UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549





FORM
10-Q





(Mark
One)




xQUARTERLY REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
quarterly period ended September 30, 2009





oTRANSITION REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934





For the
transition period from ___________________ to ___________________





Commission
file no. 001-34042





Maiden
Holdings, Ltd.





(Exact
name of registrant as specified in its charter)





Bermuda
                    (State
      or other jurisdiction of
                    incorporation
      or organization)
                  98-0570192
                    (IRS
      Employer Identification No.)131 Front Street,  Hamilton HM12,
      Bermuda
                    (Address
      of principal executive offices)
                  HM12
                    (Zip
      Code)(441) 292-7090
                    (Registrant’s
      telephone number, including area
code)





Indicate
by check mark whether the registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days. Yes xNo o





Indicate
by check mark whether the registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months (or for such shorter period that the registrant was
required to submit and post such files). Yes o    No o




Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, a non-accelerated filer, or a smaller reporting company. See
the definitions of “large accelerated filer,” “accelerated filer” and “smaller
reporting company” in Rule 12b-2 of the Exchange Act.





Large
      accelerated filer o
              Accelerated
      filer oNon-accelerated
      filer x(Do
      not check if a smaller reporting company)
              Smaller
      reporting company o





Indicate
by check mark whether the registrant is a shell company (as defined in Rule
12b-2 of the Securities Exchange Act). Yes oNo x




As of
November, 13 2009, the Registrant had one class of Common Stock ($.01 par
value),


of which
70,287,664shares were issued and
outstanding.









INDEX





PagePART
      I
                    
                    FINANCIAL
      INFORMATIONItem
      1.
                    
                    Financial
      Statements:Condensed
      Consolidated Balance Sheets as of September 30, 2009 (unaudited) and
      December 31, 2008
                    
                    3Condensed
      Consolidated Statement of Income for the three months
      ended  September 30, 2009 and 2008 (unaudited) and the nine
      months ended September 30, 2009 and 2008 (unaudited)
                    
                    4Condensed
      Consolidated Statement of Cash Flows for the nine months ended September
      30, 2009 and 2008 (unaudited)
                    
                    5Condensed
      Consolidated Statement of Changes in Shareholders’ Equity for the three
      months ended September 30, 2009 and 2008 (unaudited) and the nine months
      ended September 30, 2009 and 2008 (unaudited)
                    
                    6Notes
      to Unaudited Condensed Consolidated Financial Statements
                    
                    7Item
      2.
                    
                    Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operations
                    
                    26Item
      3.
                    
                    Quantitative
      and Qualitative Disclosures About Market Risk
                    
                    35Item
      4.
                    
                    Controls
      and Procedures
                    
                    35PART
      II
                    
                    OTHER
      INFORMATION
                    
                    36Item
      1.
                    
                    Legal
      Proceedings
                    
                    36Item
      1A
                    
                    Risk
      Factors
                    
                    36Item
      6.
                    
                    Exhibits
                    
                    37Signatures
                    
                    38





2





PART
1 - FINANCIAL INFORMATION




Item 1. Financial
Statements




MAIDEN HOLDINGS,
LTD.


CONDENSED
CONSOLIDATED BALANCE SHEETS


(in
thousands (000’s), except per share data)




(unaudited)September 30,
      2009
                                              
                                              
                                              December
      31, 2008AssetsFixed
      maturities, available-for-sale, at fair value (Amortized cost 2009:
      $1,506,704;  2008: $1,163,926)
                                              
                                              $
                                              1,541,704
                                              
                                              
                                              $
                                              1,119,955Other
      investments, at fair value (Cost 2009: $5,707; 2008:
      $5,818)
                                              
                                              
                                              5,529
                                              
                                              
                                              
                                              5,291Total
      investments
                                              
                                              
                                              1,547,233
                                              
                                              
                                              
                                              1,125,246Cash
      and cash equivalents
                                              
                                              
                                              94,582
                                              
                                              
                                              
                                              131,897Restricted
      cash and cash equivalents
                                              
                                              
                                              218,595
                                              
                                              
                                              
                                              409,277Accrued
      investment income
                                              
                                              
                                              11,078
                                              
                                              
                                              
                                              10,293Reinsurance
      balances receivable (includes $43,048 and $48,837 from related party in
      2009 and 2008, respectively - see note 10)
                                              
                                              
                                              236,643
                                              
                                              
                                              
                                              71,895Loan
      to related party (see note 10)
                                              
                                              
                                              167,975
                                              
                                              
                                              
                                              167,975Deferred
      acquisition costs (includes $77,487 and $80,455 from related party in 2009
      and 2008, respectively - see note 10)
                                              
                                              
                                              171,120
                                              
                                              
                                              
                                              104,470Other
      assets
                                              
                                              
                                              15,527
                                              
                                              
                                              
                                              2,617Intangible
      assets
                                              
                                              
                                              52,959
                                              
                                              
                                              
                                              55,147Goodwill
                                              
                                              
                                              49,747
                                              
                                              
                                              
                                              49,747Total
      Assets
                                              
                                              $
                                              2,565,459
                                              
                                              
                                              $
                                              2,128,564Liabilities
      and Shareholders’ EquityLiabilitiesReserve
      for losses and loss expenses (includes $167,218 and $69,646 from related
      party in 2009 and 2008, respectively- see note 10)
                                              
                                              $
                                              967,425
                                              
                                              
                                              $
                                              897,656Unearned
      premiums (includes $238,483 and $245,742 from  related parties
      in 2009 and 2008, respectively- see note 10)
                                              
                                              
                                              570,875
                                              
                                              
                                              
                                              444,479Accrued
      expenses and other liabilities
                                              
                                              
                                              41,482
                                              
                                              
                                              
                                              44,024Securities
      sold under agreements to repurchase, at contract value
                                              
                                              
                                              106,016
                                              
                                              
                                              
                                              232,646Trust
      preferred securities – related parties (see note 6)
                                              
                                              
                                              215,110
                                              
                                              
                                              
                                              -Total
      Liabilities
                                              
                                              
                                              1,900,908
                                              
                                              
                                              
                                              1,618,805Commitments and
      ContingenciesShareholders’
      EquityCommon
      shares, ($0.01 par
      value;71,250,000 and 59,550,000 shares issued in 2009 and 2008
      respectively; 70,287,664 and 58,587,664 shares outstanding in 2009 and
      2008 respectively)
                                              
                                              
                                              713
                                              
                                              
                                              
                                              596Additional
      paid-in capital
                                              
                                              
                                              575,891
                                              
                                              
                                              
                                              530,519Accumulated
      other comprehensive income (loss)
                                              
                                              
                                              33,117
                                              
                                              
                                              
                                              (44,499
                                              )Retained
      earnings
                                              
                                              
                                              58,631
                                              
                                              
                                              
                                              26,944Treasury
      Shares, at cost (2009
      and 2008:962,336  shares)
                                              
                                              
                                              (3,801
                                              )
                                              
                                              
                                              (3,801
                                              )Total
      Shareholders’ Equity
                                              
                                              
                                              664,551
                                              
                                              
                                              
                                              509,759Total
      Liabilities and Shareholders’ Equity
                                              
                                              $
                                              2,565,459
                                              
                                              
                                              $
                                              2,128,564




See
accompanying notes to the unaudited condensed consolidated financial
statements.





3





MAIDEN HOLDINGS,
LTD.


CONDENSED
CONSOLIDATED STATEMENT OF INCOME


(in
thousands (000’s), except per share data)


(Unaudited)




For the ThreeMonths EndedSeptember 30,2009
                                    
                                    
                                    For the ThreeMonths EndedSeptember 30,2008
                                    
                                    
                                    For the NineMonths EndedSeptember 30,2009
                                    
                                    
                                    For the NineMonths EndedSeptember 30,2008Revenues:Premium
      income:Net
      premiums written
                                    
                                    $
                                    221,400
                                    
                                    
                                    $
                                    113,187
                                    
                                    
                                    $
                                    796,304
                                    
                                    
                                    $
                                    386,870Change
      in unearned premiums
                                    
                                    
                                    15,950
                                    
                                    
                                    
                                    408
                                    
                                    
                                    
                                    (125,021
                                    )
                                    
                                    
                                    (130,631
                                    )Net
      earned premium
                                    
                                    
                                    237,350
                                    
                                    
                                    
                                    113,595
                                    
                                    
                                    
                                    671,283
                                    
                                    
                                    
                                    256,239Net
      investment income
                                    
                                    
                                    16,778
                                    
                                    
                                    
                                    8,974
                                    
                                    
                                    
                                    46,150
                                    
                                    
                                    
                                    24,346Net
      realized investment losses
                                    
                                    
                                    (66
                                    )
                                    
                                    
                                    (42,538
                                    )
                                    
                                    
                                    (462
                                    )
                                    
                                    
                                    (42,375
                                    )Total
      revenues
                                    
                                    
                                    254,062
                                    
                                    
                                    
                                    80,031
                                    
                                    
                                    
                                    716,971
                                    
                                    
                                    
                                    238,210Expenses:Loss
      and loss adjustment expenses
                                    
                                    
                                    165,123
                                    
                                    
                                    
                                    66,915
                                    
                                    
                                    
                                    462,468
                                    
                                    
                                    
                                    148,362Commission
      and other acquisition expenses
                                    
                                    
                                    55,313
                                    
                                    
                                    
                                    38,299
                                    
                                    
                                    
                                    159,608
                                    
                                    
                                    
                                    85,057Other  operating
      expenses
                                    
                                    
                                    8,059
                                    
                                    
                                    
                                    1,974
                                    
                                    
                                    
                                    22,726
                                    
                                    
                                    
                                    5,636Trust
      preferred interest – related party
                                    
                                    
                                    9,114
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    25,316
                                    
                                    
                                    
                                    -Amortization
      of intangible assets
                                    
                                    
                                    1,676
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    4,915
                                    
                                    
                                    
                                    -Foreign
      exchange and other (gain) loss
                                    
                                    
                                    (210
                                    )
                                    
                                    
                                    359
                                    
                                    
                                    
                                    (2,401
                                    )
                                    
                                    
                                    364Total
      expenses
                                    
                                    
                                    239,075
                                    
                                    
                                    
                                    107,547
                                    
                                    
                                    
                                    672,632
                                    
                                    
                                    
                                    239,419Net
      income (loss)
                                    
                                    $
                                    14,987
                                    
                                    
                                    $
                                    (27,516
                                    )
                                    
                                    $
                                    44,339
                                    
                                    
                                    $
                                    (1,209
                                    )Basic
      earnings per common share
                                    
                                    $
                                    0.21
                                    
                                    
                                    $
                                    (0.46
                                    )
                                    
                                    $
                                    0.64
                                    
                                    
                                    $
                                    (0.02
                                    )Diluted
      earnings per common share
                                    
                                    
                                    0.21
                                    
                                    
                                    
                                    (0.46
                                    )
                                    
                                    
                                    0.63
                                    
                                    
                                    
                                    (0.02
                                    )Dividends
      declared per common share
                                    
                                    $
                                    0.06
                                    
                                    
                                    $
                                    0.05
                                    
                                    
                                    $
                                    0.18
                                    
                                    
                                    $
                                    0.15




For the ThreeMonths EndedSeptember 30,2009
                      
                      
                      For the ThreeMonths EndedSeptember 30,2008
                      
                      
                      For the NineMonths EndedSeptember 30,2009
                      
                      
                      For the NineMonths EndedSeptember 30,2008Net
      realized investment losses:Total
      other-than-temporary impairment losses
                      
                      $
                      -
                      
                      
                      $
                      (42,538
                      )
                      
                      $
                      -
                      
                      
                      $
                      (42,538
                      )Portion
      of loss recognized in other comprehensive income
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -
                      
                      
                      
                      -Net
      impairment losses recognized in earnings
                      
                      
                      -
                      
                      
                      
                      (42,538
                      )
                      
                      
                      -
                      
                      
                      
                      (42,538
                      )Other
      net realized (loss) gain on investments
                      
                      
                      (66
                      )
                      
                      
                      -
                      
                      
                      
                      (462
                      )
                      
                      
                      163Net
      realized investment losses
                      
                      $
                      (66
                      )
                      
                      $
                      (42,538
                      )
                      
                      $
                      (462
                      )
                      
                      $
                      (42,375
                      ))




See
accompanying notes to the unaudited condensed consolidated financial
statements.





4




MAIDEN HOLDINGS,
LTD.


CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS


(in
thousands (000’s), except per share data)


(Unaudited)




For the NineMonths EndedSeptember 30,2009
                                                      
                                                      
                                                      For the NineMonths EndedSeptember 30,2008Cash flows
      from operating activities:Net
      income (loss)
                                                      
                                                      $
                                                      44,339
                                                      
                                                      
                                                      $
                                                      (1,209
                                                      )Adjustments
      to reconcile net income (loss) to net cash provided by operating
      activities :Depreciation
      and amortization of intangibles
                                                      
                                                      
                                                      5,426
                                                      
                                                      
                                                      
                                                      18Net
      realized loss (gain) on sales of investments
                                                      
                                                      
                                                      462
                                                      
                                                      
                                                      
                                                      (163
                                                      )Other
      than temporary impairment of investments
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      42,538Foreign
      exchange and other (gain) loss
                                                      
                                                      
                                                      (1,462
                                                      )
                                                      
                                                      
                                                      356Amortization
      of share-based compensation expense, bond premium and discount and trust
      preferred securities discount, net
                                                      
                                                      
                                                      (4,615
                                                      )
                                                      
                                                      
                                                      (1,429
                                                      )Changes
      in assets - (increase) decrease:Reinsurance
      balances receivable
                                                      
                                                      
                                                      (167,608
                                                      )
                                                      
                                                      
                                                      (71,145
                                                      )Accrued
      investment income
                                                      
                                                      
                                                      (695
                                                      )
                                                      
                                                      
                                                      (2,219
                                                      )Deferred
      commission and other acquisition costs
                                                      
                                                      
                                                      (66,604
                                                      )
                                                      
                                                      
                                                      (44,400
                                                      )Other
      assets
                                                      
                                                      
                                                      (1,702
                                                      )
                                                      
                                                      
                                                      34Changes
      in liabilities – increase (decrease):Accrued
      expenses and other liabilities
                                                      
                                                      
                                                      (19,047
                                                      )
                                                      
                                                      
                                                      (897
                                                      )Loss
      and loss adjustment expense reserves
                                                      
                                                      
                                                      72,706
                                                      
                                                      
                                                      
                                                      85,113Unearned
      premiums
                                                      
                                                      
                                                      125,022
                                                      
                                                      
                                                      
                                                      130,633Net
      cash (used in) provided by operating activities
                                                      
                                                      
                                                      (13,778
                                                      )
                                                      
                                                      
                                                      137,230Cash
      flows from investing activities:Purchases
      of investments:Purchases
      of fixed-maturity securities
                                                      
                                                      
                                                      (739,006
                                                      )
                                                      
                                                      
                                                      (379,010
                                                      )Purchases
      of other investments
                                                      
                                                      
                                                      (138
                                                      )
                                                      
                                                      
                                                      (340
                                                      )Sale
      of investments:Proceeds
      from sales of fixed-maturity securities
                                                      
                                                      
                                                      153,991
                                                      
                                                      
                                                      
                                                      -Proceeds
      from maturities and calls of fixed-maturity securities
                                                      
                                                      
                                                      263,832
                                                      
                                                      
                                                      
                                                      88,499Proceeds
      from redemption of other investments
                                                      
                                                      
                                                      127
                                                      
                                                      
                                                      
                                                      -Decrease
      in restricted cash
                                                      
                                                      
                                                      190,682
                                                      
                                                      
                                                      
                                                      -Acquisition
      of subsidiary (net of cash acquired)
                                                      
                                                      
                                                      (13,613
                                                      )
                                                      
                                                      
                                                      -Loan
      to related party
                                                      
                                                      
                                                      -
                                                      
                                                      
                                                      
                                                      (54,433
                                                      )Purchase
      of furniture and equipment
                                                      
                                                      
                                                      (122
                                                      )
                                                      
                                                      
                                                      (52
                                                      )Net
      cash used in investing activities
                                                      
                                                      
                                                      (144,247
                                                      )
                                                      
                                                      
                                                      (345,336
                                                      )Cash
      flows from financing activities:Repurchase
      agreements, net
                                                      
                                                      
                                                      (126,630
                                                      )
                                                      
                                                      
                                                      260,775Common
      share issuance
                                                      
                                                      
                                                      117
                                                      
                                                      
                                                      
                                                      -Trust
      preferred securities issuance
                                                      
                                                      
                                                      260,000
                                                      
                                                      
                                                      
                                                      -Trust
      preferred securities issuance cost
                                                      
                                                      
                                                      (4,342
                                                      )
                                                      
                                                      
                                                      -Dividend
      paid
                                                      
                                                      
                                                      (8,435
                                                      )
                                                      
                                                      
                                                      (5,955
                                                      )Net
      cash provided by financing activities
                                                      
                                                      
                                                      120,710
                                                      
                                                      
                                                      
                                                      254,820Net
      (decrease) increase in cash and cash equivalents
                                                      
                                                      
                                                      (37,315
                                                      )
                                                      
                                                      
                                                      46,714Cash
      and cash equivalents, beginning of period
                                                      
                                                      
                                                      131,897
                                                      
                                                      
                                                      
                                                      35,729Cash
      and cash equivalents, end of period
                                                      
                                                      $
                                                      94,582
                                                      
                                                      
                                                      $
                                                      82,443Supplemental
      information about non-cash investing and financing
    activitiesDiscount
      on Trust Preferred Securities
                                                      
                                                      $
                                                      (44,928
                                                      )
                                                      
                                                      $
                                                      -Additional
      paid in Capital
                                                      
                                                      
                                                      44,928
                                                      
                                                      
                                                      
                                                      -





See accompanying notes to the
unaudited condensed consolidated financial statements.





5




MAIDEN HOLDINGS,
LTD.


CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY


(in thousands(000’s), exceptpershare data)


(Unaudited)




For
      the nine months endedSeptember 30, 2009
                            
                            Common
                              Shares
                            
                            
                            Additional
                              Paid-In
                              Capital
                            
                            
                            Accumulated
                              Other
                              Comprehensive
                              Income
                            
                            
                            Retained
                              Earnings
                            
                            
                            TreasuryShares
                            
                            
                            Total
                              Shareholders’
                              EquityBalance at
      December 31, 2008
                            
                            $
                            596
                            
                            
                            $
                            530,519
                            
                            
                            $
                            (44,499
                            )
                            
                            $
                            26,944
                            
                            
                            $
                            (3,801
                            )
                            
                            $
                            509,759Net
      income
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            44,339
                            
                            
                            
                            -
                            
                            
                            
                            44,339Unrealized
      holding gains during the period
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            77,154
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            77,154Adjustment
      for re-classification of realized gains and other-than-temporary losses
      recognized in the net income
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            462
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            462Comprehensive
      income
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            
                            121,955Shares
      issued, net
                            
                            
                            117
                            
                            
                            
                            44,928
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            45,045Share
      based compensation
                            
                            
                            -
                            
                            
                            
                            444
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            444Dividends
      to shareholders
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            (12,652
                            )
                            
                            
                            -
                            
                            
                            
                            (12,652
                            )Balance
      at September 30, 2009
                            
                            $
                            713
                            
                            
                            $
                            575,891
                            
                            
                            $
                            33,117
                            
                            
                            $
                            58,631
                            
                            
                            $
                            (3,801
                            )
                            
                            $
                            664,551




For the Nine Months Ended
                                  September 30, 2008
                                
                                Common
                                  Shares
                                
                                
                                Additional
                                  Paid-In
                                  Capital
                                
                                
                                Accumulated
                                  Other
                                  Comprehensive
                                  Loss
                                
                                
                                Retained
                                  Earnings
                                
                                
                                TreasuryShares
                                
                                
                                Total
                                  Shareholders’
                                  EquityBalance at December
      31, 2007
                                
                                $
                                596
                                
                                
                                $
                                529,647
                                
                                
                                $
                                (13,496
                                )
                                
                                $
                                20,598
                                
                                
                                $
                                -
                                
                                
                                $
                                537,345Net
      loss
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (1,209
                                )
                                
                                
                                -
                                
                                
                                
                                (1,209
                                )Unrealized
      holding losses during the period
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (91,735
                                )
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (91,735
                                )Adjustment
      for re-classification of realized gains and other-than-temporary
      losses recognized in the net income
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                42,375
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                42,375Comprehensive
      loss
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                
                                (50,569
                                )Share
      based compensation
                                
                                
                                -
                                
                                
                                
                                611
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                611Dividends
      to shareholders
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                (8,933
                                )
                                
                                
                                -
                                
                                
                                
                                (8,933
                                )Balance
      at September 30, 2008
                                
                                $
                                596
                                
                                
                                $
                                530,258
                                
                                
                                $
                                (62,856
                                )
                                
                                $
                                10,456
                                
                                
                                $
                                -
                                
                                
                                $
                                478,454




See
accompanying notes to the unaudited condensed consolidated financial
statements.





