Troubled Bermudian Maiden has struck a deal to sell a portfolio to TransRe and revealed that it is in “advanced discussions” to offload its $1.1bn North American business to an as-yet-unnamed third party.
Maiden - a sister company of US insurer AmTrust - said it did not expect to disclose any further details about the sale of its North American business until “disclosure is appropriate or required”.
“The transaction would cover approximately $1.1bn of loss and LAE reserves as of June 30, 2018,” Maiden said.
But it warned: “Readers are cautioned that such discussions may or may not lead to an agreement to sell [Maiden Reinsurance North America].”
Last night’s announcement, which also revealed that TransRe has bought the renewal rights to Maiden’s US treaty reinsurance underwriting business, follows a strategic review of the firm run by BoA Merrill Lynch.
The portfolio acquired by Alleghany-owned TransRe is believed to include a large part of Maiden’s $823mn diversified reinsurance segment, which accounts for around a third of Maiden’s premiums.
The rest of Maiden’s book stems from a $2bn quota share written for sister company AmTrust.
“The [TransRe] transaction, which has now closed, does not include any of the Bermuda underwriting elements of Maiden’s portfolio,” Maiden said.
The group’s Bermuda book includes premiums written for AmTrust, as well as its international insurance services and capital solutions businesses in Europe, which makes up the significant majority of Maiden’s existing business and will remain as part of its on-going business.
News of the sell-offs suggest that Maiden will look more like a captive reinsurer for AmTrust than a fully-fledged diversified balance sheet carrier going forward.
It also follows an abysmal second quarter for the reinsurer, which revealed that its CEO Art Raschbaum and his finance boss Karen Schmitt were stepping down as it unveiled an unexpected $10.7mn operating loss.
In a statement about the TransRe deal, the group’s former general counsel and secretary, Lawrence Metz - who has now replaced Raschbaum - said: “The announcement of this transaction represents an important step in Maiden’s continuing strategic review process.
“We believe this transaction will increase our financial flexibility, improve our operating efficiency and profitability and broaden our ability to allocate capital to future strategies, which in turn will create value for our shareholders,” he continued.
“We are deeply grateful to the Maiden team for their continued efforts in this challenging environment and, prospectively, we will coordinate closely with clients to ensure a smooth transition.”
Investors have punished Maiden since it released its second quarter results. Shares in the firm were trading hands for just $4.05 each when New York’s Nasdaq exchange closed yesterday, well below the $7.50 they were trading at before news of the departures and the firm’s poor third quarter.
And the future of the firm’s relationship with AmTrust is still unknown. Earlier this month, the US insurer revealed that it had negotiated extra time to cancel its $2bn reinsurance quota share with its sister company.
But AmTrust boss Barry Zyskind - who is also the chairman of Maiden - has stood behind Metz and the former president of Maiden Bermuda Patrick Haveron who named to replace Schmitt as finance boss.
“We are confident in our new executive management team to execute this plan,” Zyskind said in Maiden’s second-quarter results announcement.