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Executives

Art Raschbaum – CEO

John Marshaleck – CFO

Barry Zyskind - Chairman

Ellen Taylor - IR

Analysts

Bijan Moazami - FBR Capital Markets

Kenneth Billingsley - Signal Hill Group

Dan Schlemmer - Fox-Pitt Kelton

Robert Farnam - Keefe, Bruyette & Woods

Maiden Holdings, Ltd. (MHLD) Q3 2009 Earnings Call November 10, 2009 2:00 PM ET

Operator

Welcome to the Maiden Holdings, Ltd. third quarter 2009 earnings conference call. At this time I’ll turn things over to our host, Ms. Ellen Taylor with Maiden Holdings Investor Relations.

Ellen Taylor

Good afternoon everyone and thanks for joining us today. This is Ellen Taylor in Investor Relations. I’m sure by now you’ve all seen our earnings release as well as our announcement regarding the dividend increase. If not you can access those on our website at www.maidenre.com.

Maiden’s CEO Art Raschbaum is going to kick things off for us today and he’ll be followed by our CFO, John Marshaleck. And after their comments we’ll be happy to take your questions. We’re also very pleased to have our Chairman of the Board, Barry Zyskind, join us today to participate in our discussions.

Now before I begin, of course we’ve got a few familiar reminders for you. This call will contain forward-looking statements which are made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. The forward-looking statements are based on the company’s current expectations and beliefs concerning future developments and their potential effects on the company.

There can be no assurance that actual developments will be those anticipated by the company. Actual results may differ materially from those projected as a result of significant risks and uncertainties including non-receipt of the expected payments; changes in interest rates; the effect of the performance of financial markets on investment income and fair values of investments; developments of claims and the effect on loss reserves; accuracy in projecting loss reserves; the effect of competition and pricing environment; changes in demand for the company’s products; the effect of general economic conditions; adverse state and federal legislation; regulations and regulatory investigations into industry practices; developments relating to existing agreements; heightened competition; changes in pricing environments and changes in asset valuations.

The company takes no obligation to publically update any forward-looking statements. Also some of the discussion about the company’s performance today will include reference to certain financial measures that are considered non-GAAP. We provided information that reconciles these measures to GAAP in our earnings release.

And with that I’ll turn it over to Art.

Art Raschbaum

Thank you Ellen, good afternoon and welcome to Maiden Holdings third quarter call. Since the acquisition of the GMAC RE portfolio in November of last year, and each subsequent quarter we see continued strengthening of the earnings power of the company.

I’m very pleased to report that this trend continued in the third quarter with significant progress made in deploying cash and increasing investible assets, also strong growth in book value with significant year on year revenue growth, growth in investment earnings, and solid underwriting performance.

Importantly Maiden continues to successfully execute its focused, disciplined, and differentiated strategy of serving the non-catastrophe needs of regional and specialty insureds. We remain focused on achieving our performance objectives, the 96% combined ratio or better, a return on equity of 15% or better at [run rate], a 10% revenue combined annual growth rate and maintaining low operating expense relativities.

As Ellen mentioned earlier this morning we also announced that the Board approved an 8% increase in our quarterly common dividends to $0.065 per share beginning next year. We believe this is a great indication of the confidence that we all have in our ability to continue to execute on our strategy as well as our prospects for future growth.

Our operating results for the quarter reflect continued underlying momentum in the earnings run rate of the company and operating earnings have steadily climbed in each quarter of this year. Importantly income from operations for the first nine months totaled $72.2 million. That’s significantly greater then any prior nine month period and reflects the substantial increase in the earnings power of the business with the acquisition of the GMAC RE and further business development.

This obviously is before the cost of the interest on the trust preferreds that we issued in connection with the GMAC transaction, and while we value that part of the capital structure we’re certainly constantly evaluating opportunities to take this out at some point in the future and replace it with a more efficient and shareholder friendly option.

We generated basic operating earnings per share of $0.24, that’s an increase of $0.04 per share from the last quarter and on a year to date basis both earnings per share and operating earnings per share compare favorably. One of the key elements critical to strengthening the earnings power of Maiden which we’ve talked about in previous calls, is the full deployment of the significant cash generated through the GMAC RE acquisition as well as the trust preferred issuance.

