Max Capital Group Ltd. Reports Third-Quarter 2009 Earnings
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Book Value per Diluted Share increased by 12.8% to $26.54
HAMILTON, Bermuda--(BUSINESS WIRE)-- Max Capital Group Ltd. (NASDAQ: MXGL; BSX: MXGL BH) today reported net income of $95.3 million, or $1.64 per diluted share for the quarter ended September 30, 2009, compared to a net loss of $163.2 million, or $2.89 per diluted share for the quarter ended September 30, 2008.
Net operating income for the quarter ended September 30, 2009 was $53.7 million, or $0.92 per diluted share, compared to a net operating loss of $144.7 million, or $2.57 per diluted share for the quarter ended September 30, 2008. Annualized net operating return on average shareholders' equity for the quarter ended September 30, 2009 was 14.8%.
W. Marston (Marty) Becker, Chairman and Chief Executive Officer of Max Capital Group Ltd., said: "Our strong third quarter results reflect positive underwriting performance from all segments and a significant increase in book value per share. Max's underwriting results have benefited from the continued build out of our global platforms in both the U.S. and at Lloyd's, and a benign Atlantic hurricane season. An improvement in the investment market has lifted the fair value of our investment portfolio, contributing to the substantial book value increase for the quarter."
Highlights for the Quarter Ended September 30, 2009 include:
-- Gross premiums written increased by $59.6 million (or 28.9%) to $265.9
million, net premiums written increased $72.4 million (or 65.7%) to
$182.6 million and net premiums earned increased $66.4 million (or
46.9%) to $208.0 million compared to 2008
-- Property & casualty combined ratio improved 8.1 percentage points to
90.9% compared to 2008
-- Net favorable development on prior year loss reserves of $15.2 million
-- Net gains on other investments of $23.3 million compared to a net loss
of $158.8 million in 2008
-- Net operating income of $53.7 million or $0.92 per diluted share,
representing an annualized net operating return on average shareholders'
equity of 14.8%
-- Book value per diluted share increased by 12.8% during the quarter to
$26.54 at September 30, 2009
Gross premiums written from property and casualty underwriting for the quarter ended September 30, 2009 were $265.8 million, generated by the segments as follows: Bermuda/Dublin insurance $81.1 million; Bermuda/Dublin reinsurance $94.1 million; U.S. specialty $69.4 million; and Max at Lloyd's $21.1 million.
Segment combined ratios were 80.2% for Bermuda/Dublin insurance, 94.9% for Bermuda/Dublin reinsurance, 99.7% for U.S. specialty and 84.2% for Max at Lloyd's for the quarter ended September 30, 2009.
Gross premiums written increased by $0.2 million (or 0.2%) for Bermuda/Dublin insurance, $21.6 million (or 29.8%) for Bermuda/Dublin reinsurance and $16.5 million (or 31.2%) for U.S. specialty compared with the quarter ended September 30, 2008. There were no new contracts written within the life and annuity segment during the quarters ended September 30, 2009 and 2008.
Highlights for the Nine Months Ended September 30, 2009 include:
-- Gross premiums written increased $214.5 million (or 24.3%) to $1,096.7
million, net premiums written increased $137.0 million (or 23.5%) to
$719.3 million and net premiums earned increased $115.1 million (or
22.5%) to $627.1 million compared to 2008
-- Property & casualty combined ratio rose 1.4 percentage points to 90.5%
compared to 2008
-- Net favorable development on prior year loss reserves of $47.5 million
-- Net gains on other investments of $62.7 million compared to a net loss
of $145.0 million in 2008
-- Net operating income of $148.4 million or $2.57 per diluted share,
representing an annualized net operating return on average shareholders'
equity of 14.0%
-- Book value per diluted share increased by 18.2% to $26.54 at September
30, 2009
Gross premiums written from property and casualty underwriting for the nine months ended September 30, 2009 were $1,054.9 million, generated by the segments as follows: Bermuda/Dublin insurance $302.7 million; Bermuda/Dublin reinsurance $422.3 million; U.S. specialty $219.3 million; and Max at Lloyd's $110.6 million.
Segment combined ratios were 81.6% for Bermuda/Dublin insurance, 93.0% for Bermuda/Dublin reinsurance, 99.5% for U.S. specialty and 89.9% for Max at Lloyd's for the nine months ended September 30, 2009.
Gross premiums written increased $26.4 million (or 9.6%) for Bermuda/Dublin insurance, $44.8 million (or 11.9%) for Bermuda/Dublin reinsurance and $85.1 million (or 63.4%) for U.S. specialty compared with the nine months ended September 30, 2008. Gross premiums written for the life and annuity segment were $41.7 million for the nine months ended September 30, 2009, a decrease of $52.6 million compared with the nine months ended September 30, 2008.
Special Items
Presented separately from general and administrative expenses is the net benefit associated with the Company's merger and acquisition activities, which resulted in a gain of $41.4 million and $0.5 million for the three months ended September 30, 2009 and 2008, respectively. On July 9, 2009, the Company received a $50.0 million termination fee in accordance with the terms of the amalgamation agreement with IPC Holdings, Ltd. The net gain of $41.4 million, after deducting $8.6 million of expenses, is included in the Company's results for the three months ended September 30, 2009.
