What changed in this filing

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Item 1. Financial Statements

2019-11-12 compared with 2019-08-09 · 433 added, 334 removed, 1002 unchanged (43% of the section changed)

4 unchanged sentences

dollars, except share and per share data)

September 30,

Fixed maturities, available-for-sale, at fair value (amortized cost 2019 - $2,040,852;

7 unchanged sentences

Reinsurance balances receivable, net (includes $30,211 and $38,278 from related parties in 2019 and 2018, respectively)

Reinsurance recoverable on unpaid losses

Loan to related party

4 unchanged sentences

Unearned premiums (includes $226,828 and $1,135,913 from related parties in 2019 and 2018, respectively)

Liability for investments purchased

Deferred gain on retroactive reinsurance

Accrued expenses and other liabilities

21 unchanged sentences

dollars, except per share data)

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Gross premiums written

5 unchanged sentences

Net realized gains (losses) on investment

Total other-than-temporary impairment losses

Total revenues

3 unchanged sentences

Interest and amortization expenses

Foreign exchange and other gains

Foreign exchange and other (gains) losses

Total expenses

Income (loss) from continuing operations before income taxes

income tax benefit

Net income (loss) from continuing operations

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

Net (loss) income

Loss from continuing operations before income taxes

income tax expense (benefit)

Loss from continuing operations

Loss from discontinued operations, net of income tax

Net income from continuing operations attributable to noncontrolling interests

Net (loss) income attributable to Maiden

Net loss attributable to Maiden

Dividends on preference shares

Net (loss) income attributable to Maiden common shareholders

Basic and diluted earnings (loss) from continuing operations per share attributable to Maiden common shareholders

Basic and diluted (loss) earnings from discontinued operations per share attributable to Maiden common shareholders

Basic and diluted (loss) earnings per share attributable to Maiden common shareholders

Weighted average number of common shares - basic

Adjusted weighted average number of common shares and assumed conversions - diluted

Net loss attributable to Maiden common shareholders

Basic and diluted loss from continuing operations per share attributable to Maiden common shareholders

Basic and diluted loss from discontinued operations per share attributable to Maiden common shareholders

Basic and diluted loss per share attributable to Maiden common shareholders

Weighted average number of common shares - basic and diluted

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

(in thousands of U.S.

For the Three Months Ended June 30,

For the Six Months Ended June 30,

Net (loss) income

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Other comprehensive income (loss)

Net unrealized holdings gains (losses) on available-for-sale fixed maturities arising during period

Net unrealized holdings (losses) gains on available-for-sale fixed maturities arising during period

Adjustment for reclassification of net realized (gains) losses recognized in net (loss) income

3 unchanged sentences

Other comprehensive income (loss), after tax

Comprehensive income (loss)

Comprehensive loss

Net income attributable to noncontrolling interests

1 unchanged sentence

Comprehensive income attributable to noncontrolling interests

Comprehensive income (loss) attributable to Maiden

Comprehensive loss attributable to Maiden

See accompanying notes to the unaudited Condensed Consolidated Financial Statements.

2 unchanged sentences

(in thousands of U.S.

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Preference shares - Series A, C and D

10 unchanged sentences

Ending balance

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Beginning balance

Change in net unrealized gains (losses) on investment

Change in net unrealized (losses) gains on investment

Foreign currency translation adjustment

2 unchanged sentences

Beginning balance

Net (loss) income attributable to Maiden

Net loss attributable to Maiden

Dividends on preference shares

15 unchanged sentences

(in thousands of U.S.

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Cash flows from operating activities

Net (loss) income

net loss (income) from discontinued operations

Adjustments to reconcile net (loss) income to net cash flows from operating activities:

net loss from discontinued operations

Adjustments to reconcile net loss to net cash flows from operating activities:

Depreciation, amortization and share-based compensation

Net realized (gains) losses on investment

Total other-than-temporary impairment losses

Foreign exchange and other gains

1 unchanged sentence

Reinsurance balances receivable, net

Reinsurance recoverable on unpaid losses

Accrued investment income

11 unchanged sentences

Purchases of other investments

Net proceeds from sale of discontinued operations

Proceeds from sales of fixed-maturities – available-for-sale

10 unchanged sentences

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

Net increase in cash, restricted cash and cash equivalents

Net (decrease) increase in cash, restricted cash and cash equivalents

Cash, restricted cash and cash equivalents, beginning of period

2 unchanged sentences

Cash, restricted cash and cash equivalents of continuing operations, end of period

Reconciliation of cash & restricted cash reported within Condensed Consolidated Balance Sheets:

Reconciliation of cash and restricted cash reported within Condensed Consolidated Balance Sheets:

Cash and cash equivalents, end of period

2 unchanged sentences

Non-cash investing activities

Investments transferred out related to Partial Termination Amendment

Investments transferred out related to funds withheld arrangement with AmTrust

Investments transferred out related to Partial Termination Amendment and Commutation

Investments transferred out for transactions under remaining AmTrust Quota Share business

Investments transferred out related to discontinued operations

19 unchanged sentences

These unaudited Condensed Consolidated Financial Statements, including these notes, should be read in conjunction with the Company's audited Consolidated Financial Statements, and related notes thereto, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 .

Results of operations for prior year comparatives have been reclassified for 2018 to conform to the 2019 presentation due to discontinued operations as discussed below.

Certain prior year comparatives have been reclassified for 2018 to conform to the 2019 presentation.

The effect of these reclassifications had no impact on previously reported shareholders' equity or net income.

1 unchanged sentence

Maiden Holdings's Board of Directors initiated a review of strategic alternatives ("Strategic Review") in the first quarter of 2018 to evaluate ways to increase shareholder value as a result of continuing significant operating losses and lower returns on equity than planned.

In addition, as of December 31, 2018 , the Company and its subsidiary Maiden Reinsurance Ltd.

In addition, as of December 31, 2018 , both the Company and its subsidiary Maiden Reinsurance Ltd.

("Maiden Bermuda") failed to meet their requirements to hold sufficient capital to cover their respective enhanced capital requirements (“ECR”).

9 unchanged sentences

(4) entered into amendments which terminated the AmTrust Quota Share and the European hospital liability quota share reinsurance contract (“European Hospital Liability Quota Share”) with AmTrust’s wholly owned subsidiaries AmTrust Europe Limited ("AEL") and AmTrust International Underwriters DAC ("AIU DAC") effective January 1, 2019;

(5) entered into the loss portfolio and adverse development cover agreement with Enstar Group Limited ("Enstar") pursuant to the revised Master Transaction Agreement entered into on March 1, 2019 ("LPT/ADC MTA");

(5) entered into the Loss Portfolio Transfer and Adverse Development Cover Agreement ("LPT/ADC Agreement") with Enstar Group Limited ("Enstar") pursuant to the revised Master Transaction Agreement entered into on March 1, 2019 ("LPT/ADC MTA");

and (6) entered into a Commutation and Release Agreement with AmTrust to commute certain workers' compensation business with AII as of January 1, 2019.

1 unchanged sentence

The relevant solvency ratios are expected to continue to improve throughout the remainder of 2019.

Please refer to "Note 13.

Subsequent Events" for additional details regarding the loss portfolio transfer and adverse development cover agreement ("LPT/ADC Agreement") with Enstar and the Commutation and Release Agreement with AmTrust.

Please see below for additional details regarding the LPT/ADC Agreement and the Commutation and Release Agreement.

Discontinued Operations

As part of the Strategic Review initiated by the Company's Board of Directors during 2018 , the Company made the strategic decision to divest its U.S.

treaty reinsurance operations which was completed on December 27, 2018.

The Company made the strategic decision to divest its U.S.

treaty reinsurance operations through the sale of Maiden US which was completed on December 27, 2018.

Except as explicitly described as held for sale or as discontinued operations, and unless otherwise noted, all discussions and amounts presented herein relate to the Company's continuing operations except for net loss, net loss attributable to Maiden and net loss attributable to Maiden common shareholders.

6 unchanged sentences

The Company continues to earn premiums and remain liable for losses occurring subsequent to August 29, 2018 for any policies in force prior to and as of August 29, 2018, until those policies expire.

The payment received for the sale of the Renewal Rights was $ 7,500 subject to potential additional amounts payable in the future in accordance with the agreement, however no additional fees have been recognized to date.

MAIDEN HOLDINGS, LTD.

3 unchanged sentences

Basis of Presentation (continued)

(b) On December 27, 2018 , the Company completed its sale agreement ("U.S.

