Maiden Holdings, Ltd. 10-Q

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited Condensed Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q (this "Form 10-Q" or this "Report"). References in this Form 10-Q to the terms "we", "us", "our", "the Company", "Maiden" or other similar terms mean the consolidated operations of Maiden Holdings, Ltd. and its subsidiaries, unless the context requires otherwise. References in this Form 10-Q to the term "Maiden Holdings" means Maiden Holdings, Ltd. only. Certain reclassifications have been made for 2023 to conform to the 2024 presentation and have no impact on consolidated net income and total equity previously reported. Note on Forward-Looking Statements This Quarterly Report on Form 10-Q includes projections concerning financial information and statements concerning future economic performance and events, plans and objectives relating to management, operations, products and services, and assumptions underlying these projections and statements. These projections and statements are forward-looking statements within the meaning of The Private Securities Litigation Reform Act of 1995 and are not historical facts but instead represent only our belief regarding future events, many of which, by their nature, are inherently uncertain and outside our control. These projections and statements may address, among other things, our strategy for growth, product development, financial results and reserves. Our actual results and financial condition may differ, possibly materially, from these projections and statements and therefore you should not place undue reliance on them. Factors that could cause our actual results and financial condition to differ, possibly materially, from those in the specific projections and statements are discussed throughout this Management's Discussion and Analysis of Financial Condition and Results of Operations and in "Risk Factors" in Item 1A of Part I of our Annual Report on Form 10-K for the year ended December 31, 2023 that was filed with the U.S. Securities and Exchange Commission ("SEC") on March 12, 2024, however, these factors should not be construed as exhaustive. Forward-looking statements speak only as of the date they are made and we undertake no obligation to update or revise any forward-looking statement that may be made from time to time, whether as a result of new information, future developments or otherwise, except as required by law. 41 Overview Maiden Holdings is a Bermuda-based holding company. We create shareholder value by actively managing and allocating our assets and capital, including through ownership and management of businesses and assets mostly in the insurance and related financial services industries where we can leverage our deep knowledge of those markets. As discussed in the “Legacy Underwriting” section further below, we have fulfilled our capital commitment to Genesis Legacy Solutions ("GLS") and have determined we will not commit any further capital to GLS for new accounts and we presently do not anticipate any further contracts in the legacy management segment, as we no longer consider it part of our strategy to produce acceptable shareholder returns. We are not currently underwriting reinsurance business on new prospective risks but have recently underwritten risks on a retroactive basis through GLS. We also have various historic reinsurance programs underwritten by Maiden Reinsurance Ltd. ("Maiden Reinsurance") which are in run-off, including the liabilities associated with AmTrust Financial Services, Inc. ("AmTrust") which we terminated in 2019 as discussed in " Note 10. Related Party Agreements " of the Notes to Condensed Consolidated Financial Statements in Part I Item 1. "Financial Information" . In addition, we have a Loss Portfolio Transfer and Adverse Development Cover Agreement ("LPT/ADC Agreement") with Cavello Bay Reinsurance Limited ("Cavello") and a commutation agreement that further reduces our exposure to and limits the potential volatility related to our AmTrust liabilities in run-off, as discussed in " Note 8. Reinsurance " of the Notes to Condensed Consolidated Financial Statements in Part I Item 1. "Financial Information" . Short-term income protection business is presently 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. Our wholly owned subsidiary, Maiden Global Holdings, Ltd. ("Maiden Global") is a licensed intermediary in the United Kingdom. Maiden Global had previously operated internationally by providing branded auto and credit life insurance products through insurer partners, particularly those in Europe and other global markets ("IIS business"). These products also produced reinsurance programs which were underwritten by our wholly owned subsidiary Maiden Reinsurance. On May 3, 2024, Maiden LF and Maiden GF entered into a Renewal Rights and Asset Purchase Agreement with AmTrust Nordic AB, a Swedish unit of AmTrust Financial Services, Inc. ("AmTrust") which is expected to cover the majority of Maiden LF and Maiden GF's primary business written in Sweden, Norway and other Nordic countries. On June 20, 2024, Maiden LF and Maiden GF entered into an additional Renewal Rights and Asset Purchase Agreement with AmTrust Europe Limited ("AEL") and AmTrust International Underwriters DAC ("AIU DAC"), both wholly owned subsidiaries of AmTrust, which is expected to cover the majority of Maiden LF and Maiden GF's primary business written in the United Kingdom and Ireland. These agreements are collectively referred to as the "AmTrust Renewal Rights Agreements". Under these agreements, those AmTrust subsidiaries in collaboration with existing Maiden LF and Maiden GF distribution partners, will offer renewals to select policyholders in exchange for a fee at standard market terms for business successfully renewed. These transactions are part of our broader plan to divest the IIS businesses as a result of our recently concluded strategic review of the IIS business platform. The purpose of that review was to evaluate the strategic value of Maiden LF and Maiden GF in relation to their ongoing growth and profitability prospects, regulatory capital requirements and ability to create shareholder value in excess of our target return on capital levels. As part of these conclusions, Maiden LF and Maiden GF are no longer writing new business and we expect to enter into additional transactions to either sell or wind-up Maiden GF and Maiden LF during 2024 and we are actively evaluating potential transactions currently. Our business currently consists of two reportable segments: Diversified Reinsurance and AmTrust Reinsurance. Our Diversified Reinsurance segment consists of a portfolio of predominantly property and casualty reinsurance business focusing on regional and specialty property and casualty insurance companies located primarily in Europe. This segment also includes transactions entered into by GLS since November 2020 . Our AmTrust Reinsurance segment includes all business ceded to Maiden Reinsurance by AmTrust, primarily the quota share reinsurance agreement (“AmTrust Quota Share”) between Maiden Reinsurance and AmTrust’s wholly owned subsidiary, AmTrust International Insurance, Ltd. (“AII”) and the European hospital liability quota share reinsurance contract ("European Hospital Liability Quota Share") with AmTrust’s wholly owned subsidiaries, AEL and AIU DAC, both of which are in run-off effective as of January 1, 2019. Please refer to " Management's Discussion and Analysis of Financial Condition and Results of Operations " section included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023 that was filed on March 12, 2024 for further information on recent developments within the Company. Business Strategy We continued to deploy our revised operating strategy during 2024 which leverages the significant assets and capital we retain. In addition to restoring operating profitability, our strategic focus centers on creating the greatest risk-adjusted shareholder returns in order to increase book value for our common shareholders, both near and long-term. In that respect, management’s focus is to increase the non-GAAP book value of the Company, which fully reflects the steps we have taken to protect our balance sheet, primarily through our LPT/ADC Agreement with Cavello, as this represents the ultimate economic value of Maiden. We also believe that these areas of strategic focus will enhance our profitability through increased returns, which should also increase the likelihood of fully utilizing the significant net operating loss ("NOL") carryforwards as described further below which would increase both GAAP and non-GAAP book value and create additional common shareholder value. This strategy presently has two principal areas of focus: • Asset management - investing in assets and asset classes in a prudent but expansive manner in order to maximize investment returns and is principally enabled by limiting the amount of insurance risk we assume in relation to the 42 assets we hold and maintaining required regulatory capital at very strong levels to manage our aggregate risk profile; and • Capital management - effectively managing the capital we hold on our balance sheet and when appropriate, repurchasing securities or returning capital to enhance common shareholder returns. As our insurance liabilities run-off and these strategies potentially develop along timelines longer than initially anticipated, we may allocate capital to other insurance activities that produce more consistent levels of revenue and profit as we seek to create longer-term shareholder value. As part of our ongoing strategic evaluation of both the insurance and reinsurance marketplace and the ability of both the fee-based, distribution and the reinsurance markets to increase our current income and improve our ability to utilize and recognize our deferred tax assets, we increasingly believe expansion of those strategies may be appropriate. We are actively exploring fee-based and distribution opportunities which are non-risk bearing and capital efficient and given ongoing changes in reinsurance markets, can be potentially complemented by limited and selective deployment of reinsurance capacity to supplement those activities and enhance returns to shareholders. To date, we invested $9.5 million in insurance distribution platforms and these investments have achieved an internal rate of return of 24.7% and a multiple of capital of 1.69x on those investments. Further, we have not engaged or pursued active reinsurance underwriting of new prospective risks as our assessment of the reinsurance marketplace along with our current operating profile has been that the risk-adjusted returns that may be produced via such underwriting are likely to be lower over the long-term than our cost of capital. However, as interest rates have increased and moved towards historically observed levels, risk-adjusted returns for active reinsurance underwriting of new prospective risks may become more attractive and while we have no immediate plans to resume such underwriting, we continue to evaluate if such a strategy, even on a limited basis, would produce suitable value for shareholders. While we do not expect to pursue such a strategy independently, such an approach could complement and enhance an approach to investing in and acquiring fee-based and distribution properties and strengthen those entities. While our returns to date have not as yet achieved our objectives, we continue to believe the measures implemented in recent years have allowed us to more flexibly allocate capital to those activities most likely to produce the greatest returns for shareholders, and we are actively engaged in evaluating and deploying funds and adjusting our strategies as discussed herein. The returns expected to be produced by each pillar of our strategy are primarily evaluated in relation to our cost of debt capital, which carries a weighted average effective interest rate of 7.6%. To the extent our experience or belief indicates we cannot exceed the cost of debt capital, we expect to refrain from activities in those areas, as evidenced in our decisions regarding legacy management. Our ability to execute our asset and capital management initiatives is dependent on maintaining adequate levels of unrestricted liquidity and cash flows. Further, there can be no assurance that our insurance liabilities will run-off at levels that will permit further capital management activities, which we continually review as part of our strategy. Please refer to the "Liquidity and Capital Resources" section for further information on our asset and capital management activities. Asset Management As part of our expanded asset management activities, as noted we have evaluated and continue to consider investing in various initiatives in the insurance industry across a variety of segments which we believe will produce appropriate risk-adjusted returns while maintaining the option to consider underwriting activities in the future. We believe these expanded activities will produce a broad range of positive impacts on our financial condition, including current income, longer-term gains and in certain instances, fee income. As of June 30, 2024 , we have invested approximately $336.8 million into alternative investments which include equity securities, other investments and equity method investments in a wide variety of asset classes, and we believe these activities will exceed that benchmark cost of capital with adjustments as necessary if those returns do not emerge. Please refer to the "Liquidity and Capital Resources" section on " Other Investments, Equity Investments and Equity Method Investments" for further information on our alternative asset classes and a detailed discussion of their investment returns. As noted, we are actively exploring fee-based and distribution opportunities which are non-risk bearing and capital efficient. As these strategic plans continue to develop, we may modify our approach to this aspect of our current strategy, including possibly reducing our investments and commitments to alternative investments. Recent development and trends in financial markets, particularly the rapid rise in interest rates and associated economic uncertainty as a result of those changes, indicate that it may take longer than expected to achieve those returns and we expect that to factor into future capital allocation decisions. In particular, as interest rates have risen to more historically observed levels, we have focused on investing in assets that produce higher levels of current income as opposed to longer-term gains, in order to increase returns to shareholders and increase the opportunity to recognize our deferred tax assets discussed below. 43 Capital Management Our capital management strategy is significantly informed by the required capital needed to operate our business in a prudent manner and our ongoing analysis of our loss development trends. Trends in recent years have increased our confidence in our recorded ultimate losses for our insurance liabilities in run-off, however a prudent assessment dictates that the run-off portfolio still requires additional maturity to fully emerge, as evidenced by the adverse loss development we have experienced in 2023 and 2024. While there is no assurance that prior positive long-term loss development trends will resume, as our insurance liabilities further mature we remain confident that we can continue the prudent and disciplined repurchase of both our common shares and senior notes which are authorized for repurchase, which we believe provided the greatest risk-adjusted returns to our common shareholders. Please refer to "Notes to Consolidated Financial Statements - Note 6 — Shareholders' Equity" under Item 8 "Financial Statements and Supplementary Data" of the Annual Report on Form 10-K for the year ended December 31, 2022 for further information on the common shares issued as part of the exchange for preference shares held by Maiden Reinsurance and other preference shareholders in 2022 ("Exchange"). Completion of the Exchange represented a significant milestone in our capital management plan and we continue to evaluate other capital management options that may be available to us, including repurchase of the Company's common shares and senior notes from time to time at market prices or as may be privately negotiated as approved by our Board in its respective authorizations. The Company expects to deploy its capital management strategy on a long-term and disciplined basis, balanced along with its other strategic initiatives. We note that recognition of the deferred tax asset on our balance sheet is a leading priority for the Company to increase its GAAP and non-GAAP book value and we will balance these considerations against opportunities to repurchase shares at what we believe are appropriate prices as we pursue our capital management initiatives. Please refer to " Notes to Condensed Consolidated Financial Statements (unaudited) Note 6. Shareholders' Equity " included under Item 1. "Financial Statements" of this Quarterly Report on Form 10-Q for further information on the recent repurchases made by Maiden Reinsurance during the three and six months ended June 30, 2024. There can be no assurance that we will continue to pursue such capital management initiatives, or that they will provide appropriate risk-adjusted returns. As we revised our strategy in recent years, we continuously evaluate the effectiveness of those strategies in achieving its goals and have been and continue to be prepared to adjust those strategies as our performance dictates. Legacy Underwriting In November 2020, the Company formed GLS to specialize in providing a full range of legacy services to small insurance entities, particularly those in run-off or with blocks of reserves that are no longer core to those companies' operations, working with clients to develop and implement finality solutions including acquiring entire companies that enable our clients to meet their capital and risk management objectives.The goal of GLS was to acquire legacy liabilities and (re)insurance reserves from companies and provide retroactive reinsurance coverage for portfolios of (re)insurance business, primarily via loss portfolio transfer contracts (“LPT”). Additionally, GLS provided reinsurance contracts to other (re)insurers to mitigate some of their risk of future adverse development (an adverse development cover, or “ADC”) on insurance risks relating to prior accident years. We believed the formation of GLS was highly complementary to our overall longer-term strategy and would produce risk-adjusted returns in excess of our debt cost of capital. However, GLS did not achieve either the volume or profitability expected and we concluded that the outlook would not change materially. At the time we formed GLS, we committed a certain level of capital to support this business which we have since fulfilled. After carefully evaluating the performance of this platform, ongoing market conditions, the competitive landscape and a variety of other factors, we have concluded that we will not commit additional capital to new accounts in this segment and will be running off the small number of accounts we underwrote since the formation of GLS. We presently do not anticipate any further contracts in the legacy management segment, and we no longer consider it part of our strategy to produce acceptable shareholder returns. At June 30, 2024, GLS and its subsidiaries have total insurance related liabilities of $23.9 million which consisted of total loss reserves of $17.6 million, an underwriting-related derivative liability of $4.0 million, and net deferred gains on retroactive reinsurance of $2.3 million. 