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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2020
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
Commission File No. 001-34042
MAIDEN HOLDINGS, LTD.
(Exact name of registrant as specified in its charter)
Bermuda
98-0570192
(State or other jurisdiction of
incorporation or organization)
(IRS Employer
Identification No.)
94 Pitts Bay Road
 
Pembroke
 
Bermuda
HM08
(Address of principal executive offices)
(Zip Code)
(441) 298-4900
(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
 
Trading symbol(s)
 
Name of Each Exchange on Which Registered
Common Shares, par value $0.01 per share
 
MHLD
 
NASDAQ Capital Market
Series A Preference Shares, par value $0.01 per share
 
MH.PA
 
New York Stock Exchange
Series C Preference Shares, par value $0.01 per share
 
MH.PC
 
New York Stock Exchange
Series D Preference Shares, par value $0.01 per share
 
MH.PD
 
New York Stock Exchange
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
Large accelerated filer
 
Accelerated filer
Non-accelerated filer
 
(Do not check if a smaller reporting company)
 
 
 
Smaller reporting company
 
 
 
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Securities Exchange Act).
Yes No
As of May 10, 2020, the number of shares of the Registrant's Common Stock ($.01 par value) outstanding was 84,718,837.




INDEX
 
 
Page
PART I - Financial Information
 
 
 

 
 
Condensed Consolidated Balance Sheets as of March 31, 2020 (unaudited) and December 31, 2019 (audited)
 
 
 
 
Condensed Consolidated Statements of Income for the Three Months Ended March 31, 2020 and 2019 (unaudited)
 
 
 
 
Condensed Consolidated Statements of Comprehensive Income for the Three Months Ended March 31, 2020 and 2019 (unaudited)
 
 
 
 
Condensed Consolidated Statements of Changes in Shareholders' Equity for the Three Months Ended March 31, 2020 and 2019 (unaudited)
 
 
 
 
Condensed Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2020 and 2019 (unaudited)
 
 
 
 
 
 
 
 
 
 
 
 
 
PART II - Other Information
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 


2


PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands of U.S. dollars, except share and per share data)
 
 
March 31,
2020
 
December 31,
2019
ASSETS
 
(Unaudited)
 
(Audited)
Investments:
 
 
 
 
Fixed maturities, available-for-sale, at fair value (amortized cost 2020 - $1,530,689; 2019 - $1,813,426)
 
$
1,508,544

 
$
1,835,518

Other investments
 
34,088

 
31,748

Total investments
 
1,542,632

 
1,867,266

Cash and cash equivalents
 
60,059

 
48,197

Restricted cash and cash equivalents
 
117,903

 
59,081

Accrued investment income
 
19,897

 
18,331

Reinsurance balances receivable, net
 
14,560

 
12,181

Reinsurance recoverable on unpaid losses
 
620,882

 
623,422

Loan to related party
 
167,975

 
167,975

Deferred commission and other acquisition expenses (includes $61,439 and $68,433 from related parties in 2020 and 2019, respectively)
 
69,109

 
77,356

Funds withheld receivable (includes $649,516 and $632,305 from related parties in 2020 and 2019, respectively)
 
696,076

 
684,441

Other assets
 
12,664

 
9,946

Total assets
 
$
3,321,757

 
$
3,568,196

LIABILITIES
 
 
 
 
Reserve for loss and loss adjustment expenses (includes $2,095,411 and $2,272,418 from related parties in 2020 and 2019, respectively)
 
$
2,249,045

 
$
2,439,907

Unearned premiums (includes $171,113 and $189,797 from related parties in 2020 and 2019, respectively)
 
197,094

 
220,269

Deferred gain on retroactive reinsurance
 
112,950

 
112,950

Accrued expenses and other liabilities (includes $11,170 and $20,049 from related parties in 2020 and 2019, respectively)
 
22,708

 
32,444

Senior notes - principal amount
 
262,500

 
262,500

Less: unamortized debt issuance costs
 
7,538

 
7,592

Senior notes, net
 
254,962

 
254,908

Total liabilities
 
2,836,759

 
3,060,478

Commitments and Contingencies
 


 


EQUITY
 
 
 
 
Preference shares
 
465,000

 
465,000

Common shares ($0.01 par value; 88,983,171 and 88,161,638 shares issued in 2020 and 2019, respectively; 83,969,991 and 83,148,458 shares outstanding in 2020 and 2019, respectively)
 
890

 
882

Additional paid-in capital
 
751,862

 
751,327

Accumulated other comprehensive (loss) income
 
(26,288
)
 
17,836

Accumulated deficit
 
(674,933
)
 
