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Max Capital Group Ltd. Reports Third-Quarter Financial Results
Hamilton, Bermuda: November 5, 2007 --Max Capital Group Ltd. (NASDAQ: MXGL; BSX: MXGL.BH) today reported net income for the three months ended September 30, 2007, of $66.8 million, or $1.05 per diluted share, compared to net income of $26.5 million, or $0.42 per diluted share, for the three months ended September 30, 2006. Net operating income, which represents net income excluding after-tax net realized gains and losses on sales of fixed maturities, for the three months ended September 30, 2007, was $68.4 million, or $1.08 per diluted share, compared with net operating income of $26.8 million, or $0.42 per diluted share, for the three months ended September 30, 2006. For the nine months ended September 30, 2007, the Company had net income of $240.9 million, or $3.77 per diluted share, compared to $121.5 million, or $1.91 per diluted share, for the nine months ended September 30, 2006. For the nine months ended September 30, 2007, the Company had net operating income of $243.9 million, or $3.81 per diluted share, compared to $128.8 million, or $2.03 per diluted share, for the nine months ended September 30, 2006.
W. Marston Becker, Chairman and Chief Executive Officer of Max Capital Group Ltd., said: "Max continues an excellent year with third-quarter results reflecting significant underwriting income and continued solid investment performance. Our internal review of loss reserves during the third quarter permitted us to release $12.4 million of prior-period reserves. Additionally, we entered an agreement to settle a large block of prior-period reserves on one of our structured product contracts for significantly less than originally estimated. We are very pleased with this quarter's performance and the depth of earnings opportunities it represents. We look forward to carrying this earnings momentum into the year-end as we continue to build the Company."
Gross premiums written for the three months ended September 30, 2007, were $223.0 million, of which $160.8 million came from property and casualty underwriting and $62.2 million from life and annuity underwriting, compared to $177.9 million, of which $177.3 million came from property and casualty underwriting and $0.6 million from life and annuity underwriting, for the three months ended September 30, 2006. The lower level of gross premiums written from property and casualty underwriting for the three months ended September 30, 2007, versus the same period in 2006 is consistent with the Company's 2007 budget. Gross premiums written in the third quarter were boosted by a new life and annuity reinsurance transaction in which the gross premium written was $62.0 million. Net premiums earned for the three months ended September 30, 2007, were $177.6 million compared to $147.1 million for the same period in 2006. Gross premiums written for the nine months ended September 30, 2007, were $678.1 million compared to $717.7 million for the first nine months of 2006. Property and casualty reinsurance, property and casualty insurance, excess and surplus lines insurance, and life and annuity reinsurance accounted for 45.5%, 41.9%, 3.2% and 9.4%, respectively, of gross premiums written for the first nine months of 2007, versus 55.4%, 38.5%, 0.0% and 6.1%, respectively, for the same period in 2006. Net premiums earned for the first nine months of 2007 decreased 10.1% to $455.0 million compared to $506.0 million for the same period in 2006. The decline in net premiums earned in the nine months ended September 30, 2007, versus the same period in 2006 principally reflects the lower volume of gross premium written and the increase in the Company's use of reinsurance in order to manage its net retained exposure.
Net investment income for the three months ended September 30, 2007, increased to $49.7 million from $38.7 million for the same period in 2006. The increase is principally attributable to a year-over-year increase in cash and fixed maturities balances. Net investment income for the nine months ended September 30, 2007, increased $29.7 million, to $138.9 million, compared to $109.2 million for the same period in 2006. Net gains on alternative investments for the three months ended September 30, 2007, were $14.5 million, for a 1.19% rate of return, versus net losses on alternative investments of $31.0 million, for a negative 2.33% rate of return, for the same period of 2006. For the nine months ended September 30, 2007, alternative investments have returned 12.18% or $136.7 million compared to 1.57% or $18.2 million for the same period in 2006. Invested assets were $5.1 billion as of September 30, 2007, with an allocation of 78.6% to cash and fixed maturities and of 21.4% to alternative investments.
Total revenue for the three months ended September 30, 2007, increased 55.4% to $240.3 million, versus $154.6 million for the same period in 2006. Total revenue for the nine months ended September 30, 2007, increased 16.1% to $728.1 million, compared to $627.0 million for the same period in 2006. The increase in revenue in the three- and nine-month periods ended September 30, 2007, reflects an increase in investment income and net gains on alternative investments partially offset by the decrease in net premiums earned compared to 2006.
Losses and benefits were $121.4 million for the three months ended September 30, 2007, versus $89.2 million for the same period in 2006. Losses and benefits include $62.6 million attributable to a new life and annuity transaction. Excluding the new life and annuity transaction, losses and benefits for the quarter were $58.8 million, with the decrease in losses and benefits for the three months ended September 30, 2007, principally attributable to favorable development of $12.4 million in prior-period reserves and the agreement to settle a large block of prior-period reserves, resulting in a $15.2 million net release of reserves.