6





MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)





1.     Basis of Presentation — Summary of
Significant Accounting Policies




The
accompanying unaudited condensed consolidated financial statements include the
accounts of Maiden Holdings, Ltd. and its subsidiaries and have been prepared in
accordance with U.S. generally accepted accounting principles (“GAAP”) for
interim financial statements and with the instructions to Form 10-Q and Article
10 of Regulation S-X as promulgated by the U.S. Securities and Exchange
Commission (“SEC”). Accordingly they do not include all of the information and
footnotes required by GAAP for complete financial statements. All significant
inter-company transactions and accounts have been eliminated in the consolidated
financial statements.




These
interim consolidated financial statements reflect all adjustments that are, in
the opinion of management, necessary for a fair presentation of the results for
the interim period and all such adjustments are of a normal recurring nature.
The results of operations for the interim period are not necessarily indicative,
if annualized, of those to be expected for the full year. The preparation
of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the amounts reported in the financial
statements and accompanying notes. Actual results could differ from those
estimates.





These
unaudited condensed consolidated financial statements, including these notes,
should be read in conjunction with the Company’s audited consolidated financial
statements, and related notes thereto, included in the Company’s Annual Report
on Form 10-K for the year ended December 31, 2008.





2.     Recent Accounting
Pronouncements





Adoption of new
accounting pronouncements





On
September 15, 2009, the Company adopted Financial Accounting Standard Board
(“FASB”) ASC Topic 105, “Generally Accepted Accounting Principles” (“ASC 105” or
the “Codification”).  ASC 105 is a replacement to FASB Statement No.
162, “The Hierarchy of Generally Accepted Accounting Principles,” (“SFAS 162”),
which became effective on November 13, 2008, and identified the sources of
accounting principles and the framework for selecting the principles used in
preparing financial statements in conformity with GAAP.  It also
arranged these sources of GAAP in a hierarchy for users to apply. ASC 105
provides for a single source of authoritative GAAP recognized by the FASB to be
applied to nongovernmental entities in the preparation of financial
statements.  The Codification carries the same level of authority and
supersedes SFAS 162 and all other accounting and reporting standards. The GAAP
hierarchy has been modified to include two levels of GAAP: authoritative and
non-authoritative.





On April
1, 2009, the Company adopted the provisions of the FASB ASC Topic 855,
“Subsequent Events” (“ASC 855”), which requires the disclosure of the date after
the balance sheet date but before financial statements are issued or available
to be issued through which an entity has evaluated subsequent events and the
basis for that date, that is, whether the date represents the date the financial
statements were issued or were available to be issued.  ASC 855 also
alerts all users of financial statements that an entity has not evaluated
subsequent events after that date in the set of financial statements being
presented.





In April
2009, the FASB issued revised guidance for recognizing and measuring
pre-acquisition contingencies in a business combination.  Under the
revised guidance which is now part of ASC 805, “Business Combinations”,
pre-acquisition contingencies are recognized at their acquisition-date fair
value if a fair value can be determined during the measurement
period.  If the acquisition-date fair value cannot be determined
during the measurement period, a contingency (best estimate) is to be recognized
if it is probable that an asset existed or liability had been incurred at the
acquisition date and the amount can be reasonably estimated.  The
revised guidance does not prescribe specific accounting for subsequent
measurement and accounting for contingencies.  The adoption of the
revised guidance on January 1, 2009 had no effect on the Company’s results of
operations, financial position or liquidity.




On April
1, 2009, the Company adopted the provisions of the FASB ASC 820-10-35, “Fair
Value Measurements and Disclosures- Overall -Subsequent Measurement” (“ASC
820-10-35”), ASC 825-10-50, “Financial Instruments – Overall – Disclosure”(“ASC
825-10-50”), and ASC 320-10-35, “Investments – Debt and Equity Securities –
Overall – Subsequent Measurement” (“ASC 320-10-35”), which are intended to
provide additional application guidance and enhance disclosures regarding fair
value measurements and impairments of securities.





ASC
820-10-35 relates to determining fair values when there is no active market or
where the price inputs being used represent distressed sales. It reaffirms that
the objective of fair value measurement is to reflect how much an asset would be
sold for in an orderly transaction (as opposed to a distressed or forced
transaction) at the date of the financial statements under current market
conditions. Specifically, it reaffirms the need to use judgment to ascertain if
a formerly active market has become inactive and in determining fair values when
markets have become inactive. The adoption of ASC 820-10-35 did not have a
material impact on the Company's consolidated shareholders’ equity or net
income.




7




MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)





2.     Recent Accounting Pronouncements
(continued)





ASC
825-10-50 enhances consistency in financial reporting by increasing the
frequency of fair value disclosures. The guidance relates to fair value
disclosures for any financial instruments that are not currently reflected on
the balance sheet at fair value. Prior to issuing this standard, fair values for
these assets and liabilities were only disclosed once a year. ASC 825-10-50 now
requires these disclosures on a quarterly basis, providing qualitative and
quantitative information about fair value estimates for all those financial
instruments not measured on the balance sheet at fair value.





ASC
320-10-35 provides additional guidance designed to create greater clarity and
consistency in accounting for and presenting impairment losses on securities.
The guidance is intended to bring greater consistency to the timing of
impairment recognition, and provide greater clarity to investors about the
credit and noncredit components of impaired debt securities that are not
expected to be sold. The measure of impairment in comprehensive income remains
at fair value. ASC 320-10-35 also requires increased and more timely disclosures
sought by investors regarding expected cash flows, credit losses, and an aging
of securities with unrealized losses.  Based on guidance in FASB ASC
320-10-65 (Prior authoritative literature: FSP 115-2 “Recognition and
Presentation of Other-Than-Temporary-Impairments”), in the event of the decline
in fair value of a debt security, a holder of that security that does not intend
to sell the debt security and for whom  it is not more than likely
than not that such holder will be required to sell the debt security before
recovery of its amortized cost basis, is required to separate the decline in
fair value into (a) the amount representing the credit loss and (b) the amount
related to other factors.  The amount of total decline in fair value
related to the credit loss shall be recognized in earnings as an Other Than
Temporary Impairment (“OTTI”) with the amount related to other factors
recognized in accumulated other comprehensive loss, net of tax.  OTTI
credit losses result in a permanent reduction of the cost basis of the
underlying investment.  The determination of OTTI is a subjective
process, and different judgments and assumptions could affect the timing of the
loss realization.





The
adoption of ASC 825-10-50 and ASC 320-10-35 as of April 1, 2009 only
required new disclosures to be made and did not have an impact on the Company’s
consolidated shareholders’ equity or net income.





New accounting
pronouncements issued during 2009 impacting the Company are as
follows:





On June
12, 2009, the FASB issued FASB Statement No. 166, “Accounting for Transfers of
Financial Assets” (“SFAS 166”).  SFAS 166 has not yet been adopted
into the Codification and it requires that a transferor recognize and initially
measure at fair value all assets obtained (including a transferor’s beneficial
interest) and liabilities incurred as a result of financial assets accounted for
as a sale. It is a revision to FASB Statement No. 140, “Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities,” and
requires more information about transfers of financial assets, including
securitization transactions, and where entities have continuing exposure to the
risks related to transferred financial assets.  SFAS 166 is effective
on a prospective basis in fiscal years beginning on or after November 15, 2009
and interim periods within those fiscal years, and will be adopted by the
Company in the first quarter of fiscal year 2010.  The Company is
assessing the potential impact, if any, of the adoption of SFAS 166 on its
consolidated results of operations and financial condition.




On June
12, 2009, the FASB issued FASB Statement No. 167, “Amendments to FASB
Interpretation No. 46(R)” (“SFAS No. 167”).  SFAS No. 167 amends FASB
Interpretation No. 46 (revised December 2003), “Consolidation of Variable
Interest Entities.” It has not yet been adopted into codification and it
requires an enterprise to perform an analysis to determine whether the
enterprise’s variable interest or interests give it a controlling financial
interest in a variable interest entity.  It determines whether a
reporting entity is required to consolidate another entity based on, among other
things, the other entity’s purpose and design and the reporting entity’s ability
to direct the activities of the other entity that most significantly impact the
other entity’s economic performance.  SFAS No. 167 is effective on a
prospective basis in fiscal years beginning on or after November 15, 2009, and
interim periods within those fiscal years, and will be adopted by the Company in
the first quarter of fiscal year 2010.  The Company is assessing the
potential impact, if any, of the adoption of SFAS No. 167 on its consolidated
results of operations and financial condition.





In August 2009, the FASB issued Accounting Standards Update
No. 2009-05, “Measuring Liabilities at Fair Value” (“ASU
2009-05”).  This update provides amendments to ASC Topic 820, “Fair
Value Measurements and Disclosures” for the fair value measurement of
liabilities when a quoted price in an active market is not available. ASU
2009-05 is effective for the first interim or annual reporting period beginning
after the ASU’s issuance, and will be adopted by the Company in the fourth
quarter of fiscal year 2009. The Company is assessing the potential impact, if
any, of the adoption of ASU 2009-05 on its consolidated results of operations
and financial condition.





In
September 2009, the FASB issued Accounting Standards Update No. 2009-12,
“Measuring Fair Value of Certain Investments” (“ASU 2009-12”).  This
update provides further amendments to ASC Topic 820, “Fair Value Measurements
and Disclosures” to offer investors a practical expedient for measuring the fair
value of investments in certain entities that calculate net asset value per
share (“NAV”). Specifically, measurement using NAV is reasonable for investments
within the scope of ASU 2009-12. The ASU 2009-12 is effective for the first
interim or annual reporting period beginning after the ASU’s issuance, and will
be adopted by the Company in the fourth quarter of fiscal year 2009. The Company
is assessing the potential impact, if any, of the adoption of ASU 2009-12 on its
consolidated results of operations and financial condition.





8




MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)





3.   Investments





(a)
            Fixed
      Maturities and Other Investments





The
original or amortized cost, estimated fair value and gross unrealized gains and
losses of available-for-sale fixed maturities and other investments as of
September 30, 2009 and December 31, 2008 are as follows:




September
      30, 2009
                          
                          Original or
                            amortized
                            cost
                          
                          
                          Gross
                            unrealized
                            gains
                          
                          
                          Gross
                            unrealized
                            losses
                          
                          
                          Fair
                            valueFixed Maturities:U.S.
      – treasury bonds
                          
                          $
                          39,451
                          
                          
                          $
                          365
                          
                          
                          $
                          (158
                          )
                          
                          $
                          39,658U.S.
      Agency - mortgage backed securities
                          
                          
                          880,024
                          
                          
                          
                          23,969
                          
                          
                          
                          (2,292
                          )
                          
                          
                          901,701Corporate
      fixed maturities
                          
                          
                          564,285
                          
                          
                          
                          35,998
                          
                          
                          
                          (23,718
                          )
                          
                          
                          576,565Municipal
      bonds
                          
                          
                          22,944
                          
                          
                          
                          836
                          
                          
                          
                          -
                          
                          
                          
                          23,780Total
      available for sale fixed maturities
                          
                          
                          1,506,704
                          
                          
                          
                          61,168
                          
                          
                          
                          (26,168
                          )
                          
                          
                          1,541,704Other
      investments
                          
                          
                          5,707
                          
                          
                          
                          -
                          
                          
                          
                          (178
                          )
                          
                          
                          5,529Total
      investments
                          
                          $
                          1,512,411
                          
                          
                          $
                          61,168
                          
                          
                          $
                          (26,346
                          )
                          
                          $
                          1,547,233





December
      31, 2008
                                    
                                    Original oramortizedcost
                                    
                                    
                                    Grossunrealizedgains
                                    
                                    
                                    Grossunrealizedlosses
                                    
                                    
                                    FairValueFixed Maturities:U.S.
      – treasury bonds
                                    
                                    $
                                    37,782
                                    
                                    
                                    $
                                    775
                                    
                                    
                                    $
                                    (30
                                    )
                                    
                                    $
                                    38,527U.S.
      Agency - mortgage backed securities
                                    
                                    
                                    756,023
                                    
                                    
                                    
                                    21,178
                                    
                                    
                                    
                                    (5,302
                                    )
                                    
                                    
                                    771,899Corporate
      fixed maturities
                                    
                                    
                                    370,121
                                    
                                    
                                    
                                    2,320
                                    
                                    
                                    
                                    (62,912
                                    )
                                    
                                    
                                    309,529Total
      available for sale fixed maturities
                                    
                                    
                                    1,163,926
                                    
                                    
                                    
                                    24,273
                                    
                                    
                                    
                                    (68,244
                                    )
                                    
                                    
                                    1,119,955Other
      investments
                                    
                                    
                                    5,819
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (528
                                    )
                                    
                                    
                                    5,291Total
      investments
                                    
                                    $
                                    1,169,745
                                    
                                    
                                    $
                                    24,273
                                    
                                    
                                    $
                                    (68,772
                                    )
                                    
                                    $
                                    1,125,246





The
contractual maturities of our fixed maturities as of September 30, 2009 and
December 31, 2008 are shown below.  Actual maturities may differ from
contractual maturities because borrowers may have the right to call or repay
obligations with or without call or prepayment.




September 30,
                                          2009
                                        
                                        
                                        December 31,
                                          2008Amortizedcost
                                        
                                        
                                        Fair Value
                                        
                                        
                                        Amortizedcost
                                        
                                        
                                        Fair ValueDue
      in one year or less
                                        
                                        $
                                        60,720
                                        
                                        
                                        $
                                        62,597
                                        
                                        
                                        $
                                        6,282
                                        
                                        
                                        $
                                        6,293Due
      after one year through five years
                                        
                                        
                                        174,771
                                        
                                        
                                        
                                        171,756
                                        
                                        
                                        
                                        160,732
                                        
                                        
                                        
                                        149,067Due
      after five years through ten years
                                        
                                        
                                        319,124
                                        
                                        
                                        
                                        326,162
                                        
                                        
                                        
                                        228,553
                                        
                                        
                                        
                                        179,843Due
      after ten years
                                        
                                        
                                        72,065
                                        
                                        
                                        
                                        79,488
                                        
                                        
                                        
                                        12,337
                                        
                                        
                                        
                                        12,854Mortgage
      and asset -backed
                                        
                                        
                                        880,024
                                        
                                        
                                        
                                        901,701
                                        
                                        
                                        
                                        756,022
                                        
                                        
                                        
                                        771,898Total
                                        
                                        $
                                        1,506,704
                                        
                                        
                                        $
                                        1,541,704
                                        
                                        
                                        $
                                        1,163,926
                                        
                                        
                                        $
                                        1,119,955




9





MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)





3.   Investments
(continued)





Realized
gains or losses on the sale of investments are determined on the basis of the
first in first out cost method and include adjustments to the cost basis of
investments for declines in value that are considered to be
other-than-temporary. The following provides an analysis of realized gains and
losses:





For the ThreeMonths EndedSeptember 30,2009
                              
                              
                              For the ThreeMonthsEndedSeptember 30,2008
                              
                              
                              For the NineMonthsEndedSeptember 30,2009
                              
                              
                              For the NineMonths EndedSeptember 30,2008Net
      realized Investment Losses:Total other-than-temporary
      impairment losses
                              
                              $
                              -
                              
                              
                              $
                              (42,538
                              )
                              
                              $
                              -
                              
                              
                              $
                              (42,538
                              )Portion of loss recognized in
      other comprehensive income
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -Net
      impairment losses recognized in earnings
                              
                              
                              -
                              
                              
                              
                              (42,538
                              )
                              
                              
                              -
                              
                              
                              
                              (42,538
                              )Gross
      realized gains on sale of investments
                              
                              
                              42
                              
                              
                              
                              -
                              
                              
                              
                              3,519
                              
                              
                              
                              163Gross
      realized loss on sale of investments
                              
                              
                              (108
                              )
                              
                              
                              -
                              
                              
                              
                              (3,981
                              )
                              
                              
                              -Net
      realized investment loss
                              
                              $
                              (66
                              )
                              
                              $
                              (42,538
                              )
                              
                              $
                              (462
                              )
                              
                              $
                              (42,375
                              )




The
following tables summarize fixed maturities in an unrealized loss position and
the aggregate fair value and gross unrealized loss by length of time the
security has continuously been in an unrealized loss position:





Less than 12 months
                              
                              
                              12 months or more
                              
                              
                              TotalSeptember 30, 2009
                              
                              Fair
                                value
                              
                              
                              Unrealized
                                losses
                              
                              
                              Fair
                                value
                              
                              
                              Unrealized
                                Losses
                              
                              
                              Fair
                                value
                              
                              
                              Unrealized
                                lossesAvailable-for-sale
      securities:U.S.
      – treasury bonds
                              
                              $
                              3,277
                              
                              
                              $
                              (158
                              )
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              3,277
                              
                              
                              $
                              (158
                              )U.S.
      Agency mortgage backed securities
                              
                              
                              120,097
                              
                              
                              
                              (1,393
                              )
                              
                              
                              31,905
                              
                              
                              
                              (899
                              )
                              
                              
                              152,002
                              
                              
                              
                              (2,292
                              )Corporate
      fixed maturities
                              
                              
                              13,935
                              
                              
                              
                              (727
                              )
                              
                              
                              209,904
                              
                              
                              
                              (22,991
                              )
                              
                              
                              223,839
                              
                              
                              
                              (23,718
                              )Municipal
      bonds
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -
                              
                              
                              
                              -137,309
                              
                              
                              
                              (2,278
                              )
                              
                              
                              241,809
                              
                              
                              
                              (23,890
                              )
                              
                              
                              379,118
                              
                              
                              
                              (26,168
                              )Other
      investments
                              
                              $
                              -
                              
                              
                              $
                              -
                              
                              
                              $
                              4,822
                              
                              
                              $
                              (178
                              )
                              
                              $
                              4,822
                              
                              
                              $
                              (178
                              )Total
      temporarily impaired  available-for-sale securities and other
      investments
                              
                              $
                              137,309
                              
                              
                              $
                              (2,278
                              )
                              
                              $
                              246,631
                              
                              
                              $
                              (24,068
                              )
                              
                              $
                              383,940
                              
                              
                              $
                              (26,346
                              )




As of
September 30, 2009, there were approximately 32 securities in an unrealized loss
position with a fair value of $383,940. Of these securities, there were 18
securities that have been in an unrealized loss position for 12 months or more
with a value of $246,631.





