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Item 2. Management’s Discussion and Analysis

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 
 The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this "Form 10-Q" or this "Report"). References in this Form 10-Q to the terms "we", "us", "our", "the Company" or other similar terms mean the consolidated operations of Maiden Holdings, Ltd. and its subsidiaries, unless the context requires otherwise. References in this Form 10-Q to the term "Maiden Holdings" means Maiden Holdings, Ltd. only. Certain reclassifications have been made for 2019 to conform to the 2020 presentation and have no impact on consolidated net income and total equity previously reported. 
 Note on Forward-Looking Statements 
 This Quarterly Report on Form 10-Q includes projections concerning financial information and statements concerning future economic performance and events, plans and objectives relating to management, operations, products and services, and assumptions underlying these projections and statements. These projections and statements are forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 and are not historical facts but instead represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and outside our control. These projections and statements may address, among other things, our strategy for growth, product development, financial results and reserves. Our actual results and financial condition may differ, possibly materially, from these projections and statements and therefore you should not place undue reliance on them. Factors that could cause our actual results and financial condition to differ, possibly materially, from those in the specific projections and statements are discussed throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations and in "Risk Factors" in Item 1A of Part I of our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission ("SEC") on March 18, 2020, however, these factors should not be construed as exhaustive. Forward-looking statements speak only as of the date they are made and we undertake no obligation to update or revise any forward-looking statement that may be made from time to time, whether as a result of new information, future developments or otherwise, except as required by law. 
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 Overview 
 Maiden Holdings is a Bermuda-based holding company, previously focused on serving the needs of regional and specialty insurers in the United States ("U.S."), Europe and select other global markets. We are running off the liabilities associated with AmTrust Financial Services, Inc. ("AmTrust") contracts terminated in early 2019 as discussed below. We are not actively underwriting reinsurance business. We have also entered into a retroactive reinsurance agreement and a commutation agreement that further reduces our exposure to and limits the potential volatility related to these AmTrust liabilities, which are discussed in " Note 1. Basis of Presentation " of the Notes to Condensed Consolidated Financial Statements included in Part I Item 1. " Financial Information ". We operate internationally providing branded auto and credit life insurance products through insurer partners to retail clients in the EU and other global markets through our wholly owned subsidiary Maiden Global Holdings, Ltd. ("Maiden Global"). These products also produce reinsurance programs which are underwritten by our indirect wholly owned subsidiary Maiden Reinsurance Ltd. ("Maiden Reinsurance"). Certain international credit life business is written on a primary basis by our wholly owned subsidiary Maiden Life Försäkrings AB ("Maiden LF") and general insurance business is written on a primary basis by our wholly owned subsidiary Maiden General Försäkrings AB ("Maiden GF"). 
 As discussed in " Note 1. Basis of Presentation " of the Notes to Condensed Consolidated Financial Statements included in Part I Item 1. " Financial Information " and in Item 1. " Business " of our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 18, 2020, the sale of Maiden Reinsurance North America, Inc. ("Maiden US") and the termination of both of our quota share contracts with AmTrust have materially reduced our gross and net premiums written since 2018. We have significantly reduced our operating expenses and continue to take steps to reduce these costs further. 
 Our business consists of two reportable segments: Diversified Reinsurance and AmTrust Reinsurance. As a result of the strategic decision to divest all our U.S. treaty reinsurance operations in 2018, we revised the composition of our reportable segments in the fourth quarter of 2018. Our Diversified Reinsurance segment now only 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 the run-off of all business ceded by AmTrust to Maiden Reinsurance, primarily the AmTrust Quota Share and the European Hospital Liability Quota Share. 
 Recent Developments 
 Since the third quarter of 2018, we have engaged in a series of transactions that have dramatically reduced the regulatory capital required to operate our business, materially strengthened our solvency ratios, and ceased active reinsurance underwriting. During that time, we significantly increased our estimate of ultimate losses and loss reserves while purchasing reinsurance protection against further loss reserve volatility and as a result, have improved the ultimate economic value of the Company. 
 The measures we have taken were initiated in early 2018, when our Board of Directors initiated a review of strategic alternatives ("Strategic Review") to evaluate ways to increase shareholder value after a period of continuing higher than targeted combined ratios and lower returns on equity than expected. This Strategic Review resulted in a series of transactions that transformed our operations and materially reduced the risk on our balance sheet. These transactions can be found in Part II of our Annual Report on Form 10-K for the year ended December 31, 2019. 
 Please refer to " Management's Discussion and Analysis of Financial Condition and Results of Operations " section included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019 for further information. 
 Effective March 16, 2020, we re-domesticated our principal operating subsidiary, Maiden Reinsurance, to the State of Vermont in the U.S. Maiden Reinsurance is now subject to the statutes and regulations of Vermont in the ordinary course of business. We have determined that re-domesticating Maiden Reinsurance to Vermont enables us to better align our capital and resources with our liabilities, which originate mostly in the United States, resulting in a more efficient structure. The re-domestication, in combination with the transactions completed pursuant to the Strategic Review, will continue to strengthen the Company’s capital position and solvency ratios. While the Vermont Department of Financial Regulation ("Vermont DFR") will be the group supervisor for the Company, the re-domestication did not apply to the parent holding company which remains a Bermuda-based holding company. Securities issued by Maiden Holdings were not affected by the re-domestication of Maiden Reinsurance to Vermont. Concurrent with the re-domestication, Maiden Holdings contributed as capital the remaining 65% of its ownership in Maiden Reinsurance to our wholly owned subsidiary Maiden Holdings North America, Ltd. ("Maiden NA"). Maiden NA now owns 100% of Maiden Reinsurance in the aggregate. 
 Maiden NA also maintains a portfolio of cash and fixed maturity investments, along with other strategic investments of $41.1 million at September 30, 2020. We believe Maiden NA’s investments, including its ownership of Maiden Reinsurance, will create opportunities to utilize net operating loss carry-forwards ("NOLs") which total $211.6 million as of September 30, 2020. These NOLs are not presently recognized as deferred tax assets as a full valuation allowance is currently carried against them. For further details please see " Note 16. Taxation" included under Item 8 "Financial Statements and Supplementary Data" in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 18, 2020. Taken together, the Company believes these measures should generate additional income for Maiden NA in a tax-efficient manner while sharing in the improvement in profitability anticipated in Maiden Reinsurance as a result of the measures enacted as part of the Strategic Review. 
 Strategy 
 We expect to continue to re–evaluate our operating strategy during 2020 while leveraging the significant assets and capital we retain. In addition to restoring operating profitability, our strategic focus will center on creating the greatest risk-adjusted shareholder returns, whether via asset and capital management or active reinsurance underwriting, or a combination of both. Our present assessment of the reinsurance marketplace along with our current operating profile is that the risk-adjusted returns 
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 that may be produced via active reinsurance underwriting are likely to present more limited opportunities compared to other strategic initiatives which may produce greater shareholder value. As a result, our strategic focus has shifted to activities which utilize our unrestricted cash and investments to manage our capital and where prudent, enhance our investment return by investing in asset classes which we believe will produce appropriate returns. 
 The measures implemented now enable the Company to more flexibly allocate capital to those activities most likely to produce the greatest returns for shareholders, and the Company is actively engaged in evaluating and deploying funds in both pillars of these strategies as discussed herein. As part of our expanded asset management activities, we have evaluated and continue to consider investing in various initiatives in the insurance industry across a variety of segments which we believe will produce appropriate risk-adjusted returns while maintaining the option to consider underwriting activities in the future. 
 Our capital management strategy is significantly informed by the required capital needed to operate our business in a prudent manner and our ongoing analysis of our loss development trends. Recent trends have increased our confidence in our recorded ultimate losses for our insurance liabilities in run-off, however a prudent assessment dictates that the run-off portfolio still requires additional maturity to fully emerge. While there is no guarantee that these recent loss development trends will persist, as confidence increases it allows us to consider capital management initiatives. Our current assessment is that losses have stabilized sufficiently to consider certain capital management initiatives, although we are careful to approach these strategies in a deliberate fashion. 
 On November 13, 2020, as part of the capital management pillar of our strategy, the Company announced that commencing November 16, 2020, Maiden Reinsurance was offering to purchase for cash, upon the terms and subject to the conditions set forth in its Offer to Purchase and accompanying Letter of Transmittal, up to $100.0 million of its 8.25% Non-Cumulative Preference Shares Series A, 7.125% Non-Cumulative Preference Shares Series C and 6.7% Non-Cumulative Preference Shares Series D (the "Preference Securities"). There can be no assurance that our insurance liabilities will run-off at levels that will permit future capital management activities, which we expect to continually review as part of our strategy. Please refer to the "Liquidity and Capital Resources" section for further information. 
 COVID-19 Pandemic 
 The continuing COVID-19 global pandemic has caused significant disruption to the economy and financial markets globally, and the full extent of the potential impacts of COVID-19 are not yet known. Circumstances caused by the COVID-19 pandemic are complex, uncertain and rapidly evolving. Our results of operations, financial condition, and liquidity and capital resources have been adversely impacted by the COVID-19 pandemic, and the future impact of the pandemic on our financial condition or results of operations is difficult to predict. 
 As described herein, the Company is not currently engaged in active reinsurance underwriting and is running off the remaining unearned exposures it has reinsured. Maiden Global’s business development teams partner with automobile manufacturers, dealer associations and local primary insurers to design and implement point of sale insurance programs which generate revenue for the auto manufacturer and insurance premiums for the primary insurer ("IIS unit"). Our IIS unit does write limited primary insurance coverages that could be exposed to COVID-19 claims. While we assess our exposure to COVID-19 insurance and reinsurance claims on our existing insurance exposures and remaining reinsurance exposures as limited and immaterial, given the uncertainty surrounding the COVID-19 pandemic and its impact on the insurance industry, our preliminary estimates of loss and loss adjustment expenses ("loss and LAE") and estimates of reinsurance recoverable arising from the COVID-19 pandemic may materially change. Maiden Reinsurance has not received any COVID-19 claims to date but our companies within our IIS unit have received a limited number of claims related to those coverages which it deems as immaterial. Unanticipated issues relating to claims and coverage may emerge, which could adversely affect our business by increasing the scope of coverage beyond our intent and/or increasing the frequency and severity of claims. 
 The Company's investment portfolio may be adversely impacted by unfavorable market conditions caused by the COVID-19 pandemic and we and our reinsurance subsidiaries may need additional capital to maintain compliance with regulatory capital requirements and/or be required to post additional collateral under existing reinsurance arrangements, which could reduce our liquidity. In addition, the Company may experience continued volatility in our results of operations which could negatively impact our financial condition and create a reduction in the amount of available distribution or dividend capacity from our regulated reinsurance subsidiaries, which would also reduce liquidity. 
 Please refer to the " Liquidity and Capital Resources" section for a further discussion of the impact of the COVID-19 pandemic on our liquidity and investment portfolio. 
 
 
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 Three and Nine Months Ended September 30, 2020 and 2019 Financial Highlights 
 
 For the Three Months Ended September 30, 2020 2019 Change 
 Summary Consolidated Statement of Income Data (unaudited): ($ in thousands except per share data) 
 Net income (loss) from continuing operations $ 2,162 $ (58,402) $ 60,564 
 Income from discontinued operations, net of income tax — 75 (75) 
 Net income (loss) 2,162 (58,327) 60,489 
 
 Basic and diluted earnings (loss) per common share (9) : 
 
 Net income (loss) attributable to common shareholders (2)(9) 
 0.03 (0.70) 0.73 
 
 Gross premiums written 3,517 35,844 (32,327) 
 Net premiums earned 24,305 94,898 (70,593) 
 Underwriting income (loss) (3) 
 3,402 (80,255) 83,657 
 Net investment income 12,686 13,223 (537) 
 Combined ratio (4) 
 109.4 % 191.2 % (81.8) 
 Non-GAAP measures: 
 Non-GAAP operating (loss) earnings (1) 
 $ (2,313) $ 39,482 $ (41,795) 
 Non-GAAP basic and diluted operating (loss) earnings per common share (1)(9) 
 (0.03) 0.47 (0.50) 
 Annualized non-GAAP operating return on average common shareholders' equity (1) 
 (5.6) % 105.0 % (110.6) 
 
 For the Nine Months Ended September 30, 2020 2019 Change 
 Summary Consolidated Statement of Income Data (unaudited): ($ in thousands except per share data) 
 Net income (loss) from continuing operations $ 32,235 $ (88,328) $ 120,563 
 Loss from discontinued operations, net of income tax — (22,048) 22,048 
 Net income (loss) 32,235 (110,376) 142,611 
 
 
 
 
 Basic and diluted earnings (loss) per common share (9) : 
 
 Net income (loss) attributable to Maiden common shareholders (2)(9) 
 0.38 (1.33) 1.71 
 
 Gross premiums written 20,233 (523,178) 543,411 
 Net premiums earned 76,828 411,986 (335,158) 
 Underwriting loss (3) 
 (308) (162,075) 161,767 
 Net investment income 44,959 76,367 (31,408) 
 Combined ratio (4) 
 124.6 % 146.0 % (21.4) 
 Non-GAAP measures: 
 Non-GAAP operating earnings (loss) (1) 
 $ 2,041 $ (9,411) $ 11,452 
 
 Non-GAAP basic and diluted operating earnings (loss) per common share (1)(9) 
 0.02 (0.11) 0.13 
 
 Annualized non-GAAP operating return on average common shareholders' equity (1) 
 1.8 % (9.6) % 11.4 

 
 
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 September 30, 2020 December 31, 2019 Change 
 Consolidated Financial Condition ($ in thousands except per share data) 
 Total investments and cash and cash equivalents (5) 
 $ 1,553,226 $ 1,974,544 $ (421,318) 
 Total assets 3,054,704 3,568,196 (513,492) 
 Reserve for loss and LAE 1,975,073 2,439,907 (464,834) 
 Senior notes - principal amount 262,500 262,500 — 
 Common shareholders' equity 73,086 42,718 30,368 
 Shareholders' equity 538,086 507,718 30,368 
 Total capital resources (6) 
 800,586 770,218 30,368 
 Ratio of debt to total capital resources (12) 
 32.8 % 34.1 % (1.3) 
 Book Value calculations: 
 Book value per common share (7) 
 $ 0.86 $ 0.51 $ 0.35 
 Accumulated dividends per common share 4.27 4.27 — 
 Book value per common share plus accumulated dividends $ 5.13 $ 4.78 $ 0.35 
 Change in book value per common share plus accumulated dividends 7.3 % 
 Diluted book value per common share (8) 
 $ 0.85 $ 0.50 $ 0.35 
 
