Exhibit 99.1
MAX RE CAPITAL LTD. REPORTS SECOND QUARTER NET INCOME OF $0.45 PER DILUTED SHARE:
Hamilton, Bermuda, July 29, 2005 - Max Re Capital Ltd. (NASDAQ: MXRE) today reported net income for the three months ended June 30, 2005 of $22.3 million, or net income of $0.45 per diluted share, compared to net income of $12.6 million, or net income of $0.26 per diluted share, for the three months ended June 30, 2004. Net operating income, which represents net income reduced by net realized gains on sale of fixed maturities, for the three months ended June 30, 2005, was $21.5 million, or net operating income of $0.43 per diluted share, compared with net operating income of $15.2 million, or net operating income of $0.32 per diluted share, for the three months ended June 30, 2004. For the six months ended June 30, 2005, the Company had net income of $59.1 million, or net income of $1.19 per diluted share, compared to $55.6 million, or $1.13 per diluted share, for the six months ended June 30, 2004. For the six months ended June 30, 2005, the Company had net operating income of $57.9 million, or net operating income of $1.16 per diluted share, compared to $52.4 million, or $1.07 per diluted share, for the six months ended June 30, 2004.
Robert J. Cooney, Chairman, President and Chief Executive Officer, commented, “For the second quarter Max Re showed strong premium growth in our property and casualty insurance and life and annuity reinsurance products. Our property and casualty underwriting produced excellent results with a combined ratio of 87.4% for the period. Even though our net gains on alternative investments were below the portfolio’s historical average, strong underwriting results enabled us to earn $0.45 per share for the quarter and end the period with total shareholders’ equity above $1.0 billion.”
Gross premiums written for the three months ended June 30, 2005 were $245.1 million, of which $211.0 million came from property and casualty underwriting and $34.1 million from life and annuity underwriting, compared to $183.7 million, coming principally from property and casualty underwriting, with only $2.2 million of life and annuity premiums, for the three months ended June 30, 2004. Net premiums earned for the three months ended June 30, 2005 were $191.9 million compared to $171.8 million for the same period of 2004, the increase principally due to a life and annuity contract written and earned in the three months ended June 30, 2005, which accounted for $34.1 million of net earned premiums compared to $2.2 million of life and annuity net earned premiums for the same period of 2004. Gross premiums written for the six months ended June 30, 2005 were $700.8 million compared to $623.2 million for the first six months of 2004. Property and casualty reinsurance, property and casualty insurance and life and annuity reinsurance accounted for 49.7%, 25.0% and 25.3%, respectively, of gross premiums written for the first six months of 2005. Net premiums earned for the first six months of 2005 increased 34.9% to $500.2 million compared to $370.7 million for the same period in 2004. The increase principally relates to increased life and annuity business written and earned partially offset by lower property and casualty reinsurance premiums earned.
Net investment income for the three months ended June 30, 2005 increased to $25.0 million, from $19.7 million for the same period in 2004 and is principally attributable to increased cash and fixed maturities balances held from period to period. Net investment income for the six months ended June 30, 2005 increased $10.1 million, to $48.6 million, compared to $38.5 million for the same period in 2004. Net gains on alternative investments for the three months ended June 30, 2005 were $3.6 million, or a 0.26% rate of return, compared to net gains on alternative investments of $1.0 million, or a 0.10% rate of return, for the same period of 2004. For the six months ended June 30, 2005, alternative investments have returned 1.46%, compared to 4.17% for the same period in 2004. Invested assets were $3.7 billion as of June 30, 2005, with an allocation of approximately 68.3% to cash and fixed maturities and 31.7% to alternative investments.
Losses, benefits and experience refunds were $156.5 million for the three months ended June 30, 2005 compared to $135.3 million for the same period in 2004. The increase in losses, benefits and experience refunds for the three months ended June 30, 2005 is principally attributable to the increase in premiums earned. Losses, benefits and experience refunds expense benefited from net favorable development of $2.5 million during the three months ended June 30, 2005. Losses, benefits and experience refunds for the six months ended June 30, 2005 were $424.8 million compared to $301.7 million for the same period in 2004. The increase for the six months ended June 30, 2005 is also principally attributable to the increase in premiums earned.