Investments and Balance Sheet
Cash and fixed maturity investments were $5.0 billion as of September 30, 2009, an increase of $425.5 million from December 31, 2008. Other investments were $389.5 million as of September 30, 2009 representing 7.2% of invested assets, a decrease from 14.1% of invested assets as at December 31, 2008. The Company's liquidity position at September 30, 2009 is strong, with 70.2% or $3.5 billion of the Company's $5.0 billion cash and fixed maturities portfolio held in cash, government and government agency-backed securities, or AAA-rated securities. The Company recognized other-than-temporary impairment losses through earnings of $0.1 million for the three months ended September 30, 2009, compared to impairment losses totaling $13.8 million during the same period in 2008. The decline in net investment income from a year ago reflects lower yields on the higher than normal cash and cash equivalents balance held by the Company as it rebalances its asset allocations and positions its portfolios for the changing fixed income markets.
During the quarter ended September 30, 2009, the Company committed to holding certain invested assets to maturity. The resulting 'held to maturity' portfolio is recorded at amortized cost, rather than at fair value. The fair value of those securities reclassified as held to maturity was $952.7 million on the date of reclassification, and this became the new cost base. The Company believes this strategy will reduce the volatility to shareholders' equity caused by the recording of fair value movements within shareholders' equity. The portfolio's subsequent unrealized gain in fair value not reflected in the Company's financial statements was $43.0 million at September 30, 2009, representing an increase to book value of 2.8% at September 30, 2009.
During the three and nine months ended September 30, 2009 the Company has significantly reduced its external borrowings. Total debt has been reduced by $375.0 million from $466.4 million at December 31, 2008 to $91.4 million at September 30, 2009.
Shareholders' equity was $1,546.7 million at September 30, 2009. Book value per share at September 30, 2009 was $27.13, compared to $24.09 at June 30, 2009, an increase of 12.6%. Diluted book value per share at September 30, 2009 was $26.54 compared to $23.53 at June 30, 2009, an increase of 12.8%.
A copy of the Company's financial supplement for the third quarter will be available on the Company's website at www.maxcapgroup.com shortly after the release of earnings.
The Company will host a conference call on Wednesday, November 4, 2009 at 10:00am (ET) to discuss this release with interested investors and shareholders. The conference call can be accessed via telephone by dialing 1-888-679-8035 (toll-free U.S.) or 1-617-213-4848 (international) and using access code 98165506. Live broadcast of the conference call will also be available through the Company's website at www.maxcapgroup.com.
Operating from offices in Bermuda, Ireland, the USA and at Lloyd's, Max Capital Group Ltd. is a global enterprise dedicated to providing diversified specialty insurance and reinsurance products to corporations, public entities, property and casualty insurers, and life and health insurers.
In presenting the Company's results, management has included and discussed net operating income per diluted share, net operating return on average shareholders' equity, book value per share and diluted book value per share. Such measures are "non-GAAP financial measures" as defined in Regulation G. Management believes that these non-GAAP financial measures, which may be defined differently by other companies, allow for a more complete understanding of the Company's business. These measures, however, should not be viewed as a substitute for those determined in accordance with GAAP. The reconciliation of such measures to their respective most directly comparable GAAP financial measures is presented in the attached financial information in accordance with Regulation G.
This release includes statements about future economic performance, finances, expectations, plans and prospects of Max Capital Group Ltd. that constitute forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those suggested by such statements. For further information regarding cautionary statements and factors affecting future results, please refer to the Company's most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q filed subsequent to the Annual Report and other documents filed by the Company with the SEC. The Company undertakes no obligation to update or revise publicly any forward-looking statement whether as a result of new information, future developments or otherwise.
MAX CAPITAL GROUP LTD.