(695,794
)
Treasury shares, at cost (5,013,180 shares in 2020 and 2019, respectively)
 
(31,533
)
 
(31,533
)
Total shareholders’ equity
 
484,998

 
507,718

Total liabilities and equity
 
$
3,321,757

 
$
3,568,196

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

3


MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
(in thousands of U.S. dollars, except per share data)
 
 
For the Three Months Ended March 31,
 
 
2020

2019
Revenues
 
 
 
 
Gross premiums written
 
$
11,734

 
$
(561,139
)
Net premiums written
 
$
10,372

 
$
(561,530
)
Change in unearned premiums
 
20,843

 
744,632

Net premiums earned
 
31,215

 
183,102

Other insurance revenue
 
408

 
812

Net investment income
 
17,964

 
32,022

Net realized gains (losses) on investment
 
11,038

 
(11,101
)
Total other-than-temporary impairment losses
 
(1,506
)
 

Total revenues
 
59,119

 
204,835

Expenses
 
 
 
 
Net loss and loss adjustment expenses
 
21,086

 
152,689

Commission and other acquisition expenses
 
11,973

 
69,617

General and administrative expenses
 
8,550

 
16,619

Interest and amortization expenses
 
4,831

 
4,829

Foreign exchange and other gains
 
(8,197
)
 
(4,979
)
Total expenses
 
38,243

 
238,775

Income (loss) from continuing operations before income taxes
 
20,876

 
(33,940
)
Less: income tax expense (benefit)
 
15

 
(38
)
Income (loss) from continuing operations
 
20,861

 
(33,902
)
Loss from discontinued operations, net of income tax
 

 
(2,734
)
Net income (loss)
 
$
20,861

 
$
(36,636
)
Basic and diluted earnings (loss) from continuing operations per share attributable to common shareholders
 
$
0.25

 
$
(0.41
)
Basic and diluted loss from discontinued operations per share attributable to common shareholders
 

 
(0.03
)
Basic and diluted earnings (loss) per share attributable to common shareholders
 
$
0.25

 
$
(0.44
)
Weighted average number of common shares - basic and diluted
 
83,256,223

 
82,965,156


See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

4


MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited)
(in thousands of U.S. dollars)
 
 
For the Three Months Ended March 31,
 
 
2020
 
2019
Net income (loss)
 
$
20,861

 
$
(36,636
)
Other comprehensive (loss) income
 
 
 
 
Net unrealized holdings (losses) gains on fixed maturities arising during period
 
(40,203
)
 
49,030

Adjustment for reclassification of net realized (gains) losses recognized in net income (loss)
 
(4,033
)
 
12,488

Foreign currency translation adjustment
 
(3
)
 
3,998

Other comprehensive (loss) income, before tax
 
(44,239
)
 
65,516

Income tax benefit (expense) related to components of other comprehensive (loss) income
 
115

 
(42
)
Other comprehensive (loss) income, after tax
 
(44,124
)
 
65,474

Comprehensive (loss) income
 
(23,263
)
 
28,838

Comprehensive income attributable to noncontrolling interests
 

 
(78
)
Comprehensive (loss) income attributable to Maiden
 
$
(23,263
)
 
$
28,760

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

5


MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
(in thousands of U.S. dollars)
 
 
For the Three Months Ended March 31,
 

2020
 
2019
Preference shares - Series A, C and D
 
 
 
 
Beginning balance
 
$
465,000

 
$
465,000

Ending balance
 
465,000

 
465,000

Common shares
 
 
 
 
Beginning balance
 
882

 
879

Exercise of options and issuance of shares
 
8

 
2

Ending balance
 
890

 
881

Additional paid-in capital
 
 
 
 
Beginning balance
 
751,327

 
749,418

Exercise of options and issuance of common shares
 
(8
)
 
(2
)
Share-based compensation expense
 
543

 
1,254

Ending balance
 
751,862

 
750,670

Accumulated other comprehensive loss
 
 
 
 
Beginning balance
 
17,836

 
(65,616
)
Change in net unrealized (losses) gains on investment
 
(44,121
)
 
61,476

Foreign currency translation adjustment
 
(3
)
 
3,920

Ending balance
 
(26,288
)
 
(220
)
Accumulated deficit
 
 
 
 
Beginning balance
 
(695,794
)
 
(563,891
)
Net income (loss)
 
20,861

 
(36,636
)
Ending balance
 
(674,933
)
 
(600,527
)
Treasury shares
 
 
 
 
Beginning balance
 
(31,533
)
 
(31,515
)
Ending balance
 
(31,533
)
 
(31,515
)
Noncontrolling interests in subsidiaries
 
 
 
