UNITED
STATES


SECURITIES
AND EXCHANGE COMMISSION


Washington,
D.C. 20549




FORM
10-Q




(Mark
One)






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




For
the quarterly period ended March 31, 2010




o
            TRANSITION 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, 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  oNo  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 ýNon-accelerated
      filer   o (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 May
7, 2010, the Registrant had one class of Common Stock ($.01 par
value),


of which
70,291,289 shares were issued and outstanding.







INDEX




PagePART
      I - Financial InformationItem
      1. Financial Statements
            
            3Condensed
      Consolidated Balance Sheets as of March 31, 2010 (unaudited) and December
      31, 2009
            
            3Condensed
      Consolidated Statement of Income for the three months ended March 31, 2010
      and 2009(unaudited)
            
            4Condensed
      Consolidated Statement of Changes in Shareholders’ Equity for the three
      months ended March
      31, 2010 and 2009 (unaudited)
            
            5Condensed
      Consolidated Statement of Cash Flows for the three months ended March 31,
      2010 and 2009
      (unaudited)
            
            6Notes
      to Condensed Consolidated Financial Statements
            
            7Item
      2. Management’s Discussion and Analysis of Financial Condition and
      Results of Operations
            
            24Item
      3. Quantitative and Qualitative Disclosures About Market
      Risk
            
            41Item
      4. Controls and Procedures
            
            42PART
      II - Other InformationItem
      5. Other Information – Submission of Matters to a Vote of Security
      Holders
            
            43Item
      6. Exhibits
            
            44Signatures
            
            45





2


PART
I - FINANCIAL INFORMATION




Item
1.  Financial Statements




MAIDEN HOLDINGS, LTD.


CONDENSED
CONSOLIDATED BALANCE SHEETS


(In
Thousands of United States Dollars, Except Par Value and Per Share
Data)


March
      31, 2010
                (Unaudited)
              
              
              December
      31, 2009
                (Audited)ASSETSInvestments:Fixed
      maturities, available for sale, at fair value
                (Amortized cost 2010:
      $1,669,433; 2009: $1,623,382)
              
              $
              1,726,472
              
              
              $
              1,661,692Other
      investments, at fair value (Cost 2010: $ 5,681;
    2009:$5,684)
              
              
              5,601
              
              
              
              5,549Total
      investments
              
              
              1,732,073
              
              
              
              1,667,241Cash
      and cash equivalents
              
              
              62,743
              
              
              
              107,396Restricted
      cash and cash equivalents
              
              
              117,639
              
              
              
              144,944Accrued
      investment income
              
              
              12,582
              
              
              
              11,405Reinsurance
      balances receivable (includes $87,326 and $43,382 from related party in
      2010 and 2009, respectively)
              
              
              299,237
              
              
              
              208,495Prepaid
      reinsurance
              
              
              26,268
              
              
              
              28,752Reinsurance
      recoverable on unpaid losses
              
              
              16,464
              
              
              
              11,984Loan
      to related party
              
              
              167,975
              
              
              
              167,975Deferred
      commission and other acquisition costs (includes $95,244 and $85,979 from
      related party in 2010 and 2009, respectively)
              
              
              178,254
              
              
              
              172,983Other
      assets
              
              
              12,464
              
              
              
              11,818Intangible
      assets, net
              
              
              49,832
              
              
              
              51,284Goodwill
              
              
              52,617
              
              
              
              52,617Total
      assets
              
              $
              2,728,148
              
              
              $
              2,636,894LIABILITIESReserve
      for loss and loss adjustment expenses (includes $195,683 and $174,046 from
      related party in 2010 and 2009, respectively)
              
              $
              1,048,930
              
              
              $
              1,006,320Unearned
      premiums (includes $292,030 and $264,751 from related party in 2010 and
      2009, respectively)
              
              
              629,940
              
              
              
              583,478Accrued
      expenses and other liabilities
              
              
              47,864
              
              
              
              60,044Securities
      sold under agreements to repurchase, at contract value
              
              
              76,324
              
              
              
              95,401Junior
      subordinated debt
              
              
              215,140
              
              
              
              215,125Total
      liabilities
              
              
              2,018,198
              
              
              
              1,960,368Commitments
      and ContingenciesShareholders’
      equityCommon
      shares ($0.01 par
      value;71,254,093 and 71,253,625 shares issued in 2010 and 2009,
      respectively;70,291,757 and 70,291,289 shares outstanding in 2010 and
      2009, respectively)
              
              
              713
              
              
              
              713Additional
      paid-in capital
              
              
              576,298
              
              
              
              576,086Accumulated
      other comprehensive income
              
              
              56,959
              
              
              
              32,747Retained
      earnings
              
              
              79,781
              
              
              
              70,781Treasury
      shares, at cost (2010
      and 2009: 962,336 shares)
              
              
              (3,801
              )
              
              
              (3,801
              )Total
      shareholders’ equity
              
              
              709,950
              
              
              
              676,526Total
      liabilities and shareholders’ equity
              
              $
              2,728,148
              
              
              $
              2,636,894




See
accompanying notes to the unaudited condensed consolidated financial
statements.




3


MAIDEN HOLDINGS, LTD.


CONDENSED
CONSOLIDATED STATEMENT OF INCOME


(In
Thousands of United States Dollars, Except Per Share Data)


(Unaudited)




For
      the
              Three
      Months
              Ended
              March
      31, 2010
            
            
            For
      the
              Three
      Months
              Ended
              March
      31, 2009Revenues:Gross
      premiums written
            
            $
            327,382
            
            
            $
            336,548Net
      premiums written
            
            
            311,291
            
            
            
            336,548Change
      in unearned premiums
            
            
            (47,362
            )
            
            
            (126,456
            )Net
      earned premium
            
            
            263,929
            
            
            
            210,092Net
      investment income
            
            
            17,581
            
            
            
            14,259Net
      realized investment gains (losses)
            
            
            312
            
            
            
            (1,930
            )Total
      revenues
            
            
            281,822
            
            
            
            222,421Expenses:Loss
      and loss adjustment expenses
            
            
            170,285
            
            
            
            146,288Commission
      and other acquisition expenses
            
            
            77,396
            
            
            
            46,631Other operating
      expenses
            
            
            8,552
            
            
            
            7,535Subordinated
      debt interest expense
            
            
            9,115
            
            
            
            7,090Amortization
      of intangible assets
            
            
            1,452
            
            
            
            1,564Foreign
      exchange loss
            
            
            1,153
            
            
            
            213Total
      expenses
            
            
            267,953
            
            
            
            209,321Income
      before income taxes
            
            
            13,869
            
            
            
            13,100Income
      taxes:Current
      tax expense
            
            
            —
            
            
            
            —Deferred
      tax expense
            
            
            300
            
            
            
            —Income
      tax expense
            
            
            300
            
            
            
            —Net
      income
            
            $
            13,569
            
            
            $
            13,100Basic
      and diluted earnings per common share
            
            $
            0.19
            
            
            $
            0.19Dividends
      declared per common share
            
            $
            0.065
            
            
            $
            0.06




For the Three
              Months Ended
              March 31,
              2010
            
            
            For the Three
              Months Ended
              March 31,
              2009Net
      realized investment gains (losses):Total
      other-than-temporary impairment losses
            
            $
            —
            
            
            $
            —Portion
      of loss recognized in other comprehensive income
            
            
            —
            
            
            
            —Net
      impairment losses recognized in earnings
            
            
            —
            
            
            
            —Other
      net realized gain (loss) on investments
            
            
            312
            
            
            
            (1,930
            )Net
      realized investment gains (losses)
            
            $
            312
            
            
            $
            (1,930
            )




See
accompanying notes to the unaudited condensed consolidated financial
statements.




4





MAIDEN HOLDINGS, LTD.


CONDENSED
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY AND


COMPREHENSIVE
INCOME (LOSS)


(In
Thousands of United States Dollars)


(Unaudited)




For
      the
              Three
      Months
              Ended
              March
      31, 2010
            
            
            For
      the
              Three
      Months
              Ended
              March
      31, 2009Common
      sharesBalance – beginning
      of period
            
            $
            713
            
            
            $
            596Exercise
      of options and issuance of shares, net
            
            
            —
            
            
            
            117Balance – end
      of period
            
            
            713
            
            
            
            713Additional
      paid-in capitalBalance – beginning
      of period
            
            
            576,086
            
            
            
            530,519Exercise
      of options and issuance of shares, net
            
            
            2
            
            
            
            44,928Share
      based compensation
            
            
            210
            
            
            
            159Balance – end
      of period
            
            
            576,298
            
            
            
            575,606Accumulated
      other comprehensive income (loss)Balance – beginning
      of period
            
            
            32,747
            
            
            
            (44,499
            )Net
      unrealized gains (losses) on securities
            
            
            24,212
            
            
            
            (16,486
            )Balance – end
      of period
            
            
            56,959
            
            
            
            (60,985
            )Retained
      earningsBalance – beginning
      of period
            
            
            70,781
            
            
            
            26,944Net
      income
            
            
            13,569
            
            
            
            13,100Dividends
      on common shares
            
            
            (4,569
            )
            
            
            (4,217
            )Balance – end
      of period
            
            
            79,781
            
            
            
            35,827Treasury
      sharesBalance – beginning
      of period
            
            
            (3,801
            )
            
            
            (3,801
            )Shares
      repurchased
            
            
            —
            
            
            
            —Balance – end
      of period
            
            
            (3,801
            )
            
            
            (3,801
            )Total
      Shareholders’ Equity
            
            $
            709,950
            
            
            $
            547,360Comprehensive
      income (loss)Net
      income
            
            $
            13,569
            
            
            $
            13,100Other
      comprehensive income (loss)
            
            
            24,212
            
            
            
            (16,486
            )Comprehensive
      income (loss)
            
            $
            37,781
            
            
            $
            (3,386
            )Disclosure
      regarding net unrealized gains (losses)Unrealized
      holding gains (losses) during the period
            
            $
            24,524
            
            
            $
            (18,416
            )Adjustment
      for reclassification of realized (gains) losses and other-than-temporary
      losses recognized in net income
            
            
            (312
            )
            
            
            1,930Net
      unrealized gains (losses) on securities
            
            $
            24,212
            
            
            $
            (16,486
            )




See
accompanying notes to the unaudited condensed consolidated financial
statements.




5


MAIDEN
HOLDINGS, LTD.


CONDENSED
CONSOLIDATED STATEMENT OF CASH FLOWS


(In
Thousands of United States Dollars)


(Unaudited)


For
      the
                  Three
      Months
                  Ended
                  March
      31, 2010
                
                
                For
      the
                  Three
      Months
                  Ended
                  March
      31, 2009Cash
      flows from operating activities:Net
      income
                
                $
                13,569
                
                
                $
                13,100Adjustments
      to reconcile net income to net cash (used in) provided by operating
      activities:Depreciation
      and amortization of intangibles
                
                
                1,749
                
                
                
                1,636Net
      realized (gain) loss on sales of investments
                
                
                (312
                )
                
                
                1,930Foreign
      exchange loss on revaluation
                
                
                1,153
                
                
                
                213Amortization
      of share-based compensation expense, bond premium and discount and
      subordinated debt discount
                
                
                (1,334
                )
                
                
                (927
                )Changes
      in assets - (increase) decrease:Reinsurance
      balances receivable
                
                
                (87,416
                )
                
                
                (110,157
                )Prepaid
      reinsurance
                
                
                2,484
                
                
                
                —Accrued
      investment income
                
                
                (1,177
                )
                
                
                840Deferred
      commission and other acquisition costs
                
                
                (5,271
                )
                
                
                (48,146
                )Other
      assets
                
                
                (270
                )
                
                
                (40
                )Changes
      in liabilities – increase (decrease):Loss
      and loss adjustment expenses, net
                
                
                38,252
                
                
                
                28,160Unearned
      premiums
                
                
                46,462
                
                
                
                126,457Accrued
      expenses and other liabilities
                
                
                (10,717
                )
                
                
                1,763Net
      cash (used in) provided by operating activities
                
                
                (2,828
                )
                
                
                14,829Cash
      flows from investing activities:Purchases
      of investments:Purchases
      of fixed-maturity securities
                
                
                (205,443
                )
                
                
                (222,323
                )Purchases
      of other investments
                
                
                —
                
                
                
                (138
                )Sale
      of investments:Proceeds
      from sales of fixed-maturity securities
                
                
                37,737
                
                
                
                85,769Proceeds
      from maturities and calls of fixed-maturity securities
                
                
                123,558
                
                
                
                19,423Proceeds
      from redemption of other investments
                
                
                3
                
                
                
                22Decrease
      in restricted cash and cash equivalents
                
                
                27,305
                
                
                
                46,694Purchase
      of capital assets
                
                
                (673
                )
                
                
                (381
                )Net
      cash used in investing activities
                
                
                (17,513
                )
                
                
                (70,934
                )Cash
      flows from financing activities:Repurchase
      agreements, net
                
                
                (19,077
                )
                
                
                (232,646
                )Common
      share issuance
                
                
                2
                
                
                
                117Junior
      subordinated debt issuance
                
                
                —
                
                
                
                260,000Junior
      subordinated debt issuance cost
                
                
                —
                
                
                
                (4,342
                )Dividend
      paid
                
                
                (4,569
                )
                
                
                (3,515
                )Net
      cash (used in) provided by financing activities
                
                
                (23,644
                )
                
                
                19,614Effect
      of exchange rate changes on foreign currency cash
                
                
                (668
                )
                
                
                (213
                )Net
      decrease in cash and cash equivalents
                
                
                (44,653
                )
                
                
                (36,704
                )Cash
      and cash equivalents, beginning of period
                
                
                107,396
                
                
                
                131,897Cash
      and cash equivalents, end of period
                
                $
                62,743
                
                
                $
                95,193Supplemental
      information about non-cash investing and financing
    activitiesDiscount
      on junior subordinated debt
                
                $
                —
                
                
                $
                (44,928
                )Additional
      paid in Capital
                
                
                —
                
                
                
                44,928




See
accompanying notes to the unaudited condensed consolidated financial
statements.




6


MAIDEN
HOLDINGS, LTD.




Notes to Unaudited Condensed Consolidated
Financial Statements


(In
Thousands of United States Dollars, Except Par Value and 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 generally accepted accounting principles in the United States
(“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, 2009.




Certain
reclassifications have been made for 2009 to conform to the 2010
presentation and have no impact on net income previously reported.




2.      Recent
Accounting Pronouncements




Adoption
of new accounting pronouncements




On June
12, 2009, the FASB issued FASB Statement No. 166, “Accounting for Transfers of
Financial Assets,” an amendment of FASB Statement 140 and the FASB subsequently
codified it as Accounting Standard Update (“ASU”) 2009-16, updating Accounting
Standards Codification (“ASC”) Topic 860 “Transfers and Servicing” 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.  ASU 2009-16 is effective on a
prospective basis in fiscal years beginning on or after November 15, 2009 and
interim periods within those fiscal years. The adoption of ASU 2009-16 did not
have a material impact on the Company’s 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)” and the FASB subsequently codified as ASU 2009-17,
updating ASC Topic 810 “Consolidation” 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. ASU 2009-17
is effective on a prospective basis in fiscal years beginning on or after
November 15, 2009, and interim periods within those fiscal years. The adoption
of ASU 2009-17 did not have a material impact on the Company’s consolidated
results of operations and financial condition.




New
accounting pronouncements issued during 2010 impacting the Company are as
follows:




In
February 2010, the FASB issued ASU 2010-09, which requires SEC filers to
evaluate subsequent events through the date the financial statements are issued.
It exempts SEC filers from disclosing the date through which subsequent events
have been evaluated.




7




MAIDEN
HOLDINGS, LTD.




Notes to Unaudited Condensed Consolidated
Financial Statements


(In
Thousands of United States Dollars, Except Par Value and Per Share
Data)


(Unaudited)




2.      Recent
Accounting Pronouncements (continued)




On
January 21, 2010, the FASB issued ASU 2010-06, Improving Disclosures about Fair
Value Measurements (“ASU 2010-06”).  ASU 2010-06 amends ASC 820, Fair
Value Measurements and Disclosures (“ASC 820”), to require a number of
additional disclosures regarding fair value measurements.  ASU 2010-06
specifically requires the disclosure of the amounts of significant transfers
between Level 1 and Level 2 of the fair value hierarchy and the reasons for the
transfers, the reasons for any transfers in or out of Level 3 and the disclosure
of information in the reconciliation of recurring Level 3 measurements about
purchases, sales, issuances and settlement on a gross basis.  ASU
2010-06 also amends ASC 820 to clarify that reporting entities are required to
provide fair value measurement disclosures for each class of assets and
liabilities.  ASU 2010-06 also clarified the requirement for entities
to disclose information about the valuation techniques and inputs used in
estimating Level 2 and Level 3 fair value measurements. ASU 2010-06 is effective
for interim and annual reporting periods beginning after December 15,
2009.  The adoption of ASU 2010-06 did not have a material impact on
the Company’s consolidated results of operations and financial
condition.