10




MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)


3.   Investments –
(continued)





Less than 12 months
                                
                                
                                12 months or more
                                
                                
                                TotalDecember 31, 2008
                                
                                Fair
                                  Value
                                
                                
                                Unrealized
                                  losses
                                
                                
                                Fair
                                  value
                                
                                
                                Unrealized
                                  Losses
                                
                                
                                Fair
                                  value
                                
                                
                                Unrealized
                                  lossesAvailable-for-sale
      securities:U.S.
      – treasury bonds
                                
                                $
                                6,521
                                
                                
                                $
                                (30
                                )
                                
                                
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                6,521
                                
                                
                                
                                (30
                                )U.S.
      Agency mortgage backed securities
                                
                                
                                148,803
                                
                                
                                
                                (5,302
                                )
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                148,803
                                
                                
                                
                                (5,302
                                )Corporate
      fixed maturities
                                
                                
                                104,279
                                
                                
                                
                                (13,708
                                )
                                
                                
                                153,055
                                
                                
                                
                                (49,204
                                )
                                
                                
                                257,334
                                
                                
                                
                                (62,912
                                )259,603
                                
                                
                                
                                (19,040
                                )
                                
                                
                                153,055
                                
                                
                                
                                (49,204
                                )
                                
                                
                                412,658
                                
                                
                                
                                (68,244
                                )Other
      investments
                                
                                $
                                4,722
                                
                                
                                $
                                (528
                                )
                                
                                $
                                -
                                
                                
                                $
                                -
                                
                                
                                $
                                4,722
                                
                                
                                
                                (528
                                )Total
      temporarily impaired  available-for-sale securities and other
      investments
                                
                                $
                                264,325
                                
                                
                                $
                                (19,568
                                )
                                
                                $
                                153,055
                                
                                
                                $
                                (49,204
                                )
                                
                                $
                                417,380
                                
                                
                                $
                                (68,772
                                )





As of
December 31, 2008, there were approximately 40 securities in an unrealized loss
position with a fair value of $417,380. Of these securities, there were 10
securities that have been in an unrealized loss position for 12 months or more
with a value of $153,055.





Other-than-Temporary
Impairments (“OTTI”)





We review
our investment portfolio for impairment on a quarterly basis. Impairment of
investments results in a charge to operations when a fair value decline below
cost is deemed to be other-than-temporary. As of September 30, 2009, we reviewed
our portfolio to evaluate the necessity of recording impairment losses for
other-than-temporary declines in the fair value of
investments.  During the three and nine months ended September 30,
2009, theCompany
recognized $0 as other than temporary impairment on fixed income securities and
other investments and forthe three and nine months ended September 30,
2008 theCompany
recognized $42,538 as other than
temporary impairment on fixed income securities and other investments.Based on our qualitative and quantitative OTTI review of each asset class
within our fixed maturity portfolio, the unrealized losses on fixed maturities
at September 30, 2009, were primarily due to widening of credit spreads relating
to the market illiquidity, rather than credit events. Because the Company
neither intends nor will be required to sell these securities until a recovery
of fair value to amortized cost, we currently believe it is probable that we
will collect all amounts due according to their respective contractual terms.
Therefore we do not consider these fixed maturities to be other-than-temporarily
impaired at September 30, 2009.





(b)
Restricted Cash and Investments





We are
required to maintain assets on deposit to support our reinsurance operations and
to serve as collateral for our reinsurance liabilities under various reinsurance
agreements. The assets on deposit are available to settle reinsurance
liabilities. We also utilize trust accounts to collateralize business with our
reinsurance counterparties. These trust accounts generally take the place of
letter of credit requirements. The assets in trust as collateral are primarily
cash and highly rated fixed maturity securities. The fair value of our
restricted assets was as follows:




September30,
      2009
                                
                                
                                December31,
      2008Restricted
      cash -  third party agreements
                                
                                $
                                199,172
                                
                                
                                $
                                335,201Restricted
      cash -  related party agreements
                                
                                
                                19,423
                                
                                
                                
                                74,076Total
      restricted cash
                                
                                
                                218,595
                                
                                
                                
                                409,277Restricted
      investments - in Trust for third party agreements at fair value (Amortized
      cost: 2009 - $860,641; 2008 - $701,973)
                                
                                
                                863,703
                                
                                
                                
                                660,388Restricted
      investments - in Trust for related party agreements at fair value
      (Amortized cost: 2009 - $140,310; 2008
-  $1,200)
                                
                                
                                158,869
                                
                                
                                
                                1,203Total
      restricted investments
                                
                                
                                1,022,572
                                
                                
                                
                                661,591Total
      restricted cash and investments
                                
                                $
                                1,241,167
                                
                                
                                $
                                1,070,868





11




MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)





3.   Investments –
(continued)





(c) Other





The
Company enters into repurchase agreements. The agreements are accounted for as
collateralized borrowing transactions and are recorded at contract amounts. The
Company receives cash or securities, that it invests or holds in short term or
fixed income securities. As of September 30, 2009, there were $106,016 principal
amount outstanding at interest rates between 0.35% and 0.50%. Interest expense
associated with these repurchase agreements was $117 and $900 for the three and
nine months ended September 30, 2009, respectively, out of which $67 was accrued
as of September 30, 2009. The Company has approximately $106,016 of collateral
pledged in support of these agreements.





4.
Fair Value of Financial Instruments




The
Company’s estimates of fair value for financial assets and financial liabilities
are based on the framework established in ASC 820. The framework is based on the
inputs used in valuation and gives the highest priority to quoted prices in
active markets and requires that observable inputs be used in the valuations
when available. The disclosure of fair value estimates in the ASC 820 hierarchy
is based on whether the significant inputs into the valuation are observable. In
determining the level of the hierarchy in which the estimate is disclosed, the
highest priority is given to unadjusted quoted prices in active markets and the
lowest priority to unobservable inputs that reflect the Company’s significant
market assumptions. The three levels of the hierarchy are as
follows:





·
            Level
      1- Unadjusted quoted market prices for identical assets or
      liabilities in active markets that the Company has the ability to
      access.





·
            Level
      2- Quoted prices for similar assets or liabilities in active
      markets; quoted prices for identical or similar assets or liabilities in
      inactive markets; or valuations based on models where the significant
      inputs are observable (e.g., interest rates, yield curves, prepayment
      speeds, default rates, loss severities, etc.) or can be corroborated by
      observable market data.





·
            Level
      3- Valuations based on models where significant inputs are not
      observable. The unobservable inputs reflect the Company’s own assumptions
      about the assumptions that market participants would
  use.





In
accordance with ASC 820, the Company determines fair value based on the price
that would be received to sell an asset or paid to transfer a liability in an
orderly transaction between market participants at the measurement
date.





ASC 825,
“Disclosure about Fair Value of Financial Instruments” requires all entities to
disclose the fair value of their financial instruments, both assets and
liabilities recognized and not recognized in the balance sheet, for which it is
practicable to estimate fair value.





The
Company uses the following methods and assumptions in estimating its fair value
disclosure for its financial instruments.





Investments available for
sale. Investments available for sale are recorded at fair value on a
recurring basis and include fixed maturities and securities sold under
agreements to repurchase. Fair value of investments is measured based upon
quoted prices in active markets, if available. If quoted prices in active
markets are not available, fair values are measured by an independent pricing
service that utilizes valuation techniques based upon observable market data.
Level 1 investments include those traded on an active exchange, such as the
NASDAQ. Since fixed maturities other than U.S. treasury securities generally do
not trade on a daily basis, the independent pricing service prepares estimates
of fair value measurements for these securities using its proprietary pricing
applications which include available relevant market information. These
investments are classified as Level 2 investments and include obligations of
U.S. government agencies, municipals and corporate debt securities.




Other investments. Other
investments consist primarily of hedge funds where the fair value estimate is
determined by an external fund manager based on recent filings, operating
results, balance sheet stability, growth and other business and market sector
fundamentals. Due to the significant unobservable inputs in these valuations,
the Company includes other investments in the amount disclosed in Level
3.





Reinsurance balance receivable.The carrying values reported in the accompanying balance sheets for these
financial instruments approximate their fair value due to short term nature of
the assets.





Loan to related party. The
carrying values reported in the accompanying balance sheets for these financial
instruments approximate their fair value.





Trust preferred securities.The carrying values reported in the accompanying balance sheets for these
financial instruments approximate their fair value.





12





MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)





a)
              Fair
      Value Hierarchy





The
following table presents the level within the fair value hierarchy at which the
Company’s financial assets and financial liabilities are measured on a recurring
basis as of September 30, 2009 and December 31, 2008:





September 30,
      2009
                                
                                Quoted Prices in
                                  Active Markets
                                  for Identical
                                  Assets (Level 1)
                                
                                
                                Significant
                                  Other Observable
                                  Inputs (Level 2)
                                
                                
                                Significant
                                  Unobservable
                                  Inputs
                                  (Level 3)
                                
                                
                                Total Fair
                                  ValueAssetsFixed
      maturities
                                
                                $
                                39,658
                                
                                
                                $
                                1,502,046
                                
                                
                                $
                                -
                                
                                
                                $
                                1,541,704Other
      investments
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                5,529
                                
                                
                                
                                5,529Total
                                
                                $
                                39,658
                                
                                
                                $
                                1,502,046
                                
                                
                                $
                                5,529
                                
                                
                                $
                                1,547,233As
      a percentage of total assets
                                
                                
                                1.5
                                %
                                
                                
                                58.5
                                %
                                
                                
                                0.2
                                %
                                
                                
                                60.3
                                %LiabilitiesSecurities
      sold under agreements to repurchase
                                
                                $
                                -
                                
                                
                                $
                                106,016
                                
                                
                                $
                                -
                                
                                
                                $
                                106,016As
      a percentage of total liabilities
                                
                                
                                -
                                
                                
                                
                                5.6
                                %
                                
                                
                                -
                                
                                
                                
                                5.6
                                %





December 31,
      2008
                                
                                Quoted Prices in
                                  Active Markets
                                  for Identical
                                  Assets (Level 1)
                                
                                
                                Significant
                                  Other Observable
                                  Inputs (Level 2)
                                
                                
                                Significant
                                  Unobservable
                                  Inputs
                                  (Level 3)
                                
                                
                                Total Fair
                                  ValueAssetsFixed
      maturities
                                
                                $
                                38,527
                                
                                
                                $
                                1,081,428
                                
                                
                                $
                                -
                                
                                
                                $
                                1,119,955Other
      investments
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                5,291
                                
                                
                                
                                5,291Total
                                
                                $
                                38,527
                                
                                
                                $
                                1,081,428
                                
                                
                                $
                                5,291
                                
                                
                                $
                                1,125,246As
      a percentage of total assets
                                
                                
                                1.8
                                %
                                
                                
                                50.8
                                %
                                
                                
                                0.2
                                %
                                
                                
                                52.8
                                %LiabilitiesSecurities
      sold under agreements to repurchase
                                
                                $
                                -
                                
                                
                                $
                                232,646
                                
                                
                                $
                                -
                                
                                
                                $
                                232,646As
      a percentage of total liabilities
                                
                                
                                -
                                
                                
                                
                                14.4
                                %
                                
                                
                                -
                                
                                
                                
                                14.4
                                %




b)
              Level
      3 Financial Instruments





The
following table presents changes in Level 3 for our financial instruments
measured at fair value on a recurring basis for the three months and nine months
ended September 30, 2009:


Other
      Investments:
                        
                        Three MonthsEndedSeptember 30,2009
                        
                        
                        Nine MonthsEndedSeptember 30,2009Balance at
      beginning of period
                        
                        $
                        5,392
                        
                        
                        $
                        5,291Change
      in net unrealized gains (losses) – included in other comprehensive
      loss
                        
                        
                        244
                        
                        
                        
                        350Net
      realized gains (losses) – included in net income
                        
                        
                        (108
                        )
                        
                        
                        (123
                        )Net
      purchases or (sales)
                        
                        
                        1
                        
                        
                        
                        11Net
      transfers in (out of) of Level 3
                        
                        
                        -
                        
                        
                        
                        -Balance
      at end of period
                        
                        $
                        5,529
                        
                        
                        $
                        5,529




13




MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)





5.
              Goodwill
      and Intangible Assets





Goodwill





Goodwill
is calculated as the excess of purchase price over the net fair value of assets
acquired. The Company performs an annual impairment analysis to identify
potential goodwill impairment and measures the amount of a goodwill impairment
loss to be recognized. This annual test is performed during the fourth quarter
of each year or more frequently if events or circumstances change in a way that
requires the Company to perform the impairment analysis on an interim basis.
Goodwill impairment testing requires an evaluation of the estimated fair value
of each reporting unit to its carrying value, including the goodwill. An
impairment charge is recorded if the estimated fair value is less than the
carrying amount of the reporting unit. No impairments have been identified to
date.





Intangibles





Intangible
assets consist of finite and indefinite life assets. Finite life intangible
assets include customer and producer relationships and trademarks. Insurance
company licenses are considered indefinite life intangible assets subject to
annual impairment testing.





On
October 31, 2008, the Company acquired the reinsurance operations of GMAC
Insurance (GMACI), including its book of assumed reinsurance business. As part
of the transaction the Company’s wholly owned subsidiary Maiden Holdings North
America, Ltd. (“Maiden NA”) acquired GMAC RE LLC, the reinsurance managing
general agent writing business on behalf of Motors Insurance Corporation and the
renewal rights for the business written by GMAC RE.  In connection
with the transaction Maiden NA also entered into an agreement to acquire two
licensed insurance companies, GMAC Direct Insurance Company (“GMAC Direct”) and
Integon Specialty Insurance Company (“Integon”). The acquisitions of GMAC Direct
and Integon were closed on December 23, 2008 and September 1, 2009,
respectively. GMAC Direct was renamed Maiden Reinsurance Company, and Integon
was renamed Maiden Specialty Insurance Company.





The
following table shows an analysis of goodwill and intangible
assets:





September
      30, 2009
                                                                  Gross
                                                                  
                                                                  AccumulatedAmortization
                                                                  
                                                                  Net
                                                                  
                                                                  Useful LifeGoodwill
                                                                  
                                                                  $
                                                                  49,747
                                                                  
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  
                                                                  $
                                                                  49,747
                                                                  
                                                                  IndefiniteState
      licenses
                                                                  
                                                                  
                                                                  7,727
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  7,727
                                                                  
                                                                  IndefiniteCustomer
      relationships
                                                                  
                                                                  
                                                                  51,400
                                                                  
                                                                  
                                                                  
                                                                  (6,168
                                                                  )
                                                                  
                                                                  
                                                                  45,232
                                                                  
                                                                  15
      years double decliningNet
      balance
                                                                  
                                                                  $
                                                                  108,874
                                                                  
                                                                  
                                                                  $
                                                                  (6,168
                                                                  )
                                                                  
                                                                  $
                                                                  102,706December 31,
      2008
                                                                  Gross
                                                                  
                                                                  AccumulatedAmortization
                                                                  
                                                                  Net
                                                                  
                                                                  Useful LifeGoodwill
                                                                  
                                                                  $
                                                                  49,747
                                                                  
                                                                  
                                                                  $
                                                                  -
                                                                  
                                                                  
                                                                  $
                                                                  49,747
                                                                  
                                                                  IndefiniteState
      licenses
                                                                  
                                                                  
                                                                  5,000
                                                                  
                                                                  
                                                                  
                                                                  -
                                                                  
                                                                  
                                                                  
                                                                  5,000
                                                                  
                                                                  IndefiniteCustomer
      relationships
                                                                  
                                                                  
                                                                  51,400
                                                                  
                                                                  
                                                                  
                                                                  (1,253
                                                                  )
                                                                  
                                                                  
                                                                  50,147
                                                                  
                                                                  15
      years double decliningNet
      balance
                                                                  
                                                                  $
                                                                  106,147
                                                                  
                                                                  
                                                                  $
                                                                  (1,253
                                                                  )
                                                                  
                                                                  $
                                                                  104,894




Goodwill
and intangible assets are subject to annual impairment testing. No impairment
was recorded during the three and nine months ended September 30, 2009. The
Company currently estimates the amortization of the intangible assets with
finite lives for the years ended December 31, 2009, 2010, 2011, 2012 and
2013 to be $6,590, $5,808, $5,033, $4,362 and $3,781, respectively.




14




MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)





6.  Trust
Preferred Securities





On
January 20, 2009, the Company completed a private placement of 260,000 units
(the “Units”), each Unit consisting of $1,000 principal amount of capital
securities (the “Trust Preferred Securities”) of Maiden Capital Financing Trust
(the “Trust”), a trust established by Maiden NA, and 45 common shares, $.01 par
value, of the Company (the “Common Shares”), for a purchase price of $1,000.45
per Unit.  This resulted in gross proceeds to the Company of $260,117,
before $4,342 of placement agent fees and expenses.  As a result, the
Company issued 11,700,000 of its Common Shares.  Certain trusts
established by Michael Karfunkel and George Karfunkel, two of the Company’s
founding shareholders, purchased an aggregate of 159,000 of the Units or
61%.  The remaining 101,000 Units were purchased by existing
institutional shareholders of the Company.




The Trust
used the proceeds from the sale of the Trust Preferred Securities to purchase a
subordinated debenture (the “Debenture”) in the principal amount of $260,000
issued by Maiden NA.





The
Debenture was issued pursuant to an Indenture dated January 20, 2009 by and
between the Maiden NA and Wilmington Trust Company
(“Wilmington”).  The terms of the Debenture are substantially the same
as the terms of the Trust Preferred Securities.  The interest payments
by Maiden NA will be used by the Trust to pay the quarterly distributions to the
holders of the Trust Preferred Securities.  The Indenture permits
Maiden NA to redeem the Debenture (and thus a like amount of the Trust Preferred
Securities) at stated value plus one year’s interest together with accrued and
unpaid interest, if any, through the date of redemption at any time until
January 15, 2014.  On and after January 15, 2014, Maiden NA may redeem
any or all of the Debenture (and thus a like amount of the Trust Preferred
Securities) at stated value plus accrued and unpaid interest, if any, through
the date of redemption.  If the Company redeems any amount of its
Debenture, the Trust must redeem a like amount of the Trust Preferred
Securities.  The Indenture permits Maiden NA, as long as no event of
default has occurred and continues, to defer interest payments on the Debenture
for up to 20 consecutive quarterly periods, during which interest accrues and
compounds until paid.





Pursuant
to separate Guarantee Agreements dated as of January 20, 2009 with Wilmington,
as guarantee trustee, each of the Company and Maiden NA has agreed to guarantee
the payment of distributions and payments on liquidation or redemption of the
Trust Preferred Securities.





As a
consequence of the issuance of a majority of the Units to a related party under
ASC 810 Consolidation (“ASC 810”), the Trust is a variable interest entity and
the Company is deemed to be the Primary beneficiary and is required to
consolidate the Trust. The issuance of Common Shares associated with the Trust
Preferred Securities resulted in an original issuance discount of $44,928 based
on market price on January 20, 2009. The discount is amortized over 30 years
based on the effective interest method. The Debentures and Trust Preferred
Securities mature in 2039 and carry a stated or coupon rate of 14% with an
effective interest rate of 16.95%. As of September 30, 2009, the stated value of
the Trust Preferred Securities was $215,110 which comprises the principal amount
of $260,000 and unamortized discount of $44,890.