 Non-GAAP measures: 
 Adjusted book value per common share (10) 
 $ 1.81 $ 1.87 $ (0.06) 
 Adjusted Maiden shareholders' equity (11) 
 618,081 620,668 (2,587) 
 Adjusted total capital resources (11) 
 880,581 883,168 (2,587) 
 Ratio of debt to adjusted total capital resources (13) 
 29.8 % 29.7 % 0.1 

 (1) Non-GAAP operating earnings (loss), non-GAAP operating earnings (loss) per common share, and annualized non-GAAP operating return on average common equity and underwriting loss are non-GAAP financial measures. See " Key Financial Measures " for additional information. 
 (2) Please refer to " Notes to Condensed Consolidated Financial Statements (unaudited) Note 12. Earnings per Common Share " for the calculation of basic and diluted income or loss per common share. 
 (3) Underwriting income or loss is a non-GAAP measure and is calculated as net premiums earned plus other insurance revenue less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities. See " Key Financial Measures " for additional information. 
 (4) Combined ratio is calculated by adding together the net loss and LAE ratio and the expense ratio. 
 (5) Total investments and cash and cash equivalents includes both restricted and unrestricted. 
 (6) Total capital resources is the sum of the Company's principal amount of debt and shareholders' equity. See " Key Financial Measures " for additional information. 
 (7) Book value per common share is calculated using common shareholders’ equity (shareholders' equity excluding the aggregate liquidation value of our preference shares) divided by the number of common shares outstanding.See " Key Financial Measures " for additional information. 
 (8) Diluted book value per common share is calculated by dividing common shareholders' equity, adjusted for assumed proceeds from the exercise of dilutive options, by the number of outstanding common shares plus dilutive options and restricted shares (assuming exercise of all dilutive share based awards). See " Key Financial Measures " for additional information. 
 (9) During a period of loss, the basic weighted average common shares outstanding is used in the denominator of the diluted loss per common share computation as the effect of including potential dilutive shares would be anti-dilutive. 
 (10) Adjusted book value per common share is a non-GAAP measure that is calculated using common shareholders' equity, adjusted for the estimated unamortized deferred gain on retroactive reinsurance, divided by the number of common shares outstanding. See " Key Financial Measures " for additional information. 
 (11) Adjusted shareholders' equity and adjusted total capital resources are calculated by adding the unamortized deferred gain on retroactive reinsurance to the GAAP shareholders' equity and GAAP total capital resources, respectively. The deferred gain arises from the LPT/ADC Agreement with Cavello relating to losses from the AmTrust Quota Share agreement. Under U.S. GAAP, the deferred gain shall be amortized over the estimated remaining settlement period. See " Key Financial Measures " for additional information. 
 (12) Ratio of debt to total capital resources is calculated using the total principal amount of debt divided by the sum of total capital resources. 
 (13) Ratio of debt to adjusted total capital resources is calculated using the total principal amount of debt divided by the sum of adjusted total capital resources. 
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 Key Financial Measures 
 In addition to the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Income and Comprehensive Income, management uses certain key financial measures, some of which are non-GAAP measures, to evaluate the Company's financial performance and the overall growth in value generated for the Company’s common shareholders. Management believes that these measures, which may be defined differently by other companies, explain the Company’s results to investors in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. The non-GAAP measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. The calculation of some of these key financial measures including the reconciliation of non-GAAP measures to the nearest GAAP measure and relevant discussions are found within Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" . These key financial measures are: 
 Non-GAAP operating earnings (loss) and non-GAAP diluted operating earnings (loss) per common share : Management believes that the use of non-GAAP operating earnings (loss) and non-GAAP diluted operating earnings (loss) per common share enables investors and other users of the Company’s financial information to analyze its performance in a manner similar to how management analyzes performance. Management also believes that these measures generally follow industry practice therefore allowing the users of financial information to compare the Company’s performance with its industry peer group, and that the equity analysts and certain rating agencies which follow the Company, and the insurance industry as a whole, generally exclude these items from their analyses for the same reasons. Non-GAAP operating earnings (loss) should not be viewed as a substitute for U.S. GAAP net income (loss). 
 Non-GAAP operating earnings (loss) is an internal performance measure used by management as these measures focus on the underlying fundamentals of the Company's operations by excluding, on a recurring basis: (1) net realized gains or losses on investment; (2) total other-than-temporary impairment ("OTTI") losses; (3) foreign exchange and other gains or losses; and (4) the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under retroactive reinsurance agreements and related changes in amortization of the deferred gain liability. It also excludes on a non-recurring basis: (1) loss from discontinued operations, net of income tax and; (2) interest expense paid resulting from the LPT/ADC Agreement and Commutation and Release Agreement; (3) loss and related activity from our NGHC Quota Share run-off operations which was commuted in November 2019. We exclude net realized gains or losses on investment, OTTI losses and foreign exchange and other gains or losses as we believe these are influenced by market opportunities and other factors. We do not believe results from our NGHC Quota Share run-off operations commuted in November 2019 and results from our discontinued operations, (2) interest expense paid on the LPT/ADC Agreement and Commutation and Release Agreement and ceded risks under retroactive reinsurance agreements are representative of our ongoing and future business. We believe all of these amounts are substantially independent of our business and any potential future underwriting process therefore including them would distort the analysis of underlying trends in our operations. 
 Underwriting income (loss) is a non-GAAP measure and is calculated as net premiums earned plus other insurance revenue less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities. For purposes of these non-GAAP operating measures, the fee-generating business which is included in our Diversified Reinsurance segment, is considered part of the underwriting operations of the Company. Management believes that this measure is important in evaluating the underwriting performance of the Company and its segments. This measure is also a useful tool to measure the profitability of the Company separately from the investment results and is also a widely used performance indicator in the insurance industry. A reconciliation of the Company's underwriting results can be found in the Condensed Consolidated Financial Statements in the " Notes to Condensed Consolidated Financial Statements (unaudited) Note 3. Segment Information " included under Item 1. "Financial Statements" of this Quarterly Report on Form 10-Q. 
 Combined ratio is commonly used in the insurance and reinsurance industry in conjunction with underwriting income (loss) as a measure of underwriting profitability. Management measures underwriting results on an overall basis and for each segment on the basis of the combined ratio. The combined ratio is the sum of the net loss and LAE ratio and the expense ratio and the computations of each component are described below. A combined ratio under 100% indicates underwriting profitability, as the net loss and LAE, commission and other acquisition expenses and general and administrative expenses are less than the net premiums earned and other insurance revenue on that business. While the Company has continued to utilize this non-GAAP measure in this Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2020, as the run-off of our reinsurance portfolios progresses, such ratios may increasingly be of less value to readers as they evaluate the financial results of the Company, particularly compared to historical data. Please refer to " Notes to Condensed Consolidated Financial Statements (unaudited) Note 3. Segment Information " included under Item 1. "Financial Statements" of this Quarterly Report on Form 10-Q for further details. 
 While an important metric of success, underwriting income (loss) and combined ratio do not reflect all components of profitability, as they do not recognize the impact of investment income earned on premiums between the time premiums are received and the time loss payments are ultimately paid to clients. Because we do not manage our cash and investments by segment, investment income and interest expense are not allocated to the reportable segments. Certain general and administrative expenses are generally allocated to segments based on actual costs incurred. 
 The " net loss and LAE ratio " is derived by dividing net loss and LAE by the sum of net premiums earned and other insurance revenue. The " commission and other acquisition expense ratio " is derived by dividing commission and other acquisition expenses by the sum of net premiums earned and other insurance revenue. The " general and administrative expense ratio " is derived by dividing general and administrative expenses by the sum of net premiums earned and other insurance revenue. The " expense ratio " is the sum of the commission and other acquisition expense ratio and the general and administrative expense ratio. 
 
 
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 Non-GAAP Operating Return on Average Adjusted Common Equity ("Non-GAAP Operating ROACE"): Management uses non-GAAP operating return on average adjusted common shareholders' equity as a measure of profitability that focuses on the return to common shareholders. It is calculated using non-GAAP operating earnings (loss) available to common shareholders (as defined above) divided by average adjusted common shareholders' equity. 
 Book Value per Common Share and Diluted Book Value per Common Share: Book value per common share and diluted book value per common share are non-GAAP measures. Management uses growth in both of these metrics as a prime measure of the value we are generating for our common shareholders, because management believes that growth in each metric ultimately results in growth in the Company’s common share price. These metrics are impacted by the Company’s net income and external factors, such as interest rates, which can drive changes in unrealized gains or losses on our investment portfolio, as well as share repurchases. 
 Ratio of Debt to Total Capital Resources: Management uses this non-GAAP measure to monitor the financial leverage of the Company. This measure is calculated using the total principal amount of debt divided by the sum of total capital resources. 
 Non-GAAP underwriting income (loss), Non-GAAP earnings (loss) and LAE ratio, and Non-GAAP combined ratio: Management has further adjusted underwriting loss, as defined above, as well as the reported loss and LAE ratios and reported combined ratios by excluding the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under retroactive reinsurance agreements such as the LPT/ADC Agreement. These losses are estimated to be fully recoverable from Cavello and management believes adjusting for this shows the ultimate economic benefit of the LPT/ADC Agreement on the Company's underwriting results. We believe reflecting the economic benefit of this retroactive reinsurance agreement is helpful for understanding future trends 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' equity by adding the unamortized deferred gain on retroactive reinsurance arising from the LPT/ADC Agreement to shareholders' equity. The unamortized deferred gain on retroactive reinsurance arising from the LPT/ADC Agreement includes the aggregate impact of: 1) cumulative increases to losses incurred prior to December 31, 2018 for which we have ceded the risk under the LPT/ADC Agreement; and 2) changes in estimated ultimate losses for certain workers' compensation reserves previously commuted by the Company to AmTrust which are subject to specific terms and conditions pursuant to the LPT/ADC Agreement. As a result, by virtue of this adjustment, management has also adjusted Total Capital Resources and computed the Ratio of Debt to Adjusted Capital Resources and Adjusted Book Value per Common Share. The deferred gain liability represents amounts estimated to be fully recoverable from Cavello and management believes adjusting for this shows the ultimate economic benefit of the LPT/ADC Agreement. We believe reflecting the economic benefit of this retroactive reinsurance agreement is helpful to understand future trends in our operations, which will improve the Company's shareholders' equity over the settlement period. 
 Certain Operating Measures 
 Refer to " Management's Discussion and Analysis of Financial Condition and Results of Operations " section included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019 for a general discussion on " Certain Operating Measures" utilized by the Company. 
 Critical Accounting Policies and Estimates 
 The Company's critical accounting policies and estimates are discussed in " Management's Discussion and Analysis of Financial Condition and Results of Operations " section included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 18, 2020. The critical accounting policies and estimates should be read in conjunction with " Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) Note 2. Significant Accounting Policies " included in this Form 10-Q and " Notes to Consolidated Financial Statements Note 2. Significant Accounting Policies " included within the audited Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 18, 2020. There have been no material changes in the application of our critical accounting estimates subsequent to that report. 
 
 
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 Results of Operations 
 The following table sets forth our selected unaudited Condensed Consolidated Statement of Income data for three and nine months ended September 30, 2020 and 2019: 
 
 For the Three Months Ended September 30, For the Nine Months Ended September 30, 
 ($ in thousands) 2020 2019 2020 2019 
 Gross premiums written 
 $ 3,517 $ 35,844 $ 20,233 $ (523,178) 
 Net premiums written 
 $ 3,031 $ 35,944 $ 17,493 $ (525,995) 
 Net premiums earned 
 $ 24,305 $ 94,898 $ 76,828 $ 411,986 
 Other insurance revenue 
 261 554 919 2,120 
 Net loss and LAE 
 (9,065) (140,860) (41,159) (415,110) 
 Commission and other acquisition expenses 
 (9,651) (32,763) (29,778) (152,036) 
 General and administrative expenses (1) 
 (2,448) (2,084) (7,118) (9,035) 
 Underwriting income (loss) (2) 
 3,402 (80,255) (308) (162,075) 
 Other general and administrative expenses (1) 
 (5,712) (6,814) (18,853) (28,640) 
 Net investment income 
 12,686 13,223 44,959 76,367 
 Net realized gains on investment 
 4,133 12,700 24,046 25,685 
 Total other-than-temporary impairment losses 
 (962) (165) (2,468) (165) 
 
 
 Foreign exchange and other (losses) gains (6,536) 7,827 (634) 14,013 
 Interest and amortization expenses (4,832) (4,831) (14,493) (14,490) 
 Income tax (expense) benefit (17) (87) (14) 977 
 Net income (loss) from continuing operations 
 2,162 (58,402) 32,235 (88,328) 
 Income (loss) from discontinued operations, net of income tax — 75 — (22,048) 
 
 
 Net income (loss) 
 $ 2,162 $ (58,327) $ 32,235 $ (110,376) 
 
 Ratios 
 
 Net loss and LAE ratio (3) 
 36.9 % 147.6 % 52.9 % 100.2 % 
 Commission and other acquisition expense ratio (4) 
 39.3 % 34.3 % 38.3 % 36.7 % 
 General and administrative expense ratio (5) 
 33.2 % 9.3 % 33.4 % 9.1 % 
 Expense ratio (6) 
 72.5 % 43.6 % 71.7 % 45.8 % 
 Combined ratio (7) 
 109.4 % 191.2 % 124.6 % 146.0 % 

