuing operations of $33.9 million for the
same period in 2019 largely due to the following factors:
- underwriting loss(4) of $3.7 million compared to $42.7 million
in the same period in 2019. The reduction in the underwriting loss
was due to:
- the impact of lower loss ratios combined with lower current
year premiums earned during the three months ended March 31, 2020
compared to the same period in 2019; and
- favorable prior year loss development of $0.5 million in the
first quarter of 2020 compared to adverse prior year loss
development of $7.3 million during the same period in 2019 which
had been incurred primarily within the AmTrust Reinsurance
segment.
- realized gains on investment of $11.0 million for the three
months ended March 31, 2020 compared to realized losses of $11.1
million for the same period in 2019; and
- foreign exchange and other gains of $8.2 million for the three
months ended March 31, 2020 compared to foreign exchange and other
gains of $5.0 million for the same period in 2019.
- No net income or loss from discontinued operations for the
three months ended March 31, 2020 compared to a net loss from
discontinued operations of $2.7 million for the same period in
2019.
Net premiums written for the three months ended March 31, 2020
were $10.4 million compared to net premiums written of $(561.5)
million in the same respective period in 2019. Premiums written in
the Diversified Reinsurance segment decreased by $4.6 million or
30.6% for the three months ended March 31, 2020 compared to the
same period in 2019 due to lower premiums written in German Auto
programs within our IIS business. There were no new written
premiums within the AmTrust Reinsurance segment due to the
termination of both the AmTrust Quota Share and the European
Hospital Liability Quota Share effective January 1, 2019. For the
three months ended March 31, 2019, the negative premiums written
were primarily the result of the Partial Termination Amendment
which resulted in Maiden Reinsurance Ltd. (“Maiden Reinsurance”)
returning approximately $648.0 million in unearned premium to
AmTrust International Insurance, Ltd., or $436.8 million net of
applicable ceding commission and brokerage.
Net premiums earned decreased by $151.9 million or 83.0% for the
three months ended March 31, 2020 compared to the same period in
2019 due to the combined impact of the terminated quota share
contracts within the AmTrust Reinsurance segment, non-renewals in
Maiden Reinsurance's European Capital Solutions business and a
reduction in the German Auto programs produced by our IIS unit
within its Diversified Reinsurance segment.
Net investment income decreased by $14.1 million or 43.9% for
the three months ended March 31, 2020 compared to the same
respective period in 2019, primarily due to the decline in average
investable assets of 34.4% in those same periods. The decline in
investable assets is largely due to the cessation of active
reinsurance underwriting and other initiatives resulting from the
Strategic Review that was commenced in 2018 and has been
responsible for significant negative operating cash flows as we
run-off our existing reinsurance liabilities. Lower investment
income was also impacted by the decline in average book yields to
2.7% for the three months ended March 31, 2020 compared to 3.1% for
the same period in 2019. Net realized gains on investment were
$11.0 million for the three months ended March 31, 2020, compared
to net realized losses of $11.1 million for the same respective
period in 2019. The realized gains for the three months ended March
31, 2020 were primarily due to sales of corporate bonds during the
first quarter of 2020 for the settlement of claim payments to
AmTrust.
Net loss and LAE decreased by $131.6 million during the three
months ended March 31, 2020 compared to the same respective period
in 2019 largely due to the termination of the AmTrust Reinsurance
quota share agreements effective January 1, 2019. Net loss and LAE
for the first quarter of 2020 was impacted by net favorable prior
year reserve development of $0.5 million compared to net adverse
prior year reserve development of $7.3 million during the same
period in 2019. Commission and other acquisition expenses decreased
by $57.6 million or 82.8% for the three months ended March 31,
2020, compared to the same respective period in 2019 due to
significantly lower earned premiums in both of our reportable
segments. The commission and other acquisition expense in the first
quarters of 2020 and 2019 includes $0.9 million and $7.7 million,
respectively of additional ceding commission agreed under the
Partial Termination Amendment.
Total general and administrative expenses decreased by $8.1
million, or 48.6% for the three months ended March 31, 2020,
compared to the same period in 2019 largely due to a continued
decrease in salary, benefits and other corporate expenses
associated with the Strategic Review and related headcount
reductions since 2018. The Company estimates that it incurred
operating expenses of approximately $0.7 million during the three
months ended March 31, 2020 which it believes will not recur in
future periods.
