Exhibit 99.1
MAX CAPITAL GROUP LTD. REPORTS THIRD-QUARTER FINANCIAL RESULTS
Annualized Return on Average Shareholders’ Equity of 22.0%,
Rolling Twelve-Month Book Value Per Share Grows By 20.1%
HAMILTON, BERMUDA, November 5, 2007—Max Capital Group Ltd. (NASDAQ: MXGL; BSX: MXGL BH) today reported net income for the three months ended September 30, 2007, of $66.8 million, or $1.05 per diluted share, compared to net income of $26.5 million, or $0.42 per diluted share, for the three months ended September 30, 2006. Net operating income, which represents net income excluding after-tax net realized gains and losses on sales of fixed maturities, for the three months ended September 30, 2007, was $68.4 million, or $1.08 per diluted share, compared with net operating income of $26.8 million, or $0.42 per diluted share, for the three months ended September 30, 2006. For the nine months ended September 30, 2007, the Company had net income of $240.9 million, or $3.77 per diluted share, compared to $121.5 million, or $1.91 per diluted share, for the nine months ended September 30, 2006. For the nine months ended September 30, 2007, the Company had net operating income of $243.9 million, or $3.81 per diluted share, compared to $128.8 million, or $2.03 per diluted share, for the nine months ended September 30, 2006.
W. Marston Becker, Chairman and Chief Executive Officer of Max Capital Group Ltd., said: “Max continues an excellent year with third-quarter results reflecting significant underwriting income and continued solid investment performance. Our internal review of loss reserves during the third quarter permitted us to release $12.4 million of prior-period reserves. Additionally, we entered an agreement to settle a large block of prior-period reserves on one of our structured product contracts for significantly less than originally estimated. We are very pleased with this quarter’s performance and the depth of earnings opportunities it represents. We look forward to carrying this earnings momentum into the year-end as we continue to build the Company.”
Gross premiums written for the three months ended September 30, 2007, were $223.0 million, of which $160.8 million came from property and casualty underwriting and $62.2 million from life and annuity underwriting, compared to $177.9 million, of which $177.3 million came from property and casualty underwriting and $0.6 million from life and annuity underwriting, for the three months ended September 30, 2006. The lower level of gross premiums written from property and casualty underwriting for the three months ended September 30, 2007, versus the same period in 2006 is consistent with the Company’s 2007 budget. Gross premiums written in the third quarter were boosted by a new life and annuity reinsurance transaction in which the gross premium written was $62.0 million. Net premiums earned for the three months ended September 30, 2007, were $177.6 million compared to $147.1 million for the same period in 2006. Gross premiums written for the nine months ended September 30, 2007, were $678.1 million compared to $717.7 million for the first nine months of 2006. Property and casualty reinsurance, property and casualty insurance, excess and surplus lines insurance, and life and annuity reinsurance accounted for 45.5%, 41.9%, 3.2% and 9.4%, respectively, of gross premiums written for the first nine months of 2007, versus 55.4%, 38.5%, 0.0% and 6.1%, respectively, for the same period in 2006. Net premiums earned for the first nine months of 2007 decreased 10.1% to $455.0 million compared to $506.0 million for the same period in 2006. The decline in net premiums earned in the nine months ended September 30, 2007, versus the same period in 2006 principally reflects the lower volume of gross premium written and the increase in the Company’s use of reinsurance in order to manage its net retained exposure.
Net investment income for the three months ended September 30, 2007, increased to $49.7 million from $38.7 million for the same period in 2006. The increase is principally attributable to a year-over-year increase in cash and fixed maturities balances. Net investment income for the nine months ended September 30, 2007, increased $29.7 million, to $138.9 million, compared to $109.2 million for the same period in 2006. Net gains on alternative investments for the three months ended September 30, 2007, were $14.5 million, for a 1.19% rate of return, versus net losses on alternative investments of $31.0 million, for a negative 2.33% rate of return, for the same period of 2006. For the nine months ended September 30, 2007, alternative investments have returned 12.18% or $136.7 million compared to 1.57% or $18.2 million for the same period in 2006. Invested assets were $5.1 billion as of September 30, 2007, with an allocation of 78.6% to cash and fixed maturities and of 21.4% to alternative investments.
Total revenue for the three months ended September 30, 2007, increased 55.4% to $240.3 million, versus $154.6 million for the same period in 2006. Total revenue for the nine months ended September 30, 2007, increased 16.1% to $728.1 million, compared to $627.0 million for the same period in 2006. The increase in revenue in the three- and nine-month periods ended September 30, 2007, reflects an increase in investment income and net gains on alternative investments partially offset by the decrease in net premiums earned compared to 2006.
Losses and benefits were $121.4 million for the three months ended September 30, 2007, versus $89.2 million for the same period in 2006. Losses and benefits include $62.6 million attributable to a new life and annuity transaction. Excluding the new life and annuity transaction, losses and benefits for the quarter were $58.8 million, with the decrease in losses and benefits for the three months ended September 30, 2007, principally attributable to favorable development of $12.4 million in prior-period reserves and the agreement to settle a large block of prior-period reserves, resulting in a $15.2 million net release of reserves.
Acquisition costs for the three months ended September 30, 2007, were $12.1 million compared to $19.0 million for the same period in 2006. Acquisition costs are principally related to the Company’s property and casualty business. The decrease in this quarter versus the same period in 2006 is principally attributable to the change in mix between reinsurance and insurance net premiums earned, with insurance being a greater proportion of premiums this quarter and having a lower net acquisition cost ratio.
