Maiden Re(US:MHLD)2022-05-10 12:04markdown [PART I - FINANCIAL INFORMATION](index=3&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The unaudited condensed consolidated financial statements for Q1 2022 and 2021 are presented, covering balance sheets, income, comprehensive income, equity, cash flows, and detailed notes [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets, liabilities, and shareholders' equity decreased from December 31, 2021, to March 31, 2022, primarily due to reductions in fixed maturities and loss reserves Condensed Consolidated Balance Sheet Highlights (in thousands of U.S. dollars) | Metric (in thousands of U.S. dollars) | March 31, 2022 (Unaudited) | December 31, 2021 (Audited) | Change (YoY) | | :------------------------------------ | :------------------------- | :-------------------------- | :----------- | | Total assets | $2,215,972 | $2,322,610 | $(106,638) | | Total liabilities | $1,848,307 | $1,938,353 | $(90,046) | | Total shareholders' equity | $367,665 | $384,257 | $(16,592) | | Fixed maturities, available-for-sale | $471,230 | $597,145 | $(125,915) | | Reserve for loss and loss adjustment expenses | $1,386,023 | $1,489,373 | $(103,350) | [Condensed Consolidated Statements of Income](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Income) Net loss for Q1 2022 significantly declined from prior-year net income, driven by lower preference share repurchase gains and reduced total revenues Condensed Consolidated Statements of Income Highlights (in thousands of U.S. dollars, except per share data) | Metric (in thousands of U.S. dollars, except per share data) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change (YoY) | | :--------------------------------------------------------- | :-------------------------------- | :-------------------------------- | :----------- | | Total revenues | $10,049 | $29,975 | $(19,926) | | Total expenses | $12,014 | $23,587 | $(11,573) | | Net (loss) income | $(1,949) | $9,286 | $(11,235) | | Gain from repurchase of preference shares | $3,543 | $62,450 | $(58,907) | | Net income available to Maiden common shareholders | $1,594 | $71,736 | $(70,142) | | Basic and diluted earnings per share attributable to common shareholders | $0.02 | $0.83 | $(0.81) | [Condensed Consolidated Statements of Comprehensive Income](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive loss increased to **$14.5 million** in Q1 2022, primarily due to net unrealized holding losses on fixed maturity investments Condensed Consolidated Statements of Comprehensive Income Highlights (in thousands of U.S. dollars) | Metric (in thousands of U.S. dollars) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change (YoY) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :----------- | | Net (loss) income | $(1,949) | $9,286 | $(11,235) | | Other comprehensive loss, after tax | $(12,567) | $(14,606) | $2,039 |\ | Comprehensive loss | $(14,516) | $(5,320) | $(9,196) | [Condensed Consolidated Statements of Changes in Shareholders' Equity](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Shareholders'%20Equity) Total shareholders' equity decreased to **$367.7 million** by March 31, 2022, mainly due to reduced preference shares, increased accumulated other comprehensive loss, and a net loss Condensed Consolidated Statements of Changes in Shareholders' Equity Highlights (in thousands of U.S. dollars) | Metric (in thousands of U.S. dollars) | March 31, 2022 | March 31, 2021 | Change (YoY) | | :------------------------------------ | :------------- | :------------- | :----------- | | Preference shares (ending balance) | $152,338 | $228,948 | $(76,610) | | Accumulated other comprehensive (deficit) income (ending balance) | $(24,782) | $9,251 | $(34,033) | | Accumulated deficit (ending balance) | $(496,701) | $(544,202) | $47,501 | | Total shareholders' equity | $367,665 | $426,611 | $(58,946) | [Condensed Consolidated Statements of Cash Flows](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operating activities decreased to **$76.1 million** in Q1 2022, while investing cash flows declined and financing cash outflows significantly reduced Condensed Consolidated Statements of Cash Flows Highlights (in thousands of U.S. dollars) | Metric (in thousands of U.S. dollars) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Change (YoY) | | :------------------------------------ | :-------------------------------- | :-------------------------------- | :----------- | | Net cash used in operating activities | $(76,078) | $(102,818) | $26,740 | | Net cash provided by investing activities | $86,125 | $199,170 | $(113,045) | | Net cash used in financing activities | $(3,893) | $(99,918) | $96,025 | | Net increase (decrease) in cash, restricted cash and cash equivalents | $5,799 | $(4,672) | $10,471 | | Cash, restricted cash and cash equivalents, end of period | $71,886 | $131,154 | $(59,268) | [Notes to Condensed Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) These notes provide essential disclosures for the unaudited condensed consolidated financial statements, covering accounting policies, segment performance, investments, equity, debt, reinsurance, and contingencies [1. Basis of Presentation](index=8&type=section&id=1.%20Basis%20of%20Presentation) Unaudited Condensed Consolidated Financial Statements adhere to U.S. GAAP, with Maiden Holdings focusing on active asset and capital management and underwriting retroactive reinsurance via GLS - Maiden Holdings focuses on active asset and capital management, including ownership and management of businesses and assets in the insurance and related financial services industries[23](index=23&type=chunk) - The company is currently underwriting reinsurance risks on a retroactive basis through its indirect wholly owned subsidiary Genesis Legacy Solutions (GLS), which provides legacy services to small insurance companies, particularly those in run-off[23](index=23&type=chunk) - GLS completed its first transaction in October 2021 and additional transactions in Q1 2022, accumulating insurance-related liabilities of **$37.12 million** as of March 31, 2022[26](index=26&type=chunk) [2. Significant Accounting Policies](index=8&type=section&id=2.%20Significant%20Accounting%20Policies) No material changes occurred in significant accounting policies since the December 31, 2021 Annual Report on Form 10-K - No material changes to significant accounting policies since the December 31, 2021 Annual Report on Form 10-K[27](index=27&type=chunk) [3. Segment Information](index=9&type=section&id=3.%20Segment%20Information) The Company's Diversified Reinsurance segment reported **$1.5 million** underwriting income in Q1 2022, while AmTrust Reinsurance, in run-off, posted a **$3.2 million** underwriting loss - The Company has two reportable segments: Diversified Reinsurance (primarily European property and casualty reinsurance, including GLS) and AmTrust Reinsurance (business ceded by AmTrust, in run-off since January 1, 2019)[29](index=29&type=chunk) Underwriting Results by Segment (in thousands of U.S. dollars) | Underwriting Results (in thousands of U.S. dollars) | Q1 2022 | Q1 2021 | Change (YoY) | | :------------------------------------------------ | :------ | :------ | :----------- | | **Diversified Reinsurance:** | | | | | Gross premiums written | $4,736 | $72 | $4,664 | | Net premiums earned | $5,955 | $6,240 | $(285) | | Underwriting income (loss) | $1,497 | $(235) | $1,732 | | **AmTrust Reinsurance:** | | | | | Gross premiums written | $(14,906)| $(2,462)| $(12,444) | | Net premiums earned | $(4,833)| $5,524 | $(10,357) | | Underwriting (loss) income | $(3,152)| $1,790 | $(4,942) | | **Total Consolidated:** | | | | | Net loss | $(1,949)| $9,286 | $(11,235) | - AmTrust Reinsurance segment's negative gross and net premiums written in Q1 2022 were due to higher than expected adjustments related to Workers Compensation policy surcharges and premium reductions to AmTrust's inuring reinsurance for Specialty Risk and Extended Warranty[211](index=211&type=chunk) [4. Investments](index=12&type=section&id=4.