EDGAR 10-K Filing

Company CIK: 1412100
Filing Year: 2025
Filename: 1412100_10-K_2025_0001412100-25-000011.json

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ITEM 1. BUSINESS
Item 1. Business.
General Overview
Maiden Holdings, Ltd. (sometimes referred to as "Maiden Holdings" or "Parent Company") is a Bermuda-based holding company. Together with its subsidiaries (collectively referred to as the "Company", "we" or "Maiden"), Maiden creates shareholder value by actively managing and allocating our assets and capital, including through ownership and management of businesses and assets primarily in the insurance and related financial services industries where we can leverage our deep knowledge of those markets.
Current Operations
The Company does not presently underwrite prospective reinsurance risks. During 2024, the Company entered into a series of strategic transactions that, upon completion, it expects will substantially transform its operations which are described below.
Short-term income protection business is written on a primary basis by our wholly owned subsidiaries Maiden Life Försäkrings AB ("Maiden LF") and Maiden General Försäkrings AB ("Maiden GF") in the Scandinavian and Northern European markets. Our wholly owned subsidiary, Maiden Global Holdings Ltd. (“Maiden Global”) is a licensed intermediary in the United Kingdom. Maiden Global had previously operated internationally by providing branded auto and credit life insurance products through insurer partners, particularly those in Europe and other global markets ("IIS business"). These products also produced reinsurance programs which were underwritten by our wholly owned subsidiary Maiden Reinsurance Ltd. (“Maiden Reinsurance”).
The Company also has various historic reinsurance programs underwritten by Maiden Reinsurance which are in run-off, including the liabilities associated with AmTrust Financial Services, Inc. ("AmTrust") reinsurance agreements which were terminated in 2019 as discussed in "Note 10 - Related Party Transactions" of the Notes to Consolidated Financial Statements included in Part II Item 8. "Financial Statements and Supplementary Data". In addition, the Company has a retroactive reinsurance agreement and a commutation agreement that further reduces its exposure and limits the potential volatility related to AmTrust liabilities, which are discussed in "Note 8 - Reinsurance" of the Notes to Consolidated Financial Statements included in Part II Item 8. "Financial Statements and Supplementary Data".
The Company is also running off certain business related to its Genesis Legacy Solutions ("GLS") platform. In November 2020, the Company formed our indirect wholly owned subsidiary GLS which specialized in providing a full range of legacy services to small insurance entities, particularly those in run-off or with blocks of reserves that are no longer core to those companies' operations, working with clients to develop and implement finality solutions including acquiring entire companies. The Company believed the formation of GLS was highly complementary to its overall longer-term strategy. However, a combination of factors, including market conditions in the sector GLS focuses on, resulted in an inability for GLS to gain sufficient scale to achieve its objectives or earn a profit, and GLS results did not reach the objectives the Company expected it to over time. Having completed the capital commitment made to GLS in November 2020, the Company determined during 2023 to not commit any additional capital to new opportunities and to run-off the existing accounts underwritten by GLS.
As of December 31, 2024, Maiden Reinsurance owns 31.1% of the Company's total outstanding common shares which is eliminated for accounting and financial reporting purposes on the Company's consolidated financial statements. The voting power of Maiden Reinsurance, with respect to its common shares, is capped at 9.5% pursuant to the bye-laws of the Company. The ownership of the common shares by Maiden Reinsurance was made in compliance with Maiden Reinsurance's investment policy and approved by the Vermont Department of Financial Regulation ("Vermont DFR").
Our business currently consists of two reportable segments: Diversified Reinsurance and AmTrust Reinsurance. Our Diversified Reinsurance segment consists of a portfolio of predominantly property and casualty reinsurance business focusing on regional and specialty property and casualty insurance companies located primarily in Europe. This segment also includes transactions entered into by GLS since November 2020. Our AmTrust Reinsurance segment includes all business ceded to Maiden Reinsurance by AmTrust, primarily the quota share reinsurance agreement (“AmTrust Quota Share”) between Maiden Reinsurance and AmTrust’s wholly owned subsidiary, AmTrust International Insurance, Ltd. (“AII”) and the European hospital liability quota share reinsurance contract ("European Hospital Liability Quota Share") with AmTrust’s wholly owned subsidiaries, AmTrust Europe Limited ("AEL") and AmTrust International Underwriters DAC ("AIU DAC"), both of which are in run-off effective as of January 1, 2019.
Divestiture of IIS Business and Swedish Subsidiaries
During 2024, we conducted and completed a strategic review of our IIS Business. The purpose of that review was to evaluate the strategic value of this business, including the operations of Maiden LF and Maiden GF in relation to their ongoing growth and profitability prospects, regulatory capital requirements and ability to create shareholder value in excess of the Company's target return on capital levels.
As a result of that review, we concluded that divesting this business was in the best interests of shareholders and subsequently entered into the following transactions to accomplish that objective: 1) two Renewal Rights and Asset Purchase Agreement with AmTrust Nordic AB (“AmTrust Renewal Rights Agreements”); and 2) a Stock Purchase Agreement to sell Maiden LF and Maiden GF (“Swedish Subsidiaries Sale”).
As part of these transactions, Maiden LF and Maiden GF are no longer writing new business and their non-underwriting related assets and liabilities are represented as held-for-sale in our consolidated financial statements. Please see Note 10 - Related Party Transactions for details regarding the AmTrust Renewal Rights Agreement and Note 16 - Assets Held for Sale for further information on the Swedish Subsidiaries Sale in the Notes to Consolidated Financial Statements included in Part II Item 8. "Financial Statements and Supplementary Data".
AmTrust Renewal Rights Agreements
On May 3, 2024, Maiden LF and Maiden GF entered into a Renewal Rights and Asset Purchase Agreement with AmTrust Nordic AB, a Swedish unit of AmTrust, which is expected to cover certain programs of Maiden LF and Maiden GF's primary business written in Sweden, Norway and other Nordic countries.
On June 20, 2024, Maiden LF and Maiden GF entered into a Renewal Rights and Asset Purchase Agreement with AEL and AIU DAC, both wholly owned subsidiaries of AmTrust, which is expected to cover certain programs of Maiden LF and Maiden GF's primary business written in the United Kingdom and Ireland.
Under these agreements, those AmTrust subsidiaries in collaboration with existing Maiden LF and Maiden GF distribution partners, will offer renewals to select policyholders in exchange for a fee at standard market terms for business successfully renewed. All programs written by Maiden LF and GF, including those covered by the AmTrust Renewal Rights Agreements, are in the process of being cancelled in accordance with the requirements of the AmTrust Renewal Rights Agreements, or their contractual terms.
Swedish Subsidiaries Sale
On November 29, 2024, the Company entered into an agreement to sell its Swedish subsidiaries, Maiden LF and Maiden GF to an expanding group of international insurance and reinsurance companies headquartered in the United Kingdom. Such transaction is subject to customary regulatory approvals. The sale is an all-cash transaction and pursuant to the terms of the agreement, existing staff of both Maiden LF and Maiden GF will transition to the new ownership group.
Combination Agreement with Kestrel Group
On December 29, 2024, the Company entered into a combination agreement, as amended, (the “Combination Agreement”) with Kestrel Group LLC (“Kestrel”), all of the equityholders of Kestrel, Ranger U.S. Newco LLC, Ranger Bermuda Merger Sub Ltd, Ranger Bermuda Topco Ltd (“Bermuda NewCo”) and Ranger Merger Sub 2 LLC to combine and form a new, publicly listed specialty program group (the "transaction"). AmTrust is a minority shareholder of Kestrel. Please see Note 10 - Related Party Transactions included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further information regarding the Company's relationship with AmTrust. Pursuant to the terms of the Combination Agreement, at the closing of the transaction, each issued and outstanding common share of Maiden will be converted into the right to receive one common share in Bermuda NewCo, a newly formed Bermuda company that will acquire both Maiden and Kestrel (the “combined company”). The transaction values Kestrel at up to $167.5 million, consisting of upfront cash of $40.0 million, 55 million common shares of the combined company valued at $82.5 million and contingent consideration of up to $45.0 million payable in common shares of the combined company upon the achievement of certain financial milestones. At the closing of the transaction, the combined company will be rebranded as Kestrel Group and expects that its common shares will be listed on the NASDAQ Capital Market ("Nasdaq").
Following closing of the transaction, Kestrel will continue to write business through its use of A.M. Best A- FSC XV insurance carriers, including Sierra Specialty Insurance Company, Rochdale Insurance Company, Park National Insurance Company, and Republic Fire and Casualty Insurance Company (collectively, the “Insurers”), all subsidiaries of AmTrust. In connection with the transaction, the combined company will have the option to acquire the Insurers from AmTrust.
Following completion of the transaction, the board of directors of the combined company will consist of seven directors, made up of four directors selected by an affiliate of Kestrel Intermediate Ledbetter Holdings LLC, two of whom will be independent under applicable securities laws and stock exchange rules, and three directors selected by AmTrust, two of whom will be independent under applicable securities laws and stock exchange rules.
The transaction is subject to certain closing conditions, including the approval of Maiden’s shareholders, the approval of listing of the shares of the combined company on the Nasdaq (subject to official notice of issuance) and the receipt of certain other regulatory approvals. Closing is expected to occur in the first half of 2025.
The foregoing description of the Combination Agreement and the transaction does not purport to be complete and is subject to and qualified in its entirety by reference to the Combination Agreement, a copy of which is included as Exhibit 2.1 to this Form 10-K. In addition, see “Risk Factors - The Transaction.”
Business Strategy
In addition to restoring operating profitability, our strategic focus centers on creating the greatest risk-adjusted shareholder returns in order to increase book value for our common shareholders, both near and long-term. In that respect, management’s focus is to increase non-GAAP book value, which fully reflects the steps we have taken to protect our balance sheet, primarily through our LPT/ADC Agreement with Cavello, as this represents the ultimate economic value of Maiden.
In recent years we had pursued a revised operating strategy which leveraged the significant assets and capital we retain. However, during 2024 we made significant revisions to that strategy which resulted in our announcement of the Combination Agreement with Kestrel. Further details are discussed in the "Business Strategy" section of Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview" of this Annual Report on Form 10-K.
2024 Financial Developments
Our non-GAAP book value decreased by 52.4% during 2024 to $1.52 per common share at December 31, 2024 due to continuing significant adverse loss development while GAAP book value decreased by 81.5% to $0.46 per common share at December 31, 2024.
Our alternative investment portfolio decreased by 18.6% during 2024 primarily due to sales and redemptions of equity securities, private equity investments and private credit funds. These sales were part of a broader effort to reposition our balance
sheet as part of ongoing revisions to our strategy we actively pursued in 2024 while also strengthening overall liquidity. Our alternative investment portfolio (including sales of alternative investments related to our shift in strategy) produced a positive net return of 3.5% during 2024 compared to 8.0% in 2023. We believe our alternative investment portfolio remains well positioned to achieve its targeted longer-term returns.
The run-off of our historic reinsurance programs produced an underwriting loss of $197.4 million during 2024, driven by adverse prior year reserve development of $154.4 million, substantially all of which emanated from the AmTrust Reinsurance segment, which offset the positive progress made in our capital and asset management strategies. Of this adverse prior year development, $64.3 million or 41.7% of total adverse development for the year ended December 31, 2024 is recoverable under the LPT/ADC Agreement and is expected to be recognized as future GAAP income over time as recoveries are received, under the provisions of the LPT/ADC Agreement and the applicable GAAP accounting rules.
We also remained active in the capital management pillar of our business strategy, repurchasing 1,871,755 common shares during 2024. As of December 31, 2024, Maiden Reinsurance owns 31.1% of the Company's total outstanding common shares which is eliminated for accounting and financial reporting purposes on our consolidated financial statements. The voting power of Maiden Reinsurance, with respect to its investment in Maiden Holdings common shares, is capped at 9.5% pursuant to the bye-laws of the Company. The ownership of the common shares by Maiden Reinsurance was made in compliance with Maiden Reinsurance's investment policy as approved by the Vermont DFR. In connection with the pending transaction with Kestrel, the Company has suspended its share repurchase program.
Details of our recent capital transactions are discussed in our Notes to the Consolidated Financial Statements in "Note 6 - Shareholders' Equity" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. Our future results, and our ability to generate an improved risk-adjusted return on capital, may be impacted by risks and trends set forth in Item 1A, "Risk Factors", and elsewhere in this Annual Report on Form 10-K.
Our Principal Operating Subsidiaries
Maiden Reinsurance, a wholly owned subsidiary of Maiden Holdings, is an affiliated reinsurance company licensed in the State of Vermont in the U.S. and our principal operating subsidiary which commenced operations in June 2007. Effective March 16, 2020, we re-domesticated Maiden Reinsurance from Bermuda to Vermont in the U.S., having determined that re-domesticating Maiden Reinsurance to Vermont enables us to better align our capital and resources with our liabilities, which originate mostly in the U.S., resulting in a more efficient structure. Maiden Reinsurance is subject to the statutes and regulations of Vermont in the ordinary course of business. The re-domestication did not apply to Maiden Holdings which remains a Bermuda-based holding company. As of December 31, 2024, Maiden Reinsurance owns 31.1% of the total outstanding common shares of Maiden Holdings and subject to our bye-laws, has the ability to vote up to 9.5% of these shares.
Maiden NA is our wholly owned U.S. holding company and is domiciled in the State of Delaware.
Maiden Global, a wholly owned subsidiary of Maiden Holdings, operates as an insurance services company. Maiden Global is organized under the laws of England and Wales. Maiden LF and Maiden GF, both wholly owned subsidiaries of Maiden Holdings, are insurance companies organized under the laws of Sweden and write income protection insurance on a primary basis in the Scandinavian and Northern European market. On December 17, 2024, the Company entered into an agreement to sell its Swedish subsidiaries, Maiden LF and Maiden GF to an expanding group of international insurance and reinsurance companies headquartered in London. Maiden LF and Maiden GF were the principal operating subsidiaries of the Company’s International Insurance Services (“IIS”) platform.
GLS is a wholly owned subsidiary of Maiden Reinsurance domiciled in the State of Delaware. GLS Services Company (“GLS Services”) is a wholly owned subsidiary of GLS. GLS, which is in run-off, specialized in providing a full range of legacy services to small insurance entities, particularly those in run-off or with blocks of reserves that are no longer core to those companies' operations, working with clients to develop and implement finality solutions including acquiring entire companies that enable our clients to meet their capital and risk management objectives. Genesis Legacy Insurance Company (Vermont) Limited, is a wholly owned subsidiary of GLS Services licensed in Vermont, and is the operating entity utilized by GLS to assume portfolios of legacy liabilities. For further information regarding GLS, please refer to the “Legacy Underwriting - Update” included in Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview" of this Annual Report on Form 10-K.
Our Reportable Segments
Our business currently consists of two reportable segments: Diversified Reinsurance and AmTrust Reinsurance. Our Diversified Reinsurance segment consists of a portfolio of predominantly property and casualty insurance and reinsurance business focusing on regional and specialty property and casualty insurance companies located primarily in Europe. This segment now also includes transactions entered into by GLS which was formed in November 2020. Our AmTrust Reinsurance segment includes all business ceded to Maiden Reinsurance by AmTrust, primarily the AmTrust Quota Share between Maiden Reinsurance and AmTrust’s wholly owned subsidiary, AII and the European Hospital Liability Quota Share with AmTrust’s wholly owned subsidiaries AEL and AIU DAC, both of which are in run-off effective January 1, 2019.
Financial data relating to our two reportable segments is included in Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" and in "Notes to Consolidated Financial Statements - Note 3. Segment Information" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
The table below compares net premiums earned, by reportable segment, reconciled to the total consolidated net premiums earned for the years ended December 31, 2024 and 2023:
For the Year Ended December 31, 2024 2023
($ in thousands) Net Premiums
Earned % of Total Net Premiums
Earned % of Total
Diversified Reinsurance
$ 35,787 72.3 % $ 29,039 66.0 %
AmTrust Reinsurance
13,687 27.7 % 14,930 34.0 %
Total
$ 49,474 100.0 % $ 43,969 100.0 %
Financial data relating to the geographical areas in which we operate and relating to our principal products by line of business may be found in "Notes to Consolidated Financial Statements - Note 3. Segment Information" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Diversified Reinsurance Segment
In this segment, Maiden Reinsurance previously wrote treaties on both a quota share basis and excess of loss basis outside the U.S. whereas Maiden LF and Maiden GF write business within Europe on a primary basis. Net premiums written by our Diversified Reinsurance segment operating subsidiaries, excluding intercompany reinsurance, for the years ended December 31, 2024 and 2023 included:
For the Year Ended December 31, 2024 2023
($ in thousands) Net Premiums
Written % of Total Net Premiums
Written % of Total
Maiden LF
$ 22,992 66.2 % $ 16,786 61.9 %
Maiden GF
11,764 33.8 % 10,344 38.2 %
Maiden Reinsurance (7) - % (26) (0.1) %
Total
$ 34,749 100.0 % $ 27,104 100.0 %
Please refer to Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations" for a discussion on the performance of our Diversified Reinsurance segment for the years ended December 31, 2024 and 2023.
Maiden Global’s business development teams historically partnered with automobile manufacturers, dealer associations and local primary insurers to design and implement point of sale insurance programs which generated revenue for the auto manufacturer and insurance premiums for the primary insurer ("IIS business"). All of these programs are in run-off and no new programs are being sought. With no new written premium, the only remaining earned premium is from the Australian program that continued through 2024. The table below shows IIS net premiums by line of business for the years ended December 31, 2024 and 2023:
For the Year Ended December 31, 2024 2023
($ in thousands) Net
Premiums
Written % of Total Net
Premiums
Written % of Total
Credit Life - Insurance $ 34,751 100.0 % $ 27,110 100.0 %
Personal Auto - Quota Share Reinsurance (8) - % (7) - %
Total
$ 34,743 100.0 % $ 27,103 100.0 %
For the years ended December 31, 2024 and 2023, the Company's net premiums written for Personal Auto on a quota share reinsurance basis were negative.
As noted, the Company has entered into an agreement to sell its Swedish subsidiaries, Maiden LF and Maiden GF to an expanding group of international insurance and reinsurance companies headquartered in the United Kingdom and await regulatory approval of this transaction.
AmTrust Reinsurance Segment
General
AmTrust is a multinational specialty property and casualty insurance holding company with operations in the U.S., Europe and Bermuda. Effective January 1, 2019 (a) the AmTrust Quota Share, and (b) the European Hospital Liability Quota Share were terminated on a run-off basis. These transactions are broadly referred to herein as the "Final AmTrust QS Terminations". Apart from certain unearned premiums in the AmTrust Quota Share and the European Hospital Liability Quota Share that were earned subsequent to December 31, 2019, there was no new premium written within this segment during 2024 and 2023.
Information relating to our founding shareholders that are affiliated with AmTrust ("Founding Shareholders") may be found in "Notes to Consolidated Financial Statements - Note 10 - Related Party Transactions" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. Through our reinsurance agreements with AmTrust, we reinsured specific lines of business within the following AmTrust business segments:
•Small commercial business insurance, which includes U.S. workers’ compensation, commercial package and other low-hazard property and casualty insurance products;
•Specialty risk and extended warranty coverage for consumer and commercial goods and custom designed coverages, such as accidental damage plans and payment protection plans offered in connection with the sale of consumer and commercial goods, in the U.S., U.K. and certain other global markets and European hospital liability; and
•Specialty program which includes package products, general liability, commercial auto liability, excess and surplus lines programs and other specialty commercial property and casualty insurance to a narrowly defined, homogeneous group of small and middle market companies.
Information regarding written and earned premiums by line of business for AmTrust Reinsurance may be found in "Notes to Consolidated Financial Statements - Note 3 - Segment Information" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
AmTrust Quota Share
Under the AmTrust Quota Share with AII, effective July 1, 2007 and through 2018, we reinsured 40% of AmTrust’s premium written, net of reinsurance with unaffiliated reinsurers, relating to all lines of business that existed on the effective date. We also had the option to reinsure additional programs, in addition to the original lines of business entered into by AmTrust since the effective date of the AmTrust Quota Share. As AmTrust expanded into new lines of business, pursuant to the terms of the AmTrust Quota Share, we had selectively added some of those lines and opted not to participate in others. Consequently our share of AmTrust's overall gross premiums written declined below 40% over time.
As a result of the Final AmTrust QS Terminations described above, our active reinsurance contracts with AmTrust were terminated effective January 1, 2019. Also, effective July 31, 2019, Maiden Reinsurance and AII entered into a Commutation and Release Agreement (which is broadly referred to herein as the "AmTrust WC Commutation") effective July 31, 2019, which provided for AII to assume all reserves ceded by AII to Maiden Reinsurance with respect to its proportional 40% share of the ultimate net loss under the AmTrust Quota Share related to: (a) all losses incurred in Accident Year 2017 and Accident Year 2018 under California workers' compensation policies and as defined in the AmTrust Quota Share ("Commuted California Business"); and (b) all losses incurred in Accident Year 2018 under New York workers' compensation policies ("Commuted New York Business" and together with the Commuted California Business, "Commuted Business") in exchange for the release and full discharge of Maiden Reinsurance of all of its obligations to AII with respect to the Commuted Business. The Commuted Business did not include any business classified by AII as Specialty Program or Specialty Risk business.
European Hospital Liability Quota Share
On April 1, 2011, Maiden Reinsurance entered into the European Hospital Liability Quota Share with AEL and AIU DAC to cover those entities' medical liability business within Europe, primarily in Italy and France. These contracts were terminated on a run-off basis effective January 1, 2019 as part of the Final AmTrust QS Terminations. For more information, please refer to "Notes to Consolidated Financial Statements - Note 10 - Related Party Transactions and Note 17 - Subsequent Events" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Risk Management
Our Enterprise Risk Management ("ERM") framework reflects the ‘three lines of defense’ approach to risk management, which involves (1) individual functions having responsibility for identifying and managing risks; (2) the ERM Committee providing oversight and guidance to individual functions; and (3) internal audit performing independent reviews. Our Board has overall responsibility for oversight of the ERM program and has delegated this oversight to its Audit Committee.
Our ERM Committee (comprised of our Chief Executive Officer and Chief Financial Officer, Group President and most other senior members of management) monitors and oversees the risk environment and provides direction to mitigate, to an acceptable level, the most significant and material risks that may adversely affect our ability to achieve our goals. The ERM Committee continually reviews factors that may impact our organizational risk and develops and implements strategies and action plans to mitigate key risks.
Our ERM program is designed to achieve the following:
•Establish a process to assess strategies and business decisions on a risk/reward basis;
•Establish a risk governance structure with clearly defined roles and responsibilities;
•Identify and assess all material risks from internal and external sources;
•Manage risks within our risk appetite; and
•Effective review and reporting of major loss events.
The first line of defense assists with the identification of risks, creation of appropriate responses to risks, and maintains them within the risk appetite and tolerances that the ERM Committee believes are necessary to achieve our business strategies and objectives. The mitigation of risks is achieved through the application and operation of controls, transferring of risk or tolerating risks within risk appetite.
Our internal audit department assesses the adequacy and effectiveness of our risk management framework and mitigating controls and coordinates risk-based audits to evaluate and address risk within targeted areas of our business. The core functions of this department are to (1) assess the adequacy and effectiveness of our internal control systems; (2) coordinate risk-based
audits and compliance reviews; and (3) carry out other initiatives to evaluate and address risk within targeted areas of our business. Internal audit integrates testing of the risk management framework into its annual test plans.
Our Audit Committee, comprised solely of independent directors, meets at least quarterly to assess whether management is addressing risk issues in a timely and appropriate manner. The Audit Committee receives a quarterly update on capital and risk management. Our risk appetite and tolerances have been formally approved by the Audit Committee.
As a property and casualty holding company, our insurance subsidiaries are in the business of assuming risk. We are not currently underwriting reinsurance business on prospective risks as we historically have, but have recently underwritten risks on a retroactive basis through GLS. Our primary risks are categorized as follows:
•Strategic risk - the risk that strategic decisions have an unexpected or adverse impact on future earnings or capital adequacy. This includes the ability to deploy capital in order to maximize risk adjusted returns in the most efficient way, without adversely impacting the adequacy of our capital position;
•Insurance risk - the risk that insured losses are higher than our expectations. This includes losses arising from inadequate loss reserves, losses from larger than expected non-catastrophe current accident year losses, and catastrophe losses that exceed our expectation or our reinsurance limits. Maiden Reinsurance is not engaged in active reinsurance underwriting on prospective risks and as a result our insurance risk from premiums is immaterial;
•Investment risk - the risk of loss in our investment portfolio potentially caused by fluctuations in interest rates, credit spreads, foreign exchange rates and inflation on both assets and liabilities;
•Liquidity risk - the risk that the group does not have sufficient unrestricted or liquid funds to pay losses or meet contractual obligations as they become due; and
•Operational risk - the risk of loss from inadequate or failed internal processes, people, systems and/or external events (i.e. cyber), which also includes legal risks.
Reserve for Loss and LAE
General
We are required by applicable insurance laws and regulations in the U.S. and Sweden and by U.S. Generally Accepted Accounting Principles ("U.S. GAAP") to establish loss reserves to cover our estimated liability for the payment of all loss and LAE incurred with respect to premiums earned on the policies and treaties that we write. These reserves are balance sheet liabilities presenting estimates of loss and LAE which we are ultimately required to pay for insured or reinsured claims that have occurred as of or before the balance sheet date. The loss and LAE reserves on our balance sheet represent management’s best estimate of the outstanding liabilities associated with our premium earned. In developing this estimate, management considers the results of internal and external actuarial analyses, trends in those analyses as well as industry trends. Our opining independent actuary certifies that the reserves established by management make a reasonable provision for our unpaid loss and LAE obligations.
These amounts include case reserves and provisions for Incurred But Not Reported ("IBNR") reserves. Case reserves are established for losses that have been reported to us, and not yet paid. IBNR reserves represent the estimated cost of losses that have occurred but have not been reported to us and include a provision for additional development on case reserves. We establish case reserves based on information from the ceding company, reinsurance intermediaries, and when appropriate, consultations with independent legal counsel. The IBNR reserves are established by management based on reported loss and LAE and actuarially determined estimates of ultimate loss and LAE.
A variety of standard actuarial methods are calculated to estimate ultimate loss and LAE. The majority of our business is reserved individually by cedant and line of business, with the remainder reserved in homogeneous groupings. Ultimate loss selections are accumulated across the reserve segments, and appropriate actuarial judgment is applied to determine the final selection of estimated ultimate losses. Ultimate losses are converted to IBNR reserves by subtracting inception to date paid losses and case reserves from those amounts. The combined total of case and IBNR results in indicated reserves which are the basis for the carried reserves for financial statements. Ultimate losses are also used to estimate premium and commission accruals for accounts with adjustable features.
Loss reserves do not represent an exact calculation of liability; rather, loss reserves are estimates of what we expect the ultimate resolution and administration of claims will cost. These estimates are based on actuarial and statistical projections and on our assessment of currently available data, as well as estimates of trends in claims severity and frequency, judicial theories of liability and other factors. Loss reserve estimates are refined as experience develops and as claims are reported and resolved. Establishing an appropriate level of loss reserves is an inherently uncertain process. In addition, the relatively long reporting periods between when a loss occurs and when it may be reported to our claims department for our casualty lines of business also increase the uncertainties of our reserve estimates in such lines. To assist us in establishing appropriate reserves for loss and LAE, we analyze a significant amount of internal data and external insurance industry information with respect to the pricing environment and loss settlement patterns. In combination with our individual account pricing analyses and our internal loss settlement patterns, this industry information is used to guide our loss and LAE estimates. These estimates are reviewed quarterly, at a high level of detail, and any adjustments are reflected in earnings in the periods in which they are determined.
For additional information concerning our reserves, see Item 7,"Management’s Discussion and Analysis of Financial Condition and Results of Operations - Critical Accounting Policies - Reserve for Loss and LAE" and "Notes to Consolidated Financial Statements - Note 9 - Reserve for Loss and Loss Adjustment Expenses" included under Item 8 "Financial Statement and Supplementary Data", for further information regarding the specific actuarial models we utilize and the uncertainties in establishing the reserve for loss and LAE.
Our Financial Strength Rating
We currently do not have a financial strength rating from any of the major rating agencies that cover our industry. A.M. Best Company, Inc. (“A.M. Best”) has developed a rating system to provide an opinion of an insurer’s or reinsurer’s financial strength and ability to meet ongoing obligations to its policyholders. Each rating reflects that rating agency’s independent opinion of the capitalization, management and sponsorship of the entity to which it relates, and is neither an evaluation directed to investors in our common shares nor a recommendation to buy, sell or hold our common shares. A.M. Best maintains a letter scale rating system ranging from "A++" (Superior) to "F" (In Liquidation).
As presently constituted, we believe that our current business operations neither require a financial strength rating nor inhibit us from pursuing or achieving our strategic objectives. Our recently announced Combination Agreement with Kestrel may result in the Company pursuing a new financial strength rating in the future, and the lack of a sufficient financial strength rating from one of the major rating agencies may limit or negatively impact our ability to market and sell those products in the future. It may also require us to use collateral more frequently to secure client relationships, which could impact our unrestricted liquidity. Both of these factors would be key considerations as to whether and when we would resume active underwriting of new prospective risks.
Our Employees
On March 3, 2025, we had approximately 42 full-time and part-time employees who are located in Bermuda, the U.S., the U.K., Germany, Ireland and Sweden. However, upon closing of the Swedish Subsidiaries sale, which is expected to be during the first half of 2025, all 15 current employees of both Maiden LF and Maiden GF will transition to the new ownership group.
Regulatory Matters
General
The insurance and reinsurance industry are subject to regulatory and legislative oversight and regulation in various markets in which we operate.
U.S. Insurance Regulation
Maiden Reinsurance is an affiliated reinsurer organized under the laws of Vermont. Regulatory, supervisory and administrative authority over insurance companies in the United States is primarily delegated to the states with the exception of federal authority over boycott, coercion and intimidation, federal antitrust laws and where federal law is enacted specifically to regulate the business of insurance. Among other things, state insurance departments regulate insurer solvency standards, insurer and agent licensing, authorized investments, loss and loss expense reserves and provisions for unearned premiums, and deposits of securities for the benefit of policyholders. Maiden Reinsurance is required to file detailed financial statements and other reports with the Vermont DFR. These financial statements are subject to the supervision, regulation and periodic examination by the Vermont DFR.
State Insurance Department Examinations
Maiden Reinsurance is subject to the financial supervision and regulation of the Vermont DFR. As part of their regulatory oversight process, state insurance departments conduct periodic detailed examinations of the financial reporting of insurance companies domiciled in their states, generally not less frequently than once every five years. Examinations may be carried out in cooperation with the insurance departments of other states under guidelines promulgated by the National Association of Insurance Commissioners ("NAIC").
Statutory Accounting Principles
Statutory accounting principles ("SAP") are a basis of accounting developed to assist insurance regulators in monitoring and regulating the solvency of insurance companies. SAP is primarily concerned with measuring an insurer's surplus to policyholders. Accordingly, statutory accounting focuses on valuing assets and liabilities of insurers at financial reporting dates in accordance with appropriate insurance law and regulatory provisions applicable in each insurer's domiciliary state.
U.S. GAAP is concerned with a company's solvency, but is also concerned with other financial measurements, principally income and cash flows. Accordingly, U.S. GAAP gives more consideration to appropriate matching of revenue and expenses and accounting for management's stewardship of assets than does SAP. As a direct result, different assets and liabilities and different amounts of assets and liabilities will be reflected in financial statements prepared in accordance with U.S. GAAP compared to SAP. Statutory accounting practices established by the NAIC and adopted in part by Vermont will determine, among other things, the amount of statutory surplus and statutory net income of Maiden Reinsurance, and thus determine, in part, the amount of funds that could be available to pay as dividends.
Holding Company Regulation
Maiden Reinsurance is subject to the U.S. statutory holding company laws of Vermont. The insurance holding company laws and regulations apply directly to individual insurers, indirectly to non-insurance entities, and provide regulators the ability to look at any entity within an insurance holding company system (or group). State regulations generally provide that each insurance company in an insurance holding company system must register with the insurance department of its state of domicile. These laws vary from state to state, but each state has enacted legislation which requires licensed insurers that are subsidiaries of insurance holding companies to register and file with state regulatory authorities certain reports including information concerning their capital structure, ownership, financial condition and general business operations. All transactions involving the insurers in a holding company system and their affiliates must be fair and reasonable and often require prior notice and non-disapproval by the state insurance department of their domicile. Further, state insurance holding company laws typically place limitations on the amounts of dividends or other distributions payable by insurers. Any capital distribution of
any kind out of Maiden Reinsurance would be done consistent with Vermont regulations or as required, with the prior approval of the Vermont DFR.
State insurance holding company laws also require prior notice and state insurance department approval of changes in control of an insurer or its holding company. "Control" is generally defined as the possession, direct or indirect, of the power to direct or cause the direction of the management and policies of the company, whether through the ownership of voting securities, by contract (except a commercial contract for goods or non-management services) or otherwise. Maiden Reinsurance is domiciled in Vermont where any beneficial owner of 10% or more of the outstanding voting securities of an insurance company or its holding company is presumed to have acquired control, unless this presumption is rebutted. Therefore, an investor who intends to acquire beneficial ownership of 10% or more of our outstanding voting securities may need to comply with these laws and would be required to file notices and reports with the Vermont DFR and receive approval from the Vermont DFR or rebut the presumption of control before such acquisition.
As of December 31, 2024, Maiden Reinsurance owns 31.1% of the Company's total outstanding common shares as described above, which is eliminated for accounting and financial reporting purposes on the Company’s consolidated financial statements. The voting power of Maiden Reinsurance, with respect to its common shares, will be capped at 9.5% pursuant to the bye-laws of the Company. The ownership of our common shares by Maiden Reinsurance was made in compliance with Maiden Reinsurance's investment policy which has been approved by the Vermont DFR. The Vermont DFR additionally specifically approved the ownership of the Company's common shares by Maiden Reinsurance related to the exchange of preference shares that occurred on December 27, 2022 ("Exchange").
Additionally, the NAIC Model Holding Company Act and NAIC Model Holding Company Regulation address “enterprise” risk - the risk that an activity, circumstance, event, or series of events involving one or more affiliates of an insurer that, if not remedied promptly, is likely to have a material adverse effect upon the financial condition or liquidity of the insurer or its insurance holding company system as a whole. The Vermont DFR adopted the requirement for a holding company to annually submit an Enterprise Risk Report with the state commissioner. In addition, under the NAIC Model Holding Company Act, as adopted in Vermont, any person divesting control (10% or more ownership) over an insurer must provide 30 days’ notice to the regulator and the insurer. After receipt of the notice, the Vermont Insurance Commissioner must determine whether the parties seeking to divest or to acquire a controlling interest will be required to file for or obtain approval of the applicable transaction. That law may discourage potential acquisition proposals and may delay, deter or prevent an acquisition of control of a direct or indirect parent of the Company (including Maiden Holdings) (in particular through an unsolicited transaction), even if the shareholders of such parent consider that transaction to be desirable.
In 2012, the NAIC adopted the Risk Management and Own Risk and Solvency Assessment (“ORSA”) Model Act (the “ORSA Model Act”), which requires domestic insurers to maintain a risk management framework and establishes a legal requirement for domestic insures to conduct an ORSA in accordance with NAIC’s ORSA Guidance Manual. The ORSA Model Act provides that domestic insurers, or their insurance group, must regularly conduct an ORSA consistent with a process comparable to the ORSA Guidance Manual process. The ORSA Model Act also provides that, no more than once a year, an insurer's domiciliary regulator may request that an insurer submit an ORSA summary report, or any combination of reports that together contain the information described in the ORSA Guidance Manual, with respect to the insurer and/or the insurance group of which it is a member. Vermont has adopted its version of the ORSA Model Act and the Company believes that a Vermont statutory exemption (8 V.S.A. Section 3586) presently exempts the Company from the requirements of Vermont’s version of the ORSA Model Act, because the Company’s and its group’s annual direct written and unaffiliated assumed premium are less than the applicable threshold.
Vermont also adopted the NAIC’s Corporate Governance Annual Disclosure Model Act ("CGAD"). CGAD requires an annual filing by an insurer or insurance group that provides detailed information regarding their governance practices as well as sample documentation on their corporate governance structure and policies.
Vermont adopted the NAIC Insurance Data Security Model Law (the “Cybersecurity Model Law”), which applies to those licensed, authorized to operate, or registered under Vermont’s insurance law, with limited exceptions. Vermont’s implementation of the Cybersecurity Model Law requires licensees to, among other things, conduct risk assessments based on detailed requirements; develop, implement, and maintain a comprehensive written information security program that includes a cybersecurity incident response plan, monitor emerging threats or vulnerabilities and use reasonable and appropriate security measures when sharing information; include cybersecurity risks in its ERM process; provide cybersecurity awareness training to personnel and update the training as necessary; and respond to cybersecurity events by conducting a prompt investigation and taking reasonable corrective action.
Risk-Based Capital
U.S. insurers are also subject to risk-based capital ("RBC") guidelines that provide a method to measure the total adjusted capital (statutory capital and surplus plus other adjustments) of insurance companies taking into account the risk characteristics of a company's investments and products. The RBC formulas establish capital requirements for four categories of risk: asset risk, insurance risk, interest rate risk and business risk. For each category, the capital requirement is determined by applying factors to asset, premium and reserve items, with higher factors applied to items with greater underlying risk and lower factors for less risky items. Insurers that have less statutory capital than the RBC calculation required are considered to have inadequate capital and are subject to varying degrees of regulatory action depending upon the level of capital inadequacy. Maiden Reinsurance filed its latest RBC reports on March 3, 2025 for the 2024 calendar year, and the reported RBC levels exceed Vermont's RBC requirements. Maiden Reinsurance has invested excess capital pursuant to its previously articulated business strategy as our RBC requirements permit.
Reinsurance
The ability of an insurer to take credit for the reinsurance purchased from reinsurance companies is a significant component of reinsurance regulation. Typically, an insurer will only enter into a reinsurance agreement if it can obtain credit to its reserves on its statutory financial statements for the reinsurance ceded to the reinsurer. With respect to U.S. domiciled reinsurers that reinsure U.S. insurers, credit is usually granted when the reinsurer is licensed, certified or accredited in a state where the primary insurer is domiciled or, in some instances, in a state in which the primary insurer is licensed. States also generally permit primary insurers to take credit for reinsurance if the reinsurer is (i) domiciled in a state with a credit for reinsurance law that is substantially similar to the standards in the primary insurer's state of domicile, and (ii) meets certain financial requirements. Credit for reinsurance purchased from a reinsurer that does not meet the foregoing conditions is generally allowed to the extent that such reinsurer secures its obligations with qualified collateral. We are able to take credit for all reinsurance purchased and all cedants are able to take credit for reinsurance they purchase from us.
NAIC Ratios
The NAIC Insurance Regulatory Information System ("IRIS") was developed to help state regulators identify companies that may require special attention. IRIS is comprised of statistical and analytical phases consisting of key financial ratios whereby financial examiners review annual statutory basis statements and financial ratios. Each ratio has an established "usual range" of results and assists state insurance departments in executing their statutory mandate to oversee the financial condition of insurance companies. A ratio result falling outside the usual range of IRIS ratios is not considered a failing result; rather unusual values are viewed as part of the regulatory early monitoring system. Furthermore, in some years, it may not be unusual for financially sound companies to have several ratios with results outside the usual ranges. An insurance company may fall out of the usual range for one or more ratios because of specific transactions that are in themselves immaterial.
Generally, an insurance company will become subject to regulatory scrutiny and may be subject to regulatory action if it falls outside the usual ranges of four or more of the ratios. Maiden Reinsurance only completed its re-domestication to Vermont in 2020, and it is therefore possible that it may produce unusual ratios outside the usual ranges for more than four tests, principally due to the lack of prior year statutory data which is required for many of the ratios to be computed.
State Legislative and Regulatory Changes
From time to time, various regulatory and legislative changes are proposed in the insurance industry. Among the proposals that have in the past been or are at present being considered are proposals in various state legislatures (some of which proposals have been enacted) to conform portions of their insurance laws and regulations to various model acts adopted by the NAIC.
While we are not actively underwriting reinsurance on new prospective risks, our insurance subsidiaries are required to comply with a wide variety of laws and regulations applicable to insurance or reinsurance companies, both in the jurisdictions in which they are organized and where they may sell insurance and reinsurance products. The insurance and regulatory environment, in particular for offshore insurance and reinsurance companies, has become subject to increased scrutiny in many jurisdictions, including the U.S., various states within the U.S. and the EU. In the past, there have been Congressional and other initiatives in the U.S. regarding increased supervision and regulation of the insurance industry. It is not possible to predict the future impact of changes in laws and regulations on our operations. The cost of complying with any new legal requirements affecting our subsidiaries could have a material adverse effect on our business.
In addition, our subsidiaries may not always be able to obtain or maintain necessary licenses, permits, authorizations or accreditations. They also may not be able to fully comply with, or to obtain appropriate exemptions from, the laws and regulations applicable to them. Any failure to comply with applicable law or to obtain appropriate exemptions could result in restrictions on either the ability of the company in question, as well as potentially its affiliates, to do business in one or more of the jurisdictions in which they operate or on brokers on which we rely to produce business for us. In addition, any such failure to comply with applicable laws or to obtain appropriate exemptions could result in the imposition of fines or other sanctions. Any of these sanctions could have a material adverse effect on our business. To date, no material fine, penalty or restriction has been imposed on us for failure to comply with any insurance law or regulation.
International Standards
U.S. federal and state regulators have committed in principle to adopting international standards with respect to basic regulatory issues such as accounting, risk management and corporate governance. International regulatory considerations are increasingly being deliberated by the NAIC and could increase regulatory burdens for Maiden Reinsurance and have the potential to negatively impact all U.S. insurers, regardless of size. Various trade associations and industry participants are aggressively working to impact the NAIC adoption of these standards. However, the final outcome of these deliberations is unknown at this time.
Federal
Although the regulation of the business of insurance and reinsurance is predominantly performed by the states, federal initiatives, such as the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank"), often have an impact on the insurance industry. From time to time, various federal regulatory and legislative changes have been proposed in the insurance and reinsurance industry. While we cannot predict the exact nature, timing or scope of possible governmental initiatives, there may be increased regulatory intervention in our industry in the future. For example, Dodd-Frank impacts the reinsurance industry in several areas, including tort reform, corporate governance and the taxation of reinsurance companies. Dodd-Frank also prohibits a state from denying credit for reinsurance if the state of domicile of the insurer purchasing the reinsurance recognizes credit for reinsurance.
On January 13, 2017, the U.S. Department of the Treasury ("U.S. Treasury Department") and the office of the U.S. Trade Representative, ("USTR"), announced the successful completion of negotiations for a "covered agreement" in the meaning of
the Dodd-Frank Act for the U.S. and an Agreement under Article 218 of the Treaty on the Functioning of the European Union for the EU ("Covered Agreement"). The agreement covers three areas of prudential oversight: (1) reinsurance; (2) group supervision; and (3) the exchange of information between insurance supervisors.
On September 22, 2017, the U.S. Treasury Department, USTR, and the EU formally signed the Covered Agreement. The agreement requires states to eliminate reinsurance collateral within five years or risk preemption. In exchange, the EU will not impose local presence requirements on U.S. firms operating in the EU, and effectively must defer to U.S. group capital regulation for U.S. entities of EU-based firms. The U.S. Treasury Department and USTR also released a U.S. policy statement clarifying their interpretation of the Covered Agreement in several key areas including capital, group supervision and reinsurance. On June 25, 2019, the NAIC Executive Committee and Plenary adopted revisions to the Credit for Reinsurance Model Law and Credit for Reinsurance Model Regulation, which implement the reinsurance collateral provisions of the Covered Agreements with the EU and the U.K. Bermuda is not covered under this agreement.
Sweden Insurance Regulation
Maiden LF and Maiden GF are subject to regulation and supervision by Finansinpektionen, the Swedish financial supervisory authority (“Swedish FSA”). As Sweden is a member of the EU, the Swedish FSA supervision is recognized across all locations within the EU. Generally, the Swedish FSA has broad supervisory and administrative powers over such matters as licenses, standards of solvency, investments, methods of accounting, form and content of financial statements, minimum capital and surplus requirements, passporting permissions, approval of directors and officers, and annual and other report filings. In general, such regulation is for the protection of policyholders rather than shareholders. The Company believes that it is in compliance with all applicable laws and regulations pertaining to its business that would have a material effect on its financial position in the event of non-compliance.
United Kingdom Insurance Regulation
The U.K left the EU on January 31, 2020 ("Brexit"). Maiden LF and Maiden GF subsequently established branches in the U.K. to enable us to continue underwriting in the U.K. post-Brexit. The branches were initially accepted into the U.K.'s Temporary Permissions Regime which allowed them to continue to write insurance in the U.K. In May 2022, both branches were authorized by the Prudential Regulation Authority (“PRA”) and Financial Conduct Authority (“FCA”). Both branches are now authorized and regulated by the PRA and FCA. The Company believes that it is in compliance with all applicable laws and regulations pertaining to its business that would have a material effect on its financial position in the event of non-compliance.
Certain Bermuda Law Considerations
Maiden Holdings has been designated as non-resident for exchange control purposes by the Bermuda Monetary Authority ("BMA") and is required to obtain the permission of the BMA for the issue and transfer of all of its shares. The BMA has given its consent for: (a) the issue and transfer of Maiden Holdings' common shares, up to the amount of its authorized capital from time to time, to and among persons that are non-residents of Bermuda for exchange control purposes; and (b) the issue and transfer of up to 20% of Maiden Holdings' common shares in issue from time to time to and among persons resident in Bermuda for exchange control purposes.
