Maiden Holdings, Ltd. 10-Q

Item 1. Financial Statements MAIDEN HOLDINGS, LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands of U.S. dollars, except share and per share data) March 31, 2022 December 31, 2021 ASSETS (Unaudited) (Audited) Investments: Fixed maturities, available-for-sale, at fair value (amortized cost 2022 - $ 492,131 ; 2021 - $ 595,344 ) $ 471,230 $ 597,145 Equity securities, at fair value 48,932 44,062 Equity method investments 93,317 83,742 Other investments 108,161 97,663 Total investments 721,640 822,612 Cash and cash equivalents 36,975 26,668 Restricted cash and cash equivalents 34,911 39,419 Accrued investment income 5,282 5,695 Reinsurance balances receivable, net (includes $ 17,006 and $ 17,471 from related parties in 2022 and 2021, respectively) 18,714 19,507 Reinsurance recoverable on unpaid losses 558,262 562,845 Loan to related party 167,975 167,975 Deferred commission and other acquisition expenses (includes $ 30,417 and $ 34,170 from related parties in 2022 and 2021, respectively) 32,692 36,703 Funds withheld receivable (includes $ 600,755 and $ 601,460 from related parties in 2022 and 2021, respectively) 634,898 636,412 Other assets 4,623 4,774 Total assets $ 2,215,972 $ 2,322,610 LIABILITIES Reserve for loss and loss adjustment expenses (includes $ 1,230,236 and $ 1,338,269 from related parties in 2022 and 2021, respectively) $ 1,386,023 $ 1,489,373 Unearned premiums (includes $ 81,657 and $ 91,730 from related parties in 2022 and 2021, respectively) 88,882 100,131 Deferred gain on retroactive reinsurance 52,805 48,960 Accrued expenses and other liabilities (includes $ 49,316 and $ 29,408 from related parties in 2022 and 2021, respectively) 65,195 44,542 Senior notes - principal amount 262,500 262,500 Less: unamortized debt issuance costs 7,098 7,153 Senior notes, net 255,402 255,347 Total liabilities 1,848,307 1,938,353 Commitments and Contingencies EQUITY Preference shares 152,338 159,210 Common shares ($ 0.01 par value; 93,311,414 and 92,316,107 shares issued in 2022 and 2021, respectively; 87,058,833 and 86,467,242 shares outstanding in 2022 and 2021, respectively) 933 923 Additional paid-in capital 770,910 768,650 Accumulated other comprehensive loss ( 24,782 ) ( 12,215 ) Accumulated deficit ( 496,701 ) ( 498,295 ) Treasury shares, at cost ( 6,252,581 and 5,848,865 shares in 2022 and 2021, respectively) ( 35,033 ) ( 34,016 ) Total shareholders’ equity 367,665 384,257 Total liabilities and equity $ 2,215,972 $ 2,322,610 See accompanying notes to the unaudited Condensed Consolidated Financial Statements. 3 MAIDEN HOLDINGS, LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands of U.S. dollars, except per share data) For the Three Months Ended March 31, 2022 2021 Revenues Gross premiums written $ ( 10,170 ) $ ( 2,390 ) Net premiums written $ ( 10,323 ) $ ( 2,696 ) Change in unearned premiums 11,445 14,460 Net premiums earned 1,122 11,764 Other insurance revenue 51 269 Net investment income 6,567 9,841 Net realized and unrealized gains on investment 2,309 8,101 Total revenues 10,049 29,975 Expenses Net loss and loss adjustment expenses ( 2,283 ) 2,359 Commission and other acquisition expenses 2,528 5,942 General and administrative expenses 10,886 13,997 Interest and amortization expenses 4,832 4,831 Foreign exchange and other gains ( 3,949 ) ( 3,542 ) Total expenses 12,014 23,587 (Loss) income before income taxes and interest in income of equity method investments ( 1,965 ) 6,388 Less: income tax expense 1,255 49 Add: Interest in income of equity method investments 1,271 2,947 Net (loss) income ( 1,949 ) 9,286 Gain from repurchase of preference shares 3,543 62,450 Net income available to Maiden common shareholders $ 1,594 $ 71,736 Basic and diluted earnings per share attributable to common shareholders $ 0.02 $ 0.83 Weighted average number of common shares - basic 86,547,173 85,132,939 Adjusted weighted average number of common shares and assumed conversions - diluted 86,550,815 85,136,888 See accompanying notes to the unaudited Condensed Consolidated Financial Statements. 4 MAIDEN HOLDINGS, LTD. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (in thousands of U.S. dollars) For the Three Months Ended March 31, 2022 2021 Net (loss) income $ ( 1,949 ) $ 9,286 Other comprehensive loss Net unrealized holdings losses on fixed maturity investments arising during period ( 17,464 ) ( 19,531 ) Net unrealized holdings gains (losses) on equity method investments arising during period 4,414 ( 1,012 ) Adjustment for reclassification of net realized gains recognized in net income ( 5,238 ) ( 4,246 ) Foreign currency translation adjustment 5,592 10,146 Other comprehensive loss, before tax ( 12,696 ) ( 14,643 ) Income tax benefit related to components of other comprehensive loss 129 37 Other comprehensive loss, after tax ( 12,567 ) ( 14,606 ) Comprehensive loss $ ( 14,516 ) $ ( 5,320 ) See accompanying notes to the unaudited Condensed Consolidated Financial Statements. 5 MAIDEN HOLDINGS, LTD. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (in thousands of U.S. dollars) For the Three Months Ended March 31, 2022 2021 Preference shares - Series A, C and D Beginning balance $ 159,210 $ 394,310 Repurchase of Preference Shares – Series A — ( 64,041 ) Repurchase of Preference Shares – Series C ( 4,500 ) ( 50,724 ) Repurchase of Preference Shares – Series D ( 2,372 ) ( 50,597 ) Ending balance 152,338 228,948 Common shares Beginning balance 923 898 Issuance of common shares from vesting of stock based compensation 10 22 Ending balance 933 920 Additional paid-in capital Beginning balance 768,650 756,122 Issuance of common shares from vesting of stock based compensation ( 10 ) ( 22 ) Share-based compensation expense 2,040 4,033 Repurchase of Preference Shares 230 5,519 Cash settlement of restricted shares granted — ( 65 ) Ending balance 770,910 765,587 Accumulated other comprehensive (deficit) income Beginning balance ( 12,215 ) 23,857 Change in net unrealized losses on investment ( 18,159 ) ( 24,752 ) Foreign currency translation adjustment 5,592 10,146 Ending balance ( 24,782 ) 9,251 Accumulated deficit Beginning balance ( 498,295 ) ( 615,837 ) Cash settlement of restricted shares granted — ( 101 ) Net (loss) income ( 1,949 ) 9,286 Gain on repurchase of preference shares 3,543 62,450 Ending balance ( 496,701 ) ( 544,202 ) Treasury shares Beginning balance ( 34,016 ) ( 31,534 ) Shares repurchased ( 1,017 ) ( 2,359 ) Ending balance ( 35,033 ) ( 33,893 ) Total shareholders' equity $ 367,665 $ 426,611 See accompanying notes to the unaudited Condensed Consolidated Financial Statements. 6 MAIDEN HOLDINGS, LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of U.S. dollars) For the Three Months Ended March 31, 2022 2021 Cash flows from operating activities Net (loss) income $ ( 1,949 ) $ 9,286 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation, amortization and share-based compensation 2,075 5,003 Interest in income of equity method investments ( 1,271 ) ( 2,947 ) Net realized and unrealized gains on investment ( 2,309 ) ( 8,101 ) Foreign exchange and other gains ( 3,949 ) ( 3,542 ) Changes in assets – (increase) decrease: Reinsurance balances receivable, net 1,456 15,716 Reinsurance recoverable on unpaid losses 3,531 2,003 Accrued investment income 359 1,898 Deferred commission and other acquisition expenses 4,071 4,979 Funds withheld receivable 449 3,110 Other assets 105 ( 849 ) Changes in liabilities – increase (decrease): Reserve for loss and loss adjustment expenses ( 92,843 ) ( 92,300 ) Unearned premiums ( 11,452 ) ( 15,188 ) Deferred gain on retroactive reinsurance 5,184 — Accrued expenses and other liabilities 20,465 ( 21,886 ) Net cash used in operating activities ( 76,078 ) ( 102,818 ) Cash flows from investing activities: Purchases of fixed maturities ( 12,963 ) ( 41,181 ) Purchases of other investments ( 9,127 ) — Purchases of equity method investments ( 27,979 ) ( 281 ) Purchases of equity securities ( 5,363 ) ( 8,083 ) Proceeds from sales of fixed maturities 101,604 153,816 Proceeds from maturities, paydowns and calls of fixed maturities 15,482 92,421 Proceeds from sale and redemption of other investments 409 126 Proceeds from sale and redemption of equity method investments 24,090 1,917 Proceeds from sale and redemption of equity securities — 441 Others, net ( 28 ) ( 6 ) Net cash provided by investing activities 86,125 199,170 Cash flows from financing activities: Repurchase of common shares ( 794 ) ( 2,359 ) Repurchase of preference shares ( 3,099 ) ( 97,393 ) Cash settlement of restricted shares granted — ( 166 ) Net cash used in financing activities ( 3,893 ) ( 99,918 ) Effect of exchange rate changes on foreign currency cash, restricted cash and equivalents ( 355 ) ( 1,106 ) Net increase (decrease) in cash, restricted cash and cash equivalents 5,799 ( 4,672 ) Cash, restricted cash and cash equivalents, beginning of period 66,087 135,826 Cash, restricted cash and cash equivalents, end of period $ 71,886 $ 131,154 Reconciliation of cash and restricted cash reported within Condensed Consolidated Balance Sheets: Cash and cash equivalents, end of period $ 36,975 $ 78,116 Restricted cash and cash equivalents, end of period 34,911 53,038 Total cash, restricted cash and cash equivalents, end of period $ 71,886 $ 131,154 See accompanying notes to the unaudited Condensed Consolidated Financial Statements. 7 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 1. Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Maiden Holdings, Ltd. ("Parent Company" or "Maiden Holdings") and its subsidiaries (the "Company" or "Maiden"). They have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. All significant intercompany transactions and accounts have been eliminated. These interim unaudited Condensed Consolidated Financial Statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim period and all such adjustments are of a normal recurring nature. The results of operations for the interim period are not necessarily indicative, if annualized, of those to be expected for the full year. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. These unaudited Condensed Consolidated Financial Statements, including these notes, should be read in conjunction with the Company's audited Consolidated Financial Statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. Certain prior year comparatives have been reclassified to conform to the current year presentation. The effect of these reclassifications had no impact on previously reported shareholders' equity or net income. Maiden creates shareholder value by actively managing and allocating our assets and capital, including through ownership and management of businesses and assets primarily in the insurance and related financial services industries where we can leverage our deep knowledge of those markets. We are currently underwriting reinsurance risks on a retroactive basis through our indirect wholly owned subsidiary Genesis Legacy Solutions ("GLS") which provides 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. GLS works with clients to develop and implement finality solutions including acquiring entire companies that enable our clients to meet their capital and risk management objectives. We expect this legacy solutions business to contribute to our active asset and capital management strategies. The Company does not presently underwrite prospective reinsurance risks. 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 by our wholly owned subsidiary services company, 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 the European Union ("EU") and other global markets. These products also produced reinsurance programs which were underwritten by our wholly owned subsidiary Maiden Reinsurance Ltd. (“Maiden Reinsurance”). We also have various historic reinsurance programs underwritten by Maiden Reinsurance which are in run-off, including the liabilities associated with AmTrust Financial Services, Inc. ("AmTrust") reinsurance agreements which were terminated in 2019 as discussed in "Note 10. Related Party Transactions" . In addition, we have a retroactive reinsurance agreement and a commutation agreement that further reduces our exposure and limits the potential volatility related to AmTrust liabilities, which are discussed in " Note 8. Reinsurance ". Please see the Company's audited Consolidated Financial Statements, and related notes thereto, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 for further details. Genesis Legacy Solutions Effective October 1, 2021, GLS 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. GLS and its subsidiaries have completed additional transactions in the first quarter of 2022, and as of March 31, 2022, GLS and its subsidiaries have insurance related liabilities totaling $ 37,120 which included total reserves of $ 29,175 and deferred gain on retroactive reinsurance of $ 7,945 . 