7 unchanged sentences

and (iv) Maiden Bermuda provided Enstar with a reinsurance cover for loss reserve development, up to a maximum of $ 25,000 , when losses are more than $ 100,000 in excess of the net loss and loss adjustment expenses recorded as of June 30, 2018, for no additional consideration.

Please refer to "Note 13.

Subsequent Events" for further details regarding the subsequent Settlement and Commutation Agreement and related ancillary agreements entered into by Maiden and Enstar affecting the terms of the U.S.

Sale Agreement discussed above.

As discussed above, Maiden NA completed the sale of Maiden US to Enstar Holdings for gross consideration of $ 286,375 , which was subject to certain post-closing adjustments.

In conjunction with the completion of the LPT/ADC Agreement discussed below, on July 31, 2019, Maiden NA and Enstar Holdings waived the post-closing adjustments procedures subject to that agreement and agreed to terminate the $ 25,000 excess of loss reinsurance agreement that Maiden Bermuda provided to Enstar in relation to the Maiden US loss reserves acquired by Enstar.

As a result of these agreements, Maiden recorded a net additional loss from discontinued operations of $ 16,715 for the nine months ended September 30, 2019 .

The Company determined that the sale of the U.S.

4 unchanged sentences

Discontinued Operations " for additional information regarding the effect of the reclassifications on the Company's Condensed Consolidated Financial Statements.

LPT/ADC Agreement with Enstar

Pursuant to the LPT/ADC Agreement dated as of July 31, 2019 and effective as of January 1, 2019 entered into between Maiden Bermuda and Cavello, Cavello will assume liabilities for the loss reserves as of December 31, 2018 associated with the AmTrust Quota Share in excess of a $ 2,178,535 retention up to $ 600,000 , in exchange for a retrocession premium of $ 445,000 .

The $ 2,178,535 retention will be subject to adjustment for paid losses subsequent to December 31, 2018 .

The LPT/ADC Agreement provides Maiden Bermuda with $ 155,000 in adverse development cover over its carried AmTrust Quota Share loss reserves at December 31, 2018 .

The LPT/ADC Agreement meets the criteria for risk transfer and therefore has been accounted for as retroactive reinsurance.

Cumulative ceded losses exceeding $ 445,000 result in a deferred gain which will be recognized over the settlement period in proportion to cumulative losses collected over the estimated ultimate reinsurance recoverable.

Consequently, cumulative adverse development subsequent to December 31, 2018 may result in significant losses from operations until periods when the deferred gain is recognized as a benefit to earnings.

At September 30, 2019 , the deferred gain liability recorded for retroactive reinsurance under the LPT/ADC Agreement was $ 104,542 .

Under the terms of the agreement, the covered losses associated with the commutation with AmTrust, as discussed below in Commutation and Release Agreement - AmTrust Quota Share, are eligible to be covered but recoverable only when such losses are paid or settled by AII or its affiliates, provided such losses and other related amounts shall not exceed $ 312,786 .

Settlement of funding for the LPT/ADC Agreement occurred on August 12, 2019 and Maiden Bermuda paid Enstar approximately $ 7,261 in interest related to the LPT/ADC Agreement premium, calculated at the rate of 2.64 % per annum from January 1, 2019 through August 12, 2019 .

Commutation and Release Agreement - AmTrust Quota Share

The Commutation and Release Agreement entered into and effective as of July 31, 2019, by AII and Maiden Bermuda, provides for AII to assume all reserves ceded by AII to Maiden Bermuda with respect to its proportional 40 % share of the ultimate net loss under the AmTrust Quota Share related to:

(a) all losses incurred in Accident Year 2017 and Accident Year 2018 under California workers' compensation policies issued by AII and as defined in the AmTrust Quota Share ("Commuted California Business");

and (b) all losses incurred in Accident Year 2018 under New York workers' compensation policies issued by AII ("Commuted New York Business" and together with the Commuted California Business ("Commuted Business")) in exchange for the release and full discharge of Maiden Bermuda of all of its obligations to AII with respect to the Commuted Business.

The Commuted Business does not include any business classified by AII as Specialty Program or Specialty Risk business.

AII and Maiden Bermuda agreed that the Commuted Business shall be discharged by Maiden Bermuda's transfer of cash and invested assets in the amount of $ 312,786 ("Commutation Payment") which is the sum of the net ceded reserves in the amount of $ 330,682 with respect to the Commuted Business as of December 31, 2018 less payments in the amount of $ 17,896 made by Maiden Bermuda with respect to the Commuted Business from January 1, 2019 through July 31, 2019.

Settlement of the Commutation Payment occurred on August 12, 2019 and Maiden Bermuda paid AII approximately $ 6,335 in interest related to the Commutation Payment premium, calculated at the rate of 3.30 % per annum from January 1, 2019 through August 12, 2019 .

Maiden Bermuda received a no objection letter from the BMA regarding the Commutation and Release Agreement.

AII and Maiden Bermuda also agreed that, as of July 31, 2019, the AmTrust Quota Share shall be deemed amended as applicable so that the Commuted Business is no longer included as part of the Covered Business under the AmTrust Quota Share.

MAIDEN HOLDINGS, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands of U.S.

dollars, except share and per share data)

Basis of Presentation (continued)

As a result of the strategic decision to divest all of the Company's U.S.

4 unchanged sentences

and (ii) AmTrust Reinsurance which includes all business ceded to Maiden Bermuda from subsidiaries of AmTrust.

In addition to these reportable segments, the results of operations of the former National General Holdings Corporation Quota Share ("NGHC Quota Share") segment is included in the "Other" category.

The prior periods presented herein have been reclassified to conform to this new presentation.

In addition to these reportable segments, the results of operations of the former National General Holdings Corporation Quota Share ("NGHC Quota Share") segment have been included in the "Other" category.

Significant Accounting Policies

There have been no material changes to the significant accounting policies as described in the Company's Annual Report on Form 10-K for the year ended December 31, 2018 except for the following:

Accounting for Retroactive Reinsurance Agreements

Retroactive reinsurance agreements are reinsurance agreements under which a reinsurer agrees to reimburse the Company as a result of past insurable events.

For these agreements, the excess of the amounts ultimately collectible under the agreement over the consideration paid is recognized as a deferred gain liability and amortized into income over the settlement period of the ceded reserves once the paid losses have exceeded the minimum retention.

The amount of the deferral is recalculated each period based on loss payments and updated estimates of ultimate losses.

If the consideration paid exceeds the ultimate losses collectible under the agreement, the net loss on the agreement is recognized in income immediately.

The Company entered into an LPT/ADC Agreement with Cavello on July 31, 2019, as discussed in "Note 1.

Basis of Presentation" .

The Company accounts for this transaction as retroactive reinsurance and pursuant to U.S.

GAAP, recognized a deferred gain during the third quarter of 2019, which represents the cumulative adverse development of losses subject to the LPT/ADC Agreement.

Amortization of the deferred gain will not occur until paid losses have exceeded the minimum retention under this agreement.

The current estimated payout period for the losses covered by the LPT/ADC Agreement before the minimum retention is exceeded is approximately five years .

Recently Adopted Accounting Standards Updates

10 unchanged sentences

None of the topics deemed applicable upon adoption of this standard on January 1, 2019 have a material impact in the Company's interim consolidated financial statements.

MAIDEN HOLDINGS, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands of U.S.

dollars, except share and per share data)

Significant Accounting Policies (continued)

Topic 842, Leases

11 unchanged sentences

The adoption of this standard on January 1, 2019 has impacted the Company’s Condensed Consolidated Balance Sheets but did not have any impact on its results of operations or cash flows.

MAIDEN HOLDINGS, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands of U.S.

dollars, except share and per share data)

Significant Accounting Policies (continued)

Please refer to "Note 10.

33 unchanged sentences

Our Diversified Reinsurance segment consists of a portfolio of predominantly property and casualty reinsurance business focusing on regional and specialty property and casualty insurance companies located primarily in Europe.

Our AmTrust Reinsurance segment includes all business ceded to our wholly owned subsidiary, Maiden Bermuda, from AmTrust, primarily the AmTrust Quota Share and the European Hospital Liability Quota Share.

In addition to our reportable segments, the results of operations of the former NGHC Quota Share segment have been included in the "Other" category.

Our AmTrust Reinsurance segment includes all business ceded to our subsidiary, Maiden Bermuda, from AmTrust, primarily the AmTrust Quota Share and the European Hospital Liability Quota Share.

In addition to our reportable segments, the results of operations of the former NGHC Quota Share segment and the remnants of our retroceded U.S.

treaty business have been included in the "Other" category.

Please refer to "Note 10.

