Maiden bounces back to profit
Specialty reinsurer Maiden Holdings took a step towards recovery as it turned a $1.5 million profit in the first quarter, bouncing back from a $11.3 million loss a year earlier.
The improved result was largely driven by improved net realized and unrealized investment gains, which improved from $1 million to $8.75 million, but the company also reduced its underwriting loss from $8.2 million to $7.5 million in the period.
Net premiums earned increased to $12.4 million from $9 million while losses rose to $11.6 million from $9.8 million.
Maiden agreed a loss portfolio transfer with Enstar subsidiary Cavello in 2019 and announced this week it was selling the renewal rights to it Scandinavian underwriting book.
Patrick J. Haveron, Maiden’s Chief Executive Officer, said: "The effects of our continued positive investment results and the stabilizing effects of our LPT/ADC Agreement led to an increase in our adjusted book value, which we believe represents Maiden's true economic value, to $3.24 per share as of March 31, 2024.
"The continued improvement in our investment performance was principally the result of higher net investment gains on our alternative asset portfolio, primarily in the private equity asset class where unrealized gains of $7.9 million were recognised across a series of investments. During the first quarter of 2024, our alternative asset portfolio produced a return of 3.4%, which continues to be well above our benchmark cost of debt capital on an annualized basis. As these results continue to increasingly demonstrate, we believe our alternative investment portfolio remains well positioned to achieve its targeted longer-term returns."
eE added: "We continue to actively evaluate our strategies as we look to build a more consistent base of revenue and profits while leveraging our experience in insurance and reinsurance markets, including through fee-based and distribution channels in the insurance and reinsurance industry. Our active pursuit of these paths should further enable us to ultimately recognise and realise the significant deferred tax asset we have.
"Our recently announced IIS renewal rights transaction with AmTrust should serve to further simplify our balance sheet while ultimately reducing our operating expenses by up to $6 million over the next 12 to 24 months. As we evaluate these options and move forward, we have limited our commitments to new alternative investment opportunities."
Haveron said the company's income statement "continues to be impacted by adverse loss development", but said "significant shares of the loss development reported are expected to be covered by our LPT/ADC Agreement with Cavello".
He added: "During the first quarter ended March 31, 2024, nearly 76% of the total reported prior year loss development is expected to be covered by the LPT/ADC Agreement and is expected to ultimately return over time to Maiden as future GAAP income, subject to certain thresholds in the LPT/ADC Agreement and the applicable GAAP accounting rules. We continue to expect to meet the thresholds to begin recoveries under the LPT/ADC Agreement late in 2024."
He said the company had $79.1 million in available limit to absorb subject loss development should it occur in the future.
"As noted, our consolidated balance sheet at March 31, 2024 does not reflect $117.3 million or $1.17 per common share in net US deferred tax assets which still maintains a full valuation allowance," he said. "It’s important to note that of $334 million in net operating loss carryforwards that we hold, approximately $151.2 million or 45.3% of these loss carryforwards have no expiry date. Despite the recent adverse reserve development which has delayed the timing related to ultimately recognising this asset, we believe the factors that will enable us to ultimately recognise these tax assets in the future, including our current strategic initiatives, continues to accumulate, particularly with our asset portfolio producing more current income."
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