Maiden Holdings, Ltd. Annual Report 2012

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FY2012 Annual Report · Maiden Holdings, Ltd.

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Building on a Strong Foundation

2012 ANNUAL REPORT

M aiden Holdings, Ltd. (Nasdaq: MHLD) is a Bermuda-

headquartered holding company with subsidiaries that provide

reinsur ance and insur ance 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 reinsur ance 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 oper ations in

both Bermuda and the United States, and production

teams in the United Kingdom, Germany and other

select markets throughout the globe.

2012

with a relentless focus on customers, Maiden has been

profitable every year since its inception. In 2012, the

Company achieved diluted oper ating earnings per common

share of $0.66, on record net written premium of $1.9 billion,

while book value per share increased 12.4% to $11.96.

Maiden Holdings, Ltd. 2012 Annual Report

Maiden at a Glance

Bermuda (cid:79) United States (cid:79) United Kingdom (cid:79) Germany

The Maiden Difference

Objective: To serve the non-catastrophic reinsurance needs
of regional and specialty insurers while delivering stable,
profitable underwriting performance and strong operating
returns.

Business Focus: We focus on delivering long-term, non-
catastrophic reinsurance solutions, primarily to regional and
specialty property & casualty insurers.

We provide lower or “working” layer reinsurance support focusing on
the more predictable and actuarially credible segments of our clients’
reinsurance programs. Our focus helps us to avoid the volatility associ-
ated with severity events such as catastrophes and also to mitigate the
impact of market cycles by developing long-term solutions for our clients.

We aspire to be our clients’ primary reinsurance relationship and to
play a significant role in meeting their long-term reinsurance needs. Our
long-term partnerships result in a stable book of business.

History: Founded in 2007, the core of our platform is the
former GMAC RE business, which has a 29-year history of
steady, long-term client relationships averaging more than
5 years. Several of Maiden’s senior managers were former leaders of
the GMAC reinsurance and insurance businesses.

Client Support: The fully collateralized Dedicated
Financial Trust® is a customized solution, which provides
exceptional financial stability. Each U.S. client with more than
$1 million of liabilities has access to an individually segregated trust
account backed by highly rated, liquid assets. This unique solution pro-
vides full trans parency and generates exceptional customer loyalty.

Customer Relationships: We learn each client’s business
in depth to provide customized reinsurance solutions. Each
account is served by a multi-functional team, including underwriters,
actuaries, accountants and claims specialists. They each work closely
together to develop custom solutions that meet the unique needs of
each client, as well as provide value-added services above and beyond
the reinsurance contract.

Financial Strength: Maiden’s disciplined business model
has maintained profitable underwriting results every year
since our formation.

Our strong capital position is based upon more than $4.1 billion of
assets. Our principal operating subsidiaries are rated A- (Excellent) by
A.M. Best and BBB+ (Good) by Standard & Poor’s.

Diversified Oper ations and Str ategic Relationships

Maiden is a diversified property and casualty reinsurer serving a wide
range of clients. We have also entered into significant quota share
reinsurance agreements with two key strategic partners.

Diversified Reinsur ance (40% of NPW). In the U.S.,
Maiden Re primarily provides property and casualty reinsur-
ance for regional and specialty insurers.

Our clients typically focus on 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.

Internationally, we work with original equipment automobile
manufacturers and related credit providers to design and
implement personal auto and credit life insurance programs.

These programs are generally underwritten with local insurance com-
panies, and Maiden’s International Insurance Services (“IIS”) unit pro-
vides business development and reinsurance product support. Based in
the U.K., the international business is mostly generated in Europe and
underwritten through our Bermuda operations.

In 2012, Diversified Reinsurance had $795.3 million of earned
premium, at a combined ratio of 102.5% .

Str ategic Relationships. Maiden’s multi-year quota share
agreements with specialty insurers AmTrust Financial Services, Inc.
(“AmTrust”) and American Capital Acquisition Corporation (“ACAC”)
provide a solid foundation of predictable long-term revenues and profit-
able growth.

AmTrust (44% of NPW). Maiden’s relationship with AmTrust
primarily 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’ compensation, commercial package and other com-
mercial lines, as well as specialty risk and extended warranty coverage
for consumer and commercial goods. In 2011, Maiden expanded its
relationship to include AmTrust’s European Hospital Liability business,
which is evaluated annually for renewal. In 2012, Maiden’s AmTrust
segment produced $727.8 million of earned premium at a combined
ratio of 95.8% .

ACAC (16% of NPW). Maiden’s multi-year 25% quota share
agreement with ACAC focuses mainly on a portfolio of
personal auto insurance in select U.S. markets.

The ACAC quota share relationship produced $280.7 million of earned
premium at a combined ratio of 97.2% .

Selected Financial Highlights

(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 common share

Operating earnings per common 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

2012

$ 1,901

1,804

2011(2)

2010

$ 1,724

$ 1,228

1,552

1,170

105

114

$ 0.64

$ 0.66

$ 0.39

$ 0.96

$ 0.98

$ 1.02

99.5%

98.1%

96.9%

$ 3,030

4,138

$ 1,015

$ 2,524

3,395

$ 769

$ 2,353

2,983

$ 750

5.9%

9.2%%

10.2%

$ 11.96

9.19

$ 665

$ 10.64

8.76

$ 633

$ 10.40

7.86

$ 567

1. Income from operations, operating earnings, and the related metrics operating earnings per common share and operating return on average common shareholders’ equity, as well as investable assets, are non-GAAP financial measures. Operating
earnings are 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 76 of this Annual Report on Form 10-K for additional information and
reconciliation to GAAP for operating earnings, operating earnings per common share, and operating return on average common 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 common share, operating return on common 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 common share, operating return on common equity and investable assets may not be comparable
to similarly titled measures used by other companies.

2. Maiden’s net income was impacted by certain non-recurring charges in 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.

2012 Business Distribution
in $ millions net premiums written

Total Assets
in $ millions

$2,983

$3,395

$4,138

1 Personal Auto $554
2 Workers’ Compensation $392
3 Commercial Auto $199
4 Warranty $167
5 Other Liability $159
6 Other Lines $131
7 European Hospital Liability $106
8 Fire, Allied Lines and Inland Marine $68
9 Commercial Multi-Peril $61
10 Accident & Health $36
11 Homeowners’ $28

109

2010

2011

2012

Dear Shareholders

Oper ations in Bermuda, U.S. and Europe

In 2012, Maiden continued to make solid progress in developing its underwriting portfolio, and importantly, strengthening its
balance sheet. In doing so the Company remained focused on its core strategy as a highly differentiated reinsurer providing
non-catastrophe working layer reinsurance support to its regional and specialty insurer clients in the United States, Europe and
select global markets. Unlike more severity or volatility oriented reinsurers, our underwriting emphasizes traditional and lower
volatility lines of business, providing clients with expert risk analysis and operational flexibility, while maximizing capital support.
To ensure that our balance sheet supports the continued growth in our business, we completed two long-term oriented capital
raising transactions. As we consider our prospects for 2013, we are confident that we are beginning the new year from a
position of strength.

Notwithstanding the accomplishments and successes of 2012, the industry was again reminded of the significant force and
impact that natural hazard catastrophes can have on the marketplace as it responded to Superstorm Sandy (“Sandy”). For
Maiden, while the impact on our results in the fourth quarter was significant, our results were within our risk tolerances for
an event of this magnitude. Despite the fourth quarter impact, Maiden produced a full year underwriting profit and solid net
and operating income for the full year. In fact, 2012 marked the Company’s sixth consecutive year of profitable underwriting
performance.

Oper ating Results

In 2012, Maiden increased its book value per common share to $11.96 per share, representing growth of 12.4% . Despite the
impact of Sandy, our full year 2012 operating return on equity remained positive at 5.9% , compared to 9.2% in 2011. Maiden’s
shareholders’ equity at December 31, 2012 stood at $1.02 billion compared to $769 million a year ago and reflects both
organic growth and the successful completion of our preference share issuance in the third quarter of 2012. The growth in
our shareholders’ equity will serve to support our business development activities in 2013 and ultimately could be used to
significantly reduce our cost of capital in early 2014, when the call premium for Maiden’s 14% coupon Trust Preferred Securities
(“TRUPS”) expires.

From an underwriting perspective, and inclusive of the impact of Sandy, our combined ratio was 99.5% compared to 98.1% in
2011. Maiden does not write catastrophe reinsurance business, however, as we have stated in the past, we do write property
exposed business which can produce losses resulting from extreme catastrophic events. While Maiden’s losses were consistent
with our expectations for a storm as significant as Sandy, going forward, we are committed to further reducing our aggregate
exposure, particularly from our U.S. Excess and Surplus lines (“E&S”) property portfolio, Maiden Specialty, where the majority
of this loss emanated. In contrast, in our U.S. treaty reinsurance portfolio, our losses from Sandy were favorable to modeled
values and the portfolio performed very much in-line with our lower volatility strategy. There was also a small exposure to Sandy
within the ACAC business segment. Absent this impact, our full year combined ratio was 97.8%, an improvement from the 2011
combined ratio of 98.1% and our operating ROE would be 9.6% . Importantly, this reflects a favorable trend to the prior year
and improvements in elements of the portfolio that are benefiting from primary insurer rate strengthening. We believe that
further reducing our exposure to natural hazard catastrophic events will further benefit the stability of Maiden’s performance.

Supporting our Clients

Maiden maintained its focus on supporting the capital position of our clients. In addition to providing stable capital support
through our customized reinsurance solutions, Maiden demonstrated its support by working with our clients impacted by Sandy
to ensure timely payment of their claims. The profitable growth of our business is the best illustration of our continued support
of our regional and specialty insurer clients.

From an overall perspective, net premiums grew to $1.90 billion in 2012 from $1.72 billion in 2011, an increase of 10.3% . The
Diversified Reinsurance segment, which includes our U.S. underwriting unit, Maiden Re; our international business development
team, IIS; and certain business from our Bermuda reinsurance company, Maiden Bermuda, produced net premiums written of

Maiden Holdings, Ltd. 2012 Annual Report

$765.3 million in 2012, down 4.1% compared to 2011. The reduction in Diversified net written premium resulted largely from
the termination of a large under-performing quota share account and to a lesser extent from a client decision to retain more
premium. As clients’ balance sheets grow, their need for pro-rata reinsurance support can diminish. Additionally, comparative
period 2011 revenue growth included incoming unearned premium reserve portfolios on several accounts, which are non-
recurring in 2012.

In our IIS business development unit, year-on-year revenue was essentially flat. Much of our efforts in this segment continue
to focus on the expansion of our automobile original equipment manufacturer branded customer insurance programs. Shortly
after we acquired the business, we eliminated a number of poor performing accounts. While total revenue is flat year-on-year,
the team has offset the impact of those terminated accounts with new opportunities. Toward the end of 2012 we added a
Business Development Executive who will focus on expanding this business model in Latin America. Across the IIS unit, we
are evaluating a number of opportunities to increase the historically profitable credit life component of this portfolio in 2013.
Going forward, one of the key growth opportunities for Maiden’s IIS business is the replication of our regional and specialty
focused reinsurance business as we concentrate on the needs of small- to mid-sized insurers. We are in the process of recruiting
an experienced executive to lead this effort.

Our two largest clients, AmTrust and ACAC, continue to enjoy healthy growth. In 2012, net premiums written for the AmTrust
Quota Share Reinsurance segment were $840.3 million, an increase of $171.0 million or 25.6% compared to 2011, reflecting
growth in all segments. While continued successful acquisition activity drives some of the increase, rate strengthening and
organic growth in active clients have also favorably impacted premium volume. In particular, rate firming in the U.S. is benefit-
ing growth in all of AmTrust’s key segments. Net premiums written for the ACAC Quota Share rose 15.4% in 2012, to $295.7
million compared to 2011, as they continue their niche strategy of expanding in select markets.

Underwriting Performance

The profitability of our operating segments varied across our lines of business. The Diversified Reinsurance business segment
produced a combined ratio of 102.5% in 2012 as the majority of Maiden’s Sandy losses came from this segment. Excluding
the impact of Sandy, the Diversified Reinsurance combined ratio would be 98.9% . However, this is still above our targeted
combined ratio, due to the adverse impact of our German auto quota share in 2012 at IIS and the impact of a large poorly
performing commercial auto account at Maiden Re in the U.S. We anticipate that implementation of significant underwriting
changes, enhanced claims processes, and rate increases will improve the performance of the German auto quota share account
in 2013. With regard to the adverse performance of the Maiden Re commercial auto account, our participation on that account
had already been terminated and we do not anticipate continued adverse impact from this business. In the fourth quarter of
2012, we completed a comprehensive audit of all of the remaining outstanding claims. Going forward, we are targeting improved
underwriting performance for these segments in 2013 and beyond. We have made progress in improving overall rate levels
across the platform. Additionally, we are continuing to see solid growth in our lower layer highly profitable facultative casualty
business. We anticipate further growth in this segment in 2013.

We continue to see pricing strength in AmTrust core markets and underlying performance reflects favorable results. The
AmTrust Quota Share segment recorded a combined ratio of 95.8% for 2012, which is within our target expectation and
reflects improvement from the 97.3% combined ratio in 2011. Importantly, the impact of pricing actions is having a favorable
effect on performance.

The ACAC segment reported a combined ratio of 97.2% for the year, compared to 97.7% in 2011. The ACAC contract has
a variable commission feature; however, the fourth quarter combined ratio of 99.1% exceeded the upper end of that variable
commission swing rate, primarily as a result of Sandy related losses. We are confident that some of the actions ACAC has
taken will improve the results of their business over time.

On balance, we are pleased with our continued progress in both growing the business and enhancing our underwriting
performance.

Growing Investments

In addition to underwriting, investment returns are a key driver of Maiden’s profitability. Despite a highly challenging environ-
ment for fixed income investing, Maiden’s net investment income increased to $81.2 million for the year ended December 31,
2012, an improvement of 8.4% compared to 2011. Total investments grew $598.7 million or 29.6% to $2.6 billion versus
December 31, 2011. At the end of 2012, the invested asset portfolio was comprised primarily of corporate bonds and U.S.
Agency mortgage backed securities, with corporate bonds representing 52% of our invested assets, while U.S. Agency MBS
made up 38% of the portfolio. Maiden experienced significant pre-payments on mortgage backed securities during 2012, which
resulted in the receipt of $438.8 million in cash, which is $155.3 million more than 2011. In addition, we invested the $250 million
in proceeds from our two capital markets transactions. In all, investable assets increased 20% to $3.0 billion in 2012. The book
yield at year-end 2012 on the fixed income portfolio (excluding cash) was 3.48% with an average duration of 3.55 years com-
pared to a book yield of 3.59% and average duration of 2.78 years at the end of 2011. The new money yield during 2012 was
3.32% compared to a new money yield of 3.59% during 2011.

Financial Strength and Flexibility

In 2012, we continued to build our balance sheet, which is optimized to efficiently utilize capital for the benefit of shareholder
returns. Maiden’s capital base was substantially strengthened in 2012 through opportunistic and diversifying capital raises, as
well as operating profits. We finished 2012 with $1.3 billion in capital. We were pleased to be able to complete two capital
markets transactions totaling $250 million. In March we issued $100 million 30-year, 8% Senior Notes to support our growth
and further strengthen our balance sheet. In August we saw an opportunity to access the preferred share market for the first
time and issued $150 million of non-cumulative perpetual preference shares. Along with this offering, the Board of Directors
authorized a common share repurchase authorization of up to $75 million. The share buy-back authorization provides us
with an additional tool with which to manage our capital position. Separately, in November, the Board of Directors increased
Maiden’s common share dividend by 12.5% to $0.09 per share. An important aspect of our prospective capital management
activities is the potential to repurchase our TRUPS. We therefore weigh all other capital management actions, including share
repurchases against the meaningful and permanent impact of repurchasing the remaining outstanding TRUPS.

Building on a Strong Foundation

Overall, 2012 was a successful year for Maiden as we continued to build out our platform and strengthen our capital position.
While the impact of Sandy was disappointing, we believe that our results continue to highlight the lower volatility nature of our
business model, despite the enormity of Sandy. As mentioned previously, we are taking further appropriate actions to significantly
reduce the catastrophe exposed elements from our E&S property business, which should mitigate our exposure to a similar
event in the future. Maiden’s differentiated business model is focused on delivering value to our shareholders through serving
the unique needs of regional and specialty insurers while maintaining underwriting discipline, leveraging operational and balance
sheet efficiency, and effective capital management. We are confident that we are beginning 2013 from a strong foundation and
with positive momentum. On behalf of the Board of Directors, we would like to thank our dedicated staff, shareholders and
other stakeholders for their continued support. In the next year we will continue to focus on delivering shareholder value
through enhancements to our earnings streams and effective capital management activities.

Arturo M. R aschbaum

President and Chief Executive Officer

Barry D. Zyskind

Chairman of the Board of Directors

Maiden Holdings, Ltd. 2012 Annual Report

231%

Since the tr ansformative acquisition of the GM AC RE

business in 2008, M aiden’s 231% total return1 to

shareholders, including dividends, far exceeds the 102%

return of a peer-group* index of Bermuda-based property

and casualty companies and the 74% return of the

S&P 500, as of December 31, 2012.

(1) Source SNL Financial. Total return of a security 11/11/2008 to 12/31/2012, including price appreciation

and the reinvestment of dividends. Dividends are assumed to be reinvested at the closing price of the
security on the ex-date of the dividend.

(*) Bermuda P&C Companies include: Aspen, Alterra, Arch, Axis, AWAC, Endurance, EverestRe,

Montpelier, PartnerRe, Platinum, RenRe, Validus, XL.

Maiden Milestones

2007
June: Formation of Maiden
Holdings, Ltd. Maiden enters
quota share agreement with
AmTrust Financial Services,
Inc., on a diversified com-
mercial insurance portfolio.

2008
May: Maiden begins trading on
NASDAQ under the symbol
“MHLD.”
October: Acquires GMAC RE,
forming the basis of the
Company’s diversified reinsurance
operations, Maiden Re.

2009
January: Completes $260 million
offering of 14% trust preferred
shares (TRUPS) to support the
GMAC RE acquisition.

2010
March: Maiden forges quota
share agreement with American
Capital Acquisition Corporation
(“ACAC”), a U.S. personal auto
insurer.
November: Acquires assets and
liabilities of GMAC International
Insurance Services, Ltd., a plat-
form for international expansion.

Charting a New Course in the Reinsur ance Industry Maiden Re set out in a
new direction as a specialty reinsurer of low-volatility, working-layer exposures for smaller and mid-sized
regional and specialty insurers. Our differentiated, fully collateralized and individually segregated Dedicated
Financial Trust®, provides an exceptional degree of security for all accounts with liabilities of more than
$1 million. After successfully establishing a reputation for reliability, flexibility and extraordinary value-
added customer service, Maiden continues to take steps to expand from its predominantly U.S.-oriented
customer base to introduce the Maiden model to Europe and Latin America.

Maiden Milestones

2011
June: Maiden refinances $107.5
million of the 14% TRUPS at the
more favorable rate of 8.25%
via issuance of $107.5 million of
30-year notes.

2012
March: Maiden issues
$100 million of 30-year
8% senior notes.
August: Issues $150 million
of 8.25% preference shares.
Together, these offerings provide
funding capable of potentially
redeeming the remaining 14%
TRUPS in January 2014.

November: Superstorm Sandy
hits Northeastern U.S. Despite
high losses for the broader rein-
surance industry, Maiden’s lower
volatility non-catastrophe model
limits its losses on a relative basis.

December: Maiden concludes
another year of profitable
underwriting. Book value per
share rises to $11.96. Net
written premiums reach $1.9
billion. Employee count stands
at 213.

Maiden Holdings, Ltd. 2012 Annual Report

Strong Client Relationships At Maiden, we take the time to get to know our clients and
their business, working with them face to face in order to structure creative, customized reinsurance
solutions. To each account we dedicate multi-disciplinary teams of professionals, including actuaries,
underwriters, accountants and claims experts, to assist clients with any aspect of their business that
may need assistance, and to provide value-added services that exceed the standard requirements of
the reinsurance transaction. We aim for a high rate of retention, which reached 94% for our Maiden Re
treaty reinsurance clients in 2012.

A Commitment to Our Core Philosophy

Net Premiums Written
in $ millions

$1,228 $1,724 $1,901

2010

2011

2012

Stable, non-catastrophe business

Long-term client relationships

Multidisciplinary teams

Dedicated Financial Trust®

Our Key to Success
Since our founding, Maiden has been dedicated to a philosophy of achieving stable,
predictable returns by focusing on reinsurance exposures with low-volatility,
while nurturing long-term, collaborative customer relationships. We provide
exceptional security by maintaining a strong balance sheet and offering our
fully collateralized Dedicated Financial Trust®. We reinforce our relationships
through customized reinsurance solutions accompanied by an exceptional level
of value-added service provided by dedicated multifunctional teams assigned
to each client. Through this commitment, we have differentiated Maiden
from other reinsurers and have built a solid, growing business upon a strong
financial foundation.

Unwavering adherence to our philosophy again proved its worth in 2012.
Although we have historically avoided the wide swings of profit and loss that
catastrophe reinsurers regularly experience, our exposure to ordinary working
layers, especially in commercial property lines, resulted in inevitable losses
brought about by Superstorm Sandy, dampening our otherwise rewarding year.
Despite Sandy’s impact, our careful underwriting—which by design should limit
our potential exposure to no more than one year’s earnings for even the most
extraordinary 1-in-250-year events—produced profitable year-end results.
Our balance sheet remained strong and our sound capital base has grown.

Importantly, Sandy provided a shining opportunity to display Maiden’s exemplary
culture of customer service. We swiftly responded to assess Sandy’s impact
on our customers and paid their claims rapidly. We demonstrated our skill,
flexibility and reliability by helping our customers determine and fulfill their
needs. Many of our clients who were impacted by this storm have seen their
capital levels weakened, and Maiden is working with these companies to develop
reinsurance solutions to help fortify their capital structures.

Our ability to develop deep, mutually rewarding client relationships—with our
diversified base of small- to mid-sized regional and specialty insurers as well as
with our two large quota-share clients, AmTrust and ACAC—has always been
a distinguishing Maiden feature. By intimately understanding each client’s business,
Maiden can serve as its primary reinsurance provider and assume a large share
of its capital needs. This was instrumental in achieving industry-leading efficiency
and an extraordinary level of client retention. In turn, it enabled us to increase
our written premium in business that met our high standards for risk-adjusted
profitability, and helped increase in our investable assets to $3.0 billion.

$1.9 Billion

In 2012, written premium grew to $1.9 billion, up 10.3%

over the prior year, while earned premium grew 16.2%

to $1.8 billion. Maiden targets a long-term aver age

net written premium growth of 10%.

Maiden Holdings, Ltd. 2012 Annual Report

A Year of Fine-Tuning Our Business

Net Premiums Earned
in $ millions

$1,170

$1,552 $1,804

2010

2011

2012

We have assembled a high quality

portfolio of diversified

property and casualty business.

We seek to grow these accounts

and are well positioned

to pursue attr active new

opportunities in an improving

marketplace.

Integr ation and Improvement
Following several years of extraordinary growth, 2012 was a period to
digest acquisitions and hone new initiatives.

We made numerous improvements in our products and services. We
enhanced one of our most successful products, AMP, our automated mod-
eling and pricing tool, which enables facultative reinsurance clients to easily
rate, quote and bind risks online, based on preset guidelines. Launched
online in 2009, AMP continued to attract new customers in 2012.

For our treaty customers, we remain committed to developing a wide range
of specialized resources in areas such as analytics, predictive modeling and
compliance. We are researching pre-underwriting tools to help clients make
better underwriting decisions, giving smaller insurers capabilities enjoyed
by their larger competitors. Internally, we launched a tool that aggregates
information from a variety of sources—incorporating such data as a com-
pany’s performance, its competitive landscape and local regulatory standing
—to allow Maiden to evaluate potential risks more thoroughly. Still in its
early stages, such a tool could eventually be made available to others for a
fee. The development of fee-based resources, to enhance our reinsurance
business, is an avenue we are actively exploring.

On the international front, we have focused on integrating and developing
our IIS platform, which is a small but promising business area. One of the
primary drivers of this business is the German auto market, which has
unfortunately softened, both in terms of vehicle sales and auto insurance
pricing. Despite current challenges, we remain committed to the long-term
viability of this market and formally restructured our major partner relation-
ship and reoriented the operation to focus on profitability. We integrated
its underwriting into Maiden Insurance in Bermuda, which underwrites all
of our international business. We also expanded it into the Netherlands and
saw good growth from a small base in the U.K. and Russia. We increased
our presence in Latin America, where, as in Europe, we are engaged in
developing new markets for branded auto insurance products. Our objective
is to help clients specifically design products for these geographic areas and
then for Maiden to generate income from both the product design and the
reinsurance opportunity. Our larger goal is to replicate the Maiden Re model
abroad, to serve small and mid-sized regional and specialty insurers overseas.

2.9%

Maiden’s industry-leading gener al & administr ative

expense r atio reflects our scalable infr astructure

and outstanding oper ating efficiency, which further

improved over last year’s excellent results.

Our Principal Financial Levers for

Maximizing Performance

Shareholders’ Equity
in $ millions

$750

$769 $1,015

2010

2011

2012

Our strengthened capital base

has given us the flexibility

to pursue sever al attr active

options: to grow our business,

redeem our high-coupon TRUPS

and repurchase our common

shares.

Three Levers
To improve our financial performance, Maiden is keenly focused on three
financial levers: lowering our combined ratio, reducing our cost of capital
and improving investment income.

Lowering our combined ratio will require maintaining our strict underwriting
discipline. Premium rates have begun to improve for our clients in the
primary market. However, the reinsurance market remains over-capitalized
and competitive. Maiden’s strategy of participating in significant shares of
our clients’ working layer reinsurance, combined with our strong client
relationships, naturally results in less commoditized pricing. We will continue
to work with existing and new clients to develop reinsurance programs that
provide value to our clients and underwriting profits for Maiden.

We made tremendous strides towards lowering our cost of capital in 2012.
We took advantage of favorable market conditions and our strong credit
quality to raise $250 million at attractive rates in two separate capital markets
transactions. These deals strengthened our balance sheet and enhanced
our financial flexibility. One of the possible uses for this fresh capital may be
to redeem our remaining $152.5 million of 14% trust preferred securities in
January 2014, when they are callable without the prepayment penalty.

Finally, improving investment income in the current low-interest-rate envi-
ronment remains a challenge. We refrain from reaching for yield and remain
committed to a conservative posture, investing primarily in highly secure
government agency mortgage-backed securities and investment grade
corporate debt. Nevertheless, at a short duration of 3.55 years, our portfolio
is liquid and positions Maiden to take advantage of any increase in interest
rates that may inevitably occur. Moreover, our growth in investable assets,
to $3.0 billion, has enabled us to increase our total investment income by
8.4% to $81.2 million in 2012.

Our medium-term goal remains to achieve a 15% return on equity. Our low-
volatility business lets us employ our balance sheet with great efficiency,
so that each point of improved combined ratio results in approximately
two points of ROE. Redeeming our 14% trust preferreds will also improve
our ROE, while 0.5% of increased investment yield translates into another
1.5 points of ROE. Thus, with diligence and moderately improving market
conditions, a 15% return on equity is within our sights.

$3.0 Billion

The build-up of our investable assets to $3.0 billion

has supported growth of total investment income,

despite falling interest r ates in 2012.

Maiden Holdings, Ltd. 2012 Annual Report

Rewarding Our Shareholders

Book Value per Basic Share
in $

$10.40

$10.64 $11.96

2010

2011

2012

2012 ACHIEVEMENTS:

Growth in Book Value to

$11.96 per share

Dividend Increase of 12.5%

Share Repurchase Authorization of

$75 Million

Long-Term Oriented Capital R aises

Totaling $250 Million

A Consistent, Long-Term Approach
Maiden maintains an acute focus on delivering shareholder value as the
business continues to develop and evolve. Our intention is to provide stable,
steadily increasing returns and consistently enhance the Company’s value.

In addition to our determined pursuit of 15% return on equity, one of the
key metrics by which we measure increasing shareholder value is through
the growth in our book value per share. In 2012, book value per common
share rose once again, to $11.96, up 12.4% from the previous year. We also
again raised our dividend, as we have done every year since our founding,
to yield a highly attractive 3.9% on an annualized basis as of December 31,
2012. We also accelerated our dividend payment at year-end to enable
shareholders to take advantage of favorable prevailing tax rates. Maiden is
committed to giving shareholders a steady, tangible reward and views a
healthy dividend as a sign of a vibrant enterprise.

The $250 million of capital we raised during the year was accomplished in a
shareholder-friendly manner, strengthening our capital base without diluting
equity holders. It gave us the means to eventually redeem our high-coupon
14% trust preferred securities and presented the additional option of return-
ing value to shareholders through the repurchase of common shares. Along
with many others in our industry, Maiden’s shares have been trading at an
historically large discount to book value. As a result, the Board authorized
the repurchase of up to $75 million worth of our common shares, which
we can execute when the opportunity appears most appropriate.

During 2012 we were pleased to see the universe of Maiden’s shareholders
broaden, as a wider population of institutional investors, pursuing a growing
range of investment strategies, recognized the long-term opportunity that
Maiden represents and sought to learn more about our Company.

Finally, the most shareholder-friendly activity we can undertake is to con-
tinue to build on the strong foundation we have established—to deliver on
our business objectives, excel in reinsurance underwriting, appropriately
manage our capital, develop the most promising business opportunities and
provide exceptional customer service.

3.9%

A 12.5% increase brought the quarterly dividend

to 9 cents per share, for an annualized yield of

approximately 3.9%,

FORM 10K

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(Mark One)
(cid:2)

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Fiscal Year Ended December 31, 2012
OR

□

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from

Commission File Number: 001-34042

MAIDEN HOLDINGS, LTD.

(Exact Name of Registrant As Speciﬁed in Its Charter)

Bermuda
(State or Other Jurisdiction of Incorporation or Organization)

98-0570192
(I.R.S. Employer Identiﬁcation No.)

131 Front Street
Hamilton HM 12, Bermuda
(Address of Principal Executive Offices and Zip Code)
(441) 298-4900
(Registrant’s Telephone Number, Including Area Code)

Securities registered pursuant to Section 12(b) of the Act:

Title of Each Class

Name of Each Exchange on Which Registered

Common Shares, par value $0.01 per share
Series A Preference Shares, par value $0.01 per share

NASDAQ Global Select Market
New York Stock Exchange, Inc.

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as deﬁned in Rule 405 of the Securities Act Yes (cid:4) No (cid:2)
Indicate by check mark if the registrant is not required to ﬁle reports pursuant to Section 13 or Section 15(d) of the Act. Yes (cid:4) No (cid:2)
Indicate by check mark whether the registrant (1) has ﬁled all reports required to be ﬁled by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to ﬁle such reports), and
(2) has been subject to such ﬁling requirements for the past 90 days. Yes (cid:2) No (cid:4)

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site,

if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for
such shorter period that the registrant was required to submit and post such ﬁles). Yes (cid:2) No (cid:4)

Indicate by check mark if disclosure of delinquent ﬁlers pursuant to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of the registrant’s knowledge, in the deﬁnitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. (cid:2)

Indicate by check mark whether the registrant is a large accelerated ﬁler, an accelerated ﬁler, a non-accelerated ﬁler, or a smaller
reporting company. See the deﬁnitions of ‘‘large accelerated ﬁler’’, ‘‘accelerated ﬁler’’ and ‘‘smaller reporting company’’ in Rule 12b-2 of
the Exchange Act. (Check one):

Large Accelerated Filer □ Accelerated Filer (cid:2)

Non-Accelerated Filer □
(Do not check if a smaller reporting company)

Smaller Reporting Company □

Indicate by check mark whether the registrant is a shell company (as deﬁned in Rule 12b-2 of the Act). Yes (cid:4) No (cid:2)
The aggregate market value of voting and non-voting common shares held by non-affiliates of the registrant as of June 30, 2012 (the
last business day of the registrant’s most recently completed second ﬁscal quarter) was approximately $449.3 million based on the closing
sale price of the registrant’s common shares on the NASDAQ Global Select Market on that date.

As of February 25, 2013, 72,421,951 common shares were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s deﬁnitive proxy statement

to
Regulation 14A with respect to the annual general meeting of the shareholders of the registrant scheduled to be held on May 7, 2013 are
incorporated by reference into Part III of this Annual Report on Form 10-K.

to be ﬁled with the Securities and Exchange Commission pursuant

Page

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E-1
F-1

MAIDEN HOLDINGS, LTD.

TABLE OF CONTENTS

PART I

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Business
Item 1.
Item 1A.
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Properties
Item 2.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4.

PART II

Item 5.

Item 6.
Item 7.

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 Operations

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . .
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Changes in and Disagreements with Accountants on Accounting and
Item 9.
Financial Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A.
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART III

Item 10.
Item 11.
Item 12.

Item 13.
Item 14.

Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . .
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Security Ownership of Certain Beneﬁcial Owners and Management and Related
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence . . . . . . . .
Principal Accounting Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 15.
Signatures
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exhibits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Financial Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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
identiﬁed with the words ‘‘anticipate’’, ‘‘believe’’, ‘‘expect’’, ‘‘predict’’, ‘‘estimate’’, ‘‘intend’’, ‘‘plan’’,
‘‘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:

•

results will ﬂuctuate

Our
long-term prospects;

from period to period and may not be

indicative of our

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;

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

Our inability to achieve our investment objectives; and

Our
controlling
shareholder approval.

shareholders’

ability

determine

the

outcome

of matters

requiring

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
the United States, Europe and select other global markets by providing
specialty insurers in Bermuda,
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 sixteen rating levels, and BBB+ (Good) with a stable outlook by Standard & Poor’s (‘‘S&P’’),
which is the eighth highest of twenty-two rating levels. Our common shares trade on the NASDAQ Global
Market under the symbol ‘‘MHLD’’.

We provide reinsurance through our wholly owned subsidiaries, Maiden Insurance Company Ltd.
(‘‘Maiden Bermuda’’) and Maiden Reinsurance Company (‘‘Maiden US’’) and have operations in Bermuda,
the United States, Europe and select other global markets. 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 inland marine and property coverages. During
2013, it is our intention to substantially reduce our net exposure to natural hazard events written by Maiden
Specialty. 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 (‘‘EU’’) 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 Förasäkrings 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, non-catastrophe oriented risk
proﬁle intact. These transactions have increased our gross written premium to an amount
in excess of
$2.0 billion while signiﬁcantly enhancing our capital position to approximately $1.3 billion as of
December 31, 2012. These transactions have included the quota share reinsurance agreement with a Bermuda
subsidiary of AmTrust Financial Services, Inc. (the ‘‘AmTrust Quota Share’’) in 2007, the acquisition of the
reinsurance operations of GMAC Insurance (the ‘‘GMAC Acquisition’’) in 2008, the private placement of trust
preferred securities resulting in gross proceeds to the Company of $260.1 million (the ‘‘TRUPS Offering’’) in
2009, and the quota share reinsurance agreement with a subsidiary of American Capital Acquisition Corp. (the
‘‘ACAC Quota Share’’) in 2010. More recent signiﬁcant developments have included:

•

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

Completing a public debt offering of $107.5 million in June 2011 (‘‘2011 Senior Notes’’) and
repurchasing a like amount of our outstanding subordinated debenture (the ‘‘Junior Subordinated
Debt’’) in July 2011. The 2011 Senior Notes trade on the New York Stock Exchange under the
symbol ‘‘MHNA’’;

Completing a public debt offering of $100.0 million in March 2012 (‘‘2012 Senior Notes’’). The
2012 Senior Notes trade on the New York Stock Exchange under the symbol ‘‘MHNB’’. The net
proceeds of $96.6 million have been used for working capital and general corporate purposes. The
2011 Senior Notes and 2012 Senior Notes may also be referred to as the ‘‘2011 Senior Note
Offering’’ or the ‘‘2012 Senior Note Offering’’, respectively, and may collectively be referred to as
the ‘‘Senior Note Offerings’’; and

•

Completing a public offering of $150.0 million Preference Shares-Series A (the ‘‘Preference
Shares’’). The Company received net proceeds of $145.0 million from the offering. The Preference
Shares trade on the New York Stock Exchange under the symbol ‘‘MHPRA’’. The net proceeds from
the offering are expected to be used for continued support and development of our reinsurance
business and for other general corporate purposes, which may include repurchasing a portion of the
Company’s outstanding common shares and repurchasing the Company’s outstanding 14% 30-year
trust preferred securities (‘‘TRUPS’’) issued in January 2009.

These signiﬁcant transactions along with other unusual or non-recurring events should be considered
when evaluating year-to-year comparability or when comparing our performance with other companies
considered our peers and with whom we compete on a regular basis.

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 completion of the Senior Notes Offerings and the repurchase of the Junior Subordinated Debt
in 2011.

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.

To date despite achieving returns on capital generally in excess of our industry peers, we have not yet
attained our targeted returns. Principally impacting our ability to achieve targeted returns in recent years has
been a higher than targeted combined ratio, lower investment yields brought about by difficult investment
conditions and a higher cost of capital as a result of the TRUPS Offering. We believe that we have measures
within our control to make substantial progress toward attainment of those long-term targets in the coming
12 to 24 months. However, our future results, and our ability to generate our targeted return on capital, may
be additionally 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 Offerings.

Maiden US, a 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 VersicherungsService GmbH (‘‘OVS’’), previously known as GMAC VersicherungsService
GmbH (‘‘Maiden VS’’),
is organized under the laws of Germany, operates as an insurance producer in
Germany and is an indirect subsidiary of Maiden Global. On September 1, 2011, in exchange for a 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 VerisicherungsService 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 ‘‘Reinsurance Agreement’’) with AmTrust Financial Services, Inc.
(‘‘AmTrust’’) and, commencing April 1, 2011, business ceded to us under a separate automatically renewing
one-year 40% quota share agreement
(the ‘‘European Hospital Liability Quota Share’’) with AmTrust
subsidiaries AmTrust Europe Limited and AmTrust International Underwriters Limited to cover those entities
medical liability business in Europe, substantially all of which is in Italy.

On March 7, 2013, after receipt of approval from the Company’s and AmTrust’s Audit Committee, the
to the Reinsurance Agreement, which provides for the
Company and AmTrust executed an amendment
extension of the term of the Reinsurance Agreement to July 1, 2016. The amendment further provides that,
effective January 1, 2013, AII will receive a ceding commission of 31% of ceded written premiums with
respect
to all Covered Business other than retail commercial package business, for which the ceding
commission will remain 34.375%. Though this commission adjustment eliminates its variable feature, the
Company anticipates operating for the foreseeable future at that commission rate. Lastly, with regards to the
Specialty Program portion of Covered Business only, excluding workers’ compensation business included in
the AmTrust’s Specialty Program segment from July 1, 2007 through December 31, 2012, AmTrust will be
responsible for ultimate net loss otherwise recoverable from Maiden Bermuda to the extent that the loss ratio
to Maiden Bermuda, which shall be determined on an inception to date basis from July 1, 2007 through the
date of calculation, is between 81.5% and 95%. Above and below the deﬁned corridor, the Company will

continue to reinsure losses at its proportional 40% share per the Reinsurance Agreement. The Company
believes that these contract revisions will help to maintain the stability of the overall performance for the
Reinsurance Agreement.

Effective January 1, 2012,

the quota share reinsurance contract with AmTrust Europe Limited and
AmTrust International Underwriters Limited was amended, thereby increasing the maximum liability attaching
to €10,000 or currency equivalent (on a 100% basis) per original claim for any one original policy.
Furthermore, amendments were also made to the contract to expand the territorial scope to include new
territories, speciﬁcally France.

Our ACAC Quota Share segment consists of the business ceded to us pursuant to our agreement with
American Capital Acquisition Corp. (‘‘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, 2012, 2011 and 2010 were as follows:

For the Year Ended December 31,

Diversiﬁed Reinsurance . . . . . . . . . . .
AmTrust Quota Share Reinsurance . . .
ACAC Quota Share . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . .

For the Year Ended December 31,

Diversiﬁed Reinsurance . . . . . . . . . . .
AmTrust Quota Share Reinsurance . . .
ACAC Quota Share . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . .

2012

Net
Premiums
Written
($ in Millions)
$ 765.3
840.3
295.7
$1,901.3

2012

Net
Premiums
Earned
($ in Millions)
$ 795.3
727.8
280.7
$1,803.8

% of
Total

2011

Net
Premiums
Written
($ in Millions)

% of
Total

2010

Net
Premiums
Written
($ in Millions)

40.3% $ 798.0
669.3
44.2%
256.2
15.5%
100.0% $1,723.5

46.3% $ 554.1
468.0
38.8%
205.7
14.9%
100.0% $1,227.8

% of
Total

2011

Net
Premiums
Earned
($ in Millions)

% of
Total

2010

Net
Premiums
Earned
($ in Millions)

44.1% $ 748.4
558.2
40.3%
245.8
15.6%
100.0% $1,552.4

48.3% $ 601.2
445.1
35.9%
123.5
15.8%
100.0% $1,169.8

% of
Total

45.1%
38.1%
16.8%
100.0%

% of
Total

51.5%
38.0%
10.5%
100.0%

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, 2012, 2011 and 2010, 82.0%, 80.7% and 79.6%, respectively, of our consolidated gross
premiums written is derived from proportional
reinsurance contracts. This signiﬁcant concentration of
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. Maiden US non-renewed certain proportional reinsurance contracts during the latter part of 2012
which may reduce the percentage of proportional reinsurance written prospectively.

