The following dialogue and evaluation of our monetary situation and outcomes of operations must be learn at the side of our Consolidated Financial Statements and associated notes included elsewhere on this Annual Report on Form 10-Ok and Item 1, "Business - General Overview". Except as explicitly described as discontinued operations, and except in any other case famous, all discussions and quantities introduced herein relate to the Company's persevering with operations besides for web revenue (loss) and web revenue (loss) obtainable to Maiden widespread shareholders. Amounts in tables could not reconcile as a result of rounding variations. Some of the data contained on this dialogue and evaluation or set forth elsewhere on this Report, together with data with respect to our plans and technique for our enterprise, contains forward-looking statements that contain threat and uncertainties. Please see the "Special Note About Forward-Looking Statements" on this Annual Report on Form 10-Ok for extra data on elements that would trigger precise outcomes to vary materially from the outcomes described in or implied by any forward-looking statements contained on this dialogue and evaluation. You ought to evaluate the "Risk Factors" set forth on this Annual Report on Form 10-Ok for a dialogue of necessary elements that would trigger precise outcomes to vary materially from the outcomes described in or implied by the forward-looking statements contained herein.
Overview
Maiden Holdings is aBermuda -based holding firm. We create shareholder worth by actively managing and allocating our property and capital, together with via possession and administration of companies and property principally within the insurance coverage and associated monetary companies industries the place we will leverage our deep information of these markets. We additionally present a full vary of legacy companies to small insurance coverage firms, significantly these in run-off or with blocks of reserves which are now not core, working with shoppers to develop and implement finality options together with buying whole firms that allow our shoppers to satisfy their capital and threat administration aims. We count on our legacy options enterprise to contribute to our energetic asset and capital administration methods. Short-term revenue safety enterprise is written on a major foundation by our wholly owned subsidiaries Maiden LF and Maiden GF within the Scandinavian and Northern European markets. Insurance help companies are supplied to Maiden LF and Maiden GF via our wholly owned subsidiary, Maiden Global which can be a licensed middleman within theUnited Kingdom . Maiden Global had beforehand operated internationally by offering branded auto and credit score life insurance coverage merchandise via insurer companions, significantly these inEurope and different international markets. These merchandise additionally produced reinsurance applications which have been underwritten by our wholly owned subsidiaryMaiden Reinsurance . We usually are not actively underwriting reinsurance enterprise on new potential dangers however are actually actively underwriting dangers on a retroactive foundation via GLS. We even have varied historic reinsurance applications underwritten byMaiden Reinsurance that are in run-off, together with the liabilities related to AmTrust which we terminated in early 2019 as mentioned in "Note 10 - Related Party Transactions" of the Notes to Consolidated Financial Statements included in Part II Item 8. "Financial Statements and Supplementary Data". In addition, we now have a LPT/ADC Agreement with Cavello and a commutation settlement that additional reduces our publicity to and limits the potential volatility associated to these AmTrust liabilities in run-off, as mentioned in "Note 8 - Reinsurance" of the Notes to Consolidated Financial Statements included in Part II Item 8. "Financial Statements and Supplementary Data". Our enterprise at present consists of two reportable segments: Diversified Reinsurance and AmTrust Reinsurance. Our Diversified Reinsurance section consists of a portfolio of predominantly property and casualty reinsurance enterprise specializing in regional and specialty property and casualty insurance coverage firms positioned primarily inEurope . This section additionally contains transactions entered into by GLS which was shaped inNovember 2020 . Our AmTrust Reinsurance section contains all enterprise ceded toMaiden Reinsurance by AmTrust, primarily the AmTrust Quota Share and the European Hospital Liability Quota Share. Please confer with Item 1. "Business - Our Reportable Segments" part for additional dialogue on our reportable segments.
Recent Developments
Since the third quarter of 2018, we now have engaged in a sequence of transactions that dramatically diminished the regulatory capital required to function our enterprise, materially strengthened our solvency ratios, and ceased energetic reinsurance underwriting. During that point, we considerably elevated our estimate of final loss and loss expense reserves whereas buying reinsurance safety in opposition to additional loss reserve volatility and because of this, have improved the last word financial worth of the Company. This resulted in a sequence of transactions that reworked our operations and materially diminished the chance on our steadiness sheet. These transactions could be present in Part II of our Annual Report on Form 10-Ok for the 12 months endedDecember 31, 2020 that was filed with theSEC onMarch 15, 2021 . EffectiveMarch 16, 2020 , we re-domesticated our principal working subsidiary,Maiden Reinsurance , fromBermuda to theState of Vermont within theU.S. , having decided that re-domesticatingMaiden Reinsurance toVermont allows us to higher align our capital and assets with our liabilities, which originate principally inthe United States , leading to a extra environment friendly construction.Maiden Reinsurance is now topic to the statutes and rules ofVermont within the bizarre course of enterprise. The re-domestication has continued to strengthen the Company's capital place and solvency ratios. While the Vermont DFR is at present the group supervisor for the Company, the re-domestication didn't apply to the father or mother holding firm which stays aBermuda -based holding firm. Securities issued byMaiden Holdings weren't affected by the re-domestication ofMaiden Reinsurance toVermont . Concurrent with the re-domestication,Maiden Holdings contributed as capital the remaining 65% of its possession inMaiden Reinsurance to our wholly owned subsidiaryMaiden NA .Maiden NA now owns 100% ofMaiden Reinsurance within the combination. 36 --------------------------------------------------------------------------------Maiden NA maintains a portfolio of money and mounted maturity investments, alongside with different strategic investments, of$16.0 million atDecember 31, 2021 . We considerMaiden NA's investments, together with its possession ofMaiden Reinsurance and its energetic asset administration technique, will create alternatives to make the most of web working loss ("NOL") carryforwards which have been$230.2 million as atDecember 31, 2021 . These NOL carryforwards, together with extra web deferred tax property ("DTA") primarily associated to our insurance coverage liabilities end in a webU.S. DTA (earlier than valuation allowance) of$90.1 million or$1.04 per widespread share as ofDecember 31, 2021 . These web DTA usually are not presently acknowledged on the Company's consolidated steadiness sheet as a full valuation allowance is carried in opposition to them. At this time, whereas optimistic proof supporting a discount of the valuation allowance is accumulating, the Company believes it's essential to take care of its full valuation allowance in opposition to the webU.S. DTA as a result of an inadequate accumulation of optimistic proof at the moment relating to the utilization of these losses. As our profitability continues to enhance, we are going to constantly consider the quantity of the valuation allowance held in opposition to the webU.S. DTA. For additional particulars please see "Note 13 - Income Taxes" included underneath Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-Ok. Taken collectively, we consider these measures ought to generate extra revenue forMaiden NA in a tax-efficient method, whereas sharing within the enchancment in profitability anticipated inMaiden Reinsurance because of this of the measures enacted as described above. Business Strategy We continued to deploy our revised working technique throughout 2021, which leverages the numerous property and capital we retain. In addition to restoring working profitability, our strategic focus facilities on creating the best risk-adjusted shareholder returns so as to improve guide worth for our widespread shareholders, each close to and long-term. This technique has three principal areas of focus: •Asset administration - investing in property and asset courses in a prudent however expansive method so as to maximize funding returns and is principally enabled by limiting the quantity of insurance coverage threat we assume in relation to the property we maintain and sustaining required regulatory capital at very sturdy ranges to handle our combination threat profile;
•Legacy underwriting – judiciously constructing a portfolio of legacy run-off
acquisitions and retroactive reinsurance transactions which we consider will
produce engaging underwriting returns; and
•Capital administration – successfully managing the capital we maintain on our steadiness
sheet and when applicable, repurchasing securities or returning capital to
improve widespread shareholder returns.
The returns anticipated to be produced by every pillar of our technique are evaluated in relation to our price of debt capital, which carries a weighted common efficient rate of interest of 7.6%. To the extent our expertise or perception signifies we can't exceed the fee of debt capital, we count on to chorus from actions in these areas. As an instance, our current evaluation of the reinsurance market together with our present working profile continues to be that the risk-adjusted returns which may be produced by way of energetic reinsurance underwriting of new potential dangers are prone to be decrease over the long-term than our price of capital. The measures carried out lately have allowed us to extra flexibly allocate capital to these actions most certainly to supply the best returns for shareholders, and we're actively engaged in evaluating and deploying funds in all pillars of the methods as mentioned herein. We additionally consider that these areas of strategic focus will improve our profitability via elevated returns, which we consider additionally improve the probability of absolutely using the vital NOL carryforwards described above which might create extra widespread shareholder worth. As half of our expanded asset administration actions, we now have evaluated and proceed to contemplate investing in varied initiatives within the insurance coverage trade throughout a spread of segments which we consider will produce applicable risk-adjusted returns whereas sustaining the choice to contemplate underwriting actions sooner or later. We consider these expanded actions will produce a broad vary of optimistic impacts on our monetary situation, together with present revenue, longer-term beneficial properties and in sure cases, payment revenue. In current years, we now have invested roughly$225.5 million into various investments which embody different investments and fairness methodology investments in a wide selection of asset courses and we consider these actions will exceed that benchmark price of capital with changes as essential if these returns don't emerge. InNovember 2020 , we shaped GLS which makes a speciality of offering a full vary of legacy companies to small insurance coverage entities, significantly these in run-off or with blocks of reserves which are now not core, working with shoppers to develop and implement finality options together with buying whole firms that allow our shoppers to satisfy their capital and threat administration aims. We purchase legacy liabilities and (re)insurance coverage reserves from firms and present retroactive reinsurance protection for portfolios of (re)insurance coverage enterprise, primarily by way of loss portfolio switch contracts ("LPT"). Additionally, we present reinsurance contracts to different (re)insurers to mitigate some of their threat of future opposed growth (an opposed growth cowl, or "ADC") on insurance coverage dangers regarding prior accident years. We consider the formation of GLS is extremely complementary to our total longer-term technique and will produce risk-adjusted returns in extra of our debt price of capital. In addition, whereas we anticipate worthwhile progress from the GLS portfolio because it develops, we count on our required capital to proceed to decline as insurance coverage threat incurred by GLS might be greater than offset by the run-off of insurance coverage liabilities from our prior reinsurance methods. GLS, together with different current insurance coverage trade investments, allows us to leverage our information base whereas not re-entering energetic underwriting of new potential dangers and sustaining an environment friendly working profile. We consider GLS not solely enhances our profitability via each payment revenue and efficient claims administration companies, however it's going to additionally improve our asset base via the addition of blocks of reserves or firms that may be efficiently wound down. 37 -------------------------------------------------------------------------------- EffectiveOctober 1, 2021 , GLS accomplished its first transaction, a loss portfolio switch transaction which incorporates an opposed growth cowl. As ofDecember 31, 2021 , GLS had losses and LAE reserves that it assumed via retroactive reinsurance contracts of$14.8 million . GLS continues to write down extra retroactive reinsurance transactions per its enterprise plan. In addition to producing returns that exceed the goal price of capital, we count on the enterprise produced via GLS ought to additional improve our potential to pursue the asset and capital administration pillars of our enterprise technique. Our capital administration technique is considerably knowledgeable by the required capital wanted to function our enterprise in a prudent method and our ongoing evaluation of our loss growth developments. Recent developments proceed to extend our confidence in our recorded final losses for our insurance coverage liabilities in run-off, nevertheless a prudent evaluation dictates that the run-off portfolio nonetheless requires extra maturity to totally emerge. While there is no such thing as a assure that these current loss growth developments will persist, as our confidence has elevated it has enabled us to pursue continued capital administration initiatives, primarily the repurchase of our Preference Shares, which we consider present the biggest risk-adjusted returns to our widespread shareholders. Our present evaluation is that losses have continued to stabilize sufficiently to proceed the capital administration initiatives we initiated in 2020, though we now have approached these methods in a deliberate trend. OnMarch 3, 2021 , the Company's Board of Directors accepted the repurchase, together with the repurchase byMaiden Reinsurance in accordance with its funding pointers, of as much as$100.0 million of the Company's Preference Shares from time to time at market costs in open market purchases or as could also be privately negotiated. OnMay 6, 2021 , the Company's Board of Directors accepted the extra repurchase, together with the repurchase byMaiden Reinsurance in accordance with its funding pointers, of as much as$50.0 million of the Company's desire shares every so often at market costs in open market purchases or as could also be privately negotiated. The authorizations that have been accepted onMarch 3, 2021 andMay 6, 2021 as described above are collectively known as the "2021 Preference Share Repurchase Program". The Company has a remaining authorization of$13.8 million for Preference Share repurchases atDecember 31, 2021 . Please confer with "Notes to Consolidated Financial Statements - Note 6 - Shareholders' Equity" and "Note 16 - Subsequent Events" underneath Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-Ok for current repurchases and additional element on our Preference Shares. Our potential to execute our asset and capital administration initiatives relies on sustaining enough ranges of unrestricted liquidity and money flows. Further, there could be no assurance that our insurance coverage liabilities will run-off at ranges that can allow additional capital administration actions, which we frequently evaluate as half of our technique. Please confer with the "Liquidity and Capital Resources" part for additional data on our asset and capital administration actions, specifically our varied Preference Share repurchase measures. COVID-19 Pandemic The persevering with COVID-19 international pandemic has precipitated vital disruption to the economic system and monetary markets globally, and the complete extent of the potential impacts of COVID-19 usually are not but identified. Circumstances attributable to the COVID-19 pandemic are complicated, unsure and quickly evolving. Our outcomes of operations, monetary situation, and liquidity and capital assets have been adversely impacted by the COVID-19 pandemic, and the long run impression of the pandemic on our monetary situation or outcomes of operations is tough to foretell. As described herein, we're not at present engaged in energetic reinsurance underwriting on potential dangers and proceed to run off the remaining unearned exposures we now have reinsured. Our Swedish andUK insurance coverage operations do write restricted major insurance coverage protection that might be uncovered to COVID-19 claims. While we assess our publicity to COVID-19 insurance coverage and reinsurance claims on our present insurance coverage exposures and remaining reinsurance exposures as restricted and immaterial, given the uncertainty surrounding the COVID-19 pandemic and its impression on the insurance coverage trade, our preliminary estimates of loss and LAE and estimates of reinsurance recoverable arising from the COVID-19 pandemic could materially change.Maiden Reinsurance has not obtained any COVID-19 claims to date however firms inside our IIS unit have obtained a restricted quantity of claims associated to these coverages which it deems as immaterial. Unanticipated points regarding claims and protection could emerge, which may adversely have an effect on our enterprise by growing the scope of protection past our intent and/or growing the frequency and severity of claims. The Company's funding portfolio could also be adversely impacted by unfavorable market situations attributable to the COVID-19 pandemic and we and our reinsurance subsidiaries may have extra capital to take care of compliance with regulatory capital necessities and/or be required to put up extra collateral underneath present reinsurance preparations, which may cut back our liquidity. In addition, the Company could expertise continued volatility in our outcomes of operations which may negatively impression our monetary situation and create a discount within the quantity of obtainable distribution or dividend capability from our regulated reinsurance subsidiaries, which might additionally cut back liquidity.
Please confer with the “Liquidity and Capital Resources” part for an extra
dialogue of the impression of the COVID-19 pandemic on our liquidity and
funding portfolio.
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2021 and 2020 Financial Highlights
For the Year Ended December 31, 2021 2020 Change Summary Consolidated Statement of Income Data: ($ in
hundreds besides per share information)
Net revenue$ 26,645 $ 41,762 $ (15,117) Gain from repurchase of desire shares 90,998 38,195 52,803 Net revenue attributable to Maiden widespread shareholders 117,643 79,957 37,686
Basic and diluted earnings per widespread share:
Net revenue attributable to Maiden widespread shareholders(2) 1.35 0.93 0.42 Gain from repurchase of desire shares per widespread share 1.06 0.45 0.61 Gross premiums written 10,938 31,389 (20,451) Net premiums earned 52,993 106,081 (53,088) Underwriting revenue(3) 11,572 17,274 (5,702) Net funding revenue 32,013 54,761 (22,748) Combined ratio(4) 126.1 % 111.4 % 14.7 Non-GAAP measures: Non-GAAP working earnings(1)$ 60,481 $ 47,076 $ 13,405 Non-GAAP diluted working earnings per widespread share(1) 0.70 0.55 0.15 Non-GAAP working return on common widespread shareholders' fairness(1) 25.0 % 25.9 % (0.9) At December 31, 2021 2020 Change Consolidated Financial Condition ($ in hundreds besides per share information) Total investments and money and money equivalents(5)$ 888,699 $ 1,456,133 $ (567,434) Total property 2,322,610 2,948,455 (625,845) Reserve for loss and LAE 1,489,373 1,893,299 (403,926) Senior notes - principal quantity 262,500 262,500 - Common shareholders' fairness 225,047 133,506 91,541 Shareholders' fairness 384,257 527,816 (143,559) Total capital assets(6) 646,757 790,316 (143,559) Ratio of debt to whole capital assets(11) 40.6 % 33.2 % 7.4 Book Value calculations: Book worth per widespread share(7)$ 2.60 $ 1.57 $ 1.03 Accumulated dividends per widespread share(13) 4.27 4.27 - Book worth per widespread share plus collected dividends$ 6.87 $ 5.84 $ 1.03 Change in guide worth per widespread share plus collected dividends 17.6 % Diluted guide worth per widespread share(8)$ 2.59 $ 1.55 $ 1.04 Non-GAAP measures: Adjusted guide worth per widespread share(9)$ 3.18 $ 2.46 $ 0.72 Adjusted Maiden shareholders' fairness(10) 434,200 602,757 (168,557) Adjusted whole capital assets(10) 696,700 865,257 (168,557) Ratio of debt to adjusted whole capital assets(12) 37.7 % 30.3 % 7.4
(1)Non-GAAP working earnings, non-GAAP working earnings per widespread share and
non-GAAP working return on common widespread fairness are non-GAAP monetary
measures. See “Key Financial Measures” for added data.
(2)Please confer with “Notes to Consolidated Financial Statements – Note 12.
Earnings per Common Share” included under Item 8 “Financial Statements and
Supplementary Data” of this Annual Report on Form 10-Ok for the calculation of
primary and diluted earnings per widespread share.
