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 L L O Y D ’ S MAX CAPITAL GROUP LTD. Nasdaq: MXGL Investment Portfolio Update November 2008 Exhibit 99.2 |
2 INFORMATION CONCERNING FORWARD LOOKING STATEMENTS This presentation 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 update or revise publicly any forward-looking statement whether as a result of new information, future developments or otherwise. Information as of November 30, 2008 included in this presentation comprise preliminary estimates made by the Company based on information available as of November 28, 2008 and is subject to change. |
3 The estimated fair value of Max’s investment portfolio ($5.0 billion), excluding investment income, has declined approximately $45 million, or $0.81 per share, between Sept. 30 and Nov. 30, 2008 Fixed maturities portfolio (82%): increased $25 million Alternative investments (18%): decreased $70 million Fourth quarter underwriting results are performing as expected No material increase in 2008 storm losses is expected Life reserves performing as expected and contain no variable annuities Max continues to have capital to opportunistically execute its business Max increases its capital position as it reduces its alternative asset portfolio Max believes it has significant liquidity Approximately $725 million of cash on hand at Nov. 30, 2008 Substantial positive cash flow from operations, near term asset maturities and paydowns $150 million of short term debt maturing in 2012 and $100 million of long term debt maturing in 2017 Max Capital’s Balance Sheet Remains Strong |
4 Max believes its fixed maturities portfolio is well diversified, of high quality and highly liquid Over 70% of the portfolio is Aaa-rated and above, less than 2% is Baa-rated or below Cash and bonds maturing within 3 years is approximately $1.6 billion All bonds are current as to principal and interest The portfolio is tailored to Max’s liabilities – duration, curve, and currency The portfolio can be thought of as two sub-portfolios Portfolio of ~ $1 billion matched to life & annuity benefits with a duration of 9.7 years Portfolio of ~ $3 billion matched to property & casualty loss reserves with a duration of 2.3 years November 30, 2008 preliminary, estimated fixed maturities portfolio information: Max’s Fixed Maturities Portfolio – High Quality & Highly Liquid ($ in millions of US dollars) Amortized Fair Unrealized Book % of Fair % of Fair % of Sector Cost Value Gain/(Loss) Yield Duration Portfolio Rating Value Fair Value Duration Value Fair Value Cash 725 $ 725 $ - $ 1.25 0.12 17.5% Tsy 635 $ 15.3% <1Yr 1,525 $ 36.7% Government 590 635 45 4.32 12.74 15.3% Agy 825 19.9% 1 to 3Yr 960 23.1% Agency 270 280 10 4.34 4.98 6.7% Aaa 1,615 38.9% 3 to 5Yr 560 13.5% MBS 475 475 - 5.28 2.30 11.4% Aa 390 9.4% 5 to 7Yr 195 4.7% CMO 190 170 (20) 5.30 2.34 4.1% A 620 14.9% 7 to 9Yr 100 2.4% ABS 240 205 (35) 5.01 3.15 4.9% Baa 55 1.3% 9+Yr 810 19.5% CMBS 235 205 (30) 5.25 2.80 4.9% Below 10 0.2% Corporate 1,490 1,410 (80) 4.86 4.06 34.0% Municipal 45 45 - 3.85 10.86 1.1% Preferred Stock - - - - - - Total 4,260 $ 4,150 $ (110) $ 4.22 4.46 100.0% Total 4,150 $ 100.0% Total 4,150 $ 100.0% |