Transfers and issues of Maiden Holdings' common shares to any resident in Bermuda for exchange control purposes may require specific prior approval under the Exchange Control Act 1972. Because we are designated as non-resident for Bermuda exchange control purposes, we are allowed to engage in transactions, and to pay dividends to Bermuda non-residents who are holders of our common shares, in currencies other than the Bermuda Dollar.
The Economic Substance Act 2018, as amended (“ESA”) impacts every Bermuda registered entity engaged in a “relevant activity” and requires them to maintain a substantial economic presence in Bermuda and to satisfy economic substance requirements. Under the ESA, holding entity activities (as defined in the ESA and the Economic Substance Regulations 2018, as amended) are deemed a relevant activity. To the extent that the ESA applies to Maiden Holdings, we are required to demonstrate compliance with economic substance requirements that we have “adequate” economic substance in Bermuda, and we must file an annual economic substance declaration with the Bermuda Registrar of Companies ("Registrar") on that basis. Any entity that must satisfy economic substance requirements but fails to do so could face automatic disclosure to competent authorities in the EU member state or other jurisdiction in which the entity has its holding entity, its ultimate parent entity, an owner or beneficial owner of the information filed by the entity with the Registrar, face financial penalties, restriction or regulation of its business activities and/or may be struck off as a registered entity in Bermuda.
The Terrorism Risk Insurance Program Reauthorization Act of 2019
Terrorism Risk Insurance Act of 2002 ("TRIA"), which was previously amended and extended in 2005, 2007, 2015 and again in 2019 by the Terrorism Risk Insurance Program Reauthorization Act of 2019 ("TRIPRA"), was enacted to ensure the availability of insurance coverage for terrorist acts in the U.S. This law renewed the prior federal terrorism risk insurance program. It was extended through December 31, 2027 with certain modifications in the provisions of the expiring program. TRIA does not apply to reinsurers directly but does apply directly to insurers and to excess and surplus lines insurers. TRIPRA has impacted some of our reinsurance clients, but not all due to the lines of business covered by TRIA. Also, in general, our reinsurance contracts contain inuring language regarding any potential recoveries from TRIA. Additional material for TRIA and TRIPRA, including U.S. Treasury Department issued interpretive letters, are found on the U.S. Treasury Department’s website.
Taxation of the Company and its Subsidiaries
The following summary of certain taxation matters is based upon current law. Legislative, judicial or administrative changes may be forthcoming that could affect this summary. Our U.S. subsidiaries are subject to federal, state and local corporate income taxes and other taxes applicable to U.S. corporations. The Company has subsidiary operations in various other locations around the world, including Canada, Ireland, Sweden and the U.K., that are subject to relevant taxes in those jurisdictions. The discussion below covers only the principal locations in which the Company or its subsidiaries are subject to taxation.
Bermuda
Maiden Holdings has received from the Minister of Finance an assurance under The Exempted Undertakings Tax Protection Act, 1966 to the effect that in the event that there is any legislation enacted in Bermuda imposing tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then the imposition of any such tax shall not be applicable to Maiden Holdings or to any of its operations or the shares, debentures or other obligations of Maiden Holdings until March 31, 2035. These assurances are subject to the proviso that they are not construed to prevent the application of any tax or duty to such persons as are ordinarily resident in Bermuda (Maiden Holdings is not currently so designated) or to prevent the application of any tax payable in accordance with the provisions of The Land Tax Act, 1967 of Bermuda or otherwise payable in relation to the property leased to us.
Bermuda recently enacted the Corporate Income Tax Act 2023 on December 27, 2023 (the “CIT Act”). Entities subject to tax under the CIT Act are the Bermuda constituent entities of multi-national groups. A multi-national group is defined under the CIT Act as a group with entities in more than one jurisdiction with consolidated revenues of at least €750 million for two of the four previous fiscal years. If Bermuda constituent entities of a multi-national group are subject to tax under the CIT Act, such tax is charged at a rate of 15% of the net income of such constituent entities (as determined in accordance with the CIT Act, including after adjusting for any relevant foreign tax credits applicable to the Bermuda constituent entities). No tax is chargeable under the CIT Act until tax years starting on or after January 1, 2025. The Company's consolidated revenues do not presently meet the minimum amounts for taxation under the CIT Act.
Sweden
Maiden LF and Maiden GF are subject to Swedish taxation on net profits irrespective of whether the profits are generated through business in general or capital. To the extent that net profits are generated, profits are taxed at a rate of 20.6%. Foreign entities are subject to tax in Sweden only to the extent they have a permanent establishment in Sweden or if the income is related to certain types of assets, typically real estate, or partnership income. Dividends paid to foreign shareholders may be subject to withholding tax with a maximum of 30% although in many cases tax is reduced because of a tax treaty or under domestic legislation. A foreign entity is deemed to have a permanent establishment in Sweden under the rules very similar to those applied by The Organisation for Economic Co-operation and Development ("OECD"). Other than Maiden LF and Maiden GF, we believe that the Company has operated and will continue to operate its business in a manner that will not cause it to be treated as having a permanent establishment in Sweden. There is no withholding tax on interest paid by a Swedish borrower to a foreign lender.
United Kingdom
Maiden Global, Maiden LF U.K. Branch and Maiden GF U.K. Branch are tax residents in the U.K. and are currently subject to corporation tax in the U.K. on their trading and other taxable profits. The main rate of U.K. corporation tax is 25%. Non-U.K. resident corporations are within the scope of corporation tax in the U.K. if they carry on a trade in the U.K. through a permanent establishment. Reinsurance business developed previously by Maiden Global was underwritten by Maiden Reinsurance. Other than in respect of Maiden Global, Maiden LF U.K. Branch and Maiden GF U.K. Branch, we believe that the Company has operated and will continue to operate its business in a manner that will not cause it to be treated as carrying on a trade within the U.K. Any U.K. source income of non-U.K. resident corporations may be subject to U.K. withholding tax, subject to the availability of treaty relief or any other applicable exemptions. Dividends paid by Maiden Global are not subject to U.K. withholding tax. Interest paid by Maiden Global may be subject to U.K. withholding tax at a rate of up to 20%, subject to the availability of treaty relief or any other applicable exemptions.
United States of America
The Tax Cuts and Jobs Act (the "2017 Act") reduced the corporate U.S. tax rate to 21%, eliminated the alternative minimum tax and limited the deductibility of interest expense, among other things. In the context of the taxation of U.S. property/casualty insurance companies such as the Company, the 2017 Act also modified the loss reserve discounting rules and the proration rules that apply to reduce reserve deductions to reflect the lower corporate income tax rate. In addition, the 2017 Act included certain provisions intended to eliminate certain perceived tax advantages of companies (including insurance companies) that have legal domiciles outside the U.S. but have certain U.S. connections and U.S. persons investing in such companies. For example, the 2017 Act includes a base erosion anti-avoidance tax (the "BEAT") that could make affiliate reinsurance between U.S. and non-U.S. members of our group economically unfeasible. As discussed in more detail below, the 2017 Act also revised the rules applicable to passive foreign investment companies ("PFICs") and controlled foreign corporations ("CFCs"). Further, it is possible that other legislation could be introduced and enacted by the current Congress or future Congresses that could have an adverse impact on us. Additionally, tax laws and interpretations regarding whether a company is engaged in a U.S. trade or business or whether a company is a CFC or a PFIC or has related person insurance income ("RPII") are subject to change, possibly on a retroactive basis. The U.S. Treasury Department recently issued final and proposed regulations intended to clarify the application of the insurance income exception to the classification of a non-U.S. insurer as a PFIC and provide guidance on a range of issues relating to PFICs, and recently issued proposed regulations that would expand the scope of the RPII rules. New regulations or pronouncements interpreting or clarifying such rules may be forthcoming as well. The Company cannot be certain if, when or in what form such regulations or pronouncements may be provided and whether such guidance will have a retroactive effect.
Maiden NA and its subsidiaries (collectively, the "Maiden NA Companies") transact business in and are subject to taxation in the U.S., and Maiden Reinsurance is subject to taxation in the U.S. since the effective date of its re-domestication. Other than the Maiden NA Companies, we believe that we have operated and will continue to operate our business in a manner that will not cause us to be treated as engaged in a trade or business within the U.S. On this basis, other than the Maiden NA Companies, we do not expect to be required to pay U.S. corporate income taxes (other than withholding and excise taxes as described below). The maximum federal corporate income tax rate has been reduced by the 2017 Act to 21% for a foreign corporation’s income that is effectively connected with a trade or business in the U.S. In addition, U.S. branches of foreign corporations may be subject to the branch profits tax, which imposes a tax on U.S. branch after-tax earnings that are deemed repatriated out of the U.S., for a potential maximum effective federal tax rate of 44.7% on the net income connected with a U.S. trade or business.
Foreign corporations not engaged in a trade or business in the U.S. are subject to U.S. income tax, effected through withholding by the payer, on certain fixed or determinable annual or periodic gains, profits and income derived from sources within the U.S. as enumerated in Section 881(a) of the Internal Revenue Code, such as dividends and interest on certain investments. The U.S. imposes an excise tax on insurance and reinsurance premiums paid to foreign insurers or reinsurers with respect to risks of a U.S. person located wholly or partly within the U.S. ("U.S. person") or risks of a foreign person engaged in the conduct of a U.S. trade or business located in the U.S. The rate of tax applicable to reinsurance is 1% of gross premiums.
Where You Can Find More Information
We maintain our principal website at www.maiden.bm. The information on our websites is not incorporated by reference in this Annual Report on Form 10-K. We make available, free of charge through our principal website, our financial information, including the information contained in our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), as soon as reasonably practicable after we electronically file such material with, or furnish such material to the SEC. We also make available, free of charge through our principal website, our Audit Committee Charter, Compensation Committee Charter, Nominating and Corporate Governance Committee Charter, and Code of Business Conduct and Ethics. Such information is also available in print for any shareholder who sends a request to Maiden Holdings, Ltd., 48 Par-la-Ville Road, Suite 1141, Hamilton HM11, Bermuda, Attention: Secretary. Reports and other information we file with the SEC may also be viewed at the SEC’s website at www.sec.gov or viewed or obtained at the SEC Public Reference Room at 100 F Street, N.E., Washington, DC 20549.
Information on the operation of the SEC Public Reference Room may be obtained by calling the SEC at 800-SEC-0330. Any shareholder or other interested party who desires to contact any member of the Board (or our Board as a group) may do so in writing to the following address: Maiden Holdings, Ltd., 48 Par-la-Ville Road, Suite 1141, Hamilton HM11, Bermuda, Attention: Secretary. Communications are distributed to the Board, or to any individual directors as appropriate, depending on the facts and circumstances outlined in the communication.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
Introduction
Investing in our securities carries risk. Managing risk effectively is critical to our success, and our organization is built around intelligent risk assumptions and prudent risk management. We have identified what we believe reflect key significant risks to the organization, and in turn to our shareholders, which are outlined below. Any of the risks described below could result in a significant or material adverse effect on our results of operations or financial condition. In addition to these enumerated risks, we face numerous other strategic, operational and emerging risks that could in the aggregate lead to shortfalls to our long-term goals or add to short-term volatility in our earnings. The following review of important risk factors should not be construed as exhaustive and should be read in conjunction with other cautionary statements that are included herein or elsewhere. The words or phrases believe, anticipate, estimate, project, plan, expect, intend, hope, forecast, evaluate, will likely result or will continue or words or phrases of similar import generally involve forward-looking statements. All of the risks that may affect our financial or operating performance may not be material at this time but may become material in the future. As used in these Risk Factors, the terms "we", "our" or "us" may, depending upon the context, refer to the Company, to one or more of the Company’s consolidated subsidiaries or to all of them taken as a whole.
Business
We have incurred volatile operating results in recent years. There can be no assurance that we will maintain operating profitability or return to active underwriting of new prospective reinsurance risks.
We produced a net loss of $201.0 million in 2024, compared to a net loss of $38.6 million during 2023, largely the result of adverse reserve development from the run-off of our legacy reinsurance obligations. While we have taken significant actions in recent years to strengthen our loss reserve and capital position, these older liabilities are dependent on the reporting by our ceding companies and have been subject to volatility. While we have purchased additional reinsurance protection to eliminate potential volatility of loss reserves from this legacy business, the accounting for this reinsurance protection precludes us from recognizing recoveries until paid losses reach certain contractual retention limits in the agreement and thus our GAAP results reported herein will not reflect this reinsurance until those limits are exceeded. Amortization of the deferred gain was $4.1 million for the year ended December 31, 2024 since cumulative paid losses have now exceeded the minimum retention under the LPT/ADC Agreement starting in the fourth quarter of 2024. There can be no assurance that this reinsurance or that the timing and accounting recognition of recoveries under that reinsurance agreement will be sufficient to protect us against further declines in shareholders’ equity.
We have taken steps to restructure our business by disposing of unprofitable operations and terminating reinsurance agreements in both of our reporting segments while significantly reducing headcount and overhead expenses. While we believe these actions along with our revised strategy will produce operating profitability, there can be no assurance that these actions will achieve their intended effects or that such reinsurance will be sufficient to protect us against further adverse loss reserve development. Further, as our insurance liabilities continue to run off, our investment income will continue to decrease which may adversely affect our profitability. While we continue to reduce our operating expenses, make additional investments which we believe will produce enhanced investment returns, and have written legacy retroactive risks, there can be no assurance that these measures will overcome the expected decline in investment income. Finally, we have not yet determined if and when we may resume active underwriting of new prospective risks, particularly in relation to our proposed combination with Kestrel, which would result in increased revenue.
While we continue to believe we will operate as a going concern, there can be no assurance that this will continue to be the case if we do not maintain operating profitability or if future significant declines in our shareholders’ equity occur.
The inability of management to successfully implement its revised business strategy, including its proposed combination with Kestrel, could result in a further decline of capital, materially adversely affecting our financial condition and results of operations and may create enhanced risks.
Management continues to evaluate various operating strategies that are likely to be significantly different than our prior strategic business focus. In addition to restoring operating profitability, our strategic focus has centered on creating the greatest risk-adjusted shareholder returns in order to increase book value for our common shareholders, both near and long-term. In that respect, management’s focus has been to increase the non-GAAP book value of the Company, which fully reflects the steps we have taken to protect our balance sheet, primarily through our LPT/ADC Agreement with Cavello, as this represents the ultimate economic value of Maiden.
In recent years we pursued a revised operating strategy which leveraged the significant assets and capital we retain. We also formed GLS to focus on smaller accounts in the legacy (re)insurance marketplace, which we believed was complimentary to this strategy. However, a combination of factors, including market conditions in the sector GLS focuses on, resulted in an inability for GLS to gain sufficient scale to achieve its objectives or earn a profit, and its results did not reach the objectives we expected it to over time. Having completed the capital commitment we made to GLS in 2020, we determined in 2023 to not commit any additional capital to new opportunities and to run-off the existing accounts GLS underwrote.
These strategies have not been successful in achieving our objectives, and as part of our ongoing efforts to improve our performance, we actively evaluate our business plans and strategies, which have resulted in material changes to those plans. As the run-off of our older reinsurance liabilities has been much more volatile than expected and our asset management strategies develop along timelines longer than initially anticipated, the need to re-allocate capital to other activities that produce more consistent levels of revenue and profit as we seek to create longer-term shareholder value has increased.
As we have re-evaluated our longer-term strategy, we also engaged in an ongoing strategic evaluation of both the insurance and reinsurance marketplace and the ability of both the fee-based, distribution and the reinsurance markets to increase current income and improve our ability to utilize and recognize our deferred tax assets.
As a result, we determined that near-term expansion of those strategies is appropriate and during 2024 took steps to: 1) further de-emphasize our prior strategies; and 2) actively explore fee-based and distribution opportunities which are non-risk bearing and capital efficient while potentially being complemented by limited and selective deployment of reinsurance capacity to supplement those activities and enhance returns to shareholders. These steps resulted in the announcement of our proposed combination with Kestrel on December 29, 2024.
We are subject to increasing risks related to our ability to successfully implement these evolving plans and strategies. Changing plans and strategies requires significant management of time and effort and may divert management’s attention from our core operations and competencies, and our efforts to improve our capital position and solvency. Moreover, modifications we undertake to our operations may not immediately result in improved financial performance.
Therefore, risks associated with implementing or changing our business strategies and initiatives, including the proposed combination with Kestrel, as well as risks related to developing or enhancing the operations, controls and other infrastructure required for these strategies and initiatives, may not have a positive impact on our publicly reported results until many years after implementation, possibly leading to an adverse effect on our long-term results of operations and financial condition.
Finally, the proposed combination with Kestrel requires the approval of the Vermont DFR, and as part of its licensing in Vermont, Maiden Reinsurance is required to closely consult with the Vermont DFR before it considers resuming active reinsurance underwriting of new prospective risks and on any matters related to capital management and business strategy. There can be no assurance that the implementation of the new business plan will succeed, that the proposed combination with Kestrel will be approved by the Vermont DFR or that further changes to our business plans or operations, including those of Maiden Reinsurance will be considered satisfactory and acceptable to the Vermont DFR, which could have a material adverse effect on our business, operations and financial condition.
We have experienced significant adverse development of our loss reserves in prior years, including again in 2024. Our actual losses may be greater than our reserve for loss and LAE, which could materially negatively impact our financial condition and results of operations.
While we have established our reserves to a level we believe to be sufficient to cover losses assumed by us when we recognize prior period development, there can be no assurance that losses will not deviate from our reserves, possibly by material amounts. We have experienced significant adverse development of our loss reserves in prior years, including again in 2024. Further, the additional reinsurance protection we have purchased to protect against further adverse development in loss reserves may be insufficient compared to the actual losses that emerge and we may need to recognize adverse development which would reduce our results of operations and shareholders' equity, possibly materially. To the extent our actual reported losses exceed expected losses, the carried estimate of the ultimate losses will be increased, which would represent unfavorable reserve development, and in turn could have a material adverse effect on our financial condition.
Our success depends upon our ability to assess accurately the risks associated with the businesses that we will reinsure, that we have acquired or will acquire in the future. Significant periods of time often elapse between the occurrence of an insured loss, the reporting of the loss to an insurer and the reporting of the loss by the insurer to its reinsurer and the ultimate disposition of that loss. The reserves we establish represent estimates of amounts needed to pay reported losses and unreported losses and the related LAE. Loss reserves are only an estimate of what an insurer or reinsurer anticipates the ultimate costs of claims to be and do not represent an exact calculation of liability. Estimating loss reserves is a difficult and complex process involving many variables, inherent uncertainty, statistical modeling, and subjective judgments. As part of our reserving process, we review historical data as well as perform actuarial and statistical projections using proprietary models and consider the impact of various factors such as: trends in claim frequency and severity; changes in operations; emerging economic and social trends; inflation; and changes in the regulatory and litigation environments.
This process assumes that past experience, adjusted for the effects of current developments and anticipated trends, is an appropriate basis for predicting future events. In addition, reserving models that are capable of estimating reserves using a variety of methodologies are utilized during the reserving process. There is no precise method, however, for evaluating the impact of any specific factor on the adequacy of reserves, and actual results are likely to differ from original estimates. Reserve models can introduce further process and parameter risk when data and methodologies are interpreted or utilized in a manner which is inconsistent with the actual underlying characteristics of the reinsured exposure. These risks could arise due to incorrect use of the models, or the use of a model or methodology that is inappropriate. In addition, unforeseen losses, the type or magnitude of which we cannot predict, may emerge in the future. Given the inherent uncertainty in the reserving process and models used for reserve estimation, we may not accurately react to the reporting and payment of loss in the projection of our reserve for loss and LAE.
We will establish or adjust reserves for our insurance subsidiaries in part based upon loss data received from the ceding companies with which we do business. There is a time delay that elapses between the receipt and recording of claims results by the ceding insurance companies and the receipt and recording of those results by us. Accordingly, the establishment and adjustment of reserves for our insurance subsidiaries is dependent upon timely and accurate estimate reporting from cedants and agents.
We use our own proprietary models to provide us with an objective risk assessment relating to risks in our reinsurance portfolio. These models help us to inform management and other stakeholders of capital requirements and to improve the risk/return profile or minimize the amount of capital required to cover the risks in each reinsurance contract in our overall portfolio of reinsurance contracts. However, given the inherent uncertainty of modeling techniques and the application of such techniques, these models and databases may not accurately address the emergence of a variety of matters which might be
deemed to impact certain of our coverages. Accordingly, these models may understate the exposures we are assuming and our financial results may be adversely impacted, perhaps significantly.
The effects of emerging claims and coverage issues on our business are uncertain.
As industry practices and legal, judicial, social and other environmental conditions change, unexpected issues related to claims and coverage may emerge. These issues may adversely affect our business by either extending coverage beyond our underwriting intent or by increasing the number or size of claims. In some instances, these changes may not become apparent until sometime after we have issued insurance or reinsurance contracts that are affected by the changes. As a result, the full extent of liability under our reinsurance contracts may not be known for many years after a contract is issued. Our exposure to these uncertainties could be exacerbated by an increase in insurance and reinsurance contract disputes, arbitration and litigation.
Our business is subject to risks related to litigation. Losses from legal and regulatory actions may have a material adverse effect on our reputation, operating results, cash flows, financial condition and prospects.
We may from time to time be subject to litigation or other legal or regulatory actions in the ordinary course of business relating to our current and past business operations, including, but not limited to, disputes over coverage or claims adjudication, including claims alleging that we have acted in bad faith in the administration of claims by our policyholders, disputes with our agents, producers and termination of contracts and related claims and disputes with former employees. We also cannot determine with any certainty what new theories of recovery may evolve or what their impact may be on our business.
We also may be subject to litigation from security holders due to the diminution in value of our securities as a result of our operating results and financial condition. Defending against these actions may require us to utilize significant resources in our defense as well as result in a significant amount of time by our senior management.
An adverse resolution of one or more lawsuits or arbitration could have a material adverse effect on our results of operations in a particular fiscal quarter or year.
Our reinsurers may not pay losses in a timely fashion, or at all, which could have a material adverse effect on our results of operations or financial condition.
At December 31, 2024, we had $568.3 million due to us from one reinsurer, Cavello, consisting of losses recoverable from Cavello under the retrocession agreement of $35.4 million and reinsurance recoverable on unpaid losses under the retroactive reinsurance agreement of $532.9 million. Cavello provided collateral in the form of a letter of credit in the amount of $445.0 million to AmTrust under the LPT/ADC Agreement with Enstar Group Limited on July 31, 2019, pursuant to which Cavello assumed the loss reserves as of December 31, 2018 associated with the AmTrust Quota Share, subject to additional collateral funding requirements. As of December 31, 2024, the amount of collateral required was $484.7 million.
We may or may not use retrocessional and reinsurance coverage to limit our exposure to risks. Any retrocessional or reinsurance coverage that we obtain may be limited, and credit and other risks associated with our retrocessional and reinsurance arrangements may result in losses which could adversely affect our financial condition and results of operations.
We have provided reinsurance to our clients and in turn we may or may not retrocede reinsurance we have assumed to other insurers and reinsurers. If we do not use or cannot obtain retrocessional coverage or reinsurance, our exposure to losses will be greater than if we did obtain such coverage. If we do obtain retrocessional or reinsurance coverage, some of the insurers or reinsurers to whom we may retrocede coverage or reinsure with may be domiciled in Bermuda or other non-U.S. locations. We would be subject to credit and other risks that depend upon the financial strength of these reinsurers. Further, we will be subject to credit risk with respect to any retrocessional or reinsurance arrangements because the ceding of risk to reinsurers and retrocessionaires would not relieve us of our liability to the clients or companies we insure or reinsure.
Our failure to establish adequate reinsurance or retrocessional arrangements or the failure of any retrocessional arrangements to protect us from overly concentrated risk exposure could adversely affect our business, financial condition and results of operation. We may attempt to mitigate such risks by retaining collateral or trust accounts for premiums and claims receivables, but nevertheless we cannot be assured that reinsurance will be fully collectable in the case of all potential claims outcomes.
The failure of any of the loss limitation methods we have employed or could employ in the future could have a material adverse effect on our results of operations or financial condition.
We seek to limit loss exposure through loss limitation provisions in policies we write, such as limitations on the amount of losses that can be claimed under a policy, limitations or exclusions from coverage and provisions relating to choice of forum, which are intended to assure that our policies are legally interpreted as intended. There can be no assurance that these contractual provisions will be enforceable in the manner expected or that disputes relating to coverage will be resolved in our favor. If the loss limitation provisions in the policies are not enforceable or disputes arise concerning the application of such provisions, the losses we incur could be materially higher than expected and our financial condition and results of operations could be adversely affected.
We depend on the policies, procedures and expertise of ceding companies for the business we have written in the past; these companies may have failed to accurately assess and price the risks they have underwritten, which may lead us to inaccurately assess and price the risks we assumed.
While we are not presently engaged in active reinsurance underwriting of new prospective risks, we are engaged in active reinsurance underwriting of retroactive risks. Our participation in these property and casualty reinsurance markets means the success of our prior underwriting efforts depends, in part, upon the policies, procedures and expertise of the ceding companies making the original underwriting decisions. As is common among reinsurers, we do not separately evaluate each of the
individual risks assumed under reinsurance treaties. We face the risk that these ceding companies may have failed to accurately assess the risks that they assumed initially, which, in turn, may lead us to inaccurately assess the risks we assumed.
If we have failed to establish and receive appropriate pricing or failed to contractually limit our exposure to such risks, we could face significant losses on these contracts, which could have a material adverse impact on our financial results.
The failure of our underwriting process and risk management could have an adverse effect on our results of operations or financial condition.
As noted, we are not presently engaged in active reinsurance underwriting of new prospective reinsurance risks, nor are we engaged in active reinsurance underwriting of retroactive risks. We also assumed risk on a primary basis through Maiden LF and Maiden GF.
We may consider resuming active reinsurance underwriting of new prospective reinsurance risks in conjunction with our proposed combination with Kestrel.
As we write these risks, we similarly seek to manage our loss exposure by maintaining a disciplined underwriting process throughout our (re)insurance operations. Underwriting is a matter of judgment, involving important assumptions about matters that are inherently unpredictable and beyond our control, and for which historical experience and probability analysis may not provide sufficient guidance. The failure of any of the underwriting risk management strategies that we employ could have a material adverse effect on our financial condition, results of operations or cash flows.
We rely on internal controls and underwriting guidelines to limit our risk exposure within prescribed parameters. However, our controls and monitoring efforts may have been ineffective, permitting one or more underwriters to exceed underwriting authority and causing us to (re)insure risks outside the agreed upon guidelines. To the extent that our underwriters exceeded their authorities, agreed to inappropriate contract terms and conditions or were influenced by broker incentives, or if there was inaccurate underwriting data captured and reported leading to licensing and sanction breaches, our financial condition or results of operations could be materially adversely affected.
We may be required to accelerate the amortization of deferred acquisition costs or establish premium deficiency reserves.
Deferred acquisition costs represent incremental direct costs related to the successful acquisition of new or renewal insurance contracts. The balances of such costs are capitalized as an asset and amortized into income over the expected lives of the underlying insurance contracts. On an ongoing basis, we test these assets recorded on our balance sheet to determine whether the amounts are recoverable under current assumptions. At December 31, 2024, a premium deficiency of $3.3 million was recognized for the AmTrust Quota Share since the sum of anticipated loss and LAE and unamortized acquisition expenses in that segment exceeded the sum of unearned premiums and anticipated investment income. This premium deficiency was recognized in the Company's results of operations by accelerating the amortization of deferred acquisition costs during the year ended December 31, 2024.
If facts and circumstances dictate, these tests and reviews could continue to establish further premium deficiency reserves which would require a further write down in the carried value of our deferred acquisition costs. Such results could have an adverse effect on the results of our operations and our financial condition.
Failure of our information technology systems could disrupt our business and adversely impact our profitability.
We believe our information technology and application systems are critical to our business and reputation. We have licensed certain systems and data from third parties. We cannot be certain that we will have access to these, or comparable service providers, or that our technology or applications will continue to operate as intended. A major defect or failure in our internal controls or information technology and application systems could result in management distraction, harm to our reputation, a loss or delay of revenues or increased expense.
Technology breaches or failures, including, but not limited to, those resulting from cyber-attacks on us or our business partners and service providers, could disrupt or otherwise negatively impact our business.
Information technology and application systems can streamline many business processes and ultimately reduce the cost of operations, however, technology initiatives present certain risks. Our business is dependent upon our employees and outsources ability to perform, in an efficient and uninterrupted fashion, necessary business functions. Like all companies, our information technology systems are vulnerable to data breaches, interruptions or failures due to events that may be beyond our control, including, but not limited to, natural disasters, theft, terrorist attacks, computer viruses, hackers and general technology failures. Our information technology systems include the Internet and third-party hosted services. We use information systems to process financial information and results of operations for internal reporting purposes and for regulatory financial reporting, legal and tax requirements. We also use information systems for electronic communications with customers and our various locations.
A shutdown or inability to access one or more of our facilities, a power outage, a security breach, or a failure of one or more of our information technology, telecommunications or other systems could significantly impair our ability to perform such functions on a timely basis. These incidents could be caused by malicious or disruptive software, computer hackers, rogue employees, cyber-attacks, failures of telecommunications systems or other catastrophic events. If sustained or repeated, such a business interruption, system failure or service denial could result in a deterioration of our ability to write and process business, provide customer service, pay claims in a timely manner or perform other necessary business functions. Furthermore, a significant portion of the communications between our employees and our business, banking and investment partners depends on information technology and electronic information exchange. In addition, we may suffer financial and reputational damage because of lost or misappropriated confidential information belonging to us, and may become subject to legal action and increased regulatory oversight. We could also be required to spend significant financial and other resources to remedy any damage caused to repair or replace information systems.
We believe that we have established and implemented appropriate security measures, controls and procedures to safeguard our information technology systems and to prevent unauthorized access to such systems and any data processed and/or stored in such systems, and we periodically employ third parties to evaluate and test the adequacy of such systems, controls and procedures. In addition, we have established a business continuity plan which is designed to ensure that we are able to maintain all aspects of our key business processes functioning in the midst of certain disruptive events, including any disruptions to or breaches of our information technology systems. We continue to make investments in technologies, cyber-insurance and training. Our business continuity plans are tested and evaluated for adequacy. Despite these safeguards, disruptions to and breaches of our information technology systems are possible and may negatively impact our business.
Like most major corporations, the Company’s information systems are a target of attacks. Although we have experienced no known material or threatened cases involving unauthorized access to our information technology systems and data or unauthorized appropriation of such data to date, we have no assurance that such technology breaches will not occur in the future.
Additionally, some of our subsidiaries collect, use, store, transmit, retrieve, retain and otherwise process confidential and personally identifiable information in their information systems in and across multiple jurisdictions, and they are subject to a variety of confidentiality obligations and privacy, data protection and information security laws, regulations, orders and industry standards in the jurisdictions in which they do business. The regulatory environment surrounding information security, data privacy and cybersecurity is evolving and increasingly demanding.
A number of our subsidiaries are subject to numerous U.S. federal and state laws and non-U.S. regulations governing the protection of personally identifiable and confidential information of their customers and employees. On October 24, 2017, the NAIC adopted an Insurance Data Security Model Law, which requires licensed insurance entities to comply with detailed information security requirements. The NAIC model law has been adopted by certain states, including Vermont, which may raise compliance costs or increase the risk of noncompliance, and noncompliance could subject our insurance subsidiaries to regulatory enforcement actions and penalties, as well as reputational harm. Any such events could potentially have an adverse impact on our insurance subsidiaries’ business, results of operations, financial condition and cash flows.
Because the interpretation and application of many privacy and data protection laws along with contractually imposed industry standards are uncertain, it is possible that these laws may be interpreted and applied in a manner that is inconsistent with our insurance subsidiaries’ existing data management practices or the features of their services and platform capabilities. Any failure or perceived failure by our insurance subsidiaries, or any third parties with which they do business, to comply with their posted privacy policies, changing consumer expectations, evolving laws, rules and regulations, industry standards, or contractual obligations to which they or such third parties are or may become subject, may result in actions or other claims against our insurance subsidiaries by governmental entities or private actors, the expenditure of substantial costs, time and other resources or the incurrence of significant fines, penalties or other liabilities. In addition, any such action, particularly to the extent our insurance subsidiaries were found to be guilty of violations or otherwise liable for damages, would damage their reputation and adversely affect their business, financial condition and results of operations.
Ongoing economic uncertainty could materially and adversely affect our business, our liquidity and financial condition.
Global economies and financial markets have, from time to time, experienced significant disruption or deterioration and likely will experience periods of disruption or deterioration in the future. In addition, U.S. federal and state governments continue to experience significant structural fiscal deficits, creating uncertainty as to levels of taxation, inflation, regulation and other economic fundamentals that may impact future growth prospects. While general economic inflation has eased in recent quarters, higher inflationary conditions may continue to remain in place, particularly as changes in U.S. administrations appear to signal policy changes including the imposition of tariffs and other economic measures which may have an impact on inflation, although the effects cannot be determined at this time. Continuation of these conditions may potentially affect (among other aspects of our business) the demand for and claims made under our products, the ability of clients, counterparties and others to establish or maintain their relationships with us, our ability to access and efficiently use internal and external capital resources and our investment performance.
Our agency mortgage-backed securities ("Agency MBS") constitute 10.0% of fixed maturity investments at December 31, 2024. As with other fixed income investments, the fair value of these securities fluctuates depending on market and other general economic conditions and the interest rate environment. Changes in interest rates can expose us to changes in the prepayment rate on these investments. In periods of declining interest rates, mortgage prepayments generally increase and mortgage-backed securities ("MBS") are prepaid more quickly, requiring us to reinvest the proceeds at lower market rates. Conversely, in periods of rising rates, mortgage prepayments generally fall, preventing us from taking full advantage of the higher level of rates. However, economic conditions may curtail prepayment activity on the underlying mortgages if refinancing is difficult, thus limiting prepayments on the MBS portfolio. In the event that these conditions persist and result in a prolonged period of economic uncertainty, our results of operations, our financial condition and/or liquidity, and our prospects could be materially and adversely affected.
We may face substantial exposure to losses from terrorism, acts of war and political instability.
We may have exposure to losses resulting from acts of terrorism, acts of war and political instability as a reinsurer of U.S. domiciled insurers. U.S. insurers are required by state and federal law to offer coverage for terrorism in certain commercial lines. These risks are inherently unpredictable, although recent events may lead to increased frequency and severity. It is difficult to predict the occurrence of these perils with statistical certainty or to estimate the amount of loss an occurrence will generate. We closely monitor the amount and types of coverage we provide for terrorism risk under insurance policies and reinsurance treaties. We often seek to exclude or limit terrorism when we cannot reasonably evaluate the risk of loss or charge an appropriate premium for such risk. Even in cases where we have deliberately sought to exclude coverage, we may not be able to eliminate our exposure to terrorist acts, and thus it is possible that these acts could have a material adverse effect on us.
Liquidity, Capital Resources and Investments
We may not have sufficient unrestricted liquidity to meet our obligations and favorable terms to obtain additional capital may not be available.
Maiden Holdings is a holding company. As a result, we do not have, and will not have, any significant operations or assets other than our ownership of the shares of our subsidiaries. Dividends and other permitted payments from our operating subsidiaries are expected to be our sole source of funds to meet ongoing cash requirements at Maiden Holdings, including debt service payments and other expenses. As of December 31, 2024 and as of the date hereof, our insurance subsidiaries' ability to make distributions require the prior approvals of their respective domestic regulators. Maiden Holdings has and may need to borrow funds from its subsidiaries if funds from dividends are not available to meet ongoing cash requirements. The impact of applicable regulatory capital requirements such as risk based capital ratios under U.S. law could impact the ability of Maiden Reinsurance to pay future cash dividends.
Maiden Reinsurance uses trust accounts, loan to related party, funds withheld and letters of credit to meet collateral requirements. Consequently, cash and cash equivalents and investments are pledged in favor of ceding companies in order to comply with relevant insurance regulations or contractual requirements. At December 31, 2024, restricted cash and cash equivalents and fixed maturity investments used as collateral were $192.4 million and represents 71.9% of the fair value of our total fixed maturity investments and cash and cash equivalents (including restricted cash and cash equivalents) at that date. This excludes the loan to related party of $168.0 million that is also being used as collateral on the AmTrust Quota Share. On a consolidated basis, the Company had $75.0 million in unrestricted cash and cash equivalents and fixed maturity investments at December 31, 2024. which includes $63.1 million in unrestricted cash and cash equivalents and fixed maturity investments at Maiden Reinsurance.
Based on our current estimate of 2025 financial projections, we believe we will have sufficient liquidity to meet and fulfill our obligations including payments due under our outstanding publicly-traded senior notes which were issued in 2013 (the "2013 Senior Notes") by Maiden NA in the principal amount of $152.4 million, all of which is currently outstanding and is subject to a guarantee by Maiden Holdings, and our outstanding publicly-traded senior notes which were issued in 2016 (the "2016 Senior Notes") in the principal amount of $110.0 million, all of which is currently outstanding (the 2016 Senior Notes collectively with the 2013 Senior Notes, the "Senior Notes").
The Company also has total unfunded commitments on alternative investments of $44.0 million at December 31, 2024 which included commitments for other investments, private equity securities and equity method investments.
However, should our operating results deteriorate, should alternative assets expected to monetize in 2025 not occur as expected, should additional collateral be required under our contractual arrangements with reinsured prior to the receipt of recoveries under reinsurance agreements we have entered into or should excess collateral under those arrangements not be returned to the Company quickly enough, we cannot assure that we will maintain sufficient unrestricted liquidity to meet those obligations.
A significant amount of our invested assets are subject to changes in interest rates and market volatility. If we are unable to realize our investment objectives, our financial condition and results of operations may be adversely affected.
Investment income is an important component of our consolidated net income. At December 31, 2024, total investments of $484.1 million represented 93.3% of our total cash and investments. Total investments included other investments of $157.0 million, or 32.4% of our total investment portfolio, comprised of a combination of private credit funds, private equity funds, other privately held investments and investments in direct lending activities. As a result of market conditions prevailing at a particular time, the allocation of our portfolio to various asset types may vary. The fair market value of these assets and the investment income from these assets will fluctuate depending on general economic and market conditions. We classify our fixed maturity investments as available-for-sale ("AFS") and therefore changes in the market value are reflected in our shareholders’ equity through accumulated other comprehensive income ("AOCI").
Our Board has established our investment policies, including the purchase of affiliated securities, approved by the Vermont DFR, and our executive management is implementing our investment strategy with the assistance of our investment managers. Although these guidelines stress diversification and capital preservation, our investment results will be subject to a variety of risks, including risks related to changes in the business, financial condition or results of operations of the entities in which we invest, as well as changes in general economic conditions and overall market conditions, interest rate fluctuations and market volatility. Given our reliance on external investment managers, we are also exposed to operational risks, which may include, but are not limited to, a failure of these managers to follow our investment policy guidelines, a failure to maintain proper internal controls, technological and staffing deficiencies and inadequate disaster recovery plans.
A substantial portion of our investment portfolio consists of interest rate-sensitive instruments, such as bonds, which may be adversely affected by changes in interest rates. Interest rates are highly sensitive to many factors, including governmental monetary policies and domestic and international economic and political conditions and other factors beyond our control. Changes in interest rates could have an adverse effect on the value of our fixed maturity investment portfolio and future investment income. For example, changes in interest rates can expose us to prepayment risks on U.S. Government Agency MBS included in our investment portfolio (all Agency MBS are currently "AA+" rated by S&P). Increases in interest rates will decrease the fair market value of our investments in fixed-income securities. If increases in interest rates occur during periods when we sell investments to satisfy liquidity needs, we may experience investment losses. In addition, a declining interest rate environment can result in reductions in our investment yield as new funds and proceeds from sales and maturities of fixed income securities are reinvested at lower rates which reduces our overall profitability.
Interest rates are highly sensitive to many factors, including governmental monetary policies, inflation, domestic and international economic and political conditions and other factors beyond our control. To limit our exposure to unexpected interest rate increases which would reduce the value of our fixed income securities and reduce our shareholders' equity, we attempt to maintain the duration of our fixed maturity investment portfolio combined with our cash and cash equivalents, both restricted and unrestricted, within a reasonable range of the duration of our loss reserves. As a result of the LPT/ADC Agreement, the duration of our liability for loss reserves will be materially shortened and if we do not correspondingly shorten the duration of the investments in our fixed maturity investment portfolio, our risk of exposure to unexpected changes in interest rates could adversely affect our operations and financial condition.
At December 31, 2024 and 2023, these respective durations in years were as follows:
At December 31, 2024 2023
Fixed maturities and cash and cash equivalents 0.8 1.2
Reserve for loss and LAE - gross of LPT/ADC Agreement reserves 6.4 5.8
Reserve for loss and LAE - net of LPT/ADC Agreement reserves 3.5 1.6
The differential in duration between these assets and liabilities may fluctuate over time and in the case of fixed maturities, is affected by factors such as market conditions, asset allocations and prepayment speeds in the case of Agency MBS.
We believe we have historically mitigated our exposure to liquidity risk through prudent duration management and strong operating cash flow. Our business has undergone significant changes since 2019, which have transformed our operations and materially reduced the risk on our balance sheet. As a result, our gross and net premiums written will continue to be materially lower going forward and investment income will continue to be a significantly larger portion of our revenues. We believe this will significantly reduce our operating cash flow.
However, we generally expect negative operating cash flows to be met or exceeded by positive investing cash flows. Overall, we expect our cash flows, together with our existing capital base and unrestricted cash and investments to be sufficient to meet cash requirements and to operate our business. We also have very limited property catastrophe exposures which could cause an immediate need for cash. However, if we do not structure our investment portfolio so that it is appropriately matched with our reinsurance liabilities or our operating cash flow declines, we may be forced to liquidate investments prior to maturity at a significant loss to cover such liabilities. For this or any of the other reasons discussed above, investment losses could significantly decrease our asset base, which would adversely affect our ability to conduct business. Any significant decline in our investment income would adversely affect our business, financial condition and results of operations.
The determination of the fair values of our investments and whether a decline in the fair value of an investment is other-than-temporary are based on management’s judgment and may prove to be incorrect.
We hold a significant amount of assets without readily available, active, quoted market prices or for which fair value cannot be measured from actively quoted prices. These assets are generally deemed to require a higher degree of judgment used in measuring fair value. The assumptions used by management to measure fair values could turn out to be inaccurate and the actual amounts that may be realized in an orderly transaction with a willing market participant could be either lower or higher than our estimates of fair value. We review our investment portfolio for factors that may indicate that a decline in the fair value of an investment is other-than-temporary. This evaluation is based on subjective factors, assumptions and estimates and may prove to be materially incorrect, which may result in us recognizing additional losses in the future as new information emerges or recognizing losses in the current period that may never materialize in the future in an orderly transaction with a willing market participant.
Our investments in alternative investments and our investments in joint ventures and/or entities accounted for using the equity method may be illiquid and volatile in terms of value and returns, which could negatively affect our investment income and liquidity.
In addition to fixed maturity securities, we have invested, and may from time to time continue to invest, in alternative investments such as hedge funds, fixed income funds, equity funds, privately held investments, private equity and private credit funds and co-investments, real estate funds and co-investments and other alternative investments. During 2024, we decreased the amount allocated to such investments, and at December 31, 2024, approximately 48% of our total cash and investments were categorized as equity securities, other investments and equity method investments on our consolidated balance sheets compared to 51% as of December 31, 2023. The reductions in 2024 reflect our shift in business strategy during the year and we do not presently expect to make further new commitments to alternative investments in future periods and have accordingly reduced our commitments to $44.0 million to future alternative investments as of December 31, 2024.
These and other similar investments may be illiquid due to restrictions on sales, transfers and redemption terms, may have different, more significant risk characteristics than our investments in fixed maturity securities and may also have more volatile values and returns, all of which could negatively affect our investment income and overall portfolio liquidity.
We have also invested, and from time to time may continue to make investments in joint ventures and in other entities that we do not control. In these investments, many of which are accounted for using the equity method, we may lack management and operational control over the entities in which we are invested, which may limit our ability to take actions that could protect or increase the value of our investment. In addition, these investments may be illiquid due to contractual provisions, and our lack of operational control may prevent us from obtaining liquidity through distributions from these investments in a timely manner or on favorable terms.
Alternative or "other" investments may not meet regulatory admissibility requirements or may result in increased regulatory capital charges to our insurance subsidiaries that hold these investments, which could limit those subsidiaries’ ability to make
capital distributions to us and, consequently, negatively impact our liquidity. For more information on our alternative investments, please see Item 7. "Management's Discussion & Analysis: Liquidity and Capital Resources - Cash & Investments".
We may require additional capital in the future, which may not be available on favorable terms or at all.
Our future capital requirements will depend on many factors. We also may not be able to grow significantly without additional capital. Our future business needs are uncertain and we may need to raise additional funds to further capitalize Maiden Reinsurance. We anticipate that any such additional funds would be raised through equity, debt, hybrid financings or entering into reinsurance agreements. While we currently have no commitment from any lender with respect to a credit facility or a loan facility, we may enter into an unsecured or secured revolving credit facility or a term loan facility with one or more syndicates of lenders. Any equity, debt or hybrid financing, if available at all, may be on terms that are not favorable to us. Recent turbulence in financial markets due to higher interest rates along with tighter credit underwriting may limit our ability to access the credit or equity markets. If we are able to raise capital through equity financings, the interest of shareholders in our Company would be diluted, and the securities we issue may have rights, preferences and privileges that are senior to those of our common shares.
