Maiden Holdings, Ltd. Annual Report 2011

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FY2011 Annual Report · Maiden Holdings, Ltd.

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is a Bermuda-headquartered holding company with subsidiaries that provide
reinsurance and insurance products and services to the regional and specialty global property and casualty markets. Our differentiated
model is focused on delivering profitable results that are stable and predictable while meeting the non-catastrophic reinsurance
capital needs of our clients. We seek to build close, long-term partnerships with our clients through a value-added, customer-centric
approach. Maiden has underwriting operations in both Bermuda and the United States, and production teams in the United Kingdom,
Germany and other select markets throughout the globe.

Maiden was formed in June 2007 and entered into a 40% quota share reinsurance agreement with AmTrust Financial Services, Inc.
In May 2008, the common shares of Maiden Holdings, Ltd. began trading on NASDAQ.

In October 2008, Maiden acquired the reinsurance operations of GMAC Insurance, including GMAC RE, which became
Maiden Re, our diversified reinsurance operations. To support the acquisition, in January 2009 Maiden successfully completed a trust
preferred offering of $260.1 million of junior subordinated debt.

In March 2010, Maiden entered into a 25% quota share reinsurance contract with American Capital Acquisition Corporation, a U.S.
personal auto insurer. In November 2010, Maiden acquired the majority of the assets and liabilities of GMAC International Insurance
Services, Ltd., providing us with an operating platform for further international expansion.

In 2011, Maiden integrated the IIS acquisition and entered into a cooperation agreement with the Opel Dealers Association in
Germany. Maiden renewed its agreement with AmTrust for another three years, on improved terms, and expanded its scope.
In June, Maiden refinanced $107.5 million of the 14% junior subordinated debt at a reduced interest rate of 8.25% .

Book value per share rose to $10.64 at year end, the highest in the Company’s history, and net written premiums grew to
$1.7 billion. Employee count increased to 213.

Strong business growth across all business segments reflected the successful implementation of multi-year business strategies.

Despite record levels of catastrophe losses for the broader reinsurance industry, Maiden’s lower volatility non-catastrophe model
significantly outperformed reinsurance sector participants from both an underwriting and ROE perspective.

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(in millions, except per share data)

Net premiums written

Net premiums earned

Net investment income

Underwriting income

Income from operations(1)

Net income(2)

Operating earnings(1)

Earnings per share

Operating earnings per share(1)

Combined ratio

Investable assets(1)

Total assets

Shareholders’ equity

Operating return on average shareholders’ equity(1)

Book value per common share

Common stock price

Market capitalization

Year ended December 31

2011(2)

2010

2009

$ 1,724

1,552

105

0.39

$ 0.96

$ 1,228

$ 1,030

1,170

114

920

101

0.98

$ 1.02

0.87

$ 0.95

98.1%

96.9%

95.9%

$2,524

3,354

$ 769

$2,353

$2,088

2,983

2,636

$ 750

$ 677

9.2%

10.2%

11.2%

$ 10.64

8.76

$ 633

$ 10.40

7.86

$ 567

$ 9.62

7.32

$ 515

1. Income from operations, operating earnings, and the related metrics operating earnings per share and operating return on average shareholders’ equity, as well as investable assets, are
non-GAAP financial measures. Operating earnings is defined by the Company as net income before net realized investment gains (losses), foreign exchange, and other gains (losses),
nonrecurring general and administrative expenses relating to acquisitions, intangibles amortization, and non-cash deferred tax charges and should not be considered as an alternative
to net income. Please see the disclosure on non-GAAP Financial Measures on page 73 of this Annual Report on Form 10-K for additional information and reconciliation to GAAP for
operating earnings, operating earnings per share, and operating return on average shareholders’ equity. Please see the inside back cover for additional information and reconciliation to
GAAP for income from operations and investable assets. The Company’s management believes that income from operations, operating earnings, operating earnings per share, operating
return on equity, and investable assets are useful indicators of trends in the Company’s underlying operations. The Company’s measure of income from operations, operating earnings,
operating earnings per share, operating return on equity and investable assets may not be comparable to similarly titled measures used by other companies.

2. Maiden’s net income was impacted by a number of non-operating expenses during 2011. These include charges related to the repurchase of junior subordinated debt with proceeds from

the June 2011 Senior Notes offering. 2011 results include $15.1 million of junior subordinated debt repurchase expenses and $20.3 million of accelerated amortization of subordinated debt
discount and issuance costs. 2011 financial results were also impacted by $9.5 million in losses related to thunderstorm and tornado activity across the U.S. in the second quarter, net of
the Company’s quarterly provisions for normalized catastrophe activity compared to no catastrophe losses in 2010.

in $ millions

$62.9

$71.6

$74.9

in $ millions

$2,088

$2,353 $2,524

in $ millions

$2,636

$2,983 $3,354

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The Maiden Difference

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Maiden’s objective is to deliver stable, predictable returns.
Our focus on delivering long-term non-catastrophic rein-
surance capital solutions for our clients enables us to avoid
much of the volatility of market cycles and the dramatic per-
formance swings experienced by more catastrophe-focused
reinsurers.

By providing coverage at lower attachment points, the
business we write tends to be data rich, actuarially credible and
therefore more predictable.

Maiden seeks to build long-term partnerships with our cus-
tomers. We prefer to be their primary reinsurer, providing a large
portion of their reinsurance needs. Our emphasis on long-term
relationships has resulted in a stable book of business with a
retention rate of 97% for our treaty customers in 2011.

The core of our platform has a 28-year history, with steady
client relationships that average better than 6 years in length
and many enjoy more than 15 years of continuity. In fact, several
members of Maiden’s senior management team, including our
CEO and CFO, have a long history as former leaders of the
GMAC reinsurance and insurance businesses.

Our focus on regional and specialty insurers allows us to
develop a balanced underwriting portfolio that is well diversified
by geography and line of business.

We invest the time to learn each client’s business in
depth. Each account is served by a multi-functional team of
professionals, including underwriters, actuaries, accountants
and claims personnel. By working closely with our clients, we
provide customized reinsurance products. We help our clients
identify new opportunities and provide value-added services
above and beyond the reinsurance contract.

Beyond the strength of Maiden’s balance sheet, we provide
exceptional financial stability through our fully collateralized
Dedicated Financial Trusts. Each client with more than
$1 million of liabilities is provided an individually segregated
trust account, backed by highly rated and liquid assets. This
unique product provides full transparency and generates
exceptional customer loyalty.

Maiden’s disciplined business model has maintained profitable
underwriting results every year since our formation. Our princi-
pal operating subsidiaries are rated A- (Excellent) by A.M. Best
and BBB+ (Good) by Standard & Poor’s.

in $ millions net premiums written

1 Personal Auto $508
2 Workers’ Compensation $318
3 Other Liability $205
4 Commercial Auto $185
5 Warranty $108
6 European Hospital Liability $95
7 Fire, Allied Lines and Inland Marine $88
8 Commercial Multi-Peril $71
9 Other Lines $58
10 Homeowners $45
11 Accident & Health $43

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Diversified Reinsur ance. Our Diversified Reinsurance
segment largely consists of Maiden Re, our U.S. platform, which
primarily provides property and casualty reinsurance for regional
and specialty insurers in the United States. Our clients typically
focus on providing personal auto, homeowners, commercial auto,
commercial multi-peril, general liability, and workers’ compensation
insurance. We provide treaty and facultative reinsurance support
on either a quota share or excess of loss basis.

The 2010 acquisition of GMAC International Insurance Services Ltd.
(“IIS”) brought a significant new international platform to our
Diversified Reinsurance operations. IIS works with original equip-
ment automobile manufacturers and related credit providers to
design and implement personal auto and credit life insurance
programs. In most cases, these insurance programs are under-
written with local insurance companies with IIS providing rein-
surance products and business development support. Based
in the U.K., the bulk of the IIS business is currently generated in
Europe and is underwritten through our Bermuda operations.

In 2011, the Diversified Reinsurance segment generated $748.4
million in earned premium at a combined ratio of 97.1% . It
accounted for a total of 48.3% of Maiden’s 2011 earned premium.

Str ategic Relationships. Maiden maintains multi-
year quota share agreements with two specialty insurers,
AmTrust Financial Services, Inc. (“AmTrust”) and American
Capital Acquisition Corporation (“ACAC”). These agreements

provide a solid foundation of predictable longer-term revenues
with profitable growth characteristics.

AmTrust. AmTrust is our largest client and the majority of the
relationship involves a 40% quota share agreement on a highly
diversified portfolio of business. AmTrust’s business is comprised
of small commercial business insurance, including workers’ com-
pensation, commercial package and other commercial lines,
as well as specialty risk and extended warranty coverage for
consumer and commercial goods. A significant portion of our
business with AmTrust is renewable every three years. In 2011,
Maiden expanded its relationship to include AmTrust’s European
Hospital Liability business, which is evaluated annually for renewal.

ACAC. ACAC is Maiden’s second-largest customer and is a
successful personal auto insurance company and former GMAC
Insurance personal lines unit. In 2010, Maiden entered into a
multi-year 25% quota share agreement with ACAC for its $1.2
billion portfolio that focuses on providing personal auto insurance
in select U.S. markets.

In 2011, Maiden’s AmTrust segment produced $558.2 million of
earned premium at a combined ratio of 97.3% , and the ACAC
quota share produced $245.8 million of earned premium at a
combined ratio of 97.7% .

in $ millions

$1,030 $1,228 $1,724

in $ millions

$677

$750

$769

in $

$9.62

$10.40 $10.64

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Maiden’s results demonstrate continued
underwriting discipline and sound risk management
against a backdrop of significant volatility in
the reinsurance sector.

9.2%

We are pleased to report Maiden’s considerable progress in

Business Development Maiden was formed on the simple

2011 as we continue to profitably build our business. While 2011

premise that by providing secure reinsurance capital support for

proved to be a very challenging year across the reinsurance sec-

small to mid-sized companies we could produce more stable

tor, for Maiden our highly differentiated business strategy of

and predictable performance than that of traditional reinsurers.

focusing on serving the non-catastrophe reinsurance needs of

This model is less capital intensive than the business models of

our regional and specialty insurer clients served us well. In 2011,

other reinsurers and as a result provides Maiden with the

Maiden delivered solid operating earnings which produced an

opportunity to produce consistent and stronger returns on that

operating return on equity of 9.2% while continuing the profit-

capital over time. In 2011, Maiden enjoyed significant year-on-

able expansion of our underwriting portfolio, which generated a

year growth in written premium, reflecting the results of strate-

98.1% combined ratio. These results are dramatically different

gies implemented over the past several years. This growth has

from the vast majority of reinsurance industry participants who

come from our Diversified Reinsurance segment—which includes

experienced significant volatility and in many cases underwriting

our U.S. underwriting unit, Maiden Re; our international business

losses from the extraordinary catastrophic loss events of 2011.

development team, Maiden IIS; and our Bermuda reinsurance

More importantly, these results reflect continued successful

development of our low-volatility, stable operating performance

business model. At Maiden, our focus is to deliver customized

reinsurance solutions that produce consistent capital support for

our clients while maintaining underwriting discipline. In doing so,

company, Maiden Bermuda—as well as growth in our relation-

ship with our largest client, AmTrust. Finally, our ACAC personal

auto quota share reinsurance support of the former GMAC

Insurance personal lines unit reflected a full year of written

premium in comparison to a partial year in 2010.

we are focused on providing superior service, exceptional security,

At Maiden Re, in the U.S., our growth came through a combi-

and a commitment to assisting our clients to grow and prosper.

nation of expanding our relationships with existing clients and

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gaining a select number of new accounts. Written premium

premiums written of $798.0 million. This continues to be our

grew by 33.4% from the prior year to $669.0 million. In our

fastest-growing business segment.

regional insurer target market segment, we have worked with

many companies who have been re-evaluating their capital needs

and their reinsurance programs. Some of this activity has been

stimulated by the impact of the significant frequency of weather

losses in the second quarter. We believe that Maiden Re is very

well positioned to continue to assist companies to respond to

the growing challenges in the market in 2012 and beyond.

Our AmTrust relationship continues to strengthen and diversify.

In 2011, reflecting AmTrust’s continued successful expansion of

its business model, our written premium with AmTrust grew

from $468.0 million in 2010 to $669.3 million in 2011. In addition,

recognizing a shifting business mix, we negotiated a favorable 1%

reduction in the ceding commission for 2011. Beyond the growth

emanating from AmTrust’s core business, Maiden also entered

Internationally, we successfully integrated our acquisition of

into a 40% quota share contract to reinsure AmTrust’s success-

the GMAC International Insurance Services Ltd. (renamed

ful and profitable expansion into European Hospital Liability.

“Maiden IIS”) reinsurance business development team. This

unique business platform works with insurer partners and

automobile manufacturers to develop branded personal auto

insurance programs in select markets in Europe. Maiden IIS

provides reinsurance support, marketing and distribution exper-

tise, and product development skills. In 2011 we enjoyed a full

year of writings from the acquired platform and underwriting

Finally, our ACAC personal auto reinsurance relationship reflects

year-on-year written premium growth of 24.6% , for a 2011 total

of $256.2 million. This growth largely reflects the full-year impact

of this account, which incepted in March 2010. The ACAC

business is profitably meeting expectations and Maiden contin-

ues to service and develop this important client relationship.

portfolio. Impor tantly, all significant customer relationships were

Of course, the growth in written premium drives growth in

transitioned to Maiden and have been renewed for 2012. Year-

earned premium, which we are confident will translate into

on-year written premium grew from $29.6 million in 2010 to

enhanced earnings. Year-on-year earned premium grew to

$105.8 million in 2011, reflecting the full-year benefit of the

$1.552 billion from $1.170 billion.

acquisition. We believe that this team is well positioned to

continue to serve the needs of its auto manufacturer clients.

In addition, we plan to begin the implementation of the Euro-

pean expansion of our regional- and specialty-insurer-based

reinsurance model in 2012. We will build this portfolio carefully

and prudently, given the challenges currently impacting the

global economy. In total, our Diversified Reinsurance segment

experienced year-on-year growth of 44.0% , resulting in net

Performance Consistent with Maiden’s operating model, we

continued to maintain profitable results while much of the

broader industry suffered underwriting losses. Across the rein-

surance industry, global natural hazard catastrophe losses

reached a record $105 billion. As expected, Maiden did not

suffer from the majority of these events. Maiden did, however,

experience an elevated level of weather-related loss activity in

3.4% a

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the U.S., largely driven by an historically unprecedented frequency

of events. In total, Maiden experienced $9.5 million of unex-

pected weather-related losses during the second quarter of

2011. Nevertheless, Maiden continued to maintain underwriting

profitability in each of the year’s four quarters. We ended the

year with a combined ratio of 98.1% , two percentage points

above our target, reflecting the elevated level of weather losses

and a change in business mix. The variation in business mix was

recognized midway through the year and resulted in a favorable

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levels. Considering the ongoing global economic uncertainty, we

Our focus on our core targets of 10% compounded annual pre-

expect to continue to maintain careful risk management in lieu

mium growth rate, improvement in ROE to reach a stable 15%

of chasing higher yield and higher risk. Given our low-risk under-

over the next several years, a combined ratio of 96% or better,

writing and asset portfolio and our focus on predictability versus

and maintaining an operating expense ratio of less than 4% remain

volatility, we believe that we are well capitalized to continue

unchanged. As always, we are focused on delivering strong per-

taking advantage of opportunities in the market.

formance for our shareholders and high quality reinsurance solu-

2012 and Beyond Today, Maiden stands well positioned for

tions and services to our clients.

continued successful expansion. In the U.S., we believe that as in

Finally, we are grateful for the significant efforts of the Maiden

2011, our target market will continue to seek additional capital

team to continue to build our profitable, highly differentiated

support. We are encouraged by the efforts of insurers in the U.S.

franchise and advance our unique business model. We would

to strengthen rate levels in the latter half of 2011. We are cau-

also like to thank our shareholders for their continuing confi-

tiously optimistic that these efforts will continue in view of a

dence and support.

challenging investment environment and poor underwriting

results. In Europe, pending implementation of Solvency II and its

risk-based capital rules, we expect a gradual increase in demand

for capital solutions for small to mid-sized regional and specialty

insurers. We continue to move forward with our plans to cau-

tiously build a European portfolio by delivering financially effi-

cient reinsurance solutions. Our strategic relationships with

AmTrust and ACAC continue to deliver stable earnings and

value, and we stand ready to support their capital needs.

Ultimately, across the platform, we will not sacrifice underwrit-

ing discipline for revenue growth.

Arturo M. Raschbaum

President and Chief Executive Officer

Our objective in 2012 will be focused on increasing underwriting

margins while continuing to build our portfolio of invested assets.

Barry D. Zyskind

Chairman of the Board

$768.6

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“O

”

A Focus on Stable, Predictable Returns When Maiden

Disciplined Underwriting, Efficient Operations Our

Holdings was launched in 2007, the Company was dedicated

diversified, low-volatility portfolio and our stable, long-term

to a strategy that would set it apart from other reinsurers.

relationships combine with disciplined underwriting and

Our philosophy is to build long-term, stable relationships

keen risk management to produce solid results. Despite our

with regional and specialty insurers, and focus on achieving

rapid growth, we refuse to book business that does not meet

steady, predictable returns by avoiding the very volatile wide

our stringent risk-adjusted return criteria. Financially, we main-

swings of profit and loss that accompany catastrophe cover-

tain a strong balance sheet while optimizing the use of our

age. Maiden specializes in meeting our clients’ working-layer

capital. We structure our portfolio so that even a one-in-250-

reinsurance needs, participating at lower attachment points

year return period catastrophic event would not expose us to

with customized solutions to meet their long-term capital

a loss greater than our annual net income, and in 2011 our

needs. Importantly, Maiden strives to be the most significant

probable maximum loss was modeled to be significantly

reinsurance relationship to its clients. In effect, Maiden has

below that level.

become a trusted partner with our clients in their ongoing

business. We learn their business intimately and develop a

close, data-rich understanding of their exposures. Our strategy

has resulted in a lower-risk portfolio of predictable losses

and more reliable outcomes.

Operationally, we are focused on efficiency. The acquisition

in late 2008 of GMAC RE gave Maiden a scalable infrastruc-

ture, with high quality people and systems, which otherwise

would have taken years and tremendous cost to develop. We

continue to leverage the platform effectively, with our growth

Our 2011 results validate this strategy. In a world of financial

in expenses comfortably less than our healthy growth in

turmoil and in a cyclical industry wracked by the extreme

revenues. Moreover, we are adamant about keeping our

conditions of hurricanes, tornadoes, wind storms and

costs low. At 3.5% , our general and administrative expense

ear thquakes, Maiden consistently achieved quar ter-to-

ratio, excluding non-recurring items, is one of the best in

quarter underwriting profitability; this is an accomplishment

our industry.

we have maintained since our inception.

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Knowing Our Customers’ Business At Maiden, we

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Headquartered in Bermuda, Transacting Worldwide

additional international markets. For instance, the U.K. market

The global reinsurance industry is highly competitive, yet

has become more attractive as the environment for auto

Maiden continues to find attractive opportunities to expand

insurers has improved, and Latin America, where Maiden

its geographical footprint and diversify its lines of business, both

this year received its first license for conducting reinsurance

in its main North American market and overseas. In 2011,

business in Chile, promises excellent growth potential.

Maiden experienced exceptional growth with the integration

of the operations and renewal rights of U.K.-based GMAC IIS

(now called Maiden IIS). This European-focused business was

acquired towards the end of 2010. Additional growth has

been achieved by adding new clients and deepening our

relationships with existing clients.

Gaining More of Our Clients’ Business Maiden has

always believed in the maxim that your best customer is

the one you already have. One of the year’s highlights was

the expansion and enhancement of existing relationships

at Maiden Re in the U.S. In addition, we expanded our

AmTrust relationship by extending the term of our profit-

A New International Platform and Portfolio Following

able multi-year contract and by negotiating a new 40%

its acquisition by Maiden, IIS has maintained its strong position

quota share participation in AmTrust’s developing European

in the European personal auto market. Going forward, with

Hospital Liability business. This new contract renews on an

access to Maiden’s extensive capabilities and resources, the

annual basis.

IIS team is well positioned to expand their unique business

model. IIS works both with insurers and auto manufacturers

to capitalize on insurance sales opportunities to the con-

sumer at the point of auto purchase. During the year, Maiden

successfully negotiated a novel cooperation agreement with

the Opel Dealers Association in Germany, providing them

equity participation and further incentivizing them to build

the business. Moreover, the IIS acquisition, which brought

sig nificant operational and human resources to the Maiden

organization, presents a singular platform for expansion into

Looking Forward As we look to the future, we believe

that the advent of Solvency II, which will impose more

stringent capital requirements on insurers seeking to con-

duct business worldwide, will lead our regional and specialty

insurance clients to seek ways to bolster their capital, espe-

cially as recent catastrophes have consumed considerable

amounts of industry capacity. This should encourage Euro-

pean regional and specialty insurers to turn to Maiden, and

our financial strength, to secure the capital they need.

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A Shareholder-Focused Company Every aspect of

conservative stance, investing primarily in U.S. government

Maiden’s business model, from our diversified, low-volatility

agency mortgage-backed securities and high-grade corporate

underwriting portfolio to the prudent manner in which we

bonds, of relatively short duration. Our portfolio contained

allocate capital and manage our invested assets, is aimed at

no debt obligations related to the governments of Italy,

rewarding our shareholders with stable returns. We remain

Greece, Portugal or Spain, which experienced such extreme

focused on achieving our medium-term return on equity

volatility during the year, nor did we own any equity or

target of 15% . While admittedly this objective is a challenge

alternative investments.

in the current interest rate environment, in 2011 we achieved

an operating ROE of 9.2% , making Maiden one of the few

reinsurers with favorable returns. In the medium term we

will focus on improving our returns through disciplined

underwriting, increasing investable assets and reducing our

cost of capital with the eventual refinancing of our trust

preferred securities.

One of the year’s highlights was the repurchase of $107.5

million of junior subordinated debt with a 14% coupon, and

the issuance of a like amount of 8.25% senior notes. This

resulted in immediate cash charges of approximately $15.1

million but will bring significant interest-rate savings in the

years ahead. We estimate that the lower cost of capital

which resulted from the partial debt refinancing equates to

We have progressively increased our book value since

expense savings of over $6 million per year.

inception, and at the end of 2011 it had risen to $10.64 per

share, up 2% from the previous year. At the same time, we

continued to pay our shareholders an attractive dividend yield,

which was 3.4% on an annualized basis as of the end of 2011.

Optimizing Our Strong Balance Sheet We are con-

stantly striving to optimize the use of our balance sheet.

The challenge is to leverage it effectively while protecting

its strength. The predictable, lower volatility nature of our

Conservative Capital Management The rapid growth

reinsurance portfolio enables us to effectively utilize our

of our business brought a large influx of investable assets,

capital but we are mindful not to overreach. Our objective

but the uncertain financial markets and low-interest-rate

is to have ample resources for the needs of the present as

environment once again presented a significant investment

well as the flexibility to take advantage of attractive oppor-

management challenge. We continued to maintain a

tunities that we envision will arise in the coming years.

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Maiden is very well
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K
MAIDEN HOLDINGS, LTD.

TABLE OF CONTENTS

PART I

Item 1.

Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1A.

Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 1B. Unresolved Staff Comments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 2.

Item 3.

Item 4.

Item 5.

Item 6.

Item 7.

Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Selected Financial Data. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Management’s Discussion and Analysis of Financial Condition and Results of
Operation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . .

Item 8.

Item 9.

Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . .

Changes in and Disagreements with Accountants on Accounting and Financial
Disclosure. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9A.

Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10.

Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . .

Item 11.

Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 12.

Security Ownership of Certain Beneﬁcial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 13.

Certain Relationships and Related Transactions, and Director Independence . . . . . . .

Item 14.

Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

118

120

121

123

Item 15.

Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

124

PART IV

This page intentionally left blank.

Special Note About Forward-Looking Statements

PART I

Certain statements in this Annual Report on Form 10-K, other than purely historical

information,
including estimates, projections, statements relating to our business plans, objectives and expected operating
results and the assumptions upon which those statements are based are forward-looking statements within the
meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933,
as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking
statements include in general statements both with respect to us and the insurance industry and generally are
‘‘intend,’’ ‘‘plan,’’
identiﬁed with the words ‘‘anticipate,’’ ‘‘believe,’’ ‘‘expect,’’ ‘‘predict’’,
‘‘project,’’ ‘‘seek,’’ ‘‘potential,’’ ‘‘possible,’’ ‘‘could,’’ ‘‘might,’’ ‘‘may,’’ ‘‘should,’’ ‘‘will,’’ ‘‘would’’, ‘‘will be’’,
‘‘will continue’’, ‘‘will likely result’’ and similar expressions. In light of the risks and uncertainties inherent in
all forward-looking statements, the inclusion of such statements in this Annual Report on Form 10-K should
not be considered as a representation by us or any other person that our objectives or plans or other matters
described in any forward-looking statement will be achieved. These statements are based on current plans,
estimates assumptions and expectations. Actual results may differ materially from those projected in such
forward-looking statements and therefore you should not place undue reliance on them. Important factors that
could cause actual results to differ materially from those in such forward-looking statements are set forth in
Item 1A ‘‘Risk Factors’’ in this Annual Report on Form 10-K and include but are not limited to:

‘‘estimate’’,

•

Our results will ﬂuctuate from period to period and may not be indicative of our long-term
prospects;

The property and casualty reinsurance and insurance markets may be affected by cyclical trends;

Rating agencies may downgrade or withdraw our ratings;

Loss of key executives could adversely impact our ability to implement our business strategy;

• We may have difficulty integrating acquisitions;

•

Our use of reinsurance brokers in contract negotiations and production of business;

Our inability to achieve our investment objectives; and

Our controlling shareholders’ ability to determine the outcome of matters requiring shareholder
approval.

We caution that the foregoing list of important factors is not intended to be and is not exhaustive. We
undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of
new information, future events or otherwise, except as may be required by law, and all subsequent written and
oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualiﬁed in
their entirety by this paragraph. If one or more risks or uncertainties materialize, or if our underlying
assumptions prove to be incorrect, our actual results may vary materially from what we projected. Any
forward-looking statements in this Annual Report on Form 10-K reﬂect our current view with respect to future
events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results
to place undue reliance on the
of operations, growth, strategy and liquidity. Readers are cautioned not
forward-looking statements which speak only as of the dates of the documents in which such statements
were made.

References in this Annual Report on Form 10-K to the terms ‘‘we,’’ ‘‘us,’’ ‘‘our,’’ ‘‘the Company’’ or other
similar terms mean the consolidated operations of Maiden Holdings, Ltd. and our consolidated subsidiaries,
unless the context requires otherwise. References in this Annual Report on Form 10-K to the term ‘‘Maiden
Holdings’’ or ‘‘Maiden’’ means Maiden Holdings, Ltd. only. References in this Annual Report on Form 10-K to
$ are to the lawful currency of the United States, unless otherwise indicated. Any discrepancies in the tables
included herein between the amounts listed and the totals thereof are due to rounding.

Item 1. Business.

General Overview

We are a Bermuda-based holding company, primarily focused on serving the needs of regional and
specialty insurers in the United States and Europe by providing innovative reinsurance solutions designed to
support their capital needs. We also provide customized reinsurance solutions internationally to clients in
support of programs we design and implement for original equipment automobile manufacturers (‘‘OEM’s’’).
We specialize in reinsurance solutions that optimize ﬁnancing by providing coverage within the more
predictable and actuarially credible lower layers of coverage and/or reinsuring risks that are believed to be
lower hazard, more predictable and generally not susceptible to catastrophe claims. Our tailored solutions
include a variety of value added services focused on helping our clients grow and prosper. Our principal
operating subsidiaries in Bermuda and the United States are rated ‘‘A-’’ (Excellent) with a stable outlook by
A.M. Best Company (‘‘A.M. Best’’), which rating is the fourth highest of 16 rating levels, and BBB + (Good)
with a stable outlook by Standard & Poor’s, which is the sixth highest of 21 rating levels. Our common shares
trade on the NASDAQ Global Market under the symbol ‘‘MHLD.’’

We provide reinsurance through our wholly owned subsidiaries, Maiden Reinsurance Company (‘‘Maiden
US’’) and Maiden Insurance Company Ltd. (‘‘Maiden Bermuda’’) and have operations in the United States
and Bermuda. On a more limited basis, Maiden Specialty Insurance Company (‘‘Maiden Specialty’’), a wholly
owned subsidiary of Maiden US, provides primary insurance on a surplus lines basis focusing on
non-catastrophe property and inland marine. Maiden Bermuda does not underwrite any primary insurance
business. Internationally, we provide reinsurance-related services through Maiden Global Holdings Ltd.
(‘‘Maiden Global’’) and its subsidiaries. Maiden Global primarily focuses on providing branded auto and
credit life insurance products through its insurer partners to retail customers in the European Union and other
global markets, which also produce reinsurance programs which are underwritten by Maiden Bermuda. Certain
international credit life business is also written directly by Maiden Life Försäkrings AB (‘‘Maiden LF’’), a
wholly owned subsidiary of Maiden Holdings, as part of Maiden Global’s service offerings.

Since our founding in 2007, we have entered into a series of signiﬁcant strategic transactions that have
transformed the scope and scale of our business while keeping our low volatility, low-catastrophe risk proﬁle
intact. These transactions have increased our net premiums written to in excess of $1.7 billion while
in order to extend our business platform both in the U.S. and internationally
strengthening our capital
and include:

•

Entering into a quota share reinsurance agreement with AmTrust Financial Services,
(‘‘AmTrust’’) in 2007 (the ‘‘AmTrust Quota Share’’);

Inc.

Acquiring and expanding the reinsurance operations of GMAC Insurance from GMACI Holdings,
LLC in 2008 (the ‘‘GMAC Acquisition’’);

Completing a private placement of trust preferred securities of approximately $260.1 million in 2009
(the ‘‘TRUPS Offering’’);

Entering into a quota share reinsurance agreement with American Capital Acquisition Corporation
(‘‘ACAC’’) in 2010 (the ‘‘ACAC Quota Share’’);

Acquiring the majority of the reinsurance-related infrastructure, assets and liabilities of U.K.-based
GMAC International Insurance Services, Ltd. (‘‘GMAC IIS’’) in 2010 (the ‘‘IIS Acquisition’’); and

Completing a public debt offering of $107.5 million in June 2011 (‘‘Senior Notes Offering’’) and
repurchasing a like amount of the junior subordinated debt in July 2011. These debt securities trade
on the New York Stock Exchange under the symbol ‘‘MHNA.’’

Additional information on the AmTrust Quota Share and the ACAC Quota Share can be found in this
section of the Annual Report Form 10-K captioned ‘‘Our Operating Segments.’’ Please also see the section
entitled ‘‘Management’s Discussion and Analysis of Financial Condition and Results of Operations’’ in this
Annual Report on Form 10-K along with Note 4 to our Consolidated Financial Statements for additional

information about the IIS Acquisition. Note 8 to our Consolidated Financial Statements contains information
about the TRUPS Offering, the completion of the Senior Notes Offering and the repurchase of the junior
subordinated debt.

Business Strategy

Our goal is to leverage the competitive strengths of our organization and capital structure to generate
stable long term returns on capital in excess of 15%. We seek to accomplish this by becoming a premier
global preferred provider of customized reinsurance products and services to regional and specialty insurance
companies. To achieve this goal, we have adopted the following strategies:

•

Dedication to Predictable and Stable Operating Segments — we execute this strategy in two ways:
(1) focusing on traditional, lower volatility insurance lines of business that are more predictable and
thus produce more stable long-term operating results and which require less capital to achieve those
goals; and (2) placing emphasis on working layer and pro rata reinsurance participations where data
is more abundant and predictable;

Targeted Customer Focus — we execute this strategy by developing signiﬁcant and long term
reinsurance relationships with targeted regional and specialty insurance companies for which
reinsurance plays a critical element of their capital structure and supporting the long term needs of
these companies by providing differentiated reinsurance products as well as an array of support
services; and

Effıcient Operating Platform — recognizing the mature nature of the reinsurance market, we are
focused on maintaining operating expense ratios within the top quartile of the industry. Efficiency is
a critical component of maintaining a disciplined underwriting approach.

Our future results, and our ability to generate our targeted return on capital, may be impacted by risks

and trends set forth in Item 1A, ‘‘Risk Factors,’’ and elsewhere in this Annual Report on Form 10-K.

Our Principal Operating Subsidiaries

Maiden Bermuda is a registered Class 3B Bermuda insurance and reinsurance company that began
operations in June 2007. Senior management and all of the staff of Maiden Bermuda are located in our
Bermuda headquarters.

Maiden Holdings North America, Ltd. (‘‘Maiden NA’’) is our wholly owned intermediate U.S. holding
company and is domiciled in the state of Delaware. Maiden NA issued the underlying securities associated
with our TRUPS Offering and the Senior Notes Offering.

Maiden US, a direct wholly owned subsidiary of Maiden NA,

is a licensed property and casualty

insurance company domiciled in the state of Missouri.

Maiden Specialty, a wholly owned subsidiary of Maiden US and an indirect wholly owned subsidiary of

Maiden NA, underwrites primary insurance on a surplus lines basis.

Maiden Re Insurance Services, LLC (‘‘Maiden Re’’), a wholly owned subsidiary of Maiden NA, is a
limited liability company organized in the state of Delaware in January 2008. Maiden Re operates as a
managing general agent and underwriter for Maiden US.

Maiden Global, a wholly owned subsidiary, operates as a reinsurance services and holding company.

Maiden Global is organized under the laws of England and Wales and formed in July 2010.

Opel Händler VerisicherungsService GmbH (‘‘OVS’’), previously known as GMAC VersicherungsService
is organized under the laws of Germany, operates as an insurance producer in
GmbH (‘‘Maiden VS’’),
in exchange for a
Germany and is an indirect subsidiary of Maiden Global. On September 1, 2011,
10% interest in Maiden VS, we entered into cooperation agreements with VDOH Wirtschaftsdienst GmbH
(‘‘Opel Dealer Association’’) in Germany and the German auto manufacturer Opel. We also renamed Maiden
VS to ‘‘Opel Händler VersicherungsService GmbH’’ on that date as well.

Maiden LF, a wholly owned subsidiary, is a life insurer organized under the laws of Sweden and writes

credit life insurance on a primary basis in support of Maiden Global’s business development efforts.

Our Operating Segments

We operate through three business segments: (i) Diversiﬁed Reinsurance; (ii) AmTrust Quota Share

Reinsurance; and (iii) ACAC Quota Share.

Our 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 the IIS Acquisition. The business associated with the GMAC Acquisition is
underwritten by Maiden US and Maiden Specialty. 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.

Our AmTrust Quota Share Reinsurance segment consists of the business ceded to us pursuant to our
Quota Share Reinsurance Agreement (the ‘‘Master Agreement’’) with AmTrust and, commencing April 1,
2011, business ceded to us under a separate one-year 40% quota share agreement (the ‘‘European Hospital
Liability Quota Share’’) with AmTrust Europe Limited and AmTrust International Underwriters Limited to
cover those entities medical liability business in Europe, substantially all of which is in Italy.

Our ACAC Quota Share segment consists of the business ceded to us pursuant to our agreement with
ACAC which, through its affiliates, cedes approximately 25% of its business to us pursuant to a quota share
reinsurance agreement.

Financial data relating to our three segments is included in Item 7. ‘‘Management’s Discussion and
Analysis of Financial Condition and Results of Operations’’ and in Note 3 to our Consolidated Financial
Statements included in this Annual Report on Form 10-K. The net premiums written and earned in each
segment for the years ended December 31, 2011, 2010 and 2009 were as follows:

2011

For the Year Ended December 31,
2010

2009

Net
Premiums
Written
($ in Millions)
$ 798.0

669.3
256.2
$1,723.5

% of
Total

46.3%

38.8%
14.9%
100.0%

Net
Premiums
Written
($ in Millions)
$ 554.1

468.0
205.7
$1,227.8

% of
Total

45.1%

38.1%
16.8%
100.0%

Net
Premiums
Written
($ in Millions)
$ 658.0

372.4
—
$1,030.4

2011

For the Year Ended December 31,
2010

2009

Net
Premiums
Earned
($ in Millions)
$ 748.4

558.2
245.8
$1,552.4

% of
Total

48.3%

35.9%
15.8%
100.0%

Net
Premiums
Earned
($ in Millions)
$ 601.2

445.1
123.5
$1,169.8

% of
Total

51.5%

38.0%
10.5%
100.0%

Net
Premiums
Earned
($ in Millions)
$568.0

351.9
—
$919.9

% of
Total

63.9%

36.1%
—%
100.0%

% of
Total

61.7%

38.3%
—%
100.0%

Diversiﬁed Reinsurance . . . . .
AmTrust Quota

Share Reinsurance . . . . . . .
ACAC Quota Share . . . . . . . .
Total . . . . . . . . . . . . . . . . . .

Diversiﬁed Reinsurance . . . . .
AmTrust Quota

Share Reinsurance . . . . . . .
ACAC Quota Share . . . . . . . .
Total . . . . . . . . . . . . . . . . . .

A substantial majority of our premium written is generated by proportional reinsurance contracts, which
are described in the General section of the Diversiﬁed Reinsurance segment below. For the years ended
December 31, 2011, 2010 and 2009, 80.7%, 79.6% and 68.3%, respectively, of our consolidated gross
reinsurance contracts. This signiﬁcant concentration of
premiums written is derived from proportional

proportional reinsurance, combined with our focus on lines of business which are inherently less volatile,
results in a less capital intensive business which enables the Company to target higher returns on equity for
its shareholders.

Financial data relating to geographic areas in which we operate and principal products may be found in

Note 3 to our Consolidated Financial Statements included in this Annual Report on Form 10-K.

Diversiﬁed Reinsurance

General

The Diversiﬁed Reinsurance segment of our reinsurance business consists of a varied portfolio of
property and casualty and accident and health reinsurance business focusing on regional and specialty property
and casualty insurance companies located in the United States and Europe. Since July 1, 2009, this business is
primarily written by Maiden US. On November 30, 2010, the business associated with the IIS Acquisition
became part of this segment and is underwritten by Maiden Bermuda, with the exception of certain credit life
policies written by Maiden LF, which are not material to the overall results of the segment in both 2011
and 2010.

It also includes the net premiums written of Maiden Specialty, which are not material to the overall
results of the segment. The reinsurance written by Maiden US is primarily written through treaties with other
insurers on a quota share or excess of loss basis, as well as on a facultative basis, all of which are marketed
primarily through third-party intermediaries and also on a direct basis. Maiden Bermuda also provides quota
share reinsurance support to Maiden US and Maiden LF.

In a proportional reinsurance arrangement (also known as pro rata reinsurance, quota share reinsurance or
participating reinsurance), the reinsurer shares a proportional part of the original premiums of the reinsured. In
return, the reinsurer assumes a proportional share of the losses incurred by the cedant. The reinsurer pays the
ceding company a commission, which is generally based on the ceding company’s cost of acquiring the
business being reinsured (including commissions, premium taxes,
and miscellaneous
administrative expenses) and may also include a proﬁt sharing arrangement. Under proportional reinsurance
contracts, ceding commission is often adjustable based upon loss experience which potentially reduces
earnings volatility under such arrangements.

assessments

Non-proportional (or excess of loss) reinsurance indemniﬁes the reinsured against all or a speciﬁed
portion of losses on underlying insurance policies in excess of a speciﬁed amount, which is called a level,
retention or attachment point. Non-proportional business is written in layers and a reinsurer or group of
reinsurers accepts a band of coverage up to a speciﬁed amount. The total coverage purchased by the cedant is
referred to as a program and is typically placed with predetermined reinsurers in pre-negotiated layers. Any
liability exceeding the upper limit of the program reverts to the ceding company.

Facultative reinsurance (proportional or non-proportional) is the reinsurance of individual risks. The
reinsurer separately rates and underwrites each risk rather than assuming all or a portion of a class of risks as
in the case of treaty reinsurance.

A combination of general market and competitive conditions, along with the underlying ﬁnancial
performance and capital levels of individual ceding companies, including those considered by rating agencies
and regulators, often inﬂuence reinsurance purchasing decisions of individual ceding companies. Historically,
Maiden US has written greater amounts of quota share business than excess of loss business reﬂecting the
needs of its clients. For the years ended December 31, 2011, 2010 and 2009, 53.6%, 52.9% and 48.8% of
Maiden US’ gross premiums written was written on a quota share basis, respectively.

Maiden US began operations in 1983 through Maiden Re (previously GMAC RE LLC or ‘‘GMAC RE’’).
Since its inception,
the business has focused on developing a portfolio of assumed reinsurance with an
emphasis on relatively predictable reinsurance with low limits of participation on both a treaty and facultative
basis. By design, the underwriting portfolio was developed to mitigate volatility and generate stable operating
performance. Our underwriting strategy has de-emphasized property catastrophe reinsurance and participations
the
in more volatile casualty lines such as D&O and professional
underwriting infrastructure and capabilities were expanded to include an accident and health reinsurance

liability. Over its years in operation,

portfolio, a specialty oriented property and casualty reinsurance and property excess and surplus lines
insurance business and, the most signiﬁcant portfolio, a regional and specialty oriented property and casualty
treaty reinsurance business.

We employ sophisticated risk management, disciplined actuarially based pricing and strong technical
underwriting in developing and maintaining this portfolio. We use both proprietary and vendor developed
technology systems to administer and manage the portfolio. The business has been carefully developed under
the active management of multi-functional underwriting teams with performance accountability. The entire
related infrastructure of Maiden Re was acquired in the GMAC Acquisition and added to existing capabilities
along with over 80 active client relationships. We are using this acquired infrastructure to continue to expand
and develop the North American underwriting portfolio.

For certain clients, Maiden Re provides enhanced security in the form of an internally developed
dedicated trust agreement for the reinsurance balances payable to that client. We believe this reinsurance
is both attractive to new clients and
security provides us with a sustainable competitive advantage that
improves retention of existing ones. The trust accounts are funded on an individual client basis with cash and
other ﬁxed maturity securities. We can actively manage the cash and investments in the accounts and any
interest earned is ours and does not remain in the trust accounts. The balances are adjusted quarterly to
correspond to the liabilities owed to the client, including individually computed Incurred But Not Reported
(‘‘IBNR’’) reserves. The clients can withdraw assets from the trusts under contractually limited circumstances.
As at December 31, 2011, we had cash and ﬁxed maturity securities totaling $778.5 million in these
trusts, which is part of the $1.6 billion restricted assets disclosed in Note 5 (e) to our Consolidated
Financial Statements.

The business associated with the IIS Acquisition is written through treaties with other insurers on a quota
share basis, which (as previously noted) are underwritten by Maiden Bermuda, with the exception of business
written through Maiden LF which is underwritten on a primary basis. All of this business is marketed
primarily through Maiden Global’s business development teams who partner with OEM’s and local primary
insurers to design and implement point of sale insurance programs which generate fee income for the auto
manufacturer and insurance premiums for the primary insurer. Typically the primary insurer agrees to reinsure
an agreed upon percentage of the underlying business to Maiden Bermuda as part of the overall arrangement.
Maiden Bermuda is generally not obligated to underwrite the OEM programs Maiden Global designs.

There are transactions where Maiden Global only collects a fee for designing and facilitating the sale of
insurance programs. Our fee income is primarily generated by OVS (previously known as Maiden VS) in
Germany and Austria through its point of sale producers in select OEM dealerships, with other smaller fee
income programs in place globally. We seek to expand these fee generating arrangements through the Maiden
Global business development
in
exchange for a 10% interest in Maiden VS, we entered into cooperation agreements with the Opel Dealer
Association in Germany and the German auto manufacturer Opel. The cooperation agreements with both
organizations are designed to increase the sales of OVS insurance products in Opel dealerships in Germany
and increase fee and other revenues for Opel, the Opel Dealer Association, and Maiden via OVS, respectively.
For the year ended December 31, 2011 and for the period from November 30, 2010 to December 31, 2010,
we earned gross fee income of $12.6 million and $0, respectively. Please refer to Note 3, Segment
Information, for further information regarding the accounting treatment of these fees.

teams contacts with OEM’s globally. As noted on September 1, 2011,

As at December 31, 2010,

there were ﬁfteen reinsurance programs that were part of the business
these programs were novated from
associated with the IIS Acquisition. During 2011,
GMAC International Insurance Company, Ltd. (‘‘GMAC IICL’’) to Maiden Bermuda and one program was
commuted. The remaining program is expected to be novated in 2012.

thirteen of

The net premiums written associated with the IIS Acquisition were written in the following countries:

Germany . . . . . . . . . . . . . . . . . . . . . .
Sweden . . . . . . . . . . . . . . . . . . . . . . .
Chile . . . . . . . . . . . . . . . . . . . . . . . . .
Mexico . . . . . . . . . . . . . . . . . . . . . . .
All other . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . .

% of
Total

For the Year Ended
December 31, 2011
Net
Premiums
Written
($ in Millions)
$ 53.4
8.5
6.4
5.5
32.0
$105.8

50.5%
8.0%
6.0%
5.2%
30.3%
100.0%

The breakdown of this business by line of business is as follows:

Personal Auto . . . . . . . . . . . . . . . . . . .
Credit Life . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . .

For the Year Ended
December 31, 2011
Net
Premiums
Written
($ in Millions)
$ 72.1
33.7
$105.8

% of
Total

68.1%
31.9%
100.0%

For the Period from
November 30 to
December 31, 2010

Net
Premiums
Written
($ in Millions)
$10.6
6.4
2.2
—
10.4
$29.6

% of
Total

35.8%
21.6%
7.4%
—%
35.2%
100.0%

For the Period from
November 30 to
December 31, 2010

Net
Premiums
Written
($ in Millions)
$18.5
11.1
$29.6

% of
Total

62.5%
37.5%
100.0%

The distribution of the premiums written by both country and by line of business for the period
November 30 to December 31, 2010 is not necessarily reﬂective of these respective distributions on a full
calendar year basis. On a geographic distribution basis, Germany historically constitutes a greater proportion
of the overall premiums written, typically over 40%. On a line of business basis, Personal Auto historically
constitutes a greater proportion of the overall premiums written,
typically over 70%. However, future
distributions of premium by country and by line of business may vary from historical experience.

Strategy

Maiden Bermuda and Maiden US are specialty reinsurers with an efficient operating platform that target
lines of business and types of contracts that are more predictable than the market as a whole, allowing
stability of earnings over time. Maiden Specialty primarily provides specialty property coverage written on a
surplus lines basis. Most business is written as reinsurance, that is, insurance of other insurance companies.
The primary focus is regional and specialty customers who rely on reinsurance for capital support and/or to
insurance companies or
reduce their risk. The majority of our customers are regional or super-regional
specialty insurers. With these customers, we believe it is possible to develop long term relationships which
not only survive the insurance market cycles, but provide beneﬁts to both reinsurer and customer during
turbulent times.

In our Diversiﬁed Reinsurance segment, we reinsure property and casualty lines of business, but
de-emphasize lines of business such as professional liability, which we consider more volatile, and we do not
offer traditional catastrophe reinsurance on a stand-alone basis. We occasionally provide limited catastrophe
coverage to customers that purchase other reinsurance from us.

We are primarily a lead reinsurer, meaning that we develop our own terms rather than accepting a small
share of another reinsurer’s program in a subscription market. We try to be the primary, if not sole, reinsurer
for our customers. On business written as part of the IIS Acquisition, Maiden Bermuda is the only reinsurer
on these contracts. Our handling of this business considers the economics of the individual customer and
therefore is less susceptible to large increases and decreases following market cycles. We are able to attract
preferred customers because we offer a secure product and an emphasis on client service. By maintaining

signiﬁcant relationships with customers, we are able to develop strong economies of scale and maintain highly
competitive operating efficiencies, a critical element of our business strategy.

We offer reinsurance on both a quota share basis and excess of loss basis. We believe that our policy of
providing our customers security for our
trusts gives us a
competitive advantage. In the current economic climate, we also believe that reinsurance brokers and insurers,
as well as rating agencies, are scrutinizing the credit-worthiness of reinsurers more closely than in the recent
past and recognize that our trust product offers a high level of security. We also utilize a partnership concept
developed over our twenty-nine year operating history to develop long-term customer relationships. This
concept entails the offer to our customers of our underwriting, claims, actuarial, marketing and accounting
expertise through tailored services which support their businesses and goals.

reinsurance obligations through collateral

Within the primary excess property business underwritten by Maiden Specialty, an experienced and
sophisticated team underwrites complex property business on an excess and layered basis as a surplus lines
insurer. To reduce the exposure to natural catastrophes that some of these policies in this segment may
contain, we purchase catastrophe reinsurance to limit our maximum exposure to any one event. We also
purchase other reinsurance to limit the impact of individual large losses in this segment.

AmTrust Quota Share Reinsurance

General

AmTrust is our largest customer and is a multinational specialty property and casualty insurance holding
company with operations in the United States, Europe and Bermuda. AmTrust’s principal operating
subsidiaries are rated ‘‘A’’ (Excellent) with a stable outlook by A.M. Best, which rating is the third highest of
16 rating levels.

AmTrust has three business segments:

•

Small commercial business insurance, which includes workers’ compensation, commercial package
and other commercial lines produced by retail agents and brokers in the United States;

Specialty risk and extended warranty coverage for consumer and commercial goods and custom
designed coverages, such as accidental damage plans and payment protection plans offered in
connection with the sale of consumer and commercial goods, in the United States, United Kingdom
and certain other European countries; and

Specialty program property and casualty insurance for homogeneous, narrowly deﬁned classes of
insured’s, requiring an in-depth knowledge of the insured’s industry segment.

Under our Master Agreement with AmTrust’s Bermuda reinsurance subsidiary, AmTrust International
Insurance, Ltd. (‘‘AII’’), effective as at July 1, 2007, we reinsure 40% of AmTrust’s written premium (net of
commissions, in the case of AmTrust’s U.K. subsidiary), net of reinsurance with unaffiliated reinsurers, on
AmTrust’s existing lines of business as at the effective date. In addition, we have the option to reinsure future
lines of business added by AmTrust, and we have exercised that option from time to time. The Master
Agreement had an initial term of three years which has been extended for three years through June 30, 2013,
and automatically renews for further successive three year terms thereafter unless either party notiﬁes the
other of its election not to renew not less than nine months prior to the end of any such three year term.

Effective April 1, 2011,

to July 1, 2014, while continuing the automatic three-year renewal subject

the Company entered into a series of contract modiﬁcations with AmTrust
regarding the reinsurance coverage it provides under the Master Agreement, including the ceding commission
arrangements contained within that contract. These changes include: 1) extension of the Master Agreement for
to the
one additional year,
provisions of the contract; 2) a reduction of the ceding commission payable under the Reinsurance Agreement
to 30.0% for the period April 1 to December 31, 2011; and 3) subsequent to December 31, 2011, a provision
which potentially reduces the ceding commission payable based on the mix of business ceded under the
Reinsurance Agreement, excluding business related to the Unitrin Business Insurance (‘‘UBI’’) business to
either 30.5% or 30.0%. 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 Bermuda, run-off, or a reduction of 50% or more of the shareholders’ equity of
Maiden Bermuda or the combined shareholders’ equity of AII and the AmTrust subsidiaries.

On April 1, 2011, the Company entered into the European Hospital Liability Quota Share with AmTrust
Europe Limited and AmTrust International Underwriters Limited to cover those entities’ medical liability
business in Europe, substantially all of which is in Italy. The European Hospital Liability Quota Share has a
term of one year and automatically renews for further one year terms thereafter unless either party notiﬁes the
other of its election in writing not to renew not less than four months prior to the end of any such term. This
contract will automatically renew at April 1, 2012. The Company’s maximum limit of liability is €2 million
and it will pay a ceding commission of 5.0% plus a proﬁt share as deﬁned in the agreement. The proﬁt
sharing is based upon the reinsured exceeding deﬁned underwriting performance of each contract year,
the underwriting
commencing two years after the beginning of each contract year. To the extent
performance is exceeded, the Company will share 50% of the excess amounts computed. Pursuant to the terms
of the European Hospital Liability Quota Share, the Company assumed the in-force and unearned premium as
at April 1, 2011 which totaled $45.9 million. As a result of the additional agreement with AmTrust, this
segment’s name has been renamed AmTrust Quota Share Reinsurance.

that

ACAC Quota Share

General

ACAC is our second largest customer and is an insurance holding company owned by the 2005 Michael
Karfunkel Grantor Retained Annuity Trust (the ‘‘Trust’’), which in turn is controlled by Michael Karfunkel
(‘‘Karfunkel’’),
individually, and AmTrust. ACAC, on March 1, 2010, acquired from GMAC Insurance
Holdings, Inc. and Motors Insurance Corporation (‘‘Motors’’) (collectively, ‘‘GMAC’’), GMAC’s personal
lines automobile business. Karfunkel is a Founding Shareholder of Maiden. In addition, Karfunkel is the
chairman of the board of directors of both ACAC and AmTrust.

to the 50% ACAC Quota Share with the thirteen GMAC personal

On March 1, 2010, Maiden Bermuda entered into a three year 25% quota share reinsurance agreement
with ACAC. Effective March 1, 2010, we reinsure 25% of the net premiums of the GMAC personal lines
business, pursuant
lines insurance
companies, as cedents, and the Company, American Capital Partners Re, Ltd., a Bermuda reinsurer which is a
wholly owned indirect subsidiary of the Trust, and AmTrust, as reinsurers. We have a 50% participation in
the ACAC Quota Share, by which we receive 25% of net premiums of the personal lines business. The
ACAC Quota Share provides that the reinsurers, severally, in accordance with their participation percentages,
shall receive 50% of the net premium of the GMAC personal lines insurance companies and assume 50% of
the related net losses. The ACAC Quota Share has an initial term of three years and shall renew automatically
for successive three year terms unless terminated by written notice not less than nine months prior to the
expiration of the current term.

Notwithstanding the foregoing, our participation in the ACAC Quota Share may be terminated by ACAC
on 60 days written notice in the event the Company becomes insolvent, is placed into receivership, its
ﬁnancial condition is impaired by 50% of the amount of its surplus at the inception of the ACAC Quota Share
or latest anniversary, whichever is greater, is subject to a change of control, or ceases writing new and
renewal business. ACAC also may terminate the agreement on nine months written notice following the
effective date of the initial public offering or private placement of stock by ACAC or a subsidiary. Maiden
Bermuda may terminate its participation in the ACAC Quota Share on 60 days written notice in the event
ACAC is subject to a change of control, cease writing new and renewal business, effects a reduction in their
net retention without Maiden Bermuda’s consent or fails to remit premium as required by the terms of the
ACAC Quota Share.

Risk Management

General

Central to the reinsurance business is the assumption and management of risk. Our risk management
discipline therefore focuses on both quantitative and qualitative elements as the means to achieve targeted
shareholder returns through a balanced analysis and assessment of these elements. The quantitative aspect of

our risk management practice focuses on understanding and controlling a broad array of risk parameters in
order to achieve desired returns. Our business model further mitigates the risk inherent in our business by
focusing on lines of business which are less volatile and thus require less capital to support the exposures
generated by those lines of business. The qualitative aspect of our risk management practice focuses on
identifying and assessing risks, and taking the necessary steps to reduce or mitigate risks, or those risks that
could threaten the achievement of our business objectives.

We believe that we have developed a strong risk management culture within Maiden through the
establishment of various processes and controls which focus on our risk exposures. We are continually
reviewing and enhancing these processes and developing additional processes that may be necessary to
achieve our business strategies and objectives within our risk management practice. Speciﬁc risk management
practices that have been or are being developed to meet our risk management goals include:

•

Tracking portfolio volatility over time;

Identifying risk mitigation opportunities and implementing them as appropriate;

Understanding the capital required to support the underwriting portfolio and individual contracts;

• Monitoring and managing exposure by line of business and geographic concentration;

• Monitoring and limiting catastrophe aggregates and concentrations;

• Monitoring and managing operational risks across the organization; and

•

Identifying, monitoring and managing emerging risks as they develop.

Our management-based Risk Management Oversight Committee, which consists of members of the
Company’s executive management, focuses primarily on identifying correlations among our primary categories
of risk, developing metrics to assess our overall risk appetite, establish appropriate risk parameters and
tolerances, performing an annual risk assessment and continually reviewing factors that may impact our
organizational risk. This risk governance structure is complemented by our internal audit department, which
assesses the adequacy and effectiveness of our internal control systems and coordinates risk-based audits and
compliance reviews and other speciﬁc initiatives to evaluate and address risk within targeted areas of our
business. Our Enterprise Risk Management (‘‘ERM’’) is dynamic, with periodic updates being made to
reﬂect organizational processes, as well as staying current with changes within our industry and the global
economic environment.

Our management’s internal ERM efforts are overseen by the Audit Committee of the Board of Directors.
This Committee, comprised solely of independent directors, assesses whether management is addressing risk
issues in a timely and appropriate manner. Internal controls and ERM can provide a reasonable but not
absolute assurance that our control objectives will be met. The possibility of material ﬁnancial loss remains in
spite of our ERM efforts.

Underwriting Risk Management

Internal underwriting controls are established by our underwriting executives who are the Chief
Underwriting Officer of Maiden Bermuda and the President of Maiden US, working in close coordination with
our Chief Executive Officer. Underwriting authority is delegated to the managers in each business segment
and to underwriters in accordance with prudent practice and an understanding of each underwriter’s
capabilities. Our policy is to grant each underwriting team a speciﬁed limit, consistent with our operating
guidelines. Our underwriters understand our return on equity guidelines. Our target performance goals and
guidelines are regularly reviewed by management to reﬂect changes in market conditions, interest rates, capital
requirements and market-expected returns.

We have a disciplined approach to underwriting and risk management

that relies heavily upon the
collective underwriting expertise of our management and staff. This expertise is in turn guided by the
following underwriting principles:

•

we will underwrite and accept only those risks we know and understand;

•

we will perform our own independent pricing or risk review on all risks we accept; and

we will accept only those risks that are expected to earn a risk-adjusted return on capital
commensurate with the risk they present.

Before we review any program proposal, we consider the appropriateness of the client, including the
quality of its management, its ﬁnancial stability and its risk management strategy. In addition, we require each
program to include signiﬁcant information on the nature of the perils to be included and detailed exposure and
loss information, including rate changes and changes in underwriting and claims handling guidelines over
time. We often conduct an on-site audit of the client’s operations prior to quoting. If a program meets our
underwriting criteria, we then develop a proposal which contemplates the prospective client’s needs, that
account’s risk/reward proﬁle, as well as our corporate risk objectives. We have fully integrated our internal
claims, underwriting and pricing actuarial staff into the underwriting and decision making process. We use
in-depth actuarial, claims and exposure analyses to evaluate contracts prior to quoting. We underwrite and
accept property and casualty reinsurance business, accident and health reinsurance business and certain
specialty property insurance business. In general, we seek to underwrite reinsurance business that historically
is lower in volatility and more predictable than other classes of reinsurance business such as catastrophe
reinsurance, which we generally seek to avoid. As part of our risk management process, we seek to identify
those casualty and specialty exposures that are most likely to be simultaneously inﬂuenced by signiﬁcant
events. These exposures are then jointly tracked to ensure that we do not develop an excessive accumulation
of exposure to that particular type of event.

In addition to the above technical and analytical practices, our underwriters use a variety of means,
including speciﬁc contract terms, to manage our exposure to loss. These include occurrence limits, adjustable
ceding commissions and premiums, aggregate limits, reinstatement provisions and loss sensitive features.
Additionally, our underwriters use appropriate exclusions, terms and conditions to further eliminate particular
risks or exposures that our underwriting team deems to be outside of the intent of the coverage we are willing
to offer.

In limited cases,

the risks assumed by us are partially reinsured with other third party reinsurers.
Reinsurance ceded varies by segment and line of business based on a number of factors, including market
conditions. The beneﬁts of ceding risks include reducing exposure on individual risks and/or protecting against
catastrophic risks. Reinsurance ceded does not
legally discharge us from our liabilities to the original
policyholder in respect of the risk being reinsured. See Item 7, ‘‘Management’s Discussion and Analysis of
Financial Condition and Results of Operations’’ and Note 9 to our Consolidated Financial Statements included
in this Annual Report on Form 10-K.

Catastrophe Risk Management

While we generally avoid catastrophe exposed reinsurance risks, certain risks we reinsure are exposed to
catastrophic loss events. As a general rule, we seek to limit our modeled one-in-250 year catastrophe exposure
to any one event to not exceed our operating income. At December 31, 2011, our one-in-250 year catastrophe

distribution reinsurers. We believe this combination affords us ﬂexibility and efficiency. In the years ended
December 31, 2011, and 2010, the sources of gross premiums written by our Diversiﬁed Reinsurance segment
were as follows:

Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

% of Gross Premiums
Written for the Year Ended
December 31,

2011
66.1%
33.9%
100.0%

2010
73.0%
27.0%
100.0%

In the year ended December 31, 2011 and 2010, our top three brokers represented approximately 39.4%
and 41.1%, respectively of gross premiums written by our Diversiﬁed Reinsurance segment. A further
breakdown of the gross premiums written by our Diversiﬁed segment by broker for December 31, 2011 and
2010, respectively, are provided in the table below.

Broker
Marsh Inc. (including Guy Carpenter and Company, LLC) . . . . . . . . . . . . . . .
Aon Benﬁeld Group, Ltd.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Beach & Associates Ltd. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Broker . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Diversiﬁed Reinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reserve for Loss and Loss Adjustment Expenses

General

% of Gross Premiums
Written for the Year Ended
December 31,

2011

2010

18.1%
11.9%
9.4%
26.7%
66.1%
33.9%
100.0%

22.7%
12.3%
6.1%
31.9%
73.0%
27.0%
100.0%

We are required by applicable insurance laws and regulations in Bermuda, the United States, Sweden and
accounting principles generally accepted in the United States (‘‘U.S. GAAP’’) to establish loss reserves to
cover our estimated liability for the payment of all loss and loss adjustment expenses incurred with respect to
premiums earned on the policies and treaties that we write. These reserves are balance sheet
liabilities
representing estimates of loss and loss adjustment expenses which ultimately we are required to pay for
insured or reinsured claims that have occurred as at or before the balance sheet date. It is our policy to
reviewing all
establish these losses and loss expense reserves using prudent actuarial methods after
information known to us as at the date they are recorded.

These amounts

(‘‘ACRs’’) and provisions

include case reserves, additional case reserves

for
IBNR reserves. Case reserves are established for losses that have been reported to us, and not yet paid. ACRs
are established for particular circumstances where, on the basis of individual loss reports, the Company
estimates that the particular loss or collection of losses covered by a treaty may be greater than those advised
by the cedant. Our claims department evaluates all signiﬁcant losses reported to us and if appropriate will
include a provision for additional case reserves if we feel the ceding company’s estimate of the claim is not
adequate. IBNR reserves represent the estimated cost of losses that have occurred but have not been reported
to us and include a provision for additional development on case reserves. We establish case reserves based on
information from the ceding company, reinsurance intermediaries, and when appropriate, consultations with
independent legal counsel. The IBNR reserves are established by management based on reported losses and
loss expenses and actuarially determined estimates of ultimate loss and loss adjustment expenses.

We use a variety of standard actuarial methods to estimate ultimate expected loss and loss adjustment

expenses applying appropriate actuarial judgment in the determination of ultimate losses.

The majority of business is reserved individually by cedant with the remainder reserved in homogeneous
groupings. Ultimate losses across the reserve segments are converted to IBNR reserves by subtracting
inception to date paid losses case reserves and ACRs from those amounts. The accumulation of case and
IBNR reserves across the reserve segments results in indicated reserves which are the basis for the carried
reserves for ﬁnancial statements. Ultimate losses are also used to estimate premium and commission accruals
for accounts with adjustable features.

Property catastrophe reserves are estimated by event and are revisited monthly. Estimated ultimate
catastrophe losses may be based on output from catastrophe models early on and then on ceding company
estimates and the reserving methods above.

Loss reserves do not represent an exact calculation of liability; rather, loss reserves are estimates of what
the ultimate resolution and administration of claims will cost. These estimates are based on
we expect
actuarial and statistical projections and on our assessment of currently available data, as well as estimates of
future trends in claims severity and frequency, judicial theories of liability and other factors. Loss reserve
estimates are reﬁned as experience develops and as claims are reported and resolved. Establishing an
appropriate level of loss reserves is an inherently uncertain process. The uncertainties may be greater for
reinsurers like us than for reinsurers with an established operating and claims history and a larger number of
insurance and reinsurance transactions. In addition, the relatively long reporting periods between when a loss
occurs and when it may be reported to our claims department for our casualty lines of business also increase
the uncertainties of our reserve estimates in such lines. To assist us in establishing appropriate reserves for
loss and loss adjustment expenses, we analyze a signiﬁcant amount of internal data and external insurance
industry information with respect to the pricing environment and loss settlement patterns. In combination with
our individual account pricing analyses and our internal loss settlement patterns, this industry information is
used to guide our loss and loss expense estimates. These estimates are reviewed quarterly, at a high level of
detail, and any adjustments are reﬂected in earnings in the periods in which they are determined.

There is a signiﬁcant amount of estimation involved in determining ultimate losses and loss adjustment
expenses. We believe that while our case reserves and IBNR reserves are sufficient to cover losses assumed by
us, there can be no assurance that losses will not deviate from our reserves, possibly by material amounts. To
the extent actual reported losses exceed estimated losses, the carried estimate of the ultimate losses will be
increased, which represents unfavorable reserve development, and to the extent actual reported losses are less
than our expectations, the carried estimate of ultimate losses will be reduced, which represents favorable
reserve development.

Loss Portfolio Transfer of the GMAC RE Loss Reserves and Ongoing Novation of Certain Related
Reserves and Liabilities

In connection with the GMAC Acquisition, Maiden Bermuda entered into a loss portfolio transfer
agreement with Motors whereby it assumed the outstanding loss reserves,
including a provision for
IBNR reserves associated with the GMAC RE business acquired ($755.6 million at October 31, 2008). We
received cash and U.S. government and U.S. government agency ﬁxed maturity investments equal to the
amount of loss reserves.

The loss reserves assumed by Maiden Bermuda from Motors represented the estimate of the unpaid
losses to be paid on all of the reinsurance contracts produced by GMAC RE from 1983 until October 31,
2008. Because the entire related infrastructure of GMAC RE, including the actuarial and claims procedures
and personnel were acquired by us, the methodology for establishing the estimates for losses and loss expense
have been consistently applied. While we believe that we have made a reasonable estimate of loss and loss
expense reserves, the ultimate loss experience may be higher or lower than the total reserves recorded by the
Company. A breakdown of the case and IBNR reserves assumed under the loss portfolio transfer as at
October 31, 2008 by underwriting year is provided in the table below.

Underwriting Year*

2000 & Prior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 1 to October 31, 2008 . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case
Reserves

$ 27.3
10.4
20.1
15.0
16.5
27.8
59.4
60.2
48.3
$285.0

IBNR
Reserves
($ in Millions)
$ 20.7
10.8
28.3
28.3
32.6
51.5
93.0
112.0
93.4
$470.6

Total
Reserves

$ 48.0
21.2
48.4
43.3
49.1
79.3
152.4
172.2
141.7
$755.6

Underwriting year comprises all policies written or renewed during the year and all losses relating to
those same policies, whenever they may occur.