2024 Developments During the six months ended June 30, 2024, our book value decreased by 4.0% to $2.38 per common share at June 30, 2024, and our non-GAAP book value decreased by 0.6% to $3.17 per common share at June 30, 2024. We made additional progress in the capital management pillar of our business strategy, repurchasing 747,561 and 1,099,672 common shares during the three and six months ended June 30, 2024, respectively. During the six months ended June 30, 2024, our alternative investment portfolio increased by 9.0% and produced a positive net return of 4.6% on that portfolio during the six months ended June 30, 2024 compared to 3.7% for the same period in 2023. The annualized return is now above our average cost of capital despite numerous investments that continue to be carried at cost or net asset values that have yet to realize positive returns due to recent deployment. We believe our alternative investment portfolio remains well positioned to achieve its targeted longer-term returns. As interest rates have risen, we are increasingly focusing our investing activities on opportunities that will produce current income. The run-off of our historic reinsurance programs produced an underwriting loss of $9.8 million and $17.3 million for the three and six months ended June 30, 2024, respectively. Much of this was driven by adverse prior year reserve development of $6.8 million and $13.4 million for three and six months ended June 30, 2024, respectively, which offset the positive progress made in our capital and asset management strategies. Approximately $5.6 million or 83.1% and $10.6 million or 79.7% of the total adverse prior year reserve development for the three and six months ended June 30, 2024, respectively, is recoverable under the LPT/ADC Agreement and is expected to be recognized as future GAAP income over time as recoveries are received, 44 including recoveries on Workers Compensation paid commuted amounts, under the provisions of the LPT/ADC Agreement and the applicable GAAP accounting rules. Maiden Holdings North America ("Maiden NA") We believe Maiden NA’s investments, including its ownership of Maiden Reinsurance and its active asset management strategy, will create opportunities to utilize NOL carryforwards of $338.2 million at June 30, 2024. Approximately $186.2 million of these NOL carryforwards expire in various years beginning in 2029. As of June 30, 2024, $152.0 million or 44.9% of the Company's NOL carryforwards have no expiry date under the relevant U.S. tax law. The NOL carryforwards combined with additional net deferred tax assets ("DTA") primarily related to our insurance liabilities result in net U.S. DTA (before valuation allowance) of $119.2 million or $1.19 per common share at June 30, 2024. Net U.S. DTA of $119.2 million is not presently recognized on the Company's condensed consolidated balance sheets as a full valuation allowance is carried against it. At this time, while positive evidence in support of reducing the valuation allowance is growing, the Company believes it is necessary to maintain a full valuation allowance against the net U.S. DTA as more evidence is needed regarding the utilization of these losses. As circumstances further develop, we will continuously evaluate the amount of the valuation allowance held against the net U.S. DTA. For further details please see " Note 13 — Income Taxes " included under Item 8 " Financial Statements and Supplementary Data " of the Annual Report on Form 10–K for the year ended December 31, 2023. Taken together, we believe these measures should generate additional income for Maiden NA in a tax-efficient manner, while sharing in the improvement in profitability anticipated in Maiden Reinsurance as a result of the measures enacted as described above. Three and Six Months Ended June 30, 2024 and 2023 Financial Highlights For the Three Months Ended June 30, 2024 2023 Change Summary Consolidated Statement of Income Data (unaudited): ($ in thousands except per share data) Net loss $ (9,971) $ (2,933) $ (7,038) Basic and diluted loss per common share: Net loss attributable to common shareholders (2) (0.10) (0.03) (0.07) Gross premiums written 8,449 6,875 1,574 Net premiums earned 12,077 11,039 1,038 Underwriting loss (3) (9,765) (9,262) (503) Net investment results (13) 9,873 16,466 (6,593) Non-GAAP measures: Non-GAAP operating (loss) earnings (1) (10,604) 4,467 (15,071) Non-GAAP basic and diluted operating (loss) earnings per common share (1) (0.11) 0.04 (0.15) Annualized non-GAAP operating return on average adjusted shareholders' equity (1) (13.3) % 5.6 % (18.9) For the Six Months Ended June 30, 2024 2023 Change Summary Consolidated Statement of Income Data (unaudited): ($ in thousands except per share data) Net loss $ (8,512) $ (14,261) $ 5,749 Basic and diluted loss per common share: Net loss attributable to Maiden common shareholders (2) (0.08) (0.14) 0.06 Gross premiums written 16,772 7,711 9,061 Net premiums earned 24,485 20,041 4,444 Underwriting loss (3) (17,289) (17,515) 226 Net investment results (13) 26,929 26,965 (36) Non-GAAP measures: Non-GAAP operating loss (1) (15,554) (3,426) (12,128) Non-GAAP basic and diluted operating loss per common share (1) (0.16) (0.03) (0.13) Annualized non-GAAP operating return on average adjusted shareholders' equity (1) (9.8) % (2.1) % (7.7) 45 June 30, 2024 December 31, 2023 Change Consolidated Financial Condition ($ in thousands except per share data) Total investments and cash and cash equivalents (4) $ 593,640 $ 602,318 $ (8,678) Total assets 1,399,950 1,518,934 (118,984) Reserve for loss and LAE 762,264 867,433 (105,169) Senior notes - principal amount 262,361 262,361 — Shareholders' equity 238,046 249,160 (11,114) Total capital resources (5) 500,407 511,521 (11,114) Ratio of debt to total capital resources (10) 52.4 % 51.3 % 1.1 Book Value calculations: Book value per common share (6) $ 2.38 $ 2.48 $ (0.10) Accumulated dividends per common share (12) 4.27 4.27 — Book value per common share plus accumulated dividends $ 6.65 $ 6.75 $ (0.10) Change in book value per common share plus accumulated dividends (1.5) % Diluted book value per common share (7) $ 2.34 $ 2.46 $ (0.12) Non-GAAP measures: Adjusted book value per common share (8) $ 3.17 $ 3.19 $ (0.02) Adjusted shareholders' equity (9) 316,249 320,076 (3,827) Adjusted total capital resources (9) 578,610 582,437 (3,827) Ratio of debt to adjusted total capital resources (11) 45.3 % 45.0 % 0.3 (1) Non-GAAP operating earnings (loss), non-GAAP operating earnings (loss) per common share, and annualized non-GAAP operating return on average common shareholders' equity are non-GAAP financial measures. See " Key Financial Measures " for additional information. (2) Please refer to " Notes to Condensed Consolidated Financial Statements (unaudited) Note 12. Earnings per Common Share " for the calculation of basic and diluted income (loss) per common share. (3) Underwriting income or loss is a non-GAAP measure and is calculated as net premiums earned plus other insurance revenue less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities. See " Key Financial Measures " for additional information. (4) Total investments and cash and cash equivalents includes both restricted and unrestricted. (5) Total capital resources is the sum of the Company's principal amount of debt and shareholders' equity. See " Key Financial Measures " for additional information. (6) Book value per common share is calculated using shareholders’ equity divided by the number of common shares outstanding. See " Key Financial Measures " for additional information. (7) Diluted book value per common share is calculated by dividing shareholders' equity, adjusted for assumed proceeds from the exercise of dilutive options, by the number of outstanding common shares plus dilutive options and restricted shares (assuming exercise of all dilutive share based awards). See " Key Financial Measures " for additional information. (8) Adjusted book value per common share is a non-GAAP measure that is calculated using shareholders' equity, adjusted by adding to shareholders' equity the unamortized deferred gain on retroactive reinsurance arising from the LPT/ADC Agreement, divided by the number of common shares outstanding. See " Key Financial Measures " for additional information. (9) Adjusted shareholders' equity and adjusted total capital resources are calculated by adding to shareholders' equity the unamortized deferred gain on retroactive reinsurance arising from the LPT/ADC Agreement with Cavello relating to losses from the AmTrust Quota Share agreement. Under U.S. GAAP, the deferred gain shall be amortized over the estimated remaining settlement period. See " Key Financial Measures " for additional information. (10) Ratio of debt to total capital resources is calculated using the total principal amount of debt divided by the sum of total capital resources. (11) Ratio of debt to adjusted total capital resources is calculated using the total principal amount of debt divided by the sum of adjusted total capital resources. (12) Accumulated dividends per common share includes the cumulative sum of dividends declared and paid in the past on the Company's issued common shares since inception. (13) Net investment results include the sum of net investment income, net realized and unrealized gains (losses), and interest in income (loss) of equity method investments. 46 Key Financial Measures In addition to our key financial measures presented in accordance with GAAP in the Condensed Consolidated Balance Sheets and Condensed Consolidated Statements of Income and Comprehensive Income, management uses certain non-GAAP financial measures to evaluate the Company's financial performance and the overall growth in value generated for the Company’s common shareholders. Management believes that these measures, which may be defined differently by other companies, explain the Company’s results to investors in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. The non-GAAP measures should not be viewed as a substitute for those determined in accordance with U.S. GAAP. The calculation of these key financial measures including the reconciliation of non-GAAP measures to the nearest GAAP measure and relevant discussions are found within Item 2 - "Management's Discussion and Analysis of Financial Condition and Results of Operations" . These non-GAAP financial measures are: Non-GAAP operating earnings (loss) and non-GAAP diluted operating earnings (loss) per common share : Management believes that the use of non-GAAP operating earnings and non-GAAP diluted operating earnings per common share enables investors and other users of the Company’s financial information to analyze its performance in a manner similar to how management analyzes performance. Management also believes that these measures generally follow industry practice therefore allowing the users of financial information to compare the Company’s performance with its industry peer group, and that the equity analysts and certain rating agencies which follow the Company, and the insurance industry as a whole, generally exclude these items from their analyses for the same reasons. Non-GAAP operating earnings should not be viewed as a substitute for U.S. GAAP net income. Non-GAAP operating earnings (loss) is an internal performance measure used by management as these measures focus on the underlying fundamentals of the Company's operations by excluding, on a recurring basis: (1) net realized investment gains (losses); (2) foreign exchange and other gains (losses); (3) the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under the LPT/ADC Agreement and related changes in amortization of the deferred gain liability; and (4) interest in income (loss) of equity method investments. We excluded net realized investment gains (losses), interest in income (loss) of equity method investments and foreign exchange and other gains (losses) as we believe these are influenced by market opportunities and other factors. We do not believe that ceded risks under the LPT/ADC Agreement are representative of our ongoing and future business which are different to retroactive reinsurance risks written by GLS that are representative of our ongoing and future business. We believe all of these amounts are substantially independent of our business and any potential future underwriting process, therefore including them would distort the analysis of underlying trends in our operations. Underwriting income (loss) is a non-GAAP measure and is calculated as net premiums earned plus other insurance revenue less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities. For purposes of these non-GAAP operating measures, the fee-generating business which is included in our Diversified Reinsurance segment, is considered part of the underwriting operations of the Company. Management believes that this measure is important in evaluating the underwriting performance of the Company and its segments. This measure is also a useful tool to measure the profitability of the Company separately from the investment results and is also a widely used performance indicator in the insurance industry. A reconciliation of the Company's underwriting results can be found in the Condensed Consolidated Financial Statements in the " Notes to Condensed Consolidated Financial Statements (unaudited) Note 3. Segment Information " included under Item 1. "Financial Statements" of this Quarterly Report on Form 10-Q. The Company no longer presents certain non-GAAP measures such as combined ratio and its related components in this Quarterly Report on Form 10-Q for the three and six months ended June 30, 2024, as it believes that as the run-off of our reinsurance portfolios progresses, such ratios are increasingly not meaningful and of less value to readers as they evaluate the financial results of the Company, particularly compared to historical data. While an important metric of success, underwriting income (loss) does not reflect all components of profitability, as it does not recognize the impact of investment income earned on premiums between the time premiums are received and the time loss payments are ultimately paid to clients. Because we do not manage our cash and investments by segment, investment income and interest expense are not allocated to the reportable segments. Certain general and administrative expenses are generally allocated to segments based on actual costs incurred. Non-GAAP Operating Return on Average Adjusted Shareholders' Equity ("Non-GAAP Operating ROACE"): Management uses non-GAAP operating return on average adjusted shareholders' equity as a measure of profitability that focuses on the return to common shareholders. It is calculated using non-GAAP operating earnings (loss) available to common shareholders (as defined above) divided by average adjusted shareholders' equity. Book Value per Common Share and Diluted Book Value per Common Share: Book value per common share and diluted book value per common share are non-GAAP measures. Management uses growth in both of these metrics as a prime measure of the value we are generating for our common shareholders, because management believes that growth in each metric ultimately results in growth in the Company’s common share price. These metrics are impacted by the Company’s net income and external factors, such as interest rates, which can drive changes in unrealized gains or losses on our fixed income investment portfolio, as well as common share repurchases. Ratio of Debt to Total Capital Resources: Management uses this non-GAAP measure to monitor the financial leverage of the Company. This measure is calculated using the total principal amount of debt divided by the sum of total capital resources. Non-GAAP underwriting income (loss) and Non-GAAP Net Loss and LAE: Management has further adjusted underwriting income (loss), as defined above, as well as reported net loss and LAE by excluding the portion of favorable or unfavorable prior year reserve development for which we have ceded the risk under retroactive reinsurance agreements such as the LPT/ADC Agreement. The losses are estimated to be fully recoverable from Cavello and management believes adjusting for this development shows the ultimate economic benefit of the LPT/ADC Agreement on our underwriting results. 47 We believe reflecting the economic benefit of this retroactive reinsurance agreement is helpful for understanding future trends in our operations. Adjusted Total Shareholders' Equity, Adjusted Total Capital Resources, Ratio of Debt to Adjusted Total Capital Resources and Adjusted Book Value per Common Share: Management has adjusted GAAP shareholders' equity by adding to shareholders' equity the unamortized deferred gain on ceded retroactive reinsurance under the LPT/ADC Agreement to shareholders' equity. The deferred gain liability on retroactive reinsurance under the LPT/ADC Agreement represents loss reserves estimated to be fully recoverable from Cavello. The unamortized deferred gain on ceded retroactive reinsurance under the LPT/ADC Agreement includes the aggregate impact of: 1) cumulative increases to losses incurred prior to December 31, 2018 for which we have ceded the risk under the LPT/ADC Agreement; and 2) changes in estimated ultimate losses for certain workers' compensation reserves previously commuted by the Company to AmTrust which are subject to specific terms and conditions pursuant to the LPT/ADC Agreement. As a result, by virtue of this adjustment, management has also adjusted Total Capital Resources and computed the Ratio of Debt to Adjusted Capital Resources and Adjusted Book Value per Common Share. We believe adjusting for this shows the ultimate economic benefit of the LPT/ADC Agreement and reflecting the economic benefit of this non-recurring retroactive reinsurance agreement is helpful to understand future trends in our operations, which will improve the Company's shareholders' equity over the settlement or contract periods, respectively. Alternative investments is the total of the Company's holdings of equity securities, other investments and equity method investments as reported on the Company's Condensed Consolidated Balance Sheets. Certain Operating Measures Refer to " Management's Discussion and Analysis of Financial Condition and Results of Operations " section included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 12, 2024, for a general discussion on " Certain Operating Measures" utilized by the Company. Critical Accounting Policies and Estimates The critical accounting policies and estimates should be read in conjunction with " Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) Note 2. Significant Accounting Policies " included in this Form 10-Q and " Notes to Consolidated Financial Statements Note 2. Significant Accounting Policies " included within the audited Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2023, filed with the SEC on March 12, 2024. There have been no material changes in the application of our critical accounting estimates subsequent to that report. 