 (1) Underwriting related general and administrative expenses is a non-GAAP measure. Please refer to "General and Administrative Expenses" below for additional information related to these corporate expenses and the reconciliation to those presented in our unaudited Condensed Consolidated Statements of Income. 
 (2) Underwriting loss is a non-GAAP measure and is calculated as net premiums earned plus other insurance revenue less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities. 
 (3) Calculated by dividing net loss and LAE by the sum of net premiums earned and other insurance revenue. 
 (4) Calculated by dividing commission and other acquisition expenses by the sum of net premiums earned and other insurance revenue. 
 (5) Calculated by dividing general and administrative expenses by the sum of net premiums earned and other insurance revenue. 
 (6) Calculated by adding together commission and other acquisition expense ratio and general and administrative expense ratio. 
 (7) Calculated by adding together net loss and LAE ratio and the expense ratio. 
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 Net Income (Loss) 
 Net income for the three months ended September 30, 2020 was $2.2 million compared to a net loss of $58.3 million for the same period in 2019. The net improvement in results for the three months ended September 30, 2020 compared to the same period in 2019 was primarily due to the following: 
 • net income from continuing operations of $2.2 million compared to net loss from continuing operations of $58.4 million for the same period in 2019 largely due to the following factors: 
 • underwriting income of $3.4 million for the three months ended September 30, 2020 compared to an underwriting loss of $80.3 million in the same period in 2019. The improvement in the underwriting income was due to: 
 ◦ the impact of lower loss ratios for current year premiums earned during the three months ended September 30, 2020 compared to the same period in 2019; and 
 ◦ favorable prior year loss development of $7.2 million or 29.5 percentage points in the third quarter of 2020 compared to adverse prior year loss development of $63.2 million or 66.2 percentage points during the same period in 2019 which had been incurred primarily within AmTrust Reinsurance Segment. 
 The improvement in our underwriting results was partially offset by the following: 
 • lower realized gains on investment of $4.1 million for the three months ended September 30, 2020 compared to realized gains of $12.7 million for the same period in 2019; 
 • a reduction in net investment income of $0.5 million or 4.1% for the three months ended September 30, 2020 compared to the same period in 2019 primarily due to the decline in average investable assets of 34.1%; and 
 • foreign exchange and other losses of $6.5 million for the three months ended September 30, 2020 compared to foreign exchange and other gains of $7.8 million for the same period in 2019. 
 Net income for the nine months ended September 30, 2020 was $32.2 million compared to a net loss of $110.4 million for the same period in 2019. The net improvement in results for the nine months ended September 30, 2020 compared to the same period in 2019 was primarily due to the following: 
 • net income from continuing operations of $32.2 million compared to net loss from continuing operations of $88.3 million for the same period in 2019 largely due to the following factors: 
 • underwriting loss of $0.3 million compared to $162.1 million in the same period in 2019. The reduction in the underwriting loss was due to: 
 ◦ the impact of lower loss ratios for current year premiums earned during the nine months ended September 30, 2020 compared to the same period in 2019; and 
 ◦ favorable prior year loss development of $7.8 million or 10.1 percentage points in the nine months ended September 30, 2020 compared to adverse prior year loss development of $96.5 million or 23.3 percentage points during the same period in 2019 which had been incurred primarily within AmTrust Reinsurance Segment. 
 The improvement in our underwriting results was partially offset by the following: 
 • a reduction in net investment income of $31.4 million or 41.1% for the nine months ended September 30, 2020 compared to the same period in 2019, primarily due to the decline in average investable assets of 34.2%; and 
 • lower realized gains on investment of $24.0 million for the nine months ended September 30, 2020 compared to realized gains of $25.7 million for the same period in 2019; and 
 • foreign exchange and other losses of $0.6 million for the nine months ended September 30, 2020 compared to foreign exchange and other gains of $14.0 million for the same period in 2019. 
 • net income from discontinued operations of $0.0 million for the nine months ended September 30, 2020 compared to a net loss from discontinued operations of $22.0 million for the same period in 2019 as a result of the Settlement and Commutation Agreement entered into by the Company and Enstar on July 31, 2019 which caused a net additional loss of $16.7 million to be recognized. 
 45 

 
 

 Net Premiums Written 
 The tables below compare net premiums written by our reportable segments, reconciled to the total consolidated net premiums written for the three and nine months ended September 30, 2020 and 2019: 
 
 For the Three Months Ended September 30, 2020 2019 Change in 
 ($ in thousands) Total Total $ % 
 Diversified Reinsurance 
 $ 8,666 $ 14,539 $ (5,873) (40.4) % 
 AmTrust Reinsurance (5,635) 21,405 (27,040) (126.3) % 
 
 
 Total $ 3,031 $ 35,944 $ (32,913) (91.6) % 
 
 For the Nine Months Ended September 30, 2020 2019 Change in 
 ($ in thousands) Total Total $ % 
 Diversified Reinsurance 
 $ 27,591 $ 38,204 $ (10,613) (27.8) % 
 AmTrust Reinsurance (10,098) (564,199) 554,101 (98.2) % 
 
 
 Total $ 17,493 $ (525,995) $ 543,488 (103.3) % 

 Net premiums written for the three and nine months ended September 30, 2020 were $3,031 and $17,493, respectively, compared to net premiums written of $35,944 and $(525,995) in the same respective periods in 2019 due to the following: 
 • Premiums written in the Diversified Reinsurance segment decreased by $5.9 million or 40.4% and $10.6 million or 27.8% for the three and nine months ended September 30, 2020, respectively, compared to the same respective periods in 2019 due to lower premiums written in German Auto programs within our IIS business. 
 • There were no new written premiums within the AmTrust Reinsurance segment due to the termination of both the AmTrust Quota Share and the European Hospital Liability Quota Share effective January 1, 2019. For the three and nine months ended September 30, 2020 and 2019, the negative premiums written are primarily the result of return premium and other adjustments after the termination of the AmTrust contracts in 2019. In 2019, the Partial Termination Amendment resulted in Maiden Reinsurance returning approximately $648.0 million in unearned premium to AII, or $436.8 million net of applicable ceding commission and brokerage. 
 Please refer to the analysis below of our Diversified Reinsurance and AmTrust Reinsurance segments for further details. 
 Net Premiums Earned 
 Net premiums earned decreased by $70.6 million or 74.4% and $335.2 million or 81.4% for the three and nine months ended September 30, 2020, respectively, compared to the same respective periods in 2019. The tables below compare net premiums earned by our reportable segments, reconciled to the total consolidated net premiums earned, for the three and nine months ended September 30, 2020 and 2019: 
 
 For the Three Months Ended September 30, 2020 2019 Change in 
 ($ in thousands) Total % of Total Total % of Total $ % 
 Diversified Reinsurance 
 $ 11,323 46.6 % $ 20,492 21.6 % $ (9,169) (44.7) % 
 AmTrust Quota Share Reinsurance 
 12,982 53.4 % 74,406 78.4 % (61,424) (82.6) % 
 
 
 Total 
 $ 24,305 100.0 % $ 94,898 100.0 % $ (70,593) (74.4) % 
 
 For the Nine Months Ended September 30, 2020 2019 Change in 
 ($ in thousands) Total % of Total Total % of Total $ % 
 Diversified Reinsurance 
 $ 35,381 46.1 % $ 68,256 16.6 % $ (32,875) (48.2) % 
 AmTrust Quota Share Reinsurance 
 41,447 53.9 % 343,730 83.4 % (302,283) (87.9) % 
 
 
 Total 
 $ 76,828 100.0 % $ 411,986 100.0 % $ (335,158) (81.4) % 

 Net premiums earned in the AmTrust Reinsurance segment for the three and nine months ended September 30, 2020 decreased by $61.4 million or 82.6% and $302.3 million or 87.9%, respectively, compared to the same respective periods in 2019 due to the terminations of the AmTrust Quota Share and European Hospital Liability Quota Share effective January 1, 2019. Please refer to the analysis of our AmTrust Reinsurance segment for further discussion. 
 Net premiums earned in our Diversified Reinsurance segment for the three and nine months ended September 30, 2020 decreased by $9.2 million or 44.7% and $32.9 million or 48.2%, respectively, compared to the same respective periods in 2019 driven by non-renewals in our European Capital Solutions business combined with reductions in quota share cessions for German Auto Programs within our IIS business. Please refer to the analysis of our Diversified Reinsurance segment for further discussion. 
 46 

 
 

 Other Insurance Revenue 
 All of our Other Insurance Revenue is produced by our Diversified Reinsurance segment. Please refer to the analysis below of our Diversified Reinsurance segment for further discussion. 
 Net Investment Income 
 Net investment income decreased by $0.5 million or 4.1% and $31.4 million or 41.1% for the three and nine months ended September 30, 2020, respectively, compared to the respective periods in 2019, primarily due to the decline in average investable assets of 34.1% and 34.2% in those same respective periods. The decrease in investable assets is largely due to the cessation of active reinsurance underwriting which materially reduced our revenues resulting in significant negative operating cash flows as we run-off our existing reinsurance liabilities. 
 During the three and nine months ended September 30, 2019, the Company paid AmTrust and Enstar an aggregate of $13.6 million for interest due on the settlement of funding for amounts related to the Commutation and Release Agreement and the LPT/ADC Agreement, respectively. Excluding this non-recurring interest expense, average book yields were 2.9% and 3.1% for the three and nine months ended September 30, 2019, respectively, compared to average book yields of 2.1% and 2.3% for the same respective periods in 2020. 
 The following table details the Company's average investable assets and average book yield for the three and nine months ended September 30, 2020 compared to the same respective periods in 2019: 
 
 For the Three Months Ended September 30, For the Nine Months Ended September 30, 
 ($ in thousands) 2020 2019 2020 2019 
 Average investable assets (1) 
 $ 2,412,864 $ 3,661,544 $ 2,559,333 $ 3,892,366 
 Average book yield (2) 
 2.1 % 1.4 % 2.3 % 2.6 % 
 Adjusted average book yield (3) 
 2.1 % 2.9 % 2.3 % 3.1 % 

 (1) The average of our total investments, cash, restricted cash and cash equivalents, funds withheld receivable and loan to related party held at each quarter-end during the period. 
 (2) Ratio of net investment income over average investable assets at fair value. 
 (3) Ratio of net investment income, excluding the interest payments to AmTrust and Enstar, over average investable assets at fair value, as adjusted. 
 
 
 Net Realized Gains on Investment 
 Net realized gains on investment were $4.1 million and $24.0 million for the three and nine months ended September 30, 2020, respectively, compared to net realized gains of $12.7 million and $25.7 million for the same respective periods in 2019. The realized gains for the three and nine months ended September 30, 2020 were primarily due to sales of corporate bonds during 2020 for the settlement of claim payments to AmTrust. 
 The net realized gains on investment of $12.7 million and $25.7 million for the same respective periods in 2019 were the result of sales of corporate bonds in anticipation of completing and funding the LPT/ADC Agreement with Enstar as well as sales of corporate bonds during the third quarter for the settlement of the Commutation Payment to AmTrust via transfer of cash and invested assets on August 12, 2019. The year-to-date gains were partially offset by net investment losses realized on the non-cash transfer of corporate and other debt securities in early 2019 related to the Partial Termination Amendment with AmTrust and the conversion of a portion of reinsurance trust assets held as collateral into a funds withheld receivable. 
 Net Impairment Losses Recognized in Earnings 
 The Company recognized $1.0 million and $2.5 million of OTTI losses on two and four fixed maturity securities for the three and nine months ended September 30, 2020, respectively, compared to $0.2 million of OTTI losses on one fixed maturity security for the three and nine months ended September 30, 2019. 
 Net Loss and LAE 
 Net loss and LAE decreased by $131.8 million and $374.0 million during the three and nine months ended September 30, 2020, respectively, compared to the same respective periods in 2019 largely due to the cessation of active reinsurance underwriting, including the termination of the AmTrust Reinsurance quota share agreements effective January 1, 2019. 
 The loss ratio for the third quarter of 2020 was impacted by net favorable prior year reserve development of $7.2 million or 29.5 percentage points compared to net adverse prior year reserve development of $63.2 million or 66.2 percentage points during the same period in 2019. The loss ratio for the nine months ended September 30, 2020 was impacted by net favorable prior year reserve development of $7.8 million or 10.1 percentage points compared to net adverse prior year reserve development of $96.5 million or 23.3 percentage points during the same period in 2019. The prior year development is discussed in greater detail in the individual segment discussion and analysis. 
 The net loss and LAE ratios decreased to 36.9% and 52.9% for the three and nine months ended September 30, 2020, respectively, compared to 147.6% and 100.2% for the same respective periods in 2019 primarily due to significant reduction in adverse prior year loss development resulting from the termination of the AmTrust Reinsurance quota share contracts effective January 1, 2019. 
 
 
 47 

 
 

 Commission and Other Acquisition Expenses 
 Commission and other acquisition expenses decreased by $23.1 million or 70.5% and $122.3 million or 80.4% for the three and nine months ended September 30, 2020, respectively, compared to the same respective periods in 2019 due to significantly lower earned premiums in both of our reportable segments. The commission and other acquisition expense ratio increased to 39.3% and 38.3% for the three and nine months ended September 30, 2020, respectively, compared to 34.3% and 36.7% for the same respective periods in 2019. 
 General and Administrative Expenses 
 General and administrative expenses include both segment and corporate expenses which are segregated for analytical purposes as a component of underwriting income. General and administrative expenses for the three and nine months ended September 30, 2020 and 2019 comprise: 
 
 For the Three Months Ended September 30, For the Nine Months Ended September 30, 
 ($ in thousands) 2020 2019 2020 2019 
 General and administrative expenses – segments 
 $ 2,448 $ 2,084 $ 7,118 $ 9,035 
 General and administrative expenses – corporate 
 5,712 6,814 18,853 28,640 
 Total general and administrative expenses 
 $ 8,160 $ 8,898 $ 25,971 $ 37,675 

 Total general and administrative expenses decreased by $0.7 million, or 8.3% and $11.7 million or 31.1% for the three and nine months ended September 30, 2020, respectively, compared to the same respective periods in 2019. The general and administrative expense ratio increased to 33.2% and 33.4% for the three and nine months ended September 30, 2020, respectively, from 9.3% and 9.1% for the three and nine months ended September 30, 2019 as a result of significantly lower earned premiums compared to the prior periods. Lower earned premiums was largely due to termination of the AmTrust Reinsurance quota share contracts effective January 1, 2019 and non-renewals within our International business in the Diversified Reinsurance segment. 
 The decreased corporate expenses for the three and nine months ended September 30, 2020 compared to the same respective periods in 2019 were largely due to lower salary, benefits and other corporate expenses associated with the Strategic Review and related headcount reductions since 2018. 
 Interest and Amortization Expenses 
 The interest and amortization expenses related to the outstanding senior notes issued by Maiden Holdings in 2016 and Maiden NA in 2013 ("Senior Notes") were $4.8 million and $14.5 million for the three and nine months ended September 30, 2020 and 2019, respectively. 
 Please refer to " Notes to Condensed Consolidated Financial Statements (unaudited) Note 7. Long Term Debt " for further details on the Senior Notes. The weighted average effective interest rate for the Senior Notes was 7.6% for the three and nine months ended September 30, 2020 and 2019, respectively. 
 Foreign Exchange and Other (Losses) Gains 
 Net foreign exchange and other losses amounted to $6.5 million and $0.6 million during the three and nine months ended September 30, 2020, respectively, compared to net foreign exchange and other gains of $7.8 million and $14.0 million for the same respective periods in 2019. 
 Net foreign exchange losses of $6.5 million and $0.2 million occurred during the three and nine months ended September 30, 2020, respectively, due to the weakening of the U.S. dollar on the re-measurement of net loss reserves and related liabilities denominated in British pound and euro. 
 Net foreign exchange and other gains of $14.0 million for the nine months ended September 30, 2019 included $4.3 million of proceeds received from the sale of AVS and its related European subsidiaries to Allianz Partners on January 10, 2019. Excluding the gain of $4.3 million, net foreign exchange gains of $9.7 million were realized primarily attributable to the strengthening of the U.S. dollar on the re-measurement of net loss reserves and related liabilities denominated in British pound and euro. 
 