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States
Dollars, except per share and share
amounts)
September 30, 2009 December 31, 2008
(Unaudited)
ASSETS
Cash and cash equivalents $ 1,056,011 $ 949,404
Fixed maturities, trading at fair 74,337 61,820
value
Fixed maturities, available for 2,872,146 3,592,039
sale at fair value
Fixed maturities, held to maturity
at amortized cost (fair value 1,026,244 -
$1,069,245)
Other investments, at fair value 389,515 753,658
Accrued interest income 52,145 52,882
Premiums receivable 546,195 554,845
Losses and benefits recoverable 985,614 846,622
from reinsurers
Deferred acquisition costs 66,451 51,337
Prepaid reinsurance premiums 206,924 192,889
Trades pending settlement 38,217 85,727
Other assets 114,947 110,772
Total assets $ 7,428,746 $ 7,251,995
LIABILITIES
Property and casualty losses $ 3,159,156 $ 2,938,171
Life and annuity benefits 1,415,836 1,366,976
Deposit liabilities 152,638 219,260
Funds withheld from reinsurers 142,384 164,157
Unearned property and casualty 676,342 574,134
premiums
Reinsurance balances payable 151,615 160,686
Accounts payable and accrued 92,722 81,916
expenses
Bank loans - 375,000
Senior notes 91,379 91,364
Total liabilities 5,882,072 5,971,664
SHAREHOLDERS' EQUITY
Preferred shares (par value $1.00)
20,000,000 shares authorized;
no shares issued or outstanding - -
Common shares (par value $1.00)
200,000,000 shares authorized;
57,013,063 (2008 - 55,805,790) 57,013 55,806
shares issued and outstanding
Additional paid-in capital 773,923 763,391
Accumulated other comprehensive 41,602 (45,399 )
income (loss)
Retained earnings 674,136 506,533
Total shareholders' equity 1,546,674 1,280,331
Total liabilities and $ 7,428,746 $ 7,251,995
shareholders' equity
Book Value Per Share $ 27.13 $ 22.94
Diluted Book Value Per Share $ 26.54 $ 22.46
Diluted Shares Outstanding 58,272,865 57,017,157
MAX CAPITAL GROUP LTD.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
(Expressed in thousands of United States Dollars, except per share and share amounts)
Three Months Ended September 30 Nine Months Ended September 30
2009 2008 2009 2008
REVENUES
Gross premiums $ 265,886 $ 206,260 $ 1,096,668 $ 882,186
written
Reinsurance premiums (83,290 ) (96,061 ) (377,338 ) (299,851 )
ceded
Net premiums written $ 182,596 $ 110,199 $ 719,330 $ 582,335
Earned premiums $ 329,869 $ 238,378 $ 993,871 $ 760,676
Earned premiums (121,853 ) (96,789 ) (366,788 ) (248,665 )
ceded
Net premiums earned 208,016 141,589 627,083 512,011
Net investment 42,830 45,265 125,073 137,398
income
Net gains (losses) 23,275 (158,756 ) 62,693 (144,990 )
on other investments
Net realized gains
(losses) on fixed 1,253 (3,793 ) 1,747 (1,024 )
maturities
Total
other-than-temporary - (13,757 ) (5,190 ) (16,887 )
impairment losses
Portion of loss
recognized in other (139 ) - 3,037 -
comprehensive income
(loss), before taxes
Net impairment
losses recognized in (139 ) (13,757 ) (2,153 ) (16,887 )
earnings
Other income 819 (423 ) 3,099 1,001
Total revenues 276,054 10,125 817,542 487,509
LOSSES AND EXPENSES
Net losses and loss 131,778 106,834 378,729 278,585
expenses
Claims and policy 14,378 14,000 84,117 137,175
benefits
Acquisition costs 27,997 13,896 73,686 35,743
Interest expense 5,971 4,501 14,654 20,547
Net foreign exchange 406 1,971 (6,474 ) 1,984
losses (gains)
Merger and (41,350 ) (500 ) (31,342 ) 3,488
acquisition expenses
General and
administrative 40,372 31,837 115,537 90,048
expenses
Total losses and 179,552 172,539 628,907 567,570
expenses
INCOME (LOSS) BEFORE 96,502 (162,414 ) 188,635 (80,061 )
TAXES
Income tax expense 1,176 773 5,012 1,174
NET INCOME (LOSS) 95,326 (163,187 ) 183,623 (81,235 )
Change in net
unrealized gains and
losses on fixed 95,794 (40,127 ) 66,629 (108,939 )
maturities, net of
tax
Foreign currency
translation (4,462 ) (9,116 ) 20,372 (17,469 )
adjustment
COMPREHENSIVE INCOME $ 186,658 $ (212,430 ) $ 270,624 $ (207,643 )
(LOSS)
Net income per share $ 1.67 $ (2.89 ) $ 3.22 $ (1.43 )
- basic
Net income per $ 1.64 $ (2.89 ) $ 3.18 $ (1.43 )
diluted share (1)
Net operating income $ 0.92 $ (2.57 ) $ 2.57 $ (1.03 )
per diluted share
Weighted average
shares outstanding - 57,233,115 56,385,134 56,978,901 56,660,457
basic
Weighted average
shares outstanding - 58,210,501 56,385,134 57,677,996 56,660,457