Acquisition costs for the three months ended September 30, 2007, were $12.1 million compared to $19.0 million for the same period in 2006. Acquisition costs are principally related to the Company's property and casualty business. The decrease in this quarter versus the same period in 2006 is principally attributable to the change in mix between reinsurance and insurance net premiums earned, with insurance being a greater proportion of premiums this quarter and having a lower net acquisition cost ratio.
Interest expense for the three months ended September 30, 2007, was $13.7 million versus $(1.7) million for the same period in 2006, with the increase principally attributable to the increased principal amount of bank loans and senior notes outstanding.
General and administrative expenses for the three months ended September 30, 2007, were $27.8 million, versus $21.3 million for the same period in 2006. The increase in general and administrative expenses for the three months ended September 30, 2007, principally reflects operating costs related to the Company's newly launched U.S.-based excess and surplus lines operations, as well as additional personnel-related costs for the group.
Shareholders' equity was $1,533.6 million at September 30, 2007. Book value per share at September 30, 2007, was $26.12 versus $24.49 at June 30, 2007, $23.06 at December 31, 2006, and $21.74 at September 30, 2006, for an increase in the rolling twelve-month book value per share of 20.1%. Annualized return on average shareholders' equity for the nine months ended September 30, 2007, was 22.0%.
During the three months ended September 30, 2007, Max Capital Group Ltd. repurchased 1,546,200 of the Company's common shares or approximately $40.0 million of such shares outstanding, at an average price of $25.87 per share, under the board-approved share repurchase plan. During the nine months ended September 30, 2007, the Company repurchased 3,056,700 common shares at an average price of $26.05 per common share for a total amount of $79.6 million, including the costs incurred to effect the repurchases. The Company has approximately $60.0 million remaining under its current share repurchase authorization.
Max Capital Group Ltd., through its operating subsidiaries, provides specialty insurance and reinsurance products to corporations, public entities, property and casualty insurers and life and health insurers.
This release includes statements about future economic performance, finances, expectations, plans and prospects of the Company 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, including those described on the Company's Form 10-K and Form 10-Q filed with the SEC, that could cause actual results to differ materially from those suggested by such statements, including the risk that the SEC's view of the conclusions reached by the Audit and Risk Management Committee of the Company's Board of Directors in connection with the internal review of three finite risk retrocessional contracts written in 2001 and 2003, which caused the Company to restate its audited financial statements for the years ended December 31, 2005, 2004, 2003, 2002 and 2001 and unaudited financial statements for the periods ended March 31, 2006, and June 30, 2006, may differ, perhaps materially, and result in material changes to information contained in the Company's past SEC filings, including financial statements and financial information. For further information regarding cautionary statements and factors affecting future results, please refer to the Company's Annual Report on Form 10-K for the year ended December 31, 2006, and other documents filed by the Company with the SEC. The Company undertakes no obligation to publicly update or revise any forward-looking statement whether as a result of new information, future developments or otherwise.
In presenting the Company's results management has included and discussed net operating income per diluted share and annualized return on average shareholders' equity. 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, allows for a more complete understanding of the Company's business. However, these measures 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.
MAX CAPITAL GROUP LTD.
