Exhibit 99.1
MAX CAPITAL GROUP LTD. REPORTS FIRST-QUARTER 2008 RESULTS
Gross Premiums Written of $306.6 Million and Continued Solid Underwriting Results
Among Highlights of Quarter
HAMILTON, BERMUDA, May 6, 2008—Max Capital Group Ltd. (NASDAQ: MXGL; BSX: MXGL BH) today reported net income for the three months ended March 31, 2008, of $7.7 million, or $0.13 per fully diluted share, versus net income of $80.0 million, or $1.24 per fully diluted share, for the three months ended March 31, 2007. 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 March 31, 2008, was $6.3 million, or $0.11 per fully diluted share, versus net operating income of $81.0 million, or $1.26 per fully diluted share, for the three months ended March 31, 2007.
On April 18, 2008, Max Capital announced that it expected the return on its alternative investments for the first quarter of 2008 to be negative 2.11 percent, and that the impact of the unrealized mark-to-market losses on its alternative investment portfolio in the first quarter, as compared to the Company’s targeted 2 percent quarterly return, was expected to be a decrease of approximately $0.83 in earnings per diluted share.
W. Marston (Marty) Becker, Chairman and Chief Executive Officer of Max Capital Group Ltd., said: “Max had another good underwriting quarter from all property and casualty units. Our gross written premium growth in the quarter was directly related to some of our 2007 initiatives. Max Specialty continues to develop well and our addition of agricultural reinsurance expertise was timely given the escalating prices in the commodity markets. As we indicated on April 18th our alternative investment results were below our quarterly target but better than comparable indexes. Given the market volatility in the first quarter, we believe these results highlight the measured volatility of this asset class, which has been a strong annual contributor to Max’s book value growth.”
Gross premiums written from property and casualty underwriting for the three months ended March 31, 2008, were $306.0 million compared to $213.0 million for the three months ended March 31, 2007, an increase of 43.7 percent. The increase in gross premiums written reflects new agriculture business written in the property and casualty reinsurance segment and the growth of the Company’s property and casualty U.S. specialty segment, which was not yet operational at March 31, 2007. Apart from these two growth initiatives, gross premiums written were in line with expectations, with modest rate and volume reductions compared to the same period in 2007. Property and casualty reinsurance, property and casualty insurance, property and casualty U.S. specialty insurance, and life and annuity reinsurance accounted for 66.3 percent, 23.9 percent, 9.6 percent and 0.2 percent, respectively, of gross premiums written for the three months ended March 31, 2008, versus 63.2 percent, 36.5 percent, nil percent and 0.3 percent, respectively, for the same period in 2007. Net premiums earned for the three months ended March 31, 2008, were $135.8 million versus $139.4 million for the same period of 2007.
Net investment income for the three months ended March 31, 2008, increased to $49.6 million from $42.8 million for the same period in 2007, an increase attributable to a year-over-year increase in cash and fixed-maturity balances. The previously indicated net loss on alternative investments for the three months ended March 31, 2008, was $25.7 million, for a negative 2.11 percent rate of return, versus a net gain on alternative investments of $54.1 million, for a 4.75 percent rate of return, for the same period in 2007. Trailing twelve month and sixty-month returns on alternative investments were 9.31 percent and 9.14 percent, respectively, at March 31, 2008. In accordance with the Company’s accounting policy, the unrealized mark-to-market gains and losses emanating from the alternative investment portfolio are recorded through net income rather than as an adjustment to book value through other comprehensive income. As noted above and as previously indicated, the negative impact of the loss in the current quarter, as compared to the Company’s targeted 2 percent quarterly return, was $0.83 of net income per diluted share. Invested assets were $5.2 billion as of March 31, 2008, with an allocation of 80.6 percent to cash and fixed maturities and 19.4 percent to alternative investments.
Losses and benefits were $108.6 million for the three months ended March 31, 2008, versus $107.0 million for the same period in 2007. The ratio of losses and benefits to net premiums earned is consistent with the ratio in the same period in 2007. Results for the three months ended March 31, 2008, included net favorable development of approximately $7.8 million on property and casualty reinsurance and insurance reserves. There was no significant reserve development for the three months ended March 31, 2007.
