Maiden Holdings & Units Receive Rating Action From A.M. Best
Maiden Holdings, Ltd. MHLD has recently received rating action from the credit rating giant A.M. Best. The rating agency has downgraded both Maiden Holdings and its downstream, intermediate holding company, Maiden Holdings North America, Ltd.’s Long-Term Issuer Credit Rating (Long-Term ICR) to “bbb-” from “bbb”. The credit rating giant has also downgraded the Long-Term Issue Credit Ratings (Long-Term IRs) of the aforementioned companies.
Further, the rating agency has downgraded the Financial Strength Rating to A- (Excellent) from A (Excellent) as well as the Long-Term ICRs to “a-” from “a” for Maiden Holdings’ insurance operating units namely Maiden Reinsurance Ltd. and Maiden Reinsurance North America, Inc. The outlook for all aforementioned ratings witnessed a revision from stable to negative.
Ratings Representation of Maiden Holdings and Units
Maiden Holdings witnessed a considerable decline in its balance sheet strength, due to lower surplus because of the weak performance in the company’s AmTrust Reinsurance business unit. Nonetheless, the group’s sustained operational performance, neutral business profile, adequate enterprise risk management and a solid balance sheet, which is considered to be robust by the rating agency, are represented by the above-mentioned ratings.
However, the revised negative outlooks denote the said decline in the balance sheet strength and weak underwriting and operating performance, which might result in negative rating action.
Factors Impacting Rating Action
The companies might witness rating downgrade if the said operating and underwriting performance does not bounce back to historical levels continuously over the near-to-medium term time frame. This apart, a significant change in the group’s association with the largest client or any material decline in risk-adjusted capitalization or deterioration of Maiden Holdings’ financial condition might impact the rating agency’s perception of balance sheet strength.
It is important to note here that the negative outlook signifies a slim chance of positive rating action over the next 24-36 months. Nonetheless, a favorable underwriting and operational performance (returning to historical levels) with the balance sheet strength, business profile and enterprise risk management supporting the current rating, can lead to positive outlook.
Zacks Rank and Share Price Movement
Maiden Holdings carries a Zacks Rank #5 (Strong Sell). Shares of the company have underperformed the industry year to date. The stock has lost 59.4% versus the industry’s rally of 11.8%. However, we expect sustained operational performance, better underwriting results and a solid capital and financial position to turn the stock around in the near term.
Stocks to Consider
Some better-ranked stocks from the insurance industry are Radian Group Inc. RDN, Alleghany Corporation Y and American Financial Group, Inc. AFG, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Radian Group offers mortgage and real estate products and services in the United States. The company delivered positive surprises in three of the last four quarters with an average beat of 7.87%.
Alleghany Corporation provides property and casualty reinsurance and insurance products in the United States and internationally. The company came up with positive surprises in two of the last four quarters with an average beat of 2.91%.
American Financial provides property and casualty insurance products in the United States. The company pulled off positive surprises in all the trailing four quarters with an average beat of 26.31%.
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