Maiden Re(US:MHLD)2020-05-15 20:29PART I - Financial Information Financial Statements Maiden Holdings reported a $20.9 million net income in Q1 2020, reversing a $36.6 million net loss from the prior year, driven by lower underwriting losses and realized investment gains Condensed Consolidated Statements of Income Highlights (Q1 2020 vs Q1 2019) | Metric | Q1 2020 (in thousands) | Q1 2019 (in thousands) | | :--- | :--- | :--- | | Net Premiums Earned | $31,215 | $183,102 | | Total Revenues | $59,119 | $204,835 | | Total Expenses | $38,243 | $238,775 | | Net Income (Loss) | $20,861 | $(36,636) | | Basic and Diluted EPS | $0.25 | $(0.44) | Condensed Consolidated Balance Sheet Highlights (as of March 31, 2020) | Metric | March 31, 2020 (in thousands) | December 31, 2019 (in thousands) | | :--- | :--- | :--- | | Total Investments | $1,542,632 | $1,867,266 | | Total Assets | $3,321,757 | $3,568,196 | | Total Liabilities | $2,836,759 | $3,060,478 | | Total Shareholders' Equity | $484,998 | $507,718 | Condensed Consolidated Statements of Cash Flows Highlights (Q1 2020 vs Q1 2019) | Metric | Q1 2020 (in thousands) | Q1 2019 (in thousands) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | $(218,481) | $(331,930) | | Net Cash Provided by Investing Activities | $288,530 | $129,781 | | Net Increase (Decrease) in Cash | $70,684 | $(202,483) | Notes to Condensed Consolidated Financial Statements Notes detail strategic changes, including cessation of active reinsurance underwriting, re-domestication, and AmTrust run-off, impacting investments and key agreements - The company has ceased active reinsurance underwriting and is focused on running off its existing liabilities, with a key strategic move being the re-domestication of Maiden Reinsurance from Bermuda to Vermont effective March 16, 2020, to better align capital with its U.S.-based liabilities2328 - The company's reportable segments are Diversified Reinsurance (primarily European property and casualty business) and AmTrust Reinsurance (all business ceded from AmTrust, now in run-off)2941 - The LPT/ADC Agreement with Enstar's affiliate, Cavello, provides $155 million in adverse development cover over the carried AmTrust Quota Share loss reserves as of December 31, 2018, resulting in a deferred gain liability of $113.0 million as of March 31, 20209594 - The company recognized net favorable prior year loss development of $0.5 million in Q1 2020, compared to adverse development of $7.3 million in Q1 2019, driven by no development in the AmTrust Reinsurance segment in 2020 versus $8.1 million of adverse development in 201999100101 Management's Discussion and Analysis of Financial Condition and Results of Operations Management confirms the company is in reinsurance run-off, focusing on asset and capital management, with lower premiums and negative operating cash flow - The company is not actively underwriting reinsurance and is running off liabilities from terminated AmTrust contracts, with a strategic focus shifted to asset and capital management to generate shareholder returns144146 - The COVID-19 pandemic has adversely impacted the company's investment portfolio, causing significant unrealized losses ($44.2 million in Q1 2020) due to widening credit spreads, also heightening liquidity risk and potentially requiring additional capital or collateral posting154244245 Key Financial Metrics (Q1 2020 vs Q1 2019) | Metric | Q1 2020 | Q1 2019 | | :--- | :--- | :--- | | Net Income (Loss) | $20.9 million | $(36.6) million | | Combined Ratio | 131.6% | 129.9% | | Non-GAAP Operating Earnings (Loss) | $3.1 million | $(27.6) million | | Book Value per Common Share | $0.24 | N/A (vs $0.51 at YE 2019) | - The company expects continued significant negative operating cash flow ($218.5 million in Q1 2020) due to the run-off of its reinsurance liabilities, with these outflows expected to be funded by cash, investment income, and proceeds from investment sales233234236 Controls and Procedures Management, including CEO and CFO, concluded disclosure controls were effective as of March 31, 2020, with no material changes to internal controls - The Chief Executive Officer and Chief Financial Officer concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report283 - No changes in the company's internal controls over financial reporting occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, these controls284 PART II - Other Information Legal Proceedings The company refers to Note 11 for legal matters and reports no material changes from previously disclosed legal proceedings - The company is subject to a putative class action complaint filed in February 2019, alleging violations of the Exchange Act related to inadequate loss reserves in connection with reinsurance provided to AmTrust, which the company believes is without merit and intends to defend vigorously133 Risk Factors The COVID-19 pandemic significantly impacts the company's business, financial condition, and liquidity, posing risks to investments, financing, and operations - The COVID-19 pandemic is identified as a significant risk factor that has adversely impacted, and is expected to continue to adversely impact, the company's business, financial condition, and liquidity288289 - Specific COVID-19 related risks include continued unrealized losses and volatility in the investment portfolio, potential negative impacts on the ability to raise additional capital, reduced liquidity from increased collateral requirements, and operational disruptions due to remote work289290291 Unregistered Sales of Equity Securities and Use of Proceeds The company has a remaining authorization of $74.2 million for share repurchases as of March 31, 2020, with no repurchases in Q1 2020 - The company has a remaining authorization of $74,245,000 for share repurchases as of March 31, 2020295 - No share repurchases were made under the authorized plan during the three months ended March 31, 2020295 Exhibits This section lists Form 10-Q exhibits, including an amended termination endorsement and required CEO and CFO certifications - Key exhibits filed include an Amended Termination Endorsement between Maiden Reinsurance Ltd. and AmTrust subsidiaries, as well as required CEO and CFO certifications299