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 March
31, 2010 and December 31, 2009 are as follows:




March
      31, 2010
            
            Original
      or
              Amortized
              Cost
            
            
            Gross
              Unrealized
              Gains
            
            
            Gross
              Unrealized
              Losses
            
            
            Fair
              ValueFixed
      Maturities:U.S. treasury
      bonds
            
            $
            39,228
            
            
            $
            211
            
            
            $
            (180
            )
            
            $
            39,259U.S.
      agency bonds – mortgage and asset-backed
            
            
            814,465
            
            
            
            21,396
            
            
            
            (937
            )
            
            
            834,924U.S.
      agency bonds – other
            
            
            189,913
            
            
            
            4,818
            
            
            
            (1
            )
            
            
            194,730Corporate
      fixed maturities
            
            
            604,449
            
            
            
            42,920
            
            
            
            (12,069
            )
            
            
            635,300Municipal
      bonds
            
            
            21,378
            
            
            
            881
            
            
            
            —
            
            
            
            22,259Total
      available for sale fixed maturities
            
            
            1,669,433
            
            
            
            70,226
            
            
            
            (13,187
            )
            
            
            1,726,472Other
      investments
            
            
            5,681
            
            
            
            —
            
            
            
            (80
            )
            
            
            5,601Total
      investments
            
            $
            1,675,114
            
            
            $
            70,226
            
            
            $
            (13,267
            )
            
            $
            1,732,073




December
      31, 2009
              
              Original
      or
                Amortized
                Cost
              
              
              Gross
                Unrealized
                Gains
              
              
              Gross
                Unrealized
                Losses
              
              
              Fair
                ValueFixed
      Maturities:U.S. treasury
      bonds
              
              $
              39,297
              
              
              $
              224
              
              
              $
              (283
              )
              
              $
              39,238U.S.
      agency bonds – mortgage and asset-backed
              
              
              779,400
              
              
              
              17,504
              
              
              
              (2,321
              )
              
              
              794,583U.S.
      agency bonds – other
              
              
              217,192
              
              
              
              4,772
              
              
              
              (447
              )
              
              
              221,517Corporate
      fixed maturities
              
              
              564,750
              
              
              
              37,985
              
              
              
              (20,071
              )
              
              
              582,664Municipal
      bonds
              
              
              22,743
              
              
              
              947
              
              
              
              —
              
              
              
              23,690Total
      available for sale fixed maturities
              
              
              1,623,382
              
              
              
              61,432
              
              
              
              (23,122
              )
              
              
              1,661,692Other
      investments
              
              
              5,684
              
              
              
              —
              
              
              
              (135
              )
              
              
              5,549Total
      investments
              
              $
              1,629,066
              
              
              $
              61,432
              
              
              $
              (23,257
              )
              
              $
              1,667,241




The
contractual maturities of our fixed maturities as of March 31, 2010 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.




8




MAIDEN
HOLDINGS, LTD.




Notes to Unaudited Condensed Consolidated
Financial Statements


(In
Thousands of United States Dollars, Except Par Value and Per Share
Data)


(Unaudited)




3.      Investments
(continued)




As
      at March 31, 2010
              
              Amortized
      Cost
              
              
              Fair
                Value
              
              
              %
      of Total
                Fair
      ValueMaturityDue
      in one year or less
              
              $
              168,341
              
              
              $
              171,972
              
              
              
              9.96
              %Due
      after one year through five years
              
              
              181,342
              
              
              
              187,816
              
              
              
              10.88
              %Due
      after five years through ten years
              
              
              415,670
              
              
              
              433,300
              
              
              
              25.10
              %Due
      after ten years
              
              
              89,615
              
              
              
              98,460
              
              
              
              5.70
              %854,968
              
              
              
              891,548
              
              
              
              51.64
              %Mortgage
      and asset-backed securities
              
              
              814,465
              
              
              
              834,924
              
              
              
              48.36
              %Total
              
              $
              1,669,433
              
              
              $
              1,726,472
              
              
              
              100.00
              %




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
                
                
                TotalMarch
      31, 2010
                
                Fair
                  Value
                
                
                Unrealized
                  Losses
                
                
                Fair
                  Value
                
                
                Unrealized
                  Losses
                
                
                Fair
                  Value
                
                
                Unrealized
                  LossesAvailable-for-sale
      securities:U.S. treasury
      bonds
                
                $
                7,615
                
                
                $
                (180
                )
                
                $
                —
                
                
                $
                —
                
                
                $
                7,615
                
                
                $
                (180
                )U.S.
      agency bonds – mortgage and asset backed
                
                
                181,777
                
                
                
                (931
                )
                
                
                31,417
                
                
                
                (6
                )
                
                
                213,194
                
                
                
                (937
                )U.S.
      agency bonds - other
                
                
                2,004
                
                
                
                (1
                )
                
                
                —
                
                
                
                —
                
                
                
                2,004
                
                
                
                (1
                )Corporate
      fixed maturities
                
                
                40,527
                
                
                
                (621
                )
                
                
                192,120
                
                
                
                (11,448
                )
                
                
                331,851
                
                
                
                (12,069
                )$
                231,923
                
                
                $
                (1,733
                )
                
                $
                223,537
                
                
                $
                (11,454
                )
                
                $
                455,460
                
                
                $
                (13,187
                )Other
      investments
                
                $
                —
                
                
                $
                —
                
                
                $
                4,919
                
                
                $
                (80
                )
                
                $
                4,919
                
                
                $
                (80
                )Total
      temporarily impaired available-for-sale securities and other
      investments
                
                $
                231,923
                
                
                $
                (1,733
                )
                
                $
                228,456
                
                
                $
                (11,534
                )
                
                $
                460,379
                
                
                $
                (13,267
                )


As
of March 31, 2010, there were approximately 32 securities in an unrealized loss
position with a fair value of $460,379 and unrealized losses of $13,267. Of
these securities, there are 14 securities that have been in an unrealized loss
position for 12 months or greater with a fair value of $228,456 and unrealized
losses of $11,534.




Less
      than 12 Months
              
              
              12
      Months or More
              
              
              TotalDecember
      31, 2009
              
              Fair
                Value
              
              
              Unrealized
                Losses
              
              
              Fair
                Value
              
              
              Unrealized
                Losses
              
              
              Fair
                Value
              
              
              Unrealized
                LossesAvailable-for-sale
      securities:U.S. treasury
      bonds
              
              $
              8,632
              
              
              $
              (283
              )
              
              $
              —
              
              
              $
              —
              
              
              $
              8,632
              
              
              $
              (283
              )U.S.
      agency bonds – mortgage and asset-backed
              
              
              235,013
              
              
              
              (2,319
              )
              
              
              694
              
              
              
              (2
              )
              
              
              235,707
              
              
              
              (2,321
              )U.S.
      agency bonds – other
              
              
              59,511
              
              
              
              (447
              )
              
              
              —
              
              
              
              —
              
              
              
              59,511
              
              
              
              (447
              )Corporate
      fixed maturities
              
              
              11,687
              
              
              
              (619
              )
              
              
              193,676
              
              
              
              (19,452
              )
              
              
              205,363
              
              
              
              (20,071
              )$
              314,843
              
              
              $
              (3,668
              )
              
              $
              194,370
              
              
              $
              (19,454
              )
              
              $
              509,213
              
              
              $
              (23,122
              )Other
      investments
              
              $
              —
              
              
              $
              —
              
              
              $
              4,864
              
              
              $
              (135
              )
              
              $
              4,864
              
              
              $
              (135
              )Total
      temporarily impaired available-for-sale securities and other
      investments
              
              $
              314,843
              
              
              $
              (3,668
              )
              
              $
              199,234
              
              
              $
              (19,589
              )
              
              $
              514,077
              
              
              $
              (23,257
              )


As
of December 31, 2009, there were approximately 34 securities in an unrealized
loss position with a fair value of $514,077 and unrealized losses of $23,257. Of
these securities, there are 14 securities that have been in an unrealized loss
position for 12 months or greater with a fair value of $199,234 and unrealized
losses of $19,589.




9




MAIDEN
HOLDINGS, LTD.




Notes to Unaudited Condensed Consolidated
Financial Statements


(In
Thousands of United States Dollars, Except Par Value and Per Share
Data)


(Unaudited)




3.      Investments
(continued)




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 March 31, 2010, 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
period ended March 31, 2010 and 2009, the Company recognized no other than
temporary impairment losses.  Based on our qualitative and
quantitative OTTI review of each asset class within our fixed maturity
portfolio, the remaining unrealized losses on fixed maturities at March 31,
2010, were primarily due to widening of credit spreads relating to the market
illiquidity, rather than credit events. Because it is more likely than not that
we will not 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 March
31, 2010.




(b)           Realized
and unrealized gains and losses




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 Three Months Ended March 31, 2010
              
              Gross
      Gains
              
              
              Gross
      Losses
              
              
              NetFixed
      maturity securities
              
              $
              312
              
              
              $
              —
              
              
              $
              312Other
      investments
              
              
              —
              
              
              
              —
              
              
              
              —Net
      realized gains (losses)
              
              $
              312
              
              
              $
              —
              
              
              $
              312
  For
      the Three Months Ended March 31, 2009
                
                
                Gross
      Gains
                
                
                
                Gross
      Losses
                
                
                
                NetFixed
      maturity securities
                
                $
                1,755
                
                
                $
                (3,670
                )
                
                $
                (1,915
                )Other
      investments
                
                
                —
                
                
                
                (15
                )
                
                
                (15
                )Net
      realized gains (losses)
                
                $
                1,755
                
                
                $
                (3,685
                )
                
                $
                (1,930
                )


Proceeds
from sales of fixed maturities classified as available for sale were $37,737 and
$85,769 for the periods ended March 31, 2010 and 2009,
respectively.




Net
unrealized gain (loss) was as follows:




March
      31, 2010
              
              
              March
      31, 2009Fixed
      maturities
              
              $
              57,039
              
              
              $
              (60,452
              )Other
      investments
              
              
              (80
              )
              
              
              (533
              )Total
      net unrealized gain (loss)
              
              
              56,959
              
              
              
              (60,985
              )Deferred
      income tax expense
              
              
              —
              
              
              
              —Net
      unrealized losses, net of deferred income tax
              
              $
              56,959
              
              
              $
              (60,985
              )Change
      in unrealized gain (loss), net of deferred income tax
              
              $
              24,212
              
              
              $
              (16,486
              )





(c)           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:




10


MAIDEN
HOLDINGS, LTD.
  Notes to Unaudited Condensed Consolidated
Financial Statements
 (In
Thousands of United States Dollars, Except Par Value and Per Share
Data)
 (Unaudited)
  3.      Investments
(continued)




March
      31,2010
              
              
              December
      31,2009Restricted
      cash – third party agreements
              
              $
              106,444
              
              
              $
              133,029Restricted
      cash – related party agreements
              
              
              10,979
              
              
              
              11,485Restricted
      cash – U.S. state regulatory authorities
              
              
              216
              
              
              
              430Total
      restricted cash
              
              
              117,639
              
              
              
              144,944Restricted
      investments – in Trust for third party agreements at fair value
      (amortized cost:
      2010 – $914,105;  2009 – $1,011,582)
              
              
              946,098
              
              
              
              1,022,337Restricted
      investments – in Trust for related party agreements at fair
      value (amortized cost: 2010 – $210,275;
      2009 – $177,537)
              
              
              235,110
              
              
              
              195,474Restricted
      investments – in Trust for U.S. state regulatory authorities
      (amortized cost: 2010 – $13,316;
      2009 – $13,032)
              
              
              13,190
              
              
              
              12,867Total
      restricted investments
              
              
              1,194,398
              
              
              
              1,230,678Total
      restricted cash and investments
              
              $
              1,312,037
              
              
              $
              1,375,622




(d)           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 March 31, 2010, there were $76,324 principal
amount outstanding at interest rate of 0.22%. Interest expense associated with
these repurchase agreements was $57 for the three months ended March 31, 2010,
out of which $11 was accrued as of March 31, 2010. The Company has approximately
$76,324 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.




11


MAIDEN
HOLDINGS, LTD.
  Notes to Unaudited Condensed Consolidated
Financial Statements
 (In
Thousands of United States Dollars, Except Par Value and Per Share
Data)
 (Unaudited)
  4.      Fair Value of
Financial Instruments (continued)




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.




Junior subordinated debt. The
carrying values reported in the accompanying balance sheets for these financial
instruments approximate their fair value.




(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 March 31, 2010 and December 31, 2009:


March
      31, 2010
              
              Quoted
      Prices
                in
      Active
                Markets
      for
                Identical
      Assets
                (Level
      1)
              
              
              Significant
                Other
                Observable
                Inputs
                (Level
      2)
              
              
              Significant
                Unobservable
                Inputs
                (Level
      3)
              
              
              Total
      Fair
                ValueAssetsFixed
      maturitiesU.S. treasury
      bonds
              
              $
              39,259
              
              
              $
              —
              
              
              $
              —
              
              
              $
              39,259U.S.
      agency bonds – mortgage and asset - backed
              
              
              —
              
              
              
              834,924
              
              
              
              —
              
              
              
              834,924U.S.
      agency bonds – other
              
              
              —
              
              
              
              194,730
              
              
              
              —
              
              
              
              194,730Corporate
      fixed maturities
              
              
              —
              
              
              
              635,300
              
              
              
              —
              
              
              
              635,300Municipal
      bonds
              
              
              —
              
              
              
              22,259
              
              
              
              —
              
              
              
              22,259Other
      investments
              
              
              —
              
              
              
              —
              
              
              
              5,601
              
              
              
              5,601Total
              
              $
              39,259
              
              
              $
              1,687,213
              
              
              $
              5,601
              
              
              $
              1,732,073As
      a percentage of total assets
              
              
              1.4
              %
              
              
              61.9
              %
              
              
              0.2
              %
              
              
              63.5
              %LiabilitiesSecurities
      sold under agreements to repurchase
              
              $
              —
              
              
              $
              76,324
              
              
              $
              —
              
              
              $
              76,324As
      a percentage of total liabilities
              
              
              —
              
              
              
              3.8
              %
              
              
              —
              
              
              
              3.8
              %




12


MAIDEN
HOLDINGS, LTD.
  Notes to Unaudited Condensed Consolidated
Financial Statements
 (In
Thousands of United States Dollars, Except Par Value and Per Share
Data)
 (Unaudited)
  4.      Fair Value of
Financial Instruments (continued)




December
      31, 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
      maturitiesU.S. treasury
      bonds
            
            $
            39,238
            
            
            $
            —
            
            
            $
            —
            
            
            $
            39,238U.S.
      agency bonds – mortgage and asset-backed
            
            
            —
            
            
            
            794,583
            
            
            
            —
            
            
            
            794,583U.S.
      agency bonds – other
            
            
            —
            
            
            
            221,517
            
            
            
            —
            
            
            
            221,517Corporate
      fixed maturities
            
            
            —
            
            
            
            582,664
            
            
            
            —
            
            
            
            582,664Municipal
      bonds
            
            
            —
            
            
            
            23,690
            
            
            
            —
            
            
            
            23,690Other
      investments
            
            
            —
            
            
            
            —
            
            
            
            5,549
            
            
            
            5,549Total
            
            $
            39,238
            
            
            $
            1,622,454
            
            
            $
            5,549
            
            
            $
            1,667,241As
      a percentage of total assets
            
            
            1.5
            %
            
            
            61.5
            %
            
            
            0.2
            %
            
            
            63.2
            %LiabilitiesSecurities
      sold under agreements to repurchase
            
            $
            —
            
            
            $
            95,401
            
            
            $
            —
            
            
            $
            95,401As
      a percentage of total liabilities
            
            
            —
            
            
            
            4.9
            %
            
            
            —
            
            
            
            4.9
            %




(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 ended March 31,
2010 and 2009:




Other Investments:
            
            Three Months
              Ended
              March
      31, 2010
            
            
            Three Months
              Ended
              March
      31, 2009Balance at
      beginning of period
            
            $
            5,549
            
            
            $
            5,291Net
      realized and unrealized gains  – included in net
    income
            
            
            —
            
            
            
            —Net
      realized and unrealized losses – included in net income
            
            
            —
            
            
            
            (15
            )Change
      in net unrealized gains – included in other comprehensive income
      (loss)
            
            
            —
            
            
            
            —Change
      in net unrealized losses – included in other comprehensive income
      (loss)
            
            
            55
            
            
            
            (6
            )Purchases
            
            
            —
            
            
            
            138Sales
      and redemptions
            
            
            (3
            )
            
            
            (22
            )Transfers
      into Level 3
            
            
            —
            
            
            
            —Transfers
      out of Level 3
            
            
            —
            
            
            
            —Balance
      at end of period
            
            $
            5,601
            
            
            $
            5,386Level
      3 gains (losses) included in net income attributable to the change in
      unrealized gains (losses) relating to assets held at the reporting
      date
            
            $
            —
            
            
            $
            (15
            )




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.