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 internationally. This business is primarily
written by Maiden US. On November 30, 2010, the business associated with the IIS Acquisition, which is
primarily located in Europe and the Americas, 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.

The Diversiﬁed Reinsurance segment 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 their underlying ﬁnancial
performance and capital levels 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, 2012, 2011 and 2010, 52.4%, 53.6% and 52.9% of Maiden US’ gross premiums written
was written on a quota share basis, respectively. Maiden US non-renewed certain proportional reinsurance
contracts during the latter part of 2012 which may reduce the percentage of proportional reinsurance
written prospectively.

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
in more volatile casualty lines such as D&O and professional
the
underwriting infrastructure and capabilities were expanded to include an accident and health reinsurance
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.

liability. Over its years in operation,

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 of December 31, 2012, we had cash and ﬁxed maturity securities totaling $855.8 million in these trusts,
which is part of
to our Consolidated
Financial Statements.

the $2.2 billion restricted assets disclosed in Note 5(e)

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 automobile manufacturers
and local primary insurers to design and implement point of sale insurance programs which generate revenue
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’s 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’s dealerships, with other smaller fee
income programs in place globally. We seek to expand these fee generating arrangements through the Maiden
Global business development
teams contacts with automobile manufacturers globally. As noted on
September 1, 2011, 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 years ended December 31, 2012 and December 31, 2011 and for the
period from November 30, 2010 to December 31, 2010, we earned gross fee income of $12.9 million,
$12.6 million and $0, respectively. Please refer to Note 3 to our Consolidated Financial Statements for further
information regarding the accounting treatment of these fees.

As of December 31, 2010,

there were ﬁfteen reinsurance programs that were part of the business
associated with the IIS Acquisition. During 2011,
these programs were novated from
GMAC International Insurance Company, Ltd. (‘‘GMAC IICL’’) to Maiden Bermuda and one program was
commuted. The remaining program will be novated in 2013.

thirteen of

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

For the Year Ended
December 31, 2012

For the Year Ended
December 31, 2011

For the Period from
November 30 to
December 31, 2010

Net
Premiums
Written
($ in Millions)
$ 45.9
11.9
8.2
7.4
7.2
7.0
17.0
$104.6

% of
Total

Net
Premiums
Written
($ in Millions)

43.9% $ 53.4
4.2
11.4%
8.5
7.9%
5.5
7.1%
2.3
6.8%
6.4
6.7%
25.5
16.2%
100.0% $105.8

% of
Total

50.5%
3.9%
8.0%
5.2%
2.2%
6.0%
24.2%
100.0%

Net
Premiums
Written
($ in Millions)
$10.6
0.6
6.4
1.9
0.4
2.2
7.5
$29.6

% of
Total

35.8%
2.2%
21.6%
6.4%
1.3%
7.4%
25.3%
100.0%

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

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

For the Year Ended
December 31, 2012

For the Year Ended
December 31, 2011

For the Period from
November 30 to
December 31, 2010

Net
Premiums
Written
($ in Millions)
$ 72.8
31.8
$104.6

% of
Total

Net
Premiums
Written
($ in Millions)

69.6% $ 72.1
33.7
30.4%
100.0% $105.8

% of
Total

68.1%
31.9%
100.0%

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

% of
Total

62.5%
37.5%
100.0%

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

The distribution of the premiums written by both country and by line of business for the period from
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 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, but as noted, we expect to substantially reduce our net exposure to this business in 2013.
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 reduce their risk. The
majority of our customers are regional or super-regional insurance companies or 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 collateral trust product offers a high level of security. We also utilize a partnership
concept developed over Maiden Re’s twenty-nine year operating history to develop long-term customer
relationships. This concept entails the offer to our customers of our expertise in underwriting, claims,
actuarial, marketing and accounting, 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 U.S.;

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 U.S., 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.

Reinsurance Agreement

Under our Reinsurance Agreement with AmTrust’s Bermuda

subsidiary, AmTrust
International Insurance, Ltd. (‘‘AII’’), effective 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 on 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.

reinsurance

Effective April 1, 2011,

the Company entered into a series of contract modiﬁcations with AmTrust
including the ceding
regarding the reinsurance coverage it provides under the Reinsurance Agreement,
commission arrangements contained within that contract. These changes include:
the
(1) extension of
Reinsurance Agreement for one additional year, to July 1, 2014, while continuing the automatic three-year
renewal subject to the provisions of the contract; (2) a reduction of the ceding commission payable under the
Reinsurance Agreement
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

to 30.0% for the period April 1 to December 31, 2011; and (3) subsequent

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 March 7, 2013, after receipt of approval from the Company’s and AmTrust’s Audit Committee, the
Company and AmTrust executed an amendment
to the Reinsurance Agreement, which provides for the
extension of the term of the Reinsurance Agreement to July 1, 2016. The amendment further provides that,
effective January 1, 2013, AII will receive a ceding commission of 31% of ceded written premiums with
respect
to all Covered Business other than retail commercial package business, for which the ceding
commission will remain 34.375%. Though this commission adjustment eliminates its variable feature, the
Company anticipates operating for the foreseeable future at that commission rate. Lastly, with regards to the
Specialty Program portion of Covered Business only, excluding workers’ compensation business included in
the AmTrust’s Specialty Program segment from July 1, 2007 through December 31, 2012, AmTrust will be
responsible for ultimate net loss otherwise recoverable from Maiden Bermuda to the extent that the loss ratio
to Maiden Bermuda, which shall be determined on an inception to date basis from July 1, 2007 through the
date of calculation, is between 81.5% and 95%. Above and below the deﬁned corridor, the Company will
continue to reinsure losses at its proportional 40% share per the Reinsurance Agreement. The Company
believes that these contract revisions will help to maintain the stability of the overall performance for the
Reinsurance Agreement.

European Hospital Liability Quota Share

On April 1, 2011, as amended on January 1, 2012, the Company entered into the European Hospital
Liability Quota Share with AmTrust Europe Limited and AmTrust International Underwriters Limited to cover
liability business in Europe, substantially all of which is in Italy. The European
those entities’ medical
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. Effective January 1, 2012, the Company’s maximum limit of liability is
€4 million, previously €2 million, and consistent with the original agreement, pays 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, 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. Pursuant to the terms of the European Hospital Liability Quota Share, the
Company assumed the in-force and unearned premium as of April 1, 2011 which totaled $45.9 million.

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 Leah Karfunkel, wife
of 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 and Chief Executive Officer
of ACAC.

On March 1, 2010, Maiden Bermuda entered into the ACAC Quota Share. Effective on that date, we
reinsure 25% of the net premiums of the GMAC automobile business acquired by ACAC. ACP Re Ltd., a
Bermuda reinsurer which is a wholly owned indirect subsidiary of the Trust, and AmTrust, are also reinsurers
of this 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 renews
automatically for successive three year terms unless terminated by written notice not less than nine months
prior to the expiration of the current term. Neither party gave that notice prior to June 1, 2012.

Effective October 1, 2012, the ACAC Quota Share was amended to decrease the provisional ceding
commission from 32.5% to 32.0% of ceded earned premium, net of inuring reinsurance, subject to adjustment.
The ceding commission is subject to adjustment to a minimum of 30.0% (changed from 30.5%), if the loss
ratio is 64.5% or greater. 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.

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, ceases 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 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 targeted 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, 2012, our one-in-250 year catastrophe
exposure to either a hurricane or earthquake event was approximately $53.3 million. To achieve our
catastrophe risk management objectives, we utilize commercially available tools to quantify and monitor the
various risks we accept.

We have licensed catastrophe modeling software from one of the principal modeling ﬁrms, Applied
Insurance Research (‘‘AIR’’). These software tools use exposure data provided by our insured’s and ceding
company clients to simulate catastrophic losses. We take an active role in the evaluation of these commercial
catastrophe models, providing feedback to AIR to improve the efficiencies and accuracy of their models. We
use modeling not just for the underwriting of individual transactions but also to optimize the total return and
risk of our underwriting portfolio. We have high standards for the quality and levels of detailed exposure data
provided by our clients and have an expressed preference for the most detailed location information available,
including data at the zip code or postal code level or ﬁner. Data provided at more summary levels, such as
counties, is conservatively modeled. The primary business underwritten by Maiden Specialty uses exposure
information by location which is geo-coded. Data output from the software described above is incorporated in
our proprietary pricing models. Our proprietary systems include those for modeling risks associated with
property catastrophe, property and workers’ compensation business, various casualty and specialty pricing
models, as well as our proprietary portfolio risk management model. These systems allow us to monitor our
pricing and risk on a contract by contract basis in each of our segments and business lines.

Reinsurance Including Retrocessions

We use reinsurance and retrocessional agreements to a limited extent to mitigate volatility and to reduce
our exposure on certain specialty reinsurance risks and to mitigate the effect of major catastrophic events.
These agreements provide for reduction of property risk losses, casualty occurrence losses and catastrophe
occurrence losses on speciﬁc treaties. We remain liable to our cedants to the extent that the retrocessionaires
do not meet their obligations under retrocessional agreements, and these retrocessions are subject to credit risk
in all cases and to aggregate loss limits in certain cases. We maintain a credit risk review process that
identiﬁes authorized acceptable reinsurers and retrocessionaires and have no impaired balances. At
December 31, 2012, we had approximately $110.9 million of reinsurance recoverable under such agreements,
of which $79.7 million or 71.9% of this recoverable relate to reinsurance claims from Superstorm Sandy.

Competition

We compete with major U.S. and non-U.S. reinsurers, including other Bermuda-based reinsurers, on an
international and regional basis. In our Diversiﬁed Reinsurance segment, we compete with reinsurers that
provide property and casualty-based lines of reinsurance such as: Swiss Reinsurance Company Ltd., Munich
Inc., General Reinsurance Corporation, PartnerRe Ltd., Hannover Re Group,
Reinsurance America,
QBE Insurance Group, Transatlantic Holdings, Inc., Endurance Specialty Holdings, Ltd., Scor Reinsurance
Company, Platinum Underwriters Holdings, Ltd. and The TOA Reinsurance Company of America,
W.R. Berkley Corporation and Everest Re Group, Ltd.

long-term and continuing business relationships throughout the industry, which can be signiﬁcant competitive
advantages. However, we believe the enhanced security that we offer our clients through collateral trusts, our
niche specialist orientation, our operating efficiency and our careful relationship management capabilities help
offset these advantages and allow us to effectively compete for proﬁtable business.

In addition, risk-linked securities and derivative and other non-traditional risk transfer mechanisms and
including entities other than insurance and
vehicles are being developed and offered by other parties,
reinsurance companies. The availability of these non-traditional products could reduce the demand for
traditional insurance and reinsurance.

A number of new, proposed or potential industry or legislative developments could further increase
competition in our industry. New competition from these developments may result in fewer contracts written,
lower premium rates, increased expenses for customer acquisition and retention and less favorable policy
terms and conditions, which could have a material adverse impact on our growth and proﬁtability.

Natural and man-made catastrophes occur each year that affect reinsurance industry results. In each of the
last three years the insurance and reinsurance industry has experienced an extensive series of signiﬁcant
natural and man-made catastrophes, both globally and in the U.S., that negatively impacted overall industry
performance. Consistent with our business model, we only experienced modest losses from the 2010 and 2011
global catastrophe events.

Although the combined ultimate impact of recent catastrophe activity, in particular Superstorm Sandy,
and the ﬁxed income investment environment remains unclear and is currently more uncertain in light of
reinsurance industry performance, broad industry conditions brought about by these events remain supportive
of improved pricing in the near term. To date however, industry ﬁnancial conditions have limited the amount
of enhanced pricing the industry would normally experience during periods of increased catastrophe losses.
More recently, January 1 reinsurance renewals for the industry appeared to show limited pricing improvement
as a result of Sandy. Finally, the scope and tenure of any improved pricing environment remains 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. Depending on the ultimate impact of Superstorm Sandy combined with the continuing unfavorable
investment environment on industry capital positions and proﬁtability, a signiﬁcant positive effect on
competition and pricing is possible. We believe that we are well positioned to take advantage of market
conditions should the pricing environment become more favorable.

Our Financial Strength Ratings

Ratings are an important factor in establishing the competitive position of insurance and reinsurance
companies and are important to our ability to market and sell our products. We believe that the primary users
of such ratings include brokers, ceding companies and investors. Insurance ratings are also used by insurance
and reinsurance intermediaries as an important means of assessing the ﬁnancial strength and quality of
insurers and reinsurers. Periodically, rating agencies evaluate us to conﬁrm that we continue to meet their
criteria for the ratings assigned to us by them.

A.M. Best and S&P have each developed a rating system to provide an opinion of an insurer’s or
reinsurer’s ﬁnancial strength and ability to meet ongoing obligations to its policyholders and not an opinion on
an insurer’s or reinsurer’s overall capacity and willingness to meet its ﬁnancial commitments as they become
due. Each rating reﬂects that rating agency’s independent opinion of the capitalization, management and
sponsorship of the entity to which it relates, and is neither an evaluation directed to investors in our common
shares nor a recommendation to buy, sell or hold our common shares.

A.M. Best maintains a letter scale rating system ranging from ‘‘A++’’ (Superior) to ‘‘F’’ (In Liquidation).
S&P maintains a letter scale rating system ranging from ‘‘AAA’’ (Extremely Strong) to ‘‘R’’ (Under
Regulatory Supervision).

Our subsidiaries, Maiden Bermuda, Maiden US and Maiden Specialty, each currently has a ﬁnancial
strength rating of ‘‘A-’’ (Excellent, the fourth highest out of sixteen rating levels) with a stable outlook from
A.M. Best, and ‘‘BBB+’’ (Good, the eighth highest out of twenty-two rating levels) with a stable outlook
from S&P.

We can offer no assurances that our ratings will remain at their current levels, or that our security will be
accepted by brokers and our insureds and reinsureds. A ratings downgrade or the potential for such a
downgrade, or failure to obtain a necessary rating, could adversely affect both our relationships with clients,
brokers and other distributors of our existing products and services and new sales of our products and
services. We believe the collateralization of reinsurance obligations provides additional ﬁnancial protection for
our clients and a signiﬁcant point of differentiation from its competitors, allowing us to compete with higher
rated reinsurers.

Distribution of Our Reinsurance Products

We market our Diversiﬁed Reinsurance segment in the United States and Bermuda primarily through
third-party intermediaries, as well as directly through our own marketing team. Our direct marketing activities
are generally focused on insurers with a demonstrated preference and propensity to utilize direct distribution
reinsurers. We believe this combination affords us ﬂexibility and efficiency. In the years ended December 31,
2012, 2011 and 2010, the sources of gross premiums written by our Diversiﬁed Reinsurance segment were
as follows:

% of Gross Premiums Written for the Year Ended December 31,
Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total

2012
68.8%
31.2%
100.0%

2011
66.1%
33.9%
100.0%

2010
73.0%
27.0%
100.0%

In the years ended December 31, 2012, 2011 and 2010, our top three brokers represented approximately
34.1%, 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,
2012, 2011 and 2010, respectively, are provided in the table below.

% of Gross Premiums Written for the Year Ended December 31,
Broker
Marsh Inc. (including Guy Carpenter) . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . .
Aon Benﬁeld Group, Ltd.
Beach & Associates Ltd.
. . . . . . . . . . . . . . . . . . . . .
Other Brokers . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Broker
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Direct . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Diversiﬁed . . . . . . . . . . . . . . . . . . . . . . . . . .

2012

2011

2010

16.5%
9.3%
8.3%
34.7%
68.8%
31.2%
100.0%

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%

Reserve for Loss and Loss Adjustment Expenses

General

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 of or before the balance sheet date. It is our policy to
establish these losses and loss expense reserves using prudent actuarial methods after
reviewing all
information known to us at the date they are recorded.

These amounts include case reserves, additional case reserves (‘‘ACRs’’) and provisions 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, we estimate 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
we expect
the ultimate resolution and administration of claims will cost. These estimates are based on
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 us.
A breakdown of the case and IBNR reserves assumed under the loss portfolio transfer as of 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 of
December 31, 2012 was as follows:

Underwriting Year*

Case
Reserves

$ 23.4
9.1
16.3
12.7
9.5
10.3
15.1
19.3
12.3
$128.0

IBNR
Reserves
($ in Millions)
$13.9
7.9
12.7
11.8
8.6
12.8
17.0
12.4
0.4
$97.5

Total
Reserves

$ 37.3
17.0
29.0
24.5
18.1
23.1
32.1
31.7
12.7
$225.5

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 U.S. 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 86.2%, 84.8% and 91.6% of the gross written premium for this segment
for the years ended December 31, 2012, 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 of December 31, 2012, 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

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,
including a provision for 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 2013. The underlying assets in support
of the remaining collateral arrangements, which total $22.7 million, are recorded as Funds Withheld on the
accompanying Consolidated Balance Sheet as of December 31, 2012.

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 us. A
breakdown of the case and IBNR reserves assumed under the IIS Reinsurance Agreement as of 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 our 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 of December 31, 2012
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

$16.5
1.4
1.2
2.6
2.8
2.5
2.8
4.9
5.0
2.9
4.6
$47.2

IBNR
Reserves
($ in Millions)
$ 0.3
0.1
0.1
(0.3)
(0.6)
(0.7)
(0.6)
(1.4)
(1.2)
(0.8)
(0.6)
$(5.7)

Total
Reserves

$16.8
1.5
1.3
2.3
2.2
1.8
2.2
3.5
3.8
2.1
4.0
$41.5

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
reserves assumed by us described above, we also assumed unearned premium of approximately $19.5 million,
net of acquisition expenses as of November 30, 2010. The reinsurance premiums from the IIS Acquisition and
underwritten by Maiden Bermuda are included in the Diversiﬁed Reinsurance segment and represent 13.7%
13.3% and 5.3% of the net premiums written for this segment for the years ended December 31, 2012, 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 2010 through 2012. The tables do not present accident or policy year development data. Each
including IBNR reserves,
table begins by showing the initial reported year-end gross and net 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 of 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, 2012, 2011 and 2010.

For the Year Ended December 31,

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

2012

2011
($ in Millions)

2010

$ 1,398.4
20.3

$1,226.8
6.7

$1,002.7
8.4

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

1,378.1

1,220.1

994.3

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

1,239.0
23.3
1,262.3

(485.0)
(530.3)
(1,015.3)
—
4.3
1,629.4
110.9

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

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

$ 1,740.3

$1,398.4

$1,226.8

The Company amortized gains as a reduction of losses incurred of $9.1 million, $28.9 million and

$25.3 million for the years ended December 31, 2012, 2011 and 2010, respectively.

The total favorable development relating to the loss portfolio transfers since the closing of the GMAC
Acquisition and IIS Acquisition has been $75.7 million. 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

For the Year Ended December 31,

2007

2008(1)

2009

2010(2)

2011

2012

($ in Millions)

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

Liability Re-estimated as of:
One Year later . . . . . . . . . . . . . . . .
Two Years later . . . . . . . . . . . . . . .
Three Years later . . . . . . . . . . . . . .
Four Years later . . . . . . . . . . . . . . .
Five Years later . . . . . . . . . . . . . . .
Cumulative deﬁciency

$ 38.5

$897.7

$1,002.7

$1,226.8

$1,398.4

$1,740.3

$ 36.7
37.3
37.9
39.5
38.8

$886.3
869.8
848.6
842.6

$ 959.7
963.8
972.5

$1,232.7
1,224.1

$1,418.8

(redundancy)

. . . . . . . . . . . . . .

0.3

$ (55.1)

$ (30.2)

(2.7)

20.4

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

$ 16.6
33.7
34.1
37.6
38.0

$303.2
402.4
542.2
665.0

$ 266.0
457.8
607.0

$ 452.7
746.1

$ 592.8

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 . . . . . . . . . . . . . . .
Five Years later . . . . . . . . . . . . . . .

95.4%
96.8%
98.5%
102.5%
100.9%

98.7%
96.9%
94.5%
93.9%

95.7%
96.1%
97.0%

100.5%
99.8

101.5%

0.9%

(6.1)%

(3.0)%

(0.2)%

1.5%

43.1%
87.6%
88.6%
97.7%
98.8%

31.9%
44.8%
60.4%
74.1%

26.5%
45.7%
60.5%

36.9%
60.8%

42.4%

For the Year Ended December 31,

2007

2008(1)

2009

2010(2)

2011

2012

($ in Millions)

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

$ 38.5

$897.7

$994.3

$1,220.1

$1,378.1

$1,629.4

$ 36.7
37.3
37.9
39.5
38.8

$886.3
869.8
852.9
842.6

$961.4
969.5
967.8

$1,234.3
1,229.6

$1,401.4

(redundancy)

. . . . . . . . . . . . . .

0.3

$ (55.1)

$ (26.5)

9.5

23.3

$ 16.6
33.7
34.1
37.6
38.0

$303.2
402.4
542.2
665.0

$266.0
444.3
575.1

$ 423.9
682.9

$ 530.3

Net Loss and Loss Expense

95.4%
96.8%
98.5%
102.5%
100.9%

98.7%
96.9%
95.0%
93.9%

96.7%
97.5%
97.3%

101.2%
100.8%

101.7%

0.9%

(6.1)%

(2.7)%

0.8%

1.7%

43.1%
87.6%
88.6%
97.7%
98.8%

33.8%
44.8%
60.4%
74.1%

26.7%
44.7%
57.8%

34.7%
56.0%

38.5%

(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 of February 25, 2013, we had a total of 214 full-time employees who are located in Bermuda, the
United States, the United Kingdom, Germany, Austria, Russia, Netherlands, Uruguay 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 U.S.. In the past,
there have been Congressional and other initiatives in the U.S. 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 Extensions of 2005 and 2007 have had little impact on our business because few of our reinsurance
clients are purchasing this coverage. 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 (together, the ‘‘Insurance
Act’’), which regulates the insurance business of Bermuda registered insurers, provides that no person shall
carry on any insurance business in or from within Bermuda unless that person has been registered under the
Insurance Act by the Bermuda Monetary Authority (the ‘‘BMA’’). The BMA is responsible for the day-to-day
is the group supervisor. Under the
supervision of insurers and insurance groups in respect of which it
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.

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, in the opinion of the BMA, the insurer has not been carrying on business in
accordance with sound insurance principles. We believe that we are in compliance with applicable regulations
under the Insurance Act.

Principal Offıce and 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
there is a likelihood of the insurer for which the principal
representative, upon reaching the view that
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 Loss Reserve Specialist. As a registered Class 3B insurer, Maiden Bermuda is required to
appoint an individual approved by the BMA as a person qualiﬁed to assess the adequacy of insurance loss
reserves as a loss reserve specialist. 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.

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
to its general business. The statutory ﬁnancial statements are distinct from the annual
Act with respect
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
the statutory
ﬁnancial statement of such insurer, declaration of the statutory ratios, solvency certiﬁcates,
ﬁnancial statements for the general business,
the opinion of the loss reserve specialist, a schedule of
reinsurance ceded and a statutory declaration in the matter of the insurance code of conduct as described
below. 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 (described below), 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, schedules 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.

Independent Approved Auditor. As a Class 3B insurer, Maiden Bermuda must appoint an approved
independent auditor who will annually audit and report 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.

Minimum Liquidity Ratio. The Insurance Act requires all general business insurers 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).

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 its prescribed minimum
solvency margin (‘‘MSM’’) and its enhanced capital requirement (‘‘ECR’’).

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 ECR. 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.

Fit and Proper Controllers. The BMA maintains supervision over the controllers of all registered
insurers in Bermuda. A controller includes (i) the managing director of the registered insurer or its parent
company; (ii) the chief executive of the registered insurer or of its parent company; (iii) a shareholder
controller; and (iv) any person in accordance with whose directions or instructions the directors of the
registered insurer or of its parent company are accustomed to act.

Notiﬁcation by Registered Person of Change of Controllers and Offıcers. All registered insurers are
required to give written notice to the BMA of the fact that a person has become, or ceased to be, a controller
or officer of the registered insurer within 45 days of becoming aware of such fact. An officer in relation to a
registered insurer means a director, chief executive or senior executive performing duties of underwriting,
actuarial, risk management, compliance, internal audit, ﬁnance or investment matters.

Notiﬁcation of Material Changes. All registered insurers are required to give notice to the BMA of their
intention to effect a material change within the meaning of the Insurance Act. For the purposes of the
Insurance Act, the following changes are material: (i) the transfer or acquisition of insurance business being
part of a scheme falling under section 25 of the Insurance Act or section 99 of the Companies Act 1981 of
Bermuda (the ‘‘Companies Act’’); (ii) the amalgamation with or acquisition of another ﬁrm; (iii) engaging in
unrelated business that is retail business, (iv) the acquisition of a controlling interest in an undertaking that is
engaged in non-insurance business which offers services and products to persons who are not affiliates of the
insurer, (v) outsourcing all or substantially all of the company’s actuarial, risk management and internal audit
functions, (vi) outsourcing all or a material part of an insurer’s underwriting activity, (vii) the transfer other
than by way of reinsurance of all or substantially all of a line of business, and (viii) the expansion into a
material new line of business.

Code of Conduct. Maiden Bermuda is subject to the Insurance Code of Conduct (the ‘‘Code’’) which
prescribes the duties and standards which must be complied with to ensure it implements sound corporate
governance, risk management and internal controls. 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 BMA’s Powers of Intervention, Obtaining Information,
Reports and Documents and Providing Information to other Regulatory Authorities 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.

Group Supervision. The BMA acts as group supervisor of the Maiden group of companies (the

‘‘Maiden Group’’) and has designated Maiden Bermuda to be the designated 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
the insurance group;
(ii) carrying out a supervisory review and assessment of
competent authorities;
(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.

In carrying out its group supervisory functions, the BMA may make rules for (i) assessing the ﬁnancial
situation and the solvency position of the insurance group and/or its members and (ii) regulating intra- group
transactions,
and regulatory reporting
and disclosure.

risk concentration, governance procedures,

risk management

Group Solvency and Group Supervision. The current insurance group supervision and insurance group
solvency rules (together, ‘‘Group Rules’’) will apply to Maiden Bermuda and the Maiden Group so long as the
BMA remains group supervisor. A summary of the Group Rules is set forth below.

The following requirements of the Group Rules discussed below are not yet required as at December 31,
2012: (i) compliance with a group enhanced capital requirement (‘‘Group ECR’’); (ii) compliance with group
eligible capital requirements; (iii) ﬁling of the opinion of an approved actuary; and (iv) compliance with
certiﬁcations by management and the parent company of the insurance group on the business solvency
certiﬁcate included in the group statutory ﬁnancial return and on the group capital and solvency return.

Annual Group Financial Statements. Every insurance group is required to prepare and submit, on an
annual basis, Group ﬁnancial statements prepared in accordance with either the international ﬁnancial
reporting standards (‘‘IFRS’’) or generally accepted accounting principles (‘‘GAAP’’), together with group
statutory ﬁnancial statements. The Group GAAP ﬁnancial statements must be audited annually by the group’s
approved auditor who is required to prepare an auditor’s report thereon in accordance with generally accepted
auditing standards. In addition, every insurance group must prepare group statutory ﬁnancial statements (which
will include, in statutory form, a group balance sheet, a group income statement, a group statement of capital
and surplus, and notes thereto). The Designated Insurer is required to ﬁle with the BMA the group statutory
ﬁnancial statements and the audited Group GAAP ﬁnancial statements with the BMA within ﬁve months from
the end of the relevant ﬁnancial year (unless speciﬁcally extended).

Annual Group Statutory Financial Return and Annual Capital and Solvency Return. Every insurance
group is required to prepare an annual group statutory ﬁnancial return which shall include, among other
things, a report of the approved group auditor, an insurance group business solvency certiﬁcate, the opinion of
a group actuary, an insurance group capital and solvency certiﬁcate (and a declaration signed by two directors
of the Designated Insurer and either the chief risk or chief ﬁnancial officer of the parent company declaring
that the return fairly represents the ﬁnancial condition of the insurance group in all material respects). Both
the annual group statutory ﬁnancial return and the group capital and solvency return must be submitted to the
BMA by the Designated Insurer within ﬁve months after its ﬁnancial year end (unless speciﬁcally extended).

Quarterly Group Financial Statements. The Designated Insurer is required to prepare and ﬁle quarterly
group ﬁnancial returns with the BMA on or before the last day of the months May, August and November of
each year.

Group MSM and Group ECR. The Designated Insurer must ensure that the value of the insurance
group’s assets exceeds the amount of the group’s liabilities by the Group MSM. A member is a qualifying
member of the insurance group if it
to solvency requirements in the jurisdiction in which it
is registered.

is subject

Where the parent company exercises control in relation to any member of the group, the minimum
margin of solvency of such member shall be its individual MSM. Where the parent company exercises
signiﬁcant inﬂuence on any member of the group, the minimum margin of solvency applicable to that member
for purposes of calculating the Group MSM shall be an amount equal to the parent company’s percentage
shareholding in the member multiplied by that member’s minimum margin of solvency. ‘‘Control’’ and
‘‘signiﬁcant inﬂuence’’ shall be determined in accordance with either the IFRS or GAAP used to prepare the
insurance group’s ﬁnancial statements.

Group Eligible Capital. To enable the BMA to better assess the quality of the group’s capital resources,
the Designated Insurer is required to disclose the makeup of its group’s capital in accordance with a ‘‘3-tiered
capital system’’. Under this system, all of the insurance group’s capital instruments will be classiﬁed as either
basic or ancillary capital which in turn will be classiﬁed into one of 3 tiers based on their ‘‘loss absorbency’’
characteristics. Highest quality capital will be classiﬁed Tier 1 Capital, lesser quality capital will be classiﬁed
as either Tier 2 Capital or Tier 3 Capital. Under this regime, not more than certain speciﬁed percentages of
Tier 1, Tier 2 and Tier 3 Capital may be used to satisfy the Group’s MSM and Group ECR requirements. Tier
1, Tier 2 and Tier 3 Capital may, until January 1, 2024, include capital instruments that do not satisfy the
requirement that the instrument be non-redeemable or settled only with the issuance of an instrument of equal
or higher quality upon a breach, or if redemption would cause a breach, of the Group ECR.

Group Governance. Group Rules require the Parent Board to establish and effectively implement
corporate governance policies and procedures, which it must be periodically review to ensure they continue to
support the overall organizational strategy of the group. In particular, the Parent Board must:

•

ensure that operational and oversight
the group are clearly deﬁned and
documented and that the reporting of material deﬁciencies and fraudulent activities are transparent
and devoid of conﬂicts of interest;

responsibilities of

establish systems for identifying on a risk sensitive basis those policies and procedures that must be
reviewed annually and those policies
reviewed at other
regular intervals;

and procedures

that must be

establish a risk management and internal controls framework and ensure that it is assessed regularly
and such assessment is reported to the Parent Board and the chief and senior executives;

establish and maintain sound accounting and ﬁnancial reporting procedures and practices for the
group; and

establish and keep under review group functions relating to actuarial, compliance, internal audit and
risk management functions which must address certain speciﬁc requirements as set out
in the
Group Rules.

Designated Insurer Notiﬁcation Obligations. The Designated Insurer must notify the BMA upon
reaching a view that there is a likelihood of the insurance group or any member of the group becoming
insolvent or that a reportable ‘‘event’’ has, to the Designated Insurer’s knowledge, occurred or is believed to
have occurred. Examples of a reportable ‘‘event’’ include a failure by the insurance group or any member of
the group to comply substantially with a requirement imposed upon it under the Group Rules relating to its
solvency position, governance and risk management or supervisory reporting and disclosures; failure by the
Designated Insurer to comply with a direction given to it under the Insurance Act in respect of the group or
any of its members; a criminal conviction imposed upon any member of the group whether in Bermuda or
abroad; material breaches of any statutory requirements by any member of the group located outside of
Bermuda that could lead to supervisory or enforcement action by a competent authority; or a signiﬁcant loss
that is reasonably likely to cause the insurance group to be unable to comply with its Group ECR. Within
30 days of such notiﬁcation to the BMA, the Designated Insurer must furnish the BMA with a written report
setting out all the particulars of the case that are available to it and within 45 days it must furnish a group
capital and solvency return that reﬂects the Group ECR that has been prepared using post-loss data and
unaudited ﬁnancial statements for such period as the BMA shall require together with a declaration of
solvency in respect thereof.

In respect of the parent company of an insurance group, the Designated Insurer is required to give
written notice to the BMA of the fact that a person has become, or ceased to be, a controller or officer of the
parent company of an insurance group within 45 days of becoming aware of such fact. An officer in relation
to the parent company of an insurance group means a director, chief executive or senior executive performing
duties of underwriting, actuarial, risk management, compliance, internal audit, ﬁnance or investment matters.

BMA’s Powers of

Intervention, Obtaining Information, Reports and Documents and Providing
Information to other Regulatory Authorities. The BMA has certain powers of investigation and intervention
relating to insurers and their holding companies, subsidiaries and other affiliates, which it may exercise in the
interest of such insurer’s policyholders or if there is any risk of insolvency or of a breach of the Insurance Act
or the insurer’s license conditions.

Certain Bermuda Law Considerations

Maiden Holdings and Maiden Bermuda have been designated as non-resident for exchange control
purposes by the BMA and are required to obtain the permission of the BMA for the issue and transfer of all
of their shares. The BMA has given its consent for:

•

the issue and transfer of Maiden Holdings’ common shares, up to the amount of its authorized
capital from time to time, to and among persons that are non-residents of Bermuda for exchange
control purposes; and

•

the issue and transfer of up to 20% of Maiden Holdings’ common shares in issue from time to time
to and among persons resident in Bermuda for exchange control purposes.

Transfers and issues of Maiden Holdings’ common shares to any resident in Bermuda for exchange
control purposes may require speciﬁc prior approval under
the Exchange Control Act 1972. Maiden
Bermuda’s common shares cannot be issued or transferred without the consent of the BMA. Because we are
designated as non-resident for Bermuda exchange control purposes, we are allowed to engage in transactions,
and to pay dividends to Bermuda non-residents who are holders of our common shares, in currencies other
than the Bermuda Dollar.

United States

Maiden US, our lead U.S. insurer domiciled in Missouri, 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 (‘‘DOI’’) 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
Insurance
departments of other states under guidelines promulgated by the National Association of
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 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 U.S. statutory holding company laws of their respective
states of domicile. The insurance holding company laws and regulations apply directly to individual insurers
and indirectly to non-insurance holding companies. They 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 structure, ownership, ﬁnancial
condition and general business operations. All transactions involving the 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 our direct and
indirect subsidiaries.

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 of 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 DOI or rebut the presumption of control.

Risk-Based Capital

U.S. insurers are also subject to risk-based capital (‘‘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 of December 31, 2012, 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 of
December 31, 2012, 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.

The NAIC’s Solvency Modernization Initiative (‘‘SMI’’) began in 2008. The primary focus of SMI is the
review of insurer solvency regulations throughout
the U.S. and the development of long-term solvency
modernization objectives. Included within the NAIC’s scope of review for SMI purposes is the U.S. insurer
solvency framework, international developments regarding insurance supervision, banking supervision, and
international accounting standards and their potential use in U.S.
insurance regulation. While the
U.S. insurance solvency regulation is updated on a continuous basis, the SMI will focus on ﬁve key solvency
areas: capital requirements; international accounting; insurance valuation; reinsurance; and group regulatory
issues. The SMI will highlight the strengths of the state-based national system of insurance regulations and
identify improvements that might be made. All work on the project is expected to be completed in 2013.

To enhance U.S. regulatory system for group supervision,

the NAIC adopted the revised Insurance
Holding Company System Regulatory Act (Model #440) and the Insurance Holding Company System Model
Regulation with Reporting Forms and Instructions (Model #450) in 2010. The revisions included the
following: expanded ability to evaluate any entity within an insurance holding company system; enhancements
to the regulator’s rights to access books and records and compelling production of information; establishment
of expectation of funding with regard to regulator participation in supervisory colleges; and enhancements in
corporate governance, such as board of directors and senior management responsibilities. Additionally,
regulators adopted an expansion to the Insurance Holding Company System Annual Registration Statement
(Form B) to broaden requirements to include ﬁnancial statements of all affiliates. A new Form F (Enterprise
Risk Report) has also been introduced for ﬁrms to identify and report their enterprise risk. ‘‘Enterprise Risk’’

the licensed insurance companies from enterprise risk,

is deﬁned as any activity, circumstance, event or series of events involving one or more affiliates of an insurer
that, if not remedied promptly, is likely to have a material adverse effect upon the ﬁnancial condition or the
liquidity of the insurer or its insurance holding company system as a whole. If and when adopted by a
the Amended Model Act and Regulation would impose more extensive informational
particular state,
requirements on us in order to protect
including
requiring us to prepare an annual enterprise risk report that identiﬁes the material risks within the insurance
company holding system that could pose enterprise risk to the licensed insurer. The Amended Model Act and
Regulation must be adopted by the individual states, and speciﬁcally states in which our U.S. insurance
companies are domiciled, for the new requirements to apply to us. Ten states have adopted some or all of
these changes; Missouri and North Carolina were not among the ten. It is anticipated that the NAIC will seek
to make the amendments part of its accreditation standards for state solvency regulation, which would most
likely motivate more states to adopt the amendments promptly. In addition to changes to NAIC Model #440
and NAIC Model #450, U.S. insurance regulators are currently implementing the international concept of the
Own Risk and Solvency Assessment (‘‘ORSA’’). In an ORSA, every U.S. insurer (or their holding company
group) will complete a self-assessment of their risk management, stress tests and capital adequacy on a yearly
basis. Through ORSA, U.S. regulators will be able to add to their existing assessment of group capital with
analysis of the company’s own assessment of group capital needs. In March 2012, the NAIC adopted the
ORSA Guidance Manual that provides guidance to an insurer and/or the insurance group with regard to
the NAIC adopted the Risk Management and Own Risk and
reporting an ORSA. In September 2012,
the legal framework for requiring a risk management
Solvency Assessment. The Model Law sets out
framework and the ﬁling of the summary report.

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 July 2010, the President signed into law the Dodd-Frank Act, Title V of which included provisions
known as the Non-admitted and Reinsurance Reform Act (‘‘NRRA’’). Under the NRRA, a ceding insurer’s
credit for reinsurance is determined only by the insurance regulatory in its domiciliary state if that state is
accredited by the NAIC. Additional protections are provided against extraterritorial application of
non-domiciliary state laws. In addition, in 2011, the NAIC adopted revisions to its credit for reinsurance
model law and regulation under which the level of required collateral required by U.S. regulators for non-U.S.
reinsurers that are certiﬁed for reduced collateral would depend upon the reinsurer’s security rating and would
range from 0% to 100% of gross assumed liabilities. A number of states are in the process of adopting and
implementing the new models. Only Florida and New York have approved certiﬁed reinsurers for collateral
reduction at this time. To the extent that these new state laws lead 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. 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 U.S., various states within the U.S. and the EU. In the past, there have been Congressional and
other initiatives in the U.S. 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.

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 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 ﬁnal outcome of these deliberations is
unknown at this time.

the NAIC adoption of these standards. However,

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 2014 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
the application of any tax payable in
Maiden Bermuda are not currently so designated) or to prevent
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
trade tax at a rate of 13.65% resulting from the registered seat of the company in
German municipal
Russelsheim is paid.

Maiden Germany is not engaged in general commerce and Maiden Germany owns 90% of the shares in
OVS. Maiden Germany. OVS implemented a tax unity by entering into a proﬁt and loss pooling agreement
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 Russelsheim, 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 13.65%. 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 the dividend/capital gains is added back to the taxable income, representing
non-deductible business expenses. Since there is a tax unity in place between Maiden Germany and OVS, the
tax exemption for dividends received by OVS is (due to the tax unity) not granted to OVS, but rather to
Maiden Germany, the 90% shareholder. Any income generated by OVS is directly attributable to Maiden
Germany under the proﬁt and loss pooling agreement and therefore taxed at the level of Maiden Germany.
Thus, no dividend payment by OVS to Maiden Germany is required. However, 4/3 of the amount of the
guaranteed dividend to the non-affiliated shareholder is taxed to OVS as its own taxable income.

Maiden Germany has obtained obtained a withholding tax exemption certiﬁcate from the Federal Central
Tax Office such that any dividend paid to Maiden Global is exempt from German withholding tax. 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. A subsidiary may qualify as
permanent representative if it carries out business activities of its shareholder or an affiliate in Germany.

