Bermuda
(State
or other jurisdiction of
incorporation
or organization)
|
98-0570192
(IRS
Employer Identification No.)
|
131 Front Street, Hamilton HM12,
Bermuda
(Address
of principal executive offices)
|
HM12
(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 September 30, 2009 (unaudited) and
December 31, 2008
|
3
|
|||
Condensed
Consolidated Statement of Income for the three months
ended September 30, 2009 and 2008 (unaudited) and the nine
months ended September 30, 2009 and 2008 (unaudited)
|
4
|
|||
Condensed
Consolidated Statement of Cash Flows for the nine months ended September
30, 2009 and 2008 (unaudited)
|
5
|
|||
Condensed
Consolidated Statement of Changes in Shareholders’ Equity for the three
months ended September 30, 2009 and 2008 (unaudited) and the nine months
ended September 30, 2009 and 2008 (unaudited)
|
6
|
|||
|
Notes
to Unaudited Condensed Consolidated Financial Statements
|
7
|
||
Item
2.
|
Management’s
Discussion and Analysis of Financial Condition and Results of
Operations
|
26
|
||
Item
3.
|
Quantitative
and Qualitative Disclosures About Market Risk
|
35
|
||
Item
4.
|
Controls
and Procedures
|
35
|
||
PART
II
|
OTHER
INFORMATION
|
36
|
||
Item
1.
|
Legal
Proceedings
|
36
|
||
Item
1A
|
Risk
Factors
|
36
|
||
Item
6.
|
Exhibits
|
37
|
||
Signatures
|
38
|
(unaudited)
|
||||||||
September 30,
2009
|
December
31, 2008
|
|||||||
Assets
|
||||||||
Fixed
maturities, available-for-sale, at fair value (Amortized cost 2009:
$1,506,704; 2008: $1,163,926)
|
$ | 1,541,704 | $ | 1,119,955 | ||||
Other
investments, at fair value (Cost 2009: $5,707; 2008:
$5,818)
|
5,529 | 5,291 | ||||||
Total
investments
|
1,547,233 | 1,125,246 | ||||||
Cash
and cash equivalents
|
94,582 | 131,897 | ||||||
Restricted
cash and cash equivalents
|
218,595 | 409,277 | ||||||
Accrued
investment income
|
11,078 | 10,293 | ||||||
Reinsurance
balances receivable (includes $43,048 and $48,837 from related party in
2009 and 2008, respectively - see note 10)
|
236,643 | 71,895 | ||||||
Loan
to related party (see note 10)
|
167,975 | 167,975 | ||||||
Deferred
acquisition costs (includes $77,487 and $80,455 from related party in 2009
and 2008, respectively - see note 10)
|
171,120 | 104,470 | ||||||
Other
assets
|
15,527 | 2,617 | ||||||
Intangible
assets
|
52,959 | 55,147 | ||||||
Goodwill
|
49,747 | 49,747 | ||||||
Total
Assets
|
$ | 2,565,459 | $ | 2,128,564 | ||||
Liabilities
and Shareholders’ Equity
|
||||||||
Liabilities
|
||||||||
Reserve
for losses and loss expenses (includes $167,218 and $69,646 from related
party in 2009 and 2008, respectively- see note 10)
|
$ | 967,425 | $ | 897,656 | ||||
Unearned
premiums (includes $238,483 and $245,742 from related parties
in 2009 and 2008, respectively- see note 10)
|
570,875 | 444,479 | ||||||
Accrued
expenses and other liabilities
|
41,482 | 44,024 | ||||||
Securities
sold under agreements to repurchase, at contract value
|
106,016 | 232,646 | ||||||
Trust
preferred securities – related parties (see note 6)
|
215,110 | - | ||||||
Total
Liabilities
|
1,900,908 | 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
|
575,891 | 530,519 | ||||||
Accumulated
other comprehensive income (loss)
|
33,117 | (44,499 | ) | |||||
Retained
earnings
|
58,631 | 26,944 | ||||||
Treasury
Shares, at cost (2009
and 2008:962,336 shares)
|
(3,801 | ) | (3,801 | ) | ||||
Total
Shareholders’ Equity
|
664,551 | 509,759 | ||||||
Total
Liabilities and Shareholders’ Equity
|
$ | 2,565,459 | $ | 2,128,564 |
For the Three
Months Ended September 30, 2009 |
For the Three
Months Ended September 30, 2008 |
For the Nine
Months Ended September 30, 2009 |
For the Nine
Months Ended September 30, 2008 |
|||||||||||||
Revenues:
|
||||||||||||||||
Premium
income:
|
||||||||||||||||
Net
premiums written
|
$ | 221,400 | $ | 113,187 | $ | 796,304 | $ | 386,870 | ||||||||
Change
in unearned premiums
|
15,950 | 408 | (125,021 | ) | (130,631 | ) | ||||||||||
Net
earned premium
|
237,350 | 113,595 | 671,283 | 256,239 | ||||||||||||
Net
investment income
|
16,778 | 8,974 | 46,150 | 24,346 | ||||||||||||
Net
realized investment losses
|
(66 | ) | (42,538 | ) | (462 | ) | (42,375 | ) | ||||||||
Total
revenues
|
254,062 | 80,031 | 716,971 | 238,210 | ||||||||||||
Expenses:
|
||||||||||||||||
Loss
and loss adjustment expenses
|
165,123 | 66,915 | 462,468 | 148,362 | ||||||||||||
Commission
and other acquisition expenses
|
55,313 | 38,299 | 159,608 | 85,057 | ||||||||||||
Other operating
expenses
|
8,059 | 1,974 | 22,726 | 5,636 | ||||||||||||
Trust
preferred interest – related party
|
9,114 | - | 25,316 | - | ||||||||||||
Amortization
of intangible assets
|
1,676 | - | 4,915 | - | ||||||||||||
Foreign
exchange and other (gain) loss
|
(210 | ) | 359 | (2,401 | ) | 364 | ||||||||||
Total
expenses
|
239,075 | 107,547 | 672,632 | 239,419 | ||||||||||||
Net
income (loss)
|
$ | 14,987 | $ | (27,516 | ) | $ | 44,339 | $ | (1,209 | ) | ||||||
Basic
earnings per common share
|
$ | 0.21 | $ | (0.46 | ) | $ | 0.64 | $ | (0.02 | ) | ||||||
Diluted
earnings per common share
|
0.21 | (0.46 | ) | 0.63 | (0.02 | ) | ||||||||||
Dividends
declared per common share
|
$ | 0.06 | $ | 0.05 | $ | 0.18 | $ | 0.15 |
For the Three
Months Ended September 30, 2009 |
For the Three
Months Ended September 30, 2008 |
For the Nine
Months Ended September 30, 2009 |
For the Nine
Months Ended September 30, 2008 |
|||||||||||||
Net