13


MAIDEN
HOLDINGS, LTD.


Notes to Unaudited Condensed Consolidated
Financial Statements
 (In
Thousands of United States Dollars, Except Par Value and Per Share
Data)
 (Unaudited)
  5.      Goodwill and
Intangible Assets (continued)




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.




The
following table shows an analysis of goodwill and intangible assets as of March
31, 2010 and December 31, 2009:




March
      31, 2010
                                    
                                    
                                    Gross
                                    
                                    
                                    
                                    Accumulated
                                      Amortization
                                    
                                    
                                    
                                    Net
                                    
                                    Useful
      LifeGoodwill
                                    
                                    $
                                    52,617
                                    
                                    
                                    $
                                    —
                                    
                                    
                                    $
                                    52,617
                                    
                                    IndefiniteState
      licenses
                                    
                                    
                                    7,727
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    7,727
                                    
                                    IndefiniteCustomer
      relationships
                                    
                                    
                                    51,400
                                    
                                    
                                    
                                    (9,295
                                    )
                                    
                                    
                                    42,105
                                    
                                    15 years double decliningNet
      balance
                                    
                                    $
                                    111,744
                                    
                                    
                                    $
                                    (9,295
                                    )
                                    
                                    $
                                    102,449




December
      31, 2009
                                    
                                    
                                    Gross
                                    
                                    
                                    
                                    Accumulated
                                      Amortization
                                    
                                    
                                    
                                    Net
                                    Useful
      LifeGoodwill
                                    
                                    $
                                    52,617
                                    
                                    
                                    $
                                    —
                                    
                                    
                                    $
                                    52,617
                                    
                                    IndefiniteState
      licenses
                                    
                                    
                                    7,727
                                    
                                    
                                    
                                    —
                                    
                                    
                                    
                                    7,727
                                    
                                    IndefiniteCustomer
      relationships
                                    
                                    
                                    51,400
                                    
                                    
                                    
                                    (7,843
                                    )
                                    
                                    
                                    43,557
                                    
                                    15 years double decliningNet
      balance
                                    
                                    $
                                    111,744
                                    
                                    
                                    $
                                    (7,843
                                    )
                                    
                                    $
                                    103,901




The
goodwill and intangible assets were recognized in 2009 and 2008 as a result of
the GMAC Acquisition and are assigned to Diversified Reinsurance segment.
Goodwill and intangible assets are subject to annual impairment testing. No
impairment was recorded during the three months ended March 31, 2010. The
estimated amortization expense for the next five years is:




March
      31, 20102010
            
            $
            4,3562011
            
            
            5,0332012
            
            
            4,3622013
            
            
            3,7812014
            
            
            3,276




6.      Junior
Subordinated Debt




On
January 20, 2009, the Company completed a private placement of 260,000 units
(the “Units” or the “TRUPS Offering”), each Unit consisting of $1,000 principal
amount of capital securities (the “Trust Preferred Securities”) of Maiden
Capital Financing Trust (the “Trust”), a special purpose trust established by
Maiden Holdings North America, Ltd. ("Maiden NA"), and 45 common shares, $0.01
par value, of the Company (the “Common Shares”), for a purchase price of
$1,000.45 per Unit. We also issued 11,700,000 common shares to the purchasers in
the “TRUPS Offering”. This resulted in gross proceeds to the Company of
$260,117, before $4,342 of placement agent fees and expenses. 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 61.12%.
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.




Under the
terms of the Trust Preferred Securities, the Company can repay the principal
balance in full or in part at any time. However, if the Company repays such
principal within five years of the date of issuance, it is required to pay an
additional amount equal to one full year of interest on the amount of Trust
Preferred Securities repaid. If the full amount of the Trust Preferred
Securities were repaid within five years of the date of issuance, the additional
amount due would be $36,400, which would be a reduction in
earnings.




14


MAIDEN
HOLDINGS, LTD.
  Notes to Unaudited Condensed Consolidated
Financial Statements
 (In
Thousands of United States Dollars, Except Par Value and Per Share
Data)
 (Unaudited)


6.      Junior
Subordinated Debt (continued)




Pursuant
to separate Guarantee Agreements dated as of January 20, 2009 with Wilmington
Trust Company, 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 Topic 810 “Consolidation”, the Trust is a variable interest entity and the
Company is deemed not to be the Primary beneficiary of the Trust and therefore
it is not consolidated. The issuance of common shares associated with the Trust
Preferred Securities resulted in an original issuance discount of $44,928 based
on market price of $3.85 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
March 31, 2010, the stated value of the Trust Preferred Securities was $215,140
which comprises the principal amount of $260,000 and unamortized discount of
$44,860. Amortization expense for the three months ended March 31, 2010 was
$15.




7.      Earnings
Per Share




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




Three
      months
              ended
              March
      31, 2010
            
            
            Three
      months
              ended
              March
      31, 2009Net
      income available to common shareholders
            
            $
            13,569
            
            
            $
            13,100Weighted
      average number of common shares outstanding - basic
            
            
            70,291,312
            
            
            
            67,687,664Potentially
      dilutive securities:Warrants
            
            
            —
            
            
            
            —Share
      options
            
            
            485,482
            
            
            
            250,126Weighted
      average number of common shares outstanding - diluted
            
            
            70,776,794
            
            
            
            67,937,790Basic
      and diluted earnings per common share:
            
            $
            0.19
            
            
            $
            0.19




As of
March 31, 2010, 4,050,000 (2009: 4,050,000) warrants and 1,584,964 (2009:
662,000) share options were excluded from the calculation of diluted earnings
per share as they were anti-dilutive.




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 Topic 718 "Compensation - Stock
Compensation" fair value method has resulted in share-based expense (a
component of salaries and benefits) in the amount of approximately $210 and $159
for the three months ended March 31, 2010 and 2009,
respectively.




The key
assumptions used in determining the fair value of options granted in the three
months ended March 31, 2010 and a summary of the methodology applied to develop
each assumption are as follows:




Assumptions:
              
              March
      31, 2010Volatility
              
              
              29.8-46.0
              %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
              %




15


MAIDEN
HOLDINGS, LTD.
 Notes to Unaudited Condensed Consolidated
Financial Statements
 (In
Thousands of United States Dollars, Except Par Value and Per Share
Data)
 (Unaudited)


8.      Share
Based Compensation (continued)




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 on NASDAQ.  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 also 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 March 31, 2010:




Three
      Months Ended March 31, 2010
            
            Number
      of
              Share
      Options
            
            
            Weighted
      Average Exercise Price
            
            
            Weighted
      Average Remaining Contractual TermOutstanding,
      December 31, 2009
            
            
            2,036,542
            
            
            $
            5.79
            
            
            8.86
      yearsGranted
            
            
            300,000
            
            
            
            7.25
            
            
            9.93
      yearsExercised
            
            
            (468
            )
            
            
            3.28
            
            
            
            —Cancelled
            
            
            (250
            )
            
            
            3.28
            
            
            
            —Outstanding,
      March 31, 2010
            
            
            2,335,824
            
            
            $
            5.98
            
            
            8.78
      years




The
following schedule shows all options granted, exercised, expired and exchanged
under the Plan for the three months ended March 31, 2009:




Three
      Months Ended March 31, 2009
            
            Number
      of
              Share
      Options
            
            
            Weighted
      Average Exercise Price
            
            
            Weighted
      Average Remaining Contractual TermOutstanding,
      December 31, 2008
            
            
            1,519,834
            
            
            $
            10.00
            
            
            9.44
      yearsGranted
            
            
            150,000
            
            
            
            4.39
            
            
            9.91
      yearsExercised
            
            
            —
            
            
            
            —
            
            
            
            —Cancelled
            
            
            (200,000
            )
            
            
            8.32
            
            
            
            —Outstanding,
      March 31, 2009
            
            
            1,469,834
            
            
            $
            5.55
            
            
            9.31
      years




The weighted
average grant date fair value was $1.76 and $0.82 for all options outstanding at
March 31, 2010 and 2009, respectively. There was approximately $2,647 and $1,878
of total unrecognized compensation cost related to non-vested share-based
compensation arrangements as of March 31, 2010 and 2009,
respectively.




16


MAIDEN
HOLDINGS, LTD.
 Notes to Unaudited Condensed Consolidated
Financial Statements
 (In
Thousands of United States Dollars, Except Par Value and Per Share
Data)
 (Unaudited)
  9.      Dividends
Declared




On March
3, 2010, the Company’s Board of Directors approved a quarterly cash dividend of
$0.065 per common share. This dividend was paid on April 15, 2010 to
shareholders of record on April 1, 2010.




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”).  In January 2009, Barry Karfunkel was hired as a managing
director of capital investments of Maiden Re Insurance Services, LLC. Barry
Karfunkel is the son of Michael Karfunkel and the brother-in-law of Barry D.
Zyskind. Barry Karfunkel’s employment ended in March 2010. The following
describes transactions between the Company and AmTrust.




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 Maiden
Insurance Company Ltd. (“Maiden Insurance” or “Maiden Bermuda”) to enter into
the 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 Reinsurance Agreement has an initial term of three years,
which has been extended for three years through 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 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 $82.2 million 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 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 Reinsurance
Agreement) retroceded to Maiden Insurance is net of ceding
commission.


17


MAIDEN
HOLDINGS, LTD.
 Notes to Unaudited Condensed Consolidated
Financial Statements
 (In
Thousands of United States Dollars, Except Par Value and Per Share
Data)
 (Unaudited)
  10.    Related Party Transactions
(continued)




The
Company recorded approximately $34,765 and $29,254 of ceding commission expense
for the three months ended March 31, 2010 and 2009, respectively as a result of
this transaction.




Other
Reinsurance Agreements




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 remaining
55% participation was placed with a single carrier. This coverage expired on
January 1, 2010; as a
result, under the Master Agreement the Company therefore now reinsures 40% of
the subject workers’ compensation business up to $10 million, subject to certain
additional inuring reinsurance protection AmTrust has
purchased.




As of
January 1, 2008, the Company had a 50% participation in a $4 million in excess
of $1 million specialty transportation program written by AmTrust. Starting
January 1, 2009, we had a 30% participation in a $4 million in excess of $1
million specialty transportation program written by AmTrust. This program
provides primarily commercial auto coverage and, to a lesser extent, general
liability coverage to private non-emergency para-transit and school bus service
operators. This participation was sourced through a reinsurance intermediary via
open market placement in which competitive bids were solicited by an independent
broker. Several other broker market reinsurers hold the other 50% and 70%
participation for 2008 and 2009 policies, respectively. The agreement was not
renewed as of January 1, 2010.




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 Agreement of
AII’s obligations to the AmTrust subsidiaries to whom 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 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.




Maiden
Insurance satisfied its collateral requirements under the Quota Share Agreement
with AII as follows:




·
              by
      lending funds in the amount of $167,975 as at March 31, 2010 and December
      31, 2009 to AII pursuant to a loan agreement entered into between those
      parties. This loan is carried at cost. 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 AIIM and its share of fees owed to the trustee of the Trust
      Accounts.


18


MAIDEN
HOLDINGS, LTD.
 Notes to Unaudited Condensed Consolidated
Financial Statements
 (In
Thousands of United States Dollars, Except Par Value and Per Share
Data)
 (Unaudited)
  10.   Related Party Transactions (continued)




·
              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, as at March 31, 2010 was approximately
      $246,089 (December 31, 2009 – $206,960) and the accrued interest
      was $2,718 (December 31,
  2009 – $1,956).


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 $1,383 and $1,155 of
reinsurance brokerage expense for the three months ended March 31, 2010 and
2009, respectively, and deferred reinsurance brokerage of $3,401 and $3,265 as
at March 31, 2010 and December 31, 2009, 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 $nil and $152
expense, which is included in other operating expenses, for the three ended
March 31, 2010 and 2009, respectively.




Asset Management
Agreement




Effective
July 1, 2007 and as amended, the Company entered into an asset management
agreement with AII Insurance Management Limited (“AIIM”), an AmTrust subsidiary,
pursuant to which AIIM has agreed to provide investment management services to
the Company.  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 $656 and $597 of investment management fees for the three
months ended March 31, 2010 and 2009, respectively, as a result of this
agreement.




ACAC
Quota Share Reinsurance Agreement




On March
1, 2010, the Company entered into a three year 25% quota share reinsurance
agreement with American Capital Acquisition Corporation (“ACAC”).




ACAC is
an insurance holding company owned by the 2005 Michael Karfunkel Grantor
Retained Annuity Trust (the “Trust”), which in turn is controlled by Michael
Karfunkel (“Karfunkel”), Karfunkel, individually, and AmTrust. ACAC, on March 1,
2010, acquired from GMAC Insurance Holdings, Inc. and Motors Insurance
Corporation (collectively, “GMAC”), GMAC’s personal lines automobile business.
Karfunkel is a Founding Shareholder of the Company. In addition, Karfunkel is
the chairman of the board of directors of ACAC and Barry D. Zyskind, the
Company’s
Chairman, is serving as an executive of ACAC on an interim
basis.


19


MAIDEN
HOLDINGS, LTD.




Notes to Unaudited Condensed Consolidated
Financial Statements


(In
Thousands of United States Dollars, Except Par Value and Per Share
Data)


(Unaudited)


10.   Related
Party Transactions (continued)




The
Company, subject to all required regulatory approval, effective March 1, 2010,
shall reinsure 25% of the net premiums of the GMAC personal lines business,
pursuant to a 50% quota share reinsurance agreement (“ACAC Quota Share”) with
the GMAC personal lines insurance companies, as cedents, and the Company, MK Re,
Ltd., a Bermuda reinsurer which is a wholly-owned subsidiary of the Trust, and
AmTrust., as reinsurers. The Company has a 50% participation in the ACAC Quota
Share, by which it receives 25% of net premiums of the personal lines business.
The ACAC Quota Share provides that the reinsurers, severally, in accordance with
their participation percentages, shall receive 50% of the net premium of the
GMAC personal lines insurance companies and assume 50% of the related net
losses. The ACAC Quota Share has an initial term of three years and shall renew
automatically for successive three year terms unless terminated by written
notice not less than nine months prior to the expiration of the current term.
Notwithstanding the foregoing, the Company’s participation in the Personal Lines
Quota Share may be terminated by the ACAC on 60 days written notice in the event
the Company becomes insolvent, is placed into receivership, its financial
condition is impaired by 50% of the amount of its surplus at the inception of
the ACAC Quota Share or latest anniversary, whichever is greater, is subject to
a change of control, or ceases writing new and renewal business. ACAC also may
terminate the agreement on nine months written notice following the effective
date of initial public offering or private placement of stock by ACAC or a
subsidiary. The Company may terminate its participation in the ACAC Quota Share
on 60 days written notice in the event ACAC is subject to a change of control,
cease writing new and renewal business, effects a reduction in their net
retention without the Company’s consent or fails to remit premium as required by
the terms of the ACAC Quota Share. The ACAC Quota Share provides that the
reinsurers pay a provisional ceding commission equal to 32.5% of ceded earned
premium, net of premiums ceded by the personal lines companies for inuring
reinsurance, subject to adjustment. The ceding commission is subject to
adjustment to a maximum of 34.5% if the loss ratio for the reinsured business is
60.5% or less and a minimum of 30.5% if the loss ratio is 64.5% or higher. We
believe that the terms, conditions and pricing of the ACAC Quota Share have been
determined by arm’s length negotiations and reflect current market terms and
conditions.