We’ve spoken over the prior two quarters of our very careful and deliberate approach to investing cash and we’ve reported steady progress. I’m pleased to report today that our invested asset base has now grown from $1.3 billion in the second quarter to over $1.55 billion in the third quarter.

Between the second and the third quarter, invested assets grew by approximately $246.9 million. Our cash balance has been reduced from $462.7 million in the second quarter down to $313.2 million in the third quarter and actually our cash balance net of the securities repurchase contract is $207.8 million.

As a result of the increase in invested assets quarter to quarter net investment income excluding realized gains and losses grew from $15.1 million to $16.8 million. And since funds were deployed throughout the quarter we’ve not yet realized the full earnings power of the investment portfolio. The aggregate yield on investments held at September 30, 2009 was 4.24% and we anticipate continued growth in investable assets consistent with the growth in the underwriting portfolio and also the additional deployment of a portion of the remaining cash.

We also continue to drive growth in shareholders equity which now stands at almost $665 million and increased by over $59 million during the quarter and was up over 30% or nearly $155 million since year-end. This increase has been significantly driven by of course unrealized gains reflecting our high quality asset portfolio, our continued growth in earnings, and the impact on equity from the trust preferred securities.

We believe this growth in shareholders equity positions the company extremely well for the future. From an underwriting perspective our combined ratio for the quarter was 96.3% while the nine month combined stands at 96.1%, essentially on target. You may remember that our stated combined target is a 96% combined ratio or better.

As we’ve stated before we typically see some level of quarter-to-quarter variability in the combined so there’s no significant story here. The combined ratio is very much in line with expectations and it also reflects the different business mix associated with the addition of the GMAC RE portfolio.

You’ve probably seen many reinsurers in the quarter and insureds in the quarter with extremely strong underwriting results. The majority of this activity stems from the relatively cat free summer in North America. As we’ve stated before catastrophe reinsurance is not a focus of Maiden and as a result our underwriting performance remains stable.

Had the cat season been an active one, we would still have anticipated relatively stable underwriting performance which we believe as we’ve said before is a very critical differentiator of our model from our peers. With regard to market conditions we believe that the competitive phase of the underwriting cycle will continue for the foreseeable future. Not only are companies today benefiting from the very benign catastrophe season, but many of them also enjoying the rebound in asset values which further intensifies the overall competitive landscape.

Now despite that reality we’ve got strong confidence in our capabilities and our differentiated strategy that will enable us to continue to enjoy a strong flow of business opportunities. We remain focused on maintaining a very disciplined approach to underwriting in the current market environment but we’re optimistic about our prospects to continue to expand our business.

We believe that Maiden’s specialist approach to the regional and specialty market, our highly competitive operating expense levels, our proprietary collateral trust facility, and our dedicated team of highly capable reinsurance professionals really position the company well to continue to deliver differentiated value to our clients and prospects.

We posted revenue growth of over 200% for the first nine months of the year which reflects not only the addition of the GMAC RE portfolio but the team’s continued focus on developing new client relationships. We generated net written premiums of over $220 million for the quarter which was down some from the second quarter.

Our third quarter does not typically represent a strong period of robust new account growth. In addition for the quarter we did see several accounts where clients reported reduced revenues reflecting the effect of the weaker economic environment. We’ve mentioned that possibility in past discussions around revenue trends, but despite this overall we continue to see significant year on year growth in the US underwriting portfolio.

We delivered earned premiums of nearly $238 million for the quarter and $671 million year to date. While on the subject of business development I’m very pleased to announce the addition of an important new client. As you may have read recently, and in today’s announcement, GMAC announced the sale of its $1 billion plus revenue personal lines business to American Capital Acquisition Corporation.

And many of us at Maiden are quite familiar with the acquired portfolio and we’re very excited to be participating in this significant opportunity. Today we’re announcing that Maiden insurance intends to provide meaningful capital support to ACAC with a multiyear 25% quota share reinsurance agreement. The reinsurance contract will incept at the close of the purchase transaction which is expected some time in the first quarter.

Going forward we anticipate that this transaction will generate annual revenues of over $200 million of additional revenue with underwriting margins consistent with our overall portfolio underwriting target of a combined ratio of 96% or better.

Of course revenue for the first year of that transaction will be dependent on the actual closing date. The addition of this important client is consistent with our strategic focus of providing long-term capital solutions to regional and specialty companies and will help further fuel the earnings power of Maiden Holdings in the coming years.