 
 48 

 
 

 Underwriting Results by Reportable Segment 
 Diversified Reinsurance Segment 
 The underwriting results and associated ratios for our Diversified Reinsurance segment for the three and nine months ended September 30, 2020 and 2019 were as follows: 
 
 For the Three Months Ended September 30, For the Nine Months Ended September 30, 
 ($ in thousands) 2020 2019 2020 2019 
 Gross premiums written 
 $ 9,152 $ 14,439 $ 30,573 $ 41,021 
 Net premiums written 
 $ 8,666 $ 14,539 $ 27,591 $ 38,204 
 Net premiums earned 
 $ 11,323 $ 20,492 $ 35,381 $ 68,256 
 Other insurance revenue 
 261 554 919 2,120 
 Net loss and LAE 
 (6,624) (13,807) (19,703) (40,695) 
 Commission and other acquisition expenses 
 (4,204) (7,005) (13,557) (24,413) 
 General and administrative expenses 
 (1,818) (1,849) (5,177) (6,972) 
 Underwriting loss $ (1,062) $ (1,615) $ (2,137) $ (1,704) 
 Ratios 
 
 Net loss and LAE ratio 
 57.2 % 65.6 % 54.3 % 57.8 % 
 Commission and other acquisition expense ratio 
 36.3 % 33.3 % 37.3 % 34.7 % 
 General and administrative expense ratio 
 15.7 % 8.8 % 14.3 % 9.9 % 
 Expense ratio 
 52.0 % 42.1 % 51.6 % 44.6 % 
 Combined ratio 
 109.2 % 107.7 % 105.9 % 102.4 % 

 The combined ratio for the three and nine months ended September 30, 2020 increased to 109.2% and 105.9%, respectively, compared to 107.7% and 102.4% for the same respective periods in 2019, largely due to significant declines in earned premium volume which increased the expense ratio and more than offset lower loss and LAE ratios. Please see the respective sections on net loss, commissions and administrative expenses for factors that have impacted the combined ratios in the discussion below. 
 Premiums — Gross premiums written decreased by $5.3 million or 36.6% and $10.4 million or 25.5% for the three and nine months ended September 30, 2020, respectively, compared to the same respective periods in 2019. This was primarily due to lower premiums written in German Auto Programs in our IIS business during the three and nine months ended September 30, 2020. Net premiums written decreased by $5.9 million or 40.4% and $10.6 million or 27.8% during the three and nine months ended September 30, 2020 compared to the same respective periods in 2019 mainly due to lower net premiums written in our German Auto programs within our IIS business as discussed above. 
 The tables below show net premiums written by line of business for the three and nine months ended September 30, 2020 and 2019: 
 
 For the Three Months Ended September 30, 2020 2019 Change in 
 ($ in thousands) Total Total $ % 
 Net Premiums Written 
 
 International 
 $ 8,757 $ 14,563 $ (5,806) (39.9) % 
 Other 
 (91) (24) (67) NM 
 
 Total Diversified Reinsurance 
 $ 8,666 $ 14,539 $ (5,873) (40.4) % 
 
 For the Nine Months Ended September 30, 2020 2019 Change in 
 ($ in thousands) Total Total $ % 
 Net Premiums Written 
 International 
 $ 27,627 $ 38,246 $ (10,619) (27.8) % 
 Other 
 (36) (42) 6 (14.3) % 
 
 Total Diversified Reinsurance 
 $ 27,591 $ 38,204 $ (10,613) (27.8) % 

 NM - not meaningful 
 
 
 49 

 
 

 Net premiums earned decreased by $9.2 million or 44.7% and $32.9 million or 48.2% during the three and nine months ended September 30, 2020, respectively, compared to the same respective periods in 2019 primarily due to lower earned premiums from German Auto programs and non-renewals in our European Capital Solutions business since 2019. The tables below show net premiums earned by line of business for the three and nine months ended September 30, 2020 and 2019: 
 
 For the Three Months Ended September 30, 2020 2019 Change in 
 ($ in thousands) Total Total $ % 
 Net Premiums Earned 
 
 International 
 $ 11,414 $ 20,516 $ (9,102) (44.4) % 
 Other 
 (91) (24) (67) NM 
 
 Total Diversified Reinsurance 
 $ 11,323 $ 20,492 $ (9,169) (44.7) % 
 
 For the Nine Months Ended September 30, 2020 2019 Change in 
 ($ in thousands) Total Total $ % 
 Net Premiums Earned 
 International 
 $ 35,417 $ 68,298 $ (32,881) (48.1) % 
 Other 
 (36) (42) 6 (14.3) % 
 
 Total Diversified Reinsurance 
 $ 35,381 $ 68,256 $ (32,875) (48.2) % 

 NM - not meaningful 
 Other Insurance Revenue — Other insurance revenue, which represents fee income from our IIS business that is not directly associated with premium revenue assumed by the Company as well as other income earned from transitional services relating to the sale of Maiden US, decreased by $0.3 million or 52.9% and $1.2 million or 56.7% for the three and nine months ended September 30, 2020, respectively, compared to the same respective periods in 2019. This was partly due to the sale of AVS and its subsidiaries on January 10, 2019 as a substantial portion of our International fee income was generated by AVS and its subsidiaries in Germany and Austria through its point of sale producers in select OEM's dealerships. 
 The tables below show other insurance revenue by source for the three and nine months ended September 30, 2020 and 2019: 
 For the Three Months Ended September 30, 2020 2019 Change 
 ($ in thousands) 
 
 
 % 
 International $ 197 $ 302 $ (105) (34.8) % 
 Other income 64 252 (188) (74.6) % 
 Total Diversified Reinsurance $ 261 $ 554 $ (293) (52.9) % 
 
 For the Nine Months Ended September 30, 2020 2019 Change 
 ($ in thousands) % 
 International $ 789 $ 1,363 $ (574) (42.1) % 
 Other income 130 757 (627) (82.8) % 
 Total Diversified Reinsurance $ 919 $ 2,120 $ (1,201) (56.7) % 

 Net Loss and LAE — Net loss and LAE decreased by $7.2 million or 52.0% and $21.0 million or 51.6% for the three and nine months ended September 30, 2020, respectively, compared to the same respective periods in 2019. Net loss and LAE ratio decreased to 57.2% and 54.3% for the three and nine months ended September 30, 2020, respectively, compared with 65.6% and 57.8% during the same respective periods in 2019. 
 During the three months ended September 30, 2020, the net loss and LAE ratio decreased by 8.4 percentage points compared to the same period in 2019. The 2020 loss ratio was impacted by adverse prior year loss reserve development which was $0.5 million or 4.2 percentage points during the three months ended September 30, 2020, compared to the impact of adverse development of $0.7 million or 3.3 percentage points on the loss ratio for the same period in 2019. The loss development in 2020 was due to adverse development experienced in European Capital Solutions while the loss development in 2019 was the result of adverse development experienced in facultative reinsurance run-off partially offset by favorable development in International Auto. 
 During the nine months ended September 30, 2020, the net loss and LAE ratio decreased by 3.5 percentage points compared to the same period in 2019. The 2020 loss ratio was impacted by adverse prior year loss reserve development which was $0.3 million or 0.9 percentage points during the nine months ended September 30, 2020, compared to the impact of favorable development of $1.5 million or 2.1 percentage points on the loss ratio in 2019. The adverse loss development in 2020 was the 
 50 

 
 

 result of adverse development experienced in European Capital Solutions, while the favorable loss development in 2019 was due to favorable development experienced from facultative reinsurance run-off lines as well as German Auto programs. 
 The impact on the net loss and LAE ratios should be considered in conjunction with the commission and other acquisition expense ratio as changes to either ratio can be effected by changes in the mix of business and the impact of increases in the commission and other acquisition expense rates on pro-rata contracts with loss sensitive features. As a result of these factors, as well as the impact on the loss ratio described above, the combined ratio increased by 1.5 and 3.5 percentage points for the three and nine months ended September 30, 2020 compared to the same respective periods in 2019. 
 Commission and Other Acquisition Expenses — Commission and other acquisition expenses decreased by $2.8 million or 40.0% and $10.9 million or 44.5% for the three and nine months ended September 30, 2020, respectively, compared to the same respective periods in 2019, largely as a result of the corresponding decrease in net premiums earned in this segment. 
 The commission and other acquisition expense ratio for the three and nine months ended September 30, 2020 increased to 36.3% and 37.3%, respectively, compared to 33.3% and 34.7% for the same respective periods in 2019, reflecting the change in the mix of pro rata versus excess of loss premiums written compared to the same respective periods in 2019. Please refer to the preceding paragraph for other factors that can impact the combined ratio. 
 General and Administrative Expenses — General and administrative expenses decreased by 1.7% and $1.8 million or 25.7% for the three and nine months ended September 30, 2020, respectively, compared to the same respective periods in 2019. The general and administrative expense ratio increased to 15.7% and 14.3% for the three and nine months ended September 30, 2020, respectively, compared to 8.8% and 9.9% for the same respective periods in 2019 due to lower net premiums earned compared to the respective prior year periods. 
 The overall expense ratio (including commission and other acquisition expenses) for the three and nine months ended September 30, 2020 increased to 52.0% and 51.6% compared to 42.1% and 44.6% for the same respective periods in 2019 largely as a result of lower premium revenue compared to the respective prior year periods. 
 
 
 51 

 
 

 AmTrust Reinsurance Segment 
 The AmTrust Reinsurance segment reported underwriting income of $4.5 million and $1.8 million during the three and nine months ended September 30, 2020, respectively, compared to an underwriting loss of $78.5 million and $160.1 million in the same respective periods in 2019. The improvement in the underwriting results was due to improved loss development on prior years, which resulted in a sharply lower combined ratio on significantly lower earned premiums during the three and nine months ended September 30, 2020 compared to the respective periods in 2019. 
 The underwriting results and associated ratios for the AmTrust Reinsurance segment for the three and nine months ended September 30, 2020 and 2019 were as follows: 
 
 For the Three Months Ended September 30, For the Nine Months Ended September 30, 
 ($ in thousands) 2020 2019 2020 2019 
 Gross premiums written 
 $ (5,635) $ 21,405 $ (10,340) $ (564,199) 
 Net premiums written 
 $ (5,635) $ 21,405 $ (10,098) $ (564,199) 
 Net premiums earned 
 $ 12,982 $ 74,406 $ 41,447 $ 343,730 
 Net loss and LAE 
 (2,441) (126,945) (21,456) (374,103) 
 Commission and other acquisition expenses 
 (5,447) (25,758) (16,221) (127,623) 
 General and administrative expenses 
 (630) (235) (1,941) (2,063) 
 Underwriting income (loss) 
 $ 4,464 $ (78,532) $ 1,829 $ (160,059) 
 Ratios 
 
 Net loss and LAE ratio 
 18.8 % 170.6 % 51.8 % 108.8 % 
 Commission and other acquisition expense ratio 
 42.0 % 34.6 % 39.1 % 37.1 % 
 General and administrative expense ratio 
 4.8 % 0.3 % 4.7 % 0.6 % 
 Expense ratio 
 46.8 % 34.9 % 43.8 % 37.7 % 
 Combined ratio 
 65.6 % 205.5 % 95.6 % 146.5 % 

 The combined ratio decreased 139.9 percentage points to 65.6% for the three months ended September 30, 2020 compared to 205.5% for the same period in 2019 partly due to the impact of favorable prior year loss development of $7.7 million or 59.5 percentage points during the third quarter of 2020 compared to the impact of adverse prior year development of $62.4 million or 83.8 percentage points for the same period in 2019. Prior year favorable development in 2020 was primarily due to Workers Compensation partly offset by adverse development within Commercial Auto and General Liability. The adverse loss development in Commercial Auto and General Liability for the three months ended September 30, 2020 was significantly more limited compared to the same period in 2019. The adverse development in 2019 was primarily due to Commercial Auto and General Liability in accident years 2015 to 2018, partly offset by favorable development in Workers Compensation in accident years 2016 to 2018. 
 The combined ratio decreased 50.9 percentage points to 95.6% for the nine months ended September 30, 2020 compared to 146.5% for the same period in 2019 partly due to the impact of favorable prior year loss development of $8.1 million or 19.6 percentage points in the first nine months of 2020 compared to the impact of adverse prior year development of $97.6 million or 28.4 percentage points for the same period in 2019. Prior year favorable development in 2020 was primarily due to Workers Compensation partly offset by adverse development within Commercial Auto and General Liability. The adverse loss development in Commercial Auto and General Liability for the nine months ended September 30, 2020 was significantly more limited compared to the same period in 2019. The adverse development in 2019 was primarily due to 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. 
 Premiums — There were negative gross and net premiums written for the three and nine months ended September 30, 2020 reflecting premium adjustments under the AmTrust Quota Share from April 1, 2020. Furthermore, the termination of both the AmTrust Quota Share and the European Hospital Liability Quota Share as of January 1, 2019, led to no new business written under these contracts during 2020. In 2019, the Partial Termination Amendment resulted in Maiden Reinsurance returning approximately $648.0 million in unearned premium to AII, or approximately $436.8 million net of applicable ceding commission and brokerage, which caused negative gross and net premiums written for the nine months ended September 30, 2019. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 52 

 
 

 The tables below show net premiums written by category for the three and nine months ended September 30, 2020 and 2019: 
 
