Maiden Holdings, Ltd. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this "Form 10-Q" or this "Report"). References in this Form 10-Q to the terms "we", "us", "our", "the Company", "Maiden" or other similar terms mean the consolidated operations of Maiden Holdings, Ltd. and its subsidiaries, unless the context requires otherwise. References in this Form 10-Q to the term "Maiden Holdings" means Maiden Holdings, Ltd. only. Certain reclassifications have been made for 2021 to conform to the 2022 presentation and have no impact on consolidated net income and total equity previously reported. Note on Forward-Looking Statements This Quarterly Report on Form 10-Q includes projections concerning financial information and statements concerning future economic performance and events, plans and objectives relating to management, operations, products and services, and assumptions underlying these projections and statements. These projections and statements are forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 and are not historical facts but instead represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and outside our control. These projections and statements may address, among other things, our strategy for growth, product development, financial results and reserves. Our actual results and financial condition may differ, possibly materially, from these projections and statements and therefore you should not place undue reliance on them. Factors that could cause our actual results and financial condition to differ, possibly materially, from those in the specific projections and statements are discussed throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations and in "Risk Factors" in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2021 that was filed with the U.S. Securities and Exchange Commission ("SEC") on March 14, 2022, however, these factors should not be construed as exhaustive. Forward-looking statements speak only as of the date they are made and we undertake no obligation to update or revise any forward-looking statement that may be made from time to time, whether as a result of new information, future developments or otherwise, except as required by law. 35 Overview Maiden Holdings is a Bermuda-based holding company. We create shareholder value by actively managing and allocating our assets and capital, including through ownership and management of businesses and assets mostly in the insurance and related financial services industries where we can leverage our deep knowledge of those markets. We also provide a full range of legacy services to small insurance companies, particularly those in run-off or with blocks of reserves that are no longer core, working with clients to develop and implement finality solutions including acquiring entire companies that enable our clients to meet their capital and risk management objectives. We expect our legacy solutions business to contribute to our active asset and capital management strategies. Short-term income protection business is written on a primary basis by our wholly owned subsidiaries Maiden Life Försäkrings AB ("Maiden LF") and Maiden General Försäkrings AB ("Maiden GF") in the Scandinavian and Northern European markets. Insurance support services are provided to Maiden LF and Maiden GF through our wholly owned subsidiary, Maiden Global Holdings, Ltd. ("Maiden Global") which is also a licensed intermediary in the United Kingdom. Maiden Global had previously operated internationally by providing branded auto and credit life insurance products through insurer partners, particularly those in Europe and other global markets. These products also produced reinsurance programs which were underwritten by our wholly owned subsidiary Maiden Reinsurance Ltd. ("Maiden Reinsurance"). We are not currently underwriting reinsurance business on new prospective risks but are actively underwriting risks on a retroactive basis through Genesis Legacy Solutions ("GLS"). 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") which we terminated in 2019 as discussed in " Note 10. Related Party Agreements " of the Notes to Condensed Consolidated Financial Statements in Part I Item 1. "Financial Information" . In addition, we have a Loss Portfolio Transfer and Adverse Development Cover Agreement ("LPT/ADC Agreement") with Cavello Bay Reinsurance Limited ("Cavello") and a commutation agreement that further reduces our exposure to and limits the potential volatility related to these AmTrust liabilities in run-off, as discussed in " Note 8. Reinsurance " of the Notes to Condensed Consolidated Financial Statements in Part I Item 1. "Financial Information" . Our business currently consists of two reportable segments: Diversified Reinsurance and AmTrust Reinsurance. Our Diversified Reinsurance segment consists of a portfolio of predominantly property and casualty reinsurance business focusing on regional and specialty property and casualty insurance companies located primarily in Europe. This segment also includes transactions entered into by GLS which was formed in November 2020 . 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"), both of which are in run-off effective January 1, 2019. Please refer to " Management's Discussion and Analysis of Financial Condition and Results of Operations " section included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021 for further information on recent developments within the Company. We believe Maiden Holdings North America, Ltd.'s ("Maiden NA") investments, including its ownership of Maiden Reinsurance and its active asset management strategy, will create opportunities to utilize net operating loss carry-forwards ("NOL") of $232.4 million as of June 30, 2022. These NOL carryforwards, in combination with additional net deferred tax assets ("DTA") primarily related to our insurance liabilities result in a net U.S. DTA (before valuation allowance) of $111.0 million or $1.27 per common share at June 30, 2022. These net DTA are not presently recognized on the Company's consolidated balance sheet as a full valuation allowance is carried against them. At this time, while positive evidence in support of reducing the valuation allowance is accumulating, the Company believes it is necessary to maintain its full valuation allowance against the net U.S. DTA due to insufficient accumulation of evidence at this time regarding the utilization of these losses. As our profitability continues to improve, we will continuously evaluate the amount of the valuation allowance held against the net U.S. DTA. For further details, please see "Note 13. Income Taxes" included under Item 8 "Financial Statements and Supplementary Data" in our Annual Report on Form 10-K for the year ended December 31, 2021. Taken together, we believe these measures should generate additional income for Maiden NA in a tax-efficient manner, while sharing in the improvement in profitability anticipated in Maiden Reinsurance as a result of the measures enacted as described above. Business Strategy We continued to deploy our revised operating strategy during 2022 which leverages the significant assets and capital we retain. In addition to restoring operating profitability, our strategic focus centers on creating the greatest risk-adjusted shareholder returns in order to increase book value for our common shareholders, both near and long-term. This strategy has three principal areas of focus: • Asset management - investing in assets and asset classes in a prudent but expansive manner in order to maximize investment returns and is principally enabled by limiting the amount of insurance risk we assume in relation to the assets we hold and maintaining required regulatory capital at very strong levels to manage our aggregate risk profile; • Legacy underwriting - judiciously building a portfolio of legacy run-off acquisitions and retroactive reinsurance transactions which we believe will produce attractive underwriting returns; and • Capital management - effectively managing the capital we hold on our balance sheet and when appropriate, repurchasing securities or returning capital to enhance common shareholder returns. 36 The returns expected to be produced by each pillar of our strategy are evaluated in relation to our cost of debt capital, which carries a weighted average effective interest rate of 7.6%. To the extent our experience or belief indicates we cannot exceed the cost of debt capital over a reasonable long-term investment horizon, we expect to refrain from activities in those areas. As an example, our present assessment of the reinsurance marketplace along with our current operating profile continues to be that the risk-adjusted returns that may be produced via active reinsurance underwriting of new prospective risks are likely to be lower over the long-term than our cost of capital. The measures implemented in recent years have allowed us to more flexibly allocate capital to those activities most likely to produce the greatest returns for shareholders, and we are actively engaged in evaluating and deploying funds in all pillars of the strategies as discussed herein. We also believe that these areas of strategic focus will enhance our profitability through increased returns, which we believe also increase the likelihood of fully utilizing the significant NOL carryforwards described above which would create additional common shareholder value. As part of our expanded asset management activities, we have evaluated and continue to consider investing in various initiatives in the insurance industry across a variety of segments which we believe will produce appropriate risk-adjusted returns while maintaining the option to consider underwriting activities in the future. We believe these expanded activities will produce a broad range of positive impacts on our financial condition, including current income, longer-term gains and in certain instances, fee income. In recent years, we have invested approximately $250.6 million into alternative investments which include equity securities, other investments and equity method investments in a wide variety of asset classes and we believe these activities will exceed that benchmark cost of capital with adjustments as necessary if those returns do not emerge. In November 2020, we formed GLS which specializes in providing a full range of legacy services to small insurance entities, particularly those in run-off or with blocks of reserves that are no longer core, working with clients to develop and implement finality solutions including acquiring entire companies that enable our clients to meet their capital and risk management objectives. We acquire legacy liabilities and (re)insurance reserves from companies and provide retroactive reinsurance coverage for portfolios of (re)insurance business, primarily via loss portfolio transfer contracts (“LPT”). Additionally, we provide reinsurance contracts to other (re)insurers to mitigate some of their risk of future adverse development (adverse development cover, or “ADC”) on insurance risks relating to prior accident years. We believe the formation of GLS is highly complementary to our overall longer-term strategy. and will produce risk-adjusted returns in excess of our debt cost of capital. In addition, while we anticipate profitable growth from the GLS portfolio as it develops, we expect our required capital to continue to decline as insurance risk incurred by GLS will be more than offset by the run-off of insurance liabilities from our prior reinsurance strategies. GLS, along with other recent insurance industry investments, enables us to leverage our knowledge base while not re-entering active underwriting of new prospective risks and maintaining an efficient operating profile. We believe GLS not only enhances our profitability through both fee income and effective claims management services, but it will also increase our asset base through the addition of blocks of reserves or companies that can be successfully wound down. Effective October 1, 2021, GLS completed its first loss portfolio transfer transaction which includes an ADC cover. GLS and its subsidiaries have completed additional transactions in 2022 and as of June 30, 2022, GLS and its subsidiaries have insurance related liabilities totaling $36.3 million which included total reserves of $22.4 million, derivative liability on retroactive reinsurance of $9.3 million, and deferred gains on retroactive reinsurance of $4.6 million. GLS continues to write additional retroactive reinsurance transactions consistent with its business plan. In addition to producing returns that exceed the target cost of capital, we expect the business produced through GLS should further enhance our ability to pursue the asset and capital management pillars of our business strategy. Our capital management strategy is significantly informed by the required capital needed to operate our business in a prudent manner and our ongoing analysis of our loss development trends. Recent trends continue to increase our confidence in our recorded ultimate losses for our insurance liabilities in run-off, however, a prudent assessment dictates that the run-off portfolio still requires additional maturity to fully emerge. While there is no guarantee that these recent loss development trends will persist, as our confidence has increased it has enabled us to pursue continued capital management initiatives, primarily the repurchase of our preference shares, which we believe provide the greatest risk-adjusted returns to our common shareholders. Our current assessment is that losses have continued to stabilize sufficiently to continue the capital management initiatives we initiated in 2020, although we have approached these strategies in a deliberate fashion. On March 3, 2021 and May 6, 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 $100.0 million and $50.0 million, respectively, 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 are collectively referred to as the "2021 Preference Share Repurchase Program". The Company has a remaining authorization of $3.9 million for preference share repurchases at June 30, 2022. Please refer to "Notes to Condensed Consolidated Financial Statements - Note 6. Shareholders' Equity" under Item 8 "Financial Statements and Supplementary Data" in Part I Item 1. "Financial Information" for recent repurchases and further detail on our preference shares. Our ability to execute our asset and capital management initiatives is dependent on maintaining adequate levels of unrestricted liquidity and cash flows. Further, there can be no assurance that our insurance liabilities will run-off at levels that will permit further capital management activities, which we continually review as part of our strategy. Please refer to the "Liquidity and Capital Resources" section for further information on our asset and capital management activities, in particular our various preference share repurchase measures. 