Maiden Holdings, Ltd. 10-Q

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", "Maiden" 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 2020 to conform to the 2021 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 15, 2021, 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. 37 Overview Maiden Holdings is a Bermuda-based holding company. As a result of a series of actions we have taken in recent years discussed below under Recent Developments , we create shareholder value by actively managing and allocating our assets and capital, including through ownership and management of businesses and assets mostly in the insurance and related financial services industries where we can leverage our deep knowledge of those markets. We also provide a full range of legacy services to small insurance companies, particularly those in run-off or with blocks of reserves that are no longer core, working with clients to develop and implement finality solutions including acquiring entire companies. We expect our legacy solutions business to contribute to our active asset and capital management strategies. Short-term income protection business is written on a primary basis by our wholly owned subsidiaries Maiden Life Försäkrings AB ("Maiden LF") and Maiden General Försäkrings AB ("Maiden GF") in the Scandinavian and Northern European markets. Insurance support services are provided to Maiden LF and Maiden GF through our wholly owned subsidiary, Maiden Global Holdings, Ltd. ("Maiden Global") which is also a licensed intermediary in the United Kingdom. Maiden Global had previously operated internationally by providing branded auto and credit life insurance products through insurer partners, particularly those in Europe and other global markets. These products also produced reinsurance programs which were underwritten by our wholly owned subsidiary Maiden Reinsurance Ltd. ("Maiden Reinsurance"). We are not actively underwriting reinsurance business presently but have some historic reinsurance programs underwritten by Maiden Reinsurance which are in run-off. We continue to run-off the underwriting liabilities related to our contracts with AmTrust Financial Services, Inc. ("AmTrust") which we terminated in 2019. We also have a Loss Portfolio Transfer and Adverse Development Cover Agreement ("LPT/ADC Agreement") with Cavello Bay Reinsurance Limited ("Cavello") and a commutation agreement that further reduces our exposure to and limits the potential volatility related to these AmTrust liabilities, as discussed in " Note 8. Reinsurance " of the Notes to Condensed Consolidated Financial Statements included in Part I Item 1. "Financial Information" . As discussed in Item 1. " Business " of our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 15, 2021, the sale of Maiden Reinsurance North America, Inc. ("Maiden US") and the termination of both of our quota share contracts with AmTrust 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 currently consists of two reportable segments: Diversified Reinsurance and AmTrust Reinsurance. Our Diversified Reinsurance segment consists of a portfolio of predominantly property and casualty reinsurance business focusing on regional and specialty property and casualty insurance companies located primarily in Europe. Our AmTrust Reinsurance segment includes all business ceded to Maiden Reinsurance by AmTrust, primarily the quota share reinsurance agreement (“AmTrust Quota Share”) between Maiden Reinsurance and AmTrust’s wholly owned subsidiary, AmTrust International Insurance, Ltd. (“AII”) and the European hospital liability quota share reinsurance contract ("European Hospital Liability Quota Share") with AmTrust’s wholly owned subsidiaries AmTrust Europe Limited ("AEL") and AmTrust International Underwriters DAC ("AIU DAC"), which are both in run-off effective January 1, 2019. Recent Developments Since the third quarter of 2018, we have engaged in a series of transactions that 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 loss and loss expense 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 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, 2020 that was filed with the SEC on March 15, 2021. 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, 2020 for further information. Effective March 16, 2020, we re-domesticated our principal operating subsidiary, Maiden Reinsurance, from Bermuda to the State of Vermont in the U.S., having 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. Maiden Reinsurance is now subject to the statutes and regulations of Vermont in the ordinary course of business. The re-domestication, in combination with other strategic measures described above that were completed in 2019, will continue to strengthen the Company’s capital position and solvency ratios. While the Vermont Department of Financial Regulation ("Vermont DFR") is currently 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 $16.7 million at September 30, 2021. We believe Maiden NA’s investments, including its ownership of Maiden Reinsurance and its active asset management strategy, will create opportunities to utilize net operating loss carry-forwards ("NOLs") which were $234.0 million as of September 30, 2021. These NOLs, in combination with additional net deferred tax assets ("DTAs") 38 primarily related to our insurance liabilities result in a net DTA (before valuation allowance) of $91.7 million or $1.06 per common share as of September 30, 2021. These net DTAs are not presently recognized on the Company's consolidated balance sheet as a full valuation allowance is currently carried against them. As our profitability continues to improve, however, we are evaluating this valuation allowance and the appropriate amount required. 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, 2020. Taken together, we believe 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. Business Strategy We continue to re–evaluate our operating strategy during 2021 while leveraging the significant assets and capital we retain. In addition to restoring operating profitability, our strategic focus centers 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 continues to be that the risk-adjusted returns that may be produced via active reinsurance underwriting of new risks are likely to present more limited opportunities compared to other strategic initiatives which may produce greater shareholder value. As a result, our strategic focus continues on 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. By enhancing our profitability through increased investment returns, we believe we also increase the likelihood of fully utilizing the significant NOLs described above which may create additional shareholder value. The measures implemented now enable us to more flexibly allocate capital to those activities most likely to produce the greatest returns for shareholders, and we are 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 our confidence has increased it has enabled us to pursue continued capital management initiatives, primarily the repurchase of our preference shares, which we believe provide the greatest risk-adjusted returns to our common shareholders. Our current assessment is that losses have continued to stabilize sufficiently to continue our capital management initiatives, although we are careful to approach these strategies in a deliberate fashion. In November 2020, we formed Genesis Legacy Solutions (“GLS”) which specializes in providing a full range of legacy services to small insurance entities, particularly those in run-off or with blocks of reserves that are no longer core, working with clients to develop and implement finality solutions including acquiring entire companies. We believe the formation of GLS is highly complementary to our overall longer-term strategy. GLS, along with other recent insurance industry investments, enables us to leverage our knowledge base while not re-entering active underwriting of new risks and maintaining an efficient operating profile. We believe GLS not only enhances our profitability through both fee income and effective claims management services, but it will also increase our asset base through the addition of blocks of reserves or companies that can be successfully wound down. Effective October 1, 2021, GLS has completed its first transaction, a loss portfolio transfer transaction which includes an adverse development cover and GLS continues to develop additional opportunities consistent with its business plan. This should further enhance our ability to pursue the asset and capital management pillars of our business strategy. Our ability to execute our asset and capital management initiatives is dependent on maintaining adequate levels of unrestricted liquidity and cash flows. Further, there can be no assurance that our insurance liabilities will run-off at levels that will permit further capital management activities, which we continually review as part of our strategy. Please refer to the "Liquidity and Capital Resources" section for further information on our asset and capital management activities, in particular our various preference share repurchase measures. 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, we are not currently engaged in active reinsurance underwriting and continue to run off the remaining unearned exposures we have reinsured. Our Swedish and UK insurance operations ("IIS unit") do write limited primary insurance coverage 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 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. 39 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 our 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. Three and Nine Months Ended September 30, 2021 and 2020 Financial Highlights For the Three Months Ended September 30, 2021 2020 Change Summary Consolidated Statement of Income Data (unaudited): ($ in thousands except per share data) Net (loss) income $ (3,140) $ 2,162 $ (5,302) Gain from repurchase of preference shares 6,004 — 6,004 Net income attributable to Maiden common shareholders 2,864 2,162 702 Basic and diluted earnings per common share: Net income attributable to common shareholders (2) 0.03 0.03 — Gain from repurchase of preference securities per common share 0.07 — 0.07 Gross premiums written 6,821 3,517 3,304 Net premiums earned 15,030 24,305 (9,275) Underwriting (loss) income (3) (3,649) 3,402 (7,051) Net investment income 7,477 12,686 (5,209) Combined ratio (4) 154.8 % 109.4 % 45.4 Non-GAAP measures: Non-GAAP operating loss (1) $ (3,114) $ (2,313) $ (801) Non-GAAP basic and diluted operating loss per common share (1) (0.04) (0.03) (0.01) Annualized non-GAAP operating return on average common shareholders' equity (1) (4.5) % (5.6) % 1.1 For the Nine Months Ended September 30, 2021 2020 Change Summary Consolidated Statement of Income Data (unaudited): ($ in thousands except per share data) Net income $ 14,258 $ 32,235 $ (17,977) Gain from repurchase of preference shares 87,168 — 87,168 Net income attributable to Maiden common shareholders 101,426 32,235 69,191 Basic and diluted earnings per common share: Net income attributable to Maiden common shareholders (2) 1.17 0.38 0.79 Gain from repurchase of preference shares per common share 1.01 — 1.01 Gross premiums written 7,865 20,233 (12,368) Net premiums earned 40,106 76,828 (36,722) Underwriting income (loss) (3) 6,377 (308) 6,685 Net investment income 24,596 44,959 (20,363) Combined ratio (4) 137.0 % 124.6 % 12.4 Non-GAAP measures: Non-GAAP operating earnings (1) $ 58,135 $ 2,041 $ 56,094 Non-GAAP basic and diluted operating earnings per common share (1) 0.67 0.02 0.65 Annualized non-GAAP operating return on average common shareholders' equity (1) 32.3 % 1.8 % 30.5 40 September 30, 2021 December 31, 2020 Change Consolidated Financial Condition ($ in thousands except per share data) Total investments and cash and cash equivalents (5) $ 1,004,229 $ 1,456,133 $ (451,904) Total assets 2,455,018 2,948,455 (493,437) Reserve for loss and LAE 1,567,526 1,893,299 (325,773) Senior notes - principal amount 262,500 262,500 — Common shareholders' equity 215,756 133,506 82,250 Shareholders' equity 383,174 527,816 (144,642) Total capital resources (6) 645,674 790,316 (144,642) Ratio of debt to total capital resources (11) 40.7 % 33.2 % 7.5 Book Value calculations: Book value per common share (7) $ 2.50 $ 1.57 $ 0.93 Accumulated dividends per common share 4.27 4.27 — Book value per common share plus accumulated dividends $ 6.77 $ 5.84 $ 0.93 Change in book value per common share plus accumulated dividends 15.9 % Diluted book value per common share (8) $ 2.48 $ 1.55 $ 0.93 Non-GAAP measures: Adjusted book value per common share (9) $ 3.16 $ 2.46 $ 0.70 Adjusted Maiden shareholders' equity (10) 440,983 602,757 (161,774) Adjusted total capital resources (10) 703,483 865,257 (161,774) Ratio of debt to adjusted total capital resources (12) 37.3 % 30.3 % 7.0 (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 income (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 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) Adjusted book value per common share is a non-GAAP measure that is calculated using common shareholders' equity, adjusted by adding the following items to shareholders' equity: 1) the unamortized deferred gain on retroactive reinsurance arising from the LPT/ADC Agreement; and 2) an adjustment which reflects the equity method accounting related to the fair value of certain hedged liabilities within an equity method investment in a limited partnership investment held by the Company wherein the ultimate realizable value of the asset supporting the hedged liabilities cannot currently be recognized at fair value, divided by the number of common shares outstanding. See " Key Financial Measures " for additional information. (10) Adjusted shareholders' equity and adjusted total capital resources are calculated by adding the following items to shareholders' equity: 1) the unamortized deferred gain on retroactive reinsurance arising from the LPT/ADC Agreement; and 2) an adjustment which reflects the equity accounting related to the fair value of certain hedged liabilities within an equity method investment held by the Company wherein the ultimate realizable value of the asset supporting the hedged liabilities cannot currently be recognized at fair value. 