Maiden reports Q2 2019 loss

13-08-2019

Maiden Holdings has reported a second quarter 2019 net loss of $15.4 million, up on the net loss of $5.9 million it reported for the second quarter of 2018.

The non-GAAP operating loss was $22.0 million, compared with $18.5 million in the second quarter of 2018.

“Our balance sheet continued to stabilise in the second quarter and this improvement, combined with the strategic transactions announced on August 5, further advance Maiden’s recovery,” said Lawrence F. Metz, Maiden’s president and CO. “While work remains to further reduce expenses and return to operating profitability, we continue to make steps toward the objective of building shareholder value.”

Patrick J. Haveron, Maiden’s chief financial officer and chief operating officer added, “We expect our solvency ratios to continue to improve throughout 2019 and beyond, reflecting the cumulative effect of the strategic measures we have implemented to materially strengthen our capital position. Restoring a very strong capital position remains our primary objective and we continue to evaluate how to further advance our progress.”

On August 5, 2019, the Company announced it had entered into a series of strategic transactions which have materially improved its capital position. The transactions completed include:

  • A loss portfolio transfer and adverse development cover agreement (LPT/ADC) with Enstar Group pursuant to the previously announced master agreement;
  • A $330.7 million commutation agreement of certain workers’ compensation loss reserves to AmTrust Financial Services;
  • Entry into a post-termination endorsement with AmTrust to:
    • Enable operation of the LPT/ADC and supporting collateral agreements; and
    • Amend the program loss corridor between Maiden and AmTrust pursuant to the terminated Amended and Restated Quota Share Agreement between Maiden’s Bermuda operating company, Maiden Reinsurance and AmTrust International Insurance; and
  • Resolution with Enstar related to balances due under the sale of Maiden Reinsurance North America, which closed on December 27, 2018, including cancellation of the $25 million excess of loss reinsurance contract between Maiden Bermuda and Enstar on the MRNA loss reserves included in that transaction.

Maiden said that in the second quarter of 2019, gross premiums written were $2.1 million, compared to $521.5 million in the prior year quarter, primarily due to the termination of both quota share contracts in the AmTrust Reinsurance segment and the return of unearned premiums on certain lines covered by the Partial Termination Agreement with AmTrust. As previously reported, both terminations were effective January 1, 2019.

Net premiums earned were $134.0 million in the second quarter of 2019, compared to $504.4 million in the second quarter of 2018 due to the combined impact of the terminated quota share contracts within the AmTrust Reinsurance segment and non-renewals in Maiden Bermuda's European capital solutions business and a reduction in the German Auto programs produced by the Company's IIS unit within its diversified reinsurance segment.

During the second quarter of 2019, net investment income decreased modestly to $31.1 million from $34.3 million in the second quarter of 2018 largely due to the decline in average yield to 3.1 percent from 3.3 percent in the same period in 2018. The realised gains of $24.1 million for the three months ended June 30, 2019 were primarily due to sales of corporate bonds during the second quarter in anticipation of completing and funding the LPT/ADC with Enstar.

However, the company also announced that it made a net loss over the six months ended June 30, 2019 of $52.0 million compared to net income of $7.8 million for the same period in 2018.

According to Maiden Holdings this net decrease for the first half of 2019 was primarily due to the following:

  • Net loss from discontinued operations of $22.1 million compared to net income from discontinued operations of $18.2 million for the same period in 2018 largely as a result of the settlement and commutation agreement entered into by Maiden and Enstar on July 31, 2019 which caused a non-recurring net additional loss of $16.7 million to be recognised;
  • Net loss from continuing operations of $30.0 million compared to net income from continuing operations of $6.8 million for the same period in 2018 largely due to the following factors:
    • an underwriting loss of $81.9 million compared to $36.7 million in the same period in 2018. The deterioration in the underwriting result was principally due to the impact of:
      • higher initial loss ratios on current year premiums earned during the period within the AmTrust reinsurance segment (which excludes the terminated business under the partial termination amendment);
      • higher ceding commission payable of $14.1 million for the remaining in-force business immediately prior to January 1, 2019, which increased by five percentage points (excluding terminated business) and related unearned premium as of January 1, 2019 under the partial termination amendment with AmTrust; and
      • adverse prior year loss development of $33.3 million or 10.5 percentage points in the first half of 2019 compared to $38.0 million or 3.7 percentage points during the same period in 2018.

The unfavorable movements in results of operations were primarily offset by the following:

  • No dividends paid to preference shareholders for the six months ended June 30, 2019 compared to $17.1 million for the same period in 2018 as the company’s board of directors did not declare dividends on any of our preference shares during 2019; and
  • Realised gains on investment of $13.0 million for the six months ended June 30, 2019 compared to realised losses of $0.1 million for the same period in 2018.

During the six months ended June 30, 2019, gross premiums written were $(559.0) million compared to $1.14 billion for the same period in the prior year primarily due to the termination of both quota share contracts in the AmTrust Reinsurance segment and the return of unearned premiums on certain lines covered by the Partial Termination Agreement with AmTrust. Both terminations were effective January 1, 2019. Net premiums earned were $317.1 million during the six months ended June 30, 2019, compared to $1.02 billion for the same period in 2018 due to the combined impact of the terminated quota share contracts within the AmTrust Reinsurance segment as well as the reduction in the German Auto programs produced by the Company's IIS unit within its diversified reinsurance segment.

During the six months ended June 30, 2019, net investment income decreased modestly to $63.1 million from $67.1 million for the same period in 2018 largely due to the decline in average yield to 3.1 percent from 3. 3 percent for the same period in 2018. The realised gains of $13.0 million for the six months ended June 30, 2019 were primarily driven by sales of corporate bonds during the second quarter in anticipation of completing and funding the LPT/ADC with Enstar, partially offset by net investment losses realised on the non-cash transfer of corporate and other debt securities in the first quarter of 2019 related to the partial termination amendment with AmTrust and the conversion of a portion of reinsurance trust assets held as collateral into funds withheld receivable.

During the six months ended June 30, 2019, net loss and loss adjustment expenses decreased to $274.3 million from $723.2 million for the same period in 2018, primarily as a result of lower earned premiums within the AmTrust Reinsurance segment. During the six months ended June 30, 2019, the loss ratio was 86.1 percent compared to 70.4 percent reported for the same period in 2018, which increased primarily due to a significant change in the mix of business resulting from the Partial Termination Amendment with AmTrust. Prior year adverse loss development was $33.3 million for the first half of 2019, compared to $38.0 million for the same period in 2018.

 

Maiden Holdings, AmTrust, results, profit, Q2 2019

Bermuda Re