Maiden Holdings, Ltd. Announces First Quarter 2022 Financial Results

PRESS RELEASE

Maiden Holdings, Ltd. Announces First Quarter 2022 Financial Results

PEMBROKE, Bermuda, May 10, 2022 - Maiden Holdings, Ltd. (NASDAQ: MHLD) ("Maiden" or the "Company") today reported first quarter 2022 net income available to Maiden common shareholders of $1.6 million or $0.02 per diluted common share compared to $71.7 million or $0.83 per diluted common share in the first quarter of 2021.

Non-GAAP operating loss(5)was $6.9 million or $0.08 per diluted common share for the first quarter of 2022 compared to non-GAAP operating earnings of $47.3 million or $0.55 per diluted common share for the same period in 2021.

Maiden's book value per common share(1)was $2.47 at March 31, 2022 compared to $2.60 at December 31, 2021. On a non-GAAP basis, adjusted for the unamortized deferred gain on ceded retroactive reinsurance of $44.9 million at March 31, 2022, the Company's adjusted book value per common share(2)was $2.99 at March 31, 2022.

Commenting on the first quarter of 2022 financial results, Patrick J. Haveron and Lawrence F. Metz, Maiden's Co-Chief Executive Officers stated, "Positive progress was made during the first quarter across our strategic pillars despite a modest decrease in our book value which was largely the result of the rising interest rate environment. Genesis Legacy Solutions completed multiple transactions during the quarter, growing its base of insurance liabilities to $37.1 million. Our alternative asset portfolio grew by an additional 11.1% during the first quarter and produced returns solidly above our benchmark cost of debt capital, and we expect further growth from that portfolio in coming quarters. Capital management had a more limited impact on our first quarter 2022 results but still contributed $3.5 million in gains during the period, bringing the total impact of our capital management initiatives to $1.52 per common share since the fourth quarter of 2020."

Messrs. Haveron and Metz added, "The netfavorabletrends in the run-off of our former reinsurance liabilities continued but were more than offset by the$5.1 millionof underwriting loss impact from higher than expected negative premium adjustments in our AmTrust cession. Our first quarter earnings were also hindered by unrealized losses on our fixed income portfolio of $0.26 per common share as interest rates rose sharply during the first quarter. Recurring expenses, while typically higher in the first quarter for discretionary compensation expenses, were 21.0% lower on a year-over-year basis and continue to reflect the positive trends we have experienced as we maintain an efficient operating profile. Our balance sheet atMarch 31, 2022does not reflect the $1.08 in net deferred tax assets which still maintain a full valuation allowance. We believe the necessary performance that will enable us to recognize these tax assets in the future continues to accumulate."

Consolidated Results for the Quarter Ended March 31, 2022

Net income available to Maiden common shareholders for the three months ended March 31, 2022 was $1.6 million compared to $71.7 million for the same period in 2021. The most significant items affecting our financial performance during the first quarter of 2022 on a comparative basis to the first quarter of 2021 included:

• •gain from repurchase of preference shares of $3.5 million for the three months ended March 31, 2022 compared to $62.5 million in the same period in 2021;

• •excluding the gain from repurchase of our preference shares, net loss was $1.9 million for the three months ended March 31, 2022 compared to net income of $9.3 million for the same period in 2021 largely due to the following factors:

  • • underwriting loss(4)of $1.7 million in the first quarter of 2022 compared to underwriting income of $1.6 million in the same period in 2021. The decrease in underwriting results was primarily due to:

    • • significantly higher than expected negative premium adjustments in the AmTrust Reinsurance segment related to adjustments for estimated surcharges on Workers' Compensation policies and inuring AmTrust reinsurance for certain programs in Specialty Risk and Extended Warranty cessions (collectively the "AmTrust Cession Adjustments"), net of commission and loss adjustments, which contributed an underwriting loss of $5.1 million to our reported results during the three months ended March 31, 2022;

    • • excluding the AmTrust Cession Adjustments, the Company had underwriting income of $3.4 million for the three months ended March 31, 2022 compared to underwriting income of $1.6 million for the same period in 2021 which consisted of the following:

• • favorable prior year loss development of $2.2 million in the first quarter of 2022 (adjusted for the AmTrust Cession Adjustments) compared to favorable prior year loss development of $5.6 million during the same period in 2021; and

• •on a current accident year basis, an underwriting income of $1.2 million for the three months ended March 31, 2022 compared to an underwriting loss of $4.0 million for the same period in 2021.

