Maiden Holdings, Ltd. - Quarter Report: 2009 March (Form 10-Q)

CONDENSED CONSOLIDATED BALANCE SHEETS

See accompanying notes to the unaudited condensed consolidated financial statements.

	(unaudited)
	March 31, 2009			December 31, 2008
Assets
Fixed maturities, available-for-sale, at fair value (Amortized cost 2009: $1,279,902; 2008: $1,163,926)	$	1,219,451		$	1,119,955
Other investments, at fair value (Cost 2009: $5,919 ; 2008: $5,819)		5,386			5,291
Total investments		1,224,837			1,125,246
Cash and cash equivalents		95,193			131,897
Restricted cash and cash equivalents		362,583			409,277
Accrued investment income		9,453			10,293
Reinsurance balances receivable (includes $58,057 and $48,837 from related party in 2009 and 2008, respectively - see note 10)		182,052			71,895
Loan to related party (see note 10)		167,975			167,975
Deferred acquisition costs (includes $80,078 and $80,455 from related party in 2009 and 2008, respectively - see note 9)		152,616			104,470
Other assets		7,647			2,617
Intangible assets		53,582			55,147
Goodwill		49,747			49,747
Total Assets	$	2,305,685		$	2,128,564
Liabilities and Shareholders’ Equity
Liabilities
Reserve for losses and loss expenses (includes $91,442 and $69,646 from related party in 2009 and 2008, respectively- see note 10)	$	925,816		$	897,656
Unearned premiums (includes $245,069 and $245,742 from related parties in 2009 and 2008, respectively- see note 10)		570,936			444,479
Accrued expenses and other liabilities		46,489			44,024
Securities sold under agreements to repurchase, at contract value		-			232,646
Trust preferred securities – related parties (see note 6)		215,084			-
Total Liabilities		1,758,325			1,618,805
Commitments and Contingencies
Shareholders’ Equity:
Common shares, ($0.01 par value;71,250,000 and 59,550,000 shares issued in 2009 and 2008 respectively; 70,287,664 and 58,587,664 shares outstanding in 2009 and 2008 respectively)		713			596
Additional paid-in capital		575,606			530,519
Accumulated other comprehensive loss		(60,985	)		(44,499	)
Retained earnings		35,827			26,944
Treasury Shares, at cost (2009 and 2008:962,336 shares)		(3,801	)		(3,801	)
Total Shareholders’ Equity		547,360			509,759
Total Liabilities and Shareholders’ Equity	$	2,305,685		$	2,128,564

CONDENSED CONSOLIDATED STATEMENT OF INCOME

(in thousands (000’s), except per share data)

(Unaudited)

	For the Three Months Ended March 31, 2009			For the Three Months Ended March 31, 2008
Revenues:
Premium income:
Net premiums written	$	336,548		$	102,432
Change in unearned premiums		(126,456	)		(37,127	)
Net earned premium		210,092			65,305
Net investment income		14,259			7,609
Net realized investment gains (losses)		(1,930	)		125
Total revenues		222,421			73,039
Expenses:
Loss and loss adjustment expenses		146,288			37,836
Commission and other acquisition expenses		46,631			21,261
Other operating expenses		7,535			1,426
Trust preferred interest – related parties		7,090			-
Amortization of intangible assets		1,564			-
Foreign exchange loss		213			-
Total expenses		209,321			60,523

Net income	$	13,100		$	12,516

Basic and diluted earnings per common share	$	0.19		$	0.21

Dividends declared per common share	$	0.06		$	0.05

See accompanying notes to the unaudited condensed consolidated financial statements.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

See accompanying notes to the unaudited condensed consolidated financial statements.

	For the Three Months Ended March 31, 2009			For the Three Months Ended March 31, 2008
Cash flows from operating activities:
Net income	$	13,100		$	12,516
Adjustments to reconcile net income to net cash provided by operating activities :
Depreciation and amortization of intangibles		1,636			5
Net realized loss (gain) on sales of investments		1,930			(125	)
Foreign exchange loss on revaluation					-
Amortization of share-based compensation expense, bond premium and discount and trust preferred securities discount		(927	)		107
Changes in assets - (increase) decrease:
Reinsurance balances receivable		(110,157	)		(51,990	)
Accrued investment income		840			(2,008	)
Deferred commission and other acquisition costs		(48,146	)		(14,459	)
Other assets		(40	)		7
Changes in liabilities – increase (decrease):
Accrued expenses and other liabilities		1,763			(22	)
Loss and loss adjustment expense reserves		28,160			23,140
Unearned premiums		126,457			37,127
Net cash provided by operating activities		14,616			4,298
Cash flows from investing activities:
Purchases of investments:
Purchases of fixed-maturity securities		(222,323	)		(156,564	)
Purchases of other investments		(138	)		(23	)
Sale of investments:
Proceeds from sales of fixed-maturity securities		85,769			58,921
Proceeds from maturities and calls of fixed-maturity securities		19,423			-
Proceeds from redemption of other investments		22			-
Increase in restricted cash		46,694			-
Purchase of furniture and equipment		(381	)		(40	)
Net cash used in investing activities		(70,934	)		(97,706	)
Cash flows from financing activities:
Repurchase agreements, net		(232,646	)		102,172
Common share issuance		117			-
Trust preferred securities issuance		260,000			-
Trust preferred securities issuance cost		(4,342	)		-
Dividend paid		(3,515	)		(1,489	)
Net cash provided by financing activities		19,614			100,683
Net (decrease) increase in cash and cash equivalents		(36,704	)		7,275
Cash and cash equivalents, beginning of period		131,897			35,729
Cash and cash equivalents, end of period	$	95,193		$	43,004

Supplemental information about non-cash investing and financing activities
Discount on Trust preferred securities	$	(44,928	)	$	-
Additional paid in Capital		44,928			-

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY

See accompanying notes to the unaudited condensed consolidated financial statements.