48 Results of Operations The following table sets forth our selected unaudited Condensed Consolidated Statement of Income data for the three and six months ended June 30, 2024 and 2023: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2024 2023 2024 2023 Gross premiums written $ 8,449 $ 6,875 $ 16,772 $ 7,711 Net premiums written $ 8,339 $ 6,875 $ 16,653 $ 7,635 Net premiums earned $ 12,077 $ 11,039 $ 24,485 $ 20,041 Other insurance revenue, net — 78 46 19 Net loss and LAE (13,971) (11,532) (25,596) (21,347) Commission and other acquisition expenses (4,813) (4,945) (10,406) (9,180) General and administrative expenses (1) (3,058) (3,902) (5,818) (7,048) Underwriting loss (2) (9,765) (9,262) (17,289) (17,515) Other general and administrative expenses (1) (4,821) (2,937) (10,121) (9,899) Net investment income 6,953 10,518 14,653 20,063 Net realized and unrealized investment gains 1,457 1,145 10,207 2,150 Foreign exchange and other (losses) gains — (2,621) 2,053 (5,437) Interest and amortization expenses (4,816) (4,773) (9,631) (8,597) Income tax (expense) benefit (442) 194 (453) 222 Interest in income of equity method investments 1,463 4,803 2,069 4,752 Net loss $ (9,971) $ (2,933) $ (8,512) $ (14,261) (1) Underwriting related general and administrative expenses is a non-GAAP measure. Please refer to "General and Administrative Expenses" below for additional information related to these corporate expenses and the reconciliation to those presented in our unaudited Condensed Consolidated Statements of Income. (2) Underwriting loss is a non-GAAP measure and is calculated as net premiums earned plus other insurance revenue less net loss and LAE, commission and other acquisition expenses and general and administrative expenses directly related to underwriting activities. (3) The Company no longer presents certain non-GAAP measures such as combined ratio and its related components in its results of operation, as it believes that as the run-off of its reinsurance portfolios progresses, such ratios are increasingly not meaningful and of less value to readers as they evaluate our financial results. Net loss Net loss for the three months ended June 30, 2024 was $10.0 million compared to net loss of $2.9 million for the same respective period in 2023. The decrease in our financial results for the second quarter of 2024 compared to the second quarter of 2023 was primarily due to: • an underwriting loss of $9.8 million for the three months ended June 30, 2024 compared to an underwriting loss of $9.3 million in the same period in 2023 largely due to: • adverse prior year loss development ("PPD") of $6.8 million in the second quarter of 2024 compared to adverse PPD of $4.5 million during the same period in 2023, detailed as follows; • Our AmTrust Reinsurance segment had adverse PPD of $5.2 million in the second quarter of 2024 compared to adverse PPD of $3.2 million for the second quarter of 2023. Of the total adverse PPD experienced in this segment for the second quarter of 2024, $5.6 million is recoverable under the LPT/ADC Agreement and will be recognized as future GAAP income over time as recoveries are received under provisions of the LPT/ADC Agreement and the applicable GAAP accounting rules. • Our Diversified Reinsurance segment had adverse PPD of $1.6 million in the second quarter of 2024 compared to adverse PPD of $1.3 million for the second quarter of 2023. • On a current accident year basis, underwriting loss was $3.0 million for the three months ended June 30, 2024 compared to an underwriting loss of $4.8 million for the same period in 2023. • lower total income from investment activities of $9.9 million for the three months ended June 30, 2024 compared to $16.5 million for the same period in 2023 which was comprised of: • net investment income decreased to $7.0 million for the three months ended June 30, 2024 compared to $10.5 million for the same period in 2023; • realized and unrealized investment gains increased to $1.5 million for the three months ended June 30, 2024 compared to investment gains of $1.1 million for the same period in 2023; and • interest in income of equity method investments of $1.5 million for the three months ended June 30, 2024 compared to an interest in income of $4.8 million for the same period in 2023. 49 • corporate general and administrative expenses increased to $4.8 million for the three months ended June 30, 2024 compared to $2.9 million for the same period in 2023; and partly offset by: • nominal foreign exchange and other gains for the three months ended June 30, 2024, compared to foreign exchange and other losses of $2.6 million for the same period in 2023. Net loss for the six months ended June 30, 2024 was $8.5 million compared to net loss of $14.3 million for the same period in 2023. The net increase in our financial results for the six months ended June 30, 2024 compared to 2023 was largely due to: • underwriting loss of $17.3 million in the six months ended June 30, 2024 compared to an underwriting loss of $17.5 million for the same period in 2023 largely due to: • adverse PPD of $13.4 million for the six months ended June 30, 2024 compared to adverse PPD of $8.2 million for the same period in 2023 detailed as follows: • Our AmTrust Reinsurance segment had adverse PPD of $12.5 million in 2024, compared to adverse PPD of $6.1 million in 2023. Of the total adverse PPD experienced in this segment for 2024, $10.6 million is recoverable under the LPT/ADC Agreement and is expected to be recognized as future GAAP income over time as recoveries are received under provisions of the LPT/ADC Agreement and the applicable GAAP accounting rules. • Our Diversified Reinsurance segment had adverse PPD of $0.9 million in 2024, compared to adverse PPD of $2.1 million for the same period in 2023. • on a current accident year basis, an underwriting loss of $3.9 million for the six months ended June 30, 2024 compared to an underwriting loss of $9.4 million for the same period in 2023, primarily due to results in AmTrust Reinsurance segment as discussed further below in the segment analysis. • total income from investment activities was $26.9 million for the six months ended June 30, 2024 compared to $27.0 million in 2023 which was comprised of: • net investment income decreased to $14.7 million for the six months ended June 30, 2024 compared to $20.1 million that was earned for the same period in 2023; • net realized and unrealized investment gains of $10.2 million for the six months ended June 30, 2024 compared to net investment gains of $2.2 million for the same period in 2023; and • interest in income of equity method investments of $2.1 million for the six months ended June 30, 2024 compared to an interest in income of equity method investments of $4.8 million for the same period in 2023. • corporate general and administrative expenses increased to $10.1 million for the six months ended June 30, 2024 compared to $9.9 million for the same period in 2023; and partly offset by: • foreign exchange and other gains of $2.1 million for the six months ended June 30, 2024 compared to foreign exchange and other losses of $5.4 million earned for the same period in 2023. Net Premiums Written The tables below compare net premiums written by our reportable segments, reconciled to the total consolidated net premiums written for the three and six months ended June 30, 2024 and 2023: For the Three Months Ended June 30, 2024 2023 Change in ($ in thousands) Total Total $ % Diversified Reinsurance $ 8,383 $ 6,652 $ 1,731 26.0 % AmTrust Reinsurance (44) 223 (267) (119.7) % Total $ 8,339 $ 6,875 $ 1,464 21.3 % For the Six Months Ended June 30, 2024 2023 Change in ($ in thousands) Total Total $ % Diversified Reinsurance $ 17,202 $ 13,425 $ 3,777 28.1 % AmTrust Reinsurance (549) (5,790) 5,241 (90.5) % Total $ 16,653 $ 7,635 $ 9,018 118.1 % Net premiums written for the three and six months ended June 30, 2024 increased to $8.3 million and $16.7 million, respectively, compared to net premiums written of $6.9 million and $7.6 million for the same respective periods in 2023: • Premiums written in the Diversified Reinsurance segment increased by $1.7 million and $3.8 million for the three and six months ended June 30, 2024 compared to the same respective periods in 2023 due to growth in direct premiums for Credit Life programs written by Maiden LF and Maiden GF. • Premiums written in the AmTrust Reinsurance segment decreased by $0.3 million and increased by $5.2 million for the three and six months ended June 30, 2024 compared to the same respective periods in 2023. The negative written 50 premiums in the prior year six month period reflect cession adjustments of $6.1 million due to the cancellation of cases in one specific program within Specialty Risk and Extended Warranty. Please refer to the analysis below of our Diversified Reinsurance and AmTrust Reinsurance segments for further details. Net Premiums Earned Net premiums earned increased by $1.0 million and $4.4 million for the three and six months ended June 30, 2024, respectively, compared to the same respective periods in 2023 due to higher earned premiums in our Diversified Reinsurance segment driven by growth in Credit Life programs written by Maiden LF and Maiden GF. The tables below compare net premiums earned by our reportable segments, reconciled to the total consolidated net premiums earned, for the three and six months ended June 30, 2024 and 2023: For the Three Months Ended June 30, 2024 2023 Change in ($ in thousands) Total Total $ % Diversified Reinsurance $ 8,229 $ 7,204 $ 1,025 14.2 % AmTrust Quota Share Reinsurance 3,848 3,835 13 0.3 % Total $ 12,077 $ 11,039 $ 1,038 9.4 % For the Six Months Ended June 30, 2024 2023 Change in ($ in thousands) Total Total $ % Diversified Reinsurance $ 17,220 $ 14,675 $ 2,545 17.3 % AmTrust Quota Share Reinsurance 7,265 5,366 1,899 35.4 % Total $ 24,485 $ 20,041 $ 4,444 22.2 % Net premiums earned in the Diversified Reinsurance segment for the three and six months ended June 30, 2024 increased by $1.0 million or 14.2% and $2.5 million or 17.3%, respectively, compared to the same respective periods in 2023 mainly due to growth in Credit Life programs written by Maiden LF and Maiden GF. Please refer to the analysis of our Diversified Reinsurance segment for further discussion. Net premiums earned in the AmTrust Reinsurance segment for the three and six months ended June 30, 2024 increased by $13.0 thousand or 0.3% and $1.9 million or 35.4%, respectively, compared to the same respective periods in 2023 primarily due to negative earned premium adjustments made during the first quarter of 2023. Please refer to the analysis of our AmTrust Reinsurance segment for further discussion. Other Insurance Revenue All of our Other Insurance Revenue is produced by our Diversified Reinsurance segment. Please refer to the analysis below of our Diversified Reinsurance segment for further discussion. Net Investment Income Net investment income decreased by $3.6 million or 33.9% and $5.4 million or 27.0% for the three and six months ended June 30, 2024, respectively, compared to the same respective periods in 2023 largely due to lower interest income earned on our funds withheld balance with AmTrust as claim payments continued to be settled through the funds held receivable. Annualized average book yields increased to 4.8% and 4.7% for the three and six months ended June 30, 2024, respectively, compared to 4.2% and 4.0% for the same respective periods in 2023 due to the following factors: • Floating rate investments comprise 50.5% of our fixed income investments as of June 30, 2024 which enabled the portfolio to respond to the higher interest rate environment more quickly; • Loan to related party carried a higher weighted average interest rate on a balance of $168.0 million which increased to 7.3% for the three and six months ended June 30, 2024, respectively, compared to 7.0% and 6.7% for the same respective periods in 2023; partly offset by: • Interest income on our funds withheld receivable decreased by $2.7 million and $5.2 million for the three and six months ended June 30, 2024, respectively, compared to the same respective periods in 2023. This was the result of a lower average funds withheld balance with AmTrust of $69.1 million in the first half of 2024 compared to $351.8 million for the first half of 2023. Funds withheld receivable from AmTrust earned an annual interest rate of 3.5% for both the three and six months ended June 30, 2024 and 2023, respectively. Average aggregate fixed income assets for the three and six months ended June 30, 2024 decreased by 41.2% and 39.8%, respectively, compared to the same respective periods for June 30, 2023 due to continued run-off of our reinsurance liabilities previously written on prospective risks primarily through the funds withheld receivable. For the three and six months ended June 30, 2024, we experienced negative operating cash flows due to settlement of claim payments to AmTrust as we run-off our existing reinsurance liabilities in the AmTrust Reinsurance segment. The following table details our average aggregate fixed income assets (at cost) and annualized investment book yield for the three and six months ended June 30, 2024 and 2023: 51 For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2024 2023 2024 2023 Average aggregate fixed income assets, at cost (1) $ 502,731 $ 855,506 $ 538,517 $ 894,686 Annualized investment book yield 4.8 % 4.2 % 4.7 % 4.0 % (1) Fixed income assets include available-for-sale ("AFS") securities, cash and restricted cash, funds withheld receivable, and loan to related party. These amounts are an average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements. Net Realized and Unrealized Investment Gains Net realized and unrealized investment gains of $1.5 million and $10.2 million were recognized for the three and six months ended June 30, 2024, respectively, compared to net realized and unrealized investment gains of $1.1 million and $2.2 million for the same respective periods in 2023. Total net realized and unrealized investment gains for the three and six months ended June 30, 2024 and 2023 are summarized in the table below by investment category: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2024 2023 2024 2023 Net realized (losses) gains: Fixed income assets (1) $ (77) $ (786) $ (295) $ (786) Other investments, including equity securities — 10 — 186 Total net realized losses (77) (776) (295) (600) Net unrealized gains: Other investments, including equity securities 1,534 1,921 10,502 2,750 Total net unrealized gains 1,534 1,921 10,502 2,750 Total net realized and unrealized investment gains $ 1,457 $ 1,145 $ 10,207 $ 2,150 (1) Fixed income assets includes AFS securities as well as cash, restricted cash, funds withheld receivable, and loan to related party. Total net realized and unrealized investment gains increased by $0.3 million and $8.1 million for the three and six months ended June 30, 2024, respectively, compared to the same respective periods in 2023 primarily due to unrealized gains in the private equity asset class of $8.1 million during the current year period. Interest in Income of Equity Method Investments Total interest in income of equity method investments of $1.5 million and $2.1 million were recognized for the three and six months ended June 30, 2024, respectively, compared to an interest in the income of equity method investments of $4.8 million and $4.8 million for the same respective periods in 2023. Equity method investments consist of real estate investments of $54.3 million and other investments of $29.4 million as of June 30, 2024. Interest in income of equity method investments for the three and six months ended June 30, 2024 and 2023 is detailed by investment category in the following table: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2024 2023 2024 2023 Other investments $ 1,599 $ 5,072 $ 1,852 $ 5,072 Real estate investments (136) (185) 217 (403) Hedge fund investments — (84) — 83 Interest in income of equity method investments $ 1,463 $ 4,803 $ 2,069 $ 4,752 Net Loss and LAE Net loss and LAE increased by $2.4 million for the second quarter of 2024 compared to the same period in 2023. Net losses were impacted by net adverse PPD of $6.8 million for the second quarter of 2024 compared to net adverse PPD of $4.5 million for the same period in 2023. Excluding adverse development, the current year losses were $7.2 million for the second quarter of 2024 compared to $7.0 million for the second quarter of 2023. Net loss and LAE increased by $4.2 million or 19.9% during the six months ended June 30, 2024 compared to the same respective period in 2023 driven by higher net adverse PPD experienced in the AmTrust Reinsurance Segment. Net loss and LAE was impacted by net adverse PPD of $13.4 million in 2024 compared to net adverse PPD of $8.2 million during 2023. Of the total adverse development in the AmTrust Reinsurance segment experienced to date in 2024, $10.6 million is recoverable under the LPT/ADC Agreement and is expected to be recognized as future GAAP income over time as recoveries are received under the provisions of the LPT/ADC Agreement and the applicable GAAP accounting rules. 