• • total income from investment activities were $10.1 million for the three months ended March 31, 2022 compared to $20.9 million for the same period in 2021 which was comprised of:

  • • net investment income of $6.6 million for the three months ended March 31, 2022 compared to $9.8 million for the same period in 2021 primarily due to the decline in average fixed income assets of 29.6%;

  • • net realized and unrealized gains on investment of $2.3 million for the three months ended March 31, 2022 compared to net realized gains of $8.1 million for the same period in 2021; and

  • •interest in income of equity method investments of $1.3 million for the three months ended March 31, 2022 compared to $2.9 million for the same period in 2021.

• •corporate general and administrative expenses decreased to $8.3 million for the three months ended March 31, 2022 compared to $11.8 million for the same period in 2021 due to lower equity-based incentive compensation costs for employees; and

• •foreign exchange and other gains amounted to $3.9 million during the three months ended March 31, 2022, compared $3.5 million for the same period in 2021.

Net premiums written for the three months ended March 31, 2022 were $(10.3) million compared to $(2.7) million for the same period in 2021. Net premiums written in the Diversified Reinsurance segment increased by $4.8 million for the three months ended March 31, 2022 compared to the same period in 2021 due to the prior year retuof unearned premiums written in German Auto quota share reinsurance contract which went into run-off on January 1, 2021. Direct gross premiums written by wholly owned Swedish subsidiaries Maiden Life Försäkrings AB and Maiden General Försäkrings ABdecreased by $0.3 million or 5.3%duringthe three months ended March 31, 2022, compared to the same period in 2021. Negative premium adjustments of $15.8 million from the AmTrust Cession Adjustments were the principal factor which resulted in $(14.9) million in net premiums written in the AmTrust Reinsurance segment in the three months ended March 31, 2022 compared to $(2.5) million for the same period in 2021.

Net premiums earned decreased by $10.6 million or 90.5% for the three months ended March 31, 2022 compared to the same period in 2021 primarily due to the AmTrust Cession Adjustments in the AmTrust Reinsurance segment.

Net investment income decreased by $3.3 million or 33.3% for the three months ended March 31, 2022 compared to the same period in 2021, primarily due to the decline in average aggregate fixed income assets of 29.6%in the same period. The decline in fixed income assetsis largely due to the cessation of active reinsurance underwriting on prospective risks since January 1, 2019 which is responsible for significant negative operating cash flows as we continue to run-off our existing reinsurance liabilities. Net investment income also decreased due to the decline in annualized average book yields from fixed income assets to 1.7% for the three months ended March 31, 2022 compared to 2.0% for the same period in 2021.

Net realized and unrealized gains for the three months ended March 31, 2022 were $2.3 million compared to $8.1 million for the same period in 2021. Net realized and unrealized gains for the three months ended March 31, 2021 included the recognition of $4.5 million in unrealized gains related to an investment in an insurtech start-up company that was acquired by a special purpose acquisition company. Net realized gains for the three months ended March 31, 2022 and 2021 also reflect sales of corporate bonds for the settlement of claim payments to AmTrust.

Net loss and LAE decreased by $4.6 million during the three months ended March 31, 2022 compared to the same period in 2021. Net loss and LAE for the first quarter of 2022 was impacted by net favorable prior year reserve development of $7.3 million compared to net favorable prior year reserve development of $5.6 million during the first quarter of 2021 primarily within the AmTrust Reinsurance segment in both respective periods.

Commission and other acquisition expenses decreased by $3.4 million or 57.5% for the three months ended March 31, 2022, compared to the same period in 2021 largely due to the AmTrust Cession Adjustments as discussed above.

Total general and administrative expenses decreased by $3.1 million, or 22.2% for the three months ended March 31, 2022, compared to the same period in 2021 due to lower equity based incentive compensation costs. The Company estimates that it incurred certain operating expenses of $0.4 million during the three months ended March 31, 2022, which it believes will not recur in future periods. These costs include salary and related costs associated with headcount reductions.

Non-GAAP Operating Results for the three months ended March 31, 2022

In addition to other adjustments, management has adjusted the GAAP net income and underwriting results by excluding incurred losses and LAE that are subject to the Loss Portfolio Transfer and Adverse Development Cover Agreement

("LPT/ADC Agreement") with Cavello Bay Reinsurance Ltd. ("Cavello"), a subsidiary of Enstar Group Limited. Such losses are fully recoverable from Cavello, and therefore adjusting for these losses shows the ultimate economic benefit of the LPT/ADC Agreement to Maiden.