Non-GAAP Operating Results for the
three months ended March 31, 2020
Non-GAAP operating earnings(5) was $3.1 million or $0.04 per
diluted common share for the three months ended March 31, 2020,
compared to a non-GAAP operating loss of $27.6 million or $(0.33)
per diluted common share for the same period in 2019.
In addition to other adjustments, management has adjusted the
GAAP net operating loss and underwriting results by recognizing the
unamortized deferred gain arising from the LPT/ADC Agreement which
is fully recoverable from Cavello to show the ultimate economic
benefit of the LPT/ADC Agreement to Maiden. The amount recognized
as an unamortized deferred gain liability pursuant to this
agreement was $113.0 million as of March 31, 2020 remained
unchanged from December 31, 2019.
For the three months ended March 31, 2020, the non-GAAP
operating results are primarily the result of underwriting results
not covered by the LPT/ADC Agreement, specifically the run-off of
AmTrust quota share business with losses occurring after December
31, 2018 (including the additional ceding commission paid under the
Partial Termination Amendment) as well as claims related to the
European Hospital Liability Quota Share. In addition, as previously
noted, the Company estimates that it incurred operating expenses of
approximately $0.7 million during the three months ended March 31,
2020, which it believes will not recur in future periods.
Similar to the reported GAAP result, the improvement in the
non-GAAP operating results for the three months ended March 31,
2020 compared to the same period in 2019 primarily reflects the
improved underwriting results described above.
Quarterly Report on Form 10-Q for the
Three Months Ended March 31, 2020 and Other Financial
Matters
The Company’s Quarterly Report on Form 10-Q for the three months
ended March 31, 2020 was filed with the U.S. Securities and
Exchange Commission on May 15, 2020. Additional information on the
matters reported in this news release along with other required
disclosures including risk factors related to COVID-19 can be found
in that filing.
Total assets were $3.3 billion at March 31, 2020, compared to
$3.6 billion at December 31, 2019. Shareholders' equity was $485.0
million at March 31, 2020, compared to $507.7 million at December
31, 2019. Adjusted shareholders' equity(2) was $597.9 million at
March 31, 2020, compared to adjusted shareholders' equity of $620.7
million at December 31, 2019 reflecting the unamortized deferred
gain on retroactive reinsurance of $113.0 million.
The Company has discontinued the presentation of certain
non-GAAP measures such as combined ratio and its related components
in this news release, as it believes that as the run-off of its
reinsurance portfolios progresses, such ratios are increasingly not
meaningful and of less value to readers as they evaluate the
financial results of the Company. The Company has, for the time
being, continued to utilize such non-GAAP measures on a quarterly
basis in its Quarterly Report on Form 10-Q for the three months
ended March 31, 2020.
Quarterly Dividends
The Company's Board of Directors did not authorize any quarterly
dividends related to either its common shares or any series of its
preferred shares.
About Maiden Holdings,
Ltd.
Maiden Holdings, Ltd. is a Bermuda-based holding company formed
in 2007.
(1)(2)(4)(5) Please see the Non-GAAP Financial Measures table
for additional information on these non-GAAP financial measures and
reconciliation of these measures to GAAP measures.
Special Note about Forward Looking
Statements
Certain statements in this press release, other than purely
historical information, including estimates, projections,
statements relating to the Company’s business plans, objectives and
expected operating results and the assumptions upon which those
statements are based are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995,
Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended. These
forward-looking statements include general statements both with
respect to the Company and the insurance industry and generally are
identified with the words "anticipate", "believe", "expect",
"predict", "estimate", "intend", "plan", "project", "seek",
"potential", "possible", "could", "might", "may", "should", "will",
"would", "will be", "will continue", "will likely result" and
similar expressions. In light of the risks and uncertainties
inherent in all forward-looking statements, the inclusion of such
statements in this press release should not be considered as a
representation by the Company or any other person that the
Company’s objectives or plans or other matters described in any
forward-looking statement will be achieved. These statements are
based on current plans, estimates, assumptions and expectations.
Actual results may differ materially from those projected in such
forward-looking statements and therefore, you should not place
undue reliance on them. Important factors that could cause actual
results to differ materially from those in such forward-looking
statements are set forth in Item 1A "Risk Factors" in the Company’s
Annual Report on Form 10-K for the year ended December 31, 2019.