 
Beginning balance
 

 
641

Disposal of subsidiaries
 

 
(719
)
Foreign currency translation adjustment
 

 
78

Ending balance
 

 

Total shareholders' equity
 
$
484,998

 
$
584,289

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

6


MAIDEN HOLDINGS, LTD.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(in thousands of U.S. dollars)
For the Three Months Ended March 31,
 
2020
 
2019
Cash flows from operating activities
 
 
 
 
Net income (loss)
 
$
20,861

 
$
(36,636
)
Less: net loss from discontinued operations
 

 
2,734

Adjustments to reconcile net income (loss) to net cash flows from operating activities:
 
 
 
 
Depreciation, amortization and share-based compensation
 
1,761

 
2,062

Net realized (gains) losses on investment
 
(11,038
)
 
11,101

Total other-than-temporary impairment losses
 
1,506

 

Foreign exchange and other gains
 
(8,181
)
 
(4,964
)
Changes in assets  (increase) decrease:
 
 
 
 
Reinsurance balances receivable, net
 
(15,205
)
 
(7,198
)
Reinsurance recoverable on unpaid losses
 
2,256

 
(36
)
Accrued investment income
 
(1,659
)
 
2

Deferred commission and other acquisition expenses
 
7,438

 
88,388

Funds withheld receivable
 
1,261

 
(53,741
)
Other assets
 
(8,464
)
 
(3,462
)
Changes in liabilities  increase (decrease):
 
 
 
 
Reserve for loss and loss adjustment expenses
 
(174,835
)
 
(67,641
)
Unearned premiums
 
(20,479
)
 
(326,214
)
Accrued expenses and other liabilities
 
(13,703
)
 
63,880

Net cash used in continuing operations
 
(218,481
)
 
(331,725
)
Net cash used in discontinued operations
 

 
(205
)
Net cash used in operating activities
 
(218,481
)
 
(331,930
)
Cash flows from investing activities:
 
 
 
 
Purchases of fixed maturities 
 
(133,353
)
 
(159,790
)
Purchases of other investments
 
(2,325
)
 
(1,528
)
Proceeds from sales of fixed maturities 
 
224,471

 
84,361

Proceeds from maturities, paydowns and calls of fixed maturities
 
200,242

 
206,811

Proceeds from sale and redemption of other investments
 
92

 
406

Other, net
 
(597
)
 
2,870

Net cash provided by investing activities for continuing operations
 
288,530

 
133,130

Net cash used in investing activities for discontinued operations
 

 
(3,349
)
Net cash provided by investing activities
 
288,530

 
129,781

Effect of exchange rate changes on foreign currency cash, restricted cash and equivalents
 
635

 
(334
)
Net increase (decrease) in cash, restricted cash and cash equivalents
 
70,684

 
(202,483
)
Cash, restricted cash and cash equivalents, beginning of period
 
107,278

 
337,102

Cash, restricted cash and cash equivalents, end of period
 
177,962

 
134,619

Less: cash, restricted cash and equivalents of discontinued operations, end of period
 

 
(2,764
)
Cash, restricted cash and cash equivalents of continuing operations, end of period
 
$
177,962

 
$
131,855

Reconciliation of cash and restricted cash reported within Condensed Consolidated Balance Sheets:
 
 
 
 
Cash and cash equivalents, end of period
 
$
60,059

 
$
89,521

Restricted cash and cash equivalents, end of period
 
117,903

 
42,334

Total cash, restricted cash and cash equivalents, end of period
 
$
177,962

 
$
131,855

Non-cash investing activities
 
 
 
 
Investments transferred out related to Partial Termination Amendment
 
$

 
$
280,670

Investments transferred out related to funds withheld arrangement with AmTrust
 

 
571,396

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

7

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)


