Exhibit 99.1
MAX CAPITAL GROUP LTD. REPORTS RECORD NET INCOME FOR 2007
Net Income of $303.2 Million, Net Operating Return on Average Shareholders’ Equity of 20.7%,
Book Value Per Share Up 19.4% Among Highlights of Eventful Year
HAMILTON, BERMUDA, February 13, 2008—Max Capital Group Ltd. (NASDAQ: MXGL; BSX: MXGL BH) today reported net income for the three months ended December 31, 2007, of $62.4 million, or $1.00 per fully diluted share, versus net income of $95.4 million, or $1.50 per fully diluted share, for the three months ended December 31, 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 December 31, 2007, was $63.4 million, or $1.01 per fully diluted share, versus net operating income of $93.9 million, or $1.48 per fully diluted share, for the three months ended December 31, 2006. For the year ended December 31, 2007, the Company had net income of $303.2 million, or $4.75 per fully diluted share, compared to $216.9 million, or $3.43 per fully diluted share, for the year ended December 31, 2006. For the year ended December 31, 2007, the Company had net operating income of $307.2 million, or $4.81 per fully diluted share, compared to $222.7 million, or $3.52 per fully diluted share, for the year ended December 31, 2006.
W. Marston (Marty) Becker, Chairman and Chief Executive Officer of Max Capital Group Ltd., said: “We are extremely pleased that 2007 was a record year for Max. Strong underwriting performance coupled with outstanding investment returns combined to produce the highest net income and return on shareholders’ equity in Max’s history. Our specialty insurance/reinsurance business model, together with our diversified investment strategy, continues to serve our stakeholders well. We expect to extend this success into 2008 by maintaining our disciplined underwriting approach in the softening market. The addition in 2007 of Max Specialty and its excess and surplus lines plus its inland marine and ocean cargo teams, place us in an excellent position for property and casualty premium growth and further diversification in 2008 and beyond.”
Gross premiums written for the three months ended December 31, 2007, were $400.2 million, of which $161.8 million came from property and casualty underwriting and $238.4 million from life and annuity underwriting, compared to $147.5 million, of which $146.6 million came from property and casualty underwriting and $0.9 million came from life and annuity underwriting, for the three months ended December 31, 2006. Net premiums earned for the three months ended December 31, 2007, was $362.9 million versus $159.0 million for the same period of 2006. Gross premiums written for the year ended December 31, 2007, was $1,078.3 million versus $865.2 million for the year ended December 31, 2006. Property and casualty reinsurance, property and casualty insurance, excess and surplus lines insurance, and life and annuity reinsurance accounted for 32.0 percent, 35.5 percent, 4.5 percent and 28.0 percent, respectively, of gross premiums written for the year ended December 31, 2007, versus 49.0 percent, 45.8 percent, nil percent and 5.2 percent, respectively, for the same period in 2006. Net premiums earned in the year ended December 31, 2007, increased 23.0 percent to $817.9 million, versus $665.0 million for the same period in 2006. The increase in gross premiums written and net premiums earned for the year ended December 31, 2007, principally relates to increased life and annuity business written and earned, which more than offset the lower volume of gross property and casualty premium written and the increase in the Company’s use of reinsurance.
Net investment income for the three months ended December 31, 2007, increased to $49.4 million from $40.8 million for the same period in 2006 and is attributable to a year-over-year increase in cash and fixed-maturity balances and higher yields on fixed-maturity investments. Net investment income for the year ended December 31, 2007, increased $38.2 million, to $188.2 million, versus $150.0 million for the same period in 2006. The net gain on alternative investments for the three months ended December 31, 2007, was $50.0 million, for a 4.27 percent rate of return, versus a net gain on alternative investments of $66.5 million, for a 5.31 percent rate of return, for the same period in 2006. For the year ended December 31, 2007, alternative investments returned 16.97 percent, versus 6.96 percent for the same period in 2006. Invested assets were $5.1 billion as of December 31, 2007, with an allocation of 79.3 percent to cash and fixed maturities and 20.7 percent to alternative investments.
Losses and benefits were $341.1 million for the three months ended December 31, 2007, versus $117.9 million for the same period in 2006. The increase for the three months ended December 31, 2007, is principally attributable to the increase in life and annuity premiums earned, partly offset by the decrease in property and casualty premiums earned compared to the three months ended December 31, 2006. Losses and benefits for the year ended December 31, 2007, totaled $676.0 million versus $498.0 million for the same period in 2006. The increase for the year ended December 31, 2007, is principally attributable to the increase in life and annuity premiums earned, offset by the decrease in net premium earned in the property and casualty reinsurance and insurance segments. Net income for the year ended December 31, 2007, includes net favorable development of approximately $45 million on property and casualty reinsurance and insurance reserves.
Acquisition costs for the three months ended December 31, 2007, were $14.6 million compared to $19.6 million for the three months ended December 31, 2006. The decrease in the 2007 quarter versus the same period in 2006 is principally attributable to the decrease in net property and casualty premiums earned in the reinsurance segment.