39 -------------------------------------------------------------------------------- (3)Underwriting revenue is a non-GAAP measure and is calculated as web premiums earned plus different insurance coverage income much less web loss and LAE, fee and different acquisition bills and normal and administrative bills straight associated to underwriting actions. See "Key Financial Measures" for added data.
(4)Combined ratio is calculated by including collectively the web loss and LAE ratio
and the expense ratio.
(5)Total investments and money and money equivalents contains each restricted and
unrestricted.
(6)Total capital assets is the sum of the Company's principal quantity of debt and Maiden shareholders' fairness. See "Key Financial Measures" for added data. (7)Book worth per widespread share is calculated utilizing widespread shareholders' fairness (shareholders' fairness excluding the mixture liquidation worth of our Preference Shares) divided by the quantity of widespread shares excellent. See "Key Financial Measures" for added data.
(8)Diluted guide worth per widespread share is calculated by dividing widespread
shareholders’ fairness, adjusted for assumed proceeds from the train of
dilutive choices, divided by the quantity of excellent widespread shares plus
dilutive choices and restricted shares (assuming train of all dilutive share
primarily based awards).
(9)Adjusted guide worth per widespread share is a non-GAAP measure that's calculated utilizing widespread shareholders' fairness, adjusted by including the next objects to shareholders' fairness: 1) the unamortized deferred acquire on retroactive reinsurance arising from the LPT/ADC Agreement; and 2) an adjustment which displays the fairness methodology accounting associated to the truthful worth of sure hedged liabilities inside an fairness methodology funding in a restricted partnership funding held by the Company whereby the last word realizable worth of the asset supporting the hedged liabilities can't at present be acknowledged at truthful worth, divided by the quantity of widespread shares excellent. See "Key Financial Measures" for added data. (10)Adjusted shareholders' fairness and adjusted whole capital assets are calculated by including the next objects to shareholders' fairness: 1) the unamortized deferred acquire on retroactive reinsurance arising from the LPT/ADC Agreement; and 2) an adjustment which displays the fairness accounting associated to the truthful worth of sure hedged liabilities inside an fairness methodology funding held by the Company whereby the last word realizable worth of the asset supporting the hedged liabilities can't at present be acknowledged at truthful worth. The deferred acquire arises from the LPT/ADC Agreement with Cavello regarding losses from the AmTrust Quota Share. UnderU.S. GAAP, the deferred acquire shall be amortized over the estimated remaining settlement interval. See "Key Financial Measures" for added data.
(11)Ratio of debt to whole capital assets is calculated utilizing the overall
principal quantity of debt divided by the sum of whole capital assets.
(12)Ratio of debt to adjusted whole capital assets is calculated utilizing the
whole principal quantity of debt divided by the sum of adjusted whole capital
assets.
(13)Accumulated dividends per widespread share contains the cumulative sum of
dividends declared and paid prior to now on the Company’s issued widespread shares
since inception.
Key Financial Measures Revenues
We traditionally derived the bulk of our revenues from premiums on
reinsurance contracts, web of any reinsurance or retrocessional protection
bought and to a minor extent from premiums from insurance coverage insurance policies.
Reinsurance premiums are a operate of the quantity and sorts of insurance policies and
contracts we write, in addition to prevailing market costs. Our costs are
decided earlier than our final prices, which can prolong far into the long run, are
identified.
As a outcome of the numerous strategic transactions carried out since 2018, our gross and web premiums written proceed to be materially decrease and due to this fact our web funding revenue will more and more turn out to be a considerably bigger portion of our whole revenues in comparison with prior durations. The Company's revenues additionally embody payment revenue earned from each our GLS enterprise and IIS enterprise in addition to revenue generated from our funding portfolio. The Company's funding portfolio is comprised of AFS mounted maturity investments and different investments together with equities, personal fairness and credit score funds, privately held investments, hedge funds, fairness methodology investments and different non-fixed revenue investments. In accordance withU.S. GAAP, our mounted maturity investments are carried at truthful market worth and any unrealized beneficial properties and losses are included in AOCI as a separate part of shareholders' fairness. If unrealized losses are thought-about to be other-than-temporarily impaired as a result of a credit-related occasion, such impairment losses are acknowledged inside earnings as a realized loss underneath whole other-than-temporary impairment losses. Equity and different investments embody restricted partnerships, hedge funds and start-up insurance coverage entities that are carried at truthful market worth with any unrealized beneficial properties or losses included in earnings underneath web realized beneficial properties (losses) on funding. Our investments made by particular function automobiles targeted on lending actions are carried at price. Any indication of impairment is acknowledged instantly inside web revenue.
Expenses
Our bills at present consist largely of web loss and LAE, fee and different acquisition bills, normal and administrative bills, curiosity and amortization bills, overseas alternate and different beneficial properties or losses, the latter of which incorporates on a non-recurring foundation any beneficial properties or losses from the disposal of subsidiaries. Net loss and LAE has three foremost elements: (1) losses paid, that are precise money funds to insureds, web of recoveries from reinsurers; (2) change in excellent loss or case reserves, which characterize cedants' greatest estimate of the seemingly settlement quantity for identified claims, much less the portion that may be recovered from reinsurers; and (3) change in IBNR reserves, which we set up to answer modifications within the values of claims which have been reported to us however usually are not but settled, in addition to claims which have occurred however haven't but been reported to us. The portion recoverable from reinsurers is deducted from the gross estimated loss. Commission and different acquisition bills embody commissions, brokerage charges and insurance coverage taxes. Commissions and brokerage charges are often calculated as a proportion of premiums and rely available on the market and line of enterprise and can, in sure cases, differ primarily based on loss delicate options of reinsurance contracts. Commission and different acquisition bills are reported after: (1) deducting commissions obtained on ceded reinsurance; (2) deducting the half of fee and different acquisition bills regarding unearned premiums; and (3) together with the amortization of beforehand deferred fee and different acquisition bills. 40 -------------------------------------------------------------------------------- General and administrative bills embody personnel bills (together with share-based compensation expense), audit charges, hire bills, authorized and skilled charges, data know-how prices and different normal working bills. General and administrative bills are allotted to the reportable segments on an precise foundation besides salaries and advantages the place administration's judgment is utilized; nevertheless normal company bills usually are not allotted to the segments. Non-GAAP Financial Measures In addition to our key monetary measures introduced in accordance with GAAP in the Consolidated Balance Sheets and Consolidated Statements of Income and Comprehensive Income, administration makes use of sure non-GAAP monetary measures to consider the Company's monetary efficiency and the general progress in worth generated for the Company's widespread shareholders. Management believes that these measures, which can be outlined and calculated in another way by different firms, clarify the Company's outcomes to buyers in a fashion that permits for a extra full understanding of the underlying developments within the Company's enterprise. The non-GAAP monetary measures shouldn't be considered as an alternative choice to these decided in accordance withU.S. GAAP. The calculation of some of these key monetary measures together with the reconciliation of non-GAAP monetary measures to the closest GAAP measure and related discussions are discovered inside Item 7 - "Management's Discussion and Analysis of Financial Condition and Results of Operations". These non-GAAP monetary measures are: Non-GAAP working earnings and non-GAAP diluted working earnings per widespread share: Management believes that the use of non-GAAP working earnings and non-GAAP diluted working earnings per widespread share allows buyers and different customers of the Company's monetary data to research its efficiency in a method just like how administration analyzes efficiency. Management additionally believes that these measures usually comply with trade apply due to this fact permitting the customers of monetary data to match the Company's efficiency with its trade peer group, and that the fairness analysts and sure score businesses which comply with the Company, and the insurance coverage trade as an entire, usually exclude this stuff from their analyses for a similar causes. Non-GAAP working earnings shouldn't be considered as an alternative choice toU.S. GAAP web revenue. Non-GAAP working earnings is an inside efficiency measure utilized by administration as these measures give attention to the underlying fundamentals of the Company's operations by excluding, on a recurring foundation: (1) web realized beneficial properties or losses on funding; (2) whole other-than-temporary impairment losses; (3) overseas alternate and different beneficial properties or losses; (4) the portion of favorable or unfavorable prior 12 months reserve growth for which we now have ceded the chance underneath the LPT/ADC Agreement and associated modifications in amortization of the deferred acquire legal responsibility; and (5) curiosity in revenue of fairness methodology investments. We have excluded web realized beneficial properties (losses) on funding, other-than-temporary impairment losses, curiosity in revenue of fairness methodology investments and overseas alternate and different beneficial properties or losses as we consider these are influenced by market alternatives and different elements. We don't consider that ceded dangers underneath the LPT/ADC Agreement are consultant of our ongoing and future enterprise which are completely different to retroactive reinsurance dangers written by GLS which are consultant of our ongoing and future enterprise. We consider all of these quantities are considerably unbiased of our enterprise and any potential future underwriting course of, due to this fact, together with them would distort the evaluation of underlying developments in our operations. Underwriting revenue is a non-GAAP measure and is calculated as web premiums earned plus different insurance coverage income much less web loss and LAE, fee and different acquisition bills and normal and administrative bills straight associated to underwriting actions. For functions of these non-GAAP working measures, the fee-generating enterprise which is included in our Diversified Reinsurance section, is taken into account half of the underwriting operations of the Company. Management believes that this measure is necessary in evaluating the underwriting efficiency of the Company and its segments. This measure can be a useful gizmo to measure the profitability of the Company individually from the funding outcomes and can be a broadly used efficiency indicator within the insurance coverage trade. A reconciliation of the Company's underwriting outcomes can be discovered within the Company's Consolidated Financial Statements within the "Notes to Consolidated Financial Statements Note 3. Segment Information" included underneath Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-Ok. Combined ratio is usually used within the insurance coverage and reinsurance trade in conjunction with underwriting revenue as a measure of underwriting profitability. Management measures underwriting outcomes on an total foundation and for every section on the premise of the mixed ratio. The mixed ratio is the sum of the web loss and LAE ratio and the expense ratio and the computations of every part are described beneath. A mixed ratio underneath 100% signifies underwriting profitability, as the web loss and LAE, fee and different acquisition bills and normal and administrative bills are lower than the web premiums earned and different insurance coverage income on that enterprise. While the Company has continued to make the most of this non-GAAP measure on this Annual Report on Form 10-Ok for the 12 months endedDecember 31, 2021 , it is very important notice that as the run-off of our reinsurance portfolios progresses, such ratios could more and more be of much less worth to readers as they consider the monetary outcomes of the Company, significantly in comparison with historic information. Please confer with "Notes to Consolidated Financial Statements - Note 3. Segment Reporting" included underneath Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-Ok for additional particulars. While an necessary metric of success, underwriting revenue and mixed ratio do not mirror all elements of profitability, as they don't acknowledge the impression of funding revenue earned on premiums between the time premiums are obtained and the time loss funds are in the end paid to shoppers. Because we don't handle our money and investments by section, funding revenue and curiosity expense usually are not allotted to the reportable segments. Certain normal and administrative bills are usually allotted to segments primarily based on precise prices incurred. The "net loss and LAE ratio" is derived by dividing web loss and LAE by the sum of web premiums earned and different insurance coverage income. The "fee and different acquisition expense ratio" is derived by dividing fee and different acquisition bills by the sum of web premiums earned and different insurance coverage income. The "general and administrative expense ratio" is derived by dividing normal and administrative bills by the sum of web premiums earned and different insurance coverage 41
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income. The “expense ratio” is the sum of the fee and different acquisition
expense ratio and the final and administrative expense ratio.
Non-GAAP Operating Return on Average Adjusted Common Equity ("Non-GAAP Operating ROACE"): Management makes use of non-GAAP working return on common adjusted widespread shareholders' fairness as a measure of profitability that focuses on the return to widespread shareholders. It is calculated utilizing non-GAAP working earnings obtainable to widespread shareholders (as outlined above) divided by common adjusted widespread shareholders' fairness. Book Value per Common Share and Diluted Book Value per Common Share: Book worth per widespread share and diluted guide worth per widespread share are non-GAAP measures. Management makes use of progress in each of these metrics as a primary measure of the worth we're producing for our widespread shareholders, as a result of administration believes that progress in every metric in the end leads to progress within the Company's widespread share worth. These metrics are impacted by the Company's web revenue and exterior elements, akin to rates of interest, which might drive modifications in unrealized beneficial properties or losses on our mounted revenue funding portfolio, in addition to widespread or desire share repurchases. Ratio of Debt to Total Capital Resources: Management makes use of this non-GAAP measure to observe the monetary leverage of the Company. This measure is calculated utilizing the overall principal quantity of debt divided by the sum of whole capital assets. Non-GAAP underwriting revenue (loss), Non-GAAP earnings and LAE ratio, and Non-GAAP mixed ratio: Management has additional adjusted underwriting revenue, as outlined above, in addition to the reported loss and LAE ratios and reported mixed ratios by excluding the portion of favorable or unfavorable prior 12 months reserve growth for which we now have ceded the chance underneath the LPT/ADC Agreement. The losses are estimated to be absolutely recoverable from Cavello and administration believes adjusting for this growth reveals the last word financial profit of the LPT/ADC Agreement on our underwriting outcomes. We consider reflecting the financial profit of this retroactive reinsurance settlement is useful for understanding future developments in our operations. Adjusted Total Shareholders' Equity, Adjusted Total Capital Resources, Ratio of Debt to Adjusted Total Capital Resources and Adjusted Book Value per Common Share: Management has adjusted GAAP shareholders' fairness by including the next objects to shareholders' fairness: 1) unamortized deferred acquire on ceded retroactive reinsurance underneath the LPT/ADC Agreement; and 2) an adjustment which displays the fairness accounting associated to the truthful worth of sure hedged liabilities inside an fairness methodology funding held by the Company whereby the last word realizable worth of the asset supporting the hedged liabilities can't at present be acknowledged at truthful worth ("LP Investment Adjustment"). The unamortized deferred acquire on retroactive reinsurance underneath the LPT/ADC Agreement contains the mixture impression of: 1) cumulative will increase to losses incurred previous toDecember 31, 2018 for which we now have ceded the chance underneath the LPT/ADC Agreement with Cavello; and 2) modifications in estimated final losses for sure employees' compensation reserves beforehand commuted to AmTrust that are topic to particular phrases and situations pursuant to the LPT/ADC Agreement. As a outcome, by advantage of this adjustment, administration has additionally adjusted Total Capital Resources and computed the Ratio of Debt to Adjusted Capital Resources and Adjusted Book Value per Common Share. The deferred acquire legal responsibility on retroactive reinsurance underneath the LPT/ADC Agreement represents loss reserves estimated to be absolutely recoverable from Cavello and administration believes adjusting for this reveals the last word financial profit of the LPT/ADC Agreement. We consider reflecting the financial profit of this non-recurring retroactive reinsurance settlement is useful to know future developments in our operations, which can enhance our shareholders' fairness over the settlement or contract durations, respectively.
Alternative investments is the overall of the Company’s different investments and
fairness methodology investments as reported on the Company’s Consolidated Balance
Sheets.
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Critical Accounting Policies and Estimates
It is necessary to know our accounting insurance policies so as to perceive our monetary place and outcomes of operations. The Company's Consolidated Financial Statements have been ready in accordance withU.S. GAAP. The preparation of monetary statements in conformity withU.S. GAAP requires administration to make estimates and assumptions that have an effect on the reported quantities of property and liabilities on the date of the monetary statements and the reported quantities of revenues and bills through the reporting interval. The following presents a dialogue of these accounting insurance policies and estimates that administration believes are essentially the most vital to its operations and require essentially the most tough, subjective and complicated judgment. If precise occasions differ considerably from the underlying assumptions and estimates utilized by administration, there might be materials changes to prior estimates that would doubtlessly adversely have an effect on the Company's outcomes of operations, monetary situation and liquidity. These vital accounting insurance policies and estimates must be learn at the side of "Notes to Consolidated Financial Statements - Note 2. Significant Accounting Policies" included underneath Item 8 "Financial Statements and Supplementary Data" of this Annual Report Form 10-Ok for a full understanding of the Company's accounting insurance policies.