Germany imposes an insurance tax (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 insurance tax on insurance premiums will
in principle only be levied if the policy-holder is a resident of Germany or if the insured car is registered 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
22%. 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 domestic 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 24%, falling to 23% from
1 April 2013. 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

through a permanent establishment

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
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.,
Maiden 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. All of the risks that may affect our ﬁnancial or operating performance may not be
material at this time but may become material in the future. 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

Our business model is different than other Bermuda reinsurers.

We believe our underwriting and investment strategies differ from other participants in the property and
casualty reinsurance markets, particularly those based in Bermuda. Many publicly traded Bermuda reinsurance
companies write property catastrophe reinsurance as a fundamental portion of their underwriting strategy.
Additionally, many of these same reinsurers have substantial primary insurance operations in the U.S. and
globally. We do not write property catastrophe reinsurance nor do we maintain substantial primary insurance
operations. We write a limited amount of excess property primary business through Maiden Specialty. As a
result, you may not be able to compare our business’s performance or prospects to other Bermuda-domiciled
publicly traded reinsurers.

We have engaged in a series of signiﬁcant transactions that may affect comparability and make it difficult
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 a series of signiﬁcant
limited to) entering into the ACAC Quota Share in
transactions during that
March 2010, the IIS Acquisition in November 2010, the Senior Note Offerings, and the issuance of the
Preference Shares in August 2012, our historical ﬁnancial statements are not necessarily meaningful for
evaluating the potential of our future operations over a long term basis.

including (but not

time,

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 since that time. Despite robust ﬁnancial market

performance since 2009, near-term U.S. economic prospects have only very gradually improved, with
unemployment continuing at historically elevated levels. In addition, U.S. federal and state governments
continue to experience signiﬁcant structural ﬁscal deﬁcits, creating uncertainty as to levels of taxation,
inﬂation, regulation and other economic fundamentals that may impact future growth prospects. Signiﬁcantly
greater economic, ﬁscal and monetary uncertainty remains in Europe, due to the combination of poor
economic growth, high unemployment and signiﬁcant sovereign deﬁcits which have called into question the
future of the common currency used across most of Europe. While immediate concerns regarding the
prospects of the European common currency abated somewhat in the second half of 2012, these issues remain
unresolved and 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 under our products, the ability of customers,
counterparties and others to establish or maintain their relationships with us, our ability to access and
efficiently use internal and external capital resources and our investment performance. In the event that these
conditions persist and result in a prolonged period of economic uncertainty, our results of operations, our
landscape could be materially and
ﬁnancial condition and/or
adversely affected.

liquidity, our prospects and competitor

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 in recent years, including the impact of Superstorm Sandy in
2012, 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 reinsurance and insurance products on more competitive
terms than we can provide. Under these circumstances, we might not be able to expand our specialty property/
casualty reinsurance business and the failure to do so may have a material adverse effect on our ability to
fully implement our business strategy, as well as on our ﬁnancial condition,
results of operations
and prospects.

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.

The inherent uncertainty of models and the use of such models as a tool to evaluate risk may have an
adverse impact on our ﬁnancial results.

We use both our own proprietary models and widely accepted and industry-recognized third party vendor
analytic and modeling capabilities to provide us with pricing, capital modeling and objective risk assessment
relating to risks in our reinsurance portfolio. In addition, we also use widely accepted and industry-recognized
third party vendor analytic and modeling capabilities to provide us with objective risk assessment relating to
inform
catastrophe risks in our reinsurance portfolio. These models help us control risk accumulation,
management and other stakeholders of capital requirements and to improve the risk/return proﬁle or minimize
the amount of capital required to cover the risks in each reinsurance contract in our overall portfolio of
reinsurance contracts. However, given the inherent uncertainty of modeling techniques and the application of
such techniques, these models and databases may not accurately address the emergence of a variety of matters
which might be deemed to impact certain of our coverages. Accordingly, these models may understate the
exposures we are assuming and our ﬁnancial results may be adversely impacted, perhaps signiﬁcantly.

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, which could have a material
adverse impact on our ﬁnancial results.

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
failure in our internal controls or information technology and application systems could result in management
distraction, harm to our reputation, a loss or delay of revenues or increased expense.

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

instability. While we attempt

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
to 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. Further,
many scientists believe that the earth’s atmospheric and oceanic temperatures are increasing and that, in recent
years, changing climate conditions have increased the unpredictability, severity and frequency of natural
disasters in certain parts of the world. In addition, it is possible that we may experience an unusual frequency
of smaller losses in a particular period, as we did in 2011. Conversely, in 2012, we incurred substantial losses
from a single event, Superstorm Sandy which, while consistent with our stated risk tolerance, did result in an
operating loss in the fourth quarter of 2012.

While we made an underwriting proﬁt in both of those years, nonetheless 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, acts of war and political instability.

We have exposure to losses resulting from acts of terrorism, acts of war and political

instability.
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
terrorism-related losses. The Terrorism Risk Insurance Extension Act
(‘‘TRIEA’’) extended the federal
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
the federal assistance program
through 2014.

(‘‘TRIPRA’’) currently extends

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 that write in the Diversiﬁed Reinsurance segment 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 or companies we insure or reinsure. Our failure to establish
adequate reinsurance or retrocessional arrangements or the failure of any retrocessional arrangements to
protect us from overly concentrated risk exposure could adversely affect our business, ﬁnancial condition and
to mitigate such risks by retaining collateral or trust accounts for
results of operation. We will attempt
premium and claims receivables, but nevertheless we cannot be assured that reinsurance will be fully
collectable in the case of all potential claims outcomes.

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
these changes may not become apparent until sometime after we have issued insurance or
instances,
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. Our exposure to these
uncertainties could be exacerbated by an increase in insurance and reinsurance contract disputes, arbitration
and litigation. 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 material 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.

Insurance and Reinsurance Markets

The property and casualty insurance and reinsurance industry is cyclical in nature, which may affect our
overall ﬁnancial performance.

Historically, the ﬁnancial performance of the property and casualty insurance and reinsurance industry
has tended to ﬂuctuate in cyclical periods of price competition and excess capacity (known as a soft market)
followed by periods of high premium rates and shortages of underwriting capacity (known as a hard market).
Although the ﬁnancial performance of an individual insurance or reinsurance company is dependent on its
own speciﬁc business characteristics, the proﬁtability of most property and casualty insurance and reinsurance
companies tends to follow this cyclical market pattern.

Beginning in 2000 and accelerating in 2001, the property and casualty insurance and reinsurance industry
experienced a market reﬂecting increasing premium rates and more conservative risk selection. These trends
slowed beginning in 2004 and, in recent years market conditions have deteriorated at varying rates of speed
with no reversals. Since that time through 2012, the market has been in a competitive environment in which
underwriting capacity has expanded, risk selection became less discrete and price competition increased
sharply. During that period, despite the signiﬁcant ﬁnancial turmoil that occurred in 2008, market participant’s
capital levels have continued to improve due to positive earnings and improved values of risk assets over that
time. This additional underwriting capacity resulted in increased competition from other insurance and
reinsurance companies expanding the types or amounts of business they write, or from companies seeking to
maintain or increase market share at the expense of underwriting discipline.

Recent catastrophe activity since 2011 and including Superstorm Sandy in 2012 appear to have slowed
the trend of competitive market conditions and potentially are suggestive of improved pricing conditions in the
near term for market participants, particularly for primary insurers. General reinsurance industry pricing
conditions excluding catastrophe results remain marginally positive presently. However, it is highly uncertain
whether these market conditions are sustainable, and if so, for how long, given that industry capital levels
appear to remain adequate.

Because this cyclicality is due in large part to the actions of our competitors and general economic
factors beyond our control, we cannot predict with certainty the timing or duration of changes in the market
cycle. These cyclical patterns, the actions of our competitors, and general economic factors could cause our
revenues and net income to ﬂuctuate, which may cause the price of our common shares to be volatile. The
ultimate outcome of these events and their market impact is not known at this time.

Negative developments in the workers’ compensation insurance industry could adversely affect our ﬁnancial
condition and results of operations.

In 2012, reinsurance of workers’ compensation insurance was 20.6% of net premiums written, which
continues a trend of decreases in this line of business as a percentage of total net premiums written in recent
years, as the Company continues to diversify. Nonetheless, negative developments in the economic,
competitive or regulatory conditions affecting the workers’ compensation insurance industry could have an
adverse effect on our ﬁnancial condition and results of operations. For example, if legislators in our larger
markets were to enact legislation to increase the scope or amount of beneﬁts for employees under workers’
compensation insurance policies without related premium increases or loss control measures, or if regulators
this could
made other changes to the regulatory system governing workers’ compensation insurance,
negatively affect the workers’ compensation insurance industry in the affected markets. Currently, reductions in
the number of people employed has affected the underlying payrolls which are generally the basis for
insurance premiums charged and subsequently paid to reinsurers for the protection we offer.

In many states,

including California, our largest state in terms of workers’ compensation premium
volume, there are active regulatory activities that oversee the level of rates that can be charged by individual
insurers. As a result, there is a risk that our clients may not be able to implement needed rate increases to
maintain sufficient levels of proﬁtability on business we write.

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

The reinsurance industry is mature and highly competitive. Reinsurance companies compete on the basis
of many factors, including premium rates, general reputation and perceived ﬁnancial strength, the terms and
conditions of the products offered, ratings assigned by independent rating agencies, speed of claims payments,
reputation and experience in risks underwritten, capacity and coverages offered and various other factors.
These factors operate at the individual market participant level and generally in the aggregate across the
reinsurance industry. In addition, underlying economic conditions and variations in the reinsurance buying
practices of ceding companies, by participant and in the aggregate, contribute to cyclical movements in rates,
terms and conditions and may impact industry aggregate results and subsequently the level of completion in
the reinsurance industry. We compete with major U.S. and non-U.S. reinsurers, including other Bermuda-based
reinsurers, on an international and regional basis. In our Diversiﬁed Reinsurance segment, we compete with
reinsurers that provide property and casualty-based lines of reinsurance 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 Holdings, Ltd., Scor
Reinsurance Company, Platinum Underwriters Holdings, Ltd., The TOA Reinsurance Company of America,
W.R. Berkley Corporation and Everest Re Group, Ltd.

Many of these entities have signiﬁcantly larger amounts of capital, higher ratings from rating agencies
and more employees than Maiden Holdings and its subsidiaries; in addition, these entities have established
long-term and continuing business relationships throughout the industry, which can be signiﬁcant competitive
advantages. However, we believe the enhanced security that we offer our clients through collateral trusts, our
niche specialist orientation, our operating efficiency and our careful relationship management capabilities help
offset these advantages and allow us to effectively compete for proﬁtable business.

In addition, risk-linked securities and derivative and other non-traditional risk transfer mechanisms and
vehicles are being developed and offered by other parties,
including entities other than insurance and
reinsurance companies. The availability of these non-traditional products could reduce the demand for
traditional insurance and reinsurance.

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
mergers and acquisition activities may seek to use the beneﬁts of consolidation,
including improved
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, Brokers and Financial Institutions

Our business is dependent upon reinsurance brokers 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.

We could incur substantial losses and reduced liquidity if one of the ﬁnancial institutions we use in our
operations fails.

We have exposure to counterparties in many different industries and routinely execute transactions with
counterparties in the ﬁnancial services industry, including brokers and dealers, commercial banks, and other
investment funds and other institutions. Many of these transactions expose us to credit risk in the event of
default of our counterparty. In addition, with respect
to secured transactions, our credit risk may be
exacerbated when the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover
the full amount of
risk of
the reinsurers.

reinsurance recoverables are subject

the obligation. Current

to the credit

We maintain cash balances, including restricted cash held in premium trust accounts, signiﬁcantly in
excess of the FDIC insurance limits at various depository institutions. We also maintain cash balances in
foreign banks and institutions and rely upon funding commitments from several banks and ﬁnancial

institutions that participate in our credit facility. If one or more of these ﬁnancial institutions were to fail, our
ability to access cash balances or draw down on our credit facility may be temporarily or permanently limited,
which could have a material adverse effect on our results of operations, ﬁnancial condition or cash ﬂows.

Financial Strength and Debt Ratings

Ratings downgrades of either Maiden Bermuda, Maiden US and Maiden Specialty 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 S&P,
which is the eighth highest of twenty-two 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, preference shares, senior notes or trust preferred securities, nor is it a recommendation to buy, sell or
hold our common shares, preference shares, senior notes 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 S&P. 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 S&P 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,
loss of business because our
insurance and reinsurance company clients may move to other reinsurers with higher claims paying and
ﬁnancial strength ratings.

therefore, could result

in a substantial

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 of December 31, 2012, the ﬁxed income securities of $2.6 billion in our investment portfolio represented
92.4% of our total cash and invested assets, of which $2.9 million or 0.1% were in other investment funds. 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 (‘‘AFS’’), 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.

Our investment portfolio consists almost completely 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, are
currently U.S. government 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 and
continue to enact 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 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.

In order to limit our exposure to unexpected interest rate increases which would reduce the value of our
ﬁxed income securities and reduce our shareholders’ equity, we have maintained the duration of our
investment portfolio at 3.5 years as of December 31, 2012, which although higher than the duration of
2.8 years as of December 31, 2011, remains shorter than our duration of our loss reserves, which was
3.6 years at December 31, 2012. In order to provide additional portfolio protection, we also maintain 11.8% of
our portfolio in variable or ﬂoating rate ﬁxed maturity securities. This increased duration is likely to increase
the amount of investment income generated by our portfolio in 2013 and beyond, if the current interest rate
environment does not change.

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 other investment funds, which are more speculative and more volatile than debt securities.

While we believe we have substantially mitigated our exposure to liquidity risk through prudent duration
management and strong operating cash ﬂow, 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.

The further downgrade of U.S. government securities by credit rating agencies could adversely impact the
value of the U.S. government and other securities in our investment portfolio and create uncertainty in the
market generally.

The further downgrade of the U.S. government securities by credit rating agencies has the potential to
adversely impact the value of the U.S. government and other securities in our investment portfolio. A further
downgrade in the rating of U.S. government securities may cause our investment portfolio’s average credit
rating to fall and may result in the Company no longer being in compliance with its current investment policy
at its current level of U.S. government security holdings. In addition to the foregoing, a further downgrade in

the rating of U.S. government securities may have an adverse impact on ﬁxed income markets, which in turn
could cause our net investment income to decline or have a material adverse effect on our ﬁnancial condition.

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. 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 and Maiden Specialty, or expand our IIS business. We anticipate that any such
additional funds would be raised through equity, debt or hybrid ﬁnancings. While we currently have no
to a credit facility or a loan facility, we may enter into an
commitment from any lender with respect
unsecured revolving credit facility or a term loan facility with one or more syndicates of lenders. 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.
In addition, the Senior Notes are both rated BBB- by S&P, which is considered investment grade by S&P, and
the Preference Shares are rated BB by S&P, which is considered non-investment grade. To the extent that any
of these securities experience a ratings downgrade or if our holding company experiences a downgrade of its
Counterparty Credit rating by S&P, this could impact our ability to execute those ﬁnancings or at reasonable
terms. Similarly, our access to funds may be impaired if regulatory authorities take negative actions against
us. Our internal sources of liquidity may prove to be insufficient, and in such case, we may not be able to
successfully obtain additional ﬁnancing on favorable terms, or at all. Finally, the possibility that customers or
lenders could develop a negative perception of our long or short-term ﬁnancial prospects if we incur large
investment losses or if the level of our business activity decreases due to a market downturn could affect our
ability to obtain ﬁnancing.

In addition to company-speciﬁc factors, the availability of additional ﬁnancing will depend on a variety
of other factors such as market conditions, the general availability of capital, the volume of trading activities
and the overall availability of capital to the ﬁnancial services industry. Such market conditions may limit our
ability to replace, in a timely manner, maturing liabilities; satisfy statutory capital requirements; generate fee
income and market-related revenue to meet liquidity needs; and access the capital necessary to grow our
business. As such, we may be forced to delay raising capital, issue shorter tenor securities than we prefer, or
bear an unattractive cost of capital which could decrease our proﬁtability and signiﬁcantly reduce our ﬁnancial
ﬂexibility. If we cannot obtain adequate capital, our business prospects, results of operations and ﬁnancial
condition could be adversely affected.

We have debt and preference shares 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
Note Offerings, Maiden NA has issued senior notes in the principal amount of $207.5 million, which is
subject to a guarantee by Maiden Holdings and which is senior to the guarantee issued with the debenture
issued in connection with the TRUPS Offering. In 2012, we issued $150.0 million in Preference Shares which
are required to be paid before common shareholders are eligible for dividend payments. We may also incur
in the future. The level of debt outstanding could adversely affect our
additional
ﬁnancial ﬂexibility.

indebtedness

Our indebtedness could have adverse consequences, including:

•

limiting our ability to pay dividends to our common 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 capital position, adequacy and ﬂexibility
and therefore,
rating agencies and regulators assessment of
our solvency.

the ﬁnancial strength ratings of

Our failure to comply with restrictive covenants contained in the indentures governing our Senior Notes or
any future credit facility could trigger prepayment obligations, which could adversely affect our business,
ﬁnancial condition and results of operations.

The indentures governing our Senior Notes contain covenants that impose restrictions on us and certain
of our subsidiaries with respect to, among other things, the incurrence of liens and the disposition of capital
stock of these subsidiaries. In addition, any future credit facility may require us and/or certain of our
subsidiaries to comply with certain covenants, which may include the maintenance of a minimum consolidated
net tangible worth and restrictions on the payment of dividends. Our failure to comply with these covenants
could result in an event of default under the indentures or any future credit facility, which, if not cured or
waived, could result in us being required to repay the notes or any amounts outstanding under such credit
facility prior to maturity. As a result, our business, ﬁnancial condition and results of operations could be
adversely affected. For more details on our indebtedness, see Note 8 to our Consolidated Financial Statements.

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
$26.2 million at December 31, 2012, 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.

to invest

In connection with the 2011 Senior Note Offering, we repurchased $107.5 million of the TRUPS and as a
result, pursuant to the terms of the TRUPS Offering, we incurred a non-recurring repurchase expense of
approximately $15.1 million, which was reported in our 2011 results of operations. As a result of the
repurchase, we also incurred in 2011 an additional non-recurring non-cash charge 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.

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.

Although we have sufficient liquidity at this time to pay off the remaining securities associated with the
TRUPS Offering, given the proximity to the expiration of that date, it is unlikely that we would pay off these
securities prior to January 20, 2014 unless were able to achieve savings in excess of the remaining interest we
are required to pay until that time, including any prepayment premium. At such time that we do pay off the
remaining securities associated with the TRUPS Offering, we will
the remaining
unamortized amounts, whether it is before or after January 20, 2014.

incur a charge for

The Series A Preference Shares are equity and are subordinate to our existing and future indebtedness and
other liabilities.

The Series A Preference Shares are equity interests and do not constitute indebtedness. As such, the
Series A Preference Shares will rank junior to all of our indebtedness and other non-equity claims of our
liquidation. As of
creditors with respect

to assets available to satisfy our claims,

including in our

December 31, 2012, our total consolidated debt was $333.8 million and our total consolidated liabilities were
$3.1 billion. We may incur additional debt and liabilities in the future. Our existing and future indebtedness
may restrict payments of dividends on the Series A Preference Shares. Additionally, unlike indebtedness,
where principal and interest would customarily be payable on speciﬁed due dates, in the case of preference
shares like the Series A Preference Shares, dividends are payable only if declared by our Board of Directors
(or a duly authorized committee of the Board).

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 U. S.

Maiden Bermuda is not

licensed, approved or accredited as a reinsurer anywhere in the U.S. and,
therefore, under the terms of most of its contracts with U.S. ceding companies, it is required to provide
collateral to its ceding companies for unpaid ceded liabilities, including when our obligations to these ceding
companies exceed negotiated amounts, in a form acceptable to state insurance 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. The amount of collateral we are required to provide typically represents a portion of the obligations
we may owe the ceding company, often including estimates of unpaid losses made by the ceding company.
Since we may be required to provide collateral based on the ceding company’s estimate, we may be obligated
to provide collateral that exceeds our estimates of the ultimate liability to the ceding company. It is also
unclear what, if any, the impact would be in the event of the liquidation of a ceding company with which we
have a collateral arrangement. 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 have entered and will enter 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, United Kingdom, 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. While the Company may be
able to match its 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, a natural offset does not
exist for all currencies.

As of December 31, 2012, foreign currency denominated assets exceed foreign currency denominated
liabilities for each of the individual non-U.S. currencies in which the Company transacts business. 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, 2012, 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. Further, we have exposure to the European
sovereign debt crisis which could have a negative impact on our ﬁnancial condition and results
of operations.

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. Countries whose currency is the Euro have experienced signiﬁcant economic uncertainty in recent
years, which continues through the present time. These circumstances are the cumulative result of the effect of
excessive sovereign debt, deﬁcits by numerous participating countries in the Euro, uncertainty regarding the
monetary policies of the EU and their underlying funding mechanisms and poor economic growth and
prospects for the EU as a whole.

While economic policy measures and commitments did stabilize the currency’s volatility in the second
half of 2012, the EU’s ﬁscal outlook remains negative, and permanent solutions to resolve these issues by
participating countries and other institutions to stabilize the EU and improve its economic outlook have not
been resolved.

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.

Irrespective of the ultimate future of the currency,

the impact of these efforts may cause a further
deterioration in the value of the Euro and consequently exacerbate instability in global credit markets, and
increase credit concerns resulting in the widening of bond yield spreads. In addition, recent rating agency
downgrades on European sovereign debt and a growing concern of the potential default of government issuers
has contributed to this uncertainty. The impact of these developments, while potentially severe, remains
extremely difficult to predict. However, should European governments default on their obligations, there will
be a negative impact on government and non-government issued bonds, government guaranteed corporate
bonds and bonds and equities issued by ﬁnancial institutions and held within the country of default which in
turn could adversely impact Euro-denominated assets held in our investment portfolio.

For the year ended December 31, 2012, 9.4% of our net premiums written and 9.6% of our reserve for
loss and loss adjustment expenses is Euro denominated. As of December 31, 2012 our ﬁxed income portfolio
contains: (1) $38.8 million of Euro-denominated non-U.S. government bonds, which constitutes 1.5% of the
ﬁxed income portfolio; and (2) $152.9 million of Euro-denominated non-U.S. corporate bonds, which
constitutes 5.8% of the ﬁxed income portfolio. Of the Euro-denominated non-U.S. government bonds, 53.4%
were from Germany and the Netherlands. We hold no sovereign bonds of Greece, Ireland, Italy, Portugal
or Spain.

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.

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.

Insurance statutes and regulations in jurisdictions outside and inside the U.S. 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 U.S. 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 Reinsurance
Agreement with AII, (2) the quota share agreement with ACAC, and (3) from reinsurance contracts entered
into with entities mostly domiciled in the U.S. 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 U.S.

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

relationship with the United Kingdom in the future,

to its

If Maiden Bermuda were to become subject to any insurance laws and regulations of the U.S. 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
speciﬁcally focusing on
state insurance regulators are re-examining existing laws and regulations,
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
Bermuda-based operating subsidiary increased under
the BSCR. While our Bermuda-based operating
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 European Economic Area (‘‘EEA’’) 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 EU 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 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. There remains uncertainty whether Solvency II
will be fully implemented by the end of 2013.

United States

In the U.S., 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.
the NAIC and state insurance regulators regularly re-examine existing laws and regulations and
Moreover,
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.

the reinsurance industry,

In addition, the federal government has undertaken initiatives, including Dodd-Frank, in several areas that
may impact
including tort reform, corporate governance and the taxation of
reinsurance companies. The Dodd-Frank Act became effective on July 21, 2011. In addition to introducing
sweeping reform of the U.S. ﬁnancial services industry, the Dodd-Frank Act has changed the regulation of
reinsurance in the U.S. The Dodd-Frank Act prohibits a state from denying credit for reinsurance if the state
of domicile of the insurer purchasing the reinsurance recognizes credit for reinsurance. At present, it appears
the changes speciﬁc to reinsurance in the Dodd-Frank Act will not have a material adverse effect for non-U.S.
reinsurers such as us, however, there is still signiﬁcant uncertainty as to how these and other provisions of the
Dodd-Frank Act will be implemented in practice.

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
changes to our reported results and ﬁnancial condition. Moreover, the SEC is currently evaluating 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.

Employee Issues

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

our new management

our newly

implement

team to

integrate

fully

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
to certain exemptions for key
places a six year term limit on individuals with work permits, subject
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 common and preference 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 on our common shares and preference shares as currently
contemplated by our board of directors.
is anticipated Maiden Bermuda can pay us dividends of
approximately $217.7 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 of December 31, 2012, Maiden US could pay
dividends to Maiden NA of approximately $0 and Maiden Specialty could pay dividends to Maiden US of
$4.6 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, 2012 was approximately $942.8 million (2011 − $693.4 million) and the amount
required to be maintained under Bermuda law,
the Minimum Solvency Margin, was $231.1 million
(2011 − $226.5 million) at December 31, 2012. 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 2012 BSCR
and as of December 31, 2012, it is anticipated Maiden Bermuda can pay dividends or distributions not
exceeding $217.7 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 2012 BSCR and believes
that it will meet the ECR as of December 31, 2012.

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.

The interests of our Founding Shareholders may not be fully aligned with your interests, and this may
lead to a strategy that is not in your best interest. As of February 25, 2013. our Founding Shareholders
beneﬁcially control approximately 28.4% 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.

We currently intend to pay a quarterly cash dividend of $0.09 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 $0.09 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. Payment of dividends to common shareholders is also predicated on
the payment of dividends to holders of Series A Preference Shares before any such common dividend can be
paid. If required dividend payments on the Series A Preference Shares are not made, dividends to common
shareholders may not be made until such time that Series A Preference Share dividend payments resume.

Dividends on the Series A Preference Shares are non-cumulative.

Dividends on the Series A Preference Shares are non-cumulative and payable only out of lawfully
available funds of Maiden under Bermuda law. Consequently, if Maiden’s Board of Directors (or a duly
authorized committee of the Board) does not authorize and declare a dividend for any dividend period with
respect to the Series A Preference Shares, holders of the Series A Preference Shares would not be entitled to
receive any such dividend, and such unpaid dividend will not accumulate and will never be payable. Maiden
will have no obligation to pay dividends for a dividend period on or after the dividend payment date for such
period if its Board of Directors (or a duly authorized committee of the Board) has not declared such dividend
before the related dividend payment date. If dividends on the Series A Preference Shares are authorized and
declared with respect to any subsequent dividend period, Maiden will be free to pay dividends on any other
series of preference shares and/or our common shares.

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 of February 25, 2013, 72,421,951 common
shares were outstanding. In addition, we have reserved 10,000,000 common shares for issuance under our
Amended and Restated 2007 Share Incentive Plan. As of February 25, 2013, the total options outstanding was
2,717,433. 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, the New York Stock Exchange and certain provisions of the
Sarbanes-Oxley Act of 2002 and the regulations promulgated thereunder, which impose signiﬁcant compliance
obligations upon us. In particular, we are, or will be, required to:

•

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

supplement our internal accounting function, including hiring staff with expertise in accounting 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 the U.S. federal
securities laws;

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 62 (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
were not ‘‘controlled shares’’ of the 9.5% U.S. Shareholder so long as such reallocation does not cause any
person to become a 9.5% U.S. Shareholder.

Under

these provisions, certain shareholders may have their voting rights limited, while other
shareholders may have voting rights in excess of one vote per share. Moreover, these provisions could have
the effect of reducing the votes of certain shareholders who would not otherwise be subject to the 9.5%
limitation by virtue of their direct share ownership.

We are authorized under our bye-laws to request information from any shareholder for the purpose of
determining whether a shareholder’s voting rights are to be reallocated under the bye-laws. If any holder fails
to respond to this request or submits incomplete or inaccurate information, we may, in our sole discretion,
eliminate the shareholder’s voting rights.

Anti-takeover provisions in our bye-laws could impede an attempt to replace or remove our directors, which
could diminish the value of our common shares.

Our bye-laws contain provisions that may entrench directors and make it more difficult for shareholders
to replace directors even if the shareholders consider it beneﬁcial to do so. In addition, these provisions could
delay or prevent a change of control
these
provisions may prevent a shareholder from receiving the beneﬁt from any premium over the market price of
our common shares offered by a bidder in a potential takeover. Even in the absence of an attempt to effect a
change in management or a takeover attempt, these provisions may adversely affect the prevailing market
price of our common shares if they are viewed as discouraging changes in management and takeover attempts
in the future.

that a shareholder might consider favorable. For example,

Examples of provisions in our bye-laws that could have such an effect include the following:

•

our board of directors may reduce the total voting power of any shareholder in order to avoid
adverse tax, legal or regulatory consequences to us or any direct or indirect holder of our shares or
its affiliates; and

our directors may, in their discretion, decline to record the transfer of any common shares on our
share register, if they are not satisﬁed that all required regulatory approvals for such transfer have
been obtained or if they determine such transfer may result in a non-de minimis adverse tax, legal or
regulatory consequence to us or any direct or indirect holder of shares or its affiliates.

It may be difficult for a third party to acquire us.

Provisions of our organizational documents may discourage, delay or prevent a merger, amalgamation,
tender offer or other change of control that holders of our shares may consider favorable. These provisions
impose various procedural and other requirements that could make it more difficult for shareholders to effect
various corporate actions. These provisions could:

•

have the effect of delaying, deferring or preventing a change in control of us;

discourage bids for our securities at a premium over the market price;

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
In the case of an
with another Bermuda company or with a body incorporated outside Bermuda.
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 U.S. jurisdictions. Class actions and derivative
actions are generally not available to shareholders under the laws of Bermuda. However, the 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 U.S. 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 &
Pearman that there is no treaty in effect between the U.S. and Bermuda providing for the 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

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

entail civil
if our
management or our independent registered public accounting ﬁrm were to conclude that our internal control
reported ﬁnancial
over ﬁnancial
information, and our ﬁnancial ﬂexibility and the value of our common shares could be adversely impacted.

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 Reinsurance 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, all of which is in Italy and France at the present time.

We are still dependent, however, on AmTrust and its subsidiaries for a substantial portion of our business
and underwriting income. Our Reinsurance 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 Reinsurance 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 Reinsurance 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.

Our non-executive 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
the Audit Committee of our Board of Directors, which consists entirely of
such situations. However,
those related to
independent directors, does review and approve all
compensation, which our independent Compensation Committee reviews.

related party transactions, except

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 Leah Karfunkel, wife of 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 disadvantageous to 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 related party transactions, except those related to compensation, which our independent
Compensation Committee reviews.

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 Reinsurance 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
of AII; or

to the applicable U.S. AmTrust

insurance subsidiaries on behalf

•

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 U.S. 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 of December 31, 2012, $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 Reinsurance 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 U.K. 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 as periodically
listed as an uncooperative tax haven jurisdiction because it had previously
updated, Bermuda was not
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.

to U.S. federal

If either Maiden Holdings or Maiden Bermuda were considered to be engaged in a trade or business in
the U.S., 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 U.S. income tax treaty with Bermuda and if Maiden Bermuda were considered
engaged in a trade or business in the U.S. through a permanent establishment, Maiden Bermuda could be
subject
income tax on the portion of its earnings that are attributable to its permanent
establishment in the U.S., 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 U.S.; (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 U.S.); (iv) our non-executive 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
U.S. 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
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 individual located wholly or partly within the U.S. or (ii) risks of a non-U.S. entity or
individual engaged in a trade or business in the U.S. which are located within the U.S. (‘‘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.

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 shares 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’’, even if the subpart F income is not distributed. ‘‘Subpart F income’’ of a 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 own (directly,
indirectly through non-U.S. entities or by attribution by application of the constructive 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 shares of that non-U.S. corporation or the total value of all stock of that corporation.

For purposes of taking into account

insurance
company in which more than 25% of the total combined voting power of all classes of shares (or more than
25% of the total value of the shares) is owned (directly, indirectly through non-U.S. entities or constructively)
by 10% U.S. shareholders 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
U.S., (ii) a partnership or corporation created or organized in or under the laws of the U.S., 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 U.S. 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 (‘‘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 of December 31, 2012, 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 ended December 31, 2012 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
the corporation’s undistributed earnings and proﬁts that were
to the extent of
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 courts, or otherwise, might have retroactive effect. The U.S. Treasury
the RPII rules by the IRS,
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
income tax purposes, a U.S. Person who owns directly or, in some cases, indirectly (e.g. through a 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 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 U.S. 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 U.S. 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 U.S., 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 U.K. for U.K. corporation tax purposes is subject to U.K. corporation
tax in respect of its worldwide income and gains. While Maiden Global is a U.K. company, neither Maiden
Holdings nor Maiden Bermuda are incorporated in the U.K. Nevertheless, Maiden Holdings or Maiden
Bermuda would be treated as being resident in the U.K. for U.K. corporation tax purposes if its central
management and control were exercised in the U.K. 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 U.K., for U.K. tax purposes. However, Her
Majesty’s Revenue & Customs could challenge our tax residence status.

A company which is not resident in the U.K. for U.K. corporation tax purposes can nevertheless be subject
to U.K. corporation tax at the rate of 24%, falling to 23% from 1 April 2013. if it carries on a trade in the U.K.
through a permanent establishment in the U.K., but the charge to U.K. 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 it does not carry on a trade in the U.K. through a permanent establishment in the U.K.
Nevertheless, Her Majesty’s Revenue & Customs might contend successfully that Maiden Bermuda is trading
in the U.K. through a permanent establishment in the U.K. because there is considerable uncertainty as to the
activities which constitute carrying on a trade in the U.K. through a permanent establishment in the U.K.

The U.K. has no income tax treaty with Bermuda. Companies that are neither resident in the U.K. nor
entitled to the protection afforded by a double tax treaty between the U.K. and the jurisdiction in which they are
resident are liable to income tax in the U.K., at the basic rate of 22%, on the proﬁts of a trade carried on in the
U.K., where that trade is not carried on through a permanent establishment in the U.K. 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 U.K. (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 U.K. for U.K. corporation
tax purposes, or if Maiden Bermuda were treated as carrying on a trade in the U.K., 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 States, the United
Kingdom, Germany, Austria 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 3 months to approximately 5
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 to the Consolidated Financial Statements in this
Annual Report on Form 10-K.

We renewed our office space lease in Hamilton, Bermuda commencing December 1, 2012 for Maiden
Holdings and Maiden Bermuda. The term of this agreement expires on November 30, 2017 with an option to
renew for another 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 U.S., one property lease in Bermuda and one office space lease in each of
Germany, Austria 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 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 in opposition to the
petition for review on October 19, 2011.

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

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.

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

2012
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
First quarter
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Second quarter
Third quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fourth quarter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

High

Low

$8.48
$9.75
$9.88
$8.95

$9.73
$8.79
$9.52
$9.21

$7.10
$7.14
$7.32
$6.99

$8.25
$7.84
$8.16
$8.10

At February 25, 2013, the last reported sale price of our common share was $9.98 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, 2012 and 2011, we declared regular quarterly dividends totaling
$0.33 and $0.30 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.

On December 24, 2012, the Company adopted a written trading plan to facilitate the repurchase of its
common shares in accordance with the Company’s existing share purchase reauthorization whereby in
August 2012, the Board of Directors approved the repurchase of up to $75 million common shares. During the
year ended, December 31, 2012, there was no common shares repurchased by the Company.

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 U.S. 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 return, including reinvestment of dividends, on the
common shares compared to such return for S&P 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, 2012, 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.

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

160

140

120

100

5 / 6 / 2

0 / 2

6 / 3

0 / 2

9 / 3

2 / 3

1 / 2

0 / 2

9
9 / 3

6 / 3

1 / 2

3 / 3

0 / 2

1 / 2

3 / 3

0 / 2

6 / 3

0 / 2

9 / 3

1 / 2

2 / 3

1 / 2

2 / 3

1 / 2

3 / 3

0 / 2

6 / 3

0 / 2

9 / 3

2 / 3

0 / 2

9 / 2

6 / 2

8 / 2

9 / 2

0 / 2

3 / 3

1 / 2

2 / 3

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 of and for the years ended December 31, 2012, 2011 and 2010. 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’’.

For the Year Ended December 31,

2012

2011
($ in Millions,
Except per Share Amounts and Ratios)

2010

Summary Consolidated Statement of Income Data:
Gross premiums written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net premiums written . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Net premiums earned . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Other insurance revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized and unrealized gains on investments . . . . . . . . . . . . .
Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss and loss adjustment expenses . . . . . . . . . . . . . . . . . . . .
Commissions 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 (gains) losses . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income attributable to noncontrolling interests . . . . . . . . . . . . . . .
Total expenses. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends on preference shares . . . . . . . . . . . . . . . . . . . . . . . . .

Net income attributable to Maiden common shareholders . . . . . . $

2,001.0 $
1,901.3 $
1,803.8 $
12.9
81.2
1.9
1,899.8
1,262.3
492.1
53.8
36.4

—
—
4.4
(1.6)
2.2
0.1
1,849.7
(3.6)
46.5 $

1,812.6 $
1,723.5 $
1,552.4 $
12.6
74.9
0.5
1,640.4
1,043.1
438.8
53.9
34.1

20.3
15.1
5.0
(0.3)
1.9
—
1,611.9
—
28.5 $

1,298.1
1,227.8
1,169.8
—
71.6
6.6
1,248.0
755.1
336.7
42.2
36.5

—
—
5.8
0.5
1.3
—
1,178.1
—
69.9

Per Share Data:
Earnings per common share(1):

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $

0.64 $
0.64 $

0.40 $
0.39 $

0.99
0.98

72,263,022
73,105,531

72,155,503
72,903,688

0.33 $

0.30 $

70,799,966
71,372,688
0.265

Weighted average number of common shares outstanding:

Basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends declared per common share . . . . . . . . . . . . . . . . . . . . $

For the Year Ended December 31,
Selected Consolidated Ratios:
Loss and loss adjustment expense ratio(2) . . . . . . . . . . . . . . . . . . . . .
Commission and other acquisition expense ratio(3) . . . . . . . . . . . . . . .
General and administrative expense ratio(4) . . . . . . . . . . . . . . . . . . . .
Expense ratio(5)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combined ratio(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2012

2011

2010

69.5%
27.1%
2.9%
30.0%
99.5%

66.6%
28.0%
3.5%
31.5%
98.1%

64.6%
28.8%
3.5%
32.3%
96.9%

December 31,

2012

2011
($ in Millions, Except per Share Amounts)

2010

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 expenses . . . . . . . . . . . . .
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 common share(7) . . . . . . . . . . . . . . . . . . . . . . . . . . .

81.5
132.3
2,621.6
522.6
42.7
168.0
270.7
4,138.2
1,740.3
936.5
—
207.5
126.3
1,015.2
$ 11.96

$ 188.1
114.9
2,022.9
423.4
42.6
168.0
248.4
3,395.1
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

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

diluted earnings per common share.

(2) Calculated by dividing net loss and loss adjustment expenses by the sum of net premiums earned and

other insurance revenue.

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

and other insurance revenue.

(4) Calculated by dividing general and administrative expenses by the sum of net premiums earned and other

insurance revenue.

(5) Calculated by combining the commission and other acquisition expense ratio and the general and

administrative expense ratio.

(6) Calculated by combining the net

loss and loss adjustment expense ratio, commission and other

acquisition expense ratio and general and administrative expense ratio.

(7) Basic book value per common share is deﬁned as total shareholders’ equity available to common
shareholders divided by the number of common shares issued and outstanding as of 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.

•

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. 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 (‘‘2011 Senior Notes’’);

Completing a public debt offering of $100.0 million in March 2012 (‘‘2012 Senior Notes’’). The net
proceeds of $96.6 million have been used for working capital and general corporate purposes; and

Completing a public offering of $150.0 million Preference Shares — Series A (the ‘‘Preference
Shares’’). The Company received net proceeds of $145.0 million from the offering. The net proceeds
from the offering are expected to be used for continued support and development of our reinsurance
business and for other general corporate purposes, which may include repurchasing a portion of the
Company’s outstanding common shares and repurchasing the Company’s outstanding 14% 30-year
trust preferred securities (‘‘TRUPS’’) issued in January 2009.

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. During 2013, it is our intention to substantially reduce
our exposure to these 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 of December 31, 2012, we had approximately $4.1 billion in total
assets, $1.0 billion of total shareholders’ equity and $1.3 billion in total capital, which includes shareholders’
equity, the 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
overall capacity of the industry to provide coverage. During the period covered by this discussion,
the
reinsurance market has been characterized by signiﬁcant competition in most lines of business.

Natural and man-made catastrophes occur each year that affect reinsurance industry results. In each of the
last three years the insurance and reinsurance industry has experienced an extensive series of signiﬁcant
natural and man-made catastrophes, both globally and in the U.S., that negatively impacted overall industry
performance. Consistent with our business model, the Company only experienced modest losses from the 2010
and 2011 global catastrophe events.

