Exhibit 99.1
MAX RE CAPITAL LTD. REPORTS THIRD QUARTER RESULTS:
Hamilton, Bermuda, October 28, 2005 - Max Re Capital Ltd. (NASDAQ: MXRE) today reported a net loss for the three months ended September 30, 2005 of $41.0 million, or a net loss of $0.89 per diluted share, compared to a net loss of $9.0 million, or a net loss of $0.20 per diluted share, for the three months ended September 30, 2004. Net operating loss, which represents net loss reduced by net realized gains on sale of fixed maturities, for the three months ended September 30, 2005 was $42.6 million, or a net operating loss of $0.92 per diluted share, compared with a net operating loss of $9.9 million, or a net operating loss of $0.22 per diluted share, for the three months ended September 30, 2004. For the nine months ended September 30, 2005, the Company had net income of $18.1 million, or net income of $0.36 per diluted share, compared to $46.6 million, or $0.96 per diluted share, for the nine months ended September 30, 2004. For the nine months ended September 30, 2005, the Company had net operating income of $15.3 million, or net operating income of $0.31 per diluted share, compared to $42.5 million, or $0.87 per diluted share, for the nine months ended September 30, 2004.
Robert J. Cooney, Chairman, President and Chief Executive Officer, commented, “Losses from natural catastrophes, principally Hurricane Katrina, during the period had a $112.0 million negative impact on our third quarter results. We were pleased with our MDS portfolio return for the period which exceeded our quarterly expectation and partially mitigated the natural catastrophe losses. Max Re’s diversification allowed us to produce better results in the third quarter than most of our competitors which, along with our $246.0 million secondary common share offering in October 2005, leaves us well positioned to participate in the expected attractive market for our products in upcoming months.”
Gross premiums written for the three months ended September 30, 2005 were $288.0 million, of which $196.3 million came from property and casualty underwriting and $91.7 million from life and annuity underwriting, compared to $280.8 million, $105.8 million coming from property and casualty underwriting and $175.0 million of life and annuity underwriting, for the three months ended September 30, 2004. Net premiums earned for the three months ended September 30, 2005 were $282.5 million compared to $331.1 million for the same period of 2004, the decrease is principally due to $83.2 million less life and annuity premiums written and earned in the three months ended September 30, 2005. Gross premiums written for the nine months ended September 30, 2005 were $988.8 million compared to $904.0 million for the first nine months of 2004. Property and casualty reinsurance, property and casualty insurance and life and annuity reinsurance accounted for 48.0%, 24.8% and 27.2%, respectively, of gross premiums written for the first nine months of 2005. Net premiums earned for the first nine months of 2005 increased 11.5% to $782.7 million compared to $701.8 million for the same period in 2004. The increase principally relates to increased life and annuity business written and earned in the first two quarters of 2005.
Net investment income for the three months ended September 30, 2005 increased to $27.0 million, from $20.1 million for the same period in 2004 and is principally attributable to increased cash and fixed maturities balances held. Net investment income for the nine months ended September 30, 2005 increased $17.1 million, to $75.7 million from $58.6 million for the same period in 2004.
Net gains on alternative investments for the three months ended September 30, 2005 were $35.6 million, net of $12.0 million in reinsurance private equity losses related to hurricane activity, or a 3.00% rate of return, compared to net losses on alternative investments of $14.6 million, net of $15.0 million in reinsurance private equity losses related to hurricane activity, or a negative 1.39% rate of return, for the same period of 2004. For the nine months ended September 30, 2005, alternative investments have returned 4.50%, compared to 2.73% for the same period in 2004. Invested assets were $3.9 billion as of September 30, 2005, with an allocation of approximately 69.0% to cash and fixed maturities and 31.0% to alternative investments.
Losses, benefits and experience refunds were $347.1 million for the three months ended September 30, 2005 compared to $299.2 million for the same period in 2004. The increase in losses, benefits and experience refunds for the three months ended September 30, 2005 is principally attributable to the losses associated with premiums earned and the recording of $100.0 million in natural catastrophe losses. Losses and benefits for the nine months ended September 30, 2005 were $771.9 million compared to $600.9 million for the same period in 2004. The increase for the nine months ended September 30, 2005 is also principally attributable to the increase in premiums earned and the recording of losses from natural catastrophes.