2. Significant Accounting Policies There have been no material changes to the significant accounting policies as described in the Company's Annual Report on Form 10-K for the year ended December 31, 2021. 8 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 3. Segment Information The Company currently has 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. This segment also includes transactions entered into by GLS which was formed in November 2020 as described in " Note 1. Basis of Presentation. 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. Please refer to "Note 10. Related Party Transactions" for additional information regarding the AmTrust Reinsurance segment. The Company evaluates segment performance based on segment profit separately from the results of our investment portfolio. General and administrative expenses are allocated to the segments on an actual basis except salaries and benefits where management’s judgment is applied; however, general corporate expenses are not allocated to the segments. In determining total assets by reportable segment, the Company identifies those assets that are attributable to a particular segment such as reinsurance balances receivable, reinsurance recoverable on unpaid losses, deferred commission and other acquisition expenses, funds withheld receivable, loan to related party and restricted cash and investments. All remaining assets are allocated to Corporate. The following tables summarize the underwriting results of our reportable segments and the reconciliation of our reportable segments' underwriting results to consolidated net income: For the Three Months Ended March 31, 2022 Diversified Reinsurance AmTrust Reinsurance Total Gross premiums written $ 4,736 $ ( 14,906 ) $ ( 10,170 ) Net premiums written $ 4,583 $ ( 14,906 ) $ ( 10,323 ) Net premiums earned $ 5,955 $ ( 4,833 ) $ 1,122 Other insurance revenue 51 — 51 Net loss and LAE 1,360 923 2,283 Commission and other acquisition expenses ( 3,771 ) 1,243 ( 2,528 ) General and administrative expenses ( 2,098 ) ( 485 ) ( 2,583 ) Underwriting income (loss) $ 1,497 $ ( 3,152 ) ( 1,655 ) Reconciliation to net loss Net investment income and net realized and unrealized investment gains 8,876 Interest and amortization expenses ( 4,832 ) Foreign exchange and other gains, net 3,949 Other general and administrative expenses ( 8,303 ) Income tax expense ( 1,255 ) Interest in income of equity method investments 1,271 Net loss $ ( 1,949 ) 9 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 3. Segment Information (continued) For the Three Months Ended March 31, 2021 Diversified Reinsurance AmTrust Reinsurance Total Gross premiums written $ 72 $ ( 2,462 ) $ ( 2,390 ) Net premiums written $ ( 234 ) $ ( 2,462 ) $ ( 2,696 ) Net premiums earned $ 6,240 $ 5,524 $ 11,764 Other insurance revenue 269 — 269 Net loss and LAE ( 1,415 ) ( 944 ) ( 2,359 ) Commission and other acquisition expenses ( 3,755 ) ( 2,187 ) ( 5,942 ) General and administrative expenses ( 1,574 ) ( 603 ) ( 2,177 ) Underwriting (loss) income $ ( 235 ) $ 1,790 1,555 Reconciliation to net income Net investment income and net realized and unrealized investment gains 17,942 Interest and amortization expenses ( 4,831 ) Foreign exchange and other gains, net 3,542 Other general and administrative expenses ( 11,820 ) Income tax expense ( 49 ) Interest in income from equity method investments 2,947 Net income $ 9,286 The following tables summarize the financial position of the Company's reportable segments including the reconciliation to the Company's consolidated total assets at March 31, 2022 and December 31, 2021: March 31, 2022 Diversified Reinsurance AmTrust Reinsurance Total Total assets - reportable segments $ 126,905 $ 1,686,992 $ 1,813,897 Corporate assets — — 402,075 Total Assets $ 126,905 $ 1,686,992 $ 2,215,972 December 31, 2021 Diversified Reinsurance AmTrust Reinsurance Total Total assets - reportable segments $ 126,116 $ 1,810,940 $ 1,937,056 Corporate assets — — 385,554 Total Assets $ 126,116 $ 1,810,940 $ 2,322,610 10 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 3. Segment Information (continued) The following tables set forth financial information relating to net premiums written by major line of business and reportable segment for the three months ended March 31, 2022 and 2021: For the Three Months Ended March 31, 2022 2021 Net premiums written Total % of Total Total % of Total Diversified Reinsurance International $ 4,583 ( 44.4 ) % $ ( 244 ) 9.1 % Other — — % 10 ( 0.4 ) % Total Diversified Reinsurance 4,583 ( 44.4 ) % ( 234 ) 8.7 % AmTrust Reinsurance Small Commercial Business ( 11,722 ) 113.5 % ( 2,478 ) 91.9 % Specialty Program 837 ( 8.1 ) % ( 25 ) 0.9 % Specialty Risk and Extended Warranty ( 4,021 ) 39.0 % 41 ( 1.5 ) % Total AmTrust Reinsurance ( 14,906 ) 144.4 % ( 2,462 ) 91.3 % Total Net Premiums Written $ ( 10,323 ) 100.0 % $ ( 2,696 ) 100.0 % The following tables set forth financial information relating to net premiums earned by major line of business and reportable segment for the three months ended March 31, 2022 and 2021: For the Three Months Ended March 31, 2022 2021 Net premiums earned Total % of Total Total % of Total Diversified Reinsurance International $ 5,955 530.7 % $ 6,230 53.0 % Other — — % 10 0.1 % Total Diversified Reinsurance 5,955 530.7 % 6,240 53.1 % AmTrust Reinsurance Small Commercial Business ( 11,710 ) ( 1,043.6 ) % ( 2,351 ) ( 20.0 ) % Specialty Program 838 74.7 % ( 18 ) ( 0.2 ) % Specialty Risk and Extended Warranty 6,039 538.2 % 7,893 67.1 % Total AmTrust Reinsurance ( 4,833 ) ( 430.7 ) % 5,524 46.9 % Total Net Premiums Earned $ 1,122 100.0 % $ 11,764 100.0 % 11 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 4. Investments The Company holds: (i) available-for-sale ("AFS") portfolios of fixed maturity and equity securities, carried at fair value; (ii) other investments, of which certain investments are carried at fair value and investments in direct lending entities are carried at cost less impairment; (iii) equity method investments; and (iv) funds held - directly managed. a) Fixed Maturities The amortized cost, gross unrealized gains and losses, and fair value of fixed maturities at March 31, 2022 and December 31, 2021 are as follows: March 31, 2022 Original or amortized cost Gross unrealized gains Gross unrealized losses Fair value U.S. treasury bonds $ 66,109 $ 1 $ ( 380 ) $ 65,730 U.S. agency bonds – mortgage-backed 85,607 75 ( 2,293 ) 83,389 Collateralized mortgage-backed securities 7,199 — ( 80 ) 7,119 Non-U.S. government bonds 3,160 — ( 151 ) 3,009 Collateralized loan obligations 174,842 22 ( 9,104 ) 165,760 Corporate bonds 155,214 1,668 ( 10,659 ) 146,223 Total fixed maturity investments $ 492,131 $ 1,766 $ ( 22,667 ) $ 471,230 December 31, 2021 Original or amortized cost Gross unrealized gains Gross unrealized losses Fair value U.S. treasury bonds $ 59,989 $ — $ ( 110 ) $ 59,879 U.S. agency bonds – mortgage-backed 96,554 2,429 ( 193 ) 98,790 Collateralized mortgage-backed securities 14,972 565 — 15,537 Non-U.S. government bonds 3,163 113 — 3,276 Collateralized loan obligations 183,974 140 ( 5,093 ) 179,021 Corporate bonds 236,692 10,094 ( 6,144 ) 240,642 Total fixed maturity investments $ 595,344 $ 13,341 $ ( 11,540 ) $ 597,145 The contractual maturities of our fixed maturities are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. March 31, 2022 Amortized cost Fair value Due in one year or less $ 73,590 $ 72,518 Due after one year through five years 129,427 122,915 Due after five years through ten years 21,466 19,529 224,483 214,962 U.S. agency bonds – mortgage-backed 85,607 83,389 Collateralized mortgage-backed securities 7,199 7,119 Collateralized loan obligations 174,842 165,760 Total fixed maturity investments $ 492,131 $ 471,230 12 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 4. Investments (continued) The following tables summarize fixed maturities in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position: Less than 12 Months 12 Months or More Total March 31, 2022 Fair value Unrealized losses Fair value Unrealized losses Fair value Unrealized losses U.S. treasury bonds $ 58,613 $ ( 347 ) $ 2,117 $ ( 33 ) $ 60,730 $ ( 380 ) U.S. agency bonds – mortgage-backed 74,447 ( 1,906 ) 3,661 ( 387 ) 78,108 ( 2,293 ) Collateralized mortgage-backed securities 7,119 ( 80 ) — — 7,119 ( 80 ) Non-U.S. government bonds 3,009 ( 151 ) — — 3,009 ( 151 ) Collateralized loan obligations 156,371 ( 9,058 ) 5,055 ( 46 ) 161,426 ( 9,104 ) Corporate bonds 52,593 ( 2,610 ) 49,920 ( 8,049 ) 102,513 ( 10,659 ) Total temporarily impaired fixed maturities $ 352,152 $ ( 14,152 ) $ 60,753 $ ( 8,515 ) $ 412,905 $ ( 22,667 ) At March 31, 2022, there were 109 securities in an unrealized loss position with a fair value of $ 412,905 and unrealized losses of $ 22,667 . Of these securities in an unrealized loss position, there were 13 securities in our portfolio that have been in an unrealized loss position for twelve months or greater with a fair value of $ 60,753 and unrealized losses of $ 8,515 . Less than 12 Months 12 Months or More Total December 31, 2021 Fair value Unrealized losses Fair value Unrealized losses Fair value Unrealized losses U.S. treasury bonds $ 59,879 $ ( 110 ) $ — $ — $ 59,879 $ ( 110 ) U.S. agency bonds – mortgage-backed 4,415 ( 193 ) — — 4,415 ( 193 ) Collateralized loan obligations 117,148 ( 5,057 ) 5,064 ( 36 ) 122,212 ( 5,093 ) Corporate bonds 38,537 ( 2,775 ) 27,852 ( 3,369 ) 66,389 ( 6,144 ) Total temporarily impaired fixed maturities $ 219,979 $ ( 8,135 ) $ 32,916 $ ( 3,405 ) $ 252,895 $ ( 11,540 ) At December 31, 2021, there were 44 securities in an unrealized loss position with a fair value of $ 252,895 and unrealized losses of $ 11,540 . Of these securities in an unrealized loss position, there were 8 securities in our portfolio that have been in an unrealized loss position for twelve months or greater with a fair value of $ 32,916 and unrealized losses of $ 3,405 . Other-than-temporarily impaired ("OTTI") The Company performs quarterly reviews of its fixed maturities in order to determine whether declines in fair value below the amortized cost basis were considered other-than-temporary in accordance with applicable guidance. At March 31, 2022, we determined that unrealized losses on fixed maturities were primarily due to changes in interest rates as well as the impact of foreign exchange rate changes on certain foreign currency denominated fixed maturities since their date of purchase. All fixed maturity securities continue to pay the expected coupon payments under the contractual terms of the securities. Any credit-related impairment related to fixed maturity securities that the Company does not intend to sell or is not more likely than not that the Company will be required to sell before its anticipated recovery of their amortized cost basis is recognized in net income, with the non-credit related impairment recognized in comprehensive income. Based on the Company's analysis, our fixed maturity portfolio is of high credit quality and we believe the amortized cost basis of the securities will ultimately be recovered. The Company continually monitors the credit quality of the fixed maturity investments to assess if it is probable that it will receive contractual or estimated cash flows in the form of principal and interest. There was no impairment recorded for the three months ended March 31, 2022 and 2021, respectively. 