----------------------------------------
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States
Dollars, except per-share and share
amounts)
September 30, December 31,
2007 2006
------------- ------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 514,697 $ 441,895
Fixed maturities, available for sale at
fair value 3,511,362 3,028,108
Alternative investments, at fair value 1,094,247 1,065,874
Accrued interest income 43,372 38,922
Premiums receivable 423,418 390,889
Losses and benefits recoverable from
reinsurers 651,620 538,009
Funds withheld 14,263 15,385
Deferred acquisition costs 50,393 49,064
Prepaid reinsurance premiums 122,102 104,443
Trades pending settlement 49,477 136,563
Other assets 57,287 39,832
------------- ------------
Total assets $ 6,532,238 $ 5,848,984
============= ============
LIABILITIES
Property and casualty losses $ 2,506,019 $ 2,335,109
Life and annuity benefits 964,525 895,560
Deposit liabilities 220,839 204,389
Funds withheld from reinsurers 255,329 254,723
Unearned property and casualty premiums 473,968 436,476
Reinsurance balances payable 107,843 79,506
Accounts payable and accrued expenses 85,346 103,160
Bank loans 285,000 150,000
Senior notes 99,773 -
------------- ------------
Total liabilities 4,998,642 4,458,923
------------- ------------
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;
58,707,527 (2006 - 60,276,560) shares
issued and outstanding 58,708 60,277
Additional paid-in capital 873,330 950,862
Unearned stock grant compensation - (17,570)
Accumulated other comprehensive loss (43,625) (21,688)
Retained earnings 645,183 418,180
------------- ------------
Total shareholders' equity 1,533,596 1,390,061
------------- ------------
Total liabilities and shareholders'
equity $ 6,532,238 $ 5,848,984
============= ============
Book Value Per Share $ 26.12 $ 23.06
============= ============
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 Nine Months Ended
September 30 September 30
2007 2006 2007 2006
------------ ------------ ------------ ------------
REVENUES
Gross premiums
written $ 222,989 $ 177,854 $ 678,089 $ 717,745
Reinsurance
premiums ceded (49,680) (39,005) (203,521) (170,406)
------------ ------------ ------------ ------------
Net premiums
written $ 173,309 $ 138,849 $ 474,568 $ 547,339
============ ============ ============ ============
Earned premiums $ 239,462 $ 202,831 $ 640,651 $ 658,240
Earned premiums
ceded (61,908) (55,750) (185,664) (152,213)
------------ ------------ ------------ ------------
Net premiums
earned 177,554 147,081 454,987 506,027
Net investment
income 49,665 38,668 138,851 109,195
Net gains (losses)
on alternative
investments 14,487 (31,004) 136,686 18,219
Net realized
losses on sale of
fixed maturities (1,650) (288) (2,975) (7,249)
Other income 244 167 587 831
------------ ------------ ------------ ------------
Total revenues 240,300 154,624 728,136 627,023
------------ ------------ ------------ ------------
LOSSES AND
EXPENSES
Losses and
benefits 121,353 89,186 334,869 380,110
Acquisition costs 12,105 18,979 46,763 59,369
Interest expense 13,673 (1,650) 30,108 6,317
General and
administrative
expenses 27,783 21,301 79,741 58,857
------------ ------------ ------------ ------------
Total losses
and expenses 174,914 127,816 491,481 504,653
------------ ------------ ------------ ------------
NET INCOME BEFORE
TAXES 65,386 26,808 236,655 122,370
Income tax
(benefit) expense (1,380) 311 (4,244) 868
------------ ------------ ------------ ------------
NET INCOME 66,766 26,497 240,899 121,502
Change in net
unrealized
depreciation of
fixed maturities 33,274 61,110 (24,472) (20,064)
Foreign currency
translation
adjustment 1,666 2,371 2,535 3,853
------------ ------------ ------------ ------------
COMPREHENSIVE
INCOME $ 101,706 $ 89,978 $ 218,962 $ 105,291
============ ============ ============ ============
Basic earnings per
share $ 1.12 $ 0.45 $ 4.01 $ 2.05
============ ============ ============ ============
Diluted earnings
per share $ 1.05 $ 0.42 $ 3.77 $ 1.91
============ ============ ============ ============
Diluted net
operating
earnings per
share $ 1.08 $ 0.42 $ 3.81 $ 2.03
============ ============ ============ ============
Weighted average
shares
outstanding -
basic 59,609,354 59,447,853 60,021,083 59,373,409
============ ============ ============ ============
Weighted average
shares
outstanding -
diluted 63,558,087 63,249,815 63,958,341 63,511,226
============ ============ ============ ============
MAX CAPITAL GROUP LTD.
----------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
(Expressed in thousands of United States
Dollars)
Nine Months Ended
September 30,
2007 2006
----------- -----------
Preferred shares
Balance, beginning of period $ - $ -
----------- -----------
Balance, end of period - -
----------- -----------
Common shares
Balance, beginning of period 60,277 58,829
Issue of shares 1,488 722
Repurchase of shares (3,057) (1)
----------- -----------
Balance, end of period 58,708 59,550
----------- -----------
Additional paid-in capital
Balance, beginning of period 950,862 921,384
Reclassification of unearned stock grant
compensation (26,357) -
Issue of common shares 19,775 15,106
Stock based compensation expense 5,625 616
Repurchase of shares (76,575) (17)
----------- -----------
Balance, end of period 873,330 937,089
----------- -----------
Loans receivable from common share sales
Balance, beginning of period - (465)
Loans repaid - 465
----------- -----------
Balance, end of period - -
----------- -----------
Unearned stock grant compensation
Balance, beginning of period (17,570) (14,574)
Stock grants awarded (16,481) (13,052)
Amortization 7,694 9,794
Reclassification of unearned stock grant
compensation 26,357 -
----------- -----------
Balance, end of period - (17,832)
----------- -----------
Accumulated other comprehensive loss
Balance, beginning of period (21,688) 4,981
Holding losses on fixed maturities arising in
period (27,447) (27,313)
Net realized losses included in net income 2,975 7,249
Currency translation adjustments 2,535 3,853
----------- -----------
Balance, end of period (43,625) (11,230)
----------- -----------
Retained earnings
Balance, beginning of period 418,180 215,565
Net income 240,899 121,502
Dividends paid (13,896) (10,098)
----------- -----------
Balance, end of period 645,183 326,969
----------- -----------
Total shareholders' equity $1,533,596 $1,294,546
=========== ===========
MAX CAPITAL GROUP LTD.