For the three months ended March 31, 2009	Common Shares		Additional Paid-In Capital		Accumulated Other Comprehensive Loss			Retained Earnings			Treasury Shares			Total Shareholders’ Equity
Balance at December 31, 2008	$	596	$	530,519	$	(44,499	)	$	26,944		$	(3,801	)	$	509,759

Net income		-		-		-			13,100			-			13,100
Net unrealized losses		-		-		(16,486	)		-			-			(16,486	)
Comprehensive loss															(3,386	)
Shares issued, net		117		44,928		-			-			-			45,045
Share based compensation		-		159		-			-			-			159
Dividends to shareholders		-		-		-			(4,217	)		-			(4,217	)
Balance at March 31, 2009	$	713	$	575,606	$	(60,985	)	$	35,827		$	(3,801	)	$	547,360

For the three months ended March 31, 2008	Common Shares		Additional Paid-In Capital		Accumulated Other Comprehensive Loss			Retained Earnings			Treasury Shares		Total Shareholders’ Equity
Balance at December 31, 2007	$	596	$	529,647	$	(13,496	)	$	20,598		$	-	$	537,345

Net income		-		-		-			12,516			-		12,516
Net unrealized losses		-		-		(16,493	)		-			-		(16,493	)
Comprehensive loss														(3,977	)
Share based compensation		-		187		-			-			-		187
Dividends to shareholders		-		-		-			(2,978	)		-		(2,978	)
Balance at March 31, 2008		596	$	529,834	$	(29,989	)	$	30,136		$	-	$	530,577

Notes to Unaudited Condensed Consolidated Financial Statements

1. Basis of Presentation — Summary of Significant Accounting Policies

The accompanying unaudited condensed consolidated financial statements include the accounts of Maiden Holdings, Ltd. and its subsidiaries and have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) for interim financial statements and with the instructions to Form 10-Q and Article 10 of Regulation S-X as promulgated by the U.S. Securities and Exchange Commission (“SEC”). Accordingly they do not include all of the information and footnotes required by GAAP for complete financial statements. All significant inter-company transactions and accounts have been eliminated in the consolidated financial statements.

These interim consolidated financial statements reflect all adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim period and all such adjustments are of a normal recurring nature. The results of operations for the interim period are not necessarily indicative, if annualized, of those to be expected for the full year. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

These unaudited condensed consolidated financial statements, including these notes, should be read in conjunction with the Company’s audited consolidated financial statements, and related notes thereto, included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008.

2.	Recent Accounting Pronouncements

In April 2009, the Financial Accounting Standard Board (“FASB”) issued three FASB Staff Positions (“FSP”) – (1) FSP FAS 115-2 and FAS 124-2 “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP FAS 115-2”), (2) FSP FAS 157-4 “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS 157-4”), and (3) FSP FAS 107-1 and APB 28-1 “Interim Disclosures about Fair Value of Financial Instruments” (“FSP FAS 107-1”). FSP FAS 115-2 amends the other-than-temporary impairment guidance in GAAP for debt securities to remove the requirement that a company must have the intent and ability to hold a debt security until its anticipated recovery, but rather, under the revised guidance, a company must recognize an other-than-temporary impairment charge on its income statement if it intends to sell the debt security or if it is more likely than not it will be required to sell a debt security before the recovery of its amortized cost basis. In addition, the new FSP FAS 115-2 also requires the recognition of an other-than-temporary impairment charge if the present value of cash flows of a debt security expected to be collected is less than the amortized cost basis of the debt security. FSP FAS 115-2 is effective for interim and annual periods ending after June 15, 2009. The Company will adopt FSP FAS 115-2 for the period ended June 30, 2009. The Company is currently evaluating the provisions of FSP FAS 115-2 and its potential impact on future financial statements. FSP FAS 157-4 provides additional guidance for estimating fair value in accordance with Financial Accounting Standard No. 157 “Fair Value Measurements” (“SFAS 157”), when the volume and level of activity for an asset or liability has significantly decreased. FSP FAS 157-4 provides a list of non-exhaustive factors a company should consider in determining whether there has been a significant decrease in the volume and level of activity for an asset or liability when compared with normal market activity for that asset or liability (or similar assets or liabilities). If a company determines there has been a significant decrease in the volume and level of activity of an asset or liability, further analysis of the transactions or quoted prices is needed, and a significant adjustment to the transactions or quoted prices may be necessary to estimate the fair value in accordance with SFAS 157. FSP FAS 157-4 also provides additional guidance on identifying circumstances that indicate a transaction is not orderly, and therefore, excluded as an observable input in the determination of fair value. FSP FAS 157-4 is effective for interim and annual periods ending after June 15, 2009. The Company will adopt FSP FAS 157-4 for the period ended June 30, 2009. The Company is currently evaluating the provisions of FSP FAS 157-4 and its potential impact on future financial statements. FSP FAS 107-1 requires publicly traded companies to include disclosures about the fair value of its financial instruments whenever it issues its interim financial statements. FSP FAS 107-1 is effective for interim and annual periods ending after June 15, 2009. The Company will include the required disclosures about the fair value of its financial instruments in its interim financial statements starting with the period ended June 30, 2009.

In addition, in April 2009, the SEC staff issued Staff Accounting Bulletin (“SAB”) 111 that amended Topic 5.M. “Other Than Temporary Impairment of Certain Investments in Debt and Equity Securities”. This SAB amends Topic 5.M. solely to include the staff’s view on equity securities and exclude debt securities from its scope. By excluding debt securities from the scope of Topic 5.M., companies are no longer required to assess if they have the intent and ability to hold available-for-sale debt securities until anticipated recovery to determine if there is an other-than-temporary impairment charge.