%20Investments) The investment portfolio saw a significant decrease in fixed maturities and net unrealized losses in Q1 2022, while equity and other investments increased Investment Portfolio Composition (in thousands of U.S. dollars) | Investment Type (in thousands of U.S. dollars) | March 31, 2022 | December 31, 2021 | Change | | :--------------------------------------------- | :------------- | :---------------- | :----- | | Fixed maturities, available-for-sale | $471,230 | $597,145 | $(125,915) | | Equity securities | $48,932 | $44,062 | $4,870 | | Equity method investments | $93,317 | $83,742 | $9,575 | | Other investments | $108,161 | $97,663 | $10,498 | | Total investments | $721,640 | $822,612 | $(100,972) | - At March 31, 2022, fixed maturities had gross unrealized losses of **$22.7 million**, primarily due to changes in interest rates and foreign exchange rates, compared to **$11.5 million** at December 31, 2021[35](index=35&type=chunk) - Net investment income decreased to **$6.6 million** in Q1 2022 from **$9.8 million** in Q1 2021, mainly due to a **29.6%** decline in average fixed income assets[47](index=47&type=chunk)[190](index=190&type=chunk) - Net realized and unrealized gains on investment decreased to **$2.3 million** in Q1 2022 from **$8.1 million** in Q1 2021, with the prior year including **$4.5 million** in unrealized gains from an insurtech start-up IPO[49](index=49&type=chunk)[192](index=192&type=chunk)[193](index=193&type=chunk) [5. Fair Value of Financial Instruments](index=17&type=section&id=5.%20Fair%20Value%20of%20Financial%20Instruments) Financial instruments are categorized into a three-level fair value hierarchy, with significant Level 2 fixed maturities and Level 3 privately held equity investments - Fair value measurements are categorized into Level 1 (quoted prices in active markets), Level 2 (observable inputs), and Level 3 (unobservable inputs)[59](index=59&type=chunk) Fair Value Hierarchy of Financial Instruments (in thousands of U.S. dollars) | Fair Value Hierarchy (in thousands of U.S. dollars) | March 31, 2022 | December 31, 2021 | | :-------------------------------------------------- | :------------- | :---------------- | | Level 1 (Identical Assets) | $66,438 | $59,879 | | Level 2 (Observable Inputs) | $405,500 | $537,266 | | Level 3 (Unobservable Inputs) | $29,660 | $27,094 | | Fair Value Based on NAV Practical Expedient | $80,550 | $70,481 | | Total Fair Value | $582,148 | $695,894 | - Level 3 financial instruments, primarily privately held equity investments, totaled **$29.7 million** at March 31, 2022, valued using quarterly financial statements or recent private market transactions due to significant unobservable inputs[70](index=70&type=chunk) [6. Shareholders' Equity](index=21&type=section&id=6.%20Shareholders'%20Equity) Total shareholders' equity decreased to **$367.7 million** by March 31, 2022, impacted by preference share repurchases and increased accumulated other comprehensive loss Shareholders' Equity Highlights (in thousands of U.S. dollars, except share data) | Metric (in thousands of U.S. dollars, except share data) | March 31, 2022 | December 31, 2021 | | :------------------------------------------------------- | :------------- | :---------------- | | Preference shares (ending balance) | $152,338 | $159,210 | | Common shares outstanding | 87,058,833 | 86,467,242 | | Total shareholders' equity | $367,665 | $384,257 | Preference Share Repurchases (Q1) | Preference Share Repurchases (Q1) | 2022 (Number of shares) | 2022 (Average price) | 2021 (Number of shares) | 2021 (Average price) | | :-------------------------------- | :---------------------- | :------------------- | :---------------------- | :------------------- | | Series A | — | — | 2,561,636 | $14.88 | | Series C | 179,996 | $11.59 | 2,028,961 | $14.65 | | Series D | 94,865 | $10.67 | 2,023,896 | $14.60 | | Total | 274,861 | $11.27 | 6,614,493 | $14.72 | | Total price paid (in thousands) | $3,098 | | $97,393 | | | Gain on purchase (in thousands) | $3,543 | | $62,450 | | - Accumulated other comprehensive loss increased from **$(12.2) million** at the beginning of Q1 2022 to **$(24.8) million** at the end, driven by net unrealized investment losses and foreign currency translation adjustments[81](index=81&type=chunk) [7. Long-Term Debt](index=23&type=section&id=7.%20Long-Term%20Debt) Maiden Holdings maintains **$262.5 million** in outstanding Senior Notes with fixed coupon rates, and Q1 2022 interest expense remained consistent Senior Notes Details (in thousands of U.S. dollars) | Senior Notes (in thousands of U.S. dollars) | March 31, 2022 | December 31, 2021 | | :------------------------------------------ | :------------- | :---------------- | | Principal amount | $262,500 | $262,500 | | Less: unamortized issuance costs | $7,098 | $7,153 | | Carrying value | $255,402 | $255,347 | | 2016 Senior Notes Coupon rate | 6.625% | 6.625% | | 2013 Senior Notes Coupon rate | 7.75% | 7.75% | - Interest expense on Senior Notes was **$4.777 million** for both Q1 2022 and Q1 2021, with a weighted average effective interest rate of **7.6%**[83](index=83&type=chunk)[200](index=200&type=chunk) [8. Reinsurance](index=24&type=section&id=8.