Maiden Holdings, Ltd. 10-Q

Item 1. Financial Statements MAIDEN HOLDINGS, LTD. CONDENSED CONSOLIDATED BALANCE SHEETS (in thousands of U.S. dollars, except share and per share data) September 30, 2023 December 31, 2022 ASSETS (Unaudited) (Audited) Investments: Fixed maturities, available-for-sale, at fair value (Amortized cost: 2023 - $ 270,900 ; 2022 - $ 330,439 ) $ 258,106 $ 314,527 Equity securities, at fair value (cost: 2023 - $ 41,488 ; 2022 - $ 40,509 ) 45,647 43,621 Equity method investments 79,400 80,159 Other investments (Allowance for expected credit losses: 2023 - $ 1,023 ) 166,222 148,753 Total investments 549,375 587,060 Cash and cash equivalents 17,930 30,986 Restricted cash and cash equivalents 11,600 15,638 Accrued investment income 5,486 4,122 Reinsurance balances receivable, net: (includes $ 7,366 and $ 8,395 from related parties in 2023 and 2022, respectively. Allowance for expected credit losses: 2023 - $ 158 ) 10,416 10,707 Reinsurance recoverable on unpaid losses (Allowance for expected credit losses: 2023 - $ 4,289 ) 558,777 556,116 Loan to related party 167,975 167,975 Deferred commission and other acquisition expenses (includes $ 18,220 and $ 23,632 from related parties in 2023 and 2022, respectively) 19,122 24,976 Funds withheld receivable: (includes $ 213,051 and $ 416,835 from related parties in 2023 and 2022, respectively. Allowance for expected credit losses: 2023 - $ 17 ) 229,568 441,412 Other assets 7,214 7,874 Total assets $ 1,577,463 $ 1,846,866 LIABILITIES Reserve for loss and loss adjustment expenses (includes $ 783,595 and $ 988,684 from related parties in 2023 and 2022, respectively) $ 911,475 $ 1,131,408 Unearned premiums (includes $ 48,914 and $ 63,443 from related parties in 2023 and 2022, respectively) 50,691 67,081 Deferred gain on retroactive reinsurance 58,837 47,708 Accrued expenses and other liabilities (includes $ 21,960 and $ 33,278 from related parties in 2023 and 2022, respectively) 38,664 60,518 Senior notes - principal amount 262,361 262,500 Less: unamortized debt issuance costs 7,802 6,928 Senior notes, net 254,559 255,572 Total liabilities 1,314,226 1,562,287 Commitments and Contingencies EQUITY Common shares ($ 0.01 par value; 2023: 149,726,105 and 2022: 149,224,080 shares issued; 2023: 101,085,340 and 2022: 101,532,151 shares outstanding) 1,497 1,492 Additional paid-in capital 885,748 884,259 Accumulated other comprehensive loss ( 38,893 ) ( 41,234 ) Accumulated deficit ( 466,164 ) ( 442,863 ) Treasury shares, at cost (2023: 48,640,765 shares and 2022: 47,691,929 shares) ( 118,951 ) ( 117,075 ) Total shareholders’ equity 263,237 284,579 Total liabilities and equity $ 1,577,463 $ 1,846,866 See accompanying notes to the unaudited Condensed Consolidated Financial Statements. 3 MAIDEN HOLDINGS, LTD. CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) (in thousands of U.S. dollars, except per share data) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 Revenues Gross premiums written $ 8,660 $ 5,380 $ 16,371 $ ( 1,451 ) Net premiums written $ 8,625 $ 5,222 $ 16,260 $ ( 1,915 ) Change in unearned premiums 3,854 7,029 16,260 25,731 Net premiums earned 12,479 12,251 32,520 23,816 Other insurance (expense) revenue, net ( 16 ) 368 3 888 Net investment income 9,048 6,637 29,111 20,871 Net realized and unrealized investment gains (losses) 244 ( 1,572 ) 2,394 2,848 Total revenues 21,755 17,684 64,028 48,423 Expenses Net loss and loss adjustment expenses 15,156 17,426 36,503 22,017 Commission and other acquisition expenses 5,340 5,398 14,520 12,811 General and administrative expenses 6,787 6,491 23,734 24,671 Interest and amortization expenses 4,814 4,833 13,411 14,498 Foreign exchange and other (gains) losses ( 4,594 ) ( 8,586 ) 843 ( 19,121 ) Total expenses 27,503 25,562 89,011 54,876 Loss before income taxes and interest in income (loss) of equity method investments ( 5,748 ) ( 7,878 ) ( 24,983 ) ( 6,453 ) Less: income tax (benefit) expense ( 31 ) ( 91 ) ( 253 ) 451 Interest in income (loss) of equity method investments 2,190 ( 373 ) 6,942 ( 2,143 ) Net loss ( 3,527 ) ( 8,160 ) ( 17,788 ) ( 9,047 ) Gain from repurchase of preference shares — — — 28,233 Net (loss) income (attributable) available to Maiden common shareholders $ ( 3,527 ) $ ( 8,160 ) $ ( 17,788 ) $ 19,186 Basic and diluted (loss) earnings per share (attributable) available to common shareholders $ ( 0.03 ) $ ( 0.09 ) $ ( 0.18 ) $ 0.22 Weighted average number of common shares - basic 101,454,767 87,161,499 101,586,759 86,935,823 Adjusted weighted average number of common shares and assumed conversions - diluted 101,454,767 87,161,499 101,586,759 86,937,552 See accompanying notes to the unaudited Condensed Consolidated Financial Statements. 4 MAIDEN HOLDINGS, LTD. CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) (in thousands of U.S. dollars) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 Net loss $ ( 3,527 ) $ ( 8,160 ) $ ( 17,788 ) $ ( 9,047 ) Other comprehensive income (loss) Net unrealized holdings gains (losses) on AFS securities arising during period 338 ( 14,864 ) 3,121 ( 56,446 ) Net unrealized holdings gains on equity method investments arising during period — — — 4,414 Adjustment for reclassification of net realized gains recognized in net loss ( 3 ) ( 48 ) ( 3 ) ( 5,696 ) Foreign currency translation adjustment ( 2,075 ) 2,246 ( 741 ) 18,094 Other comprehensive (loss) income, before tax ( 1,740 ) ( 12,666 ) 2,377 ( 39,634 ) Income tax (expense) benefit related to components of other comprehensive (loss) income ( 17 ) 53 ( 36 ) 296 Other comprehensive (loss) income, after tax ( 1,757 ) ( 12,613 ) 2,341 ( 39,338 ) Comprehensive loss $ ( 5,284 ) $ ( 20,773 ) $ ( 15,447 ) $ ( 48,385 ) See accompanying notes to the unaudited Condensed Consolidated Financial Statements. 5 MAIDEN HOLDINGS, LTD. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (in thousands of U.S. dollars) For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 Preference shares - Series A, C and D Beginning balance $ — $ 119,672 $ — $ 159,210 Repurchase of Preference Shares – Series A — — — ( 10,891 ) Repurchase of Preference Shares – Series C — — — ( 15,644 ) Repurchase of Preference Shares – Series D — — — ( 13,003 ) Ending balance — 119,672 — 119,672 Common shares Beginning balance 1,497 934 1,492 923 Issuance of common shares from vesting of stock based compensation — — 5 11 Ending balance 1,497 934 1,497 934 Additional paid-in capital Beginning balance 885,462 772,241 884,259 768,650 Issuance of common shares from vesting of stock based compensation — — ( 5 ) ( 11 ) Share-based compensation expense 286 233 1,401 2,504 Repurchase of preference shares — — 93 1,321 Cash settlement of restricted shares/options granted — — — 10 Ending balance 885,748 772,474 885,748 772,474 Accumulated other comprehensive loss Beginning balance ( 37,136 ) ( 38,940 ) ( 41,234 ) ( 12,215 ) Change in net unrealized investment gains (losses) 318 ( 14,859 ) 3,082 ( 57,432 ) Foreign currency translation adjustment ( 2,075 ) 2,246 ( 741 ) 18,094 Ending balance ( 38,893 ) ( 51,553 ) ( 38,893 ) ( 51,553 ) Accumulated deficit Beginning balance ( 462,637 ) ( 470,949 ) ( 442,863 ) ( 498,295 ) Opening allowance for expected credit losses — — ( 5,513 ) — Net loss ( 3,527 ) ( 8,160 ) ( 17,788 ) ( 9,047 ) Gain from repurchase of preference shares — — — 28,233 Ending balance ( 466,164 ) ( 479,109 ) ( 466,164 ) ( 479,109 ) Treasury shares Beginning balance ( 117,896 ) ( 35,025 ) ( 117,075 ) ( 34,016 ) Shares repurchased ( 1,055 ) — ( 1,876 ) ( 1,009 ) Ending balance ( 118,951 ) ( 35,025 ) ( 118,951 ) ( 35,025 ) Total shareholders' equity $ 263,237 $ 327,393 $ 263,237 $ 327,393 See accompanying notes to the unaudited Condensed Consolidated Financial Statements. 6 MAIDEN HOLDINGS, LTD. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of U.S. dollars) For the Nine Months Ended September 30, 2023 2022 Cash flows from operating activities Net loss $ ( 17,788 ) $ ( 9,047 ) Adjustments to reconcile net loss to net cash flows from operating activities: Depreciation, amortization and share-based compensation ( 890 ) 1,628 Interest in (income) loss of equity method investments ( 6,942 ) 2,143 Net realized and unrealized investment gains ( 2,394 ) ( 2,848 ) Change in allowance for expected credit losses ( 23 ) — Foreign exchange and other losses (gains) 843 ( 19,121 ) Changes in assets – (increase) decrease: Reinsurance balances receivable, net 177 6,163 Reinsurance recoverable on unpaid losses 4,060 6,238 Accrued investment income ( 1,391 ) 635 Deferred commission and other acquisition expenses 5,797 9,192 Funds withheld receivable 1,683 1,037 Other assets 411 ( 235 ) Changes in liabilities – increase (decrease): Reserve for loss and loss adjustment expenses ( 9,086 ) ( 179,627 ) Unearned premiums ( 16,264 ) ( 25,725 ) Deferred gain on retroactive reinsurance — ( 270 ) Accrued expenses and other liabilities ( 24,190 ) 110,004 Net cash used in operating activities ( 65,997 ) ( 99,833 ) Cash flows from investing activities: Purchases of fixed maturities ( 47,373 ) ( 34,022 ) Purchases of other investments ( 33,287 ) ( 28,225 ) Purchases of equity method investments ( 10,288 ) ( 26,483 ) Purchases of equity securities ( 1,448 ) ( 15,592 ) Proceeds from sales of fixed maturities 64,126 139,645 Proceeds from maturities, paydowns and calls of fixed maturities 43,903 48,003 Proceeds from sale and redemption of other investments 17,229 3,794 Proceeds from sale and redemption of equity method investments 17,843 32,332 Proceeds from sale and redemption of equity securities 469 — Others, net ( 37 ) ( 73 ) Net cash provided by investing activities 51,137 119,379 Cash flows from financing activities: Repurchase of common shares ( 1,876 ) ( 1,009 ) Repurchase of preference shares — ( 9,984 ) Repurchase of senior notes ( 95 ) — Cash settlement of restricted shares granted and options exercised — 10 Net cash used in financing activities ( 1,971 ) ( 10,983 ) Effect of exchange rate changes on foreign currency cash, restricted cash and equivalents ( 263 ) ( 2,152 ) Net (decrease) increase in cash, restricted cash and cash equivalents ( 17,094 ) 6,411 Cash, restricted cash and cash equivalents, beginning of period 46,624 66,087 Cash, restricted cash and cash equivalents, end of period $ 29,530 $ 72,498 Reconciliation of cash and restricted cash reported within Condensed Consolidated Balance Sheets: Cash and cash equivalents, end of period $ 17,930 $ 24,376 Restricted cash and cash equivalents, end of period 11,600 48,122 Total cash, restricted cash and cash equivalents, end of period $ 29,530 $ 72,498 See accompanying notes to the unaudited Condensed Consolidated Financial Statements. 7 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 1. Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements include the accounts of Maiden Holdings, Ltd. ("Parent Company" or "Maiden Holdings") and its subsidiaries (the "Company" or "Maiden"). They have been prepared in accordance with accounting principles generally accepted in the United States ("U.S. GAAP") for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the U.S. Securities and Exchange Commission ("SEC"). Accordingly, they do not include all of the information and footnotes required by U.S. GAAP for complete financial statements. All significant intercompany transactions and accounts have been eliminated. These interim unaudited Condensed Consolidated Financial Statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim period and all such adjustments are of a normal recurring nature. The results of operations for the interim period are not necessarily indicative, if annualized, of those to be expected for the full year. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. These unaudited Condensed Consolidated Financial Statements, including these notes, should be read in conjunction with the Company's audited Consolidated Financial Statements and related notes included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022. Certain prior year comparatives have been reclassified to conform to the current period presentation. The effect of these reclassifications had no impact on previously reported shareholders' equity or net income. Maiden creates shareholder value by actively managing and allocating our assets and capital, including through ownership and management of businesses and assets primarily in the insurance and related financial services industries where we can leverage our deep knowledge of those markets. We are currently underwriting reinsurance risks on a retroactive basis through our indirect wholly owned subsidiary Genesis Legacy Solutions ("GLS") which provides a full range of legacy services to small insurance companies, particularly those in run-off or with blocks of reserves that are no longer core to operations. GLS works with clients to develop and implement finality solutions including acquiring entire companies that enable our clients to meet their capital and risk management objectives. We expect this legacy solutions business to contribute to our active asset and capital management strategies. The Company does not presently underwrite prospective reinsurance risks. Short-term income protection business is written on a primary basis by our wholly owned subsidiaries Maiden Life Försäkrings AB ("Maiden LF") and Maiden General Försäkrings AB ("Maiden GF") in the Scandinavian and Northern European markets. Insurance support services are provided to Maiden LF and Maiden GF by our wholly owned subsidiary services company, Maiden Global Holdings Ltd. (“Maiden Global”), which is also a licensed intermediary in the United Kingdom. Maiden Global had previously operated internationally by providing branded auto and credit life insurance products through insurer partners, particularly those in the European Union ("EU") and other global markets ("IIS business"). These products also produced reinsurance programs which were underwritten by our wholly owned subsidiary Maiden Reinsurance Ltd. (“Maiden Reinsurance”). The Company also has various historic reinsurance programs underwritten by Maiden Reinsurance which are in run-off, including the liabilities associated with AmTrust Financial Services, Inc. ("AmTrust") reinsurance agreements which were terminated in 2019 as discussed in "Note 10. Related Party Transactions" . In addition, the Company has a retroactive reinsurance agreement and a commutation agreement that further reduces its exposure and limits the potential volatility related to AmTrust liabilities, which are discussed in " Note 8. Reinsurance ". Please see the Company's audited Consolidated Financial Statements, and related notes thereto, included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 for further details . 