EXHIBIT 99.1
MAX RE CAPITAL LTD. REPORTS FIRST QUARTER NET INCOME OF $0.74 PER DILUTED SHARE:
Hamilton, Bermuda, April 29, 2005 - Max Re Capital Ltd. (NASDAQ: MXRE) today reported net income for the three months ended March 31, 2005 of $36.8 million, or net income of $0.74 per diluted share, compared to net income of $43.0 million, or net income of $0.87 per diluted share, for the three months ended March 31, 2004. Net operating income, which represents net income reduced by net realized gains on sale of fixed maturities, for the three months ended March 31, 2005 was $36.4 million, or net operating income of $0.73 per diluted share, compared with net operating income of $37.2 million, or net operating income of $0.75 per diluted share, for the three months ended March 31, 2004.
Robert J. Cooney, Chairman, President and Chief Executive Officer, commented, “Our gross premiums written grew in the first quarter largely attributable to increased volume in our life and annuity business. Our property and casualty underwriting produced excellent results with a combined ratio of 87.6% for the period. The strong underwriting performance allowed us to achieve reasonable net operating income for the quarter.”
Gross premiums written for the three months ended March 31, 2005 were $455.7 million, of which $312.5 million came from property and casualty underwriting and $143.2 million from life and annuity underwriting, compared to $439.5 million, all from property and casualty underwriting, for the three months ended March 31, 2004. Reinsurance and insurance products account for 79.4% and 20.6%, respectively, of property and casualty gross premiums written in the three months ended March 31, 2005, compared to 90.5% and 9.5%, respectively, of property and casualty gross premiums written for the three months ended March 31, 2004. The decline in property and casualty premiums written is principally due to the non-renewal of three reinsurance contracts in 2005, which accounted for $164.5 million of gross premiums written in 2004. Net premiums earned for the three months ended March 31, 2005 were $308.3 million compared to $198.9 million for the same period of 2004, the increase principally due to a life and annuity contract written and earned in the first three months of 2005, with no comparative for the same period of 2004.
Net investment income for the three months ended March 31, 2005 increased to $23.7 million, from $18.8 million for the same period in 2004 and is principally attributable to increased holdings of cash and fixed maturities during the three months ended March 31, 2005 compared to the three months ended March 31, 2004. Net gains on alternative investments for the three months ended March 31, 2004 were $14.4 million, or a 1.2% rate of return, compared to net gains on alternative investments of $38.5 million, or a 4.1% rate of return, for the same period of 2004. Invested assets were $3.7 billion as of March 31, 2005, with an allocation of approximately 68.2% to cash and fixed maturities and 31.8% to alternative investments.
Total revenue for the three months ended March 31, 2005 increased 32.3% to $348.1 million, compared to $263.2 million of total revenue for the same period in 2004. Growth in revenue in the three months to March 31, 2005 is principally attributable to the 55.0% increase in net premiums earned over the same period in 2004, partially offset by the 62.6% decrease in net gains on alternative investments.
Losses, benefits and experience refunds were $268.3 million for the three months ended March 31, 2005 compared to $166.4 million for the same period in 2004. The increase in losses, benefits and
experience refunds for the three months ended March 31, 2005 is principally attributable to the increase in premiums earned. Loss, benefit and experience refunds expense benefited from net favorable development of $4.0 million during the three months ended March 31, 2005.
Acquisition costs for the three months ended March 31, 2005 decreased by 32.3% to $21.5 million compared to $31.8 million for the three months ended March 31, 2004. The reduction is attributable to the change in premium mix, with life and annuity products typically having lower acquisition costs compared to property and casualty reinsurance and insurance products.
Interest expense for the three months ended March 31, 2005 decreased 47.4% from the same period in 2004. The decrease is principally attributable to a lower average interest crediting rate on funds withheld balances with reinsurers, partially offset by the interest expense on additional funds withheld from those reinsurers during the three months ended March 31, 2005.
General and administrative expenses for the three months ended March 31, 2005 were $15.3 million compared to $10.2 million for the same period in 2004. General and administrative expenses for the three months ended March 31, 2005 were 4.9% of net premiums earned compared to 5.1% of net premiums earned for the three months ended March 31, 2004.
Shareholders’ equity was $964.1 million at March 31, 2005. Book value per share at March 31, 2005 was $20.77 per share, compared to $20.45 at December 31, 2004. Annualized return on average shareholders’ equity for the three months ended March 31, 2004 was 15.3%.
