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Maiden signs loss portfolio transfer, other deals to improve capital position

Maiden Holdings Ltd. said its capital position has materially improved after it entered into a number of strategic transactions, including a loss portfolio transfer and adverse development agreement with Enstar Group Ltd.

Under the loss portfolio transfer and adverse development agreement, Enstar's Bermuda operating company, Cavello Bay Reinsurance Ltd., will assume liabilities for loss reserves as of Dec. 31, 2018, related to the terminated quota share agreement between Maiden's Bermuda operating company, Maiden Reinsurance Ltd., and AmTrust International Insurance Ltd., in excess of an about $2.18 billion retention up to $600.0 million, in exchange for a premium of $445 million. The deal with Enstar gives Maiden Reinsurance $155.0 million in adverse development cover over its carried AmTrust reserves at Dec. 31, 2018.

In connection with the loss portfolio transfer and adverse development agreement, Maiden and Enstar entered into a resolution of balances due under the sale of Maiden Reinsurance North America Inc. Maiden and Enstar have waived the post-closing adjustments procedures related to the sale and also agreed to cancel the $25 million excess of loss reinsurance contract between Maiden Reinsurance and Enstar on the Maiden Reinsurance North America loss reserves included in the transaction. As a result of these agreements, Maiden will recognize a net charge in its results of operations for the three months ended June 30 of $16.7 million.

Maiden also secured a $330.7 million commutation agreement of certain workers' compensation loss reserves to AmTrust Financial Services Inc. The commutation agreement covers losses incurred in accident years 2017 and 2018 under California workers' compensation policies and in accident year 2018 under New York workers' compensation policies. The policies were issued by AmTrust International Insurance affiliates and reinsured by Maiden Reinsurance.

Maiden also entered into a post-termination endorsement with AmTrust to allow operation of the loss portfolio transfer and adverse development agreement and supporting collateral agreements. The endorsement also amends the program loss corridor between the two companies under the terminated quota share deal to now include a maximum amount of $40.5 million. Additionally, it increases the required funding percentage for Maiden Reinsurance under the collateral arrangements to 105% from 102% of its obligations, subject to a minimum excess funding requirement of $54 million and amendment.

Settlement of funding related to the loss portfolio transfer and adverse development agreement and commutation agreement is expected to happen no later than Aug. 12. Maiden will pay Enstar about $7.3 million in interest related to the loss portfolio transfer and adverse development agreement premium back to Jan. 1. AmTrust will receive about $6.1 million in interest from Maiden related to the commuted reserves back to Jan. 1.