Acquisition costs for the three months ended March 31, 2008, were $9.6 million compared to $14.9 million for the three months ended March 31, 2007. The decrease in the 2008 quarter versus the same period in 2007 is principally attributable to a change in the mix of business written, with agriculture reinsurance lowering the average acquisition cost ratio for the reinsurance segment. In addition, reductions in acquisition costs were recorded on two quota share contracts based on the insureds’ actual underlying costs.
Interest expense for the three months ended March 31, 2008, was $12.0 million versus $8.1 million for the same period in 2007. The increase is principally attributable to higher interest crediting rates on funds withheld balances, which are based on the total return of two fixed income indices, together with the increased principal outstanding on the Company’s bank loans and senior notes compared to the same period in 2007.
General and administrative expenses for the three months ended March 31, 2008, were $24.7 million compared to $25.2 million for the same period in 2007. The decrease in general and administrative expenses is principally the result of reductions in performance-related compensation costs reflecting the Company’s results for the year to date, compared to the same period in 2007, which costs have been partly offset by increased expenses related to the launch of the Company’s property and casualty U.S. specialty segment.
During the three months ended March 31, 2008, under the Board-approved share repurchase authorization, the Company repurchased 3,342,264 of its common shares at an average price of $28.08 per share for a total amount of $93.9 million. These repurchases include total payments of $38.5 million for the repurchase of shares issued upon the exercise of warrants by two original shareholders. As of March 31, 2008, $85.8 million remains under the Company’s share repurchase authorization.
Shareholders’ equity was $1,511.6 million at March 31, 2008. Book value per share at March 31, 2008, was $26.78 per share, versus $27.54 at December 31, 2007, a decrease of 2.8 percent. Fully diluted book value per share at March 31, 2008, was $25.50 versus $25.59 at December 31, 2007, a decrease of 0.4 percent. Diluted book value per share is computed using the treasury stock method. Net operating return on average shareholders’ equity for the three months ended March 31, 2008, was 1.6 percent.
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 various 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 update or revise publicly 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. These measures, however, 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@maxcapservices.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)
March 31, 2008 | December 31, 2007 | |||||||
(Unaudited) | ||||||||
ASSETS | ||||||||
Cash and cash equivalents | $ | 495,344 | $ | 397,656 | ||||
Fixed maturities, available for sale at fair value | 3,671,112 | 3,663,226 | ||||||
Alternative investments, at fair value | 999,805 | 1,061,734 | ||||||
Accrued interest income | 47,960 | 49,100 | ||||||
Premiums receivable | 519,034 | 432,965 | ||||||
Losses and benefits recoverable from reinsurers | 633,176 | 578,333 | ||||||
Funds withheld | 13,677 | 13,823 | ||||||
Deferred acquisition costs | 52,671 | 44,187 | ||||||
Prepaid reinsurance premiums | 161,103 | 130,071 | ||||||
Trades pending settlement | 71,051 | 112,423 | ||||||
Other assets | 54,502 | 53,684 | ||||||
Total assets | $ | 6,719,435 | $ | 6,537,202 | ||||
LIABILITIES | ||||||||
Property and casualty losses | $ | 2,435,384 | $ | 2,333,877 | ||||