 For the Three Months Ended September 30, 2020 2019 
 ($ in thousands) Total Total 
 Net Premiums Written 
 Small Commercial Business 
 $ (2,123) $ 8,050 
 Specialty Program 
 (209) 4,139 
 Specialty Risk and Extended Warranty 
 (3,303) 9,216 
 Total AmTrust Reinsurance 
 $ (5,635) $ 21,405 
 
 For the Nine Months Ended September 30, 2020 2019 
 ($ in thousands) Total Total 
 Net Premiums Written 
 Small Commercial Business 
 $ (8,517) $ (329,116) 
 Specialty Program 
 268 (24,500) 
 Specialty Risk and Extended Warranty 
 (1,849) (210,583) 
 Total AmTrust Reinsurance 
 $ (10,098) $ (564,199) 

 Net premiums earned decreased by $61.4 million or 82.6% and $302.3 million or 87.9% for the three and nine months ended September 30, 2020, respectively, compared to the same respective periods in 2019 due to the terminations of the AmTrust Quota Share and European Hospital Liability Quota Share as of January 1, 2019. The negative net premiums earned on Small Commercial Business for the three and nine months ended September 30, 2020 was due to premium adjustments and earned premium returns under the recent commutation of certain home warranty business under the AmTrust Quota Share as of April 1, 2020. The tables below detail net premiums earned by category for the three and nine months ended September 30, 2020 and 2019: 
 
 For the Three Months Ended September 30, 2020 2019 Change in 
 ($ in thousands) Total % of Total Total % of Total $ % 
 Net Premiums Earned 
 Small Commercial Business 
 $ (1,921) (14.8) % $ 18,686 25.1 % $ (20,607) (110.3) % 
 Specialty Program 
 (190) (1.5) % 22,204 29.8 % (22,394) (100.9) % 
 Specialty Risk and Extended Warranty 
 15,093 116.3 % 33,516 45.1 % (18,423) (55.0) % 
 Total AmTrust Reinsurance 
 $ 12,982 100.0 % $ 74,406 100.0 % $ (61,424) (82.6) % 
 
 For the Nine Months Ended September 30, 2020 2019 Change in 
 ($ in thousands) Total % of Total Total % of Total $ % 
 Net Premiums Earned 
 Small Commercial Business 
 $ (8,094) (19.5) % $ 81,424 23.7 % $ (89,518) (109.9) % 
 Specialty Program 
 311 0.7 % 128,751 37.5 % (128,440) (99.8) % 
 Specialty Risk and Extended Warranty 
 49,230 118.8 % 133,555 38.8 % (84,325) (63.1) % 
 Total AmTrust Reinsurance 
 $ 41,447 100.0 % $ 343,730 100.0 % $ (302,283) (87.9) % 

 Net Loss and LAE — Net loss and LAE decreased by $124.5 million or 98.1% and $352.6 million or 94.3% for the three and nine months ended September 30, 2020, respectively, compared to the same respective periods in 2019 due to significantly lower earned premiums as a result of the termination of both quota share agreements with AmTrust. Net loss and LAE ratios decreased to 18.8% and 51.8% for the three and nine months ended September 30, 2020, respectively, compared to 170.6% and 108.8% for the same respective periods in 2019. 
 During the three months ended September 30, 2020, the net loss and LAE ratio decreased by 151.8 percentage points compared to the same period in 2019 primarily due to the following factors: 
 • the Partial Termination Amendment caused significant changes in the mix of business being earned in 2020 compared to 2019. These changes resulted in a current year loss ratio which decreased relative to the same period in 2019 for the remaining in-force business; and 
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 • the impact of prior year loss development was favorable development of $7.7 million or 59.5 percentage points during the three months ended September 30, 2020 on the loss ratio, compared to the impact of adverse prior year loss development which was $62.4 million or 83.8 percentage points for the same period in 2019. Prior year favorable development in 2020 was primarily due to Workers Compensation partly offset by adverse development within Commercial Auto and General Liability. The adverse loss development in Commercial Auto and General Liability for the three months ended September 30, 2020 was significantly more limited compared to the same period in 2019. Prior year adverse development in 2019 was due to favorable development in Commercial Auto and General Liability in accident years 2015 to 2018, partly offset by favorable development in Workers Compensation. 
 During the nine months ended September 30, 2020, the net loss and LAE ratio decreased by 57.0 percentage points compared to the same period in 2019 primarily due to the following factors: 
 • the Partial Termination Amendment caused significant changes in the mix of business being earned in 2020 compared to 2019. These changes resulted in a current year loss ratio which decreased relative to the same period in 2019 for the remaining in-force business; and 
 • the impact of prior year loss development was favorable development of $8.1 million or 19.6 percentage points during the nine months ended September 30, 2020 on the loss ratio, compared to the impact of adverse prior year loss development which was $97.6 million or 28.4 percentage points for the same period in 2019. Prior year favorable development in 2020 was primarily due to Workers Compensation partly offset by adverse development within Commercial Auto and General Liability. The adverse loss development in Commercial Auto and General Liability for the nine months ended September 30, 2020 was significantly more limited compared to the same period in 2019. Prior year adverse development in 2019 was due to 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. 
 Commission and Other Acquisition Expenses — Commission and other acquisition expenses decreased by $20.3 million or 78.9% and $111.4 million or 87.3% for the three and nine months ended September 30, 2020, respectively, compared to the same respective periods in 2019 due to significantly lower earned premiums as a result of the terminations of both quota share agreements with AmTrust effective as of January 1, 2019. 
 The commission and other acquisition expense ratio increased to 42.0% and 39.1% for the three and nine months ended September 30, 2020, respectively, compared to 34.6% and 37.1% for the same respective periods in 2019. 
 General and Administrative Expenses — General and administrative expenses increased by $0.4 million or 168.1% and decreased by $0.1 million or 5.9% for the three and nine months ended September 30, 2020, respectively, compared to the same respective periods in 2019. The general and administrative expense ratios increased to 4.8% and 4.7% for the three and nine months ended September 30, 2020, respectively, compared to 0.3% and 0.6% for the same respective periods in 2019 as a result of much lower earned premiums due to the termination of both quota share agreements with AmTrust as of January 1, 2019. 
 The overall expense ratio (including commission and other acquisition expenses) increased to 46.8% and 43.8% for the three and nine months ended September 30, 2020, respectively, compared to 34.9% and 37.7% for the same respective periods in 2019 primarily due to significantly lower earned premiums as discussed above. 
 
 Liquidity and Capital Resources 
 Liquidity 
 Maiden Holdings is a holding company and transacts no business of its own. We therefore rely on cash flows in the form of dividends, advances, loans and other permitted distributions from our subsidiary companies to pay expenses and make dividend payments on our common and preference shares. The jurisdictions in which our operating subsidiaries are licensed to write business impose regulations requiring companies to maintain or meet statutory solvency and liquidity requirements and also place restrictions on the declaration and payment of dividends and other distributions. 
 As of September 30, 2020, the Company had investable assets of $2.4 billion compared to $2.8 billion as of December 31, 2019. Investable assets are the combined total of our investments, cash and cash equivalents (including restricted), loan to a related party and funds withheld receivable. The decrease in investable assets is primarily the result of significant negative operating cash flows during nine months ended September 30, 2020, particularly as a result of our cessation of active reinsurance underwriting, including certain contract terminations that occurred in 2019 that require the disbursement of cash and investments to settle claim payments in 2020. 
 The regulatory and liquidity requirements of the Company's operating segments are discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" section included under Item 7 of our Annual Report on Form 10- K for the year ended December 31, 2019, filed with the SEC on March 18, 2020. 
 As previously indicated, Maiden Reinsurance re-domesticated to Vermont on March 16, 2020. We continue to be actively engaged with the Vermont DFR regarding the formulation of Maiden Reinsurance's longer term business plan, including its investment policy, changes to which require prior regulatory approval as stipulated by Vermont law or the Vermont DFR for any active underwriting, capital management or other strategic initiatives. Maiden Reinsurance has received all necessary approvals required to date by the Vermont DFR, including its investment policy. 
 The Company's investment portfolio may be adversely impacted by unfavorable market conditions caused by the COVID-19 pandemic and we and our insurance subsidiaries may need additional capital to maintain compliance with regulatory capital requirements and/or be required to post additional collateral under existing reinsurance arrangements, which could reduce our liquidity. In addition, we may experience continued volatility in our results of operations which could negatively impact our 
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 financial condition and create a reduction in the amount of available distribution or dividend capacity from our regulated reinsurance subsidiaries, which would also reduce liquidity. 
 Operating, investing and financing cash flows 
 Our sources of funds historically have consisted of premium receipts net of commissions and brokerage, investment income, net proceeds from capital raising activities, and proceeds from sales, maturities, pay downs and redemption of investments. Cash is currently used primarily to pay loss and LAE, ceded reinsurance premium, general and administrative expenses, and interest expense, with the remainder in excess of our operating requirements, made available to our investment managers for investment in accordance with our investment policy. 
 Our business has undergone significant changes in the past two years. As previously noted, the Strategic Review resulted in a series of transactions that have materially reduced our balance sheet risk and have transformed our operations. As a result of the transactions entered into from the Strategic Review, we are not engaged in any active underwriting of reinsurance business thus our net premiums written will continue to be materially lower in 2020 and investment income will become a significantly larger portion of our total revenues. This has caused significant negative operating cash flows, particularly as we run off the AmTrust Reinsurance reserves as shown in the table below. We expect this trend to continue going forward for the rest of 2020 and beyond. 
 We expect to use funds from cash and investment portfolios, collected premiums on reinsurance contracts in force or being run-off, investment income and proceeds from investment sales and redemptions to meet our expected claims payments and operational expenses. Claim payments will be principally from the run-off of existing reserves for loss and loss adjustment expenses. A significant portion of those liabilities are collateralized and claim payments will be funded by using this collateral which should provide sufficient funding to fulfill those obligations. We generally expect negative operating cash flows to be sufficiently offset by positive investing cash flows. Overall, we continue to expect our cash flows to be sufficient to meet our cash requirements and to operate our business. 
 At September 30, 2020 and December 31, 2019, unrestricted cash and cash equivalents and unrestricted fixed maturity investments were $319.7 million and $435.0 million, respectively. The Company’s management believes its current sources of liquidity are adequate to meet its cash requirements for the next twelve months. The table below summarizes our operating, investing and financing cash flows for the nine months ended September 30, 2020 and 2019: 
 
 For the Nine Months Ended September 30, 2020 2019 
 ($ in thousands) 
 Operating activities 
 $ (447,664) $ (949,283) 
 Investing activities 
 528,677 686,394 
 Financing activities 
 (1) (18) 
 Effect of exchange rate changes on foreign currency cash 
 1,605 (1,269) 
 Total increase (decrease) in cash, restricted cash and cash equivalents 
 82,617 (264,176) 
 Less: change in cash, restricted cash and cash equivalents of discontinued operations — (6,113) 
 Total change in cash, restricted cash and cash equivalents of continuing operations 
 $ 82,617 $ (258,063) 