Notes to Unaudited Condensed Consolidated Financial Statements

Fixed Maturities and Other Investments

3.	Investments

(a)

The original or amortized cost, estimated fair value and gross unrealized gains and losses of available-for-sale fixed maturities and other investments as of March 31, 2009 and December 31, 2008 are as follows:

March 31, 2009	Original or amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
Fixed Maturities:
U.S. – treasury bonds		33,365		620		(235	)		33,750
U.S. Agency - mortgage backed securities	$	747,243	$	25,048	$	(3,455	)	$	768,836
Corporate fixed maturities		488,114		3,815		(86,305	)		405,624
Municipalities		11,180		61		-			11,241
Total available for sale fixed maturities		1,279,902		29,544		(89,995	)		1,219,451
Other investments		5,919		-		(533	)		5,386
Total investments	$	1,285,821	$	29,544	$	(90,528	)	$	1,224,837

December 31, 2008	Original or amortized cost		Gross unrealized gains		Gross unrealized losses			Fair Value
Fixed Maturities:
U.S. – treasury bonds	$	37,782	$	775	$	(30	)	$	38,527
U.S. Agency - mortgage backed securities		756,023		21,178		(5,302	)		771,899
Corporate fixed maturities		370,121		2,320		(62,912	)		309,529
Total available for sale fixed maturities		1,163,926		24,273		(68,244	)		1,119,955
Other investments		5,819		-		(528	)		5,291
Total investments	$	1,169,745	$	24,273	$	(68,772	)	$	1,125,246

The following tables summarize fixed maturities in an unrealized loss position and the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:

	Less than 12 months					12 months or more					Total
March 31, 2009	Fair value		Unrealized losses			Fair value		Unrealized Losses			Fair value		Unrealized losses
Available-for-sale securities:
U.S. – treasury bonds	$	3,017		(235	)		-		-		$	3,017		(235	)
U.S. Agency mortgage backed securities		14,905		(488	)		129,954		(2,967	)		144,859		(3,455	)
Corporate fixed maturities		110,637		(24,967	)		180,741		(61,338	)		291,378		(86,305	)
		128,559		(25,690	)		310,695		(64,305	)		436,237		(89,995	)
Other investments	$	-		-		$	4,679		(533	)	$	4,679		(533	)
Total temporarily impaired available-for-sale securities and other investments	$	128,559	$	(25,690	)	$	315,374	$	(64,838	)	$	443,933	$	(90,528	)

MAIDEN HOLDINGS, LTD.

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands (000’s), except per share data)

(Unaudited)

3.	Investments – (continued)

As of March 31, 2009, there were approximately 53 securities in an unrealized loss position with a fair value of $443,933. Of these securities, there are 20 securities that have been in an unrealized loss position for 12 months or greater with a value of $315,374.

	Less than 12 months					12 months or more					Total
December 31, 2008	Fair value		Unrealized losses			Fair value		Unrealized Losses			Fair value		Unrealized losses
Available-for-sale securities:
U.S. – treasury bonds	$	6,521	$	(30	)		-	$	-		$	6,521		(30	)
U.S. Agency mortgage backed securities		148,803		(5,302	)		-		-			148,803		(5,302	)
Corporate fixed maturities		104,279		(13,707	)		153,055		(49,205	)		257,334		(62,912	)
		259,603		(19,039	)		153,055		(49,205	)		412,658		(68,244	)
Other investments	$	4,722	$	(528	)	$	-	$	-		$	4,722		(528	)
Total temporarily impaired available-for-sale securities and other investments	$	264,325	$	(19,567	)	$	153,055	$	(49,205	)	$	417,380	$	(68,772	)

As of December 31, 2008, there were approximately 40 securities in an unrealized loss position with a fair value of $417,380. Of these securities, there are 10 securities that have been in an unrealized loss position for 12 months or greater with a value of $153,055.

Other-than-Temporary Impairments (“OTTI”)

We review our investment portfolio for impairment on a quarterly basis. Impairment of investments results in a charge to operations when a fair value decline below cost is deemed to be other-than-temporary. As of March 31, 2009, we reviewed our portfolio to evaluate the necessity of recording impairment losses for other-than-temporary declines in the fair value of investments. During the quarter ended March 31, 2009, the Company recognized no other than temporary impairment fixed income securities and other investments (2008: $-). Based on our qualitative and quantitative OTTI review of each asset class within our fixed maturity portfolio, the unrealized losses on fixed maturities at March 31, 2009, were primarily due to widening of credit spreads relating to the market illiquidity, rather than credit events. Because we have the ability and intent to hold these securities until a recovery of fair value to amortized cost, we currently believe it is probable that we will collect all amounts due according to their respective contractual terms. Therefore we do not consider these fixed maturities to be other-than-temporarily impaired at March 31, 2009.

(b)

Restricted Cash and Investments

We are required to maintain assets on deposit to support our reinsurance operations and to serve as collateral for our reinsurance liabilities under various reinsurance agreements. The assets on deposit are available to settle reinsurance liabilities. We also utilize trust accounts to collateralize business with our reinsurance counterparties. These trust accounts generally take the place of letter of credit requirements. The assets in trust as collateral are primarily cash and highly rated fixed maturity securities. The fair value of our restricted assets was as follows:

	March 31, 2009		December 31, 2008
Restricted cash - third party agreements	$	268,453	$	335,201
Restricted cash - related party agreements		94,130		74,076
Total restricted cash		362,583		409,277
Restricted investments - in Trust for third party agreements at fair value (Amortized cost: 2009 - $759,624; 2008 - $701,973)		703,729		660,388
Restricted investments - in Trust for related party agreements at fair value (Amortized cost: 2009 - $58,819; 2008 - $1, 200)		59,264		1,203
Total restricted investments		762,994		661,591
Total restricted cash and investments	$	1,125,577	$	1,070,868

Notes to Unaudited Condensed Consolidated Financial Statements

The Company’s estimates of fair value for financial assets and financial liabilities are based on the framework established in SFAS 157. The framework is based on the inputs used in valuation and gives the highest priority to quoted prices in active markets and requires that observable inputs be used in the valuations when available. The disclosure of fair value estimates in the SFAS 157 hierarchy is based on whether the significant inputs into the valuation are observable. In determining the level of the hierarchy in which the estimate is disclosed, the highest priority is given to unadjusted quoted prices in active markets and the lowest priority to unobservable inputs that reflect the Company’s significant market assumptions. The three levels of the hierarchy are as follows:

4.	Fair Value of Financial Instruments

Level 1 - Unadjusted quoted market prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; or valuations based on models where the significant inputs are observable (e.g., interest rates, yield curves, prepayment speeds, default rates, loss severities, etc.) or can be corroborated by observable market data.

