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Maiden Holdings (MHLD +0.00%) reported its first-quarter 2016 earnings after the market closed on Wednesday. The Bermuda-based reinsurance company's written premiums ticked slightly down, and net income fell from the year-ago period. Positively, premiums earned and investment income increased, and the company remains profitable from an underwriting standpoint.
Shares of Maiden rose 3.7% on Thursday. Notably for income investors, the stock's annualized dividend yield is 4.5% at the current share price.
Maiden Holdings key quarterly numbers
Metric |
Q1 2016 |
Q1 2015 |
Growth (YOY) |
---|---|---|---|
Net premiums written |
$792.8 million |
$796.9 million |
(0.5)% |
Net premiums earned |
$616 million |
$577.3 million |
6.7% |
Net operating earnings |
$28.3 million |
$26.6 million |
6.4% |
Net operating earnings per share |
$0.37 |
$0.35 |
5.7% |
Operating return on common equity (annualized) |
12.3% |
11.4% |
7.9% |
Net investment income |
$36.3 million |
$28.3 million |
28.5% |
Net income |
$27.2 million |
$32.4 million |
(16)% |
Earnings per share (EPS) |
$0.35 |
$0.41 |
(14.6)% |
Loss ratio |
65% |
64.8% |
0.3% |
Combined ratio |
98.9% |
98.2% |
0.7% |
While the combined ratio (loss ratio plus expense ratio) has ticked up from the year-ago period, Maiden remains profitable from an underwriting standpoint since this ratio is less than 100%. Positively, the combined ratio has decreased on a sequential basis; it was 99.9% in the fourth quarter of 2015.
Long-term investors shouldn't grant too much meaning to analysts' estimates, as Wall Street is focused on the short term. This is especially true with Maiden because there are only two analysts providing projections. That said, analysts' expectations often help explain market reactions. So, it's worth noting that analysts were looking for net operating earnings per share of $0.37 on premiums earned of $609.6 million. Maiden beat premium expectations and met the operating earnings consensus.
Results by segment
Maiden reports results for two business segments. The largest is "AmTrust," which consists of reinsurance it provides to AmTrust Financial Services (AFSI +0.00%). AmTrust was founded by the same team that started Maiden, and it accounted for nearly 71% of Maiden's net written premium and just over 69% of its earned premium in 2015. The "diversified" segment includes reinsurance Maiden provides to all other insurance companies.
AmTrust's quarterly results
Metric |
Q1 2016 |
Q1 2015 |
Growth (YOY) |
---|---|---|---|
Net premiums written |
$506.7 million |
$502.8 million |
7.8% |
Net premiums earned |
$443.8 million |
$384.7 million |
15.4% |
Combined ratio |
95.3% |
94.6% |
0.7% |
Data source: Maiden Holdings.
Diversified's quarterly results
Metric |
Q1 2016 |
Q1 2015 |
Growth (YOY) |
---|---|---|---|
Net premiums written |
$286.1 million |
$294.2 million |
(2.8)% |
Net premiums earned |
$172.3 million |
$192.7 million |
(10.6)% |
Combined ratio |
102.9% |
101.1% |
1.8% |
Data source: Maiden Holdings.
What management had to say
CEO Art Raschbaum emphasized the positive in the press release, while acknowledging the reinsurance market remains "highly competitive":
For the quarter, Maiden generated a 12.3% operating return on common equity, with book value per common share increasing over 12% versus year end 2015. While the reinsurance market remains highly competitive, Maiden continues to focus on disciplined organic growth with existing clients and implementation of new business initiatives in the U.S. and Europe. In the quarter, we benefited from continued strong investment income, profitable underwriting and lower expense relativities. Maiden's gross premiums written grew by 3.6% versus the first quarter of 2015 with continued prospects for disciplined growth for the balance of the year.
Looking ahead
Maiden's results were a mixed bag. Its investment portfolio continues to grow nicely, and it continues to generate double-digit operating returns on equity. As has been the case in the last few quarters, AmTrust continues to perform well from premium growth and underwriting performance standpoints. The challenge remains improving underwriting performance in its diversified segment, which has a combined ratio of 102.9%.