![]() I N S U R A N C E / R E I N S U R A N C E B E R M U D A I R E L A N D U N I T E D S T A T E S MAX CAPITAL GROUP LTD. (formerly Max Re Capital Ltd.) Nasdaq: MXGL Investor Presentation For the quarter-ended September 30, 2007 Exhibit 99.2 |
![]() 2 INFORMATION CONCERNING FORWARD LOOKING STATEMENTS 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 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, 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, Forms 10-Q for the periods ended March 31, 2007, June 30, 2007 and September 30, 2007 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. |
![]() 3 Corporate Objective – Consistent Growth in Book Value Global underwriter of specialty insurance and reinsurance, with operating subsidiaries in Bermuda, Ireland and United States Property & Casualty Insurance - Bermuda / Dublin Property & Casualty Reinsurance - Bermuda / Dublin Life & Annuity Reinsurance - Bermuda U.S. Excess & Surplus Lines Insurance - U. S. Growth through opportunistic expansion and addition of product lines Property Cat Reinsurance operations launched post-KRW in 2005 U.S.-based Excess and Surplus Lines Insurance Company launched in 2007 Portfolio approach to risk through integration of asset / liabilities for all transactions Operating ROE >15% in 3 of last 4 fiscal years; 2005 positive ROE with KRW At September 30, 2007 Total assets $ 6.5 billion Total shareholders’ equity $ 1.5 billion Book value per share $26.12 Combined ratio (YTD) 86% Return on equity (YTD) 22% (Annualized) |
![]() 4 A Balanced, Global Insurance / Reinsurance Business Targets Balanced P&C insurance / reinsurance underwriting Insurance 60% Reinsurance 40% Balanced exposures / focus Long-tail exposures 60% Short-tail exposures 40% Balanced geographic diversification North America 60% Europe 40% Enhanced investment strategy Traditional Fixed Maturities 80% Alternative Investments 20% |
![]() 5 Diversified Premium Mix: A Key Differentiator Casualty Reinsurance Property Insurance Max Capital Group Ltd. Incumbent (Re) Insurers Bermuda Underwriters Class of 2001 White Mountains Re Lancashire Ariel Re AHL ACGL AWH PTP IPCR ENH MRH PRE RNR AXS TRH RE Harbor Point Validus Re Flagstone Re ACE Class of 2005 Source: Bank of America (except Ironshore) Ironshore XL |
![]() 6 Opportunistic Expansion Of The Company Structured & Alternative Life & Annuity Insurance Reinsurance Specialty MDS allocation % Book value per share - 200 400 600 800 1,000 1,200 1,400 32.2% 31.5% 29.1% 23.5% 21.4% $26.12 $0 $5 $10 $15 $20 $25 $30 $35 31.8% 2002 2003 2004 2005 2006 Q3 2007* * Rolling 12 months Traditional casualty reinsurance Casualty Insurance – Bermuda/Dublin Property Insurance Property/Cat reinsurance $23.50 Common share offering U.S. E&S insurance Max USA $100m senior debt issue 2007 2004 2005 2006 2002 2003 39.0% $14.92 |
![]() 7 Core Strengths / Competitive Advantages Business strategy focused on niches / specialties Consistent financial performance and solid balance sheet Operating ROE exceeding 15% in 3 of past 4 years 2005 Exception – KRW Hurricanes – Operating ROE of 1% Enhanced investment strategy with invested assets / shareholders’ equity leverage – 3.3:1 State-of-the-art Enterprise Risk Management System No reinsurance recovery issues since inception through September 30, 2007 Strong financial strength ratings A.M. Best “A- (Excellent)”, Fitch “A (Strong)” and Moody “A3” |