realized investment losses:
|
||||||||||||||||
Total
other-than-temporary impairment losses
|
$ | - | $ | (42,538 | ) | $ | - | $ | (42,538 | ) | ||||||
Portion
of loss recognized in other comprehensive income
|
- | - | - | - | ||||||||||||
Net
impairment losses recognized in earnings
|
- | (42,538 | ) | - | (42,538 | ) | ||||||||||
Other
net realized (loss) gain on investments
|
(66 | ) | - | (462 | ) | 163 | ||||||||||
Net
realized investment losses
|
$ | (66 | ) | $ | (42,538 | ) | $ | (462 | ) | $ | (42,375 | )) |
For the Nine
Months Ended September 30, 2009 |
For the Nine
Months Ended September 30, 2008 |
|||||||
Cash flows
from operating activities:
|
||||||||
Net
income (loss)
|
$ | 44,339 | $ | (1,209 | ) | |||
Adjustments
to reconcile net income (loss) to net cash provided by operating
activities :
|
||||||||
Depreciation
and amortization of intangibles
|
5,426 | 18 | ||||||
Net
realized loss (gain) on sales of investments
|
462 | (163 | ) | |||||
Other
than temporary impairment of investments
|
- | 42,538 | ||||||
Foreign
exchange and other (gain) loss
|
(1,462 | ) | 356 | |||||
Amortization
of share-based compensation expense, bond premium and discount and trust
preferred securities discount, net
|
(4,615 | ) | (1,429 | ) | ||||
Changes
in assets - (increase) decrease:
|
||||||||
Reinsurance
balances receivable
|
(167,608 | ) | (71,145 | ) | ||||
Accrued
investment income
|
(695 | ) | (2,219 | ) | ||||
Deferred
commission and other acquisition costs
|
(66,604 | ) | (44,400 | ) | ||||
Other
assets
|
(1,702 | ) | 34 | |||||
Changes
in liabilities – increase (decrease):
|
||||||||
Accrued
expenses and other liabilities
|
(19,047 | ) | (897 | ) | ||||
Loss
and loss adjustment expense reserves
|
72,706 | 85,113 | ||||||
Unearned
premiums
|
125,022 | 130,633 | ||||||
Net
cash (used in) provided by operating activities
|
(13,778 | ) | 137,230 | |||||
Cash
flows from investing activities:
|
||||||||
Purchases
of investments:
|
||||||||
Purchases
of fixed-maturity securities
|
(739,006 | ) | (379,010 | ) | ||||
Purchases
of other investments
|
(138 | ) | (340 | ) | ||||
Sale
of investments:
|
||||||||
Proceeds
from sales of fixed-maturity securities
|
153,991 | - | ||||||
Proceeds
from maturities and calls of fixed-maturity securities
|
263,832 | 88,499 | ||||||
Proceeds
from redemption of other investments
|
127 | - | ||||||
Decrease
in restricted cash
|
190,682 | - | ||||||
Acquisition
of subsidiary (net of cash acquired)
|
(13,613 | ) | - | |||||
Loan
to related party
|
- | (54,433 | ) | |||||
Purchase
of furniture and equipment
|
(122 | ) | (52 | ) | ||||
Net
cash used in investing activities
|
(144,247 | ) | (345,336 | ) | ||||
Cash
flows from financing activities:
|
||||||||
Repurchase
agreements, net
|
(126,630 | ) | 260,775 | |||||
Common
share issuance
|
117 | - | ||||||
Trust
preferred securities issuance
|
260,000 | - | ||||||
Trust
preferred securities issuance cost
|
(4,342 | ) | - | |||||
Dividend
paid
|
(8,435 | ) | (5,955 | ) | ||||
Net
cash provided by financing activities
|
120,710 | 254,820 | ||||||
Net
(decrease) increase in cash and cash equivalents
|
(37,315 | ) | 46,714 | |||||
Cash
and cash equivalents, beginning of period
|
131,897 | 35,729 | ||||||
Cash
and cash equivalents, end of period
|
$ | 94,582 | $ | 82,443 | ||||
Supplemental
information about non-cash investing and financing
activities
|
||||||||
Discount
on Trust Preferred Securities
|
$ | (44,928 | ) |
$
|
- | |||
Additional
paid in Capital
|
44,928 | - |
For
the nine months ended
September 30, 2009 |
Common
Shares
|
Additional
Paid-In
Capital
|
Accumulated
Other
Comprehensive
Income
|
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
|
- | - | - | 44,339 | - | 44,339 | ||||||||||||||||||
Unrealized
holding gains during the period
|
- | - | 77,154 | - | - | 77,154 | ||||||||||||||||||
Adjustment
for re-classification of realized gains and other-than-temporary losses
recognized in the net income
|
- | - | 462 | - | - | 462 | ||||||||||||||||||
Comprehensive
income
|
121,955 | |||||||||||||||||||||||
Shares
issued, net
|
117 | 44,928 | - | - | - | 45,045 | ||||||||||||||||||
Share
based compensation
|
- | 444 | - | - | - | 444 | ||||||||||||||||||
Dividends
to shareholders
|
- | - | - | (12,652 | ) | - | (12,652 | ) | ||||||||||||||||
Balance
at September 30, 2009
|
$ | 713 | $ | 575,891 | $ | 33,117 | $ | 58,631 | $ | (3,801 | ) | $ | 664,551 |
For the Nine Months Ended
September 30, 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
loss
|
- | - | - | (1,209 | ) | - | (1,209 | ) | ||||||||||||||||
Unrealized
holding losses during the period
|
- | - | (91,735 | ) | - | - | (91,735 | ) | ||||||||||||||||
Adjustment
for re-classification of realized gains and other-than-temporary
losses recognized in the net income
|
- | - | 42,375 | - | - | 42,375 | ||||||||||||||||||
Comprehensive
loss
|
(50,569 | ) | ||||||||||||||||||||||
Share
based compensation
|
- | 611 | - | - | - | 611 | ||||||||||||||||||
Dividends
to shareholders
|
- | - | - | (8,933 | ) | - | (8,933 | ) | ||||||||||||||||
Balance
at September 30, 2008
|
$ | 596 | $ | 530,258 | $ | (62,856 | ) | $ | 10,456 | $ | - | $ | 478,454 |
|
(a)
|
Fixed
Maturities and Other Investments
|
September
30, 2009
|
Original or
amortized
cost
|
Gross
unrealized
gains
|
Gross
unrealized
losses
|
Fair
value
|
||||||||||||
Fixed Maturities:
|
||||||||||||||||
U.S.
