Bermuda
(State
or other jurisdiction of
incorporation
or organization)
|
04-3106389
(IRS
Employer Identification No.)
|
48 Par-la-Ville Road, Suite 1141
HM11
(Address
of principal executive offices)
|
HM11
(Zip
Code)
|
(441) 292-7090
(Registrant’s
telephone number, including area
code)
|
Large
accelerated filer o
|
Accelerated
filer o
|
Non-accelerated
filer x (Do
not check if a smaller reporting company)
|
Smaller
reporting company o
|
Page
|
||||
PART
I
|
FINANCIAL
INFORMATION
|
|||
Item
1.
|
Financial
Statements:
|
|||
Condensed
Consolidated Balance Sheets as of March 31, 2009 (unaudited) and December
31, 2008
|
3
|
|||
Condensed
Consolidated Statement of Income for the three months ended March 31, 2009
and 2008 (unaudited)
|
4
|
|||
Condensed
Consolidated Statement of Cash Flows for the three months ended March 31,
2009 and 2008 (unaudited)
|
5
|
|||
Condensed
Consolidated Statement of Changes in Shareholders’ Equity for the three
months ended March 31, 2009 and 2008 (unaudited)
|
6
|
|||
|
Notes
to Condensed Consolidated Financial Statements
|
7
|
||
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
21
|
||
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
29
|
||
Item
4.
|
Controls
and Procedures
|
30
|
||
PART
II
|
OTHER
INFORMATION
|
|||
Item
1.
|
Legal
Proceedings
|
31
|
||
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
31
|
||
Item
6.
|
Exhibits
|
31
|
||
Signatures
|
(unaudited)
|
||||||||
March
31, 2009
|
December
31, 2008
|
|||||||
Assets
|
||||||||
Fixed
maturities, available-for-sale, at fair value (Amortized cost 2009:
$1,279,902; 2008: $1,163,926)
|
$ | 1,219,451 | $ | 1,119,955 | ||||
Other
investments, at fair value (Cost 2009: $5,919 ; 2008:
$5,819)
|
5,386 | 5,291 | ||||||
Total
investments
|
1,224,837 | 1,125,246 | ||||||
Cash
and cash equivalents
|
95,193 | 131,897 | ||||||
Restricted
cash and cash equivalents
|
362,583 | 409,277 | ||||||
Accrued
investment income
|
9,453 | 10,293 | ||||||
Reinsurance
balances receivable (includes $58,057 and $48,837 from
related party in 2009 and 2008, respectively - see
note 10)
|
182,052 | 71,895 | ||||||
Loan
to related party (see note 10)
|
167,975 | 167,975 | ||||||
Deferred
acquisition costs (includes $80,078 and $80,455 from related party in 2009
and 2008, respectively - see note 9)
|
152,616 | 104,470 | ||||||
Other
assets
|
7,647 | 2,617 | ||||||
Intangible
assets
|
53,582 | 55,147 | ||||||
Goodwill
|
49,747 | 49,747 | ||||||
Total
Assets
|
$ | 2,305,685 | $ | 2,128,564 | ||||
Liabilities
and Shareholders’ Equity
|
||||||||
Liabilities
|
||||||||
Reserve
for losses and loss expenses (includes $91,442 and $69,646 from
related party in 2009 and 2008, respectively- see note 10)
|
$ | 925,816 | $ | 897,656 | ||||
Unearned
premiums (includes $245,069 and $245,742 from related parties
in 2009 and 2008, respectively- see note 10)
|
570,936 | 444,479 | ||||||
Accrued
expenses and other liabilities
|
46,489 | 44,024 | ||||||
Securities
sold under agreements to repurchase, at contract value
|
- | 232,646 | ||||||
Trust
preferred securities – related parties (see note 6)
|
215,084 | - | ||||||
Total
Liabilities
|
1,758,325 | 1,618,805 | ||||||
Commitments and
Contingencies
|
||||||||
Shareholders’
Equity:
|
||||||||
Common
shares, ($0.01 par
value;71,250,000 and 59,550,000 shares issued in 2009 and 2008
respectively; 70,287,664 and 58,587,664 shares outstanding in 2009 and
2008 respectively)
|
713 | 596 | ||||||
Additional
paid-in capital
|
575,606 | 530,519 | ||||||
Accumulated
other comprehensive loss
|
(60,985 | ) | (44,499 | ) | ||||
Retained
earnings
|
35,827 | 26,944 | ||||||
Treasury
Shares, at cost (2009
and 2008:962,336 shares)
|
(3,801 | ) | (3,801 | ) | ||||
Total
Shareholders’ Equity
|
547,360 | 509,759 | ||||||
Total
Liabilities and Shareholders’ Equity
|
$ | 2,305,685 | $ | 2,128,564 |
For
the
Three Months Ended March 31, 2009 |
For
the
Three Months Ended March 31, 2008 |
|||||||
Revenues:
|
||||||||
Premium
income:
|
||||||||
Net
premiums written
|
$ | 336,548 | $ | 102,432 | ||||
Change
in unearned premiums
|
(126,456 | ) | (37,127 | ) | ||||
Net
earned premium
|
210,092 | 65,305 | ||||||
Net
investment income
|
14,259 | 7,609 | ||||||
Net
realized investment gains (losses)
|
(1,930 | ) | 125 | |||||
Total
revenues
|
222,421 | 73,039 | ||||||
Expenses:
|
||||||||
Loss
and loss adjustment expenses
|
146,288 | 37,836 | ||||||
Commission
and other acquisition expenses
|
46,631 | 21,261 | ||||||
Other operating
expenses
|
7,535 | 1,426 | ||||||
Trust
preferred interest – related parties
|
7,090 | - | ||||||
Amortization
of intangible assets
|
1,564 | - | ||||||
Foreign