Life and annuity benefits | 1,256,521 | 1,203,509 | ||||||
Deposit liabilities | 221,207 | 220,513 | ||||||
Funds withheld from reinsurers | 170,987 | 169,263 | ||||||
Unearned property and casualty premiums | 537,580 | 439,581 | ||||||
Reinsurance balances payable | 120,838 | 99,221 | ||||||
Accounts payable and accrued expenses | 40,577 | 57,565 | ||||||
Bank loans | 325,000 | 330,000 | ||||||
Senior notes | 99,784 | 99,779 | ||||||
Total liabilities | 5,207,878 | 4,953,308 | ||||||
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; 56,450,598 (2007 - 57,515,075) shares issued and outstanding | 56,451 | 57,515 | ||||||
Additional paid-in capital | 760,533 | 844,455 | ||||||
Accumulated other comprehensive loss | (10,318 | ) | (20,341 | ) | ||||
Retained earnings | 704,891 | 702,265 | ||||||
Total shareholders’ equity | 1,511,557 | 1,583,894 | ||||||
Total liabilities and shareholders’ equity | $ | 6,719,435 | $ | 6,537,202 | ||||
Book Value Per Share | $ | 26.78 | $ | 27.54 | ||||
Fully Diluted Book Value Per Share | $ | 25.50 | $ | 25.59 | ||||
Diluted Shares Outstanding | 59,275,585 | 61,901,228 |
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 March 31 | ||||||||
2008 | 2007 | |||||||
REVENUES | ||||||||
Gross premiums written | $ | 306,634 | $ | 213,598 | ||||
Reinsurance premiums ceded | (104,676 | ) | (76,208 | ) | ||||
Net premiums written | $ | 201,958 | $ | 137,390 | ||||
Earned premiums | $ | 209,640 | $ | 201,492 | ||||
Earned premiums ceded | (73,828 | ) | (62,070 | ) | ||||
Net premiums earned | 135,812 | 139,422 | ||||||
Net investment income | 49,626 | 42,817 | ||||||
Net (losses) gains on alternative investments | (25,727 | ) | 54,112 | |||||
Net realized gains (losses) on sale of fixed maturities | 1,432 | (1,043 | ) | |||||
Other income | 1,223 | 174 | ||||||
Total revenues | 162,366 | 235,482 | ||||||
LOSSES AND EXPENSES | ||||||||
Losses and benefits | 108,557 | 107,015 | ||||||
Acquisition costs | 9,612 | 14,926 | ||||||
Interest expense | 11,957 | 8,107 | ||||||
General and administrative expenses | 24,720 | 25,196 | ||||||
Total losses and expenses | 154,846 | 155,244 | ||||||
NET INCOME BEFORE TAXES | 7,520 | 80,238 | ||||||
Income tax (benefit) expense | (229 | ) | 245 | |||||
NET INCOME | 7,749 | 79,993 | ||||||
Change in net unrealized appreciation (depreciation) of fixed maturities, net of tax | 14,949 | (4,740 | ) | |||||
Foreign currency translation adjustment | (4,926 | ) | 384 | |||||
COMPREHENSIVE INCOME | $ | 17,772 | $ | 75,637 | ||||
Basic earnings per share | $ | 0.14 | $ | 1.32 | ||||
Diluted earnings per share | $ | 0.13 | $ | 1.24 | ||||
Diluted net operating earnings per share | $ | 0.11 | $ | 1.26 | ||||
Weighted average shares outstanding - basic | 56,839,896 | 60,799,481 | ||||||
Weighted average shares outstanding - diluted | 60,002,077 | 64,491,168 | ||||||
MAX CAPITAL GROUP LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(Expressed in thousands of United States Dollars)
Three Months Ended March 31, | ||||||||
2008 | 2007 | |||||||
Preferred shares | ||||||||
Balance, beginning of period | $ | — | $ | — | ||||
Balance, end of period | — | — | ||||||
Common shares | ||||||||
Balance, beginning of period | 57,515 | 60,277 | ||||||
Issue of shares | 2,278 | 824 | ||||||
Repurchase of shares | (3,342 | ) | (795 | ) | ||||
Balance, end of period | 56,451 | 60,306 | ||||||
Additional paid-in capital | ||||||||
Balance, beginning of period | 844,455 | 933,292 | ||||||
Issue of common shares | 1,580 | 810 | ||||||
Stock based compensation expense | 5,007 | 4,690 | ||||||
Repurchase of shares | (90,509 | ) | (18,838 | ) | ||||
Balance, end of period | 760,533 | 919,954 | ||||||