– treasury bonds
|
$ | 39,451 | $ | 365 | $ | (158 | ) | $ | 39,658 | |||||||
U.S.
Agency - mortgage backed securities
|
880,024 | 23,969 | (2,292 | ) | 901,701 | |||||||||||
Corporate
fixed maturities
|
564,285 | 35,998 | (23,718 | ) | 576,565 | |||||||||||
Municipal
bonds
|
22,944 | 836 | - | 23,780 | ||||||||||||
Total
available for sale fixed maturities
|
1,506,704 | 61,168 | (26,168 | ) | 1,541,704 | |||||||||||
Other
investments
|
5,707 | - | (178 | ) | 5,529 | |||||||||||
Total
investments
|
$ | 1,512,411 | $ | 61,168 | $ | (26,346 | ) | $ | 1,547,233 |
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 |
September 30,
2009
|
December 31,
2008
|
|||||||||||||||
Amortized
cost |
Fair Value
|
Amortized
cost |
Fair Value
|
|||||||||||||
Due
in one year or less
|
$ | 60,720 | $ | 62,597 | $ | 6,282 | $ | 6,293 | ||||||||
Due
after one year through five years
|
174,771 | 171,756 | 160,732 | 149,067 | ||||||||||||
Due
after five years through ten years
|
319,124 | 326,162 | 228,553 | 179,843 | ||||||||||||
Due
after ten years
|
72,065 | 79,488 | 12,337 | 12,854 | ||||||||||||
Mortgage
and asset -backed
|
880,024 | 901,701 | 756,022 | 771,898 | ||||||||||||
Total
|
$ | 1,506,704 | $ | 1,541,704 | $ | 1,163,926 | $ | 1,119,955 |
For the Three
Months Ended September 30, 2009 |
For the Three
Months Ended September 30, 2008 |
For the Nine
Months Ended September 30, 2009 |
For the Nine
Months Ended September 30, 2008 |
|||||||||||||
Net
realized Investment Losses:
|
||||||||||||||||
Total other-than-temporary
impairment losses
|
$ | - | $ | (42,538 | ) | $ | - | $ | (42,538 | ) | ||||||
Portion of loss recognized in
other comprehensive income
|
- | - | - | - | ||||||||||||
Net
impairment losses recognized in earnings
|
- | (42,538 | ) | - | (42,538 | ) | ||||||||||
Gross
realized gains on sale of investments
|
42 | - | 3,519 | 163 | ||||||||||||
Gross
realized loss on sale of investments
|
(108 | ) | - | (3,981 | ) | - | ||||||||||
Net
realized investment loss
|
$ | (66 | ) | $ | (42,538 | ) | $ | (462 | ) | $ | (42,375 | ) |
Less than 12 months
|
12 months or more
|
Total
|
||||||||||||||||||||||
September 30, 2009
|
Fair
value
|
Unrealized
losses
|
Fair
value
|
Unrealized
Losses
|
Fair
value
|
Unrealized
losses
|
||||||||||||||||||
Available-for-sale
securities:
|
||||||||||||||||||||||||
U.S.
– treasury bonds
|
$ | 3,277 | $ | (158 | ) | $ | - | $ | - | $ | 3,277 | $ | (158 | ) | ||||||||||
U.S.
Agency mortgage backed securities
|
120,097 | (1,393 | ) | 31,905 | (899 | ) | 152,002 | (2,292 | ) | |||||||||||||||
Corporate
fixed maturities
|
13,935 | (727 | ) | 209,904 | (22,991 | ) | 223,839 | (23,718 | ) | |||||||||||||||
Municipal
bonds
|
- | - | - | - | - | - | ||||||||||||||||||
137,309 | (2,278 | ) | 241,809 | (23,890 | ) | 379,118 | (26,168 | ) | ||||||||||||||||
Other
investments
|
$ | - | $ | - | $ | 4,822 | $ | (178 | ) | $ | 4,822 | $ | (178 | ) | ||||||||||
Total
temporarily impaired available-for-sale securities and other
investments
|
$ | 137,309 | $ | (2,278 | ) | $ | 246,631 | $ | (24,068 | ) | $ | 383,940 | $ | (26,346 | ) |
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 | (13,708 | ) | 153,055 | (49,204 | ) | 257,334 | (62,912 | ) | |||||||||||||||
259,603 | (19,040 | ) | 153,055 | (49,204 | ) | 412,658 | (68,244 | ) | ||||||||||||||||
Other
investments
|
$ | 4,722 | $ | (528 | ) | $ | - | $ | - | $ | 4,722 | (528 | ) | |||||||||||
Total
temporarily impaired available-for-sale securities and other
investments
|
$ | 264,325 | $ | (19,568 | ) | $ | 153,055 | $ | (49,204 | ) | $ | 417,380 | $ | (68,772 | ) |
September
30, 2009 |
December
31, 2008 |
|||||||
Restricted
cash - third party agreements
|
$ | 199,172 | $ | 335,201 | ||||
Restricted
cash - related party agreements
|
19,423 | 74,076 | ||||||
Total
restricted cash
|
218,595 | 409,277 | ||||||
Restricted
investments - in Trust for third party agreements at fair value (Amortized
cost: 2009 - $860,641; 2008 - $701,973)
|
863,703 | 660,388 | ||||||
Restricted
investments - in Trust for related party agreements at fair value
(Amortized cost: 2009 - $140,310; 2008
- - $1,200)
|
158,869 | 1,203 | ||||||
Total
restricted investments
|
1,022,572 | 661,591 | ||||||
Total
restricted cash and investments
|
$ | 1,241,167 | $ | 1,070,868 |
|
·
|
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
|
September 30,
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
|
$ | 39,658 | $ | 1,502,046 | $ | - | $ | 1,541,704 | ||||||||
Other
investments
|
- | - | 5,529 | 5,529 | ||||||||||||
Total
|
$ | 39,658 | $ | 1,502,046 | $ | 5,529 | $ | 1,547,233 | ||||||||
As
a percentage of total assets
|
1.5 | % | 58.5 | % | 0.2 | % | 60.3 | % | ||||||||
Liabilities
|
||||||||||||||||
Securities
sold under agreements to repurchase
|
$ | - | $ | 106,016 | $ | - | $ | 106,016 | ||||||||
As
a percentage of total liabilities
|
- | 5.6 | % | - | 5.6 | % |
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:
|
Three Months
Ended September 30, 2009 |
Nine Months
Ended September 30, 2009 |
||||||
Balance at
beginning of period
|
$ | 5,392 | $ | 5,291 | ||||
Change
in net unrealized gains (losses) – included in other comprehensive
loss
|
244 | 350 | ||||||
Net
realized gains (losses) – included in net income
|
(108 | ) | (123 | ) | ||||
Net
purchases or (sales)
|
1 | 11 | ||||||
Net
transfers in (out of) of Level 3
|
- | - | ||||||
Balance
at end of period
|
$ | 5,529 | $ | 5,529 |
5.