5 Approximately 50% of Max’s fixed maturities portfolio is invested in cash, governments, agencies, and agency mortgage-backed securities (“MBS”) Approximately $725 million of cash on hand at Nov. 30, 2008 Government bonds of approximately $635 million Greater than 95% are issued by the US, UK, Germany, France, and Netherlands Agencies are primarily Fannie, Freddie, and FHLB with a duration of 4.98 years Agency MBS are plain vanilla GNMA, FNMA, FHLM 15 and 30 year pass-throughs Weighted avg. coupon of approx. 5.5% / Weighted avg. maturity of approx. 22 years Cash, Governments, Agencies, And Agency MBS ($ in millions of US dollars) Fair % of Fair % of Fair % of Issuer Value Portfolio Rating Value Fair Value Duration Value Fair Value Tsy 635 $ 30.2% <1Yr 1,050 $ 50.0% Agy 740 35.2% 1 to 3Yr 275 13.1% Cash 725 $ 17.5% Aaa 725 34.5% 3 to 5Yr 125 6.0% Governments 635 15.3% Aa - 0.0% 5 to 7Yr 60 2.9% Agencies 280 6.7% A - 0.0% 7 to 9Yr 30 1.4% Agency MBS 460 11.1% Baa - 0.0% 9+Yr 560 26.7% Below - 0.0% Total 2,100 $ 50.6% Total 2,100 $ 100.0% Total 2,100 $ 100.0% |
6 Max’s corporate portfolio has an estimated fair value of approximately $1.4 billion or 34% of the portfolio at Nov. 30, 2008 Average credit rating of Aa+ Credit duration is short – 3.8 years overall / 1.6 years in the non-life portfolio Average issuer size is approximately 0.2% or $6.8 million No single issuer is greater than 1.3% / Only 3 issuers are greater than 1% position Highly Rated Corporate Bonds Issuer Fair Value % of Portfolio Issuer Fair Value % of Portfolio (in '000s of USD) (in '000s of USD) Finance Industrials KFW-KREDIT WIEDERAUFBAU 54,000 1.3% WAL-MART STORES 27,000 0.7% GENERAL ELECTRIC 50,000 1.2% CONOCOPHILLIPS 15,000 0.4% CREDIT SUISSE 34,000 0.8% UNITED TECHNOLOGIES CORP 14,000 0.3% CITIGROUP INC 33,000 0.8% PROCTER & GAMBLE CO 13,000 0.3% JPMORGAN CHASE & CO 32,000 0.8% UNILEVER NV 11,000 0.3% BANK OF AMERICA CORP 27,000 0.7% WYETH 10,000 0.2% MERRILL LYNCH & CO 27,000 0.7% PEPSICO INC 10,000 0.2% WELLS FARGO COMPANY 26,000 0.6% AVON PRODUCTS INC 9,000 0.2% HYPO PFANDBRIEFBK INTL 26,000 0.6% FRANCE TELECOM 9,000 0.2% MORGAN STANLEY 24,000 0.6% GENENTECH INC 9,000 0.2% Utilities Yankee / Sovereign GEORGIA POWER COMPANY 16,000 0.4% EUROPEAN INVESTMENT BANK 46,000 1.1% PUBLIC SERV CO OF COLO 14,000 0.3% INTL BK RECON & DEVELOP 14,000 0.3% CONS EDISON CO OF NY 10,000 0.2% CAISSE D'AMORT DETTE SOC 12,000 0.3% FLORIDA POWER CORP 8,000 0.2% REPUBLIC OF AUSTRIA 8,000 0.2% RWE AG 6,000 0.1% RESEAU FERRE DE FRANCE 7,000 0.2% SOUTH CAROLINA ELEC&GAS 6,000 0.1% ONTARIO (PROVINCE OF) 5,000 0.1% SOUTHERN CALIF GAS CO 5,000 0.1% INTER-AMERICAN DEVEL BK 5,000 0.1% DOMINION RESOURCES INC 4,000 0.1% INTL FINANCE CORPORATION 5,000 0.1% DETROIT EDISON COMPANY 3,000 0.1% HYDRO-QUEBEC 3,000 0.1% UNION ELECTRIC CO 3,000 0.1% REPUBLIC OF LITHUANIA 3,000 0.1% ($ in millions of US dollars) Fair % of Rating Value Fair Value Aaa 420 $ 29.8% Aa 355 25.2% A 585 41.5% Baa 50 3.5% Below - 0.0% Total 1,410 $ 100.0% Fair % of Duration Value Fair Value <1Yr 300 $ 21.3% 1 to 3Yr 505 35.8% 3 to 5Yr 205 14.5% 5 to 7Yr 125 8.9% 7 to 9Yr 70 5.0% 9+Yr 205 14.5% Total 1,410 $ 100.0% |
7 CMBS portfolio has an estimated fair value of approximately $205 million or 5% of the portfolio at Nov. 30, 2008 Comprised largely of senior and super-senior tranches 98% Aaa-rated with 70% 2005 and prior vintages Very little “pro-forma” projection underwriting utilized in Max’s CMBS holdings Growing amounts defeased with treasury and agency collateral Cash-flow and stress testing show that substantial economic deterioration is required before Max loses principal Commercial Mortgage Backed Securities (“CMBS”) * Information is as of October 31, 2008 Vintage % of Portfolio % of CMBS Avg Life* Avg Rating* Original Support Current Support as of 10/31/08 Defeased with Tsy / Agy* Adjusted Support* DSCR* Orig LTV* 90+ Delinq.