%20Reinsurance) Ceded reinsurance manages risk, significantly impacting net premiums, while the LPT/ADC Agreement with Cavello Bay Reinsurance Limited reduces AmTrust liabilities Reinsurance Impact on Financials (in thousands of U.S. dollars) | Reinsurance Impact (in thousands of U.S. dollars) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------------------ | :-------------------------------- | :-------------------------------- | | Net premiums written | $(10,323) | $(2,696) | | Net premiums earned | $1,122 | $11,764 | | Net loss and LAE | $(2,283) | $2,359 | - Reinsurance recoverable on unpaid losses was **$558.3 million** at March 31, 2022, with no valuation allowance[88](index=88&type=chunk) - The LPT/ADC Agreement with Cavello provides **$155 million** in adverse development cover over AmTrust Quota Share loss reserves. As of March 31, 2022, the reinsurance recoverable was **$489.9 million**, and the deferred gain liability was **$44.9 million**[90](index=90&type=chunk) [9. Reserve for Loss and Loss Adjustment Expenses](index=25&type=section&id=9.%20Reserve%20for%20Loss%20and%20Loss%20Adjustment%20Expenses) Gross loss and LAE reserves decreased to **$1.39 billion** by March 31, 2022, driven by **$7.3 million** net favorable prior year loss development across segments Reserve for Loss and LAE (in thousands of U.S. dollars) | Reserve for Loss and LAE (in thousands of U.S. dollars) | March 31, 2022 | December 31, 2021 | | :------------------------------------------------------ | :------------- | :---------------- | | Reserve for reported loss and LAE | $804,771 | $851,950 | | Reserve for losses incurred but not reported ("IBNR") | $581,252 | $637,423 | | Total Reserve for loss and LAE | $1,386,023 | $1,489,373 | - Net favorable prior year loss development was **$7.285 million** for Q1 2022, compared to **$5.554 million** in Q1 2021[94](index=94&type=chunk) - Diversified Reinsurance segment had **$2.211 million** in net favorable prior year loss development in Q1 2022, mainly from German Auto Programs. AmTrust Reinsurance segment had **$5.074 million** in net favorable prior year loss development, primarily from Workers Compensation and Specialty Risk[95](index=95&type=chunk)[96](index=96&type=chunk) [10. Related Party Transactions](index=26&type=section&id=10.%20Related%20Party%20Transactions) Significant related party transactions exist with AmTrust Financial Services, Inc., involving run-off reinsurance agreements and substantial collateral arrangements - Key related parties include AmTrust Financial Services, Inc., with founding shareholders of Maiden Holdings also holding significant interests in AmTrust[98](index=98&type=chunk) - The AmTrust Quota Share and European Hospital Liability Quota Share reinsurance agreements were terminated on a run-off basis effective January 1, 2019[102](index=102&type=chunk)[108](index=108&type=chunk) Collateral Provided to AmTrust (in thousands of U.S. dollars) | Collateral Provided to AmTrust (in thousands of U.S. dollars) | March 31, 2022 | December 31, 2021 | | :---------------------------------------------------------- | :------------- | :---------------- | | Loan to related party | $167,975 | $167,975 | | Reinsurer Trust Assets Collateral | $138,810 | $246,874 | | Funds withheld balance | $575,000 | $575,000 | | European Hospital Liability Quota Share (AEL trust accounts) | $234,633 | $244,488 | | European Hospital Liability Quota Share (AIU DAC funds withheld) | $25,755 | $26,460 | [11. Commitments, Contingencies and Guarantees](index=29&type=section&id=11.%20Commitments,%20Contingencies%20and%20Guarantees) The Company faces credit risk, has unfunded commitments totaling **$85.1 million**, provides **$36.2 million** in real estate guarantees, and is involved in ongoing legal proceedings - Unfunded commitments on other investments were **$67.278 million** at March 31, 2022, and on equity method investments were **$17.790 million**[128](index=128&type=chunk) - Guarantees provided to lenders on behalf of real estate joint ventures totaled **$36.231 million** at March 31, 2022, with the likelihood of incurring losses determined to be remote[131](index=131&type=chunk) - The Company is vigorously defending against a Sarbanes-Oxley whistle-blower claim and a class action lawsuit alleging inadequate loss reserves related to AmTrust reinsurance[134](index=134&type=chunk)[135](index=135&type=chunk) [12. Earnings per Common Share](index=31&type=section&id=12.