13 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 4. Investments (continued) The following tables summarize the credit ratings of our fixed maturities as at March 31, 2022 and December 31, 2021: March 31, 2022 Amortized cost Fair value % of Total fair value U.S. treasury bonds $ 66,109 $ 65,730 13.9 % U.S. agency bonds 85,607 83,389 17.7 % AAA 147,966 138,999 29.5 % AA+, AA, AA- 35,298 34,864 7.4 % A+, A, A- 49,221 46,267 9.8 % BBB+, BBB, BBB- 102,157 96,386 20.5 % BB+ or lower 5,773 5,595 1.2 % Total fixed maturities (1) $ 492,131 $ 471,230 100.0 % December 31, 2021 Amortized cost Fair value % of Total fair value U.S. treasury bonds $ 59,989 $ 59,879 10.0 % U.S. agency bonds 96,554 98,790 16.6 % AAA 161,179 156,706 26.2 % AA+, AA, AA- 38,999 39,140 6.6 % A+, A, A- 99,748 99,962 16.7 % BBB+, BBB, BBB- 126,770 129,618 21.7 % BB+ or lower 12,105 13,050 2.2 % Total fixed maturities (1) $ 595,344 $ 597,145 100.0 % (1) Ratings above are based on Standard & Poor’s ("S&P"), or equivalent, ratings . b) Other Investments, Equity Securities and Equity Method Investments Certain of the Company's other investments and equity method investments are subject to restrictions on redemptions and sales that are determined by the governing documents, which could limit our ability to liquidate those investments. These restrictions may include lock-ups, redemption gates, restricted share classes, restrictions on the frequency of redemption and notice periods. A gate is the ability to deny or delay a redemption request. Certain other investments and equity method investments may not have any restrictions governing their sale, but there is no active market and no guarantee that we will be able to execute a sale in a timely manner. In addition, even if certain other investments and equity method investments are not eligible for redemption or sales are restricted, the Company may still receive income distributions from those investments. Other investments The table shows the composition of the Company's other investments as of March 31, 2022 and December 31, 2021: March 31, 2022 December 31, 2021 Carrying value % of Total Carrying value % of Total Private equity funds $ 27,608 25.5 % $ 23,324 23.9 % Private credit funds 21,781 20.1 % 20,863 21.3 % Other privately held investments 12,597 11.7 % 10,500 10.8 % Total other investments at fair value 61,986 57.3 % 54,687 56.0 % Investments in direct lending entities (at cost) 46,175 42.7 % 42,976 44.0 % Total other investments $ 108,161 100.0 % $ 97,663 100.0 % The Company's investments in direct lending entities of $ 46,175 at March 31, 2022 (December 31, 2021 - $ 42,976 ) are carried at cost less impairment, if any, with any indication of impairment recognized in net income when determined. Please see "Note 5(d). Fair Value Measurements" for additional information regarding this investment. 14 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 4. Investments (continued) Equity Securities Equity securities include publicly traded common stocks and privately held common and preferred stocks. The Company's publicly traded equity investments in common stocks trade on major exchanges. The Company's privately held equity investments in common and preferred stocks are direct investments in companies that the Company believes offer attractive risk adjusted returns or offer other strategic advantages. Each investment may have its own unique terms and conditions and there may be restrictions on disposals. There is no active market for these investments. The following table provides the fair values of the equity securities held at March 31, 2022 and December 31, 2021: March 31, 2022 December 31, 2021 Fair Value Fair Value Privately held equity securities $ 48,224 $ 42,888 Publicly traded equity securities 708 1,174 Total equity securities $ 48,932 $ 44,062 Equity Method Investments The Company's equity method investments include hedge fund investments, real estate investments and other investments. The table below shows the carrying value of the Company's equity method investments as of March 31, 2022 and December 31, 2021: March 31, 2022 December 31, 2021 Carrying Value % of Total Carrying Value % of Total Real estate investments $ 52,210 56.0 % $ 44,050 52.6 % Hedge fund investments 32,861 35.2 % 32,929 39.3 % Other investments 8,246 8.8 % 6,763 8.1 % Total equity method investments $ 93,317 100.0 % $ 83,742 100.0 % The equity method investments above include limited partnerships which are variable interests issued by variable interest entities ("VIEs"). The Company does not have the power to direct the activities that are most significant to the economic performance of these VIEs therefore the Company is not the primary beneficiary of these VIEs. T he Company is deemed to have limited influence over the operating and financial policies of the investee and accordingly these investments are reported under the equity method of accounting. In applying the equity method of accounting, the investments are initially recorded at cost and are subsequently adjusted based on the Company’s proportionate share of the investee's net income or loss. Generally, the maximum exposure to loss on these interests is limited to the amount of commitment made by the Company as more fully described in "Note 11 - Commitments, Contingencies and Guarantees" in these condensed consolidated financial statements. c) Net Investment Income Net investment income was derived from the following sources for the three months ended March 31, 2022 and 2021: For the Three Months Ended March 31, 2022 2021 Fixed maturities $ 2,654 $ 6,691 Income on funds withheld 2,624 2,505 Interest income from loan to related party 879 860 Cash and cash equivalents and other investments 593 129 6,750 10,185 Investment expenses ( 183 ) ( 344 ) Net investment income $ 6,567 $ 9,841 d) Net Realized and Unrealized Gains (Losses) on Investment Realized gains or losses on the sale of investments are determined on the basis of the first in first out cost method. The following tables show the net realized and unrealized gains (losses) on investment included in the Condensed Consolidated Statements of Income for the three months ended March 31, 2022 and 2021: 15 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 4. Investments (continued) For the Three Months Ended March 31, 2022 Gross gains Gross losses Net Fixed maturities $ 1,238 $ ( 95 ) $ 1,143 Equity securities — ( 492 ) ( 492 ) Other investments 1,913 ( 255 ) 1,658 Net realized and unrealized gains (losses) on investment $ 3,151 $ ( 842 ) $ 2,309 For the Three Months Ended March 31, 2021 Gross gains Gross losses Net Fixed maturities $ 3,043 $ ( 149 ) $ 2,894 Equity securities 4,957 ( 25 ) 4,932 Other investments 275 — 275 Net realized and unrealized gains (losses) on investment $ 8,275 $ ( 174 ) $ 8,101 Realized gains and losses from equity securities detailed in the table above include both sales of equity securities and unrealized gains and losses from fair value changes. The unrealized losses recognized in net income for the three months ended March 31, 2022 and 2021 for investments still held at March 31, 2022 and 2021, respectively, were as follows: For the Three Months Ended March 31, 2022 2021 Net (losses) gains recognized for equity securities during the period $ ( 492 ) $ 4,932 Less: Net losses (gains) recognized for equity securities divested during the period — ( 441 ) Unrealized (losses) gains recognized for equity securities still held at reporting date $ ( 492 ) $ 4,491 Proceeds from sales of fixed maturities were $ 101,604 and $ 153,816 for the three months ended March 31, 2022 and 2021, respectively. Net unrealized gains on investments were as follows at March 31, 2022 and December 31, 2021, respectively: March 31, 2022 December 31, 2021 Fixed maturities $ ( 20,901 ) $ 1,801 Equity method investments — ( 4,414 ) Total net unrealized losses ( 20,901 ) ( 2,613 ) Deferred income tax 49 ( 80 ) Net unrealized losses, net of deferred income tax $ ( 20,852 ) $ ( 2,693 ) Change, net of deferred income tax $ ( 18,159 ) $ ( 52,050 ) e) Restricted Cash and Cash Equivalents and Investments The Company is required to provide collateral for its reinsurance liabilities under various reinsurance agreements and utilizes trust accounts to collateralize business with reinsurance counterparties. The assets in trust as collateral are primarily cash and highly rated fixed maturities. The fair values of restricted assets at March 31, 2022 and December 31, 2021 included: March 31, 2022 December 31, 2021 Restricted cash – third party agreements $ 28,953 $ 19,177 Restricted cash – related party agreements 5,958 20,242 Total restricted cash 34,911 39,419 Restricted investments – in trust for third party agreements at fair value (amortized cost: 2022 – $ 58,675 ; 2021 – $ 48,860 ) 58,581 48,845 Restricted investments – in trust for related party agreements at fair value (amortized cost: 2022 – $ 394,115 ; 2021 – $ 493,128 ) 375,021 493,883 Total restricted investments 433,602 542,728 Total restricted cash and investments $ 468,513 $ 582,147 16 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 5. Fair Value of Financial Instruments (a) Fair Values of Financial Instruments Fair Value Measurements — Accounting Standards Codification Topic 820, "Fair Value Measurements and Disclosures" ("ASC 820") defines fair value as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between open market participants at the measurement date. Additionally, ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy is broken down into three levels based on the reliability of inputs: • Level 1 — Valuations based on unadjusted quoted market prices for identical assets or liabilities that we have the ability to access. Because valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. Examples of assets and liabilities utilizing Level 1 inputs include: U.S. Treasury bonds; and publicly traded equity securities; • Level 2 — Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in inactive markets, or valuations based on models where the significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severity, etc.) or can be corroborated by observable market data. Examples of assets and liabilities utilizing Level 2 inputs include: U.S. government-sponsored agency securities; non-U.S. government and supranational obligations; commercial mortgage-backed securities ("CMBS"); collateralized loan obligations ("CLO"); corporate and municipal bonds; and • Level 3 — Valuations based on models where significant inputs are not observable. The unobservable inputs reflect our own assumptions about assumptions that market participants would use developed on the basis of the best information available in the particular circumstances. Examples of assets and liabilities utilizing Level 3 inputs include: an investment in preference shares of a start-up insurance producer. The availability of observable inputs can vary and is affected by a wide variety of factors, including, for example, the type of financial instrument, whether the financial instrument is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized in the Level 3 hierarchy. The Company uses prices and inputs that are current as at the measurement date. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified between hierarchy levels. For investments that have quoted market prices in active markets, the Company uses the quoted market prices as fair value and includes these in the Level 1 hierarchy. The Company receives the quoted market prices from a third party nationally recognized provider ("the Pricing Service"). When quoted market prices are unavailable, the Company utilizes the Pricing Service to determine an estimate of fair value. The fair value estimates are included in the Level 2 hierarchy. The Company will challenge any prices for its investments which are considered not to be representative of fair value. If quoted market prices and an estimate from the Pricing Service are unavailable, the Company produces an estimate of fair value based on dealer quotations for recent activity in positions with the same or similar characteristics to that being valued. The Company determines whether the fair value estimate is in the Level 2 or Level 3 hierarchy depending on the level of observable inputs available when estimating the fair value. The Company bases its estimates of fair values for assets on the bid price as it represents what a third party market participant would be willing to pay in an orderly transaction. ASC 825, "Disclosure About Fair Value of Financial Instruments" , requires all entities to disclose the fair value of their financial instruments for assets and liabilities recognized and not recognized in the balance sheet, for which it is practicable to estimate fair value. The following describes the valuation techniques used by the Company to determine the fair value of financial instruments that are measured at fair value on a recurring basis held at March 31, 2022 and December 31, 2021. U.S. government and U.S. agency bonds — Bonds issued by the U.S. Treasury, the Federal Home Loan Bank, the Federal Home Loan Mortgage Corporation, Government National Mortgage Association, Federal National Mortgage Association and the Federal Farm Credit Banks Funding Corporation. The fair values of U.S. treasury bonds are based on quoted market prices in active markets, and are included in the Level 1 fair value hierarchy. We believe the market for U.S. treasury bonds is an actively traded market given the high level of daily trading volume. The fair values of U.S. agency bonds are determined using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for these securities are observable market inputs, the fair values of U.S. agency bonds are included in the Level 2 fair value hierarchy. Non-U.S. government bonds — These securities are generally priced by independent pricing services. The Pricing Service may use current market trades for securities with similar quality, maturity and coupon. If no such trades are available, the Pricing Service typically uses analytical models which may incorporate spreads, interest rate data and market/sector news. As the significant inputs used to price non-U.S. government bonds are observable market inputs, the fair values of non-U.S. government bonds are included in the Level 2 fair value hierarchy. 