Of course this transaction is subject to regulatory approval and the final terms of the agreement are under development. Overall the third quarter was a very solid quarter both from a financial perspective and from a business development perspective. The integration of the GMAC RE business is essentially complete and we continue to make significant progress across all of our key business objectives and metrics.

This coupled with the ACAC transaction as well as the previously announced extension of our agreement with AmTrust really set the stage for continued growth and increased earnings as we look towards next year and beyond. I’d like to turn the discussion over now to our Chief Financial Officer, John Marshaleck, who will focus on a few of our key financial highlights for the quarter.

John Marshaleck

Thanks Art, good afternoon, and thank you for being with us today. I’m happy to provide you with some additional detail on our results this quarter. I think it is important to once again remind you the third quarter and year to date results last year did not include the business acquired in the GMAC RE acquisition, so that the year over year comparisons are somewhat distorted.

In some cases I will provide a reference to our second quarter 2009 results even though there is some seasonality effecting the quarter-to-quarter trends because it may provide a more useful reference point.

As you know Maiden earned $0.21 a share on a GAAP basis compared with a loss of $0.46 in the third quarter of 2008 and $0.23 in the second quarter of this year. Our GAAP net income for the quarter of $15 million was lowered by the net cost of intangible amortization, realized investment losses, and foreign exchange adjustments versus our operating earnings for the quarter of $16.5 million.

Our operating earnings for the quarter reflected growth of over $1.1 million compared to the quarter a year ago and $2.5 million from the second quarter of this year. Year over year reported earnings for the quarter compared very favorably with 2008 which included significantly higher realized investment impairments and a net loss of $27.5 million. Our net premium written for the quarter was $221.4 million. We generated net earned premium of $237.4 million during the quarter, up significantly from the $113.6 million in the third quarter of 2008 driven by the addition of the GMAC RE business and other growth.

Net earned premium grew $1 million from the second quarter of this year. On a year to date basis we generated net earned premium of $671.3 million, up 162% over last year’s results of $256.2 million. Given the current market headwinds we expect our net written premium for the full year 2009 to be in the $1 to $1.2 billion range.

As Art mentioned we are continuing to invest our excess cash with a goal of driving and improving investment income. As a result of the increase in invested assets, quarter-to-quarter net investment income grew 11% from $15.1 million to $16.8 million. Now this reflects the additional excess cash deployed of approximately $230 million.

At the end of September the yield on the fixed income portfolio stood at 4.2%, 61% of our fixed maturities portfolio was government issued or backed and 39% represented corporate. Of this 87% were single A rated or better with 65% rated AAA.

The average duration of the portfolio for the quarter was 2.7 years and approximately 26% of our investments represented floating rate securities. Our cash balance net of [inaudible] is $208 million at the end of the quarter, therefore we have approximately $100 to $150 million of excess cash to deploy, and we are optimistic that we will fully invest this by the end of the year.

Thus far this year our net investment income has nearly doubled to $46.2 million versus $24.3 million for the same period last year. Additionally our realized investment losses were only $66,000 this quarter compared to $42.5 million a year ago and modest gains of $1.5 million last quarter.

Our expense levels increased this quarter in line with our premium increased from the GMAC RE transaction and other growth. For the quarter we generated income from operations of $25.6 million and $72.1 million on a year to date basis. This compares to a loss of $27.2 million in the third quarter and $845,000 on a year to date basis last year.

This again demonstrates our ability to leverage our solid capital position and maintain our disciplined underwriting standards. Our net income for the nine months was $44.3 million, up from a loss of $1.2 million in 2008. So to recap, we generated healthy operating earnings of $16.5 million for the quarter and $44.3 million thus far this year of operating earnings per share of $0.23 for the quarter and $0.68 year to date.

We continue to deliver growth in shareholders equity which stood at nearly $665 million at quarter end with book value per share up 9.8% from the second quarter to $9.45 per share. Despite the competitive landscape and economic environment we continue to deliver underwriting results within our target range and we continue to focus on growing our investment income as we deploy our remaining excess cash.

Thank you.

Art Raschbaum

Thanks John, I’d like to conclude by again emphasizing the significant progress that continued at Maiden. In the quarter we produced continued strengthening of operating earnings, significant growth in shareholders equity, maintained our underwriting discipline, all while laying a solid foundation for the future.

