Exhibit 99.1
MAX RE CAPITAL LTD. REPORTS RECORD FIRST QUARTER NET INCOME OF $1.15 PER DILUTED SHARE:
Hamilton, Bermuda, May 31, 2006 - Max Re Capital Ltd. (NASDAQ: MXRE) today reported net income for the three months ended March 31, 2006 of $72.9 million, or net income of $1.15 per diluted share, compared to net income of $37.7 million, or net income of $0.75 per diluted share, for the three months ended March 31, 2005. Net operating income, which represents net income adjusted for net realized gains and losses on sales of fixed maturities, for the three months ended March 31, 2006 was $74.5 million, or net operating income of $1.17 per diluted share, compared with net operating income of $37.3 million, or net operating income of $0.75 per diluted share, for the three months ended March 31, 2005.
Robert J. Cooney, Chairman, President and Chief Executive Officer, commented, “Our first quarter results reflect solid underwriting performance coupled with strong investment returns. Gross premiums written declined in the first quarter largely attributable to reduced volume in our life and annuity business. Our property and casualty reinsurance premium volume declined in line with our expectations as we reduced our participation on certain casualty and specialty reinsurance renewals. We continue our efforts to diversify our business through such smaller participations and increased the number of transactions bound in the quarter.”
Gross premiums written for the three months ended March 31, 2006 were $255.9 million, of which $255.1 million came from property and casualty underwriting and $0.8 million from life and annuity underwriting, compared to $455.7 million, of which $312.5 million came from property and casualty underwriting and $143.2 million from life and annuity underwriting, for the three months ended March 31, 2005. Reinsurance and insurance products account for 72.5% and 27.5%, respectively, of property and casualty gross premiums written in the three months ended March 31, 2006, compared to 79.4% and 20.6%, respectively, of property and casualty gross premiums written for the three months ended March 31, 2005. The decline in property and casualty premiums written is principally due to reduced participation on certain reinsurance contracts renewed in 2006 as compared to 2005. Net premiums earned for the three months ended March 31, 2006 were $159.8 million compared to $308.3 million for the same period of 2005. The decrease is principally due to $0.8 million of life and annuity written and earned premium during the first three months of 2006 compared to $143.2 million of life and annuity written and earned premium during the first three months of 2005.
Net investment income for the three months ended March 31, 2006 increased to $34.0 million, from $23.7 million for the same period in 2005 and is principally attributable to a year over year increase in cash and fixed maturities balances. Net gains on alternative investments for the three months ended March 31, 2006 were $54.9 million, or a 4.4% rate of return, compared to net gains on alternative investments of $14.4 million, or a 1.2% rate of return, for the same period of 2005. Invested assets were $4.3 billion as of March 31, 2006, with an allocation of approximately 70.5% to cash and fixed maturities and 29.5% to alternative investments.
Total revenue for the three months ended March 31, 2006 decreased 28.9% to $247.5 million, compared to $348.1 million for the same period in 2005. The decline in revenue in the three months to March 31, 2006 is principally attributable to the 48% decrease in net premiums earned over the same period in 2005, partially offset by the increase in net investment income and net gains on alternative investments.
Losses and benefits were $125.0 million for the three months ended March 31, 2006 compared to $267.4 million for the same period in 2005. The decrease in losses and benefits for the three months ended March 31, 2006 is principally attributable to the decrease in premiums earned.
Acquisition costs for the three months ended March 31, 2006 remained unchanged at $21.5 million compared to the three months ended March 31, 2005, despite lower net premiums earned in 2006. Acquisition costs are principally related to our property and casualty reinsurance and insurance products. Acquisition costs increased marginally in our property and casualty reinsurance segment.
Interest expense for the three months ended March 31, 2006 was $6.3 million compared to $6.2 million for the same period in 2005, principally attributable to similar interest crediting rates on funds withheld balances and balances with reinsurers in the three months ended March 31, 2006 compared to the three months ended March 31, 2005.