![]() 8 Proven Talent With Strong Quantitative Orientation Experienced & highly quantitative underwriting teams Lead underwriters average over 20 years in the business High percentage of employees hold professional designations FCAA, MAAA and / or ACAA, CPA and / or CA and CFA Capital allocated to maximize return on every transaction Every transaction individually modeled Every transaction priced to target ROE Underwriters compensated on results Reinsurance purchased to manage exposures and pricing cycle Aggregation of cat and clash Line size Ceding commission Sophisticated asset / liability model Integrated asset and liability risk measurement Alternative investments allocated by risk duration Surplus decline is key risk measure State-of-the art systems, risk controls |
![]() 9 P & C Reinsurance Growth of P&C Insurance / Reinsurance Maximizes ROE P&C Annual Gross Premiums Written ($ in millions) P & C Insurance 2003 400 500 600 700 800 900 1,000 100 200 300 0 1,100 1,200 1,300 P&C Alternative Risk Non-recurring additional premiums on prior years’ contracts of $182 million Total P&C Insurance / Reinsurance excluding Alternative Risk and non- recurring additional premiums on prior years’ contracts (year-on-year change) 2006 2005 2004 $902 $831 $971 (+4%) (+36%) (+21%) $820 $ millions 2007 Rolling 12 months $740 (-10%) $805 Max Specialty (expected) (-2%) |
![]() 10 P&C Insurance: Bermuda / Dublin Niche – Oriented Focus Target: Working layer excess business Larger customer – Fortune 1000 Customer-oriented approach: Responsive and innovative Consider toughest classes of business Offer multi-year programs Flexible in program attachment points Work with all leading brokers Underwritten in Bermuda and Dublin Combined ratio 2007 YTD - 83% 2006 - 71% Gross Premiums Written – 2007 Rolling 12 Months $405 million By Exposure Aviation 33% Excess Liability 36% Professional Liability 15% Property 16% |
![]() 11 P&C Reinsurance: Bermuda / Dublin Diversification & Flexibility Emphasized Target: Working layer excess business / quota share business Specialty / niche focus Customer-oriented approach: Quick turnaround Line-specific expertise Net line underwriter (stability of capacity) Cross-class capability Modeling and structuring capabilities Work with all leading brokers Underwritten in Bermuda and Dublin Combined ratio 2007 YTD - 83% 2006 - 94% Aviation 13% General Liability 5% Medical Malpractice 16% Other 1% Professional Liability 14% Property 29% Marine & Energy 10% Whole Account 4% Workers Compensation 8% By Exposure Gross Premiums Written – 2007 Rolling 12 Months $335 million |
![]() 12 Growth Initiative: Max Specialty Insurance Company Nationwide underwriter of property and casualty insurance, focused on profitable excess and surplus lines niches Operating on a surplus lines non-admitted basis in 46 States Approvals pending – California, Colorado, Louisiana, New Hampshire Well-known and respected management team with a proven track record of controlled growth and profitability Distribution system Select group of national brokers and regional Managing General Agencies with whom management has close relationships for 20+ years Two distinct channels - brokerage & contract binding – seeking to provide stability through all market cycles Current employees – approximately 60 Locations – Richmond, Atlanta & Philadelphia Affiliated service company office in San Francisco Inland Marine / Ocean Cargo locations – NYC & Dallas |
![]() 13 Growth Initiative: Max Specialty Insurance Company 2007 Start-Up: Gross written premium: Up to $65 million ($25 million net) Brokerage and Contract Binding operations commenced April 2007 New products in Q4 – 2007 Inland Marine / Ocean Cargo Specialty Casualty Long-term underwriting objectives: Products priced and underwritten so net incurred loss ratios do not exceed 55% Expense ratios less than 35% Combined ratio less than 85% Gross Premiums Written since Inception April 2007 $22 million By Type Brokerage 76% Contract Binding 24% |