We no longer have an S&P rating or A.M. Best rating. The absence of credit ratings on our outstanding securities could impact our ability to obtain additional debt or hybrid capital at reasonable terms or at all. Credit ratings are an opinion by third parties of our financial strength and ability to meet ongoing obligations to our future policyholders. The lack of a credit rating may make it difficult for investors to evaluate an investment in our securities and for us to raise additional capital in the future on acceptable terms or at all. Similarly, our access to funds may be impaired if regulatory authorities take negative actions against us. Finally, our operating results in the last several years may make investors reluctant to commit capital to us at reasonable valuations and/or pricing. Our internal sources of liquidity may prove to be insufficient, and in such case, we may not be able to successfully obtain additional financing on favorable terms, or at all. Establishing a credit rating on our securities, if needed in the future, may be difficult to obtain.
The availability of additional financing will also depend on a variety of other factors such as market conditions, the general availability of capital, the volume of trading activities and the overall availability of capital to the financial services industry. As such, we may be forced to delay raising capital, issue shorter maturity securities than we prefer, or bear an unattractive cost of capital which could decrease our profitability and significantly reduce our financial flexibility. If we cannot obtain adequate capital, our business prospects, results of operations and financial condition could be adversely affected.
We do not anticipate paying any cash dividends on our common shares for the foreseeable future.
We currently intend to retain our future earnings, if any, to strengthen our regulatory capital and solvency ratios, improve our liquidity and working capital and for other general corporate purposes. The insurance laws and regulations of our insurance subsidiaries generally contain restrictions on the ability to pay dividends or distributions to Maiden Holdings, which may restrict our ability to pay dividends on common shares. Any capital distribution of any kind out of Maiden Reinsurance would be done consistent with Vermont regulation which requires the prior approval of the Vermont DFR. Any future determination to pay dividends on our common shares will be at the discretion of our Board, subject to applicable laws, and will depend on our financial condition, results of operations, capital requirements, general business conditions, and other factors that our Board considers relevant.
Our failure to comply with restrictive covenants contained in the documents governing our Senior Notes or any future credit facility could trigger prepayment obligations, which could adversely affect our business, financial condition and results of operations.
The indentures governing our Senior Notes contain covenants that impose restrictions on us and certain of our subsidiaries with respect to, among other things, the incurrence of liens and the disposition of capital stock of these subsidiaries. In addition, any future credit facility may require us and/or certain of our subsidiaries to comply with certain covenants, which may include the maintenance of a minimum consolidated net tangible worth and restrictions on the payment of dividends. Our failure to comply with these covenants could result in an event of default under the indentures or any future credit facility, which, if not cured or waived, could result in us being required to repay the notes or any amounts outstanding under such credit facility prior to maturity. We believe we are in compliance with all of the covenants in the Indentures governing the Senior Notes. However, our business, financial condition and results of operations could be adversely affected if we were found to be in default of these covenants.
On December 26, 2024, WUSO Holding Corporation and 683 Capital Partners filed a lawsuit against Maiden NA and Maiden Holdings in the Supreme Court of the State of New York, County of New York, captioned WUSO Holding Corporation and 683 Capital Partners, LP v. Maiden Holdings North America, Ltd. and Maiden Holdings, Ltd., Index No. 659861/2024. The complaint alleges that Maiden’s sale of Maiden Reinsurance North America, Inc., which closed approximately six years ago from the date of the complaint, breached a sole provision of Maiden’s indenture governing its 2013 Senior Notes. Plaintiffs allege that principal and interest payable under the 2013 Senior Notes are due currently, rather than upon the stated maturity date of the 2013 Senior Notes. Maiden believes it has substantial procedural and substantive defenses to the asserted claims, and it intends to vigorously defend against these claims.
For more details on our indebtedness, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations" included under Item 7 and "Notes to Consolidated Financial Statements - "Note 7 - Long-Term Debt" included under Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
We may be adversely impacted by claims inflation.
Our operations, like those of other property and casualty insurers and reinsurers, are susceptible to the effects of claims inflation because premiums are established before the ultimate amounts of loss and LAE are known. Although we consider the potential effects of claims inflation when setting premium rates, our premiums may not fully offset the effects of inflation and
essentially result in our underpricing the risks we insure and reinsure. Our reserve for loss and LAE includes assumptions about future payments for settlement of claims and claims handling expenses, such as the value of replacing property and associated labor costs for the property business we write, the value of medical treatments and litigation costs. To the extent claims inflation causes these costs to increase above reserves established for these claims, we will be required to increase our loss reserves with a corresponding reduction in our net income in the period in which the deficiency is identified, which may have a material adverse effect on our financial condition or results of operations.
Climate change may adversely impact our results of operations and/or our financial position.
Global climate change has been linked to a number of factors that contribute to the increased unpredictability, frequency, duration and severity of weather events, including changing weather patterns, a rise in ocean temperatures, and sea level rise. Global climate change and global climate change transitions could lead to new or enhanced regulation, which may be difficult or costly to comply with, or impact assets that we invest in, which may result in realized and unrealized losses in future periods that could have a material adverse impact on our results of operations and/or financial position. It is not possible to foresee the impacts of potential future climate regulation, or which, if any, assets, industries or markets may be materially and adversely affected by global climate change and global climate change transitions, nor is it possible to foresee the magnitude of such effects.
A decrease in the fair value of our subsidiaries may result in future impairments.
The determination of impairments taken on our investments and loans varies by type of asset and is based upon our periodic evaluation and assessment of known and inherent risks associated with the respective asset class. Such evaluations and assessments are revised as conditions change and new information becomes available. Management updates its evaluations regularly and reflects impairments in operations as such evaluations are revised. There can be no assurance that our management has accurately assessed the level of impairments taken in our financial statements. Furthermore, additional impairments may need to be taken in the future, which could materially impact our financial position or results of operations. Historical trends may not be indicative of future impairments.
Regulation
Compliance by our insurance subsidiaries with the legal and regulatory requirements to which they are subject is expensive. Any failure to comply could have a material adverse effect on our business.
Our insurance subsidiaries are required to comply with a wide variety of laws and regulations applicable to insurance or reinsurance companies, both in the jurisdictions in which they are organized and where they sell their insurance and reinsurance products. The insurance and regulatory environment has become subject to increased scrutiny in many jurisdictions, including the U.S., various states within the U.S. and the EU. In the past, there have been Congressional and other initiatives in the U.S. regarding increased supervision and regulation of the insurance industry. It is not possible to predict the future impact of changes in laws and regulations on our operations. The cost of complying with any new legal requirements affecting our subsidiaries could have a material adverse effect on our business.
In addition, our subsidiaries may not always be able to obtain or maintain necessary licenses, permits, authorizations or accreditations. They also may not be able to fully comply with, or to obtain appropriate exemptions from, the laws and regulations applicable to them. Any failure to comply with applicable law or to obtain appropriate exemptions could result in restrictions on either the ability of the company in question, as well as potentially its affiliates, to do business in one or more of the jurisdictions in which they operate or on brokers on which we rely to produce business for us. In addition, any such failure to comply with applicable laws or to obtain appropriate exemptions could result in the imposition of fines or other sanctions. Any of these sanctions could have a material adverse effect on our business.
Our industry is highly regulated and we are subject to significant legal restrictions and these restrictions may have a material adverse effect on our business, financial condition, results of operations, liquidity, cash flows and prospects.
The financial services industry is the focus of increased regulatory scrutiny as various state and federal governmental agencies and self-regulatory organizations conduct inquiries and investigations into the products and practices of the companies within this industry. Governmental authorities in the U.S. and worldwide have become increasingly interested in potential risks posed by the insurance industry as a whole, and to commercial and financial systems in general. Among the proposals that are being considered is the possible introduction of global regulatory standards for the amount of capital that insurance groups must maintain across the group, such as the development of the risk-based global insurance capital standard for internationally active insurance groups being developed by the International Association of Insurance Supervisors as well as the U.S. group capital calculation being developed by the NAIC. In 2021, the NAIC adopted the final version of group capital calculation template and instructions and proposed revisions to the Insurance Holding Company System Act and Regulation to implement the filing of the group capital calculation with the lead state insurance commissioner. This establishes a filing requirement for insurance groups for the purposes of evaluating solvency at the group level. State legislatures and insurance departments have begun to implement the holding company system revisions Please see Item 1. "Business - Regulatory Matters" for further discussion. While we cannot predict the exact nature, timing or scope of possible governmental initiatives, there may be increased regulatory intervention in the insurance and financial services industry in the future.
Europe
Under EU Freedom of Services, a firm authorized in a European Economic Area ("EEA") state can offer certain products or services in other EEA states if it has the relevant passport. Maiden LF and Maiden GF are established in an EEA state (Sweden) and have passports for a number of EEA states. Maiden LF is licensed by the Swedish financial regulator (Finansinspektionen) to write insurance and reinsurance of short-term life insurance (Class 1a) and supplementary insurance to Class 1a (Class 1b). Maiden GF is licensed by Finansinspektionen to write insurance and reinsurance of accident and sickness (Classes 1 and 2), other property damage (Class 9) and other miscellaneous financial losses (Class 16). We cannot predict the impact laws and
regulations adopted in the EU or other non-U.S. jurisdictions may have on the financial markets generally or on our businesses, results of operations or cash flows. It is possible that changes in such laws and regulations may alter our business practices. They may also limit our ability to engage in capital or liability management, require us to raise additional capital, and impose burdensome requirements and additional costs. It is possible that the laws and regulations adopted in foreign jurisdictions will differ from one another, and that they could be inconsistent with the laws and regulations of other jurisdictions including the U.S.
United States
Our U.S. subsidiaries are subject to a complex and extensive array of laws and regulations that are administered and enforced by state insurance regulators, state securities administrators, state banking authorities, the SEC, FINRA, the DOL, the IRS and the Office of the Comptroller of the Currency. See Item 1. “Business - Regulatory Matters” for a summary of certain U.S. state and federal laws and regulations applicable to our business. Failure to comply with these laws and regulations could subject us to administrative penalties imposed by a particular governmental or self-regulatory authority, unanticipated costs associated with remedying such failure or other claims, harm to our reputation, or interruption of our operations, any of which could have a material and adverse effect on our capital, surplus, or other aspects of our financial position, results of operations and cash flows.
In addition, these statutes and regulations may, in effect, restrict the ability of our subsidiaries to write new business or, as indicated below, distribute funds to Maiden Holdings. In recent years, some U.S. state legislatures have considered or enacted laws that may alter or increase state authority to regulate insurance companies and insurance holding companies. Moreover, the NAIC and state insurance regulators regularly re-examine existing laws and regulations and interpretations of existing laws and develop new laws. The new interpretations or laws may be more restrictive or may result in higher costs to us than current statutory requirements.
Our risk management policies and procedures may prove to be ineffective and leave us exposed to unidentified or unanticipated risk.
We have developed and continue to develop enterprise-wide risk management policies and procedures to mitigate risk and loss to which we are exposed. There are inherent limitations to risk management strategies because there may exist, or develop in the future, risks that we have not anticipated, identified or accurately assessed. If our risk management policies and procedures are ineffective, we may suffer unexpected losses and could be materially adversely affected. As our business changes and the markets in which we operate evolve, our risk management framework may not adapt at the same pace as those changes. As a result, there is a risk that new products or new business strategies may present risks that are not adequately identified, monitored or managed. In times of market stress, unanticipated market movements or unanticipated claims experience, the effectiveness of our risk management strategies may be insufficient, resulting in losses to us. In addition, we may be unable to effectively review and monitor all risks and our employees may not follow our risk management policies and procedures.
In addition, the NAIC and state legislatures and regulators have increased their focus on risks within an insurer’s holding company system that may pose enterprise risk to insurers. Our insurance company subsidiaries are subject to regulation in Vermont. Vermont has adopted regulations for insurance holding companies to adopt a formal ERM function and to file an annual enterprise risk report. The regulations also require most domestic insurers to conduct an ORSA and to submit an ORSA summary report prepared in accordance with the NAIC’s ORSA Guidance Manual. While we operate within an ERM framework designed to assess and monitor our risks, we may not be able to effectively review and monitor all risks, our employees may not all operate within the ERM framework and our ERM framework may not result in our accurately identifying all risks and limiting our exposures based on our assessments.
Changes in accounting principles and financial reporting requirements could result in material changes to our reported results of operations and financial condition.
U.S. GAAP and related financial reporting requirements are complex, continually evolving and may be subject to varied interpretation by the relevant authoritative bodies. Such varied interpretations could result from differing views related to specific facts and circumstances. Changes in U.S. GAAP and financial reporting requirements, or in the interpretation of U.S. GAAP or those requirements, could result in material changes to our reported results and financial condition.
Moreover, our insurance subsidiaries are required to comply with SAP. SAP and various components of SAP are subject to constant review by the NAIC and its task forces and committees, as well as state insurance departments, in an effort to address emerging issues and otherwise improve financial reporting. Various proposals are pending before committees and task forces of the NAIC, some of which, if enacted and adopted on a state level, could have negative effects on insurance industry participants. The NAIC continuously examines existing laws and regulations. We cannot predict whether or in what form such reforms will be enacted and, if so, whether the enacted reforms will positively or negatively affect us.
Legislation enacted in Bermuda in response to the EU’s review of harmful tax competition could adversely affect our operations.
During 2017, the EU Economic and Financial Affairs Council released a list of non-cooperative jurisdictions for tax purposes. The stated aim of this list, and accompanying report, was to promote good governance worldwide in order to maximize efforts to prevent tax fraud and tax evasion. Bermuda was not on the list of non-cooperative jurisdictions but did feature in the report (along with approximately 40 other jurisdictions) as having committed to address concerns relating to economic substance by December 31, 2018. In accordance with that commitment, Bermuda enacted the Economic Substance Act 2018 (as amended) of Bermuda (the “ESA”) that came into force on January 1, 2019. As noted above under “Regulatory Matters - Certain Bermuda Law Regulations”, the ESA requires an in-scope registered entity (other than an entity which is resident for tax purposes in certain jurisdictions outside Bermuda) that carries on as a business any one or more of the “relevant activities” referred to in the ESA, to comply with economic substance requirements.
Under the ESA, holding entity activities (as defined in the ESA and the Economic Substance Regulations 2018, as amended) satisfy the requirement of undertaking a “relevant activity” and therefore would apply to Maiden Holdings. However, because Maiden Holdings’ primary function is to acquire and hold shares or equitable interests in other entities and it does not perform any commercial activities, we believe we are only subject to the ESA’s minimum economic substance requirements, and we file an annual economic substance declaration with the Registrar on that basis.
Even as a pure equity holding entity, Maiden Holdings will still be required to demonstrate compliance with the ESA that we have “adequate” economic substance in Bermuda, and therefore should have adequate people for holding and managing equity participation, and adequate premises in Bermuda.
Given that the legislation is relatively new and remains subject to further clarification and interpretation, the meaning of "adequate" in this context remains unclear. It is not currently possible to ascertain the steps required to ensure our continued compliance with the ESA, which makes it difficult to predict its future impact. Any entity that must satisfy economic substance requirements but fails to do so could face financial penalties or could be ordered by a court to take action to remedy such failure. It may also be faced with a restriction of its business activities, automatic reporting by the Bermuda authorities to competent authorities in the EU member state or other jurisdiction in which the entity has its holding entity, its ultimate parent entity, an owner or beneficial owner on an entity's non-compliance or may be struck off as a registered entity in Bermuda. If any one of the foregoing were to occur, it may adversely impact the business operations of Maiden Holdings.
Legislation enacted in Bermuda as to Corporate Income Tax may affect our operations.
Bermuda recently enacted the Corporate Income Tax Act 2023 (as amended) (the "CIT Act"). Entities subject to tax under the CIT Act are the Bermuda constituent entities of in scope multi-national groups with consolidated revenues of at least €750 million for two of the four previous fiscal years. If Bermuda constituent entities of an in scope multi-national group are subject to tax under the CIT Act, such tax is charged at a rate of 15% of the net income of such constituent entities (as determined in accordance with the CIT Act, including after adjusting for any relevant foreign tax credits applicable to the Bermuda constituent entities). No tax is chargeable under the CIT Act until tax years starting on or after January 1, 2025. The Company's consolidated revenues do not presently meet the minimum amounts for taxation under the CIT Act, however it is possible that the CIT Act may have an adverse effect on our results of operations going forward. We are considering the CIT Act and will evaluate the impact of the CIT Act on our operations as further information and guidance becomes available.
Corporate Governance and Risks Related to an Investment in our Securities
Our holding company structure and certain regulatory and other constraints affect our ability to pay dividends and make other payments.
Maiden Holdings is a holding company. As a result, we do not have, and will not have, any significant operations or assets other than our ownership of the shares of our subsidiaries. We expect that dividends and other permitted distributions from Maiden Global (and its subsidiaries), Maiden LF, Maiden GF and Maiden NA (and its subsidiaries) will be our sole source of funds to pay any dividends to common shareholders and meet ongoing cash requirements, including debt service payments, if any, and other expenses. The jurisdictions in which our operating subsidiaries are licensed to write business impose regulations requiring companies to maintain or meet statutory solvency and liquidity requirements and also place restrictions on the declaration and payment of dividends and other distributions. The inability of our subsidiaries to pay dividends in an amount sufficient to enable us to meet our cash requirements at the holding company level could have a material adverse effect on our business, financial condition and results of operations. Any capital distribution of any kind out of Maiden Reinsurance requires the prior approval of the Vermont DFR.
The timing and amount of any cash dividends on our common shares are at the discretion of our Board and will depend upon the results of operations and cash flows, our financial position and capital requirements, and any other factors that our Board deems relevant.
We have risks related to the Company’s Senior Notes.
Maiden NA issued the 2013 Senior Notes and Maiden Holdings issued the 2016 Senior Notes, both of which are currently outstanding. We may be dependent on dividends from Maiden Reinsurance, which required regulatory approval, to provide cash flows to pay interest on both the 2013 Senior Notes and the 2016 Senior Notes. If we are unable to maintain a level of cash flows from operating and investment activities, our ability to pay our obligations on our Senior Notes could be adversely affected.
We may also incur additional indebtedness in the future. The level of debt outstanding could adversely affect our financial flexibility. Our indebtedness could have adverse consequences, including:
•limiting our ability to pay dividends to our common shareholders;
•limiting our subsidiaries’ ability to pay dividends;
•increasing our vulnerability to changing economic, regulatory and industry conditions;
•limiting our ability to compete and our flexibility in planning for, or reacting to, changes in our business and the industry;
•limiting our ability to borrow additional funds;
•requiring us to dedicate a substantial portion of our cash flow from operations to payments on our debt, thereby, reducing funds available for working capital, capital expenditures, acquisitions and other purposes; and
•impacting regulators assessment of our capital position, adequacy and flexibility and therefore, the financial strength ratings of rating agencies and regulators' assessment of our solvency.
•Please refer to Item 3. Legal Proceedings for recent litigation regarding the 2013 Senior Notes.
Maiden Reinsurance owns approximately 31.1% of our total outstanding common shares and thus has a significant ownership and voting stake in our common shares.
As a result of the common shares issued as part of the Exchange on December 27, 2022 as well as subsequent share repurchases made under the Company's authorized repurchase plan, Maiden Reinsurance owns approximately 31.1% of our total outstanding common shares and subject to our bye-laws, has the ability to vote up to 9.5% of these shares. In addition, if the proposed combination with Kestrel is completed, Maiden Reinsurance would be able to vote all of its shares in the combined company, which represents a significant increase in its overall voting power. As our wholly owned subsidiary, Maiden Reinsurance’s economic and voting interests in our common shares may not be aligned with other shareholders and it could take positions that may differ from, and which could adversely affect the interests of, other shareholders.
Our common shares owned by Maiden Reinsurance are not retired and could be sold to other shareholders, which could dilute the ownership interests of other shareholders and reduce our book value and earnings per common share.
For the purposes of our consolidated financial statements, our common shares owned by Maiden Reinsurance are treated similar to treasury shares and not included in the computation of consolidated book value and earnings per common share. However, these shares are not retired and Maiden Reinsurance retains both economic and voting interests in our shares (subject to limitations in our bye-laws, Maiden Reinsurance has a 9.5% voting interest in our common shares). Maiden Reinsurance thus retains the ability to sell those shares in the open market or through privately negotiated transactions, subject to applicable securities laws and regulations. If Maiden Reinsurance were to engage in such transactions, then the number of outstanding shares for consolidated financial reporting purposes would increase and thus reduce our book value and earnings per common share.
A few significant shareholders may influence or control the direction of our business. If the ownership of our common shares continues to be highly concentrated, it may limit your ability and the ability of other shareholders to influence significant corporate decisions.
The interests of our significant shareholders may not be fully aligned with our interests, and this may lead to a strategy that is not in our best interest. Although they do not have any voting agreements or arrangements, our Founding Shareholders or other significant shareholders could exercise significant influence over matters requiring shareholder approval, and their concentrated holdings may delay or deter possible changes in control of Maiden Holdings, which may reduce the market price of our common shares. In addition, if the proposed combination with Kestrel is completed, the voting power of the combined company's common shares will be even more concentrated, which may delay or deter possible changes in control of the combined company or may reduce the market price of its common shares.
Our revenues and results of operations may fluctuate as a result of factors beyond our control, which may cause the price of our shares to be volatile.
The revenues and results of operations of reinsurance companies historically have been subject to significant fluctuations and uncertainties. In addition, we are not currently engaged in reinsurance underwriting of new prospective risks and may not do so for the foreseeable future. This has resulted in a significant reduction in our revenues. Our profitability can also be affected significantly by:
•fluctuations in interest rates, inflationary pressures and other changes in the investment environment that impact returns on invested assets;
•changes in the frequency or severity of claims;
•volatile and unpredictable developments, including man-made, weather-related and other natural catastrophes, terrorist attacks or pandemics, such as the spread of the COVID-19 virus;
•price competition;
•inadequate loss and LAE reserves;
•cyclical nature of the property and casualty insurance market; and
•negative developments in the specialty property and casualty reinsurance sectors in which we operate.
These factors may cause the price of the Company's shares to be volatile.
The market price for our common shares has been and may continue to be highly volatile, and if there is a further sustained decline in our share price there could be limited liquidity for our common shares.
The market price for our common shares has fluctuated significantly. Future sales of our common shares by our shareholders or us, or the perception that such sales may occur, could adversely affect the market price of our common shares. As of March 3, 2025, 99,039,253 common shares were outstanding when the ownership by our affiliate Maiden Reinsurance of 44,750,678 common shares were excluded, which consists of 41,439,348 common shares issued to Maiden Reinsurance in the Exchange and 3,311,330 shares directly purchased on the open market. These shares are reflected as treasury shares on the Consolidated Balance Sheet and not treated as outstanding shares in the computation of consolidated book value and earnings per common share on December 31, 2024. A significant percentage of our outstanding common shares are held by affiliates, including Maiden Reinsurance, and as a result, your common shares may not have sufficient liquidity in the trading markets.
In addition, we have reserved 1,291,729 common shares remaining for issuance under our 2019 Omnibus Incentive Plan. As of March 3, 2025, there were 103,500 stock options outstanding and 2,035,634 restricted shares outstanding. Sales of substantial amounts of our shares, or the perception that such sales could occur, could adversely affect the prevailing price of
the shares and may make it more difficult for us to sell our equity securities in the future, or for shareholders to sell their shares, at a time and price that they deem appropriate.
Provisions in our bye-laws may reduce or increase the voting rights of our shares.
In general, and except as provided under our bye-laws and as provided below, the common shareholders have one vote for each common share held by them and are entitled to vote, on a non-cumulative basis, at all meetings of shareholders. However, if, and so long as, the shares of a shareholder are treated as "controlled shares" (as determined pursuant to Sections 957 and 958 of the Internal Revenue Code of 1986, as amended (the "IRS Code")) of any U.S. Person (as that term is defined in the Risk Factors under the section captioned "Taxation" within this Item that owns shares directly or indirectly through non-U.S. entities) and such controlled shares constitute 9.5% or more of the votes conferred by our issued shares, the voting rights with respect to the controlled shares owned by such U.S. Person will be limited, in the aggregate, to a voting power of less than 9.5%, under a formula specified in our bye-laws. The formula is applied repeatedly until the voting power of all 9.5% U.S. Shareholders has been reduced to less than 9.5%. In addition, our Board may limit a shareholder’s voting rights when it deems it appropriate to do so to (i) avoid the existence of any 9.5% U.S. Shareholder; and (ii) avoid certain material adverse tax, legal or regulatory consequences to us, to any of our subsidiaries or any direct or indirect shareholder or its affiliates. "Controlled shares" include, among other things, all shares that a U.S. Person is deemed to own directly, indirectly or constructively (within the meaning of section 958 of the IRS Code). The amount of any reduction of votes that occurs by operation of the above limitations will generally be reallocated proportionately among our other shareholders whose shares were not "controlled shares" of the 9.5% U.S. Shareholder so long as such reallocation does not cause any person to become a 9.5% U.S. Shareholder.
Under these provisions, certain shareholders may have their voting rights limited, while other shareholders may have voting rights in excess of one vote per share. Subject to limitations in our bye-laws, Maiden Reinsurance will be limited to a 9.5% voting interest in our common shares. Moreover, these provisions could have the effect of reducing the votes of certain shareholders who would not otherwise be subject to the 9.5% limitation by virtue of their direct share ownership. However, if the proposed combination with Kestrel is completed, Maiden Reinsurance would be able to vote all of its shares in the combined company without being subject to such 9.5% limitation, which represents a significant increase in its overall voting power.
We are authorized under our bye-laws to request information from any shareholder for the purpose of determining whether a shareholder’s voting rights are to be reallocated under the bye-laws. If any holder fails to respond to this request or submits incomplete or inaccurate information, we may, in our sole discretion, eliminate or adjust the shareholder’s voting rights.
Anti-takeover provisions in our bye-laws could impede an attempt to replace or remove our directors, which could diminish the value of our common shares.
Our bye-laws contain provisions that may entrench directors and make it more difficult for shareholders to replace directors even if the shareholders consider it beneficial to do so. In addition, these provisions could delay or prevent a change of control that a shareholder might consider favorable. For example, these provisions may prevent a shareholder from receiving the benefit from any premium over the market price of our common shares offered by a bidder in a potential takeover. Even in the absence of an attempt to effect a change in management or a takeover attempt, these provisions may adversely affect the prevailing market price of our common shares if they are viewed as discouraging changes in management and takeover attempts in the future.
Examples of provisions in our bye-laws that could have such an effect include the following:
•our Board may reduce the total voting power of any shareholder to avoid adverse tax, legal or regulatory consequences to us or any direct or indirect holder of our shares or its affiliates; and
•our Board may, in their discretion, decline to record the transfer of any common shares on our share register, if they are not satisfied that all required regulatory approvals for such transfer have been obtained or if they determine such transfer may result in a non-de minimis adverse tax, legal or regulatory consequence to us or any direct or indirect holder of shares or its affiliates.
It may be difficult for a third party to acquire us.
Provisions of our organizational documents may discourage, delay or prevent a merger, amalgamation, tender offer or other change of control that holders of our shares may consider favorable. These provisions impose various procedural and other requirements that could make it more difficult for shareholders to affect various corporate actions. These provisions could:
•have the effect of delaying, deferring or preventing a change in control of us;
•discourage bids for our securities at a premium over the market price;
•adversely affect the price of, and the voting and other rights of the holders of our securities; or
•impede the ability of the holders of our securities to change our management.
U.S. persons who own our shares may have more difficulty in protecting their interests than U.S. persons who are shareholders of a U.S. corporation.
The Companies Act 1981 (as amended) (the "Companies Act") in Bermuda, which applies to us, differs in certain material respects from laws generally applicable to U.S. corporations and their shareholders. As a result of these differences, U.S. persons who own our shares may have more difficulty protecting their interests than U.S. persons who own shares of a U.S. corporation. Set forth below is a summary of certain significant provisions of the Companies Act, including modifications adopted pursuant to our bye-laws, applicable to us, which differ in certain respects from provisions of Delaware corporate law.
Because the following statements are summaries, they do not discuss all aspects of Bermuda law that may be relevant to us and our shareholders.
Interested Directors. Bermuda law provides that if a director has a personal interest in a transaction to which the company is also a party and if the director discloses the nature of this personal interest at the first opportunity, either at a meeting of directors or in writing to the directors, then the company will not be able to declare such transaction void solely due to the existence of that personal interest and the director will not be liable to the company for any profit realized from such transaction. In addition, Bermuda law and our bye-laws provide that, after a director has made the declaration of interest referred to above, he is allowed to be counted for purposes of determining whether a quorum is present and to vote on a transaction in which he has an interest, unless disqualified from doing so by the chairman of the relevant board meeting.
Under Delaware law, such transaction would not be voidable if:
•the material facts as to such interested director’s relationship or interests are disclosed or are known to the board of directors and the board in good faith authorizes such transaction by the affirmative vote of a majority of the disinterested directors;
•such material facts are disclosed or are known to the shareholders entitled;
•to vote on such transaction and such transaction is specifically approved in good faith by vote of the majority of shares entitled to vote thereon; or
•such transaction is fair as to the corporation as of the time it is authorized, approved or ratified.
Under Delaware law, such interested director could be held liable for a transaction in which such director derived an improper personal benefit.
Mergers and Similar Arrangements. The amalgamation or merger of a Bermuda company with another Bermuda company or with a body incorporated outside Bermuda (a “foreign corporation") (other than certain affiliated companies) requires the amalgamation agreement to be approved by the company’s board of directors and by its shareholders. Under our bye-laws, we may, with the approval of a majority of votes cast at a general meeting of our shareholders at which a quorum is present, amalgamate with another Bermuda company or with a foreign corporation. In the case of an amalgamation or merger, a shareholder that did not vote in favor of the amalgamation or merger may apply to a Bermuda court for a proper valuation of such shareholder’s shares if such shareholder is not satisfied that fair value has been paid for such shares. Under Delaware law, with certain exceptions, a merger, consolidation or sale of all or substantially all the assets of a corporation must be approved by the board of directors and a majority of the outstanding shares entitled to vote thereon. Under Delaware law, a shareholder of a corporation participating in certain major corporate transactions may, under certain circumstances, be entitled to appraisal rights pursuant to which such shareholder may receive cash in the amount of the fair value of the shares held by such shareholder (as determined by a court) in lieu of the consideration such shareholder would otherwise receive in the applicable transaction.
Shareholders’ Suit. The rights of shareholders under Bermuda law are not as extensive as the rights of shareholders under legislation or judicial precedent in many U.S. jurisdictions. Class actions and derivative actions are generally not available to shareholders under the laws of Bermuda. However, the Bermuda courts ordinarily would be expected to follow English case law precedent, which would permit a shareholder to commence an action in the name of the company to remedy a wrong done to the company where the act complained of is alleged to be beyond the corporate power of the company, is illegal or would result in the violation of our memorandum of association or bye-laws. Furthermore, consideration would be given by the court to acts that are alleged to constitute a fraud against the minority shareholders or where an act requires the approval of a greater percentage of our shareholders than actually approved it. The winning party in such an action generally would be able to recover a portion of attorneys’ fees incurred in connection with such action. Our bye-laws provide that shareholders waive all claims or rights of action that they might have, individually or in the right of the company, against any director or officer for any act or failure to act in the performance of such director’s or officer’s duties, except with respect to any fraud or dishonesty of such director or officer. Class actions and derivative actions generally are available to shareholders under Delaware law for, among other things, breach of fiduciary duty, corporate waste and actions not taken in accordance with applicable law. In such actions, the court has discretion to permit the winning party to recover attorneys’ fees incurred in connection with such action.
Indemnification of Directors. We may indemnify our directors or officers in their capacity as directors or officers of any loss arising or liability attaching to them by virtue of any rule of law in respect of any negligence, default, breach of duty or breach of trust of which a director or officer may be guilty in relation to the company other than in respect of his or her own fraud or dishonesty. Under Delaware law, a corporation may indemnify a director or officer of the corporation against expenses (including attorneys’ fees), judgments, fines and amounts paid in settlement actually and reasonably incurred in defense of an action, suit or proceeding by reason of such position if such director or officer acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal action or proceeding, such director or officer had no reasonable cause to believe his or her conduct was unlawful. In addition, we have entered into indemnification agreements with our directors and officers.
We are a Bermuda company, and it may be difficult to enforce judgments against us or our directors and executive officers.
We are incorporated under the laws of Bermuda and our holding company is based in Bermuda. In addition, all of our directors and officers reside outside Bermuda and a substantial portion of our assets will be and the assets of these persons are, and will continue to be, located in jurisdictions outside Bermuda. As such, it may be difficult or impossible to effect service of process within the U.S. upon us or those persons or to recover against us or them on judgments of U.S. courts, including judgments predicated upon civil liability provisions of the U.S. federal securities laws. Further, no claim may be brought in Bermuda against us or our directors and officers in the first instance for violation of U.S. federal securities laws because these laws have no extraterritorial jurisdiction under Bermuda law and do not have force of law in Bermuda. A Bermuda court may,
however, impose civil liability, including the possibility of monetary damages, on us or our directors and officers if the facts alleged in a complaint constitute or give rise to a cause of action under Bermuda law.
We have been previously advised by Conyers Dill & Pearman Limited, our Bermuda counsel, that there is doubt as to whether the courts of Bermuda would enforce judgments of U.S. courts obtained in actions against us or our directors and officers, as well as the experts named in this Annual Report, predicated upon the civil liability provisions of the U.S. federal securities laws or original actions brought in Bermuda against us or these persons predicated solely upon U.S. federal securities laws. Further, we have been advised by Conyers Dill & Pearman Limited that there is no treaty in effect between the U.S. and Bermuda providing for the enforcement of judgments of U.S. courts, and there are grounds upon which Bermuda courts may not enforce judgments of U.S. courts. Some remedies available under the laws of U.S. jurisdictions, including some remedies available under the U.S. federal securities laws, may not be allowed in Bermuda courts as contrary to that jurisdiction’s public policy. Because judgments of U.S. courts are not automatically enforceable in Bermuda, it may be difficult for you to recover against us based upon such judgments.
Employee Issues
We are dependent on our key executives. We may not be able to attract and retain key employees or successfully implement our business strategy.
Our success depends largely on our senior management, which includes, among others, Patrick J. Haveron, our Chief Executive Officer and Chief Financial Officer, and Lawrence F. Metz, our Executive Vice Chairman and Group President. We have entered into employment agreements with these executive officers.
In addition to the officers listed above, we require key staff with actuarial, legal, reinsurance, accounting and administrative skills. We have a significantly smaller staff and given our current business circumstances, it may be difficult for us to retain staff and recruit competent new executives and staff. Our inability to attract and retain additional personnel or the loss of the services of any of our senior executives or key employees could delay or prevent us from fully implementing our business strategy and could significantly and negatively affect our business.
Our business in Bermuda could be adversely affected by Bermuda employment restrictions.
Currently, Maiden Holdings employs five non-Bermudians who are work permit holders in our Bermuda office including Messrs. Haveron and Metz. Under Bermuda law, non-Bermudians (other than spouses of Bermudians and holders of permanent residents’ certificates) may not engage in any gainful occupation in Bermuda without a valid government work permit. A work permit may be granted or renewed upon showing that, after proper public advertisement, no Bermudian, spouse of a Bermudian, or holder of a permanent resident’s or working resident’s certificate who meets the minimum standards reasonably required by the employer has applied for the job. Work permits are issued with expiry dates that range from one, two, three, four and five years. A waiver from advertising is automatically granted in respect of any chief executive officer position and other chief officer positions. We may not be able to use the services of one or more of our non-Bermudian employees if we are not able to obtain work permits for them, which could have a material adverse effect on our business, financial condition and results of operations.
International Operations
Our offices that operate in jurisdictions outside Bermuda and the U.S. are subject to certain limitations and risks that are unique to foreign operations.
Our international operations are regulated in various jurisdictions with respect to licensing requirements, currency, reserves, employees and other matters. International operations may be harmed by political developments in foreign countries, which may be hard to predict in advance. Regulations governing technical reserves and remittance balances in some countries may hinder remittance of profits and repatriation of assets.
The U.K.'s exit from the EU could adversely affect us.
The UK left the EU on January 31, 2020. Maiden LF and Maiden GF have subsequently established UK branches to enable us to continue underwriting in the UK post-Brexit. Maiden LF, UK Branch and Maiden GF, UK Branch were authorized by the Prudential Regulatory Authority and Financial Conduct Authority on May 30, 2022 and May 12, 2022 respectively. As a result, our regulatory compliance oversight and reporting requirements have increased.
The risks associated with the potential consequences that may follow Brexit, including volatility in financial markets, exchange rates and interest rates, remain uncertain. These uncertainties could increase the volatility of, or adversely affect, our investment results in particular periods or over time. Brexit could adversely affect European or worldwide political, regulatory, economic or market conditions and could contribute to instability in global political institutions and regulatory agencies which, in turn, could adversely affect our business, results of our operations and our financial condition.
Foreign currency fluctuations may reduce our net income and our capital levels, adversely affecting our financial condition.
We conduct business in a variety of non-U.S. currencies, the principal exposures being the euro and the British pound. Assets and liabilities denominated in foreign currencies are exposed to changes in currency exchange rates. Our reporting currency is the U.S. dollar, and exchange rate fluctuations relative to the U.S. dollar may materially impact our results of operations and financial position. Our principal exposure to foreign currency risk is our obligation to settle claims in foreign currencies. In addition, we maintain and expect to continue to maintain a portion of our investment portfolio in investments denominated in currencies other than the U.S. dollar. While the Company may be able to match its foreign currency denominated assets against its net reinsurance liabilities both by currency and duration to protect the Company against foreign exchange and interest rate risks, a natural offset does not exist for all currencies.
We may employ various strategies (including hedging) to manage our exposure to foreign currency exchange risk. To the extent that these exposures are not fully hedged or the hedges are ineffective, our results or equity may be reduced by fluctuations in foreign currency exchange rates that could materially adversely affect our financial condition and results of operations. At December 31, 2024, no such hedges or hedging strategies were in force or had been entered into.
Relationship with AmTrust
Significant changes in our reinsurance relationship with AmTrust have reduced our current and future revenues and create significant uncertainty for sources of future liquidity.
During 2019, we, through our subsidiary Maiden Reinsurance, executed the partial termination amendment ("Partial Termination Amendment") effective January 1, 2019 which amended the AmTrust Quota Share, the Final AmTrust QS Terminations, the AmTrust WC Commutation and several post-termination endorsements. These transactions served to eliminate all new premium revenues from AmTrust, return certain unearned premiums to AmTrust, commuted and returned certain workers’ compensation loss reserves to AmTrust, capped the loss corridor on certain program business reinsured from AmTrust and increased the levels of collateral provided to AmTrust as security against the obligations the Company has assumed under the reinsurance contracts with AmTrust.
While these transactions have contributed significantly to the reduction in required regulatory capital needed to operate our business and the subsequent strengthening of our capital and solvency ratios, these transactions have resulted in a significant reduction in revenues which is likely to continue for the foreseeable future as we are not presently engaged in active reinsurance underwriting on prospective risks. As a result, our financial condition could be adversely affected by these actions. Due to this loss of revenue, we will need to rely on unrestricted cash from operations and returns on our investments to fund our operations, maintain liquidity and meet our financial obligations and capital allocation priorities. While we believe we have sufficient sources to meet these obligations, deterioration in our results of operations or other adverse financial events could impact our ability to continue meeting these obligations.
Our initial arrangements with AmTrust were negotiated while we were its affiliate. The arrangements could be challenged as not reflecting terms that we would agree to in arm’s-length negotiations with an independent third party; moreover, our business relationship with AmTrust and its subsidiaries may present, and may make us vulnerable to, possible adverse tax consequences, difficult conflicts of interest, and legal claims that we have not acted in the best interest of our shareholders.
Effective July 1, 2007, we entered into a quota share agreement with AII, which reinsures AmTrust’s insurance company subsidiaries, and a master agreement with AmTrust, as amended ("Master Agreement"), pursuant to which Maiden Reinsurance and AII entered into the AmTrust Quota Share. Because Leah Karfunkel (wife of the late Michael Karfunkel), George Karfunkel and Barry Zyskind (the Company's non-executive chairman) collectively own or control approximately 55.2% of the outstanding common shares of Evergreen Parent, L.P., the ultimate parent of AmTrust, and our Founding Shareholders sponsored our formation, we may be deemed to be an affiliate of AmTrust.
Leah Karfunkel (wife of the late Michael Karfunkel), George Karfunkel and Barry Zyskind (the Company's non-executive chairman) each own or control less than 5.0% of the outstanding shares of the Company based on their most recent individual public filings. Due to our close business relationship with AmTrust, we may be presented with situations involving conflicts of interest with respect to the agreements and other arrangements we will enter into with AmTrust and its subsidiaries, exposing us to possible claims that we have not acted in the best interest of our shareholders. The arrangements between us and AmTrust were modified after they were originally entered into and there could be future modifications.
Our non-executive Chairman of the Board currently holds the positions of Chief Executive Officer and Chairman of AmTrust. These dual positions may present, and make us vulnerable to, difficult conflicts of interest and related legal challenges.
Barry Zyskind, our non-executive Chairman of the Board, is the Chief Executive Officer and Chairman of the Board of AmTrust and, as such, he does not serve our Company on a full-time basis. Mr. Zyskind is expected to continue in both of his positions for the foreseeable future. Conflicts of interest could arise with respect to business opportunities that could be advantageous to AmTrust or its subsidiaries, on the one hand, and us or our subsidiary, on the other hand. In addition, potential conflicts of interest may arise should the interests of the Company and AmTrust diverge. However, the Audit Committee of our Board, which consists entirely of independent directors, does exclusively review and approve all related party transactions.
The amount of collateral we provide to AmTrust could limit our unrestricted liquidity and impact our ability to fulfill our obligations in certain circumstances.
As a result of our use of trust accounts, letters of credit and a loan, a substantial portion of our assets will not be available to us for other uses, which could reduce our financial flexibility and could impact our ability to fulfill our obligations in certain circumstances. If further collateral is required to be provided to any other AmTrust subsidiaries under applicable law or regulatory requirements, Maiden Reinsurance will provide collateral to the extent required.
At December 31, 2024, we provided $296.8 million of collateral to AmTrust, AII and AEL in the form of trusts, letters of credit, and a loan receivable. Maiden Reinsurance is not a party to the reinsurance agreements between AII and AmTrust’s U.S. insurance subsidiaries or the related reinsurance trust agreements and has no rights thereunder. If one or more of these AmTrust subsidiaries withdraws Maiden Reinsurance’s assets from their trust account and that subsidiary is or becomes insolvent, we believe it may be more difficult for Maiden Reinsurance to recover any such amounts to which we are entitled than it would be if Maiden Reinsurance had entered into reinsurance and trust agreements with these AmTrust subsidiaries directly. AII has agreed to immediately return to Maiden Reinsurance any collateral provided by Maiden Reinsurance that one of those subsidiaries improperly utilizes or retains, and AmTrust has agreed to guarantee AII’s repayment obligation and AII’s payment obligations under its loan agreement with Maiden Reinsurance. We are subject to the risk that AII and/or AmTrust may be unable or unwilling to discharge these obligations.
Insurance and Reinsurance Markets
The property and casualty insurance and reinsurance industry is cyclical in nature, which may affect our overall financial performance.
Historically, the financial performance of the property and casualty insurance and reinsurance industry has tended to fluctuate in cyclical periods of price competition and excess capacity (known as a soft market) followed by periods of high premium rates and shortages of underwriting capacity (known as a hard market). Although the financial performance of an individual insurance or reinsurance company is dependent on its own specific business characteristics, the profitability of most property and casualty insurance and reinsurance companies tends to follow this cyclical market pattern.
In recent years, the market has been in a competitive environment in which underwriting capacity has expanded, risk selection became less disciplined and price competition increased sharply. During that period, market participants' capital levels have continued to improve due to positive earnings and improved values of risk assets over that time. In addition, an influx of new market participants with different operating models than traditional reinsurers such as us have entered the market place. While many of these new market participants specialize in property catastrophe oriented business and do not directly compete with us, they are influencing competitive conditions in the broader reinsurance market. This additional underwriting capacity resulted in increased competition from other insurance and reinsurance companies expanding the types or amounts of business they write, or from companies seeking to maintain or increase market share at the expense of underwriting discipline.
Because this cyclically is due in large part to the actions of our competitors and general economic factors beyond our control, we cannot predict with certainty the timing or duration of changes in the market cycle. These cyclical patterns, the actions of our competitors, and general economic factors could cause our revenues and net income to fluctuate, which may cause the price of our common shares to be volatile. The ultimate outcome of these events and their market impact is not known at this time.
Negative developments in the U.S. workers’ compensation insurance industry could adversely affect our financial condition and results of operations.
Approximately 36.4% of our AmTrust Reinsurance segment's reserve for loss and LAE at December 31, 2024 was related to the reinsurance of U.S. workers' compensation risks which is our largest exposure to a particular line of business. Our AmTrust Reinsurance segment includes all business ceded by AmTrust to Maiden Reinsurance, primarily the AmTrust Quota Share and the European Hospital Liability Quota Share. Both contracts in this segment have been terminated effective January 1, 2019. Negative developments in the economic, competitive or regulatory conditions affecting the U.S. workers’ compensation insurance industry could have an adverse effect on our financial condition and results of operations. For example, if legislators in our larger markets were to enact legislation to increase the scope or amount of benefits for employees under U.S. workers’ compensation insurance policies without related loss control measures, or if regulators made other changes to the regulatory system governing U.S. workers’ compensation insurance, this could negatively affect the U.S. workers’ compensation insurance industry in the affected markets.
Reinsurance is a highly competitive industry.