diluted (1)
(1) In accordance with U.S. generally accepted accounting principles, diluted earnings
per share calculations use weighted average common
shares outstanding - basic, for periods with a net loss
MAX CAPITAL GROUP LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
(Expressed in thousands of United States Dollars)
Nine Months Ended September 30
2009 2008
Common shares
Balance, beginning of period $ 55,806 $ 57,515
Issuance of common shares, net 1,529 2,315
Repurchase of shares (322 ) (3,860 )
Balance, end of period 57,013 55,970
Additional paid-in capital
Balance, beginning of period 763,391 844,455
Issuance of common shares, net 457 2,677
Stock based compensation expense 16,124 14,726
Repurchase of shares (6,049 ) (102,380 )
Balance, end of period 773,923 759,478
Accumulated other comprehensive income (loss)
Balance, beginning of period (45,399 ) (20,341 )
Holding gains (losses) on available for sale 66,650 (122,677 )
securities arising in period, net of tax
Net realized losses on available for sale 3,016 13,738
securities included in net income, net of tax
Portion of other-than-temporary impairment
losses recognised in other comprehensive (3,037 ) -
income,
net of tax
Foreign currency translation adjustment 20,372 (17,469 )
Balance, end of period 41,602 (146,749 )
Retained earnings
Balance, beginning of period 506,533 702,265
Net income (loss) 183,623 (81,235 )
Dividends paid (16,020 ) (15,247 )
Balance, end of period 674,136 605,783
Total shareholders' equity $ 1,546,674 $ 1,274,482
MAX CAPITAL GROUP LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Expressed in thousands of United States Dollars)
Nine Months Ended September 30
2009 2008
OPERATING ACTIVITIES
Net income (loss) $ 183,623 $ (81,235 )
Adjustments to reconcile net income (loss) to
net cash provided by operating activities:
Stock based compensation 16,124 14,726
Amortization of premium on fixed maturities 2,503 3,771
Accretion of deposit liabilities 2,078 3,649
Net (gains) losses on other investments (62,693 ) 144,990
Net realized (gains) losses on fixed maturities (1,747 ) 1,024
Net impairment losses recognized in earnings 2,153 16,887
Changes in:
Accrued interest income 820 1,461
Premiums receivable 12,894 (72,295 )
Losses and benefits recoverable from reinsurers (130,985 ) (140,869 )
Deferred acquisition costs (13,645 ) (7,381 )
Prepaid reinsurance premiums (11,907 ) (51,004 )
Other assets (2,624 ) 17,135
Property and casualty losses 183,163 247,334
Life and annuity benefits 508 55,057
Funds withheld from reinsurers (21,773 ) (10,306 )
Unearned property and casualty premiums 92,046 121,510
Reinsurance balances payable (10,515 ) 48,358
Accounts payable and accrued expenses 9,828 36,821
Cash provided by operating activities 249,851 349,633
INVESTING ACTIVITIES
Purchases of available for sale securities (783,451 ) (630,760 )
Sales of available for sale securities 175,465 261,290
Redemptions of available for sale securities 479,310 441,634
Purchases of trading securities (40,691 ) -
Sales of trading securities 28,887 -
Redemptions of trading securities 5,094 -
Purchases of held to maturity securities (33,647 ) -
Net sales of other investments 462,501 28,251
Acquisition of subsidiary, net of cash acquired - (29,941 )
Cash provided by investing activities 293,468 70,474
FINANCING ACTIVITIES
Net proceeds from issuance of common shares 1,986 4,992
Repurchase of common shares (6,371 ) (106,240 )
Net repayments of bank loans (375,000 ) (35,000 )
Dividends paid (16,020 ) (15,247 )
Additions to deposit liabilities 12,422 15,762
Payment of deposit liabilities (80,748 ) (21,011 )
Cash used in financing activities (463,731 ) (156,744 )
Effect of exchange rate on cash 27,019 (8,090 )
Net increase in cash and cash equivalents 106,607 255,273
Cash and cash equivalents, beginning of period 949,404 397,656
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 1,056,011 $ 652,929
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid totaled $4,943 and $14,892 for the nine months ended September 30,
2009 and 2008, respectively.
Corporate taxes paid totaled $310 and $185 for the nine months ended September
30, 2009 and 2008, respectively.
MAX CAPITAL GROUP LTD.
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA-NINE MONTHS ENDED SEPTEMBER 30, 2009 (Unaudited)