Interest expense for the three months ended September 30, 2007, was $13.7 million versus $(1.7) million for the same period in 2006, with the increase principally attributable to the increased principal amount of bank loans and senior notes outstanding.
General and administrative expenses for the three months ended September 30, 2007, were $27.8 million, versus $21.3 million for the same period in 2006. The increase in general and administrative expenses for the three months ended September 30, 2007, principally reflects operating costs related to the Company’s newly launched U.S.-based excess and surplus lines operations, as well as additional personnel-related costs for the group.
Shareholders’ equity was $1,533.6 million at September 30, 2007. Book value per share at September 30, 2007, was $26.12 versus $24.49 at June 30, 2007, $23.06 at December 31, 2006, and $21.74 at September 30, 2006, for an increase in the rolling twelve-month book value per share of 20.1%. Annualized return on average shareholders’ equity for the nine months ended September 30, 2007, was 22.0%.
During the three months ended September 30, 2007, Max Capital Group Ltd. repurchased 1,546,200 of the Company’s common shares or approximately $40.0 million of such shares outstanding, at an average price of $25.87 per share, under the board-approved share repurchase plan. During the nine months ended September 30, 2007, the Company repurchased 3,056,700 common shares at an average price of $26.05 per common share for a total amount of $79.6 million, including the costs incurred to effect the repurchases. The Company has approximately $60.0 million remaining under its current share repurchase authorization.
Max Capital Group Ltd., through its operating subsidiaries, provides specialty insurance and reinsurance products to corporations, public entities, property and casualty insurers and life and health insurers.
This release includes statements about future economic performance, finances, expectations, plans and prospects of the Company that constitute forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties, including those described on the Company’s Form 10-K and Form 10-Q filed with the SEC, 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 the Company’s 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 restate its audited financial statements for the years ended December 31, 2005, 2004, 2003, 2002 and 2001 and unaudited financial statements for the periods ended March 31, 2006, and June 30, 2006, may differ,
2
perhaps materially, and result in material changes to information contained in the Company’s past SEC filings, including financial statements and financial information. For further information regarding cautionary statements and factors affecting future results, please refer to the Company’s Annual Report on Form 10-K for the year ended December 31, 2006, and other documents filed by the Company with the SEC. 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.
In presenting the Company’s results management has included and discussed net operating income per diluted share and annualized return on average shareholders’ equity. Such measures are “non-GAAP financial measures” as defined in Regulation G. Management believes that these non-GAAP financial measures, which may be defined differently by other companies, allows for a more complete understanding of the Company’s business. However, these measures should not be viewed as a substitute for those determined in accordance with GAAP. The reconciliation of such measures to their respective most directly comparable GAAP financial measures is presented in the attached financial information in accordance with Regulation G.
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MAX CAPITAL GROUP LTD.
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States Dollars, except per-share and share amounts)
September 30, 2007 | December 31, 2006 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 514,697 | $ | 441,895 | ||||
Fixed maturities, available for sale at fair value | 3,511,362 | 3,028,108 | ||||||
Alternative investments, at fair value | 1,094,247 | 1,065,874 | ||||||
Accrued interest income | 43,372 | 38,922 | ||||||
Premiums receivable | 423,418 | 390,889 | ||||||
Losses and benefits recoverable from reinsurers | 651,620 | 538,009 | ||||||
Funds withheld | 14,263 | 15,385 | ||||||
Deferred acquisition costs | 50,393 | 49,064 | ||||||
Prepaid reinsurance premiums | 122,102 | 104,443 | ||||||
Trades pending settlement | 49,477 | 136,563 | ||||||
Other assets | 57,287 | 39,832 | ||||||
Total assets | $ | 6,532,238 | $ | 5,848,984 | ||||
LIABILITIES | ||||||||
Property and casualty losses | $ | 2,506,019 | $ | 2,335,109 | ||||