Circumstances caused by the COVID-19 pandemic are complex,
uncertain and rapidly evolving. We therefore may not be able to
accurately predict the longer-term effects that the COVID-19
pandemic may have on our financial condition or results of
operations. To the extent the COVID-19 pandemic adversely affects
our financial condition or results of operations, it may also have
the effect of heightening additional risks described in Part I,
Item 1A, Risk Factors, of our Annual Report on Form 10-K for the
year ended December 31, 2019.
The Company cautions that the list of important risk factors in
its Quarterly Report on Form 10-Q for the three months ended March
31, 2020 is not intended to be and is not exhaustive. The Company
undertakes no obligation to update or revise publicly any
forward-looking statements, whether as a result of new information,
future events or otherwise, except as may be required by law, and
all subsequent written and oral forward-looking statements
attributable to the Company or individuals acting on the Company’s
behalf are expressly qualified in their entirety by this paragraph.
If one or more risks or uncertainties materialize, or if the
Company’s underlying assumptions prove to be incorrect, the
Company’s actual results may vary materially from what was
projected. Any forward-looking statements in this press release
reflect the Company’s current view with respect to future events
and are subject to these and other risks, uncertainties and
assumptions relating to the Company’s operations, results of
operations, growth, strategy and liquidity. Readers are cautioned
not to place undue reliance on the forward-looking statements which
speak only as of the dates of the documents in which such
statements were made.
Maiden Holdings, Ltd. Consolidated Balance Sheets
(in thousands (000's), except per share data) March 31,
2020 December 31, 2019 (Unaudited)
(Audited) Assets Fixed maturities,
available-for-sale, at fair value (amortized cost 2020: $1,530,689;
2019: $1,813,426)
$
1,508,544
$
1,835,518
Other investments
34,088
31,748
Total investments
1,542,632
1,867,266
Cash and cash equivalents
60,059
48,197
Restricted cash and cash equivalents
117,903
59,081
Accrued investment income
19,897
18,331
Reinsurance balances receivable, net
14,560
12,181
Reinsurance recoverable on unpaid losses
620,882
623,422
Loan to related party
167,975
167,975
Deferred commission and other acquisition expenses, net
69,109
77,356
Funds withheld receivable
696,076
684,441
Other assets
12,664
9,946
Total Assets
$
3,321,757
$
3,568,196
Liabilities and Equity Liabilities Reserve for loss
and loss adjustment expenses
$
2,249,045
$
2,439,907
Unearned premiums
197,094
220,269
Deferred gain on retroactive reinsurance
112,950
112,950
Accrued expenses and other liabilities
22,708
32,444
Senior notes - principal amount
262,500
262,500
Less: unamortized debt issuance costs
7,538
7,592
Senior notes, net
254,962
254,908
Total Liabilities
2,836,759
3,060,478
Commitments and Contingencies
Equity Preference Shares
465,000
465,000
Common shares
890
882
Additional paid-in capital
751,862
751,327
Accumulated other comprehensive (loss) income
(26,288)
17,836
Accumulated deficit
(674,933)
(695,794)
Treasury shares, at cost
(31,533)
(31,533)
Total Equity
484,998
507,718
Total Liabilities and Equity
$
3,321,757
$
3,568,196
Book value per common share(1)
$
0.24
$
0.51
Common shares outstanding
83,969,991
83,148,458
Maiden Holdings, Ltd. Consolidated Statements of
Income (in thousands (000's), except per share data)
(Unaudited)
For the Three Months Ended
March 31,
2020
2019
Revenues:
Gross premiums written
$
11,734
$
(561,139)
Net premiums written
$
10,372
$
(561,530)
Change in unearned premiums
20,843
744,632
Net premiums earned
31,215
183,102
Other insurance revenue
408
812
Net investment income
17,964
32,022
Net realized gains (losses) on investment
11,038
(11,101)
Total other-than-temporary impairment losses
(1,506)
-
Portion of loss recognized in other comprehensive income (loss)
-
-
Net impairment losses recognized in earnings
(1,506)
-
Total revenues
59,119
204,835
Expenses: Net loss and loss adjustment expenses
21,086
152,689
Commission and other acquisition expenses
11,973
69,617
General and administrative expenses
8,550
16,619
Total expenses
41,609
238,925
Other expenses: Interest and
amortization expenses
(4,831)
(4,829)
Foreign exchange and other gains
8,197
4,979
Total other expenses
3,366
150
Income (loss) before income taxes
20,876
(33,940)