11 unchanged sentences

The Company does not allocate general corporate expenses to the segments.

In determining total assets by reportable segment, the Company identifies those assets that are attributable to a particular segment such as reinsurance balances receivable, deferred commission and other acquisition expenses, funds withheld receivable, loans and restricted cash and cash equivalents and investments.

In determining total assets by reportable segment, the Company identifies those assets that are attributable to a particular segment such as reinsurance balances receivable, reinsurance recoverable on unpaid losses, deferred commission and other acquisition expenses, funds withheld receivable, loans and restricted cash and cash equivalents and investments.

All remaining assets are allocated to Corporate.

2 unchanged sentences

Related Party Transactions", the Partial Termination Amendment and the termination of the remaining business with AmTrust effective January 1, 2019 resulted in a significant reduction in gross premiums written.

This was due to the return of unearned premium on certain lines covered by the Partial Termination Agreement, with no new business written in 2019 due to the termination of the remaining business within the AmTrust Quota Share and the European Hospital Liability Quota Share.

The following tables summarize our reporting segment's underwriting results and the reconciliation of our reportable segments and Other category's underwriting results to our consolidated net (loss) income from continuing operations:

For the Three Months Ended June 30, 2019

This was due to the return of unearned premium on certain lines covered by the Partial Termination Amendment, with no new business written in 2019 resulting from the termination of the AmTrust Quota Share and the European Hospital Liability Quota Share.

For the Three Months Ended September 30, 2019

Diversified Reinsurance

7 unchanged sentences

General and administrative expenses

Underwriting income (loss)

Reconciliation to net income from continuing operations

Underwriting loss

Reconciliation to net loss from continuing operations

Net investment income and realized gains on investment

Total other-than-temporary impairment losses

Interest and amortization expenses

1 unchanged sentence

Other general and administrative expenses

Income tax benefit

Net income from continuing operations

Income tax expense

Net loss from continuing operations

Net loss and LAE ratio (1)

8 unchanged sentences

Segment Information (continued)

For the Three Months Ended June 30, 2018

For the Three Months Ended September 30, 2018

Diversified Reinsurance

10 unchanged sentences

Net investment income and realized losses on investment

Total other-than-temporary impairment losses

Interest and amortization expenses

Foreign exchange gains

Foreign exchange and other losses

Other general and administrative expenses

Income tax benefit

Income tax expense

Net loss from continuing operations

9 unchanged sentences

Segment Information (continued)

For the Six Months Ended June 30, 2019

For the Nine Months Ended September 30, 2019

Diversified Reinsurance

10 unchanged sentences

Net investment income and realized gains on investment

Total other-than-temporary impairment losses

Interest and amortization expenses

13 unchanged sentences

Segment Information (continued)

For the Six Months Ended June 30, 2018

For the Nine Months Ended September 30, 2018

Diversified Reinsurance

8 unchanged sentences

Underwriting loss

Reconciliation to net income from continuing operations

Reconciliation to net loss from continuing operations

Net investment income and realized losses on investment

Total other-than-temporary impairment losses

Interest and amortization expenses

Foreign exchange gains

Foreign exchange and other gains

Other general and administrative expenses

Income tax benefit

Net income from continuing operations

Income tax expense

Net loss from continuing operations

Net loss and LAE ratio (1)

8 unchanged sentences

Calculated by adding together net loss and LAE ratio and the expense ratio.

The following tables summarize the financial position of our reportable segments including the reconciliation to our consolidated assets at June 30, 2019 and December 31, 2018 :

June 30, 2019

The following tables summarize the financial position of our reportable segments including the reconciliation to our consolidated assets at September 30, 2019 and December 31, 2018 :

September 30, 2019

Diversified Reinsurance

2 unchanged sentences

Corporate assets

Assets held for sale

December 31, 2018

9 unchanged sentences

Segment Information (continued)

The following tables set forth financial information relating to net premiums written by major line of business and reportable segment for the three and six months ended June 30, 2019 and 2018 :

For the Three Months Ended June 30,

The following tables set forth financial information relating to net premiums written by major line of business and reportable segment for the three and nine months ended September 30, 2019 and 2018 :

For the Three Months Ended September 30,

Net premiums written

8 unchanged sentences

Total Net Premiums Written

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Net premiums written

8 unchanged sentences

Total Net Premiums Written

The following tables set forth financial information relating to net premiums earned by major line of business and reportable segment for the three and six months ended June 30, 2019 and 2018 :

For the Three Months Ended June 30,

The following tables set forth financial information relating to net premiums earned by major line of business and reportable segment for the three and nine months ended September 30, 2019 and 2018 :

For the Three Months Ended September 30,

Net premiums earned

13 unchanged sentences

Segment Information (continued)

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Net premiums earned

9 unchanged sentences

Fixed Maturities

The original or amortized cost, estimated fair value and gross unrealized gains and losses of fixed maturities at June 30, 2019 and December 31, 2018 are as follows:

June 30, 2019

The original or amortized cost, estimated fair value and gross unrealized gains and losses of fixed maturities at September 30, 2019 and December 31, 2018 are as follows:

September 30, 2019

Original or amortized cost

4 unchanged sentences

agency bonds – mortgage-backed

agency bonds – other

government and supranational bonds

31 unchanged sentences

The difference between the security’s amortized cost and fair value at the date of transfer into the AFS portfolio will be recognized as an unrealized gain or loss and recorded in accumulated other comprehensive income ("AOCI").

Due to the termination of both AmTrust Reinsurance quota share contracts effective January 1, 2019, the Company no longer believes that it has the positive ability to hold the securities in the HTM portfolio to maturity since this portfolio serves as part of the collateral for the AmTrust Reinsurance segment loss reserves.

Due to the termination of both AmTrust Reinsurance quota share contracts effective January 1, 2019, the Company no longer believed that it had the positive ability to hold the securities in the HTM portfolio to maturity because this portfolio served as part of the collateral for the AmTrust Reinsurance segment loss reserves.

Therefore, the Company has reclassified and transferred all HTM securities to the AFS portfolio at their fair market value as at March 31, 2019 .

2 unchanged sentences

Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

June 30, 2019

September 30, 2019

Amortized cost

8 unchanged sentences

12 Months or More

June 30, 2019

September 30, 2019

Fixed maturities

treasury bonds

agency bonds – mortgage-backed

agency bonds – other

government and supranational bonds

2 unchanged sentences

Total temporarily impaired fixed maturities

At September 30, 2019 , there were approximately 126 securities in an unrealized loss position with a fair value of $ 493,948 and unrealized losses of $ 24,256 .

Of these securities, there were 68 securities that have been in an unrealized loss position for 12 months or greater with a fair value of $ 306,817 and unrealized losses of $ 21,454 .

MAIDEN HOLDINGS, LTD.

3 unchanged sentences

Investments (continued)

At June 30, 2019 , there were approximately 131 securities in an unrealized loss position with a fair value of $ 946,904 and unrealized losses of $ 19,316 .

Of these securities, there were 84 securities that have been in an unrealized loss position for 12 months or greater with a fair value of $ 512,594 and unrealized losses of $ 18,130 .

Less than 12 Months

14 unchanged sentences

The Company performs quarterly reviews of its fixed maturities in order to determine whether declines in fair value below the amortized cost basis were considered other-than-temporary in accordance with applicable guidance.

At June 30, 2019 , we have determined that the unrealized losses on fixed maturities were primarily due to interest rates rising as well as the impact of foreign exchange rate changes on certain foreign currency denominated AFS fixed maturities since their date of purchase.

At September 30, 2019 , we have determined that the unrealized losses on fixed maturities were primarily due to interest rates rising as well as the impact of foreign exchange rate changes on certain foreign currency denominated AFS fixed maturities since their date of purchase.

All fixed maturity securities in the investment portfolio continue to pay the expected coupon payments under the contractual terms of the securities.

2 unchanged sentences

We continually monitor the credit quality of our fixed maturity investments to assess if it is probable that we will receive our contractual or estimated cash flows in the form of principal and interest.

Therefore, there were no OTTI losses recognized in earnings on the fixed maturity portfolio in the three and six months ended June 30, 2019 and June 30, 2018 , respectively.

The following summarizes the credit ratings of our fixed maturities:

Ratings (1) at June 30, 2019

For the three and nine months ended September 30, 2019 , we recognized $ 165 ( 2018 - $ 479 ) in OTTI charges in earnings on one fixed maturity security ( 2018 - one fixed maturity security).