8 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 2. Significant Accounting Policies There have been no material changes to the significant accounting policies as described in the Company's Annual Report on Form 10-K for the year ended December 31, 2022, except for the following: Recently Adopted Accounting Standards Accounting for Measurement of Credit Losses on Financial Instruments In June 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2016-13 "Financial Instruments: Credit Losses (Topic 326)" replacing the "incurred loss" impairment methodology with an approach based on "expected losses" to estimate credit losses on certain types of financial instruments and requires consideration of a broader range of reasonable and supportable information to inform credit loss estimates. The guidance requires financial assets to be presented at the net amount expected to be collected. The allowance for credit losses is a valuation account that is deducted from the cost of the financial asset to present the net carrying value at the amount expected to be collected on the financial asset. ASU 2016-13 also modified the accounting for available-for-sale ("AFS") debt securities, which must be individually assessed for credit losses when fair value is less than the amortized cost basis, in accordance with Subtopic 326-30, Financial Instruments: Credit Losses Available-for-Sale Debt Securities . Credit losses relating to AFS debt securities will be recorded through an allowance for credit losses rather than under the previous other-than-temporarily-impaired ("OTTI") methodology. In April 2019, the FASB issued ASU 2019-04 for targeted improvements related to ASU 2016-13 which clarify that an entity should include all expected recoveries in its estimate of the allowance for credit losses. In addition, for collateral dependent financial assets, the amendments mandate that an allowance for credit losses that is added to the amortized cost basis of the financial asset should not exceed amounts previously written off. It also clarifies FASB’s intent to include all reinsurance recoverables within the scope of Topic 944 to be within the scope of Subtopic 326-20 , regardless of the measurement basis of those recoverables. The Company's reinsurance recoverable on unpaid losses is currently the most significant financial asset within the scope of ASU 2016-13. Topic 326 was adopted by the Company on January 1, 2023 and an opening allowance for expected credit losses of $ 5,513 was recognized by the Company in the beginning retained earnings on January 1, 2023. Credit Losses - AFS Fixed Maturity Securities An AFS fixed maturity security is considered impaired if the fair value of the investment is below its amortized cost. On a quarterly basis, the Company evaluates all AFS fixed maturities for impairment losses. If an AFS fixed maturity security is impaired and the Company intends to sell the security or it is more likely than not that the Company will be required to sell the security before its anticipated recovery, the full amount of the impairment loss is charged immediately to net income (loss) and is included in net investment gains (losses). If the Company does not intend to sell or will not be required to sell the impaired security before its anticipated recovery, the Company determines whether the decline in fair value below the amortized cost basis has resulted from a credit loss impairment or other factors. If the Company does not anticipate to fully recover the amortized cost, an allowance for expected credit losses is established. The allowance for expected credit losses is limited to the difference between a security's amortized cost basis and its fair value. The allowance for expected credit losses is charged to net income (loss) and is included in net investment gains (losses). On a quarterly basis, the Company assesses whether unrealized losses on its AFS fixed maturity securities represent credit impairments by considering the following factors: the extent to which its fair value is less than its amortized cost; adverse conditions related to the specific security, industry, or geographical area; any recent downgrades in the security's credit rating by a credit rating agency; and if failure of the issuer to make scheduled principal or interest payments exists. The length of time a security has been in an unrealized loss position no longer impacts the determination of whether a credit loss impairment exists. If a security is assessed to be credit impaired, it is subject to discounted cash flow analysis by comparing the present value of expected future cash flows with the amortized cost basis. If the present value of expected cash flows is less than the amortized cost, then a credit loss exists and an allowance for expected credit losses is recognized. If the present value of expected future cash flows is equal to or greater than the amortized cost basis, an expected credit loss does not exist. The non-credit impairment amount of the loss related to changes in interest rates and market conditions is recognized in other comprehensive income. The Company reports accrued interest receivable related to AFS securities separately and has elected not to measure an allowance for expected credit losses for accrued interest receivable. Write-offs of accrued interest receivable balances are recognized in net investment gains and losses in the period in which they are deemed uncollectible. Based on the Company's analysis, there was no allowance for expected credit losses recognized on AFS securities held at September 30, 2023. Credit Losses - Other Investments The Company's investments in direct lending entities are carried at cost less an allowance for expected credit losses, with any indication of credit loss recognized in net income or loss when determined to be needed from the Company's analysis of expected future cash flows. As of September 30, 2023, the total allowance for expected credit losses on the Company's investment in direct lending entities was $ 1,023 . Please see "Note 5(d). Fair Value Measurements" for additional information regarding this investment. 9 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 2. Significant Accounting Policies (continued) Credit Losses - Reinsurance Recoverable on Unpaid Losses Reinsurance recoverable balances are reviewed for impairment on a quarterly basis and are presented net of an allowance for expected credit losses. A case-specific allowance for expected credit losses against reinsurance recoverables that the Company deems unlikely to be collected in full, is estimated based on the Company's analysis of amounts due, historical delinquencies and write-offs. In addition, a default analysis is used to estimate an allowance for expected credit losses on the remainder of the reinsurance recoverable balance. The principal components of the default analysis are reinsurance recoverable balances by reinsurer and default factors applied to estimate uncollectible amounts based on reinsurers’ credit ratings and the length of collection periods. The default factors are based on a model developed by a major rating agency. The default analysis considers both current and forecasted economic conditions in the determination of the credit loss allowance. The Company records credit loss expenses related to reinsurance recoverable in net incurred losses and loss adjustment expenses in the Company’s condensed consolidated statements of income. Any adjustment to the allowance for expected credit losses is recognized in the period in which it is determined. Write-offs of reinsurance recoverable balances, together with associated allowances for expected credit losses, are recognized in the period in which balances are deemed uncollectible. The Company does not have a history of significant write-offs. As of September 30, 2023, the total allowance for expected credit losses on the Company's reinsurance recoverable balance was $ 4,289 which is discussed in more detail in "Note 8. Reinsurance" . Credit Losses - Reinsurance Balances Receivable Reinsurance balances receivable are reviewed for impairment on a quarterly basis and are presented net of an allowance for expected credit losses. The allowance for expected credit losses is estimated based on the Company's analysis of amounts due, historical delinquencies and write-offs, and current economic conditions, together with reasonable and supportable forecasts of short-term economic conditions. The allowance for expected credit losses is recognized in net income (loss) and any adjustment to the allowance for expected credit losses is recognized in the period in which it is determined. Write-offs of premium balances receivable, together with associated allowances for expected credit losses, are recognized in the period in which balances are deemed uncollectible. The Company does not have a history of significant write-offs. As of September 30, 2023, the total allowance for expected credit losses on the Company's reinsurance balances receivable was $ 158 . Credit Losses - Funds Withheld Receivable Funds withheld receivable are reviewed for impairment on a quarterly basis and are presented net of an allowance for expected credit losses. The allowance for expected credit losses is estimated based on the Company's analysis of amounts due, historical delinquencies and write-offs, and current economic conditions, together with reasonable and supportable forecasts of short-term economic conditions. The allowance for expected credit losses is recognized in net income (loss) and any adjustment to the allowance for expected credit losses is recognized in the period in which it is determined. Write-offs of funds withheld receivable, together with associated allowances for expected credit losses, are recognized in the period in which balances are deemed uncollectible. The Company does not have a history of significant write-offs. As of September 30, 2023, the total allowance for expected credit losses on the Company's funds withheld receivable was $ 17 . 10 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 3. Segment Information The Company currently has two reportable segments: Diversified Reinsurance and AmTrust Reinsurance. Our Diversified Reinsurance segment consists of a portfolio of predominantly property and casualty reinsurance business focusing on regional and specialty property and casualty insurance companies located primarily in Europe. This segment also includes transactions entered into by GLS as described in " Note 1. Basis of Presentation. Our AmTrust Reinsurance segment includes all business ceded to Maiden Reinsurance by AmTrust, primarily the quota share reinsurance agreement (“AmTrust Quota Share”) between Maiden Reinsurance and AmTrust’s wholly owned subsidiary, AmTrust International Insurance, Ltd. (“AII”) and the European hospital liability quota share reinsurance contract ("European Hospital Liability Quota Share") with AmTrust’s wholly owned subsidiaries, AmTrust Europe Limited ("AEL") and AmTrust International Underwriters DAC ("AIU DAC"), which are both in run-off effective January 1, 2019. Please refer to "Note 10. Related Party Transactions" for additional information regarding the AmTrust Reinsurance segment. The Company evaluates segment performance based on segment profit separately from the results of our investment portfolio. General and administrative expenses are allocated to the segments on an actual basis except salaries and benefits where management’s judgment is applied; however, general corporate expenses are not allocated to the segments. In determining total assets by reportable segment, the Company identifies those assets that are attributable to a particular segment such as reinsurance balances receivable, reinsurance recoverable on unpaid losses, deferred commission and other acquisition expenses, funds withheld receivable, loan to related party and restricted cash and investments. All remaining assets are allocated to Corporate. The following tables summarize the underwriting results of our reportable segments and the reconciliation of our reportable segments' underwriting results to consolidated net loss for the three months ended September 30, 2023 and 2022, respectively: For the Three Months Ended September 30, 2023 Diversified Reinsurance AmTrust Reinsurance Total Gross premiums written $ 6,762 $ 1,898 $ 8,660 Net premiums written $ 6,727 $ 1,898 $ 8,625 Net premiums earned $ 7,207 $ 5,272 $ 12,479 Other insurance expense ( 16 ) — ( 16 ) Net loss and LAE ( 4,142 ) ( 11,014 ) ( 15,156 ) Commission and other acquisition expenses ( 3,374 ) ( 1,966 ) ( 5,340 ) General and administrative expenses ( 2,216 ) ( 661 ) ( 2,877 ) Underwriting loss $ ( 2,541 ) $ ( 8,369 ) ( 10,910 ) Reconciliation to net loss Net investment income and net realized and unrealized investment gains 9,292 Interest and amortization expenses ( 4,814 ) Foreign exchange and other gains, net 4,594 Other general and administrative expenses ( 3,910 ) Income tax benefit 31 Interest in income of equity method investments 2,190 Net loss $ ( 3,527 ) 11 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 3. Segment Information (continued) For the Three Months Ended September 30, 2022 Diversified Reinsurance AmTrust Reinsurance Total Gross premiums written $ 6,185 $ ( 805 ) $ 5,380 Net premiums written $ 6,027 $ ( 805 ) $ 5,222 Net premiums earned $ 6,932 $ 5,319 $ 12,251 Other insurance revenue 368 — 368 Net loss and LAE ( 1,965 ) ( 15,461 ) ( 17,426 ) Commission and other acquisition expenses ( 3,394 ) ( 2,004 ) ( 5,398 ) General and administrative expenses ( 1,901 ) ( 521 ) ( 2,422 ) Underwriting income (loss) $ 40 $ ( 12,667 ) ( 12,627 ) Reconciliation to net loss Net investment income and net realized and unrealized investment losses 5,065 Interest and amortization expenses ( 4,833 ) Foreign exchange and other gains, net 8,586 Other general and administrative expenses ( 4,069 ) Income tax benefit 91 Interest in loss from equity method investments ( 373 ) Net loss $ ( 8,160 ) The following tables summarize the underwriting results of our reportable segments and the reconciliation of our reportable segments' underwriting results to consolidated net loss for the nine months ended September 30, 2023 and 2022, respectively: For the Nine Months Ended September 30, 2023 Diversified Reinsurance AmTrust Reinsurance Total Gross premiums written $ 20,263 $ ( 3,892 ) $ 16,371 Net premiums written $ 20,152 $ ( 3,892 ) $ 16,260 Net premiums earned $ 21,882 $ 10,638 $ 32,520 Other insurance revenue 3 — 3 Net loss and LAE ( 11,126 ) ( 25,377 ) ( 36,503 ) Commission and other acquisition expenses ( 10,544 ) ( 3,976 ) ( 14,520 ) General and administrative expenses ( 7,863 ) ( 2,062 ) ( 9,925 ) Underwriting loss $ ( 7,648 ) $ ( 20,777 ) ( 28,425 ) Reconciliation to net loss Net investment income and net realized and unrealized investment gains 31,505 Interest and amortization expenses ( 13,411 ) Foreign exchange and other losses, net ( 843 ) Other general and administrative expenses ( 13,809 ) Income tax benefit 253 Interest in income from equity method investments 6,942 Net loss $ ( 17,788 ) 12 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 3. Segment Information (continued) For the Nine Months Ended September 30, 2022 Diversified Reinsurance AmTrust Reinsurance Total Gross premiums written $ 17,069 $ ( 18,520 ) $ ( 1,451 ) Net premiums written $ 16,605 $ ( 18,520 ) $ ( 1,915 ) Net premiums earned $ 20,012 $ 3,804 $ 23,816 Other insurance revenue 888 — 888 Net loss and LAE ( 2,945 ) ( 19,072 ) ( 22,017 ) Commission and other acquisition expenses ( 10,684 ) ( 2,127 ) ( 12,811 ) General and administrative expenses ( 7,007 ) ( 2,281 ) ( 9,288 ) Underwriting income (loss) $ 264 $ ( 19,676 ) ( 19,412 ) Reconciliation to net loss Net investment income and net realized and unrealized investment gains 23,719 Interest and amortization expenses ( 14,498 ) Foreign exchange and other gains, net 19,121 Other general and administrative expenses ( 15,383 ) Income tax expense ( 451 ) Interest in loss from equity method investments ( 2,143 ) Net loss $ ( 9,047 ) The following tables summarize the financial position of the Company's reportable segments including the reconciliation to the Company's consolidated total assets at September 30, 2023 and December 31, 2022: September 30, 2023 Diversified Reinsurance AmTrust Reinsurance Total Total assets - reportable segments $ 84,773 $ 1,067,057 $ 1,151,830 Corporate assets — — 425,633 Total Assets $ 84,773 $ 1,067,057 $ 1,577,463 December 31, 2022 Diversified Reinsurance AmTrust Reinsurance Total Total assets - reportable segments $ 97,290 $ 1,342,852 $ 1,440,142 Corporate assets — — 406,724 Total Assets $ 97,290 $ 1,342,852 $ 1,846,866 13 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 3. Segment Information (continued) The following tables set forth financial information relating to net premiums written by major line of business and reportable segment for the three and nine months ended