|
Goodwill
and Intangible Assets
|
September
30, 2009
|
Gross
|
Accumulated
Amortization |
Net
|
Useful Life
|
|||||||||
Goodwill
|
$ | 49,747 | $ | - | $ | 49,747 |
Indefinite
|
||||||
State
licenses
|
7,727 | - | 7,727 |
Indefinite
|
|||||||||
Customer
relationships
|
51,400 | (6,168 | ) | 45,232 |
15
years double declining
|
||||||||
Net
balance
|
$ | 108,874 | $ | (6,168 | ) | $ | 102,706 | ||||||
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 |
Three Months
Ended September 30, 2009 |
Three Months
Ended September 30,
2008
|
Nine Months
Ended September 30, 2009 |
Nine Months
Ended
September 30, 2008
|
|||||||||||||
Net
income (loss) available to common shareholders
|
$ | 14,987 | $ | (27,516 | ) | $ | 44,339 | $ | (1,209 | ) | ||||||
Weighted
average number of common shares outstanding - basic
|
70,287,664 | 59,550,000 | 69,430,521 | 59,550,000 | ||||||||||||
Potentially
dilutive securities:
|
||||||||||||||||
Warrants
|
- | - | - | - | ||||||||||||
Share
options
|
565,231 | - | 416,193 | - | ||||||||||||
Weighted
average number of common shares outstanding - diluted
|
70,852,895 | 59,550,000 | 69,846,714 | 59,550,000 | ||||||||||||
Basic
earnings per common share:
|
$ | 0.21 | $ | (0.46 | ) | $ | 0.64 | $ | (0.02 | ) | ||||||
Diluted
earnings per common share:
|
$ | 0.21 | $ | (0.46 | ) | $ | 0.63 | $ | (0.02 | ) |
Assumptions
:
|
September
30, 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 | % |
Three
Months Ended
September 30,
2009
|
Number of
Share Options
|
Weighted
Average Exercise Price |
Weighted Average
Years Remaining Contractual Term |
|||||||||
Outstanding,
June 30, 2009
|
1,503,834 | $ | 5.54 | 9.3 | ||||||||
Granted
|
200,000 | 4.54 | 9.4 | |||||||||
Exercised
|
- | - | - | |||||||||
Cancelled
|
(10,500 | ) | 3.28 | - | ||||||||
Outstanding,
September 30, 2009
|
1,693,334 | $ | 5.47 | 8.9 |
Nine
Months Ended
September 30,
2009
|
Number of
Share Options
|
Weighted
Average Exercise Price |
Weighted Average
Years Remaining Contractual Term |
|||||||||
Outstanding,
December 31, 2008
|
1,519,834 | $ | 5.92 | 9.4 | ||||||||
Granted
|
384,000 | 4.51 | 9.4 | |||||||||
Exercised
|
- | - | - | |||||||||
Cancelled
|
(210,500 | ) | 8.07 | - | ||||||||
Outstanding,
September 30, 2009
|
1,693,334 | $ | 5.47 | 8.9 |
Three
Months Ended
September
30, 2008
|
Number of
Share Options |
Weighted
Average Exercise
Price |
Weighted Average
Years Remaining Contractual Term |
|||||||||
Outstanding,
June 30, 2008
|
962,000 | $ | 10.00 | 9.3 | ||||||||
Granted
|
- | - | - | |||||||||
Exercised
|
- | - | - | |||||||||
Cancelled
|
- | - | - | |||||||||
Outstanding,
September 30, 2008
|
962,000 | $ | 10.00 | 9.0 |
Nine
Months Ended
September 30,
2008
|
Number of
Share Options |
Weighted
Average Exercise Price |
Weighted Average
Years Remaining Contractual Term |
|||||||||
Outstanding,
December 31, 2007
|
716,000 | $ | 10.00 | 9.1 | ||||||||
Granted
|
246,000 | 10.00 | 9.5 | |||||||||
Exercised
|
- | - | - | |||||||||
Cancelled
|
- | - | - | |||||||||
Outstanding,
September 30, 2008
|
962,000 | $ | 10.00 | 9.0 |
Assets
and (liabilities):
|
September
30,
2009
|
December
31,
2008 |
||||||
Restricted
cash and investments
|
$ | 178,293 | $ | 75,279 | ||||
Loan
to related party
|
167,975 | 167,975 | ||||||
Reinsurance
balances receivable, net
|
43,048 | 48,387 | ||||||
Accrued
interest on loan to related party
|
1,631 | 1,478 | ||||||
Deferred
acquisition costs
|
77,487 | 80,455 | ||||||
Reserve
for losses and loss expenses
|
(167,218 | ) | (69,646 | ) | ||||
Unearned
premiums
|
(238,483 | ) | (245,742 | ) |
Results
of operations:
|
Three Months
Ended September 30,
2009 |
Three Months
Ended September 30, 2008 |
Nine Months
Ended September 30,
2009 |
Nine Months
Ended September 30,
2008 |
||||||||||||
Net
premium written - assumed
|
$ | 92,168 | $ | 102,674 | $ | 275,511 | $ | 361,632 | ||||||||
Change
in unearned premium - assumed
|
(785 | ) | 8,654 | 879 | (109,365 | ) | ||||||||||
Net
earned premium - assumed
|
91,383 | 111,328 | 276,390 | 252,267 | ||||||||||||
Commission
and other acquisition costs on premium written
|
29,859 | 33,570 | 87,706 | 120,113 | ||||||||||||
Change
in deferred acquisition costs
|
31 | 3,617 | 2,968 | (37,008 | ) | |||||||||||
Ceding
commission and other acquisition cost - expensed
|
29,890 | 37,187 | 90,674 | 83,105 | ||||||||||||
|
||||||||||||||||
Loss
and loss adjustment expense
|
54,703 | 65,664 | 171,189 | 146,084 | ||||||||||||
Interest
income on loan to related party
|
507 | 1,481 | 1,871 | 3,766 |
For
the Three Months Ended September 30, 2009
|
Reinsurance -
AmTrust Quota Share |
Reinsurance
- Other |
Total
|
|||||||||
Net
premiums written
|
$ | 92,168 | $ | 129,232 | $ | 221,400 | ||||||
Net
earned premium
|
89,474 | 147,876 | 237,350 | |||||||||
Losses
and loss adjustment expenses