52 The cessation of active reinsurance underwriting on prospective risks included the termination of the AmTrust Quota Share and European Hospital Liability Quota Share effective January 1, 2019. The segment net loss development is discussed in greater detail in the individual segment discussion and analysis and is primarily associated with run-off of unearned premium for terminated reinsurance contracts in the AmTrust Reinsurance and Diversified Reinsurance segments. Commission and Other Acquisition Expenses Commission and other acquisition expenses decreased by $0.1 million or 2.7% and increased by $1.2 million or 13.4% for the three and six months ended June 30, 2024, respectively, compared to the same respective periods in 2023. The year-to-date movement was primarily due to lower earned premium adjustments in the AmTrust Reinsurance segment as negative premium adjustments in the first quarter of 2023 resulted in lower commission costs and brokerage fees. Total acquisition expenses decreased as a percentage of net premiums earned for both respective periods due to lower profit commissions incurred based on loss experience of certain programs. Please see further discussion in the individual segment analysis further below. General and Administrative Expenses General and administrative expenses include both segment and corporate expenses segregated for analytical purposes as a component of underwriting income. Total general and administrative expenses increased by $1.0 million or 15.2% and decreased by $1.0 million or 5.9% for the three and six months ended June 30, 2024, respectively, compared to the same respective periods in 2023. The year-to-date decline was mainly driven by lower incentive compensation costs relative to 2023. Corporate expenses increased by $1.9 million and $0.2 million or the three and six months ended June 30, 2024 largely due to higher professional, audit and legal fees. Total general and administrative expenses included lower stock-based awards which were $0.9 million for the six months ended June 30, 2024 compared to $1.1 million for the same period in 2023. General and administrative expenses for the three and six months ended June 30, 2024 and 2023 were comprised of: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2024 2023 2024 2023 General and administrative expenses – segments $ 3,058 $ 3,902 $ 5,818 $ 7,048 General and administrative expenses – corporate 4,821 2,937 10,121 9,899 Total general and administrative expenses $ 7,879 $ 6,839 $ 15,939 $ 16,947 Excluding expenses related to the Company’s IIS business, which is no longer writing new business and has entered into the AmTrust Renewal Rights Agreements, total general and administrative expenses increased 22.4% to $6.5 million and decreased 4.7% to $13.3 million for the three and six months ended June 30, 2024, respectively, compared to $5.3 million and $13.9 million for the same respective periods in 2023 primarily due to higher professional, audit and legal fees for the quarter-to-date period and lower incentive compensation costs for the year-to-date period. Interest and Amortization Expenses Total interest and amortization expenses related to outstanding senior notes issued by Maiden Holdings in 2016 and Maiden NA in 2013 ("Senior Notes") were $4.8 million and $9.6 million for the three and six months ended June 30, 2024, respectively, compared to $4.8 million and $8.6 million for the same respective periods in 2023. This included interest expense incurred on the Senior Notes for the three and six months ended June 30, 2024 and 2023 of $4.8 million and $9.6 million, respectively. The issuance costs related to the Senior Notes were capitalized and are amortized over their effective life using the effective interest method of amortization. Due to a change in the amortization method for the 2013 Senior Notes in the prior year period, amortization expenses were $39.0 thousand and $0.1 million for the three and six months ended June 30, 2024, respectively, compared to amortization expense of $37.0 thousand and income of $0.9 million for the same respective periods in 2023. During the three and six months ended June 30, 2023, the Company realized a gain of $39.9 thousand due to the partial repurchase of the 2013 Senior Notes which was offset against total interest and amortization expenses discussed above. Please refer to " Notes to Condensed Consolidated Financial Statements (unaudited) Note 7. Long Term Debt " for further details on the Senior Notes. The weighted average effective interest rate for the Senior Notes was 7.6% for the three and six months ended June 30, 2024 and 2023, respectively. Foreign Exchange and Other Gains (Losses) Net foreign exchange and other gains of $2.1 million were realized during the six months ended June 30, 2024 compared to net foreign exchange and other losses of $2.6 million and $5.4 million for the same respective periods in 2023. For the six months ended June 30, 2024, net foreign exchange gains of $2.1 million were attributable to the strengthening of the U.S. dollar on the re-measurement of net loss reserves and insurance related liabilities denominated in the British pound and euro. Net foreign exchange losses of $2.6 million and $4.7 million for the three and six months ended June 30, 2023 respectively, were attributable to the weakening of the U.S. dollar on the re-measurement of net loss reserves and insurance related liabilities denominated in British pound and euro. Foreign currency fluctuations are primarily driven by exposures to euro, British pound and other non-USD denominated net loss reserves and insurance related liabilities in excess of foreign currency assets. Our non-USD denominated liabilities at June 30, 2024 included net loss reserves of $262.2 million. Our foreign currency asset exposures at June 30, 2024 included $151.3 million of fixed maturity securities managed by our investment managers who have the discretion to hold foreign 53 currency exposures as part of their total return strategy, $29.3 million of equity method real estate investments denominated in Canadian dollars, as well as $14.5 million of funds withheld receivable. Underwriting Results by Reportable Segment Diversified Reinsurance Segment The underwriting results for our Diversified Reinsurance segment for the three and six months ended June 30, 2024 and 2023 were as follows: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2024 2023 2024 2023 Gross premiums written $ 8,493 $ 6,652 $ 17,321 $ 13,501 Net premiums written $ 8,383 $ 6,652 $ 17,202 $ 13,425 Net premiums earned $ 8,229 $ 7,204 $ 17,220 $ 14,675 Other insurance revenue, net — 78 46 19 Net loss and LAE (5,354) (3,828) (8,278) (6,984) Commission and other acquisition expenses (3,294) (3,514) (7,589) (7,170) General and administrative expenses (2,358) (3,058) (4,448) (5,647) Underwriting loss $ (2,777) $ (3,118) $ (3,049) $ (5,107) Underwriting loss by business unit is detailed in the table below for the Diversified Reinsurance segment for the three and six months ended June 30, 2024 and 2023: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2024 2023 2024 2023 International $ (1,021) $ (1,845) $ (1,676) $ (2,025) GLS (822) (1,147) (910) (2,211) Other run-off lines (934) (126) (463) (871) Underwriting loss $ (2,777) $ (3,118) $ (3,049) $ (5,107) Premiums — The growth in written and earned premium was the result of new Credit Life programs written by Maiden LF and Maiden GF in the three and six months ended June 30, 2024. As discussed in the "Overview" section, Maiden LF and Maiden GF are no longer writing new business and have entered into the AmTrust Renewal Rights Transactions which are expected to cover the majority of Maiden LF and Maiden GF's primary business written in Sweden, Norway, other Nordic countries, the United Kingdom and Ireland. As a result, Maiden LF and Maiden GF should begin to experience declines in premium written during the second half of 2024. Gross premiums written increased by $1.8 million or 27.7% and $3.8 million, or 28.3% for the three and six months ended June 30, 2024, respectively, compared to the same respective periods in 2023. Net premiums written increased by $1.7 million or 26.0% and $3.8 million or 28.1% during the three and six months ended June 30, 2024, respectively, compared to the same respective periods in 2023. Net premiums earned increased by $1.0 million or 14.2% and $2.5 million or 17.3% during the three and six months ended June 30, 2024, respectively, compared to the same respective periods in 2023. Other insurance revenue, net — Other insurance revenue, net includes fee related income generated from our GLS business, fair value changes in underwriting-related derivatives related to certain coverages on retroactive reinsurance contracts written by GLS, and fee income derived from our IIS business not directly associated with premium revenue assumed. 54 The tables below show other insurance revenue by source for the three and six months ended June 30, 2024 and 2023: For the Three Months Ended June 30, 2024 2023 Change ($ in thousands) Changes in fair value of non-hedged underwriting-related derivatives $ — $ (18) $ 18 Other service fee income — 96 (96) Other insurance revenue, net $ — $ 78 $ (78) For the Six Months Ended June 30, 2024 2023 Change ($ in thousands) International $ — $ 97 $ (97) Changes in fair value of non-hedged underwriting-related derivatives — (230) 230 Other service fee income 46 152 (106) Total other insurance revenue, net $ 46 $ 19 $ 27 Net Loss and LAE — Net loss and LAE increased by $1.5 million and $1.3 million for the three and six months ended June 30, 2024, respectively, compared to the same respective periods in 2023 primarily due to adverse prior year loss development in International and other runoff business lines. The net loss and LAE was impacted by net adverse PPD of $1.6 million and $0.9 million for the three and six months ended June 30, 2024, respectively, compared to adverse PPD of $1.3 million and $2.1 million for the same respective periods in 2023. The net adverse PPD for the three months ended June 30, 2024 was primarily from International and other runoff business lines. The adverse PPD for the six months ended June 30, 2024 was due to International and facultative runoff lines partly offset by favorable development in GLS business . The net adverse development for the three and six months ended June 30, 2023 was primarily from an Australian Warranty program and a German Auto program in run-off from our International unit along with development from other runoff business lines and included the recognition of expected credit losses on reinsurance recoverable on unpaid losses. Commission and Other Acquisition Expenses — Commission and other acquisition expenses decreased by $0.2 million or 6.3% and increased by $0.4 million or 5.8% for the three and six months ended June 30, 2024, respectively, compared to the same respective periods in 2023. The year-to-date movement was due to growth in new Credit Life programs written by Maiden LF and GF. Total acquisition costs as a percentage of net premiums earned decreased for both respective periods due to lower profit commissions incurred as a result of recent loss experience on certain programs. General and Administrative Expenses — General and administrative expenses decreased by $0.7 million or 22.9% and $1.2 million or 21.2% for the three and six months ended June 30, 2024, respectively, compared to the same respective periods in 2023 largely due to lower staff incentive compensation. AmTrust Reinsurance Segment The AmTrust Reinsurance segment reported an underwriting loss of $7.0 million and $14.2 million during the three and six months ended June 30, 2024, respectively, compared to an underwriting loss of $6.1 million and $12.4 million for the same respective periods in 2023. The underwriting results for the AmTrust Reinsurance segment for the three and six months ended June 30, 2024 and 2023 were as follows: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2024 2023 2024 2023 Gross premiums written $ (44) $ 223 $ (549) $ (5,790) Net premiums written $ (44) $ 223 $ (549) $ (5,790) Net premiums earned $ 3,848 $ 3,835 $ 7,265 $ 5,366 Net loss and LAE (8,617) (7,704) (17,318) (14,363) Commission and other acquisition expenses (1,519) (1,431) (2,817) (2,010) General and administrative expenses (700) (844) (1,370) (1,401) Underwriting loss $ (6,988) $ (6,144) $ (14,240) $ (12,408) 55 Premiums — The tables below show net premiums written by category for the three and six months ended June 30, 2024 and 2023: For the Three Months Ended June 30, 2024 2023 Change in ($ in thousands) Total Total $ Net Premiums Written Small Commercial Business $ (55) $ (75) $ 20 Specialty Program (30) 1 (31) Specialty Risk and Extended Warranty 41 297 (256) Total AmTrust Reinsurance $ (44) $ 223 $ (267) For the Six Months Ended June 30, 2024 2023 Change in ($ in thousands) Total Total $ Net Premiums Written Small Commercial Business $ (547) $ (158) $ (389) Specialty Program (45) 157 (202) Specialty Risk and Extended Warranty 43 (5,789) 5,832 Total AmTrust Reinsurance $ (549) $ (5,790) $ 5,241 The negative premiums for the six months ended June 30, 2024 and June 30, 2023 reflect the termination of the AmTrust Quota Share and the European Hospital Liability Quota Share as of January 1, 2019 which has resulted in no new business written under these contracts since 2018. The negative gross and net premiums written for the six months ended June 30, 2023 reflect cession adjustments of $6.1 million due to the cancellation of cases in a certain program within Specialty Risk and Extended Warranty. Net premiums earned increased by $13.0 thousand and $1.9 million for the three and six months ended June 30, 2024, respectively, compared to the same respective periods in 2023 due to lower negative premium adjustments during the first half of 2024. The tables below provide detail on net premiums earned in the three and six months ended June 30, 2024 and 2023: For the Three Months Ended June 30, 2024 2023 Change in ($ in thousands) Total Total $ Net Premiums Earned Small Commercial Business $ (55) $ (75) $ 20 Specialty Program (30) 1 (31) Specialty Risk and Extended Warranty 3,933 3,909 24 Total AmTrust Reinsurance $ 3,848 $ 3,835 $ 13 For the Six Months Ended June 30, 2024 2023 Change in ($ in thousands) Total Total $ Net Premiums Earned Small Commercial Business $ (547) $ (158) $ (389) Specialty Program (45) 157 (202) Specialty Risk and Extended Warranty 7,857 5,367 2,490 Total AmTrust Reinsurance $ 7,265 $ 5,366 $ 1,899 Net Loss and LAE — Net loss and LAE increased by $0.9 million and $3.0 million for the three and six months ended June 30, 2024, respectively, compared to the same respective periods in 2023. The movement was driven by higher adverse PPD under the AmTrust Quota Share for the three and six months ended June 30, 2024 and the European Hospital Liability Quota Share for the six months ended June 30, 2024. Net adverse PPD was $5.2 million and $12.5 million during the three and six months ended June 30, 2024, respectively, compared to net adverse development of $3.2 million and $6.1 million for the same respective periods in 2023, incurred primarily within the AmTrust Quota Share and European Hospital Liability Quota Share. 56 The table below shows PPD for the AmTrust Reinsurance segment for the three and six months ended June 30, 2024 and 2023: For the Three Months Ended June 30, For the Six Months Ended June 30, 2024 2023 2024 2023 Prior Year Loss Development adverse (favorable) ($ in thousands) AmTrust Quota Share $ 5,075 $ 2,988 $ 10,075 $ 6,436 AmTrust other runoff 91 183 (226) (340) European Hospital Liability Quota Share 77 6 2,612 (20) Total AmTrust Prior Year Development $ 5,243 $ 3,177 $ 12,461 $ 6,076 Net adverse PPD for the three and six months ended June 30, 2024 was primarily due to the AmTrust Quota Share contract, with European Hospital Liability also producing significant adverse loss development. In the AmTrust Quota Share, U.S. Program business experienced continuing adverse development from construction defect coverage for accident years 2015 to 2018 as new claims emergence reported by AmTrust was again far greater than expected; this was partly offset by continued favorable development within Workers Compensation business for accident years 2014 to 2017. Net adverse loss development on European Hospital Liability Quota Share was primarily driven by emergence of loss data from adverse claim verdicts on older claims prior to 2014, resulting in strengthening of loss development tail on underwriting years 2011 to 2014. Net adverse PPD for the three and six months ended June 30, 2023 was primarily due to General Liability and Commercial Auto Liability partly offset by continued favorable development in Workers Compensation. As of June 30, 2024, the reinsurance recoverable on unpaid losses under the LPT/ADC Agreement was $523.0 million. The LPT/ADC Agreement provides Maiden Reinsurance with $155.0 million in adverse PPD cover over its carried AmTrust Quota Share loss reserves at December 31, 2018. The reinsurance recoverable includes the deferred gain liability under the LPT/ADC Agreement of $78.2 million. At June 30, 2024, there was $76.8 million remaining in available coverage under the LPT/ADC Agreement. For the three and six months ended June 30, 2024, $5.6 million and $10.6 million (2023: $10.7 million and $12.3 million) of total adverse PPD from the AmTrust Quota Share reported in the table above, respectively, are recoverable under the LPT/ADC Agreement that is expected to be recognized as future GAAP income over time as recoveries are received subject to the provisions of the LPT/ADC Agreement and the applicable GAAP accounting rules. To the extent recent adverse loss development in European Hospital Liability continues, the European Hospital Liability Quota Share may have a more significant negative impact on our results than the AmTrust Quota Share, in particular once recoveries from the LPT/ADC Agreement commence and are recognized as GAAP income pursuant to the applicable GAAP accounting rules. Commission and Other Acquisition Expenses — Commission and other acquisition expenses increased by $0.1 million and $0.8 million for the three and six months ended June 30, 2024, respectively, compared to the same respective periods in 2023 driven by lower earned premium adjustments in the AmTrust Reinsurance segment as negative premium adjustments in the first quarter of 2023 resulted in lower commission costs and brokerage fees, partially offset by higher earned premiums in Specialty Risk and Extended Warranty programs. Total acquisition costs increased as a percentage of net premiums earned for both respective periods due to the amortization of deferred acquisition costs upon the recognition of a premium deficiency of $0.1 million in the AmTrust Reinsurance segment for the three and six months ended June 30, 2024. General and Administrative Expenses — General and administrative expenses decreased by $0.1 million and $31.0 thousand for the three and six months ended June 30, 2024, respectively, compared to the same respective periods in 2023. 57 Liquidity and Capital Resources Liquidity Maiden Holdings is a holding company and transacts no business of its own. We therefore rely on cash flows in the form of dividends, advances, loans and other permitted distributions from our subsidiary companies to pay expenses and make dividend payments on our common shares. The jurisdictions in which our operating subsidiaries are licensed to write business impose regulations requiring companies to maintain or meet statutory solvency and liquidity requirements and also place restrictions on the declaration and payment of dividends and other distributions. As of June 30, 2024, the Company had investable assets of $794.2 million compared to $914.3 million as of December 31, 2023. Investable assets include the combined total of our investments, cash and restricted cash including cash equivalents, loan to a related party and funds withheld receivable. Our investable assets decreased by $120.1 million during the six months ended June 30, 2024 due to the continued run-off of our reinsurance portfolio liabilities as claim payments were settled from the funds withheld receivable, which decreased by $111.4 million in the six months ended June 30, 2024. The regulatory and liquidity requirements of the Company's operating segments are discussed in "Management's Discussion and Analysis of Financial Condition and Results of Operations" section included under Item 7 of our Annual Report on Form 10- K for the year ended December 31, 2023, that was filed with the SEC on March 12, 2024. Maiden Reinsurance re-domesticated from Bermuda to Vermont on March 16, 2020. We continue to be actively engaged with the Vermont Department of Financial Regulation ("Vermont DFR") regarding Maiden Reinsurance's longer term business plan, including its investment policy, changes to which require prior regulatory approval as stipulated by Vermont law or the Vermont DFR for any active underwriting, capital management or other strategic initiatives. Maiden Reinsurance has received all necessary approvals required to date by the Vermont DFR, including its activities via GLS and its investment policy which includes: 1) the expansion of approved asset classes for investment reflecting not only Maiden Reinsurance’s solvency position but the material reduction in required capital necessary to operate its business; and 2) the purchase of affiliated securities as demonstrated in previous preference share tender offers and the Exchange. The Investment Policy, as approved and as amended, maintains our established investment management and governance practices. In 2023 and 2024, the Vermont DFR approved an annual dividend program to be paid by Maiden Reinsurance to Maiden NA, with notification to the Vermont DFR as dividends are paid. During the six months ended June 30, 2024, Maiden Reinsurance paid dividends of $12.5 million to Maiden NA (2023: $12.5 million). During the six months ended June 30, 2024 and 2023, Maiden NA did not pay any dividends to Maiden Holdings. We may experience continued volatility in our results of operations which