Exhibit 99.2
Max Specialty Insurance Company
May 11, 2009
A member of the Max Capital Group BERMUD AIRELAND UNITED STATES LLOYD’S
INFORMATION CONCERNING FORWARD LOOKING STATEMENTS
CAUTIONARY NOTE REGARDING FORWARD -LOOKING INFORMATION
This presentation includes statements about future economic performance, finances, expectations, plans and prospects of both IPC Holdings, Ltd. (“IPC”) and Max Capital Group Ltd. (“Max”) that constitute forward -looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward -looking statements are subject to certain risks and uncertainties, including the risks described in the definitive joint proxy statement/prospectus of IPC and Max that has been filed with the Securities and Exchange Commission (“SEC”) under “Risk Factors,” many of which are difficult to predict and generally beyond the control of IPC and Max, that could cause actual results to differ materially from those expressed in or suggested by such statements. For further information regarding cautionary statements and factors affecting future results, please also refer to the 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 each of IPC or Max, as the case may be, with the SEC. Neither IPC nor Max undertakes any obligation to update or revise publicly any forward -looking statement whether as a result of new information, future developments or otherwise.
This presentation contains certain forward -looking statements within the meaning of the U.S. federal securities laws. Statements that are not historical facts, including statements about our beliefs, plans or expectations, are forward -looking statements. These statements are based on our current plans, estimates and expectations. Some forward -looking statements may be identified by our use of terms such as “believes,” “anticipates,” “intends,” “expects” and similar statements of a future or forward looking nature. In light of the inherent risks and uncertainties in all forward -looking statements, the inclusion of such statements in this presentation should not be considered as a representation by us or any other person that our objectives or plans will be achieved. A non-exclusive list of important factors that could cause actual results to differ materially from those in such forward -looking statements includes the following: (a) the occurrence of natural or man-made catastrophic events with a frequency or severity exceeding our expectations; (b) the adequacy of our loss reserves and the need to adjust such reserves as claims develop over time; (c) any lowering or loss of financial ratings of any wholly -owned operating subsidiary; (d) the effect of competition on market trends and pricing; (e) changes in general economic conditions, including changes in interest rates and/or equity values in the United States of America and elsewhere and continued instability in global credit markets; and (f) other factors set forth in the definitive joint proxy statement/prospectus of IPC and Max, the most recent reports on Form 10-K, Form 10-Q and other documents of IPC or Max, as the case may be, on file with the SEC. Risks and uncertainties relating to the proposed transaction include the risks that: the parties will not obtain the requisite shareholder or regulatory approvals for the transaction; the anticipated benefits of the transaction will not be realized; and/or the proposed transactions will not be consummated. Readers are cautioned not to place undue reliance on these forward -looking statements, which speak only as of the date on which they are made. We do not intend, and are under no obligation, to update any forward looking statement contained in this presentation.
ADDITIONAL INFORMATION ABOUT THE PROPOSED BUSINESS COMBINATION AND WHERE TO FIND IT:
This presentation relates to a proposed business combination between IPC and Max. On May 7, 2009, IPC and Max filed with the SEC a definitive joint proxy statement/prospectus of IPC and Max. This presentation is not a substitute for the definitive joint proxy statement/prospectus or any other document that IPC or Max may file with the SEC or send to their respective shareholders in connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS AND ALL OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC AS THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED BUSINESS COMBINATION. All such documents, if filed, would be available free of charge at the SEC’s website (www.sec.gov) or by directing a request to IPC, at Jim Bryce, President and Chief Executive Officer, or John Weale, Executive Vice President and Chief Financial Officer, at 441-298-5100, in the case of IPC’s filings, or Max, at Joe Roberts, Chief Financial Officer, or Susan Spivak Bernstein, Senior Vice President, Investor Relations at 441-295-8800, in the case of Max’s filings.
PARTICIPANTS IN THE SOLICITATION:
IPC and Max and their directors, executive officers and other employees may be deemed to be participants in any solicitation of IPC and Max shareholders, respectively, in connection with the proposed business combination.
Information about IPC’s directors and executive officers is available in the definitive joint proxy statement/prospectus filed with the SEC on May 7, 2009, relating to IPC’s 2009 annual meeting of shareholders; information about Max’s directors and executive officers is available in the amendment to its annual report on Form-10K, filed with the SEC on April 1, 2009.