Acquisition costs for the three months ended September 30, 2005 decreased by 21.2% to $20.5 million compared to $26.0 million for the three months ended September 30, 2004. Acquisition costs for the nine months ended September 30, 2005 decreased by 31.1% to $59.9 million from $87.0 million for the nine months ended September 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 September 30, 2005 decreased to $6.7 million from $12.0 million for the same period in 2004. Interest expense for the nine months ended September 30, 2005 increased to $26.4 million from $23.9 million for the same period in 2004.
General and administrative expenses for the three months ended September 30, 2005 were $14.5 million compared to $10.5 million for the same period in 2004 principally due to increased personnel and related costs in 2005, compared to 2004. General and administrative expenses for the nine months ended September 30, 2005 were 5.4% of net premiums earned compared to 4.9% of net premiums earned for the nine months ended September 30, 2004.
Shareholders’ equity was $954.3 million at September 30, 2005, compared to $937.0 million at December 31, 2004. Book value per share at September 30, 2005 was $20.69 per share, compared to $20.45 at December 31, 2004. Annualized return on average shareholders’ equity for the nine months ended September 30, 2005 was 1.9%.
Max Re Capital Ltd., through its principal operating subsidiaries, Max Re Ltd., Max Insurance Europe Limited and Max Re Europe Limited, offers customized risk financing 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 Prospectus Supplement dated October 11, 2005 to the Company’s Prospectus dated October 4, 2005 and other documents previously 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)
September 30, 2005 | December 31, 2004 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 227,396 | $ | 239,188 | ||||
Fixed maturities, available for sale at fair value | 2,463,439 | 2,156,011 | ||||||
Alternative investments, at fair value | 1,207,519 | 1,119,028 | ||||||
Accrued interest income | 29,816 | 24,257 | ||||||
Premiums receivable | 301,689 | 262,714 | ||||||
Losses and benefits recoverable from reinsurers | 464,528 | 388,067 | ||||||
Funds withheld | 16,875 | 17,599 | ||||||
Deferred acquisition costs | 85,741 | 54,770 | ||||||
Prepaid reinsurance premiums | 76,376 | 79,337 | ||||||
Other assets | 24,434 | 26,384 | ||||||
Total assets | $ | 4,897,813 | $ | 4,367,355 | ||||
LIABILITIES | ||||||||
Property and casualty losses | $ | 1,764,003 | $ | 1,455,099 | ||||
Life and annuity benefits | 864,112 | 666,101 | ||||||
Deposit liabilities | 224,854 | 266,479 | ||||||
Funds withheld from reinsurers | 315,232 | 301,100 | ||||||
Unearned property and casualty premiums | 502,980 | 447,633 | ||||||
Reinsurance balances payable | 47,690 | 50,258 | ||||||
Accounts payable and accrued expenses | 74,689 | 93,694 | ||||||
Bank loan | 150,000 | 150,000 | ||||||
Total liabilities | 3,943,560 | 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; 46,112,212 (2004 - 45,825,880) shares issued and outstanding | 46,112 | 45,826 | ||||||
Additional paid-in capital | 657,251 | 652,029 | ||||||
Loans receivable from common share sales | (465 | ) | (10,515 | ) | ||||
Unearned stock grant compensation | (16,725 | ) | (13,294 | ) | ||||
Accumulated other comprehensive income | 15,253 | 22,227 | ||||||