exchange loss
|
213 | - | ||||||
Total
expenses
|
209,321 | 60,523 | ||||||
Net
income
|
$ | 13,100 | $ | 12,516 | ||||
Basic
and diluted earnings per common share
|
$ | 0.19 | $ | 0.21 | ||||
Dividends
declared per common share
|
$ | 0.06 | $ | 0.05 |
For
the
Three Months Ended March 31, 2009 |
For
the
Three Months Ended March 31, 2008 |
|||||||
Cash
flows from operating activities:
|
||||||||
Net
income
|
$ | 13,100 | $ | 12,516 | ||||
Adjustments
to reconcile net income to net cash provided by operating activities
:
|
||||||||
Depreciation
and amortization of intangibles
|
1,636 | 5 | ||||||
Net
realized loss (gain) on sales of investments
|
1,930 | (125 | ) | |||||
Foreign
exchange loss on revaluation
|
- | |||||||
Amortization
of share-based compensation expense, bond premium and discount and trust
preferred securities discount
|
(927 | ) | 107 | |||||
Changes
in assets - (increase) decrease:
|
||||||||
Reinsurance
balances receivable
|
(110,157 | ) | (51,990 | ) | ||||
Accrued
investment income
|
840 | (2,008 | ) | |||||
Deferred
commission and other acquisition costs
|
(48,146 | ) | (14,459 | ) | ||||
Other
assets
|
(40 | ) | 7 | |||||
Changes
in liabilities – increase (decrease):
|
||||||||
Accrued
expenses and other liabilities
|
1,763 | (22 | ) | |||||
Loss
and loss adjustment expense reserves
|
28,160 | 23,140 | ||||||
Unearned
premiums
|
126,457 | 37,127 | ||||||
Net
cash provided by operating activities
|
14,616 | 4,298 | ||||||
Cash
flows from investing activities:
|
||||||||
Purchases
of investments:
|
||||||||
Purchases
of fixed-maturity securities
|
(222,323 | ) | (156,564 | ) | ||||
Purchases
of other investments
|
(138 | ) | (23 | ) | ||||
Sale
of investments:
|
||||||||
Proceeds
from sales of fixed-maturity securities
|
85,769 | 58,921 | ||||||
Proceeds
from maturities and calls of fixed-maturity securities
|
19,423 | - | ||||||
Proceeds
from redemption of other investments
|
22 | - | ||||||
Increase
in restricted cash
|
46,694 | - | ||||||
Purchase
of furniture and equipment
|
(381 | ) | (40 | ) | ||||
Net
cash used in investing activities
|
(70,934 | ) | (97,706 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Repurchase
agreements, net
|
(232,646 | ) | 102,172 | |||||
Common
share issuance
|
117 | - | ||||||
Trust
preferred securities issuance
|
260,000 | - | ||||||
Trust
preferred securities issuance cost
|
(4,342 | ) | - | |||||
Dividend
paid
|
(3,515 | ) | (1,489 | ) | ||||
Net
cash provided by financing activities
|
19,614 | 100,683 | ||||||
Net
(decrease) increase in cash and cash equivalents
|
(36,704 | ) | 7,275 | |||||
Cash
and cash equivalents, beginning of period
|
131,897 | 35,729 | ||||||
Cash
and cash equivalents, end of period
|
$ | 95,193 | $ | 43,004 |
Supplemental
information about non-cash investing and financing
activities
|
||||||||
Discount
on Trust preferred securities
|
$ | (44,928 | ) | $ | - | |||
Additional
paid in Capital
|
44,928 | - |
For
the three months ended March 31, 2009
|
Common
Shares
|
Additional
Paid-In
Capital
|
Accumulated
Other
Comprehensive
Loss
|
Retained
Earnings
|
Treasury
Shares
|
Total
Shareholders’
Equity
|
||||||||||||||||||
Balance
at December 31, 2008
|
$ | 596 | $ | 530,519 | $ | (44,499 | ) | $ | 26,944 | $ | (3,801 | ) | $ | 509,759 | ||||||||||
Net
income
|
- | - | - | 13,100 | - | 13,100 | ||||||||||||||||||
Net
unrealized losses
|
- | - | (16,486 | ) | - | - | (16,486 | ) | ||||||||||||||||
Comprehensive
loss
|
(3,386 | ) | ||||||||||||||||||||||
Shares
issued, net
|
117 | 44,928 | - | - | - | 45,045 | ||||||||||||||||||
Share
based compensation
|
- | 159 | - | - | - | 159 | ||||||||||||||||||
Dividends
to shareholders
|
- | - | - | (4,217 | ) | - | (4,217 | ) | ||||||||||||||||
Balance
at March 31, 2009
|
$ | 713 | $ | 575,606 | $ | (60,985 | ) | $ | 35,827 | $ | (3,801 | ) | $ | 547,360 |
For
the three months ended March 31, 2008
|
Common
Shares
|
Additional
Paid-In
Capital
|
Accumulated
Other
Comprehensive
Loss
|
Retained
Earnings
|
Treasury
Shares
|
Total
Shareholders’
Equity
|
||||||||||||||||||
Balance
at December 31, 2007
|
$ | 596 | $ | 529,647 | $ | (13,496 | ) | $ | 20,598 | $ | - | $ | 537,345 | |||||||||||
Net
income
|
- | - | - | 12,516 | - | 12,516 | ||||||||||||||||||
Net
unrealized losses
|
- | - | (16,493 | ) | - | - | (16,493 | ) | ||||||||||||||||
Comprehensive
loss
|
(3,977 | ) | ||||||||||||||||||||||
Share
based compensation
|
- | 187 | - | - | - | 187 | ||||||||||||||||||
Dividends
to shareholders
|
- | - | - | (2,978 | ) | - | (2,978 | ) | ||||||||||||||||
Balance
at March 31, 2008
|
596 | $ | 529,834 | $ | (29,989 | ) | $ | 30,136 | $ | - | $ | 530,577 |
2.