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
Executive Vice President & CFO
441-296-8800
keithh@maxre.bm
N. James Tees
Senior Vice President & Treasurer
441-296-8800
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, 2005 | December 31, 2004 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 262,739 | $ | 239,188 | ||||
Fixed maturities, available for sale at fair value | 2,245,390 | 2,156,011 | ||||||
Alternative investments, at fair value | 1,170,187 | 1,119,028 | ||||||
Accrued interest income | 26,190 | 24,257 | ||||||
Premiums receivable | 322,668 | 262,714 | ||||||
Losses recoverable from reinsurers | 410,596 | 388,067 | ||||||
Funds withheld | 17,599 | 17,599 | ||||||
Deferred acquisition costs | 90,797 | 54,770 | ||||||
Deferred charges | 6,063 | 6,958 | ||||||
Prepaid reinsurance premiums | 80,978 | 79,337 | ||||||
Other assets | 22,997 | 19,426 | ||||||
Total assets | $ | 4,656,204 | $ | 4,367,355 | ||||
LIABILITIES | ||||||||
Property and casualty losses and experience refunds | $ | 1,562,269 | $ | 1,455,099 | ||||
Life and annuity benefits and experience refunds | 790,507 | 666,101 | ||||||
Deposit liabilities | 226,829 | 266,479 | ||||||
Funds withheld from reinsurers | 311,767 | 301,100 | ||||||
Unearned property and casualty premiums | 551,513 | 447,633 | ||||||
Reinsurance balances payable | 44,747 | 50,258 | ||||||
Accounts payable and accrued expenses | 54,483 | 93,694 | ||||||
Bank loan | 150,000 | 150,000 | ||||||
Total liabilities | 3,692,115 | 3,430,364 | ||||||
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; 46,417,878 (2004 - 45,825,880) shares issued and outstanding | 46,418 | 45,826 | ||||||
Additional paid-in capital | 663,411 | 652,029 | ||||||
Loans receivable from common share sales | (465 | ) | (10,515 | ) | ||||
Unearned stock grant compensation | (21,513 | ) | (13,294 | ) | ||||
Accumulated other comprehensive income | 103 | 22,227 | ||||||
Retained earnings | 276,135 | 240,718 | ||||||
Total shareholders’ equity | 964,089 | 936,991 | ||||||
Total liabilities and shareholders’ equity | $ | 4,656,204 | $ | 4,367,355 | ||||
Book Value Per Share | $ | 20.77 | $ | 20.45 | ||||
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 | ||||||||
2005 | 2004 | |||||||
REVENUES | ||||||||
Gross premiums written | $ | 455,689 | $ | 439,531 | ||||
Reinsurance premiums ceded | (44,019 | ) | (42,787 | ) | ||||
Net premiums written | $ | 411,670 | $ | 396,744 | ||||
Earned premiums | $ | 350,328 | $ | 233,290 | ||||
Earned premiums ceded | (42,004 | ) | (34,392 | ) | ||||
Net premiums earned | 308,324 | 198,898 | ||||||
Net investment income | 23,689 | 18,846 | ||||||
Net gains on alternative investments | 14,377 | 38,476 | ||||||
Net realized gains on sale of fixed maturities | 390 | 5,781 | ||||||
Other income | 1,318 | 1,168 | ||||||
Total revenues | 348,098 | 263,169 | ||||||
LOSSES AND EXPENSES | ||||||||
Losses, benefits and experience refunds | 268,298 | 166,385 | ||||||
Acquisition costs | 21,502 | 31,783 | ||||||
Interest expense | 6,232 | 11,843 | ||||||
General and administrative expenses | 15,257 | 10,169 | ||||||
Total losses and expenses | 311,289 | 220,180 | ||||||
NET INCOME | 36,809 | 42,989 | ||||||
Change in net unrealized appreciation of fixed maturities | (21,515 | ) | 18,729 | |||||
Foreign currency translation adjustment | (609 | ) | (139 | ) | ||||
COMPREHENSIVE INCOME | $ | 14,685 | $ | 61,579 | ||||
Basic earnings per share | $ | 0.80 | $ | 0.94 | ||||
Diluted earnings per share | $ | 0.74 | $ | 0.87 | ||||
Diluted net operating earnings per share | $ | 0.73 | $ | 0.75 | ||||
Weighted average shares outstanding - basic | 46,166,537 | 45,547,393 | ||||||
Weighted average shares outstanding - diluted | 49,914,515 | 49,332,004 | ||||||
MAX RE CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(Expressed in thousands of United States Dollars)
Three months ended March 31, | ||||||||
2005 | 2004 | |||||||
Preferred shares | ||||||||
Balance, beginning of period | $ | — | $ | — | ||||
Balance, end of period | — | — | ||||||
Common shares | ||||||||
Balance, beginning of period | 45,826 | 45,185 | ||||||
Issue of shares | 592 | 541 | ||||||