7.    Earnings Per
Share





The
following is a summary of the elements used in calculating basic and diluted
earnings per share:




Three MonthsEndedSeptember 30,2009
                                
                                
                                Three MonthsEnded
                                  September 30,
                                  2008
                                
                                
                                Nine MonthsEndedSeptember 30,2009
                                
                                
                                Nine Months
                                  EndedSeptember 30,
                                  2008Net
      income (loss) available to common shareholders
                                
                                $
                                14,987
                                
                                
                                $
                                (27,516
                                )
                                
                                $
                                44,339
                                
                                
                                $
                                (1,209
                                )Weighted
      average number of common shares outstanding - basic
                                
                                
                                70,287,664
                                
                                
                                
                                59,550,000
                                
                                
                                
                                69,430,521
                                
                                
                                
                                59,550,000Potentially
      dilutive securities:Warrants
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -
                                
                                
                                
                                -Share
      options
                                
                                
                                565,231
                                
                                
                                
                                -
                                
                                
                                
                                416,193
                                
                                
                                
                                -Weighted
      average number of common shares outstanding - diluted
                                
                                
                                70,852,895
                                
                                
                                
                                59,550,000
                                
                                
                                
                                69,846,714
                                
                                
                                
                                59,550,000Basic
      earnings per common share:
                                
                                $
                                0.21
                                
                                
                                $
                                (0.46
                                )
                                
                                $
                                0.64
                                
                                
                                $
                                (0.02
                                )Diluted
      earnings per common share:
                                
                                $
                                0.21
                                
                                
                                $
                                (0.46
                                )
                                
                                $
                                0.63
                                
                                
                                $
                                (0.02
                                )




As of
September 30, 2009, 4,050,000 (2008: 4,050,000) warrants and 638,000 (2008:
893,529) share options were excluded from the calculation of diluted earnings
per share as they were anti-dilutive.





15





MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)





8.    Share Based
Compensation





Share
Options




The fair
value of each option grant is separately estimated for each vesting date. The
fair value of each option is amortized into compensation expense on a
straight-line basis between the grant date for the award and each vesting date.
The Company has estimated the fair value of all share option awards as of the
date of the grant by applying the Black-Scholes-Merton multiple-option pricing
valuation model. The application of this valuation model involves assumptions
that are judgmental and highly sensitive in the determination of compensation
expense. The adoption of ASC 718 Compensation - Stock
Compensation fair value method has resulted in share-based expense (a
component of salaries and benefits) in the amount of approximately $168 and $444
for the three and nine months ended September 30, 2009, respectively (2008: $219
and $611, respectively).





The key
assumptions used in determining the fair value of options granted in the three
and nine months ended September 30, 2009 and a summary of the methodology
applied to develop each assumption are as follows:





Assumptions
      :
                    
                    September30, 2009Volatility
                    
                    
                    29.8-43.9
                    %Risk-free
      interest rate
                    
                    
                    2.36-3.30
                    %Weighted
      average expected lives in years
                    
                    5-6.1
      yearsForfeiture
      rate
                    
                    
                    0
                    %Dividend
      yield rate
                    
                    
                    1-5.39
                    %





Expected Price Volatility –
This is a measure of the amount by which a price has fluctuated or is expected
to fluctuate. The common shares of Maiden Holdings, Ltd. began trading on May 6,
2008. Since the Company does not have enough history over which to calculate an
expected volatility representative of the volatility over the expected lives of
the options, the Company considered the historical and current implied
volatilities of a set of comparable companies in the industry in which the
Company operates.




Risk-Free Interest Rate –
This is the U.S. Treasury rate for the week of the grant having a term equal to
the expected life of the option. An increase in the risk-free interest rate will
increase compensation expense.





Expected Lives – This is the
period of time over which the options granted are expected to remain outstanding
giving consideration to vesting schedules, historical exercise and forfeiture
patterns. The Company uses the simplified method outlined in SEC Staff
Accounting Bulletin No. 107 to estimate expected lives for options granted
during the period as historical exercise data is not available and the options
meet the requirements set out in the Bulletin. Options granted have a maximum
term of ten years. An increase in the expected life will increase compensation
expense.





Forfeiture Rate – This is the
estimated percentage of options granted that are expected to be forfeited or
cancelled before becoming fully vested. An increase in the forfeiture rate will
decrease compensation expense.





The
following schedules shows all options granted, exercised, expired and exchanged
under the Plan for the three months ended September 30, 2009:





Three
      Months Ended
                              September 30,
      2009
                            
                            Number of
                              Share Options
                            
                            
                            WeightedAverageExercise Price
                            
                            
                            Weighted AverageYears RemainingContractual TermOutstanding,
      June 30, 2009
                            
                            
                            1,503,834
                            
                            
                            $
                            5.54
                            
                            
                            
                            9.3Granted
                            
                            
                            200,000
                            
                            
                            
                            4.54
                            
                            
                            
                            9.4Exercised
                            
                            
                            -
                            
                            
                            
                            -
                            
                            
                            
                            -Cancelled
                            
                            
                            (10,500
                            )
                            
                            
                            3.28
                            
                            
                            
                            -Outstanding,
      September 30, 2009
                            
                            
                            1,693,334
                            
                            
                            $
                            5.47
                            
                            
                            
                            8.9





16




MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)





8.    Share Based Compensation
(continued)





The
following schedule shows all options granted, exercised, expired and exchanged
under the Plan for the nine months ended September 30, 2009:





Nine
      Months Ended
                  September 30,
      2009
                
                Number of
                  Share Options
                
                
                WeightedAverageExercise Price
                
                
                Weighted AverageYears RemainingContractual TermOutstanding,
      December 31, 2008
                
                
                1,519,834
                
                
                $
                5.92
                
                
                
                9.4Granted
                
                
                384,000
                
                
                
                4.51
                
                
                
                9.4Exercised
                
                
                -
                
                
                
                -
                
                
                
                -Cancelled
                
                
                (210,500
                )
                
                
                8.07
                
                
                
                -Outstanding,
      September 30, 2009
                
                
                1,693,334
                
                
                $
                5.47
                
                
                
                8.9




The
following schedules shows all options granted, exercised, expired and exchanged
under the Plan for the three months ended September 30, 2008:





Three
      Months Ended
                                            September
      30, 2008
                                          
                                          Number ofShare Options
                                          
                                          
                                          Weighted
                                            Average ExercisePrice
                                          
                                          
                                          Weighted AverageYears RemainingContractual TermOutstanding,
      June 30, 2008
                                          
                                          
                                          962,000
                                          
                                          
                                          $
                                          10.00
                                          
                                          
                                          
                                          9.3Granted
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Exercised
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Cancelled
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -
                                          
                                          
                                          
                                          -Outstanding,
      September 30, 2008
                                          
                                          
                                          962,000
                                          
                                          
                                          $
                                          10.00
                                          
                                          
                                          
                                          9.0





The
following schedule shows all options granted, exercised, expired and exchanged
under the Plan for the nine months ended September 30, 2008:





Nine
      Months Ended
                    September 30,
      2008
                  
                  Number ofShare Options
                  
                  
                  WeightedAverage ExercisePrice
                  
                  
                  Weighted AverageYears RemainingContractual TermOutstanding,
      December 31, 2007
                  
                  
                  716,000
                  
                  
                  $
                  10.00
                  
                  
                  
                  9.1Granted
                  
                  
                  246,000
                  
                  
                  
                  10.00
                  
                  
                  
                  9.5Exercised
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Cancelled
                  
                  
                  -
                  
                  
                  
                  -
                  
                  
                  
                  -Outstanding,
      September 30, 2008
                  
                  
                  962,000
                  
                  
                  $
                  10.00
                  
                  
                  
                  9.0





The
weighted average grant date fair value was $1.50 and $3.30 for all options
outstanding at September 30, 2009 and 2008, respectively. There was
approximately $1,466 and $2,252 of total unrecognized compensation cost related
to non-vested share-based compensation arrangements as of September 30, 2009 and
2008, respectively.





9.Dividends
Declared





On
February 25, 2009, the Company’s Board of Directors approved a quarterly cash
dividend of $0.06 per common share. This dividend was paid on April 15, 2009 to
shareholders of record on April 1, 2009.





On May
11, 2009, the Company’s Board of Directors approved a quarterly cash dividend of
$0.06 per common share. This dividend was paid on July 15, 2009 to shareholders
of record on July 1, 2009.





On August
10, 2009, the Company’s Board of Directors approved a quarterly cash dividend of
$0.06 per common share. This dividend was paid on October 15, 2009 to
shareholders of record on October 1, 2009.





17




MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)





10.    Related Party
Transactions





The
Founding Shareholders of Maiden, Michael Karfunkel, George Karfunkel and Barry
Zyskind, are also the principal shareholders, and, respectively, the Chairman of
the Board of Directors, a Director, and the President and Chief Executive
Officer and Director of AmTrust Financial Services, Inc. (“AmTrust”). The
following describes transactions between the Company and AmTrust.





Quota
Share Reinsurance Agreement





Effective
July 1, 2007, the Company and AmTrust entered into a master agreement, as
amended (the “Master Agreement”), by which they caused AmTrust’s Bermuda
reinsurance subsidiary, AmTrust International Insurance, Ltd.  (“AII”)
and the Company’s wholly owned Bermuda subsidiary Maiden Insurance Company Ltd.
(“Maiden Insurance”), to enter into the Quota Share Reinsurance Agreement
by which (a) AII retrocedes to Maiden Insurance an amount equal to 40% of the
premium written by  subsidiaries of AmTrust, net of the cost of
unaffiliated inuring reinsurance (and in the case of AmTrust’s U.K. insurance
subsidiary, IGI Insurance Company Limited (“IGI”), net of commissions) and 40%
of losses and (b) AII transferred to Maiden Insurance 40% of the AmTrust
subsidiaries’ unearned premium reserves, effective as of July 1, 2007, with
respect to the current lines of business, excluding risks for which the AmTrust
subsidiaries’ net retention exceeds $5,000 (“Covered Business”). AmTrust
also has agreed to cause AII, subject to regulatory requirements, to reinsure
any insurance company which writes Covered Business in which AmTrust acquires a
majority interest to the extent required to enable AII to cede to Maiden
Insurance 40% of the premiums and losses related to such Covered Business. The
Agreement further provides that AII receives a ceding commission of 31% of ceded
written premiums.





The Quota
Share Reinsurance Agreement which has an initial term of three years, has
been automatically renewed for another three year term until June
30, 2013 and will automatically renew for successive three year terms
thereafter, unless either AII or Maiden Insurance notifies the other of its
election not to renew not less than nine months prior to the end of any such
three year term. In addition, either party is entitled to terminate on thirty
days notice or less upon the occurrence of certain early termination events,
which include a default in payment, insolvency, change in control of AII or
Maiden Insurance, run-off, or a reduction of 50% or more of the shareholders’
equity of Maiden Insurance or the combined shareholders’ equity of AII and the
AmTrust subsidiaries.





On June
11, 2008, the Company and AmTrust amended the Quota Share Reinsurance Agreement
to add Retail Commercial Package Business to the Covered Business as a
consequence of AmTrust’s acquisition of Unitrin Business Insurance (UBI). Under
the amendment, AmTrust's subsidiaries cede, upon collection, to Maiden 100% of
unearned premium (net of inuring reinsurance) from the acquisition of UBI's
in-force book of business. Additionally, AmTrust cedes to Maiden 40% of net
premium written, effective as of June 1, 2008. Maiden will pay to AmTrust a
ceding commission of 34.375% on the unearned premium cession and the Retail
Commercial Package Business. The $2,000 maximum liability for a single loss
provided in the Quota Share Reinsurance Agreement shall not be applicable to
Retail Commercial Package Business.





On
February 9, 2009, AII and Maiden Insurance amended the Quota Share Reinsurance
Agreement to clarify that (i) AII would offer Maiden Insurance the opportunity
to reinsure Excess Retention Business, which is defined as a policy issued by an
AmTrust insurance subsidiary with respect to which the insurance subsidiary’s
retention is greater than $5 million and (ii) the deduction for the cost of
inuring reinsurance from Affiliate Subject Premium (as defined in the Quota
Share Reinsurance Agreement) retroceded to Maiden Insurance is net of ceding
commission. In addition, the Quota Share Reinsurance Agreement has been amended
by deleting the limitation on Maiden Insurance’s maximum liability in respect of
a single loss, which, under certain circumstances, was $2 million. Pursuant to
the Quota Share Reinsurance Agreement, as amended, AII and Maiden Insurance
share, proportionally, in all premium and losses ceded
thereunder.





The
Company recorded approximately $28,132 and $85,005 of ceding commission expense
for the three and nine months ended September 30, 2009, respectively (2008:
$36,908 and $82,524 respectively), as a result of this transaction.





Other
Reinsurance Agreement





Effective
January 1, 2008, the Company and AmTrust entered into an agreement to reinsure a
45% participation in the $9 million in excess of $1 million layer of AmTrust's
workers' compensation excess of loss program. This layer provides reinsurance to
AmTrust for losses per occurrence in excess of $1 million up to $10 million,
subject to an annual aggregate deductible of $1.25 million. This participation
was sourced through a reinsurance intermediary via open market placement in
which competitive bids were solicited by an independent broker.




The
following is the effect on the Company’s balance sheet as of September 30, 2009
and December 31, 2008, and the results of operations for the three and nine
months ended September 30, 2009 and 2008 related to the Reinsurance Agreements
with AmTrust:





18




MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)


10.    Related Party Transactions
(continued)





Assets
      and (liabilities):
                      
                      September
      30,
                        2009
                      
                      
                      December
      31,2008Restricted
      cash and investments
                      
                      $
                      178,293
                      
                      
                      $
                      75,279Loan
      to related party
                      
                      
                      167,975
                      
                      
                      
                      167,975Reinsurance
      balances receivable, net
                      
                      
                      43,048
                      
                      
                      
                      48,387Accrued
      interest on loan to related party
                      
                      
                      1,631
                      
                      
                      
                      1,478Deferred
      acquisition costs
                      
                      
                      77,487
                      
                      
                      
                      80,455Reserve
      for losses and loss expenses
                      
                      
                      (167,218
                      )
                      
                      
                      (69,646
                      )Unearned
      premiums
                      
                      
                      (238,483
                      )
                      
                      
                      (245,742
                      )





Results
      of operations:
                          
                          Three MonthsEnded
                            September 30,2009
                          
                          
                          Three MonthsEnded September
      30, 2008
                          
                          
                          Nine MonthsEnded
                            September 30,2009
                          
                          
                          Nine MonthsEnded
                            September 30,2008Net
      premium written - assumed
                          
                          $
                          92,168
                          
                          
                          $
                          102,674
                          
                          
                          $
                          275,511
                          
                          
                          $
                          361,632Change
      in unearned premium - assumed
                          
                          
                          (785
                          )
                          
                          
                          8,654
                          
                          
                          
                          879
                          
                          
                          
                          (109,365
                          )Net
      earned premium - assumed
                          
                          
                          91,383
                          
                          
                          
                          111,328
                          
                          
                          
                          276,390
                          
                          
                          
                          252,267Commission
      and other acquisition costs on premium written
                          
                          
                          29,859
                          
                          
                          
                          33,570
                          
                          
                          
                          87,706
                          
                          
                          
                          120,113Change
      in deferred acquisition costs
                          
                          
                          31
                          
                          
                          
                          3,617
                          
                          
                          
                          2,968
                          
                          
                          
                          (37,008
                          )Ceding
      commission and other acquisition cost - expensed
                          
                          
                          29,890
                          
                          
                          
                          37,187
                          
                          
                          
                          90,674
                          
                          
                          
                          83,105Loss
      and loss adjustment expense
                          
                          
                          54,703
                          
                          
                          
                          65,664
                          
                          
                          
                          171,189
                          
                          
                          
                          146,084Interest
      income on loan to related party
                          
                          
                          507
                          
                          
                          
                          1,481
                          
                          
                          
                          1,871
                          
                          
                          
                          3,766





Collateral
provided to AmTrust




In order
to provide AmTrust’s U.S. insurance subsidiaries with credit for reinsurance on
their statutory financial statements, AII, as the direct reinsurer of the
AmTrust’s insurance subsidiaries, has established trust accounts (“Trust
Accounts”) for their benefit. Maiden Insurance has agreed to provide appropriate
collateral to secure its proportional share under the Quota Share Reinsurance
Agreement of AII’s obligations to the AmTrust subsidiaries to which AII is
required to provide collateral. This collateral may be in the form of (a) assets
loaned by Maiden Insurance to AII, for deposit into the Trust Accounts, pursuant
to a loan agreement between those parties, (b) assets transferred by Maiden
Insurance, for deposit into the Trust Accounts, (c) a letter of credit obtained
by Maiden Insurance and delivered to an AmTrust subsidiary on AII’s behalf (a
“Letter of Credit”), or (d) premiums withheld by an AmTrust subsidiary at Maiden
Insurance’s request in lieu of remitting such premiums to AII (“Withheld
Funds”). Maiden Insurance may provide any or a combination of these forms of
collateral, provided that the aggregate value thereof equals Maiden Insurance’s
proportionate share of its obligations under the Quota Share Reinsurance
Agreement with AII. If collateral is required to be provided to any AmTrust
subsidiary under applicable law or regulatory requirements, Maiden Insurance
will provide collateral to the extent required, although Maiden Insurance does
not expect that such collateral will be required unless an AmTrust subsidiary is
domiciled in the United States.




19




MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)





10.    Related Party Transactions
(continued)




Maiden
Insurance satisfied its collateral requirements under the Quota Share
Reinsurance Agreement with AII by lending funds in the amount of $167,975 as at
September 30, 2009 and December 31, 2008 to AII pursuant to a loan agreement
entered into between those parties. The amount of collateral Maiden Insurance is
required to maintain, which is determined quarterly, equals its proportionate
share of (a) the amount of ceded paid losses for which AII is responsible to
such AmTrust subsidiaries but has not yet paid, (b) the amount of ceded loss
reserves (including ceded reserves for claims reported but not resolved and
losses incurred but not reported) for which AII is responsible to AmTrust
subsidiaries, and (c) the amount of ceded reserves for unearned premiums ceded
by AmTrust subsidiaries to AII. Pursuant to the Master Agreement, AmTrust has
agreed to cause AII not to commingle Maiden Insurance’s assets with AII’s other
assets and to cause the AmTrust subsidiaries not to commingle Maiden Insurance’s
assets with the AmTrust subsidiaries’ other assets if an AmTrust subsidiary
withdraws those assets. AII has agreed that, if an AmTrust subsidiary returns to
AII excess assets withdrawn from a Trust Account, drawn on a Letter of Credit or
maintained by such AmTrust subsidiary as Withheld Funds, AII will immediately
return to Maiden Insurance its proportionate share of such excess assets. AII
has further agreed that if the aggregate fair market value of the amount of
Maiden Insurance’s assets held in the Trust Account exceeds Maiden Insurance’s
proportionate share of AII’s obligations, or if an AmTrust subsidiary misapplies
any such collateral, AII will immediately return to Maiden Insurance an amount
equal to such excess or misapplied collateral, less any amounts AII has paid to
Maiden Insurance. In addition, if an AmTrust subsidiary withdraws Maiden
Insurance’s assets from a Trust Account and maintains those assets on its books
as withheld funds, AII has agreed to pay to Maiden Insurance interest at the
rate equivalent to the one-month London Interbank Offered Rate (“LIBOR”) plus 90
basis points per annum computed on the basis of a 360-day year on the loan
(except to the extent Maiden Insurance’s proportionate share of AII’s
obligations to that AmTrust subsidiary exceeds the value of the collateral
Maiden Insurance has provided), and net of unpaid fees Maiden Insurance owes to
AII Insurance Management Limited (“AIIM”) and its share of fees owed to the
trustee of the Trust Accounts. Effective December 1, 2008, the Company entered
into a Reinsurer Trust Assets Collateral agreement to provide to AII sufficient
collateral to secure its proportional share of AII’s obligations to the U.S.
AmTrust subsidiaries. The amount of the collateral in Trust, as at September 30,
2009 and December 31, 2008 was approximately $178,293 and $75,279, respectively
(See Note 3(b)).