Reserve for Loss and LAE
General: The quantity of time that elapses earlier than a declare is reported to the cedant and then subsequently reported to the reinsurer is usually referred to within the trade because the reporting tail. Lines of enterprise for which claims are reported rapidly are generally known as short-tailed strains; and strains of enterprise for which an extended interval of time elapses earlier than claims are reported to the reinsurer are generally known as long-tailed strains. In normal, for reinsurance, the time lags are longer than for major enterprise as a result of delay that happens between the cedant changing into conscious of a loss and reporting the data to its reinsurer(s). The delay varies by reinsurance market (nation of cedant), sort of treaty, whether or not losses are paid by the cedant and the scale of the loss. The delay may differ from a number of weeks to a 12 months or typically longer. Because a big quantity of time can elapse, significantly on longer-tail strains of enterprise written on an extra of loss foundation, between the idea of threat, the prevalence of a loss occasion, the reporting of the occasion to an insurance coverage firm (the first firm or the cedant), the next reporting to the reinsurance firm ("the reinsurer") and the last word cost of the declare on the loss occasion by the reinsurer, the Company's legal responsibility for unpaid loss and LAE ("loss reserves") is predicated largely upon estimates. The Company categorizes loss reserves into two sorts of reserves: reported excellent loss reserves ("case reserves") and IBNR reserves. Case reserves characterize, for every particular person declare, an estimate of unpaid losses, both by the Company's cedants or the Company's claims dealing with professionals, and recorded by the Company. IBNR reserves characterize a provision for claims which have been incurred however not but reported to the Company, in addition to future loss growth on losses already reported, in extra of the case reserves. The Company updates its estimates for every of the aforementioned classes totally on a quarterly foundation utilizing data obtained from its cedants. For extra of loss treaties, cedants usually are required to report losses that both (i) exceed 50% of their retention; or (ii) have an affordable likelihood of exceeding the retention; or (iii) meet outlined reporting standards. All extra of loss reinsurance claims which are reserved are reviewed on a periodic foundation. In addition, reserves for loss and LAE are reviewed each quarter for every cedant. For proportional treaties, cedants are required to provide a periodic assertion of account, usually month-to-month or quarterly. These periodic statements usually embody data relating to premiums written, premiums earned, unearned premiums, ceding commissions, brokerage quantities, relevant taxes, paid losses and reported excellent losses. They could be submitted as much as ninety days after the shut of the reporting interval. Some proportional treaties have particular language requiring earlier discover of critical claims. For all strains, the Company's goal is to fairly estimate final loss and LAE. Total loss reserves are then calculated by subtracting losses paid. Similarly, IBNR reserves are calculated by subtracting case reserves from whole loss reserves. IBNR is the estimated legal responsibility for: (1) modifications within the values of claims which have been reported to us however usually are not but settled; (2) claims that have occurred however haven't but been reported; and (3) claims which are closed however subsequently reopened. Each declare is settled individually primarily based upon its deserves, and significantly for longer-tailed strains of enterprise, it's not uncommon for a declare to take a number of years after being initially reported to be settled and paid, particularly if authorized motion is concerned. These claims can also require modifications in anticipated future funds as a result of modifications in medical situations or modifications in anticipated inflationary pressures. As a outcome, the reserve for loss and LAE contains vital estimates for IBNR reserves. The reserve for IBNR is mostly estimated by administration primarily based on varied elements, together with actuarial evaluation and precise loss expertise to this point. Our actuaries make use of normal actuarial methodologies to find out estimated final loss reserves. In choosing administration's greatest estimate of loss and LAE reserves, we think about the vary of outcomes produced by many actuarial strategies and the appropriateness of these estimates. These actuarial methodologies are described in "Notes to Consolidated Financial Statements - Note 9. Reserve for Loss and Loss Adjustment Expenses" included under Item 8 "Financial Statement and Supplementary Data". The composition of the reserve for loss and LAE atDecember 31, 2021 and 2020 was as follows: December 31, 2021 2020 ($ in hundreds)
Reserve for reported loss and LAE$ 851,950 $ 998,691 Reserve for losses incurred however not reported 637,423 894,608 Reserve for loss and LAE$ 1,489,373 $
1,893,299
43 -------------------------------------------------------------------------------- The loss reserves within the desk above exclude the impression of the LPT/ADC Agreement. While administration believes that our case reserves and IBNR are enough to cowl losses assumed by us, there could be no assurance that losses is not going to deviate from our reserves, probably by materials quantities. The evaluation of the appropriateness of the reserve for IBNR is reviewed quarterly, with changes made as applicable. To the extent that precise reported losses exceed anticipated losses, the carried estimate of the last word losses could also be elevated (i.e. unfavorable reserve growth), and to the extent precise reported losses are lower than our expectations, the carried estimate of final losses could also be diminished (i.e. favorable reserve growth). We file any modifications in our loss reserve estimates and the associated reinsurance recoverable in the durations wherein they're decided. Reinsurance recoverable on unpaid losses coated by the ADC portion of the LPT/ADC Agreement are recorded as half of the deferred acquire on retroactive reinsurance proven on the Consolidated Balance Sheets which represents the cumulative opposed loss growth underneath the AmTrust Quota Share coated by the LPT/ADC Agreement atDecember 31, 2021 . Amortization of the deferred acquire is not going to happen till paid losses have exceeded the minimal retention underneath the LPT/ADC Agreement, which is estimated to be in 2024. Loss reserves don't characterize an actual calculation of legal responsibility. Rather, loss reserves are estimates of what we fairly count on the last word decision and administration of claims will price. These estimates are primarily based on actuarial projections and on our evaluation of at present obtainable information, in addition to estimates of future developments in claims severity and frequency, judicial theories of legal responsibility and different elements. Loss reserve estimates are refined as expertise develops and as claims are reported and resolved. In addition, the comparatively lengthy durations between when a loss happens and when it might be reported to our claims division for our casualty reinsurance strains of enterprise additionally improve the uncertainties of reserve estimates in such strains. With the steerage of the strategies described in "Notes to Consolidated Financial Statements - Note 9. Reserve for Loss and Loss Adjustment Expenses" included underneath Item 8 "Financial Statement and Supplementary Data" of this Annual Report on Form 10-Ok, actuarial judgment is utilized within the dedication of final losses. In normal, the Company's segments have various ranges of seasoning with which the Company has direct expertise and because of this, differing strategies are utilized to estimate loss and LAE reserves inside every section. In our Diversified Reinsurance section, we maintain books of enterprise which have been in runoff for a number of years, in addition to books of enterprise which have been underwritten solely throughout the previous few years. In normal, we make the most of the Expected Loss Ratio ("ELR") method on the onset of reserving an account, the Bornhuetter-Ferguson ("BF") methodology for enterprise with much less however maturing loss expertise, and then, because the expertise matures, theLoss Development ("LD") methodology is utilized. The runoff guide of enterprise primarily makes use of the LD methodology due to its maturity and the quantity of expertise which has emerged through the years. For proportional enterprise, the Company depends closely on the precise contract expertise, whereas for extra of loss enterprise, there might be extra utilization of trade and/or Company particular benchmark assumptions within the reserving course of. The Company underwrote the AmTrust Reinsurance section fromJuly 1, 2007 till the Final AmTrust QS Terminations efficientJanuary 1, 2019 . A big portion of the publicity within the underlying guide of enterprise has vital seasoning, and permits for a big quantity of credibility in utilizing parameters derived from historic expertise to calculate reserve estimates. Some segments of the guide are a outcome of current acquisitions or newer markets for AmTrust. These segments require a larger degree of assumptions and skilled judgment in deriving reserve ranges, which inherently implies a wider vary of cheap estimates. In addition, modifications to case reserving and claims settlement practices by AmTrust have required the use of strategies which regulate historic paid and incurred losses to mirror the present foundation. As a outcome, we now have tended to depend on a weighted method which primarily employs the LD methodology for elements of the section with ample historic information, whereas additionally contemplating the ELR or BF methodology for publicity ensuing from current acquisitions, or a relative enterprise with a extra restricted degree of expertise. The LD methodology will also be primarily based on AmTrust particular historic data, historic data adjusted to present ranges, or data derived from trade sources, with actuarial judgment getting used as to the credibility weighting employed. The Frequency-Severity ("FS") methodology can be thought-about for segments of the AmTrust guide for which declare rely data is offered. Additional information detailing objects akin to the category of enterprise, state of prevalence, declare counts, and the frequency and severity of claims is offered in lots of cases, additional enhancing the loss reserve evaluation. Significant Assumptions Employed within the Estimation of Reserve for Loss and Loss Adjustment Expenses: The most important assumptions used atDecember 31, 2021 to estimate the reserve for loss and LAE inside our reporting segments are as follows:
•the data developed from inside and unbiased exterior sources could be
used to develop significant estimates of the seemingly future efficiency of
enterprise certain by the Company;
•the loss and publicity data supplied by ceding firms, insureds and brokers in help of their reinsurance submissions have been utilized by the Company's pricing actuaries to derive significant estimates of the seemingly future efficiency of enterprise certain with respect to every contract and coverage;
•historic loss growth and pattern expertise could also be used to foretell future
loss growth and developments;
•no vital emergence of losses or sorts of losses that aren't represented within the data provided to the Company by its brokers, ceding firms and insureds will happen; and
•the Company is ready to determine and correctly regulate for modifications to case
reserving and claims settlement charges within the underlying information.
The 5 assumptions above considerably affect the Company's dedication of preliminary anticipated loss ratios and anticipated loss reporting and cost patterns which are the important thing inputs which impression potential variability within the estimate of the reserve for loss and LAE and are relevant to every of the Company's enterprise segments. These elements are mixed with the actuarial judgment exercised by our reserving actuaries. While there could be no assurance that any of the above assumptions will 44 -------------------------------------------------------------------------------- show to be right, we consider that this course of represents a practical and applicable foundation for estimating the reserve for loss and LAE. Loss emergence elements and anticipated loss ratios used within the reserving course of are primarily based on a mix of our personal direct expertise, cedant expertise and trade benchmarks, when applicable. The benchmarks chosen have been people who we consider are most just like our underwriting enterprise. Factors Creating Uncertainty within the Estimation of the Reserve for Loss and Loss Adjustment Expenses: While administration doesn't embody an express or implicit provision for uncertainty in its reserve for loss and LAE, sure of the Company's enterprise strains are by their nature topic to extra uncertainties, that are mentioned intimately beneath. In addition, the Company's reserves are topic to extra elements which add to the uncertainty of estimating reserve for loss and LAE. Time lags within the reporting of losses can additionally introduce additional ambiguity to the method of estimating reserve for loss and LAE.
The inherent uncertainty of estimating the Company’s reserve for loss and LAE
will increase principally as a result of:
•the lag in time between the time claims are initially reported to the ceding
firm and the time they’re in the end reported via a number of
reinsurance dealer intermediaries to the Company;
•the differing case reserving practices amongst ceding firms;
•modifications to traits of a declare over time, akin to future medical wants
or evaluation of legal responsibility;
•the range of loss growth patterns amongst differing types of reinsurance
treaties or contracts;
•the Company's must depend on its ceding firms for loss data, which additionally exposes the Company to modifications within the reserving philosophy of the ceding firm and the adequacy of its underlying case reserves; and
•modifications in inside firm operations akin to alterations in claims dealing with
procedures.
To confirm the accuracy and completeness of the data supplied to us by our ceding firm counterparties, the Company's actuaries, accountants and claims personnel carry out claims critiques, and at instances additionally accounting and monetary audits, of the Company's ceding firms. Any materials findings are communicated to the ceding firms and utilized within the institution or revision of the Company's case reserves and associated IBNR reserve. On event, these critiques reveal that the ceding firm's reported loss and LAE don't comport with the phrases of the contract held with the Company. In such occasions, the Company strives to resolve the excellent variations in an amicable trend. The giant majority of such variations are resolved on this method. In the rare occasion the place an amicable resolution just isn't possible, the Company's coverage is to vigorously defend its place in litigation or arbitration. AtDecember 31, 2021 , the Company was not concerned in any materials claims litigation or arbitration proceedings. Due to the big quantity of potential transactions that should be recorded within the insurance coverage and reinsurance trade, backlogs within the recording of the Company's enterprise actions can even impair the accuracy of its loss and LAE reserve estimates. AtDecember 31, 2021 , there have been no vital backlogs associated to the processing of coverage or contract data in any of our reporting segments. The Company assumes in its loss and LAE reserving course of that, on common, the time interval between the recording of anticipated losses and the reporting of precise losses are predictable when measured within the combination and over time. The time interval over which all losses are anticipated to be reported to the Company varies considerably by line of enterprise. This interval can vary from a number of quarters for some strains, akin to property, to a few years for some casualty strains of enterprise. To the extent that precise reported losses are reported extra rapidly or extra slowly than anticipated, the Company could regulate its estimate of final loss accordingly. Potential Volatility within the Reserve for Loss and LAE: In addition to the elements creating uncertainty within the Company's estimate of loss and LAE, the Company's estimated reserve for loss and LAE can change over time as a result of of surprising modifications within the exterior surroundings. Potential altering exterior elements embody:
•modifications within the inflation charge for items and companies associated to the coated
damages;
•modifications within the normal financial surroundings that would trigger unanticipated
modifications in declare frequency or severity;
•modifications within the litigation surroundings relating to the illustration of
plaintiffs and potential plaintiffs;
•modifications within the judicial and/or arbitration surroundings relating to the
interpretation of coverage and contract provisions regarding the dedication
of protection and/or the quantity of damages awarded for sure sorts of claims;
•modifications within the social surroundings relating to the final angle of juries in
the dedication of legal responsibility and damages;
•modifications within the legislative surroundings relating to the definition of damages;
•new sorts of accidents attributable to new sorts of injurious actions or exposures;
and
•evaluation of modifications in ceding firm case reserving and reporting patterns.
The change in loss reserve estimates from the prior 12 months is known as PriorYear Development ("PPD"). We skilled favorable PPD of$27.6 million for the 12 months endedDecember 31, 2021 in comparison with favorable PPD of$16.5 million for the 12 months endedDecember 31, 2020 , primarily inside the AmTrust Reinsurance section. Please confer with "Notes to Consolidated Financial Statements - Note 9. Reserve for Loss and Loss Adjustment Expenses" included under Item 8. "Financial Statements and Supplementary Data" of this Form 10-Ok for additional particulars. 45 -------------------------------------------------------------------------------- The Company creates a statistical distribution across the estimate of reserve for loss and LAE primarily based on an assumption of the volatility inherent within the estimate. The Company, within the evaluation of reserves for loss and LAE, as well as to choosing a greatest level estimate, makes a variety of a spread of cheap reserves. This vary is predicated on a mix of goal and subjective information, together with the underlying traits of the publicity, the volatility in historic emergence, the credibility of the data obtainable to estimate the reserve for loss and LAE, and skilled actuarial judgement. The measurement of the vary is expounded to the extent of confidence related to the purpose estimate, in addition to the quantity of uncertainty inherent within the traits of the publicity being evaluated. Based on this vary of cheap reserves, our required reserves after reinsurance recoverable may improve by roughly$152.1 million , or 10.7%, of our consolidated web loss and LAE reserves, excluding the impression of the LPT/ADC Agreement. If the LPT/ADC Agreement have been to be thought-about, our required reserves may improve by roughly$72.1 million , or 7.8% of our consolidated web loss and LAE reserves.
For the vary of cheap reserves, we now have assumed what we consider is an
applicable confidence degree. However, the vary just isn’t meant to be a
measurement of all attainable future outcomes, and there could be no assurance that
our declare obligation is not going to differ exterior of this vary.
Premiums and Commissions and Other Acquisition Expenses
For pro-rata contracts and excess-of-loss contracts the place no deposit or minimal premium is specified within the contract, premium written is acknowledged primarily based on estimates of final premiums supplied by the ceding firms. Initial estimates of premium written are acknowledged within the interval wherein the underlying dangers are incepted. Subsequent changes, primarily based on reviews of precise premium by the ceding firms, or revisions in estimates, are recorded within the interval wherein they're decided. Reinsurance premiums assumed are usually earned on a professional rata foundation over the phrases of the underlying insurance policies or reinsurance contracts. Contracts and insurance policies written on a "losses occurring" foundation cowl claims that could happen through the time period of the contract or coverage, which is usually twelve months. Accordingly, the premium is earned evenly over the contract time period. Contracts that are written on a "risks attaching" foundation cowl claims from all underlying insurance coverage insurance policies written through the phrases of such contracts. Premiums earned on such contracts prolong past the unique time period of the reinsurance contract, usually leading to recognition of premiums earned over a twenty-four-month interval. Reinsurance premiums on specialty threat and prolonged guarantee are earned primarily based on the estimated program protection interval. These estimates are primarily based on the anticipated distribution of protection durations by contract at inception, as a result of a single contract could include a number of protection interval choices and these estimates are revised primarily based on the precise protection interval chosen by the unique insured. Unearned premiums characterize the portion of premiums written which is relevant to the unexpired time period of the contract or coverage in drive. These premiums could be topic to estimates primarily based upon data obtained from ceding firms and any subsequent variations arising on such estimates are recorded within the interval wherein they're decided. The Company gives proportional and non-proportional reinsurance protection to cedants (insurance coverage firms). Cedants' precise premiums are unknown on the time they enter into reinsurance settlement so treaties are primarily based upon estimates of these premiums on the time the treaties are written and are usually adjusted as premiums are identified. Reporting delays are inherent within the reinsurance trade and differ in size by sort of treaty. As delays can differ from a number of weeks to a 12 months or typically longer, the Company produces accounting estimates to report premiums and fee and different acquisition bills till it receives the cedants' precise outcomes. Under proportional treaties, the Company shares proportionally in each the premiums and losses of the cedant and pays the cedant a fee to cowl the cedants' acquisition bills. Under this sort of treaty, the Company's final premiums written and earned and acquisition bills usually are not identified on the inception of the treaty and should be estimated till the cedant reviews its precise outcomes to the Company. Under non-proportional treaties, the Company is usually uncovered to loss occasions in extra of a predetermined greenback quantity or loss ratio and receives a deposit or minimal premium, which is topic to adjustment relying on the premium quantity written by the cedant. Reported premiums written and earned and fee and different acquisition bills on proportional treaties are usually primarily based upon reviews obtained from cedants and brokers, supplemented by the Company's personal estimates of premiums written and fee and different acquisition bills for which ceding firm reviews haven't been obtained. Premium and acquisition expense estimates are decided on the particular person treaty degree primarily based upon contract provisions. The dedication of estimates requires a evaluate of the Company's expertise with cedants, an intensive understanding of the person traits of every line of enterprise and the power to mission the impression of present financial indicators on the quantity of enterprise written and ceded by the Company's cedants. Estimates for premiums and fee and different acquisition bills are up to date constantly as new data is obtained from the cedants. Differences between such estimates and precise quantities are recorded within the interval wherein estimates are modified or the precise quantities are decided. Assessing whether or not or not a reinsurance contract meets the situation for threat switch requires judgment. The dedication of threat switch is vital to reporting premiums written and is predicated, partly, on the use of actuarial and pricing fashions and assumptions. If we decide {that a} reinsurance contract does not switch enough threat, we account for the contract as a deposit legal responsibility moderately than a premium written. Acquisition bills characterize the prices of writing enterprise that modify with, and are primarily associated to, the manufacturing of the enterprise. Acquisition bills which are associated to profitable contracts are deferred and acknowledged as expense over the identical interval wherein the associated premiums are earned. Only sure bills incurred within the profitable acquisition of new and renewal insurance coverage contracts are capitalized. Those bills embody incremental direct prices of contract acquisition that outcome 46 -------------------------------------------------------------------------------- straight from and are important to the contract transaction and wouldn't have been incurred had the contract transaction not occurred. All different acquisition-related bills, akin to prices incurred for soliciting enterprise, administration, and unsuccessful acquisition or renewal efforts are charged to expense as incurred. Administrative bills, together with hire, depreciation, occupancy, gear, and all different normal overhead bills are thought-about oblique and are expensed as incurred. The Company considers anticipated funding revenue in figuring out the recoverability of these deferred prices and believes they're absolutely recoverable. A premium deficiency is acknowledged if the sum of anticipated losses and LAE, unamortized acquisition bills and anticipated funding revenue exceed unearned premium.