These loss reserves are treated as retroactive reinsurance under U.S. GAAP. Accordingly, any subsequent
change in the estimate of the subject losses since the date of transfer are amortized into the Company’s results
of operations based upon the cumulative payment of actual claims in relation to the subject losses transferred.
A breakdown of the remaining case and IBNR reserves assumed under the loss portfolio transfer as at
December 31, 2011 was as follows:

Underwriting Year*

2000 & Prior . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 1 to October 31, 2008. . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case
Reserves

$ 19.0
6.7
11.4
8.4
11.3
9.4
16.6
18.4
9.7
$110.9

IBNR
Reserves
($ in Millions)
$ 14.0
7.6
12.4
12.8
4.2
13.5
19.8
19.9
6.2
$110.4

Total
Reserves

$ 33.0
14.3
23.8
21.2
15.5
22.9
36.4
38.3
15.9
$221.3

Underwriting year comprises all policies written or renewed during the year and all losses relating to
those same policies, whenever they may occur.

Under the terms of the GMAC Acquisition, we had the right for a transition period of twenty-four
months, which expired on October 31, 2010, to have Motors front certain reinsurance business in cases where
we do not have the necessary regulatory licenses or approvals. In 2009, Maiden US received all of the
necessary regulatory licenses and approvals. Therefore reinsurance premiums underwritten by Maiden Re in
the United States have been recorded both in Maiden US and pursuant to the terms of the quota share
reinsurance agreement between the companies, by Maiden Bermuda. This business is included in the
Diversiﬁed Reinsurance segment and represents 84.8% and 91.6% of the gross written premium for this
segment for the years ended December 31, 2011 and 2010, respectively.

In June 2009, A.M. Best downgraded its rating of Motors to B++, which is an insufficient rating for
many of our reinsurance clients. The impact of this downgrade is minimal as most of our clients have their
liabilities collateralized in trusts. Nevertheless, for current clients we have offered the opportunity to novate all
their policies with Motors underwritten by Maiden Re. As at December 31, 2011, approximately
of
$144.1 million of liabilities relating to the Loss Portfolio Transfer have been novated to Maiden US.

Loss Portfolio Transfer of the IIS Acquisition Loss Reserves and Ongoing Novation of Certain Related
Reserves and Liabilities

including a provision for

In connection with the IIS Acquisition, Maiden Bermuda entered into a loss Portfolio Transfer Agreement
and Quota Share Reinsurance (‘‘IIS Reinsurance Agreement’’) with GMAC IICL whereby it assumed the
outstanding loss reserves,
IBNR reserves associated with the IIS business
($98.8 million at November 30, 2010). This does not include the $3.2 million of outstanding loss reserves,
including a provision for IBNR reserves associated with the acquisition of Maiden LF. Pursuant to the terms
of the purchase agreement, the substantial majority of the subject reinsurance contracts are collateralized by
letters of credit or trust agreements. Until such time as those contracts were novated from GMAC IICL to
Maiden Bermuda (which was required to be completed within twelve months of closing), the underlying
assets were held by GMAC IICL subject to the provisions of the reinsurance agreement between GMAC IICL
and Maiden Bermuda. However, all investment income produced by these assets is fully credited to Maiden
Bermuda until novation. During 2011, thirteen of the ﬁfteen reinsurance programs that were part of the
business associated with the IIS Acquisition were novated from GMAC IICL to Maiden Bermuda and one was
commuted. The remaining program is expected to be novated in 2012. The underlying assets in support of the
remaining collateral arrangements, which total $24.3 million, are recorded as Funds Withheld on the
accompanying Consolidated Balance Sheet as at December 31, 2011.

The loss reserves retroceded by GMAC IICL to Maiden Bermuda represented the estimate of the unpaid
losses to be paid on all of the reinsurance contracts produced by GMAC IICL through November 30, 2010.
Because the entire related infrastructure of GMAC IICL, including the claims procedures and personnel were
acquired by us,
the methodology for establishing the estimates for losses and loss expense have been
consistently applied. While we believe that we have made a reasonable estimate of loss and loss expense
reserves,
the ultimate loss experience may be higher or lower than the total reserves recorded by the
Company. A breakdown of the case and IBNR reserves assumed under the IIS Reinsurance Agreement as at
November 30, 2010, by underwriting year is provided in the table below.

Underwriting Year*

2000 & Prior . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 1 to November 30, 2010. . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case
Reserves

$17.8
2.0
1.6
2.8
2.7
3.4
4.3
5.3
7.5
9.1
12.8
$69.3

IBNR
Reserves
($ in Millions)
$ 0.9
—
—
0.2
0.4
0.5
0.4
1.4
1.5
2.6
21.6
$29.5

Total
Reserves

$18.7
2.0
1.6
3.0
3.1
3.9
4.7
6.7
9.0
11.7
34.4
$98.8

Underwriting year comprises all policies written or renewed during the year and all losses relating to
those same policies, whenever they may occur.

These losses are treated as retroactive reinsurance under U.S. GAAP. Accordingly, any subsequent change
in the estimate of the subject losses since the date of transfer are amortized into the Company’s results of
operations based upon the cumulative payment of actual claims in relation to the subject losses transferred. A
breakdown of the remaining case and IBNR reserves assumed under the loss portfolio transfer as at
December 31, 2011 was as follows:

Underwriting Year*

2000 & Prior . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2001 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2002 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2003 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2004 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2005 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2006 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2007 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2008 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
January 1 to November 30, 2010 . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Case
Reserves

$15.9
1.6
1.5
1.8
1.7
1.3
1.2
1.5
2.5
2.7
5.3
$37.0

IBNR
Reserves
($ in Millions)
$0.8
—
—
0.1
0.3
0.2
0.1
0.4
0.5
0.8
2.0
$5.2

Total
Reserves

$16.7
1.6
1.5
1.9
2.0
1.5
1.3
1.9
3.0
3.5
7.3
$42.2

Underwriting year comprises all policies written or renewed during the year and all losses relating to
those same policies, whenever they may occur.

Pursuant to the IIS Reinsurance Agreement, Maiden Bermuda reinsures all of the existing reinsurance
contracts written by GMAC IICL. Future new reinsurance contracts will be underwritten by Maiden Bermuda.
According to the loss portfolio transfer provisions of the IIS Reinsurance Agreement, in addition to the loss
the Company also assumed unearned premium of
reserves assumed by the Company described above,
approximately $19.5 million, net of acquisition expenses as at November 30, 2010. The reinsurance premiums
from the IIS Acquisition and underwritten by Maiden Bermuda are included in the Diversiﬁed Reinsurance
segment and represent 13.3% and 5.3% of the net premiums written for this segment for the years ended
December 31, 2011 and 2010, respectively.

Change in Reserves

The following tables

(‘‘Analysis of Consolidated Net Loss Reserves Development’’)

show the
development of gross and net reserves for unpaid loss and loss adjustment expenses for our business for
calendar years 2009 through 2011. The tables do not present accident or policy year development data. Each
table begins by showing the initial reported year-end gross and net reserves,
including IBNR reserves,
recorded at the balance sheet date for each of the three years presented. The next section of the table shows
the re-estimated amount of the initial reported net reserves for up to four subsequent years, based on
experience at the end of each subsequent year. The re-estimated net liabilities reﬂect additional information,
received from cedants or obtained through reviews of industry trends, regarding claims incurred prior to the
end of the preceding ﬁnancial year. A redundancy (or deﬁciency) arises when the re-estimation of reserves is
less (or greater) than its estimation at the preceding year-end. The cumulative redundancies (or deﬁciencies)
reﬂect cumulative differences between the initial reported net reserves and the currently re-estimated net
reserves. Annual changes in the estimates are reﬂected in the income statement for each year as the liabilities
are re-estimated.

The lower section of the table shows the portion of the initial year-end net reserves that was paid (claims
paid) as at the end of subsequent years. This section of the table provides an indication of the portion of the
re-estimated net liability that is settled and is unlikely to develop in the future.

Analysis of Consolidated Net Loss Reserves Development

The following table presents additional information regarding the development of gross loss reserves. The
table below is a reconciliation of the beginning and ending liability for unpaid loss and loss adjustment
expenses for the years ended December 31, 2011, 2010 and 2009.

2011

For the Year Ended December 31,
2010
($ in Millions)

2009

Gross unpaid loss and loss adjustment expenses reserves at

beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less reinsurance recoverable at beginning of period . . . . . . . . . .
Net loss and loss adjustment expense reserves at beginning

$1,226.8
6.7

$1,002.7
8.4

$ 897.7
—

of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,220.1

994.3

897.7

Net incurred losses related to:

Current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net paid losses related to:

Current year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Acquired loss and loss expense reserve . . . . . . . . . . . . . . . . . .
Effect of foreign exchange movement . . . . . . . . . . . . . . . . . . .
Net loss and loss adjustment expense reserves at end of period . .
Reinsurance recoverable at end of period . . . . . . . . . . . . . . . . .
Gross unpaid loss and loss adjustment expenses reserves at

1,028.9
14.2
1,043.1

456.1
423.9
880.0
0.4
(5.5)
1,378.1
20.3

788.0
(32.9)
755.1

365.3
266.0
631.3
102.0
—
1,220.1
6.7

620.0
(11.4)
608.6

209.1
303.2
512.3
0.2
0.1
994.3
8.4

end of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,398.4

$1,226.8

$1,002.7

The Company amortized gains as a reduction of losses incurred of $28.9 million, $25.3 million and

$10.7 million for the years ended December 31, 2011, 2010 and 2009, respectively.

The total favorable development relating to the loss portfolio transfers since the closing of the GMAC
and IIS Acquisitions has been $68.9 million and the remaining $2.6 million is recorded as a deferred gain in
the Company’s loss reserves at December 31, 2011 that are included in the accompanying balance sheet,
including the unamortized gains described above. Due to loss sensitive features of certain contracts, favorable
(or unfavorable) loss reserve development does not necessarily result in additional (or reduced) underwriting
income as ceding commission may be adjusted proportionally to the amount of loss development, pursuant to
the terms of the individual contracts.

Analysis of Gross and Net Unpaid Losses and Loss Adjustment Expenses and Net Re-estimated Liability

Development of Reserve for Loss and Loss Adjustment Expenses Cumulative Deﬁciency (Redundancy)
Gross Losses

2007

2008(1)

For the Year Ended December 31,
2009
($ in Millions)

2010(2)

2011

Gross
As Originally Estimated . . . . . . . . . .

Liability Re-estimated as at:
One Year later . . . . . . . . . . . . . . . . . .
Two Years later . . . . . . . . . . . . . . . . .
Three Years later . . . . . . . . . . . . . . . .
Four Years later . . . . . . . . . . . . . . . . .
Cumulative deﬁciency (redundancy) . .

Cumulative claims paid as at:
One Year later . . . . . . . . . . . . . . . . . .
Two Years later . . . . . . . . . . . . . . . . .
Three Years later . . . . . . . . . . . . . . . .
Four Years later . . . . . . . . . . . . . . . . .

$ 38.5

$897.7

$1,002.7

$1,226.8

$1,398.4

$ 36.7
37.3
37.9
39.5
1.0

$ 16.6
33.7
34.1
37.6

$886.3
869.8
848.6

$ 959.7
963.8

$1,232.7

$ (49.1)

$ (38.9)

5.9

$303.2
402.4
542.2

$ 266.0
457.8

$ 452.7

95.4%
96.8%
98.5%
102.6%

98.7%
96.9%
94.5%

95.7%
96.1%

100.5%

on gross reserve . . . . . . . . . . . . . .

2.6%

(5.5)%

(3.9)%

0.5%

Gross Loss and Loss Expense

Cumulative Paid as a Percentage of
Originally Estimated Liability

One Year later . . . . . . . . . . . . . . . . . .
Two Years later . . . . . . . . . . . . . . . . .
Three Years later . . . . . . . . . . . . . . . .
Four Years later . . . . . . . . . . . . . . . . .

43.1%
87.6%
88.6%
97.7%

31.9%
44.8%
60.4%

26.5%
45.7%

36.9%

2007

2008(1)

For the Year Ended December 31,
2009
($ in Millions)

2010(2)

2011

Losses Net of Reinsurance
As Originally Estimated . . . . . . . . . .

$ 38.5

$897.7

$994.3

$1,220.1

$1,378.1

$ 36.7
37.3
37.9
39.5
1.0

$ 16.6
33.7
34.1
37.6

$886.3
869.8
852.9

$961.4
969.5

$1,234.3

$ (44.8)

$ (24.8)

14.2

$303.2
402.4
542.2

$266.0
444.3

$ 423.9

95.4%
96.8%
98.5%
102.5%

98.7%
96.9%
95.0%

96.7%
97.5%

101.2%

on net reserve . . . . . . . . . . . . . . . .

2.5%

(5.0)%

(2.5)%

1.2%

Net Loss and Loss Expense

Cumulative Paid as a Percentage of
Originally Estimated Liability

43.1%
87.6%
88.6%
97.7%

33.8%
44.8%
60.4%

26.7%
44.7%

34.7%

(1) Reserve for loss and loss adjustment expenses include the reserves for loss and loss adjustment expenses

of $755.6 million, from the GMAC Acquisition, which we acquired in October 2008.

(2) Reserve for loss and loss adjustment expenses include the reserves for loss and loss adjustment expenses

of $98.8 million from the IIS Acquisition, which we acquired in November 2010.

For additional information concerning our reserves, see Item 7, ‘‘Management’s Discussion and Analysis
of Financial Condition and Results of Operations — Critical Accounting Policies — Reserve for Losses and
Loss Adjustment Expenses’’ for further information regarding the speciﬁc actuarial models we utilize and the
uncertainties in establishing the reserve for loss and loss adjustment expenses.

Our Employees

As at March 1, 2012, we had a total of 213 full-time employees who are located in Bermuda, the United
States, the United Kingdom, Germany, Austria, Russia and Australia. We may increase our staff over time
commensurate with the expansion of operations. We believe that our employee relations are good. None of
our employees are subject to collective bargaining agreements.

Regulatory Matters

General

The reinsurance and regulatory environment,

in particular for offshore reinsurance companies, has
become subject to increased scrutiny in many jurisdictions, including the United States and various states
within the United States. In the past, there have been Congressional and other initiatives in the United States
regarding increased supervision and regulation of the insurance industry. For example, in response to the
tightening of supply in some insurance and reinsurance markets resulting from, among other things, the World
Trade Center tragedy, the United States Terrorism Risk Insurance Act of 2002 (‘‘TRIA’’), the Terrorism Risk
Insurance Extension Act of 2005 (the ‘‘TRIA Extension of 2005’’) and the Terrorism Risk Insurance Program
Reauthorization Act of 2007 (the ‘‘TRIA Extension of 2007’’) were enacted to ensure the availability of
insurance coverage for terrorist acts in the United States. This law establishes a federal assistance program
through the end of 2014 to help the commercial property and casualty insurance industry cover claims related
to future terrorism related losses and regulates the terms of insurance relating to terrorism coverage. TRIA, the
TRIA Extension of 2005 and the TRIA Extension of 2007 have had little impact on our business because few
of our reinsurance clients are purchasing this coverage. Maiden Specialty is protected by a terrorism treaty
that limits our net exposure emanating from the deductible and co-participations of these federal acts. Recent
US federal budget proposals have contained provisions dealing with both the taxation of premium cessions to
foreign affiliates and a recommendation supporting the termination of TRIA. We do not believe that either of
these initiatives will have a signiﬁcant impact on Maiden. We are in compliance with the recommended
reinsurance cession limitation in the tax proposal. Given our focus on a diverse portfolio of regional and
specialty clients and occurrence limitations contained within speciﬁc reinsurance contracts, we believe that
exposure to the termination of TRIA would be limited.

Bermuda Insurance Regulation

The Insurance Act 1978 of Bermuda, as amended, and related regulations of Bermuda (together, the
‘‘Insurance Act’’), which regulate the insurance business of Maiden Bermuda, provides that no person shall
carry on any insurance business in or from within Bermuda unless registered as an insurer under the Insurance
Act by the Bermuda Monetary Authority (the ‘‘BMA’’), which is responsible for the day-to-day supervision of
insurers. Under the Insurance Act, insurance business includes reinsurance business. The registration of an
applicant as an insurer is subject to its complying with the terms of its registration and such other conditions
as the BMA may impose from time to time.

The Insurance Act imposes solvency and liquidity standards and auditing and reporting requirements on
Bermuda insurance companies and grants to the BMA powers to supervise, investigate and intervene in the
affairs of insurance companies. The Insurance Act also imposes certain regulatory requirements on insurance
groups where the BMA has determined that it should act as group supervisor. Certain signiﬁcant aspects of the
Bermuda insurance regulatory framework are set forth below.

Classiﬁcation of Insurers. The Insurance Act distinguishes between insurers carrying on long-term
business, insurers carrying on general business and insurers carrying on special purpose business. There are
six classiﬁcations of insurers carrying on general business, with Class 4 insurers subject
to the strictest
regulation, and Class 3B insurers subject to the next strictest regulation. Maiden Bermuda is registered as a
Class 3B insurer in Bermuda and is regulated as such under the Insurance Act.

Classiﬁcation as a Class 3B insurer. A body corporate is registrable as a Class 3B insurer where
(a) 50% or more of its net premiums written; or (b) 50% or more of its loss and loss expense provisions,
represent unrelated business and its total net premiums written from unrelated business are $50 million
or more.

Cancellation of Insurer’s Registration. An insurer’s registration may be canceled by the BMA on certain
grounds speciﬁed in the Insurance Act, including failure of the insurer to comply with its obligations under
the Insurance Act or if,
the insurer has not been carrying on business in
accordance with sound insurance principles. We believe we are in compliance with applicable regulations
under the Insurance Act.

in the opinion of the BMA,

Principal Representative. An insurer is required to maintain a principal office in Bermuda and to
appoint and maintain a principal representative in Bermuda. It is the duty of the principal representative, upon
reaching the view that there is a likelihood of the insurer for which the principal representative acts becoming
insolvent or that a reportable ‘‘event’’ has, to the principal representative’s knowledge, occurred or is believed
to have occurred, to immediately notify the BMA and to make a report in writing to the BMA within 14 days
of the prior notiﬁcation setting out all
the particulars of the case that are available to the principal
representative.

Approved Independent Auditor. A Class 3B insurer must appoint an independent auditor who annually
audits and reports on the insurer’s ﬁnancial statements prepared under generally accepted accounting
principles or international ﬁnancial reporting standards (‘‘U.S. GAAP ﬁnancial statements’’) and statutory
ﬁnancial statements and the statutory ﬁnancial return of the insurer, all of which, in the case of Maiden
Bermuda, are required to be ﬁled annually with the BMA. The independent auditor must be approved by
the BMA.

Approved Loss Reserve Specialist. As a registered Class 3B insurer, Maiden Bermuda is required to
submit an opinion of its approved loss reserve specialist with its statutory ﬁnancial return in respect of its loss
and loss expense provisions. The loss reserve specialist, who will normally be a qualiﬁed casualty actuary,
must be approved by the BMA.

Annual Financial Statements, Annual Statutory Financial Return and Annual Capital and Solvency
Return. Maiden Bermuda must prepare annual statutory ﬁnancial statements as prescribed in the Insurance
Act with respect
to its general business. The statutory ﬁnancial statements are distinct from the annual
U.S. GAAP ﬁnancial statements referred to below. Maiden Bermuda is also required to prepare and ﬁle with
the BMA statutory ﬁnancial returns with respect to its general business. The statutory ﬁnancial return for a
Class 3B insurer includes, among other things, a report of the approved independent auditor on the statutory
ﬁnancial statement of such insurer, solvency certiﬁcates, the statutory ﬁnancial statements for the general
business, the opinion of the loss reserve specialist and a schedule of reinsurance ceded. Maiden Bermuda is
also required to ﬁle audited U.S. GAAP annual ﬁnancial statements, which must be available to the public. In
addition, Maiden Bermuda is required to ﬁle a capital and solvency return, which shall include the company’s
Bermuda Solvency Capital Requirement (‘‘BSCR’’) model (or an approved internal capital model in lieu
thereof), a schedule of ﬁxed income investments by rating categories, a schedule of net reserves for losses and
loss expense provisions by line of business, a schedule of premiums written by line of business, a schedule of
risk management, a schedule of ﬁxed income securities, a schedule of commercial insurer’s solvency self
assessment (‘‘CISSA’’), a schedule of catastrophe risk return, a schedule of loss triangles or reconciliation of
net loss reserves and a schedule of eligible capital. Maiden Bermuda is also required to ﬁle quarterly ﬁnancial
intra-group
returns which consist of quarterly unaudited ﬁnancial statements and details of material
transactions and risk concentrations.

Independent Approved Auditor. As a Class 3B insurer, Maiden Bermuda must appoint an independent
auditor who will annually audit and report on its U.S. GAAP ﬁnancial statements, its statutory ﬁnancial
statements and its statutory ﬁnancial returns, each of which are required to be ﬁled annually with the BMA.
The auditor must be approved by the BMA as the independent auditor of the insurer. If the insurer fails to
appoint an approved auditor or at any time fails to ﬁll a vacancy for such auditor, the BMA may appoint an
approved auditor for the insurer and shall ﬁx the remuneration to be paid to the approved auditor within
14 days, if not agreed sooner by the insurer and the auditor.

Minimum Solvency Margin, Enhanced Capital Requirement and Restrictions on Dividends and
Distributions. Under the Insurance Act, Maiden Bermuda must ensure that the value of its general business
assets exceeds the amount of its general business liabilities by an amount greater than the prescribed minimum
solvency margin and enhanced capital requirement (‘‘ECR’’). As a Class 3B insurer, Maiden Bermuda:

•

is required to maintain a minimum solvency margin equal to the greatest of (a) $1 million, (b) 20%
of the ﬁrst $6 million of net premiums written; if in excess of $6 million, the ﬁgure is $1.2 million
plus 15% of net premiums written in excess of $6 million, and (c) 15% of net discounted aggregate
losses and loss expense provisions and other insurance reserves;

•

is required to maintain available statutory capital and surplus to an amount that is equal to or
exceeds its enhanced capital requirement, which is calculated using the BSCR model or an approved
internal capital model. The BSCR model is a risk based capital model which provides a method for
determining an insurer’s capital requirements (statutory capital and surplus) by taking into account
the risk characteristics of different aspects of the insurer’s business. The BSCR formula establishes
capital requirements for eight categories of risk: ﬁxed income investment risk, equity investment
risk, catastrophe risk and
risk,
operational risk. For each category, the capital requirement is determined by applying factors to
asset, premium, reserve, creditor, probable maximum loss and operation items, with higher factors
applied to items with greater underlying risk and lower factors for less risky items;

rate/liquidity risk, premium risk,

reserve risk, credit

interest

is prohibited from declaring or paying any dividends during any ﬁnancial year if it is in breach of its
enhanced capital requirement, solvency margin or minimum liquidity ratio or if the declaration or
payment of such dividends would cause such a breach. If it has failed to meet its minimum solvency
margin or minimum liquidity ratio on the last day of any ﬁnancial year, Maiden Bermuda will be
prohibited, without the approval of the BMA, from declaring or paying any dividends during the
next ﬁnancial year;

is prohibited from declaring or paying in any ﬁnancial year dividends of more than 25% of its total
statutory capital and surplus (as shown on its previous ﬁnancial year’s statutory balance sheet)
unless it ﬁles (at least 7 days before payment of such dividends) with the BMA an affidavit stating
that it will continue to meet the required margins;

is prohibited, without the approval of the BMA, from reducing by 15% or more its total statutory
capital as set out in its previous year’s ﬁnancial statements and any application for such approval
must include an affidavit stating that it will continue to meet the required margins;

is required, at any time it fails to meet its enhanced capital requirements or solvency margins, to ﬁle
with the BMA a written report containing certain information.

While not speciﬁcally referred to in the Insurance Act, the BMA has also established a target capital level
(‘‘TCL’’) for each insurer subject to an enhanced capital requirement equal to 120% of its enhanced capital
requirement. While such an insurer is not currently required to maintain its statutory capital and surplus at this
level, the TCL serves as an early warning tool for the BMA and failure to maintain statutory capital at least
equal to the TCL will likely result in increased regulatory oversight.

In addition, for each insurer subject to an enhanced capital requirement, the BMA has recently introduced
a three-tiered capital system designed to assess the quality of capital resources that a company has available to
meet its capital requirements. The new system classiﬁes all capital instruments into one of three tiers based on
their ‘‘loss absorbency’’ characteristics. Highest quality capital is classiﬁed as Tier 1 Capital; lesser quality
capital is classiﬁed as either Tier 2 Capital or Tier 3 Capital. Under the proposed regime, up to certain
speciﬁed percentages of Tier 1, Tier 2 and Tier 3 Capital (determined by registration classiﬁcation) may be
used to support the company’s minimum solvency margin, enhanced capital requirement and TCL.

Minimum Liquidity Ratio. The Insurance Act provides a minimum liquidity ratio for general business
insurers such as Maiden Bermuda. An insurer engaged in general business is required to maintain the value of
its relevant assets at not less than 75% of the amount of its relevant liabilities. Relevant assets include cash
and time deposits, quoted investments, unquoted bonds and debentures, ﬁrst liens on real estate, investment
income due and accrued, accounts and premiums receivable, reinsurance balances receivable and funds held
by ceding reinsurers. There are certain categories of assets which, unless speciﬁcally permitted by the BMA,
investments in and
do not automatically qualify as relevant assets, such as unquoted equity securities,
advances to affiliates and real estate and collateral loans.

The relevant liabilities are total general business insurance reserves and total other liabilities less deferred

income tax and sundry liabilities (by interpretation, those not speciﬁcally deﬁned).

Code of Conduct. Maiden Bermuda is subject to the Insurance Code of Conduct (the ‘‘Code’’), which
prescribes the duties, standards, procedures and sound business principles that must be complied with by all
insurers registered under the Insurance Act. Every Bermuda insurer is now required to submit as part of its
annual statutory return, a statutory declaration conﬁrming that the company is in compliance with the Code.
Failure to comply with the requirements under the Code will be a factor taken into account by the BMA in
determining whether an insurer is conducting its business in a sound and prudent manner as prescribed by the
Insurance Act. Such failure to comply with the requirements of the Code could result in the BMA exercising
its powers of intervention (see Supervision, Investigation and Intervention below) and will be a factor in
calculating the operational risk charge applicable in accordance with that insurer’s BSCR model or approved
internal model. We believe that we are in compliance with the Code of Conduct.

Supervision, Investigation and Intervention. The BMA may appoint an inspector with extensive powers
to investigate the affairs of an insurer if the BMA believes that an investigation is required in the interest of
the insurer’s policyholders or persons who may become policyholders. In order to verify or supplement
the BMA may direct an insurer to produce documents or
information otherwise provided to the BMA,
information relating to matters connected with the insurer’s business.

If it appears to the BMA that there is a risk of the insurer becoming insolvent, or that it is in breach of
the Insurance Act or any conditions imposed upon its registration, the BMA may, among other things, direct
the insurer (1) not to take on any new insurance business, (2) not to vary any insurance contract if the effect
would be to increase the insurer’s liabilities, (3) not
to make certain investments, (4) to realize certain
investments, (5) to maintain in, or transfer to the custody of, a speciﬁed bank, certain assets, (6) not to declare
or pay any dividends or other distributions or to restrict the making of such payments, (7) to limit its premium
income, (8) not to enter into speciﬁed transactions with any speciﬁed person or persons of a speciﬁed class,
(9) to provide such written particulars relating to the ﬁnancial circumstances of the insurer as the BMA thinks
ﬁt, (10) to obtain the opinion of a loss reserve specialist and submit it to the BMA and/or (11) to remove a
controller or officer.

Group Supervision. The BMA may,

is
appropriate for it to be the group supervisor of that group. For purposes of the Insurance Act, an insurance
group is deﬁned as a group of companies that conducts exclusively, or mainly, insurance business.

in respect of an insurance group, determine whether

The BMA may make such determination where it ascertains that (i) the group is headed by a ‘‘speciﬁed
insurer’’ (which would include a Class 3B insurer such as Maiden Bermuda); or (ii) where the insurance
group is not headed by a ‘‘speciﬁed insurer’’, where it is headed by a parent company which is incorporated
in Bermuda or (iii) where the parent company of the group is not a Bermuda company, where the BMA is
satisﬁed that the insurance group is directed and managed from Bermuda or the insurer with the largest
balance sheet total is a speciﬁed insurer.

As group supervisor, the BMA will perform a number of supervisory functions including (i) coordinating
the gathering and dissemination of information which is of importance for the supervisory task of other
competent authorities;
the insurance group;
(ii) carrying out a supervisory review and assessment of
(iii) carrying out an assessment of the insurance group’s compliance with the rules on solvency, risk
concentration,
intra-group transactions and good governance procedures; (iv) planning and coordinating,
through regular meetings (to be held at least annually) with other competent authorities, supervisory activities
in respect of the insurance group, both as a going concern and in emergency situations; (v) coordinating any
enforcement action that may need to be taken against
the insurance group or any of its members; and
(vi) planning and coordinating meetings of colleges of supervisors in order to facilitate the carrying out of the
functions described above.

Where the BMA determines that it should act as the group supervisor, it shall designate a speciﬁed
insurer that is a member of the insurance group to be the designated insurer and it shall give written notice to
the designated insurer and other competent authorities of its intention to act as group supervisor. The
BMA acts as group supervisor of the Maiden group of companies (the ‘‘Group’’) and has designated Maiden

Bermuda to be the designated insurer of the Group. The designated insurer is required to ensure that
the Group complies with the provisions of the Insurance Act pertaining to groups. These include the
following requirements:

•

The Group is required to prepare and submit annually group U.S. GAAP and statutory ﬁnancial
statements, a group statutory ﬁnancial return and a group capital and solvency return. The Group
U.S. GAAP ﬁnancial statements are available for public inspection.

The Group must prepare and ﬁle quarterly ﬁnancial returns with the BMA which include quarterly
unaudited group ﬁnancial statements and a list and details of material intra-group transactions and
risk concentrations.

With effect from January 1, 2013, the Board of directors of the parent company of the Group (the
‘‘Parent Board’’) will have to establish solvency self assessment procedures for the Group that factor in all
foreseeable material risks and the Parent Board will be required to establish and effectively implement
corporate governance policies and procedures to ensure they support the overall organizational strategy of the
Group. In addition, the designated insurer will need to ensure that the Group’s assets exceed the amount of the
Group’s liabilities by the aggregate minimum margin of solvency of each qualifying member and that
available group capital and surplus is maintained at a level equal to or in excess of the Group’s enhanced
capital requirement, which will be established by reference to either the Group BSCR model or an approved
group internal capital model.

Maiden is not an insurer and is not regulated in Bermuda as such. However, pursuant to its functions
the group within its group supervision,

the BMA may include any member of

as group supervisor,
including Maiden.

Shareholder Controllers. Any person who, directly or indirectly, becomes a holder of 10% or more,
20% or more, 33% or more, or 50% or more of the common shares of Maiden must notify the BMA in
writing within 45 days of becoming such a holder. The BMA may, by written notice, object to such a person
if it appears to the BMA that the person is not a ﬁt and proper person to be a controller of the registered
insurer. The BMA may require the holder to reduce their holding of common shares in Maiden and direct,
among other things, that voting rights attaching to the common shares shall not be exercisable. A person that
does not comply with such a notice or direction from the BMA will be guilty of an offense.

The BMA may ﬁle a notice of objection to any person who has become a controller of any description
where it appears that such person is, or is no longer, a ﬁt and proper person to be a controller of the
registered insurer. Any person who continues to be a controller of any description after having received a

who meets the minimum standards reasonably required by the employer. The Bermuda government has a
policy that places a six-year term limit on individuals with work permits, subject to certain exemptions for
key employees.

United States

Our U.S. Subsidiaries

Maiden US, our lead U.S. insurer, is an accredited reinsurer in 6 states and an authorized insurer in
45 jurisdictions. Maiden Specialty is a licensed insurer in its state of domicile, North Carolina, and is an
eligible excess and surplus lines carrier in 50 jurisdictions (Maiden Specialty primarily writes insurance on a
surplus lines basis). Regulatory, supervisory and administrative authority is primarily delegated to the states
with the exception of federal authority over boycott, coercion and intimidation, federal antitrust laws and
where federal law is enacted speciﬁcally to regulate the business of insurance. Among other things, state
insurance departments regulate insurer solvency standards, insurer and agent licensing, authorized investments,
premium rates, loss and expense reserves and provisions for unearned premiums, and deposits of securities for
the beneﬁt of policyholders. The states’ regulatory schemes also extend to policy form approval and market
conduct regulation. In addition, some states have enacted variations of competitive rate making laws, which
allow insurers to set premium rates for certain classes of insurance without obtaining the prior approval of the
state insurance department. Maiden US and Maiden Specialty are required to ﬁle detailed ﬁnancial statements
and other reports with the departments of insurance in all states in which they are licensed to transact
business. These ﬁnancial statements are subject to the supervision, regulation and periodic examination by the
department of insurance in the state in which they are domiciled.

State Insurance Department Examinations

Our U.S. insurance subsidiaries are subject to the supervision and regulation of the state in which they
are domiciled. As part of their regulatory oversight process, state insurance departments conduct periodic
detailed examinations of the ﬁnancial reporting of insurance companies domiciled in their states, generally
once every three to ﬁve years. Examinations are generally carried out in cooperation with the insurance
departments of other states under guidelines promulgated by the National Association of
Insurance
Commissioners (‘‘NAIC’’).

Statutory Accounting Principles

Statutory accounting principles (‘‘SAP’’) are a basis of accounting developed to assist

insurance
regulators in monitoring and regulating the solvency of insurance companies. SAP is primarily concerned with
measuring an insurer’s surplus to policyholders. Accordingly, statutory accounting focuses on valuing assets
and liabilities of insurers at ﬁnancial reporting dates in accordance with appropriate insurance law and
regulatory provisions applicable in each insurer’s domiciliary state.

U.S. GAAP is concerned with a company’s solvency, but

is also concerned with other ﬁnancial
measurements, principally income and cash ﬂows. Accordingly, U.S. GAAP gives more consideration to
appropriate matching of revenue and expenses and accounting for management’s stewardship of assets than
does SAP. As a direct result, different assets and liabilities and different amounts of assets and liabilities will
be reﬂected in ﬁnancial statements prepared in accordance with U.S. GAAP as compared to SAP.

Statutory accounting practices established by the NAIC and adopted in part by Missouri will determine,
income of Maiden US, and thus

among other things,
determine, in part, the amount of funds that are available to pay dividends to Maiden NA.

the amount of statutory surplus and statutory net

Holding Company Regulation

Maiden US and Maiden Specialty are subject to regulation under the insurance holding company laws of
their respective states of domicile. The insurance holding company laws and regulations vary from state to
state, but generally require licensed insurers that are subsidiaries of insurance holding companies to register
and ﬁle with state regulatory authorities certain reports including information concerning their capital
transactions involving the
structure, ownership, ﬁnancial condition and general business operations. All
insurers in a holding company system and their affiliates must be fair and reasonable and, if material, require

prior notice and approval or non-disapproval by the state insurance department of their domicile. Prior to
February 2, 2012, entry by Maiden US into certain material transactions with AmTrust or its affiliates required
prior notice to and approval of the Missouri DOI. This requirement has been rescinded and now applies only
to direct and indirect subsidiaries of the Company.

Further, state insurance holding company laws typically place limitations on the amounts of dividends or
other distributions payable by insurers. Payment of ordinary dividends by Maiden US requires prior approval
of the Director of the Missouri DOI unless dividends will be paid out of ‘‘earned surplus.’’ ‘‘Earned surplus’’
is an amount equal to the unassigned funds of an insurer as set forth in the most recent annual statement of
the insurer including all or part of the surplus arising from unrealized capital gains or revaluation of assets.
Extraordinary dividends generally require 30 days prior notice to and non-disapproval of the Missouri DOI
before being paid. An extraordinary dividend includes any dividend whose fair market value together with that
of other dividends or distributions made within the preceding 12 months exceeds the greater of: (1) 10% of
the insurer’s surplus as regards policyholders as at December 31 of the prior year, or (2) the net income of the
insurer, not including realized capital gains, for the 12-month period ending December 31 of the prior year,
but does not include pro rata distributions of any class of the insurer’s own securities.

State insurance holding company laws also require prior notice and state insurance department approval
of changes in control of an insurer or its holding company. ‘‘Control’’ is generally deﬁned as the possession,
direct or indirect, of the power to direct or cause the direction of the management and policies of the
company, whether through the ownership of voting securities, by contract (except a commercial contract for
goods or non-management services) or otherwise. Maiden US is domiciled in Missouri where any beneﬁcial
owner of 10% or more of the outstanding voting securities of an insurance company or its holding company is
presumed to have acquired control, unless this presumption is rebutted. Maiden Specialty is domiciled in
North Carolina, which determines control in the same manner. Therefore, an investor who intends to acquire
beneﬁcial ownership of 10% or more of our outstanding voting securities may need to comply with these laws
and would be required to ﬁle notices and reports with the Missouri DOI and receive approval from the
Missouri DOI or rebut the presumption of control before such acquisition. An investor acquiring beneﬁcial
ownership would need to obtain approval as to the change of control of Maiden Specialty from the North
Carolina Department of Insurance or rebut the presumption of control.

Risk-Based Capital

U.S. insurers are also subject to risk-based capital (or RBC) guidelines that provide a method to measure
the total adjusted capital (statutory capital and surplus plus other adjustments) of insurance companies taking
into account the risk characteristics of a company’s investments and products. The RBC formulas establish
capital requirements for four categories of risk: asset risk, insurance risk, interest rate risk and business risk.
For each category, the capital requirement is determined by applying factors to asset, premium and reserve
items, with higher factors applied to items with greater underlying risk and lower factors for less risky items.
Insurers that have less statutory capital than the RBC calculation required are considered to have inadequate
capital and are subject to varying degrees of regulatory action depending upon the level of capital inadequacy.
The RBC formulas have not been designed to differentiate among adequately capitalized companies that
operate with higher levels of capital. Therefore, it is inappropriate and ineffective to use the formulas to rate
or to rank such companies. Maiden US has satisﬁed the RBC formula and has exceeded all recognized
industry solvency standards. As at December 31, 2011, Maiden US and Maiden Specialty each had adjusted
capital in excess of amounts requiring company or regulatory action.

Reinsurance

if it can obtain credit

The ability of a primary insurer to take credit for the reinsurance purchased from reinsurance companies
is a signiﬁcant component of reinsurance regulation. Typically, a primary insurer will only enter into a
reinsurance agreement
to its reserves on its statutory ﬁnancial statements for the
reinsurance ceded to the reinsurer. With respect to U.S. domiciled reinsurers that reinsure U.S. insurers, credit
is usually granted when the reinsurer is licensed or accredited in a state where the primary insurer is
domiciled or, in some instances, in a state in which the primary insurer is licensed. States also generally
permit primary insurers to take credit for reinsurance if the reinsurer is (i) domiciled in a state with a credit
for reinsurance law that is substantially similar to the standards in the primary insurer’s state of domicile, and

(ii) meets certain ﬁnancial requirements. Credit for reinsurance purchased from a reinsurer that does not meet
the foregoing conditions is generally allowed to the extent that such reinsurer secures its obligations with
qualiﬁed collateral. Some states impose requirements that make it difficult to become licensed or accredited as
a reinsurer.

NAIC Ratios

The NAIC Insurance Regulatory Information System (‘‘IRIS’’), was developed to help state regulators
identify companies that may require special attention. IRIS is comprised of statistical and analytical phases
consisting of key ﬁnancial ratios whereby ﬁnancial examiners review annual statutory basis statements and
ﬁnancial ratios. Each ratio has an established ‘‘usual range’’ of results and assists state insurance departments
in executing their statutory mandate to oversee the ﬁnancial condition of insurance companies. A ratio result
falling outside the usual range of IRIS ratios is not considered a failing result; rather unusual values are
viewed as part of the regulatory early monitoring system. Furthermore, in some years, it may not be unusual
for ﬁnancially sound companies to have several ratios with results outside the usual ranges. An insurance
company may fall out of the usual range for one or more ratios because of speciﬁc transactions that are in
themselves immaterial. Generally, an insurance company will become subject to regulatory scrutiny and may
be subject to regulatory action if it falls outside the usual ranges of four or more of the ratios. As at
December 31, 2011, Maiden US and Maiden Specialty did not have an IRIS ratio range warranting any
regulatory action.

State Legislative and Regulatory Changes

From time to time, various regulatory and legislative changes are proposed in the insurance industry.
Among the proposals that have in the past been or are at present being considered are proposals in various
state legislatures (some of which proposals have been enacted) to conform portions of their insurance laws
and regulations to various model acts adopted by the NAIC. We are unable to predict whether any of these
laws and regulations will be adopted, the form in which any such laws and regulations would be adopted or
the effect, if any, these developments would have on our operations and ﬁnancial condition.

In December 2008,

the NAIC formally adopted the NAIC Reinsurance Regulatory Modernization
Framework proposal (the ‘‘Framework’’) which provides for the formation of a new office to be called the
NAIC Reinsurance Supervision Review Department (‘‘RSRD’’). The purpose of the RSRD will be to evaluate
and approve systems of reinsurance regulation in place both in U.S. and non-U.S. jurisdictions to determine
whether reinsurers domiciled in those jurisdictions would be permitted to participate in the Framework. Under
the Framework, credit for reinsurance determinations would be governed by the state that is the primary
U.S. regulator of the reinsurer rather than by the domestic regulators of all of the ceding insurers, as is
currently the case. The level of required collateral for a participating reinsurer would depend upon the
reinsurer’s security rating and would range from 0% to 100% of gross assumed liabilities. It is likely that
U.S. federal enabling legislation will be necessary to implement the Framework. If the Framework ultimately
leads to a reduction of the collateral requirements for non-U.S. insurers, such changes could be beneﬁcial to
Maiden Bermuda by permitting Maiden Bermuda to post less collateral to secure its reinsurance obligations to
its U.S. ceding companies. In 2011, several changes were made to the NAIC’s proposed model
law
revisions on reinsurance collateral. The amended models will still permit reduced collateral requirements for
non-U.S. reinsurers, but modiﬁcations were made that will help protect the rights of U.S. ceding insurers.
Again, at this time, we are unable to determine whether any additional changes in the U.S. reinsurance
regulatory framework will be implemented based on the NAIC proposal and the effect, if any, such changes
would have on our operations or ﬁnancial condition.

Our insurance subsidiaries are required to comply with a wide variety of laws and regulations applicable
to insurance or reinsurance companies, both in the jurisdictions in which they are organized and where they
sell their insurance and reinsurance products. The insurance and regulatory environment, in particular for
offshore insurance and reinsurance companies, has become subject to increased scrutiny in many jurisdictions,
including the United States, various states within the United States and the European Union. In the past, there
have been Congressional and other initiatives in the United States regarding increased supervision and
regulation of the insurance industry. It is not possible to predict the future impact of changes in laws and
regulations on our operations. The cost of complying with any new legal requirements affecting our
subsidiaries could have a material adverse effect on our business.

In addition, our subsidiaries may not always be able to obtain or maintain necessary licenses, permits,
authorizations or accreditations. They also may not be able to fully comply with, or to obtain appropriate
exemptions from, the laws and regulations applicable to them. Any failure to comply with applicable law or to
obtain appropriate exemptions could result in restrictions on either the ability of the company in question, as
well as potentially its affiliates, to do business in one or more of the jurisdictions in which they operate or on
brokers on which we rely to produce business for us. In addition, any such failure to comply with applicable
laws or to obtain appropriate exemptions could result in the imposition of ﬁnes or other sanctions. Any of
these sanctions could have a material adverse effect on our business. To date, no material ﬁne, penalty or
restriction has been imposed on us for failure to comply with any insurance law or regulation.

International Standards

to basic regulatory issues such as accounting,

U.S. federal and state regulators have committed in principle to adopting international standards with
respect
risk management, and corporate governance.
International regulatory considerations are increasingly being deliberated by the National Association of
Insurance Commissioners (NAIC) and could increase regulatory burdens for Maiden US and Maiden Specialty
and have the potential to negatively impact all U.S. insurers, regardless of size. Various trade associations and
industry participants are aggressively working to impact the NAIC adoption of these standards. However, the
ﬁnal outcome of these deliberations is unknown at this time.

Federal

Although the U.S. federal government typically does not directly regulate the business of insurance and
reinsurance, federal initiatives often have an impact on the insurance industry. From time to time, various
federal regulatory and legislative changes have been proposed in the insurance and reinsurance industry.
Among the proposals that have in the past been or are at present being considered are the possible
introduction of federal regulation in addition to, or in lieu of, the current system of state regulation of
insurers. The extreme turmoil in the ﬁnancial markets has increased the likelihood of changes in the way the
ﬁnancial services industry is regulated. While we cannot predict the exact nature, timing or scope of possible
governmental initiatives, there may be increased regulatory intervention in our industry in the future. In recent
years, the U.S. federal government has increased its scrutiny of the insurance regulatory framework and in
July 2010 enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (‘‘Dodd-Frank’’), which
is discussed below. Additionally, the 2013 budget proposed by President Obama includes a provision that
for certain reinsurance premiums paid to affiliated foreign insurance
would change the tax treatment
companies. We are unable to predict what laws and regulations will be proposed or adopted, the form in
which any such laws and regulations would be adopted, or the effect, if any, these developments would have
on our operations and ﬁnancial condition.

McCarran-Ferguson Act

Proposals to repeal the McCarran-Ferguson Act antitrust exemption for the insurance industry periodically
are made, including in recent years, but have been unsuccessful. The antitrust exemption allows insurers to
compile and share loss data, develop standard policy forms and manuals and predict future loss costs with
greater reliability, among other things. The ability of the industry, under the exemption permitted in the
McCarran-Ferguson Act, to collect loss cost data and build a credible database as a means of predicting future
loss costs is an important part of cost-based pricing. If the ability to collect this data was removed in the
future, the predictability of future loss costs and the reliability of pricing could be undermined.

Dodd-Frank Wall Street Reform and Consumer Protection Act

The Dodd-Frank became law in July 2010. Dodd-Frank creates a new source of regulation and
supervision of the insurance industry at the federal level. Dodd-Frank’s requirements include streamlining the
state-based regulation of reinsurance and non-admitted insurance (property or casualty insurance placed from
insurers that are eligible to accept insurance, but are not licensed to write insurance in a particular state).
Dodd-Frank also establishes a new Federal Insurance Office (‘‘FIO’’) within the U.S. Department of the
Treasury with powers over all lines of insurance except health insurance, certain long-term care insurance and
crop insurance, in order to, among other things, monitor aspects of the insurance industry, identify issues in
the regulation of insurers that could contribute to a systemic crises in the insurance industry or the overall

ﬁnancial system, coordinate federal policy on international insurance matters and preempt state insurance
measures under certain circumstances. Congress ultimately limited the scope of the FIO and recognized that it
should not be a duplicate federal insurance regulator. The office is restricted primarily to monitoring the
industry and advising Congress and federal agencies on insurance issues. However, federal regulators will
have vast discretion over how this oversight
is executed. Dodd-Frank calls for numerous studies and
contemplates further regulation, the timing and impact of which is uncertain. Dodd-Frank clariﬁcation bills
were advanced during 2011 that could reduce costly, duplicative information requests on insurers, and prevent
insurers from being subjected to bank-centric rules. Any additional legislation or regulatory requirements
imposed in connection with Dodd-Frank or other regulatory reform may have an adverse effect on the
operation of the Company and its subsidiaries.

The Terrorism Risk Insurance Program Reauthorization Act of 2007

insured losses that exceed insurer deductibles, subject

The Terrorism Risk Insurance Program Reauthorization Act of 2007 (‘‘TRIA’’) was signed into law by
President Bush on December 26, 2007. This law renews the prior federal terrorism risk insurance program
through December 31, 2014. The program includes protections for acts of domestic terrorism. The insurer
deductible is ﬁxed at 20% of an insurer’s direct earned premium, and the federal share of compensation is
ﬁxed at 85% of
to a $100 billion cap. The
U.S. Treasury Department is required to promulgate regulations to determine the pro-rata share of insured
losses if they exceed the $100 billion cap. In addition, clear and conspicuous notice to policyholders of the
$100 billion cap is required. Under the program reauthorization, the trigger at which federal compensation
becomes available remains ﬁxed at $100 million per year through 2014. Under the TRIA Extension of 2007,
the deﬁnition of ‘‘acts of terrorism’’ has been expanded to include ‘‘domestic terrorism,’’ which could impact
insurance coverage and have an adverse effect on our clients, the industry and us. There is also no assurance
that TRIA will be extended beyond 2014 on either a temporary or permanent basis and its expiration could
have an adverse effect on our clients, the industry or us. TRIA does not apply to reinsurers directly but does
apply directly to insurers and to excess and surplus lines insurers, like Maiden Specialty.

Taxation of the Company and its Subsidiaries

The following summary of the taxation of Maiden Holdings, Maiden US, Maiden Specialty, Maiden
Bermuda and the companies formed and/or acquired in the IIS Acquisition,
including Maiden Global,
OVS and Maiden LF, is based upon current law. Legislative, judicial or administrative changes may be
forthcoming that could affect this summary. Certain subsidiaries of ours are subject to taxation related to
operations in Australia, Germany, Russia, Sweden, the United Kingdom and the United States. The discussion
below covers the principal locations for which the Company or its subsidiaries are subject to taxation.

Bermuda

Maiden Holdings and Maiden Bermuda have each received from the Minister of Finance an assurance
under The Exempted Undertakings Tax Protection Act, 1966, as amended of Bermuda, to the effect that in the
event that there is any legislation enacted in Bermuda imposing tax computed on proﬁts or income, or
computed on any capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax,
then the imposition of any such tax shall not be applicable to Maiden Holdings or Maiden Bermuda or to any
of their operations or the shares, debentures or other obligations of Maiden Holdings or Maiden Bermuda until
March 31, 2035. These assurances are subject to the proviso that they are not construed to prevent the
application of any tax or duty to such persons as are ordinarily resident in Bermuda (Maiden Holdings and
Maiden Bermuda are not currently so designated) or to prevent
the application of any tax payable in
accordance with the provisions of The Land Tax Act, 1967 of Bermuda or otherwise payable in relation to the
property leased to Maiden.

Germany

Maiden Germany GmbH (‘‘Maiden Germany’’), which is a wholly owned subsidiary of Maiden Global,
is the majority shareholder of OVS. Maiden Germany is subject to German corporate income tax at a rate of
15.0% plus a solidarity surcharge of 5.5% thereon (in the aggregate, a rate of 15.825%). In addition, a
German municipal trade tax at a rate of 14.875% resulting from the registered seat of the company in
Darmstadt is paid.

Maiden Germany is not engaged in general commerce and Maiden Germany owns 90% of the shares in
OVS. Maiden Germany and OVS implemented a tax unity with a retroactive effect from January 1, 2011,
which results that all proﬁts and losses generated at the level of OVS are attributed to Maiden Germany. The
non-affiliated shareholder that holds the remaining 10% stake in OVS receives a ﬁxed annual compensation of
€45,000 from Maiden Germany, since all income is attributed to Maiden Germany as a result of the tax unity.

OVS, also with its registered seat in Darmstadt, is subject to the same German corporate income tax at a
rate of 15% plus solidarity surcharge of 5.5% thereon (in the aggregate, a rate of 15.825%) and German trade
tax at a rate of 14.875%. OVS is engaged in general commerce as an insurance agency. The taxable income of
a German corporate entity is in principle, absent a Treaty exemption, the total amount of worldwide income
(current proﬁts, capital gains) after deduction of business expenses. In general, income from dividend and
capital gains arising upon the sale of shares in corporate entities are, in principle, fully tax exempt. However,
a lump sum of 5% of
representing
non-deductible business expenses. Since there is a tax unity in place between Maiden Germany and OVS, the
tax exemption of dividends received by OVS is (due to the tax unity) not granted to OVS, but rather to
Maiden Germany, the 90% shareholder. Dividends are also tax exempt at the level of Maiden Germany, since
Maiden Germany is entitled to claim this exemption regulation.

the dividend/capital gains is added back to the taxable income,

Dividends paid by German corporate entities to foreign shareholders are subject to German withholding
tax at a rate of 26.375%, unless the respective shareholder obtained a withholding tax exemption or reduction
certiﬁcate from the Federal Central Tax Office by reference to a Double Tax Treaty or by reference to the
EC Parent/Subsidiary Directive. There is no German withholding tax on (non-proﬁt related) interest payments
to corporate shareholders. Other than Maiden Germany and OVS, we believe that the Company has operated
and will continue to operate its business in a manner that will not cause its affiliates to be treated as engaged
in a trade or business within Germany. A trade or business in Germany requires a permanent establishment
either in the form of a ﬁxed place of business or by having a permanent representative on German ground.

Germany imposes an excise tax on auto insurance premiums paid to insurers which reside in Germany.
The tax rate generally applicable is 19% of the insurance premium. If the insurer resides in a member state of
the European Community or in a third country, the excise tax on insurance premiums will in principle only be
levied if the policy-holder is a resident of Germany or if the insured property is located in Germany. There is
generally no excise tax on reinsurance premiums.

Sweden

Maiden LF is subject to Swedish taxation on net proﬁts irrespective of whether the proﬁts are generated
through business in general or capital. To the extent that net proﬁts are generated, proﬁts are taxed at a rate of
26.3%. Foreign entities are subject to tax in Sweden only to the extent they have a permanent establishment in
Sweden or if the income is related to certain types of assets, typically real estate, or partnership income.
Dividends paid to foreign shareholders may be subject to withholding tax with a maximum of 30% although
in many cases tax is reduced as a result of a tax treaty or under EU legislation. A foreign entity is deemed to
have a permanent establishment in Sweden under the rules very similar to those applied by OECD. Other than
Maiden LF, we believe that Maiden has operated and will continue to operate its business in a manner that
will not cause it to be treated as having a permanent establishment in Sweden. There is no withholding tax on
interest paid by a Swedish borrower to a foreign lender.

United Kingdom

Maiden Global is tax resident in the U.K. and is currently subject to corporation tax in the U.K. on its
trading and other taxable proﬁts. The full rate of U.K corporation tax is currently 26%, falling to 25% from
April 2012. Non-U.K. resident corporations will only be within the charge to corporation tax in the U.K. if
they carry on a trade in the U.K.
in the U.K. Non-U.K. resident
corporations which are not entitled to treaty relief may be subject to U.K. income tax on U.K. source trading
proﬁts at the rate of 20% if they carry on a trade in the U.K. Reinsurance business developed by Maiden
Global is underwritten by Maiden Bermuda in Bermuda. Other than in respect of Maiden Global, we believe
that the Company has operated and will continue to operate its business in a manner that will not cause it to
be treated as engaged in a trade within the U.K. Dividends paid by Maiden Global will not be subject to

through a permanent establishment

deduction or withholding for or on account of U.K. tax. Interest paid by Maiden Global will be subject to
deduction of U.K. income tax at the rate of 20%, subject to the availability of treaty relief.

United States

Maiden NA and its subsidiaries, including Maiden US and Maiden Specialty (collectively, the Maiden
US Companies), transact business in and are subject to taxation in the United States. Other than the Maiden
US Companies, we believe that we have operated and will continue to operate our business in a manner that
will not cause us to be treated as engaged in a trade or business within the United States. On this basis, other
than the Maiden US Companies, we do not expect to be required to pay US corporate income taxes (other
than withholding taxes as described below). However, because there is considerable uncertainty as to the
activities that constitute a trade or business in the United States, there can be no assurance that the Internal
Revenue Service will not contend successfully that the Company or its non-U.S. subsidiaries are engaged in a
trade or business in the United States. The maximum federal tax rate is currently 35% for a corporation’s
income that is effectively connected with a trade or business in the United States. In addition, U.S. branches
of foreign corporations may be subject to the branch proﬁts tax, which imposes a tax on U.S. branch after-tax
earnings that are deemed repatriated out of the United States, for a potential maximum effective federal tax
rate of approximately 54% on the net income connected with a U.S. trade or business.

Foreign corporations not engaged in a trade or business in the United States are subject to U.S. income
tax, effected through withholding by the payer, on certain ﬁxed or determinable annual or periodic gains,
proﬁts and income derived from sources within the United States as enumerated in Section 881(a) of the
Internal Revenue Code, such as dividends and interest on certain investments.

The United States also imposes an excise tax on insurance and reinsurance premiums paid to foreign
to risks located in the United States. The rate of tax applicable to

insurers or reinsurers with respect
reinsurance premiums paid to Maiden Bermuda is 1% of gross premiums.

Where You Can Find More Information

We maintain our principal website at www.maiden.bm. The information on our websites is not

incorporated by reference in this Annual Report on Form 10-K.

We make available, free of charge through our principal website, our ﬁnancial information, including the
information contained in our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current
Reports on Form 8-K and amendments to those reports ﬁled or furnished pursuant to Section 13(a) or 15(d) of
the Securities Exchange Act of 1934, as amended (the ‘‘Exchange Act’’), as soon as reasonably practicable
after we electronically ﬁle such material with, or furnish such material to, the SEC. We also make available,
free of charge through our principal website, our Audit Committee Charter, Compensation Committee Charter,
Nominating & Corporate Governance Committee Charter, and Code of Business Conduct and Ethics. Such
information is also available in print for any shareholder who sends a request to Maiden Holdings, Ltd.,
Schroders House, 131 Front Street, Hamilton HM 12, Bermuda, Attention: Secretary. Reports and other
information we ﬁle with the SEC may also be viewed at the SEC’s website at www.sec.gov or viewed or
obtained at the SEC Public Reference Room at 100 F Street, N.E., Washington, DC 20549. Information on the
operation of the SEC Public Reference Room may be obtained by calling the SEC at 800-SEC-0330.

Item 1A. Risk Factors

Introduction

Current and potential

investors in the Company should be aware that, as with any publicly traded
company, investing in our securities carries risk. Managing risk effectively is critical to our success, and our
organization is built around intelligent risk assumptions and prudent risk management. We have identiﬁed
what we believe reﬂect key signiﬁcant risks to the organization, and in turn to our shareholders, which are
outlined below. Any of the risks described below could result in a signiﬁcant or material adverse effect on our
results of operations or ﬁnancial condition. In addition to these enumerated risks, we face numerous other
strategic, operational and emerging risks that could in the aggregate lead to shortfalls to our long-term goals
or add to short-term volatility in our earnings. The following review of important risk factors should not be
construed as exhaustive and should be read in conjunction with other cautionary statements that are included
herein or elsewhere. The words or phrases believe, anticipate, estimate, project, plan, expect, intend, hope,
forecast, evaluate, will likely result or will continue or words or phrases of similar import generally involve
forward-looking statements. As used in these Risk Factors, the terms ‘‘we’’, ‘‘our’’ or ‘‘us’’ may, depending
upon the context, refer to the Company, to one or more of the Company’s consolidated subsidiaries or to all
of them taken as a whole.

Business

There is limited historical information available for investors to evaluate our performance.

We began underwriting reinsurance transactions in July 2007. As a result, there is limited historical
information available to help investors evaluate our performance. In addition, in light of our limited operating
history and a series of signiﬁcant transactions, including the GMAC Acquisition in November 2008, entering
into the ACAC Quota Share, IIS Acquisition in 2010 and the Senior Note Offering in 2011, our historical
ﬁnancial statements are not necessarily meaningful for evaluating the potential of our future operations.
Because our underwriting and investment strategies differ from other participants in the property and casualty
reinsurance markets, you may not be able to compare our business’s performance or prospects to other
property and casualty reinsurers.

We may not be able to manage our growth effectively.

We expect our business to grow in the future as we continue our relationships with existing customers
while seeking opportunities to reinsure other insurance companies operating in similar niches. We do not have
speciﬁc targets or time frames for growth. Expansion of our business in the U.S. and internationally could
require additional capital, systems development and skilled personnel. We cannot assure you that we will be
able to meet our capital needs, expand our systems effectively, allocate our human resources optimally,
identify and hire qualiﬁed employees or incorporate effectively the components of any businesses we may
acquire. The failure to manage our growth effectively could have a material adverse effect on our business,
ﬁnancial condition and results of operations.

Ongoing economic uncertainty could materially and adversely affect our business, our liquidity and
ﬁnancial condition.

Global economies and ﬁnancial markets have experienced signiﬁcant weakness and volatility since 2008,
although the most extreme of these circumstances have abated and economic conditions and markets have
shown positive, albeit
tentative progress since the ﬁrst quarter of 2009. While near-term U.S. economic
prospects have improved, unemployment continues at elevated levels and many sovereign, U.S. federal and
state governments continued to experience signiﬁcant structural ﬁscal deﬁcits, creating uncertainty as to levels
of taxation, inﬂation and other economic fundamentals that may impact future growth prospects. There is
signiﬁcantly greater economic, ﬁscal and monetary uncertainty in Europe, due to the combination of poor
economic growth, signiﬁcant sovereign deﬁcits which have called into question the future of the common
currency used across most of Europe. These issues may have an indirect and potentially signiﬁcant impact on
the U.S. economy, although these prospects are not clearly deﬁned at
this time. Continuation of these
conditions may potentially affect (among other aspects of our business) the demand for and claims made
the ability of customers, counterparties and others to establish or maintain their
under our products,

relationships with us, our ability to access and efficiently use internal and external capital resources and our
investment performance. In the event
in a prolonged period of
economic uncertainty, our results of operations, our ﬁnancial condition and/or liquidity, and competitor
landscape could be materially and adversely affected.

these conditions persist and result

that

If opportunities for writing reinsurance and insurance through Maiden US do not materialize as we expect,
our ﬁnancial condition and results of operations may be materially adversely affected.

We believe that there will be opportunities to renew and write new reinsurance and insurance through
Maiden US. However, we cannot assure you that Maiden US will retain its customers or write new business
as we expect. Based upon industry developments during 2011, pricing conditions may be improving which
could enhance our ability to write new business. However, market conditions have been highly competitive for
an extended period of time and the breadth (by line of business) and duration of any improved pricing
environment which may develop is highly uncertain. In addition, other companies may continue to offer
these
reinsurance and insurance products on more competitive terms
circumstances, we might not be able to expand our specialty property/casualty reinsurance business and have a
material adverse effect on our ability to fully implement our business strategy, as well as on our ﬁnancial
condition and results of operations.

than we can provide. Under

Our actual (re)insured losses may be greater than our reserve for loss and loss adjustment expenses, which
would negatively impact our ﬁnancial condition and results of operations.

We expect that our success will depend upon our ability to assess accurately the risks associated with the
businesses that we will reinsure. Signiﬁcant periods of time often elapse between the occurrence of an insured
loss, the reporting of the loss to an insurer and the reporting of the loss by the insurer to its reinsurer. After
we begin to write reinsurance business and to recognize liabilities for unpaid losses, we will establish loss and
loss adjustment expense reserves as balance sheet
liabilities. These reserves will represent estimates of
amounts needed to pay reported losses and unreported losses and the related loss adjustment expense. Loss
reserves are only an estimate of what an insurer or reinsurer anticipates the ultimate costs of claims to be and
do not represent an exact calculation of liability. Estimating loss reserves is a difficult and complex process
involving many variables and subjective judgments. As part of our reserving process, we will review historical
data as well as actuarial and statistical projections and consider the impact of various factors such as:

•

trends in claim frequency and severity;

changes in operations;

emerging economic and social trends;

inﬂation; and

changes in the regulatory and litigation environments.

This process assumes that past experience, adjusted for

the effects of current developments and
anticipated trends, is an appropriate basis for predicting future events. There is no precise method, however,
for evaluating the impact of any speciﬁc factor on the adequacy of reserves, and actual results are likely to
differ from original estimates. In addition, unforeseen losses, the type or magnitude of which we cannot
predict, may emerge in the future. We will establish or adjust reserves for our insurance subsidiaries in part
based upon loss data received from the ceding companies with which we do business, including AmTrust and
ACAC. There is a time delay that elapses between the receipt and recording of claims results by the ceding
insurance companies or by the managing general agents and the receipt and recording of those results by us.
Accordingly, establishment and adjustment of reserves for our insurance subsidiaries is dependent upon timely
and accurately estimate reporting from cedants and agents.

To the extent our reserve for loss and loss adjustment expenses is insufficient to cover actual loss and
loss adjustment expenses, we will have to adjust our reserve and may incur charges to our earnings, which
could have a material adverse effect on our business, ﬁnancial condition and results of operations.

For our property and casualty reinsurance underwriting, we depend on the policies, procedures and
expertise of ceding companies; these companies may fail to accurately assess and price the risks they
underwrite, which may lead us to inaccurately assess and price the risks we assume.

Because we participate in property and casualty reinsurance markets, the success of our underwriting
efforts depends, in part, upon the policies, procedures and expertise of the ceding companies making the
original underwriting decisions. As is common among reinsurers, we do not separately evaluate each of the
individual risks assumed under reinsurance treaties. We face the risk that these ceding companies may fail to
accurately assess the risks that they assume initially, which, in turn, may lead us to inaccurately assess the
risks we assume. If we fail to establish and receive appropriate premium rates or fail to contractually limit our
exposure to such risks, we could face signiﬁcant losses on these contracts.

Operational risks, including human or systems failures, are inherent in our business.

Operational risks and losses can result from many sources including fraud, errors by employees, failure to
document transactions properly or to obtain proper internal authorization, failure to comply with regulatory
requirements or information technology failures.

We believe our modeling, underwriting and information technology and application systems are critical to
our business and reputation. Moreover, our technology and applications have been an important part of our
underwriting process and our ability to compete successfully. Such technology is and will continue to be a
very important part of our underwriting process. We have also licensed certain systems and data from third
parties. We cannot be certain that we will have access to these, or comparable service providers, or that our
technology or applications will continue to operate as intended. In addition, we cannot be certain that we
would be able to replace these service providers or consultants without slowing our underwriting response
time. A major defect or
information technology and application
internal controls or
systems could result
in management distraction, harm to our reputation, a loss or delay of revenues or
increased expense.

failure in our

The occurrence of severe catastrophic events may have a material adverse effect on our ﬁnancial results
and ﬁnancial condition.

Although our business strategy generally precludes us from writing signiﬁcant amounts of catastrophe
reinsurance segment, most property reinsurance contains some exposure to
exposed business in our
catastrophic loss. Our Diversiﬁed Reinsurance segment
includes only limited exposure to natural and
man-made disasters, such as hurricane, typhoon, windstorm, ﬂood, earthquake, acts of war, acts of terrorism
and political instability. While we carefully manage our aggregate exposure to catastrophes, modeling errors
and the incidence and severity of catastrophes, such as hurricanes, windstorms and large-scale terrorist attacks
are inherently unpredictable, and our losses from catastrophes could be substantial. In addition, it is possible
that we may experience an unusual frequency of smaller losses in a particular period. In either case, the
consequences could be substantial volatility in our ﬁnancial condition or results of operations for any
ﬁscal quarter or year, which could have a material adverse effect on our ﬁnancial condition or results of
operations and our ability to write new business. These losses could deplete our shareholders’ equity. Increases
in the values and geographic concentrations of insured property and the effects of inﬂation have resulted in
increased severity of industry losses from catastrophic events in recent years and we expect that those factors
will increase the severity of catastrophe losses in the future.

We may face substantial exposure to losses from terrorism.

U.S. insurers are required by state and federal law to offer coverage for terrorism in certain commercial
lines. In response to the September 11, 2001 terrorist attacks, the Congress enacted legislation designed to
ensure, among other things, the availability of insurance coverage for foreign terrorist acts, including the
requirement that insurers offer such coverage in certain commercial lines. The TRIA requires commercial
property and casualty insurance companies to offer coverage for certain acts of terrorism and established a
federal assistance program through the end of 2005 to help such insurers cover claims related to future
(‘‘TRIEA’’) extended the federal
terrorism-related losses. The Terrorism Risk Insurance Extension Act
assistance program through 2007, but it also set a per-event threshold that had to be met before the federal

program would become applicable and also increased insurers’ statutory deductibles. The Terrorism Risk
Insurance Program Revitalization Act (‘‘TRIPRA’’) currently extends the federal assistance program through
2014. However, the Obama administration has proposed an elimination of the program in its ﬁscal 2011
budget. It is uncertain at this time whether the program will continue through its scheduled expiration date.