Life and annuity benefits | 964,525 | 895,560 | ||||||
Deposit liabilities | 220,839 | 204,389 | ||||||
Funds withheld from reinsurers | 255,329 | 254,723 | ||||||
Unearned property and casualty premiums | 473,968 | 436,476 | ||||||
Reinsurance balances payable | 107,843 | 79,506 | ||||||
Accounts payable and accrued expenses | 85,346 | 103,160 | ||||||
Bank loans | 285,000 | 150,000 | ||||||
Senior notes | 99,773 | — | ||||||
Total liabilities | 4,998,642 | 4,458,923 | ||||||
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; 58,707,527 (2006 - 60,276,560) shares issued and outstanding | 58,708 | 60,277 | ||||||
Additional paid-in capital | 873,330 | 950,862 | ||||||
Unearned stock grant compensation | — | (17,570 | ) | |||||
Accumulated other comprehensive loss | (43,625 | ) | (21,688 | ) | ||||
Retained earnings | 645,183 | 418,180 | ||||||
Total shareholders’ equity | 1,533,596 | 1,390,061 | ||||||
Total liabilities and shareholders’ equity | $ | 6,532,238 | $ | 5,848,984 | ||||
Book Value Per Share | $ | 26.12 | $ | 23.06 | ||||
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MAX CAPITAL GROUP 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 September 30 | Nine Months Ended September 30 | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
REVENUES | ||||||||||||||||
Gross premiums written | $ | 222,989 | $ | 177,854 | $ | 678,089 | $ | 717,745 | ||||||||
Reinsurance premiums ceded | (49,680 | ) | (39,005 | ) | (203,521 | ) | (170,406 | ) | ||||||||
Net premiums written | $ | 173,309 | $ | 138,849 | $ | 474,568 | $ | 547,339 | ||||||||
Earned premiums | $ | 239,462 | $ | 202,831 | $ | 640,651 | $ | 658,240 | ||||||||
Earned premiums ceded | (61,908 | ) | (55,750 | ) | (185,664 | ) | (152,213 | ) | ||||||||
Net premiums earned | 177,554 | 147,081 | 454,987 | 506,027 | ||||||||||||
Net investment income | 49,665 | 38,668 | 138,851 | 109,195 | ||||||||||||
Net gains (losses) on alternative investments | 14,487 | (31,004 | ) | 136,686 | 18,219 | |||||||||||
Net realized losses on sale of fixed maturities | (1,650 | ) | (288 | ) | (2,975 | ) | (7,249 | ) | ||||||||
Other income | 244 | 167 | 587 | 831 | ||||||||||||
Total revenues | 240,300 | 154,624 | 728,136 | 627,023 | ||||||||||||
LOSSES AND EXPENSES | ||||||||||||||||
Losses and benefits | 121,353 | 89,186 | 334,869 | 380,110 | ||||||||||||
Acquisition costs | 12,105 | 18,979 | 46,763 | 59,369 | ||||||||||||
Interest expense | 13,673 | (1,650 | ) | 30,108 | 6,317 | |||||||||||
General and administrative expenses | 27,783 | 21,301 | 79,741 | 58,857 | ||||||||||||
Total losses and expenses | 174,914 | 127,816 | 491,481 | 504,653 | ||||||||||||
NET INCOME BEFORE TAXES | 65,386 | 26,808 | 236,655 | 122,370 | ||||||||||||
Income tax (benefit) expense | (1,380 | ) | 311 | (4,244 | ) | 868 | ||||||||||
NET INCOME | 66,766 | 26,497 | 240,899 | 121,502 | ||||||||||||
Change in net unrealized depreciation of fixed maturities | 33,274 | 61,110 | (24,472 | ) | (20,064 | ) | ||||||||||
Foreign currency translation adjustment | 1,666 | 2,371 | 2,535 | 3,853 | ||||||||||||
COMPREHENSIVE INCOME | $ | 101,706 | $ | 89,978 | $ | 218,962 | $ | 105,291 | ||||||||
Basic earnings per share | $ | 1.12 | $ | 0.45 | $ | 4.01 | $ | 2.05 | ||||||||
Diluted earnings per share | $ | 1.05 | $ | 0.42 | $ | 3.77 | $ | 1.91 | ||||||||
Diluted net operating earnings per share | $ | 1.08 | $ | 0.42 | $ | 3.81 | $ | 2.03 | ||||||||
Weighted average shares outstanding - basic | 59,609,354 | 59,447,853 | 60,021,083 | 59,373,409 | ||||||||||||
Weighted average shares outstanding - diluted | 63,558,087 | 63,249,815 | 63,958,341 | 63,511,226 | ||||||||||||
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MAX CAPITAL GROUP LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(Expressed in thousands of United States Dollars)
Nine Months Ended September 30 | ||||||||
2007 | 2006 | |||||||
Preferred shares | ||||||||
Balance, beginning of period | $ | — | $ | — | ||||
Balance, end of period | — | — | ||||||
Common shares | ||||||||
Balance, beginning of period | 60,277 | 58,829 | ||||||
Issue of shares | 1,488 | 722 | ||||||
Repurchase of shares | (3,057 | ) | (1 | ) | ||||
Balance, end of period | 58,708 | 59,550 | ||||||
Additional paid-in capital | ||||||||
Balance, beginning of period | 950,862 | 921,384 | ||||||
Reclassification of unearned stock grant compensation | (26,357 | ) | — | |||||
Issue of common shares | 19,775 | 15,106 | ||||||
Stock based compensation expense | 5,625 | 616 | ||||||
Repurchase of shares | (76,575 | ) | (17 | ) | ||||
Balance, end of period | 873,330 | 937,089 | ||||||
Loans receivable from common share sales | ||||||||
Balance, beginning of period | — | (465 | ) | |||||
