Exhibit 99.3
MAX RE CAPITAL LTD. REPORTS FIRST QUARTER NET INCOME OF $0.87 PER DILUTED SHARE:
Hamilton, Bermuda, May 3, 2004 - Max Re Capital Ltd. (NASDAQ: MXRE) today reported net income for the three months ended March 31, 2004 of $43.0 million, or net income of $0.87 per diluted share, compared to net income of $14.6 million, or net income of $0.38 per diluted share, for the three months ended March 31, 2003. Net operating income before minority interest, which represents net income before minority interest reduced by net realized gains on sale of fixed maturities, for the three months ended March 31, 2004 was $37.2 million, or net operating income of $0.75 per diluted share, compared with net operating income before minority interest of $14.7 million, or net operating income of $0.32 per diluted share, for the three months ended March 31, 2003.
Robert J. Cooney, Chairman, President and Chief Executive Officer, commented, “Our first quarter produced record premiums written largely attributable to strong growth in traditional reinsurance and insurance. Our property and casualty business continues to show improved underwriting profits reflecting our change in product mix over the last eighteen months. Our favorable net operating income result this quarter is attributable to profitable traditional reinsurance and insurance underwriting and a return of 4.1% on the alternative investment portfolio.”
Gross premiums written for the three months ended March 31, 2004 were $439.5 million, coming entirely from property and casualty underwriting, compared to $430.5 million, all from property and casualty underwriting, for the three months ended March 31, 2003. Traditional reinsurance and alternative risk products accounted for 49.1% and 41.3%, respectively, of gross premiums written in the three months ended March 31, 2004, compared to 26.5% and 71.4%, respectively, of gross premiums written for the three months ended March 31, 2003. Net premiums earned for the three months ended March 31, 2004 were $198.9 million compared to $143.7 million for the same period of 2003.
Net investment income for the three months ended March 31, 2004, increased to $18.8 million, from $14.5 million for the same period in 2003 and is principally attributable to increased holdings of cash and fixed maturities during the three months ended March 31, 2004 compared to the three months ended March 31, 2003. Net gains on alternative investments for the three months ended March 31, 2004 were $38.5 million, or a 4.1% rate of return, compared to net gains on alternative investments of $21.8 million, or a 3.1% rate of return, for the same period of 2003. Invested assets were $2.8 billion as of March 31, 2004, with an allocation of approximately 65.0% to cash and fixed maturities and 35.0% to alternative investments.
Total revenue for the three months ended March 31, 2004 increased 43% to $263.2 million, compared to $184.5 million of total revenue for the same period in 2003. Growth in revenue in the three months to March 31, 2004 is principally attributable to the 38% increase in net premiums earned over the same period in 2003 and the 77% increase in net gains on alternative investments.
Losses, benefits and experience refunds were $166.4 million for the three months ended March 31, 2004 compared to $114.5 million for the same period in 2003. The increase in losses, benefits and experience refunds for the three months ended March 31, 2004 is principally attributable to the increase in premiums earned. There were no significant adjustments to loss, benefit and experience refund reserves during the three months ended March 31, 2004.
Acquisition costs for the three months ended March 31, 2004 decreased by 18.0% to $31.8 million compared to $38.7 million for the three months ended March 31, 2003. The reduction is attributable to the change in product mix, with traditional reinsurance and insurance products having lower acquisition costs compared to alternative risk transfer products.
Interest expense for the three months ended March 31, 2004 has increased 98% from the same period in 2003. The increase is principally attributable to additional funds withheld from reinsurers and a higher average interest crediting rate on the funds withheld balances with those reinsurers during the three months ended March 31, 2004.
General and administrative expenses for the three months ended March 31, 2004 were $10.2 million compared to $8.2 million for the same period in 2003. General and administrative expenses for the three months ended March 31, 2004 were 5.1% of net premiums earned compared to 5.7% of net premiums earned for the three months ended March 31, 2003.
Shareholders’ equity was $866.9 million at March 31, 2004. Book value per share at March 31, 2004 was $18.96 per share, compared to $17.82 at December 31, 2003. Return on average shareholders’ equity for the trailing 12 month period was 16.9%.