Acquisition costs for the three months ended June 30, 2005 decreased by 38.7% to $17.9 million compared to $29.2 million for the three months ended June 30, 2004. The reduction is attributable to the change in premium mix, with life and annuity products and property and casualty insurance products typically having lower acquisition costs compared to property and casualty reinsurance products.
Interest expense for the three months ended June 30, 2005 increased to $13.4 million from $0.1 million for the same period in 2004. The increase is principally attributable to a higher average interest crediting rate on funds withheld balances with reinsurers, and the interest expense on additional funds withheld from reinsurers during the three months ended June 30, 2005.
General and administrative expenses for the three months ended June 30, 2005 were $12.3 million compared to $13.9 million for the same period in 2004 principally due to lower bonus accruals in 2005, compared to 2004. General and administrative expenses for the six months ended June 30, 2005 were 5.5% of net premiums earned compared to 6.5% of net premiums earned for the six months ended June 30, 2004.
Shareholders’ equity was $1,025.0 million at June 30, 2005. Book value per share at June 30, 2005 was $22.23 per share, compared to $20.45 at December 31, 2004. Annualized return on average shareholders’ equity for the six months ended June 30, 2005 was 11.8%.
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)
June 30, 2005 | December 31, 2004 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 270,405 | $ | 239,188 | ||||
Fixed maturities, available for sale at fair value | 2,246,704 | 2,156,011 | ||||||
Alternative investments, at fair value | 1,168,621 | 1,119,028 | ||||||
Accrued interest income | 25,653 | 24,257 | ||||||
Premiums receivable | 313,231 | 262,714 | ||||||
Losses recoverable from reinsurers | 411,057 | 388,067 | ||||||
Funds withheld | 16,876 | 17,599 | ||||||
Deferred acquisition costs | 89,167 | 54,770 | ||||||
Prepaid reinsurance premiums | 89,452 | 79,337 | ||||||
Other assets | 27,678 | 26,384 | ||||||
Total assets | $ | 4,658,844 | $ | 4,367,355 | ||||
LIABILITIES | ||||||||
Property and casualty losses | $ | 1,495,996 | $ | 1,455,099 | ||||
Life and annuity benefits | 789,171 | 666,101 | ||||||
Deposit liabilities | 225,673 | 266,479 | ||||||
Funds withheld from reinsurers | 301,751 | 301,100 | ||||||
Unearned property and casualty premiums | 558,062 | 447,633 | ||||||
Reinsurance balances payable | 47,366 | 50,258 | ||||||
Accounts payable and accrued expenses | 65,809 | 93,694 | ||||||
Bank loan | 150,000 | 150,000 | ||||||
Total liabilities | 3,633,828 | 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; 46,099,712 (2004 - 45,825,880) shares issued and outstanding | 46,100 | 45,826 | ||||||
Additional paid-in capital | 656,894 | 652,029 | ||||||
Loans receivable from common share sales | (465 | ) | (10,515 | ) | ||||
Unearned stock grant compensation | (19,282 | ) | (13,294 | ) | ||||
Accumulated other comprehensive income | 45,635 | 22,227 | ||||||
Retained earnings | 296,134 | 240,718 | ||||||
Total shareholders’ equity | 1,025,016 | 936,991 | ||||||
Total liabilities and shareholders’ equity | $ | 4,658,844 | $ | 4,367,355 | ||||
Book Value Per Share | $ | 22.23 | $ | 20.45 | ||||
MAX RE CAPITAL LTD.