|
Recent Accounting
Pronouncements
|
3.
|
Investments
|
(a)
|
Fixed
Maturities and Other
Investments
|
March
31, 2009
|
Original
or
amortized
cost
|
Gross
unrealized
gains
|
Gross
unrealized
losses
|
Fair
value
|
||||||||||||
Fixed
Maturities:
|
||||||||||||||||
U.S.
– treasury bonds
|
33,365 | 620 | (235 | ) | 33,750 | |||||||||||
U.S.
Agency - mortgage backed securities
|
$ | 747,243 | $ | 25,048 | $ | (3,455 | ) | $ | 768,836 | |||||||
Corporate
fixed maturities
|
488,114 | 3,815 | (86,305 | ) | 405,624 | |||||||||||
Municipalities
|
11,180 | 61 | - | 11,241 | ||||||||||||
Total
available for sale fixed maturities
|
1,279,902 | 29,544 | (89,995 | ) | 1,219,451 | |||||||||||
Other
investments
|
5,919 | - | (533 | ) | 5,386 | |||||||||||
Total
investments
|
$ | 1,285,821 | $ | 29,544 | $ | (90,528 | ) | $ | 1,224,837 |
December 31,
2008
|
Original
or
amortized
cost
|
Gross
unrealized
gains
|
Gross
unrealized
losses
|
Fair
Value
|
||||||||||||
Fixed
Maturities:
|
||||||||||||||||
U.S.
– treasury bonds
|
$ | 37,782 | $ | 775 | $ | (30 | ) | $ | 38,527 | |||||||
U.S.
Agency - mortgage backed securities
|
756,023 | 21,178 | (5,302 | ) | 771,899 | |||||||||||
Corporate
fixed maturities
|
370,121 | 2,320 | (62,912 | ) | 309,529 | |||||||||||
Total
available for sale fixed maturities
|
1,163,926 | 24,273 | (68,244 | ) | 1,119,955 | |||||||||||
Other
investments
|
5,819 | - | (528 | ) | 5,291 | |||||||||||
Total
investments
|
$ | 1,169,745 | $ | 24,273 | $ | (68,772 | ) | $ | 1,125,246 |
Less
than 12 months
|
12
months or more
|
Total
|
||||||||||||||||||||||
March 31,
2009
|
Fair
value
|
Unrealized
losses
|
Fair
value
|
Unrealized
Losses
|
Fair
value
|
Unrealized
losses
|
||||||||||||||||||
Available-for-sale
securities:
|
||||||||||||||||||||||||
U.S.
– treasury bonds
|
$ | 3,017 | (235 | ) | - | - | $ | 3,017 | (235 | ) | ||||||||||||||
U.S.
Agency mortgage backed securities
|
14,905 | (488 | ) | 129,954 | (2,967 | ) | 144,859 | (3,455 | ) | |||||||||||||||
Corporate
fixed maturities
|
110,637 | (24,967 | ) | 180,741 | (61,338 | ) | 291,378 | (86,305 | ) | |||||||||||||||
128,559 | (25,690 | ) | 310,695 | (64,305 | ) | 436,237 | (89,995 | ) | ||||||||||||||||
Other
investments
|
$ | - | - | $ | 4,679 | (533 | ) | $ | 4,679 | (533 | ) | |||||||||||||
Total
temporarily impaired available-for-sale securities and other
investments
|
$ | 128,559 | $ | (25,690 | ) | $ | 315,374 | $ | (64,838 | ) | $ | 443,933 | $ | (90,528 | ) |
3.
|
Investments –
(continued)
|
Less
than 12 months
|
12
months or more
|
Total
|
||||||||||||||||||||||
December 31,
2008
|
Fair
value
|
Unrealized
losses
|
Fair
value
|
Unrealized
Losses
|
Fair
value
|
Unrealized
losses
|
||||||||||||||||||
Available-for-sale
securities:
|
||||||||||||||||||||||||
U.S.
– treasury bonds
|
$ | 6,521 | $ | (30 | ) | - | $ | - | $ | 6,521 | (30 | ) | ||||||||||||
U.S.