Max Re Capital Ltd., through its principal operating subsidiaries, Max Re Ltd., Max Insurance Europe Limited and Max Re Europe Limited, offers customized insurance and reinsurance solutions to property and casualty insurers, life and health insurers and large corporations.
The above remarks about future expectations, plans and prospects for the Company are forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such 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 operating results, please refer to the Company’s most recent Annual Report on Form 10-K and other documents filed with the Securities and Exchange Commission. 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.
Contact Information:
Keith S. Hynes | N. James Tees | |
Executive Vice President & CFO | Senior Vice President & Treasurer | |
441-296-8800 | 441-296-8800 | |
keithh@maxre.bm | jimt@maxre.bm |
MAX RE CAPITAL LTD.
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States Dollars, except per share and share amounts)
March 31, 2004 | December 31, 2003 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 171,467 | $ | 201,515 | ||||
Fixed maturities, available for sale at fair value | 1,666,500 | 1,604,430 | ||||||
Alternative investments, at fair value | 988,077 | 831,359 | ||||||
Accrued interest income | 15,840 | 14,608 | ||||||
Premiums receivable | 454,391 | 389,393 | ||||||
Losses recoverable from reinsurers | 305,522 | 273,711 | ||||||
Funds withheld | 19,216 | 56 | ||||||
Deferred acquisition costs | 129,901 | 87,116 | ||||||
Deferred charges | 9,774 | 5,259 | ||||||
Prepaid reinsurance premiums | 75,248 | 67,343 | ||||||
Other assets | 28,418 | 20,769 | ||||||
Total assets | $ | 3,864,354 | $ | 3,495,559 | ||||
LIABILITIES | ||||||||
Property and casualty losses and experience refunds | $ | 1,137,861 | $ | 991,687 | ||||
Life and annuity benefits and experience refunds | 474,025 | 480,099 | ||||||
Deposit liabilities | 242,774 | 267,350 | ||||||
Funds withheld from reinsurers | 238,702 | 213,483 | ||||||
Unearned property and casualty premiums | 678,194 | 471,625 | ||||||
Reinsurance balances payable | 54,233 | 74,693 | ||||||
Accounts payable and accrued expenses | 21,666 | 41,392 | ||||||
Bank loan | 150,000 | 150,000 | ||||||
Total liabilities | 2,997,455 | 2,690,329 | ||||||
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; 45,725,811 (2003 - 45,184,611) shares issued and outstanding | 45,726 | 45,185 | ||||||
Additional paid-in capital | 650,354 | 637,772 | ||||||
Loans receivable from common share sales | (11,965 | ) | (11,965 | ) | ||||
Unearned stock grant compensation | (15,694 | ) | (4,032 | ) | ||||
Accumulated other comprehensive income | 44,380 | 25,790 | ||||||
Retained earnings | 154,098 | 112,480 | ||||||
Total shareholders’ equity | 866,899 | 805,230 | ||||||
Total liabilities and shareholders’ equity | $ | 3,864,354 | $ | 3,495,559 | ||||
MAX RE CAPITAL 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 March 31 | ||||||||
2004 | 2003 | |||||||
REVENUES | ||||||||
Gross premiums written | $ | 439,531 | $ | 430,545 | ||||
Reinsurance premiums ceded | (42,787 | ) | (31,852 | ) | ||||
Net premiums written | $ | 396,744 | $ | 398,693 | ||||
Earned premiums | $ | 233,290 | $ | 158,065 | ||||
Earned premiums ceded | (34,392 | ) | (14,337 | ) | ||||
Net premiums earned | 198,898 | 143,728 | ||||||
Net investment income | 18,846 | 14,507 | ||||||