Interest expense for the three months ended December 31, 2007, was $12.6 million versus $7.5 million for the same period in 2006. Interest expense for the year ended December 31, 2007, was $42.7 million versus $13.8 million for the same period in 2006. The increase principally reflects the new senior notes issued in April 2007 and the increase in the principal amount on the Company’s bank loans.
General and administrative expenses for the three months ended December 31, 2007, were $27.0 million compared to $27.4 million for the same period in 2006. General and administrative expenses for the year ended December 31, 2007, were $106.7 million compared to $86.3 million for the same period in 2006. The increase in general and administrative expenses for the year ended December 31, 2007, principally reflects operating costs related to the Company’s recently launched U.S.-based excess and surplus lines operations, as well as additional personnel-related costs for the group. The Company recorded a valuation allowance in the amount of $4.7 million on deferred tax assets related to operating losses at Max Specialty for the three months and year ended December 31, 2007. This reduced net operating income for the three months and year ended December 31, 2007, by 7 cents per diluted share.
Shareholders’ equity was $1,583.9 million at December 31, 2007. Book value per share at December 31, 2007, was $27.54 per share, versus $23.06 at December 31, 2006, resulting in an increase in book value per share of 19.4 percent for 2007. Net operating return on average shareholders’ equity for the year ended December 31, 2007, was 20.7 percent.
During the three months ended December 31, 2007, Max Capital Group Ltd. repurchased 1,232,551 of the Company’s common shares at an average price of $28.17 per share for a total amount of $34.7 million, under the Board-approved share repurchase plan. During the year ended December 31, 2007, the Company repurchased 4,289,251 common shares at an average price of $26.66 per share for a total amount of $114.4 million. Subsequent to December 31, 2007, the Company commenced an accelerated share repurchase program and committed to repurchase shares to a total value of $50.0 million. It is expected that this program will be completed within the first quarter of 2008. In addition, on February 8, 2008, the Company repurchased 1,031,178 shares issued upon the exercise of warrants by an original shareholder. The repurchase amount for these shares was $29.7 million.
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 that could cause actual results to differ materially from those suggested by such statements. For further information regarding cautionary statements and factors affecting future results, please refer to the Company’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q filed subsequent to the Annual Report 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 net operating 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, allow 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.
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 |
MAX CAPITAL GROUP LTD.
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States Dollars, except per-share and share amounts)
December 31, 2007 | December 31, 2006 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 397,656 | $ | 441,895 | ||||
Fixed maturities, available for sale at fair value | 3,663,226 | 3,028,108 | ||||||
Alternative investments, at fair value | 1,061,734 | 1,065,874 | ||||||
Accrued interest income | 49,100 | 38,922 | ||||||
Premiums receivable | 432,965 | 390,889 | ||||||
Losses and benefits recoverable from reinsurers | 578,333 | 538,009 | ||||||
Funds withheld | 13,823 | 15,385 | ||||||
Deferred acquisition costs | 44,187 | 49,064 | ||||||
Prepaid reinsurance premiums | 130,071 | 104,443 | ||||||
Trades pending settlement | 112,423 | 136,563 | ||||||
Other assets | 53,684 | 39,832 | ||||||
Total assets | $ | 6,537,202 | $ | 5,848,984 | ||||
LIABILITIES | ||||||||
Property and casualty losses | $ | 2,333,877 | $ | 2,335,109 | ||||
Life and annuity benefits | 1,203,509 | 895,560 | ||||||
Deposit liabilities | 220,513 | 204,389 | ||||||
Funds withheld from reinsurers | 169,263 | 254,723 | ||||||
Unearned property and casualty premiums | 439,581 | 436,476 | ||||||