Pursuant

to TRIA, as extended, U.S.

insurance companies must offer insureds coverage for acts of
terrorism that are certiﬁed as such by the U.S. Secretary of the Treasury, in concurrence with the Secretary of
State and the Attorney General, for an additional premium or decline such coverage. The federal government
will reimburse commercial insurers for up to 85% of the losses due to certiﬁed acts of terrorism in excess of a
deductible which, for 2008, is set at 20% of the insurer’s direct earned commercial lines premiums for the
immediately preceding calendar year. The federal reimbursement is triggered only after a per-event threshold,
referred to as the program trigger, has been reached. In the case of certiﬁed acts of terrorism taking place after
March 31, 2006, the program trigger throughout the seven-year duration of the program has been set at
$100 million for industry-wide insured losses.

TRIPRA also expanded the deﬁnition of Act of Terrorism by removing the distinction between foreign

and domestic acts of terrorism.

The federal terrorism risk assistance provided by TRIA, TRIEA and TRIPRA will expire at the end of

2014. Any renewal may be on substantially less favorable terms.

Pursuant to the quota share agreements with AmTrust and ACAC and the reinsurance agreements that we
anticipate that our reinsurance subsidiaries will enter into with others, our subsidiaries will reinsure a portion
of each ceding insurer’s losses resulting from terrorism. With respect to those reinsurance agreements that we
have entered into to date, either terrorism coverage is speciﬁcally excluded or we do not consider exposure to
terrorist acts to be signiﬁcant. Although we expect that Maiden Bermuda will seek to retrocede some or all of
this terrorism risk to unaffiliated reinsurers, it may be unable to do so on terms that it considers favorable, or
at all.

We may or may not use retrocessional and reinsurance coverage to limit our exposure to risks. Any
retrocessional or reinsurance coverage that we obtain may be limited, and credit and other risks associated
with our retrocessional and reinsurance arrangements may result in losses which could adversely affect our
ﬁnancial condition and results of operations.

We will provide reinsurance to our clients and in turn we may or may not retrocede reinsurance we
assume to other insurers and reinsurers. If we do not use retrocessional coverage or reinsurance, our exposure
to losses will be greater than if we did obtain such coverage. If we do obtain retrocessional or reinsurance
coverage, some of the insurers or reinsurers to whom we may retrocede coverage or reinsure with may be
domiciled in Bermuda or other non-U.S. locations. We would be subject to credit and other risks that depend
upon the ﬁnancial strength of these reinsurers.

Further, we will be subject to credit risk with respect to any retrocessional or reinsurance arrangements
because the ceding of risk to reinsurers and retrocessionaires would not relieve us of our liability to the clients
retrocessional
or companies we insure or
arrangements or the failure of any retrocessional arrangements to protect us from overly concentrated risk
exposure could adversely affect our business, ﬁnancial condition and results of operation. We will attempt to
mitigate such risks by retaining collateral or
trust accounts for premium and claims receivables, but
nevertheless we cannot be assured that reinsurance will be fully collectable in the case of all potential
claims outcomes.

failure to establish adequate reinsurance or

reinsure. Our

The effects of emerging claim and coverage issues on our business are uncertain.

As industry practices and legal, judicial, social and other environmental conditions change, unexpected
issues related to claims and coverage may emerge. These issues may adversely affect our business by either
extending coverage beyond our underwriting intent or by increasing the number or size of claims. In some
instances,
these changes may not become apparent until sometime after we have issued insurance or
reinsurance contracts that are affected by the changes. As a result, the full extent of liability under our
reinsurance contracts may not be known for many years after a contract is issued. A recent example of

emerging claims and coverage issues is the growing trend of plaintiffs targeting property and casualty insurers
in purported class action litigation relating to claims-handling, insurance sales practices and other practices
related to the conduct of business in our industry. The effects of this and other unforeseen emerging claim and
coverage issues are extremely hard to predict and could have a material adverse effect on our business,
ﬁnancial condition and results of operations.

The integration of acquired companies may not be as successful as we anticipate.

Acquisitions involve numerous risks, including operational, strategic, and ﬁnancial risks such as potential
liabilities associated with the acquired business. Difficulties in integrating an acquired company may result in
the acquired company performing differently than we currently expect or in our failure to realize anticipated
expense-related efficiencies. Our existing businesses could also be negatively impacted by acquisitions.

Technology breaches or failures, including, but not limited to, those resulting from cyber-attacks on us or
our business partners and service providers, could disrupt or otherwise negatively impact our business.

While technology can streamline many business processes and ultimately reduce the cost of operations,
technology initiatives present certain risks. Our business is dependent upon our employees’ and outsourcers’
ability to perform, in an efficient and uninterrupted fashion, necessary business functions. Like all companies,
our information technology systems are vulnerable to data breaches, interruptions or failures due to events that
may be beyond our control, including, but not limited to, natural disasters, theft, terrorist attacks, computer
viruses, hackers and general technology failures.

A shutdown or inability to access one or more of our facilities, a power outage, or a failure of one or
more of our information technology,
telecommunications or other systems could signiﬁcantly impair our
ability to perform such functions on a timely basis. If sustained or repeated, such a business interruption,
system failure or service denial could result in a deterioration of our ability to write and process business,
provide customer service, pay claims in a timely manner or perform other necessary business functions.
Furthermore, a signiﬁcant portion of the communications between our employees and our business, banking
and investment partners depends on information technology and electronic information exchange.

We believe that we have established and implemented appropriate security measures, controls and
procedures to safeguard our information technology systems and to prevent unauthorized access to such
systems and any data processed and/or stored in such systems, and we periodically employ third parties to
evaluate and test the adequacy of such systems, controls and procedures. In addition, we have established a
business continuity plan which is designed to ensure that we are able to maintain all aspects of our key
business processes functioning in the midst of certain disruptive events,
including any disruptions to or
breaches of our information technology systems. Our business continuity plans are tested and evaluated for
adequacy. Despite these safeguards, disruptions to and breaches of our information technology systems are
possible and may negatively impact our business.

It is possible that insurance policies we have in place with third-parties would not entirely protect us in
the event that we experienced a breach, interruption or widespread failure of our information technology
systems. Furthermore, we have not secured any insurance coverage designed to speciﬁcally protect us from
the result of such events.

Although we have experienced no known or threatened cases involving unauthorized access to our
information technology systems and data or unauthorized appropriation of such data to date, we have no
assurance that such technology breaches will not occur in the future.

We compete with a large number of companies in the reinsurance industry for underwriting revenues.

The worldwide reinsurance business is highly competitive, as well as cyclical by product and market.
These cycles, as well as other factors that inﬂuence aggregate supply and demand for property and casualty
reinsurance products, are outside of our control. We compete with a large number of other companies in our
selected lines of business. There are many reinsurers throughout the world, and new reinsurance companies,
based in Bermuda or elsewhere, may be formed at any time. We will compete with major U.S. and
non-U.S. reinsurers that offer the lines of reinsurance that we will offer, target the same market as we do and
utilize similar business strategies. We compete with various reputable and established reinsurers, such as
Swiss Reinsurance Company Ltd., Munich Reinsurance America, Inc., General Reinsurance Corporation,
PartnerRe Ltd., Hannover Re Group, QBE Insurance Group, Transatlantic Holdings, Inc., Endurance Specialty
International Group, Ltd., Odyssey Re Holdings
Holdings, Ltd., Scor Reinsurance Company, Sirius
Corporation, W.R. Berkley Corp., and Everest Re Group, Ltd.

Since we have a limited operating history, many of our competitors will have greater name and brand
recognition than we will have. Many of them also have more (in some cases substantially more) capital and
greater marketing and management resources than we expect to have, and may offer a broader range of
products and more competitive pricing than we expect to, or will be able to, offer.

Our competitive position will be based on many factors, including our perceived ﬁnancial strength,
ratings assigned by independent rating agencies, geographic scope of business, client relationships, premiums
charged, contract
terms and conditions, products and services offered (including the ability to design
customized programs), knowledge of the types of business to be reinsured, speed of claims payment,
reputation, experience and qualiﬁcations of employees and local presence. Since we have only been in
operation since 2007, we may not be able to compete successfully on many of these bases. If competition
limits our ability to write new business at adequate rates, our return on capital may be adversely affected.

Consolidation in the insurance and reinsurance industry and increased competition on premium rates
could lead to lower margins for us and less demand for our products and services.

The insurance and reinsurance industry continues to undergo a process of consolidation as industry
participants seek to enhance their product and geographic reach, client base, operating efficiency and general
market power through merger and acquisition activities. We believe that the larger entities resulting from these
including improved
mergers and acquisition activities may seek to use the beneﬁts of consolidation,
efficiencies and economies of scale, to, among other things, implement price reductions for their products and
services to increase their market shares. Consolidation among primary insurance companies may also lead to
reduced use of reinsurance as the resulting larger companies may be able to retain more risk and may also
have bargaining power in negotiations with reinsurers. If competitive pressures compel us to reduce our
prices, our operating margins will decrease.

As the insurance and reinsurance industry consolidates, competition may become more intense and the
importance of acquiring and properly servicing each customer will become greater. We could incur greater
expenses relating to customer acquisition and retention, which could reduce our operating margins.

When the property-casualty insurance industry has exhibited a greater degree of competition, premium
rates have come under downward pressure as a result. Greater competition could result in reduced volumes of
reinsurance written and could reduce our proﬁtability.

Clients and Brokers

Our business is dependent upon reinsurance brokers, managing general agents and other producers,
including third party administrators and ﬁnancial institutions, and the failure to develop or maintain these
relationships could materially adversely affect our ability to market our products and services.

We market our reinsurance products primarily through brokers and expect

that we will derive a
signiﬁcant portion of our business from a limited number of brokers. Our failure to further develop or
maintain relationships with brokers from whom we expect to receive our business could have a material
adverse effect on our business, ﬁnancial condition and results of operations.

Our reliance on brokers subjects us to their credit risk.

In accordance with industry practice, we anticipate that we will frequently pay amounts owed on claims
under our reinsurance contracts to brokers, and these brokers in turn are required to pay and will pay these
amounts over to the clients that have purchased reinsurance from us. If a broker fails to make such a payment,
in a signiﬁcant majority of business that we will write, it is highly likely that we will be liable to the client
for the deﬁciency under local laws or contractual obligations, notwithstanding the broker’s obligation to make
such payment. Likewise, when the client pays premiums for these policies to brokers for payment over to us,
these premiums are considered to have been paid and, in most cases, the client will no longer be liable to us
for those amounts, whether or not we actually receive the premiums from the brokers. Consequently, we will
assume a degree of credit risk associated with brokers with whom we work with respect to most of our
reinsurance business.

Financial Strength and Debt Ratings

Maiden Bermuda, Maiden US and Maiden Specialty have received ﬁnancial strength ratings of ‘‘A-’’
(Excellent) from A.M. Best and BBB+ (Good) from Standard & Poor’s. Ratings downgrades of either
company may adversely affect our competitive position and our ability to meet our ﬁnancial goals and
capital requirements.

Competition in the types of insurance business that we intend to reinsure is based on many factors,
including the perceived ﬁnancial strength of the insurer and ratings assigned by independent rating agencies.
Maiden Bermuda, Maiden US and Maiden Specialty have each received a ﬁnancial strength rating of ‘‘A-’’
(Excellent) with a stable outlook from A.M. Best, which is the fourth highest of sixteen rating levels. These
subsidiaries have also received a ﬁnancial strength rating of BBB+ (Good) with a stable outlook from
Standard & Poor’s, which is the sixth highest of twenty-one rating levels.

Ratings from these agencies are an opinion of our ﬁnancial strength and ability to meet ongoing
obligations to our future policyholders, and it is not an evaluation directed to our investors in our common
shares or trust preferred securities, nor is it a recommendation to buy, sell or hold our common shares or trust
preferred securities. Each rating should be evaluated independently of any other rating.

The ratings of Maiden Bermuda, Maiden US and Maiden Specialty are subject to periodic review by, and
may be revised downward or revoked at any time at the sole discretion of A.M. Best and/or Standard &
Poor’s. If A.M. Best were to downgrade Maiden Bermuda’s rating below ‘‘A-,’’ AII and other clients would
have the right to terminate their respective reinsurance agreements. More generally, if A.M. Best or Standard
& Poor’s were to downgrade Maiden Bermuda, Maiden US or Maiden Specialty, our competitive position
would suffer, and our ability to market our products, to obtain customers and to compete in the reinsurance
industry would be adversely affected. A subsequent downgrade, therefore, could result in a substantial loss of
business because our insurance and reinsurance company clients may move to other reinsurers with higher
claims paying and ﬁnancial strength ratings.

Liquidity, Capital Resources and Investments

A signiﬁcant amount of our invested assets are subject to changes in interest rates and market volatility. If
we were unable to realize our investment objectives, our ﬁnancial condition and results of operations may
be adversely affected.

Investment income is an important component of our net income. We plan to invest approximately
90 − 95% of our investments in high grade marketable ﬁxed income securities, cash and cash equivalents, and
up to approximately 5 − 10% in other securities which may include high-yield securities and equity securities.
As at December 31, 2011, the ﬁxed income securities of $2.0 billion in our investment portfolio represented
86.9% of our total cash and invested assets, of which $2.2 million or 0.1% were other investments. As a result
of market conditions prevailing at a particular time, the allocation of our portfolio to various asset types may
vary from these targets at times. The fair market value of these assets and the investment income from these
assets will ﬂuctuate depending on general economic and market conditions. Because we intend to classify
substantially all of our invested assets as available for sale, we expect changes in the market value of our
securities will be reﬂected in shareholders’ equity.

investment strategy with the assistance of AII

Our board of directors has established our investment policies and our executive management

is
implementing our
Insurance Management Limited, our
investment manager. Although these guidelines stress diversiﬁcation and capital preservation, our investment
results will be subject to a variety of risks, including risks related to changes in the business, ﬁnancial
condition or results of operations of the entities in which we invest, as well as changes in general economic
conditions and overall market conditions, interest rate ﬂuctuations and market volatility. General economic
conditions and overall market conditions may be adversely affected by U.S. involvement in hostilities with
other countries and large-scale acts of terrorism, or the threat of hostilities or terrorist acts.

Our investment portfolio includes a signiﬁcant amount of interest rate-sensitive instruments, such as
bonds, which may be adversely affected by changes in interest rates. Interest rates are highly sensitive to
many factors, including governmental monetary policies and domestic and international economic and political
conditions and other factors beyond our control. Because of the unpredictable nature of losses that may arise
under reinsurance policies, our liquidity needs could be substantial and may increase at any time. Changes in
interest rates could have an adverse effect on the value of our investment portfolio and future investment
income. For example, changes in interest rates can expose us to prepayment risks on mortgage-backed
securities included in our investment portfolio (all, excluding one Commercial Mortgage-Backed Security
(‘‘CMBS’’), are currently agency-backed and AA+ rated). Increases in interest rates will decrease the value of
our investments in ﬁxed-income securities. If increases in interest rates occur during periods when we sell
investments to satisfy liquidity needs, we may experience investment
losses. If interest rates decline,
reinvested funds will earn less than expected.

Certain categories of ﬁxed income securities can experience signiﬁcant price declines for reasons
unrelated to interest rates. Since 2007, global ﬁnancial markets and credit markets in particular have
experienced unprecedented volatility due to the effects of global economic weakness and resulting ﬁscal and
monetary crises. Both the U.S. and other sovereign governments, particularly in Europe, have enacted
signiﬁcant ﬁscal and monetary measures which have elevated levels of liquidity in the credit market place in
order to ensure economic stability and sustain recent limited economic growth. These measures have reduced
interest rates to historically low levels and could continue to affect many types of ﬁxed income securities,
continuing the current period of higher than average price volatility. Based on the statements of the
U.S. Federal Reserve and other central banks globally, this period of low interest rates is widely expected to
continue for at least the next two years.

In order to limit the Company’s exposure to unexpected interest rate increases which would reduce the
value of our ﬁxed income securities and reduce our shareholders’ equity, the Company has maintained the
duration of its investment portfolio at 2.78 years as at December 31, 2011, which is lower than the duration of
3.8 years as at December 31, 2010. This shortened duration is likely to reduce the amount of investment
income generated by our portfolio in 2012 and beyond, if the current interest rate environment does not
change. In addition, these measures could increase the likelihood of inﬂation which would likely reduce the
value of our ﬁxed income securities and reduce our shareholders’ equity.

We may invest a portion of our portfolio in below investment-grade securities. Borrowers that issue
below investment-grade securities are more sensitive to adverse economic conditions, including a recession.
The risk of default by these borrowers and the risk that we may not be able to recover our investment are
signiﬁcantly greater than for other borrowers. We also may invest a portion of our portfolio in equity
securities, including hedge funds, which are more speculative and more volatile than debt securities.

If we do not structure our investment portfolio so that it is appropriately matched with our reinsurance
liabilities, we may be forced to liquidate investments prior to maturity at a signiﬁcant loss to cover such
liabilities. For this or any of the other reasons discussed above, investment losses could signiﬁcantly decrease
our asset base, which would adversely affect our ability to conduct business. Any signiﬁcant decline in our
investment income would adversely affect our business, ﬁnancial condition and results of operations.

We may require additional capital in the future, which may not be available on favorable terms or at all.

Our future capital requirements will depend on many factors, including our growth and our ability to
write new business successfully and to establish premium rates and reserves at levels sufficient to cover our
losses. In 2007, we used approximately $450.0 million of the $500.0 million in net proceeds we received from
a private offering and the $50.0 million our Founding Shareholders invested in us to capitalize Maiden
Bermuda. We used the $260.0 million raised in the TRUPS Offering in January 2009 to capitalize Maiden US.
In 2011, the Senior Note Offering reﬁnanced a portion of the TRUPS Offering while providing us with our
ﬁrst public debt offering.

However, while we have been successful to date in raising the capital necessary to prudently manage our
business, our business has grown rapidly and we may need to raise additional funds to further capitalize
Maiden Bermuda, Maiden US or and Maiden Specialty, or expand our IIS business. We anticipate that any
such additional funds would be raised through equity, debt or hybrid ﬁnancings. In addition, we may enter
into an unsecured revolving credit facility or a term loan facility with one or more syndicates of lenders. We
currently have no commitment from any lender with respect to a credit facility or a loan facility. Any equity,
debt or hybrid ﬁnancing, if available at all, may be on terms that are not favorable to us. If we are able to
raise capital through equity ﬁnancings, the interest of shareholders in our Company would be diluted, and the
securities we issue may have rights, preferences and privileges that are senior to those of our common shares.
If we cannot obtain adequate capital, our business prospects, results of operations and ﬁnancial condition
could be adversely affected.

We have debt outstanding that could adversely affect our ﬁnancial ﬂexibility.

In connection with the TRUPS Offering, Maiden NA issued a subordinated debenture in the principal
amount of $260.0 million, which is the subject of a subordinated guarantee by Maiden Holdings, which
currently has an outstanding principal balance of $152.5 million. In addition, in connection with the Senior
Notes Offering in 2011, Maiden NA issued senior notes in the principal amount of $107.5 million, which is
subject to a guarantee by Maiden Holdings which is senior to the guarantee issued with the debenture issued
in connection with the TRUPS Offering. We may also incur additional indebtedness in the future. The level of
debt outstanding could adversely affect our ﬁnancial ﬂexibility.

Our indebtedness could have adverse consequences, including:

•

limiting our ability to pay dividends to our shareholders;

increasing our vulnerability to changing economic, regulatory and industry conditions;

limiting our ability to compete and our ﬂexibility in planning for, or reacting to, changes in our
business and the industry;

limiting our ability to borrow additional funds;

requiring us to dedicate a substantial portion of our cash ﬂow from operations to payments on our
debt, thereby reducing funds available for working capital, capital expenditures, acquisitions and
other purposes; and

impacting rating agencies and regulators assessment of our Company’s capital position, adequacy
rating agencies and regulators
the ﬁnancial strength ratings of
and ﬂexibility and therefore,
assessment of our solvency.

Under the terms of our TRUPS Offering, if we prepay the TRUPS before January 20, 2014 we are required
to pay a premium to security holders. This premium, along with an amortized discount currently recorded
as a reduction of a liability, would affect both results of operations and our book value.

The terms of the TRUPS Offering stipulate that a premium equal to 14% of the value of the TRUPS
would be payable to the holders of the TRUPS if we were to pay off the securities prior to January 20, 2014.
Also, at the time of the TRUPS Offering, we issued 11.7 million common shares to the holders of the TRUPS
in the TRUPS. The value assigned to these shares, which was
Offering as an inducement

to invest

$26.2 million at December 31, 2011, is recorded as a reduction of the liability for the TRUPS on our balance
sheet and is being amortized into expense over the term of the TRUPS Offering (30 years) using the effective
yield method.

In 2011, in connection with the Senior Notes Offering, we repurchased $107.5 million of the TRUPS and
as a result, pursuant to the terms of the TRUPS Offering, the Company incurred a non-recurring repurchase
expense of approximately $15.1 million, which was reported in the Company’s results of operations. As a
the Company also incurred an additional non-recurring non-cash charge of
result of
approximately $20.3 million, which represents the accelerated amortization of original issue discount and
issuance costs associated with equity issued in conjunction with the TRUPS Offering.

the repurchase,

If we were to fully pay off the remaining securities prior to January 20, 2014, we would incur
$21.4 million in additional expenses along with incurring additional amortization charges to write off the
remaining unamortized amounts which are presently $26.2 million. Thus our results of operations and book
value would be reduced commensurately.

While the Company’s liquidity is strong, we do not currently have a source or level of funding to prepay
these obligations. To the extent that ﬁnancing is sought to prepay those obligations, the cost associated with
such ﬁnancing would need to be sufficiently lower to justify the near-term ﬁnancial impact of such an event.
While we frequently evaluate the capital markets to gauge the capacity and costs associated with such a
ﬁnancing, it is unclear whether such levels of ﬁnancing are available or cost-effective enough to proceed and
the execution of such a ﬁnancing would be subject to market conditions and numerous other factors beyond
our control.

The availability and cost of security arrangements for reinsurance transactions may materially impact our
ability to provide reinsurance from Bermuda to insurers domiciled in the United States.

Maiden Bermuda is not licensed, approved or accredited as a reinsurer anywhere in the United States
and, therefore, under the terms of most of its contracts with U.S. ceding companies, it is required to provide
to its ceding companies for unpaid ceded liabilities in a form acceptable to state insurance
collateral
commissioners. Typically, this type of collateral takes the form of letters of credit issued by a bank, the
establishment of a trust, or funds withheld. If these facilities are unavailable, not sufficient or if we are unable
to arrange for other types of security on commercially acceptable terms, Maiden Bermuda’s ability to provide
reinsurance to U.S. based clients may be severely limited.

International Operations

Our offices that operate in jurisdictions outside the Bermuda and U.S. are subject to certain limitations and
risks that are unique to foreign operations.

Our international operations are regulated in various jurisdictions with respect to licensing requirements,
currency, security deposits, reserves and other matters. International operations may be harmed by political
developments in foreign countries, which may be hard to predict in advance. Regulations governing technical
reserves and remittance balances in some countries may hinder remittance of proﬁts and repatriation of assets.

As a result of the IIS Acquisition, we are entering into a variety of global insurance and reinsurance
markets that we have limited experience with and results may differ from our expectations, which could
adversely affect our results of operations and ﬁnancial condition.

The business associated with the IIS Acquisition and underwritten by Maiden Bermuda is primarily
written in Germany, Russia, Latin America, Australia and other global markets that we have limited
experience with. We have retained the entire management team and staff of GMAC IIS and OVS to improve
the likelihood that the IIS Acquisition will achieve its expected results. We expect the transaction to generally
perform within its overall stated targets. In addition, we have secured an arrangement with the largest primary
insurer in the IIS Acquisition portfolio to continue to reinsure business with us for a period of three years.
Further we have entered into cooperation agreements with the dealer association and manufacturer in that
country to increase sales penetration through these arrangements. Despite these measures, there can be no
guarantee that the IIS Acquisition will achieve the targets anticipated, or that the transaction could result in
losses that would adversely affect our results of operations and ﬁnancial condition.

Foreign currency ﬂuctuations may reduce our net income and our capital levels adversely affecting our
ﬁnancial condition.

the Canadian dollar,

We conduct business in a variety of non-U.S. currencies, the principal exposures being the euro, the
British pound,
the Swedish krona and the Russian ruble. Assets and liabilities
denominated in foreign currencies are exposed to changes in currency exchange rates. Our reporting currency
is the U.S. dollar, and exchange rate ﬂuctuations relative to the U.S. dollar may materially impact our results
and ﬁnancial position. Our principal exposure to foreign currency risk is our obligation to settle claims in
foreign currencies. In addition, we maintain and expect to continue to maintain a portion of our investment
portfolio in investments denominated in currencies other than the U.S. dollar. We may employ various
strategies (including hedging) to manage our exposure to foreign currency exchange risk. To the extent that
these exposures are not fully hedged or the hedges are ineffective, our results or equity may be reduced by
ﬂuctuations in foreign currency exchange rates that could materially adversely affect our ﬁnancial condition
and results of operations. At December 31, 2011, no such hedges or hedging strategies were in force or had
been entered into.

If the European common currency, the Euro, were to collapse, be devalued or undergo structural changes
in its participating countries or the basis on which they participate, we could be impacted, potentially
signiﬁcantly by the subsequent effects of such a circumstance.

We conduct a wide variety of business in countries in which the Euro is the local currency. We report our
ﬁnancial results in U.S. dollars and use widely reported exchange rates to convert
this currency into
U.S. dollars. For the year ended December 31, 2011, 8.6% of our net premiums written and 8.4% of our
reserve for loss and loss adjustment expenses is Euro denominated. As at December 31, 2011 our ﬁxed
income portfolio contains: 1) $51.2 million of Euro-denominated non-U.S. government bonds, which
constitutes 2.5% of the ﬁxed income portfolio; and 2) $66.8 million of Euro-denominated non-U.S. corporate
bonds, which constitutes 3.3% of the ﬁxed income portfolio.

Countries that participate in the Euro have been engulfed in signiﬁcant economic uncertainty in recent
years, but particularly in 2011. This uncertainty is the result of the cumulative effect of excessive sovereign
debt, deﬁcits by certain participating countries in the Euro and poor economic growth and prospects for the
union as a whole. The uncertainty has been exacerbated by the lack (to date) of both deﬁnitive solutions to
these issues and questions surrounding the adequacy of funding mechanisms by participating countries and
other institutions to de-lever the economic union and improve its economic outlook. While not likely at this
time, without satisfactory and timely resolution of these issues, the collapse or modiﬁcation of the Euro cannot
be ruled out at this time, with further uncertainty as to what forms of currency would take its place.

As a result, we could be exposed to signiﬁcantly greater foreign currency exposure than we estimate at
this time. If the currency were impaired or disrupted to any signiﬁcant degree, it could also impact our ability
to conduct normal business operations in those participating countries.

Regulation

Compliance by our insurance subsidiaries with the legal and regulatory requirements to which they are
subject is expensive. Any failure to comply could have a material adverse effect on our business.

Our insurance subsidiaries are required to comply with a wide variety of laws and regulations applicable
to insurance or reinsurance companies, both in the jurisdictions in which they are organized and where they
sell their insurance and reinsurance products. The insurance and regulatory environment, in particular for
offshore insurance and reinsurance companies, has become subject to increased scrutiny in many jurisdictions,
including the United States, various states within the United States and the European Union (‘‘EU’’). In the
past, there have been Congressional and other initiatives in the United States regarding increased supervision
and regulation of the insurance industry. It is not possible to predict the future impact of changes in laws and
regulations on our operations. The cost of complying with any new legal requirements affecting our
subsidiaries could have a material adverse effect on our business.

exemptions from, the laws and regulations applicable to them. Any failure to comply with applicable law or to
obtain appropriate exemptions could result in restrictions on either the ability of the company in question, as
well as potentially its affiliates, to do business in one or more of the jurisdictions in which they operate or on
brokers on which we rely to produce business for us. In addition, any such failure to comply with applicable
laws or to obtain appropriate exemptions could result in the imposition of ﬁnes or other sanctions. Any of
these sanctions could have a material adverse effect on our business.

Insurance statutes and regulations in jurisdictions outside and inside the United States could affect our
proﬁtability and restrict our ability to operate.

Maiden Bermuda is licensed as a Bermuda insurance company and is subject

to regulation and
supervision in Bermuda. The applicable Bermuda statutes and regulations generally are designed to protect
insureds and ceding insurance companies, not our shareholders. We do not intend Maiden Bermuda to be
registered or licensed as an insurance company in any jurisdiction outside Bermuda or to conduct any
insurance or reinsurance activities in the United States or elsewhere outside of Bermuda. Nevertheless, we
expect that a large portion of the gross premiums written by Maiden Bermuda will be derived from (1) the
Master Agreement with AII, (2) the quota share agreement with ACAC, and (3) from reinsurance contracts
entered into with entities mostly domiciled in the United States and Europe. Inquiries into or challenges to the
insurance activities of Maiden Bermuda may still be raised by U.S. or European insurance regulators in
the future.

In addition, even if Maiden Bermuda, as a reinsurer, is not directly regulated by applicable laws and
regulations governing insurance in the jurisdictions where its ceding companies operate,
these laws and
regulations, and changes in them, can affect the proﬁtability of the business that is ceded to Maiden Bermuda,
and thereby affect our results of operations. The laws and regulations applicable to direct insurers could
indirectly affect us in other ways as well, such as collateral requirements in various U.S. states to enable such
insurers to receive credit for reinsurance ceded to us.

In the past, there have been Congressional and other proposals in the United States regarding increased
supervision and regulation of the insurance industry, including proposals to supervise and regulate reinsurers
domiciled outside the United States. Our exposure to potential regulatory initiatives could be heightened by
that Maiden Bermuda is intended to be domiciled in, and operate exclusively from, Bermuda.
the fact
Bermuda is a small
jurisdiction and may be disadvantaged when participating in global or cross-border
regulatory matters as compared with larger jurisdictions such as the U.S. or the leading European Union
countries. This disadvantage could be ampliﬁed by the fact that Bermuda, which is currently an overseas
territory of the United Kingdom, may consider changes to its relationship with the United Kingdom in the
future, including potentially seeking independence.

If Maiden Bermuda were to become subject to any insurance laws and regulations of the United States or
any U.S. state, which are generally more restrictive than Bermuda laws and regulations, at any time in the
future, it might be required to post deposits or maintain minimum surplus levels and might be prohibited from
engaging in lines of business or from writing speciﬁed types of policies or contracts. Complying with those
laws could have a material adverse effect on our ability to conduct business and on our ﬁnancial condition and
results of operations.

In recent years, the state insurance regulatory framework in the U.S. has come under increased federal
scrutiny, and some state legislatures have considered or enacted laws that may alter or increase state authority
to regulate insurance and reinsurance companies and insurance holding companies. Further, the NAIC and
state insurance regulators are re-examining existing laws and regulations,
speciﬁcally focusing on
modiﬁcations to holding company regulations, interpretations of existing laws and the development of new
laws. Any proposed or future legislation or NAIC initiatives may be more restrictive than current regulatory
requirements or may result in higher costs.

In 2008, the BMA introduced new risk-based capital standards for insurance companies as a tool to assist
the BMA both in measuring risk and in determining appropriate levels of capitalization. The amended
Bermuda insurance statutes and regulations pursuant to the new risk-based supervisory approach required
additional ﬁlings by insurers to be made to the BMA. The required statutory capital and surplus of our
the BSCR. While our Bermuda-based operating
Bermuda-based operating subsidiary increased under

subsidiary currently has excess capital and surplus under these new requirements, there can be no assurance
that such requirement or similar regulations, in their current form or as may be amended in the future, will not
have a material adverse effect on our business, ﬁnancial condition or results of operations.

Europe

Within the EU,

the EU Reinsurance Directive of November 2005 (the ‘‘Directive’’) was adopted.
Member States of the EU and the EEA (‘‘European Economic Area’’) were required to implement this by
December 2007 however several Member States were late in the implementation of the Directive and, in a
few cases, further legislation is still necessary. The Directive requires member countries to lift barriers to trade
within the EU for companies that are domiciled in an EU country., therefore, allowing reinsurers established
in the EU to provide services to all EEA states. As a result, Maiden LF, being established in Sweden and
regulated by the Swedish Finansinspektionen (‘‘Swedish FSA’’), is able, subject to regulatory notiﬁcations and
there being no objection from the Swedish FSA and the Member States concerned, to provide insurance and
reinsurance services in all EEA Member States.

The Directive also does not prohibit EEA insurers from obtaining reinsurance from reinsurers licensed
outside the EEA. As such, and subject to the speciﬁc rules in particular Member States, Maiden Bermuda may
do business from Bermuda with insurers in EEA Member States, but
it may not directly operate its
reinsurance business within the EEA. Currently, each individual EEA Member State may impose conditions on
reinsurance provided by Bermuda based reinsurers which could restrict their future provision of reinsurance to
the EEA Member State concerned. A number of EEA Member States currently restrict the extent to which
Bermudian reinsurers may promote their services in those Member States, and a few have certain prohibitions
on the purchase of insurance from reinsurers not authorized in the EEA.

In addition to the Directive,

the European Union is introducing a new regulatory regime for the
regulation of the insurance and reinsurance sector known as ‘‘Solvency II.’’ Solvency II is a principles-based
regulatory regime which seeks to promote ﬁnancial stability, enhance transparency and facilitate harmonization
among insurance and reinsurance companies within the European Community (‘‘EC’’). Solvency II employs a
risk-based approach to setting capital requirements for insurers and reinsurers. One aspect of Solvency II (the
details of which are currently being developed) concerns the treatment of reinsurance ceded by EC insurers to
reinsurers headquartered in a state outside the EC. For example, consideration is being given as to whether
reinsurance ceded to a non-EC reinsurer should be treated in the same way as reinsurance ceded to an
EC reinsurer, and whether EC decants should require their non-EC reinsurers to provide collateral to cover
unearned premium and outstanding claims provisions. The Solvency II directive proposes that EC and
non-EC reinsurers shall be treated in the same way provided that the non-EC jurisdiction is found to have a
regulatory regime ‘‘equivalent’’ to that of Solvency II. Our reinsurance subsidiaries are headquartered in
non-EC countries. If the regulatory regimes of such countries are found not to be equivalent to that of
Solvency II and if our reinsurance subsidiaries fall below a certain minimum credit rating, then cedants in the
EC may be prevented from recognizing the reinsurance provided to them by our reinsurance subsidiaries for
the purpose of meeting their capital requirements or we may be required to provide collateral for our
obligations to EC insurers. This could have a material adverse impact on our ability to conduct our business.
Solvency II is scheduled to be fully implemented by the end of 2013.

United States

In the United States, licensed reinsurers are highly regulated and must comply with ﬁnancial supervision
standards comparable to those governing primary insurers. For additional discussion of the regulatory
requirements to which Maiden Holdings, as a holding company, and its subsidiaries are subject, see Item 1
‘‘Business — Regulatory Matters’’ in this Form 10-K. Any failure to comply with applicable laws could result
in the imposition of signiﬁcant restrictions on our ability to do business, and could also result in ﬁnes and
other sanctions, any or all of which could materially adversely affect our ﬁnancial condition and results of
operations. In addition, these statutes and regulations may, in effect, restrict the ability of our subsidiaries to
write new business or, as indicated below, distribute funds to Maiden Holdings. In recent years, some
U.S. state legislatures have considered or enacted laws that may alter or increase state authority to regulate
insurance companies and insurance holding companies. Moreover, the NAIC and state insurance regulators
regularly re-examine existing laws and regulations and interpretations of existing laws and develop new laws.
The new interpretations or laws may be more restrictive or may result in higher costs to us than current

statutory requirements. In addition, the federal government has undertaken initiatives, including Dodd-Frank,
in several areas that may impact the reinsurance industry, including tort reform, corporate governance and the
taxation of reinsurance companies.

Applicable insurance laws regarding the change of control of
acquisition of our shares.

insurance companies may limit

the

Under Bermuda law, for so long as Maiden Holdings has an insurance subsidiary registered under the
Insurance Act, the BMA may at any time, by written notice, object to a person holding 10% or more of its
common shares if it appears to the BMA that the person is not or is no longer ﬁt and proper to be such a
holder. In such a case, the BMA may require the shareholder to reduce its holding of common shares in
that such shareholder’s voting rights attaching to the
Maiden Holdings and direct, among other things,
common shares shall not be exercisable. A person who does not comply with such a notice or direction from
the BMA will be guilty of an offense. This may discourage potential acquisition proposals and may delay,
deter or prevent a change of control of our Company,
including through transactions, and in particular
unsolicited transactions, that some or all of our shareholders might consider to be desirable.

In addition to the foregoing, we are subject to U.S. state statutes governing insurance holding companies,
which generally require that any person or entity desiring to acquire direct or indirect control of any of our
U.S. insurance company subsidiaries obtain prior regulatory approval. ‘‘Control’’ is generally deﬁned as the
possession, direct or indirect, of the power to direct or cause the direction of the management and policies of
the company, whether through the ownership of voting securities, by contract (except a commercial contract
for goods or non-management services) or otherwise. Under the laws of most U.S. states, any beneﬁcial owner
of 10% or more of the outstanding voting securities of an insurance company or its holding company is
presumed to have acquired control, unless this presumption is rebutted. These laws may also discourage
potential acquisition proposals and may delay, deter or prevent a change of control of our company, including
through transactions, and in particular unsolicited transactions, that some or all of our shareholders might
consider to be desirable.

Any person having a shareholding of 10% or more of the issued share capital in Maiden Holdings would
be considered to have an indirect holding in our U.S. insurance subsidiaries at or over the 10% limit. Any
change that resulted in the indirect acquisition or disposal of a shareholding of greater than or equal to 10% in
the share capital of Maiden Holdings may require approval of the relevant U.S. state insurance regulators prior
to the transaction.

Changes in accounting principles and ﬁnancial reporting requirements could result in material changes to
our reported results and ﬁnancial condition.

U.S. GAAP and related ﬁnancial reporting requirements are complex, continually evolving and may be
subject to varied interpretation by the relevant authoritative bodies. Such varied interpretations could result
from differing views related to speciﬁc facts and circumstances. Changes in U.S. GAAP and ﬁnancial
reporting requirements, or in the interpretation of U.S. GAAP or those requirements, could result in material
the SEC is currently evaluating
changes to our
International Financial Reporting Standards (‘‘IFRS’’) to determine whether IFRS should be incorporated into
the ﬁnancial reporting system for U.S. issuers. Certain of these standards could result in material changes to
our reported results of operation.

reported results and ﬁnancial condition. Moreover,

Employee Issues

We are dependent on our key executives. We may not be able to attract and retain key employees
or
team to fully implement our newly formulated
business strategy.

successfully integrate our new management

Our success depends largely on our senior management, which includes, among others, Art Raschbaum,
our President and Chief Executive Officer, John Marshaleck, our Chief Financial Officer, Karen Schmitt, our
President of Maiden US and Maiden Specialty, Patrick J. Haveron, our Executive Vice President, and Ronald
M. Judd, our President of Maiden Global. We have entered into employment agreements with each of these
executive officers, as well as with additional former key employees of GMAC RE and GMAC IIS. These

employees were instrumental in developing the book of business with the former GMAC RE and GMAC IIS
and have been managing the retention of that business as it has transferred to Maiden US, Maiden Specialty
or Maiden Bermuda. Our inability to attract and retain additional personnel or the loss of the services of any
of our senior executives or key employees could delay or prevent us from fully implementing our business
strategy and could signiﬁcantly and negatively affect our business.

Our business in Bermuda could be adversely affected by Bermuda employment restrictions.

Currently, we employ twelve non-Bermudians in our Bermuda office including our President and Chief
Executive Officer, our Chief Financial Officer and our Chief Underwriting Officer. We may hire additional
non-Bermudians as our business grows. Under Bermuda law, non-Bermudians (other
than spouses of
Bermudians, holders of permanent residents’ certiﬁcates and holders of working residents’ certiﬁcates) may not
engage in any gainful occupation in Bermuda without a valid government work permit. A work permit may be
granted or renewed upon showing that, after proper public advertisement, no Bermudian, spouse of a
Bermudian, or holder of a permanent resident’s or working resident’s certiﬁcate who meets the minimum
standards reasonably required by the employer has applied for the job. The Bermuda government’s policy
places a six year term limit on individuals with work permits, subject
to certain exemptions for key
employees. A work permit is issued with an expiry date (up to ﬁve years) and no assurances can be given that
any work permit will be issued or, if issued, renewed upon the expiration of the relevant term. We may not be
able to use the services of one or more of our non-Bermudian employees if we are not able to obtain work
permits for them, which could have a material adverse effect on our business, ﬁnancial condition and results
of operations.

Corporate Governance

Our holding company structure and certain regulatory and other constraints affect our ability to pay
dividends and make other payments.

Maiden Holdings is a holding company. As a result, we do not have, and will not have, any signiﬁcant

operations or assets other than our ownership of the shares of our subsidiaries.

We expect that dividends and other permitted distributions from Maiden Bermuda, Maiden Global (and
its subsidiaries), Maiden LF and Maiden NA (and its subsidiaries) will be our sole source of funds to pay
dividends to shareholders and meet ongoing cash requirements, including debt service payments, if any, and
other expenses. Bermuda law and regulations, including, but not limited to, Bermuda insurance regulations,
will restrict the declaration and payment of dividends and the making of distributions by Maiden Bermuda,
unless speciﬁc regulatory requirements are met. In addition, Maiden Bermuda might enter into contractual
arrangements in the future that could impose restrictions on any such payments. If we cannot receive
dividends or other permitted distributions from Maiden Bermuda as a result of such restrictions, we will be
unable to pay dividends as currently contemplated by our board of directors. It is anticipated Maiden Bermuda
can pay us dividends of approximately $3.8 million. The inability of Maiden Bermuda to pay dividends in an
amount sufficient to enable us to meet our cash requirements at the holding company level could have a
material adverse effect on our business, ﬁnancial condition and results of operations.

We are subject to Bermuda regulatory constraints that will affect our ability to pay dividends on our
shares and make other payments. Under the Companies Act, we may declare or pay a dividend out of
distributable reserves only if we have reasonable grounds for believing that we are, or would after the
payment be, able to pay our liabilities as they become due and if the realizable value of our assets would
thereby not be less than the aggregate of our liabilities and issued share capital and share premium accounts.

The ability of Maiden US and Maiden Specialty to pay dividends is regulated, and under certain
circumstances, restricted, pursuant
to applicable law. If Maiden US and Maiden Specialty cannot pay
dividends to Maiden NA, Maiden NA may not, in turn, be able to pay dividends to Maiden Holdings, which
may not, in turn, be able to pay dividends to shareholders. As at December 31, 2011, Maiden US could pay
dividends to Maiden NA of approximately $0 and Maiden Specialty could pay dividends to Maiden US of
$3.6 million without prior regulatory approval. Any dividends paid by Maiden US and Maiden Specialty
would reduce its surplus.

Under the Insurance Act, Maiden Bermuda is required to prepare Statutory Financial Statements and to
ﬁle a Statutory Financial Return in Bermuda. The Insurance Act also requires Maiden Bermuda to maintain a
minimum share capital of $120. To satisfy these requirements, the statutory capital and surplus of Maiden
Bermuda at December 31, 2011 was approximately $693.4 million (2010 — $670.1 million) and the amount
required to be maintained under Bermuda law,
the Minimum Solvency Margin, was $226.5 million
(2010 — $164.6 million) at December 31, 2011. Maiden Bermuda was also required to maintain a minimum
liquidity ratio. All requirements were met by Maiden Bermuda throughout the period. In addition, Maiden
Bermuda is subject to statutory and regulatory restrictions under the Insurance Act that limit the maximum
amount of annual dividends or distributions to be paid by Maiden Bermuda to Maiden Holdings without
notiﬁcation to the BMA of such payment (and in certain cases prior approval of the BMA). Maiden Bermuda
is allowed to pay dividends provided the payment of the dividends does not result in Maiden Bermuda failing
to comply with the ECR as calculated by the BSCR. Maiden Bermuda is currently completing its 2011 BSCR
and as at December 31, 2011, it is anticipated Maiden Bermuda can pay dividends or distributions not
exceeding $3.8 million.

Maiden Bermuda is registered as a Class 3B reinsurer under

the Insurance Act and therefore
must maintain capital at a level equal to its ECR which is established by reference to the BSCR model. The
BSCR employs a standard mathematical model that correlates the risk underwritten to the capital that is
dedicated to the business. The regulatory requirements are designed to have insurers operate at or above a
threshold capital level, which exceeds the BSCR. While not speciﬁcally referred to in the Insurance Act, the
BMA has established a TCL for each Class 3B insurer equal to 120% of its ECR. While a Class 3B insurer is
not currently required to maintain its statutory capital and surplus at this level, the TCL serves as an early
warning tool for the BMA and failure to maintain statutory capital at least equal to the TCL will likely result
in increased BMA regulatory oversight. Maiden Bermuda is currently completing its 2011 BSCR and believes
that it will meet the ECR as at December 31, 2011.

A few signiﬁcant shareholders may inﬂuence or control the direction of our business. If the ownership of
our common shares continues to be highly concentrated, it may limit your ability and the ability of other
shareholders to inﬂuence signiﬁcant corporate decisions.

is not

The interests of our Founding Shareholders may not be fully aligned with your interests, and this may
lead to a strategy that
interest. As at March 7, 2012, our Founding Shareholders
beneﬁcially control approximately 28.3% of our outstanding common shares. Although they do not act as a
group, our Founding Shareholders exercise signiﬁcant inﬂuence over matters requiring shareholder approval,
and their concentrated holdings may delay or deter possible changes in control of Maiden Holdings, which
may reduce the market price of our common shares.

in your best

We currently intend to pay a quarterly cash dividend of $0.08 per common share; however, any
determination to pay dividends will be at the discretion of our board of directors.

Our board of directors currently intends to authorize the payment of a cash dividend of $0.08 per
common share each quarter. Any determination to pay dividends will be at the discretion of our board of
directors and will be dependent upon our results of operations and cash ﬂows, our ﬁnancial position and
capital requirements, general business conditions, legal, tax, regulatory, rating agency and any contractual
restrictions on the payment of dividends and any other factors our board of directors deems relevant, including
Bermuda legal and regulatory constraints.

Our revenues and results of operations may ﬂuctuate as a result of factors beyond our control, which may
cause the price of our shares to be volatile.

The revenues and results of operations of reinsurance companies historically have been subject

signiﬁcant ﬂuctuations and uncertainties. Our proﬁtability can be affected signiﬁcantly by:

•

ﬂuctuations in interest rates, inﬂationary pressures and other changes in the investment environment
that affect returns on invested assets;

changes in the frequency or severity of claims;

•

volatile and unpredictable developments,
catastrophes or terrorist attacks;

price competition;

including man-made, weather-related and other natural

inadequate loss and loss adjustment expense reserves;

cyclical nature of the property and casualty insurance market;

negative developments in the specialty property and casualty reinsurance sectors in which we
operate; and

reduction in the business activities of AmTrust, ACAC or any of our ceding insurers.

If our revenues and results of operations ﬂuctuate as a result of one or more of these factors, the price of

our shares may be volatile.

Future sales of shares may adversely affect their price.

Future sales of our common shares by our shareholders or us, or the perception that such sales
may occur, could adversely affect
the market price of our common shares. As at March 7, 2012,
72,221,999 common shares are outstanding. In addition, we have reserved 10,000,000 common shares for
the total options outstanding was
issuance under our 2007 Share Incentive Plan. As at March 7, 2012,
2,902,794 Sales of substantial amounts of our shares, or the perception that such sales could occur, could
adversely affect the prevailing price of the shares and may make it more difficult for us to sell our equity
securities in the future, or for shareholders to sell their shares, at a time and price that they deem appropriate.

We are subject to additional ﬁnancial and other reporting and corporate governance requirements that may
be difficult for us to satisfy.

We are subject to ﬁnancial and other reporting and corporate governance requirements, including the
requirements of the NASDAQ Global Market and certain provisions of the Sarbanes-Oxley Act of 2002 and
In
the regulations promulgated thereunder, which impose signiﬁcant compliance obligations upon us.
particular, we are, or will be, required to:

•

enhance the roles and duties of our board of directors, our board committees and management;

including hiring staff with expertise in accounting
supplement our internal accounting function,
and ﬁnancial reporting for a public company, as well as implement appropriate and sufficient
accounting and reporting systems, and enhance and formalize closing procedures at the end of our
accounting periods;

prepare and distribute periodic public reports in compliance with our obligations under
U.S. federal securities laws;

the

involve and retain to a greater degree outside counsel and accountants in the activities listed above;

establish or outsource an internal audit function;

enhance our investor relations function; and

establish new control policies, such as those relating to disclosure controls and procedures,
segregation of duties and procedures and insider trading.

These obligations require a signiﬁcant commitment of additional resources. We may not be successful in
implementing these requirements, and implementing or maintaining them could adversely affect our business
or operating results. In addition, if we fail to implement or maintain the requirements with respect to our
internal accounting and audit functions, our ability to report our operating results on a timely and accurate
basis would be impaired.

Provisions in our bye-laws may reduce or increase the voting rights of our shares.

In general, and except as provided under our bye-laws and as provided below, the common shareholders
have one vote for each common share held by them and are entitled to vote, on a non-cumulative basis, at all

meetings of shareholders. However, if, and so long as, the shares of a shareholder are treated as ‘‘controlled
shares’’ (as determined pursuant to Sections 957 and 958 of the Internal Revenue Code of 1986, as amended
(the ‘‘Code’’)) of any U.S. Person (as that term is deﬁned in the risk factors under the section captioned
‘‘Taxation’’ within this Item on page 58 (that owns shares directly or indirectly through non-U.S. entities) and
such controlled shares constitute 9.5% or more of the votes conferred by our issued shares, the voting rights
with respect to the controlled shares owned by such U.S. Person will be limited, in the aggregate, to a voting
power of less than 9.5%, under a formula speciﬁed in our bye-laws. The formula is applied repeatedly until
the voting power of all 9.5% U.S. Shareholders has been reduced to less than 9.5%. In addition, our board
may limit a shareholder’s voting rights when it deems it appropriate to do so to (i) avoid the existence of any
9.5% U.S. Shareholder; and (ii) avoid certain material adverse tax, legal or regulatory consequences to us, any
of our subsidiaries or any direct or indirect shareholder or its affiliates. ‘‘Controlled shares’’ include, among
other things, all shares that a U.S. Person is deemed to own directly, indirectly or constructively (within the
meaning of section 958 of the Code). The amount of any reduction of votes that occurs by operation of the
above limitations will generally be reallocated proportionately among our other shareholders whose shares

•

adversely affect the price of, and the voting and other rights of the holders of our securities; or

impede the ability of the holders of our securities to change our management.

In addition, AII and ACAC are entitled to terminate their respective Quota Share Agreements if we
undergo a change in control. Because we expect the business we reinsure from AmTrust and ACAC to
constitute a substantial portion of our business, this termination right may deter parties who are interested in
acquiring us, may prevent shareholders from receiving a premium over the market price of our common
shares and may depress the price of our common shares below levels that might otherwise prevail.

U.S. persons who own our shares may have more difficulty in protecting their interests than U.S. persons
who are shareholders of a U.S. corporation.

The Companies Act, which applies to us, differs in certain material respects from laws generally
applicable to U.S. corporations and their shareholders. As a result of these differences, U.S. persons who own
our shares may have more difficulty protecting their interests than U.S. persons who own shares of a
U.S. corporation. Set forth below is a summary of certain signiﬁcant provisions of the Companies Act,
including modiﬁcations adopted pursuant to our bye-laws, applicable to us which differ in certain respects
from provisions of Delaware corporate law. Because the following statements are summaries, they do not
discuss all aspects of Bermuda law that may be relevant to us and our shareholders.

Interested Directors. Bermuda law provides that if a director has a personal interest in a transaction to
which the company is also a party and if the director discloses the nature of this personal interest at the
ﬁrst opportunity, either at a meeting of directors or in writing to the directors, then the company will not be
able to declare the transaction void solely due to the existence of that personal interest and the director will
not be liable to the company for any proﬁt realized from the transaction. In addition, Bermuda law and our
bye-laws provide that, after a director has made the declaration of interest referred to above, he is allowed to
be counted for purposes of determining whether a quorum is present and to vote on a transaction in which he
has an interest, unless disqualiﬁed from doing so by the chairman of the relevant board meeting. Under
Delaware law such transaction would not be voidable if:

•

the material facts as to such interested director’s relationship or interests are disclosed or are known
to the board of directors and the board in good faith authorizes the transaction by the affirmative
vote of a majority of the disinterested directors;

such material facts are disclosed or are known to the shareholders entitled;

to vote on such transaction and the transaction is speciﬁcally approved in good faith by vote of the
majority of shares entitled to vote thereon; or

the transaction is fair as to the corporation as of the time it is authorized, approved or ratiﬁed.

Under Delaware law, such interested director could be held liable for a transaction in which such director

derived an improper personal beneﬁt.

Mergers and Similar Arrangements. The amalgamation of a Bermuda company with another company
or corporation (other than certain affiliated companies) requires the amalgamation agreement to be approved
by the company’s board of directors and by its shareholders. Under our bye-laws, we may, with the approval
of a majority of votes cast at a general meeting of our shareholders at which a quorum is present, amalgamate
with another Bermuda company or with a body incorporated outside Bermuda.
In the case of an
amalgamation, a shareholder may apply to a Bermuda court for a proper valuation of such shareholder’s
shares if such shareholder is not satisﬁed that fair value has been paid for such shares. Under Delaware law,
with certain exceptions, a merger, consolidation or sale of all or substantially all the assets of a corporation
must be approved by the board of directors and a majority of the outstanding shares entitled to vote thereon.
Under Delaware law, a shareholder of a corporation participating in certain major corporate transactions may,
under certain circumstances, be entitled to appraisal rights pursuant to which such shareholder may receive
cash in the amount of the fair value of the shares held by such shareholder (as determined by a court) in lieu
of the consideration such shareholder would otherwise receive in the transaction.

Shareholders’ Suit. The rights of shareholders under Bermuda law are not as extensive as the rights of
shareholders under legislation or judicial precedent in many United States jurisdictions. Class actions and
the
derivative actions are generally not available to shareholders under the laws of Bermuda. However,
Bermuda courts ordinarily would be expected to follow English case law precedent, which would permit a
shareholder to commence an action in the name of the company to remedy a wrong done to the company
where the act complained of is alleged to be beyond the corporate power of the company, is illegal or would
result in the violation of our memorandum of association or bye-laws. Furthermore, consideration would be
given by the court to acts that are alleged to constitute a fraud against the minority shareholders or where an
act requires the approval of a greater percentage of our shareholders than actually approved it. The winning
party in such an action generally would be able to recover a portion of attorneys’ fees incurred in connection
with such action. Our bye-laws provide that shareholders waive all claims or rights of action that they might
have, individually or in the right of the company, against any director or officer for any act or failure to act in
the performance of such director’s or officer’s duties, except with respect to any fraud or dishonesty of such
director or officer. Class actions and derivative actions generally are available to shareholders under Delaware
law for, among other things, breach of ﬁduciary duty, corporate waste and actions not taken in accordance
with applicable law. In such actions, the court has discretion to permit the winning party to recover attorneys’
fees incurred in connection with such action.

Indemniﬁcation of Directors. We may indemnify our directors or officers in their capacity as directors or
officers of any loss arising or liability attaching to them by virtue of any rule of law in respect of any
negligence, default, breach of duty or breach of trust of which a director or officer may be guilty in relation to
the company other than in respect of his own fraud or dishonesty. Under Delaware law, a corporation may
indemnify a director or officer of the corporation against expenses (including attorneys’ fees), judgments, ﬁnes
and amounts paid in settlement actually and reasonably incurred in defense of an action, suit or proceeding by
reason of such position if such director or officer acted in good faith and in a manner he or she reasonably
believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal
action or proceeding, such director or officer had no reasonable cause to believe his or her conduct was
unlawful. In addition, we have entered into indemniﬁcation agreements with our directors and officers.

We are a Bermuda company and it may be difficult for you to enforce judgments against us or our
directors and executive officers.

We are incorporated under the laws of Bermuda and our business is based in Bermuda. In addition, most
of our directors and officers reside outside Bermuda and a substantial portion of our assets will be and the
assets of these persons are, and will continue to be, located in jurisdictions outside Bermuda. As such, it may
be difficult or impossible to effect service of process within the United States upon us or those persons or to
recover against us or them on judgments of U.S. courts, including judgments predicated upon civil liability
provisions of the U.S. federal securities laws. Further, no claim may be brought in Bermuda against us or our
directors and officers in the ﬁrst instance for violation of U.S. federal securities laws because these laws have
no extraterritorial jurisdiction under Bermuda law and do not have force of law in Bermuda. A Bermuda court
may, however, impose civil liability, including the possibility of monetary damages, on us or our directors and
officers if the facts alleged in a complaint constitute or give rise to a cause of action under Bermuda law.

We have been previously advised by Conyers Dill & Pearman, our Bermuda counsel, that there is doubt
as to whether the courts of Bermuda would enforce judgments of U.S. courts obtained in actions against us or
our directors and officers, as well as the experts named in this Report, predicated upon the civil liability
provisions of the U.S. federal securities laws or original actions brought in Bermuda against us or these
persons predicated solely upon U.S. federal securities laws. Further, we have been advised by Conyers Dill &
there is no treaty in effect between the United States and Bermuda providing for the
Pearman that
enforcement of judgments of U.S. courts, and there are grounds upon which Bermuda courts may not enforce
judgments of U.S. courts. Some remedies available under the laws of U.S. jurisdictions, including some
remedies available under the U.S. federal securities laws, may not be allowed in Bermuda courts as contrary
to that jurisdiction’s public policy. Because judgments of U.S. courts are not automatically enforceable in
Bermuda, it may be difficult for you to recover against us based upon such judgments.

Our internal control and reporting systems might not be effective in the future, which could increase the
risk that we would become subject to restatements of our ﬁnancial results or to regulatory action or
litigation or other developments that could adversely affect our business.

Our ability to produce accurate ﬁnancial statements and comply with applicable laws,

rules and
regulations is largely dependent on our maintenance of internal control and reporting systems, as well as on
our ability to attract and retain qualiﬁed management and accounting and actuarial personnel
to further
develop our internal accounting function and control policies. If we fail to effectively establish and maintain
such reporting and accounting systems or fail to attract and retain personnel who are capable of designing and
operating such systems, these failures will increase the likelihood that we may be required to restate our
ﬁnancial results to correct errors or that we will become subject to legal and regulatory infractions, which may
if our
entail civil
management or our independent registered public accounting ﬁrm were to conclude that our internal control
over ﬁnancial
reported ﬁnancial
information, and our ﬁnancial ﬂexibility and the value of our stock could be adversely impacted.

litigation and investigations by regulatory agencies including the SEC. In addition,

investors could lose conﬁdence in our

reporting was not effective,

Relationship with AmTrust and ACAC

We are dependent on AmTrust and its subsidiaries for a substantial portion of our business.

AmTrust is Maiden’s largest client relationship and we will continue to derive a substantial portion of our
business from AmTrust in the near term. We commenced our reinsurance business by providing traditional
quota share reinsurance to AmTrust through the Master Agreement with AmTrust’s Bermuda reinsurance
subsidiary AII, assuming initially a 40% quota share portion of the net liabilities less recoveries of the policies
written by AmTrust. In 2011, we provided additional quota share reinsurance through the European Hospital
Liability Quota Share which is a separate one-year 40% quota share agreement with AmTrust Europe Limited
and AmTrust International Underwriters Limited. The European Hospital Liability Quota Share covers those
entities medical liability business in Europe, substantially all of which is in Italy at the present time. Despite
the ongoing growth of our reinsurance relationship with AmTrust and its subsidiaries, with the ongoing
diversiﬁcation of the Company through the GMAC Acquisition and IIS Acquisition, along with entering into
the ACAC Quota Share in recent years, AmTrust now represents a reduced percentage of the overall portfolio.

We are still dependent, however, on AmTrust and its subsidiaries for a substantial portion of our business.
Our Master Agreement with AII has been renewed for an additional three years (until June 30, 2014), subject
to certain early termination provisions (including if the A.M. Best rating of Maiden Bermuda is reduced below
‘‘A-’’). The Master Agreement will be extended for additional terms of three years unless either party elects
not to renew. There is no assurance that this agreement will not terminate. The termination of the Master
Agreement would signiﬁcantly reduce our revenues and could have a material adverse effect on us.

At the same time, there are risks related to the business of AmTrust and its insurance subsidiaries that
may adversely impact our ability to continue doing business with them. In addition, we are not able to control
the types or amounts of reinsurance AmTrust purchases from unaffiliated reinsurers, and any changes AmTrust
makes to such reinsurance may affect our proﬁtability and ability to write additional business.

Our initial arrangements with AmTrust were negotiated while we were its affiliate. The arrangements could
be challenged as not reﬂecting terms that we would agree to in arm’s-length negotiations with an
independent third party; moreover, our business relationship with AmTrust and its subsidiaries may present,
and may make us vulnerable to, possible adverse tax consequences, difficult conﬂicts of interest, and legal
claims that we have not acted in the best interest of our shareholders.

We entered into a quota share agreement with AII, which reinsures AmTrust’s insurance company
subsidiaries, and a Master Agreement with AmTrust, pursuant to which we and AmTrust agreed that we will
cause Maiden Bermuda to enter into the quota share agreement. The asset management agreement with an
AmTrust subsidiary, the reinsurance brokerage agreement with an AmTrust subsidiary, the warrants previously
issued to our Founding Shareholders (which were exchanged for restricted common shares in September 2010)
and the expired provisional employment agreement with our former Chief Executive Officer, Max G. Caviet,
were negotiated while we were an affiliate of AmTrust. These circumstances could increase the likelihood that

the IRS would claim that the agreements between us and AmTrust were not executed on an arm’s-length basis
and any such assertion, if not disproved by us, could result in adverse tax consequences to us.

Because (i) our Founding Shareholders collectively own or control approximately 59% of the outstanding
shares of AmTrust’s common stock, (ii) our Founding Shareholders sponsored our formation, and (iii) our
Founding Shareholders’ common shares represent approximately 28.3% of our outstanding common shares;
we therefore may be deemed an affiliate of AmTrust. Due to our close business relationship with AmTrust, we
may be presented with situations involving conﬂicts of interest with respect to the agreements and other
arrangements we will enter into with AmTrust and its subsidiaries, exposing us to possible claims that we
have not acted in the best interest of our shareholders. The arrangements between us and AmTrust were
modiﬁed somewhat after they were originally entered into and there could be future modiﬁcations.

The Chairman of the Board currently holds the positions of President, Chief Executive Officer and director
of AmTrust, and our former Chief Executive Officer and director is currently employed by AmTrust as an
executive officer. These dual positions may present, and make us vulnerable to, difficult conﬂicts of interest
and related legal challenges.

Barry D. Zyskind, our non-executive Chairman of the Board, is the President, Chief Executive Officer
and director of AmTrust and, as such, he does not serve our Company on a full-time basis. Mr. Zyskind is
expected to continue in both of his positions for the foreseeable future. In addition, Max G. Caviet, our former
Chief Executive Officer and director, is currently employed by AmTrust as an executive officer. Conﬂicts of
interest could arise with respect to business opportunities that could be advantageous to AmTrust or its
subsidiaries, on the one hand, and us or our subsidiary, on the other hand. In addition, potential conﬂicts of
interest may arise should the interests of Maiden Holdings and AmTrust diverge. Because AmTrust was our
only signiﬁcant customer until November 2008, remains our largest customer, and is expected to remain our
largest customer for at least the next several years, AmTrust could have the ability to signiﬁcantly inﬂuence
such situations. However, the Audit Committee of the Company’s Board of Directors, which consists entirely
of independent directors, does review and approve all related party transactions.

One of our Founding Shareholders owns the majority of the common stock of ACAC, and AmTrust has an
investment in ACAC. This may present, and make us vulnerable to, difficult conﬂicts of interest and related
legal challenges.

In November 2009, we announced an agreement

in principal with ACAC regarding a multi-year
25% quota share agreement expected to generate over $200 million in annual revenue. The contract
commenced on March 1, 2010 after ﬁnal regulatory approval and the closing of ACAC’s acquisition of
GMACI’s U.S. consumer property and casualty insurance business, as well as a small amount of commercial
auto business. ACAC is owned by one of our Founding Shareholders, Michael Karfunkel, and the Michael
Karfunkel 2005 Grantor Retained Annuity Trust (the ‘‘Trust’’), which is controlled by Michael Karfunkel. The
Trust currently owns 72.4% of ACAC’s issued and outstanding common stock, Michael Karfunkel currently
owns 27.6% of ACAC’s issued and outstanding common stock and AmTrust owns preferred shares convertible
into 21.25% of the issued and outstanding common stock of ACAC.

Conﬂicts of interest could arise with respect to business opportunities that could be advantageous to
ACAC or its subsidiaries, on the one hand, and us or our subsidiary, on the other hand. In addition, potential
conﬂicts of interest may arise should the interests of Maiden Holdings and ACAC diverge. Because it is
anticipated that ACAC will be a signiﬁcant customer for at least the next several years, one of our Founding
Shareholders could have the ability to signiﬁcantly inﬂuence such situations. However, the Audit Committee
of the Company’s Board of Directors, which consists entirely of independent directors, does review and
approve all
independent
Compensation Committee reviews.

those related to compensation, which our

related party transactions, except

Our funds will be loaned to AII to be placed in trusts for the beneﬁt of AmTrust’s insurance companies or
will be placed in trusts for the beneﬁt of other ceding companies.

Maiden Bermuda has agreed to collateralize its obligations under the Master Agreement by one or more

of the following methods at the election of Maiden Bermuda:

•

by lending funds (which may include cash or investments) on an unsecured basis to AII pursuant to
a loan agreement between Maiden Bermuda and AII with such funds being deposited by AII into the
the sole beneﬁt of AmTrust’s
trust accounts established or
U.S.
to the reinsurance agreements between AII and those
AmTrust subsidiaries;

insurance subsidiaries pursuant

to be established by AII

for

by transferring to AII assets for deposit into those trust accounts;

by delivering letters of credit to the applicable U.S. AmTrust insurance subsidiaries on behalf of
AII; or

by requesting that AII cause such AmTrust insurance subsidiary to withhold premiums in lieu of
remitting such premiums to AII.

As a result of our use of Regulation 114 trusts accounts or letters of credit and our election to lend funds
to AII, a substantial portion of our assets will not be available to us for other uses, which could reduce our
ﬁnancial ﬂexibility.

If collateral is required to be provided to any other AmTrust insurance company subsidiaries under
applicable law or regulatory requirements, Maiden Bermuda will provide collateral to the extent required,
although Maiden Bermuda does not expect that such collateral will be required unless an AmTrust insurance
company subsidiary is domiciled in the United States. Maiden Bermuda currently is satisfying its collateral
requirements under the Master Agreement by lending funds (which may include cash or investments) on an
unsecured basis to AII pursuant to a loan agreement. As at December 31, 2011, $168.0 million was on loan
to AII.