September 30, 2023 and 2022: For the Three Months Ended September 30, 2023 2022 Net premiums written Total Total Diversified Reinsurance International $ 6,727 $ 6,027 Total Diversified Reinsurance 6,727 6,027 AmTrust Reinsurance Small Commercial Business ( 160 ) ( 636 ) Specialty Program — ( 43 ) Specialty Risk and Extended Warranty 2,058 ( 126 ) Total AmTrust Reinsurance 1,898 ( 805 ) Total Net Premiums Written $ 8,625 $ 5,222 For the Nine Months Ended September 30, 2023 2022 Net premiums written Total Total Diversified Reinsurance International $ 20,152 $ 16,605 Total Diversified Reinsurance 20,152 16,605 AmTrust Reinsurance Small Commercial Business ( 318 ) ( 15,007 ) Specialty Program 157 732 Specialty Risk and Extended Warranty ( 3,731 ) ( 4,245 ) Total AmTrust Reinsurance ( 3,892 ) ( 18,520 ) Total Net Premiums Written $ 16,260 $ ( 1,915 ) 14 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 3. Segment Information (continued) The following tables set forth financial information for net premiums earned by major line of business and reportable segment for the three and nine months ended September 30, 2023 and 2022: For the Three Months Ended September 30, 2023 2022 Net premiums earned Total Total Diversified Reinsurance International $ 7,207 $ 6,932 Total Diversified Reinsurance 7,207 6,932 AmTrust Reinsurance Small Commercial Business ( 160 ) ( 636 ) Specialty Program — ( 43 ) Specialty Risk and Extended Warranty 5,432 5,998 Total AmTrust Reinsurance 5,272 5,319 Total Net Premiums Earned $ 12,479 $ 12,251 For the Nine Months Ended September 30, 2023 2022 Net premiums earned Total Total Diversified Reinsurance International $ 21,882 $ 20,012 Total Diversified Reinsurance 21,882 20,012 AmTrust Reinsurance Small Commercial Business ( 318 ) ( 14,995 ) Specialty Program 157 733 Specialty Risk and Extended Warranty 10,799 18,066 Total AmTrust Reinsurance 10,638 3,804 Total Net Premiums Earned $ 32,520 $ 23,816 15 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 4. Investments The Company holds: (i) available-for-sale ("AFS") portfolios of fixed maturity and equity securities, carried at fair value; (ii) other investments, of which certain investments are carried at fair value and investments in direct lending entities are carried at cost less impairment; (iii) equity method investments; and (iv) funds held - directly managed. a) Fixed Maturities The amortized cost, gross unrealized gains and losses, and fair value of fixed maturities at September 30, 2023 and December 31, 2022 are as follows: September 30, 2023 Original or amortized cost Gross unrealized gains Gross unrealized losses Fair value U.S. treasury bonds $ 47,633 $ 2 $ ( 23 ) $ 47,612 U.S. agency bonds – mortgage-backed 36,009 — ( 5,602 ) 30,407 Collateralized mortgage-backed securities 6,199 — ( 360 ) 5,839 Non-U.S. government bonds 14,551 — ( 729 ) 13,822 Collateralized loan obligations 89,346 — ( 2,374 ) 86,972 Corporate bonds 77,162 — ( 3,708 ) 73,454 Total fixed maturity investments $ 270,900 $ 2 $ ( 12,796 ) $ 258,106 December 31, 2022 Original or amortized cost Gross unrealized gains Gross unrealized losses Fair value U.S. treasury bonds $ 55,647 $ 1 $ ( 116 ) $ 55,532 U.S. agency bonds – mortgage-backed 38,767 — ( 4,402 ) 34,365 Collateralized mortgage-backed securities 7,199 — ( 432 ) 6,767 Non-U.S. government bonds 12,643 — ( 825 ) 11,818 Collateralized loan obligations 119,120 — ( 5,028 ) 114,092 Corporate bonds 97,063 — ( 5,110 ) 91,953 Total fixed maturity investments $ 330,439 $ 1 $ ( 15,913 ) $ 314,527 The contractual maturities of our fixed maturities are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. September 30, 2023 Amortized cost Fair value Due in one year or less $ 80,291 $ 79,644 Due after one year through five years 50,293 47,306 Due after five years through ten years 8,762 7,938 139,346 134,888 U.S. agency bonds – mortgage-backed 36,009 30,407 Collateralized mortgage-backed securities 6,199 5,839 Collateralized loan obligations 89,346 86,972 Total fixed maturity investments $ 270,900 $ 258,106 16 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 4. Investments (continued) The following tables summarize fixed maturities in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position: Less than 12 Months 12 Months or More Total September 30, 2023 Fair value Unrealized losses Fair value Unrealized losses Fair value Unrealized losses U.S. treasury bonds $ 2,648 $ ( 7 ) $ 984 $ ( 16 ) $ 3,632 $ ( 23 ) U.S. agency bonds – mortgage-backed — — 30,407 ( 5,602 ) 30,407 ( 5,602 ) Collateralized mortgage-backed securities — — 5,839 ( 360 ) 5,839 ( 360 ) Non-U.S. government bonds 2,078 — 11,744 ( 729 ) 13,822 ( 729 ) Collateralized loan obligations — — 86,972 ( 2,374 ) 86,972 ( 2,374 ) Corporate bonds — — 73,454 ( 3,708 ) 73,454 ( 3,708 ) Total temporarily impaired fixed maturities $ 4,726 $ ( 7 ) $ 209,400 $ ( 12,789 ) $ 214,126 $ ( 12,796 ) At September 30, 2023, there were 75 securities in an unrealized loss position with a fair value of $ 214,126 and unrealized losses of $ 12,796 . Of these securities in an unrealized loss position, there were 70 securities in our portfolio that have been in an unrealized loss position for twelve months or greater with a fair value of $ 209,400 and unrealized losses of $ 12,789 . Less than 12 Months 12 Months or More Total December 31, 2022 Fair value Unrealized losses Fair value Unrealized losses Fair value Unrealized losses U.S. treasury bonds $ 53,094 $ ( 114 ) $ 148 $ ( 2 ) $ 53,242 $ ( 116 ) U.S. agency bonds – mortgage-backed 31,394 ( 3,697 ) 2,971 ( 705 ) 34,365 ( 4,402 ) Collateralized mortgage-backed securities 6,767 ( 432 ) — — 6,767 ( 432 ) Non-U.S. government bonds 11,818 ( 825 ) — — 11,818 ( 825 ) Collateralized loan obligations 17,959 ( 1,032 ) 96,133 ( 3,996 ) 114,092 ( 5,028 ) Corporate bonds 87,213 ( 4,325 ) 4,740 ( 785 ) 91,953 ( 5,110 ) Total temporarily impaired fixed maturities $ 208,245 $ ( 10,425 ) $ 103,992 $ ( 5,488 ) $ 312,237 $ ( 15,913 ) At December 31, 2022, there were 88 securities in an unrealized loss position with a fair value of $ 312,237 and unrealized losses of $ 15,913 . Of these securities in an unrealized loss position, there were 26 securities in our portfolio that have been in an unrealized loss position for twelve months or greater with a fair value of $ 103,992 and unrealized losses of $ 5,488 . Allowance for Expected Credit Losses & Non-Credit Related Impairment Costs The Company evaluates AFS securities for impairment when fair value is below amortized cost on a quarterly basis. If the Company intends to sell or will be required to sell the security before its anticipated recovery, the full amount of the impairment loss is charged to net income (loss) and included in net investment gains (losses). If the Company does not intend to sell or will not be required to sell the security before its anticipated recovery, an allowance for expected credit losses is established and the portion of the loss relating to credit factors is recorded in net income (loss). The non-credit impairment amount of the loss (which could be related to interest rates and/or market conditions) is recognized in other comprehensive income. To estimate the allowance for expected credit losses for most of the AFS securities, the Company analyzes projected cash flows which are primarily driven by assumptions regarding loss severity, probability of default and projected recovery rates. The Company's determination of default and loss severity rates are based on credit rating, credit analysis and macroeconomic forecasts. Unrealized losses on securities issued or backed, either explicitly or implicitly by the U.S. government are not analyzed for credit losses. The Company has concluded that any possibility of a credit loss on these securities is highly unlikely due to the explicit U.S. government guarantee related to certain securities (e.g., Government National Mortgage Association issuances) and the implicit guarantee related to other securities that has been validated by past actions (e.g., U.S. government bailout of Federal National Mortgage Association and Federal Home Loan Mortgage Corporation during the 2008 credit crisis). Although these securities are not analyzed for credit losses, they are evaluated for impairment based on the Company's intention to sell and likely requirement to sell. Based on the Company's analysis at September 30, 2023 and 2022, respectively, the Company did not recognize any impairment on its AFS fixed maturity securities as the Company expects the amortized cost basis will ultimately be recovered based on projected cash flows as the related securities approach maturity. The Company continues to monitor the credit quality of the AFS securities to assess if it is probable that it will receive contractual or estimated cash flows in the form of principal and interest. Therefore, as the unrealized losses were due to non-credit factors, there was no allowance recorded for expected credit losses on AFS securities for the three and nine months ended September 30, 2023. 17 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 4. Investments (continued) The following tables summarize the credit ratings of our fixed maturities as at September 30, 2023 and December 31, 2022: September 30, 2023 Amortized cost Fair value % of Total fair value U.S. treasury bonds $ 47,633 $ 47,612 18.4 % U.S. agency bonds 36,009 30,407 11.8 % AAA 90,382 87,844 34.1 % AA+, AA, AA- 20,257 19,302 7.5 % A+, A, A- 32,769 30,884 12.0 % BBB+, BBB, BBB- 38,563 37,035 14.3 % BB+ or lower 5,287 5,022 1.9 % Total fixed maturities (1) $ 270,900 $ 258,106 100.0 % December 31, 2022 Amortized cost Fair value % of Total fair value U.S. treasury bonds $ 55,647 $ 55,532 17.7 % U.S. agency bonds 38,767 34,365 10.9 % AAA 112,775 108,136 34.4 % AA+, AA, AA- 23,974 22,640 7.2 % A+, A, A- 38,549 35,996 11.4 % BBB+, BBB, BBB- 55,374 53,094 16.9 % BB+ or lower 5,353 4,764 1.5 % Total fixed maturities (1) $ 330,439 $ 314,527 100.0 % (1) Ratings above are based on Standard & Poor’s ("S&P"), or equivalent, ratings . b) Other Investments, Equity Securities and Equity Method Investments Certain of the Company's other investments and equity method investments are subject to restrictions on redemptions and sales that are determined by the governing documents, which could limit our ability to liquidate those investments. These restrictions may include lock-ups, redemption gates, restricted share classes, restrictions on the frequency of redemption and notice periods. A gate is the ability to deny or delay a redemption request. Certain other investments and equity method investments may not have any restrictions governing their sale, but there is no active market and no guarantee that we will be able to execute a sale in a timely manner. In addition, even if certain other investments and equity method investments are not eligible for redemption or sales are restricted, the Company may still receive income distributions from those investments. Other investments The table shows the composition of the Company's other investments as of September 30, 2023 and December 31, 2022: September 30, 2023 December 31, 2022 Carrying value % of Total Carrying value % of Total Private equity funds $ 43,710 26.3 % $ 32,298 21.7 % Private credit funds 22,734 13.7 % 26,354 17.7 % Privately held equity investments 34,778 20.9 % 34,014 22.9 % Total other investments at fair value 101,222 60.9 % 92,666 62.3 % Investments in direct lending entities (at cost) 65,000 39.1 % 56,087 37.7 % Total other investments $ 166,222 100.0 % $ 148,753 100.0 % The Company's investments in direct lending entities of $ 65,000 at September 30, 2023 (December 31, 2022 - $ 56,087 ) are carried at cost less an allowance for expected credit losses, with any indication of credit loss recognized in net income when determined. An allowance for expected credit losses of $ 1,023 was reported on the investments in direct lending entities as at September 30, 2023 and recorded in opening retained earnings on January 1, 2023. Please see "Note 5(d). Fair Value Measurements" for additional information regarding this investment. 18 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 4. Investments (continued) Equity Securities Equity securities include publicly traded equity investments in common stocks and privately held equity investments in common and preferred stocks. The Company's publicly traded equity investments in common stocks trade on major exchanges. The Company's privately held equity investments in common and preferred stocks are direct investments in companies that the Company believes offer attractive risk adjusted returns or offer other strategic advantages. Each investment may have its own unique terms and conditions and there may be restrictions on disposals. There is no active market for these investments. The following table provides the cost and fair values of the equity securities held at September 30, 2023 and December 31, 2022: September 30, 2023 December 31, 2022 Cost Fair Value Cost Fair Value Privately held common stocks $ 33,223 $ 32,636 $ 32,775 $ 32,290 Privately held preferred stocks 8,175 12,953 7,175 10,945 Publicly traded equity investments in common stocks 90 58 559 386 Total equity securities $ 41,488 $ 45,647 $ 40,509 $ 43,621 Equity Method Investments The equity method investments include real estate investments, hedge fund investments, and other investments. The table below shows the carrying value of the Company's equity method investments as of September 30, 2023 and December 31, 2022: September 30, 2023 December 31, 2022 Carrying Value % of Total Carrying Value % of Total Real estate investments $ 48,524 61.1 % $ 40,944 51.1 % Hedge fund investments — — % 5,376 6.7 % Other investments 30,876 38.9 % 33,839 42.2 % Total equity method investments $ 79,400 100.0 % $ 80,159 100.0 % The equity method investments above include limited partnerships which are variable interests issued by variable interest entities ("VIEs"). The Company does not have the power to direct the activities that are most significant to the economic performance of these VIEs, therefore, the Company is not the primary beneficiary of these VIEs. T he Company is deemed to have limited influence over the operating and financial policies of the investee and accordingly, these investments are reported under the equity method of accounting. In applying the equity method of accounting, the investments are initially recorded at cost and are subsequently adjusted based on the Company’s proportionate share of the investee's net income or loss. Generally, the maximum exposure to loss on these interests is limited to the amount of commitment made by the Company as more fully described in "Note 11 - Commitments, Contingencies and Guarantees" in these condensed consolidated financial statements. c) Net Investment Income Net investment income was derived from the following sources for the three and nine months ended September 30, 2023 and 2022: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 Fixed maturities $ 2,522 $ 2,259 $ 7,720 $ 7,074 Income on funds withheld 2,307 2,616 8,829 8,753 Interest income from loan to related party 3,073 1,771 8,698 3,808 Cash and cash equivalents and other investments 1,244 930 4,250 2,292 9,146 7,576 29,497 21,927 Investment expenses ( 98 ) ( 939 ) ( 386 ) ( 1,056 ) Net investment income $ 9,048 $ 6,637 $ 29,111 $ 20,871 19 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 4. Investments (continued) d) Net Realized and Unrealized Investment Gains (Losses) Realized gains or losses on the sale of investments are determined on the basis of the first in first out cost method. The following tables show the net realized and unrealized investment gains (losses) included in the Condensed Consolidated Statements of Income for the three and nine months ended September 30, 2023 and 2022: For the Three Months Ended September 30, 2023 Gross gains Gross losses Net Fixed maturities $ — $ ( 301 ) $ ( 301 ) Equity securities — ( 52 ) ( 52 ) Other investments 1,393 ( 796 ) 597 Net realized and unrealized investment gains (losses) $ 1,393 $ ( 1,149 ) $ 244 For the Three Months Ended September 30, 2022 Gross gains Gross losses Net Fixed maturities $ 591 $ ( 495 ) $ 96 Equity securities 217 ( 63 ) 154 Other investments 393 ( 2,215 ) ( 1,822 ) Net realized and unrealized investment gains (losses) $ 1,201 $ ( 2,773 ) $ ( 1,572 ) For the Nine Months Ended September 30, 2023 Gross gains Gross losses Net Fixed maturities $ — $ ( 1,087 ) $ ( 1,087 ) Equity securities 1,478 ( 431 ) 1,047 Other investments 5,268 ( 2,834 ) 2,434 Net realized and unrealized investment gains (losses) $ 6,746 $ ( 4,352 ) $ 2,394 For the Nine Months Ended September 30, 2022 Gross gains Gross losses Net Fixed maturities $ 1,829 $ ( 637 ) $ 1,192 Equity securities 3,876 ( 871 ) 3,005 Other investments 2,825 ( 4,174 ) ( 1,349 ) Net realized and unrealized investment gains (losses) $ 8,530 $ ( 5,682 ) $ 2,848 Realized and unrealized gains and losses from equity securities detailed above include both sales and distributions of equity securities and unrealized gains and losses coming from fair value changes. Unrealized (losses) gains recognized for equity securities still held at reporting date for the three and nine months ended September 30, 2023 and 2022, respectively, included: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 Net (losses) gains recognized for equity securities $ ( 52 ) $ 154 $ 1,047 $ 3,005 Net gains recognized for equity securities divested — ( 111 ) ( 186 ) ( 111 ) Unrealized (losses) gains recognized for equity securities still held at reporting date $ ( 52 ) $ 43 $ 861 $ 2,894 Proceeds from sales of fixed maturity investments were $ 19,343 and $ 64,126 for the three and nine months ended September 30, 2023 (2022 - $ 35,107 and $ 139,645 , respectively). Net unrealized losses included in accumulated other comprehensive income ("AOCI") were as follows at September 30, 2023 and December 31, 2022, respectively: September 30, 2023 December 31, 2022 Net unrealized losses on fixed maturity investments $ ( 12,794 ) $ ( 15,912 ) Deferred income tax 208 244 Net unrealized losses, net of deferred income tax $ ( 12,586 ) $ ( 15,668 ) Change, net of deferred income tax $ 3,082 $ ( 12,975 ) 20 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 4. Investments (continued) e) Restricted Cash and Cash Equivalents and Investments The Company is required to provide collateral for its reinsurance liabilities under various reinsurance agreements and utilizes trust accounts to collateralize business with reinsurance counterparties. The assets in trust as collateral are primarily cash and highly rated fixed maturities. The fair values of restricted assets at September 30, 2023 and December 31, 2022 are: September 30, 2023 December 31, 2022 Restricted cash – third party agreements $ 5,561 $ 13,122 Restricted cash – related party agreements 6,039 2,516 Total restricted cash 11,600 15,638 Restricted investments – in trust for third party agreements at fair value (amortized cost: 2023 – $ 55,547 ; 2022 – $ 48,181 ) 53,408 48,101 Restricted investments – in trust for related party agreements at fair value (amortized cost: 2023 – $ 159,278 ; 2022 – $ 246,325 ) 153,382 233,091 Total restricted investments 206,790 281,192 Total restricted cash and investments $ 218,390 $ 296,830 5. Fair Value of Financial Instruments (a) Fair Values of Financial Instruments Fair Value Measurements — Accounting Standards Codification Topic 820, "Fair Value Measurements and Disclosures" ("ASC 820") defines fair value as the price that would be received upon the sale of an asset or paid to transfer a liability in an orderly transaction between open market participants at the measurement date. Additionally, ASC 820 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. The hierarchy is broken down into three levels based on the reliability of inputs: • Level 1 — Valuations based on unadjusted quoted market prices for identical assets or liabilities that we have the ability to access. Because valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. Examples of assets and liabilities utilizing Level 1 inputs include: U.S. Treasury bonds; and publicly traded equity securities; • Level 2 — Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical assets or liabilities in inactive markets, or valuations based on models where the significant inputs are observable (e.g. interest rates, yield curves, prepayment speeds, default rates, loss severity, etc.) or can be corroborated by observable market data. Examples of assets and liabilities utilizing Level 2 inputs include: U.S. government-sponsored agency securities; non-U.S. government and supranational obligations; commercial mortgage-backed securities ("CMBS"); collateralized loan obligations ("CLO"); corporate and municipal bonds; and • Level 3 — Valuations based on models where significant inputs are not observable. The unobservable inputs reflect our own assumptions about assumptions that market participants would use developed on the basis of the best information available in the particular circumstances. Examples of assets and liabilities utilizing Level 3 inputs include: an investment in preference shares of a start-up insurance producer. The availability of observable inputs can vary and is affected by a wide variety of factors, including, for example, the type of financial instrument, whether the financial instrument is new and not yet established in the marketplace, and other characteristics particular to the transaction. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires significantly more judgment. Accordingly, the degree of judgment exercised by management in determining fair value is greatest for instruments categorized in the Level 3 hierarchy. The Company uses prices and inputs that are current as at the measurement date. In periods of market dislocation, the observability of prices and inputs may be reduced for many instruments. This condition could cause an instrument to be reclassified between hierarchy levels. For investments that have quoted market prices in active markets, the Company uses the quoted market prices as fair value and includes these in the Level 1 hierarchy. The Company receives the quoted market prices from a third party nationally recognized provider ("the Pricing Service"). When quoted market prices are unavailable, the Company utilizes the Pricing Service to determine an estimate of fair value. The fair value estimates are included in the Level 2 hierarchy. The Company will challenge any prices for its investments which are considered not to be representative of fair value. If quoted market prices and an estimate from the Pricing Service are unavailable, the Company produces an estimate of fair value based on dealer quotations for recent activity in positions with the same or similar characteristics to that being valued. The Company determines whether the fair value estimate is in the Level 2 or Level 3 hierarchy depending on the level of observable inputs available when estimating the fair value. The Company bases its estimates of fair values for assets on the bid price as it represents what a third party market participant would be willing to pay in an orderly transaction. 21 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 5. Fair Value of Financial Instruments (continued) ASC 825, "Disclosure About Fair Value of Financial Instruments" , requires all entities to disclose the fair value of their financial instruments for assets and liabilities recognized and not recognized in the balance sheet, for which it is practicable to estimate fair value. The following describes the valuation techniques used by the Company to determine the fair value of financial instruments that are measured at fair value on a recurring basis held at September 30, 2023 and December 31, 2022. U.S. government and U.S. agency bonds — Bonds issued by the U.S. Treasury, the Federal Home Loan Bank, the Federal Home Loan Mortgage Corporation, Government National Mortgage Association, Federal National Mortgage Association and the Federal Farm Credit Banks Funding Corporation. The fair values of U.S. treasury bonds are based on quoted market prices in active markets, and are included in the Level 1 fair value hierarchy. We believe the market for U.S. treasury bonds is an actively traded market given the high level of daily trading volume. The fair values of U.S. agency bonds are determined using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for these securities are observable market inputs, the fair values of U.S. agency bonds are included in the Level 2 fair value hierarchy. Non-U.S. government bonds — These securities are generally priced by independent pricing services. The Pricing Service may use current market trades for securities with similar quality, maturity and coupon. If no such trades are available, the Pricing Service typically uses analytical models which may incorporate spreads, interest rate data and market/sector news. As the significant inputs used to price non-U.S. government bonds are observable market inputs, the fair values of non-U.S. government bonds are included in the Level 2 fair value hierarchy. Collateralized loan obligations ("CLO") - These asset backed securities are originated by a variety of financial institutions that on acquisition are rated BBB-/Baa3 or higher. These securities are priced by independent pricing services and brokers. The pricing provider applies dealer quotes and other available trade information, prepayment speeds, yield curves and credit spreads to the valuation. As the significant inputs used to price the CLO are observable market inputs, the fair values are included in the Level 2 fair value hierarchy. Commercial mortgage-backed securities ("CMBS") - These asset backed securities are originated by a variety of financial institutions that on acquisition are rated BBB-/Baa3 or higher. These securities are priced by independent pricing services and brokers. The pricing provider applies dealer quotes and other available trade information, prepayment speeds, yield curves and credit spreads to the valuation. As the significant inputs used to price the CMBS are observable market inputs, the fair values are included in the Level 2 fair value hierarchy. Corporate and municipal bonds — Bonds issued by corporations, U.S. state and municipality entities or agencies that on acquisition are rated BBB-/Baa3 or higher. These securities are generally priced by independent pricing services. The credit spreads are sourced from broker/dealers, trade prices and new issue market. Where pricing is unavailable from pricing services, custodian pricing or non-binding quotes are obtained from broker-dealers to estimate fair values. As significant inputs used to price corporate and municipal bonds are observable market inputs, fair values are included in the Level 2 fair value hierarchy. Equity securities - Equity securities include publicly traded common and preferred stocks, and privately held common and preferred stocks. The fair value of publicly traded common and preferred stocks is primarily priced by pricing services, reflecting the closing price quoted for the final trading day of the period. These investments are carried at fair value using observable market pricing data and is included in the Level 1 fair value hierarchy. Any unrealized gains or losses on the investment is recorded in net income in the reporting period in which it occurs. The privately held common and preferred stocks are valued using significant inputs that are unobservable where there is little or no market activity. Unadjusted third party pricing sources or management's assumptions and internal valuation models may be used to determine the fair values, therefore, these investments are classified as Level 3 in the fair value hierarchy. Other investments — Includes unquoted investments comprised of the following types of investments: • Privately held investments: These are direct equity investments in common and preferred shares of privately held entities. The fair values are estimated using quarterly financial statements and/or recent private market transactions and thus are included under Level 3 of the fair value hierarchy due to unobservable market data used for valuation. • Private credit funds: These are privately held equity investments in common stock of entities that lend money valued using the most recently available or quarterly net asset value ("NAV") statements as provided by the external fund manager or third-party administrator and therefore measured using the NAV as a practical expedient. • Private equity funds: These are comprised of private equity funds, private equity co-investments with sponsoring entities and investments in real estate limited partnerships and joint ventures . The fair value is estimated based on the most recently available NAV as advised by the external fund manager or third-party administrator. The fair values are therefore measured using the NAV as a practical expedient. Derivative Instruments - The Company has entered into reinsurance contracts that are accounted for as derivatives. These reinsurance contracts provide indemnification to an insured or cedant as a result of a change in a variable as opposed to an identifiable insurable event. The Company considers these contracts to be part of its underwriting operations. The derivatives are initially valued at cost which approximates fair value. In subsequent measurement periods, the fair values of these derivatives are determined using internally developed discounted cash flow models using appropriate discount rates. The selection of an appropriate discount rate is judgmental and is the most significant unobservable input used in the valuation of these derivatives. T he fair value changes in underwriting-related derivative instruments is included within other insurance revenue (expense), net. 22 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 5. Fair Value of Financial Instruments (continued) The derivative liability on retroactive reinsurance is presented as part of accrued expenses and other liabilities. A significant increase (decrease) in this input in isolation may result in a significantly lower (higher) fair value measurement for the derivative contract. As the significant inputs used to price these derivatives are unobservable, the fair values of these contracts are classified as Level 3 in the fair value hierarchy. (b) Fair Value Hierarchy The Company’s estimates of fair value for financial assets and financial liabilities are based on the framework established in ASC 820. The framework is based on the inputs used in valuation and gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuation methodology whenever available. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active trading markets and the lowest priority to unobservable inputs that reflect significant market assumptions. At September 30, 2023 and December 31, 2022, the Company classified its financial instruments measured at fair value on a recurring basis in the following valuation hierarchy: September 30, 2023 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Fair Value Based on NAV Practical Expedient Total Fair Value Fixed maturities U.S. treasury bonds $ 47,612 $ — $ — $ — $ 47,612 U.S. agency bonds – mortgage-backed — 30,407 — — 30,407 Collateralized mortgage-backed bonds — 5,839 — — 5,839 Non-U.S. government bonds — 13,822 — — 13,822 Collateralized loan obligations — 86,972 — — 86,972 Corporate bonds — 73,454 — — 73,454 Equity securities 58 — 20,013 25,576 45,647 Other investments — — 2,985 98,237 101,222 Total investments $ 47,670 $ 210,494 $ 22,998 $ 123,813 $ 404,975 As a percentage of total assets 3.0 % 13.3 % 1.5 % 7.8 % 25.6 % Underwriting-related derivative liability $ — $ — $ 3,984 $ — $ 3,984 December 31, 2022 Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Fair Value Based on NAV Practical Expedient Total Fair Value Fixed maturities U.S. treasury bonds $ 55,532 $ — $ — $ — $ 55,532 U.S. agency bonds – mortgage-backed — 34,365 — — 34,365 Collateralized mortgage-backed bonds — 6,767 — — 6,767 Non-U.S. government bonds — 11,818 — — 11,818 Collateralized loan obligations — 114,092 — — 114,092 Corporate bonds — 91,953 — — 91,953 Equity securities 386 — 17,806 25,429 43,621 Other investments — 1,000 1,000 90,666 92,666 Total investments $ 55,918 $ 259,995 $ 18,806 $ 116,095 $ 450,814 As a percentage of total assets 3.0 % 14.1 % 1.0 % 6.3 % 24.4 % Underwriting-related derivative liability $ — $ — $ 14,559 $ — $ 14,559 23 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 5. Fair Value of Financial Instruments (continued) The Company utilizes the Pricing Service to assist in determining the fair value of its investments; however, management is ultimately responsible for all fair values presented in the Company’s consolidated financial statements. This includes responsibility for monitoring the fair value process, ensuring objective and reliable valuation practices, and pricing of assets and liabilities and use of pricing sources. The Company analyzes and reviews the information and prices received from the Pricing Service to ensure that the prices provided represent a reasonable estimate of fair value. The Pricing Service was utilized to estimate fair value measurements for 98.1 % and 98.5 % of our fixed maturities at September 30, 2023 and December 31, 2022, respectively. The Pricing Service utilizes market quotations for fixed maturity securities that have quoted market prices in active markets. Since fixed maturities other than U.S. treasury bonds generally do not trade actively on a daily basis, the Pricing Service prepares estimates of fair value measurements using relevant market data, benchmark curves, sector groupings and matrix pricing and these have been classified as Level 2 within the fair value hierarchy. At September 30, 2023 and December 31, 2022, approximately 1.9 % and 1.5 %, respectively, of our fixed maturities were valued using the market approach. At September 30, 2023, one security or $ 5,022 (December 31, 2022 - one security or $ 4,764 ) of our fixed maturity investment portfolio classified as Level 2 in the table above was priced using a quotation from a broker and/or custodian as opposed to the Pricing Service due to lack of information available. At September 30, 2023 and December 31, 2022, the Company has not adjusted any pricing provided to it based on the review performed by its investment managers. There were no transfers to or from Level 3 during the nine months ended September 30, 2023 and 2022. (c) Level 3 Financial Instruments At September 30, 2023, the Company holds Level 3 financial instruments which consist of privately held investments of $ 22,998 (December 31, 2022 - $ 18,806 ) and an underwriting-related derivative liability of $ 3,984 (December 31, 2022 - $ 14,559 ) on a reinsurance contract written by GLS which is included in accrued expenses and other liabilities. The fair value of privately held equity securities are estimated using quarterly unaudited capital or financial statements provided by the investee or recent private market transactions, where applicable. Any changes to the financial information provided by the investee could result in a significantly higher or lower valuation at the reporting date. The fair value of underwriting-related derivative instruments is determined using a discounted cash flow model in which the Company examines current market conditions, historical results as well as contract specific information that may impact future cash flows in order to assess the reasonableness of inputs used in the valuation model . Due to significant unobservable inputs in these valuations, the Company classifies the fair values as Level 3 within the fair value hierarchy . The following table provides a summary of quantitative information regarding the significant unobservable inputs used in determining the fair value of other investments measured at fair value on a recurring basis under the Level 3 classification at September 30, 2023: Fair Value Valuation Technique Unobservable Inputs Range Privately held equity securities - common shares $ 10,045 Quarterly financial statements Price/book ratios of comparable public companies Privately held equity securities - preferred shares 12,953 Quarterly financial statements Privately calculated enterprise valuations Total Level 3 investments $ 22,998 Underwriting-related derivative liability $ 3,984 Discounted cash flows Duration matched discount rates 5.0 % to 6.0 % The following table shows the reconciliation of beginning and ending balances for investments measured at fair value on a recurring basis using Level 3 inputs for the three and nine months ended September 30, 2023 and 2022. The Company includes any related interest and dividend income in net investment income and are excluded from the reconciliation in the table below: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 Balance - beginning of period $ 21,398 $ 16,194 $ 18,806 $ 7,094 Sales — — — ( 1,000 ) Net realized and unrealized gains recognized in the statement of income — 111 1,592 3,770 Purchases 1,600 2,000 2,600 8,441 Total Level 3 investments - end of period $ 22,998 $ 18,305 $ 22,998 $ 18,305 24 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 5. Fair Value of Financial Instruments (continued) (d) Financial Instruments Disclosed, But Not Carried, at Fair Value The fair value of financial instruments accounting guidance also applies to financial instruments disclosed, but not carried, at fair value, except for certain financial instruments related to insurance contracts . At September 30, 2023, the carrying values of cash equivalents (including restricted amounts), accrued investment income, reinsurance balances receivable, loan to related party, and certain other assets and liabilities approximate fair values due to their inherent short duration. As these financial instruments are not actively traded, the fair values of these financial instruments are classified as Level 2. The investments made by direct lending entities are carried at cost less an allowance for expected credit losses, with any indication of credit loss recognized in net income when determined. The net carrying value of which approximates fair value. The fair value estimates of these investments are not based on observable market data and, as a result, are classified as Level 3. The fair values of the Senior Notes (as defined in "Note 7. Long-Term Debt" ) are based on indicative market pricing obtained from a third-party pricing service which uses observable market inputs, and therefore the fair values of these liabilities are classified as Level 2. The following table presents the respective carrying value and fair value for the Senior Notes as at September 30, 2023 and December 31, 2022: September 30, 2023 December 31, 2022 Carrying Value Fair Value Carrying Value Fair Value Senior Notes - MHLA – 6.625 % $ 110,000 $ 69,080 $ 110,000 $ 76,560 Senior Notes - MHNC – 7.75 % 152,361 107,506 152,500 113,826 Total Senior Notes $ 262,361 $ 176,586 $ 262,500 $ 190,386 6. Shareholders' Equity a) Common Shares On May 3, 2023 at its Annual General Meeting of Shareholders, the Company's common shareholders approved the increase in the authorized share capital of the Company from $ 1,500 divided into 150,000,000 shares of par value $ 0.01 each, to $ 2,000 divided into 200,000,000 shares of par value $ 0.01 each. At September 30, 2023, the aggregate authorized share capital of the Company is 200,000,000 shares from which 149,726,105 common shares were issued, of which 101,085,340 common shares are outstanding, and 48,640,765 shares are treasury shares (please see Note 6. (b) Treasury Shares below for additional information). The remaining 50,273,895 shares are undesignated at September 30, 2023. At September 30, 2023, 981,277 common shares will be issued and outstanding upon vesting of restricted shares. b) Treasury Shares On February 21, 2017, the Company's Board of Directors approved the repurchase of up to $ 100,000 of the Company's common shares from time to time at market prices. During the three and nine months ended September 30, 2023, Maiden Reinsurance repurchased 520,475 and 820,105 common shares, respectively, at an average price per share of $ 1.86 and $ 1.93 , respectively, under the Company's share repurchase plan (2022 - none ). The Company has a remaining authorization of $ 72,659 for common share repurchases at September 30, 2023 (December 31, 2022 - $ 74,245 ). During the nine months ended September 30, 2023, the Company also repurchased 128,731 common shares (2022 - 403,716 ) at an average price per share of $ 2.25 (2022 - $ 2.50 ) from employees, which represent tax withholding in respect of tax obligations on the vesting of both non-performance-based and discretionary performance-based restricted shares. Treasury shares include 42,259,453 common shares owned by Maiden Reinsurance consisting of 41,439,348 shares issued as part of the exchange for preference shares held ("Exchange") and 820,105 shares directly purchased on the open market by Maiden Reinsurance which are not treated as outstanding common shares on the Condensed Consolidated Balance Sheet at September 30, 2023. Please see further information on the Exchange and related preference share repurchases in the Annual Report on Form 10-K for the year ended December 31, 2022, filed with the SEC on March 15, 2023. T he table below includes the total number of treasury shares outstanding at September 30, 2023 and December 31, 2022, respectively: September 30, 2023 December 31, 2022 Number of shares held by Maiden Reinsurance treated as treasury shares 42,259,453 41,439,348 Number of treasury shares due to common share repurchases by Maiden Holdings 6,381,312 6,252,581 Total number of treasury shares at the end of the reporting period 48,640,765 47,691,929 25 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 6. Shareholders' Equity (continued) c) AOCI The following tables set forth financial information regarding the changes in the balances of each component of AOCI: For the Three Months Ended September 30, 2023 Change in net unrealized gains on investment Foreign currency translation Total Beginning balance $ ( 12,904 ) $ ( 24,232 ) $ ( 37,136 ) Other comprehensive income (loss) before reclassifications 321 ( 2,075 ) ( 1,754 ) Amounts reclassified from AOCI to net income, net of tax ( 3 ) — ( 3 ) Net current period other comprehensive income (loss) 318 ( 2,075 ) ( 1,757 ) Ending balance, Maiden shareholders $ ( 12,586 ) $ ( 26,307 ) $ ( 38,893 ) For the Three Months Ended September 30, 2022 Change in net unrealized gains on investment Foreign currency translation Total Beginning balance $ ( 45,266 ) $ 6,326 $ ( 38,940 ) Other comprehensive (loss) income before reclassifications ( 14,811 ) 2,246 ( 12,565 ) Amounts reclassified from AOCI to net income, net of tax ( 48 ) — ( 48 ) Net current period other comprehensive (loss) income ( 14,859 ) 2,246 ( 12,613 ) Ending balance, Maiden shareholders $ ( 60,125 ) $ 8,572 $ ( 51,553 ) For the Nine Months Ended September 30, 2023 Change in net unrealized gains on investment Foreign currency translation Total Beginning balance $ ( 15,668 ) $ ( 25,566 ) $ ( 41,234 ) Other comprehensive income (loss) before reclassifications 3,085 ( 741 ) 2,344 Amounts reclassified from AOCI to net income, net of tax ( 3 ) — ( 3 ) Net current period other comprehensive income (loss) 3,082 ( 741 ) 2,341 Ending balance, Maiden shareholders $ ( 12,586 ) $ ( 26,307 ) $ ( 38,893 ) For the Nine Months Ended September 30, 2022 Change in net unrealized gains on investment Foreign currency translation Total Beginning balance $ ( 2,693 ) $ ( 9,522 ) $ ( 12,215 ) Other comprehensive (loss) income before reclassifications ( 51,736 ) 18,094 ( 33,642 ) Amounts reclassified from AOCI to net income, net of tax ( 5,696 ) — ( 5,696 ) Net current period other comprehensive (loss) income ( 57,432 ) 18,094 ( 39,338 ) Ending balance, Maiden shareholders $ ( 60,125 ) $ 8,572 $ ( 51,553 ) 26 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 7. Long-Term Debt Senior Notes At September 30, 2023 and December 31, 2022, Maiden Holdings had outstanding publicly-traded senior notes which were issued in 2016 ("2016 Senior Notes") and its wholly owned subsidiary, Maiden Holdings North America, Ltd. ("Maiden NA") had outstanding publicly-traded senior notes which were issued in 2013 ("2013 Senior Notes") (collectively "Senior Notes"). The 2013 Senior Notes issued by Maiden NA are fully and unconditionally guaranteed by Maiden Holdings. The Senior Notes are unsecured and unsubordinated obligations of the Company. The following tables detail the issuances of Senior Notes outstanding at September 30, 2023 and December 31, 2022: September 30, 2023 2016 Senior Notes 2013 Senior Notes Total Principal amount $ 110,000 $ 152,361 $ 262,361 Less: unamortized issuance costs 3,360 4,442 7,802 Carrying value $ 106,640 $ 147,919 $ 254,559 December 31, 2022 2016 Senior Notes 2013 Senior Notes Total Principal amount $ 110,000 $ 152,500 $ 262,500 Less: unamortized issuance costs 3,406 3,522 6,928 Carrying value $ 106,594 $ 148,978 $ 255,572 Other details: Original debt issuance costs pertaining to remaining outstanding principal amount $ 3,715 $ 5,050 Maturity date June 14, 2046 December 1, 2043 Earliest redeemable date (for cash) June 14, 2021 December 1, 2018 Coupon rate 6.625 % 7.75 % Effective interest rate 7.07 % 8.04 % Total interest and amortization expense incurred on the Senior Notes for the three and nine months ended September 30, 2023 was $ 4,814 and $ 13,451 , respectively (2022 - $ 4,833 and $ 14,498 , respectively), of which $ 1,342 was accrued as interest payable at both September 30, 2023 and December 31, 2022, respectively. The issuance costs related to the Senior Notes were capitalized and are amortized over the effective life of the Senior Notes using the effective interest method of amortization. Under the terms of the 2013 Senior Notes, the 2013 Senior Notes can be redeemed, in whole or in part, at Maiden NA's option at any time and from time to time, until maturity at a redemption price equal to 100 % of the principal amount of the notes to be redeemed plus accrued but unpaid interest on the principal amount being redeemed to, but not including, the redemption date. Maiden NA is required to give at least thirty days and not more than sixty days notice prior to the redemption date. Under the terms of the 2016 Senior Notes, the 2016 Senior Notes can be redeemed, in whole or in part, at Maiden Holdings' option at any time and from time to time, until maturity at a redemption price equal to 100 % of the principal amount of the notes to be redeemed plus accrued but unpaid interest on the principal amount being redeemed to, but not including, the redemption date. Maiden Holdings is required to give at least thirty days and not more than sixty days notice prior to the redemption date. On May 3, 2023, the Company's Board of Directors approved the repurchase, including the repurchase by Maiden Reinsurance in accordance with its investment guidelines, of up to $ 100,000 of the Company's Senior Notes from time to time at market prices in open market purchases or as may be privately negotiated. During the nine months ended September 30, 2023, the Company repurchased 5,567 notes of the 2013 Senior Notes at an average price per unit of $ 17.10 for a total cost of $ 95 . Total interest and amortization expenses were partly offset by a gain of $ 40 that was realized on the repurchase of the 2013 Senior Notes during the nine months ended September 30, 2023. The Company has a remaining authorization of $ 99,905 for Senior Notes repurchases at September 30, 2023. 