Maiden Holdings (MHLD -0.89%) reported its third-quarter 2015 earnings after the market closed on Wednesday. The Bermuda-based reinsurance company's operating earnings fell from the year-ago period, written premium was flat, and the combined loss ratio ticked up because of an increase in the expense ratio. On the positive side, investment income increased from the year-ago period.
Maiden also announced on Wednesday a dividend increase. It raised its quarterly dividend $0.01, or 7.7%, to $0.14 per share. The dividend will be payable on January 15 to shareholders of record as of January 1. As of the market close on Wednesday, the company's annualized dividend yield was 3.4%.
The overall quarterly numbers
|
Metric |
Q3 2015 |
Q3 2014 |
Growth (YOY) |
|---|---|---|---|
|
Net premiums written |
$599.2 million | $605.5 million | (1%) |
|
Net premiums earned |
$658.5 million | $592.4 million | 11.2% |
|
Net operating earnings |
$25.8 million | $29.3 million | (11.9%) |
|
Net operating earnings per share |
$0.34 | $0.38 | (10.5%) |
|
Operating return on common equity (annualized) |
11.3% | 12.9% | (12.4%) |
|
Net investment income |
$32.8 million | $29.5 million | 11.3% |
| Net income | $22.5 million | $27.8 million | (19.1%) |
| EPS | $0.30 | $0.36 | (16.7%) |
| Loss ratio | 67.2% | 67.2% | 0% |
| Combined ratio | 99.6% | 97.8% | 1.8% |
Data source: Maiden Holdings.
The results by segment
Maiden Holdings reports results for two business segments. The largest is "AmTrust," which consists of reinsurance it provides to AmTrust Financial Services (AFSI). AmTrust was founded by the same team that started Maiden and accounted for 61% of Maiden's net written premiums last year. The company's "Diversified" segment includes reinsurance that it provides to all other insurance companies.
AmTrust's quarterly results
|
Metric |
Q3 2015 |
Q3 2014 |
Growth (YOY) |
|---|---|---|---|
|
Net premiums written |
$435.4 million |
$385.9 million |
12.8% |
|
Net premiums earned |
$465.3 million |
$359.1 million |
29.6% |
|
Combined ratio |
95.5% |
95.6% |
(0.1%) |
Data source: Maiden Holdings.
- The increase in net premiums written reflects continued organic growth and premiums from the acquisition of Tower Group business.
- With double-digit premium growth and an attractive combined ratio (the lower, the better), this segment continues to perform very well.
Diversified's quarterly results
|
Metric |
Q3 2015 |
Q3 2014 |
Growth (YOY) |
|---|---|---|---|
|
Net premiums written |
$163.7 million |
$219.6 million |
(25.4%) |
|
Net premiums earned |
$193.2 million |
$233.0 million |
(17.1%) |
|
Combined ratio |
104% |
98.5% |
5.6% |
Data source: Maiden Holdings.
- Premiums continued to be negatively affected because of Maiden's loss of a large account in the U.S. when the parent company was acquired.
- The combined ratio was up from the year-ago period because of continued (from the second quarter) higher auto liability claims in the U.S., as well as losses stemming from tornado activity in the quarter, which exceeded Maiden's planned catastrophic load. The loss ratio is essentially the same as the second quarter of 2015.
What management had to say
CEO Art Raschbaum said:
Maiden continues to generate solid earnings and double digit operating returns despite a challenging operating environment. Importantly, we continue to enjoy growth in invested assets and strong year-on-year growth in investment income. While comparative year-on-year earnings and underwriting results have been affected by adverse commercial auto experience in the Diversified Reinsurance segment, we are confident that we are effectively responding to these issues. While these actions have adversely affected revenue in the quarter, we remain confident in our ability to expand our Diversified Reinsurance segment in the U.S., with continued growth from existing clients and a strong flow of year-end opportunities. In Europe, we expect the recently announced branded automotive OEM solutions partnership with Allianz to drive growth in the Diversified Reinsurance segment, along with additional Solvency II related initiatives. Our AmTrust segment continues to benefit from strong business growth and strong underwriting performance.
Looking forward
As Raschbaum noted, Maiden continues to generate solid earnings and double-digit operating returns despite a challenging environment. On a positive note, it has a strong flow of year-end opportunities to increase premiums, its AmTrust segment continues to perform well from premium growth and underwriting performance standpoints, and its investment portfolio continues to grow. The challenge remains improving underwriting performance in its Diversified segment to bring down the 104% loss ratio.