Retroactive Reinsurance
Retroactive reinsurance insurance policies present indemnification for losses and LAE with respect to previous loss occasions. For our GLS run-off enterprise in our Diversified Reinsurance section, we use the steadiness sheet accounting method for assumed loss portfolio transfers, whereby on the inception of the contract there are not any premiums or losses recorded in earnings. At the inception of a run-off retroactive reinsurance contract, if the estimated undiscounted final losses payable are in extra of the premiums obtained, a deferred cost asset is recorded for the surplus; whereas, if the premiums obtained are in extra of the estimated undiscounted final losses payable, a deferred acquire legal responsibility is recorded for the surplus, such that we don't file any acquire or loss on the inception of these retroactive reinsurance contracts. The premium consideration that we cost the ceding firms underneath retroactive reinsurance contracts could also be decrease than the undiscounted estimated final losses payable as a result of time worth of cash. After receiving the premium consideration in full from our cedents on the inception of the contract, we make investments the premium obtained over an prolonged interval of time, thereby producing funding revenue. We count on to generate earnings from these retroactive reinsurance contracts when taking into consideration the premium obtained and anticipated funding revenue, much less contractual obligations and bills. Deferred cost property might be recorded in different property (if and when relevant), and deferred acquire liabilities are recorded in different liabilities, and amortized over the estimated declare cost interval of the associated contract with the periodic amortization mirrored in earnings as a part of losses and LAE. The amortization of deferred cost property and deferred acquire liabilities is adjusted at every reporting interval to mirror new estimates of the quantity and timing of remaining loss and LAE funds. Changes within the estimated quantity and timing of funds of unpaid losses could affect the unamortized deferred cost property and deferred acquire liabilities and the quantity of periodic amortization.
Fair Value of Financial Instruments
Please confer with "Notes to Consolidated Financial Statements - Note 5. Fair Value of Financial Instruments" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-Ok for a dialogue on the truthful worth methodology and valuation strategies utilized by the Company to find out the truthful worth of the monetary devices held atDecember 31, 2021 and 2020.
Other-Than-Temporary Impairment (“OTTI”) of Investments
Please confer with "Notes to Consolidated Financial Statements - Note 2. Significant Accounting Policies" included under Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-Ok for a dialogue on the impairment analysis carried out by the Company on its funding portfolio. For the 12 months endedDecember 31, 2021 , the Company didn't acknowledge any OTTI impairment losses in its outcomes of operation in comparison with$2.5 million of OTTI acknowledged for mounted maturity investments held atDecember 31, 2020 . Please see "Notes to Consolidated Financial Statements: Note 4. Investments" included underneath Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-Ok for additional particulars. 47
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Results of Operations
The following desk units forth our chosen Consolidated Statement of Income
information for every of the years indicated:
For the Year EndedDecember 31, 2021
2020 ($ in hundreds) Gross premiums written$ 10,938 $ 31,389 Net premiums written$ 10,403 $ 28,432 Net premiums earned$ 52,993 $ 106,081 Other insurance coverage income 1,067 1,276 Net loss and LAE (7,307) (41,799)
Commission and different acquisition bills (24,840)
(38,796)
General and administrative bills(1) (10,341)
(9,488)
Underwriting revenue(2) 11,572
17,274
Other normal and administrative bills(1) (25,679)
(29,630)
Net funding revenue 32,013
54,761
Net realized and unrealized beneficial properties on funding 12,648
24,473
Total other-than-temporary impairment losses -
(2,468)
Foreign alternate and different beneficial properties (losses) 7,685
(8,526)
Interest and amortization bills (19,327)
(19,324)
Income tax (expense) profit (15)
104
Interest in revenue of fairness methodology investments 7,748
5,098
Net revenue 26,645
41,762
Gain from repurchase of desire shares 90,998
38,195
Net revenue obtainable to Maiden widespread shareholders
Ratios
Net loss and LAE ratio(3) 13.5 %
38.9 %
Commission and different acquisition expense ratio(4) 46.0 %
36.1 %
General and administrative expense ratio(5) 66.6 %
36.4 % Expense ratio(6) 112.6 % 72.5 % Combined ratio(7) 126.1 % 111.4 %
(1)Underwriting associated normal and administrative bills is a non-GAAP
measure. Please confer with “General and Administrative Expenses” beneath for
extra data associated to those company bills and the
reconciliation to these introduced in our Consolidated Statements of Income.
(2)Underwriting revenue is a non-GAAP measure and is calculated as web premiums earned plus different insurance coverage income much less web loss and LAE, fee and different acquisition bills and normal and administrative bills straight associated to underwriting actions.
(3)Calculated by dividing web loss and LAE by the sum of web premiums earned and
different insurance coverage income.
(4)Calculated by dividing fee and different acquisition bills by the sum
of web premiums earned and different insurance coverage income.
(5)Calculated by dividing all normal and administrative bills by the sum of
web premiums earned and different insurance coverage income.
(6)Calculated by including collectively fee and different acquisition expense ratio
and normal and administrative expense ratio.
(7)Calculated by including collectively web loss and LAE ratio and the expense ratio.
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Net Income
Net revenue obtainable to Maiden widespread shareholders for the 12 months endedDecember 31, 2021 was$117.6 million in comparison with web revenue obtainable to Maiden widespread shareholders of$80.0 million in 2020. The web enchancment in our outcomes for the 12 months endedDecember 31, 2021 in comparison with 2020 was primarily as a result of acquire from the repurchase of our Preference Shares of$91.0 million for the 12 months endedDecember 31, 2021 in comparison with the acquire of$38.2 million for Preference Share repurchases throughout 2020. Excluding the acquire on the repurchase of our Preference Shares, web revenue for the 12 months endedDecember 31, 2021 was$26.6 million in comparison with web revenue of$41.8 million in 2020. The most important objects affecting our monetary efficiency through the 12 months endedDecember 31, 2021 on a comparative foundation to 2020 included:
•underwriting revenue of
in comparison with
•favorable prior 12 months loss growth of$27.6 million for the 12 months endedDecember 31, 2021 in comparison with$16.5 million throughout the identical interval in 2020 primarily associated to the quota share reinsurance agreements with AmTrust, or the AmTrust Reinsurance section, and partly offset by: •an underwriting loss of$16.0 million for the 12 months endedDecember 31, 2021 on a present accident 12 months foundation in comparison with an underwriting revenue of$0.8 million for a similar interval in 2020 on a present accident 12 months foundation, as a result of greater expense ratios attributable to a big lower in earned premium.
•no funding impairment losses for the 12 months ended
to
•whole revenue from funding actions have been
ended
which was comprised of:
•web funding revenue decreased to
primarily as a result of decline in common mounted revenue property of 28.8%;
•realized and unrealized beneficial properties on funding decreased to
12 months ended
in 2020;
•curiosity in revenue of fairness methodology investments of
ended
investments of
•company normal and administrative bills decreased to$25.7 million for the 12 months endedDecember 31, 2021 in comparison with$29.6 million for a similar interval in 2020; and •overseas alternate and different beneficial properties elevated to$7.7 million for the 12 months endedDecember 31, 2021 in comparison with overseas alternate and different losses of$8.5 million for a similar interval in 2020.
Net Premiums Written
The desk beneath compares web premiums written by our reportable segments, reconciled to the overall consolidated web premiums written for the years endedDecember 31, 2021 and 2020: For the Year Ended December 31, 2021 2020 Change in ($ in hundreds) Total % of Total Total % of Total $ % Diversified Reinsurance$ 16,098 154.7 %$ 37,258 131.1 %$ (21,160) (56.8) % AmTrust Reinsurance (5,695) (54.7) % (8,826) (31.1) % 3,131 (35.5) % Total$ 10,403 100.0 %$ 28,432 100.0 %$ (18,029) (63.4) %
Net premiums written for the 12 months ended
to web premiums written of
•Net premiums written within the Diversified Reinsurance section decreased by$21.2 million or 56.8% for the 12 months endedDecember 31, 2021 in comparison with 2020 largely as a result of return of unearned premiums after the non-renewal of the German Auto Programs reinsurance contract in our IIS enterprise onJanuary 1, 2021 . •There have been negligible premiums written in AmTrust Reinsurance section as a result of the termination of each the AmTrust Quota Share and theEuropean Hospital Liability Quota Share efficientJanuary 1, 2019 . Negative premiums written in the AmTrust Reinsurance section for the years endedDecember 31, 2021 and 2020 have been primarily as a result of premium changes on Small Commercial Business insurance policies subsequent to their termination.
Please confer with the evaluation beneath of our Diversified Reinsurance and AmTrust
Reinsurance segments for additional particulars.
49
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Net Premiums Earned
Net premiums earned decreased by$53.1 million or 50.0% for the 12 months endedDecember 31, 2021 in comparison with the identical interval in 2020. The desk beneath compares web premiums earned by our reportable segments, reconciled to the overall consolidated web premiums earned, for the years endedDecember 31, 2021 and 2020: For the Year Ended December 31, 2021 2020 Change in ($ in hundreds) Total % of Total Total % of Total $ % Diversified Reinsurance$ 27,681 52.2 %$ 47,847 45.1 %$ (20,166) (42.1) % AmTrust Reinsurance 25,312 47.8 % 58,234 54.9 % (32,922) (56.5) % Total$ 52,993 100.0 %$ 106,081 100.0 %$ (53,088) (50.0) % Net premiums earned within the AmTrust Reinsurance section for the 12 months endedDecember 31, 2021 decreased by$32.9 million or 56.5% in comparison with 2020 as a result of the termination of the AmTrust Quota Share and the European Hospital Liability Quota Share efficientJanuary 1, 2019 . Please confer with the evaluation of our AmTrust Reinsurance section for additional dialogue. Net premiums earned within the Diversified Reinsurance section for the 12 months endedDecember 31, 2021 decreased by$20.2 million or 42.1% in comparison with 2020 pushed by decrease quota share cessions for German Auto Programs which went into run-off onJanuary 1, 2021 within the IIS enterprise. Please confer with the evaluation of our Diversified Reinsurance section for additional dialogue.
Other Insurance Revenue
All of our Other Insurance Revenue is produced by our Diversified Reinsurance section. Please confer with the evaluation of our Diversified Reinsurance section beneath for additional dialogue. Net Investment Income Net funding revenue decreased by$22.7 million or 41.5% for the 12 months endedDecember 31, 2021 in comparison with 2020, primarily as a result of decline in common combination mounted revenue property of 28.8%. The decline in mounted revenue property is pushed by the cessation of energetic reinsurance underwriting on potential dangers which has materially diminished our revenues, leading to vital destructive working money flows as we run-off our present reinsurance liabilities. Net funding revenue additionally decreased as a result of decline in common guide yields to 1.9% for the 12 months endedDecember 31, 2021 in comparison with 2.3% in 2020, which was the outcome of each decrease rates of interest and shorter length of property in our mounted revenue portfolios.
The following desk particulars our common combination mounted revenue property (at price)
and funding guide yield for the years ended
For the Year Ended December 31, 2021 2020 ($ in hundreds) Average combination mounted revenue property, at price (1)$ 1,794,173 $ 2,521,380 Annualized funding guide yield 1.9 % 2.3 % (1)Fixed revenue property embody available-for-sale ("AFS") securities, money and restricted money, funds held receivable, and mortgage to associated occasion. These quantities are a median of the quantities disclosed in our quarterlyU.S. GAAP consolidated monetary statements.
Net Realized and Unrealized Gains on Investment
Net realized and unrealized beneficial properties on funding have been$12.6 million for the 12 months endedDecember 31, 2021 , in comparison with web realized beneficial properties on funding of$24.5 million for 2020. Net realized beneficial properties for the years endedDecember 31, 2021 and 2020 primarily mirror gross sales of company bonds for the settlement of declare funds to AmTrust.
Net realized and unrealized beneficial properties for the 12 months ended
the popularity of
funding in an insurtech start-up firm that was acquired by a particular
function acquisition firm.
Net Impairment Losses Recognized in Earnings
No OTTI losses have been acknowledged on our mounted maturity portfolio for the 12 months
ended
mounted maturity securities for the 12 months ended
Interest in Income of Equity Method Investments
We acknowledged an curiosity in revenue of fairness methodology investments of$7.7 million for the 12 months endedDecember 31, 2021 in comparison with$5.1 million for the 12 months endedDecember 31, 2020 . Our fairness methodology investments embody hedge fund investments of$32.9 million , actual property investments of$44.1 million and different investments of$6.8 million as ofDecember 31, 2021 . 50
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This desk reveals our curiosity in revenue of fairness methodology investments for the
years ended
For the Year Ended December 31, ($ in hundreds) 2021 2020 Hedge fund investments$ 3,494 $ 4,435 Other investments 4,254 663 Interest in revenue of fairness methodology investments
Net Loss and Loss Adjustment Expenses
Net loss and LAE decreased by$34.5 million , or 82.5%, through the 12 months endedDecember 31, 2021 in comparison with the identical interval in 2020 largely as a result of cessation of energetic reinsurance underwriting on potential dangers, together with the termination of the AmTrust Quota Share and European Hospital Liability Quota Share efficientJanuary 1, 2019 . The loss ratio for 2021 was impacted by web favorable prior 12 months reserve growth of$27.6 million or 51.1 proportion factors throughout 2021 in comparison with web favorable prior 12 months reserve growth of$16.5 million or 15.4 proportion factors throughout 2020. The prior 12 months growth was primarily inside the AmTrust Reinsurance section and is mentioned in larger element within the particular person section dialogue and evaluation. The web loss and LAE ratio decreased to 13.5% for the 12 months endedDecember 31, 2021 in comparison with 38.9% for 2020 largely as a result of vital favorable prior 12 months loss expertise within the AmTrust Reinsurance section.
Commission and Other Acquisition Expenses
Commission and different acquisition bills decreased by$14.0 million or 36.0% for the 12 months endedDecember 31, 2021 in comparison with 2020 as a result of considerably decrease earned premiums in each of our reportable segments. The fee and different acquisition expense ratio elevated to 46.0% for the 12 months endedDecember 31, 2021 in comparison with 36.1% for 2020 largely as a result of a change within the combine of premiums written in our Diversified Reinsurance section.
General and Administrative Expenses
General and administrative bills embody each section and company bills segregated for analytical functions as a part of underwriting revenue. Total normal and administrative bills decreased by$3.1 million or 7.9% for the 12 months endedDecember 31, 2021 , in comparison with 2020. Corporate normal and administrative bills for the 12 months endedDecember 31, 2021 decreased by$4.0 million or 13.3% in comparison with 2020 as a result of decrease payroll prices and money incentive workers compensation in comparison with the prior 12 months.
General and administrative bills for the years ended
2020 are comprised of:
For the Year Ended December 31, 2021 2020 ($ in hundreds) General and administrative bills - segments$ 10,341 $ 9,488 General and administrative bills - company 25,679 29,630 Total normal and administrative bills$ 36,020 $
39,118
Interest and Amortization Expenses
The curiosity and amortization bills associated to the excellent senior notes issued byMaiden Holdings in 2016 andMaiden NA in 2013 have been$19.3 million for the years endedDecember 31, 2021 and 2020, respectively. Please confer with "Notes to Consolidated Financial Statements - Note 7 - Long-Term Debt" included underneath Item 8 "Financial Statements and Supplementary Data" of this Form 10-Ok for additional particulars on the Senior Notes. The weighted common efficient curiosity charge for the Senior Notes was 7.6% for the years endedDecember 31, 2021 and 2020, respectively.
Foreign Exchange and Other (Gains) Losses
Net overseas alternate and different beneficial properties amounted to$7.7 million through the 12 months endedDecember 31, 2021 in comparison with web overseas alternate and different losses of$8.5 million in 2020. Net overseas alternate beneficial properties of$7.5 million have been realized through the 12 months endedDecember 31, 2021 as a result of strengthening of theU.S. greenback on the re-measurement of web loss reserves and insurance coverage associated liabilities denominated in British pound and euro. Net overseas alternate losses of$8.1 million have been realized in 2020 as a result of weakening of theU.S. greenback on the re-measurement of web loss reserves and insurance coverage associated liabilities denominated in British pound and euro.