Repurchase of shares | — | — | ||||||
Balance, end of period | 46,418 | 45,726 | ||||||
Additional paid-in capital | ||||||||
Balance, beginning of period | 652,029 | 637,772 | ||||||
Issue of common shares | 11,131 | 12,453 | ||||||
Stock option expense | 251 | 129 | ||||||
Repurchase of shares | — | — | ||||||
Balance, end of period | 663,411 | 650,354 | ||||||
Loans receivable from common share sales | ||||||||
Balance, beginning of period | (10,515 | ) | (11,965 | ) | ||||
Loans granted | — | — | ||||||
Loans repaid | 10,050 | — | ||||||
Balance, end of period | (465 | ) | (11,965 | ) | ||||
Unearned stock grant compensation | ||||||||
Balance, beginning of period | (13,294 | ) | (4,032 | ) | ||||
Stock grants awarded | (10,463 | ) | (12,994 | ) | ||||
Amortization | 2,244 | 1,332 | ||||||
Balance, end of period | (21,513 | ) | (15,694 | ) | ||||
Accumulated other comprehensive income | ||||||||
Balance, beginning of period | 22,227 | 25,790 | ||||||
Holding gains (losses) on fixed maturities arising in period | (21,125 | ) | 24,510 | |||||
Net realized gains included in net income | (390 | ) | (5,781 | ) | ||||
Currency translation adjustments | (609 | ) | (139 | ) | ||||
Balance, end of period | 103 | 44,380 | ||||||
Retained earnings | ||||||||
Balance, beginning of period | 240,718 | 112,480 | ||||||
Net income | 36,809 | 42,989 | ||||||
Dividends paid | (1,392 | ) | (1,371 | ) | ||||
Balance, end of period | 276,135 | 154,098 | ||||||
Total shareholders’ equity | $ | 964,089 | $ | 866,899 | ||||
MAX RE CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Expressed in thousands of United States Dollars)
Three Months Ended March 31 | ||||||||
2005 | 2004 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 36,809 | $ | 42,989 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Amortization of unearned stock based compensation | 2,495 | 1,461 | ||||||
Amortization of premium on fixed maturities | 2,413 | 2,046 | ||||||
Net realized gains on sale of fixed maturities | (390 | ) | (5,781 | ) | ||||
Alternative investments | (51,418 | ) | (157,046 | ) | ||||
Accrued interest income | (1,933 | ) | (1,232 | ) | ||||
Premiums receivable | (59,954 | ) | (64,998 | ) | ||||
Losses recoverable from reinsurers | (22,529 | ) | (31,811 | ) | ||||
Funds withheld | — | (19,160 | ) | |||||
Deferred acquisition costs | (36,027 | ) | (42,785 | ) | ||||
Deferred charges | 895 | (4,515 | ) | |||||
Prepaid reinsurance premiums | (1,641 | ) | (7,905 | ) | ||||
Other assets | (3,571 | ) | (7,649 | ) | ||||
Property and casualty losses and experience refunds | 107,170 | 146,174 | ||||||
Life and annuity benefits and experience refunds | 124,406 | (6,074 | ) | |||||
Funds withheld from reinsurers | 10,667 | 25,219 | ||||||
Unearned property and casualty premiums | 103,880 | 206,569 | ||||||
Reinsurance balances payable | (5,511 | ) | (20,460 | ) | ||||
Accounts payable and accrued expenses | (39,211 | ) | (19,726 | ) | ||||
Cash from operating activities | 166,550 | 35,316 | ||||||
INVESTING ACTIVITIES | ||||||||
Purchase of fixed maturities | (589,498 | ) | (374,228 | ) | ||||
Sales of fixed maturities | 464,420 | 322,061 | ||||||
Redemptions of fixed maturities | 12,420 | 12,889 | ||||||
Cash used in investing activities | (112,658 | ) | (39,278 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Net proceeds from issuance of common shares | 1,260 | — | ||||||
Dividends | (1,392 | ) | (1,371 | ) | ||||
Additions to deposit liabilities | 13,916 | 30,407 | ||||||
Payment of deposit liabilities | (53,566 | ) | (54,983 | ) | ||||
Notes and loans repaid | 10,050 | — | ||||||
Cash used in financing activities | (29,732 | ) | (25,947 | ) | ||||
Effect of exchange rate on cash | (609 | ) | (139 | ) | ||||
Net increase (decrease) in cash and cash equivalents | 23,551 | (30,048 | ) | |||||
Cash and cash equivalents, beginning of period | 239,188 | 201,515 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 262,739 | $ | 171,467 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid totaled $1,589 and $1,152 for the three months ended March 31, 2005 and 2004, respectively.
MAX RE CAPITAL LTD.