Level 3 - Valuations based on models where significant inputs are not observable. The unobservable inputs reflect the Company’s own assumptions about the assumptions that market participants would use.

In accordance with SFAS 157, the Company determines fair value based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The following section describes the valuation methodologies used by the Company to measure assets and liabilities at fair value, including an indication of the level within the fair value hierarchy in which each asset or liability is generally classified.

Investments available for sale. Investments available for sale are recorded at fair value on a recurring basis and include fixed maturities and securities sold under agreements to repurchase. Fair value of investments is measured based upon quoted prices in active markets, if available. If quoted prices in active markets are not available, fair values are measured by an independent pricing service that utilizes valuation techniques based upon observable market data. Level 1 investments include those traded on an active exchange, such as the NASDAQ. Since fixed maturities other than U.S. treasury securities generally do not trade on a daily basis, the independent pricing service prepares estimates of fair value measurements for these securities using its proprietary pricing applications which include available relevant market information. These investments are classified as Level 2 investments and include obligations of U.S. government agencies, municipals and corporate debt securities.

Other investments. Other investments consist primarily of hedge funds where the fair value estimate is determined by an external fund manager based on recent filings, operating results, balance sheet stability, growth and other business and market sector fundamentals. Due to the significant unobservable inputs in these valuations, the Company includes other investments in the amount disclosed in Level 3.

Fair Value Hierarchy

The following table presents the level within the fair value hierarchy at which the Company’s financial assets and financial liabilities are measured on a recurring basis as of March 31, 2009 and December 31, 2008:

March 31, 2009	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value

Assets

Fixed maturities	$	33,750		$	1,185,701		$	-		$	1,219,451

Other investments		-			-			5,386			5,386

Total	$	33,750		$	1,185,701		$	5,386		$	1,224,837

As a percentage of total assets		1.5	%		51.4	%		0.2	%		53.1	%

Notes to Unaudited Condensed Consolidated Financial Statements

Level 3 Financial Instruments

4.	Fair Value of Financial Instruments (continued)

December 31, 2008	Quoted Prices in Active Markets for Identical Assets (Level 1)			Significant Other Observable Inputs (Level 2)			Significant Unobservable Inputs (Level 3)			Total Fair Value

Assets

Fixed maturities	$	38,527		$	1,081,428		$	-		$	1,119,955

Other investments		-			-			5,291			5,291

Total	$	38,527		$	1,081,428		$	5,291		$	1,125,246

As a percentage of total assets		1.8	%		50.8	%		0.2	%		52.8	%

Liabilities

Securities sold under agreements to repurchase	$	-		$	232,646		$	-		$	232,646

As a percentage of total liabilities		-			14.4	%		-			14.4	%

The following table presents changes in Level 3 for our financial instruments measured at fair value on a recurring basis for the three months ended March 31, 2009 and 2008:

Other Investments:	March 31, 2009			March 31, 2008
Balance at beginning of period	$	5,291		$	15,656
Change in net unrealized losses – included in other comprehensive loss		(6	)		(3,296	)
Net realized losses – included in net income		(15	)		-
Net purchases		116			23
Net transfers in (out of) of Level 3		-			-
Balance at end of period	$	5,386		$	12,383

Notes to Unaudited Condensed Consolidated Financial Statements

The following table shows an analysis of goodwill and intangible assets:

5.	Goodwill and Intangible Assets

March 31, 2009	Gross		Accumulated Amortization			Net		Useful Life
Goodwill	$	49,747	$	-		$	49,747	Indefinite
State licenses		5,000		-			5,000	Indefinite
Customer relationships		51,400		(2,818	)		48,582	15 years double declining
Net balance	$	106,147	$	(2,818	)	$	103,329

December 31, 2008	Gross		Accumulated Amortization			Net		Useful Life
Goodwill	$	49,747	$	-		$	49,747	Indefinite
State licenses		5,000		-			5,000	Indefinite
Customer relationships		51,400		(1,253	)		50,147	15 years double declining
Net balance	$	106,147	$	(1,253	)	$	104,894

On November 3, 2008, the Company acquired the reinsurance operations of GMAC Insurance (GMACI), including its book of assumed reinsurance business. As part of the transaction the Company’s wholly owned subsidiary Maiden Holdings North America, Ltd. (“Maiden NA”) acquired GMAC RE LLC, the reinsurance managing general agent writing business on behalf of Motors Insurance Corporation and the renewal rights for the business written by GMAC RE. In connection with the transaction Maiden NA also entered into an agreement to acquire two licensed insurance companies, GMAC Direct Insurance Company (“GMAC Direct”) and Integon Specialty Insurance Company (“Integon”). Consummation of the acquisition of these insurance companies is subject to regulatory approval. The acquisition of GMAC Direct closed on December 23, 2008, and it was renamed Maiden Reinsurance Company on February 2nd 2009.

Goodwill and intangible assets are subject to annual impairment testing. No impairment was recorded during the quarter ended March 31, 2009. The amortization of the intangible assets with finite lives for the years ended December 31, 2009, 2010, 2011, 2012 and 2013 will be $6,590, $5,808, $5,033, $4,362, $3,781, respectively.