Reinsurance
Brokerage Agreements





Effective
July 1, 2007, the Company entered into a reinsurance brokerage agreement with
AII Reinsurance Broker Ltd., a subsidiary of AmTrust.




Pursuant
to the brokerage agreement, AII Reinsurance Broker Ltd. provides brokerage
services relating to the Quota Share Reinsurance Agreement for a fee equal to
1.25% of the premium reinsured from AII. The brokerage fee is payable in
consideration of AII Reinsurance Broker Ltd’s brokerage services. AII
Reinsurance Broker Ltd. is not the Company’s exclusive broker. AII Reinsurance
Broker Ltd. may, if mutually agreed, also produce reinsurance for the Company
from other ceding companies, and in such cases the Company will negotiate a
mutually acceptable commission rate. The Company recorded approximately $1,118
and $3,369 of reinsurance brokerage expense for the three and nine months ended
September 30, 2009, respectively (2008: $1,381 and $3,131, respectively), and
deferred reinsurance brokerage of $2,982 and $3,009 as at September 30, 2009 and
December 31, 2008, respectively, as a result of this agreement.





Effective
April 1, 2008, the Company entered into brokerage services agreements with IGI
Intermediaries Limited and IGI Inc. (IGI), both subsidiaries of AmTrust.
Pursuant to the brokerage services agreements, IGI provides marketing services
to us which includes providing marketing material to potential policyholders,
providing us with market information on new trends and business opportunities
and referring new brokers and potential policyholders to us. A fee equal to
IGI‘s costs in providing such services plus 8% is payable in consideration of
IGI’s marketing services. The Company recorded approximately $55 and $325
expense, which is included in other operating expenses, for the three and nine
months ended September 30, 2009, respectively (2008: $401 and $811,
respectively).





Asset
Management Agreement





Effective
July 1, 2007, the Company entered into an asset management agreement with AIIM
pursuant to which AIIM has agreed to provide investment management services to
Maiden Insurance. Pursuant to the asset management agreement, AIIM provides
investment management services for an annual fee equal to 0.35% of average
invested assets plus all costs incurred.  Effective April 1, 2008, the
investment management services annual fee has been reduced to 0.20% if the
average value of the account is less than $1 billion and 0.15% if the average
value of the account is greater than $1 billion.  The Company recorded
approximately $721 and $1,937 of investment management fees for the three and
nine months ended September 30, 2009 (2008: $254 and $970), respectively, as a
result of this agreement.





11.   
Segments





The
Company currently operates two business segments, Reinsurance - AmTrust Quota
Share and Reinsurance - Other. The Company evaluates segment performance based
on segment profit, which excludes investment income, realized gains and losses,
general corporate expenses, interest expenses, income taxes and any other
non-core business income or expenses. Other expenses are allocated on an actual
basis except salaries and benefits where management’s judgment is applied; the
Company does not allocate general corporate expenses to the
segments.  The following tables summarize business segments as
follows:




20




MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)





11.    Segments
(continued)
 
 For
      the Three Months Ended September 30, 2009
                                  
                                  Reinsurance -AmTrustQuota
      Share
                                  
                                  
                                  Reinsurance-
      Other
                                  
                                  
                                  TotalNet
      premiums written
                                  
                                  $
                                  92,168
                                  
                                  
                                  $
                                  129,232
                                  
                                  
                                  $
                                  221,400Net
      earned premium
                                  
                                  
                                  89,474
                                  
                                  
                                  
                                  147,876
                                  
                                  
                                  
                                  237,350Losses
      and loss adjustment expenses
                                  
                                  
                                  (54,703
                                  )
                                  
                                  
                                  (110,420
                                  )
                                  
                                  
                                  (165,123
                                  )Commissions
      and other acquisition expenses
                                  
                                  
                                  (29,251
                                  )
                                  
                                  
                                  (26,062
                                  )
                                  
                                  
                                  (55,313
                                  )General
      and administrative expenses
                                  
                                  
                                  (812
                                  )
                                  
                                  
                                  (3,785
                                  )
                                  
                                  
                                  (4,597
                                  )Underwriting
      income
                                  
                                  $
                                  4,708
                                  
                                  
                                  $
                                  7,609
                                  
                                  
                                  $
                                  12,317Reconciliation
      to net incomeNet
      investment income and realized gains
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  16,712Amortization
      of intangible assets
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (1,676
                                  )Foreign
      exchange and other gain
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  210Trust
      preferred interest
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (9,114
                                  )General
      and administrative expenses
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  (3,462
                                  )Net
      Income
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  
                                  $
                                  14,987Net
      loss and loss expense ratio*
                                  
                                  
                                  61.1
                                  %
                                  
                                  
                                  74. 7
                                  %
                                  
                                  
                                  69.6
                                  %Acquisition
      cost ratio**
                                  
                                  
                                  32.7
                                  %
                                  
                                  
                                  17.6
                                  %
                                  
                                  
                                  23.3
                                  %General
      and administrative expense ratio***
                                  
                                  
                                  0.9
                                  %
                                  
                                  
                                  2.6
                                  %
                                  
                                  
                                  3.4
                                  %Combined
      ratio****
                                  
                                  
                                  94.7
                                  %
                                  
                                  
                                  94.9
                                  %
                                  
                                  
                                  96.3
                                  %
 
 For
      the Nine Months Ended September 30, 2009
                  
                  Reinsurance -AmTrustQuota Share
                  
                  
                  Reinsurance
                    - Other
                  
                  
                  TotalNet premiums
      written
                  
                  $
                  267,341
                  
                  
                  $
                  528,963
                  
                  
                  $
                  796,304Net
      earned premium
                  
                  
                  269,522
                  
                  
                  
                  401,761
                  
                  
                  
                  671,283Losses
      and loss adjustment expenses
                  
                  
                  (168,463
                  )
                  
                  
                  (294,005
                  )
                  
                  
                  (462,468
                  )Commissions
      and other acquisition expenses
                  
                  
                  (88,374
                  )
                  
                  
                  (71,234
                  )
                  
                  
                  (159,608
                  )General
      and administrative expenses
                  
                  
                  (1,873
                  )
                  
                  
                  (13,599
                  )
                  
                  
                  (15,472
                  )Underwriting
      income
                  
                  $
                  10,812
                  
                  
                  $
                  22,923
                  
                  
                  $
                  33,735Reconciliation
      to net incomeNet
      investment income and realized gain
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  45,688Amortization
      of intangibles assets
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (4,915
                  )Foreign
      exchange and other gain
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  2,401Trust
      preferred interest
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (25,316
                  )General
      and administrative expenses
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  (7,254
                  )Net
      Income
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  $
                  44,339Net
      loss and loss expense ratio*
                  
                  
                  62.5
                  %
                  
                  
                  73.2
                  %
                  
                  
                  68.9
                  %Acquisition
      cost ratio**
                  
                  
                  32.8
                  %
                  
                  
                  17.7
                  %
                  
                  
                  23.8
                  %General
      and administrative expense ratio***
                  
                  
                  0.7
                  %
                  
                  
                  3.4
                  %
                  
                  
                  3.4
                  %Combined
      ratio****
                  
                  
                  96.0
                  %
                  
                  
                  94.3
                  %
                  
                  
                  96.1
                  %
 
 21


MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)


11.    Segments
(continued)





For the Three Months Ended September 30,
                                2008
                              
                              Reinsurance -
                                AmTrust
                                Quota Share
                              
                              
                              Reinsurance
                                - Other
                              
                              
                              TotalNet
      premiums written
                              
                              $
                              102,673
                              
                              
                              $
                              10,514
                              
                              
                              $
                              113,187Net
      earned premium
                              
                              
                              110,495
                              
                              
                              
                              3,100
                              
                              
                              
                              113,595Losses
      and loss adjustment expenses
                              
                              
                              (65,664
                              )
                              
                              
                              (1,251
                              )
                              
                              
                              (66,915
                              )Commissions
      and other acquisition expenses
                              
                              
                              (36,908
                              )
                              
                              
                              (1,391
                              )
                              
                              
                              (38,299
                              )General
      and administrative expenses
                              
                              
                              (258
                              )
                              
                              
                              (856
                              )
                              
                              
                              (1,114
                              )Underwriting
      income (loss)
                              
                              $
                              7,665
                              
                              
                              $
                              (398
                              )
                              
                              
                              7,267Reconciliation
      to net incomeNet
      investment income and realized gain (loss)
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              8,974Other
      than temporary impairment
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (42,538
                              )Foreign
      exchange loss
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (359
                              )General
      and administrative expenses
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              (860
                              )Net
      Loss
                              
                              
                              
                              
                              
                              
                              
                              
                              
                              $
                              (27,516
                              )Net
      loss and loss expense ratio*
                              
                              
                              59.4
                              %
                              
                              
                              40.4
                              %
                              
                              
                              58.9
                              %Acquisition
      cost ratio**
                              
                              
                              33.4
                              %
                              
                              
                              44.9
                              %
                              
                              
                              33.7
                              %General
      and administrative expense ratio***
                              
                              
                              0.2
                              %
                              
                              
                              27.6
                              %
                              
                              
                              1.0
                              %Combined
      ratio****
                              
                              
                              93.0
                              %
                              
                              
                              112.9
                              %
                              
                              
                              93.6
                              %





For the Nine Months Ended September 30,
                                      2008
                                    
                                    Reinsurance -
                                      AmTrust
                                      Quota Share
                                    
                                    
                                    Reinsurance
                                      - Other
                                    
                                    
                                    TotalNet
      premiums written
                                    
                                    $
                                    353,690
                                    
                                    
                                    $
                                    33,180
                                    
                                    
                                    $
                                    386,870Net
      earned premium
                                    
                                    
                                    250,531
                                    
                                    
                                    
                                    5,708
                                    
                                    
                                    
                                    256,239Losses
      and loss adjustment expenses
                                    
                                    
                                    (146,084
                                    )
                                    
                                    
                                    (2,278
                                    )
                                    
                                    
                                    (148,362
                                    )Commissions
      and other acquisition expenses
                                    
                                    
                                    (82,523
                                    )
                                    
                                    
                                    (2,534
                                    )
                                    
                                    
                                    (85,057
                                    )General
      and administrative expenses
                                    
                                    
                                    (635
                                    )
                                    
                                    
                                    (1,485
                                    )
                                    
                                    
                                    (2,120
                                    )Underwriting
      income
                                    
                                    $
                                    21,289
                                    
                                    
                                    $
                                    (589
                                    )
                                    
                                    $
                                    20,700Reconciliation
      to net incomeNet
      investment income and realized gain
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    24,509Other
      than temporary impairment
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    (42,538
                                    )Foreign
      exchange loss
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    (364
                                    )General
      and administrative expenses
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    (3,516
                                    )Net
      Loss
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    
                                    $
                                    (1,209
                                    )Net
      loss and loss expense ratio*
                                    
                                    
                                    58.3
                                    %
                                    
                                    
                                    39.9
                                    %
                                    
                                    
                                    57.9
                                    %Acquisition
      cost ratio**
                                    
                                    
                                    32.9
                                    %
                                    
                                    
                                    44.4
                                    %
                                    
                                    
                                    33.2
                                    %General
      and administrative expense ratio***
                                    
                                    
                                    0.3
                                    %
                                    
                                    
                                    26.0
                                    %
                                    
                                    
                                    0.8
                                    %Combined
      ratio****
                                    
                                    
                                    91.5
                                    %
                                    
                                    
                                    110.3
                                    %
                                    
                                    
                                    91.9
                                    %


*Calculated by dividing net
losses and loss expenses by net earned premium.


**
Calculated by dividing commission and other acquisition expenses by net earned
premium


*** Calculated
by dividing general and administrative expenses by net earned
premium.


****
Calculated by adding together net loss and loss expense ratio, acquisition cost
ratio and general and administrative expense ratio.


22


MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)





11.    Segments
(continued)




Reinsurance -
                                        AmTrust
                                        Quota Share
                                      
                                      
                                      Reinsurance
                                        - Other
                                      
                                      
                                      TotalAs ofSeptember30, 2009Reinsurance
      balances receivable
                                      
                                      $
                                      40,823
                                      
                                      
                                      $
                                      195,820
                                      
                                      
                                      $
                                      236,643Deferred
      acquisition costs
                                      
                                      
                                      77,508
                                      
                                      
                                      
                                      93,612
                                      
                                      
                                      
                                      171,120Loan
      to related party
                                      
                                      
                                      167,975
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      167,975Goodwill
                                      
                                      
                                      
                                      
                                      
                                      
                                      49,747
                                      
                                      
                                      
                                      49,747Intangibles
                                      
                                      
                                      
                                      
                                      
                                      
                                      52,959
                                      
                                      
                                      
                                      52,959Restricted
      investments and cash
                                      
                                      
                                      178,292
                                      
                                      
                                      
                                      1,062,875
                                      
                                      
                                      
                                      1,241,167Corporate
      and other assets
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      
                                      645,848Total
      Assets
                                      
                                      $
                                      464,598
                                      
                                      
                                      $
                                      1,455,013
                                      
                                      
                                      $
                                      2,565,459





As ofDecember 31, 2008Reinsurance
      balances receivable
                      
                      $
                      44,386
                      
                      
                      $
                      27,509
                      
                      
                      $
                      71,895Deferred
      commission and other acquisition costs
                      
                      
                      78,774
                      
                      
                      
                      25,696
                      
                      
                      
                      104,470Loan
      to related party
                      
                      
                      167,975
                      
                      
                      
                      -
                      
                      
                      
                      167,975Goodwill
                      
                      
                      
                      
                      
                      
                      49,747
                      
                      
                      
                      49,747Intangibles
                      
                      
                      
                      
                      
                      
                      55,147
                      
                      
                      
                      55,147Restricted
      investments and cash
                      
                      
                      75,279
                      
                      
                      
                      983,477
                      
                      
                      
                      1,058,756Corporate
      and other assets
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      
                      620,574Total
      Assets
                      
                      $
                      366,414
                      
                      
                      $
                      1,141,576
                      
                      
                      $
                      2,128,564





*Calculated by dividing net
losses and loss expenses by net earnedpremium.


**Calculated by dividing commission and
other acquisitionexpensesby netearned
premium


***
Calculated by dividing general and administrative expenses by net earned
premium.


****
Calculated by adding together net loss and loss expense ratio, acquisition cost
ratio and general and administrative expense ratio.





The
following tables set forth financial information relating to gross and net
premiums written and earned by major line of business for the three and nine
months ended September 30, 2009 and 2008:





Three
      Months Ended September 302009
                                
                                
                                2008Total
                                
                                
                                %
      of Total
                                
                                
                                Total
                                
                                
                                %
      ofTotalGross
      and net premiums writtenReinsurance
      - AmTrust Quota ShareSmall
      Commercial Business
                                
                                $
                                34,077
                                
                                
                                
                                15.4
                                %
                                
                                $
                                43,738
                                
                                
                                
                                38.6
                                %Specialty
      Middle Market Property & Casualty
                                
                                
                                13,052
                                
                                
                                
                                5.9
                                %
                                
                                
                                9,091
                                
                                
                                
                                8.1
                                %Specialty
      Risk and Extended Warranty
                                
                                
                                45,039
                                
                                
                                
                                20.3
                                %
                                
                                
                                49,844
                                
                                
                                
                                44.0
                                %Total
      Reinsurance - AmTrust Quota Share
                                
                                $
                                92,168
                                
                                
                                
                                41.6
                                %
                                
                                $
                                102,673
                                
                                
                                
                                90.7
                                %Reinsurance
      – OtherProperty
                                
                                
                                28,691
                                
                                
                                
                                13.0
                                %
                                
                                
                                -
                                
                                
                                
                                -
                                %Casualty
                                
                                
                                76,377
                                
                                
                                
                                34.5
                                %
                                
                                
                                10,514
                                
                                
                                
                                9.3
                                %Accident
      and Health
                                
                                
                                24,164
                                
                                
                                
                                10.9
                                %
                                
                                
                                -
                                
                                
                                
                                -
                                %Total
      Reinsurance - Other
                                
                                $
                                129,232
                                
                                
                                
                                58.4
                                %
                                
                                $
                                10,514
                                
                                
                                
                                9.3
                                %$
                                221,400
                                
                                
                                
                                100.0
                                %
                                
                                $
                                113,187
                                
                                
                                
                                100.0
                                %


23


MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)





11.    Segments
(continued)





Nine
      Months Ended September 302009
                                
                                
                                2008Total
                                
                                
                                % of Total
                                
                                
                                Total
                                
                                
                                % of TotalGross
      and net premiums writtenReinsurance
      - AmTrust Quota ShareSmall
      Commercial Business
                                
                                $
                                132,985
                                
                                
                                
                                16.7
                                %
                                
                                $
                                203,599
                                
                                
                                
                                52.6
                                %Specialty
      Middle Market Property & Casualty
                                
                                
                                35,044
                                
                                
                                
                                4.4
                                %
                                
                                
                                30,572
                                
                                
                                
                                7.9
                                %Specialty
      Risk and Extended Warranty
                                
                                
                                99,312
                                
                                
                                
                                12.5
                                %
                                
                                
                                119,519
                                
                                
                                
                                30.9
                                %Total
      Reinsurance - AmTrust Quota Share
                                
                                $
                                267,341
                                
                                
                                
                                33.6
                                %
                                
                                $
                                353,690
                                
                                
                                
                                91.4
                                %Reinsurance
      – OtherProperty
                                
                                
                                105,650
                                
                                
                                
                                13.3
                                %
                                
                                
                                -
                                
                                
                                
                                -
                                %Casualty
                                
                                
                                331,685
                                
                                
                                
                                41.6
                                %
                                
                                
                                33,180
                                
                                
                                
                                8.6
                                %Accident
      and Health
                                
                                
                                91,628
                                
                                
                                
                                11.5
                                %
                                
                                
                                -
                                
                                
                                
                                -
                                %Total
      Reinsurance - Other
                                
                                $
                                528,963
                                
                                
                                
                                66.4
                                %
                                
                                $
                                33,180
                                
                                
                                
                                8.6
                                %$
                                796,304
                                
                                
                                
                                100.0
                                %
                                
                                $
                                386,870
                                
                                
                                
                                100.0
                                %





Three
      Months Ended September 302009
                                
                                
                                2008Total
                                
                                
                                % of Total
                                
                                
                                Total
                                
                                
                                % of TotalGross
      and net premiums earnedReinsurance
      - AmTrust Quota ShareSmall
      Commercial Business
                                
                                $
                                50,896
                                
                                
                                
                                21.4
                                %
                                
                                $
                                69,877
                                
                                
                                
                                61.5
                                %Specialty
      Middle Market Property & Casualty
                                
                                
                                11,426
                                
                                
                                
                                4.9
                                %
                                
                                
                                10,961
                                
                                
                                
                                9.7
                                %Specialty
      Risk and Extended Warranty
                                
                                
                                27,152
                                
                                
                                
                                11.4
                                %
                                
                                
                                29,657
                                
                                
                                
                                26.1
                                %Total
      Reinsurance - AmTrust Quota Share
                                
                                $
                                89,474
                                
                                
                                
                                37.7
                                %
                                
                                $
                                110,495
                                
                                
                                
                                97.3
                                %Reinsurance
      – OtherProperty
                                
                                
                                33,948
                                
                                
                                
                                14.3
                                %
                                
                                
                                -
                                
                                
                                
                                -
                                %Casualty
                                
                                
                                87,043
                                
                                
                                
                                36.7
                                %
                                
                                
                                3,100
                                
                                
                                
                                2.7
                                %Accident
      and Health
                                
                                
                                26,885
                                
                                
                                
                                11.3
                                %
                                
                                
                                -
                                
                                
                                %Total
      Reinsurance - Other
                                
                                $
                                147,876
                                
                                
                                
                                62.3
                                %
                                
                                $
                                3,100
                                
                                
                                
                                2.7
                                %$
                                237,350
                                
                                
                                
                                100.0
                                %
                                
                                $
                                113,595
                                
                                
                                
                                100.0
                                %


24


MAIDEN HOLDINGS,
LTD.