Agency mortgage backed securities
|
148,803 | (5,302 | ) | - | - | 148,803 | (5,302 | ) | ||||||||||||||||
Corporate
fixed maturities
|
104,279 | (13,707 | ) | 153,055 | (49,205 | ) | 257,334 | (62,912 | ) | |||||||||||||||
259,603 | (19,039 | ) | 153,055 | (49,205 | ) | 412,658 | (68,244 | ) | ||||||||||||||||
Other
investments
|
$ | 4,722 | $ | (528 | ) | $ | - | $ | - | $ | 4,722 | (528 | ) | |||||||||||
Total
temporarily impaired available-for-sale securities and other
investments
|
$ | 264,325 | $ | (19,567 | ) | $ | 153,055 | $ | (49,205 | ) | $ | 417,380 | $ | (68,772 | ) |
(b)
|
Restricted
Cash and Investments
|
March 31,
2009
|
December 31,
2008
|
|||||||
Restricted cash - third party
agreements
|
$ | 268,453 | $ | 335,201 | ||||
Restricted cash - related party
agreements
|
94,130 | 74,076 | ||||||
Total restricted
cash
|
362,583 | 409,277 | ||||||
Restricted investments - in Trust for third party
agreements at fair
value (Amortized
cost: 2009 -
$759,624; 2008 -
$701,973)
|
703,729 | 660,388 | ||||||
Restricted investments - in Trust for related party agreements at fair value (Amortized cost: 2009 - $58,819; 2008 - $1,
200)
|
59,264 | 1,203 | ||||||
Total restricted
investments
|
762,994 | 661,591 | ||||||
Total restricted cash and
investments
|
$ | 1,125,577 | $ | 1,070,868 |
4.
|
Fair
Value of Financial Instruments
|
|
·
|
Level
1
- Unadjusted quoted market prices for identical assets or
liabilities in active markets that the Company has the ability to
access.
|
|
·
|
Level
2
- Quoted prices for similar assets or liabilities in active
markets; quoted prices for identical or similar assets or liabilities in
inactive markets; or valuations based on models where the significant
inputs are observable (e.g., interest rates, yield curves, prepayment
speeds, default rates, loss severities, etc.) or can be corroborated by
observable market data.
|
|
·
|
Level
3
- Valuations based on models where significant inputs are not
observable. The unobservable inputs reflect the Company’s own assumptions
about the assumptions that market participants would
use.
|
a)
|
Fair Value
Hierarchy
|
March 31, 2009 |
Quoted Prices in
Active Markets
for
Identical
Assets (Level
1)
|
Significant
Other Observable
Inputs (Level
2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total Fair
Value
|
||||||||||||
Assets
|
||||||||||||||||
Fixed
maturities
|
$ | 33,750 | $ | 1,185,701 | $ | - | $ | 1,219,451 | ||||||||
Other
investments
|
- | - | 5,386 | 5,386 | ||||||||||||
Total
|
$ | 33,750 | $ | 1,185,701 | $ | 5,386 | $ | 1,224,837 | ||||||||
As a percentage of total
assets
|
1.5 | % | 51.4 | % | 0.2 | % | 53.1 | % |
4.
|
Fair
Value of Financial Instruments
(continued)
|
December 31,
2008
|
Quoted Prices in
Active Markets
for
Identical
Assets (Level
1)
|
Significant
Other Observable
Inputs (Level
2)
|
Significant
Unobservable
Inputs
(Level 3)
|
Total Fair
Value
|
||||||||||||
Assets
|
||||||||||||||||
Fixed
maturities
|
$ | 38,527 | $ | 1,081,428 | $ | - | $ | 1,119,955 | ||||||||
Other
investments
|
- | - | 5,291 | 5,291 | ||||||||||||
Total
|
$ | 38,527 | $ | 1,081,428 | $ | 5,291 | $ | 1,125,246 | ||||||||
As a percentage of total
assets
|
1.8 | % | 50.8 | % | 0.2 | % | 52.8 | % | ||||||||
Liabilities
|
||||||||||||||||
Securities sold under agreements
to repurchase
|
$ | - | $ | 232,646 | $ | - | $ | 232,646 | ||||||||
As a percentage of total
liabilities
|
- | 14.4 | % | - | 14.4 | % |
b)
|
Level 3 Financial
Instruments
|
Other
Investments:
|
March
31, 2009
|
March
31, 2008
|
||||||
Balance at beginning of
period
|
$ | 5,291 | $ | 15,656 | ||||
Change in net unrealized
losses – included in other comprehensive
loss
|
(6 | ) | (3,296 | ) | ||||
Net realized losses – included in net
income
|
(15 | ) | - | |||||
Net
purchases
|
116 | 23 | ||||||
Net transfers in (out of) of Level
3
|
- | - | ||||||
Balance at end of
period
|
$ | 5,386 | $ | 12,383 |
5.
|
Goodwill and Intangible
Assets
|
March 31, 2009
|
Gross
|
Accumulated
Amortization |
Net
|
Useful
Life
|
|||||||||
Goodwill
|
$ | 49,747 | $ | - | $ | 49,747 |
Indefinite
|
||||||
State
licenses
|
5,000 | - | 5,000 |
Indefinite
|
|||||||||
Customer
relationships
|
51,400 | (2,818 | ) | 48,582 |
15 years double
declining
|
||||||||
Net balance
|
$ | 106,147 | $ | (2,818 | ) | $ | 103,329 |
December 31,
2008
|
Gross
|
Accumulated
Amortization |
Net
|
Useful
Life
|
|||||||||
Goodwill
|
$ | 49,747 | $ | - | $ | 49,747 |
Indefinite
|
||||||
State
licenses
|
5,000 | - | 5,000 |
Indefinite
|
|||||||||
Customer
relationships
|
51,400 | (1,253 | ) | 50,147 |
15 years double
declining
|
||||||||
Net balance
|
$ | 106,147 | $ | (1,253 | ) | $ | 104,894 |
6.
|
Trust
Preferred Securities
|
6.
|
Trust
Preferred Securities (continued)
|
7.