The following tables summarize the credit ratings of our fixed maturities as at September 30, 2019 and December 31, 2018 :

September 30, 2019

Amortized cost

7 unchanged sentences

Investments (continued)

Ratings (1) at December 31, 2018

December 31, 2018

Amortized cost

2 unchanged sentences

Total fixed maturities (1)

Based on Standard & Poor’s ("S&P"), or equivalent, ratings

Ratings above are based on Standard & Poor’s ("S&P"), or equivalent, ratings .

Other Investments

The table below shows our portfolio of other investments:

June 30, 2019

September 30, 2019

December 31, 2018

2 unchanged sentences

Total other investments

The Company has a remaining unfunded commitment on its investment in limited partnerships of approximately $ 340 at June 30, 2019 ( December 31, 2018 - $ 414 ).

The Company also has a remaining unfunded commitment on its investment in special purpose vehicles focused on lending activities of approximately $ 3,516 at June 30, 2019 ( December 31, 2018 - $ 7,359 ).

The Company has a remaining unfunded commitment on its investment in limited partnerships of approximately $ 340 at September 30, 2019 ( December 31, 2018 - $ 414 ).

The Company also has a remaining unfunded commitment on its investment in special purpose vehicles focused on lending activities of approximately $ 1,358 at September 30, 2019 ( December 31, 2018 - $ 7,359 ).

Net Investment Income

Net investment income was derived from the following sources:

For the Three Months Ended June 30,

For the Six Months Ended June 30,

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Fixed maturities

2 unchanged sentences

Cash and cash equivalents and other

Interest paid on LPT/ADC and Commutation (1)

Investment expenses

Net investment income

(1) Interest expense includes:

(1) Maiden Bermuda paid Enstar approximately $ 7,261 in interest related to the LPT/ADC Agreement premium, calculated at the rate of 2.64 % per annum from January 1, 2019 through August 12, 2019 ;

(2) Maiden Bermuda paid AII approximately $ 6,335 in interest related to the Commutation Payment premium, calculated at the rate of 3.30 % per annum from January 1, 2019 through August 12, 2019 .

Settlement of funding for the LPT/ADC Agreement and Commutation Payment occurred on August 12, 2019 by Maiden Bermuda's transfer of cash and invested assets as described in "Note 1.

Basis of Presentation".

MAIDEN HOLDINGS, LTD.

6 unchanged sentences

The following provides an analysis of net realized gains (losses) on investment included in the Condensed Consolidated Statements of Income:

For the Three Months Ended June 30, 2019

For the Three Months Ended September 30, 2019

AFS fixed maturities

1 unchanged sentence

Net realized gains (losses) on investment

For the Three Months Ended June 30, 2018

For the Three Months Ended September 30, 2018

AFS fixed maturities

1 unchanged sentence

Net realized gains (losses) on investment

For the Six Months Ended June 30, 2019

For the Nine Months Ended September 30, 2019

AFS fixed maturities

1 unchanged sentence

Net realized gains (losses) on investment

For the Six Months Ended June 30, 2018

For the Nine Months Ended September 30, 2018

AFS fixed maturities

1 unchanged sentence

Net realized gains (losses) on investment

Proceeds from sales of AFS fixed maturities were $ 625,254 and $ 709,615 for the three and six months ended June 30, 2019 , respectively ( 2018 - $ 36,315 and $ 116,555 , respectively).

Proceeds from sales of AFS fixed maturities were $ 136,347 and $ 845,962 for the three and nine months ended September 30, 2019 , respectively ( 2018 - $ 68,534 and $ 185,089 , respectively).

Net unrealized gains (losses) on investments, including those allocated to discontinued operations and classified as held for sale, were as follows:

June 30, 2019

September 30, 2019

December 31, 2018

3 unchanged sentences

Change, net of deferred income tax

The portion of net unrealized gains (losses) recognized in net income (loss) for the three and six months ended June 30, 2019 and 2018 that are related to other investments still held at the end of the reporting period were as follows:

For the Three Months Ended June 30,

The portion of net unrealized gains (losses) recognized in net loss for the three and nine months ended September 30, 2019 and 2018 that are related to other investments still held at the end of the reporting period were as follows:

For the Three Months Ended September 30,

Net gains recognized in net income on other investments during the period

1 unchanged sentence

Net unrealized losses recognized on other investments still held at end of period

For the Six Months Ended June 30,

For the Nine Months Ended September 30,

Net gains recognized in net income on other investments during the period

11 unchanged sentences

The fair value of our restricted assets was as follows:

June 30, 2019

September 30, 2019

December 31, 2018

8 unchanged sentences

2018 – $3,870,731)

Restricted investments – liability for investments purchased for related party agreements (1)

Total restricted investments

Total restricted cash and investments

(1) $ 266,946 of the restricted cash held for related party agreements as of June 30, 2019 was used to settle the liability for investments purchased of $ 298,939 as of June 30, 2019 subsequent to the quarter end.

Fair Value of Financial Instruments

4 unchanged sentences

Level 1 — Valuations based on unadjusted quoted market prices for identical assets or liabilities that we have the ability to access.

Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

Because valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment.

Examples of assets and liabilities utilizing Level 1 inputs include:

32 unchanged sentences

ASC 825, "Disclosure About Fair Value of Financial Instruments" , requires all entities to disclose the fair value of their financial instruments, both assets and liabilities recognized and not recognized in the balance sheet, for which it is practicable to estimate fair value.

The following describes the valuation techniques used by the Company to determine the fair value of financial instruments held at June 30, 2019 and December 31, 2018 .

The following describes the valuation techniques used by the Company to determine the fair value of financial instruments held at September 30, 2019 and December 31, 2018 .

government and U.S.

40 unchanged sentences

Cash and cash equivalents (including restricted amounts), accrued investment income, reinsurance balances receivable, and certain other assets and liabilities — The carrying values reported in the Condensed Consolidated Balance Sheets for these financial instruments approximate their fair value due to their short term nature and are classified as Level 2.

Loan to related party — The carrying value reported in the Condensed Consolidated Balance Sheets for this financial instrument approximates its fair value and it is included in the Level 2 hierarchy.

Loan to related party, reinsurance recoverable on unpaid losses, and funds withheld receivable — The carrying values reported in the Condensed Consolidated Balance Sheets for these financial instruments approximate their fair value and are included in the Level 2 hierarchy.

Senior notes — The amount reported in the Condensed Consolidated Balance Sheets for these financial instruments represents the carrying value of the notes.

10 unchanged sentences

In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Company’s significant market assumptions.

At June 30, 2019 and December 31, 2018 , we classified our financial instruments measured at fair value on a recurring basis in the following valuation hierarchy:

June 30, 2019

At September 30, 2019 and December 31, 2018 , we classified our financial instruments measured at fair value on a recurring basis in the following valuation hierarchy:

September 30, 2019

Quoted Prices in Active Markets for Identical Assets (Level 1)

6 unchanged sentences

agency bonds – mortgage-backed

agency bonds – other

government and supranational bonds

23 unchanged sentences

The Company analyzes and reviews the information and prices received from the Pricing Service to ensure that the prices represent a reasonable estimate of the fair value.

The Pricing Service was utilized to estimate fair value measurements for approximately 99.8 % and 99.9 % of our fixed maturities at June 30, 2019 and December 31, 2018 , respectively.

The Pricing Service was utilized to estimate fair value measurements for approximately 99.7 % and 99.9 % of our fixed maturities at September 30, 2019 and December 31, 2018 , respectively.

The Pricing Service utilizes market quotations for fixed maturity securities that have quoted market prices in active markets.

6 unchanged sentences

Fair Value of Financial Instruments (continued)

At June 30, 2019 and December 31, 2018 , approximately 0.2 % and 0.1 % , respectively, of the Level 2 fixed maturities are valued using the market approach.

At June 30, 2019 and December 31, 2018 , one security or $ 5,723 and $ 5,676 , respectively, of Level 2 fixed maturities, was priced using a quotation from a broker and/or custodian as opposed to the Pricing Service due to lack of information available.

At June 30, 2019 and December 31, 2018 , we have not adjusted any pricing provided to us based on the review performed by our investment managers.

At September 30, 2019 and December 31, 2018 , approximately 0.3 % and 0.1 % , respectively, of the Level 2 fixed maturities are valued using the market approach.

At September 30, 2019 and December 31, 2018 , one security or $ 5,328 and $ 5,676 , respectively, of Level 2 fixed maturities, was priced using a quotation from a broker and/or custodian as opposed to the Pricing Service due to lack of information available.

At September 30, 2019 and December 31, 2018 , we have not adjusted any pricing provided to us based on the review performed by our investment managers.