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
(Expressed in thousands of United States Dollars, except shares and per share amounts)
Three Months Ended June 30 | Six Months Ended June 30 | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
REVENUES | ||||||||||||||||
Gross premiums written | $ | 245,107 | $ | 183,654 | $ | 700,796 | $ | 623,185 | ||||||||
Reinsurance premiums ceded | (52,898 | ) | (47,567 | ) | (96,917 | ) | (90,353 | ) | ||||||||
Net premiums written | $ | 192,209 | $ | 136,087 | $ | 603,879 | $ | 532,832 | ||||||||
Earned premiums | $ | 235,598 | $ | 206,557 | $ | 585,927 | $ | 439,847 | ||||||||
Earned premiums ceded | (43,710 | ) | (34,739 | ) | (85,715 | ) | (69,130 | ) | ||||||||
Net premiums earned | 191,888 | 171,818 | 500,212 | 370,717 | ||||||||||||
Net investment income | 24,965 | 19,696 | 48,653 | 38,542 | ||||||||||||
Net gains on alternative investments | 3,597 | 1,038 | 17,975 | 39,514 | ||||||||||||
Net realized gains (losses) on sale of fixed maturities | 813 | (2,575 | ) | 1,203 | 3,205 | |||||||||||
Other income | 1,182 | 1,211 | 2,500 | 2,379 | ||||||||||||
Total revenues | 222,445 | 191,188 | 570,543 | 454,357 | ||||||||||||
LOSSES AND EXPENSES | ||||||||||||||||
Losses and benefits | 156,524 | 135,305 | 424,822 | 301,690 | ||||||||||||
Acquisition costs | 17,921 | 29,199 | 39,422 | 60,982 | ||||||||||||
Interest expense | 13,372 | 95 | 19,605 | 11,937 | ||||||||||||
General and administrative expenses | 12,310 | 13,945 | 27,567 | 24,115 | ||||||||||||
Total losses and expenses | 200,127 | 178,544 | 511,416 | 398,724 | ||||||||||||
NET INCOME | 22,318 | 12,644 | 59,127 | 55,633 | ||||||||||||
Change in net unrealized appreciation of fixed maturities | 49,248 | (55,689 | ) | 27,733 | (36,960 | ) | ||||||||||
Foreign currency translation adjustment | (3,716 | ) | 572 | (4,325 | ) | 433 | ||||||||||
COMPREHENSIVE INCOME (LOSS) | $ | 67,850 | $ | (42,473 | ) | $ | 82,535 | $ | 19,106 | |||||||
Basic earnings per share | $ | 0.48 | $ | 0.28 | $ | 1.28 | $ | 1.22 | ||||||||
Diluted earnings per share | $ | 0.45 | $ | 0.26 | $ | 1.19 | $ | 1.13 | ||||||||
Diluted net operating earnings per share | $ | 0.43 | $ | 0.32 | $ | 1.16 | $ | 1.07 | ||||||||
Weighted average shares outstanding - basic | 46,258,301 | 45,725,811 | 46,155,728 | 45,636,602 | ||||||||||||
Weighted average shares outstanding - diluted | 49,746,583 | 48,852,992 | 49,773,858 | 49,092,498 | ||||||||||||
MAX RE CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(Expressed in thousands of United States Dollars)
Six months ended June 30, | ||||||||
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 | 609 | 553 | ||||||
Repurchase of shares | (335 | ) | — | |||||
Balance, end of period | 46,100 | 45,738 | ||||||
Additional paid-in capital | ||||||||
Balance, beginning of period | 652,029 | 637,772 | ||||||
Issue of common shares | 11,478 | 12,671 | ||||||
Stock option expense | 412 | 272 | ||||||
Repurchase of shares | (7,025 | ) | — | |||||
Balance, end of period | 656,894 | 650,715 | ||||||
Loans receivable from common share sales | ||||||||
Balance, beginning of period | (10,515 | ) | (11,965 | ) | ||||
Loans repaid | 10,050 | 1,000 | ||||||
Balance, end of period | (465 | ) | (10,965 | ) | ||||
Unearned stock grant compensation | ||||||||
Balance, beginning of period | (13,294 | ) | (4,032 | ) | ||||
Stock grants awarded | (10,812 | ) | (12,994 | ) | ||||
Amortization | 4,824 | 3,026 | ||||||
Balance, end of period | (19,282 | ) | (14,000 | ) | ||||
Accumulated other comprehensive income (loss) | ||||||||
Balance, beginning of period | 22,227 | 25,790 | ||||||
Holding gains (losses) on fixed maturities arising in period | 28,936 | (33,755 | ) | |||||