 Cash Flows used in Operating Activities 
 Cash flows used in operating activities for the nine months ended September 30, 2020 were $447.7 million compared to cash flows used in operating activities of $949.3 million for the nine months ended September 30, 2019, a decrease of $501.6 million. Cash flows used in discontinued operations were $0.0 million for the nine months ended September 30, 2020 compared to $1.8 million in the nine months ended September 30, 2019. Cash flows used in continuing operating activities were $447.7 million for the nine months ended September 30, 2020 compared to cash flows used in continuing operations of $947.4 million for the nine months ended September 30, 2019. 
 The operating cash flows used in continuing operations for the nine months ended September 30, 2020 and 2019 were primarily the result of the termination of the AmTrust Quota Share including both the Partial Termination Amendment and the Commutation and Release Agreement, and the termination of the European Hospital Liability Quota Share, which significantly decreased gross premiums written during both respective periods while claim payments have been principally from the run-off of existing reserves for loss and LAE. 
 Cash Flows from Investing Activities 
 Cash flows from investing activities consist primarily of proceeds from the sales and maturities of investments and payments for investments acquired. Net cash provided by investing activities was $528.7 million for the nine months ended September 30, 2020 compared to $686.4 million for the same period in 2019 primarily due to proceeds from the sale of fixed maturity investments which were made to settle claim payments during the nine months ended September 30, 2020. Net cash provided by investing activities of $686.4 million for the same period in 2019 was primarily due to the sale of fixed maturity investments in the third quarter of 2019 which were made to settle the Commutation Payment of $312.8 million and retrocession premium of $445.0 million under the LPT/ADC Agreement. 
 Cash flows used in discontinued operations was $0.0 million for the nine months ended September 30, 2020 compared to cash flows used in discontinued operations of $6.1 million for the same period in 2019. Cash flows provided by continuing operations was $528.7 million during the nine months ended September 30, 2020 compared to cash flows provided by 
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 continuing operations of $692.5 million for the same period in 2019 as the proceeds from the sales, maturities and calls exceeded the purchases of fixed maturity securities by $572.8 million compared to an inflow of $695.8 million for the same period in 2019. 
 Cash Flows from Financing Activities 
 Cash flows used in financing activities were $1.0 thousand for the nine months ended September 30, 2020 compared to $18.0 thousand for the same period in 2019 which represent repurchases of common shares to settle employee withholding in respect of tax obligations on the vesting of restricted shares and performance based shares. No dividends on common or preference shares were paid during the nine months ended September 30, 2020 and 2019. Our Board of Directors have not declared any common or preference share dividends since the fourth quarter of 2018. 
 Restrictions, Collateral and Specific Requirements 
 The Company's restrictions, collateral and specific requirements are discussed in " Management's Discussion and Analysis of Financial Condition and Results of Operations " section included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 18, 2020. 
 At September 30, 2020 and December 31, 2019, restricted cash and cash equivalents and fixed maturity investments used as collateral were $1.2 billion and $1.5 billion, respectively. This collateral represents 78.4% and 77.6% of the fair value of our total fixed maturity investments and cash, restricted cash and cash equivalents at September 30, 2020 and December 31, 2019, respectively. 
 Investments 
 The investment of our funds has generally been designed to ensure safety of principal while generating current income. Accordingly, the majority of our funds have been invested in liquid, investment-grade fixed income securities which are all designated as available-for-sale at September 30, 2020. Please see " Notes to Condensed Consolidated Financial Statements (unaudited) Note 4. Investments " included under Part I Item 1 " Financial Information" of this Form 10-Q. 
 As our insurance liabilities continue to run-off and the required capital to operate our business for regulatory purposes decreases, we may have the ability to consider additional asset classes to enhance the income and returns our investment portfolio produces. We have and may continue to allocate a portion of our investment portfolio to other investments, including private equity and credit funds, fixed income funds, hedge funds, equity funds and other non-fixed income investments. We categorize these investments as "Other Investments" on our condensed consolidated balance sheets. For further details on these Other Investments, please see " Notes to Condensed Consolidated Financial Statements (unaudited) Note 4(b). Other Investments" included under Part I Item 1 " Financial Information " of this Form 10-Q. 
 We may utilize and pay fees to various companies to provide investment advisory and/or management services related to these investments. These fees, which would be predominantly based upon the amount of assets under management, would be included in net investment income. We believe other investments and equity method investments would provide diversification against our fixed maturity investments and an opportunity for improved risk-adjusted returns; however, the returns of other investments may be more volatile and we may experience significant unrealized gains or losses in any particular quarter or year. 
 The substantial majority of our current and future investments are held by Maiden Reinsurance, whose investment policy has been approved by the Vermont DFR. Maiden Reinsurance has received all necessary approvals for its investment policy. 
 During the nine months ended September 30, 2020, the yield on the 10-year U.S. Treasury bond decreased by 123 basis points to 0.69%. The 10-year U.S. Treasury rate is the key risk-free determinant in the fair value of many of the securities in our portfolio. The U.S. Treasury yield curve experienced a material downward shift during the nine months ended September 30, 2020, reflecting significant global financial and economic volatility from the COVID-19 pandemic which spread during the first half of 2020. The global nature of the pandemic resulted in an abrupt downturn in economic activity both globally and within the U.S., and financial markets experienced unprecedented volatility during this period. The U.S. Federal Reserve, along with central bankers globally, have implemented multiple rounds of rapid and aggressive monetary measures to provide liquidity to financial markets and to relieve imbalances that rapidly formed in those markets in the face of the pandemic and its economic and financial impacts. Government policymakers in the U.S. and globally have additionally implemented an ongoing series of unprecedented fiscal policy measures to provide immediate and near-term economic relief to affected populations. 
 The movement in the market values of our fixed maturity portfolio during the nine months ended September 30, 2020 generated net unrealized gains of $7.0 million, despite the ongoing COVID-19 pandemic which has caused widening credit spreads, a surging demand for liquidity and a slowdown to global economic activity. Due in large part to the ongoing uncertainty caused by the COVID-19 pandemic in global financial markets during the nine months ended September 30, 2020, our investment portfolio experienced significant fluctuation in unrealized gains and losses (largely due to rapidly fluctuating credit spreads on fixed income investments), increased volatility, heightened credit risk, and declines in average yields on our fixed income investments. Our investment portfolios may be adversely impacted by unfavorable market conditions caused by the COVID-19 pandemic, which could cause continued volatility in our results of operations and negatively impact our financial condition. 
 At September 30, 2020, we consider the levels of cash and cash equivalents we are holding to be within our targeted ranges. During periods when interest rates experience greater volatility, we have periodically maintained more cash and cash equivalents in order to better assess current market conditions and opportunities within our defined risk appetite, and may do so in future periods. To limit our exposure to unexpected interest rate increases which would reduce the value of our fixed income securities and reduce our shareholders' equity, we attempt to maintain the duration of our fixed maturity investment portfolio combined with our cash and cash equivalents, both restricted and unrestricted, within a reasonable range of the duration of our loss reserves. 
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 At September 30, 2020 and December 31, 2019, these respective durations in years were as follows: 
 
 September 30, 2020 December 31, 2019 
 Fixed maturities and cash and cash equivalents 
 2.3 3.0 
 Reserve for loss and LAE (1) 
 4.4 4.2 

 (1) The duration regarding our reserve for loss and LAE at September 30, 2020 is gross of LPT/ADC Agreement reserves. 
 During the nine months ended September 30, 2020, the weighted average duration of our fixed maturity investment portfolio decreased by 0.7 years to 2.3 years and the duration for the reserve for loss and LAE increased by 0.2 years to 4.4 years. The differential in duration between these assets and liabilities may fluctuate over time and in the case of fixed maturities, historically has been affected by factors such as market conditions, changes in asset mix and prepayment speeds in the case of both our agency mortgage-backed securities ("Agency MBS") and commercial mortgage-backed securities. At September 30, 2020, the duration of our fixed maturity investment portfolio decreased compared to December 31, 2019 due to sales of fixed maturity investments primarily as a result of settling claim payments with AmTrust. At September 30, 2020, the duration of our loss reserves net of the LPT/ADC Agreement was in line with the duration of our fixed maturity investment portfolio. 
 The average yield and average duration of our fixed maturities, by asset class, and our cash and cash equivalents (restricted and unrestricted) are as follows at September 30, 2020 and December 31, 2019, respectively: 
 
 September 30, 2020 Original or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Average yield (1) 
 Average duration (2) 
 
 ($ in thousands) 
 U.S. treasury bonds 
 $ 100,930 $ 197 $ — $ 101,127 2.1 % 0.1 
 U.S. agency bonds – mortgage-backed 
 339,144 11,567 (361) 350,350 2.6 % 3.4 
 
 Non-U.S. government and supranational bonds 
 8,649 605 (32) 9,222 1.1 % 6.4 
 Asset-backed securities 
 184,982 1,233 (1,225) 184,990 2.3 % 0.7 
 Corporate bonds 
 625,210 27,782 (10,714) 642,278 2.3 % 3.2 
 
 1,258,915 41,384 (12,332) 1,287,967 2.4 % 2.7 
 Cash and cash equivalents 
 189,895 — — 189,895 0.1 % 0.0 
 Total 
 $ 1,448,810 $ 41,384 $ (12,332) $ 1,477,862 2.1 % 2.3 

 
 December 31, 2019 Original or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Average yield (1) 
 Average duration (2) 
 
 ($ in thousands) 
 U.S. treasury bonds 
 $ 94,921 $ 704 $ — $ 95,625 2.5 % 0.7 
 U.S. agency bonds – mortgage-backed 
 533,296 6,717 (1,291) 538,722 2.9 % 4.1 
 
 Non-U.S. government and supranational bonds 
 11,796 294 (91) 11,999 1.2 % 4.6 
 Asset-backed securities 
 187,881 821 (532) 188,170 3.8 % 0.9 
 Corporate bonds 
 981,441 31,140 (15,725) 996,856 2.9 % 3.4 
 Municipal bonds 
 4,091 55 — 4,146 4.6 % 1.4 
 1,813,426 39,731 (17,639) 1,835,518 3.0 % 3.2 
 Cash and cash equivalents 
 107,278 — — 107,278 0.6 % 0.0 
 Total 
 $ 1,920,704 $ 39,731 $ (17,639) $ 1,942,796 2.8 % 3.0 

 (1) Average yield is calculated by dividing annualized investment income for each sub-component of fixed maturity securities and cash and cash equivalents (including amortization of premium or discount) by amortized cost. 
 (2) Average duration in years. 
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 At September 30, 2020 and December 31, 2019, 100.0% of the Company’s U.S. agency bond holdings are mortgage-backed. Additional details on the Agency MBS at September 30, 2020 and December 31, 2019 were as follows: 
 
 September 30, 2020 December 31, 2019 
 ($ in thousands) Fair Value % of Total Fair Value % of Total 
 U.S. agency bonds - mortgage-backed 
 
 Residential mortgage-backed ("RMBS") 
 
 GNMA – fixed rate 
 $ 21,102 6.0 % $ 33,079 6.1 % 
 GNMA – variable rate 
 6,020 1.7 % 7,075 1.3 % 
 FNMA – fixed rate 
 152,738 43.6 % 241,905 44.9 % 
 
 FHLMC – fixed rate 
 170,490 48.7 % 256,663 47.7 % 
 
 
 
 Total U.S. agency bonds 
 $ 350,350 100.0 % $ 538,722 100.0 % 

 Our Agency MBS portfolio is 27.2% of our fixed maturity investments at September 30, 2020. Given the relative size of this portfolio to our total investments, if faster prepayment patterns were to occur over an extended period of time, this could potentially limit the growth in our investment income in certain circumstances or reduce the total amount of investment income we earn. 
 At September 30, 2020 and December 31, 2019, 96.6% and 99.7%, respectively, of our fixed maturity investments consisted of investment grade securities. We define a security as being below investment grade if it has an S&P credit rating of BB+, or equivalent, or less. Please see " Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) Note 4. Investments " for additional information on the credit rating of our fixed income portfolio. 
 The security holdings by sector and financial strength rating of our corporate bond holdings at September 30, 2020 and December 31, 2019 were as follows: 
 
 Ratings (1) 
 
 September 30, 2020 AAA, AA+, AA, AA- A+, A, A- BBB+, BBB, BBB- BB+ or lower Fair Value % of Corporate bonds portfolio 
 Corporate bonds 
 ($ in thousands) 
 Basic Materials 
 — % 0.9 % 1.4 % — % $ 15,356 2.3 % 
 Communications 
 — % 1.0 % 4.5 % 1.6 % 45,468 7.1 % 
 Consumer 
 — % 2.0 % 21.9 % 1.6 % 163,424 25.5 % 
 Energy 
 2.5 % 6.1 % 2.9 % 1.9 % 86,022 13.4 % 
 Financial Institutions 
 7.0 % 25.0 % 12.3 % 1.0 % 291,193 45.3 % 
 Industrials 
 — % 0.9 % 1.5 % 0.7 % 19,816 3.1 % 
 Technology 
 — % 2.7 % 0.6 % — % 20,999 3.3 % 
 Total 
 9.5 % 38.6 % 45.1 % 6.8 % $ 642,278 100.0 % 

 
 Ratings (1) 
 
 December 31, 2019 AAA, AA+, AA, AA- A+, A, A- BBB+, BBB, BBB- BB+ or lower Fair Value % of Corporate bonds portfolio 
 Corporate bonds 
 ($ in thousands) 
 Basic Materials 
 — % 0.6 % 1.4 % — % $ 19,517 2.0 % 
 Communications 
 — % 2.4 % 4.0 % — % 64,159 6.4 % 
 Consumer 
 0.2 % 8.3 % 19.6 % — % 279,940 28.1 % 
 Energy 
 0.9 % 6.1 % 3.8 % — % 107,369 10.8 % 
 Financial Institutions 
 3.1 % 30.1 % 10.7 % 0.6 % 443,983 44.5 % 
 Industrials 
 — % 1.8 % 3.5 % — % 53,279 5.3 % 
 Technology 
 — % 1.7 % 1.2 % — % 28,609 2.9 % 
 Total 
 4.2 % 51.0 % 44.2 % 0.6 % $ 996,856 100.0 % 

 (1) Ratings as assigned by S&P, or equivalent 
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 At September 30, 2020, the Company’s ten largest corporate holdings, 50.9% of which are U.S. dollar denominated, 39.1% of which are in the Consumer Sector and 48.3% of which are in the Financial Institutions sector, at fair value and as a percentage of all fixed income securities were as follows: 
 
 September 30, 2020 Fair Value % of Holdings Rating (1) 
 
 ($ in thousands) 
 Electricite de France, 4.625%, Due 9/11/2024 $ 17,862 1.4 % A- 
 UBS Group Funding (Jersey) Ltd, 2.65% Due 2/1/2022 17,487 1.4 % A- 
 Abbvie Inc., 3.80%, Due 3/15/2025 16,633 1.3 % BBB 
 Brookfield Asset Management Inc., 4.00% Due 1/15/2025 13,459 1.0 % A- 
 Nordea Bank ABP, 0.875% Due 6/26/2023 13,115 1.0 % A 
 Anheuser-Busch INBEV NV, 2.875% Due 9/25/2024 13,063 1.0 % BBB+ 
 Bayer US Finance LLC, 3.375% Due 10/8/2024 13,054 1.0 % BBB+ 
 Deutsche Bank AG, 1.25%, Due 9/8/2021 12,994 1.0 % BBB- 
 Carlsberg Breweries A/S, 2.5%, Due 5/28/2024 12,693 1.0 % BBB 
 Deutsche Bank AG (NY Branch), 3.7%, Due 5/30/2024 11,525 0.9 % BBB- 
 Total 
 $ 141,885 11.0 % 

 (1) Ratings as assigned by S&P, or equivalent 
 At September 30, 2020 and December 31, 2019, respectively, we hold the following non-U.S. dollar denominated securities: 
 
 September 30, 2020 December 31, 2019 
 ($ in thousands) Fair Value % of Total Fair Value % of Total 
 Non-U.S. dollar denominated corporate bonds $ 343,962 97.4 % $ 310,323 96.3 % 
 Non-U.S. government and supranational bonds 9,222 2.6 % 11,999 3.7 % 
 Total non-U.S. dollar denominated securities 
 $ 353,184 100.0 % $ 322,322 100.0 % 

 At September 30, 2020 and December 31, 2019, respectively, these non-U.S. securities are invested in the following currencies: 
 
 September 30, 2020 December 31, 2019 
 ($ in thousands) Fair Value % of Total Fair Value % of Total 
 Euro $ 322,075 91.2 % $ 272,493 84.5 % 
 British Pound 24,830 7.0 % 42,342 13.1 % 
 Canadian Dollar 4,875 1.4 % 5,364 1.7 % 
 All other currencies 1,404 0.4 % 2,123 0.7 % 
 Total non-U.S. dollar denominated securities 
 $ 353,184 100.0 % $ 322,322 100.0 % 

 The net increase in non-U.S. denominated fixed maturities is primarily due to the depreciation of Euro denominated corporate bonds during the nine months ended September 30, 2020. At September 30, 2020 and December 31, 2019, all of the Company's non-U.S. government and supranational issuers have a rating of A or higher by S&P. 
 For our non-U.S. dollar denominated corporate bonds, the following table summarizes the composition of the fair value of our fixed maturity investments at the dates indicated by ratings: 
 