(Expressed in thousands of United States Dollars)
Year to Date Life &
Segment Property & Casualty Annuity Corporate Consolidated
Information:
Bermuda/Dublin
Insurance Reinsurance U.S. Max at Total Reinsurance
Specialty Lloyd's
Gross premiums $ 302,727 $ 422,296 $ 219,268 $ 110,629 $ 1,054,920 $ 41,748 $ - $ 1,096,668
written
Reinsurance (146,076 ) (80,574 ) (118,579 ) (31,963 ) (377,192 ) (146 ) - (377,338 )
premiums ceded
Net premiums $ 156,651 $ 341,722 $ 100,689 $ 78,666 $ 677,728 $ 41,602 $ - $ 719,330
written
Earned $ 307,709 $ 364,994 $ 185,609 $ 93,811 $ 952,123 $ 41,748 $ - $ 993,871
premiums
Earned (157,710 ) (74,711 ) (111,682 ) (22,539 ) (366,642 ) (146 ) - (366,788 )
premiums ceded
Net premiums 149,999 290,283 73,927 71,272 585,481 41,602 - 627,083
earned
Net investment 16,861 29,607 4,549 3,216 54,233 37,626 33,214 125,073
income
Net gains on
other 3,537 8,467 - - 12,004 29,146 21,543 62,693
investments
Net realized
gains (losses) - - 148 2,587 2,735 - (988 ) 1,747
on fixed
maturities
Net impairment
losses - - - - - - (2,153 ) (2,153 )
recognized in
earnings
Other income 1,238 12 272 475 1,997 - 1,102 3,099
Total revenues 171,635 328,369 78,896 77,550 656,450 108,374 52,718 817,542
Net losses and 106,029 192,756 46,500 33,444 378,729 - - 378,729
loss expenses
Claims and
policy - - - - - 84,117 - 84,117
benefits
Acquisition (1,503 ) 53,496 5,873 14,797 72,663 1,023 - 73,686
costs
Interest - 2,400 - - 2,400 2,803 9,451 14,654
expense
Net foreign - - - (5,124 ) (5,124 ) - (1,350 ) (6,474 )
exchange gains
Merger and
acquisition - - - - - - (31,342 ) (31,342 )
expenses
General and
administrative 17,825 23,604 21,195 15,856 78,480 2,180 34,877 115,537
expenses
Total losses 122,351 272,256 73,568 58,973 527,148 90,123 11,636 628,907
and expenses
Income before $ 49,284 $ 56,113 $ 5,328 $ 18,577 $ 129,302 $ 18,251 $ 41,082 $ 188,635
taxes
Loss Ratio (a) 70.7 % 66.4 % 62.9 % 46.9 % 64.7 %
Combined Ratio 81.6 % 93.0 % 99.5 % 89.9 % 90.5 %
(b)
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA-THREE MONTHS ENDED SEPTEMBER 30, 2009 (Unaudited)
(Expressed in thousands of United States Dollars)
Quarter Life &
Segment Property & Casualty Annuity Corporate Consolidated
Information:
Bermuda/Dublin
Insurance Reinsurance U.S. Max at Total Reinsurance
Specialty Lloyd's
Gross premiums $ 81,134 $ 94,118 $ 69,419 $ 21,087 $ 265,758 $ 128 $ - $ 265,886
written
Reinsurance (41,884 ) (11,106 ) (26,259 ) (4,015 ) (83,264 ) (26 ) - (83,290 )
premiums ceded
Net premiums $ 39,250 $ 83,012 $ 43,160 $ 17,072 $ 182,494 $ 102 $ - $ 182,596
written
Earned $ 103,961 $ 128,458 $ 68,175 $ 29,147 $ 329,741 $ 128 $ - $ 329,869
premiums
Earned (54,814 ) (25,367 ) (37,074 ) (4,572 ) (121,827 ) (26 ) - (121,853 )
premiums ceded
Net premiums 49,147 103,091 31,101 24,575 207,914 102 - 208,016
earned
Net investment 5,898 10,404 1,461 1,749 19,512 13,143 10,175 42,830
income
Net gains on
other 1,298 3,040 - - 4,338 11,932 7,005 23,275
investments
Net realized
gains (losses) - - - 1,400 1,400 - (147 ) 1,253
on fixed
maturities
Net impairment
losses - - - - - - (139 ) (139 )
recognized in
earnings
Other income 91 - 52 (33 ) 110 - 709 819
Total revenues 56,434 116,535 32,614 27,691 233,274 25,177 17,603 276,054
Net losses and 31,756 68,728 21,266 10,028 131,778 - - 131,778
loss expenses
Claims and
policy - - - - - 14,378 - 14,378
benefits
Acquisition 369 20,299 1,926 5,250 27,844 153 - 27,997
costs
Interest - 1,706 - - 1,706 2,349 1,916 5,971
expense
Net foreign
exchange - - - 42 42 - 364 406
losses
Merger and
acquisition - - - - - - (41,350 ) (41,350 )
expenses
General and
administrative 7,281 8,857 7,804 5,423 29,365 829 10,178 40,372
expenses
Total losses 39,406 99,590 30,996 20,743 190,735 17,709 (28,892 ) 179,552
and expenses
Income before $ 17,028 $ 16,945 $ 1,618 $ 6,948 $ 42,539 $ 7,468 $ 46,495 $ 96,502
taxes
Loss Ratio (a) 64.6 % 66.7 % 68.4 % 40.8 % 63.4 %
Combined Ratio 80.2 % 94.9 % 99.7 % 84.2 % 90.9 %
(b)
(a) The loss ratio is calculated by dividing net losses and loss expenses by
net premiums earned.
The combined ratio is calculated by dividing the sum of net losses and loss
(b) expenses, acquisition costs and general and administrative expenses by net
premiums earned.
MAX CAPITAL GROUP LTD.