Net gains on alternative investments | 38,476 | 21,802 | ||||||
Net realized gains on sale of fixed maturities | 5,781 | 2,490 | ||||||
Other income | 1,168 | 2,002 | ||||||
Total revenues | 263,169 | 184,529 | ||||||
LOSSES AND EXPENSES | ||||||||
Losses, benefits and experience refunds | 166,385 | 114,463 | ||||||
Acquisition costs | 31,783 | 38,737 | ||||||
Interest expense | 11,843 | 5,981 | ||||||
General and administrative expenses | 10,169 | 8,196 | ||||||
Total losses and expenses | 220,180 | 167,377 | ||||||
INCOME BEFORE MINORITY INTEREST | 42,989 | 17,152 | ||||||
Minority interest | — | (2,590 | ) | |||||
NET INCOME | 42,989 | 14,562 | ||||||
Change in net unrealized appreciation of fixed maturities | 18,729 | (728 | ) | |||||
Foreign currency translation adjustment | (139 | ) | — | |||||
COMPREHENSIVE INCOME | $ | 61,579 | $ | 13,834 | ||||
Basic earnings per share | $ | 0.94 | $ | 0.38 | ||||
Diluted earnings per share | $ | 0.87 | $ | 0.38 | ||||
Diluted net operating earnings per share | $ | 0.75 | $ | 0.32 | ||||
Weighted average shares outstanding - basic | 45,547,393 | 38,172,645 | ||||||
Weighted average shares outstanding - diluted | 49,332,004 | 45,293,477 | ||||||
MAX RE CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(Expressed in thousands of United States Dollars)
Three months ended March 31, | ||||||||
2004 | 2003 | |||||||
Preferred shares | ||||||||
Balance, beginning of period | $ | — | $ | — | ||||
Balance, end of period | — | — | ||||||
Common shares | ||||||||
Balance, beginning of period | 45,185 | 37,999 | ||||||
Issue of shares | 541 | 335 | ||||||
Repurchase of shares | — | (202 | ) | |||||
Balance, end of period | 45,726 | 38,132 | ||||||
Additional paid-in capital | ||||||||
Balance, beginning of period | 637,772 | 526,582 | ||||||
Issue of common shares | 12,453 | 3,633 | ||||||
Stock option expense | 129 | — | ||||||
Repurchase of shares | — | (2,140 | ) | |||||
Balance, end of period | 650,354 | 528,075 | ||||||
Loans receivable from common share sales | ||||||||
Balance, beginning of period | (11,965 | ) | (12,575 | ) | ||||
Loans granted | — | — | ||||||
Loans repaid | — | 610 | ||||||
Balance, end of period | (11,965 | ) | (11,965 | ) | ||||
Unearned stock grant compensation | ||||||||
Balance, beginning of period | (4,032 | ) | (2,656 | ) | ||||
Stock grants awarded | (12,994 | ) | (3,741 | ) | ||||
Amortization | 1,332 | 518 | ||||||
Balance, end of period | (15,694 | ) | (5,879 | ) | ||||
Accumulated other comprehensive income | ||||||||
Balance, beginning of period | 25,790 | 49,108 | ||||||
Holding gains on fixed maturities arising in period | 24,510 | 1,594 | ||||||
Net realized gains included in net income | (5,781 | ) | (2,490 | ) | ||||
Currency translation adjustments | (139 | ) | — | |||||
Allocation to minority interest | — | 168 | ||||||
Balance, end of period | 44,380 | 48,380 | ||||||
Retained earnings (deficit) | ||||||||
Balance, beginning of period | 112,480 | (4,299 | ) | |||||
Net income | 42,989 | 14,562 | ||||||
Dividends paid | (1,371 | ) | (766 | ) | ||||
Balance, end of period | 154,098 | 9,497 | ||||||
Total shareholders’ equity | $ | 866,899 | $ | 606,240 | ||||
MAX RE CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Expressed in thousands of United States Dollars)
Three Months Ended March 31 | ||||||||