SCHEDULE OF SUPPLEMENTAL DATA - MARCH 31, 2005
Year to Date Segment Information: (in 000’s US$)
| Property & Casualty | Life & Annuity | Corporate | Consolidated | |||||||||||||||||||
Reinsurance | Insurance | Total | Reinsurance | ||||||||||||||||||||
Gross premiums written | $ | 248,210 | $ | 64,255 | $ | 312,465 | $ | 143,224 | $ | — | $ | 455,689 | |||||||||||
Reinsurance premiums ceded | (15,978 | ) | (28,000 | ) | (43,978 | ) | (41 | ) | — | (44,019 | ) | ||||||||||||
Net premiums written | $ | 232,232 | $ | 36,255 | $ | 268,487 | $ | 143,183 | $ | — | $ | 411,670 | |||||||||||
Earned premiums | $ | 139,318 | $ | 67,786 | $ | 207,104 | $ | 143,224 | $ | — | $ | 350,328 | |||||||||||
Earned premiums ceded | (12,566 | ) | (29,397 | ) | (41,963 | ) | (41 | ) | — | (42,004 | ) | ||||||||||||
Net premiums earned | 126,752 | 38,389 | 165,141 | 143,183 | — | 308,324 | |||||||||||||||||
Net investment income | — | — | — | — | 23,689 | 23,689 | |||||||||||||||||
Net gains on alternative investments | — | — | — | — | 14,377 | 14,377 | |||||||||||||||||
Net realized gains on sales of fixed maturities | — | — | — | — | 390 | 390 | |||||||||||||||||
Other income | — | — | — | — | 1,318 | 1,318 | |||||||||||||||||
Total revenues | 126,752 | 38,389 | 165,141 | 143,183 | 39,774 | 348,098 | |||||||||||||||||
Losses, benefits and experience refunds | 89,722 | 27,561 | 117,283 | 151,015 | — | 268,298 | |||||||||||||||||
Acquisition costs | 20,857 | 424 | 21,281 | 221 | — | 21,502 | |||||||||||||||||
Interest expense | — | — | — | — | 6,232 | 6,232 | |||||||||||||||||
General and administrative expenses | 3,644 | 2,529 | 6,173 | 1,039 | 8,045 | 15,257 | |||||||||||||||||
Total losses and expenses | 114,223 | 30,514 | 144,737 | 152,275 | 14,277 | 311,289 | |||||||||||||||||
Net income (loss) before minority interest | $ | 12,529 | $ | 7,875 | $ | 20,404 | $ | (9,092 | ) | $ | 25,497 | $ | 36,809 | ||||||||||
Loss Ratio (a) | 70.8 | % | 71.8 | % | 71.0 | % | |||||||||||||||||
Combined Ratio (b) | 90.1 | % | 79.5 | % | 87.6 | % |
(a) | The loss ratio is calculated by dividing losses, benefits and experience refunds by net premiums earned. |
(b) | The combined ratio is calculated by dividing total losses and expenses by net premiums earned. |
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 | $ | 2,508,129 | 68.2 | % | 0.14 | % | 1.69 | % | 5.44 | % | |||||
Global Macro | $ | 137,284 | 3.7 | % | -1.58 | % | 5.05 | % | 12.41 | % | |||||
Long / Short Equity | 129,639 | 3.5 | % | 3.51 | % | 5.16 | % | 8.96 | % | ||||||
Convertible Arbitrage | 43,266 | 1.2 | % | -2.95 | % | -4.81 | % | 5.49 | % | ||||||
Diversified Arbitrage | 182,892 | 5.0 | % | 1.13 | % | 4.16 | % | 7.98 | % | ||||||
Distressed Securities | 159,210 | 4.3 | % | 2.97 | % | 19.87 | % | 22.30 | % | ||||||
Opportunistic | 24,556 | 0.7 | % | 5.84 | % | 27.39 | % | 13.17 | % | ||||||
Emerging Markets | 73,239 | 2.0 | % | 6.50 | % | 23.66 | % | 18.57 | % | ||||||
Fixed Income Arbitrage | 85,420 | 2.3 | % | -1.14 | % | -1.89 | % | 9.32 | % | ||||||
Event-Driven Arbitrage | 128,446 | 3.5 | % | 2.96 | % | 13.23 | % | 14.53 | % | ||||||
Commodity Trading Advisers | 65,471 | 1.8 | % | -0.92 | % | -8.47 | % | 2.97 | % | ||||||
Credit Long / Short | 74,634 | 2.0 | % | 0.81 | % | 9.92 | % | 8.21 | % | ||||||
MDS | 1,104,057 | 30.0 | % | 1.22 | % | 6.60 | % | 10.48 | % | ||||||
Insurance Underwriting | 66,130 | 1.8 | % | 0.69 | % | -12.04 | % | 5.15 | % | ||||||
Alternative Investments | $ | 1,170,187 | 31.8 | % | 1.20 | % | 5.24 | % | 10.20 | % | |||||
Total Investments | $ | 3,678,316 | 100.0 | % | 0.46 | % | 2.87 | % | 7.10 | % | |||||
* | Expressed in thousands of United States Dollars |
** | Annualized |