* Accum Loss* Fair Value (millions of USD) 2007 0.55% 11.19% 3.93 AAA 32.47% 35.79% 0.00% 35.79% 2.86 50.94% 0.54% 0.00% 23 $ 2006 0.92% 18.66% 4.55 AAA 27.42% 29.03% 0.14% 25.96% 1.71 63.74% 0.70% 0.00% 38 2005 1.49% 30.13% 2.18 AA+ 25.14% 26.15% 5.63% 27.74% 1.74 68.47% 0.87% 0.00% 62 2004 0.65% 13.08% 2.50 AAA 13.96% 15.01% 16.88% 18.16% 1.90 64.48% 0.05% 0.11% 27 2003 0.44% 8.97% 2.30 AAA 18.77% 25.79% 23.75% 33.04% 1.93 66.76% 0.19% 0.06% 18 <=2002 0.89% 17.96% 2.03 AAA 22.09% 38.67% 32.47% 57.16% 1.56 63.30% 0.11% 0.03% 37 Total 4.94% 100.00% 2.84 AAA 23.81% 28.53% 11.89% 32.82% 1.87 64.02% 0.50% 0.02% 205 $ |
8 Sub-prime and Alt-A asset-backed securities (“ABS”) have an estimated fair value of approximately $68 million or 1.6% of the portfolio at Nov. 30, 2008 Short duration and average life Over 50% Aa+ or better Max’s sub-prime and Alt-A portfolio is performing as expected No loss of principal or income is expected Increasing levels of over-collateralization Cushion factors remain adequate Sub-Prime And Alt-A ABS Holdings Continues To Perform * Deal loss projection assumes that all currently delinquent loans are defaulted, with forward default rates and recovery rates specific to each deal ** Information is as of October 31, 2008 Vintage % of Portfolio % of SubPrime Avg Life** Avg Rating** Original Support Current Support as of 10/31/08 Deal Loss Projection* Cushion Factor** 90+ Delinq.** Accum Loss** Fair Value (millions of USD) 2007 0.0% 2.5% 2.73 BAA 24.40% 28.49% 31.49% -3.00% 29.09% 4.84% 2 $ 2006 0.9% 56.4% 1.46 AA 30.57% 41.95% 16.27% 25.68% 27.14% 4.31% 38 2005 0.3% 20.8% 2.01 AAA 17.25% 25.79% 16.59% 9.20% 19.28% 1.76% 14 2004 0.2% 10.3% 5.52 AA+ 5.25% 12.77% 4.23% 8.54% 3.94% 0.31% 7 2003 0.1% 4.7% 1.54 A+ 95.07% 96.12% 1.61% 94.51% 1.18% 0.90% 3 <=2002 0.1% 5.5% 4.15 AA 57.43% 61.84% 3.74% 58.10% 7.84% 1.73% 4 Total 1.6% 100.00% 2.17 AA 29.52% 38.87% 14.12% 24.75% 20.92% 3.09% 68 $ |
9 Max’s alternative asset return of -6.8% for October and November compares with the HFRX Fund of Funds Index return of -11.7% for the same period and -23.2% for the S&P. Max’s alternative asset returns continue to compare favorably to other spread asset classes over the last two months, 11 month (2008), and 23 month (2007-2008) time periods: Alternative Assets * Past performance should not be considered to be a reliable indicator of future performance The portfolio is being rebalanced to reflect a more market neutral / lower volatility strategy Alternative assets are expected to be down to 15% of total investments by the end of Q1 2009 Max is redeeming managers who’s exposures do not fit the market neutral / low volatility profile Approximately 16% of the alternative asset portfolio Max expects to have received the majority of the cash and have eliminated the related economic exposure by March 2009 Max implemented a hedging strategy to reduce our exposure to these redeemed managers in mid October, but residual basis risk remains The cost of the redeemed portfolio, net of the hedge, has been approximately $50 million since Sept 30 . Oct /Nov 2007 to Asset Class 2008 2008 2008 Max Capital AI Portfolio -6.8% -18.4% -4.3% HFRI Fund of Funds -11.7% -23.5% -14.5% S&P 500 -23.2% -39.0% -36.9% High Yield -23.3% -31.5% -30.0% 5 - 7 Year Corporate A -1.2% -12.0% -7.3% 5 - 7 Year Corporate BBB -9.5% -14.3% -9.5% th |