Accumulated other comprehensive loss | ||||||||
Balance, beginning of period | (20,341 | ) | (21,688 | ) | ||||
Holding gains (losses) on fixed maturities arising in period, net of tax | 16,377 | (5,784 | ) | |||||
Net realized (gains) losses included in net income, net of tax | (1,428 | ) | 1,044 | |||||
Currency translation adjustments | (4,926 | ) | 384 | |||||
Balance, end of period | (10,318 | ) | (26,044 | ) | ||||
Retained earnings | ||||||||
Balance, beginning of period | 702,265 | 418,180 | ||||||
Net income | 7,749 | 79,993 | ||||||
Dividends paid | (5,123 | ) | (4,276 | ) | ||||
Balance, end of period | 704,891 | 493,897 | ||||||
Total shareholders’ equity | $ | 1,511,557 | $ | 1,448,113 | ||||
MAX CAPITAL GROUP LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Expressed in thousands of United States Dollars)
Three Months Ended March 31 | ||||||||
2008 | 2007 | |||||||
OPERATING ACTIVITIES | ||||||||
Net income | $ | 7,749 | $ | 79,993 | ||||
Adjustments to reconcile net income to net cash from operating activities: | ||||||||
Stock based compensation | 5,007 | 4,691 | ||||||
Amortization of premium on fixed maturities | 1,176 | 1,298 | ||||||
Accretion of deposit liabilities | 1,187 | 1,584 | ||||||
Net losses (gains) on alternative investments | 25,727 | (54,112 | ) | |||||
Net realized (gains) losses on sale of fixed maturities | (1,432 | ) | 1,043 | |||||
Changes in: | ||||||||
Accrued interest income | 1,140 | 780 | ||||||
Premiums receivable | (86,070 | ) | (26,406 | ) | ||||
Losses and benefits recoverable from reinsurers | (52,615 | ) | (31,673 | ) | ||||
Funds withheld | 146 | 887 | ||||||
Deferred acquisition costs | (8,484 | ) | (2,678 | ) | ||||
Prepaid reinsurance premiums | (30,848 | ) | (14,090 | ) | ||||
Trades pending settlement | 41,372 | 118,765 | ||||||
Other assets | (814 | ) | (3,106 | ) | ||||
Property and casualty losses | 96,456 | 86,507 | ||||||
Life and annuity benefits | (13,412 | ) | (12,730 | ) | ||||
Funds withheld from reinsurers | 1,724 | 157 | ||||||
Unearned property and casualty premiums | 96,994 | 11,817 | ||||||
Reinsurance balances payable | 21,617 | 6,724 | ||||||
Accounts payable and accrued expenses | (16,988 | ) | (102,771 | ) | ||||
Cash from operating activities | 89,632 | 66,680 | ||||||
INVESTING ACTIVITIES | ||||||||
Purchases of fixed maturities | (218,261 | ) | (469,761 | ) | ||||
Sales of fixed maturities | 104,908 | 81,531 | ||||||
Redemptions of fixed maturities | 184,025 | 123,880 | ||||||
Sales (purchases) of alternative investments | 36,202 | 12,059 | ||||||
Cash provided by (used in) investing activities | 106,874 | (252,291 | ) | |||||
FINANCING ACTIVITIES | ||||||||
Net proceeds from issuance of common shares | 3,858 | 1,633 | ||||||
Repurchase of common shares | (93,851 | ) | (19,633 | ) | ||||
Net proceeds from bank loans | (5,000 | ) | 125,000 | |||||
Dividends | (5,123 | ) | (4,276 | ) | ||||
Additions to deposit liabilities | 378 | 239 | ||||||
Payment of deposit liabilities | (2,522 | ) | (1,594 | ) | ||||
Cash (used in) provided by financing activities | (102,260 | ) | 101,369 | |||||
Effect of exchange rate on cash | 3,442 | 384 | ||||||
Net increase in cash and cash equivalents | 97,688 | (83,858 | ) | |||||
Cash and cash equivalents, beginning of period | 397,656 | 441,895 | ||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 495,344 | $ | 358,037 | ||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid totaled $4,976 and $3,411 for the three months ended March 31, 2008 and 2007, respectively. Corporate taxes paid totaled $183 and $nil for the three months ended March 31, 2008 and 2007, respectively.