Reinsurance balances payable | 99,221 | 79,506 | ||||||
Accounts payable and accrued expenses | 57,565 | 43,160 | ||||||
Bank loans | 330,000 | 210,000 | ||||||
Senior notes | 99,779 | — | ||||||
Total liabilities | 4,953,308 | 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; 57,515,075 (2006 - 60,276,560) shares issued and outstanding | 57,515 | 60,277 | ||||||
Additional paid-in capital | 844,455 | 950,862 | ||||||
Unearned stock grant compensation | — | (17,570 | ) | |||||
Accumulated other comprehensive loss | (20,341 | ) | (21,688 | ) | ||||
Retained earnings | 702,265 | 418,180 | ||||||
Total shareholders’ equity | 1,583,894 | 1,390,061 | ||||||
Total liabilities and shareholders’ equity | $ | 6,537,202 | $ | 5,848,984 | ||||
Book Value Per Share | $ | 27.54 | $ | 23.06 | ||||
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 December 31 | Years Ended December 31 | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
REVENUES | ||||||||||||||||
Gross premiums written | $ | 400,197 | $ | 147,452 | $ | 1,078,286 | $ | 865,197 | ||||||||
Reinsurance premiums ceded | (78,176 | ) | (60,140 | ) | (281,696 | ) | (230,546 | ) | ||||||||
Net premiums written | $ | 322,021 | $ | 87,312 | $ | 796,590 | $ | 634,651 | ||||||||
Earned premiums | $ | 433,522 | $ | 217,004 | $ | 1,074,173 | $ | 875,244 | ||||||||
Earned premiums ceded | (70,604 | ) | (58,023 | ) | (256,268 | ) | (210,236 | ) | ||||||||
Net premiums earned | 362,918 | 158,981 | 817,905 | 665,008 | ||||||||||||
Net investment income | 49,355 | 40,836 | 188,206 | 150,030 | ||||||||||||
Net gains on alternative investments | 50,035 | 66,531 | 186,721 | 84,750 | ||||||||||||
Net realized (losses) gains on sale of fixed maturities | (1,042 | ) | 1,451 | (4,017 | ) | (5,798 | ) | |||||||||
Other income | 158 | 189 | 745 | 1,021 | ||||||||||||
Total revenues | 461,424 | 267,988 | 1,189,560 | 895,011 | ||||||||||||
LOSSES AND EXPENSES | ||||||||||||||||
Losses and benefits | 341,127 | 117,860 | 675,996 | 497,969 | ||||||||||||
Acquisition costs | 14,597 | 19,564 | 61,360 | 78,933 | ||||||||||||
Interest expense | 12,555 | 7,514 | 42,663 | 13,832 | ||||||||||||
General and administrative expenses | 26,973 | 27,431 | 106,714 | 86,289 | ||||||||||||
Total losses and expenses | 395,252 | 172,369 | 886,733 | 677,023 | ||||||||||||
NET INCOME BEFORE TAXES | 66,172 | 95,619 | 302,827 | 217,988 | ||||||||||||
Income tax (benefit) expense | 3,822 | 233 | (422 | ) | 1,100 | |||||||||||
NET INCOME | 62,350 | 95,386 | 303,249 | 216,888 | ||||||||||||
Change in net unrealized appreciation (depreciation) of fixed maturities, net of tax | 24,841 | (10,378 | ) | 369 | (30,441 | ) | ||||||||||
Foreign currency translation adjustment | (1,557 | ) | (80 | ) | 978 | 3,772 | ||||||||||
COMPREHENSIVE INCOME | $ | 85,634 | $ | 84,928 | $ | 304,596 | $ | 190,219 | ||||||||
Basic earnings per share | $ | 1.07 | $ | 1.60 | $ | 5.06 | $ | 3.64 | ||||||||
Diluted earnings per share | $ | 1.00 | $ | 1.50 | $ | 4.75 | $ | 3.43 | ||||||||
Diluted net operating earnings per share | $ | 1.01 | $ | 1.48 | $ | 4.81 | $ | 3.52 | ||||||||
Weighted average shares outstanding - basic | 58,480,101 | 59,717,958 | 59,892,414 | 59,655,636 | ||||||||||||
Weighted average shares outstanding - diluted | 62,534,171 | 63,510,091 | 63,839,232 | 63,258,800 | ||||||||||||
MAX CAPITAL GROUP LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(Expressed in thousands of United States Dollars)
Years ended December 31, | ||||||||
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 | 1,527 | 1,449 | ||||||
Repurchase of shares | (4,289 | ) | (1 | ) | ||||
Balance, end of period | 57,515 | 60,277 | ||||||
Additional paid-in capital | ||||||||
Balance, beginning of period | 950,862 | 921,384 | ||||||
Reclassification of unearned stock grant compensation | (26,357 | ) | — | |||||
Issue of common shares | 19,930 | 27,122 | ||||||
Stock based compensation expense | 10,086 | 2,373 | ||||||
Repurchase of shares | (110,066 | ) | (17 | ) | ||||
Balance, end of period | 844,455 | 950,862 | ||||||
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 | ) | (17,068 | ) | ||||
Amortization | 7,694 | 14,072 | ||||||
Reclassification of unearned stock grant compensation | 26,357 | — | ||||||
Balance, end of period | — | (17,570 | ) | |||||
Accumulated other comprehensive loss | ||||||||
