• Underwriting income of $48.2 million and combined ratio of 95.9%(1)
• Common shareholders’ equity of $676.5 million; book value per common share of $9.62
(1) Operating income, operating income per share, underwriting income, combined ratio and book value per share are non-GAAP financial measures. See “Non-GAAP Financial Measures” for additional information and a reconciliation to the nearest GAAP financial measure (net income).
Factors Creating Uncertainty in the Estimation of the Reserve for Losses and Loss Expenses. While management does not at this time include an explicit or implicit provision for uncertainty in its reserve for losses and loss expenses, certain of the Company’s business lines are by their nature subject to additional uncertainties, which are discussed in detail below. In addition, the Company’s reserves are subject to additional factors which add to the uncertainty of estimating loss and loss expense reserves. Time lags in the reporting of losses can also introduce further ambiguity to the process of estimating loss and loss expense reserves.
• new types of injuries caused by new types of injurious activities or exposures; and
likely to recur. The total favorable development relating to the loss portfolio transfer since the closing of the GMAC Acquisition has been $18.2 million and the remaining $5.7 million is recorded as a deferred gain and is part of the Company’s loss reserves at December 31, 2009 that are included in the accompanying balance sheet.
Commissions and Other Acquisition Expenses Comparison of Years Ended December 31, 2009 and December 31, 2008 Commissions and other acquisition costs increased by $121.7 million, or 101.7%, for the year ended December 31, 2009 compared to the same period in 2008. The increase was the result of the increase in gross premiums related to the first full year of the GMAC Acquisition. Acquisition costs as a percentage of net premiums earned were 26.2% for the year ended December 31, 2009 as compared to 28.5% for the year ended December 31, 2008. This decrease was due to the acquisition cost on the business associated with the GMAC Acquisition being lower than the acquisition costs associated with the AmTrust Quota Share segment.
Comparison of Year Ended December 31, 2008 and Period from May 31 (Inception) to December 31, 2007 Commissions and other acquisition costs increased by $84.2 million, or 237.2%, for the year ended December 31, 2008 compared to the period from May 31 (inception) December 31, 2007. The increase was the result of the increase in gross premiums. Acquisition costs as a percentage of net premiums earned were 28.5% for the year ended December 31, 2008 compared to 32.2% for the period May 31 (inception) to December 31, 2007. This decrease was due to the acquisition costs relating to the business obtained via the GMAC Acquisition being lower than the rate on the AmTrust Quota Share.
• Salary and employee welfare costs increased approximately $6.7 million due to our staff count increasing to 127 as of December 31, 2008 from 6 as of December 31, 2007. The general and administrative expense ratio was 3.5% and 2.7% for the year ended December 31, 2009 and the period from May 31 (inception) to December 31, 2007, respectively. As a result the overall expense ratio (including acquisition costs) was 32.0% and 34.9%, respectively, for the year ended December 31, 2008 and the period from May 31, (inception) to December 31, 2007. The increase in staff count includes 120 employees of Maiden Re located in the U.S. The increase also included a non-recurring expense of $1.0 million for the reimbursement of forfeited compensation for new executives and increased share compensation costs of $0.6 million for all offices.
AmTrust Quota Share Segment The following table summarizes the underwriting results and associated ratios for the AmTrust Quota Share segment for the years ended December 31, 2009 and 2008 and the period from May 31 (inception) to December 31, 2007. Comparisons for the 2008 to 2007 period are affected by two factors: 1) 2007 was the Company’s first year and was only a partial year; and 2) the underlying reinsurance contract with AmTrust did not commence until July 1, 2007 and thus 2008 is the first full year of the AmTrust contract.
Comparison of Year Ended December 31, 2008 and the Period from May 31 (Inception) to December 31, 2007 The combined ratio increased to 92.5% for the year ended December 31, 2008 as compared to 91.5% for the period from May 31 (inception) to December 31, 2007. Meaningful comparisons are not available as 2007 was the initial period for the Company and 2008 reflected the first full twelve months for the segment under the reinsurance agreement.
The table below illustrates net premiums written by AmTrust’s segments for the year ended December 31, 2008 and the period from May 31 (inception) to December 31, 2007.
The following table presents information regarding our invested assets that were in an unrealized loss position at December 31, 2009 and 2008 by the amount of time in a continuous unrealized loss position:
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 December 31, 2009 and 2008 was as follows:
On January 20, 2009, 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.