Maiden Holdings Ltd (MHLD)

Kestrel Group’s Maiden Voyage

Maiden Holdings (MHLD) is a reinsurance company in run-off. This means it is not writing new business and is instead winding down its old policies. Why would we invest in this? The interesting part isn’t Maiden, it’s what’s happening through Maiden.

Maiden is merging with a private company called Kestrel Group, a fast-growing insurance fronting platform run by the same team that built State National (SNC) from scratch and sold it for $900 million to Markel in 2017. If you buy MHLD today, you're essentially buying into Kestrel ahead of its public debut.

This is an under-the-radar micro-cap opportunity in the insurance space that has the potential to be a long term compounder and multi-bagger for early investors.

Kestrel’s Business Model

Kestrel operates as a fronting carrier. In plain English, that means they let MGAs (underwriting specialists) use their licenses across multiple states and insurance lines to write policies, while the risk gets passed off to big reinsurers or insurance-linked securities (ILS) investors (who lack said licensing themselves). They are being paid to facilitate the passing of the premiums and risk associated with insurance policies. Kestrel earns a steady fee on all the premiums written without taking on much risk themselves. It’s a capital-light model that scales quickly and produces strong returns.

To do this at scale, you need licensing, credibility, and regulatory trust. Kestrel achieves this by partnering with AmTrust subsidiaries, which gives them broad licensing across all 50 states without needing to build their own carrier network from scratch. They’ve also secured an A- rating from AM Best and are arguably one of the most credible teams in the industry given the leadership team’s track record.

Leadership

The company is led by father-son duo Terry and Luke Ledbetter. The Ledbetter family founded State National in 1973 in Bedford, Texas. They pioneered the “fronting model” and grew from a small family business into a nearly billion dollar organization when acquired. They are now using that playbook with Kestrel – but with better tech, more diverse lines of business, and a stronger network.

Along with the Ledbetter’s Kestrel has recruited a number of the key members of State National. They have already launched seven programs across areas like workers' comp, general liability, cyber, and commercial property. A key part of the strategy is operating in markets like these that are more niche resulting in less competition and more pricing power than larger, more competitive markets, such as South-East Hurricane risk.

Overview of the Merger

This is a reverse merger. Kestrel is taking over Maiden’s public listing (not too dissimilar from a SPAC transaction), with the new combined company to be named Kestrel Group and listed under the ticker "KG". Maiden shareholders will own about 65% of the combined company post-merger, expected to close mid-2025.

There’s also $56 million in deferred tax assets on the books, value that isn’t yet recognized but could be realized over time.

Importantly, Maiden took a large non-cash write-down in late 2024 to align its asset values, essentially clearing the decks before the merger. This will result in a one-time gain for Kestrel at closing but shouldn’t be viewed as recurring earnings.

Near Term Growth and Valuation

This is a rare setup: top-tier operators running a micro-cap public company. They’ve done it before and now have better tools and broader reach. They’re targeting a space that’s grown fast, is still evolving, and where strong execution can really separate the winners.

The fronting market is getting more crowded, but barriers remain high, especially around licensing and trust. Kestrel’s management and setup give it a real edge. And given the growth of their programs, they’re likely to hit their goal of $1 billion in written premium by 2026. That translates to about $25 million in EBITDA.

At 15x 2026 EBITDA (lower end of range of recent comparable transactions), the stock could be worth around $1.30 per share or roughly 30% upside from current levels.

This is a short-term valuation exercise to ensure we are paying a fair price, but the real value here is over the longer term.

Long-Term Growth Potential

I believe Kestrel has the potential to become a $1B+ business (multi-bagger from todays’ levels), similar to State National (SNC), which was acquired by Markel in 2017 for $880M when it was writing ~$1.2B in premium (acquired at roughly 70% of GWP).

The fronting market has expanded meaningfully since 2017, Gallagher Re estimates it reached $28B in 2024, up 26% YoY. Even assuming a more measured 7% CAGR, the market could hit $40B within five years. A 3% market share would put Kestrel at ~$1.2B in GWP, right where SNC was when it was acquired for $880 million.

It’s still early, Kestrel only wrote $143M in premium last year, but this is a bet on a proven team operating in a large and growing market.

Risks

If the deal falls through, you’re left with a runoff business. Maiden has had a spotty reserving history, so there’s always a risk of further surprises. And if insurance markets soften, growth could take longer than expected.

Conclusion

This is a bet on a proven team executing a familiar strategy, but with better tools and a cleaner setup. Maiden is just the wrapper. The real story is Kestrel, which has multi-bagger potential over time as they scale.

Disclaimer

This publication should not be construed as investment advice. All assertions are solely the opinion of the author. The author may hold positions in the securities discussed or advise others that hold positions in the securities discussed. This publication is worked on during free-time, which reduces the amount of time and depth that can be spent on research and due diligence. Do your own research.