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. (11) Ratio of debt to total capital resources is calculated using the total principal amount of debt divided by the sum of total capital resources. (12) 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. 41 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 and non-GAAP diluted operating earnings per common share : Management believes that the use of non-GAAP operating earnings and non-GAAP diluted operating earnings 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 should not be viewed as a substitute for U.S. GAAP net income. Non-GAAP operating earnings 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; (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; and (5) interest in income of equity method investments. We have excluded net realized gains on investment, OTTI losses, interest in income of equity method investments and foreign exchange and other gains as we believe these are influenced by market opportunities and other factors. We do not believe that 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, 2021, it is important to note that 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 " 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. 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 42 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 fixed income investment portfolio, as well as common or preference 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 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 development shows the ultimate economic benefit of the LPT/ADC Agreement on our 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 following items to shareholders' equity: 1) the unamortized deferred gain on retroactive reinsurance arising from the LPT/ADC Agreement; and 2) an adjustment which reflects the equity accounting related to the fair value of certain hedged liabilities within an equity method investment held by the Company wherein the ultimate realizable value of the asset supporting the hedged liabilities cannot currently be recognized at fair value ("LP Investment Adjustment"). 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 these adjustments, 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. The LP Investment Adjustment reflects the fair value of the assets not presently able to be recognized currently. We believe reflecting the economic benefit of both items is helpful to understand future trends in our operations, which will improve the Company's shareholders' equity over the settlement or contract periods, respectively. 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, 2020, filed with the SEC on March 15, 2021, 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, 2020, filed with the SEC on March 15, 2021. 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, 2020, filed with the SEC on March 15, 2021. There have been no material changes in the application of our critical accounting estimates subsequent to that report. 43 Results of Operations The following table sets forth our selected unaudited Condensed Consolidated Statement of Income data for the three and nine months ended September 30, 2021 and 2020: For the Three Months Ended September 30, For the Nine Months Ended September 30, ($ in thousands) 2021 2020 2021 2020 Gross premiums written $ 6,821 $ 3,517 $ 7,865 $ 20,233 Net premiums written $ 6,953 $ 3,031 $ 7,518 $ 17,493 Net premiums earned $ 15,030 $ 24,305 $ 40,106 $ 76,828 Other insurance revenue 138 261 946 919 Net loss and LAE (10,514) (9,065) (7,546) (41,159) Commission and other acquisition expenses (6,313) (9,651) (19,154) (29,778) General and administrative expenses (1) (1,990) (2,448) (7,975) (7,118) Underwriting (loss) income (2) (3,649) 3,402 6,377 (308) Other general and administrative expenses (1) (4,660) (5,712) (21,578) (18,853) Net investment income 7,477 12,686 24,596 44,959 Net realized (losses) gains on investment (937) 4,287 8,013 24,200 Total other-than-temporary impairment losses — (962) — (2,468) Foreign exchange and other gains (losses) 4,116 (6,536) 6,070 (634) Interest and amortization expenses (4,832) (4,832) (14,495) (14,493) Income tax benefit (expense) 155 (17) 363 (14) Interest in (loss) income of equity method investments (810) (154) 4,912 (154) Net (loss) income (3,140) 2,162 14,258 32,235 Gain from repurchase of preference shares 6,004 — 87,168 — Net income available to Maiden common shareholders $ 2,864 $ 2,162 $ 101,426 $ 32,235 Ratios Net loss and LAE ratio (3) 69.3 % 36.9 % 18.4 % 52.9 % Commission and other acquisition expense ratio (4) 41.6 % 39.3 % 46.6 % 38.3 % General and administrative expense ratio (5) 43.9 % 33.2 % 72.0 % 33.4 % Expense ratio (6) 85.5 % 72.5 % 118.6 % 71.7 % Combined ratio (7) 154.8 % 109.4 % 137.0 % 124.6 % (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 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. (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. 44 Net Income Net income available to Maiden common shareholders for the three months ended September 30, 2021 was $2.9 million compared to $2.2 million for the same period in 2020. The net improvement in results for the three months ended September 30, 2021 compared to the same period in 2020 was primarily due to the gain from repurchase of our preference shares of $6.0 million for the three months ended September 30, 2021. Excluding the gain on the repurchase of our preference shares, net loss for the three months ended September 30, 2021 was $3.1 million compared to net income of $2.2 million for the same period in 2020. The most significant items affecting our financial performance during the third quarter of 2021 on a comparative basis to the third quarter of 2020 included: • underwriting loss of $3.6 million for the three months ended September 30, 2021 compared to underwriting income of $3.4 million in the same period in 2020. The deterioration in underwriting loss was largely due to: ◦ an underwriting loss of $9.0 million for the three months ended September 30, 2021 on a current accident year basis compared to an underwriting loss of $3.8 million for the same period in 2020 on a current accident year basis, due primarily to higher loss ratios on the run-off of unearned premium for terminated reinsurance contracts in the AmTrust segment; which was partially offset by: ◦ favorable prior year loss development of $5.4 million or 35.3 percentage points in the third quarter of 2021 compared to favorable prior year loss development of $7.2 million or 29.5 percentage points during the same period in 2020. This was primarily generated by favorable prior year loss development in the AmTrust Reinsurance segment in the third quarter of 2021; • corporate general and administrative expenses decreased to $4.7 million for the three months ended September 30, 2021 compared to $5.7 million for the same period in 2020 due to lower staff related costs; • net investment income decreased to $7.5 million for the three months ended September 30, 2021 compared to investment income of $12.7 million for the same period in 2020 primarily due to the decline in average fixed income assets of 27.5%; • realized and unrealized losses on investment were $0.9 million for the three months ended September 30, 2021 compared to net realized gains of $4.3 million for the same period in 2020; • net foreign exchange and other gains amounted to $4.1 million during the three months ended September 30, 2021, compared to net foreign exchange and other losses of $6.5 million for the same period in 2020; and • interest in loss of equity method investments was $0.8 million for the three months ended September 30, 2021 compared to interest in loss of equity method investments of $0.2 million for the same period in 2020. Net income available to Maiden common shareholders for the nine months ended September 30, 2021 was $101.4 million compared to a net income of $32.2 million for the same period in 2020. The net improvement in our results for the nine months ended September 30, 2021 compared to the same period in 2020 was primarily due to the gain from repurchase of our preference shares of $87.2 million for the nine months ended September 30, 2021. Excluding the gain on the repurchase of our preference shares, net income for the nine months ended September 30, 2021 was $14.3 million compared to net income of $32.2 million for the same period in 2020. The most significant items affecting our financial performance during the nine months ended September 30, 2021 on a comparative basis to the same period in 2020 included: • underwriting income of $6.4 million for the nine months ended September 30, 2021 compared to an underwriting loss of $0.3 million during the nine months ended September 30, 2020. The improvement in underwriting income was largely due to: ◦ favorable prior year loss development of $23.7 million or 57.8 percentage points for the nine months ended September 30, 2021 compared to favorable prior year loss development of $7.8 million or 10.1 percentage points for the same period in 2020 which were incurred primarily in the AmTrust Reinsurance segment for each respective period. This was partially offset by: ◦ an underwriting loss of $17.3 million for the nine months ended September 30, 2021 on a current accident year basis compared to an underwriting loss of $8.1 million for the same period in 2020 on a current accident year basis, due primarily to higher loss ratios on the run-off of unearned premium for terminated reinsurance contracts in the AmTrust Reinsurance segment along with higher expense ratios caused by a significant decrease in earned premium. • no investment impairment losses for the nine months ended September 30, 2021 compared to $2.5 million in 2020; • net investment income decreased to $24.6 million for the nine months ended September 30, 2021 compared to $45.0 million for the same period in 2020, primarily due to the decline in average fixed income assets of 25.8%; • realized and unrealized gains on investment decreased to $8.0 million for the nine months ended September 30, 2021 compared to $24.2 million for the same period in 2020; • corporate general and administrative expenses increased to $21.6 million for the nine months ended September 30, 2021 compared to $18.9 million for the same period in 2020 due to higher incentive compensation costs incurred; • foreign exchange and other gains increased to $6.1 million for the nine months ended September 30, 2021 compared to foreign exchange and other losses of $0.6 million for the same period in 2020; and 45 • interest in income of equity method investments of $4.9 million for the nine months ended September 30, 2021 compared to an interest in loss of equity method investments of $0.2 million for the same period in 2020. Net Premiums Written The tables below compare net premiums written by our reportable segments, reconciled to the total consolidated net premiums written for the three and nine months ended September 30, 2021 and 2020: For the Three Months Ended September 30, 2021 2020 Change in ($ in thousands) Total Total $ % Diversified Reinsurance $ 5,816 $ 8,666 $ (2,850) (32.9) % AmTrust Reinsurance 1,137 (5,635) 6,772 (120.2) % Total $ 6,953 $ 3,031 $ 3,922 129.4 % For the Nine Months Ended September 30, 2021 2020 Change in ($ in thousands) Total Total $ % Diversified Reinsurance $ 10,600 $ 27,591 $ (16,991) (61.6) % AmTrust Reinsurance (3,082) (10,098) 7,016 (69.5) % Total $ 7,518 $ 17,493 $ (9,975) (57.0) % Net premiums written for the three and nine months ended September 30, 2021 increased to $7.0 million and decreased to $7.5 million, respectively, compared to net premiums written of $3.0 million and $17.5 million in the same respective periods in 2020 due to: • Premiums written in the Diversified Reinsurance segment decreased by $2.9 million or 32.9% and $17.0 million or 61.6% for the three and nine months ended September 30, 2021 compared to the same respective periods in 2020 largely due to the return of unearned premiums after the non-renewal of the German Auto Programs reinsurance contract in our IIS business on January 1, 2021. • There were negligible 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. Negative premiums for the nine months ended September 30, 2021 were mainly due to premium adjustments on Small Commercial Business policies. 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 $9.3 million or 38.2% and $36.7 million or 47.8% for the three and nine months ended September 30, 2021, respectively, compared to the same respective periods in 2020. The tables below compare net premiums earned by our reportable segments, reconciled to the total consolidated net premiums earned, for the three and nine months ended September 30, 2021 and 2020: For the Three Months Ended September 30, 2021 2020 Change in ($ in thousands) Total % of Total Total % of Total $ % Diversified Reinsurance $ 7,521 50.0 % $ 11,323 46.6 % $ (3,802) (33.6) % AmTrust Quota Share Reinsurance 7,509 50.0 % 12,982 53.4 % (5,473) (42.2) % Total $ 15,030 100.0 % $ 24,305 100.0 % $ (9,275) (38.2) % For the Nine Months Ended September 30, 2021 2020 Change in ($ in thousands) Total % of Total Total % of Total $ % Diversified Reinsurance $ 20,723 51.7 % $ 35,381 46.1 % $ (14,658) (41.4) % AmTrust Quota Share Reinsurance 19,383 48.3 % 41,447 53.9 % (22,064) (53.2) % Total $ 40,106 100.0 % $ 76,828 100.0 % $ (36,722) (47.8) % Net premiums earned in the AmTrust Reinsurance segment for the three and nine months ended September 30, 2021 decreased by $5.5 million or 42.2% and $22.1 million or 53.2%, respectively, compared to the same respective periods in 2020 due to termination 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, 2021 decreased by $3.8 million or 33.6% and $14.7 million or 41.4%, respectively, compared to the same respective periods in 2020 46 due to the German Auto programs quota share reinsurance contract which went into run-off on January 1, 2021 in our IIS business. Please refer to the analysis of our Diversified Reinsurance segment for further discussion. 