We believe that today’s dividend announcement is certainly solid recognition of the strength in earnings power of the company and we remain intently focused on creating significant value for our customers and our shareholders.

Ellen Taylor

We are now ready to take some questions.

Question-and-Answer Session

Operator

(Operator Instructions) Your first question comes from the line of Bijan Moazami - FBR Capital Markets

Bijan Moazami - FBR Capital Markets

I have a number of questions relating to the transaction that you made with ACAC I assume this is a high frequency, lower severity personal lines business, so is the capital requirement on this business quite different then the capital requirement on the casualty lines that you underwrite.

Art Raschbaum

Yes, I think that if you think of the characteristics of the business and its been a fairly stable performing business we would anticipate that on a risk adjusted basis there would be less capital required to support this transaction.

John Marshaleck

I would agree and I think, we have some of this type of business in our portfolio already so it is not at certainly a change from our existing portfolio.

Bijan Moazami - FBR Capital Markets

Could you just walk us through why you wouldn’t need any additional level of capital to support almost $400 million of additional business.

John Marshaleck

We have significant growth in our capital base since the beginning of the year and that alone would provide enough capital I think to support this transaction. We expect to grow again in another quarter and as this business comes on in 2010 more then likely its going to come in the second quarter again we’ll have some additional capital generated through the first quarter and as the business comes on we should be generating capital as well.

So we feel pretty comfortable with our position today and as we expect that to grow.

Art Raschbaum

There’s no incoming portfolio on this so we think that our capital base will grow organically through earnings and that in addition to the fact that as John said before, we’ve had a significant amount of unrealized growth in our book value as well. We feel like we’re in pretty good shape there.

Barry Zyskind

We’re very mindful of the strong rating that [inaudible] and its something that we make sure that we want to keep the strong rating and its something that when we look at the capital model we feel very good about the position we’re in now that we could take on this business and keep a strong rating.

Bijan Moazami - FBR Capital Markets

Obviously the duration of these liabilities is much shorter then the kind of business you wrote in the past, so should it naturally target, you shouldn’t target a lower commodity ratio on this book of business then you are targeting for the rest of your book.

Art Raschbaum

As you know our book of business is a mix of different elements so longer tail business we have a bit higher combined in the average really, that 96 combined target. We would expect that this portfolio of business will be at or below the 96 given as you correctly point out the relatively short duration liabilities. We were going to make our return on this business on underwriting.

Bijan Moazami - FBR Capital Markets

Have you negotiated terms and conditions on the contract quite yet. We know that this is a multiyear contract but have you decided if its going to be similar to the transaction you have with AmTrust for three years or is this going to shorter contract terms then this.

Art Raschbaum

I would anticipate a multiyear contract. I think its in everybody’s best interest that it be a stable source of capital for an extended period of time. So while we haven’t exactly refined the exact terms I don’t think it would be unrealistic to expect something along the lines of the initial AmTrust contract.

Operator

Your next question comes from the line of Kenneth Billingsley - Signal Hill Group

Kenneth Billingsley - Signal Hill Group

Just to follow-up on the last question there regarding the agreement that you’ll be signing, with the seating commission be as favorable to them as it was to AFSI.

Art Raschbaum

Well its going to be reflective of sort of their cost structure and in fact with the margin we need to underwrite, generate a good return on the business, so its going to be different I would say from AFSI because the portfolio is different. So can’t be much more specific about what the actual terms will be other then to say, like we do any auto portfolio we look at the cost characteristics, we look at the expected loss characteristics and we blend the structure that produces what we believe is a reasonable risk adjusted return for the business we produce.

Kenneth Billingsley - Signal Hill Group

I understand and I guess I should have asked the question a little better, when the original agreement with AFSI was announced, it was kind of a win win for both of you at the time. Is it going to be on more even terms now that you are on fairly solid footing to do this transaction.

Art Raschbaum

Yes, I would say we’ll be on much more even terms on this transaction.

Kenneth Billingsley - Signal Hill Group

Regarding that line of business you said you have a little bit of this type of business already on your books, who at Maiden will have the responsibility since this is going to be a large new chunk of business coming in.