General and administrative expenses for the three months ended March 31, 2006 were $21.8 million compared to $15.3 million for the same period in 2005. General and administrative expenses for the three months ended March 31, 2006 increased principally due to increased personnel costs and fees for professional services related to an internal investigation of finite risk retrocessional contracts written in 2001 and 2003..
Shareholders’ equity was $1,223.8 million at March 31, 2006. Book value per share at March 31, 2006 was $20.61 per share, compared to $20.38 at December 31, 2005. Annualized return on average shareholders’ equity for the three months ended March 31, 2006 was 24.1%.
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 from 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, including the risk that the SEC’s view of the conclusions reached by the Audit and Risk Management Committee of our 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 conclude that a restatement of the Company’s audited financial statements for the years ended December 31, 2005, 2004, 2003, 2002 and 2001 is warranted, may differ, perhaps materially. For further information regarding cautionary statements and factors affecting future results, please refer to documents filed by the Company 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, 2006 | December 31, 2005 | |||||||
(Unaudited) | (Restated) | |||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 336,786 | $ | 314,031 | ||||
Fixed maturities, available for sale at fair value | 2,695,709 | 2,682,864 | ||||||
Alternative investments, at fair value | 1,271,090 | 1,230,889 | ||||||
Accrued interest income | 31,560 | 32,632 | ||||||
Premiums receivable | 417,214 | 398,666 | ||||||
Losses and benefits recoverable from reinsurers | 652,151 | 646,669 | ||||||
Funds withheld | 16,638 | 16,932 | ||||||
Deferred acquisition costs | 76,711 | 69,015 | ||||||
Prepaid reinsurance premiums | 95,162 | 83,493 | ||||||
Other assets | 25,563 | 23,001 | ||||||
Total assets | $ | 5,618,584 | $ | 5,498,192 | ||||
LIABILITIES | ||||||||
Property and casualty losses | $ | 2,087,065 | $ | 2,006,032 | ||||
Life and annuity benefits | 853,642 | 854,224 | ||||||
Deposit liabilities | 200,831 | 225,328 | ||||||
Funds withheld from reinsurers | 415,394 | 435,942 | ||||||
Unearned property and casualty premiums | 493,696 | 442,976 | ||||||
Reinsurance balances payable | 85,600 | 90,781 | ||||||
Accounts payable and accrued expenses | 108,550 | 94,043 | ||||||
Bank loan | 150,000 | 150,000 | ||||||
Total liabilities | 4,394,778 | 4,299,326 | ||||||
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; 59,372,778 (2005 - 58,829,354) shares issued and outstanding | 59,373 | 58,829 | ||||||
Additional paid-in capital | 939,194 | 926,386 | ||||||
Loans receivable from common share sales | (300 | ) | (465 | ) | ||||
Unearned stock grant compensation | (24,074 | ) | (14,574 | ) | ||||
Accumulated other comprehensive income (loss) | (43,990 | ) | 4,981 | |||||
Retained earnings | 293,603 | 223,709 | ||||||
Total shareholders’ equity | 1,223,806 | 1,198,866 | ||||||
Total liabilities and shareholders’ equity | $ | 5,618,584 | $ | 5,498,192 | ||||
Book Value Per Share | $ | 20.61 | $ | 20.38 | ||||