Less: income tax expense (benefit)
15
(38)
Net income (loss) from continuing operations
20,861
(33,902)
Loss from discontinued operations, net of income tax
-
(2,734)
Net income (loss)
$
20,861
$
(36,636)
Basic and diluted earnings (loss) from continuing
operations per share attributable to Maiden common
shareholders(9)
$
0.25
$
(0.41)
Basic and diluted loss from discontinued operations per share
attributable to Maiden common shareholders(9)
-
(0.03)
Basic and diluted earnings (loss) per share attributable to
Maiden common shareholders(9)
$
0.25
$
(0.44)
Annualized return on average common equity
267.6%
-142.5%
Weighted average number of common shares - basic
and diluted(9)
83,256,223
82,965,156
Maiden Holdings, Ltd. Supplemental
Financial Data - Segment Information (in thousands
(000's)) (Unaudited) For
the Three Months Ended March 31, 2020
Diversified
Reinsurance
AmTrust
Reinsurance
Other
Total
Gross premiums written
$
11,734
$
-
$
-
$
11,734
Net premiums written
$
10,372
$
-
$
-
$
10,372
Net premiums earned
$
12,531
$
18,684
$
-
$
31,215
Other insurance revenue
408
-
-
408
Net loss and loss adjustment expenses ("loss and LAE")
(7,041)
(14,045)
-
(21,086)
Commissions and other acquisition expenses
(4,979)
(6,994)
-
(11,973)
General and administrative expenses(3)
(1,613)
(644)
-
(2,257)
Underwriting loss(4)
$
(694)
$
(2,999)
$
-
$
(3,693)
Reconciliation to net income from continuing
operations Net investment income and realized gains on
investment
29,002
Total other-than-temporary impairment losses
(1,506)
Interest and amortization expenses
(4,831)
Foreign exchange and other gains
8,197
Other general and administrative expenses(3)
(6,293)
Income tax expense
(15)
Net income from continuing operations
$
20,861
For the Three Months Ended March 31, 2019
Diversified
Reinsurance
AmTrust
Reinsurance
Other
Total
Gross premiums written
$
15,338
$
(576,477)
$
-
$
(561,139)
Net premiums written
$
14,947
$
(576,477)
$
-
$
(561,530)
Net premiums earned
$
25,292
$
157,810
$
-
$
183,102
Other insurance revenue
812
-
-
812
Net loss and LAE
(14,391)
(138,070)
(228)
(152,689)
Commissions and other acquisition expenses
(9,261)
(60,356)
-
(69,617)
General and administrative expenses(3)
(3,031)
(1,266)
-
(4,297)
Underwriting loss(4)
$
(579)
$
(41,882)
$
(228)
$
(42,689)
Reconciliation to net loss from continuing operations
Net investment income and realized losses on investment
20,921
Interest and amortization expenses
(4,829)
Foreign exchange and other gains
4,979
Other general and administrative expenses(3)
(12,322)
Income tax benefit
38
Net loss from continuing operations
$
(33,902)
Maiden Holdings, Ltd. Non - GAAP Financial
Measures (in thousands (000's), except per share data)
(Unaudited)
For the Three Months Ended
March 31,
2020
2019
Non-GAAP operating earnings (loss)(5)
$
3,132
$
(27,552)
Non-GAAP basic and diluted operating earnings (loss) per share
attributable to Maiden common shareholders
$
0.04
$
(0.33)
Annualized non-GAAP operating return on average common
equity(6)
40.2%
-107.2%
Reconciliation of net income (loss) to non-GAAP
operating earnings (loss): Net income (loss)
$
20,861
$
(36,636)
Add (subtract) Net realized (gains) losses on investment
(11,038)
11,101
Total other-than-temporary impairment losses
1,506
-
Foreign exchange and other gains
(8,197)
(4,979)
Loss from discontinued operations, net of income tax
-
2,734
Loss from NGHC Quota Share run-off
-
228
Non-GAAP operating earnings (loss)(5)
$
3,132
$
(27,552)
Weighted average number of common shares - basic
and diluted
83,256,223
82,965,156
Reconciliation of diluted earnings (loss) per
share attributable to Maiden common shareholders to non-GAAP
diluted operating earnings (loss) per share attributable to Maiden
common shareholders: Diluted earnings (loss) per share
attributable to Maiden common shareholders
$
0.25
$
(0.44)
Add (subtract) Net realized (gains) losses on
investment
(0.13)
0.13
Total other-than-temporary impairment losses
0.02
-
Foreign exchange and other gains
(0.10)
(0.06)
Loss from discontinued operations, net of income tax
-
0.03
Loss from NGHC Quota Share run-off
-
0.01
Non-GAAP diluted operating earnings (loss) per share
attributable to Maiden common shareholders
$
0.04
$
(0.33)
March 31, 2020
December 31, 2019
Reconciliation of total shareholders' equity to adjusted
shareholders' equity: Total Shareholders’ Equity
$
484,998
$
507,718
Unamortized deferred gain on retroactive reinsurance
112,950
112,950
Adjusted shareholders' equity(2)
$
597,948
$
620,668