Notes
to Unaudited Condensed Consolidated Financial Statements


(in
thousands (000’s), except per share data)


(Unaudited)





11.    Segments
(continued)





Nine
      Months Ended September 302009
                                
                                
                                2008Total
                                
                                
                                % of Total
                                
                                
                                Total
                                
                                
                                % of TotalGross
      and net premiums earnedReinsurance
      - AmTrust Quota ShareSmall
      Commercial Business
                                
                                $
                                157,645
                                
                                
                                
                                23.5
                                %
                                
                                $
                                147,605
                                
                                
                                
                                57.6
                                %Specialty
      Middle Market Property & Casualty
                                
                                
                                37,844
                                
                                
                                
                                5.7
                                %
                                
                                
                                30,265
                                
                                
                                
                                11.8
                                %Specialty
      Risk and Extended Warranty
                                
                                
                                74,033
                                
                                
                                
                                11.0
                                %
                                
                                
                                72,661
                                
                                
                                
                                28.4
                                %Total
      Reinsurance - AmTrust Quota Share
                                
                                $
                                269,522
                                
                                
                                
                                40.2
                                %
                                
                                $
                                250,531
                                
                                
                                
                                97.8
                                %Reinsurance
      – OtherProperty
                                
                                
                                99,525
                                
                                
                                
                                14.8
                                %
                                
                                
                                -
                                
                                
                                
                                -
                                %Casualty
                                
                                
                                224,737
                                
                                
                                
                                33.5
                                %
                                
                                
                                5,708
                                
                                
                                
                                2.2
                                %Accident
      and Health
                                
                                
                                77,499
                                
                                
                                
                                11.5
                                %
                                
                                
                                -
                                
                                
                                
                                -
                                %Total
      Reinsurance - Other
                                
                                $
                                401,761
                                
                                
                                
                                59.8
                                %
                                
                                $
                                5,708
                                
                                
                                
                                2.2
                                %$
                                671,283
                                
                                
                                
                                100.0
                                %
                                
                                $
                                256,239
                                
                                
                                
                                100.0
                                %





12.    Subsequent
Events





Management
has reviewed all events occurring since the date of the financial statements to
November 16, 2009, the date at which the attached statements were issued,
to determine if any such events should be disclosed. No such events, other than
disclosed in the following paragraph, arose during the period indicated which
required disclosure.




On
November 10, 2009, the Company’s Board of Directors approved a quarterly cash
dividend of $0.065 per common share payable on January 15, 2010 to shareholders
of record on January 4, 2010.




25


Item
2.MANAGEMENT’S
DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS





The
following discussion and analysis of our financial condition and results of
operations should be read in conjunction with the attached condensed
consolidated financial statements and related notes thereto and the audited
consolidated financial statements and related notes thereto included in the
Company’s Annual Report on Form 10-K for the year ended December 31, 2008 .
References in this Form 10-Q to the terms “we,” “us,” “our,” “the company” or
other similar terms mean the consolidated operations of Maiden Holdings, Ltd and
its subsidiaries, unless the context requires otherwise. References in this Form
10-Q to the term “Holdings” means Maiden Holdings, Ltd only.




Note
on Forward-Looking Statement




This
Form 10-Q and other publicly available documents may include, and our officers
and representatives may from time to time make, projections concerning financial
information and statements concerning future economic performance and events,
plans and objectives relating to management, operations, products and services,
and assumptions underlying these projections and statements. These projections
and statements are forward-looking statements within the meaning of The Private
Securities Litigation Reform Act of 1995 and are not historical facts but
instead represent only our belief regarding future events, many of which, by
their nature, are inherently uncertain and outside our control. These
projections and statements may address, among other things, our strategy for
growth, product development, financial results and reserves. Actual results and
financial condition may differ, possibly materially, from these projections and
statements and therefore you should not place undue reliance on them. Factors
that could cause our actual results to differ, possibly materially, from those
in the specific projections and statements are discussed throughout this
Management’s Discussion and Analysis of Financial Condition and Results of
Operations and in “Risk Factors” in Item 1A of Part I of our 2008
Annual Report on Form 10-K filed with the U.S. Securities and Exchange
Commission (“SEC”) on March 31, 2009 and in Item 1A of Part II of our Form 10-Q
for the quarter ended June 30, 2009 filed with the SEC on August 14, 2009. The
projections and statements in this report speak only as of the date of this
report and those in other publicly available documents or made by our officers
and representatives from time to time speak only as of their respective dates
and we undertake no obligation to update or revise any forward-looking statement
that may be made from time to time, whether as a result of new information,
future developments or otherwise, except as required by law.





General
Overview




We are a
Bermuda-based holding company formed in June 2007 to provide reinsurance
solutions, products and services to U.S. and European insurance companies that
specialize in products offering coverage at low limits or insuring risks that
are believed to be low hazard, predictable and generally not susceptible to
catastrophe claims. We have operations in Bermuda and the U.S.  We
provide innovative reinsurance business solutions for such insurance companies
to enable them to improve their capacity and ability to deliver and market their
products and services.





On
October 31, 2008, we acquired the reinsurance operations of GMAC Insurance from
GMACI Holdings, LLC (“GMACI”), including a book of assumed reinsurance business
(“GMAC Acquisition”). As part of the transaction, the Company’s wholly owned
subsidiary, Maiden Holdings North America, Ltd. (“Maiden NA”), acquired GMAC RE
LLC (“GMAC RE”), a reinsurance managing general agent writing business on behalf
of Motors Insurance Corporation (“Motors”) and the renewal rights for the
business written through GMAC RE.  GMAC RE was subsequently renamed
Maiden Re Insurance Services, LLC (“Maiden Re”).  In connection with
the transaction, Maiden NA also entered into stock purchase agreements to
acquire insurance companies, GMAC Direct Insurance Company (“GMAC Direct”) and
Integon Specialty Insurance Company (“Integon”). The acquisitions of GMAC Direct
and Integon were closed on December 23, 2008 and September 1, 2009,
respectively. GMAC Direct was renamed Maiden Reinsurance Company and Integon was
renamed Maiden Specialty Insurance Company. In conjunction with the GMAC
Acquisition, on October 31, 2008, Maiden Insurance and Motors entered into a
Portfolio Transfer and Quota Share Reinsurance Agreement under which Maiden
Insurance reinsured (i) all of the existing contracts written by GMAC RE
pursuant to a loss portfolio transfer, and (ii) contracts written pursuant to a
fronting arrangement with Motors.  The acquisition of GMAC RE, GMAC
Direct and Integon and the renewal rights to GMACI’s reinsurance business and
the loss portfolio and quota share reinsurance transaction with Motors is
referred to as the “GMAC Acquisition”.





To
support the businesses acquired in the GMAC Acquisition and the North American
operations of Maiden NA, on January 20, 2009, we completed a private placement
of 260,000 units (the “Units”), each Unit consisting of $1,000 principal amount
of capital securities (the “Trust Preferred Securities”) of Maiden Capital
Financing Trust, a trust established by Maiden NA, and 45 common shares, $.01
par value, of the Company for a purchase price of $1,000.45 per
Unit.  This resulted in gross proceeds to the Company of approximately
$260.1 million before approximately $4.3 million of placement agent fees and
expenses.  As part of the transaction, the Company issued 11,700,000
common shares to the purchasers of the Units. The Trust Preferred
Securities mature in 2039 and carry an interest rate of 14% and an
effective rate of interest of 16.95%. Approximately 61% of these securities were
placed privately with two of the Founding Shareholders of the Company,
Michael Karfunkel and George Karfunkel, and the remainder with several
existing institutional shareholders of the Company.





On
November 10, 2009 the Company announced that it has reached an agreement in
principle with American Capital Acquisition Corporation (“ACAC”) regarding a
multi-year 25% quota share reinsurance agreement that is expected to generate
over $200 million in annual premium income for the Company. The agreement will
commence upon consummation of ACAC’s acquisition of GMAC’s U.S. consumer
property and casualty insurance business, which is expected to occur in the
first quarter of 2010 and is subject to, among other customary conditions,
regulatory approval in several states.   GMAC’s consumer property and
casualty insurance business is one of the leading writers of automobile coverage
through independent agents in the United States. It utilizes a network of 10,500
agents in 12 core markets, as well as exclusive relationships with 23 affinity
partners. GMAC’s U.S. consumer property and casualty insurance business had a
net written premium in excess of $1.0 billion in 2008 that encompassed all fifty
states. Coverages include standard/preferred auto, recreational vehicles,
non-standard auto and commercial auto.


26


ACAC was
formed by the Michael Karfunkel 2005 Grantor Retained Annuity Trust (the
“Trust”). The Trust is controlled by Michael Karfunkel, one of the Founding
Shareholders of Maiden.  The ultimate beneficiaries of the Trust
include Michael Karfunkel’s children, one of whom is married to Mr. Zyskind,
another of the Founding Shareholders of Maiden and non-executive Chairman of our
Board of Directors. The Company’s audit committee, comprised of independent
directors, reviewed and approved the agreement in principle. In addition,
AmTrust has entered into an agreement with ACAC effective upon the closing of
the acquisition, whereunder ACAC will issue and sell to AmTrust for a
purchase price equal to 25% of the capital required by ACAC, 42,500 shares of
Series A Preferred Stock,  which provides for a semi-annual 8%
cumulative dividend and is non-redeemable and convertible, at AmTrust’s option,
into approximately 21.25% of the issued and outstanding common shares of
ACAC.





Relevant
Factors




Revenues




We derive
our revenues primarily from premiums on our insurance policies and reinsurance
contracts, net of any reinsurance or retrocessional coverage purchased.
Insurance and reinsurance premiums are a function of the amounts and types of
policies and contracts we write, as well as prevailing market prices. Our prices
are determined before our ultimate costs, which may extend far into the future,
are known. In addition, our revenues include income generated from our
investment portfolio, consisting of net investment income and net realized
investment gains or losses. Investment income is principally derived from
interest and dividends earned on investments, partially offset by investment
management fees and fees paid to our custodian bank. Net realized investment
gains or losses include (1) net realized investment gains or losses from
the sale of investments and (2) write-downs related to declines in the
market value of securities on our available for sale portfolio that were
considered to be other than temporary.




Expenses




Our
expenses consist largely of net losses and loss adjustment expenses, commissions
and other acquisition costs, general and administrative expenses, amortization
of intangible assets and foreign exchange gains or losses. Net losses and loss
adjustment expenses incurred are comprised of three main
components:





•
              losses
      paid, which are actual cash payments to insureds, net of recoveries from
      reinsurers;


•
              outstanding
      loss or case reserves, which represent management’s best estimate of the
      likely settlement amount for known claims, less the portion that can be
      recovered from
reinsurers; and


•
              IBNR,
      which are reserves established by us for changes in the values of claims
      that have been reported to us but are not yet settled, as well as claims
      that have occurred but have not yet been reported. The portion recoverable
      from reinsurers is deducted from the gross estimated
  loss.





Commissions
and other acquisition expenses are comprised of commissions, brokerage fees and
insurance taxes. Commissions and brokerage fees are usually calculated as a
percentage of premiums and depend on the market and line of business.
Commissions and other acquisition costs are reported after (1) deducting
commissions received on ceded reinsurance, (2) deducting the part of
acquisition costs relating to unearned premiums and (3) including the
amortization of previously deferred acquisition costs.




General
and administrative expenses include personnel expenses, including share-based
compensation charges, rent expense, professional fees, information technology
costs and other general operating expenses. We are experiencing increases in
general and administrative expenses resulting from additional staff, increased
rent expense for our offices and increased professional fees. We believe
this trend will continue for the remainder of 2009 and into 2010 as we continue
to hire additional staff and build our infrastructure.




Ratios




Management
measures results for each segment on the basis of the “net loss and loss expense
ratio,” “acquisition cost ratio,” “general and administrative expense ratio,”
“expense ratio” and the “combined ratio.” Because we do not manage our assets by
segment, investment income, interest expense and total assets are not allocated
to individual reportable segments. General and administrative expenses are
allocated to segments based on various factors, including staff count and each
segment’s proportional share of gross premiums written. The “loss and loss
adjustment expenses ratio” is derived by dividing net losses and loss adjustment
expenses by net earned premium. The “acquisition cost ratio” is derived by
dividing commissions and other acquisition expenses by net earned premium. The
“general and administrative expense ratio” is derived by dividing general and
administrative expenses by net earned premium. The “expense ratio” is the sum of
the acquisition cost ratio and the general and administrative expense ratio. The
“combined ratio” is the sum of the net loss and loss adjustment expense ratio,
the acquisition cost ratio and the general and administrative expense
ratio.





Critical
Accounting Policies





It
is important to understand our accounting policies in order to understand our
financial position and results of operations. Our unaudited condensed
consolidated financial statements reflect determinations that are inherently
subjective in nature and require management to make assumptions and best
estimates to determine the reported values. If events or other factors cause
actual results to differ materially from management’s underlying assumptions or
estimates, there could be a material adverse effect on our financial condition
or results of operations. We believe that some of the more critical judgments in
the areas of accounting estimates and assumptions that affect our financial
condition and results of operations are related to reserves for losses and loss
adjustment expenses, reinsurance recoverables, premiums and acquisition costs,
valuation of financial instruments and other-than-temporary-impairment of
investments. For a detailed discussion of our critical accounting policies
please refer to our Annual Report on Form 10-K for the year ended
December 31, 2008 filed with the SEC. There were no material changes in the
application of our critical accounting estimates subsequent to that
report.


27


Summary
of Results of Operations





The following table sets
forth our selected consolidated statement of operations data for each of the
periods indicated.The
comparisons with the prior year are not particularly meaningful, both overall
and for the Reinsurance - Other Segment, due to the GMAC Acquisition in the
fourth quarter of 2008:




For the Three
                                                            Months Ended
                                                            September 30,
                                                            2009
                                                          
                                                          
                                                          For the Three
                                                            Months Ended
                                                            September 30,
                                                            2008
                                                          
                                                          
                                                          For the Nine
                                                            Months Ended
                                                            September 30,
                                                            2009
                                                          
                                                          
                                                          For the Nine
                                                            Months Ended
                                                            September 30,
                                                            2008($
      in thousands)
                                                          
                                                          
                                                          ($
      in thousands)Gross
      and net premiums written
                                                          
                                                          $
                                                          221,400
                                                          
                                                          
                                                          $
                                                          113,187
                                                          
                                                          
                                                          $
                                                          796,304
                                                          
                                                          
                                                          $
                                                          386,870Change
      in unearned premiums
                                                          
                                                          
                                                          15,950
                                                          
                                                          
                                                          
                                                          408
                                                          
                                                          
                                                          
                                                          (125,021
                                                          )
                                                          
                                                          
                                                          (130,631
                                                          )Net
      earned premium
                                                          
                                                          
                                                          237,350
                                                          
                                                          
                                                          
                                                          113,595
                                                          
                                                          
                                                          
                                                          671,283
                                                          
                                                          
                                                          
                                                          256,239Net
      investment income
                                                          
                                                          
                                                          16,778
                                                          
                                                          
                                                          
                                                          8,974
                                                          
                                                          
                                                          
                                                          46,150
                                                          
                                                          
                                                          
                                                          24,346Net
      realized investment gains (losses)
                                                          
                                                          
                                                          (66
                                                          )
                                                          
                                                          
                                                          (42,538
                                                          )
                                                          
                                                          
                                                          (462
                                                          )
                                                          
                                                          
                                                          (42,375
                                                          )Total
      revenue
                                                          
                                                          
                                                          254,062
                                                          
                                                          
                                                          
                                                          80,031
                                                          
                                                          
                                                          
                                                          716,971
                                                          
                                                          
                                                          
                                                          238,210Loss
      and loss adjustment expenses
                                                          
                                                          
                                                          165,123
                                                          
                                                          
                                                          
                                                          66,915
                                                          
                                                          
                                                          
                                                          462,468
                                                          
                                                          
                                                          
                                                          148,362Commission
      and other acquisition expenses
                                                          
                                                          
                                                          55,313
                                                          
                                                          
                                                          
                                                          38,299
                                                          
                                                          
                                                          
                                                          159,608
                                                          
                                                          
                                                          
                                                          85,057General
      and administrative expenses
                                                          
                                                          
                                                          8,059
                                                          
                                                          
                                                          
                                                          1,974
                                                          
                                                          
                                                          
                                                          22,726
                                                          
                                                          
                                                          
                                                          5,636Amortization
      of intangible assets
                                                          
                                                          
                                                          1,676
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          4,915
                                                          
                                                          
                                                          
                                                          -Trust
      preferred interest expense – related party
                                                          
                                                          
                                                          9,114
                                                          
                                                          
                                                          
                                                          -
                                                          
                                                          
                                                          
                                                          25,316
                                                          
                                                          
                                                          
                                                          -Foreign
      exchange and other (gain)loss
                                                          
                                                          
                                                          (210
                                                          )
                                                          
                                                          
                                                          359
                                                          
                                                          
                                                          
                                                          (2,401
                                                          )
                                                          
                                                          
                                                          364Total
      expenses
                                                          
                                                          
                                                          239,075
                                                          
                                                          
                                                          
                                                          107,547
                                                          
                                                          
                                                          
                                                          672,632
                                                          
                                                          
                                                          
                                                          239,419Net
      income
                                                          
                                                          $
                                                          14,987
                                                          
                                                          
                                                          $
                                                          (27,516
                                                          )
                                                          
                                                          $
                                                          44,339
                                                          
                                                          
                                                          $
                                                          (1,209
                                                          )Selected
      Consolidated Ratios:Net
      loss ratio
                                                          
                                                          
                                                          69.6
                                                          %
                                                          
                                                          
                                                          58.9
                                                          %
                                                          
                                                          
                                                          68.9
                                                          %
                                                          
                                                          
                                                          57.9
                                                          %Acquisition
      cost ratio
                                                          
                                                          
                                                          23.3
                                                          %
                                                          
                                                          
                                                          33.7
                                                          %
                                                          
                                                          
                                                          23.8
                                                          %
                                                          
                                                          
                                                          33.2
                                                          %General
      and administrative expense ratio
                                                          
                                                          
                                                          3.4
                                                          %
                                                          
                                                          
                                                          1.7
                                                          %
                                                          
                                                          
                                                          3.4
                                                          %
                                                          
                                                          
                                                          2.2
                                                          %Expense
      Ratio
                                                          
                                                          
                                                          26.7
                                                          %
                                                          
                                                          
                                                          35.4
                                                          %
                                                          
                                                          
                                                          27.2
                                                          %
                                                          
                                                          
                                                          35.4
                                                          %Combined
      ratio
                                                          
                                                          
                                                          96.3
                                                          %
                                                          
                                                          
                                                          94.3
                                                          %
                                                          
                                                          
                                                          96.1
                                                          %
                                                          
                                                          
                                                          93.3
                                                          %





Comparison
of Three and Nine Months Ended September 30, 2009 and 2008





Premiums.  Net
premium written increased by $108.2 million, or 95.6%, and $409.4 million, or
105.8%, respectively for the three and nine months ended September 30, 2009
compared to the three and nine months ended September 30,
2008.  The increase for the three months ended September 30, 2009
was primarily due to the GMAC Acquisition in the fourth quarter of 2008
partially offset by a decrease of $9.5 million in Small Commercial Business
segment of the AmTrust Quota Share premium.





