Maiden Holdings sees improved net income and lower underwriting loss in Q1’24

Maiden Holdings Ltd., has posted its results for the first quarter of 2024, which includes a net income of $1.5 million, compared to a net loss of $11.3 million from the prior year period.

According to the firm, this improvement was due to higher total income from investment activities of $17.1 million seen in the quarter, which compares to the $10.5 million for the same period in 2023.

For Q1 2024, the firm posted lower underwriting loss of $7.5 million compared to an underwriting loss of $8.3 million in the same period in 2023.

Maiden Holdings stated that this quarter’s underwriting loss includes adverse prior year loss development of $6.6 million, compared to adverse prior year loss development of $3.7 million during Q1 2023.

Moreover, net premiums written (NPW) for Q1 2024 sat at $8.3 million, compared to $0.8 million reported for the prior year quarter. Net written premiums in Maiden’s AmTrust Reinsurance segment were $(0.5) million in this year’s first quarter.

These compare to net premiums of $(6.0) million for the same period in 2023 which included negative gross and net premiums written of $6.1 million due to the cancellation of cases in a certain program within Specialty Risk and Extended Warranty.

At the same time, the company’s net premiums earned increased by $3.4 million in the quarter, compared to the same period in 2022.

According to the firm, this was due to higher earned premiums for Specialty Risk business in the AmTrust Reinsurance segment and Diversified Reinsurance segment due to growth in Credit Life programs written by Maiden LF and Maiden GF.

Maiden Holdings also saw its net investment income in Q1 2024 decrease 19.3%, by $1.8 million, compared to the same period in 2023.

This change was primarily due to lower interest income earned on the company’s funds withheld balance with AmTrust in the first quarter of 2024 as loss reserves continued to be settled using the funds withheld receivable.

Commenting on the firm’s Q1 2024 results, 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.”

Haveron added: “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 recognized 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.”

“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 recognize and realize the significant deferred tax asset we have.”

The CEO also highlighted that its recently announced IIS renewal rights transaction with AmTrust should serve to further simplify the company’s balance sheet while ultimately reducing 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,” he added.

Haveron continued: “While our GAAP income statement continues to be impacted by adverse loss development, it’s important to note that much of this volatility is expected to be temporary as significant shares of the loss development reported are expected to be covered by our LPT/ADC Agreement with Cavello,”

“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.”

“As the benefits of the LPT/ADC Agreement begin to be amortized though our GAAP income statement, it reinforces why adjusted book value, which includes the $75.9 million deferred gain presently on the balance sheet, is a key metric in evaluating Maiden’s value. It’s also worth noting that under the provisions of the LPT/ADC Agreement, we still have an additional $79.1 million in available limit to absorb subject loss development should it occur in the future.”

He also explained: “As noted, our consolidated balance sheet at March 31, 2024 does not reflect $117.3 million or $1.17 per common share in net U.S. deferred tax assets which still maintains a full valuation allowance. It’s important to note that of $334.0 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 recognizing this asset, we believe the factors that will enable us to ultimately recognize these tax assets in the future, including our current strategic initiatives, continues to accumulate, particularly with our asset portfolio producing more current income.”

Haveron concluded: “Finally, during both the first quarter and in the second quarter via a 10b-5 trading plan implemented prior to March 31, 2024, we continued our long-term capital management strategy and repurchased 590,995 common shares at an average price per share of $2.01 under our share repurchase plan. We expect to continue a disciplined and prudent approach to share repurchases as part of this program, particularly in periods of share weakness relative to our book value.”

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