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 | ||||||||
2006 | 2005 | |||||||
(Restated) | ||||||||
REVENUES | ||||||||
Gross premiums written | $ | 255,924 | $ | 455,689 | ||||
Reinsurance premiums ceded | (57,762 | ) | (44,019 | ) | ||||
Net premiums written | $ | 198,162 | $ | 411,670 | ||||
Earned premiums | $ | 206,126 | $ | 350,328 | ||||
Earned premiums ceded | (46,369 | ) | (42,004 | ) | ||||
Net premiums earned | 159,757 | 308,324 | ||||||
Net investment income | 34,029 | 23,689 | ||||||
Net gains on alternative investments | 54,859 | 14,377 | ||||||
Net realized (losses) gains on sale of fixed maturities | (1,676 | ) | 390 | |||||
Other income | 500 | 1,318 | ||||||
Total revenues | 247,469 | 348,098 | ||||||
LOSSES AND EXPENSES | ||||||||
Losses and benefits | 124,959 | 267,425 | ||||||
Acquisition costs | 21,543 | 21,502 | ||||||
Interest expense | 6,345 | 6,232 | ||||||
General and administrative expenses | 21,759 | 15,257 | ||||||
Total losses and expenses | 174,606 | 310,416 | ||||||
NET INCOME | 72,863 | 37,682 | ||||||
Change in net unrealized appreciation of fixed maturities | (50,069 | ) | (21,515 | ) | ||||
Foreign currency translation adjustment | 1,098 | (609 | ) | |||||
COMPREHENSIVE INCOME | $ | 23,892 | $ | 15,558 | ||||
Basic earnings per share | $ | 1.23 | $ | 0.82 | ||||
Diluted earnings per share | $ | 1.15 | $ | 0.75 | ||||
Diluted net operating earnings per share | $ | 1.17 | $ | 0.75 | ||||
Weighted average shares outstanding - basic | 59,104,352 | 46,166,537 | ||||||
Weighted average shares outstanding - diluted | 63,516,268 | 49,914,515 | ||||||
MAX RE CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(Expressed | in thousands of United States Dollars) |
Three Months Ended March 31, | ||||||||
2006 | 2005 | |||||||
(Restated) | ||||||||
Preferred shares | ||||||||
Balance, beginning of period | $ | — | $ | — | ||||
Balance, end of period | — | — | ||||||
Common shares | ||||||||
Balance, beginning of period | 58,829 | 45,826 | ||||||
Issue of shares | 544 | 592 | ||||||
Repurchase of shares | — | — | ||||||
Balance, end of period | 59,373 | 46,418 | ||||||
Additional paid-in capital | ||||||||
Balance, beginning of period | 926,386 | 648,446 | ||||||
Issue of common shares | 12,529 | 11,131 | ||||||
Direct equity offering expenses | — | — | ||||||
Stock option expense | 279 | 251 | ||||||
Repurchase of shares | — | — | ||||||
Balance, end of period | 939,194 | 659,828 | ||||||
Loans receivable from common share sales | ||||||||
Balance, beginning of period | (465 | ) | (10,515 | ) | ||||
Loans repaid | 165 | 10,050 | ||||||
Balance, end of period | (300 | ) | (465 | ) | ||||
Unearned stock grant compensation | ||||||||
Balance, beginning of period | (14,574 | ) | (13,294 | ) | ||||
Stock grants awarded | (12,596 | ) | (10,463 | ) | ||||
Amortization | 3,096 | 2,244 | ||||||
Balance, end of period | (24,074 | ) | (21,513 | ) | ||||
Accumulated other comprehensive income (loss) | ||||||||
Balance, beginning of period | 4,981 | 22,227 | ||||||
Holding losses on fixed maturities arising in period | (51,745 | ) | (21,125 | ) | ||||
Net realized losses (gains) included in net income | 1,676 | (390 | ) | |||||
Currency translation adjustments | 1,098 | (609 | ) | |||||