-----------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Expressed in thousands of United States Dollars)
Nine Months Ended
September 30
2007 2006
------------ ----------
OPERATING ACTIVITIES
Net income $ 240,899 $ 121,502
Adjustments to reconcile net income to net cash
from operating activities:
Stock based compensation 13,319 10,410
Amortization of premium on fixed maturities 3,271 5,053
Accretion of deposit liabilities 4,950 (10,474)
Net realized losses on sale of fixed
maturities 2,975 7,249
Changes in:
Alternative investments (28,410) (51,552)
Accrued interest income (4,450) (2,965)
Premiums receivable (32,529) (11,712)
Losses and benefits recoverable from
reinsurers (113,611) (55,780)
Funds withheld 1,122 1,362
Deferred acquisition costs (1,329) (8,809)
Prepaid reinsurance premiums (17,659) (18,939)
Trades pending settlement 87,086 -
Other assets (8,780) (753)
Property and casualty losses 170,910 232,450
Life and annuity benefits 68,965 31,959
Funds withheld from reinsurers 606 (15,621)
Unearned property and casualty premiums 37,492 62,571
Reinsurance balances payable 28,337 (7,222)
Accounts payable and accrued expenses (17,814) 36,896
------------ ----------
Cash from operating activities 435,350 325,625
------------ ----------
INVESTING ACTIVITIES
Purchases of fixed maturities (1,103,483) (852,365)
Sales of fixed maturities 263,024 425,485
Redemptions of fixed maturities 346,525 128,824
Purchase of Max Specialty (28,400) -
------------ ----------
Cash used in investing activities (522,334) (298,056)
------------ ----------
FINANCING ACTIVITIES
Net proceeds from issuance of common shares 4,782 2,776
Repurchase of common shares (79,632) (18)
Proceeds from bank loan 135,000 -
Proceeds from issuance of senior notes 99,497 -
Dividends (13,896) (10,098)
Additions to deposit liabilities 18,879 25,297
Payment of deposit liabilities (7,379) (36,581)
Notes and loans repaid - 465
------------ ----------
Cash provided by (used in) financing activities 157,251 (18,159)
------------ ----------
Effect of exchange rate on cash 2,535 3,853
Net increase in cash and cash equivalents 72,802 13,263
Cash and cash equivalents, beginning of period 441,895 314,031
------------ ----------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 514,697 $ 327,294
============ ==========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION:
Interest paid totaled $13,084 and $9,096 for the nine months ended
September 30, 2007 and 2006, respectively.
Corporate taxes paid totaled $307 and $nil for the nine months ended
September 30, 2007 and 2006, respectively.
MAX CAPITAL GROUP LTD.
----------------------------------------------------------------------
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA-NINE MONTHS TO SEPTEMBER
30, 2007 (Unaudited)
(Expressed in thousands of United States Dollars, except per Share and
share amounts)
Year to Date Segment
Information: Property & Casualty
--------------------------------------------
U.S.