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA-NINE MONTHS ENDED SEPTEMBER 30, 2008 (Unaudited)
(Expressed in thousands of United States Dollars)
Year to Date Life &
Segment Property & Casualty Annuity Corporate Consolidated
Information:
Bermuda/Dublin
U.S. Max at
Insurance Reinsurance Specialty Lloyd's Total Reinsurance
(c)
Gross premiums $ 276,288 $ 377,485 $ 134,162 $ - $ 787,935 $ 94,251 $ - $ 882,186
written
Reinsurance (133,099 ) (85,133 ) (81,334 ) - (299,566 ) (285 ) - (299,851 )
premiums ceded
Net premiums $ 143,189 $ 292,352 $ 52,828 $ - $ 488,369 $ 93,966 $ - $ 582,335
written
Earned $ 278,092 $ 310,663 $ 77,670 $ - $ 666,425 $ 94,251 $ - $ 760,676
premiums
Earned (140,991 ) (57,817 ) (49,571 ) - (248,379 ) (286 ) - (248,665 )
premiums ceded
Net premiums 137,101 252,846 28,099 - 418,046 93,965 - 512,011
earned
Net investment 13,313 27,797 5,563 - 46,673 29,932 60,793 137,398
income
Net losses on
other (13,576 ) (29,638 ) - - (43,214 ) (58,751 ) (43,025 ) (144,990 )
investments
Net realized
losses on - - (523 ) - (523 ) - (501 ) (1,024 )
fixed
maturities
Net impairment
losses - - - - - - (16,887 ) (16,887 )
recognized in
earnings
Other income 1,112 - 140 - 1,252 - (251 ) 1,001
Total revenues 137,950 251,005 33,279 - 422,234 65,146 129 487,509
Net losses and 108,819 150,326 19,440 - 278,585 - - 278,585
loss expenses
Claims and
policy - - - - - 137,175 - 137,175
benefits
Acquisition (1,945 ) 35,174 2,058 - 35,287 456 - 35,743
costs
Interest - 2,382 - - 2,382 2,096 16,069 20,547
expense
Net foreign
exchange - - - - - - 1,984 1,984
losses
Merger and
acquisition - - - - - - 3,488 3,488
expenses
General and
administrative 16,052 21,981 20,599 - 58,632 2,273 29,143 90,048
expenses
Total losses 122,926 209,863 42,097 - 374,886 142,000 50,684 567,570
and expenses
Income (loss) $ 15,024 $ 41,142 $ (8,818 ) $ - $ 47,348 $ (76,854 ) $ (50,555 ) $ (80,061 )
before taxes
Loss Ratio (a) 79.4 % 59.5 % 69.2 % 66.6 %
Combined Ratio 89.7 % 82.1 % 149.8 % 89.1 %
(b)
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA-THREE MONTHS ENDED SEPTEMBER 30, 2008 (Unaudited)
(Expressed in thousands of United States Dollars)
Quarter Life &
Segment Property & Casualty Annuity Corporate Consolidated
Information:
Bermuda/Dublin
U.S. Max at
Insurance Reinsurance Specialty Lloyd's Total Reinsurance
(c)
Gross premiums $ 80,908 $ 72,458 $ 52,894 $ - $ 206,260 $ - $ - $ 206,260
written
Reinsurance (38,316 ) (27,210 ) (30,535 ) - (96,061 ) - - (96,061 )
premiums ceded
Net premiums $ 42,592 $ 45,248 $ 22,359 $ - $ 110,199 $ - $ - $ 110,199
written
Earned $ 93,264 $ 110,132 $ 34,982 $ - $ 238,378 $ - $ - $ 238,378
premiums
Earned (47,013 ) (28,054 ) (21,722 ) - (96,789 ) - - (96,789 )
premiums ceded
Net premiums 46,251 82,078 13,260 - 141,589 - - 141,589
earned
Net investment 4,933 8,360 1,753 - 15,046 9,347 20,872 45,265
income
Net losses on
other (14,937 ) (32,637 ) - - (47,574 ) (65,286 ) (45,896 ) (158,756 )
investments
Net realized
losses on - - (523 ) - (523 ) - (3,270 ) (3,793 )
fixed
maturities
Net impairment
losses - - - - - - (13,757 ) (13,757 )
recognized in
earnings
Other income - - 140 - 140 - (563 ) (423 )
Total revenues 36,247 57,801 14,630 - 108,678 (55,939 ) (42,614 ) 10,125
Net losses and 39,014 58,990 8,830 - 106,834 - - 106,834
loss expenses
Claims and
policy - - - - - 14,000 - 14,000
benefits
Acquisition (743 ) 12,668 1,773 - 13,698 198 - 13,896
costs
Interest - (63 ) - - (63 ) (148 ) 4,712 4,501
expense
Net foreign
exchange - - - - - - 1,971 1,971
losses
Merger and
acquisition - - - - - - (500 ) (500 )
expenses
General and
administrative 5,200 6,186 8,323 - 19,709 782 11,346 31,837
expenses
Total losses 43,471 77,781 18,926 - 140,178 14,832 17,529 172,539
and expenses
Loss before $ (7,224 ) $ (19,980 ) $ (4,296 ) $ - $ (31,500 ) $ (70,771 ) $ (60,143 ) $ (162,414 )
taxes
Loss Ratio (a) 84.4 % 71.9 % 66.6 % 75.5 %
Combined Ratio 94.0 % 94.8 % 142.7 % 99.0 %
(b)
(a) The loss ratio is calculated by dividing net losses and loss expenses by
net premiums earned.
The combined ratio is calculated by dividing the sum of net losses and loss
(b) expenses, acquisition costs and general and administrative expenses by net
premiums earned.
(c) The results of operations for the Max at Lloyd's segment are consolidated
only from the November 6, 2008 date of acquisition.
MAX CAPITAL GROUP LTD.