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 Total net investment income decreased by $5.2 million or 41.1% and $20.4 million or 45.3% for the three and nine months ended September 30, 2021, respectively, compared to the same respective periods in 2020 largely due to the decline in average aggregate fixed income assets of 27.5% and 25.8% in those same respective periods. The decline in fixed income assets is driven by the cessation of active reinsurance underwriting which have materially reduced our revenues, resulting in significant negative operating cash flows as we run-off our existing reinsurance liabilities. In addition, during 2021, our investment expenses associated with our alternative investments have increased compared to 2020 due to the additional time and expertise required to manage these investments. Net investment income decreased partly due to the decline in annualized average book yields to 1.9% and 1.9% for the three and nine months ended September 30, 2021, respectively, compared to 2.1% and 2.4% for the three and nine months ended September 30, 2020, respectively, which was the result of both lower interest rates and shorter duration of assets in our fixed income portfolios. The following table details our average aggregate fixed income assets (at cost) and annualized investment book yield for the three and nine months ended September 30, 2021 and 2020: For the Three Months Ended September 30, For the Nine Months Ended September 30, ($ in thousands) 2021 2020 2021 2020 Average aggregate fixed income assets, at cost (1) $ 1,708,297 $ 2,356,494 $ 1,870,686 $ 2,521,380 Annualized investment book yield 1.9 % 2.1 % 1.9 % 2.4 % (1) Fixed income assets include available-for-sale ("AFS") securities, cash and restricted cash, funds held receivable, and loan to related party. These amounts are an average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements. Net Realized and Unrealized Gains on Investment Net realized and unrealized losses on investment of $0.9 million and net realized and unrealized gains on investment of $8.0 million were recognized for the three and nine months ended September 30, 2021, respectively, compared to net realized gains of $4.3 million and $24.2 million for the same respective periods in 2020. Net realized and unrealized losses and gains for the three and nine months ended September 30, 2021 included the recognition of $3.0 million in unrealized losses and $0.9 million in unrealized gains, respectively, related to an investment in an insurtech start-up company that was acquired by a special purpose acquisition company. In addition, realized gains for the three and nine months ended September 30, 2021 and 2020 reflect sales of corporate bonds for the settlement of claim payments to AmTrust. Net Impairment Losses Recognized in Earnings The Company did not recognize any OTTI losses on its fixed maturity portfolio for the three and nine months ended September 30, 2021. There were $1.0 million and $2.5 million of OTTI losses recorded on two and four fixed maturity securities for the three and nine months ended September 30, 2020, respectively. Interest in (Loss) Income of Equity Method Investments The Company recognized interest in loss of equity method investments of $0.8 million and interest in income of equity method investments of $4.9 million for the three and nine months ended September 30, 2021, respectively, compared to interest in loss of equity method investments of $0.2 million for the three and nine months ended September 30, 2020. The equity method investments mainly include hedge fund investments of $31.2 million and real estate investments of $42.6 million. The following table shows our interest in the (loss) income from equity method investments for the three and nine months ended September 30, 2021 and 2020: For the Three Months Ended September 30, For the Nine Months Ended September 30, ($ in thousands) 2021 2020 2021 2020 Hedge fund investments $ (1,838) $ 376 $ 1,786 $ 376 Other investments 1,028 (530) 3,126 (530) Interest in (loss) income from equity method investments $ (810) $ (154) $ 4,912 $ (154) 47 Net Loss and LAE Net loss and LAE increased by $1.4 million and decreased by $33.6 million during the three and nine months ended September 30, 2021, respectively, compared to the same respective periods in 2020 as our reinsurance liabilities continue to run off, along with favorable prior year reserve development of $5.4 million and $23.7 million for the three and nine months ended September 30, 2021, respectively. The loss ratio for the third quarter of 2021 was impacted by net favorable prior year reserve development of $5.4 million or 35.3 percentage points compared to net favorable prior year reserve development of $7.2 million or 29.5 percentage points during the same period in 2020. The development was primarily generated within the AmTrust Reinsurance segment. The loss ratio for the nine months ended September 30, 2021 was impacted by net favorable prior year reserve development of $23.7 million or 57.8 percentage points compared to net favorable prior year reserve development of $7.8 million or 10.1 percentage points during the same period in 2020. The prior year development was primarily within the AmTrust Reinsurance segment and is discussed in greater detail in the individual segment discussion and analysis. The net loss and LAE ratios increased to 69.3% and decreased to 18.4% for the three and nine months ended September 30, 2021, respectively, compared to 36.9% and 52.9% for the same respective periods in 2020. The increased loss ratio for the third quarter of 2021 was due to higher current underwriting year loss ratios associated with the run-off of unearned premium for terminated reinsurance contracts within the AmTrust Reinsurance segment. The decreased loss ratio for the nine months ended September 30, 2021 was largely due to significant favorable prior year loss experience in the AmTrust Reinsurance segment. Commission and Other Acquisition Expenses Commission and other acquisition expenses decreased by $3.3 million or 34.6% and $10.6 million or 35.7% for the three and nine months ended September 30, 2021, respectively, compared to the same respective periods in 2020. The commission and other acquisition expense ratio increased to 41.6% and 46.6% for the three and nine months ended September 30, 2021, respectively, compared to 39.3% and 38.3% for the respective periods in 2020 largely due to a change in mix of premiums written in our Diversified Reinsurance segment. General and Administrative Expenses General and administrative expenses include both segment and corporate expenses segregated for analytical purposes as a component of underwriting income. Total general and administrative expenses decreased by $1.5 million or 18.5% and increased by $3.6 million or 13.8% for the three and nine months ended September 30, 2021, respectively, compared to the same respective periods in 2020. Corporate general and administrative expenses for the three and nine months ended September 30, 2021 decreased by $1.1 million or 18.4% and increased by $2.7 million or 14.5% compared to the same respective periods in 2020. The $2.7 million increase in corporate expenses for the nine months ended September 30, 2021 compared to the same respective period in 2020 was due to higher discretionary equity-based and cash incentive staff compensation and higher professional fees incurred in 2021. General and administrative expenses for the three and nine months ended September 30, 2021 and 2020 were comprised of: For the Three Months Ended September 30, For the Nine Months Ended September 30, ($ in thousands) 2021 2020 2021 2020 General and administrative expenses – segments $ 1,990 $ 2,448 $ 7,975 $ 7,118 General and administrative expenses – corporate 4,660 5,712 21,578 18,853 Total general and administrative expenses $ 6,650 $ 8,160 $ 29,553 $ 25,971 The Company incurred operating expenses of $0.1 million and $3.0 million during the three and nine months ended September 30, 2021, respectively, that are not considered part of our ongoing business operations, and which are largely related to accelerated depreciation for fixed assets connected with the termination of our principal office lease in Bermuda as well as salary and related costs associated with headcount reductions and certain regulatory costs in our international operations. 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, 2021 and 2020, 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, 2021 and 2020, respectively. Foreign Exchange and Other Gains (Losses) Net foreign exchange and other gains amounted to $4.1 million and $6.1 million during the three and nine months ended September 30, 2021, respectively, compared to net foreign exchange and other losses of $6.5 million and $0.6 million for the same respective periods in 2020. Net foreign exchange gains of $4.1 million and $6.3 million for the three and nine months ended September 30, 2021, respectively, were attributable to the strengthening of the U.S. dollar on the re-measurement of net loss reserves and insurance related liabilities denominated in British pound and euro. Net foreign exchange losses of $6.5 million and $0.2 million occurred during the three and nine months ended September 30, 2020, respectively, due to the weakening of the U.S. dollar on the re-measurement of net loss reserves and insurance related liabilities denominated in British pound and euro. 48 Underwriting Results by Reportable Segment Diversified Reinsurance Segment The underwriting results and associated ratios for our Diversified Reinsurance segment for the three and nine months ended September 30, 2021 and 2020 were as follows: For the Three Months Ended September 30, For the Nine Months Ended September 30, ($ in thousands) 2021 2020 2021 2020 Gross premiums written $ 5,684 $ 9,152 $ 10,947 $ 30,573 Net premiums written $ 5,816 $ 8,666 $ 10,600 $ 27,591 Net premiums earned $ 7,521 $ 11,323 $ 20,723 $ 35,381 Other insurance revenue 138 261 946 919 Net loss and LAE (554) (6,624) (3,216) (19,703) Commission and other acquisition expenses (3,461) (4,204) (11,668) (13,557) General and administrative expenses (1,583) (1,818) (6,190) (5,177) Underwriting income (loss) $ 2,061 $ (1,062) $ 595 $ (2,137) Ratios Net loss and LAE ratio 7.2 % 57.2 % 14.8 % 54.3 % Commission and other acquisition expense ratio 45.2 % 36.3 % 53.9 % 37.3 % General and administrative expense ratio 20.7 % 15.7 % 28.6 % 14.3 % Expense ratio 65.9 % 52.0 % 82.5 % 51.6 % Combined ratio 73.1 % 109.2 % 97.3 % 105.9 % The combined ratio for the three and nine months ended September 30, 2021 decreased to 73.1% and 97.3%, respectively, compared to 109.2% and 105.9% for the same respective periods in 2020, largely due to favorable loss development partly offset by higher non-recurring general and administrative expenses in our IIS business, which increased the expense ratio. Please see the respective sections below on net loss and LAE, commissions and other acquisition expenses and general and administrative expenses for further details on these elements that have impacted the combined ratios. Premiums — Gross premiums written decreased by $3.5 million or 37.9% and $19.6 million or 64.2% for the three and nine months ended September 30, 2021, respectively, compared to the same respective periods in 2020. This was primarily due to the return of unearned premiums written in a German Auto quota share reinsurance contract in our IIS business which went into run-off on January 1, 2021. Direct premiums written by Maiden LF and Maiden GF increased by $1.1 million or 25.5% and $1.5 million or 9.9% during the three and nine months ended September 30, 2021, respectively, compared to the same respective periods in 2020. Net premiums written decreased by $2.9 million or 32.9% and $17.0 million or 61.6% during the three and nine months ended September 30, 2021, respectively, compared to the same respective periods in 2020 due to return of unearned premiums written in our German Auto quota share reinsurance contract which went into run-off on January 1, 2021. The tables below show net premiums written by line of business for the three and nine months ended September 30, 2021 and 2020: For the Three Months Ended September 30, 2021 2020 Change in ($ in thousands) Total Total $ % Net Premiums Written International $ 5,816 $ 8,757 $ (2,941) (33.6) % Other — (91) 91 (100.0) % Total Diversified Reinsurance $ 5,816 $ 8,666 $ (2,850) (32.9) % For the Nine Months Ended September 30, 2021 2020 Change in ($ in thousands) Total Total $ % Net Premiums Written International $ 10,600 $ 27,627 $ (17,027) (61.6) % Other — (36) 36 (100.0) % Total Diversified Reinsurance $ 10,600 $ 27,591 $ (16,991) (61.6) % Net premiums earned decreased by $3.8 million or 33.6% and $14.7 million or 41.4% during the three and nine months ended September 30, 2021, respectively, compared to the same respective periods in 2020 primarily due to lower earned 49 premiums from German Auto programs