Maiden losses widen in 2018 results despite strategic measures to de-risk business

Losses increased at Bermuda-based Maiden Holdings despite taking several  strategic measures to de-risk its balance sheet in an "extremely difficult year", but its CEO Lawrence Metz believes that the performance will start to improve in 2019 as it nears the end of its review process.

Maiden posted a net loss of $570.3 million in 2018, compared with a net loss of $199.1 million in the previous year.

It's gross premiums written were $2.02 billion in 2018 compared to $2.08 billion in 2017 as declines in the AmTrust Reinsurance segment were offset by modest increases in the diversified reinsurance segment from the company’s international business.

The combined ratio for 2018 totalled 127.7 percent, compared with 112.5 percent in 2017.

“We recognise that 2018 was an extremely difficult year for all of our shareholders and dedicated employees," said president and chief executive officer Metz.

In 2018, the company divested its US reinsurance treaty operations to Transatlantic Holdings; and sold its US facultative business including its team of specialists to Japan-based Sompo Group.

In addition, Maiden sold its North America reinsurance business to Enstar Group for initial net consideration of $272.4 million. At closing, Enstar assumed approximately $1.3 billion of net loss and loss adjustment expense reserves and unearned premium reserves.

Earlier in March 2018, the company announced that Enstar has terminated its $2.68 billion loss portfolio transfer (LPT) deal with Maiden, and replaced it with a new $675 million adverse development cover (ADC). Under the new deal, an Enstar subsidiary will enter into an adverse development cover reinsurance agreement with respect to Maiden Re’s quota share reinsurance contracts with AmTrust Financial Services and its subsidiaries, for losses incurred on or prior to December 31, 2018 in excess of a $2.44 billion retention.

Metz said: "With our recently announced revised LPT/ADC transaction with Enstar, we believe we are nearing the end of our strategic review process. Since our third quarter report we have continued to take decisive action, completing the sale of our US reinsurance business to Enstar, mutually agreeing with AmTrust to first amend and then terminate our quota share reinsurance contracts effective January 1, 2019, completing the sale of certain of our European subsidiaries, and entering into a new LPT/ADC agreement with Enstar. We look forward to now taking the necessary steps to enhance our business and create lasting shareholder value.”

Patrick Haveron, Maiden’s chief financial officer and chief operating officer, added: “Since September 1, 2018 the series of strategic measures we have implemented have materially de-risked our balance sheet, improved liquidity, significantly strengthened our capital position relative to regulatory requirements, and cured our breach of the Bermuda Enhanced Capital Requirement.

"Looking ahead, we have also reduced our annual total operating expenses by more than $50 million and look to improve on that to reflect the significant changes in our business during 2018 and 2019. The new LPT/ADC with Enstar will further solidify the progress we have made by protecting our reserves while retaining more assets for investment.

"Maiden enters 2019 with a stronger balance sheet and we expect to further improve our solvency ratios as we look to rebuild shareholder value and begin re-positioning our business for the future.”