|
Earnings Per
Share
|
Three
months
ended March 31, 2009 |
Three
months
ended March 31, 2008 |
|||||||
Net
income available to common shareholders
|
$ | 13,100 | $ | 12,516 | ||||
Weighted
average number of common shares outstanding - basic
|
67,687,664 | 59,550,000 | ||||||
Potentially
dilutive securities:
|
||||||||
Warrants
|
- | - | ||||||
Share
options
|
250,126 | - | ||||||
Weighted
average number of common shares outstanding - diluted
|
67,937,790 | 59,550,000 | ||||||
Basic
and diluted earnings per common share:
|
$ | 0.19 | $ | 0.21 |
8.
|
Share Based
Compensation
|
8.
|
Share Based Compensation
(continued)
|
Assumptions
:
|
March
31, 2009
|
|||
Volatility
|
29.8-43.9 | % | ||
Risk-free
interest rate
|
2.36-3.30 | % | ||
Weighted
average expected lives in years
|
5-6.1
years
|
|||
Forfeiture
rate
|
0 | % | ||
Dividend
yield rate
|
1-5.39 | % |
March 31,
2009
|
Number
of
Share
Options
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Contractual Term
|
|||||||||
Outstanding,
December 31, 2008
|
1,519,834 | $ | 10.00 | 9.44 years | ||||||||
Granted
|
150,000 | 4.39 | 9.91 years | |||||||||
Exercised
|
- | - | - | |||||||||
Cancelled
|
(200,000 | ) | - | - | ||||||||
Outstanding,
March 31, 2009
|
1,469,834 | $ | 5.55 | 9.31 years |
March 31,
2008
|
Number
of
Share
Options
|
Weighted
Average Exercise Price
|
Weighted
Average Remaining Contractual Term
|
|||||||||
Outstanding,
December 31, 2007
|
716,000
|
$ | 10.00 | 9.60 years | ||||||||
Granted
|
167,000
|
10.00 | 9.90 years | |||||||||
Exercised
|
- | - | - | |||||||||
Cancelled
|
- | - | - | |||||||||
Outstanding,
March 31, 2008
|
883,000
|
$ | 10.00 | 9.50 years |
Assets
and (liabilities):
|
March
31, 2009
|
December
31, 2008
|
||||||
Loan
to related party
|
$ | 167,975 | $ | 167,975 | ||||
Reinsurance
balances receivable, net
|
58,057 | 48,837 | ||||||
Accrued
interest on loan to related party
|
570 | 1,478 | ||||||
Deferred
commission and other acquisition costs
|
80,078 | 80,455 | ||||||
Loss
and loss adjustment expense reserves
|
(91,442 | ) | (69,646 | ) | ||||
Unearned
premiums
|
$ | (245,069 | ) | $ | (245,742 | ) |
Three
months Ended
March
31,
|
||||||||
Results
of operations:
|
2009
|
2008
|
||||||
Net
premium written - assumed
|
$ | 93,314 | $ | 87,714 | ||||
Change
in unearned premium - assumed
|
671 | (23,417 | ) | |||||
Net
earned premium - assumed
|
93,985 | 64,297 | ||||||
Commission
and other acquisition costs on premium written
|
30,556 | 26,905 | ||||||
Change
in deferred commission and other acquisition costs
|
377 | (7,004 | ) | |||||
Ceding
commission and other acquisition cost - expensed
|
30,933 | 19,901 | ||||||
Loss
and loss adjustment expense
|
58,132 | 37,399 | ||||||
Interest
income on loan to related party
|
$ | 810 | $ | 1,591 |
For the three months ended March
31, 2009
|
Reinsurance -
AmTrust
Quota Share |
Reinsurance
-
Other |
Total
|
|||||||||
Net premiums
written
|
$ | 85,371 | $ | 251,177 | $ | 336,548 | ||||||
Net premiums
earned
|
92,420 | 117,672 | 210,092 | |||||||||
Net losses and loss
expenses
|
(57,272 | ) | (89,016 | ) | (146,288 | ) | ||||||
Commissions and other
acquisition
costs
|
(30,409 | ) | (16,222 | ) | (46,631 | ) | ||||||
General and administrative
expenses
|
(374 | ) | (5,726 | ) | (6,100 | ) | ||||||
Underwriting
income
|
$ | 4,365 | $ | 6,708 | $ | 11,073 | ||||||
Reconciliation to net
income
|
||||||||||||
Net investment
income
|
12,329 | |||||||||||
Amortization of
intangibles
|
(1,564 | ) | ||||||||||
Foreign exchange loss
|
(213 | ) | ||||||||||
Trust
preferred interest
|
(7,090 | ) | ||||||||||
General and administrative
expenses
|
(1,435 | ) | ||||||||||
Net Income
|
$ | 13,100 | ||||||||||
Net loss and loss expense
ratio*
|
62.0 | % | 75.6 | % | 69.6 | % | ||||||
Acquisition cost
ratio**
|
32.9 | % | 13.8 | % | 22.2 | % | ||||||
General and administrative expense
ratio***
|
0.4 | % | 4.9 | % | 3.6 | % | ||||||
Combined
ratio
|
95.3 | % | 94.3 | % | 95.4 | % | ||||||
As of March 31,
2009
|
||||||||||||
Reinsurance
balances receivable
|
49,552 | 132,500 | 182,052 | |||||||||
Deferred
commission and other acquisition costs
|
76,261 | 76,355 | 152,616 | |||||||||
Loan