Maiden Bermuda is not a party to the reinsurance agreements between AII and AmTrust’s U.S. insurance
subsidiaries or the related reinsurance trust agreements and has no rights there under. If one or more of these
AmTrust subsidiaries withdraws Maiden Bermuda’s assets from their trust account, draws down on its letter of
credit or misapplies withheld funds that are due to Maiden and that subsidiary is or becomes insolvent, we
believe it may be more difficult for Maiden Bermuda to recover any such amounts to which we are entitled
than it would be if Maiden Bermuda had entered into reinsurance and trust agreements with these AmTrust
subsidiaries directly. AII has agreed to immediately return to Maiden Bermuda any collateral provided by
Maiden Bermuda that one of those subsidiaries improperly utilizes or retains, and AmTrust has agreed to
guarantee AII’s repayment obligation and AII’s payment obligations under its loan agreement with Maiden
Bermuda. We are subject to the risk that AII and/or AmTrust may be unable or unwilling to discharge these
obligations. In addition, if AII experiences a change in control and Maiden Bermuda chooses not to terminate
the Master Agreement, AmTrust’s guarantee obligations will terminate immediately and automatically.

We will not be able to control AmTrust’s or ACAC’s decisions relating to its other reinsurance, and
AmTrust and/or ACAC may change its reinsurance in ways that could adversely affect us.

The reinsurance ceded by AmTrust and ACAC is net of any reinsurance that AmTrust and ACAC obtain
from unaffiliated reinsurers. For example, Maiden Bermuda will receive 40% of AmTrust’s premiums (net of
commissions in the case of AmTrust’s UK subsidiary) net of premiums ceded to unaffiliated reinsurers, and
will be liable for 40% of losses and loss adjustment expenses on the ceded business net of any reinsurance
recoverable (whether collectible or not) from unaffiliated reinsurers. We are not able to control the types or
amounts of reinsurance that AmTrust or ACAC purchases from unaffiliated reinsurers. If AmTrust and/or
ACAC chose to purchase additional reinsurance from unaffiliated reinsurers, AmTrust and/or ACAC would
reduce the premium revenue ceded to us. The purchase of such additional reinsurance would however, in
general inure to our beneﬁt.

Taxation

We may become subject to taxes in Bermuda after 2035, which may have a material adverse effect on our
ﬁnancial condition and operating results and on an investment in our shares.

The Bermuda Minister of Finance, under the Exempted Undertakings Tax Protection Act 1966, as
amended, of Bermuda, has given each of Maiden Holdings and Maiden Bermuda an assurance that if any
legislation is enacted in Bermuda that would impose tax computed on proﬁts or income, or computed on any

capital asset, gain or appreciation, or any tax in the nature of estate duty or inheritance tax,
then the
imposition of any such tax will not be applicable to Maiden Holdings, Maiden Bermuda or any of their
respective operations or their respective shares, debentures or other obligations (except insofar as such tax
applies to persons ordinarily resident in Bermuda or to any taxes payable by them in respect of real property
or leasehold interests in Bermuda held by them) until March 31, 2035. Given the limited duration of the
Minister of Finance’s expected assurance, we cannot be certain that we will not be subject to any Bermuda
tax after March 31, 2035. Since Maiden Holdings and Maiden Bermuda are incorporated in Bermuda, we will
be subject to changes of law or regulation in Bermuda that may have an adverse impact on our operations,
including imposition of tax liability.

The impact of the Organization for Economic Cooperation and Development’s directive to eliminate
harmful tax practices is uncertain and could adversely affect our tax status in Bermuda.

The Organization for Economic Cooperation and Development (the ‘‘OECD’’) has published reports and
launched a global dialogue among member and non-member countries on measures to limit harmful tax
competition. These measures are largely directed at counteracting the effects of tax havens and preferential tax
regimes in countries around the world. In the OECD’s report dated April 18, 2002 and periodically updated,
Bermuda was not listed as an uncooperative tax haven jurisdiction because it had previously committed to
eliminate harmful tax practices and to embrace international tax standards for transparency, exchange of
information and the elimination of any aspects of the regimes for ﬁnancial and other services that attract
business with no substantial domestic activity. We are not able to predict what changes will arise from the
commitment or whether such changes will subject us to additional taxes.

We may be subject to U.S. federal income tax, which would have an adverse effect on our ﬁnancial
condition and results of operations and on an investment in our shares.

If either Maiden Holdings or Maiden Bermuda were considered to be engaged in a trade or business in
the United States, it could be subject to U.S. federal income and additional branch proﬁts taxes on the portion
of its earnings that are effectively connected to such U.S. business or in the case of Maiden Bermuda, if it is
entitled to beneﬁts under the United States income tax treaty with Bermuda and if Maiden Bermuda were
considered engaged in a trade or business in the United States through a permanent establishment, Maiden
Bermuda could be subject to U.S. federal income tax on the portion of its earnings that are attributable to its
permanent establishment in the United States, in which case its results of operations could be materially
adversely affected. Maiden Holdings and Maiden Bermuda are Bermuda companies. We intend to manage our
business so that each of these companies should operate in such a manner that neither of these companies
should be treated as engaged in a U.S. trade or business and, thus, should not be subject to U.S. federal
taxation (other than the U.S. federal excise tax on insurance and reinsurance premium income attributable to
insuring or reinsuring U.S. risks and U.S. federal withholding tax on certain U.S. source investment income).
However, because (i) there is considerable uncertainty as to activities which constitute being engaged in a
trade or business within the United States; (ii) a signiﬁcant portion of Maiden Bermuda’s business is
reinsurance of AmTrust’s insurance subsidiaries and ACAC’s insurance subsidiaries; (iii) Maiden Bermuda has
entered into a brokerage services agreement with IGI Intermediaries, Inc. (‘‘IGI Inc.’’) (an AmTrust subsidiary
that provides brokerage services in the United States); (iv) our Chairman of the Board is AmTrust’s President
and Chief Executive Officer, and certain of our executive officers or directors and former executive officers are
also either executive officers of AmTrust or related to directors of AmTrust, including (a) our former interim
Chief Financial Officer for part of 2007 was at the time and is AmTrust’s Chief Financial Officer, (b) our
former Chief Executive Officer is currently an executive officer of AmTrust, and (c) one of our directors is
related to a signiﬁcant shareholder of AmTrust; (v) one of our Founding Shareholders, Michael Karfunkel,
controls ACAC; (vi) we have an asset management agreement with a subsidiary of AmTrust and may also
have additional contractual relationships with AmTrust and its subsidiaries in the future, and (vii) the activities
conducted outside the United States related to Maiden Bermuda’s start-up were limited, thus we cannot be
certain that the IRS will not contend successfully that we are engaged in a trade or business in the U.S.

Potential Additional Application of the Federal Insurance Excise Tax.

The IRS, in Revenue Ruling 2008-15, has formally announced its position that the U.S. federal insurance
excise tax (the ‘‘FET’’) is applicable (at a 1% rate on premiums) to all reinsurance cessions or retrocessions

individual

located wholly or partly within the United States or

of risks by non-U.S. insurers or reinsurers to non-U.S. reinsurers where the underlying risks are either (i) risks
of a U.S. entity or
risks of a
non-U.S. entity or individual engaged in a trade or business in the United States which are located within the
United States (‘‘U.S. Situs Risks’’), even if the FET has been paid on prior cessions of the same risks. The
legal and jurisdictional basis for, and the method of enforcement of, the IRS’s position is unclear. Maiden
Bermuda has not determined if the FET should be applicable with respect to risks ceded to it by, or by it to, a
non-U.S. insurance company. If the FET is applicable, it should apply at a 1% rate on premium for all
U.S. Situs Risks ceded to Maiden Bermuda by a non-U.S. insurance company, or by Maiden Bermuda to a
non-U.S. insurance company, even though the FET also applies at a 1% rate on premium ceded to Maiden
Bermuda with respect to such risks.

(ii)

Holders of 10% or more of our shares may be subject to U.S. income taxation under the controlled foreign
corporation rules.

If you are a ‘‘10% U.S. Shareholder’’ of a non-U.S. corporation (deﬁned as a U.S. Person who owns
(directly, indirectly through non-U.S. entities or constructively (as deﬁned below)) at least 10% of the total
combined voting power of all classes of stock entitled to vote) that is a controlled foreign corporation, which
we refer to as a CFC, for an uninterrupted period of 30 days or more during a taxable year, and you own
shares in the CFC directly or indirectly through non-U.S. entities on the last day of the CFC’s taxable year,
you must include in your gross income for U.S. federal income tax purposes your pro rata share of the CFC’s
‘‘Subpart F income’’ of a
‘‘subpart F income,’’ even if
non-U.S. insurance corporation typically includes foreign personal holding company income (such as interest,
dividends and other types of passive income), as well as insurance and reinsurance income (including
underwriting and investment income). A non-U.S. corporation is considered a CFC if 10% U.S. Shareholders
indirectly through non-U.S. entities or by attribution by application of the constructive
own (directly,
ownership rules of section 958(b) of the Code) (that
is, ‘‘constructively’’) more than 50% of the total
combined voting power of all classes of voting stock of that non-U.S. corporation or the total value of all
stock of that corporation.

the subpart F income is not distributed.

For purposes of taking into account

insurance
company in which more than 25% of the total combined voting power of all classes of stock (or more than
25% of the total value of the stock) is owned (directly, indirectly through non-U.S. entities or constructively)
by 10% U.S. share holders on any day during the taxable year of such corporation.

insurance income, a CFC also includes a non-U.S.

For purposes of this discussion, the term ‘‘U.S. Person’’ means: (i) an individual citizen or resident of the
United States, (ii) a partnership or corporation created or organized in or under the laws of the United States,
or under the laws of any State thereof (including the District of Columbia), (iii) an estate, the income of
which is subject to U.S. federal income taxation regardless of its source, (iv) a trust if either (1) a court within
the United States is able to exercise primary supervision over the administration of such trust and one or more
U.S. Persons have the authority to control all substantial decisions of such trust or (2) the trust has a valid
election in effect to be treated as a U.S. Person for U.S. federal income tax purposes or (v) any other person
or entity that is treated for U.S. federal income tax purposes as if it were one of the foregoing.

Because our Founding Shareholders owned all of the shares of Maiden Holdings prior to July 3, 2007,
Maiden Holdings was a CFC during the period of 2007 prior to July 3, 2007. Following the 2007 private
offering, Barry Zyskind may be treated as a 10% U.S. Shareholder of Maiden Holdings and Maiden Bermuda
as a result of his seat on the board of Maiden Holdings, George Karfunkel and/or Michael Karfunkel may be
treated as a 10% U.S. Shareholder of Maiden Holdings and Maiden Bermuda as a result of Yehuda
Neuberger’s seat on the board of Maiden Holdings, because of Mr. Neuberger’s signiﬁcant
familial
connections to the Karfunkels and, through them, to AmTrust. We believe, subject to the discussion below,
that because of provisions in our organizational documents that limit voting power and other factors, no
U.S. Person who acquired our shares directly or indirectly through one or more non-U.S. entities should be
treated as owning (directly, indirectly through non-U.S. entities or constructively) 10% or more of the total
voting power of all classes of Maiden Holdings’ or Maiden Bermuda’s shares. However, the IRS could
challenge the effectiveness of the provisions in our organizational documents and a court could sustain such a
challenge. Accordingly, no assurance can be given that a U.S. Person (other than the Founding Shareholders)
who owns our shares will not be characterized as a 10% U.S. Shareholder.

U.S. Persons who hold our shares may be subject to U.S. federal income taxation at ordinary income rates
on their proportionate share of Maiden Bermuda’s related person insurance income.

If U.S. persons are treated as owning 25% or more of Maiden Bermuda’s shares (by vote or by value) (as
is expected to be the case) and the related person insurance income (or RPII) of Maiden Bermuda (determined
on a gross basis) were to equal or exceed 20% of Maiden Bermuda’s gross insurance income in any taxable
year and direct or indirect insureds (and persons related to those insureds) own directly or indirectly through
entities 20% or more of the voting power or value of our shares, then a U.S. Person who owns any shares of
Maiden Bermuda (directly or indirectly through non-U.S. entities) on the last day of the taxable year would be
required to include in its income for U.S. federal income tax purposes such person’s pro rata share of Maiden
Bermuda’s RPII for the entire taxable year, determined as if such RPII were distributed proportionately only
to U.S. Persons at that date, regardless of whether such income is distributed. In addition, any RPII that is
includible in the income of a U.S. tax-exempt organization generally will be treated as unrelated business
taxable income. The amount of RPII earned by Maiden Bermuda (generally, premium and related investment
income from the direct or indirect insurance or reinsurance of any direct or indirect U.S. holder of shares or
any person related to such holder) will depend on a number of factors, including the identity of persons
directly or indirectly insured or reinsured by Maiden Bermuda. As at December 31, 2011, we believe that
either (i) the direct or indirect insureds of Maiden Bermuda (and related persons) should not directly or
indirectly own 20% or more of either the voting power or value of our shares or (ii) the RPII (determined on
a gross basis) of Maiden Bermuda should not equal or exceed 20% of Maiden Bermuda’s gross insurance
income for the taxable year ending December 31, 2011 and we do not expect both of these thresholds to be
exceeded in the foreseeable future. However, we cannot be certain that this will be the case because some of
the factors which determine the extent of RPII may be beyond our control.

U.S. Persons who dispose of our shares may be subject to U.S. federal income taxation at the rates
applicable to dividends on a portion of their gains if any.

the holder’s share of

The RPII rules provide that if a U.S. Person disposes of shares in a non-U.S. insurance corporation in
which U.S. Persons own 25% or more of the shares (even if the amount of gross RPII is less than 20% of the
corporation’s gross insurance income and the ownership of its shares by direct or indirect insureds and related
persons is less than the 20% threshold), any gain from the disposition will generally be treated as a dividend
to the extent of
the corporation’s undistributed earnings and proﬁts that were
accumulated during the period that the holder owned the shares (whether or not such earnings and proﬁts are
attributable to RPII). In addition, such a holder will be required to comply with certain reporting requirements,
regardless of the amount of shares owned by the holder. These RPII rules should not apply to dispositions
of our shares because Maiden Holdings will not be directly engaged in the insurance business. The
RPII provisions, however, have never been interpreted by the courts or the U.S. Treasury Department in ﬁnal
regulations, and regulations interpreting the RPII provisions of the Code exist only in proposed form. It is not
certain whether these regulations will be adopted in their proposed form or what changes or clariﬁcations
might ultimately be made thereto or whether any such changes, as well as any interpretation or application of
the RPII rules by the IRS,
the courts, or otherwise, might have retroactive effect. The U.S. Treasury
Department has authority to impose, among other things, additional reporting requirements with respect to
RPII. Accordingly, the meaning of the RPII provisions and the application thereof to Maiden Holdings and
Maiden Bermuda is uncertain.

U.S. Persons who hold our shares will be subject to adverse U.S. federal income tax consequences if
Maiden Holdings is considered to be a passive foreign investment company.

If Maiden Holdings is considered a passive foreign investment company, or a PFIC, for U.S. federal
through a
income tax purposes, a U.S. Person who owns directly or,
non-U.S. partnership) any of our shares will be subject to adverse U.S. federal income tax consequences,
including subjecting the investor to a greater tax liability than might otherwise apply and subjecting the
investor to a tax on amounts in advance of when such tax would otherwise be imposed, in which case your
investment could be materially adversely affected. In addition, if Maiden Holdings were considered a PFIC,
upon the death of any U.S. individual owning our shares, such individual’s heirs or estate would not be
entitled to a ‘‘step-up’’ in the basis of the shares which might otherwise be available under U.S. federal

in some cases,

indirectly (e.g.

income tax laws. We believe that we are not, and we currently do not expect
to become, a PFIC for
U.S. federal income tax purposes; however, there can be no assurance that we will not be deemed a PFIC by
the IRS. There are currently no regulations regarding the application of the PFIC provisions to an insurance
company. New regulations or pronouncements interpreting or clarifying these rules may be forthcoming. We
cannot predict what impact, if any, such guidance would have on a shareholder that is subject to U.S. federal
income taxation.

The Quota Share Agreements between Maiden Bermuda and AmTrust and ACAC, respectively, may be
subject to recharacterization or other adjustment for U.S. federal income tax purposes, which may have a
material adverse effect on our ﬁnancial condition and operating results.

Under section 845 of the Code, the IRS may allocate income, deductions, assets, reserves, credits and
any other items related to a reinsurance agreement among certain related parties to the reinsurance agreement,
or in circumstances where one party is an agent of the other, recharacterize such items, or make any other
adjustment, in order to reﬂect the proper source, character or amount of the items for each party. In addition,
if a reinsurance contract has a signiﬁcant tax avoidance effect on any party to the contract, the IRS may make
adjustments with respect to such party to eliminate the tax avoidance effect. No regulations have been issued
under section 845 of the Code. Accordingly, the application of such provisions is uncertain and we cannot
predict what impact, if any, such provisions may have on us.

Changes in U.S. federal income tax law could materially adversely affect an investment in our shares.

In the past, legislation has been introduced in the U.S. Congress (but not enacted) intended to eliminate
certain perceived tax advantages of companies (including insurance companies) that have legal domiciles
outside the United States but have certain U.S. connections. It is possible that legislation could be introduced
and enacted by the current Congress or future Congresses that could have an adverse effect on us, or our
shareholders. For example, President Obama’s 2011 budget proposal would reduce or eliminate the tax
deduction for reinsurance premiums paid by a U.S.
insurer or reinsurer to an affiliate in a lower tax
jurisdiction, such as Bermuda. Another proposal would treat foreign corporations as U.S. corporations for tax
purposes if management and control occur primarily in the United States. Any such change in U.S. tax law
could have a material adverse effect on the Company.

Additionally,

the U.S. federal

income tax laws and interpretations regarding whether a company is
engaged in a trade or business within the United States, or is a PFIC or whether U.S. Persons would be
required to include in their gross income the ‘‘subpart F income’’ or the RPII of a CFC are subject to change,
possibly on a retroactive basis. There are currently no regulations regarding the application of the PFIC rules
to insurance companies and the regulations regarding RPII are still in proposed form. New regulations or
pronouncements interpreting or clarifying such rules may be forthcoming. We cannot be certain if, when or in
what form such regulations or pronouncements may be provided and whether such guidance will have a
retroactive effect.

We may be subject to United Kingdom taxes, which would have an adverse effect on our ﬁnancial condition
and results of operations and on an investment in our shares.

A company which is resident in the UK for UK corporation tax purposes is subject to UK corporation tax
in respect of its worldwide income and gains. While Maiden Global is a UK company, neither Maiden
Holdings nor Maiden Bermuda are incorporated in the UK. Nevertheless, Maiden Holdings or Maiden
in the UK for UK corporation tax purposes if its central
Bermuda would be treated as being resident
management and control were exercised in the UK. The concept of central management and control
is
indicative of the highest level of control of a company’s affairs, which is wholly a question of fact. The
directors and officers of both Maiden Holdings and Maiden Bermuda intend to manage their affairs so that
both companies are resident in Bermuda, and not resident in the UK, for UK tax purposes. However, Her
Majesty’s Revenue & Customs could challenge our tax residence status.

A company which is not resident in the UK for UK corporation tax purposes can nevertheless be subject
to UK corporation tax at the rate of 30% if it carries on a trade in the UK through a permanent establishment
in the UK, but the charge to UK corporation tax is limited to proﬁts (including income proﬁts and chargeable
gains) attributable directly or indirectly to such permanent establishment.

The directors and officers of Maiden Bermuda intend to operate the business of Maiden Bermuda in such
a manner that
in the UK.
it does not carry on a trade in the UK through a permanent establishment
Nevertheless, Her Majesty’s Revenue & Customs might contend successfully that Maiden Bermuda is trading
in the UK through a permanent establishment in the UK because there is considerable uncertainty as to the
activities which constitute carrying on a trade in the UK through a permanent establishment in the UK.

The UK has no income tax treaty with Bermuda. Companies that are neither resident in the UK nor
entitled to the protection afforded by a double tax treaty between the UK and the jurisdiction in which they
are resident are liable to income tax in the UK, at the basic rate of 22%, on the proﬁts of a trade carried on in
the UK, where that trade is not carried on through a permanent establishment in the UK. The directors and
officers of Maiden Bermuda intend to operate the business in such a manner that Maiden Bermuda will
not fall within the charge to income tax in the UK (other than by way of deduction or withholding) in
this respect.

If either Maiden Holdings or Maiden Bermuda were treated as being resident

in the UK for
UK corporation tax purposes, or if Maiden Bermuda were treated as carrying on a trade in the UK,
whether through a permanent establishment or otherwise, the results of our operations would be materially
adversely affected.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

We currently lease office space in Bermuda (our corporate headquarters),

the
United Kingdom, Germany, Austria, Australia and Russia for the operation of our business. We also lease a
property for employee use in Bermuda. Our office leases have remaining terms ranging from 7 months to
approximately 10 years in length. We renew and enter into new leases in the ordinary course of business as
needed. While we believe that the office space from these leased properties is sufficient for us to conduct our
operations for the foreseeable future, we may need to expand into additional facilities to accommodate future
growth. For more information on our leasing arrangements, please see Note 12 of the notes to the
Consolidated Financial Statements in this Annual Report on Form 10-K.

the United States,

We executed an office space lease in Hamilton, Bermuda commencing September 1, 2009 for Maiden
Holdings and Maiden Bermuda. The initial
term of this agreement expires on November 1, 2012 with
one option of ﬁve years. We have an office space lease in Mount Laurel, New Jersey expiring on May 31,
2015, for use by Maiden Re, Maiden US and Maiden Specialty. We have also executed an office space lease
in Beaconsﬁeld, Buckinghamshire, United Kingdom commencing on October 1, 2010, for Maiden Global; the
initial term of this agreement expires on October 1, 2015, with one option of ﬁve years. We also have
ten other office space leases in the United States, one property lease in Bermuda and one office space lease in
Germany, Austria, Australia and Russia, respectively, with various expiry dates.

Item 3. Legal Proceedings.

We may become involved in various claims and legal proceedings that arise in the normal course of our
business, which are not likely to have a material adverse effect on our ﬁnancial position, results of operations
or liquidity.

In April 2009, the Company learned that Bentzion S. Turin, the former Chief Operating Officer, General
Counsel and Secretary of Maiden Holdings and Maiden Bermuda, sent a letter to the U.S. Department of
Labor claiming that his employment with the Company was terminated in retaliation for corporate whistle
blowing in violation of the whistle blower protection provisions of the Sarbanes-Oxley Act of 2002. Mr. Turin
alleged concerns regarding corporate governance with respect to negotiation of the terms of the TRUPS
Offering and seeks reinstatement as Chief Operating Officer, General Counsel and Secretary of Maiden
Holdings and Maiden Bermuda, back pay and legal fees incurred. The Company believes that it had ample
reason for terminating such employment for good and sufficient legal cause, and the Company believes that
the claim is without merit and is vigorously defending this claim. On December 31, 2009, the U.S. Secretary
in its entirety.
of Labor found no reasonable cause for Mr. Turin’s claim and dismissed the complaint

Mr. Turin objected to the Secretary’s ﬁndings and requested a hearing before an administrative law judge in
the U.S. Department of Labor. The Company moved to dismiss Mr. Turin’s complaint, and its motion
was granted by the Administrative Law Judge on June 30, 2011. On July 13, 2011, Mr. Turin ﬁled a petition
for
the Administrative Law Judge’s decision with the Administrative Review Board in
the U.S. Department of Labor. The Company ﬁled its brief in opposition to the petition for review on
October 19, 2011.

review of

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.

Our common shares began publicly trading on the NASDAQ Global Select Market under the symbol
‘‘MHLD’’ on May 6, 2008. The following table sets out the high and low prices for our common shares for
the periods indicated as reported by the NASDAQ Global Select Market. Such prices reﬂect inter-dealer
prices, without retail mark-up, mark-down or commission, and do not necessarily represent actual transactions.

High

Low

2010
First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011
First quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$7.74
$7.69
$7.79
$8.11

$8.48
$9.75
$9.88
$8.95

$6.46
$6.36
$6.14
$7.43

$7.10
$7.14
$7.32
$6.99

At March 7, 2012, the last reported sale price of our common share was $8.41 per share and there were
22 holders of record of our common shares. This ﬁgure does not represent the actual number of beneﬁcial
owners of our common shares because shares are frequently held in ‘‘street name’’ by securities dealers and
others for the beneﬁt of beneﬁcial owners who may vote the shares.

During the years ended December 31, 2011 and 2010, we declared regular quarterly dividends totaling
$0.30 and $0.265 per common share, respectively. The continued declaration and payment of dividends to
holders of common shares is expected but will be at the discretion of our board of directors and subject to
speciﬁed legal, regulatory, ﬁnancial and other restrictions.

As a holding company, our principal source of income is dividends or other statutorily permissible
payments from our subsidiaries. The ability of our subsidiaries to pay dividends is limited by the applicable
laws and regulations of the various countries in which we operate, including Bermuda and the United States.
See Item 1 Business — Regulatory Matters, Item 7 Management’s Discussion and Analysis of Financial
Condition, and Results of Operations — Liquidity and Capital Resources — Restrictions, Collateral and
Speciﬁc Requirements, and Note 17 of the notes to Consolidated Financial Statements included in this Annual
Report on Form 10-K.

Performance Graph

The following information is not deemed to be ‘‘soliciting material’’ or to be ‘‘ﬁled’’ with the SEC or
subject
to the liabilities of Section 18 of the Exchange Act, and the report shall not be deemed to be
incorporated by reference into any prior or subsequent ﬁling by the Company under the Securities Act or the
Exchange Act.

The following graph shows the cumulative total

including reinvestment of dividends, on
the common shares compared to such return for Standard & Poor’s 500 Composite Stock Price Index
(‘‘S&P 500’’), and NASDAQ Insurance Index for the period beginning on May 6, 2008, the date of our listing
on NASDAQ, and ending on December 31, 2011, assuming $100 was invested on May 6, 2008. The
measurement point on the graph represents the cumulative shareholder return as measured by the last reported
sale price on such date during the relevant period.

return,

Total Return To Shareholders
(Includes Reinvestment of Dividends)
Comparison of Cumulative Total Return

140.00

120.00

100.00

80.00

60.00

40.00

20.00

0.00

6- M ay-08

30-Jun-08

30-Sep-08

31-D ec-08

31- M ar-09

30-Jun-09

30-Sep-09

31-D ec-09

31- M ar-10

30-Jun-10

30-Sep-10

31-D ec-10

31- M ar-11

30-Jun-11

30-Sep-11

31-D ec-11

MHLD

NASDAQ Insurance

S&P 500

Item 6. Selected Financial Data.

The following tables set forth our summary historical statement of operations data and summary balance
sheet data as at and for the years ended December 31, 2011, 2010 and 2009. Statement of operations data and
balance sheet data are derived from our audited consolidated ﬁnancial statements, which have been prepared
in accordance with U.S. GAAP. These historical results are not necessarily indicative of results to be expected
from any future period. For further discussion of this risk see Item 1A. ‘‘Risk Factors’’ in this Annual Report
on Form 10-K. You should read the following selected ﬁnancial data in conjunction with the other information
contained in this Annual Report on Form 10-K, including Item 7 ‘‘Management’s Discussion and Analysis of
Financial Condition and Results of Operations’’ and Item 8 ‘‘Financial Statements and Supplementary Data.’’

As at December 31,

2011

2009
2010
($ in Millions, Except per Share Amounts)

Summary Consolidated Balance Sheet Data:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash and cash equivalents . . . . . . . . . . . . . . . . .
Investments at fair market value . . . . . . . . . . . . . . . . . . . .
Reinsurance balances receivable, net . . . . . . . . . . . . . . . . .
Funds withheld. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan to related party . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred commission and other acquisition costs . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for loss and loss adjustment expenses. . . . . . . . . . .
Unearned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Securities sold under agreements to repurchase,

at contract value . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Junior subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . .
Total Maiden shareholders’ equity . . . . . . . . . . . . . . . . . . .
Book value per share(7) . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 188.1
114.9
2,022.9
382.7
42.6
168.0
248.4
3,354.4
1,398.4
832.0

—
107.5
126.3
768.6
$ 10.64

96.2
89.8
1,880.3
226.3
152.7
168.0
203.6
2,982.6
1,226.8
657.6

76.2
—
215.2
750.2
$ 10.40

$ 107.4
144.9
1,667.2
211.3
—
168.0
173.0
2,636.1
1,002.7
583.5

95.4
—
215.1
676.5
9.62

(1) Please refer to Note 13 of the notes to Consolidated Financial Statements for the calculation of basic and

diluted earnings per share.

(2) Calculated by dividing net loss and loss adjustment expenses by net premiums earned and other insurance

revenue.

(3) Calculated by dividing commission and other acquisition expenses by net premiums earned and other

insurance revenue.

(4) Calculated by dividing general and administrative expenses by net premiums earned and other insurance

revenue.

(5) Calculated by combining the acquisition cost ratio and the general and administrative expense ratio.
(6) Calculated by combining the net loss and loss expense ratio, acquisition cost ratio and general and

administrative expense ratio.

(7) Basic book value per share is deﬁned as total shareholders’ equity available to common shareholders
divided by the number of common shares issued and outstanding as at the end of the period, giving no
effect to dilutive securities.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of the Company’s ﬁnancial condition and results of operations
should be read in conjunction with the Company’s Consolidated Financial Statements and related notes
included elsewhere in this Annual Report on Form 10-K. Amounts in tables may not reconcile due to
rounding differences. Some of the information contained in this discussion and analysis or set forth elsewhere
in this Report, including information with respect to the Company’s plans and strategy for its business,
includes forward-looking statements that involve risk and uncertainties. Please see the ‘‘Special Note About
Forward-Looking Statements’’ in this Annual Report on Form 10-K for more information on factors that could
cause actual results to differ materially from the results described in or implied by any forward-looking
statements contained in this discussion and analysis. You should review the ‘‘Risk Factors’’ set forth in this
Annual Report on Form 10-K for a discussion of important factors that could cause actual results to differ
materially from the results described in or implied by the forward-looking statements contained herein.

Since our founding in 2007, we have entered into a series of signiﬁcant strategic transactions that have
transformed the scope and scale of our business while keeping our low volatility, non-catastrophe risk proﬁle
intact. These transactions have increased our net premiums written to in excess of $1.7 billion while strongly
positioning our capital to extend its business platform both in the U.S. and internationally and include:

•

Entering into a quota share reinsurance agreement with AmTrust Financial Services,
(‘‘AmTrust’’) in 2007 (the ‘‘AmTrust Quota Share’’);

Inc.

Acquiring and expanding the reinsurance operations of GMAC Insurance from GMACI Holdings,
LLC in 2008 (the ‘‘GMAC Acquisition’’);

Completing a private placement of trust preferred securities of approximately $260.1 million in 2009
(the ‘‘TRUPS Offering’’);

Entering into a quota share reinsurance agreement with American Capital Acquisition Corporation
(‘‘ACAC’’) in 2010 (the ‘‘ACAC Quota Share’’); and

Acquiring the majority of the reinsurance-related infrastructure, assets and liabilities of U.K.-based
GMAC International Insurance Services, Ltd. in 2010 (the ‘‘IIS Acquisition’’).

Completing a public debt offering of $107.5 million in June 2011 and repurchasing a like amount of
our outstanding TRUPS Offering securities in July 2011 (the ‘‘Senior Note Offering’’).

Until such time as the Company attains sufficient historical experience, year-to-year comparability is
likely to be more difficult as compared with other companies considered peers of the Company and with
whom it competes on a regular basis.

Overview

We are a Bermuda-based holding company formed in June 2007 primarily focused on serving the needs
of regional and specialty insurers in the United States and Europe by providing innovative reinsurance
solutions designed to support their capital needs. We specialize in reinsurance solutions that optimize ﬁnancing
by providing coverage within the more predictable and actuarially credible lower layers of coverage and/or
reinsuring risks that are believed to be lower hazard, more predictable and generally not susceptible to
catastrophe claims. Our tailored solutions include a variety of value added services focused on helping our
clients grow and prosper.

We provide reinsurance through our wholly owned subsidiaries, Maiden US and Maiden Bermuda and
have operations in the United States and Bermuda. On a more limited basis, Maiden Specialty, a wholly
owned subsidiary of Maiden US, provides primary insurance on a surplus lines basis focusing on
non-catastrophe inland marine and property coverages. Maiden Bermuda does not underwrite any primary
insurance business. Maiden LF is a life insurer organized in Sweden and writes credit life insurance on a
primary basis in support of Maiden Global business development efforts.

We currently operate our business through three segments: Diversiﬁed Reinsurance, AmTrust Quota Share
Reinsurance and ACAC Quota Share. As at December 31, 2011, we had approximately $3.4 billion in total
total shareholders’ equity and $1.0 billion in total capital, which includes
assets, $768.6 million of
shareholders’ equity and both senior notes and junior subordinated debt.

The market conditions in which we operate have historically been cyclical, experiencing cycles of price
erosion followed by rate strengthening as a result of catastrophes or other signiﬁcant losses that affect the
the
overall capacity of the industry to provide coverage. During the period covered by this discussion,
reinsurance market has been characterized by signiﬁcant competition in most lines of business.

While natural and man-made catastrophes occur each year affecting reinsurance industry results, both
2010 and 2011 experienced an extensive series of signiﬁcant natural and man-made catastrophes, both globally
and in the U.S., negatively impacting overall industry performance. Consistent with our business model, the
Company experienced modest losses from the 2010 or 2011 global catastrophe events; however, the unusually
high frequency of loss activity from U.S. thunderstorm and tornado did impact our U.S clients in the second
quarter of 2011, adversely affecting the Company’s results. Other U.S.-based catastrophe experience in 2011
has been within the Company’s expected parameters which are incorporated into the pricing of our Maiden
US accounts. Despite this elevated level of weather losses, consistent with its operating model, Maiden
maintained proﬁtable underwriting results throughout 2011.

Despite the signiﬁcant ﬁnancial impact of these occurrences, capital positions across the insurance and
reinsurance industry appear to remain adequate at present. Although the ultimate impact remains unclear and
is currently more uncertain in light of reinsurance industry performance in 2011, broad industry conditions
brought about by the combination of catastrophe events, unfavorable pricing and investment conditions appear
to be more supportive of improved pricing in the near term. The scope and tenure of this improved pricing
environment is less certain. As market conditions continue to develop, we continue to maintain our adherence
to disciplined underwriting by declining business when pricing,
terms and conditions do not meet our
underwriting standards. We believe that if such events continue, they could have a signiﬁcant positive effect
on competition and pricing. We believe that we are well positioned to take advantage of market conditions
should the pricing environment become more favorable.

In addition, the property and casualty industry invests signiﬁcant portions of its premiums and retained
underwriting proﬁts in ﬁxed income maturities; yields on these securities are at historically low levels and are
widely forecast to remain at such levels for the foreseeable future. Continued existence of these conditions
will adversely impact the results of the property and casualty industry generally, placing additional pressure on
companies underwriting results at a time that market conditions may not be supportive of sustained,
longer-term additional pricing measures which would stabilize underwriting trends.

Recent Developments

Senior Notes Offering

On June 24, 2011, the Company’s wholly-owned U.S. holding company subsidiary, Maiden NA, closed
the offering of $107.5 million aggregate principal amount of 8.25% Senior Notes due June 15, 2041 (the
‘‘Senior Notes’’), which are fully and unconditionally guaranteed by Maiden Holdings. The Senior Notes are
redeemable for cash, in whole or in part, on or after June 15, 2016, at 100% of the principal amount of the
Senior Notes to be repurchased plus accrued and unpaid interest up to but excluding the redemption date.

Maiden NA has listed the Senior Notes on the New York Stock Exchange and trading commenced on

July 21, 2011 under the symbol ‘‘MHNA.’’

Total net proceeds from the offering were approximately $104.7 million, after deducting the underwriting
discount and estimated offering expenses payable by Maiden NA and the Company. The net proceeds were
used to repurchase a portion of the TRUPS Offering securities. The Company repurchased $107.5 million of
junior subordinated debt issued in the TRUPS Offering securities on July 15, 2011. Pursuant to the terms
of
the Company incurred a non-recurring repurchase expense of approximately
$15.1 million, which was reported in the Company’s results of operations for the year ended December 31,
2011. The Company will save approximately $6.2 million annually as a result of the reﬁnancing, and
approximately $15.9 million from the closing of the Senior Notes offering until January 20, 2014, the date on

the TRUPS Offering,

which the repurchase or redemption penalty associated with the TRUPS Offering expires. As a result of the
repurchase,
the Company also incurred an additional non-recurring non-cash charge of approximately
$20.3 million for the year ended December 31, 2011, which represents the accelerated amortization of original
issue discount and issuance costs associated with equity issued in conjunction with the TRUPS Offering.

GMAC International Insurance Services, Ltd. Reinsurance Acquisition

On November 30, 2010, we acquired the majority of the reinsurance-related infrastructure, assets and
liabilities of GMAC IIS. GMAC IIS is based in the United Kingdom and also included the following primary
components, the sum of which is referred to as the IIS Acquisition:

•

A renewal rights agreement under which Maiden Bermuda underwrites certain assumed reinsurance
business written by GMAC IICL, which covers primarily personal auto and credit life coverages
offered by primary insurers in association with programs GMAC IIS designs and implements for
original equipment automobile manufacturers;

The IICL Agreement under which Maiden Bermuda reinsures all of the existing contracts written by
GMAC IICL pursuant to a loss portfolio transfer; under the purchase agreement, all future contracts
will be underwritten by Maiden Bermuda;

Acquisition of GMAC VS, an insurance producer based in Germany which supports sales of primary
personal auto insurance through participating automobile dealerships and original equipment
automobile manufacturers; and

Acquisition of GMAC LF, a credit life insurer domiciled in Sweden which writes certain credit life
insurance in association through automobile ﬁnancings offered through participating automobile
dealerships and original equipment automobile manufacturers which has been renamed Maiden LF.

According to the loss portfolio transfer provisions of the IICL Agreement, the Company assumed loss
reserves of $98.8 million associated with the GMAC IICL business as at November 30, 2010. The Company
also assumed unearned premium, net of acquisition expenses, of approximately $19.5 million.

requirements in the form of

letters of credit and trust agreements. At

The substantial majority of the premiums and losses underwritten by GMAC IICL are subject

to
collateral
the
the Company settled cash balances applicable to the subject reinsurance contracts with
IIS Acquisition,
GMAC IICL. Actual assets in support of the liabilities assumed under the IICL Agreement were transferred to
the Company when the subject individual agreements were novated to Maiden Bermuda. The substantial
majority of subject contracts have been novated as at December 31, 2011. Please refer to the section entitled
‘‘IIS Acquisition — Funds Withheld’’ in the Liquidity and Capital Resources section of ‘‘Management’s
Discussion and Analysis of Financial Condition and Results of Operations’’ in this Annual Report on
Form 10-K for further information.

the closing of

As a result of the assumption of these liabilities, at November 30, 2010, the underlying assets in support
of these collateral arrangements totaled $141.8 million. The Company now assumes one hundred percent
(100%) of all premiums and losses for which GMAC IICL is otherwise entitled to or liable in respect of the
reinsurance contracts.

We will pay a fee to GMAC IICL for the right to renew the expiring contracts, subject to certain

minimum payments at close, over a three-year period commencing November 30, 2010.

On September 1, 2011, in exchange for a 10% interest in GMAC VS, we entered into cooperation
agreements with the Opel Dealer Association, the Opel dealer association in Germany and the German auto
manufacturer Opel. We also renamed GMAC VS ‘‘Opel Händler VersicherungsService GmbH’’. The
cooperation agreements with both organizations are designed to increase the sales of OVS insurance products
in Opel dealerships in Germany and increase fee and other revenues for Opel, the Opel Dealer Association,
and Maiden via OVS, respectively.

The aggregate purchase price of GMAC VS and GMAC LF at November 30, 2010 was $22.3 million,
which was the tangible book value of each entity. All balances of the IIS Acquisition were settled on an
estimated basis and pursuant to the terms of the underlying agreements, were subject to adjustment to the ﬁnal
actual balances as at November 30, 2010 in the following year. In 2011, the total consideration was reduced to
$21.6 million.

ACAC Transaction

In November 2009, we announced an agreement

in principal with ACAC regarding a multi-year
25% quota share agreement. The contract commenced on March 1, 2010 after ﬁnal regulatory approval and
the closing of ACAC’s acquisition of GMACI’s U.S. consumer property and casualty insurance business, as
well as a small amount of commercial auto business. ACAC is owned by one of our Founding Shareholders,
Michael Karfunkel, and the Michael Karfunkel 2005 Grantor Retained Annuity Trust (the ‘‘Trust’’), which is
controlled by Michael Karfunkel. The Trust currently owns 72.4% of ACAC’s issued and outstanding common
stock, Michael Karfunkel currently owns 27.6% of ACAC’s issued and outstanding common stock and
AmTrust owns preferred shares convertible into 21.25% of the issued and outstanding common stock of
ACAC. In addition to reinsurance support, we provide support services focused on helping ACAC to continue
its proﬁtable expansion. As noted, management of this business is treated as a separate segment captioned
ACAC Quota Share.

2011 Financial Highlights

2011 Consolidated Results of Operations

•

Net income attributable to Maiden shareholders of $28.5 million, or $0.40 basic and $0.39 diluted
earnings per share.

Operating earnings of $69.6 million, or $0.97 basic and $0.96 diluted operating earnings per share(1)

Gross premiums written of $1.8 billion, a 39.6% increase over 2010.

Net premiums earned of $1.6 billion, a 32.7% increase over 2010.

Underwriting income of $42.8 million and combined ratio of 98.1%(2)

thunderstorm and
Adverse net underwriting impact of
tornado activity totaling $9.5 million, net of the Company’s quarterly provision for normalized
catastrophe activity.

second quarter 2011 due to U.S.

Non-recurring charges in the year ended December 31, 2011 related to Senior Notes Offering of
$15.1 million for the repurchase expense of $107.5 million in junior subordinated debt funded by the
Senior Notes along with a $20.3 million non-cash charge for the accelerated amortization of
subordinated debt discount and issuance costs related to the TRUPS Offering which were
repurchased with the proceeds of the Senior Notes Offering.

•

Net investment income of $74.9 million, a 4.5% increase over 2010.

2011 Consolidated Financial Condition

•

Operating return on equity of 9.2% for the year ended December 31, 2011 as compared to 10.2% for
the year ended December 31, 2010.

Common shareholders’ equity of $768.6 million; book value per common share of $10.64.

Total cash and investments of $2.3 billion; ﬁxed maturities comprise 86.9% of total invested assets,
of which 60.1% have a credit rating of AA+ or better and an overall average credit rating of AA-.

Total assets of $3.4 billion.

Reserve for loss and loss adjustment expenses of $1.4 billion.

Total debt of $233.8 million and a debt to total capitalization ratio of 23.3%.

(1) Operating earnings, operating earnings per share and operating return on equity are non-GAAP ﬁnancial
measures. See ‘‘Non-GAAP Financial Measures’’ for additional information and a reconciliation to the
nearest U.S. GAAP ﬁnancial measure (net income).

(2) Combined ratio is an operating metric. See ‘‘Non-GAAP Financial Measures’’ for additional information.

Non-GAAP Financial Measures

In presenting the Company’s results, management has included and discussed certain non-GAAP ﬁnancial
measures. Management believes that these non-GAAP measures, which may be deﬁned differently by other
companies, better explain the Company’s results of operations in a manner that allows for a more complete
understanding of the underlying trends in the Company’s business. However these measures should not be
viewed as a substitute for those determined in accordance with U.S GAAP. These non-GAAP measures are:

Operating Earnings and Operating Earnings per Share:

In addition to presenting net income
determined in accordance with U.S. GAAP, we believe that showing operating earnings enables investors,
analysts, rating agencies and other users of our ﬁnancial information to more easily analyze our results of
operations in a manner similar to how management analyzes our underlying business performance.
Operating earnings should not be viewed as a substitute for U.S. GAAP net income. Operating earnings
are an internal performance measure used in the management of our operations and represents operating
results excluding, as applicable on a recurring basis, the following:

•

Net realized and unrealized gains or losses on investment;

Foreign exchange and other gains or losses;

Amortization of intangible assets; and

Non-cash deferred tax expenses;

We exclude net realized and unrealized gains or losses on investment and foreign exchange and other
gains or losses as we believe that both are heavily inﬂuenced in part by market opportunities and other
factors. We do not believe amortization of intangible assets are representative of our ongoing business. We
believe all of these amounts are largely independent of our business and underwriting process and including
them distorts the analysis of trends in our operations.

We also exclude certain non-recurring expenditures that are material to understanding our results of

operations, including the following:

•

for 2011 and 2010, we exclude transaction expenses related to the IIS Acquisition as these are
non-recurring; and

in 2011, as a result of the Senior Notes Offering, we exclude the junior subordinated debt repurchase
expense and the accelerated amortization of junior subordinated debt discount and issuance costs.

The following is a reconciliation of operating earnings to its most closely related GAAP measure,

net income.

For the Year Ended December 31,
2010
($ in Millions)
$69.9

2009

$61.1

2011

$28.5

Net income attributable to Maiden shareholders. . . . . . . . . . . . .
Add (subtract):

Net realized and unrealized gains on investment. . . . . . . . . . .
Foreign exchange and other (gains) losses . . . . . . . . . . . . . . .
Amortization of intangible assets . . . . . . . . . . . . . . . . . . . . .
Junior subordinated debt repurchase expense . . . . . . . . . . . . .
Accelerated amortization of junior subordinated debt discount

(0.5)
(0.3)
5.0
15.1

and issuance cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20.3

Non-recurring general and administrative expenses relating

to IIS Acquisition. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash deferred tax expense . . . . . . . . . . . . . . . . . . . . . . . .
Operating earnings attributable to Maiden shareholders. . . . . . . .

Operating earnings per common share:
Basic operating earnings per share. . . . . . . . . . . . . . . . . . . . . .
Diluted operating earnings per share . . . . . . . . . . . . . . . . . . . .

0.2
1.3
$69.6

$0.97
$0.96

(6.6)
0.5
5.8
—

—

1.9
1.2
$72.7

$1.03
$1.02

(0.3)
(2.4)
6.6
—

—

—
1.3
$66.3

$0.95
$0.95

Operating Return on Equity (‘‘Operating ROE’’): Management uses operating return on average
shareholders’ equity as a measure of proﬁtability that focuses on the return to common shareholders. It is
calculated using operating earnings available to common shareholders (as deﬁned above) divided by average
common shareholders’ equity. Management has set as a target a long-term average of 15% Operating ROE,
which management believes provides an attractive return to shareholders for the risk assumed. The decrease in
Operating ROE in 2011 was the result of higher combined ratios in part brought about by the adverse net
underwriting impact of second quarter 2011 U.S. thunderstorm and tornado activity totaling $9.5 million, net
of the Company’s quarterly provision for normalized catastrophe activity. Operating ROE for the years ended
December 31, 2011, 2010 and 2009 is computed as follows:

Operating earnings. . . . . . . . . . . . . . . . . . . . . . . . . .
Opening shareholders’ equity. . . . . . . . . . . . . . . . . . .
Ending shareholders’ equity . . . . . . . . . . . . . . . . . . .
Average shareholders’ equity . . . . . . . . . . . . . . . . . . .
Operating return on equity . . . . . . . . . . . . . . . . . . . .

2011

2009

For the Year Ended December 31,
2010
($ in Millions)
$ 72.7
$676.5
$750.2
$713.4

$ 66.3
$509.8
$676.5
$593.1

$ 69.6
$750.2
$768.6
$759.4

9.2%

10.2%

11.2%

Book Value per Share: Management uses growth in book value per share as a prime measure of the
value the Company is generating for its common shareholders, as management believes that growth in the
Company’s book value per share ultimately translates into growth in the Company’s stock price. Book value
per share is calculated using common shareholders’ equity divided by the number of common shares
outstanding. Book value per share is impacted by the Company’s net income and external factors such as
interest rates, which can drive changes in unrealized gains or losses on its investment portfolio. Book value
per share as at December 31, 2011, 2010 and 2009 is computed as follows:

As at December 31,

2011

Ending shareholders’ equity . . . . . . . . . . . . . . . . . .

768.6

Common shares outstanding. . . . . . . . . . . . . . . . . .
Book value per share . . . . . . . . . . . . . . . . . . . . . .

72,221,428
10.64

2010
($ in Millions)
750.2
$

72,107,100
10.40
$

2009

676.5

70,291,289
9.62
$

Certain Operating Measures

Underwriting Income and Combined Ratio: The combined ratio is used in the insurance and reinsurance
industry as a measure of underwriting proﬁtability. Management measures underwriting results on an overall
basis and for each segment on the basis of the combined ratio. The combined ratio is the sum of the net loss
and loss expense ratio and the expense ratio and the computations of each component are described below. A
combined ratio under 100% indicates underwriting proﬁtability, as the total loss and loss adjustment expenses,
commission and other acquisition expenses and general and administrative expenses are less than the net
premiums earned and other insurance revenue on that business. We have generated underwriting income
in each year since our inception. Underwriting income is calculated by subtracting net
loss and loss
adjustment expenses, commissions and other acquisition expenses and applicable general and administrative
expenses from the net premiums earned and other insurance revenue and is the monetized counterpart of the
combined ratio.

For purposes of these operating measures, the fee-generating business associated with the IIS Acquisition
(‘‘IIS Fee Business’’) which is included in the Diversiﬁed Reinsurance segment, is considered part of the
underwriting operations of the Company. Certain portions of the IIS Fee Business are directly associated with
the underlying reinsurance contracts recorded in the Diversiﬁed Reinsurance segment. To the extent that the
fees are generated on underlying insurance contracts sold to third parties that are then ceded under quota share
the related
reinsurance contracts to Maiden Bermuda, a proportionate share of the fee is offset against
acquisition expense. To the extent that IIS Fee Business is not directly associated with premium revenue
generated under the applicable reinsurance contracts,
that fee revenue is separately reported on the line
captioned ‘‘Other insurance revenue’’ in the Company’s Consolidated Statements of Income.

While an important metric of success, underwriting income and combined ratio do not reﬂect all
components of proﬁtability, as they do not recognize the impact of investment income earned on premiums
between the time premiums are received and the time loss payments are ultimately paid to clients. Because we
do not manage our cash and investments by segment,
income and interest expense are not
allocated to individual reportable segments. Certain general and administrative expenses are allocated to
segments based on various factors, including staff count and each segment’s proportional share of gross
premiums written.

investment

The ‘‘net loss and loss expense ratio’’ is derived by dividing net loss and loss adjustment expenses by the
sum of net premiums earned and other insurance revenue. The ‘‘acquisition cost ratio’’ is derived by dividing
commission and other acquisition expenses by the sum of net premiums earned and other insurance revenue.
The ‘‘general and administrative expense ratio’’ is derived by dividing general and administrative expenses by
the sum of net premiums earned and other insurance revenue. The ‘‘expense ratio’’ is the sum of the
acquisition cost ratio and the general and administrative expense ratio.

Relevant Factors

Revenues

We derive our revenues primarily from premiums on our insurance policies and reinsurance contracts, net
of any reinsurance or retrocessional coverage purchased. Insurance and reinsurance premiums are a function
of the amounts and types of policies and contracts we write, as well as prevailing market prices. Our prices
are determined before our ultimate costs, which may extend far into the future, are known.

The Company’s revenues also include fee income generated by the IIS Fee Business as well as income
generated from its investment portfolio. The Company’s investment portfolio is comprised of ﬁxed maturity
investments, held as available-for-sale (‘‘AFS’’), and other investments that are held as AFS. In accordance
with U.S. GAAP, these investments are carried at fair market value and unrealized gains and losses on the
Company’s investments held as available-for sale are generally excluded from earnings. These unrealized
gains and losses are included on the Company’s Consolidated Balance Sheet
in Accumulated other
comprehensive income as a separate component of shareholders’ equity. If unrealized losses are considered to
be other-than-temporarily impaired, such losses are included in earnings as a realized loss.

Expenses

Our expenses consist largely of net loss and loss adjustment expenses, commission and other acquisition
expenses, general and administrative expenses, amortization of intangible assets and foreign exchange and
other gains or losses. Net loss and loss adjustment expenses are comprised of three main components:

•

losses paid, which are actual cash payments to insureds, net of recoveries from reinsurers;

change in outstanding loss or case reserves, which represent management’s best estimate of
the likely settlement amount for known claims,
less the portion that can be recovered from
reinsurers; and

change in IBNR reserves, which are reserves established by us for changes in the values of
claims that have been reported to us but are not yet settled, as well as claims that have occurred but
have not yet been reported. The portion recoverable from reinsurers is deducted from the gross
estimated loss.

Commission and other acquisition expenses are comprised of commissions, brokerage fees and insurance
taxes. Commissions and brokerage fees are usually calculated as a percentage of premiums and depend on the
market and line of business and can, in certain instances, vary based on loss sensitive features of reinsurance
contracts. Commission and other acquisition expenses are reported after (1) deducting commissions received
on ceded reinsurance, (2) deducting the part of commission and other acquisition expenses relating to
unearned premiums and (3)
including the amortization of previously deferred commission and other
acquisition expenses.

General and administrative expenses include personnel expenses including share-based compensation
charges, rent expense, professional fees, information technology costs and other general operating expenses.
We are experiencing increases in general and administrative expenses resulting from additional staff, increased
share-based compensation expense, increased rent expense for our offices and increased professional fees. As
the Company continues to expand and diversify in 2012, we expect this trend to continue.

Critical Accounting Policies and Estimates

It is important to understand our accounting policies in order to understand our ﬁnancial position and
results of operations. The Company’s Consolidated Financial Statements have been prepared in accordance
with U.S. GAAP. The preparation of ﬁnancial statements in conformity with U.S. GAAP requires management
to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the
ﬁnancial statements and the reported amounts of revenues and expenses during the reporting period. The
following presents a discussion of those accounting policies and estimates that management believes are the
most critical to its operations and require the most difficult, subjective and complex judgment. If actual events
there could be
differ signiﬁcantly from the underlying assumptions and estimates used by management,
material adjustments to prior estimates that could potentially adversely affect
the Company’s results of
operations, ﬁnancial condition and liquidity. These critical accounting policies and estimates should be read in
conjunction with the Company’s Notes to Consolidated Financial Statements, including Note 2, Signiﬁcant
Accounting Policies, for a full understanding of the Company’s accounting policies.

Reserve for Loss and Loss Adjustment Expenses
General

The amount of time that elapses before a claim is reported to the cedant and then subsequently reported
to the reinsurer is commonly referred to in the industry as the reporting tail. Lines of business for which
claims are reported quickly are commonly referred to as short-tail lines; and lines of business for which a
longer period of time elapses before claims are reported to the reinsurer are commonly referred to as long-tail
lines. In general, for reinsurance, the time lags are longer than for primary business due to the delay that
occurs between the cedant becoming aware of a loss and reporting the information to its reinsurer(s). The
delay varies by reinsurance market (country of cedant), type of treaty, whether losses are paid by the cedant
and the size of the loss. The delay could vary from a few weeks to a year or sometimes longer.

Because a signiﬁcant amount of time can elapse between the assumption of risk, particularly on
longer-tail lines of business, occurrence of a loss event, the reporting of the event to an insurance company

(the primary company or the cedant), the subsequent reporting to the reinsurance company (‘‘the reinsurer’’)
and the ultimate payment of the claim on the loss event by the reinsurer, the Company’s liability for unpaid
loss and loss adjustment expenses (‘‘loss reserves’’) is based largely upon estimates. The Company categorizes
loss reserves into three types of reserves: reported outstanding loss reserves (‘‘case reserves’’), ACRs and
IBNR reserves. Case reserves represent unpaid losses reported by the Company’s cedants and recorded by the
Company. ACRs are established for particular circumstances where, on the basis of individual loss reports, the
Company estimates that the particular loss or collection of losses covered by a treaty may be greater than
those advised by the cedant. IBNR reserves represent a provision for claims that have been incurred but not
yet reported to the Company, as well as future loss development on losses already reported, in excess of the
case reserves and ACRs. The Company updates its estimates for each of the aforementioned categories on a
quarterly basis using information received from its cedants. The Company also estimates the future
unallocated loss adjustment expenses (‘‘ULAE’’) associated with the loss reserves and these form part of the
Company’s loss adjustment expense reserves.

For excess of loss treaties, cedents generally are required to report losses that either exceed 50% of the
retention, have a reasonable probability of exceeding the retention or meet deﬁned reporting criteria. All
reinsurance claims that are reserved are reviewed at least every six months. For proportional treaties, cedents
are required to give a periodic statement of account, generally monthly or quarterly. These periodic statements
typically include information regarding written premiums, earned premiums, unearned premiums, ceding
commissions, brokerage amounts, applicable taxes, paid losses and outstanding losses. They can be submitted
60 to 90 days after the close of the reporting period. Some proportional treaties have speciﬁc language
regarding earlier notice of serious claim.

For all lines, the Company’s objective is to estimate ultimate loss and loss adjustment expenses. Total
loss reserves are then calculated by subtracting losses paid. Similarly, IBNR reserves are calculated by
subtraction of case reserves and ACRs from total loss reserves. IBNR is the estimated liability for (1) changes
in the values of claims that have been reported to us but are not yet settled, as well as (2) claims that have
occurred but have not yet been reported. Each claim is settled individually based upon its merits, and
particularly for longer-tailed lines of business, it is not unusual for a claim to take years after being reported
to settle, especially if legal action is involved. As a result, the reserve for loss and loss adjustment expenses
include signiﬁcant estimates for IBNR reserves.

The reserve for IBNR is estimated by management for each account based on various factors, including
underwriters’ expectations about loss experience, actuarial analysis and loss experience to date. Our actuaries
employ standard actuarial methodologies to determine estimated ultimate loss reserves.

the Company employs include, but may not be limited to,

In selecting its best estimate, the Company considers the appropriateness of each methodology to the
individual circumstances of the treaties and underwriting year for which the projection is made. The
the Expected Loss Ratio
methodologies that
applicable) Paid
method,
and
Bornhuetter-Ferguson (B-F) methods.
the Company uses other methodologies to estimate
liabilities for speciﬁc types of occurrences. For example, external and vendor catastrophe models are typically
used in the estimation of loss and loss adjustment expenses at the early stages of catastrophe losses before
loss information is reported to the reinsurer.

the Reported Loss Development method

In addition,

Incurred

and

the

(as

The reserve methodologies employed by the Company are dependent on data that the Company collects.
This data consists primarily of loss amounts and loss payments reported by the Company’s cedants, and
premiums written and earned reported by cedants or estimated by the Company. The actuarial methods used
by the Company to project loss reserves that it will pay in the future (future liabilities) do not generally
include methodologies that are dependent on claim counts reported, claim counts settled or claim counts open
as, due to the nature of the Company’s business, this information is not routinely provided by cedants for
every treaty. Consequently, actuarial methods relying on this information cannot be used by the Company to
estimate loss reserves.

The reserve for loss and loss adjustment expenses as at December 31, 2011 and 2010 comprised:

As at December 31,

2011

2010

($ in Millions)

Reserve for reported loss and loss adjustment expenses . . . . . . . . . . .
Reserve for losses incurred but not reported . . . . . . . . . . . . . . . . . .
Reserve for loss and loss adjustment expenses . . . . . . . . . . . . . . .

$ 820.8
577.6
$1,398.4

$ 655.0
571.8
$1,226.8

While management believes that our case reserves and IBNR are sufficient to cover losses assumed by
us, there can be no assurance that losses will not deviate from our reserves, possibly by material amounts. The
methodology of estimating loss reserves is periodically reviewed to ensure that the assumptions made continue
to be appropriate. To the extent actual reported losses exceed estimated losses, the carried estimate of the
ultimate losses will be increased (i.e., unfavorable reserve development), and to the extent actual reported
losses are less than our expectations, the carried estimate of ultimate losses will be reduced (i.e., favorable
reserve development). We record any changes in our loss reserve estimates and the related reinsurance
recoverable in the periods in which they are determined.

Loss reserves do not represent an exact calculation of liability. Rather, loss reserves are estimates of what
we expect
the ultimate resolution and administration of claims will cost. These estimates are based on
actuarial projections and on our assessment of currently available data, as well as estimates of future trends in
claims severity and frequency, judicial theories of liability and other factors. Loss reserve estimates are reﬁned
as experience develops and as claims are reported and resolved. In addition, the relatively long periods
between when a loss occurs and when it may be reported to our claims department for our casualty
reinsurance lines of business also increase the uncertainties of our reserve estimates in such lines.

Actuarial Methods Used to Estimate Loss and Loss Adjustment Expense Reserves

We utilize a variety of standard actuarial methods in our analysis. The selections from these various
methods are based on the loss development characteristics of the speciﬁc line of business. The actuarial
methods we utilize include:

The Expected Loss Ratio (‘‘ELR’’) method is a technique that multiplicatively applies an expected loss
ratio to earned premium to yield estimated ultimate losses. The ELR assumption is derived most often from
the pricing of the business that is being reserved but can be based on historical experience of the business.
This method is frequently used for the purpose of stability in the early valuations of an underwriting year with
large and uncertain loss development factors. This technique does not take into account actual loss experience
for the underwriting year being projected. As an underwriting year matures and actual
loss experience
becomes available, other methods may be applied in determining the estimated ultimate losses.

The Reported Loss Development (‘‘RLD’’) method is a common reserving method in which ultimate
losses are estimated by applying a loss development factor to actual loss experience. This method fully
utilizes actual experience. Multiplication of underwriting year actual reported (or paid) losses by its respective
development factor produces the estimated ultimate losses. The RLD method is based upon the assumption
that the relative change in a given underwriting year’s losses from one evaluation point to the next is similar
to the relative change in prior underwriting years’ losses at similar evaluation points. In addition, this method
is based on the assumption that the reserving and payment patterns as well as the claim handling procedures
have not changed substantially over time. When a company has a sufficiently reliable loss development
history, a development pattern based on the company’s historical indications may be used to develop losses to
ultimate values.

The Bornhuetter-Ferguson (‘‘BF’’) reserving technique is commonly used for long-tailed or erratic lines.
It is also useful in situations where the reported loss experience is relatively immature and/or lacks sufficient
credibility for the application of methods that are more heavily reliant on emerged experience. The BF method
is an additive IBNR method that combines the ELR and RLD techniques by splitting the expected loss into
two pieces — expected reported (or paid) losses and expected unreported (or unpaid) losses. Expected
unreported (unpaid) losses are added to the current actual reported (or paid) losses to produce an estimate of
ultimate losses by underwriting year. The BF method introduces an element of stability that moderates the
impact of inconsistent changes in paid and reported amounts.

With the guidance of the methods above, actuarial judgment is applied in the determination of ultimate
losses. In general, the Company’s segments have varying levels of seasoning with which the Company has
direct experience and as a result, differing methods are utilized to estimate loss and loss adjustment expenses
reserves in each segment.

In the Diversiﬁed Reinsurance segment, as at December 31, 2011, 88.7% of the loss reserves in the
Diversiﬁed Reinsurance segment are associated with the business acquired in the GMAC Acquisition (which
includes new business written subsequent
transaction). The Company’s executive and technical
management, including claims and underwriting, have signiﬁcant experience with this book of business, which
also has more than 25 years of loss experience associated with it. In general for the Diversiﬁed Reinsurance
segment we utilize the ELR approach at the onset of reserving an account, the BF method for business with
less but maturing loss experience, and as the experience matures the RLD Method.

to that

The Company has underwritten the AmTrust Quota Share Reinsurance segment since July 1, 2007. This
segment consists of business written under the Master Agreement since that time, and commencing April 1,
2011, the business associated with the European Hospital Liability Quota Share. In addition, certain aspects of
this segment are associated with recent acquisitions by AmTrust and while the underlying experience of the
book has signiﬁcant seasoning, the combination of the shorter time frame with which the Company has direct
experience with this business and the relative inexperience of certain aspects of this business may result in a
greater range of volatility. As a result, we have tended to rely on a weighted approach which primarily
employs the RLD method for aspects of the segment with ample historical data, while also considering the
ELR method for exposure resulting from recent acquisitions, or a relative level of experience. The Company’s
actuarial analysis of this book of business is more reﬁned in that it utilizes a combination of monthly and
quarterly data instead of contract period data in totality. As a result, a range of loss development factors are
utilized due to the relative lack of seasoning of the underlying business as regards the Company’s experience.
Because of the reﬁnement of the data, this allows for greater use of the loss development method earlier on in
the maturity of the book than would ordinarily occur.

Signiﬁcant Assumptions Employed in the Estimation of Reserve for Loss and Loss Adjustment Expenses

The most signiﬁcant assumptions used as at December 31, 2011 to estimate the reserve for loss and loss

adjustment expenses within the Company’s segments are as follows:

the information developed from internal and independent external sources can be used to develop
meaningful estimates of the likely future performance of business bound by the Company;

the loss and exposure information provided by ceding companies, insureds and brokers in support of
their submissions can be used to derive meaningful estimates of the likely future performance of
business bound with respect to each contract and policy;

historic loss development and trend experience is assumed to be indicative of
development and trends; and

future loss

no signiﬁcant emergence of losses or types of losses that are not represented in the information
supplied to the Company by its brokers, ceding companies and insureds will occur.

The above four assumptions most signiﬁcantly inﬂuence the Company’s determination of initial expected
loss ratios and expected loss reporting patterns that are the key inputs which impact potential variability in the
estimate of the reserve for loss and loss adjustment expenses and are applicable to each of the Company’s
business segments. While there can be no assurance that any of the above assumptions will prove to be
correct, we believe that these assumptions represent a realistic and appropriate basis for estimating the reserve
for loss and loss adjustment expenses.

Our reporting factors and expected loss ratios are based on a blend of our own experience, cedant
experience and industry benchmarks. The benchmarks selected were those that we believe are most similar to
our underwriting business.

Factors Creating Uncertainty in the Estimation of the Reserve for Loss and Loss Adjustment Expenses.

While management does not at this time include an explicit or implicit provision for uncertainty in its
reserve for loss and loss adjustment expenses, certain of the Company’s business lines are by their nature
subject to additional uncertainties, which are discussed in detail below. In addition, the Company’s reserves
are subject to additional factors which add to the uncertainty of estimating reserve for loss and loss adjustment
expenses. Time lags in the reporting of losses can also introduce further ambiguity to the process of
estimating reserve for loss and loss adjustment expenses.

The inherent uncertainty of estimating the Company’s reserve for loss and loss adjustment expenses

increases principally due to:

ii.

iii.

iv.

the lag in time between the time claims are reported to the ceding company and the time they are
reported through one or more reinsurance broker intermediaries to the Company;

the differing reserving practices among ceding companies;

the diversity of loss development patterns among different types of reinsurance treaties or contracts;
and

the Company’s need to rely on its ceding companies for loss information, which also exposes the
Company to changes in the reserving philosophy of the ceding company and the adequacy of its
underlying case reserves.

In order to verify the accuracy and completeness of the information provided to the Company by its
ceding company counterparties,
the Company’s underwriters, actuaries, accounting and claims personnel
perform underwriting and claims reviews of the Company’s ceding companies. Any material ﬁndings are
communicated to the ceding companies and utilized in the establishment or revision of the Company’s case
reserves and related IBNR reserve. On occasion, these reviews reveal that the ceding company’s reported loss
and loss adjustment expenses do not comport with the terms of the contract with the Company. In such
events, the Company strives to resolve the outstanding differences in an amicable fashion. The large majority
of such differences are resolved in this manner. In the infrequent instance where an amicable solution is not
the Company’s policy is to vigorously defend its position in litigation or arbitration. As at
feasible,
December 31, 2011,
involved in any material claims litigation or arbitration
proceedings.

the Company was not

Due to the large volume of potential transactions that must be recorded in the insurance and reinsurance
industry, backlogs in the recording of the Company’s business activities can also impair the accuracy of its
loss and loss adjustment expense reserve estimates. As at December 31, 2011, there were no signiﬁcant
backlogs related to the processing of policy or contract information in the Company’s segments.