Art Raschbaum

I want to go back a second to something you said about the AmTrust Maiden, recognize it in the AmTrust Maiden transaction, this is underwritten by the Bermuda company. And its country of domicile it does not have an income tax associated with it so the difference, the variance in the seating commission is to some extent reflective of that difference. So its not necessarily that we’re both getting different economics from the business, its that its more reflective of the fact that our portfolio is reflective of the true economics of our business.

John Marshaleck

And just to add further to that, we have some as I mentioned we have some of this business in our portfolio. We’ve been writing this type of business for a number of years now and our financial models take into account the payout of the losses, the type of business obviously, the mix of business is really important so its really not that different from what our existing portfolio contains or has contained over the past.

Art Raschbaum

The business will be managed by Maiden Insurance in Bermuda and will use our technical infrastructure here including our actuality sources, our technical underwriting sources. We will also probably most likely leverage Maiden Global Services to provide some of the onsite audit and client support activity as well.

Kenneth Billingsley - Signal Hill Group

Will you need to hire new people or will you be able to do it internal with the group you have.

Art Raschbaum

No we can do this internally.

Kenneth Billingsley - Signal Hill Group

And this is something you obviously were very familiar with from before. Has there been some changes since you’ve been away from this book for a little bit of time now. Is there anything that’s changed or different over the last year and a half from either a competitive standpoint, pricing, just kind of market trends.

Art Raschbaum

No I don’t think there are any significant changes. Its really been if you think about when the Maiden transaction closed, its been just barely a year so don’t see any significant changes in the underlying business. Its been a business too that to give you a little color on the business, that has generated very stable underwriting results over market cycles.

And this was from my experience there and they’ve been a fairly good producer of solid underwriting results. They’ve got very strong pricing analytic capabilities. We think they’re among best in class and in a business where you have to have strong multi variant pricing capabilities they’re among the best, we think. So one of the challenges as you heard the announcement, the original announcement, AmTrust is bringing a significant amount of technology capability to this group. One of the Achilles heels of this business and its effected the expense side of the business has been the fact that they have multiple legacy platforms.

The idea is to build a single platform. That will generate significant efficiencies so, the theory is keep maintaining the same disciplined approach on the loss ratio but then attacking the cost side to improve the efficiency of the business.

Kenneth Billingsley - Signal Hill Group

What was the combined ratio, average over the last two years.

Art Raschbaum

I guess I would say that it tends to get, this is a sub of a larger company. It was not a GAAP reporter on a standalone basis so but they have been combined that have been under 100, I can assure you of that.

Kenneth Billingsley - Signal Hill Group

And under 100 even with the expense inefficiencies.

Art Raschbaum

Yes, which is where we think the great leverage is.

Kenneth Billingsley - Signal Hill Group

Just a couple more questions, on the loss ratio side, we’ve seen a few companies have already started to release some reserves from near years, like 2007 early 2008, are there any reserve adjustments at all in this number.

Art Raschbaum

No, remember that the way our business is managed there, it’s the business that came over, the portfolio of reserves that came over, under portfolio accounting we can’t take the economic benefit out of that. That has to be amortized over time so we’re generally living off of our more recent underwriting results.

Kenneth Billingsley - Signal Hill Group

Very good, and on the balance sheet for restricted cash, that number dropped quarter over quarter from a 312 to 219, just to make sure I understand, I believe that that restricted cash was, was that part of the assets that have been put up for the benefit of your customers, is that correct, is that what that line item is.

Art Raschbaum

That’s correct, those are assets that are in trust so for the benefit of our clients, of course we generate all the earnings out of those trust accounts but we do segregate them on the balance sheet.

Kenneth Billingsley - Signal Hill Group

So you can invest them how you wish.

Art Raschbaum

Absolutely.

John Marshaleck

And we do replace that with securities from time to time as well, so the balances will change if a maturity occurs during the quarter there could be a cash balance sitting in there at the end of the quarter but more then likely that’s going to be replaced with, and is replaced with a security.

Kenneth Billingsley - Signal Hill Group

So my question is since, it seemed like that was a selling point for some of your customers early on, but that balance has dropped from about $410 million at the end of 2009 to 219 now. Are customers not demanding it, are you not pushing that, I’m just trying to get an idea of what’s the shift that’s going on regarding the way you sold that, sold yourself.

John Marshaleck

No, we’re still providing collateral through the trust and all that’s really happening is the balances that could be in that restricted cash become, they’re replaced with securities so the balance really isn’t representative of anything that’s really going on on an overall basis. It really happens to do with maturities in the individual trust. So you’ll see changes from time to time, does not reflect any change in what we’re doing with the collateral.

