A return to underwriting profitability and a favourable result from continuing operations helped Maiden Holdings, Ltd. produce net income of $47.7 million and $80 million for the fourth-quarter and full-year 2020, respectively.
For the quarter, net income improved significantly from the $21.5 million net loss reported for the same period in 2019.
The company attributes the improved result to net income from continuing operations of $9.5 million compared to a net loss from continuing operations of $21 million for Q4 2019.
The improvement here, says Maiden, is a result of underwriting income of $17.6 million for the quarter against an underwriting loss of $21.7 million for the prior year quarter; the impact of lower loss ratios combined with lower current year premiums earned during Q4 2020 when compared with Q4 2019; and favourable reserve development of $8.7 million against adverse development of $16.1 million in 2019.
Maiden notes that these improvements were partially offset by lower investment income of $9.8 million, and realised losses on investments of $0.3 million for the fourth-quarter of 2020.
During the final quarter of the year, net premiums written amounted to $10.9 million compared to negative premiums written of $5.9 million in Q4 2019. Within the Diversified Reinsurance arm, premiums written fell by almost 12% when compared with the same period in 2019, due to lower premiums written in German Auto programs in Maiden’s IIS business.
Year-on-year, net premiums earned fell by more than 18% as a result of the combined impact of the terminated quota share contracts within the AmTrust Reinsurance segment and the Diversified Reinsurance segment, non-renewals in Maiden Reinsurance’s former European Capital Solutions business, and also a reduction in the German Auto programs produced by its IIS unit.
Net loss and loss adjustment expenses (LAE) declined by a significant $37.1 million in Q4 2020 when compared with the prior year quarter, driven by the termination of the AmTrust quota share agreements.
Lawrence F. Metz, Maiden’s President and Co-Chief Executive Officer (CEO), commented: “We are pleased to report the completion of a full year of profitability in 2020 with our fourth quarter results, with continued modestly favorable loss development during the quarter and positive investment results from our evolving alternative investment portfolio. We are grateful for our dedicated team’s contributions to our 2020 results.
“We also continue to experience immaterial effects from the COVID-19 pandemic. The results of the partial tender of our preference shares during the fourth quarter contributed to the increase in book value at December 31, 2020, which has more than tripled in the last year. Our newly formed Genesis Legacy Solutions platform is beginning to build its pipeline and we look forward to seeing its contributions to Maiden’s results in 2021 and beyond.”
For the full-year 2020, net income of $80 million compares with a net loss of $131.9 million for 2019. The company highlights net income from continuing operations of $41.8 million for the year against a net loss of $109.4 million for the previous year.
Again, an improved underwriting result had a positive impact for the year as a gain of $17.3 million marked a substantial improvement on the $183.8 million underwriting loss announced for 2019.
Maiden attributes this to the impact of lower loss ratios combined with lower current year premiums earned during 2020 compared with the previous year; and favourable prior year loss development of $16.5 million for 2020 against adverse prior year loss development of $112.5 million during 2019.
For the year, improvements were partially offset by lower net investment income of $54.8 million, lower realised gains on investments of $24.5 million, and foreign exchange and other losses of $8.5 million.
Net premiums written totalled $28.4 million compared to negative premiums written of $531.9 million in 2019. Within the Diversified Reinsurance arm, premiums written fell by over 24% when compared with the same period in 2019, due to lower premiums written in German Auto programs in Maiden’s IIS business.
At the same time, net premiums earned fell by more than 76% as a result of the terminated quota share contracts in the AmTrust Reinsurance segment and non-renewals in the former European Capital Solutions business, and a reduction in German Auto programs produced by its IIS unit within the Diversified Reinsurance segment.
In 2020, Maiden’s net loss and LAE decreased by a sizeable $411 million when compared with the previous year, driven mostly by the termination of the AmTrust quota share agreement.
Patrick J. Haveron, Maiden’s Co-CEO and Chief Financial Officer (CFO), said: “”Maiden finished 2020 fully utilizing both pillars of our asset and capital management strategy. The fourth quarter tender for our preference shares achieved its goals by creating value for both common and preference shareholders. We also continued to find productive opportunities in our asset management pillar across private equity and other investments that we believe will produce both current income and gains in future periods, and we continue to see additional opportunities in the early part of 2021. The run-off of our insurance liabilities continues in line with our expectations and 2020 produced overall favorable development.
“These positive indicators are tempered by the knowledge that certain longer-tail segments still require further seasoning. As our run-off continues, it is critical to continue to build risk-adjusted investment income and gains to enable Maiden to utilize the potentially significant tax assets it has available. While we enter 2021 focused on both pillars, we remain careful to approach these strategies in a deliberate fashion, as we build Maiden’s value for the future. During the first quarter of 2021 we opportunistically advanced our capital management pillar in a meaningful way as these strategies are delivering increasing value to Maiden’s shareholders, and we believe they will continue to do so over the longer-term.”