The Company assumes in its loss and loss adjustment expense reserving process that, on average, the
time periods between the recording of expected losses and the reporting of actual losses are predictable when
measured in the aggregate and over time. The time period over which all losses are expected to be reported to
the Company varies signiﬁcantly by line of business. This period can range from a few quarters for some
lines, such as property, to many years for some casualty lines of business. To the extent that actual reported
losses are reported more quickly or more slowly than expected, the Company may adjust its estimate of
ultimate loss.

Potential Volatility in the Reserve for Loss and Loss Adjustment Expenses.

In addition to the factors
creating uncertainty in the Company’s estimate of loss and loss adjustment expenses, the Company’s estimated
reserve for loss and loss adjustment expenses can change over time because of unexpected changes in the
external environment. Potential changing external factors include:

•

changes in the inﬂation rate for goods and services related to the covered damages;

changes in the general economic environment
frequency or severity;

that could cause unanticipated changes in claim

changes in the litigation environment
plaintiffs;

regarding the representation of plaintiffs and potential

•

changes in the judicial and/or arbitration environment regarding the interpretation of policy and
contract provisions relating to the determination of coverage and/or the amount of damages awarded
for certain types of claims;

changes in the social environment regarding the general attitude of juries in the determination of
liability and damages;

changes in the legislative environment regarding the deﬁnition of damages;

new types of injuries caused by new types of injurious activities or exposures; and

in the case of assumed reinsurance, changes in ceding company case reserving and reporting
patterns.

The Company’s estimates of reserve for loss and loss adjustment expenses can also change over time

because of changes in internal company operations, such as:

•

alterations in claims handling procedures;

growth in new lines of business where exposure and loss development patterns are not well
established; or

changes in the quality of risk selection or pricing in the underwriting process.

Due to the inherent complexity of the assumptions used in establishing the Company’s loss and loss
adjustment expense reserve estimates, ﬁnal claim settlements made by the Company may vary signiﬁcantly
from the present estimates, particularly when those settlements may not occur until well into the future.

In addition, the Company’s segments have varying levels of seasoning with which the Company has
direct experience and as a result, the reasonably likely variance of our expected loss ratio for each segment
varies commensurately with that experience. As at December 31, 2011, 88.7% of the loss reserves in the
Diversiﬁed Reinsurance segment are associated with the business acquired in the GMAC Acquisition. The
including claims and underwriting, have signiﬁcant
Company’s executive and technical management,
experience with this book of business, which also has more than 25 years of loss experience associated with
it. We believe the possible variance of our expected loss ratio for all applicable loss years for the Diversiﬁed
Reinsurance segment was approximately one percentage point as at December 31, 2011. If our ﬁnal loss ratio
for the Diversiﬁed Reinsurance segment were to vary by approximately one percentage point from the
expected loss ratios in the aggregate, our required reserves after reinsurance recoverable would increase or
decrease by approximately $20.0 million.

The Company has underwritten the AmTrust Quota Share Reinsurance segment since July 1, 2007. This
segment consists of business written under the Master Agreement since that time, and commencing April 1,
2011, the business associated with the European Hospital Liability Quota Share. In addition, certain aspects of
this segment are associated with recent acquisitions by AmTrust and while the underlying experience of the
book has signiﬁcant seasoning, the combination of the shorter time frame with which the Company has direct
experience with this business and the relative inexperience of certain aspects of this business may result in a
greater range of volatility in the reasonably likely variance of our expected loss ratio for all applicable loss
years in the segment as compared to the Diversiﬁed Reinsurance segment. We believe a possible variance of
our expected loss ratio for all applicable loss years for the AmTrust Quota Share segment was approximately
four percentage points as at December 31, 2011. If our ﬁnal loss ratio for the AmTrust Quota Share segment
were to vary by four percentage points from the expected loss ratios in aggregate, our required reserves after
reinsurance recoverable would increase or decrease by approximately $72.0 million.

The Company has underwritten the ACAC Quota Share segment since March 1, 2010. ACAC’s executive
and technical management, including claims and underwriting, have signiﬁcant experience with this book of
business, which also has more than 15 years of loss experience associated with it. In addition, our
management has experience with this book of business when part of our business and ACAC were owned by
GMAC. As a result, we believe the possible variance of our expected loss ratio for all applicable loss years
for the ACAC Quota Share segment was approximately one percentage point as at December 31, 2011. If our
ﬁnal loss ratio for the ACAC Quota Share segment were to vary by approximately one percentage point from

the expected loss ratios in the aggregate, our required reserves after reinsurance recoverable would increase or
decrease by approximately $3.7 million.

Premiums and Commissions and Other Acquisition Expenses

For pro-rata contracts and excess-of-loss contracts where no deposit or minimum premium is speciﬁed in

Non-U.S. government bonds: Comprised of non-U.S. government bonds

issued by non-U.S.
governments primarily Germany, Sweden and Netherlands. These securities are generally priced by pricing
services. The pricing services may use current market trades for securities with similar quality, maturity and
coupon. If no such trades are available,
the pricing service typically uses analytical models which may
incorporate spreads, interest rate data and market/sector news. As the signiﬁcant inputs used to price non-U.S.
government bonds are observable market inputs, the fair values of non-U.S. government bonds are included in
the Level 2 fair value hierarchy.

Other mortgage-backed securities: Other mortgage-backed securities consist of a CMBS. This security
is priced by independent pricing services and brokers. The pricing provider applies dealer quotes and other
available trade information, prepayment speeds, yield curves and credit spreads to the valuation. As the
signiﬁcant inputs used to price the CMBS are observable market inputs, the fair value of the CMBS is
included in the Level 2 fair value hierarchy.

Corporate bonds: Comprised of bonds issued by corporations that on acquisition are rated BBB-/Baa3
or higher. These securities are generally priced by pricing services. The fair values of corporate bonds that are
short-term are priced, by the pricing services, using the spread above the London Interbank Offering Rate
(‘‘LIBOR’’) yield curve and the fair value of corporate bonds that are long-term are priced using the spread
above the risk-free yield curve. The spreads are sourced from broker/dealers, trade prices and the new issue
market. Where pricing is unavailable from pricing services, we obtain non-binding quotes from broker-dealers.
As the signiﬁcant inputs used to price corporate bonds are observable market inputs, the fair values of
corporate bonds are included in the Level 2 fair value hierarchy.

Municipals: Municipal securities comprise bonds and auction rate securities issued by U.S. domiciled
state and municipality entities. The fair values of municipal bonds are generally priced by pricing services.
The pricing services typically use spreads obtained from broker-dealers, trade prices and the new issue market.
As the signiﬁcant inputs used to price the municipal bonds are observable market inputs, municipals are
classiﬁed within Level 2. Municipal auction rate securities are reported in the consolidated balance sheet at
cost which approximates their fair value.

Other investments: The fair values of the investment in limited partnerships are determined by the fund
manager based on recent ﬁlings, operating results, balance sheet stability, growth and other business and
market sector fundamentals, and as such, the fair values are included in the Level 3 fair value hierarchy.

Reinsurance balance receivable: The carrying values reported in the accompanying balance sheets for

these ﬁnancial instruments approximate their fair value due to short term nature of the assets.

Loan to related party: The carrying values reported in the accompanying balance sheets for these

ﬁnancial instruments approximate their fair value.

Senior notes: The amount reported in the accompanying balance sheets for these ﬁnancial instruments
represents the carrying value of the notes. At December 31, 2011, the fair value of the 8.25% senior notes was
$104.9 million based on its traded price and yield information obtained from third party service provider.

Junior subordinated debt: The amount reported in the accompanying balance sheets for these ﬁnancial
instruments represents the carrying value of the debt. At December 31, 2011, the fair value of the debt was
$173.6 million based on the binomial lattice model, Black-Derman-Toy model.

Other-than-Temporary Impairment (‘‘OTTI’’) of Investments

Impairments of investment securities results in a charge to operations when a market decline below cost
is deemed to be other than temporary. To determine the recovery period of a ﬁxed maturity security, we
consider the facts and circumstances surrounding the underlying issuer including, but not limited to, the
following:

•

Historic and implied volatility of the security;

Length of time and extent to which the fair value has been less than amortized cost;

•

Adverse conditions speciﬁcally related to the security or to speciﬁc conditions in an industry or
geographic area;

Failure, if any, of the issuer of the security to make scheduled payments; and

Recoveries or additional declines in fair value subsequent to the balance sheet date.

When assessing our intent to sell a ﬁxed maturity security or if it is more likely that we will be required
to sell a ﬁxed maturity security before recovery of its cost basis, we evaluate facts and circumstances such as,
but not limited to, decisions to reposition our security portfolio, sale of securities to meet cash ﬂow needs and
sales of securities to capitalize on favorable pricing. In order to determine the amount of the credit loss for a
ﬁxed maturity security, we calculate the recovery value by performing a discounted cash ﬂow analysis based
on the current cash ﬂows and future cash ﬂows we expect to recover. The discount rate is the effective interest
rate implicit in the underlying ﬁxed maturity security. The effective interest rate is the original yield or the
coupon if the ﬁxed maturity security was previously impaired. If OTTI exists and we have the intent to sell
the security, we conclude that the entire OTTI is credit-related and the amortized cost for the security is
written down to current fair value with a corresponding charge to realized loss on our Consolidated
Statements of Income. If we do not intend to sell a ﬁxed maturity security or it is not more likely than not we
will be required to sell a ﬁxed maturity security before recovery of its amortized cost basis but the present
value of the cash ﬂows expected to be collected is less than the amortized cost of the ﬁxed maturity security
(referred to as the credit loss), we conclude that an OTTI has occurred and the amortized cost is written down
to the estimated recovery value with a corresponding charge to realized loss on our Consolidated Statements
of Income, as this is also deemed the credit portion of the OTTI. The remainder of the decline to fair value is
recorded to other comprehensive income (‘‘OCI’’), as an unrealized OTTI loss on our Consolidated Balance
Sheets, as this is considered a noncredit (i.e., recoverable) impairment.

There were no other-than-temporary impaired securities during the years ended December 31, 2011, 2010

and 2009.

Goodwill and Intangible Assets

The GMAC Acquisition and IIS Acquisition created certain assets separately described in our ﬁnancial
statements as Goodwill and Intangible Assets, respectively. Goodwill is calculated as the excess of purchase
price over the net fair value of assets acquired. Intangible Assets consist of ﬁnite and indeﬁnite life assets.
Finite life intangible assets include customer and producer relationships and trademarks with useful life of
15 years. Insurance company licenses are considered indeﬁnite life intangible assets.

ASC Topic 805, Business Combinations requires that the Company make an annual assessment as to
whether the value of the Company’s goodwill and intangible assets are impaired. Impairment, which can be
either partial or full, is based on a fair value analysis by individual reporting unit. Based upon the Company’s
assessment at the reporting unit level, there was no impairment of its goodwill and intangible assets as of
December 31, 2011 of $98.8 million.

In making an assessment of the value of its goodwill and intangible assets, the Company uses both
market based and non-market based valuations. Assumptions underlying these valuations include an analysis
of the Company’s stock price relative to both its book value and its net income in addition to forecasts of
future cash ﬂows and future proﬁts. Signiﬁcant changes in the data underlying these assumptions could result
in an assessment of impairment of the Company’s goodwill asset. In addition,
if the current economic
environment and/or the Company’s ﬁnancial performance were to deteriorate signiﬁcantly, this could lead to
an impairment of goodwill and intangible, the write-off of which would be recorded against net income in the
period such deterioration occurred. If a 5% decline in the fair value of the reporting units occurred, this would
not result in an impairment of the goodwill asset at December 31, 2011.

Results of Operations

The following table sets forth our selected Consolidated Statement of Income data for each of the periods

indicated.

Gross premiums written . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net premiums written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net premiums earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other insurance revenue. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss and loss adjustment expenses . . . . . . . . . . . . . . . . . . .
Commission and other acquisition expenses . . . . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . . . . .
Total underwriting income . . . . . . . . . . . . . . . . . . . . . . . . . .
Other general and administrative expenses . . . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized and unrealized gains on investment . . . . . . . . . . . .
Junior subordinated debt repurchase expense. . . . . . . . . . . . . . .
Accelerated amortization of junior subordinated debt discount

and issuance cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets. . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange and other gains (losses) . . . . . . . . . . . . . . . .
Interest and amortization expenses. . . . . . . . . . . . . . . . . . . . . .
Income tax expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Maiden shareholders . . . . . . . . . .

Ratios
Net loss and loss expense ratio* . . . . . . . . . . . . . . . . . . . . . . .
Acquisition cost ratio** . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expense ratio*** . . . . . . . . . . . . . . .
Expense ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combined ratio**** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011

2009

For the Year Ended December 31,
2010
($ in Millions)
$1,298.1
$1,227.8
$1,169.8
—
(755.1)
(336.7)
(27.9)
50.1
(14.3)
71.6
6.6
—

$ 1,812.6
$ 1,723.5
$ 1,552.4
12.6
(1,043.1)
(438.8)
(40.3)
42.8
(13.6)
74.9
0.5
(15.1)

$1,048.7
$1,030.4
$ 919.9
—
(608.6)
(241.4)
(21.7)
48.2
(10.4)
62.9
0.3
—

(20.3)
(5.0)
0.3
(34.1)
(1.9)
28.5

—
(5.8)
(0.5)
(36.5)
(1.3)
69.9

—
(6.6)
2.4
(34.4)
(1.3)
61.1

66.6%
28.0%
3.5%
31.5%
98.1%

64.6%
28.8%
3.5%
32.3%
96.9%

66.2%
26.2%
3.5%
29.7%
95.9%

Calculated by dividing net
insurance revenue.
Calculated by dividing commission and other acquisition expenses by net premiums earned and other
insurance revenue.

loss and loss adjustment expenses by net premiums earned and other

*** Calculated by dividing general and administrative expenses by net premiums earned and other insurance

revenue

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

administrative expense ratio.

Net Income

2011 vs. 2010

Net income attributable to Maiden shareholders for the year ended December 31, 2011 was $28.5 million
as compared to $69.9 million for the same period in 2010. The lower result in 2011 was due to charges
related to the Senior Notes offering which include $15.1 million of junior subordinated debt repurchase
expense and $20.3 million of accelerated amortization of junior subordinated debt discount and issuance costs.
The 2011 results reﬂect continued strong premium growth in all of the Company’s operating segments, offset
by higher combined ratios in each of its segments. The 2011 results include $9.5 million in losses related to
thunderstorm and tornado activity across the U.S. in the second quarter, net of the Company’s quarterly

provisions for normalized catastrophe activity. In addition, the lower result reﬂects realized and unrealized
gains on investment of $0.5 million in 2011 as compared to realized and unrealized gains on investment of
$6.6 million in 2010.

2010 vs. 2009

Net income attributable to Maiden shareholders for the year ended December 31, 2010 was $69.9 million
compared to $61.1 million for the same period in 2009, a 14.4% increase. The improvement was the result of
higher underwriting income of $1.9 million due to the commencement of the ACAC Quota Share in 2010 and
continuing growth in the AmTrust Quota Share Reinsurance segment offset by a higher combined ratio. Net
income was further enhanced by investment income which was $8.7 million higher in 2010 as investable
assets grew signiﬁcantly as a result of positive operating cash ﬂow and the aforementioned premium growth.
The Company also realized investment gains of $6.6 million as it selectively sold certain securities compared
to a $0.3 million realized investment gains in 2009. These improvements were also offset by higher operating
expenses, in part due to expenses associated with the IIS Acquisition, the ﬁrst full year of interest expense
from the junior subordinated debt issued in 2009 and minor foreign exchange losses (compared to gains
in 2009).

We evaluate our business by segment, distinguishing between Diversiﬁed Reinsurance, AmTrust Quota

Share Reinsurance and ACAC Quota Share segments.

Net Premiums Written

Comparison of Years Ended December 31, 2011 and 2010

Net premiums written increased by $495.7 million, or 40.4%, for the year ended December 31, 2011
compared to the year ended December 31, 2010. The table below compares net premiums written by segment
for the years ended December 31, 2011 and 2010.

2011

For the Year Ended December 31,
2010

Change in

Total
($ in Millions)

% of
Total

Total
($ in Millions)

% of
Total

$
($ in Millions)

Diversiﬁed

Reinsurance . . . . .
AmTrust Quota Share
Reinsurance . . . . .
ACAC Quota Share .
Total . . . . . . . . . . . .

$ 798.0

46.3%

$ 554.1

45.1%

$243.9

669.3
256.2
$1,723.5

38.8%
14.9%
100.0%

468.0
205.7
$1,227.8

38.1%
16.8%
100.0%

201.3
50.5
$495.7

44.0%

43.0%
24.5%
40.4%

The increase in net premiums written was primarily the result of the following:

•

Premium from the IIS Acquisition. The IIS Acquisition was completed on November 30, 2010;
IIS contributed $105.8 million for the year ended December 31, 2011 compared to $29.6 million for
the year ended December 31, 2010.

Continued underwriting discipline by Maiden US. Maiden US continues
to maintain its
underwriting discipline in the face of ongoing signiﬁcant market competition. However, Maiden US
continues to see demand for its products and the year ended December 31, 2011, was successful in
securing a series of new accounts and experienced strong organic growth, which resulted in
increased premiums of $167.4 million, or 33.4% during the year.

Growth in the AmTrust Quota Share Reinsurance segment premium. The commencement of the
European Hospital Liability Quota Share increased premiums written by $95.3 million in the year
increased
ended December 31, 2011, while the business assumed under the Master Agreement
$106.0 million in the year ended December 31, 2011.

•

Growth in the ACAC Quota Share segment.
2011 includes a full year of results compared to only
ten months in 2010, resulting in growth of $50.5 million or 24.5% for the year ended December 31,
2011 as compared to 2010.

Excluding the business associated with the European Hospital Liability Quota Share, $197.9 million or
49.4% of the increase in net premiums written for the year ended December 31, 2011 as compared to the
same period in 2010 was attributable to the automobile line of business, primarily personal auto.

Comparison of Years Ended December 31, 2010 and 2009

Net premiums written increased by $197.4 million, or 19.2%, for the year ended December 31, 2010
compared to the year ended December 31, 2009. The table below compares net premiums written by segment
for the years ended December 31, 2010 and 2009.

2010

For the Year Ended December 31,
2009

Change in

Total
($ in Millions)

% of
Total

Total
($ in Millions)

% of
Total

$
($ in Millions)

Diversiﬁed

Reinsurance . . . . .
AmTrust Quota Share
Reinsurance . . . . .
ACAC Quota Share .
Total . . . . . . . . . . . .

$ 554.1

45.1%

$ 658.0

63.9%

$(103.9)

(15.8)%

468.0
205.7
$1,227.8

38.1%
16.8%
100.0%

372.4
—
$1,030.4

36.1%
—%
100.0%

95.6
205.7
$ 197.4

25.7%
NM
19.2%

NM — Not meaningful in management’s opinion.

The increase in net premiums written was primarily the result of the following:

•

Commencement of the ACAC Quota Share. As noted, this new segment commenced on March 1,
2010 and contributed $205.7 million to net premiums written during 2010.

Continuing growth in our AmTrust Quota Share Reinsurance segment. This segment grew by
$95.6 million or 25.7%, largely as a result of AmTrust’s increase in its Specialty Risk and Extended
Warranty business, particularly internationally, during 2010. AmTrust continued to experience growth
in its other segments, consistent with its growth and expansion strategy.

Completion of the IIS Acquisition. We completed the IIS Acquisition on November 30, 2010. For
the period from November 30, 2010 to December 31, 2010, net premium written was $29.6 million,
which includes $19.5 million of assumed unearned premium as at November 30, 2010, which was
acquired net of acquisition expenses of $12.1 million. Premiums associated with the IIS Acquisition
are included in the Diversiﬁed Reinsurance segment.

Net Premiums Earned

Comparison of Years Ended December 31, 2011 and 2010

Net premiums earned increased by $382.6 million, or 32.7%, for the year ended December 31, 2011
compared to the year ended December 31, 2010. The table below compares net premiums earned by segment
for the years ended December 31, 2011 and 2010.

2011

For the Year Ended December 31,
2010

Change in

Total
($ in Millions)

% of
Total

Total
($ in Millions)

% of
Total

$
($ in Millions)

Diversiﬁed

Reinsurance . . . . .
AmTrust Quota Share
Reinsurance . . . . .
ACAC Quota Share .
Total . . . . . . . . . . . .

$ 748.4

48.3%

$ 601.2

51.5%

$147.2

558.2
245.8
$1,552.4

35.9%
15.8%
100.0%

445.1
123.5
$1,169.8

38.0%
10.5%
100.0%

113.1
122.3
$382.6

24.5%

25.4%
99.1%
32.7%

The increase in net premiums earned was primarily the result of the following:

•

full calendar year of

First
the IIS Acquisition. The IIS Acquisition was completed on
November 30, 2010 and thus the year ended December 31, 2011 represents the ﬁrst full calendar
year of operations for
the business associated with the IIS Acquisition, which contributed
$107.3 million of the overall increase in net premiums earned year ended December 31, 2011 as
compared to 2010.

Growth in the AmTrust Quota Share Reinsurance segment premium. The commencement of the
European Hospital Liability Quota Share on April 1, 2011 increased premiums earned by
$68.1 million for the year ended December 31, 2011 while the business assumed under the Master
Agreement increased $45.0 million for the year ended December 31, 2011 as compared to the year
ended December 31, 2010, respectively.

Growth in the ACAC Quota Share segment. As noted, this new segment commenced on March 1,
2010 and thus the year ended December 31, 2011 represents a full year of operations as compared to
only ten months in 2010, contributing $122.3 million of
the year ended
December 31, 2011.

the increase for

Comparison of Years Ended December 31, 2010 and 2009

Net premiums earned increased by $249.9 million, or 27.2%, for the year ended December 31, 2010
compared to the year ended December 31, 2009. The table below compares net premiums earned by segment
for the years ended December 31, 2010 and 2009.

2010

For the Year Ended December 31,
2009

Change in

Total
($ in Millions)

% of
Total

Total
($ in Millions)

% of
Total

$
($ in Millions)

Diversiﬁed

Reinsurance . . . . .
AmTrust Quota Share
Reinsurance . . . . .
ACAC Quota Share .
Total . . . . . . . . . . . .

$ 601.2

51.5%

$568.0

61.7%

$ 33.2

445.1
123.5
$1,169.8

38.0%
10.5%
100.0%

351.9
—
$919.9

38.3%
—%
100.0%

93.2
123.5
$249.9

5.9%

26.5%
NM
27.2%

NM — Not meaningful in management’s opinion.

The increase in net premiums earned was primarily the result of the following:

•

Commencement of the ACAC Quota Share on March 1, 2010 which resulted in net earned
premiums of $123.5 million.

Despite the decline in premiums written in the Diversiﬁed Reinsurance segment, earned premiums
increased $33.2 million or 5.9% due to the earned premiums associated with prior years at higher
production levels.

Continuing growth in all segments of the AmTrust Quota Share Reinsurance, which resulted in
earned premium growth of $93.2 million or 26.5%.

Due to its closing late in the fourth quarter on November 30, 2010, earned premiums from the
IIS Acquisition were limited, at $5.4 million.

Other Insurance Revenue

Other insurance revenue of $12.6 million represents the IIS Fee Business that is not directly associated
with premium revenue generated by the Company. The year ended December 31, 2011 represents the ﬁrst full
calendar year of operations for the IIS Fee Business and is primarily in respect of the German auto business
produced by OVS.

Net Loss and Loss Adjustment Expenses

Comparison of Years Ended December 31, 2011 and 2010

Net

loss and loss adjustment expenses increased by $288.0 million, or 38.1%, for the year ended
December 31, 2011 as compared to the same period in 2010, primarily reﬂecting the continuing growth in the
Company as a result of the commencement of the ACAC Quota Share in 2010 and the continuing growth of
the AmTrust Quota Share in 2011compared to 2010.

The loss ratios were 66.6% and 64.6% for the years ended December 31, 2011 and 2010, respectively.
The underwriting impact of U.S storm activity in 2011 increased the loss ratio by 0.6% in 2011. Without the
storm losses, the Company’s loss ratio for the year ended December 31, 2011 would have been 66.0%,
reﬂecting stable loss ratios in the Diversiﬁed Reinsurance segment as a result of the IIS Acquisition, offset by
higher loss ratios in the AmTrust and ACAC segments.

The total favorable development relating to the loss portfolio transfers since the closing of the GMAC
and IIS Acquisitions has been $68.9 million and the remaining $2.6 million is recorded as a deferred gain and
is part of the Company’s reserve for loss and loss adjustment expenses at December 31, 2011 that are
included in the accompanying Consolidated Balance Sheet. Included in the total favorable development were
amortized gains from the loss portfolio acquired as part of the GMAC and IIS Acquisitions, recorded as a
reduction of losses incurred of $28.9 million and $25.3 million for the years ended December 31, 2011 and
2010, respectively.

Comparison of Years Ended December 31, 2010 and 2009

Net

loss and loss adjustment expenses increased by $146.5 million, or 24.1%, for the year ended
December 31, 2010 as compared to the same period in 2009, primarily reﬂecting the continuing growth in the
Company as a result of the commencement of the ACAC Quota Share in 2010 and the continuing growth of
the AmTrust Quota Share Reinsurance in 2010 compared to 2009.

The loss ratios were 64.6% and 66.2% for the years ended December 31, 2010 and 2009, respectively.
The decrease was generally the result of business acquired in the GMAC Acquisition having a lower loss
ratio, having completed its ﬁrst full year of business in 2009 which had a higher loss ratio due to a lower
earned premium base which had commission and other acquisition expenses offsetting it and a modestly
higher loss ratio in the AmTrust Quota Share Reinsurance segment.

In 2010 and 2009, the Company recognized $32.9 million and $11.4 million, respectively, of favorable
development on prior years’ reserves, principally due to favorable development in its Diversiﬁed Reinsurance
segment in both years. The total favorable development relating to the loss portfolio transfer since the closing
of the GMAC Acquisition has been $43.8 million and the remaining $6.2 million is recorded as a deferred
gain and is part of the Company’s reserve for loss and loss adjustment expenses at December 31, 2010 that
are included in the accompanying Consolidated Balance Sheet. Included in the total favorable development
were amortized gains from the loss portfolio acquired as part of the GMAC Acquisition, recorded as a
reduction of losses incurred of $25.3 million and $10.7 million for the years ended December 31, 2010 and
2009, respectively.

Commission and Other Acquisition Expenses

Comparison of Years Ended December 31, 2011 and 2010

Commission and other acquisition expenses increased by $102.1 million, or 30.3%, for the year ended
December 31, 2011 compared to the same period in 2010 due to the ongoing premium growth of the
Company. However, the acquisition cost ratio decreased to 28.0% for the year ended December 31, 2011 as
compared to 28.8% for the same periods in 2010, respectively. This reﬂects the growth in earned premium
offset by: 1) modiﬁcations to the ceding commission made under the Master Agreement; 2) lower ceding
commissions under the European Hospital Liability Quota Share; and 3) a lower ceding commission under the
ACAC Quota Share due to an increase in the loss ratio (under the loss sensitive feature of that segment’s
reinsurance contract).

Comparison of Years Ended December 31, 2010 and 2009

Commission and other acquisition expenses increased by $95.3 million, or 39.5%, for the year ended
December 31, 2010 compared to the same period in 2009. This reﬂects both the growth in earned premium
in our mix of business to quota share business which typically has a higher
and the continuing shift
acquisition cost ratio. In particular, the commencement of the ACAC Quota Share in 2010 and Diversiﬁed
Reinsurance segment have contributed to the increase. For the Diversiﬁed Segment, the increases were due to
the following factors: 1) 2009 reﬂects only a partial year of earned premiums in this segment as the ﬁrst full
year of operations from the GMAC Acquisition had not yet been completed; 2) the unearned premium
portfolio assumed as part of the GMAC Acquisition was acquired net of commission and other acquisition
expenses; 3) the Diversiﬁed Reinsurance segment’s mix of business continues to shift from excess of loss to
pro rata business which has a higher acquisition cost ratio; and 4) increased commissions accruals on the 2009
and 2010 underwriting years due to lower loss ratios. Finally, for the period November 30, 2010 to
December 31, 2010, we earned gross fee income from the IIS Acquisition of $0.8 million, which is netted
against commission and other acquisition expenses in the accompanying Consolidated Statements of Income.

As a result, the acquisition cost ratio increased to 28.8% for the year ended December 31, 2010 as
compared to 26.2% for the same periods in 2009, respectively. The 2010 ratios more accurately reﬂect
recurring acquisition ratios as the transition from the GMAC Acquisition was completed near the end of 2009.

General & Administrative Expenses

General and administrative expenses are segregated for analytical purposes as a component of

underwriting income as follows:

General & administrative expenses − segments. . . . . . .
General & administrative expenses − corporate. . . . . . .
Total general & administrative expenses . . . . . . . . . . .

2011

2009

For the Year Ended December 31,
2010
($ in Millions)
$27.9
14.3
$42.2

$21.7
10.4
$32.1

$40.3
13.6
$53.9

Comparison of Years Ended December 31, 2011 and 2010

Total general & administrative expenses increased by $11.7 million, or 27.8%, for the year ended
December 31, 2011 compared to 2010. The general and administrative expense ratio was 3.5% for the years
ended December 31, 2011 and 2010. The increase for the year reﬂects a full years expenses relating to the
IIS Acquisition in November 2010 offset by reductions in non-recurring legal and professional expenses
relating to the IIS Acquisition.

The following represents the major factors contributing to the increase:

•

Salary and employee welfare costs, including share compensation expense, increased approximately
the
$7.9 million due to the 50 additional employees added in November 2010 as part of
IIS acquisition;

Legal, audit and other professional fees decreased by $1.1 million — decreases in fees, primarily
legal, arising due to smaller number and scale non-recurring activities in 2011 offset partially by
increases relating to additional overseas locations;

Travel and office related expenses increased by $1.9 million, substantially all related to full years
expenses relating to employees and offices acquired as part of the IIS acquisition on November 30,
2010;

Other expenses,
approximately $3.0 million.

including regulatory, depreciation and technology expenses,

increased in by

Comparison of Years Ended December 31, 2010 and 2009

Total general & administrative expenses increased by $10.1 million, or 31.3%, for the year ended
December 31, 2010 compared to the same period in 2009. The general and administrative expense ratio was
3.5% for the years ended December 31, 2010 and 2009, respectively. In 2010, total general & administrative
expenses for the year ended December 31, 2010, include $1.9 million of non-recurring expenses incurred to
date as a result of the IIS Acquisition. Excluding these non-recurring expenses, the Company’s general and
administrative expense ratio, which is a measure of its efficiency, was 3.4% for the year ended December 31,
2010 as compared to 3.5% for the same period in 2009, respectively.

As a result, the overall expense ratio (including commission and other acquisition expenses) was 32.3%
and 29.7%, respectively for the years ended December 31, 2010 and 2009. The increase reﬂects the increased
acquisition expenses and the costs associated with the IIS Acquisition previously described. The following is a
breakdown of the major factors contributing to the increased operating expenses.

The following represents the major factors contributing to this increase:

•

Salary and employee welfare costs, including share compensation expense, increased approximately
time employees including 50 that were added at
$5.0 million due to an additional 63 full
November 30, 2010 as part of the IIS Acquisition.

Additional non-recurring expenses of $1.9 million, primarily legal, were incurred as a result of the
IIS Acquisition.

Additional general & administrative expenses incurred of $1.3 million including premises related,
regulatory and other ﬁling fees, insurance and IT expenses.

Professional fees increased by $0.8 million.

Depreciation expense increased by $0.6 million which reﬂects the full years depreciation expense on
capital assets added in 2009 as well as depreciation on capital assets added in 2010.

Other expenses of $0.6 million incurred by the entities acquired by IIS Acquisition in addition to the
salary and professional expenses noted above.

Net Investment Income and Net Realized and Unrealized Gains (Losses) on Investment

Comparison of Years Ended December 31, 2011 and December 31, 2010

Net investment income increased by $3.3 million, or 4.5%, for the year ended December 31, 2011
compared to the same period in 2010. Average invested assets were approximately $2.4 billion for the year
ended December 31, 2011 compared to approximately $2.1 billion for the year ended December 31, 2010, a
14.3% increase. Continued growth in the overall book of business combined with positive cash ﬂow from
operations contributed to the growth in invested assets. The average yield for the years ended December 31,
2011 and 2010 was 3.2% and 3.5% respectively. Despite the Company’s premium growth and the increase in
average invested assets, investment income grew at a slower rate in 2011 compared to 2010 reﬂecting:

•

the continued signiﬁcant accumulation of cash and cash equivalents which occurred during 2011 and
2010 due largely to continuing strong operating cash ﬂow;

a continuing decline in the duration of the Company’s investment portfolio, brought about largely by
an increase in prepayments in the Company’s mortgage-backed securities portfolio.

Yields in ﬁxed income securities in general as well as in cash and cash equivalents have continued to be
at historically low levels throughout 2011, resulting in downward pressure on yields as available cash is newly
invested at lower rates than maturing securities previously yielded. Interest on the loan to AmTrust amounted
to $1.9 million in 2011 compared to $2.0 million for the same period in 2010 due to a reduction in average
30 day LIBOR interest rates during 2011. Investment management fees and expenses of $3.5 million and
$3.0 million were incurred during the year ended December 31, 2011 and 2010, respectively.

Please refer to Liquidity and Capital Resources for a more detailed discussion of the Company’s
investing position relative to the continuing accumulation of cash and cash equivalents, along with the
Company’s operating and investing cash ﬂow results.

Net realized and unrealized gains on investment were $0.5 million for the year ended December 31, 2011
compared to $6.6 million for the same period in 2010. In 2011, these were offset by $3.5 million in net
unrealized losses on short
information on
the Company’s investments and realized and unrealized gains and losses, please refer to Liquidity and
Capital Resources.

sales of certain U.S. Treasury securities. For additional

Comparison of Years Ended December 31, 2010 and 2009

Net investment income increased by $8.7 million, or 13.8%, for the year ended December 31, 2010
compared to the same period in 2009. Average invested assets were approximately $2.1 billion for the year
ended December 31, 2010 compared to approximately $1.8 billion for the year ended December 31, 2009, a
16.7% increase. Continued growth in the overall book of business combined with positive cash ﬂow from
operations contributed to the growth in invested assets.

Despite the Company’s premium growth and the increase in average invested assets, investment income
grew at a slower rate in 2010 compared to 2009 reﬂecting the signiﬁcant accumulation of cash and cash
equivalents which occurred during 2010; we had reduced the level of cash and cash equivalents to more
customary levels by December 31, 2010. Please refer to Liquidity and Capital Resources for a more detailed
discussion of the Company’s investing position relative to the continuing accumulation of cash and cash
equivalents, along with the Company’s operating and investing cash ﬂow results.

The average yield for the years ended December 31, 2010 and 2009 was 3.5%. We increased our
allocation to corporate bonds during 2010, generating higher yields. This was offset by yields in cash and cash
equivalents which have continued to be at historically low levels throughout 2010. Interest on the loan to
AmTrust amounted to $2.0 million in 2010 compared to $2.4 million for the same period in 2009 due to a
reduction in average 30 day LIBOR interest rates during 2010. Investment management fees and expenses of
$3.0 million and $2.7 million were incurred during the years ended December 31, 2010 and 2009,
respectively.

Net realized and unrealized gains on investment were $6.6 million for the year ended December 31, 2010
information on the Company’s

compared to $0.3 million for the same period in 2009. For additional
investments and realized and unrealized gains and losses, please refer to Liquidity and Capital Resources.

Interest and Amortization Expense

The TRUPS Offering was completed in January 2009 and the Senior Notes Offering closed on June 24,
the years ended December 31, 2011, 2010 and

2011. The interest and amortization expense for
2009 comprises:

TRUPS Offering . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior Note Offering . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison of Years Ended December 31, 2011 and 2010

2011

2009

For the Year Ended December 31,
2010
($ in Millions)
$36.5
—
$36.5

$34.4
—
$34.4

$29.5
4.6
$34.1

The decrease in interest and amortization expense for the year ended December 31, 2011 as compared to
the same period in 2010 was due to the repurchase on July 15, 2011 of $107.5 million of the TRUPS Offering
which have a coupon of 14.0%, the repurchase of which was ﬁnanced with the issuance of the Senior Notes,
which have a coupon of 8.25%. The weighted average interest
the year ended
December 31, 2011 as compared to 16.95% for the same period in 2010, respectively.

rate was 14.8% for

Comparison of Years Ended December 31, 2010 and 2009

Interest and amortization expense related to the TRUPS Offering was $36.5 million and $34.4 million for
the years ended December 31, 2010 and 2009, respectively. The TRUPS Offering was completed on
January 20, 2009 and thus 2010 represents the ﬁrst full year of interest expense, accounting for the increase.

Deferred Tax Expense

The Company recorded a deferred tax expense of $1.3 million, $1.2 million and $1.3 million for the
years ended December 31, 2011, 2010 and 2009, respectively. These amounts are related to the goodwill
associated with the Company’s acquisition of its U.S. subsidiaries in the GMAC Acquisition. For U.S. tax
purposes, this goodwill is deductible and is amortized over a ﬁfteen year period. For U.S. GAAP reporting
purposes, this goodwill is recorded as an asset subject to impairment testing and is not recorded as expense,
creating a temporary difference. Further, under U.S. GAAP, deferred tax liabilities associated with indeﬁnite
lived intangibles cannot be applied to valuation allowance tests for recognition of net deferred tax assets.
Presently, the Company carries a full valuation allowance against its U.S. originated deferred tax assets and
due to the Company’s lack of historical experience, it would be premature to recognize the associated tax
asset and accordingly we have recorded a full valuation reserve for the tax beneﬁt of our U.S. net operating
losses. The effect of this expense will be reversed as: 1) we develop U.S. taxable income to permit recognition
of the net deferred tax asset; and 2) the amortization period of the goodwill for tax purposes is exhausted.

Underwriting Results by Operating Segments

Results of this segment include the results of operations from the IIS Acquisition, which completed its
ﬁrst full year of operations in 2011. The results of operations for our three segments, Diversiﬁed Reinsurance,
AmTrust Quota Share Reinsurance and ACAC Quota Share are discussed below.

Diversiﬁed Reinsurance Segment

The following table summarizes the underwriting results and associated ratios for the Diversiﬁed

Reinsurance segment for the years ended December 31, 2011, 2010 and 2009:

Net premiums written. . . . . . . . . . . . . . . . . . . . . . . .
Net premiums earned . . . . . . . . . . . . . . . . . . . . . . . .
Other insurance revenue . . . . . . . . . . . . . . . . . . . . . .
Net loss and loss adjustment expenses . . . . . . . . . . . .
Commission and other acquisition expenses. . . . . . . . .
General and administrative expenses. . . . . . . . . . . . . .
Underwriting income . . . . . . . . . . . . . . . . . . . . .

Ratios
Net loss and loss expense ratio . . . . . . . . . . . . . . . . .
Acquisition cost ratio . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expense ratio. . . . . . . . . . .
Expense ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combined ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011

2009

For the Year Ended December 31,
2010
($ in Millions)
$ 554.1
$ 601.2
—
(394.6)
(152.7)
(26.1)
$ 27.8

$ 798.0
$ 748.4
12.6
(502.4)
(200.2)
(36.4)
$ 22.0

$ 658.0
$ 568.0
—
(393.8)
(126.2)
(19.2)
$ 28.8

66.0%
26.3%
4.8%
31.1%
97.1%

65.6%
25.4%
4.4%
29.8%
95.4%

69.3%
22.2%
3.4%
25.6%
94.9%

Comparison of Years Ended December 31, 2011 and 2010

The combined ratio increased to 97.1% for the year ended December 31, 2011 as compared to 95.4% in
the same period ended 2010. As discussed previously, the 2011 results include the underwriting impact of U.S.
storm activity, which increased the combined ratio by 1.2% for the year ended December 31, 2011. Adjusted
for the storm losses, the segment’s combined ratio for the year ended December 31, 2011 was 95.9% as
compared to 95.4% for the same period in 2010, reﬂecting a small deterioration in the loss ratios (as adjusted)
in the segment.

Premiums. Net premiums written increased by $243.9 million, or 44.0%,

the year ended
December 31, 2011 as compared to the same period in 2010. The table below illustrates net premiums written
by line of business in this segment for the years ended December 31, 2011 and 2010:

for

2011

For the Year Ended December 31,
2010

Change in

Total
($ in Millions)
$208.0
441.6
42.6
105.8

% of
Total

26.1%
55.3%
5.3%
13.3%

Total
($ in Millions)
$168.9
311.9
43.7
29.6

% of
Total

30.5%
56.3%
7.9%
5.3%

$
($ in Millions)
$ 39.1
129.7
(1.1)
76.2

23.1%
41.6%
(2.4)%
257.1%

Property . . . . . . . . .
Casualty . . . . . . . . .
Accident and Health .
International. . . . . . .
Total Diversiﬁed

Reinsurance . . . . .

$798.0

100.0%

$554.1

100.0%

$243.9

44.0%

The table below illustrates net premiums earned by line of business in this segment for the years ended

December 31, 2011 and 2010:

2011

For the Year Ended December 31,
2010

Change in

Total
($ in Millions)
$197.0
395.5
43.2
112.7

% of
Total

26.3%
52.8%
5.8%
15.1%

Total
($ in Millions)
$176.5
356.4
62.9
5.4

% of
Total

29.4%
59.3%
10.5%
0.8%

$
($ in Millions)
$ 20.5
39.1
(19.7)
107.3

11.6%
11.0%
(31.4)%
1,997.5%

Property . . . . . . . . .
Casualty . . . . . . . . .
Accident and Health .
International. . . . . . .
Total Diversiﬁed

Reinsurance . . . . .

$748.4

100.0%

$601.2

100.0%

$147.2

24.5%

NM — Not meaningful in management’s opinion.

As noted, the IIS Acquisition was completed on November 30, 2010 and the year ended December 31,
2011 represents the ﬁrst full year of operations, which accounted for $76.2 million of the increase. For the
year ended December 31, 2011, approximately 68.1% of the net premiums written of the International line of
business was Personal Automobile business associated with the IIS Acquisition. The remainder of the net

The following table summarizes the underwriting results and associated ratios for the AmTrust Quota

Share Reinsurance segment for the years ended December 31, 2011, 2010 and 2009:

Net premiums written. . . . . . . . . . . . . . . . . . . . . . . .
Net premiums earned . . . . . . . . . . . . . . . . . . . . . . . .
Net loss and loss adjustment expenses . . . . . . . . . . . .
Commission and other acquisition expenses. . . . . . . . .
General and administrative expenses. . . . . . . . . . . . . .
Underwriting income . . . . . . . . . . . . . . . . . . . . .

2011

2009

For the Year Ended December 31,
2010
($ in Millions)
$ 468.0
$ 445.1
(280.9)
(144.7)
(1.5)
$ 18.0

$ 669.3
$ 558.2
(380.3)
(160.5)
(2.3)
$ 15.1

$ 372.4
$ 351.9
(214.9)
(115.2)
(2.5)
$ 19.3

68.1%
28.8%
0.4%
29.2%
97.3%

63.1%
32.5%
0.3%
32.8%
95.9%

61.1%
32.7%
0.7%
33.4%
94.5%

Comparison of Years Ended December 31, 2011 and 2010

The combined ratio increased to 97.3% for year ended December 31, 2011 as compared to 95.9% in
2010. The cause of the increase was due to an increase in the overall loss ratio, offset by a reduction in
commissions as a result of a negotiated reduction in the ceding commission of 1.0% effective April 1, 2011,
and the change in mix of business due to the commencement of the European Hospital Liability Quota Share.

Premiums. Net premiums written increased by $201.3 million, or 43.0%,

the year ended
December 31, 2011 as compared to the same period in 2010. For the year ended December 31, 2011, net
premiums written for the European Hospital Liability Quota Share were $95.3 million. Excluding this new
coverage, the net premiums written in the segment increased by $106.0 million or 22.6%, primarily due to
continuing increases in each line of business. The table below illustrates net premiums written by AmTrust’s
segments for the years ended December 31, 2011 and 2010.

for

Small Commercial Business . . . . . . . . . . . . . . . .
Specialty Program. . . . . . . . . . . . . . . . . . . . . . .
Specialty Risk and Extended Warranty . . . . . . . . .
Total AmTrust Quota Share Reinsurance . . . . . . .

For the Year Ended
December 31,

2011

$237.6
93.7
338.0
$669.3

2010
($ in Millions)
$197.0
73.9
197.1
$468.0

Change in

$ 40.6
19.8
140.9
$201.3

20.6%
26.8%
71.5%
43.0%

Net premiums earned increased by $113.1 million, or 25.4% for the year ended December 31, 2011, as
compared to the same period in 2010. The increase in net premiums earned was primarily due to the
commencement of the European Hospital Liability Quota Share effective April 1, 2011, which accounted for
$68.1 million of the overall increase. Excluding this new coverage, the net premiums earned in the segment
increased by $45.0 million or 10.1%.

100

The table below details net premiums earned by line of business for the years ended December 31, 2011

and 2010:

Small Commercial Business . . . . . . . . .
Specialty Program . . . . . . . . . . . . . . . .
Specialty Risk and Extended Warranty . .
Total AmTrust Quota Share Reinsurance .

For the Year Ended
December 31,

2011

$215.9
81.3
261.0
$558.2

2010
($ in Millions)
$202.7
71.6
170.8
$445.1

Change in

$ 13.2
9.7
90.2
$113.1

6.5%
13.5%
52.8%
25.4%

The increase in earned premium reﬂects and is consistent with the growth in written premiums described

above.

Net Loss and Loss Adjustment Expenses. Net loss and loss expenses increased by $99.4 million, or
35.4%, for the year ended December 31, 2011 compared to the same period in 2010. Loss ratios were 68.1%
and 63.1% for the years ended December 31, 2011 and 2010, respectively. The increase in the loss ratios
reﬂects the ongoing shift in the mix of business to Specialty Risk and Extended Warranty under the Master
Agreement and the European Hospital Liability Quota Share, which historically produce higher loss ratios
than the other lines of business.

Commission and Other Acquisition Expenses. Commission and other acquisition expenses increased by
$15.8 million, or 11.0%, for the year ended December 31, 2011 compared to the same period in 2010. The
commission and acquisition ratio declined to 28.8% for the year ended December 31, 2011 as compared to
32.5% in 2010. The change in both the expenses and ratio reﬂects the modiﬁcations to ceding commission
made under the Master Agreement and the lower ceding commission under the European Hospital Liability
Quota Share, both effective April 1, 2011. The impact of the lower ceding commission rate reduced the
amount of ceding commission paid to AmTrust by $3.4 million for the year ended December 31, 2011.
Expenses have also increased in both periods as a result of ongoing growth in earned premium.

General and Administrative Expenses. General and administrative expenses increased by $0.8 million,
or 52.2%, for the year ended December 31, 2011 compared to the same period in 2010. The general and
administrative expense ratio also increased to 0.4% for the year ended December 31, 2011 as compared to
0.3% for the year ended December 31, 2010. The overall expense ratio (including commission and other
acquisition expenses) was 29.2% and 32.8% for the years ended December 31, 2011 and 2010, respectively,
reﬂecting the changes in the acquisition cost ratio.

Comparison of Years Ended December 31, 2010 and 2009

The combined ratio increased to 95.9% for the year ended December 31, 2010 as compared to 94.5% in
the same period ended 2009. The increase was primarily due to a higher loss ratio reﬂecting ongoing changes
in the mix of business within the segment, particularly ongoing growth in AmTrust’s Specialty Risk and
Extended Warranty line of business.

Premiums. Net premiums written increased by $95.6 million, or 25.7%,

the year ended
December 31, 2010 as compared to the same period in 2009. The table below illustrates net premiums written
by AmTrust’s segments for the years ended December 31, 2010 and 2009:

for

Small Commercial Business . . . . . . . . .
Specialty Program . . . . . . . . . . . . . . . .
Specialty Risk and Extended Warranty . .
Total AmTrust Quota Share Reinsurance

Change in

$10.5
15.8
69.3
$95.6

5.6%
27.2%
54.2%
25.7%

For the Year Ended
December 31,

2009
($ in Millions)
$186.5
58.1
127.8
$372.4

2010

$197.0
73.9
197.1
$468.0

101

The increase in net premiums written is the result of continuing growth in AmTrust’s Specialty Risk and
Extended Warranty line, particularly internationally. AmTrust continues to expand its business, both
organically and through acquisitions, and as a result, continues to experience growth in its Small Commercial
Business and Specialty Program lines of business as well in 2010 as compared to 2009.

Net premiums earned increased by $93.2 million, or 26.5% for the year ended December 31, 2010, as
compared to the same period in 2009. The table below details net premiums earned by line of business for the
years ended December 31, 2010 and 2009:

Small Commercial Business . . . . . . . . .
Specialty Program . . . . . . . . . . . . . . . .
Specialty Risk and Extended Warranty . .
Total AmTrust Quota Share Reinsurance .

For the Year Ended
December 31,

2010

$202.7
71.6
170.8
$445.1

2009
($ in Millions)
$199.0
52.8
100.1
$351.9

Change in

$ 3.7
18.8
70.7
$93.2

1.9%
35.6%
70.6%
26.5%

The increase in earned premium reﬂects and is consistent with the growth in written premiums described

above.

Net Loss and Loss Adjustment Expenses. Net

loss and loss adjustment expenses increased by
$66.0 million, or 30.7%, for the year ended December 31, 2010 compared to the same period in 2009. Loss
ratios were 63.1% and 61.1% for the years ended December 31, 2010 and 2009, respectively. The increase in
the loss ratio reﬂects the continuing change in the mix of business ceded by AmTrust to us. AmTrust’s
Specialty Risk and Extended Warranty business generates higher loss ratios than AmTrust’s core Small
Commercial Business segment, which is smaller as a percentage of the total in 2010 as compared to 2009.

Commission and Other Acquisition Expenses. Commission and other acquisition expenses increased by
$29.5 million, or 25.5%, for the year ended December 31, 2010 compared to the same period in 2009. This is
consistent with the increase in earned premium experienced.

General and Administrative Expenses. General and administrative expenses decreased by $1.0 million,
or 40.4%, for the year ended December 31, 2010 compared to the same period in 2009. The general and
administrative expense ratio also declined to 0.3% for the year ended December 31, 2010 as compared to
0.7% for the year ended December 31, 2009. The decrease in both the actual expenses and the general and
administrative expense ratio reﬂects the continued diversiﬁcation of our overall book of business among
different segments (which includes in 2010 the commencement of the ACAC Quota Share and the completion
of the IIS Acquisition) and the resulting decreased allocation of overhead expenses to this segment in 2010 as
compared to 2009. The 2010 ratio also reﬂects the continuing growth in the premiums written and earned in
this segment. The overall expense ratio (including commission and other acquisition expenses) was 32.8% and
33.4% for the years ended December 31, 2010 and 2009, respectively.

102

ACAC Quota Share Segment

Please refer

to the above discussion of

the ACAC Transaction, which resulted in this segment
commencing on March 1, 2010. As a result, comparability between the periods is affected by the fact that
2010 only reﬂects ten months of results. The following table summarizes the underwriting results and
associated ratios for the ACAC Quota Share segment for the year ended December 31, 2011 and for the
period March 1 to December 31, 2010:

For the Year
Ended
December 31,
2011

For the period
March 1 to
December 31,
2010

($ in Millions)

Net premiums written. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net premiums earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss and loss adjustment expenses . . . . . . . . . . . . . . . . . . . . .
Commission and other acquisition expenses. . . . . . . . . . . . . . . . . .
General and administrative expenses. . . . . . . . . . . . . . . . . . . . . . .
Underwriting income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net loss and loss expense ratio . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition cost ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expense ratio. . . . . . . . . . . . . . . . . . . .
Expense ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combined ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 256.2
$ 245.8
(160.4)
(78.1)
(1.6)
5.7

65.3%
31.7%
0.7%
32.4%
97.7%

$205.7
$123.5
(79.7)
(39.3)
(0.3)
4.2

64.5%
31.9%
0.2%
32.1%
96.6%

Comparison of Years Ended December 31, 2011 and 2010

The combined ratio increased to 97.7% for the ended December 31, 2011 as compared to 96.6% for the
period ended December 31, 2010. The cause of the increase was due to an increase in the overall loss ratio
from 64.5% for the year ended December 31, 2010 to 65.3% for the year ended December 31, 2011.

Premiums. Net premiums written increased by $50.5 million, or 24.6% for

the year ended
December 31, 2011 compared to the year ended December 31, 2010. The table below details net premiums
written by line of business in this segment for the years ended December 31, 2011 and 2010:

Automobile liability . . . . . . . . . . . . . . .
Automobile physical damage. . . . . . . . .
Total ACAC Quota Share . . . . . . . . . . .

For the Year Ended
December 31,

2011

$147.4
108.8
$256.2

2010
($ in Millions)
$118.0
87.7
$205.7

Change in

$29.4
21.1
$50.5

24.9%
24.0%
24.6%

Net premium earned increased by $122.3 million, or 99.1% for the year ended December 31, 2011
compared to the year ended December 31, 2010. The table below details net premiums earned by line of
business in this segment for the years ended December 31, 2011 and 2010:

Automobile liability . . . . . . . . . . . . . . .
Automobile physical damage. . . . . . . . .
Total ACAC Quota Share . . . . . . . . . . .

For the Year Ended
December 31,

2011

$141.2
104.6
$245.8

2010
($ in Millions)
$ 69.5
54.0
$123.5

Change in

$ 71.7
50.6
$122.3

103.3%
93.8%
99.1%

103

Commission and Other Acquisition Expenses. The ACAC Quota Share provides that the reinsurers pay
a provisional ceding commission equal to 32.5% of ceded earned premium, net of premiums ceded by the
personal lines companies for inuring reinsurance, subject to adjustment. The ceding commission is subject to
adjustment to a maximum of 34.5% if the loss ratio for the reinsured business is 60.5% or less and a
minimum of 30.5% if the loss ratio is 64.5% or higher. For the year ended December 31, 2011 and the period
from March 1 to December 31, 2010, the acquisition cost ratio of 31.7% and 31.9%, respectively, reﬂects the
adjusted ceding commission recorded in addition to the U.S. Federal excise tax payable on this premium.

Liquidity and Capital Resources

Liquidity

Maiden Holdings is a holding company and transacts no business of its own. We therefore rely on cash
ﬂows to Maiden Holdings in the form of dividends, advances and loans and other permitted distributions from
its subsidiary companies to make dividend payments on its common shares.

The jurisdictions in which our operating subsidiaries are licensed to write business impose regulations
requiring companies to maintain or meet various deﬁned statutory ratios, including solvency and liquidity
requirements. Some jurisdictions also place restrictions on the declaration and payment of dividends and other
distributions.

The payment of dividends from Maiden Holdings’ Bermuda-domiciled operating subsidiary Maiden
Bermuda is, under certain circumstances, limited under Bermuda law, which requires our Bermuda operating
subsidiary to maintain certain measures of solvency and liquidity including the BSCR. At December 31,
2011, the statutory capital and surplus of Maiden Bermuda was $693.4 million. Maiden Bermuda is currently
determining its BSCR as at December 31, 2011 and we estimate that Maiden Bermuda will be allowed to pay
dividends or distributions not exceeding $3.8 million. During 2011 and 2010, Maiden Bermuda did not pay
any dividends to Maiden Holdings.

Maiden Holdings’ U.S. domiciled operating subsidiaries, Maiden US and Maiden Specialty, are subject to
signiﬁcant regulatory restrictions limiting their ability to declare and pay dividends by the states of Missouri
and North Carolina, respectively, the states in which those subsidiaries are domiciled. In addition, there are
restrictions based on risk-based capital a test which is the threshold that constitutes the authorized control
level. If Maiden US or Maiden Specialty’s statutory capital and surplus falls below the authorized control
level, their respective domiciliary insurance regulators are authorized to take whatever regulatory actions are
considered necessary to protect policyholders and creditors. The inability of the subsidiaries of Maiden
Holdings to pay dividends and other permitted distributions could have a material adverse effect on Maiden
Holdings’ cash requirements and ability to make principal, interest and dividend payments on its senior notes
and common shares. During 2011, Maiden US and Maiden Specialty paid no dividends.

Our sources of funds primarily consist of premium receipts net of commissions, investment income, net
proceeds from capital raising activities, which may include the issuance of common shares, and proceeds from
sales and redemption of investments. Cash is used primarily to pay loss and loss adjustment expenses, general
and administrative expenses and dividends, with the remainder made available to our investment managers for
in accordance with our investment policy. A summary of cash ﬂows provided by (used in)
investment
operating,
investing and ﬁnancing activities for the years ended December 31, 2011, 2010 and 2009 is
as follows:

Operating activities . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities. . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on foreign

currency cash . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total increase (decrease) in cash and cash equivalents. .

104

2011

For the Year Ended December 31,
2010
($ in Millions)
$ 151.6
(125.2)
(37.2)

$181.3
13.2
(99.5)

$ 45.5
(173.4)
102.4

2009

(3.1)
$ 91.9

(0.4)
$ (11.2)

1.0
$ (24.5)

Cash ﬂows from operations for the year ended December 31, 2011 were $181.3 million compared to
$151.6 million for the year ended December 31, 2010. Cash ﬂows from operations for the year ended
December 31, 2011 were again strong due to continued positive underwriting results and reﬂect the continued
overall growth of the Company in all segments. These positive factors were somewhat offset by the adverse
net underwriting impact of second quarter 2011 U.S. thunderstorm and tornado activity totaling $9.5 million
and lower growth in investment
income during 2011. Cash ﬂows from operations for the year ended
December 31, 2010 were $151.6 million compared to $45.5 million for the year ended December 31, 2009.
The increase in cash ﬂows from operations for the year ended December 31, 2010 compared to December 31,
2009 was due to continued positive underwriting results and the continued growth of the Company, which in
2010 was primarily due to increased net premiums written from the AmTrust and ACAC Quota Shares.

Investing cash ﬂows consist primarily of proceeds on the sale or maturity of ﬁxed-maturity investments
and payments for ﬁxed-maturity investments acquired. We generated $13.2 million in net cash from investing
activities during the year ended December 31, 2011 compared to using $125.2 million for the year ended
December 31, 2010. This change was the result of an increase in restricted cash balances and prepayments
from the Company’s mortgage-backed securities portfolio. We used $125.2 million in net cash for investing
activities during the year ended December 31, 2010 compared to $173.4 million for the year ended
December 31, 2009. The decrease in cash ﬂows used in investing activities for the year ended December 31,
2010 compared to the year ended December 31, 2009 was primarily due to the investing of cash ﬂows
generated by operating activities and available cash on the Company’s Consolidated Balance Sheet, in order to
reduce cash levels to desired amounts.

Cash ﬂows used by ﬁnancing activities were $99.5 million for the year ended December 31, 2011
compared to $37.2 million for the year ended December 31, 2010. Included in cash ﬂows used in ﬁnancing
activities for the year ended December 31, 2011 were dividends paid of $20.9 million and $76.2 million of
outﬂow relating to a reduction in the securities sold under agreements to repurchase, at contract value
compared to dividends paid of $18.4 million and $19.2 million of outﬂow relating to a decrease in the
securities sold under agreements to repurchase, at contract value, respectively, during the year ended
December 31, 2010.

Cash ﬂows used by ﬁnancing activities were $37.2 million for the year ended December 31, 2010
compared to cash ﬂows provided by ﬁnancing activities of $102.4 million for the year ended December 31,
2009. Included in cash ﬂows used in ﬁnancing activities for the year ended December 31, 2010 were
dividends paid of $18.4 million and $19.2 million of outﬂow relating to a reduction in the securities sold
under agreements to repurchase, at contract value, respectively, compared to dividends paid of $16.2 million
and $137.2 million of outﬂow relating to a decrease in the securities sold under agreements to repurchase, at
contract value, respectively, during the year ended December 31, 2009. On January 20, 2009, we completed
the TRUPS Offering. The net proceeds of $255.8 million were used to capitalize Maiden US and Maiden
Specialty’s business, which were the insurance subsidiaries acquired in the GMAC Acquisition. These funds
were invested in ﬁxed-maturity securities.

Restrictions, Collateral and Speciﬁc Requirements

Maiden Bermuda is neither licensed nor admitted as an insurer, nor is it accredited as a reinsurer, in any
jurisdiction in the United States. As a result, it is generally required to post collateral security with respect to
any reinsurance liabilities it assumes from ceding insurers domiciled in the United States in order for U.S.
ceding companies to obtain credit on their U.S. statutory ﬁnancial statements with respect
to insurance
liabilities ceded to them. Under applicable statutory provisions, the security arrangements may be in the form
of letters of credit, reinsurance trusts maintained by trustees or funds withheld arrangements where assets are
held by the ceding company.

this time, Maiden Bermuda uses trust accounts primarily to meet collateral requirements — cash
equivalents and investments pledged in favor of ceding companies in order to comply with relevant
insurance regulations.

105

Maiden US also offers to its clients, on a voluntary basis, the ability to collateralize certain liabilities
related to the reinsurance contracts it issues. Under these arrangements, Maiden retains broad investment
to achieve its business objectives while offering clients the additional security a
discretion in order
collateralized arrangement offers. We believe this offers the Company a signiﬁcant competitive advantage and
improves the Company’s retention of high-quality clients. As a result of the transition of relationships as a
result of the GMAC Acquisition, as at December 31, 2011 certain of these liabilities and collateralized
arrangements are on the records of Maiden Bermuda while the remaining liabilities and collateralized
arrangements are on the records of Maiden US.

As at December 31, 2011, total trust account balances were $1.6 billion compared to $1.5 billion as at
December 31, 2010. The following table details additional information on the trust account balances by
segment and by underlying asset as at December 31, 2011 and 2010:

As at December 31,

Cash &
Equivalents

Maiden US . . . . . . .
Maiden Bermuda . . .
Diversiﬁed

Reinsurance. . . . .
Maiden Bermuda . . .
AmTrust Quota

Share Reinsurance.
Maiden Bermuda . . .
ACAC Quota Share.
Total . . . . . . . . . . . .

$ 19.4
50.8

70.2
41.7

41.7
3.0
3.0
$114.9

2011
Fixed
Maturities
($ in Millions)
$ 624.4
368.4

992.8
419.5

419.5
59.0
59.0
$1,471.3

Total

Cash &
Equivalents

$ 643.8
419.2

1,063.0
461.2

461.2
62.0
62.0
$1,586.2

$13.4
49.0

62.4
18.1

18.1
9.3
9.3
$89.8

2010
Fixed
Maturities
($ in Millions)
$ 558.1
515.8

1,073.9
340.5

340.5
14.7
14.7
$1,429.1

Total

$ 571.5
564.8

1,136.3
358.6

358.6
24.0
24.0
$1,518.9

As part of

the AmTrust Master Agreement, Maiden Bermuda has also loaned funds

totaling
$168.0 million as at December 31, 2011 and 2010, respectively, to AII to satisfy collateral requirements. In
addition, Maiden Bermuda has outstanding letters of credit totaling $97.5 million and $24.0 million as at
December 31, 2011 and 2010, respectively.

Collateral arrangements with ceding insurers may subject our assets to security interests or require that a
portion of our assets be pledged to, or otherwise held by, third parties. Both our trust accounts and letters of
credit are fully collateralized by assets held in custodial accounts. Although the investment income derived
from our assets while held in trust accrues to our beneﬁt, the investment of these assets is governed by the
terms of the letter of credit facilities or the investment regulations of the state or territory of domicile of the
ceding insurer, which may be more restrictive than the investment regulations applicable to us under Bermuda
law. The restrictions may result in lower investment yields on these assets, which may adversely affect our
proﬁtability.

We do not currently anticipate that the restrictions on liquidity resulting from restrictions on the payments
of dividends by our subsidiary companies or from assets committed in trust accounts or to collateralize the
letter of credit facilities will have a material impact on our ability to carry out our normal business activities,
including, our ability to make dividend payments on our common shares.

IIS Acquisition — Funds Withheld

requirements in the form of

letters of credit and trust agreements. At

The substantial majority of the premiums and losses underwritten by GMAC IICL are subject

to
the
collateral
IIS Acquisition,
the Company settled cash balances applicable to the subject reinsurance contracts with
GMAC IICL of $26.2 million. Actual assets in support of the liabilities assumed under the IICL Agreement
will be transferred to the Company when the subject individual agreements are novated to Maiden Bermuda.
In the interim, under the funds withheld provisions of the IICL Agreement, the Company is fully credited for
the investment income earned by the underlying assets which support the letters of credit and trust agreements
GMAC IICL has provided to its ceding companies.

the closing of

106

The pre-existing funds withheld amounts (‘‘IIS Funds Withheld’’) and cash transferred to GMAC IICL
are included in the Consolidated Balance Sheet as Funds Withheld. During 2011, the substantial majority of
underlying reinsurance contracts were novated to Maiden Bermuda per the terms of the IICL Agreement. As at
December 31, 2011, one contract had not yet been novated and this is expected to occur in 2012. Maiden
Bermuda now provides collateral in the form of both trusts and letters of credit as required by the respective
reinsurance contracts. As at December 31, 2011 and 2010, the IIS Funds Withheld balance consisted of the
following:

As at December 31,

Fixed maturities, at fair value . . . . . . . .
Cash and cash equivalents . . . . . . . . . .
Funds held on underlying business . . . . .
Insurance balances receivable and other .
Total . . . . . . . . . . . . . . . . . . . . . . . . .

2011

2010

Fair
Value
($ in Millions)
$27.3
2.4
0.6
(6.0)
$24.3

% of
Total

112.2%
10.1%
2.5%
(24.8)%
100.0%

Fair
Value
($ in Millions)
$109.1
10.3
18.0
15.3
$152.7

% of
Total

71.4%
6.8%
11.8%
10.0%
100.0%

The ﬁxed maturity portfolio consists entirely of non-U.S. government debt, 100.0% and 67.1% of which
is rated AAA as at December 31, 2011 and December 31, 2010, respectively. The three largest non-U.S.
sovereign government issuers are the following:

As at December 31,

United Kingdom . . . . . . . . . . . . . . . . .
Germany . . . . . . . . . . . . . . . . . . . . . .
Italy . . . . . . . . . . . . . . . . . . . . . . . . .

2011

2010

Fair
Value
($ in Millions)
$27.3
—
—

% of
Total

100.0%
—
—

Fair
Value
($ in Millions)
$29.8
19.9
17.4

% of
Total

27.3%
18.2%
15.9%

We do not have any non-U.S. government and government related obligations related to Ireland, Italy,
Greece, Portugal or Spain as at December 31, 2011. As at December 31, 2010, 9.6% of these securities
consist of non-U.S. government obligations of Ireland which were subsequently disposed of during 2011. We
had no exposure to government-related obligations of Greece, Italy, Portugal and Spain as at December 31,
2010. See the discussion in Counterparty Credit Risk in Item 7A of Part II of this Form 10-K related to the
release of assets forming part of the IIS Funds Withheld.