Balance, beginning of period | (21,688 | ) | 4,981 | |||||
Holding losses on fixed maturities arising in period, net of tax | (3,630 | ) | (36,239 | ) | ||||
Net realized losses included in net income, net of tax | 3,999 | 5,798 | ||||||
Currency translation adjustments | 978 | 3,772 | ||||||
Balance, end of period | (20,341 | ) | (21,688 | ) | ||||
Retained earnings | ||||||||
Balance, beginning of period | 418,180 | 215,565 | ||||||
Net income | 303,249 | 216,888 | ||||||
Dividends paid | (19,164 | ) | (14,273 | ) | ||||
Balance, end of period | 702,265 | 418,180 | ||||||
Total shareholders’ equity | $ | 1,583,894 | $ | 1,390,061 | ||||
MAX CAPITAL GROUP LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Expressed in thousands of United States Dollars)
Years Ended December 31 | ||||||||
2007 | 2006 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 303,249 | $ | 216,888 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Stock based compensation | 17,780 | 16,445 | ||||||
Amortization of premium on fixed maturities | 5,146 | 6,052 | ||||||
Accretion of deposit liabilities | 4,607 | (6,513 | ) | |||||
Net realized losses on sale of fixed maturities | 4,017 | 5,798 | ||||||
Changes in: | ||||||||
Alternative investments | 4,103 | 160,626 | ||||||
Accrued interest income | (10,178 | ) | (6,290 | ) | ||||
Premiums receivable | (42,076 | ) | 7,777 | |||||
Losses and benefits recoverable from reinsurers | (37,102 | ) | (84,368 | ) | ||||
Funds withheld | 1,562 | 1,547 | ||||||
Deferred acquisition costs | 4,877 | 19,951 | ||||||
Prepaid reinsurance premiums | (25,698 | ) | (20,950 | ) | ||||
Trades pending settlement | 24,140 | (131,998 | ) | |||||
Other assets | (5,169 | ) | (16,831 | ) | ||||
Property and casualty losses | (11,348 | ) | 329,077 | |||||
Life and annuity benefits | 252,601 | 41,336 | ||||||
Funds withheld from reinsurers | (85,460 | ) | (17,269 | ) | ||||
Unearned property and casualty premiums | 4,128 | (6,500 | ) | |||||
Reinsurance balances payable | 19,715 | (11,275 | ) | |||||
Accounts payable and accrued expenses | 14,405 | 15,049 | ||||||
Cash from operating activities | 443,299 | 518,552 | ||||||
INVESTING ACTIVITIES | ||||||||
Purchases of fixed maturities | (1,459,418 | ) | (1,108,748 | ) | ||||
Sales of fixed maturities | 428,522 | 555,918 | ||||||
Redemptions of fixed maturities | 466,988 | 165,119 | ||||||
Purchase of Max Specialty | (28,400 | ) | — | |||||
Cash used in investing activities | (592,308 | ) | (387,711 | ) | ||||
FINANCING ACTIVITIES | ||||||||
Net proceeds from issuance of common shares | 4,976 | 11,503 | ||||||
Repurchase of common shares | (114,355 | ) | (18 | ) | ||||
Net proceeds from bank loans | 120,000 | 10,000 | ||||||
Proceeds from issuance of senior notes | 99,497 | — | ||||||
Dividends | (19,163 | ) | (14,273 | ) | ||||
Additions to deposit liabilities | 19,253 | 25,587 | ||||||
Payment of deposit liabilities | (9,630 | ) | (40,013 | ) | ||||
Notes and loans repaid | — | 465 | ||||||
Cash provided by (used in) financing activities | 100,578 | (6,749 | ) | |||||
Effect of exchange rate on cash | 4,192 | 3,772 | ||||||
Net increase in cash and cash equivalents | (44,239 | ) | 127,864 | |||||
Cash and cash equivalents, beginning of period | 441,895 | 314,031 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 397,656 | $ | 441,895 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid totaled $21,514 and $12,384 for the years ended December 31, 2007 and 2006, respectively. Corporate taxes paid totaled $1,879 and $1,430 for the years ended December 31, 2007 and 2006, respectively.
MAX CAPITAL GROUP LTD.
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–YEAR ENDED DECEMBER 31, 2007 (Unaudited)
(Expressed in thousands of United States Dollars, except per Share and share amounts)
Property & Casualty | Life & Annuity | Corporate | Consolidated | |||||||||||||||||||||||||
Reinsurance | Insurance | U.S. Excess & Surplus | Total | Reinsurance | ||||||||||||||||||||||||
Year to Date Segment Information: | ||||||||||||||||||||||||||||
Gross premiums written | $ | 345,156 | $ | 382,926 | $ | 48,243 | $ | 776,325 | $ | 301,961 | $ | — | $ | 1,078,286 | ||||||||||||||
Reinsurance premiums ceded | (44,565 | ) | (201,987 | ) | (34,610 | ) | (281,162 | ) | (534 | ) | — | (281,696 | ) | |||||||||||||||