Despite the elevated levels of global and U.S. catastrophe losses affecting the industry during this period,
industry ﬁnancial conditions, taken as a whole, have continued to improve through a combination of very
positive non-catastrophe underwriting results, enhanced balance sheets resulting from strong ﬁxed income
market performance and readily available capital sources for industry participants. As a result, capital positions
across the insurance and reinsurance industry appeared to remain adequate through December 31, 2012.

However, the property and casualty industry invests signiﬁcant portions of its premiums and retained
underwriting proﬁts in ﬁxed income maturities and relies signiﬁcantly on investment income to generate
acceptable levels of net income. Yields on these securities have continued to decline and remain at historically
low levels. Interest rates are widely forecast to persist at such levels for the foreseeable future. During the
third quarter of 2012, the U.S. Federal Reserve announced additional policy measures designed to provide
the mortgage-backed securities market. The
in particular
greater
U.S. Federal Reserve announced additional actions in the fourth quarter of 2012 further increasing liquidity in
credit markets. The likely continued existence of these investment conditions should continue to adversely
impact
the results of the property and casualty industry generally, placing additional pressure on both
insurance and reinsurance companies underwriting results.

liquidity to certain credit markets,

Although the combined ultimate impact of recent catastrophe activity, in particular Superstorm Sandy,
and the ﬁxed income investment environment remains unclear and is currently more uncertain in light of
reinsurance industry performance, broad industry conditions brought about by these events remain supportive
of improved pricing in primary insurance markets in the near term. To date however, industry ﬁnancial
conditions have limited the amount of enhanced reinsurance pricing the industry would normally experience
during periods of increased catastrophe losses. More recently, January 1 reinsurance renewals for the industry
appeared to show limited pricing improvement as a result of Sandy. However, the scope and tenure of any
improved pricing environment remains 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. Depending on the ultimate impact of Superstorm Sandy combined with the continuing unfavorable
investment environment on industry capital positions and proﬁtability, a signiﬁcant positive effect on
competition and pricing is possible. We believe we are well positioned to take advantage of market conditions
should the pricing environment become more favorable.

Recent Developments

Losses Incurred from Catastrophic Events

As we have described, our business model is designed to minimize our exposure to catastrophic property
losses. Despite this approach, we periodically do incur losses from such events which exceed our provisions
for normalized catastrophe activity, which occurred both in 2011 and 2012.

In 2011, the unusually high frequency of loss activity from U.S. thunderstorm and tornado impacted our
U.S. clients in the second quarter of 2011, adversely affecting the Company’s results. The 2011 results include
$9.5 million in losses incurred by Maiden US 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. These losses
increased our loss ratio and combined ratio for that period by 0.6% on a consolidated basis.

In 2012, we incurred signiﬁcant losses as a result of Superstorm Sandy which struck the Northeast U.S.
on October 29, 2012. Presently, industry insured losses are likely to exceed $20 billion making it the largest
catastrophe loss in U.S. history. Based on a comprehensive analysis of the Company’s exposure in the affected
area, as well as loss reports and estimates from clients, we initially expected the underwriting impact from
Superstorm Sandy, net of applicable reinsurance and the Company’s provision for normalized catastrophe
losses to be in the range of between $25 million and $35 million. Maiden’s exposure to this event emanates
predominantly from the Company’s excess property insurance business written by Maiden Specialty, and to a
lesser extent from the U.S. assumed treaty reinsurance business written by Maiden US and the ACAC
Quota Share.

For the year ended December 31, 2012, the Company has presently incurred $31.1 million in losses from
Sandy, which increased its loss ratio and combined ratio by 1.7% for the year. The sources of these losses are
as follows:

For the Year Ended December 31, 2012

Maiden
US

Maiden
Specialty

ACAC

Total

($ in Millions)

Losses Incurred . . . . . . . . . . . . . . . . . . . . . .
% of Total . . . . . . . . . . . . . . . . . . . . . . . . .

$ 6.5

20.9%

$22.6
72.7%

$2.0
6.4%

$ 31.1
100.0%

Other U.S.-based catastrophe experience in 2011 and 2012 were within the Company’s expected
parameters which are incorporated into the pricing of our Maiden US accounts. Despite these elevated level of
weather-related losses in 2011 and 2012, consistent with its operating model, Maiden has maintained proﬁtable
underwriting results in both years.

Issuance of Preference Shares

On August 22, 2012, the Company issued six million 8.25% Preference Shares, par value $0.01 per
share, at $25 per share. The Company received net proceeds of $145.0 million from the offering, after
deducting expenses and underwriting discounts of $5.0 million. The Preference Shares have no stated maturity
date and are redeemable in whole or in part at the option of the Company any time on or after August 29,
2017 at a redemption price of $25 per share plus any declared and unpaid dividends, without accumulation of
any undeclared dividends.

Dividends on the Preference Shares are non-cumulative. Consequently, in the event dividends are not
declared on the Preference Shares for any dividend period, holders of Preference Shares will not be entitled to
receive a dividend for such period, and such undeclared dividend will not accrue and will not be payable. The
holders of Preference Shares will be entitled to receive dividend payments only when, as and if declared by
the Company’s board of directors or a duly authorized committee of the board of directors. Any such
dividends will be payable from, and including, the date of original issue on a non-cumulative basis, quarterly
in arrears. To the extent declared, these dividends will accumulate, with respect to each dividend period, in an
amount per share equal to 8.25% of the $25 liquidation preference per annum.

The holders of the Preference Shares have no voting rights other than the right to elect up to two
directors if preference share dividends are not declared and paid for six or more dividend periods. The
Preference Shares have been listed on the New York Stock Exchange and trading commenced on August 31,
2012 under the symbol ‘‘MHPRA’’.

Senior Note Offerings

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 (‘‘2011
Senior Notes’’), which are fully and unconditionally guaranteed by Maiden Holdings. The 2011 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 2011 Senior Notes to be repurchased plus accrued and unpaid interest up to but excluding the redemption
date. Maiden NA has listed the 2011 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
the TRUPS Offering,
$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 2011 Senior Notes offering until January 20, 2014, the
date on 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.

On March 27 2012, the Company, through Maiden NA, issued $100.0 million principal amount of 8.00%
Senior Notes (‘‘2012 Senior Notes’’) due on March 27, 2042, which are fully and unconditionally guaranteed
by the Company. The 2012 Senior Notes are redeemable for cash, in whole or in part, on or after March 27,
2017, at 100% of the principal amount to be redeemed plus accrued and unpaid interest to but excluding the
redemption date. Maiden NA has listed the 2012 Senior Notes on the New York Stock Exchange and trading
commenced on March 29, 2012 under the symbol ‘‘MHNB’’.

The net proceeds from the 2012 Senior Notes of $96.6 million have been used for working capital and

general corporate purposes.

The 2011 Senior Notes and 2012 Senior Notes may also be referred to as the ‘‘2011 Senior Note
Offering’’ or the ‘‘2012 Senior Note Offering’’, respectively, and may collectively be referred to as the
‘‘Senior Note Offerings’’.

2012 Financial Highlights

2012 Consolidated Results of Operations

•

Net income attributable to Maiden common shareholders of $46.5 million, or $0.64 basic and diluted
earnings per common share for the year ended December 31, 2012 compared to $28.5 million, or
$0.40 basic and $0.39 diluted earnings per common share for the year ended December 31, 2011.

Operating earnings of $48.5 million, or $0.67 basic and $0.66 diluted operating earnings per
common share for the year ended December 31, 2012 compared to $69.6 million, or $0.97 basic and
$0.96 diluted operating earnings per common share for the year ended December 31, 2011.

Gross premiums written of $2.0 billion for the year ended December 31, 2012, a 10.4% increase
over the year ended December 31, 2011.

•

Net premiums earned of $1.8 billion for the year ended December 31, 2012, a 16.2% increase over
the year ended December 31, 2011.

Underwriting income of $18.7 million and combined ratio(1) of 99.5% for
December 31, 2012 compared to $42.8 million and 98.1% for the year ended December 31, 2011.

the year ended

Net investment income of $81.2 million for the year ended December 31, 2012, a 8.4% increase
over the year ended December 31, 2011.

2012 Consolidated Financial Condition

•

Operating return on common equity of 5.9% for the year ended December 31, 2012 compared to
9.2% for the year ended December 31, 2011.

Common shareholders’ equity of $865.2 million at December 31, 2012 compared to $768.6 million
at December 31, 2011; book value per common share of $11.96 and $10.64 at December 31, 2012
and 2011, respectively.

Total cash and investments of $2.8 billion and $2.3 billion at December 31, 2012 and 2011,
respectively; ﬁxed maturities comprise 92.4% and 86.9% of total invested assets, of which 48.0%
and 60.1% have a credit rating of AA+ or better and an overall average credit rating of A+ at
December 31, 2012 and 2011, respectively.

Total assets of $4.1 billion at December 31, 2012 compared to $3.4 billion at December 31, 2011.

Reserve for loss and loss adjustment expenses of $1.7 billion and $1.4 billion at December 31, 2012
and 2011, respectively.

Total debt of $333.8 million and $233.8 million at December 31, 2012 and 2011, respectively, and a
debt to total capitalization ratio of 24.7% and 23.3% at December 31, 2012 and 2011, respectively.

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 Common 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.

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

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, we exclude the Junior Subordinated Debt
amortization of Junior Subordinated Debt discount and issuance costs.

repurchase expense and the accelerated

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

net income.

For the Year Ended December 31,

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

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

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

Non-recurring general and administrative expenses relating to

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

2012

$46.5

2011
($ in Millions)
$28.5

2010

$69.9

(1.9)
(1.6)
4.4
—

—

—
1.1

(0.5)
(0.3)
5.0
15.1

20.3

0.2
1.3

(6.6)
0.5
5.8
—

—

1.9
1.2

common shareholders. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$48.5

$69.6

$72.7

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

$0.67
$0.66

$0.97
$0.96

$1.03
$1.02

Operating Return on Common Equity (‘‘Operating ROCE’’): Management uses operating return on
average common 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 ROCE, which management believes provides an attractive return to shareholders for the risk
assumed. Operating ROCE for the years ended December 31, 2012, 2011 and 2010 is computed as follows:

For the Year Ended December 31,

Operating earnings available to common shareholders . .

Opening common shareholders’ equity . . . . . . . . . . . .

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

Average common shareholders’ equity . . . . . . . . . . . .

2012

$ 48.5

$768.6

$865.2

$816.9

2011
($ in Millions)
$ 69.6

$750.2

$768.6

$759.4

2010

$ 72.7

$676.5

$750.2

$713.4

Operating return on common equity . . . . . . . . . . . . . .

5.9%

9.2%

10.2%

The decrease in Operating ROCE for the year ended December 31, 2012 is primarily due to lower net
income in 2012 as a result of losses from Superstorm Sandy. In addition, Operating ROCE was further
reduced by greater increases in the common shareholders’ equity in 2012, the combined effect of net income
along with higher other comprehensive income for the year ended December 31, 2012,
the result of a
$79.9 million increase in unrealized gains on the Company’s ﬁxed maturity investment portfolio.

Book Value per Common Share: Management uses growth in book value per common 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 common share ultimately translates into growth in the Company’s
share price. Book value per common share is calculated using common shareholders’ equity (shareholders’
equity excluding the aggregate liquidation value of our preference shares) divided by the number of common
shares outstanding. Preference Shares are not included in the computation of book value per common share.
Book value per common 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
common share as of December 31, 2012, 2011 and 2010 is computed as follows:

December 31,

2012

Ending common shareholders’ equity . . . . . . . . . . . . . $

865.2 $

2011
($ in Millions)
768.6

2010

750.2

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

72,343,947

72,221,428

72,107,100

11.96 $

10.64

10.40

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 (‘‘IIS Fee Business’’) associated
with the IIS Acquisition 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
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.

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 adjustment expense ratio’’ is derived by dividing net loss and loss adjustment
expenses by the sum of net premiums earned and other insurance revenue. The ‘‘commission and other
acquisition expense 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 commission and other acquisition expense 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 AFS, and other investments. In accordance with U.S. GAAP, these investments are
carried at fair market value and unrealized gains and losses on the Company’s investments 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
the portion that can be recovered from
reinsurers; and

for known claims,

less

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
including the amortization of previously deferred commission and other
unearned premiums and (3)
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.

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
differ signiﬁcantly from the underlying assumptions and estimates used by management,
there could be
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
our underwriting teams expectations about loss experience, actuarial analysis and loss experience to date. Our
actuaries employ standard actuarial methodologies to determine estimated ultimate loss reserves.

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
method,
applicable) Paid
and
the Company uses other methodologies to estimate
Bornhuetter-Ferguson (‘‘B-F’’) methods. In addition,
liabilities for speciﬁc types of occurrences. For example, external and vendor catastrophe models are typically

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

the Reported Loss Development method

Incurred

and

the

(as

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 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 in the Diversiﬁed Reinsurance segment 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. However, the Company does use actuarial methods in the
AmTrust Quota Share Reinsurance and ACAC Quota Share segments that are dependent on claim counts
reported, claim counts settled or claim counts open. Consequently, actuarial methods relying on this
information cannot be used by the Company to estimate loss reserves in the Diversiﬁed Reinsurance segment.

The reserve for loss and loss adjustment expenses as of December 31, 2012 and 2011 comprised:

December 31,

2012

2011

($ in Millions)

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

$1,029.6
710.7
$1,740.3

$ 820.8
577.6
$1,398.4

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 BF reserving technique is commonly used for long-tailed or erratic lines. It

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
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.

the ELR and RLD techniques by splitting the expected loss

is also useful

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 of December 31, 2012, 90.5% 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 Reinsurance 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 lack of experience the Company has with
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 business with a more limited 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 of December 31, 2012 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:

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;

ii.

the differing reserving practices among ceding companies;

iii.

iv.

the diversity of
contracts; and

loss development patterns among different

types of

reinsurance treaties or

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
the Company’s underwriters, actuaries, accounting and claims personnel
ceding company counterparties,
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 of
feasible,
or
involved
2012,
December
arbitration proceedings.

the Company was

any material

litigation

claims

not

31,

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 of December 31, 2012, 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
the
potential plaintiffs;

litigation

environment

regarding

the

representation

plaintiffs

and

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
reporting patterns.

assumed reinsurance,

changes

in ceding company case

reserving and

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 of December 31, 2012, 89.6% of the loss reserves in the
Diversiﬁed Reinsurance segment are associated with the business acquired in the GMAC Acquisition. 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. 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 of December 31, 2012. 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 $28.0 million.

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 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 of December 31, 2012. 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 $101.1 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 of December 31, 2012. 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 $6.5 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
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 term of the reinsurance contract, 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.

The Company provides proportional and non-proportional reinsurance coverage to cedants (insurance
companies). In most cases, cedants seek protection for business that they have not yet written at the time they
enter into reinsurance agreements and thus have to estimate the volume of premiums they will cede to the
Company. Reporting delays are inherent in the reinsurance industry and vary in length by type of treaty. As
delays can vary from a few weeks to a year or sometimes longer, the Company produces accounting estimates
to report premiums and commission and other acquisition expenses until it receives the cedants’ actual results.

Under proportional

treaties, which represented 82.0% of gross premiums written for

the year
December 31, 2012, the Company shares proportionally in both the premiums and losses of the cedant and
pays the cedant a commission to cover the cedant’s acquisition expenses. Under this type of treaty, the
Company’s ultimate premiums written and earned and acquisition expenses are not known at the inception of
the treaty and must be estimated until
results to the Company. Under
non-proportional treaties, which represented 18.0% of gross premiums written for the year December 31,
2012, the Company is typically exposed to loss events in excess of a predetermined dollar amount or loss
ratio and receives a ﬁxed or minimum premium, which is subject to upward adjustment depending on the
premium volume written by the cedant.

reports its actual

the cedant

Reported premiums written and earned and commission and other acquisition expenses on proportional
treaties are generally based upon reports received from cedants and brokers, supplemented by the Company’s
own estimates of premiums written and commission and other acquisition expenses for which ceding company
reports have not been received. Premium and acquisition expenses estimates are determined at the individual
treaty level. The determination of estimates requires a review of the Company’s experience with cedants, a
thorough understanding of the individual characteristics of each line of business and the ability to project the
impact of current economic indicators on the volume of business written and ceded by the Company’s
cedants. Estimates for premiums and commission and other acquisition expenses are updated continuously as
new information is received from the cedants. Differences between such estimates and actual amounts are
recorded in the period in which estimates are changed or the actual amounts are determined.

Assessing whether or not a reinsurance contract meets the condition for risk transfer requires judgment.
The determination of risk transfer is critical to reporting premiums written and is based, in part, on the use of
actuarial and pricing models and assumptions. If we determine that a reinsurance contract does not transfer
sufficient risk, we account for the contract as deposit liability.

Commission and other 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 commission and
other 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 at segment level is recognized if the sum of anticipated losses and loss adjustment expenses,
unamortized acquisition expenses and anticipated investment income exceed unearned premium.

Fair Value of Financial Instruments

The Company currently classiﬁes its ﬁxed maturity investments as AFS, other investments at fair value in
accordance with FASB ASC Topic 944, ‘‘Financial Services’’ (‘‘ASC 944’’) and short-term investments as
AFS. Pursuant to U.S. GAAP, these investments are carried at estimated fair value, with net unrealized gains
or losses excluded from earnings and included in shareholders’ equity as a component of accumulated other
comprehensive (loss) income.

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 quoted prices in active markets 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 in active markets for similar assets or liabilities, quoted
inputs are
prices for identical assets or liabilities in inactive markets, or for which signiﬁcant
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
over-the-counter (‘‘OTC’’) derivatives (e.g. foreign currency options and forward contracts).

contracts; hedge and credit funds with partial
(‘‘CLO’’) — equity tranche securities that are traded in less liquid markets.

transparency; and collateralized loan obligation

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
that valuation is based on models or inputs that are less observable or
the transaction. To the extent
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. To date, we
have only included U.S. government ﬁxed maturity instruments as level 1. 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 the Pricing Service to determine an estimate of fair value.
The fair value estimates are included in the Level 2 hierarchy. The Pricing Service utilizes evaluated pricing
models that vary by asset class and incorporate available trade, bid and other market information and for
structured securities, cash ﬂow and, when available, loan performance data. The Pricing Service’s evaluated
pricing applications apply available information as applicable through processes such as benchmark curves,
benchmarking of like securities, sector groupings and matrix pricing, to prepare evaluations. In addition, the
Pricing Service uses model processes, such as the Option Adjusted Spread model, to assess interest rate
impact and develop prepayment scenarios. The market inputs that the Pricing Service normally seeks for
evaluations of securities, listed in approximate order of priority, include: benchmark yields, reported trades,
broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data
including market research publications.

The Company typically utilizes the fair values received from the Pricing Service. If quoted market prices
and an estimate from the Pricing Service are unavailable, the Company produces an estimate of fair value
based on 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. Approximately 98.3% and
97.7%, respectively of the Company’s ﬁxed maturity investments are categorized as Level 2 within the fair
value hierarchy as of December 31, 2012 and 2011. At December 31, 2012 and 2011, we have not adjusted
any pricing provided by the Pricing Services.

the Company will

If a fair value is challenged,

The Company will challenge any prices for its investments which are not considered to represent fair
value.
typically obtain a non-binding quote from a
broker-dealer; multiple quotations are not typically sought. As of December 31, 2012 and 2011, one security
those dates, approximately
and three securities, respectively, are valued using the market approach. At
$26.1 million and $11.4 million, respectively or less than 1.0%. and 0.6%, respectively of Level 2 ﬁxed
maturities, was priced using a quotation from a broker and/or custodian as opposed to the Pricing Service. At
December 31, 2012 and 2011, we have not adjusted any pricing provided to us based on the review performed
by our investment managers.

To validate prices, the Company compares the fair value estimates to its knowledge of the current market
and will investigate prices that it considers not to be representative of fair value. In addition, our process to
validate the market prices obtained from the Pricing Service includes, but is not limited to, periodic evaluation
of model pricing methodologies and analytical reviews of certain prices. We also periodically perform testing,
as appropriate, of the market to determine trading activity, or lack of trading activity, as well as evaluating the
variability of market prices. Securities sold during the quarter are also ‘‘back-tested’’ (i.e., the sales prices are
compared to the previous month end reported market price to determine the reasonableness of the reported
market price). There were no material differences between the prices from the Pricing Service and the prices
obtained from our validation procedures as of December 31, 2012 and 2011.

At December 31, 2012 and 2011, the Company has no ﬁxed income investments that are guaranteed by
third parties. We do not have any direct exposure to third party guarantors as of December 31, 2012 and 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 inputs, the fair values of U.S. government agency securities are included in the Level 2
fair value hierarchy.

Non-U.S. government bonds: Comprised of bonds issued by non-U.S. governments and their agencies
along with supranational organizations. 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

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

bonds

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.

Municipal bonds: Municipal bonds comprise bonds and auction rate securities issued by U.S. state and
municipality entities or agencies. 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 Sheets 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. The underlying investments of the loan are generally priced
by pricing services. As the signiﬁcant inputs used to price the underlying investments are observable market
inputs, the fair values of Loan to related party are included in the Level 2 fair value hierarchy.

Senior notes: The amount reported in the accompanying balance sheets for these ﬁnancial instruments
represents the carrying value of the notes. The fair values are based on quoted prices of identical instruments

in inactive markets and as such, are included in the Level 2 hierarchy. At December 31, 2012, the fair value
of the 2011 Senior Notes was $112.8 million and the fair value of the 2012 Senior Notes was $105.6 million.

Junior subordinated debt: The amount reported in the accompanying balance sheets for these ﬁnancial
instruments represents the carrying value of the debt. The fair value of the debt was derived using the
Black-Derman-Toy model. As the fair value of the junior subordinated debt is determined using observable
market inputs in the Black-Derman-Toy model, the fair value is included in the Level 2 fair value hierarchy.
At December 31, 2012, the fair value of the debt was $166.9 million.

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
limited to,
the following:

the facts and circumstances surrounding the underlying issuer

including, but not

•

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, 2012, 2011

and 2010.

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, 2012 of $94.4 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 share 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, 2012.

Results of Operations

The following table sets forth our selected Consolidated Statement of Income data for each of the

periods indicated.

For the Year Ended December 31,

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 investments. . . . . . . . . . . .
Junior subordinated debt repurchase expense. . . . . . . . . . . . . . .
Accelerated amortization of junior subordinated debt discount

and issuance cost. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of intangible assets. . . . . . . . . . . . . . . . . . . . . . .
Foreign exchange gains (losses) . . . . . . . . . . . . . . . . . . . . . . .
Interest and amortization expenses. . . . . . . . . . . . . . . . . . . . . .
Income tax expense. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Income attributable to noncontrolling interests. . . . . . . . . . . . . .
Dividends on preference shares . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Maiden common shareholders. . . .

Ratios
Net loss and loss adjustment expense ratio* . . . . . . . . . . . . . . .
Commission and other acquisition expense ratio**. . . . . . . . . . .
General and administrative expense ratio*** . . . . . . . . . . . . . . .
Expense ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combined ratio**** . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2012

$ 2,001.0
$ 1,901.3
$ 1,803.8
12.9
(1,262.3)
(492.1)
(43.6)
18.7
(10.2)
81.2
1.9
—

2011
($ in Millions)
$ 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)

—
(4.4)
1.6
(36.4)
(2.2)
(0.1)
(3.6)
46.5

69.5%
27.1%
2.9%
30.0%
99.5%

(20.3)
(5.0)
0.3
(34.1)
(1.9)
—
—
28.5

66.6%
28.0%
3.5%
31.5%
98.1%

2010

$1,298.1
$1,227.8
$1,169.8
—
(755.1)
(336.7)
(27.9)
50.1
(14.3)
71.6
6.6
—

—
(5.8)
(0.5)
(36.5)
(1.3)
—
—
69.9

64.6%
28.8%
3.5%
32.3%
96.9%

***

Calculated by dividing general and administrative expenses by the sum of net premiums earned and
other insurance revenue.

**** Calculated by adding together net

loss and loss adjustment expense ratio, commission and other

acquisition expense ratio and general and administrative expense ratio.

Net Income

2012 vs. 2011

Net income attributable to Maiden common shareholders for the year ended December 31, 2012 was

$46.5 million as compared to $28.5 million for the same period in 2011.

In 2012, net income was reduced by $31.1 million due to the underwriting impact of Superstorm Sandy,

which is net of applicable reinsurance and the Company’s provision for normalized catastrophe activity.

The results in 2011 were adversely affected by non-recurring charges related to the 2011 Senior Note
Offering which included $15.1 million of junior subordinated debt repurchase expense and $20.3 million of
accelerated amortization of subordinated debt discount and issuance costs. The 2011 results also 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.

Excluding the catastrophe losses in both 2012 and 2011, and the 2011 non-recurring charges, net income
in 2012 increased to $77.6 million from $73.4 million in 2011, primarily as a result of improved investment
income and investment and foreign exchange gains, which were partially offset by higher interest expenses
and dividends on Preference Shares.

2011 vs. 2010

Net income attributable to Maiden common shareholders for the year ended December 31, 2011 was
$28.5 million compared to $69.9 million for the same period in 2010. The lower result in 2011 was due to
charges related to the 2011 Senior Note 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 investments of $0.5 million in 2011 compared to realized and unrealized gains on
investments of $6.6 million in 2010.

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, 2012 and 2011

Net premiums written increased by $177.8 million, or 10.3%, for the year ended December 31, 2012
compared to the year ended December 31, 2011. The table below compares net premiums written by segment
for the years ended December 31, 2012 and 2011.

For the Year Ended December 31,

2012

2011

Change in

Total
($ in
Millions)
Diversiﬁed Reinsurance . . . . . . . . . . . $ 765.3
840.3
AmTrust Quota Share Reinsurance . . . .
ACAC Quota Share . . . . . . . . . . . . . .
295.7
Total . . . . . . . . . . . . . . . . . . . . . . . . $1,901.3

% of Total

Total
($ in
Millions)
40.3% $ 798.0
669.3
44.2%
15.5%
256.2
100.0% $1,723.5

% of Total

$
($ in
Millions)
46.3% $ (32.7)
171.0
38.8%
39.5
14.9%
100.0% $177.8

(4.1)%
25.6%
15.4%
10.3%

The increase in net premiums written was primarily the result of the following:

•

Growth on recurring business in the AmTrust Quota Share Reinsurance segment — The results for
the year ended December 31, 2011 include the $45.9 million in force and unearned premium
assumed at the commencement of the European Hospital Liability Quota Share on April 1, 2011.
Excluding that non-recurring item, net premiums written increased by $216.9 million or 34.8% for
the year ended December 31, 2012 compared to the year ended December 31, 2011. This increase
reﬂects AmTrust’s continuing expansion through acquisition and ongoing organic growth, both of
which are beneﬁting from improved rate levels.

Growth in the ACAC Quota Share segment — For the year ended December 31, 2012, net premiums
written increased by $39.5 million or 15.4% compared to the year ended December 31, 2011, as
ACAC continues to expand its business.

These increases were offset by reductions in business written in the Diversiﬁed Reinsurance segment,
primarily by Maiden US, which experienced a decrease in premiums written for the year ended December 31,
2012 of $17.3 million or 2.6% compared to December 31, 2011. In addition to writing fewer new accounts in
2012, Maiden US added a number of large proportional contracts in the second half of 2011 which had
sizable in-force and unearned premiums assumed, which did not recur in 2012. Finally, several
large
proportional reinsurance contracts that no longer met Maiden US’ proﬁtability criteria were non-renewed,
contributing to the decrease.

Maiden Bermuda and IIS also decreased their written premium by $15.4 million or 12.0% during the
year ended December 31, 2012 compared to December 31, 2011, largely due to non-renewals of certain
accounts which were partially offset by new account activity.

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.

For the Year Ended December 31,

2011

2010

Change in

Total
($ in
Millions)
Diversiﬁed Reinsurance . . . . . . . . . . . $ 798.0
669.3
AmTrust Quota Share Reinsurance . . . .
ACAC Quota Share . . . . . . . . . . . . . .
256.2
Total . . . . . . . . . . . . . . . . . . . . . . . . $1,723.5

% of Total

Total
($ in
Millions)
46.3% $ 554.1
468.0
38.8%
14.9%
205.7
100.0% $1,227.8

% of Total

$
($ in
Millions)
45.1% $243.9
201.3
38.1%
50.5
16.8%
100.0% $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
ended December 31, 2011, while the business assumed under the Reinsurance Agreement increased
$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 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 compared to the same
period in 2010 was attributable to the automobile line of business, primarily personal auto.

Net Premiums Earned

Comparison of Years Ended December 31, 2012 and 2011

Net premiums earned increased by $251.4 million, or 16.2%, for the year ended December 31, 2012
compared to the year ended December 31, 2011. The table below compares net premiums earned by segment
for the years ended December 31, 2012 and 2011.

For the Year Ended December 31,

2012

2011

Change in

Total
($ in
Millions)
Diversiﬁed Reinsurance . . . . . . . . . . . $ 795.3
727.8
AmTrust Quota Share Reinsurance . . . .
ACAC Quota Share . . . . . . . . . . . . . .
280.7
Total . . . . . . . . . . . . . . . . . . . . . . . . $1,803.8

% of Total

Total
($ in
Millions)
44.1% $ 748.4
558.2
40.3%
15.6%
245.8
100.0% $1,552.4

% of Total

$
($ in
Millions)
48.3% $ 46.9
169.6
35.9%
34.9
15.8%
100.0% $251.4

6.3%
30.4%
14.2%
16.2%

The increase in net premiums earned was primarily the result of the following:

•

Growth in Maiden US business in the Diversiﬁed Reinsurance segment
in 2011 — Continued
underwriting discipline and strong organic premium written growth in 2011, particularly the second
half of that year, resulted in increased earned premiums by Maiden US of $73.8 million or 12.3%
during the year ended December 31, 2012, compared to the year ended December 31, 2011. This
growth in earned premium was partially offset by slower premium written growth in 2012 in Maiden
US as noted. Additionally, reduced writings by Maiden Bermuda and the Company’s international
operations in 2011, as certain accounts reduced in size or were non-renewed, affected earned
premium in 2012.

Growth in the AmTrust Quota Share Reinsurance segment — The commencement of the European
Hospital Liability Quota Share on April 1, 2011 increased premiums earned by $49.4 million or
72.6% for the year ended December 31, 2012 compared to the year ended December 31, 2011,
while the business assumed under the Reinsurance Agreement increased $120.2 million or 24.5% for
the year ended December 31, 2012 compared to the year ended December 31, 2011.

Growth in the ACAC Quota Share segment — For the year ended December 31, 2012, net premiums
earned increased by $34.9 million or 14.2% compared to the year ended December 31, 2011, as
ACAC continues to expand its business.

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.

For the Year Ended December 31,

2011

2010

Change in

Total
($ in
Millions)
Diversiﬁed Reinsurance . . . . . . . . . . . $ 748.4
558.2
AmTrust Quota Share Reinsurance . . . .
245.8
ACAC Quota Share . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . $1,552.4

% of Total

Total
($ in
Millions)
48.3% $ 601.2
445.1
35.9%
123.5
15.8%
100.0% $1,169.8

% of Total

$
($ in
Millions)
51.5% $147.2
113.1
38.0%
122.3
10.5%
100.0% $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

the IIS Acquisition. The IIS Acquisition was completed on
First
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
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
Reinsurance Agreement increased $45.0 million for the year ended December 31, 2011 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 compared to
the year ended
only ten months in 2010, contributing $122.3 million of
December 31, 2011.

the increase for

Other Insurance Revenue

Other insurance revenue represents the IIS Fee Business, which consists primarily of commissions on
is not directly associated with premium revenue assumed by the
the year ended December 31, 2012 compared to the year ended

that

German auto business produced,
Company and increased 2.0% for
December 31, 2011.

Net Investment Income and Net Realized and Unrealized Gains (Losses) on Investments

Comparison of Years Ended December 31, 2012 and 2011

Net Investment Income — Net investment income increased by $6.3 million or 8.4% for the year ended

December 31, 2012 compared to the year ended December 31, 2011.

The following table details the Company’s average invested assets and average book yield for the year

ended December 31, 2012 compared to the year ended December 31, 2011.

For the Year Ended December 31,

Average invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Average book yield* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2012

2011

($ in Millions)

$2,764.6

$2,360.0

2.9%

3.2%

Ratio of net investment income over average invested assets, at fair value, including cash and cash
equivalents and loan to related party.

Despite the Company reducing the amount of cash held during 2012 and investing in longer term assets,
the continuing decline in interest rates to historically low levels continue to reduce the Company’s overall
portfolio yield. Despite the lower portfolio yields, the increase in net investment income for the year ended
December 31, 2012 compared to the same period in 2011 is the result of the 17.1% growth in average
invested assets. The growth in average invested assets during this period is the result of: 1) continued
proﬁtable growth in the overall book of business in all segments as described herein; 2) strong positive cash
ﬂow from operations during the year ended December 31, 2012; and 3) the issuance of the 2012 Senior Notes
and the Preference Shares.

As a result, despite the increase in average invested assets, the historically low interest rate environment
has continued to limit the growth of investment income in the year ended December 31, 2012 compared to
income in 2012 was additionally impacted negatively by increases in
2011. Growth in net
prepayments
agency
mortgage-backed securities portfolio, resulting in increased levels of amortization of bond premiums by
$5.1 million in 2012 compared to 2011.

the Company’s U.S. government

initially expected levels of

in excess of

investment

Net Realized and Unrealized Gains (Losses) on Investments — Net realized gains on investments were
$1.9 million for the year ended December 31, 2012 compared to net realized and unrealized gains of
$0.5 million for the year ended December 31, 2011, see ‘‘Liquidity and Capital Resources-Investments’’ on
page 112 for further information.

Comparison of Years Ended December 31, 2011 and 2010

Net Investment Income — 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.

For the Year Ended December 31,

2011

2010

($ in Millions)

Average invested assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,360.0

$2,080.6

Average book yield* . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.2%

3.5%

Ratio of net investment income over average invested assets, at fair value, including cash and cash
equivalents and loan to related party.

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 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; and

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 (Losses) on Investments — Net realized and unrealized gains on
investments 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 sales of certain
U.S. Treasury securities. For additional information on the Company’s investments and realized and unrealized
gains and losses, please refer to Liquidity and Capital Resources.

Net Loss and Loss Adjustment Expenses

Comparison of Years Ended December 31, 2012 and 2011

Net

loss and loss adjustment expenses increased by $219.2 million, or 21.0%, for the year ended
December 31, 2012 compared to 2011. The net loss and loss adjustment expense ratios were 69.5% and
66.6% for the years ended December 31, 2012 and 2011, respectively. As noted, catastrophic losses increased
the Company’s loss ratios in 2012 and 2011, particularly the Diversiﬁed Reinsurance segment, the result of
Superstorm Sandy in 2012 and thunderstorm and tornado activity in the U.S. in the second quarter of 2011.
These events increased the net loss and loss adjustment expense ratios by 1.7% and 0.6% in 2012 and
2011, respectively.

Excluding losses from catastrophic events, net loss and loss adjustment expense ratios were 67.8% and
66.0% for the years ended December 31, 2012 and 2011, respectively. The increased net
loss and loss
adjustment expense ratios were largely the result of poor performance on certain accounts, primarily in
Maiden US. The Company amortized gains as a reduction of losses assumed from the GMAC Acquisition and

the IIS Acquisition of $9.1 million for year ended December 31, 2012, compared to $28.9 million in 2011.
The higher net loss and loss adjustment expense ratios occurred in the Diversiﬁed Reinsurance segment, in
particular Maiden US and the ACAC Quota Share segment.

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 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 2011 compared to 2010.

The net

loss and loss adjustment expense 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 net loss and loss adjustment expense ratio by 0.6 % in 2011. Without the storm losses, the Company’s net
loss and loss adjustment expense ratio for the year ended December 31, 2011 would have been 66.0%,
reﬂecting stable net loss and loss adjustment expense ratios in the Diversiﬁed Reinsurance segment as a result
of the IIS Acquisition, offset by higher net loss and loss adjustment expense ratios in the AmTrust and
ACAC segments.

The total favorable development relating to the loss portfolio transfers since the closings of the GMAC
Acquisition and the IIS Acquisition 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 Acquisition and the
IIS Acquisition, 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.

Commission and Other Acquisition Expenses

Comparison of Years Ended December 31, 2012 and 2011

Commission and other acquisition expenses increased by $53.3 million, or 12.1%, for the year ended
December 31, 2012 compared to 2011 due to the ongoing premium growth of the Company. However, the
commission and other acquisition expense ratio decreased to 27.1% for the year ended December 31, 2012
compared to 28.0% in 2011, respectively. The reduced ratio largely reﬂects: (1) the impact of loss sensitive
features on ceding commission in the Diversiﬁed Reinsurance segment, in particular business written by
Maiden US, due to higher loss ratios in that segment; (2) continued growth and ongoing changes in the mix
of business in the AmTrust Quota Share Reinsurance segment,
including the impact of a full year of
modiﬁcations to ceding commission made under the Reinsurance Agreement along with lower ceding
commission and proﬁt share under the European Hospital Liability Quota Share, effective April 1, 2011 and
discussed in further detail
(3) modiﬁcations made to ceding
commission made to the ACAC Quota Share effective October 1, 2012.

in that segment’s results of operations;

These changes were partially offset by the adoption of new accounting standards regarding the
recognition of deferred commission and other acquisition expenses in the ﬁrst quarter of 2012 which increased
commission and other acquisition expenses by $2.0 million for the year ended December 31, 2012 compared
to 2011.

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 commission and other acquisition expense ratio decreased to 28.0% for the year
ended December 31, 2011 compared to 28.8% for the same periods in 2010. This reﬂects the growth in earned
premium offset by: (1) modiﬁcations to the ceding commission made under the Reinsurance 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).

General and Administrative Expenses

General and administrative expenses include expenses which are segregated for analytical purposes as a

component of underwriting income. General and administrative expenses consist of:

For the Year Ended December 31,

General and administrative expenses − segments. . . . . . . . .
General and administrative expenses − corporate . . . . . . . .
Total general and administrative expenses . . . . . . . . . . .

Comparison of Years Ended December 31, 2012 and 2011

2012

$43.6
10.2
$53.8

2011
($ in Millions)
$40.3
13.6
$53.9

2010

$27.9
14.3
$42.2

Total general and administrative expenses decreased by $0.1 million, or 0.2%, for the year ended
December 31, 2012 compared to 2011. The general and administrative expense ratio is 2.9% for the year
ended December 31, 2012 compared to 3.5% in 2011. The decrease for the year reﬂects the continuing growth
of larger quota share accounts which enable the Company to operate more efficiently.

The small decrease in total general and administrative expenses is primarily a result of decreases in office

and technology expenses offset by increases in regulatory, legal and other professional fees.

Comparison of Years Ended December 31, 2011 and 2010

Total general and 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 both 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
$7.9 million due to the 50 additional employees added in November 2010 as part of
the
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; and

Other expenses,
approximately $3.0 million.

including regulatory, depreciation and technology expenses,

increased in by

Interest and Amortization Expense

The interest and amortization expense for the years ended December 31, 2012, 2011 and 2010 comprises:

For the Year Ended December 31,

TRUPS Offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior Note Offerings . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Comparison of Years Ended December 31, 2012 and 2011

2012

$21.4
15.0
$36.4

2011
($ in Millions)
$29.5
4.6
$34.1

2010

$36.5
—
$36.5

The increase in interest and amortization expense for the year ended December 31, 2012 compared to the
same period in 2011 was due to the issuance of 2012 Senior Notes during the ﬁrst quarter 2012. These
increases were offset by savings in interest expense realized due to the repurchase on July 15, 2011 of

$107.5 million of the Junior Subordinated Debt, the repurchase of which was ﬁnanced with the issuance of
2011 Senior Notes. The weighted average interest rate was 11.7% for the year ended December 31, 2012
compared to 14.8% in 2011.

Comparison of Years Ended December 31, 2011 and 2010

The decrease in interest and amortization expense for the year ended December 31, 2011 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 2011 Senior
Notes, which have a coupon of 8.25%. The weighted average interest rate was 14.8% for the year ended
December 31, 2011 compared to 16.95% for the same period in 2010.

Income Tax Expense

The Company recorded a current income tax expense of $1.1 million, $0.6 million and $0.1 million for
the years ended December 31, 2012, 2011 and 2010 respectively. These amounts relate to income tax on the
earnings of its international subsidiaries and state taxes incurred by its U.S. subsidiaries. The effective rate of
the years ended December 31, 2012, 2011 and
current
2010, respectively.

income tax was 1.9%, 2.1% and 0.2% for

The Company recorded a deferred tax expense of $1.1 million, $1.3 million and $1.2 million for the
years ended December 31, 2012, 2011 and 2010, respectively. These amounts are related to the goodwill
associated with the Company’s acquisition of its U.S. subsidiaries in the GMAC Acquisition. 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.