which were in run-off since January 1, 2021. The tables below show net premiums earned by line of business for the three and nine months ended September 30, 2021 and 2020: For the Three Months Ended September 30, 2021 2020 Change in ($ in thousands) Total Total $ % Net Premiums Earned International $ 7,521 $ 11,414 $ (3,893) (34.1) % Other — (91) 91 (100.0) % Total Diversified Reinsurance $ 7,521 $ 11,323 $ (3,802) (33.6) % For the Nine Months Ended September 30, 2021 2020 Change in ($ in thousands) Total Total $ % Net Premiums Earned International $ 20,723 $ 35,417 $ (14,694) (41.5) % Other — (36) 36 (100.0) % Total Diversified Reinsurance $ 20,723 $ 35,381 $ (14,658) (41.4) % Other Insurance Revenue — Other insurance revenue includes $0.1 million and $0.2 million of fee income earned from our GLS business for the three and nine months ended September 30, 2021, respectively, as well as fee income derived from our IIS business that is not directly associated with premium revenue assumed by the Company for the three and nine months ended September 30, 2021 and 2020 as specified in the table below. Other income of $0.1 million and $0.1 million for the three and nine months ended September 30, 2020, respectively, was generated from transitional services provided relating to the sale of Maiden US. Other insurance revenue decreased by $0.1 million or 47.1% and increased by $27.0 thousand or 2.9% for the three and nine months ended September 30, 2021, respectively, compared to the same respective periods in 2020. The tables below show other insurance revenue by source for the three and nine months ended September 30, 2021 and 2020, respectively: For the Three Months Ended September 30, 2021 2020 Change ($ in thousands) % International $ 61 $ 197 $ (136) (69.0) % Other income 77 64 13 20.3 % Total Diversified Reinsurance $ 138 $ 261 $ (123) (47.1) % For the Nine Months Ended September 30, 2021 2020 Change ($ in thousands) % International $ 714 $ 789 $ (75) (9.5) % Other income 232 130 102 78.5 % Total Diversified Reinsurance $ 946 $ 919 $ 27 2.9 % Net Loss and LAE — Net loss and LAE decreased by $6.1 million or 91.6% and $16.5 million or 83.7% for the three and nine months ended September 30, 2021, respectively, compared to the same respective periods in 2020 due primarily to the run-off of reinsurance liabilities associated with our German auto programs. Net loss and LAE ratio decreased to 7.2% and 14.8% for the three and nine months ended September 30, 2021, respectively, compared with 57.2% and 54.3% during the same respective periods in 2020. During the three months ended September 30, 2021, the net loss and LAE ratio decreased by 50.0 percentage points comp ared to the same period in 2020. The 2021 loss ratio was impacted by favorable prior year loss reserve development which was $1.7 million or 21.9 percentage points during the three months ended September 30, 2021 compared to the impact of adverse development of $0.5 million or 4.2 percentage points on the loss ratio for the same period in 2020. The loss development in 2021 was due to favorable development experienced in IIS and other run-off business while the loss development in 2020 was driven by adverse development experienced in our former European Capital Solutions business. During the nine months ended September 30, 2021, the net loss and LAE ratio decreased by 39.5 percentage points compared to the same period in 2020. The 2021 loss ratio was impacted by favorable prior year loss reserve development of $2.6 million or 12.1 percentage points during 2021, compared to the impact of adverse development of $0.3 million or 0.9 percentage points on the loss ratio in 2020. The 2021 development was driven by favorable experience in IIS and other run-off business while the 2020 development was due to adverse experience in European Capital Solutions. 50 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 decreased by 36.1 and 8.6 percentage points for the three and nine months ended September 30, 2021, respectively, compared to the same respective periods in 2020. Commission and Other Acquisition Expenses — Commission and other acquisition expenses decreased by $0.7 million or 17.7% and $1.9 million or 13.9% for the three and nine months ended September 30, 2021, respectively, compared to the same respective periods in 2020 primarily due to lower net premiums earned which similarly decreased in this segment. The commission and other acquisition expense ratio for the three and nine months ended September 30, 2021 increased to 45.2% and 53.9%, respectively, compared to 36.3% and 37.3% for the same respective periods in 2020, reflecting the change in the mix of pro rata versus excess of loss premiums written compared to the same respective periods in 2020. 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 $0.2 million or 12.9% and increased by $1.0 million or 19.6% for the three and nine months ended September 30, 2021, respectively, compared to the same respective periods in 2020. The general and administrative expense ratio increased to 20.7% and 28.6% for the three and nine months ended September 30, 2021, respectively, compared to 15.7% and 14.3% for the same respective periods in 2020 largely due to lower net premiums earned which decreased significantly as noted previously, combined with higher non-recurring expenses. This included severance costs and certain regulatory costs of approximately $1.0 million incurred in our IIS business unit which increased the expense ratio for the nine months ended September 30, 2021 compared to the same period in 2020. The overall expense ratio (including commission and other acquisition expenses) for the three and nine months ended September 30, 2021 increased to 65.9% and 82.5%, respectively, compared to 52.0% and 51.6% for the same respective periods in 2020 due to net premiums earned which decreased combined with higher non-recurring expenses as discussed above. AmTrust Reinsurance Segment The AmTrust Reinsurance segment reported an underwriting loss of $5.7 million and underwriting income of $5.8 million during the three and nine months ended September 30, 2021, respectively, compared to an underwriting income of $4.5 million and $1.8 million for the same respective periods in 2020. The underwriting results and associated ratios for the AmTrust Reinsurance segment for the three and nine months ended September 30, 2021 and 2020 were as follows: For the Three Months Ended September 30, For the Nine Months Ended September 30, ($ in thousands) 2021 2020 2021 2020 Gross premiums written $ 1,137 $ (5,635) $ (3,082) $ (10,340) Net premiums written $ 1,137 $ (5,635) $ (3,082) $ (10,098) Net premiums earned $ 7,509 $ 12,982 $ 19,383 $ 41,447 Net loss and LAE (9,960) (2,441) (4,330) (21,456) Commission and other acquisition expenses (2,852) (5,447) (7,486) (16,221) General and administrative expenses (407) (630) (1,785) (1,941) Underwriting (loss) income $ (5,710) $ 4,464 $ 5,782 $ 1,829 Ratios Net loss and LAE ratio 132.6 % 18.8 % 22.3 % 51.8 % Commission and other acquisition expense ratio 38.0 % 42.0 % 38.6 % 39.1 % General and administrative expense ratio 5.4 % 4.8 % 9.2 % 4.7 % Expense ratio 43.4 % 46.8 % 47.8 % 43.8 % Combined ratio 176.0 % 65.6 % 70.1 % 95.6 % The combined ratio increased 110.4 percentage points to 176.0% for the three months ended September 30, 2021 compared to 65.6% for the same period in 2020. This was primarily driven by the impact of a higher underwriting loss for the current accident year during the three months ended September 30, 2021 of $9.4 million compared to an underwriting loss of $3.3 million for the current accident year in the same period in 2020. These results were due primarily to higher loss ratios on the run-off of unearned premium for terminated reinsurance contracts. The results were partially offset by favorable prior year loss development of $3.7 million or 49.0 percentage points during the third quarter of 2021 compared to favorable development of $7.7 million or 59.5 percentage points during the third quarter of 2020. Prior year favorable development for the three months ended September 30, 2021 was driven by Workers Compensation and Commercial Auto Liability. Prior year favorable development in 2020 was primarily due to Workers Compensation partly offset by adverse development within Commercial Auto and General Liability. 51 The combined ratio decreased by 25.5 percentage points to 70.1% for the nine months ended September 30, 2021 compared to 95.6% for 2020 primarily due to the impact of favorable prior year loss development of $21.1 million or 108.9 percentage points during 2021 compared to the impact of favorable prior year loss development of $8.1 million or 19.6 percentage points during 2020. Prior year favorable development in 2021 was primarily due to Workers Compensation and Commercial Auto Liability partly offset by adverse development within Hospital Liability. Prior year favorable development in 2020 was primarily due to Workers Compensation partly offset by adverse development within Commercial Auto and General Liability. These results were partially offset by a higher underwriting loss for the current accident year during the nine months ended September 30, 2021 of $15.3 million compared to an underwriting loss of $6.3 million for the current accident year in the same period in 2020. These results were due primarily to higher loss ratios on the run-off of unearned premium for terminated reinsurance contracts in the segment. Premiums — The tables below show net premiums written by category for the three and nine months ended September 30, 2021 and 2020, respectively: For the Three Months Ended September 30, 2021 2020 ($ in thousands) Total Total Net Premiums Written Small Commercial Business $ (1,309) $ (2,123) Specialty Program 22 (209) Specialty Risk and Extended Warranty 2,424 (3,303) Total AmTrust Reinsurance $ 1,137 $ (5,635) For the Nine Months Ended September 30, 2021 2020 ($ in thousands) Total Total Net Premiums Written Small Commercial Business $ (5,381) $ (8,517) Specialty Program (7) 268 Specialty Risk and Extended Warranty 2,306 (1,849) Total AmTrust Reinsurance $ (3,082) $ (10,098) The gross and net premiums written for the three and nine months ended September 30, 2021 reflect premium adjustments on Small Commercial Business policies in the AmTrust Quota Share. 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 the AmTrust Quota Share and the European Hospital Liability Quota Share as of January 1, 2019 resulted in no new business written under these contracts since 2018. Net premiums earned decreased by $5.5 million or 42.2% and $22.1 million, or 53.2% for the three and nine months ended September 30, 2021, respectively, compared to the same respective periods in 2020 due to termination of the AmTrust Quota Share and European Hospital Liability Quota Share as of January 1, 2019. There were negative premiums earned for the three and nine months ended September 30, 2021 in Small Commercial Business due to premium adjustments on such policies in the AmTrust Quota Share. The negative net premiums earned on Small Commercial Business for the three and nine months ended September 30, 2020 were due to premium adjustments and earned premium returns under the commutation of certain home warranty business under the AmTrust Quota Share as of April 1, 2020. 52 The tables below detail net premiums earned by category for the three and nine months ended September 30, 2021 and 2020: For the Three Months Ended September 30, 2021 2020 Change in ($ in thousands) Total % of Total Total % of Total $ % Net Premiums Earned Small Commercial Business $ (1,227) (16.4) % $ (1,921) (14.8) % $ 694 (36.1) % Specialty Program 28 0.4 % (190) (1.5) % 218 (114.7) % Specialty Risk and Extended Warranty 8,708 116.0 % 15,093 116.3 % (6,385) (42.3) % Total AmTrust Reinsurance $ 7,509 100.0 % $ 12,982 100.0 % $ (5,473) (42.2) % For the Nine Months Ended September 30, 2021 2020 Change in ($ in thousands) Total % of Total Total % of Total $ % Net Premiums Earned Small Commercial Business $ (5,073) (26.2) % $ (8,094) (19.5) % $ 3,021 (37.3) % Specialty Program 12 0.1 % 311 0.7 % (299) (96.1) % Specialty Risk and Extended Warranty 24,444 126.1 % 49,230 118.8 % (24,786) (50.3) % Total AmTrust Reinsurance $ 19,383 100.0 % $ 41,447 100.0 % $ (22,064) (53.2) % Net Loss and LAE — Net loss and LAE increased by $7.5 million or 308.0% and decreased by $17.1 million or 79.8% for the three and nine months ended September 30, 2021, respectively, compared to the same respective periods in 2020 due to the impact of favorable prior year loss development of $3.7 million and $21.1 million, respectively. Net loss and LAE ratios increased to 132.6% and decreased to 22.3% for the three and nine months ended September 30, 2021, respectively, compared to 18.8% and 51.8% for the same respective periods in 2020. During the three months ended September 30, 2021, the net loss and LAE ratio increased by 113.8 percentage points compared to the same period in 2020. The impact of favorable prior year loss development of $3.7 million was 49.0 percentage points on the loss ratio during the three months ended September 30, 2021 compared to favorable prior year development of $7.7 million or 59.5 points in 2020. Prior year favorable development in 2021 was primarily driven by Workers Compensation and Commercial Auto Liability. Prior year favorable development in 2020 was primarily due to Workers Compensation partly offset by adverse development within Commercial Auto and General Liability programs. Excluding the impact of favorable development in both respective periods, the current year loss ratio was 181.6% for the three months ended September 30, 2021 compared to 78.3% in 2020 due to higher loss ratios on the run-off of unearned premium