Net realized gains included in net income | (1,203 | ) | (3,205 | ) | ||||
Currency translation adjustments | (4,325 | ) | 433 | |||||
Balance, end of period | 45,635 | (10,737 | ) | |||||
Retained earnings | ||||||||
Balance, beginning of period | 240,718 | 112,480 | ||||||
Net income | 59,127 | 55,633 | ||||||
Dividends paid | (3,711 | ) | (2,743 | ) | ||||
Balance, end of period | 296,134 | 165,370 | ||||||
Total shareholders’ equity | $ | 1,025,016 | $ | 826,121 | ||||
MAX RE CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Expressed in thousands of United States Dollars)
Six Months Ended June 30 | ||||||||
2005 | 2004 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 59,127 | $ | 55,633 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Amortization of unearned stock based compensation | 5,236 | 3,298 | ||||||
Amortization of premium on fixed maturities | 4,642 | 4,293 | ||||||
Net realized gains on sale of fixed maturities | (1,203 | ) | (3,205 | ) | ||||
Alternative investments | (50,298 | ) | (185,093 | ) | ||||
Accrued interest income | (1,396 | ) | (1,961 | ) | ||||
Premiums receivable | (50,517 | ) | 442 | |||||
Losses recoverable from reinsurers | (22,990 | ) | (56,503 | ) | ||||
Funds withheld | 723 | (18,014 | ) | |||||
Deferred acquisition costs | (34,397 | ) | (24,018 | ) | ||||
Prepaid reinsurance premiums | (10,115 | ) | (20,556 | ) | ||||
Other assets | (1,294 | ) | (10,514 | ) | ||||
Property and casualty losses | 40,897 | 269,236 | ||||||
Life and annuity benefits | 123,070 | (15,613 | ) | |||||
Funds withheld from reinsurers | 651 | 45,257 | ||||||
Unearned property and casualty premiums | 110,429 | 182,525 | ||||||
Reinsurance balances payable | (2,892 | ) | (24,222 | ) | ||||
Accounts payable and accrued expenses | (27,885 | ) | (17,744 | ) | ||||
Cash from operating activities | 141,788 | 183,241 | ||||||
INVESTING ACTIVITIES | ||||||||
Purchase of fixed maturities | (774,613 | ) | (615,145 | ) | ||||
Sales of fixed maturities | 689,499 | 479,119 | ||||||
Redemptions of fixed maturities | 19,420 | 20,489 | ||||||
Cash used in investing activities | (65,694 | ) | (115,537 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Net proceeds from issuance of common shares | 1,275 | 230 | ||||||
Repurchase of common shares | (7,360 | ) | — | |||||
Dividends | (3,711 | ) | (2,743 | ) | ||||
Additions to deposit liabilities | 15,460 | 32,760 | ||||||
Payment of deposit liabilities | (56,266 | ) | (57,605 | ) | ||||
Notes and loans repaid | 10,050 | 1,000 | ||||||
Cash used in financing activities | (40,552 | ) | (26,358 | ) | ||||
Effect of exchange rate on cash | (4,325 | ) | 433 | |||||
Net increase in cash and cash equivalents | 31,217 | 41,779 | ||||||
Cash and cash equivalents, beginning of period | 239,188 | 201,515 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 270,405 | $ | 243,294 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: |
Interest paid totaled $3,469 and $1,992 for the six months ended June 30, 2005 and 2004, respectively.
MAX RE CAPITAL LTD.
SCHEDULE OF SUPPLEMENTAL DATA - JUNE 30, 2005
Year to Date Segment Information: (in 000’s US$) | Property & Casualty | Life & Annuity Reinsurance | Corporate | Consolidated | ||||||||||||||||||||
Reinsurance | Insurance | Total | ||||||||||||||||||||||
Gross premiums written | $ | 348,320 | $ | 175,174 | $ | 523,494 | $ | 177,302 | $ | — | $ | 700,796 | ||||||||||||
Reinsurance premiums ceded | (24,103 | ) | (72,417 | ) | (96,520 | ) | (397 | ) | — | (96,917 | ) | |||||||||||||
Net premiums written | $ | 324,217 | $ | 102,757 | $ | 426,974 | $ | 176,905 | $ | — | $ | 603,879 | ||||||||||||