|
(54,703 | ) | (110,420 | ) | (165,123 | ) | ||||||
Commissions
and other acquisition expenses
|
(29,251 | ) | (26,062 | ) | (55,313 | ) | ||||||
General
and administrative expenses
|
(812 | ) | (3,785 | ) | (4,597 | ) | ||||||
Underwriting
income
|
$ | 4,708 | $ | 7,609 | $ | 12,317 | ||||||
Reconciliation
to net income
|
||||||||||||
Net
investment income and realized gains
|
16,712 | |||||||||||
Amortization
of intangible assets
|
(1,676 | ) | ||||||||||
Foreign
exchange and other gain
|
210 | |||||||||||
Trust
preferred interest
|
(9,114 | ) | ||||||||||
General
and administrative expenses
|
(3,462 | ) | ||||||||||
Net
Income
|
$ | 14,987 | ||||||||||
Net
loss and loss expense ratio*
|
61.1 | % | 74. 7 | % | 69.6 | % | ||||||
Acquisition
cost ratio**
|
32.7 | % | 17.6 | % | 23.3 | % | ||||||
General
and administrative expense ratio***
|
0.9 | % | 2.6 | % | 3.4 | % | ||||||
Combined
ratio****
|
94.7 | % | 94.9 | % | 96.3 | % |
For
the Nine Months Ended September 30, 2009
|
Reinsurance -
AmTrust Quota Share |
Reinsurance
- Other
|
Total
|
|||||||||
Net premiums
written
|
$ | 267,341 | $ | 528,963 | $ | 796,304 | ||||||
Net
earned premium
|
269,522 | 401,761 | 671,283 | |||||||||
Losses
and loss adjustment expenses
|
(168,463 | ) | (294,005 | ) | (462,468 | ) | ||||||
Commissions
and other acquisition expenses
|
(88,374 | ) | (71,234 | ) | (159,608 | ) | ||||||
General
and administrative expenses
|
(1,873 | ) | (13,599 | ) | (15,472 | ) | ||||||
Underwriting
income
|
$ | 10,812 | $ | 22,923 | $ | 33,735 | ||||||
Reconciliation
to net income
|
||||||||||||
Net
investment income and realized gain
|
45,688 | |||||||||||
Amortization
of intangibles assets
|
(4,915 | ) | ||||||||||
Foreign
exchange and other gain
|
2,401 | |||||||||||
Trust
preferred interest
|
(25,316 | ) | ||||||||||
General
and administrative expenses
|
(7,254 | ) | ||||||||||
Net
Income
|
$ | 44,339 | ||||||||||
Net
loss and loss expense ratio*
|
62.5 | % | 73.2 | % | 68.9 | % | ||||||
Acquisition
cost ratio**
|
32.8 | % | 17.7 | % | 23.8 | % | ||||||
General
and administrative expense ratio***
|
0.7 | % | 3.4 | % | 3.4 | % | ||||||
Combined
ratio****
|
96.0 | % | 94.3 | % | 96.1 | % |
For the Three Months Ended September 30,
2008
|
Reinsurance -
AmTrust
Quota Share
|
Reinsurance
- Other
|
Total
|
|||||||||
Net
premiums written
|
$ | 102,673 | $ | 10,514 | $ | 113,187 | ||||||
Net
earned premium
|
110,495 | 3,100 | 113,595 | |||||||||
Losses
and loss adjustment expenses
|
(65,664 | ) | (1,251 | ) | (66,915 | ) | ||||||
Commissions
and other acquisition expenses
|
(36,908 | ) | (1,391 | ) | (38,299 | ) | ||||||
General
and administrative expenses
|
(258 | ) | (856 | ) | (1,114 | ) | ||||||
Underwriting
income (loss)
|
$ | 7,665 | $ | (398 | ) | 7,267 | ||||||
Reconciliation
to net income
|
||||||||||||
Net
investment income and realized gain (loss)
|
8,974 | |||||||||||
Other
than temporary impairment
|
(42,538 | ) | ||||||||||
Foreign
exchange loss
|
(359 | ) | ||||||||||
General
and administrative expenses
|
(860 | ) | ||||||||||
Net
Loss
|
$ | (27,516 | ) | |||||||||
Net
loss and loss expense ratio*
|
59.4 | % | 40.4 | % | 58.9 | % | ||||||
Acquisition
cost ratio**
|
33.4 | % | 44.9 | % | 33.7 | % | ||||||
General
and administrative expense ratio***
|
0.2 | % | 27.6 | % | 1.0 | % | ||||||
Combined
ratio****
|
93.0 | % | 112.9 | % | 93.6 | % |
For the Nine Months Ended September 30,
2008
|
Reinsurance -
AmTrust
Quota Share
|
Reinsurance
- Other
|
Total
|
|||||||||
Net
premiums written
|
$ | 353,690 | $ | 33,180 | $ | 386,870 | ||||||
Net
earned premium
|
250,531 | 5,708 | 256,239 | |||||||||
Losses
and loss adjustment expenses
|
(146,084 | ) | (2,278 | ) | (148,362 | ) | ||||||
Commissions
and other acquisition expenses
|
(82,523 | ) | (2,534 | ) | (85,057 | ) | ||||||
General
and administrative expenses
|
(635 | ) | (1,485 | ) | (2,120 | ) | ||||||
Underwriting
income
|
$ | 21,289 | $ | (589 | ) | $ | 20,700 | |||||
Reconciliation
to net income
|
||||||||||||
Net
investment income and realized gain
|
24,509 | |||||||||||
Other
than temporary impairment
|
(42,538 | ) | ||||||||||
Foreign
exchange loss
|
(364 | ) | ||||||||||
General
and administrative expenses
|
(3,516 | ) | ||||||||||
Net
Loss
|
$ | (1,209 | ) | |||||||||
Net
loss and loss expense ratio*
|
58.3 | % | 39.9 | % | 57.9 | % | ||||||
Acquisition
cost ratio**
|
32.9 | % | 44.4 | % | 33.2 | % | ||||||
General
and administrative expense ratio***
|
0.3 | % | 26.0 | % | 0.8 | % | ||||||
Combined
ratio****
|
91.5 | % | 110.3 | % | 91.9 | % |
Reinsurance -
AmTrust
Quota Share
|
Reinsurance
- Other
|
Total
|
||||||||||
As of September 30, 2009
|
||||||||||||
Reinsurance
balances receivable
|
$ | 40,823 | $ | 195,820 | $ | 236,643 | ||||||
Deferred
acquisition costs
|
77,508 | 93,612 | 171,120 | |||||||||