Income Tax Expense (Benefit)
The Company recorded revenue tax expense of$15.0 thousand for the 12 months endedDecember 31, 2021 in comparison with an revenue tax profit of$0.1 million recorded for 2020. The revenue tax profit for 2020 was largely generated on the working losses of our worldwide subsidiaries. The efficient charge of revenue tax was 0.1% for the 12 months endedDecember 31, 2021 in comparison with a tax charge of (0.3)% for the 12 months endedDecember 31, 2020 . 51
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Underwriting Results by Reportable Segment
Diversified Reinsurance Segment
The underwriting outcomes and related ratios for our Diversified Reinsurance
section for the years ended
For the Year EndedDecember 31, 2021
2020
($ in
hundreds)
Gross premiums written$ 16,633 $ 40,457 Net premiums written$ 16,098 $ 37,258 Net premiums earned$ 27,681 $ 47,847 Other insurance coverage income 1,067
1,276
Net loss and LAE (4,286)
(24,909)
Commission and different acquisition bills (15,093)
(18,475)
General and administrative bills (7,827)
(6,936)
Underwriting revenue (loss)$ 1,542
Ratios
Net loss and LAE ratio 14.9 %
50.7 %
Commission and different acquisition expense ratio 52.5 %
37.6 %
General and administrative expense ratio 27.2 % 14.1 % Expense ratio 79.7 % 51.7 % Combined ratio 94.6 % 102.4 % The mixed ratio for the 12 months endedDecember 31, 2021 decreased to 94.6% in comparison with 102.4% in 2020 largely as a result of favorable loss growth partly offset by greater non-recurring normal and administrative bills in our IIS enterprise, which elevated the expense ratio. Please see the respective sections on web loss and LAE, commissions and different acquisition bills and normal and administrative bills for additional particulars on these components which have impacted the mixed ratios. Premiums - Direct premiums written by Maiden LF and Maiden GF elevated by$2.3 million or 11.8% through the 12 months endedDecember 31, 2021 in comparison with 2020. Gross premiums written within the Diversified Reinsurance section decreased by$23.8 million , or 58.9% for the 12 months endedDecember 31, 2021 in comparison with 2020 primarily as a result of return of unearned premiums written in a German Auto quota share reinsurance contract in our IIS enterprise which went into run-off onJanuary 1, 2021 . Net premiums written for the 12 months endedDecember 31, 2021 decreased by$21.2 million or 56.8% in comparison with 2020 as a result of return of unearned premiums in our German Auto quota share reinsurance contract which went into run-off onJanuary 1, 2021 . The desk beneath reveals web premiums written by line of enterprise for the years endedDecember 31, 2021 and 2020: For the Year Ended December 31, 2021 2020 Change in ($ in hundreds) Total Total $ % Net Premiums Written International$ 16,098 $ 37,294 $ (21,196) (56.8) % Other - (36) 36 (100.0) % Total Diversified Reinsurance$ 16,098 $ 37,258 $ (21,160) (56.8) % Net premiums earned decreased by$20.2 million or 42.1% through the 12 months endedDecember 31, 2021 in comparison with 2020 primarily as a result of decrease earned premiums from German Auto applications which went into run-off onJanuary 1, 2021 . The desk beneath reveals web premiums earned by line of enterprise for the years endedDecember 31, 2021 and 2020: For the Year Ended December 31, 2021 2020 Change in ($ in hundreds) Total Total $ % Net Premiums Earned International$ 27,681 $ 47,883 $ (20,202) (42.2) % Other - (36) 36 (100.0) % Total Diversified Reinsurance$ 27,681 $ 47,847 $ (20,166) (42.1) % 52 -------------------------------------------------------------------------------- Other Insurance Revenue - Other insurance coverage income contains$0.3 million of payment revenue earned from our GLS enterprise for the 12 months endedDecember 31, 2021 , as properly as payment revenue derived from our IIS enterprise in a roundabout way related to premium income assumed by the Company for the years endedDecember 31, 2021 and 2020 as specified within the desk beneath. Other revenue of$0.1 million for the 12 months endedDecember 31, 2020 was generated from transitional companies supplied regarding the sale of ourU.S. operations. Other insurance coverage income decreased by$0.2 million or 16.4% to$1.1 million for the 12 months endedDecember 31, 2021 in comparison with 2020. The decline of$0.4 million in International was primarily as a result of loss of payment revenue from an auto buyer program that went into run-off onJuly 31, 2021 . The desk beneath reveals different insurance coverage income by supply for the years endedDecember 31, 2021 and 2020:
For the Year Ended
Change ($ in hundreds) % International$ 765 $ 1,145 $ (380) (33.2) % Other revenue 302 131 171 130.5 % Total Diversified Reinsurance$ 1,067 $ 1,276 $ (209) (16.4) % Net Loss and LAE - Net loss and LAE decreased by$20.6 million or 82.8% for the 12 months endedDecember 31, 2021 in comparison with 2020 due primarily to the run-off of reinsurance liabilities related to our German Auto applications. Net loss and LAE ratio decreased to 14.9% for the 12 months endedDecember 31, 2021 in contrast with 50.7% for 2020.
The loss ratio decreased by 35.8 proportion factors for the 12 months ended
favorable prior 12 months loss reserve growth of
factors throughout 2021, in comparison with the impression of favorable growth of
million
The 2021 growth was as a result of favorable growth in German Auto applications, European Capital Solutions and facultative reinsurance run-off strains. The 2020 growth was pushed by favorable expertise in facultative reinsurance run-off strains and partly offset by opposed growth skilled in European Capital Solutions. The impression on the web loss and LAE ratios must be thought-about in conjunction with the fee and different acquisition expense ratio as modifications to both ratio could be effected by modifications within the combine of enterprise and the impression of will increase within the fee and different acquisition expense charges on pro-rata contracts with loss delicate options. As a outcome of these elements, in addition to the impression on the loss ratio described above, the mixed ratio decreased by 7.8 proportion factors for the 12 months endedDecember 31, 2021 in comparison with 2020. Commission and Other Acquisition Expenses - Commission and different acquisition bills decreased by$3.4 million or 18.3%, for the 12 months endedDecember 31, 2021 in comparison with 2020 primarily as a result of decrease web premiums earned which equally decreased on this section. The fee and different acquisition expense ratio elevated 14.9 proportion factors to 52.5% for the 12 months endedDecember 31, 2021 in comparison with 37.6% for 2020 largely reflecting the late accrual of contingent fee on run-off enterprise with no earned premiums throughout 2021. Also, it's as a result of change within the combine of professional rata versus extra of loss premiums written through the 12 months. Please confer with the previous paragraph for different elements that may impression the mixed ratio. General and Administrative Expenses - General and administrative bills elevated by$0.9 million or 12.8% for the 12 months endedDecember 31, 2021 in contrast to 2020. The normal and administrative expense ratio elevated to 27.2% for the 12 months endedDecember 31, 2021 in comparison with 14.1% for 2020 as a result of decrease web premiums earned which decreased considerably as famous beforehand, mixed with greater non-recurring bills. This included severance prices and sure regulatory prices of roughly$1.0 million incurred in our IIS enterprise unit which elevated the expense ratio for the 12 months endedDecember 31, 2021 in contrast to the identical interval in 2020. The total expense ratio (together with fee and different acquisition bills) elevated to 79.7% for the 12 months endedDecember 31, 2021 in comparison with 51.7% for 2020 largely as a result of greater non-recurring bills and commissions mixed with web premiums earned which decreased as mentioned above. 53
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AmTrust Reinsurance Segment
The AmTrust Reinsurance section reported underwriting revenue of$10.0 million for the 12 months endedDecember 31, 2021 in comparison with underwriting revenue of$18.5 million for the 12 months endedDecember 31, 2020 . The underwriting outcomes and related ratios for the AmTrust Reinsurance section for the years endedDecember 31, 2021 and 2020 have been as follows: For the Year Ended December 31, 2021 2020 ($ in hundreds) Gross premiums written$ (5,695) $ (9,068) Net premiums written$ (5,695) $ (8,826) Net premiums earned$ 25,312 $ 58,234 Net loss and LAE (3,021) (16,890) Commission and different acquisition bills (9,747)
(20,321)
General and administrative bills (2,514) (2,552) Underwriting revenue$ 10,030 $ 18,471 Ratios Net loss and LAE ratio 11.9 % 29.0 %
Commission and different acquisition expense ratio 38.5 % 34.9
%
General and administrative expense ratio 9.9 % 4.4 % Expense ratio 48.4 % 39.3 % Combined ratio 60.3 % 68.3 % The mixed ratio decreased by 8.0 proportion factors to 60.3% for the 12 months endedDecember 31, 2021 in comparison with 68.3% for 2020 primarily as a result of favorable prior 12 months growth of$24.0 million or 95.0 proportion factors throughout 2021 in comparison with favorable growth of$15.2 million or 26.2 proportion factors throughout 2020. The favorable loss growth was partially offset by the next underwriting loss for the present accident 12 months through the 12 months endedDecember 31, 2021 of$14.0 million in comparison with an underwriting revenue of$3.3 million for the present accident 12 months in the identical interval in 2020. These outcomes have been due primarily to greater loss ratios on the run-off of unearned premium for terminated AmTrust reinsurance contracts.
Premiums – The desk beneath reveals web premiums written by class for the years
ended
For the Year Ended December 31, 2021 2020 ($ in hundreds) Total % of Total Total % of Total Net Premiums Written Small Commercial Business$ (6,445) 113.2 %$ (11,515) 130.5 % Specialty Program (876) 15.4 % (19) 0.2 %
Specialty Risk and Extended Warranty 1,626 (28.6) %
2,708 (30.7) % Total AmTrust Reinsurance$ (5,695) 100.0 %$ (8,826) 100.0 % The gross and web premiums written for the 12 months endedDecember 31, 2021 mirror premium changes on Small Commercial Business insurance policies within the AmTrust Quota Share. There have been destructive gross and web premiums written for the 12 months endedDecember 31, 2020 reflecting premium changes underneath the AmTrust Quota Share fromApril 1, 2020 . Furthermore, the termination of the AmTrust Quota Share and the European Hospital Liability Quota Share as ofJanuary 1, 2019 resulted in no new enterprise written underneath these contracts since 2018. Net premiums earned decreased by$32.9 million , or 56.5% for the 12 months endedDecember 31, 2021 in comparison with 2020 as a result of termination of the AmTrust Quota Share and European Hospital Liability Quota Share as ofJanuary 1, 2019 . The destructive premiums earned for the 12 months endedDecember 31, 2021 in Small Commercial Business have been as a result of premium changes on such insurance policies within the AmTrust Quota Share. Negative web premiums earned on Small Commercial Business for the 12 months endedDecember 31, 2020 have been as a result of premium changes and earned premium returns for the commutation of sure residence guarantee enterprise within the AmTrust Quota Share as ofApril 1, 2020 . 54
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The desk beneath particulars web premiums earned by class for the years ended
For the Year Ended December 31, 2021 2020 ($ in hundreds) Total % of Total Total % of Total Net Premiums Earned Small Commercial Business$ (6,095) (24.1) %$ (10,938) (18.8) % Specialty Program (853) (3.4) % 33 0.1 %
Specialty Risk and Extended Warranty 32,260 127.5 %
69,139 118.7 %
Total AmTrust Reinsurance$ 25,312 100.0 %
Net Loss and Loss Adjustment Expenses - Net loss and LAE decreased by$13.9 million or 82.1%, for the 12 months endedDecember 31, 2021 in comparison with 2020 largely as a result of impression of web favorable prior 12 months loss growth of$24.0 million mixed with decrease web earned premiums. Net loss and LAE ratios decreased to 11.9% for the 12 months endedDecember 31, 2021 in comparison with 29.0% for 2020. During the 12 months endedDecember 31, 2021 , the web loss and LAE ratio decreased by 17.1 factors in comparison with 2020 as a result of impression of web favorable prior 12 months loss growth which was$24.0 million or 95.0 factors throughout 2021, in comparison with web favorable prior 12 months growth of$15.2 million or 26.2 factors throughout 2020.
The desk beneath particulars prior 12 months loss growth by strains of enterprise for the
years ended
For the Year Ended December 31, 2021 2020 ($ in hundreds) Total Total PriorYear Loss Development (favorable) opposed Workers Compensation$ (22,242) $ (39,016) Commercial Auto Liability (29,918) 17,650 General Liability 20,868 18,334 European Hospital Liability 7,885 683 Other (637) (12,889) Total AmTrust Reinsurance Prior Year Adverse Development$ (24,044) $ (15,238)
The present 12 months loss ratio was 106.9% for the 12 months ended
in comparison with 55.2% in 2020 as a result of greater loss ratios on the run-off of unearned
premium for terminated reinsurance contracts.
Commission and Other Acquisition Expenses - Commission and different acquisition bills decreased by$10.6 million , or 52.0%, for the 12 months endedDecember 31, 2021 in comparison with 2020 as a result of decrease web earned premiums because of this of terminating each quota share agreements with AmTrust efficient as ofJanuary 1, 2019 . The fee and different acquisition expense ratio elevated 3.6 factors to 38.5% for the 12 months endedDecember 31, 2021 in comparison with 34.9% in 2020. General and Administrative Expenses - General and administrative bills decreased by$38.0 thousand or 1.5% for the 12 months endedDecember 31, 2021 in comparison with 2020. The normal and administrative expense ratio elevated to 9.9% for the 12 months endedDecember 31, 2021 in comparison with 4.4% in 2020 because of this of decrease web earned premiums as a result of terminating each quota share agreements with AmTrust as ofJanuary 1, 2019 . The total expense ratio (together with fee and different acquisition bills) elevated to 48.4% for the 12 months endedDecember 31, 2021 in comparison with 39.3% in 2020 primarily as a result of comparatively secure administrative section bills mixed with considerably decrease earned premiums as mentioned above. 55
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Liquidity and Capital Resources
Liquidity
Maiden Holdings is a holding firm and transacts no enterprise of its personal. We due to this fact depend on money flows within the kind of dividends, advances, loans and different permitted distributions from our subsidiary firms to pay bills and make dividend funds on our widespread and desire shares. The jurisdictions in which our working subsidiaries are licensed to write down enterprise impose rules requiring firms to take care of or meet statutory solvency and liquidity necessities and additionally place restrictions on the declaration and cost of dividends and different distributions. As ofDecember 31, 2021 , the Company had investable property of$1.7 billion in comparison with$2.3 billion as ofDecember 31, 2020 . Investable property are the mixed whole of our investments, money and money equivalents (together with restricted money), mortgage to a associated occasion and funds withheld receivable. The decline in our investable property is primarily the outcome of our cessation of energetic reinsurance underwriting of new potential dangers in 2018 and 2019 which subsequently leads to destructive working money flows to settle declare funds from the run-off of the liabilities from that reinsurance portfolio in 2021. As beforehand indicated,Maiden Reinsurance re-domesticated fromBermuda toVermont onMarch 16, 2020 . We proceed to be actively engaged with theVermont DFR relating to the formulation ofMaiden Reinsurance's long term marketing strategy, together with its funding coverage, modifications to which require prior regulatory approval as stipulated byVermont legislation or the Vermont DFR for any energetic underwriting, capital administration or different strategic initiatives.Maiden Reinsurance has obtained all essential approvals required to this point by theVermont DFR, together with its actions by way of GLS and its funding coverage, which incorporates: 1) the growth of accepted asset courses for funding reflecting not solelyMaiden Reinsurance's solvency place however the materials discount in required capital essential to function its enterprise as mentioned additional in Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity & Capital Resources - Cash and Investments; and 2) the buy of affiliated securities as demonstrated within the current desire share tender provides. The Investment Policy, as accepted and as amended, maintains our established funding administration and governance practices.Maiden Reinsurance is regulated by the Vermont DFR and is the principal working subsidiary ofMaiden Holdings . AtDecember 31, 2021 ,Maiden Reinsurance had statutory capital and surplus of$999.8 million , exceeding the quantities required to be maintained of$132.8 million atDecember 31, 2021 . Under its license as an affiliated reinsurer underneath the captive licensing legal guidelines within theState of Vermont ,Maiden Reinsurance requires the approval of the Vermont DFR for the cost of any dividends. During the years endedDecember 31, 2021 and 2020,Maiden Reinsurance didn't pay any dividends toMaiden NA and likewise,Maiden NA didn't pay any dividends toMaiden Holdings throughout each durations..Maiden Holdings has two Swedish domiciled working subsidiaries, Maiden LF and Maiden GF, that are each regulated by the Swedish FSA. AtDecember 31, 2021 , Maiden LF and Maiden GF every had a statutory capital and surplus of$8.3 million and$10.0 million , respectively, exceeding the quantities required to be maintained of$4.2 million and$5.1 million , respectively, atDecember 31, 2021 . Maiden LF and Maiden GF are topic to statutory and regulatory restrictions underneath the Swedish FSA that restrict the utmost quantity of annual dividends or distributions paid by Maiden LF and Maiden GF toMaiden Holdings . AtDecember 31, 2021 , Maiden LF and Maiden GF usually are not allowed to pay dividends or distributions with out the permission of the Swedish FSA. During the years endedDecember 31, 2021 and 2020, Maiden LF and Maiden GF didn't pay any dividends toMaiden Holdings .Maiden Holdings' wholly ownedU.Ok. subsidiary, Maiden Global, operates as a reinsurance companies and holding firm. Maiden Global is topic to regulation by theU.Ok. Financial Conduct Authority (the "FCA"). AtDecember 31, 2021 , Maiden Global is allowed to pay dividends or distributions not exceeding$5.1 million . Maiden Global didn't pay any dividends toMaiden Holdings through the years endedDecember 31, 2021 and 2020. We could expertise continued volatility in our outcomes of operations which may negatively impression our monetary situation and create a discount within the quantity of obtainable distribution or dividend capability from our regulated reinsurance subsidiaries, which might additionally cut back liquidity. Further, we and our insurance coverage subsidiaries may have extra capital to take care of compliance with regulatory capital necessities and/or be required to put up extra collateral underneath present reinsurance preparations, which may cut back our liquidity. Finally, whereas we now have had restricted impacts from the consequences of COVID-19 on our monetary situation to this point, the Company's funding portfolio might be adversely impacted by unfavorable market situations attributable to the pandemic ought to it proceed longer than anticipated.
Operating, investing and financing money flows
Our sources of funds traditionally have consisted of premium receipts web of commissions and brokerage, funding revenue, web proceeds from capital elevating actions, and proceeds from gross sales, maturities, pay downs and redemption of investments. Cash is at present used primarily to pay loss and LAE, ceded reinsurance premium, normal and administrative bills, and curiosity expense, with the rest of money in extra of our working necessities made obtainable to our funding managers for funding in accordance with our funding coverage, in addition to for capital administration akin to repurchasing our shares. Our enterprise has undergone vital modifications since 2018. As beforehand famous, we now have engaged in a sequence of transactions which have materially diminished our steadiness sheet threat and reworked our operations. As a outcome of these transactions, we're not engaged in any energetic underwriting of new potential reinsurance enterprise thus our web premiums written will proceed to be materially decrease and funding revenue will turn out to be a considerably bigger portion of our whole revenues. We are writing new retroactive dangers via GLS, nevertheless this might be smaller in relation to the run-off of our prior reinsurance enterprise. Despite the preliminary influx of new enterprise from GLS, this has continued to trigger vital destructive working money flows as we run off the AmTrust Reinsurance section reserves as proven within the money flows desk additional beneath. 56 -------------------------------------------------------------------------------- While the event of the GLS platform over time ought to additional improve our potential to pursue the asset and capital administration pillars of our enterprise technique, we nonetheless count on the pattern of destructive total money flows to proceed to scale back our asset base going ahead into 2022 and past. We count on to make use of funds from money and funding portfolios, collected premiums on reinsurance contracts in drive or being run-off, funding revenue and proceeds from funding gross sales and redemptions to satisfy our anticipated claims funds and operational bills. Claim funds might be principally from the run-off of present reserves for losses and LAE. A good portion of these liabilities are collateralized and declare funds might be funded through the use of this collateral which ought to present enough funding to meet these obligations. The Company's administration believes its present sources of liquidity are enough to satisfy its money necessities for the following twelve months as we usually count on destructive working money flows to be sufficiently offset by optimistic investing money flows. While we proceed to count on our money flows to be enough to satisfy our money necessities and to function our enterprise, our potential to execute our asset and capital administration initiatives are depending on sustaining enough ranges of unrestricted liquidity and money flows. AtDecember 31, 2021 and 2020, unrestricted money and money equivalents and unrestricted mounted maturity investments have been$81.1 million and$269.2 million , respectively. The lower of$188.1 million in unrestricted money and mounted maturity investments throughout 2021 was primarily the outcome of$136.3 million utilized for the 2021 Preference Share Repurchase Program,$74.4 million utilized for web purchases of different investments and$37.3 million utilized for web purchases of fairness methodology investments, and$19.1 million for curiosity funds on the Senior Notes, partly offset by receipts of$80.0 million from restricted property as collateral is launched by ceding firms upon satisfaction of liabilities, together with AmTrust. Please see the associated dialogue on money flows from investing and financing actions beneath.
