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Maiden Holdings (MHLD) Q2 Loss Widens Y/Y, Revenues Down

Zacks Equity Research

Maiden Holdings, Ltd . MHLD reported operating loss per share of 27 cents in the second quarter of 2019, wider than a loss of 22 cents incurred in the year-ago quarter.

Operating revenues dropped 77% year over year to $166 million, attributable to lower net premiums earned, other insurance revenues and net investment income.

Quarter in Detail

In the quarter under review, gross premiums declined to $2.1 million from $521.5 million due to 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.

Net investment income decreased 9.3% to $31.1 million attributable to lower yield.

Total expenses dropped 66.4% year over year to $184.1 million, owing to lower net loss and loss adjustment expenses, commission costs, and other acquisition costs as well as general and administrative expenses.

Net loss and loss adjustment expenses decreased 67.1% to $121.6 million, attributable to lower earned premiums within the AmTrust Reinsurance segment.

The company incurred an underwriting loss of $39.1 million, wider than the year-ago quarterly net loss of $32 million. Combined ratio deteriorated 2850 basis points (bps) year over year to 136.6%.

Maiden Holdings, Ltd. Price, Consensus and EPS Surprise

Maiden Holdings, Ltd. Price, Consensus and EPS Surprise

Maiden Holdings, Ltd. price-consensus-eps-surprise-chart | Maiden Holdings, Ltd. Quote

Segment Result

Diversified Reinsurance : Net premiums earned dropped 71% to $8.7 million. Underwriting income was $0.5 million against loss of $0.1 million in the prior-year quarter. Combined ratio improved 270 bps to 97.9%.

AmTrust Reinsurance : Net premiums earned were negative $9.1 million against $491.3 million in the year-ago quarter. Underwriting loss was $39.6 million, wider than loss of $31.9 million in the year-earlier quarter. Combined ratio deteriorated 2880 bps year over year to 135.5%.

Other : Underwriting income was $0.02 million in the second quarter.

Financial Update

Maiden Holdings exited the quarter with total assets of $4.6 billion compared with $5.3 billion at the end of 2018. Cash and cash equivalents as of Jun 30, 2019 was $464.2 million, up from $331 million at end of 2018.

The company’s net senior notes totaled $254.8 million, slightly down from $264.7 million at 2018 end level.

Shareholders’ equity of $590.6 billion in the second quarter of 2019 was up from $554.3 million at the end of 2018.

As of Jun 30, 2019, book value per share was $1.51, up 39.8% from the 2018-end level.

Operating return on equity was negative 72.2% compared with negative 11.2% in the year-ago quarter.

Business Updates

On Aug 5, 2019, the company entered into a series of strategic transactions, which have materially improved its capital position. The agreement constitutes a loss portfolio transfer and adverse development cover agreement (LPT/ADC) with Enstar Group Limited pursuant to the previously announced Master Agreement; a $330.7 million commutation agreement of certain workers’ compensation loss reserves to AmTrust Financial Services; and 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. It also includes resolution with Enstar related to balances due under the sale of Maiden Reinsurance North America.

Performance of Other P&C Insurers

Second-quarter earnings of The Progressive Corporation PGR, CNA Financial Corporation CNA and RLI Corp. RLI beat the respective Zacks Consensus Estimate while that of The Travelers Companies, Inc. TRV missed expectations.

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