Loan
to related party
|
167,975 | - | 167,975 | |||||||||
Goodwill
|
49,747 | 49,747 | ||||||||||
Intangibles
|
52,959 | 52,959 | ||||||||||
Restricted
investments and cash
|
178,292 | 1,062,875 | 1,241,167 | |||||||||
Corporate
and other assets
|
645,848 | |||||||||||
Total
Assets
|
$ | 464,598 | $ | 1,455,013 | $ | 2,565,459 |
As of December 31, 2008
|
||||||||||||
Reinsurance
balances receivable
|
$ | 44,386 | $ | 27,509 | $ | 71,895 | ||||||
Deferred
commission and other acquisition costs
|
78,774 | 25,696 | 104,470 | |||||||||
Loan
to related party
|
167,975 | - | 167,975 | |||||||||
Goodwill
|
49,747 | 49,747 | ||||||||||
Intangibles
|
55,147 | 55,147 | ||||||||||
Restricted
investments and cash
|
75,279 | 983,477 | 1,058,756 | |||||||||
Corporate
and other assets
|
620,574 | |||||||||||
Total
Assets
|
$ | 366,414 | $ | 1,141,576 | $ | 2,128,564 |
Three
Months Ended September 30
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
Total
|
%
of Total
|
Total
|
%
of Total
|
|||||||||||||
Gross
and net premiums written
|
||||||||||||||||
Reinsurance
- AmTrust Quota Share
|
||||||||||||||||
Small
Commercial Business
|
$ | 34,077 | 15.4 | % | $ | 43,738 | 38.6 | % | ||||||||
Specialty
Middle Market Property & Casualty
|
13,052 | 5.9 | % | 9,091 | 8.1 | % | ||||||||||
Specialty
Risk and Extended Warranty
|
45,039 | 20.3 | % | 49,844 | 44.0 | % | ||||||||||
Total
Reinsurance - AmTrust Quota Share
|
$ | 92,168 | 41.6 | % | $ | 102,673 | 90.7 | % | ||||||||
Reinsurance
– Other
|
||||||||||||||||
Property
|
28,691 | 13.0 | % | - | - | % | ||||||||||
Casualty
|
76,377 | 34.5 | % | 10,514 | 9.3 | % | ||||||||||
Accident
and Health
|
24,164 | 10.9 | % | - | - | % | ||||||||||
Total
Reinsurance - Other
|
$ | 129,232 | 58.4 | % | $ | 10,514 | 9.3 | % | ||||||||
$ | 221,400 | 100.0 | % | $ | 113,187 | 100.0 | % |
Nine
Months Ended September 30
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
Total
|
% of Total
|
Total
|
% of Total
|
|||||||||||||
Gross
and net premiums written
|
||||||||||||||||
Reinsurance
- AmTrust Quota Share
|
||||||||||||||||
Small
Commercial Business
|
$ | 132,985 | 16.7 | % | $ | 203,599 | 52.6 | % | ||||||||
Specialty
Middle Market Property & Casualty
|
35,044 | 4.4 | % | 30,572 | 7.9 | % | ||||||||||
Specialty
Risk and Extended Warranty
|
99,312 | 12.5 | % | 119,519 | 30.9 | % | ||||||||||
Total
Reinsurance - AmTrust Quota Share
|
$ | 267,341 | 33.6 | % | $ | 353,690 | 91.4 | % | ||||||||
Reinsurance
– Other
|
||||||||||||||||
Property
|
105,650 | 13.3 | % | - | - | % | ||||||||||
Casualty
|
331,685 | 41.6 | % | 33,180 | 8.6 | % | ||||||||||
Accident
and Health
|
91,628 | 11.5 | % | - | - | % | ||||||||||
Total
Reinsurance - Other
|
$ | 528,963 | 66.4 | % | $ | 33,180 | 8.6 | % | ||||||||
$ | 796,304 | 100.0 | % | $ | 386,870 | 100.0 | % |
Three
Months Ended September 30
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
Total
|
% of Total
|
Total
|
% of Total
|
|||||||||||||
Gross
and net premiums earned
|
||||||||||||||||
Reinsurance
- AmTrust Quota Share
|
||||||||||||||||
Small
Commercial Business
|
$ | 50,896 | 21.4 | % | $ | 69,877 | 61.5 | % | ||||||||
Specialty
Middle Market Property & Casualty
|
11,426 | 4.9 | % | 10,961 | 9.7 | % | ||||||||||
Specialty
Risk and Extended Warranty
|
27,152 | 11.4 | % | 29,657 | 26.1 | % | ||||||||||
Total
Reinsurance - AmTrust Quota Share
|
$ | 89,474 | 37.7 | % | $ | 110,495 | 97.3 | % | ||||||||
Reinsurance
– Other
|
||||||||||||||||
Property
|
33,948 | 14.3 | % | - | - | % | ||||||||||
Casualty
|
87,043 | 36.7 | % | 3,100 | 2.7 | % | ||||||||||
Accident
and Health
|
26,885 | 11.3 | % | - |
%
|
|||||||||||
Total
Reinsurance - Other
|
$ | 147,876 | 62.3 | % | $ | 3,100 | 2.7 | % | ||||||||
$ | 237,350 | 100.0 | % | $ | 113,595 | 100.0 | % |
Nine
Months Ended September 30
|
||||||||||||||||
2009
|
2008
|
|||||||||||||||
Total
|
% of Total
|
Total
|
% of Total
|
|||||||||||||
Gross
and net premiums earned
|
||||||||||||||||
Reinsurance
- AmTrust Quota Share
|
||||||||||||||||
Small
Commercial Business
|
$ | 157,645 | 23.5 | % | $ | 147,605 | 57.6 | % | ||||||||
Specialty
Middle Market Property & Casualty
|
37,844 | 5.7 | % | 30,265 | 11.8 | % | ||||||||||
Specialty
Risk and Extended Warranty
|
74,033 | 11.0 | % | 72,661 | 28.4 | % | ||||||||||
Total
Reinsurance - AmTrust Quota Share
|
$ | 269,522 | 40.2 | % | $ | 250,531 | 97.8 | % | ||||||||
Reinsurance
– Other
|
||||||||||||||||
Property
|
99,525 | 14.8 | % | - | - | % | ||||||||||
Casualty
|
224,737 | 33.5 | % | 5,708 | 2.2 | % | ||||||||||
Accident
and Health
|
77,499 | 11.5 | % | - | - | % | ||||||||||
Total
Reinsurance - Other
|
$ | 401,761 | 59.8 | % | $ | 5,708 | 2.2 | % | ||||||||
$ | 671,283 | 100.0 | % | $ | 256,239 | 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.
