Bermuda-based Maiden Holdings has reported a net loss of $2.9m for the second quarter of 2023 and an operating income of $4.5m, as well as an underwriting loss of $9.3m in both the AmTrust Reinsurance and Diversified Reinsurance segments.
These figures compare with net income of $25.8m for the second quarter of last year, operating income of $16.6m and an underwriting loss of $5.1m.
This quarter’s underwriting loss includes adverse prior year development of $4.5m from AmTrust contracts ($3.2m) and Diversified run-off contracts ($1.3m). Q2 2022 only had adverse prior year development of $1.0m
Net premiums written in Q2 2023 were $6.9m, compared to the $3.2m reported in the same period last year. Net premiums earned were $11.03m, compared to $10.4 in Q2 2022, while net investment income for the quarter also improved, to $10.5m from $7.6 in the prior year.
Maiden Holdings also reported improved investment results in Q2 2023, from $6.7m in Q2 2022 to $16.5m this quarter.
Net investment income was 37.2% higher at $10.5m in Q2 2023 compared to the $7.7m reported in Q2 2022 as income received on floating rate AmTrust loan and adjustable-rate Funds Withheld increased, the company noted.
Patrick J. Haveron, Maiden’s Chief Executive Officer commented: “Our adjusted book value increased by 3.2% from March 31 as stronger investment results largely offset an underwriting loss during the second quarter, with most of the adverse development incurred during the quarter being covered by our LPT/ADC with Enstar. This also led to a sharp improvement in non-GAAP operating income excluding the gain from repurchase of preference shares in 2022.”
Haveron added: “Our investment performance was the result of significantly higher investment income as our floating rate and adjustable-rate securities responded to the continued rise in interest rates, with minimal impact on asset values. Net investment income increased by $2.9 million or 37.2% compared to last year’s second quarter, and with 33.9% of our fixed income investments now in floating rate securities, we expect to continue to see the benefit from the rise in interest rates on our results.
“We also recognized income on a number of our equity method investments during the quarter as well. As noted in our last report, the market environment has led to a more measured pace of deployment of new alternative investment opportunities, and we are adjusting our investment focus accordingly, focusing on income producing, lower risk assets at more attractive yields. We believe our second quarter results demonstrate our asset management strategy remains on track to achieve its targeted long-term returns.”
There were also realised and unrealized gains of $1.1m in Q2 2023 compared to $2.1m in Q2 2022. This is mainly attributable to gains on equity securities & other investments offset by losses on AFS securities.
Income from equity method investments was $4.8m compared to a loss of $3.0m reported in Q2 2022. This was mainly attributable to investments in the alternative & private equity asset classes, as well as improved results in hedge fund investments compared to Q2 2022.
“During the second quarter, when we found market prices to be sufficiently compelling for repurchases. We continued to implement our active capital management strategy, repurchasing both common shares and senior notes. This portion of our strategy, which is intended to be long-term, will continue to be disciplined and prudent and respond to market conditions as appropriate.” Haveron continued.
“Underwriting results were improved over the first quarter as negative premium adjustments were lower in our AmTrust segment. Ongoing adverse loss development continued to be experienced in certain Auto Liability and Specialty programs, and we continue to respond to additional loss data as reported. Much of this activity, however, is covered by the LPT/ADC reinsurance we have in place.
“Loss development in our Diversified segment was primarily from a German auto program in run- off from our IIS unit along with smaller development from a variety of older treaty programs. In addition, operating expenses were 6.2% lower on a year-over-year basis for the second quarter and we expect them to continue on a lower trajectory over the remainder of 2023.”
Haveron also noted that Maiden Holdings’ consolidated balance sheet at June 30, 2023 does not reflect $1.17 in net US deferred tax assets which still maintains a full valuation allowance.
He said: “While the ongoing adverse reserve development experienced may impact the timing related to ultimately recognizing this asset, we believe the factors that will enable us to ultimately recognize these tax assets in the future continues to accumulate, particularly with our asset portfolio producing more current income.
“We continue to closely evaluate our strategies as we look to build a more consistent base of revenue and profits while leveraging our experience in insurance and reinsurance markets, including distribution channels.”