6.	Trust Preferred Securities

On January 20, 2009, the Company completed a private placement of 260,000 units (the “Units”), each Unit consisting of $1,000 principal amount of capital securities (the “Trust Preferred Securities”) of Maiden Capital Financing Trust (the “Trust”) ,a trust established by Maiden NA, and 45 common shares, $.01 par value, of the Company (the “Common Shares”), for a purchase price of $1,000.45 per Unit. This resulted in gross proceeds to the Company of $260,117, before $4,342 of placement agent fees and expenses. As a result the Company issued 11,700,000 of its Common Shares. Certain trusts established by Michael Karfunkel and George Karfunkel, two of the Company’s founding shareholders, purchased an aggregate of 159,000 of the Units or 61%. The remaining 101,000 Units were purchased by existing institutional shareholders of the Company.

The Trust used the proceeds from the sale of the Trust Preferred Securities to purchase a subordinated debenture (the “Debenture”) in the principal amount of $260,000 issued by Maiden NA.

Notes to Unaudited Condensed Consolidated Financial Statements

The Debenture was issued pursuant to an Indenture dated January 20, 2009 by and between the Maiden NA and Wilmington Trust Company (“Wilmington”). The terms of the Debenture are substantially the same as the terms of the Trust Preferred Securities. The interest payments by Maiden NA will be used by the Trust to pay the quarterly distributions to the holders of the Trust Preferred Securities. The Indenture permits Maiden NA to redeem the Debenture (and thus a like amount of the Trust Preferred Securities) at stated value plus one year’s interest together with accrued and unpaid interest, if any, through the date of redemption at any time until January 15, 2014. On and after January 15, 2014, Maiden NA may redeem any or all of the Debenture (and thus a like amount of the Trust Preferred Securities) at stated value plus accrued and unpaid interest, if any, through the date of redemption. If the Company redeems any amount of its Debenture, the Trust must redeem a like amount of the Trust Preferred Securities. The Indenture permits Maiden NA, as long as no event of default has occurred and continues, to defer interest payments on the Debenture for up to 20 consecutive quarterly periods, during which interest accrues and compounds until paid.

6.	Trust Preferred Securities (continued)

Pursuant to separate Guarantee Agreements dated as of January 20, 2009 (each a “Guarantee Agreement”) with Wilmington, as guarantee trustee, each of the Company and Maiden NA has agreed to guarantee the payment of distributions and payments on liquidation or redemption of the Trust Preferred Securities.

As a consequence of the issuance of a majority of the Units to a related party under FASB Interpretation 46R Consolidation of Variable Interest Entities (“FIN 46R”), the Trust is a variable interest entity and the Company is deemed to be the Primary beneficiary and is required to consolidate the Trust. The issuance of common shares associated with the Trust Preferred Securities resulted in an original issuance discount of $44,928 based on market price on January 20, 2009. The discount is amortized over 30 years based on the effective interest method. The Debentures and Trust Preferred Securities mature in 2039 and carry a stated or coupon rate of 14% with an effective interest rate of 16.95%. As of March 31, 2009, the stated value of the Trust Preferred Securities was $215,084 which comprises the principal amount of $260,000 and unamortized discount of $44,916.

7.	Earnings Per Share

The following is a summary of the elements used in calculating basic and diluted earnings per share:

	Three months ended March 31, 2009		Three months ended March 31, 2008

Net income available to common shareholders	$	13,100	$	12,516

Weighted average number of common shares outstanding - basic		67,687,664		59,550,000

Potentially dilutive securities:
Warrants		-		-

Share options		250,126		-

Weighted average number of common shares outstanding - diluted		67,937,790		59,550,000

Basic and diluted earnings per common share:	$	0.19	$	0.21

As of March 31, 2009, 4,050,000 (2008: 4,050,000) warrants and 662,000 (2008: 793,700) share options were excluded from the calculation of diluted earnings per share as they were anti-dilutive.

8.	Share Based Compensation

Share Options

The fair value of each option grant is separately estimated for each vesting date. The fair value of each option is amortized into compensation expense on a straight-line basis between the grant date for the award and each vesting date. The Company has estimated the fair value of all share option awards as of the date of the grant by applying the Black-Scholes-Merton multiple-option pricing valuation model. The application of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense. The adoption of SFAS No. 123R’s fair value method has resulted in share-based expense (a component of salaries and benefits) in the amount of approximately $159 and $187 for the three months ended March 31, 2009 and 2008, respectively.

Notes to Unaudited Condensed Consolidated Financial Statements

The key assumptions used in determining the fair value of options granted in the three months ended March 31, 2009 and a summary of the methodology applied to develop each assumption are as follows:

8.	Share Based Compensation (continued)

Assumptions :	March 31, 2009
Volatility		29.8-43.9	%
Risk-free interest rate		2.36-3.30	%
Weighted average expected lives in years	5-6.1 years
Forfeiture rate		0	%
Dividend yield rate		1-5.39	%

Expected Price Volatility – This is a measure of the amount by which a price has fluctuated or is expected to fluctuate. At the times the Company granted options, there was no external market for the Company’s common shares. Thus, it was not possible to use actual experience to estimate the expected volatility of the price of the common shares in estimating the value of the options granted. As a substitute for such estimate, the Company used the historical volatility of companies in the industry in which the Company operates.

Risk-Free Interest Rate – This is the U.S. Treasury rate for the week of the grant having a term equal to the expected life of the option. An increase in the risk-free interest rate will increase compensation expense.

Expected Lives – This is the period of time over which the options granted are expected to remain outstanding giving consideration to vesting schedules, historical exercise and forfeiture patterns. The Company uses the simplified method outlined in SEC Staff Accounting Bulletin No. 107 to estimate expected lives for options granted during the period as historical exercise data is not available and the options meet the requirements set out in the Bulletin. Options granted have a maximum term of ten years. An increase in the expected life will increase compensation expense.

Forfeiture Rate – This is the estimated percentage of options granted that are expected to be forfeited or cancelled before becoming fully vested. An increase in the forfeiture rate will decrease compensation expense.