Dividends on Preference Shares

Dividends on Preference Shares in 2012 cover the period from the date of issuance of the Preference

Shares on August 22, 2012 to the date of the ﬁrst dividend payment which was December 17, 2012.

Underwriting Results by Operating Segments

The results of operations for our

three segments, Diversiﬁed Reinsurance, AmTrust Quota Share

Reinsurance and ACAC Quota Share are discussed below.

Diversiﬁed Reinsurance Segment

Results of this segment include the results of operations from the IIS Acquisition, which completed its
ﬁrst full year of operations in 2011. The following table summarizes the underwriting results and associated
ratios for the Diversiﬁed Reinsurance segment for the years ended December 31, 2012, 2011 and 2010:

For the Year Ended December 31,

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 (loss) income . . . . . . . . . . . . . . . . . . . .

Ratios
Net loss and loss adjustment expense ratio . . . . . . . . . . . .
Commission and other acquisition expense ratio. . . . . . . . .
General and administrative expense ratio. . . . . . . . . . . . . .
Expense ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combined ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2012

$ 765.3
$ 795.3
12.9
(584.0)
(203.2)
(40.9)
$ (19.9)

2011
($ in Millions)
$ 798.0
$ 748.4
12.6
(502.4)
(200.2)
(36.4)
$ 22.0

2010

$ 554.1
$ 601.2
—
(394.6)
(152.7)
(26.1)
$ 27.8

72.3%
25.1%
5.1%
30.2%
102.5%

66.0%
26.3%
4.8%
31.1%
97.1%

65.6%
25.4%
4.4%
29.8%
95.4%

Comparison of Years Ended December 31, 2012 and 2011

The combined ratio increased to 102.5% for the year ended December 31, 2012 compared to 97.1% in
2011. As noted, catastrophic losses increased this segments combined ratios in 2012 and 2011, the result of
Superstorm Sandy in 2012 and thunderstorm and tornado activity in the U.S. in the second quarter of 2011.
These events increased the segment combined ratios by 3.6% and 1.2% in 2012 and 2011, respectively.

Excluding losses from catastrophic events, combined ratios were 98.9% and 95.9% for the years ended
December 31, 2012 and 2011, respectively. The increased net loss and loss adjustment expense ratios were
primarily the result of were largely the result of poor performance on certain accounts, primarily in Maiden
US and were partially offset by a lower commission and other acquisition expense ratio as a result of
reductions in ceding commission from loss sensitive contract features, primarily written by Maiden US.

Premiums — Net premiums written decreased by $32.7 million, or 4.1%,

the year ended
December 31, 2012 compared to the same period in 2011. The table below illustrates net premiums written by
line of business in this segment for the years ended December 31, 2012 and 2011:

for

For the Year Ended December 31,

Net Premiums Written
Property . . . . . . . . . . . . . . . . . . . . . .
Casualty . . . . . . . . . . . . . . . . . . . . . .
Accident and Health . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . .
Total Diversiﬁed Reinsurance . . . . . .

2012

% of Total

2011

% of Total

Total
($ in
Millions)

Change in

$
($ in
Millions)

24.8% $208.0
441.6
56.6%
42.6
4.9%
105.8
13.7%
100.0% $798.0

26.1% $(17.9)
(8.3)
55.3%
(5.3)
5.3%
(1.2)
13.3%
100.0% $(32.7)

(8.6)%
(1.9)%
(12.6)%
(1.1)%
(4.1)%

Total
($ in
Millions)

$190.1
433.3
37.3
104.6
$765.3

The table below illustrates net premiums earned by line of business in this segment for the years ended

December 31, 2012 and 2011:

For the Year Ended December 31,

Net Premiums Earned
Property . . . . . . . . . . . . . . . . . . . . . .
Casualty . . . . . . . . . . . . . . . . . . . . . .
Accident and Health . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . .
Total Diversiﬁed Reinsurance . . . . . .

2012

% of Total

2011

% of Total

Total
($ in
Millions)

Change in

$
($ in
Millions)

26.7% $197.0
395.5
55.9%
43.2
5.3%
112.7
12.1%
100.0% $748.4

26.3% $ 15.0
49.2
52.8%
(1.2)
5.8%
(16.1)
15.1%
100.0% $ 46.9

7.6%
12.4%
(2.9)%
(14.3)%
6.3%

Total
($ in
Millions)

$212.0
444.7
42.0
96.6
$795.3

The reduction in premium written in the segment was primarily attributable to Maiden US, which
experienced a decrease in premiums written for the year ended December 31, 2012 of $17.3 million or 2.6%
compared to December 31, 2011. In addition to writing fewer new accounts in 2012, Maiden US added a
number of large proportional contracts in the second half of 2011 which had sizable in-force and unearned
premiums assumed, which did not recur in 2012. Finally, several large proportional reinsurance contracts that
no longer met Maiden US’ proﬁtability criteria were non-renewed, further contributing to the decrease.

Despite the decrease in premiums written, strong organic premium written growth in 2011, particularly
the second half of that year, resulted in increased earned premiums by Maiden US of $73.8 million or 12.3%
during the year ended December 31, 2012, compared to the year ended December 31, 2011. This growth in
earned premium was partially offset by slower premium written growth in 2012 in Maiden US as noted.

Additionally, reduced writings by Maiden Bermuda and the Company’s international operations, as certain
accounts reduced in size or were non-renewed, affected earned premium in 2012.

Other Insurance Revenue — Other insurance revenue represents the IIS Fee Business, which consists
primarily of commissions on German auto business produced, that is not directly associated with premium
revenue assumed by the Company and increased 2.0% for the year ended December 31, 2012, compared to
December 31, 2011.

Net Loss and Loss Adjustment Expenses — Net

loss and loss adjustment expenses increased by
$81.6 million, or 16.2%, for the year ended December 31, 2012 compared to 2011. Net
loss and loss
adjustment expense ratios were 72.3% and 66.0% for the years ended December 31, 2012 and 2011,
respectively. As noted, catastrophic losses increased this segments net loss and loss adjustment expense ratios
in 2012 and 2011, the result of Superstorm Sandy in 2012 and thunderstorm and tornado activity in the
U.S. in the second quarter of 2011. These events increased the net loss and loss adjustment expense ratios by
3.6% and 1.2 % in 2012 and 2011, respectively.

Excluding losses from catastrophic events, net loss and loss adjustment expense ratios were 68.7% and
64.8% for the years ended December 31, 2012 and 2011, respectively. The increased net
loss and loss
adjustment expense ratios were largely the result of poor performance on certain accounts, primarily in
Maiden US. The Company amortized gains as a reduction of losses assumed from the GMAC Acquisition and
the IIS Acquisition of $9.1 million for year ended December 31, 2012, compared to $28.9 million in 2011. In
addition to the lower amortized gains in 2012, the higher net loss and loss adjustment expense ratios were
also impacted by higher current underwriting year loss ratios in both Maiden US and the international
business written from the IIS Acquisition, in particular German Auto, as well as development from business
written by Maiden Bermuda in prior years.

Commission and Other Acquisition Expenses — Commission and other acquisition expenses increased by
$3.0 million, or 1.5%, for the year ended December 31, 2012 compared to 2011. The increase during the year
reﬂects the growth of the segment
in 2012 compared to 2011, consistent with the reasons cited in the
discussion of the change in earned premiums. In addition, as a result of the adoption of new accounting
standards regarding the recognition of deferred commission and other acquisition expenses in the ﬁrst quarter
2012, commission and other acquisition expenses increased an additional $2.0 million during year ended
December 31, 2012 compared to 2011. The implementation of this new accounting standard increased the
commission and other
ended
ratio for
December 31, 2012.

segment by 0.3% for

acquisition expense

the year

the

These increases were offset by the impact of loss sensitive features on ceding commission in the
segment, in particular business written by Maiden US, due to higher loss ratios in 2012 from the impact of
both Superstorm Sandy and non-catastrophe underwriting results. For the year ended December 31, 2012,
54.8% of the Maiden US net premiums written have loss sensitive features, which results in lower ceding
commissions when loss ratios increase. For the year ended December 31, 2012, the net effect of loss sensitive
features on Maiden US reinsurance contracts reduced ceding commission by $10.4 million, compared to
$10.7 million for the year ended December 31, 2011.

Thus despite the increase in commission and other acquisition expenses in 2012 compared to 2011, the
commission and other acquisition expense ratio decreased to 25.1% for the year ended December 31, 2012
compared to 26.3% in 2011.

General and Administrative Expenses — Consistent with the Company’s growth, general
and
administrative expenses increased by $4.5 million, or 12.6%, for the year ended December 31, 2012 compared
to 2011. The general and administrative expense ratio was 5.1% and 4.8% for the years ended December 31,
2012 and 2011, respectively. The overall expense ratio (including commission and other acquisition expenses)
was 30.2% and 31.1% for the years ended December 31, 2012 and 2011, respectively.

100

Comparison of Years Ended December 31, 2011 and 2010

The combined ratio increased to 97.1% for the year ended December 31, 2011 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%
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 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

For the Year Ended December 31,

2011

% of Total

2010

Change in

Total
($ in
Millions)

% of Total

$
($ in
Millions)

26.1% $168.9
311.9
55.3%
43.7
5.3%
29.6
13.3%
100.0% $554.1

30.5% $ 39.1
129.7
56.3%
(1.1)
7.9%
76.2
5.3%
100.0% $243.9

23.1%
41.6%
(2.4)%
257.1%
44.0%

Total
($ in
Millions)

$208.0
441.6
42.6
105.8
$798.0

The table below illustrates net premiums earned by line of business in this segment for the years ended

December 31, 2011 and 2010:

For the Year Ended December 31,

2011

% of Total

2010

Change in

Total
($ in
Millions)

% of Total

$
($ in
Millions)

26.3% $176.5
356.4
52.8%
62.9
5.8%
5.4
15.1%
100.0% $601.2

29.4% $ 20.5
39.1
59.3%
(19.7)
10.5%
107.3
0.8%
100.0% $147.2

11.6%
11.0%
(31.4)%
1,997.5%
24.5%

Total
($ in
Millions)

$197.0
395.5
43.2
112.7
$748.4

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 in net premiums
written. 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 premiums written in the International line of business was Credit Life business associated
with the IIS Acquisition. Further, approximately 50.5% of the net premiums written in the International line of
business originated in Germany. No other country in International exceeded 10% of net premiums written for
the year ended December 31, 2011. In addition, the business written by Maiden US experienced strong growth
in the year ended December 31, 2011 of $167.4 million or 33.4% compared to the same period in 2010, when
certain accounts were not renewed or more premiums was retained by clients. A series of new accounts were
successfully added in 2011, both quota share and excess of loss, accounting for the increase in this business.

Other Insurance Revenue — Other insurance revenue of $12.6 million represents the IIS Fee Business
is not directly associated with premium revenue generated by the Company. The year ended
that
December 31, 2011 represents the ﬁrst full calendar periods 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 — Net

loss and loss adjustment expenses increased by
$107.8 million, or 27.3%, for the year ended December 31, 2011 compared to the same period in 2010. Net
loss and loss adjustment expense ratios were 66.0% and 65.6% for the years ended December 31, 2011 and

101

2010, respectively. The underwriting impact of U.S. storm activity increased the net loss and loss adjustment
expense ratio by 1.2% for the year ended December 31, 2011. Adjusted for the storm losses, the Company’s
net loss and loss adjustment expense ratio for the year ended December 31, 2011 was 64.8%.

The total favorable development relating to the loss portfolio transfer since the closing of the GMAC
Acquisition and the IIS Acquisition has been $68.9 million and the remaining $2.6 million is recorded as a
deferred gain in the Company’s reserve for loss and loss adjustment expenses at December 31, 2011 that are
included in the accompanying Consolidated Balance Sheet.

Commission and Other Acquisition Expenses — Commission and other acquisition expenses increased by
$47.5 million, or 31.1%, for the year ended December 31, 2011 compared to the same period in 2010,
primarily reﬂecting the increased quota share business as a result of the ﬁrst full year of business from the IIS
Acquisition, which typically has a higher ceding commission associated with that business. As a result, the
commission and other acquisition expense ratio increased to 26.3% for the year ended December 31, 2011
compared to 25.4% for the same period in 2010.

General and Administrative Expenses — General and administrative expenses increased by $10.3 million,
or 39.2%, for the year ended December 31, 2011 compared to the same period in 2010. The general and
administrative expense ratio was 4.8% and 4.4% for the years ended December 31, 2011 and 2010,
respectively, primarily as a result of the ﬁrst full year of operations from the IIS Acquisition. The overall
expense ratio (including commission and other acquisition expenses) was 31.1% and 29.8% for the years
ended December 31, 2011 and 2010, respectively.

AmTrust Quota Share Reinsurance Segment

Effective April 1, 2011,

the Company entered into a series of contract modiﬁcations with AmTrust
including the ceding
regarding the reinsurance coverage it provides under the Reinsurance Agreement,
commission arrangements contained within that contract. These changes include:
the
(1) extension of
Reinsurance Agreement for one additional year, to July 1, 2014, while continuing the automatic three-year
renewal subject to the provisions of the contract; (2) a reduction of the ceding commission payable under the
Reinsurance Agreement to 30.0% for the period April 1, 2011 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%.

the Company and AmTrust executed an amendment

On March 7, 2013, after receipt of approval from each of the Company’s and AmTrust’s Audit
Committee,
to the Reinsurance Agreement, which
provides for the extension of the term of the Reinsurance Agreement to July 1, 2016. The amendment further
provides that, effective January 1, 2013, AII will receive a ceding commission of 31% of ceded written
premiums with respect to all Covered Business other than retail commercial package business, for which the
ceding commission will remain 34.375%. Though this commission adjustment eliminates its variable feature,
the Company anticipates operating for the foreseeable future at that commission rate. Lastly, with regards to
the Specialty Program portion of Covered Business only, excluding workers’ compensation business included
in the AmTrust’s Specialty Program segment from July 1, 2007 through December 31, 2012, AmTrust will be
responsible for ultimate net loss otherwise recoverable from Maiden Bermuda to the extent that the loss ratio
to Maiden Bermuda, which shall be determined on an inception to date basis from July 1, 2007 through the
date of calculation, is between 81.5% and 95%. Above and below the deﬁned corridor, the Company will
continue to reinsure losses at its proportional 40% share per the Reinsurance Agreement. The Company
believes that these contract revisions will help to maintain the stability of the overall performance for the
Reinsurance Agreement.

On April 1, 2011,

the Company entered into a separate one-year 40% quota share agreement with
AmTrust Europe Limited and AmTrust International Underwriters Limited to cover those entities medical
liability business in Europe (‘‘European Hospital Liability Quota Share’’), substantially all of which is in Italy.
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, 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

102

amounts computed. Pursuant to the terms of the European Hospital Liability Quota Share, the Company
assumed the in-force and unearned premium as of April 1 which totaled $45.9 million. The business written
is included in the Specialty Risk and Extended Warranty line of business in the
under this agreement
discussion that follows. As a result of the additional agreement with AmTrust, this segment has been renamed
AmTrust Quota Share Reinsurance.

Effective January 1, 2012, the European Hospital Liability Quota Share was amended, thereby increasing
the maximum liability attaching to €10,000 or currency equivalent (on a 100% basis) per original claim for
any one original policy. Furthermore, amendments were also made to the contract to expand the territorial
scope to include new territories, speciﬁcally France.

The following table summarizes the underwriting results and associated ratios for the AmTrust Quota

Share Reinsurance segment for the years ended December 31, 2012, 2011 and 2010:

For the Year Ended December 31,

Net premiums written. . . . . . . . . . . . . . . . . . . . . . . . . . .
Net premiums earned . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss and loss adjustment expenses . . . . . . . . . . . . . . .
Commission and other acquisition expenses. . . . . . . . . . . .
General and administrative expenses. . . . . . . . . . . . . . . . .
Underwriting income . . . . . . . . . . . . . . . . . . . . . . . .

2012

$ 840.3
$ 727.8
(494.6)
(200.6)
(1.9)
$ 30.7

2011
($ in Millions)
$ 669.3
$ 558.2
(380.3)
(160.5)
(2.3)
$ 15.1

2010

$ 468.0
$ 445.1
(280.9)
(144.7)
(1.5)
$ 18.0

68.0%
27.6%
0.2%
27.8%
95.8%

68.1%
28.8%
0.4%
29.2%
97.3%

63.1%
32.5%
0.3%
32.8%
95.9%

Comparison of Years Ended December 31, 2012 and 2011

The combined ratio decreased to 95.8% for year ended December 31, 2012 compared to 97.3% in 2011,
reﬂecting generally stable loss ratios and a lower commission and other acquisition expense ratio, which
reﬂects ongoing changes in this segments mix of business and modiﬁcations to the Reinsurance Agreement’s
ceding commission.

Premiums — Net premiums written increased by $171.0 million, or 25.6%,

the year ended
December 31, 2012 compared to the same period in 2011. The results for the year ended December 31, 2011
include the $45.9 million in force and unearned premium assumed at the commencement of the European
Hospital Liability Quota Share on April 1, 2011. Excluding that non-recurring item, net premiums written
increased by $216.9 million or 34.8% for the year ended December 31, 2012 compared to 2011.

for

During 2012, business written under the Reinsurance Agreement increased by $139.3 million or 24.3%
compared to 2011 and this increase reﬂects AmTrust’s continuing expansion through acquisition and ongoing
organic growth, both of which are beneﬁting from improved rate levels, particularly in workers’
compensation. Business written under the European Hospital Liability Quota Share increased by $31.8 million
or 33.4% in 2012 compared to 2011, reﬂecting the ﬁrst full year of writings from that contract.

103

The table below illustrates net premiums written by AmTrust’s segments for

the years ended

December 31, 2012 and 2011.

For the Year Ended December 31,

Net Premiums Written
Small Commercial Business. . . . . . . . .
Specialty Program . . . . . . . . . . . . . . .
Specialty Risk and Extended

2012

% of Total

2011

% of Total

Total
($ in
Millions)

Change in

$
($ in
Millions)

43.3% $237.6
93.7
11.4%

35.5% $126.5
2.2
14.0%

53.3%
2.3%

Total
($ in
Millions)

$364.1
95.9

Warranty . . . . . . . . . . . . . . . . . . . .

380.3

45.3%

338.0

50.5%

42.3

12.5%

Total AmTrust Quota Share

Reinsurance . . . . . . . . . . . . . . . . .

$840.3

100.0% $669.3

100.0% $171.0

25.6%

Net premiums earned increased by $169.6 million, or 30.4% for the year ended December 31, 2012,
compared to the same period in 2011. The increase reﬂects the ongoing growth of business written under the
Reinsurance Agreement and the European Hospital Liability Quota Share. The table below details net
premiums earned by line of business for the years ended December 31, 2012 and 2011:

For the Year Ended December 31,

Net Premiums Earned
Small Commercial Business. . . . . . . . .
Specialty Program . . . . . . . . . . . . . . .
Specialty Risk and Extended

2012

% of Total

2011

% of Total

Total
($ in
Millions)

Change in

$
($ in
Millions)

43.0% $215.9
81.3
11.8%

38.7% $ 97.2
4.5
14.6%

45.0%
5.6%

Total
($ in
Millions)

$313.1
85.8

Warranty . . . . . . . . . . . . . . . . . . . .

328.9

45.2%

261.0

46.7%

67.9

26.0%

Total AmTrust Quota Share

Reinsurance . . . . . . . . . . . . . . . . .

$727.8

100.0% $558.2

100.0% $169.6

30.4%

Net Loss and Loss Adjustment Expenses — Net loss and loss expenses increased by $114.3 million, or
30.1%, for the year ended December 31, 2012 compared to the year ended December 31, 2011. Net loss and
loss adjustment expense ratios were 68.0% and 68.1% for the years ended December 31, 2012 and 2011,
respectively. Improved loss ratios in the workers’ compensation line of business within Small Commercial
were largely offset by higher loss ratios in Specialty Program. The Specialty Risk and Warranty loss ratios
were generally stable.

Commission and Other Acquisition Expenses — Commission and other acquisition expenses increased by
$40.1 million, or 24.9%, for the year ended December 31, 2012 compared to the same period in 2011.
Expenses have increased in 2012 as a result of ongoing growth in earned premium under both the Reinsurance
Agreement and the European Hospital Liability Quota Share. The commission and other acquisition expense
ratio declined to 27.6% for the year ended December 31, 2012 compared to 28.8% in 2011. The change in
both the expenses and ratio reﬂects the modiﬁcations to ceding commission made under the Reinsurance
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 $6.3 million for
the year ended December 31, 2012, compared to
$3.4 million for the year ended December 31, 2011.

General and Administrative Expenses — General and administrative expenses decreased by $0.4 million,
or 14.6%, for the year ended December 31, 2012 compared to the same period in 2011. The general and
administrative expense ratio also decreased to 0.2% for the year ended December 31, 2012 compared to 0.4%
for the year ended December 31, 2011. The overall expense ratio (including commission and other acquisition
expenses) was 27.8% and 29.2% for the years ended December 31, 2012 and 2011, respectively, reﬂecting the
changes in the commission and other acquisition expense ratio.

104

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 compared to 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

For the Year Ended December 31,

Net Premiums Written
Small Commercial Business. . . . . . . . .
Specialty Program . . . . . . . . . . . . . . .
Specialty Risk and Extended

2011

% of Total

2010

Change in

Total
($ in
Millions)

% of Total

$
($ in
Millions)

35.5% $197.0
73.9
14.0%

42.1% $ 40.6
19.8
15.8%

20.6%
26.8%

Total
($ in
Millions)

$237.6
93.7

Warranty . . . . . . . . . . . . . . . . . . . .

338.0

50.5%

197.1

42.1%

140.9

71.5%

Total AmTrust Quota Share

Reinsurance . . . . . . . . . . . . . . . . .

$669.3

100.0% $468.0

100.0% $201.3

43.0%

Net premiums earned increased by $113.1 million, or 25.4% for the year ended December 31, 2011,
compared to 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
increased by
$45.0 million or 10.1%.

the net premiums earned in the segment

increase. Excluding this new coverage,

The table below details net premiums earned by line of business for the years ended December 31, 2011

and 2010:

For the Year Ended December 31,

Net Premiums Earned
Small Commercial Business. . . . . . . . .
Specialty Program . . . . . . . . . . . . . . .
Specialty Risk and Extended

2011

% of Total

2010

Change in

Total
($ in
Millions)

% of Total

$
($ in
Millions)

38.7% $202.7
71.6
14.6%

45.5% $ 13.2
9.7
16.1%

6.5%
13.5%

Total
($ in
Millions)

$215.9
81.3

Warranty . . . . . . . . . . . . . . . . . . . .

261.0

46.7%

170.8

38.4%

90.2

52.8%

Total AmTrust Quota Share

Reinsurance . . . . . . . . . . . . . . . . .

$558.2

100.0% $445.1

100.0% $113.1

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 2010. Net loss and loss adjustment expense ratios
were 68.1% and 63.1% for the years ended December 31, 2011 and 2010, respectively. The increase in the net
loss and loss adjustment expense ratios reﬂects the ongoing shift in the mix of business to Specialty Risk and
Extended Warranty under the Reinsurance Agreement and the European Hospital Liability Quota Share, which
historically produce higher loss ratios than the other lines of business.

105

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 2010. The commission and other
acquisition expense ratio declined to 28.8% for the year ended December 31, 2011 compared to 32.5% in
2010. The change in both the expenses and ratio reﬂects the modiﬁcations to ceding commission made under
the Reinsurance 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 2010. The general and administrative expense
ratio also increased to 0.4% for the year ended December 31, 2011 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
commission and other acquisition expense ratio.

ACAC Quota Share Segment

The following table summarizes the underwriting results and associated ratios for the ACAC Quota Share
segment for the years ended December 31, 2012 and 2011 and for the period March 1 to December 31, 2010:

For the Year Ended December 31,

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 adjustment expense ratio . . . . . . . . . .
Commission and other acquisition expense ratio. . . . . . .
General and administrative expense ratio. . . . . . . . . . . .
Expense ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Combined ratio . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2012

$ 295.7
$ 280.7
(183.7)
(88.3)
(0.8)
7.9
65.5%
31.5%
0.2%
31.7%
97.2%

2011
($ in Millions)
$ 256.2
$ 245.8
(160.4)
(78.1)
(1.6)
5.7
65.3%
31.7%
0.7%
32.4%
97.7%

2010

$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, 2012 and 2011

The combined ratio decreased to 97.2% for the year ended December 31, 2012 compared to 97.7% for
the year ended December 31, 2011. In October 2012, ACAC incurred losses from Superstorm Sandy. Our
share, net of inuring reinsurance, under the ACAC Quota Share was $2.0 million, which increased the net loss
and loss adjustment expense ratio and combined ratio for the year ended December 31, 2012 by 0.7%.
Excluding losses from Superstorm Sandy, the combined ratio decreased to 96.5% in 2012 from 97.7% in
2011. The cause of the decrease was a lower expense ratio in 2012, attributable in part to lower ceding
commissions in 2012, the result of changes to the reinsurance agreement with ACAC discussed below.

Effective October 1, 2012, the parties amended the reinsurance agreement to decrease the provisional
ceding commission from 32.5% to 32.0% of ceded earned premium, net of premiums ceded by the personal
to
lines companies for
adjustment to a minimum of 30.0% (changed from 30.5%), if the loss ratio is 64.5% or greater. The Company
believes 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. For the three months ended December 31,
2012, the effect of this contract amendment reduced ceded commission by $0.4 million.

to adjustment. The ceding commission is subject

inuring reinsurance, subject

106

Premiums — Net premiums written increased by $39.5 million, or 15.4% for

the year ended
December 31, 2012 compared to the year ended December 31, 2011. The table below details net premiums
written by line of business in this segment for the years ended December 31, 2012 and 2011:

For the Year Ended December 31,

Net Premiums Written
Automobile liability . . . . . . . . . . . . . .
Automobile physical damage . . . . . . . .
Total ACAC Quota Share . . . . . . . . .

2012

% of Total

2011

% of Total

Total
($ in
Millions)

Change in

$
($ in
Millions)

54.1% $147.4
108.8
45.9%
100.0% $256.2

57.5%
42.5%
100.0%

$12.5
27.0
$39.5

8.5%
24.8%
15.4%

Total
($ in
Millions)

$159.9
135.8
$295.7

Net premium earned increased by $34.9 million, or 14.2% for the year ended December 31, 2012
compared to the year ended December 31, 2011, as a result of the increase in premium written. The table
below details net premiums earned by line of business in this segment for the years ended December 31, 2012
and 2011:

For the Year Ended December 31,

Net Premiums Earned
Automobile liability . . . . . . . . . . . . . .
Automobile physical damage . . . . . . . .
Total ACAC Quota Share . . . . . . . . .

2012

% of Total

2011

% of Total

Total
($ in
Millions)

Change in

$
($ in
Millions)

55.3% $141.2
104.6
44.7%
100.0% $245.8

57.4%
42.6%
100.0%

$14.1
20.8
$34.9

10.0%
19.8%
14.2%

Total
($ in
Millions)

$155.3
125.4
$280.7

Loss and Loss Adjustment Expenses — Net losses and loss expenses increased by $23.3 million or 14.5%
for the year ended December 31, 2012 compared to December 31, 2011. As noted above, in October 2012,
ACAC incurred losses from Superstorm Sandy. Our share, net of inuring reinsurance, under the ACAC Quota
Share was $2.0 million, which increased the net loss and loss adjustment expense ratio for the year ended
December 31, 2012 by 0.7%. Excluding losses from Superstorm Sandy, net loss and loss adjustment expense
ratios decreased to 64.8% for the year ended December 31, 2012 compared to 65.3% for the year ended
December 31, 2011.

Commission and Other Acquisition Expenses — The ACAC Quota Share, as amended, provides that the
reinsurers pay a provisional ceding commission equal to 32.0% 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 years ended December 31, 2012 and 2011, the commission and other acquisition expense ratio of
reﬂects the adjusted ceding commission recorded in addition to the

respectively,

31.5% and 31.7%,
U.S. Federal excise tax payable on this premium.

Comparison of Years Ended December 31, 2011 and 2010

The ACAC segment commenced on March 1, 2010. As a result, comparability between the 2011 and

2010 periods is affected by the fact that 2010 only reﬂects ten months of results.

The combined ratio increased to 97.7% for the year ended December 31, 2011 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 to 65.3% for
the period ended
the year ended December 31, 2011 compared to 64.5% for
December 31, 2010.

107

Premiums — Net premiums written increased by $50.5 million, or 24.5% for

the year ended
December 31, 2011 compared to the period ended December 31, 2010. The table below details net premiums
written by line of business in this segment for the year ended December 31, 2011 and for the period from
March 1 to December 31, 2010:

For the Year Ended December 31,

Net Premiums Written
Automobile liability . . . . . . . . . . . . . .
Automobile physical damage . . . . . . . .
Total ACAC Quota Share . . . . . . . . .

2011

% of Total

2010

Change in

Total
($ in
Millions)

% of Total

$
($ in
Millions)

57.5% $118.0
87.7
42.5%
100.0% $205.7

57.3%
42.7%
100.0%

$29.4
21.1
$50.5

24.9%
24.0%
24.5%

Total
($ in
Millions)

$147.4
108.8
$256.2

Net premium earned increased by $122.3 million, or 99.1% for the year ended December 31, 2011
compared to the period ended December 31, 2010. The table below details net premiums earned by line of
business in this segment for the year ended December 31, 2011 and for the period from March 1 to
December 31, 2010:

For the Year Ended December 31,

Net Premiums Earned
Automobile liability . . . . . . . . . . . . . .
Automobile physical damage . . . . . . . .
Total ACAC Quota Share . . . . . . . . .

2011

% of Total

2010

Change in

Total
($ in
Millions)

% of Total

$
($ in
Millions)

57.4% $ 69.5
54.0
42.6%
100.0% $123.5

56.3% $ 71.7
50.6
43.7%
100.0% $122.3

103.3%
93.8%
99.1%

Total
($ in
Millions)

$141.2
104.6
$245.8

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 commission and other acquisition expense 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, 2012,
the statutory capital and surplus of Maiden Bermuda was $942.8 million. Maiden Bermuda is currently
determining its BSCR as of December 31, 2012 and we estimate that Maiden Bermuda will be allowed to pay
dividends or distributions not exceeding $217.7 million. During 2012 and 2011, Maiden Bermuda did not pay
any dividends to Maiden Holdings.

108

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’s 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. At December 31, 2012, Maiden US and Maiden
Specialty statutory capital and surplus were $267.9 million and $46.2 million, respectively, in excess of its
authorized control level. 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 debt, preference shares and common shares. During
2012 and 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, 2012, 2011 and 2010 is
as follows:

For the Year Ended December 31,

Operating activities . . . . . . . . . . . . . . . . . . . . . . . . .
Investing activities. . . . . . . . . . . . . . . . . . . . . . . . . .
Financing activities . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on foreign

2012

$ 319.1
(637.5)
208.8

2011
($ in Millions)
$181.3
13.3
(99.5)

2010

$ 151.6
(125.2)
(37.2)

currency cash . . . . . . . . . . . . . . . . . . . . . . . . . . .

3.1

(3.1)

(0.4)

Total (decrease) increase in cash and

cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . .

$(106.5)

$ 92.0

$ (11.2)

Cash Flows from Operating Activities

Cash ﬂows from operations for the year ended December 31, 2012 were $319.1 million compared to
$181.3 million for the year ended December 31, 2011. The increase in the amount of cash provided by
operations in the year ended December 31, 2012 reﬂects the signiﬁcant growth in the Company during both
2011 and 2012, along with continuing proﬁtable combined ratios, despite the losses incurred by the Company
in Superstorm Sandy. The Company’s assets grew by $743.1 million or 21.9% as of December 31, 2012
compared to December 31, 2011, primarily reﬂecting the operating cash ﬂows described, in addition to the
issuance of the 2012 Senior Notes and the Preference Shares. Although the Company’s rate of premium
growth has slowed in recent calendar quarters, the combination of expected premium growth and stable
combined ratios should continue to generate positive cash ﬂow from operations resulting in continued growth
in the Company’s invested assets.

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 Investing Activities

Investing cash ﬂows consist primarily of proceeds from the sales and maturities of investments and
payments for investments acquired. Net cash used in investing activities was $637.5 million during the year
ended December 31, 2012 compared to $13.3 million provided by investing activities for
the ended
December 31, 2011. Despite the current interest rate environment which continues to provide historically low
ﬁxed income yield levels, the Company continues to deploy available cash for longer-term investments as

109

quickly as investment conditions permit and to maintain, where possible, cash and cash equivalents balances
at low levels. Continuation of current market conditions however, may result in the Company accumulating
elevated levels of cash and cash equivalents which may result in slower growth in investment income and in
certain instances, reductions in investment income despite the increase in invested assets. During the year
ended December 31, 2012,
the purchases of ﬁxed maturity securities exceeded the proceeds of sales,
maturities and calls of such instruments by $619.2 million. 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
from the Company’s mortgage-backed
securities portfolio.

in restricted cash balances

and prepayments

Cash Flows from Financing Activities

Cash ﬂows provided by ﬁnancing activities were $208.8 million for the year ended December 31, 2012
compared to $99.5 million and $37.2 million used in the years ended December 31, 2011 and 2010,
respectively. The following summarizes the net cash inﬂow (outﬂow) from ﬁnancing activities for the years
ended December 31, 2012, 2011 and 2010.

For the Year Ended December 31,

Cash ﬂows from Financing Activities
Senior notes issuance, net of issuance costs . . . . . . . . . . . . . . .
Repayment of junior subordinated debt . . . . . . . . . . . . . . . . . .
Preference shares − Series A issuance, net of issuance costs. . . . .
Dividends paid to Maiden common shareholders . . . . . . . . . . . .
Dividends paid on preference shares . . . . . . . . . . . . . . . . . . . .
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by (used in) ﬁnancing activities . . . . . . . . .

Restrictions, Collateral and Speciﬁc Requirements

2012

2011
($ in Millions)

2010

$ 96.6
—
145.0
(29.6)
(3.6)
0.4
$208.8

$ 104.7
(107.5)
—
(20.9)
—
(75.8)
$ (99.5)

$ —
—
—
(18.4)
—
(18.8)
$(37.2)

Maiden Bermuda is neither licensed nor admitted as an insurer, nor is it accredited as a reinsurer, in any
jurisdiction in the U.S. 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 U.S.
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.

At this time, Maiden Bermuda uses trust accounts primarily to meet collateral requirements — cash and
cash equivalents and investments pledged in favor of ceding companies in order to comply with relevant
insurance regulations.

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 of December 31, 2012 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 of December 31, 2012,

total cash and cash equivalents and ﬁxed maturity investments used as
collateral were $2.2 billion compared to $1.6 billion as of December 31, 2011. The increase was primarily
the AmTrust Quota Share
attributable
Reinsurance agreement.

collateral

provided

increase

assets

the

for

110

The following table details additional information on those assets as of December 31, 2012 and 2011:

December 31,

Restricted
Cash &
Equivalents

Maiden US . . . . . . . . . . . . . . . . . . . .
Maiden Bermuda . . . . . . . . . . . . . . . .
Diversiﬁed Reinsurance. . . . . . . . . . .
Maiden Bermuda . . . . . . . . . . . . . . . .
AmTrust Quota Share Reinsurance . .
Maiden Bermuda . . . . . . . . . . . . . . . .
ACAC Quota Share . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . .
As a % of Consolidated Balance

$ 34.0
64.5
98.5
32.4
32.4
1.4
1.4
$132.3

2012

Fixed
Maturities
($ in
Millions)
$ 722.7
398.3
1,121.0
824.6
824.6
89.4
89.4
$2,035.0

Restricted
Cash &
Equivalents

Total

$ 756.7
462.8
1,219.5
857.0
857.0
90.8
90.8
$2,167.3

$ 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

$ 643.8
419.2
1,063.0
461.2
461.2
62.0
62.0
$1,586.2

Sheet captions. . . . . . . . . . . . . . . .

100.0%

77.7%

78.8% 100.0%

72.8%

74.3%

As part of the Reinsurance Agreement, Maiden Bermuda has also loaned funds to AmTrust totaling
to satisfy collateral

$168.0 million as of December 31, 2012 and December 31, 2011,
requirements with AII.

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

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

to
the closing of the IIS
collateral requirements in the form of letters of credit and trust agreements. At
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 have been
transferred to the Company when the subject individual agreements were novated to Maiden Bermuda.Until
such time, 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. As of December 31, 2012, one contract had not yet been
novated and this is expected to occur in 2013. Maiden Bermuda now provides collateral in the form of both
trusts and letters of credit as required by the respective reinsurance contracts.

111

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
of December 31, 2012 and December 31, 2011, the IIS Funds Withheld balance consisted of the following:

December 31,

Fixed maturities, at fair value . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . .
Funds held on underlying business . . . . . . . . . . . . . . .
Insurance balances receivable and other . . . . . . . . . . . .
Total IIS Funds Withheld. . . . . . . . . . . . . . . . . . . . .

Fair Value
($ in
Millions)
$26.4
0.1
0.5
(4.3)
$22.7

2012

% of Total

116.4%
0.4%
2.3%
(19.1)%
100.0%

Fair Value
($ in
Millions)
$27.3
2.4
0.6
(6.0)
$24.3

2011

% of Total

112.2%
10.1%
2.5%
(24.8)%
100.0%

The IIS Funds Withheld constituted 53.1% and 57.2% of the total funds withheld balance on the
Company’s Consolidated Balance Sheets at December 31, 2012 and 2011, respectively. The ﬁxed maturity
portfolio consists primarily of non-U.S. government debt, 100.0% of which is rated AAA as of December 31,
2012 and December 31, 2011. All corporate bonds held as of December 31, 2012 are investment grade
securities. The ﬁxed maturities consisted of the following:

December 31,

U.K. government bonds . . . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Fair Value
($ in
Millions)
$20.0
6.4
26.4

2012

% of Total

75.7%
24.3%
100.0%

Fair Value
($ in
Millions)
$27.3
—
27.3

2011

% of Total

100.0%
—%
100.0%

We do not have any non-U.S. government and government related obligations related to Greece, Ireland,
Italy, Portugal or Spain as of December 31, 2012 and December 31, 2011. 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.

Investments

Our funds are primarily invested in liquid, high-grade ﬁxed income securities and are designated AFS
with an orientation to generating current income. As of December 31, 2012, the weighted average duration of
our ﬁxed maturity investment portfolio was 3.5 years and there were approximately $143.5 million of net
unrealized gains in the portfolio, compared to a duration of 2.8 years and net unrealized gains of
$63.6 million in the portfolio as of December 31, 2011. The duration on the Company’s portfolio as of
December 31, 2012 was higher as a result of an increased allocation to purchases of longer-duration corporate
bonds during 2012, which were partially offset by continuing faster prepayments on its U.S. government
agency bonds − mortgage-backed.

112

The Company’s AFS ﬁxed maturity investments increased by $598.0 million or 29.6% for the year ended
December 31, 2012 compared to December 31, 2011, which was the result of: (1) the Company’s continued
strong premium growth; (2) continuing proﬁtable combined ratios which have generated signiﬁcant positive
cash ﬂow from operations; and (3) the issuance of the 2012 Senior Notes and the Preference Shares. The table
below shows the aggregate amounts of our invested AFS assets and other investments at fair value including
the average yield and duration at December 31, 2012 and December 31, 2011:

December 31, 2012

Original or
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

($ in Millions)

Fair
Value

Average
yield*

Average
duration

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

42.7

1.2

$ —

43.9

1.9% 1.2 years

962.6
11.7
55.2
23.1
1,247.3
132.6

31.0
1.4
2.2
0.9
113.5
1.2

(1.4)
—
—
—
(6.5)
—

992.2
13.1
57.4
24.0
1,354.3
133.8

2.6% 2.5 years
4.4% 4.8 years
1.8% 2.9 years
2.8% 3.8 years
4.6% 4.8 years
0.8% 0.7 years

3.5% 3.5 years

ﬁxed maturities . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . .

2,475.2
2.6
Total investments . . . . . . . . . . . . . $2,477.8

151.4
0.4
$151.8

(7.9)
(0.1)
$(8.0)

2,618.7
2.9
$2,621.6

December 31, 2011

Original or
Amortized
Cost

Gross
Unrealized
Gains

Gross
Unrealized
Losses

($ in Millions)

Fair
Value

Average
yield*

Average
duration

Available-for-sale securities
U.S. treasury bonds . . . . . . . . . . . . . . $
U.S. agency

44.2

$ 1.8

$ — $

46.0

1.8% 2.1 years

928.9
10.4
52.5
9.9
742.9
168.3

43.3
0.6
0.1
—
47.7
0.7

(0.1)
—
(0.3)
—
(30.2)
—

972.1
11.0
52.3
9.9
760.4
169.0

3.4% 2.7 years
2.6% 1.6 years
1.1% 2.7 years
2.7% 1.6 years
4.8% 3.5 years
0.7% 0.5 years

3.6% 2.8 years

ﬁxed maturities . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . .

1,957.1
2.0
Total investments . . . . . . . . . . . . . $1,959.1

94.2
0.3
$94.5

(30.6)
(0.1)
$(30.7)

2,020.7
2.2
$2,022.9

income for each sub-component of
Average yield is calculated by dividing annualized investment
available-for sale securities (including amortization of premium or discount) by amortized cost and
therefore does not
income earned on cash and cash equivalents or other
short-term investments.

include investment

113

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, 2012 and 2011, 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, 2012, 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, 2012.

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
or short positions in United States Treasury securities. These periodic activities are classiﬁed as trading for the
purpose of augmenting where possible investment returns. Unrealized gains and losses from trading activities
are recorded in net realized and unrealized gains on investment on the Company’s Consolidated Statements
of Income.

For the years ended December 31, 2012, 2011 and 2010, the Company recorded realized (losses) gains
respectively. As of
that would be classiﬁed as

from these trading activities of $(1.6) million, $0.8 million and $(1.5) million,
December 31, 2012,
the Company had no open positions,
trading activities.

long or short,

114

The following table presents information regarding our available-for-sale securities and other investments
that were in an unrealized loss position at December 31, 2012 and December 31, 2011, and split by the length
of time the assets are in a continuous unrealized loss position:

December 31, 2012

Available-for-sale securities:
U.S. agency

bonds − mortgage-backed . . . . . . . .
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

$158.6
94.7
253.3
—

$(1.4)
(1.1)
(2.5)
—

$ —
141.9
141.9
2.0

$ —
(5.4)
(5.4)
(0.1)

$158.6
236.6
395.2
2.0

$(1.4)
(6.5)
(7.9)
(0.1)

securities and other investments . .

$253.3

$(2.5)

$143.9

$(5.5)

$397.2

$(8.0)

As of December 31, 2012, there were approximately 32 securities in an unrealized loss position with a
fair value of $397.2 million and unrealized losses of $8.0 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 $143.9 million and
unrealized losses of $5.5 million.

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
43.6
227.4
301.4
1.2

$(0.1)
(0.3)
(7.4)
(7.8)
(0.1)

$ —
—
125.1
125.1
—

$ —
—
(22.8)
(22.8)
—

$ 30.4
43.6
352.5
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 of 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.

The following table summarizes the fair value by contractual maturity of our AFS ﬁxed maturity

investment portfolio as of December 31, 2012 and 2011:

December 31,

2012

2011

Due in one year or less . . . . . . . . . . . . . . . . . . . . . . . . . . .
Due after one year through ﬁve years . . . . . . . . . . . . . . . . .
Due after ﬁve years through ten years . . . . . . . . . . . . . . . . .
Due after ten years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

U.S. agency bonds − mortgage-backed . . . . . . . . . . . . . . . . .
Commercial mortgage-backed securities . . . . . . . . . . . . . . . .
Total AFS securities. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

($ in
Millions)
58.7
$
387.9
981.5
174.4
1,602.5
992.2
24.0
$2,618.7

115

% of
Total

2.2% $

($ in
Millions)
54.3
299.9
14.8%
502.9
37.5%
6.7%
181.6
61.2% 1,038.7
972.1
37.9%
9.9
0.9%
100.0% $2,020.7

% of
Total

2.7%
14.8%
24.9%
9.0%
51.4%
48.1%
0.5%
100.0%

As of December 31, 2012 and 2011, 98.6% and 99.1%, respectively, of our ﬁxed income portfolio
consisted of investment grade securities. We deﬁne a security as being below-investment grade if it has an
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):

December 31, 2012

Ratings
U.S. treasury bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. agency bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AA+, AA, AA- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A+, A, A-. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BBB+, BBB, BBB- . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BB+ or lower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total AFS securities . . . . . . . . . . . . . . . . . . . . . . . . . . .

December 31, 2011

Amortized
Cost

Fair
Value

% of Total
Fair Value

($ in Millions)

42.7
974.3
171.1
186.5
477.2
587.9
35.5
$2,475.2

43.9
1,005.3
184.0
196.7
515.4
637.1
36.3
$2,618.7

1.7%
38.4%
7.0%
7.5%
19.7%
24.3%
1.4%
100.0%

Amortized
Cost

Fair
Value

% of Total
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

2.3%
48.6%
8.0%
7.6%
16.3%
16.3%
0.9%
100.0%

Substantially all the Company’s U.S. government agency securities holdings are mortgage-backed bonds.
Additional details on the mortgage-backed bonds component of our U.S. government agency bonds portfolio
as of December 31, 2012 and 2011 are as follows:

December 31,

2012

2011

Mortgage-backed securities

Residential mortgage-backed (RMBS)
GNMA − ﬁxed rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FNMA − ﬁxed rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
FNMA − variable rate . . . . . . . . . . . . . . . . . . . . . . . . . .
FHLMC − ﬁxed rate. . . . . . . . . . . . . . . . . . . . . . . . . . . .
FHLMC − variable rate . . . . . . . . . . . . . . . . . . . . . . . .
Total RMBS . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total agency mortgage-backed securities . . . . . . . . . . . . . .
Non-MBS ﬁxed rate agency securities . . . . . . . . . . . . . . . .
Total U.S. agency bonds. . . . . . . . . . . . . . . . . . . . . . . . . .

Fair
Value
($ in
Millions)

$ 100.8
573.0
46.9
257.7
13.8
992.2
992.2
13.1
$1,005.3

% of
Total

Fair
Value
($ in
Millions)

% of
Total

10.0% $185.3
487.3
57.0%
77.8
4.7%
221.7
25.6%
—
1.4%
972.1
98.7%
972.1
98.7%
11.0
1.3%
100.0% $983.1

18.8%
49.6%
7.9%
22.6%
—%
98.9%
98.9%
1.1%
100.0%

116

The following table provides a summary of changes in fair value associated with the Company’s U.S.

government agency bonds — mortgage-backed portfolio for the years ended December 31, 2012 and 2011:

December 31,

U.S. agency bonds − mortgage-backed:
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and paydowns. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized gains (losses) on sales − included in net income . . . . . . . . . . .
Change in net unrealized (gains) losses − included in other

comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of bond premium and discount . . . . . . . . . . . . . . . . . . . . . .
Ending balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2012

2011

($ in Millions)

$ 972.1
481.9
(438.8)
(1.3)

(11.3)
(10.4)
$ 992.2

$ 969.5
264.8
(283.5)
4.2

22.4
(5.3)
$ 972.1

The Company continued to experience elevated levels of paydowns of its U.S. government agency
mortgage-backed bond portfolio for the year ended December 31, 2012, compared to the December 31, 2011.
The increased paydowns reﬂect the ongoing decline in interest rates in the U.S. and globally in recent years,
resulting in higher reﬁnancing activity in the U.S. mortgage markets. This market environment was reinforced
during the 2012 when the U.S. Federal Reserve enacted new policy measures designed to provide greater
liquidity to certain credit markets, in particular the mortgage-backed securities market. These measures may,
combined with an already low interest rate environment, have the effect of increasing the level of paydowns
on certain mortgage-backed securities in the Company’s portfolio, consequently increasing the amount of
amortization of bond premium we have incurred. These increased paydowns have in turn increased the
amount of premium amortization recognized by the Company for those periods, reducing the amount of net
investment income reported by the Company as a result.

Our U.S. government agency mortgage-backed bond portfolio is 37.9% of our ﬁxed maturity investments
as of December 31, 2012. Given the relative size of this portfolio to our total investments, if these faster
prepayment patterns continue over an extended period of time,
this could potentially have the effect of
limiting the growth in our investment income, or in certain circumstances, or even potentially reducing the
total amount of investment income we earn.

The Company holds no asset-backed securities other

than the mortgage-backed securities it has

described herein.

During 2012, the Company increased its holdings in investment-grade corporate bonds to: (1) offset
accelerating prepayment patterns in its agency MBS portfolio which had reduced both portfolio duration and
yield; (2) take advantage of higher yielding securities while maintaining asset quality; and (3) provide greater
balance to its ﬁxed maturity holdings. Security holdings by sector and ﬁnancial strength rating by S&P in this
asset class as of December 31, 2012 and 2011 are as follows:

December 31, 2012

Corporate bonds
Financial Institutions . . . . .
Industrials. . . . . . . . . . . . .
Utilities/Other . . . . . . . . . .
Total Corporate bonds . . .

AAA

AA+, AA,
AA-

Ratings*

A+, A, A-

BBB+,
BBB, BBB-

B+ or
lower

% of
Corporate
bonds
portfolio

Fair
Value
($ in
Millions)

7.1%
—%
—%
7.1%

5.2%
1.2%
—%
6.4%

31.1%
4.8%
0.9%
36.8%

13.7%
30.8%
2.5%
47.0%

0.1% $ 775.1
520.9
1.7%
0.9%
58.3
2.7% $1,354.3

57.2%
38.5%
4.3%
100.0%

117

December 31, 2011

Corporate bonds
Financial Institutions . . . . .
Industrials. . . . . . . . . . . . .
Utilities/Other . . . . . . . . . .
Total Corporate bonds . . .

AAA

AA+, AA,
AA-

Ratings*

A+, A, A-

BBB+,
BBB, BBB-

B+ or
lower

7.5%
—%
—%
7.5%

2.6%
3.1%
—%
5.7%

36.8%
4.3%
—%
41.1%

22.1%
19.0%
2.3%
43.4%

0.8%
—%
1.5%
2.3%

% of
Corporate
bonds
portfolio

69.8%
26.4%
3.8%
100.0%

Fair
Value
($ in
Millions)

$531.1
199.9
29.4
$760.4

Ratings as assigned by S&P

As noted, during the year ended December 31, 2012, the Company increased its allocation to investment
grade corporate bonds, in particular sectors other than the Financial Institutions sector. These purchases have
marginally increased the duration of the Company’s AFS ﬁxed maturity portfolio as of December 31, 2012.
The Company has also increased its allocation to corporate bonds with credit ratings of BBB, in order to take
advantage of more attractive yield opportunities in those bonds, while staying within its established
investment guidelines.

The Company’s 10 largest corporate holdings, all of which are in the Financial Institutions sector, as of

December 31, 2012 as carried at fair value and as a percentage of all ﬁxed income securities are as follows:

December 31, 2012

Morgan Stanley FLT, Due 10/18/2016(1) . . . . . . . . . . . . . . . . . .
Citigroup FLT, Due 6/9/2016(1) . . . . . . . . . . . . . . . . . . . . . . . .
Northern Rock Asset Mgt., 3.875% Due 11/16/2020. . . . . . . . . .
BNP Paribas, Due 1/15/2021 . . . . . . . . . . . . . . . . . . . . . . . . .
Rabobank Nederland UTREC, 3.875% Due 2/8/2022 . . . . . . . . .
Barclays Bank PLC NY FLT, Due 2/24/2020(1) . . . . . . . . . . . . .
SLM Corp FLT, Due 1/27/2014(1) . . . . . . . . . . . . . . . . . . . . . .
Bear Stearns FLT, 11/21/2016(1) . . . . . . . . . . . . . . . . . . . . . . .
JPMorgan Chase & Co FLT, Due 6/13/2016(1). . . . . . . . . . . . . .
HSBC Financial FLT, Due 6/1/2016(1) . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Ratings as assigned by S&P

*
(1) Securities with the notation FLT are ﬂoating rate securities.

% of Holdings
Based on Fair
Value of All
Fixed Income
Securities

1.5%
1.0%
1.0%
0.9%
0.8%
0.8%
0.8%
0.8%
0.7%
0.7%
9.0%

Fair
Value
($ in
Millions)
$ 38.0
25.5
25.1
22.5
21.5
20.0
19.8
19.7
19.4
19.4
$230.9

Rating*

A-
BBB+
AAA
A+
AA-
A+
BBB-
A
A
A

As of December 31, 2012 and 2011, 17.5% and 33.0% of its corporate securities were ﬂoating rate
securities, respectively, all of which were in the Financial Institutions sector. These securities enable the
Company to maintain ﬂexibility in the face of volatile ﬁxed income market conditions and to quickly take
advantage of any unanticipated increases in interest rates which may occur.

Given the Company’s status as a Bermuda domicile with limited U.S. Federal tax exposure, to the extent
that the Company invests in ﬁxed maturity securities issued by U.S. state and local governments, these
investments are made on the merits of the underlying investment and not on the tax-exempt status of those
securities under U.S. Federal tax law. As a result, as of December 31, 2012 and 2011, municipal securities
only composed 5.1% and 8.4% of the Company’s ﬁxed maturity portfolio, respectively.

118

As of December 31, 2012 and 2011, we own the following securities not denominated in U.S. dollars:

December 31,

Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. government bonds. . . . . . . . . . . . . . . . . . . .
Total non-U.S. dollar AFS securities . . . . . . . . . . . . .

Fair Value
($ in
Millions)
$156.5
57.4
$213.9

2012

% of Total

73.1%
26.9%
100.0%

Fair Value
($ in
Millions)
$ 65.7
52.3
$118.0

2011

% of Total

55.7%
44.3%
100.0%

The increase in these assets held during 2012 is primarily the result of funds relating to the European
Hospital Liability Quota Share, which incepted on April 1, 2011 and under which the Company provides
collateral which is denominated in Euro. These securities were invested in the following currencies:

December 31,

Euro . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Swedish Krona . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Australian Dollar . . . . . . . . . . . . . . . . . . . . . . . . . . .
British Pound . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-U.S. dollar AFS securities . . . . . . . . . . . . .

Fair Value
($ in
Millions)
$191.7
10.9
7.7
2.9
0.7
$213.9

2012

% of Total

89.6%
5.1%
3.6%
1.4%
0.3%
100.0%

Fair Value
($ in
Millions)
$107.2
9.9
—
0.9
—
$118.0

2011

% of Total

90.8%
8.4%
—%
0.8%
—%
100.0%

We do not have any non-U.S. government and government related obligations of Greece, Ireland, Italy,
Portugal and Spain as of December 31, 2012 and 2011. As of December 31, 2012 and 2011, 90.1% and
90.4% of the Company’s non-sovereign government issuers were rated AA or higher by S&P. The four largest
non-U.S. government issuers held by the Company as of December 31, 2012 and 2011 are:

December 31,

Germany . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
European Investment Bank. . . . . . . . . . . . . . . . . . . . .
Sweden . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-U.S. government bonds . . . . . . . . . . . . . . .

Fair Value
($ in
Millions)
$24.8
12.5
6.1
5.9
8.1
$57.4

2012

% of Total

43.1%
21.7%
10.7%
10.3%
14.2%
100.0%

Fair Value
($ in
Millions)
$28.6
—
8.8
6.4
8.5
$52.3

2011

% of Total

54.6%
—%
16.8%
12.2%
16.4%
100.0%

For corporate bonds not denominated in U.S. dollars, 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:

December 31,

AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AA+, AA, AA-. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A+, A, A- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BBB+, BBB, BBB-. . . . . . . . . . . . . . . . . . . . . . . . . .
BB+ or lower. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total non-U.S. dollar denominated corporate bonds . .

Fair Value
($ in
Millions)
$ 61.8
7.9
52.3
33.1
1.4
$156.5

2012

% of Total

39.5%
5.0%
33.4%
21.1%
1.0%
100.0%

Fair Value
($ in
Millions)
$22.7
13.1
7.8
22.1
—
$65.7

2011

% of Total

34.5%
20.0%
11.9%
33.6%
—%
100.0%

119

The Company does not employ any credit default protection against any of the ﬁxed maturities held in

non-U.S. denominated currencies.

Reserve for Loss and Loss Adjustment Expenses

The Company establishes loss reserves to cover the estimated liability for the payment of all loss and
loss adjustment expenses incurred with respect to premiums earned on the contracts that the Company writes.
Loss reserves do not represent an exact calculation of the liability. Estimates of ultimate liabilities are
contingent on many future events and the eventual outcome of these events may be different from the
assumptions underlying the reserve estimates. The Company believes that the recorded unpaid loss and loss
adjustment expenses represent management’s best estimate of the cost to settle the ultimate liabilities based on
information available at December 31, 2012.

As of December 31, 2012 and 2011, the Company recorded gross reserves for unpaid loss and loss
adjustment expenses of $1.7 billion and $1.4 billion, respectively, and net reserves for unpaid loss and loss
adjustment expenses of $1.6 billion and $1.4 billion, respectively.

The following table provides a reconciliation of the net reserves for unpaid loss and loss adjustment

expenses for the years ended December 31, 2012, 2011 and 2010:

For the Year Ended December 31,

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

2012

2011
($ in Millions)

2010

$ 1,398.4
20.3

$1,226.8
6.7

$1,002.7
8.4

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

1,378.1

1,220.1

994.3

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

1,239.0
23.3
1,262.3

1,028.9
14.2
1,043.1

(485.0)
(530.3)
(1,015.3)
—
4.3

(456.1)
(423.9)
(880.0)
0.4
(5.5)

788.0
(32.9)
755.1

(365.3)
(266.0)
(631.3)
102.0
—

1,629.4
110.9

1,378.1
20.3

1,220.1
6.7

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

$ 1,740.3

$1,398.4

$1,226.8

See Business — Reserve for Loss and Loss Adjustment Expenses in Item 1 of Part I of this Report,
Critical Accounting Policies and Estimates — Reserve for Loss and Loss Adjustment Expenses and Results of
Operations above for a discussion of loss and loss adjustment expenses and prior years’ reserve developments.

Financial Strength Ratings

Financial strength ratings represent

the opinions of rating agencies on our capacity to meet our
obligations. Some of our reinsurance treaties contain special funding and termination clauses that are triggered
in the event that we or one of our subsidiaries is downgraded by one of the major rating agencies to levels
speciﬁed in the treaties, or our capital is signiﬁcantly reduced. If such an event were to happen, we would be
required, in certain instances, to post collateral in the form of letters of credit and/or trust accounts against
existing outstanding losses, if any, related to the treaty. In a limited number of instances, the subject treaties

120

could be cancelled retroactively or commuted by the cedant and might affect our ability to write business. Our
principal operating subsidiaries are rated ‘‘A-’’ (Excellent) with a stable outlook by A.M. Best, which rating is
the fourth highest of sixteen rating levels and BBB+ (Good) with a stable outlook by S&P, which is the eighth
highest of twenty-two rating levels. Our 2011 Senior Notes and 2012 Senior Notes are both rated BBB- by
S&P and the Preference Shares are rated BB by S&P.

Other Material Changes in Financial Position

The following summarizes other material changes in the ﬁnancial position of the Company as of

December 31, 2012 and 2011:

December 31,

2012

2011

($ in Millions)

Reinsurance balances receivable, net
. . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid reinsurance premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reinsurance Recoverable on unpaid losses . . . . . . . . . . . . . . . . . . . . .
Deferred commission and other acquisition expenses. . . . . . . . . . . . . . .
Reserve for loss and loss adjustment expenses . . . . . . . . . . . . . . . . . . .
Unearned premiums . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

522.6
38.7
110.9
270.7
(1,740.3)
(936.5)

423.4
35.4
20.3
248.4
(1,398.4)
(832.0)

In general, the increases in these balances reﬂect the continued growth of the Company, in particular in
2012 in both the AmTrust Quota Share Reinsurance segment and the ACAC Quota Share segment, including a
full year of business under the European Hospital Liability Agreement. At December 31, 2012, the reinsurance
recoverable increased by $90.6 million compared to 2011, of which $79.7 million or 71.9% relates to
reinsurance claims from Superstorm Sandy.

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, 2012 and 2011 were as follows:

December 31,

Senior notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Junior subordinated debt. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Maiden shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total capital resources . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ratio of debt to total capital resources. . . . . . . . . . . . . . . . . . . . . . .

2012

2011

($ in Millions)

$ 207.5
126.3
1,015.2
$1,349.0

$ 107.5
126.3
768.6
$1,002.4

24.7%

23.3%

As of December 31, 2012, our shareholders’ equity was $1,015.2 million, a 32.1% increase compared to
$768.6 million as of December 31, 2011. In addition to the issuance of the 2012 Senior Notes and the
Preference Shares described previously, the remainder of the increase was due primarily to net income for the
year ended December 31, 2012 of $46.5 million and the increase in unrealized gains on investments of
$79.9 million offset by common dividends declared of $23.9 million, and an unfavorable foreign currency
translation adjustment of $2.9 million.

On August 22, 2012, the Company issued 6 million of 8.25% Preference Shares-Series A, par value
$0.01 per share, at $25 per share. The Company received net proceeds of $145.0 million from the offering,
The net proceeds from the offering are expected to be used for continued support and development of our
reinsurance business and for other general corporate purposes, which may include repurchasing the
Company’s outstanding common shares and repurchasing the Company’s outstanding 14% 30-year trust
preferred securities issued in January 2009.

Also on that date, the Company’s Board of Directors authorized management at its discretion to purchase
its outstanding common shares in an amount not exceeding 50% of the net proceeds of the Preference Share
Offering. Repurchases under the program may be made in open market or privately negotiated transactions or
otherwise, from time to time, depending on market conditions. On December 24, 2012, Maiden Holdings
adopted a written trading plan under Rule 10b5-1 under the Securities Exchange Act of 1934, as amended (the

121

‘‘Exchange Act’’), to facilitate the repurchase of its common shares in accordance with Maiden’s existing
share repurchase authorization. For the period August 22, 2012 through December 31, 2012, the Company did
not repurchase any of its common shares.

Senior Note Offerings

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 2011 Senior
Notes to be issued and sold by the Company pursuant
to the underwriters’ exercise in part of their
overallotment option. The 2011 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 2011 Senior Note 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 of 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 the 2011 Senior Note Offering.

On March 27, 2012, the Company completed an offering of $100.0 million aggregate principal amount of
8.00% Senior Notes due on March 27, 2042. The 2012 Senior Notes are redeemable for cash, in whole or in
part, on or after March 27, 2017, at 100% of the principal amount to be redeemed plus accrued and unpaid
interest to but excluding the redemption date. The net proceeds from the 2012 Senior Notes will be used for
working capital and general corporate purposes.

Junior Subordinated Debt

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, 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 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, 2012 and 2011,
the unamortized amount carried as a reduction of the Company’s liability for the junior subordinated debt was
$26.2 million in both periods. 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.

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 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 (as noted above) incurring additional amortization

122

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.

Although the Company has sufficient liquidity at this time to pay off the remaining securities associated
with the TRUPS Offering, given the proximity to the expiration of that date, it is unlikely that we would pay
off these securities prior to January 20, 2014 unless were able to achieve savings in excess of the remaining
interest we are required to pay until that time, including any prepayment premium. At such time that we do
pay off the remaining securities associated with the TRUPS Offering, we will incur a charge for the remaining
unamortized amounts

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
aggregate contractual obligations as of December 31, 2012 are summarized as follows:

December 31, 2012

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

5.6

2.0

2.6

1.0

—

713.0
694.3

21.4
16.9

42.7
33.7

606.2
610.0

350.9

adjustment expenses. . . . . . . . . .

1,740.3

548.9

571.8

268.7

Other investments − unfunded

commitments . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . .

3.1
$3,156.3

1.0
$590.2

2.1
$652.9

—
$346.1

—
$1,567.1

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 of December 31, 2012. 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,
2012, 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.

123

Net foreign exchange gains amounted to $1.6 million during the year ended December 31, 2012
compared to $0.3 million during the year ended December 31, 2011 and losses of $0.5 million during the year
ended December 31, 2010.

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
extent inﬂation causes these costs, particularly medical treatments and litigation costs, to increase above
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, 2012, 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.

124

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, 2012, we had ﬁxed maturity securities with a fair value of $2.6 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, 2012 to selected hypothetical changes in interest rates, and the associated impact on our
shareholders’ 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, 2012:

Hypothetical Change in Interest Rates

Fair Value

Estimated
Change in
Fair Value

Hypothetical %
(Decrease) Increase in
Shareholders’ Equity

200 basis point increase . . . . . . . . . . . . . . . . . .
100 basis point increase . . . . . . . . . . . . . . . . . .
No change . . . . . . . . . . . . . . . . . . . . . . . . . . .
100 basis point decrease . . . . . . . . . . . . . . . . . .
200 basis point decrease . . . . . . . . . . . . . . . . . .

$2,418.2
2,514.3
2,618.7
2,727.1
2,845.2

$(200.5)
(104.4)
—
108.4
226.5

(19.7)%
(10.3)%
—%
10.7%
22.3%

($ in Millions)

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, 2011.

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. The table below summarizes the credit ratings by major rating category of the Company’s ﬁxed
maturity investments as of December 31 for each of the years presented:

For the Year Ended December 31,
Ratings*
AA+ or better . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AA, AA-, A+, A, A- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BBB+, BBB, BBB- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BB+ or lower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2012

2011

48.0%
26.3%
24.3%
1.4%
100.0%

60.1%
22.7%
16.3%
0.9%
100.0%

Ratings as assigned by S&P

125

The Company believes this high quality concentration reduces its exposure to credit risk on ﬁxed income

investments to an acceptable level.

At December 31, 2012, 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
total ﬁxed income
corporate
securities, respectively.

accounting for only 1.5% and 9.0% of

the Company’s

issuers

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
have been transferred to the Company upon novation of the underlying reinsurance contract from GMAC IICL
to the Company. As of December 31, 2012, one contract had not yet been novated and this is expected to
occur in 2013. At December 31, 2012,
the IIS Funds Withheld account due from GMAC IICL was
$22.7 million, including $26.4 million in a segregated investment portfolio which represents collateral pledged
as required by the underlying reinsurance contracts offset by other net
liabilities of $4.3 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 34.1% of the Company’s gross premiums written in the Diversiﬁed
Reinsurance segment for the year ended December 31, 2012.

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
assets. Reinsurance balances
receivable from the Company’s clients at December 31, 2012 were
$522.6 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

126

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, 2012.

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 $110.9 million at December 31,
2012. This balance is elevated as a result of $79.7 million in estimated reinsurance recoverable on unpaid
losses from reinsurers as a result of Superstorm Sandy, almost exclusively on business written by Maiden
Specialty. As at December 31, 2012, 88.4% of the reinsurance recoverable on unpaid losses was due from
reinsurers with credit ratings from A.M Best of A, or better, 11.3% due from reinsurers with credit ratings of
A- and the remaining 0.3% of the reinsurance recoverable was primarily due from 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
the Company’s
currency is the U.S. dollar,
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, 2012, 9.4%
of our net premiums written and 9.6% of our reserve for loss and loss adjustment expenses were transacted in
the Euro.

Countries that participate in the Euro have experienced signiﬁcant economic uncertainty in recent years,
which continues through the present time. These circumstances are the cumulative result of the effect of
excessive sovereign debt, deﬁcits by numerous participating countries in the Euro, uncertainty regarding the
monetary policies of the EU and their underlying funding mechanisms and poor economic growth and
prospects for the EU as a whole.

While economic policy measures and commitments did stabilize the currency’s volatility in the second
half of 2012, the EU’s ﬁscal outlook remains negative, and permanent solutions to resolve these issues by
participating countries and other institutions to reduce debt levels of EU members and improve its economic
outlook have not been resolved.

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.

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, 2012, 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 $15.9 million and $31.8 million, respectively.

127

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-56 and S-1 through S-7 below.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

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, 2012. Based on their evaluation, our Principal Executive Officer and Principal Financial Officer
concluded that, as of December 31, 2012, 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 U.S. 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, 2012 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, 2012 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, 2012 that have
materially affected, or are reasonably likely to materially affect, our internal control over ﬁnancial reporting.

128

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, 2012, 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, 2012, 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, 2012 and
2011, and the related consolidated statements of income, comprehensive income, changes in shareholders’
equity and cash ﬂows for years ended December 31, 2012, 2011 and 2010, and our report dated March 8,
2013 expressed an unqualiﬁed opinion thereon.

/s/ BDO USA, LLP

New York, New York
March 8, 2013

129

Item 9B. Other Information.

None.

130

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 7, 2013 (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 2012’’, ‘‘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.’’

Item 15. Exhibits, Financial Statement Schedules.

(a) Financial statement schedules

PART IV

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.

131

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 8, 2013.

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

/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 G. Lyons
Simcha G. Lyons

/s/ Yehuda L. Neuberger
Yehuda L. Neuberger

/s/ Steven H. Nigro
Steven H. Nigro

Title

President and Chief Executive Officer
(Principal Executive Officer)

Date

March 8, 2013

Chief Financial Officer
(Principal Financial and Accounting Officer)

March 8, 2013

Chairman

Director

132

Exhibit
No.

3.1
3.2

4.1

4.2

4.3

4.4

4.5

4.6

4.7*

4.8

4.9

4.10

4.11
4.12

4.13

4.14

4.15

10.1*

10.2*

10.3*

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

Form of Indenture for Debt Securities by and among Maiden Holdings North
America, Ltd., Maiden Holdings, Ltd., as guarantor, and Wilmington Trust
Company, as trustee
First Supplemental Indenture, dated as of June 24, 2011, by and among Maiden
Holdings North America, Ltd., Maiden Holdings, Ltd., as guarantor, and
Wilmington Trust Company, as trustee
Form of 8.25% Notes due 2041 (included in Exhibit 4.10)
Second Supplemental Indenture, dated March 27, 2012, by and among Maiden
Holdings North America, Ltd., Maiden Holdings, Ltd., as guarantor, and
Wilmington Trust Company, as trustee

Form of 8.000% Notes due 2042 (included in Exhibit 4.12)

Certiﬁcate of Designations of 8.25% Non-Cumulative Preference Shares, Series A,
adopted on August 7, 2012

Form of stock certiﬁcate evidencing 8.25% Series A Preference Share (included in
Exhibit 4.14)

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

(1)
(2)

(2)

(3)

(4)

(5)

(6)

(6)
(7)

(7)

(8)

(4)

(2)

E-1

Exhibit
No.

10.4*

10.5*

10.6*

10.7*

10.8*

10.9

10.10

10.11

10.12

10.13

10.14

10.15

10.16

10.17

10.18

10.19

10.20

Description

Reference

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

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

(4)

(9)

(10)

(2)

(11)

(12)

(2)

(10)

(2)

(12)

(13)

(4)

E-2

Description

Reference

Exhibit
No.

10.21

10.22

10.23

10.24

10.25

10.26

10.27

10.28

10.29

10.30

Endorsement No. 2 to the Quota Share Reinsurance Contract by and between
Maiden Insurance Company Ltd. and AmTrust International Insurance, Ltd. dated as
of March 7, 2013

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

Endorsement No. 2 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 August 7, 2012

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
Addendum No. 1 to Personal and Commercial Automobile Quota Share Reinsurance
Agreement by and between Maiden Insurance Company Ltd. and Integon National
Insurance Company and others, dated as October 1, 2012
Form of Indemniﬁcation Agreement between Maiden Holdings, Ltd. and its officers
and directors

Warrant Exchange Agreement by and between Michael Karfunkel and Maiden
Holdings, Ltd. as of September 20, 2010

Warrant Exchange Agreement by and between George Karfunkel and Maiden
Holdings, Ltd. as of September 20, 2010

10.31*

Warrant Exchange Agreement by and between Barry Zyskind and Maiden Holdings,
Ltd. as of September 20, 2010

10.32

10.33

10.34

21.1

23.1

31.1

31.2

32.1

32.2

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

†

(4)

(14)

(15)

(10)

†

(12)

(16)

†

(1)

(2)

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).

E-3

(3)

(4)

(5)

(6)

(7)

(8)

(9)

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 Registration Statement on S-3
ﬁled with the SEC on February 7, 2011 (File Nos. 333-172107 and 333-172107-01).
Incorporated by reference to the ﬁling of such exhibit with the registrant’s Current Report on Form 8-K
ﬁled with the SEC on June 17, 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 March 27, 2012 (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 August 22, 2012 (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, 2011 ﬁled with the SEC on March 13, 2012
(File No. 001-34042).

(10) 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).

(11) 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).

(12) 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).

(13) 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).

(14) 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, 2012 ﬁled with the SEC on August 9, 2012
(File No. 001-34042)

(15) 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).

(16) 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-4

Item 8. Financial Statements and Supplementary Data

Index to Consolidated Financial Statements and Related Notes
Report of Independent Registered Public Accounting Firm . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets as of December 31, 2012 and 2011 . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Income for the Years Ended December 31, 2012, 2011 and 2010 . . . . .
Consolidated Statements of Comprehensive Income for the Years Ended December 31, 2012, 2011

Page
F-2
F-3
F-4

and 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-5

Consolidated Statements of Changes in Shareholders’ Equity for the Years Ended December 31,

2012, 2011 and 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for the Years Ended December 31, 2012, 2011 and 2010 . .
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) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F-6
F-7
F-9
F-9
F-9
F-17
F-23
F-25
F-29
F-33
F-35
F-36
F-37
F-39
F-44
F-47
F-47
F-49
F-51
F-53
F-55
F-56

S-1
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, 2012 and 2011, and the related consolidated statements of
income, comprehensive income, changes in shareholders’ equity, and cash ﬂows for each of the years ended
December 31, 2012, 2011 and 2010. 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
Board (United States). Those standards require that we plan and perform the audit to obtain reasonable
includes
assurance about whether the ﬁnancial statements are free of material misstatement. An audit
examining, on a test basis, evidence supporting the amounts and disclosures in the ﬁnancial statements. An
audit also includes assessing the accounting principles used and signiﬁcant estimates made by management, as
well as evaluating the overall ﬁnancial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, the consolidated ﬁnancial statements present fairly, in all material respects, the ﬁnancial
position of Maiden Holdings, Ltd. and subsidiaries as of December 31, 2012 and 2011, and the results of their
operations and their cash ﬂows for the years ended December 31, 2012, 2011 and 2010, in conformity with
accounting principles generally accepted in the United States of America.

Also,

in our opinion,

the ﬁnancial statement schedules, when considered in relation to the basic
consolidated ﬁnancial statements taken as a whole, present fairly, in all material respects, the information set
forth therein.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight
Board (United States), Maiden Holdings, Ltd.’s internal control over ﬁnancial reporting as of December 31,
2012, based on criteria established in Internal Control — Integrated Framework issued by the Committee of
Sponsoring Organization of the Treadway Commission (COSO) and our report dated March 8, 2013 expressed
an unqualiﬁed opinion.

/s/ BDO USA, LLP

New York, New York
March 8, 2013

F-2

MAIDEN HOLDINGS, LTD.

CONSOLIDATED BALANCE SHEETS
As of December 31, 2012 and 2011
(In thousands of U.S. dollars, except share and per share data)

ASSETS

Investments:
Fixed maturities, available-for-sale, at fair value (Amortized cost 2012:

$2,475,202; 2011: $1,957,106) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other investments, at fair value (Cost 2012: $2,599; 2011: $1,955). . . . . . . . .
Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued investment income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Reinsurance balances receivable, net (includes $265,766 and $178,745 from

related parties in 2012 and 2011, respectively). . . . . . . . . . . . . . . . . . . . . . .
Funds withheld. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid reinsurance premiums (includes $743 and $7,265 from related parties in
2012 and 2011, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reinsurance recoverable on unpaid losses (includes $9,387 and $7,207 from

related parties in 2012 and 2011, respectively). . . . . . . . . . . . . . . . . . . . . . .
Loan to related party . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred commission and other acquisition expenses (includes $187,387 and

$147,743 from related parties in 2012 and 2011, respectively) . . . . . . . . . . . .
Goodwill and intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

LIABILITIES
Reserve for loss and loss adjustment expenses (includes $610,810 and $396,198

2012

2011

$2,618,697
2,901
2,621,598
81,543
132,327
21,007

$2,020,661
2,192
2,022,853
188,082
114,895
13,215

522,614
42,712

423,355
42,605

38,725

35,381

110,858
167,975

20,289
167,975

270,669
94,393
33,742
$4,138,163

248,436
98,755
19,270
$3,395,111

from related parties in 2012 and 2011, respectively) . . . . . . . . . . . . . . . . . . .

$1,740,281

$1,398,438

Unearned premiums (includes $612,903 and $483,935 from related parties in

2012 and 2011, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Senior notes. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Junior subordinated debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

936,497
111,957
207,500
126,317
3,122,552

832,047
161,883
107,500
126,263
2,626,131

Commitments and Contingencies

EQUITY
Preference shares − Series A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common shares ($0.01 par value; 73,306,283 and 73,183,764 shares issued in

2012 and 2011, respectively; 72,343,947 and 72,221,428 shares outstanding in
2012 and 2011, respectively) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury shares, at cost (2012 and 2011: 962,336 shares) . . . . . . . . . . . . . . . . .
Total Maiden shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Noncontrolling interest in subsidiaries. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

150,000

—

733
575,869
141,130
151,308
(3,801)
1,015,239
372
1,015,611
$4,138,163

732
579,004
64,059
128,648
(3,801)
768,642
338
768,980
$3,395,111

See accompanying notes to Consolidated Financial Statements

F-3

MAIDEN HOLDINGS, LTD.

CONSOLIDATED STATEMENTS OF INCOME
(In thousands of U.S. dollars, except share and per share data)

For the Year Ended December 31,
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 investments. . . . . . . . . .
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 (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 . . . . . . . .
Dividends on preference shares . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Maiden common shareholders. .
Basic earnings per share attributable to Maiden common

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Diluted earnings per share attributable to Maiden common

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Dividends declared per common share . . . . . . . . . . . . . . . . .

Weighted average number of basic common shares

2012

2011

2010

$ 2,000,992

$ 1,812,597

$ 1,298,055

$ 1,901,285
(97,505)
1,803,780
12,890
81,188
1,907
1,899,765

$ 1,723,521
(171,093)
1,552,428
12,640
74,891
481
1,640,440

$ 1,227,831
(58,041)
1,169,790
—
71,651
6,604
1,248,045

1,262,348
492,031
53,804
36,384

—
—
4,362
(1,638)
1,847,291
52,474

1,043,054
438,812
53,892
34,155

20,313
15,050
5,033
(323)
1,609,986
30,454

755,122
336,697
42,180
36,466

—
—
5,808
580
1,176,853
71,192

1,020
1,193
2,213
50,261
(107)
50,154
(3,644)
46,510

0.64

0.33

632
1,295
1,927
28,527
(3)
28,524
—
28,524

0.40

0.39

0.30

160
1,170
1,330
69,862
4
69,866
—
69,866

0.99

0.98

0.27

outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

72,263,022

72,155,503

70,799,966

Weighted average number of diluted common shares

outstanding. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

73,105,531

72,903,688

71,372,688

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)

For the Year Ended December 31,
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 (income) loss attributable to noncontrolling

2012

2011

2010

$ 50,261

$28,527

$69,862

82,915

12,189

30,154

(2,987)
(2,852)
77,076
127,337
(107)

(3,206)
733
9,716
38,243
(3)

(8,147)
(420)
21,587
91,449
4

interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5)

—

Comprehensive (income) loss attributable to noncontrolling

interest. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Comprehensive income attributable to Maiden shareholders. . . . . .

(112)
$127,225

6
$38,249

4
$91,453

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,
Preference shares − Series A
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of preference shares . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Common shares
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of options and issuance of shares . . . . . . . . . . . . . . . . .
Exchange of warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Additional paid-in capital
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercise of options and issuance of common shares . . . . . . . . . . .
Exchange of Warrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Issuance costs of preference shares . . . . . . . . . . . . . . . . . . . . . .
Partial disposal of interest in subsidiary . . . . . . . . . . . . . . . . . . .
Share based compensation expense . . . . . . . . . . . . . . . . . . . . . .
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Accumulated other comprehensive income
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Change in net unrealized gains on investments . . . . . . . . . . . . . .
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . .
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Retained earnings
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Maiden shareholders. . . . . . . . . . . . . .
Dividends on preference shares . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends on common shares . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Treasury shares
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Noncontrolling interest in subsidiaries
Beginning balance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of subsidiary . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Partial disposal of interest in subsidiary . . . . . . . . . . . . . . . . . . .
Dividend paid to noncontrolling interest . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to noncontrolling interest . . . . . . . .
Foreign currency translation adjustment . . . . . . . . . . . . . . . . . . .
Ending balance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2012

2011

2010

— $

150,000
150,000

—
—
—

731
1
—
732

—
—
—

713
—
18
731

577,135
421
—
—
141
1,307
579,004

54,334
8,983
742
64,059

121,775
28,524
—
(21,651)
128,648

576,086
52
(18)
—
—
1,015
577,135

32,747
22,007
(420)
54,334

70,781
69,866
—
(18,872)
121,775

732
1
—
733

579,004
477
—
(4,959)
—
1,347
575,869

64,059
79,928
(2,857)
141,130

128,648
50,154
(3,644)
(23,850)
151,308

(3,801)
(3,801)

338
—
—
(78)
107
5
372
$1,015,611

275
—
69
—
3
(9)
338
$768,980

—
279
—
—
(4)
—
275
$750,449

See accompanying notes to Consolidated Financial Statements

F-6

MAIDEN HOLDINGS, LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands of U.S. dollars)

For the Year Ended December 31,
Cash ﬂows from operating activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2012

2011

2010

50,261

$ 28,527

69,862

Adjustments to reconcile net income to net cash provided

by operating activities:
Depreciation and amortization of intangibles . . . . . . . . . . .
Net realized and unrealized gains on investments . . . . . . . .
Foreign exchange (gains) losses. . . . . . . . . . . . . . . . . . . .
Amortization of share-based compensation expense, bond

premium and discount and subordinated debt
discount, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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 expenses . . . .
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

6,258
(1,907)
(1,638)

8,599
(481)
(323)

7,205
(6,604)
580

10,949

22,236

(3,586)

(98,987)
917
(3,344)
(90,567)
(7,719)
(22,073)
(13,277)

337,348
103,796
49,072
319,089

(168,338)
16,074
(6,389)
(13,632)
836
(45,037)
(14,422)

176,869
178,436
(1,685)
181,270

(29,036)
(152,713)
(240)
1,684
(2,686)
(30,648)
1,583

220,932
68,413
6,833
151,579

securities − available-for-sale . . . . . . . . . . . . . . . . . .
Purchases of ﬁxed-maturity securities − trading and short
sales . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of other investments . . . . . . . . . . . . . . . . . .