The non-GAAP operating loss was $6.9 million or $0.08 per diluted common share for the first quarter of 2022 compared to non-GAAP operating earnings of $47.3 million or $0.55 per diluted common share for the first quarter of 2021. Adjusted to include net realized and unrealized investment gains and the interest in income of equity method investments which are both a recurring part of investment results with the Company's underwriting activities in run-off, the non-GAAP operating loss was $3.4 million or $0.04 per diluted common share for the first quarter of 2022, compared to non-GAAP operating earnings of $58.3 million or $0.67 per diluted common share for the first quarter of 2021.

Similar to the reported GAAP results, the reduction in non-GAAP operating results for the three months ended March 31, 2022 compared to the same period in 2021 primarily reflects gains from repurchase of preference shares of $3.5 million recognized in the three months ended March 31, 2022 compared to $62.5 million for the same period in 2021.

The unamortized deferred gain on retroactive reinsurance under the LPT/ADC Agreement with Cavello was $44.9 million as of March 31, 2022, a decrease of $1.0 million compared to $45.9 million at December 31, 2021. The decrease in the unamortized deferred gain under the LPT/ADC Agreement for the three months ended March 31, 2022 is attributable to $1.0 million in loss and LAE recognized as favorable loss development in the Company's GAAP income statement that was covered by the LPT/ADC Agreement.

Adjusted for favorable loss development covered by the LPT/ADC Agreement of $1.0 million during the three months ended March 31, 2022, the non-GAAP underwriting loss(9)was $2.7 million compared to $8.3 million for the same period in 2021.

For the three months ended March 31, 2022, our non-GAAP operating loss also included underwriting results for business not covered by the LPT/ADC Agreement, specifically Hospital Liability business and run-off of the AmTrust Reinsurance segment.

In addition, as previously noted, the Company estimates that it incurred operating expenses of $0.4 million during the three months ended March 31, 2022 which it believes will not recur in future periods.

Please refer to the Non-GAAP Financial Measures tables in this release for additional information on these non-GAAP financial measures and reconciliation of these measures to the appropriate GAAP measures.

Quarterly Report on Form 10-Q for Period Ended March 31, 2022 and Other Financial Matters

The Company's Quarterly Report on Form 10-Q for the period ended March 31, 2022 was filed with the U.S. Securities and Exchange Commission on May 10, 2022. Additional information on the matters reported in this news release along with other required disclosures can be found in that filing.

Total assets were $2.2 billion at March 31, 2022 compared to $2.3 billion at December 31, 2021. Shareholders' equity was $367.7 million at March 31, 2022 compared to $384.3 million at December 31, 2021. Adjusted shareholders' equity(2)was $412.5 million at March 31, 2022 compared to $434.2 million at December 31, 2021, which reflects the unamortized deferred gain under the LPT/ADC Agreement of $44.9 million at March 31, 2022 and $45.9 million at December 31, 2021. Adjusted shareholders' equity for December 31, 2021 also included an adjustment of $4.1 million to reflect the equity accounting related to the fair value of certain hedged liabilities in an equity method investment in a limited partnership investment held by the Company wherein the ultimate realizable value of the asset supporting the hedged liabilities was not recognized at fair value ("LP Investment Adjustment") until it was sold at a realized gain in the first quarter of 2022.

Effective October 1, 2021, Genesis Legacy Solutions ("GLS") completed its first transaction, a loss portfolio transfer transaction which includes an adverse development cover. GLS continues to write additional retroactive reinsurance transactions consistent with its business plan. As of March 31, 2022, GLS has insurance liabilities that it assumed through retroactive reinsurance contracts of $29.2 million, including deferred gains on retroactive reinsurance of $7.9 million. In addition to producing returns that exceed the target cost of capital, we expect business produced through GLS to further enhance our ability to pursue the asset and capital management pillars of our business strategy.

The Company's wholly owned subsidiary, Maiden Holdings North America, Ltd., holds net operating loss carryforwards ("NOLs") which were $235.7 million as of March 31, 2022. These NOLs, in combination with additional net deferred tax assets primarily related to our insurance liabilities, result in a net deferred tax asset (before valuation allowance) of $94.3 million or $1.08 per common share as of March 31, 2022. These net deferred tax assets are not presently recognized on the Company's balance sheet as a full valuation allowance is carried against them.

The Company no longer presents certain non-GAAP measures such as combined ratio and its related components in its news release or its quarterly reports, as it believes that as the run-off of its reinsurance portfolios progresses, such ratios are increasingly not meaningful and of less value to readers as they evaluate our financial results.