The following schedules shows all options granted, exercised, expired and exchanged under the Plan for the three months ended March 31, 2009:

March 31, 2009	Number of Share Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Outstanding, December 31, 2008		1,519,834		$	10.00		9.44 years
Granted		150,000			4.39		9.91 years
Exercised		-			-		-
Cancelled		(200,000	)		-		-
Outstanding, March 31, 2009		1,469,834		$	5.55		9.31 years

The following schedule shows all options granted, exercised, expired and exchanged under the Plan for the three months ended March 31, 2008:

March 31, 2008	Number of Share Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term
Outstanding, December 31, 2007		716,000	$	10.00		9.60 years
Granted		167,000		10.00		9.90 years
Exercised		-		-		-
Cancelled		-		-		-
Outstanding, March 31, 2008		883,000	$	10.00		9.50 years

The weighted average grant date fair value was $0.82 and $3.42 for all options outstanding at March 31, 2009 and 2008, respectively. There was approximately $ 1,878 and $2,518 of total unrecognized compensation cost related to non-vested share-based compensation arrangements as of March 31, 2009 and 2008, respectively.

MAIDEN HOLDINGS, LTD.

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands (000’s), except per share data)

(Unaudited)

9. Dividends Declared

On February 25, 2009, the Company’s Board of Directors approved a quarterly cash dividend of $0.06 per common share. This dividend was paid on April 15, 2009 to shareholders of record on April 1, 2009.

10. Related Party Transactions

The Founding Shareholders of Maiden, Michael Karfunkel, George Karfunkel and Barry Zyskind, are also the principal shareholders, and, respectively, the Chairman of the Board of Directors, a Director, and the President and Chief Executive Officer and Director of AmTrust. The following describes transactions between the Company and AmTrust.

Quota Share Reinsurance Agreement

Effective July 1, 2007, the Company and AmTrust entered into a master agreement, as amended (the “Master Agreement”), by which they caused AmTrust’s Bermuda reinsurance subsidiary, AmTrust International Insurance, Ltd. (“AII”) and Maiden Insurance Company Ltd. (“Maiden Insurance”) to enter into the Reinsurance Agreement by which (a) AII retrocedes to Maiden Insurance an amount equal to 40% of the premium written by subsidiaries of AmTrust, net of the cost of unaffiliated inuring reinsurance (and in the case of AmTrust’s U.K. insurance subsidiary, IGI Insurance Company Limited (“IGI”), net of commissions) and 40% of losses and (b) AII transferred to Maiden Insurance 40% of the AmTrust subsidiaries’ unearned premium reserves, effective as of July 1, 2007, with respect to the current lines of business, excluding risks for which the AmTrust subsidiaries’ net retention exceeds $5,000 (“Covered Business”). AmTrust also has agreed to cause AII, subject to regulatory requirements, to reinsure any insurance company which writes Covered Business in which AmTrust acquires a majority interest to the extent required to enable AII to cede to Maiden Insurance 40% of the premiums and losses related to such Covered Business. The Agreement further provides that AII receives a ceding commission of 31% of ceded written premiums. The Reinsurance Agreement has an initial term of three years and will automatically renew for successive three year terms thereafter, unless either AII or Maiden Insurance notifies the other of its election not to renew not less than nine months prior to the end of any such three year term. In addition, either party is entitled to terminate on thirty days notice or less upon the occurrence of certain early termination events, which include a default in payment, insolvency, change in control of AII or Maiden Insurance, run-off, or a reduction of 50% or more of the shareholders’ equity of Maiden Insurance or the combined shareholders’ equity of AII and the AmTrust subsidiaries.

On June 11, 2008, the Company and AmTrust amended the Reinsurance Agreement to add Retail Commercial Package Business to the Covered Business as a consequence of AmTrust’s acquisition of Unitrin Business Insurance (UBI). Under the amendment, AmTrust's subsidiaries cede, upon collection, to Maiden 100% of unearned premium (net of inuring reinsurance) from the acquisition of UBI's in-force book of business. Additionally, AmTrust cedes to Maiden 40% of net premium written, effective as of June 1, 2008. Maiden will pay to AmTrust a ceding commission of 34.375% on the unearned premium cession and the Retail Commercial Package Business. The $2,000 maximum liability for a single loss provided in the Quota Share Reinsurance Agreement shall not be applicable to Retail Commercial Package Business.

On February 9, 2009, AII and Maiden Insurance amended the Reinsurance Agreement to clarify that (i) AII would offer Maiden Insurance the opportunity to reinsure Excess Retention Business, which is defined as a policy issued by an AmTrust insurance subsidiary with respect to which the insurance subsidiary’s retention is greater than $5 million and (ii) the deduction for the cost of inuring reinsurance from Affiliate Subject Premium (as defined in the Reinsurance Agreement) retroceded to Maiden Insurance is net of ceding commission. In addition, the Reinsurance Agreement has been amended by deleting the limitation on Maiden Insurance’s maximum liability in respect of a single loss, which, under certain circumstances, was $2 million. Pursuant to the Reinsurance Agreement, as amended, AII and Maiden Insurance share, proportionally, in all premium and losses ceded thereunder.

The Company recorded approximately $29,254 and $19,774 of ceding commission expense for the three months ended March 31, 2009 and 2008, respectively as a result of this transaction.

Other Reinsurance Agreement

Effective January 1, 2008 the Company and AmTrust entered into an agreement to reinsure a 45% participation in the $9 million in excess of $1 million layer of AmTrust's workers' compensation excess of loss program. This layer provides reinsurance to AmTrust for losses per occurrence in excess of $1 million up to $10 million, subject to an annual aggregate deductible of $1.25 million. This participation was sourced through a reinsurance intermediary via open market placement in which competitive bids were solicited by an independent broker. The remaining 55% participation was placed with a single carrier.

The following is the effect on the Company’s balance sheet as of March 31, 2009 and December 31, 2008, and the results of operations for the three months ended March 31, 2009 and 2008 related to the Reinsurance Agreements with AmTrust:

MAIDEN HOLDINGS, LTD.