Excess &
Reinsurance Insurance Surplus Total
--------------------------------------------
Gross premiums written $308,765 $ 284,078 $ 21,692 $ 614,535
Reinsurance premiums
ceded (41,629) (146,419) (15,074) (203,122)
--------------------------------------------
Net premiums written $267,136 $ 137,659 $ 6,618 $ 411,413
============================================
Earned premiums $271,578 $ 299,984 $ 5,535 $ 577,097
Earned premiums ceded (30,531) (150,854) (3,880) (185,265)
--------------------------------------------
Net premiums earned 241,047 149,130 1,655 391,832
Net investment income 31,826 12,056 3,856 47,738
Net gains on alternative
investments 41,364 10,517 - 51,881
Net realized losses on
sales of fixed
maturities - - - -
Other income - - - -
--------------------------------------------
Total revenues 314,237 171,703 5,511 491,451
Losses and benefits 131,484 110,799 946 243,229
Acquisition costs 47,247 (972) (96) 46,179
Interest expense 8,919 - - 8,919
General and
administrative expenses 20,428 13,409 14,149 47,986
--------------------------------------------
Total losses and expenses 208,078 123,236 14,999 346,313
--------------------------------------------
Net income before taxes $106,159 $ 48,467 $ (9,488) $ 145,138
============================================
Loss Ratio (a) 54.5% 74.3% 57.2% 62.1%
Combined Ratio (b) 82.6% 82.6% n/a 86.1%
Year to Date Segment Information: Life &
Annuity Corporate Consolidated
----------------------------------
Reinsurance
-----------
Gross premiums written $ 63,554 $ - $ 678,089
Reinsurance premiums ceded (399) - (203,521)
----------------------------------
Net premiums written $ 63,155 $ - $ 474,568
==================================
Earned premiums $ 63,554 $ - $ 640,651
Earned premiums ceded (399) - (185,664)
----------------------------------
Net premiums earned 63,155 - 454,987
Net investment income 22,261 68,852 138,851
Net gains on alternative investments 43,313 41,492 136,686
Net realized losses on sales of
fixed maturities - (2,975) (2,975)
Other income - 587 587
----------------------------------
Total revenues 128,729 107,956 728,136
Losses and benefits 91,640 - 334,869
Acquisition costs 584 - 46,763
Interest expense 4,368 16,821 30,108
General and administrative expenses 2,126 29,629 79,741
----------------------------------
Total losses and expenses 98,718 46,450 491,481
----------------------------------
Net income before taxes $ 30,011 $ 61,506 $ 236,655
==================================
Loss Ratio (a)
Combined Ratio (b)
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA-THREE MONTHS TO SEPTEMBER
30, 2007 (Unaudited)
(Expressed in thousands of United States Dollars, except per Share and
share amounts)
Quarter Segment Information: Property & Casualty
----------------------------------------
U.S.
Excess
&
Reinsurance Insurance Surplus Total
----------------------------------------
Gross premiums written $ 68,839 $ 80,140 $11,820 $160,799
Reinsurance premiums ceded (6,463) (34,891) (8,200) (49,554)
----------------------------------------
Net premiums written $ 62,376 $ 45,249 $ 3,620 $111,245
========================================
Earned premiums $ 74,673 $ 98,003 $ 4,596 $177,272
Earned premiums ceded (8,672) (49,896) (3,214) (61,782)
----------------------------------------
Net premiums earned 66,001 48,107 1,382 115,490
Net investment income 9,994 4,102 2,211 16,307
Net gains on alternative
investments 3,903 1,108 - 5,011
Net realized gains on sales
of fixed maturities - - - -
Other income - - - -
----------------------------------------
Total revenues 79,898 53,317 3,593 136,808
Losses and benefits 16,170 33,817 794 50,781
Acquisition costs 12,334 (339) (76) 11,919
Interest expense 4,675 - - 4,675
General and administrative
expenses 6,487 4,494 5,970 16,951
----------------------------------------
Total losses and expenses 39,666 37,972 6,688 84,326
----------------------------------------
Net income before taxes $ 40,232 $ 15,345 $(3,095) $ 52,482
========================================
Loss Ratio (a) 24.5% 70.3% 57.5% 44.0%
Combined Ratio (b) 53.0% 78.9% n/a 69.0%
Quarter Segment Information: Life &
Annuity Corporate Consolidated
-----------------------------------
Reinsurance
------------
Gross premiums written $ 62,190 $ - $ 222,989
Reinsurance premiums ceded (126) - (49,680)
-----------------------------------
Net premiums written $ 62,064 $ - $ 173,309
===================================
Earned premiums $ 62,190 $ - $ 239,462
Earned premiums ceded (126) - (61,908)
-----------------------------------
Net premiums earned 62,064 - 177,554
Net investment income 7,620 25,738 49,665
Net gains on alternative
investments 4,529 4,947 14,487
Net realized gains on sales of
fixed maturities - (1,650) (1,650)
Other income - 244 244
-----------------------------------
Total revenues 74,213 29,279 240,300
Losses and benefits 70,572 - 121,353
Acquisition costs 186 - 12,105
Interest expense 2,200 6,798 13,673
General and administrative expenses 697 10,135 27,783
-----------------------------------
Total losses and expenses 73,655 16,933 174,914
-----------------------------------
Net income before taxes $ 558 $ 12,346 $ 65,386
===================================
Loss Ratio (a)
Combined Ratio (b)
(a)The loss ratio is calculated by dividing losses and benefits by net
premiums earned.
(b)The combined ratio is calculated by dividing the sum of losses and
benefits, acquisition costs and general and administrative
expenses by net premiums earned.
MAX CAPITAL GROUP LTD.
----------------------
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA-NINE MONTHS TO SEPTEMBER
30, 2006 (Unaudited)
(Expressed in thousands of United States Dollars, except per Share and
share amounts)
Year to Date Segment
Information: Property & Casualty
------------------------------------------
U.S.