1. Basis of Presentation
The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Maiden Holdings, Ltd. ("Maiden Holdings") and its subsidiaries (the "Company" or "Maiden"). They have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. All significant intercompany transactions and accounts have been eliminated.
These interim unaudited Condensed Consolidated Financial Statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim period and all such adjustments are of a normal recurring nature. The results of operations for the interim period are not necessarily indicative, if annualized, of those to be expected for the full year. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.
These unaudited Condensed Consolidated Financial Statements, including these notes, should be read in conjunction with the Company's audited Consolidated Financial Statements, and related notes thereto, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019. Certain prior year comparatives have been reclassified to conform to the current year presentation. The effect of these reclassifications had no impact on previously reported shareholders' equity or net loss.
Strategic Review
Since 2018, the Company has engaged in a series of strategic measures that have dramatically reduced the regulatory capital required to operate our business, materially strengthened our solvency ratios, re-domiciled Maiden Reinsurance Ltd. ("Maiden Reinsurance") to Vermont in the U.S. and ceased active reinsurance underwriting. During that time, we significantly increased our estimate of ultimate losses and loss reserves while purchasing reinsurance protection against further loss reserve volatility and as a result, have improved the ultimate economic value of the Company. We believe these measures have given the Company the ability to more flexibly allocate capital to those activities most likely to produce the greatest returns for shareholders.
The measures we ultimately have taken were initiated in early 2018, when our Board of Directors initiated a review of strategic alternatives ("Strategic Review") to evaluate ways to increase shareholder value after a period of continuing higher than targeted combined ratios and lower returns on equity than expected.
As part of the Strategic Review, a series of transactions were entered into including: (1) completed the sale of Maiden Reinsurance North America, Inc. ("Maiden US") on December 27, 2018; (2) Maiden Reinsurance's shareholders, Maiden Holdings and Maiden Holdings North America, Ltd. ("Maiden NA"), made capital injections of $125,000 on December 31, 2018 and $70,000 on January 18, 2019 to Maiden Reinsurance from the sale proceeds of Maiden US; (3) entered into a partial termination amendment ("Partial Termination Amendment") with AmTrust Financial Services, Inc. ("AmTrust") effective January 1, 2019 which amended the quota share reinsurance agreement (“AmTrust Quota Share”) between Maiden Reinsurance and AmTrust’s wholly owned subsidiary AmTrust International Insurance, Ltd. (“AII”) (as more fully described in "Note 10 - Related Party Transactions"); (4) entered into amendments which terminated the AmTrust Quota Share and the European hospital liability Quota Share Reinsurance Contract (“European Hospital Liability Quota Share”) with AmTrust’s wholly owned subsidiaries AmTrust Europe Limited ("AEL") and AmTrust International Underwriters DAC ("AIU DAC") effective January 1, 2019 (these transactions are broadly referred to herein as the "Final AmTrust QS Terminations"); (5) entered into the Loss Portfolio Transfer and Adverse Development Cover Agreement ("LPT/ADC Agreement") with Enstar Group Limited ("Enstar") pursuant to the revised Master Transaction Agreement entered into on March 1, 2019; and (6) entered into a Commutation and Release Agreement with AmTrust to commute certain workers' compensation business with AII as of January 1, 2019.
Please see the Company's audited Consolidated Financial Statements, and related notes thereto, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 for further details on the above transactions.
Discontinued Operations
The Company made the strategic decision to divest its U.S. treaty reinsurance operations through the sale of Maiden US which was completed on December 27, 2018. Except as explicitly described as discontinued operations, and unless otherwise noted, all discussions and amounts presented herein relate to the Company's continuing operations except for net income (loss).
Re-domestication of Maiden Reinsurance
Effective March 16, 2020, we re-domesticated our principal operating subsidiary, Maiden Reinsurance, to the State of Vermont in the United States, having made the necessary filings in both Vermont and Bermuda in the fourth quarter of 2019 and first quarter of 2020. Maiden Reinsurance is now subject to the statutes and regulations of Vermont in the ordinary course of business. We have determined that re-domesticating Maiden Reinsurance to Vermont enables us to better align our capital and resources with our liabilities, which originate mostly in the United States, resulting in a more efficient structure. The re-domestication, in combination with the transactions completed pursuant to the Strategic Review, will continue to strengthen the Company’s capital position and solvency ratios. While the Vermont Department of Financial Regulation ("Vermont DFR") will be the group supervisor for the Company, the re-domestication did not apply to the parent holding company which remains a Bermuda-based holding company. Securities issued by Maiden Holdings were not affected by the re-domestication of Maiden Reinsurance to Vermont. Concurrent with its re-domestication to Vermont on March 16, 2020, Maiden Holdings contributed as capital the remaining 65% of its ownership in Maiden Reinsurance to Maiden NA. Maiden NA now owns 100% of Maiden Reinsurance.

8

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)

1. Basis of Presentation (continued)
Segments
As a result of the strategic decision to divest all of the Company's U.S. treaty reinsurance operations noted above, the Company revised the composition of its reportable segments. As described in more detail under “Note 3. Segment Information”, the reportable segments include: (i) Diversified Reinsurance which consists of a portfolio of property and casualty reinsurance business focusing on regional and specialty property and casualty insurance companies located primarily in Europe; and (ii) AmTrust Reinsurance which includes all business ceded to Maiden Reinsurance from subsidiaries of AmTrust. In addition to these reportable segments, the results of operations of the former National General Holdings Corporation Quota Share ("NGHC Quota Share") segment, which was commuted in November 2019, was previously included in the "Other" category.

