Maiden flight
Now, with $2.8 billion in assets and an increasingly international platform, Maiden is ready to spread its wings.
Maiden Re executives would be forgiven for dwelling on how far they have come in two years.
In November 2008, Maiden Re was formed when Maiden Holdings (Maiden) bought GMAC Re, the successful reinsurance arm of the then troubled financial services giant GMAC.
Now, the company—built largely on the former structure of GMAC Re and its 120 employees—is free to fulfil its true potential.
It is enjoying excellent operating results and developing new operating platforms in Europe and North America—the world is now their oyster.
It is all a far cry from the summer of 2008 when uncertainty hung over GMAC Re, before Maiden stepped in to acquire it.
Art Raschbaum, CEO of Maiden and formerly the CEO of GMAC Re, says the last two years of GMAC Re’s existence as a unit of GMAC brought “severe challenges”.
Despite having a 25-year history as a successful enterprise, expansion was difficult due to the financial strain its parent GMAC was under.
“Moving out of the GMAC umbrella and into Maiden meant a lot of the overhang left,” Raschbaum says. “We’ve seen growth and opportunity flow—both have been very positive.”
For Raschbaum, the potential of this reinsurance unit, which had built successful relationships with regional and specialty insurers in the US and Europe, was clear.
The acquisition by year-old start-up Maiden Holdings was an excellent fit for both sides as Maiden had been created with the intention of writing reinsurance business for regional and specialty insurers in the US and Europe—a strategy that was ‘fast-forwarded’ by the GMAC Re purchase.
While Raschbaum has his eyes squarely fixed on the future of Maiden, he retains sight of the heritage of GMAC Re. Maiden, he says, gains “almost all” of its identity from the heritage of GMAC Re.
It is true that Maiden Holdings does not have the demeanour of a start-up. Long-standing partnerships are its hallmark and it serves approximately 90 regional US insurance companies, and has long-term strategic quotashare relationships with others such as ACAC, with a focus on client service and dedicated trust products.
Its range of products also have the depth and diversity of a mature company and include broker and direct treaty, accident and health, excess and surplus lines, facultative and specialty risk reinsurance. Maiden’s results have risen steadily in the two years since the takeover.
Operating profits in the second quarter rose by about 25 percent and the company has also grown investment income. CEO Art Raschbaum attributes the success to the company‘s unusual structure and client base.
Although the company is located in the traditional home of property catastrophe underwriters, Maiden has always studiously avoided cat risk wherever it can. “We are maintaining a lower exposure to catastrophe,” Raschbaum says, adding that this is essential in order to maintain effective and efficient pricing for clients.
“Our underwriting is delivered in more predictable layers of protection. Through a lower-volatility business and de-emphasising of catastrophic risk, we have avoided losses from the recent large industry events such as the Chilean earthquake and the Deepwater Horizon oil spill.”
Maiden defines its business as looking after regional and specialty insurers, those with steady and consistent business of their own who expect and benefit from close, long-lived relationships with their reinsurer.
The company’s business among regional and specialty US insurers is a tried and tested formula, but it is starting to make strides in new territories, including its recently announced acquisition of GMAC’s International Insurance Services reinsurance businesses which will give Maiden Re a solid platform on the ground in Europe.
This new business, which will be underwritten and managed through Bermuda, is expected to provide “enhanced revenue streams, greater diversity and longer-term opportunities”. It will also be an added benefit to clients who will face pressure from Solvency II.
“We do believe that, while we don’t see it as a panacea, there will be regional specialty companies who do require capital. The implementation of Solvency II is a catalyst for this and we would like to be a solution provider in the European market.”
It is an opportunity, Raschbaum says, for Maiden to leverage its key differentiators, which he defines as:
- Multifunctional teams: groups of underwriters with rather more diverse skills than would normally be seen in reinsurance. This enables Maiden to look after the whole range of a clients’ needs rather than a single narrow tranche.
- Individual collateral trusts: Raschbaum describes these as an “exceptional reinsurance security” which allows clients to know that their assets are protected for the full value.
“Others who provide it outside of regulatory requirements generally do so as an aggregate trust. It is not as an individual trust in the way that we do it,” Raschbaum explains. - Long-term close relationships, which form a significant proportion of Maiden’s client-base. Its average client relationship is 6.4 years, but many in the portfolio stretch back 15 years or more.
It is an unusual formula in reinsurance, but one which Raschbaum says is more effective while supporting regional and specialty insurers.
“These are the differentiators that enable Maiden to bring a specialist approach to our clients who, as mainly regional and specialty insurers, have unique needs and are affected by economic trends in different ways. For example, there are unique capital pressures for regional insurers.”
Raschbaum sees opportunities ahead including several “bright spots” in specific lines of US insurance business, but he prefers to play the long game.
“We don’t tend to move from one line to the next, as we are a long-term provider of support for diversified lines of business,” he says.
“We feel pretty good about continuing to build out the business and provide capital solutions to the European regionals, once the acquisition of GMAC International Services is completed. However it will be done as a long-term, broad-based provider of support.”
Maiden’s expansion through organic growth and acquisition, coupled with its low 3.5% operating expense ratio, means that the company and its clients are expecting to reach new heights in the years ahead.