The
Company recorded approximately $679 of ceding commission expense for the three
months ended March 31, 2010 as a result of this transaction.




11.   Segments




The
Company currently operates three business segments, Diversified Reinsurance,
AmTrust Quota Share and ACAC Quota Share. The Company evaluates segment
performance based on segment profit separately from the results of our
investment portfolio. Other operating expenses allocated to the segments are
called General and Administrative expenses which 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. In
determining total assets by segment the Company identifies those assets that are
attributable to a particular segment such as reinsurance receivable, deferred
commissions and acquisition cost, loans, goodwill and intangibles, and
restricted cash and investments. All remaining assets are allocated to
Corporate.




20


MAIDEN
HOLDINGS, LTD.




Notes to Unaudited Condensed Consolidated
Financial Statements


(In
Thousands of United States Dollars, Except Par Value and Per Share
Data)


(Unaudited)


11.   Segments(continued)




The
following tables summarize the underwriting results of our operating segments:




For
      the three months ended March 31, 2010
            
            Diversified
      Reinsurance
            
            
            AmTrust
      Quota Share
            
            
            ACAC
              Quota
      Share
            
            
            TotalNet
      premiums written
            
            $
            167,914
            
            
            $
            121,556
            
            
            $
            21,821
            
            
            $
            311,291Net
      premiums earned
            
            
            151,180
            
            
            
            110,659
            
            
            
            2,090
            
            
            
            263,929Net
      losses and loss expenses
            
            
            (99,417
            )
            
            
            (69,562
            )
            
            
            (1,306
            )
            
            
            (170,285
            )Commissions
      and other acquisition costs
            
            
            (40,514
            )
            
            
            (36,148
            )
            
            
            (734
            )
            
            
            (77,396
            )General
      and administrative expenses
            
            
            (5,872
            )
            
            
            (474
            )
            
            
            —
            
            
            
            (6,346
            )Underwriting
      income
            
            $
            5,377
            
            
            $
            4,475
            
            
            $
            50
            
            
            $
            9,902Reconciliation
      to net incomeNet
      investment income and realized (loss)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            17,893Amortization
      of intangible assets
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,452
            )Foreign
      exchange loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,153
            )Subordinated
      debt interest expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (9,115
            )Other
      operating expenses
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (2,206
            )Net
      Income before income taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            13,869Net
      loss and loss expense ratio*
            
            
            65.7
            %
            
            
            62.9
            %
            
            
            62.5
            %
            
            
            64.5
            %Acquisition
      cost ratio**
            
            
            26.8
            %
            
            
            32.7
            %
            
            
            35.1
            %
            
            
            29.3
            %General
      and administrative expense ratio***
            
            
            3.9
            %
            
            
            0.4
            %
            
            
            —
            %
            
            
            3.3
            %Combined
      ratio****
            
            
            96.4
            %
            
            
            96.0
            %
            
            
            97.6
            %
            
            
            97.1
            %





For
      the three months ended March 31, 2009
            
            Diversified
      Reinsurance
            
            
            AmTrust
      Quota Share
            
            
            ACAC
              Quota
      Share
            
            
            TotalNet
      premiums written
            
            $
            251,177
            
            
            $
            85,371
            
            
            $
            —
            
            
            $
            336,548Net
      premiums earned
            
            
            117,67
      2
            
            
            
            92,420
            
            
            
            —
            
            
            
            210,092Net
      losses and loss expenses
            
            
            (89,016
            )
            
            
            (57,272
            )
            
            
            —
            
            
            
            (146,288
            )Commissions
      and other acquisition costs
            
            
            (16,222
            )
            
            
            (30,409
            )
            
            
            —
            
            
            
            (46,631
            )General
      and administrative expenses
            
            
            (5,726
            )
            
            
            (374
            )
            
            
            —
            
            
            
            (6,100
            )Underwriting
      income
            
            $
            6,708
            
            
            $
            4,365
            
            
            $
            —
            
            
            $
            11,073Reconciliation
      to net incomeNet
      investment income and realized (loss)
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            12,329Amortization
      of intangible assets
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,564
            )Foreign
      exchange loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (213
            )Subordinated
      debt interest expense
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (7,090
            )Other
      operating expenses
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (1,435
            )Net
      Income before income taxes
            
            
            
            
            
            
            
            
            
            
            
            
            
            $
            13,100Net
      loss and loss expense ratio*
            
            
            75.6
            %
            
            
            62.0
            %
            
            
            —
            %
            
            
            69.6
            %Acquisition
      cost ratio**
            
            
            13.8
            %
            
            
            32.9
            %
            
            
            —
            %
            
            
            22.2
            %General
      and administrative expense ratio***
            
            
            4.9
            %
            
            
            0.4
            %
            
            
            —
            %
            
            
            3.
      6
            %Combined
      ratio****
            
            
            94.3
            %
            
            
            95.
      3
            %
            
            
            —
            %
            
            
            95.4
            %







*
            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.




21


MAIDEN
HOLDINGS, LTD.




Notes to Unaudited Condensed Consolidated
Financial Statements


(In
Thousands of United States Dollars, Except Par Value and Per Share
Data)


(Unaudited)





11.           Segments
(continued)




Diversified
              Reinsurance
            
            
            AmTrust
              Quota
      Share
            
            
            ACAC
              Quota
      Share
            
            
            TotalAs
      of March 31, 2010Reinsurance
      balances receivable, net
            
            $
            212,144
            
            
            $
            72,630
            
            
            $
            14,463
            
            
            $
            299,237Prepaid
      reinsurance
            
            
            26,268
            
            
            
            —
            
            
            
            —
            
            
            
            26,268Reinsurance
      recoverable on unpaid losses
            
            
            16,464
            
            
            
            —
            
            
            
            —
            
            
            
            16,464Deferred
      acquisition costs
            
            
            83,078
            
            
            
            88,243
            
            
            
            6,933
            
            
            
            178,254Loan
      to related party
            
            
            —
            
            
            
            167,975
            
            
            
            —
            
            
            
            167,975Goodwill
            
            
            52,617
            
            
            
            —
            
            
            
            —
            
            
            
            52,617Intangible
      assets, net
            
            
            49,832
            
            
            
            —
            
            
            
            —
            
            
            
            49,832Restricted
      investments and cash
            
            
            1,065,948
            
            
            
            246,089
            
            
            
            —
            
            
            
            1,312,037Corporate
      and other assets
            
            
            2,097
            
            
            
            —
            
            
            
            —
            
            
            
            625,464Total
      Assets
            
            $
            1,508,448
            
            
            $
            574,937
            
            
            $
            21,396
            
            
            $
            2,728,148





Diversified
              Reinsurance
            
            
            AmTrust
              Quota
      Share
            
            ACAC
              Quota
      Share
            
            
            TotalAs
      of December 31, 2009Reinsurance
      balances receivable, net
            
            $
            168,639
            
            
            $
            39,856
            
            
            $
            —
            
            
            $
            208,495Prepaid
      reinsurance
            
            
            28,752
            
            
            
            —
            
            
            
            —
            
            
            
            28,752Reinsurance
      recoverable on unpaid losses
            
            
            11,984
            
            
            
            —
            
            
            
            —
            
            
            
            11,984Deferred
      acquisition costs
            
            
            88,224
            
            
            
            84,759
            
            
            
            —
            
            
            
            172,983Loan
      to related party
            
            
            —
            
            
            
            167,975
            
            
            
            —
            
            
            
            167,975Goodwill
            
            
            52,617
            
            
            
            —
            
            
            
            —
            
            
            
            52,617Intangible
      assets, net
            
            
            51,284
            
            
            
            —
            
            
            
            —
            
            
            
            51,284Restricted
      investments and cash
            
            
            1,168,663
            
            
            
            206,959
            
            
            
            —
            
            
            
            1,375,622Corporate
      and other assets
            
            
            2,502
            
            
            
            —
            
            
            
            —
            
            
            
            567,182Total
      Assets
            
            $
            1,572,665
            
            
            $
            499,549
            
            
            $
            —
            
            
            $
            2,636,894




The
following tables set forth financial information relating to gross and net
premiums written and earned by major line of business for the three months ended
March 31, 2010 and 2009:




For
      the Three Months Ended
              March
      31, 2010
            
            
            For
      the Three Months Ended
              March
      31, 2009Total
            
            
            %
      of Total
            
            
            Total
            
            
            %
      of TotalNet premiums writtenDiversified ReinsuranceProperty
            
            $
            58,053
            
            
            
            18.6
            %
            
            $
            51,448
            
            
            
            15.3
            %Casualty
            
            
            92,161
            
            
            
            29.6
            %
            
            
            150,075
            
            
            
            44.6
            %Accident
      and Health
            
            
            17,700
            
            
            
            5.7
            %
            
            
            49,654
            
            
            
            14.8
            %Total
      Diversified Reinsurance
            
            
            167,914
            
            
            
            53.9
            %
            
            
            251,177
            
            
            
            74.7
            %AmTrust Quota ShareSmall
      Commercial Business
            
            
            58,934
            
            
            
            18.9
            %
            
            
            52,972
            
            
            
            15.7
            %Specialty
      Program Business
            
            
            10,074
            
            
            
            3.3
            %
            
            
            9,228
            
            
            
            2.7
            %Specialty
      Risk and Extended Warranty
            
            
            52,548
            
            
            
            16.9
            %
            
            
            23,171
            
            
            
            6.9
            %Total
      AmTrust Quota Share
            
            
            121,556
            
            
            
            39.1
            %
            
            
            85,371
            
            
            
            25.3
            %ACAC
      Quota ShareCasualty
            
            
            21,821
            
            
            
            7.0
            %
            
            
            —
            
            
            
            —
            %Total
      ACAC Quota Share
            
            
            21,821
            
            
            
            7.0
            %
            
            
            —
            
            
            
            —
            %Total net premiums written
            
            $
            311,291
            
            
            
            100.0
            %
            
            $
            336,548
            
            
            
            100
            %





22


MAIDEN
HOLDINGS, LTD.




Notes to Unaudited Condensed Consolidated
Financial Statements


(In
Thousands of United States Dollars, Except Par Value and Per Share
Data)


(Unaudited)


11.           Segments
(continued)




For
      the Three Months Ended
                March
      31, 2010
              
              
              For
      the Three Months Ended
                March
      31, 2009Total
              
              
              %
      of Total
              
              
              Total
              
              
              %
      of TotalNet
      premiums earnedDiversified
      ReinsuranceProperty
              
              $
              41,788
              
              
              
              15.8
              %
              
              $
              25,999
              
              
              
              12.4
              %Casualty
              
              
              88,246
              
              
              
              33.5
              %
              
              
              66,355
              
              
              
              31.6
              %Accident
      and Health
              
              
              21,146
              
              
              
              8.0
              %
              
              
              25,318
              
              
              
              12.0
              %Total
      Diversified Reinsurance
              
              
              151,180
              
              
              
              57.3
              %
              
              
              117,672
              
              
              
              56.0
              %AmTrust
      Quota ShareSmall
      Commercial Business
              
              
              51,954
              
              
              
              19.7
              %
              
              
              54,627
              
              
              
              26.0
              %Specialty
      Program Business
              
              
              14,774
              
              
              
              5.6
              %
              
              
              13,348
              
              
              
              6.4
              %Specialty
      Risk and Extended Warranty
              
              
              43,931
              
              
              
              16.6
              %
              
              
              24,445
              
              
              
              11.6
              %Total
      AmTrust Quota Share
              
              
              110,659
              
              
              
              41.9
              %
              
              
              92,420
              
              
              
              44.0
              %ACAC
      Quota ShareCasualty
              
              
              2,090
              
              
              
              0.8
              %
              
              
              —
              
              
              
              —
              %Total
      ACAC Quota Share
              
              
              2,090
              
              
              
              0.8
              %
              
              
              —
              
              
              
              —
              %Total
      net premiums earned
              
              $
              263,929
              
              
              
              100.00
              %
              
              $
              210,092
              
              
              
              100.00
              %




12.           Subsequent
Events




On
May 4, 2010, the Company declared a quarterly dividend of $0.065 per common
share, payable on July 15, 2010 to shareholders of record on July 1,
2010.




23


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 our condensed consolidated
financial statements and related notes included elsewhere in this Form 10-Q.
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
Quarterly Report on 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 Annual Report on Form 10-K filed with the U.S. Securities and Exchange
Commission (“SEC”) on March 16, 2010.  Since the Company commenced
operations in 2007, the Company has engaged in a number of significant
transactions, including entering into the AmTrust Quota Share in 2007, the GMAC
Acquisition in 2008, the TRUPS Offering in 2009 and the ACAC Transaction in
2010,  each discussed below that significantly affect the
comparability of results of operations from year to year.  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.




Overview




We are a
Bermuda-based holding company formed in June 2007 primarily focused on serving
the needs of regional and specialty insurers in the United States and Europe by
providing innovative reinsurance solutions designed to support their capital
needs. We specialize in reinsurance solutions that optimize financing by
providing coverage within the more predictable and actuarially credible lower
layers of coverage and/or reinsuring risks that arc believed to be lower hazard,
more predictable and generally not susceptible to catastrophe claims. Our
tailored solutions include a variety of value added services focused on helping
our clients grow and prosper.




We
provide reinsurance through our wholly owned subsidiaries, Maiden Reinsurance
Company ("Maiden US") and Maiden Bermuda and have operations in the United
States and Bermuda. On a more limited basis, Maiden Specialty Insurance Company
("Maiden Specialty"), a wholly owned subsidiary of Maiden US, provides primary
insurance on a surplus lines basis focusing on non-catastrophe inland marine and
property coverages. Maiden Bermuda does not underwrite any primary insurance
business.




We
historically have managed our business through two operating
segments:  Diversified Reinsurance and the AmTrust Quota
Share.  In the first quarter of 2010, we have added a third segment,
ACAC Quota Share, as a result of the ACAC Transaction discussed
below.  As of March 31, 2010, we had approximately $710.0 million
of total shareholders equity and $925.1 million in total capital, which
includes shareholders’ equity and junior subordinated debt.




The
market conditions in which we operate have historically been cyclical,
experiencing cycles of price erosion followed by rate strengthening as a result
of catastrophes or other significant losses that affect the overall capacity of
the industry to provide coverage. During the period covered by this discussion,
the reinsurance market has been characterized by significant competition
in  most lines of business.




During
2009 and 2010, there were a number of events that impacted the property and
casualty industry generally. While natural and man-made catastrophes occur each
year affecting reinsurance industry results, 2009 generally featured fewer such
events, favorably impacting industry performance. Further, despite the ongoing
global economic recession, industry investments in risk assets performed
significantly better in 2009, increasing both statutory and generally accepted
accounting principles in the United States ("GAAP") capital at the individual
market participant level and in the aggregate across the reinsurance industry
more generally. In the first quarter of 2010, a series of significant natural
catastrophes occurred, including a major earthquake in Chile, damaging
windstorms in Europe (Xynthia) and a series of severe winter storms in the
northeastern United States.  Consistent with its business model, the
Company experienced no losses from the Chilean earthquake or European
windstorms, while losses from the United States winter storms, if any, are
expected to be immaterial.




24




We
believe that if such events continue, they could have a significant effect on
competition and pricing, although the ultimate impact remains
unclear.  As market conditions continue to develop and competition
further increases, we continue to maintain our adherence to underwriting
standards by declining business when pricing, terms and conditions do not meet
our underwriting standards.




Recent
Developments




GMAC
Acquisition




On
October 31, 2008, we acquired the reinsurance operations of GMAC Insurance from
GMACI Holdings, LLC ("GMACI"), which included the following components, the sum
of which are referred to as the "GMAC Acquisition":




·
            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 (which was subsequently
      renamed Maiden Re Insurance Services, LLC ("Maiden
  Re"));




·
            GMAC
      Direct Insurance Company ("GMAC Direct") (which was subsequently renamed
      Maiden Reinsurance Company); and




·
            Integon
      Specialty Insurance Company ("Integon") (which was subsequently renamed
      Maiden Specialty Insurance
Company).