Retained earnings | 252,827 | 240,718 | ||||||
Total shareholders’ equity | 954,253 | 936,991 | ||||||
Total liabilities and shareholders’ equity | $ | 4,897,813 | $ | 4,367,355 | ||||
Book Value Per Share | $ | 20.69 | $ | 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 September 30 | Nine Months Ended September 30 | |||||||||||||||
2005 | 2004 | 2005 | 2004 | |||||||||||||
REVENUES | ||||||||||||||||
Gross premiums written | $ | 288,047 | $ | 280,848 | $ | 988,843 | $ | 904,033 | ||||||||
Reinsurance premiums ceded | (47,805 | ) | (29,777 | ) | (144,722 | ) | (120,130 | ) | ||||||||
Net premiums written | $ | 240,242 | $ | 251,071 | $ | 844,121 | $ | 783,903 | ||||||||
Earned premiums | $ | 343,437 | $ | 369,455 | $ | 929,364 | $ | 809,302 | ||||||||
Earned premiums ceded | (60,985 | ) | (38,384 | ) | (146,700 | ) | (107,514 | ) | ||||||||
Net premiums earned | 282,452 | 331,071 | 782,664 | 701,788 | ||||||||||||
Net investment income | 27,002 | 20,106 | 75,654 | 58,648 | ||||||||||||
Net gains (losses) on alternative investments | 35,642 | (14,624 | ) | 53,617 | 24,891 | |||||||||||
Net realized gains on sale of fixed maturities | 1,624 | 916 | 2,827 | 4,121 | ||||||||||||
Other income | 1,088 | 1,285 | 3,588 | 3,663 | ||||||||||||
Total revenues | 347,808 | 338,754 | 918,350 | 793,111 | ||||||||||||
LOSSES AND EXPENSES | ||||||||||||||||
Losses and benefits | 347,086 | 299,216 | 771,908 | 600,906 | ||||||||||||
Acquisition costs | 20,492 | 26,032 | 59,914 | 87,015 | ||||||||||||
Interest expense | 6,748 | 11,979 | 26,352 | 23,916 | ||||||||||||
General and administrative expenses | 14,484 | 10,549 | 42,052 | 34,664 | ||||||||||||
Total losses and expenses | 388,810 | 347,776 | 900,226 | 746,501 | ||||||||||||
NET INCOME (LOSS) | (41,002 | ) | (9,022 | ) | 18,124 | 46,610 | ||||||||||
Change in net unrealized appreciation of fixed maturities | (31,393 | ) | 33,355 | (3,660 | ) | (3,605 | ) | |||||||||
Foreign currency translation adjustment | 1,011 | (257 | ) | (3,314 | ) | 176 | ||||||||||
COMPREHENSIVE INCOME (LOSS) | $ | (71,384 | ) | $ | 24,076 | $ | 11,150 | $ | 43,181 | |||||||
Basic earnings (loss) per share | $ | (0.89 | ) | $ | (0.20 | ) | $ | 0.39 | $ | 1.02 | ||||||
Diluted earnings (loss) per share | $ | (0.89 | ) | $ | (0.20 | ) | $ | 0.36 | $ | 0.96 | ||||||
Diluted net operating earnings (loss) per share | $ | (0.92 | ) | $ | (0.22 | ) | $ | 0.31 | $ | 0.87 | ||||||
Weighted average shares outstanding - basic | 46,104,424 | 45,785,731 | 46,160,067 | 45,686,675 | ||||||||||||
Weighted average shares outstanding - diluted | 49,939,135 | 47,904,970 | 49,850,390 | 48,697,018 | ||||||||||||
MAX RE CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(Expressed in thousands of United States Dollars)
Nine months ended September 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 | 621 | 719 | ||||||
Repurchase of shares | (335 | ) | (172 | ) | ||||
Balance, end of period | 46,112 | 45,732 | ||||||
Additional paid-in capital | ||||||||
Balance, beginning of period | 652,029 | 637,772 | ||||||
Issue of common shares | 11,673 | 15,500 | ||||||
Stock option expense | 574 | 417 | ||||||
Repurchase of shares | (7,025 | ) | (2,896 | ) | ||||
Balance, end of period | 657,251 | 650,793 | ||||||
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 | (10,847 | ) | (15,906 | ) | ||||