%20Earnings%20per%20Common%20Share) Basic and diluted earnings per common share significantly decreased to **$0.02** in Q1 2022, primarily due to lower preference share repurchase gains Earnings per Common Share (in thousands of U.S. dollars, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :----- | :-------------------------------- | :-------------------------------- | | Net income allocated to Maiden common shareholders (in thousands) | $1,584 | $70,603 | | Basic and diluted earnings per share attributable to common shareholders | $0.02 | $0.83 | | Weighted average number of common shares - basic | 86,547,173 | 85,132,939 | [13. Income Taxes](index=31&type=section&id=13.%20Income%20Taxes) Income tax expense increased to **$1.255 million** in Q1 2022, with a full valuation allowance maintained against net U.S. deferred tax assets Income Tax Expense (in thousands of U.S. dollars) | Metric (in thousands of U.S. dollars) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :------------------------------------ | :-------------------------------- | :-------------------------------- | | Income tax expense | $1,255 | $49 | - A valuation allowance has been established against net U.S. deferred tax assets, primarily from net operating losses and discounting of loss reserves, due to insufficient positive evidence regarding future utilization[138](index=138&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=32&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Maiden Holdings' Q1 2022 financial condition and results, covering strategy, segment performance, liquidity, capital, investments, and non-GAAP measures, reporting a net loss [Overview](index=33&type=section&id=Overview) Maiden Holdings, a Bermuda-based holding company, focuses on active asset and capital management, underwriting retroactive reinsurance via GLS and managing run-off programs - Maiden Holdings creates shareholder value by actively managing and allocating assets and capital, primarily in the insurance and related financial services industries[143](index=143&type=chunk) - The company is actively underwriting risks on a retroactive basis through GLS, while its historic reinsurance programs, including those with AmTrust, are in run-off[145](index=145&type=chunk) - Maiden Holdings North America, Ltd. (Maiden NA) has net operating loss carry-forwards (NOL) of **$235.7 million** and net U.S. deferred tax assets (DTA) of **$94.3 million** (**$1.08** per common share) as of March 31, 2022, though a full valuation allowance is maintained[148](index=148&type=chunk)[149](index=149&type=chunk) [Business Strategy](index=33&type=section&id=Business%20Strategy) Maiden Holdings' 2022 strategy focuses on asset management, legacy underwriting, and capital management, aiming to maximize returns, build run-off portfolios, and enhance shareholder value - The business strategy has three principal areas of focus: asset management, legacy underwriting, and capital management, aiming to maximize risk-adjusted shareholder returns and increase book value[151](index=151&type=chunk) - The company has invested approximately **$250.4 million** into alternative investments (equity securities, other investments, and equity method investments) and expects these activities to exceed the benchmark cost of debt capital (**7.6%**)[152](index=152&type=chunk)[155](index=155&type=chunk) - GLS completed additional transactions in Q1 2022, with insurance-related liabilities totaling **$37.1 million**, and is expected to enhance asset and capital management while contributing to profitable growth[158](index=158&type=chunk) - Capital management initiatives include the repurchase of preference shares, with a remaining authorization of **$10.7 million** at March 31, 2022[160](index=160&type=chunk) [Three Months Ended March 31, 2022 and 2021 Financial Highlights](index=35&type=section&id=Three%20Months%20Ended%20March%2031,%202022%20and%202021%20Financial%20Highlights) Maiden Holdings reported a significant decrease in Q1 2022 net income, driven by lower preference share repurchase