For the
nine months ended September 30, 2009, $489.0 million of the increase was
due to the GMAC Acquisition in the fourth quarter of 2008 offset by an overall
decrease of $86.4 million in the AmTrust Quota Share segment. This decrease was
comprised of the following principal components: non-recurrence
of  premium written relating to the AmTrust Quota Share of
approximately $82 million relating to a one-time unearned premium portfolio
transfer in the second quarter of 2008 as a result of AmTrust’s acquisition of
Unitrin Business Insurance (“UBI”); a decrease of $20.2 million premium written
in the Specialty Risk and Extended Warranty segment of AmTrust; and an increase
of $22.6 million premium written in the Small Commercial Business and Specialty
Middle Market Property & Casualty segments of AmTrust.





Net
premium earned increased by $123.8 million, or 108.9%, and $415.0 million, or
162.0%, respectively for the three and nine months ended September 30, 2009
compared to the three and nine months ended September 30, 2008.
Approximately $144.4 million of the increase for the three months ended
September 30, 2009 was due to the GMAC Acquisition in the fourth quarter of
2008 offset by the reduction of $25.9 million in net premium earned for the
AmTrust Quota Share relating to the one-time unearned premium portfolio transfer
in the second quarter of 2008 relating to UBI – the premium relating to this
transfer was fully earned by the second quarter of 2009.





For the
nine months ended September 30, 2009 $390.4 million of the increase was due
to the GMAC Acquisition in the fourth quarter of 2008 with the balance relating
to increases across all lines, primarily the Small Commercial Business segment
of the AmTrust Quota Share.





Net
investment income. Net investment income increased by $7.8 million, or
87.0%, and $21.8 million, or 89.6%, respectively for the three and nine months
ended September 30, 2009 compared to the three and nine months ended
September 30, 2008. Average invested assets for the periods were
approximately $1,881 million and $1,803 million, respectively, compared to $687
million and $660 million, respectively for 2008, and yields were
approximately 3.6% and 3.4%, respectively, compared to 5.2% and
4.9%, respectively, for the three and nine months ended September 30,
2009 and 2008. We also carried a substantial amount of cash and cash
equivalents in the three and nine months ended September 30, 2009 as we continue
to deploy the cash obtained through the GMAC Acquisition and also from the
proceeds from the Trust Preferred issuance. We expect investment income and the
yield achieved to increase over time as cash is more fully
deployed.


28


Net
realized investment gains (losses). Net realized losses on investments
were $0.1 million and $0.5 million, respectively, for the three and nine months
ended September 30, 2009 compared to losses of $42.5 million and $42.4
million, respectively, for the three and nine months ended September 30,
2008. In the three and nine months ended September 30, 2009 we had no OTTI
losses compared to OTTI losses totaling $42.5 million on our fixed maturity and
other investment portfolios in the three and nine months ended September 30,
2008.





Loss
and loss adjustment expenses. Loss and loss adjustment expenses increased
by $98.2 million, or 146.8%, and $314.1 million, or 211.7%, respectively, for
the three and nine months ended September 30, 2009 compared to the three
and nine months ended September 30, 2008. The Company’s loss ratio for the
three and nine months ended September 30, 2009 increased to 69.6% and 68.9%
, respectively, from 58.9% and 57.9%, respectively, for the three and nine
months ended September 30, 2008. The increase for the three months
ended September 30, 2009 was primarily due to an increase of $108.9 million
due to the GMAC Acquisition in the fourth quarter of 2008 partially offset by a
decrease of $11.0 million relating to the AmTrust Quota Share as a consequence
of lower premium earned.





For the
nine months ended September 30, 2009 the increase was primarily due to the
increase of $287.9 million relating to the GMAC Acquisition in the fourth
quarter of 2008 offset by decrease of $22.4 million in the AmTrust Quota Share
as a consequence of lower premium earned.





The
increase in the loss ratios for the three and nine months ended
September 30, 2009 compared to the three and nine months ended
September 30, 2008 was primarily due to the GMAC Acquisition in the fourth
quarter of 2008 and the addition of UBI premiums, which carry a higher loss
ratio, to the AmTrust Quota Share.





Commission
and other acquisition expenses. Commission and other acquisition expenses
increased by $17.0 million, or 44.4%, and $74.6 million, or 87.6%, respectively,
for the three and nine months ended September 30, 2009 compared to the
three and nine months ended September 30, 2008. The increase for the
three months ended September 30, 2009 was primarily due to an increase of
$24.7 million relating to the GMAC Acquisition in the fourth quarter of 2008
partially offset by a decrease of $7.6 million relating to the AmTrust Quota
Share as a consequence of lower premium earned as a result of the non-recurrence
of the UBI unearned premium transfer.





For the
nine months ended September 30, 2009 there was an increase of $68.7 million
relating to the GMAC Acquisition in the fourth quarter of 2008 offset by a
decrease of $5.9 million in the AmTrust Quota Share as a consequence of lower
premium earned.





General
and administrative expenses.General and administrative
expensesincreased by $6.1 million, or 308.3%, and $17.1 million, or
303.2%, respectively, for the three and nine months ended September 30,
2009 compared to the three and nine months ended September 30,
2008. This increase was primarily due to the GMAC Acquisition in the fourth
quarter of 2008 and the continued build out of our infrastructure.





Trust
preferred interest expense – related party.  Interest expense
for the for the three and nine months ended September 30, 2009 of $9.1
million and $25.3 million, respectively,  relates to the issuance of
$260 million of 14% Trust Preferred Securities on January 20, 2009.





Foreign
exchange and other (gain) loss.The foreign exchange and
other (gain) lossfor the three and nine months ended September 30,
2009 arose primarily because of the strengthening of Sterling versus the US
dollar and our assets in Sterling exceeding our liabilities compared to the
three and nine months ended September 30, 2008 when Sterling weakened
versus the US dollar and our assets in Sterling exceeded our
liabilities.





Underwriting
Results by Segment


The
Company currently operates two business segments Reinsurance - Other and
Reinsurance – AmTrust Quota Share. The following tables summarize the
underwriting results and associated ratios by segments:





Reinsurance
– Other Segment





The
following table summarizes the underwriting results and associated ratios for
the Reinsurance - Other segment. The comparisons with the prior year for this
segment are not particularly meaningful due to the GMAC Acquisition in the
fourth quarter of 2008:





Three
      months ended September 30,
                                          
                                          
                                          Nine
      months ended September 30,2009
                                          
                                          
                                          2008
                                          
                                          
                                          2009
                                          
                                          
                                          2008($
      in thousands)
                                          
                                          
                                          ($
      in thousands)Net
      premiums written
                                          
                                          $
                                          129,232
                                          
                                          
                                          $
                                          10,514
                                          
                                          
                                          $
                                          528,963
                                          
                                          
                                          $
                                          33,180Net
      earned premium
                                          
                                          
                                          147,876
                                          
                                          
                                          
                                          3,100
                                          
                                          
                                          
                                          401,761
                                          
                                          
                                          
                                          5,708Losses
      and loss adjustment expenses
                                          
                                          
                                          (110,420
                                          )
                                          
                                          
                                          (1,251
                                          )
                                          
                                          
                                          (294,005
                                          )
                                          
                                          
                                          (2,278
                                          )Commissions
      and other acquisition expenses
                                          
                                          
                                          (26,062
                                          )
                                          
                                          
                                          (1,391
                                          )
                                          
                                          
                                          (71,234
                                          )
                                          
                                          
                                          (2,534
                                          )General
      and administrative expenses
                                          
                                          
                                          (3,784
                                          )
                                          
                                          
                                          (856
                                          )
                                          
                                          
                                          (13,599
                                          )
                                          
                                          
                                          (1,485
                                          )Underwriting
      income (loss)
                                          
                                          $
                                          7,609
                                          
                                          
                                          $
                                          (398
                                          )
                                          
                                          $
                                          22,923
                                          
                                          
                                          $
                                          (589
                                          )Net
      loss ratio
                                          
                                          
                                          74.7
                                          %
                                          
                                          
                                          40.4
                                          %
                                          
                                          
                                          73.2
                                          %
                                          
                                          
                                          39.9
                                          %Acquisition
      cost ratio
                                          
                                          
                                          17.6
                                          %
                                          
                                          
                                          44.9
                                          %
                                          
                                          
                                          17.7
                                          %
                                          
                                          
                                          44.4
                                          %General
      and administrative expense ratio
                                          
                                          
                                          2.6
                                          %
                                          
                                          
                                          27.6
                                          %
                                          
                                          
                                          3.4
                                          %
                                          
                                          
                                          26.0
                                          %Combined
      ratio
                                          
                                          
                                          94.9
                                          %
                                          
                                          
                                          112.9
                                          %
                                          
                                          
                                          94.3
                                          %
                                          
                                          
                                          110.3
                                          %


29


Comparison
of Three and Nine Months Ended September 30, 2009 and 2008





Premiums.
Net premium written increased by $118.7 million, or 1,129.1%, and $495.8
million, or 1,494.2%, respectively, for the three and nine months ended
September 30, 2009 compared to the three and nine months ended
September 30, 2008. These increases were principally due to the GMAC
Acquisition in the fourth quarter of 2008.





Net
premium earned increased by $144.8 million, or 4,760.2%, and $396.1 million, or
6,938.6%, respectively, for the three and nine months ended September 30,
2009 compared to the three and nine months ended September 30,
2008. These increases were principally due to GMAC Acquisition in the
fourth quarter of 2008.





Loss
and Loss Adjustment Expenses. Loss and loss adjustment expenses increased
by $109.2 million, or 8,726.5%, and $291.7 million, or 12,806.3%, respectively,
for the three and nine months ended September 30, 2009 and 2008,
respectively. These increases were principally due to the GMAC Acquisition in
the fourth quarter of 2008. The Company’s net loss ratio for the three and
nine months ended September 30, 2009 increased to 74.7 % and 73.2%,
respectively, from 40.4% and 39.9%, respectively, for the three and nine months
ended September 30, 2008 due to higher loss ratios associated with the
GMAC Acquisition compared with the contracts written previously.





Commission
and Other Acquisition Expenses. Commission and other acquisition expenses
increased by $24.7 million, or 1,773.6%, and $68.7 million, or 2,711.1%,
respectively, for the three and nine months ended September 30, 2009
compared to the three and nine months ended September 30, 2008.
These increases were principally due to the GMAC Acquisition in the fourth
quarter of 2008.





General
and Administrative Expenses.General and administrative
expensesincreased by $2.9 million, or 342.1%, $12.1 million, or 815.8%,
respectively, for the three and nine months ended September 30, 2009
compared to the three and nine months ended September 30, 2008. These
increases were principally due to the GMAC Acquisition in the fourth
quarter of 2008.





Reinsurance
– AmTrust Quota Share





The
following table summarizes the underwriting results and associated ratios for
the Reinsurance – AmTrust Quota Share segment:





Three
      months ended September 30,
                                              
                                              
                                              Nine months
      ended September 30,2009
                                              
                                              
                                              2008
                                              
                                              
                                              2009
                                              
                                              
                                              2008($
      in thousands)
                                              
                                              
                                              ($
      in thousands)Net
      premiums written
                                              
                                              $
                                              92,168
                                              
                                              
                                              $
                                              102,673
                                              
                                              
                                              $
                                              267,341
                                              
                                              
                                              $
                                              353,690Net
      earned premium
                                              
                                              
                                              89,474
                                              
                                              
                                              
                                              110,495
                                              
                                              
                                              
                                              269,522
                                              
                                              
                                              
                                              250,531Net
      losses and loss adjustment expenses
                                              
                                              
                                              (54,703
                                              )
                                              
                                              
                                              (65,664
                                              )
                                              
                                              
                                              (168,463
                                              )
                                              
                                              
                                              (146,084
                                              )Commissions
      and other acquisition expenses
                                              
                                              
                                              (29,251
                                              )
                                              
                                              
                                              (36,908
                                              )
                                              
                                              
                                              (88,374
                                              )
                                              
                                              
                                              (82,523
                                              )General
      and administrative expenses
                                              
                                              
                                              (812
                                              )
                                              
                                              
                                              (258
                                              )
                                              
                                              
                                              (1,873
                                              )
                                              
                                              
                                              (635
                                              )Underwriting
      income
                                              
                                              $
                                              4,708
                                              
                                              
                                              $
                                              7,665
                                              
                                              
                                              $
                                              10,812
                                              
                                              
                                              $
                                              21,289Net
      loss ratio
                                              
                                              
                                              61.1
                                              %
                                              
                                              
                                              59.4
                                              %
                                              
                                              
                                              62.5
                                              %
                                              
                                              
                                              58.3
                                              %Acquisition
      cost ratio
                                              
                                              
                                              32.7
                                              %
                                              
                                              
                                              33.4
                                              %
                                              
                                              
                                              32.8
                                              %
                                              
                                              
                                              32.9
                                              %General
      and administrative expense ratio
                                              
                                              
                                              0.9
                                              %
                                              
                                              
                                              0.2
                                              %
                                              
                                              
                                              0.7
                                              %
                                              
                                              
                                              0.3
                                              %Combined
      ratio
                                              
                                              
                                              94.7
                                              %
                                              
                                              
                                              93.0
                                              %
                                              
                                              
                                              96.0
                                              %
                                              
                                              
                                              91.5
                                              %





Comparison
of Three and Nine Months Ended September 30, 2009 and 2008





Premiums.
Net premium written decreased by $10.5 million, or 10.2%, and $86.3 million, or
24.4%, respectively, for the three and nine months ended September 30, 2009
compared to the three and nine months ended September 30,
2008.  The decrease for the three months ended September 30, 2009
was primarily due a decrease of $9.5 million in Small Commercial Business
segment of the AmTrust Quota Share.





For the
nine months ended September 30, 2009 the decrease comprised the following
components: non-recurrence of premium written relating to a $82 million one-time
unearned premium portfolio transfer in the second quarter of 2008 from UBI ; a
decrease of $20.2 million in the Specialty Risk and Extended Warranty segment of
AmTrust; and an increase of $22.6 million in the Small Commercial Business and
Specialty Middle Market Property & Casualty segments of
AmTrust.





Net
earned premium decreased by $21.0 million, or 19.0%, and increased by $19.0
million, or 7.6%, respectively, for the three and nine months ended
September 30, 2009 compared to the three and nine months ended
September 30, 2008. For the three months ended September 30, 2009
the reduction of $25.9 million was related to the one-time unearned premium
portfolio transfer in the second quarter of 2008 for UBI – the premium relating
to this transfer was fully earned by the second quarter of 2009. For the nine
months ended September 30, 2009 the increase was across all AmTrust’s lines
in the AmTrust Quota Share, primarily AmTrust’s Small Commercial Business
segment.


30


Loss
and Loss Adjustment Expenses. Loss and loss adjustment expenses decreased
by $11.0 million, or 16.7%, and increased by $22.4 million, or 15.3%,
respectively, for the three and nine months ended September 30, 2009
compared to the three and nine months ended September 30, 2008. The
Company’s net loss ratio for the three and nine months ended September 30,
2009 increased to 61.1 % and 62.5%, respectively, from 56.7 % and 57.4%,
respectively, for the three and nine months ended September 30, 2008. The
increase in the net loss ratio resulted, primarily, from the addition of UBI
premiums, which carry a higher loss ratio, to the AmTrust Quota Share in the
second quarter of 2008.





Commission
and Other Acquisition Expenses. Commission and other acquisition expenses
decreased by $7.7 million, or 20.7%, and increased by $5.9 million, or 7.1%,
respectively, for the three and nine months ended September 30, 2009
compared to the three and nine months ended September 30, 2008. The change
in commissions and other acquisition expenses is consistent with the change in
earned premiums except that the commission rate on the UBI premium ceded is
34.375% versus 31% on all other premium relating to the AmTrust Quota Share.





General
and Administrative Expenses.General and administrative
expensesincreased by $0.6 million, or 214.7%, and $1.2 million, or 195%,
respectively, for the three and nine months ended September 30, 2009
compared to the three and nine months ended September 30, 2008.The increase
arose primarily due to an increase in salaries as we continue to build our
infrastructure.





Liquidity
and Capital Resources





Sources
and Uses of Funds




Our
sources of funds primarily consist of premium receipts net of paid losses and
commissions, investment income, net proceeds from capital raising activities,
which may include the issuance of common shares, and proceeds from sales and
redemption of investments. Cash is used primarily to pay losses and loss
expenses, general and administrative expenses and dividends, with the remainder
made available to our investment managers for investment in accordance with our
investment policy.




The
following table is a summary of our statement of cash flows:




Nine months ended September 30,2009
                        
                        
                        2008($
      in thousands)Cash
      and cash equivalents provided by (used in):Operating
      activities
                        
                        $
                        (13,778
                        )
                        
                        $
                        137,230Investing
      activities
                        
                        
                        (144,247
                        )
                        
                        
                        (345,336
                        )Financing
      activities
                        
                        
                        120,710
                        
                        
                        
                        254,820Change
      in cash and cash equivalents
                        
                        $
                        (37,315
                        )
                        
                        $
                        46,714





Cash
flows from operations for the nine months ended September 30, 2009 were
$(13.8) million compared to $137.2 million for the nine months ended
September 30, 2008. This increase in the cash used in operating activities
was primarily due to the increase in the reinsurance receivables and
acquisitions costs, which were attributable to the GMAC
Acquisition.





Investing
cash flows consist primarily of proceeds on the sale of investments and payments
for investments acquired. We used $144.3 million in net cash for investing
activities during the nine months ended September 30, 2009 compared to
$345.4 million for the nine months ended September 30,
2008.





Cash
flows provided by financing activities were $120.7 million for the nine
months ended September 30, 2009 compared to $254.8 million for the
nine months ended September 30, 2008. Included in cash flows provided by
financing activities for the nine months ended September 30, 2009 were the
Trust Preferred Securities issuance (net of expenses) of $255.8 million,
dividends paid of $8.4 million and the repayment of $126.6 million of
the proceeds from the securities sold under agreements to repurchase, at
contract value.





Our funds
are primarily invested in liquid, high-grade fixed income securities. As of
September 30, 2009, 99.6% of our fixed income portfolio consisted of investment
grade securities. The maturity distribution of our fixed income portfolio (on a
market value basis) as of September 30, 2009 was as follows:




September
      30, 2009($
      in thousands)Due
      in one year or less
                                    
                                    $
                                    62,597Due
      after one year through five years
                                    
                                    
                                    171,756Due
      after five years through ten years
                                    
                                    
                                    326,162Due
      after ten years
                                    
                                    
                                    79,488Mortgage
      and asset -backed
                                    
                                    
                                    901,701Total
                                    
                                    $
                                    1,541,704


31


We do not
believe that inflation has had a material effect on our consolidated results of
operations. The effects of inflation are considered implicitly in pricing. Loss
reserves are established to recognize likely loss settlements at the date
payment is made. Those reserves inherently recognize the effects of inflation.
The actual effects of inflation on our results cannot be accurately known,
however, until claims are ultimately resolved.