Amortization | 7,416 | 4,829 | ||||||
Balance, end of period | (16,725 | ) | (15,109 | ) | ||||
Accumulated other comprehensive income (loss) | ||||||||
Balance, beginning of period | 22,227 | 25,790 | ||||||
Holding gains (losses) on fixed maturities arising in period | (833 | ) | 516 | |||||
Net realized gains included in net income | (2,827 | ) | (4,121 | ) | ||||
Currency translation adjustments | (3,314 | ) | 176 | |||||
Balance, end of period | 15,253 | 22,361 | ||||||
Retained earnings | ||||||||
Balance, beginning of period | 240,718 | 112,480 | ||||||
Net income | 18,124 | 46,610 | ||||||
Dividends paid | (6,015 | ) | (4,117 | ) | ||||
Balance, end of period | 252,827 | 154,973 | ||||||
Total shareholders’ equity | $ | 954,253 | $ | 847,785 | ||||
MAX RE CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Expressed in thousands of United States Dollars)
Nine Months Ended September 30 | ||||||||
2005 | 2004 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 18,124 | $ | 46,610 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Amortization of unearned stock based compensation | 7,990 | 5,246 | ||||||
Amortization of premium on fixed maturities | 7,071 | 6,690 | ||||||
Net realized gains on sale of fixed maturities | (2,827 | ) | (4,121 | ) | ||||
Alternative investments | (88,928 | ) | (156,169 | ) | ||||
Accrued interest income | (5,559 | ) | (4,831 | ) | ||||
Premiums receivable | (38,975 | ) | 91,725 | |||||
Losses and benefits recoverable from reinsurers | (76,461 | ) | (85,045 | ) | ||||
Funds withheld | 724 | (17,543 | ) | |||||
Deferred acquisition costs | (30,971 | ) | (3,301 | ) | ||||
Prepaid reinsurance premiums | 2,961 | (11,942 | ) | |||||
Other assets | 1,950 | (11,761 | ) | |||||
Property and casualty losses | 308,904 | 391,064 | ||||||
Life and annuity benefits | 198,011 | 144,536 | ||||||
Funds withheld from reinsurers | 14,132 | 61,427 | ||||||
Unearned property and casualty premiums | 55,347 | 93,790 | ||||||
Reinsurance balances payable | (2,568 | ) | (28,703 | ) | ||||
Accounts payable and accrued expenses | (19,005 | ) | (10,918 | ) | ||||
Cash from operating activities | 349,920 | 506,754 | ||||||
INVESTING ACTIVITIES | ||||||||
Purchase of fixed maturities | (1,257,224 | ) | (1,071,594 | ) | ||||
Sales of fixed maturities | 918,799 | 743,874 | ||||||
Redemptions of fixed maturities | 23,530 | 23,489 | ||||||
Cash used in investing activities | (314,895 | ) | (304,231 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Net proceeds from issuance of common shares | 1,447 | 313 | ||||||
Repurchase of common shares | (7,360 | ) | (3,068 | ) | ||||
Dividends | (6,015 | ) | (4,117 | ) | ||||
Additions to deposit liabilities | 17,623 | 37,079 | ||||||
Payment of deposit liabilities | (59,248 | ) | (59,964 | ) | ||||
Notes and loans repaid | 10,050 | 1,000 | ||||||
Cash used in financing activities | (43,503 | ) | (28,757 | ) | ||||
Effect of exchange rate on cash | (3,314 | ) | 176 | |||||
Net increase (decrease) in cash and cash equivalents | (11,792 | ) | 173,942 | |||||
Cash and cash equivalents, beginning of period | 239,188 | 201,515 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 227,396 | $ | 375,457 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid totaled $5,580 and $2,976 for the nine months ended September 30, 2005 and 2004, respectively.
MAX RE CAPITAL LTD.