(1,193,768)

(636,141)

(1,010,142)

(102,073)
(940)

(663,339)
(1,173)

(1,293,386)
(424)

Sale of investments:

Proceeds from sales of ﬁxed-maturity

securities − available-for-sale . . . . . . . . . . . . . . . . . .

142,694

304,499

331,593

Proceeds from sales of ﬁxed-maturity

securities − trading and short sales . . . . . . . . . . . . . .

49,883

720,100

1,291,843

Proceeds from maturities and calls of ﬁxed

maturity securities . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from redemption of other investments . . . . . . .

484,091
340

310,526
4,896

(Increase) decrease in restricted cash and

cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquisition of subsidiaries (net of cash acquired). . . . . . . .
Purchase of capital assets . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by investing activities. . . . . . . . .

(17,432)
—
(341)
(637,546)

(25,139)
635
(1,538)
13,326

507,326
108

55,657
(4,893)
(2,875)
(125,193)

See accompanying notes to Consolidated Financial Statements

F-7

For the Year Ended December 31,
Cash ﬂows from ﬁnancing activities:

2012

2011

2010

Repurchase agreements, net . . . . . . . . . . . . . . . . . . . . . .
Senior notes issuance, net of issuance costs. . . . . . . . . . . .
Repayment of junior subordinated debt. . . . . . . . . . . . . . .
Preference shares − Series A issuance, net of issuance costs .
Contribution of noncontrolling interest . . . . . . . . . . . . . . .
Common share issuance . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends paid to Maiden common shareholders . . . . . . . .
Dividends paid on preference shares . . . . . . . . . . . . . . . .
Net cash provided by (used in) ﬁnancing activities . . . . . . . .
Effect of exchange rate changes on foreign currency cash .
Net (decrease) increase in cash and cash equivalents . . . . .
Cash and cash equivalents, beginning of period . . . . . . . . .
Cash and cash equivalents, end of period . . . . . . . . . . . . . . .

—
96,594
—
145,041
—
478
(29,630)
(3,644)
208,839
3,079
(106,539)
188,082
$ 81,543

(76,225)
104,689
(107,500)
—
—
422
(20,921)
—
(99,535)
(3,130)
91,931
96,151
$ 188,082

(19,176)
—
—
—
279
52
(18,394)
—
(37,239)
(392)
(11,245)
107,396
$ 96,151

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. . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common shares issued in exchange of warrants . . . . . . . . . . . .
Redemption of other investment. . . . . . . . . . . . . . . . . . . . . . .
Purchase of other investment . . . . . . . . . . . . . . . . . . . . . . . . .

$ 36,219
55

$ 36,850
429

$ 36,400
129

—
—
—
—
—
—
—

81,930
(81,930)
—
—
—
—
—

17,806
—
(17,806)
18
(18)
(4,751)
4,751

See accompanying notes to Consolidated Financial Statements

F-8

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

1. Organization

‘‘Parent Company’’)

Maiden Holdings, Ltd.

is a
(sometimes referred to as ‘‘Maiden Holdings’’ or
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 sixteen rating levels, and BBB+ (Good) with a
stable outlook by Standard & Poor’s (‘‘S&P’’), which is the eighth highest of twenty-two rating levels.

We provide reinsurance through our wholly-owned subsidiaries, Maiden Insurance Company Ltd.
(‘‘Maiden Bermuda’’) and Maiden Reinsurance Company (‘‘Maiden US’’) and have operations in Bermuda
and the United States, 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 subsidiaries. These Consolidated Financial Statements reﬂect all adjustments that are, in the opinion of
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
the reported amounts of assets and
requires management
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-9

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

as
classiﬁes
‘‘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.

its ﬁxed maturity

investments

currently

all

The Company accounts for its other investments at fair value in accordance with Financial Accounting
Standards Board (‘‘FASB’’) Accounting Standards Codiﬁcation (‘‘ASC’’) Topic 944, ‘‘Financial Services’’
(‘‘ASC 944’’). Other investments comprise investments in limited partnerships which are reported at fair value
information received from the fund managers and other information available to
based on the ﬁnancial
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 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 that we will be required to sell a ﬁxed maturity security before recovery of its
amortized cost 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

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)

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.

Fair Value Measurements — 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 over-the-counter (‘‘OTC’’) derivatives (e.g. foreign currency options and
forward contracts).

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
contracts; hedge and credit funds with partial
transparency; and collateralized loan obligation
(‘‘CLO’’) — equity tranche securities that are traded in less liquid markets.

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 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

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)

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 that are related to successful contracts 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 if the sum of anticipated losses and loss adjustment expenses, unamortized acquisition
expenses and anticipated investment income exceed unearned premium.

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)

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

Non Controlling Interests — The Company accounts for its noncontrolling interest in accordance with
FASB ASC Topic 810 ‘‘ Consolidations’’, and presents such noncontrolling shareholders’ interest in the equity
section of the Company’s Consolidated Balance Sheets. Net
income (loss) attributable to noncontrolling
interests is presented separately in the Company’s Consolidated Statements of Income.

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-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)

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 many 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 commission and other acquisition
expenses 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 of
December 31, 2012 was $(2,535) (2011 − $322).

Recently Adopted Accounting Standards Updates

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,
2011, but early adoption was prohibited. The adoption of this guidance did not have any effect on the
Company’s results of operations, ﬁnancial position or liquidity.

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

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)

improve comparability of

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 was not permitted.
The adoption of this guidance did not have any effect on the Company’s results of operations, ﬁnancial
position or liquidity.

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 January 1, 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 was 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.

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
is effective for ﬁscal periods beginning on or after December 15, 2011 with prospective or retrospective
application permitted. The Company applied the new provisions of ASU 2010-26 prospectively. As a result of
adopting ASU 2010-26, commission and other acquisition expenses have increased by $2,033 and net income
attributable to Maiden shareholders decreased by the same amount for the year ended December 31, 2012.
The impact of the change on basic and diluted earnings per common share is a decrease of $0.03 for the year
ended December 31, 2012. The application of the new provisions means that $2,614 of unamortized deferred
commission and other acquisition expenses as of January 1, 2012,
that had been deferred under prior
guidance, would not have been deferrable and would have been recognized as an expense over the original
amortization period. If the Company had followed ASU 2010-26 in 2011, commission and other acquisition
expenses would have increased by $2,614 for the year ended December 31, 2011.

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: 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
qualitative assessment
in any subsequent period. The amendments are effective for annual and interim
goodwill impairment tests performed for ﬁscal years beginning after December 15, 2011. Early adoption was
permitted. The annual impairment test is done during the fourth quarter and the adoption of this guidance did
not have any effect on the Company’s results of operations, ﬁnancial position or liquidity.

Technical Corrections and Improvements

In October 2012, FASB issued ASU 2012-04, Technical Corrections and Improvements. The amendments
in this ASU represent changes to clarify the Codiﬁcation, correct unintended application of guidance, or make
minor improvements to the Codiﬁcation that are not expected to have a signiﬁcant effect on current
accounting practice or create a signiﬁcant administrative cost to most entities. Additionally, the amendments
will make the Codiﬁcation easier to understand and the fair value measurement guidance easier to apply by
eliminating inconsistencies and providing needed clariﬁcations. Transition guidance is provided for
amendments the FASB believes could change practice. The amendments in this ASU that will not have
transition guidance will be effective upon issuance for both public and nonpublic entities. For public entities,
the amendments that are subject to the transition guidance will be effective for ﬁscal periods beginning after
December 15, 2012. The adoption of this guidance did not have any effect on the Company’s results of
operations, ﬁnancial position or liquidity.

Recently Issued Accounting Standards Updates Not Yet Adopted

Qualitative Impairment Test For Indeﬁnite-Lived Intangibles

On July 27, 2012,

the FASB issued ﬁnal guidance adding an optional qualitative assessment for
determining whether an indeﬁnite-lived intangible asset is impaired. This ASU 2012-02 is similar to last
year’s goodwill guidance which allows companies to perform a qualitative assessment to test goodwill for
impairment. This guidance gives companies the option to ﬁrst perform a qualitative assessment to determine
whether it is more likely than not (a likelihood of more than 50%) that an indeﬁnite-lived intangible asset is
impaired. If a company determines that it is more likely than not that the fair value of such asset exceeds its
carrying amount, it would not need to calculate the fair value of the asset in that year. However, if a company
concludes otherwise, it must calculate the fair value of the asset, compare that value with its carrying amount
and record an impairment charge, if any. To perform a qualitative assessment, a company must identify and
evaluate changes in economic, industry and company-speciﬁc events and circumstances that could affect the
signiﬁcant inputs used to determine the fair value of an indeﬁnite-lived intangible asset. The guidance is
effective for annual and interim impairment tests performed for ﬁscal years beginning after September 15,
2012. 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.

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)

Balance Sheet Offsetting

In December 2011,

the FASB issued ASU 2011-11requiring additional disclosures about ﬁnancial
instruments and derivative instruments that are either: (1) offset for balance sheet presentation purposes or
(2) subject to an enforceable master netting arrangement or similar arrangement, regardless of whether they
are offset for balance sheet presentation purposes. In January 2013, the FASB issued ASU 2013-01 to address
implementation issues about the scope of ASU 2011-11. This new guidance clariﬁes that the scope, of the
offsetting disclosures required, applies to derivatives accounted for in accordance with ASC 815 Derivatives
and Hedging,
including bifurcated embedded derivatives, repurchase agreements and reverse repurchase
agreements, and securities lending transactions. This guidance will be effective on January 1, 2013, with
retrospective presentation of the new disclosures required. As this new guidance is disclosure-related only and
does not amend the existing balance sheet offsetting guidance, the adoption of this guidance is not expected to
have an impact on our results of operations, ﬁnancial condition or liquidity.

Comprehensive Income — Reporting of amounts reclassiﬁed out of Accumulated Other Comprehensive Income

In February 2013, the FASB issued ASU 2013-02, which adds new disclosure requirements for items
reclassiﬁed out of accumulated other comprehensive income. The ASU expands the current disclosure
guidance by requiring entities to present separately, for each component of other comprehensive income,
current period reclassiﬁcations out of accumulated other comprehensive income and other amounts of current
period other comprehensive income. In addition, the ASU requires entities to present, either on the face of the
statement where net income is presented or in the notes to the ﬁnancial statements, signiﬁcant amounts
reclassiﬁed out of other comprehensive income by component of accumulated other comprehensive income.
The new disclosure requirements are effective for ﬁscal years, and interim periods within those years,
beginning after December 15, 2012. Early adoption of the guidance is permitted and shall be applied
prospectively. The adoption of this guidance is not expected to have an impact on our results of operations,
ﬁnancial condition 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,
restricted cash and cash equivalents and
investments. All remaining assets are allocated to Corporate.

loans, goodwill and intangible assets,

is applied;

The fee-generating business (‘‘IIS Fee Business’’) associated with the acquisition of certain companies,
businesses and assets comprising the international insurance services business of GMAC Insurance Holdings
Ltd. (the ‘‘IIS Acquisition’’), 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 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
that fee revenue is separately reported on the line
generated under the applicable reinsurance contracts,
captioned ‘‘Other insurance revenue’’ in the Company’s Consolidated Statements of Income.

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)

The following tables summarize the underwriting results of our operating segments:

For the Year Ended December 31, 2012
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 (loss) income . . . . . . . . . . . . .

Reconciliation to net income attributable to

Maiden common shareholders

Net investment income and realized and

unrealized gains on investments. . . . . . . . . . .
Amortization of intangible assets. . . . . . . . . . . .
Foreign exchange gains . . . . . . . . . . . . . . . . . .
Interest and amortization expenses. . . . . . . . . . .
Other general and administrative expenses . . . . .
Income tax expense. . . . . . . . . . . . . . . . . . . . .
Income attributable to noncontrolling

interest. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dividends on preference shares . . . . . . . . . . . . .
Net income attributable to Maiden

common shareholders. . . . . . . . . . . . . . . . .

Net loss and loss expense ratio* . . . . . . . . . . . .
Commission and other acquisition

expense ratio** . . . . . . . . . . . . . . . . . . . . . .
General and administrative expense ratio*** . . . .
Combined ratio**** . . . . . . . . . . . . . . . . . .

Diversiﬁed
Reinsurance
$ 765,293
$ 795,341
12,890
(583,970)
(203,209)
(40,951)
$ (19,899)

AmTrust
Quota Share
Reinsurance
$ 840,346
$ 727,781
—
(494,633)
(200,546)
(1,949)
$ 30,653

ACAC
Quota Share
$ 295,646
$ 280,658
—
(183,745)
(88,276)
(737)
7,900

Total
$ 1,901,285
$ 1,803,780
12,890
(1,262,348)
(492,031)
(43,637)
18,654

83,095
(4,362)
1,638
(36,384)
(10,167)
(2,213)

(107)
(3,644)

46,510

72.3%

68.0%

65.5%

25.1%
5.1%
102.5%

27.6%
0.2%
95.8%

31.5%
0.2%
97.2%

69.5%

27.1%
2.9%
99.5%

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, 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 common shareholders

Net investment income and realized and

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 common

shareholders . . . . . . . . . . . . . . . . . . . . . . .

Net loss and loss adjustment expense ratio* . . . .
Commission and other acquisition expense

ratio** . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative expense ratio*** . . . .
Combined ratio**** . . . . . . . . . . . . . . . . . .

Diversiﬁed
Reinsurance
$ 798,037
$ 748,387
12,640
(502,375)
(200,239)
(36,374)
$ 22,039

AmTrust
Quota Share
Reinsurance
$ 669,283
$ 558,197
—
(380,263)
(160,522)
(2,283)
$ 15,129

ACAC
Quota Share
$ 256,201
$ 245,844
—
(160,416)
(78,051)
(1,635)
5,742

Total
$ 1,723,521
$ 1,552,428
12,640
(1,043,054)
(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%

68.1%

65.3%

26.3%
4.8%
97.1%

28.8%
0.4%
97.3%

31.7%
0.7%
97.7%

66.6%

28.0%
3.5%
98.1%

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, 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 common shareholders

Net investment income and realized and

unrealized gains on investments. . . . . . . . . . .
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 common

shareholders

Net loss and loss adjustment expense ratio* . . . .
Commission and other acquisition

expense ratio** . . . . . . . . . . . . . . . . . . . . . .
General and administrative expense ratio*** . . . .
Combined ratio**** . . . . . . . . . . . . . . . . . .

Diversiﬁed
Reinsurance
$ 554,049
$ 601,254
(394,604)
(152,698)
(26,123)
$ 27,829

AmTrust
Quota Share
Reinsurance
$ 468,043
$ 445,081
(280,890)
(144,655)
(1,500)
$ 18,036

ACAC
Quota Share
$205,739
$123,455
(79,628)
(39,344)
(243)
4,240

Total
$1,227,831
$1,169,790
(755,122)
(336,697)
(27,866)
50,105

78,255
(5,808)
(580)
(36,466)
(14,314)
(1,330)
4

69,866

65.6%

63.1%

64.5%

25.4%
4.4%
95.4%

32.5%
0.3%
95.9%

31.9%
0.2%
96.6%

64.6%

28.8%
3.5%
96.9%

***

Calculated by dividing net loss and loss adjustment expenses by the sum of net premiums earned and
other insurance revenue.
Calculated by dividing commission and other acquisition expenses by the sum of net premiums earned
and other insurance revenue.
Calculated by dividing general and administrative expenses by the sum of net premiums earned and
other insurance revenue.

**** Calculated by adding together net

loss and loss adjustment expense ratio, commission and other

acquisition expense 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)

The following table summarizes the ﬁnancial position of our operating segments as of December 31,

2012 and 2011:

December 31, 2012
Reinsurance balances receivable, net . . . . . . . . .
Funds withheld. . . . . . . . . . . . . . . . . . . . . . . .
Prepaid reinsurance premiums. . . . . . . . . . . . . .
Reinsurance recoverable on unpaid losses . . . . . .
Deferred commission and other acquisition

expenses . . . . . . . . . . . . . . . . . . . . . . . . . .
Loan to related party . . . . . . . . . . . . . . . . . . . .
Goodwill and intangible assets, net . . . . . . . . . .
Restricted cash and cash equivalents and

investments . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and other assets . . . . . . . . . . . . . . . .
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . .

December 31, 2011
Reinsurance balances receivable, net . . . . . . . . .
Funds withheld. . . . . . . . . . . . . . . . . . . . . . . .
Prepaid reinsurance premiums. . . . . . . . . . . . . .
Reinsurance recoverable on unpaid losses . . . . . .
Deferred commission and other acquisition

investments . . . . . . . . . . . . . . . . . . . . . . . .
Corporate and other assets . . . . . . . . . . . . . . . .
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . .

Diversiﬁed
Reinsurance

$ 260,161
42,712
38,725
110,858

AmTrust
Quota Share
Reinsurance

$ 170,983
—
—
—

83,287
—
94,393

153,530
167,975
—

ACAC
Quota Share

Total

$ 91,470
—
—
—

33,852
—
—

$ 522,614
42,712
38,725
110,858

270,669
167,975
94,393

1,219,454
5,864
$1,855,454

857,013
—
$1,349,501

90,851
—
$216,173

2,167,318
722,899
$4,138,163

$ 244,610
42,605
35,381
20,289

$ 102,003
—
—
—

98,712
—
98,755

120,369
167,975
—

$ 76,742
—
—
—

29,355
—
—

$ 423,355
42,605
35,381
20,289

248,436
167,975
98,755

1,063,010
2,429
$1,605,791

461,216
—
$ 851,563

62,017
—
$168,114

1,586,243
772,072
$3,395,111

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 table shows an analysis of the Company’s gross and net premiums written and net
premiums earned by geographic location for the years ended December 31, 2012, 2011 and 2010. In case of
business assumed from AmTrust Financial Services, Inc. (‘‘AmTrust’’),
is the location of the relevant
AmTrust subsidiaries.

For the Year Ended December 31,
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) . . . . . . . . .

2012
$1,575,452
425,540
1,481,076
420,209
1,413,596
390,184

2011
$1,400,114
412,483
1,317,265
406,256
1,194,628
357,800

2010
$1,098,672
199,383
1,028,518
199,313
1,038,859
130,931

The following tables set forth ﬁnancial information relating to net premiums written by major line of

business for the years ended December 31, 2012, 2011 and 2010:

For the Year Ended December 31,

2012

2011

2010

Total

% of Total

Total

% of Total

Total

% of Total

Net premiums written
Diversiﬁed Reinsurance
Property . . . . . . . . . . . . . . . . .
Casualty . . . . . . . . . . . . . . . . .
Accident and Health. . . . . . . . . .
International . . . . . . . . . . . . . . .
Total Diversiﬁed Reinsurance . . . .

AmTrust Quota Share

Reinsurance

Small Commercial Business. . . . .
Specialty Program . . . . . . . . . . .
Specialty Risk and Extended

Warranty . . . . . . . . . . . . . . .

Total AmTrust Quota Share

$ 190,125
433,307
37,244
104,617
765,293

10.0% $ 207,993
441,666
22.8%
42,604
2.0%
105,774
5.5%
798,037
40.3%

12.1% $ 168,919
311,852
25.6%
43,658
2.5%
29,620
6.1%
554,049
46.3%

13.8%
25.4%
3.5%
2.4%
45.1%

364,123
95,902

19.2%
5.0%

237,560
93,701

13.8%
5.4%

197,097
73,881

16.0%
6.0%

380,321

20.0%

338,022

19.6%

197,065

16.1%

Reinsurance . . . . . . . . . . . . .

840,346

44.2%

669,283

38.8%

468,043

38.1%

ACAC Quota Share
Automobile Liability . . . . . . . . .
Automobile Physical

Damage . . . . . . . . . . . . . . . .
Total ACAC Quota Share . . . . . .

159,861

8.4%

147,362

8.6%

117,962

9.6%

135,785
295,646
$1,901,285

108,839
7.1%
15.5%
256,201
100.0% $1,723,521

6.3%
14.9%

87,777
205,739
100.0% $1,227,831

7.2%
16.8%
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, 2012, 2011 and 2010:

For the Year Ended December 31,

2012

2011

2010

Total

% of Total

Total

% of Total

Total

% of Total

Net premiums earned
Diversiﬁed Reinsurance
Property . . . . . . . . . . . . . . . . .
Casualty . . . . . . . . . . . . . . . . .
Accident and Health. . . . . . . . . .
International . . . . . . . . . . . . . . .
Total Diversiﬁed Reinsurance . . . .

AmTrust Quota Share

Reinsurance

Small Commercial Business. . . . .
Specialty Program . . . . . . . . . . .
Specialty Risk and Extended

Warranty . . . . . . . . . . . . . . .

Total AmTrust Quota Share

$ 211,997
444,775
41,968
96,601
795,341

11.7% $ 196,947
395,533
24.7%
43,210
2.3%
112,697
5.4%
748,387
44.1%

12.7% $ 176,538
356,389
25.5%
62,954
2.8%
5,373
7.3%
601,254
48.3%

15.1%
30.5%
5.4%
0.5%
51.5%

313,110
85,812

17.3%
4.8%

215,941
81,281

13.9%
5.2%

202,716
71,596

17.3%
6.1%

328,859

18.2%

260,975

16.8%

170,769

14.6%

Reinsurance . . . . . . . . . . . . .

727,781

40.3%

558,197

35.9%

445,081

38.0%

ACAC Quota Share
Automobile Liability . . . . . . . . .
Automobile Physical

Damage . . . . . . . . . . . . . . . .
Total ACAC Quota Share . . . . . .

4. Acquisitions

a) IIS Acquisition

155,266

8.6%

141,173

9.1%

69,444

5.9%

125,392
280,658
$1,803,780

7.0%
15.6%

104,671
245,844
100.0% $1,552,428

6.7%
15.8%

54,011
123,455
100.0% $1,169,790

4.6%
10.5%
100.0%

On November 30, 2010, the Company completed its 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 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 VersicherungsService GmbH (subsequently renamed
Opel Händler VersicherungsService GmbH (‘‘OVS’’) following a cooperation agreement being entered into
with VDOH Wirtschaftsdienst GmbH (‘‘Opel Dealer Association’’)
in Germany and the German auto
manufacturer Opel in exchange for a 10% interest in OVS) and 60% of the share capital and net assets of
GMAC VersicherungsService 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.

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)

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 of 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.

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 of December 31, 2012 and 2011, are as follows:

December 31, 2012
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 bonds. . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . .
Municipal bonds . . . . . . . . . . . . . . . . . . . . . . . . .
Total available-for-sale ﬁxed maturities . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . .
Total investments . . . . . . . . . . . . . . . . . . . . . . .

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 bonds. . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . .
Municipal bonds . . . . . . . . . . . . . . . . . . . . . . . . .
Total available-for-sale ﬁxed maturities . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . .
Total investments . . . . . . . . . . . . . . . . . . . . . . .

Original or
amortized
cost

Gross
unrealized
gains

Gross
unrealized
losses

Fair
value

42,671
962,649
11,682
55,169
23,167
1,247,260
132,604
2,475,202
2,599
$2,477,801

Original or
amortized
cost

44,175
928,944
10,374
52,489
9,919
742,867
168,338
1,957,106
1,955
$1,959,061

1,260
30,998
1,407
2,264
901
113,386
1,244
151,460
353
$151,813

Gross
unrealized
gains

$ 1,774
43,230
622
78
1
47,726
728
94,159
318
$94,477

$ —
(1,473)
—
—
—
(6,492)
—
(7,965)
(51)
$(8,016)

Gross
unrealized
losses

43,931
992,174
13,089
57,433
24,068
1,354,154
133,848
2,618,697
2,901
$2,621,598

Fair
value

— $
(75)
—
(293)
—
(30,236)
—
(30,604)
(81)
$(30,685)

45,949
972,099
10,996
52,274
9,920
760,357
169,066
2,020,661
2,192
$2,022,853

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.

December 31, 2012
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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

U.S. agency bonds − mortgage-backed . . . . . . . . . . . . . . . . . . . . .
Other mortgage-backed bonds. . . . . . . . . . . . . . . . . . . . . . . . . . .
Total
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortized
cost

Fair
value

% of Total
Fair value

57,675
373,208
888,694
169,809
1,489,386
962,649
23,167
$2,475,202

58,672
387,882
981,504
174,397
1,602,455
992,174
24,068
$2,618,697

2.2%
14.8%
37.5%
6.7%
61.2%
37.9%
0.9%
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:

December 31, 2012
Available-for-sale securities:
U.S. agency

bonds − mortgage-backed . . .
Corporate bonds . . . . . . . . . . .

Other investments . . . . . . . . .
Total temporarily impaired

available-for-sale securities
and other investments. . . . . .

Less than 12 Months
Fair
value

Unrealized
losses

12 Months or More
Fair
value

Unrealized
losses

Total

Fair
value

Unrealized
losses

$158,591
94,742
253,333
—

$(1,473)
(1,098)
(2,571)
—

— $ — $158,591
236,584
395,175
2,011

(5,394)
(5,394)
(51)

141,842
141,842
2,011

$(1,473)
(6,492)
(7,965)
(51)

$253,333

$(2,571)

$143,853

$(5,445)

$397,186

$(8,016)

As of December 31, 2012, there were approximately 32 securities in an unrealized loss position with a
fair value of $397,186 and unrealized losses of $8,016. 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 $143,853 and unrealized
losses of $5,445.

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

available-for-sale securities
and other investments. . . . . .

Less than 12 Months
Fair
value

Unrealized
losses

12 Months or More
Fair
value

Unrealized
losses

Total

Fair
value

Unrealized
losses

$ 30,447
43,629
227,367
301,443
1,214

(75)
(293)
(7,406)
(7,774)
(81)

— $
—
125,089
125,089
—

— $ 30,447
43,629
—
352,456
(22,830)
426,532
(22,830)
1,214
—

(75)
(293)
(30,236)
(30,604)
(81)

$302,657

$(7,855)

$125,089

$(22,830)

$427,746

$(30,685)

As of 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.

OTTI

We review our investment portfolio for impairment on a quarterly basis. Impairment of investments
results in a charge to operations when a fair value decline below cost is deemed to be other-than-temporary.
As of December 31, 2012, 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, 2012, 2011 and 2010, the Company recognized no OTTI. Based
on our qualitative and quantitative OTTI review of each investment within our ﬁxed maturity portfolio,
unrealized losses on ﬁxed maturities at December 31, 2012, were primarily due to widening of credit spreads

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)

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, 2012.

The following summarizes the credit ratings of our ﬁxed maturities:

Rating* as of December 31, 2012
U.S. treasury bonds . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. agency bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . .
AAA . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
AA+, AA, AA- . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
A+, A, A-. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
BBB+, BBB, BBB- . . . . . . . . . . . . . . . . . . . . . . . . . . .
BB+ or lower . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Rating* as of 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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Amortized
cost
42,671
974,331
171,136
186,495
477,236
587,858
35,475
$2,475,202

Amortized
cost
44,175
939,318
160,319
150,961
327,794
316,150
18,389
$1,957,106

Fair
value
43,931
1,005,263
183,950
196,797
515,383
637,089
36,284
$2,618,697

Fair
value
45,949
983,095
161,945
153,303
328,448
330,156
17,765
$2,020,661

% of Total
fair value
1.7%
38.4%
7.0%
7.5%
19.7%
24.3%
1.4%
100.0%

% of Total
fair value
2.3%
48.6%
8.0%
7.6%
16.3%
16.3%
0.9%
100.0%

Ratings as assigned by S&P

b) Other Investments

The table below shows our portfolio of other investments:

December 31,
Investment in limited partnerships . . . . . . . . . . . . . .
Total other investments . . . . . . . . . . . . . . . . . . . .

2012

2011

$2,901
$2,901

100.0% $2,192
100.0% $2,192

100.0%
100.0%

The Company has an unfunded commitment on its investment in limited partnerships of approximately

$3,099 as of December 31, 2012.

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

2012
$79,891
1,439
1,648
1,945
84,923

2011
$72,050
925
4,235
1,925
79,135

2010
$71,607
1,680
407
1,996
75,690

(3,735)

(3,488)

(2,992)

to repurchase . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
$81,188

(756)
$74,891

(1,047)
$71,651

d) Realized and Unrealized Gains (Losses) on Investments

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 following provides an analysis of net realized and unrealized gains
on investment:

For the Year Ended December 31, 2012
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . .
Trading securities and short sales . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized gains on investments . . . . . . . . . . . . . . . .

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 investments . . . . .

For the Year Ended December 31, 2010
Available-for-sale securities. . . . . . . . . . . . . . . . . . . . . .
Trading securities and short sales . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net realized gains on investments . . . . . . . . . . . . . . . .

Gross gains
$3,468
—
55
$3,523

Gross gains
$5,091
2,709
43
7,843
—
$7,843

Gross gains
$10,372
6,372
—
$16,744

Gross losses
(13)
(1,592)
(11)
$(1,616)

Gross losses
$(1,812)
(1,902)
(116)
(3,830)
(3,532)
$(7,362)

Gross losses
$ (1,976)
(7,915)
(249)
$(10,140)

Net
$ 3,455
(1,592)
44
$ 1,907

Net
$ 3,279
807
(73)
4,013
(3,532)
481

Net
$ 8,396
(1,543)
(249)
$ 6,604

Proceeds from sales of ﬁxed maturities classiﬁed as available-for-sale were $142,694, $304,499 and

$331,593, and for the years ended December 31, 2012, 2011 and 2010, 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:

December 31,
Available-for-sale securities. . . . . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Total net unrealized gains . . . . . . . . . . . . . . . . . . . . .
Deferred income tax . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains, net of deferred income tax . . . . .
Change in net unrealized gains, net of deferred

2012
$143,495
302
143,797
(132)
$143,665

2011
$63,555
237
63,792
(55)
$63,737

2010
$54,658
96
54,754
—
$54,754

income tax . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 79,928

$ 8,983

$22,007

e) Restricted Cash and Cash Equivalents 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:

December 31,
Restricted cash and cash equivalents − third party agreements . . . . . .
Restricted cash and cash equivalents − related party agreements . . . . .
Restricted cash and cash equivalents − U.S. state regulatory authorities
Total restricted cash and cash equivalents . . . . . . . . . . . . . . . . . . . .
Restricted investments – in trust for third party agreements at fair
value (Amortized cost: 2012 − $1,048,827; 2011 − $950,103)
Restricted investments – in trust for related party agreements at fair

. . . .

2012
97,695
33,882
750
132,327

2011
67,627
46,729
539
114,895

1,101,971

972,130

value (Amortized cost: 2012 − $851,873; 2011 − $458,105) . . . . . .

919,557

485,468

Restricted investments – in trust for U.S. state regulatory authorities

(Amortized cost: 2012 − $12,744; 2011 − $12,862) . . . . . . . . . . . .
Total restricted investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total restricted cash and cash equivalents and investments
. . . . .

13,463
2,034,991
$2,167,318

13,750
1,471,348
$1,586,243

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
of December 31, 2012 was $0 (December 31, 2011 − $55,830). This amount was included in accrued expenses
and other liabilities in the Consolidated Balance Sheets. Collateral of an equivalent amount was pledged to the
clearing broker.

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.

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 − (continued)

The following describes the valuation techniques used by the Company to determine the fair value of

ﬁnancial instruments held as of December 31, 2012.

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 inputs, the fair values of U.S. government agency securities are included in
the Level 2 fair value hierarchy.

Non-U.S. government bonds — Comprised of bonds issued by non-U.S. governments and their agencies
along with supranational organizations. 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

consist

bonds

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.

Municipal bonds — Municipal bonds comprise bonds and auction rate securities issued by U.S. state and
municipality entities or agencies. 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 Sheets 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.

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)

Loan to related party — The carrying value reported in the accompanying balance sheets for this
ﬁnancial instrument approximates its fair value. The underlying investments of the loan are generally priced
by pricing services. As the signiﬁcant inputs used to price the underlying investments are observable market
inputs, the fair value of the loan to related party is included in the Level 2 fair value hierarchy.

Senior notes — The amount reported in the accompanying balance sheets for these ﬁnancial instruments
represents the carrying value of the notes. The fair values are based on quoted prices of identical instruments
in inactive markets and as such, are included in the Level 2 hierarchy.

Junior subordinated debt — The amount reported in the accompanying balance sheets for this ﬁnancial
instrument represents the carrying value of the debt. The fair value of the debt was derived using the
Black-Derman-Toy model. As the fair value of the junior subordinated debt is determined using observable
market inputs in the Black-Derman-Toy model, the fair value is included in the Level 2 fair value hierarchy.

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, 2012 and 2011, we classiﬁed our ﬁnancial instruments measured at fair value on a

recurring basis in the following valuation hierarchy:

December 31, 2012
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 . . . . . . . . . . . . .

Quoted Prices
in Active
Markets for
Identical Assets
(Level 1)

Signiﬁcant
Other
Observable
Inputs
(Level 2)

Signiﬁcant
Unobservable
Inputs
(Level 3)

$43,931
—
—
—
—
—
—
—
$43,931

—
992,174
13,089
57,433
24,068
1,354,154
133,848
—
$2,574,766

$ —
—
—
—
—
—
—
2,901
$2,901

Total
Fair Value

43,931
992,174
13,089
57,433
24,068
1,354,154
133,848
2,901
$2,621,598

1.1%

62.2%

0.1%

63.4%

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)

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 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)

$45,949
—
—
—
—
—
—
—
$45,949

—
972,099
10,996
52,274
9,920
760,357
169,066
—
$1,974,712

$ —
—
—
—
—
—
—
2,192
$2,192

Total
Fair Value

45,949
972,099
10,996
52,274
9,920
760,357
169,066
2,192
$2,022,853

1.4%

58.1%

0.1%

59.6%

$ —

55,830

$ —

55,830

—%

2.1%

—%

2.1%

The Company utilized a pricing service to estimate fair value measurements for approximately 99.7% 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 $2,901 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 as 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, 2012 and 2011:

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

For the Year Ended
December 31,

2012
$2,192
44
—

2011
$ 5,847
—
(73)

comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

141

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

—
940
(340)
—
—
$2,901

—
1,173
(4,896)
—
—
$ 2,192

unrealized gains (losses) relating to assets held at the reporting date . . . . .

$ — $ —

d) Fair Value of Liabilities

The following table presents the carrying values and fair values of the Senior Notes and Junior

Subordinated Debt as of December 31, 2012 and 2011:

Carrying
Value

Interest
Rate
8.25% $107,500
100,000
8.00%
126,317
14.00%

December 31, 2012
Fair
Value
$112,832
105,600
166,919

December 31, 2011
Fair
Value
$104,888
—
173,621

Carrying
Value
$107,500
—
126,263

2011 Senior Notes . . . . . . . . . . . . . . . . . .
2012 Senior Notes . . . . . . . . . . . . . . . . . .
Junior Subordinated Debt . . . . . . . . . . . . .

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.

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)

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 tables show the analysis of goodwill and intangible assets:

December 31, 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustment during the year . . . . . . . . . . . . . . . . . . . . . . .
Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . .

Goodwill
$58,429
(117)
—
58,312
—
$58,312

Intangible
Assets
$45,476
—
(5,033)
40,443
(4,362)
$36,081

Total
$103,905
(117)
(5,033)
98,755
(4,362)
$ 94,393

December 31, 2012
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . .
State licenses . . . . . . . . . . . . . . . . . . . . . . .

Gross
$ 58,312
7,727

Accumulated
Amortization
—
$
—

Customer relationships . . . . . . . . . . . . . . . . .
Net balance . . . . . . . . . . . . . . . . . . . . . . . .

51,400
$117,439

(23,046)
$(23,046)

December 31, 2011
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . .
State licenses . . . . . . . . . . . . . . . . . . . . . . .

Gross
$ 58,312
7,727

Accumulated
Amortization
—
$
—

Customer relationships . . . . . . . . . . . . . . . . .
Net balance . . . . . . . . . . . . . . . . . . . . . . . .

51,400
$117,439

(18,684)
$(18,684)

Net
$58,312
7,727

28,354
$94,393

Net
$58,312
7,727

32,716
$98,755

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
including its book of assumed
acquisition of the reinsurance operations of GMAC Insurance (‘‘GMACI’’),
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, 2012, 2011 and 2010. 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:

2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2015 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2016 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2017 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,781
3,276
2,840
2,461
2,133

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

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 (‘‘2011 Senior Notes’’) due on
June 15, 2041, which are fully and unconditionally guaranteed by the Company. The 2011 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 2011
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 2011 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 2011 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 2011
Senior Notes offering in exchange for a waiver of such notice provisions and an agreement to accept interest
through July 15, 2011. Certain of the Trust Preferred Securities holders accepted the offer by June 16, 2011.
All proceeds of the 2011 Senior Notes offering were used to repurchase the Trust Preferred Securities of the
holders who accepted the offer. The 2011 Senior Notes are an unsecured and unsubordinated obligation of the
Company and rank ahead of the Junior Subordinated Debt, described below. The effective interest rate of the
2011 Senior Notes, based on the net proceeds received, was 8.47%. The net proceeds from the sale of the
2011 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 2011 Senior Notes were capitalized and will be amortized over the life of the
notes. Amortization expense for the year ended December 31, 2012 was $94 (for the period from June 15,
2011 to December 31, 2011 − $49).

The interest on the 2011 Senior Notes is payable each quarter beginning on September 15, 2011. Interest
expense for the year ended December 31, 2012 was $8,869 (for the period from June 15, 2011 to
December 31, 2011 − $4,607), of which $394 was accrued as of December 31, 2012 (2011 − $394).

In March 2012, the Company, through Maiden NA, issued $100,000 principal amount of 8.00% Senior
Notes (‘‘2012 Senior Notes’’) due on March 27, 2042, which are fully and unconditionally guaranteed by the
Company. The 2012 Senior Notes are redeemable for cash, in whole or in part, on or after March 27, 2017, at
100% of the principal amount to be redeemed plus accrued and unpaid interest up to but excluding the
redemption date. The 2012 Senior Notes are an unsecured and unsubordinated obligation of the Company and
rank ahead of the Junior Subordinated Debt, described below. The effective interest rate of the 2012 Senior
Notes, based on the net proceeds received, was 8.28%. The net proceeds from the sale of the 2012 Senior
Notes were $96,594, after placement agent fees and other expenses of $3,406, and will be used for general
corporate purposes and working capital. The issuance costs related to the 2012 Senior Notes were capitalized
and will be amortized over the life of the notes. Amortization expense for the period from March 27, 2012 to
December 31, 2012 was $87.

The interest on the 2012 Senior Notes is payable each quarter beginning on June 27, 2012 and will
include accrued interest from March 27, 2012. Interest expense for the period from March 27, 2012 to
December 31, 2012 was $6,111, of which $111 was accrued as of December 31, 2012.

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’’).

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)

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 of 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 2011 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.

As of December 31, 2012,

the stated value of the Junior Subordinated Debt was $126,317 which
comprises the principal amount of $152,500 and unamortized discount of $26,183. Amortization expense for
the year ended December 31, 2012 was $54 (2011 − $46, 2010 − $66). Interest expense for the year ended
December 31, 2012 was $21,350 (2011 − $29,502, 2010 − $36,400), of which $4,448 was accrued as of
December 31, 2012 (2011 − $4,448).

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.