107

Investments

Our funds are primarily invested in liquid, high-grade ﬁxed income securities and are all considered AFS.
As at December 31, 2011, the weighted average duration of our ﬁxed maturity investment portfolio was
2.78 years and there were approximately $63.8 million of net unrealized gains on AFS, compared to a
duration of 3.8 years and net unrealized gains on AFS of $54.7 million as at December 31, 2010. The
decrease in duration is due to the acceleration of actual and expected prepayments of certain of the
Company’s U.S. agency mortgage-backed securities, largely due to the declining interest rate environment
which has resulted in signiﬁcant reﬁnancing of residential real estate loans. The table below shows the
aggregate amounts of our invested assets at fair value at December 31, 2011 and 2010:

As at December 31, 2011

Original or
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

($ in Millions)

Corporate bonds . . . . . . . . . . . . . . . . . . . . .
Non-U.S. government bonds
. . . . . . . . . . . .
Other mortgage-backed securities . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Municipal bonds
. . . . . . . . . . . . . . . . . .
U.S. treasury bonds
U.S. agency bonds − mortgage backed . . . . . .
U.S. agency bonds − other . . . . . . . . . . . . . .
Total AFS ﬁxed maturities . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .

Total investments

$ 744.0
51.4
9.9
168.3
44.2
928.9
10.4
1,957.1
2.0
$1,959.1

$47.7
0.1
—
0.7
1.8
43.3
0.6
94.2
0.3
$94.5

$(30.2)
(0.3)
—
—
—
(0.1)
—
(30.6)
(0.1)
$(30.7)

As at December 31, 2010

Original or
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

($ in Millions)

Corporate bonds . . . . . . . . . . . . . . . . . . . . .
Non U.S. government bonds
. . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Municipal bonds
U.S. treasury bonds
. . . . . . . . . . . . . . . . . .
U.S. agency bonds − mortgage backed . . . . . .
U.S. agency bonds − other . . . . . . . . . . . . . .
Total AFS ﬁxed maturities . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .

Total investments

$ 673.8
15.5
45.2
92.0
951.5
41.8
1,819.8
5.8
$1,825.6

$46.6
0.4
0.4
1.1
22.4
1.7
72.6
0.1
$72.7

$(11.4)
—
(0.8)
(1.4)
(4.4)
—
(18.0)
—
$(18.0)

The major factors inﬂuencing the increase during 2011 were:

Fair
Value

$ 761.5
51.2
9.9
169.0
46.0
972.1
11.0
2,020.7
2.2
$2,022.9

Fair
Value

$ 709.0
15.9
44.8
91.7
969.5
43.5
1,874.4
5.9
$1,880.3

•

Net cash provided by operating activities of $181.3 million;

Transfer of assets associated with reinsurance contracts novated under
$89.9 million.

IIS Acquisition of

Utilization of existing cash balances available, offset by;

Dividend payments on common shares of $20.9 million

As at December 31, 2011 and 2010, net unrealized gains on AFS were $63.8 million and $54.7 million,
respectively. The change in unrealized gains or losses during 2011 reﬂected continued movements in interest
rates to historically low levels. In addition, while credit spread tightening on corporate bonds did result in
increased values for these assets, this was offset by increased volatility in the ﬁnancial sector of the corporate
bond market, due to economic uncertainty and the ongoing European debt crisis. These gains were partially
offset by the recognition of approximately $3.2 million of net realized gains.

108

short positions

The Company may, from time to time, engage in investment activity that will be considered trading
activity, in amounts generally less than $100 million. This trading activity is generally focused on taking long
in United States Treasury securities. These activities, which commenced in the
or
second quarter of 2010, are classiﬁed as trading for the purpose of augmenting where possible investment
returns. For the year ended December 31, 2011, $0.8 million in net realized gains from these trading activities
occurred, as compared to a net realized losses of $1.5 million for the year ended December 31, 2010. As at
December 31, 2011, the Company maintained one open short position in a U.S. treasury bond valued at
$55.8 million which to date has resulted in an unrealized loss of $3.5 million which is recorded in net realized
and unrealized gains on investment on the Company’s Consolidated Statements of Income. This short position
is recorded as a liability in the Accrued expenses and other liabilities caption on the Company’s Consolidated
Balance Sheet as at December 31, 2011.

We review our investment portfolio for impairment on a quarterly basis. Impairments of investment
securities results in a charge to operations when a market decline below cost is deemed to be other than
temporary. To determine the recovery period of a ﬁxed maturity security, we consider the facts and
circumstances surrounding the underlying issuer including, but not limited to, the following:

•

Historic and implied volatility of the security;

Length of time and extent to which the fair value has been less than amortized cost;

Adverse conditions speciﬁcally related to the security or to speciﬁc conditions in an industry or
geographic area;

Failure, if any, of the issuer of the security to make scheduled payments; and

Recoveries or additional declines in fair value subsequent to the balance sheet date.

When assessing our intent to sell a ﬁxed maturity security or if it is more likely that we will be required
to sell a ﬁxed maturity security before recovery of its cost basis, we evaluate facts and circumstances such as,
but not limited to, decisions to reposition our security portfolio, sale of securities to meet cash ﬂow needs and
sales of securities to capitalize on favorable pricing. In order to determine the amount of the credit loss for a
ﬁxed maturity security, we calculate the recovery value by performing a discounted cash ﬂow analysis based
on the current cash ﬂows and future cash ﬂows we expect to recover. The discount rate is the effective interest
rate implicit in the underlying ﬁxed maturity security. The effective interest rate is the original yield or the
coupon if the ﬁxed maturity security was previously impaired. If OTTI exists and we have the intent to sell
the security, we conclude that the entire OTTI is credit-related and the amortized cost for the security is
written down to current fair value with a corresponding charge to realized loss on our Consolidated
Statements of Income. If we do not intend to sell a ﬁxed maturity security or it is not more likely than not we
will be required to sell a ﬁxed maturity security before recovery of its amortized cost basis but the present
value of the cash ﬂows expected to be collected is less than the amortized cost of the ﬁxed maturity security
(referred to as the credit loss), we conclude that an OTTI has occurred and the amortized cost is written down
to the estimated recovery value with a corresponding charge to realized loss on our Consolidated Statements
of Income, as this is also deemed the credit portion of the OTTI. The remainder of the decline to fair value is
recorded to OCI, as an unrealized OTTI loss on our Consolidated Balance Sheets, as this is considered a
noncredit (i.e., recoverable) impairment.

During the years ended December 31, 2011 and 2010, the Company recognized no OTTI. Based on our
qualitative and quantitative impairment review of each asset class within our ﬁxed maturity portfolio, the
remaining unrealized losses on ﬁxed maturities at December 31, 2011, were primarily due to widening of
credit spreads relating to the market illiquidity, rather than credit events. Because we do not intend to sell
these securities and it is not more likely than not that we will be required to sell 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 December 31, 2011.

109

The following table presents information regarding our AFS assets that were in an unrealized loss

position at December 31, 2011 and 2010 by the amount of time in a continuous unrealized loss position:

As at December 31, 2011

Available-for-sale securities:
U.S. agency bonds − mortgage backed .
Non-U.S government bonds . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . .

Other investments . . . . . . . . . . . . . . .
Total temporarily impaired AFS

Less Than 12 Months

Fair
Value

Unrealized
Losses

12 Months or More
Fair
Value

Unrealized
Losses

($ in Millions)

Total

Fair
Value

Unrealized
Losses

$ 30.4
42.6
228.4
301.4
1.2

$(0.1)
(0.3)
(7.4)
(7.8)
(0.1)

$ —
—
125.1
125.1
—

$ —
—
(22.8)
(22.8)
—

$ 30.4
42.6
353.5
426.5
1.2

$ (0.1)
(0.3)
(30.2)
(30.6)
(0.1)

securities and other investments . . . .

$302.6

$(7.9)

$125.1

$(22.8)

$427.7

$(30.7)

As at December 31, 2011, there were approximately 62 securities in an unrealized loss position with a
fair value of $427.7 million and unrealized losses of $30.7 million. Of these securities, there are 8 securities
that have been in an unrealized loss position for 12 months or greater with a fair value of $125.1 million and
unrealized losses of $22.8 million.

As at December 31, 2010

Available-for-sale securities:
U.S. treasury bonds . . . . . . . . . . . . . .
U.S. agency bonds − mortgage backed .
Corporate bonds . . . . . . . . . . . . . . . .
. . . . . . . . .
U.S. agency bonds − other

Other investments . . . . . . . . . . . . . . .
Total temporarily impaired AFS

Less Than 12 Months

Fair
Value

Unrealized
Losses

12 Months or More
Fair
Value

Unrealized
Losses

($ in Millions)

Total

Fair
Value

Unrealized
Losses

$ 47.2
315.4
86.9
27.3
476.8
—

$(1.4)
(4.4)
(1.5)
(0.8)
(8.1)
—

$ —
—
166.1
—
166.1
—

$ —
—
(9.9)
—
(9.9)
—

$ 47.2
315.4
253.0
27.3
642.9
—

$ (1.4)
(4.4)
(11.4)
(0.8)
(18.0)
—

securities and other investments . . . .

$476.8

$(8.1)

$166.1

$(9.9)

$642.9

$(18.0)

As at December 31, 2010, there were approximately 32 securities in an unrealized loss position with a
fair value of $642.9 million and unrealized losses of $18.0 million. Of these securities, there are 9 securities
that have been in an unrealized loss position for 12 months or greater with a fair value of $166.1 million and
unrealized losses of $9.9 million.

The contractual maturities of our ﬁxed maturities are shown below. Actual maturities may differ from
contractual maturities because borrowers may have the right to call or prepay obligations with or without call
or prepayment penalties.

As at December 31,
Due in one year or less . . . . . . . . . . . . . . . . . . . . . . .
Due after one year through ﬁve years . . . . . . . . . . . . .
Due after ﬁve years through ten years . . . . . . . . . . . . .
Due after ten years
. . . . . . . . . . . . . . . . . . . . . . . . .
Mortgage-backed securities . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total

2011

2010

($ in
Millions)
54.3
$
299.9
502.9
181.6
982.0
$2,020.7

% of
Total

2.7%
14.8%
24.9%
9.0%
48.6%
100.0%

($ in
Millions)
65.4
$
180.2
578.7
80.6
969.5
$1,874.4

% of
Total

3.5%
9.6%
30.9%
4.3%
51.7%
100.0%

110

As at December 31, 2011 and 2010, 99.1% and 97.9%, respectively, of our ﬁxed income portfolio
consisted of investment grade securities. We deﬁne a security as being below-investment grade if it has an
Standard & Poor’s (‘‘S&P’’) credit rating of BB+ or less. The following table summarizes the composition of
the fair value of our ﬁxed maturity investments at the dates indicated by ratings as assigned by S&P and/or
other rating agencies when S&P ratings were not available:

As at December 31, 2011

Ratings
. . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. treasury bonds
U.S. agency bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AA+, AA, AA-
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A+, A, A- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
BBB+, BBB, BBB-
BB+ or lower
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total

As at December 31, 2010

Ratings
U.S. treasury bonds
. . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. agency bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AA+, AA, AA-
A+, A, A- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . .
BBB+, BBB, BBB-
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BB+ or lower
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total

Amortized
Cost

Fair
Value

($ in Millions)

44.2
939.3
160.3
151.0
327.8
316.1
18.4
$1,957.1

46.0
983.1
161.9
153.3
328.4
330.2
17.8
$2,020.7

Amortized
Cost

Fair
Value

($ in Millions)

92.0
993.3
74.7
74.5
325.2
222.5
37.6
$1,819.8

$
91.7
1,013.0
78.4
79.4
329.1
244.1
38.7
$1,874.4

% of
Total Fair
Value

2.3%
48.6%
8.0%
7.6%
16.3%
16.3%
0.9%
100.0%

% of
Total Fair
Value

4.9%
54.0%
4.2%
4.2%
17.6%
13.0%
2.1%
100.0%

Substantially all the Company’s U.S. agency bond holdings are mortgage-backed securities. Additional
details on the mortgage-backed securities component of our U.S. agency bonds portfolio as at December 31,
2011 and 2010 are provided below:

As at December 31,

Mortgage-backed securities

Residential mortgage-backed (RMBS)
GNMA − ﬁxed rate . . . . . . . . . . .
FNMA − ﬁxed rate . . . . . . . . . . . .
FNMA − variable rate . . . . . . . . . .
FHLMC − ﬁxed rate . . . . . . . . . . .
Total RMBS . . . . . . . . . . . . . .

Total agency mortgage-backed

securities . . . . . . . . . . . . . . . . . . . .
Non-MBS ﬁxed rate agency securities .
Total U.S. agency bonds
. . . . . . . . . .

2011

2010

Fair
Value
($ in Millions)

% of
Total

Fair
Value
($ in Millions)

% of
Total

18.8%
49.6%
7.9%
22.6%
98.9%

98.9%
1.1%
100.0%

$ 273.5
465.7
80.0
150.3
969.5

969.5
43.5
$1,013.0

27.0%
46.0%
7.9%
14.8%
95.7%

95.7%
4.3%
100.0%

$185.3
487.3
77.8
221.7
972.1

972.1
11.0
$983.1

111

The Company has increased its holdings of investment grade corporate securities in 2011 to take
advantage of various investment opportunities in this asset class. As at December 31, 2011 and 2010, 33.0%
and 31.8% of its corporate securities were ﬂoating rate securities, respectively. Security holdings by sector in
this asset class as at December 31, 2011 and 2010 are as follows:

As at December 31,

Corporate bonds

2011

2010

Fair
Value
($ in Millions)

% of
Total

Fair
Value
($ in Millions)

% of
Total

Financial Institutions . . . . . . . . . . . .
Industrials . . . . . . . . . . . . . . . . . . .
Utilities/Other . . . . . . . . . . . . . . . . .
. . . . . . . . . . .

Total Corporate bonds

$532.1
199.9
29.5
$761.5

69.9%
26.3%
3.8%
100.0%

$486.1
161.5
61.4
$709.0

68.6%
22.8%
8.6%
100.0%

The Company’s 10 largest corporate holdings as at December 31, 2011 as carried at fair value and as a

percentage of all ﬁxed income securities are as follows:

As at December 31, 2011

Morgan Stanley FLT, Due 10/18/2016(1)
. . . . . . . .
Citigroup Inc. FLT, Due 6/9/2016(1)
. . . . . . . . . . .
Barclays Bank PLC NY FLT, Due 2/24/2020(1) . . . .
Merrill Lynch & Co. FLT, Due 6/5/2012(1) . . . . . . .
SLM Corp FLT, Due 1/27/2014(1)
. . . . . . . . . . . . .
Bear Stearns FLT, Due 11/21/2016(1) . . . . . . . . . . .
JP Morgan Chase FLT, Due 6/13/2016(1)
. . . . . . . .
HSBC Financial FLT, Due 6/1/2016(1)
. . . . . . . . . .

% of Holdings
Based on Fair
Value of All
Fixed Income
Securities

1.6%
1.0%
1.0%
1.0%
0.9%
0.9%
0.9%
0.8%

Fair
Value
($ in Millions)
$ 32.1
21.1
20.1
19.6
18.1
17.9
17.9
16.7

Credit
Rating

A-
BBB+
A+
A-
BBB-
A
A
A

Other Material Changes in Financial Position

The following summarizes other material changes in the ﬁnancial position of the Company as at

December 31, 2011 and 2010:

As at December 31,

2011

2010

($ in Millions)

. . . . . . . . . . . . . . . . . . . . . . .
Reinsurance balances receivable, net
Prepaid reinsurance premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred commission and other acquisition expenses. . . . . . . . . . . . .
Reserve for loss and loss adjustment expenses . . . . . . . . . . . . . . . . .
Unearned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

382.7
35.4
248.4
(1,398.4)
(832.0)

226.3
29.0
203.6
(1,226.8)
(657.6)

In general, the increases in these balances reﬂect the continued growth of the Company, in particular
growth in the business of the Diversiﬁed Reinsurance segment as a result of both the IIS Acquisition and that
segment’s U.S. business, along with continuing growth in the AmTrust Quota Share Reinsurance segment,
including the addition of the European Hospital Liability Quota Share.

Capital Resources

Capital resources consist of funds deployed or available to be deployed in support of our business

operations. Our total capital resources at December 31, 2011 and 2010 were as follows:

As at December 31,

Senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Junior subordinated debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maiden shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total capital resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ratio of debt to total capital resources. . . . . . . . . . . . . . . . . . . . .

2011

2010

($ in Millions)

$ 107.5
126.3
768.6
$1,002.4

$ —
215.2
750.2
$965.4

23.3%

22.3%

As at December 31, 2011, our shareholders’ equity was $768.6 million, a 2.5% increase compared to
$750.2 million as at December 31, 2010. The increase was due primarily to net income for the year ended
December 31, 2011 of $28.5 million and unrealized gains on investments of $9.0 million offset by dividends
declared of $21.7 million.

On June 24, 2011, the Company completed an offering of $107.5 million aggregate principal amount of
8.25% Senior Notes due June 15, 2041, including $7.5 million aggregate principal amount of Senior Notes to
be issued and sold by the Company pursuant to the underwriters’ exercise in part of their overallotment
option. The Senior Notes are redeemable for cash, in whole or in part, on or after June 15, 2016, at 100% of
the principal amount of the Senior Notes to be redeemed plus accrued and unpaid interest to but excluding the
redemption date.

The net proceeds from the Senior Notes Offering were approximately $104.7 million, after deducting the
underwriting discount and offering expenses. With the underwriters’ exercise part of a portion of their
over-allotment option,
the Company repurchased $107.5 million aggregate liquidation amount of TRUPS
Offering on July 15, 2011. Pursuant to the terms of the TRUPS Offering, in the year ended December 31,
2011,
the Company incurred a non-recurring call premium charge of approximately $15.1 million. The
Company also incurred an additional non-recurring non-cash charge of $20.3 million, which represents the
accelerated amortization of original issue discount and issuance costs associated with equity issued along with
the TRUPS Offering. These charges have decreased the shareholders’ equity as at December 31, 2011 by
$35.4 million. Our shareholders’ equity is expected to increase in the future from interest expense savings that
will result from this offering.

115

On January 20, 2009, the Company established a special purpose trust for the purpose of issuing trust
preferred securities. This involved 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’’) and 45 common shares, $.01 par value, of the Company (the ‘‘Common Shares’’), for a
purchase price of $1,000.45 per Unit.

As part of the transaction, the Company issued 11,700,000 common shares to the purchasers of the Trust
Preferred Securities. The Trust Preferred Securities mature in 2039 and carry an interest rate of 14% and an
effective rate of interest of 16.76%. The proceeds from such issuances, together with the proceeds of the
related issuances of common securities of the trusts, were invested by the trusts in subordinated debentures
issued by the Company. The gross proceeds to the Company were approximately $260.1 million in the form
of junior subordinated debt, before approximately $4.3 million of placement agent fees and expenses.

The Company expects to continue to evaluate additional opportunities to reﬁnance the TRUPS Offering
securities at lower, more cost-effective interest rate levels. To the extent that such reﬁnancing does occur prior
to January 20, 2014, the Company may incur additional interest penalties pursuant to the terms of the TRUPS
Offering. Under the terms of the TRUPS Offering, the Company can repay the principal balance in full or in
part at any time. However, if the Company repays such principal within ﬁve years of the date of issuance, it is
required to pay an additional amount equal to one full year of interest on the amount of Trust Preferred
Securities repaid. If the remaining amount of the Trust Preferred Securities were repaid within ﬁve years of
the date of issuance (adjusted for the $107.5 million repurchase junior subordinated debt, which occurred on
July 15, 2011), the additional amount due would be $21.4 million, which would be a reduction in earnings.

The Company’s objective would be to generate recurring interest expense savings that would match or
exceed the cost of any such interest penalty. However, it is possible this may not occur depending on market
conditions and other factors beyond the Company’s control.

The value of the common shares issued to purchasers of the Trust Preferred Securities are being carried
as a reduction of the liability for the Trust Preferred Securities with the value being amortized against the
Company’s earnings over the 30-year term of the Trust Preferred Securities. At December 31, 2011 and 2010,
the unamortized amount carried as a reduction of the Company’s liability for the junior subordinated debt was
$26.2 million and $44.8 million, respectively. If the Company were to repay the Trust Preferred Securities in
full or in part at any time prior to their maturity date, the Company would have to recognize a commensurate
amount as a reduction of earnings at that time.

Aggregate Contractual Obligations

In the normal course of business, the Company is a party to a variety of contractual obligations as
summarized below. These contractual obligations are considered by the Company when assessing its liquidity
requirements and the Company is conﬁdent in its ability to meet all of its obligations. The Company’s table
aggregate contractual obligations as at December 31, 2011 are summarized as follows:

Contractual Obligations
Operating lease obligations. . . . . . .
Junior subordinated debt

and interest. . . . . . . . . . . . . . . .
Senior notes and interest . . . . . . . .
Reserve for loss and loss

Payment Due by Period

Total

Less than
1 Year

1 − 3 Years
($ in Millions)

3 − 5 Years

More than
5 Years

5.7

1.7

2.7

1.3

—

729.8
372.6

21.4
8.9

42.7
17.7

623.0
328.3

341.8

adjustment expenses. . . . . . . . . .

1,398.4

427.0

432.3

197.3

Other investments − unfunded

commitments . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . .

3.8
$2,510.3

1.0
$460.0

2.8
$498.2

—
$259.0

—
$1,293.1

116

The amounts included for reserve for loss and loss adjustment expenses reﬂect the estimated timing of
expected loss payments on known claims and anticipated future claims as at December 31, 2011. Both the
amount and timing of cash ﬂows are uncertain and do not have contractual payout terms. For a discussion of
these uncertainties,
to ‘‘Critical Accounting Policies — Reserve for Loss and Loss Adjustment
Expenses.’’ Due to the inherent uncertainty in the process of estimating the timing of these payments, there is
a risk that the amounts paid in any period will differ signiﬁcantly from those disclosed. Total estimated
obligations will be funded by existing cash and investments.

refer

Currency and Foreign Exchange

We conduct business in a variety of foreign (non-U.S.) currencies, the principal exposures being the
Euro, the British pound, the Australian dollar, the Canadian dollar, the Swedish krona and the Russian ruble.
Assets and liabilities denominated in foreign currencies are exposed to changes in currency exchange rates.
Our reporting currency is the U.S. dollar, and exchange rate ﬂuctuations relative to the U.S. dollar may
materially impact our results and ﬁnancial position. Our principal exposure to foreign currency risk is our
obligation to settle claims in foreign currencies. In addition, in order to minimize this risk we maintain and
expect to continue to maintain a portion of our investment portfolio in investments denominated in currencies
other than the U.S. dollar. We may employ various strategies (including hedging) to manage our exposure to
foreign currency exchange risk. To the extent that these exposures are not fully hedged or the hedges are
ineffective, our results of operations or equity may be reduced by ﬂuctuations in foreign currency exchange
rates could materially adversely affect our ﬁnancial condition and results of operations. At December 31, 2011,
no such hedges or hedging strategies were in force or had been entered into. We measure monetary assets and
liabilities denominated in foreign currencies at year end exchange rates, with the resulting foreign exchange
gains and losses recognized in the Consolidated Statements of Income. Revenues and expenses in foreign
currencies are converted at average exchange rates during the year. The effect of the translation adjustments
for foreign operations is included in accumulated other comprehensive income.

Net foreign exchange gains amounted to $0.3 million during the year ended December 31, 2011
compared to losses of $0.6 million during the year ended December 31, 2010 and gains of $2.4 million during
the year ended December 31, 2009.

Effects of Inﬂation

The effects of inﬂation are considered implicitly in pricing and estimating reserves loss and loss
adjustment expenses. The effects of inﬂation could cause the severity of claims to rise in the future. To the
inﬂation causes these costs, particularly medical treatments and litigation costs, to increase above
extent
reserves established for these claims, the Company will be required to increase the reserve for loss and loss
adjustment expenses with a corresponding reduction in its earnings in the period in which the deﬁciency is
identiﬁed. The actual effects of inﬂation on the results of operations of the Company cannot be accurately
known until claims are ultimately settled.

Off-Balance Sheet Arrangements

As of December 31, 2011, we did not have any off-balance sheet arrangements as deﬁned by

Item 303(a)(4) of Regulation S-K.

Recent Accounting Pronouncements

See Item 8, Note 2 to the Consolidated Financial Statements for a discussion on recently issued

accounting pronouncements.

117

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Quantitative and Qualitative Disclosures About Market Risk

Market risk is the risk that we will incur losses in our investments due to adverse changes in market rates
and prices. Market risk is directly inﬂuenced by the volatility and liquidity in the market in which the related
underlying assets are invested. We believe that we are principally exposed to two types of market risk:
changes in interest rates and changes in credit quality of issuers of investment securities and reinsurers.

Interest Rate Risk

Interest rate risk is the risk that we may incur economic losses due to adverse changes in interest rates.
The primary market risk to the investment portfolio is interest rate risk associated with investments in ﬁxed
maturity securities. Fluctuations in interest rates have a direct
impact on the market valuation of these
securities. At December 31, 2011, we had ﬁxed maturity securities with a fair value of $2.0 billion that are
subject to interest rate risk.

The table below summarizes the interest rate risk associated with our ﬁxed maturity securities by
illustrating the sensitivity of the fair value and carrying value of our ﬁxed maturity securities as of
December 31, 2011 to selected hypothetical changes in interest rates, and the associated impact on our
stockholders’ equity. Temporary changes in the fair value of our ﬁxed maturity securities that are held as AFS
do impact the carrying value of these securities and are reported in our shareholders’ equity as a component of
other comprehensive income. The selected scenarios in the table below are not predictions of future events,
but rather are intended to illustrate the effect such events may have on the fair value and carrying value of our
ﬁxed maturity securities and on our shareholders’ equity, as of December 31, 2011:

Hypothetical Change in Interest Rates

Fair
Value

Estimated
Change in
Fair Value

($ in Millions)

200 basis point increase. . . . . . . . . . . . . . . . . . . . .
100 basis point increase. . . . . . . . . . . . . . . . . . . . .
No change. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
100 basis point decrease . . . . . . . . . . . . . . . . . . . .
200 basis point decrease . . . . . . . . . . . . . . . . . . . .

$1,887.4
1,951.3
2,020.7
2,092.0
$2,169.6

$(133.3)
(69.4)
—
71.3
$ 148.9

Hypothetical%
(Decrease)
Increase in
Shareholders’
Equity

(17.3)%
(9.0)%
—%
9.3%
19.4%

The interest rate sensitivity on the $168.0 million loan to related party which carries an interest rate of
one month LIBOR plus 90 basis points, an increase of 100 and 200 basis points in LIBOR would increase our
earnings and cash ﬂows by $1.7 million and $3.4 million, respectively, on an annual basis, but would not
affect the carrying value of the loan.

Counterparty Credit Risk

The concentrations of the Company’s counterparty credit risk exposures have not changed materially

compared to December 31, 2010.

The Company has exposure to credit risk primarily as a holder of ﬁxed income securities. The Company
controls this exposure by emphasizing investment grade credit quality in the ﬁxed income securities it
purchases. At December 31, 2011, 60.1% of the Company’s ﬁxed income portfolio was rated AA+ or better
(or equivalent rating), 22.7% was rated A- or better and only 0.9% of the Company’s ﬁxed income portfolio
was rated below investment grade. The Company believes this high quality concentration reduces its exposure
to credit risk on ﬁxed income investments to an acceptable level. At December 31, 2011, the Company is not
exposed to any signiﬁcant credit concentration risk on its investments, excluding securities issued by the U.S.
governments which are rated AA+ (see Investments in Item 7 of Part II of this Annual Report on Form 10-K),
with the single largest corporate issuer and the top 10 corporate issuers accounting for only 1.6% and 9.5% of
the Company’s total ﬁxed income securities, respectively.

118

The Company is subject to the credit risk of its cedants in the event of their insolvency or their failure to
honor the value of the funds held balances due to the Company for any other reason. However,
the
Company’s credit risk in some jurisdictions is mitigated by a mandatory right of offset of amounts payable by
the Company to a cedant against amounts due to the Company. In certain other jurisdictions the Company is
able to mitigate this risk, depending on the nature of the funds held arrangements, to the extent that the
Company has the contractual ability to offset any shortfall in the payment of the funds held balances with
amounts owed by the Company to cedants for losses payable and other amounts contractually due. Funds held
balances for which the Company receives an investment return based upon either the results of a pool of
assets held by the cedant or the investment return earned by the cedant on its investment portfolio are exposed
to an additional layer of credit risk.

The IIS Funds Withheld account due to the Company is related to one cedant, GMAC IICL, whereby
GMAC IICL and the Company entered into the IICL Agreement to assume business written by GMAC IICL.
Under the IICL Agreement, the individual balances by cedant which comprise the IIS Funds Withheld account
will transfer to the Company upon novation of the underlying reinsurance contract from GMAC IICL to the
Company. During 2011, the substantial majority of underlying reinsurance contracts were novated to Maiden
Bermuda per the terms of the IICL Agreement. As of December 31, 2011, one contract had not yet been
novated and this is expected to occur in 2012. At December 31, 2011, the IIS Funds Withheld account due
from GMAC IICL was $24.3 million, including $27.3 million in a segregated investment portfolio which
represents collateral pledged as required by the underlying reinsurance contracts offset by other net liabilities
of $3.0 million. The investments underlying the IIS Funds Withheld account are maintained in separate
investment portfolios by GMAC IICL and managed by the Company.

The Company is subject to the credit risk of this cedant in the event of insolvency or GMAC IICL’s
failure to honor the value of the funds held balances for any other reason. However, the Company’s credit risk
is somewhat mitigated by the fact that the Company generally has the right to offset any shortfall in the
payment of the funds held balances with amounts owed by the Company to the cedant for losses payable and
other amounts contractually due.

The Company has exposure to credit risk as it relates to its business written through brokers if any of the
Company’s brokers is unable to fulﬁll their contractual obligations with respect to payments to the Company.
In addition, in some jurisdictions, if the broker fails to make payments to the insured under the Company’s
policy, the Company might remain liable to the insured for the deﬁciency. The Company’s exposure to such
credit risk is somewhat mitigated in certain jurisdictions by contractual terms. See Business and Risk Factors
in Item 1 and 1A of Part I of this Annual Report on Form 10-K, respectively, for detailed information on three
brokers that accounted for approximately 39.4% of the Company’s gross premiums written in the Diversiﬁed
Reinsurance segment for the year ended December 31, 2011.

The Company has exposure to credit risk as it relates to its reinsurance balances receivable and
reinsurance recoverable on paid and unpaid losses. We are subject to the credit risk that AII and/or AmTrust
will fail to perform their obligations to pay interest on and repay principal of amounts loaned to AII pursuant
to its loan agreement with Maiden Bermuda, and to reimburse Maiden Bermuda for any assets or other
collateral of Maiden that AmTrust’s U.S. insurance company subsidiaries apply or retain, and income on those
receivable from the Company’s clients at December 31, 2011 were
assets. Reinsurance balances
$382.7 million, including balances both currently due and accrued.

The Company believes that credit risk related to these balances is mitigated by several factors, including
but not limited to, credit checks performed as part of the underwriting process and monitoring of aged
receivable balances. In addition, as the vast majority of its reinsurance agreements permit the Company the
right to offset reinsurance balances receivable from clients against losses payable to them, the Company
believes that the credit risk in this area is substantially reduced. Provisions are made for amounts considered
potentially uncollectible. There was no allowance for uncollectible reinsurance balances receivable at
December 31, 2011.

119

The Company purchases limited amounts of retrocessional reinsurance and requires its reinsurers to have
adequate ﬁnancial strength. The Company evaluates the ﬁnancial condition of its reinsurers and monitors its
concentration of credit risk on an ongoing basis. Provisions are made for amounts considered potentially
uncollectible. The balance of reinsurance recoverable on unpaid losses was $20.3 million at December 31,
2011. At December 31, 2011, $2.1 million of the reinsurance recoverable on unpaid losses was due from
Motors and the remaining amount was due from reinsurers with an A- or better rating from A.M. Best or
state pools.

Foreign Currency Risk

Through its international reinsurance operations, the Company conducts business in a variety of non-U.S.
currencies, with the principal exposures being the Euro and British pound. As the Company’s reporting
currency is the U.S. dollar,
the Company’s
Consolidated Financial Statements.

foreign exchange rate ﬂuctuations may materially impact

The Company is generally able to match foreign currency denominated assets against its net reinsurance
liabilities both by currency and duration to protect the Company against foreign exchange and interest rate
risks. However, a natural offset does not exist for all currencies. For the year ended December 31, 2011, 8.6%
of our net premiums written and 8.4% of our reserve for loss and loss adjustment expenses were transacted in
the Euro. Countries that participate in the Euro have been engulfed in signiﬁcant economic, ﬁscal and
monetary uncertainty in recent years, but particularly in 2011. This uncertainty is the result of the cumulative
effect of excessive sovereign debt and deﬁcits by certain participating countries in the Euro and poor
economic growth and prospects for the union as a whole. The uncertainty has been exacerbated by the lack (to
date) of both deﬁnitive solutions to these issues and questions surrounding the adequacy of
funding
mechanisms by participating countries and other institutions to de-lever the economic union and improve its
economic, ﬁscal and monetary outlook. While not
this time, without satisfactory and timely
resolution of these issues, the collapse or modiﬁcation of the Euro cannot be ruled out at this time, with
further uncertainty as to what forms of currency would take its place. As a result, we could be exposed to
signiﬁcantly greater foreign currency exposure than we estimate at this time. If the currency were impaired or
disrupted to any signiﬁcant degree, it could also impact our ability to conduct normal business operations in
those participating countries.

likely at

We may employ various strategies to manage our exposure to foreign currency exchange risk. To the
extent that these exposures are not fully hedged or the hedges are ineffective, our results of operations or
equity may be reduced by ﬂuctuations in foreign currency exchange rates and could materially adversely affect
our ﬁnancial condition and results of operations. At December 31, 2011, no hedging instruments have been
entered into.

Our principal foreign currency exposure is to the Euro and British pound, however assuming all other
variables remain constant and disregarding any tax effects, a strengthening (weakening) of the U.S. dollar
exchange rate of 10% or 20% relative to the non-U.S. currencies held by the Company would result in a
decrease (increase) in the Company’s net assets of $12.8 million and $25.5 million, respectively.

Item 8. Financial Statements and Supplementary Data.

See our Consolidated Financial Statements and notes thereto and required ﬁnancial statement schedules

commencing on pages F-1 through F-53 and S-1 through S-7 below.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

120

Item 9A. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

In connection with the preparation of this Report, our management has performed an evaluation, with the
participation of our Principal Executive Officer and Principal Financial Officer, of the effectiveness of our
disclosure controls and procedures (as deﬁned in Rule 13a-15(e) and 15d-15(e) under the Exchange Act) as of
December 31, 2011. Based on their evaluation, our Principal Executive Officer and Principal Financial Officer
concluded that, as of December 31, 2011, our Company’s disclosure controls and procedures were effective.

Management’s Annual Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over ﬁnancial
reporting as deﬁned in Rules 13a-15(f) and 15d-15(f) under the Exchange Act and for the assessment of the
effectiveness of internal control over ﬁnancial reporting. As deﬁned by the SEC, internal control over ﬁnancial
reporting is a process designed by, or under the supervision of, our principal executive and principal ﬁnancial
officers and effected by our Board of Directors, management and other personnel, to provide reasonable
assurance regarding the reliability of ﬁnancial reporting and the preparation of the consolidated ﬁnancial
statements in accordance with U.S. GAAP.

(2) provide reasonable assurance that

Our internal control over ﬁnancial reporting includes those policies and procedures that (1) pertain to the
maintenance of records that, in reasonable detail, accurately and fairly reﬂect our transactions and dispositions
of our assets;
transactions are recorded as necessary to permit
preparation of the consolidated ﬁnancial statements in accordance with GAAP, and that our receipts and
expenditures are being made only in accordance with authorizations of our management and directors; and
(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or
disposition of our assets that could have a material effect on the consolidated ﬁnancial statements.

Because of its inherent limitations, internal control over ﬁnancial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that
controls may become inadequate because of changes in conditions, or that the degree of compliance with the
policies or procedures may deteriorate.

the effectiveness of our

In connection with the preparation of our annual consolidated ﬁnancial statements, management has
undertaken an assessment of
reporting as of
December 31, 2011 based on criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO Framework). Management’s
assessment included an evaluation of the design of our internal control over ﬁnancial reporting and testing of
the operational effectiveness of those controls. Based on this evaluation, management has concluded that our
internal control over ﬁnancial reporting is effective as of December 31, 2011 based on those criteria.

internal control over ﬁnancial

The Company’s independent auditors have issued an audit report on our assessment of the Company’s

internal control over ﬁnancial reporting. This report appears below.

Changes in Internal Control Over Financial Reporting

No changes were made in our internal controls over ﬁnancial reporting, as such term is deﬁned in
Exchange Act Rules 13a-15(f) and 15(d) − 15(f), during the fourth quarter ended December 31, 2011 that have
materially affected, or are reasonably likely to materially affect, our internal control over ﬁnancial reporting.

121

Report of Independent Registered Public Accounting Firm

Board of Directors and Shareholders
Maiden Holdings, Ltd.

We have audited Maiden Holdings, Ltd. and subsidiaries’ internal control over ﬁnancial reporting as of
December 31, 2011, based on criteria established in Internal Control — Integrated Framework issued by the
Committee of Sponsoring Organizations of the Treadway Commission (the COSO criteria). Maiden Holdings,
Ltd.’s management is responsible for maintaining effective internal control over ﬁnancial reporting and for its
assessment of the effectiveness of internal control over ﬁnancial reporting, included in the accompanying
Item 9A, Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express
an opinion on the company’s internal control over ﬁnancial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether effective internal control over ﬁnancial reporting was maintained in all material
respects. Our audit included obtaining an understanding of internal control over ﬁnancial reporting, assessing
the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of
internal control based on the assessed risk. Our audit also included performing such other procedures as we
considered necessary in the circumstances. We believe that our audit provides a reasonable basis for
our opinion.

A company’s internal control over ﬁnancial reporting is a process designed to provide reasonable
assurance regarding the reliability of ﬁnancial reporting and the preparation of ﬁnancial statements for external
purposes in accordance with generally accepted accounting principles. A company’s internal control over
ﬁnancial reporting includes those policies and procedures that (1) pertain to the maintenance of records that,
in reasonable detail, accurately and fairly reﬂect
the transactions and dispositions of the assets of the
company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of
ﬁnancial statements in accordance with generally accepted accounting principles, and that receipts and
expenditures of the company are being made only in accordance with authorizations of management and
directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of
unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
ﬁnancial statements.

In our opinion, Maiden Holdings, Ltd. and subsidiaries maintained, in all material respects, effective

internal control over ﬁnancial reporting as of December 31, 2011, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), the consolidated balance sheets of Maiden Holdings, Ltd. as of December 31, 2011 and
2010, and the related consolidated statements of income, stockholders’ equity, and cash ﬂows for years ended
December 31, 2011, 2010 and 2009, and our report dated March 13, 2012 expressed an unqualiﬁed opinion
thereon.

/s/ BDO USA, LLP

New York, New York
March 13, 2012

122

Item 9B. Other Information.

None.

PART III

Item 10. Directors, Executive Officers and Corporate Governance.

The information required by this item is incorporated by reference from the information responsive
thereto in the sections in the proxy statement for our Annual Meeting of Shareholders to be held on May 2,
2012 (the ‘‘Proxy Statement’’) captioned ‘‘Election of Directors,’’ ‘‘Executive Officers,’’ ‘‘Audit Committee,’’
‘‘Section 16(a) Beneﬁcial Ownership Reporting Compliance,’’ and ‘‘Nominating and Corporate Governance
Committee.’’

We have adopted a Code of Business Conduct and Ethics for all employees. The Code of Business
Conduct and Ethics is available free of charge on our website at www.maiden.bm and is available in print to
any shareholder who requests it. We intend to disclose any amendments to this code by posting such
information on our website, and disclose any waivers of this code applicable to our principal executive officer,
principal ﬁnancial officer, principal accounting officer or controller and other executive officers who perform
similar functions through such means or by ﬁling a Form 8-K.

Item 11. Executive Compensation.

The information required by this item is incorporated by reference from the information responsive
thereto in the sections in the Proxy Statement captioned ‘‘Compensation Discussion and Analysis,’’ ‘‘Director
Compensation for 2011,’’ ‘‘Compensation Committee Interlocks and Insider Participation’’ and ‘‘Compensation
Committee Report’’.

Item 12. Security Ownership of Certain Beneﬁcial Owners and Management and Related Stockholder
Matters.

The information required by this item is incorporated by reference from the information responsive
thereto in the sections in the Proxy Statement captioned ‘‘Security Ownership of Certain Beneﬁcial Owners,’’
‘‘Equity Compensation Plan Information,’’ and ‘‘Security Ownership of Management’’.

Item 13. Certain Relationships and Related Transactions, and Director Independence.

The information required by this item is incorporated by reference from the information responsive
thereto in the sections in the Proxy Statement captioned ‘‘Certain Relationships and Related Transactions,’’
‘‘Audit Committee,’’ ‘‘Board Independence,’’ ‘‘Compensation Committee,’’ and ‘‘Nominating and Corporate
Governance Committee.’’

Item 14. Principal Accounting Fees and Services.

The information required by this item is incorporated by reference from the information responsive
thereto in the section in the Proxy Statement captioned ‘‘Appointment of Independent Auditors of Maiden
Holdings, Ltd.’’

123

PART IV

Item 15. Exhibits, Financial Statement Schedules.

(a) Financial statement schedules

Financial statement schedules listed in the accompanying index to our Consolidated Financial Statements
starting on page F-1 are ﬁled as part of this Form 10-K, and are included in Item 8. All other schedules for
which provision is made in the applicable regulation of the Securities and Exchange Commission are not
required under the related instructions or are inapplicable, and therefore have been omitted.

(b) Exhibits

The exhibits listed in the Exhibit Index starting on page E-1 following the signature page are ﬁled

herewith, which Exhibit Index is incorporated herein by reference.

124

SIGNATURES

Pursuant

to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934,

the
registrant has duly caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized,
in Hamilton, Bermuda on March 13, 2012.

MAIDEN HOLDINGS, LTD.

By: /s/ Arturo M. Raschbaum

Name: Arturo M. Raschbaum
Title: President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below

by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Signature

Title

Date

/s/ Arturo M. Raschbaum
Arturo M. Raschbaum

/s/ John M. Marshaleck
John M. Marshaleck

/s/ Barry D. Zyskind
Barry D. Zyskind

/s/ Raymond M. Neff
Raymond M. Neff

/s/ Simcha Lyons
Simcha Lyons

/s/ Yehuda L. Neuberger
Yehuda L. Neuberger

/s/ Steven H. Nigro
Steven H. Nigro

President and Chief Executive Officer
(Principal Executive Officer)

Chief Financial Officer
(Principal Financial and Accounting Officer)

Chairman

Director

March 13, 2012

125

This page intentionally left blank.

Exhibit
No.

3.1
3.2

4.1

4.2

4.3

4.4

4.5

4.6

4.7*

4.8

10.1*

10.2*

10.3*

10.4*

10.5*

10.6*

10.7*

10.8*

10.9

EXHIBIT INDEX

Description

Reference

Memorandum of Association (as amended)
Bye-Laws

Form of Common Share Certiﬁcate

Registration Rights Agreement by and between Maiden Holdings, Ltd. and
Friedman, Billings, Ramsey & Co., Inc., dated as of July 3, 2007

Amended and Restated Declaration of Trust by and among Wilmington Trust
Company, as Institutional Trustee and as Delaware Trustee, Maiden Holdings
North America, Ltd., as Sponsor, and the Administrators (as named therein), dated
as of January 20, 2009

Indenture by and between Maiden Holdings North America, Ltd. and Wilmington
Trust Company, as Trustee, relating to Fixed Rate Subordinated Deferrable Interest
Debentures Due 2039 (including the form of debenture), dated January 20, 2009

Guarantee Agreement by and between Maiden Holdings, Ltd., as Guarantor, and
Wilmington Trust Company, as Trustee, dated as of January 20, 2009
Guarantee Agreement by and between Maiden Holdings North America, Ltd., as
Guarantor, and Wilmington Trust Company, as Trustee, dated as of January 20,
2009
Form of Purchase Agreement by and among Maiden Holdings, Ltd., Maiden Capital
Financing Trust, Maiden Holdings North America, Ltd. and various institutional
investors, dated as of January 14, 2009
First Amendment to Amended and Restated Declaration of Trust, dated as of
July 14, 2011, by and among Maiden Holdings North America, Ltd., Arturo M.
Raschbaum, John M. Marshaleck and Karen L. Schmitt, as all of the Administrators,
and Wilmington Trust Company, as Institutional Trustee and Delaware Trustee
Amended and Restated Maiden Holdings, Ltd. 2007 Share Incentive Plan as of
July 26, 2011
Form of Share Option Agreement for Employee Recipients of Options under 2007
Share Incentive Plan
Form of Share Option Agreement for Non-Employee Recipients of Options under
2007 Share Incentive Plan
Form of Performance-Based Restricted Share Unit Agreement for Employee
Recipients of Restricted Share Units under the Amended and Restated 2007 Share
Incentive Plan
Form of Employment Agreement by and between Maiden and Arturo Raschbaum,
John Marshaleck, Patrick J. Haveron, Karen Schmitt and Lawrence F. Metz, dated
as of November 1, 2011

Employment Agreement by and between Maiden Holdings, Ltd. and Ronald M.
Judd, dated as of December 1, 2010

Master Agreement by and between Maiden Holdings, Ltd. and AmTrust Financial
Services, Inc., dated as of July 3, 2007

Amendment No. 1 to the Master Agreement by and between Maiden Holdings, Ltd.
and AmTrust Financial Services, Inc., dated as of September 17, 2007

Amended and Restated Quota Share Reinsurance Agreement by and between
Maiden Insurance Company Ltd. and AmTrust International Insurance, Ltd. and
dated as of June 1, 2008

(1)
(2)

(2)

(3)

(4)

(2)

(4)

†

(5)

(2)

(6)

E-1

Exhibit
No.

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

10.18

10.19

10.20

10.21

10.22

10.23

10.24

10.25

10.26

Description

Reference

Loan Agreement by and between AmTrust International Insurance, Ltd. and Maiden
Insurance Company Ltd., dated as of November 16, 2007

Amendment No. 1 to the Loan Agreement by and between AmTrust International
Insurance, Ltd. and Maiden Insurance Company Ltd., dated as of February 15, 2008

Asset Management Agreement by and between AII Insurance Management Limited
and Maiden Insurance Company Ltd., dated as of July 3, 2007

First Amendment to Asset Management Agreement by and between AII Insurance
Management Limited, Maiden Insurance Company Ltd., Maiden Holdings, Ltd., and
Maiden Holdings North America, Ltd., dated as of November 3, 2008

Second Amendment to Asset Management Agreement by and between AII Insurance
Management Limited, Maiden Insurance Company Ltd., Maiden Holdings, Ltd.,
Maiden Holdings North America, Ltd. and Maiden Reinsurance Company, dated as
of December 23, 2008

Third Amendment to Asset Management Agreement by and between AII Insurance
Management Limited, Maiden Insurance Company Ltd., Maiden Holdings, Ltd.,
Maiden Holdings North America, Ltd., Maiden Reinsurance Company and Maiden
Specialty Insurance Company dated as of September 1, 2009
Fourth Amendment to Asset Management Agreement by and between AII Insurance
Management Limited, Maiden Insurance Company Ltd., Maiden Holdings, Ltd.,
Maiden Holdings North America, Ltd., Maiden Reinsurance Company and Maiden
Specialty Insurance Company dated as of August 6, 2010
Reinsurance Brokerage Agreement by and between Maiden Insurance Company Ltd.
and AII Reinsurance Broker Ltd., dated as of July 3, 2007
Brokerage Services Agreement between Maiden Insurance Company Ltd. and
IGI Intermediaries Limited, dated as of January 1, 2008
Reinsurance Brokerage Services Agreement between Maiden Insurance Company
Ltd. and IGI Intermediaries, Inc., dated as of April 3, 2008
Endorsement No. 1 to the Amended and Restated Quota Share Reinsurance
Agreement by and between Maiden Insurance Company Ltd. and AmTrust
International Insurance, Ltd. dated as of July 26, 2011
Quota Share Reinsurance Contract by and between Maiden Insurance Company Ltd.
and AmTrust Europe Limited and/or AmTrust International Underwriters Limited
dated as of April 1, 2011
Endorsement No. 1 to the Quota Share Reinsurance Contract by and between
Maiden Insurance Company Ltd. and AmTrust Europe Limited and/or AmTrust
International Underwriters Limited dated as of July 26, 2011

Portfolio Transfer and Quota Share Reinsurance Agreement by and between Maiden
Insurance Company Ltd. and Motors Insurance Corporation, dated as of October 31,
2008

Personal and Commercial Automobile Quota Share Reinsurance Agreement by and
between Maiden Insurance Company Ltd. and Integon National Insurance Company,
dated as March 1, 2010

Form of Indemniﬁcation Agreement between Maiden Holdings, Ltd. and its officers
and directors

(7)

(2)

(5)

(2)

(7)

(8)

(4)

(9)

(5)

(7)

Warrant Exchange Agreement by and between Michael Karfunkel and Maiden
Holdings, Ltd. as of September 20, 2010

(10)

E-2

Exhibit
No.

10.27

10.28*

10.29

10.30

10.31

21.1

23.1

31.1

31.2

32.1
32.2

Description

Reference

Warrant Exchange Agreement by and between George Karfunkel and Maiden
Holdings, Ltd. as of September 20, 2010

Warrant Exchange Agreement by and between Barry Zyskind and Maiden Holdings,
Ltd. as of September 20, 2010

Lockup Agreement by and between Michael Karfunkel and Maiden Holdings, Ltd.
as of September 20, 2010

Lockup Agreement by and between George Karfunkel and Maiden Holdings, Ltd. as
of September 20, 2010

Lockup Agreement by and between Barry Zyskind and Maiden Holdings, Ltd. as of
September 20, 2010

Subsidiaries of the registrant

Consent of BDO USA, LLP

Section 302 Certiﬁcation of CEO

Section 302 Certiﬁcation of CFO

Section 906 Certiﬁcation of CEO
Section 906 Certiﬁcation of CFO

(10)

†

†
†

(1)

(2)

(3)

(4)

(5)

(6)

(7)

(8)

(9)

Incorporated by reference to the ﬁling of such exhibit with the registrant’s Registration Statement on
Form S-8 ﬁled with the SEC on May 18, 2010 (File No. 333-166934).
Incorporated by reference to the ﬁling of such exhibit with the registrant’s Registration Statement on S-1
initially ﬁled with the SEC on September 17, 2007, subsequently amended and declared effective May 6,
2008 (File No. 333-146137).
Incorporated by reference to the ﬁling of such exhibit with the registrant’s Current Report on Form 8-K
ﬁled with the SEC on January 26, 2009 (File No. 001-34042).
Incorporated by reference to the ﬁling of such exhibit with the registrant’s Quarterly Report on
Form 10-Q for the period ended September 30, 2010 ﬁled with the SEC on August 8, 2011 (File
No. 001-34042).
Incorporated by reference to the ﬁling of such exhibit with the registrant’s Annual Report on Form 10-K
for
the ﬁscal year ended December 31, 2010 ﬁled with the SEC on March 14, 2011 (File
No. 001-34042).
Incorporated by reference to the ﬁling of such exhibit with the registrant’s Current Report on Form 8-K
ﬁled with the SEC on November 14, 2008 (File No. 001-34042).
Incorporated by reference to the ﬁling of such exhibit with the registrant’s Annual Report on Form 10-K
for
the ﬁscal year ended December 31, 2008 ﬁled with the SEC on March 31, 2009 (File
No. 001-34042).
Incorporated by reference to the ﬁling of such exhibit with Amendment No. 2 to the registrant’s
Registration Statement on S-1 ﬁled with the SEC on March 28, 2008 (No. 333-146137).
Incorporated by reference to the ﬁling of such exhibit with Amendment No. 3 to the registrant’s
Registration Statement on S-1 ﬁled with the SEC on April 24, 2008 (No. 333-146137).

(10) Incorporated by reference to the ﬁling of such exhibit with the registrant’s Current Report on Form 8-K

ﬁled with the SEC on November 7, 2008 (File No. 001-34042).

(11) Incorporated by reference to the ﬁling of such exhibit with the registrant’s Quarterly Report on
Form 10-Q for the period ended June 30, 2010 ﬁled with the SEC on November 9, 2010 (File
No. 001-34042).
Filed herewith.

†
* Management contract or compensatory plan or arrangement

E-3

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Index to Consolidated Financial Statements and Related Notes

Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Balance Sheets as at December 31, 2011 and 2010 . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Income for the Years Ended December 31, 2011, 2010 and 2009 . . . .

Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2011,

2010 and 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31,

2011, 2010 and 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Consolidated Statements of Cash Flows for the Years Ended December 31, 2011, 2010 and 2009 .

Notes to Consolidated Financial Statements

Note 1 — Organization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 2 — Signiﬁcant Accounting Policies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 3 — Segment Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 4 — Acquisitions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 5 — Investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 6 — Fair Value Measurements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 7 — Goodwill and Intangible Assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 8 — Long-Term Debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 9 — Reinsurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 10 — Reserve for Loss and Loss Adjustment Expenses . . . . . . . . . . . . . . . . . . . . . . . .

Note 11 — Related Party Transactions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 12 — Commitments and Contingencies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 13 — Earnings Per Common Share. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 14 — Shareholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 15 — Share Compensation and Pension Plans. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 16 — Taxation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 17 — Statutory Financial Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 18 — Subsequent Events . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Note 19 — Condensed Quarterly Financial Data — Unaudited . . . . . . . . . . . . . . . . . . . . . . .

Supplementary Information

Summary of Investments — Other than Investments in Related Parties (Schedule I). . . . . . . . .

Condensed Financial Information of Registrant (Schedule II) . . . . . . . . . . . . . . . . . . . . . . . .

Supplementary Insurance Information (Schedule III) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplementary Reinsurance Information (Schedule IV) . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Supplementary Insurance Information Concerning Property and Casualty Insurance Operations
(Schedule VI) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

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S-2

S-5

S-6

S-7

F-1

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Shareholders of
Maiden Holdings, Ltd.

We have audited the accompanying consolidated balance sheets of Maiden Holdings, Ltd. and
subsidiaries (the ‘‘Company’’) as of December 31, 2011 and 2010, and the related consolidated statements of
income, comprehensive income, changes in shareholders’ equity, and cash ﬂows for each of the years ended
December 31, 2011, 2010 and 2009. In connection with our audits of the ﬁnancial statements, we have also
audited the ﬁnancial statement schedules listed in the accompanying index. These ﬁnancial statements and
schedules are the responsibility of the Company’s management. Our responsibility is to express an opinion on
the ﬁnancial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight

MAIDEN HOLDINGS, LTD.

CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)

Revenues:
Gross premiums written . . . . . . . . . . . . . . . . . . . . . . . . . .
Net premiums written . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in unearned premiums . . . . . . . . . . . . . . . . . . . . .
Net premiums earned . . . . . . . . . . . . . . . . . . . . . . . . .
Other insurance revenue. . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized and unrealized gains on investment . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Expenses:
Net loss and loss adjustment expenses . . . . . . . . . . . . . . . .
Commission and other acquisition expenses . . . . . . . . . . . .
General and administrative expenses . . . . . . . . . . . . . . . . .
Interest and amortization expenses. . . . . . . . . . . . . . . . . . .
Accelerated amortization of junior subordinated debt

discount and issuance cost . . . . . . . . . . . . . . . . . . . . . .
Junior subordinated debt repurchase expense. . . . . . . . . . . .
Amortization of intangible assets. . . . . . . . . . . . . . . . . . . .
Foreign exchange and other (gains) losses . . . . . . . . . . . . .
Total expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . .
Income taxes:
Current tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax expense. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Add: (income) loss attributable to noncontrolling interest . . .
Net income attributable to Maiden shareholders . . . . . . .
Basic earnings per share attributable to Maiden shareholders .
Diluted earnings per share attributable to Maiden

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends declared per common share . . . . . . . . . . . . . . . .

For the Year Ended December 31,
2010

2009

2011

$ 1,812,597
$ 1,723,521
(171,093)
1,552,428
12,640
74,891
481
1,640,440

$ 1,298,055
$ 1,227,831
(58,041)
1,169,790
—
71,651
6,604
1,248,045

$ 1,048,676
$ 1,030,374
(110,455)
919,919
—
62,957
270
983,146

1,043,054
438,812
53,892
34,155

20,313
15,050
5,033
(323)
1,609,986
30,454

632
1,295
1,927
28,527
(3)
28,524
0.40

0.39
0.30

$
$

755,122
336,697
42,180
36,466

—
—
5,808
580
1,176,853
71,192

160
1,170
1,330
69,862
4
69,866
0.99

0.98
0.265

608,613
241,429
32,135
34,431

—
—
6,590
(2,454)
920,744
62,402

—
1,344
1,344
61,058
—
61,058
0.88

0.87
0.25

$
$

Weighted average number of basic shares outstanding . . . . .

72,155,503

70,799,966

Weighted average number of diluted shares outstanding . . . .

72,903,688

71,372,688

69,646,804

70,060,197

See accompanying notes to Consolidated Financial Statements.

F-4

MAIDEN HOLDINGS, LTD.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(In thousands of U.S. dollars, except share and per share data)

Comprehensive income:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income
Unrealized holdings net gains arising during the period . . . . . . . . . .
Adjustment for reclassiﬁcation of net realized gains recognized in net
income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . . . .
Other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net (income) loss attributable to noncontrolling interest . . . . . . . . . .
Other comprehensive loss attributable to noncontrolling interest . . . . .
Comprehensive loss attributable to noncontrolling interest. . . . . . . . .
Comprehensive income attributable to Maiden shareholders. . . . .

For the Year Ended December 31,
2009
2010

2011

$28,527

$69,862

$ 61,058

12,189

30,154

77,516

(3,206)
733
9,716
38,243
(3)
9
6
$38,249

(8,147)
(420)
21,587
91,449
4
—
4
$91,453

(270)
—
77,246
138,304
—
—
—
$138,304

See accompanying notes to Consolidated Financial Statements.

F-5

MAIDEN HOLDINGS, LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands of U. S. dollars)

For the Year Ended
December 31, 2011
Beginning balance . . . . . . . . . . . . . . . . . . . . $750,449
422
Exercise of options and issuance of shares. . . .
210
Partial disposal of interest in subsidiary. . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . .
28,527
Change in unrealized gains on investments,

Total
equity

8,983
net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
733
Foreign currency translation adjustment. . . . . .
1,307
Share-based compensation expense . . . . . . . . .
Dividends on common shares . . . . . . . . . . . .
(21,651)
Ending balance . . . . . . . . . . . . . . . . . . . . . . $768,980

Retained
earnings
$121,775

28,524

(21,651)
$128,648

Maiden Shareholders’ Equity
Accumulated
other
comprehensive
income
$54,334

Treasury
shares
$(3,801)

Common
shares
$731
1

Additional
paid-in
capital
$577,135
421
141

Noncontrolling
interest in
subsidiaries
$275
—
69
3

8,983
742

1,307

$(3,801)

$64,059

$732

$579,004

—
(9)
—
—
$338

See accompanying notes to Consolidated Financial Statements.

F-6

MAIDEN HOLDINGS, LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands of U. S. dollars)

Total
equity

For the Year Ended
December 31, 2010
Beginning balance . . . . . . . . . . . . . . . . . . . . $676,526
279
Acquisition of subsidiary . . . . . . . . . . . . . . .
52
Exercise of options and issuance of shares. . . .
Exchange of warrants . . . . . . . . . . . . . . . . . .
—
Net income (loss) . . . . . . . . . . . . . . . . . . . .
69,862
Change in unrealized gains on investments,

22,007
net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(420)
Foreign currency translation adjustment. . . . . .
1,015
Share-based compensation expense . . . . . . . . .
Dividends on common shares . . . . . . . . . . . .
(18,872)
Ending balance . . . . . . . . . . . . . . . . . . . . . . $750,449

Retained
earnings
$ 70,781

69,866

(18,872)
$121,775

Maiden Shareholders’ Equity
Accumulated
other
comprehensive
income
$32,747

Treasury
shares
$(3,801)

Common
shares
$713

Additional
paid-in
capital
$576,086

52
(18)

22,007
(420)

1,015

$(3,801)

$54,334

$731

$577,135

Noncontrolling
interest in
subsidiary
$ —
279
—
—
(4)

—
—
—
—
$275

See accompanying notes to Consolidated Financial Statements.

F-7

MAIDEN HOLDINGS, LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(In thousands of U. S. dollars)

For the Year Ended
December 31, 2009
Beginning balance . . . . . . . . . . . . . . . . . . . . $509,759
45,057
Exercise of options and issuance of shares. . . .
61,058
Net income . . . . . . . . . . . . . . . . . . . . . . . . .
Change in unrealized gains on investments,

Total
equity

77,246
net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
627
Share-based compensation expense . . . . . . . . .
(17,221)
Dividends on common shares . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . $676,526

Retained
earnings
$ 26,944

61,058

(17,221)
$ 70,781

Maiden Shareholders’ Equity
Accumulated
other
comprehensive
income (loss)
$(44,499)

Treasury
shares
$(3,801)

Common
Shares
$596
117

Additional
paid-in
capital
$530,519
44,940

Noncontrolling
interest in
subsidiary
$ —
—
—

77,246

627

$(3,801)

$ 32,747

$713

$576,086

—
—
—
$ —

See accompanying notes to Consolidated Financial Statements.

F-8

MAIDEN HOLDINGS, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)

Cash ﬂows from operating activities:
Net income . . .
.
.

.
.
Adjustments to reconcile net income to net cash provided by operating activities:

. . . . . . . . . . . . . . . . . . . . . .

subordinated debt discount, net .

Depreciation and amortization of intangibles .
. . . . . . . . . . . . . . . . . . . . . .
Net realized and unrealized gains on investments . . . . . . . . . . . . . . . . . . . . .
Foreign exchange and other (gains) losses .
. . . . . . . . . . . . . . . . . . . . . .
Amortization of share-based compensation expense, bond premium and discount and
.
.

.
Changes in assets − (increase) decrease:
. . . . . . . . . . . . . . . . . . . . . .
.
Reinsurance balances receivable, net .
. . . . . . . . . . . . . . . . . . . . . .
.
.
Funds withheld .
.
.
. . . . . . . . . . . . . . . . . . . . . .
Prepaid reinsurance premiums .
.
.
. . . . . . . . . . . . . . . . . . . . . .
Reinsurance recoverable on unpaid losses .
Accrued investment income .
. . . . . . . . . . . . . . . . . . . . . .
.
Deferred commission and other acquisition costs . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
.
Other assets .

. . . . . . . . . . . . . . . . . . . . . .

.
.
.
.
.

.
.
.

.
.

.
.
Changes in liabilities − increase (decrease):

Reserve for loss and loss adjustment expenses. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
.
.
Unearned premiums .
. . . . . . . . . . . . . . . . . . . . . .
.
Accrued expenses and other liabilities .
. . . . . . . . . . . . . . . . . . . . . .
.
.

.
.
.

Net cash provided by operating activities .
Cash ﬂows from investing activities:

Purchases of investments:

Purchases of ﬁxed-maturity securities − available-for-sale . . . . . . . . . . . . . . . .
Purchases of ﬁxed-maturity securities − trading and short sales . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
.
Purchases of other investments .

For the Year Ended December 31,
2009
2010
2011

$ 28,527

69,862

$ 61,058

8,599
(481)
(323)

7,205
(6,604)
580

7,359
(270)
(2,454)

22,236

(3,586)

(5,474)

(143,699)
16,074
(6,389)
(13,632)
836
(45,037)
(14,344)

176,869
178,436
(26,324)
181,348

(29,036)
(152,713)
(240)
1,684
(2,686)
(30,648)
1,583

220,932
68,413
6,833
151,579

(636,141)
(663,339)
(1,173)

(1,010,142)
(1,293,386)
(424)

331,593
1,291,843
507,326
108
55,657
(4,893)
(2,875)
(125,193)

(19,176)
—
—
—
—
—
279
52
(18,394)
(37,239)
(392)
(11,245)
107,396
96,151

Sale of investments:

.
.
.

.
.
.
.

.
.
.
.
.
.
.
.
.

Proceeds from sales of ﬁxed-maturity securities − available-for-sale . . . . . . . . . .
Proceeds from sales of ﬁxed-maturity securities − trading and short sales . . . . . . .
Proceeds from maturities and calls of ﬁxed maturity securities . . . . . . . . . . . . .
Proceeds from redemption of other investments . . . . . . . . . . . . . . . . . . . . .
(Increase) decrease in restricted cash and cash equivalents . . . . . . . . . . . . . . . .
Acquisition of subsidiaries (net of cash acquired) . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
.
Purchase of capital assets .
.
Net cash provided by (used in) investing activities . . . . . . . . . . . . . . . . . . . . . .
Cash ﬂows from ﬁnancing activities:
.
.
.
Repurchase agreements, net .
.
.
.
.
Senior notes issuance .
.
.
Senior notes issuance cost .
.
.
.
.
Junior subordinated debt issuance .
Junior subordinated debt issuance cost .
Repayment of junior subordinated debt .
Contribution of noncontrolling interest .
.
Common share issuance .
.
.
Dividends paid to shareholders .

. . . . . . . . . . . . . . . . . . . . . .
.
. . . . . . . . . . . . . . . . . . . . . .
.
. . . . . . . . . . . . . . . . . . . . . .
.
. . . . . . . . . . . . . . . . . . . . . .
.
. . . . . . . . . . . . . . . . . . . . . .
.
. . . . . . . . . . . . . . . . . . . . . .
.
. . . . . . . . . . . . . . . . . . . . . .
.
. . . . . . . . . . . . . . . . . . . . . .
.
. . . . . . . . . . . . . . . . . . . . . .
.
Net cash (used in) provided by ﬁnancing activities . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on foreign currency cash . . . . . . . . . . . . . . .
Net increase (decrease) in cash and cash equivalents. . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents, beginning of period . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .
.

Cash and cash equivalents, end of period .
Supplemental information on cash ﬂows:
.
.
.
.
.
Interest paid . . .
Taxes paid .
.
.
.
.
.
.
Supplemental information about non cash investing and ﬁnancing activities:
Acquisition of ﬁxed maturities, available for sale .
.
.
.
.
.
.
Funds withheld .
.
.
Reinsurance balances receivable .
.
.
.
Discount on junior subordinated debt.
.
Additional paid-in capital .
.
.
.
Common shares issued in exchange of warrants .
.
.
Redemption of other investment
.
.
.
Purchase of other investment .

. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . .

.
.
.
.
.
.
.
.

.
.
.
.

.
.

304,499
720,100
310,526
4,818
(25,139)
635
(1,538)
13,248

(76,225)
107,500
(2,811)
—
—
(107,500)
—
422
(20,921)
(99,535)
(3,130)
91,931
96,151
$ 188,082

$ 36,850
429

81,930
(81,930)
—
—
—
—
—
—

See accompanying notes to Consolidated Financial Statements.

F-9

36,400
129

$ 26,794
—

17,806
—
(17,806)
—
18
(18)
(4,751)
4,751

—
—
—
44,928
(44,928)
—
—
—

(142,363)
—
(28,752)
(8,340)
(1,022)
(68,467)
3,376

105,909
137,625
(12,688)
45,497

(891,332)
—
(139)

200,493
—
268,429
153
264,333
(13,613)
(1,749)
(173,425)

(137,245)
—
—
260,000
(4,342)
—
—
129
(16,167)
102,375
1,052
(24,501)
131,897
$ 107,396

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

1. Organization

Maiden Holdings, Ltd. (sometimes referred to as ‘‘Maiden Holdings’’ or ‘‘Parent Company’’) is a
Bermuda-based holding company formed in June 2007, primarily focused on serving the needs of regional and
specialty insurers in the United States and Europe by providing innovative reinsurance solutions designed to
support their capital needs. Together with its subsidiaries (collectively referred to as the ‘‘Company’’, ‘‘we’’ or
‘‘Maiden’’), Maiden specializes in reinsurance solutions that optimize ﬁnancing by providing coverage within
the more predictable and actuarially credible lower layers of coverage and/or reinsure risks that are believed to
be lower hazard, more predictable and generally not susceptible to catastrophe claims. Our tailored solutions
include a variety of value added services focused on helping our clients grow and prosper. Our principal
operating subsidiaries in Bermuda and the United States are rated ‘‘A-’’ (Excellent) with a stable outlook by
A.M. Best Company (‘‘A.M. Best’’), which rating is the fourth highest of 16 rating levels, and BBB+ (Good)
with a stable outlook by Standard & Poor’s, which is the sixth highest of 21 rating levels.

