Business context and reporting period
Maiden Holdings, Ltd. filed its audited Form 10-K for the fiscal year ended December 31, 2023, comparing results with 2022. The Bermuda-based holding company is primarily managing assets and capital while legacy reinsurance contracts run off. It is not writing new prospective reinsurance risks; its Swedish subsidiaries write short-term income protection insurance, and its legacy-services subsidiary GLS is being run off.
Key financial metrics
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue | $89.2 million | $58.1 million |
| Net loss | $38.6 million | $60.0 million |
| Net loss available to common shareholders per share | $0.38 | Net income of $0.63 |
| Net premiums earned | $44.0 million | $37.7 million |
| Underwriting loss (non-GAAP) | $49.5 million | $54.9 million |
| Net investment income | $37.4 million | $30.1 million |
| Net realized and unrealized investment gains (losses) | $7.8 million | $(5.1) million |
| Net cash used in operating activities | $59.8 million | $195.9 million |
Investment returns included in earnings were $53.1 million, versus $24.7 million in 2022. The alternative-investment portfolio returned 8.0% net in 2023, compared with 2.0% in 2022. The filing no longer presents combined ratios, saying they are less meaningful as the reinsurance portfolios run off.
At year-end, total assets were $1.519 billion, shareholders’ equity was $249.2 million, and loss and LAE reserves were $867.4 million. Senior notes had $262.4 million principal outstanding; debt was 51.3% of total capital resources, compared with 48.0% in 2022. GAAP book value was $2.48 per common share, down 11.4%; adjusted book value, a non-GAAP measure adding the deferred gain under the Cavello agreement, was $3.19, down 1.8%.
Unrestricted cash, cash equivalents and fixed-maturity investments totaled $73.4 million. Cash flows from investing activities were positive $58.5 million and financing activities used $3.0 million. The company reported $219.9 million of restricted cash and fixed maturities pledged as collateral. Alternative investments were $309.0 million, or 51.3% of total cash and investments; unfunded alternative-investment commitments were $100.8 million.
Material changes versus 2022
- Net loss narrowed to $38.6 million from $60.0 million. The 2022 common-shareholder result included a $115.5 million gain from preference-share repurchases and exchanges, making reported-year comparisons less representative of operating performance.
- Adverse prior-year reserve development rose to $38.2 million from $32.6 million, mainly in the AmTrust Reinsurance segment. Of 2023 AmTrust adverse development, $25.5 million was expected to be covered by the Cavello LPT/ADC agreement, subject to the agreement’s terms and GAAP recognition timing.
- Net investment income increased 24.3%, and investment gains improved from a loss to a gain. Higher yields, including on floating-rate assets and related-party balances, contributed.
- Net cash used in operations improved to $59.8 million from $195.9 million, largely reflecting the use of funds-withheld assets to settle claims. The funds-withheld receivable fell to $144.0 million from $441.4 million.
- GAAP equity declined by $35.4 million. The loss-reserve balance fell by $264.0 million, principally as claims were settled and the portfolio ran off.
Outlook, risks and unusual items
- Management expects current liquidity sources to meet requirements for the next 12 months, including senior-note payments, but cautions that deterioration in results, additional collateral needs or delayed collateral releases could impair unrestricted liquidity. The company expects runoff-related negative operating cash flows to continue.
- Management expects to begin recognizing GAAP income from the Cavello LPT/ADC recoveries after paid losses exceed the agreement’s minimum retention, currently estimated before the end of 2024. The filing reports $515.5 million of recoverables under the LPT/ADC and a $70.9 million deferred gain; timing and collection remain important uncertainties. Cavello’s required collateral was $490.1 million at year-end.
- The company expects to conclude its strategic review of Maiden LF and Maiden GF during 2024. It is exploring fee-based insurance distribution and MGA opportunities and may consider selective prospective underwriting, but has no immediate plan to resume it. GLS did not achieve expected scale or profitability; no additional capital is planned for new GLS accounts.
- Reserve adequacy is a key uncertainty: management’s reasonable-reserve range indicated possible increases of approximately $187.3 million to gross reserves, or $107.2 million to net reserves after the LPT/ADC, under the assumptions described in the filing. General liability deterioration and uncovered European Hospital Liability claims are notable exposures.
- Counterparty, collateral and investment risks are significant. The company has substantial exposure to Cavello and AmTrust; alternative investments may be illiquid or volatile. It also has $100.8 million of unfunded investment commitments and $62.5 million of real-estate-related guarantees, for which management assessed potential losses as remote and recorded no liability.
- The company has no major-agency financial-strength rating, does not anticipate common dividends for the foreseeable future, and has paid no common dividend since the third quarter of 2018. Statutory restrictions limit subsidiary distributions. Its $337.4 million of tax NOL carryforwards are subject to potential Section 382 limits; a full valuation allowance remains against the U.S. deferred tax asset.
- A securities class action received summary judgment in the company’s favor in December 2023; plaintiffs appealed. A separate former-employee claim is also under appeal. Management says it intends to defend the matters. The auditor gave an unqualified opinion on the financial statements and internal controls; management reported controls effective at year-end.
Important facts for investors to verify
- How subsequent claims emergence affects AmTrust and other legacy reserves, especially general liability and European Hospital Liability, and whether further adverse development occurs.
- Whether Cavello pays covered recoveries as expected, when the retention is crossed, and how collateral and deferred-gain accounting affect reported earnings and liquidity.
- Whether the $73.4 million of unrestricted cash and investments, permitted subsidiary distributions and investment cash flows remain sufficient for debt service, claims, collateral needs and $100.8 million of commitments.
- Realized performance, valuation support and liquidity terms for the $309.0 million alternative-investment portfolio, including the $69.0 million direct-lending investment and real-estate guarantees.
- Results of the 2024 review of the Swedish insurance subsidiaries, any changes to business strategy or underwriting, and the status of litigation appeals and NOL availability.