Loans repaid | — | 465 | ||||||
Balance, end of period | — | — | ||||||
Unearned stock grant compensation | ||||||||
Balance, beginning of period | (17,570 | ) | (14,574 | ) | ||||
Stock grants awarded | (16,481 | ) | (13,052 | ) | ||||
Amortization | 7,694 | 9,794 | ||||||
Reclassification of unearned stock grant compensation | 26,357 | — | ||||||
Balance, end of period | — | (17,832 | ) | |||||
Accumulated other comprehensive loss | ||||||||
Balance, beginning of period | (21,688 | ) | 4,981 | |||||
Holding losses on fixed maturities arising in period | (27,447 | ) | (27,313 | ) | ||||
Net realized losses included in net income | 2,975 | 7,249 | ||||||
Currency translation adjustments | 2,535 | 3,853 | ||||||
Balance, end of period | (43,625 | ) | (11,230 | ) | ||||
Retained earnings | ||||||||
Balance, beginning of period | 418,180 | 215,565 | ||||||
Net income | 240,899 | 121,502 | ||||||
Dividends paid | (13,896 | ) | (10,098 | ) | ||||
Balance, end of period | 645,183 | 326,969 | ||||||
Total shareholders’ equity | $ | 1,533,596 | $ | 1,294,546 | ||||
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MAX CAPITAL GROUP LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Expressed in thousands of United States Dollars)
Nine Months Ended September 30 | ||||||||
2007 | 2006 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 240,899 | $ | 121,502 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Stock based compensation | 13,319 | 10,410 | ||||||
Amortization of premium on fixed maturities | 3,271 | 5,053 | ||||||
Accretion of deposit liabilities | 4,950 | (10,474 | ) | |||||
Net realized losses on sale of fixed maturities | 2,975 | 7,249 | ||||||
Changes in: | ||||||||
Alternative investments | (28,410 | ) | (51,552 | ) | ||||
Accrued interest income | (4,450 | ) | (2,965 | ) | ||||
Premiums receivable | (32,529 | ) | (11,712 | ) | ||||
Losses and benefits recoverable from reinsurers | (113,611 | ) | (55,780 | ) | ||||
Funds withheld | 1,122 | 1,362 | ||||||
Deferred acquisition costs | (1,329 | ) | (8,809 | ) | ||||
Prepaid reinsurance premiums | (17,659 | ) | (18,939 | ) | ||||
Trades pending settlement | 87,086 | — | ||||||
Other assets | (8,780 | ) | (753 | ) | ||||
Property and casualty losses | 170,910 | 232,450 | ||||||
Life and annuity benefits | 68,965 | 31,959 | ||||||
Funds withheld from reinsurers | 606 | (15,621 | ) | |||||
Unearned property and casualty premiums | 37,492 | 62,571 | ||||||
Reinsurance balances payable | 28,337 | (7,222 | ) | |||||
Accounts payable and accrued expenses | (17,814 | ) | 36,896 | |||||
Cash from operating activities | 435,350 | 325,625 | ||||||
INVESTING ACTIVITIES | ||||||||
Purchases of fixed maturities | (1,103,483 | ) | (852,365 | ) | ||||
Sales of fixed maturities | 263,024 | 425,485 | ||||||
Redemptions of fixed maturities | 346,525 | 128,824 | ||||||
Purchase of Max Specialty | (28,400 | ) | — | |||||
Cash used in investing activities | (522,334 | ) | (298,056 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Net proceeds from issuance of common shares | 4,782 | 2,776 | ||||||
Repurchase of common shares | (79,632 | ) | (18 | ) | ||||
Proceeds from bank loan | 135,000 | — | ||||||
Proceeds from issuance of senior notes | 99,497 | — | ||||||
Dividends | (13,896 | ) | (10,098 | ) | ||||
Additions to deposit liabilities | 18,879 | 25,297 | ||||||
Payment of deposit liabilities | (7,379 | ) | (36,581 | ) | ||||
Notes and loans repaid | — | 465 | ||||||
Cash provided by (used in) financing activities | 157,251 | (18,159 | ) | |||||
Effect of exchange rate on cash | 2,535 | 3,853 | ||||||
Net increase in cash and cash equivalents | 72,802 | 13,263 | ||||||
Cash and cash equivalents, beginning of period | 441,895 | 314,031 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 514,697 | $ | 327,294 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid totaled $13,084 and $9,096 for the nine months ended September 30, 2007 and 2006, respectively.
Corporate taxes paid totaled $307 and $nil for the nine months ended September 30, 2007 and 2006, respectively.
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MAX CAPITAL GROUP LTD.
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–NINE MONTHS TO SEPTEMBER 30, 2007 (Unaudited)
(Expressed in thousands of United States Dollars, except per Share and share amounts)
Year to Date Segment Information:
Property & Casualty | Life & Annuity | Corporate | Consolidated | |||||||||||||||||||||||||
Reinsurance | Insurance | U.S. Excess & Surplus | Total | Reinsurance | ||||||||||||||||||||||||
Gross premiums written | $ | 308,765 | $ | 284,078 | $ | 21,692 | $ | 614,535 | $ | 63,554 | $ | — | $ | 678,089 | ||||||||||||||