17 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 5. Fair Value of Financial Instruments (continued) Collateralized loan obligations ("CLO") - These asset backed securities are originated by a variety of financial institutions that on acquisition are rated BBB-/Baa3 or higher. These securities are priced by independent pricing services and brokers. The pricing provider applies dealer quotes and other available trade information, prepayment speeds, yield curves and credit spreads to the valuation. As the significant inputs used to price the CLO are observable market inputs, the fair values are included in the Level 2 fair value hierarchy. Commercial mortgage-backed securities ("CMBS") - These asset backed securities are originated by a variety of financial institutions that on acquisition are rated BBB-/Baa3 or higher. These securities are priced by independent pricing services and brokers. The pricing provider applies dealer quotes and other available trade information, prepayment speeds, yield curves and credit spreads to the valuation. As the significant inputs used to price the CMBS are observable market inputs, the fair values are included in the Level 2 fair value hierarchy. Corporate and municipal bonds — Bonds issued by corporations, U.S. state and municipality entities or agencies that on acquisition are rated BBB-/Baa3 or higher. These securities are generally priced by independent pricing services. The credit spreads are sourced from broker/dealers, trade prices and new issue market. Where pricing is unavailable from pricing services, custodian pricing or non-binding quotes are obtained from broker-dealers to estimate fair values. As significant inputs used to price corporate and municipal bonds are observable market inputs, fair values are included in the Level 2 fair value hierarchy. Equity securities - Equity securities include publicly traded common and preferred stocks, and privately held common and preferred stocks. The fair value of publicly traded common and preferred stocks is primarily priced by pricing services, reflecting the closing price quoted for the final trading day of the period. These investments are carried at fair value using observable market pricing data and is included in the Level 1 fair value hierarchy. Any unrealized gains or losses on the investment is recorded in net income in the reporting period in which it occurs. The privately held common and preferred stocks are valued using significant inputs that are unobservable where there is little or no market activity. Unadjusted third party pricing sources or management's assumptions and internal valuation models may be used to determine the fair values, therefore, these investments are classified as Level 3 in the fair value hierarchy. Other investments — Includes unquoted investments comprised of the following types of investments: • Privately held investments: These are direct equity investments in common and preferred shares of privately held entities. The fair values are estimated using quarterly financial statements and/or recent private market transactions and thus are included under Level 3 of the fair value hierarchy due to unobservable market data used for valuation. • Private credit funds: These are privately held equity investments in common stock of entities that lend money valued using the most recently available or quarterly net asset value ("NAV") statements as provided by the external fund manager or third-party administrator and therefore measured using the NAV as a practical expedient. • Private equity funds: These are comprised of private equity funds, private equity co-investments with sponsoring entities and investments in real estate limited partnerships and joint ventures . The fair value is estimated based on the most recently available NAV as advised by the external fund manager or third-party administrator. The fair values are therefore measured using the NAV as a practical expedient. (b) Fair Value Hierarchy The Company’s estimates of fair value for financial assets and financial liabilities are based on the framework established in ASC 820. The framework is based on the inputs used in valuation and gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuation methodology whenever available. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active trading markets and the lowest priority to unobservable inputs that reflect significant market assumptions. 18 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 5. Fair Value of Financial Instruments (continued) At March 31, 2022 and December 31, 2021, the Company classified its financial instruments measured at fair value on a recurring basis in the following valuation hierarchy: March 31, 2022 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Fair Value Based on NAV Practical Expedient Total Fair Value Fixed maturities U.S. treasury bonds $ 65,730 $ — $ — $ — $ 65,730 U.S. agency bonds – mortgage-backed — 83,389 — — 83,389 Collateralized mortgage-backed bonds — 7,119 — — 7,119 Non-U.S. government bonds — 3,009 — — 3,009 Collateralized loan obligations — 165,760 — — 165,760 Corporate bonds — 146,223 — — 146,223 Equity securities 708 — 27,660 20,564 48,932 Other investments — — 2,000 59,986 61,986 Total $ 66,438 $ 405,500 $ 29,660 $ 80,550 $ 582,148 As a percentage of total assets 3.0 % 18.3 % 1.3 % 3.6 % 26.2 % December 31, 2021 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Fair Value Based on NAV Practical Expedient Total Fair Value Fixed maturities U.S. treasury bonds $ 59,879 $ — $ — $ — $ 59,879 U.S. agency bonds – mortgage-backed — 98,790 — — 98,790 Collateralized mortgage-backed bonds — 15,537 — — 15,537 Non-U.S. government bonds — 3,276 — — 3,276 Collateralized loan obligations — 179,021 — — 179,021 Corporate bonds — 240,642 — — 240,642 Equity securities 1,174 — 25,094 17,794 44,062 Other investments — — 2,000 52,687 54,687 Total $ 59,879 $ 537,266 $ 27,094 $ 70,481 $ 695,894 As a percentage of total assets 2.6 % 23.1 % 1.2 % 3.0 % 29.9 % The Company utilizes the Pricing Service to assist in determining the fair value of its investments; however, management is ultimately responsible for all fair values presented in the Company’s consolidated financial statements. This includes responsibility for monitoring the fair value process, ensuring objective and reliable valuation practices, and pricing of assets and liabilities and use of pricing sources. The Company analyzes and reviews the information and prices received from the Pricing Service to ensure that the prices provided represent a reasonable estimate of fair value. The Pricing Service was utilized to estimate fair value measurements for 98.8 % and 99.0 % of our fixed maturities at March 31, 2022 and December 31, 2021, respectively. The Pricing Service utilizes market quotations for fixed maturity securities that have quoted market prices in active markets. Since fixed maturities other than U.S. treasury bonds generally do not trade actively on a daily basis, the Pricing Service prepares estimates of fair value measurements using relevant market data, benchmark curves, sector groupings and matrix pricing and these have been classified as Level 2 within the fair value hierarchy. At March 31, 2022 and December 31, 2021, approximately 1.2 % and 1.0 %, respectively, of our fixed maturities were valued using the market approach. At March 31, 2022, one security or $ 5,595 (2021 - one security or $ 6,225 ) of our fixed maturity investment portfolio classified as Level 2 were priced using a quotation from a broker and/or custodian as opposed to the Pricing Service due to lack of information available. At March 31, 2022 and December 31, 2021, the Company has not adjusted any pricing provided to it based on the review performed by its investment managers. During the three months ended March 31, 2021, the Company transferred its equity investment in an insurtech start-up company focused on technological advancement in the automobile insurance industry out of Level 3 within the fair value hierarchy and into Level 1 due to the recent completion of its initial public offering. There were no transfers to or from Level 3 during the three months ended March 31, 2022. 19 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 5. Fair Value of Financial Instruments (continued) (c) Level 3 Financial Instruments At March 31, 2022, the Company holds Level 3 financial instruments of $ 29,660 (December 31, 2021 - $ 27,094 ) which includes privately held equity investments. The fair value of these investments are estimated using quarterly unaudited financial statements or recent private market transactions, where applicable. Due to significant unobservable inputs in these valuations, the Company classifies their fair values as Level 3 within the fair value hierarchy. The following table provides a summary of quantitative information regarding the significant unobservable inputs used in determining the fair value of other investments measured at fair value on a recurring basis under the Level 3 classification at March 31, 2022: Fair Value Valuation Technique Unobservable Inputs Range Private equity investments $ 27,860 Quarterly financial statements Estimated maturity dates 1.0 years to 3.0 years Others including start-ups 1,800 Recent market transactions Liquidity discount rates Total Level 3 investments $ 29,660 The following table shows the reconciliation of the beginning and ending balances for investments measured at fair value on a recurring basis using Level 3 inputs for the three months ended March 31, 2022 and 2021. The Company includes any related interest and dividend income in net investment income and are excluded from the reconciliation in the table below: For the Three Months Ended March 31, 2022 2021 Balance - beginning of period $ 27,094 $ 26,094 Purchases 2,566 4,250 Transfers out of Level 3 — ( 1,000 ) Total Level 3 investments - end of period $ 29,660 $ 29,344 (d) Financial Instruments Disclosed, But Not Carried, at Fair Value The fair value of financial instruments accounting guidance also applies to financial instruments disclosed, but not carried, at fair value, except for certain financial instruments related to insurance contracts . At March 31, 2022, the carrying values of cash and cash equivalents (including restricted amounts), accrued investment income, reinsurance balances receivable, loan to related party, liability for securities purchased and certain other assets and liabilities approximate fair values due to their inherent short duration. As these financial instruments are not actively traded, the fair values of these financial instruments are classified as Level 2. The investments made by direct lending entities are carried at cost less impairment, if any, which approximates fair value. The fair value estimates of these investments are not based on observable market data and, as a result, are classified as Level 3. The fair values of the Senior Notes (as defined in "Note 7. Long-Term Debt" ) are based on indicative market pricing obtained from a third-party pricing service which uses observable market inputs, and therefore the fair values of these liabilities are classified as Level 2. The following table presents the respective carrying value and fair value for the Senior Notes as at March 31, 2022 and December 31, 2021: March 31, 2022 December 31, 2021 Carrying Value Fair Value Carrying Value Fair Value Senior Notes - MHLA – 6.625 % $ 110,000 $ 80,071 $ 110,000 $ 94,820 Senior Notes - MHNC – 7.75 % 152,500 128,039 152,500 140,300 Total Senior Notes $ 262,500 $ 208,110 $ 262,500 $ 235,120 20 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 6. Shareholders' Equity a) Common Shares At March 31, 2022, the aggregate authorized share capital of the Company is 150,000,000 shares from which 93,311,414 common shares were issued, of which 87,058,833 common shares are outstanding, and 18,600,000 preference shares were issued, all of which are outstanding. The remaining 38,088,586 shares are undesignated at March 31, 2022. Excluding the preference shares held by Maiden Reinsurance, a total of 6,093,532 preference shares are held by non-affiliates. b) Preference Shares On March 3, 2021, the Company's Board of Directors approved the repurchase, including the repurchase by Maiden Reinsurance in accordance with its investment guidelines, of up to $ 100,000 of the Company's preference shares from time to time at market prices in open market purchases or as may be privately negotiated. 