Net premiums written | $ | 300,591 | $ | 180,939 | $ | 13,633 | $ | 495,163 | $ | 301,427 | $ | — | $ | 796,590 | ||||||||||||||
Earned premiums | $ | 356,448 | $ | 398,776 | $ | 16,988 | $ | 772,212 | $ | 301,961 | $ | — | $ | 1,074,173 | ||||||||||||||
Earned premiums ceded | (43,501 | ) | (199,223 | ) | (13,010 | ) | (255,734 | ) | (534 | ) | — | (256,268 | ) | |||||||||||||||
Net premiums earned | 312,947 | 199,553 | 3,978 | 516,478 | 301,427 | — | 817,905 | |||||||||||||||||||||
Net investment income | 41,025 | 16,160 | 5,974 | 63,159 | 33,936 | 91,111 | 188,206 | |||||||||||||||||||||
Net gains on alternative investments | 53,021 | 14,271 | — | 67,292 | 60,713 | 58,716 | 186,721 | |||||||||||||||||||||
Net realized losses on sales of fixed maturities | — | — | — | — | — | (4,017 | ) | (4,017 | ) | |||||||||||||||||||
Other income | — | — | — | — | — | 745 | 745 | |||||||||||||||||||||
Total revenues | 406,993 | 229,984 | 9,952 | 646,929 | 396,076 | 146,555 | 1,189,560 | |||||||||||||||||||||
Losses and benefits | 173,317 | 153,816 | 3,261 | 330,394 | 345,602 | — | 675,996 | |||||||||||||||||||||
Acquisition costs | 60,910 | (1,162 | ) | 376 | 60,124 | 1,236 | — | 61,360 | ||||||||||||||||||||
Interest expense | 11,890 | — | — | 11,890 | 6,864 | 23,909 | 42,663 | |||||||||||||||||||||
General and administrative expenses | 28,394 | 19,348 | 17,430 | 65,172 | 2,813 | 38,729 | 106,714 | |||||||||||||||||||||
Total losses and expenses | 274,511 | 172,002 | 21,067 | 467,580 | 356,515 | 62,638 | 886,733 | |||||||||||||||||||||
Net income before taxes | $ | 132,482 | $ | 57,982 | $ | (11,115 | ) | $ | 179,349 | $ | 39,561 | $ | 83,917 | $ | 302,827 | |||||||||||||
Loss Ratio (a) | 55.4 | % | 77.1 | % | 82.0 | % | 64.0 | % | ||||||||||||||||||||
Combined Ratio (b) | 83.9 | % | 86.2 | % | n/a | 88.2 | % |
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–THREE MONTHS TO DECEMBER 31, 2007 (Unaudited)
(Expressed in thousands of United States Dollars, except per Share and share amounts)
Property & Casualty | Life & Annuity | Corporate | Consolidated | |||||||||||||||||||||||||
Reinsurance | Insurance | U.S. Excess & Surplus | Total | Reinsurance | ||||||||||||||||||||||||
Quarter Segment Information: | ||||||||||||||||||||||||||||
Gross premiums written | $ | 36,391 | $ | 98,848 | $ | 26,551 | $ | 161,790 | $ | 238,407 | $ | — | $ | 400,197 | ||||||||||||||
Reinsurance premiums ceded | (2,936 | ) | (55,568 | ) | (19,536 | ) | (78,040 | ) | (136 | ) | — | (78,176 | ) | |||||||||||||||
Net premiums written | $ | 33,455 | $ | 43,280 | $ | 7,015 | $ | 83,750 | $ | 238,271 | $ | — | $ | 322,021 | ||||||||||||||
Earned premiums | $ | 84,870 | $ | 98,792 | $ | 11,453 | $ | 195,115 | $ | 238,407 | $ | — | $ | 433,522 | ||||||||||||||
Earned premiums ceded | (12,970 | ) | (48,369 | ) | (9,130 | ) | (70,469 | ) | (135 | ) | — | (70,604 | ) | |||||||||||||||
Net premiums earned | 71,900 | 50,423 | 2,323 | 124,646 | 238,272 | — | 362,918 | |||||||||||||||||||||
Net investment income | 9,199 | 4,104 | 2,118 | 15,421 | 11,675 | 22,259 | 49,355 | |||||||||||||||||||||
Net gains on alternative investments | 11,656 | 3,755 | — | 15,411 | 17,399 | 17,225 | 50,035 | |||||||||||||||||||||
Net realized losses on sales of fixed maturities | — | — | — | — | — | (1,042 | ) | (1,042 | ) | |||||||||||||||||||
Other income | — | — | — | — | — | 158 | 158 | |||||||||||||||||||||
Total revenues | 92,755 | 58,282 | 4,441 | 155,478 | 267,346 | 38,600 | 461,424 | |||||||||||||||||||||
Losses and benefits | 41,833 | 43,017 | 2,315 | 87,165 | 253,962 | — | 341,127 | |||||||||||||||||||||
Acquisition costs | 13,663 | (190 | ) | 472 | 13,945 | 652 | — | 14,597 | ||||||||||||||||||||
Interest expense | 2,971 | — | — | 2,971 | 2,496 | 7,088 | 12,555 | |||||||||||||||||||||
General and administrative expenses | 7,966 | 5,939 | 3,281 | 17,186 | 687 | 9,100 | 26,973 | |||||||||||||||||||||
Total losses and expenses | 66,433 | 48,766 | 6,068 | 121,267 | 257,797 | 16,188 | 395,252 | |||||||||||||||||||||
Net income before taxes | $ | 26,322 | $ | 9,516 | $ | (1,627 | ) | $ | 34,211 | $ | 9,549 | $ | 22,412 | $ | 66,172 | |||||||||||||
Loss Ratio (a) | 58.2 | % | 85.3 | % | 99.7 | % | 69.9 | % | ||||||||||||||||||||
Combined Ratio (b) | 88.3 | % | 96.7 | % | n/a | 94.9 | % |
(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. |
MAX CAPITAL GROUP LTD.