The desk beneath summarizes our working, investing and financing money flows for
the years ended
For the Year Ended December 31, 2021 2020 ($ in hundreds) Operating actions$ (394,430) $ (541,775) Investing actions 464,064 596,044 Financing actions (138,903) (30,130) Effect of alternate charge modifications on overseas forex money (470) 4,409
Total (lower) improve in money, restricted money and money
equivalents
$
(69,739)
Cash Flows from Operating Activities
Cash flows utilized in working actions for the 12 months endedDecember 31, 2021 have been$394.4 million in comparison with money flows utilized in working actions of$541.8 million for the 12 months endedDecember 31, 2020 , a lower of$147.3 million . The working money flows utilized in operations for the years endedDecember 31, 2021 and 2020 have been primarily the outcome of claims funds for the terminated AmTrust Quota Share and the European Hospital Liability Quota Share reinsurance agreements, which produced negligible gross premiums written that have been greater than offset by declare funds from the run-off of present reserves for loss and LAE underneath these agreements.
Cash Flows from Investing Activities
Cash flows from investing actions consist primarily of proceeds from gross sales and maturities of investments web of funds for investments acquired. Net money supplied by investing actions was$464.1 million for the 12 months endedDecember 31, 2021 in comparison with$596.0 million for 2020 as a result of proceeds from gross sales of mounted maturity investments which have been made primarily to settle declare funds in addition to repurchase Preference Shares through the 12 months endedDecember 31, 2021 . For the 12 months endedDecember 31, 2021 , the proceeds from the gross sales, maturities and calls exceeded the purchases of mounted maturity securities by$575.4 million in comparison with web proceeds of$666.3 million throughout 2020. This was partly offset by$74.4 million utilized for web purchases of different investments and$37.3 million utilized for web purchases of fairness methodology investments through the 12 months endedDecember 31, 2021 .
Cash Flows from Financing Activities
Cash flows utilized in financing actions have been$138.9 million for the 12 months endedDecember 31, 2021 in comparison with$30.1 million throughout 2020 primarily as a result of repurchase of the Company's Preference Shares. The Company paid$136.3 million for the repurchase of 9,404,012 Preference Shares pursuant to the 2021 Preference Share Repurchase Program as half of its current capital administration technique through the 12 months endedDecember 31, 2021 . This in comparison with 2,827,595 Preference Shares repurchased by the Company throughout 2020 for combination whole consideration of$30.1 million pursuant to the 2020 Tender Offer (as outlined beneath). No dividends on widespread or desire shares have been paid throughout 2021 and 2020. Our Board of Directors has not declared any widespread or desire share dividends for the reason that third quarter of 2018. 57
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Restrictions, Collateral and Specific Requirements
Maiden Reinsurance is mostly required to put up collateral safety with respect to any reinsurance liabilities it assumes from ceding insurers domiciled within theU.S. to acquire credit score on theirU.S. statutory monetary statements with respect to reinsurance recoverables as a result of them. Consequently, money and money equivalents and investments are pledged in favor of ceding firms to conform with related insurance coverage rules or contractual necessities. AtDecember 31, 2021 , the Company had letters of credit score excellent of$53.6 million for collateral functions that are secured by money and mounted maturities with a good worth of$72.8 million . AtDecember 31, 2021 and 2020, restricted money and money equivalents and mounted maturity investments used as collateral have been$0.6 billion and$1.1 billion , respectively. This collateral represents 87.8% and 80.0% of the truthful worth of our whole mounted maturity investments and money, restricted money and money equivalents atDecember 31, 2021 and 2020, respectively. The following desk gives extra data on these property used as collateral atDecember 31, 2021 and 2020: December 31, 2021 2020 Restricted Cash & Fixed Restricted Cash & Fixed ($ in hundreds) Equivalents Maturities Total Equivalents Maturities Total
Diversified Reinsurance $ 34,298 $ 48,845 $ 83,143 $ 22,064 $ 65,355 $ 87,419 AmTrust Reinsurance 5,121 493,883 499,004 39,722 952,914 992,636 Total $ 39,419 $ 542,728 $ 582,147 $ 61,786 $ 1,018,269 $ 1,080,055
As a % of Consolidated Balance Sheet
captions 100.0% 90.9% 91.5% 100.0% 83.9% 84.7%Maiden Reinsurance loaned funds of$168.0 million to AmTrust atDecember 31, 2021 and 2020, respectively, to partially fulfill its collateral necessities with AII. Advances underneath the mortgage are secured by promissory notes and the mortgage is carried at price. OnJanuary 30, 2019 , in reference to the termination of the AmTrust Quota Share, the Company and AmTrust amended the Loan Agreement betweenMaiden Reinsurance , AmTrust and AII, initially entered into onNovember 16, 2007 , to increase the maturity date toJanuary 1, 2025 and the events acknowledged that as a result of termination of the AmTrust Quota Share, no additional loans or advances could also be made pursuant to the Loan Agreement. OnJanuary 11, 2019 , a portion of the present belief accounts used for collateral on the AmTrust Quota Share have been transformed to a funds withheld association. The Company transferred$575.0 million to AmTrust as a funds withheld receivable which at present bears an annual rate of interest of 1.8%, topic to annual adjustment. The annual rate of interest was 2.65% for the length of 2020. OnJanuary 24, 2019 ,Maiden Reinsurance transferred money of €45.1 million ($51.2 million ) to AIU DAC as a funds withheld receivable to serve as collateral for the European Hospital Liability Quota Share. AIU DAC paysMaiden Reinsurance a hard and fast annual rate of interest of 0.5% on the common each day funds withheld steadiness which is topic to annual adjustment. AtDecember 31, 2021 , the quantity of funds withheld underneath this settlement was$26.5 million (December 31, 2020 -$28.1 million ). Collateral preparations with ceding insurers could topic our property to safety pursuits or require {that a} portion of our property be pledged to, or in any other case held by, third events. Although the funding revenue derived from these property, whereas held in belief, accrues to our profit, the funding of these property is ruled by the phrases of the letter of credit score services or the funding rules of the state or territory of domicile of the ceding insurer, which can be extra restrictive than the funding rules relevant to the Company underneathU.S. legislation within theState of Vermont . The restrictions could end in decrease funding yields on these property, which can adversely have an effect on our profitability. We don't anticipate that the restrictions on liquidity ensuing from restrictions on the funds of dividends by our subsidiary firms or from property dedicated in belief accounts or these property used to collateralize letter of credit score services could have a cloth impression on our potential to hold out our regular enterprise actions. 58
-------------------------------------------------------------------------------- Cash and Investments The funding of our funds has usually been designed to make sure security of principal whereas producing present revenue. Accordingly, the bulk of our funds have been invested in liquid, investment-grade mounted revenue securities that are all designated as AFS atDecember 31, 2021 . As ofDecember 31, 2021 and 2020, our money and investments consisted of: AtDecember 31, 2021
2020
($ in
hundreds)
Fixed maturities, available-for-sale, at truthful worth$ 597,145 $ 1,213,411 Equity methodology investments 83,742 43,136 Other investments 141,725 63,760 Total investments 822,612 1,320,307 Cash and money equivalents 26,668 74,040 Restricted money and money equivalents 39,419
61,786
Total Investments and Cash (together with money equivalents)
In addition to the dialogue on Cash and Cash Equivalents and Fixed Maturities that follows herein, please see "Notes to Consolidated Financial Statements - Note 4 - Investments" included under Part II Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-Ok for additional dialogue on our AFS mounted revenue securities. As our insurance coverage liabilities proceed to run-off and the required capital to function our enterprise for regulatory functions decreases, we now have modifiedMaiden Reinsurance's funding coverage (which has been accepted by the Vermont DFR as famous) and have expanded the vary of asset courses we spend money on to reinforce the revenue and returns our funding portfolio produces. We categorize these investments as various investments which embody "Other Investments" and "Equity Method Investments" on our consolidated steadiness sheets as mentioned in "Note 2 - Significant Accounting Policies" included underneath Part II Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-Ok. Under this revised funding coverage, we now have elevated the quantity of various investments throughout 2021 and 2020, and we count on to proceed to improve the quantities invested therein. Under our funding coverage, various investments may embody, however usually are not restricted to, privately held investments, personal equities, personal credit score lending funds, fixed-income funds, hedge funds, fairness funds, actual property (together with joint ventures and restricted partnerships) and different non-fixed-income investments. For additional particulars on our various investments, along with the dialogue of the investments herein, please see "Notes to Consolidated Financial Statements Note 4(b). Other Investments and Equity Method Investments" included underneath Part II Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-Ok. Our funding efficiency is topic to a spread of dangers, together with dangers associated to normal financial situations, market volatility, rate of interest fluctuations, overseas alternate threat, liquidity threat and credit score and default threat. Interest charges are extremely delicate to many elements, together with governmental financial insurance policies, home and worldwide financial and political situations and different elements past our management. An improve in rates of interest may outcome in vital losses, realized or unrealized, within the worth of our funding portfolio. A portion of our portfolio consists of various investments that topic us to restrictions on redemption, which can restrict our potential to withdraw funds for some interval of time after the preliminary funding. The values of, and returns on, such investments can also be extra risky. We consider our different investments and fairness methodology investments portfolio gives diversification in opposition to our fixed-income investments and a chance for improved risk-adjusted return, nevertheless, the returns of these investments could be extra risky and we could expertise vital unrealized beneficial properties or losses in a selected quarter or 12 months. While we consider the returns produced by these investments will exceed our price of capital, specifically our price of debt capital, it's too quickly to find out if the precise returns will obtain this goal and it might be an prolonged interval of time earlier than that dedication can be made. We could make the most of and pay charges to numerous firms to offer funding advisory and/or administration companies associated to those investments. These charges, which might be predominantly primarily based upon the quantity of property underneath administration, could be included in web funding revenue. In addition, prices related to evaluating, analyzing and monitoring these investments could require extra expenditures than conventional marketable securities. During 2021, our funding bills related to our various investments decreased in comparison with 2020. The substantial majority of our present and future investments are held byMaiden Reinsurance , whose funding coverage has been accepted by theVermont DFR. We could make the most of a portion ofMaiden Reinsurance's unrestricted property to buy affiliated securities and, through the 12 months endedDecember 31, 2021 , we utilized$136.3 million at the side of the 2021 Preference Share Repurchase Program.Maiden Reinsurance has obtained all essential approvals for its funding coverage. As ofDecember 31, 2021 , we now have cumulatively invested$165.8 million within the Preference Shares ofMaiden Holdings .
Cash & Cash Equivalents
AtDecember 31, 2021 , we think about the degrees of money and money equivalents we're holding to be inside our focused ranges. During durations when rates of interest expertise larger volatility, we now have periodically maintained more money and equivalents to higher assess present market situations and alternatives inside our outlined threat urge for food, and could achieve this in future durations. 59
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Fixed Maturity Investments
The common yield and common length of our mounted maturities, by asset class, and our money and money equivalents (each restricted and unrestricted) are as follows: Original or Gross Gross Amortized Unrealized Unrealized Fair Average December 31, 2021 Cost Gains Losses Value yield(1) Average length(2) AFS Fixed maturities ($ in hundreds) U.S. treasury bonds$ 59,989 $ -$ (110) $ 59,879 0.2 % 0.9 U.S. company bonds - mortgage-backed 96,554 2,429 (193) 98,790 2.7 % 2.1 Non-U.S. authorities bonds 3,163 113 - 3,276 0.3 % 7.3 Asset-backed securities 198,946 705 (5,093) 194,558 1.5 % 0.5 Corporate bonds 236,692 10,094 (6,144) 240,642 2.5 % 2.7 Total mounted maturities 595,344 13,341 (11,540) 597,145 1.9 % 1.7 Cash and money equivalents 66,087 - - 66,087 - % 0.0 Total$ 661,431 $ 13,341 $ (11,540) $ 663,232 1.7 % 1.5 Original or Gross Gross Amortized Unrealized Unrealized Fair Average December 31, 2020 Cost Gains Losses Value yield(1) Average length(2) AFS mounted maturities ($ in hundreds) U.S. treasury bonds$ 94,468 $ 34 $ -$ 94,502 0.1 % 1.4 U.S. company bonds - mortgage-backed 272,124 9,439 (126) 281,437 2.5 % 1.9 Non-U.S. authorities bonds 8,641 1,067 - 9,708 1.1 % 6.2 Asset-backed securities 184,227 1,611 (406) 185,432 2.2 % 0.7 Corporate bonds 604,463 40,904 (3,035) 642,332 2.3 % 3.1 Total AFS mounted maturities 1,163,923 53,055 (3,567) 1,213,411 2.2 % 2.3 Cash and money equivalents 135,826 - - 135,826 0.1 % 0.0 Total$ 1,299,749 $ 53,055 $ (3,567) $ 1,349,237 2.0 % 2.1 (1) Average yield is calculated by dividing annualized funding revenue for every sub-component of mounted maturity securities and money and money equivalents (together with amortization of premium or low cost) by amortized price.
(2) Average length in years.
During the 12 months endedDecember 31, 2021 , the yield on the 10-yearU.S. Treasury bond elevated by 59 foundation factors to 1.52%. The 10-yearU.S. Treasury charge is the important thing risk-free determinant within the truthful worth of many of the mounted revenue securities in our portfolio. TheU.S. Treasury yield curve skilled a materials upward shift through the 12 months endedDecember 31, 2021 , reflecting issues about potential inflation emanating from the mixture of: 1) rising confidence within theU.S. financial outlook because the financial results of the COVID-19 pandemic proceed to abate; 2) enactment of extra vital fiscal stimulus laws within theU.S. ; and 3) continued accommodative financial coverage pursued by central banks globally. The motion out there values of our mounted maturity portfolio through the 12 months endedDecember 31, 2021 generated web unrealized losses of$47.7 million which diminished our guide worth per widespread share by$0.55 throughout that interval. Our funding portfolios could also be adversely impacted by unfavorable market situations attributable to the COVID-19 pandemic, which may trigger continued volatility in our outcomes of operations and negatively impression our monetary situation. Interest charge threat is the value sensitivity of a safety to modifications in curiosity charges. Credit unfold threat is the value sensitivity of a safety to modifications in credit score spreads. As famous, the truthful worth of our mounted maturity investments will fluctuate with modifications in rates of interest and credit score spreads. We try and keep enough liquidity in our mounted maturity investments portfolio with a technique designed to emphasise the preservation of our invested property and present enough liquidity for the immediate cost of claims and contract liabilities. Because we collateralize a good portion of our insurance coverage liabilities, unanticipated or giant will increase in rates of interest may require us to make the most of vital quantities of unrestricted money and mounted maturity securities to offer extra collateral, which may impression our asset and capital administration technique described herein. We additionally monitor the length and construction of our funding portfolio as mentioned beneath. As ofDecember 31, 2021 , the mixture hypothetical change in truthful worth from a right away 100 foundation factors improve in rates of interest, assuming credit score spreads stay fixed, in our mounted maturity investments portfolio would lower the truthful worth of that portfolio by$19.1 million . Actual shifts in rates of interest could not change by the identical magnitude throughout the maturity spectrum or on a person safety and, because of this, the impression on the truthful worth of our mounted maturity securities could also be materially completely different from the ensuing change in worth described above. 60 -------------------------------------------------------------------------------- To restrict our publicity to surprising rate of interest will increase which would scale back the worth of our mounted revenue securities and cut back our shareholders' fairness, we try to take care of the length of our mounted maturity funding portfolio mixed with our money and money equivalents, each restricted and unrestricted, inside an affordable vary of the length of our loss reserves. AtDecember 31, 2021 and 2020, these respective durations in years have been as follows:December 31 ,
2021 2020
Fixed maturities and money and money equivalents
1.5 2.1
Reserve for loss and LAE – gross of LPT/ADC Agreement reserves 4.4 3.9
Reserve for loss and LAE - web of LPT/ADC Agreement reserves
1.4 0.9
During the 12 months endedDecember 31, 2021 , the weighted common length of our mounted maturity funding portfolio decreased by 0.6 years to 1.5 years whereas the length for reserve for loss and LAE elevated by 0.5 years to 4.4 years. The differential in length between these property and liabilities could fluctuate over time and, within the case of mounted maturities, traditionally has been affected by elements akin to market situations, modifications in asset combine and prepayment speeds within the case of each our Agency MBS and industrial mortgage-backed securities. AtDecember 31, 2021 , the length of our mounted maturity funding portfolio decreased in comparison withDecember 31, 2020 as a result of continued gross sales of mounted maturity investments primarily made to settle declare funds with AmTrust. The length of our loss reserves web of the LPT/ADC Agreement was decrease than the length of our mounted maturity funding portfolio atDecember 31, 2021 .