In
conjunction with the acquisition of GMAC RE, on October 31, 2008, the Company
and Motors entered into a Portfolio Transfer and Quota Share Reinsurance
Agreement ("Motors Agreement") under which the Company reinsures (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. According
to the loss portfolio transfer provisions of the Motors Agreement, the Company
assumed the loss reserves of $755.6 million associated with the GMAC RE business
as of October 31, 2008. The Company also assumed unearned premium of
approximately $169.9 million. As a result of assumption of these liabilities,
the Company initially received cash and investments of approximately $956.3
million from Motors. The Company now assumes one hundred percent (100%) of all
premiums and losses for which Motors is otherwise entitled to or liable in
respect of the reinsurance contracts.




To
support the businesses acquired in the GMAC Acquisition and Maiden Holdings
North America, Ltd. (“Maiden NA”), on January 20, 2009, we completed the TRUPS
Offering of approximately $260.1 million in the form of junior subordinated
debentures (the "Debentures") issued by Maiden Capital Financing Trust, a trust
established by Maiden NA, and also issued 11,700,000 common shares to the
purchasers. The Debentures mature in 2039 and carry an interest rate of 14%.
Approximately 61% of these securities were placed privately with two of our
Founding Shareholders (Michael Karfunkel and George Karfunkel), and the
remainder with existing institutional investors.




ACAC
Transaction




In
November 2009, we announced an agreement in principal with American Capital
Acquisition Corporation ("ACAC") regarding a multi-year 25% quota share
agreement expected to generate over $200 million in annual revenue. The contract
commenced on March 1, 2010 after final regulatory approval and the closing of
ACAC's acquisition of GMACI Holdings, LLC U.S. consumer property and casualty
insurance business, as well as a small amount of commercial auto business. This
business generated over $1.0 billion in net written premium in each of 2008 and
2009. ACAC is owned by one of our Founding Shareholders, Michael Karfunkel, and
the Michael Karfunkel 2005 Grantor Retained Annuity Trust (the “Trust"), which
is controlled by Michael Karfunkel. The Trust currently owns 72.4% of ACAC's
issued and outstanding common stock, Michael Karfunkel currently owns 27.6% of
ACAC's issued and outstanding common stock, and AmTrust owns preferred shares
convertible into 21.25% of the issued and outstanding common stock of
ACAC.




As noted,
management of this business will be treated as a separate segment captioned ACAC
Quota Share.




25




2010
Financial Highlights




2010
Consolidated Results of Operations




·
            Net
      income available to common shareholders of $13.6 million, or $0.19
      basic and diluted earnings per share compared to $13.1 million or $0.19
      basic and diluted earnings per share for the same period in
      2009




·
            Operating
      earnings of $16.2 million, or $0.23 basic and diluted operating earnings
      per share compared to $16.8 million or $0.25 basic and diluted
      operating earnings per share in 2009(1)




·
            Gross
      premiums written of $327.4 million




·
            Net
      premiums earned of $263.9 million




·
            Underwriting
      income of $9.9 million and combined ratio of 97.1%compared
      to $11.1 million and 95.4%, respectively for the same period in
      2009(1)




·
            Net
      investment income of
$17.6 million




2010
Consolidated Financial Condition




·
            Annualized
      operating return on equity of 9.4% as compared to 13.0% for the same
      period in 2009(1)




·
            Common
      shareholders' equity of $710.0 million; book value per common share of
      $10.10




·
            Total
      investments of $1.7 billion; fixed maturities and short-term
      securities comprise 99.7% of total investments, of which 65.0% have a
      credit rating of AAA and an overall average credit rating of
      AA




·
            Total
      assets of $2.7 billion




·
            Reserve
      for losses and loss expenses of
  $1.05 billion




·
            Total
      debt of $215.1 million and a debt to total capitalization ratio of
      23.3%





(1)
            Operating
      earnings, operating earnings per share, underwriting income, combined
      ratio and book value per share arc non-GAAP financial measures. Sec
      "Non-GAAP Financial Measures" for additional information and a
      reconciliation to the nearest GAAP financial measure (net
      income).




Non-GAAP
Financial Measures




In
presenting the Company's results, management has included and discussed certain
non-GAAP financial measures. Management believes that these non-GAAP measures,
which may be defined differently by other companies, better explain the
Company's results of operations in a manner that allows for a more complete
understanding of the underlying trends in the Company's business. However these
measures should not be viewed as a substitute for those determined in accordance
with GAAP. These non-GAAP measures are:




Operating Earnings and Operating
Earnings per Share:  In addition to presenting net income
determined in accordance with GAAP, we believe that showing operating earnings
enables investors, analysts, rating agencies and other users of our financial
information to more easily analyze our results of operations in a manner similar
to how management analyzes our underlying business
performance.  Operating earnings should not be viewed as a substitute
for GAAP net income. Operating earnings are an internal performance measure used
in the management of our operations and represents operating results excluding,
as applicable, realized investment gains or losses, foreign exchange gain or
loss, the amortization of intangible assets and deferred tax
expenses.  We exclude net realized investment gains or losses and
foreign exchange gain or loss as we believe that both are heavily influenced in
part by market opportunities and other factors. We do not believe amortization
of intangible assets are representative of our ongoing business. We believe all
of these amounts are largely independent of our business and underwriting
process and including them distorts the analysis of trends in our operations.
The following is a reconciliation of operating earnings to its most closely
related GAAP measure, net income.




26




For
      the Three Months Ended March 312010
              
              
              2009($
      in Millions)Net
      income
              
              $
              13.6
              
              
              $
              13.1Add
      (subtract):Net
      realized investment (gains) losses
              
              
              (0.3
              )
              
              
              1.9Amortization
      of intangibles
              
              
              1.4
              
              
              
              1.6Foreign
      exchange and other (gains) losses
              
              
              1.2
              
              
              
              0.2Deferred
      tax expense
              
              
              0.3
              
              
              
              —Operating
      earnings
              
              $
              16.2
              
              
              $
              16.8Operating
      earnings per common share:Basic
      and diluted operating earnings per share
              
              $
              0.23
              
              
              $
              0.25




Underwriting Income and Combined
Ratio: The combined ratio is used in the insurance and reinsurance
industry as a measure of underwriting profitability. The combined ratio is the
sum of the loss and loss expense ratio and the expense ratio. A combined ratio
under 100% indicates underwriting profitability, as the total losses and loss
expenses, acquisition costs and general and administrative expenses are less
than the premiums earned on that business. We have generated underwriting income
in each year since our inception. Underwriting income is calculated by
subtracting losses and loss adjustment expenses, commissions and other
acquisition expenses and applicable general and administrative expenses from the
net earned premium and is the monetized counterpart of the combined ratio. While
an important metric of success, underwriting income and combined ratio do not
reflect all components of profitability, as it does not recognize the impact of
investment income earned on premiums between the time premiums are received and
the time loss payments arc ultimately paid to clients. Please refer to Relevant
Factors for further information on the components and computation of combined
ratio.




Operating Return on Equity
("Operating ROE"):Management uses operating return on average
shareholders' equity as a measure of profitability that focuses on the return to
common shareholders. It is calculated using operating earnings available to
common shareholders (realized gains or losses on investments, foreign exchange
gain and other (gains) losses, amortization of intangibles, and amortization of
intangible assets) divided by average common shareholders' equity. Management
has set as a target a long-term average of 15% Operating ROE, which management
believes provides an attractive return to shareholders for the risk assumed.
Operating ROE for the three months ended March 31, 2010 and 2009 is computed as
follows:




2010
              
              
              2009($
      in Millions)Operating
      earnings
              
              $
              16.2
              
              
              $
              16.8Opening
      shareholders’ equity
              
              $
              676.5
              
              
              $
              509.8Ending
      shareholders’ equity
              
              $
              710.0
              
              
              $
              547.4Average
      shareholders’ equity
              
              $
              693.2
              
              
              $
              528.6Operating
      return on equity
              
              
              2.3
              %
              
              
              3.2
              %Annualized
      operating return on equity
              
              
              9.4
              %
              
              
              13.0
              %




Book Value per Share:
Management uses growth in book value per share as a prime measure of the value
the Company is generating for its common shareholders, as management believes
that growth in the Company's book value per share ultimately translates into
growth in the Company's stock price. Book value per share is calculated using
common shareholders' equity divided by the number of common shares outstanding.
Book value per share is impacted by the Company's net income and external
factors such as interest rates, which can drive changes in unrealized gains or
losses on its investment portfolio.  Book value per share as of March
31, 2010 and December 31, 2009 is computed as follows:




27




March
      31, 2010
              
              
              December
      31, 2009($
      in Millions)Ending
      shareholders’ equity
              
              $
              710.0
              
              
              $
              676.5Common
      shares outstanding
              
              
              70,291,757
              
              
              
              70,291,289Book
      value per share
              
              $
              10.10
              
              
              $
              9.62




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,
arc known.




The
Company's revenues also include income generated from its investment portfolio.
The Company's investment portfolio is comprised of fixed maturity investments,
short term investments and other investments that are held as available for
sale. In accordance with GAAP, these investments are carried at fair market
value and unrealized gains and losses on the Company's investments are generally
excluded from earnings. These unrealized gains and losses are included on the
Company's balance sheet in accumulated other comprehensive (loss) income as a
separate component of shareholders' equity. If unrealized losses are considered
to be other-than-temporarily impaired, such losses are included in earnings as a
realized loss.




Expenses




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




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




·
            change
      in 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




·
            change
      in Incurred but Not Reported (“IBNR”) reserves, 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.




Acquisition
costs 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 and can, in certain
instances, vary based on loss sensitive features of reinsurance contracts.
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
share-based compensation expense, increased rent expense for our offices and
increased professional fees. As the Company continues to expand and diversify in
2010, particularly through the ACAC Transaction and other initiatives across
both its US and Bermuda platforms, we expect this trend to
continue.




Combined
Ratio Components




Management
measures underwriting results on an overall basis and for each segment on the
basis of the "combined ratio." The "combined ratio" is the sum of the loss and
loss expense ratio and expense ratio. The individual components of the combined
ratio include the "loss and loss expense ratio," "acquisition cost ratio," and
the "general and administrative expense 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
expense ratio" is derived by dividing net losses and loss expenses by net
premiums earned. The "acquisition cost ratio" is derived by dividing acquisition
costs by net premiums earned. The "general and administrative expense ratio" is
derived by dividing general and administrative expenses by net premiums earned.
The "expense ratio" is the sum of the acquisition cost ratio and the general and
administrative expense ratio.




28




Critical
Accounting Policies




It is
important to understand our accounting policies in order to understand our
financial position and results of operations. The Company's Consolidated
Financial Statements have been prepared in accordance with GAAP. The preparation
of financial statements in conformity with GAAP requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. The following presents a
discussion of those accounting policies and estimates that Management believes
are the most critical to its operations and require the most difficult,
subjective and complex judgment. If actual events differ significantly from the
underlying assumptions and estimates used by Management, there could be material
adjustments to prior estimates that could potentially adversely affect the
Company's results of operations, financial condition and liquidity. These
critical accounting policies and estimates should be read in conjunction with
the Company's Notes to Consolidated Financial Statements, including Note 2,
Significant Accounting Policies, for a full understanding of the Company's
accounting policies.  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, 2009 filed with the SEC.  There were no material
changes in the application of our critical accounting estimates subsequent to
that report.




Results of Operations




Net
Income




Net
income for the three months ended March 31, 2010 was $13.6 million compared
to net income of $13.1 million for the same period in 2009.




The
improvement in net income was the result of increased investment income as the
Company’s invested asset base continued to increase in 2010 compared to 2009,
combined with a decrease in the amount of realized losses from sales of
investments over those periods. These improvements were offset by lower
underwriting income, higher interest expense from the TRUPS Offering, a foreign
exchange loss, deferred tax expense and slightly higher operating
expenses.




The
following table sets forth our selected consolidated statement of operations
data for each of the periods indicated:




Three
      Months ended March 31,2010
            
            
            2009($
      in Millions)Gross
      premiums written
            
            $
            327.4
            
            
            $
            336.5Net
      premiums written
            
            $
            311.3
            
            
            $
            336.5Net
      earned premium
            
            $
            264.0
            
            
            $
            210.1Loss
      and loss adjustment expenses
            
            
            170.3
            
            
            
            146.3Commissions
      and other acquisition expenses
            
            
            77.4
            
            
            
            46.6General
      and administrative expenses
            
            
            6.3
            
            
            
            6.1Total
      underwriting income
            
            
            10.0
            
            
            
            11.1Other
      operating expenses
            
            
            (2.2
            )
            
            
            (1.4
            )Net
      investment income
            
            
            17.6
            
            
            
            14.2Net
      realized investment gains (losses)
            
            
            0.3
            
            
            
            (1.9
            )Amortization
      of intangible assets
            
            
            (1.5
            )
            
            
            (1.6
            )Foreign
      exchange loss
            
            
            (1.2
            )
            
            
            (0.2
            )Junior
      subordinated debt interest expense
            
            
            (9.1
            )
            
            
            (7.1
            )Deferred
      tax expense
            
            
            (0.3
            )
            
            
            —Net
      income
            
            $
            13.6
            
            
            $
            13.1




29




Three
      Months ended March 31,2009
            
            
            2008Selected
      Consolidated Ratios:Loss
      and loss expense ratio
            
            
            64.5
            %
            
            
            69.6
            %Acquisition
      cost ratio
            
            
            29.3
            %
            
            
            22.2
            %General
      and administrative expense ratio
            
            
            3.3
            %
            
            
            3.6
            %Expense
      ratio
            
            
            32.6
            %
            
            
            25.8
            %Combined
      ratio
            
            
            97.1
            %
            
            
            95.4
            %




Comparison
of Three Months Ended March 31, 2010 and 2009




Premiums.  We evaluate
our business by segment.  The following table details the mix of our
business on both a net premiums written and net premiums earned
basis:




Net
      Premiums Written
              
              
              Net
      Premiums EarnedThree
      months ended March 31,
              
              
              Three
      months ended March 31,2010
              
              
              2009
              
              
              2010
              
              
              2009Diversified
      Reinsurance
              
              
              53.9
              %
              
              
              74.7
              %
              
              
              57.3
              %
              
              
              56.0
              %AmTrust
      Quota Share
              
              
              39.1
              %
              
              
              25.3
              %
              
              
              41.9
              %
              
              
              44.0
              %ACAC
      Quota Share
              
              
              7.0
              %
              
              
              —
              
              
              
              0.8
              %
              
              
              —Total
              
              
              100.0
              %
              
              
              100.0
              %
              
              
              100
              %
              
              
              100.0
              %




The ACAC
Quota Share segment commenced in 2010.  As premiums associated with
the ACAC Quota Share continue to increase during 2010, the mix of business among
the segments will continue to shift and become more diverse, reducing the
percentage of premiums and losses from the Diversified Reinsurance and AmTrust
Quota Share segments.




Net Premiums
Written.  Net premiums decreased by $25.2 million or 7.5%
for the three months ended March 31, 2010 as compared to the same period in
2009.  The decrease in net premiums written was primarily the result
of the following:




·
            A decrease in premiums written
      in the Diversified Reinsurance segment. The Company did not renew
      certain large accounts as part of its disciplined underwriting practice
      and as a result, premiums written decreased by $83.3 million or 33.1% for
      the three months ended March 31, 2010 as compared to the same period in
      2009.




·
            Strong growth in our AmTrust
      Quota Share segment. The AmTrust Quota Share segment increased by
      $36.2 million or 42.4% in the three months ended March 31, 2010 as
      compared to the same period in 2009, the result of significant growth in
      the Specialty Risk and Extended Warranty line, which was supplemented by
      more modest growth in that segment’s Small Commercial and Specialty
      Program lines of business.




Net Premiums
Earned.  Net premiums earned increased by $53.8 million or
25.6% for the three months ended March 31, 2010 as compared to the same period
in 2009.




The
increase was attributable to the ongoing growth of the AmTrust Quota Share
segment combined with continued growth of the Diversified Reinsurance segment
compared to 2009.  In the Diversified Reinsurance segment, the impact
of the unearned premium assumed from the GMAC Acquisition which was acquired net
of acquisition costs, still represented the majority of the premium earned in
2009, which resulted in lower earned premium in that period and thus also
affects comparability from period to period.




