Maiden Holdings Q1 Earnings Fall, Underwriting Remains Profitable
Maiden Holdings 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% |
Data source: Maiden Holdings.
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 segmentMaiden reports results for two business segments. The largest is "AmTrust," which consists of reinsurance it provides toAmTrust Financial Services. 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.
- Segment growth was moderated by the commutation announced in the fourth quarter of 2015 and the completion of the absorption of new business following the acquisition of Tower Group. (Acommutation is an agreement between a reinsured and a reinsurer that terminates the reinsurance obligation and involves the reinsurer paying funds at present value that are not yet due under the reinsurance agreement. Basically, it's like a buyout of the reinsurance policy, which means Maiden won't be on the hook for paying claims in the future for the involved policies.)
- With solid premium growth and an attractive combined ratio (the lower the better), this segment continues to perform well.
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.
- The combined ratio increased from the year-ago period due to continued higher auto liability claims in the U.S. However, it's improved sequentially, as it was 103.9% in the fourth quarter of 2015.
What management had to sayCEO Art Raschbaum emphasized the positive in the press release, while acknowledging the reinsurance market remains "highly competitive":
Looking aheadMaiden'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%.
The article Maiden Holdings Q1 Earnings Fall, Underwriting Remains Profitable originally appeared on Fool.com.
Beth McKenna has no position in any stocks mentioned. The Motley Fool owns shares of AmTrust Financial Services. The Motley Fool recommends Maiden Holdings. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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