Compass Point Believes Premium Growth And Loss Ratio Support Thesis For Maiden

In a report published Friday, Compass Point analyst Ken Billingsley reiterated a Buy rating and $16.00 price target on Maiden (NASDAQ: MHLD).

In the report, Compass Point noted, “MHLD reported results that were in line with the consensus estimate for the quarter when adjusted for an increased provision related to a divested business in 2013. Strong premium growth lies at the heart of our recommendation of MHLD shares. The company getting solid NPW growth (8.6% in the quarter, and 27% when excluding the National General Quota share that was canceled in August of 2013).

"The Diversified segment is growing faster than we had anticipated due to opportunities in the U.S. and Europe. A major concern of investors is the company's concentration risk with AmTrust Financial Services (AFSI – Buy, $52 PT). While the business produced through the AmTrust Quota share is very profitable, investors should be pleased to see the Diversified segment growing at a faster pace, which will help to reduce the expected concentration risk from the AmTrust segment. The loss ratio was lower than we had expected in the quarter. This may have a lot to do with business mix shift, as the company focuses on the overall combined ratio of the business it writes (versus the loss ratio alone). However, we believe a lower loss ratio (which may come with a higher expense ratio) provides an extra cushion if results in a segment start to perform below expectations.”

Maiden closed on Thursday at $11.69.