gains, underwriting losses, and declining investment income Financial Highlights (in thousands of U.S. dollars, except per share data) | Metric (in thousands of U.S. dollars, except per share data) | Q1 2022 | Q1 2021 | Change | | :--------------------------------------------------------- | :------ | :------ | :----- | | Net income attributable to Maiden common shareholders | $1,594 | $71,736 | $(70,142) | | Basic and diluted EPS attributable to common shareholders | $0.02 | $0.83 | $(0.81) | | Gross premiums written | $(10,170)| $(2,390)| $(7,780) | | Net premiums earned | $1,122 | $11,764 | $(10,642) | | Underwriting (loss) income | $(1,655)| $1,555 | $(3,210) | | Net investment income | $6,567 | $9,841 | $(3,274) | | Total assets | $2,215,972| $2,322,610| $(106,638) | | Shareholders' equity | $367,665| $384,257| $(16,592) | | Book value per common share | $2.47 | $2.60 | $(0.13) | - Non-GAAP operating loss was **$6.9 million** in Q1 2022, a significant decrease from **$47.3 million** in operating earnings in Q1 2021[163](index=163&type=chunk) - The ratio of debt to total capital resources increased from **40.6%** in December 2021 to **41.7%** in March 2022[163](index=163&type=chunk) [Key Financial Measures](index=36&type=section&id=Key%20Financial%20Measures) Management uses non-GAAP financial measures, including operating earnings and adjusted equity, to evaluate performance by excluding market-influenced items and retroactive reinsurance impacts - Non-GAAP operating (loss) earnings exclude net realized gains/losses on investment, foreign exchange and other gains/losses, ceded prior year reserve development under LPT/ADC, and interest in income of equity method investments to focus on underlying operational fundamentals[167](index=167&type=chunk) - Underwriting income (loss) is a non-GAAP measure calculated as net premiums earned plus other insurance revenue less net loss and LAE, commission, and general and administrative expenses directly related to underwriting activities[168](index=168&type=chunk) - Adjusted shareholders' equity and related metrics incorporate the unamortized deferred gain on ceded retroactive reinsurance under the LPT/ADC Agreement to reflect the ultimate economic benefit of this agreement[176](index=176&type=chunk)[177](index=177&type=chunk) [Critical Accounting Policies and Estimates](index=37&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) Critical accounting policies and estimates remain consistent with the December 31, 2021 Annual Report on Form 10-K, with no material changes in application - No material changes in the application of critical accounting estimates since the Annual Report on Form 10-K for the year ended December 31, 2021[180](index=180&type=chunk) [Results of Operations](index=38&type=section&id=Results%20of%20Operations) Maiden Holdings reported a **$1.9 million** net loss in Q1 2022, a significant decline from prior-year net income, driven by lower preference share repurchase gains and an underwriting loss Results of Operations Highlights (in thousands of U.S. dollars) | Metric (in thousands of U.S. dollars) | Q1 2022 | Q1 2021 | Change | | :------------------------------------ | :------ | :------ | :----- | | Net (loss) income | $(1,949)| $9,286 | $(11,235) | | Gain from repurchase of preference shares | $3,543 | $62,450 | $(58,907) | | Net income available to Maiden common shareholders | $1,594 | $71,736 | $(70,142) | | Total revenues | $10,049 | $29,975 | $(19,926) | | Underwriting (loss) income | $(1,655)| $1,555 | $(3,210) | - Excluding the gain on preference share repurchases, net loss for Q1 2022 was **$1.9 million**, compared to net income of **$9.3 million** in Q1 2021, mainly due to an underwriting loss and lower investment income[184](index=184&type=chunk) - Net premiums written decreased to **$(10.3) million** in Q1 2022 from **$(2.7) million** in Q1 2021, primarily due to AmTrust Cession Adjustments in the AmTrust Reinsurance segment[185](index=185&type=chunk)[189](index=189&type=chunk) - Net investment income decreased by **33.3%** to **$6.6 million** in Q1 2022, driven by a **29.6%** decline in average fixed income assets[190](index=190&type=chunk) [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) Investable assets decreased to **$1.6 billion** by March 31, 2022, due to negative operating cash flows, while capital resources