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, of up to $ 50,000 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 as described above are collectively referred to as the "2021 Preference Share Repurchase Program". The following table shows the summary of the Company's preference shares repurchases made for the three months ended March 31, 2022 and 2021: For the Three Months Ended March 31, 2022 For the Three Months Ended March 31, 2021 Number of shares purchased Average price of shares purchased Number of shares purchased Average price of shares purchased Series A — $ — 2,561,636 $ 14.88 Series C 179,996 11.59 2,028,961 14.65 Series D 94,865 10.67 2,023,896 14.60 Total 274,861 11.27 6,614,493 14.72 Total price paid $ 3,098 $ 97,393 Gain on purchase $ 3,543 $ 62,450 The following table shows the summary of changes for the Company's preference shares outstanding (including the total of the Company's preference shares held by Maiden Reinsurance pursuant to the cash tender offer in December 2020 and the 2021 Preference Share Repurchase Program) at March 31, 2022: Series A Series C Series D Total Outstanding shares issued by Maiden Holdings 6,000,000 6,600,000 6,000,000 18,600,000 Less: Total shares held by Maiden Reinsurance - March 31, 2022 4,064,311 4,410,226 4,031,931 12,506,468 Total shares held by non-affiliates - March 31, 2022 1,935,689 2,189,774 1,968,069 6,093,532 Percentage held by Maiden Reinsurance - March 31, 2022 67.7 % 66.8 % 67.2 % 67.2 % The Company's remaining authorization for preference share repurchases was $ 10,746 at March 31, 2022. For further discussion on the Company's preference shares, please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2021. c) Treasury Shares On February 21, 2017, the Company's Board of Directors approved the repurchase of up to $ 100,000 of the Company's common shares from time to time at market prices. The Company has a remaining authorization of $ 74,245 for common share repurchases at March 31, 2022 (December 31, 2021 - $ 74,245 ). No repurchases were made during the three months ended March 31, 2022 and 2021 under the common share repurchase plan. During the three months ended March 31, 2022, the Company repurchased a total of 403,716 common shares (2021 - 799,548 ) at an average price per share of $ 2.52 (2021 - $ 2.95 ) from employees, which represent withholding in respect of tax obligations on the vesting of both non-performance-based and discretionary performance-based restricted shares. 21 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 6. Shareholders' Equity (continued) d) Accumulated Other Comprehensive Income The following tables set forth financial information regarding the changes in the balances of each component of AOCI: For the Three Months Ended March 31, 2022 Change in net unrealized gains on investment Foreign currency translation Total Beginning balance $ ( 2,693 ) $ ( 9,522 ) $ ( 12,215 ) Other comprehensive (loss) income before reclassifications ( 12,921 ) 5,592 ( 7,329 ) Amounts reclassified from AOCI to net income, net of tax ( 5,238 ) — ( 5,238 ) Net current period other comprehensive (loss) income ( 18,159 ) 5,592 ( 12,567 ) Ending balance, Maiden shareholders $ ( 20,852 ) $ ( 3,930 ) $ ( 24,782 ) For the Three Months Ended March 31, 2021 Change in net unrealized gains on investment Foreign currency translation Total Beginning balance $ 49,357 $ ( 25,500 ) $ 23,857 Other comprehensive (loss) income before reclassifications ( 20,506 ) 10,146 ( 10,360 ) Amounts reclassified from AOCI to net income, net of tax ( 4,246 ) — ( 4,246 ) Net current period other comprehensive (loss) income ( 24,752 ) 10,146 ( 14,606 ) Ending balance, Maiden shareholders $ 24,605 $ ( 15,354 ) $ 9,251 22 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 7. Long-Term Debt Senior Notes At March 31, 2022 and December 31, 2021, Maiden Holdings had outstanding publicly-traded senior notes which were issued in 2016 ("2016 Senior Notes") and its wholly owned subsidiary, Maiden Holdings North America, Ltd. ("Maiden NA") had outstanding publicly-traded senior notes which were issued in 2013 ("2013 Senior Notes") (collectively "Senior Notes"). The 2013 Senior Notes issued by Maiden NA are fully and unconditionally guaranteed by Maiden Holdings. The Senior Notes are unsecured and unsubordinated obligations of the Company. The following tables detail the issuances of Senior Notes outstanding at March 31, 2022 and December 31, 2021: March 31, 2022 2016 Senior Notes 2013 Senior Notes Total Principal amount $ 110,000 $ 152,500 $ 262,500 Less: unamortized issuance costs 3,449 3,649 7,098 Carrying value $ 106,551 $ 148,851 $ 255,402 December 31, 2021 2016 Senior Notes 2013 Senior Notes Total Principal amount $ 110,000 $ 152,500 $ 262,500 Less: unamortized issuance costs 3,463 3,690 7,153 Carrying value $ 106,537 $ 148,810 $ 255,347 Other details: Original debt issuance costs $ 3,715 $ 5,054 Maturity date June 14, 2046 December 1, 2043 Earliest redeemable date (for cash) June 14, 2021 December 1, 2018 Coupon rate 6.625 % 7.75 % Effective interest rate 7.07 % 8.04 % The interest expense incurred on the Senior Notes for the three months ended March 31, 2022 was $ 4,777 (2021 - $ 4,777 ), of which $ 1,342 was accrued at both March 31, 2022 and December 31, 2021, respectively. The issuance costs related to the Senior Notes were capitalized and are being amortized over the effective life of the Senior Notes. The amortization expense for the three months ended March 31, 2022 was $ 55 (2021 - $ 54 ). Under the terms of the 2013 Senior Notes, the 2013 Senior Notes can be redeemed, in whole or in part, at Maiden NA's option at any time and from time to time, until maturity at a redemption price equal to 100 % of the principal amount of the notes to be redeemed plus accrued but unpaid interest on the principal amount being redeemed to, but not including, the redemption date. Maiden NA is required to give at least thirty days and not more than sixty days notice prior to the redemption date. Under the terms of the 2016 Senior Notes, the 2016 Senior Notes can be redeemed, in whole or in part, at Maiden Holdings' option at any time and from time to time, until maturity at a redemption price equal to 100 % of the principal amount of the notes to be redeemed plus accrued but unpaid interest on the principal amount being redeemed to, but not including, the redemption date. Maiden Holdings is required to give at least thirty days and not more than sixty days notice prior to the redemption date. 23 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 8. Reinsurance The Company uses reinsurance and retrocessional agreements ("ceded reinsurance") to mitigate volatility, reduce its exposure to certain risks and provide capital support. Ceded reinsurance provides for the recovery of a portion of loss and LAE under certain circumstances without relieving the Company of its obligations to the policyholders. The Company remains liable to the extent that any of its reinsurers or retrocessionaires fails to meet their obligations. Loss and LAE incurred and premiums earned are reported after deduction for ceded reinsurance. In the event that one or more of our reinsurers or retrocessionaires are unable to meet their obligations under these agreements, the Company would not realize the full value of the reinsurance recoverable balances. The effect of ceded reinsurance on net premiums written and earned and on net loss and LAE for the three months ended March 31, 2022 and 2021 was as follows: For the Three Months Ended March 31, 2022 2021 Premiums written Direct $ 4,736 $ 5,003 Assumed ( 14,906 ) ( 7,393 ) Ceded ( 153 ) ( 306 ) Net $ ( 10,323 ) $ ( 2,696 ) Premiums earned Direct $ 4,751 $ 5,854 Assumed ( 3,469 ) 6,944 Ceded ( 160 ) ( 1,034 ) Net $ 1,122 $ 11,764 Loss and LAE Gross loss and LAE $ ( 2,196 ) $ 2,525 Loss and LAE ceded ( 87 ) ( 166 ) Net $ ( 2,283 ) $ 2,359 The Company's reinsurance recoverable on unpaid losses balance as at March 31, 2022 was $ 558,262 (December 31, 2021 - $ 562,845 ) presented in the Condensed Consolidated Balance Sheets. At March 31, 2022 and December 31, 2021, the Company had no valuation allowance against reinsurance recoverable on unpaid losses. On December 27, 2018, Cavello Bay Reinsurance Limited ("Cavello") and Maiden Reinsurance entered into a retrocession agreement pursuant to which certain assets and liabilities associated with the U.S. treaty reinsurance business held by Maiden Reinsurance were 100.0 % retroceded to Cavello in exchange for a ceding commission. The reinsurance recoverable on unpaid losses due from Cavello under this retrocession agreement was $ 67,633 at March 31, 2022 (December 31, 2021 - $ 69,006 ). On July 31, 2019, Maiden Reinsurance and Cavello entered into a Loss Portfolio Transfer and Adverse Development Cover Agreement ("LPT/ADC Agreement") pursuant to which Cavello assumed the loss reserves as of December 31, 2018 associated with the AmTrust Quota Share in excess of a $ 2,178,535 retention up to $ 600,000 , in exchange for a retrocession premium of $ 445,000 . The $ 2,178,535 retention is subject to adjustment for paid losses subsequent to December 31, 2018. The LPT/ADC Agreement provides Maiden Reinsurance with $ 155,000 in adverse development cover over its carried AmTrust Quota Share loss reserves at December 31, 2018. The LPT/ADC Agreement meets the criteria for risk transfer and is thus accounted for as retroactive reinsurance. Cumulative ceded losses exceeding $ 445,000 are recognized as a deferred gain liability and amortized into income over the settlement period of the ceded reserves in proportion to cumulative losses collected over the estimated ultimate reinsurance recoverable. The amount of the deferral is recalculated each period based on loss payments and updated estimates. Consequently, cumulative adverse development subsequent to December 31, 2018 may result in significant losses from operations until periods when the deferred gain is recognized as a benefit to earnings. As of March 31, 2022, the reinsurance recoverable on unpaid losses under the LPT/ADC Agreement was $ 489,860 while the deferred gain liability under the LPT/ADC Agreement was $ 44,860 (December 31, 2021 - $ 490,860 and $ 45,860 , respectively). Amortization of the deferred gain will not occur until paid losses have exceeded the minimum retention under the LPT/ADC Agreement, which is estimated to be in 2024. Cavello provided collateral in the form of a letter of credit in the amount of $ 445,000 to AmTrust under the LPT/ADC Agreement. Cavello is subject to additional collateral funding requirements as explained in "Note 10. Related Party Transactions". As of March 31, 2022, the amount of collateral required was $ 405,029 . Under the terms of the LPT/ADC Agreement, the covered losses associated with the Commutation and Release Agreement with AmTrust are eligible to be covered but recoverable only when such losses are paid or settled by AII or its affiliates, provided such losses and other related amounts shall not exceed $ 312,786 . Cavello's parent company, Enstar, has credit ratings of BBB from both Standard & Poor's and Fitch Ratings at March 31, 2022. 