MAX CAPITAL GROUP LTD.
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–THREE MONTHS ENDED MARCH 31, 2008 (Unaudited)
(Expressed in thousands of United States Dollars)
Property & Casualty | Life & Annuity | Corporate | Consolidated | |||||||||||||||||||||||||
Reinsurance | Insurance | U.S. Specialty | Total | Reinsurance | �� | |||||||||||||||||||||||
Year to Date Segment Information: | ||||||||||||||||||||||||||||
Gross premiums written | $ | 203,425 | $ | 73,204 | $ | 29,352 | $ | 305,981 | $ | 653 | $ | — | $ | 306,634 | ||||||||||||||
Reinsurance premiums ceded | (39,252 | ) | (45,391 | ) | (19,902 | ) | (104,545 | ) | (131 | ) | — | (104,676 | ) | |||||||||||||||
Net premiums written | $ | 164,173 | $ | 27,813 | $ | 9,450 | $ | 201,436 | $ | 522 | $ | — | $ | 201,958 | ||||||||||||||
Earned premiums | $ | 100,614 | $ | 91,791 | $ | 16,582 | $ | 208,987 | $ | 653 | $ | — | $ | 209,640 | ||||||||||||||
Earned premiums ceded | (13,597 | ) | (49,213 | ) | (10,887 | ) | (73,697 | ) | (131 | ) | — | (73,828 | ) | |||||||||||||||
Net premiums earned | 87,017 | 42,578 | 5,695 | 135,290 | 522 | — | 135,812 | |||||||||||||||||||||
Net investment income | 9,885 | 4,055 | 1,935 | 15,875 | 9,805 | 23,946 | 49,626 | |||||||||||||||||||||
Net losses on alternative investments | (6,485 | ) | (2,000 | ) | — | (8,485 | ) | (10,369 | ) | (6,873 | ) | (25,727 | ) | |||||||||||||||
Net realized gains on sales of fixed maturities | — | — | — | — | — | 1,432 | 1,432 | |||||||||||||||||||||
Other income | — | 1,066 | — | 1,066 | — | 157 | 1,223 | |||||||||||||||||||||
Total revenues | 90,417 | 45,699 | 7,630 | 143,746 | (42 | ) | 18,662 | 162,366 | ||||||||||||||||||||
Losses and benefits | 58,637 | 31,111 | 3,854 | 93,602 | 14,955 | — | 108,557 | |||||||||||||||||||||
Acquisition costs | 9,964 | (846 | ) | 342 | 9,460 | 152 | — | 9,612 | ||||||||||||||||||||
Interest expense | 3,043 | — | — | 3,043 | 2,491 | 6,423 | 11,957 | |||||||||||||||||||||
General and administrative expenses | 6,606 | 5,280 | 5,193 | 17,079 | 611 | 7,030 | 24,720 | |||||||||||||||||||||
Total losses and expenses | 78,250 | 35,545 | 9,389 | 123,184 | 18,209 | 13,453 | 154,846 | |||||||||||||||||||||
Net income before taxes | $ | 12,167 | $ | 10,154 | $ | (1,759 | ) | $ | 20,562 | $ | (18,251 | ) | $ | 5,209 | $ | 7,520 | ||||||||||||
Loss Ratio (a) | 67.4 | % | 73.1 | % | 67.7 | % | 69.2 | % | ||||||||||||||||||||
Combined Ratio (b) | 86.4 | % | 83.5 | % | 164.9 | % | 88.8 | % |