Excess
&
Reinsurance Insurance Surplus Total
------------------------------------------
Gross premiums written $ 397,481 $ 276,078 $ - $ 673,559
Reinsurance premiums ceded (33,653) (136,196) - (169,849)
------------------------------------------
Net premiums written $ 363,828 $ 139,882 $ - $ 503,710
==========================================
Earned premiums $ 339,880 $ 274,174 $ - $ 614,054
Earned premiums ceded (24,471) (127,185) - (151,656)
------------------------------------------
Net premiums earned 315,409 146,989 - 462,398
Net investment income 28,723 10,958 - 39,681
Net gains on alternative
investments 3,603 1,363 - 4,966
Net realized losses on
sales of fixed maturities - - - -
Other income - - - -
------------------------------------------
Total revenues 347,735 159,310 - 507,045
Losses and benefits 224,960 83,315 - 308,275
Acquisition costs 57,360 554 - 57,914
Interest expense (6,482) - - (6,482)
General and administrative
expenses 16,957 10,767 - 27,724
------------------------------------------
Total losses and expenses 292,795 94,636 - 387,431
------------------------------------------
Net income before taxes $ 54,940 $ 64,674 $ - $ 119,614
==========================================
Loss Ratio (a) 71.3% 56.7% 66.7%
Combined Ratio (b) 94.9% 64.4% 85.2%
Year to Date Segment Information: Life &
Annuity Corporate Consolidated
-----------------------------------
Reinsurance
-------------
Gross premiums written $ 44,186 $ - $ 717,745
Reinsurance premiums ceded (557) - (170,406)
-----------------------------------
Net premiums written $ 43,629 $ - $ 547,339
===================================
Earned premiums $ 44,186 $ - $ 658,240
Earned premiums ceded (557) - (152,213)
-----------------------------------
Net premiums earned 43,629 - 506,027
Net investment income 21,778 47,736 109,195
Net gains on alternative
investments 3,559 9,694 18,219
Net realized losses on sales of
fixed maturities - (7,249) (7,249)
Other income - 831 831
-----------------------------------
Total revenues 68,966 51,012 627,023
Losses and benefits 71,835 - 380,110
Acquisition costs 1,455 - 59,369
Interest expense 3,662 9,137 6,317
General and administrative expenses 2,169 28,964 58,857
-----------------------------------
Total losses and expenses 79,121 38,101 504,653
-----------------------------------
Net income before taxes $ (10,155) $ 12,911 $ 122,370
===================================
Loss Ratio (a)
Combined Ratio (b)
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA-THREE MONTHS TO
SEPTEMBER 30, 2006 (Unaudited)
(Expressed in thousands of United States Dollars, except per
Share and share amounts)
Quarter Segment Information: Property & Casualty
----------------------------------------
U.S.
Excess
&
Reinsurance Insurance Surplus Total
----------------------------------------
Gross premiums written $ 98,708 $ 78,531 $ - $177,239
Reinsurance premiums ceded (6,130) (32,579) - (38,709)
----------------------------------------
Net premiums written $ 92,578 $ 45,952 $ - $138,530
========================================
Earned premiums $ 107,209 $ 95,007 $ - $202,216
Earned premiums ceded (9,164) (46,290) - (55,454)
----------------------------------------
Net premiums earned 98,045 48,717 - 146,762
Net investment income 9,514 3,519 - 13,033
Net gains (losses) on
alternative investments (8,672) (2,089) - (10,761)
Net realized gains on sales
of fixed maturities - - - -
Other income - - - -
----------------------------------------
Total revenues 98,887 50,147 - 149,034
Losses and benefits 71,735 8,483 - 80,218
Acquisition costs 17,957 111 - 18,068
Interest expense (7,791) - - (7,791)
General and administrative
expenses 5,985 3,894 - 9,879
----------------------------------------
Total losses and expenses 87,886 12,488 - 100,374
----------------------------------------
Net income before taxes $ 11,001 $ 37,659 $ - $ 48,660
========================================
Loss Ratio (a) 73.2% 17.4% 54.7%
Combined Ratio (b) 97.6% 25.6% 73.7%
Quarter Segment Information: Life &
Annuity Corporate Consolidated
-----------------------------------
Reinsurance
-------------
Gross premiums written $ 615 $ - $ 177,854
Reinsurance premiums ceded (296) - (39,005)
-----------------------------------
Net premiums written $ 319 $ - $ 138,849
===================================
Earned premiums $ 615 $ - $ 202,831
Earned premiums ceded (296) - (55,750)
-----------------------------------
Net premiums earned 319 - 147,081
Net investment income 7,428 18,207 38,668
Net gains (losses) on alternative
investments (10,126) (10,117) (31,004)
Net realized gains on sales of
fixed maturities - (288) (288)
Other income - 167 167
-----------------------------------
Total revenues (2,379) 7,969 154,624
Losses and benefits 8,968 - 89,186
Acquisition costs 911 - 18,979
Interest expense 2,812 3,329 (1,650)
General and administrative expenses 853 10,569 21,301
-----------------------------------
Total losses and expenses 13,544 13,898 127,816
-----------------------------------
Net income before taxes $ (15,923) $ (5,929) $ 26,808
===================================
Loss Ratio (a)
Combined Ratio (b)
(a)The loss ratio is calculated by dividing losses and benefits by net
premiums earned.