The
following summarizes the credit ratings of our fixed maturities:





Rating*
      as of September 30, 2009
                                                    
                                                    Amortized cost
                                                    
                                                    
                                                    Fair
                                                      value
                                                    
                                                    
                                                    %
      of total fair
                                                      value($
      in thousands)U.S.
      treasury bonds
                                                    
                                                    $
                                                    39,451
                                                    
                                                    
                                                    $
                                                    39,658
                                                    
                                                    
                                                    
                                                    2.6
                                                    %AAA
      U.S. Agency - mortgage-backed securities
                                                    
                                                    
                                                    880,024
                                                    
                                                    
                                                    
                                                    901,701
                                                    
                                                    
                                                    
                                                    58.5
                                                    %AAA
                                                    
                                                    
                                                    58,382
                                                    
                                                    
                                                    
                                                    63,122
                                                    
                                                    
                                                    
                                                    4.1
                                                    %AA+,
      AA, AA-
                                                    
                                                    
                                                    41,224
                                                    
                                                    
                                                    
                                                    45,576
                                                    
                                                    
                                                    
                                                    2.9
                                                    %A+,
      A, A-
                                                    
                                                    
                                                    299,346
                                                    
                                                    
                                                    
                                                    294,711
                                                    
                                                    
                                                    
                                                    19.1
                                                    %BBB+,
      BBB, BBB-
                                                    
                                                    
                                                    186,586
                                                    
                                                    
                                                    
                                                    195,882
                                                    
                                                    
                                                    
                                                    12.7
                                                    %B-  or
      lower
                                                    
                                                    
                                                    1,691
                                                    
                                                    
                                                    
                                                    1,054
                                                    
                                                    
                                                    
                                                    0.1
                                                    %$
                                                    1,506,704
                                                    
                                                    
                                                    $
                                                    1,541,704
                                                    
                                                    
                                                    
                                                    100.0
                                                    %





Rating* as of December 31, 2008
                          
                          Amortized cost
                          
                          
                          Fair
                            value
                          
                          
                          % of total fair
                            value($
      in thousands)U.S.
      treasury bonds
                          
                          $
                          37,782
                          
                          
                          $
                          38,527
                          
                          
                          
                          3.4
                          %AAA
      U.S. Agency - mortgage-backed securities
                          
                          
                          756,023
                          
                          
                          
                          771,899
                          
                          
                          
                          68.9
                          %AAA,
                          
                          
                          15,693
                          
                          
                          
                          15,748
                          
                          
                          
                          1.4
                          %AA,
      AA-
                          
                          
                          40,954
                          
                          
                          
                          29,087
                          
                          
                          
                          2.6
                          %A+,
      A, A-
                          
                          
                          265,170
                          
                          
                          
                          222,704
                          
                          
                          
                          19.9
                          %BBB+,
      BBB-
                          
                          
                          36,920
                          
                          
                          
                          30,607
                          
                          
                          
                          2.7
                          %B-
      or lower
                          
                          
                          11,384
                          
                          
                          
                          11,383
                          
                          
                          
                          1.1
                          %$
                          1,163,926
                          
                          
                          $
                          1,119,955
                          
                          
                          
                          100.0
                          %





* Ratings
as assigned by Standard & Poor’s (“S&P”)





Trust
Preferred





On
January 20, 2009, the Company completed a private placement of 260,000 units
(the “Units”), each Unit consisting of $1,000 principal amount of capital
securities (the “Trust Preferred Securities”) of Maiden Capital Financing Trust
(the “Trust”) (an indirect wholly owned subsidiary of the Company) and 45 common
shares, $.01 par value, of the Company (the “Common Shares”), for a purchase
price of $1,000.45 per Unit.  This resulted in gross proceeds to the
Company of $260.1 million before $4.3 million of placement agent fees and
expenses.  11,700,000 Common Shares in the aggregate were issued by
the Company.  Certain trusts established by Michael Karfunkel and
George Karfunkel, two of the Company’s founding shareholders, purchased an
aggregate of 159,000 of the Units or 61%.  The remaining 101,000 Units
were purchased by existing institutional shareholders of the
Company.




The Trust
used the proceeds from the sale of the Trust Preferred Securities to purchase a
subordinated debenture (the “Debenture”) in the principal amount of $260 million
issued by the Company’s wholly owned subsidiary, Maiden Holdings North America,
Ltd. (“Maiden NA”).





As a
consequence of the issuance of a majority of the Units to a related party under
ASC 810, the Trust is a variable interest entity and the Company is deemed to be
the Primary beneficiary and is required to consolidate the Trust. The issuance
of common shares associated with the Trust Preferred Securities resulted in an
original issuance discount of $44.9 million based on market price on January 20,
2009. The discount is amortized over 30 years based on the effective interest
method. The Debentures and Trust Preferred Securities mature in 2039 and carry a
stated or coupon rate of 14% with an effective interest rate of 16.95%. As of
September 30, 2009, the stated value of the Trust Preferred Securities was
$215.1 million which comprises the principal amount of $260 million and
unamortized discount of $49.9 million.


32


Securities Sold
Under Agreements to Repurchase, at Contract Value





The
Company enters into repurchase agreements. The agreements are accounted for as
collateralized borrowing transactions and are recorded at contract amounts. The
Company receives cash or securities, that it invests or holds in short term or
fixed income securities. In March 2009 the Company chose to end all of its
agreements and repaid all amounts then outstanding from existing cash resources.
On June 23, 2009, the Company entered into new repurchase agreements totaling
$108.8 million for which the outstanding amount due was $106.0 million at
September 30, 2009. We expect to repay these agreements from existing cash
resources prior to December 31, 2009.  Interest expense associated
with repurchase agreements for the three and nine months ended September 30,
2009 was $0.1 million and $0.9 million, respectively, compared to the three andninemonths endedSeptember30, 2008
interest expense of $2.0 million and $3.5 million, respectively.





Restrictions,
Collateral and Specific Requirements





The
jurisdictions in which our operating subsidiaries are licensed to write business
impose regulations requiring companies to maintain or meet various defined
statutory ratios, including solvency and liquidity requirements. Some
jurisdictions also place restrictions on the declaration and payment of
dividends and other distributions.





The
payment of dividends from Maiden Holdings’ Bermuda domiciled operating
subsidiary is, under certain circumstances, limited under Bermuda law, which
requires our Bermuda operating subsidiary to maintain certain measures of
solvency and liquidity. Maiden Holdings’ U.S. domiciled operating
subsidiaries are subject to significant regulatory restrictions limiting their
ability to declare and pay dividends. The inability of the subsidiaries of
Maiden Holdings to pay dividends and other permitted distributions could have a
material adverse effect on Maiden Holdings’ cash requirements and ability to
make dividend payments on its common shares.





Maiden
Holdings’ operating subsidiary in Bermuda, Maiden Insurance, is neither licensed
nor admitted as an insurer, nor is it accredited as a reinsurer, in any
jurisdiction in the United States. As a result, it is generally required to post
collateral security with respect to any reinsurance liabilities it assumes from
ceding insurers domiciled in the United States in order for U.S. ceding
companies to obtain credit on their U.S. statutory financial statements
with respect to insurance liabilities ceded by such companies. Under applicable
statutory provisions, the security arrangements may be in the form of letters of
credit, reinsurance trusts maintained by trustees or funds-withheld arrangements
where assets are held by the ceding company.





At this
time, Maiden Insurance uses trust accounts primarily to meet collateral
requirements - cash equivalents and investments pledged in favor of ceding
companies in order to comply with relevant insurance regulations. As of
September 30, 2009, total trust account deposits were $1.19 billion
compared to $0 as of September 30, 2008. For the Quota Share Reinsurance
Agreement with AII, Maiden Insurance has also loaned funds totaling $168.0
million as of September 30, 2009 and 2008 to AmTrust’s Bermuda reinsurance
subsidiary to satisfy collateral requirements.





In
addition, Maiden Insurance has outstanding letters of credit totaling
$17.0 million and $0 as of September 30, 2009 and 2008,
respectively.





Collateral
arrangements with ceding insurers may subject our assets to security interests
or require that a portion of our assets be pledged to, or otherwise held by,
third parties. Both our trust accounts and letters of credit are fully
collateralized by assets held in custodial accounts. Although the investment
income derived from our assets while held in trust accrues to our benefit, the
investment of these assets is governed by the terms of the letter of credit
facilities or the investment regulations of the state or territory of domicile
of the ceding insurer, which may be more restrictive than the investment
regulations applicable to us under Bermuda law. The restrictions may result in
lower investment yields on these assets, which may adversely affect our
profitability.





In
addition, the terms of the Debentures would limit, in the event of certain
circumstances, Maiden NA’s ability to pay dividends to the Company.





We do not
currently anticipate that the restrictions on liquidity resulting from
restrictions on the payments of dividends by our subsidiary companies or from
assets committed in trust accounts or to collateralize the letter of credit
facilities will have a material impact on our ability to carry out our normal
business activities, including our ability to make dividend payments on our
common shares.


33


Investment
Portfolio





Our
investment portfolio, including cash and cash equivalents and restricted cash,
increased by $194.0 million, or 11.6% to $1,860.4 million at September 30, 2009
from $1,666.4 million as of December 31, 2008. Our fixed maturities are
classified as available for sale (99.6%) as of September 30, 2009, as defined by
ASC 320, “Investment - Debt and Equity Securities.” As such, the reported value
of those securities is equal to their fair value. Our fixed maturity securities,
gross, as of September 30, 2009 had a fair value of $1,541.7 million and an
amortized cost of $1,506.7 million.  Our investment portfolio is summarized
in the table below by type of investment:




(Unaudited)
                                                                September
      30, 2009
                                                              
                                                              
                                                              December
      31, 2008Fair
      value
                                                              
                                                              
                                                              Percentage
                                                                of portfolio
                                                              
                                                              
                                                              Fair
      value
                                                              
                                                              
                                                              Percentage
                                                                of portfolio($
      in thousands)
                                                              
                                                              
                                                              
                                                              
                                                              
                                                              ($
      in thousands)U.S.
      – treasury bonds
                                                              
                                                              $
                                                              39,658
                                                              
                                                              
                                                              
                                                              2.6
                                                              %
                                                              
                                                              $
                                                              38,527
                                                              
                                                              
                                                              
                                                              3.4
                                                              %U.S.
      Agency - mortgage backed securities
                                                              
                                                              
                                                              901,701
                                                              
                                                              
                                                              
                                                              58.3
                                                              %
                                                              
                                                              
                                                              771,899
                                                              
                                                              
                                                              
                                                              68.6
                                                              %Corporate
      fixed maturities
                                                              
                                                              
                                                              576,565
                                                              
                                                              
                                                              
                                                              37.2
                                                              %
                                                              
                                                              
                                                              309,529
                                                              
                                                              
                                                              
                                                              27.5
                                                              %Municipalities
                                                              
                                                              
                                                              23,780
                                                              
                                                              
                                                              
                                                              1.5
                                                              %
                                                              
                                                              
                                                              -
                                                              
                                                              
                                                              
                                                              -
                                                              %Other
      investments
                                                              
                                                              
                                                              5,529
                                                              
                                                              
                                                              
                                                              0.4
                                                              %
                                                              
                                                              
                                                              5,291
                                                              
                                                              
                                                              
                                                              0.5
                                                              %Total
      available for sale investments
                                                              
                                                              $
                                                              1,547,233
                                                              
                                                              
                                                              
                                                              100.0
                                                              %
                                                              
                                                              $
                                                              1,125,246
                                                              
                                                              
                                                              
                                                              100.0
                                                              %





Quarterly,
the Company evaluates for other-than-temporary-impairment, whereby it evaluates
each security which has an unrealized loss as of the end of the subject
reporting period. We use a set of quantitative and qualitative criteria to
review our investment portfolio to evaluate the necessity of recording
impairment losses for other-than-temporary declines in the fair value of our
investments. Some of the criteria we consider include:





·
            how
      long and by how much the fair value of the security has been below its
      amortized cost;


·
              the
      financial condition and near-term prospects of the issuer of the security,
      including any specific events that may affect its operations or
      earnings;


·
            our
      intent and ability to keep the security for a sufficient time period for
      it to recover its value;


·
            any
      nonpayment of scheduled interest payments;
and


·
              the occurrence
      of any discrete credit event resulting in the issuer defaulting on
      material outstanding obligation or seeking protection under bankruptcy
      law.





Impairment
of investment securities results in a charge to operations when a market decline
below cost is deemed to be other-than-temporary. During the three and nine
months ended September 30, 2009 based on the criteria above, we determined that
no securities were other-than-temporarily-impaired.  During the three
months and nine months ended September 30, 2008, the Company recognized other
than temporary impairment on Lehman Brothers Inc., Washington Mutual, Inc. fixed
income securities and other investments of $17.4 million, $20.0 million and $5.2
million respectively.





At
September 30, 2009, the Company had $26.2 million of gross unrealized losses
related to available-for-sale fixed income securities. Corporate bonds represent
37.4% of the fair value of our fixed maturities and 90.6% of the total
unrealized losses of our fixed maturities. The Company owns 99 corporate bonds
in the industrial, bank and financial and other sectors, which have a fair value
of approximately 10.5%, 24.0% and 2.9%, respectively, and 15.0%, 75.6% and 0% of
gross unrealized losses, respectively, of our fixed maturities. The Company
believes that the unrealized losses in these securities are the result,
primarily, of general economic conditions and not the condition of the issuers,
which we believe are solvent and have the ability to meet their obligations.
Therefore, the Company expects that the market price for these securities should
recover within a reasonable time.


34


Item
3. Exposures to Market Risk





Quantitative
and Qualitative Disclosures about Market Risk





Market
risk is the risk that we will incur losses in our investments due to adverse
changes in market rates and prices. Market risk is directly influenced by the
volatility and liquidity in the market in which the related underlying assets
are invested. We believe that we are principally exposed to two types of market
risk: changes in interest rates and changes in credit quality of issuers of
investment securities and reinsurers.





Interest
Rate Risk





Interest
rate risk is the risk that we may incur economic losses due to adverse changes
in interest rates. The primary market risk to the investment portfolio is
interest rate risk associated with investments in fixed maturity securities.
Fluctuations in interest rates have a direct impact on the market valuation of
these securities. At September 30, 2009, we had fixed maturity securities with a
fair value of $1,541.7 million that are subject to interest rate
risk.





The table
below summarizes the interest rate risk associated with our fixed maturity
securities by illustrating the sensitivity of the fair value and carrying value
of our fixed maturity securities as of September 30, 2009 to selected
hypothetical changes in interest rates, and the associated impact on our
stockholders’ equity. Temporary changes in the fair value of our fixed maturity
securities that are held as available-for-sale do impact the carrying value of
these securities and are reported in our shareholders’ equity as a component of
other comprehensive income. The selected scenarios in the table below are not
predictions of future events, but rather are intended to illustrate the effect
such events may have on the fair value and carrying value of our fixed maturity
securities and on our shareholders’ equity as of September 30,
2009.





Hypothetical Change in Interest Rates
                                      
                                      Fair
                                        Value
                                      
                                      
                                      Estimated
                                        Change in
                                        Fair Value
                                      
                                      
                                      Hypothetical Percentage
                                        Increase (Decrease) in
                                        Shareholders’ Equity200
      basis point increase
                                      
                                      $
                                      1,451,578
                                      
                                      
                                      $
                                      (90,126
                                      )
                                      
                                      
                                      (14
                                      )%100
      basis point increase
                                      
                                      
                                      1,487,114
                                      
                                      
                                      
                                      (54,590
                                      )
                                      
                                      
                                      (8
                                      )%No
      change
                                      
                                      
                                      1,541,704
                                      
                                      
                                      
                                      -
                                      
                                      
                                      
                                      0
                                      %100
      basis point decrease
                                      
                                      
                                      1,564,140
                                      
                                      
                                      
                                      22,436
                                      
                                      
                                      
                                      3
                                      %200
      basis point decrease
                                      
                                      $
                                      1,605,770
                                      
                                      
                                      $
                                      64,066
                                      
                                      
                                      
                                      10
                                      %





The
interest rate sensitivity on the $168.0 million loan to related party, which
carries an interest rate of one month LIBOR plus 90 basis points, is that a
fluctuation of 100 and 200 basis points in LIBOR would affect our earnings and
cash flows by $1.7 million and $3.4 million, respectively, on an annual basis,
but would not affect the carrying value of the loan.





Credit
Risk


In
providing reinsurance, we have premiums receivable subject to credit risk of the
ceding company. Our credit risk results from our insureds’ potential inability
to meet their premium obligations. We also are exposed to credit risk on our
investment portfolio. Our credit risk is the potential loss in market value
resulting from adverse change in the borrower’s ability to repay its
obligations. Our investment objectives are to preserve capital, generate
investment income and maintain adequate liquidity for the payment of claims and
debt service, if any. We seek to achieve these goals by investing in a
diversified portfolio of securities. We manage credit risk through regular
review and analysis of the creditworthiness of all investments and potential
investments. If we retrocede business to other reinsurers, we will have
reinsurance recoverables subject to credit risk. To mitigate the risk of these
counterparties’ nonpayment of amounts due, we will establish business and
financial standards for reinsurer approval, incorporating ratings and outlook by
major rating agencies and considering then-current market information. Further,
we are subject to the credit risk that AII and/or AmTrust will fail to perform
their obligations to pay interest on and repay principal of amounts loaned to
AII pursuant to its loan agreement with Maiden Insurance, and to reimburse
Maiden Insurance for any assets or other collateral of Maiden that AmTrust’s
U.S. insurance company subsidiaries apply or retain, and income on those
assets.





Off-Balance
Sheet Transactions


We have
no off-balance sheet arrangements or transactions with unconsolidated, special
purpose entities.





Item
4. Controls and Procedures





Our
management, with the participation and under the supervision of our principal
executive officer and principal financial officer, has evaluated the
Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d – 15(e) of the Securities Exchange Act of 1934, as amended (“the Exchange
Act”)) and has concluded that, as of the end of the period covered by this
report, such disclosure controls and procedures were effective. During the most
recent fiscal quarter, there were no changes in the Company’s internal controls
over financial reporting (as defined in Exchange Act Rule 13a – 15(f ) and 15d –
15(f) that have materially affected, or are reasonably likely to materially
affect, the Company’s internal control over financial
reporting.


35


PART II - OTHER INFORMATION





Item
1. Legal Proceedings.





See the
Company’s Form 10-Q for the quarter ended June 30, 2009 filed with the
SEC on August 14, 2009 for a discussion of a letter sent by the
Company’s
former Chief Operating Officer, General Counsel and Secretary to the U.S.
Department of Labor.





Item
1A . Risk Factors.





Information
regarding risk factors appears in Item 1A. Risk Factors in our 2008 Annual
report on Form 10-K filed with the SEC on March 31, 2009, as updated in our
Quarterly Report on Form 10-Q for the quarter ended June 30, 2009 filed with the
SEC on August 14, 2009.


36


Item
6. Exhibits.





Exhibit
                    Number
                  
                  Description31.1
                  
                  Certification
      of the Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a),
      for the quarter ended September 30, 2009.31.2
                  
                  Certification
      of the Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a),
      for the quarter ended September 30, 2009.32.1
                  
                  Certification
      of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, for
      the quarter ended September 30, 2009.32.2
                  
                  Certification
      of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, for
      the quarter ended September 30,
2009.


37


SIGNATURES





Pursuant to the requirements of the
Securities Exchange Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned hereunto duly
authorized.





Maiden
      Holdings, Ltd.(Registrant)Date:
      November 16, 2009
                
                /s/ 
      ARTURO M.
      RASCHBAUMArturo
      M. Raschbaum
                  President
      and Chief Executive Officer/s/ 
      JOHN M.
      MARSHALECKJohn
      M. Marshaleck
                  Chief
      Financial Officer


38