could negatively impact our financial condition and create a reduction in the amount of available distribution or dividend capacity from our regulated reinsurance subsidiaries, which would also reduce liquidity. Further, we and our insurance subsidiaries may need additional capital to maintain compliance with regulatory capital requirements and/or be required to post additional collateral under existing reinsurance arrangements, which could reduce our liquidity. Operating, investing and financing cash flows Our sources of funds historically have consisted of premium receipts net of commissions and brokerage, investment income, net proceeds from capital raising activities, and proceeds from sales, maturities, pay downs and redemption of investments. Cash is currently used primarily to pay loss and LAE, ceded reinsurance premium, general and administrative expenses, and interest expense, with the remainder in excess of our operating requirements made available to our investment managers for investment in accordance with our investment policy as well as for capital management such as repurchasing our shares. Our business has undergone significant changes since 2018. As previously noted, we engaged in a series of transactions that have materially reduced our balance sheet risk and transformed our operations. As a result of these transactions, we are not presently engaged in any active underwriting of new prospective reinsurance business thus our net premiums written will continue to be materially lower and investment income will become a significantly larger portion of our total revenues. We have not written any new retroactive risks through GLS since December 30, 2022, and this will be smaller in relation to the run-off of our prior reinsurance business. During the six months ended June 30, 2024, we experienced negative operating cash flows as we run off the AmTrust Reinsurance segment reserves as shown in the cash flows table further below. We currently expect a trend of positive investing cash flows through 2024, and we expect to use funds from cash and investment portfolios, collected premiums on reinsurance contracts in force or being run-off, investment income and proceeds from investment sales and redemptions to meet our expected claims payments and operational expenses. Claim payments will be principally from the run-off of existing reserves for loss and LAE. A significant portion of those liabilities are collateralized and claim payments will be funded by using this collateral which should provide sufficient funding to fulfill those obligations. The Company’s management believes our current sources of liquidity are adequate to meet its cash requirements for the next twelve months as we generally expect operating cash flows to be sufficiently offset by investing cash flows. While we continue to expect our cash flows to be sufficient to meet our cash requirements and to operate our business, our ability to execute our asset and capital management initiatives are dependent on maintaining adequate levels of unrestricted liquidity and cash flows. Our expanded asset management strategy can be impacted by both investment specific and broader financial market conditions and may not produce the expected liquidity and cash flows these investments are designed to achieve, or the timing thereof may also be impacted by those factors. 58 At June 30, 2024, unrestricted cash, cash equivalents and fixed maturity investments were $52.3 million compared to $73.4 million held at December 31, 2023, a decrease of $21.1 million during the six months ended June 30, 2024. This was primarily driven by $9.6 million for interest payments on the Senior Notes, $16.1 million of net purchases for alternative investments including equity method investments, $2.5 million for common share repurchases made under the Company's authorized repurchase plan and employee tax obligations on vesting of restricted shares as well as payments for general operating expenses of $15.9 million, partly offset by $15.3 million of collateral released by AmTrust through the funds withheld receivable during the six months ended June 30, 2024. Please see the related discussion on investing and financing cash flows below. The table below summarizes our operating, investing and financing cash flows for the six months ended June 30, 2024 and 2023: For the Six Months Ended June 30, 2024 2023 ($ in thousands) Operating activities $ (15,332) $ (63,662) Investing activities 12,650 45,183 Financing activities (2,492) (916) Effect of exchange rate changes on foreign currency cash (182) 233 Total decrease in cash, restricted cash and cash equivalents $ (5,356) $ (19,162) Cash Flows used in Operating Activities Cash flows used in operating activities for the six months ended June 30, 2024 was $15.3 million compared to cash flows used in operating activities of $63.7 million for the six months ended June 30, 2023. Operating cash flows were driven by funds withheld receivable which was primarily used for settlement of claim payments to AmTrust in the six months ended June 30, 2024 and 2023. Cash Flows provided by Investing Activities Cash flows provided by investing activities consist primarily of proceeds from sales and maturities of investments net of purchases. Net cash provided by investing activities was $12.7 million for the six months ended June 30, 2024 compared to net cash provided by investing activities of $45.2 million for the same period in 2023. For the six months ended June 30, 2024, the proceeds from the sales, maturities and calls exceeded the purchases of fixed maturity securities by $29.1 million compared to net proceeds of $34.2 million for the same period in 2023. The size of the fixed income investment portfolio will diminish as claims payments are made for the runoff of existing loss reserves for the terminated AmTrust Quota Share and the European Hospital Liability Quota Share contracts. Cash flows provided by investing activities for six months ended June 30, 2024 also included purchases of alternative investments which exceeded proceeds from the sales and redemptions. There were net purchases of $16.1 million for alternative investments including equity method investments during the six months ended June 30, 2024 compared to net proceeds from the sale and redemption of alternative investments of $11.0 million for the same period in 2023. Cash Flows used in Financing Activities Cash flows used in financing activities were $2.5 million for the six months ended June 30, 2024 compared to $0.9 million for the same period in 2023. During the six months ended June 30, 2024, the Company repurchased 1,099,672 common shares at an average price of $2.06 per share for $2.3 million used under the Company's authorized common share repurchase plan. No dividends on common shares were paid during the six months ended June 30, 2024 and 2023. Our Board of Directors have not declared any common share dividends since the third quarter of 2018. Restrictions, Collateral and Specific Requirements The Company's restrictions, collateral and specific requirements are discussed in " Management's Discussion and Analysis of Financial Condition and Results of Operations " section included under Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2023, that was filed with the SEC on March 12, 2024. Please also refer to " Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) "Note 4.(e) Restricted Cash, Cash Equivalents and Investments " included in this Form 10-Q for details of the fair values of restricted assets at June 30, 2024 and December 31, 2023. At June 30, 2024 and December 31, 2023, restricted cash and cash equivalents and fixed maturity investments used as collateral were $204.5 million and $219.9 million, respectively. This collateral represents 79.6% and 75.0% of the fair value of total fixed maturity investments, cash, restricted cash and cash equivalents at June 30, 2024 and December 31, 2023, respectively. 59 Cash and Investments Historically, the investment of our funds had generally been designed to ensure safety of principal while generating current income. Accordingly, our fixed income investment portfolio is invested in liquid, investment-grade fixed maturity securities which are all designated as AFS at June 30, 2024. Further, as our insurance liabilities continue to run-off and the required capital to operate our business for regulatory purposes decreases, we expanded Maiden Reinsurance’s investment policy which has been approved by the Vermont DFR. Under this modified investment policy, we expanded the range of asset classes we invest in to enhance the income and total returns our investment portfolio produces. We categorize these investments as alternative investments which include " Other Investments ", "Equity Securities" , and "Equity Method Investments" on our Condensed Consolidated Balance Sheets. As of June 30, 2024 and December 31, 2023, our cash and investments consisted of: June 30, 2024 December 31, 2023 ($ in thousands) Fixed maturities, available-for-sale, at fair value $ 219,541 $ 250,601 Equity securities, at fair value 44,388 45,299 Equity method investments 83,794 80,929 Other investments 208,595 182,811 Total investments 556,318 559,640 Cash and cash equivalents 24,807 35,412 Restricted cash and cash equivalents 12,515 7,266 Total Investments and Cash and Cash Equivalents $ 593,640 $ 602,318 In addition to the discussion on Cash and Cash Equivalents and Fixed Maturities that follows herein, please see the " Notes to Condensed Consolidated Financial Statements (unaudited) Note 4. Investments " included under Part I Item 1 " Financial Information" of this Form 10-Q for further discussion on our AFS fixed income securities. Under this revised investment policy, we increased the amount of alternative investments held, and we presently expect to continue to increase the amounts invested therein. Under our investment policy, alternative investments could include, but are not limited to, privately held investments, private equities, private credit lending funds, fixed-income funds, hedge funds, equity funds, real estate (including joint ventures and limited partnerships) and other non-fixed-income investments. However, as our strategic plans continue to develop, we may modify our approach to this investment policy, including possibly reducing our investments and commitments to alternative investments under this policy. For further details on our alternative investments, in addition to the discussion of the investments herein, please see " Notes to Condensed Consolidated Financial Statements (unaudited) Note 4(b). Other Investments, Equity Securities and Equity Method Investments" included under Part I Item 1 " Financial Information " of this Form 10-Q. Our investment performance is subject to a variety of risks, including risks related to general economic conditions, market volatility, interest rate fluctuations, foreign exchange risk, liquidity risk and credit and default risk. Interest rates are highly sensitive to many factors, including governmental monetary policies, domestic and international economic and political conditions and other factors beyond our control. An increase in interest rates could result in significant losses, realized or unrealized, in the value of our investment portfolio. A portion of our portfolio consists of alternative investments that subject us to restrictions on redemption, which may limit our ability to withdraw funds for some period of time after the initial investment. The values of, and returns on, such investments may also be more volatile. We believe our other investments, equity securities and equity method investments portfolio provides diversification against our fixed-income investments and an opportunity for improved risk-adjusted return, however, the returns of these investments may be more volatile and we may experience significant unrealized gains or losses in any particular quarter or year. While we believe the returns produced by these investments will exceed our cost of capital, in particular our cost of debt capital, it is too soon to determine if the actual returns will achieve this objective and it may be an extended period of time before that determination can be made. We may utilize and pay fees to various companies to provide investment advisory and/or management services related to these investments. These fees, which would be predominantly based upon the amount of assets under management, would be included in net investment income. In addition, costs associated with evaluating, analyzing and monitoring these investments may require additional expenditures than traditional marketable securities. The substantial majority of our current and future investments are held by Maiden Reinsurance, whose investment policy was approved by the Vermont DFR. Prior to the Exchange, the Company cumulatively invested $176.4 million in preference shares of Maiden Holdings which have since been extinguished and exchanged for 41,439,348 common shares of the Company pursuant to the Exchange. As a result of the Exchange, there are no preference shares outstanding. As of June 30, 2024, Maiden Reinsurance owns 30.6% of the Company's total outstanding common shares which is eliminated for accounting and financial reporting purposes on our condensed consolidated financial statements. The voting power of Maiden Reinsurance, with respect to its common shares, is capped at 9.5% pursuant to the bye-laws of the Company. Treasury shares include 43,978,595 common shares owned by Maiden Reinsurance consisting of 41,439,348 shares issued as part of the Exchange in 2022 and 2,539,247 common shares that were directly purchased on the open market by Maiden 60 Reinsurance under the Company's authorized repurchase plan to date. The market value of our common shares held by Maiden Reinsurance due to the Exchange and common share repurchases was $90.6 million at June 30, 2024. Cash & Cash Equivalents At June 30, 2024, we consider the levels of cash and cash equivalents held to be within our targeted ranges. During periods when interest rates experience greater volatility, we have periodically maintained more cash and cash equivalents to better assess current market conditions and opportunities within our defined risk appetite, and may do so in future periods. Fixed Maturity Investments The average yield and average duration of our fixed maturities, by asset class, and our cash and cash equivalents (restricted and unrestricted) are as follows at June 30, 2024 and December 31, 2023: June 30, 2024 Original or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Average yield (1) Average duration (2) ($ in thousands) U.S. treasury bonds $ 40,760 $ 1 $ (2) $ 40,759 5.4 % 0.1 U.S. agency bonds – mortgage-backed 28,663 — (3,745) 24,918 4.5 % 6.3 Non-U.S. government bonds 28,848 5 (367) 28,486 3.0 % 0.9 Collateralized loan obligations 63,510 3 (268) 63,245 4.9 % 0.2 Corporate bonds 64,190 — (2,057) 62,133 1.6 % 1.3 Total fixed maturities 225,971 9 (6,439) 219,541 3.8 % 1.4 Cash and cash equivalents 37,322 — — 37,322 1.5 % 0.0 Total $ 263,293 $ 9 $ (6,439) $ 256,863 3.4 % 1.2 December 31, 2023 Original or Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Fair Value Average yield (1) Average duration (2) ($ in thousands) U.S. treasury bonds $ 55,046 $ 8 $ (2) $ 55,052 5.4 % 0.1 U.S. agency bonds – mortgage-backed 29,918 — (3,267) 26,651 4.6 % 6.1 Non-U.S. government bonds 21,219 — (468) 20,751 1.9 % 1.1 Collateralized loan obligations 80,591 — (1,788) 78,803 4.9 % 0.3 Corporate bonds 71,762 — (2,418) 69,344 1.6 % 1.7 Total fixed maturities 258,536 8 (7,943) 250,601 3.8 % 1.3 Cash and cash equivalents 42,678 — — 42,678 2.5 % 0.0 Total $ 301,214 $ 8 $ (7,943) $ 293,279 3.6 % 1.2 (1) Average yield is calculated by dividing annualized investment income for each sub-component of fixed maturity securities and cash and cash equivalents (including amortization of premium or discount) by amortized cost. (2) Average duration in years. During the six months ended June 30, 2024, the yield on the 10-year U.S. Treasury bond increased by 48 basis points to 4.36%. The 10-year U.S. Treasury rate is the key risk-free determinant in the fair value of many of the fixed maturity securities in our portfolio. Despite the increase in risk-free rates during the six months ended June 30, 2024, the change in the market values of our fixed maturity investment portfolio generated net unrealized gains of $1.5 million which increased our book value per common share by $0.02 during the period, largely the result of tightening spreads on collateralized loan obligations. Current outlooks for global monetary policy indicate that quantitative tightening by central banks in the U.S. and globally appear likely to moderate in the near to intermediate term, although central banks have indicated that they maintain the option to either adopt a neutral stance or apply further tightening should data dictate such actions, particularly inflation and labor market data. Recent data suggest that delays in the anticipated moderation of global monetary policy may be ending in the near-term. Our investment portfolios, in particular our fixed maturity portfolio, may be adversely impacted by unfavorable market conditions caused by these measures, which could cause continued volatility in our results of operations and negatively impact our financial condition. Interest rate risk is the price sensitivity of a security to changes in interest rates. Credit spread risk is the price sensitivity of a security to changes in credit spreads. As noted, the fair value of our fixed maturity investments will fluctuate with changes in interest rates and credit spreads. We attempt to maintain adequate liquidity in our fixed maturity investments portfolio with a strategy designed to emphasize the preservation of our invested assets and provide sufficient liquidity for the prompt payment of claims and contract liabilities. Because we collateralize a significant portion of our insurance liabilities, unanticipated or large increases in interest rates could require us to utilize significant amounts of unrestricted cash and fixed maturity securities to provide additional collateral, which could impact our asset and capital management strategy described herein. 