Reinsurance firm Maiden Holdings (MHLD -2.36%) reported its second-quarter earnings results after the bell on August 4. Here's what you need to know.
The key numbers
For the quarter ended June 30, Maiden generated net income of $20.5 million, or $0.27 per diluted share, down 20.5% from a year ago. Net premiums increased 16.4% to $629.6 million.
Net operating earnings, a key measure, were $28.4 million or $0.37 per share. That was flat year over year, and it fell short of Wall Street's $0.42-per-share consensus estimate.
Maiden's shares fell a little over 1% in trading the following day.
The details by segment
Maiden is a Bermuda-based reinsurer, a company that is in the business of insuring other insurance companies. Its biggest client is AmTrust Financial Services (AFSI), which was founded by the same team that created Maiden. AmTrust contributed 61% of Maiden's net premiums earned last year.
These days, Maiden reports results for two business segments, which divide up as you'd expect from that introduction: The "AmTrust" segment, and the everybody-else "Diversified" segment.
The Diversified Reinsurance unit accounted for $144.8 million of Maiden's net premiums during the second quarter, down 15.1% from a year ago. The drop was partially explained by the loss of one key account in the U.S. (the company in question was acquired), and partially by adverse exchange-rate movements.
The unit's "combined ratio," its percentage of premiums earned with losses as a percentage of premiums earned, was 104.1%, up from 97.7% a year ago. (Lower numbers are better.) During the company's earnings call, CEO Art Raschbaum attributed the rise to "adverse developments" in Maiden's U.S excess commercial auto liability reinsurance book. Translation: Claims jumped, and Raschbaum said that Maiden is currently reviewing the business.
In the AmTrust Reinsurance segment, net premiums written rose 30.3% to $484.8 million. Maiden attributed that growth in part to AmTrust's acquisition of some of Tower Group's commercial insurance operations, as well as "continued organic growth." The unit's combined ratio was 95.2%, down from 95.7% a year ago.
Net investment income of $35.2 million in the second quarter was up 25.1% from a year ago.
On the flip side, net loss and loss adjustment expenses of $414.9 million were up 18.2% from a year ago, and Maiden's 67.8% loss ratio was also up from 65.7% a year ago.
Despite the rise in the loss ratio, Maiden's overall combined ratio was still under 100%, at 99.2%. That's up from 98% a year ago.
CEO's outlook: Increasing competition but a solid pipeline
Looking ahead, Raschbaum expects further growth in its international insurance services business, or "ISS." ISS supports consumer insurance businesses in the captive financial units of automakers -- essentially, Maiden partners with insurers to deliver packages of insurance products to automakers. Raschbaum said that Maiden added some new automotive relationships during the quarter, and discussions are ongoing with several additional prospects.
More broadly, he noted that while the U.S. market is becoming more competitive, he expects good pricing trends in niche markets served by AmTrust to remain. Maiden is continuing to see growth from existing client relationships, its deal pipeline is increasing, and its investment portfolio continues to grow.
