Maiden hires bankers to advise on options
Bermudian reinsurer Maiden Holdings has hired Bank of America Merrill Lynch to “assist the company in evaluating strategic alternatives to enhance value”.
Such action and language can sometimes be taken to mean that the company is putting itself, or part of its business, up for sale.
Friday’s announcement follows a fourth-quarter loss of $133.6 million — Maiden’s fourth net loss in five quarters — and a consequent financial strength credit rating downgrade to A- from A by AM Best last month.
Maiden’s statement was welcomed by investors, as the company’s battered shares, which have lost half of their value over the past 12 months, gained 3 per cent during Friday’s broad market slump to close on $6.85.
A report by trade publication The Insurance Insider, citing unnamed sources, claimed that Maiden was looking for a buyer for its diversified reinsurance business, which last year wrote $823 million of Maiden’s total $2.65 billion in premiums.
More than two-thirds of Maiden’s premiums come from a multiyear quota share reinsurance agreement with AmTrust, a US insurer that closely associated with Maiden and shares the same founders.
Last year, AmTrust had to restate results and repeatedly bolster reserves, as its share price plunged.
AmTrust is now set to go private. The $13.50-per-share offer has been made by members of the Karfunkel family — who also founded Maiden — along with private-equity firm Stone Point Capital, also a major backer of Bermuda’s Enstar Group.
Barry Zyskind, chairman and chief executive officer of AmTrust, is also non-executive chairman of Maiden.
Adding to the speculation over Maiden’s future is a regulatory filing which shows that fellow Bermudian company and run-off specialist Catalina Holdings has built up a 5 per cent stake in Maiden through accrual of shares on the open market.
The filing details Catalina’s purchase of 2.63 million Maiden shares in 20 transactions between February 5 and March 21 this year.
In total, Catalina owned about 4.16 million Maiden shares by March 22, giving it a 5.01 per cent stake in the reinsurer, the filing stated.
Maiden dropped strong hints in its fourth-quarter earnings statement that it was considering options for its future, when Art Raschbaum, the chief executive officer, said Maiden was “actively engaged in efforts to develop and implement further initiatives and strategies aimed at strengthening shareholder value”.
Ratings agency AM Best said on Friday that its ratings for Maiden remained unchanged, along with a negative outlook.
Best stated: “Management has indicated in recent public comments that it was reviewing strategic options to enhance the value of the enterprise.
“AM Best views today’s announcement as a step in that process. AM Best will remain in contact with the company’s leadership regarding its progress in evaluating alternatives, and should management determine that specific action will be taken, will evaluate the ratings impact of that decision.”
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