Net Investment Income. Net
investment income increased by $3.3 million, or 23.3% for the three months
ended March 31, 2010 compared to the three months ended March 31, 2009. Average
invested assets for the period were approximately $2.0 billion compared to
$1.7 billion and average yields were approximately 4.0% compared to 3.3%
for the three months ended March 31, 2010 and 2009,
respectively.  Continued growth in the overall book of business
combined with positive cash flow from operations over the last twelve months
contributed to the growth in invested assets. Further, the Company has continued
to deploy the cash obtained through the GMAC Acquisition and also from the
proceeds from the TRUPS Offering.




30




Net Realized Investment (Losses) Gains.
Net realized gains on investments were $0.3 million for the three months ended
March 31, 2010 compared to net realized losses of $1.9 million for the
three months ended March 31, 2009.




Loss and Loss Adjustment
Expenses. Loss and loss adjustment expenses were $170.3 million for
the three months ended March 31, 2010 compared to $146.3 million for the
same period in 2009.  The Company’s loss ratio for the three months
ended March 31, 2010 decreased to 64.5% from 69.6% for the three months ended
March 31, 2009.




As of
March 31, 2009, the Company’s earned premium from the GMAC Acquisition had not
yet completed its first full year and was still increasing and thus
comparability is affected. The overall loss ratio for 2010 was increased by
certain non-catastrophe property losses in the Diversified Reinsurance
segment.




Commission and Other
Acquisition Expenses. Commission and
other acquisition expenses increased by $30.8 million, or 66.0% for the
three months ended March 31, 2010 compared to the same period in
2009.  This increase was primarily due to the increase in Commission
and Other Acquisition Expenses associated with the Diversified Reinsurance
segment,  which was driven by the following: 1) 2009 reflects only a
partial year of earned premiums in this segment as the first full year of
operations from the GMAC Acquisition had not yet been completed; 2) the unearned
premium portfolio assumed as part of the GMAC Acquisition was acquired net of
acquisition costs; 3) the Diversified Reinsurance segment’s mix of business
continues to shift from excess of loss to pro rata business which has a higher
acquisition cost ratio; and 4) increased commission accruals on the 2009 and
2010 underwriting years due to lower loss ratios. In addition, growth in the
AmTrust Quota Share segment contributed to the increase as well. As a result,
the acquisition cost ratio increased to 29.3% in the three months ended March
31, 2010 as compared to 22.2% for the same period in 2009.




General and Administrative
Expenses.
Other operating expenses include general and administrative expenses which are
segregated for analytical purposes as a component of underwriting
income.  Other operating expenses consist of:




For
      the three months ended March 31,2010
              
              
              2009($
      in Millions)General
      and administrative  expenses – segments
              
              $
              6.3
              
              
              $
              6.1Other
      operating expenses – corporate
              
              
              2.2
              
              
              
              1.4Total
              
              $
              8.5
              
              
              $
              7.5






The
increase in other operating expenses reflects the overall growth of the Company
over the last twelve months, including increases in headcount, professional
services, information technology and other related infrastructure costs. Despite
these increases, the Company’s general and administrative expense ratio, which
is a measure of its efficiency, decreased to 3.3% for the three months ended
March 31, 2010 from 3.6% in the same period in 2009.




Junior Subordinated Debt Interest
Expense.  The TRUPS Offering was completed in January 2009 and
the interest expense for 2010 was $9.1 million as compared to $7.1 million
in 2009.




Underwriting
Results by Segment




The
results of operations for our three business segments, Diversified Reinsurance,
AmTrust Quota Share and ACAC Quota Share are discussed below.  As
noted previously, the Company added a third business segment in the first
quarter of 2010, ACAC Quota Share.  Please refer to the section within
Recent Developments captioned ACAC Transaction for further details on this new
segment.




Diversified Reinsurance Segment




The
combined ratio increased to 96.4% for the three months ended March 31, 2010 as
compared to 94.3% in the same period ended 2009.  The cause of the
increase was due to a higher expense ratio which offset decreases in the
segments loss ratio. The overall loss ratio for 2010 was affected by certain
non-catastrophe property losses as well.




The
following table summarizes the underwriting results and associated ratios for
the Diversified Reinsurance segment:




31




Three
      months ended March 31,2010
            
            
            2009($
      in Millions)Net
      premiums written
            
            $
            167.9
            
            
            $
            251.2Net
      premiums earned
            
            
            151.1
            
            
            
            117.7Net
      losses and loss expenses
            
            
            (99.4)
            
            
            
            (89.0
            )Commissions
      and other acquisition expenses
            
            
            (40.5)
            
            
            
            (16.2
            )General
      and administrative expenses
            
            
            (5.8)
            
            
            
            (5.8
            )Underwriting
      income
            
            $
            5.4
            
            
            $
            6.7Loss
      and loss expense ratio
            
            
            65.7
            %
            
            
            75.6
            %Acquisition
      cost ratio
            
            
            26.8
            %
            
            
            13.8
            %General
      and administrative expense ratio
            
            
            3.9
            %
            
            
            4.9
            %Expense
      ratio
            
            
            30.7
            %
            
            
            18.7
            %Combined
      ratio
            
            
            96.4
            %
            
            
            94.3
            %





Premiums.  Net
premiums written decreased by $83.3 million, or 33.1% for the three months
ended March 31, 2010 compared to the three months ended March 31,
2009.  The table below details net premiums written by line of
business in this segment for the three months ended March 31, 2010 and
2009:




Three
      months ended March 31,2010
              
              
              2009
              
              
              $
      Change
              
              
              
              %
      Change($
      in Millions)Property
              
              $
              58.0
              
              
              $
              51.4
              
              
              $
              6.6
              
              
              
              12.8
              %Casualty
              
              
              92.2
              
              
              
              150.1
              
              
              
              (57.9
              )
              
              
              (38.6
              )%Accident
      and Health
              
              
              17.7
              
              
              
              49.7
              
              
              
              (32.0
              )
              
              
              (64.4
              )%Total
      Diversified Reinsurance
              
              $
              167.9
              
              
              $
              251.2
              
              
              $
              (83.3
              )
              
              
              (33.1
              )%




Consistent
with its disciplined underwriting approach, the Company did not renew certain
large Casualty accounts that did not meet its pricing requirements. Due to the
nature of certain of these non-renewals, the Company does not anticipate similar
non-renewals during the remainder of 2010. In addition, the Company did renew
more than 85% of its accounts at its January 1 renewal in this segment. Finally,
the Company did not renew certain underperforming Accident and Health
accounts as well. These factors contributed to the decrease in net premium
written in the three months ended March 31, 2010 as compared to the same period
in 2009.




Net
premium earned increased by $33.4 million, or 28.4% for the three months
ended March 31, 2010 compared to the three months ended March 31,
2009.  The table below details net premiums earned by line of business
in this segment for the three months ended March 31, 2010 and 2009:




Three
      months ended March 31,2010
              
              
              2009
              
              
              $ Change
              
              
              %
      Change($
      in Millions)Property
              
              $
              41.8
              
              
              $
              26.0
              
              
              $
              15.8
              
              
              
              60.7
              %Casualty
              
              
              88.2
              
              
              
              66.4
              
              
              
              21.8
              
              
              
              33.0
              %Accident
      and Health
              
              
              21.2
              
              
              
              25.3
              
              
              
              (4.2
              )
              
              
              (16.6
              )%Total
      Diversified Reinsurance
              
              $
              151.2
              
              
              $
              117.7
              
              
              $
              33.4
              
              
              
              28.4
              %




Despite
the decrease in net premiums written, earned premiums increased in 2010 as
compared to 2009 due to the ongoing implementation of the GMAC Acquisition in
2009, which were assumed net of acquisition costs and which had not yet
completed its first full year of operations.  These premiums
represented the majority of the premium earned in 2009, which resulted in lower
earned premium in that period and thus also affects comparability with
2010.




Loss and Loss Adjustment
Expenses.  Net losses and loss expenses increased by
$10.4 million or 11.7% for the three months ended March 31, 2010 compared
to the same period in 2009.  Loss ratios were 65.7% and 75.6% for the
three months ended March 31, 2010 and 2009, respectively. As of March 31, 2009,
the Company’s earned premium from the GMAC Acquisition had not yet completed its
first full year and was still increasing and thus comparability is affected. The
overall loss ratio for 2010 was increased by certain non-catastrophe property
losses.




32




Commission and Other
Acquisition Expenses. Commission and
other acquisition expenses increased by $24.3 million, or 149.7% for the
three months ended March 31, 2010 compared to the three months ended March 31,
2009.  The increase is due to a number of factors, as: 1) 2009
reflects only a partial year of earned premiums as the first full year of
operations from the GMAC Acquisition had not yet been completed; 2) the unearned
premium portfolio assumed as part of the GMAC Acquisition was acquired net of
acquisition costs; 3) the segments mix of business continues to shift from
excess of loss to pro rata business which has a higher acquisition cost ratio;
and 4) increased commission accruals on the 2009 and 2010 underwriting years due
to lower loss ratios in those years. As a result, the acquisition cost ratio
increased to 26.8% in the three months ended March 31, 2010 as compared to 13.8%
for the same period in 2009.




General and Administrative
Expenses.  General and administrative expenses increased by
less than $0.1 million, or 2.5%, for the three months ended March 31, 2010
compared to the three months ended March 31, 2009. The general and
administrative expense ratio was 3.9% and 4.9% for the three months ended March
31, 2010 and 2009, respectively. The overall expense ratio (including
acquisition costs) was 30.7% and 18.7% for the three months ended March 31, 2010
and 2009, respectively. The increase in the ratio is due to the factors cited
under Commissions and Other Acquisition Expenses.




AmTrust Quota Share Segment




The
combined ratio increased to 96.0% for the three months ended March 31, 2010 as
compared to 95.3% for the same period in 2009.  The cause of the
increase was due to a marginal increase in the overall loss ratio, partially
offset by a slight decrease in the expense ratio.  The following table
summarizes  the underwriting results and associated ratios for the
AmTrust Quota Share segment for the three months ended March 31, 2010 and
2009:




Three
      months ended March 31,2010
              
              
              2009($
      in Millions)Net
      premiums written
              
              $
              121.6
              
              
              $
              85.4Net
      premiums earned
              
              $
              110.7
              
              
              $
              92.4Net
      losses and loss expenses
              
              
              (69.6
              )
              
              
              (57.2
              )Commissions
      and other acquisition expenses
              
              
              (36.1
              )
              
              
              (30.4
              )General
      and administrative expenses
              
              
              (0.5
              )
              
              
              (0.4
              )Underwriting
      income
              
              $
              4.5
              
              
              $
              4.4Net
      loss and loss expense ratio
              
              
              62.9
              %
              
              
              62.0
              %Acquisition
      cost ratio
              
              
              32.7
              %
              
              
              32.9
              %General
      and administrative expense ratio
              
              
              0.4
              %
              
              
              0.4
              %Expense
      ratio
              
              
              33.1
              %
              
              
              33.3
              %Combined
      ratio
              
              
              96.0
              %
              
              
              95.3
              %




Premiums.  Net
premiums written increased by $36.2 million or 42.4% for the three months
ended March 31, 2010 as compared to the same period in 2009.  The
increase in net premiums written was primarily due to a substantial increase in
the Specialty Risk and Extended Warranty line of business, where AmTrust
continues expand, particularly internationally. The table below details
components of net premiums written for the three months ended March 31, 2010 as
compared to the same period in 2009:




Three
      months ended March 31,2010
              
              
              2009
              
              
              $
      Change
              
              
              %
      Change($
      in Millions)Small
      Commercial Business
              
              $
              58.9
              
              
              $
              53.0
              
              
              $
              5.9
              
              
              
              11.3
              %Specialty
      Program Business
              
              
              10.1
              
              
              
              9.2
              
              
              
              0.9
              
              
              
              9.2
              %Specialty
      Risk and Extended Warranty
              
              
              52.6
              
              
              
              23.2
              
              
              
              29.4
              
              
              
              126.8
              %Total
      AmTrust Quota Share
              
              $
              121.6
              
              
              $
              85.4
              
              
              $
              36.2
              
              
              
              42.4
              %




33




Net
premiumsearned
increased by $18.3 million or 19.7% for the three months ended March 31, 2010 as
compared to the same period in 2009.  The table below details
components of net premiums earned for the three months ended March 31, 2010 as
compared to the same period in 2009:






Three
      months ended March 31,2010
              
              
              2009
              
              
              $
      Change
              
              
              %
      Change($
      in Millions)Small
      Commercial Business
              
              $
              52.0
              
              
              $
              54.6
              
              
              $
              (2.6
              )
              
              
              (4.9
              )%Specialty
      Program Business
              
              
              14.8
              
              
              
              13.4
              
              
              
              1.4
              
              
              
              10.7
              %Specialty
      Risk and Extended Warranty
              
              
              43.9
              
              
              
              24.4
              
              
              
              19.5
              
              
              
              79.7
              %Total
      AmTrust Quota Share
              
              $
              110.7
              
              
              $
              92.4
              
              
              $
              18.3
              
              
              
              19.7
              %




Loss and Loss Adjustment
Expenses.  Net losses and loss expenses increased by
$12.3 million or 21.5% for the three months ended March 31, 2010 compared
to the same period in 2009.  Loss ratios were 62.9% and 62.0% for the
three months ended March 31, 2010 and 2009, respectively.




Commission and Other Acquisition
Expenses. Commission and other acquisition expenses increased by
$5.7 million, or 18.9% for the three months ended March 31, 2010 compared
to the three months ended March 31, 2009.  The increase in commissions
and other acquisition expenses is consistent with the increase in earned
premiums.




General and Administrative
Expenses.  General and administrative expenses increased by
less than $0.1 million for the three months ended March 31, 2010 compared
to the three months ended March 31, 2009.




ACAC
Quota Share Segment




This
segment commenced on March 1, 2010. Please refer to the ACAC Transaction
discussed previously.  Due to the limited amount of time this segment
has been in operation, financial tables consistent with the Company's other
segments are not meaningful. For the period from March 1 to March 31, 2010,
$21.8 million and $2.1 million in premiums written and earned were
recorded. The combined ratio was 97.6%, consisting of a loss ratio of 62.5% and
an expense ratio of 35.1%.  The initial expense ratio reflects certain
allocated expenses; the expense ratio will decrease over time as premiums earned
increase.




Liquidity
and Capital Resources




Liquidity




Maiden
Holdings is a holding company and transacts no business of its own. We therefore
rely on cash flows to Maiden Holdings in the form of dividends, advances and
loans and other permitted distributions from its subsidiary companies to make
dividend payments on its common shares.




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 Maiden Bermuda is, under certain circumstances, limited under Bermuda
law, which requires our Bermuda operating subsidiary to maintain certain
measures of solvency and liquidity. In addition, Bermuda regulations require
approval from the Bermuda Monetary Authority for any reduction of capital in
excess of 15% of statutory capital, as defined in the Insurance Act. At March
31, 2010, the statutory capital and surplus of Maiden Bermuda was $606.1
million, and the amount of capital and surplus required to be maintained was
$253.6 million. During 2010 and 2009, Maiden Bermuda paid no dividends
to Holdings.




Maiden
Holdings’ U.S. domiciled operating subsidiaries, Maiden US and Maiden Specialty,
are subject to significant regulatory restrictions limiting their ability to
declare and pay dividends by their states of domicile, which are Missouri and
North Carolina, respectively.  In addition, there are restrictions
based on risk-based capital tests which is the threshold that constitutes the
authorized control level. If Maiden US or Maiden Specialty’s statutory capital
and surplus falls below the authorized control level, their respective
domiciliary insurance regulators are authorized to take whatever regulatory
actions are considered necessary to protect policyholders and creditors. The
inability of the subsidiaries of Maiden Holdings to paydividends and other permitted distributions could have a material adverse effect
on Maiden Holdings’ cash requirements and ability to make principal, interest
and dividend payments on its senior notes and common shares. During 2010 and
2009, Maiden US and Maiden Specialty paid no dividends.




34




Our
sources of funds primarily consist of premium receipts net of 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. A
summary of cash flows from and (used) in operating, investing and financing
activities for the three months ended March 31, 2010 and 2009 is as
follows:




March
      31,2010
              
              
              2009($
      in Millions)Operating
      activities
              
              $
              (2.9
              )
              
              $
              14.8Investing
      activities
              
              
              (17.5
              )
              
              
              (70.9
              )Financing
      activities
              
              
              (23.6
              )
              
              
              19.6Effect
      of foreign exchange
              
              
              (0.7
              )
              
              
              (0.2
              )Total
      decrease in cash and cash equivalents
              
              $
              (44.7
              )
              
              $
              (36.7
              )




Cash flows used in operations for the three
months ended March 31, 2010 were $2.9 million compared to cash flow
provided by operations of $14.8 million for the three months ended
March 31, 2009. The decrease in net premiums written combined with a
slightly higher combined ratio accounted for the change in operating cash
flow.