Balance, end of period | (43,990 | ) | 103 | |||||
Retained earnings | ||||||||
Balance, beginning of period | 223,709 | 226,337 | ||||||
Net income | 72,863 | 37,682 | ||||||
Dividends paid | (2,969 | ) | (1,392 | ) | ||||
Balance, end of period | 293,603 | 262,627 | ||||||
Total shareholders’ equity | $ | 1,223,806 | $ | 946,998 | ||||
MAX RE CAPITAL LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Expressed | in thousands of United States Dollars) |
Three Months Ended March 31 | ||||||||
2006 | 2005 | |||||||
(Restated) | ||||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 72,863 | $ | 37,682 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Amortization of unearned stock based compensation | 3,375 | 2,495 | ||||||
Amortization of premium on fixed maturities | 1,864 | 2,413 | ||||||
Net realized (gains) losses on sale of fixed maturities | 1,676 | (390 | ) | |||||
Alternative investments | (40,091 | ) | (51,418 | ) | ||||
Accrued interest income | 1,072 | (1,933 | ) | |||||
Premiums receivable | (18,548 | ) | (59,954 | ) | ||||
Losses and benefits recoverable from reinsurers | (5,482 | ) | (12,706 | ) | ||||
Funds withheld | 294 | — | ||||||
Deferred acquisition costs | (7,696 | ) | (36,027 | ) | ||||
Prepaid reinsurance premiums | (11,669 | ) | (1,641 | ) | ||||
Other assets | (2,562 | ) | (2,676 | ) | ||||
Property and casualty losses | 81,033 | 107,170 | ||||||
Life and annuity benefits | (582 | ) | 124,406 | |||||
Funds withheld from reinsurers | (20,548 | ) | 844 | |||||
Unearned property and casualty premiums | 50,720 | 103,880 | ||||||
Reinsurance balances payable | (5,181 | ) | (5,511 | ) | ||||
Accounts payable and accrued expenses | 14,507 | (40,084 | ) | |||||
Cash from operating activities | 115,045 | 166,550 | ||||||
INVESTING ACTIVITIES | ||||||||
Purchase of fixed maturities | (211,424 | ) | (589,498 | ) | ||||
Sales of fixed maturities | 113,290 | 464,420 | ||||||
Redemptions of fixed maturities | 31,570 | 12,420 | ||||||
Cash used in investing activities | (66,564 | ) | (112,658 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Net proceeds from issuance of common shares | 477 | 1,260 | ||||||
Repurchase of common shares | — | — | ||||||
Dividends | (2,969 | ) | (1,392 | ) | ||||
Additions to deposit liabilities | 7,515 | 13,916 | ||||||
Payment of deposit liabilities | (32,012 | ) | (53,566 | ) | ||||
Notes and loans repaid | 165 | 10,050 | ||||||
Cash used in financing activities | (26,824 | ) | (29,732 | ) | ||||
Effect of exchange rate on cash | 1,098 | (609 | ) | |||||
Net increase in cash and cash equivalents | 22,755 | 23,551 | ||||||
Cash and cash equivalents, beginning of period | 314,031 | 239,188 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 336,786 | $ | 262,739 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest | paid totaled $2,716 and $1,589 for the three months ended March 31, 2006 and 2005, respectively. |
MAX RE CAPITAL LTD.
SCHEDULE OF SUPPLEMENTAL DATA - MARCH 31, 2006
Year to Date Segment Information: (in 000’s US$) | Property & Casualty | Life & Annuity | Corporate | Consolidated | ||||||||||||||||||||
Reinsurance | Insurance | Total | Reinsurance | |||||||||||||||||||||