Reinsurance premiums ceded | (41,629 | ) | (146,419 | ) | (15,074 | ) | (203,122 | ) | (399 | ) | — | (203,521 | ) | |||||||||||||||
Net premiums written | $ | 267,136 | $ | 137,659 | $ | 6,618 | $ | 411,413 | $ | 63,155 | $ | — | $ | 474,568 | ||||||||||||||
Earned premiums | $ | 271,578 | $ | 299,984 | $ | 5,535 | $ | 577,097 | $ | 63,554 | $ | — | $ | 640,651 | ||||||||||||||
Earned premiums ceded | (30,531 | ) | (150,854 | ) | (3,880 | ) | (185,265 | ) | (399 | ) | — | (185,664 | ) | |||||||||||||||
Net premiums earned | 241,047 | 149,130 | 1,655 | 391,832 | 63,155 | — | 454,987 | |||||||||||||||||||||
Net investment income | 31,826 | 12,056 | 3,856 | 47,738 | 22,261 | 68,852 | 138,851 | |||||||||||||||||||||
Net gains on alternative investments | 41,364 | 10,517 | — | 51,881 | 43,313 | 41,492 | 136,686 | |||||||||||||||||||||
Net realized losses on sales of fixed maturities | — | — | — | — | — | (2,975 | ) | (2,975 | ) | |||||||||||||||||||
Other income | — | — | — | — | — | 587 | 587 | |||||||||||||||||||||
Total revenues | 314,237 | 171,703 | 5,511 | 491,451 | 128,729 | 107,956 | 728,136 | |||||||||||||||||||||
Losses and benefits | 131,484 | 110,799 | 946 | 243,229 | 91,640 | — | 334,869 | |||||||||||||||||||||
Acquisition costs | 47,247 | (972 | ) | (96 | ) | 46,179 | 584 | — | 46,763 | |||||||||||||||||||
Interest expense | 8,919 | — | — | 8,919 | 4,368 | 16,821 | 30,108 | |||||||||||||||||||||
General and administrative expenses | 20,428 | 13,409 | 14,149 | 47,986 | 2,126 | 29,629 | 79,741 | |||||||||||||||||||||
Total losses and expenses | 208,078 | 123,236 | 14,999 | 346,313 | 98,718 | 46,450 | 491,481 | |||||||||||||||||||||
Net income before taxes | $ | 106,159 | $ | 48,467 | $ | (9,488 | ) | $ | 145,138 | $ | 30,011 | $ | 61,506 | $ | 236,655 | |||||||||||||
Loss Ratio (a) | 54.5 | % | 74.3 | % | 57.2 | % | 62.1 | % | ||||||||||||||||||||
Combined Ratio (b) | 82.6 | % | 82.6 | % | n/a | 86.1 | % | |||||||||||||||||||||
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–THREE MONTHS TO SEPTEMBER 30, 2007 (Unaudited) | ||||||||||||||||||||||||||||
(Expressed in thousands of United States Dollars, except per Share and share amounts)
Quarter Segment Information:
|
| |||||||||||||||||||||||||||
Property & Casualty | Life & Annuity | Corporate | Consolidated | |||||||||||||||||||||||||
Reinsurance | Insurance | U.S. Excess & Surplus | Total | Reinsurance | ||||||||||||||||||||||||
Gross premiums written | $ | 68,839 | $ | 80,140 | $ | 11,820 | $ | 160,799 | $ | 62,190 | $ | — | $ | 222,989 | ||||||||||||||
Reinsurance premiums ceded | (6,463 | ) | (34,891 | ) | (8,200 | ) | (49,554 | ) | (126 | ) | — | (49,680 | ) | |||||||||||||||
Net premiums written | $ | 62,376 | $ | 45,249 | $ | 3,620 | $ | 111,245 | $ | 62,064 | $ | — | $ | 173,309 | ||||||||||||||
Earned premiums | $ | 74,673 | $ | 98,003 | $ | 4,596 | $ | 177,272 | $ | 62,190 | $ | — | $ | 239,462 | ||||||||||||||
Earned premiums ceded | (8,672 | ) | (49,896 | ) | (3,214 | ) | (61,782 | ) | (126 | ) | — | (61,908 | ) | |||||||||||||||
Net premiums earned | 66,001 | 48,107 | 1,382 | 115,490 | 62,064 | — | 177,554 | |||||||||||||||||||||
Net investment income | 9,994 | 4,102 | 2,211 | 16,307 | 7,620 | 25,738 | 49,665 | |||||||||||||||||||||
Net gains on alternative investments | 3,903 | 1,108 | — | 5,011 | 4,529 | 4,947 | 14,487 | |||||||||||||||||||||
Net realized gains on sales of fixed maturities | — | — | — | — | — | (1,650 | ) | (1,650 | ) | |||||||||||||||||||
Other income | — | — | — | — | — | 244 | 244 | |||||||||||||||||||||
Total revenues | 79,898 | 53,317 | 3,593 | 136,808 | 74,213 | 29,279 | 240,300 | |||||||||||||||||||||
Losses and benefits | 16,170 | 33,817 | 794 | 50,781 | 70,572 | — | 121,353 | |||||||||||||||||||||
Acquisition costs | 12,334 | (339 | ) | (76 | ) | 11,919 | 186 | — | 12,105 | |||||||||||||||||||
Interest expense | 4,675 | — | — | 4,675 | 2,200 | 6,798 | 13,673 | |||||||||||||||||||||
General and administrative expenses | 6,487 | 4,494 | 5,970 | 16,951 | 697 | 10,135 | 27,783 | |||||||||||||||||||||
Total losses and expenses | 39,666 | 37,972 | 6,688 | 84,326 | 73,655 | 16,933 | 174,914 | |||||||||||||||||||||
Net income before taxes | $ | 40,232 | $ | 15,345 | $ | (3,095 | ) | $ | 52,482 | $ | 558 | $ | 12,346 | $ | 65,386 | |||||||||||||
Loss Ratio (a) | 24.5 | % | 70.3 | % | 57.5 | % | 44.0 | % | ||||||||||||||||||||
Combined Ratio (b) | 53.0 | % | 78.9 | % | n/a | 69.0 | % |
(a) | The loss ratio is calculated by dividing losses and benefits by net premiums earned. |
(b) | The combined ratio is calculated by dividing the sum of losses and benefits, acquisition costs and general and administrative expenses by net premiums earned. |
8
MAX CAPITAL GROUP LTD.