Investing
cash flows consist primarily of proceeds on the sale of investments and payments
for investments acquired. We used $17.5 million in net cash from investing
activities during the three months ended March 31, 2010 compared to using
$70.9 million for the three months ended March 31, 2009, as the
Company continued to deploy available cash for longer-term
investments.




Cash
flows used by financing activities were $23.6 million for the three months
ended March 31, 2010 compared to $19.6 million provided by financing
activities for the three months ended March 31, 2009. In 2010, cash
flow used consisted of dividends paid of $4.6 million and the repayment of
$19.0 million of the proceeds from the securities sold under agreements to
repurchase, at contract value. Cash flows provided by financing activities for
the three months ended March 31, 2009 were the TRUPS Offering (net of
expenses) of $255.7 million, dividends paid of $3.5 million and the
repayment of $232.6 million of the proceeds from the securities sold under
agreements to repurchase, at contract value.




Restrictions, Collateral and Specific
Requirements




Maiden
Bermuda 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 to them. 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 Bermuda 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.




Maiden US
also offers to its clients, on a voluntary basis, the ability to collateralize
certain liabilities related to the reinsurance contracts it issues. Under these
arrangements, Maiden US retains broad investment discretion in order to achieve
its business objectives while offering clients the additional security a
collateralized arrangement offers. We believe this offers the Company a
significant competitive advantage and improves the Company’s retention of
high-quality clients. As a result of the transition of relationships as a result
of the GMAC Acquisition, as of December 31, 2009, certain of these liabilities
and collateralized arrangements are on the records of Maiden Bermuda while the
remaining are on the records of Maiden US.




35






As of
March 31, 2010, total trust account deposits were $1,312.0 million compared
to $1,375.6 million as of December 31, 2009. The following table details
additional information on the trust account deposits by segment and by
underlying asset as of December 31, 2010 and 2009:




March
      31, 2010
            
            
            December
      31, 2009Cash
      & Equivalents
            
            
            FixedMaturities
            
            
            Total
            
            
            Cash
      & Equivalents
            
            
            FixedMaturities
            
            
            Total($
      in Millions)
            
            
            ($
      in Millions)Maiden
      US
            
            $
            29.4
            
            
            $
            341.0
            
            
            $
            370.4
            
            
            $
            38.6
            
            
            $
            258.9
            
            
            $
            297.5Maiden
      Bermuda
            
            
            77.3
            
            
            
            618.2
            
            
            
            695.5
            
            
            
            94.8
            
            
            
            776.3
            
            
            
            871.1Total
      Diversified Reinsurance Segment
            
            
            106.7
            
            
            
            959.2
            
            
            
            1,065.9
            
            
            
            133.4
            
            
            
            1,035.2
            
            
            
            1,168.6Maiden
      Bermuda
            
            
            11.0
            
            
            
            235.1
            
            
            
            246.1
            
            
            
            11.5
            
            
            
            195.5
            
            
            
            207.0Total
      AmTrust Quota Share Segment
            
            
            11.0
            
            
            
            235.1
            
            
            
            246.1
            
            
            
            11.5
            
            
            
            195.5
            
            
            
            207.0Total
            
            $
            117.7
            
            
            $
            1,194.3
            
            
            $
            1,312.0
            
            
            $
            144.9
            
            
            $
            1,230.7
            
            
            $
            1,375.6




As part
of the AmTrust Quota Share, Maiden Bermuda has also loaned funds totaling $168.0
million as of March 31, 2010 and December 31, 2009, respectively, to AII to
satisfy collateral requirements. In addition, Maiden Bermuda has outstanding
letters of credit totaling $24.2 million and $19.6 million as of March
31, 2010 and December 31, 2009, 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 letter 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.




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.




Investments




Our funds
are primarily invested in liquid, high-grade fixed income securities. The table
below shows the aggregate amounts of our invested assets at fair value at March
31, 2010 and December 31, 2009:




March
      31, 2010
            
            Original
      or
              Amortized
              Cost
            
            
            Gross
              Unrealized
              Gains
            
            
            Gross
              Unrealized
              Losses
            
            
            Fair
              Value($
      in Millions)Fixed
      Maturities:U.S. treasury
      bonds
            
            $
            39.3
            
            
            $
            0.2
            
            
            $
            (0.2
            )
            
            $
            39.3U.S.
      agency bonds – mortgage and asset-backed
            
            
            814.5
            
            
            
            21.4
            
            
            
            (0.9
            )
            
            
            835.0U.S.
      agency bonds – other
            
            
            189.9
            
            
            
            4.8
            
            
            
            —
            
            
            
            194.7Corporate
      fixed maturities
            
            
            604.5
            
            
            
            42.9
            
            
            
            (12.1
            )
            
            
            635.3Municipal
      bonds
            
            
            21.3
            
            
            
            0.9
            
            
            
            —
            
            
            
            22.2Total
      available - for - sale fixed maturities
            
            
            1,669.5
            
            
            
            70.2
            
            
            
            (13.2)
            
            
            
            1,726.5Other
      investments
            
            
            5.6
            
            
            
            —
            
            
            
            —
            
            
            
            5.6Total
      investments
            
            $
            1,675.1
            
            
            $
            70.2
            
            
            $
            (13.2)
            
            
            $
            1,732.1





36




December
      31, 2009
            
            Original
      or
              Amortized
              Cost
            
            
            Gross
              Unrealized
              Gains
            
            
            Gross
              Unrealized
              Losses
            
            
            Fair
              Value($
      in Millions)Fixed
      Maturities:U.S. treasury
      bonds
            
            $
            39.3
            
            
            $
            0.2
            
            
            $
            (0.3
            )
            
            $
            39.2U.S.
      agency bonds – mortgage and asset - backed
            
            
            779.4
            
            
            
            17.5
            
            
            
            (2.3
            )
            
            
            794.6U.S.
      agency bonds – other
            
            
            217.2
            
            
            
            4.8
            
            
            
            (0.5
            )
            
            
            221.5Corporate
      fixed maturities
            
            
            564.8
            
            
            
            38.0
            
            
            
            (20.1
            )
            
            
            582.7Municipal
      bonds
            
            
            22.7
            
            
            
            1.0
            
            
            
            —
            
            
            
            23.7Total
      available - for - sale fixed maturities
            
            
            1,623.4
            
            
            
            61.5
            
            
            
            (23.2
            )
            
            
            1,661.7Other
      investments
            
            
            5.7
            
            
            
            —
            
            
            
            (0.1
            )
            
            
            5.6Total
      investments
            
            $
            1,629.1
            
            
            $
            61.5
            
            
            $
            (23.3
            )
            
            $
            1,667.3




Despite
reductions in cash flow from operations which utilized available cash and cash
equivalents, total investments were relatively stable in 2010 and increased as a
result of generally higher fair values along with additional deployment of
available cash balances.




The
following table presents information regarding our invested assets that were in
an unrealized loss position at March 31, 2010 and December 31, 2009 by the
amount of time in a continuous unrealized loss position:







Less
      than 12 Months
            
            
            12
      Months or More
            
            
            TotalMarch
      31, 2010
            
            Fair
              Value
            
            
            Unrealized
              Losses
            
            
            Fair
              Value
            
            
            Unrealized
              Losses
            
            
            Fair
              Value
            
            
            Unrealized
              Losses($
      in Millions)Available-for-sale
      securities:U.S. treasury
      bonds
            
            $
            7.6
            
            
            $
            (0.2
            )
            
            $
            —
            
            
            $
            —
            
            
            $
            7.6
            
            
            $
            (0.2
            )U.S.
      agency bonds – mortgage and asset - backed
            
            
            181.8
            
            
            
            (1.0
            )
            
            
            31.4
            
            
            
            —
            
            
            
            213.2
            
            
            
            (1.0
            )U.S.
      agency bonds  - other
            
            
            2.0
            
            
            
            —
            
            
            
            —
            
            
            
            —
            
            
            
            2.0
            
            
            
            —Corporate
      fixed maturities
            
            
            40.5
            
            
            
            (0.5
            )
            
            
            192.2
            
            
            
            (11.5
            )
            
            
            232.7
            
            
            
            (12.0
            )Total available - for - sale securities
            
            $
            231.9
            
            
            $
            (1.7
            )
            
            $
            223.6
            
            
            $
            (11.5
            )
            
            $
            455.5
            
            
            $
            (13.2
            )Other
      investments
            
            $
            —
            
            
            $
            —
            
            
            $
            4.9
            
            
            $
            (0.1
            )
            
            $
            4.9
            
            
            $
            (0.1
            )Total
      temporarily impaired available-for-sale securities and other
      investments
            
            $
            231.9
            
            
            $
            (1.7
            )
            
            $
            228.5
            
            
            $
            (11.6
            )
            
            $
            460.4
            
            
            $
            (13.3
            )




As of
March 31, 2010, there were approximately 32 securities in an unrealized loss
position with a fair value of $460.4 million and unrealized losses of
$13.3 million. Of these securities, there are 14 securities that have been
in an unrealized loss position for 12 months or greater with a fair value
of $228.5 million and unrealized losses of $11.6 million.




Less
      Than 12 Months
            
            
            12
      Months or More
            
            
            TotalDecember
      31, 2009
            
            Fair
              Value
            
            
            Unrealized
              Losses
            
            
            Fair
              Value
            
            
            Unrealized
              Losses
            
            
            Fair
              Value
            
            
            Unrealized
              Losses($
      in Millions)Available-for-sale
      securities:U.S. treasury
      bonds
            
            $
            8.6
            
            
            $
            (0.3
            )
            
            $
            —
            
            
            $
            —
            
            
            $
            8.6
            
            
            $
            (0.3
            )U.S.
      agency bonds – mortgage and asset - backed
            
            
            235.0
            
            
            
            (2.3
            )
            
            
            0.7
            
            
            
            —
            
            
            
            235.7
            
            
            
            (2.3
            )U.S.
      agency bonds - other
            
            
            59.5
            
            
            
            (0.5
            )
            
            
            —
            
            
            
            —
            
            
            
            59.5
            
            
            
            (0.5
            )Corporate
      fixed maturities
            
            
            11.7
            
            
            
            (0.6
            )
            
            
            193.7
            
            
            
            (19.5
            )
            
            
            205.4
            
            
            
            (20.1
            )Total available - for - sale securities
            
            $
            314.8
            
            
            $
            (3.7
            )
            
            $
            194.4
            
            
            $
            (19.5
            )
            
            $
            509.2
            
            
            $
            (23.2
            )Other
      investments
            
            $
            —
            
            
            $
            —
            
            
            $
            4.9
            
            
            $
            (0.1
            )
            
            $
            4.9
            
            
            $
            (0.1
            )Total
      temporarily impaired available-for-sale securities and other
      investments
            
            $
            314.8
            
            
            $
            (3.7
            )
            
            $
            199.3
            
            
            $
            (19.6
            )
            
            $
            514.1
            
            
            $
            (23.3
            )




37




As of
December 31, 2009, there were approximately 34 securities in an unrealized loss
position with a fair value of $514.1 million and unrealized losses of
$23.3 million. Of these securities, there are 14 securities that have been
in an unrealized loss position for 12 months or greater with a fair value
of $199.3 million and unrealized losses of $19.6 million.




The following table summarizes the fair value by contractual
maturity of our fixed maturity investment maturity distribution of our fixed
income portfolio (on a fair value basis) as of March 31, 2010 and December 31,
2009 was as follows:





March
      31, 2010
            
            
            December
      31, 2009($
      in
              Millions)
            
            
            %
      of
              Total
            
            
            ($
      in
              Millions)
            
            
            %
      of
              TotalDue
      in one year or less
            
            $
            172.0
            
            
            
            10.0
            %
            
            $
            159.4
            
            
            
            9.6
            %Due
      after one year through five years
            
            
            187.8
            
            
            
            10.9
            %
            
            
            222.4
            
            
            
            13.4
            %Due
      after five years through ten years
            
            
            433.3
            
            
            
            25.1
            %
            
            
            366.7
            
            
            
            22.1
            %Due
      after ten years
            
            
            98.4
            
            
            
            5.7
            %
            
            
            118.6
            
            
            
            7.1
            %U.S.
      agency bonds - mortgage-backed securities
            
            
            835.0
            
            
            
            48.3
            %
            
            
            794.6
            
            
            
            47.8
            %Total
            
            $
            1,726.5
            
            
            
            100.0
            %
            
            $
            1661.7
            
            
            
            100.0
            %




As of
March 31, 2010 and December 31, 2009, 99% and 99%, respectively, of our fixed
income portfolio consisted of investment grade securities. We define a security
as being below-investment grade if it has an S&P credit rating of BB or
less. The following table summarizes the composition of the fair value of our
fixed maturity investments at the dates indicated by ratings as assigned by
Standard & Poor’s (“S&P”) and/or other rating agencies when S&P
ratings were not available:




Ratings
      as of March 31, 2010
            
            
            AmortizedCost
            
            
            FairMarket
      Value
            
            
            %
      of TotalFair
      Market Value($
      in Millions)U.S.
      treasury bonds
            
            $
            39.3
            
            
            $
            39.3
            
            
            
            2.3
            %AAA
      U.S. agency  bonds – mortgage backed securities
            
            
            814.5
            
            
            
            835.0
            
            
            
            48.4
            %AAA
            
            
            237.9
            
            
            
            248.1
            
            
            
            14.4
            %AA+,
      AA, AA-
            
            
            71.2
            
            
            
            77.2
            
            
            
            4.4
            %A+,
      A, A-
            
            
            292.8
            
            
            
            293.1
            
            
            
            17.0
            %BBB+,
      BBB, BBB-
            
            
            203.0
            
            
            
            223.1
            
            
            
            12.9
            %B
      or lower
            
            
            10.8
            
            
            
            10.7
            
            
            
            0.6
            %Total
            
            $
            1,669.5
            
            
            $
            1,726.5
            
            
            
            100.0
            %




Ratings
      as of December 31, 2009
            
            AmortizedCost
            
            
            FairMarket
      Value
            
            
            %
      of TotalFair
      Market Value($
      in Millions)U.S.
      treasury bonds
            
            $
            39.3
            
            
            $
            39.2
            
            
            
            2.4
            %AAA
      U.S. agency bonds – mortgage backed securities
            
            
            779.4
            
            
            
            796.6
            
            
            
            47.8
            %AAA
            
            
            265.6
            
            
            
            272.2
            
            
            
            16.5
            %AA+,
      AA, AA-
            
            
            51.6
            
            
            
            57.4
            
            
            
            3.4
            %A+,
      A, A-
            
            
            290.0
            
            
            
            285.4
            
            
            
            17.2
            %BBB+,
      BBB, BBB-
            
            
            187.6
            
            
            
            201.4
            
            
            
            12.1
            %B
      or lower
            
            
            9.9
            
            
            
            9.5
            
            
            
            0.6
            %Total
            
            $
            1,623.4
            
            
            $
            1,661.7
            
            
            
            100.0
            %




38




The Company holds no asset-backed securities or sovereign
securities of foreign governments. The majority of the Company’s U.S. government
agency-based securities holdings are mortgage-backed securities. Additional
details on the mortgage-backed securities component of our U.S. government
agency-based investment portfolio at March 31, 2010 and December 31, 2009 are
provided below:





March
      31, 2010
            
            
            December
      31, 2009Fair
      Value
            
            
            %
      of Total
            
            
            Fair
      Value
            
            
            %
      of Total($
      in Millions)Mortgage-backed
      securitiesResidential
      mortgage-backed (RMBS)GNMA – Fixed
      Rate
            
            $
            336.7
            
            
            
            32.7
            %
            
            $
            333.1
            
            
            
            32.8
            %FNMA – Fixed
      Rate
            
            
            240.5
            
            
            
            23.4
            %
            
            
            125.5
            
            
            
            12.3
            %FNMA – Variable
      Rate
            
            
            150.2
            
            
            
            14.6
            %
            
            
            135.7
            
            
            