61 We also monitor the duration and structure of our investment portfolio as discussed below. As of June 30, 2024, the aggregate hypothetical change in fair value from an immediate 100 basis points increase in interest rates, assuming credit spreads remain constant, in our fixed maturity investments portfolio would decrease the fair value of that portfolio by $4.5 million. Actual shifts in interest rates may not change by the same magnitude across the maturity spectrum or on an individual security and, as a result, the impact on the fair value of our fixed maturity securities may be materially different from the resulting change in value described above. To limit our exposure to unexpected interest rate increases which would reduce the value of our fixed income securities and reduce our shareholders' equity, we attempt to maintain the duration of our fixed maturity investment portfolio combined with our cash and cash equivalents, both restricted and unrestricted, within a reasonable range of the duration of our loss reserves. At June 30, 2024 and December 31, 2023, these respective durations in years were as follows: June 30, 2024 December 31, 2023 Fixed maturities and cash and cash equivalents 1.2 1.2 Reserve for loss and LAE - gross of LPT/ADC Agreement reserves 6.0 5.8 Reserve for loss and LAE - net of LPT/ADC Agreement reserves 2.9 1.6 During the six months ended June 30, 2024, the weighted average duration of our fixed maturity investment portfolio remained at 1.2 years while the duration for the gross reserve for loss and LAE increased by 0.2 years to 6.0 years. The differential in duration between these assets and liabilities may fluctuate over time and in the case of fixed maturities, historically has been affected by factors such as market conditions, changes in asset mix and prepayment speeds in the case of both our U.S. agency mortgage-backed securities ("Agency MBS") and commercial mortgage-backed securities held. At June 30, 2024, the duration of our loss reserves net of the LPT/ADC Agreement was higher than the duration of our fixed maturity investment portfolio. To limit our exposure to unexpected interest rate increases that could reduce the value of our fixed maturity securities and reduce our shareholders' equity, the Company holds floating rate securities whose fair values are less sensitive to interest rates. At June 30, 2024 and December 31, 2023, 50.5% and 40.8%, respectively, of our fixed income investments were comprised of floating rate securities which are detailed in the table below: June 30, 2024 December 31, 2023 ($ in thousands) Fair Value % of Total Fair Value % of Total Floating rate securities Collateralized loan obligations $ 63,245 13.8 % $ 78,803 13.0 % Total floating rate AFS fixed maturities at fair value 63,245 13.8 % 78,803 13.0 % Loan to related party 167,975 36.7 % 167,975 27.8 % Total floating rate securities $ 231,220 50.5 % $ 246,778 40.8 % Total fixed income investments at fair value (1) $ 457,430 $ 605,239 (1) Total fixed income investments at fair value include AFS fixed maturities, cash and restricted cash, funds withheld receivable, and loan to related party. At June 30, 2024 and December 31, 2023, 100.0% of the Company’s U.S. agency bond holdings are mortgage-backed. Total U.S. agency MBS comprise 11.4% of our fixed maturity investment portfolio at June 30, 2024. Given their relative size to our total investments, if faster prepayment patterns were to occur over an extended period of time, this could potentially limit the growth in our investment income in certain circumstances or reduce the total amount of investment income we earn. Additional details on our U.S. Agency MBS holdings at June 30, 2024 and December 31, 2023 were as follows: June 30, 2024 December 31, 2023 ($ in thousands) Fair Value % of Total Fair Value % of Total FNMA – fixed rate $ 14,163 56.8 % $ 15,164 56.9 % FHLMC – fixed rate 8,513 34.2 % 9,099 34.1 % GNMA – variable rate 2,242 9.0 % 2,388 9.0 % Total U.S. Agency MBS $ 24,918 100.0 % $ 26,651 100.0 % At June 30, 2024 and December 31, 2023, 97.7% and 97.8%, respectively, of our fixed maturity investments consisted of investment grade securities. We define a security as being below investment grade if it has an S&P credit rating of BB+ or equivalent, or less. Please see " Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) Note 4. Investments " for additional information on the credit rating of our fixed income investment portfolio. 62 The security holdings by sector and financial strength rating of our corporate bond holdings at June 30, 2024 and December 31, 2023 were as follows: Ratings (1) June 30, 2024 AAA A+, A, A- BBB+, BBB, BBB- BB+ or lower Fair Value % of Corporate bonds portfolio Corporate bonds ($ in thousands) Basic Materials — % — % 8.3 % — % $ 5,159 8.3 % Communications — % — % 4.6 % — % 2,838 4.6 % Consumer — % 21.4 % 27.7 % — % 30,529 49.1 % Energy — % 1.4 % 2.7 % — % 2,567 4.1 % Financial Institutions 2.5 % 22.6 % 0.7 % 8.1 % 21,040 33.9 % Total 2.5 % 45.4 % 44.0 % 8.1 % $ 62,133 100.0 % Ratings (1) December 31, 2023 AAA A+, A, A- BBB+, BBB, BBB- BB+ or lower Fair Value % of Corporate bonds portfolio Corporate bonds ($ in thousands) Basic Materials — % — % 7.6 % — % $ 5,273 7.6 % Communications — % 7.9 % 4.2 % — % 8,392 12.1 % Consumer — % 15.8 % 29.2 % — % 31,186 45.0 % Energy — % 1.2 % 2.6 % — % 2,639 3.8 % Financial Institutions 2.2 % 20.9 % 0.6 % 7.8 % 21,854 31.5 % Total 2.2 % 45.8 % 44.2 % 7.8 % $ 69,344 100.0 % (1) Ratings as assigned by S&P, or equivalent The table below includes the Company’s ten largest corporate holdings at fair value and as a percentage of all fixed income securities held as at June 30, 2024. The Company's ten largest corporate holdings are 100.0% euro denominated, with 55.1% in the Consumer Sector and 29.3% in the Financial Institutions sector. June 30, 2024 Fair Value % of Holdings Rating (1) ($ in thousands) Anheuser-Busch INBEV SA, 2.875%, Due 9/25/2024 $ 10,686 4.9 % A- Chubb Ina Holdings Inc., 1.55%, Due 3/15/2028 6,498 3.0 % A Molson Coors Beverage Co., 1.25%, Due 7/15/2024 5,351 2.4 % BBB Utah Acquisition Sub Inc., 2.25%, Due 11/22/2024 5,319 2.4 % BBB- PPG Industries Inc., 0.875%, Due 11/3/2025 5,159 2.3 % BBB+ FBD Insurance PLC, 5.0%, Due 10/9/2028 5,008 2.3 % NA Kellanova, 1.25%, Due 3/10/2025 4,212 1.9 % BBB BNP Paribas SA, 1.25%, Due 3/19/2025 3,452 1.6 % A- Vodafone Group PLC, 1.875%, Due 9/11/2025 2,838 1.3 % BBB McKesson Corp., 1.5% Due 11/17/2025 2,602 1.2 % A- Total $ 51,125 23.3 % (1) Ratings as assigned by S&P, or equivalent At June 30, 2024 and December 31, 2023, respectively, 100.0% of non-U.S. dollar denominated securities were invested in euro denominated bonds. The net decrease in non-USD denominated fixed maturities is largely due to sales and maturities of euro denominated corporate bonds during the six months ended June 30, 2024. At June 30, 2024 and December 31, 2023, the Company's non-U.S. government issuers have a rating of AA- or higher by Fitch Ratings. The Company does not employ any credit default protection against any of the fixed maturities held in non-U.S. dollar denominated currencies at June 30, 2024 and December 31, 2023, respectively. 63 At June 30, 2024 and December 31, 2023, we held the following non-U.S. dollar denominated securities: June 30, 2024 December 31, 2023 ($ in thousands) Fair Value % of Total Fair Value % of Total Non-USD denominated collateralized loan obligations $ 62,251 41.2 % $ 77,816 46.8 % Non-USD denominated corporate bonds 60,586 40.0 % 67,822 40.7 % Non-U.S. government bonds 28,486 18.8 % 20,751 12.5 % Total non-U.S. dollar denominated securities $ 151,323 100.0 % $ 166,389 100.0 % For our non-U.S. dollar denominated corporate bonds, the following table summarizes the composition of the fair value of our fixed maturity investments at the dates indicated by ratings at June 30, 2024 and December 31, 2023: Ratings (1) June 30, 2024 December 31, 2023 ($ in thousands) Fair Value % of Total Fair Value % of Total A+, A, A- $ 28,192 46.5 % $ 31,810 46.9 % BBB+, BBB, BBB- 27,386 45.2 % 30,630 45.2 % BB+ or lower 5,008 8.3 % 5,382 7.9 % Total non-U.S. dollar denominated corporate bonds $ 60,586 100.0 % $ 67,822 100.0 % (1) Ratings as assigned by S&P, or equivalent Other Investments, Equity Securities and Equity Method Investments Our alternative investments are categorized as other investments, equity securities, and equity method investments as reported on our condensed consolidated balance sheets. These include private equity funds, private credit funds, investments in limited partnerships, as well as investments in direct lending entities and investments in technology-oriented insurance related businesses known as insurtechs. Private equity investments consist of direct investments in privately held entities, investments in private equity funds and private equity co-investments with sponsoring entities. Private credit investments consist of loans and other debt securities of privately held entities or investment sponsors. Our alternative investments as of June 30, 2024 and December 31, 2023 consisted of the following asset categories: June 30, 2024 December 31, 2023 ($ in thousands) Carrying Value % of Total Carrying Value % of Total Privately held common stocks $ 34,359 10.2 % $ 35,272 11.4 % Privately held preferred stocks 9,946 3.0 % 9,946 3.2 % Publicly traded equity investments in common stocks 83 — % 81 — % Total equity securities $ 44,388 13.2 % $ 45,299 14.6 % Real estate investments $ 54,346 16.2 % $ 49,897 16.1 % Other equity method investments 29,448 8.7 % 31,032 10.1 % Total equity method investments $ 83,794 24.9 % $ 80,929 26.2 % Private equity funds $ 56,431 16.8 % $ 47,383 15.4 % Private credit investments 29,806 8.8 % 27,806 9.0 % Privately held equity investments 44,740 13.3 % 38,617 12.5 % Investments in direct lending entities (at cost) 77,618 23.0 % 69,005 22.3 % Total other investments $ 208,595 61.9 % $ 182,811 59.2 % Total alternative investments $ 336,777 100.0 % $ 309,039 100.0 % Our allocation to alternative investments increased to 56.7% of our total cash and investments as of June 30, 2024 compared to 51.3% as of December 31, 2023; and increased to 141.5% of our total shareholders' equity as of June 30, 2024 compared to 124.0% as of December 31, 2023. 64 In addition to the categories described above, we also evaluate our alternative investments by the following asset classes: June 30, 2024 December 31, 2023 ($ in thousands) Carrying Value % of Total Carrying Value % of Total Private Equity $ 95,952 28.5 % $ 82,230 26.6 % Private Credit 56,016 16.6 % 53,673 17.4 % Alternatives 102,003 30.3 % 95,258 30.8 % Venture Capital 22,513 6.7 % 21,220 6.9 % Real Estate 60,293 17.9 % 56,658 18.3 % Total alternative investments $ 336,777 100.0 % $ 309,039 100.0 % For further details on these alternative investments, see " Notes to Condensed Consolidated Financial Statements: Note 4(b) Other Investments, Equity Securities and Equity Method Investments" included under Part I Item 1. "Financial Information" of this Report on Form 10-Q. Within these asset classes, our portfolio broadly consists of the following types of investments: • Private Equity – this asset class consists of both fund investments with leading private equity sponsors and direct equity investments in private companies, sometimes in conjunction with our private equity fund sponsors. As of June 30, 2024, $26.8 million or 27.9% of investments in the private equity asset class consisted of investments in private equity funds and $69.1 million or 72.1% consisted of direct equity investments in private companies. • Private Credit - this asset class consists of both fund investments with leading private credit sponsors and direct credit investments in private companies, sometimes in conjunction with our private credit fund sponsors. Private credit investments in both funds and on a direct basis will typically be secured lending arrangements with non-rated entities, often with additional protective provisions to enhance the security and returns of these investments. As of June 30, 2024, $52.4 million or 93.5% of investments in the private credit asset class consisted of investments in private credit funds and $3.6 million or 6.5% consisted of direct investments in debt securities of private companies. • Alternatives – this asset class consists of structured financing arrangements which typically have incentive features to enhance the Company’s returns. As part of these arrangements, the Company requires collateral or bankruptcy-remote structures to protect its investments. As of June 30, 2024, $100.5 million or 98.5% of investments in the alternatives asset class were direct investments and $1.5 million or 1.5% of the alternatives asset class were invested in funds. One investment in a collateralized direct lending entity of $77.6 million represents 76.1% of this asset class and is discussed further in "Note 4 — Investments" included in Part I Item 1. "Financial Information" in this Quarterly Report on Form 10-Q for the six months ended June 30, 2024. • Venture Capital – this asset class consists of both fund investments with venture capital firms focused primarily on “insurtech” or “fintech” early-stage investments as well as direct investments in start-up companies in this sector, including equity investments in individual companies made in conjunction with our venture capital fund sponsors. As of June 30, 2024, $8.3 million or 36.9% of investments in the venture capital asset class consisted of investments in funds and $14.2 million or 63.1% consisted of direct equity investments in start-up companies. As of June 30, 2024, $13.4 million or 59.3% of our venture capital investments were invested in funds or companies that would be considered “insurtech” investments. • Real Estate – this asset class consists of long-term equity investments in three real estate projects. Two are multi-family residential development projects near major urban centers where workforce housing demand continues to be strong. One investment is a minority stake as a limited partner with a leading property developer with a highly successful track record, where the Company will earn returns from both operating income from rentals and future sales of properties. As of June 30, 2024, the Company has $25.0 million invested in this project and expects investment returns to commence in earnest in 2026 and beyond. The second multi-family residential investment is a majority stake with general partner rights wherein the Company is providing the capital backing to an experienced and successful developer in the subject market, while also taking minority equity stakes in individual projects. To date, this development project has secured five properties in attractive locations and is currently in the zoning and planning stages. As of June 30, 2024, the Company has $29.3 million invested in this project and has commenced earning limited amounts of fee income from this project. As part of its investment, the Company has also provided certain loan guarantees which are discussed in more detail in Note 11 — Commitments, Contingencies and Guarantees included in Part I Item 1. "Financial Information" . We expect fee and operating income and gains from future sales of properties to commence in earnest in 2027 and beyond. Finally, the Company has a minority equity stake in an iconic office building in a major city in the U.S., with an attractive and growing tenant roll. As of June 30, 2024, the Company has $5.9 million invested in this project and to date has earned preferred returns and received certain distributions. In addition to preferred returns, the Company expects to receive future distributions of operating income from this investment. C ertain of the Company's investments in limited partnerships are related to real estate joint ventures with interests in multi-property projects with varying strategies ranging from the development of properties to the ownership of income-producing properties. In certain of these joint ventures, the Company has provided certain indemnities, guarantees and commitments to certain parties such that it may be required to make payments now or in the future. For further details on these financial guarantees, please see " Notes to Condensed Consolidated Financial Statements: Note 11 - Commitments, Contingencies and Guarantees" included under Part I Item 1. "Financial Information" of this Report on Form 10-Q. 65 Investment Results Our investment portfolio returns decreased to $9.9 million and $26.9 million during the three and six months ended June 30, 2024, respectively, compared to $16.5 million and $27.0 million for the same respective periods in 2023 largely due to lower interest income earned on our funds withheld balance with AmTrust as claim payments continued to be settled through the funds held receivable. This was offset by a combination of higher yields on certain fixed income assets along with strengthening returns on our alternative investment portfolio, which increased by 9.0% during 2024, and produced a positive net return of 4.6% during 2024 compared to 3.7% in 2023. The following table summarizes our investment results for the three and six months ended June 30, 2024 and 2023: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2024 2023 2024 2023 Net investment income: Fixed income investments (1) $ 5,765 $ 8,894 $ 12,176 $ 17,345 Cash and restricted cash 211 112 386 418 Other investments, including equities 1,211 1,701 2,417 2,588 Investment expenses (234) (189) (326) (288) Total net investment income 6,953 10,518 14,653 20,063 Net realized (losses) gains: Fixed income assets (1) (77) (786) (295) (786) Other investments, including equities — 10 — 186 Total net realized losses (77) (776) (295) (600) Net unrealized gains: Other investments, including equities 1,534 1,921 10,502 2,750 Total net unrealized gains 1,534 1,921 10,502 2,750 Interest in income of equity method investments: Interest in income of equity method investments 1,463 4,803 2,069 4,752 Interest in income of equity method investments 1,463 4,803 2,069 4,752 Total investment return included in earnings (A) $ 9,873 $ 16,466 $ 26,929 $ 26,965 Other comprehensive income: Unrealized gains on AFS fixed maturity securities and equity method investments excluding foreign exchange (B) $ 487 $ 847 $ 1,505 $ 2,783 Total investment return = (A) + (B) $ 10,360 $ 17,313 $ 28,434 $ 29,748 Annualized income from fixed income assets (2) $ 23,904 $ 36,024 $ 25,124 $ 35,526 Average aggregate fixed income assets, at cost (2) 502,731 855,506 538,517 894,686 Annualized investment book yield 4.8 % 4.2 % 4.7 % 4.0 % Average aggregate invested assets, at fair value (3) $ 827,933 $ 1,108,005 $ 854,243 $ 1,150,740 Investment return included in net earnings 1.2 % 1.5 % 3.2 % 2.3 % Total investment return 1.3 % 1.6 % 3.3 % 2.6 % 1. Fixed income investments include AFS securities as well as funds withheld receivable, and loan to related party. 2. Average aggregate fixed income assets include AFS portfolio, cash and restricted cash, funds withheld receivable, and loan to related party and is computed as an average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements. 3. Average aggregate invested assets include all investments (AFS and alternative investments), cash and restricted cash, loan to related party and funds withheld receivable and is computed as an average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements. 