Reconciliation of book value per common share to
adjusted book value per common share: Book value per
common share
$
0.24
$
0.51
Unamortized deferred gain on retroactive reinsurance
1.35
1.36
Adjusted book value per common share(2)
$
1.59
$
1.87
Maiden Holdings, Ltd. Non - GAAP Financial
Measures (in thousands (000's), except per share data)
(Unaudited)
March 31, 2020
December 31, 2019
Investable assets: Total investments
$
1,542,632
$
1,867,266
Cash and cash equivalents
60,059
48,197
Restricted cash and cash equivalents
117,903
59,081
Loan to related party
167,975
167,975
Funds withheld receivable
696,076
684,441
Total investable assets(7)
$
2,584,645
$
2,826,960
March 31, 2020
December 31, 2019
Capital: Preference shares
$
465,000
$
465,000
Common shareholders' equity
19,998
42,718
Total shareholders' equity
484,998
507,718
2016 Senior Notes
110,000
110,000
2013 Senior Notes
152,500
152,500
Total capital resources(8)
$
747,498
$
770,218
(1) Book value per common share is calculated using
common shareholders’ equity (shareholders' equity excluding the
aggregate liquidation value of our preference shares) divided by
the number of common shares outstanding. (2) Adjusted Total
Shareholders' Equity and Adjusted Book Value per Common Share:
Management has adjusted GAAP shareholders' equity by adding the
unamortized deferred gain on retroactive reinsurance arising from
the LPT/ADC Agreement relating to losses incurred subject to that
agreement to shareholders' equity. As a result, by virtue of this
adjustment, management has also computed the Adjusted Book Value
per Common Share. The deferred gain represents amounts fully
recoverable from Cavello and management believes adjusting for this
shows the ultimate economic benefit of the LPT/ADC Agreement. We
believe reflecting the economic benefit of this retroactive
reinsurance agreement is helpful for understanding future trends in
our operations, which will improve shareholders' equity over the
settlement period. (3) Underwriting related general and
administrative expenses is a non-GAAP measure and includes expenses
which are segregated for analytical purposes as a component of
underwriting loss. (4) Underwriting loss is a non-GAAP
measure and is calculated as net premiums earned plus other
insurance revenue less net loss and LAE, commission and other
acquisition expenses and general and administrative expenses
directly related to underwriting activities. Management believes
that this measure is important in evaluating the underwriting
performance of the Company and its segments. This measure is also a
useful tool to measure the profitability of the Company separately
from the investment results and is also a widely used performance
indicator in the insurance industry. (5) Non-GAAP operating
earnings (loss) is a non-GAAP financial measure defined by the
Company as net income (loss) excluding realized investment gains
and losses, total other-than-temporary impairment losses, foreign
exchange and other gains and losses, loss from discontinued
operations, net of income tax and income (loss) from NGHC Quota
Share run-off and should not be considered as an alternative to net
income (loss). The Company's management believes that non-GAAP
operating earnings (loss) is a useful indicator of trends in the
Company's underlying operations. The Company's measure of non-GAAP
operating earnings (loss) may not be comparable to similarly titled
measures used by other companies. (6) Non-GAAP operating
return on average common equity is a non-GAAP financial measure.
Management uses non-GAAP operating return on average common
shareholders' equity as a measure of profitability that focuses on
the return to common shareholders. It is calculated using non-GAAP
operating earnings (loss) divided by average common shareholders'
equity. (7) Investable assets is the total of the Company's
investments, cash and cash equivalents, loan to a related party and
funds withheld receivable. (8) Total capital resources is
the sum of the Company's principal amount of debt and shareholders'
equity. (9) During a period of loss, the basic weighted
average common shares outstanding is used in the denominator of the
diluted loss per common share computation as the effect of
including potential dilutive shares would be anti-dilutive.
View source
version on businesswire.com: https://www.businesswire.com/news/home/20200515005582/en/
Sard Verbinnen & Co. Maiden-SVC@sardverb.com
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