SCHEDULE OF SUPPLEMENTAL DATA - SEPTEMBER 30, 2005
Year to Date Segment Information: | Property & Casualty | Life & Annuity Reinsurance | Corporate | Consolidated | |||||||||||||||||||
(in 000’s US$)
| Reinsurance | Insurance | Total | ||||||||||||||||||||
Gross premiums written | $ | 474,440 | $ | 245,330 | $ | 719,770 | $ | 269,073 | $ | — | $ | 988,843 | |||||||||||
Reinsurance premiums ceded | (47,746 | ) | (96,579 | ) | (144,325 | ) | (397 | ) | — | (144,722 | ) | ||||||||||||
Net premiums written | $ | 426,694 | $ | 148,751 | $ | 575,445 | $ | 268,676 | $ | — | $ | 844,121 | |||||||||||
Earned premiums | $ | 440,187 | $ | 220,104 | $ | 660,291 | $ | 269,073 | $ | — | $ | 929,364 | |||||||||||
Earned premiums ceded | (52,038 | ) | (94,265 | ) | (146,303 | ) | (397 | ) | — | (146,700 | ) | ||||||||||||
Net premiums earned | 388,149 | 125,839 | 513,988 | 268,676 | — | 782,664 | |||||||||||||||||
Net investment income | — | — | — | — | 75,654 | 75,654 | |||||||||||||||||
Net gains on alternative investments | — | — | — | — | 53,617 | 53,617 | |||||||||||||||||
Net realized gains on sales of fixed maturities | — | — | — | — | 2,827 | 2,827 | |||||||||||||||||
Other income | — | — | — | — | 3,588 | 3,588 | |||||||||||||||||
Total revenues | 388,149 | 125,839 | 513,988 | 268,676 | 135,686 | 918,350 | |||||||||||||||||
Losses and benefits | 347,358 | 131,405 | 478,763 | 293,145 | — | 771,908 | |||||||||||||||||
Acquisition costs | 58,787 | (772 | ) | 58,015 | 1,899 | — | 59,914 | ||||||||||||||||
Interest expense | — | — | — | — | 26,352 | 26,352 | |||||||||||||||||
General and administrative expenses | 11,051 | 7,576 | 18,627 | 2,775 | 20,650 | 42,052 | |||||||||||||||||
Total losses and expenses | 417,196 | 138,209 | 555,405 | 297,819 | 47,002 | 900,226 | |||||||||||||||||
Net income (loss) | $ | (29,047 | ) | $ | (12,370 | ) | $ | (41,417 | ) | $ | (29,143 | ) | $ | 88,684 | $ | 18,124 | |||||||
Loss Ratio (a) | 89.5 | % | 104.4 | % | 93.1 | % | |||||||||||||||||
Combined Ratio (b) | 107.5 | % | 109.8 | % | 108.1 | % |
(a) | The loss ratio is calculated by dividing losses and benefits 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 | Year to Date | Last 12 Months | Last 60 months** | ||||||||||||
Cash and Fixed Maturities | $ | 2,690,835 | 69.0 | % | -0.26 | % | 3.19 | % | 4.28 | % | 6.15 | % | ||||||
Global Macro | $ | 98,387 | 2.5 | % | 4.55 | % | 1.16 | % | 11.00 | % | 11.94 | % | ||||||
Long / Short Equity | 145,682 | 3.7 | % | 3.24 | % | 6.84 | % | 7.61 | % | 5.94 | % | |||||||
Convertible Arbitrage | 41,616 | 1.1 | % | 2.50 | % | -4.06 | % | -3.88 | % | 7.15 | % | |||||||
Diversified Arbitrage | 163,718 | 4.2 | % | 6.86 | % | 6.78 | % | 11.44 | % | 9.62 | % | |||||||
Distressed Securities | 167,414 | 4.3 | % | 4.97 | % | 9.72 | % | 20.76 | % | 18.57 | % | |||||||
Opportunistic | 22,684 | 0.6 | % | 6.45 | % | 16.05 | % | 32.88 | % | 12.15 | % | |||||||
Emerging Markets | 90,072 | 2.3 | % | 5.02 | % | 15.37 | % | 24.29 | % | 18.39 | % | |||||||
Fixed Income Arbitrage | 23,352 | 0.6 | % | 2.21 | % | -6.89 | % | -6.11 | % | 5.23 | % | |||||||
Event-Driven Arbitrage | 212,152 | 5.4 | % | 4.55 | % | 7.58 | % | 17.54 | % | 11.86 | % | |||||||
Commodity Trading Advisers | 78,314 | 2.0 | % | 2.91 | % | 9.66 | % | 11.82 | % | 5.83 | % | |||||||
Credit Long / Short | 108,721 | 2.8 | % | 4.44 | % | 5.54 | % | 12.04 | % | 8.53 | % | |||||||
MDS | 1,152,112 | 29.6 | % | 4.22 | % | 5.35 | % | 11.04 | % | 8.96 | % | |||||||
Reinsurance Private Equity | 55,407 | 1.4 | % | -16.88 | % | -10.41 | % | -6.35 | % | 0.88 | % | |||||||
Alternative Investments | $ | 1,207,519 | 31.0 | % | 3.00 | % | 4.50 | % | 10.10 | % | 8.66 | % | ||||||
Total Investments | $ | 3,898,354 | 100.0 | % | 0.78 | % | 3.61 | % | 6.07 | % | 7.00 | % | ||||||
* | Expressed in thousands of United States Dollars |
** | Annualized |