(b)The combined ratio is calculated by dividing the sum of losses and
benefits, acquisition costs and general and administrative
expenses by net premiums earned.
MAX CAPITAL GROUP LTD.
-----------------------------
SCHEDULE OF SUPPLEMENTAL PREMIUM DATA-NINE MONTHS TO SEPTEMBER 30,
2007 (Unaudited)
(Expressed in thousands of United States Dollars, except per Share and
share amounts)
Gross Premiums Written by Nine months to Nine months to
Type of Risk: September 30, 2007 September 30, 2006
------------------- --------------------
Percentage Percentage
Gross of Total Gross of Total
Premiums Premiums Premiums Premiums
Written Written Written Written
Property & Casualty
Reinsurance:
Accident & Health $ - 0.0% $ 7,585 1.1%
Aviation 33,314 4.8% 26,141 3.6%
Excess Liability 14,705 2.2% 65,963 9.2%
Medical Malpractice 49,868 7.3% 49,997 7.0%
Other 1,150 0.2% 660 0.1%
Professional Liability 37,082 5.5% 50,223 7.0%
Property 96,709 14.2% 67,759 9.4%
Marine & Energy 33,058 4.9% 28,955 4.0%
Whole Account 12,551 1.9% 41,015 5.7%
Workers' Compensation 30,328 4.5% 59,183 8.3%
--------- -------- --------- ---------
308,765 45.5% 397,481 55.4%
Property & Casualty
Insurance:
Aviation 14,408 2.1% 4,449 0.6%
Excess Liability 106,160 15.7% 121,962 17.0%
Professional Liability 116,624 17.2% 105,821 14.7%
Property 46,886 6.9% 43,846 6.1%
--------- -------- --------- ---------
284,078 41.9% 276,078 38.4%
Excess & Surplus Insurance:
Property 21,692 3.2% - 0.0%
--------- -------- --------- ---------
21,692 3.2% - 0.0%
--------- -------- --------- ---------
Aggregate Property &
Casualty $614,535 90.6% $ 673,559 93.9%
--------- -------- --------- ---------
Life & Annuity:
Annuity $ 62,010 9.2% $ 41,059 5.7%
Health 28 0.0% - 0.0%
Life 1,516 0.2% 3,127 0.4%
--------- -------- --------- ---------
Aggregate Life & Annuity 63,554 9.4% 44,186 6.1%
--------- -------- --------- ---------
Aggregate P&C and Life &
Annuity $678,089 100.0% $ 717,745 100.0%
========= ======== ========= =========
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 Nine Months Ended
September 30 September 30
2007 2006 2007 2006
------------ ------------ ------------ ------------
Net income $ 66,766 $ 26,497 $ 240,899 $ 121,502
Net realized
losses on sale
of fixed
maturities, net
of tax 1,650 288 2,975 7,249
------------------------- -------------------------
Net operating
income $ 68,416 $ 26,785 $ 243,874 $ 128,751
========================= =========================
Net income per
diluted share $ 1.05 $ 0.42 $ 3.77 $ 1.91
Net realized
losses on sale
of fixed
maturities, net
of tax 0.03 - 0.04 0.12
------------------------- -------------------------
Net operating
income per
diluted share $ 1.08 $ 0.42 $ 3.81 $ 2.03
========================= =========================
Weighted average
shares
outstanding -
basic 59,609,354 59,447,853 60,021,083 59,373,409
Weighted average
shares
outstanding -
diluted 63,558,087 63,249,815 63,958,341 63,511,226
Annualized Return on Average Shareholders' Equity
(Expressed in thousands of United States Dollars)
Three Months Ended Nine Months Ended
September 30 September 30
2007 2006 2007 2006
------------ ------------ ------------ ------------
Net income $ 66,766 $ 26,497 $ 240,899 $ 121,502
Annualized net
income 267,064 105,988 321,199 162,003
Beginning
shareholders'
equity 1,472,774 1,203,398 1,390,061 1,185,720
Ending
shareholders'
equity 1,533,596 1,294,546 1,533,596 1,294,546
------------ ------------ ------------ ------------
Average
shareholders'
equity 1,503,185 1,248,972 1,461,829 1,240,133
------------ ------------ ------------ ------------
Annualized return
on average
shareholders'
equity 17.8% 8.5% 22.0% 13.1%
MAX CAPITAL GROUP LTD.