 Ratings (1) 
 September 30, 2020 December 31, 2019 
 ($ in thousands) Fair Value % of Total Fair Value % of Total 
 AAA $ 1,217 0.4 % $ 481 0.2 % 
 AA+, AA, AA- 29,698 8.6 % 21,231 6.8 % 
 A+, A, A- 161,301 46.9 % 137,584 44.3 % 
 BBB+, BBB, BBB- 138,703 40.3 % 145,546 46.9 % 
 BB+ or lower 13,043 3.8 % 5,481 1.8 % 
 Total non-U.S. dollar denominated corporate bonds $ 343,962 100.0 % $ 310,323 100.0 % 

 (1) Ratings as assigned by S&P, or equivalent 
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 The Company does not employ any credit default protection against any of the fixed maturities held in non-U.S. denominated currencies at September 30, 2020 and December 31, 2019, respectively. 
 Other Balance Sheet Changes 
 The following table summarizes the Company's other material balance sheet changes at September 30, 2020 and December 31, 2019: 
 
 ($ in thousands) September 30, 2020 December 31, 2019 Change Change % 
 
 Reinsurance recoverable on unpaid losses 
 $ 597,677 $ 623,422 $ (25,745) (4.1) % 
 Deferred commission and other acquisition expenses 
 55,962 77,356 (21,394) (27.7) % 
 Funds withheld receivable 
 652,855 684,441 (31,586) (4.6) % 
 Reserve for loss and LAE 
 1,975,073 2,439,907 (464,834) (19.1) % 
 Unearned premiums 
 161,453 220,269 (58,816) (26.7) % 
 Deferred gain on retroactive reinsurance 
 79,995 112,950 (32,955) (29.2) % 
 
 Accrued expenses and other liabilities 
 45,026 32,444 12,582 38.8 % 

 The Company's deferred commission and other acquisition expenses decreased by 27.7% and unearned premiums decreased by 26.7% primarily due to the Partial Termination Amendment with AmTrust on a cut-off basis and the termination of the remaining business under both quota share contracts with AmTrust which are now in run-off with no new business written beginning January 1, 2019. Funds withheld receivable decreased by 4.6% primarily due to lower funds withheld to be utilized as collateral for the European Hospital Liability Quota Share. 
 Accrued expenses and other liabilities increased by 38.8% as at September 30, 2020 compared to December 31, 2019 due to increases in reinsurance balances payable, particularly claims, to AmTrust. The Company's reserve for loss and LAE decreased by 19.1% primarily due to the recent commutation of workers' compensation reserves during 2019 in the AmTrust Reinsurance segment. 
 The deferred gain on retroactive reinsurance decreased by 29.2%. The decrease in the unamortized deferred gain on retroactive reinsurance for the nine months ended September 30, 2020 is attributable to the following: 1) $9.3 million in loss and loss adjustment expenses recognized as favorable loss development in the Company’s GAAP income statement that are subject to the LPT/ADC Agreement; and 2) $23.7 million related to a reduction in estimated ultimate losses for certain workers’ compensation losses previously commuted by the Company to AmTrust which are subject to specific terms and conditions pursuant to the LPT/ADC Agreement. This also impacted the reinsurance recoverable on unpaid losses which decreased by 4.1% as at September 30, 2020 compared to December 31, 2019. 
 Capital Resources 
 Capital resources consist of funds deployed in support of our operations. In the nine months ended September 30, 2020, our total capital resources increased by $30.4 million, or 3.9% compared to December 31, 2019 due to net income attributable to common shareholders partly offset by unrealized gains on our investment portfolio.The following table shows the movement in total capital resources at September 30, 2020 and December 31, 2019: 
 
 ($ in thousands) September 30, 2020 December 31, 2019 Change Change % 
 Preference shares 
 $ 465,000 $ 465,000 $ — — % 
 Common shareholders' equity 
 73,086 42,718 30,368 71.1 % 
 Total shareholders' equity 
 538,086 507,718 30,368 6.0 % 
 Senior Notes - principal amount 
 262,500 262,500 — — % 
 Total capital resources 
 $ 800,586 $ 770,218 $ 30,368 3.9 % 

 The major factors contributing to the net increase in capital resources were as follows: 
 Shareholders' equity 
 Total shareholders' equity at September 30, 2020 increased by $30.4 million, or 6.0% compared to December 31, 2019 due to the following factors: 
 • net income attributable to Maiden of $32.2 million for the nine months ended September 30, 2020; and 
 • net increase in share based transactions of $2.0 million; partly offset by 
 • net decrease in AOCI of $3.9 million which arose due to: (1) an increase in net unrealized gains on investment of $6.9 million resulting from the net increase in the fair value of our investment portfolio relating to market price movements due to widening credit spreads and unfavorable economic conditions during the nine months ended September 30, 2020; and (2) a decrease in cumulative translation adjustments of $10.8 million due to the effect of the appreciation of 
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 the euro relative to the original currencies on our non-U.S. dollar net liabilities (excluding non-U.S. dollar denominated AFS fixed maturities). 
 On February 21, 2017, the Company's Board of Directors approved the repurchase of up to $100.0 million of the Company's common shares from time to time at market prices. During the nine months ended September 30, 2020, the Company did not repurchase any common shares under its share repurchase authorization, as it is precluded from repurchasing its common shares due to its failure to pay dividends on its preference shares. Until such time as dividends on preference shares are paid, the Company will not be able to repurchase or pay dividends on its common shares. At September 30, 2020, the Company has a remaining authorization of $74.2 million for share repurchases. 
 Please refer to " Notes to Consolidated Financial Statements Note 13. Shareholders' Equity " included under Part II Item 8. " Financial Statements and Supplementary Data" of our Annual Report on Form 10-K for a discussion of the equity instruments issued by the Company as at December 31, 2019. 
 On October 25, 2019, the Company transferred the listing of its common shares from the NASDAQ Global Select Market to the NASDAQ Capital Market. The NASDAQ Capital Market is a continuous trading market that operates in substantially the same manner as the NASDAQ Global Select Market and listed companies must meet certain financial requirements and comply with the NASDAQ Stock Market LLC’s (“NASDAQ”) corporate governance requirements. The Company’s common shares continue to trade under the symbol “MHLD”. 
 On April 17, 2020, the Company received a letter from NASDAQ stating that the Company had not regained compliance during the compliance period and that the Company’s securities would be delisted from the NASDAQ Capital Market by the opening of business on April 28, 2020 unless the Company requests an appeal of NASDAQ’s determination to a Hearings Panel. On April 24, 2020, the Company filed a Hearing Request Form to appeal NADSAQ’s determination with the Hearings Panel, which stayed the de-listing until a decision is rendered subsequent to the appeal hearing. On June 2, 2020, the Company issued a press release announcing it has regained compliance with NADSAQ’s mimimum bid price and all applicable listing requirements for continued listing, and the appeal hearing was canceled. Accordingly, the Company's common shares continue to be listed on the NASDAQ Capital Market. 
 Book value and diluted book value per common share at September 30, 2020 and December 31, 2019 were computed as follows: 
 
 September 30, 2020 December 31, 2019 
 ($ in thousands except share and per share data) 
 Ending common shareholders’ equity 
 $ 73,086 $ 42,718 
 
 Numerator for diluted book value per common share calculation 
 $ 73,086 $ 42,718 
 
 Common shares outstanding 
 84,763,882 83,148,458 
 Shares issued from assumed conversion of dilutive options and restricted shares 
 1,518,843 1,818,797 
 Denominator for diluted book value per common share calculation 
 86,282,725 84,967,255 
 
 Book value per common share 
 $ 0.86 $ 0.51 
 Diluted book value per common share 
 0.85 0.50 

 At September 30, 2020, book value per common share increased by 68.6% and diluted book value per common share increased by 70.0%, compared to December 31, 2019. This was primarily due to our net income attributable to common shareholders of $32.2 million during the nine months ended September 30, 2020, partly offset by the net decrease in AOCI of $3.9 million for the nine months ended September 30, 2020. 
 Please see the section named " Liquidity and Capital Resources - Investments" above for further information on the change in fair value of our fixed maturity investment portfolio. 
 Senior Notes 
 There were no changes in the Company’s Senior Notes at September 30, 2020 compared to December 31, 2019 and the Company did not enter into any short-term borrowing arrangements during the nine months ended September 30, 2020. Please refer to " Notes to Condensed Consolidated Financial Statements (unaudited) Note 7. Long Term Debt " included under Part I Item 1 " Financial Information" of this Form 10-Q for a discussion of the Company’s Senior Notes. 
 
 
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 The ratio of Debt to Total Capital Resources at September 30, 2020 and December 31, 2019 was computed as follows: 
 
 September 30, 2020 December 31, 2019 
 ($ in thousands) 
 Senior notes - principal amount 
 $ 262,500 $ 262,500 
 Maiden shareholders’ equity 
 538,086 507,718 
 Total capital resources 
 $ 800,586 $ 770,218 
 Ratio of debt to total capital resources 
 32.8 % 34.1 % 

 Preference Shares 
 
 
 On November 13, 2020, the Company announced that commencing November 16, 2020, Maiden Reinsurance was offering to purchase for cash, upon the terms and subject to the conditions set forth in its Offer to Purchase ("Purchase Offer") and accompanying Letter of Transmittal, up to $100.0 million of its 8.25% Non-Cumulative Preference Shares Series A, 7.125% Non-Cumulative Preference Shares Series C and 6.7% Non-Cumulative Preference Shares Series D (the "Preference Securities"). The acquisition by Maiden Reinsurance of the Preference Securities pursuant to the Purchase Offer is being made in compliance with Maiden Reinsurance's investment policy previously approved by the Vermont DFR. 
 The principal purpose of the Purchase Offer is to adjust the Company's and Maiden Reinsurance’s capital structure to reflect its current operations and the amount of capital that is required to operate. The Company's Board of Directors has not declared or paid a dividend on the Preference Securities since the fourth quarter of 2018 and there can be no assurance that it will declare and pay dividends on the Preference Securities in the future. The Preference Securities are perpetual and there is no fixed date on which we are required to redeem or otherwise repurchase them. Further, given the perpetual form of capital the Preference Securities represent, there can be no assurance that the Company or Maiden Reinsurance will make additional offers in the future to purchase the Preference Securities. The Company expects to use cash on hand to pay the consideration payable by it pursuant to the Purchase Offer and the fees and expenses incurred by it in connection therewith. The Offer is neither conditioned upon any minimum number of Securities being tendered, nor subject to any financing condition. 
 The Company or Maiden Reinsurance reserves the right, but is not obligated to, increase the Maximum Aggregate Purchase Amount in its sole and absolute discretion. The Purchase Offer will expire on December 15, 2020 at 11:59 p.m., New York City time, unless the Company or Maiden Reinsurance extends it (such date and time, as the same may be extended, the "Expiration Date"). If the aggregate Offer Price of the Preference Securities that are validly tendered and not properly withdrawn at the Expiration Time (the "Total Consideration Amount") exceeds the Maximum Aggregate Purchase Amount, Maiden Reinsurance will accept for purchase that number of Securities that does not result in the Total Consideration Amount exceeding the Maximum Aggregate Purchase Amount. In that event, the Securities will be subject to proration, as will be described in the Purchase Offer. 
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 Non-GAAP Measures 
 As defined and described in the Key Financial Measures section , m anagement uses certain key financial measures, some of which are non-GAAP measures, to evaluate the Company's financial performance and the overall growth in value generated for the Company’s common shareholders. Management believes that these measures, which may be defined differently by other companies, explain the Company’s results to investors in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. The calculation, reconciliation to nearest GAAP measure and discussion of relevant non-GAAP measures used by management are as follows: 
 Non-GAAP operating loss was $2.3 million for the three months ended September 30, 2020, compared to non-GAAP operating earnings of $39.5 million for the same period in 2019. The Company's non-GAAP operating results included a non-GAAP underwriting loss of $4.4 million for the three months ended September 30, 2020, compared to underwriting income of $24.3 million for the same period in 2019, which was primarily the result of underwriting results not covered by the LPT/ADC Agreement, specifically the run-off of the AmTrust Quota Share with losses occurring after December 31, 2018 (including the additional ceding commission paid under the Partial Termination Amendment) as well as claims related to the European Hospital Liability Quota Share. 
 Non-GAAP operating earnings were $2.0 million for the nine months ended September 30, 2020, compared to a non-GAAP operating loss of $9.4 million for the same period in 2019. The Company's non-GAAP operating results included a non-GAAP underwriting loss of $9.6 million for the nine months ended September 30, 2020, compared to a non-GAAP underwriting loss of $57.5 million for the same period in 2019, which was primarily the result of underwriting results in the AmTrust segment not covered by the LPT/ADC Agreement, specifically the run-off of the AmTrust Quota Share with losses occurring after December 31, 2018 (including the additional ceding commission paid under the Partial Termination Amendment) as well as claims related to the European Hospital Liability Quota Share. The significant improvement in non-GAAP underwriting losses for the nine months ended September 30, 2020 as compared to the same period 2019 was also assisted by a $9.8 million decline in other general and administrative expenses offset by a $31.4 million decrease in net investment income. 
 Non-GAAP operating earnings (loss) and Non-GAAP diluted operating earnings (loss) per share attributable to common shareholders 
 Non-GAAP operating earnings (loss) and non-GAAP diluted operating earnings (loss) per share attributable to common shareholders can be reconciled to the nearest U.S. GAAP financial measure as follows: 
 
 For the Three Months Ended September 30, 2020 2019 
 ($ in thousands except per share data) 
 Net income (loss) 
 $ 2,162 $ (58,327) 
 Add (subtract): 
 
 Net realized gains on investment (4,133) (12,700) 
 Total other-than-temporary impairment losses 962 165 
 Foreign exchange and other losses (gains) 6,536 (7,827) 
 (Favorable) adverse prior year loss development subject to LPT/ADC Agreement (7,840) 104,542 
 Income from discontinued operations, net of income tax — (75) 
 Interest expense paid under the LPT/ADC Agreement and the Commutation Agreement — 13,596 
 Loss from NGHC Quota Share run-off — 108 
 Non-GAAP operating (loss) earnings $ (2,313) $ 39,482 
 
 Diluted earnings (loss) per share attributable to common shareholders 
 $ 0.03 $ (0.70) 
 Add (subtract): 
 
 Net realized gains on investment (0.05) (0.15) 
 Total other-than-temporary impairment losses 
 0.01 — 
 Foreign exchange and other losses (gains) 0.07 (0.09) 
 (Favorable) adverse prior year loss development subject to LPT/ADC Agreement (0.09) 1.25 
 
