Maiden Holdings rebounds from loss with strong Q1 earnings

Maiden Holdings rebounds from loss with strong Q1 earnings | Insurance Business New Zealand

Reinsurance

Maiden Holdings rebounds from loss with strong Q1 earnings

Operational revamps pave the way

Reinsurance

By
Mav Rodriguez

In a notable shift from its financial trajectory last year, Maiden Holdings revealed a net income of $1.5 million for the first quarter ending March 31. This represented a reversal from the $11.3 million net loss reported in the corresponding quarter of 2023.

The company recorded a significant rise in net premiums written, totaling $8.3 million compared to just $0.8 million in the first quarter of 2023. Further financial improvements were observed across various metrics, including net investment income, adjusted book value, net premiums earned, and total revenues.

In an ongoing strategic overhaul of its International Insurance Services (IIS) business, Maiden executed a renewal rights transaction with AmTrust Nordic AB, a Swedish subsidiary of AmTrust Financial Services, Inc., primarily affecting its operations in Nordic countries. Similar agreements are expected to be secured for the company’s business in the United Kingdom and Ireland.

Maiden CEO Patrick J. Haveron highlighted the positive outcomes of the company’s investments and the stabilizing impact of a specific loss portfolio transfer/adverse development cover (LPT/ADC) agreement.

“The effects of our continued positive investment results and the stabilising effects of our 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 said.

The LPT/ADC agreement with Cavello Bay Reinsurance Ltd played a crucial role in this progress. Haveron mentioned that the improved investment performance was primarily due to higher net investment gains on the company’s alternative asset portfolio, particularly in the private equity sector. The portfolio yielded a 3.4% return in the first quarter, surpassing the annualized cost of debt capital.

“As these results continue to increasingly demonstrate, we believe our alternative investment portfolio remains well positioned to achieve its targeted longer-term returns,” Haveron said.

Maiden continues to refine its strategies to enhance revenue and profit consistency while leveraging its expertise in the insurance and reinsurance markets. These efforts include exploring fee-based and distribution channels within the industry. For example, the recent IIS transaction with AmTrust is expected to simplify Maiden’s balance sheet and potentially reduce operating expenses by up to $6 million over the next one to two years.

“As we evaluate these options and move forward, we have limited our commitments to new alternative investment opportunities,” Haveron said.

Although there are ongoing challenges in the GAAP income statement due to adverse loss development, the company expects much of this volatility to be temporary. Nearly 76% of the reported prior year loss development is anticipated to be covered by the LPT/ADC agreement, with expected recoveries to commence later in 2024.

Maiden’s adjusted book value remains a crucial metric, incorporating a $75.9 million deferred gain currently on the balance sheet. Additionally, the company holds significant net operating loss carryforwards, with a substantial portion having no expiry date. Despite delays in recognizing certain assets due to adverse reserve developments, strategic initiatives continue to build, aiming to optimize future recognition of these tax assets.

In the first and second quarters of 2024, Maiden pursued its long-term capital management strategy, repurchasing 590,995 common shares at an average price of $2.01 per share under its share repurchase plan.

“We expect to continue a disciplined and prudent approach to share repurchases as part of this programme, particularly in periods of share weakness relative to our book value,” Haveron said.