declined by **2.6%** to **$630.2 million** - Investable assets decreased from **$1.7 billion** at December 31, 2021, to **$1.6 billion** at March 31, 2022, primarily due to negative operating cash flows from the run-off of reinsurance liabilities[218](index=218&type=chunk) Cash Flow Activity (in thousands of U.S. dollars) | Cash Flow Activity (in thousands of U.S. dollars) | Q1 2022 | Q1 2021 | | :------------------------------------------------ | :------ | :------ | | Operating activities | $(76,078)| $(102,818)| | Investing activities | $86,125 | $199,170| | Financing activities | $(3,893)| $(99,918)| | Net increase (decrease) in cash, restricted cash and cash equivalents | $5,799 | $(4,672)| - Total capital resources decreased by **$16.6 million** (**2.6%**) to **$630.2 million** at March 31, 2022, mainly due to a **$16.6 million** decrease in total shareholders' equity[274](index=274&type=chunk) - Book value per common share decreased by **5.0%** to **$2.47**, and diluted book value per common share decreased by **5.0%** to **$2.46**, primarily due to a net loss and a net decrease in Accumulated Other Comprehensive Income (AOCI)[273](index=273&type=chunk) [Non-GAAP Measures](index=55&type=section&id=Non-GAAP%20Measures) Non-GAAP operating loss was **$6.9 million** in Q1 2022, a significant reduction from prior-year operating earnings, with adjusted equity and capital resources also decreasing Non-GAAP Operating Metrics (in thousands of U.S. dollars, except per share data) | Non-GAAP Operating Metrics (in thousands of U.S. dollars, except per share data) | Q1 2022 | Q1 2021 | | :------------------------------------------------------------------------------- | :------ | :------ | | Non-GAAP operating (loss) earnings | $(6,935)| $47,301 | | Non-GAAP diluted operating (loss) earnings per share available to common shareholders | $(0.08) | $0.55 | | Non-GAAP Operating ROACE | (10.5)% | 81.4% | - Non-GAAP underwriting loss was **$2.7 million** in Q1 2022, compared to **$8.3 million** in Q1 2021, after adjusting for prior year reserve development subject to the LPT/ADC Agreement[289](index=289&type=chunk)[290](index=290&type=chunk) Adjusted Capital Metrics (in thousands of U.S. dollars) | Adjusted Capital Metrics (in thousands of U.S. dollars) | March 31, 2022 | December 31, 2021 | | :------------------------------------------------------ | :------------- | :---------------- | | Adjusted shareholders' equity | $412,525 | $434,200 | | Adjusted total capital resources | $675,025 | $696,700 | | Adjusted book value per common share | $2.99 | $3.18 | | Ratio of debt to adjusted total capital resources | 38.9% | 37.7% | [Currency and Foreign Exchange](index=58&type=section&id=Currency%20and%20Foreign%20Exchange) Net foreign exchange gains of **$3.9 million** in Q1 2022 resulted from a strengthening U.S. dollar against euro and British pound denominated liabilities, with no hedging strategies in place - Net foreign exchange gains were **$3.9 million** in Q1 2022, up from **$3.4 million** in Q1 2021, primarily due to the strengthening U.S. dollar against euro and British pound denominated liabilities[201](index=201&type=chunk)[299](index=299&type=chunk) - At March 31, 2022, non-U.S. dollar denominated liabilities included **$382.6 million** in net loss reserves, while foreign currency asset exposures included **$252.5 million** in fixed maturity securities[203](index=203&type=chunk) - No hedging strategies were in force during Q1 2022 to manage foreign currency exchange risk[298](index=298&type=chunk) [Effects of Inflation](index=58&type=section&id=Effects%20of%20Inflation) Anticipated inflation effects are considered in pricing and loss reserves, but unforeseen changes in claim costs could necessitate reserve adjustments and impact earnings - Anticipated effects of inflation are considered in pricing and estimating loss and LAE reserves[300](index=300&type=chunk) - Unforeseen changes in claim costs due to inflation (e.g., medical treatments, litigation) could require reserve adjustments and impact earnings[300](index=300&type=chunk) [Off-Balance Sheet Arrangements](index=58&type=section&id=Off-Balance%20Sheet%20Arrangements) The Company had no off-balance sheet arrangements as defined by Regulation S-K Item 303(a)(4) as of March 31, 2022 - The Company had no off-balance sheet arrangements as of March 31, 