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–YEAR ENDED DECEMBER 31, 2006 (Unaudited)
(Expressed in thousands of United States Dollars, except per Share and share amounts)
Property & Casualty | Life & Annuity | Corporate | Consolidated | ||||||||||||||||||||||||
Reinsurance | Insurance | U.S. Excess & Surplus | Total | Reinsurance | |||||||||||||||||||||||
Year to Date Segment Information: | |||||||||||||||||||||||||||
Gross premiums written | $ | 423,555 | $ | 396,594 | $ | — | $ | 820,149 | $ | 45,048 | $ | — | $ | 865,197 | |||||||||||||
Reinsurance premiums ceded | (35,267 | ) | (194,549 | ) | — | (229,816 | ) | (730 | ) | — | (230,546 | ) | |||||||||||||||
Net premiums written | $ | 388,288 | $ | 202,045 | $ | — | $ | 590,333 | $ | 44,318 | $ | — | $ | 634,651 | |||||||||||||
Earned premiums | $ | 456,283 | $ | 373,913 | $ | — | $ | 830,196 | $ | 45,048 | $ | — | $ | 875,244 | |||||||||||||
Earned premiums ceded | (33,470 | ) | (176,036 | ) | — | (209,506 | ) | (730 | ) | — | (210,236 | ) | |||||||||||||||
Net premiums earned | 422,813 | 197,877 | — | 620,690 | 44,318 | — | 665,008 | ||||||||||||||||||||
Net investment income | 38,613 | 14,852 | — | 53,465 | 29,013 | 67,552 | 150,030 | ||||||||||||||||||||
Net gains on alternative investments | 20,167 | 5,168 | — | 25,335 | 22,901 | 36,514 | 84,750 | ||||||||||||||||||||
Net realized losses on sales of fixed maturities | — | — | — | — | — | (5,798 | ) | (5,798 | ) | ||||||||||||||||||
Other income | — | — | — | — | — | 1,021 | 1,021 | ||||||||||||||||||||
Total revenues | 481,593 | 217,897 | — | 699,490 | 96,232 | 99,289 | 895,011 | ||||||||||||||||||||
Losses and benefits | 296,036 | 124,183 | — | 420,219 | 77,750 | — | 497,969 | ||||||||||||||||||||
Acquisition costs | 77,330 | (136 | ) | — | 77,194 | 1,739 | — | 78,933 | |||||||||||||||||||
Interest expense | (3,828 | ) | — | — | (3,828 | ) | 5,233 | 12,427 | 13,832 | ||||||||||||||||||
General and administrative expenses | 23,484 | 15,641 | — | 39,125 | 3,038 | 44,126 | 86,289 | ||||||||||||||||||||
Total losses and expenses | 393,022 | 139,688 | — | 532,710 | 87,760 | 56,553 | 677,023 | ||||||||||||||||||||
Net income before taxes | $ | 88,571 | $ | 78,209 | $ | — | $ | 166,780 | $ | 8,472 | $ | 42,736 | $ | 217,988 | |||||||||||||
Loss Ratio (a) | 70.0 | % | 62.8 | % | 67.7 | % | |||||||||||||||||||||
Combined Ratio (b) | 93.9 | % | 70.6 | % | 86.4 | % |
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–THREE MONTHS TO DECEMBER 31, 2006 (Unaudited)
(Expressed in thousands of United States Dollars, except per Share and share amounts)
Property & Casualty | Life & Annuity | Corporate | Consolidated | |||||||||||||||||||||||
Reinsurance | Insurance | U.S. Excess & Surplus | Total | Reinsurance | ||||||||||||||||||||||
Quarter Segment Information: | ||||||||||||||||||||||||||
Gross premiums written | $ | 26,074 | $ | 120,516 | $ | — | $ | 146,590 | $ | 862 | $ | — | $ | 147,452 | ||||||||||||
Reinsurance premiums ceded | (1,614 | ) | (58,353 | ) | — | (59,967 | ) | (173 | ) | — | (60,140 | ) | ||||||||||||||
Net premiums written | $ | 24,460 | $ | 62,163 | $ | — | $ | 86,623 | $ | 689 | $ | — | $ | 87,312 | ||||||||||||
Earned premiums | $ | 116,403 | $ | 99,739 | $ | — | $ | 216,142 | $ | 862 | $ | — | $ | 217,004 | ||||||||||||
Earned premiums ceded | (8,999 | ) | (48,851 | ) | — | (57,850 | ) | (173 | ) | — | (58,023 | ) | ||||||||||||||
Net premiums earned | 107,404 | 50,888 | — | 158,292 | 689 | — | 158,981 | |||||||||||||||||||
Net investment income | 9,159 | 4,609 | — | 13,768 | 7,378 | 19,690 | 40,836 | |||||||||||||||||||
Net gains on alternative investments | 16,826 | 4,406 | — | 21,232 | 19,218 | 26,081 | 66,531 | |||||||||||||||||||
Net realized gains on sales of fixed maturities | — | — | — | — | — | 1,451 | 1,451 | |||||||||||||||||||
Other income | — | — | — | — | — | 189 | 189 | |||||||||||||||||||
Total revenues | 133,389 | 59,903 | — | 193,292 | 27,285 | 47,411 | 267,988 | |||||||||||||||||||
Losses and benefits | 71,076 | 40,869 | — | 111,945 | 5,915 | — | 117,860 | |||||||||||||||||||
Acquisition costs | 19,970 | (690 | ) | — | 19,280 | 284 | — | 19,564 | ||||||||||||||||||
Interest expense | 2,656 | — | — | 2,656 | 1,571 | 3,287 | 7,514 | |||||||||||||||||||
General and administrative expenses | 6,527 | 4,874 | — | 11,401 | 869 | 15,161 | 27,431 | |||||||||||||||||||
Total losses and expenses | 100,229 | 45,053 | — | 145,282 | 8,639 | 18,448 | 172,369 | |||||||||||||||||||
Net income before taxes | $ | 33,160 | $ | 14,850 | $ | — | $ | 48,010 | $ | 18,646 | $ | 28,963 | $ | 95,619 | ||||||||||||
Loss Ratio (a) | 66.2 | % | 80.3 | % | 70.7 | % | ||||||||||||||||||||
Combined Ratio (b) | 90.8 | % | 88.5 | % | 90.1 | % |
(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. |
MAX CAPITAL GROUP LTD.