37 Three and Six Months Ended June 30, 2022 and 2021 Financial Highlights For the Three Months Ended June 30, 2022 2021 Change Summary Consolidated Statement of Income Data (unaudited): ($ in thousands except per share data) Net income $ 1,062 $ 8,112 $ (7,050) Gain from repurchase of preference shares 24,690 18,714 5,976 Net income attributable to Maiden common shareholders 25,752 26,826 (1,074) Basic and diluted earnings per common share: Net income attributable to common shareholders (2) 0.29 0.31 (0.02) Gain from repurchase of preference securities per common share 0.28 0.22 0.06 Gross premiums written 3,339 3,434 (95) Net premiums earned 10,443 13,312 (2,869) Underwriting (loss) income (3) (5,130) 8,471 (13,601) Net investment income 7,667 7,278 389 Non-GAAP measures: Non-GAAP operating earnings (1) 16,633 13,948 2,685 Non-GAAP basic and diluted operating earnings per common share (1) 0.19 0.16 0.03 Annualized non-GAAP operating return on average common shareholders' equity (1) 25.2 % 20.7 % 4.5 For the Six Months Ended June 30, 2022 2021 Change Summary Consolidated Statement of Income Data (unaudited): ($ in thousands except per share data) Net (loss) income $ (887) $ 17,398 $ (18,285) Gain from repurchase of preference shares 28,233 81,164 (52,931) Net income attributable to Maiden common shareholders 27,346 98,562 (71,216) Basic and diluted earnings per common share: Net income attributable to Maiden common shareholders (2) 0.31 1.14 (0.83) Gain from repurchase of preference shares per common share 0.33 0.95 (0.62) Gross premiums written (6,831) 1,044 (7,875) Net premiums earned 11,565 25,076 (13,511) Underwriting (loss) income (3) (6,785) 10,026 (16,811) Net investment income 14,234 17,119 (2,885) Non-GAAP measures: Non-GAAP operating earnings (1) 9,698 61,249 (51,551) Non-GAAP basic and diluted operating earnings per common share (1) 0.11 0.71 (0.60) Annualized non-GAAP operating return on average common shareholders' equity (1) 7.2 % 50.9 % (43.7) 38 June 30, 2022 December 31, 2021 Change Consolidated Financial Condition ($ in thousands except per share data) Total investments and cash and cash equivalents (4) $ 747,390 $ 888,699 $ (141,309) Total assets 2,156,190 2,322,610 (166,420) Reserve for loss and LAE 1,275,107 1,489,373 (214,266) Senior notes - principal amount 262,500 262,500 — Common shareholders' equity 228,261 225,047 3,214 Shareholders' equity 347,933 384,257 (36,324) Total capital resources (5) 610,433 646,757 (36,324) Ratio of debt to total capital resources (10) 43.0 % 40.6 % 2.4 Book Value calculations: Book value per common share (6) $ 2.62 $ 2.60 $ 0.02 Accumulated dividends per common share (12) 4.27 4.27 — Book value per common share plus accumulated dividends $ 6.89 $ 6.87 $ 0.02 Change in book value per common share plus accumulated dividends 0.3 % Diluted book value per common share (7) $ 2.60 $ 2.59 $ 0.01 Non-GAAP measures: Adjusted book value per common share (8) $ 3.09 $ 3.18 $ (0.09) Adjusted shareholders' equity (9) 389,330 434,200 (44,870) Adjusted total capital resources (9) 651,830 696,700 (44,870) Ratio of debt to adjusted total capital resources (11) 40.3 % 37.7 % 2.6 (1) Non-GAAP operating earnings, non-GAAP operating earnings per common share, and annualized non-GAAP operating return on average common shareholders' equity are non-GAAP financial measures. See " Key Financial Measures " for additional information. (2) Please refer to " Notes to Condensed Consolidated Financial Statements (unaudited) Note 12. Earnings per Common Share " for the calculation of basic and diluted income per common share. (3) Underwriting income or loss is a non-GAAP measure and is calculated as net premiums earned plus other insurance revenue less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities. See " Key Financial Measures " for additional information. (4) Total investments and cash and cash equivalents includes both restricted and unrestricted. (5) Total capital resources is the sum of the Company's principal amount of debt and shareholders' equity. See " Key Financial Measures " for additional information. (6) Book value per common share is calculated using common shareholders’ equity (shareholders' equity excluding the aggregate liquidation value of our preference shares) divided by the number of common shares outstanding. See " Key Financial Measures " for additional information. (7) Diluted book value per common share is calculated by dividing common shareholders' equity, adjusted for assumed proceeds from the exercise of dilutive options, by the number of outstanding common shares plus dilutive options and restricted shares (assuming exercise of all dilutive share based awards). See " Key Financial Measures " for additional information. (8) Adjusted book value per common share is a non-GAAP measure that is calculated using common shareholders' equity, adjusted by adding the following items to shareholders' equity: 1) the unamortized deferred gain on retroactive reinsurance arising from the LPT/ADC Agreement; and 2) an adjustment which reflects the equity method accounting related to the fair value of certain hedged liabilities within an equity method investment in a limited partnership investment held by the Company wherein the ultimate realizable value of the asset supporting the hedged liabilities cannot currently be recognized at fair value, divided by the number of common shares outstanding. See " Key Financial Measures " for additional information. (9) Adjusted shareholders' equity and adjusted total capital resources are calculated by adding the following items to shareholders' equity: 1) the unamortized deferred gain on retroactive reinsurance arising from the LPT/ADC Agreement; and 2) an adjustment which reflects the equity method accounting related to the fair value of certain hedged liabilities within an equity method investment held by the Company wherein the ultimate realizable value of the asset supporting the hedged liabilities cannot currently be recognized at fair value. The deferred gain arises from the LPT/ADC Agreement with Cavello relating to losses from the AmTrust Quota Share agreement. Under U.S. GAAP, the deferred gain shall be amortized over the estimated remaining settlement period. See " Key Financial Measures " for additional information. (10) Ratio of debt to total capital resources is calculated using the total principal amount of debt divided by the sum of total capital resources. (11) Ratio of debt to adjusted total capital resources is calculated using the total principal amount of debt divided by the sum of adjusted total capital resources. (12) Accumulated dividends per common share includes the cumulative sum of dividends declared and paid in the past on the Company's issued common shares since inception. 39 Key Financial Measures In addition to our key financial measures presented in accordance with GAAP in the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Income and Comprehensive Income, management uses certain non-GAAP financial measures to evaluate the Company's financial performance and the overall growth in value generated for the Company’s common shareholders. Management believes that these measures, which may be defined differently by other companies, explain the Company’s results to investors in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. The non-GAAP measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. The calculation of these key financial measures including the reconciliation of non-GAAP measures to the nearest GAAP measure and relevant discussions are found within Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" . These non-GAAP financial measures are: Non-GAAP operating earnings and non-GAAP diluted operating earnings per common share : Management believes that the use of non-GAAP operating earnings and non-GAAP diluted operating earnings per common share enables investors and other users of the Company’s financial information to analyze its performance in a manner similar to how management analyzes performance. Management also believes that these measures generally follow industry practice therefore allowing the users of financial information to compare the Company’s performance with its industry peer group, and that the equity analysts and certain rating agencies which follow the Company, and the insurance industry as a whole, generally exclude these items from their analyses for the same reasons. Non-GAAP operating earnings should not be viewed as a substitute for U.S. GAAP net income. Non-GAAP operating earnings is an internal performance measure used by management as these measures focus on the underlying fundamentals of the Company's operations by excluding, on a recurring basis: (1) net realized gains or losses on investment; (2) foreign exchange and other gains or losses; (3) the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under the LPT/ADC Agreement; and (4) interest in income (loss) of equity method investments. We have excluded net realized gains on investment, interest in income (loss) of equity method investments and foreign exchange and other gains (losses) as we believe these are influenced by market opportunities and other factors. We do not believe that ceded risks under the LPT/ADC Agreement are representative of our ongoing and future business which are different to retroactive reinsurance risks written by GLS that are representative of our ongoing and future business. We believe all of these amounts are substantially independent of our business and any potential future underwriting process, and therefore including them would distort the analysis of underlying trends in our operations. Underwriting income (loss) is a non-GAAP measure and is calculated as net premiums earned plus other insurance revenue less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities. For purposes of these non-GAAP operating measures, the fee-generating business which is included in our Diversified Reinsurance segment, is considered part of the underwriting operations of the Company. Management believes that this measure is important in evaluating the underwriting performance of the Company and its segments. This measure is also a useful tool to measure the profitability of the Company separately from the investment results and is also a widely used performance indicator in the insurance industry. A reconciliation of the Company's underwriting results can be found in the Condensed Consolidated Financial Statements in the " Notes to Condensed Consolidated Financial Statements (unaudited) Note 3. Segment Information " included under Item 1. "Financial Statements" of this Quarterly Report on Form 10-Q. The Company no longer presents certain non-GAAP measures such as combined ratio and its related components in this Quarterly Report on Form 10-Q for the three and six months ended June 30, 2022, as it believes that as the run-off of our reinsurance portfolios progresses, such ratios are increasingly not meaningful and of less value to readers as they evaluate the financial results of the Company, particularly compared to historical data. While an important metric of success, underwriting income (loss) does not reflect all components of profitability, as it does not recognize the impact of investment income earned on premiums between the time premiums are received and the time loss payments are ultimately paid to clients. Because we do not manage our cash and investments by segment, investment income and interest expense are not allocated to the reportable segments. Certain general and administrative expenses are generally allocated to segments based on actual costs incurred. Non-GAAP Operating Return on Average Adjusted Common Equity ("Non-GAAP Operating ROACE"): Management uses non-GAAP operating return on average adjusted common shareholders' equity as a measure of profitability that focuses on the return to common shareholders. It is calculated using non-GAAP operating earnings (loss) available to common shareholders (as defined above) divided by average adjusted common shareholders' equity. Book Value per Common Share and Diluted Book Value per Common Share: Book value per common share and diluted book value per common share are non-GAAP measures. Management uses growth in both of these metrics as a prime measure of the value we are generating for our common shareholders, because management believes that growth in each metric ultimately results in growth in the Company’s common share price. These metrics are impacted by the Company’s net income and external factors, such as interest rates, which can drive changes in unrealized gains or losses on our fixed income investment portfolio, as well as common or preference share repurchases. Ratio of Debt to Total Capital Resources: Management uses this non-GAAP measure to monitor the financial leverage of the Company. This measure is calculated using the total principal amount of debt divided by the sum of total capital resources. Non-GAAP underwriting income (loss) and Non-GAAP Net Loss and LAE: Management has further adjusted underwriting income (loss), as defined above, as well as reported net loss and LAE by excluding the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under retroactive reinsurance agreements such as the LPT/ADC Agreement. These losses are estimated to be fully recoverable from Cavello and management believes adjusting for this development shows the ultimate economic benefit of the LPT/ADC Agreement on our underwriting results. We believe 40 reflecting the economic benefit of this retroactive reinsurance agreement is helpful for understanding future trends in our operations. Adjusted Total Shareholders' Equity, Adjusted Total Capital Resources, Ratio of Debt to Adjusted Total Capital Resources and Adjusted Book Value per Common Share: Management has adjusted GAAP shareholders' equity by adding the following items to shareholders' equity: 1) unamortized deferred gain on ceded retroactive reinsurance under the LPT/ADC Agreement; and 2) an adjustment which reflects the equity method accounting related to the fair value of certain hedged liabilities within an equity method investment held by the Company wherein the ultimate realizable value of the asset supporting the hedged liabilities cannot currently be recognized at fair value ("LP Investment Adjustment"). The unamortized deferred gain on ceded retroactive reinsurance under the LPT/ADC Agreement includes the aggregate impact of: 1) cumulative increases to losses incurred prior to December 31, 2018 for which we have ceded the risk under the LPT/ADC Agreement; and 2) changes in estimated ultimate losses for certain workers' compensation reserves previously commuted by the Company to AmTrust which are subject to specific terms and conditions pursuant to the LPT/ADC Agreement. As a result, by virtue of this adjustment, management has also adjusted Total Capital Resources and computed the Ratio of Debt to Adjusted Capital Resources and Adjusted Book Value per Common Share. The deferred gain liability on retroactive reinsurance under the LPT/ADC Agreement represents loss reserves estimated to be fully recoverable from Cavello and management believes adjusting for this shows the ultimate economic benefit of the LPT/ADC Agreement. We believe reflecting the economic benefit of this non-recurring retroactive reinsurance agreement is helpful to understand future trends in our operations, which will improve the Company's shareholders' equity over the settlement or contract periods, respectively. Alternative investments is the total of the Company's holdings of equity securities, other investments and equity method investments as reported on the Company's Condensed Consolidated Balance Sheets. Certain Operating Measures Refer to " Management's Discussion and Analysis of Financial Condition and Results of Operations " section included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 14, 2022, for a general discussion on " Certain Operating Measures" utilized by the Company. Critical Accounting Policies and Estimates The Company's critical accounting policies and estimates are discussed in " Management's Discussion and Analysis of Financial Condition and Results of Operations " section included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 14, 2022. The critical accounting policies and estimates should be read in conjunction with " Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) Note 2. Significant Accounting Policies " included in this Form 10-Q and " Notes to Consolidated Financial Statements Note 2. Significant Accounting Policies " included within the audited Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2021, filed with the SEC on March 14, 2022. There have been no material changes in the application of our critical accounting estimates subsequent to that report. 