24 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 9. Reserve for Loss and Loss Adjustment Expenses The Company uses both historical experience and industry-wide loss development factors to provide a reasonable basis for estimating future losses. In the future, certain events may be beyond the control of management, such as changes in law, judicial interpretations of law, and rates of inflation, which may favorably or unfavorably impact the ultimate settlement of the Company’s loss and LAE reserves. The anticipated effect of inflation is implicitly considered when estimating liabilities for loss and LAE. While anticipated changes in claim costs due to inflation are considered in estimating the ultimate claim costs, changes in the average severity of claims are caused by a number of factors that vary with the individual type of policy written. Ultimate losses are projected based on historical trends adjusted for implemented changes in underwriting standards, claims handling, policy provisions, and general economic trends. Those anticipated trends are monitored based on actual development and are modified if necessary. The reserving process begins with the collection and analysis of paid losses and incurred claims data for each of the Company's contracts. While reserves are mostly reviewed on a contract by contract basis, paid loss and incurred claims data is also aggregated into reserving segments. The segmental data is disaggregated by reserving class and further disaggregated by either accident year (i.e. the year in which the loss event occurred) or by underwriting year (i.e. the year in which the contract generating the premium and losses incepted). In cases where the Company uses underwriting year information, reserves are subsequently allocated to the respective accident year. The reserve for loss and LAE consists of: March 31, 2022 December 31, 2021 Reserve for reported loss and LAE $ 804,771 $ 851,950 Reserve for losses incurred but not reported ("IBNR") 581,252 637,423 Reserve for loss and LAE $ 1,386,023 $ 1,489,373 The following table represents a reconciliation of our beginning and ending gross and net loss and LAE reserves: For the Three Months Ended March 31, 2022 2021 Gross loss and LAE reserves, January 1 $ 1,489,373 $ 1,893,299 Less: reinsurance recoverable on unpaid losses, January 1 562,845 592,571 Net loss and LAE reserves, January 1 926,528 1,300,728 Net incurred losses related to: Current year 5,002 7,913 Prior years ( 7,285 ) ( 5,554 ) ( 2,283 ) 2,359 Net paid losses related to: Current year ( 49 ) ( 82 ) Prior years ( 101,669 ) ( 92,563 ) ( 101,718 ) ( 92,645 ) Change in deferred gain on retroactive reinsurance 1,339 9,845 Assumed retroactive reinsurance business 14,350 — Effect of foreign exchange rate movements ( 10,455 ) ( 16,488 ) Net loss and LAE reserves, March 31 827,761 1,203,799 Reinsurance recoverable on unpaid losses, March 31 558,262 580,709 Gross loss and LAE reserves, March 31 $ 1,386,023 $ 1,784,508 Prior period development arises from changes to loss estimates recognized in the current year that relate to loss reserves established in previous calendar years. The favorable or unfavorable development reflects changes in management's best estimate of the ultimate losses under the relevant reinsurance policies after considerable review of changes in actuarial assessments. During the three months ended March 31, 2022, the Company recognized net favorable prior year loss development of $ 7,285 (2021 - favorable $ 5,554 ). In the Diversified Reinsurance segment, net favorable prior year loss development was $ 2,211 for the three months ended March 31, 2022 (2021 - adverse $ 14 ). Prior year loss development for the three months ended March 31, 2022 was due to favorable reserve development in German Auto Programs and other runoff business. Prior year loss development for the three months ended March 31, 2021 was largely due to adverse reserve development in European Capital Solutions and other runoff business. 25 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 9. Reserve for Loss and Loss Adjustment Expenses (continued) In the AmTrust Reinsurance segment, the net favorable prior year loss development was $ 5,074 for the three months ended March 31, 2022 (2021 - favorable $ 5,568 ). The net favorable prior year loss development for the three months ended March 31, 2022 was primarily due to favorable development from Workers Compensation policies and adjustments to AmTrust's inuring reinsurance for certain programs in Specialty Risk and Extended Warranty. The net favorable prior year loss development for the three months ended March 31, 2021 was primarily due to favorable development in Workers Compensation partly offset by adverse development in Hospital Liability. The change in the deferred gain on retroactive reinsurance was $ 1,339 for the three months ended March 31, 2022 (2021 - $ 9,845 ). This change included a $ 1,000 decrease in the deferred gain liability and related reinsurance recoverable on unpaid losses under the LPT/ADC Agreement with Cavello recognized in the three months ended March 31, 2022 (2021 - $ 9,845 ) for favorable development on reserves covered under the LPT/ADC Agreement. The deferred gain on retroactive reinsurance under the LPT/ADC Agreement represents the cumulative adverse development for covered risks in the AmTrust Quota Share as of March 31, 2022 and December 31, 2021. Amortization of the deferred gain will not occur until paid losses have exceeded the minimum retention under the LPT/ADC Agreement, which is estimated to be in 2024. 10. Related Party Transactions The Founding Shareholders of the Company were Michael Karfunkel, George Karfunkel and Barry Zyskind. Based on each individual's most recent public filing, Leah Karfunkel (wife of the late Michael Karfunkel) owns or controls approximately 7.8 % of the Company's outstanding common shares and Barry Zyskind (the Company's non-executive chairman) owns or controls approximately 7.3 % of the Company's outstanding common shares. George Karfunkel owns or controls less than 5.0 % of the Company's outstanding common shares. Leah Karfunkel and George Karfunkel are directors of AmTrust, and Barry Zyskind is the chief executive officer and chairman of AmTrust. Leah Karfunkel, George Karfunkel and Barry Zyskind own or control approximately 55.2 % of the ownership interests of Evergreen Parent LP, the ultimate parent of AmTrust. The following describes transactions that have transpired between the Company and AmTrust: AmTrust Quota Share Effective July 1, 2007, the Company and AmTrust entered into a master agreement, as amended ("Master Agreement"), by which they caused Maiden Reinsurance and AII to enter into the AmTrust Quota Share by which AII retroceded to Maiden Reinsurance an amount equal to 40 % of the premium written by subsidiaries of AmTrust, net of the cost of unaffiliated inuring reinsurance and 40 % of losses. The Master Agreement further provided that AII receive a ceding commission of 31 % of ceded written premiums. On June 11, 2008, Maiden Reinsurance and AII amended the AmTrust Quota Share to add Retail Commercial Package Business to the Covered Business (as defined in the AmTrust Quota Share). AII receives a ceding commission of 34.375 % on Retail Commercial Package Business. On July 1, 2016, the agreement was renewed through June 30, 2019. Effective July 1, 2018, the amount AEL ceded to Maiden Reinsurance was reduced to 20 %. Effective July 1, 2013, for the Specialty Program portion of Covered Business only, AII was responsible for ultimate net loss otherwise recoverable from Maiden Reinsurance to the extent that the loss ratio to Maiden Reinsurance, which shall be determined on an inception to date basis from July 1, 2007 through the date of calculation, is between 81.5 % and 95 % ("Loss Corridor"). Above and below the Loss Corridor, Maiden Reinsurance continued to reinsure losses at its proportional 40 % share of the AmTrust Quota Share. Effective July 31, 2019, the Loss Corridor was amended such that the maximum amount covered is $ 40,500 , the amount calculated by Maiden Reinsurance for the Loss Corridor coverage as of March 31, 2019. Any development above this maximum amount will be subject to the coverage of the LPT/ADC Agreement. Effective January 1, 2019, Maiden Reinsurance and AII entered into a partial termination amendment ("Partial Termination Amendment") which amended the AmTrust Quota Share. The Partial Termination Amendment provided for the cut-off of the ongoing and unearned premium of AmTrust’s Small Commercial Business, comprising workers’ compensation, general liability, umbrella liability, professional liability (including cyber liability) insurance coverages, and U.S. Specialty Risk and Extended Warranty ("Terminated Business") as of December 31, 2018. Under the Partial Termination Amendment, the ceding commission payable by Maiden Reinsurance for its remaining in-force business immediately prior to January 1, 2019 increased by five percentage points with respect to in-force remaining business (excluding Terminated Business) and related unearned premium as of January 1, 2019. The Partial Termination Amendment resulted in Maiden Reinsurance returning $ 647,980 in unearned premium to AII, or $ 436,760 net of applicable ceding commission and brokerage as calculated during the second quarter of 2019. Subsequently, on January 30, 2019, Maiden Reinsurance and AII agreed to terminate the remaining business subject to the AmTrust Quota Share on a run-off basis effective as of January 1, 2019. Effective July 31, 2019, Maiden Reinsurance and AII entered into a Commutation and Release Agreement which provided for AII to assume all reserves ceded by AII to Maiden Reinsurance with respect to its proportional 40 % share of the ultimate net loss under the AmTrust Quota Share related to the commuted business including: (a) all losses incurred in Accident Year 2017 and Accident Year 2018 under California workers' compensation policies and as defined in the AmTrust Quota Share ("Commuted California Business"); and (b) all losses incurred in Accident Year 2018 under New York workers' compensation policies ("Commuted New York Business"), and together with the Commuted California Business ("Commuted Business") in exchange for the release and full discharge of Maiden Reinsurance's obligations to AII with respect to the Commuted Business. The Commuted Business excludes any business classified by AII as Specialty Program or Specialty Risk business. 