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–NINE MONTHS TO SEPTEMBER 30, 2006 (Unaudited)
(Expressed in thousands of United States Dollars, except per Share and share amounts)
Year to Date Segment Information:
Property & Casualty | Life & Annuity | Corporate | Consolidated | ||||||||||||||||||||||||
Reinsurance | Insurance | U.S. Excess & Surplus | Total | Reinsurance | |||||||||||||||||||||||
Gross premiums written | $ | 397,481 | $ | 276,078 | $ | — | $ | 673,559 | $ | 44,186 | $ | — | $ | 717,745 | |||||||||||||
Reinsurance premiums ceded | (33,653 | ) | (136,196 | ) | — | (169,849 | ) | (557 | ) | — | (170,406 | ) | |||||||||||||||
Net premiums written | $ | 363,828 | $ | 139,882 | $ | — | $ | 503,710 | $ | 43,629 | $ | — | $ | 547,339 | |||||||||||||
Earned premiums | $ | 339,880 | $ | 274,174 | $ | — | $ | 614,054 | $ | 44,186 | $ | — | $ | 658,240 | |||||||||||||
Earned premiums ceded | (24,471 | ) | (127,185 | ) | — | (151,656 | ) | (557 | ) | — | (152,213 | ) | |||||||||||||||
Net premiums earned | 315,409 | 146,989 | — | 462,398 | 43,629 | — | 506,027 | ||||||||||||||||||||
Net investment income | 28,723 | 10,958 | — | 39,681 | 21,778 | 47,736 | 109,195 | ||||||||||||||||||||
Net gains on alternative investments | 3,603 | 1,363 | — | 4,966 | 3,559 | 9,694 | 18,219 | ||||||||||||||||||||
Net realized losses on sales of fixed maturities | — | — | — | — | — | (7,249 | ) | (7,249 | ) | ||||||||||||||||||
Other income | — | — | — | — | — | 831 | 831 | ||||||||||||||||||||
Total revenues | 347,735 | 159,310 | — | 507,045 | 68,966 | 51,012 | 627,023 | ||||||||||||||||||||
Losses and benefits | 224,960 | 83,315 | — | 308,275 | 71,835 | — | 380,110 | ||||||||||||||||||||
Acquisition costs | 57,360 | 554 | — | 57,914 | 1,455 | — | 59,369 | ||||||||||||||||||||
Interest expense | (6,482 | ) | — | — | (6,482 | ) | 3,662 | 9,137 | 6,317 | ||||||||||||||||||
General and administrative expenses | 16,957 | 10,767 | — | 27,724 | 2,169 | 28,964 | 58,857 | ||||||||||||||||||||
Total losses and expenses | 292,795 | 94,636 | — | 387,431 | 79,121 | 38,101 | 504,653 | ||||||||||||||||||||
Net income before taxes | $ | 54,940 | $ | 64,674 | $ | — | $ | 119,614 | $ | (10,155 | ) | $ | 12,911 | $ | 122,370 | ||||||||||||
Loss Ratio (a) | 71.3 | % | 56.7 | % | 66.7 | % | |||||||||||||||||||||
Combined Ratio (b) | 94.9 | % | 64.4 | % | 85.2 | % | |||||||||||||||||||||
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–THREE MONTHS TO SEPTEMBER 30, 2006 (Unaudited) |
| ||||||||||||||||||||||||||
(Expressed in thousands of United States Dollars, except per Share and share amounts)
Quarter Segment Information:
|
| ||||||||||||||||||||||||||
Property & Casualty | Life & Annuity | Corporate | Consolidated | ||||||||||||||||||||||||
Reinsurance | Insurance | U.S. Excess & Surplus | Total | Reinsurance | |||||||||||||||||||||||
Gross premiums written | $ | 98,708 | $ | 78,531 | $ | — | $ | 177,239 | $ | 615 | $ | — | $ | 177,854 | |||||||||||||
Reinsurance premiums ceded | (6,130 | ) | (32,579 | ) | — | (38,709 | ) | (296 | ) | — | (39,005 | ) | |||||||||||||||
Net premiums written | $ | 92,578 | $ | 45,952 | $ | — | $ | 138,530 | $ | 319 | $ | — | $ | 138,849 | |||||||||||||
Earned premiums | $ | 107,209 | $ | 95,007 | $ | — | $ | 202,216 | $ | 615 | $ | — | $ | 202,831 | |||||||||||||
Earned premiums ceded | (9,164 | ) | (46,290 | ) | — | (55,454 | ) | (296 | ) | — | (55,750 | ) | |||||||||||||||
Net premiums earned | 98,045 | 48,717 | — | 146,762 | 319 | — | 147,081 | ||||||||||||||||||||
Net investment income | 9,514 | 3,519 | — | 13,033 | 7,428 | 18,207 | 38,668 | ||||||||||||||||||||
Net gains (losses) on alternative investments | (8,672 | ) | (2,089 | ) | — | (10,761 | ) | (10,126 | ) | (10,117 | ) | (31,004 | ) | ||||||||||||||
Net realized gains on sales of fixed maturities | — | — | — | — | — | (288 | ) | (288 | ) | ||||||||||||||||||
Other income | — | — | — | — | — | 167 | 167 | ||||||||||||||||||||
Total revenues | 98,887 | 50,147 | — | 149,034 | (2,379 | ) | 7,969 | 154,624 | |||||||||||||||||||
Losses and benefits | 71,735 | 8,483 | — | 80,218 | 8,968 | — | 89,186 | ||||||||||||||||||||
Acquisition costs | 17,957 | 111 | — | 18,068 | 911 | — | 18,979 | ||||||||||||||||||||
Interest expense | (7,791 | ) | — | — | (7,791 | ) | 2,812 | 3,329 | (1,650 | ) | |||||||||||||||||
General and administrative expenses | 5,985 | 3,894 | — | 9,879 | 853 | 10,569 | 21,301 | ||||||||||||||||||||
Total losses and expenses | 87,886 | 12,488 | — | 100,374 | 13,544 | 13,898 | 127,816 | ||||||||||||||||||||
Net income before taxes | $ | 11,001 | $ | 37,659 | $ | — | $ | 48,660 | $ | (15,923 | ) | $ | (5,929 | ) | $ | 26,808 | |||||||||||
Loss Ratio (a) | 73.2 | % | 17.4 | % | 54.7 | % | |||||||||||||||||||||
Combined Ratio (b) | 97.6 | % | 25.6 | % | 73.7 | % |
(a) | The loss ratio is calculated by dividing losses and benefits by net premiums earned. |
(b) | The combined ratio is calculated by dividing the sum of losses and benefits, acquisition costs and general and administrative expenses by net premiums earned. |
9
MAX CAPITAL GROUP LTD.