to related party
|
167,975 | - | 167,975 | |||||||||
Goodwill
|
- | 49,747 | 49,747 | |||||||||
Intangibles
|
- | 53,582 | 53,582 | |||||||||
Restricted
Investments and cash
|
152,278 | 570,086 | 722,364 | |||||||||
Corporate
and other assets
|
- | - | 977,349 | |||||||||
Total
Assets
|
446,066 | 882,270 | 2,305,685 |
For the three months ended March
31, 2008
|
Reinsurance -
AmTrust
Quota Share |
Reinsurance -
Other
|
Total
|
|||||||||
Net premiums
written
|
$ | 82,948 | $ | 19,484 | $ | 102,432 | ||||||
Net premiums
earned
|
63,790 | 1,515 | 65,305 | |||||||||
Net losses and loss
expenses
|
(37,208 | ) | (628 | ) | (37,836 | ) | ||||||
Acquisition
costs
|
(20,572 | ) | (689 | ) | (21,261 | ) | ||||||
General and administrative
expenses
|
(176 | ) | (149 | ) | (325 | ) | ||||||
Underwriting
income
|
$ | 5,834 | $ | 49 | $ | 5,883 | ||||||
Reconciliation to net
income
|
||||||||||||
Net investment
income
|
7,734 | |||||||||||
General and administrative
expenses
|
(1,101 | ) | ||||||||||
Net Income
|
$ | 12,516 | ||||||||||
Net loss and loss expense
ratio*
|
58.3 | % | 41.5 | % | 57.9 | % | ||||||
Acquisition cost
ratio**
|
32.3 | % | 45.5 | % | 32.6 | % | ||||||
General and administrative expense
ratio***
|
0.3 | % | 9.8 | % | 0.5 | % | ||||||
Combined
ratio
|
90.9 | % | 96.8 | % | 91.0 | % | ||||||
As of March 31,
2008
|
||||||||||||
Reinsurance
balances receivable
|
$ | 69,425 | $ | 10,555 | $ | 79,980 | ||||||
Deferred
commission and other acquisition costs
|
50,393 | 8,281 | 58,674 | |||||||||
Loan
to related party
|
113,542 | - | 113,542 | |||||||||
Corporate
and other assets
|
- | 643,000 | ||||||||||
Total
Assets
|
$ | 233,360 | $ | 18,836 | $ | 895,196 |
Three months ended
March
31,
|
||||||||||||||||
|
2009
|
2008
|
||||||||||||||
|
Total
|
%
of Total
|
Total
|
%
of Total
|
||||||||||||
Gross
and net premiums written
|
||||||||||||||||
Reinsurance
- AmTrust Quota Share
|
||||||||||||||||
Small
Commercial Business
|
$ | 52,972 | 15.7 | % | $ | 43,657 | 42.6 | % | ||||||||
Specialty
Middle Market Property & Casualty
|
9,228 | 2.7 | % | 6,867 | 6.7 | % | ||||||||||
Specialty
Risk and Extended Warranty
|
23,171 | 6.9 | % | 32,424 | 31.7 | % | ||||||||||
Total
Reinsurance - AmTrust Quota Share
|
$ | 85,371 | 25.3 | % | $ | 82,948 | 81.00 | % | ||||||||
Reinsurance
– Other
|
||||||||||||||||
Property
|
51,448 | 15.3 | % | - | - | % | ||||||||||
Casualty
|
150,075 | 44.6 | % | 19,484 | 19.0 | % | ||||||||||
Accident
and Health
|
49,654 | 14.8 | % | - | - | % | ||||||||||
Total
Reinsurance - Other
|
251,177 | 74.7 | % | 19,484 | 19.0 | % | ||||||||||
$ | 336,548 | 100.0 | % | $ | 102,432 | 100.0 | % |
Three months ended
March
31
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
Total
|
%
of Total
|
Total
|
%
of Total
|
|||||||||||||
Gross
and net premiums earned
|
||||||||||||||||
Reinsurance
– AmTrust Quota Share
|
||||||||||||||||
Small
Commercial Business
|
$ | 54,627 | 26.0 | % | $ | 31,880 | 48.8 | % | ||||||||
Specialty
Middle Market Property & Casualty
|
13,348 | 6.4 | % | 10,314 | 15.8 | % | ||||||||||
Specialty
Risk and Extended Warranty
|
24,445 | 11.6 | % | 21,596 | 33.1 | % | ||||||||||
Total
AmTrust Quota Share
|
$ | 92,420 | 44.0 | % | $ | 63,790 | 97.7 | % | ||||||||
Reinsurance
– Other
|
||||||||||||||||
Property
|
25,999 | 12.4 | % | - | - | % | ||||||||||
Casualty
|
66,354 | 31.6 | % | 1,515 | 2.3 | % | ||||||||||
Accident
and Health
|
25,318 | 12.0 | % | - | - | % | ||||||||||
Total
Reinsurance - Other
|
117,672 | 56.0 | % | 1,515 | 2.3 | % | ||||||||||
$ | 210,092 | 100.0 | % | $ | 65,305 | 100.0 | % |
|
•
|
losses
paid, which are actual cash payments to insureds, net of recoveries from
reinsurers;
|
•
|
outstanding
loss or case reserves, which represent management’s best estimate of the
likely settlement amount for known claims, less the portion that can be
recovered from reinsurers; and
|
|
•
|
IBNR,
which are reserves established by us for changes in the values of claims
that have been reported to us but are not yet settled, as well as claims
that have occurred but have not yet been reported. The portion recoverable
from reinsurers is deducted from the gross estimated
loss.