for terminated reinsurance contracts. During the nine months ended September 30, 2021, the net loss and LAE ratio decreased by 29.5 points compared to the nine months ended in 2020 due to the impact of favorable prior year loss development of $21.1 million or 108.9 points in 2021 compared to favorable prior year development of $8.1 million or 19.6 points in 2020. Prior year favorable development in 2021 was primarily due to favorable Workers Compensation and Commercial Auto Liability development partly offset by adverse development within Hospital Liability. Prior year favorable development in 2020 was primarily due to Workers Compensation partly offset by adverse development within Commercial General Liability programs. Excluding the impact of favorable development in both respective periods, the current year loss ratio was 131.2% for the nine months ended September 30, 2021 compared to 71.4% in 2020 due to higher loss ratios on the run-off of unearned premium for terminated reinsurance contracts. Commission and Other Acquisition Expenses — Commission and other acquisition expenses decreased by $2.6 million or 47.6% and $8.7 million or 53.8% for the three and nine months ended September 30, 2021, respectively, compared to the same respective periods in 2020 due to lower net earned premiums as a result of terminating both quota share agreements with AmTrust effective as of January 1, 2019. The commission and other acquisition expense ratios were 38.0% and 38.6% for the three and nine months ended September 30, 2021, respectively, compared to 42.0% and 39.1% for the same respective periods in 2020. General and Administrative Expenses — General and administrative expenses decreased by $0.2 million or 35.4% and $0.2 million or 8.0% for the three and nine months ended September 30, 2021, respectively, compared to the same respective periods in 2020. The general and administrative expense ratios increased to 5.4% and 9.2% for the three and nine months ended September 30, 2021, respectively, compared to 4.8% and 4.7% for the same respective periods in 2020 as a result of lower earned premiums due to terminating both quota share agreements with AmTrust as of January 1, 2019. The overall expense ratio (including commission and other acquisition expenses) decreased to 43.4% and increased to 47.8% for the three and nine months ended September 30, 2021, respectively, compared to 46.8% and 43.8% for the same respective periods in 2020. 53 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, 2021, the Company had investable assets of $1.8 billion compared to $2.3 billion as of December 31, 2020. Investable assets are the combined total of our investments, cash and cash equivalents (including restricted cash), loan to a related party and funds withheld receivable. The decline in our investable assets is primarily the result of our cessation of active reinsurance underwriting in 2018 and 2019 which subsequently results in negative operating cash flows to settle claim payments from the run-off of the liabilities from that reinsurance portfolio in 2021. 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, 2020, that was filed with the SEC on March 15, 2021. As previously indicated, Maiden Reinsurance re-domesticated from Bermuda 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 which includes: 1) the expansion of approved asset classes for investment reflecting not only Maiden Reinsurance’s solvency position but the material reduction in required capital necessary to operate its business as discussed further in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity & Capital Resources – Cash and Investments ; and 2) the purchase of affiliated securities as demonstrated in the recent preference share tender offers. The Investment Policy, as approved and as amended, maintains our established investment management and governance practices. We 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. Further, 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. Finally, while we have had limited impacts from the effects of COVID-19 on our financial condition to date, the Company's investment portfolio could be adversely impacted by unfavorable market conditions caused by the pandemic should it continue longer than anticipated. 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 as well as for capital management such as repurchasing our shares. Our business has undergone significant changes since 2018. As previously noted, the Strategic Review resulted in a series of transactions that materially reduced our balance sheet risk and 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 and investment related income will become a significantly larger portion of our total revenues. This has caused significant negative operating cash flows as we run off the AmTrust Reinsurance reserves as shown in the cash flows table further below. As noted in our Business Strategy, in November 2020, we formed GLS which will specialize in providing a full range of legacy services to small insurance entities. Effective October 1, 2020, GLS has completed its first transaction, a loss portfolio transfer transaction which includes an adverse development cover and GLS continues to develop additional opportunities consistent with its business plan. We believe the formation of GLS is highly complementary to our overall longer-term strategy and will not only enhance our profitability through both fee income and effective claims management services, but it will also increase our asset base through the addition of blocks of reserves or companies that can be successfully wound down. While the development of the GLS platform over time should further enhance our ability to pursue the asset and capital management pillars of our business strategy, we still expect the trend of negative overall cash flows to continue to reduce our asset base going forward into 2021 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 LAE. 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. The Company’s management believes its current sources of liquidity are adequate to meet its cash requirements for the next twelve months as we generally expect negative operating cash flows to be sufficiently offset by positive investing cash flows. While we continue to expect our cash flows to be sufficient to meet our cash requirements and to operate our business, our ability to execute our asset and capital management initiatives are dependent on maintaining adequate levels of unrestricted 54 liquidity and cash flows. At September 30, 2021 and December 31, 2020, unrestricted cash and cash equivalents and unrestricted fixed maturity investments were $127.5 million and $269.2 million, respectively. The decrease of $141.6 million in unrestricted cash and fixed maturity investments during 2021 was primarily the result of $132.2 million utilized for the 2021 Preference Share Repurchase Program, $37.0 million utilized for net purchases of other investments, and $37.7 million utilized for net purchases of equity method investments, and $14.3 million for interest payments on the Senior Notes, offset by $80.0 million of excess collateral released by AmTrust. Please see the related discussion on investing and financing cash flows below. The table below summarizes our operating, investing and financing cash flows for the nine months ended September 30, 2021 and 2020: For the Nine Months Ended September 30, 2021 2020 ($ in thousands) Operating activities $ (299,750) $ (447,664) Investing activities 344,206 528,677 Financing activities (128,988) (1) Effect of exchange rate changes on foreign currency cash (333) 1,605 Total (decrease) increase in cash, restricted cash and cash equivalents $ (84,865) $ 82,617 Cash Flows used in Operating Activities Cash flows used in operating activities for the nine months ended September 30, 2021 were $299.8 million compared to cash flows used in operating activities of $447.7 million for the nine months ended September 30, 2020, a decrease of $147.9 million. The operating cash flows used in operations for the nine months ended September 30, 2021 and 2020 were primarily the result of claims payments from the terminated AmTrust Quota Share and the European Hospital Liability Quota Share contracts, which produced negligible gross premiums written which were more than offset by claim payments from the run-off of existing reserves for loss and LAE under those agreements. 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 $344.2 million for the nine months ended September 30, 2021 compared to $528.7 million for the same period in 2020 due to proceeds from the sale of fixed maturity investments which were made primarily to settle claim payments during the nine months ended September 30, 2021 and 2020 as well as repurchase preference shares during the nine months ended September 30, 2021. For the nine months ended September 30, 2021, the proceeds from the sales, maturities and calls exceeded the purchases of fixed maturity securities by $418.5 million compared to net proceeds of $572.8 million for the same period in 2020. This was partly offset by $37.0 million utilized for net purchases of other investments and $37.7 million utilized for net purchases of equity method investments during the nine months ended September 30, 2021. Cash Flows from Financing Activities Cash flows used in financing activities were $129.0 million for the nine months ended September 30, 2021 due mainly to the repurchase of the Company's preference shares. During the nine months ended September 30, 2021, the Company paid $132.2 million for the repurchase of 9,075,673 preference shares pursuant to the 2021 Preference Share Repurchase Program as part of its recent capital management strategy. No dividends on common or preference shares were paid during the nine months ended September 30, 2021 and 2020. 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, 2020, that was filed with the SEC on March 15, 2021. At September 30, 2021 and December 31, 2020, restricted cash and cash equivalents and fixed maturity investments used as collateral were $0.7 billion and $1.1 billion, respectively. This collateral represents 84.5% and 80.0% of the fair value of our respective total fixed maturity investments, cash, restricted cash and cash equivalents at September 30, 2021 and December 31, 2020, respectively. Cash and Investments The investment of our funds has generally been designed to ensure safety of principal while generating current income. Accordingly, the majority of our funds are invested in liquid, investment-grade fixed income securities which are all designated as AFS at September 30, 2021. As of September 30, 2021 and December 31, 2020, our cash and investments consisted of: 55 September 30, 2021 December 31, 2020 ($ in thousands) Fixed maturities, available-for-sale, at fair value $ 772,427 $ 1,213,411 Equity securities, at fair value 1,903 — Equity method investments 75,050 39,886 Other investments 103,888 67,010 Total investments 953,268 1,320,307 Cash and cash equivalents 29,310 74,040 Restricted cash and cash equivalents 21,651 61,786 Total Investments and Cash and Cash Equivalents $ 1,004,229 $ 1,456,133 In addition to the discussion on Cash and Cash Equivalents and Fixed Maturities that follows herein, please see the " Notes to Condensed Consolidated Financial Statements (unaudited) Note 4. Investments " included under Part I Item 1 " Financial Information" of this Form 10-Q for further discussion on our AFS fixed income securities. As our insurance liabilities continue to run-off and the required capital to operate our business for regulatory purposes decreases, we have modified Maiden Reinsurance’s investment policy (which has been approved by the Vermont DFR as noted) and have expanded the range of asset classes we invest in to enhance the income and returns our investment portfolio produces. We categorize these investments as " Other Investments " and "Equity Method Investments" on our condensed consolidated balance sheets. During 2020 and 2021, under this revised investment policy, we have increased the amount of investments in these categories, and we expect to continue to increase the amounts invested therein. Under our investment policy, investments included in these categories could include, but are not limited to, privately held investments, private equities, private credit lending funds, fixed-income funds, hedge funds, equity funds, real estate (including joint ventures and limited partnerships) and other non-fixed-income investments. For further details on our other investments, in addition to the discussion of the investments herein, please see " Notes to Condensed Consolidated Financial Statements (unaudited) Note 4(b). Other Investments and Equity Method Investments" included under Part I Item 1 " Financial Information " of this Form 10-Q. Our investment performance is subject to a variety of risks, including risks related to general economic conditions, market volatility, interest rate fluctuations, foreign exchange risk, liquidity risk and credit and default risk. Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. An increase in interest rates could result in significant losses, realized or unrealized, in the value of our investment portfolio. A portion of our portfolio consists of alternative investments that subject us to restrictions on redemption, which may limit our ability to withdraw funds for some period of time after the initial investment. The values of, and returns on, such investments may also be more volatile. We believe our other investments and equity method investments portfolio provides diversification against our fixed-income investments and an opportunity for improved risk-adjusted return, however, the returns of these investments may be more volatile and we may experience significant unrealized gains or losses in any particular quarter or year. During the third quarter of 2021, we recognized $1.8 million loss in the interest of our equity method investment in hedge funds and we recognized $3.0 million in unrealized losses related to an investment in an insurtech start-up company that was acquired by a special purpose acquisition company.While we believe the returns produced by these investments will exceed our cost of capital, in particular our cost of debt capital, it is too soon to determine if the actual returns will achieve this objective and it may be an extended period of time before that determination can be made. 