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Max Specialty – Leading E&S Writer
Nationwide excess and surplus lines writer of property, casualty and marine
Three distinct divisions: Brokerage, Marine and Contract Binding
Strong financial strength and technical expertise
Significant product diversification and strong distribution relationships
Start-up in 2007 with experienced teams from Essex/Markel and other E&S platforms
On target to write $250 million of GWP in 2009
Internal structure in place and start-up expenses have stabilized
Licensed in 49 states on a non-admitted basis and 50 states on an admitted basis
Now have the people and the platforms to write a diversified book anywhere in the U.S.
Use of third party reinsurance to minimize exposure in early years
Strong sponsorship by the reinsurance community
Placed with favorable terms and conditions
Target combined ratio of 85% to 90%
Loss ratio on target; expense ratio decreasing as book continues to grow
Max Specialty contributes to Max Capital’s diversified niche orientation by adding profitable business in both property and casualty throughout the market cycle
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An Important and Growing Business for Max
Product diversification allows resources to be reallocated as market cycles change
Max Capital 2008 GPW
Bermuda/Dublin Insurance
31%
U.S. Specialty
15%
1% (1) 34% Max at Lloyd's Bermuda/Dublin Reinsurance 19% Life & Annuity Reinsurance
Total = $1,254 million
Max Specialty 2008 GPW
Marine
20%
49% Property
General 31% Casualty
Total = $194 million
(1) |
| Max at Lloyd’s acquired in November 2008 and includes partial year GPW. |
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E&S Market Overview
Characteristics of the Excess and Surplus Lines Market
What is the E&S market?
E&S market offers coverages unavailable in the standard insurance market
Only after insureds have been denied coverage in the admitted market can they turn to the E&S market As nonadmitted insurers, E&S companies are not subject to the rate and form regulations of the insured’s state regulator
? Free to use policy forms and rates they believe are appropriate for the risks they accept
What risks does the E&S market accept?
Unique: unusual risks that admitted insurers are unwilling / unequipped to insure Non-standard: policies having unfavorable traits (e.g., frequent, large losses) unacceptable to admitted insurers
High-capacity: policies with high insurance limits (i.e., risks in excess of what an admitted insurer will write, given its changing appetite)
What specific coverages?
The majority of the E&S lines are commercial lines including:
Property catastrophe Excess and umbrella
High-hazard products
D&O E&O
Special events
Environmental impairment Employment practices
Distribution
Typically distributed by wholesale brokers, retail agents, and program managers
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E&S Market Overview
Innovative underwritng strategies quickly adjust to the needs of the insured
Unique policy forms and rates allowing freedom to price each risk separately
Unlike the traditional marketplace, E&S lines carriers are not bound by price or by the need to provide certain types of coverage
E&S industry has historically outperformed the broader P&C universe
($ in millions) 2002 2003 2004 2005 2006 2007
Total U.S. Insurance Industry DPW $406,738 $456,693 $477,118 $488,723 $499,058 $501,637 Total Surplus Lines Industry DPW $25,565 $32,799 $33,012 $33,281 $38,698 $37,337
% of industry 6.3% 7.2% 6.9% 6.8% 7.8% 7.4%
P&C Industry Combined Ratio 107.4% 100.1% 98.1% 100.9% 92.4% 95.4% Surplus Lines Industry Combined Ratio 93.0% 92.3% 92.7% 93.2% 79.3% 76.0%
Outperformance 14.4% 7.8% 5.4% 7.7% 13.1% 19.4%
E&S industry has enjoyed stronger growth and better underwriting profitability than standard lines companies
Source: A.M. Best.
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E&S Outperforms the P&C Industry
Combined Ratios
120% 100% 80% 60%
1997 1999 2001 2003 2005 2007
95.4%
76.0%
E&S sector has materially outperformed the P&C Industry
E&S sector has consistently produced superior returns when compared to the broader P&C industry
Loss Ratios
100% 90% 80% 70% 60% 50%
1997 1999 2001 2003 2005 2007
67.5%
52.4%
Total Returns on Surplus
25 %
20 %
15 %
10 %
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0 % (5)% (10)%
1997 1999 2001 2003 2005 2007
20.9% 14.7%
P&C Industry Domestic Professional Surplus Lines
Source: A.M. Best.