The reinsurance industry is highly competitive. While we are not currently engaged in active reinsurance underwriting of new prospective risks, we are writing risks on a retroactive basis and compete with major U.S. and non-U.S. reinsurers, including other Bermuda-based reinsurers, on an international and regional basis. Many of these entities have significantly larger amounts of capital, higher ratings from rating agencies and more resources than us. We currently do not have a financial strength or credit rating from S&P or A.M. Best and the lack of such ratings will likely limit the opportunities we have to write new reinsurance business if we resume active underwriting of new prospective risks. Historically, periods of increased capacity levels in our industry have led to increased competition which puts pressure on reinsurance pricing.
In recent years, significant increases in the use of risk-linked securities and derivative and other non-traditional risk transfer mechanisms and vehicles are being developed and offered by other parties, including entities other than insurance and reinsurance companies. The availability of both these non-traditional products and sources of capital could reduce the demand for traditional insurance and reinsurance, and if we were to resume active reinsurance underwriting of new prospective risks, it may result in fewer contracts written, lower premium rates, increased expenses for customer acquisition and retention and less favorable policy terms and conditions, which could have a material adverse impact on our growth and profitability.
Consolidation in the insurance and reinsurance industry and increased competition on premium rates could lead to lower margins for us and less demand for our products and services if and when we resume active reinsurance underwriting of new prospective risks.
The insurance and reinsurance industry continues to undergo a process of consolidation as industry participants seek to enhance their product and geographic reach, client base, operating efficiency and general market power through merger and acquisition activities. It is possible that the larger combined entities resulting from these mergers and acquisition activities may seek to use the benefits of consolidation, including improved efficiencies and economies of scale, to, among other things, implement price reductions for their products and services to increase their market shares. Consolidation among primary insurance companies may also lead to reduced use of reinsurance as the resulting larger companies may be able to retain more risk and may also have bargaining power in negotiations with reinsurers.
We are not presently engaged in active reinsurance underwriting of new prospective risks. If and when we do decide to resume active reinsurance underwriting of new prospective risks, these competitive pressures could compel us to write business at unprofitable operating margins.
As the insurance and reinsurance industry consolidates, competition may become more intense and the importance of acquiring and properly servicing each customer will become greater. If and when we do decide to resume active reinsurance underwriting on prospective risks, we could incur greater expenses relating to customer acquisition and retention, which could
reduce our operating margins. When the property-casualty insurance industry has exhibited a greater degree of competition, premium rates have come under downward pressure as a result.
Taxation
We may become subject to taxes in Bermuda after 2035, which may have a material adverse effect on our financial condition and operating results and on an investment in our shares.
The Bermuda Minister of Finance, under the Exempted Undertakings Tax Protection Act 1966, as amended, of Bermuda, has given Maiden Holdings an assurance that if any legislation is enacted in Bermuda that would impose tax computed on profits or income, or computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax, then the imposition of any such tax will not be applicable to Maiden Holdings, or any of its respective operations or its respective shares, debentures or other obligations (except insofar as such tax applies to persons ordinarily resident in Bermuda or to any taxes payable by them in respect of real property or leasehold interests in Bermuda held by it) until March 31, 2035. Given the limited duration of the Minister of Finance’s expected assurance, we cannot be certain that we will not be subject to any Bermuda tax after March 31, 2035. Since Maiden Holdings is incorporated in Bermuda, we will be subject to changes in law or regulation in Bermuda that may have an adverse impact on our operations, including imposition of tax liability.
OECD two-pillar solution to address the tax challenges arising from the digital economy may apply to our activities.
On May 31, 2019, the OECD published a “Programme of Work” designed to address the tax challenges created by an increasing digitalized economy which was divided into two pillars. Pillar One addresses the broader challenge of a digitalized economy and focuses on the allocation of group profits among taxing jurisdictions based on a market based concept rather than historical “permanent establishment” concepts, but includes explicit exclusions for Regulated Financial Services, so is not expected to have a material impact on insurance and reinsurance groups. Pillar Two addresses the remaining BEPS risk of profit shifting to entities in low tax jurisdictions by introducing a global minimum tax and a proposed tax on base eroding payments, which would operate through a denial of a deduction or imposition of source-based taxation (including withholding tax) on certain payments.
In 2021, significant steps were taken to develop a plan for implementing the two-pillar solution. In October 2021, the OECD/G20 Inclusive Framework released a statement agreeing a two-pillar solution to address the tax challenges arising from the digital economy. In December 2021, the OECD issued Pillar Two model rules for domestic implementation of the global minimum tax and shortly thereafter the European Commission proposed a Directive to implement the Pillar Two rules into EU law, which required EU member states to transpose the rules into their national laws by December 31, 2023 with certain measures initially coming into effect from January 1, 2024. In 2023, a number of jurisdictions (including Sweden and the UK) passed legislation to implement the OECD/G20's model rules into domestic law with effect from January 1, 2024.
The proposals, in particular in relation to Pillar Two, are broad in scope and include a number of exemptions which may be available to us, however, the Company's consolidated revenues do not presently meet the minimum amounts for taxation under the OECD/G20’s Pillar Two model rules, therefore, the proposals are currently not expected to impact our operations and results. If the consolidated revenue threshold for multinational enterprises within the scope of OECD/G20’s Pillar Two model rules is reduced or if the Company’s consolidated revenues exceed €750 million in two out of the four previous fiscal years, the Company may fall within the scope of domestic top-up taxes in certain jurisdictions in which we operate and our operations and results may be adversely impacted as a result.
We may be subject to U.S. federal income tax, which would have an adverse effect on our financial condition and results of operations and on an investment in our shares.
If Maiden Holdings or one of its non-U.S. subsidiaries were considered to be engaged in a trade or business in the U.S., it could be subject to U.S. federal income and additional branch profits taxes on the portion of its earnings that are effectively connected to such U.S. business. Maiden Holdings is a Bermuda-based holding company. We intend to manage our business so that Maiden Holdings and its non-U.S. subsidiaries operate in such a manner that none of these companies should be treated as engaged in a U.S. trade or business and, thus, should not be subject to U.S. federal taxation (other than the U.S. federal excise tax on insurance and reinsurance premium income attributable to insuring or reinsuring U.S. risks and U.S. federal withholding tax on certain U.S. source investment income). Maiden Reinsurance is currently subject to U.S. taxation as a domestic corporation from the effective date of its re-domestication to the State of Vermont on March 16, 2020.
However, there is considerable uncertainty as to which activities constitute being engaged in a trade or business within the U.S., so we cannot be certain that the IRS will not contend successfully that Maiden Holdings and/or any of its non-U.S. subsidiaries are engaged in a trade or business in the U.S.
Net operating losses ("NOL") (and certain other tax attributes or tax benefits of the Maiden NA tax group) may be subject to limitation under Section 382 of the Tax Code.
Maiden NA has significant tax NOL carryforwards as of December 31, 2024. As a result of the Maiden NA NOL and other tax attributes, the Company presently has a net deferred tax asset with a full valuation allowance against it which may be recognized in future periods. It is possible that certain ownership changes of Maiden NA, if they were to occur, could result in an “ownership change” of Maiden NA for purposes of Section 382 of the Tax Code. If such an ownership change (as defined) were to occur, the value and amount of the Maiden NA NOL would be substantially impaired, increasing the U.S. federal income tax liability of Maiden NA and materially reducing the value of Maiden NA. Should the NOL be limited in any way, it could also limit or eliminate the Company's ability to recognize and realize that asset in the future.
U.S. Persons who hold our shares may be subject to U.S. federal income taxation at ordinary income rates on their proportionate share of any non-U.S. subsidiary’s RPII.
If U.S. persons are treated as owning 25% or more of Maiden Holdings’ shares (by vote or by value) (as is expected to be the case) and the RPII of a non-U.S. insurance subsidiary of Maiden Holdings (determined on a gross basis) were to equal or exceed 20% of its gross insurance income in any taxable year and direct or indirect insureds (and persons related to those insureds) own directly or indirectly through entities 20% or more of the voting power or value of our shares, then a U.S. Person who owns any shares of a non-U.S. insurance subsidiary of Maiden Holdings (directly or indirectly through non-U.S. entities) on the last day of the taxable year would be required to include in its income for U.S. federal income tax purposes such person’s pro rata share of such non-U.S. insurance subsidiary’s RPII for the entire taxable year, determined as if such RPII were distributed proportionately only to U.S. Persons at that date, regardless of whether such income is distributed. In addition, any RPII that is includible in the income of a U.S. tax-exempt organization generally will be treated as unrelated business taxable income. The amount of RPII earned by a non-U.S. insurance subsidiary of Maiden Holdings (generally, premium and related investment income from the direct or indirect insurance or reinsurance of any direct or indirect U.S. holder of shares or any person related to such holder) will depend on a number of factors, including the identity of persons directly or indirectly insured or reinsured by a non-U.S. insurance subsidiary.
Further, recently proposed regulations could, if finalized in their current form, substantially expand the definition of RPII to include insurance income of our non-U.S. subsidiaries with respect to certain affiliate reinsurance transactions. If these proposed regulations are finalized in their current form, it could limit the Company’s ability to execute affiliate reinsurance transactions that would otherwise be undertaken for non-tax business reasons in the future and could increase the risk that potential exceptions to the RPII rules would not be available in a particular taxable year, which could result in RPII being taxable to certain U.S. persons holding our shares. It is not certain whether these regulations will be adopted in their proposed form or what changes or clarifications might ultimately be made thereto or whether any such changes, as well as any interpretation or application of the RPII rules by the IRS, the courts, or otherwise, might have retroactive effect. The U.S. Treasury Department has authority to impose, among other things, additional reporting requirements with respect to RPII. Accordingly, the meaning of the RPII provisions and the application thereof to Maiden Holdings and its non-U.S. insurance subsidiary's is uncertain. Prospective investors are urged to consult their tax advisors with respect to these rules. We believe that either (i) the direct or indirect insureds of Maiden Holdings (and related persons) should not directly or indirectly own 20% or more of either the voting power or value of our shares or (ii) the RPII (determined on a gross basis) of a non-U.S. insurance subsidiary of Maiden Holdings should not equal or exceed 20% of its gross insurance income for the taxable year. However, we cannot be certain that this will be the case because some of the factors which determine the extent of RPII may be beyond our control.
U.S. Persons who dispose of our shares may be subject to U.S. federal income taxation at the rates applicable to dividends on a portion of their gains if any.
The RPII rules provide that if a U.S. Person disposes of shares in a non-U.S. insurance corporation in which U.S. Persons own 25% or more of the shares (even if the amount of gross RPII is less than 20% of the corporation’s gross insurance income or the ownership of its shares by direct or indirect insureds and related persons is less than the 20% threshold), any gain from the disposition will generally be treated as a dividend to the extent of the holder’s share of the corporation’s undistributed earnings and profits that were accumulated during the period that the holder owned the shares (whether or not such earnings and profits are attributable to RPII). In addition, such a holder will be required to comply with certain reporting requirements, regardless of the number of shares owned by the holder. These RPII rules should not apply to dispositions of our shares because Maiden Holdings will not be directly engaged in the insurance business. The RPII provisions, however, have never been interpreted by the courts or the U.S. Treasury Department in final regulations, and regulations interpreting the RPII provisions of the Code exist only in proposed form.
U.S. Persons who hold our shares will be subject to adverse U.S. federal income tax consequences if Maiden Holdings is considered to be a passive foreign investment company.
If Maiden Holdings is considered a PFIC for U.S. federal income tax purposes, a U.S. Person who owns directly or, in some cases, indirectly (e.g. through a non-U.S. partnership) any of our shares will be subject to adverse U.S. federal income tax consequences, including subjecting the investor to a greater tax liability than might otherwise apply and subjecting the investor to a tax on amounts in advance of when such tax would otherwise be imposed, in which case your investment could be materially adversely affected. In addition, if Maiden Holdings were considered a PFIC, upon the death of any U.S. individual owning our shares, such individual’s heirs or estate would not be entitled to a "step-up" in the basis of the shares which might otherwise be available under U.S. federal income tax laws. We believe that we are not, and we currently do not expect to become, a PFIC for U.S. federal income tax purposes; however, there can be no assurance that we will not be deemed a PFIC by the IRS. As discussed below, the IRS issued final and proposed PFIC regulations. New regulations or pronouncements interpreting or clarifying these rules may be forthcoming. We cannot predict what impact, if any, such guidance would have on a shareholder that is subject to U.S. federal income taxation.
U.S. Persons who hold 10% or more of Maiden Holdings’ shares directly or through foreign entities may be subject to taxation under the U.S. CFC rules.
Each 10% U.S. shareholder of a foreign corporation that is a CFC at any time during a taxable year that owns shares in the foreign corporation directly or indirectly through foreign entities on the last day of the foreign corporation's taxable year during which it is a CFC must include in its gross income for U.S. federal income tax purposes its pro rata share of the CFC's "subpart F income," even if the subpart F income is not distributed. In addition, upon a sale of shares of a CFC, certain 10% U.S. shareholders may be subject to U.S. federal income tax on a portion of their gain at ordinary income rates.
The Company believes that because of the dispersion of the share ownership in Maiden Holdings, no U.S. Person who owns Maiden Holdings’ shares directly or indirectly through foreign entities should be treated as a 10% U.S. shareholder of Maiden
Holdings or of any of its foreign subsidiaries. However, Maiden Holdings’ shares may not be as widely dispersed as we believe due to, for example, the application of certain ownership attribution rules, and no assurance may be given that a U.S. Person who owns our shares will not be characterized as a 10% U.S. shareholder, in which case such U.S. Person may be subject to taxation under U.S. CFC rules.
The 2017 U.S. tax reform legislation, as well as possible future tax legislation and regulations, could materially adversely affect an investment in our shares.
The 2017 Act amends a range of U.S. federal tax rules applicable to individuals, businesses and international taxation, with certain provisions intended to eliminate certain perceived tax advantages of companies (including insurance companies) that have legal domiciles outside the U.S. but have certain U.S. connections and U.S. persons investing in such companies. For example, the 2017 Act includes a BEAT that could make affiliate reinsurance between U.S. and non-U.S. members of our group economically unfeasible. In addition, the 21% corporate income tax rate could lead to higher after-tax income for most U.S. insurance companies in the long term that could result in increased competition for our products and services.
The 2017 Act may also increase the likelihood that we or our non-U.S. subsidiaries will be deemed to be CFCs for U.S. federal tax purposes. Specifically, the 2017 Act expands the definition of "10% U.S. shareholder" for CFC purposes to include U.S. persons who own 10% or more of the value of a foreign corporation’s shares, rather than only looking to voting power held. As a result, the "voting cut-back" provisions included in our Amended and Restated Bye-laws that limit the voting power of any shareholder to 9.5% of the total voting power of our capital stock will be ineffective in avoiding "10% U.S. shareholder" status for U.S. persons who own 10% or more of the value of our shares. The 2017 Act also expands certain attribution rules for stock ownership in a way that would cause foreign subsidiaries in a foreign parented group that includes at least one U.S. subsidiary to be treated as CFCs. In the event a corporation is characterized as a CFC, any "10% U.S. shareholder" of the CFC is required to include its pro rata share of certain insurance and related investment income in income for a taxable year, even if such income is not distributed. In addition, U.S. tax exempt entities subject to the unrelated business taxable income ("UBTI") rules that own 10% or more of the value of our non-U.S. subsidiaries that are characterized as CFCs may recognize UBTI with respect to such investment.
In addition to changes in the CFC rules, the 2017 Act contains modifications to certain provisions relating to PFIC status that could, for example, discourage U.S. persons from investing in our company. The 2017 Act makes it more difficult for a non-U.S. insurance company to avoid PFIC status under an exception for certain non-U.S. insurance companies engaged in the active conduct of an insurance business. The 2017 Act limits this exception to a non-U.S. insurance company that would be taxable as an insurance company if it were a U.S. corporation and that maintains insurance liabilities of more than 25% of such company’s assets for a taxable year (or maintains reserves that at least equal 10% of its assets, is predominantly engaged in an insurance business and satisfies a facts and circumstances test that requires a showing that the failure to exceed the 25% threshold is due to runoff-related or rating-related circumstances) (the "Reserve Test"). In addition, the IRS recently issued final and proposed regulations (the "2020 Regulations") intended to clarify the application of the PFIC provisions to an insurance company and provide guidance on a range of issues relating to PFICs including the application of the look-through rule, the treatment of income and assets of certain U.S. insurance subsidiaries for purposes of the look-through rule and the extension of the look-through rule to 25% or more owned partnerships.
The 2020 Regulations define insurance liabilities for purposes of the Reserve Test, tighten the Reserve Test and the statutory cap on insurance liabilities, and provide guidance on the runoff-related and rating-related circumstances for purposes of qualifying as a qualifying insurance corporation under the alternative test (including tightening the scope of non-U.S insurers that can qualify for the rating-related circumstances test). The 2020 Regulations also propose that a non-U.S. insurer will qualify for the insurance company exception only if a factual requirements test or an active conduct percentage test is satisfied. The factual requirements test will be met if the non-U.S. insurer's officers and employees perform its substantial managerial and operational activities (taking into account activities of officers and employees of certain related entities in certain cases). The active conduct percentage test will be satisfied if (1) the total costs incurred by the non-U.S. insurer with respect to its officers and employees (including officers and employees of certain related entities) for services related to core functions (other than investment activities) equal at least 50% of the total costs incurred for all such services and (2) the non-U.S. insurer's officers and employees oversee any part of the non-U.S. insurer's core functions, including investment management, that are outsourced to an unrelated party. Services provided by officers and employees of certain related entities are only taken into account in the numerator of the active conduct percentage if the non-U.S. insurer exercised regular oversight and supervision over such services and compensation arrangements meet certain requirements. The 2020 Regulations also propose that a non-U.S. insurer with no or a nominal number of employees that relies exclusively or almost exclusively upon independent contractors (other than certain related entities) to perform its core functions. While we believe that our non-U.S. insurance subsidiaries have met, and will continue to meet, the Reserve Test and that we should not be characterized as a PFIC for the foreseeable future, we cannot assure you that this will continue to be the case in future years.
Impact of U.S. Tax Reform
We are unable to predict all the ultimate impacts of the 2017 Act and other proposed tax reform regulations and legislation on our business and results of operations. It is possible the IRS will construe the intent of the 2017 Act as having been to reduce or eliminate certain perceived tax advantages of companies (including insurance companies) that have legal domicile outside the U.S., and its interpretation, enforcement actions or regulatory changes could increase the impact of the 2017 Act beyond prevailing current assessments or our own estimates. Further, it is possible that other legislation could be introduced and enacted in the future that would have an adverse impact on us. These events and trends towards more punitive taxation of cross border transactions could in the future materially adversely impact the insurance and reinsurance industry and our own results of operations by increasing taxation of certain activities and transactions in our industry. Accordingly, we cannot reliably estimate what the potential impact of any such changes could be to us or our non-U.S. subsidiaries or investors or the market generally, however, it is possible these changes could materially adversely impact our results of operations.
We may be subject to U.K. taxes, which would have an adverse effect on our financial condition and results of operations and on an investment in our shares.
A company which is resident in the U.K. for U.K. corporation tax purposes is subject to U.K. corporation tax in respect of its worldwide income and gains. While Maiden Global is a U.K. company, neither Maiden Holdings nor Maiden Reinsurance are incorporated in the U.K. Nevertheless, Maiden Holdings or Maiden Reinsurance would be treated as being resident in the U.K. for U.K. corporation tax purposes if its central management and control were exercised in the U.K. The concept of central management and control is indicative of the highest level of control of a company’s affairs, which is wholly a question of fact. The directors and officers of both Maiden Holdings and Maiden Reinsurance intend to manage their affairs so that both companies are resident in Bermuda, and not resident in the U.K., for U.K. tax purposes. However, HM Revenue & Customs could challenge our tax residence status.
A company which is not resident in the U.K. for U.K. corporation tax purposes can nevertheless be subject to U.K. corporation tax at the rate of 25% if it carries on a trade in the U.K. through a permanent establishment in the U.K., but the charge to U.K. corporation tax is limited to profits (both income profits and chargeable gains) attributable directly or indirectly to such permanent establishment.
The directors and officers of Maiden Reinsurance intend to operate the business of Maiden Reinsurance in such a manner that it does not carry on a trade in the U.K. through a permanent establishment in the U.K. Nevertheless, HM Revenue & Customs might contend successfully that Maiden Reinsurance is trading in the U.K. through a permanent establishment in the U.K. because there is considerable uncertainty as to the activities which constitute carrying on a trade in the U.K. through a permanent establishment in the U.K.
The U.K. has no income tax treaty with Bermuda. Companies that are neither resident in the U.K. nor entitled to the protection afforded by a double tax treaty between the U.K. and the jurisdiction in which they are resident are liable to income tax in the U.K., at the basic rate of 20%, on the profits of a trade carried on in the U.K., where that trade is not carried on through a permanent establishment in the U.K. The directors and officers of Maiden Reinsurance intend to operate the business in such a manner that Maiden Reinsurance will not fall within the charge to income tax in the U.K. (other than by way of deduction or withholding).
In addition, diverted profits tax ("DPT") applies to foreign companies with sales in the U.K. (such as Maiden Reinsurance) that design their affairs to avoid creating a taxable presence (in the form of a permanent establishment) in the U.K., or to U.K. companies that enter into transactions with connected companies which lack economic substance to exploit differentials in tax rates. DPT is charged at 31% of the profits representing the contribution of the U.K. activities to the group’s results.
If either Maiden Holdings or Maiden Reinsurance were treated as being resident in the U.K. for U.K. corporation tax purposes, or if Maiden Reinsurance were treated as carrying on a trade in the U.K., whether through a permanent establishment or otherwise, or if DPT applied, the results of our operations would be materially adversely affected.
Any arrangements (including with regard to the provision of services or financing) between Maiden Global and any non-U.K. resident members of the group are subject to the U.K. transfer pricing regime. Consequently, if any such arrangement were found not to be on arm’s length terms and, as a result, a U.K. tax advantage was being obtained, an adjustment would be required to compute U.K. tax profits as if such arrangement were on arm’s length terms. Any transfer pricing adjustment could adversely impact the tax charge suffered by Maiden Global. The U.K. has implemented the BEPS recommendation for "country-by-country" reporting. As a result, our approach to transfer pricing may become subject to greater scrutiny from the U.K. tax authorities.
Clients, Brokers and Financial Institutions
Our retroactive underwriting utilizes reinsurance brokers and other producers, including third party administrators and financial institutions, and the failure to develop or maintain these relationships could materially adversely affect our ability to market our products and services should we begin to pursue active reinsurance underwriting.
While we do not presently engage in active reinsurance underwriting of prospective risks, we have recently underwritten retroactive risks and source certain of those opportunities from brokers and other producers, thus our failure to further develop or maintain relationships with brokers and other producers, including third party administrators and financial institutions, from whom we expect to receive our business could have a material adverse effect on our business, financial condition and results of operations.
Our reliance on brokers subjects us to their credit risk.
In accordance with industry practice, we anticipate that we will frequently pay amounts owed on claims under our reinsurance contracts to brokers, and these brokers in turn are required to pay and will pay these amounts over to the clients that have purchased reinsurance from us. If a broker fails to make such a payment, it is highly likely that we will be liable to the client for the deficiency under local laws or contractual obligations, notwithstanding the broker’s obligation to make such payment. Likewise, when the client pays premiums for these policies to brokers for payment over to us, these premiums are considered to have been paid and, in most cases, the client will no longer be liable to us for those amounts, whether or not we actually receive the premiums from the brokers. Consequently, we will assume a degree of credit risk associated with brokers with whom we work with respect to some of our reinsurance business.
We could incur substantial losses and reduced liquidity if one of the financial institutions we use in our operations fails.
We have exposure to counterparties in many different industries and routinely execute transactions with counterparties in the financial services industry, including brokers and dealers, commercial banks, and other institutions. Many of these transactions expose us to credit risk in the event of default of our counterparty. In addition, with respect to secured transactions, our credit
risk may be exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount of the obligation.
We maintain cash balances, including restricted cash held in trust accounts, significantly in excess of the Federal Deposit Insurance Corporation insurance limits at various depository institutions. We also maintain cash balances in foreign banks and institutions. If one or more of these financial institutions were to fail, our ability to access cash balances may be temporarily or permanently limited, which could have a material adverse effect on our results of operations, financial condition or cash flows.
The Transaction
Obtaining required regulatory approvals may prevent or delay completion of the transaction, reduce the anticipated benefits of the transaction or require changes to the structure or terms of the transaction.
At any time before or after the transaction is consummated, either the FTC or the Antitrust Division could take action under the antitrust laws in opposition to the transaction, including seeking to enjoin completion of the transaction, condition completion of the transaction upon the divestiture of assets of Kestrel, Maiden or their subsidiaries or impose restrictions on the combined company's post-merger operations. These could negatively affect the results of operations and financial condition of the combined company following completion of the transaction. Any such requirements or restrictions may prevent or delay completion of the transaction or may reduce the anticipated benefits of the transaction, which could have a material adverse effect on the combined company's business and cash flows, financial condition and results of operations.
The transaction is subject to approvals or non-disapprovals, as applicable, by the Vermont DFR, the Swedish FSA, the U.K. Financial Conduct Authority and the Texas Department of Insurance. In addition, in order to complete the transaction, Maiden Re will need to obtain approval from the Vermont DFR to pay a dividend in an amount equivalent to the cash component of the consideration for the transaction to Maiden NA, followed by a dividend of such amount payable in cash from Maiden NA to Maiden. In addition, the transaction is subject to approval by the Swedish Inspectorate of Strategic Products, and the transaction cannot be completed until after the applicable waiting period has expired or the relevant approval has been obtained under the Swedish Screening of Foreign Direct Investments Act. Additionally, Maiden and Kestrel have agreed to take certain actions, conditioned on the closing, and may take other actions that Maiden or Kestrel determines in its sole discretion to take, to the extent necessary to ensure satisfaction, on or prior to the closing, of certain conditions to the closing relating to regulatory approvals. Certain of these actions may be taken after receipt of the approval of Maiden shareholders and it is not currently contemplated that any such shareholder approval would be resolicited in the event that any of these actions are taken after the Maiden special meeting.
Failure to successfully combine the businesses of Kestrel and Maiden in the expected timeframe may adversely affect the combined company’s future results.
The success of the transaction will depend, in part, on the combined company’s ability to realize the anticipated benefits from combining the businesses of Maiden and Kestrel. To realize these anticipated benefits, the businesses of Kestrel and Maiden must be successfully combined. Historically, Kestrel and Maiden have been independent companies, and they will continue to be operated as such until the completion of the transaction. The management of the combined company may face significant challenges in consolidating the functions of Maiden and Kestrel, integrating the technologies, organizations, procedures, policies and operations, as well as addressing the different business cultures at the two companies and retaining key personnel. If the combined company is not successfully integrated, the anticipated benefits of the transaction may not be realized fully or at all or may take longer to realize than expected. The integration may also be complex and time consuming and require substantial resources and effort. In addition, the overall integration of the two companies may result in material unanticipated problems, expenses, liabilities, competitive responses, loss of agent relationships and diversion of management’s attention, and may cause the combined company’s share price to decline. The difficulties of combining the operations of Maiden and Kestrel include, among others:
•unforeseen expenses or delays associated with the integration or the transaction;
•the potential diversion of management focus and resources from other strategic opportunities and from operational matters, and potential disruption associated with the transaction;
•maintaining employee morale and retaining key management and other employees;
•integrating two unique business cultures, which may prove to be incompatible;
•the possibility of faulty assumptions underlying expectations regarding the integration process;
•consolidating corporate and administrative infrastructures and eliminating duplicative operations;
•managing tax costs or inefficiencies associated with integrating the operations of the combined company; and
•making any necessary modifications to internal financial control standards to comply with the Sarbanes-Oxley Act and the rules and regulations promulgated thereunder.
Many of these factors will be outside of the combined company’s control and any one of them could result in increased costs, decreases in the amount of expected revenues and diversion of management’s time and energy, which could materially impact the combined company’s business, financial condition and results of operations. In addition, even if the operations of Maiden and Kestrel are integrated successfully, the combined company may not realize the full benefits of the transaction, including the synergies, cost savings or growth opportunities that the combined company expects. These benefits may not be achieved within the anticipated time frame, or at all. As a result, Maiden and Kestrel cannot assure you that the combination of Maiden and Kestrel will result in the realization of the full benefits anticipated from the transaction. The integration process and other disruptions resulting from the transaction may also disrupt each company’s ongoing businesses and/or adversely affect Maiden’s or Kestrel’s relationships with employees, regulators and others with whom they have business or other dealings.
Kestrel and Maiden will be subject to business uncertainties and contractual restrictions while the transaction is pending.
Uncertainty about the effect of the transaction on employees, customers, insureds, cedants, policyholders, brokers, agents, financing sources, business partners, service providers, governmental authorities or reinsurance providers, as applicable, may have an adverse effect on Maiden or Kestrel and consequently on the combined company. These uncertainties may impair Maiden’s or Kestrel’s ability to retain and motivate key personnel and could cause governmental authorities, key customers, reinsurance providers and others that deal with Maiden or Kestrel, as applicable, to defer entering into contracts with Maiden or Kestrel or making other decisions concerning Maiden or Kestrel or seek to change existing business relationships with Maiden or Kestrel. In addition, if key employees depart because of uncertainty about their future roles and the potential complexities of the transaction, Maiden’s and Kestrel’s businesses could be harmed. In addition, the combination agreement restricts Kestrel and Maiden from making certain acquisitions and taking other specified actions until the combination occurs without the consent of the other party. These restrictions may prevent Kestrel and Maiden from pursuing attractive business opportunities that may arise prior to the completion of the transaction.
The combination agreement limits Kestrel’s and Maiden’s ability to pursue alternatives to the combination.
Kestrel has agreed that it will not solicit, encourage, initiate or engage in discussions or negotiations with, or provide any information to, any third party (other than Maiden and its representatives) concerning any purchase of the Kestrel units or any merger, sale of all or a material portion of the assets of Kestrel or any of its subsidiaries or similar transactions involving Kestrel or any of its subsidiaries, provide non-public information or documentation with respect to Kestrel or any of its subsidiaries to any person, other than Maiden or Bermuda NewCo or their respective subsidiaries or its or their representatives related to such a transaction or enter into any letter of intent, definitive agreement or other arrangement or understanding with any person, other than Maiden or Bermuda NewCo or their respective subsidiaries relating to such a transaction. Maiden has agreed that it will not solicit, initiate, knowingly encourage or facilitate inquiries or proposals or engage in discussions or negotiations regarding takeover proposals, subject to limited exceptions, including that Maiden may, in certain circumstances, take certain actions in the event Maiden receives, at any time prior to the Maiden shareholder approval, a bona fide takeover proposal which does not result from any breach of the combination agreement and constitutes or would reasonably be expected to lead to a superior proposal. Maiden has also agreed that its board of directors will not change its recommendation to its shareholders or approve any alternative agreement, subject to limited exceptions, including that, at any time prior to the Maiden shareholder approval, the Maiden board may make a change in recommendation (i) in circumstances not involving or relating to a takeover proposal, if the Maiden board concludes in good faith, after consultation with its financial advisor and outside legal counsel, that failure to take such action would be inconsistent with the exercise of its fiduciary duties under applicable laws; or (ii) in response to a superior proposal, if the Maiden board concludes in good faith, after consultation with its financial advisor and outside legal counsel, that failure to change its recommendation would be inconsistent with the exercise of its fiduciary duties under applicable law.
Additionally, the combination agreement provides that under specified circumstances, if the Maiden board determines in good faith, after consultation with its financial advisor and outside legal counsel, that a bona fide takeover proposal which does not result from any breach of the combination agreement constitutes or would reasonably be expected to lead to a superior proposal and failure to take such action would be inconsistent with the exercise of its fiduciary duties under applicable laws, Maiden may enter into an acceptable confidentiality agreement with the person or group making the takeover proposal and, pursuant thereto, furnish information with respect to Maiden and its subsidiaries.
The combination agreement also requires Maiden to take all necessary actions to duly call, give notice of, convene and hold a meeting of its shareholders for the purpose of obtaining the applicable shareholder approval. This special meeting requirement does not apply to Maiden in the event that the combination agreement is terminated in accordance with its terms.
In addition, under specified circumstances, Maiden may be required to pay a termination fee of up to $7.0 million if the combination is not consummated. These provisions might discourage a potential competing acquiror that might have an interest in acquiring all or a significant part of Maiden from considering or proposing an acquisition, even if it were prepared to pay consideration with a higher price per share than that proposed in the transaction, or might result in a potential competing acquiror proposing to pay a lower price per share to acquire Maiden than it might otherwise have been willing to pay.
Certain directors and executive officers of Maiden may have interests in the transaction that are different from, or in addition to or in conflict with, yours.
Executive officers of Maiden negotiated the terms of the combination agreement, and the Maiden board (other than Messrs. Zyskind and Neuberger, who recused themselves from determinations relating to the transactions contemplated by the combination agreement due to their financial interest in AmTrust and Mr. Zyskind’s role as CEO and Chairman of AmTrust's board of directors) approved the combination agreement and unanimously recommends that you vote in favor of the proposals in connection with the transaction. These directors and executive officers may have interests in the transaction that are different from, or in addition to or in conflict with, yours. These interests include the continued employment of certain executive officers of Maiden by the combined company, the continued positions of certain directors of Maiden as directors of the combined company and the indemnification of former Maiden directors and officers by the combined company. With respect to Maiden executive officers, these interests also include the treatment in the transaction of restricted Maiden shares held by executive officers and their participation in Maiden’s executive severance and executive retention bonus plans. You should be aware of these interests when you consider the Maiden board’s recommendation that you vote in favor of the proposals.
The Bermuda NewCo common shares to be received by Maiden shareholders as a result of the transaction will have different rights than Maiden shares.
Following completion of the transaction, Maiden shareholders will no longer be shareholders of Maiden, but will instead become shareholders of Bermuda NewCo. There will be important differences between your current rights as a Maiden shareholder and your rights as a Bermuda NewCo shareholder.
Maiden shareholders will have a reduced ownership and voting interest after the transaction and will exercise less influence over management.
After the completion of the transaction, former Maiden shareholders are expected to own approximately 64.8% of the issued and outstanding Bermuda NewCo common shares, and former Kestrel equityholders are expected to own approximately 35.2% of the issued and outstanding Bermuda NewCo common shares, in each case including Maiden’s outstanding restricted shares but excluding (i) the potential contingent consideration that may become payable to the former Kestrel equityholders, and (ii) the 44,750,678 Bermuda NewCo common shares that will be held by Maiden Reinsurance. Consequently, Maiden shareholders, as a group, will have reduced ownership and voting power in Bermuda NewCo compared to their ownership and voting power in Maiden and thus will exercise less influence over management of the combined company.
Failure to complete the transaction could negatively impact the share price, businesses and financial results of Maiden.
If the transaction is not completed, the ongoing business of Maiden may be adversely affected, and Maiden will be subject to several risks and consequences, including the following:
•Maiden may be required, under certain specified circumstances, to pay Kestrel a termination fee of up to $7.0 million;
•Maiden is subject to certain restrictions on the conduct of its business prior to completing the transaction, which may adversely affect its ability to execute certain of its business strategies;
•Maiden is no longer writing new business and therefore will not have an operating business if the transaction is not completed; and
•Matters relating to the transaction may require substantial commitments of time and resources by Maiden management, which could otherwise have been devoted to other opportunities that may have been beneficial to Maiden as an independent company.
In addition, if the transaction is not completed, Maiden may experience negative reactions from the financial markets and from its employees, customers, insureds, cedants, policyholders, brokers, agents, business partners, service providers or reinsurance providers. Maiden also could be subject to litigation related to a failure to complete the transaction or to enforce its obligations under the combination agreement. If the transaction is not consummated, Maiden cannot assure its shareholders that the risks described will not materially affect the business, financial results and share price of Maiden.
Maiden and Kestrel will incur significant transaction and transaction-related transition costs in connection with the transaction.
Maiden and Kestrel expect that they will incur significant, non-recurring costs in connection with consummating the transaction and integrating the operations of both companies. Maiden will also incur significant fees and expenses relating to legal, accounting and other transaction fees and other costs associated with the transaction. Some of these costs are payable regardless of whether the transaction is completed. Moreover, under certain specified circumstances, Maiden may be required to pay a termination fee of up to $7.0 million if the transaction is not consummated.
Maiden, Kestrel and, subsequently, the combined company must continue to retain, motivate and recruit executives and other key employees, which may be difficult in light of uncertainty regarding the transaction, and failure to do so could negatively affect the combined company.
For the transaction to be successful, during the period before the transaction is completed, both Kestrel and Maiden must continue to retain, motivate and recruit executives and other key employees. Moreover, the combined company must be successful at retaining and motivating key employees following the completion of the transaction. Experienced employees in the industries in which Maiden and Kestrel operate are in high demand, and competition for their talents can be intense. Employees of both Maiden and Kestrel may experience uncertainty about their future role within the combined company until, or even after, strategies with regard to the combined company are announced or executed. The potential distractions of the transaction may adversely affect the ability of Maiden, Kestrel or, following completion of the transaction, the combined company, to retain, motivate and recruit executives and other key employees and keep them focused on applicable strategies and goals. A failure by Maiden, Kestrel or, following the completion of the transaction, the combined company, to attract, retain and motivate executives and other key employees during the period prior to or after the completion of the transaction could have a negative impact on the business of Maiden, Kestrel or the combined company.
If the transaction is not completed, Maiden’s shares could be materially adversely affected.
The transaction is subject to customary conditions to closing, including the approval of Maiden’s shareholders. In addition, Maiden and Kestrel may terminate the combination agreement under certain circumstances. If Maiden and Kestrel do not complete the transaction, the market price of Maiden’s shares may fluctuate to the extent that the current market price of those shares reflects a market assumption that the transaction will be completed. Further, whether or not the transaction is completed, Maiden and Kestrel will also be obligated to pay certain investment banking, legal and accounting fees and related expenses in connection with the transaction, which could negatively impact results of operations when incurred. If the transaction is not completed, Maiden cannot assure its shareholders that additional risks will not materialize or not materially adversely affect its business, result of operations and share price.
Maiden may in the future be the target of securities class action and derivative lawsuits, which could result in substantial costs and may delay or prevent the completion of the transaction.
Securities class action lawsuits and derivative lawsuits are often brought against public companies that have entered into transaction agreements in an effort to enjoin the relevant transactions or seek monetary relief. Maiden may in the future be a defendant in one or more lawsuits relating to the combination agreement and the transaction and, even if any such future lawsuits are without merit or resolved in Maiden’s favor, defending against these claims could result in substantial costs and
divert management time and resources from pursuing the completion of the transaction and from other potentially beneficial business opportunities. Maiden cannot predict whether such lawsuits will be brought against Maiden or the outcome of such lawsuits or others, nor can Maiden predict the amount of time and expense that will be required to resolve such litigation. An unfavorable resolution of any such litigation surrounding the combination agreement and the transaction could delay or prevent the completion of the transaction, which may adversely affect Maiden’s, Kestrel’s or, if the transaction is completed but delayed, the combined company’s business, financial position and results of operations.
The Combined Company Following the Transaction
The combined company may not be able to recover amounts due from its reinsurers, which would adversely affect its financial condition.
The combined company will be a specialty program group offering fronting arrangements to domestic and foreign insurers that want to access specific U.S. property and casualty insurance business, which are collectively referred to as “capacity providers,” and will generally reinsure on a quota share basis up to 100% of the risk under these policies with these carriers in exchange for ceding fees. The combined company will write business initially through the AmTrust Insurance Companies, all subsidiaries of AmTrust through which Kestrel has been writing its business, and the combined company will have an option to acquire the AmTrust Insurance Companies from AmTrust.
The combined company will reinsure a substantial portion of the underwriting and operating risks in connection with its fronting arrangements to its capacity providers. The combined company will generally select either well capitalized, highly rated authorized capacity providers or will require the capacity providers to post collateral and/or obtain guarantees to secure the reinsured risks. However, if any of the capacity providers becomes insolvent or otherwise refuse to reimburse losses paid to these policyholders in a timely manner, the corresponding impact to the combined company’s ability to continue writing business through the AmTrust Insurance Companies could materially adversely affect the combined company’s financial condition and results of operations.
While the combined company generally will not hold net reserves for LAEs that might arise as a result of claims made under the policies (unless it participates on a quota share basis to a limited extent in certain programs), it may hold collateral from capacity providers who may not be well capitalized, highly rated, or authorized to protect against any such capacity provider’s failure to pay claims. However, collateral may not be sufficient to cover the combined company’s liability for these claims, and the combined company may not be able to cause the capacity providers to deliver additional collateral.
Although the AmTrust Insurance Companies will ultimately take the risk of insolvency or other failure to pay by a capacity provider, any adverse impact to the business, financial condition, results of operations and prospects of the AmTrust Insurance Companies may have an adverse impact on the combined company’s financial condition and results of operations as the combined company is reliant on the AmTrust Insurance Companies to write its business. For example, any risks or difficulties that result in a negative impact on the financial strength ratings, licenses or reputation of any of the AmTrust Insurance Companies may limit or restrict the combined company’s ability to continue to write business on behalf of its capacity providers, which in turn may have a material and adverse impact on the combined company’s ability to generate fee revenues.
If market conditions cause the combined company’s reinsurance to be more costly or difficult to obtain, it may be required to bear increased risks or reduce the level of its underwriting commitments.
The combined company will provide access to the U.S. property and casualty insurance markets in exchange for ceding fees through its fronting business by providing access to the AmTrust Insurance Companies with expansive licensing and an “A-” (Excellent) rating by A.M. Best through its relationship with AmTrust. As part of its business strategy, the combined company will reinsure a substantial portion of underwriting risk, credit risk and business risk related to its fronting business. The combined company may be unable to maintain its current reinsurance arrangements or to obtain other reinsurance in adequate amounts and at favorable rates, particularly if reinsurers become unwilling or unable to support its specialized fronting model in the future. A decline in the availability of reinsurance, increases in the cost of reinsurance or a decreased level of activity by general agents could limit the amount of fronting business the combined company could write through the AmTrust Insurance Companies and materially and adversely affect its business, financial condition, results of operations and prospects.
Regulators may challenge the combined company’s use of fronting arrangements in states in which its capacity providers are not licensed.
The combined company will enter into fronting arrangements with general agents and domestic and foreign insurers that want to access specific U.S. property and casualty insurance business in states in which such capacity providers are not licensed or are not authorized to write particular lines of insurance. The capacity providers or the general agents administer the business, settle all claims and reinsure a substantial portion of the risks. The combined company will receive ceding fees but generally will not share in the profits or losses of the business it writes for the capacity providers unless Maiden Reinsurance participates on a quota share basis to a limited extent in certain programs. Some state insurance regulators may object to such fronting arrangements. In certain states, insurance regulators have the authority to prohibit an authorized insurer from acting as an issuing carrier for an unauthorized insurer. In addition, insurance departments in states without such prohibition could still deem the assuming insurer as transacting insurance business without a license and the issuing carrier as aiding and abetting the unauthorized sale of insurance.
If regulators in any of the states where the combined company conducts its fronting business were to prohibit or limit the arrangement, the combined company would be prevented or limited from conducting the business for which a capacity provider is not authorized in those states, unless and until such capacity provider is able to obtain the necessary licenses. This could have a material and adverse effect on the combined company’s business, financial condition, results of operations and prospects.
While it is expected that the fronting business will be ceded to a number of unaffiliated reinsurers, Maiden Reinsurance may be ceded a small percentage of the reinsurance, subject to prior approval from the Vermont DFR of the combined company's
ability to reinsure the business that it expects to underwrite. If the Vermont DFR fails to provide this approval, or places certain limitations on such approval, the combined company may not be able to operate its fronting business efficiently, which could reduce the combined company’s effectiveness in the marketplace. In addition, the Vermont DFR may place certain restrictions on Maiden Reinsurance’s fronting business, such as requiring Maiden Reinsurance to no longer be licensed as a captive or affiliated reinsurer. Such limitations could further impact the combined company’s ability to operate its fronting business, which could have a material and adverse effect on the combined company’s business, financial condition, results of operations and prospects.
Notwithstanding these state law restrictions on ceding insurers, the Nonadmitted and Reinsurance Reform Act (“NRRA”) contained in Dodd-Frank provides that all laws of a ceding insurer’s nondomestic state (except those with respect to taxes and assessments on insurers or insurance income) are preempted to the extent that they otherwise apply the laws of the state to reinsurance agreements of nondomestic ceding insurers. The NRRA places the power to regulate reinsurer financial solvency primarily with the reinsurer’s domiciliary state and requires credit for reinsurance to be recognized for a nondomestic ceding company if it is allowed by the ceding company’s domiciliary state. A state insurance regulator might not view the NRRA as preempting a state regulator’s determination that an unauthorized reinsurer must obtain a license or that any statute prohibits the combined company from doing a fronting business. However, such a determination or a conflict between state law and the NRRA could cause regulatory uncertainty about its fronting business, which could have a material and adverse effect on its business, financial condition, results of operations and prospects.
The combined company may change its underwriting guidelines or strategy without shareholder approval.
The combined company’s management team has the authority to change its underwriting guidelines or strategy without notice to shareholders and without shareholder approval. As a result, the combined company may make fundamental changes to its operations without shareholder approval, which could result in the combined company pursuing a strategy or implementing underwriting guidelines that may be materially different from the current strategy and underwriting guidelines.
The combined company has a limited operating history and may not be able to manage its growth effectively.