Earned premiums | $ | 266,023 | $ | 142,602 | $ | 408,625 | $ | 177,302 | $ | — | $ | 585,927 | ||||||||||||
Earned premiums ceded | (22,746 | ) | (62,572 | ) | (85,318 | ) | (397 | ) | — | (85,715 | ) | |||||||||||||
Net premiums earned | 243,277 | 80,030 | 323,307 | 176,905 | — | 500,212 | ||||||||||||||||||
Net investment income | — | — | — | — | 48,653 | 48,653 | ||||||||||||||||||
Net gains on alternative investments | — | — | — | — | 17,975 | 17,975 | ||||||||||||||||||
Net realized gains on sales of fixed maturities | — | — | — | — | 1,203 | 1,203 | ||||||||||||||||||
Other income | — | — | — | — | 2,500 | 2,500 | ||||||||||||||||||
Total revenues | 243,277 | 80,030 | 323,307 | 176,905 | 70,331 | 570,543 | ||||||||||||||||||
Losses and benefits | 174,129 | 57,793 | 231,922 | 192,900 | — | 424,822 | ||||||||||||||||||
Acquisition costs | 39,139 | (857 | ) | 38,282 | 1,140 | — | 39,422 | |||||||||||||||||
Interest expense | — | — | — | — | 19,605 | 19,605 | ||||||||||||||||||
General and administrative expenses | 7,571 | 5,275 | 12,846 | 1,836 | 12,885 | 27,567 | ||||||||||||||||||
Total losses and expenses | 220,839 | 62,211 | 283,050 | 195,876 | 32,490 | 511,416 | ||||||||||||||||||
Net income (loss) | $ | 22,438 | $ | 17,819 | $ | 40,257 | $ | (18,971 | ) | $ | 37,841 | $ | 59,127 | |||||||||||
Loss Ratio (a) | 71.6 | % | 72.2 | % | 71.7 | % | ||||||||||||||||||
Combined Ratio (b) | 90.8 | % | 77.7 | % | 87.5 | % | ||||||||||||||||||
(a) The loss ratio is calculated by dividing losses and benefits by net premiums earned. |
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(b) The combined ratio is calculated by dividing total losses and expenses by net premiums earned. |
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Periodic Rate of Return | ||||||||||||||||||||||||
Fair Value* | Investment %’s | Last 3 Months | Year to Date | Last 12 Months | Last 60 months** | |||||||||||||||||||
Selected Investment Return Data: | ||||||||||||||||||||||||
Cash and Fixed Maturities | $ | 2,517,109 | 68.3 | % | 3.31 | % | 3.46 | % | 7.49 | % | 6.73 | % | ||||||||||||
Global Macro | $ | 110,676 | 3.0 | % | -1.69 | % | -3.24 | % | 3.50 | % | 11.77 | % | ||||||||||||
Long / Short Equity | 120,687 | 3.3 | % | -0.02 | % | 3.48 | % | 2.75 | % | 5.82 | % | |||||||||||||
Convertible Arbitrage | 40,646 | 1.1 | % | -3.56 | % | -6.40 | % | -5.14 | % | 7.42 | % | |||||||||||||
Diversified Arbitrage | 181,013 | 4.9 | % | -1.18 | % | -0.07 | % | 3.84 | % | 9.35 | % | |||||||||||||
Distressed Securities | 161,859 | 4.4 | % | 1.51 | % | 4.52 | % | 19.33 | % | 18.38 | % | |||||||||||||
Opportunistic | 21,331 | 0.6 | % | 3.00 | % | 9.01 | % | 29.94 | % | 11.35 | % | |||||||||||||
Emerging Markets | 85,853 | 2.3 | % | 3.15 | % | 9.85 | % | 25.38 | % | 18.14 | % | |||||||||||||
Fixed Income Arbitrage | 57,703 | 1.6 | % | -7.85 | % | -8.90 | % | -13.37 | % | 4.96 | % | |||||||||||||
Event-Driven Arbitrage | 183,832 | 5.0 | % | -0.05 | % | 2.90 | % | 12.08 | % | 12.35 | % | |||||||||||||
Commodity Trading Advisers | 61,185 | 1.7 | % | 7.55 | % | 6.56 | % | 5.92 | % | 5.30 | % | |||||||||||||
Credit Long / Short | 74,924 | 2.0 | % | 0.23 | % | 1.05 | % | 10.56 | % | 7.24 | % | |||||||||||||
MDS | 1,099,709 | 29.9 | % | -0.14 | % | 1.09 | % | 6.61 | % | 8.90 | % | |||||||||||||
Insurance Underwriting | 68,912 | 1.9 | % | 7.05 | % | 7.78 | % | -8.76 | % | 5.51 | % | |||||||||||||
Alternative Investments | $ | 1,168,621 | 31.7 | % | 0.26 | % | 1.46 | % | 5.41 | % | 8.85 | % | ||||||||||||
Total Investments | $ | 3,685,730 | 100.0 | % | 2.34 | % | 2.81 | % | 6.80 | % | 7.49 | % | ||||||||||||
* | Expressed in thousands of United States Dollars |
** | Annualized |