COVID-19 Pandemic
The evolving COVID-19 global pandemic has caused significant disruption to the economy and financial markets globally, and the full extent of the potential impacts of COVID-19 are not yet known. Circumstances caused by the COVID-19 pandemic are complex, uncertain and rapidly evolving. Our results of operations, financial condition, and liquidity and capital resources have been adversely impacted by the COVID-19 pandemic, and the future impact of the pandemic on our financial condition or results of operations is difficult to predict.
As described herein, the Company is not currently engaged in active reinsurance underwriting and is running off the remaining unearned exposures it has reinsured. The Company's IIS unit does write limited primary insurance coverages that could be exposed to COVID-19 claims.  While we assess our exposure to COVID-19 insurance and reinsurance claims on our existing insurance exposures and remaining reinsurance exposures as limited and immaterial, given the uncertainty surrounding the COVID-19 pandemic and its impact on the insurance industry, our preliminary estimates of losses and loss adjustment expenses and estimates of reinsurance recoverable arising from the COVID-19 pandemic may materially change. The Company has not received any COVID-19 claims to date. Unanticipated issues relating to claims and coverage may emerge, which could adversely affect our business by increasing the scope of coverage beyond our intent and/or increasing the frequency and severity of claims.
Due to the change in fair value of our investments caused by the COVID-19 pandemic, we and our reinsurance subsidiaries may need additional capital to maintain compliance with regulatory capital requirements and/or be required to post additional collateral under existing reinsurance arrangements, which could reduce our liquidity. In addition, the Company may experience a reduction in the amount of available distribution or dividend capacity from its regulated reinsurance subsidiaries, which would also reduce liquidity.
Due in large part to the uncertainty caused by the COVID-19 pandemic in global financial markets, during the three months ended March 31, 2020, the Company's investment portfolio experienced significant unrealized losses (largely due to widening credit spreads on fixed income investments), increased volatility, heightened credit risk, and declines in yields on its fixed income investments. The Company's investment portfolio may continue to be adversely impacted by unfavorable market conditions caused by the COVID-19 pandemic, which could cause continued volatility in our results of operations and negatively impact our financial condition.


9

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)

2. Significant Accounting Policies
There have been no material changes to the significant accounting policies as described in the Company's Annual Report on Form 10-K for the year ended December 31, 2019 except for the following:
Recently Adopted Accounting Standards Updates
Changes to the Disclosure Requirements for Fair Value Measurement
In August 2018, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2018-13 for changes to the disclosure framework related to Topic 820 which amends the disclosure requirements for fair value measurement. The following disclosure requirements were removed from Topic 820: (i) amount of and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, (ii) policy for timing of transfers between levels, and (iii) valuation processes for Level 3 fair value measurements. The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. The following disclosure requirements were added to Topic 820: (i) changes in unrealized gains and losses for the period included in other comprehensive income for recurring Level 3 fair value measurements held at the end of the reporting period; and (ii) range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements. For certain unobservable inputs, an entity may disclose other quantitative information (such as the median or arithmetic average) in lieu of the weighted average if the entity determines that other quantitative information would be a more reasonable and rational method to reflect the distribution of unobservable inputs used to develop Level 3 fair value measurements.
The amendments in this Update are effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. The amendments on changes in unrealized gains and losses, the range and weighted average of significant unobservable inputs used to develop Level 3 fair value measurements, and the narrative description of measurement uncertainty should be applied prospectively for only the most recent interim or annual period presented in the initial fiscal year of adoption. All other amendments should be applied retrospectively to all periods presented upon their effective date. Early adoption is permitted upon issuance of this Update. An entity is permitted to early adopt any removed or modified disclosures upon issuance of this Update and delay adoption of the additional disclosures until their effective date. These amendments only impact disclosures made in "Note 5. Fair Value Measurements" therefore, the adoption of this standard on January 1, 2020 did not impact the Company’s consolidated balance sheets, results of operations or cash flows.
Recently Issued Accounting Standards Not Yet Adopted
Accounting for Measurement of Credit Losses on Financial Instruments
In June 2016, the FASB issued ASU 2016-13 "Financial Instruments: Credit Losses (Topic 326)" replacing the "incurred loss" impairment methodology with an approach based on "expected losses" to estimate credit losses on certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance requires financial assets to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the cost of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. ASU 2016-13 also modified the accounting for available-for-sale ("AFS") debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments: Credit Losses Available-for-Sale Debt Securities. Credit losses relating to AFS debt securities will be recorded through an allowance for credit losses rather than under the current other-than-temporarily impaired ("OTTI") methodology.
In April 2019, the FASB issued ASU 2019-04 for targeted improvements related to ASU 2016-13 which clarify that an entity should include all expected recoveries in its estimate of the allowance for credit losses. In addition, for collateral dependent financial assets, the amendments mandate that an allowance for credit losses that is added to the amortized cost basis of the financial asset should not exceed amounts previously written off. It also clarifies FASB’s intent to include all reinsurance recoverables within the scope of Topic 944 to be within the scope of Subtopic 326-20, regardless of the measurement basis of those recoverables. The Company's reinsurance balances receivable and reinsurance recoverable on unpaid losses are its most significant financial assets within the scope of ASU 2016-13.
The guidance is effective for public business entities, excluding entities eligible to be smaller reporting companies ("SRCs") as defined by the SEC, for annual periods beginning after December 15, 2019, and interim periods therein. The guidance is effective for all other entities, including public entities eligible to be SRCs, for fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. As of December 31, 2019, the Company qualified for SRC status, as determined on the last business day of its most recent second quarter, and is thus eligible to follow the reporting deadlines and effective dates applicable to SRCs. Therefore Topic 326 will not be effective until the 2023 fiscal year. The Company continues to evaluate the impact of this guidance on its results of operations, financial condition and liquidity.