![]() 14 Life Reinsurance - Long-Tail, Reserve Buy-Out Business Specialize in: Investment spread business In force, closed / ring-fenced books Mortality, morbidity & longevity Predictable cash flows Asset heavy – no interest sensitive liabilities Strategy: Leveraging underwriting skills with low volatility alternative investments Focus on closed block reserve buy-out transactions Almost no IBNR Differentiated by: Detailed data focus Strong actuarial analysis Bermuda efficiencies Gross Premiums Written US$ Millions $0 $50 $100 $150 $200 $250 $300 $350 2003 2004 2005 $108 $212 $275 2 3 $45 1 2006 3 2007 Target 2/3 $150 Reserves & Deposits 9/30/2007 $978 million Annuity 61% Life 21% Health 18% |
![]() 15 Strong Investment Expertise Investment Strategy designed to enhance annualized returns without materially increasing risk Target allocation 80% investment grade fixed income and 20% alternative asset (low volatility hedge funds) MDS includes over 35 different hedge funds provide diversification and encompass 9 styles / asset classes Hedge fund accounting requires quarterly mark to market to flow through operating income Annual Return 60 months as of September 30, 2007 (1) Alternative Investment Return is 10.24%, which also includes Reinsurance Private Equity Investments Max Fixed Maturities Merrill Lynch Master Bond Index MDS (Max Fund of Funds) Max Total Portfolio Typical Competitor Portfolio (80% MLMBI / 20% S&P) S&P 500 MFIX MLMBI MDS SP500 MAX COMP 15 14.5 14 13.5 13 12.5 12 11.5 11 10.5 10 9.5 9 8.5 8 7.5 7 6.5 6 5.5 5 4.5 4 3.5 3 2.5 2 1.5 1 0.5 0 3.78 4.18 10.96 (1) 14.72 6.29 6.68 |
![]() 16 Asset Allocation as of September 30, 2007 Diversified and Risk Averse Investment Strategy Standard Deviation Last 60 Months as of September 30, 2007 Max Fixed Maturities Merrill Lynch Master Bond Index MDS (Max Fund of Funds) Max Total Portfolio Typical Competitor Portfolio S&P 500 Traditional Investments 78.6% Target 80% Alternative Investments 21.4% Target 20% A 12% Baa 1% Distressed 4% Global Macro 1% Credit Long / Short 1% Emerging Markets 2% Fixed Income Arbitrage 1% Opportunistic 1% Tsy / Agy 19% Aaa 36% Aa 10% Event Driven Arbitrage 4% Equity Long / Short 5% Diversified 3% MFIX MLMBI MDS SP500 MAX COMP 0 -0.5 -1 -1.5 -2 -2.5 -3 -3.5 -4 -4.5 -5 -5.5 -6 -6.5 -7 -7.5 -8 -8.5 -9 -9.5 -10 -3.34 -3.67 -4.11 -9.72 -3.09 -3.23 |
![]() 17 De Minimus Exposure to Sub-prime Approximately $61 million par value of bonds have exposure to sub- prime collateral All are high quality, short average life $55 million AAA, $6 million AA+ Weighted average life is 2.4 years Significant and growing over-collateralization Most with 30-50% over-collateralization Most issued between 2003 and 2005 Over-collateralization on most is growing, and has increased in the last 3 months Through September 2007, default and delinquency rates are generally in the low single digits to low teens range At September 30, 2007, unrealized loss is approximately $1.4 million Alternative asset portfolio net short sub-prime at September 30 2007 Based upon stress testing analysis we expect no principal losses from our sub-prime-backed bonds |
![]() 18 Profitable Financial Trends Despite Hurricanes in 2005 Gross Premiums Written ($ in millions) -3% 0% 5% 10% 15% 20% $0 $300 $600 $900 $1,200 $1,500 P&C Combined Ratio 0% 30% 60% Operating Earnings Per Share (Diluted) Operating ROE 80% 100% 0 $1 $2 2006 17.3% 2006 2006 $865 86% Life $45 2006 $3.52 $3 $4 Life $275 1.0% 2005 $1,246 2005 2005 106% 2005 $0.19 2004 2004 Life $212 2004 15.8% 2004 $1,044 94% $2.70 16.5% 2003 $1,010 2003 2003 100% 2003 $2.58 Life $108 Annualized 2007 YTD 9/30/07 YTD 9/30/07 86% Life $64 YTD 9/30/07 $3.77 $678 22.0% |