27 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 8. Reinsurance The Company uses reinsurance and retrocessional agreements ("ceded reinsurance") to mitigate volatility, reduce its exposure to certain risks and provide capital support. Ceded reinsurance provides for the recovery of a portion of loss and LAE under certain circumstances without relieving the Company of its obligations to the policyholders. The Company remains liable to the extent that any of its reinsurers or retrocessionaires fails to meet their obligations. Loss and LAE incurred and premiums earned are reported after deduction for ceded reinsurance. In the event that one or more of our reinsurers or retrocessionaires are unable to meet their obligations under these agreements, the Company would not realize the full value of the reinsurance recoverable balances. The effect of ceded reinsurance on net premiums written and earned and on net loss and LAE for the nine months ended September 30, 2023 and 2022 was as follows: For the Nine Months Ended September 30, 2023 2022 Premiums written Direct $ 20,283 $ 17,383 Assumed ( 3,912 ) ( 18,834 ) Ceded ( 111 ) ( 464 ) Net $ 16,260 $ ( 1,915 ) Premiums earned Direct $ 20,141 $ 17,332 Assumed 12,494 6,942 Ceded ( 115 ) ( 458 ) Net $ 32,520 $ 23,816 Loss and LAE Gross loss and LAE $ 36,397 $ 22,511 Loss and LAE ceded 106 ( 494 ) Net $ 36,503 $ 22,017 The Company's reinsurance recoverable on unpaid losses balance as at September 30, 2023 was $ 558,777 (December 31, 2022 - $ 556,116 ) presented in the Condensed Consolidated Balance Sheets. As of September 30, 2023, the total allowance for expected credit losses on the Company's reinsurance recoverable balance was $ 4,289 . The following table provides a reconciliation of the beginning and ending balances of the allowance for expected credit losses on reinsurance recoverable for the three and nine months ended September 30, 2023: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2023 Allowance for expected credit losses on reinsurance recoverable, beginning of period $ 4,530 $ 4,277 (Decrease) increase in allowance for expected credit losses on reinsurance recoverable where credit losses were previously recognized ( 241 ) 12 Allowance for expected credit losses on reinsurance recoverable, end of period $ 4,289 $ 4,289 On December 27, 2018, Cavello Bay Reinsurance Limited ("Cavello") and Maiden Reinsurance entered into a retrocession agreement pursuant to which certain assets and liabilities associated with the U.S. treaty reinsurance business held by Maiden Reinsurance were 100.0 % retroceded to Cavello in exchange for a ceding commission. The reinsurance recoverable on unpaid losses due from Cavello under this retrocession agreement was $ 53,943 at September 30, 2023 (December 31, 2022 - $ 60,112 ). The recoverable due from Cavello is net of an allowance for expected credit losses of $ 3,783 as at September 30, 2023. On July 31, 2019, Maiden Reinsurance and Cavello entered into a Loss Portfolio Transfer and Adverse Development Cover Agreement ("LPT/ADC Agreement") pursuant to which Cavello assumed the loss reserves as of December 31, 2018 associated with the AmTrust Quota Share in excess of a $ 2,178,535 retention up to $ 600,000 , in exchange for a retrocession premium of $ 445,000 . The $ 2,178,535 retention is subject to adjustment for paid losses subsequent to December 31, 2018. The LPT/ADC Agreement provides Maiden Reinsurance with $ 155,000 in adverse development cover over its carried AmTrust Quota Share loss reserves at December 31, 2018. The LPT/ADC Agreement meets the criteria for risk transfer and is thus accounted for as retroactive reinsurance. Cumulative ceded losses exceeding $ 445,000 are recognized as a deferred gain liability and amortized into income over the settlement period of the ceded reserves in proportion to cumulative losses collected over the estimated ultimate reinsurance recoverable. The amount of the deferral is recalculated each period based on loss payments and updated estimates. Consequently, cumulative adverse development subsequent to December 31, 2018 may result in significant losses from operations until periods when the deferred gain is recognized as a benefit to earnings. 28 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 8. Reinsurance (continued) As of September 30, 2023, the reinsurance recoverable on unpaid losses under the LPT/ADC Agreement was $ 501,023 while the deferred gain liability under the LPT/ADC Agreement was $ 56,516 (December 31, 2022 - $ 490,408 and $ 45,408 , respectively). The recoverable due under the LPT/ADC Agreement is net of an allowance for expected credit losses of $ 493 as at September 30, 2023. Amortization of the deferred gain will not occur until paid losses have exceeded the minimum retention under the LPT/ADC Agreement, which is estimated to be in 2025. Cavello provided collateral in the form of a letter of credit in the amount of $ 445,000 to AmTrust under the LPT/ADC Agreement. Cavello is subject to additional collateral funding requirements as explained in "Note 10. Related Party Transactions". As of September 30, 2023, the amount of collateral required was $ 471,636 . Under the terms of the LPT/ADC Agreement, the covered losses associated with the Commutation and Release Agreement with AmTrust are eligible to be covered but recoverable only when such losses are paid or settled by AII or its affiliates, provided such losses and other related amounts shall not exceed $ 312,786 . Cavello's parent company, Enstar, has credit ratings of BBB+ from both Standard & Poor's and Fitch Ratings at September 30, 2023 . 29 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 9. Reserve for Loss and Loss Adjustment Expenses The Company uses both historical experience and industry-wide loss development factors to provide a reasonable basis for estimating future losses. In the future, certain events may be beyond the control of management, such as changes in law, judicial interpretations of law, and rates of inflation, which may favorably or unfavorably impact the ultimate settlement of the Company’s loss and LAE reserves. The anticipated effect of inflation is implicitly considered when estimating liabilities for loss and LAE. While anticipated changes in claim costs due to inflation are considered in estimating the ultimate claim costs, changes in the average severity of claims are caused by a number of factors that vary with the individual type of policy written. Ultimate losses are projected based on historical trends adjusted for implemented changes in underwriting standards, claims handling, policy provisions, and general economic trends. Those anticipated trends are monitored based on actual development and are modified if necessary. The reserving process begins with the collection and analysis of paid losses and incurred claims data for each of the Company's contracts. While reserves are mostly reviewed on a contract by contract basis, paid loss and incurred claims data is also aggregated into reserving segments. The segmental data is disaggregated by reserving class and further disaggregated by either accident year (i.e. the year in which the loss event occurred) or by underwriting year (i.e. the year in which the contract generating the premium and losses incepted). In cases where the Company uses underwriting year information, reserves are subsequently allocated to the respective accident year. The reserve for loss and LAE consists of: September 30, 2023 December 31, 2022 Reserve for reported loss and LAE $ 585,535 $ 702,691 Reserve for losses incurred but not reported ("IBNR") 325,940 428,717 Reserve for loss and LAE $ 911,475 $ 1,131,408 The following table represents a reconciliation of our beginning and ending gross and net loss and LAE reserves: For the Nine Months Ended September 30, 2023 2022 Gross loss and LAE reserves, January 1 $ 1,131,408 $ 1,489,373 Less: reinsurance recoverable on unpaid losses, January 1 556,116 562,845 Net loss and LAE reserves, January 1 575,292 926,528 Net incurred losses related to: Current year 20,519 27,510 Prior years 15,984 ( 5,493 ) 36,503 22,017 Net paid losses related to: Current year ( 448 ) ( 334 ) Prior years ( 249,965 ) ( 319,132 ) ( 250,413 ) ( 319,466 ) Change in deferred gain on retroactive reinsurance ( 11,129 ) 12,024 GLS run-off business acquired or assumed 767 7,580 Opening allowance for expected credit loss on reinsurance recoverable on unpaid losses 4,277 — Effect of foreign exchange rate movements ( 2,599 ) ( 50,574 ) Net loss and LAE reserves, September 30 352,698 598,109 Reinsurance recoverable on unpaid losses, September 30 558,777 547,975 Gross loss and LAE reserves, September 30 $ 911,475 $ 1,146,084 Prior period development arises from changes to loss estimates recognized in the current year that relate to loss reserves established in previous calendar years. The favorable or unfavorable development reflects changes in management's best estimate of the ultimate losses under the relevant reinsurance policies after considerable review of changes in actuarial assessments. The Company recognized net adverse prior year loss development of $ 7,834 and $ 15,984 for the three and nine months ended September 30, 2023, respectively (2022 - adverse $ 834 and favorable $ 5,493 , respectively). In the Diversified Reinsurance segment, there was adverse prior year loss development of $ 1,864 and $ 3,938 for the three and nine months ended September 30, 2023, respectively (2022 - favorable $ 590 and $ 1,975 , respectively). Prior year loss development for the three and nine months ended September 30, 2023 was driven by adverse development primarily due to a German auto program in run-off from the International unit along with development from other runoff business lines and also included the recognition of expected credit losses on reinsurance recoverable on unpaid losses for the year-to-date period. 30 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 9. Reserve for Loss and Loss Adjustment Expenses (continued) Prior year loss development for the three and nine months ended September 30, 2022 was primarily due to favorable reserve development in German Auto Programs and GLS reinsurance contracts partly offset by adverse development in European Capital Solutions. In the AmTrust Reinsurance segment, net adverse prior year loss development was $ 5,970 and $ 12,046 during the three and nine months ended September 30, 2023, respectively (2022 - adverse $ 1,424 and favorable $ 3,518 , respectively). Net adverse prior year loss development for the three and nine months ended September 30, 2023 was primarily from European Hospital Liability for the three months ended September 30, 2023, and European Hospital Liability and the AmTrust Quota Share (General Liability and Commercial Auto Liability partly offset by continued favorable development in Workers Compensation) for the nine months ended September 30, 2023. Net adverse loss development on European Hospital Liability was primarily driven by emergence of loss data during 2023 on underwriting years 2011 to 2016. Net adverse prior year loss development for the three months ended September 30, 2022 was driven by unfavorable movements in European Hospital Liability due to higher than expected loss emergence in Italian Hospital Liability policies as well as the agreed exit cost of $ 3,666 (€ 3,444 ) for the commutation of French Hospital Liability policies as described in "Note 10. Related Party Transactions" ; partly offset by favorable runoff of Workers Compensation business. The net favorable prior year loss development for the nine months ended September 30, 2022 included $ 5,346 of favorable reserve adjustments for estimated surcharges on Workers' Compensation policies and inuring AmTrust reinsurance for programs in Specialty Risk and Extended Warranty cessions ("AmTrust Cession Adjustments"). Excluding AmTrust Cession Adjustments, there was adverse development of $ 1,828 for the nine months ended September 30, 2022 driven by unfavorable movements in European Hospital Liability due to higher than expected loss emergence in Italian Hospital Liability policies as well as the agreed exit cost of $ 3,666 (€ 3,444 for commutation of French Hospital Liability policies as described in "Note 10. Related Party Transactions" ; partly offset by favorable runoff of Workers Compensation business. The increase in the deferred gain on retroactive reinsurance was $ 11,129 for the nine months ended September 30, 2023 (2022 - $ 12,024 decrease). This included an increase in the deferred gain liability and related reinsurance recoverable on unpaid losses under the LPT/ADC Agreement with Cavello of $ 11,108 for the nine months ended September 30, 2023 (2022 - $ 10,722 decrease) caused by adverse development on loss reserves covered under the LPT/ADC Agreement (2022 - favorable). The deferred gain on retroactive reinsurance under the LPT/ADC Agreement represents the cumulative adverse development for covered risks in the AmTrust Quota Share as of September 30, 2023 and December 31, 2022. Amortization of the deferred gain will not occur until paid losses have exceeded the minimum retention under the LPT/ADC Agreement, which is estimated to be in 2025. 