10

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)

3. Segment Information
The Company currently has two reportable segments: Diversified Reinsurance and AmTrust Reinsurance. Our Diversified Reinsurance segment consists of a portfolio of predominantly property and casualty reinsurance business focusing on regional and specialty property and casualty insurance companies located primarily in Europe. Our AmTrust Reinsurance segment includes all business ceded to Maiden Reinsurance by AmTrust, primarily the AmTrust Quota Share and the European Hospital Liability Quota Share, which are in run-off effective January 1, 2019. In addition to our reportable segments, the results of operations of the former NGHC Quota Share segment which was commuted in November 2019 and the remnants of our retroceded U.S. treaty business have been included in the "Other" category. Please refer to "Note 10. Related Party Transactions" for additional information.
The Company evaluates segment performance based on segment profit separately from the results of our investment portfolio. General and administrative expenses are allocated to the segments on an actual basis except salaries and benefits where management’s judgment is applied; however general corporate expenses are not allocated to the segments. In determining total assets by reportable segment, the Company identifies those assets that are attributable to a particular segment such as reinsurance balances receivable, reinsurance recoverable on unpaid losses, deferred commission and other acquisition expenses, funds withheld receivable, loan to related party and restricted cash and investments. All remaining assets are allocated to Corporate.
As discussed in "Note 1. Basis of Presentation" and "Note 10. Related Party Transactions", the Partial Termination Amendment and the termination of the remaining business with AmTrust effective January 1, 2019 resulted in a significant reduction in gross premiums written. This was due to the return of unearned premium on certain lines covered by the Partial Termination Amendment, with no new business written since 2018 as a result of the termination of the AmTrust Quota Share and the European Hospital Liability Quota Share. The following tables summarize the underwriting results of our reportable segments and the reconciliation of our reportable segments and Other category's underwriting results to consolidated net income (loss) from continuing operations:
For the Three Months Ended March 31, 2020
 
Diversified Reinsurance
 
AmTrust Reinsurance
 
Total
Gross premiums written
 
$
11,734

 
$

 
$
11,734

Net premiums written
 
$
10,372

 
$

 
$
10,372

Net premiums earned
 
$
12,531

 
$
18,684

 
$
31,215

Other insurance revenue
 
408

 

 
408

Net loss and loss adjustment expenses ("loss and LAE")
 
(7,041
)
 
(14,045
)
 
(21,086
)
Commission and other acquisition expenses
 
(4,979
)
 
(6,994
)
 
(11,973
)
General and administrative expenses
 
(1,613
)
 
(644
)
 
(2,257
)
Underwriting loss
 
$
(694
)
 
$
(2,999
)
 
(3,693
)
Reconciliation to net income from continuing operations
 
 
 
 
 
 
Net investment income and realized gains on investment
 
 
 
 
 
29,002

Total other-than-temporary impairment losses
 
 
 
 
 
(1,506
)
Interest and amortization expenses
 
 
 
 
 
(4,831
)
Foreign exchange and other gains, net
 
 
 
 
 
8,197

Other general and administrative expenses
 
 
 
 
 
(6,293
)
Income tax expense
 
 
 
 
 
(15
)
Net income from continuing operations
 
 
 
 
 
$
20,861

 
 
 
 
 
 
 
Net loss and LAE ratio(1)
 