Gross premiums written | $ | 184,983 | $ | 70,166 | $ | 255,149 | $ | 775 | $ | — | $ | 255,924 | ||||||||||||
Reinsurance premiums ceded | (16,059 | ) | (41,548 | ) | (57,607 | ) | (155 | ) | — | (57,762 | ) | |||||||||||||
Net premiums written | $ | 168,924 | $ | 28,618 | $ | 197,542 | $ | 620 | $ | — | $ | 198,162 | ||||||||||||
Earned premiums | $ | 117,034 | $ | 88,317 | $ | 205,351 | $ | 775 | $ | — | $ | 206,126 | ||||||||||||
Earned premiums ceded | (7,916 | ) | (38,298 | ) | (46,214 | ) | (155 | ) | — | (46,369 | ) | |||||||||||||
Net premiums earned | 109,118 | 50,019 | 159,137 | 620 | — | 159,757 | ||||||||||||||||||
Net investment income | — | — | — | — | 34,029 | 34,029 | ||||||||||||||||||
Net gains on alternative investments | — | — | — | — | 54,859 | 54,859 | ||||||||||||||||||
Net realized losses on sales of fixed maturities | — | — | — | — | (1,676 | ) | (1,676 | ) | ||||||||||||||||
Other income | — | — | — | — | 500 | 500 | ||||||||||||||||||
Total revenues | 109,118 | 50,019 | 159,137 | 620 | 87,712 | 247,469 | ||||||||||||||||||
Losses and benefits | 76,807 | 37,109 | 113,916 | 11,043 | — | 124,959 | ||||||||||||||||||
Acquisition costs | 20,831 | 453 | 21,284 | 259 | — | 21,543 | ||||||||||||||||||
Interest expense | — | — | — | — | 6,345 | 6,345 | ||||||||||||||||||
General and administrative expenses | 5,761 | 3,690 | 9,451 | 644 | 11,664 | 21,759 | ||||||||||||||||||
Total losses and expenses | 103,399 | 41,252 | 144,651 | 11,946 | 18,009 | 174,606 | ||||||||||||||||||
Net income (loss) | $ | 5,719 | $ | 8,767 | $ | 14,486 | $ | (11,326 | ) | $ | 69,703 | $ | 72,863 | |||||||||||
Loss Ratio (a) | 70.4 | % | 74.2 | % | 71.6 | % | ||||||||||||||||||
Combined Ratio (b) | 94.8 | % | 82.5 | % | 90.9 | % |
(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 | Last 12 Months | Last 60 months** | ||||||||||
Cash and Fixed Maturities | $ | 3,032,495 | 70.5 | % | -0.62 | % | 3.05 | % | 4.90 | % | |||||
Global Macro | $ | 119,376 | 2.8 | % | 1.39 | % | 6.24 | % | 9.26 | % | |||||
Long / Short Equity | 189,612 | 4.4 | % | 2.17 | % | 2.04 | % | 4.48 | % | ||||||
Convertible Arbitrage | 4,132 | 0.1 | % | -0.91 | % | -2.53 | % | 4.67 | % | ||||||
Diversified Arbitrage | 199,892 | 4.6 | % | 6.87 | % | 16.75 | % | 9.73 | % | ||||||
Distressed Securities | 206,250 | 4.8 | % | 6.27 | % | 14.39 | % | 18.20 | % | ||||||
Opportunistic | 26,147 | 0.6 | % | 10.36 | % | 27.68 | % | 14.16 | % | ||||||
Emerging Markets | 85,940 | 2.0 | % | 5.88 | % | 15.20 | % | 17.70 | % | ||||||
Fixed Income Arbitrage | 25,188 | 0.6 | % | 10.05 | % | 1.74 | % | 6.46 | % | ||||||
Event-Driven Arbitrage | 198,201 | 4.6 | % | 5.81 | % | 10.49 | % | 11.91 | % | ||||||
Commodity Trading Advisers | 68,868 | 1.6 | % | -0.01 | % | 11.23 | % | 5.16 | % | ||||||
Credit Long / Short | 112,653 | 2.6 | % | 4.87 | % | 11.42 | % | 9.40 | % | ||||||
MDS | 1,236,259 | 28.7 | % | 4.41 | % | 9.21 | % | 8.72 | % | ||||||
Reinsurance Private Equity | 34,832 | 0.8 | % | 4.30 | % | -40.96 | % | -7.28 | % | ||||||
Alternative Investments | $ | 1,271,090 | 29.5 | % | 4.40 | % | 6.62 | % | 8.07 | % | |||||
Total Investments | $ | 4,303,585 | 100.0 | % | 0.86 | % | 4.07 | % | 5.92 | % | |||||
* | Expressed in thousands of United States Dollars |
** | Annualized |