There were no transfers between Level 1 and Level 2 and there were no transfers to or from Level 3 during the periods represented by these Condensed Consolidated Financial Statements.

At June 30, 2019 , the Company has other investments of $ 25,173 (December 31, 2018 - $ 19,883 ) which includes investments in special purpose vehicles focused on lending activities as well as investments in start-up insurance entities.

At September 30, 2019 , the Company has other investments of $ 27,333 (December 31, 2018 - $ 19,883 ) which includes investments in special purpose vehicles focused on lending activities as well as investments in start-up insurance entities.

The fair value of the investments in special purpose vehicles focused on lending activities is initially at cost which approximates fair value.

4 unchanged sentences

The following table presents the fair value and carrying value or principal amount of the financial instruments not measured at fair value:

June 30, 2019

September 30, 2019

December 31, 2018

18 unchanged sentences

The Company continued to earn premiums and remain liable for losses occurring subsequent to August 29, 2018 for any policies in force prior to and as of August 29, 2018, through December 27, 2018, the date the sale of Maiden US was closed pursuant to the U.S.

Sale Agreement with Enstar.

Maiden US was a substantial portion of our Diversified Reinsurance segment, therefore, the Company concluded that the sale represented a strategic shift that has a major effect on its ongoing operations and financial results and that all of the held for sale criteria have been met.

Sale Agreement with Enstar Holdings.

Maiden US was a substantial portion of our Diversified Reinsurance segment;

therefore the Company concluded that the sale represented a strategic shift that has a major effect on its ongoing operations and financial results and that all of the held for sale criteria have been met.

Accordingly, all transactions related to the U.S.

treaty reinsurance operations are reported and presented as part of discontinued operations.

Furthermore, all of the assets and liabilities related to the sale of the U.S.

treaty reinsurance operations are removed from the Condensed Consolidated Balance Sheets of the Company and any remaining assets and liabilities related to the retrocession agreement and true up of sale consideration, are classified as held for sale in the Condensed Consolidated Balance Sheets as at June 30, 2019 and December 31, 2018 .

The operations of the Company's U.S.

treaty reinsurance business for the three and six months ended June 30, 2018 have been reclassified as part of the results from discontinued operations in the Condensed Consolidated Statements of Income.

The classes of assets and liabilities to be sold and classified as held for sale as of June 30, 2019 and December 31, 2018 comprise:

June 30, 2019

treaty reinsurance operations are reported and presented as part of discontinued operations and all of the remaining assets and liabilities related to the true up of sale consideration are classified as held for sale in the Consolidated Balance Sheet as at December 31, 2018 .

As described in "Note 1.

Basis of Presentation", Cavello and Maiden Bermuda entered into a retrocession agreement pursuant to which certain assets and liabilities associated with the U.S.

treaty reinsurance business held by Maiden Bermuda were retroceded to Cavello on December 27, 2018.

Previously, the assets and liabilities related to this business including the retrocession agreement were classified as held for sale, however, a decision has been made to reclassify them as held and used in the current period as it is now considered unlikely that these reserves will be novated in the foreseeable future;

therefore, there are no remaining assets and liabilities classified as held for sale as at September 30, 2019 .

Furthermore, the assets and liabilities related to this business as at December 31, 2018 have been reclassified from held for sale to conform to the current presentation.

The assets and liabilities that are classified as held for sale as of September 30, 2019 and December 31, 2018 comprise:

September 30, 2019

December 31, 2018

1 unchanged sentence

Restricted cash and cash equivalents

Reinsurance balances receivable, net

Reinsurance recoverable on unpaid losses

Total assets held for sale

2 unchanged sentences

Total liabilities held for sale

The following table summarizes the major classes of line items constituting the results from discontinued operations for the three and six months ended June 30, 2019 and 2018 , respectively, presented in the Condensed Consolidated Statements of Income:

For the Three Months Ended June 30,

For the Six Months Ended June 30,

The following table summarizes the major classes of items constituting the results from discontinued operations for the three and nine months ended September 30, 2019 and 2018 , respectively, presented in the Condensed Consolidated Statements of Income:

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Gross premiums written

7 unchanged sentences

Amortization of intangible assets

Income from discontinued operations before income taxes

(Loss) income from discontinued operations before income tax

Loss on disposal of discontinued operations

Income tax expense

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

Income tax benefit (expense)

Loss from discontinued operations, net of income tax

As described in "Note 1.

Subsequent Events", as a result of the Settlement and Commutation Agreement entered into by Maiden and Enstar on July 31, 2019, Maiden recorded an additional loss from discontinued operations of $ 16,715 for the three and six months ended June 30, 2019 .

Basis of Presentation", as a result of the Settlement and Commutation Agreement entered into by Maiden and Enstar Holdings on July 31, 2019, Maiden recorded an additional loss from discontinued operations of $ 16,715 for the nine months ended September 30, 2019 .

MAIDEN HOLDINGS, LTD.

3 unchanged sentences

Long-Term Debt

At June 30, 2019 and December 31, 2018 , both Maiden Holdings and its wholly owned subsidiary, Maiden NA, have outstanding publicly-traded debt offering of senior notes which were issued in 2016 and 2013, respectively ("Senior Notes").

At September 30, 2019 and December 31, 2018 , both Maiden Holdings and its wholly owned subsidiary, Maiden NA, have outstanding publicly-traded debt offering of senior notes which were issued in 2016 and 2013, respectively ("Senior Notes").

The 2013 Senior Notes issued by Maiden NA are fully and unconditionally guaranteed by Maiden Holdings.

The Senior Notes are unsecured and unsubordinated obligations of the Company.

The following table details the Company's Senior Notes issuances outstanding at June 30, 2019 and December 31, 2018 :

June 30, 2019

The following table details the Company's Senior Notes issuances outstanding at September 30, 2019 and December 31, 2018 :

September 30, 2019

2016 Senior Notes

16 unchanged sentences

Effective interest rate

The interest expense incurred on the Senior Notes for the three and six months ended June 30, 2019 was $ 4,777 and $ 9,553 , respectively ( 2018 - $ 4,776 and $ 9,553 , respectively) of which $ 1,342 was accrued at both June 30, 2019 and December 31, 2018 , respectively.

The interest expense incurred on the Senior Notes for the three and nine months ended September 30, 2019 was $ 4,777 and $ 14,330 , respectively ( 2018 - $ 4,776 and $ 14,329 , respectively) of which $ 1,342 was accrued at both September 30, 2019 and December 31, 2018 , respectively.

The issuance costs related to the Senior Notes were capitalized and are being amortized over the effective life of the Senior Notes.

The amortization expense for the three and six months ended June 30, 2019 was $ 53 and $ 106 , respectively ( 2018 - $ 53 and $ 105 , respectively).

The amortization expense for the three and nine months ended September 30, 2019 was $ 54 and $ 160 , respectively ( 2018 - $ 53 and $ 158 , respectively).

Under the terms of the 2013 Senior Notes, the 2013 Senior Notes can be redeemed, in whole or in part after December 1, 2018 at Maiden NA's option at any time and from time to time, until maturity at a redemption price equal to 100 % of the principal amount of the notes to be redeemed plus accrued but unpaid interest on the principal amount being redeemed to, but not including, the redemption date.

1 unchanged sentence

However, as part of the Company's remediation measures to improve its capital ratios and adequacy, Maiden has voluntarily undertaken with the BMA to not voluntarily redeem the 2013 Senior Notes without its prior written approval.

MAIDEN HOLDINGS, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands of U.S.

dollars, except share and per share data)

The Company uses reinsurance and retrocessional agreements ("ceded reinsurance") to mitigate volatility, reduce its exposure to certain risks and provide capital support.

Additionally, Maiden Bermuda entered into a number of retrocessional quota share agreements with a highly rated global insurer to cede certain lines of business from both of our reportable segments.

Effective July 1, 2018, Maiden Bermuda commuted all of these retrocessional quota share agreements.

Effective on July 31, 2019, Maiden Bermuda and Cavello entered into a retroactive reinsurance agreement, the LPT/ADC Agreement, pursuant to which, Cavello will assume liabilities for the loss reserves as of December 31, 2018 associated with the AmTrust Quota Share in excess of a $ 2,178,535 retention up to $ 600,000 , in exchange for a retrocession premium of $ 445,000 .

The $ 2,178,535 retention will be subject to adjustment for paid losses subsequent to December 31, 2018 .

Please see " Note 1.

Basis of Presentation " for further details.

Each of these agreements provide for recovery from reinsurers or retrocessionaires of a portion of loss and LAE under certain circumstances without relieving the Company of its obligations to the policyholders.