26 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 10. Related Party Transactions (continued) Maiden Reinsurance paid $ 312,786 ("Commutation Payment"), which is the sum of the net ceded reserves in the amount of $ 330,682 with respect to the Commuted Business as of December 31, 2018 less payments in the amount of $ 17,896 made by Maiden Reinsurance with respect to the Commuted Business from January 1, 2019 through July 31, 2019. The Commutation Payment was settled on August 12, 2019 and Maiden Reinsurance paid AII approximately $ 6,335 in interest related to the Commutation Payment premium, calculated at the rate of 3.30 % per annum from January 1, 2019 through August 12, 2019. AII and Maiden Reinsurance also agreed that as of July 31, 2019, the AmTrust Quota Share was deemed amended as applicable so that the Commuted Business is no longer included as part of Covered Business under the AmTrust Quota Share. On January 30, 2019, in connection with the termination of the reinsurance agreement described above, the Company and AmTrust entered into a second amendment to the Master Agreement between the parties, originally entered into on July 3, 2007, to remove the provisions requiring AmTrust to reinsure business with the Company. European Hospital Liability Quota Share Effective April 1, 2011, Maiden Reinsurance entered into the European Hospital Liability Quota Share with AEL and AIU DAC. Pursuant to the terms of the European Hospital Liability Quota Share, Maiden Reinsurance assumed 40 % of the premiums and losses related to policies classified as European Hospital Liability, including associated liability coverages and policies covering physician defense costs, written or renewed on or after April 1, 2011. The European Hospital Liability Quota Share also covers policies written or renewed on or before March 31, 2011, but only with respect to losses that occur, accrue or arise on or after April 1, 2011. The maximum limit of liability attaching shall be € 5,000 (€ 10,000 effective January 1, 2012) or currency equivalent (on a 100 % basis) per original claim for any one original policy. Maiden Reinsurance paid a ceding commission of 5 % on contracts assumed under the European Hospital Liability Quota Share. Effective July 1, 2016, the European Hospital Liability Quota Share was amended such that Maiden Reinsurance assumes from AEL 32.5 % of the premiums and losses of all policies written or renewed on or after July 1, 2016 until June 30, 2017 and 20 % of all policies written or renewed on or after July 1, 2017. Thereafter, on January 30, 2019, Maiden Reinsurance, AEL and AIU DAC agreed to terminate the European Hospital Liability Quota Share on a run-off basis effective as of January 1, 2019. The table below shows the effect of both of these quota share arrangements with AmTrust on the Company's Condensed Consolidated Income Statements for the three months ended March 31, 2022 and 2021, respectively: For the Three Months Ended March 31, 2022 2021 Gross and net premiums written $ ( 14,906 ) $ ( 2,462 ) Net premiums earned ( 4,833 ) 5,524 Net loss and LAE 923 ( 944 ) Commission and other acquisition expenses 1,243 ( 2,187 ) Collateral provided to AmTrust a) AmTrust Quota Share To provide AmTrust's U.S. insurance subsidiaries with credit for reinsurance on their statutory financial statements, AII, as the direct reinsurer of AmTrust's insurance subsidiaries, established trust accounts ("Trust Accounts") for their benefit. Maiden Reinsurance has provided appropriate collateral to secure its proportional share under the AmTrust Quota Share of AII's obligations to the AmTrust subsidiaries to whom AII is required to provide collateral which can include (a) assets loaned by Maiden Reinsurance to AII for deposit into the Trust Accounts, pursuant to a loan agreement between those parties, (b) assets transferred by Maiden Reinsurance for deposit into the Trust Accounts, or (c) a letter of credit obtained by Maiden Reinsurance and delivered to an AmTrust subsidiary on AII's behalf. Maiden Reinsurance may provide any or a combination of these forms of collateral, provided that the aggregate value thereof equals Maiden Reinsurance's proportionate share of its obligations under the AmTrust Quota Share. Maiden Reinsurance satisfied its collateral requirements under the AmTrust Quota Share with AII as follows: • by lending funds of $ 167,975 at March 31, 2022 and December 31, 2021 pursuant to a loan agreement entered into between those parties. Advances under the loan are secured by promissory notes. This loan was assigned by AII to AmTrust effective December 31, 2014 and is carried at cost. Interest is payable at a rate equivalent to the Federal Funds Effective Rate ("Fed Funds") plus 200 basis points per annum. Interest income on the loan was $ 879 for the three months ended March 31, 2022 (2021 - $ 860 ) and the effective yield was 2.1 % for the period (2021 - 2.0 %). • on January 30, 2019, in connection with the termination of the reinsurance agreements described above, the Company and AmTrust amended the Loan Agreement between Maiden Reinsurance, AmTrust and AII, originally entered into on November 16, 2007, by extending the maturity date to January 1, 2025 and specifies that due to the termination of the AmTrust Quota Share, no further loans or advances may be made pursuant to the Loan Agreement; 27 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 10. Related Party Transactions (continued) • effective December 1, 2008, the Company entered into a Reinsurer Trust Assets Collateral agreement to provide to AII sufficient collateral to secure its proportional share of AII's obligations to the U.S. AmTrust subsidiaries. The amount of the collateral at March 31, 2022 was $ 138,810 (December 31, 2021 - $ 246,874 ) and the accrued interest was $ 416 (December 31, 2021 - $ 1,171 ). Please refer to "Note 4. (e) Investments" for additional information; • on January 11, 2019, a portion of the existing Trust Accounts used for collateral on the AmTrust Quota Share were converted to a funds withheld arrangement. The Company transferred $ 575,000 to AmTrust as a funds withheld receivable which currently has an annual interest rate of 1.8 %, subject to annual adjustment. The annual interest rate was 1.80 % for the duration of 2021. At March 31, 2022, the funds withheld balance was $ 575,000 (December 31, 2021 - $ 575,000 ) and the accrued interest was $ 2,552 (December 31, 2021 - $ 2,609 ). The interest income on the funds withheld receivable was $ 2,552 for the three months ended March 31, 2022 (2021 - $ 2,552 ). Pursuant to the terms of the LPT/ADC Agreement, Maiden Reinsurance, Cavello and AmTrust and certain of its affiliated companies entered into a Master Collateral Agreement (“MCA”) to define and enable the operation of collateral provided under the AmTrust Quota Share. Under the MCA, Cavello provided letters of credit on behalf of Maiden Reinsurance to AmTrust in an amount representing Cavello’s obligations under the LPT/ADC Agreement. Because these letters of credit replaced other collateral previously provided directly by Maiden Reinsurance to AmTrust, the MCA coordinates the collateral protection that will be provided to AmTrust to ensure that no gaps in collateral funding occur by operation of the LPT/ADC Agreement and related MCA. As a result of entering into both the LPT/ADC Agreement and the MCA, certain post-termination endorsements (“PTEs”) to the AmTrust Quota Share between AII and Maiden Reinsurance were required. Effective July 31, 2019, the PTEs: i) enable the operation of both the LPT/ADC Agreement and MCA by making provision for certain forms of collateral, including letters of credit provided by Cavello on Maiden Reinsurance’s behalf, and further defines the permitted use and return of collateral; and ii) increase the required funding percentage for Maiden Reinsurance under the collateral arrangements between the parties to 105 % of its obligations, subject to a minimum excess funding requirement of $ 54,000 , as may be mutually amended by the parties from time to time. Under certain defined conditions, Maiden Reinsurance may be required to increase this funding percentage to 110 %. Effective March 16, 2020, Maiden Reinsurance discontinued as a Bermuda company and completed its re-domestication to the State of Vermont. Bermuda is a Solvency II equivalent jurisdiction and the State of Vermont is not such a jurisdiction; therefore, the collateral provided under the respective agreements with AmTrust subsidiaries was strengthened to reflect the impact of the re-domestication concurrent with the date of Maiden Reinsurance’s re-domestication to Vermont. Maiden Reinsurance and AmTrust agreed to: 1) amend the AmTrust Quota Share pursuant to Post Termination Endorsement No. 2 effective March 16, 2020; and 2) amend the European Hospital Liability Quota Share pursuant to Post Termination Endorsement No. 1 effective March 16, 2020. Pursuant to the terms of Post Termination Endorsement No. 2 to the AmTrust Quota Share, Maiden Reinsurance strengthened the collateral protection provided by Maiden Reinsurance to AII by increasing the required funding percentage for Maiden Reinsurance under the collateral arrangements between the parties to 110 % of its obligations, subject to a minimum excess funding requirement of $ 54,000 , as may be mutually amended by the parties from time to time. Post Termination Endorsement No. 2 also sets forth conditions by which the funding percentage will be reduced and the sequence of how collateral will be utilized as obligations, as defined under the AmTrust Quota Share, are satisfied. Pursuant to the terms of Post Termination Endorsement No. 1 to the European Hospital Liability Quota Share, Maiden Reinsurance strengthened the collateral protection provided by Maiden Reinsurance to AEL and AIU DAC by increasing the required funding percentage for Maiden Reinsurance under the collateral arrangements between the parties to the greater of 120 % of the Exposure (as defined therein) and the amount of security required to offset the increase in the Solvency Capital Requirement (“SCR”) that results from the changes in the SCR which arise out of Maiden Reinsurance's re-domestication as compared to the SCR calculation if Maiden Reinsurance had remained domesticated in a Solvency II equivalent jurisdiction with a solvency ratio above 100 % and provided collateral equivalent to 100 % of the Exposure. b) European Hospital Liability Quota Share Collateral has been provided to both AEL and AIU DAC under the European Hospital Liability Quota Share. For AEL, the amount of the collateral held in reinsurance trust accounts at March 31, 2022 was $ 234,633 (December 31, 2021 - $ 244,488 ) and the accrued interest was $ 1,538 (December 31, 2021 - $ 1,273 ). For AIU DAC, the Company utilizes funds withheld to satisfy its collateral requirements. At March 31, 2022, the amount of funds withheld was $ 25,755 (December 31, 2021 - $ 26,460 ) and the accrued interest was $ 163 (December 31, 2021 - $ 141 ). AIU DAC pays Maiden Reinsurance a fixed annual interest rate of 0.5 % on the average daily funds withheld balance which is subject to annual adjustment. The interest income on the funds withheld receivable was $ 26 for the three months ended March 31, 2022 (2021 - $ 37 ). Brokerage Agreement Effective July 1, 2007, the Company entered into a reinsurance brokerage agreement with AII Reinsurance Broker Ltd. ("AIIB"), a wholly owned subsidiary of AmTrust. Pursuant to the brokerage agreement, AIIB provided brokerage services relating to the AmTrust Quota Share and the European Hospital Liability Quota Share for a fee equal to 1.25 % of the premium assumed. AIIB was not the Company's exclusive broker. The brokerage agreement was terminated as of March 15, 2019. Maiden Reinsurance recorded $( 60 ) of reinsurance brokerage expense for the three months ended March 31, 2022 (2021 - $ 69 ) and deferred reinsurance brokerage of $ 1,021 at March 31, 2022 (December 31, 2021 - $ 1,147 ) as a result of this agreement. 28 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 10. Related Party Transactions (continued) Asset Management Agreement Effective July 1, 2007, the Company entered into an asset management agreement with AII Insurance Management Limited ("AIIM"), a wholly owned subsidiary of AmTrust, pursuant to which AIIM agreed to provide investment management services to the Company. Effective January 1, 2018, AIIM provides investment management services for a quarterly fee of 0.02125 % of the average value of the account. The agreement may be terminated upon 30 days written notice by either party. The Company recorded $ 126 of investment management fees for the three months ended March 31, 2022 (2021 - $ 272 ) under this agreement. On September 9, 2020, Maiden Reinsurance, AmTrust and AIIM entered into a novation agreement, effective July 1, 2020, which provided for the novation of the asset management agreement, dated January 1, 2018 between Maiden Reinsurance and AIIM, and the release by Maiden Reinsurance of AIIM's obligations under the asset management agreement. The novation mandates that AmTrust is to be bound by the terms of the asset management agreement in place of AIIM and AmTrust agrees to perform any and all past, present and future obligations of AIIM under the asset management agreement. On November 13, 2020, Maiden LF, Maiden GF, AmTrust and AIIM entered into a novation agreement, effective July 1, 2020, which provided for the novation of the asset management agreement, dated January 1, 2018 between Maiden LF, Maiden GF and AIIM, and the release by Maiden LF and Maiden GF of AIIM's obligations under the asset management agreement. The novation mandates that AmTrust is to be bound by the terms of the asset management agreement in place of AIIM and AmTrust agrees to perform any and all past, present and future obligations of AIIM under the asset management agreement. 