At
mortgage-backed. Additional particulars on the Agency MBS holdings at
2021
December 31, 2021 2020 ($ in hundreds) Fair Value % of Total Fair Value % of Total FNMA - mounted charge$ 47,419 48.0 %$ 119,910 42.6 % FHLMC - mounted charge 47,758 48.3 % 138,733 49.3 % GNMA - variable charge 3,613 3.7 % 5,409 1.9 % GNMA - mounted charge - - % 17,385 6.2 %
Total
Agency MBS bonds includes 16.5% of our mounted maturity investments atDecember 31, 2021 . Given their relative measurement to our whole investments, if quicker prepayment patterns have been to happen over an prolonged interval of time, this might doubtlessly restrict the expansion in our funding revenue in sure circumstances or cut back the overall quantity of funding revenue we earn.
At
maturity investments consisted of funding grade securities. We outline a
safety as being beneath funding grade if it has an S&P credit standing of BB+
or equal, or much less. Please see “Part II, Item 8 – Notes to Consolidated
Financial Statements Note 4. Investments” for added data on the
credit standing of our mounted revenue portfolio.
61
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The safety holdings by sector and monetary energy score of our company
bond holdings at
Ratings(1) BBB+, BBB, % of Corporate December 31, 2021 AAA, AA+, AA, AA- A+, A, A- BBB- BB+ or decrease Fair Value bonds Corporate bonds ($ in hundreds) Basic Materials - % 2.4 % 1.7 % - % $ 9,995 4.1 % Communications - % 2.4 % 3.2 % - % 13,480 5.6 % Consumer - % 2.4 % 31.3 % 2.8 % 87,753 36.5 % Energy - % 9.4 % 4.8 % - % 34,068 14.2 % Financial Institutions 0.6 % 18.8 % 12.9 % 2.6 % 84,025 34.9 % Industrials - % 1.0 % - % - % 2,393 1.0 % Technology - % 3.7 % - % - % 8,928 3.7 % Total Corporate bonds 0.6 % 40.1 % 53.9 % 5.4 % $ 240,642 100.0 % Ratings(1) BBB+, BBB, % of Corporate December 31, 2020 AAA, AA+, AA, AA- A+, A, A- BBB- BB+ or decrease Fair Value bonds Corporate bonds ($ in hundreds) Basic Materials - % 1.0 % 1.4 % - % $ 15,637 2.4 % Communications - % 1.0 % 4.6 % 1.6 % 46,167 7.2 % Consumer - % 2.0 % 21.7 % 1.8 % 164,033 25.5 % Energy 2.5 % 6.3 % 3.0 % 2.2 % 89,984 14.0 % Financial Institutions 7.2 % 23.8 % 13.0 % 1.0 % 288,649 45.0 % Industrials - % 0.9 % 1.2 % 0.8 % 18,494 2.9 % Technology - % 2.4 % 0.6 % - % 19,368 3.0 % Total Corporate bonds 9.7 % 37.4 % 45.5 % 7.4 % $ 642,332 100.0 %
(1) Ratings as assigned by S&P, or equal
The desk beneath contains the Company's ten largest company holdings at truthful worth and as a proportion of all mounted revenue securities held as atDecember 31, 2021 . As ofDecember 31, 2021 , 38.5% areU.S. greenback denominated and 61.5% are Euro denominated, with 41.5% within the Consumer Sector and 33.1% within the Financial Institutions sector: % of Total Fixed December 31, 2021 Fair Value Income Holdings Rating(1) ($ in
hundreds)
Electricite de France, 4.625%, Due 9/11/2024 $ 16,473 2.8 % A- Brookfield Asset Management Inc., 4.00% Due 1/15/2025 12,830 2.1 % A- Anheuser-Busch INBEV NV, 2.875% Due 9/25/2024 12,278 2.1 % BBB+ Carlsberg Breweries A/S, 2.5%, Due 5/28/2024 11,983 2.0 % BBB Thompson Reuters Corp, 4.3% Due 11/23/23 10,467 1.8 % BBBInternational Business Machines Corp. , 7.0%, Due 10/30/2025 8,928 1.5 % A- Chubb Ina Holdings Inc., 1.55%, Due 3/15/2028 7,823 1.3 % A Kraft Heinz Food Co., 1.5%, Due 5/24/2024 6,825 1.1 % BB+ WEA Finance LLC, 3.75%, Due 9/17/2024 6,295 1.1 % BBB+ FBD Insurance PLC, 5% Due 10/9/2028 6,225 1.0 % NA Total $ 100,127 16.8 %
(1) Ratings as assigned by S&P, or equal
62
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At
greenback denominated securities:
December 31, 2021 2020 ($ in hundreds) Fair Value % of Total Fair Value % of Total Non-U.S. greenback denominated company bonds$ 147,740 55.9 %$ 349,231 97.3 % Non-U.S. greenback denominated asset-backed securities 113,399 42.9 % - - % Non-U.S. authorities bonds 3,275 1.2 % 9,708 2.7 % Total non-U.S. greenback denominated securities$ 264,414 100.0 %$ 358,939 100.0 %
At
securities have been invested within the following currencies:
December 31, 2021 2020 ($ in hundreds) Fair Value % of Total Fair Value % of Total Euro$ 264,414 100.0 %$ 329,447 91.8 % British Pound - - % 22,861 6.4 % Canadian Dollar - - % 5,110 1.4 % All different - - % 1,521 0.4 % Total non-U.S. greenback denominated securities$ 264,414 100.0 %$ 358,939 100.0 % The web lower in non-U.S. greenback denominated mounted maturities is primarily as a result of sale of Euro denominated company bonds through the 12 months endedDecember 31, 2021 . AtDecember 31, 2021 and 2020, all of the Company's non-U.S. authorities issuers have a score of AA- or greater by S&P.
For our non-
summarizes the composition of the truthful worth of our mounted maturity investments
by rankings at
Ratings(1) at December 31, 2021 2020 ($ in hundreds) Fair Value % of Total Fair Value % of Total AAA $ - - %$ 1,277 0.4 % AA+, AA, AA- - - % 31,102 8.9 % A+, A, A- 56,669 38.4 % 165,585 47.4 % BBB+, BBB, BBB- 78,021 52.8 % 137,297 39.3 % BB+ or decrease 13,050 8.8 % 13,970 4.0 % Total non-U.S. greenback denominated company bonds$ 147,740 100.0 %$ 349,231 100.0 %
(1) Ratings as assigned by S&P, or equal
The Company doesn't make use of any credit score default safety in opposition to any of the mounted maturity investments held in non-U.S. greenback denominated currencies atDecember 31, 2021 and 2020, respectively. Other Investments and Equity Method Investments Our various investments are categorized as different investments and fairness methodology investments as reported on our consolidated steadiness sheets. These embody personal fairness, personal credit score and hedge funds investments, investments in restricted partnerships, in addition to investments in direct lending entities and investments in technology-oriented insurance coverage associated companies often called insurtechs. Private fairness investments consist of direct investments in privately held entities, investments in personal fairness funds and personal fairness co-investments with sponsoring entities. Private credit score investments consist of loans and different debt securities of privately held entities or funding sponsors.
Our allocation to various investments elevated to 25.4% of our whole money
and investments as of
2020
63
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Our various investments as ofDecember 31, 2021 and 2020 consist of the following asset courses: December 31, 2021 2020 Carrying Value % of Total Carrying Value % of Total Privately held fairness investments$ 52,013 23.1 %$ 22,844 21.4 % Real property investments 44,050 19.5 % - - % Investments in direct lending entities 42,976 19.1 % 36,571 34.2 % Private credit score funds 38,656 17.1 % 1,301 1.2 % Hedge fund investments 32,929 14.6 % 29,435 27.5 % Private fairness funds 6,906 3.1 % 3,044 2.9 % Other investments 6,763 3.0 % 13,701 12.8 % Publicly traded fairness investments 1,174 0.5 % - - % Total various investments$ 225,467 100.0 %$ 106,896 100.0 %
For additional particulars on these different investments, please see “Notes to
Consolidated Financial Statements: Note 4(b) Other Investments and Equity Method
Investments” included under Part II Item 8 “Financial Statements and
Supplementary Data” of this Annual Report on Form 10-Ok.
Certain of the Company's investments in restricted partnerships are associated to actual property joint ventures with pursuits in multi-property initiatives with various methods starting from the event of properties to the possession of income-producing properties. In sure of these joint ventures, the Company has supplied sure indemnities, ensures and commitments to sure events such that it might be required to make funds now or sooner or later. For additional particulars on these monetary ensures, please see "Notes to Consolidated Financial Statements: Note 11 - Commitments, Contingencies and Guarantees" included underneath Part II Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-Ok. 64
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Investment Results
The following desk summarizes our funding outcomes for the years ended
For the Year Ended December 31, 2021 2020 Net funding revenue Fixed revenue property(1)$ 33,261 $ 56,196 Cash and restricted money (3) 781 Other investments, together with equities 1,103 621 Investment bills (2,348) (2,837) Total web funding revenue 32,013 54,761 Net realized beneficial properties: Fixed revenue property(1) 9,097 24,100 Other investments, together with equities 3,377 373 Total web realized beneficial properties 12,474 24,473 Net unrealized beneficial properties: Other investments, together with equities 174 - Total web unrealized beneficial properties 174 - Interest in revenue of fairness methodology investments: Interest in revenue of fairness methodology investments 7,748 5,098 Total curiosity in revenue of fairness methodology investments 7,748 5,098 Total funding return included in earnings (A)(4)$ 52,409 $ 84,332
Other complete revenue (loss):
Unrealized losses on AFS and Equity Method Investments excluding
overseas alternate (B)
$ (32,880) $ (3,434) Total funding return = (A) + (B)$ 19,529 $ 80,898 Annualized revenue from mounted revenue property and money(2)$ 33,258 $ 56,977 Average combination mounted revenue property and money, at price(2) 1,794,173 2,521,380 Annualized funding guide yield 1.9 % 2.3 % Average combination invested property, at truthful worth(3)$ 1,986,000 $ 2,552,937 Investment return included in web earnings 2.6 % 3.3 % Total funding return 1.0 % 3.2 %
1.Includes AFS securities in addition to funds withheld receivable, and mortgage to
associated occasion.
2.Fixed revenue securities contains AFS portfolio, money and restricted money,
funds withheld receivable, and mortgage to associated occasion.
3.Average combination invested property embody all investments (AFS and various investments), money and restricted money, mortgage to associated occasion and funds withheld receivable and is computed as a median of the quantities disclosed in our quarterlyU.S. GAAP consolidated monetary statements.
4.Total funding return included in earnings excludes OTTI for the 12 months
ended
65
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Other Balance Sheet Changes
The following desk summarizes the Company’s different materials steadiness sheet
modifications at
December 31, 2021 2020 Change Change ($ in hundreds) % Reinsurance balances receivable, web$ 19,507 $ 5,777 $ 13,730 237.7 % Reinsurance recoverable on unpaid losses 562,845 592,571 (29,726) (5.0) % Deferred fee and different acquisition bills 36,703 51,903 (15,200) (29.3) % Funds withheld receivable 636,412 654,805 (18,393) (2.8) % Reserve for loss and LAE 1,489,373 1,893,299 (403,926) (21.3) % Unearned premiums 100,131 144,271 (44,140) (30.6) % Deferred acquire on retroactive reinsurance 48,960 74,941 (25,981) (34.7) % The Company's deferred fee and different acquisition bills decreased by 29.3% and unearned premiums decreased by 30.6% primarily as a result of Partial Termination Amendment with AmTrust on a cut-off foundation and the termination of the remaining enterprise underneath each quota share contracts with AmTrust which are actually in run-off with no new enterprise written startingJanuary 1, 2019 . Reinsurance balances receivable elevated by 237.7% primarily as a result of$17.5 million of premiums receivable not but due from the European Hospital Liability Quota Share that was acknowledged through the third quarter of 2021.
Funds withheld receivable decreased by 2.8% primarily as a result of decrease funds
withheld to be utilized as collateral for IIS reinsurance agreements within the
Diversified Reinsurance section.
The Company’s reserve for loss and LAE decreased by 21.3% primarily as a result of
cost of prior 12 months loss claims in addition to favorable loss growth
acknowledged primarily for the AmTrust Reinsurance section.
The lower within the deferred acquire on retroactive reinsurance by 34.7% for the 12 months endedDecember 31, 2021 is essentially attributable to$29.1 million of favorable prior 12 months loss growth underneath the AmTrust Quota Share which is absolutely recoverable from Cavello underneath the LPT/ADC Agreement. This favorable growth additionally impacted the reinsurance recoverable on unpaid losses which decreased by 5.0% or$29.7 million as atDecember 31, 2021 in comparison withDecember 31, 2020 .
Capital Resources
Capital assets consist of funds deployed in help of our operations. In the 12 months endedDecember 31, 2021 , our whole capital assets decreased by$143.6 million , or 18.2% in comparison withDecember 31, 2020 primarily as a result of repurchases of our Preference Shares and unrealized losses on our mounted maturity funding portfolio, partially offset by web revenue obtainable to widespread shareholders. During the 12 months endedDecember 31, 2021 , guide worth per widespread share elevated by 65.6% to$2.60 and diluted guide worth per widespread share elevated by 67.1% to$2.59 , in comparison withDecember 31, 2020 . This was primarily as a result of acquire of$91.0 million on the 2021 Preference Share Repurchase Program which elevated guide worth by$1.05 per widespread share. Book worth additionally elevated as a result of web revenue of$26.6 million through the 12 months endedDecember 31, 2021 . Book worth progress was partly offset by a web lower in AOCI of$36.1 million for the 12 months endedDecember 31, 2021 . The following desk reveals the motion in whole capital assets atDecember 31, 2021 and 2020: December 31, 2021 2020 Change Change ($ in hundreds) % Preference shares$ 159,210 $ 394,310 $ (235,100) (59.6) %
Common shareholders' fairness 225,047 133,506
91,541 68.6 %
Total Maiden shareholders’ fairness 384,257 527,816
(143,559) (27.2) %
Senior Notes – principal quantity 262,500 262,500
- - % Total capital assets$ 646,757 $ 790,316
The web lower in whole capital assets was as a result of decline in whole
shareholders’ fairness at
27.2% in comparison with
•web lower of$136.3 million from the 2021 Preference Share Repurchase Program which consisted of the par worth of Preference Shares repurchased of$235.1 million partly offset by: (1) beneficial properties acknowledged on the repurchase of Preference Shares at market values of$91.0 million for the 12 months endedDecember 31, 2021 which elevated retained earnings; and (2) a web improve in extra paid-in capital of$7.8 million regarding proportionate share in issuance prices of Preference Shares repurchased, which was beforehand acknowledged as a discount in extra paid-in capital; 66 -------------------------------------------------------------------------------- •web lower in AOCI of$36.1 million which arose as a result of: (1) web unrealized losses on funding of$52.1 million ensuing largely from the web lower in the truthful worth of$47.7 million for our mounted revenue funding portfolio regarding market worth actions as a result of rising rates of interest through the 12 months endedDecember 31, 2021 and$4.4 million associated to declines within the worth of fairness methodology investments; much less (2) a rise in cumulative translation changes of$16.0 million as a result of strengthening of theU.S. greenback on the remeasurement of web insurance-related liabilities denominated in euro throughout the 12 months endedDecember 31, 2021 ; partly offset by:
•web revenue attributable to Maiden of
•web improve as a result of share-based compensation of
Please confer with “Notes to Consolidated Financial Statements – Note
6 – Shareholders’ Equity” included under Item 8 “Financial Statements and
Supplementary Data” of this Annual Report on Form 10-Ok for a dialogue of the
fairness devices issued by the Company at
Book worth and diluted guide worth per widespread share atDecember 31, 2021 and 2020 have been computed as follows: December 31, 2021 2020 ($ in
hundreds besides share and per
share information) Ending Maiden widespread shareholders' fairness$ 225,047 $ 133,506 Proceeds from assumed conversion of dilutive choices 10 10
Numerator for diluted guide worth per widespread share calculation
Common shares excellent 86,467,242 84,801,161
Shares issued from assumed conversion of dilutive choices and
restricted share items
494,926 1,489,064
Denominator for diluted guide worth per widespread share
calculation
86,962,168 86,290,225 Book worth per widespread share$ 2.60 $ 1.57 Diluted guide worth per widespread share 2.59 1.55 Common Shares OnFebruary 21, 2017 , the Company's Board of Directors accepted the repurchase of as much as$100.0 million of the Company's widespread shares every so often at market costs. During the 12 months endedDecember 31, 2021 , the Company didn't repurchase any widespread shares underneath its share repurchase authorization as it's precluded from repurchasing its widespread shares as a result of its failure to pay dividends on its Preference Shares. Until such time as dividends on Preference Shares are paid, the Company will be unable to repurchase or pay dividends on its widespread shares. AtDecember 31, 2021 , the Company had a remaining authorization of$74.2 million for share repurchases.