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. In addition, costs associated with evaluating, analyzing and monitoring these investments may require additional expenditures than traditional marketable securities. During 2021, our investment expenses associated with our alternative investments have increased significantly compared to 2020. The substantial majority of our current and planned future investments are held by Maiden Reinsurance, whose investment policy was approved by the Vermont DFR. We may utilize a portion of Maiden Reinsurance's unrestricted assets to purchase affiliated securities and, during the nine months ended September 30, 2021, we utilized $132.2 million in conjunction with the 2021 Preference Share Repurchase Program. Maiden Reinsurance has received all necessary approvals for its investment policy. Cash & Cash Equivalents At September 30, 2021, we consider the levels of cash and cash equivalents we are holding to be within our targeted ranges. During periods when interest rates experience greater volatility, we have periodically maintained more cash and cash equivalents to better assess current market conditions and opportunities within our defined risk appetite, and may do so in future periods. Fixed Maturity Investments The average yield and average duration of our fixed maturities, by asset class, and our cash and cash equivalents (restricted and unrestricted) are as follows at September 30, 2021 and December 31, 2020, respectively: 56 September 30, 2021 Original or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Average yield (1) Average duration (2) ($ in thousands) U.S. treasury bonds $ 73,485 $ 16 $ (7) $ 73,494 0.1 % 1.1 U.S. agency bonds – mortgage-backed 117,205 3,915 (103) 121,017 2.7 % 1.7 Non-U.S. government bonds 3,164 187 — 3,351 0.3 % 7.5 Asset-backed securities 204,601 930 (2,693) 202,838 1.5 % 0.6 Corporate bonds 359,380 17,787 (5,440) 371,727 2.4 % 3.1 Total fixed maturities 757,835 22,835 (8,243) 772,427 2.0 % 2.0 Cash and cash equivalents 50,961 — — 50,961 — % 0.0 Total $ 808,796 $ 22,835 $ (8,243) $ 823,388 1.9 % 1.9 December 31, 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 $ 94,468 $ 34 $ — $ 94,502 0.1 % 1.4 U.S. agency bonds – mortgage-backed 272,124 9,439 (126) 281,437 2.5 % 1.9 Non-U.S. government bonds 8,641 1,067 — 9,708 1.1 % 6.2 Asset-backed securities 184,227 1,611 (406) 185,432 2.2 % 0.7 Corporate bonds 604,463 40,904 (3,035) 642,332 2.3 % 3.1 Total fixed maturities 1,163,923 53,055 (3,567) 1,213,411 2.2 % 2.3 Cash and cash equivalents 135,826 — — 135,826 0.1 % 0.0 Total $ 1,299,749 $ 53,055 $ (3,567) $ 1,349,237 2.0 % 2.1 (1) Average yield is calculated by dividing annualized 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. During the nine months ended September 30, 2021, the yield on the 10-year U.S. Treasury bond increased by 59 basis points to 1.52%. The 10-year U.S. Treasury rate is the key risk-free determinant in the fair value of many of the fixed maturity securities in our portfolio. The U.S. Treasury yield curve experienced a material upward shift during the nine months ended September 30, 2021, reflecting concerns about potential inflation emanating from the combination of: 1) growing confidence in the U.S. economic outlook as the economic effects of the COVID-19 pandemic continue to abate; 2) enactment of additional significant fiscal stimulus legislation in the U.S.; and 3) continued accommodative monetary policy pursued by central banks globally. The movement in the market values of our fixed maturity portfolio during the nine months ended September 30, 2021 generated net unrealized losses of $34.9 million which reduced our book value per common share by $0.40 during that period. 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. Interest rate risk is the price sensitivity of a security to changes in interest rates. Credit spread risk is the price sensitivity of a security to changes in credit spreads. As noted, the fair value of our fixed maturity investments will fluctuate with changes in interest rates and credit spreads. We attempt to maintain adequate liquidity in our fixed maturity investments portfolio with a strategy designed to emphasize the preservation of our invested assets and provide sufficient liquidity for the prompt payment of claims and contract liabilities. Because we collateralize a significant portion of our insurance liabilities, unanticipated or large increases in interest rates could require us to utilize significant amounts of unrestricted cash and fixed maturity securities to provide additional collateral, which could impact our asset and capital management strategy described herein. We also monitor the duration and structure of our investment portfolio as discussed below. As of September 30, 2021, the aggregate hypothetical change in fair value from an immediate 100 basis points increase in interest rates, assuming credit spreads remain constant, in our fixed maturity investments portfolio would decrease the fair value of that portfolio by $24.3 million. Actual shifts in interest rates may not change by the same magnitude across the maturity spectrum or on an individual security and, as a result, the impact on the fair value of our fixed maturity securities may be materially different from the resulting change in value described above. 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. At September 30, 2021 and December 31, 2020, these respective durations in years were as follows: 57 September 30, 2021 December 31, 2020 Fixed maturities and cash and cash equivalents 1.9 2.1 Reserve for loss and LAE (1) 4.0 3.9 (1) The duration regarding our reserve for loss and LAE at September 30, 2021 is gross of LPT/ADC Agreement reserves. On a net basis, the duration of our reserve for loss and LAE is 1.2 years at September 30, 2021 (December 31, 2020 - 0.9 years). During the nine months ended September 30, 2021, the weighted average duration of our fixed maturity investment portfolio decreased 0.2 years to 1.9 years while the duration for the reserve for loss and LAE increased by 0.1 years to 4.0 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, 2021, the duration of our loss reserves net of the LPT/ADC Agreement was lower than the duration of our fixed maturity investment portfolio. At September 30, 2021 and December 31, 2020, 100.0% of the Company’s U.S. agency bond holdings are mortgage-backed. Additional details on the Agency MBS holdings at September 30, 2021 and December 31, 2020 were as follows: September 30, 2021 December 31, 2020 ($ in thousands) Fair Value % of Total Fair Value % of Total FNMA – fixed rate $ 59,734 49.4 % $ 119,910 42.6 % FHLMC – fixed rate 57,290 47.3 % 138,733 49.3 % GNMA – variable rate 3,993 3.3 % 5,409 1.9 % GNMA – fixed rate — — % 17,385 6.2 % Total U.S. agency bonds $ 121,017 100.0 % $ 281,437 100.0 % Agency MBS bonds comprise 15.7% of our fixed maturity investments at September 30, 2021. Given their relative size 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, 2021 and December 31, 2020, 97.0% and 96.1%, 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. 58 The security holdings by sector and financial strength rating of our corporate bond holdings at September 30, 2021 and December 31, 2020 were as follows: Ratings (1) September 30, 2021 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 — % 1.6 % 1.1 % — % $ 10,222 2.7 % Communications — % 1.6 % 3.2 % — % 17,857 4.8 % Consumer — % 4.7 % 26.2 % 3.1 % 126,064 34.0 % Energy — % 10.9 % 4.7 % — % 57,926 15.6 % Financial Institutions 2.3 % 19.1 % 13.5 % 1.7 % 136,359 36.6 % Industrials — % 0.6 % 0.8 % 1.4 % 10,358 2.8 % Technology — % 2.5 % 1.0 % — % 12,941 3.5 % Total 2.3 % 41.0 % 50.5 % 6.2 % $ 371,727 100.0 % Ratings (1) December 31, 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 — % 1.0 % 1.4 % — % $ 15,637 2.4 % Communications — % 1.0 % 4.6 % 1.6 % 46,167 7.2 % Consumer — % 2.0 % 21.7 % 1.8 % 164,033 25.5 % Energy 2.5 % 6.3 % 3.0 % 2.2 % 89,984 14.0 % Financial Institutions 7.2 % 23.8 % 13.0 % 1.0 % 288,649 45.0 % Industrials — % 0.9 % 1.2 % 0.8 % 18,494 2.9 % Technology — % 2.4 % 0.6 % — % 19,368 3.0 % Total 9.7 % 37.4 % 45.5 % 7.4 % $ 642,332 100.0 % (1) Ratings as assigned by S&P, or equivalent The table below includes the Company’s ten largest corporate holdings at fair value and as a percentage of all fixed income securities held as at September 30, 2021. As of September 30, 2021, 55.4% are U.S. dollar denominated and 44.6% are Euro denominated, 39.4% are in the Consumer Sector and 30.6% are in the Financial Institutions sector. September 30, 2021 Fair Value % of Holdings Rating (1) ($ in thousands) Electricite de France, 4.625%, Due 9/11/2024 $ 17,020 2.2 % A- Brookfield Asset Management Inc., 4.00% Due 1/15/2025 13,034 1.7 % A- Nordea Bank ABP, 0.875% Due 6/26/2023 12,878 1.7 % A Bayer US Finance LLC, 3.375% Due 10/8/2024 12,781 1.6 % BBB Anheuser-Busch INBEV NV, 2.875% Due 9/25/2024 12,646 1.6 % BBB+ Carlsberg Breweries A/S, 2.5%, Due 5/28/2024 12,330 1.6 % BBB Deutsche Bank AG (NY Branch), 3.7%, Due 5/30/2024 11,710 1.5 % BBB Total Energies Capital International SA, 3.75%, Due 4/10/2024 10,779 1.4 % A+ Thompson Reuters Corp, 4.3% Due 11/23/23 10,650 1.4 % BBB International Business Machines Corp., 7.0%, Due 10/30/2025 9,106 1.2 % A- Total $ 122,934 15.9 % (1) Ratings as assigned by S&P, or equivalent 59 At September 30, 2021 and December 31, 2020, respectively, we held the following non-U.S. dollar denominated securities: September 30, 2021 December 31, 2020 ($ in thousands) Fair Value % of Total Fair Value % of Total Non-U.S. dollar denominated corporate bonds $ 220,381 68.7 % $ 349,231 97.3 % Non-U.S. dollar denominated asset-backed securities 96,888 30.2 % — — % Non-U.S. government bonds 3,351 1.1 % 9,708 2.7 % Total non-U.S. dollar denominated securities $ 320,620 100.0 % $ 358,939 100.0 % At September 30, 2021 and December 31, 2020, respectively, our non-U.S. dollar denominated securities were invested in the following currencies: September 30, 2021 December 31, 2020 ($ in thousands) Fair Value % of Total Fair Value % of Total Euro $ 316,756 98.8 % $ 329,447 91.8 % British Pound 3,864 1.2 % 22,861 6.4 % Canadian Dollar — — % 5,110 1.4 % All other currencies — — % 1,521 0.4 % Total non-U.S. dollar denominated securities $ 320,620 100.0 % $ 358,939 100.0 % The net decrease in non-U.S. denominated fixed maturities is primarily due to the relative depreciation of Euro denominated corporate bonds during the nine months ended September 30, 2021. At September 30, 2021 and December 31, 2020, all of the Company's non-U.S. government 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 at September 30, 2021 and December 31, 2020: Ratings (1) September 30, 2021 December 31, 2020 ($ in thousands) Fair Value % of Total Fair Value % of Total AAA $ — — % $ 1,277 0.4 % AA+, AA, AA- 7,106 3.2 % 31,102 8.9 % A+, A, A- 101,067 45.9 % 165,585 47.4 % BBB+, BBB, BBB- 98,770 44.8 % 137,297 39.3 % BB+ or lower 13,438 6.1 % 13,970 4.0 % Total non-U.S. dollar denominated corporate bonds $ 220,381 100.0 % $ 349,231 100.0 % (1) Ratings as assigned by S&P, or equivalent 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, 2021 and December 31, 2020, respectively. Other Investments, Equity Method Investments and Equity Securities Our alternative investments are categorized as other investments, equity method investments, and equity securities. These include private equity, private credit and hedge funds investments, investments in limited partnerships, as well as investments in direct lending entities and investments in technology-oriented insurance related businesses known as insurtechs. Private equity investments consist of direct investments in privately held entities, investments in private equity funds and private equity co-investments with sponsoring entities. Private credit investments consist of loans and other debt securities of privately held entities or investment sponsors. Our allocation to alternative investments increased to 18.0% of our total cash and investments as of September 30, 2021 compared to 7.3% as of December 31, 2020; and increased to 47.2% of our total shareholders' equity as of September 30, 2021 compared to 20.3% as of December 31, 2020. For further details on other investments, see " Notes to Condensed Consolidated Financial Statements: Note 4. Investments" included under Part I Item 1. "Financial Information" of this Report on Form 10-Q. C ertain of the Company's investments in limited partnerships are related to real estate joint ventures with interests in multi-property projects with varying strategies ranging from the development of properties to the ownership of income-producing properties. In certain of these joint ventures, the Company has provided certain indemnities, guarantees and commitments to certain parties such that it may be required to make payments now or in the future. For further details on these financial guarantees, please see " Notes to Condensed Consolidated Financial Statements: Note 11 - Commitments, Contingencies and Guarantees" included under Part I Item 1. "Financial Information" of this Report on Form 10-Q. 60 Investment Results The following table summarizes our investment results for the three and nine months ended September 30, 2021 and 2020, respectively: For the Three Months Ended September 30, For the Nine Months Ended September 30, Net investment income: 2021 2020 2021 2020 Fixed income assets (1) $ 8,042 $ 12,514 $ 26,074 $ 44,887 Cash and restricted cash (5) 55 11 710 Other investments, including equities 382 493 602 493 Less: Investment expenses (942) (376) (2,091) (1,131) Total net investment income 7,477 12,686 24,596 44,959 Net realized gains: Fixed income assets (1) 1,791 3,948 5,794 23,938 Other investments, including equities 274 339 1,316 262 Total net realized gains 2,065 4,287 7,110 24,200 Net unrealized (losses) gains: Other investments, including equities (3,002) — 903 — Total net unrealized (losses) gains (3,002) — 903 — Interest in (loss) income of equity method investment: Interest in (loss) income of equity method investments (810) (154) 4,912 (154) Total interest in (loss) income of equity method investments (810) (154) 4,912 (154) Total investment return included in earnings (A) $ 5,730 $ 16,819 $ 37,521 $ 69,005 Other comprehensive income (loss): Unrealized (losses) gains on AFS and Equity Method Investments excluding foreign exchange (B) $ (9,066) $ 234 $ (26,453) $ (8,919) Total investment return = (A) + (B) $ (3,336) $ 17,053 $ 11,068 $ 60,086 Annualized income from fixed income assets and cash (2) $ 32,148 $ 50,276 $ 34,780 $ 60,796 Average aggregate fixed income assets and cash, at cost (2) 1,708,297 2,356,494 1,870,686 2,521,380 Annualized investment book yield 1.9 % 2.1 % 1.9 % 2.4 % Average aggregate invested assets, at fair value (3) $ 1,896,211 $ 2,435,362 $ 2,046,594 $ 2,600,508 Investment return included in net earnings 0.3 % 0.7 % 1.8 % 2.7 % Total investment return (0.2) % 0.7 % 0.5 % 2.3 % 1. Includes AFS securities as well as funds withheld receivable, and loan to related party. 