66 The following table details total investment returns for our fixed income investments for the three and six months ended June 30, 2024 and 2023: Fixed Income Investments (1) For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2024 2023 2024 2023 Gross investment income $ 5,976 $ 9,006 $ 12,562 $ 17,763 Net realized losses (77) (786) (295) (786) Change in AOCI (3) 487 847 1,505 2,783 Gross investment returns $ 6,386 $ 9,067 $ 13,772 $ 19,760 Average invested assets, at fair value (4) $ 496,057 $ 841,954 $ 531,335 $ 880,165 Gross Investment Returns 1.3 % 1.1 % 2.6 % 2.2 % Less: Investment expenses $ 56 $ 72 $ 52 $ 145 Net investment returns $ 6,330 $ 8,995 $ 13,720 $ 19,615 Net Investment Returns 1.3 % 1.1 % 2.6 % 2.2 % Our net investment returns increased to 1.3% and 2.6% for the three and six months ended June 30, 2024, respectively, compared to 1.1% and 2.2% for the same respective periods in 2023. This was largely due to floating rate investments that comprised 50.5% of our fixed income investments at June 30, 2024 which enabled the portfolio to respond to the higher interest rate environment more quickly. The loan to related party carried a higher weighted average interest rate on a balance of $168.0 million which increased to 7.3% during the three and six months ended June 30, 2024, respectively, compared to 7.0% and 6.7% for the same respective periods in 2023. This was partly offset by lower interest income on the funds withheld receivable from AmTrust which decreased due to a much lower average ending balance of $69.1 million during the six months ended June 30, 2024 compared to an average balance of $351.8 million for the same respective period in 2023 as claims payments are made using the funds withheld receivable for the runoff of existing loss reserves for the terminated AmTrust Quota Share and the European Hospital Liability Quota Share contracts. Please refer to " Notes to Condensed Consolidated Financial Statements - Note 4 — Investments " included under Part I, Item 1 " Financial Information" of this Quarterly Report on Form 10-Q for further detail on investment returns from fixed income investments held by the Company at June 30, 2024 and 2023. The following table details total investment returns for our alternative investments for the three and six months ended June 30, 2024 and 2023, respectively: Alternative Investments (2) For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2024 2023 2024 2023 Gross investment income $ 2,674 $ 6,504 $ 4,486 $ 7,340 Net realized and unrealized gains 1,534 1,931 10,502 2,936 Gross investment returns $ 4,208 $ 8,435 $ 14,988 $ 10,276 Average invested assets, at fair value (4) $ 331,876 $ 266,051 $ 322,908 $ 270,575 Gross Investment Returns 1.3 % 3.2 % 4.6 % 3.8 % Less: Investment expenses $ 178 $ 117 $ 274 $ 143 Net investment returns $ 4,030 $ 8,318 $ 14,714 $ 10,133 Net Investment Returns 1.2 % 3.1 % 4.6 % 3.7 % 1. Fixed income investments includes AFS securities as well as cash, restricted cash, funds withheld receivable, and loan to related party. 2. Alternative investments includes other investments, equity securities, and equity method investments. 3. Change in accumulated other comprehensive income ("AOCI") excludes unrealized foreign exchange gains and losses. 4. Average invested assets is the average of the amounts disclosed in our quarterly U.S. GAAP consolidated financial statements. 67 The following table details total investment returns for alternative investments by asset class for the six months ended June 30, 2024: June 30, 2024 Private Equity Private Credit Alternative Assets Venture Capital Real Estate Total ($ in thousands) Gross investment income $ 618 $ 1,810 $ 1,456 $ 6 $ 596 $ 4,486 Net realized and unrealized gains (losses) 8,050 2,724 (102) 644 (814) 10,502 Total Investment Return $ 8,668 $ 4,534 $ 1,354 $ 650 $ (218) $ 14,988 Average Investments $ 89,091 $ 54,845 $ 98,631 $ 21,867 $ 58,476 $ 322,908 Gross Investment Returns 9.7 % 8.3 % 1.4 % 3.0 % (0.4) % 4.6 % Annualized Gross Returns 19.5 % 16.5 % 2.7 % 5.9 % (0.7) % 9.3 % The following table details total investment returns for alternative investments by asset class for the six months ended June 30, 2023: June 30, 2023 Private Equity Private Credit Hedge Funds Alternative Assets Venture Capital Real Estate Total ($ in thousands) Gross investment income $ 1,069 $ 1,608 $ 83 $ 4,221 $ — $ 359 $ 7,340 Net realized and unrealized gains (losses) 2,181 178 — (25) 959 (357) 2,936 Total Investment Return $ 3,250 $ 1,786 $ 83 $ 4,196 $ 959 $ 2 $ 10,276 Average Investments $ 62,868 $ 47,279 $ 2,688 $ 86,903 $ 22,032 $ 48,806 $ 270,575 Gross Investment Returns 5.2 % 3.8 % 3.1 % 4.8 % 4.4 % — % 3.8 % Annualized Gross Returns 10.3 % 7.6 % 6.2 % 9.7 % 8.7 % — % 7.6 % During the six months ended June 30, 2024, our annualized gross and net investment returns exceeded our cost of debt capital, and on an inception to date basis through June 30, 2024, active alternative investments have now produced an internal rate of return of 5.2% and a multiple on invested capital of 1.12. This includes investments, primarily in the Alternatives and Real Estate asset classes where we anticipate future returns to emerge but have not as yet recognized either returns or gains based on the development stage of certain investments, which constitute 39.2% of our total alternative assets as of June 30, 2024. Excluding the investments still carried at cost, the internal rate of return was 10.7% with a multiple on invested capital of 1.23. Total returns on active alternative investments by asset class from inception are discussed below in detail as of June 30, 2024: Asset Class June 30, 2024 Total Direct Fund ($ in thousands) Carrying Value IRR MOIC (x) IRR MOIC (x) IRR MOIC (x) Private Equity $ 95,952 10.8 % 1.32 10.2 % 1.33 11.6 % 1.29 Private Credit 56,016 8.0 % 1.15 11.2 % 1.14 7.9 % 1.15 Hedge Funds — 5.2 % 1.12 5.2 % 1.12 — % — Alternatives 102,003 5.1 % 1.12 5.2 % 1.13 (11.1) % 0.90 Venture Capital 22,513 8.3 % 1.20 13.6 % 1.45 (10.5) % 0.82 Real Estate 60,293 (2.5) % 0.96 (2.5) % 0.96 — % — Total $ 336,777 5.2 % 1.12 5.4 % 1.13 8.1 % 1.15 • Private Equity – investment returns in this asset class reflect both dividends and distributions received as well as unrealized gains or losses from adjustments to net asset values in the case of fund investments and market value adjustments in the case of direct equity investments. During the six months ended June 30, 2024, private equity investments produced a total investment return of $8.7 million with fund investments earning $1.0 million while direct investments produced a total investment return of $7.7 million. Inception to date, private equity investments have produced an internal rate of return of 10.8% and a multiple on invested capital of 1.32; fund investments produced an internal rate of return of 11.6% and a multiple on invested capital of 1.29, and direct investments have produced an 68 internal rate of return of 10.2% and a multiple on invested capital of 1.33. No realized gains on private equity investments have been recognized through June 30, 2024. • Private Credit – investment returns in this asset class reflect both distributions received as well as unrealized gains or losses from adjustments to net asset values in the case of fund investments and market value adjustments in the case of direct equity investments. During the six months ended June 30, 2024, private credit investments produced a total investment return of $4.5 million with fund investments earning $4.3 million while direct investments produced a total investment return of $0.2 million. Inception to date, private credit investments have produced an internal rate of return of 8.0% and a multiple on invested capital of 1.15, with fund investments producing an internal rate of return of 7.9% and a multiple on invested capital of 1.15, while direct investments have produced an internal rate of return of 11.2% and a multiple on invested capital of 1.14. • Alternative Assets – investment returns in this asset class largely relate to equity method recognition of income from structured financing arrangements in real assets which utilize bankruptcy-remote structures to protect these investments. During the six months ended June 30, 2024, alternative investments produced a total investment return of $1.4 million. Inception to date, alternative direct investments on real assets have produced an internal rate of return of 38.0% and a multiple on invested capital of 1.44; in total, alternative fund investments have produced an internal rate of return of (11.1)% and a multiple on invested capital of 0.90. We have not recognized any returns (including contractual preferred returns) on other alternative investments as the underlying collateralized investment supporting this direct lending initiative continues to develop; these investments represent 76.1% of the alternative investment class at June 30, 2024. We expect to recognize our preferred returns and contingency gains as these investment develops further or if other collateral we have secured as part of our investment responds sooner, subject to certain conditions. • Venture Capital – investment returns in this asset class primarily reflect unrealized gains or losses from adjustments to net asset values in the case of fund investments and market value adjustments in the case of direct equity investments. During the six months ended June 30, 2024, our venture capital investments produced a total return of $0.7 million entirely from our fund investments. Inception to date, venture capital investments have produced an internal rate of return of 8.3% and a multiple on invested capital of 1.20; venture capital fund investments have produced an internal rate of return of (10.5)% and a multiple on invested capital of 0.82, while direct venture capital investments have produced an internal rate of return of 13.6% and a multiple on invested capital of 1.45. Through June 30, 2024, we realized total gains of $4.8 million on the sale of the Company’s stake in Betterview Marketplace, Inc. ("Betterview") in a cash and stock transaction with Nearmap US, Inc. ("Nearmap"). We now continue to hold shares in Nearmap after completion of this transaction. To date our investment in Betterview has produced an internal rate of return of 27.2% and a multiple on invested capital of 1.74. • Real Estate – investment returns in this asset class include preferred returns and distributions (if any) from plan developers along with limited unrealized gains or losses to date as two of the projects remain in the development phase. As noted earlier, the Company does not expect significant investment returns from these attractive projects for the next several years. To date these investments have produced an internal rate of return of (2.5)% and a multiple on invested capital of 0.96. As our returns in alternative investments continues to increase, we believe our alternative investment portfolio remains well positioned to achieve its targeted longer-term returns. Other Balance Sheet Changes The following table summarizes our other material balance sheet changes at June 30, 2024 and December 31, 2023: ($ in thousands) June 30, 2024 December 31, 2023 Change in $ Change % Deferred commission and other acquisition expenses $ 14,435 $ 17,566 $ (3,131) (17.8) % Funds withheld receivable 32,592 143,985 (111,393) (77.4) % Reserve for loss and LAE 762,264 867,433 (105,169) (12.1) % Unearned premiums 38,377 46,260 (7,883) (17.0) % Deferred gain on retroactive reinsurance 80,506 73,240 7,266 9.9 % The Company's deferred commission and other acquisition expenses decreased by 17.8% and unearned premiums decreased by 17.0% primarily due to the termination of the remaining business under both quota share contracts with AmTrust which have been in run-off since January 1, 2019. Funds withheld receivable decreased by 77.4% primarily due to settlement of reinsurance losses payable under the AmTrust Quota Share as well as $15.3 million of excess collateral released by AmTrust during the six months ended June 30, 2024. The funds withheld receivable balance is likely to be exhausted during the third quarter 2024. The Company's reserve for loss and LAE decreased by 12.1% primarily due to continued settlement of loss reserves for AmTrust Reinsurance contracts. The deferred gain on retroactive reinsurance increased by $7.3 million or 9.9% compared to December 31, 2023 driven by net adverse reserve development of $10.1 million reported for policies under the AmTrust Quota Share as these losses are largely covered by the LPT/ADC Agreement with Cavello. The adverse development was adjusted to remove the impact of favorable loss development on certain Workers Compensation losses that were commuted to AmTrust in 2019 that inure to the benefit of Cavello under the terms of the LPT/ADC Agreement and reduced the deferred gain liability on retroactive reinsurance by $3.2 million for the six months ended June 30, 2024. 69 Capital Resources During the six months ended June 30, 2024, book value per common share decreased by 4.0% to $2.38 and diluted book value per common share decreased by 4.9% to $2.34, compared to December 31, 2023. This was largely due to lower capital resources which decreased by $11.1 million for the six months ended June 30, 2024. Capital resources consist of funds deployed in support of our operations. The following table shows the movement in our capital resources at June 30, 2024 and December 31, 2023: June 30, 2024 December 31, 2023 Change in $ Change (%) ($ in thousands) Common shares at par value $ 1,503 $ 1,497 $ 6 0.4 % Additional paid-in capital 886,972 886,072 900 0.1 % Accumulated other comprehensive loss (32,485) (31,469) (1,016) 3.2 % Accumulated deficit (495,457) (486,945) (8,512) 1.7 % Treasury shares, at cost (122,487) (119,995) (2,492) 2.1 % Total Maiden shareholders' equity 238,046 249,160 (11,114) (4.5) % Senior Notes - principal amount 262,361 262,361 — — % Total capital resources $ 500,407 $ 511,521 $ (11,114) (2.2) % Total capital resources decreased by $11.1 million compared to December 31, 2023 due to the following items: • net increase in additional paid-in capital of $0.9 million due to share-based compensation of $0.9 million; • net decrease in AOCI of $1.0 million which arose due to: (1) net unrealized gains on investment of $1.5 million mainly from our AFS bond portfolio relating to market price movements in the six months ended June 30, 2024, offset by (2) a decrease in foreign currency translation adjustment of $2.5 million in the six months ended June 30, 2024 due to the impact of the U.S. dollar appreciation on the re-measurement of net assets denominated in British pound and euro; • accumulated deficit increased by $8.5 million due to the net loss reported for the six months ended June 30, 2024; and • treasury shares increased by $2.5 million due to $2.3 million of shares repurchased under our authorized common share repurchase plan and $0.2 million of common share repurchases due to tax withholding on vested shares. Please refer to " Notes to Consolidated Financial Statements Note 6. Shareholders' Equity " included under Part II Item 8. " Financial Statements and Supplementary Data" of our Annual Report on Form 10-K for a discussion of the equity instruments issued by the Company as at December 31, 2023. Book value and diluted book value per common share at June 30, 2024 and December 31, 2023 were as follows: ($ in thousands except share and per share data) June 30, 2024 December 31, 2023 Ending common shareholders’ equity $ 238,046 $ 249,160 Proceeds from assumed conversion of dilutive options — — Numerator for diluted book value per common share calculation $ 238,046 $ 249,160 Common shares outstanding 99,811,336 100,472,120 Shares issued from assumed conversion of dilutive options and restricted shares 2,035,634 975,027 Denominator for diluted book value per common share calculation 101,846,970 101,447,147 Book value per common share $ 2.38 $ 2.48 Diluted book value per common share 2.34 2.46 Common Shares On February 21, 2017, the Company's Board of Directors approved the repurchase of up to $100.0 million of the Company's common shares from time to time at market prices. 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 March 20, 2024, an amendment was made to the agreement initially signed on September 29, 2023 between Maiden Holdings and a financial intermediary authorizing the intermediary to purchase common shares from October 30, 2023 until the close of business on September 29, 2024, subject to certain conditions set forth in the agreement. The Company has fulfilled the repurchases under its current Rule 10b5-1(c)(1) trading arrangement. During the three and six months ended June 30, 2024, Maiden Reinsurance repurchased 747,561 and 1,099,672 common shares from the open market at an average price per share of $2.13 and $2.06, respectively, under the Company's share repurchase plan. 70 During the three and six months ended June 30, 2023, Maiden Reinsurance repurchased 299,630 common shares at an average price per share of $2.07 under the Company's share repurchase plan. The Company's remaining authorization is $69.4 million for common share repurchases at June 30, 2024. Senior Notes There were no changes in the Company’s Senior Notes at June 30, 2024 compared to December 31, 2023. The Company did not enter into any short-term borrowing arrangements during the six months ended June 30, 2024. Please refer to " Notes to Condensed Consolidated Financial Statements (unaudited) Note 7. Long Term Debt " included under Part I Item 1 " Financial Information" of this Form 10-Q for a discussion of the Company’s Senior Notes. The 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. As described in " Notes to Condensed Consolidated Financial Statements (unaudited) Note 7. Long-Term Debt " included under Part I Item 1 " Financial Information" of this Form 10-Q, 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 $100.0 million of the Company's Senior Notes from time to time at market prices in open market purchases or as may be privately negotiated. The Company has a remaining authorization of $99.9 million for such repurchases at June 30, 2024. Maiden Holdings does not have any significant operations or assets other than ownership of the shares of our subsidiaries. The dividends and other permitted distributions from Maiden NA (and its subsidiaries) will be our sole source of funds to meet ongoing cash requirements, including debt service payments. Factors that may affect payments to holders of the 2013 Senior Notes include restrictions on the payments of dividends by Maiden Reinsurance to Maiden NA which provides the sole source of income for interest payments on the 2013 Senior Notes. In 2023 and 2024, the Vermont DFR approved an annual dividend program from Maiden Reinsurance to Maiden NA, with notification to the Vermont DFR as dividends are paid. Subsequent to those approvals, Maiden Reinsurance paid total dividends of $56.3 million to Maiden NA as of June 30, 2024. The summarized financial information below has been presented on a combined basis for the issuer Maiden NA and the guarantor Maiden Holdings, excluding all other subsidiaries. Intercompany balances and transactions between Maiden NA and Maiden Holdings, whose information is presented above on a combined basis, were eliminated. Any investment by Maiden NA or Maiden Holdings in subsidiaries that are not issuers or guarantors is not presented in the financial information below. Intercompany balances with subsidiaries that are not issuers or guarantors and any related party transactions were separately disclosed below and are not included in the total assets and total liabilities presented for Maiden NA and Maiden Holdings. The net loss for Maiden NA and Maiden Holdings was due to interest and amortization expenses on the Senior Notes as well as general and administrative expenses. The net loss in Maiden NA also reflects income tax expense incurred for the respective period. Summarized financial information of Maiden NA and Maiden Holdings as of June 30, 2024 and for the three and six months ended June 30, 2024 were as follows: Maiden NA Maiden Holdings ($ in thousands) Total assets $ 9,743 $ 6,168 Total liabilities 151,340 108,042 Amounts due from subsidiaries (not included in total assets above) 5 2,717 Amounts due to subsidiaries (not included in total liabilities above) 12,671 3,219 Related party loan payable (not included in total liabilities above) — 300,792 Total revenue for the quarter-to-date period 1,723 5 Net loss for the quarter-to-date period (1,401) (9,960) Total revenue for year-to-date period 674 9 Net loss for year-to-date period (5,490) (19,199) The ratio of Debt to Total Capital Resources at June 30, 2024 and December 31, 2023 was computed as follows: ($ in thousands) June 30, 2024 December 31, 2023 Senior notes - principal amount $ 262,361 $ 262,361 Maiden shareholders’ equity 238,046 249,160 Total capital resources $ 500,407 $ 511,521 Ratio of debt to total capital resources 52.4 % 51.3 % 71 Off-Balance Sheet Arrangements C ertain of the Company's investments in limited partnerships are related to real estate joint ventures with interests in multi-property projects with varying strategies ranging from the development of properties to the ownership of income-producing properties. In certain of these joint ventures, the Company has provided certain indemnities, guarantees and commitments to ce rtain parties such that it may be required to make payments now or in the future as further described in the " Notes to Condensed Consolidated Financial Statements (unaudited) Note 11. Commitments, Contingencies and Guarantees " included under Part I Item 1 " Financial Information" of this Form 10-Q. Any loss for which the Company could be liable would be contingent on the default of a loan by the real estate joint venture entity for which the Company provided a financial guarantee to a lender. While the Company has committed to aggregate limits as to the amount of guarantees it will provide as part of its limited partnerships, guarantees are only provided on an individual transaction basis and are subject to the terms and conditions of each transaction mutually agreed by the parties involved. The Company is not bound to such guarantees without its express authorization. As discussed above, at June 30, 2024, guarantees of $69.0 million have been provided to lenders by the Company on behalf of the real estate joint venture, however, the likelihood of the Company incurring any losses pertaining to project level financing guarantees was determined to be remote. Therefore, no liability has been accrued under ASC 450-20. 