Kenneth Billingsley - Signal Hill Group

So those segregated assets may actually be in the fixed investment line item as well, is that correct.

John Marshaleck

Yes.

Kenneth Billingsley - Signal Hill Group

Okay thank you, congratulations on the quarter.

Operator

Your next question comes from the line of Dan Schlemmer - Fox-Pitt Kelton

Dan Schlemmer - Fox-Pitt Kelton

Question on, you were just talking about the development, and I understand it doesn’t flow through, prior development doesn’t flow through in the way it would if the reserves were not acquired through acquisition, but you still have, the development does eventually hit your bottom line if I understand the accounting correct, it just happens over time as opposed to in the quarter. Can you give us an update on when you’ve most recently reviewed those reserves and what you’re seeing and whether that is going to end up with some favorable or adverse numbers.

John Marshaleck

We do analyze our reserves quarterly, we do an actuarial review each quarter, and we have seen some positive development in the older years in the portfolio coming over. But we need to amortized that so there is a small portion amortized in the quarter but its amortized over the payment of the losses so that’s going to flow into the next few years actually, the positive [inaudible] that we’ve seen so far.

Dan Schlemmer - Fox-Pitt Kelton

And then just to be clear then on the 69.6 in the current quarter that has no prior development from the reserves brought over in the acquisition but you’re also saying it has no prior development from prior quarters, is that accurate.

John Marshaleck

Well the current periods, since the portfolio moved over, there has been no development plus or minus, that’s pretty much on our loss [inaudible]. There is some amortization of the favorable development from the portfolio that we purchased from GMAC RE. But it’s a smaller amount.

Art Raschbaum

Its not an exact science every quarter, we get some reserve movement, but its not significant, its not $10 million, $20 million, its not a big number.

Dan Schlemmer - Fox-Pitt Kelton

And then on your top line, looking at the net written, its down quarter over quarter I was wondering if you can break that out for us a little bit. Are you seeing it on rate or is it more just on business renewing or on the portions that are being seated to Maiden or what’s driving that down, just the quarter over quarter comparison and to the extent its also some seasonality etc., if you can break that down for us.

Art Raschbaum

Sure I can give you a rough approximation, we tend to think, remember that a big chunk of our business is reporting basis, sort of contract business so we have an expectation of how much our clients are going to write in each quarter but then when we finally get their settlements, those amounts are either going to be higher, lower or on the money.

And we talked a little bit about this in the last quarter that the trend hadn’t shown that any economic effect was influencing the amount of revenue we were seeing from clients on our sort of active reporting basis contracts. We did actually see some movement in this quarter.

There could be seasonality to that number but we also have seen in some of our audit activity some evidence that exposure units are down, just given, particularly on commercial business where you just see parts of the country where you don’t generate the same level of exposure units because businesses are smaller.

So we see that effecting it. There’s always a normal amount of churn in the business where we may not come to terms with a client and we non renew, a little bit of that activity in the quarter but I wouldn’t say, I’d say, if I was going to focus on any one area would just be those reporting basis contracts coming in, little less then our expectation.

Dan Schlemmer - Fox-Pitt Kelton

And then you said you just made a comment about non renewing and maybe if you can talk about that a little bit and in particular you’re right at the upper bound, the 96% the upper bound of what you’re targeting, are you getting into a situation where its tougher to renew contracts then it was previously.

Art Raschbaum

Its interesting we’ve got some interesting examples of situations where we’ve believed that because of rate actions that we’ve taken, that we would have trouble holding accounts, but remarkably we’ve seen quite honestly some logic and reason in our competitors set. Nobody is doing anything totally crazy and we found that in the vast majority of cases, our clients have accepted, needed rate where its, where we can show them the justification.

As you know we’re pretty transparent in our relationship with our customers. We show them what our view of the performance is on a quarter-to-quarter basis. So its rarely a surprise when we get to renewals and so I think more often then not we’re finding that we’re able to work with clients with addition rate needs.

It doesn’t always happen and we have a client retention rate in the sort of 85% to 90% range. So we always see some spill off that occurs. There’s nothing, I don’t think there’s any big headline in terms of accounts that were non renewed this quarter that suggests to us that we’re seeing just some [sea] change in the market, I think its rather sort of business as usual right now.