2. Average aggregate fixed income assets and cash include AFS securities, cash and restricted cash, funds withheld receivable, and loan to related party and is computed as an average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements. 3. Average aggregate invested assets include all investments (AFS and alternative investments), cash and restricted cash, loan to related party and funds withheld receivable and is computed as an average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements. 61 Other Balance Sheet Changes The following table summarizes our other material balance sheet changes at September 30, 2021 and December 31, 2020: ($ in thousands) September 30, 2021 December 31, 2020 Change Change % Reinsurance balances receivable, net $ 19,788 $ 5,777 $ 14,011 242.5 % Reinsurance recoverable on unpaid losses 561,627 592,571 (30,944) (5.2) % Deferred commission and other acquisition expenses 40,242 51,903 (11,661) (22.5) % Reserve for loss and LAE 1,567,526 1,893,299 (325,773) (17.2) % Unearned premiums 110,071 144,271 (34,200) (23.7) % Deferred gain on retroactive reinsurance 50,645 74,941 (24,296) (32.4) % Accrued expenses and other liabilities 72,424 53,002 19,422 36.6 % The Company's deferred commission and other acquisition expenses decreased by 22.5% and unearned premiums decreased by 23.7% 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 as of January 1, 2019. Reinsurance balances receivable increased by 242.5% primarily due to $17.8 million of premiums receivable not yet due from European Hospital Liability Quota Share that was recognized during the third quarter of 2021. Accrued expenses and other liabilities increased by 36.6% as at September 30, 2021 compared to December 31, 2020 due to reinsurance balances payable as a result of claims incurred under the run-off of AmTrust reinsurance contracts. The Company's reserve for loss and LAE decreased by 17.2% primarily due to the payment of prior year loss claims as well as favorable loss development recognized for the AmTrust Reinsurance segment. The decrease in the deferred gain on retroactive reinsurance for the nine months ended September 30, 2021 by 32.4% is attributable to $24.3 million in loss and LAE recognized as favorable loss development in the Company’s GAAP income statement that are covered by the LPT/ADC Agreement. This also impacted the reinsurance recoverable on unpaid losses which decreased by $30.9 million or 5.2% as at September 30, 2021 compared to December 31, 2020. Capital Resources Capital resources consist of funds deployed in support of our operations. In the nine months ended September 30, 2021, our total capital resources decreased by $144.6 million, or 18.3% compared to December 31, 2020 primarily due to repurchases of our preference shares and unrealized losses on our fixed maturity investment portfolio partially offset by net income attributable to common shareholders. During the three months ended September 30, 2021, book value per common share decreased by 3.1% to $2.50 and diluted book value per common share decreased by 3.1% to $2.48, compared to June 30, 2021. This was largely due to a net loss of $3.1 million and net decrease in AOCI of $10.6 million during the three months ended September 30, 2021, which was partially offset by the gain of $6.0 million on the 2021 Preference Share Repurchase Program during the third quarter. During the nine months ended September 30, 2021, book value per common share increased by 59.2% to $2.50 and diluted book value per common share increased by 60.0% to $2.48, compared to December 31, 2020. This was primarily due to the gain of $87.2 million on the 2021 Preference Share Repurchase Program which increased book value by $1.01 per common share. Book value also increased due to net income of $14.3 million during the nine months ended September 30, 2021, partially offset by a net decrease in AOCI of $28.7 million for the nine months ended September 30, 2021. The following table shows the movement in total capital resources at September 30, 2021 and December 31, 2020: ($ in thousands) September 30, 2021 December 31, 2020 Change Change % Preference shares $ 167,418 $ 394,310 $ (226,892) (57.5) % Common shareholders' equity 215,756 133,506 82,250 61.6 % Total shareholders' equity 383,174 527,816 (144,642) (27.4) % Senior Notes - principal amount 262,500 262,500 — — % Total capital resources $ 645,674 $ 790,316 $ (144,642) (18.3) % The net decrease in total capital resources was due to the decline in total shareholders' equity at September 30, 2021 which decreased by $144.6 million, or 27.4% compared to December 31, 2020 due to the following: • net decrease of $132.2 million from the 2021 Preference Share Repurchase Program composed of a decline in preference share capital of $226.9 million partly offset by: (1) a gain on repurchase of preference shares of $87.2 million for the nine months ended September 30, 2021 which increased retained earnings; and (2) a net increase in additional paid-in capital of $7.5 million relating to proportionate share in issuance costs of preference shares repurchased, which was previously recognized as a reduction in additional paid-in capital; 62 • net decrease in AOCI of $28.7 million which arose due to: (1) net unrealized losses on investment of $42.3 million resulting largely from the net decrease in the fair value of $34.9 million for our fixed income investment portfolio relating to market price movements due to rising interest rates during the nine months ended September 30, 2021 and $7.5 million related to equity method investments; less (2) an increase in cumulative translation adjustments of $13.6 million due to the strengthening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in euro during the nine months ended September 30, 2021; partly offset by: • net income attributable to Maiden of $14.3 million for the nine months ended September 30, 2021; and • net increase due to share-based compensation of $2.0 million. Please refer to " Notes to Consolidated Financial Statements Note 13. Shareholders' Equity " included under Part II Item 8. " Financial Statements and Supplementary Data" of our Annual Report on Form 10-K for a discussion of the equity instruments issued by the Company as at December 31, 2020. Book value and diluted book value per common share at September 30, 2021 and December 31, 2020 were computed as follows: ($ in thousands except share and per share data) September 30, 2021 December 31, 2020 Ending common shareholders’ equity $ 215,756 $ 133,506 Proceeds from assumed conversion of dilutive options 10 10 Numerator for diluted book value per common share calculation $ 215,766 $ 133,516 Common shares outstanding 86,443,757 84,801,161 Shares issued from assumed conversion of dilutive options and restricted shares 510,577 1,489,064 Denominator for diluted book value per common share calculation 86,954,334 86,290,225 Book value per common share $ 2.50 $ 1.57 Diluted book value per common share 2.48 1.55 Common Shares 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, 2021, 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, 2021, the Company had a remaining authorization of $74.2 million for share repurchases. 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 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. On June 2, 2020, the Company issued a press release announcing it had regained compliance with NADSAQ’s minimum 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. Preference Shares As part of the capital management pillar of our strategy, pursuant to the cash tender offer on December 24, 2020, Maiden Reinsurance accepted for purchase (i) 545,218 shares of the Company's 8.25% Non-Cumulative Preference Shares Series A, (ii) 1,203,466 shares of the Company's 7.125% Non-Cumulative Preference Shares Series C and (iii) 1,078,911 shares of the Company's 6.7% Non-Cumulative Preference Shares Series D (collectively referred to as the "2020 Tender Offer"). The acquisition by Maiden Reinsurance of the preference shares pursuant to the tender offer was made in compliance with Maiden Reinsurance's investment policy previously approved b y the Vermont DFR. Maiden Reinsurance used unrestricted cash of $29.7 million to repurchase the preference shares pursuant to the 2020 Tender Offer. On March 3, 2021, the Company's Board approved the repurchase, including the repurchase by Maiden Reinsurance within its investment guidelines, of up to $100.0 million of the Company's preference shares. On May 6, 2021, the Company's Board of Directors approved the additional repurchase, including the repurchase by Maiden Reinsurance in accordance with its investment guidelines (as may be amended), of up to $50.0 million of the Company's preference shares from time to time at market prices in open market purchases or as may be privately negotiated. The authorizations that were approved on March 3, 2021 and May 6, 2021 are collectively referred to as the "2021 Preference Share Repurchase Program". The principal purpose of the 2020 Tender Offer and 2021 Preference Share Repurchase Program is to adjust our capital structure to reflect current operations and the amount of capital required to operate Maiden Reinsurance. The Board has not 63 declared or paid a dividend on the preference shares since the fourth quarter of 2018 and there can be no assurance that it will declare and pay dividends on the preference shares in the future. The preference shares are perpetual and there is no fixed date on which we are required to redeem or otherwise repurchase them. Please refer to "Notes to Consolidated Financial Statements - Note 6. Shareholders' Equity and Note 14. Subsequent Events" under Part 1 Item 1 "Financial Information" of this Quarterly Report on Form 10-Q for further information on our preference shares, including a summary of repurchases made of the Company's preference shares during the three and nine months ended September 30, 2021 as well as those made subsequent to September 30, 2021. The Company has a remaining authorization of $17.3 million for preference share repurchases. Senior Notes There were no changes in the Company’s Senior Notes at September 30, 2021 compared to December 31, 2020 and the Company did not enter into any short-term borrowing arrangements during the nine months ended September 30, 2021. Please refer to " Notes to Condensed Consolidated Financial Statements (unaudited) Note 7. Long Term Debt " included under Part I Item 1 " Financial Information" of this Form 10-Q for a discussion of the Company’s Senior Notes. The ratio of Debt to Total Capital Resources at September 30, 2021 and December 31, 2020 was computed as follows: ($ in thousands) September 30, 2021 December 31, 2020 Senior notes - principal amount $ 262,500 $ 262,500 Maiden shareholders’ equity 383,174 527,816 Total capital resources $ 645,674 $ 790,316 Ratio of debt to total capital resources 40.7 % 33.2 % Off-Balance Sheet Arrangements C ertain of the Company's investments in limited partnerships are related to real estate joint ventures with interests in multi-property projects with varying strategies ranging from the development of properties to the ownership of income-producing properties. In certain of these joint ventures, the Company has provided certain indemnities, guarantees and commitments to ce rtain parties such that it may be required to make payments now or in the future as further described in the " Notes to Condensed Consolidated Financial Statements (unaudited) Note 11. Commitments, Contingencies and Guarantees " included under Part I Item 1 " Financial Information" of this Form 10-Q. Any loss for which the Company could be liable would be contingent on the default of a loan by the real estate joint venture entity for which the Company provided a financial guarantee to a lender. While the Company has committed to aggregate limits as to the amount of guarantees it will provide as part of its limited partnerships, guarantees are only provided on an individual transaction basis and are subject to the terms and conditions of each transaction mutually agreed by the parties involved. The Company is not bound to such guarantees without its express authorization. As discussed above, at September 30, 2021, guarantees of $33.2 million have been provided to lenders by the Company on behalf of the real estate joint venture, however, the likelihood of the Company incurring any losses pertaining to project level financing guarantees was determined to be remote. Therefore, no liability has been accrued under ASC 450-20. 