SCHEDULE OF SUPPLEMENTAL PREMIUM DATA–NINE MONTHS TO SEPTEMBER 30, 2007 (Unaudited)
(Expressed in thousands of United States Dollars, except per Share and share amounts)
Gross Premiums Written by Type of Risk:
Nine months to September 30, 2007 | Nine months to September 30, 2006 | |||||||||||
Gross Premiums Written | Percentage of Total Premiums Written | Gross Premiums Written | Percentage of Total Premiums Written | |||||||||
Property & Casualty Reinsurance: | ||||||||||||
Accident & Health | $ | — | 0.0 | % | $ | 7,585 | 1.1 | % | ||||
Aviation | 33,314 | 4.8 | % | 26,141 | 3.6 | % | ||||||
Excess Liability | 14,705 | 2.2 | % | 65,963 | 9.2 | % | ||||||
Medical Malpractice | 49,868 | 7.3 | % | 49,997 | 7.0 | % | ||||||
Other | 1,150 | 0.2 | % | 660 | 0.1 | % | ||||||
Professional Liability | 37,082 | 5.5 | % | 50,223 | 7.0 | % | ||||||
Property | 96,709 | 14.2 | % | 67,759 | 9.4 | % | ||||||
Marine & Energy | 33,058 | 4.9 | % | 28,955 | 4.0 | % | ||||||
Whole Account | 12,551 | 1.9 | % | 41,015 | 5.7 | % | ||||||
Workers’ Compensation | 30,328 | 4.5 | % | 59,183 | 8.3 | % | ||||||
308,765 | 45.5 | % | 397,481 | 55.4 | % | |||||||
Property & Casualty Insurance: | ||||||||||||
Aviation | 14,408 | 2.1 | % | 4,449 | 0.6 | % | ||||||
Excess Liability | 106,160 | 15.7 | % | 121,962 | 17.0 | % | ||||||
Professional Liability | 116,624 | 17.2 | % | 105,821 | 14.7 | % | ||||||
Property | 46,886 | 6.9 | % | 43,846 | 6.1 | % | ||||||
284,078 | 41.9 | % | 276,078 | 38.4 | % | |||||||
Excess & Surplus Insurance: | ||||||||||||
Property | 21,692 | 3.2 | % | — | 0.0 | % | ||||||
21,692 | 3.2 | % | — | 0.0 | % | |||||||
Aggregate Property & Casualty | $ | 614,535 | 90.6 | % | $ | 673,559 | 93.9 | % | ||||
Life & Annuity: | ||||||||||||
Annuity | $ | 62,010 | 9.2 | % | $ | 41,059 | 5.7 | % | ||||
Health | 28 | 0.0 | % | — | 0.0 | % | ||||||
Life | 1,516 | 0.2 | % | 3,127 | 0.4 | % | ||||||
Aggregate Life & Annuity | 63,554 | 9.4 | % | 44,186 | 6.1 | % | ||||||
Aggregate P&C and Life & Annuity | $ | 678,089 | 100.0 | % | $ | 717,745 | 100.0 | % | ||||
10
MAX CAPITAL GROUP LTD.
NON-GAAP FINANCIAL MEASURE RECONCILIATIONS (Unaudited)
Net Operating Income per Diluted Share
(Expressed in thousands of United States Dollars, except per-share and share amounts)
Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Net income | $ | 66,766 | $ | 26,497 | $ | 240,899 | $ | 121,502 | ||||||||
Net realized losses on sale of fixed maturities, net of tax | 1,650 | 288 | 2,975 | 7,249 | ||||||||||||
Net operating income | $ | 68,416 | $ | 26,785 | $ | 243,874 | $ | 128,751 | ||||||||
Net income per diluted share | $ | 1.05 | $ | 0.42 | $ | 3.77 | $ | 1.91 | ||||||||
Net realized losses on sale of fixed maturities, net of tax | 0.03 | — | 0.04 | 0.12 | ||||||||||||
Net operating income per diluted share | $ | 1.08 | $ | 0.42 | $ | 3.81 | $ | 2.03 | ||||||||
Weighted average shares outstanding - basic | 59,609,354 | 59,447,853 | 60,021,083 | 59,373,409 | ||||||||||||
Weighted average shares outstanding - diluted | 63,558,087 | 63,249,815 | 63,958,341 | 63,511,226 | ||||||||||||
Annualized Return on Average Shareholders’ Equity | ||||||||||||||||
(Expressed in thousands of United States Dollars) |
| |||||||||||||||
Three Months Ended September 30 | Nine Months Ended September 30 | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Net income | $ | 66,766 | $ | 26,497 | $ | 240,899 | $ | 121,502 | ||||||||
Annualized net income | 267,064 | 105,988 | 321,199 | 162,003 | ||||||||||||
Beginning shareholders’ equity | 1,472,774 | 1,203,398 | 1,390,061 | 1,185,720 | ||||||||||||
Ending shareholders’ equity | 1,533,596 | 1,294,546 | 1,533,596 | 1,294,546 | ||||||||||||
Average shareholders’ equity | 1,503,185 | 1,248,972 | 1,461,829 | 1,240,133 | ||||||||||||
Annualized return on average shareholders’ equity | 17.8 | % | 8.5 | % | 22.0 | % | 13.1 | % |
11
MAX CAPITAL GROUP LTD.