The Company remains liable to the extent that any of our reinsurers or retrocessionaires fails to meet their obligations.

Loss and LAE incurred and premiums earned are reported after deduction for reinsurance and retrocession.

In the event that one or more of our reinsurers or retrocessionaires are unable to meet their obligations under these reinsurance or retrocessional agreements, the Company would not realize the full value of the reinsurance recoverable balances.

The effect of ceded reinsurance on net premiums written and earned and on net loss and LAE for the nine months ended September 30, 2019 and 2018 was as follows:

For the Nine Months Ended September 30,

Premiums written

Premiums earned

Gross loss and LAE

Loss and LAE ceded

The Company's reinsurance recoverable on unpaid losses balance at September 30, 2019 was $ 615,481 ( December 31, 2018 - $ 71,901 ) presented in the Condensed Consolidated Balance Sheets.

At September 30, 2019 and 2018 , the Company had no valuation allowance against reinsurance recoverable on unpaid losses.

As discussed in "Note 1.

Organization" , on December 27, 2018, Cavello and Maiden Bermuda entered into a retrocession agreement pursuant to which certain assets and liabilities associated with the U.S.

treaty reinsurance business held by Maiden Bermuda were retroceded to Cavello in exchange for a ceding commission.

The balance of reinsurance recoverable on unpaid losses due from Cavello under this retrocession agreement was $ 64,018 at September 30, 2019 ( December 31, 2018 - $ 70,158 ).

Additionally, the LPT/ADC Agreement discussed above provides Maiden Bermuda with $ 155,000 in adverse development cover over its carried AmTrust Quota Share loss reserves at December 31, 2018 .

The LPT/ADC Agreement meets the criteria for risk transfer and is thus accounted for as retroactive reinsurance.

Cumulative ceded losses exceeding $ 445,000 are recognized as a deferred gain liability and amortized into income over the settlement period of the ceded reserves in proportion to cumulative losses collected over the estimated ultimate reinsurance recoverable.

The amount of the deferral is recalculated each period based on loss payments and updated estimates.

Reinsurance recoverable on unpaid losses under the retroactive reinsurance agreement were $ 549,542 and the deferred gain liability was $ 104,542 as of September 30, 2019 .

Amortization of the deferred gain will not occur until paid losses have exceeded the minimum retention under the ADC.

The current estimated payout period for the losses covered by the LPT/ADC Agreement before the minimum retention is exceeded is approximately five years .

MAIDEN HOLDINGS, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands of U.S.

dollars, except share and per share data)

Reinsurance (continued)

Cavello has provided collateral in the form of a letter of credit in the amount of $ 445,000 to AmTrust under the LPT/ADC Agreement and is subject to additional collateral funding requirements as explained in "Note 10.

Related Party Transactions" .

The Founding Shareholders of the Company are Michael Karfunkel, George Karfunkel and Barry Zyskind.

Under the terms of the LPT/ADC Agreement, the covered losses associated with the Commutation and Release Agreement with AmTrust, as discussed in " Note 1.

Basis of Presentation", are eligible to be covered but recoverable only when such losses are paid or settled by AII or its affiliates, provided such losses and other related amounts shall not exceed $ 312,786 .

Cavello's parent company, Enstar, has credit ratings of BBB from both Standard &Poor's and Fitch Ratings at September 30, 2019 .

Reserve for Loss and Loss Adjustment Expenses

The Company uses both historical experience and industry-wide loss development factors to provide a reasonable basis for estimating future losses.

In the future, certain events may be beyond the control of management, such as changes in law, judicial interpretations of law, and inflation, which may favorably or unfavorably impact the ultimate settlement of the Company’s loss and LAE reserves.

The anticipated effect of inflation is implicitly considered when estimating liabilities for loss and LAE.

While anticipated changes in claim costs due to inflation are considered in estimating the ultimate claim costs, changes in average severity of claims are caused by a number of factors that vary with the individual type of policy written.

Ultimate losses are projected based on historical trends adjusted for implemented changes in underwriting standards, policy provisions, and general economic trends.

Those anticipated trends are monitored based on actual development and are modified if necessary.

The reserving process begins with the collection and analysis of paid losses and incurred claims data for each of our contracts.

While reserves are reviewed on a contract by contract basis, paid losses and incurred claims data is also aggregated into reserving segments.

The segmental data is disaggregated by reserving class and further disaggregated by either accident year (i.e.

the year in which the loss event occurred) or by underwriting year (i.e.

the year in which the contract generating the premium and losses incepted).

The Company in some cases uses underwriting year information to analyze our Diversified Reinsurance segment and subsequently allocate reserves to the respective accident years.

Our reserve for loss and LAE consists of:

September 30, 2019

December 31, 2018

Reserve for reported loss and LAE

Reserve for losses incurred but not reported ("IBNR")

Reserve for loss and LAE

The following table represents a reconciliation of our beginning and ending gross and net loss and LAE reserves:

For the Nine Months Ended September 30,

Gross loss and LAE reserves, January 1

reinsurance recoverable on unpaid losses, January 1

Net loss and LAE reserves, January 1

Net incurred losses related to:

Net paid losses related to:

Retroactive reinsurance adjustment

Effect of foreign exchange rate movements

Other adjustments

Net loss and LAE reserves, September 30

Reinsurance recoverable on unpaid losses, September 30

Gross loss and LAE reserves, September 30

Commencing in 2015, Maiden Bermuda entered into a number of retrocessional quota share agreements with a highly rated global insurer to cede certain lines of business from both of our reportable segments.

Effective July 1, 2018, Maiden Bermuda commuted all of these retrocessional quota share agreements.

MAIDEN HOLDINGS, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands of U.S.

dollars, except share and per share data)

Reserve for Loss and Loss Adjustment Expenses (continued)

Prior period development arises from changes to loss estimates recognized in the current year that relate to loss reserves in previous calendar years.

The development reflects changes in management's best estimate of the ultimate losses under the relevant reinsurance policies after review of changes in actuarial assessments.

During the three and nine months ended September 30, 2019 , the Company recognized net adverse prior year loss development of $ 63,184 and $ 96,456 , respectively ( 2018 - adverse $ 212,473 and $ 250,451 , respectively) before the impact of the LPT/ADC Agreement with Cavello.

In the Diversified Reinsurance segment, the net prior year loss development was adverse $ 692 and favorable $ 1,456 for the three and nine months ended September 30, 2019 , respectively ( 2018 - adverse $ 671 and $ 1,756 , respectively).

The favorable development for the nine months ended September 30, 2019 was primarily due to favorable reserve development in German Auto programs as well as facultative reinsurance run-off lines.

The adverse development for the three months ended September 30, 2019 and the three and nine months ended September 30, 2018 was due to facultative reinsurance run-off partially offset by favorable development in International Auto.

In the AmTrust Reinsurance segment, the net adverse prior year loss development was $ 62,384 and $ 97,600 for the three and nine months ended September 30, 2019 , respectively ( 2018 - adverse $ 210,433 and $ 247,326 , respectively).

The adverse development in the three and nine months ended September 30, 2019 was primarily driven by Commercial Auto and General Liability in accident years 2014 to 2018, partly offset by favorable development in Workers Compensation in accident years 2016 to 2018.

The adverse development for the three and nine months ended September 30, 2019 includes $ 27,587 recognized from application of the $ 40,500 loss corridor cap on AmTrust program business (please see "Note 10.

Related Party Transactions" for details).

The adverse development for 2018 was largely from Workers Compensation which represented nearly half of the adverse development and was primarily driven by accident years 2014 to 2017, and to a lesser extent, development in European Hospital Liability, Commercial Auto and General Liability lines.

Reinsurance recoverable on unpaid losses under the LPT/ADC Agreement with Cavello of $ 549,542 , which includes a deferred gain on retroactive reinsurance of $ 104,542 , was recognized in the nine months ended September 30, 2019 in the reconciliation of our beginning and ending gross and net loss and LAE reserves presented above.

The deferred gain on retroactive reinsurance represents the cumulative adverse development under the AmTrust Quota Share covered under the LPT/ADC Agreement at September 30, 2019 .

Amortization of the deferred gain will not occur until paid losses have exceeded the minimum retention under the LPT/ADC Agreement.

The current estimated payout period for the losses covered by the LPT/ADC Agreement before the minimum retention is exceeded is approximately 5 years .

Under the Commutation and Release Agreement with AmTrust on July 1, 2019, Maiden Bermuda transferred cash and invested assets in the amount of $ 312,786 which is the sum of the net ceded reserves in the amount of $ 330,682 with respect to the Commuted Business as of December 31, 2018 less payments in the amount of $ 17,896 made by Maiden Bermuda with respect to the Commuted Business from January 1, 2019 through July 31, 2019.