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–THREE MONTHS ENDED MARCH 31, 2007 (Unaudited)
(Expressed in thousands of United States Dollars)
Property & Casualty | Life & Annuity | Corporate | Consolidated | |||||||||||||||||||||||||
Reinsurance | Insurance | U.S. Specialty | Total | Reinsurance | ||||||||||||||||||||||||
Quarter Segment Information: | ||||||||||||||||||||||||||||
Gross premiums written | $ | 135,014 | $ | 78,034 | $ | — | $ | 213,048 | $ | 550 | $ | — | $ | 213,598 | ||||||||||||||
Reinsurance premiums ceded | (23,549 | ) | (52,549 | ) | — | (76,098 | ) | (110 | ) | — | (76,208 | ) | ||||||||||||||||
Net premiums written | $ | 111,465 | $ | 25,485 | $ | — | $ | 136,950 | $ | 440 | $ | — | $ | 137,390 | ||||||||||||||
Earned premiums | $ | 98,896 | $ | 102,046 | $ | — | $ | 200,942 | $ | 550 | $ | — | $ | 201,492 | ||||||||||||||
Earned premiums ceded | (10,476 | ) | (51,484 | ) | — | (61,960 | ) | (110 | ) | — | (62,070 | ) | ||||||||||||||||
Net premiums earned | 88,420 | 50,562 | — | 138,982 | 440 | — | 139,422 | |||||||||||||||||||||
Net investment income | 10,735 | 3,944 | — | 14,679 | 7,356 | 20,782 | 42,817 | |||||||||||||||||||||
Net gains on alternative investments | 16,422 | 4,375 | — | 20,797 | 17,496 | 15,819 | 54,112 | |||||||||||||||||||||
Net realized losses on sales of fixed maturities | — | — | — | — | — | (1,043 | ) | (1,043 | ) | |||||||||||||||||||
Other income | — | — | — | — | — | 174 | 174 | |||||||||||||||||||||
Total revenues | 115,577 | 58,881 | — | 174,458 | 25,292 | 35,732 | 235,482 | |||||||||||||||||||||
Losses and benefits | 59,764 | 36,834 | — | 96,598 | 10,417 | — | 107,015 | |||||||||||||||||||||
Acquisition costs | 15,256 | (591 | ) | — | 14,665 | 261 | — | 14,926 | ||||||||||||||||||||
Interest expense | 3,031 | — | — | 3,031 | 1,664 | 3,412 | 8,107 | |||||||||||||||||||||
General and administrative expenses | 7,270 | 4,384 | 3,507 | 15,161 | 711 | 9,324 | 25,196 | |||||||||||||||||||||
Total losses and expenses | 85,321 | 40,627 | 3,507 | 129,455 | 13,053 | 12,736 | 155,244 | |||||||||||||||||||||
Net income before taxes | $ | 30,256 | $ | 18,254 | $ | (3,507 | ) | $ | 45,003 | $ | 12,239 | $ | 22,996 | $ | 80,238 | |||||||||||||
Loss Ratio (a) | 67.6 | % | 72.8 | % | n/a | 69.5 | % | |||||||||||||||||||||
Combined Ratio (b) | 93.1 | % | 80.4 | % | n/a | 91.0 | % |
(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. |
MAX CAPITAL GROUP LTD.