 Interest expense paid under the LPT/ADC Agreement and the Commutation Agreement — 0.16 
 
 Non-GAAP diluted operating (loss) earnings per share attributable to common shareholders 
 $ (0.03) $ 0.47 
 

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 For the Nine Months Ended September 30, 2020 2019 
 ($ in thousands except per share data) 
 Net income (loss) 
 $ 32,235 $ (110,376) 
 Add (subtract): 
 
 Net realized gains on investment 
 (24,046) (25,685) 
 Total other-than-temporary impairment losses 2,468 165 
 Foreign exchange and other losses (gains) 634 (14,013) 
 Loss from NGHC Quota Share run-off — 312 
 (Favorable) adverse prior year loss development subject to LPT/ADC Agreement (9,250) 104,542 
 Loss from discontinued operations, net of income tax — 22,048 
 Interest expense paid under the LPT/ADC Agreement and the Commutation Agreement — 13,596 
 
 Non-GAAP operating earnings (loss) $ 2,041 $ (9,411) 
 
 Diluted earnings (loss) per share attributable to common shareholders 
 $ 0.38 $ (1.33) 
 Add (subtract): 
 
 Net realized gains on investment 
 (0.29) (0.31) 
 Total other-than-temporary impairment losses 0.03 — 
 Foreign exchange and other losses (gains) 0.01 (0.17) 
 Loss from NGHC Quota Share run-off 
 — 0.01 
 (Favorable) adverse prior year loss development subject to LPT/ADC Agreement (0.11) 1.26 
 Loss from discontinued operations, net of income tax 
 — 0.27 
 Interest expense paid under the LPT/ADC Agreement and the Commutation Agreement — 0.16 
 
 Non-GAAP diluted operating earnings (loss) per share attributable to common shareholders 
 $ 0.02 $ (0.11) 

 
 Non-GAAP Operating ROACE 
 Non-GAAP Operating ROACE for the three and nine months ended September 30, 2020 and 2019 was computed as follows: 
 
 For the Three Months Ended September 30, For the Nine Months Ended September 30, 
 ($ in thousands) 2020 2019 2020 2019 
 Non-GAAP operating (loss) earnings $ (2,313) $ 39,482 $ 2,041 $ (9,411) 
 Opening adjusted common shareholders’ equity 177,279 125,572 155,668 89,275 
 Ending adjusted common shareholders’ equity 153,081 172,697 153,081 172,697 
 Average adjusted common shareholders’ equity 165,180 149,135 154,375 130,986 
 Non-GAAP Operating ROACE 
 (5.6) % 105.0 % 1.8 % (9.6) % 

 
 
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 Non-GAAP Underwriting Results and Combined Ratio 
 The following summarizes our non-GAAP underwriting results for the three and nine months ended September 30, 2020 and 2019: 
 
 For the Three Months Ended September 30, For the Nine Months Ended September 30, 
 ($ in thousands) 2020 2019 2020 2019 
 Gross premiums written $ 3,517 $ 35,844 $ 20,233 $ (523,178) 
 Net premiums written $ 3,031 $ 35,944 $ 17,493 $ (525,995) 
 Net premiums earned $ 24,305 $ 94,898 $ 76,828 $ 411,986 
 Other insurance revenue 261 554 919 2,120 
 Non-GAAP net loss and LAE (1) 
 (16,905) (36,318) (50,409) (310,568) 
 Commission and other acquisition expenses (9,651) (32,763) (29,778) (152,036) 
 General and administrative expenses (2,448) (2,084) (7,118) (9,035) 
 Non-GAAP underwriting (loss) income (1) 
 $ (4,438) $ 24,287 $ (9,558) $ (57,533) 
 
 Ratios: 
 Non-GAAP net loss and LAE ratio (1) 
 68.8 % 38.1 % 64.8 % 75.0 % 
 Commission and other acquisition expense ratio 39.3 % 34.3 % 38.3 % 36.7 % 
 General and administrative expense ratio 33.2 % 9.3 % 33.4 % 9.1 % 
 Expense ratio 72.5 % 43.6 % 71.7 % 45.8 % 
 Non-GAAP combined ratio (1) 
 141.3 % 81.7 % 136.5 % 120.8 % 

 (1) Non-GAAP underwriting income (loss), non-GAAP net loss and LAE, non-GAAP net loss and LAE ratio, and non-GAAP combined ratio for the three and nine months ended September 30, 2020 and 2019 include the impact of prior year reserve development subject to the LPT/ADC Agreement in the respective periods. Please see the "Key Financial Measures" section for definitions of Non-GAAP underwriting income (loss), net loss and LAE, non-GAAP net loss and LAE ratio, and non-GAAP combined ratio. 
 The non-GAAP underwriting results as well as the non-GAAP loss and LAE and ratios and non-GAAP combined ratios include the impact of prior year loss reserve development related to the AmTrust Quota Share which is fully recoverable from Cavello and subject to the LPT/ADC Agreement to show the ultimate economic benefit to the Company. 
 As shown in the table above, adjusted for the impact of favorable prior year reserve development subject to the LPT/ADC Agreement of $7.8 million and $9.3 million during the three and nine months ended September 30, 2020, respectively, the non-GAAP underwriting loss was $4.4 million and $9.6 million, respectively. This compared to non-GAAP underwriting income of $24.3 million and a non-GAAP underwriting loss of $57.5 million for the same respective periods in 2019 when adjusted for the impact of adverse prior year reserve development subject to the LPT/ADC Agreement of $104.5 million during the three and nine months ended September 30, 2019. The non-GAAP underwriting results in all respective periods were primarily the result of underwriting results in the AmTrust segment not covered by the LPT/ADC Agreement, specifically the run-off of the AmTrust Quota Share with losses occurring after December 31, 2018 (including the additional ceding commission paid under the Partial Termination Amendment) as well as claims related to the European Hospital Liability Quota Share. Results in the Diversified segment during the three and nine months ended September 30, 2020 and 2019, respectively, were stable. 
 The non-GAAP combined ratio during the three and nine months ended September 30, 2020 was 141.3% and 136.5%, respectively, compared to 81.7% and 120.8% during the same respective periods in 2019 as shown in the table below: 
 
 For the Three Months Ended September 30, For the Nine Months Ended September 30, 
 2020 2019 2020 2019 
 Combined ratio 
 109.4 % 191.2 % 124.6 % 146.0 % 
 Less: change in unamortized deferred gain on retroactive reinsurance 
 (31.9) % 109.5 % (11.9) % 25.2 % 
 Non-GAAP combined ratio 141.3 % 81.7 % 136.5 % 120.8 % 

 Non-GAAP Net Loss and LAE 
 As noted previously, adjusted for the impact of favorable prior year loss development on AmTrust reserves subject to the LPT/ADC Agreement, non-GAAP net loss and LAE for the three and nine months ended September 30, 2020 increased by $7.8 million and $9.3 million for the respective periods as these amounts are ultimately recoverable from Cavello. In comparison, adjusted for the impact of adverse prior year loss development on AmTrust reserves subject to the LPT/ADC Agreement of $104.5 million during the three and nine months ended September 30, 2019, non-GAAP net loss and LAE decreased by $104.5 million for the same respective periods as these amounts are ultimately recoverable from Cavello. 
 
 
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 These adjustments have been reflected in the calculation of non-GAAP Loss and LAE as shown in the table below: 
 
 For the Three Months Ended September 30, For the Nine Months Ended September 30, 
 ($ in thousands) 2020 2019 2020 2019 
 Net loss and LAE 
 $ 9,065 $ 140,860 $ 41,159 $ 415,110 
 Less: impact of PPD subject to LPT/ADC Agreement (7,840) 104,542 (9,250) 104,542 
 Non-GAAP net loss and LAE 
 $ 16,905 $ 36,318 $ 50,409 $ 310,568 

 Adjusted for the impact of favorable prior year loss development on AmTrust reserves subject to the LPT/ADC Agreement of $7.8 million and $9.3 million during the three and nine months ended September 30, 2020, non-GAAP net loss and LAE was $16.9 million and $50.4 million, respectively, as shown in the table above. 
 Adjusted for the impact of adverse prior year loss development on AmTrust reserves subject to the LPT/ADC Agreement of $104.5 million during the three and nine months ended September 30, 2019, non-GAAP net loss and LAE was $36.3 million and $310.6 million, respectively. 
 The non-GAAP net loss and LAE ratios were 68.8% and 64.8%, respectively, for the three and nine months ended September 30, 2020 compared to non-GAAP net loss ratios of 38.1% and 75.0% for the same respective periods in 2019. 
 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 at September 30, 2020 and December 31, 2019 reflect the addition of the unamortized deferred gain on retroactive reinsurance to the GAAP shareholders' equity as depicted in the computations below. The estimated deferred gain of $80.0 million at September 30, 2020 and $113.0 million at December 31, 2019 arises from the LPT/ADC Agreement with Cavello relating to losses subject to that agreement which are fully recoverable from Cavello. 
 The change in the unamortized deferred gain on retroactive reinsurance for the nine months ended September 30, 2020 is attributable to the following: (1) $9.3 million in loss and loss adjustment expenses recognized as favorable loss development in the Company's GAAP income statement that are subject to the LPT/ADC Agreement; and (2) $23.7 million related to a reduction in estimated ultimate losses for certain workers' compensation reserves previously commuted by the Company to AmTrust which are subject to specific terms and conditions pursuant to the LPT/ADC Agreement. We believe the inclusion of the unamortized deferred gain in these metrics better reflects the ultimate economic benefit of the LPT/ADC Agreement, which will improve the Company's shareholders' equity over the settlement period under the terms of the agreement. 
 Reconciliation of shareholders' equity to Adjusted shareholders' equity and Adjusted Total Capital Resources 
 The following table computes adjusted shareholders' equity and adjusted total capital resources by recognizing the unamortized deferred gain on retroactive reinsurance at September 30, 2020 and December 31, 2019: 
 
 ($ in thousands) September 30, 2020 December 31, 2019 Change Change % 
 Preference shares 
 $ 465,000 $ 465,000 $ — — % 
 Common shareholders' equity 
 73,086 42,718 30,368 71.1 % 
 Total shareholders' equity 
 538,086 507,718 30,368 6.0 % 
 Unamortized deferred gain on retroactive reinsurance 
 79,995 112,950 (32,955) (29.2) % 
 Adjusted shareholders' equity 
 618,081 620,668 (2,587) (0.4) % 
 Senior Notes - principal amount 
 262,500 262,500 — — % 
 Adjusted total capital resources $ 880,581 $ 883,168 $ (2,587) (0.3) % 

 Reconciliation of Book Value per Common Share to Adjusted Book Value per Common Share 
 The adjusted book value per common share as reconciled for the recognition of the unamortized deferred gain on retroactive reinsurance at September 30, 2020 and December 31, 2019 was computed as follows: 
 
 September 30, 2020 December 31, 2019 
 Book value per common share 
 $ 0.86 $ 0.51 
 Unamortized deferred gain on retroactive reinsurance 
 0.95 1.36 
 Adjusted book value per common share 
 $ 1.81 $ 1.87 

 
 
 
 
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 Ratio of Debt to Adjusted Total Capital Resources 
 Management uses this non-GAAP measure to monitor the financial leverage of the Company. This measure is calculated using the total principal amount of debt divided by the sum of adjusted total capital resources as computed in the table above. The ratio of Debt to Adjusted Total Capital Resources at September 30, 2020 and December 31, 2019 was computed as follows: 
 
 ($ in thousands) September 30, 2020 December 31, 2019 
 Senior notes - principal amount 
 $ 262,500 $ 262,500 
 Adjusted shareholders’ equity 
 618,081 620,668 
 Adjusted total capital resources 
 $ 880,581 $ 883,168 
 
 Ratio of debt to adjusted total capital resources 29.8 % 29.7 % 

 
 
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 Currency and Foreign Exchange 
 We conduct business in a variety of foreign (non-U.S.) currencies, the principal exposures being the euro and the British pound. Assets and liabilities denominated in foreign currencies are exposed to changes in currency exchange rates. Our reporting currency is the U.S. dollar, and exchange rate fluctuations relative to the U.S. dollar may materially impact our results and financial position. Our principal exposure to foreign currency risk is our obligation to settle claims in foreign currencies. In addition, in order to minimize this risk, we maintain and expect to continue to maintain a portion of our investment portfolio in investments denominated in currencies other than the U.S. dollar. We may employ various strategies (including hedging) to manage our exposure to foreign currency exchange risk. To the extent that these exposures are not fully hedged or the hedges are ineffective, our results of operations or equity may be adversely affected. At September 30, 2020, no such hedges or hedging strategies were in force or had been entered into. We measure monetary assets and liabilities denominated in foreign currencies at period end exchange rates, with the resulting foreign exchange gains and losses recognized in the unaudited Condensed Consolidated Statements of Income. Revenues and expenses in foreign currencies are converted at average exchange rates during the period. The effect of the translation adjustments for foreign operations is included in AOCI. 
 Net foreign exchange losses of $6.5 million and $0.2 million were generated during the three and nine months ended September 30, 2020, respectively, compared to foreign exchange gains of $7.8 million and $9.7 million for the three and nine months ended September 30, 2019, respectively. 
 Effects of Inflation 
 The anticipated effects of inflation are considered explicitly in the pricing of the insured exposures, which are used as the initial estimates of reserves for loss and LAE. In addition, inflation is also implicitly accounted for in subsequent estimates of loss and LAE reserves, as the expected rate of emergence is in part predicated upon the historical levels of inflation that impact ultimate claim costs. To the extent inflation causes these costs, particularly medical treatments and litigation costs, to vary from the assumptions made in the pricing or reserving estimates, the Company will be required to change the reserve for loss and LAE with a corresponding change in its earnings in the period in which the variance is identified. The actual effects of inflation on the results of operations of the Company cannot be accurately known until claims are ultimately settled. 
 Off-Balance Sheet Arrangements 
 At September 30, 2020, we did not have any off-balance sheet arrangements as defined by Item 303(a) (4) of Regulation S-K. 
 Recent Accounting Pronouncements 
 See " Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) Note 2. Significant Accounting Policies " for a discussion on recently issued accounting pronouncements not yet adopted. 
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Text extracted from the filing as submitted to EDGAR. Formatting, tables and exhibits are simplified for reading; the original document is authoritative for anything you rely on.
Maiden Holdings, Ltd. 10-Q

Item 2. Management’s Discussion and Analysis