The combined company intends to grow its business in the future, which could require additional capital, systems development and skilled personnel. However, the limited operating history of the combined company may make it difficult to evaluate its current capital structure and future capital requirements, which may have an adverse impact on potential strategic initiatives. The combined company will encounter risks and difficulties frequently experienced by growing companies in rapidly changing industries, including increasing and unforeseen expenses as it continues to grow its business. The inability of the combined company to manage these risks successfully may have a direct impact on its ability to exercise the option to acquire the AmTrust Insurance Companies from AmTrust, as it must be able to meet its capital needs, expand its systems and internal controls effectively, allocate its human resources optimally, identify, hire, train and develop qualified employees and effectively incorporate the components of any business it may acquire in its effort to achieve growth. The failure to manage the combined company’s growth effectively could have a material adverse effect on its business, financial condition and results of operations.
Inability to maintain the strategic relationship with AmTrust could adversely affect the combined company’s business.
Upon the completion of the transaction, AmTrust will hold approximately 10.0% of the issued and outstanding Bermuda NewCo common shares and will have the right to nominate three directors to the Bermuda NewCo board. The combined company will write its business on a fronting basis initially through the AmTrust Insurance Companies. The combined company will cede up to 100% of underwriting risk in exchange for a ceding fee based on gross premiums written. In addition, AmTrust will provide additional services in relation to the AmTrust Insurance Companies pursuant to a management agreement with Kestrel Insurance Agency, including compliance, data reporting, data flow and information technology systems. As a result, the combined company will rely on its strategic partnership with AmTrust, and any inability to maintain such relationship with AmTrust or to exercise the option to acquire the AmTrust Insurance Companies from AmTrust would materially adversely affect its business. These contractual arrangements may terminate or be terminated under certain circumstances, and there can be no assurance that this strategic relationship will continue in the future, including on the same or similar terms, and if not, that the combined company would be able to find a suitable replacement or another strategic partnership on favorable terms, if at all. If the combined company was not able to find other insurance carriers with similar financial strength ratings with which it could partner, its ability to write new and renewal business would be significantly impacted.
The combined company’s business, and therefore its results of operations and financial condition, may be adversely affected by conditions that result in reduced insurer capacity.
The combined company’s results of operations depend on the continued capacity of the AmTrust Insurance Companies to adequately and appropriately underwrite risk and provide coverage. Capacity could be reduced by the AmTrust Insurance Companies failing or withdrawing from writing certain coverages that the combined company will offer and it will have limited control over these matters. In addition, to the extent that reinsurance becomes significantly more expensive, the combined company may experience restrictions and limitations on its ability to continue to write the amount or types of business it anticipated, which could have a negative impact on its ability to generate fee revenue.
A decline in the financial strength rating or financial size category of the combined company's fronting companies may adversely affect the combined company’s financial condition and results of operations.
Each of the combined company's fronting companies has an “A-” (Excellent) financial strength rating and a XV financial size category from A.M. Best. A downgrade or withdrawal of the financial strength rating or reduction in the financial size category of any of the combined company's fronting companies could cause current and future general agents and insureds to choose other competitors and could severely limit or prevent the combined company’s writing of new and renewal insurance contracts.
A.M. Best’s analysis includes comparisons to peers and industry standards as well as assessments of operating plans, philosophy and management. A.M. Best periodically reviews each insurance carrier’s financial strength rating and may adjust upward or downward at its discretion based primarily on analyzing the balance sheet strength, operating performance and business profile of each insurance carrier.
In addition, in view of the earnings and capital pressures experienced by many financial institutions, including insurance companies, it is possible that rating organizations will heighten the level of scrutiny that they apply to such institutions, increase the frequency and scope of their credit reviews, request additional information from the companies that they rate or increase the capital and other requirements employed in the rating organizations’ models for maintenance of certain ratings levels.
As the combined company will leverage its strategic relationship with such fronting companies for lines of business that require an “A-” financial strength rating from A.M. Best, any downgrade or withdrawal of any insurance carrier’s rating could have a material adverse effect on the combined company’s business. A.M. Best assigns ratings that are intended to provide an independent opinion of an insurance company’s ability to meet its obligations to policyholders and is neither an evaluation directed to investors nor a recommendation to buy, sell or hold stock or any other securities an insurance group may issue.
There can be no assurances that the combined company's fronting companies will be able to maintain this rating. Any downgrade in ratings would likely materially adversely affect the combined company’s business through the loss of certain existing and potential policyholders and the loss of relationships with clients that might move to other companies with higher ratings. If such fronting companies lose their “A-” rating, the combined company may need to secure a new fronting arrangement or risk losing the business of its capacity providers to higher rated issuing carriers.
The combined company derives a significant portion of its fee revenues from a limited number of general agents, the loss of which could result in its inability to continue to write a significant portion of the current business, additional expense and a material decrease in fee revenues.
A significant portion of the combined company’s total fees are derived from a limited number of general agents and the combined company is heavily reliant upon these general agents to generate revenues. The decision of any such general agent to seek to terminate its arrangements with the combined company or to otherwise decrease the volume of business the combined company writes through them, could result in additional expense and a material decrease in the amount of fee revenues the combined company is able to generate. In addition, if the combined company is unable to collect fees under these arrangements due to insolvency, dispute or other unwillingness or inability of any of its general agents to meet their obligations to the combined company, its business, financial condition, results of operations or prospects could be materially and adversely affected.
The combined company will depend on a limited number of capacity providers and general agents for a large portion of its gross written premium, and the loss of business provided by any one of them could materially adversely affect the combined company.
The combined company will offer fronting arrangements to both general agents and capacity providers. Capacity providers may be either independent or under common control with a particular general agent. An independent capacity provider may reinsure a single book or multiple books with various general agents. A single general agent may control a single book with one capacity provider or multiple books with various capacity providers.
Other insurance companies compete with the combined company for this business. These capacity providers and general agents may choose to enter into fronting arrangements with such competitors, and the general agents or capacity providers may terminate fronting arrangements with the combined company if they no longer need access to its fronting capacity. Relationships with clients, including general agents and capacity providers, are generally governed by agreements that may be terminated on relatively short notice.
Given the combined company’s reliance on a small group of capacity providers and general agents, a significant decrease in business from, or the entire loss of, any of them would cause the combined company to lose premium and ceding fees and require the combined company to seek additional capacity providers or general agents or to replace the lost premium and ceding fees. If the combined company is unable to do so, its business, financial condition, results of operations and prospects would be materially and adversely affected.
In addition, the ability of the combined company to compete and remain profitable will depend, in part, on it maintaining business relationships with clients (including general agents and capacity providers), the business development and marketing efforts of its sales professionals, the servicing efforts of its relationship managers and on its ability to offer insurance solutions and maintain financial strength ratings through the AmTrust Insurance Companies that meet the requirements and preferences of clients. Any failure to be effective in any of these areas may have a material and adverse effect on the combined company’s business, financial condition, results of operations and prospects.
Failure of capacity providers or general agents to properly market, underwrite or administer policies could materially adversely affect the combined company.
The marketing, underwriting, claims administration and other administration of policies will be the responsibility of the combined company’s capacity providers or general agents. Any failure by them to properly handle these functions could result in liability to the AmTrust Insurance Companies, which may have an adverse impact on the financial condition of the combined company. Even though these capacity providers or general agents may be required to compensate the AmTrust Insurance Companies for any such liability, there are risks that any such failure could create regulatory or reputational issues for the AmTrust Insurance Companies, which could limit or restrict the combined company’s ability to continue to write business on behalf of its capacity providers. Any such limitations or restrictions could materially and adversely affect the business, financial condition, results of operations and prospects of the combined company.
The combined company may not be successful in building more direct relationships with general agents and capacity providers.
The combined company’s fronting capacity may be constrained by the size of its capital base, and it may rely on its relationship-driven channels to generate new fronting business. In addition, the combined company may rely on brokers to identify general agents in need of fronting. Although the combined company will build direct relationships with general agents and capacity providers and hire additional fully dedicated sales staff, the combined company may not be successful in its efforts to expand its fronting business.
Some of the combined company’s fronting arrangements may contain limits on the reinsurer’s obligations.
While the combined company will reinsure a substantial portion of the risks inherent in its fronting programs, the combined company will, in certain cases, enter into programs that contain limits on its reinsurers’ obligations, including exclusion of certain coverages, loss ratio caps, per occurrence or aggregate reinsurance limits or exclusion of the credit risk of general agents. To the extent losses under these programs exceed the prescribed limits, the combined company and/or the AmTrust Insurance Companies will be liable to pay the losses in excess of such limits, which could materially and adversely affect the business, financial condition, results of operations and prospects of the combined business.
Even if the combination with Kestrel qualifies as a transaction described in Section 351 of the Code, a U.S. Holder of Maiden shares may still recognize gain as a result of the transaction if Maiden is or was classified as a PFIC for any taxable year during which a U.S. Holder held Maiden shares.
Pursuant to Section 1291(f) of the Code, to the extent provided in U.S. Treasury Regulations promulgated under the Code (the “Treasury Regulations”), even if the combination with Kestrel qualifies as a transaction described in Section 351 of the Code, if Maiden was a PFIC for any taxable year during a U.S. Holder’s holding period for the Maiden shares, certain adverse U.S. federal income tax consequences, including recognition of gain, could apply to such U.S. Holder as a result of the transaction, unless certain exceptions apply. Based on the nature of Maiden’s business, the projected composition of its income and the projected composition and estimated fair market values of its assets, Maiden does not believe it was a PFIC for its taxable year ended on December 31, 2024 and does not expect to be a PFIC for its taxable year ending on December 31, 2025, or the succeeding taxable year. However, because there is significant uncertainty in the application of the PFIC rules, no assurance can be given that Maiden was not previously a PFIC and will not be a PFIC for its taxable year ending December 31, 2025, or any subsequent taxable year.
Holders of Maiden shares should consult such holders’ tax advisors regarding the possible classification of Maiden as a PFIC and the resulting U.S. federal income tax considerations.
The ability of Bermuda NewCo’s subsidiaries to use net operating loss carryforwards and other tax attributes may be limited in connection with the combination with Kestrel or other transactions.
As of December 31, 2024, Maiden and certain of its subsidiaries had U.S. federal net operating losses of approximately $459.6 million. These net operating losses will carry forward to offset a portion of future taxable income, if any, until such unused losses expire, if at all.
Under Sections 382 and 383 of Code, these federal net operating loss carryforwards, certain losses incurred following the combination with Kestrel, and other tax attributes may become subject to an annual limitation in the event of certain changes in Bermuda NewCo’s ownership. An “ownership change” pursuant to Section 382 of the Code generally occurs if one or more stockholders or groups of stockholders who own at least 5% of a company’s stock increase their ownership by more than 50 percentage points over their lowest ownership percentage within a rolling three-year period. Bermuda NewCo’s, or its subsidiaries’, ability to utilize net operating loss carryforwards, certain losses incurred following the transaction, and other tax attributes to offset future taxable income or tax liabilities may be limited as a result of ownership changes, including potential changes in connection with the combination with Kestrel or other transactions. Similar rules may apply under state tax laws. Such limitations could result in increased future income tax liability to Bermuda NewCo or its subsidiaries, and Bermuda NewCo’s or its subsidiaries’ future cash flows could be adversely affected.
To preserve Bermuda NewCo’s and its subsidiaries’ ability to utilize their tax attributes without limitation, Bermuda NewCo has taken actions to attempt to prevent an “ownership change” from occurring, including adopting provisions that limit or discourage shareholders from acquiring 5% or more of Bermuda NewCo or, in the case of shareholders that already own 5% or more of Bermuda NewCo, from increasing their ownership. Bermuda NewCo may take further actions in the future. There can be no assurances that such actions will be available, or if such actions are available, whether Bermuda NewCo will decide to undertake any such actions. Moreover, there can be no assurances that any existing or future actions will be effective in preventing an “ownership change” pursuant to Section 382 of the Code.
Bermuda NewCo expects to be a tax resident of, and subject to tax in, both the United States and Bermuda, which may result in an increase in Bermuda NewCo’s and its subsidiaries’ cash tax obligations and effective rate.
Under current U.S. federal tax law, a corporation organized under Bermuda law is generally classified as a foreign corporation pursuant to Section 7701(a)(4) of the Code. Section 7874 of the Code and the Treasury Regulations promulgated thereunder, however, contain rules that cause a foreign corporation, such as Bermuda NewCo, that acquires the stock of a domestic corporation, such as US NewCo, to be treated as a domestic corporation for U.S. federal tax purposes in certain situations. Bermuda NewCo expects to be treated as a domestic corporation for all US. federal tax purposes upon consummation of the transaction pursuant to Section 7874(b) of the Code. However, Section 7874 of the Code is complex and Bermuda NewCo cannot be certain or provide any guarantees regarding its expected treatment.
On the basis that Bermuda NewCo is treated as a tax resident in the U.S., Bermuda NewCo is not expected to be treated as a Bermuda tax resident pursuant to Bermuda’s tax legislation. Regardless of whether Bermuda NewCo expects to be treated as a domestic corporation for U.S. federal income tax purposes pursuant to Section 7874(b) of the Code, it could be liable for both
U.S. and Bermuda taxes. Bermuda NewCo does not expect any tax owed to Bermuda to be material, but Bermuda’s tax laws may change and Bermuda NewCo cannot provide any assurances that its Bermuda tax obligations will not become material in the future.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
None.

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ITEM 2. PROPERTIES
Item 2. Properties.
We currently lease office space in New York and Sweden for the operation of our business. We renew and enter into new leases in the ordinary course of business as needed. We believe that the office space from these leased properties is sufficient for us to conduct our operations for the foreseeable future. To date, the cost of acquiring and maintaining our office space has not been material to us as a whole.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings.
We may become involved in various claims and legal proceedings that arise in the normal course of our business, which are not likely to have a material adverse effect on our financial position, results of operations or liquidity.
Except as noted below, we are not a party to any material legal proceedings. From time to time, we are subject to routine legal proceedings, including arbitrations, arising in the ordinary course of business. These legal proceedings generally relate to claims asserted by or against us in the ordinary course of insurance or reinsurance operations. Based on our opinion, the eventual outcome of these legal proceedings is not expected to have a material adverse effect on our financial condition or results of operations.
In April 2009, we learned that Bentzion S. Turin, the former Chief Operating Officer, General Counsel and Secretary of Maiden Holdings and Maiden Reinsurance, sent a letter to the U.S. Department of Labor claiming that his employment with the Company was terminated in retaliation for corporate whistleblowing in violation of the whistleblower protection provisions of the Sarbanes-Oxley Act of 2002. Mr. Turin alleged that he was terminated for raising concerns regarding corporate governance with respect to the negotiation of the terms of the Trust Preferred Securities Offering. He seeks reinstatement as Chief Operating Officer, General Counsel and Secretary of Maiden Holdings and Maiden Reinsurance, back pay and legal fees incurred. On December 31, 2009, the U.S. Secretary of Labor found no reasonable cause for Mr. Turin’s claim and dismissed the complaint in its entirety. Mr. Turin objected to the Secretary's findings and requested a hearing before an administrative law judge in the U.S. Department of Labor. The Company moved to dismiss Mr. Turin's complaint, and its motion was granted by the Administrative Law Judge on June 30, 2011. On July 13, 2011, Mr. Turin filed a petition for review of the Administrative Law Judge's decision with the Administrative Review Board in the U.S. Department of Labor.
On March 29, 2013, the Administrative Review Board reversed the dismissal of the complaint on procedural grounds, and remanded the case to the administrative law judge. The administrative hearing began in September 2014 and concluded in November 2018. On September 2, 2021, Administrative Law Judge Theresa C. Timlin of the U.S. Department of Labor issued a decision and order which denied Mr. Turin’s complaint in full. On September 16, 2021, Mr. Turin filed a petition for review of the Administrative Law Judge's decision with the Administrative Review Board in the U.S. Department of Labor. On June 29, 2023, the Administrative Review Board issued a decision and order which summarily affirmed the September 2, 2021 decision and order of the Administrative Law Judge. The decision and order of the Administrative Review Board became the final order of the Secretary of Labor on July 27, 2023. On July 28, 2023, Mr. Turin filed a petition for review of the final order of the Secretary of Labor in the United States Court of Appeals for the Second Circuit. The Secretary of Labor is the respondent before the Second Circuit and the Court granted the Company's petition to intervene in order to present its position to the Court. On November 13, 2024, the Second Circuit found Turin’s arguments to be without merit and denied the petition for review.
A putative class action complaint was filed against Maiden Holdings, Arturo M. Raschbaum, Karen L. Schmitt, and John M. Marshaleck in the United States District Court for the District of New Jersey on February 11, 2019. On February 19, 2020, the Court appointed lead plaintiffs, and on May 1, 2020, lead plaintiffs filed an amended class action complaint (the “Amended Complaint”). The Amended Complaint asserts violations of Section 10(b) of the Exchange Act and Rule 10b-5 (and Section 20(a) for control person liability) arising in large part from allegations that Maiden failed to take adequate loss reserves in connection with reinsurance provided to AmTrust. Plaintiffs further claim that certain of Maiden Holdings’ representations concerning its business, underwriting and financial statements were rendered false by the allegedly inadequate loss reserves, that these misrepresentations inflated the price of Maiden Holdings' common stock, and that when the truth about the misrepresentations was revealed, the Company’s stock price fell, causing Plaintiffs to incur losses. On September 11, 2020, a motion to dismiss was filed on behalf of all Defendants. On August 6, 2021, the Court issued an order denying, in part, Defendants’ motion to dismiss, ordering Plaintiffs to file a shorter amended complaint no later than August 20, 2021, and permitting discovery to proceed on a limited basis. On February 7, 2023, the District Court denied Plaintiffs’ motion for reconsideration of the District Court’s decision denying Plaintiffs’ objection to the Magistrate Judge’s December 2021 ruling on discovery. On May 26, 2023, the Company filed a Renewed Motion to Dismiss the Second Amended Complaint or, in the Alternative, for Summary Judgment, which has been fully briefed. On December 19, 2023, the U.S. District Court for the District of New Jersey granted summary judgment on plaintiffs’ claim for securities fraud under Section 10(b) of the Securities Exchange Act to Maiden Holdings, Ltd. and individual defendants Arturo Raschbaum, Karen Schmitt, and John Marshalek. The Court held that the factual record failed to support, as a matter of law, plaintiffs’ allegations that the defendants had made false statements regarding the Company’s loss reserves. The Court also dismissed plaintiffs’ claims that the individual defendants were liable as control persons under Section 20(a) of the Securities Exchange Act for any such alleged false statements. Plaintiffs have appealed to the United States Court of Appeals for the Third Circuit.
On December 26, 2024, WUSO Holding Corporation and 683 Capital Partners filed a lawsuit against Maiden NA and Maiden Holdings in the Supreme Court of the State of New York, County of New York, captioned WUSO Holding Corporation and 683 Capital Partners, LP v. Maiden Holdings North America, Ltd. and Maiden Holdings, Ltd., Index No. 659861/2024. The complaint alleges that Maiden’s sale of Maiden Reinsurance North America, Inc., which closed approximately six years ago from the date of the complaint, breached a sole provision of Maiden’s indenture governing its 2013 Senior Notes. Plaintiffs allege that principal and interest payable under the 2013 Senior Notes are due currently, rather than upon the stated maturity date of the 2013 Senior Notes. Maiden believes it has substantial procedural and substantive defenses to the asserted claims, and it intends to vigorously defend against these claims.
We believe all of the above claims are without merit and we intend to vigorously defend ourselves. It is possible that additional lawsuits will be filed against the Company, its subsidiaries and its respective officers due to the diminution in value of our securities as a result of our operating results and financial condition. It is currently uncertain as to the effect of such litigation on our business, operating results and financial condition.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Our common shares began publicly trading on the Nasdaq under the symbol "MHLD" on May 6, 2008 and our shares currently trade on the Nasdaq Capital Market. At March 3, 2025, the closing sale price of our common share was $0.82 per share and there were 18 holders of record of our common shares. This figure does not represent the actual number of beneficial owners of our common shares because shares are frequently held in "street name" by securities dealers and others for the benefit of beneficial owners who may vote the shares.
No dividends have been declared by our Board on our common shares since the third quarter of 2018. The future declaration and payment of dividends to common shareholders will be at the discretion of our Board subject to specified legal, regulatory, financial and other restrictions. Please see "Notes to Consolidated Financial Statements - Note 15 - Statutory Requirements and Dividend Restrictions" under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for discussion regarding dividend restrictions on subsidiary's ability to transfer funds to Maiden Holdings.
On February 21, 2017, our Board approved the repurchase of up to $100.0 million of our common shares from time to time at market prices. For the year ended December 31, 2024, Maiden Reinsurance repurchased 1,871,755 common shares at an average price per share of $1.87 under our authorized share repurchase plan (2023 - 1,439,575 at an average price of $1.83 per share). The Company's remaining authorization for common share repurchases was $68.1 million at December 31, 2024 (December 31, 2023 - $71.6 million). No repurchases of common shares were made subsequent to December 31, 2024 and through the period ended March 10, 2025 under the Company's share repurchase authorization plan. In connection with the Combination Agreement entered into with Kestrel, Maiden has suspended its common share repurchase program.
During the year ended December 31, 2024, we repurchased a total of 127,555 (2023 - 128,731) common shares at an average price of $1.79 per share (2023 - $2.25) from employees, which represent tax withholding in respect of tax obligations on the vesting of both non-performance-based and discretionary performance-based restricted shares.
Combination Agreement with Kestrel Group
In connection with the transaction, each issued and outstanding common share of Maiden, par value $0.01 per share (each, a “Maiden Share”), other than any Maiden Share that is subject to any Maiden Award (as defined below), will be automatically canceled and converted into and, upon the completion of the transaction (the “Closing”) will thereafter represent the right to receive one share of Bermuda NewCo. In addition, as consideration for the Kestrel Contribution (as defined in the Combination Agreement), the Kestrel Equityholders (as defined in the Combination Agreement), at the Closing, will receive an aggregate of $40.0 million in cash and 55 million shares of Bermuda NewCo. In addition, the Kestrel Equityholders will be entitled to receive in contingent consideration up to the lesser of (x) 55 million shares of Bermuda NewCo and (y) an aggregate number of Bermuda NewCo shares equal to $45.0 million divided by certain volume weighted average prices of such shares (as calculated pursuant to the terms of the Combination Agreement), which will be payable upon the achievement of certain EBITDA milestones by the businesses that Kestrel and its subsidiaries conducted as of immediately prior to the Closing, and any extensions of such businesses or related or ancillary businesses existing thereafter, subject to other terms and conditions as set forth in the Combination Agreement.
In connection with the transaction, former Maiden shareholders and former Kestrel Equityholders are expected to own approximately 64.8% and 35.2% of Bermuda NewCo, respectively, at the Closing (including Maiden restricted shares outstanding, but excluding shares of Bermuda NewCo that will be owned by Maiden Reinsurance and the potential contingent consideration payable to Kestrel Equityholders). Upon the completion of the transaction, (i) each outstanding option to purchase Maiden Shares (each, a “Maiden Option”) will be converted into an option to purchase Bermuda NewCo shares, on substantially the same terms and conditions, including vesting schedule and per share exercise price, as applied to such Maiden Option immediately prior to the effective time of the First Merger (as defined in the Combination Agreement), and (ii) each outstanding Maiden Share that is unvested and/or subject to a risk of forfeiture (each, a “Maiden Restricted Share,” and together with the Maiden Options, the “Maiden Awards”) will convert automatically into a Bermuda NewCo Share that is unvested and/or subject to a risk of forfeiture, on substantially the same terms and conditions (including vesting schedule) as applied to such Maiden Restricted Share.
The foregoing description of the Combination Agreement and the transaction does not purport to be complete and is subject to and qualified in its entirety by reference to the Combination Agreement, a copy of which is included as Exhibit 2.1 to this Form 10-K. In addition, see "Risk Factors - The Transaction."
Equity Compensation Plans
Please see "Notes to Consolidated Financial Statements - Note 14. Share Compensation and Pension Plans" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for a discussion about the Company's equity compensation plans.

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ITEM 6. SELECTED FINANCIAL DATA

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. 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 Consolidated Financial Statements and related notes included elsewhere in this Annual Report on Form 10-K and Item 1, "Business - General Overview". Except as explicitly described as discontinued operations, and unless otherwise noted, all discussions and amounts presented herein relate to the Company's continuing operations except for net income (loss) and net income available to Maiden common shareholders. Amounts in tables may not reconcile due to rounding differences. Some of the information contained in this discussion and analysis or set forth elsewhere in this Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risk and uncertainties. Please see the "Special Note About Forward-Looking Statements" in this Annual Report on Form 10-K for more information on factors that could cause actual results to differ materially from the results described in or implied by any forward-looking statements contained in this discussion and analysis. You should review the "Risk Factors" set forth in this Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained herein.
Overview
Maiden Holdings is a Bermuda-based holding company. We create shareholder value by actively managing and allocating our assets and capital, including through ownership and management of businesses and assets mostly in the insurance and related financial services industries where we can leverage our deep knowledge of those markets.
Current Operations
The Company does not presently underwrite prospective reinsurance risks. During 2024, the Company re-evaluated its business and entered into a series of strategic transactions that, upon completion, it expects will substantially transform its operations which are described below.
Short-term income protection business is written on a primary basis by our wholly owned subsidiaries Maiden Life Försäkrings AB ("Maiden LF") and Maiden General Försäkrings AB ("Maiden GF") in the Scandinavian and Northern European markets. Our wholly owned subsidiary, Maiden Global Holdings Ltd. (“Maiden Global”) is a licensed intermediary in the United Kingdom. Maiden Global had previously operated internationally by providing branded auto and credit life insurance products through insurer partners, particularly those in Europe and other global markets ("IIS business"). These products also produced reinsurance programs which were underwritten by our wholly owned subsidiary Maiden Reinsurance Ltd. (“Maiden Reinsurance”).
During 2024, we conducted and completed a strategic review of our IIS Business. The purpose of that review was to evaluate the strategic value of this business, including the operations of Maiden LF and Maiden GF in relation to their ongoing growth and profitability prospects, regulatory capital requirements and ability to create shareholder value in excess of the Company's target return on capital levels.
As a result of that review, we concluded that divesting this business was in the best interests of shareholders and we subsequently entered into the following transactions to accomplish that objective: 1) two Renewal Rights and Asset Purchase Agreement with AmTrust Nordic AB (“AmTrust Renewal Rights Agreements”); and 2) a Stock Purchase Agreement to sell Maiden LF and Maiden GF (“Swedish Subsidiaries Sale”). See Item 1. "Business" for additional information on these transactions which are further discussed in Note 16 - Assets Held for Sale of the Notes to Consolidated Financial Statements included in Part II Item 8. "Financial Statements and Supplementary Data".
The Company also has various historic reinsurance programs underwritten by Maiden Reinsurance which are in run-off, including the liabilities associated with AmTrust Financial Services, Inc. ("AmTrust")"reinsurance agreements which were terminated in 2019 as discussed in "Note 10 - Related Party Transactions" of the Notes to Consolidated Financial Statements included in Part II Item 8. "Financial Statements and Supplementary Data". In addition, the Company has a retroactive reinsurance agreement and a commutation agreement that further reduces its exposure and limits the potential volatility related to AmTrust liabilities, which are discussed in "Note 8 - Reinsurance" of the Notes to Consolidated Financial Statements included in Part II Item 8. "Financial Statements and Supplementary Data".
The Company is also running off certain business related to its Genesis Legacy Solutions ("GLS") platform. In November 2020, the Company formed our indirect wholly owned subsidiary GLS which specialized in providing a full range of legacy services to small insurance entities, particularly those in run-off or with blocks of reserves that are no longer core to those companies' operations, working with clients to develop and implement finality solutions including acquiring entire companies. The Company believed the formation of GLS was highly complementary to its overall longer-term strategy. However, a combination of factors, including market conditions in the sector GLS focuses on, resulted in an inability for GLS to gain sufficient scale to achieve its objectives or earn a profit, and GLS results did not reach the objectives the Company expected it to over time. Having completed the capital commitment made to GLS in November 2020, the Company determined during 2023 to not commit any additional capital to new opportunities and to run-off the existing accounts underwritten by GLS.
Our business currently consists of two reportable segments: Diversified Reinsurance and AmTrust Reinsurance. Our Diversified Reinsurance segment consists of a portfolio of predominantly property and casualty reinsurance business focusing on regional and specialty property and casualty insurance companies located primarily in Europe. This segment also includes transactions entered into by GLS since November 2020. Our AmTrust Reinsurance segment includes all business ceded to Maiden Reinsurance by AmTrust, primarily the AmTrust Quota Share and the European Hospital Liability Quota Share, both of which are in run-off effective as of January 1, 2019. Please refer to Item 1. "Business - Our Reportable Segments" section for further discussion on our reportable segments.
As of December 31, 2024, Maiden Reinsurance owns 31.1% of the Company's total outstanding common shares which is eliminated for accounting and financial reporting purposes on the Company's consolidated financial statements. The voting power of Maiden Reinsurance, with respect to its common shares, is capped at 9.5% pursuant to the bye-laws of the Company. The ownership of the common shares by Maiden Reinsurance was made in compliance with Maiden Reinsurance's investment policy and approved by the Vermont Department of Financial Regulation ("Vermont DFR").
Business Strategy
In addition to restoring operating profitability, our strategic focus centers on creating the greatest risk-adjusted shareholder returns in order to increase book value for our common shareholders, both near and long-term. In that respect, management’s focus is to increase the non-GAAP book value of the Company, which fully reflects the steps we have taken to protect our balance sheet, primarily through our LPT/ADC Agreement with Cavello, as this represents the ultimate economic value of Maiden.
In recent years we pursued a revised operating strategy which leveraged the significant assets and capital we retain. As noted, we also formed GLS to focus on smaller accounts in the legacy (re)insurance marketplace, which we believed was complimentary to this strategy. Our assessment had been that these areas of strategic focus would enhance our profitability through increased returns, which would also increase the likelihood of fully utilizing the significant NOL carryforwards, as described further below, which would increase both GAAP and non-GAAP book value and create additional common shareholder value. The recognition of the deferred tax asset on our balance sheet remains a leading priority for the Company to increase its GAAP and non-GAAP book value.
This strategy has recently had two principal areas of focus:
•Asset management - investing in assets and asset classes in a prudent but expansive manner in order to maximize investment returns and is principally enabled by limiting the amount of insurance risk we assume in relation to the assets we hold and maintaining required regulatory capital at very strong levels to manage our aggregate risk profile; and
•Capital management - effectively managing the capital we hold on our balance sheet and when appropriate, repurchasing securities or returning capital to enhance common shareholder returns.
The returns expected to be produced by each pillar of our strategy are evaluated in relation to our cost of debt capital, which carries a weighted average effective interest rate of 7.6%. To the extent our experience or belief indicates we cannot exceed the cost of debt capital, we expect to refrain from activities in those areas, as evidenced in our decisions regarding legacy management. Our ability to execute our asset and capital management initiatives is dependent on maintaining adequate levels of unrestricted liquidity and cash flows. Please refer to the "Liquidity and Capital Resources" section for further information.
Asset Management
As of December 31, 2024, we have invested $251.5 million into alternative investments which include equity securities, other investments and equity method investments in a wide variety of asset classes, and we believe these activities will exceed that benchmark cost of capital with adjustments as necessary if those returns do not emerge. Please refer to the "Liquidity and Capital Resources" section on "Other Investments, Equity Investments and Equity Method Investments" for further information on our alternative asset classes and a detailed discussion of their investment returns.
Recent development and trends in financial markets, particularly the rapid rise in interest rates and associated economic uncertainty as a result of those changes, indicate that it may take longer than expected to achieve those returns and we expect that to factor into future capital allocation decisions.
Capital Management
Our capital management strategy is significantly informed by the required capital needed to operate our business in a prudent manner and our ongoing analysis of our loss development trends. While our recorded ultimate losses for our insurance liabilities have experienced significant adverse loss development in recent years, as our insurance liabilities further mature we remain confident that we can continue the prudent and disciplined repurchase of our common shares and senior notes, both of which are authorized for repurchase, which we believe provided the greatest risk-adjusted returns to our common shareholders.
Please refer to "Notes to Consolidated Financial Statements: Note 6 - Shareholders' Equity" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further information on the common share repurchases made by Maiden Reinsurance during 2024. In connection with the transaction entered into with Kestrel, Maiden has suspended its common share repurchase program.
Legacy Underwriting
At December 31, 2024, GLS and its subsidiaries have total insurance related liabilities of $27.8 million which consisted of total loss reserves of $21.5 million, an underwriting-related derivative liability of $4.0 million, and net deferred gains on retroactive reinsurance of $2.3 million.
Re-Assessment of Business Strategy
As part of our ongoing efforts to continually improve our performance, we regularly evaluate our business plans and strategies, which have resulted in material changes to those plans. In recent years, losses reported in our AmTrust Reinsurance segment continue to produce significant levels of adverse prior period loss development, including amounts increasingly not
covered by the LPT/ADC Agreement. Please refer to the "Underwriting Results by Reportable Segment" section on "AmTrust Reinsurance Segment" for further information.
As the run-off of our insurance liabilities has been more volatile than expected and our asset management strategies develop along timelines longer than initially anticipated, the need to allocate capital to other activities that produce more consistent levels of revenue and profit as we seek to create longer-term shareholder value has increased.
As we have re-evaluated our longer-term strategy, we also engaged in an ongoing strategic evaluation of both the insurance and reinsurance marketplace and the ability of both the fee-based, distribution and the reinsurance markets to increase current income and improve our ability to utilize and recognize our deferred tax assets.
As a result, we determined that the near-term expansion of those strategies is appropriate and during 2024 took steps to: 1) further de-emphasize our prior strategies; and 2) actively explore fee-based and distribution opportunities which are non-risk bearing and capital efficient while potentially being complemented by limited and selective deployment of reinsurance capacity to supplement those activities and enhance returns to shareholders.
These steps resulted in the announcement of our proposed combination with Kestrel on December 29, 2024. See Item 1. "Business" for further information on this transaction. We believe the proposed combination with Kestrel represents a transformative milestone for Maiden, and believe that Kestrel’s balance sheet light, fee revenue model will enable us to realize our vision of delivering a strong fee-based insurance platform while selectively deploying underwriting capacity to optimize returns for shareholders.
In light of the revisions to our strategy, during the third quarter of 2024 we took steps to begin to reduce the asset management pillar of our strategy which are discussed below. Our alternative investments portfolio decreased by 18.6% during the year ended December 31, 2024 due to recent sales and redemptions of private equity and private credit funds, and this portfolio may be reduced further in future periods as we continue to refine our strategy. The sales we executed during 2024 resulted in a lower positive net return of 3.5% during 2024 compared to 8.0% in 2023. While we remain confident that our asset management strategy will achieve the returns we have set out to achieve, we currently believe it is more critical to reposition our balance sheet and increase our liquidity in support of the current initiatives being pursued.
While we have revised our strategy and believe that our proposed combination with Kestrel will increase the likelihood of achieving our stated objectives, there can be no assurance that our insurance liabilities will run-off at levels that will permit further capital management activities, which we continually review as part of our strategy.
As a result, we continue to pursue finality solutions to resolve the AmTrust liabilities not covered by the LPT/ADC Agreement, including through third-parties. There can be no guarantee that we will execute such finality solutions and these solutions could involve significant charges to execute and we are actively evaluating the potential costs and benefits of such solutions, to the extent they are available to the Company.
2024 Developments
The run-off of our historic reinsurance programs produced an underwriting loss of $197.4 million in 2024. This was driven by adverse prior year reserve development of $154.4 million which offset the positive progress made in our capital and asset management strategies. As a result, during 2024, our book value decreased by 81.5% to $0.46 per common share at December 31, 2024, and our non-GAAP book value decreased by 52.4% to $1.52 per common share at December 31, 2024. We continued to execute the capital management pillar of our business strategy and repurchased 1,871,755 common shares during 2024. Please refer to the "Results of Operations" section for further information on our 2024 results.
Maiden NA
We believe Maiden NA’s investments, including its ownership of Maiden Reinsurance and its active asset management strategy, will create opportunities to utilize NOL carryforwards of $459.6 million at December 31, 2024. Approximately $379.9 million of these NOL carryforwards expire in various years beginning in 2029. As of December 31, 2024, $79.7 million or 17.4% of the Company's NOL carryforwards have no expiry date under the relevant U.S. tax law. The NOL carryforwards combined with additional net deferred tax assets ("DTA") primarily related to our insurance liabilities result in U.S. DTA (before valuation allowance) of $157.7 million or $1.59 per common share at December 31, 2024.
Net U.S. DTA of $157.7 million is not presently recognized on the Company's consolidated balance sheets as a full valuation allowance is carried against it. At this time, the Company believes it is necessary to maintain a full valuation allowance against the net U.S. DTA as more evidence is needed regarding the utilization of these losses. As circumstances further develop, we will continuously evaluate the amount of the valuation allowance held against the net U.S. DTA.
For further details on the NOL carryforwards, please see "Note 13 - Income Taxes" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. Taken together, we believe these measures should generate additional income for Maiden NA in a tax-efficient manner, while sharing in the improvement in profitability anticipated in Maiden Reinsurance as a result of the measures enacted as described above.
2024 and 2023 Financial Highlights
For the Year Ended December 31, 2024 2023 Change
Summary Consolidated Statement of Income Data: ($ in thousands except per share data)
Net loss
$ (200,969) $ (38,569) $ (162,400)
Basic and diluted loss per common share:
Net loss attributable to Maiden common shareholders(2)
(2.01) (0.38) (1.63)
Gross premiums written 33,196 23,466 9,730
Net premiums earned 49,474 43,969 5,505
Underwriting loss(3)
(197,371) (49,482) (147,889)
Net investment results(13)
32,856 53,072 (20,216)
Non-GAAP measures:
Non-GAAP operating loss(1)
(181,241) (23,014) (158,227)
Non-GAAP diluted operating loss per common share(1)
(1.81) (0.23) (1.58)
Non-GAAP operating return on average common shareholders' equity(1)
(77.1) % (7.1) % (70.0)
At December 31, 2024 2023 Change
Consolidated Financial Condition ($ in thousands except per share data)
Total investments and cash and cash equivalents(4)
$ 518,798 $ 602,318 $ (83,520)
Total assets 1,316,006 1,518,934 (202,928)
Reserve for loss and LAE 793,679 867,433 (73,754)
Senior notes - principal amount 262,361 262,361 -
Shareholders' equity 45,193 249,160 (203,967)
Total capital resources(5)
307,554 511,521 (203,967)
Ratio of debt to total capital resources(10)
85.3 % 51.3 % 34.0
Book Value calculations:
Book value per common share(6)
$ 0.46 $ 2.48 $ (2.02)
Accumulated dividends per common share(12)
4.27 4.27 -
Book value per common share plus accumulated dividends $ 4.73 $ 6.75 $ (2.02)
Change in book value per common share plus accumulated dividends (29.9) %
Diluted book value per common share(7)
$ 0.45 $ 2.46 $ (2.01)
Non-GAAP measures:
Adjusted book value per common share(8)
1.52 3.19 (1.67)
Adjusted Maiden shareholders' equity(9)
150,148 320,076 (169,928)
Adjusted total capital resources(9)
412,509 582,437 (169,928)
Ratio of debt to adjusted total capital resources(11)
63.6 % 45.0 % 18.6
(1)Non-GAAP operating loss, non-GAAP diluted operating loss per common share and non-GAAP operating return on average common shareholders' equity are non-GAAP financial measures. See "Key Financial Measures" for additional information.
(2)Please refer to "Notes to Consolidated Financial Statements - Note 12. Earnings per Common Share" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for the calculation of basic and diluted earnings per common share.
(3)Underwriting loss is a non-GAAP measure and is calculated as net premiums earned plus other insurance revenue, less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities. See "Key Financial Measures" for additional information.
(4)Total investments and cash and cash equivalents includes both restricted and unrestricted.
(5)Total capital resources is the sum of the Company's principal amount of debt and Maiden shareholders' equity. See "Key Financial Measures" for additional information.
(6)Book value per common share is calculated using common shareholders’ equity divided by the number of common shares outstanding. See "Key Financial Measures" for additional information.
(7)Diluted book value per common share is calculated by dividing common shareholders' equity, adjusted for assumed proceeds from the exercise of dilutive options, divided by the number of outstanding common shares plus dilutive options and restricted shares (assuming exercise of all dilutive share based awards).
(8)Adjusted book value per common share is a non-GAAP measure that is calculated using common shareholders' equity adjusted by adding the unamortized deferred gain on retroactive reinsurance arising from the LPT/ADC Agreement to shareholders' equity, divided by the number of common shares outstanding. See "Key Financial Measures" for additional information.
(9)Adjusted shareholders' equity and adjusted total capital resources are calculated by adding the unamortized deferred gain on retroactive reinsurance arising from the LPT/ADC Agreement to shareholders' equity. The deferred gain arises from the LPT/ADC Agreement with Cavello relating to losses from the AmTrust Quota Share. Under U.S. GAAP, the deferred gain shall be amortized over the estimated remaining settlement period. See "Key Financial Measures" for additional information.
(10)Ratio of debt to total capital resources is calculated using the total principal amount of debt divided by the sum of total capital resources.
(11)Ratio of debt to adjusted total capital resources is calculated using the total principal amount of debt divided by the sum of adjusted total capital resources.
(12)Accumulated dividends per common share includes the cumulative sum of dividends declared and paid in the past on the Company's issued common shares since inception.
(13)Net investment results include the sum of net investment income, net realized and unrealized gains (losses), and interest in income (loss) of equity method investments.
Key Financial Measures
Revenues
We historically derived the majority of our revenues from premiums on reinsurance contracts, net of any reinsurance or retrocessional coverage purchased and to a minor extent from premiums from insurance policies. Reinsurance premiums are a function of the amount and types of policies and contracts we write, as well as prevailing market prices. Our prices are determined before our ultimate costs, which may extend far into the future, are known. As a result of significant strategic transactions, our gross and net premiums written continue to be materially lower and our net investment income will increasingly become a significantly larger portion of our total revenues compared to prior periods.
The Company's revenues also include fee income earned from both our GLS business and IIS business as well as income generated from our investment portfolio. The Company's investment portfolio is comprised of AFS fixed maturity investments and other investments including equities, private equity and credit funds, privately held investments, hedge funds, equity method investments and other non-fixed income investments. In accordance with U.S. GAAP, our fixed maturity investments are carried at fair market value and any unrealized gains and losses are included in AOCI as a separate component of shareholders' equity. If unrealized losses are considered to be other-than-temporarily impaired due to a credit-related event, such impairment losses are recognized within earnings as a realized loss under total other-than-temporary impairment losses. Equity and other investments include limited partnerships, hedge funds and start-up insurance entities which are carried at fair market value with any unrealized gains or losses included in earnings under net realized gains (losses) on investment. Our investments made by special purpose vehicles focused on lending activities are carried at cost. Any indication of impairment is recognized immediately within net income.
Expenses
Our expenses currently consist largely of net loss and LAE, commission and other acquisition expenses, general and administrative expenses, interest and amortization expenses, foreign exchange and other gains or losses, the latter of which includes on a non-recurring basis any gains or losses from the disposal of subsidiaries.
Net loss and LAE has three main components: (1) losses paid, which are actual cash payments to insureds, net of recoveries from reinsurers; (2) change in outstanding loss or case reserves, which represent cedants' best estimate of the likely settlement amount for known claims, less the portion that can be recovered from reinsurers; and (3) change in IBNR reserves, which we establish to respond to 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 to us. The portion recoverable from reinsurers is deducted from the gross estimated loss.
Commission and other acquisition expenses include 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. Commission and other acquisition expenses are reported after: (1) deducting commissions received on ceded reinsurance; (2) deducting the part of commission and other acquisition expenses relating to unearned premiums; and (3) including the amortization of previously deferred commission and other acquisition expenses.
General and administrative expenses include personnel expenses (including share-based compensation expense), audit fees, rent expenses, legal and professional fees, information technology costs and other general operating expenses. General and administrative expenses are allocated to the reportable segments on an actual basis except salaries and benefits where management’s judgment is applied; however general corporate expenses are not allocated to the segments.
Non-GAAP Financial Measures
In addition to our key financial measures presented in accordance with GAAP in the Consolidated Balance Sheets and Consolidated Statements of Income and Comprehensive Income, management uses certain non-GAAP financial measures to evaluate the Company's financial performance and the overall growth in value generated for the Company’s common shareholders. Management believes that these measures, which may be defined and calculated differently by other companies, explain the Company’s results to investors in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. The non-GAAP financial measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. The calculation of some of these key financial measures including the reconciliation of non-GAAP financial measures to the nearest GAAP measure and relevant discussions are found within Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations". These non-GAAP financial measures are:
Non-GAAP operating earnings and non-GAAP diluted operating earnings per common share: Management believes that the use of non-GAAP operating earnings and non-GAAP diluted operating earnings per common share enables investors and other users of the Company’s financial information to analyze its performance in a manner similar to how management analyzes performance. Management also believes that these measures generally follow industry practice therefore allowing the users of financial information to compare the Company’s performance with its industry peer group, and that the equity analysts and certain rating agencies which follow the Company, and the insurance industry as a whole, generally exclude these items from their analyses for the same reasons. Non-GAAP operating earnings should not be viewed as a substitute for U.S. GAAP net income. Non-GAAP operating earnings is an internal performance measure used by management as these measures focus on the underlying fundamentals of the Company's operations by excluding, on a recurring basis: (1) net realized and unrealized investment gains (losses); (2) foreign exchange and other gains (losses); (3) the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under the LPT/ADC Agreement and related changes in amortization of the deferred gain liability; and (4) interest in income (loss) of equity method investments. We excluded net realized and
unrealized gains (losses) on investment, interest in income (loss) of equity method investments and foreign exchange and other gains (losses) as we believe these are influenced by market opportunities and other factors. We do not believe that ceded risks under the LPT/ADC Agreement are representative of our ongoing and future business which are different to retroactive reinsurance risks written by GLS that are representative of our ongoing and future business. We believe all of these amounts are substantially independent of our business and any potential future underwriting process, therefore, including them would distort the analysis of underlying trends in our operations.