As I said before we expect that the competitive cycle will continue but we’re going to remain disciplined. We’re not chasing revenue.

Dan Schlemmer - Fox-Pitt Kelton

Can you talk about just a little bit about any new opportunities, what you’re seeing in terms of opportunities coming in and maybe how would you characterize the opportunities out there, whether its different segments or just what the competitive environment is.

Art Raschbaum

We just attended two major industry conventions, one is NAMUIC, which is the National Association of Mutual Insurance Companies and the other is PCIAA, which is Property and Casualty Insurance Association and both of those are very important sort of generators of business opportunities for us. We have a lot of customers that are members of both those associations and we had a tremendous reception at both of the conventions.

If you think about the last several years that we’ve been going to these conventions, there’s been a headwind around some of the things of our former parent was having to deal with and they’ve spilled onto us. We had a great reception and we generated actually a number of active quoting opportunities that we’re evaluating as we speak.

So we think we’re going to see strong deal flow. Characteristically I don’t think we’re going to see the volume of surplus relief type transactions that we saw earlier in the year but we still are seeing a couple. We’re evaluating a couple fairly substantial transactions right now but we do expect submission cat will be up and that’s our best indicator of how business will flow at the year-end.

The big variable is whether our price will match and our return requirement will match the client needs but we’re cautiously optimistic about the year-end. We don’t see anything that suggesting our deal flow is going to be down at all.

Dan Schlemmer - Fox-Pitt Kelton

You’re still seeing some surplus relief which I guess maybe is against my intuition would lead me to believe, most companies are seeing favorable results on their own investment portfolios at the same time as competition means they’re not seeing tons of growth. So is there anything generally you could characterize as driving those needs.

Art Raschbaum

These would really be less around sort of weakening of the balance sheet from the investment portfolio and more around potentially companies that have had maybe a bad run of cat experience and they need capital and we’re looking at the non-cat portion of the business to see whether we can create some additional capital for them through financing reinsurance.

So they’re kind of individually unique. They’re not at the volume we saw earlier in the year as I mentioned before but we do have capability and in interest to provide those needs if the circumstances meet our requirements.

Dan Schlemmer - Fox-Pitt Kelton

Nice quarter, congratulations.

Operator

Your final question comes from the line of Robert Farnam - Keefe, Bruyette & Woods

Robert Farnam - Keefe, Bruyette & Woods

A couple of questions from here, going back to I guess one of the original questions was the capital needs getting the GMAC book next year, you currently retain all of your premium on a gross basis, would you consider starting to retrocede some of that.

Art Raschbaum

No, we really don’t see a need to. And there are a couple of elements of our portfolio we do retrocede sort of what limited cat exposure we have, we do have areas where we do retrocede elements of it but on balance its still a book of relatively stable predictable frequency oriented business. So we really don’t see the need.

John Marshaleck

Its certainly an option we would have if we would need it and, at this point we really don’t see that we would need that.

Robert Farnam - Keefe, Bruyette & Woods

Any cyclicality in the GMAC books premium coming on board.

Art Raschbaum

Its kind of hard, the challenge is kind of morphing the businesses together and kind of understanding how they’ll behave in the aggregate. If there’s any cyclicality its 01/01 is a big period for us, where a lot of business renews and a lot of new business development occurs. While we’ve talked about we still have a reasonable flow of business throughout the year, by a fairly significant margin, we see a lot of activity in January, and so I would expect that if we have a good January 1 season, that would start to manifest itself in the early quarters of the year.

John Marshaleck

That and the long list, the additional, the quota share transaction that would probably, the premium would start flowing in the second quarter so our first quarter typically is a fairly high written premium quarter anyway because of our excess of loss contracts. But we would expect, that would happen again and then the new business would start flowing into second quarter.

Robert Farnam - Keefe, Bruyette & Woods

And the last one is a number’s question, what was operating cash flow for the quarter.

John Marshaleck

I don’t have that with me right now.

Art Raschbaum

We’ll get back to you with that.

Operator

There are no additional questions at this time; I would like to turn it back over to management for any additional or closing comments.

Art Raschbaum

Thank you very much, we appreciate your participation and interest. We’ll see you next quarter.

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Source: Maiden Holdings, Ltd. Q3 2009 Earnings Call Transcript
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