Preference Shares

On March 3, 2021, the Company's Board of Directors approved the repurchase, including the repurchase by Maiden Reinsurance Ltd. ("Maiden Reinsurance") in accordance with its investment guidelines, of up to $100.0 million of the Company's preference shares from time to time at market prices in open market purchases or as may be privately negotiated.

On May 6, 2021, the Company's Board of Directors approved the repurchase, including the repurchase by Maiden Reinsurance in accordance with its investment guidelines, of up to an additional $50.0 million of the Company's preference shares from time to time at market prices in open market purchases or as may be privately negotiated.

The authorizations approved on March 3, 2021 and May 6, 2021 are collectively referred to as the "2021 Preference Share Repurchase Program". The principal purpose of thecash tender offer on December 24, 2020 to purchase the Company's preference sharesand the 2021 Preference Share Repurchase Program was to adjust our capital structure to reflect current operations and the amount of capital required to operate Maiden Reinsurance.

The following table shows the summary of repurchases made of the Company's preference shares pursuant to the 2021 Preference Share Repurchase Program during the three months ended March 31, 2022 and 2021, respectively:

For the Three Months Ended March 31, 2022

For the Three Months Ended March 31, 2021

Series A

Series C

Series D

Total

Quarterly Dividends

The Company's Board of Directors did not authorize any quarterly dividends related to either its common shares or any series of its preference shares.

About Maiden Holdings, Ltd.

Maiden Holdings, Ltd. is a Bermuda-based holding company formed in 2007. Maiden creates shareholder value by actively managing and allocating our assets and capital, including through ownership and management of businesses and assets mostly in the insurance and related financial services industries where we can leverage our deep knowledge of those markets. Maiden also provides a full range of legacy services to small insurance companies, particularly those in run-off or with blocks of reserves that are no longer core, working with clients to develop and implement finality solutions including acquiring entire companies that enable our clients to meet their capital and risk management objectives.

(1)(2)(4)(5)(9) Please refer to the Non-GAAP Financial Measures tables for additional information on these non-GAAP financial measures and reconciliation of these measures to GAAP measures.

Special Note about Forward Looking Statements

Certain statements in this press release, other than purely historical information, including estimates, projections, statements relating to the Company's business plans, objectives and expected operating results and the assumptions upon which those statements are based are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements include general statements both with respect to the Company and the insurance industry and generally are identified with the words "anticipate", "believe", "expect", "predict", "estimate", "intend", "plan", "project", "seek", "potential", "possible", "could", "might", "may", "should", "will", "would", "will be", "will continue", "will likely result" and similar expressions. In light of the risks and uncertainties inherent in all forward-looking statements, the inclusion of such statements in this press release should not be considered as a representation by the Company or any other person that the Company's objectives or plans or other matters described in any forward-looking statement will be achieved. These statements are based on current plans, estimates, assumptions and expectations. Actual results may differ materially from those projected in such forward-looking statements and therefore, you should not place undue reliance on them. Important factors that could cause actual results to differ materially from those in such forward-looking statements are set forth in Item 1A"Risk Factors"in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. Circumstances caused by the COVID-19 pandemic are complex, uncertain and rapidly evolving. We therefore may not be able to accurately predict the longer-term effects that the COVID-19 pandemic may have on our financial condition or results of operations. To the extent the COVID-19 pandemic adversely affects our financial condition or results of operations, it may also heighten additional risks described in "Part I, Item 1A, Risk Factors"of our Annual Report on Form 10-K for the year ended December 31, 2021.

The Company cautions that the list of important risk factors in its Annual Report on Form 10-K for the year ended December 31, 2021 is not intended to be and is not exhaustive. The Company undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by law, and all subsequent written and oral forward-looking statements attributable to the Company or individuals acting on the Company's behalf are expressly qualified in their entirety by this paragraph. If one or more risks or uncertainties materialize, or if the Company's underlying assumptions prove to be incorrect, the Company's actual results may vary materially from what was projected. Any forward-looking statements in this press release reflect the Company's current view with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to the Company's operations, results of operations, growth, strategy and liquidity. Readers are cautioned not to place undue reliance on the forward-looking statements which speak only as of the dates of the documents in which such statements were made.

Any discrepancies between the amounts included in the results of operations discussion and the consolidated financial statement tables are due to rounding.

CONTACT:

Sard Verbinnen & Co.

[email protected]

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Maiden Holdings Ltd. published this content on 10 May 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 10 May 2022 12:08:31 UTC.