2022[301](index=301&type=chunk) [Recent Accounting Pronouncements](index=58&type=section&id=Recent%20Accounting%20Pronouncements) Refer to Note 2, Significant Accounting Policies, for details on recent accounting pronouncements not yet adopted - Refer to Note 2 for details on recent accounting pronouncements not yet adopted[302](index=302&type=chunk) [Item 4. Controls and Procedures](index=58&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of March 31, 2022, with no material changes in internal controls over financial reporting during the quarter - Disclosure controls and procedures were evaluated and deemed effective as of March 31, 2022[303](index=303&type=chunk) - No material changes in internal controls over financial reporting occurred during the most recent fiscal quarter[304](index=304&type=chunk) [PART II - OTHER INFORMATION](index=59&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=59&type=section&id=Item%201.%20Legal%20Proceedings) No material changes to legal proceedings occurred since the December 31, 2021 Annual Report on Form 10-K - No material changes to legal proceedings since the December 31, 2021 Annual Report on Form 10-K[306](index=306&type=chunk) [Item 1A. Risk Factors](index=59&type=section&id=Item%201A.%20Risk%20Factors) No material changes to risk factors occurred since the December 31, 2021 Annual Report on Form 10-K - No material changes to risk factors previously disclosed in the Annual Report on Form 10-K for the year ended December 31, 2021[308](index=308&type=chunk) [Item 2. Unregistered Sales of Equity and Use of Proceeds](index=59&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20and%20Use%20of%20Proceeds) No unregistered equity sales occurred; **274,861** preference shares were repurchased for **$3.1 million** in Q1 2022, with **$10.7 million** remaining authorization - No common shares were repurchased under the **$100 million** authorization during Q1 2022, with **$74.2 million** remaining[309](index=309&type=chunk) Preference Share Repurchases (in millions of U.S. dollars) | Preference Share Repurchases (Q1) | 2022 (Number of shares) | 2022 (Total price paid, in millions) | 2021 (Number of shares) | 2021 (Total price paid, in millions) | | :-------------------------------- | :---------------------- | :----------------------------------- | :---------------------- | :----------------------------------- | | Total | 274,861 | $3.1 | 6,614,493 | $97.4 | | Gain on purchase | $3.5 | | $62.5 | | - The Company has a remaining authorization of **$10.7 million** for preference share repurchases as of March 31, 2022[312](index=312&type=chunk) [Item 3. Defaults Upon Senior Securities](index=59&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities occurred during the period - No defaults upon senior securities[313](index=313&type=chunk) [Item 4. Mine Safety Disclosures](index=59&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) Mine Safety Disclosures are not applicable to the Company - Mine Safety Disclosures are not applicable[314](index=314&type=chunk) [Item 5. Other Information](index=60&type=section&id=Item%205.%20Other%20Information) This section details executive ownership and sales, and reports the 2022 Annual General Meeting results, including director elections and advisory votes - Directors and executives may sell common shares for personal financial planning or liquidity, following Rule 10b5-1 trading plans and company policy[315](index=315&type=chunk) 2022 Annual General Meeting of Shareholders Voting Results | 2022 Annual General Meeting of Shareholders Voting Results | | :------------------------------------------------------- | | **Election of Directors:** | | - All nine nominated directors were elected. | | **Non-binding advisory vote on executive compensation:** | | - Votes For: 33,991,707 | | - Votes Against: 14,264,128 | | - Abstain: 3,613,797 | | **Appointment of Ernst & Young LLP as independent auditor:** | | - Votes For: 75,692,046 | | - Votes Against: 96,215 | | - Abstain: 19,016 | [Item 6. Exhibits](index=60&type=section&id=Item%206.%20Exhibits) Exhibits include Section 302 and 906 certifications from the CEO and CFO, and Inline XBRL formatted financial statements and notes - Exhibits include Section 302 and 906 certifications from the CEO and CFO, and Inline XBRL formatted financial statements and notes[317](index=317&type=chunk)