41 Results of Operations The following table sets forth our selected unaudited Condensed Consolidated Statement of Income data for the three and six months ended June 30, 2022 and 2021: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2022 2021 2022 2021 Gross premiums written $ 3,339 $ 3,434 $ (6,831) $ 1,044 Net premiums written $ 3,186 $ 3,261 $ (7,137) $ 565 Net premiums earned $ 10,443 $ 13,312 $ 11,565 $ 25,076 Other insurance revenue 469 539 520 808 Net loss and LAE (6,874) 5,327 (4,591) 2,968 Commission and other acquisition expenses (4,885) (6,899) (7,413) (12,841) General and administrative expenses (1) (4,283) (3,808) (6,866) (5,985) Underwriting (loss) income (2) (5,130) 8,471 (6,785) 10,026 Other general and administrative expenses (1) (3,011) (5,098) (11,314) (16,918) Net investment income 7,667 7,278 14,234 17,119 Net realized and unrealized investment gains 2,111 849 4,420 8,950 Foreign exchange and other gains (losses) 6,586 (1,588) 10,535 1,954 Interest and amortization expenses (4,833) (4,832) (9,665) (9,663) Income tax benefit (expense) 713 257 (542) 208 Interest in (loss) income of equity method investments (3,041) 2,775 (1,770) 5,722 Net income (loss) 1,062 8,112 (887) 17,398 Gain from repurchase of preference shares 24,690 18,714 28,233 81,164 Net income available to Maiden common shareholders $ 25,752 $ 26,826 $ 27,346 $ 98,562 (1) Underwriting related general and administrative expenses is a non-GAAP measure. Please refer to "General and Administrative Expenses" below for additional information related to these corporate expenses and the reconciliation to those presented in our unaudited Condensed Consolidated Statements of Income. (2) Underwriting income (loss) is a non-GAAP measure and is calculated as net premiums earned plus other insurance revenue less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities. (3) The Company no longer presents certain non-GAAP measures such as combined ratio and its related components in its results of operation, as it believes that as the run-off of its reinsurance portfolios progresses, such ratios are increasingly not meaningful and of less value to readers as they evaluate our financial results. Net Income Net income available to Maiden common shareholders for the three months ended June 30, 2022 was $25.8 million compared to net income of $26.8 million for the same period in 2021. The net income for the three months ended June 30, 2022 was primarily due to the gain from repurchase of our preference shares which was $24.7 million for the three months ended June 30, 2022 compared to $18.7 million for the same period in 2021. Excluding the gain on the repurchase of our preference shares, net income for the three months ended June 30, 2022 was $1.1 million compared to net income of $8.1 million for the same period in 2021. The decrease in results during the second quarter of 2022 compared to the second quarter of 2021 was primarily due to: • underwriting loss of $5.1 million for the three months ended June 30, 2022 compared to underwriting income of $8.5 million in the same period in 2021 largely due to: ◦ adverse prior year loss development of $1.0 million in the second quarter of 2022 compared to favorable prior year loss development of $12.8 million during the same period in 2021; and ◦ on a current accident year basis, underwriting loss of $4.2 million for the three months ended June 30, 2022 compared to an underwriting loss of $4.3 million for the same period in 2021. • total income from investment activities was $6.7 million for the three months ended June 30, 2022 compared to $10.9 million for the same period in 2021 which was comprised of: ◦ net investment income increased to $7.7 million for the three months ended June 30, 2022 compared to $7.3 million for the same period in 2021; ◦ realized and unrealized investment gains were $2.1 million for the three months ended June 30, 2022 compared to net realized and unrealized investment gains of $0.8 million for the same period in 2021; and 42 ◦ interest in loss of equity method investments was $3.0 million for the three months ended June 30, 2022 compared to income of $2.8 million for the same period in 2021. The decrease in our results as discussed above was partially offset by the following: • corporate general and administrative expenses decreased to $3.0 million for the three months ended June 30, 2022 compared to $5.1 million for the same period in 2021; and • foreign exchange and other gains increased to $6.6 million for the three months ended June 30, 2022, compared to foreign exchange and other losses of $1.6 million for the same period in 2021. Net income available to Maiden common shareholders for the six months ended June 30, 2022 was $27.3 million compared to net income available to Maiden common shareholders of $98.6 million for the same period in 2021. The net decrease in results for the six months ended June 30, 2022 compared to the same period in 2021 was primarily due to gains from the repurchase of our preference shares which decreased by $52.9 million to $28.2 million for the six months ended June 30, 2022 compared to $81.2 million for the same period in 2021. Excluding the gain on the repurchase of our Preference Shares, net loss for the six months ended June 30, 2022 was $0.9 million compared to net income of $17.4 million for the same period in 2021. The most significant items affecting our financial performance during the six months ended June 30, 2022 on a comparative basis to 2021 included: • underwriting loss of $6.8 million in the six months ended June 30, 2022 compared to underwriting income of $10.0 million in the same period in 2021 largely due to: • favorable prior year loss development of $6.3 million for the six months ended June 30, 2022 compared to favorable development of $18.4 million during the same period in 2021 primarily related to the quota share reinsurance agreements in the AmTrust Reinsurance segment; and • on a current accident year basis, underwriting loss of $13.1 million for the six months ended June 30, 2022 compared to an underwriting loss of $8.3 million for the same period in 2021 primarily due to results within the AmTrust Reinsurance segment as discussed below: • significantly higher than expected negative premium adjustments in the AmTrust Reinsurance segment related to adjustments for estimated surcharges on Workers' Compensation policies and inuring AmTrust reinsurance for certain programs in Specialty Risk and Extended Warranty cessions (collectively the "AmTrust Cession Adjustments" which are discussed in greater detail in the AmTrust Reinsurance segment), net of commission and loss adjustments, contributed an underwriting loss of $5.1 million to our reported results for the six months ended June 30, 2022. • total income from investment activities were $16.9 million for the six months ended June 30, 2022 compared to $31.8 million for the same period in 2021 which was comprised of: • net investment income decreased to $14.2 million for the six months ended June 30, 2022 compared to $17.1 million for the same period in 2021, primarily due to the decline in average fixed income assets of 28.5%; • realized and unrealized investment gains decreased to $4.4 million for the six months ended June 30, 2022 compared to $9.0 million for the same period in 2021; and • interest in loss of equity method investments of $1.8 million for the six months ended June 30, 2022 compared to an interest in income of equity method investments of $5.7 million for the same period in 2021. The decrease in our results as discussed above was partially offset by the following: • corporate general and administrative expenses decreased to $11.3 million for the six months ended June 30, 2022 compared to $16.9 million for the same period in 2021; and • foreign exchange and other gains increased to $10.5 million for the six months ended June 30, 2022 compared to foreign exchange and other gains of $2.0 million for the same period in 2021. 43 Net Premiums Written The tables below compare net premiums written by our reportable segments, reconciled to the total consolidated net premiums written for the three and six months ended June 30, 2022 and 2021: For the Three Months Ended June 30, 2022 2021 Change in ($ in thousands) Total Total $ Diversified Reinsurance $ 5,995 $ 5,018 $ 977 AmTrust Reinsurance (2,809) (1,757) (1,052) Total $ 3,186 $ 3,261 $ (75) For the Six Months Ended June 30, 2022 2021 Change in ($ in thousands) Total Total $ Diversified Reinsurance $ 10,578 $ 4,784 $ 5,794 AmTrust Reinsurance (17,715) (4,219) (13,496) Total $ (7,137) $ 565 $ (7,702) Net premiums written for the three and six months ended June 30, 2022 decreased to $3.2 million and $(7.1) million, respectively, compared to net premiums written of $3.3 million and $0.6 million for the same respective periods in 2021: • Premiums written in the Diversified Reinsurance segment increased by $1.0 million and $5.8 million for the three and six months ended June 30, 2022, respectively, compared to the same respective periods in 2021 largely due to the prior year return of unearned premiums after the non-renewal of the German Auto Programs reinsurance contract in our IIS business on January 1, 2021. • The negative written premiums are primarily related to the AmTrust Cession Adjustments in the AmTrust Reinsurance segment for the three and six months ended June 30, 2022. Please refer to the analysis below of our Diversified Reinsurance and AmTrust Reinsurance segments for further details. Net Premiums Earned Net premiums earned decreased by $2.9 million or 21.6% and $13.5 million or 53.9% for the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021. The tables below compare net premiums earned by our reportable segments, reconciled to the total consolidated net premiums earned, for the three and six months ended June 30, 2022 and 2021: For the Three Months Ended June 30, 2022 2021 Change in ($ in thousands) Total Total $ % Diversified Reinsurance $ 7,125 $ 6,962 $ 163 2.3 % AmTrust Quota Share Reinsurance 3,318 6,350 (3,032) (47.7) % Total $ 10,443 $ 13,312 $ (2,869) (21.6) % For the Six Months Ended June 30, 2022 2021 Change in ($ in thousands) Total Total $ % Diversified Reinsurance $ 13,080 $ 13,202 $ (122) (0.9) % AmTrust Quota Share Reinsurance (1,515) 11,874 (13,389) (112.8) % Total $ 11,565 $ 25,076 $ (13,511) (53.9) % Net premiums earned in the AmTrust Reinsurance segment for the three and six months ended June 30, 2022 decreased by $3.0 million and $13.4 million compared to the same periods in 2021 primarily due to the AmTrust Cession Adjustment s . Please refer to the analysis of our AmTrust Reinsurance segment for further discussion. Net premiums earned in the Diversified Reinsurance segment for the three and six months ended June 30, 2022 increased by $0.2 million or 2.3% and decreased by $0.1 million or 0.9% compared to the same periods in 2021, respectively. Please refer to the analysis of our Diversified Reinsurance segment for further discussion. Other Insurance Revenue All of our Other Insurance Revenue is produced by our Diversified Reinsurance segment. Please refer to the analysis below of our Diversified Reinsurance segment for further discussion. 44 Net Investment Income Total net investment income increased by $0.4 million or 5.3% and decreased by $2.9 million or 16.9% for the three and six months ended June 30, 2022, respectively, compared to the same respective periods in 2021. The decline in average aggregate fixed income assets of 26.8% and 28.5% for the three and six months ended June 30, 2022, respectively, was driven by the continued run-off of reinsurance liabilities previously written on prospective risks, resulting in significant negative operating cash flows as we run-off our existing reinsurance liabilities. Net investment income was helped by an increase in annualized average book yields to 2.0% and 1.9% for the three and six months ended June 30, 2022, respectively, compared to 1.7% and 1.8% for the three and six months ended June 30, 2021, respectively. The Company's shorter duration on its fixed income portfolio as well as floating rate investments held enabled it to take advantage of the higher interest rate environment by reinvesting at higher yields more quickly. The following table details our average aggregate fixed income assets (at cost) and annualized investment book yield for the three and six months ended June 30, 2022 and 2021: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2022 2021 2022 2021 Average aggregate fixed income assets, at cost (1) $ 1,353,007 $ 1,848,666 $ 1,402,471 $ 1,960,141 Annualized investment book yield 2.0 % 1.7 % 1.9 % 1.8 % (1) Fixed income assets include available-for-sale ("AFS") securities, cash and restricted cash, funds held receivable, and loan to related party. These amounts are an average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements. Net Realized and Unrealized Investment Gains Net realized and unrealized investment gains of $2.1 million and $4.4 million were recognized for the three and six months ended June 30, 2022, respectively, compared to net realized and unrealized investment gains of $0.8 million and $9.0 million for the same periods in 2021. Realized gains for the three and six months ended June 30, 2022 and 2021 primarily reflect sales of corporate bonds for the settlement of claim payments to AmTrust. Net realized and unrealized investment gains for the three and six months ended June 30, 2022 included the recognition of $3.7 million in unrealized gains related to an increase in the valuation of an investment in an insurtech start-up company. Net realized and unrealized investment gains for the three and six months ended June 30, 2021 included the recognition of $0.6 million in unrealized losses and $3.9 million in unrealized gains, respectively, related to an investment in an insurtech start-up company that was acquired by a special purpose acquisition company. Interest in (Loss) Income of Equity Method Investments The Company had interest in loss of equity method investments of $3.0 million and $1.8 million for the three and six months ended June 30, 2022, respectively, compared to interest in income of equity method investments of $2.8 million and $5.7 million for the same respective periods in 2021. Equity method investments consist of hedge fund investments of $16.9 million, real estate investments of $52.4 million and other investments of $7.6 million as of June 30, 2022. The following table details our interest in the loss or income from equity method investments for the three and six months ended June 30, 2022 and 2021: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2022 2021 2022 2021 Hedge fund investments $ (3,476) $ 1,933 $ (3,544) $ 3,624 Real estate investments 18 — 18 — Other investments 417 842 1,756 2,098 Interest in (loss) income from equity method investments $ (3,041) $ 2,775 $ (1,770) $ 5,722 Net Loss and LAE Net loss and LAE increased by $12.2 million and $7.6 million during the three and six months ended June 30, 2022, respectively, compared to the same respective periods in 2021 due to lower favorable prior year loss development experienced in our AmTrust Reinsurance segment compared to the same respective periods in 2021. The cessation of active reinsurance underwriting on prospective risks included the termination of the AmTrust Quota Share and European Hospital Liability Quota Share effective January 1, 2019. Net loss and LAE for the second quarter of 2022 was impacted by net adverse prior year loss development of $1.0 million compared to net favorable prior year loss development of $12.8 million for the same period in 2021. Net loss and LAE for six months ended June 30, 2022 was impacted by net favorable prior year loss development of $6.3 million compared to net favorable prior year loss development of $18.4 million during the same period in 2021. This net loss development is discussed in greater detail in