54.4
%
 
75.2
%
 
66.7
%
Commission and other acquisition expense ratio(2)
 
38.5
%
 
37.4
%
 
37.9
%
General and administrative expense ratio(3)
 
12.5
%
 
3.5
%
 
27.0
%
Expense ratio(4)
 
51.0
%
 
40.9
%
 
64.9
%
Combined ratio(5)
 
105.4
%
 
116.1
%
 
131.6
%

11

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)

3. Segment Information (continued)
For the Three Months Ended March 31, 2019
 
Diversified Reinsurance
 
AmTrust Reinsurance
 
Other
 
Total
Gross premiums written
 
$
15,338

 
$
(576,477
)
 
$

 
$
(561,139
)
Net premiums written
 
$
14,947

 
$
(576,477
)
 
$

 
$
(561,530
)
Net premiums earned
 
$
25,292

 
$
157,810

 
$

 
$
183,102

Other insurance revenue
 
812

 

 

 
812

Net loss and LAE
 
(14,391
)
 
(138,070
)
 
(228
)
 
(152,689
)
Commission and other acquisition expenses
 
(9,261
)
 
(60,356
)
 

 
(69,617
)
General and administrative expenses
 
(3,031
)
 
(1,266
)
 

 
(4,297
)
Underwriting loss
 
$
(579
)
 
$
(41,882
)
 
$
(228
)
 
(42,689
)
Reconciliation to net loss from continuing operations
 
 
 
 
 
 
 
 
Net investment income and realized losses on investment
 
 
 
 
 
 
 
20,921

Interest and amortization expenses
 
 
 
 
 
 
 
(4,829
)
Foreign exchange and other gains, net
 
 
 
 
 
 
 
4,979

Other general and administrative expenses
 
 
 
 
 
 
 
(12,322
)
Income tax benefit
 
 
 
 
 
 
 
38

Net loss from continuing operations
 
 
 
 
 
 
 
$
(33,902
)
 
 
 
 
 
 
 
 
 
Net loss and LAE ratio(1)
 
55.1
%
 
87.5
%
 
 
 
83.0
%
Commission and other acquisition expense ratio(2)
 
35.5
%
 
38.2
%
 
 
 
37.9
%
General and administrative expense ratio(3)
 
11.6
%
 
0.8
%
 
 
 
9.0
%
Expense ratio(4)
 
47.1
%
 
39.0
%
 
 
 
46.9
%
Combined ratio(5)
 
102.2
%
 
126.5
%
 
 
 
129.9
%
(1)
Calculated by dividing net loss and LAE by the sum of net premiums earned and other insurance revenue.
(2)
Calculated by dividing commission and other acquisition expenses by the sum of net premiums earned and other insurance revenue.
(3)
Calculated by dividing general and administrative expenses by the sum of net premiums earned and other insurance revenue.
(4)
Calculated by adding together the commission and other acquisition expense ratio and general and administrative expense ratio.
(5)
Calculated by adding together net loss and LAE ratio and the expense ratio.
For the Three Months Ended March 31, 2020
 
Diversified Reinsurance
 
AmTrust Reinsurance
 
Other
 
Total

For the Three Months Ended March 31, 2019
 
Diversified Reinsurance
 
AmTrust Reinsurance
 
Other
 
Total
The following tables summarize the financial position of the Company's reportable segments including the reconciliation to the Company's consolidated total assets at March 31, 2020 and December 31, 2019:
March 31, 2020
 
Diversified Reinsurance
 
AmTrust Reinsurance
 
Total
Total assets - reportable segments
 
$
163,684

 
$
2,643,073

 
$
2,806,757

Corporate assets
 

 

 
515,000

Total Assets
 
$
163,684

 
$
2,643,073

 
$
3,321,757

 
 
 
 
 
 
 
December 31, 2019
 
Diversified Reinsurance
 
AmTrust Reinsurance
 
Total
Total assets - reportable segments
 
$
167,845

 
$
2,843,802

 
$
3,011,647

Corporate assets
 

 

 
556,549

Total Assets
 
$
167,845

 
$
2,843,802

 
$
3,568,196



12

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)

3. Segment Information (continued)
The following tables set forth financial information relating to net premiums written by major line of business and reportable segment for the three months ended March 31, 2020 and 2019:
For the Three Months Ended March 31,
 
2020
2019
Net premiums written
 
Total
Total
Diversified Reinsurance
 
 
 
 
International
 
$
10,372

 
$
14,947

Total Diversified Reinsurance
 
10,372

 
14,947

AmTrust Reinsurance
 
 
 