SCHEDULE OF SUPPLEMENTAL PREMIUM DATA–THREE MONTHS ENDED MARCH 31, 2008 (Unaudited)
(Expressed in thousands of United States Dollars)
Three Months Ended March 31, 2008 | Three Months Ended March 31, 2007 | ||||||||||||
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: | |||||||||||||
Agriculture | $ | 84,992 | 27.7 | % | $ | 467 | 0.2 | % | |||||
Aviation | 5,821 | 1.9 | % | 8,131 | 3.8 | % | |||||||
Excess Liability | 5,212 | 1.7 | % | 6,330 | 2.9 | % | |||||||
Medical Malpractice | 32,175 | 10.5 | % | 21,286 | 10.0 | % | |||||||
Other | 3,088 | 1.0 | % | (77 | ) | 0.0 | % | ||||||
Professional Liability | 12,263 | 4.0 | % | 9,340 | 4.4 | % | |||||||
Property | 41,456 | 13.5 | % | 57,471 | 26.9 | % | |||||||
Marine & Energy | 6,455 | 2.1 | % | 8,057 | 3.8 | % | |||||||
Whole Account | 5,213 | 1.7 | % | 5,880 | 2.7 | % | |||||||
Workers’ Compensation | 6,750 | 2.2 | % | 18,129 | 8.5 | % | |||||||
203,425 | 66.3 | % | 135,014 | 63.2 | % | ||||||||
Property & Casualty Insurance: | |||||||||||||
Aviation | 3,199 | 1.0 | % | 4,048 | 1.9 | % | |||||||
Excess Liability | 33,915 | 11.1 | % | 38,199 | 17.9 | % | |||||||
Professional Liability | 25,501 | 8.3 | % | 25,359 | 11.8 | % | |||||||
Property | 10,589 | 3.5 | % | 10,428 | 4.9 | % | |||||||
73,204 | 23.9 | % | 78,034 | 36.5 | % | ||||||||
Property & Casualty U.S. Specialty: | |||||||||||||
Property | 16,510 | 5.4 | % | — | 0.0 | % | |||||||
General Casualty | 8,472 | 2.8 | % | — | 0.0 | % | |||||||
Marine | 4,370 | 1.4 | % | — | 0.0 | % | |||||||
29,352 | 9.6 | % | — | 0.0 | % | ||||||||
Aggregate Property & Casualty | $ | 305,981 | 99.8 | % | $ | 213,048 | 99.7 | % | |||||
Life & Annuity: | |||||||||||||
Annuity | $ | — | 0.0 | % | $ | — | 0.0 | % | |||||
Health | — | 0.0 | % | — | 0.0 | % | |||||||
Life | 653 | 0.2 | % | 550 | 0.3 | % | |||||||
Aggregate Life & Annuity | 653 | 0.2 | % | 550 | 0.3 | % | |||||||
Aggregate P&C and Life & Annuity | $ | 306,634 | 100.0 | % | $ | 213,598 | 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 March 31 | |||||||
2008 | 2007 | ||||||
Net income | $ | 7,749 | $ | 79,993 | |||
Net realized losses (gains) on sale of fixed maturities, net of tax | (1,428 | ) | 1,044 | ||||
Net operating income | $ | 6,321 | $ | 81,037 | |||
Net income per diluted share | $ | 0.13 | $ | 1.24 | |||
Net realized losses (gains) on sale of fixed maturities, net of tax | (0.02 | ) | 0.02 | ||||
Net operating income per diluted share | $ | 0.11 | $ | 1.26 | |||
Weighted average shares outstanding - basic | 56,839,896 | 60,799,481 | |||||
Weighted average shares outstanding - diluted | 60,002,077 | 64,491,168 |
Annualized Return and Annualized Net Operating Return on Average Shareholders’ Equity
(Expressed in thousands of United States Dollars)
Three Months Ended March 31 | ||||||||
2008 | 2007 | |||||||
Net income | $ | 7,749 | $ | 79,993 | ||||
Annualized net income | 30,996 | 319,972 | ||||||
Net operating income | $ | 6,321 | $ | 81,037 | ||||
Annualized net operating income | 25,284 | 324,148 | ||||||
Beginning shareholders’ equity | $ | 1,583,894 | $ | 1,390,061 | ||||
Ending shareholders’ equity | 1,511,557 | 1,448,113 | ||||||
Average shareholders’ equity | $ | 1,547,726 | $ | 1,419,087 | ||||
Annualized return on average shareholders’ equity | 2.0 | % | 22.5 | % | ||||
Annualized net operating return on average shareholders’ equity | 1.6 | % | 22.8 | % |
MAX CAPITAL GROUP LTD.