Preference Shares
As half of the capital administration pillar of our technique, pursuant to the money tender provide onDecember 24, 2020 ,Maiden Reinsurance accepted for buy 2,827,595 Preference Shares known as the "2020 Tender Offer". The acquisition byMaiden Reinsurance of the Company's Preference Shares pursuant to the tender provide was made in compliance withMaiden Reinsurance's funding coverage beforehand accepted by the Vermont DFR.Maiden Reinsurance used unrestricted money of$29.7 million to repurchase the Preference Shares pursuant to the 2020 Tender Offer. OnMarch 3, 2021 , the Company's Board accepted the repurchase, together with the repurchase byMaiden Reinsurance inside its funding pointers, of as much as$100.0 million of the Company's Preference Shares. OnMay 6, 2021 , the Company's Board of Directors accepted the extra repurchase, together with the repurchase byMaiden Reinsurance in accordance with its funding pointers (as could also be amended), of as much as$50.0 million of the Company's Preference Shares from time to time at market costs in open market purchases or as could also be privately negotiated. The principal function of the 2020 Tender Offer and 2021 Preference Share Repurchase Program is to regulate our capital construction to mirror present operations and the quantity of capital required to functionMaiden Reinsurance . The Board has not declared or paid a dividend on the Preference Shares since 2018 and there could be no assurance that it's going to declare and pay dividends on the Preference Shares sooner or later. The Preference Shares are perpetual and there is not any mounted date on which we're required to redeem or in any other case repurchase them. As half of the capital administration pillar of our technique throughout 2021,Maiden Reinsurance accepted 9,404,012 Preference Shares for buy by way of personal negotiation with sure safety holders at a median worth of$14.48 per Preference Share. The Company has continued to repurchase Preference Shares subsequent toDecember 31, 2021 pursuant to a Rule 10b5-1 plan. Please see "Note 16 - Subsequent Events" included under Item 8. "Financial Statements and Supplementary Data" of this Annual Report on Form 10-Ok for particulars. 67
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Please confer with “Notes to Consolidated Financial Statements – ‘Note
6 – Shareholders’ Equity” under Item 8 “Financial Statements and Supplementary
Data” of this Annual Report on Form 10-Ok for additional data on our
Preference Shares. At
authorization of
Senior Notes
There have been no modifications within the Company's Senior Notes atDecember 31, 2021 in comparison withDecember 31, 2020 and the Company didn't enter into any short-term borrowing preparations through the 12 months endedDecember 31, 2021 . Please confer with "Notes to Consolidated Financial Statements - Note 7 - Long-Term Debt" included underneath Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-Ok for a dialogue of the Senior Notes issued by the Company. The ratio of Debt to Total Capital Resources atDecember 31, 2021 and 2020 was computed as follows: December 31, 2021 2020 ($ in hundreds) Senior notes - principal quantity$ 262,500 $
262,500
Maiden shareholders' fairness 384,257
527,816
Total capital assets$ 646,757 $
790,316
Ratio of debt to whole capital assets 40.6 %
33.2 %
Off-Balance Sheet Arrangements
Certain of the Company's investments in restricted partnerships are associated to actual property joint ventures with pursuits in multi-property initiatives with various methods starting from the event of properties to the possession of income-producing properties. In sure of these joint ventures, the Company has supplied sure indemnities, ensures and commitments to sure events such that it might be required to make funds now or sooner or later as additional described within the "Notes to Consolidated Financial Statements - Note 11 - Commitments, Contingencies and Guarantees " included underneath Item 8 "Financial Statements and Supplementary Data" of this Annual Report on Form 10-Ok. Any loss for which the Company might be liable could be contingent on the default of a mortgage by the actual property three way partnership entity for which the Company supplied a monetary assure to a lender. While the Company has dedicated to combination limits as to the quantity of ensures it's going to present as half of its restricted partnerships, ensures are solely supplied on a person transaction foundation and are topic to the phrases and situations of every transaction mutually agreed by the events concerned. The Company just isn't certain to such ensures with out its specific authorization. As mentioned above, atDecember 31, 2021 , ensures of$33.3 million have been supplied to lenders by the Company on behalf of actual property joint ventures, nevertheless, the probability of the Company incurring any losses pertaining to mission degree financing ensures was decided to be distant. Therefore, no legal responsibility has been accrued underneath ASC 450-20. 68
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Non-GAAP Financial Measures
As outlined and described within the Key Financial Measures part, administration makes use of sure key monetary measures, some of that are non-GAAP monetary measures, to judge the Company's monetary efficiency and the general progress in worth generated for the Company's widespread shareholders. Management believes that these monetary measures, which can be outlined and calculated in another way by different firms, clarify the Company's outcomes to buyers in a fashion that permits for a extra full understanding of the underlying developments within the Company's enterprise. The calculation, reconciliation to nearest GAAP measure and dialogue of related non-GAAP monetary measures utilized by administration are mentioned beneath. Non-GAAP working earnings have been$60.5 million for the 12 months endedDecember 31, 2021 , in comparison with$47.1 million in 2020. The enchancment in non-GAAP working earnings was largely as a result of: • beneficial properties of$91.0 million from the repurchase of Preference Shares at market values for the 12 months endedDecember 31, 2021 in comparison with beneficial properties of$38.2 million for Preference Share repurchases throughout 2020; partly offset by: • underwriting loss of$16.0 million for the 12 months endedDecember 31, 2021 on a present accident 12 months foundation in comparison with underwriting revenue of$0.8 million for 2020 on a present accident 12 months foundation attributable to greater loss ratios together with greater expense ratios attributable to a big lower in earned premium on the run-off of unearned premium for terminated reinsurance contracts in our AmTrust Reinsurance section; and
• decrease web funding revenue which decreased by
The Company's non-GAAP working outcomes included a non-GAAP underwriting loss of$17.5 million for the 12 months endedDecember 31, 2021 , in comparison with non-GAAP underwriting revenue of$3.0 million in 2020, as a result of underwriting leads to the AmTrust section not coated by the LPT/ADC Agreement, particularly the run-off of the AmTrust Quota Share with losses occurring afterDecember 31, 2018 (together with the extra ceding fee paid underneath the Partial Termination Amendment) and claims associated to the European Hospital Liability Quota Share. The lower in underwriting outcomes was pushed by greater loss ratios on the run-off of unearned premium for terminated reinsurance contracts within the AmTrust Reinsurance section for the 12 months endedDecember 31, 2021 in addition to greater expense ratios attributable to a big lower in earned premium.
Non-GAAP working earnings and Non-GAAP diluted working earnings per share
attributable to widespread shareholders
Non-GAAP working earnings and Non-GAAP diluted working earnings per share attributable to widespread shareholders could be reconciled to the closestU.S. GAAP monetary measure as follows: For the Year Ended December 31, 2021 2020
($ in hundreds besides per share
information) Net revenue$ 117,643 $ 79,957 Add (subtract): Net realized and unrealized beneficial properties on funding (12,648) (24,473) Total other-than-temporary impairment losses - 2,468 Foreign alternate and different (beneficial properties) losses (7,685) 8,526 Decrease in deferred acquire on retroactive reinsurance (29,081) (14,304) Interest in revenue of fairness methodology investments (7,748) (5,098) Non-GAAP working earnings
Diluted earnings per share attributable to widespread shareholders$ 1.35 $ 0.93 Add (subtract): Net realized and unrealized beneficial properties on funding (0.14) (0.29) Total other-than-temporary impairment losses - 0.03 Foreign alternate and different (beneficial properties) losses (0.09) 0.11 Decrease in deferred acquire on retroactive reinsurance (0.33) (0.17) Interest in revenue of fairness methodology investments (0.09) (0.06) Non-GAAP diluted working earnings per widespread share attributable to widespread shareholders$ 0.70 $ 0.55 69
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Non-GAAP Operating ROACE
Non-GAAP Operating ROACE for the years ended
computed as follows:
For the Year Ended
2020
($ in
hundreds)
Non-GAAP working earnings$ 60,481
Opening adjusted widespread shareholders' fairness 208,447
155,668
Ending adjusted widespread shareholders' fairness 274,990
208,447
Average adjusted widespread shareholders' fairness 241,719
182,058
Non-GAAP Operating ROACE 25.0 %
25.9 %
Non-GAAP Underwriting Results and Combined Ratio
The following summarizes our non-GAAP underwriting outcomes for the years ended
For the Year EndedDecember 31, 2021
2020
($ in
hundreds)
Gross premiums written$ 10,938
$ 31,389 Net premiums written$ 10,403 $ 28,432 Net premiums earned$ 52,993 $ 106,081 Other insurance coverage income 1,067
1,276
Non-GAAP web loss and LAE(1) (36,388)
(56,103)
Commission and different acquisition bills (24,840)
(38,796)
General and administrative bills (10,341)
(9,488)
Non-GAAP underwriting (loss) revenue(1)$ (17,509)
Ratios:
Non-GAAP web loss and LAE ratio(1) 67.3 %
52.3 %
Commission and different acquisition expense ratio 46.0 %
36.1 %
General and administrative expense ratio 66.6 %
36.4 %
Expense ratio 112.6 %
72.5 %
Non-GAAP mixed ratio(1) 179.9 %
124.8 %
(1) Non-GAAP underwriting (loss) revenue, non-GAAP web loss and LAE, non-GAAP web loss and LAE ratio, and non-GAAP mixed ratio for the years endedDecember 31, 2021 and 2020 embody the impression of prior 12 months reserve growth topic to the LPT/ADC Agreement within the respective durations. Please see the "Key Financial Measures" part for definitions of non-GAAP underwriting (loss) revenue, non-GAAP web loss and LAE, non-GAAP web loss and LAE ratio, and non-GAAP mixed ratio. The non-GAAP underwriting outcomes in addition to the non-GAAP loss and LAE and ratios and non-GAAP mixed ratios embody the impression of favorable prior 12 months loss reserve growth underneath the AmTrust Quota Share which is absolutely recoverable from Cavello and topic to the LPT/ADC Agreement with Cavello to present the last word financial profit to the Company.
As proven within the desk above, adjusted for the lower within the deferred acquire
underneath the LPT/ADC Agreement of
2021
non-GAAP underwriting revenue of
lower within the deferred acquire underneath the LPT/ADC Agreement of
through the 12 months ended
The non-GAAP underwriting outcomes above have been as a result of underwriting leads to the AmTrust section not coated by the LPT/ADC Agreement, particularly the run-off of the AmTrust Quota Share with losses occurring afterDecember 31, 2018 (together with the extra ceding fee paid underneath the Partial Termination Amendment) in addition to claims associated to the European Hospital Liability Quota Share. Underwriting leads to the Diversified section through the years endedDecember 31, 2021 and 2020, respectively, have been comparatively secure. 70
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The non-GAAP mixed ratio through the 12 months ended
in comparison with 124.8% throughout 2020.
For the Year EndedDecember 31, 2021
2020
Combined ratio 126.1 % 111.4 % Less: lower within the deferred acquire on the LPT/ADC Agreement (53.8) % (13.4) % Non-GAAP mixed ratio 179.9 % 124.8 % Non-GAAP Net Loss and LAE Adjusted for the lower within the deferred acquire underneath the LPT/ADC Agreement, the non-GAAP web loss and LAE for the 12 months endedDecember 31, 2021 elevated by$29.1 million as these quantities embody favorable loss expertise for AmTrust reserves topic to the LPT/ADC Agreement that are in the end recoverable from Cavello. In comparability, adjusted for the lower within the deferred acquire underneath the LPT/ADC Agreement through the 12 months endedDecember 31, 2020 , the non-GAAP web loss and LAE elevated by$14.3 million for the reason that favorable loss expertise on AmTrust reserves topic to the LPT/ADC Agreement are in the end recoverable from Cavello.
These changes have been mirrored within the calculation of non-GAAP Loss and
LAE as proven within the desk beneath:
For the Year Ended December 31, 2021 2020 ($ in hundreds) Net loss and LAE$ 7,307 $ 41,799 Less: lower within the deferred acquire on the LPT/ADC Agreement (29,081) (14,304) Non-GAAP web loss and LAE$ 36,388 $ 56,103 Adjusted for the lower within the deferred acquire underneath the LPT/ADC Agreement of$29.1 million through the 12 months endedDecember 31, 2021 , non-GAAP web loss and LAE was$36.4 million . Adjusted for lower within the deferred acquire underneath the LPT/ADC Agreement of$14.3 million through the 12 months endedDecember 31, 2020 , non-GAAP web loss and LAE was$56.1 million . The non-GAAP web loss and LAE ratio was 67.3% for the 12 months endedDecember 31, 2021 in comparison with 52.3% for 2020.
Adjusted Shareholders’ Equity, Adjusted Total Capital Resources, Adjusted Book
Value per Common Share and Ratio of Debt to Total Adjusted Capital Resources
The Adjusted Shareholders' Equity, Adjusted Total Capital Resources and Adjusted Book Value per Common Share atDecember 31, 2021 and 2020 displays the addition of the unamortized deferred acquire underneath the LPT/ADC Agreement to the GAAP shareholders' fairness as depicted within the computations beneath. The deferred acquire underneath the LPT/ADC Agreement was$45.9 million atDecember 31, 2021 in comparison with$74.9 million atDecember 31, 2020 , and pertains to loss reserves topic to that settlement which are absolutely recoverable from Cavello. The lower within the unamortized deferred acquire underneath the LPT/ADC Agreement of$29.1 million for the 12 months endedDecember 31, 2021 is attributable to$29.1 million in loss and LAE acknowledged as favorable loss growth within the Company's GAAP revenue assertion topic to the LPT/ADC Agreement. We consider the inclusion of this unamortized deferred acquire in these metrics higher displays the final financial profit of the LPT/ADC Agreement, which can enhance the Company's shareholders' fairness over the settlement interval underneath the phrases of the settlement. The Adjusted Shareholders' Equity, Adjusted Total Capital Resources and Adjusted Book Value per Common Share atDecember 31, 2021 additionally displays the addition of the LP Investment Adjustment of$4.1 million , which pertains to the fairness accounting associated to the truthful worth of sure hedged liabilities inside an fairness methodology funding held by the Company whereby the last word realizable worth of the asset supporting the hedged liabilities can't at present be acknowledged at truthful worth. We consider that this adjustment acknowledges future realizable worth and displays the last word financial profit of this funding which can enhance the Company's shareholders' fairness over the hedged contract interval inside the funding. 71
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Reconciliation of shareholders’ fairness to Adjusted shareholders’ fairness and
Adjusted Total Capital Resources
The following desk computes adjusted shareholders' fairness and adjusted whole capital assets by recognizing the unamortized deferred acquire underneath the LPT/ADC Agreement in addition to the LP Investment Adjustment for realizable worth of intangible asset in an restricted partnership funding atDecember 31, 2021 and 2020: December 31, 2021 2020 Change Change ($ in hundreds) % Preference shares$ 159,210 $ 394,310 $ (235,100) (59.6) % Common shareholders' fairness 225,047 133,506 91,541 68.6 % Total shareholders' fairness 384,257 527,816 (143,559) (27.2) % LP Investment Adjustment 4,083 - 4,083 NM Unamortized deferred acquire on LPT/ADC Agreement 45,860 74,941 (29,081) (38.8) % Adjusted shareholders' fairness 434,200 602,757 (168,557) (28.0) % Senior Notes - principal quantity 262,500 262,500 - - % Adjusted whole capital assets$ 696,700 $ 865,257 $ (168,557) (19.5) % NM - non significant
Reconciliation of Book Value per Common Share to Adjusted Book Value per Common
Share
The adjusted guide worth per widespread share as reconciled for the popularity of
the unamortized deferred acquire underneath the LPT/ADC Agreement in addition to the LP
Investment Adjustment for realizable worth of intangible asset in restricted
partnership funding at
December 31, 2021 2020 Book worth per widespread share$ 2.60 $ 1.57 LP Investment Adjustment 0.05 - Unamortized deferred acquire on LPT/ADC Agreement 0.53 0.89 Adjusted guide worth per widespread share$ 3.18 $ 2.46
Ratio of Debt to Adjusted Total Capital Resources
Management makes use of this non-GAAP measure to observe the monetary leverage of the Company. This measure is calculated utilizing the overall principal quantity of debt divided by the sum of adjusted whole capital assets as computed within the desk above. The ratio of Debt to Adjusted Total Capital Resources atDecember 31, 2021 and 2020 was computed as follows:December 31, 2021
2020
($ in
hundreds)
Senior notes - principal quantity$ 262,500
Adjusted shareholders' fairness 434,200
602,757
Adjusted whole capital assets$ 696,700
Ratio of debt to adjusted whole capital assets 37.7 %
30.3 %
Currency and Foreign Exchange
We conduct enterprise in a spread of overseas (non-U.S. ) currencies, the principal exposures being the euro and the British pound. Assets and liabilities denominated in foreign currency are uncovered to modifications in forex alternate charges. Our reporting forex is theU.S. greenback, and alternate charge fluctuations relative to theU.S. greenback could materially impression our outcomes and monetary place. Our principal publicity to overseas forex threat is our obligation to settle claims in foreign currency. In addition, to reduce this threat, we keep and count on to proceed to take care of a portion of our funding portfolio in investments denominated in currencies apart from theU.S. greenback. We could make use of varied methods (together with hedging) to handle our publicity to overseas forex alternate threat. To the extent that these exposures usually are not absolutely hedged or the hedges are ineffective, our outcomes of operations or fairness could also be adversely effected. AtDecember 31, 2021 , no such hedges or hedging methods have been in drive or had been entered into. We measure financial property and liabilities denominated in foreign currency at interval finish alternate charges, with the ensuing overseas alternate beneficial properties and losses acknowledged within the Consolidated Statements of Income. Revenues and bills in foreign currency are transformed at quarterly common alternate charges through the 12 months. The impact of the translation changes for overseas operations is included in AOCI. 72 -------------------------------------------------------------------------------- Net overseas alternate beneficial properties have been$7.5 million through the 12 months endedDecember 31, 2021 in comparison with web overseas alternate losses of$8.1 million through the 12 months endedDecember 31, 2020 . Effects of Inflation The anticipated results of inflation are thought-about explicitly within the pricing of the insured exposures, that are used because the preliminary estimates of reserves for loss and LAE. In addition, inflation can be implicitly accounted for in subsequent estimates of loss and LAE reserves, because the anticipated charge of emergence is partly predicated upon the historic ranges of inflation that impression final declare prices. To the extent inflation causes these prices, significantly medical remedies and litigation prices, to differ from the assumptions made in the pricing or reserving estimates, the Company might be required to alter the reserve for loss and LAE with a corresponding change in its earnings within the interval wherein the variance is recognized. The precise results of inflation on the outcomes of operations of the Company can't be precisely identified till claims are in the end settled. We proceed to observe inflationary impacts ensuing from authorities stimulus, sharp will increase in demand, labor drive and provide chain disruptions, amongst different elements, on our loss price developments. For instance, Governmental coverage responses to inflation could improve rates of interest which, within the brief time period, could have a vital impression on our investments, specifically our mounted maturity securities. We will proceed to observe our liquidity, capital and potential earnings impression of these modifications however stay targeted on our asset allocation selections as described in our "Business Strategy" part of Item 7 "Management's Discussion and Analysis of Financial Condition and Results of Operations - Overview". Inflation can also end in elevated wage pressures for our working bills, as we stay targeted on being a aggressive employer in our market.
Recent Accounting Pronouncements
Refer to “Notes to Consolidated Financial Statements – Note 2. Significant
Accounting Policies” included under Item 8 “Financial Statement and
Supplementary Data”, of this Annual Report on Form 10-Ok for a dialogue on
just lately issued accounting pronouncements not but adopted.
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