2004 | 2003 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 42,989 | $ | 14,562 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Minority interest share of income | — | 2,590 | ||||||
Amortization of unearned stock based compensation | 1,461 | 518 | ||||||
Amortization of discount on fixed maturities | 2,046 | 1,111 | ||||||
Net realized gains on sale of fixed maturities | (5,781 | ) | (2,490 | ) | ||||
Net gains on alternative investments | (38,476 | ) | (21,802 | ) | ||||
Accrued interest income | (1,232 | ) | (1,403 | ) | ||||
Premiums receivable | (64,998 | ) | (185,815 | ) | ||||
Losses recoverable from reinsurers | (31,811 | ) | (11,298 | ) | ||||
Funds withheld | (19,160 | ) | (15,691 | ) | ||||
Deferred acquisition costs | (42,785 | ) | (71,088 | ) | ||||
Deferred charges | (4,515 | ) | 1,168 | |||||
Prepaid reinsurance premiums | (7,905 | ) | (17,517 | ) | ||||
Other assets | (7,649 | ) | (2,325 | ) | ||||
Property and casualty losses and experience refunds | 146,174 | 98,928 | ||||||
Life and annuity benefits and experience refunds | (6,074 | ) | (9,037 | ) | ||||
Funds withheld from reinsurers | 25,219 | 12,909 | ||||||
Unearned property and casualty premiums | 206,569 | 272,501 | ||||||
Reinsurance balances payable | (20,460 | ) | 4,208 | |||||
Accounts payable and accrued expenses | (19,726 | ) | (3,125 | ) | ||||
Cash from operating activities | 153,886 | 66,904 | ||||||
INVESTING ACTIVITIES | ||||||||
Purchase of fixed maturities | (374,228 | ) | (164,953 | ) | ||||
Sales (purchases) of alternative investments | (118,570 | ) | (60,713 | ) | ||||
Sales of fixed maturities | 322,061 | 103,323 | ||||||
Redemptions of fixed maturities | 12,889 | 26,500 | ||||||
Cash used in investing activities | (157,848 | ) | (95,843 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Net proceeds from issuance of common shares | — | 227 | ||||||
Repurchases of common shares | — | (2,343 | ) | |||||
Proceeds from bank loan | — | 50,000 | ||||||
Dividends | (1,371 | ) | (766 | ) | ||||
Distributions to minority shareholders | — | (142 | ) | |||||
Deposit liabilities | (24,576 | ) | (902 | ) | ||||
Notes and loans repaid | — | 610 | ||||||
Cash from (used in) financing activities | (25,947 | ) | 46,684 | |||||
Effect of exchange rate on cash | (139 | ) | — | |||||
Net increase (decrease) in cash and cash equivalents | (30,048 | ) | 17,745 | |||||
Cash and cash equivalents, beginning of period | 201,515 | 92,103 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 171,467 | $ | 109,848 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid totaled $1,152 and $708 for the three months ended March 31, 2004 and 2003, respectively.
MAX RE CAPITAL LTD.
SCHEDULE OF SUPPLEMENTAL DATA - MARCH 31, 2004
Property & Casualty | Life & Annuity | Corporate | Consolidated | ||||||||||||||||||||||||
Year to Date Segment Information: (in 000’s US$)
| Traditional Reinsurance | Alternative Risk | Traditional Insurance | Total | |||||||||||||||||||||||
Gross premiums written | $ | 216,016 | $ | 181,725 | $ | 41,790 | $ | 439,531 | $ | — | $ | — | $ | 439,531 | |||||||||||||
Reinsurance premiums ceded | (11,714 | ) | (8,425 | ) | (22,648 | ) | (42,787 | ) | — | — | (42,787 | ) | |||||||||||||||
Net premiums written | $ | 204,302 | $ | 173,300 | $ | 19,142 | $ | 396,744 | $ | — | $ | — | $ | 396,744 | |||||||||||||
Earned premiums | $ | 73,550 | $ | 112,029 | $ | 47,711 | $ | 233,290 | $ | — | $ | — | $ | 233,290 | |||||||||||||
