The neutral business profile reflects the geographic spread of the group's business throughout the United States, with a growing portion of its business reinsuring exposures outside the U.S., and the benefits of the quota share business model, which provide the group with more predictable losses as a result of the typically low-severity, high frequency nature of losses. Offsetting these rating factors are the customer concentration, with the AmTrust Reinsurance segment comprising approximately 70% of the group's business, and its modest position within the reinsurance market.ERM is appropriate for an organization of Maiden's size and complexity. It has a well-developed and embedded framework for assessing, managing and monitoring risk, clearly defined risk tolerances and generally manages its higher-risk products well. The adverse reserve development experienced by the group in recent years indicates that its management of the risks associated with reserves is not currently in line with the profile of those risks. The holding company's debt- to-total capital and debt-to-tangible capital ratios, adjusted to afford equity credit for preferred debt and with accumulated other comprehensive income (AOCI) removed, are within A.M. Best's guidelines at year-end 2017. Unadjusted leverage ratios are elevated, however, reflecting the predominance of hybrid securities in the capital structure. Interest coverage metrics historically have been in-line with guidelines, but were negative in 2017 as a result of the organization's net loss. A return of coverage metrics to a level that is within guidelines is expected in 2018. The negative outlook indicates that positive rating action is unlikely over the next 24 to 36 months; however, a positive change in the outlook could take place in the medium to long term if underwriting and operating results return to historical levels while balance sheet strength, business profile and ERM remain supportive of the current rating, with no significant further adverse development of loss reserves.
Negative rating actions could result if the group's operating and underwriting performance does not return to historical levels consistently over the near-to-medium term, from a substantive change in the group's relationship with its largest client that negatively impacts Maiden's balance sheet strength or prospective operating performance, from deterioration in the financial condition of MHLD, or from any material deterioration in risk-adjusted capitalization that negatively impacts A.M. Best's view of balance sheet strength.The following Long-Term IRs have been downgraded with the outlooks revised to negative from stable: Maiden Holdings, Ltd.— —to "bbb-" from "bbb" on $110 million 6.625% senior unsecured notes, due 2046 —to "bb" from "bb+" on $165 million 7.125% preferred non-cumulative stock —to "bb" from "bb+" on $150 million 8.25% preferred stock —to "bb" from "bb+" on $150 million 6.7% preferred stock Maiden Holdings North America, Ltd.— —to "bbb-" from "bbb" on $152.5 million 7.75% senior unsecured notes, due 2043 The following indicative Long-Term IRs under the shelf registration have been downgraded with the outlooks revised to negative from stable: Maiden Holdings, Ltd.— —to "bbb-" from "bbb" on senior unsecured debt —to "bb+" from "bbb-" on subordinated debt —to "bb" from "bb+" on preferred stock Maiden Holdings North America, Ltd.— —to "bbb-" from "bbb" on senior unsecured debt —to "bb+" from "bbb-" on senior subordinated debt —to "bb" from "bb+" on junior subordinated debt This press release relates to Credit Ratings that have been published on A.M. Best's website. For all rating information relating to the release and pertinent disclosures, including details of the office responsible for issuing each of the individual ratings referenced in this release, please see A.M. Best's Recent Rating Activity web page. For additional information regarding the use and limitations of Credit Rating opinions, please view Understanding Best's Credit Ratings . For information on the proper media use of Best's Credit Ratings and A.M. Best press releases, please view Guide for Media - Proper Use of Best's Credit Ratings and A.M. Best Rating Action Press Releases . A.M. Best is the world's oldest and most authoritative insurance rating and information source. For more information, visit www.ambest.com. Copyright © 2018 by A.M. Best Rating Services, Inc. and/or its affiliates. ALL RIGHTS RESERVED.