Underwriting income (loss) is a non-GAAP measure and is calculated as net premiums earned plus other insurance revenue (expense), net less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities. For purposes of these non-GAAP operating measures, the fee-generating business which is included in our Diversified Reinsurance segment, is considered part of the underwriting operations of the Company. The fair value changes in underwriting-related derivative instruments is also included within other insurance (expense) revenue as the Company considers these contracts to be part of its underwriting operations. For the year ended December 31, 2024 other insurance expense included $24.3 million in underwriting-related charges for the resolution of certain related party transactions entered into with AmTrust that were effective as of December 31, 2024. Management believes that this measure is important in evaluating the underwriting performance of the Company and its segments. This measure is also a useful tool to measure the profitability of the Company separately from the investment results and is also a widely used performance indicator in the insurance industry. A reconciliation of the Company's underwriting results can be found in the Company's Consolidated Financial Statements in the "Notes to Consolidated Financial Statements Note 3 - Segment Information" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
The Company no longer presents certain non-GAAP measures such as combined ratio and its related components in this Annual Report on Form 10-K for the year ended December 31, 2024, as it believes that as the run-off of our reinsurance portfolios progresses, such ratios are increasingly not meaningful and of less value to readers as they evaluate the financial results of the Company, particularly compared to historical data.
While an important metric of success, underwriting income (loss) does 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 are ultimately paid to clients. Because we do not manage our cash and investments by segment, investment income and interest expense are not allocated to the reportable segments. Certain general and administrative expenses are generally allocated to segments based on actual costs incurred.
Non-GAAP Operating Return on Average Adjusted Common Equity ("Non-GAAP Operating ROACE"): Management uses non-GAAP operating return on average adjusted common shareholders' equity as a measure of profitability that focuses on the return to common shareholders. It is calculated using non-GAAP operating earnings available to common shareholders (as defined above) divided by average adjusted common shareholders' equity.
Book Value per Common Share and Diluted Book Value per Common Share: Book value per common share and diluted book value per common share are non-GAAP measures. Management uses growth in both of these metrics as a prime measure of the value we are generating for our common shareholders, because management believes that growth in each metric ultimately results in growth in the Company’s common share price. These metrics are impacted by the Company’s net income and external factors, such as interest rates, which can drive changes in unrealized gains or losses on our fixed income investment portfolio, as well as common share repurchases.
Ratio of Debt to Total Capital Resources: Management uses this non-GAAP measure to monitor the financial leverage of the Company. This measure is calculated using the total principal amount of debt divided by the sum of total capital resources.
Non-GAAP underwriting loss, Non-GAAP earnings, and Non-GAAP net loss and LAE: Management has further adjusted underwriting income, as defined above, as well as reported loss and LAE by excluding the portion of favorable or unfavorable prior year reserve development for which we ceded the risk under retroactive reinsurance agreements such as the LPT/ADC Agreement. The losses are estimated to be fully recoverable from Cavello and management believes adjusting for this development shows the ultimate economic benefit of the LPT/ADC Agreement on our underwriting results. We believe reflecting the economic benefit of this retroactive reinsurance agreement is helpful to understand future trends in our operations.
Adjusted Total Shareholders' Equity, Adjusted Total Capital Resources, Ratio of Debt to Adjusted Total Capital Resources and Adjusted Book Value per Common Share: Management has adjusted GAAP shareholders' equity by adding the unamortized deferred gain on ceded retroactive reinsurance under the LPT/ADC Agreement to shareholders' equity. The unamortized deferred gain on ceded retroactive reinsurance under the LPT/ADC Agreement includes the aggregate impact of: 1) cumulative increases to losses incurred prior to December 31, 2018 for which we have ceded the risk under the LPT/ADC Agreement with Cavello; and 2) changes in estimated ultimate losses for certain workers' compensation reserves previously commuted to AmTrust which are subject to specific terms and conditions pursuant to the LPT/ADC Agreement. As a result, by virtue of this adjustment, management has also adjusted Total Capital Resources and computed the Ratio of Debt to Adjusted Capital Resources and Adjusted Book Value per Common Share. The deferred gain liability on retroactive reinsurance under the LPT/ADC Agreement represents loss reserves estimated to be fully recoverable from Cavello and management believes adjusting for this shows the ultimate economic benefit of the LPT/ADC Agreement. We believe reflecting the economic benefit of this non-recurring retroactive reinsurance agreement is helpful to understand future trends in our operations, which will improve our shareholders' equity over the settlement or contract periods, respectively.
Alternative investments is the total of the Company's holdings of equity securities, other investments and equity method investments as reported on the Company's Consolidated Balance Sheets.
Critical Accounting Policies and Estimates
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 U.S. GAAP. The preparation of financial statements in conformity with U.S. 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 "Notes to Consolidated Financial Statements - Note 2. Significant Accounting Policies" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report Form 10-K for a full understanding of the Company’s accounting policies.
Reserve for Loss and LAE
General: The amount of time that elapses before a claim is reported to the cedant and then subsequently reported to the reinsurer is commonly referred to in the industry as the reporting tail. Lines of business for which claims are reported quickly are commonly referred to as short-tailed lines; and lines of business for which a longer period of time elapses before claims are reported to the reinsurer are commonly referred to as long-tailed lines. In general, for reinsurance, the time lags are longer than for primary business due to the delay that occurs between the cedant becoming aware of a loss and reporting the information to its reinsurer(s). The delay varies by reinsurance market (country of cedant), type of treaty, whether losses are paid by the cedant and the size of the loss. The delay could vary from a few weeks to a year or sometimes longer.
Because a significant amount of time can elapse, particularly on longer-tail lines of business written on an excess of loss basis, between the assumption of risk, the occurrence of a loss event, the reporting of the event to an insurance company (the primary company or the cedant), the subsequent reporting to the reinsurance company ("the reinsurer") and the ultimate payment of the claim on the loss event by the reinsurer, the Company’s liability for unpaid loss and LAE ("loss reserves") is based largely upon estimates. The Company categorizes loss reserves into two types of reserves: reported outstanding loss reserves ("case reserves") and IBNR reserves. Case reserves represent, for each individual claim, an estimate of unpaid losses, either by the Company’s cedants or the Company’s claims handling professionals, and recorded by the Company. IBNR reserves represent a provision for claims that have been incurred but not yet reported to the Company, as well as future loss development on losses already reported, in excess of the case reserves. The Company updates its estimates for each of the aforementioned categories primarily on a quarterly basis using information received from its cedants.
For excess of loss treaties, cedants generally are required to report losses that either (i) exceed 50% of their retention; or (ii) have a reasonable probability of exceeding the retention; or (iii) meet defined reporting criteria. All excess of loss reinsurance claims that are reserved are reviewed on a periodic basis. In addition, reserves for loss and LAE are reviewed every quarter for each cedant. For proportional treaties, cedants are required to give a periodic statement of account, generally monthly or quarterly. These periodic statements typically include information regarding premiums written, premiums earned, unearned premiums, ceding commissions, brokerage amounts, applicable taxes, paid losses and reported outstanding losses. They can be submitted up to ninety days after the close of the reporting period. Some proportional treaties have specific language requiring earlier notice of serious claims.
For all lines, the Company’s objective is to reasonably estimate ultimate loss and LAE. Total loss reserves are then calculated by subtracting losses paid. Similarly, IBNR reserves are calculated by subtracting case reserves from total loss reserves. IBNR is the estimated liability for: (1) changes in the values of claims that have been reported to us but are not yet settled; (2) claims that have occurred but have not yet been reported; and (3) claims that are closed but subsequently reopened. Each claim is settled individually based upon its merits, and particularly for longer-tailed lines of business, it is not unusual for a claim to take several years after being initially reported to be settled and paid, especially if legal action is involved. These claims may also require changes in anticipated future payments due to changes in medical conditions or changes in expected inflationary pressures. As a result, the reserve for loss and LAE includes significant estimates for IBNR reserves.
The reserve for IBNR is generally estimated by management based on various factors, including actuarial analysis and actual loss experience to date. Our actuaries employ standard actuarial methodologies to determine estimated ultimate loss reserves. In selecting management's best estimate of loss and LAE reserves, we consider the range of results produced by many actuarial methods and the appropriateness of those estimates. These actuarial methodologies are described in "Notes to Consolidated Financial Statements - Note 9. Reserve for Loss and Loss Adjustment Expenses" included under Item 8 "Financial Statement and Supplementary Data".
The composition of the reserve for loss and LAE at December 31, 2024 and 2023 was as follows:
December 31, 2024 2023
($ in thousands)
Reserve for reported loss and LAE
$ 383,087 $ 543,818
Reserve for losses incurred but not reported
410,592 323,615
Reserve for loss and LAE
$ 793,679 $ 867,433
The loss reserves in the table above exclude the impact of the LPT/ADC Agreement. While management believes that our case reserves and IBNR are sufficient to cover losses assumed by us, there can be no assurance that losses will not deviate from our reserves, possibly by material amounts. The analysis of the appropriateness of the reserve for IBNR is reviewed quarterly, with adjustments made as appropriate. To the extent that actual reported losses exceed expected losses, the carried estimate of the ultimate losses may be increased (i.e. unfavorable reserve development), and to the extent actual reported losses are less than our expectations, the carried estimate of ultimate losses may be reduced (i.e. favorable reserve development). We record any changes in our loss reserve estimates and the related reinsurance recoverable in the periods in which they are determined. Reinsurance recoverable on unpaid losses covered by the ADC portion of the LPT/ADC Agreement are recorded as part of the deferred gain on retroactive reinsurance shown on the Consolidated Balance Sheets which represents the cumulative adverse loss development under the AmTrust Quota Share covered by the LPT/ADC Agreement at December 31, 2024. Amortization of the deferred gain will not occur until paid losses have exceeded the minimum retention under the LPT/ADC Agreement, which has recently commenced in the fourth quarter of 2024.
Loss reserves do not represent an exact calculation of liability. Rather, loss reserves are estimates of what we reasonably expect the ultimate resolution and administration of claims will cost. These estimates are based on actuarial projections and on our assessment of currently available data, as well as estimates of future trends in claims severity and frequency, judicial theories of liability and other factors. Loss reserve estimates are refined as experience develops and as claims are reported and resolved. In addition, the relatively long periods between when a loss occurs and when it may be reported to our claims department for our casualty reinsurance lines of business also increase the uncertainties of reserve estimates in such lines.
With the guidance of the methods described in "Notes to Consolidated Financial Statements - Note 9. Reserve for Loss and Loss Adjustment Expenses" included under Item 8 "Financial Statement and Supplementary Data" of this Annual Report on Form 10-K, actuarial judgment is applied in the determination of ultimate losses. In general, the Company’s segments have varying levels of seasoning with which the Company has direct experience and as a result, differing methods are utilized to estimate loss and LAE reserves within each segment.
In our Diversified Reinsurance segment, we hold books of business that have been in runoff for several years, as well as books of business that have been underwritten only during the last few years. In general, we utilize the Expected Loss Ratio ("ELR") approach at the onset of reserving an account, the Bornhuetter-Ferguson ("BF") method for business with less but maturing loss experience, and then, as the experience matures, the Loss Development ("LD") method is utilized. The runoff book of business primarily uses the LD method due to its maturity and the amount of experience which has emerged over the years. For proportional business, the Company relies heavily on the actual contract experience, whereas for excess of loss business, there will be more usage of industry and/or Company specific benchmark assumptions in the reserving process.
The Company underwrote the AmTrust Reinsurance segment from July 1, 2007 until Maiden Reinsurance and AII agreed to terminate the remaining business subject to the AmTrust Quota Share and European Hospital Liability Quota Share, both on a run-off basis, effective January 1, 2019. A large portion of the exposure in the underlying book of business has significant seasoning, and allows for a significant amount of credibility in using parameters derived from historical experience to calculate reserve estimates. Some segments of the book are a result of recent acquisitions or newer markets for AmTrust. These segments require a greater level of assumptions and professional judgment in deriving reserve levels, which inherently implies a wider range of reasonable estimates. In addition, changes to case reserving and claims settlement practices by AmTrust have required the use of methods which adjust historical paid and incurred losses to reflect the current basis. As a result, we have tended to rely on a weighted approach which primarily employs the LD method for aspects of the segment with ample historical data, while also considering the ELR or the BF method for exposures with more limited or volatile historical data. The LD method can also be based on AmTrust specific historical information, historical information adjusted to current levels, or information derived from industry sources, with actuarial judgment being used as to the credibility weighting employed. The Frequency-Severity ("FS") method is also considered for segments of the AmTrust book for which claim count information is available. Additional data detailing items such as the class of business, state of occurrence, claim counts, and the frequency and severity of claims is available in many instances, further enhancing the loss reserve analysis.
Significant Assumptions Employed in the Estimation of Reserve for Loss and LAE: The most significant assumptions used at December 31, 2024 to estimate the reserve for loss and LAE within our reporting segments are as follows:
•the information developed from internal and independent external sources can be used to develop meaningful estimates of the likely future performance of business bound by the Company;
•historic loss development and trend experience may be used to predict future loss development and trends;
•no significant emergence of losses or types of losses that are not represented in the information supplied to the Company by its brokers, ceding companies and insureds will occur; and
•the Company is able to identify and properly adjust for changes to case reserving, claims settlement rates, legislative changes and the impact of claims inflation in the underlying data.
The four assumptions above significantly influence the Company’s determination of initial expected loss ratios and expected loss reporting and payment patterns that are the key inputs which impact potential variability in the estimate of the reserve for loss and LAE and are applicable to each of the Company’s business segments. These factors are combined with the actuarial judgment exercised by our reserving actuaries. While there can be no assurance that any of the above assumptions will prove to be correct, we believe that this process represents a realistic and appropriate basis for estimating the reserve for loss and LAE. Loss emergence factors and expected loss ratios used in the reserving process are based on a blend of our own direct experience, cedant experience and industry benchmarks, when appropriate. The benchmarks selected were those that we believe are most similar to our underwriting business.
Factors Creating Uncertainty in the Estimation of the Reserve for Loss and LAE: While management does not include an explicit or implicit provision for uncertainty in its reserve for loss and LAE, 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 reserve for loss and LAE. Time lags in the reporting of losses can also introduce further ambiguity to the process of estimating reserve for loss and LAE.
The inherent uncertainty of estimating the Company’s reserve for loss and LAE increases principally due to:
•the lag in time between the time claims are initially reported to the ceding company and the time they are ultimately reported through one or more reinsurance broker intermediaries to the Company;
•the differing case reserving practices among ceding companies;
•changes to characteristics of a claim over time, such as future medical needs or assessment of liability;
•the diversity of loss development patterns among different types of reinsurance treaties or contracts;
•the Company’s need to rely on its ceding companies for loss information, which also exposes the Company to changes in the reserving philosophy of the ceding company and the adequacy of its underlying case reserves;
•changes in internal ceding company operations such as alterations in claims handling procedures; and
•the Company's ability to properly parameterize the reserving analysis for each type of exposure, including those that may be unique to the Company or the industry.
To verify the accuracy and completeness of the information provided to us by our ceding company counterparties, the Company’s actuaries, accountants and claims personnel perform claims reviews, and at times also accounting and financial audits, of the Company’s ceding companies. Any material findings are communicated to the ceding companies and utilized in the establishment or revision of the Company’s case reserves and related IBNR reserve. On occasion, these reviews reveal that the ceding company’s reported loss and LAE do not comport with the terms of the contract held with the Company. In such events, the Company strives to resolve the outstanding differences in an amicable fashion. The large majority of such differences are resolved in this manner. In the infrequent instance where an amicable solution is not feasible, the Company’s policy is to vigorously defend its position in litigation or arbitration. At December 31, 2024, the Company was not involved in any material claims litigation or arbitration proceedings.
Due to the large volume of potential transactions that must be recorded in the insurance and reinsurance industry, backlogs in the recording of the Company’s business activities can also impair the accuracy of its loss and LAE reserve estimates. At December 31, 2024, there were no significant backlogs related to the processing of policy or contract information in any of our reporting segments.
The Company assumes in its loss and LAE reserving process that, on average, the time period between the recording of expected losses and the reporting of actual losses are predictable when measured in the aggregate and over time. The time period over which all losses are expected to be reported to the Company varies significantly by line of business. This period can range from a few quarters for some lines, such as property, to many years for some casualty lines of business. To the extent that actual reported losses are reported more quickly or more slowly than expected, the Company may adjust its estimate of ultimate loss accordingly.
Potential Volatility in the Reserve for Loss and LAE: In addition to the factors creating uncertainty in the Company’s estimate of loss and LAE, the Company’s estimated reserve for loss and LAE can change over time because of unexpected changes in the external environment. Potential changing external factors include:
•changes in the inflation rate for goods and services related to the covered damages;
•changes in the general economic environment that could cause unanticipated changes in claim frequency or severity;
•changes in the litigation environment regarding the representation of plaintiffs and potential plaintiffs;
•changes in the judicial and/or arbitration environment regarding the interpretation of policy and contract provisions relating to the determination of coverage and/or the amount of damages awarded for certain types of claims;
•changes in the social environment regarding the general attitude of juries in the determination of liability and damages;
•changes in the legislative environment regarding the definition of damages;
•new types of injuries caused by new types of injurious activities or exposures; and
•assessment of changes in ceding company case reserving and reporting patterns.
The change in loss reserve estimates from the prior year is referred to as Prior Year Development ("PPD"). We experienced adverse PPD of $154.4 million for the year ended December 31, 2024 compared to adverse PPD of $38.2 million for the year ended December 31, 2023, primarily within the AmTrust Reinsurance segment for both respective years.
Please refer to “Notes to Consolidated Financial Statements - Note 9 - Reserve for Loss and Loss Adjustment Expenses” included under Item 8. "Financial Statements and Supplementary Data" of this Form 10-K for further details.
The Company, in the analysis of reserves for loss and LAE, in addition to selecting a best point estimate, makes a selection of a range of reasonable reserves. This range is based on a combination of objective and subjective data, including the
underlying characteristics of the exposure, the volatility in historical emergence, the credibility of the information available to estimate the reserve for loss and LAE, and professional actuarial judgement. The size of the range is related to the level of confidence associated with the point estimate, as well as the amount of uncertainty inherent in the characteristics of the exposure being evaluated.
Based on this range of reasonable reserves, our required reserves could increase by approximately $83.4 million, or 10.5%, of our consolidated gross loss and LAE reserves, excluding the impact of the LPT/ADC Agreement. If the LPT/ADC Agreement were to be considered, our required reserves could increase by approximately $37.4 million, or 16.8% of our consolidated net loss and LAE reserves.
For the range of reasonable reserves, we have assumed what we believe is an appropriate confidence level. However, the range is not intended to be a measurement of all possible future outcomes, and there can be no assurance that our claim obligation will not vary outside of this range.
Premiums and Commissions and Other Acquisition Expenses
For pro-rata contracts and excess-of-loss contracts where no deposit or minimum premium is specified in the contract, premium written is recognized based on estimates of ultimate premiums provided by the ceding companies. Initial estimates of premium written are recognized in the period in which the underlying risks are incepted. Subsequent adjustments, based on reports of actual premium by the ceding companies, or revisions in estimates, are recorded in the period in which they are determined. Reinsurance premiums assumed are generally earned on a pro rata basis over the terms of the underlying policies or reinsurance contracts.
Contracts and policies written on a "losses occurring" basis cover claims that may occur during the term of the contract or policy, which is typically twelve months. Accordingly, the premium is earned evenly over the contract term. Contracts which are written on a "risks attaching" basis cover claims from all underlying insurance policies written during the terms of such contracts. Premiums earned on such contracts extend beyond the original term of the reinsurance contract, typically resulting in recognition of premiums earned over a twenty-four-month period.
Reinsurance premiums on specialty risk and extended warranty are earned based on the estimated program coverage period. These estimates are based on the expected distribution of coverage periods by contract at inception, because a single contract may contain multiple coverage period options and these estimates are revised based on the actual coverage period selected by the original insured.
Unearned premiums represent the portion of premiums written which is applicable to the unexpired term of the contract or policy in force. These premiums can be subject to estimates based upon information received from ceding companies and any subsequent differences arising on such estimates are recorded in the period in which they are determined.
The Company provides proportional and non-proportional reinsurance coverage to cedants (insurance companies). Cedants' actual premiums are unknown at the time they enter into reinsurance agreement so treaties are based upon estimates of those premiums at the time the treaties are written and are typically adjusted as premiums are known. Reporting delays are inherent in the reinsurance industry and vary in length by type of treaty. As delays can vary from a few weeks to a year or sometimes longer, the Company produces accounting estimates to report premiums and commission and other acquisition expenses until it receives the cedants’ actual results. Under proportional treaties, the Company shares proportionally in both the premiums and losses of the cedant and pays the cedant a commission to cover the cedants' acquisition expenses. Under this type of treaty, the Company’s ultimate premiums written and earned and acquisition expenses are not known at the inception of the treaty and must be estimated until the cedant reports its actual results to the Company. Under non-proportional treaties, the Company is typically exposed to loss events in excess of a predetermined dollar amount or loss ratio and receives a deposit or minimum premium, which is subject to adjustment depending on the premium volume written by the cedant.
Reported premiums written and earned and commission and other acquisition expenses on proportional treaties are generally based upon reports received from cedants and brokers, supplemented by the Company’s own estimates of premiums written and commission and other acquisition expenses for which ceding company reports have not been received. Premium and acquisition expense estimates are determined at the individual treaty level based upon contract provisions. The determination of estimates requires a review of the Company’s experience with cedants, a thorough understanding of the individual characteristics of each line of business and the ability to project the impact of current economic indicators on the volume of business written and ceded by the Company’s cedants. Estimates for premiums and commission and other acquisition expenses are updated continuously as new information is received from the cedants. Differences between such estimates and actual amounts are recorded in the period in which estimates are changed or the actual amounts are determined.
Assessing whether or not a reinsurance contract meets the condition for risk transfer requires judgment. The determination of risk transfer is critical to reporting premiums written and is based, in part, on the use of actuarial and pricing models and assumptions. If we determine that a reinsurance contract does not transfer sufficient risk, we account for the contract as a deposit liability rather than a premium written.
Acquisition expenses represent the costs of writing business that vary with, and are primarily related to, the production of the business. Acquisition expenses that are related to successful contracts are deferred and recognized as expense over the same period in which the related premiums are earned. Only certain expenses incurred in the successful acquisition of new and renewal insurance contracts are capitalized. Those expenses include incremental direct costs of contract acquisition that result directly from and are essential to the contract transaction and would not have been incurred had the contract transaction not occurred. All other acquisition-related expenses, such as costs incurred for soliciting business, administration, and unsuccessful
acquisition or renewal efforts are charged to expense as incurred. Administrative expenses, including rent, depreciation, occupancy, equipment, and all other general overhead expenses are considered indirect and are expensed as incurred.
The Company considers anticipated investment income in determining the recoverability of these deferred costs and believes they are fully recoverable. A premium deficiency is recognized if the sum of anticipated losses and LAE, unamortized acquisition expenses and anticipated investment income exceed unearned premium. At December 31, 2024, a premium deficiency of $3.3 million was recognized for the AmTrust Quota Share with the Company accelerating the amortization of deferred acquisition costs to the extent of the deficiency. If in future periods the premium deficiency exhausts the remaining deferred acquisition costs, the Company would have to further establish a premium deficiency liability for any forecasted deficiencies estimated in the remaining unearned premium.
Retroactive Reinsurance
Retroactive reinsurance policies provide indemnification for losses and LAE with respect to past loss events. For our GLS run-off business in our Diversified Reinsurance segment, we use the balance sheet accounting approach for assumed loss portfolio transfers, whereby at the inception of the contract there are no premiums or losses recorded in earnings.
At the inception of a run-off retroactive reinsurance contract, if the estimated undiscounted ultimate losses payable are in excess of the premiums received, a deferred charge asset is recorded for the excess; whereas, if the premiums received are in excess of the estimated undiscounted ultimate losses payable, a deferred gain liability is recorded for the excess, such that we do not record any gain or loss at the inception of these retroactive reinsurance contracts. The premium consideration that we charge the ceding companies under retroactive reinsurance contracts may be lower than the undiscounted estimated ultimate losses payable due to the time value of money. After receiving the premium consideration in full from our cedents at the inception of the contract, we invest the premium received over an extended period of time, thereby generating investment income. We expect to generate profits from these retroactive reinsurance contracts when taking into account the premium received and expected investment income, less contractual obligations and expenses.
Deferred charge assets will be recorded in other assets (if and when applicable), and deferred gain liabilities are recorded in other liabilities, and amortized over the estimated claim payment period of the related contract with the periodic amortization reflected in earnings as a component of losses and LAE. The amortization of deferred charge assets and deferred gain liabilities is adjusted at each reporting period to reflect new estimates of the amount and timing of remaining loss and LAE payments. Changes in the estimated amount and timing of payments of unpaid losses may have an effect on the unamortized deferred charge assets and deferred gain liabilities and the amount of periodic amortization.
Reinsurance Recoverable on Unpaid Losses and Loss Expenses
Reinsurance recoverable balances are reviewed for impairment on a quarterly basis and are presented net of an allowance for expected credit losses. A case-specific allowance for expected credit losses against reinsurance recoverables that the Company deems unlikely to be collected in full, is estimated based on the Company's analysis of amounts due, historical delinquencies and write-offs. In addition, a default analysis is used to estimate an allowance for expected credit losses on the remainder of the reinsurance recoverable balance. The principal components of the default analysis are reinsurance recoverable balances by reinsurer and default factors applied to estimate uncollectible amounts based on reinsurers’ credit ratings and the length of collection periods. The default factors are based on a model developed by a major rating agency. The default analysis considers both current and forecasted economic conditions in the determination of the credit loss allowance.
The Company records credit loss expenses related to reinsurance recoverable in net incurred losses and LAE in the Company’s consolidated statements of income. Any adjustment to the allowance for expected credit losses is recognized in the period in which it is determined. Write-offs of reinsurance recoverable balances, together with associated allowances for expected credit losses, are recognized in the period in which balances are deemed uncollectible. The Company does not have a history of significant write-offs. As of December 31, 2024, the total allowance for expected credit losses on the Company's reinsurance recoverable on unpaid losses was $3.0 million which is discussed in "Notes to Consolidated Financial Statements - Note 8. Reinsurance" under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Fair Value of Financial Instruments
Please refer to "Notes to Consolidated Financial Statements - Note 5. Fair Value of Financial Instruments" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for a discussion on the fair value methodology and valuation techniques used by the Company to determine the fair value of the financial instruments held at December 31, 2024 and 2023.
Allowance for expected credit losses associated with AFS fixed maturities and other investments
Please refer to "Notes to Consolidated Financial Statements - Note 2. Significant Accounting Policies" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for a discussion on the impairment evaluation performed by the Company on its investment portfolio. For the years ended December 31, 2024 and 2023, the Company did not recognize any impairment or allowance for expected credit losses on its AFS securities in its results of operation. There was $1.0 million recognized in opening retained earnings on the Company's other investments on January 1, 2023. Please see "Notes to Consolidated Financial Statements: Note 4. Investments" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further details.
Results of Operations
The following table sets forth our selected Consolidated Statement of Income data for each of the years indicated:
For the Year Ended December 31, 2024 2023
($ in thousands)
Gross premiums written
$ 33,196 $ 23,466
Net premiums written
$ 33,063 $ 23,168
Net premiums earned
$ 49,474 $ 43,969
Other insurance (expense) revenue, net (24,194) 39
Net loss and LAE
(186,127) (61,228)
Commission and other acquisition expenses
(24,310) (19,462)
General and administrative expenses(1)
(12,214) (12,800)
Underwriting loss(2)
(197,371) (49,482)
Other general and administrative expenses(1)
(23,134) (17,996)
Net investment income 25,546 37,378
Net realized and unrealized investment gains 5,610 7,848
Foreign exchange and other gains (losses), net
7,001 (5,741)
Interest and amortization expenses (19,266) (18,226)
Income tax expense
(1,055) (196)
Interest in income of equity method investments
1,700 7,846
Net loss
$ (200,969) $ (38,569)
(1)Underwriting related general and administrative expenses is a non-GAAP measure. Please refer to "General and Administrative Expenses" below for additional information related to these corporate expenses and the reconciliation to those presented in our Consolidated Statements of Income.
(2)Underwriting loss is a non-GAAP measure and is calculated as net premiums earned plus other insurance revenue (expense), less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities.
(3)The Company no longer presents certain non-GAAP measures such as combined ratio and its related components in its results of operation, as it believes that as the run-off of its reinsurance portfolios progresses, such ratios are increasingly not meaningful and of less value to readers as they evaluate our financial results.
Net loss attributable to Maiden common shareholders
Net loss for the year ended December 31, 2024 was $201.0 million compared to a net loss of $38.6 million in 2023. The net decrease in our financial results for the year ended December 31, 2024 compared to 2023 was primarily due to:
•underwriting loss of $197.4 million in the year ended December 31, 2024 compared to an underwriting loss of $49.5 million in 2023 largely due to:
•adverse PPD of $154.4 million for the year ended December 31, 2024 compared to adverse PPD of $38.2 million in 2023 detailed as follows:
•Our AmTrust Reinsurance segment had adverse PPD of $147.5 million in 2024, compared to adverse PPD of $33.7 million in 2023; and
•Our Diversified Reinsurance segment had adverse PPD of $6.9 million in 2024, compared to adverse PPD of $4.4 million in 2023.
•on a current accident year basis, an underwriting loss of $42.9 million for the year ended December 31, 2024 compared to an underwriting loss of $11.3 million in 2023, primarily due to results in the AmTrust Reinsurance segment. The increase in the current year underwriting loss is primarily due to $24.3 million in charges related to the resolution of disputed ceded collected premium balances with AmTrust, which is further discussed under the AmTrust Reinsurance segment analysis below.
•lower income from investment activities of $32.9 million for the year ended December 31, 2024 compared to $53.1 million in 2023 primarily due to continued negative operating cash flows due to settlement of claim payments to AmTrust as we run-off existing reinsurance liabilities in the AmTrust Reinsurance segment. The change in investment activities was comprised of:
•net investment income decreased to $25.5 million for the year ended December 31, 2024 compared to $37.4 million that was earned in 2023;
•realized and unrealized investment gains of $5.6 million for the year ended December 31, 2024 compared to gains of $7.8 million in 2023; and
•interest in income of equity method investments of $1.7 million for the year ended December 31, 2024 compared to income of $7.8 million in 2023.
•corporate general and administrative expenses increased to $23.1 million for the year ended December 31, 2024 compared to $18.0 million in 2023, primarily due to expenses related to significant and ongoing strategic initiatives pursued by the Company, including our recently announced business combination with Kestrel. These items were partly offset by:
•foreign exchange and other gains of $7.0 million for the year ended December 31, 2024 compared to foreign exchange and other losses of $5.7 million earned in 2023, as the U.S. dollar strengthened against both the Euro and the British pound.
Net Premiums Written
The table below compares net premiums written by our reportable segments, reconciled to the total consolidated net premiums written for the years ended December 31, 2024 and 2023:
For the Year Ended December 31, 2024 2023 Change in
($ in thousands) Total Total $ %
Diversified Reinsurance
$ 34,749 $ 27,104 $ 7,645 28.2 %
AmTrust Reinsurance (1,686) (3,936) 2,250 (57.2) %
Total $ 33,063 $ 23,168 $ 9,895 42.7 %
Net premiums written for the year ended December 31, 2024 were $33.1 million compared to net premiums written of $23.2 million during 2023 due to the following:
•Net premiums written in the Diversified Reinsurance segment increased by $7.6 million or 28.2% for the year ended December 31, 2024 compared to 2023 primarily due to growth in direct premiums for Credit Life programs written by Maiden LF and Maiden GF; and
•Premiums written in the AmTrust Reinsurance segment increased by $2.3 million for the year ended December 31, 2024 compared to 2023. The negative premiums in the year ended December 31, 2023 reflect cession adjustments of $6.1 million due to the cancellation of cases in one specific program in Specialty Risk and Extended Warranty.
Please refer to the analysis below of our Diversified Reinsurance and AmTrust Reinsurance segments for further details.
Net Premiums Earned
Net premiums earned increased by $5.5 million or 12.5% for the year ended December 31, 2024 compared to 2023. The table below compares net premiums earned by our reportable segments, reconciled to the total consolidated net premiums earned, for the years ended December 31, 2024 and 2023:
For the Year Ended December 31, 2024 2023 Change in
($ in thousands) Total Total $ %
Diversified Reinsurance
$ 35,787 $ 29,039 $ 6,748 23.2 %
AmTrust Reinsurance
13,687 14,930 (1,243) (8.3) %
Total
$ 49,474 $ 43,969 $ 5,505 12.5 %
Net premiums earned in the Diversified Reinsurance segment for the year ended December 31, 2024 increased by $6.7 million or 23.2% compared to 2023 mainly due to growth in Credit Life programs written by Maiden LF and Maiden GF. Please refer to the analysis of our Diversified Reinsurance segment for further discussion.
Net premiums earned in the AmTrust Reinsurance segment for the year ended December 31, 2024 decreased by $1.2 million or 8.3% compared to 2023. Please refer to the analysis of our AmTrust Reinsurance segment for further discussion.
Other Insurance Expenses (Revenue), Net
Other insurance (expense) revenue, net is discussed further in our Diversified Reinsurance and AmTrust Reinsurance segment analysis. For the year ended December 31, 2024 this included $24.3 million in underwriting-related charges for the resolution of disputed ceded collected premium balances with AmTrust effective as of December 31, 2024, which is further discussed under the AmTrust Reinsurance segment analysis below.
Net Investment Income
Net investment income decreased by $11.8 million or 31.7% to $25.5 million for the year ended December 31, 2024 compared to $37.4 million of net investment income in 2023. This was largely driven by lower interest income earned on our funds withheld balance with AmTrust as claim payments were settled through the funds held receivable, combined with higher investment expenses compared to the prior year. The funds withheld balance with AmTrust was fully exhausted during 2024.
Average book yields increased to 4.5% for the year ended December 31, 2024 compared to 4.1% in 2023 due to the following factors:
▪Loan to related party carried a higher weighted average interest rate on a balance of $168.0 million which increased to 7.1% during the year ended December 31, 2024 compared to 7.0% in 2023. The loan to related party represents a larger portion of our fixed income assets now that the funds withheld receivable with AmTrust has been fully utilized, leading to an overall increase in book yields. This was partly offset by:
▪Interest income on our funds withheld receivable decreased by $8.9 million due to a lower average ending funds withheld balance with AmTrust which was $19.7 million during the year ended December 31, 2024 compared to $279.4 million in 2023. Funds withheld receivable from AmTrust earned an annual interest rate of 3.5% for the years ended December 31, 2024 and 2023, respectively. At December 31, 2024, the funds withheld balance with AmTrust decreased to $0.0 million compared to a balance of $128.5 million held at December 31, 2023; and
▪Investment expenses increased by $1.8 million for the year ended December 31, 2024 compared to 2023 driven by $1.6 million of fees incurred related to sales and redemptions in our alternative investment portfolio in the third quarter of 2024.
Average aggregate fixed income assets at December 31, 2024 decreased by 33.4% compared to December 31, 2023 due to the continued run-off of reinsurance liabilities previously written on prospective risks through the funds withheld receivable. For both respective years, we experienced negative operating cash flows due to settlement of claim payments to AmTrust as we run-off existing reinsurance liabilities in the AmTrust Reinsurance segment. Floating rate investments comprise 51.1% of our fixed income investments at December 31, 2024 compared to 40.8% at December 31, 2023.
The following table details our average aggregate fixed income assets (at cost) and investment book yield for the years ended December 31, 2024 and 2023:
For the Year Ended December 31, 2024 2023
($ in thousands)
Average aggregate fixed income assets, at cost (1)
$ 532,661 $ 799,812
Annualized investment book yield 4.5 % 4.1 %
(1)Fixed income assets include AFS securities, cash and restricted cash, funds held receivable, and loan to related party. These amounts are an average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements.
Net Realized and Unrealized Investment Gains
Net realized and unrealized investment gains of $5.6 million were recognized for the year ended December 31, 2024, compared to net realized and unrealized investment gains of $7.8 million in 2023. Total net realized and unrealized investment gains for the years ended December 31, 2024 and 2023 are summarized in the table below by investment category:
For the Year Ended December 31, 2024 2023
Net realized gains (losses): ($ in thousands)
Fixed income assets(1)
$ (730) $ (2,971)
Other investments 9,353 -
Equity securities (3,538) 4,957
Total net realized gains 5,085 1,986
Net unrealized gains (losses):
Other investments 2,197 7,327
Equity securities (1,672) (1,465)
Total net unrealized gains 525 5,862
Total net realized and unrealized investment gains $ 5,610 $ 7,848
For the year ended December 31, 2024, the net investment gains of $5.6 million were primarily due to net realized gains of $9.4 million on the sale of other investments, partially offset by net realized losses of $3.5 million on equity securities. The net realized gains on other investments for the year ended December 31, 2024 were mainly from sales and redemptions of private credit funds and private equity funds during the third quarter of 2024. The sales and redemptions of other investments including equity securities were part of a broader effort to reposition our balance sheet as part of ongoing group strategic initiatives while also strengthening overall liquidity.
Interest in Income of Equity Method Investments
Total interest in income of equity method investments of $1.7 million was recognized for the year ended December 31, 2024 compared to an interest in income of equity method investments of $7.8 million for the year ended December 31, 2023. The Company's equity method investments consisted of real estate investments of $57.5 million and other investments of $23.7 million as of December 31, 2024. The following table details our interest in the income of equity method investments for the years ended December 31, 2024 and 2023, respectively:
For the Year Ended December 31, 2024 2023
($ in thousands)
Other equity method investments $ 1,370 $ 8,211
Real estate investments 330 (448)
Hedge fund investments - 83
Interest in income of equity method investments
$ 1,700 $ 7,846
Net Loss and LAE
Net loss and LAE increased by $124.9 million or 204.0% during the year ended December 31, 2024 compared to 2023 driven by higher net adverse PPD in the AmTrust Reinsurance Segment. Net loss and LAE was impacted by net adverse PPD of $154.4 million in 2024 compared to net adverse PPD of $38.2 million during 2023. Please refer to the individual analysis of our Diversified Reinsurance and AmTrust Reinsurance segments for further details on PPD by lines of business.
The adverse PPD experienced in the AmTrust Reinsurance segment caused a net increase in reinsurance recoverable on unpaid losses under the LPT/ADC Agreement with Cavello of $34.0 million for the year ended December 31, 2024 due to adverse development on loss reserves covered under the LPT/ADC Agreement. The deferred gain on retroactive reinsurance under the LPT/ADC Agreement represents the cumulative adverse development for covered risks in the AmTrust Quota Share as of December 31, 2024. The increase in reinsurance recoverable is net of the amortization of the deferred gain of $4.1 million for the year ended December 31, 2024 which was recognized now that cumulative paid losses have exceeded the minimum retention under the LPT/ADC Agreement starting in the fourth quarter of 2024.
The cessation of active reinsurance underwriting on prospective risks included the termination of the AmTrust Quota Share and European Hospital Liability Quota Share effective January 1, 2019. The segment net loss development is discussed in greater detail in the individual segment discussion and analysis and is primarily associated with the run-off of terminated reinsurance contracts in the AmTrust Reinsurance and Diversified Reinsurance segments.
Commission and Other Acquisition Expenses
Commission and other acquisition expenses increased by $4.8 million or 24.9% for the year ended December 31, 2024 compared to 2023. This was partly due to lower earned premium adjustments in the AmTrust Reinsurance segment as negative premium adjustments in the first quarter of 2023 resulted in lower commission costs and brokerage fees.
Total acquisition expenses increased as a percentage of net premiums earned for the year ended December 31, 2024 driven by the accelerated amortization of deferred acquisition costs upon the recognition of a premium deficiency of $3.3 million in the AmTrust Reinsurance segment. Please see further discussion in the individual segment analysis below.
General and Administrative Expenses
General and administrative expenses include both segment and corporate expenses segregated for analytical purposes as a component of underwriting income. Total general and administrative expenses increased by $4.6 million or 14.8% for the year ended December 31, 2024, compared to 2023.
Corporate general and administrative expenses for the year ended December 31, 2024 increased by $5.1 million or 28.6% compared to 2023 primarily due to $5.9 million in higher professional service fees related to various strategic initiatives. Excluding these non-recurring expenses, our adjusted operating expenses decreased 3.9% to $29.4 million for the year ended December 31, 2024, compared to $30.6 million for the year ended December 31, 2023. The majority of these expenses were related to significant and ongoing strategic initiatives pursued by the Company, including our recently announced business combination with Kestrel and active exploration of finality solutions related to the Company's reinsurance liabilities as discussed in the Business Strategy section.
Corporate expenses also included stock-based incentive compensation costs of $2.0 million compared to $1.7 million in 2023. General and administrative expenses for the years ended December 31, 2024 and 2023 are comprised of:
For the Year Ended December 31, 2024 2023
($ in thousands)
General and administrative expenses - segments
$ 12,214 $ 12,800
General and administrative expenses - corporate
23,134 17,996
Total general and administrative expenses
$ 35,348 $ 30,796
Expenses related to the Company’s IIS business, which is no longer writing new business and has entered into the AmTrust Renewal Rights Agreements, were 19.0% of recurring operating expenses for the year ended December 31, 2024.
Interest and Amortization Expenses
Total interest and amortization expenses for the outstanding Senior Notes issued by Maiden Holdings in 2016 and Maiden NA in 2013 were $19.3 million for the year ended December 31, 2024 compared to $18.2 million in 2023 which included interest expense for the Senior Notes of $19.1 million for both respective years.The issuance costs related to the Senior Notes were capitalized and are being amortized over their effective life using the effective interest method of amortization. Due to changes in the amortization method for the 2013 Senior Notes in 2023, the amortization expense was $0.2 million for the year ended December 31, 2024 compared to amortization income of $0.8 million in 2023.
During the year ended December 31, 2023, the Company realized a gain of $39.9 thousand due to the partial repurchase of the 2013 Senior Notes which was offset against total interest and amortization expenses. Net interest and amortization expenses for the Senior Notes were $18.2 million for year ended December 31, 2023.
Please refer to "Notes to Consolidated Financial Statements - Note 7 - Long-Term Debt" included under Item 8 "Financial Statements and Supplementary Data" of this Form 10-K for further details on the Senior Notes. The weighted average effective interest rate for the Senior Notes was 7.6% for the years ended December 31, 2024 and 2023, respectively.
Foreign Exchange and Other Gains (Losses)
Net foreign exchange and other gains amounted to $7.0 million during the year ended December 31, 2024 compared to net foreign exchange and other losses of $5.7 million in 2023. Net foreign exchange gains of $6.8 million for the year ended December 31, 2024 were attributable to the strengthening of the U.S. dollar on the re-measurement of net loss reserves and insurance related liabilities denominated in British pound and euro. Net foreign exchange losses of $5.7 million during 2023 were attributable to the weakening of the U.S. dollar on the re-measurement of net loss reserves and insurance related liabilities denominated in British pound and euro.
Foreign currency fluctuations are primarily driven by exposures to euro, British pound and other non-USD denominated net loss reserves and insurance related liabilities in excess of foreign currency assets. Our non-USD denominated liabilities at December 31, 2024 included net loss reserves of $355.9 million. Our foreign currency asset exposures at December 31, 2024 included $123.2 million of fixed maturity securities managed by our investment managers who have the discretion to hold foreign currency exposures as part of their total return strategy, $30.0 million of equity method real estate investments denominated in Canadian dollars, as well as $12.7 million of funds withheld receivable.
Income Tax Expense
The Company recognized an income tax expense of $1.1 million for the year ended December 31, 2024 compared to an income tax expense of $0.2 million recognized for 2023. The income tax expense for 2024 and 2023 was largely generated on the operating results of our international subsidiaries. The effective rate of income tax was (0.5)% for the year ended December 31, 2024 compared to an income tax rate of (0.5)% for the year ended December 31, 2023. The effective tax rate on the Company's net loss differs from the statutory rate of zero percent under Bermuda law due to tax on foreign operations, primarily the U.S. and Sweden.
Underwriting Results by Reportable Segment
Diversified Reinsurance Segment
The underwriting results for our Diversified Reinsurance segment for the years ended December 31, 2024 and 2023 were as follows:
For the Year Ended December 31, 2024 2023
($ in thousands)
Gross premiums written
$ 34,882 $ 27,402
Net premiums written
$ 34,749 $ 27,104
Net premiums earned
$ 35,787 $ 29,039
Other insurance revenue, net
65 39
Net loss and LAE
(22,583) (14,230)
Commission and other acquisition expenses
(15,266) (13,879)
General and administrative expenses
(9,441) (10,110)
Underwriting loss
$ (11,438) $ (9,141)
Underwriting loss by business unit is detailed in the table below for the Diversified Reinsurance segment for the years ended December 31, 2024 and 2023:
For the Year Ended December 31, 2024 2023
($ in thousands)
International $ (2,235) $ (4,880)
GLS (8,529) (4,625)
Other run-off lines (674) 364
Underwriting loss $ (11,438) $ (9,141)
Premiums - Gross premiums written increased by $7.5 million, or 27.3% for the year ended December 31, 2024 compared to 2023. Net premiums written for the year ended December 31, 2024 increased by $7.6 million or 28.2% compared to 2023 due to growth in new Credit Life programs written by Maiden LF and Maiden GF. Net premiums earned increased by $6.7 million or 23.2% during the year ended December 31, 2024 compared to 2023.