SCHEDULE OF SUPPLEMENTAL INVESTMENT DATA–NINE MONTHS TO SEPTEMBER 30, 2007 (Unaudited)
Selected Investment Return Data:
Periodic Rate of Return | |||||||||||||||
Fair Value* | Investment Distribution | Last 3 Months | Year to Date | Last 60 months** | |||||||||||
Cash and Fixed Maturities | $ | 4,026,059 | 78.6 | % | 2.18 | % | 3.19 | % | 3.78 | % | |||||
Commodity Trading Advisers | $ | — | 0.0 | % | 0.00 | % | 6.63 | % | 5.88 | % | |||||
Distressed Securities | 182,381 | 3.5 | % | 0.30 | % | 9.93 | % | 21.96 | % | ||||||
Diversified Arbitrage | 168,462 | 3.3 | % | 12.30 | % | 20.04 | % | 9.85 | % | ||||||
Emerging Markets | 96,106 | 1.9 | % | 1.44 | % | 14.70 | % | 17.82 | % | ||||||
Event-Driven Arbitrage | 205,950 | 4.0 | % | 3.71 | % | 25.89 | % | 17.01 | % | ||||||
Fixed Income Arbitrage | 29,780 | 0.6 | % | 7.11 | % | 14.95 | % | 8.27 | % | ||||||
Global Macro | 65,169 | 1.3 | % | -1.59 | % | 6.75 | % | 9.40 | % | ||||||
Long / Short Credit | 78,030 | 1.5 | % | -4.74 | % | 2.19 | % | 10.66 | % | ||||||
Long / Short Equity | 230,640 | 4.5 | % | 3.23 | % | 16.53 | % | 10.00 | % | ||||||
Opportunistic | 34,805 | 0.7 | % | 1.83 | % | 17.19 | % | 19.69 | % | ||||||
MDS **** | 1,091,323 | 21.3 | % | 1.18 | % | 12.17 | % | 10.96 | % | ||||||
Reinsurance Private Equity | 2,924 | 0.1 | % | 1.90 | % | 17.30 | % | -1.05 | % | ||||||
Alternative Investments | $ | 1,094,247 | 21.4 | % | 1.19 | % | 12.18 | % | 10.24 | % | |||||
Total Investments | $ | 5,120,306 | 100.0 | % | 1.92 | % | 7.74 | % | 6.29 | % | |||||
Alternative Investment Return Data ***:
MDS Performance History **** – 60 months ended September 30, 2007
Largest monthly gain | 3.02 | % | Largest monthly loss | (2.04 | %) | |||
Largest quarterly gain | 6.07 | % | Largest quarterly loss | (2.72 | %) | |||
Average monthly gain | 1.36 | % | Average monthly loss | (0.88 | %) | |||
Average quarterly gain | 3.55 | % | Average quarterly loss | (0.89 | %) | |||
Months with a gain | 47 | Months with a loss | 13 | |||||
Quarters with a gain | 16 | Quarters with a loss | 4 | |||||
% of months with a gain | 78 | % | Quarterly standard deviation | 2.47 | % | |||
% of quarters with a gain | 80 | % | Annual standard deviation | 4.11 | % | |||
Largest drawdown ***** | (5.04 | %) |
Monthly performance
2002 | 2003 | 2004 | 2005 | 2006 | 2007 | |||||||||||||
January | 1.63 | % | 1.75 | % | 0.16 | % | 2.75 | % | 1.28 | % | ||||||||
February | 1.40 | % | 1.28 | % | 1.69 | % | 0.39 | % | 1.50 | % | ||||||||
March | (0.18 | %) | 1.18 | % | (0.61 | %) | 1.22 | % | 1.90 | % | ||||||||
April | 2.03 | % | 0.03 | % | (0.65 | %) | 1.89 | % | 2.30 | % | ||||||||
May | 3.02 | % | (0.87 | %) | (0.68 | %) | (1.74 | %) | 2.59 | % | ||||||||
June | 0.92 | % | 0.70 | % | 1.20 | % | (0.66 | %) | 0.85 | % | ||||||||
July | (0.24 | %) | 0.03 | % | 1.33 | % | (0.71 | %) | 0.99 | % | ||||||||
August | 0.96 | % | (0.02 | %) | 0.98 | % | 0.02 | % | (1.62 | %) | ||||||||
September | 2.63 | % | 0.04 | % | 1.84 | % | (2.04 | %) | 1.85 | % | ||||||||
October | 0.25 | % | 0.98 | % | 1.04 | % | (1.45 | %) | 1.37 | % | ||||||||
November | 1.68 | % | 0.56 | % | 2.54 | % | 0.61 | % | 1.81 | % | ||||||||
December | 2.05 | % | 1.85 | % | 1.74 | % | 1.37 | % | 1.96 | % | ||||||||
Quarterly performance | ||||||||||||||||||
Q1 | 2.88 | % | 4.27 | % | 1.22 | % | 4.41 | % | 4.75 | % | ||||||||
Q2 | 6.07 | % | (0.15 | %) | (0.14 | %) | (0.54 | %) | 5.83 | % | ||||||||
Q3 | 3.37 | % | 0.06 | % | 4.21 | % | (2.72 | %) | 1.18 | % | ||||||||
Q4 | 4.02 | % | 3.43 | % | 5.41 | % | 0.51 | % | 5.22 | % | ||||||||
Period return | 4.02 | % | 16.67 | % | 9.81 | % | 5.88 | % | 6.30 | % | 12.17 | % |
Past performance should not be considered to be a reliable indicator of future performance.
* | Expressed in thousands of United States Dollars |
** | Annualized |
*** | The percentages shown under the alternative investment return data relate only to the performance of our alternative investments held by MDS. |
**** | Net of all fees |
***** | Largest drawdown represents the largest decline in value between two NAV peak values. |
12
Contacts | ||
N. James Tees | Roy Winnick | |
Executive Vice President | Kekst and Company | |
jim.tees@maxcapgroup.com | roy-winnick@kekst.com | |
1-441-295-8800 | 1-212-521-4842 |
13