SCHEDULE OF SUPPLEMENTAL PREMIUM DATA-NINE MONTHS ENDED SEPTEMBER 30, 2009
(Unaudited)
(Expressed in thousands of United States Dollars)
Gross Premiums Nine Months Ended Nine Months Ended
Written by Type September 30, September 30,
of Risk: 2009 2008
Percentage Movement Percentage
Gross of on Gross of
Premiums Total Prior Premiums Total
Written Gross Year Written Gross
Premiums Period Premiums
Written Written
Property &
Casualty:
Bermuda/Dublin
Insurance:
Aviation $ 30,314 2.8 % 38.6 % $ 21,870 2.5 %
Excess 87,084 7.9 % (9.8 %) 96,557 10.9 %
Liability
Professional 134,845 12.3 % 15.7 % 116,565 13.2 %
Liability
Property 50,484 4.6 % 22.2 % 41,296 4.7 %
302,727 27.6 % 9.6 % 276,288 31.3 %
Bermuda/Dublin
Reinsurance:
Agriculture 87,338 8.0 % 8.9 % 80,220 9.1 %
Aviation 25,335 2.3 % (8.7 %) 27,746 3.1 %
General 23,404 2.1 % 184.1 % 8,239 1.0 %
Casualty
Marine & 14,722 1.3 % 86.5 % 7,892 0.9 %
Energy
Medical 56,397 5.1 % (12.6 %) 64,555 7.3 %
Malpractice
Other 2,268 0.2 % (20.4 %) 2,849 0.3 %
Professional 45,922 4.2 % 56.7 % 29,306 3.3 %
Liability
Property 89,414 8.2 % (8.6 %) 97,774 11.1 %
Whole Account 8,509 0.8 % (18.8 %) 10,481 1.2 %
Workers' 68,987 6.3 % 42.5 % 48,423 5.5 %
Compensation
422,296 38.5 % 11.9 % 377,485 42.8 %
U.S.
Specialty:
General 69,026 6.3 % 61.1 % 42,849 4.9 %
Casualty
Marine 45,917 4.2 % 78.5 % 25,723 2.9 %
Property 104,325 9.5 % 59.1 % 65,590 7.4 %
219,268 20.0 % 63.4 % 134,162 15.2 %
Max at Lloyd's
(a):
Accident & 21,357 2.0 % n/a - -
Health
Financial 18,376 1.7 % n/a - -
Institutions
Professional 14,599 1.3 % n/a - -
Liability
Property 56,297 5.1 % n/a - -
110,629 10.1 % n/a - -
Aggregate
Property & $ 1,054,920 96.2 % 33.9 % $ 787,935 89.3 %
Casualty
Life & Annuity:
Annuity $ - - n/a $ 92,821 10.5 %
Life 41,748 3.8 % n/a 1,430 0.2 %
Aggregate Life $ 41,748 3.8 % (55.7 %) $ 94,251 10.7 %
& Annuity
Aggregate P&C
and Life & $ 1,096,668 100.0 % 24.3 % $ 882,186 100.0 %
Annuity
(a) The results of operations for the Max at Lloyd's segment are consolidated
only from November 6, 2008,
the date Max at Lloyd's was acquired
MAX CAPITAL GROUP LTD.
NON-GAAP FINANCIAL MEASURE RECONCILIATIONS (Unaudited)
Net Operating Income per Diluted Share
(Expressed in thousands of United States Dollars, except per share and share
amounts)
Three Months Ended September 30 Nine Months Ended September 30
2009 2008 2009 2008
Net income $ 95,326 $ (163,187 ) $ 183,623 $ (81,235 )
(loss)
Net realized
(gains)
losses on (711 ) 17,065 1,166 17,532
fixed
maturities,
net of tax
Foreign
exchange
losses 395 1,971 (5,043 ) 1,984
(gains), net
of tax
Merger and
acquisition (41,350 ) (500 ) (31,342 ) 3,488
expenses,
net of tax
Net operating $ 53,660 $ (144,651 ) $ 148,404 $ (58,231 )
income (loss)
Net income
(loss) per $ 1.64 $ (2.89 ) $ 3.18 $ (1.43 )
diluted share
Net realized
(gains)
losses on (0.01 ) 0.30 0.02 0.31
fixed
maturities,
net of tax
Foreign
exchange
losses 0.01 0.03 (0.09 ) 0.03
(gains), net
of tax
Merger and
acquisition (0.72 ) (0.01 ) (0.54 ) 0.06
expenses,
net of tax
Net operating
income (loss) $ 0.92 $ (2.57 ) $ 2.57 $ (1.03 )
per diluted
share
Weighted
average
shares 57,233,115 56,385,134 56,978,901 56,660,457
outstanding -
basic
Weighted
average
shares 58,210,501 56,385,134 57,677,996 56,660,457
outstanding -
diluted (1)
(1) In accordance with U.S. generally accepted accounting principles, diluted
earnings per share calculations use weighted average common
shares outstanding - basic, for periods with a net loss
Annualized Return and Annualized Net Operating Return on Average Shareholders'
Equity
(Expressed in thousands of United States Dollars)
Three Months Ended September 30 Nine Months Ended September 30
2009 2008 2009 2008
Net income $ 95,326 $ (163,187 ) $ 183,623 $ (81,235 )
(loss)
Annualized
net income 381,304 (652,748 ) 244,831 (108,313 )
(loss)
Net operating $ 53,660 $ (144,651 ) $ 148,404 $ (58,231 )
income (loss)
Annualized
net operating 214,640 (578,604 ) 197,872 (77,641 )
income (loss)
Beginning
shareholders' $ 1,363,469 $ 1,489,556 $ 1,280,331 $ 1,583,894
equity
Ending
shareholders' 1,546,674 1,274,482 1,546,674 1,274,482
equity
Average
shareholders' 1,455,072 1,382,019 1,413,503 1,429,188
equity
Annualized
return on
average 26.2 % (47.2 %) 17.3 % (7.6 %)
shareholders'
equity
Annualized
net operating
return on 14.8 % (41.9 %) 14.0 % (5.4 %)
average
shareholders'
equity
MAX CAPITAL GROUP LTD.