The growth in written and earned premium was the result of new Credit Life programs written by Maiden LF and Maiden GF in the year ended December 31, 2024. However, as discussed in the "Overview" section, Maiden LF and Maiden GF are no longer writing new business and have entered into the AmTrust Renewal Rights Agreements which are expected to cover certain programs of Maiden LF and Maiden GF's primary business written in Sweden, Norway, other Nordic countries, the United Kingdom and Ireland. Also, on November 29, 2024, the Company entered into an agreement to sell its Swedish subsidiaries, Maiden LF and Maiden GF to an expanding group of international insurance and reinsurance companies headquartered in the United Kingdom. Maiden LF and Maiden GF were the principal operating subsidiaries of the Company’s IIS platform; therefore we will experience limited premium written beyond 2024 for the Diversified Segment. Please refer to Note 16 - Assets Held for Sale of the Notes to Consolidated Financial Statements included in Part II Item 8. "Financial Statements and Supplementary Data for further information.
Other Insurance Revenue, Net - Total other insurance revenue, net includes service fee income generated by our GLS business, fair value changes in underwriting-related derivatives related to certain coverages on retroactive reinsurance contracts written by GLS, and fee income derived from our IIS business not directly associated with premium revenue assumed. Total other insurance revenue, net by source for the years ended December 31, 2024 and 2023 is detailed in the table below:
For the Year Ended December 31, 2024 2023 Change in $
($ in thousands)
Change in fair value of non-hedged underwriting-related derivatives $ - $ (230) $ 230
Other service fee income 46 169 (123)
International fee income 19 100 (81)
Total other insurance revenue, net
$ 65 $ 39 $ 26
Net Loss and LAE - Net loss and LAE increased by $8.4 million for the year ended December 31, 2024 compared to 2023. Net Loss and LAE was impacted by adverse PPD of $6.9 million in 2024 compared to adverse PPD of $4.4 million experienced for 2023. The adverse PPD in 2024 was primarily due to adverse experience in GLS with unfavorable development also experienced in our International and facultative runoff lines. The adverse PPD experienced in 2023 was primarily due to German auto programs in run-off, along with development in European Capital Solutions and other runoff business lines. It also included the recognition of expected credit losses on reinsurance recoverable on unpaid losses recognized during the year.
The table below details prior year loss development by line of business for the years ended December 31, 2024 and 2023:
For the Year Ended December 31, 2024 2023
Prior Year Loss Development adverse (favorable) ($ in thousands)
IIS business $ 793 $ 2,504
GLS 5,265 954
Other run-off lines 850 982
Total Diversified Reinsurance Prior Year Development $ 6,908 $ 4,440
Commission and Other Acquisition Expenses - Commission and other acquisition expenses increased by $1.4 million or 10.0% for the year ended December 31, 2024 compared to 2023 due to growth in new Credit Life programs written by Maiden LF and GF. Total acquisition costs as a percentage of net premiums earned decreased due to lower profit commissions incurred as a result of recent loss experience on certain International programs.
General and Administrative Expenses - General and administrative expenses decreased by $0.7 million or 6.6% for the year ended December 31, 2024 compared to 2023 largely due to lower staff incentive compensation compared to the prior year.
AmTrust Reinsurance Segment
The AmTrust Reinsurance segment reported an underwriting loss of $185.9 million for the year ended December 31, 2024 compared to an underwriting loss of $40.3 million for the year ended December 31, 2023. The underwriting results for the AmTrust Reinsurance segment for the years ended December 31, 2024 and 2023 were as follows:
For the Year Ended December 31, 2024 2023
($ in thousands)
Gross premiums written
$ (1,686) $ (3,936)
Net premiums written
$ (1,686) $ (3,936)
Net premiums earned
$ 13,687 $ 14,930
Other insurance expenses (24,259) -
Net loss and LAE
(163,544) (46,998)
Commission and other acquisition expenses
(9,044) (5,583)
General and administrative expenses
(2,773) (2,690)
Underwriting loss
$ (185,933) $ (40,341)
Premiums - The table below shows net premiums written by category for the years ended December 31, 2024 and 2023:
For the Year Ended December 31, 2024 2023
($ in thousands)
Net Premiums Written
Small Commercial Business
$ (643) 38.1 % $ (465) 11.8 %
Specialty Program
(31) 1.9 % 156 (4.0) %
Specialty Risk and Extended Warranty
(1,012) 60.0 % (3,627) 92.2 %
Total AmTrust Reinsurance
$ (1,686) 100.0 % $ (3,936) 100.0 %
The negative premiums for the year ended December 31, 2024 and 2023 reflect the termination of the AmTrust Quota Share and the European Hospital Liability Quota Share as of January 1, 2019 which has resulted in no new business written under these contracts since 2018. The negative premiums written for the year ended December 31, 2024 is largely due to premiums cancellation of cases from 2020 in Specialty Risk and Extended Warranty. The negative gross and net premiums written for the year ended December 31, 2023 reflect cession adjustments of $6.1 million due to cancellation of cases in a certain program in Specialty Risk and Extended Warranty.
Net premiums earned decreased by $1.2 million for the year ended December 31, 2024 compared to 2023. The table below details net premiums earned by category for the years ended December 31, 2024 and 2023:
For the Year Ended December 31, 2024 2023
($ in thousands) Total % of Total Total % of Total
Net Premiums Earned
Small Commercial Business
$ (643) (4.7) % $ (465) (3.1) %
Specialty Program
(31) (0.2) % 156 1.0 %
Specialty Risk and Extended Warranty
14,361 104.9 % 15,239 102.1 %
Total AmTrust Reinsurance
$ 13,687 100.0 % $ 14,930 100.0 %
Other Insurance Expenses - This included $24.3 million in underwriting related charges incurred during the fourth quarter of 2024 which represents the settlement of a dispute over cessions of ceded uncollected premium made by AII to Maiden Reinsurance, the principal amount of which will be payable by Maiden Reinsurance in quarterly installments through the maturity date of December 31, 2032. Please refer to Note 10 - Related Party Transactions included under Part II Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further information.
Net Loss and Loss Adjustment Expenses - Net loss and LAE increased by $116.5 million for the year ended December 31, 2024 compared to 2023 driven by significantly higher net adverse PPD for the AmTrust Quota Share experienced in 2024.
The table below shows total adverse PPD for the AmTrust Reinsurance segment for the years ended December 31, 2024 and 2023:
For the Year Ended December 31, 2024 2023
PPD adverse (favorable) ($ in thousands)
AmTrust Quota Share $ 104,952 $ 24,098
European Hospital Liability Quota Share 47,015 10,268
AmTrust other runoff (4,443) (618)
Total AmTrust Reinsurance PPD $ 147,524 $ 33,748
AmTrust Quota Share
Net adverse PPD was $105.0 million for the year ended December 31, 2024 compared to net adverse PPD of $24.1 million in 2023. The table below details prior year loss development by the most significant lines of business for AmTrust Quota Share for the years ended December 31, 2024 and 2023:
For the Year Ended December 31, 2024 2023
PPD adverse (favorable) before the impact of the LPT/ADC Agreement ($ in thousands)
Workers Compensation $ (18,145) $ (17,956)
Commercial Auto Liability (3,536) 9,747
General Liability 92,997 31,703
Other Lines 56 (14)
Other Specialty Risk & Extended Warranty 33,580 618
Total AmTrust Quota Share PPD $ 104,952 $ 24,098
Net adverse PPD for the AmTrust Quota Share during the year ended December 31, 2024 was primarily due to significant adverse PPD in General Liability and Other Specialty Risk & Extended Warranty for two principal sub-lines of business:
• adverse development of $79.0 million in U.S. Program General Liability business ceded in the Specialty Risk and Extended Warranty segment as one specific program has continued to experience significant adverse development from construction defect coverage for accident years 2014 to 2022 and new claims emergence reported by AmTrust was again far greater than expected. This program includes multiple year policies written in venues with lengthy statutes of repose which result in reporting periods that extend for many years; and
• adverse development of $33.6 million in U.K. structural defect coverages driven by continued significant emergence during the recent year for policies written in 2011 which are related to both cladding and other perils such as water ingress. The Company's ongoing analysis of this emergence, including additional claims diligence and consultation with subject matter experts concluded that ultimate development patterns may be significantly longer than previously estimated and the Company has considered this in its determination of ultimate loss.
This was partly offset by continued favorable development within Workers Compensation business for accident years 2014 to 2018, as well as favorable development within Commercial Auto Liability during the year ended December 31, 2024.
Net adverse prior year reserve development of $24.1 million in the year ended December 31, 2023 for the AmTrust Quota Share was primarily due to reserve strengthening in General Liability and Commercial Auto Liability partly offset by continued favorable development in Workers Compensation due to better than expected loss emergence.
Net adverse PPD for the AmTrust Quota Share of $105.0 million for the year ended December 31, 2024 includes $64.3 million recoverable under the LPT/ADC Agreement to be recognized as future GAAP income over time as recoveries are received subject to the provisions of the LPT/ADC Agreement and the applicable GAAP accounting rules. Net adverse PPD for the AmTrust Quota Share of $24.1 million for the year ended December 31, 2023 includes $29.3 million recoverable under the LPT/ADC Agreement to be recognized as future GAAP income over time as recoveries are received subject to the provisions of the LPT/ADC Agreement and the applicable GAAP accounting rules. During the fourth quarter of 2024, recoveries from the LPT/ADC Agreement commenced and are recognized as GAAP income pursuant to the applicable GAAP accounting rules. Amortization of the deferred gain was $4.1 million for the year ended December 31, 2024 since cumulative paid losses have now exceeded the retention under the LPT/ADC Agreement. Please refer to Other Balance Sheet Changes in "Liquidity & Capital Resources" for a table that details the change in the deferred gain on reinsurance recoverable under the LPT/ADC Agreement for the years ended December 31, 2024 and 2023.
As of December 31, 2024, the reinsurance recoverable on unpaid losses under the LPT/ADC Agreement was $532.9 million (2023 - $515.5 million). The LPT/ADC Agreement provides Maiden Reinsurance with $155.0 million in adverse PPD cover over its carried AmTrust Quota Share loss reserves at December 31, 2018. The reinsurance recoverable includes the deferred gain liability under the LPT/ADC Agreement of $105.0 million (2023 - $70.9 million). At December 31, 2024, there was $45.9 million remaining in available coverage under the LPT/ADC Agreement (2023 - $84.1 million).
Please see Note 8 - Reinsurance included under Part II Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further information on the reinsurance recoverable related to the LPT/ADC Agreement.
European Hospital Liability Quota Share
Net adverse loss development on European Hospital Liability Quota Share was primarily driven by emergence of loss data from adverse claim verdicts on older claims prior to 2014, resulting in strengthening of loss development tail on underwriting years 2011 to 2014. For the European Hospital Liability Quota Share, certain tables used in determining non-economic damages were updated in the year ended December 31, 2024 by the applicable authorities in Italy and increased compensation values for subject claims. The Company analyzed the potential impact of the changes to these tables on its estimate of ultimate loss for the Hospital Liability contract, including consultation with specialist third-party subject matter experts. In combination with the continued emergence of loss data from adverse claims verdicts noted above, these revisions significantly impacted the Company's evaluation of ultimate loss on these claims resulting in adverse development of $47.0 million incurred for the year ended December 31, 2024.
Net adverse development for European Hospital Liability of $10.3 million for the year ended December 31, 2023 was driven by emergence of loss data during 2023 on underwriting years 2011 to 2016. To the extent recent adverse loss development in European Hospital Liability continues, the European Hospital Liability Quota Share may have a more significant negative impact on our underwriting results than the AmTrust Quota Share, particularly as the deferred gain recognized under the LPT/ADC Agreement is amortized into GAAP income.
Commission and Other Acquisition Expenses - Commission and other acquisition expenses increased by $3.5 million for the year ended December 31, 2024 compared to 2023. Total acquisition costs increased as a percentage of net premiums earned in 2024 due to the accelerated amortization of deferred acquisition costs upon the recognition of a premium deficiency of $3.3 million in the AmTrust Reinsurance segment for the year ended December 31, 2024.
General and Administrative Expenses - General and administrative expenses increased by $0.1 million or 3.1% for the year ended December 31, 2024 compared to 2023 largely due to increases in expenses related to letter of credit fees for collateral provided to AmTrust under the LPT/ADC Agreement as liabilities covered by that agreement continued to 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 in the form of dividends, advances, loans and other permitted distributions from our subsidiary companies to pay expenses and make dividend payments on our common shares. The jurisdictions in which our operating subsidiaries are licensed to write business impose regulations requiring companies to maintain or meet statutory solvency and liquidity requirements and also place restrictions on the declaration and payment of dividends and other distributions.
As of December 31, 2024, the Company had investable assets of $699.4 million compared to $914.3 million as of December 31, 2023. Investable assets include the combined total of our investments, cash and restricted cash (including cash equivalents), loan to a related party and funds withheld receivable. Our investable assets decreased by $214.9 million during the year ended December 31, 2024 due to the continued run-off of our reinsurance portfolio liabilities as claim payments were settled primarily from the funds withheld receivable, which decreased by $131.3 million in the year ended December 31, 2024.
As discussed in "Item 1. Business", Maiden Reinsurance re-domesticated from Bermuda to Vermont on March 16, 2020. We continue to be actively engaged with the Vermont DFR regarding Maiden Reinsurance's longer term business plan, including its investment policy, changes to which require prior regulatory approval as stipulated by Vermont law or the Vermont DFR for any active underwriting, capital management or other strategic initiatives, including our proposed combination with Kestrel. Maiden Reinsurance has received all necessary approvals required to date by the Vermont DFR, including GLS activities and its investment policy, which includes: 1) the expansion of approved asset classes for investment reflecting not only Maiden Reinsurance’s solvency position but the material reduction in required capital necessary to operate its business; and 2) the purchase of affiliated securities as demonstrated in recent common share repurchases. The Investment Policy, as approved and as amended, maintains our established investment management and governance practices.
Maiden Reinsurance is regulated by the Vermont DFR and is the principal operating subsidiary of Maiden Holdings. At December 31, 2024, Maiden Reinsurance had statutory capital and surplus of $737.2 million, exceeding the amounts required to be maintained of $88.8 million at December 31, 2024. Under its license as an affiliated reinsurer under the captive licensing laws in the State of Vermont, Maiden Reinsurance requires the approval of the Vermont DFR for the payment of any dividends. In 2023 and 2024, the Vermont DFR approved an annual dividend program to be paid by Maiden Reinsurance to Maiden NA, with notification to the Vermont DFR as dividends are paid. During the year ended December 31, 2024, Maiden Reinsurance paid dividends of $25.0 million to Maiden NA (2023 - $25.0 million). During the years ended December 31, 2024 and 2023, Maiden NA did not pay any dividends to Maiden Holdings.
Maiden Holdings has two Swedish domiciled operating subsidiaries, Maiden LF and Maiden GF, which are both subject to regulation and supervision by the Swedish Finansinspektionen ("Swedish FSA"). As discussed in "Item 1. Business", we have entered into an agreement to sell Maiden LF and Maiden GF, which is pending regulatory approval. At December 31, 2024, Maiden LF and Maiden GF had statutory capital and surplus of $6.6 million and $6.9 million, respectively, exceeding the amounts required to be maintained of $4.1 million and $4.1 million, respectively, at December 31, 2024. Maiden LF and Maiden GF are subject to statutory and regulatory restrictions under the Swedish FSA that limit the maximum amount of annual dividends or distributions paid by Maiden LF and Maiden GF to Maiden Holdings. At December 31, 2024, Maiden LF and Maiden GF are not allowed to pay dividends or distributions without the permission of the Swedish FSA. During the years ended December 31, 2024 and 2023, Maiden LF and Maiden GF did not pay any dividends to Maiden Holdings.
Maiden Holdings’ wholly owned U.K. subsidiary, Maiden Global, operates as a reinsurance services and holding company. Maiden Global is subject to regulation by the U.K. FCA. At December 31, 2024, Maiden Global is allowed to pay dividends or distributions not exceeding $3.3 million. Maiden Global paid dividends of $0.0 million to Maiden Holdings during the year ended December 31, 2024 (2023 - $1.0 million).
We may experience continued volatility in our results of operations which could negatively impact our financial condition and create a reduction in the amount of available distribution or dividend capacity from our regulated reinsurance subsidiaries, which would also reduce liquidity. Further, we and our insurance subsidiaries may need additional capital to maintain compliance with regulatory capital requirements and/or be required to post additional collateral under existing reinsurance arrangements, which could reduce our liquidity.
Operating, investing and financing cash flows
Our sources of funds historically have consisted of premium receipts net of commissions and brokerage, investment income, net proceeds from capital raising activities, and proceeds from sales, maturities, pay downs and redemption of investments. Cash is currently used primarily to pay loss and LAE, ceded reinsurance premium, general and administrative expenses, and interest expense, with the remainder of cash in excess of our operating requirements made available to our investment managers for investment in accordance with our investment policy, as well as for capital management such as repurchasing our shares.
Our business has undergone significant changes since 2018. As previously noted, we have engaged in a series of transactions that have materially reduced our balance sheet risk and transformed our operations. As a result of these transactions, we are not presently engaged in any active underwriting of new prospective reinsurance business thus our net premiums written will continue to be materially lower and investment income will become a significantly larger portion of our total revenues. We have not written any new retroactive risks through GLS since December 30, 2022, and this will be smaller in relation to the run-off of our prior reinsurance business. During the year ended December 31, 2024, we experienced negative operating cash flows as we run off the AmTrust Reinsurance segment reserves as shown in the cash flows table further below.
We currently expect a trend of positive investing cash flows into 2025, and we expect to use funds from cash and investment portfolios, collected premiums on reinsurance contracts in force or being run-off, investment income and proceeds from investment sales and redemptions to meet our expected claims payments and operational expenses. Claim payments will be principally from the run-off of existing reserves for losses and LAE. A significant portion of those liabilities are collateralized and claim payments will be funded by using this collateral which should provide sufficient funding to fulfill those obligations.
The Company’s management believes our current sources of liquidity are adequate to meet its cash requirements for the next twelve months as we generally expect negative operating cash flows to be sufficiently offset by positive investing cash flows. While we continue to expect our cash flows to be sufficient to meet our cash requirements and to operate our business, our ability to execute our asset and capital management initiatives are dependent on maintaining adequate levels of unrestricted liquidity and cash flows. Our recent expanded asset management strategy can be impacted by both investment specific and broader financial market conditions and may not produce the expected liquidity and cash flows these investments are designed to achieve, or the timing thereof may also be impacted by those factors.
At December 31, 2024, unrestricted cash, cash equivalents and fixed maturity investments were $75.0 million compared to $73.4 million held at December 31, 2023, an increase of $1.6 million during the year ended December 31, 2024. Please see the related discussion on cash flows from investing and financing activities below. The table below summarizes our operating, investing and financing cash flows for the years ended December 31, 2024 and 2023:
For the Year Ended December 31, 2024 2023
($ in thousands)
Operating activities
$ (67,449) $ (59,778)
Investing activities
77,740 58,512
Financing activities
(3,735) (3,015)
Effect of exchange rate changes on foreign currency cash
(1,150) 335
Total increase (decrease) in cash, cash equivalents and restricted cash
$ 5,406 $ (3,946)
Cash Flows from Operating Activities
Cash flows used in operating activities for the year ended December 31, 2024 were $67.4 million compared to cash flows used in operating activities of $59.8 million for the year ended December 31, 2023. The increase in cash used in operating cash flows were largely due to significantly weaker operating results during 2024 compared to 2023.
Cash Flows from Investing Activities
Cash flows provided by investing activities consist of proceeds from sales and maturities of investments net of payments for investments acquired. Net cash provided by investing activities was $77.7 million during the year ended December 31, 2024 compared to net cash provided by investing activities of $58.5 million for 2023.
For the year ended December 31, 2024, the proceeds from the sales, maturities and calls exceeded the purchases of fixed maturity securities by $14.9 million compared to net proceeds from sales and maturities of $77.0 million during 2023. The size of the fixed income investment portfolio continues to decrease as claims payments are made for the runoff of existing loss reserves for contracts related to the terminated AmTrust Quota Share and the European Hospital Liability Quota Share.
Cash flows provided by investing activities for year ended December 31, 2024 included net proceeds from sales and redemption of $63.2 million for alternative investments during the year ended December 31, 2024 compared to net purchases of alternative investments of $18.4 million in 2023. The significant sales and redemptions of alternative investments during the year ended December 31, 2024 was part of a broader effort to reposition our balance sheet as part of ongoing group strategic initiatives while also strengthening overall liquidity.
Cash Flows from Financing Activities
Cash flows used in financing activities were $3.7 million for the year ended December 31, 2024 compared to $3.0 million during 2023, largely due to common share repurchases under the Company's authorized share repurchase program.
During the year ended December 31, 2024, the Company repurchased 1,871,755 common shares at an average price per share of $1.87 for a total cost of $3.5 million under the Company's authorized common share repurchase plan. During the year ended December 31, 2023, the Company repurchased 1,439,575 common shares at an average price per share of $1.83 for a total cost of $2.6 million under the Company's authorized common share repurchase plan.
No dividends on common shares were paid during the year ended December 31, 2024 and 2023. Our Board of Directors have not declared any common share dividends since the third quarter of 2018.
Restrictions, Collateral and Specific Requirements
Maiden Reinsurance is generally required to post collateral security with respect to any reinsurance liabilities it assumes from ceding insurers domiciled in the U.S. to obtain credit on their U.S. statutory financial statements with respect to reinsurance recoverables due to them. Consequently, cash and cash equivalents and investments are pledged in favor of ceding companies to comply with relevant insurance regulations or contractual requirements.
At December 31, 2024, the Company had letters of credit outstanding of $36.9 million for collateral purposes which are secured by cash and fixed maturities with a fair value of $42.6 million.
At December 31, 2024 and 2023, restricted cash and cash equivalents and fixed maturity investments used as collateral were $192.4 million and $219.9 million, respectively. This collateral represents 71.9% and 75.0% of the fair value of total fixed maturity investments and cash, restricted cash and cash equivalents at December 31, 2024 and 2023, respectively. The following table provides additional information on restricted cash and fixed maturities used as collateral at December 31, 2024 and 2023:
December 31, 2024 2023
($ in thousands) Restricted Cash &
Equivalents Fixed
Maturities Total Restricted Cash &
Equivalents Fixed
Maturities Total
Diversified Reinsurance $ 7,608 $ 55,848 $ 63,456 $ 6,019 $ 61,192 $ 67,211
AmTrust Reinsurance 1,406 127,420 128,826 1,247 151,416 152,663
Other 70 - 70 - - -
Total $ 9,084 $ 183,268 $ 192,352 $ 7,266 $ 212,608 $ 219,874
As a % of Consolidated Balance Sheet captions 100.0% 78.8% 79.6% 100.0% 84.8% 85.3%
Maiden Reinsurance loaned funds of $168.0 million to AmTrust at December 31, 2024 and 2023, respectively, to partially satisfy its collateral requirements with AII. Advances under the loan are secured by promissory notes and the loan is carried at cost. On January 30, 2019, in connection with the termination of the AmTrust Quota Share, the Company and AmTrust amended the Loan Agreement between Maiden Reinsurance, AmTrust and AII, originally entered into on November 16, 2007, to extend the maturity date to January 1, 2025 and the parties acknowledged that due to the termination of the AmTrust Quota Share, no further loans or advances may be made pursuant to the Loan Agreement.
Subsequent to December 31, 2024, Maiden Reinsurance and AmTrust amended the terms of the loan agreement provided by Maiden Reinsurance to AII. Under the new terms, an Amended and Restated Loan Agreement was entered into effective January 1, 2025 (“AR Loan Agreement”), by which the principal amount of the collateral loan will be repaid (subject to satisfying stipulated collateral funding requirements) on or before the extended maturity date of January 1, 2033 pursuant to the repayment schedule set forth in the AR Loan Agreement. The principal amount shall equal (a) $152.4 million minus (b) the amount of payments and any prepayments made by or on behalf of AmTrust from time to time. Interest will be payable at a rate equivalent to the Fed Funds rate plus 150 basis points per annum under the terms of the AR Loan Agreement.
Maiden Reinsurance and AmTrust also entered into a new Loan Agreement (“Premium Repayment Loan Agreement”), effective on December 31, 2024, by which Maiden Reinsurance will repay AII the principal amount of $24.3 million representing the settlement of a dispute over cessions of ceded uncollected premium made by AII to Maiden Reinsurance, payable by Maiden Reinsurance in quarterly installments through the maturity date of December 31, 2032. The execution and delivery of the AR Loan Agreement and the Premium Repayment Loan Agreement were approved by the Vermont DFR on February 7, 2025. AmTrust may offset any amount payable against any amount due and unpaid by Maiden Reinsurance, under any agreement between AmTrust or its affiliate and Maiden Reinsurance or its affiliate, including without limitation, the European Hospital Liability Quota Share, dated April 1, 2011, as amended.
Please refer to Note 17 - Subsequent Events and Note 10 - Related Party Transactions included under Part II Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further information on these items.
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. Although the investment income derived from these 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 the Company under U.S. law in the State of Vermont. The restrictions may result in lower investment yields on these assets, which may adversely affect our profitability.
We do not anticipate that restrictions on liquidity resulting from restrictions on the payments of dividends by our subsidiary companies or from assets committed in trust accounts or those assets used to collateralize letter of credit facilities will have a material impact on our ability to carry out our normal business activities.
Cash and Investments
Historically, the investment of our funds had generally been designed to ensure safety of principal while generating current income. Accordingly, our fixed income investment portfolio is invested in liquid, investment-grade fixed maturity securities which are all designated as AFS at December 31, 2024. Further, as our insurance liabilities continue to run-off and the required capital to operate our business for regulatory purposes decreases, we expanded Maiden Reinsurance’s investment policy which has been approved by the Vermont DFR. Under this modified investment policy, we expanded the range of asset classes we invest in to enhance the income and total returns our investment portfolio produces. We categorize these investments as alternative investments which include "Other Investments", "Equity Securities", and "Equity Method Investments" on our Consolidated Balance Sheets as discussed in "Note 2 - Significant Accounting Policies" included under Part II Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
As of December 31, 2024 and 2023, our cash and investments consisted of the following captions:
At December 31, 2024 2023
($ in thousands)
Fixed maturities, available-for-sale, at fair value $ 232,613 $ 250,601
Equity investments, at fair value 13,147 41,722
Equity method investments 81,287 80,929
Other investments 157,016 186,388
Total investments 484,063 559,640
Cash and cash equivalents 25,651 35,412
Restricted cash and cash equivalents 9,084 7,266
Total Investments and Cash (including cash equivalents) $ 518,798 $ 602,318
In addition to the discussion on Cash and Cash Equivalents and Fixed Maturities that follows herein, please see "Notes to Consolidated Financial Statements - Note 4 - Investments" included under Part II Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further discussion on our AFS fixed income securities.
Under this revised investment policy, we had increased the amount of alternative investments held and we had expected to continue to increase the amounts invested therein over time. However, as our strategic plans continue to develop, we have begun to modify our approach to this investment policy, and began to reduce our investments and commitments to alternative investments under this policy. The sales and redemptions of other investments including equity securities during the year ended December 31, 2024 were part of a broader effort to reposition our balance sheet as part of ongoing group strategic initiatives while also strengthening overall liquidity. We do not presently anticipate making new commitments to alternative investments in the foreseeable future.
Under our current investment policy, alternative investments could include, but are not limited to, privately held investments, private equities, private credit lending funds, fixed-income funds, hedge funds, equity funds, real estate (including joint ventures and limited partnerships) and other non-fixed-income investments. For further details on our alternative investments, in addition to the discussion of the investments herein, please see "Notes to Consolidated Financial Statements Note 4(b). Other Investments, Equity Securities and Equity Method Investments" included under Part II Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Our investment performance is subject to a variety of risks, including risks related to general economic conditions, market volatility, interest rate fluctuations, foreign exchange risk, liquidity risk and credit and default risk. Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. An increase in interest rates could result in significant losses, realized or unrealized, in the value of our investment portfolio. A portion of our portfolio consists of alternative investments that subject us to restrictions on redemption, which may limit our ability to withdraw funds for some period of time after the initial investment. The values of, and returns on, such investments may also be more volatile.
We believe our other investments, equity securities and equity method investments portfolio provides diversification against our fixed-income investments and an opportunity for improved risk-adjusted return, however, the returns of these investments may be more volatile and we may experience significant unrealized gains or losses in a particular quarter or year. While we believe the returns produced by these investments will exceed our cost of capital, in particular our cost of debt capital, it is too soon to determine if actual returns will achieve this objective and it may be an extended period of time before that determination can be made.
We may utilize and pay fees to various companies to provide investment advisory and/or management services related to these investments. These fees, which would be predominantly based upon the amount of assets under management, are included in net investment income. In addition, costs associated with evaluating, analyzing and monitoring these investments may require additional expenditures than traditional marketable securities.
The substantial majority of our current investments are held by Maiden Reinsurance, whose investment policy was approved by the Vermont DFR. Prior to the exchange of our preference shares for common shares, the Company cumulatively invested $176.4 million in the preference shares of Maiden Holdings which have since been extinguished and exchanged for 41,439,348 common shares of the Company as of December 27, 2022. Therefore, there are no preference shares outstanding.
As of December 31, 2024, Maiden Reinsurance owns 31.1% of the Company's total outstanding common shares which is eliminated for accounting and financial reporting purposes on our condensed consolidated financial statements. The voting power of Maiden Reinsurance, with respect to its common shares, is capped at 9.5% pursuant to the bye-laws of the Company. Treasury shares include 44,750,678 common shares owned by Maiden Reinsurance consisting of 41,439,348 shares issued as part of the Exchange during 2022 and an additional 3,311,330 common shares that were directly purchased on the open market by Maiden Reinsurance under the Company's authorized repurchase plan. The market value of our common shares held by Maiden Reinsurance due to the Exchange and common share repurchases was $75.6 million at December 31, 2024.
Cash & Cash Equivalents
At December 31, 2024, we consider the levels of cash and cash equivalents held to be within our targeted ranges. During periods when interest rates experience greater volatility, we have periodically maintained more cash and cash equivalents to better assess current market conditions and opportunities within our defined risk appetite, and may do so in future periods.
Fixed Maturity Investments
The average yield and average duration of our fixed maturities, by asset class, and our cash and cash equivalents (both restricted and unrestricted) are as follows at December 31, 2024 and 2023, respectively :
December 31, 2024 Original or
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value Average yield(1)
Average duration(2)
AFS Fixed maturities ($ in thousands)
U.S. treasury bonds
$ 84,033 $ 25 $ - $ 84,058 4.5 % 0.1
U.S. agency bonds - mortgage-backed
26,841 - (3,485) 23,356 4.6 % 6.0
Non-U.S. government bonds 38,496 39 (3) 38,532 2.7 % 0.4
Collateralized loan obligations 60,829 4 (130) 60,703 4.1 % 0.2
Corporate bonds
26,589 - (625) 25,964 1.0 % 1.1
Total fixed maturities
236,788 68 (4,243) 232,613 3.7 % 1.0
Cash and cash equivalents
34,735 - - 34,735 1.5 % 0.0
Total
$ 271,523 $ 68 $ (4,243) $ 267,348 3.4 % 0.8
December 31, 2023 Original or
Amortized
Cost Gross
Unrealized
Gains Gross
Unrealized
Losses Fair
Value Average yield(1)
Average duration(2)
AFS fixed maturities
($ in thousands)
U.S. treasury bonds
$ 55,046 $ 8 $ (2) $ 55,052 5.4 % 0.1
U.S. agency bonds - mortgage-backed
29,918 - (3,267) 26,651 4.6 % 6.1
Non-U.S. government bonds 21,219 - (468) 20,751 1.9 % 1.1
Collateralized loan obligations 80,591 - (1,788) 78,803 4.9 % 0.3
Corporate bonds
71,762 - (2,418) 69,344 1.6 % 1.7
Total AFS fixed maturities
258,536 8 (7,943) 250,601 3.8 % 1.3
Cash and cash equivalents
42,678 - - 42,678 2.5 % 0.0
Total
$ 301,214 $ 8 $ (7,943) $ 293,279 3.6 % 1.2
(1) Average yield is calculated by dividing annualized investment income for each sub-component of fixed maturity securities and cash and cash equivalents (including amortization of premium or discount) by amortized cost.
(2) Average duration in years.
During the year ended December 31, 2024, the yield on the 10-year U.S. Treasury bond increased by 70 basis points to 4.58% compared to December 31, 2023. The 10-year U.S. Treasury rate is the key risk-free determinant in the fair value of many of the fixed income securities in our portfolio. Despite an increase in risk-free rates during the year ended December 31, 2024, our fixed maturity investment portfolio generated net unrealized gains of $3.8 million which increased our book value per common share by $0.04 during the period, largely the result of lower duration on corporate and government bonds as well as tightening spreads on collateralized loan obligations. Current outlooks for global monetary policy indicate that quantitative tightening by central banks in the U.S. and globally appear likely to moderate in the near to intermediate term, although central banks have indicated that they maintain the option to either adopt a neutral stance or apply further tightening should data dictate such actions, particularly inflation and labor market data. Recent data suggest that the anticipated moderation of global monetary policy is likely to be deferred in the near-term. Our investment portfolios, in particular our fixed maturity portfolio, may be adversely impacted by unfavorable market conditions caused by these measures, which could cause continued volatility in our results of operations and negatively impact our financial condition.
Interest rate risk is the price sensitivity of a security to changes in interest rates. Credit spread risk is the price sensitivity of a security to changes in credit spreads. As noted, the fair value of our fixed maturity investments will fluctuate with changes in interest rates and credit spreads. We attempt to maintain adequate liquidity in our fixed maturity investments portfolio with a strategy designed to emphasize the preservation of our invested assets and provide sufficient liquidity for the prompt payment of claims and contract liabilities. Because we collateralize a significant portion of our insurance liabilities, unanticipated or large increases in interest rates could require us to utilize significant amounts of unrestricted cash and fixed maturity securities to provide additional collateral, which could impact our asset and capital management strategy described herein.
We also monitor the duration and structure of our investment portfolio as discussed below. As of December 31, 2024, the aggregate hypothetical change in fair value from an immediate 100 basis points increase in interest rates, assuming credit spreads remain constant, in our fixed maturity investments portfolio would decrease the fair value of that portfolio by $3.6 million. Actual shifts in interest rates may not change by the same magnitude across the maturity spectrum or on an individual security and, as a result, the impact on the fair value of our fixed maturity securities may be materially different from the resulting change in value described above.
To limit our exposure to unexpected interest rate increases which would reduce the value of our fixed income securities and reduce our shareholders' equity, we attempt to maintain the duration of our fixed maturity investment portfolio combined with our cash and cash equivalents, both restricted and unrestricted, within a reasonable range of the duration of our loss reserves. At December 31, 2024 and 2023, these respective durations in years were as follows:
December 31, 2024 2023
Fixed maturities and cash and cash equivalents
0.8 1.2
Reserve for loss and LAE - gross of LPT/ADC Agreement reserves 6.4 5.8
Reserve for loss and LAE - net of LPT/ADC Agreement reserves 3.5 1.6
During the year ended December 31, 2024, the weighted average duration of our fixed maturity investment portfolio decreased by 0.4 years to 0.8 years while the duration for reserve for loss and LAE increased by 0.6 years to 6.4 years. The differential in duration between these assets and liabilities may fluctuate over time and, in the case of our fixed maturities, historically has been affected by factors such as market conditions, changes in asset mix and prepayment speeds in the case of both Agency MBS and commercial mortgage-backed securities held. At December 31, 2024, the duration of loss reserves net of the LPT/ADC Agreement was higher than the duration of our fixed maturity investment portfolio.
To limit our exposure to unexpected interest rate increases that could reduce the value of our fixed maturity securities and reduce our shareholders' equity, the Company holds floating rate securities whose fair values are less sensitive to interest rates. At December 31, 2024 and December 31, 2023, 51.1% and 40.8%, respectively, of our fixed income investments were comprised of floating rate securities which are detailed in the table below:
December 31, 2024 2023
($ in thousands) Fair Value % of Total Fair Value % of Total
Floating rate securities
Collateralized loan obligations $ 60,703 13.6 % $ 78,803 13.0 %
Total floating rate AFS fixed maturities at fair value 60,703 13.6 % 78,803 13.0 %
Loan to related party(2)
167,975 37.5 % 167,975 27.8 %
Total floating rate securities $ 228,678 51.1 % $ 246,778 40.8 %
Total fixed income investments at fair value (1)
$ 447,973 $ 605,239
(1) Total fixed income investments at fair value include AFS fixed maturities, cash and restricted cash, funds withheld receivable, and loan to related party.
(2) The loan to related party balance does not include the the Premium Repayment Loan Agreement dated December 31, 2024 with respect to the settlement of certain ceded premium balances of $24.3 million entered into between AII and Maiden Reinsurance as discussed in Note 10 - Related Party Transactions.
At December 31, 2024 and 2023, 100.0% of the Company’s U.S. agency bond holdings are mortgage-backed. Total U.S. agency MBS comprise 10.0% of our fixed maturity investment portfolio at December 31, 2024. Given their relative size to our total investments, if faster prepayment patterns were to occur over an extended period of time, this could potentially limit the growth in our investment income in certain circumstances or reduce the total amount of investment income we earn. Additional details on our U.S. Agency MBS holdings at December 31, 2024 and 2023 were as follows:
December 31, 2024 2023
($ in thousands) Fair Value % of Total Fair Value % of Total
FNMA - fixed rate $ 13,232 56.7 % $ 15,164 56.9 %
FHLMC - fixed rate 7,987 34.2 % 9,099 34.1 %
GNMA - variable rate 2,137 9.1 % 2,388 9.0 %
Total U.S. agency bonds $ 23,356 100.0 % $ 26,651 100.0 %
At December 31, 2024 and 2023, 100.0% and 97.8%, respectively, of our fixed maturity investments 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 equivalent, or less. Please see "Part II, Item 8 - Notes to Consolidated Financial Statements Note 4. Investments" for additional information on the credit rating of our fixed income portfolio.
The security holdings by sector and financial strength rating of our corporate bond holdings at December 31, 2024 and 2023 were as follows:
Ratings(1)
December 31, 2024 AAA A+, A, A- BBB+, BBB, BBB- BB+ or lower Fair Value % of Corporate bonds
Corporate bonds
($ in thousands)
Basic Materials
- % - % 19.6 % - % $ 5,090 19.6 %
Consumer
- % 9.9 % 24.8 % - % 9,001 34.7 %
Financial Institutions
6.1 % 37.9 % 1.7 % - % 11,873 45.7 %
Total Corporate bonds
6.1 % 47.8 % 46.1 % - % $ 25,964 100.0 %
Ratings(1)
December 31, 2023 AAA A+, A, A- BBB+, BBB, BBB- BB+ or lower Fair Value % of Corporate bonds
Corporate bonds
($ in thousands)
Basic Materials
- % - % 7.6 % - % $ 5,273 7.6 %
Communications
- % 7.9 % 4.2 % - % 8,392 12.1 %
Consumer
- % 15.8 % 29.2 % - % 31,186 45.0 %
Energy
- % 1.2 % 2.6 % - % 2,639 3.8 %
Financial Institutions
2.2 % 20.9 % 0.6 % 7.8 % 21,854 31.5 %
Total Corporate bonds
2.2 % 45.8 % 44.2 % 7.8 % $ 69,344 100.0 %
(1) Ratings as assigned by S&P, or equivalent
The table below includes the Company’s ten largest corporate holdings at fair value and as a percentage of all fixed income securities held as at December 31, 2024. The Company's ten largest corporate holdings are 94.6% euro denominated, with 30.4% in the Consumer Sector and 52.4% in the Financial Institutions sector:
December 31, 2024 Fair Value % of Total Fixed Income Holdings Rating(1)
($ in thousands)
Chubb Ina Holdings Inc., 1.55%, Due 3/15/2028 $ 6,460 2.8 % A
PPG Industries Inc., 0.875%, Due 11/3/2025 5,090 2.2 % BBB+
Kellanova, 1.25%, Due 3/10/2025 4,127 1.8 % BBB
BNP Paribas SA, 1.25%, Due 3/19/2025 3,382 1.4 % A-
McKesson Corp., 1.5% Due 11/17/2025 2,561 1.1 % A-
Baxter International Inc., 1.3%, Due 5/30/2025 2,313 1.0 % BBB
Morgan Stanley, 1.875%, Due 4/27/2027 2,028 0.9 % A+
Aareal Bank AG, 0.625%, Due 2/14/2025 1,591 0.7 % AAA
Natwest Group PLC, 1.75%, Due 3/2/2026 1,033 0.4 % A-
Chubb Ina Holdings Inc., 0.875%, Due 6/15/2027 988 0.4 % A
Total
$ 29,573 12.7 %
(1) Ratings as assigned by S&P, or equivalent
At December 31, 2024 and 2023, respectively, 100.0% of our non-U.S. dollar denominated securities were invested in euro denominated bonds. The net decrease in non-USD denominated fixed maturities is largely due to sales and maturities of euro denominated corporate bonds during the year ended December 31, 2024. At December 31, 2024 and 2023, the Company's non-U.S. government issuers have a rating of AA- or higher by Fitch Ratings. The Company does not employ any credit default protection against any of the fixed maturities held in non-U.S. dollar ("non-USD") denominated currencies at December 31, 2024 and 2023, respectively.
At December 31, 2024 and 2023, respectively, we held the following non-USD denominated securities:
December 31, 2024 2023
($ in thousands) Fair Value % of Total Fair Value % of Total
Non-USD denominated collateralized loan obligations $ 60,283 48.9 % $ 77,816 46.8 %
Non-USD denominated corporate bonds 24,373 19.8 % 67,822 40.7 %
Non-USD government bonds 38,532 31.3 % 20,751 12.5 %
Total non-USD denominated securities $ 123,188 100.0 % $ 166,389 100.0 %
For our non-U.S. dollar denominated corporate bonds, the following table summarizes the composition of the fair value of our fixed maturity investments by ratings at December 31, 2024 and 2023:
Ratings(1) at December 31,
2024 2023
($ in thousands) Fair Value % of Total Fair Value % of Total
A+, A, A- $ 12,403 50.9 % $ 31,810 46.9 %
BBB+, BBB, BBB- 11,970 49.1 % 30,630 45.2 %
BB+ or lower - - % 5,382 7.9 %
Total non-U.S. dollar denominated corporate bonds $ 24,373 100.0 % $ 67,822 100.0 %
(1) Ratings as assigned by S&P, or equivalent
Other Investments, Equity Investments and Equity Method Investments
Our alternative investments are categorized as other investments, equity securities and equity method investments as reported on our consolidated balance sheets. These include private equity funds, private credit funds and hedge funds investments, investments in limited partnerships, as well as investments in direct lending entities and investments in technology-oriented insurance related businesses known as insurtechs. Private equity investments consist of direct investments in privately held entities, investments in private equity funds and private equity co-investments with sponsoring entities. Private credit investments consist of loans and other debt securities of privately held entities or investment sponsors. Our alternative investments as of December 31, 2024 and 2023 consisted of the following asset categories:
December 31, 2024 2023
($ in thousands) Carrying Value % of Total Carrying Value % of Total
Privately held common stocks $ 6,778 2.7 % $ 35,272 11.4 %
Privately held preferred stocks(1)
6,369 2.5 % 6,369 2.1 %
Publicly traded equity investments in common stocks - - % 81 - %
Total equity securities 13,147 5.2 % 41,722 13.5 %
Real estate investments 57,541 22.9 % 49,897 16.1 %
Other equity method investments 23,746 9.4 % 31,032 10.1 %
Total equity method investments 81,287 32.3 % 80,929 26.2 %
Private equity funds 25,123 10.0 % 47,383 15.3 %
Private credit funds 1,909 0.8 % 27,806 9.0 %
Privately held equity investments(1)
46,301 18.4 % 42,194 13.7 %
Investment in direct lending funds (at cost) 83,683 33.3 % 69,005 22.3 %
Total other investments 157,016 62.5 % 186,388 60.3 %
Total alternative investments $ 251,450 100.0 % $ 309,039 100.0 %
(1) The categories for privately held preferred stocks and privately held equity investments reported above includes a reclassification for a particular investment from equity securities to other investments at December 31, 2024 and 2023 due to new information received in the recent reporting period.
Our allocation to alternative investments decreased to 48.5% of total cash and investments as of December 31, 2024 compared to 51.3% as of December 31, 2023; and increased to 556.4% of our total shareholders' equity as of December 31, 2024 compared to 124.0% as of December 31, 2023. Our alternative investment portfolio decreased in relation to total cash and investments reflecting the ongoing shift in our strategy as described in the Overview section.
In addition to the categories described above, we also evaluate our alternative investments by the following asset classes:
December 31, 2024 2023
($ in thousands) Carrying Value % of Total Carrying Value % of Total
Private Equity $ 58,031 23.1 % $ 82,230 26.6 %
Private Credit 1,909 0.7 % 53,673 17.4 %
Alternatives 104,790 41.7 % 95,258 30.8 %
Venture Capital 23,533 9.4 % 21,220 6.9 %
Real Estate 63,187 25.1 % 56,658 18.3 %
Total alternative investments $ 251,450 100.0 % $ 309,039 100.0 %
For further details on these alternative investments, please see "Notes to Consolidated Financial Statements: Note 4(b) Other Investments, Equity Securities and Equity Method Investments" included under Part II Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K. Within these asset classes, our portfolio broadly consists of the following types of investments:
•Private Equity - this asset class consists of both fund investments with leading private equity sponsors and direct equity investments in private companies, sometimes in conjunction with our private equity fund sponsors. As of December 31, 2024, $3.9 million or 6.6% of investments in the private equity asset class consisted of investments in private equity funds and $54.2 million or 93.4% consisted of direct equity investments in private companies.