F-36

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

9. Reinsurance − (continued)

The effect of retrocessional activity on net premiums written and earned and on net

loss and loss

adjustment expenses for the years ended December 31, 2012, 2011 and 2010 was as follows:

For the Year Ended December 31,
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 ceded . . . . . . . . . .
Net. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2012

2011

2010

$ 122,412
1,878,580
(99,707)
$1,901,285

$ 114,036
1,698,561
(89,076)
$1,723,521

71,625
1,226,430
(70,224)
$1,227,831

$ 119,398
1,780,745
(96,363)
$1,803,780

$ 112,308
1,523,685
(83,565)
$1,552,428

68,967
1,168,116
(67,293)
$1,169,790

$1,457,404
(195,056)
$1,262,348

$1,103,821
(60,767)
$1,043,054

$ 788,815
(33,693)
$ 755,122

The reinsurers with the three largest balances accounted for 30.2%, 18.0% and 11.4%, respectively, of the
Company’s reinsurance recoverable on unpaid losses balance at December 31, 2012 (2011 − 31.1%, 26.2%
and 12.6%, respectively). At December 31, 2012, 88.4% of the reinsurance recoverable on unpaid loss and
loss adjusted expenses ceded was due from reinsurers with credit ratings from A.M Best of A, or better,
11.3% due from reinsurers with credit ratings of A- and the remaining 0.3% of the reinsurance recoverable
was primarily due from state pools. At December 31, 2012 and 2011,
the Company had no valuation
allowance against reinsurance recoverable on unpaid losses.

10. Reserve for Loss and Loss Adjustment Expenses

Our reserve for loss and loss adjustment expenses comprise the following:

December 31,
Reserve for reported loss and loss adjustment expenses . . . . . . . . . . .
Reserve for losses incurred but not reported . . . . . . . . . . . . . . . . . .
Reserve for loss and loss adjustment expenses . . . . . . . . . . . . . . . . .

2012
$1,029,594
710,687
$1,740,281

2011
$ 820,795
577,643
$1,398,438

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)

The following table represents a reconciliation of our beginning and ending net

losses and loss

expense reserves:

For the Year Ended December 31,
Gross unpaid loss and loss adjustment expenses

2012

2011

2010

reserves at beginning of period . . . . . . . . . . . . . . .

$ 1,398,438

$1,226,773

$1,002,676

Less: reinsurance recoverable on unpaid losses at

beginning of period . . . . . . . . . . . . . . . . . . . . . . .

20,289

6,656

8,340

Net loss and loss adjustment expense reserves at

beginning of period . . . . . . . . . . . . . . . . . . . . . . .

1,378,149

1,220,117

994,336

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 movements. . . . . . . . . . . .
Net loss and loss adjustment expense reserves at

1,239,016
23,332
1,262,348

1,028,855
14,199
1,043,054

(485,015)
(530,294)
(1,015,309)
—
4,235

(456,149)
(423,855)
(880,004)
450
(5,468)

787,967
(32,845)
755,122

(365,343)
(265,991)
(631,334)
102,020
(27)

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

1,629,423

1,378,149

1,220,117

Reinsurance recoverable on unpaid losses at

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

110,858

20,289

6,656

Gross unpaid loss and loss adjustment expenses

reserves at end of period . . . . . . . . . . . . . . . . . .

$ 1,740,281

$1,398,438

$1,226,773

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.

During 2012, the Company recorded estimated net adverse development on prior year loss reserves of
$23,332 compared to net adverse development of $14,199 in the prior year and net favorable development of
$32,845 in 2010. Included in the total is $9,134 (2011 − $28,898, 2010 − $25,332) 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 $75,656 (2011 − $68,882, 2010 − $43,811) of which $4 remains as
of December 31, 2012 (2011 − $2,570). The gain is being amortized into income in proportion to the actual
paydown of the reserves acquired.

F-38

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)

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

The Founding Shareholders of the Company are Michael Karfunkel, George Karfunkel and Barry
Zyskind. Michael Karfunkel is the non-executive chairman of the board of AmTrust Financial Services, Inc.
(‘‘AmTrust’’), George Karfunkel is a director of AmTrust, and Barry Zyskind is the president, chief executive
officer and director of AmTrust. The Founding Shareholders own or control approximately 59% of the
outstanding shares of AmTrust. In addition, the Michael Karfunkel 2005 Grantor Retained Annuity Trust
(which is controlled by Leah Karfunkel, wife of Michael Karfunkel) (‘‘Annuity Trust’’), currently owns 72.4%
of the issued and outstanding common stock of American Capital Acquisition Corporation (‘‘ACAC’’),
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 (see
below for a description of our common business arrangements with AmTrust and ACAC). Michael Karfunkel
is the Chairman and Chief Executive Officer of ACAC.

AmTrust

The following describes transactions between the Company and AmTrust.

AmTrust Quota Share Reinsurance Agreement

Effective July 1, 2007, the Company and AmTrust entered into a master agreement, as amended (the
‘‘Master Agreement’’), by which they caused 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 ‘‘Reinsurance 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 losses and (b) AII transferred to Maiden Bermuda 40% of the
AmTrust subsidiaries’ unearned premiums, effective 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’’).
Effective January 1, 2010, the Company agreed to assume its proportionate share of AmTrust’s workers’
compensation exposure and shared the beneﬁt of the 2010 excess reinsurance protection. 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.

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% on the unearned premium
cession and the Retail Commercial Package Business. The $2,000 maximum liability for a single loss provided in
the Reinsurance Agreement shall not be applicable to Retail Commercial Package Business.

On February 9, 2009, Maiden Bermuda and AII amended the Reinsurance 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

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)

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 the AII or Maiden Bermuda elects to
so terminate the Reinsurance Agreement, it shall give written notice to the other party hereto not less than
nine months prior to either July 1, 2014 or the expiration of any successive three-year period.

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 shareholder’s equity of Maiden Bermuda or
the combined shareholders’ equity of AII and the AmTrust subsidiaries.

Maiden Bermuda recorded approximately $185,574, $150,140 and $139,092 of ceding commission

expense for the years ended December 31, 2012, 2011 and 2010, 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
to the terms of the contract, Maiden Bermuda assumed 40% of the
subsidiaries of AmTrust. Pursuant
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.

Effective January 1, 2012,

For the year ended December 31, 2012, the Company recorded approximately $5,876 (2011 − $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

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)

$10,000, subject
to an annual aggregate deductible of $1,250. This participation was sourced through a
in which competitive bids were solicited by an
reinsurance intermediary via open market placement
independent broker. The remaining 55% participation was placed with a single carrier. This coverage expired
on January 1, 2010; as a result, under the Reinsurance Agreement, Maiden Bermuda therefore now reinsures
40% of the subject workers’ compensation business up to $10,000, subject
inuring
reinsurance protection that AmTrust has purchased.

to certain additional

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
gross liability written under the Open Lending Program (‘‘OPL’’) and (b) 100% of its surplus lines 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 had a term of three years and remained continuously in force until terminated in accordance with
the contract. The OPL program was terminated on December 31, 2011 on a run-off basis and the NAXS
program terminated on October 31, 2012. Maiden Specialty recorded approximately $7,363 of premiums
earned ceded and $2,171 ceding commission for the year ended December 31, 2012 (2011 − $10,276 and
$3,155, respectively, 2010 − $88 and $26, respectively).

the Company,

Effective September 1, 2010,

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 and automatically renews annually unless terminated
pursuant to the terms of the agreement. Under this agreement, Maiden US recorded approximately $2,145 of
premiums earned and $107 commission expense for the year ended December 31, 2012 (2011 − $7 and $0.1,
respectively, 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
the Reinsurance Agreement of AII’s obligations to the AmTrust
secure its proportional share under
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 Reinsurance Agreement with AII. 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.

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)

Maiden Bermuda satisﬁed its collateral

requirements under

the Reinsurance Agreement with AII

as follows:

•

by lending funds in the amount of $167,975 as of December 31, 2012 and 2011 to AII pursuant to a
loan agreement entered into between those parties. This loan is carried at cost. Pursuant to the
Reinsurance 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 or maintained by such AmTrust subsidiary as
Withheld Funds, AII will immediately return to 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 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 AII Insurance Management Limited (‘‘AIIM’’) and its share of fees owed to the trustee of
the Trust Account. The amount of accrued interest relating to the loan was $0 and $0 as of
December 31, 2012 and 2011, 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
the collateral, as of December 31, 2012 was
U.S. AmTrust
approximately $857,013 (2011 − $461,216) and the accrued interest was $6,967 (2011 − $4,131).
(See Note 5(e)).

subsidiaries. The amount of

Reinsurance Brokerage Agreements

Effective July 1, 2007,

the Company entered into a reinsurance brokerage agreement with AII
Reinsurance Broker Ltd. (‘‘AIIB’’), a subsidiary of AmTrust. Pursuant to the brokerage agreement, AIIB
provides brokerage services relating to the Reinsurance 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.
Following the initial one-year term, the agreement may be terminated upon 30 days written notice by either
party. Maiden Bermuda recorded approximately $9,097, $6,977 and $5,564 of reinsurance brokerage expense
for the years ended December 31, 2012, 2011 and 2010, respectively, and deferred reinsurance brokerage of
$6,299 and $4,891 as of December 31, 2012 and 2011, respectively, as a result of this agreement.

The Company paid brokerage fees to AmTrust’s subsidiary, AmTrust North America, of $61, $111 and
$83 for the years ended December 31, 2012, 2011 and 2010, respectively, for acting as insurance intermediary
in relation to certain insurance placements.

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)

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. Following the initial one-year term, the
agreement may be terminated upon 30 days written notice by either party. The Company recorded
approximately $3,697, $3,158 and $2,643 of investment management fees for the years ended December 31,
2012, 2011 and 2010, 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, 2012 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,
2012, the Company recorded an expense of $38 (2011 − $96) for the use of the aircraft.

ACAC

The following describes transactions between the Company and ACAC and its subsidiaries:

ACAC Quota Share Reinsurance Agreement

lines automobile business. The ACAC Quota Share provides that

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, ACP 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
in
personal
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 years terms unless terminated by
written notice not less than nine months prior to the expiration of the current term. Notwithstanding the
foregoing, Maiden Bermuda’s participation in the ACAC Quota Share may be terminated by ACAC on
60 days written notice in the event Maiden Bermuda 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 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, ceases 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.

the reinsurers, severally,

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 60.0% or less and a minimum of 30.5% if the loss ratio is 64.5% or greater.

F-43

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)

Effective October 1, 2012, the parties amended the reinsurance agreement to decrease the provisional
ceding commission from 32.5% to 32.0% of ceded earned premium, net of premiums ceded by the personal
lines companies for
to
adjustment to a minimum of 30.0% (changed from 30.5%), if the loss ratio is 64.5% or greater. The Company
believes 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. The ceding commission is subject

inuring reinsurance, subject

Maiden Bermuda recorded approximately $85,296 of ceding commission expense for the year ended

December 31, 2012 (2011 − $74,983, 2010 − $37,654) as a result of this transaction.

Other

Effective September 12, 2012, the Company through its indirect wholly-owned subsidiary, Maiden Re
Insurance Services, LLC (‘‘Maiden Re’’), entered into a consulting agreement with Integon Association
Management LLC (‘‘Integon’’), a wholly owned subsidiary of ACAC, pursuant to which Maiden Re has
agreed to provide to Integon underwriting, and pricing support for a fee of $25 per month, and also a fee of
$0.1 for each policy quote evaluation and an additional $0.1 for each policy re-quote evaluation. The initial
term of this agreement is for a period of one year, unless terminated earlier by either party. This agreement
shall be renewed automatically upon expiration of the initial term for successive one year periods, unless a
party delivers written notice of non-renewal to the other party at least 120 days before the end of the initial
term or any renewal
the year ended
December 31, 2012.

term. The Company recorded $100 consulting fee income for

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 and $0 of ceded premium and ceding commissions, respectively, for the
year ended December 31, 2012 (2011 − $(0.6) and $0.2, respectively, 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 2011
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. ACP 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 2011 Senior Notes. The Company’s Audit Committee reviewed and
approved ACAC’s, AII’s, and George Karfunkel’s participation in the 2011 Senior Notes offering.

Warrant Exchange

Please see Note 14 to the Consolidated Financial Statements.

12. Commitments and Contingencies

a) Concentrations of Credit Risk

As of December 31, 2012 and 2011, 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-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)

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 2012, our gross premiums written for AmTrust and ACAC accounted for 56.8% (2011 − 51.0%,
2010 − 51.9%) of our
total gross premiums written. AmTrust accounted for $840,346 or 42.0%
(2011 − $669,283 or 36.9%, 2010 − $468,043 or 36.1%) and ACAC accounted for $295,646 or 14.8%
(2011 − $256,201 or 14.1%, 2010 − $205,739 or 15.8%).

c) Brokers

We produce our reinsurance business for our Diversiﬁed Reinsurance segment primarily through brokers.
During 2012, three brokers accounted for 49.7% (2011 − 59.7%, 2010 − 56.3%) of our total gross premiums
written through brokers for the Diversiﬁed Reinsurance segment. Marsh & McLennan Inc.(including Guy
Carpenter) accounted for 24.1% (2011 − 27.4%, 2010 − 31.0%), Aon Benﬁeld Group, Ltd.
for 13.5%
(2011 − 18.1%, 2010 − 16.9%) and Beach & Associates, Ltd. for 12.1% (2011 − 14.2%, 2010 − 8.4%).

d) Letters of Credit

As of December 31, 2012 and 2011, we had letters of credit outstanding of $101,411 and $97,486,

respectively. The letters of credit are secured by cash and marketable investments of $113,717 (2011 − $109,337).

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, an apartment, equipment and vehicles under operating leases expiring
in various years through 2017. Total rent expense for the years ended December 31, 2012, 2011 and 2010 was
$2,485, $2,283 and $1,969, respectively. Future minimum lease payments as of December 31, 2012 under
non-cancellable operating leases for the next ﬁve years are approximately as follows:

December 31,
2012
$2,004
1,646
942
482
482
$5,556

g) Unfunded Commitments

The Company has an unfunded commitment on its investment in limited partnerships of approximately

$3,099 as of December 31, 2012.

h) Loans and Other Collateral

Please see Note 11 for the discussion related to loan provided to AmTrust.

F-45

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)

i) Deposit Insurance

The Company maintains cash and cash equivalents 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. In certain other international jurisdictions, there exist similar protections. Management monitors
risk to
balances in excess of
the Company.

insured limits and believes they do not

represent a signiﬁcant credit

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.

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
review of
U.S. Department of Labor. The Company ﬁled its brief
review on
October 19, 2011.

in opposition to the petition for

k) Dividends declared

During the fourth quarter, the Company’s Board of Directors authorized the following quarterly dividends

payable to shareholders:

Common shares . . . . . . . . . . . . . . .
Preference shares − Series A . . . . . . .

Dividend
per Share
$
0.09
$0.6073

Payable on:
December 28, 2012
December 17, 2012

Record date:
December 14, 2012
December 1, 2012

On December 4, 2012, the Company announced the acceleration of the common share dividend record
date and payment date for the Company’s previously announced quarterly cash dividend of $0.09 per common
share. The common share dividend was paid on December 28, 2012 to shareholders of record as of
December 14, 2012. Prior to this announcement, the record date and the payment date of the quarterly
dividends to common shareholders were January 2, 2013 and January 15, 2013 respectively.

F-46

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

common share:

For the Year Ended December 31,
Net income attributable to Maiden common

2012

2011

2010

shareholders. . . . . . . . . . . . . . . . . . . . . . . . .

46,510

28,524

69,866

Weighted average number of common shares

outstanding − basic . . . . . . . . . . . . . . . . . . . . .

72,263,022

72,155,503

70,799,966

Potentially dilutive securities:
Share options . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average number of common shares

842,509

748,185

572,722

outstanding − diluted. . . . . . . . . . . . . . . . . . . .

73,105,531

72,903,688

71,372,688

Basic earnings per share attributable to Maiden

common shareholders:

Diluted earnings per share attributable to

Maiden common shareholders:

0.64

0.40

0.39

0.99

0.98

As of December 31, 2012, 2,072,989 share options (2011 − 2,137,836; 2010 − 1,820,626) were excluded

from diluted earnings per common share as they were anti-dilutive.

14. Shareholders’ Equity

a) Common Shares

The following table shows the summary of changes in common shares issued and outstanding:

Issued and outstanding shares − January 1 . . . . . . . .
Exercise of options . . . . . . . . . . . . . . . . . . . . . . .
Exchange of warrants. . . . . . . . . . . . . . . . . . . . . .
Issued and outstanding shares − December 31 . . . . .

For the Year Ended December 31,
2011
72,107,100
114,328
—
72,221,428

2010
70,291,289
15,811
1,800,000
72,107,100

2012
72,221,428
122,519
—
72,343,947

(i) 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 72,343.947 common shares issued and outstanding. A total
of 7,800,000 common 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 122,519, 114,328, and 15,811 common shares were issued in
2012, 2011 and 2010, 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 common share, subject to downward
adjustment under certain circumstances. See below for the discussion relating to the exchange of warrants
in 2010.

F-47

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

14. Shareholders’ Equity − (continued)

On December 24, 2012, the Company adopted a written trading plan to facilitate the repurchase of its
common shares in accordance with the Company’s existing share purchase reauthorization whereby in
August 2012, the Board of Directors approved the repurchase of up to $75 million of the Company’s common
shares. During the year ended, December 31, 2012, there was no common shares repurchased by the Company.

(ii) 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 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 common 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.

(iii) 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.

b) Preference Shares — Series A

On August 22, 2012, the Company issued six million 8.25% Preference Shares-Series A (the ‘‘Preference
Shares’’), par value $0.01 per share, at a price of $25 per share. The Company received net proceeds of
$145,041 from its offering, after deducting expenses and underwriting discounts of $4,959. The Preference
Shares have no stated maturity date and are redeemable in whole or in part at the option of the Company any
time after August 29, 2017 at a redemption price of $25 per preference share plus any declared and unpaid
dividends, without accumulation of any undeclared dividends.

F-48

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

14. Shareholders’ Equity − (continued)

the Company’s Board of Directors or a duly authorized committee of the Board of Directors. Any such
dividends will be payable from, and including, the date of original issue on a non-cumulative basis, quarterly
in arrears.

To the extent declared, these dividends will accumulate, with respect to each dividend period, in an
amount per share equal to 8.25% of the $25 liquidation preference per annum. During any dividend period, so
long as any Preference Shares remain outstanding, unless the full dividends for the latest completed dividend
period on all outstanding Preference Shares have been declared and paid, no dividend shall be paid or
declared on the common shares.

The holders of the Preference Shares have no voting rights other than the right to elect up to two

directors if preference share dividends are not declared and paid for six or more dividend periods.

For the year ended December 31, 2012, the Company declared and paid $3,644 in preference share

dividends.

15. Share Compensation and Pension Plans

The Company’s Amended and Restated 2007 Share Incentive Plan (the ‘‘Plan’’), provides for grants of
options, restricted common shares and restricted share units. The total number of common shares currently
reserved for issuance under the Plan is 10,000,000. 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 Company’s common shares at the date of grant. Under the Plan, unless otherwise determined by the
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.

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 on 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 $1,347, $1,307 and
$1,015 for the years ended December 31, 2012, 2011 and 2010, respectively.

The key assumptions used in determining the fair value of options granted in 2012, 2011 and 2010 and a

summary of the methodology applied to develop each assumption were as follows:

2012

2011

2010

Assumptions:
Volatility . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . .
Weighted average expected lives in years
. .
Forfeiture rate . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . .
Dividend yield rate

45.30 − 47.60% 45.55 − 47.60% 29.50 − 46.00%
1.29 − 1.62%
1.62 − 3.21%
5.5 − 6.1 years
6.1 years
0%
0%
1.00 − 3.57%
3.04 − 3.27%

0.85 − 1.29%
6.1 years
1.60%
3.04 − 3.55%

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)

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
the Company blended its historical volatility with the historical volatilities of a set of
such estimate,
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 share price of the

Company at the valuation date. An increase in the dividend yield will decrease compensation expense.

The following schedule shows all options granted, exercised, expired and exchanged under the Plan for

the years ended December 31, 2012, 2011 and 2010:

Outstanding, December 31, 2009 . .
Granted . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . .
Forfeited. . . . . . . . . . . . . . . . . . .

Outstanding, December 31, 2010 . .
Granted . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . .
Forfeited. . . . . . . . . . . . . . . . . . .

Outstanding, December 31, 2011 . .
Granted . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . .
Expired . . . . . . . . . . . . . . . . . . .
Forfeited. . . . . . . . . . . . . . . . . . .

Outstanding, December 31, 2012 . .
Total options exercisable at

December 31, 2012 . . . . . . . . . .

Number of
Share
Options
2,036,542
931,333
(15,811)
(688)
(10,500)

2,940,876
133,500
(114,328)
(375)
(43,530)

2,916,143
117,000
(122,519)
(103,847)
(11,340)

2,795,437

Weighted
Average
Exercise
Price
$5.79
$7.57
$3.28
$3.28
$3.28

$6.41
$8.57
$3.69
$7.65
$7.19

$6.61
$8.89
$3.90
$9.87
$7.54

$6.70

Weighted
Average
Remaining
Contractual
Term
8.86 years
9.60 years

Fair
Value of
Options

$2.45

Aggregate
Intrinsic
Value
$1,548

Range of
Exercise
Prices
$3.28 − 10.00
$6.94 − 7.99

$2.89

8.40 years
9.77 years

$2.65

7.55 years
9.65 years

$5,286

$ 587

$6,866

$ 616

$3.28 − 10.00
$7.63 − 9.40

$3.28 − 10.00
$8.14 − 9.42

6.75 years

$7,271

$3.28 − 10.00

2,127,141

$6.35

6.35 years

$6,336

$3.28 − 10.00

F-50

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 weighted average grant date fair value was $2.05, $2.01 and $1.91 for all options outstanding at
December 31, 2012, 2011 and 2010, respectively. There was approximately $1,528 of total unrecognized
compensation cost related to non-vested share-based compensation arrangements as of December 31, 2012
which will be recognized during the next 4 years. Cash in the amount of $478 was received from employees
as a result of employee share option exercises during the year ended December 31, 2012 (2011 − $422;
2010 − $52). The Company issues new common 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 the Company’s 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 years ended December 31, 2012 and 2011, no accrual was recognized as the calculated
weighted percentage of the performance results of the Company did not meet the target level.

CEO Non-Performance-Based Restricted Share Units

On March 1, 2012, the Compensation Committee of the Board of Directors approved an award of
non-performance-based restricted share units to the Company’s CEO. The award consists of 86,705 restricted
share units, of which one-third automatically vest by December 31, 2012, of which one-third automatically
vest by December 31, 2013, and of which one-third automatically vest by December 31, 2014. Each share unit
has a fair value of $8.56 which is amortized over 34 months. The unamortized compensation cost related to
this grant is $524 as of December 31, 2012.

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 $2,529, $2,813 and $2,326 for the years

ended December 31, 2012, 2011 and 2010, 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 U.S. 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

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)

U.S. subsidiaries pay a dividend outside the U.S. group, withholding taxes will apply. Our U.S. subsidiaries
were under examination for tax years 2009 and 2010. The audits have been closed. There was no impact on
the ﬁnancial statements as a result. Subsequent tax years 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 Australia, Austria, Germany, Netherlands, Russia and the U.K., 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 as it is the intention that such earnings will remain reinvested or will not be taxable. If the
earnings were to be distributed, as dividends or otherwise, such amounts may be subject to withholding
taxation in the country of the paying entity. Currently however, no withholding taxes have been accrued.

There were no unrecognized tax beneﬁts at December 31, 2012, 2011 and 2010.

Income tax expense for the years ended December 31, 2012, 2011 and 2010 and net deferred tax

liabilities for the years ended December 31, 2012 and 2011 were as follows:

For the Year Ended December 31,
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 . . . . . . . . . . . . . . . . . . . . . . . . . . .

2012

34
986
1,020
1,161
32
1,193
$2,213

2011

79
553
632
1,161
134
1,295
$1,927

2010
$ 130
30
160
1,170
—
1,170
$1,330

The following table is a reconciliation of the actual income tax rate for the years ended December 31,
2012, 2011 and 2010 to the amount computed by applying the effective tax rate of 0.0% under Bermuda law
to income before taxes:

For the Year Ended December 31,
Income before income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2012
$52,474
2,213
$50,261

2011
$30,454
1,927
$28,527

2010
$71,192
1,330
$69,862

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 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—%

—%
—%
(9.4)% (67.2)% (18.8)%
20.6%
71.3%
11.7%
0.1%
2.2%
1.9%
1.9%
6.3%
4.2%

F-52

MAIDEN HOLDINGS, LTD.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. dollars, except share and per share data)

16. Taxation − (continued)

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 of December 31, 2012 and 2011 were as follows:

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 expenses. . . . . . . . . . . . . . . .
Indeﬁnite lived intangible . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net unrealized gains on investments . . . . . . . . . . . . . . . . . . . . . . . . . . .
Market discount on bonds. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Others . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2012

2011

$42,014
8,929
10,585
88
2,988
913
65,517
41,231
24,286

13,054
2,870
4,837
10,249
488
488
31,986
$ 7,700

$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

The net deferred tax liability at December 31, 2012 is $7,700. 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 this time, we believe it 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 2012,
the Company recorded an increase in the valuation allowance of $6,104 (2011 − $21,713) which was recorded in
the Consolidated Statements of Income and a decrease of $1,081 (2011 − increase of $1,545) was recorded as a
component of other comprehensive income in shareholders’ equity.

At December 31, 2012,

the Company has available U.S. net operating loss carry-forward of

approximately $119,991 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,
2012 was approximately $942,806 (2011 − $693,435) and the amount required to be maintained under
Bermuda law,
the Minimum Solvency Margin, was $231,133 (2011 − $226,468) at December 31, 2012.
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

F-53

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)

payment (and in certain cases prior approval of the Bermuda Monetary Authority). Maiden Bermuda is also
restricted in paying 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 of December 31, 2012 and it is anticipated Maiden Bermuda
will be allowed to pay dividends or distributions not exceeding $217,652.

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 of
December 31, 2012 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 the U.S., 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
losses and loss expense, and unearned premium reserves are presented gross of
reinsurance with a
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 of the preceding December 31, or net income, less net realized capital gain on
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 $4,616, 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 $4,618 at December 31, 2012 (2011 − $4,536). This requirement was met by Maiden LF
throughout
the period. The statutory assets were approximately $29,378 (2011 − $31,761). 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, 2012, Maiden LF
is allowed to pay dividends or distributions not exceeding the capital surplus of $2,007.

F-54

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)

The Statutory equity and net income of the Company’s insurance and reinsurance subsidiaries were as

follows:

Statutory Capital and Surplus
December 31, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . .

Statutory Net Income (Loss)
For the Year Ended December 31, 2012 . . . . . . . . . . . .
For the Year Ended December 31, 2011 . . . . . . . . . . . .
For the Year Ended December 31, 2010 . . . . . . . . . . . .

18. Subsequent Events

Maiden
Bermuda

Maiden
US

Maiden
Specialty

Maiden
LF

$942,806
693,435

$267,863
268,055

$46,164
36,280

$8,603
7,866

$ 79,113
30,070
89,562

$ (19,156)
(1,684)
1,268

$ 1,227
119
1,675

$ 464
753
486

On February 19, 2013, the Company’s Board of Directors authorized the following quarterly dividends:

Common shares . . . . . . . . . . . . . . . . . . .
Preference shares − Series A. . . . . . . . . . .

Dividend
per Share
$
0.09
$0.515625

Payable on:
April 15, 2013
March 15, 2013

Record date:
April 1, 2013
March 1, 2013

On March 7, 2013, Maiden Bermuda and AII executed an amendment to the Reinsurance Agreement,
which provides for the extension of the term of the Quota Share to July 1, 2016. The amendment further
provides that, effective January 1, 2013, AII will receive a ceding commission of 31% of ceded written
premiums with respect to all Covered Business other than retail commercial package business, for which the
ceding commission will remain 34.375%. Lastly, with regards to the Specialty Program portion of Covered
Business only, excluding workers’ compensation business included in the AmTrust’s Specialty Program
segment from July 1, 2007 through December 31, 2012, AmTrust will be responsible for ultimate net loss
otherwise recoverable from Maiden Bermuda to the extent that the loss ratio to Maiden Bermuda, which shall
be determined on an inception to date basis from July 1, 2007 through the date of calculation, is between
81.5% and 95%. Above and below the deﬁned corridor, the Company will continue to reinsure losses at its
proportional 40% share per the Reinsurance Agreement.

F-55

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

The following tables summarize our quarterly ﬁnancial data:

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Maiden common

Mar 31
$463,052
20,378

2012 Quarters Ended
Sep 30
Jun 30
$475,555
$456,536
21,934
14,606

Dec 31
$504,622
(6,657)

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . .

20,377

14,541

21,919

(10,327)

Comprehensive income (loss) − attributable to Maiden

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings (loss) per common share attributable to
Maiden shareholders . . . . . . . . . . . . . . . . . . . . . .

Diluted earnings (loss) per common share attributable

to Maiden shareholders . . . . . . . . . . . . . . . . . . . .

47,167

19,250

63,802

(2,994)

0.28

0.20

0.30

(0.14)

Total revenues . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . .
Net income (loss) attributable to Maiden common

Mar 31
$370,378
19,345

2011 Quarters Ended
Sep 30
Jun 30
$440,656
$390,371
16,002
(24,372)

Dec 31
$439,035
17,552

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . .

19,342

(24,366)

16,004

17,544

Comprehensive income (loss) − attributable to Maiden

shareholders . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Basic earnings (loss) per common share attributable to
Maiden shareholders . . . . . . . . . . . . . . . . . . . . . .

Diluted earnings (loss) per common share attributable

to Maiden shareholders . . . . . . . . . . . . . . . . . . . .

24,212

(5,722)

12,918

6,841

0.27

(0.34)

0.22

0.25

0.24

F-56

MAIDEN HOLDINGS, LTD.
SUMMARY OF INVESTMENTS
OTHER THAN INVESTMENTS IN RELATED PARTIES
(in thousands of U.S. dollars)

December 31, 2012
Available-for-sale securities:

Amortized
Cost*

Fair Value

U.S. treasury bonds
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
U.S. agency bonds − mortgage-backed . . . . . . . . . . . . . . . . .
U.S. agency bonds − other . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . .
Non-U.S. government bonds
Other mortgage-backed bonds
. . . . . . . . . . . . . . . . . . . . . .
Corporate bonds . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Municipal bonds
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total available-for-sale ﬁxed maturities . . . . . . . . . . . . . . . .
Other investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total investments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

42,671
962,649
11,682
55,169
23,167
1,247,260
132,604
2,475,202
2,599
$2,477,801

43,931
992,174
13,089
57,433
24,068
1,354,154
133,848
2,618,697
2,901
$2,621,598

Schedule I

Amount at
Which Shown
in the
Balance Sheet

43,931
992,174
13,089
57,433
24,068
1,354,154
133,848
2,618,697
2,901
$2,621,598

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 of December 31, 2012 and 2011
(In thousands of U.S. dollars, except share and per share data)

Assets:
Fixed maturities, available-for-sale, at fair value (Amortized cost: $103,049) . . .
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
Preference shares − Series A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Common shares ($0.01 par value; 73,306,283 and 73,183,764 shares issued in
2012 and 2011, respectively; 72,343,947 and 72,221,428 shares outstanding
in 2012 and 2011, respectively)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive income . . . . . . . . . . . . . . . . . . . . . . . . . .
Retained earnings
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Treasury shares, at cost (2012 and 2011: 962,336 shares) . . . . . . . . . . . . . . . .
Total shareholders’ equity. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total liabilities and shareholders’ equity . . . . . . . . . . . . . . . . . . . . . . . .

2012

2011

$ 103,651
3,147
1,213,865
55,370
1,063
$1,377,096

—
550
983,816
137,733
233
$1,122,332

1,138
360,719
361,857

8,495
345,195
353,690

150,000

—

733
575,869
141,130
151,308
(3,801)
1,015,239
$1,377,096

732
579,004
64,059
128,648
(3,801)
768,642
$1,122,332

S-2

MAIDEN HOLDINGS, LTD.
CONDENSED STATEMENTS OF INCOME — PARENT COMPANY
For the Years Ended December 31, 2012, 2011 and 2010
(In thousands of U.S. dollars)

Schedule II

For the Year Ended December 31,
2011

2010

2012

Revenues:

Net investment income (loss) . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . .
Net realized and unrealized gains on investments

Expenses:

General and administrative expenses . . . . . . . . . . . . . . . . . .
Foreign exchange (gains) losses . . . . . . . . . . . . . . . . . . . . .

Loss before equity in earnings of consolidated subsidiaries
. . . .
Equity in earnings of consolidated subsidiaries . . . . . . . . . . . . .
Net income attributable to Maiden shareholders . . . . . . . . . .
Dividends on preference shares . . . . . . . . . . . . . . . . . . . . . . .
Net income attributable to Maiden common shareholders . . .

795
229
1,024

8,030
(225)
7,805
(6,781)
56,935
50,154
(3,644)
$46,510

408
—
408

10,806
31
10,837
(10,429)
38,953
28,524
—
$ 28,524

$ (118)
—
(118)

7,076
—
7,076
(7,194)
77,060
69,866
—
$69,866

S-3

Schedule II

MAIDEN HOLDINGS, LTD.
CONDENSED STATEMENTS OF CASH FLOWS — PARENT COMPANY
For the Years Ended December 31, 2012, 2011 and 2010
(In thousands of U.S. dollars)

Cash ﬂows provided by operating activities:

Net income attributable to Maiden shareholders

. . . . . . . . . . . . .

$ 50,154

$ 28,524

$ 69,866

2012

2011

2010

Adjustments to reconcile net income to cash provided by

operating activities:
Equity in earnings of consolidated subsidiaries
. . . . . . . . . . . .
Amortization of bond premium and discount . . . . . . . . . . . . . .
Net realized and unrealized gains on investments . . . . . . . . . . .
Foreign exchange (gains) losses
. . . . . . . . . . . . . . . . . . . . . .
Non-cash share compensation expense . . . . . . . . . . . . . . . . . .

(56,935)
786
(229)
(225)
1,347

(38,953)
—
—
31
1,307

(77,060)
—
—
—
1,015

Changes in assets − decrease (increase):
Balance due from subsidiaries . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

82,588
(829)

(36,414)
230

(4,209)
(57)

Changes in liabilities − (decrease) increase:
Accounts payable and accrued liabilities . . . . . . . . . . . . . . . . .
Balances due to subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . .

Net cash provided by operating activities

(1,579)
15,524
90,602

1,746
63,633
20,104

Cash ﬂows used in investing activities:

Purchases of ﬁxed-maturity securities − available-for-sale . . . . .
Proceeds from sales of ﬁxed-maturity

securities − available-for-sale . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from maturities and calls of ﬁxed maturity securities . .
Investment in subsidiaries . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by investing activities . . . . . . . .

(137,486)

9,452
24,427
(96,643)
(200,250)

—

—
—
148
148

387
36,485
26,427

—

—
—
(7,476)
(7,476)

Cash ﬂows used in ﬁnancing activities:

Preference shares − Series A issuance, net of issuance costs . . . .
Dividends paid on preference shares
. . . . . . . . . . . . . . . . . . .
Dividends paid to Maiden common shareholders . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
Issuance of common shares
Net cash provided by (used in) ﬁnancing activities . . . . . . . .
Net increase (decrease) in cash and cash equivalents . . . . . . . . . . . .
Cash and cash equivalents, beginning of year . . . . . . . . . . . . . . . . .
Cash and cash equivalents, end of year . . . . . . . . . . . . . . . . . . . . .

145,041
(3,644)
(29,630)
478
112,245
2,597
550
3,147

—
—
(20,921)
422
(20,499)
(247)
797
550

—
—
(18,394)
52
(18,342)
609
188
797

S-4

MAIDEN HOLDINGS, LTD.
SUPPLEMENTARY INSURANCE INFORMATION
(In thousands of U.S. dollars)

December 31, 2012

For the Year Ended December 31, 2012

Schedule III

Deferred
commission
and other
acquisition
expenses

Reserve for
loss and loss
adjustment
expenses

Unearned
premiums

Net
premiums
earned

Net
investment
income

Net loss and
loss
adjustment
expenses

Diversiﬁed Reinsurance . . $ 83,287 $1,139,179 $324,954 $ 795,341 $ — $ 583,970
AmTrust Quota Share

Amortization
of deferred
commission
and other
acquisition
expenses
$203,209

General and
administrative
expenses
$40,951

Net
premiums
written
$ 765,293

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

—
—
— 81,188
. . . . . . . . . . . . . . $270,669 $1,740,281 $936,497 $1,803,780 $81,188

521,924
79,178
—

153,530
33,852
—

727,781
280,658

503,915
107,628

494,633
183,745
—
$1,262,348

200,546
88,276
—
$492,031

1,949
737
10,167
$53,804

840,346
295,646
—
$1,901,285

December 31, 2011

For the Year Ended December 31, 2011

Deferred
commission
and other
acquisition
expenses

Reserve for
loss and loss
adjustment
expenses

Unearned
premiums

Net
premiums
earned

Net
investment
income

Net loss and
loss
adjustment
expenses

Diversiﬁed Reinsurance . . $ 98,712 $1,011,431 $348,131 $ 748,387 $ — $ 502,375
AmTrust Quota Share

Amortization
of deferred
commission
and other
acquisition
expenses
$200,239

General and
administrative
expenses
$36,374

Net
premiums
written
$ 798,037

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

—
—
— 74,891
. . . . . . . . . . . . . . $248,436 $1,398,438 $832,047 $1,552,428 $74,891

391,275
92,641
—

327,101
59,906
—

120,369
29,355
—

558,197
245,844

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

December 31, 2010

For the Year Ended December 31, 2010

Net loss and
loss
adjustment
expenses
Diversiﬁed Reinsurance . . $ 85,252 $ 971,317 $291,148 $ 601,254 $ — $394,604
AmTrust Quota Share

Reserve for
loss and loss
adjustment
expenses

Net
investment
income

Net
premiums
earned

Unearned
premiums

Deferred
commission
and other
acquisition
expenses

Amortization
of deferred
commission
and other
acquisition
expenses
$152,698

General and
administrative
expenses
$26,123

Net
premiums
written
$ 554,049

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

—
—
— 71,651
. . . . . . . . . . . . . . $203,631 $1,226,773 $657,556 $1,169,790 $71,651

284,124
82,284
—

222,812
32,644
—

92,155
26,224
—

445,081
123,455

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

S-5

Schedule IV

MAIDEN HOLDINGS, LTD.
SUPPLEMENTARY REINSURANCE INFORMATION
(In thousands of U.S. dollars)

For the Year Ended December 31,
2012 Premiums − General Insurance . . . .
2011 Premiums − General Insurance . . . .
2010 Premiums − General Insurance . . . .

(a)
Gross
$122,412
114,036
71,625

(b)
Ceded to other
companies
$99,707
89,076
70,224

(d)
Net amount
(a) − (b)+(c)
$1,901,285
1,723,521
1,227,831

Percentage of
amount to net
(c)/(d)
98.8%
98.6%
99.9%

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,
2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Current Year
$1,239,016
1,028,855
787,967

Prior Year
$ 23,332
14,199
(32,845)

Net loss and loss
adjustment expenses

Schedule VI

Paid loss and
loss adjustment
expenses
$1,015,309
880,004
631,334

S-7

Corpor ate Information

Board of Directors & Executive

Corpor ate Headquarters

Form 10-K /Investor Contact

Officers

Patrick J. Haveron
Executive Vice President

Ronald M. Judd
President of Maiden Global Holdings, Ltd.

Maiden Holdings, Ltd.
Maiden House
131 Front Street, 2nd Floor
Hamilton HM 12 Bermuda
Phone: 441 298 4900

A copy of the Maiden Holdings, Ltd. 2012
Annual Report on Form 10-K as filed
with the Securities and Exchange Com mis-
sion is available on the Company’s web-
site at www.maiden.bm. It is also available
from the Company at no charge. These
requests and other investor contacts
should be directed to Investor Relations
at the Company’s corporate office.

The Company’s principal operating sub-
sidiaries are located in Bermuda, the
United States and the United Kingdom.

Common Stock

The Company’s common stock trades on
the NASDAQ Global Select Market
under the symbol “MHLD.”

Annual Meeting

May 7, 2013
Hamilton, Bermuda

Tr ansfer Agent and Registr ar

Independent Auditors

American Stock Transfer &
Trust Company, LLC
6201 15th Avenue
Brooklyn, NY 11219
800 937 5449 or 718 921 8200

BDO USA, LLP
New York, NY

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

Reconciliation to U.S. GA AP

Reconciliation of net income attributable to Maiden to income from operations:

Net income attributable to Maiden
Add (subtract)
Foreign exchange (gains) losses
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, and cash and cash equivalents included in the funds withheld.

For the Year ended
December 31,

2012

2011

2010

in $ millions
$ 29

(2)
5
37
2–0—
—
2

—
5
34
20
15
2

1)
6
36
—
—
1

$ 105

$ 114

As at December 31,

2012

2011

2010

in $ millions

$ 2,622
82
132
168
26

$ 2,023
188
115
168
30

$ 1,880
96
90
168
119

$ 3,030

$ 2,524

$ 2,353

Maiden House

131 Front Street, 2nd Floor

Hamilton HM 12 Bermuda

P: 441 298 4900

F: 441 292 0471

maiden.bm