|
Three Months ended March
31,
|
||||||||
2009
|
2008
|
|||||||
($ in
thousands)
|
||||||||
Gross and net premiums
written
|
$
|
336,548
|
$
|
102,432
|
||||
Net earned
premium
|
$
|
210,092
|
$
|
65,305
|
||||
Net investment
income
|
14,259
|
7,609
|
||||||
Net realized investment (losses)
gains
|
(1,930
|
)
|
125
|
|
||||
Total
Revenue
|
222,421
|
73,039
|
||||||
Loss and loss adjustment
expenses
|
146,288
|
37,836
|
||||||
Commissions and other acquisition
expenses
|
46,631
|
21,261
|
||||||
General and administrative
expenses
|
7,535
|
1,426
|
||||||
Amortization of intangible
assets
|
1,564
|
-
|
|
|||||
Interest
expense
|
7,090
|
-
|
||||||
Foreign exchange
loss
|
213
|
-
|
||||||
Total
Expenses
|
209,321
|
60,523
|
||||||
Net income
|
$
|
13,100
|
$
|
12,516
|
Three Months ended March
31,
|
||||||||
2009
|
2008
|
|||||||
Selected Consolidated
Ratios:
|
||||||||
Loss and loss expense
ratio
|
69.6
|
%
|
57.9
|
%
|
||||
Acquisition cost
ratio
|
22.2
|
%
|
32.6
|
%
|
||||
General and administrative expense
ratio
|
3.6
|
%
|
2.2
|
%
|
||||
Expense
ratio
|
25.8
|
%
|
34.8
|
%
|
||||
Combined
ratio
|
95.4
|
%
|
92.7
|
%
|
Three months ended March
31,
|
||||||||
2009
|
2008
|
|||||||
($ in
thousands)
|
||||||||
Net premiums
written
|
$ | 251,177 | $ | 19,484 | ||||
Net premiums
earned
|
117,671 | 1,515 | ||||||
Net losses and loss
expenses
|
(89,016 | ) | (628 | ) | ||||
Commissions and other
acquisition
expenses
|
(16,222 | ) | (689 | ) | ||||
General and administrative
expenses
|
(5,726 | ) | (149 | ) | ||||
Underwriting
income
|
$ | 6,707 | $ | 49 | ||||
Net loss and loss expense
ratio
|
75.6 | % | 41.5 | % | ||||
Acquisition cost
ratio
|
13.8 | % | 45.5 | % | ||||
General and administrative expense
ratio
|
4.9 | % | 9.8 | % | ||||
Combined
ratio
|
94.3 | % | 96.8 | % |
Three months ended March
31,
|
||||||||
For the three months ended March
31, 2009
|
2009
|
2008
|
||||||
($ in
thousands)
|
||||||||
Net premiums
written
|
$ | 85,371 | $ | 82,948 | ||||
Net premiums
earned
|
92,420 | 63,790 | ||||||
Net losses and loss
expenses
|
(57,272 | ) | (37,208 | ) | ||||
Commissions and other
acquisition
expenses
|
(30,409 | ) | (20,572 | ) | ||||
General and administrative
expenses
|
(374 | ) | (176 | ) | ||||
Underwriting
income
|
$ | 4,365 | $ | 5,834 | ||||
Net loss and loss expense
ratio
|
62.0 | % | 58.3 | % | ||||
Acquisition cost
ratio
|
32.9 | % | 32.5 | % | ||||
General and administrative expense
ratio
|
0.4 | % | 0.3 | % | ||||
Combined
ratio
|
95.3 | % | 91.1 | % |
Three months ended March
31,
|
||||||||
2009
|
2008
|
|||||||
($ in
thousands)
|
||||||||
Cash and cash equivalents provided
by (used in):
|
||||||||
Operating
activities
|
$ | 14,616 | $ | 4,298 | ||||
Investing
activities
|
(70,934 | ) | (97,706 | ) | ||||
Financing
activities
|
19,614 | 100,683 | ||||||
Change in cash and cash
equivalents
|
$ | (36,704 | ) | $ | 7,275 |
March 31,
|
||||
2009
|
||||
($ in
thousands)
|
||||
Due in one year or
less
|
$ | 22,697 | ||
Due after one year through five
years
|
167,878 | |||
Due after five years through ten
years
|
206,195 | |||
Due after ten
years
|
53,845 | |||
Mortgage and asset
-backed
|
768,836 | |||
Total
|
1,219,451 |
(Unaudited)
March
31, 2009
|
December
31, 2008
|
|||||||||||||||
Fair
value
|
Percentage
of portfolio
|
Fair
value
|
Percentage
of portfolio
|
|||||||||||||
($ in
thousands)
|
($ in
thousands)
|
|||||||||||||||
U.S.
– treasury bonds
|
$ | 33,750 | 2.8 | % | $ | 38,527 | 3.4 | % | ||||||||
U.S.
Agency - mortgage backed securities
|
768,836 | 62.8 | % | 771,899 | 68.6 | % | ||||||||||
Corporate
fixed maturities
|
405,624 | 33.1 | % | 309,529 | 27.5 | % | ||||||||||
Municipalities
|
11,241 | 0.9 | % | - | - | % | ||||||||||
Other
investments
|
5,386 | 0.4 | % | 5,291 | 0.5 | % | ||||||||||
Total
available for sale investments
|
$ | 1,224,837 | 100.0 | % | $ | 1,125,246 | 100.0 | % |
·
|
how long and by how much the fair
value of the security has been below its amortized
cost;
|
·
|
the financial condition and
near-term prospects of the issuer of the security, including any specific
events that may affect its operations or
earnings;
|
·
|
our intent and ability to keep the
security for a sufficient time period for it to recover its
value;
|
·
|
any nonpayment of scheduled
interest payments; and
|
·
|
the occurrence of discrete credit
event resulting in (i) the issuer defaulting on material outstanding
obligation (ii) the issuer seeking protection under bankruptcy
law.