31 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 10. Related Party Transactions The Founding Shareholders of the Company were Michael Karfunkel, George Karfunkel and Barry Zyskind. Based on each individual's most recent public filing, Leah Karfunkel (wife of the late Michael Karfunkel), George Karfunkel and Barry Zyskind (the Company's non-executive chairman) each own or control less than 5.0 % of the Company's outstanding common shares. Leah Karfunkel and George Karfunkel are directors of AmTrust, and Barry Zyskind is the chief executive officer and chairman of AmTrust. Leah Karfunkel, George Karfunkel and Barry Zyskind own or control approximately 55.2 % of the ownership interests of Evergreen Parent, L.P., the ultimate parent of AmTrust. The following describes transactions that have transpired between the Company and AmTrust: AmTrust Quota Share Effective July 1, 2007, the Company and AmTrust entered into a master agreement, as amended ("Master Agreement"), by which they caused Maiden Reinsurance and AII to enter into the AmTrust Quota Share by which AII retroceded to Maiden Reinsurance an amount equal to 40 % of the premium written by subsidiaries of AmTrust, net of the cost of unaffiliated inuring reinsurance and 40 % of losses. The Master Agreement further provided that AII receive a ceding commission of 31 % of ceded written premiums. On June 11, 2008, Maiden Reinsurance and AII amended the AmTrust Quota Share to add Retail Commercial Package Business to the Covered Business (as defined in the AmTrust Quota Share). AII receives a ceding commission of 34.375 % on Retail Commercial Package Business. On July 1, 2016, the agreement was renewed through June 30, 2019. Effective July 1, 2018, the amount AEL ceded to Maiden Reinsurance was reduced to 20 %. Effective July 1, 2013, for the Specialty Program portion of Covered Business only, AII was responsible for ultimate net loss otherwise recoverable from Maiden Reinsurance to the extent that the loss ratio to Maiden Reinsurance, which shall be determined on an inception to date basis from July 1, 2007 through the date of calculation, is between 81.5 % and 95 % ("Loss Corridor"). Above and below the Loss Corridor, Maiden Reinsurance continued to reinsure losses at its proportional 40 % share of the AmTrust Quota Share. Effective July 31, 2019, the Loss Corridor was amended such that the maximum amount covered is $ 40,500 , the amount calculated by Maiden Reinsurance for the Loss Corridor coverage as of March 31, 2019. Any development above this maximum amount will be subject to the coverage of the LPT/ADC Agreement. Effective January 1, 2019, Maiden Reinsurance and AII entered into a partial termination amendment ("Partial Termination Amendment") which amended the AmTrust Quota Share. The Partial Termination Amendment provided for the cut-off of the ongoing and unearned premium of AmTrust’s Small Commercial Business and U.S. Specialty Risk and Extended Warranty ("Terminated Business") as of December 31, 2018. Under the Partial Termination Amendment, the ceding commission payable by Maiden Reinsurance for its remaining in-force business immediately prior to January 1, 2019 increased by five percentage points with respect to in-force remaining business (excluding Terminated Business) and related unearned premium as of January 1, 2019. Subsequently, on January 30, 2019, Maiden Reinsurance and AII agreed to terminate the remaining business subject to the AmTrust Quota Share on a run-off basis effective as of January 1, 2019. Effective July 31, 2019, Maiden Reinsurance and AII entered into a Commutation and Release Agreement which provided for AII to assume all reserves ceded by AII to Maiden Reinsurance with respect to its proportional 40 % share of the ultimate net loss under the AmTrust Quota Share related to the commuted business including: (a) all losses incurred in Accident Year 2017 and Accident Year 2018 under California workers' compensation policies and as defined in the AmTrust Quota Share ("Commuted California Business"); and (b) all losses incurred in Accident Year 2018 under New York workers' compensation policies ("Commuted New York Business"), and together with the Commuted California Business ("Commuted Business") in exchange for the release and full discharge of Maiden Reinsurance's obligations to AII with respect to the Commuted Business. The Commuted Business excludes any business classified by AII as Specialty Program or Specialty Risk business. AII and Maiden Reinsurance also agreed that as of July 31, 2019, the AmTrust Quota Share was deemed amended as applicable so that the Commuted Business is no longer included as part of Covered Business under the AmTrust Quota Share. On January 30, 2019, in connection with the termination of the reinsurance agreement described above, the Company and AmTrust entered into a second amendment to the Master Agreement between the parties, originally entered into on July 3, 2007, to remove the provisions requiring AmTrust to reinsure business with the Company. Please refer to " Note 10. Related Party Transactions" in the Annual Report on Form 10-K for the year ended December 31, 2022 for further details. European Hospital Liability Quota Share Effective April 1, 2011, Maiden Reinsurance entered into the European Hospital Liability Quota Share with AEL and AIU DAC. Pursuant to the terms of the European Hospital Liability Quota Share, Maiden Reinsurance assumed 40 % of the premiums and losses related to policies classified as European Hospital Liability, including associated liability coverages and policies covering physician defense costs, written or renewed on or after April 1, 2011. The European Hospital Liability Quota Share also covers policies written or renewed on or before March 31, 2011, but only with respect to losses that occur, accrue or arise on or after April 1, 2011. The maximum limit of liability attaching shall be € 5,000 (€ 10,000 effective January 1, 2012) or currency equivalent (on a 100 % basis) per original claim for any one original policy. Maiden Reinsurance paid a ceding commission of 5 % on contracts assumed under the European Hospital Liability Quota Share. Effective July 1, 2016, the European Hospital Liability Quota Share was amended such that Maiden Reinsurance assumes from AEL 32.5 % of the premiums and losses of all policies written or renewed on or after July 1, 2016 until June 30, 2017 and 20 % of all policies written or renewed on or after July 1, 2017. Thereafter, on January 30, 2019, Maiden Reinsurance, AEL and AIU DAC agreed to terminate the European Hospital Liability Quota Share on a run-off basis effective as of January 1, 2019. 32 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 10. Related Party Transactions (continued) Effective July 1, 2022, Maiden Reinsurance and AIU DAC entered into an agreement ("Commutation Agreement") which provided for AIU DAC to assume all reserves ceded by AIU DAC to Maiden Reinsurance with respect to AIU DAC’s French Medical Malpractice exposures for underwriting years 2012 through 2018 reinsured by Maiden Reinsurance under the European Hospital Liability Quota Share. In accordance with the Commutation Agreement, Maiden Reinsurance paid $ 31,291 (€ 29,401 ) to AIU DAC, which is the sum of net ceded reserves of $ 27,625 (€ 25,956 ) and an agreed exit cost of $ 3,666 (€ 3,444 ). As a result of the Commutation Agreement, Maiden Reinsurance reduced its exposure to AmTrust's Hospital Liability business, but still has exposure to Italian medical malpractice liabilities under the European Hospital Liability Quota Share. The table below shows the effect of both of these quota share arrangements with AmTrust on the Company's Condensed Consolidated Income Statements for the three and nine months ended September 30, 2023 and 2022, respectively: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 Gross and net premiums written $ 1,898 $ ( 805 ) $ ( 3,892 ) $ ( 18,520 ) Net premiums earned 5,272 5,319 10,638 3,804 Net loss and LAE ( 11,034 ) ( 15,461 ) ( 25,737 ) ( 19,072 ) Commission and other acquisition expenses ( 1,966 ) ( 2,004 ) ( 3,976 ) ( 2,127 ) Collateral provided to AmTrust a) AmTrust Quota Share To provide AmTrust's U.S. insurance subsidiaries with credit for reinsurance on their statutory financial statements, AII, as the direct reinsurer of AmTrust's insurance subsidiaries, established trust accounts ("Trust Accounts") for their benefit. Maiden Reinsurance has provided appropriate collateral to secure its proportional share under the AmTrust Quota Share of AII's obligations to the AmTrust subsidiaries to whom AII is required to provide collateral which can include any of the following: (a) assets loaned by Maiden Reinsurance to AII for deposit into the Trust Accounts, pursuant to a loan agreement between those parties; (b) assets transferred by Maiden Reinsurance for deposit into the Trust Accounts; or (c) a letter of credit obtained by Maiden Reinsurance and delivered to an AmTrust subsidiary on AII's behalf. Maiden Reinsurance may provide any or a combination of these forms of collateral, provided that the aggregate value thereof equals Maiden Reinsurance's proportionate share of its obligations under the AmTrust Quota Share. The collateral requirements under the AmTrust Quota Share with AII was satisfied as follows: • by lending funds of $ 167,975 at September 30, 2023 and December 31, 2022 pursuant to a loan agreement entered into between those parties. Advances under the loan are secured by promissory notes and was assigned by AII to AmTrust effective December 31, 2014 and carried at cost. Interest is payable at a rate equivalent to the Federal Funds Effective Rate ("Fed Funds") plus 200 basis points per annum. Interest income on the loan was $ 3,073 and $ 8,698 for the three and nine months ended September 30, 2023, respectively (2022 - $ 1,771 and $ 3,808 , respectively) and the effective yield was 7.3 % and 6.9 % for the respective periods (2022 - 4.2 % and 3.0 %). • on January 30, 2019, in connection with the termination of the reinsurance agreements described above, the Company and AmTrust amended the Loan Agreement between Maiden Reinsurance, AmTrust and AII, originally entered into on November 16, 2007, by extending the maturity date to January 1, 2025 and specifies that due to the termination of the AmTrust Quota Share, no further loans or advances may be made pursuant to the Loan Agreement; • effective December 1, 2008, the Company entered into a Reinsurer Trust Assets Collateral agreement to provide to AII sufficient collateral to secure its proportional share of AII's obligations to the U.S. AmTrust subsidiaries. The amount of collateral remaining at September 30, 2023 was $ 0 (December 31, 2022 - $ 42,305 ) and the accrued interest was $ 0 (December 31, 2022 - $ 224 ). Please refer to "Note 4. (e) Investments" for additional information; • on January 11, 2019, the Company transferred $ 575,000 to AmTrust as a portion of the existing Trust Accounts used for collateral on the AmTrust Quota Share was converted to a funds withheld arrangement. The funds withheld receivable earns an annual interest rate of 3.5 % for 2023, which is subject to annual adjustment ( 2.1 % for 2022). At September 30, 2023, the funds withheld balance was $ 213,051 (December 31, 2022 - $ 416,835 ) and accrued interest was $ 2,474 (December 31, 2022 - $ 2,359 ). Interest income on the funds withheld receivable was $ 2,227 and $ 8,569 for the three and nine months ended September 30, 2023, respectively (2022 - $ 2,597 and $ 8,585 , respectively). Pursuant to the terms of the LPT/ADC Agreement, Maiden Reinsurance, Cavello and AmTrust and certain of its affiliated companies entered into a Master Collateral Agreement (“MCA”) to define and enable the operation of collateral provided under the AmTrust Quota Share. Under the MCA, Cavello provided letters of credit on behalf of Maiden Reinsurance to AmTrust in an amount representing Cavello’s obligations under the LPT/ADC Agreement. 33 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 10. Related Party Transactions (continued) Because these letters of credit replaced other collateral previously provided directly by Maiden Reinsurance to AmTrust, the MCA coordinates the collateral protection that will be provided to AmTrust to ensure that no gaps in collateral funding occur by operation of the LPT/ADC Agreement and related MCA. As a result of entering into both the LPT/ADC Agreement and the MCA, certain post-termination endorsements (“PTEs”) to the AmTrust Quota Share between AII and Maiden Reinsurance were required. Effective July 31, 2019, the PTEs: i) enable the operation of both the LPT/ADC Agreement and MCA by making provision for certain forms of collateral, including letters of credit provided by Cavello on Maiden Reinsurance’s behalf, and further defines the permitted use and return of collateral; and ii) increase the required funding percentage for Maiden Reinsurance under the collateral arrangements between the parties to 105 % of its obligations, subject to a minimum excess funding requirement of $ 54,000 , as may be mutually amended by the parties from time to time. Under certain defined conditions, Maiden Reinsurance may be required to increase this funding percentage to 110 %. Effective March 16, 2020, Maiden Reinsurance discontinued as a Bermuda company and completed its re-domestication to the State of Vermont. Bermuda is a Solvency II equivalent jurisdiction and the State of Vermont is not such a jurisdiction; therefore, the collateral provided under the respective agreements with AmTrust subsidiaries was strengthened to reflect the impact of the re-domestication concurrent with the date of Maiden Reinsurance’s re-domestication to Vermont. Maiden Reinsurance and AmTrust agreed to: 1) amend the AmTrust Quota Share pursuant to Post Termination Endorsement No. 2 effective March 16, 2020; and 2) amend the European Hospital Liability Quota Share pursuant to Post Termination Endorsement No. 1 effective March 16, 2020. Pursuant to the terms of Post Termination Endorsement No. 2 to the AmTrust Quota Share, Maiden Reinsurance strengthened the collateral protection provided by Maiden Reinsurance to AII by increasing the required funding percentage for Maiden Reinsurance under the collateral arrangements between the parties to 110 % of its obligations, subject to a minimum excess funding requirement of $ 54,000 , as may be mutually amended by the parties from time to time. Post Termination Endorsement No. 2 also sets forth conditions by which the funding percentage will be reduced and the sequence of how collateral will be utilized as obligations, as defined under the AmTrust Quota Share, are satisfied. Pursuant to the terms of Post Termination Endorsement No. 2, the funding percentage was reduced to 107.5 % during the first quarter of 2023. Pursuant to the terms of Post Termination Endorsement No. 1 to the European Hospital Liability Quota Share, Maiden Reinsurance strengthened the collateral protection provided by Maiden Reinsurance to AEL and AIU DAC by increasing the required funding percentage for Maiden Reinsurance under the collateral arrangements between the parties to the greater of 120 % of the Exposure (as defined therein) and the amount of security required to offset the increase in the Solvency Capital Requirement (“SCR”) that results from the changes in the SCR which arise out of Maiden Reinsurance's re-domestication as compared to the SCR calculation if Maiden Reinsurance had remained domesticated in a Solvency II equivalent jurisdiction with a solvency ratio above 100 % and provided collateral equivalent to 100 % of the Exposure. b) European Hospital Liability Quota Share Collateral has been provided to both AEL and AIU DAC under the European Hospital Liability Quota Share. For AEL, the amount of the collateral held in reinsurance trust accounts at September 30, 2023 was $ 154,653 (December 31, 2022 - $ 188,473 ) and the accrued interest was $ 1,085 (December 31, 2022 - $ 966 ). Asset Management Agreement Effective July 1, 2007, the Company entered into an asset management agreement with AII Insurance Management Limited ("AIIM"), a wholly owned subsidiary of AmTrust, pursuant to which AIIM agreed to provide investment management services to the Company. Effective January 1, 2018, AIIM provides investment management services for a quarterly fee of 0.02125 % of the average value of the account. The agreement may be terminated upon 30 days written notice by either party. The Company recorded $ 61 and $ 206 of investment management fees for the three and nine months ended September 30, 2023, respectively (2022 - $ 99 and $ 329 , respectively) under this agreement. On September 9, 2020, Maiden Reinsurance, AmTrust and AIIM entered into a novation agreement, effective July 1, 2020, which provided for the novation of the asset management agreement, dated January 1, 2018 between Maiden Reinsurance and AIIM, and the release by Maiden Reinsurance of AIIM's obligations under the asset management agreement. The novation mandates that AmTrust is to be bound by the terms of the asset management agreement in place of AIIM and AmTrust agrees to perform any and all past, present and future obligations of AIIM under the asset management agreement. On November 13, 2020, Maiden LF, Maiden GF, AmTrust and AIIM entered into a novation agreement, effective July 1, 2020, which provided for the novation of the asset management agreement, dated January 1, 2018 between Maiden LF, Maiden GF and AIIM, and the release by Maiden LF and Maiden GF of AIIM's obligations under the asset management agreement. The novation mandates that AmTrust is to be bound by the terms of the asset management agreement in place of AIIM and AmTrust agrees to perform any and all past, present and future obligations of AIIM under the asset management agreement. 