683 Capital Partners, LP (“683 Partners”) At March 31, 2022, 683 Partners and its affiliates own or control approximately 6.7 % of the outstanding common shares of the Company. 683 Partners and its affiliates are not related parties as defined in ASC 850: Related Party Disclosures . Limited Partnership Agreement with 683 Capital Management, LLC ("683 Capital") In July 2020, the Company and 683 Capital entered into a limited partnership agreement (“683 LP Agreement”) whereby 683 Capital will separately manage certain funds of Maiden Reinsurance at its discretion, subject to guidelines established by the parties. Under the 683 LP Agreement, Maiden Reinsurance will pay 683 Capital a management fee and subject to certain metrics agreed to by the parties, an incentive fee upon attainment of those metrics. Maiden Reinsurance may periodically and in its discretion increase the amount invested under the 683 LP Agreement, and subject to certain conditions, reduce the amount invested under the 683 LP Agreement. Hedge fund investments of $ 32,861 were managed by 683 Capital under this agreement at March 31, 2022 (December 31, 2021 - $ 32,929 ). 11. Commitments, Contingencies and Guarantees There are no material changes from the commitments, contingencies and concentrations previously disclosed in the Company’s Form 10-K for the year ended December 31, 2021. a) Concentrations of Credit Risk At March 31, 2022 and December 31, 2021, the Company’s assets where significant concentrations of credit risk may exist include investments, cash and cash equivalents, loan to related party, reinsurance recoverable on unpaid losses and funds withheld receivable. Please refer to " Note 8. Reinsurance " for additional information regarding the Company's credit risk exposure on its reinsurance counterparties including the impact of the LPT/ADC Agreement effective January 1, 2019. The Company requires its reinsurers to have adequate financial strength. The Company evaluates the financial condition of its reinsurers and monitors its concentration of credit risk on an ongoing basis. Provisions are made for amounts considered potentially uncollectible. Letters of credit are provided by its reinsurers for material amounts recoverable as discussed in " Note 8. Reinsurance ". The Company manages the concentration of credit risk in its investment portfolio through issuer and sector exposure limitations. The Company believes it bears minimal credit risk in its cash on deposit. The Company also monitors the credit risk related to the loan to related party and funds withheld receivable, within which the largest balances are due from AmTrust. AmTrust has a financial strength/credit rating of A- (Excellent) from A.M. Best at March 31, 2022. To mitigate credit risk, the Company generally has a contractual right of offset thereby allowing claims to be settled net of any premiums or loan receivable. The Company believes these balances as at March 31, 2022 will be fully collectible. b) Investment Commitments and Related Financial Guarantees The Company had unfunded commitments on other investments of $ 67,278 at March 31, 2022 (December 31, 2021 - $ 68,262 ). The Company had unfunded commitments on equity method investments of $ 17,790 at March 31, 2022 (December 31, 2021 - $ 25,950 ). The Company's unfunded commitments on privately held equity securities at March 31, 2022 was $ 22,052 (December 31, 2021 - $ 27,415 ). 29 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 11. Commitments, Contingencies and Guarantees (continued) The Company's unfunded commitments on other investments held at March 31, 2022 and December 31, 2021 were as follows: March 31, 2022 December 31, 2021 Fair Value % of Total Fair Value % of Total Private credit funds $ 3,771 5.6 % $ 4,897 7.2 % Investments in direct lending entities 9,912 14.7 % 13,216 19.4 % Other privately held investments 1,900 2.8 % 4,000 5.8 % Private equity funds 51,695 76.9 % 46,149 67.6 % Total unfunded commitments on other investments $ 67,278 100.0 % $ 68,262 100.0 % Certain 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. 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 March 31, 2022, guarantees of $ 36,231 (December 31, 2021 - $ 33,305 ) were provided to lenders by the Company on behalf of real estate joint ventures, 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. c) Operating Lease Commitments The Company leases office spaces, housing, office equipment and company vehicles under various operating leases expiring in various years through 2024. The Company's leases are currently classified as operating leases and none of them have non-lease components. For operating leases that have a lease term of more than twelve months, and whose lease payments are above a certain threshold, the Company recognizes a lease liability and a right-of-use asset in the Condensed Consolidated Balance Sheets at the present value of the remaining lease payments until expiration. As the lease contracts generally do not provide an implicit discount rate, the Company used the weighted-average discount rate of 10 %, representing its secured incremental borrowing rate, in calculating the present value of the lease liability. This amount of $ 427 is recorded as a lease liability within accrued expenses and other liabilities with an equivalent amount for the right-of-use asset presented as part of other assets at March 31, 2022. The Company's weighted-average remaining lease term is approximately 2.5 years at March 31, 2022. d) Legal Proceedings Except as noted below, the Company is not a party to any material legal proceedings. From time to time, the Company is subject to routine legal proceedings, including arbitration, arising in the ordinary course of business. These legal proceedings generally relate to claims asserted by or against the Company in the ordinary course of insurance or reinsurance operations. Based on the Company's opinion, the eventual outcome of these legal proceedings is not expected to have a material adverse effect on its financial condition or results of operations. In April 2009, the Company learned that Bentzion S. Turin, the former Chief Operating Officer, General Counsel and Secretary of Maiden Holdings and Maiden Reinsurance, sent a letter to the U.S. Department of Labor claiming that his employment with the Company was terminated in retaliation for corporate whistle-blowing in violation of the whistle-blower protection provisions of the Sarbanes-Oxley Act of 2002. Mr. Turin alleged that he was terminated for raising concerns regarding corporate governance with respect to the negotiation of the terms of the Trust Preferred Securities Offering. He seeks reinstatement as Chief Operating Officer, General Counsel and Secretary of Maiden Holdings and Maiden Reinsurance, back pay and legal fees incurred. On December 31, 2009, the U.S. Secretary of Labor found no reasonable cause for Mr. Turin’s claim and dismissed the complaint in its entirety. Mr. Turin objected to the Secretary's findings and requested a hearing before an administrative law judge in the U.S. Department of Labor. The Company moved to dismiss Mr. Turin's complaint, and its motion was granted by the Administrative Law Judge on June 30, 2011. On July 13, 2011, Mr. Turin filed a petition for review of the Administrative Law Judge's decision with the Administrative Review Board in the U.S. Department of Labor. On March 29, 2013, the Administrative Review Board reversed the dismissal of the complaint on procedural grounds, and remanded the case to the administrative law judge. The administrative hearing began in September 2014 and concluded in November 2018. On September 2, 2021, Administrative Law Judge Theresa C. Timlin of the U.S. Department of Labor issued a decision and order which denied Mr. Turin’s complaint in full. On September 16, 2021, Mr. Turin filed a petition for review of the Administrative Law Judge's decision with the Administrative Review Board in the U.S. Department of Labor. The Company believes that it had good and sufficient reasons for terminating Mr. Turin's employment and that the claim is without merit. The Company will continue to vigorously defend itself against this claim. 30 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 11. Commitments, Contingencies and Guarantees (continued) A putative class action complaint was filed against Maiden Holdings, Arturo M. Raschbaum, Karen L. Schmitt, and John M. Marshaleck in the United States District Court for the District of New Jersey on February 11, 2019. On February 19, 2020, the Court appointed lead plaintiffs, and on May 1, 2020, lead plaintiffs filed an amended class action complaint (the “Amended Complaint”).The Amended Complaint asserts violations of Section 10(b) of the Exchange Act and Rule 10b-5 (and Section 20(a) for control person liability) arising in large part from allegations that Maiden failed to take adequate loss reserves in connection with reinsurance provided to AmTrust. Plaintiffs further claim that certain of Maiden Holdings’ representations concerning its business, underwriting and financial statements were rendered false by the allegedly inadequate loss reserves, that these misrepresentations inflated the price of Maiden Holdings' common stock, and that when the truth about the misrepresentations was revealed, the Company’s stock price fell, causing Plaintiffs to incur losses. On September 11, 2020, a motion to dismiss was filed on behalf of all Defendants. On August 6, 2021, the Court issued an order denying, in part, Defendants’ motion to dismiss, ordering Plaintiffs to file a shorter amended complaint no later than August 20, 2021, and permitting discovery to proceed on a limited basis. We believe the claims are without merit and we intend to vigorously defend ourselves. It is possible that additional lawsuits will be filed against the Company, its subsidiaries and its respective officers due to the diminution in value of our securities as a result of our operating results and financial condition. It is currently uncertain as to the effect of such litigation on our business, operating results and financial condition. 12. Earnings per Common Share The following is a summary of the elements used in calculating basic and diluted earnings per common share: For the Three Months Ended March 31, 2022 2021 Numerator: Net (loss) income $ ( 1,949 ) $ 9,286 Gain from repurchase of preference shares - Series A, C and D 3,543 62,450 Amount allocated to participating common shareholders (1) ( 10 ) ( 1,133 ) Net income allocated to Maiden common shareholders $ 1,584 $ 70,603 Denominator: Weighted average number of common shares – basic 86,547,173 85,132,939 Potentially dilutive securities: Share options and restricted share units (2) 3,642 3,949 Adjusted weighted average number of common shares – diluted (2) 86,550,815 85,136,888 Basic and diluted earnings per share attributable to common shareholders $ 0.02 $ 0.83 (1) This represents the share in net income using the two-class method for holders of non-vested restricted shares issued to the Company's employees under the 2019 Omnibus Incentive Plan. (2) Please refer to "Note 6. Shareholders' Equity" and "Note 14. Share Compensation and Pension Plans" in the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2021 for the terms and conditions of securities that could potentially be dilutive in the future. For the three months ended March 31, 2022, there were 3,642 potentially dilutive securities (2021 - 3,949 ). 13. Income Taxes The income tax expense amounts on net income for the three months ended March 31, 2022 and 2021 were $ 1,255 and $ 49 , respectively. The effective tax rate on income differs from the statutory rate of zero percent under Bermuda law due to tax on foreign operations, primarily the U.S. and Sweden. A valuation allowance has been established against the net U.S. deferred tax assets which are primarily attributable to net operating losses and discounting of loss reserves for tax purposes. At this time, the Company believes it is necessary to establish a valuation allowance against the U.S. net deferred tax assets due to insufficient positive evidence regarding the utilization of these tax benefits in the future . 31