Maiden CEO has 'comfort' reinsurer has addressed adverse loss development

09-08-2017

As Bermuda reinsurer Maiden Holdings slipped into a loss in the second quarter of 2017, Art Raschbaum, chief executive of Maiden, moved to address the issue by stressing the company has taken action on several fronts.

Raschbaum explained the areas in which adverse loss development had occurred, which include casualty facultative business, but said he had comfort that the company had addressed this issue.

“The emergence of adverse loss development in both of our key operating segments has impacted our second quarter 2017 results,” Raschbaum said. “We do not believe that the development observed in the quarter is analogous to the trend observed across our portfolio over recent quarters which specifically emanated from elevated commercial auto liability frequency and severity from the 2011-2014 underwriting years, a phenomenon which has plagued many in the industry.

“While the AmTrust Reinsurance segment adverse development is relatively modest in the context of the overall historical portfolio assumed, as we have committed to in the past, it is our practice to respond to confirmed adverse development promptly.

“In response to observed elevated claims activity which we noted in our first quarter earnings call, Maiden’s audit activity has confirmed claims operational changes in AmTrust’s US small commercial lines business which are believed to have contributed to a portion of the increased emergence in related casualty lines. We have however increased our reserves in these lines in the quarter in response to elevated severity in specific jurisdictions.

“In the Diversified Reinsurance segment, adverse development was observed in the segment’s casualty facultative business and from a small number of treaty accounts. Despite the adverse development in the quarter, year-to-date treaty commercial auto which has been the source of significant development over many recent quarters, has been benign, giving us increasing comfort that we have addressed this issue.

“In the quarter, Maiden also experienced elevated non-cat property loss activity in its Diversified Reinsurance segment. As we have observed in prior quarters, the most recent underwriting years continue to perform within expectations. Despite the underwriting results, we did benefit from strong investment income, up 14.7 percent from the prior year period driven by increased investable assets. Absent adverse development, this will improve both return on equity and operating results in future quarters.”

Maiden made a loss of $22.4 million compared with a profit of $30.9 million in the second quarter of 2016. It made an operating loss of $12.5 million in the period compared with a $28.4 million profit a year earlier.

Its combined ratio also soared in the period, reaching 105.8 percent compared with 98.6 percent in the second quarter of 2016. Its Diversified Reinsurance segment’s combined ratio was a very high 112.9 percent in the second quarter of 2017 compared to 103.4 percent in the second quarter of 2016.

The company enjoyed some growth. Its gross premiums written increased by 2.5 percent to $705.2 million in the quarter compared with $688.3 million in the second quarter of 2016.

Its gross premiums written in its diversified reinsurance segment, decreased by 14.6 percent, however, to $140.8 million primarily due to the commutation of a single large account and the return of the unearned premium reserve.

Maiden Holdings, Second quarter 2017 results, Art Raschbaum, AmTrust Reinsurance, Bermuda, North America

Bermuda Re