            13.4
            %FHLMC – Fixed
      Rate
            
            
            105.1
            
            
            
            10.2
            %
            
            
            200.3
            
            
            
            19.7
            %FHLMC – Variable
      Rate
            
            
            2.5
            
            
            
            0.2
            %
            
            
            —
            
            
            
            —
            %Total
      agency RMBS
            
            
            835.0
            
            
            
            81.1
            %
            
            
            794.6
            
            
            
            78.2
            %Non-agency
      RMBS
            
            
            —
            
            
            
            —
            %
            
            
            —
            
            
            
            —
            %Total
      RMBS
            
            
            835.0
            
            
            
            81.1
            %
            
            
            794.6
            
            
            
            78.2
            %Commercial
      mortgage-backed
            
            
            —
            
            
            
            —
            %
            
            
            —
            
            
            
            —
            %Total
      mortgage-backed securities
            
            
            835.0
            
            
            
            81.1
            %
            
            
            794.6
            
            
            
            78.2
            %Non-MBS
      fixed rate Agency securities
            
            
            194.7
            
            
            
            18.9
            %
            
            
            221.5
            
            
            
            21.8
            %Total
      US Agency bonds
            
            $
            1,029.7
            
            
            
            100.0
            %
            
            $
            1,016.1
            
            
            
            100.0
            %




The
Company has also increased its holdings of corporate securities in 2010 and 2009
to take advantage of various investment opportunities in this asset class. As of
March 31, 2010 and December 31, 2009, 43.6% and 46.8% of its corporate
securities were floating rate securities. Security holdings by sector in this
asset class as of March 31, 2010 and December 31, 2009 are as
follows:




March
      31, 2010
            
            
            December
      31, 2009Fair
      Value
            
            
            %
      of Total
            
            
            Fair
      Value
            
            
            %
      of Total($
      in Millions)Corporate
      SecuritiesFinancial
      Institutions
            
            $
            458.3
            
            
            
            72.1
            %
            
            $
            430.4
            
            
            
            73.9
            %Industrials
            
            
            119.7
            
            
            
            18.8
            %
            
            
            108.6
            
            
            
            18.6
            %Utilities/Other
            
            
            57.3
            
            
            
            9.1
            %
            
            
            43.7
            
            
            
            7.5
            %Total
      Corporate Securities
            
            $
            635.3
            
            
            
            100.0
            %
            
            $
            582.7
            
            
            
            100.0
            %




Financial Strength Ratings




Financial
strength ratings represent the opinions of rating agencies on our capacity to
meet our obligations. Some of our reinsurance treaties contain special funding
and termination clauses that are triggered in the event that we or one of our
subsidiaries is downgraded by one of the major rating agencies to levels
specified in the treaties, or our capital is significantly reduced. If such an
event were to happen, we would be required, in certain instances, to post
collateral in the form of letters of credit and/or trust accounts against
existing outstanding losses, if any, related to the treaty. In a limited number
of instances, the subject treaties could be cancelled retroactively or commuted
by the cedant and might affect our ability to write business. As of March 31,
2010, our financial strength rating from A.M. Best was A-.




Other Material Changes in
Financial Position




The
following summarizes other material changes in the financial position of the
Company as of March 31, 2010 and  December 31, 2009.




March
      31,
                2010
              
              
              December
      31,
                2009($
      in Millions)Reinsurance
      balances receivable
              
              $
              299.2
              
              
              $
              208.5Prepaid
      reinsurance
              
              
              26.3
              
              
              
              28.8Deferred
      acquisition costs
              
              
              178.3
              
              
              
              173.0Reserve
      for loss and loss adjustment expenses
              
              
              (1,048.9
              )
              
              
              (1,006.3
              )Unearned
      premiums
              
              
              (629.9
              )
              
              
              (583.5
              )






The
increase in reinsurance balances receivable was the result of timing related to
receipt of certain balances due under the AmTrust Quota Share. The increase in
unearned premium reflects the growth in net premiums written in the AmTrust
Quota Share in the first quarter of 2010.




39




Capital Resources




Capital
resources consists of funds deployed or available to be deployed in support of
our business operations. Our total capital resources at March 31, 2010 and
December 31, 2009 were as follows:






March
      31,
                2010
              
              
              December
      31,
                2009($
      in Millions)Junior
      subordinated debt
              
              $
              215.1
              
              
              $
              215.1Shareholders’
      equity
              
              
              710.0
              
              
              
              676.5Total
      capital resources
              
              $
              925.1
              
              
              $
              891.6Ratio
      of debt to total capitalization
              
              
              23.3
              %
              
              
              24.1
              %




As of
March 31, 2010, our shareholders’ equity was $710.0 million, a 4.9%
increase compared to $676.5 million as of December 31, 2009. The increase
was due primarily to net income for the three months ended March 31, 2010 of
$13.6 million and unrealized gains on investments of $24.2 million
offset by dividends declared of $4.6 million.




On
January 20, 2009, as part of the TRUPS Offering the Company established a
special purpose trust for the purpose of issuing trust preferred securities.
This involved 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”) and 45
common shares, $.01 par value, of the Company (the “Common Shares”), for a
purchase price of $1,000.45 per Unit.




As part
of the transaction, the Company issued 11,700,000 common shares to the
purchasers of the Trust Preferred Securities. The Trust Preferred Securities
mature in 2039 and carry an interest rate of 14% and an effective rate of
interest of 16.76%. The proceeds from such issuances, together with the proceeds
of the related issuances of common securities of the trusts, were invested by
the trusts in subordinated debentures issued by the Company. The gross proceeds
to the Company were approximately $260.1 million in the form of junior
subordinated debt, before approximately $4.3 million of placement agent fees and
expenses.




Under the
terms of the TRUPS Offering, the Company can repay the principal balance in full
or in part at any time. However, if the Company repays such principal within
five years of the date of issuance, it is required to pay an additional amount
equal to one full year of interest on the amount of Trust Preferred Securities
repaid. If the full amount of the Trust Preferred Securities were repaid within
five years of the date of issuance, the additional amount due would be $36.4
million, which would be a reduction in earnings.




Further,
the value of the common shares issued to purchasers of the Trust Preferred
Securities are being carried as a reduction of the liability for the Trust
Preferred Securities with the value being amortized against the Company’s
earnings over the 30-year term of the Trust Preferred Securities. At March 31,
2010, the unamortized amount carried as a reduction of the Company’s liability
for the Trust Preferred Securities was $44.9 million. If the Company were to
repay the Trust Preferred Securities in full or in part at any time prior to
their maturity date, the Company would have to recognize a commensurate amount
as a reduction of earnings at that time.




Currency and Foreign
Exchange




The
Company’s reporting currency is the U.S. dollar. The Company has exposure to
foreign currency risk as certain portions of the Diversified Reinsurance and
AmTrust Quota Share segment, including underwriting reinsurance exposures,
collecting premiums and paying claims and other operating expenses in currencies
other than the U.S. dollar and holding certain net assets in such currencies.
The Company’s most significant foreign currency exposure is to the British
pound. The Company may, from time to time, experience losses resulting from
fluctuations in the values of foreign currencies, which could have an effect on
the Company’s results of operations.




We
measure monetary assets and liabilities denominated in foreign currencies at
year end exchange rates, with the resulting foreign exchange gains and losses
recognized in the Consolidated Statements of Operations. Revenues and expenses
in foreign currencies are converted at average exchange rates during the year.
The effect of the translation adjustments for foreign operations is included in
accumulated other comprehensive income.




Net
foreign exchange losses amounted to $1.2 million during the three months ended
March 31, 2010 compared to losses of $0.2 million during the same period in
2009.




40


Effects
of Inflation




The
effects of inflation are considered implicitly in pricing and estimating
reserves for unpaid losses and loss expenses. The effects of inflation could
cause the severity of claims to rise in the future. To the extent inflation
causes these costs, particularly medical treatments and litigation costs, to
increase above reserves established for these claims, the Company will be
required to increase the reserve for losses and loss expenses with a
corresponding reduction in its earnings in the period in which the deficiency is
identified. The actual effects of inflation on the results of operations of the
Company cannot be accurately known until claims are ultimately
settled.




Off-Balance Sheet Arrangements




As of
March 31, 2010, we did not have any off-balance sheet arrangements as defined by
Item 303(a)(4)(ii) of Regulation S-K.




Recent
Accounting Pronouncements




See Item
8, Note 2 to the Consolidated Financial Statements for a discussion on recently
issued accounting pronouncements not yet adopted.




Item 3.  Quantitative and Qualitative Disclosures
About 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 March 31, 2010, we had fixed maturity securities with a
fair value of $1,726.0 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 March 31, 2010 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 March 31,
2010.




Hypothetical Change in Interest Rates
            
            Fair
      Value
            
            
            Estimated
      Change in Fair Value
            
            
            Hypothetical
      Percentage Increase (Decrease) in Shareholders’ Equity($
      in Millions)200
      basis point increase
            
            $
            1,617.3
            
            
            $
            (109.2
            )
            
            
            (15.4
            %)100
      basis point increase
            
            
            1,673.8
            
            
            
            (52.7
            )
            
            
            (7.4
            %)No
      change
            
            
            1,726.5
            
            
            
            —
            
            
            
            0
            %100
      basis point decrease
            
            
            1,756.7
            
            
            
            39.2
            
            
            
            5.5
            %200
      basis point decrease
            
            $
            1,793.3
            
            
            $
            66.8
            
            
            
            9.4
            %




The
interest rate sensitivity on the $168 million loan to related party which
carries an interest rate of one month LIBOR plus 90 basis points.  A
fluctuation of 100 and 200 basis points in LIBOR would increase or decrease our
earnings and cash flows by $1.7 million and $3.4 million, respectively, on an
annual basis, depending on the direction of the change in LIBOR, but would not
increase or decrease the carrying value of the loan.




41




Credit
Risk




In
providing reinsurance, we will have premiums receivable subject to credit risk
of the ceding company. The Company has exposure to credit risk as it relates to
its reinsurance balances receivable and reinsurance recoverable on paid and
unpaid losses. Reinsurance balances receivable from the Company's clients at
March 31, 2010 were $299.2 million, including balances currently due and
accrued. The Company believes that credit risk related to these balances is
mitigated by several factors, including but not limited to, credit checks
performed as part of the underwriting process and monitoring of aged receivable
balances. In addition, as the vast majority of its reinsurance agreements permit
the Company the right to offset reinsurance balances receivable from clients
against losses payable to them, the Company believes that the credit risk in
this area is substantially reduced. 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 topreserve 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 Bermuda, and to reimburse Maiden
Bermuda for any assets or other collateral of Maiden that AmTrust’s U.S.
insurance company subsidiaries apply or retain, and income on those
assets.




Given the
recent turmoil in the financial markets, we believe that there is potential for
significant write-downs of our, and other insurers’, invested assets in future
periods if the ongoing turmoil in the financial markets were to persist for an
extended period of time.




The U.S.
dollar is our reporting currency and the functional currency of all of our
operating subsidiaries. We enter into insurance and reinsurance contracts where
the premiums receivable and losses payable are denominated in currencies other
than the U.S. dollar. Assets in non-U.S. currencies are generally converted into
U.S. dollars at the time of receipt. When we incur a liability in a non-U.S.
currency, we carry such liability on our books in the original currency. These
liabilities are converted from the non-U.S. currency to U.S. dollars at the time
of payment. As a result, we have an exposure to foreign currency risk resulting
from fluctuations in exchange rates.




As of
March 31, 2010, 0.5% of our total investments and cash and cash equivalents were
denominated in currencies other than the U.S. dollar compared to 0.6% as of
December 31, 2009. For the three months ended March 31, 2010 and 2009,
approximately 13.1% and 8.6%, respectively, of our business written was
denominated in currencies other than the U.S. dollar.




Our
foreign exchange losses for the three months ended March 31, 2010 and 2009 were
$1.2 million and $0.2 million, respectively.




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.




42




PART II -OTHER
INFORMATION




Item 5. Other Information




Submission of Matters to a
Vote of Security Holders




(a)
            The
      2010 Annual General Meeting of Shareholders was held on May 4,
      2010.




(b)
            All
      of the Company's director nominees, Simcha G. Lyons, Raymond M. Neff,
      Yehuda L. Neuberger, Steven H. Nigro and Barry D. Zyskind, were
      elected.  There was no solicitation in opposition to the
      Company's nominees.




(c)
            Matters
      voted on at the meeting and the number of votes
  cast:




1.
            To
      elect five directors to the Board of Directors of Maiden Holdings, Ltd. to
      serve until the 2011 Annual General Meeting of Shareholders or until their
      successors have been duly elected or appointed and
    qualified:




Name
            
            Votes
      For
            
            
            WithheldSimcha
      G. Lyons
            
            
            56,799,114
            
            
            
            578,000Raymond
      M. Neff
            
            
            57,127,722
            
            
            
            249,392Yehuda
      L. Neuberger
            
            
            56,557,134
            
            
            
            819,980Steven
      H. Nigro
            
            
            57,125,222
            
            
            
            251,892Barry
      D. Zyskind
            
            
            56,877,431
            
            
            
            499,683




2.
            To
      elect four directors to the Board of Directors of Maiden Insurance Company
      Ltd. to serve until the 2011 Annual General Meeting of Shareholders or
      until their successors have been duly elected or appointed and
      qualified:




Name
            
            Votes
      For
            
            
            WithheldDavid
      A. Lamneck
            
            
            57,078,091
            
            
            
            299,023John
      Marshaleck
            
            
            57,078,091
            
            
            
            299,023Lawrence
      F. Metz
            
            
            57,078,091
            
            
            
            299,023Arturo
      M. Raschbaum
            
            
            57,078,091
            
            
            
            299,023




3.
            To
      amend the Company’s 2007 Share Incentive Plan (the ‘‘Plan’’) to, among
      other things, increase the number of common shares reserved for issuance
      under the Plan from two million eight hundred thousand (2,800,000) shares
      to ten million (10,000,000) shares:




Voted
      For
            
            Voted
      Against
            
            Abstain
            
            Broker
      Non-Votes53,003,897
            
            4,353,853
            
            19,364
            
            5,604,816




4.
            To
      ratify the selections of BDO Seidman, LLP to serve as the Company’s
      independent registered public accounting firm for the year ending December
      31, 2010, and Arthur Morris and Company as Maiden Insurance Company Ltd.’s
      independent registered public accounting firm for the year ending December
      31, 2010:




Voted
      For
            
            Voted
      Against
            
            Abstain
            
            Broker
      Non-Votes62,922,572
            
            14,674
            
            44,684
            
            0




Entry into a Material
Agreement.




On May 4,
2010, at the Company's Annual General Meeting of Shareholders, the Company's
shareholders approved an amendment of the Company's 2007 Share Incentive Plan
(the "Plan") to (i) increase the number of common shares reserved for issuance
pursuant to the Plan to 10,000,000 shares and (ii) maintain the percentage (25%)
of Plan shares that may be issued as restricted share awards by increasing the
number of Plan shares that may be issued as restricted share awards under the
Plan to 2,500,000 shares.  The amendment of the Plan was previously adopted
by the Company's Board of Directors and became effective with shareholder
approval on May 4, 2010.




43


More
complete descriptions of the key terms of the Plan can be found in the Company's
definitive proxy statement filed with the Securities and Exchange Commission on
April 2, 2010, which description is incorporated herein by reference. 
The description of the Plan is qualified in its entirety by reference to the
text of the Plan, a copy of which is filed as an exhibit to this
report.




Item
6.  Exhibits.




Exhibit Number
            
            Description10.1
            
            Amended
      and Restated Maiden Holdings, Ltd. 2007 Share Incentive Plan (incorporated
      by reference to Appendix A to the Company's definitive proxy statement
      filed with the Securities and Exchange Commission on April 2,
      2010).31.1
            
            Certification
      of the Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a),
      for the quarter ended March 31, 2010.31.2
            
            Certification
      of the Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a),
      for the quarter ended March 31, 2010.32.1
            
            Certification
      of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, for
      the quarter ended March 31, 2010.32.2
            
            Certification
      of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, for
      the quarter ended March 31, 2010.





44


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:
      May 10, 2010
              
              /s/ ARTURO
      M. RASCHBAUMArturo
      M. RaschbaumPresident
      and Chief Executive Officer/s/ JOHN
      MARSHALECKJohn
      MarshaleckChief
      Financial Officer(Principal
      Financial and Accounting Officer)




45