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands (000’s), except per share data)

(Unaudited)

10. Related Party Transactions (continued)

Assets and (liabilities):	March 31, 2009			December 31, 2008
Loan to related party	$	167,975		$	167,975
Reinsurance balances receivable, net		58,057			48,837
Accrued interest on loan to related party		570			1,478
Deferred commission and other acquisition costs		80,078			80,455
Loss and loss adjustment expense reserves		(91,442	)		(69,646	)
Unearned premiums	$	(245,069	)	$	(245,742	)

	Three months Ended March 31,
Results of operations:	2009		2008
Net premium written - assumed	$	93,314	$	87,714
Change in unearned premium - assumed		671		(23,417	)
Net earned premium - assumed		93,985		64,297

Commission and other acquisition costs on premium written		30,556		26,905
Change in deferred commission and other acquisition costs		377		(7,004	)
Ceding commission and other acquisition cost - expensed		30,933		19,901

Loss and loss adjustment expense		58,132		37,399

Interest income on loan to related party	$	810	$	1,591

Collateral provided to AmTrust

In order to provide AmTrust’s U.S. insurance subsidiaries with credit for reinsurance on their statutory financial statements, AII, as the direct reinsurer of the AmTrust’s insurance subsidiaries, has established trust accounts (“Trust Accounts”) for their benefit. Maiden Insurance has agreed to provide appropriate collateral to secure its proportional share under the Quota Share Agreement of AII’s obligations to the AmTrust subsidiaries to whom AII is required to provide collateral. This collateral may be in the form of (a) assets loaned by Maiden Insurance to AII, for deposit into the Trust Accounts, pursuant to a loan agreement between those parties, (b) assets transferred by Maiden Insurance, for deposit into the Trust Accounts, (c) a letter of credit obtained by Maiden Insurance and delivered to an AmTrust subsidiary on AII’s behalf (a “Letter of Credit”), or (d) premiums withheld by an AmTrust subsidiary at Maiden Insurance’s request in lieu of remitting such premiums to AII (“Withheld Funds”). Maiden Insurance may provide any or a combination of these forms of collateral, provided that the aggregate value thereof equals Maiden Insurance’s proportionate share of its obligations under the Quota Share Agreement with AII. If collateral is required to be provided to any AmTrust subsidiary under applicable law or regulatory requirements, Maiden Insurance will provide collateral to the extent required, although Maiden Insurance does not expect that such collateral will be required unless an AmTrust subsidiary is domiciled in the United States.

Maiden Insurance satisfied its collateral requirements under the Quota Share Agreement with AII by lending funds in the amount of $167,975 as at March 31, 2009 and December 31, 2008 to AII pursuant to a loan agreement entered into between those parties. The amount of collateral Maiden Insurance is required to maintain, which is determined quarterly, equals its proportionate share of (a) the amount of ceded paid losses for which AII is responsible to such AmTrust subsidiaries but has not yet paid, (b) the amount of ceded loss reserves (including ceded reserves for claims reported but not resolved and losses incurred but not reported) for which AII is responsible to AmTrust subsidiaries, and (c) the amount of ceded reserves for unearned premiums ceded by AmTrust subsidiaries to AII. Pursuant to the Master Agreement, AmTrust has agreed to cause AII not to commingle Maiden Insurance’s assets with AII’s other assets and to cause the AmTrust subsidiaries not to commingle Maiden Insurance’s assets with the AmTrust subsidiaries’ other assets if an AmTrust subsidiary withdraws those assets. AII has agreed that, if an AmTrust subsidiary returns to AII excess assets withdrawn from a Trust Account, drawn on a Letter of Credit or maintained by such AmTrust subsidiary as Withheld Funds, AII will immediately return to Maiden Insurance its proportionate share of such excess assets. AII has further agreed that if the aggregate fair market value of the amount of Maiden Insurance’s assets held in the Trust Account exceeds Maiden Insurance’s proportionate share of AII’s obligations, or if an AmTrust subsidiary misapplies any such collateral, AII will immediately return to Maiden Insurance an amount equal to such excess or misapplied collateral, less any amounts AII has paid to Maiden Insurance. In addition, if an AmTrust subsidiary withdraws Maiden Insurance’s assets from a Trust Account and maintains those assets on its books as withheld funds, AII has agreed to pay to Maiden Insurance interest at the rate equivalent to the one-month London Interbank Offered Rate (“LIBOR”) plus 90 basis points per annum computed on the basis of a 360-day year on the loan (except to the extent Maiden Insurance’s proportionate share of AII’s obligations to that AmTrust subsidiary exceeds the value of the collateral Maiden Insurance has provided), and net of unpaid fees Maiden Insurance owes to AIIM and its share of fees owed to the trustee of the Trust Accounts.

MAIDEN HOLDINGS, LTD.

Notes to Unaudited Condensed Consolidated Financial Statements

(in thousands (000’s), except per share data)

(Unaudited)

10. Related Party Transactions (continued)

Effective December 1, 2008, the Company entered into a Reinsurer Trust Assets Collateral agreement to provide to AII sufficient collateral to secure its proportional share of AII’s obligations to the U.S. AmTrust subsidiaries. The amount of the collateral in Trust, as at March 31, 2009 and December 31, 2008 was approximately $153,394 and $75,279. (See Note 3(b)).

Reinsurance Brokerage Agreements

Effective July 1, 2007, the Company entered into a reinsurance brokerage agreement with AII Reinsurance Broker Ltd., a subsidiary of AmTrust. Pursuant to the brokerage agreement, AII Reinsurance Broker Ltd. provides brokerage services relating to the Reinsurance Agreement for a fee equal to 1.25% of the premium reinsured from AII. The brokerage fee is payable in consideration of AII Reinsurance Broker Ltd’s brokerage services. AII Reinsurance Broker Ltd. is not the Company’s exclusive broker. AII Reinsurance Broker Ltd. may, if mutually agreed, also produce reinsurance for the Company from other ceding companies, and in such cases the Company will negotiate a mutually acceptable commission rate. The Company recorded approximately $1,155 and $797 of reinsurance brokerage expense for the three months ended March 31, 2009 and 2008, respectively and deferred reinsurance brokerage of $2,920 and $3,009 as at March 31, 2009 and December 31, 2008, respectively as a result of this agreement.