|
For the Three
Months Ended
September 30,
2009
|
For the Three
Months Ended
September 30,
2008
|
For the Nine
Months Ended
September 30,
2009
|
For the Nine
Months Ended
September 30,
2008
|
|||||||||||||
($
in thousands)
|
($
in thousands)
|
|||||||||||||||
Gross
and net premiums written
|
$ | 221,400 | $ | 113,187 | $ | 796,304 | $ | 386,870 | ||||||||
Change
in unearned premiums
|
15,950 | 408 | (125,021 | ) | (130,631 | ) | ||||||||||
Net
earned premium
|
237,350 | 113,595 | 671,283 | 256,239 | ||||||||||||
Net
investment income
|
16,778 | 8,974 | 46,150 | 24,346 | ||||||||||||
Net
realized investment gains (losses)
|
(66 | ) | (42,538 | ) | (462 | ) | (42,375 | ) | ||||||||
Total
revenue
|
254,062 | 80,031 | 716,971 | 238,210 | ||||||||||||
Loss
and loss adjustment expenses
|
165,123 | 66,915 | 462,468 | 148,362 | ||||||||||||
Commission
and other acquisition expenses
|
55,313 | 38,299 | 159,608 | 85,057 | ||||||||||||
General
and administrative expenses
|
8,059 | 1,974 | 22,726 | 5,636 | ||||||||||||
Amortization
of intangible assets
|
1,676 | - | 4,915 | - | ||||||||||||
Trust
preferred interest expense – related party
|
9,114 | - | 25,316 | - | ||||||||||||
Foreign
exchange and other (gain)loss
|
(210 | ) | 359 | (2,401 | ) | 364 | ||||||||||
Total
expenses
|
239,075 | 107,547 | 672,632 | 239,419 | ||||||||||||
Net
income
|
$ | 14,987 | $ | (27,516 | ) | $ | 44,339 | $ | (1,209 | ) | ||||||
Selected
Consolidated Ratios:
|
||||||||||||||||
Net
loss ratio
|
69.6 | % | 58.9 | % | 68.9 | % | 57.9 | % | ||||||||
Acquisition
cost ratio
|
23.3 | % | 33.7 | % | 23.8 | % | 33.2 | % | ||||||||
General
and administrative expense ratio
|
3.4 | % | 1.7 | % | 3.4 | % | 2.2 | % | ||||||||
Expense
Ratio
|
26.7 | % | 35.4 | % | 27.2 | % | 35.4 | % | ||||||||
Combined
ratio
|
96.3 | % | 94.3 | % | 96.1 | % | 93.3 | % |
Three
months ended September 30,
|
Nine
months ended September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
($
in thousands)
|
($
in thousands)
|
|||||||||||||||
Net
premiums written
|
$ | 129,232 | $ | 10,514 | $ | 528,963 | $ | 33,180 | ||||||||
Net
earned premium
|
147,876 | 3,100 | 401,761 | 5,708 | ||||||||||||
Losses
and loss adjustment expenses
|
(110,420 | ) | (1,251 | ) | (294,005 | ) | (2,278 | ) | ||||||||
Commissions
and other acquisition expenses
|
(26,062 | ) | (1,391 | ) | (71,234 | ) | (2,534 | ) | ||||||||
General
and administrative expenses
|
(3,784 | ) | (856 | ) | (13,599 | ) | (1,485 | ) | ||||||||
Underwriting
income (loss)
|
$ | 7,609 | $ | (398 | ) | $ | 22,923 | $ | (589 | ) | ||||||
Net
loss ratio
|
74.7 | % | 40.4 | % | 73.2 | % | 39.9 | % | ||||||||
Acquisition
cost ratio
|
17.6 | % | 44.9 | % | 17.7 | % | 44.4 | % | ||||||||
General
and administrative expense ratio
|
2.6 | % | 27.6 | % | 3.4 | % | 26.0 | % | ||||||||
Combined
ratio
|
94.9 | % | 112.9 | % | 94.3 | % | 110.3 | % |
Three
months ended September 30,
|
Nine months
ended September 30,
|
|||||||||||||||
2009
|
2008
|
2009
|
2008
|
|||||||||||||
($
in thousands)
|
($
in thousands)
|
|||||||||||||||
Net
premiums written
|
$ | 92,168 | $ | 102,673 | $ | 267,341 | $ | 353,690 | ||||||||
Net
earned premium
|
89,474 | 110,495 | 269,522 | 250,531 | ||||||||||||
Net
losses and loss adjustment expenses
|
(54,703 | ) | (65,664 | ) | (168,463 | ) | (146,084 | ) | ||||||||
Commissions
and other acquisition expenses
|
(29,251 | ) | (36,908 | ) | (88,374 | ) | (82,523 | ) | ||||||||
General
and administrative expenses
|
(812 | ) | (258 | ) | (1,873 | ) | (635 | ) | ||||||||
Underwriting
income
|
$ | 4,708 | $ | 7,665 | $ | 10,812 | $ | 21,289 | ||||||||
Net
loss ratio
|
61.1 | % | 59.4 | % | 62.5 | % | 58.3 | % | ||||||||
Acquisition
cost ratio
|
32.7 | % | 33.4 | % | 32.8 | % | 32.9 | % | ||||||||
General
and administrative expense ratio
|
0.9 | % | 0.2 | % | 0.7 | % | 0.3 | % | ||||||||
Combined
ratio
|
94.7 | % | 93.0 | % | 96.0 | % | 91.5 | % |
Nine months ended September 30,
|
||||||||
2009
|
2008
|
|||||||
($
in thousands)
|
||||||||
Cash
and cash equivalents provided by (used in):
|
||||||||
Operating
activities
|
$ | (13,778 | ) | $ | 137,230 | |||
Investing
activities
|
(144,247 | ) | (345,336 | ) | ||||
Financing
activities
|
120,710 | 254,820 | ||||||
Change
in cash and cash equivalents
|
$ | (37,315 | ) | $ | 46,714 |
September
30, 2009
|
||||
($
in thousands)
|
||||
Due
in one year or less
|
$ | 62,597 | ||
Due
after one year through five years
|
171,756 | |||
Due
after five years through ten years
|
326,162 | |||
Due
after ten years
|
79,488 | |||
Mortgage
and asset -backed
|
901,701 | |||
Total
|
$ | 1,541,704 |
Rating*
as of September 30, 2009
|
Amortized cost
|
Fair
value
|
%
of total fair
value
|
|||||||||
($
in thousands)
|
||||||||||||
U.S.