Earned premiums ceded | (5,225 | ) | (11,012 | ) | (18,155 | ) | (34,392 | ) | — | — | (34,392 | ) | |||||||||||||||
Net premiums earned | 68,325 | 101,017 | 29,556 | 198,898 | — | — | 198,898 | ||||||||||||||||||||
Net investment income | — | — | — | — | — | 18,846 | 18,846 | ||||||||||||||||||||
Net gains on alternative investments | — | — | — | — | — | 38,476 | 38,476 | ||||||||||||||||||||
Net realized gains on sales of fixed maturities | — | — | — | — | — | 5,781 | 5,781 | ||||||||||||||||||||
Other income | — | — | — | — | — | 1,168 | 1,168 | ||||||||||||||||||||
Total revenues | 68,325 | 101,017 | 29,556 | 198,898 | — | 64,271 | 263,169 | ||||||||||||||||||||
Losses, benefits and experience refunds | 48,760 | 87,677 | 22,228 | 158,665 | 7,720 | — | 166,385 | ||||||||||||||||||||
Acquisition costs | 12,317 | 18,090 | 1,160 | 31,567 | 216 | — | 31,783 | ||||||||||||||||||||
Interest expense | — | — | — | — | — | 11,843 | 11,843 | ||||||||||||||||||||
General and administrative expenses | 984 | 1,154 | 161 | 2,299 | 871 | 6,999 | 10,169 | ||||||||||||||||||||
Total losses and expenses | 62,061 | 106,921 | 23,549 | 192,531 | 8,807 | 18,842 | 220,180 | ||||||||||||||||||||
Net income (loss) before minority interest | $ | 6,264 | $ | (5,904 | ) | $ | 6,007 | $ | 6,367 | $ | (8,807 | ) | $ | 45,429 | $ | 42,989 | |||||||||||
Loss Ratio | 71.4 | % | 86.8 | % | 75.2 | % | 79.8 | % | |||||||||||||||||||
Combined Ratio | 90.8 | % | 105.8 | % | 79.7 | % | 96.8 | % |
Periodic Rate of Return | |||||||||||||||
Selected Investment Return Data:
| Fair Value* | Investment %’s | Last 3 Months | Last 12 Months | Last 36 months** | ||||||||||
Cash and Fixed Maturities | $ | 1,837,967 | 65.0 | % | 2.40 | % | 4.51 | % | 6.62 | % | |||||
Global Macro | $ | 115,830 | 4.1 | % | 3.30 | % | 20.64 | % | 11.74 | % | |||||
Long / Short Equity | 96,277 | 3.4 | % | 6.53 | % | 22.69 | % | 5.09 | % | ||||||
Convertible Arbitrage | 90,491 | 3.2 | % | 3.30 | % | 8.20 | % | 10.64 | % | ||||||
Diversified Arbitrage | 153,869 | 5.4 | % | 3.62 | % | 11.02 | % | 9.37 | % | ||||||
Distressed Securities | 137,470 | 4.9 | % | 5.76 | % | 43.57 | % | 19.06 | % | ||||||
Opportunistic | 22,036 | 0.8 | % | 6.08 | % | 9.52 | % | 6.03 | % | ||||||
Emerging Markets | 61,069 | 2.2 | % | 5.20 | % | 27.99 | % | 16.00 | % | ||||||
Fixed Income Arbitrage | 65,492 | 2.3 | % | 2.95 | % | 15.93 | % | 12.21 | % | ||||||
Event-Driven Arbitrage | 60,198 | 2.1 | % | 6.68 | % | 29.29 | % | 11.96 | % | ||||||
Commodity Trading Advisers | 51,149 | 1.8 | % | 6.05 | % | 17.53 | % | 10.51 | % | ||||||
Credit Long / Short | 56,751 | 2.0 | % | 3.76 | % | 3.76 | % | 3.76 | % | ||||||
MDS | 910,632 | 32.2 | % | 4.27 | % | 18.26 | % | 9.28 | % | ||||||
Insurance Underwriting | 77,445 | 2.7 | % | 1.81 | % | 12.02 | % | 10.22 | % | ||||||
Alternative Investments | $ | 988,077 | 35.0 | % | 4.07 | % | 17.67 | % | 9.52 | % | |||||
Total Investments | $ | 2,826,044 | 100.0 | % | 2.98 | % | 8.95 | % | 7.53 | % | |||||
Comparative returns | |||||||||||||||
Merrill Lynch Master Bond Index | 2.66 | % | 5.42 | % | 7.47 | % | |||||||||
Standard & Poors 500 Stock Index | 1.69 | % | 35.10 | % | 0.63 | % | |||||||||
80% Merrill Lynch Master Index and 20% S&P Index | 2.47 | % | 10.88 | % | 6.37 | % |
* | Expressed in thousands of United States Dollars |
** | Annualized |