Settlement of the commutation occurred on August 12, 2019 and is reflected in the reconciliation of our beginning and ending gross and net loss and LAE reserves presented above under net paid losses related to prior years.

The Other category had net adverse prior year loss development of $ 108 and $ 312 for the three and nine months ended September 30, 2019 , respectively, ( 2018 - adverse $ 1,369 , respectively) due to increased reserves in the run-off of the NGHC Quota Share.

Please refer to "Note 14.

Subsequent Events" for additional information regarding the commutation of this quota share subsequent to September 30, 2019 .

MAIDEN HOLDINGS, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands of U.S.

dollars, except share and per share data)

Related Party Transactions

The Founding Shareholders of the Company were Michael Karfunkel, George Karfunkel and Barry Zyskind.

Michael Karfunkel passed away on April 27, 2016.

5 unchanged sentences

Barry Zyskind is a director of NGHC.

MAIDEN HOLDINGS, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands of U.S.

dollars, except share and per share data)

Related Party Transactions (continued)

The following describes transactions between the Company and AmTrust:

AmTrust Quota Share

Effective July 1, 2007, the Company and AmTrust entered into a master agreement, as amended ("Master Agreement"), by which they caused Maiden Bermuda, a wholly owned subsidiary of the Company, and AmTrust's Bermuda reinsurance subsidiary, AmTrust International Insurance, Ltd.

("AII"), to enter into the AmTrust Quota Share by which AII retrocedes to Maiden Bermuda an amount equal to 40 % of the premium written by subsidiaries of AmTrust, net of the cost of unaffiliated inuring reinsurance and 40 % of losses.

Effective July 1, 2007, the Company and AmTrust entered into a master agreement, as amended ("Master Agreement"), by which they caused Maiden Bermuda, then a wholly owned subsidiary of the Company, and AmTrust's Bermuda reinsurance subsidiary, AII, to enter into the AmTrust Quota Share by which AII retrocedes to Maiden Bermuda an amount equal to 40 % of the premium written by subsidiaries of AmTrust, net of the cost of unaffiliated inuring reinsurance and 40 % of losses.

The Master Agreement further provided that AII receives a ceding commission of 31 % of ceded written premiums.

2 unchanged sentences

On July 1, 2016, the agreement was renewed through June 30, 2019.

Effective July 1, 2018, the amount AmTrust Europe Limited ("AEL") cedes to the Company was reduced to 20 % .

Effective July 1, 2018, the amount AEL ceded to the Company was reduced to 20 % .

Additionally, for the Specialty Program portion of Covered Business only, AII will be responsible for ultimate net loss otherwise recoverable from Maiden Bermuda to the extent that the loss ratio to Maiden Bermuda, which shall be determined on an inception to date basis from July 1, 2007 through the date of calculation, is between 81.5 % and 95 % ("Loss Corridor").

Above and below the Loss Corridor, Maiden Bermuda will continue to reinsure losses at its proportional 40 % share of the AmTrust Quota Share.

Effective January 1, 2019, Maiden Bermuda and AmTrust entered into the Partial Termination Amendment which amended the AmTrust Quota Share that was in-force and set to expire on June 30, 2019.

Above and below the Loss Corridor, Maiden Bermuda continued to reinsure losses at its proportional 40 % share of the AmTrust Quota Share.

Effective July 31, 2019, the Loss Corridor was amended such that the maximum amount covered is $ 40,500 , the amount calculated by Maiden Bermuda for the Loss Corridor coverage as of March 31, 2019 .

Any development above this maximum amount will be subject to the coverage of the LPT/ADC Agreement.

Please refer to Note 1.

"Basis of Presentation" for additional information .

Effective January 1, 2019, Maiden Bermuda and AmTrust entered into the Partial Termination Amendment which amended the AmTrust Quota Share.

The Partial Termination Amendment provided for the cut-off of the ongoing and unearned premium of AmTrust’s Small Commercial Business, comprising workers’ compensation, general liability, umbrella liability, professional liability (including cyber liability) insurance coverages, and U.S.

1 unchanged sentence

Under the Partial Termination Amendment, the ceding commission payable by Maiden Bermuda for its remaining in-force business immediately prior to January 1, 2019 increased by five percentage points with respect to in-force remaining business (excluding Terminated Business) and related unearned premium as of January 1, 2019.

Subsequently, on January 30, 2019, Maiden Bermuda and AII agreed to terminate the AmTrust Quota Share on a run-off basis effective as of January 1, 2019.

Subsequently, on January 30, 2019, Maiden Bermuda and AII agreed to terminate the remaining business subject to the AmTrust Quota Share on a run-off basis effective as of January 1, 2019.

The Partial Termination Amendment resulted in Maiden Bermuda returning approximately $ 647,980 in unearned premium to AII, or approximately $ 436,760 net of applicable ceding commission and brokerage as calculated during the second quarter of 2019.

1 unchanged sentence

The excess of estimated unearned premium, net of applicable ceding commission and brokerage over the actual amount of approximately $ 43,240 was returned by AII to Maiden Bermuda during the second quarter of 2019.

Effective as of July 31, 2019, Maiden Bermuda and AII entered into a Commutation and Release Agreement which provided for AII to assume all reserves ceded by AII to Maiden Bermuda with respect to its proportional 40 % share of the ultimate net loss under the AmTrust Quota Share related to the Commuted Business.

See further details in Note 1 "Basis of Presentation".

MAIDEN HOLDINGS, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands of U.S.

dollars, except share and per share data)

Related Party Transactions (continued)

European Hospital Liability Quota Share

Effective April 1, 2011, Maiden Bermuda, entered into a quota share reinsurance contract with AEL and AmTrust International Underwriters DAC ("AIU DAC"), both wholly owned subsidiaries of AmTrust.

Effective April 1, 2011, Maiden Bermuda entered into a quota share reinsurance contract with AEL and AIU DAC, both wholly owned subsidiaries of AmTrust.

Pursuant to the terms of the contract, Maiden Bermuda assumed 40 % of the premiums and losses related to policies classified as European Hospital Liability, including associated liability coverages and policies covering physician defense costs, written or renewed on or after April 1, 2011.

1 unchanged sentence

The maximum limit of liability attaching shall be € 5,000 ( € 10,000 effective January 1, 2012) or currency equivalent (on a 100 % basis) per original claim for any one original policy.

Maiden Bermuda will pay a ceding commission of 5 % .

Maiden Bermuda paid a ceding commission of 5 % .

Effective July 1, 2016, the contract was amended such that Maiden Bermuda assumes from AEL 32.5 % of the premiums and losses of all policies written or renewed on or after July 1, 2016 until June 30, 2017 and 20 % of all policies written or renewed on or after July 1, 2017.

1 unchanged sentence

On January 30, 2019, in connection with the termination of the reinsurance agreements described above, the Company and AmTrust entered into a second amendment to the Master Agreement between the parties, originally entered into on July 3, 2007, to remove the provisions requiring AmTrust to reinsure business with the Company.

The table below shows the effect of both of these quota share arrangements with AmTrust on the Company's consolidated results of operations for the three and six months ended June 30, 2019 and 2018 :

For the Three Months Ended June 30,

For the Six Months Ended June 30,

The table below shows the effect of both of these quota share arrangements with AmTrust on the Company's Condensed Consolidated Results of Operations for the three and nine months ended September 30, 2019 and 2018 :

For the Three Months Ended September 30,

For the Nine Months Ended September 30,

Gross and net premiums written

2 unchanged sentences

Commission expenses

MAIDEN HOLDINGS, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands of U.S.

dollars, except share and per share data)

Related Party Transactions (continued)

Collateral provided to AmTrust

a) AmTrust Quota Share Reinsurance Agreement

In order to provide AmTrust's U.S.

To provide AmTrust's U.S.

insurance subsidiaries with credit for reinsurance on their statutory financial statements, AII, as the direct reinsurer of AmTrust's insurance subsidiaries, has established trust accounts ("Trust Accounts") for their benefit.

3 unchanged sentences

Maiden Bermuda satisfied its collateral requirements under the AmTrust Quota Share with AII as follows:

by lending funds in the amount of $ 167,975 at June 30, 2019 and December 31, 2018 pursuant to a loan agreement entered into between those parties.

by lending funds in the amount of $ 167,975 at September 30, 2019 and December 31, 2018 pursuant to a loan agreement entered into between those parties.