![]() 19 A Growing, Global Insurance / Reinsurance Company Invested Assets (Ratio to Shareholders’ Equity) $0 $1,000 $2,000 $3,000 $4,000 Operating Cash Flow $0 $200 $400 $600 Shareholders’ Equity (Book Value per Share) $0 $500 $1,000 $1,500 Dividends Per Share $0.00 $1.00 ($ in millions) $5,000 2006 2006 2006 2006 $529 $1,390 ($23.06) $0.24 $4,536 (3.3:1) $4,223 2005 $395 2005 2005 $1,186 ($20.16) $0.18 2005 (3.6:1) $3,514 2004 $607 2004 2004 $903 ($19.70) $0.12 2004 (3.9:1) $2,637 2003 $397 2003 2003 $763 ($16.88) $0.09 2003 (3.5:1) 9/30/2007 9/30/2007 YTD 9/30/07 YTD 9/30/07 $1,534 ($26.12) $0.23 $5,120 (3.3:1) $435 |
![]() 20 Peer Comparisons: Max Capital – Consistently Solid ROE’s Annual Data 2003 to 2006 and Annualized YTD 6/30/2007 0.00% 2.00% 4.00% 6.00% 8.00% 0.00% 5.00% 10.00% 15.00% 20.00% 25.00% 30.00% 35.00% Std Deviation of ROE PTP XL IPCR MRH RE ENH RNR 14.00% 16.00% 18.00% 20.00% ACGL AXS ACE 10.00% TRH 12.00% PRE AWH AHL |
![]() 21 Peer Comparison: Max Capital - Highest Total Shareholder Return over last 5 years Source: Credit Suisse 1, 2 & 5 Year Cumulative TSRs (1) 1-year 2-year cumulative 1.4% 11.8% (6.2%) 24.8% 21.8% 21.3% 21.1% 14.7% 12.4% 11.2% 10.7% 4.7% 1.9% S&P 500 S&P Insurance Index AXS PTP PRE MXGL ACGL AHL RNR ENH ORH IPCR MRH (9.0%) 18.4% 19.0% 19.0% 22.7% 29.0% 36.5% 45.2% 48.9% 61.3% 62.8% 3.8% 27.6% S&P 500 S&P Insurance Index RNR AXS ACGL ORH PRE PTP ENH IPCR MXGL AHL MRH N.A. 73.9% 58.1% 107.8% 76.3% 57.2% 50.9% 163.2% 180.1% S&P 500 S&P Insurance Index MXGL ACGL ORH PRE RNR PTP IPCR MRH AXS ENH AHL 7.0% (9.8%) 5-year cumulative Note: The peer set includes Arch Capital Group Ltd. (ACGL), Aspen Insurance Holdings Limited (AHL), Axis Capital Holdings Limited (AXS), Endurance Speciality Holding Ltd. (ENH), IPC Holding Ltd. (IPCR), Montpelier Re Holding (MRH), Partn er Re Holdings (PRE), Platinum Underwriters Holding Ltd. (PTP), Renaissance Holding (RNR). Data includes only the companies public during the measurement period. (1) Defined as share price appreciation plus reinvested dividends cumulatively over the time period, as of 10/31/07 |
![]() Additional Financial Information |
![]() 23 YTD September 30, 2007 and Year – End 2006 Results 2006 ($ in millions) YTD September 30, 2007 Gross Premiums Written $678 $865 Net Premiums Earned $455 $665 Net Investment Income 139 150 Net Gains on Alternative Investments 137 85 Net Realized (Losses) on Sale of Fixed Maturities (3) (6) Other Income - 1 Total Revenues 728 895 Total Losses, Expenses and Income Taxes 487 678 Net Income $241 $217 Property & Casualty Underwriting Loss Ratio 62% 68% Expense Ratio 24% 18% Combined Ratio 86% 86% |
![]() 24 Strong Balance Sheet December 31, 2006 September 30, 2007 ($ in millions) (1) Includes a $235 million collateral related transaction for our reinsurance business. In substance, a Total Return Swap with sale of MDS shares in exchange for cash. Cash received from sale of MDS shares is included in Cash & Fixed Maturities. Return from MDS shares is received in exchange for a payment of interest at LIBOR plus a spread. Total Liabilities & Shareholders’ Equity Cash & Fixed Maturities $4,026 $3,470 Alternative Investments 1,094 1,066 Premium Receivables 423 391 Losses Recoverable 652 538 Other Assets 337 384 Total Assets $6,532 $5,849 Property & Casualty Losses $2,506 $2,335 Life & Annuity Benefits 965 896 Deposit Liabilities 221 204 Funds Withheld 255 255 Unearned Premium 474 436 Bank Loans / Swap (1) 285 150 Senior Notes 100 - Other Liabilities 192 183 Total Liabilites $4,998 $4,459 Shareholders' Equity $1,534 $1,390 $6,532 $5,849 |
![]() I N S U R A N C E / R E I N S U R A N C E B E R M U D A I R E L A N D U N I T E D S T A T E S MAX CAPITAL GROUP LTD. (formerly Max Re Capital Ltd.) Nasdaq: MXGL Investor Presentation For the quarter-ended September 30, 2007 |