Wednesday marked the maiden preferred stock issue of Maiden Holdings, LTD (NASDAQ:MHLD), a Bermuda based reinsurer.
Details of the offering are:
The coupon has not been set, but I would expect it to come north of 8%.
Additionally, at any time prior to the redemption date, the company may redeem all, but not less than all, of the Series A Preference Shares at a redemption price of $26 per share, plus any declared and unpaid dividends, to, but excluding, the date of redemption, if we:
- submit a proposal to the holders of common shares concerning an amalgamation, consolidation, merger, arrangement, reconstruction, reincorporation, de-registration or other similar transaction involving the company that requires a vote of the holders of the Series A Preference Shares, voting separately as a single class; or
- submit any proposal for any other matter that, as a result of any change in Bermuda law after the date of this prospectus supplement (whether by enactment or official interpretation), requires a vote of the holders of the Series A Preference Shares.
Maiden Holdings, Ltd., through its subsidiaries, provides reinsurance solutions to regional and specialty insurers primarily in the United States and Europe. The company offers property, casualty, accident, and health; non-catastrophe property and inland marine; and personal lines auto and credit life reinsurance products. It also provides small commercial business insurance, which includes workers compensation, commercial package, and other commercial lines; specialty risk and extended warranty coverage for consumer and commercial goods, as well as custom designed coverage, such as accidental damage plans and payment protection plans in connection with the sale of consumer and commercial goods; and specialty program property and casualty insurance.
The company operates through three business segments:
- Diversified Reinsurance: The Diversified Reinsurance segment consists of a portfolio of predominantly property and casualty reinsurance business focusing on regional and specialty property and casualty insurance companies located in the United States and Europe. This segment includes the book of assumed reinsurance business purchased in the GMAC Acquisition and IIS Acquisition. The business associated with the GMAC Acquisition is underwritten by Maiden US and Maiden Specialty Insurance Company. The business associated with the IIS Acquisition is underwritten by Maiden Bermuda, which also underwrites business independent of the business associated with the IIS Acquisition, the AmTrust Quota Shares and ACAC Quota Share.
- AmTrust Quota Share Reinsurance: AmTrust Quota Share Reinsurance segment consists of the business ceded to the company pursuant to the Master Agreement with AmTrust which, through its affiliates, cedes approximately 40% of its business to MHLB pursuant to a quota share reinsurance arrangement, and pursuant to the European Hospital Liability Quota Share with AmTrust Europe Limited and AmTrust International Underwriters Limited, through which approximately 40% of those entities' medical liability business in Europe, substantially all of which is in Italy, is also ceded to MHLB; and
- ACAC Quota Share: ACAC Quota Share segment consists of the personal and commercial auto business ceded to the company pursuant to the quota share reinsurance agreement with ACAC which, through its affiliates, cedes approximately 25% of its business to the company.
The company does show an underwriting profit (combined ratio below 100%) in the following table:
Bottom Line: This is not an analysis of the company, but an article about a new preferred stock issue that investors might consider. I would pay close attention to related party transactions (note 10 of their recent 10Q) as AmTrust, ACAC and their asset manager AIIM are controlled by Maiden Holdings founding shareholders. As well, take a look at their top ten investment portfolio holdings (p. 62 of the 10Q) as they are concentrated in financials. Be skeptical and be thorough.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: This article is for informational purposes only, it is not a recommendation to buy or sell any security and is strictly the opinion of Rubicon Associates LLC. Every investor is strongly encouraged to do their own research prior to investing.