----------------------
SCHEDULE OF SUPPLEMENTAL INVESTMENT DATA-NINE MONTHS TO SEPTEMBER 30,
2007 (Unaudited)
Selected Investment Return Data:
Fair Investment
Value* Distribution
----------- ------------
Cash and Fixed Maturities $4,026,059 78.6%
=========== ============
Commodity Trading Advisers $ - 0.0%
Distressed Securities 182,381 3.5%
Diversified Arbitrage 168,462 3.3%
Emerging Markets 96,106 1.9%
Event-Driven Arbitrage 205,950 4.0%
Fixed Income Arbitrage 29,780 0.6%
Global Macro 65,169 1.3%
Long / Short Credit 78,030 1.5%
Long / Short Equity 230,640 4.5%
Opportunistic 34,805 0.7%
----------- ------------
MDS **** 1,091,323 21.3%
Reinsurance Private Equity 2,924 0.1%
----------- ------------
Alternative Investments $1,094,247 21.4%
=========== ============
Total Investments $5,120,306 100.0%
=========== ============
Selected Investment Return Data: Periodic Rate of Return
Last Year Last
3 Months to Date 60 months**
-------- ------- -----------
Cash and Fixed Maturities 2.18% 3.19% 3.78%
Commodity Trading Advisers 0.00% 6.63% 5.88%
Distressed Securities 0.30% 9.93% 21.96%
Diversified Arbitrage 12.30% 20.04% 9.85%
Emerging Markets 1.44% 14.70% 17.82%
Event-Driven Arbitrage 3.71% 25.89% 17.01%
Fixed Income Arbitrage 7.11% 14.95% 8.27%
Global Macro -1.59% 6.75% 9.40%
Long / Short Credit -4.74% 2.19% 10.66%
Long / Short Equity 3.23% 16.53% 10.00%
Opportunistic 1.83% 17.19% 19.69%
MDS **** 1.18% 12.17% 10.96%
Reinsurance Private Equity 1.90% 17.30% -1.05%
Alternative Investments 1.19% 12.18% 10.24%
Total Investments 1.92% 7.74% 6.29%
Alternative Investment Return Data ***:
MDS Performance History **** - 60 months ended September 30, 2007
Largest monthly Largest monthly
gain 3.02% loss (2.04%)
Largest quarterly Largest
gain 6.07% quarterly loss (2.72%)
Average monthly Average monthly
gain 1.36% loss (0.88%)
Average quarterly Average
gain 3.55% quarterly loss (0.89%)
Months with a
Months with a gain 47 loss 13
Quarters with a Quarters with a
gain 16 loss 4
Quarterly
% of months with a standard
gain 78% deviation 2.47%
% of quarters with Annual standard
a gain 80% deviation 4.11%
Largest
drawdown ***** (5.04%)
Monthly performance
2002 2003 2004 2005 2006 2007
January 1.63% 1.75% 0.16% 2.75% 1.28%
February 1.40% 1.28% 1.69% 0.39% 1.50%
March (0.18%) 1.18% (0.61%) 1.22% 1.90%
April 2.03% 0.03% (0.65%) 1.89% 2.30%
May 3.02% (0.87%) (0.68%) (1.74%) 2.59%
June 0.92% 0.70% 1.20% (0.66%) 0.85%
July (0.24%) 0.03% 1.33% (0.71%) 0.99%
August 0.96% (0.02%) 0.98% 0.02% (1.62%)
September 2.63% 0.04% 1.84% (2.04%) 1.85%
October 0.25% 0.98% 1.04% (1.45%) 1.37%
November 1.68% 0.56% 2.54% 0.61% 1.81%
December 2.05% 1.85% 1.74% 1.37% 1.96%
Quarterly performance
Q1 2.88% 4.27% 1.22% 4.41% 4.75%
Q2 6.07% (0.15%) (0.14%) (0.54%) 5.83%
Q3 3.37% 0.06% 4.21% (2.72%) 1.18%
Q4 4.02% 3.43% 5.41% 0.51% 5.22%
Period return 4.02% 16.67% 9.81% 5.88% 6.30% 12.17%
Past performance should not be considered to be a reliable indicator
of future performance.
* Expressed in thousands of United States Dollars
** Annualized
*** The percentages shown under the alternative investment return data
relate only to the performance of our alternative investments held by
MDS.
**** Net of all fees
***** Largest drawdown represents the largest decline in value between
two NAV peak values.