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 were $3.1 million for the three months ended September 30, 2021 compared to non-GAAP operating loss of $2.3 million for the same period in 2020. The Company's non-GAAP operating results included a non-GAAP underwriting loss of $7.3 million for the three months ended September 30, 2021 compared to an underwriting loss of $4.4 million for the same period in 2020, due to 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. The deterioration in underwriting results are due primarily to higher loss ratios on the run-off of unearned premium for terminated reinsurance contracts in the AmTrust Reinsurance segment for the three months ended September 30, 2021 as well as higher expense ratios caused by a significant decrease in earned premium. Non-GAAP operating earnings were $58.1 million for the nine months ended September 30, 2021, compared to a non-GAAP operating earnings of $2.0 million for the same period in 2020. The Company's non-GAAP operating results included a non-GAAP underwriting loss of $17.9 million for the nine months ended September 30, 2021 compared to a non-GAAP underwriting loss of $9.6 million for the same period in 2020, due to underwriting results not covered by the LPT/ADC Agreement, specifically the run-off of the AmTrust Quota Share with losses occurring after December 31, 2018 (including the additional ceding commission paid under the Partial Termination Amendment) and claims related to the European Hospital Liability Quota Share. The deterioration in underwriting results are due primarily to higher loss ratios on the run-off of 64 unearned premium for terminated reinsurance contracts in the AmTrust Reinsurance segment for the nine months ended September 30, 2021 as well as higher expense ratios caused by a significant decrease in earned premium. Non-GAAP operating (loss) earnings and Non-GAAP diluted operating (loss) earnings per share attributable to common shareholders Non-GAAP operating (loss) earnings and non-GAAP diluted operating (loss) earnings per share attributable to common shareholders can be reconciled to the nearest U.S. GAAP financial measure as follows: For the Three Months Ended September 30, 2021 2020 ($ in thousands except per share data) Net income available to Maiden common shareholders $ 2,864 $ 2,162 Add (subtract): Net realized and unrealized losses (gains) on investment 937 (4,287) Total other-than-temporary impairment losses — 962 Foreign exchange and other (gains) losses (4,116) 6,536 Interest in loss of equity method investments 810 154 Favorable prior year loss development subject to LPT/ADC Agreement (3,609) (7,840) Non-GAAP operating loss $ (3,114) $ (2,313) Diluted earnings per share attributable to common shareholders $ 0.03 $ 0.03 Add (subtract): Net realized and unrealized losses (gains) on investment 0.01 (0.05) Total other-than-temporary impairment losses — 0.01 Foreign exchange and other (gains) losses (0.05) 0.07 Interest in loss of equity method investments 0.01 — Favorable prior year loss development subject to LPT/ADC Agreement (0.04) (0.09) Non-GAAP diluted operating loss per share available to common shareholders $ (0.04) $ (0.03) For the Nine Months Ended September 30, 2021 2020 ($ in thousands except per share data) Net income available to Maiden common shareholders $ 101,426 $ 32,235 Add (subtract): Net realized and unrealized gains on investment (8,013) (24,200) Total other-than-temporary impairment losses — 2,468 Foreign exchange and other (gains) losses (6,070) 634 Favorable prior year loss development subject to LPT/ADC Agreement (24,296) (9,250) Interest in (income) loss of equity method investments (4,912) 154 Non-GAAP operating earnings $ 58,135 $ 2,041 Diluted earnings per share attributable to common shareholders $ 1.17 $ 0.38 Add (subtract): Net realized and unrealized gains on investment (0.09) (0.29) Total other-than-temporary impairment losses — 0.03 Foreign exchange and other (gains) losses (0.07) 0.01 Favorable prior year loss development subject to LPT/ADC Agreement (0.28) (0.11) Interest in (income) loss of equity method investments (0.06) — Non-GAAP diluted operating earnings per share attributable to common shareholders $ 0.67 $ 0.02 65 Non-GAAP Operating ROACE Non-GAAP Operating ROACE for the three and nine months ended September 30, 2021 and 2020 was computed as follows: For the Three Months Ended September 30, For the Nine Months Ended September 30, ($ in thousands) 2021 2020 2021 2020 Non-GAAP operating loss $ (3,114) $ (2,313) $ 58,135 $ 2,041 Opening adjusted common shareholders’ equity 277,082 177,279 208,447 155,668 Ending adjusted common shareholders’ equity 273,565 153,081 273,565 153,081 Average adjusted common shareholders’ equity 275,324 165,180 241,006 154,375 Non-GAAP Operating ROACE (4.5) % (5.6) % 32.3 % 1.8 % Non-GAAP Underwriting Results and Combined Ratio The following summarizes our non-GAAP underwriting results for the three and nine months ended September 30, 2021 and 2020: For the Three Months Ended September 30, For the Nine Months Ended September 30, ($ in thousands) 2021 2020 2021 2020 Gross premiums written $ 6,821 $ 3,517 $ 7,865 $ 20,233 Net premiums written $ 6,953 $ 3,031 $ 7,518 $ 17,493 Net premiums earned $ 15,030 $ 24,305 $ 40,106 $ 76,828 Other insurance revenue 138 261 946 919 Non-GAAP net loss and LAE (1) (14,123) (16,905) (31,842) (50,409) Commission and other acquisition expenses (6,313) (9,651) (19,154) (29,778) General and administrative expenses (1,990) (2,448) (7,975) (7,118) Non-GAAP underwriting loss (1) $ (7,258) $ (4,438) $ (17,919) $ (9,558) Ratios: Non-GAAP net loss and LAE ratio (1) 93.1 % 68.8 % 77.6 % 64.8 % Commission and other acquisition expense ratio 41.6 % 39.3 % 46.6 % 38.3 % General and administrative expense ratio 43.9 % 33.2 % 72.0 % 33.4 % Expense ratio 85.5 % 72.5 % 118.6 % 71.7 % Non-GAAP combined ratio (1) 178.6 % 141.3 % 196.2 % 136.5 % (1) Non-GAAP underwriting 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, 2021 include the impact of prior year reserve development subject to the LPT/ADC Agreement. Please see the "Key Financial Measures" section for definitions of Non-GAAP underwriting 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 $3.6 million and $24.3 million during the three and nine months ended September 30, 2021, respectively, the non-GAAP underwriting loss was $7.3 million and $17.9 million, respectively. This compared to a non-GAAP underwriting loss of $4.4 million and $9.6 million for the same respective periods in 2020 when 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 results above were due to underwriting results in the AmTrust Reinsurance 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 Reinsurance segment during the three and nine months ended September 30, 2021 and 2020 were generally stable. 66 The non-GAAP combined ratio during the three and nine months ended September 30, 2021 was 178.6% and 196.2%, respectively, compared to 141.3% and 136.5% during the same respective periods in 2020 as shown in the table below: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2021 2020 2021 2020 Combined ratio 154.8 % 109.4 % 137.0 % 124.6 % Less: Favorable prior year loss development subject to LPT/ADC Agreement (23.8) % (31.9) % (59.2) % (11.9) % Non-GAAP combined ratio 178.6 % 141.3 % 196.2 % 136.5 % Non-GAAP Net Loss and LAE 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, 2021 increased by $3.6 million and $24.3 million, respectively, as these amounts are ultimately recoverable from Cavello. In comparison, adjusted for the impact of favorable prior year loss development on AmTrust reserves subject to the LPT/ADC Agreement during the three and nine months ended September 30, 2020, the non-GAAP net loss and LAE increased by $7.8 million and $9.3 million, respectively, as these reserves are ultimately recoverable from Cavello. This adjustment is reflected in the calculation of non-GAAP Loss and LAE as shown below: For the Three Months Ended September 30, For the Nine Months Ended September 30, ($ in thousands) 2021 2020 2021 2020 Net loss and LAE $ 10,514 $ 9,065 $ 7,546 $ 41,159 Less: Favorable prior year loss development subject to LPT/ADC Agreement (3,609) (7,840) (24,296) (9,250) Non-GAAP net loss and LAE $ 14,123 $ 16,905 $ 31,842 $ 50,409 Adjusted for the impact of favorable prior year loss development on AmTrust reserves subject to the LPT/ADC Agreement of $3.6 million and $24.3 million during the three and nine months ended September 30, 2021, respectively, non-GAAP net loss and LAE was $14.1 million and $31.8 million, respectively, as shown in the table above. 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, respectively, the non-GAAP loss and LAE was $16.9 million and $50.4 million, respectively. The non-GAAP net loss and LAE ratio was 93.1% and 77.6% for the three and nine months ended September 30, 2021, respectively, compared to 68.8% and 64.8% for the same respective periods in 2020. Adjusted Shareholders' Equity, Adjusted Total Capital Resources, Adjusted Book Value per Common Share, and Ratio of Debt to Total Adjusted Capital Resources The Adjusted Shareholders' Equity, Adjusted Total Capital Resources and Adjusted Book Value per Common Share at September 30, 2021 and December 31, 2020 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 $50.6 million at September 30, 2021 and $74.9 million at December 31, 2020 arises from the LPT/ADC Agreement with Cavello relating to losses subject to that agreement which are fully recoverable from Cavello. The decrease in the unamortized deferred gain on retroactive reinsurance for the nine months ended September 30, 2021 is attributable to $24.3 million in loss and LAE recognized as favorable loss development in the Company's GAAP income statement that are subject to the LPT/ADC Agreement. We believe the inclusion of the unamortized deferred gain in these metrics better reflects the ultimate economic benefit of the LPT/ADC Agreement, which will improve the Company's shareholders' equity over the settlement period under the terms of the agreement. The Adjusted Shareholders' Equity, Adjusted Total Capital Resources and Adjusted Book Value per Common Share at September 30, 2021 also excludes the LP Investment Adjustment, which pertains to the equity accounting related to the fair value of certain hedged liabilities within an equity method investment held by the Company wherein the ultimate realizable value of the asset supporting the hedged liabilities cannot currently be recognized at fair value. We believe that this adjustment recognizes future realizable value and reflects the ultimate economic benefit of this investment which will improve the Company's shareholders' equity over the hedged contract period within the investment. 67 Reconciliation of shareholders' equity to Adjusted shareholders' equity and Adjusted Total Capital Resources The following table computes adjusted shareholders' equity and adjusted total capital resources by recognizing the unamortized deferred gain on retroactive reinsurance as well as the LP Investment Adjustment for realizable value of intangible asset in limited partnership investment at September 30, 2021 and December 31, 2020: ($ in thousands) September 30, 2021 December 31, 2020 Change Change % Preference shares $ 167,418 $ 394,310 $ (226,892) (57.5) % Common shareholders' equity 215,756 133,506 82,250 61.6 % Total shareholders' equity 383,174 527,816 (144,642) (27.4) % LP Investment Adjustment 7,164 — 7,164 NM Unamortized deferred gain on retroactive reinsurance 50,645 74,941 (24,296) (32.4) % Adjusted shareholders' equity 440,983 602,757 (161,774) (26.8) % Senior Notes - principal amount 262,500 262,500 — — % Adjusted total capital resources $ 703,483 $ 865,257 $ (161,774) (18.7) % NM - non meaningful 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 as well as the LP Investment Adjustment for realizable value of intangible asset in limited partnership investment at September 30, 2021 and December 31, 2020, was computed as follows: September 30, 2021 December 31, 2020 Book value per common share $ 2.50 $ 1.57 LP Investment Adjustment 0.08 — Unamortized deferred gain on retroactive reinsurance 0.58 0.89 Adjusted book value per common share $ 3.16 $ 2.46 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, 2021 and December 31, 2020 was computed as follows: ($ in thousands) September 30, 2021 December 31, 2020 Senior notes - principal amount $ 262,500 $ 262,500 Adjusted shareholders’ equity 440,983 602,757 Adjusted total capital resources $ 703,483 $ 865,257 Ratio of debt to adjusted total capital resources 37.3 % 30.3 % 68 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, 2021, 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 gains of $4.1 million and $6.3 million were generated during the three and nine months ended September 30, 2021, respectively, compared to net foreign exchange losses of $6.5 million and $0.2 million for the three and nine months ended September 30, 2020, 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, 2021, 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.