Advances under the loan are secured by promissory notes.

This loan was assigned by AII to AmTrust effective December 31, 2014 and is carried at cost.

Effective December 18, 2017, interest is payable at a rate equivalent to the Federal Funds Effective Rate ("Fed Funds") plus 200 basis points per annum.

Interest is payable at a rate equivalent to the Federal Funds Effective Rate ("Fed Funds") plus 200 basis points per annum.

Please see "Note 4.

The interest income on the loan was approximately $ 1,777 and $ 5,441 for the three and nine months ended September 30, 2019 , respectively, ( 2018 - $ 1,658 and $ 4,651 , respectively) and the effective yield was 4.2 % and 4.3 % for the same respective periods ( 2018 - 3.9 % and 3.7 % , respectively).

On January 30, 2019, in connection with the termination of the reinsurance agreements described above, the Company and AmTrust entered into an amendment to the Loan Agreement between Maiden Bermuda, AmTrust and AII, originally entered into on November 16, 2007.

The Amendment to the Loan Agreement provides for the extension of the maturity date to January 1, 2025 and acknowledges that due to the termination of the AmTrust Quota Share, no further loans or advances may be made pursuant to the Loan Agreement;

The Amendment provides for the extension of the maturity date to January 1, 2025 and acknowledges that due to the termination of the AmTrust Quota Share, no further loans or advances may be made pursuant to the Loan Agreement;

effective December 1, 2008, the Company entered into a Reinsurer Trust Assets Collateral agreement to provide to AII sufficient collateral to secure its proportional share of AII's obligations to the U.S.

AmTrust subsidiaries.

The amount of the collateral at June 30, 2019 was approximately $ 2,521,158 (December 31, 2018 - $ 3,650,418 ) and the accrued interest was $ 13,203 (December 31, 2018 - $ 23,283 ).

The amount of the collateral at September 30, 2019 was approximately $ 1,354,283 (December 31, 2018 - $ 3,650,418 ) and the accrued interest was $ 7,645 (December 31, 2018 - $ 23,283 ).

Please refer to "Note 4.

2 unchanged sentences

The Company transferred cash and investments of $ 575,000 to AmTrust as a funds withheld receivable which bears an interest rate of 3.5 % , subject to annual adjustment.

At June 30, 2019 , the balance of funds withheld was $ 575,000 and the accrued interest was $ 5,017 .

The interest income on the funds withheld receivable was approximately $ 5,017 and $ 9,443 for the three and six months ended June 30, 2019 , respectively.

At September 30, 2019 , the balance of funds withheld was $ 575,000 and the accrued interest was $ 5,073 .

The interest income on the funds withheld receivable was approximately $ 5,073 and $ 14,500 for the three and nine months ended September 30, 2019 , respectively.

MAIDEN HOLDINGS, LTD.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)

(in thousands of U.S.

dollars, except share and per share data)

Related Party Transactions (continued)

Pursuant to the terms of the LPT/ADC Agreement, Maiden Bermuda, Cavello and AmTrust and certain of its affiliated companies entered into a Master Collateral Agreement (“MCA”) to define and enable the operation of collateral provided under the AmTrust Quota Share.

Under the MCA, Cavello, on behalf of Maiden Bermuda, provided letters of credit to AmTrust in an amount representing Cavello’s obligations under the LPT/ADC Agreement.

As these letters of credit replaced other collateral previously provided directly by Maiden Bermuda to AmTrust, the MCA coordinates the collateral protection that will be provided to AmTrust to ensure that no gaps in collateral funding occur by operation of the LPT/ADC Agreement and related MCA.

As a result of entering into both the LPT/ADC Agreement and the MCA, certain post-termination endorsements (“PTE's”) to the AmTrust Quota Share between AII and Maiden Bermuda were required.

Effective July 31, 2019, the PTE's:

i) enable the operation of both the LPT/ADC Agreement and MCA by making provision for certain forms of collateral, including letters of credit provided by Cavello on Maiden Bermuda’s behalf, and further defines the permitted use and return of collateral;

ii) increase the required funding percentage for Maiden Bermuda under the collateral arrangements between the parties to 105 % of its obligations, subject to a minimum excess funding requirement of $ 54,000 , as may be mutually amended by the parties from time to time.

Under certain defined conditions, Maiden Bermuda may be required to increase this funding percentage to 110 % .

b) European Hospital Liability Quota Share

Collateral has been provided to both AEL and AIU DAC;

i) for AEL, the amount of the collateral in reinsurance trust accounts at June 30, 2019 was approximately $ 248,878 (December 31, 2018 - $ 249,948 ) and the accrued interest was $ 2,022 (December 31, 2018 - $ 1,976 ).

Collateral has been provided to both AEL and AIU DAC under the European Hospital Liability Quota Share agreement:

i) for AEL, the amount of the collateral in reinsurance trust accounts at September 30, 2019 was approximately $ 240,386 (December 31, 2018 - $ 249,948 ) and the accrued interest was $ 1,305 (December 31, 2018 - $ 1,976 ).

Please refer to "Note 4.

(e) Investments" for additional information;

and ii) in January 2019, Maiden Bermuda transferred cash of € 45,113 ( $ 51,244 ) to AIU DAC as a funds withheld receivable.

ii) in January 2019, Maiden Bermuda transferred cash of € 45,113 ( $ 51,244 ) to AIU DAC as a funds withheld receivable.

AIU DAC pays Maiden a fixed annual interest rate of 0.50 % , on the average daily Funds Withheld balance, commencing on January 24, 2019, subject to annual adjustment.

At June 30, 2019 , the balance of funds withheld was $ 58,123 and the accrued interest was $ 127 .

The interest income on the funds withheld receivable was approximately $ 72 and $ 125 for the three and six months ended June 30, 2019 , respectively.

At September 30, 2019 , the balance of funds withheld was $ 55,701 and the accrued interest was $ 192 .

The interest income on the funds withheld receivable was approximately $ 71 and $ 196 for the three and nine months ended September 30, 2019 , respectively.

Brokerage Agreement

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("AIIB"), a wholly owned subsidiary of AmTrust.

Pursuant to the brokerage agreement, AIIB provides brokerage services relating to the AmTrust Quota Share and the European Hospital Liability Quota Share for a fee equal to 1.25 % of the premium assumed.

AIIB is not the Company's exclusive broker.

The agreement may be terminated upon 30 days written notice by either party.

Maiden Bermuda recorded approximately $ 1,398 and $ 3,375 of reinsurance brokerage expense for the three and six months ended June 30, 2019 , respectively ( 2018 - $ 5,966 and $ 12,263 , respectively) and deferred reinsurance brokerage of $ 3,502 at June 30, 2019 (December 31, 2018 - $ 14,199 ) as a result of this agreement.

Pursuant to the brokerage agreement, AIIB provided brokerage services relating to the AmTrust Quota Share and the European Hospital Liability Quota Share for a fee equal to 1.25 % of the premium assumed.

AIIB was not the Company's exclusive broker.

The brokerage agreement was terminated as of March 15, 2019.

Maiden Bermuda recorded approximately $ 930 and $ 4,305 of reinsurance brokerage expense for the three and nine months ended September 30, 2019 , respectively ( 2018 - $ 6,145 and $ 18,408 , respectively) and deferred reinsurance brokerage of $ 2,835 at September 30, 2019 (December 31, 2018 - $ 14,199 ) as a result of this agreement.

Asset Management Agreement

Effective July 1, 2007, the Company entered into an asset management agreement with AII Insurance Management Limited ("AIIM"), a wholly owned subsidiary of AmTrust, pursuant to which AIIM has agreed to provide investment management services to the Company.

Effective July 1, 2007, the Company entered into an asset management agreement with AII Insurance Management Limited ("AIIM"), a wholly owned subsidiary of AmTrust, pursuant to which AIIM agreed to provide investment management services to the Company.

Effective January 1, 2018, AIIM provides investment management services for a quarterly fee of 0.02125 % of the average value of the account.

1 unchanged sentence

The agreement may be terminated upon 30 days written notice by either party.

The Company recorded approximately $ 678 and $ 1,453 of investment management fees for the three and six months ended June 30, 2019 , respectively, ( 2018 - $ 1,033 and $ 2,082 , respectively) under this agreement.

The Company recorded approximately $ 618 and $ 2,071 of investment management fees for the three and nine months ended September 30, 2019 , respectively, ( 2018 - $ 1,055 and $ 3,137 , respectively) under this agreement.

NGHC Quota Share

2 unchanged sentences

The Company and NGHC mutually agreed that the termination is on a run-off basis.