72 Non-GAAP Measures As defined and described in the Key Financial Measures section , m anagement uses certain key financial measures, some of which are non-GAAP measures, to evaluate the Company's financial performance and the overall growth in value generated for the Company’s common shareholders. Management believes that these measures, which may be defined differently by other companies, explain the Company’s results to investors in a manner that allows for a more complete understanding of the underlying trends in the Company’s business. The calculation, reconciliation to nearest GAAP measure and discussion of relevant non-GAAP measures used by management are as follows: Non-GAAP operating (loss) earnings and Non-GAAP diluted operating (loss) earnings per share (attributable) available to common shareholders Non-GAAP operating (loss) earnings and Non-GAAP diluted operating (loss) earnings per share (attributable) available to common shareholders can be reconciled to the nearest U.S. GAAP financial measure as follows: For the Three Months Ended June 30, 2024 2023 ($ in thousands except per share data) Net loss $ (9,971) $ (2,933) Add (subtract): Net realized and unrealized investment gains (1,457) (1,145) Foreign exchange and other losses — 2,621 Interest in income of equity method investments (1,463) (4,803) Change in deferred gain on retroactive reinsurance under the LPT/ADC Agreement 2,287 10,727 Non-GAAP operating (loss) earnings $ (10,604) $ 4,467 Diluted loss per share attributable to common shareholders $ (0.10) $ (0.03) Add (subtract): Net realized and unrealized investment gains (0.01) (0.01) Foreign exchange and other losses — 0.02 Interest in income of equity method investments (0.02) (0.05) Change in deferred gain on retroactive reinsurance under the LPT/ADC Agreement 0.02 0.11 Non-GAAP diluted operating (loss) earnings per share (attributable) available to common shareholders $ (0.11) $ 0.04 For the Six Months Ended June 30, 2024 2023 ($ in thousands except per share data) Net loss attributable to Maiden common shareholders $ (8,512) $ (14,261) Add (subtract): Net realized and unrealized investment gains (10,207) (2,150) Foreign exchange and other (gains) losses (2,053) 5,437 Interest in income of equity method investments (2,069) (4,752) Change in deferred gain on retroactive reinsurance under the LPT/ADC Agreement 7,287 12,300 Non-GAAP operating loss $ (15,554) $ (3,426) Diluted loss per share attributable to common shareholders $ (0.08) $ (0.14) Add (subtract): Net realized and unrealized investment gains (0.11) (0.02) Foreign exchange and other (gains) losses (0.02) 0.05 Interest in income of equity method investments (0.02) (0.04) Change in deferred gain on retroactive reinsurance under the LPT/ADC Agreement 0.07 0.12 Non-GAAP diluted operating loss per share attributable to common shareholders $ (0.16) $ (0.03) Non-GAAP operating loss was $10.6 million for the three months ended June 30, 2024 compared to non-GAAP operating earnings of $4.5 million for the same period in 2023. The non-GAAP operating results were primarily driven by non-GAAP underwriting results in the AmTrust Reinsurance segment as discussed further below. 73 Non-GAAP operating loss was $15.6 million for the six months ended June 30, 2024, compared to non-GAAP operating loss of $3.4 million for the same period in 2023. The non-GAAP operating loss in both respective years were primarily driven by non-GAAP underwriting results in the AmTrust Reinsurance segment as discussed further below. Non-GAAP Underwriting Results The non-GAAP underwriting results for the three and six months ended June 30, 2024 and 2023 are as follows: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2024 2023 2024 2023 Gross premiums written $ 8,449 $ 6,875 $ 16,772 $ 7,711 Net premiums written $ 8,339 $ 6,875 $ 16,653 $ 7,635 Net premiums earned $ 12,077 $ 11,039 $ 24,485 $ 20,041 Other insurance revenue, net — 78 46 19 Non-GAAP net loss and LAE (1) (11,684) (805) (18,309) (9,047) Commission and other acquisition expenses (4,813) (4,945) (10,406) (9,180) General and administrative expenses (3,058) (3,902) (5,818) (7,048) Non-GAAP underwriting loss (1) $ (7,478) $ 1,465 $ (10,002) $ (5,215) (1) Non-GAAP underwriting loss and non-GAAP net loss and LAE for the three and six months ended June 30, 2024 and 2023 are adjusted for prior year reserve development subject to the LPT/ADC Agreement. Please see "Key Financial Measures" section for the definitions of Non-GAAP underwriting loss and net loss and LAE. The non-GAAP underwriting results above are summarized by segment for the three and six months ended June 30, 2024 and 2023 in the table below: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2024 2023 2024 2023 Diversified Reinsurance underwriting loss $ (2,777) $ (3,118) $ (3,049) $ (5,107) AmTrust Reinsurance underwriting loss (6,988) (6,144) (14,240) (12,408) Plus: adverse prior year loss development covered under the LPT/ADC Agreement 2,287 10,727 7,287 12,300 Non-GAAP AmTrust Reinsurance underwriting loss (4,701) 4,583 (6,953) (108) Non-GAAP underwriting loss $ (7,478) $ 1,465 $ (10,002) $ (5,215) The non-GAAP underwriting results have been adjusted for prior year loss reserve development under the AmTrust Quota Share which is fully recoverable from Cavello under the LPT/ADC Agreement to show the ultimate economic benefit to the Company. As shown in the table above, adjusted for the increase in the deferred gain under the LPT/ADC Agreement of $2.3 million and $7.3 million during the three and six months ended June 30, 2024, respectively, the non-GAAP underwriting loss was $7.5 million and $10.0 million, respectively. These results compared to non-GAAP underwriting income of $1.5 million and underwriting loss of $5.2 million when adjusted for the increase in the deferred gain under the LPT/ADC Agreement of $10.7 million and $12.3 million during the three and six months ended June 30, 2023, respectively. The non-GAAP underwriting loss of $7.5 million and $10.0 million for the three and six months ended June 30, 2024, respectively, was primarily driven by: • underwriting results in the AmTrust Reinsurance segment not covered by the LPT/ADC Agreement, specifically the run-off of the AmTrust Quota Share with losses occurring after December 31, 2018; • adverse loss development of $0.1 million and $2.6 million for the three and six months ended June 30, 2024 in the European Hospital Liability Quota Share, which is not covered by the LPT/ADC Agreement; • favorable loss development on commuted Workers Compensation losses which are contractually covered by the LPT/ADC Agreement reduced the deferred gain liability on retroactive reinsurance by $3.2 million for the three and six months ended June 30, 2024; and • underwriting loss of $2.8 million and $3.0 million in the Diversified Reinsurance segment for the three and six months ended June 30, 2024, respectively. Please refer to the respective segment results for AmTrust Reinsurance and Diversified Reinsurance under Item 2. "Management's Discussion and Analysis of Financial Condition and Results of Operations" of this Quarterly Report on Form 10-Q for further details of these underwriting results. Non-GAAP Net Loss and LAE Adjusted for prior year reserve development under the AmTrust Quota Share which is fully recoverable from Cavello under the LPT/ADC Agreement, the non-GAAP net loss and LAE decreased by $2.3 million and $7.3 million for the three and six months ended June 30, 2024, respectively. Adjusted for prior year reserve development under the AmTrust Quota Share which is fully recoverable from Cavello under the LPT/ADC Agreement, the non-GAAP net loss and LAE decreased by $10.7 million 74 and $12.3 million for the three and six months ended June 30, 2023, respectively. These adjustments are reflected in the calculation of non-GAAP Loss and LAE below: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2024 2023 2024 2023 Net loss and LAE $ 13,971 $ 11,532 $ 25,596 $ 21,347 Less: adverse prior year loss development covered under the LPT/ADC Agreement 2,287 10,727 7,287 12,300 Non-GAAP net loss and LAE $ 11,684 $ 805 $ 18,309 $ 9,047 Adjusted Shareholders' Equity, Adjusted Total Capital Resources, Adjusted Book Value per Common Share, and Ratio of Debt to Total Adjusted Capital Resources The Adjusted Shareholders' Equity, Adjusted Total Capital Resources and Adjusted Book Value per Common Share at June 30, 2024 and December 31, 2023 reflect the addition of the unamortized deferred gain under the LPT/ADC Agreement to the GAAP shareholders' equity as depicted in the computations below. The deferred gain under the LPT/ADC Agreement was $78.2 million at June 30, 2024 compared to $70.9 million at December 31, 2023; this increase is attributable to $7.3 million in net loss and LAE recognized as adverse reserve development in the Company's GAAP income statement for AmTrust Quota Share policies covered by the LPT/ADC Agreement. Net adverse development of $10.1 million was reported for policies under the AmTrust Quota Share for the six months ended June 30, 2024. These losses are largely recoverable under the LPT/ADC Agreement and are expected to be recognized as future GAAP income over time as recoveries are received subject to the provisions of both the LPT/ADC Agreement and the applicable GAAP accounting rules. We believe the inclusion of this unamortized deferred gain under these metrics better reflects the ultimate economic benefit of the LPT/ADC Agreement, which will improve the Company's shareholders' equity over the settlement period under the terms of the agreement. Reconciliation of shareholders' equity to Adjusted shareholders' equity and Adjusted Total Capital Resources The following table computes adjusted shareholders' equity and adjusted total capital resources by recognizing the unamortized deferred gain under the LPT/ADC Agreement at June 30, 2024 and December 31, 2023: ($ in thousands) June 30, 2024 December 31, 2023 Change in $ Change % Total shareholders' equity $ 238,046 $ 249,160 $ (11,114) (4.5) % Unamortized deferred gain on LPT/ADC Agreement 78,203 70,916 7,287 10.3 % Adjusted shareholders' equity 316,249 320,076 (3,827) (1.2) % Senior Notes - principal amount 262,361 262,361 — — % Adjusted total capital resources $ 578,610 $ 582,437 $ (3,827) (0.7) % Non-GAAP Operating ROACE Non-GAAP Operating ROACE for the three and six months ended June 30, 2024 and 2023 was as follows: For the Three Months Ended June 30, For the Six Months Ended June 30, ($ in thousands) 2024 2023 2024 2023 Non-GAAP operating (loss) earnings $ (10,604) $ 4,467 $ (15,554) $ (3,426) Opening adjusted shareholders’ equity 325,276 317,775 320,076 329,987 Ending adjusted shareholders’ equity 316,249 326,998 316,249 326,998 Average adjusted shareholders’ equity 320,763 322,387 318,163 328,493 Non-GAAP Operating ROACE (13.3) % 5.6 % (9.8) % (2.1) % Reconciliation of Book Value per Common Share to Adjusted Book Value per Common Share The adjusted book value per common share as reconciled for the recognition of the unamortized deferred gain under the LPT/ADC Agreement at June 30, 2024 and December 31, 2023 was computed as follows: June 30, 2024 December 31, 2023 Book value per common share $ 2.38 $ 2.48 Unamortized deferred gain on LPT/ADC Agreement 0.79 0.71 Adjusted book value per common share $ 3.17 $ 3.19 75 Ratio of Debt to Adjusted Total Capital Resources Management uses this non-GAAP measure to monitor the financial leverage of the Company. This measure is calculated using the total principal amount of debt divided by the sum of adjusted total capital resources as computed in the table above. The ratio of Debt to Adjusted Total Capital Resources at June 30, 2024 and December 31, 2023 was computed as follows: ($ in thousands) June 30, 2024 December 31, 2023 Senior notes - principal amount $ 262,361 $ 262,361 Adjusted shareholders’ equity 316,249 320,076 Adjusted total capital resources $ 578,610 $ 582,437 Ratio of debt to adjusted total capital resources 45.3 % 45.0 % 76 Currency and Foreign Exchange We conduct business in a variety of foreign (non-U.S.) currencies, the principal exposures being the euro and the British pound. Assets and liabilities denominated in foreign currencies are exposed to changes in currency exchange rates. Our reporting currency is the U.S. dollar, and exchange rate fluctuations relative to the U.S. dollar may materially impact our results and financial position. Our principal exposure to foreign currency risk is our obligation to settle claims in foreign currencies. In addition, in order to minimize this risk, we maintain and expect to continue to maintain a portion of our investment portfolio in investments denominated in currencies other than the U.S. dollar. We may employ various strategies (including hedging) to manage our exposure to foreign currency exchange risk. To the extent that these exposures are not fully hedged or the hedges are ineffective, our results of operations or equity may be adversely affected. At June 30, 2024, no such hedges or hedging strategies were in force or had been entered into. We measure monetary assets and liabilities denominated in foreign currencies at period end exchange rates, with the resulting foreign exchange gains and losses recognized in the unaudited Condensed Consolidated Statements of Income. Revenues and expenses in foreign currencies are converted at average exchange rates during the period. The effect of the translation adjustments for foreign operations is included in AOCI. Net foreign exchange gains of $0.0 million and $2.1 million were generated during the three and six months ended June 30, 2024, respectively, compared to net foreign exchange losses of $2.6 million and $4.7 million for the three and six months ended June 30, 2023. The increase in foreign exchange gains for the six months ended June 30, 2024 compared to the same period in 2023 was largely due to an appreciation in the value of the U.S. dollar relative to the euro and the British pound. At June 30, 2024, the decrease in foreign currency translation adjustments of $2.5 million for the six months ended June 30, 2024 was primarily driven by exposures to euro, British pound and other non-USD denominated net loss reserves and insurance related liabilities in excess of foreign currency assets. Our non-USD denominated liabilities at June 30, 2024 included reserve for net loss and LAE of $262.2 million. Our foreign currency asset exposures at June 30, 2024 include $151.3 million of fixed maturity securities managed by our investment managers who have the discretion to hold foreign currency exposures as part of their total return strategy, $29.3 million of equity method real estate investments denominated in Canadian dollars, as well as $14.5 million of funds withheld receivable. Effects of Inflation The anticipated effects of inflation are considered explicitly in the pricing of the insured exposures, which are used as the initial estimates of reserves for loss and LAE. In addition, inflation is also implicitly accounted for in subsequent estimates of loss and LAE reserves, as the expected rate of emergence is in part predicated upon the historical levels of inflation that impact ultimate claim costs. To the extent inflation causes these costs, particularly medical treatments and litigation costs, to vary from the assumptions made in the pricing or reserving estimates, the Company will be required to change the reserve for loss and LAE with a corresponding change in its earnings in the period in which the variance is identified. The actual effects of inflation on the results of operations of the Company cannot be accurately known until claims are ultimately settled. We continue to monitor inflationary impacts resulting from recent government stimulus, sharp increases in demand, labor force and supply chain disruptions, among other factors, on our loss cost trends. Our reserves predominantly consist of workers’ compensation, general liability, and hospital liability business. These long tailed lines of business have been subject to the longer term trend of social inflation, but we have not observed significant impacts for the recently elevated levels of inflation. We proactively analyze available data and we incorporate trends into our loss reserving assumptions to ensure we are considerate of current and future economic conditions. Governmental policy responses to inflation have significantly increased interest rates which, in the short term, have contributed to unrealized losses on our fixed income investments, particularly on our fixed maturity securities. While general economic inflation has eased in recent quarters, there remains uncertainty around the rate and direction of inflation and interest rates and we continue to monitor our liquidity, capital and potential earnings impact of these changes but remain focused on our asset allocation decisions as described in our "Business Strategy" section of Item 2. " Management’s Discussion and Analysis of Financial Condition and Results of Operations - Overview ". Inflation may also result in increased wage pressures for our operating expenses, as we remain focused on being a competitive employer in our market. Currently, while salaries and incentive compensation costs comprise less than one-half of our total general and administrative expenses, continuing inflation and tight labor conditions could have a material impact on our net operating results. Off-Balance Sheet Arrangements At June 30, 2024, we did not have any off-balance sheet arrangements as defined by Item 303(a) (4) of Regulation S-K. Recent Accounting Pronouncements See " Part I, Item 1 - Notes to Condensed Consolidated Financial Statements (unaudited) Note 2. Significant Accounting Policies " for a discussion on recently issued accounting pronouncements not yet adopted. 77