SCHEDULE OF SUPPLEMENTAL PREMIUM DATA–YEAR ENDED DECEMBER 31, 2007 (Unaudited)
(Expressed in thousands of United States Dollars, except per Share and share amounts)
Year Ended December 31, 2007 | Year Ended December 31, 2006 | |||||||||||
Gross Premiums Written | Percentage of Total Premiums Written | Gross Premiums Written | Percentage of Total Premiums Written | |||||||||
Gross Premiums Written by Type of Risk: | ||||||||||||
Property & Casualty Reinsurance: | ||||||||||||
Accident & Health | $ | — | 0.0 | % | $ | 7,585 | 0.9 | % | ||||
Aviation | 34,095 | 3.1 | % | 35,374 | 4.1 | % | ||||||
Excess Liability | 16,716 | 1.6 | % | 66,876 | 7.7 | % | ||||||
Medical Malpractice | 53,138 | 4.9 | % | 53,400 | 6.2 | % | ||||||
Other | 7,016 | 0.7 | % | 660 | 0.1 | % | ||||||
Professional Liability | 33,640 | 3.1 | % | 60,704 | 7.0 | % | ||||||
Property | 89,197 | 8.3 | % | 67,497 | 7.8 | % | ||||||
Marine & Energy | 47,077 | 4.4 | % | 29,152 | 3.4 | % | ||||||
Whole Account | 15,080 | 1.4 | % | 43,548 | 5.0 | % | ||||||
Workers’ Compensation | 49,197 | 4.5 | % | 58,759 | 6.8 | % | ||||||
345,156 | 32.0 | % | 423,555 | 49.0 | % | |||||||
Property & Casualty Insurance: | ||||||||||||
Aviation | 31,961 | 3.0 | % | 21,864 | 2.5 | % | ||||||
Excess Liability | 131,515 | 12.2 | % | 162,786 | 18.8 | % | ||||||
Professional Liability | 157,450 | 14.6 | % | 150,885 | 17.4 | % | ||||||
Property | 62,000 | 5.7 | % | 61,059 | 7.1 | % | ||||||
382,926 | 35.5 | % | 396,594 | 45.8 | % | |||||||
Excess & Surplus Insurance: | ||||||||||||
Property | 34,721 | 3.2 | % | — | 0.0 | % | ||||||
Excess Liability | 12,302 | 1.2 | % | — | 0.0 | % | ||||||
Marine | 1,220 | 0.1 | % | — | 0.0 | % | ||||||
48,243 | 4.5 | % | — | 0.0 | % | |||||||
Aggregate Property & Casualty | $ | 776,325 | 72.0 | % | $ | 820,149 | 94.8 | % | ||||
Life & Annuity: | ||||||||||||
Annuity | $ | 299,261 | 27.8 | % | $ | 41,059 | 4.8 | % | ||||
Health | 29 | 0.0 | % | 340 | 0.0 | % | ||||||
Life | 2,671 | 0.2 | % | 3,649 | 0.4 | % | ||||||
Aggregate Life & Annuity | 301,961 | 28.0 | % | 45,048 | 5.2 | % | ||||||
Aggregate P&C and Life & Annuity | $ | 1,078,286 | 100.0 | % | $ | 865,197 | 100.0 | % | ||||
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 December 31 | Year Ended December 31 | ||||||||||||
2007 | 2006 | 2007 | 2006 | ||||||||||
Net income | $ | 62,350 | $ | 95,386 | $ | 303,249 | $ | 216,888 | |||||
Net realized losses (gains) on sale of fixed maturities, net of tax | 1,046 | (1,451 | ) | 3,999 | 5,798 | ||||||||
Net operating income | $ | 63,396 | $ | 93,935 | $ | 307,248 | $ | 222,686 | |||||
Net income per diluted share | $ | 1.00 | $ | 1.50 | $ | 4.75 | $ | 3.43 | |||||
Net realized losses (gains) on sale of fixed maturities, net of tax | 0.01 | (0.02 | ) | 0.06 | 0.09 | ||||||||
Net operating income per diluted share | $ | 1.01 | $ | 1.48 | $ | 4.81 | $ | 3.52 | |||||
Weighted average shares outstanding - basic | 58,480,101 | 59,717,958 | 59,892,414 | 59,655,636 | |||||||||
Weighted average shares outstanding - diluted | 62,534,171 | 63,510,091 | 63,839,232 | 63,258,800 |
Annualized Return and Annualized Net Operating Return on Average Shareholders’ Equity
(Expressed in thousands of United States Dollars)
Three Months Ended December 31 | Year Ended December 31 | |||||||||||||||
2007 | 2006 | 2007 | 2006 | |||||||||||||
Net income | $ | 62,350 | $ | 95,386 | $ | 303,249 | $ | 216,888 | ||||||||
Annualized net income | 249,400 | 381,544 | 303,249 | 216,888 | ||||||||||||
Net operating income | $ | 63,396 | $ | 93,935 | $ | 307,248 | $ | 222,686 | ||||||||
Annualized net operating income | 253,584 | 375,740 | 307,248 | 222,686 | ||||||||||||
Beginning shareholders’ equity | 1,533,596 | 1,294,546 | 1,390,061 | 1,185,720 | ||||||||||||
Ending shareholders’ equity | 1,583,894 | 1,390,061 | 1,583,894 | 1,390,061 | ||||||||||||
Average shareholders’ equity | 1,558,745 | 1,342,304 | 1,486,978 | 1,287,891 | ||||||||||||
Annualized return on average shareholders’ equity | 16.0 | % | 28.4 | % | 20.4 | % | 16.8 | % | ||||||||
Annualized net operating return on average shareholders’ equity | 16.3 | % | 28.0 | % | 20.7 | % | 17.3 | % |
MAX CAPITAL GROUP LTD.