We provide reinsurance through our wholly-owned subsidiaries, Maiden Reinsurance Company
(‘‘Maiden US’’) and Maiden Insurance Company Ltd. (‘‘Maiden Bermuda’’) and have operations in United
States and Bermuda, respectively. On a more limited basis, Maiden Specialty Insurance Company (‘‘Maiden
Specialty’’), a wholly owned subsidiary of Maiden US, provides primary insurance on a surplus lines basis
focusing on non-catastrophe property and inland marine. Maiden Bermuda does not underwrite any primary
insurance business. Internationally, we provide reinsurance-related services through Maiden Global Holdings,
Ltd. (‘‘Maiden Global’’) and its subsidiaries. Maiden Global primarily focuses on providing branded auto and
credit life insurance products through its insurer partners to retail customers in the European Union and other
global markets, which also produce reinsurance programs which are underwritten by Maiden Bermuda. Certain
international credit life business is also written directly by Maiden Life Försäkrings AB (‘‘Maiden LF’’), a
wholly owned subsidiary of Maiden Holdings, as part of Maiden Global’s service offerings.

2. Signiﬁcant Accounting Policies

Basis of Reporting and Consolidation — These consolidated ﬁnancial statements of the Company have
been prepared in conformity with accounting principles generally accepted in the United States of America
(‘‘U.S. GAAP’’). The consolidated ﬁnancial statements include the accounts of Maiden Holdings and all of its
in the opinion of
subsidiaries. These consolidated ﬁnancial statements reﬂect all adjustments that are,
management, necessary for a fair presentation of the results for the period and all such adjustments are of a
normal recurring nature. All signiﬁcant intercompany transactions and accounts have been eliminated in the
consolidated ﬁnancial statements. Certain prior year comparatives have been reclassiﬁed to conform to the
current year presentation.

to make estimates and assumptions that affect

Estimates — The preparation of these consolidated ﬁnancial statements in conformity with U.S. GAAP
requires management
the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the consolidated ﬁnancial statements
and the reported amounts of revenues and expenses during the reporting period. Actual results could differ
from those estimates. The signiﬁcant estimates reﬂected in the Company’s ﬁnancial statements include, but are
not limited to:

•

reserve for loss and loss adjustment expenses;

recoverability of deferred commission and other acquisition expenses;

determination of impairment of goodwill and other intangible assets;

valuation of ﬁnancial instruments; and

determination of other-than-temporary impairment of investments.

F-10

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

2. Signiﬁcant Accounting Policies − (continued)

Investments — The Company currently classiﬁes all of its ﬁxed maturity investments and short-term
investments as ‘‘available for sale’’ and, accordingly, they are carried at estimated fair value. The fair value of
ﬁxed maturity securities is generally determined from quotations received from nationally recognized pricing
services, or when such prices are not available, by reference to broker or underwriter bid indications.
Short-term investments comprise securities due to mature within one year of the date of purchase.

Other Investments — Other investments comprise investments in limited partnerships which are reported
at fair value based on the ﬁnancial information received from the fund managers and other information
available to management. Unrealized gains or losses on other investments are reported as a component of
accumulated other comprehensive income.

Purchases and sales of investments are recorded on a trade date basis. Realized gains or losses on sales
of investments are determined based on the ﬁrst in ﬁrst out cost method. Net investment income is recognized
when earned and includes interest and dividend income together with amortization of market premiums and
discounts using the effective yield method and is net of investment management fees and other expenses. For
mortgage-backed securities and any other holdings for which there is a prepayment risk, prepayment
assumptions are evaluated and revised as necessary. Any adjustments required due to the change in effective
yields and maturities are recognized on a prospective basis through yield adjustments.

Impairments of investment securities results in a charge to operations when a market decline below
cost is deemed to be other than temporary. To determine the recovery period of a ﬁxed maturity security,
we consider the facts and circumstances surrounding the underlying issuer including, but not limited to,
the following:

•

Historic and implied volatility of the security;

Length of time and extent to which the fair value has been less than amortized cost;

Adverse conditions speciﬁcally related to the security or to speciﬁc conditions in an industry or
geographic area;

Failure, if any, of the issuer of the security to make scheduled payments; and

Recoveries or additional declines in fair value subsequent to the balance sheet date.

When assessing our intent to sell a ﬁxed maturity security or if it is more likely that we will be
required to sell a ﬁxed maturity security before recovery of its cost basis, we evaluate facts and circumstances
such as, but not limited to, decisions to reposition our security portfolio, sale of securities to meet cash ﬂow
needs and sales of securities to capitalize on favorable pricing. In order to determine the amount of the credit
loss for a ﬁxed maturity security, we calculate the recovery value by performing a discounted cash ﬂow
analysis based on the current cash ﬂows and future cash ﬂows we expect to recover. The discount rate is the
effective interest rate implicit in the underlying ﬁxed maturity security. The effective interest rate is the
original yield or the coupon if the ﬁxed maturity security was previously impaired. If an other-than-temporary
impairment (‘‘OTTI’’) exists and we have the intent to sell the security, we conclude that the entire OTTI is
credit-related and the amortized cost
fair value with a
corresponding charge to realized loss on our Consolidated Statements of Income. If we do not intend to sell a
ﬁxed maturity security or it is not more likely than not we will be required to sell a ﬁxed maturity security
before recovery of its amortized cost basis but the present value of the cash ﬂows expected to be collected is
less than the amortized cost of the ﬁxed maturity security (referred to as the credit loss), we conclude that an
OTTI has occurred and the amortized cost
is written down to the estimated recovery value with a
corresponding charge to realized loss on our Consolidated Statements of Income, as this is also deemed the
credit portion of the OTTI. The remainder of the decline to fair value is recorded to other comprehensive

the security is written down to current

for

F-11

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

2. Signiﬁcant Accounting Policies − (continued)

income (‘‘OCI’’), as an unrealized OTTI loss on our Consolidated Balance Sheets, as this is considered a
noncredit (i.e., recoverable) impairment.

Fair Value Measurements — Financial Accounting Standards Board (‘‘FASB’’) ASC Topic 820, ‘‘Fair
Value Measurements and Disclosures’’ (‘‘ASC 820’’) deﬁnes fair value as the price to sell an asset or transfer
a liability (i.e. the ‘‘exit price’’) in an orderly transaction between market participants. Additionally, ASC 820
establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and
minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available.
The hierarchy is broken down into three levels based on the reliability of inputs as follows:

•

Level 1 — Valuations based on unadjusted quoted market prices for identical assets or liabilities that
we have the ability to access. Valuation adjustments and block discounts are not applied to Level 1
instruments. Since valuations are based on quoted prices that are readily and regularly available in
an active market, valuation of these products does not entail a signiﬁcant degree of judgment.

Examples of assets and liabilities utilizing Level 1 inputs include: exchange-traded equity securities,

U.S. Treasury securities, and listed derivatives that are actively traded.

•

Level 2 — Valuations based on quoted prices for similar assets or liabilities in active markets, quoted
prices for identical 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.

Examples of assets and liabilities utilizing Level 2 inputs include: listed derivatives that are not actively
traded; U.S. government-sponsored agency securities; non-U.S. government obligations; corporate and
municipal bonds; mortgage-backed securities (‘‘MBS’’) and asset-backed securities (‘‘ABS’’); short-duration
high yield fund,
and
forward contracts).

foreign currency options

(‘‘OTC’’) derivatives

and over-the-counter

(e.g.

•

Level 3 — Valuations based on models where signiﬁcant inputs are not observable. The unobservable
inputs reﬂect our own assumptions about assumptions that market participants would use.

Examples of assets and liabilities utilizing Level 3 inputs include: insurance and reinsurance derivative
obligation

contracts;
(‘‘CLO’’) — equity tranche securities that are traded in less liquid markets.

collateralized

transparency;

funds with

partial

hedge

credit

loan

and

The availability of observable inputs can vary from ﬁnancial instrument to ﬁnancial instrument and is
affected by a wide variety of factors, including, for example, the type of ﬁnancial instrument, whether the
ﬁnancial instrument is new and not yet established in the marketplace, and other characteristics particular to
the transaction. To the extent
that valuation is based on models or inputs that are less observable or
unobservable in the market, the determination of fair value requires signiﬁcantly more judgment. Accordingly,
the degree of judgment exercised by management
in determining fair value is greatest for instruments
categorized in Level 3. We use prices and inputs that are current as of the measurement date. In periods of
market dislocation,
the observability of prices and inputs may be reduced for many instruments. This
condition could cause an instrument to be reclassiﬁed between levels.

For investments that have quoted market prices in active markets,

the Company uses the quoted
market prices as fair value and includes these prices in the amounts disclosed in the Level 1 hierarchy. The
Company receives the quoted market prices from third party, nationally, recognized pricing services (‘‘pricing
service’’). When quoted market prices are unavailable, the Company utilizes a pricing service to determine an
estimate. The fair value estimates are included in the Level 2 hierarchy. The Company will challenge any
prices for its investments which are considered to not represent fair value. If quoted market prices and an
estimate from a pricing service are unavailable, the Company produces an estimate of fair value based on

F-12

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

2. Signiﬁcant Accounting Policies − (continued)

dealer quotations for recent activity in positions with the same or similar characteristics to that being valued
or through consensus pricing of a pricing service. Depending on the level of observable inputs, the Company
will then determine if the estimate is Level 2 or Level 3 hierarchy. The Company bases its estimates of fair
values for assets on the bid price as it represents what a third party market participant would be willing to pay
in an arm’s length transaction.

Cash and Cash Equivalents — The Company maintains its cash accounts in several banks and brokerage
institutions. Cash equivalents consist of investments in money market funds and short-term investments with
an original maturity of 90 days or less and are stated at cost, which approximates fair value. Restricted cash
and cash equivalents are separately reported in the Consolidated Balance Sheets. Accordingly, changes in
restricted cash and cash equivalents are reported as an investing activity in our Consolidated Statements of
Cash Flows. The Company maintains certain cash and investments in Trust accounts to be used primarily as
collateral for unearned premiums and loss and loss adjustment expenses reserves owed to insureds. The
Company is required to maintain minimum balances in these accounts based on pre-determined formulas. See
Note 5(e) for additional details.

Premiums and Related Costs — For pro-rata contracts and excess-of-loss contracts where no deposit or
minimum premium is speciﬁed in the contract, written premium is recognized based on estimates of ultimate
premiums provided by the ceding companies. Initial estimates of written premium are recognized in the period
in which the underlying risks are incepted. Subsequent adjustments, based on reports of actual premium by the
ceding companies, or revisions in estimates, are recorded in the period in which they are determined.
Reinsurance premiums assumed are generally earned on a pro-rata basis over the terms of the underlying
policies or reinsurance contracts. Contracts and policies written on a ‘‘losses occurring’’ basis cover claims
that may occur during the term of the contract or policy, which is typically 12 months. Accordingly, the
premium is earned evenly over the term. Contracts which are written on a ‘‘risks attaching’’ basis cover
claims which attach to the underlying insurance policies written during the terms of such contracts. Premiums
earned on such contracts usually extend beyond the original
typically
resulting in recognition of premiums earned over a 24-month period. Reinsurance premiums on specialty risk
and extended warranty are earned based on the estimated program coverage period. These estimates are based
on the expected distribution of coverage periods by contract at inception, because a single contract may
contain multiple coverage period options and these estimates are revised based on the actual coverage period
selected by the original insured. Unearned premiums represent the portion of premiums written which is
applicable to the unexpired term of the contract or policy in force. These premiums can be subject
to
estimates based upon information received from ceding companies and any subsequent differences arising on
such estimates are recorded in the period in which they are determined.

term of the reinsurance contract,

The unearned portion of reinsurance purchased by the Company (retrocession or reinsurance premiums
ceded) is reported as prepaid reinsurance premiums and amortized over the contract period in proportion to
the amount of insurance protection provided. The ultimate amount of premiums, including adjustments, is
recognized as premiums ceded, and amortized over the applicable contract period to which they apply.
Reserves are established for the earned portion of premiums ceded and recorded as an asset called reinsurance
recoverable on unpaid losses. Premiums earned are reported net of reinsurance in the consolidated statements
of income.

Assumed and ceded reinsurance contracts that lack a signiﬁcant transfer of risk are treated as deposits.

Acquisition expenses represent the costs of writing business that vary with, and are primarily related to,
the production of insurance and reinsurance business. Policy and contract acquisition expenses, including
assumed commissions and other direct operating expenses are deferred and recognized as expense as related
premiums are earned. The Company considers anticipated investment income in determining the recoverability
of these costs and believes they are fully recoverable. A premium deﬁciency is recognized at a segment level

F-13

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

2. Signiﬁcant Accounting Policies − (continued)

the sum of anticipated losses and loss adjustment expenses, unamortized acquisition expenses and

if
anticipated investment income exceed unearned premium.

Loss and Loss Adjustment Expenses Incurred — Loss and loss adjustment expenses (‘‘LAE’’) represent
the estimated ultimate net costs of all reported and unreported losses incurred through December 31. The
reserve for loss and LAE is estimated using individual case-basis valuations and statistical analysis and is not
discounted. Although considerable variability is inherent
in the estimates of reserves for loss and LAE,
management believes that the reserve for loss and LAE is adequate. In estimating reserves, the Company
utilizes a variety of standard actuarial methods. The estimates are continually reviewed and adjusted as
necessary as experience develops or new information becomes known. Such adjustments are included in
current operations.

Capital Assets — Capital assets are recorded at cost. Maintenance and repairs are charged to operations
as incurred. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets,
as follows:

Furniture and ﬁxtures
Computer equipment and software
Vehicles
Leasehold improvements

3 − 7 years
3 years
3 years
Lease term

Business Combinations, Goodwill and Intangible Assets — A purchase price that is in excess of the fair
value of the net assets acquired arising from a business combination is recorded as goodwill, and is not
amortized. Other intangible assets with a ﬁnite life are amortized over the estimated useful life of the asset.
Other intangible assets with an indeﬁnite useful life are not amortized.

Goodwill and other indeﬁnite life intangible assets are tested for impairment on an annual basis or more
frequently if events or changes in circumstances indicate that the carrying amount may not be recoverable.
Deﬁnite life intangible assets are reviewed for indicators of impairment on an annual basis or more frequently
if events or changes in circumstances indicate that the carrying amount may not be recoverable, and tested for
impairment if appropriate. For purposes of the annual impairment evaluation, goodwill is assigned to the
applicable reporting unit of the acquired entities giving rise to the goodwill.

The Company has established October 1 as the date for performing its annual

tests. If
goodwill or other intangible assets are impaired, they are written down to their estimated fair values with a
corresponding loss reﬂected in the Company’s consolidated statements of income.

impairment

Income Taxes — The Company accounts for income taxes using FASB ASC Topic 740 ‘‘Income Taxes’’
for its subsidiaries operating in taxable jurisdictions. Deferred income taxes reﬂect the expected future tax
consequences of temporary differences between the carrying amounts of assets and liabilities for ﬁnancial
reporting purposes and amounts used for income tax purposes. A valuation allowance is recorded if it is more
likely than not that some or all of a deferred tax asset may not be realized. The Company considers future
taxable income and feasible tax planning strategies in assessing the need for a valuation allowance. In the
event the Company determines that it will not be able to realize all or part of its deferred income tax assets in
the future, an adjustment to the deferred income tax assets would be charged to income in the period in which
such determination is made. In addition, if the Company subsequently assesses that the valuation allowance is
no longer needed, a beneﬁt would be recorded to income in the period in which such determination is made.
U.S. GAAP allows for the recognition of tax beneﬁts of uncertain tax positions only where the position is
more likely than not to be sustained assuming examination by tax authorities. A liability is established for any
tax beneﬁt claimed in a tax return in excess of this threshold. Income tax related interest and penalties are
included as income tax expense.

F-14

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

2. Signiﬁcant Accounting Policies − (continued)

Share Compensation Expense — The Company recognizes the compensation expense for share option
grants, based on the fair value of the award on the date of grant, over the vesting period, which is the
requisite service period. The fair value of the grant will be amortized ratably over its vesting period as a
charge to compensation expense and an increase to additional paid in capital in Shareholders’ Equity.

Earnings Per Share — Basic earnings per share are computed based on the weighted-average number of
common shares outstanding. Dilutive earnings per share are computed using the weighted-average number of
common shares outstanding during the period adjusted for the dilutive impact of share options using the
treasury stock method.

Treasury Shares — Treasury shares are common shares

repurchased by the Company and not
subsequently cancelled. These shares are recorded at cost and result in a reduction of our shareholders’ equity
in the Consolidated Balance Sheets.

Foreign Currency Transactions — The functional currency of the Company and the substantial majority
of its subsidiaries is the U.S. dollar. For these companies, we translate monetary assets and liabilities
denominated in foreign currencies at year-end exchange rates, with the resulting foreign exchange gains and
losses recognized in the Consolidated Statements of Income. Revenues and expenses in foreign currencies are
converted at average exchange rates during the year. Monetary assets and liabilities include investments, cash
and cash equivalents, reinsurance balances receivable, reserve for loss and loss adjustment expenses and
accrued expenses and other liabilities. Accounts that are classiﬁed as non-monetary, such as deferred
acquisition and other acquisition costs and unearned premiums, are not revalued.

Assets and liabilities of subsidiaries and divisions, whose functional currency is not the U.S. dollar, are
translated at prevailing year-end exchange rates. Revenues and expenses of such foreign entities are translated
at average exchange rates during the year. The effects of the translation adjustments for foreign entities are
included in accumulated other comprehensive income. The amount of cumulative translation adjustment as at
December 31, 2011 was $322 (2010 — $(420)).

Recently Issued Accounting Pronouncements

Presentation of Comprehensive Income

In June 2011, the FASB issued updated guidance, Accounting Standards Update (‘‘ASU’’) 2011-05, to
increase the prominence of items reported in other comprehensive income by eliminating the option of
presenting components of comprehensive income as part of the statement of changes in shareholders’ equity.
The updated guidance requires that all non-owner changes in shareholders’ equity be presented either as a
single continuous statement of comprehensive income or in two separate but consecutive statements. Under
this guidance, an entity has the option to present the total of comprehensive income, the components of net
income, and the components of other comprehensive income either in a single continuous statement of
comprehensive income or in two separate but consecutive statements. The updated guidance is to be applied
retrospectively and is effective for the quarter ending March 31, 2012, except for the provision requiring
entities to present components of reclassiﬁcations of other comprehensive income on the face of the income
statement, which the FASB voted to defer indeﬁnitely during the fourth quarter of 2011. Early adoption is
permitted. The adoption of this guidance resulted in a change in the presentation of the Company’s ﬁnancial
statements but did not have any impact on the Company’s results of operations, ﬁnancial position or liquidity.

F-15

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

2. Signiﬁcant Accounting Policies − (continued)

Intangibles — Goodwill and Other: When to Perform Step 2 of the Goodwill Impairment Test for Reporting
Units with Zero or Negative Carrying Amounts

In December 2010, the FASB issued updated guidance that modiﬁes the goodwill impairment test. Under
the updated guidance, goodwill is tested for impairment using a two-step process. The ﬁrst step is to identify
potential impairments by comparing the estimated fair value of a reporting unit to its carrying value, including
goodwill. If the carrying value of a reporting unit exceeds the estimated fair value, a second step is performed
to measure the amount of impairment, if any. The second step is to determine the implied fair value of the
reporting unit’s goodwill, measured in the same manner as goodwill is recognized in a business combination,
and compare the implied fair value with the carrying amount of the goodwill. If the carrying amount exceeds
the implied fair value of the reporting unit’s goodwill, an impairment loss is recognized in an amount equal to
that excess.

The updated guidance requires that, if the carrying amount of a reporting unit becomes zero or negative,
the second step of the impairment test must be performed when it is more likely than not that a goodwill
impairment loss exists. In considering whether it is more likely than not that an impairment loss exists, a
company is required to evaluate qualitative factors, including the factors presented in existing guidance that
trigger an interim impairment test of goodwill (e.g., a signiﬁcant adverse change in business climate or an
anticipated sale of a reporting unit). The provisions of the guidance were effective for annual and interim
periods beginning after December 15, 2010. The adoption of this guidance in January 2011 did not have any
effect on the Company’s results of operations, ﬁnancial position or liquidity.

Accounting Standards Not Yet Adopted

Accounting for Costs Associated with Acquiring or Renewing Insurance Contracts

In October 2010, the FASB issued ASU 2010-26, which modiﬁes the deﬁnition of the types of costs
incurred by insurance entities that can be capitalized in the acquisition of new or renewal insurance contracts.
The amended guidance speciﬁes that certain costs incurred in the successful acquisition of new and renewal
insurance contracts should be capitalized. Those costs include incremental direct costs of contract acquisition
that result directly from and are essential to the contract transaction and would not have been incurred had the
contract transaction not occurred. All other acquisition-related costs, such as costs incurred for soliciting
business, administration, and unsuccessful acquisition or renewal efforts should be charged to expense as
incurred. Administrative costs,
including rent, depreciation, occupancy, equipment, and all other general
overhead costs are considered indirect costs and should also be charged to expense as incurred. ASU 2010-26
will be effective for ﬁscal periods beginning on or after December 15, 2011 with prospective or retrospective
impact on the
application permitted. The Company does not expect
Company’s consolidated ﬁnancial statements.

this standard to have a material

Transfers and Servicing: Reconsideration of Effective Control for Repurchase Agreement

In April 2011,

the FASB amended its guidance on accounting for

repurchase agreements. The
amendments simplify the accounting by eliminating the requirement that the transferor demonstrate it has
adequate collateral to fund substantially all the cost of purchasing replacement assets. Under the amended
guidance, a transferor maintains effective control over transferred ﬁnancial assets (and thus accounts for the
transfer as a secured borrowing) if there is an agreement that both entitles and obligates the transferor to
repurchase the ﬁnancial assets before maturity and if all of the following conditions previously required are
met; (i) ﬁnancial assets to be repurchased or redeemed are the same or substantially the same as those
transferred, (ii) repurchase or redemption date before maturity at a ﬁxed or determinable price, and (iii) the
agreement is entered into contemporaneously with, or in contemplation of, the transfer. As a result, more
arrangements could be accounted for as secured borrowings rather than sales. The updated guidance is
effective on a prospective basis for interim and annual reporting periods beginning on or after December 15,

F-16

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

2. Signiﬁcant Accounting Policies − (continued)

2011, early adoption is prohibited. We are currently evaluating the impact of the adoption of this new
guidance on our consolidated results of operations and ﬁnancial condition.

Amendments to Achieve Common Fair Value Measurements and Disclosure Requirements in U.S. GAAP
and IFRS

In May 2011, the FASB issued updated guidance that addresses the objective of the FASB and the
International Accounting Standards Board (‘‘IASB’’) to develop common requirements for measuring and for
disclosing information about fair value measurements with U.S. GAAP and International Financial Reporting
Standards (‘‘IFRS’’). The FASB and the IASB worked together to ensure that fair value has the same meaning
in U.S. GAAP and IFRS and that their respective fair value measurement and disclosure requirements are the
same (except for minor differences in wording and style). The FASB and the IASB concluded that this
guidance will
fair value measurements presented and disclosed in ﬁnancial
statements prepared in accordance with U.S. GAAP and IFRS. The guidance explains how to measure fair
value. This updated guidance does not require additional fair value measurements and are not intended to
establish valuation standards or affect valuation practices outside of ﬁnancial reporting. The updated guidance
is effective during interim and annual periods after December 15, 2011. Early application is not permitted. The
adoption of this guidance is not expected to have any effect on the Company’s results of operations, ﬁnancial
position or liquidity.

improve comparability of

Intangibles — Goodwill and Other: Testing Goodwill for Impairment

In September 2011, the FASB issued updated guidance on goodwill impairment that gives companies the
option to perform a qualitative assessment that may allow them to skip the annual two-step test and reduce
costs. Under the new guidance, an entity has the option to ﬁrst assess qualitative factors to determine whether
the existence of events or circumstances leads to a determination that it is more likely than not that the fair
value of a reporting unit
is less than its carrying amount. If, after assessing the totality of events or
circumstances, an entity determines it is not more likely than not that the fair value of a reporting unit is less
than its carrying amount, then performing the two-step impairment test is unnecessary. The FASB provided a
sample list of events and circumstances that an entity can consider in performing its qualitative assessment.
Under the amended guidance, an entity has the option to bypass the qualitative assessment and proceed
directly to performing the ﬁrst step of the two-step goodwill impairment test and may resume performing the
in any subsequent period. The amendments are effective for annual and interim
qualitative assessment
goodwill impairment tests performed for ﬁscal years beginning after December 15, 2011. Early adoption is
permitted. The adoption of this guidance is not expected to have any effect on the Company’s results of
operations, ﬁnancial position or liquidity.

3. Segment Information

The Company currently operates three business segments, Diversiﬁed Reinsurance, AmTrust Quota Share
Reinsurance and the ACAC Quota Share. The Company evaluates segment performance based on segment
proﬁt separately from the results of our investment portfolio. Other operating expenses allocated to the
segments are called General and Administrative expenses which are allocated on an actual basis except
salaries and beneﬁts where management’s judgment
the Company does not allocate general
corporate expenses to the segments. In determining total assets by segment the Company identiﬁes those
assets that are attributable to a particular segment such as reinsurance balances receivable, funds withheld,
prepaid reinsurance premiums, reinsurance recoverable on unpaid losses, deferred commission and other
acquisition expenses, loans, goodwill and intangible assets, and restricted cash and investments. All remaining
assets are allocated to Corporate.

is applied;

The fee-generating business associated with the IIS Acquisition (‘‘IIS Fee Business’’) which is included
in the Diversiﬁed Reinsurance segment, is considered part of the underwriting operations of the Company.
Certain portions of the IIS Fee Business are directly associated with the underlying reinsurance contracts

F-17

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

3. Segment Information − (continued)

recorded in the Diversiﬁed Reinsurance segment. To the extent that the fees are generated on underlying
insurance contracts sold to third parties that are then ceded under quota share reinsurance contracts to Maiden
Bermuda, a proportionate share of the fee is offset against the related acquisition expense. To the extent that
IIS Fee Business is not directly associated with premium revenue generated under the applicable reinsurance
contracts, that fee revenue is separately reported on the line captioned ‘‘Other insurance revenue’’ in the
Company’s Consolidated Statements of Income.

The following tables summarize the underwriting results of our operating segments:

For the Year Ended December 31, 2011
Net premiums written. . . . . . . . . . . . . .
Net premiums earned . . . . . . . . . . . . . .
Other insurance revenue . . . . . . . . . . . .
Net loss and loss adjustment expenses . .
Commission and other acquisition

expenses . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses. . . .
Underwriting income . . . . . . . . . .

Reconciliation to net income

attributable to Maiden shareholders
Net investment income and realized

and unrealized gains on investment .
Amortization of intangible assets . . . . . .
Foreign exchange gains . . . . . . . . . . . .
Interest and amortization expenses . . . . .
Accelerated amortization of junior
subordinated debt discount and
issuance cost . . . . . . . . . . . . . . . . . .

Junior subordinated debt repurchase

expense . . . . . . . . . . . . . . . . . . . . .

Other general and administrative

expenses . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . .
Income attributable to noncontrolling

interest . . . . . . . . . . . . . . . . . . . . . .

Net income attributable to Maiden

shareholders. . . . . . . . . . . . . . . . . .

Net loss and loss expense ratio* . . . . . .
Acquisition cost ratio** . . . . . . . . . . . .
General and administrative expense

ratio*** . . . . . . . . . . . . . . . . . . . . .
Combined ratio**** . . . . . . . . . .

Diversiﬁed
Reinsurance
$ 798,037
$ 748,387
12,640
(502,375)

AmTrust
Quota Share
Reinsurance
$ 669,283
$ 558,197
—
(380,263)

ACAC
Quota Share
$ 256,201
$ 245,844
—
(160,416)

Total
$ 1,723,521
$ 1,552,428
12,640
(1,043,054)

(200,239)
(36,374)
$ 22,039

(160,522)
(2,283)
$ 15,129

(78,051)
(1,635)
5,742

(438,812)
(40,292)
42,910

75,372
(5,033)
323
(34,155)

(20,313)

(15,050)

(13,600)
(1,927)

(3)

28,524

66.0%
26.3%

4.8%
97.1%

68.1%
28.8%

0.4%
97.3%

65.3%
31.7%

0.7%
97.7%

66.6%
28.0%

3.5%
98.1%

F-18

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

3. Segment Information − (continued)

For the Year Ended December 31, 2010
Net premiums written. . . . . . . . . . . . . .
Net premiums earned . . . . . . . . . . . . . .
Net loss and loss adjustment expenses . .
Commission and other acquisition

expenses . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses. . . .
Underwriting income . . . . . . . . . .

Reconciliation to net income
attributable to Maiden
Net investment income and realized

and unrealized gains on investment .
Amortization of intangible assets . . . . . .
Foreign exchange losses . . . . . . . . . . . .
Interest and amortization expenses . . . . .
Other general and administrative

expenses . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . .
Loss attributable to noncontrolling

interest . . . . . . . . . . . . . . . . . . . . . .

Net income attributable to Maiden

shareholders. . . . . . . . . . . . . . . . . .

Net loss and loss expense ratio* . . . . . .
Acquisition cost ratio** . . . . . . . . . . . .
General and administrative expense

ratio*** . . . . . . . . . . . . . . . . . . . . .
Combined ratio**** . . . . . . . . . .

Diversiﬁed
Reinsurance
$ 554,049
$ 601,254
(394,604)

AmTrust
Quota Share
Reinsurance
$ 468,043
$ 445,081
(280,890)

ACAC
Quota Share
$205,739
$123,455
(79,628)

Total
$1,227,831
$1,169,790
(755,122)

(152,698)
(26,123)
$ 27,829

(144,655)
(1,500)
$ 18,036

(39,344)
(243)
4,240

(336,697)
(27,866)
50,105

78,255
(5,808)
(580)
(36,466)

(14,314)
(1,330)

69,866

64.6%
28.8%

3.5%
96.9%

65.6%
25.4%

4.4%
95.4%

63.1%
32.5%

0.3%
95.9%

64.5%
31.9%

0.2%
96.6%

F-19

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

3. Segment Information − (continued)

For the Year Ended December 31, 2009
Net premiums written. . . . . . . . . . . . . .
Net premiums earned . . . . . . . . . . . . . .
Net loss and loss adjustment expenses . .
Commission and other acquisition

expenses . . . . . . . . . . . . . . . . . . . . .
General and administrative expenses. . . .
Underwriting income . . . . . . . . . .

Reconciliation to net income
attributable to Maiden
Net investment income and realized

and unrealized gains on investment .
Amortization of intangible assets . . . . . .
Foreign exchange and other gains . . . . .
Interest and amortization expenses . . . . .
Other general and administrative

expenses . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . .
Net income attributable to Maiden

shareholders. . . . . . . . . . . . . . . . . .

Net loss and loss expense ratio* . . . . . .
Acquisition cost ratio** . . . . . . . . . . . .
General and administrative expense

ratio*** . . . . . . . . . . . . . . . . . . . . .
Combined ratio**** . . . . . . . . . .

Diversiﬁed
Reinsurance
$ 658,016
$ 567,998
(393,760)

AmTrust
Quota Share
Reinsurance
$ 372,358
$ 351,921
(214,853)

ACAC
Quota Share
$ —
$ —
—

(126,193)
(19,211)
$ 28,834

(115,236)
(2,515)
$ 19,317

—
—
$ —

Total
$1,030,374
$ 919,919
(608,613)

(241,429)
(21,726)
48,151

63,227
(6,590)
2,454
(34,431)

(10,409)
(1,344)

61,058

69.3%
22.2%

3.4%
94.9%

61.1%
32.7%

0.7%
94.5%

—%
—%

66.2%
26.2%

3.5%
95.9%

***

loss and loss adjustment expenses by net premiums earned and other

Calculated by dividing net
insurance revenue.
Calculated by dividing commission and other acquisition expenses by net premiums earned and other
insurance revenue.
Calculated by dividing general and administrative expenses by net premiums earned and other
insurance revenue

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

administrative expense ratio.

F-20

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

3. Segment Information − (continued)

Diversiﬁed
Reinsurance

AmTrust
Quota Share
Reinsurance

ACAC
Quota Share

Total

As at December 31, 2011
Reinsurance balances receivable, net . . . . . . $ 203,925
42,605
Funds withheld . . . . . . . . . . . . . . . . . . . .
35,381
Prepaid reinsurance premiums . . . . . . . . . .
Reinsurance recoverable on unpaid losses. . .
20,289
Deferred commission and other acquisition

expenses . . . . . . . . . . . . . . . . . . . . . . .
98,712
Loan to related party. . . . . . . . . . . . . . . . .
—
Goodwill and intangible assets, net . . . . . . .
98,755
Restricted investments and cash . . . . . . . . .
1,063,010
2,429
Corporate and other assets . . . . . . . . . . . . .
Total Assets . . . . . . . . . . . . . . . . . . . . . . $1,565,106

As at December 31, 2010
Reinsurance balances receivable, net . . . . . . $ 131,109
152,713
Funds withheld . . . . . . . . . . . . . . . . . . . .
28,992
Prepaid reinsurance premiums . . . . . . . . . .
Reinsurance recoverable on unpaid losses. . .
6,656
Deferred commission and other acquisition

85,252
expenses . . . . . . . . . . . . . . . . . . . . . . .
—
Loan to related party. . . . . . . . . . . . . . . . .
103,905
Goodwill and intangible assets, net . . . . . . .
1,136,252
Restricted investments and cash . . . . . . . . .
Corporate and other assets . . . . . . . . . . . . .
88
Total Assets . . . . . . . . . . . . . . . . . . . . . . $1,644,967

$102,003
—
—
—

120,369
167,975
—
461,216
—
$851,563

$ 25,566
—
—
—

92,155
167,975
—
358,621
—
$644,317

$ 76,742
—
—
—

29,355
—
—
62,017
—
$168,114

$ 69,658
—
—
—

26,224
—
—
23,979
—
$119,861

$ 382,670
42,605
35,381
20,289

248,436
167,975
98,755
1,586,243
772,072
$3,354,426

$ 226,333
152,713
28,992
6,656

203,631
167,975
103,905
1,518,852
573,505
$2,982,562

The following table shows an analysis of the Company’s gross and net premiums written and earned by
geographic location. In case of business assumed from AmTrust Financial Services, Inc. (‘‘AmTrust’’), it is the
location of the relevant AmTrust subsidiaries.

For the Year Ended December 31,
2010
$1,098,672
199,383
1,028,518
199,313
1,038,859
130,931

2009
$947,371
101,305
929,069
101,305
838,152
81,767

2011
$1,400,114
412,483
1,317,265
406,256
1,194,628
357,800

Gross premiums written − North America . . . . . . . . . . . . . . .
Gross premiums written − Other (predominantly Europe) . . . . .
Net premiums written − North America . . . . . . . . . . . . . . . . .
Net premiums written − Other (predominantly Europe) . . . . . .
Net premiums earned − North America . . . . . . . . . . . . . . . . .
Net premiums earned − Other (predominantly Europe). . . . . . .

F-21

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

3. Segment Information − (continued)

The following tables set forth ﬁnancial information relating to net premiums written by major line of

business for the years ended December 31, 2011, 2010 and 2009:

2011

For the Year Ended December 31,
2010

2009

Total

% of Total

Total

% of Total

Total

% of Total

Net premiums written
Diversiﬁed Reinsurance
Property . . . . . . . . . . . . . . . . $ 207,993
441,666
Casualty . . . . . . . . . . . . . . . .
42,604
Accident and Health. . . . . . . .
105,774
International . . . . . . . . . . . . .

Total Diversiﬁed

12.1% $ 168,919
311,852
25.6%
43,658
2.5%
29,620
6.1%

13.8% $ 165,705
387,218
25.4%
105,093
3.5%
—
2.4%

16.1%
37.6%
10.2%
—%

Reinsurance . . . . . . . . . .

798,037

46.3%

554,049

45.1%

658,016

63.9%

AmTrust Quota Share

Reinsurance

Small Commercial Business . .
Specialty Program . . . . . . . . .
Specialty Risk and Extended

Warranty . . . . . . . . . . . . . .
Total AmTrust Quota Share

237,560
93,701

13.8%
5.4%

197,097
73,881

16.0%
6.0%

186,473
58,048

18.1%
5.6%

338,022

19.6%

197,065

16.1%

127,837

12.4%

Reinsurance . . . . . . . . . .

669,283

38.8%

468,043

38.1%

372,358

36.1%

ACAC Quota Share
Automobile Liability . . . . . . .
Automobile Physical Damage .
Total ACAC Quota Share . .

147,362
108,839
256,201
$1,723,521

117,962
8.6%
87,777
6.3%
14.9%
205,739
100.0% $1,227,831

—
9.6%
—
7.2%
16.8%
—
100.0% $1,030,374

—%
—%
—%
100.0%

F-22

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

3. Segment Information − (continued)

The following tables set forth ﬁnancial information relating to net premiums earned by major line of

business for the years ended December 31, 2011, 2010 and 2009:

2011

For the Year Ended December 31,
2010

2009

Total

% of Total

Total

% of Total

Total

% of Total

Net premiums earned
Diversiﬁed Reinsurance
Property . . . . . . . . . . . . . . . . $ 196,947
395,533
Casualty . . . . . . . . . . . . . . . .
43,210
Accident and Health. . . . . . . .
112,697
International . . . . . . . . . . . . .

Total Diversiﬁed

12.7% $ 176,538
356,389
25.5%
62,954
2.8%
5,373
7.3%

15.1% $146,783
316,676
30.5%
104,539
5.4%
—
0.5%

15.9%
34.4%
11.4%
—%

Reinsurance . . . . . . . . . .

748,387

48.3%

601,254

51.5%

567,998

61.7%

AmTrust Quota Share

Reinsurance

Small Commercial Business . .
Specialty Program . . . . . . . . .
Specialty Risk and Extended

Warranty . . . . . . . . . . . . . .
Total AmTrust Quota Share

215,941
81,281

13.9%
5.2%

202,716
71,596

17.3%
6.1%

199,020
52,842

21.6%
5.8%

260,975

16.8%

170,769

14.6%

100,059

10.9%

Reinsurance . . . . . . . . . .

558,197

35.9%

445,081

38.0%

351,921

38.3%

ACAC Quota Share
Automobile Liability . . . . . . .
Automobile Physical Damage .
Total ACAC Quota Share . .

4. Acquisitions

IIS Acquisition

141,173
104,671
245,844
$1,552,428

9.1%
69,444
6.7%
54,011
123,455
15.8%
100.0% $1,169,790

5.9%
—
4.6%
—
—
10.5%
100.0% $919,919

—%
—%
—%
100.0%

On November 30, 2010, the Company completed its acquisition of certain companies, businesses and
assets comprising the international
insurance services business of GMAC Insurance Holdings Ltd. (the
‘‘IIS Acquisition’’), including renewal rights on nearly $100 million of predominantly personal auto quota
share reinsurance as well as the supporting business development subsidiaries in Europe. The transaction
includes the assumption of more than $100 million of loss reserves and net unearned premiums as well as the
corresponding assets, and was funded through existing cash. The businesses primarily focus on providing
branded auto and auto-related insurance products through its insurer partners to retail customers in the
European Union and other global markets.

The IIS Acquisition also includes the acquisition of GMAC Life Försäkrings AB (‘‘GMAC LF’’), a life
insurance company organized under the laws of Sweden which writes credit life insurance on a primary basis.
GMAC LF was renamed Maiden Life Försäkrings AB (‘‘Maiden LF’’).

Under the terms of the acquisition, the Company acquired 100% of the share capital and net assets of
GMAC LF, GMAC Australia (Finance) Limited, GMAC VersicherungService GmBH (subsequently renamed
Opel Händler VersicherungsService GmbH (‘‘OVS’’) following a cooperation agreement being entered into
in Germany and the German auto
with VDOH Wirtschaftsdienst GmbH (‘‘Opel Dealer Association’’)
manufacturer Opel in exchange for a 10% interest in OVS) and 60% of the share capital and net assets of

F-23

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

4. Acquisitions − (continued)

GMAC VersicherungService GmBH Austria. The agreement provided for a base purchase cost of $4,000
adjustable based on the renewal premium written net of commissions over the next three years plus an amount
equal to the net assets of the acquired entities.

The Company ﬁnalized the purchase price allocation in 2011 which resulted in a total consideration of
$21,632 (2010 estimate — $22,274). The Company recorded goodwill of $5,695 (2010 estimate — $5,812)
and incurred non-recurring acquisition expenses of $1,841 as a result of the acquisition. The results of the
operations have been included in the Company’s consolidated ﬁnancial statements since the acquisition date.
The cost of acquisition was allocated to the assets acquired and liabilities assumed based on estimated fair
values as at the acquisition date, with the amount exceeding the fair value recorded as goodwill.

The fair value of the net assets acquired is summarized as follows:

Cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fixed maturity investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reserve for loss and loss adjustment expenses . . . . . . . . . . . . . . . . .
Unearned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities. . . . . . . . . . . . . . . . . . . . . . .
Liabilities acquired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total purchase price. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011 Actual
$14,971
450
13,480
303
5,695
34,899
4,739
5,454
3,074
13,267
$21,632

2010 Estimate
$15,595
469
13,999
191
5,812
36,066
3,192
5,665
4,935
13,792
$22,274

In conjunction with the IIS Acquisition on November 30, 2010, Maiden Bermuda and GMAC
International Insurance Company Ltd. (‘‘GMAC International Insurance’’) entered into a loss portfolio transfer
and quota share reinsurance agreement under which Maiden Bermuda reinsured 100% of the existing contracts
written by GMAC International Insurance in respect of the businesses acquired in the IIS Acquisition. As a
result of the agreement, Maiden Bermuda assumed estimated liabilities of $122,574. The loss portfolio transfer
and quota share reinsurance agreement required Maiden Bermuda to fund the existing funds withheld
collateral arrangements of GMAC International Insurance and its cedants. The initial funds withheld collateral
requirements were $140,520 and Maiden Bermuda transferred cash on closing in the amount of $26,204 in
order to meet such collateral requirements.

The effect of the IIS Acquisition on premiums and losses for the year ended December 31, 2010 was

as follows:

Results of operations:
Net premium written − assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in unearned premium − assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net earned premium − assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss and loss adjustment expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the
Year Ended
December 31,
2010
$ 29,620
(24,247)
5,373
(4,217)

F-24

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

5. Investments

a) Fixed Maturities and Other Investments

The original or amortized cost, estimated fair value and gross unrealized gains and losses of

available-for-sale ﬁxed maturities and other investments as at December 31, 2011 and 2010, are as follows:

Original or
amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

As at December 31, 2011
Available-for-sale securities:
U.S. treasury bonds . . . . . . . . . . . . . . .
U.S. agency bonds − mortgage-backed . .
U.S. agency bonds − other . . . . . . . . . .
Non-U.S. government bonds . . . . . . . . .
Other mortgage-backed securities. . . . . .
Corporate bonds . . . . . . . . . . . . . . . . .
Municipal bonds . . . . . . . . . . . . . . . . .

Total available-for-sale ﬁxed

44,175
928,944
10,374
51,405
9,919
743,951
168,338

maturities . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . .
Total investments . . . . . . . . . . . . . .

1,957,106
1,955
$1,959,061

As at December 31, 2010
Available-for-sale securities:
U.S. treasury bonds . . . . . . . . . . . . . . .
U.S. agency bonds − mortgage-backed . .
U.S. agency bonds − other . . . . . . . . . .
Non-U.S. government bonds . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . .
Municipal bonds . . . . . . . . . . . . . . . . .

Total available-for-sale ﬁxed

92,043
951,465
41,770
15,494
673,756
45,247

maturities . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . .
Total investments . . . . . . . . . . . . . .

1,819,775
5,751
$1,825,526

$ 1,774
43,230
622
78
1
47,726
728

94,159
318
$94,477

$ 1,108
22,351
1,638
444
46,647
441

72,629
96
$72,725

Original or
amortized
cost

Gross
unrealized
gains

Fair
value

45,949
972,099
10,996
51,198
9,920
761,433
169,066

2,020,661
2,192
$2,022,853

Fair
value

91,729
969,468
43,408
15,938
708,993
44,897

1,874,433
5,847
$1,880,280

—
(75)
—
(285)
—
(30,244)
—

(30,604)
(81)
$(30,685)

Gross
unrealized
losses

$ (1,422)
(4,348)
—
—
(11,410)
(791)

(17,971)
—
$(17,971)

As at December 31, 2011
Maturity
Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after one year through ﬁve years . . . . . . . . . . . . . . . . . . .
Due after ﬁve years through ten years . . . . . . . . . . . . . . . . . . .
Due after ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Mortgage-backed securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortized
cost

Fair
value

% of Total
fair value

54,544
315,015
469,574
179,110
1,018,243
938,863
$1,957,106

54,281
299,922
502,833
181,606
1,038,642
982,019
$2,020,661

2.7%
14.8%
24.9%
9.0%
51.4%
48.6%
100.0%

F-25

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

5. Investments − (continued)

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:

Fair
value

As at December 31, 2011
Available-for-sale securities:
U.S. agency bonds − mortgage-backed . $ 30,447
42,552
Non-U.S. government bonds . . . . . . . .
228,444
Corporate bonds . . . . . . . . . . . . . . . .
301,443
1,214

Other investments . . . . . . . . . . . . . . .
Total temporarily impaired

Less than 12 Months

Unrealized
losses

12 Months or More
Fair
value

Unrealized
losses

Total

Fair
value

Unrealized
losses

(75)
(285)
(7,414)
(7,774)
(81)

— $
—
125,089
125,089
—

— $ 30,447
42,552
—
353,533
(22,830)
426,532
(22,830)
1,214
—

(75)
(285)
(30,244)
(30,604)
(81)

available-for-sale securities and
other investments . . . . . . . . . . . . . . $302,657

$(7,855)

$125,089

$(22,830) $427,746

$(30,685)

As at December 31, 2011, there were approximately 62 securities in an unrealized loss position with a
fair value of $427,746 and unrealized losses of $30,685. Of these securities, there are 8 securities that have
been in an unrealized loss position for 12 months or greater with a fair value of $125,089 and unrealized
losses of $22,830.

Fair
value

As at December 31, 2010
Available-for-sale securities:
U.S. treasury bonds . . . . . . . . . . . . . . $ 47,165
315,370
U.S. agency bonds − mortgage-backed .
86,976
U.S. agency bonds − other. . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . .
27,315
Total temporarily impaired

available-for-sale securities and
other investments . . . . . . . . . . . . . . $476,826

Less than 12 Months

Unrealized
losses

12 Months or More
Fair
value

Unrealized
losses

Total

Fair
value

Unrealized
losses

$(1,422)
(4,348)
(1,555)
(791)

— $ — $ 47,165
— 315,370
—
253,038
166,062
27,315
—

(9,855)
—

$ (1,422)
(4,348)
(11,410)
(791)

$(8,116)

$166,062

$(9,855)

$642,888

$(17,971)

As at December 31, 2010, there were approximately 32 securities in an unrealized loss position with a
fair value of $642,888 and unrealized losses of $17,971. Of these securities, there are 9 securities that have
been in an unrealized loss position for 12 months or greater with a fair value of $166,062 and unrealized
losses of $9,855.

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 at December 31, 2011, 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 years ended December 31, 2011, 2010 and 2009, the Company recognized no OTTI. Based
on our qualitative and quantitative OTTI review of each asset class within our ﬁxed maturity portfolio, the
remaining unrealized losses on ﬁxed maturities at December 31, 2011, were primarily due to widening of
credit spreads relating to the market illiquidity, rather than credit events. Because we do not intend to sell
these securities and it is not more likely than not that we will be required to sell these securities until a

F-26

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

5. Investments − (continued)

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 December 31, 2011.

The following summarizes the credit ratings of our ﬁxed maturities:

Rating* as at December 31, 2011
U.S. treasury bonds . . . . . . . . . . . . . . . . . . . . . . .
U.S. agency bonds . . . . . . . . . . . . . . . . . . . . . . . .
AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AA+, AA, AA- . . . . . . . . . . . . . . . . . . . . . . . . . .
A+, A, A- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BBB+, BBB, BBB- . . . . . . . . . . . . . . . . . . . . . . .
BB+ or lower . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rating* as at December 31, 2010
U.S. treasury bonds . . . . . . . . . . . . . . . . . . . . . . .
U.S. agency bonds . . . . . . . . . . . . . . . . . . . . . . . .
AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AA+, AA, AA- . . . . . . . . . . . . . . . . . . . . . . . . . .
A+, A, A- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BBB+, BBB, BBB- . . . . . . . . . . . . . . . . . . . . . . .
BB+ or lower . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortized
cost
44,175
939,318
160,319
150,961
327,794
316,150
18,389
$1,957,106

Amortized
cost
92,043
993,235
74,683
74,479
325,252
222,496
37,587
$1,819,775

Fair
value
45,949
983,095
161,945
153,303
328,448
330,156
17,765
$2,020,661

Fair
value
91,729
1,012,876
78,427
79,445
329,100
244,126
38,730
$1,874,433

% of Total
fair value
2.3%
48.6%
8.0%
7.6%
16.3%
16.3%
0.9%
100.0%

% of Total
fair value
4.9%
54.0%
4.2%
4.2%
17.6%
13.0%
2.1%
100.0%

Ratings as assigned by Standard & Poor’s (‘‘S&P’’)

b) Other Investments

The table below shows our portfolio of other investments:

As at December 31,
Hedge funds . . . . . . . . . . . . . . . . . .
Investment in limited partnerships . . .
Total other investments . . . . . . . .

2011

2010

$ —
2,192
$2,192

—%
100.0%
100.0%

$4,846
1,001
$5,847

82.9%
17.1%
100.0%

The Company has an unfunded commitment on its investment in limited partnerships of approximately

$3,808 as at December 31, 2011.

F-27

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

5. Investments − (continued)

c) Net Investment Income

Net investment income was derived from the following sources:

For the Year Ended December 31,
Fixed maturities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . .
Funds withheld . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan to related party . . . . . . . . . . . . . . . . . . . . . . . .

Less:
Investment expenses . . . . . . . . . . . . . . . . . . . . . . . .
Interest expense on securities sold under agreements to
repurchase. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011
$72,050
925
4,235
1,925
79,135

2010
$71,607
1,680
407
1,996
75,690

2009
$51,025
13,236
—
2,361
66,622

(3,488)

(2,992)

(2,685)

(756)
$74,891

(1,047)
$71,651

(980)
$62,957

d) Realized and Unrealized Gains (Losses) on Investment

Realized gains or losses on the sale of investments are determined on the basis of the ﬁrst in ﬁrst out
cost method and include any adjustments to the cost basis of investments for declines in value that are
considered to be other-than-temporary. The Company maintained one open position in a U.S. Treasury Bond
sold but not yet purchased valued at $55,830 which resulted in an unrealized loss of $3,532, which is
recorded in net realized and unrealized gains on investment on the Company’s Consolidated Statement of
Income for the year ended December 31, 2011. This short position is recorded as a liability in Accrued
expenses and other liabilities on the Company’s Consolidated Balance Sheet as at December 31, 2011. The
following provides an analysis of net realized and unrealized gains on investment:

For the Year Ended December 31, 2011
Available-for-sale securities . . . . . . . . . . . . . . . . . .
Trading securities and short sales . . . . . . . . . . . . . .
Other investments. . . . . . . . . . . . . . . . . . . . . . . . .
Net realized gains . . . . . . . . . . . . . . . . . . . . . . . .
Unrealized losses on short sales . . . . . . . . . . . . . . .
Net realized and unrealized gains on investment . .

For the Year Ended December 31, 2010
Available-for-sale securities . . . . . . . . . . . . . . . . . .
Trading securities and short sales . . . . . . . . . . . . . .
Other investments. . . . . . . . . . . . . . . . . . . . . . . . .
Net realized gains on investment . . . . . . . . . . . . .

For the Year Ended December 31, 2009
Available-for-sale securities . . . . . . . . . . . . . . . . . .
Other investments. . . . . . . . . . . . . . . . . . . . . . . . .
Net realized gains on investment . . . . . . . . . . . . .

Gross gains
$5,091
2,709
43
7,843
—
$7,843

Gross gains
$10,372
6,372
—
$16,744

Gross gains
$4,896
—
$4,896

Gross losses
$(1,812)
(1,902)
(116)
(3,830)
(3,532)
$(7,362)

Gross losses
$ (1,976)
(7,915)
(249)
$(10,140)

Gross losses
$(4,505)
(121)
$(4,626)

Net
$ 3,279
807
(73)
4,013
(3,532)
481

Net
$ 8,396
(1,543)
(249)
$ 6,604

Net
$ 391
(121)
$ 270

Proceeds from sales of ﬁxed maturities classiﬁed as available-for-sale were $304,499, $331,593 and

$200,493 for the years ended December 31, 2011, 2010 and 2009, respectively.

F-28

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

5. Investments − (continued)

Net unrealized gains (losses) were as follows:

As at December 31,
Available-for-sale securities. . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Total net unrealized gains . . . . . . . . . . . . . . . . . . . . .
Deferred income tax expense. . . . . . . . . . . . . . . . . . .
Net unrealized gains, net of deferred income tax . . . . .

Change in net unrealized gains, net of deferred income
tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011
$63,555
237
63,792
(55)
$63,737

2010
$54,658
96
54,754
—
$54,754

2009
$38,310
(135)
38,175
(5,428)
$32,747

$ 8,983

$22,007

$77,246

e) 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 highly rated ﬁxed maturity securities. The fair value of our restricted
assets was as follows:

As at December 31,
Restricted cash − third party agreements . . . . . . . . . . . . . . . . . . . .
Restricted cash − related party agreements . . . . . . . . . . . . . . . . . . .
Restricted cash − U.S. state regulatory authorities . . . . . . . . . . . . . .
Total restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted investments − in trust for third party agreements at fair

2011
67,627
46,729
539
114,895

2010
59,615
29,743
398
89,756

value (Amortized cost: 2011 − $950,103; 2010 − $1,024,895) . . . .

972,130

1,053,982

Restricted investments − in trust for related party agreements at fair

value (Amortized cost: 2011 − $458,105; 2010 − $339,810) . . . . .

485,468

361,424

Restricted investments − in trust for U.S. state regulatory authorities

(Amortized cost: 2011 − $12,862; 2010 − $13,198) . . . . . . . . . . .
Total restricted investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total restricted cash and investments . . . . . . . . . . . . . . . . . . .

13,750
1,471,348
$1,586,243

13,690
1,429,096
$1,518,852

f) Other

Securities sold but not yet purchased represent obligations of the Company to deliver the speciﬁed
security at the contracted price and, thereby, create a liability to purchase the security in the market at
prevailing prices. The Company’s liability for securities to be delivered is measured at their fair value and as
at December 31, 2011 were $55,830 for a U.S. Treasury bond. This amount is included in accrued expenses
and other liabilities in the Consolidated Balance Sheets. Collateral of an equivalent amount has been pledged
to the clearing broker.

The Company also enters into repurchase agreements. The agreements are accounted for as collateralized
borrowing transactions and are recorded at contract amounts. The Company receives cash or securities, that it
invests or holds in short term or ﬁxed income securities. During the year, the Company repaid the entire
balance outstanding of $76,225. Interest expense associated with these repurchase agreements was $756 for
the year ended December 31, 2011 (2010 — $1,047, 2009 — $980); out of which $0 was accrued as at
December 31, 2011 (2010 — $702).

F-29

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

6. Fair Value Measurements

a) Fair Values of Financial Instruments

ASC 825, ‘‘Disclosure about Fair Value of Financial Instruments,’’ requires all entities to disclose the fair
value of their ﬁnancial instruments, both assets and liabilities recognized and not recognized in the balance
sheet, for which it is practicable to estimate fair value.

The following describes the valuation techniques used by the Company to determine the fair value of

ﬁnancial instruments held as at December 31, 2011.

U.S. Government and U.S. Government agencies: Comprised primarily of bonds issued by the
U.S. Treasury, the Federal Home Loan Bank, the Federal Home Loan Mortgage Corporation, Government
National Mortgage Association and the Federal National Mortgage Association. The fair values of
U.S. government securities are based on quoted market prices in active markets, and are included in the
Level 1 fair value hierarchy. We believe the market for U.S. Treasury securities is an actively traded market
given the high level of daily trading volume. The fair values of U.S. government agency securities are priced
using the spread above the risk-free yield curve. As the yields for the risk-free yield curve and the spreads for
these securities are observable market
the fair values of U.S. government agency securities are
included in the Level 2 fair value hierarchy.

inputs,

Non-U.S. government bonds: Comprised of Non-U.S. government bonds

issued by non-U.S.
governments primarily Germany, Sweden and Netherlands. These securities are generally priced by pricing
services. The pricing services may use current market trades for securities with similar quality, maturity and
coupon. If no such trades are available,
the pricing service typically uses analytical models which may
incorporate spreads, interest rate data and market/sector news. As the signiﬁcant inputs used to price Non-U.S.
government bonds are observable market inputs, the fair values of Non-U.S. government bonds are included
in the Level 2 fair value hierarchy.

Other mortgage-backed securities: Other mortgage-backed securities

commercial
mortgage-backed security (‘‘CMBS’’). This security is priced by independent pricing services and brokers. The
pricing provider applies dealer quotes and other available trade information, prepayment speeds, yield curves
and credit spreads to the valuation. As the signiﬁcant inputs used to price the CMBS are observable market
inputs, the fair value of the CMBS is included in the Level 2 fair value hierarchy.

consist of

F-30

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

6. Fair Value Measurements − (continued)

Reinsurance balance receivable: The carrying values reported in the accompanying balance sheets for

these ﬁnancial instruments approximate their fair value due to short term nature of the assets.

Loan to related party: The carrying values reported in the accompanying balance sheets for these

ﬁnancial instruments approximate their fair value.

Senior notes: The amount reported in the accompanying balance sheets for these ﬁnancial instruments
represents the carrying value of the notes. At December 31, 2011, the fair value of the 8.25% senior notes was
$104,888 based on its traded price and yield information obtained from a third party service provider.

Junior subordinated debt: The amount reported in the accompanying balance sheets for these ﬁnancial
instruments represents the carrying value of the debt. At December 31, 2011, the fair value of the debt was
$173,621 based on the binomial lattice model, Black-Derman-Toy model.

b) Fair Value Hierarchy

The Company’s estimates of fair value for ﬁnancial assets and ﬁnancial liabilities are based on the
framework established in ASC 820. 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 ASC 820 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.

In accordance with ASC 820, 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.

At December 31, 2011 and 2010, we classiﬁed our ﬁnancial instruments measured at fair value on a

recurring basis in the following valuation hierarchy:

As at December 31, 2011
Assets
Fixed maturities

U.S. treasury bonds . . . . . . . . . . . . . .
U.S. agency bonds − mortgage-backed .
U.S. agency bonds − other . . . . . . . . .
Non U.S. government bonds . . . . . . . .
Other mortgage-backed securities. . . . .
Corporate bonds . . . . . . . . . . . . . . . .
Municipal bonds . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . .
As a percentage of total assets . . . . . . .
Liabilities
Securities sold but not yet purchased . . . .
As a percentage of total liabilities . . . . .

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Signiﬁcant
Other
Observable
Inputs
(Level 2)

Signiﬁcant
Unobservable
Inputs
(Level 3)

Total
Fair
Value

$45,949
—
—
—
—
—
—
—
$45,949

—
972,099
10,996
51,198
9,920
761,433
169,066
—
$1,974,712

$ —
—
—
—
—
—
—
2,192
$2,192

45,949
972,099
10,996
51,198
9,920
761,433
169,066
2,192
$2,022,853

1.4%

58.8%

0.1%

60.3%

$ —

55,830

—%

2.2%

—
—%

55,830

2.2%

F-31

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

6. Fair Value Measurements − (continued)

As at December 31, 2010
Assets
Fixed maturities

U.S. treasury bonds . . . . . . . . . . . . . .
U.S. agency bonds − mortgage-backed .
U.S. agency bonds − other . . . . . . . . .
Non U.S. government bonds . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . .
Municipal bonds . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . .
As a percentage of total assets . . . . . . .
Liabilities
Securities sold under agreements to

repurchase . . . . . . . . . . . . . . . . . . . .
As a percentage of total liabilities . . . . .

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Signiﬁcant
Other
Observable
Inputs
(Level 2)

Signiﬁcant
Unobservable
Inputs
(Level 3)

Total
Fair
Value

$91,729
—
—
—
—
—
—
$91,729

—
969,468
43,408
15,938
708,993
44,897
—
$1,782,704

$ —
—
—
—
—
—
5,847
$5,847

91,729
969,468
43,408
15,938
708,993
44,897
5,847
$1,880,280

3.1%

59.7%

0.2%

63.0%

$ —

76,225

$ —

76,225

—%

3.4%

—%

3.4%

The Company utilized a pricing service to estimate fair value measurements for approximately 99.4% of
its ﬁxed maturities. The pricing service utilizes market quotations for ﬁxed maturity securities that have
quoted market prices in active markets. Since ﬁxed maturities other than U.S. treasury securities generally do
not trade on a daily basis, the pricing service prepares estimates of fair value measurements using relevant
market data, benchmark curves, sector groupings and matrix pricing and these have been classiﬁed as level 2.

Other investments. The Company has $2,192 or approximately 0.1% of its investment portfolio in
limited partnerships where the fair value estimate is determined by the 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 the estimate in the amount
disclosed in Level 3. The Company has determined that its investments in Level 3 securities are not material
to its ﬁnancial position or results of operations.

F-32

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

6. Fair Value Measurements − (continued)

c) Level 3 Financial Instruments

The following table presents changes in Level 3 for our ﬁnancial instruments measured at fair value on a

recurring basis for the years ended December 31, 2011 and 2010:

Other investments:
Balance at beginning of period . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized and unrealized gains − included in net income . . . . . . . . . . . .
Net realized and unrealized (losses) − included in net income. . . . . . . . . . .
Change in net unrealized (gains) − included in other comprehensive income .
Change in net unrealized losses − included in other comprehensive income .
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and redemptions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers into Level 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Transfers out of Level 3 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance at end of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Level 3 gains (losses) included in net income attributable to the change in

For the Year Ended
December 31,

2011
$ 5,847
—
(73)
—
141
1,173
(4,896)
—
—
$ 2,192

2010
$ 5,549
—
(249)
—
231
5,175
(4,859)
—
—
$ 5,847

unrealized gains (losses) relating to assets held at the reporting date . . . .

$ —

7. Goodwill and Intangible Assets

Goodwill

Goodwill is calculated as the excess of purchase price over the net fair value of assets acquired. The
Company performs an annual impairment analysis to identify potential goodwill impairment and measures the
amount of a goodwill impairment loss to be recognized. This annual test is performed during the fourth
quarter of each year or more frequently if events or circumstances change in a way that requires the Company
to perform the impairment analysis on an interim basis. Goodwill impairment testing requires an evaluation of
the estimated fair value of each reporting unit to its carrying value, including the goodwill. An impairment
charge is recorded if the estimated fair value is less than the carrying amount of the reporting unit. No
impairments have been identiﬁed to date.

Intangible Assets

Intangible assets consist of ﬁnite and indeﬁnite life assets. Finite life intangible assets include customer
Insurance company licenses are considered indeﬁnite life

and producer
intangible assets subject to annual impairment testing.

relationships and trademarks.

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

Balance as at December 31, 2009. . . . . . . . . . . . . . .
Acquired during the year . . . . . . . . . . . . . . . . . . . . .
Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as at December 31, 2010. . . . . . . . . . . . . . .
Adjustment during the year . . . . . . . . . . . . . . . . . . . .
Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment losses . . . . . . . . . . . . . . . . . . . . . . . . . .
Balance as at December 31, 2011. . . . . . . . . . . . . . .

Goodwill
$52,617
5,812
—
—
58,429
(117)
—
—
$58,312

Intangible
Assets
$51,284
—
(5,808)
—
45,476
—
(5,033)
—
$40,443

Total
$103,901
5,812
(5,808)
—
103,905
(117)
(5,033)
—
$ 98,755

F-33

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

7. Goodwill and Intangible Assets − (continued)

As at December 31, 2011
Goodwill . . . . . . . . . . . .
State licenses . . . . . . . . .
Customer relationships . . .
Net balance . . . . . . . . . .

As at December 31, 2010
Goodwill . . . . . . . . . . . .
State licenses . . . . . . . . .
Customer relationships . . .
Net balance . . . . . . . . . .

Gross
$ 58,312
7,727
51,400
$117,439

Gross
$ 58,429
7,727
51,400
$117,556

Accumulated
Amortization
—
$
—
(18,684)
$(18,684)

Accumulated
Amortization
—
$
—
(13,651)
$(13,651)

Net
$58,312
7,727
32,716
$98,755

Net
$ 58,429
7,727
37,749
$103,905

Useful Life

Indeﬁnite
Indeﬁnite
15 years double declining

Useful Life

Indeﬁnite
Indeﬁnite
15 years double declining

The goodwill and intangible assets were recognized as a result of the IIS Acquisition (see note 4) and
the acquisition of the reinsurance operations of GMAC Insurance (‘‘GMACI’’), including its book of assumed
reinsurance business, GMAC RE Insurance Services LLC (renamed Maiden Re), GMAC Direct Insurance
Company (renamed Maiden US) and Integon Specialty Insurance Company (renamed Maiden Specialty)
(referred to as the ‘‘GMAC Acquisition’’) on October 31, 2008. The goodwill and intangible assets are
assigned to Diversiﬁed Reinsurance segment and are subject to annual impairment testing. No impairment
was recorded during the years ended December 31, 2011, 2010 and 2009. However, during 2011 as a result of
the adjusted price allocation relating to the IIS Acquisition,
the amount of goodwill was reduced to
$5,695 (2010 — $5,812). The estimated amortization of intangible assets for the next ﬁve years is:

2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,362
3,781
3,276
2,840
2,461

8. Long-Term Debt

Senior Notes

In June 2011, the Company, through its wholly owned subsidiary Maiden Holdings North America, Ltd.
(‘‘Maiden NA’’), issued $107,500 principal amount of 8.25% Senior Notes (‘‘Senior Notes’’) due on June 15,
2041, which are fully and unconditionally guaranteed by the Company. The Senior Notes are redeemable for
cash, in whole or in part, on or after June 15, 2016, at 100% of the principal amount plus accrued and unpaid
interest to but excluding the redemption date. In order to ensure that issuance of the Senior Notes resulted in a
long term favorable impact to Maiden’s shareholders, the Company sought to repurchase a portion of the Trust
Preferred Securities, described below, with the proceeds of the Senior Notes offering. Under the redemption
notice provisions of the Trust Preferred Securities, the Company was required to give at least 30 days’ notice
in advance of the next interest payment (July 15, 2011) prior to redemption, or incur an additional quarter’s
interest payments. Since the Senior Notes offering was initiated after the 30 day notice period on June 16,
2011, the Company offered to all holders an option to have a portion of their Trust Preferred Securities
repurchased on a pro rata basis from the proceeds of the Senior Notes offering in exchange for a waiver of
such notice provisions and an agreement
through July 15, 2011. Certain of the Trust
Preferred Securities holders accepted the offer by June 16, 2011. All proceeds of the Senior Notes offering
were used to repurchase the Trust Preferred Securities of the holders who accepted the offer. The Senior Notes
are an unsecured and unsubordinated obligation of the Company and rank ahead of the Junior Subordinated

to accept

interest

F-34

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

8. Long-Term Debt − (continued)

Debt, described below. The effective interest rate of the Senior Notes, based on the net proceeds received, was
8.47%. The net proceeds from the sale of the Senior Notes were $104,689, after placement agent fees and
expense or debt issuance cost of $2,811, and were used to repurchase $107,500 principal amount portion of
the outstanding Junior Subordinated Debt. The issuance costs related to the Senior Notes were capitalized and
will be amortized over the life of the notes. Amortization expense for the period from June 15, 2011 to
December 31, 2011 was $49.

