AmTrust weighs on Maiden’s Q2 results

AmTrust Financial Services, Maiden Holding’s biggest client has continued to drag the reinsurer’s performance in the second quarter of 2018 and both companies decided to reduce the notice period for termination of their quota share agreement from nine months to five months prior to July 1, 2019.

Maiden’s AmTrust reinsurance segment produced a combined ratio of 106.7 percent in the second quarter of 2018 after 101.5 percent in the same period a year ago, driven primarily by higher initial current year loss ratios on current year premiums earned during the period.

The segment experienced adverse prior year development of $28.4 million for the second quarter of 2018 mainly from worker’s compensation and general liability. This compares to $29.4 million of adverse development for the second quarter of 2017 primarily related to non-programme casualty and European hospital liability.

The AmTrust reinsurance segment is Maiden’s biggest account, but gross premium written declined 12.9 percent year on year to $491.5 million in the second quarter of 2018, reflecting reductions in the small commercial business lines, particularly AmTrust’s workers’ compensation line of business.

Back in 2007, AmTrust and Maiden had entered into a quota share reinsurance agreement and the companies now decided to reduce the notice period for termination of the deal by either party from nine months to five months prior to July 1, 2019, according to an SEC filing.

Maiden’s diversified reinsurance segment improved the combined ratio to 101.1 percent in the second quarter of 2018 from 112.9 percent in the same period a year ago primarily due to lower adverse prior year development.

The segment experienced adverse prior year loss development of $8.0 million for the second quarter of 2018 largely from general liability and commercial auto treaty contracts. This compared to adverse prior year development of $25.4 million in the same period last year primarily due to adverse development in facultative commercial auto as well as a handful of specific contracts across several lines of business.

Earlier in 2018 Maiden launched a strategic review of its operations and it expects improved results of operations from its diversified segment in the future via enhanced underwriting standards and expense reduction.

Gross premiums in the diversified reinsurance segment grew 15.6 percent year on year to $162.8 million in the second quarter of 2018.

Overall, Maiden reduced the net loss to $5.9 million in second quarter of 2018 from a net loss of $22.4 million in the same period a year ago. Gross premiums written decreased to $654.2 million from $705.2 million in the second quarter of 2017.

Outgoing CEO Art Raschbaum, said: “While we did experience continued loss development during the second quarter, our diversified combined ratios are significantly better in 2018 as compared to 2017, with much lower prior year adverse loss development. We continue to evaluate the impact of the operational changes taking place in the underlying claims for the AmTrust segment and believe we are taking a prudent course as more is learned and observed regarding these continuing changes.

“Revenue in the quarter reflected a continued moderation of premiums from our largest client, AmTrust, somewhat offset by increased premiums in the diversified segment.

“We remain committed to restoring underwriting profitability by maintaining disciplined underwriting and through our strategic review, enhancing shareholder value,” Raschbaum added.

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