Effective April 1, 2008, the Company entered into brokerage services agreements with IGI Intermediaries Limited and IGI Inc. (IGI), both subsidiaries of AmTrust. Pursuant to the brokerage services agreements, IGI provides marketing services to us which includes providing marketing material to potential policyholders, providing us with market information on new trends and business opportunities and referring new brokers and potential policyholders to us. A fee equal to IGI‘s costs in providing such services plus 8% is payable in consideration of IGI’s marketing services. The Company recorded approximately $152 as expense, which is included in other operating expenses, for the three months ended March 31, 2009.

Asset Management Agreement

Effective July 1, 2007, the Company entered into an asset management agreement with AII Insurance Management Limited (“AIIM”), an AmTrust subsidiary, pursuant to which AIIM has agreed to provide investment management services to Maiden Insurance. Pursuant to the asset management agreement, AIIM provides investment management services for an annual fee equal to 0.35% of average invested assets plus all costs incurred. Effective April 1, 2008, the investment management services annual fee has been reduced to 0.20% if the average value of the account is less than $1 billion and 0.0375 if the average value of the account is greater than $1 billion. The Company recorded approximately $597 and $458 of investment management fees for the three months ended March 31, 2009 and 2008, respectively, as a result of this agreement.

Notes to Unaudited Condensed Consolidated Financial Statements

The Company currently operates two business segments, Reinsurance – AmTrust Quota Share and Reinsurance - Other. The Company evaluates segment performance based on segment profit, which excludes investment income, realized gains and losses, general corporate expenses, interest expenses, income taxes and any other non-core business income or expenses. The following tables summarize business segments as follows:

11. Segments

For the three months ended March 31, 2009	Reinsurance - AmTrust Quota Share			Reinsurance - Other			Total
Net premiums written	$	85,371		$	251,177		$	336,548
Net premiums earned		92,420			117,672			210,092
Net losses and loss expenses		(57,272	)		(89,016	)		(146,288	)
Commissions and other acquisition costs		(30,409	)		(16,222	)		(46,631	)
General and administrative expenses		(374	)		(5,726	)		(6,100	)
Underwriting income	$	4,365		$	6,708		$	11,073

Reconciliation to net income
Net investment income								12,329
Amortization of intangibles								(1,564	)
Foreign exchange loss								(213	)
Trust preferred interest								(7,090	)
General and administrative expenses								(1,435	)

Net Income							$	13,100

Net loss and loss expense ratio*		62.0	%		75.6	%		69.6	%
Acquisition cost ratio**		32.9	%		13.8	%		22.2	%
General and administrative expense ratio***		0.4	%		4.9	%		3.6	%
Combined ratio		95.3	%		94.3	%		95.4	%
As of March 31, 2009
Reinsurance balances receivable		49,552			132,500			182,052
Deferred commission and other acquisition costs		76,261			76,355			152,616
Loan to related party		167,975			-			167,975
Goodwill		-			49,747			49,747
Intangibles		-			53,582			53,582
Restricted Investments and cash		152,278			570,086			722,364
Corporate and other assets		-			-			977,349
Total Assets		446,066			882,270			2,305,685

Notes to Unaudited Condensed Consolidated Financial Statements

* Calculated by dividing net losses and loss expenses by net premiums earned.

11. Segments (continued)

For the three months ended March 31, 2008	Reinsurance - AmTrust Quota Share			Reinsurance - Other			Total
Net premiums written	$	82,948		$	19,484		$	102,432
Net premiums earned		63,790			1,515			65,305
Net losses and loss expenses		(37,208	)		(628	)		(37,836	)
Acquisition costs		(20,572	)		(689	)		(21,261	)
General and administrative expenses		(176	)		(149	)		(325	)
Underwriting income	$	5,834		$	49		$	5,883

Reconciliation to net income
Net investment income								7,734
General and administrative expenses								(1,101	)
Net Income							$	12,516

Net loss and loss expense ratio*		58.3	%		41.5	%		57.9	%
Acquisition cost ratio**		32.3	%		45.5	%		32.6	%
General and administrative expense ratio***		0.3	%		9.8	%		0.5	%
Combined ratio		90.9	%		96.8	%		91.0	%
As of March 31, 2008
Reinsurance balances receivable	$	69,425		$	10,555		$	79,980
Deferred commission and other acquisition costs		50,393			8,281			58,674
Loan to related party		113,542			-			113,542
Corporate and other assets		-						643,000
Total Assets	$	233,360		$	18,836		$	895,196

** Calculated by dividing commission and other acquisition costs by net premiums earned

*** Calculated by dividing general and administrative expenses by net premiums earned.

**** Calculated by adding together net loss and loss expense ratio, acquisition cost ratio and general and administrative expense ratio.

The following tables set forth financial information relating to gross and net premiums written and earned by major line of business for the three months ended March 31, 2009 and 2008:

	Three months ended March 31,
	2009					2008
	Total		% of Total			Total		% of Total
Gross and net premiums written
Reinsurance - AmTrust Quota Share
Small Commercial Business	$	52,972		15.7	%	$	43,657		42.6	%
Specialty Middle Market Property & Casualty		9,228		2.7	%		6,867		6.7	%
Specialty Risk and Extended Warranty		23,171		6.9	%		32,424		31.7	%
Total Reinsurance - AmTrust Quota Share	$	85,371		25.3	%	$	82,948		81.00	%
Reinsurance – Other
Property		51,448		15.3	%		-		-	%
Casualty		150,075		44.6	%		19,484		19.0	%
Accident and Health		49,654		14.8	%		-		-	%
Total Reinsurance - Other		251,177		74.7	%		19,484		19.0	%
	$	336,548		100.0	%	$	102,432		100.0	%

Notes to Unaudited Condensed Consolidated Financial Statements