treasury bonds
|
$ | 39,451 | $ | 39,658 | 2.6 | % | ||||||
AAA
U.S. Agency - mortgage-backed securities
|
880,024 | 901,701 | 58.5 | % | ||||||||
AAA
|
58,382 | 63,122 | 4.1 | % | ||||||||
AA+,
AA, AA-
|
41,224 | 45,576 | 2.9 | % | ||||||||
A+,
A, A-
|
299,346 | 294,711 | 19.1 | % | ||||||||
BBB+,
BBB, BBB-
|
186,586 | 195,882 | 12.7 | % | ||||||||
B- or
lower
|
1,691 | 1,054 | 0.1 | % | ||||||||
$ | 1,506,704 | $ | 1,541,704 | 100.0 | % |
Rating* as of December 31, 2008
|
Amortized cost
|
Fair
value
|
% of total fair
value
|
|||||||||
($
in thousands)
|
||||||||||||
U.S.
treasury bonds
|
$ | 37,782 | $ | 38,527 | 3.4 | % | ||||||
AAA
U.S. Agency - mortgage-backed securities
|
756,023 | 771,899 | 68.9 | % | ||||||||
AAA,
|
15,693 | 15,748 | 1.4 | % | ||||||||
AA,
AA-
|
40,954 | 29,087 | 2.6 | % | ||||||||
A+,
A, A-
|
265,170 | 222,704 | 19.9 | % | ||||||||
BBB+,
BBB-
|
36,920 | 30,607 | 2.7 | % | ||||||||
B-
or lower
|
11,384 | 11,383 | 1.1 | % | ||||||||
$ | 1,163,926 | $ | 1,119,955 | 100.0 | % |
(Unaudited)
September
30, 2009
|
December
31, 2008
|
|||||||||||||||
Fair
value
|
Percentage
of portfolio
|
Fair
value
|
Percentage
of portfolio
|
|||||||||||||
($
in thousands)
|
($
in thousands)
|
|||||||||||||||
U.S.
– treasury bonds
|
$ | 39,658 | 2.6 | % | $ | 38,527 | 3.4 | % | ||||||||
U.S.
Agency - mortgage backed securities
|
901,701 | 58.3 | % | 771,899 | 68.6 | % | ||||||||||
Corporate
fixed maturities
|
576,565 | 37.2 | % | 309,529 | 27.5 | % | ||||||||||
Municipalities
|
23,780 | 1.5 | % | - | - | % | ||||||||||
Other
investments
|
5,529 | 0.4 | % | 5,291 | 0.5 | % | ||||||||||
Total
available for sale investments
|
$ | 1,547,233 | 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 any discrete credit event resulting in the issuer defaulting on
material outstanding obligation or 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
|
$ | 1,451,578 | $ | (90,126 | ) | (14 | )% | |||||
100
basis point increase
|
1,487,114 | (54,590 | ) | (8 | )% | |||||||
No
change
|
1,541,704 | - | 0 | % | ||||||||
100
basis point decrease
|
1,564,140 | 22,436 | 3 | % | ||||||||
200
basis point decrease
|
$ | 1,605,770 | $ | 64,066 | 10 | % |
Exhibit
Number
|
Description
|
|
31.1
|
Certification
of the Chief Executive Officer, pursuant to Rule 13a-14(a) or 15d-14(a),
for the quarter ended September 30, 2009.
|
|
31.2
|
Certification
of the Chief Financial Officer, pursuant to Rule 13a-14(a) or 15d-14(a),
for the quarter ended September 30, 2009.
|
|
32.1
|
Certification
of the Chief Executive Officer, pursuant to 18 U.S.C. Section 1350, for
the quarter ended September 30, 2009.
|
|
32.2
|
Certification
of the Chief Financial Officer, pursuant to 18 U.S.C. Section 1350, for
the quarter ended September 30,
2009.
|
Maiden
Holdings, Ltd.
|
||
(Registrant)
|
||
Date:
November 16, 2009
|
/s/
ARTURO M.
RASCHBAUM
|
|
Arturo
M. Raschbaum
President
and Chief Executive Officer
|
||
/s/
JOHN M.
MARSHALECK
|
||
John
M. Marshaleck
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:
|
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):
|
Dated: November 16,
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:
|
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):
|
Dated: November 16,
2009
|
/s/
JOHN M. MARSHALECK
|
John
M. Marshaleck
|
|
Chief
Financial Officer
(Principal
Financial and Accounting
Officer)
|
Dated: November 16,
2009
|
By:
|
/s/ ARTURO M. RASCHBAUM
|
||
Name: Arturo M. Raschbaum | ||||
Title:
|
President
and Chief Executive
Officer |
Dated: November 16,
2009
|
By:
|
/s/ JOHN M. MARSHALECK
|
|||
Name: John
M. Marshaleck
|
|||||
Title:
|
Chief
Financial Officer
|