Maiden Holdings, Ltd. (NASDAQ:MHLD)

The market conditions in which we operate have historically been cyclical, experiencing periods 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.

 While natural and man-made catastrophes occur each year affecting reinsurance industry results, 2010 and the first quarter of 2011 experienced an increased level of significant natural and man-made catastrophes, negatively impacting overall industry performance. These events include major earthquakes in Chile in 2010, New Zealand in 2010 and 2011, the Japanese earthquake and tsunami in 2011 and the Deepwater Horizon explosion and oil spill in the Gulf of Mexico in 2010. Consistent with our business model, the Company experienced no losses from the 2010 catastrophe events and we anticipate minimal, if any, losses from the 2011 events.

In addition, the property and casualty industry invests significant portions of its premiums and retained underwriting profits in fixed income maturities, the yields on which continue to perform at historically low levels. Continued existence of these conditions will increasingly adversely impact the results of the property and casualty industry generally, placing additional pressure on companies underwriting results at a time that market conditions are not supportive of additional pricing measures which would stabilize underwriting trends.
 
Nonetheless, capital positions across the insurance and reinsurance industry appear to remain sufficiently strong at present.  As a result, despite the financial impact of the significant catastrophes along with the unfavorable pricing and investment environment, broad industry competitive conditions appear unlikely to significantly change in the immediately foreseeable future, although the ultimate impact remains unclear and is currently more uncertain in light of reinsurance industry performance in the first quarter of 2011. As market conditions continue to develop, we continue to maintain our adherence to underwriting standards by declining business when pricing, terms and conditions do not meet our underwriting standards. We believe that if such events continue, they could have a significant positive effect on competition and pricing.  We believe we are well positioned to take advantage of market conditions should the pricing environment become more favorable.