 
Small Commercial Business
 

 
(342,681
)
Specialty Program
 

 
(12,608
)
Specialty Risk and Extended Warranty
 

 
(221,188
)
Total AmTrust Reinsurance
 

 
(576,477
)
Total Net Premiums Written
 
$
10,372

 
$
(561,530
)
For the Three Months Ended March 31,
 
2020
2019
The following tables set forth financial information relating to net premiums earned by major line of business and reportable segment for the three months ended March 31, 2020 and 2019:
For the Three Months Ended March 31,
 
2020
 
 
 
2019
Net premiums earned
 
Total
% of Total
 
Total
 
% of Total
Diversified Reinsurance
 
 
 
 
 
 
 
 
International
 
$
12,531

 
40.1
%
 
$
25,292

 
13.8
%
Total Diversified Reinsurance
 
12,531

 
40.1
%
 
25,292

 
13.8
%
AmTrust Reinsurance
 
 
 
 
 
 
 
 
Small Commercial Business
 
939

 
3.0
%
 
39,455

 
21.6
%
Specialty Program
 
75

 
0.3
%
 
76,221

 
41.6
%
Specialty Risk and Extended Warranty
 
17,670

 
56.6
%
 
42,134

 
23.0
%
Total AmTrust Reinsurance
 
18,684

 
59.9
%
 
157,810

 
86.2
%
Total Net Premiums Earned
 
$
31,215

 
100.0
%
 
$
183,102

 
100.0
%

For the Three Months Ended March 31,
 
2020
 
2019

4. Investments
a)
Fixed Maturities
The original or amortized cost, estimated fair value and gross unrealized gains and losses of fixed maturities at March 31, 2020 and December 31, 2019 are as follows:
March 31, 2020
 
Original or amortized cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Fair value
U.S. treasury bonds
 
$
84,959

 
$
1,185

 
$
(1
)
 
$
86,143

U.S. agency bonds – mortgage-backed
 
495,747

 
19,510

 
(132
)
 
515,125

Non-U.S. government and supranational bonds
 
7,290

 
93

 
(200
)
 
7,183

Asset-backed securities
 
187,255

 
495

 
(14,715
)
 
173,035

Corporate bonds
 
755,438

 
9,336

 
(37,716
)
 
727,058

Total fixed maturity investments
 
$
1,530,689

 
$
30,619

 
$
(52,764
)
 
$
1,508,544



13

MAIDEN HOLDINGS, LTD.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
(in thousands of U.S. dollars, except share and per share data)

4. Investments (continued)
December 31, 2019
 
Original or amortized cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Fair value
U.S. treasury bonds
 
$
94,921

 
$
704

 
$

 
$
95,625

U.S. agency bonds – mortgage-backed
 
533,296

 
6,717

 
(1,291
)
 
538,722

Non-U.S. government and supranational bonds
 
11,796

 
294

 
(91
)
 
11,999

Asset-backed securities
 
187,881

 
821

 
(532
)
 
188,170

Corporate bonds
 
981,441

 
31,140

 
(15,725
)
 
996,856

Municipal bonds
 
4,091

 
55

 

 
4,146

Total fixed maturity investments
 
$
1,813,426

 
$
39,731

 
$
(17,639
)
 
$
1,835,518


The contractual maturities of our fixed maturities are shown in the table below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.
March 31, 2020
 
Amortized cost
 
Fair value
Due in one year or less
 
$
124,415

 
$
123,759

Due after one year through five years
 
527,356

 
508,288

Due after five years through ten years
 
195,916

 
188,337

 
 
847,687

 
820,384

U.S. agency bonds – mortgage-backed
 
495,747

 
515,125

Asset-backed securities
 
187,255

 
173,035

Total fixed maturity investments
 
$
1,530,689

 
$
1,508,544


The following tables summarize fixed maturities in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:
 
 
Less than 12 Months
 
12 Months or More
 
Total
March 31, 2020
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
 
Fair
value
 
Unrealized
losses
U.S. treasury bonds
 
$
9,999

 
$
(1
)
 
$

 
$

 
$
9,999

 
$
(1
)
U.S. agency bonds – mortgage-backed
 
16,204

 
(132
)
 

 

 
16,204

 
(132
)
Non-U.S. government and supranational bonds
 
2,307

 
(180
)
 
162

 
(20
)
 
2,469

 
(200
)
Asset-backed securities
 
142,916

 
(12,976
)
 
16,154

 
(1,739
)
 
159,070

 
(14,715
)
Corporate bonds
 
245,591

 
(18,440
)
 
115,797

 
(19,276
)
 
361,388

 
(37,716
)
Total temporarily impaired fixed maturities
 
$
417,017

 
$
(