the individual segment discussion and analysis and is associated with run-off of unearned premium for terminated reinsurance contracts in the AmTrust Reinsurance and Diversified Reinsurance segments. Commission and Other Acquisition Expenses Commission and other acquisition expenses decreased by $2.0 million or 29.2% and $5.4 million or 42.3% for the three and six months ended June 30, 2022, respectively, compared to the same respective periods in 2021 largely due to negative earned 45 premiums in the AmTrust Reinsurance segment which reduced commission costs due to the AmTrust Cession Adjustments. Please see further discussion in the individual segment analysis below. General and Administrative Expenses General and administrative expenses include both segment and corporate expenses segregated for analytical purposes as a component of underwriting income. Total general and administrative expenses decreased by $1.6 million, or 18.1% for the three months ended June 30, 2022, compared to the same period in 2021 due to lower salary, professional and regulatory fees. Total general and administrative expenses decreased by $4.7 million, or 20.6% for the six months ended June 30, 2022, compared to the same period in 2021 due to lower equity based incentive compensation costs. General and administrative expenses for the three and six months ended June 30, 2022 and 2021 were comprised of: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2022 2021 2022 2021 General and administrative expenses – segments $ 4,283 $ 3,808 $ 6,866 $ 5,985 General and administrative expenses – corporate 3,011 5,098 11,314 16,918 Total general and administrative expenses $ 7,294 $ 8,906 $ 18,180 $ 22,903 Interest and Amortization Expenses The interest and amortization expenses related to the outstanding senior notes issued by Maiden Holdings in 2016 and Maiden NA in 2013 ("Senior Notes") were $4.8 million and $9.7 million for the three and six months ended June 30, 2022 and 2021, respectively. Please refer to " Notes to Condensed Consolidated Financial Statements (unaudited) Note 7. Long Term Debt " for further details on the Senior Notes. The weighted average effective interest rate for the Senior Notes was 7.6% for the three and six months ended June 30, 2022 and 2021, respectively. Foreign Exchange and Other Gains (losses) Net foreign exchange and other gains amounted to $6.6 million and $10.5 million during the three and six months ended June 30, 2022, respectively, compared to net foreign exchange and other losses of $1.6 million and gains of $2.0 million for the same respective periods in 2021. At June 30, 2022, net foreign exchange gains were primarily driven by exposures to euro, British pound and other non-USD denominated net loss reserves and insurance related liabilities in excess of foreign currency assets. Our non-USD denominated liabilities at June 30, 2022 included net loss reserves of $354.5 million. There was no new business written in non-USD currencies during the three and six months ended June 30, 2022. Our foreign currency asset exposures at June 30, 2022 included $233.9 million of fixed maturity securities managed by our investment managers who have the discretion to hold foreign currency exposures as part of their total return strategy as well as $32.4 million of equity method real estate investments denominated in Canadian dollars. We held $53.8 million of non-USD denominated funds withheld receivable at June 30, 2022. Net foreign exchange gains of $7.9 million and $11.9 million for the three and six months ended June 30, 2022, respectively, were attributable to the strengthening of the U.S. dollar on the re-measurement of net loss reserves and insurance related liabilities denominated in British pound and euro. Net foreign exchange losses of $1.2 million during the three months ended June 30, 2021 was due to the weakening of the U.S. dollar on the re-measurement of net loss reserves and insurance related liabilities denominated in euro. Net foreign exchange gains of $2.2 million during the six months ended June 30, 2021 were primarily due to the strengthening of the U.S. dollar on the re-measurement of net loss reserves and insurance related liabilities denominated in euro. Underwriting Results by Reportable Segment Diversified Reinsurance Segment The underwriting results for our Diversified Reinsurance segment for the three and six months ended June 30, 2022 and 2021 were as follows: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2022 2021 2022 2021 Gross premiums written $ 6,148 $ 5,191 $ 10,884 $ 5,263 Net premiums written $ 5,995 $ 5,018 $ 10,578 $ 4,784 Net premiums earned $ 7,125 $ 6,962 $ 13,080 $ 13,202 Other insurance revenue 469 539 520 808 Net loss and LAE (2,340) (1,247) (980) (2,662) Commission and other acquisition expenses (3,519) (4,452) (7,290) (8,207) General and administrative expenses (3,008) (3,033) (5,106) (4,607) Underwriting (loss) income $ (1,273) $ (1,231) $ 224 $ (1,466) 46 Premiums — Gross premiums written increased by $1.0 million and $5.6 million for the three and six months ended June 30, 2022, respectively, compared to the same respective periods in 2021. This was primarily due to the prior year return of unearned premiums written in a German Auto quota share reinsurance contract in our IIS business which went into run-off on January 1, 2021. Direct premiums written by Maiden LF and Maiden GF increased by $0.6 million or 11.3% and $0.4 million or 3.4% during the three and six months ended June 30, 2022, respectively, compared to the same respective periods in 2021. Net premiums written increased by $1.0 million and $5.8 million during the three and six months ended June 30, 2022, respectively, compared to the same respective periods in 2021 due to the prior year return of unearned premiums written in our German Auto quota share reinsurance contract which went into run-off on January 1, 2021. The tables below show net premiums written by line of business for the three and six months ended June 30, 2022 and 2021: For the Three Months Ended June 30, 2022 2021 Change in ($ in thousands) Total Total $ International $ 5,995 $ 5,028 $ 967 Other — (10) 10 Total Diversified Reinsurance $ 5,995 $ 5,018 $ 977 For the Six Months Ended June 30, 2022 2021 Change in ($ in thousands) Total Total $ International $ 10,578 $ 4,784 $ 5,794 Total Diversified Reinsurance $ 10,578 $ 4,784 $ 5,794 Net premiums earned increased by $0.2 million or 2.3% and decreased by $0.1 million or 0.9% during the three and six months ended June 30, 2022, respectively, compared to the same respective periods in 2021. The tables below show net premiums earned by line of business for the three and six months ended June 30, 2022 and 2021: For the Three Months Ended June 30, 2022 2021 Change in ($ in thousands) Total Total $ International $ 7,125 $ 6,972 $ 153 Other — (10) 10 Total Diversified Reinsurance $ 7,125 $ 6,962 $ 163 For the Six Months Ended June 30, 2022 2021 Change in ($ in thousands) Total Total $ International $ 13,080 $ 13,202 $ (122) Total Diversified Reinsurance $ 13,080 $ 13,202 $ (122) Other Insurance Revenue — Other insurance revenue decreased by $0.1 million and $0.3 million for the three and six months ended June 30, 2022, respectively, compared to the same respective periods in 2021. Other insurance revenue for the three and six months ended June 30, 2022 includes $0.1 million of fee related income earned from our GLS business, $0.4 million for fair value changes in underwriting-related derivatives for the three and six months ended June 30, 2022, and fee income derived from our IIS business that is not directly associated with premium revenue assumed by the Company as specified in the table below. The decline of $0.4 million and $0.6 million from International was due to the loss of fee income from an auto customer program that went into run-off on July 31, 2021. 47 The table below shows other insurance revenue by source for the three and six months ended June 30, 2022 and 2021: For the Three Months Ended June 30, 2022 2021 Change ($ in thousands) International $ 10 $ 384 $ (374) Changes in fair value of non-hedged derivatives on retroactive reinsurance 393 — 393 Other service fee income 66 155 (89) Total Diversified Reinsurance $ 469 $ 539 $ (70) For the Six Months Ended June 30, 2022 2021 Change ($ in thousands) International $ 20 $ 653 $ (633) Changes in fair value of non-hedged derivatives on retroactive reinsurance 393 — 393 Other service fee income 107 155 (48) Total Diversified Reinsurance $ 520 $ 808 $ (288) Net Loss and LAE — Net loss and LAE increased by $1.1 million or 87.7% and decreased by $1.7 million or 63.2% for the three and six months ended June 30, 2022, respectively, compared to the same respective periods in 2021 primarily due to the run-off of reinsurance liabilities associated with our German Auto programs . The net loss and LAE was impacted by net adverse prior year loss development of $0.8 million for the three months ended June 30, 2022 and net favorable prior year loss development of $1.4 million for the six months ended June 30, 2022, respectively, compared to favorable prior year development of $1.0 million and $0.9 million for the same respective periods in 2021. The net adverse loss development for the three months ended June 30, 2022 was experienced in European Capital Solutions while the favorable development for the six months ended June 30, 2022 was driven by German Auto and GLS. The favorable loss development for the same respective periods in 2021 was experienced in German Auto Programs, European Capital Solutions and other run-off business. Commission and Other Acquisition Expenses — Commission and other acquisition expenses decreased by $0.9 million or 21.0% and $0.9 million or 11.2% for the three and six months ended June 30, 2022, respectively, compared to the same respective periods in 2021. General and Administrative Expenses — General and administrative expenses remained flat at $3.0 million for the three months ended June 30, 2022 and increased by $0.5 million or 10.8% for the six months ended June 30, 2022, respectively, compared to the same respective periods in 2021. AmTrust Reinsurance Segment The AmTrust Reinsurance segment reported an underwriting loss of $3.9 million and $7.0 million during the three and six months ended June 30, 2022, respectively, compared to underwriting income of $9.7 million and $11.5 million for the same respective periods in 2021. The AmTrust Cession Adjustments contributed an underwriting loss of $5.1 million to the reported results during the six months ended June 30, 2022; excluding these adjustments, the AmTrust Reinsurance segment had an underwriting loss of $1.9 million on the run-off of unearned premium for terminated AmTrust reinsurance contracts. The underwriting results for the AmTrust Reinsurance segment for the three and six months ended June 30, 2022 and 2021 were as follows: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2022 2021 2022 2021 Gross premiums written $ (2,809) $ (1,757) $ (17,715) $ (4,219) Net premiums written $ (2,809) $ (1,757) $ (17,715) $ (4,219) Net premiums earned $ 3,318 $ 6,350 $ (1,515) $ 11,874 Net loss and LAE (4,534) 6,574 (3,611) 5,630 Commission and other acquisition expenses (1,366) (2,447) (123) (4,634) General and administrative expenses (1,275) (775) (1,760) (1,378) Underwriting (loss) income $ (3,857) $ 9,702 $ (7,009) $ 11,492 48 Premiums — The tables below show net premiums written by category for the three and six months ended June 30, 2022 and 2021, respectively: For the Three Months Ended June 30, 2022 2021 Change in ($ in thousands) Total Total $ Net Premiums Written Small Commercial Business $ (2,649) $ (1,594) $ (1,055) Specialty Program (62) (4) (58) Specialty Risk and Extended Warranty (98) (159) 61 Total AmTrust Reinsurance $ (2,809) $ (1,757) $ (1,052) For the Six Months Ended June 30, 2022 2021 Change in ($ in thousands) Total Total $ Net Premiums Written Small Commercial Business $ (14,371) $ (4,072) $ (10,299) Specialty Program 775 (29) 804 Specialty Risk and Extended Warranty (4,119) (118) (4,001) Total AmTrust Reinsurance $ (17,715) $ (4,219) $ (13,496) The negative gross and net premiums written for the six months ended June 30, 2022 reflect the AmTrust Cession Adjustments which consist of higher than expected adjustments related to the following items: • $11.0 million of premium reductions on Workers Compensation policy surcharges in Small Commercial Business subsequent to the termination of the AmTrust Quota Share; and • $4.8 million of premium reductions to AmTrust's inuring reinsurance for certain programs in Specialty Risk and Extended Warranty which reduced the amount of premium ceded to Maiden. There were also negative gross and net premiums written for the three and six months ended June 30, 2021 reflecting premium adjustments on Small Commercial Business policies in the AmTrust Quota Share. Furthermore, the termination of the AmTrust Quota Share and the European Hospital Liability Quota Share as of January 1, 2019 resulted in no new business written under these contracts since 2018. Net premiums earned decreased by $3.0 million and $13.4 million for the three and six months ended June 30, 2022, respectively, compared to the same respective periods in 2021 primarily due to the AmTrust Cession Adjustments as discussed above. The tables below detail net premiums earned by category for the three and six months ended June 30, 2022 and 2021: For the Three Months Ended June 30, 2022 2021 Change in ($ in thousands) Total Total $ Net Premiums Earned Small Commercial Business $ (2,649) $ (1,495) $ (1,154) Specialty Program (62) 2 (64) Specialty Risk and Extended Warranty 6,029 7,843 (1,814) Total AmTrust Reinsurance $ 3,318 $ 6,350 $ (3,032) For the Six Months Ended June 30, 2022 2021 Change in ($ in thousands) Total Total $ Net Premiums Earned Small Commercial Business $ (14,359) $ (3,846) $ (10,513) Specialty Program 776 (16) 792 Specialty Risk and Extended Warranty 12,068 15,736 (3,668) Total AmTrust Reinsurance $ (1,515) $ 11,874 $ (13,389) Net Loss and LAE — Net loss and LAE increased by $11.1 million and $9.2 million for the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021 due to significant favorable development experienced in the prior year periods. Net favorable prior year loss development of $4.9 million during the six months ended June 30, 2022 included $5.3 million of favorable loss reserve adjustments related to the AmTrust Cession Adjustments. 