|
Hypothetical Change in Interest Rates
|
Fair
Value
|
Estimated
Change in Fair Value
|
Hypothetical
Percentage Increase (Decrease) in Shareholders’ Equity
|
|||||||||
200 basis point
increase
|
$ | 1,172,035 | $ | (47,416 | ) | (9 | %) | |||||
100 basis point
increase
|
1,194,939 | (24,512 | ) | (4 | %) | |||||||
No change
|
1,219,451 | - | 0 | % | ||||||||
100 basis point
decrease
|
1,243,812 | 24,362 | 4 | % | ||||||||
200 basis point
decrease
|
$ | 1,272,076 | $ | 52,625 | 10 | % |
Exhibit
Number
|
Description
|
|
4.1
|
Amended
and Restated Declaration of Trust, dated as of January 20, 2009, by and
among Wilmington Trust Company, as Institutional Trustee and as Delaware
Trustee, Maiden Holdings North America, Ltd., as Sponsor, and the
Administrators (as named therein).*
|
|
4.2
|
Indenture,
dated January 20, 2009, between Maiden Holdings North America, Ltd. and
Wilmington Trust Company, as Trustee, relating to Fixed Rate Subordinated
Deferable Interest Debentures Due 2039 (including the form of
debenture).*
|
|
4.3
|
Guarantee
Agreement, dated as of January 20, 2009, by and between Maiden Holdings,
Ltd., as Guarantor, and Wilmington Trust Company, as
Trustee.*
|
|
4.4
|
Guarantee
Agreement, dated as of January 20, 2009, by and between Maiden Holdings
North America, Ltd., as Guarantor, and Wilmington Trust Company, as
Trustee.*
|
|
10.1
|
Form
of Purchase Agreement by and among Maiden Holdings, Ltd., Maiden Capital
Financing Trust, Maiden Holdings North America, Ltd. and various
institutional investors dated as of January 14, 2009.*
|
|
31.1
|
Certification
of the Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a),
for the quarter ended March 31, 2009.
|
|
31.2
|
Certification
of the Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a),
for the quarter ended March 31, 2009.
|
|
32.1
|
Certification
of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, for
the quarter ended March 31, 2009.
|
|
32.2
|
Certification
of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, for
the quarter ended March 31,
2009.
|
*
|
Incorporated
by reference to the Company’s Current Report on Form 8-K filed with the
SEC on January 26, 2009.
|
Maiden Holdings, Ltd. | |||
(Registrant)
|
|||
Date: May 15, 2009
|
|
/s/ ARTURO M. RASCHBAUM | |
Arturo M. Raschbaum | |||
President and Chief Executive
Officer
|
|||
|
|
/s/ MICHAEL J. TAIT | |
Michael J. Tait | |||
Chief Financial
Officer
|
|||
1.
|
I
have reviewed this quarterly report on Form 10-Q of Maiden Holdings,
Ltd.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
|
(a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including any
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
(b)
|
evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
(c)
|
disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
(a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
(b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Dated: May 15,
2009
|
|
/s/ ARTURO M. RASCHBAUM | |
Arturo M.
Raschbaum
|
|||
President and Chief Executive Officer | |||
(Principal Executive
Officer)
|
1.
|
I
have reviewed this quarterly report on Form 10-Q of Maiden Holdings,
Ltd.;
|
2.
|
Based
on my knowledge, this report does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements
were made, not misleading with respect to the period covered by this
report;
|
3.
|
Based
on my knowledge, the financial statements, and other financial information
included in this report, fairly present in all material respects the
financial condition, results of operations and cash flows of the
registrant as of, and for, the periods presented in this
report;
|
4.
|
The
registrant’s other certifying officer and I are responsible for
establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant
and have:
|
(a)
|
designed
such disclosure controls and procedures, or caused such disclosure
controls and procedures to be designed under our supervision, to ensure
that material information relating to the registrant, including any
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this report is being
prepared;
|
(b)
|
evaluated
the effectiveness of the registrant’s disclosure controls and procedures
and presented in this report our conclusions about the effectiveness of
the disclosure controls and procedures, as of the end of the period
covered by this report based on such evaluation;
and
|
(c)
|
disclosed
in this report any change in the registrant’s internal control over
financial reporting that occurred during the registrant’s most recent
fiscal quarter (the registrant’s fourth fiscal quarter in the case of an
annual report) that has materially affected, or is reasonably likely to
materially affect, the registrant’s internal control over financial
reporting; and
|
5.
|
The
registrant’s other certifying officer and I have disclosed, based on our
most recent evaluation of internal control over financial reporting, to
the registrant’s auditors and the audit committee of the registrant’s
board of directors (or persons performing the equivalent
functions):
|
(a)
|
all
significant deficiencies and material weaknesses in the design or
operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant’s ability to record,
process, summarize and report financial information;
and
|
(b)
|
any
fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant’s internal control
over financial reporting.
|
Dated: May 15,
2009
|
|
/s/ MICHAEL J. TAIT | |
Michael J.
Tait
|
|||
Chief Financial Officer | |||
(Principal Financial and
Accounting Officer)
|
Dated:
May 15,
2009
|
By:
|
/s/ ARTURO M. RASCHBAUM | |
Name: | Arturo M. Raschbaum | ||
Title:
|
President and Chief Executive
Officer
|
||
Dated:
May 15,
2009
|
By:
|
/s/ MICHAEL J. TAIT | |
Name: | Michael J. Tait | ||
Title:
|
Chief Financial
Officer
|
||