The interest on the Senior Notes is payable each quarter beginning on September 15, 2011.
Interest expense for the year ended December 31, 2011 was $4,607, of which $394 was accrued as of
December 31, 2011.

Junior Subordinated Debt

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 special purpose trust established by Maiden NA, and 45 common
shares, $0.01 par value, of the Company for a purchase price of $1,000.45 per Unit (the ‘‘TRUPS Offering’’).
In the aggregate, 11,700,000 common shares were issued to the purchasers in the TRUPS Offering. This
resulted in gross proceeds to the Company of $260,117, before $4,342 of placement agent fees and expenses.

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 61.12%. 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 ‘‘Junior Subordinated Debt’’) in the principal amount of $260,000 issued by Maiden NA.

Under the terms of the Trust Preferred Securities, the Company can repay the principal balance in full or
in part at any time. However, if the Company repays such principal within ﬁve years of the date of issuance,
it is required to pay an additional amount equal to one full year of interest on the amount of Trust Preferred
Securities repaid. If the remaining amount of the Trust Preferred Securities were repaid within ﬁve years of
the date of issuance (adjusted for the $107,500 repurchase of Junior Subordinated Debt, which occurred on
July 15, 2011), the additional amount due would be $21,350, which would be a reduction in earnings.

Pursuant

to separate Guarantee Agreements dated as at January 20, 2009 with Wilmington Trust
Company, 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 ASC Topic 810
‘‘Consolidation’’, the Trust is a variable interest entity and the Company is deemed not to be the primary
beneﬁciary of the Trust, therefore it is not consolidated. The issuance of common shares associated with the
Trust Preferred Securities resulted in an original issuance discount of $44,928 based on market price of $3.85
on January 20, 2009. The discount is amortized over 30 years based on the effective interest method. The
Junior Subordinated Debt and Trust Preferred Securities mature in 2039 and carry a stated or coupon rate of
14% with an effective interest rate of 16.95%.

Using the proceeds from the Senior Notes offering and existing cash, the Company repurchased principal
amount of $107,500 of the Junior Subordinated Debt on July 15, 2011. Pursuant
to the terms of the
TRUPS Offering, the Company incurred and paid a repurchase expense equivalent to one year’s interest
expense of $15,050. The Company also accelerated the amortization of the issuance cost and discount related
to the repurchased Junior Subordinated Debt which amounted to $20,313.

F-35

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

8. Long-Term Debt − (continued)

As at December 31, 2011,

the stated value of the Junior Subordinated Debt was $126,263 which
comprises the principal amount of $152,500 and unamortized discount of $26,237. Amortization expense for
the year ended December 31, 2011 was $46, (2010 — $66, 2009 — $53). Interest expense for the year ended
December 31, 2011 was $29,502 (2010 — $36,400, 2009 — $34,378), of which $4,448 was accrued as at
December 31, 2011 (2010 — $7,583).

9. Reinsurance

The Company utilizes reinsurance and retrocessional reinsurance (‘‘ceded reinsurance’’) agreements to
reduce its exposure to large claims and catastrophic loss occurrences with various reinsurance companies.
These agreements provide for recovery from reinsurers of a portion of losses and LAE under certain
circumstances without relieving the Company of its obligations to the policyholders. The Company remains
liable to the extent that any reinsurance company fails to meet its obligations. Losses and LAE incurred and
premiums earned are reported after deduction for reinsurance. In the event that one or more of the reinsurers
are unable to meet their obligations under these reinsurance agreements, the Company would not realize the
full value of the reinsurance recoverable balances.

The effect of retrocessional activity on premiums written and earned and on net loss and loss adjustment

expenses for the years ended December 31, 2011, 2010 and 2009 was as follows:

For the Year Ended December 31,
2010

2009

2011

Premiums written
Direct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ceded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Premiums earned
Direct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ceded . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Loss and loss adjustment expenses
Gross loss and loss adjustment expenses . . . . . . . . . . .
Loss and loss adjustment expenses recovered. . . . . . . .
Net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 114,036
1,698,561
(89,076)
$1,723,521

$
71,625
1,226,430
(70,224)
$1,227,831

$
21,655
1,027,021
(18,302)
$1,030,374

$ 112,308
1,523,685
(83,565)
$1,552,428

68,967
1,168,116
(67,293)
$1,169,790

4,118
940,012
(24,211)
$ 919,919

$1,103,821
(60,767)
$1,043,054

$ 788,815
(33,693)
$ 755,122

$ 616,905
(8,292)
$ 608,613

The reinsurers with the three largest balances accounted for 31.1%, 26.2% and 12.6%, respectively, of the
Company’s reinsurance recoverable on unpaid losses balance at December 31, 2011 (2010 — 29.0%, 17.3%
and 9.5%, respectively). At December 31, 2011, $2,067 (2010 — $1,933) of the reinsurance recoverable on
unpaid losses was due from Motors Insurance Corporation (‘‘Motors’’) and the remaining amount was due
from reinsurers with an A- or better rating from A.M. Best or state pools. At December 31, 2011 and 2010,
the Company had no valuation allowance against reinsurance recoverable on unpaid losses.

F-36

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

10. Reserve for Loss and Loss Adjustment Expenses

Our reserve for loss and loss adjustment expenses comprise the following:

As at December 31,
Reserve for reported loss and loss adjustment expenses . . . . . . . . . . .
Reserve for losses incurred but not reported . . . . . . . . . . . . . . . . . .
Reserve for loss and loss adjustment expenses . . . . . . . . . . . . . . . . .

2011
$ 820,795
577,643
$1,398,438

2010
$ 654,946
571,827
$1,226,773

The following table represents a reconciliation of our beginning and ending net

losses and loss

expense reserves:

For the Year Ended December 31,
2010

2009

2011

Gross unpaid loss and loss adjustment expenses

reserves at beginning of period. . . . . . . . . . . . . . . .

$1,226,773

$1,002,676

$ 897,656

Less: Reinsurance recoverable on unpaid losses at

beginning of period . . . . . . . . . . . . . . . . . . . . . . .

6,656

8,340

—

Net loss and loss adjustment expense reserves at

beginning of period . . . . . . . . . . . . . . . . . . . . . . .

1,220,117

994,336

897,656

Net incurred losses related to:

Current year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net paid losses related to:

Current year . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prior years . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Acquired loss and loss expense reserve . . . . . . . . . . . .
Effect of foreign exchange movement . . . . . . . . . . . . .
Net loss and loss adjustment expense reserves at end

1,028,855
14,199
1,043,054

456,149
423,855
880,004
450
(5,468)

787,967
(32,845)
755,122

365,343
265,991
631,334
102,020
(27)

620,046
(11,433)
608,613

209,123
303,158
512,281
184
164

of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,378,149

1,220,117

994,336

Reinsurance recoverable on unpaid losses at end

of period. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20,289

6,656

8,340

Gross unpaid loss and loss adjustment expenses

reserves at end of period . . . . . . . . . . . . . . . . . . . .

$1,398,438

$1,226,773

$1,002,676

Management believes that

its use of both historical experience and industry-wide loss development
factors provide a reasonable basis for estimating future losses. As the Company writes more business and
develops more credible data, the Company expects to assign more weight to its own historical experience than
to AmTrust’s historical experience and industry-wide results. In either case, future events beyond the control
of management, such as changes in law,
interpretations of law, and inﬂation may favorably or
unfavorably impact the ultimate settlement of the Company’s loss and LAE reserves.

judicial

The anticipated effect of inﬂation is implicitly considered when estimating liabilities for losses and LAE.
While anticipated changes in claim costs due to inﬂation are considered in estimating the ultimate claim costs,
changes in average severity of claims are caused by a number of factors that vary with the individual type of
policy written. Future average severities are projected based on historical trends adjusted for implemented
changes in underwriting standards, policy provisions, and general economic trends. Those anticipated trends
are monitored based on actual development and are modiﬁed if necessary.

F-37

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

10. Reserve for Loss and Loss Adjustment Expenses − (continued)

During 2011, the Company recorded estimated net adverse development on prior year loss reserves of
$14,199 compared to net favorable development of $32,845 in the prior year. Included in the total is $28,898
(2010 — $25,332, 2009 — $10,676) of gains relating to the loss portfolio transfers acquired as part of the
GMAC Acquisition and the IIS Acquisition. The total gain to date from the loss portfolio transfer reserves is
$68,882 (2010 — $43,811) of which $2,570 remains as at December 31, 2011 (2010 — $6,172). The gain is
being amortized into income in proportion to the actual paydown of the reserves acquired.

Prior period development arises from changes to loss estimates recognized in the current year that relate
to loss reserves ﬁrst reported in previous calendar years. The development reﬂects changes in the actuarial
assessments of the ultimate losses under the relevant reinsurance policies.

11. Related Party Transactions

AmTrust

The Founding Shareholders of the Company, 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, Chief Executive Officer and Director of AmTrust.

The following describes transactions between the Company and AmTrust.

AmTrust Quota Share Reinsurance Agreement

losses and (b) AII

transferred to Maiden Bermuda 40% of

Effective July 1, 2007, the Company and AmTrust entered into a master agreement, as amended (the
‘‘Master Agreement’’), by which they caused Maiden Bermuda, a wholly owned subsidiary of the Company,
and AmTrust’s Bermuda reinsurance subsidiary, AmTrust International Insurance, Ltd. (‘‘AII’’), to enter into a
quota share reinsurance agreement (the ‘‘Master Agreement’’) by which (a) AII retrocedes to Maiden Bermuda
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, AmTrust Europe, Limited, net of
commissions) and 40% of
the AmTrust
subsidiaries’ unearned premiums, effective as at 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 Bermuda 40% of the premiums and losses related to such Covered Business. The
Master Agreement further provided that AII receives a ceding commission of 31% of ceded written premiums.
The Master Agreement had an initial term of three years, which was extended for three years through June 30,
2013 (and extended again through 2014 — see below), and will automatically renew for successive three year
terms thereafter, unless either AII or Maiden Bermuda 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 Bermuda, run-off, or a reduction of 50% or more
of the shareholders’ equity of Maiden Bermuda or the combined shareholders’ equity of AII and the
AmTrust subsidiaries.

On June 11, 2008, Maiden Bermuda and AII 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 ceded, upon collection, to Maiden
Bermuda 100% of $82.2 million of unearned premium (net of inuring reinsurance) from the acquisition of
UBI’s in-force book of business. Additionally, AmTrust cedes to Maiden Bermuda 40% of net premium
written, effective as of June 1, 2008. Maiden Bermuda will pay to AmTrust a ceding commission of 34.375%

F-38

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

11. Related Party Transactions − (continued)

on the unearned premium cession and the Retail Commercial Package Business. The $2,000 maximum
liability for a single loss provided in the Master Agreement shall not be applicable to Retail Commercial
Package Business.

On February 9, 2009, Maiden Bermuda and AII amended the Master Agreement to clarify that (i) AII
would offer Maiden Bermuda 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 $5,000 and (ii) the deduction for the cost of inuring reinsurance from Affiliate Subject Premium
(as deﬁned in the Reinsurance Agreement) retroceded to Maiden Bermuda is net of ceding commission.

Effective April 1, 2011, Maiden Bermuda and AII amended the Master Agreement

to reduce the
commission on all business ceded except Retail Commercial Package Business to 30% until December 31,
2011. Thereafter the rate shall be 31% subject to an adjustment of 1% to 30% if the proportion of Specialty
Risk and Extended Warranty premium ceded is greater than or equal
to 42% of the Covered Business
(excluding Retail Commercial Package Business). If the proportion of Specialty Risk and Extended Warranty
premium ceded is greater than or equal to 38% but less than 42% of the Covered Business (excluding Retail
Commercial Package Business), the commission rate shall be reduced by 0.5% to 30.5%. In addition, the
collateral requirements were restated to clarify that balances relating to all AmTrust subsidiaries are subject to
collateral requirements and the Reinsurance Agreement was extended by one year through June 30, 2014, and
shall automatically renew for successive three-year periods thereafter. If AII or Maiden Bermuda elects to so
terminate this Master Agreement,
less than
nine months prior to either July 1, 2014 or the expiration of any successive three-year period.

it shall give written notice to the other party hereto not

Maiden Bermuda recorded approximately $150,140, $139,092 and $110,838 of ceding commission

expense for the years ended December 31, 2011, 2010 and 2009, respectively, as a result of this transaction.

AmTrust European Hospital Liability Quota Share Agreement
Quota Share’’)

(‘‘European Hospital Liability

Effective April 1, 2011, the Company, through Maiden Bermuda, entered into a quota share reinsurance
contract with AmTrust Europe Limited and AmTrust International Underwriters Limited, both wholly owned
subsidiaries of AmTrust. Pursuant
to the terms of the contract, Maiden Bermuda assumed 40% of the
premiums and losses related to policies classiﬁed as European Hospital Liability, including associated liability
coverages and policies covering physician defense costs, written or renewed on or after April 1, 2011. The
contract also covers policies written or renewed on or before March 31, 2011, but only with respect to losses
that occur, accrue or arise on or after April 1, 2011. The maximum limit of liability attaching shall be €5,000
or currency equivalent (on a 100% basis) per original claim for any one original policy. Maiden Bermuda will
pay a ceding commission of 5% and shall allow the reinsured a proﬁt share on original net premiums ceded
under the contract. The proﬁt sharing is based upon the reinsured exceeding deﬁned underwriting performance
of each contract year, commencing two years after the beginning of each contract year. To the extent that the
underwriting performance is exceeded, the Company will share 50% of the excess amounts computed. For the
year ended December 31, 2011, the Company recorded approximately $3,405 of commission expense as a
result of this transaction.

Other Reinsurance Agreements

Effective January 1, 2008, Maiden Bermuda and AmTrust entered into an agreement

to reinsure a
45% participation in the $9,000 in excess of $1,000 layer of AmTrust’s workers’ compensation excess of loss
program. This layer provides reinsurance to AmTrust for losses per occurrence in excess of $1,000 up to
to an annual aggregate deductible of $1,250. This participation was sourced through a
$10,000, subject
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. This coverage expired
on January 1, 2010; as a result, under the Master Agreement, Maiden Bermuda therefore now reinsures

F-39

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

11. Related Party Transactions − (continued)

40% of the subject workers’ compensation business up to $10,000, subject
reinsurance protection that AmTrust has purchased.

to certain additional

inuring

As at January 1, 2008, Maiden Bermuda had a 50% participation in a $4,000 in excess of
$1,000 specialty transportation program written by AmTrust. Starting January 1, 2009, Maiden Bermuda had a
30% participation in a $4,000 in excess of $1,000 specialty transportation program written by AmTrust. This
program provides primarily commercial auto coverage and, to a lesser extent, general liability coverage to
private non-emergency para-transit and school bus service operators. This participation was sourced through a
reinsurance intermediary via open market placement
in which competitive bids were solicited by an
independent broker. Several other broker market reinsurers hold the other 50% and 70% participation for 2008
and 2009 policies, respectively. The agreement was not renewed as at January 1, 2010.

Effective September 1, 2010,

the Company through its indirect wholly owned subsidiary, Maiden
Specialty, entered into a quota share reinsurance agreement with Technology Insurance Company, Inc.
(‘‘Technology’’), a subsidiary of AmTrust. Under the agreement, Maiden Specialty will cede (a) 90% of its
credit insurance business written under the Open Lending Program (‘‘OPL’’) and (b) 100% of its general
liability business under the Naxos Avondale Specialty Casualty Program (‘‘NAXS’’). Maiden Specialty’s
involvement is limited to certain states where Technology is not fully licensed. The agreement also provides
that Maiden Specialty receives a ceding commission of 5% of ceded written premiums. The reinsurance
agreement has a term of three years and will remain continuously in force until terminated in accordance to
the provisions set forth in the contract. Maiden Specialty recorded approximately $10,276 of premiums earned
ceded and $3,155 ceding commission for
the year ended December 31, 2011 (2010 — $88 and
$26, respectively).

Effective September 1, 2010, the Company, through its indirect wholly owned subsidiary, Maiden US,
entered into a reinsurance agreement with Security National Insurance Company (‘‘SNIC’’), a subsidiary of
AmTrust. Under the agreement, SNIC will cede 80% of the gross liabilities produced under the Southern
General Agency program to Maiden US. The agreement provides SNIC with a 5% commission of ceded
written premiums. The agreement has a term of one year. Under this agreement, Maiden US recorded
approximately $7 of premiums earned and $0.1 commission expense for the year ended December 31, 2011
(2010 — $1 and $0.2, respectively).

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 Bermuda has agreed to provide appropriate collateral to
secure its proportional share under the Master 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
Bermuda to AII, for deposit into the Trust Accounts, pursuant to a loan agreement between those parties,
(b) assets transferred by Maiden Bermuda, for deposit into the Trust Accounts, (c) a letter of credit obtained
by Maiden Bermuda and delivered to an AmTrust subsidiary on AII’s behalf (a ‘‘Letter of Credit’’), or
(d) premiums withheld by an AmTrust subsidiary at Maiden Bermuda’s request in lieu of remitting such
premiums to AII (‘‘Withheld Funds’’). Maiden Bermuda may provide any or a combination of these forms of
collateral, provided that
the aggregate value thereof equals Maiden Bermuda’s proportionate share of its
obligations under the Master Agreement with AII. If collateral is required to be provided to any AmTrust
subsidiary under applicable law or regulatory requirements, Maiden Bermuda will provide collateral to the
extent required, although Maiden Bermuda does not expect that such collateral will be required unless the
AmTrust subsidiary is domiciled in the United States.

F-40

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

11. Related Party Transactions − (continued)

Maiden Bermuda satisﬁed its collateral requirements under the Master Agreement with AII as follows:

•

by lending funds in the amount of $167,975 as at December 31, 2011 and 2010 to AII pursuant to a
loan agreement entered into between those parties. This loan is carried at cost. The amount of
collateral Maiden Bermuda 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 Bermuda’s assets with AII’s other assets and to cause the
AmTrust subsidiaries not to commingle Maiden Bermuda’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
immediately return to
or maintained by such AmTrust subsidiary as Withheld Funds, AII will
Maiden Bermuda its proportionate share of such excess assets. AII has further agreed that if the
aggregate fair market value of the amount of Maiden Bermuda’s assets held in the Trust Account
exceeds Maiden Bermuda’s proportionate share of AII’s obligations, or if an AmTrust subsidiary
misapplies any such collateral, AII will immediately return to Maiden Bermuda an amount equal to
such excess or misapplied collateral, less any amounts AII has paid to Maiden Bermuda. In addition,
if an AmTrust subsidiary withdraws Maiden Bermuda’s assets from a Trust Account and maintains
those assets on its books as withheld funds, AII has agreed to pay to Maiden Bermuda 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
Bermuda’s proportionate share of AII’s obligations to that AmTrust subsidiary exceeds the value of
the collateral Maiden Bermuda has provided), and net of unpaid fees Maiden Bermuda owes to
AIIM and its share of fees owed to the trustee of the Trust Accounts. The amount of accrued interest
relating to the loan was $0 and $496 as at December 31, 2011 and 2010, respectively; and

•

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, as at December 31, 2011 was approximately
$461,216 (2010 — $358,621) and the accrued interest was $4,131 (2010 — $3,684). (See Note 5(e)).

Reinsurance Brokerage Agreements

Effective

July 1, 2007,

reinsurance brokerage

the Company entered into a

agreement with
AII Reinsurance Broker Ltd. (‘‘AIIB’’), a subsidiary of AmTrust. Pursuant to the brokerage agreement, AIIB
provides brokerage services relating to the Master Agreement and, beginning on April 1, 2011, the European
Hospital Liability Quota Share agreement for a fee equal to 1.25% of the premium assumed from AII. The
brokerage fee is payable in consideration of AIIB’s brokerage services. AIIB is not the Company’s exclusive
broker. AIIB may, if mutually agreed, also produce reinsurance business for the Company from other ceding
companies, and in such cases the Company will negotiate a mutually acceptable commission rate. Maiden
Bermuda recorded approximately $6,977, $5,564 and $4,399 of reinsurance brokerage expense for the years
ended December 31, 2011, 2010 and 2009, respectively, and deferred reinsurance brokerage of $4,891 and
$3,552 as at December 31, 2011 and 2010, 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. (collectively ‘‘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

F-41

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

11. Related Party Transactions − (continued)

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. Maiden Bermuda recorded approximately $0, $88 and
$199 as expense, which is included in commission and other acquisition expenses, for the years ended
December 31, 2011, 2010 and 2009, respectively.

The Company paid brokerage fees to AmTrust’s subsidiary, AmTrust North America, of $111, $83 and
$66 for the years ended December 31, 2011, 2010 and 2009, respectively, for acting as insurance intermediary
in relation to certain insurance placements.

Asset Management Agreement

Effective July 1, 2007, the Company entered into an asset management agreement with AII Insurance
to which AIIM has agreed to provide
Management Limited (‘‘AIIM’’), an AmTrust subsidiary, pursuant
investment management services to the Company. Pursuant
to the asset management agreement, AIIM
provides investment management services for a quarterly fee of 0.05% if the average value of the account for
the previous calendar quarter is less than or equal to $1 billion and 0.0375% if the average value of the
account for the previous calendar quarter is greater than $1 billion. The Company recorded approximately
$3,158, $2,643 and $2,480 of investment management fees for the years ended December 31, 2011, 2010 and
2009, respectively, as a result of this agreement.

Other

On March 1, 2011, the Company entered into a time sharing agreement for the lease of aircraft owned by
AmTrust Underwriters, Inc. (‘‘AUI’’), a wholly owned subsidiary of AmTrust. The lease is for 10 months
ending on December 31, 2011 and automatically renews for successive one-year terms unless terminated in
accordance with the provisions of the agreement. Pursuant to the agreement, the Company will reimburse AUI
for actual expenses incurred as allowed by Federal Aviation Regulations. For the year ended December 31,
2011, the Company recorded an expense of $96 for the use of the aircraft.

ACAC

The following describes

transactions between the Company and American Capital Acquisition

Corporation (‘‘ACAC’’):

On March 1, 2010, Maiden Bermuda entered into a three year 25% quota share reinsurance agreement
with ACAC. ACAC is an insurance holding company owned by the 2005 Michael Karfunkel Grantor Retained
Annuity Trust (the ‘‘Annuity Trust’’), which is controlled by Michael Karfunkel (‘‘Karfunkel’’), Karfunkel
individually, and AmTrust. ACAC, on March 1, 2010, acquired from GMAC Insurance Holdings, Inc. and
Motors (collectively, ‘‘GMAC’’), GMAC’s personal
is a Founding
Shareholder of the Company. In addition, Karfunkel is the Chairman of the Board of Directors of ACAC.

lines automobile business. Karfunkel

ACAC Quota Share Reinsurance Agreement

Maiden Bermuda, effective March 1, 2010, reinsures 25% of the net premiums of the GMAC personal
lines business, pursuant to a quota share reinsurance agreement (‘‘ACAC Quota Share’’) with the GMAC
personal lines insurance companies, as cedents, and Maiden Bermuda, American Capital Partners Re, Ltd., a
Bermuda reinsurer which is a wholly owned indirect subsidiary of the Annuity Trust, and AmTrust, as
reinsurers. Maiden Bermuda has a 50% participation in the ACAC Quota Share, by which it receives 25% of
net premiums of the personal lines automobile business. The ACAC Quota Share provides that the reinsurers,
severally, in accordance with their participation percentages, shall receive 50% of the net premium of the
GMAC personal lines insurance companies and assume 50% of the related net losses. The ACAC Quota Share
term of three years and shall renew automatically for successive three year terms unless
has an initial
term.
terminated by written notice not

less than nine months prior

to the expiration of

the current

F-42

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

11. Related Party Transactions − (continued)

Notwithstanding the foregoing, Maiden Bermuda’s participation in the ACAC Quota Share may be terminated
is placed into
by ACAC on 60 days written notice in the event Maiden Bermuda becomes insolvent,
receivership, its ﬁnancial condition is impaired by 50% of the amount of its surplus at the inception of the
ACAC Quota Share or latest anniversary, whichever is greater, is subject to a change of control, or ceases
writing new and renewal business. ACAC also may terminate the agreement on nine months written notice
following the effective date of initial public offering or private placement of stock by ACAC or a subsidiary.
Maiden Bermuda may terminate its participation in the ACAC Quota Share on 60 days written notice in the
event ACAC is subject to a change of control, cease writing new and renewal business, effects a reduction in
their net retention without Maiden Bermuda’s consent or fails to remit premium as required by the terms of
the reinsurers pay a provisional ceding
the ACAC Quota Share. The ACAC Quota Share provides that
commission equal to 32.5% of ceded earned premium, net of premiums ceded by the personal lines companies
for inuring reinsurance, subject to adjustment.

The ceding commission is subject

to a maximum of 34.5% if the loss ratio for the
reinsured business is 60.5% or less and a minimum of 30.5% if the loss ratio is 64.5% or higher. We believe
that the terms, conditions and pricing of the ACAC Quota Share have been determined by arm’s length
negotiations and reﬂect current market terms and conditions.

to adjustment

Maiden Bermuda recorded approximately $74,983 of ceding commission expense for the year ended

December 31, 2011 (2010 — $37,654) as a result of this transaction.

Other

Maiden Specialty entered into a reinsurance arrangement with New South Insurance Company
(‘‘New South’’), a subsidiary of ACAC. Pursuant to the agreement, Maiden Specialty cedes 100% of certain
personal lines business to New South. On March 1, 2010, Maiden Specialty entered into a novation agreement
with Motors and New South whereby New South replaced Motors as the reinsurer for all of this business.
Maiden Specialty recorded approximately $(0.6) and $0.2 of ceded premium and ceding commissions,
respectively, for the year ended December 31, 2011 (December 31, 2010, — $398 and $61, respectively).

In June 2011, the Company, through Maiden NA, issued $107,500 principal amount of 8.25% Senior
Notes due on June 15, 2041, which are fully and unconditionally guaranteed by the Company. The Senior
Notes were used to repurchase on a pro rata basis $107,500 of the $260,000 outstanding Trust Preferred
Securities. The Company offered all Trust Preferred Securities holders the option to have their securities
repurchased on the same terms. American Capital Partners Re, Ltd., an entity owned by the Annuity Trust
controlled by Michael Karfunkel accepted the offer to repurchase its $79,066 in principal amount of Trust
Preferred Securities on July 15, 2011. George Karfunkel purchased $25,000, and ACAC and AII each
purchased $12,500, of the principal amount of the Senior Notes. The Company’s Audit Committee reviewed
and approved ACAC’s, AII’s, and George Karfunkel’s participation in the Senior Notes offering.

Warrant Exchange

Please see Note 14 to the Consolidated Financial Statements.

12. Commitments and Contingencies

a) Concentrations of Credit Risk

As at December 31, 2011 and 2010, the Company’s assets primarily consisted of investments, cash, loan

to related party and reinsurance balances receivable.

The Company manages concentration of credit risk in the investment portfolio through issuer and sector

exposure limitations. The Company believes it bears minimal credit risk in its cash on deposit.

F-43

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

12. Commitments and Contingencies − (continued)

The Company also monitors the credit risk related to the loan to related party and its reinsurance
balances receivable, within which the largest balances are due from AmTrust, ACAC and Motors. To mitigate
credit risk we generally have a contractual right of offset thereby allowing us to settle claims net of any
premiums or loan receivable, the Company believes these balances will be fully collectible.

b) Concentrations of Revenue

During 2011, our gross premium written for AmTrust and ACAC accounted for 51.0% (2010 — 51.9%,
AmTrust and Motors — 2009 — 96.1%) of our total gross premium written. AmTrust accounted for $669,283
or 36.9% (2010 — $468,043 or 36.1%, 2009 — $372,358 or 35.5%) and ACAC accounted for $256,201 or
14.1% (2010 — $205,739 or 15.8%, Motors — 2009 — $635,143 or 60.6%).

c) Brokers

We produce our reinsurance business for our Diversiﬁed Reinsurance segment primarily through brokers.
During 2011, three brokers accounted for 59.7% (2010 — 56.3%, 2009 — 81.4%) of our total gross premiums
written through brokers for the Diversiﬁed Reinsurance segment. Marsh & McLennan Inc. (including Guy
Carpenter) accounted for 27.4% (2010 — 31.0%, 2009 — 42.2%), Aon Benﬁeld Group, Ltd. for 18.1%
(2010 — 16.9%, 2009 — 30.8%) and Beach & Associates, Ltd. for 14.2% (2010 — 8.4%, Risk Insurance
Consulting Services LLC — 2009 — 8.4%).

d) Letters of Credit

As at December 31, 2011 and 2010, we had letters of credit outstanding of $97,486 and
respectively. The letters of credit are secured by cash and marketable investments of

$23,978,
$109,337 (2010 — $23,996).

e) Employment agreements

The Company has entered into employment agreements with certain individuals. The employment
agreements provide for option awards, executive beneﬁts and severance payments under certain circumstances.

f) Operating Lease Commitments

The Company leases office space and apartments under operating leases expiring in various years through
2015. Total rent expense for the years ended December 31, 2011, 2010 and 2009 was $2,283, $1,969 and
$1,723, respectively. Future minimum lease payments as at December 31, 2011 under non-cancellable
operating leases for the next ﬁve years are approximately as follows:

As at
December 31,
2011
$1,727
1,390
1,328
868
466
$5,779

g) Unfunded Commitments

The Company has an unfunded commitment on its investment in limited partnerships of approximately

$3,808 as at December 31, 2011.

F-44

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

12. Commitments and Contingencies − (continued)

h) Loans and Other Collateral

Please see Note 11 for the discussion related to loan provided to AmTrust.

i) Deposit Insurance

The Company maintains cash and cash equivalent balances at ﬁnancial institutions in the U.S., Bermuda
and other international jurisdictions. In the U.S., the Federal Deposit Insurance Corporation secures account up
to $250.
similar protections. Management
monitors balances in excess of insured limits and believes they do not represent a signiﬁcant credit risk to
the Company.

In certain other

jurisdictions,

international

there

exist

j) Legal Proceedings

Except as noted below, the Company is not a party to any material legal proceedings. From time to time,
the Company is subject to routine legal proceedings, including arbitrations, arising in the ordinary course of
the Company in the
business. These legal proceedings generally relate to claims asserted by or against
the eventual
ordinary course of insurance or reinsurance operations. Based on the Company’s opinion,
outcome of these legal proceedings is not expected to have a material adverse effect on its ﬁnancial condition
or results of operations.

regarding corporate governance with respect

In April 2009, the Company learned that Bentzion S. Turin, the former Chief Operating Officer, General
Counsel and Secretary of Maiden Holdings and Maiden Bermuda, sent a letter to the U.S. Department of
Labor claiming that his employment with the Company was terminated in retaliation for corporate whistle
blowing in violation of the whistle blower protection provisions of the Sarbanes-Oxley Act of 2002. Mr. Turin
the
alleged concerns
TRUPS Offering and seeks reinstatement as Chief Operating Officer, General Counsel and Secretary of
Maiden Holdings and Maiden Bermuda, back pay and legal fees incurred. The Company believes that it had
ample reason for terminating such employment for good and sufficient legal cause, and the Company believes
that the claim is without merit and is vigorously defending this claim. On December 31, 2009, the U.S.
Secretary of Labor found no reasonable cause for Mr. Turin’s claim and dismissed the complaint in its
entirety. Mr. Turin objected to the Secretary’s ﬁndings and requested a hearing before an administrative law
judge in the U.S. Department of Labor. The Company moved to dismiss Mr. Turin’s complaint, and its motion
was granted by the Administrative Law Judge on June 30, 2011. On July 13, 2011, Mr. Turin ﬁled a petition
for review of the Administrative Law Judge’s decision with the Administrative Review Board in the
U.S. Department of Labor. The Company ﬁled its brief
review on
October 19, 2011.

in opposition to the petition for

to negotiation of

the terms of

k) Dividends for Common Shares

On November 2, 2011,

the Company’s Board of Directors approved a quarterly cash dividend of
$0.08 per common share. This dividend was paid on January 17, 2012 to shareholders of record on
January 2, 2012.

F-45

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

13. Earnings per Common Share

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

For the Year Ended December 31,
2010

2009

2011

Net income attributable to Maiden shareholders . .

28,524

69,866

61,058

Weighted average number of common shares

outstanding − basic. . . . . . . . . . . . . . . . . . . . .

72,155,503

70,799,966

69,646,804

Potentially dilutive securities:
Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Share options. . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted average number of common shares

—
748,185

—
572,722

—
413,393

outstanding − diluted . . . . . . . . . . . . . . . . . . .

72,903,688

71,372,688

70,060,197

Basic earnings per share attributable to

Maiden shareholders:. . . . . . . . . . . . . . . . . . . .

Diluted earnings per share attributable to

Maiden shareholders:. . . . . . . . . . . . . . . . . . . .

0.40

0.39

0.99

0.98

0.88

0.87

As at December 31, 2011, 0 warrants (2010 — 0; 2009 — 4,050,000) and 2,137,836 share options
they were

(2010 — 1,820,626; 2009 — 707,735) were excluded from diluted earnings per
anti-dilutive.

share as

14. Shareholders’ Equity

The following table shows the summary of changes in common shares issued and outstanding:

Issued and outstanding shares − January 1 . . . . . . . .
Issuance of shares. . . . . . . . . . . . . . . . . . . . . . . . .
Shares repurchased . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of options . . . . . . . . . . . . . . . . . . . . . . . .
Exchange of warrants . . . . . . . . . . . . . . . . . . . . . .
Issued and outstanding shares − December 31 . . . . . .

For the Year Ended December 31,
2010
70,291,289
—
—
15,811
1,800,000
72,107,100

2009
58,587,664
11,700,000
—
3,625
—
70,291,289

2011
72,107,100
—
—
114,328
—
72,221,428

(a) Authorized and Issued — The Company’s authorized share capital is 150,000,000 common shares
with a par value of $0.01 per share, of which there are 72,221,428 common shares issued and outstanding. A
total of 7,800,000 shares were issued to the Founding Shareholders in consideration of their investment of
$50,000 in the Company and a further 51,750,000 common shares were sold by the Company in a private
placement which raised approximately $479,929 in net proceeds in July 2007. On January 20, 2009, the
Company issued an additional 11,700,000 common shares as a result of another private placement which was
discussed in more detail under Note 8. A further 114,328, 15,811 and 3,625 shares were issued in 2011, 2010
and 2009, respectively, relating to the exercise of share options. The holders of our common shares are
entitled to receive dividends and are allocated one vote per share, subject to downward adjustment under
certain circumstances. See below for the discussion relating to the exchange of warrants in 2010.

F-46

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

14. Shareholders’ Equity − (continued)

(b) Warrants — In connection with the formation by our Founding Shareholders, the Company issued to
the Founding Shareholders 10-year warrants to purchase up to 4,050,000 common shares of the Company at
$10 per share. The warrants were effective as at June 14, 2007 and were to expire on June 14, 2017. The
warrants were initially measured at an aggregate fair value of $19,521 which was recorded as an addition to
additional paid-in-capital with an offsetting charge to additional paid-in-capital as well. The fair value of the
warrants issued was estimated on the date of grant using the Black-Scholes option-pricing model. The
volatility assumption used, 34.53%, was derived from the historical volatility of the share price of a range of
publicly-traded companies with similar types of business to that of the Company. No allowance was made for
any potential illiquidity associated with the private trading of the Company’s shares. The other assumptions in
the option pricing model were as follows: risk free interest rate of 5.16%, expected life of 10 years and a
dividend yield of 1%.

On September 20, 2010, the Company entered into Warrant Exchange Agreements, under which each of
the Founding Shareholders agreed to surrender the warrants in exchange for a total of 1,800,000 of the
Company’s common shares. These common shares are restricted under Lockup Agreements under which the
Founding Shareholders may not sell or transfer the shares awarded without the prior written consent of the
Company for a period of 36 months following the exchange. The fair value of the warrants at the time of
exchange was $2.06 per warrant or $8,343 while the fair value of the 1,800,000 restricted common shares
issued was $4.56 per share or $8,208. The terms of the exchange of the warrants and issuance of the common
shares were negotiated and unanimously approved by the Audit and Compensation Committees of the
Company’s Board of Directors. In connection with their review, the Committees were advised by independent
legal counsel and obtained an independent appraisal of the fair value of the warrants and the restricted
common shares. The issuance of the restricted common shares was recorded as an offset
to additional
paid-in-capital where the warrants were originally recorded.

(c) Treasury Shares — On October 14, 2008, a hedge fund that the Company had invested in decided to
close and liquidate its investments and return cash to shareholders in stages over an 18 month period. This
hedge fund was also a shareholder in the Company. Maiden agreed to receive its shares from the hedge fund,
in lieu of the cash that the Company would have received upon the redemption of 90% of its investment in
the fund. As a result of this transaction the Company received 962,336 shares at the valuation price of
$3.95 per share. The Company holds these shares as Treasury Shares.

15. Share Compensation and Pension Plans

The Company’s 2007 Share Incentive Plan (the ‘‘Plan’’), as amended, provides for grants of options,
restricted shares and restricted share units. The total number of shares currently reserved for issuance under
the Plan is 10,000,000 common shares. The Plan is administered by the Compensation Committee of the
Board of Directors. Exercise prices of options will be established at or above the fair market value of the
the date of grant. Under the Plan, unless otherwise determined by the
Company’s common shares at
Compensation Committee and provided in an award agreement, 25% of the options will become exercisable
on the ﬁrst anniversary of the grant date, with an additional 6.25% of the options vesting each quarter
thereafter based on the grantee’s continued employment over a four-year period, and will expire ten years after
grant date.

F-47

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

15. Share Compensation and Pension Plans − (continued)

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 at 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 ASC Topic 718 ‘‘Compensation — Stock Compensation’’ fair value
method has resulted in share-based expenses (a component of salaries and beneﬁts) in the amount of
approximately $1,307, $1,015 and $627 for the years ended December 31, 2011, 2010 and 2009, respectively.

The key assumptions used in determining the fair value of options granted in 2011, 2010 and 2009 and a

summary of the methodology applied to develop each assumption were as follows:

2011

2010

2009

Assumptions:
Volatility . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . .
Weighted average expected lives in years .
Forfeiture rate . . . . . . . . . . . . . . . . . . .
Dividend yield rate . . . . . . . . . . . . . . . .

45.55 − 47.60% 29.50 − 46.00%
1.29 − 1.62%
6.1 years
0%
3.04 − 3.27%

1.62 − 3.21%
5.5 − 6.1 years
0%
1.00 − 3.57%

29.80 − 46.00%
2.36 − 3.30%
5.0 − 6.1 years
0%
1.00 − 5.39%

Expected Price Volatility — This is a measure of the amount by which a price has ﬂuctuated or is
expected to ﬂuctuate. 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 because the Company’s common
shares only began trading in May 2008, thus, it does not have enough history over which to calculate an
expected volatility representative of the volatility over the expected lives of the options. As a substitute for
such estimate,
the Company blended its historical volatility with the historical volatilities of a set of
comparable 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.

Dividend Yield — This is calculated by dividing the expected annual dividend by the stock price of the

Company at the valuation date. An increase in the dividend yield will decrease compensation expense.

F-48

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

15. Share Compensation and Pension Plans − (continued)

The following schedule shows all options granted, exercised, expired and exchanged under the Plan for

the years ended December 31, 2011, 2010 and 2009:

Number of
Share
Options

Outstanding, December 31, 2008 . . 1,519,834
735,333
Granted . . . . . . . . . . . . . . . . . . . .
(3,625)
Exercised . . . . . . . . . . . . . . . . . . .
Forfeited . . . . . . . . . . . . . . . . . . .
(215,000)
Outstanding, December 31, 2009 . . 2,036,542
931,333
Granted . . . . . . . . . . . . . . . . . . . .
(15,811)
Exercised . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . .
(688)
Forfeited . . . . . . . . . . . . . . . . . . .
(10,500)
Outstanding, December 31, 2010 . . 2,940,876
133,500
Granted . . . . . . . . . . . . . . . . . . . .
(114,328)
Exercised . . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . . .
(375)
Forfeited . . . . . . . . . . . . . . . . . . .
(43,530)
Outstanding, December 31, 2011 . . 2,916,143
Total options exercisable at

Weighted
Average
Exercise
Price
$10.00
$ 5.83
$ 3.28
$ 7.97
$ 5.79
$ 7.57
$ 3.28
$ 3.28
$ 3.28
$ 6.41
$ 8.57
$ 3.69
$ 7.65
$ 7.19
$ 6.61

Weighted
Average
Remaining
Contractual
Term
9.44 years
9.51 years

Fair Value
of Options

$1.60

Aggregate
Intrinsic
Value

Range of
Exercise Prices
— $3.28 − 10.00
$4.45 − 7.27

8.86 years
9.60 years

$2.45

8.40 years
9.77 years

$2.89

$1,548

$5,286

$ 587

$3.28 − 10.00
$6.94 − 7.99

$3.28 − 10.00
$7.63 − 9.40

7.55 years

$6,866

$3.28 − 10.00

December 31, 2011. . . . . . . . . . . 1,716,463

$ 6.48

7.04 years

$4,480

$3.28 − 10.00

The weighted average grant date fair value was $2.01, $1.91 and $1.66 for all options outstanding at
December 31, 2011, 2010 and 2009, respectively. There was approximately $2,397 of total unrecognized
compensation cost related to non-vested share-based compensation arrangements as at December 31, 2011
which will be recognized during the next 2.2 years. Cash in the amount of $422 was received from employees
as a result of employee stock option exercises during the year ended December 31, 2011 (2010 — $52;
2009 — $12). The Company issues new shares upon the exercise of an option. In connection with these
exercises, there was no tax beneﬁt realized by the Company.

Performance-Based Restricted Share Units (PB-RSUs)

The Compensation Committee of the Board of Directors approved the formation of a long-term incentive
program under the Plan on March 1, 2011. On that date, the Committee determined to award PB-RSUs to
executive officers and senior Company employees. The formula for determining the amount of PB-RSUs
awarded uses a combination of a percentage of the employee’s base salary (based on a benchmarking analysis
from our compensation consultant) divided by the closing price on NASDAQ Global Select Market of our
common shares on that date. The grants are performance based which require that certain criteria such as
return on equity, underwriting performance, revenue growth and operating expense be met during the
performance period to attain a payout. Each metric has a corresponding weighted percentage with a target,
threshold and maximum level of performance goal set to achieve a payout. Settlement of the grants can be
made in either common shares or cash upon the decision of the Compensation Committee of the Company.
The ﬁrst performance cycle is for two years, 2011-2012, and subsequent performance cycles will be for
three years. For the year ended December 31, 2011, no accrual was recognized as the calculated weighted
percentage of the performance results of the Company did not meet the target level.

F-49

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

15. Share Compensation and Pension Plans − (continued)

Pension Plans

The Company provides pension beneﬁts to eligible employees principally through various deﬁned

contribution plans sponsored by the Company which vary for each subsidiary.

The Company’s expenses for its deﬁned contribution plans were $2,813, $2,326 and $1,795 for the years

ended December 31, 2011, 2010 and 2009, respectively.

16. Taxation

Under current Bermuda law, Maiden Holdings and Maiden Bermuda, have received an undertaking from
the Bermuda government exempting them from all local income, withholding and capital gains taxes until
March 31, 2035. At the present time, no such taxes are levied in Bermuda. Maiden Holdings and Maiden
Bermuda believe that they operate in a manner such that they will not be considered to be engaged in a trade
or business in the United States. Accordingly, Maiden Holdings and Maiden Bermuda have not recorded any
provision for U.S. taxation.

Our U.S. subsidiaries are subject to federal, state and local corporate income taxes and other taxes
income taxes has been determined under the
applicable to U.S. corporations. The provision for federal
principles of the consolidated tax provisions of the U.S. Internal Revenue Code and Regulations. Should the
U.S. subsidiaries pay a dividend outside the U.S. group, withholding taxes will apply. Our U.S. subsidiaries
are currently under examination for tax year 2009. Tax years 2008 and 2010-2011 are not under examination
but remain subject to examination in the U.S.

The Company has subsidiary operations in various other jurisdictions around the world, including but not
limited to the U.K., Sweden, Germany, Russia, Austria, and Australia that are subject to relevant taxes in
those jurisdictions.

Deferred income taxes have not been accrued with respect to certain undistributed earnings of foreign
subsidiaries. If the earnings were to be distributed, as dividends or otherwise, such amounts may be subject to
withholding taxation in the state of the paying entity. Currently however, no withholding taxes are accrued
with respect to the earnings, as it is the intention that such earnings will remain reinvested indeﬁnitely.

There were no unrecognized tax beneﬁts at December 31, 2011, 2010 and 2009.

Income tax expense for the years ended December 31, 2011, 2010 and 2009 and net deferred tax

liabilities for the years ended December 31, 2011 and 2010 were as follows:

Current tax expense − U.S. . . . . . . . . . . . . . . . . . . . . . . . . . .
Current tax expense − Other jurisdictions . . . . . . . . . . . . . . . .
Total current tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax expense − U.S. . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax expense − Other jurisdictions. . . . . . . . . . . . . . . .
Total deferred tax expense . . . . . . . . . . . . . . . . . . . . . . . . . .
Total income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-50

For the Year Ended December 31,
2009
2010
2011
$ —
$ 130
—
30
—
160
1,344
1,170
—
—
1,344
1,170
$1,344
$1,330

79
553
632
1,161
134
1,295
$1,927

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

16. Taxation − (continued)

The following table is a reconciliation of the actual income tax rate for the years ended December 31,
2011, 2010 and 2009 to the amount computed by applying the effective tax rate of 0% under Bermuda law to
income before taxes:

Income before income taxes . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . .
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reconciliation of effective tax rate

(% of income before taxes)

Bermuda tax rate. . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. taxes at statutory rates. . . . . . . . . . . . . . . . . . . .
Valuation allowance in respect of U.S. taxes . . . . . . . .
Other jurisdictions . . . . . . . . . . . . . . . . . . . . . . . . . .
Actual tax rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .

For the Year Ended December 31,
2010
$71,192
1,330
$69,862

2009
$62,402
1,344
$61,058

2011
$30,454
1,927
$28,527

—%
(67.2)%
71.3%
2.2%
6.3%

—%
(18.8)%
20.6%
0.1%
1.9%

—%
(12.4)%
14.6%
—%
2.2%

Deferred income taxes reﬂect the tax impact of temporary differences between the carrying amounts of
assets and liabilities for ﬁnancial reporting and income tax purposes. The signiﬁcant components of our
deferred tax assets and liabilities as at December 31, 2011 and 2010 were as follows:

As at December 31,
Deferred tax assets:
Net operating losses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unearned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Discounting of net loss and loss adjustment expense reserves . . . . . . . . . . .
Accruals not currently deductible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets before valuation allowance. . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Deferred tax liabilities:
Deferred commission and other acquisition costs . . . . . . . . . . . . . . . . . . .
Indeﬁnite lived intangible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains on investments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market discount on bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2011

2010

$38,279
5,595
5,212
1,647
2,680
343
53,756
36,208
17,548

7,829
2,870
3,676
9,111
497
24
24,007
$ 6,459

$15,690
4,705
4,634
1,605
2,137
1,037
29,808
12,949
16,859

5,420
2,870
2,515
9,664
874
728
22,071
$ 5,212

The net deferred liability at December 31, 2011 is $6,459. A valuation allowance has been established
against the net U.S. deferred tax assets which is primarily attributable to net operating losses, unearned
premium and loss reserve discounting. At
is necessary to establish a valuation
allowance against the net deferred tax assets due to insufficient positive evidence regarding the utilization of
these losses. During 2011,
the Company recorded an increase in the valuation allowance of $23,259
(2010 — $5,213) which was recorded in the consolidated statements of income and none was recorded as a
component of other comprehensive income in shareholders’ equity.

this time, we believe it

F-51

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

16. Taxation − (continued)

At December 31, 2011,

the Company has available U.S. net operating loss carry-forward of

approximately $109,369 for income tax purposes which will expire beginning in 2029.

17. Statutory Financial Information

Under The Insurance Act 1978 (Bermuda), amendments thereto and related regulations (the ‘‘Insurance
Act’’), Maiden Bermuda is required to prepare Statutory Financial Statements and to ﬁle a Statutory Financial
Return in Bermuda. The Insurance Act also requires Maiden Bermuda to maintain a minimum share capital of
$120. To satisfy these requirements, the statutory capital and surplus of Maiden Bermuda at December 31,
2011 was approximately $693,435 (2010 — $670,060) and the amount required to be maintained under
the Minimum Solvency Margin, was $226,468 (2010 — $164,593) at December 31, 2011.
Bermuda law,
Maiden Bermuda was also required to maintain a minimum liquidity ratio. All requirements were met by
Maiden Bermuda throughout the period. In addition, Maiden Bermuda is subject to statutory and regulatory
restrictions under the Insurance Act that limit the maximum amount of annual dividends or distributions to be
paid by Maiden Bermuda to Maiden Holdings without notiﬁcation to the Bermuda Monetary Authority of such
payment (and in certain cases prior approval of the Bermuda Monetary Authority). Maiden Bermuda is also
restricted to pay dividends that would result in Maiden Bermuda failing to comply with the enhanced capital
requirement
(‘‘ECR’’) as calculated based on the Bermuda Solvency Requirement (‘‘BSCR’’). Maiden
Bermuda is currently completing its BSCR as at December 31, 2011 and it is anticipated Maiden Bermuda
will be allowed to pay dividends or distributions not exceeding $3,843.

Maiden Bermuda is registered as a Class 3B reinsurer under the Insurance Act and therefore must
maintain capital at a level equal to its ECR which is established by reference to the BSCR model. The BSCR
employs a standard mathematical model that correlates the risk underwritten to the capital that is dedicated to
the business. The regulatory requirements are designed to have insurers operate at or above a threshold capital
level, which exceeds the BSCR. While not speciﬁcally referred to in the Insurance Act,
the BMA has
established a target capital level (‘‘TCL’’) for each Class 3B insurer equal to 120% of its ECR. While a
Class 3B insurer is not currently required to maintain its statutory capital and surplus at this level, the
TCL serves as an early warning tool for the BMA and failure to maintain statutory capital at least equal to the
TCL will likely result in increased BMA regulatory oversight. Maiden Bermuda is currently completing its
BSCR as at December 31, 2011 and believes that it exceeds the ECR level of required capital.

For Bermuda registered insurance companies, there are some differences between ﬁnancial statements
prepared in accordance with U.S. GAAP and those prepared on a statutory basis. Certain assets are
non-admitted under Bermuda regulations and so deferred commission and other acquisition expenses have
been fully expensed and prepaid expenses and ﬁxed assets removed from the statutory balance sheet.

The Company’s insurance subsidiaries in United States, Maiden US and Maiden Specialty, ﬁle ﬁnancial
statements in accordance with statutory accounting practices (‘‘SAP’’) prescribed or permitted by domestic or
foreign insurance regulatory authorities. The differences between statutory ﬁnancial statements and ﬁnancial
statements prepared in accordance with GAAP vary between domestic and foreign jurisdictions. The principal
differences relate to (1) acquisition expenses incurred in connection with acquiring new business which are
charged to expense under SAP but under GAAP are deferred and amortized as the related premiums are
earned; (2) limitation on net deferred tax assets created by the tax effects of temporary differences; (3) unpaid
reinsurance with a
losses and loss expense, and unearned premium reserves are presented gross of
corresponding asset recorded; and (4) ﬁxed maturity portfolios that qualify as available-for-sale are carried at
fair value and changes in fair value are reﬂected directly in unassigned surplus, net of related deferred taxes.

Without prior approval of its domiciliary commissioner, dividends to shareholders are limited by the laws
of the US companies’ state of domicile, Missouri and North Carolina, to the greater of 10% of statutory
policyholders’ surplus as at the preceding December 31, or net income, less net realized capital gain on

F-52

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

17. Statutory Financial Information − (continued)

investments, for the 12-month period ending December 31 of the preceding year. Accordingly, the maximum
dividend payments that can be made in the next year without prior approval by the Missouri Department of
Insurance and North Carolina Department of Insurance is $0 and $3,628, respectively.

insurance

The Company’s

regulated by the Swedish
subsidiary in Sweden, Maiden LF,
Finansinspektionen (‘‘Swedish FSA’’). Maiden LF was required to maintain a minimum level of statutory
capital and surplus of $4,536 at December 31, 2011 (2010 — $4,953). This requirement was met by Maiden
LF throughout the period. The statutory assets were approximately $31,761 (2010 — $47,334). Maiden LF is
subject to statutory and regulatory restrictions under the Swedish FSA that limit the maximum amount of
annual dividends or distributions paid by Maiden LF to the Company. As of December 31, 2011, Maiden LF
is allowed to pay dividends or distributions not exceeding the capital surplus of $1,385.

The Statutory and GAAP equity and net income of the Company’s insurance and reinsurance subsidiaries

were as follows:

Statutory Capital and Surplus
As at December 31, 2011 . . . . . . . . . . .
As at December 31, 2010 . . . . . . . . . . .
Statutory Net Income (Loss)
For the Year Ended December 31, 2011 .
For the Year Ended December 31, 2010 .
For the Year Ended December 31, 2009 .

18. Subsequent Events

Maiden
Bermuda

Maiden
US

Maiden
Specialty

$693,435
670,060

$268,055
262,724

$36,280
30,693

$ 30,070
89,562
43,937

$ (1,684)
1,268
(7,826)

119
1,675
1,680

Maiden
LF

$7,866
7,755

$ 753
486
—

On February 22, 2012,

the Company’s Board of Directors approved a quarterly cash dividend of
$0.08 per common share. This dividend is payable on April 16, 2012 to shareholders of record on
April 2, 2012.

19. Condensed Quarterly Financial Data — Unaudited

The following tables summarize our quarterly ﬁnancial data:

Total revenues. . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . .
Net income (loss) attributable to

Mar 31
$370,378
19,345

2011 Quarters Ended
Sep 30
$440,656
16,002

Jun 30
$390,371
(24,372)

Dec 31
$439,035
17,552

Maiden shareholders . . . . . . . . . . . . .

19,342

(24,366)

16,004

17,544

Comprehensive income (loss) −

attributable to Maiden shareholders . . .

24,212

(5,722)

12,918

Basic earnings (loss) per common share

attributable to Maiden shareholders . . .

0.27

(0.34)

0.22

6,841

0.25

Diluted earnings (loss) per

common share attributable to
Maiden shareholders . . . . . . . . . . . . .

0.27

(0.34)

0.22

0.24

F-53

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

19. Condensed Quarterly Financial Data — Unaudited − (continued)

Total revenues. . . . . . . . . . . . . . . . . . .
Net income. . . . . . . . . . . . . . . . . . . . .
Net income attributable to

Mar 31
$281,822
13,569

2010 Quarters Ended
Sep 30
$328,720
18,526

Jun 30
$303,194
18,637

Dec 31
$334,309
19,130

Maiden shareholders . . . . . . . . . . . . .

13,569

18,637

18,526

19,134

Comprehensive income (loss) −

attributable to Maiden shareholders . . .

37,781

19,167

37,975

(3,470)

Basic earnings per common share

attributable to Maiden shareholders . . .

Diluted earnings per common share

attributable to Maiden shareholders . . .

0.19

0.27

0.26

0.27

F-54

MAIDEN HOLDINGS, LTD.

SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
(in thousands of U.S. dollars)

Amortized
Cost*

Fair
Value

As at December 31, 2011
Fixed Maturities:

Bonds:

U.S. government and government agencies . . . . . . . . . . .
Non-U.S. government bonds . . . . . . . . . . . . . . . . . . . . .
Other mortgage-backed securities . . . . . . . . . . . . . . . . .
All other corporate . . . . . . . . . . . . . . . . . . . . . . . . . . .
Municipal bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total ﬁxed maturities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investments. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 983,493
51,405
9,919
743,951
168,338
1,957,106
1,955
$1,959,061

$1,029,044
51,198
9,920
761,433
169,066
2,020,661
2,192
$2,022,853

Schedule I

Amount at
Which Shown
in the
Balance Sheet

$1,029,044
51,198
9,920
761,433
169,066
2,020,661
2,192
$2,022,853

Original cost of other investments and, for ﬁxed maturities, original cost reduced by repayments and
adjusted for amortization of premiums or discounts

S-1

Schedule II

MAIDEN HOLDINGS, LTD.

CONDENSED BALANCE SHEETS — PARENT COMPANY
As at December 31, 2011 and 2010
(In thousands of U.S. dollars, except share and per share data)

Assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Investment in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balances due from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Liabilities:
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Balances due to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shareholders’ equity
Common shares ($0.01 par value; 73,183,764 and 73,069,436 shares issued in
2011 and 2010, respectively; 72,221,428 and 72,107,100 shares outstanding
in 2011 and 2010, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury shares, at cost (2011 and 2010: 962,336 shares) . . . . . . . . . . . . . . .
Total shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . .

2011

2010

550
983,816
137,733
233
$1,122,332

797
935,145
101,350
463
$1,037,755

8,495
345,195
353,690

6,019
281,562
287,581

732
579,004
64,059
128,648
(3,801)
768,642
$1,122,332

731
577,135
54,334
121,775
(3,801)
750,174
$1,037,755

S-2

MAIDEN HOLDINGS, LTD.

CONDENSED STATEMENTS OF INCOME — PARENT COMPANY
For the Years Ended December 31, 2011, 2010 and 2009
(In thousands of U.S. dollars)

Schedule II

For the Year Ended December 31,
2010

2009

2011

Revenues:

Net investment (loss) income . . . . . . . . . . . . . . . . . . . . . .

408
408

Expenses:

General and administrative expenses . . . . . . . . . . . . . . . . .
Foreign exchange losses . . . . . . . . . . . . . . . . . . . . . . . . .

Loss before equity in earnings of consolidated subsidiaries. . . .
Equity in earnings of consolidated subsidiaries . . . . . . . . . . . .
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,806
31
10,837
(10,429)
38,953
$ 28,524

$ (118)
(118)

7,076
—
7,076
(7,194)
77,060
$69,866

265
265

4,809
—
4,809
(4,544)
65,602
$61,058

S-3

Schedule II

MAIDEN HOLDINGS, LTD.

CONDENSED STATEMENTS OF CASH FLOWS — PARENT COMPANY
For the Years Ended December 31, 2011, 2010 and 2009
(In thousands of U.S. dollars)

Cash ﬂows provided by operating activities:

Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net income to cash provided by

operating activities:
Equity in earnings of consolidated subsidiaries . . . . . . . .
Foreign exchange loss . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash share compensation expense . . . . . . . . . . . . . .
Balance due from subsidiaries . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and accrued liabilities . . . . . . . . . . . . .
Balances due to subsidiaries . . . . . . . . . . . . . . . . . . . . .
Net cash provided by operating activities. . . . . . . . . . .

Cash ﬂows used in investing activities:

2011

2010

2009

$ 28,524

$ 69,866

$ 61,058

(38,953)
31
1,307
(36,414)
230
1,746
63,633
20,104

(77,060)
—
1,015
(4,209)
(57)
387
36,485
26,427

(65,602)
—
627
(97,039)
(189)
(881)
134,084
32,058

Investment in subsidiaries. . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) investing activities . . . .

148
148

(7,476)
(7,476)

(20,073)
(20,073)

Cash ﬂows used in ﬁnancing activities:

Dividends paid . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of common shares . . . . . . . . . . . . . . . . . . . . .
Net cash used in ﬁnancing activities . . . . . . . . . . . . . .
Net (decrease) increase in cash and cash equivalents . . . . . . . .
Cash and cash equivalents, beginning of year. . . . . . . . . . . . .
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . .

(20,921)
422
(20,499)
(247)
797
550

(18,394)
52
(18,342)
609
188
797

(16,167)
129
(16,038)
(4,053)
4,241
188

S-4

Reinsurance .

Diversiﬁed Reinsurance .
AmTrust Quota Share
.
ACAC Quota Share .
.
Corporate .
.
Total. . . .

.
.
.
.

.
.

Reinsurance .

Diversiﬁed Reinsurance .
AmTrust Quota Share
.
ACAC Quota Share .
.
Corporate .
.
Total. . . .

.
.
.
.

.
.

Diversiﬁed Reinsurance .
AmTrust Quota Share
.
.
.

Reinsurance .
.
.

Corporate .
Total. . . .

.
.
.

.
.

MAIDEN HOLDINGS, LTD.

SUPPLEMENTARY INSURANCE INFORMATION
(In thousands of U.S. dollars)

Schedule III

As at December 31, 2011

For the Year Ended December 31, 2011

Deferred
commission
and other
acquisition
costs

Reserve
for loss
and loss
adjustment
expenses

Unearned
premiums

Net
premiums
earned

Net
investment
income

Net loss
and loss
adjustment
expenses

Amortization
of deferred
commission
and other
acquisition
expenses

General and
administrative
expenses

Net
premiums
written

$ 98,712

$1,011,431

$348,131

$ 748,387

$ —

$ 502,375

$200,239

$36,374

$ 798,037

120,369
29,355
—
$248,436

327,101
59,906
—
$1,398,438

391,275
92,641
—
$832,047

558,197
245,844
—
$1,552,428

—
—
74,891
$74,891

380,263
160,416
—
$1,043,054

160,522
78,051
—
$438,812

2,283
1,635
13,600
$53,892

669,283
256,201
—
$1,723,521

As at December 31, 2010

For the Year Ended December 31, 2010

Deferred
commission
and other
acquisition
costs

Reserve
for loss
and loss
adjustment
expenses

Unearned
premiums

Net
premiums
earned

Net
investment
income

Net loss
and loss
adjustment
expenses

Amortization
of deferred
commission
and other
acquisition
expenses

General and
administrative
expenses

Net
premiums
written

$ 85,252

$ 971,317

$291,148

$ 601,254

$ —

$394,604

$152,698

$26,123

$ 554,049

92,155
26,224
—
$203,631

222,812
32,644
—
$1,226,773

284,124
82,284
—
$657,556

445,081
123,455
—
$1,169,790

—
—
71,651
$71,651

280,890
79,628
—
$755,122

144,655
39,344
—
$336,697

1,500
243
14,314
$42,180

468,043
205,739
—
$1,227,831

As at December 31, 2009

For the Year Ended December 31, 2009

Deferred
commission
and other
acquisition
costs

Reserve
for loss
and loss
adjustment
expenses

Unearned
premiums

$ 88,224

$ 837,291

$322,316

84,759
—
$172,983

165,385
—
$1,002,676

261,162
—
$583,478

Net
premiums
earned

$567,998

351,921
—
$919,919

Net
investment
income

Net loss
and loss
adjustment
expenses

Amortization
of deferred
commission
and other
acquisition
expenses

General and
administrative
expenses

Net
premiums
written

$ —

$393,760

$126,193

$19,211

$ 658,016

—
62,957
$62,957

214,853
—
$608,613

115,236
—
$241,429

2,515
10,409
$32,135

372,358
—
$1,030,374

.
.
.
.

.
.
.

.
.
.
.

.
.
.

.
.
.
.

.
.
.

.
.
.
.

.
.
.

.
.
.
.

.
.
.

S-5

Schedule IV

MAIDEN HOLDINGS, LTD.

SUPPLEMENTARY REINSURANCE INFORMATION
(In thousands of U.S. dollars)

For the Year Ended December 31,
2011 Premiums − General Insurance
2010 Premiums − General Insurance
2009 Premiums − General Insurance

(a)
Gross
$114,036
71,625
21,655

(b)
Ceded to
other
companies
$89,076
70,224
18,302

(d)
Net amount
(a) - (b) + (c)
$1,723,521
1,227,831
1,030,374

Percentage of
amount
to net
(c)/(d)
98.6%
99.9%
99.7%

S-6

MAIDEN HOLDINGS, LTD.

SUPPLEMENTARY INSURANCE INFORMATION
CONCERNING PROPERTY/CASUALTY INSURANCE OPERATIONS
(In thousands of U.S. dollars)

For the Year Ended December 31,
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current Year
$1,028,855
787,967
620,046

Prior Year
$ 14,199
(32,845)
(11,433)

Net loss and loss
adjustment expenses

Schedule VI

Paid loss
and loss
adjustment
expenses
$880,004
631,334
512,281

S-7

This page intentionally left blank.

Patrick J. Haveron
Executive Vice President

Ronald M. Judd
President of Maiden Global Holdings, Ltd.

Simcha G. Lyons
Director

John M. Marshaleck
Chief Financial Officer

Lawrence F. Metz, Esq.
Senior Vice President, General Counsel
and Secretary

Raymond M. Neff
Director

Yehuda L. Neuberger
Director

Steven H. Nigro
Director

Arturo M. Raschbaum
President and Chief Executive Officer

Karen L. Schmitt
President of Maiden Reinsurance Company

Barry D. Zyskind
Chairman of the Board of Directors

Maiden Holdings, Ltd.
131 Front Street, 2nd Floor
Hamilton HM 12 Bermuda
Phone: 441 298 4900

The Company’s principal operating sub-
sidiaries are located in Bermuda, the
United States and the United Kingdom.

A copy of the Maiden Holdings, Ltd.
2011 Annual Report on Form 10-K as
filed with the Securities and Exchange
Commission is available on the Company’s
website at www.maiden.bm. It is also
available from the Company at no
charge. These requests and other inves-
tor contacts should be directed to
Investor Relations at the Company’s
corporate office.

May 2, 2012
Hamilton, Bermuda

The Company’s common stock trades
on the NASDAQ Global Select Market
under the symbol “MHLD.”

BDO USA, LLP
New York, NY

American Stock Transfer &
Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
800 937 5449 or 718 921 8275

Reconciliation of net income to income from operations:

Net income attributable to Maiden shareholders
Add (subtract)
Foreign exchange losses (gains)
Amortization of intangible assets

Interest and amortization expenses

Accelerated amortization of junior subordinated debt discount and issuance cost

Junior subordinated debt repurchase expense
Income tax expense

Income from operations

Investable assets:
Total investments
Cash and cash equivalents
Restricted cash and cash equivalents
Loan to related party
Funds withheld (1)

Total investable assets

1) Comprised of fixed maturity securities, cash and cash equivalents included in the funds withheld.

For the Year ended
December 31,

2011

2010

2009

in $ millions
$ 70

$ 61

$ 29

—
5
34
20
15
2

1
6
36
—
—
1

(2)
7
34
—
—
1

$ 105

$ 114

$ 101

As at December 31,

2011

2010

2009

in $ millions

$ 2,023
188
115
168
30

$ 1,880
96
90
168
119

$ 1,667
108
145
168
—

$ 2,524

$ 2,353

$ 2,088

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131 Front Street, 2nd Floor

Hamilton HM 12 Bermuda

P: 441 298 4900

F: 441 292 0471

maiden.bm