49 There was adverse prior year loss development of $0.1 million during the three months ended June 30, 2022 compared to favorable prior year loss development of $11.9 million for the same period in 2021. Net adverse development during the three months ended June 30, 2022 was primarily due to modest deterioration in General Liability and Commercial Auto partly offset by continued favorable development on Workers Compensation. The net favorable prior year loss development for the three months ended June 30, 2021 was due to favorable development in Workers Compensation and Commercial Auto Liability. Net favorable prior year loss development was $4.9 million during the six months ended June 30, 2022, compared to net favorable prior year loss development of $17.4 million during the same period in 2021. The favorable prior year loss development during the six months ended June 30, 2022 was due to favorable runoff of Workers Compensation business and AmTrust Cession Adjustments for Specialty Risk and Extended Warranty. Prior year favorable development in 2021 was due to Workers Compensation and Commercial Auto Liability partly offset by adverse development within Hospital Liability. Commission and Other Acquisition Expenses — Commission and other acquisition expenses decreased by $1.1 million and $4.5 million for the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021 due to the AmTrust Cession Adjustments which resulted in negative earned premiums and a reduction to brokerage fees. General and Administrative Expenses — General and administrative expenses increased by $0.5 million or 64.5% and $0.4 million or 27.7% for the three and six months ended June 30, 2022, respectively, compared to the same periods in 2021 primarily due to letter of credit fees associated with the LPT/ADC Agreement. Liquidity and Capital Resources Liquidity Maiden Holdings is a holding company and transacts no business of its own. We therefore rely on cash flows in the form of dividends, advances, loans and other permitted distributions from our subsidiary companies to pay expenses and make dividend payments on our common and preference shares. The jurisdictions in which our operating subsidiaries are licensed to write business impose regulations requiring companies to maintain or meet statutory solvency and liquidity requirements and also place restrictions on the declaration and payment of dividends and other distributions. As of June 30, 2022, the Company had investable assets of $1.5 billion compared to $1.7 billion as of December 31, 2021. Investable assets are the combined total of our investments, cash and cash equivalents (including restricted cash), loan to a related party and funds withheld receivable. The decrease in our investable assets is primarily the result of our cessation of active reinsurance underwriting of new prospective risks in 2018 and 2019 which subsequently resulted in negative operating cash flows to settle claim payments from the run-off of the liabilities from that reinsurance portfolio in 2022. The regulatory and liquidity requirements of the Company's operating segments are discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" section included under Item 7 of our Annual Report on Form 10- K for the year ended December 31, 2021, that was filed with the SEC on March 14, 2022. As previously indicated, Maiden Reinsurance re-domesticated from Bermuda to Vermont on March 16, 2020. We continue to be actively engaged with the Vermont Department of Financial Regulation ("Vermont DFR") regarding the formulation of Maiden Reinsurance's longer term business plan, including its investment policy, changes to which require prior regulatory approval as stipulated by Vermont law or the Vermont DFR for any active underwriting, capital management or other strategic initiatives. Maiden Reinsurance has received all necessary approvals required to date by the Vermont DFR, including its activities via GLS and its investment policy which includes: 1) the expansion of approved asset classes for investment reflecting not only Maiden Reinsurance’s solvency position but the material reduction in required capital necessary to operate its business as discussed further in Item 7 - Management's Discussion and Analysis of Financial Condition and Results of Operations – Liquidity & Capital Resources – Cash and Investments ; and 2) the purchase of affiliated securities as demonstrated in the recent preference share tender offers. The Investment Policy, as approved and as amended, maintains our established investment management and governance practices. During the second quarter of 2022, the Vermont DFR approved an annual dividend program to be paid by Maiden Reinsurance to Maiden NA, with notification to the Vermont DFR as dividends are paid. Subsequent to that approval, Maiden Reinsurance has paid $6.3 million in dividends to Maiden NA. We may experience continued volatility in our results of operations which could negatively impact our financial condition and create a reduction in the amount of available distribution or dividend capacity from our regulated reinsurance subsidiaries, which would also reduce liquidity. Further, we and our insurance subsidiaries may need additional capital to maintain compliance with regulatory capital requirements and/or be required to post additional collateral under existing reinsurance arrangements, which could reduce our liquidity. Operating, investing and financing cash flows Our sources of funds historically have consisted of premium receipts net of commissions and brokerage, investment income, net proceeds from capital raising activities, and proceeds from sales, maturities, pay downs and redemption of investments. Cash is currently used primarily to pay loss and LAE, ceded reinsurance premium, general and administrative expenses, and interest expense, with the remainder in excess of our operating requirements made available to our investment managers for investment in accordance with our investment policy as well as for capital management such as repurchasing our shares. Our business has undergone significant changes since 2018. We have entered into a series of transactions that have materially reduced our balance sheet risk and transformed our operations. As a result of these transactions, we are not engaged in active underwriting of new prospective risks thus our net premiums written will continue to be materially lower and investment income will become a significantly larger portion of our total revenues. We are writing new retroactive risks through 50 GLS, however this will be smaller in relation to the run-off of our prior reinsurance business. Despite the initial inflow of new business from GLS, the run-off of our prior reinsurance business has continued to cause significant negative operating cash flows as we run off the AmTrust Reinsurance segment reserves as shown in the cash flows table further below. While the development of the GLS platform over time should further enhance our ability to pursue the asset and capital management pillars of our business strategy, we still expect the trend of negative overall cash flows to continue to reduce our asset base going forward through the remainder of 2022 and beyond. We expect to use funds from cash and investment portfolios, collected premiums on reinsurance contracts in force or being run-off, investment income and proceeds from investment sales and redemptions to meet our expected claims payments and operational expenses. Claim payments will be principally from the run-off of existing reserves for loss and LAE. A significant portion of those liabilities are collateralized and claim payments will be funded by using this collateral which should provide sufficient funding to fulfill those obligations. The Company’s management believes its current sources of liquidity are adequate to meet its cash requirements for the next twelve months as we generally expect negative operating cash flows to be sufficiently offset by positive investing cash flows. While we continue to expect our cash flows to be sufficient to meet our cash requirements and to operate our business, our ability to execute our asset and capital management initiatives are dependent on maintaining adequate levels of unrestricted liquidity and cash flows. At June 30, 2022 and December 31, 2021, unrestricted cash and cash equivalents and unrestricted fixed maturity investments were $79.7 million and $81.1 million, respectively. The decrease of $1.4 million in unrestricted cash and fixed maturity investments during 2022 was primarily the result of $10.0 million utilized for the 2021 Preference Share Repurchase Program, $28.7 million utilized for net purchases of other investments and equity securities, and $9.6 million for interest payments on the Senior Notes, partly offset by $35.0 million of collateral released by AmTrust and net proceeds of $9.5 million from equity method investments. Please see the related discussion on investing and financing cash flows below. The table below summarizes our operating, investing and financing cash flows for the six months ended June 30, 2022 and 2021: For the Six Months Ended June 30, 2022 2021 ($ in thousands) Operating activities $ (88,756) $ (185,784) Investing activities 96,333 251,005 Financing activities (10,983) (127,183) Effect of exchange rate changes on foreign currency cash (1,213) (107) Total decrease in cash, restricted cash and cash equivalents $ (4,619) $ (62,069) Cash Flows used in Operating Activities Cash flows used in operating activities for the six months ended June 30, 2022 were $88.8 million compared to cash flows used in operating activities of $185.8 million for the six months ended June 30, 2021, a decrease of $97.0 million due to the timing of settlement of balances due to AmTrust, which have been subsequently settled. The operating cash flows used in operations for the six months ended June 30, 2022 and 2021 were primarily the result of claims payments for the runoff of existing reserves for terminated AmTrust Quota Share and the European Hospital Liability Quota Share contracts as well as return of premiums due to AmTrust Cession Adjustments. Cash Flows provided by Investing Activities Cash flows from investing activities consist primarily of proceeds from the sales and maturities of investments and payments for investments acquired. Net cash provided by investing activities was $96.3 million for the six months ended June 30, 2022 compared to $251.0 million for the same period in 2021 due to proceeds from the sale of fixed maturity investments which were made primarily to settle claim payments during the six months ended June 30, 2022 and 2021 as well as repurchase preference shares during the six months ended June 30, 2022 and 2021. For the six months ended June 30, 2022, the proceeds from the sales, maturities and calls exceeded the purchases of fixed maturity securities by $115.5 million compared to net proceeds of $290.1 million for fixed maturity securities in the same period in 2021. There was also net proceeds of equity method investments of $9.5 million partly offset by $28.7 million utilized for net purchases of other investments and equity securities during the six months ended June 30, 2022. Cash Flows used in Financing Activities Cash flows used in financing activities were $11.0 million for the six months ended June 30, 2022 compared to $127.2 million during the six months ended in 2021 due to the repurchase of the Company's preference shares. During the six months ended June 30, 2022, the Company paid $10.0 million for the repurchase of 1,581,509 preference shares pursuant to the 2021 Preference Share Repurchase Program compared to 8,517,037 preference shares repurchased by the Company during the same period in 2021 for an aggregate total consideration of $124.7 million. No dividends on common or preference shares were paid during the six months ended June 30, 2022 and 2021. Our Board of Directors have not declared any common or preference share dividends since the third quarter of 2018. 51 Restrictions, Collateral and Specific Requirements The Company's restrictions, collateral and specific requirements are discussed in " Management's Discussion and Analysis of Financial Condition and Results of Operations " section included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2021, that was filed with the SEC on March 14, 2022. At June 30, 2022 and December 31, 2021, restricted cash and cash equivalents and fixed maturity investments used as collateral were $417.2 million and $582.1 million, respectively. This collateral represents 84.0% and 87.8% of the fair value of total fixed maturity investments, cash, restricted cash and equivalents at June 30, 2022 and December 31, 2021, respectively. Cash and Investments The investment of our funds has generally been designed to ensure safety of principal while generating current income. Accordingly, the majority of our funds have been invested in liquid, investment-grade fixed income securities which are all designated as AFS at June 30, 2022. As of June 30, 2022 and December 31, 2021, our cash and investments consisted of: June 30, 2022 December 31, 2021 ($ in thousands) Fixed maturities, available-for-sale, at fair value $ 435,367 $ 597,145 Equity securities, at fair value 57,692 44,062 Equity method investments 76,847 83,742 Other investments 116,016 97,663 Total investments 685,922 822,612 Cash and cash equivalents 37,766 26,668 Restricted cash and cash equivalents 23,702 39,419 Total Investments and Cash and Cash Equivalents $ 747,390 $ 888,699 In addition to the discussion on Cash and Cash Equivalents and Fixed Maturities that follows herein, please see the " Notes to Condensed Consolidated Financial Statements (unaudited) Note 4. Investments " included under Part I Item 1 " Financial Information" of this Form 10-Q for further discussion on our AFS fixed income securities. As our insurance liabilities continue to run-off and the required capital to operate our business for regulatory purposes decreases, we have modified Maiden Reinsurance’s investment policy (which has been approved by the Vermont DFR as noted) and have expanded the range of asset classes we invest in to enhance the income and total returns our investment portfolio produces. We categorize these investments as alternative investments which include " Other Investments ", "Equity Securities" , and "Equity Method Investments" as captioned on our condensed consolidated balance sheets. Under this revised investment policy, we increased the amount of alternative investments during 2022 and 2021, and we expect to continue to increase the amounts invested therein. Under our investment policy, alternative investments could include, but are not limited to, privately held investments, private equities, private credit lending funds, fixed-income funds, hedge funds, equity funds, real estate (including joint ventures and limited partnerships) and other non-fixed-income investments. For further details on our alternative investments, in addition to the discussion of the investments herein, please see " Notes to Condensed Consolidated Financial Statements (unaudited) Note 4(b). Other Investments, Equity Securities and Equity Method Investments" included under Part I Item 1 " Financial Information " of this Form 10-Q. Our investment performance is subject to a variety of risks, including risks related to general economic conditions, market volatility, interest rate fluctuations, foreign exchange risk, liquidity risk and credit and default risk. Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. An increase in interest rates could result in significant losses, realized or unrealized, in the value of our investment portfolio. A portion of our portfolio consists of alternative investments that subject us to restrictions on redemption, which may limit our ability to withdraw funds for some period of time after the initial investment. The values of, and returns on, such investments may also be more volatile. We believe our other investments, equity securities and equity method investments portfolio provides diversification against our fixed-income investments and an opportunity for improved risk-adjusted return, however, the returns of these investments may be more volatile and we may experience significant unrealized gains or losses in any particular quarter or year. While we believe the returns produced by these investments will exceed our cost of capital, in particular our cost of debt capital, it is too soon to determine if the actual returns will achieve this objective and it may be an extended period of time before that determination can be made. We may utilize and pay fees to various companies to provide investment advisory and/or management services related to these investments. These fees, which would be predominantly based upon the amount of assets under management, would be included in net investment income. In addition, costs associated with evaluating, analyzing and monitoring these investments may require additional expenditures than traditional marketable securities. During 2022, our investment expenses associated with our alternative investments have decreased compared to 2021. The substantial majority of our current and future investments are held by Maiden Reinsurance, whose investment policy was approved by the Vermont DFR. We may utilize a portion of Maiden Reinsurance's unrestricted assets to purchase affiliated securities and, during the six months ended June 30, 2022, we utilized $10.0 million in conjunction with the 2021 Preference 52 Share Repurchase Program. As of June 30, 2022, Maiden Reinsurance cumulatively invested $175.8 million in the preference shares of Maiden Holdings. Cash & Cash Equivalents At June 30, 2022, we consider the levels of cash and cash equivalents held to be within our targeted ranges. During periods when interest rates experience greater volatility, we have periodically maintained more cash and cash equivalents to better assess current market conditions and opportunities within our defined risk appetite, and may do so in future periods. Fixed Maturity Investments The average yield and average duration of our fixed maturities, by asset class, and our cash and cash equivalents (restricted and unrestricted) are as follows at June 30, 2022 and December 31, 2021, respectively: June 30, 2022 Original or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Average yield (1) Average duration (2) ($ in thousands) U.S. treasury bonds $ 65,021 $ — $ (446) $ 64,575 0.4 % 0.4 U.S. agency bonds – mortgage-backed 78,228 18 (4,220) 74,026 2.6 % 3.6 Collateralized mortgage-backed securities 7,199 — (313) 6,886 3.2 % 3.3 Non-U.S. government bonds 16,840 — (648) 16,192 0.3 % 3.0 Collateralized loan obligations 174,915 — (20,281) 154,634 1.5 % 0.3 Corporate bonds 138,593 — (19,539) 119,054 1.7 % 2.4 Total fixed maturities 480,796 18 (45,447) 435,367 1.6 % 1.6 Cash and cash equivalents 61,468 — — 61,468 0.3 % 0.0 Total $ 542,264 $ 18 $ (45,447) $ 496,835 1.5 % 1.4 December 31, 2021 Original or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Average yield (1) Average duration (2) ($ in thousands) U.S. treasury bonds $ 59,989 $ — $ (110) $ 59,879 0.2 % 0.9 U.S. agency bonds – mortgage-backed 96,554 2,429 (193) 98,790 2.7 % 2.1 Collateralized mortgage-backed securities 14,972 565 — 15,537 3.2 % 3.1 Non-U.S. government bonds 3,163 113 — 3,276 0.3 % 7.3 Collateralized loan obligations 183,974 140 (5,093) 179,021 1.3 % 0.3 Corporate bonds 236,692 10,094 (6,144) 240,642 2.5 % 2.7 Total fixed maturities 595,344 13,341 (11,540) 597,145 1.9 % 1.7 Cash and cash equivalents 66,087 — — 66,087 — % 0.0 Total $ 661,431 $ 13,341 $ (11,540) $ 663,232 1.7 % 1.5 (1) Average yield is calculated by dividing annualized investment income for each sub-component of fixed maturity securities and cash and cash equivalents (including amortization of premium or discount) by amortized cost. (2) Average duration in years. During the six months ended June 30, 2022, the yield on the 10-year U.S. Treasury bond increased by 146 basis points to 2.98%. The 10-year U.S. Treasury rate is the key risk-free determinant in the fair value of many of the fixed maturity securities in our portfolio. The U.S. Treasury yield curve experienced a material upward shift during the six months ended June 30, 2022, reflecting concerns about ongoing inflation emanating from the combination of: 1) the strength of the U.S. economy as the economic effects of the COVID-19 pandemic continue to abate; 2) geopolitical instability in Eastern Europe which threatened additional inflation and global economic stability; 3) the levels of fiscal stimulus administered by the U.S. federal government to support the economy; and 4) the anticipated monetary policy responses by central banks globally in light of these other circumstances, which indicate measures which may increase interest rates broadly . The movement in the market values of our fixed maturity portfolio during the six months ended June 30, 2022 generated net unrealized losses of $47.2 million which reduced our book value per common share by $0.54 during that period. Current outlooks for global monetary policy indicate that substantial quantitative tightening by central banks in the U.S. and globally is underway and appear likely to continue for at least the near term. Our investment portfolios, in particular our fixed maturity portfolio, may be adversely impacted by unfavorable market conditions caused by these measures, which could cause continued volatility in our results of operations and negatively impact our financial condition. Interest rate risk is the price sensitivity of a security to changes in interest rates. Credit spread risk is the price sensitivity of a security to changes in credit spreads. As noted, the fair value of our fixed maturity investments will fluctuate with changes in interest rates and credit spreads. We attempt to maintain adequate liquidity in our fixed maturity investments portfolio with a strategy designed to emphasize the preservation of our invested assets and provide sufficient liquidity for the prompt payment 53 of claims and contract liabilities. Because we collateralize a significant portion of our insurance liabilities, unanticipated or large increases in interest rates could require us to utilize significant amounts of unrestricted cash and fixed maturity securities to provide additional collateral, which could impact our asset and capital management strategy described herein. We also monitor the duration and structure of our investment portfolio as discussed below. As of June 30, 2022, the aggregate hypothetical change in fair value from an immediate 100 basis points increase in interest rates, assuming credit spreads remain constant, in our fixed maturity investments portfolio would decrease the fair value of that portfolio by $14.2 million. Actual shifts in interest rates may not change by the same magnitude across the maturity spectrum or on an individual security and, as a result, the impact on the fair value of our fixed maturity securities may be materially different from the resulting change in value described above. To limit our exposure to unexpected interest rate increases which would reduce the value of our fixed income securities and reduce our shareholders' equity, we attempt to maintain the duration of our fixed maturity investment portfolio combined with our cash and cash equivalents, both restricted and unrestricted, within a reasonable range of the duration of our loss reserves. At June 30, 2022 and December 31, 2021, these respective durations in years were as follows: June 30, 2022 December 31, 2021 Fixed maturities and cash and cash equivalents 1.4 1.5 Reserve for loss and LAE - gross of LPT/ADC Agreement reserves 5.0 4.4 Reserve for loss and LAE - net of LPT/ADC Agreement reserves 1.5 1.4 During the six months ended June 30, 2022, the weighted average duration of our fixed maturity investment portfolio decreased by 0.1 year to 1.4 years while the duration for the reserve for loss and LAE increased by 0.6 year to 5.0 years. The differential in duration between these assets and liabilities may fluctuate over time and in the case of fixed maturities, historically has been affected by factors such as market conditions, changes in asset mix and prepayment speeds in the case of both our agency mortgage-backed securities ("Agency MBS") and commercial mortgage-backed securities. At June 30, 2022, the duration of our fixed maturity investment portfolio decreased compared to December 31, 2021 due to continued sales of fixed maturity investments primarily made to settle claim payments with AmTrust. At June 30, 2022, the duration of our loss reserves net of the LPT/ADC Agreement was relatively in line with the duration of our fixed maturity investment portfolio. To limit our exposure to unexpected interest rate increases that could reduce the value of our fixed maturity securities and reduce our shareholders' equity, the Company holds floating rate securities whose fair values are less sensitive to interest rates. At June 30, 2022 and December 31, 2021, 25.4% and 23.6%, respectively, of our fixed income investments are comprised of floating rate securities. The floating rate investment holdings at June 30, 2022 and December 31, 2021 were as follows: June 30, 2022 December 31, 2021 ($ in thousands) Fair Value % of Total Fair Value % of Total Floating rate securities Collateralized loan obligations $ 154,634 11.9 % $ 174,873 11.9 % Collateralized mortgage-backed securities 4,796 0.4 % 3,007 0.2 % Corporate bonds 1,047 0.1 % 1,145 0.1 % Total floating rate AFS fixed maturities at fair value 160,477 12.4 % 179,025 12.2 % Loan to related party 167,975 13.0 % 167,975 11.4 % Total floating rate securities $ 328,452 25.4 % $ 347,000 23.6 % Total fixed income investments at fair value (1) $ 1,293,695 $ 1,467,619 (1) Total fixed income investments at fair value include AFS fixed maturities, cash and restricted cash, funds withheld receivable, and loan to related party. At June 30, 2022 and December 31, 2021, 100.0% of the Company’s U.S. agency bond holdings are mortgage-backed. Additional details on the Agency MBS holdings at June 30, 2022 and December 31, 2021 were as follows: June 30, 2022 December 31, 2021 ($ in thousands) Fair Value % of Total Fair Value % of Total FNMA – fixed rate $ 35,591 48.1 % $ 47,419 48.0 % FHLMC – fixed rate 35,424 47.8 % 47,758 48.3 % GNMA – variable rate 3,011 4.1 % 3,613 3.7 % Total U.S. Agency MBS $ 74,026 100.0 % $ 98,790 100.0 % Total U.S. agency MBS comprise 17.0% of our fixed maturity investment portfolio at June 30, 2022. Given their relative size to our total investments, if faster prepayment patterns were to occur over an extended period of time, this could potentially limit the growth in our investment income in certain circumstances or reduce the total amount of investment income we earn. 54 At June 30, 2022 and December 31, 2021, 98.9% and 97.8%, respectively, of our fixed maturity investments consisted of investment grade securities. We define a security as being below investment grade if it has an S&P credit rating of BB+ or equivalent, or less. Please see " Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) Note 4. Investments " for additional information on the credit rating of our fixed income portfolio. The security holdings by sector and financial strength rating of our corporate bond holdings at June 30, 2022 and December 31, 2021 were as follows: Ratings (1) June 30, 2022 AAA A+, A, A- BBB+, BBB, BBB- BB+ or lower Fair Value % of Corporate bonds portfolio Corporate bonds ($ in thousands) Basic Materials — % 4.1 % — % — % $ 4,909 4.1 % Communications — % 4.4 % 4.1 % — % 10,028 8.5 % Consumer — % 4.8 % 38.9 % — % 52,036 43.7 % Energy — % 0.7 % 16.3 % — % 20,276 17.0 % Financial Institutions 1.2 % 17.5 % 2.1 % 4.1 % 29,700 24.9 % Industrials — % 1.8 % — % — % 2,105 1.8 % Total 1.2 % 33.3 % 61.4 % 4.1 % $ 119,054 100.0 % Ratings (1) December 31, 2021 AAA A+, A, A- BBB+, BBB, BBB- BB+ or lower Fair Value % of Corporate bonds portfolio Corporate bonds ($ in thousands) Basic Materials — % 2.4 % 1.7 % — % $ 9,995 4.1 % Communications — % 2.4 % 3.2 % — % 13,480 5.6 % Consumer — % 2.4 % 31.3 % 2.8 % 87,753 36.5 % Energy — % 9.4 % 4.8 % — % 34,068 14.2 % Financial Institutions 0.6 % 18.8 % 12.9 % 2.6 % 84,025 34.9 % Industrials — % 1.0 % — % — % 2,393 1.0 % Technology — % 3.7 % — % — % 8,928 3.7 % Total 0.6 % 40.1 % 53.9 % 5.4 % $ 240,642 100.0 % (1) Ratings as assigned by S&P, or equivalent The table below includes the Company’s ten largest corporate holdings at fair value and as a percentage of all fixed income securities held as at June 30, 2022; of which 100.0% are euro denominated, with 51.0% in the Consumer Sector and 15.6% in the Financial Institutions sector. June 30, 2022 Fair Value % of Holdings Rating (1) ($ in thousands) Electricite de France, 4.625%, Due 9/11/2024 $ 14,305 3.3 % BBB+ Anheuser-Busch INBEV NV, 2.875%, Due 9/25/2024 10,664 2.4 % BBB+ Carlsberg Breweries A/S, 2.5%, Due 5/28/2024 10,561 2.4 % BBB Chubb Ina Holdings Inc., 1.55%, Due 3/15/2028 6,294 1.4 % A Kraft Heinz Foods Co., 1.5%, Due 5/24/2024 6,045 1.4 % BBB- Santander Consumer Finance SA, 1.125%, Due 10/9/2023 5,198 1.2 % A America Movil SAB DE CV, 1.5%, Due 3/10/2024 5,196 1.2 % A- Volkswagen International Finance NV, 1.125%, Due 10/2/2023 5,191 1.2 % A- Glencore Finance (Europe) LTD, 1.875%, Due 9/13/2023 5,156 1.2 % BBB+ Utah Acquistion Sub Inc., 2.25%, Due 11/22/2024 5,087 1.2 % BBB- Total $ 73,697 16.9 % (1) Ratings as assigned by S&P, or equivalent 55 At June 30, 2022 and December 31, 2021, respectively, we held the following non-U.S. dollar denominated securities: June 30, 2022 December 31, 2021 ($ in thousands) Fair Value % of Total Fair Value % of Total Non-U.S. dollar denominated corporate bonds $ 117,569 50.3 % $ 147,740 55.9 % Non-U.S. dollar denominated collateralized loan obligations 100,137 42.8 % 113,399 42.9 % Non-U.S. government bonds 16,192 6.9 % 3,275 1.2 % Total non-U.S. dollar denominated securities $ 233,898 100.0 % $ 264,414 100.0 % At June 30, 2022 and December 31, 2021, respectively, 100.0% of our non-U.S. dollar denominated securities above were invested in euro. The net decrease in non-U.S. denominated fixed maturities is largely due to the relative depreciation of euro denominated corporate bonds during the six months ended June 30, 2022. At June 30, 2022 and December 31, 2021, all of the Company's non-U.S. government issuers have a rating of AA- or higher by S&P. June 30, 2022 December 31, 2021 For our non-U.S. dollar denominated corporate bonds, the following table summarizes the composition of the fair value of our fixed maturity investments at the dates indicated by ratings at June 30, 2022 and December 31, 2021: Ratings (1) June 30, 2022 December 31, 2021 ($ in thousands) Fair Value % of Total Fair Value % of Total A+, A, A- $ 39,660 33.7 % $ 56,669 38.4 % BBB+, BBB, BBB- 73,060 62.2 % 78,021 52.8 % BB+ or lower 4,849 4.1 % 13,050 8.8 % Total non-U.S. dollar denominated corporate bonds $ 117,569 100.0 % $ 147,740 100.0 % (1) Ratings as assigned by S&P, or equivalent The Company does not employ any credit default protection against any of the fixed maturities held in non-U.S. denominated currencies at June 30, 2022 and December 31, 2021, respectively. Other Investments, Equity Securities and Equity Method Investments Our alternative investments are categorized as other investments, equity securities, and equity method investments as reported on our consolidated balance sheets. These include private equity funds, private credit funds and hedge fund investments, investments in limited partnerships, as well as investments in direct lending entities and investments in technology-oriented insurance related businesses known as insurtechs. Private equity investments consist of direct investments in privately held entities, investments in private equity funds and private equity co-investments with sponsoring entities. Private credit investments consist of loans and other debt securities of privately held entities or investment sponsors. Our allocation to alternative investments increased to 33.5% of our total cash and investments as of June 30, 2022 compared to 25.4% as of December 31, 2021; and increased to 72.0% of our total shareholders' equity as of June 30, 2022 compared to 58.7% as of December 31, 2021. Our alternative investments as of June 30, 2022 and December 31, 2021 consist of the following asset classes: June 30, 2022 December 31, 2021 ($ in thousands) Carrying Value % of Total Carrying Value % of Total Real estate equity method investments $ 52,396 20.9 % $ 44,050 19.5 % Hedge fund equity method investments 16,884 6.8 % 32,929 14.6 % Investments in direct lending entities 49,479 19.8 % 42,976 19.1 % Private equity funds 30,849 12.3 % 23,324 10.3 % Private credit funds 24,092 9.6 % 20,863 9.3 % Privately held other investments 11,596 4.6 % 10,500 4.7 % Other equity method investments 7,567 3.0 % 6,763 3.0 % Privately held equity securities 57,200 22.8 % 42,888 19.0 % Publicly traded equity securities 492 0.2 % 1,174 0.5 % Total alternative investments $ 250,555 100.0 % $ 225,467 100.0 % 56 For further