SCHEDULE OF SUPPLEMENTAL INVESTMENT DATA–THREE MONTHS ENDED MARCH 31, 2008 (Unaudited)
Selected Investment Return Data:
Periodic Rate of Return | ||||||||||||||||||
Fair Value* | Investment Distribution | Last 3 Months | Year to Date | Last 12 months | Last 60 months** | |||||||||||||
Cash and Fixed Maturities | $ | 4,166,456 | 80.6 | % | 1.41 | % | 1.41 | % | 5.35 | % | 4.04 | % | ||||||
Commodity Trading Advisers | $ | — | 0.0 | % | 0.00 | % | 0.00 | % | 7.32 | % | 6.69 | % | ||||||
Distressed Securities | 168,069 | 3.3 | % | -0.56 | % | -0.56 | % | 9.55 | % | 20.15 | % | |||||||
Diversified Arbitrage | 99,197 | 1.9 | % | -8.49 | % | -8.49 | % | 1.40 | % | 5.65 | % | |||||||
Emerging Markets | 64,956 | 1.3 | % | 0.28 | % | 0.28 | % | 13.58 | % | 17.62 | % | |||||||
Event-Driven Arbitrage | 166,685 | 3.2 | % | 1.51 | % | 1.51 | % | 26.14 | % | 17.97 | % | |||||||
Fixed Income Arbitrage | 36,997 | 0.7 | % | 14.21 | % | 14.21 | % | 37.35 | % | 11.08 | % | |||||||
Global Macro | 74,559 | 1.5 | % | -0.09 | % | -0.09 | % | 10.55 | % | 9.43 | % | |||||||
Long / Short Credit | 44,890 | 0.9 | % | 1.69 | % | 1.69 | % | 1.17 | % | 10.14 | % | |||||||
Long / Short Equity | 270,853 | 5.2 | % | -7.02 | % | -7.02 | % | 12.24 | % | 9.62 | % | |||||||
Opportunistic | 69,237 | 1.3 | % | -2.25 | % | -2.25 | % | 10.73 | % | 18.83 | % | |||||||
MDS **** | 995,443 | 19.3 | % | -2.15 | % | -2.15 | % | 9.08 | % | 9.88 | % | |||||||
Reinsurance Private Equity | 4,362 | 0.1 | % | 10.67 | % | 10.67 | % | 105.92 | % | 9.90 | % | |||||||
Alternative Investments | $ | 999,805 | 19.4 | % | -2.11 | % | -2.11 | % | 9.31 | % | 9.14 | % | ||||||
Total Investments | $ | 5,166,261 | 100.0 | % | 0.61 | % | 0.61 | % | 7.34 | % | 6.14 | % | ||||||
Alternative Investment Return Data ***:
MDS Performance History **** – 60 months ended March 31, 2008
Largest monthly gain | 4.15 | % | Largest monthly loss | (2.58 | %) | |||
Largest quarterly gain | 6.07 | % | Largest quarterly loss | (2.72 | %) | |||
Average monthly gain | 1.40 | % | Average monthly loss | (1.02 | %) | |||
Average quarterly gain | 3.60 | % | Average quarterly loss | (1.14 | %) | |||
Months with a gain | 45 | Months with a loss | 15 | |||||
Quarters with a gain | 15 | Quarters with a loss | 5 | |||||
% of months with a gain | 75 | % | Quarterly standard deviation | 2.68 | % | |||
% of quarters with a gain | 75 | % | Annual standard deviation | 4.70 | % | |||
Largest drawdown ***** | (5.04 | %) |
Monthly performance
2003 | 2004 | 2005 | 2006 | 2007 | 2008 | |||||||||||||
January | 1.75 | % | 0.16 | % | 2.75 | % | 1.28 | % | (1.37 | %) | ||||||||
February | 1.28 | % | 1.69 | % | 0.39 | % | 1.50 | % | 1.83 | % | ||||||||
March | 1.18 | % | (0.61 | %) | 1.22 | % | 1.90 | % | (2.58 | %) | ||||||||
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 | 4.27 | % | 1.22 | % | 4.41 | % | 4.75 | % | (2.15 | %) | ||||||||
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 | % | ||||||||
Period return | 13.41 | % | 9.81 | % | 5.88 | % | 6.30 | % | 16.78 | % | (2.15 | %) |
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. |