•Private Credit - this asset class consists of both fund investments with leading private credit sponsors and direct credit investments in private companies, sometimes in conjunction with our private credit fund sponsors. Private credit investments in both funds and on a direct basis will typically be secured lending arrangements with non-rated entities, often with additional protective provisions to enhance the security and returns of these investments. During 2024 we sold nearly all of our private credit investments in conjunction with our change in strategy. As of December 31, 2024, the private credit asset class included $1.9 million or 100.0% in direct investments in debt securities of private companies.
•Alternatives - this asset class consists of structured financing arrangements which typically have incentive features to enhance the Company’s returns. As part of these arrangements, the Company requires collateral or bankruptcy-remote structures to protect its investments. As of December 31, 2024, $103.2 million or 98.5% of investments in the alternatives asset class were direct investments except for investments in funds of $1.6 million or 1.5% of the alternatives asset class. One investment in a collateralized direct lending entity of $83.7 million represents 79.9% of this asset class and is discussed further in "Note 4 - Investments" included in Part II Item 8. "Financial Statements and Supplementary Data" in this Annual Report on Form 10-K for the year ended December 31, 2024.
•Venture Capital - this asset class consists of both fund investments with venture capital firms focused primarily on “insurtech” or “fintech” early-stage investments as well as direct investments in start-up companies in this sector, including equity investments in individual companies made in conjunction with our venture capital fund sponsors. As of December 31, 2024, $9.4 million or 39.8% of investments in the venture capital asset class consisted of investments in funds and $14.2 million or 60.2% consisted of direct equity investments in start-up companies. As of December 31, 2024, $13.4 million or 56.9% of our venture capital investments were invested in funds or companies that would be considered “insurtech” investments.
•Real Estate - this asset class consists of long-term equity investments in three real estate projects. Two are multi-family residential development projects near major urban centers where workforce housing demand continues to be strong. One investment is a minority stake as a limited partner with a leading property developer with a highly successful track record, where the Company will earn returns from both operating income from rentals and future sales of properties. As of December 31, 2024, the Company has $27.5 million invested in this project and expects investment returns to commence in earnest in 2026 and beyond. The second multi-family residential investment is a majority stake with general partner rights wherein the Company is providing the capital backing to an experienced and successful developer in the subject market, while also taking minority equity stakes in individual projects. To date, this development project has secured five properties in attractive locations and is currently in the zoning and planning stages. As of December 31, 2024, the Company has $30.0 million invested in this project and has commenced earning limited amounts of fee income from this project. As part of its investment, the Company has also provided certain loan guarantees which are discussed in more detail in Note 11 - Commitments, Contingencies and Guarantees included in Part II Item 8. "Financial Statements and Supplementary Data". We expect fee and operating income and gains from future sales of properties to commence in earnest in 2027 and beyond. Finally, the Company has a minority equity stake in an iconic office building in a major city in the U.S., with an attractive and growing tenant roll. As of December 31, 2024, the Company has a carrying value of $5.6 million invested in this project and to date has earned preferred returns and received certain distributions. In addition to preferred returns, the Company expects to receive future distributions of operating income from this investment.
Certain of the Company's investments in limited partnerships are related to real estate joint ventures with interests in multi-property projects with varying strategies ranging from the development of properties to the ownership of income-producing
properties. In certain of these joint ventures, the Company has provided certain indemnities, guarantees and commitments to certain parties such that it may be required to make payments now or in the future. For further details on these financial guarantees, please see "Notes to Consolidated Financial Statements: Note 11 - Commitments, Contingencies and Guarantees" included under Part II Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Investment Results
Our investment portfolio returns decreased to $32.9 million included in earnings during 2024 compared to $53.1 million in 2023. This was largely due to lower interest income earned on our funds withheld balance with AmTrust as claim payments were settled through the funds held receivable in 2024, lower unrealized gains as well as lower interest in income of equity method investments which decreased by $6.1 million. In addition, our alternative investment portfolio decreased by 18.6% during 2024 due to sales and redemptions of equity securities, private equity investments and private credit funds as part of a broader effort to reposition our balance sheet due to ongoing group strategic initiatives that we are actively pursuing while also strengthening our overall liquidity. The alternative investment portfolio produced a positive net return of 3.5% during 2024 compared to 8.0% in 2023. The following table summarizes our investment results for the years ended December 31, 2024 and 2023, respectively:
For the Year Ended December 31, 2024 2023
Net investment income ($ in thousands)
Fixed income investments(1)
$ 22,724 $ 32,300
Cash and restricted cash 1,200 685
Other investments, including equities 3,972 4,957
Investment expenses (2,350) (564)
Total net investment income 25,546 37,378
Net realized gains (losses):
Fixed income assets(1)
(730) (2,971)
Other investments, including equities 5,815 4,957
Total net realized gains
5,085 1,986
Net unrealized gains:
Other investments, including equities 525 5,862
Total net unrealized gains 525 5,862
Interest in income of equity method investments:
Interest in income of equity method investments
1,700 7,846
Total interest in income of equity method investments
1,700 7,846
Total investment return included in earnings (A) $ 32,856 $ 53,072
Other comprehensive income:
Unrealized gains on AFS fixed maturities and equity method investments excluding foreign exchange (B)
$ 3,760 $ 7,977
Total investment return = (A) + (B) $ 36,616 $ 61,049
Annualized income from fixed income assets(2)
$ 23,924 $ 32,985
Average aggregate fixed income assets, at cost(2)
532,661 799,812
Annualized investment book yield 4.5 % 4.1 %
Average aggregate invested assets, at fair value(3)
$ 806,851 $ 1,078,675
Investment return included in net earnings 4.1 % 4.9 %
Total investment return 4.5 % 5.7 %
1.Fixed income investments include AFS securities as well as funds withheld receivable, and loan to related party.
2.Fixed income assets include AFS portfolio, cash and restricted cash, funds withheld receivable, and loan to related party.
3.Average aggregate invested assets include all investments (AFS and alternative investments), cash and restricted cash, loan to related party and funds withheld receivable and is computed as an average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements.
The following table details total investment returns for our fixed income investments for the years ended December 31, 2024 and 2023, respectively:
Fixed Income Investments(1)
For the Year Ended December 31,
($ in thousands) 2024 2023
Gross investment income $ 23,924 $ 32,985
Net realized losses (730) (2,971)
Change in AOCI (3)
3,760 7,977
Gross investment returns $ 26,954 $ 37,991
Average invested assets, at fair value (4)
$ 526,606 $ 787,889
Gross Investment Returns 5.1 % 4.8 %
Investment expenses $ 166 $ 324
Net investment returns $ 26,788 $ 37,667
Net Investment Returns 5.1 % 4.8 %
Our net investment returns increased to 5.1% for the year ended December 31, 2024 compared to 4.8% in 2023. This was largely due to floating rate investments that comprised 51.1% of our fixed income investments at December 31, 2024 which enabled the portfolio to respond to the higher interest rate environment more quickly. The loan to related party carried a higher weighted average interest rate on a balance of $168.0 million which increased to 7.1% during the year ended December 31, 2024 compared to 7.0% during 2023.
This was partly offset by lower interest income on the funds withheld receivable which decreased by $8.9 million in 2024 compared to 2023, as a result of a much lower average ending funds withheld balance with AmTrust of $19.7 million during the year ended December 31, 2024 compared to an average ending balance of $279.4 million for 2023. This was driven by using the funds withheld receivable for claim payments to AmTrust as the runoff of existing loss reserves continues in the terminated AmTrust Quota Share agreement, with the balance of funds withheld now fully exhausted at December 31, 2024.
Please refer to "Notes to Consolidated Financial Statements - Note 4 - Investments" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further detail on investment returns from fixed income investments held by the Company at December 31, 2024 and 2023. The following table details total investment returns for our alternative investments for the years ended December 31, 2024 and 2023, respectively:
Alternative Investments(2)
For the Year Ended December 31,
($ in thousands) 2024 2023
Gross investment income $ 5,672 $ 12,803
Net realized gains 5,815 4,957
Net unrealized gains 525 5,862
Gross investment returns $ 12,012 $ 23,622
Average invested assets, at fair value (4)
$ 280,245 $ 290,786
Gross Investment Returns 4.3 % 8.1 %
Investment expenses $ 2,184 $ 240
Net investment returns $ 9,828 $ 23,382
Net Investment Returns 3.5 % 8.0 %
1.Fixed income investments includes AFS securities as well as cash, restricted cash, funds withheld receivable, and loan to related party.
2.Alternative investments includes other investments, equity securities, and equity method investments.
3.Change in AOCI excludes unrealized foreign exchange gains and losses.
4.Average invested assets is the average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements.
The following table details total investment returns for alternative investments by asset class at December 31, 2024:
December 31, 2024 Private Equity Private Credit Alternative Assets Venture Capital Real Estate Total
($ in thousands)
Gross investment income $ 1,736 $ 2,747 $ 54 $ 6 $ 1,129 $ 5,672
Net realized and unrealized gains (losses) 9,270 (1,288) (262) 372 (1,752) 6,340
Total Investment Return $ 11,006 $ 1,459 $ (208) $ 378 $ (623) $ 12,012
Average Investments $70,131 $27,791 $ 100,024 $ 22,376 $ 59,923 $ 280,245
Gross Investment Returns 15.7 % 5.3 % (0.2) % 1.7 % (1.0) % 4.3 %
The following table details total investment returns for alternative investments by asset class at December 31, 2023:
December 31, 2023 Private Equity Private Credit Hedge Funds Alternative Assets Venture Capital Real Estate Total
($ in thousands)
Gross investment income $ 2,545 $ 3,380 $ 83 $ 6,114 $ - $ 681 $ 12,803
Net realized and unrealized gains (losses) 7,691 1,697 - (33) 1,914 (450) 10,819
Total Investment Return $ 10,236 $ 5,077 $ 83 $ 6,081 $ 1,914 $ 231 $ 23,622
Average Investments $ 71,228 $ 52,728 $ 2,688 $ 90,562 $ 21,173 $ 52,407 $ 290,786
Gross Investment Returns 14.4 % 9.6 % 3.1 % 6.7 % 9.0 % 0.4 % 8.1 %
During the year ended December 31, 2024, on an inception to date basis through December 31, 2024, our alternative investment portfolio has produced an internal rate of return of 5.0% and a multiple on invested capital of 1.12. This includes investments, primarily in the Alternatives and Real Estate asset classes where we anticipate future returns to emerge but have not as yet recognized either returns or gains based on the development stage of certain investments, which constitute 56.2% of our total alternative assets as of December 31, 2024. Excluding the investments still carried at cost, the internal rate of return was 9.0% with a multiple on invested capital of 1.21. Total returns on our alternative investments by asset class from inception are discussed in detail as of December 31, 2024 in the table below:
Asset Class December 31, 2024 Total Direct Fund
($ in thousands) Carrying Value IRR MOIC (x) IRR MOIC (x) IRR MOIC (x)
Private Equity $ 58,031 10.2 % 1.33 10.0 % 1.38 10.7 % 1.25
Private Credit 1,909 5.3 % 1.10 12.4 % 1.20 5.0 % 1.10
Hedge Funds - 5.2 % 1.12 5.2 % 1.12 - % -
Alternatives 104,790 4.0 % 1.10 4.1 % 1.11 (13.9) % 0.83
Venture Capital 23,533 6.9 % 1.18 12.6 % 1.46 (9.5) % 0.82
Real Estate 63,187 (3.3) % 0.94 (3.3) % 0.94 - % -
Total $ 251,450 5.0 % 1.12 4.6 % 1.12 5.7 % 1.11
•Private Equity - investment returns in this asset class reflect both dividends and distributions received as well as unrealized gains or losses from adjustments to net asset values in the case of fund investments and market value adjustments in the case of direct equity investments. During 2024, private equity investments produced a total investment return of $11.0 million with fund investments earning a total investment return of $0.5 million while direct investments produced a total investment return of $10.5 million. Inception to date, private equity investments have produced an internal rate of return of 10.2% and a multiple on invested capital of 1.33, with fund investments producing
an internal rate of return of 10.7% and a multiple on invested capital of 1.25, while direct investments have produced an internal rate of return of 10.0% and a multiple on invested capital of 1.38. Net realized gains on private equity investments of $9.3 million have been recognized through December 31, 2024.
•Private Credit - investment returns in this asset class reflect both distributions received as well as unrealized gains or losses from adjustments to net asset values in the case of fund investments and market value adjustments in the case of direct equity investments. During 2024, private credit investments produced a total investment return of $1.5 million with fund investments earning $1.0 million while direct investments produced a total investment return of $0.5 million. Inception to date, private credit investments have produced an internal rate of return of 5.3% and a multiple on invested capital of 1.10, with fund investments producing an internal rate of return of 5.0% and a multiple on invested capital of 1.10, while direct investments have produced an internal rate of return of 12.4% and a multiple on invested capital of 1.20.
•Alternative Assets - investment returns in this asset class largely relate to equity method recognition of income from structured financing arrangements in real assets which utilize bankruptcy-remote structures to protect these investments. During 2024, alternative investments produced a total investment return of $(0.2) million. Inception to date, alternative direct investments have produced an internal rate of return of 4.1% and a multiple on invested capital of 1.11; in total, alternative fund investments have produced an internal rate of return of (13.9)% and a multiple on invested capital of 0.83. We have not recognized any returns (including contractual preferred returns) on other alternative investments as the underlying collateralized investment supporting this direct lending initiative continues to develop; these investments represent 79.9% of the alternative investment class at December 31, 2024. We expect to recognize our preferred returns and contingency gains as these investment develops further or if other collateral we have secured as part of our investment responds sooner, subject to certain conditions.
•Venture Capital - investment returns in this asset class primarily reflect unrealized gains or losses from adjustments to net asset values in the case of fund investments and market value adjustments in the case of direct equity investments. During 2024, venture capital investments produced a total return of $0.4 million including $(0.4) million from our fund investments and $0.8 million from direct investments. Inception to date, venture capital investments have produced an internal rate of return of 6.9% and a multiple on invested capital of 1.18; venture capital fund investments have produced an internal rate of return of (9.5)% and a multiple on invested capital of 0.82, while direct venture capital investments have produced an internal rate of return of 12.6% and a multiple on invested capital of 1.46. Through 2024, we realized total gains of $4.8 million on the sale of the Company’s stake in Betterview Marketplace, Inc. ("Betterview") in a cash and stock transaction with Nearmap US, Inc. ("Nearmap"). We now continue to hold shares in Nearmap after completion of this transaction. To date our investment in Betterview has produced an internal rate of return of 25.8% and a multiple on invested capital of 1.74.
•Real Estate - investment returns in this asset class include preferred returns and distributions (if any) from plan developers along with limited unrealized gains or losses to date as two of the projects remain in the development phase. As noted earlier, the Company does not expect significant investment returns from these attractive projects for the next several years. Inception to date, these investments have produced an internal rate of return of (3.3)% and a multiple on invested capital of 0.94.
On an inception to date basis through December 31, 2024, the Company completed various alternative investments that had total contributions of $153.1 million which produced an internal rate of return of 8.7% and a multiple on invested capital of 1.19. This includes sales of certain assets concurrent with our aforementioned change in strategy during 2024 which was earlier than anticipated for most of these investments. The total returns on our inactive alternative investments by asset class from inception are shown in detail as of December 31, 2024 in the table below along with total returns on our active alternative investment portfolio by asset class from inception as of December 31, 2024:
Asset Class December 31, 2024 Total Completed Investments December 31, 2024 Total Active Investments
($ in thousands) Contributions IRR MOIC (x) Contributions IRR MOIC (x)
Private Equity $ 43,850 7.8 % 1.18 $ 58,031 12.3 % 1.48
Private Credit 68,990 5.0 % 1.10 1,909 12.4 % 1.25
Hedge Funds 25,000 5.2 % 1.12 - - % -
Alternatives 11,358 48.9 % 1.55 104,790 2.2 % 1.06
Venture Capital 3,925 14.3 % 2.22 23,533 0.5 % 1.01
Real Estate - - % - 63,187 (3.3) % 0.94
Total $ 153,123 8.7 % 1.19 $ 251,450 3.0 % 1.08
We believe our alternative investment portfolio remains well positioned to achieve its targeted longer-term returns.
Other Balance Sheet Changes
The following table summarizes the Company's other material balance sheet changes at December 31, 2024 and 2023:
December 31, 2024 2023 Change Change
($ in thousands) $ %
Deferred commission and other acquisition expenses
$ 8,102 $ 17,566 $ (9,464) (53.9) %
Funds withheld receivable
12,650 143,985 (131,335) (91.2) %
Reserve for loss and LAE
793,679 867,433 (73,754) (8.5) %
Unearned premiums
29,793 46,260 (16,467) (35.6) %
Deferred gain on retroactive reinsurance
107,255 73,240 34,015 46.4 %
Liability for investments purchased 6,480 - 6,480 NM
Accrued expenses and other liabilities
77,966 28,244 49,722 176.0 %
The Company's deferred commission and other acquisition expenses decreased by 53.9% and unearned premiums decreased by 35.6% primarily due to the termination of the remaining business under both quota share contracts with AmTrust which have been in run-off since January 1, 2019. In addition, deferred commission and other acquisition expenses decreased further in 2024 due to accelerated amortization upon the recognition of a premium deficiency of $3.3 million in the AmTrust Reinsurance segment during the year ended December 31, 2024.
Funds withheld receivable decreased by 91.2% primarily due to settlement of reinsurance losses payable under the AmTrust Quota Share as well as $15.3 million of excess collateral released by AmTrust during the year ended December 31, 2024. The funds withheld receivable balance with AmTrust was fully exhausted in the third quarter of 2024, and the remaining funds withheld receivable balance pertains to accounts in the Diversified Reinsurance segment.
The Company's reserve for loss and LAE decreased by 8.5% primarily due to continued settlement of loss reserves for AmTrust Reinsurance contracts.
The deferred gain on retroactive reinsurance increased by $34.0 million or 46.4% for the year ended December 31, 2024 primarily due to adverse development in the AmTrust Quota Share that is covered by the LPT/ADC Agreement with Cavello. The table below details the increase in the deferred gain for losses recoverable under the LPT/ADC Agreement for the years ended December 31, 2024 and 2023:
For the Year Ended December 31, 2024 2023
($ in thousands)
Opening Balance $ 70,916 $ 45,408
Adverse PPD covered under the LPT/ADC Agreement 64,338 29,308
Favorable PPD on commuted Workers Compensation business (26,200) (3,800)
Amortization of deferred gain for the LPT/ADC Agreement (4,099) -
Deferred gain liability for the LPT/ADC Agreement $ 104,955 $ 70,916
.
Accrued expenses and other liabilities increased by $49.7 million for the year ended December 31, 2024 primarily due to accrual of reinsurance losses payable due to AmTrust including $24.3 million for the Premium Repayment Loan Agreement. The liability for investments purchased increased by $6.5 million due to trades occurring on or before December 31, 2024 that will be settled subsequent to that date.
Capital Resources
During the year ended December 31, 2024, book value per common share decreased by 81.5% to $0.46 and diluted book value per common share decreased by 81.7% to $0.45, compared to December 31, 2023. This was largely due to the net loss of $201.0 million reported by the Company, which produced substantially all of the $204.0 million decline in shareholders' equity for the year ended December 31, 2024.
Capital resources consist of funds deployed in support of our operations. The following table shows the movement in our capital resources at December 31, 2024 and 2023:
December 31, 2024 2023 Change Change (%)
($ in thousands)
Common shares at par value $ 1,503 $ 1,497 $ 6 0.4 %
Additional paid-in capital 888,067 886,072 1,995 0.2 %
Accumulated other comprehensive loss (32,733) (31,469) (1,264) 4.0 %
Accumulated deficit (687,914) (486,945) (200,969) 41.3 %
Treasury shares, at cost (123,730) (119,995) (3,735) 3.1 %
Total Maiden shareholders' equity
45,193 249,160 (203,967) (81.9) %
Senior Notes - principal amount
262,361 262,361 - - %
Total capital resources
$ 307,554 $ 511,521 $ (203,967) (39.9) %
Total capital resources decreased by $204.0 million, or 39.9% compared to December 31, 2023 due to the following items:
•accumulated deficit increased by $201.0 million due to the Company's reported net loss of $201.0 million for the year ended December 31, 2024;
•net decrease in AOCI of $1.3 million which arose due to: (1) net unrealized gains on investment of $3.2 million mainly from our AFS bond portfolio relating to market price movements in the year ended December 31, 2024; and (2) an decrease in cumulative translation adjustments of $4.4 million during the year ended December 31, 2024 due to the impact of the U.S. dollar depreciation on the re-measurement of net assets denominated in British pound and euro;
•treasury shares increased by $3.7 million due to $3.5 million of shares repurchased under our authorized common share repurchase plan and $0.2 million of common share repurchases due to tax withholding on vested shares; and
•net increase in additional paid-in capital of $2.0 million mainly due to share-based compensation of $2.0 million.
Please refer to "Notes to Consolidated Financial Statements - Note 6 - Shareholders' Equity" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for a discussion of the equity instruments issued by the Company at December 31, 2024 and 2023.
Book value and diluted book value per common share at December 31, 2024 and 2023 were computed as follows:
December 31, 2024 2023
($ in thousands except share and per share data)
Ending common shareholders’ equity $ 45,193 $ 249,160
Numerator for diluted book value per common share calculation
$ 45,193 $ 249,160
Common shares outstanding
99,039,253 100,472,120
Shares issued from assumed conversion of dilutive options and restricted shares 2,035,634 975,027
Denominator for diluted book value per common share calculation
101,074,887 101,447,147
Book value per common share
$ 0.46 $ 2.48
Diluted book value per common share
0.45 2.46
Common Shares
On February 21, 2017, the Company's Board of Directors approved the repurchase of up to $100.0 million of the Company's common shares from time to time at market prices. During the year ended December 31, 2024, Maiden Reinsurance repurchased 1,871,755 common shares from the open market at an average price per share of $1.87 under the Company's share repurchase plan. (2023 - 1,439,575 common shares at an average price per share of $1.83). The Company's remaining authorization for common share repurchases is $68.1 million at December 31, 2024.
Please see "Notes to Consolidated Financial Statements - Note 6 - Shareholders' Equity" under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for further information on the repurchase transactions. Concurrent with its announcement on December 29, 2024 regarding its proposed combination with Kestrel, the Company has suspended its share repurchase program.
Senior Notes
There were no changes in the Company’s Senior Notes at December 31, 2024 compared to December 31, 2023 other than repurchases as discussed further below. The Company did not enter into any short-term borrowing arrangements during the year ended December 31, 2024. Please refer to "Notes to Consolidated Financial Statements - Note 7 - Long-Term Debt" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K for a discussion of the Senior Notes issued by the Company. The 2013 Senior Notes issued by Maiden NA are fully and unconditionally guaranteed by Maiden Holdings. The Senior Notes are unsecured and unsubordinated obligations of the Company. Please refer to Note 11 - Commitments, Contingencies and Guarantees included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K regarding recent litigation regarding the 2013 Senior Notes.
As described in "Notes to Consolidated Financial Statements - Note 7 - Long-Term Debt" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K, on May 3, 2023, the Company's Board of Directors approved the repurchase, including the repurchase by Maiden Reinsurance in accordance with its investment guidelines, of up to $100.0 million of the Company's Senior Notes from time to time at market prices in open market purchases or as may be privately negotiated. During the year ended December 31, 2023, Maiden Reinsurance repurchased 5,567 notes of the 2013 Senior Notes at an average price per unit of $17.10 for a total cost of $95.2 thousand. Total interest and amortization expenses for the year ended December 31, 2023 were partly offset by a gain of $39.9 thousand realized on the repurchase of the 2013 Senior Notes. The Company has a remaining authorization of $99.9 million for such repurchases at December 31, 2024.
Maiden Holdings does not have any significant operations or assets other than our ownership of the shares of our subsidiaries. The dividends and other permitted distributions from Maiden NA (and its subsidiaries) will be our sole source of funds to meet ongoing cash requirements, including debt service payments. Factors that may affect payments to holders of the 2013 Senior Notes include restrictions on the payments of dividends by Maiden Reinsurance to Maiden NA which provides the sole source of income for interest payments on the 2013 Senior Notes. In 2023 and 2024, the Vermont DFR approved an annual dividend program from Maiden Reinsurance to Maiden NA, with notification to the Vermont DFR as dividends are paid. Subsequent to that approval, Maiden Reinsurance paid total dividends of $68.8 million to Maiden NA as of December 31, 2024.
The summarized financial information below has been presented on a combined basis for the issuer Maiden NA and the guarantor Maiden Holdings, excluding all other subsidiaries. Intercompany balances and transactions between Maiden NA and Maiden Holdings, whose information is presented above on a combined basis, were eliminated. Any investment by Maiden NA or Maiden Holdings in subsidiaries that are not issuers or guarantors is not presented in the financial information below.
Intercompany balances with subsidiaries that are not issuers or guarantors and any related party transactions were separately disclosed and are not included in the total assets and total liabilities presented for Maiden NA and Maiden Holdings. The net loss for Maiden NA and Maiden Holdings was due to interest and amortization expenses on the Senior Notes as well as general and administrative expenses. The net loss in Maiden NA also reflects income tax expense incurred for the respective periods.
Summarized financial information of Maiden NA and Maiden Holdings as of December 31, 2024 and for the year ended December 31, 2024 was as follows:
Maiden NA Maiden Holdings
($ in thousands)
Total assets $ 11,486 $ 4,749
Total liabilities 153,756 109,528
Amounts due from subsidiaries (not included in total assets above) 28 3,123
Amounts due to subsidiaries (not included in total liabilities above) 12,718 3,518
Related party loan payable (not included in total liabilities above) - 311,534
Total revenue 1,828 21
Net loss (10,566) (41,907)
The ratio of Debt to Total Capital Resources at December 31, 2024 and 2023 was computed as follows:
December 31, 2024 2023
($ in thousands)
Senior notes - principal amount
$ 262,361 $ 262,361
Maiden shareholders’ equity
45,193 249,160
Total capital resources
$ 307,554 $ 511,521
Ratio of debt to total capital resources
85.3 % 51.3 %
Off-Balance Sheet Arrangements
Certain of the Company's investments in limited partnerships are related to real estate joint ventures with interests in multi-property projects with varying strategies ranging from the development of properties to the ownership of income-producing properties. In certain of these joint ventures, the Company has provided certain indemnities, guarantees and commitments to certain parties such that it may be required to make payments now or in the future as further described in the "Notes to Consolidated Financial Statements - Note 11 - Commitments, Contingencies and Guarantees " included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-K.
Any loss for which the Company could be liable would be contingent on the default of a loan by the real estate joint venture entity for which the Company provided a financial guarantee to a lender. While the Company has committed to aggregate limits as to the amount of guarantees it will provide as part of its limited partnerships, guarantees are only provided on an individual transaction basis and are subject to the terms and conditions of each transaction mutually agreed by the parties involved. The Company is not bound to such guarantees without its express authorization.
As discussed above, at December 31, 2024, guarantees of $67.7 million have been provided to lenders by the Company on behalf of the real estate joint venture, however, the likelihood of the Company incurring any losses pertaining to project level financing guarantees was determined to be remote. Therefore, no liability has been accrued under ASC 450-20.
Non-GAAP Financial Measures
As defined and described in the Key Financial Measures section, management uses certain key financial measures, some of which are non-GAAP measures, to evaluate the Company's financial performance and the overall growth in value generated for the Company’s common shareholders. Management believes that these financial measures, which may be defined differently by other companies, explain the Company’s results to investors in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. The calculation, reconciliation to nearest GAAP measure and discussion of relevant non-GAAP measures used by management are discussed below.
Non-GAAP operating loss and Non-GAAP diluted operating loss per share attributable to common shareholders
Non-GAAP operating loss was $181.2 million for the year ended December 31, 2024, compared to a non-GAAP operating loss of $23.0 million for the year ended December 31, 2023. The non-GAAP operating loss in both respective years was primarily driven by significantly lower underwriting results in the AmTrust Reinsurance segment as discussed further below.
Non-GAAP operating loss and Non-GAAP diluted operating loss per share attributable to common shareholders can be reconciled to the nearest U.S. GAAP financial measure as follows:
For the Year Ended December 31, 2024 2023
($ in thousands except per share data)
Net loss attributable to Maiden common shareholders
$ (200,969) $ (38,569)
Add (subtract):
Net realized and unrealized investment gains
(5,610) (7,848)
Foreign exchange and other (gains) losses
(7,001) 5,741
Interest in income of equity method investments
(1,700) (7,846)
Change in reinsurance recoverable under the LPT/ADC Agreement 34,039 25,508
Non-GAAP operating loss
$ (181,241) $ (23,014)
Diluted loss per share attributable to common shareholders
$ (2.01) $ (0.38)
Add (subtract):
Net realized and unrealized investment gains
(0.05) (0.08)
Foreign exchange and other (gains) losses
(0.07) 0.06
Interest in income of equity method investments (0.02) (0.08)
Change in reinsurance recoverable under the LPT/ADC Agreement 0.34 0.25
Non-GAAP diluted operating loss per share attributable to common shareholders
$ (1.81) $ (0.23)
Non-GAAP Underwriting Results
The following summarizes our non-GAAP underwriting results for the years ended December 31, 2024 and 2023:
For the Year Ended December 31, 2024 2023
($ in thousands)
Gross premiums written $ 33,196 $ 23,466
Net premiums written $ 33,063 $ 23,168
Net premiums earned $ 49,474 $ 43,969
Other insurance (expense) revenue, net (24,194) 39
Non-GAAP net loss and LAE(1)
(152,088) (35,720)
Commission and other acquisition expenses (24,310) (19,462)
General and administrative expenses (12,214) (12,800)
Non-GAAP underwriting loss(1)
$ (163,332) $ (23,974)
(1) Non-GAAP underwriting loss and non-GAAP net loss and LAE for the years ended December 31, 2024 and 2023 are adjusted for prior year reserve development subject to the LPT/ADC Agreement. Please see the "Key Financial Measures" section for the definitions of non-GAAP underwriting loss and non-GAAP net loss and LAE.
The non-GAAP underwriting results above are summarized by segment for the years ended December 31, 2024 and 2023 in the table below:
For the Year Ended December 31, 2024 2023
($ in thousands)
Diversified Reinsurance underwriting loss $ (11,438) $ (9,141)
AmTrust Reinsurance underwriting loss (185,933) (40,341)
Plus: adverse prior year loss development covered under the LPT/ADC Agreement 34,039 25,508
Non-GAAP AmTrust Reinsurance underwriting loss (151,894) (14,833)
Non-GAAP underwriting loss $ (163,332) $ (23,974)
The non-GAAP underwriting results have been adjusted for prior year reserve development under the AmTrust Quota Share which is fully recoverable from Cavello under the LPT/ADC Agreement to show the ultimate economic benefit to the Company. As shown in the table above, adjusted for the increase in reinsurance recoverable under the LPT/ADC Agreement of $34.0 million during the year ended December 31, 2024, the non-GAAP underwriting loss was $163.3 million. This compared to a non-GAAP underwriting loss of $24.0 million during the year ended December 31, 2023 when adjusted for the increase in the reinsurance recoverable under the LPT/ADC Agreement of $25.5 million for the year ended December 31, 2023.
The non-GAAP underwriting loss of $163.3 million for the year ended December 31, 2024 was primarily driven by:
•adverse loss development of $40.6 million in the AmTrust Reinsurance segment not covered by the LPT/ADC Agreement, specifically the run-off of the AmTrust Quota Share with losses occurring after December 31, 2018;
•$24.3 million in incurred charges in the fourth quarter of 2024 which represents the settlement of a dispute over cessions of ceded uncollected premium made by AII to Maiden Reinsurance, the principal amount of which will be payable by Maiden Reinsurance in quarterly installments through the maturity date of December 31, 2032;
•adverse loss development of $47.0 million in the European Hospital Liability Quota Share, which is not covered by the LPT/ADC Agreement;
•favorable loss development on Workers Compensation losses previously commuted back to AmTrust which are contractually covered by the LPT/ADC Agreement reduced the deferred gain liability on retroactive reinsurance by $26.2 million for the year ended December 31, 2024; and
•underwriting loss of $11.4 million in the Diversified Reinsurance segment, which included an underwriting loss of $8.5 million from GLS operations during the year ended December 31, 2024.
Please refer to the respective segment results for AmTrust Reinsurance and Diversified Reinsurance as discussed under Item 7. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Annual Report on Form 10-K for further details of these underwriting results.
Non-GAAP Net Loss and LAE
Adjusted for prior year reserve development under the AmTrust Quota Share which is fully recoverable from Cavello under the LPT/ADC Agreement, the non-GAAP net loss and LAE decreased by $34.0 million for the year ended December 31, 2024. The favorable development on Workers Compensation losses previously commuted back to AmTrust which are contractually covered by the LPT/ADC Agreement reduced the reinsurance recoverable by $26.2 million for the year ended December 31, 2024.
Adjusted for prior year reserve development under the AmTrust Quota Share which is fully recoverable from Cavello under the LPT/ADC Agreement, the non-GAAP net loss and LAE decreased by $25.5 million for the year ended December 31, 2023. The reinsurance recoverable under the LPT/ADC Agreement was reduced by $3.8 million of favorable development on certain Workers Compensation losses that were previously commuted back to AmTrust in 2019 that inure to the benefit of Cavello as opposed to the Company under the terms of the LPT/ADC Agreement. These adjustments are reflected in the calculation of non-GAAP Loss and LAE in the table below:
For the Year Ended December 31, 2024 2023
($ in thousands)
Net loss and LAE $ 186,127 $ 61,228
Less: adverse prior year loss development covered under the LPT/ADC Agreement
34,039 25,508
Non-GAAP net loss and LAE $ 152,088 $ 35,720
Adjusted Shareholders' Equity, Adjusted Total Capital Resources, Adjusted Book Value per Common Share and Ratio of Debt to Total Adjusted Capital Resources
The Adjusted Shareholders' Equity, Adjusted Total Capital Resources and Adjusted Book Value per Common Share at December 31, 2024 and 2023 reflect the addition of the unamortized deferred gain under the LPT/ADC Agreement to the
GAAP shareholders' equity as depicted in the computations below. The unamortized deferred gain under the LPT/ADC Agreement was $105.0 million at December 31, 2024 compared to $70.9 million at December 31, 2023; this increase attributable to $34.0 million in net loss and LAE recognized as adverse loss reserve development in the Company's GAAP income statement for AmTrust Quota Shares policies covered by the LPT/ADC Agreement.
Net adverse development of $105.0 million was reported for policies under the AmTrust Quota Share for the year ended December 31, 2024. These losses are recoverable under the LPT/ADC Agreement and will be recognized as future GAAP income over time as recoveries are received subject to the provisions of both the LPT/ADC Agreement and the applicable GAAP accounting rules. We believe the inclusion of this unamortized deferred gain under these metrics better reflects the ultimate economic benefit of the LPT/ADC Agreement, which will improve the Company's shareholders' equity over the settlement period under the terms of the agreement.
Reconciliation of shareholders' equity to Adjusted shareholders' equity and Adjusted Total Capital Resources
The following table computes adjusted shareholders' equity and adjusted total capital resources by recognizing the unamortized deferred gain under the LPT/ADC Agreement at December 31, 2024 and 2023:
December 31, 2024 2023 Change Change
($ in thousands) $ %
Total shareholders' equity $ 45,193 $ 249,160 $ (203,967) (81.9) %
Unamortized deferred gain on LPT/ADC Agreement 104,955 70,916 34,039 48.0 %
Adjusted shareholders' equity 150,148 320,076 (169,928) (53.1) %
Senior Notes - principal amount
262,361 262,361 - - %
Adjusted total capital resources $ 412,509 $ 582,437 $ (169,928) (29.2) %
Non-GAAP Operating ROACE
Non-GAAP Operating ROACE for the years ended December 31, 2024 and 2023 was as follows:
For the Year Ended December 31, and at December 31, 2024 2023
($ in thousands)
Non-GAAP operating loss
$ (181,241) $ (23,014)
Opening adjusted common shareholders’ equity 320,076 329,987
Ending adjusted common shareholders’ equity 150,148 320,076
Average adjusted common shareholders’ equity 235,112 325,032
Non-GAAP Operating ROACE (77.1) % (7.1) %
Reconciliation of Book Value per Common Share to Adjusted Book Value per Common Share
The adjusted book value per common share as reconciled for the recognition of the unamortized deferred gain under the LPT/ADC Agreement at December 31, 2024 and 2023 was computed as follows:
December 31, 2024 2023
Book value per common share
$ 0.46 $ 2.48
Unamortized deferred gain on LPT/ADC Agreement 1.06 0.71
Adjusted book value per common share
$ 1.52 $ 3.19
Ratio of Debt to Adjusted Total Capital Resources
Management uses this non-GAAP measure to monitor the financial leverage of the Company. This measure is calculated using the total principal amount of debt divided by the sum of adjusted total capital resources as computed in the table above. The ratio of Debt to Adjusted Total Capital Resources at December 31, 2024 and 2023 was computed as follows:
December 31, 2024 2023
($ in thousands)
Senior notes - principal amount
$ 262,361 $ 262,361
Adjusted shareholders’ equity 150,148 320,076
Adjusted total capital resources
$ 412,509 $ 582,437
Ratio of debt to adjusted total capital resources
63.6 % 45.0 %
Currency and Foreign Exchange
We conduct business in a variety of foreign (non-U.S.) currencies, the principal exposures being the euro and the British pound. Assets and liabilities denominated in foreign currencies are exposed to changes in currency exchange rates. Our reporting currency is the U.S. dollar, and exchange rate fluctuations relative to the U.S. dollar may materially impact our results and financial position. Our principal exposure to foreign currency risk is our obligation to settle claims in foreign currencies. In addition, to minimize this risk, we maintain and expect to continue to maintain a portion of our investment portfolio in investments denominated in currencies other than the U.S. dollar.
We may employ various strategies (including hedging) to manage our exposure to foreign currency exchange risk. To the extent that these exposures are not fully hedged or the hedges are ineffective, our results of operations or equity may be adversely effected. At December 31, 2024, no such hedges or hedging strategies were in force or had been entered into. We measure monetary assets and liabilities denominated in foreign currencies at period end exchange rates, with the resulting foreign exchange gains and losses recognized in the Consolidated Statements of Income. 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 AOCI.
Net foreign exchange gains were $6.8 million during the year ended December 31, 2024 compared to net foreign exchange losses of $5.7 million during the year ended December 31, 2023. The foreign exchange gains for the year ended December 31, 2024 was largely due to the appreciation of the U.S. dollar relative to the euro and the British pound. At December 31, 2024, net foreign exchange gains were primarily driven by exposures to euro, British pound and other non-USD denominated net loss reserves and insurance related liabilities in excess of foreign currency assets.
The foreign exchange losses for the year ended December 31, 2023 was due to the depreciation of the U.S. dollar relative to the euro and the British pound.
There was a decrease in foreign currency translation adjustments of $4.4 million in the year ended December 31, 2024. Our non-USD denominated liabilities at December 31, 2024 included reserves for net loss and LAE of $355.9 million. Our foreign currency asset exposures at December 31, 2024 include $123.2 million of fixed maturity securities managed by our investment managers who have the discretion to hold foreign currency exposures as part of their total return strategy, $30.0 million of equity method real estate investments denominated in Canadian dollars, as well as $12.7 million of funds withheld receivable.
Effects of Inflation
The anticipated effects of inflation are considered explicitly in the pricing of the insured exposures, which are used as the initial estimates of reserves for loss and LAE. In addition, inflation is also implicitly accounted for in subsequent estimates of loss and LAE reserves, as the expected rate of emergence is in part predicated upon the historical levels of inflation that impact ultimate claim costs. To the extent inflation causes these costs, particularly medical treatments and litigation costs, to vary from the assumptions made in the pricing or reserving estimates, the Company will be required to change the reserve for loss and LAE with a corresponding change in its earnings in the period in which the variance is identified. The actual effects of inflation on the results of operations of the Company cannot be accurately known until claims are ultimately settled.
We continue to monitor inflationary impacts resulting from recent government stimulus, sharp increases in demand, labor force and supply chain disruptions, among other factors, on our loss cost trends. Our reserves predominantly consist of workers’ compensation, general liability, and hospital liability. These long tailed lines of business have been subject to the longer term trend of social inflation, but we have not observed significant impacts for the recently elevated levels of inflation. We proactively analyze available data and we incorporate trends into our loss reserving assumptions to ensure we are considerate of current and future economic conditions.
Governmental policy responses to inflation have increased interest rates in recent years which, in the short term, have contributed to unrealized losses on our fixed income investments, particularly on our fixed maturity securities. While general economic inflation has eased in recent quarters, there remains uncertainty around the rate and direction of inflation and interest rates and we continue to monitor our liquidity, capital and potential earnings impact of these changes but remain focused on our asset allocation decisions as described in our "Business Strategy" section of Item 7. "Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview". Recent changes in administrations in the U.S. appear to signal policy changes including the imposition of tariffs and other economic measures which may have an impact on inflation, although the effects cannot be determined at this time.
Inflation may also result in increased wage pressures for our operating expenses, as we remain focused on being a competitive employer in our market. Currently, while salaries and incentive compensation costs comprise less than one-third of our total general and administrative expenses, continuing inflation and tight labor conditions could have a material impact on our net operating results.
Recent Accounting Pronouncements
Refer to "Notes to Consolidated Financial Statements - Note 2. Significant Accounting Policies" included under Item 8 "Financial Statement and Supplementary Data", of this Annual Report on Form 10-K for a discussion on recently issued accounting pronouncements adopted and not yet adopted.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data.
See our Consolidated Financial Statements and Notes thereto commencing on pages through below.

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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this Report, our management has performed an evaluation, with the participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) at December 31, 2024. Based on their evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, at December 31, 2024, our Company’s disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act and for the assessment of the effectiveness of internal control over financial reporting. As defined by the SEC, internal control over financial reporting is a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our Board of Directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of the consolidated financial statements in accordance with U.S. GAAP.
Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect our transactions and dispositions of our assets; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of the consolidated financial statements in accordance with U.S. GAAP, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
In connection with the preparation of our annual consolidated financial statements, management has undertaken an assessment of the effectiveness of our internal control over financial reporting as of December 31, 2024 based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ("COSO") 2013. Management’s assessment included an evaluation of the design of our internal control over financial reporting and testing of the operational effectiveness of those controls. Based on this evaluation, management, including our Principal Executive Officer and Principal Financial Officer, have concluded that our internal control over financial reporting is effective as of December 31, 2024 based on those criteria.
The Company's independent auditors have issued an audit opinion on the Company's internal control over financial reporting as of December 31, 2024. This report appears below in the Report of Independent Registered Public Accounting Firm.
Changes in Internal Control Over Financial Reporting
No changes were made in our internal controls over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15(d) - 15(f), during the fourth quarter ended December 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Report of Independent Registered Public Accounting Firm
To the Shareholders and the Board of Directors of Maiden Holdings, Ltd.
Opinion on Internal Control Over Financial Reporting
We have audited Maiden Holdings, Ltd.’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Maiden Holdings, Ltd. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related consolidated statements of income, comprehensive income, changes in shareholders’ equity and cash flows for each of the two years in the period ended December 31, 2024, and the related notes and our report dated March 10, 2025 expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
/s/ Ernst & Young LLP
New York, New York
March 10, 2025

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
During the three months ended December 31, 2024, none of our directors or executive officers adopted or terminated a Rule 10b5-1 trading arrangement (as defined in Item 408(a)(1)(i) of Regulation S-K) or adopted or terminated a non-Rule 10b5-1 trading arrangement (as defined in Item 408(c) of Regulation S-K).
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance.
In accordance with General Instruction G. (3) to Form 10-K, we intend to file with the Securities and Exchange Commission the information required by this Item not later than 120 days after the end of the fiscal year covered by this Form 10-K.
We have adopted a Code of Business Conduct and Ethics for all employees. The Code of Business Conduct and Ethics is available free of charge on our website at www.maiden.bm and is available in print to any shareholder who requests it. We intend to disclose any amendments to this code by posting such information on our website, and disclose any waivers of this code applicable to our principal executive officer, principal financial officer, principal accounting officer or controller and other executive officers who perform similar functions through such means or by filing a Form 8-K.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
In accordance with General Instruction G. (3) to Form 10-K, we intend to file with the Securities and Exchange Commission the information required by this Item not later than 120 days after the end of the fiscal year covered by this Form 10-K.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
In accordance with General Instruction G. (3) to Form 10-K, we intend to file with the Securities and Exchange Commission the information required by this Item not later than 120 days after the end of the fiscal year covered by this Form 10-K.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence.
In accordance with General Instruction G. (3) to Form 10-K, we intend to file with the Securities and Exchange Commission the information required by this Item not later than 120 days after the end of the fiscal year covered by this Form 10-K.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services.
In accordance with General Instruction G. (3) to Form 10-K, we intend to file with the Securities and Exchange Commission the information required by this Item not later than 120 days after the end of the fiscal year covered by this Form 10-K.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules.
(a) Financial statements and schedules
Financial statements listed in the accompanying index to our Consolidated Financial Statements starting on page are filed as part of this Annual Report on Form 10-K, and are included in Item 8. "Financial Statement and Supplementary Data".
All other schedules for which provision is made in the applicable regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable, and therefore have been omitted.
(b) Exhibits
The exhibits listed in the Exhibit Index starting on page E-1 following the signature page are filed herewith, which Exhibit Index is incorporated herein by reference.