details on these alternative investments, see " Notes to Condensed Consolidated Financial Statements: Note 4(b) Other Investments, Equity Securities and Equity Method Investments" included under Part I Item 1. "Financial Information" of this Report on Form 10-Q. C ertain of the Company's investments in limited partnerships are related to real estate joint ventures with interests in multi-property projects with varying strategies ranging from the development of properties to the ownership of income-producing properties. In certain of these joint ventures, the Company has provided certain indemnities, guarantees and commitments to certain parties such that it may be required to make payments now or in the future. For further details on these financial guarantees, please see " Notes to Condensed Consolidated Financial Statements: Note 11 - Commitments, Contingencies and Guarantees" included under Part I Item 1. "Financial Information" of this Report on Form 10-Q. Investment Results The following table summarizes our investment results for the three and six months ended June 30, 2022 and 2021: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2022 2021 2022 2021 Net investment income: Fixed income assets (1) $ 6,832 $ 7,976 $ 12,989 $ 18,032 Cash and restricted cash 25 (4) 18 15 Other investments, including equities 964 111 1,564 221 Investment expenses (154) (805) (337) (1,149) Total net investment income 7,667 7,278 14,234 17,119 Net realized (losses) gains: Fixed income assets (1) (47) 1,109 1,096 4,003 Other investments, including equities (1,181) 266 477 982 Total net realized (losses) gains (1,228) 1,375 1,573 4,985 Net unrealized gains (losses): Other investments, including equities 3,339 (526) 2,847 3,965 Total net unrealized gains (losses) 3,339 (526) 2,847 3,965 Interest in (loss) income of equity method investments: Interest in (loss) income of equity method investments (3,041) 2,775 (1,770) 5,722 Total interest in (loss) income of equity method investments (3,041) 2,775 (1,770) 5,722 Total investment return included in earnings (A) $ 6,737 $ 10,902 $ 16,884 $ 31,791 Other comprehensive (loss) income: Unrealized losses on AFS fixed maturities and equity method investments excluding foreign exchange (B) $ (12,274) $ (4,603) $ (23,666) $ (17,387) Total investment return = (A) + (B) $ (5,537) $ 6,299 $ (6,782) $ 14,404 Annualized income from fixed income assets and cash (2) $ 27,428 $ 31,888 $ 26,014 $ 36,094 Average aggregate fixed income assets and cash, at cost (2) 1,353,007 1,848,666 1,402,471 1,960,141 Annualized investment book yield 2.0 % 1.7 % 1.9 % 1.8 % Average aggregate invested assets, at fair value (3) $1,570,324 $2,011,676 $1,618,668 $2,128,530 Investment return included in net earnings 0.4 % 0.5 % 1.0 % 1.5 % Total investment return (0.4) % 0.3 % (0.4) % 0.7 % 1. Includes AFS securities as well as funds withheld receivable, and loan to related party. 57 2. Average aggregate fixed income assets and cash include AFS securities, cash and restricted cash, funds withheld receivable, and loan to related party and is computed as an average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements. 3. Average aggregate invested assets include all investments (AFS and alternative investments), cash and restricted cash, loan to related party and funds withheld receivable and is computed as an average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements. The following table details total investment returns for our fixed income investments for the three and six months ended June 30, 2022 and 2021, respectively: Fixed Income Investments (1) For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2022 2021 2022 2021 Gross investment income $ 6,857 $ 7,972 $ 13,007 $ 18,047 Net realized and unrealized gains (47) 1,109 1,096 4,003 Change in AOCI (3) (12,274) (2,196) (28,080) (13,968) Gross investment returns $ (5,464) $ 6,885 $ (13,977) $ 8,082 Average invested assets, at fair value (4) $ 1,319,841 $ 1,875,090 $ 1,380,657 $ 1,998,454 Gross Investment Returns (0.4) % 0.4 % (1.0) % 0.4 % Investment expenses $ 104 $ 222 $ 230 $ 493 Net investment returns $ (5,568) $ 6,663 $ (14,207) $ 7,589 Net Investment Returns (0.4) % 0.4 % (1.0) % 0.4 % The following table details total investment returns for our alternative investments for the three and six months ended June 30, 2022 and 2021, respectively: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2022 2021 2022 2021 Gross investment income $ (2,077) $ 2,886 $ (206) $ 5,943 Net realized and unrealized gains 2,158 (260) 3,324 4,947 Change in AOCI (3) — (2,407) 4,414 (3,419) Gross investment returns $ 81 $ 219 $ 7,532 $ 7,471 Average invested assets, at fair value (4) $ 250,483 $ 136,586 $ 238,011 $ 130,076 Gross Investment Returns — % 0.2 % 3.2 % 5.7 % Investment expenses $ 50 $ 583 $ 107 $ 656 Net investment returns $ 31 $ (364) $ 7,425 $ 6,815 Net Investment Returns — % (0.3) % 3.1 % 5.2 % 1. Fixed income investments includes AFS securities as well as cash, restricted cash, funds withheld receivable, and loan to related party. 2. Alternative investments includes other investments, equity securities, and equity method investments. 3. Change in accumulated other comprehensive income ("AOCI") excludes unrealized foreign exchange gains and losses. 4. Average invested assets is the average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements. Total returns on fixed income investments were adversely impacted by the increase in interest rates during the six months ended June 30, 2022 compared to same period in 2021. Total returns on alternative investments were positive for the six months ended June 30, 2022 partly due to the sale of an equity method investment which produced gross returns of $5.8 million which contributed 2.4% to the gross investment returns during the current period. On a percentage basis however, the investment returns on alternative investments during the six months ended June 30, 2022 were lower compared to 2021 due to higher average invested assets in 2022. For the six months ended June 30, 2021, gross investment returns included unrealized gains of $3.9 million from an investment in an insurtech start-up company that was acquired by a special purpose acquisition company which contributed 3.0% to the gross investment returns for the prior year period. 58 Other Balance Sheet Changes The following table summarizes our other material balance sheet changes at June 30, 2022 and December 31, 2021: ($ in thousands) June 30, 2022 December 31, 2021 Change Change % Reinsurance balances receivable, net $ 13,439 $ 19,507 $ (6,068) (31.1) % Reinsurance recoverable on unpaid losses 554,846 562,845 (7,999) (1.4) % Deferred commission and other acquisition expenses 29,958 36,703 (6,745) (18.4) % Reserve for loss and LAE 1,275,107 1,489,373 (214,266) (14.4) % Unearned premiums 81,129 100,131 (19,002) (19.0) % Accrued expenses and other liabilities 150,567 44,542 106,025 238.0 % The Company's deferred commission and other acquisition expenses decreased by 18.4% and unearned premiums decreased by 19.0% primarily due to the Partial Termination Amendment with AmTrust on a cut-off basis and the termination of the remaining business under both quota share contracts with AmTrust which have been in run-off since January 1, 2019. Reinsurance balances receivable decreased by 31.1% with the collection of premiums receivable due from the European Hospital Liability Quota Share during the second quarter of 2022. Accrued expenses and other liabilities increased by 238.0% as at June 30, 2022 compared to December 31, 2021 primarily due to the timing of settlement of reinsurance losses payable due to AmTrust, which have been subsequently settled. Other liabilities also increased due to the derivative liability on retroactive reinsurance of $9.3 million that was recognized at June 30, 2022. The Company's reserve for loss and LAE decreased by 14.4% primarily due to the settlement of prior year loss claims as well as favorable loss development recognized for the AmTrust Reinsurance segment. The favorable loss development on reserves covered by the LPT/ADC Agreement impacted the reinsurance recoverable on unpaid losses which decreased by $8.0 million or 1.4% as at June 30, 2022 compared to December 31, 2021. Capital Resources During the six months ended June 30, 2022, book value per common share increased by 0.8% to $2.62 and diluted book value per common share increased by 0.4% to $2.60, compared to December 31, 2021. This was largely due to net income available to Maiden common shareholders of $27.3 million partly offset by a net decrease in AOCI of $26.7 million during the six months ended June 30, 2022. Capital resources consist of funds deployed in support of our operations. The following table shows the movement in total capital resources at June 30, 2022 and December 31, 2021: ($ in thousands) June 30, 2022 December 31, 2021 Change Change % Preference shares $ 119,672 $ 159,210 $ (39,538) (24.8) % Common shareholders' equity 228,261 225,047 3,214 1.4 % Total shareholders' equity 347,933 384,257 (36,324) (9.5) % Senior Notes - principal amount 262,500 262,500 — — % Total capital resources $ 610,433 $ 646,757 $ (36,324) (5.6) % Total capital resources decreased by $36.3 million, or 5.6% at June 30, 2022 compared to December 31, 2021 primarily due to the decrease in total shareholders' equity as follows: • net decrease of $10.0 million from the 2021 Preference Share Repurchase Program composed of declines in preference share capital of $39.5 million partly offset by: (1) a gain on repurchase of preference shares of $28.2 million for the six months ended June 30, 2022 which increased retained earnings; and (2) a net increase in additional paid-in capital of $1.3 million relating to proportionate share in issuance costs of preference shares repurchased, which was previously recognized as a reduction in additional paid-in capital; • net decrease in AOCI of $26.7 million which arose due to: (1) net unrealized losses on investment of $42.6 million resulting largely from a decrease in the fair value of $47.2 million for our fixed income investment portfolio relating to market price movements due to rising interest rates during the six months ended June 30, 2022 offset by $4.4 million related to equity method investments; partly offset by (2) an increase in cumulative translation adjustments of $15.8 million due to strengthening of the U.S. dollar on the remeasurement of net insurance-related liabilities denominated in euro during the six months ended June 30, 2022; • net loss attributable to Maiden of $0.9 million for the six months ended June 30, 2022; and partly offset by: • net increase due to share-based compensation of $1.3 million. Please refer to " Notes to Consolidated Financial Statements Note 6. Shareholders' Equity " included under Part II Item 8. " Financial Statements and Supplementary Data" of our Annual Report on Form 10-K for a discussion of the equity instruments issued by the Company as at December 31, 2021. 59 Book value and diluted book value per common share at June 30, 2022 and December 31, 2021 were as follows: ($ in thousands except share and per share data) June 30, 2022 December 31, 2021 Ending common shareholders’ equity $ 228,261 $ 225,047 Proceeds from assumed conversion of dilutive options 8 10 Numerator for diluted book value per common share calculation $ 228,269 $ 225,057 Common shares outstanding 87,161,499 86,467,242 Shares issued from assumed conversion of dilutive options and restricted shares 511,591 494,926 Denominator for diluted book value per common share calculation 87,673,090 86,962,168 Book value per common share $ 2.62 $ 2.60 Diluted book value per common share 2.60 2.59 Common Shares On February 21, 2017, the Company's Board of Directors approved the repurchase of up to $100.0 million of the Company's common shares from time to time at market prices. During the six months ended June 30, 2022, the Company did not repurchase any common shares under its share repurchase authorization as it is precluded from repurchasing its common shares due to its failure to pay dividends on its preference shares. Until such time as dividends on preference shares are paid, the Company will not be able to repurchase or pay dividends on its common shares. At June 30, 2022, the Company had a remaining authorization of $74.2 million for share repurchases. Preference Shares On March 3, 2021 and May 6, 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 $100.0 million and $50.0 million, respectively, 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 are collectively referred to as the "2021 Preference Share Repurchase Program". The principal purpose of the 2021 Preference Share Repurchase Program is to adjust our capital structure to reflect current operations and the amount of capital required to operate Maiden Reinsurance. The Board has not declared or paid a dividend on the preference shares since 2018 and there can be no assurance that it will declare and pay dividends on the preference shares in the future. The preference shares are perpetual and there is no fixed date on which we are required to redeem or otherwise repurchase them. Please refer to "Notes to Consolidated Financial Statements - Note 6. Shareholders' Equity" under Part 1 Item 1 "Financial Information" of this Quarterly Report on Form 10-Q for further information on our preference shares, including a summary of repurchases made of the Company's preference shares during the three and six months ended June 30, 2022. The Company has a remaining authorization of $3.9 million for preference share repurchases. Senior Notes There were no changes in the Company’s Senior Notes at June 30, 2022 compared to December 31, 2021 and the Company did not enter into any short-term borrowing arrangements during the six months ended June 30, 2022. Please refer to " Notes to Condensed Consolidated Financial Statements (unaudited) Note 7. Long Term Debt " included under Part I Item 1 " Financial Information" of this Form 10-Q for a discussion of the Company’s Senior Notes. The ratio of Debt to Total Capital Resources at June 30, 2022 and December 31, 2021 was computed as follows: ($ in thousands) June 30, 2022 December 31, 2021 Senior notes - principal amount $ 262,500 $ 262,500 Maiden shareholders’ equity 347,933 384,257 Total capital resources $ 610,433 $ 646,757 Ratio of debt to total capital resources 43.0 % 40.6 % Off-Balance Sheet Arrangements C ertain of the Company's investments in limited partnerships are related to real estate joint ventures with interests in multi-property projects with varying strategies ranging from the development of properties to the ownership of income-producing properties. In certain of these joint ventures, the Company has provided certain indemnities, guarantees and commitments to ce rtain parties such that it may be required to make payments now or in the future as further described in the " Notes to Condensed Consolidated Financial Statements (unaudited) Note 11. Commitments, Contingencies and Guarantees " included under Part I Item 1 " Financial Information" of this Form 10-Q. 60 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 June 30, 2022, guarantees of $35.2 million have been provided to lenders by the Company on behalf of the real estate joint venture, however, the likelihood of the Company incurring any losses pertaining to project level financing guarantees was determined to be remote. Therefore, no liability has been accrued under ASC 450-20. Non-GAAP Measures As defined and described in the Key Financial Measures section , m anagement uses certain key financial measures, some of which are non-GAAP measures, to evaluate the Company's financial performance and the overall growth in value generated for the Company’s common shareholders. Management believes that these measures, which may be defined differently by other companies, explain the Company’s results to investors in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. The calculation, reconciliation to nearest GAAP measure and discussion of relevant non-GAAP measures used by management are as follows: Non-GAAP operating earnings were $16.6 million for the three months ended June 30, 2022 compared to non-GAAP operating earnings of $13.9 million for the same period in 2021. The improvement in the Company's non-GAAP operating results was largely due to gains of $24.7 million from the repurchase of preference shares at market values for the three months ended June 30, 2022 compared to gains of $18.7 million for preference share repurchases during the same period in 2021. Those improved results were partly offset by a non-GAAP underwriting loss of $8.6 million for the three months ended June 30, 2022 compared to a non-GAAP underwriting loss of $2.4 million for the same period in 2021. Non-GAAP operating earnings were $9.7 million for the six months ended June 30, 2022, compared to non-GAAP operating earnings of $61.2 million in 2021. The reduction in the Company's non-GAAP operating results was largely due to gains of $28.2 million from the repurchase of preference shares at market values for the six months ended June 30, 2022 compared to gains of $81.2 million for preference share repurchases during the same period in 2021. 