SCHEDULE OF SUPPLEMENTAL INVESTMENT DATA-NINE MONTHS ENDED SEPTEMBER 30, 2009 (Unaudited)
Selected Investment Return Data:
As at
Investment Credit September Ratings
30,
2009
Expressed in As at
thousands of September Distribution Rating Distribution
United 30,
States Dollars 2009
U.S.
Cash and Cash Government
Equivalents $ 1,056,011 19.5 % and $ 1,047,968 26.4 %
Agencies
(1)
AAA 677,434 17.1 %
U.S. Government 437,967 8.1 % AA 305,040 7.7 %
and Agencies
Non-U.S. 100,363 1.9 % A 650,756 16.4 %
Government
Corporate 1,210,951 22.3 % BBB 143,337 3.6 %
Securities
Municipal 68,630 1.3 % BB 32,607 0.8 %
Securities
Asset-Backed 151,299 2.8 % B or lower 89,341 2.2 %
Securities
Residential Fixed
Mortgage-Backed 689,497 12.7 % Maturities $ 2,946,483 74.2 %
Securities at fair
value
Commercial
Mortgage-Backed 287,776 5.3 %
Securities
U.S.
Government $ 14,041 0.3 %
and
Agencies
Fixed
Maturities at $ 2,946,483 54.4 % AAA 733,276 18.5 %
fair value
AA 106,383 2.7 %
A 158,387 4.0 %
U.S. Government $ 14,041 0.2 % BBB 12,685 0.3 %
and Agencies
Non-U.S. 585,906 10.8 % BB - 0.0 %
Government
Corporate 426,297 7.9 % B or lower 1,472 0.0 %
Securities
Fixed
Maturities
at $ 1,026,244 25.8 %
amortised
cost
Fixed
Maturities at $ 1,026,244 18.9 %
amortised cost
Total
Fixed $ 3,972,727
Maturities
Periodic
Rate of
Return
Last Year Last Last
3 Months to Date 12 months 60 months*
Cash and Fixed $ 5,028,738 92.8 % 4.31 % 5.46 % 9.63 % 4.62 %
Maturities
Convertible $ - 0.0 % 0.00 % 16.99 % 19.28 % (0.41 %)
Arbitrage
Distressed 75,003 1.4 % 8.90 % 13.74 % 2.09 % 8.53 %
Securities
Diversified 35,289 0.7 % 4.42 % 7.85 % (12.54 %) (2.39 %)
Arbitrage
Emerging 29,174 0.5 % 10.09 % 32.09 % 3.64 % 8.33 %
Markets
Event-Driven 56,110 1.0 % 4.30 % 16.46 % (4.57 %) 7.02 %
Arbitrage
Fixed Income 17,029 0.3 % 3.62 % 16.30 % 22.64 % 12.70 %
Arbitrage
Global Macro 43,634 0.8 % 1.86 % 8.50 % 8.46 % 6.50 %
Long / Short 11,083 0.2 % 6.47 % 17.40 % 7.03 % 6.65 %
Credit
Long / Short 116,893 2.2 % 4.67 % 10.52 % 9.02 % 5.48 %
Equity
Opportunistic 2,772 0.1 % (5.31 %) (32.64 %) (49.74 %) (3.58 %)
Hedge Funds ** 386,987 7.2 % 3.94 % 9.36 % 0.27 % 4.08 %
Reinsurance 2,528 0.0 % 3.05 % 10.88 % 9.16 % 14.15 %
Private Equity
Other $ 389,515 7.2 % 3.94 % 9.38 % 0.32 % 3.76 %
Investments
Total $ 5,418,253 100.0 % 4.26 % 6.04 % 7.66 % 4.79 %
Investments
Past performance should not be considered to be a reliable indicator of future performance. (1) Included within U.S. Government and Agencies are Agency-issued Residential Mortgage-Backed Securities with a fair value of $610,001 * Annualized ** Net of all fees
Source: Max Capital Group Ltd.
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