34 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 11. Commitments, Contingencies and Guarantees There are no material changes from the commitments, contingencies and concentrations previously disclosed in the Company’s Form 10-K for the year ended December 31, 2022. a) Concentrations of Credit Risk At September 30, 2023 and December 31, 2022, the Company’s assets where significant concentrations of credit risk may exist include investments, cash and cash equivalents, loan to related party, reinsurance balances receivable, reinsurance recoverable on paid and unpaid losses and funds withheld receivable. Please refer to " Note 8. Reinsurance " for additional information regarding the Company's credit risk exposure on its reinsurance counterparties including the impact of the LPT/ADC Agreement effective January 1, 2019. The Company requires its reinsurers to have adequate financial strength. The Company evaluates the financial condition of its reinsurers and monitors its concentration of credit risk on an ongoing basis. Provisions are made for amounts that are considered potentially uncollectible. Letters of credit are provided by its reinsurers for material amounts recoverable as discussed in " Note 8. Reinsurance ". The Company manages the concentration of credit risk in its investment portfolio through issuer and sector exposure limitations. The Company believes it bears minimal credit risk in its cash on deposit. The Company also monitors the credit risk related to the loan to related party, reinsurance balances receivable and funds withheld receivable, within which the largest balances are due from AmTrust. AmTrust has a financial strength/credit rating of A- (Excellent) from A.M. Best at September 30, 2023. To mitigate credit risk, the Company generally has a contractual right of offset thereby allowing claims to be settled net of any premiums or loan receivable. The Company believes these balances as at September 30, 2023 will be fully collectible. Please refer to " Note 2. Significant Accounting Polices " for additional information on the Company's credit loss allowances as at September 30, 2023 regarding other investments, reinsurance recoverable on unpaid losses, reinsurance balances receivable and funds withheld receivable that were recorded under Topic 326 which was adopted effective January 1, 2023. b) Investment Commitments and Related Financial Guarantees The Company had total unfunded commitments on alternative investments of $ 105,844 at September 30, 2023 (December 31, 2022 - $ 112,989 ) which included commitments for other investments, private equity securities and equity method investments. The table below shows the total unfunded commitments by type of investment as at September 30, 2023 and December 31, 2022: September 30, 2023 December 31, 2022 Fair Value % of Total Fair Value % of Total Private equity funds $ 51,761 48.9 % $ 54,996 48.7 % Private credit funds 16,244 15.3 % 13,906 12.3 % Privately held equity investments 705 0.7 % 705 0.6 % Total unfunded commitments on other investments $ 68,710 64.9 % $ 69,607 61.6 % Total unfunded commitments on equity securities $ 16,061 15.2 % $ 16,509 14.6 % Total unfunded commitments on equity method investments $ 21,073 19.9 % $ 26,873 23.8 % Total unfunded commitments on alternative investments $ 105,844 100.0 % $ 112,989 100.0 % Certain of the Company's investments in limited partnerships are related to real estate joint ventures with interests in multi-property projects with varying strategies ranging from the development of properties to the ownership of income-producing properties. In certain of these joint ventures, the Company has provided certain indemnities, guarantees and commitments to certain parties such that it may be required to make payments now or in the future. Any loss for which the Company could be liable would be contingent on the default of a loan by the real estate joint venture entity for which the Company provided a financial guarantee to a lender. While the Company has committed to aggregate limits as to the amount of guarantees it will provide as part of its limited partnerships, guarantees are only provided on an individual transaction basis and are subject to the terms and conditions of each transaction mutually agreed by the parties involved. The Company is not bound to such guarantees without its express authorization. As discussed above, at September 30, 2023, guarantees of $ 55,109 (December 31, 2022 - $ 42,141 ) were provided to lenders by the Company on behalf of real estate joint ventures, however, the likelihood of the Company incurring any losses pertaining to project level financing guarantees was determined to be remote. Therefore, no liability has been accrued under ASC 450-20. 35 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 11. Commitments, Contingencies and Guarantees (continued) c) Operating Lease Commitments The Company leases office spaces and equipment under various operating leases expiring in various years through 2025. The Company's leases are currently classified as operating leases and none of them have non-lease components. For operating leases that have a lease term of more than twelve months, and whose lease payments are above a certain threshold, the Company recognizes a lease liability and a right-of-use asset in the Condensed Consolidated Balance Sheets at the present value of the remaining lease payments until expiration. As the lease contracts generally do not provide an implicit discount rate, the Company used the weighted-average discount rate of 10 %, representing its secured incremental borrowing rate, in calculating the present value of the lease liability. At September 30, 2023, the Company's future lease obligations of $ 272 (December 31, 2022 - $ 300 ) were calculated based on the present value of future annual rental commitments excluding taxes, insurance and other operating costs for non-cancellable operating leases discounted using its secured incremental borrowing rate. This amount has been recognized on the Consolidated Balance Sheet as a lease liability within accrued expenses and other liabilities with an equivalent amount for the right-of-use asset presented as part of other assets . The Company has made an accounting policy election not to include renewal, termination, or purchase options that are not reasonably certain of exercise when determining the term of the borrowing. The Company’s lease agreements do not contain any material residual value guarantees or material restrictive covenants. The Company's weighted-average remaining lease term is approximately 1.4 years at September 30, 2023. Under Topic 842, Leases , the Company continues to recognize the related leasing expense on a straight-line basis over the lease term on the Consolidated Statements of Income. The Company's total lease expense was $ 119 and $ 374 for three and nine months ended September 30, 2023, respectively (2022 - $ 101 and $ 260 , respectively) recognized within general and administrative expenses consistent with the prior accounting treatment under Topic 840. d) Legal Proceedings Except as noted below, the Company is not a party to any material legal proceedings. From time to time, the Company is subject to routine legal proceedings, including arbitration, arising in the ordinary course of business. These legal proceedings generally relate to claims asserted by or against the Company in the ordinary course of insurance or reinsurance operations. Based on the Company's opinion, the eventual outcome of these legal proceedings is not expected to have a material adverse effect on its financial condition or results of operations. In April 2009, the Company learned that Bentzion S. Turin, the former Chief Operating Officer, General Counsel and Secretary of Maiden Holdings and Maiden Reinsurance, sent a letter to the U.S. Department of Labor claiming that his employment with the Company was terminated in retaliation for corporate whistle-blowing in violation of the whistle-blower protection provisions of the Sarbanes-Oxley Act of 2002. Mr. Turin alleged that he was terminated for raising concerns regarding corporate governance with respect to the negotiation of the terms of the Trust Preferred Securities Offering. He seeks reinstatement as Chief Operating Officer, General Counsel and Secretary of Maiden Holdings and Maiden Reinsurance, back pay and legal fees incurred. On December 31, 2009, the U.S. Secretary of Labor found no reasonable cause for Mr. Turin’s claim and dismissed the complaint in its entirety. Mr. Turin objected to the Secretary's findings and requested a hearing before an administrative law judge in the U.S. Department of Labor. The Company moved to dismiss Mr. Turin's complaint, and its motion was granted by the Administrative Law Judge on June 30, 2011. On July 13, 2011, Mr. Turin filed a petition for review of the Administrative Law Judge's decision with the Administrative Review Board in the U.S. Department of Labor. On March 29, 2013, the Administrative Review Board reversed the dismissal of the complaint on procedural grounds, and remanded the case to the administrative law judge. The administrative hearing began in September 2014 and concluded in November 2018. On September 2, 2021, Administrative Law Judge Theresa C. Timlin of the U.S. Department of Labor issued a decision and order which denied Mr. Turin’s complaint in full. On September 16, 2021, Mr. Turin filed a petition for review of the Administrative Law Judge's decision with the Administrative Review Board in the U.S. Department of Labor. On June 29, 2023, the Administrative Review Board issued a decision and order which summarily affirmed the September 2, 2021 decision and order of the Administrative Law Judge. The decision and order of the Administrative Review Board became the final order of the Secretary of Labor on July 27, 2023. On July 28, 2023, Mr. Turin filed a petition for review of the final order of the Secretary of Labor in the United States Court of Appeals for the Second Circuit. The Secretary of Labor is the respondent before the Second Circuit and the Court granted the Company's petition to intervene in order to present its position to the Court. The parties are awaiting a briefing order. A putative class action complaint was filed against Maiden Holdings, Arturo M. Raschbaum, Karen L. Schmitt, and John M. Marshaleck in the United States District Court for the District of New Jersey on February 11, 2019. On February 19, 2020, the Court appointed lead plaintiffs, and on May 1, 2020, lead plaintiffs filed an amended class action complaint (the “Amended Complaint”).The Amended Complaint asserts violations of Section 10(b) of the Exchange Act and Rule 10b-5 (and Section 20(a) for control person liability) arising in large part from allegations that Maiden failed to take adequate loss reserves in connection with reinsurance provided to AmTrust. Plaintiffs further claim that certain of Maiden Holdings’ representations concerning its business, underwriting and financial statements were rendered false by the allegedly inadequate loss reserves, that these misrepresentations inflated the price of Maiden Holdings' common stock, and that when the truth about the misrepresentations was revealed, the Company’s stock price fell, causing Plaintiffs to incur losses. On September 11, 2020, a motion to dismiss was filed on behalf of all Defendants. On August 6, 2021, the Court issued an order denying, in part, Defendants’ motion to dismiss, ordering Plaintiffs to file a shorter amended complaint no later than August 20, 2021, and permitting discovery to proceed on a limited basis. 36 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 11. Commitments, Contingencies and Guarantees (continued) On February 7, 2023, the District Court denied Plaintiffs’ motion for reconsideration of the District Court’s decision denying Plaintiffs’ objection to the Magistrate Judge’s December 2021 ruling on discovery. On May 26, 2023, the Company filed a Renewed Motion to Dismiss the Second Amended Complaint or, in the Alternative, for Summary Judgment, which has been fully briefed and is now under consideration by the Court. We believe the claims are without merit and we intend to vigorously defend ourselves. It is possible that additional lawsuits will be filed against the Company, its subsidiaries and its respective officers due to the diminution in value of our securities as a result of our operating results and financial condition. It is currently uncertain as to the effect of such litigation on our business, operating results and financial condition. 12. Earnings per Common Share The following is a summary of the elements used in calculating basic and diluted earnings per common share: For the Three Months Ended September 30, For the Nine Months Ended September 30, 2023 2022 2023 2022 Numerator: Net loss $ ( 3,527 ) $ ( 8,160 ) $ ( 17,788 ) $ ( 9,047 ) Gain from repurchase of preference shares — — — 28,233 Amount allocated to participating common shareholders (1) — — — ( 109 ) Net (loss) income (attributable) available to Maiden common shareholders $ ( 3,527 ) $ ( 8,160 ) $ ( 17,788 ) $ 19,077 Denominator: Weighted average number of common shares – basic 101,454,767 87,161,499 101,586,759 86,935,823 Potentially dilutive securities: Share options and restricted share units (2) — — — 1,729 Adjusted weighted average number of common shares – diluted (2) 101,454,767 87,161,499 101,586,759 86,937,552 Basic and diluted (loss) earnings per share (attributable) available to common shareholders $ ( 0.03 ) $ ( 0.09 ) $ ( 0.18 ) $ 0.22 (1) This represents the share in net income using the two-class method for holders of non-vested restricted shares issued to the Company's employees under the 2019 Omnibus Incentive Plan. (2) Please refer to "Note 6. Shareholders' Equity" and "Note 14. Share Compensation and Pension Plans" in the Notes to Consolidated Financial Statements included in the Company's Annual Report on Form 10-K for the year ended December 31, 2022 for the terms and conditions of securities that could potentially be dilutive in the future. There were no potentially dilutive securities for the three and nine months ended September 30, 2023 (2022 - 0 and 1,729 , respectively). 13. Income Taxes The Company recognized an income tax benefit of $ 31 and $ 253 for the three and nine months ended September 30, 2023, respectively, compared to an income tax benefit of $ 91 and an income tax expense of $ 451 for the same respective periods in 2022. The effective tax rate on the Company's net loss differs from the statutory rate of zero percent under Bermuda law due to tax on foreign operations, primarily the U.S. and Sweden. A valuation allowance has been established against the net U.S. deferred tax assets which are primarily attributable to net operating losses and discounting of loss reserves for tax purposes. At this time, the Company believes it is necessary to establish a full valuation allowance against the U.S. net deferred tax assets as more evidence is needed regarding the utilization of these tax benefits in the future. 37 MAIDEN HOLDINGS, LTD. NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) (in thousands of U.S. dollars, except share and per share data) 14. Subsequent Events a) Common Share Repurchases Subsequent to September 30, 2023 and through the period ended November 7, 2023, the Company repurchased 226,250 additional common shares at an average price per share of $ 1.67 under the Company's authorized common share repurchase plan pursuant to Rule 10b5-1(c)(1) under the Securities Exchange Act of 1934. The Company's remaining share repurchase authorization was $ 72,281 at November 7, 2023. b) Insider Trading Arrangements and Policies During the three months ended September 30, 2023, the Company adopted a Rule 10b5-1(c)(1) trading arrangement as defined in Item 408 of Regulation S-K under the Securities Exchange Act of 1934, as amended. On September 29, 2023, an agreement was signed between Maiden Holdings and a financial intermediary, who was authorized to begin purchasing common shares on October 30, 2023 until the close of business on September 29, 2024, subject to certain conditions set forth in the agreement. 38