61 Non-GAAP operating earnings and Non-GAAP diluted operating earnings per share attributable to common shareholders Non-GAAP operating earnings and non-GAAP diluted operating earnings per share attributable to common shareholders can be reconciled to the nearest U.S. GAAP financial measure as follows: For the Three Months Ended June 30, 2022 2021 ($ in thousands except per share data) Net income available to Maiden common shareholders $ 25,752 $ 26,826 Add (subtract): Net realized and unrealized investment gains (2,111) (849) Foreign exchange and other (gains) losses (6,586) 1,588 Interest in loss (income) of equity method investments 3,041 (2,775) Decrease in deferred gain on retroactive reinsurance under the LPT/ADC Agreement (3,463) (10,842) Non-GAAP operating earnings $ 16,633 $ 13,948 Diluted earnings per share attributable to common shareholders $ 0.29 $ 0.31 Add (subtract): Net realized and unrealized investment gains (0.02) (0.01) Foreign exchange and other (gains) losses (0.08) 0.02 Interest in loss (income) of equity method investments 0.04 (0.03) Decrease in deferred gain on retroactive reinsurance under the LPT/ADC Agreement (0.04) (0.13) Non-GAAP diluted operating earnings per share available to common shareholders $ 0.19 $ 0.16 For the Six Months Ended June 30, 2022 2021 ($ in thousands except per share data) Net income available to Maiden common shareholders $ 27,346 $ 98,562 Add (subtract): Net realized and unrealized investment gains (4,420) (8,950) Foreign exchange and other gains (10,535) (1,954) Interest in loss (income) of equity method investments 1,770 (5,722) Decrease in deferred gain on retroactive reinsurance under the LPT/ADC Agreement (4,463) (20,687) Non-GAAP operating earnings $ 9,698 $ 61,249 Diluted earnings per share attributable to common shareholders $ 0.31 $ 1.14 Add (subtract): Net realized and unrealized investment gains (0.05) (0.10) Foreign exchange and other gains (0.12) (0.02) Interest in loss (income) of equity method investments 0.02 (0.07) Decrease in deferred gain on retroactive reinsurance under the LPT/ADC Agreement (0.05) (0.24) Non-GAAP diluted operating earnings per share available to common shareholders $ 0.11 $ 0.71 62 Non-GAAP Operating ROACE Non-GAAP Operating ROACE for the three and six months ended June 30, 2022 and 2021 was computed as follows: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2022 2021 2022 2021 Non-GAAP operating earnings $ 16,633 $ 13,948 $ 9,698 $ 61,249 Opening adjusted common shareholders’ equity 260,195 262,759 274,990 208,447 Ending adjusted common shareholders’ equity 269,658 277,082 269,658 277,082 Average adjusted common shareholders’ equity 264,927 269,921 272,324 242,765 Non-GAAP Operating ROACE 25.2 % 20.7 % 7.2 % 50.9 % Non-GAAP Underwriting Results The following summarizes our non-GAAP underwriting results for the three and six months ended June 30, 2022 and 2021: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2022 2021 2022 2021 Gross premiums written $ 3,339 $ 3,434 $ (6,831) $ 1,044 Net premiums written $ 3,186 $ 3,261 $ (7,137) $ 565 Net premiums earned $ 10,443 $ 13,312 $ 11,565 $ 25,076 Other insurance revenue 469 539 520 808 Non-GAAP net loss and LAE (1) (10,337) (5,515) (9,054) (17,719) Commission and other acquisition expenses (4,885) (6,899) (7,413) (12,841) General and administrative expenses (4,283) (3,808) (6,866) (5,985) Non-GAAP underwriting loss (1) $ (8,593) $ (2,371) $ (11,248) $ (10,661) (1) Non-GAAP underwriting loss and non-GAAP net loss and LAE for the three and six months ended June 30, 2022 and 2021 are adjusted for prior year reserve development subject to the LPT/ADC Agreement. Please see "Key Financial Measures" section for the definitions of Non-GAAP underwriting loss and net loss and LAE. The non-GAAP underwriting results include the impact of favorable prior year loss reserve development under the AmTrust Quota Share which is fully recoverable from Cavello under the LPT/ADC Agreement to show the ultimate economic benefit to the Company. As shown in the table above, adjusted for the decrease in the deferred gain under the LPT/ADC Agreement of $3.5 million and $4.5 million during the three and six months ended June 30, 2022, respectively, the non-GAAP underwriting loss was $8.6 million and $11.2 million, respectively. This compared to a non-GAAP underwriting loss of $2.4 million and $10.7 million, respectively, when adjusted for the decrease in the deferred gain under the LPT/ADC Agreement of $10.8 million and $20.7 million during the three and six months ended June 30, 2021, respectively. The non-GAAP underwriting results above were due to underwriting results in the AmTrust Reinsurance segment not covered by the LPT/ADC Agreement, specifically the run-off of the AmTrust Quota Share with losses occurring after December 31, 2018 (including the additional ceding commission paid under the Partial Termination Amendment) as well as claims related to the European Hospital Liability Quota Share. Underwriting results in the Diversified Reinsurance segment during the three and six months ended June 30, 2022 were generally stable compared to the same periods in 2021. Non-GAAP Net Loss and LAE Adjusted for the decrease in the deferred gain for the LPT/ADC Agreement, the non-GAAP net loss and LAE for the three and six months ended June 30, 2022 increased by $3.5 million and $4.5 million, respectively (2021 - $10.8 million and $20.7 million, respectively), due to favorable loss experience for AmTrust reserves subject to the LPT/ADC Agreement which are ultimately recoverable from Cavello. This adjustment is reflected in the calculation of non-GAAP Loss and LAE below: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2022 2021 2022 2021 Net loss and LAE $ 6,874 $ (5,327) $ 4,591 $ (2,968) Less: favorable prior year loss development subject to the LPT/ADC Agreement (3,463) (10,842) (4,463) (20,687) Non-GAAP net loss and LAE $ 10,337 $ 5,515 $ 9,054 $ 17,719 Adjusted for the impact of favorable prior year loss development on AmTrust reserves subject to the LPT/ADC Agreement of $3.5 million and $4.5 million during the three and six months ended June 30, 2022, respectively (2021 - $10.8 million and $20.7 million, respectively), non-GAAP net loss and LAE was $10.3 million and $9.1 million, respectively (2021 - $5.5 million and $17.7 million, respectively). 63 Adjusted Shareholders' Equity, Adjusted Total Capital Resources, Adjusted Book Value per Common Share, and Ratio of Debt to Total Adjusted Capital Resources The Adjusted Shareholders' Equity, Adjusted Total Capital Resources and Adjusted Book Value per Common Share at June 30, 2022 and December 31, 2021 reflect the addition of the unamortized deferred gain under the LPT/ADC Agreement to the GAAP shareholders' equity as depicted in the computations below. The deferred gain under the LPT/ADC Agreement was $41.4 million at June 30, 2022 compared to $45.9 million at December 31, 2021, and relates to loss reserves subject to that agreement that are fully recoverable from Cavello. The decrease in the unamortized deferred gain under the LPT/ADC Agreement for the six months ended June 30, 2022 is attributable to $4.5 million in loss and LAE recognized as favorable loss development in the Company's GAAP income statement subject to the LPT/ADC Agreement. We believe the inclusion of this unamortized deferred gain in these metrics better reflects the ultimate economic benefit of the LPT/ADC Agreement, which will improve the Company's shareholders' equity over the settlement period under the terms of the agreement. The Adjusted Shareholders' Equity, Adjusted Total Capital Resources and Adjusted Book Value per Common Share at December 31, 2021 also reflected the LP Investment Adjustment of $4.1 million, which pertained to the equity accounting related to the fair value of certain hedged liabilities in an equity method investment held by the Company wherein the ultimate realizable value of the asset supporting the hedged liabilities was not recognized at fair value until its sale in the six months ended June 30, 2022. We believe that this adjustment recognized the future realizable value and reflected the ultimate economic benefit of this investment which was sold at a realized gain in the six months ended June 30, 2022 and improved the Company's shareholders' equity over the hedged contract period of the investment. Reconciliation of shareholders' equity to Adjusted shareholders' equity and Adjusted Total Capital Resources The following table computes adjusted shareholders' equity and adjusted total capital resources by recognizing the unamortized deferred gain under the LPT/ADC Agreement at June 30, 2022 and December 31, 2021 as well as the LP Investment Adjustment for realizable value of intangible asset in a limited partnership investment at December 31, 2021: ($ in thousands) June 30, 2022 December 31, 2021 Change Change % Preference shares $ 119,672 $ 159,210 $ (39,538) (24.8) % Common shareholders' equity 228,261 225,047 3,214 1.4 % Total shareholders' equity 347,933 384,257 (36,324) (9.5) % LP Investment Adjustment — 4,083 (4,083) (100.0) % Unamortized deferred gain on LPT/ADC Agreement 41,397 45,860 (4,463) (9.7) % Adjusted shareholders' equity 389,330 434,200 (44,870) (10.3) % Senior Notes - principal amount 262,500 262,500 — — % Adjusted total capital resources $ 651,830 $ 696,700 $ (44,870) (6.4) % Reconciliation of Book Value per Common Share to Adjusted Book Value per Common Share The adjusted book value per common share as reconciled for the recognition of the unamortized deferred gain under the LPT/ADC Agreement as well as the LP Investment Adjustment for realizable value of intangible asset in limited partnership investment at June 30, 2022 and December 31, 2021 was computed as follows: June 30, 2022 December 31, 2021 Book value per common share $ 2.62 $ 2.60 LP Investment Adjustment — 0.05 Unamortized deferred gain on LPT/ADC Agreement 0.47 0.53 Adjusted book value per common share $ 3.09 $ 3.18 Ratio of Debt to Adjusted Total Capital Resources Management uses this non-GAAP measure to monitor the financial leverage of the Company. This measure is calculated using the total principal amount of debt divided by the sum of adjusted total capital resources as computed in the table above. The ratio of Debt to Adjusted Total Capital Resources at June 30, 2022 and December 31, 2021 was computed as follows: ($ in thousands) June 30, 2022 December 31, 2021 Senior notes - principal amount $ 262,500 $ 262,500 Adjusted shareholders’ equity 389,330 434,200 Adjusted total capital resources $ 651,830 $ 696,700 Ratio of debt to adjusted total capital resources 40.3 % 37.7 % 64 Currency and Foreign Exchange We conduct business in a variety of foreign (non-U.S.) currencies, the principal exposures being the euro and the British pound. Assets and liabilities denominated in foreign currencies are exposed to changes in currency exchange rates. Our reporting currency is the U.S. dollar, and exchange rate fluctuations relative to the U.S. dollar may materially impact our results and financial position. Our principal exposure to foreign currency risk is our obligation to settle claims in foreign currencies. In addition, in order to minimize this risk, we maintain and expect to continue to maintain a portion of our investment portfolio in investments denominated in currencies other than the U.S. dollar. We may employ various strategies (including hedging) to manage our exposure to foreign currency exchange risk. To the extent that these exposures are not fully hedged or the hedges are ineffective, our results of operations or equity may be adversely affected. At June 30, 2022, no such hedges or hedging strategies were in force or had been entered into. We measure monetary assets and liabilities denominated in foreign currencies at period end exchange rates, with the resulting foreign exchange gains and losses recognized in the unaudited Condensed Consolidated Statements of Income. Revenues and expenses in foreign currencies are converted at average exchange rates during the period. The effect of the translation adjustments for foreign operations is included in AOCI. Net foreign exchange gains of $7.9 million and $11.9 million were generated during the three and six months ended June 30, 2022, respectively, compared to net foreign exchange losses of $1.2 million and gains of $2.2 million for the three and six months ended June 30, 2021, respectively. At June 30, 2022, net foreign exchange gains were primarily driven by exposures to euro, British pound and other non-USD denominated net loss reserves and insurance related liabilities in excess of foreign currency assets. Our non-USD denominated liabilities at June 30, 2022 included reserve for net loss and LAE of $354.5 million. There was no new business written in non-USD currencies during the three and six months ended June 30, 2022. Our foreign currency asset exposures at June 30, 2022 included $233.9 million of fixed maturity securities managed by our investment managers who have the discretion to hold foreign currency exposures as part of their total return strategy as well as $32.4 million of equity method real estate investments denominated in Canadian dollars. We held $53.8 million of non-USD denominated funds withheld receivable at June 30, 2022. Effects of Inflation The anticipated effects of inflation are considered explicitly in the pricing of the insured exposures, which are used as the initial estimates of reserves for loss and LAE. In addition, inflation is also implicitly accounted for in subsequent estimates of loss and LAE reserves, as the expected rate of emergence is in part predicated upon the historical levels of inflation that impact ultimate claim costs. To the extent inflation causes these costs, particularly medical treatments and litigation costs, to vary from the assumptions made in the pricing or reserving estimates, the Company will be required to change the reserve for loss and LAE with a corresponding change in its earnings in the period in which the variance is identified. The actual effects of inflation on the results of operations of the Company cannot be accurately known until claims are ultimately settled. Off-Balance Sheet Arrangements At June 30, 2022, we did not have any off-balance sheet arrangements as defined by Item 303(a) (4) of Regulation S-K. Recent Accounting Pronouncements See " Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) Note 2. Significant Accounting Policies " for a discussion on recently issued accounting pronouncements not yet adopted.