SCHEDULE OF SUPPLEMENTAL INVESTMENT DATA–YEAR ENDED DECEMBER 31, 2007 (Unaudited)
Periodic Rate of Return | |||||||||||||||
Fair Value* | Investment Distribution | Last 3 Months | Year to Date | Last 60 months** | |||||||||||
Selected Investment Return Data: | |||||||||||||||
Cash and Fixed Maturities | $ | 4,060,882 | 79.3 | % | 1.86 | % | 5.11 | % | 3.99 | % | |||||
Commodity Trading Advisers | $ | — | 0.0 | % | 0.00 | % | 6.63 | % | 7.31 | % | |||||
Distressed Securities | 168,050 | 3.3 | % | 5.28 | % | 15.74 | % | 21.52 | % | ||||||
Diversified Arbitrage | 161,870 | 3.2 | % | -3.47 | % | 15.87 | % | 8.12 | % | ||||||
Emerging Markets | 98,882 | 1.9 | % | 3.33 | % | 18.53 | % | 18.36 | % | ||||||
Event-Driven Arbitrage | 170,563 | 3.3 | % | 8.14 | % | 36.14 | % | 18.32 | % | ||||||
Fixed Income Arbitrage | 32,265 | 0.6 | % | 8.78 | % | 25.04 | % | 8.71 | % | ||||||
Global Macro | 69,092 | 1.3 | % | 6.48 | % | 13.67 | % | 9.89 | % | ||||||
Long / Short Credit | 51,512 | 1.0 | % | 1.19 | % | 3.41 | % | 10.32 | % | ||||||
Long / Short Equity | 269,959 | 5.3 | % | 8.94 | % | 26.94 | % | 11.75 | % | ||||||
Opportunistic | 35,600 | 0.7 | % | 2.73 | % | 20.38 | % | 19.37 | % | ||||||
MDS **** | 1,057,793 | 20.6 | % | 4.11 | % | 16.78 | % | 10.98 | % | ||||||
Reinsurance Private Equity | 3,941 | 0.1 | % | 68.23 | % | 97.33 | % | 8.81 | % | ||||||
Alternative Investments | $ | 1,061,734 | 20.7 | % | 4.27 | % | 16.97 | % | 10.28 | % | |||||
Total Investments | $ | 5,122,616 | 100.0 | % | 2.45 | % | 10.38 | % | 6.40 | % | |||||
Alternative Investment Return Data ***:
MDS Performance History **** – 60 months ended December 31, 2007
Largest monthly gain | 4.15 | % | |
Largest quarterly gain | 6.07 | % | |
Average monthly gain | 1.40 | % | |
Average quarterly gain | 3.56 | % | |
Months with a gain | 46 | ||
Quarters with a gain | 16 | ||
% of months with a gain | 77 | % | |
% of quarters with a gain | 80 | % |
Largest monthly loss | (2.04 | %) | |
Largest quarterly loss | (2.72 | %) | |
Average monthly loss | (0.83 | %) | |
Average quarterly loss | (0.89 | %) | |
Months with a loss | 14 | ||
Quarters with a loss | 4 | ||
Quarterly standard deviation | 2.47 | % | |
Annual standard deviation | 4.35 | % | |
Largest drawdown ***** | (5.04 | %) |
Monthly performance
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 | 0.98 | % | 1.04 | % | (1.45 | %) | 1.37 | % | 4.15 | % | |||||
November | 0.56 | % | 2.54 | % | 0.61 | % | 1.81 | % | 0.10 | % | |||||
December | 1.85 | % | 1.74 | % | 1.37 | % | 1.96 | % | (0.13 | %) | |||||
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 | 3.43 | % | 5.41 | % | 0.51 | % | 5.22 | % | 4.11 | % | |||||
Annual return | 16.67 | % | 9.81 | % | 5.88 | % | 6.30 | % | 16.78 | % |
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. |