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E&S is the Insurance Growth Sector
Net Premiums Written Growth
100 % 80 % 60 % 40 % 20 % 0 % (20)%
1974 1979 1984 1989 1994 1999 2004 2007
P&C Industry Domestic Professional Surplus Lines
E&S Market Share % of Commercial Insurance
14%
6% 5%
1987 1997 2007
Source: A.M. Best.
E&S DWP CAGR of 9% vs. commercial insurance CAGR of 4% between 1987 and 2007
E&S companies have ability to enter nonstandard markets and retain much of the transitioned business
Evidenced by significant premium growth following dislocating events
Events include:
9/11
Florida 2004 hurricanes
2005 Hurricane Katrina
And most recently Hurricane Ike and Gustav in 2008
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Max Specialty
Key Success Factors for Max in the E&S Market
Experienced management team with a profitable track record
Disciplined underwriting strategy
Underwriting transparency with limited authority and real time aggregation and monitoring
Prudent use of limits and a conservative reserving strategy
Contract binding business closely managed and audited for compliance with pricing and authority levels
Strong relationships and distribution capabilities
Formal appointment process of wholesalers/retailers adds controls to distribution relationships
Process means we are not an open distribution market
80 wholesale brokers with 20 year track records/relationships (Brokerage Division)
83 Managing General Agencies (Contract Binding Division)
Operates through 6 offices across the country
Product diversification allows resources to be reallocated as market cycles change
Underwrites for profit and not market share
Compensation rewarded on underwriting profit and ROE
Structured in three distinct divisions: Brokerage, Marine and Contract Binding
Utilizes strong underwriting skills to find solutions to client’s problems
Provides alternatives rather than declinations
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Management Team With Significant Industry Experience
Executive Previous Experience Years Experience
Steve Vaccaro President & COO 38 CEO – Max Specialty Essex Insurance Company
Bryan Sanders E&S Division, Hilb, Rogal & Hobbs 27 EVP – Contract Binding President Dominion Specialty Max Specialty
Jon Hahn VP Western Region 18 SVP – Brokerage Division Markel Corporation Max Specialty
Mike Miller CUO Specialty Division 36 SVP – Marine Division Firemans Fund Max Specialty William H McGee
Buddy Anckner SVP Max Bermuda 25 President – Casualty Div. SVP XL’s Bermuda Insurance Operation Max Managers, USA
Phil Vedell SVP 13 SVP, CAO, Director of Aon Catastrophe Management
Stephen Loderick VP, CFO and Treasurer 25 SVP, CFO and Treasurer W.R. Berkley Max Specialty Markel Corporation
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Disciplined Underwriting Strategy
Experienced underwriting team with a profitable track record Individual risk underwriting managed to common risk-reward criteria
Strong underwriters with solid technology and common pricing models
Prudent use of limits combined with reinsurance to manage maximum downsides
Conservative underwriting and management philosophy to manage catastrophe exposures on a 1:250 year event
Proactively manage business with conservative catastrophe limits
Data is in “real time” and captured down to location address
Monitoring, managing and pricing local concentrations
Approach tested and proven in Ike/Gustav with less then $5 million in losses
Max Specialty adds further diversification to Max Capital’s book of risk
Different distribution system, smaller sized clients, but consistent methodology
Softer classes compliment the Bermuda book
This underwriting strategy has led to loss ratios consistent with our goal of an 85%—90% combined ratio
Loss ratio of 56.5% in Q1 2009
Combined ratio of 98.4% in Q1 2009
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Max Specialty’s Diversified Premium Base
Four unique divisions allow resources to be reallocated throughout market cycle for greatest risk-adjusted returns
Each division led by a seasoned professional with profitable track record
Underwriting teams with significant experience in their specialty niche
Adds diversification to Max Capital across distribution and underlying client base, as well as class of business
Max Specialty 2008 GPW
Max Managers
6%
Marine
20%
Brokerage Property 40%
33% 1%
Brokerage Casualty Contract Binding
Total = $194 million
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Brokerage Division
Capacity—$25 million per risk
Property catastrophe exposed -layered accounts
Property non-catastrophe exposed
Middle market property and casualty
Brokerage casualty—$6,000,000 (Primary or Umbrella X/S)
Underwriting Strategy
Attract and retain high quality underwriting talent
Individual risk underwriting supported by robust models
Collaborative underwriting process and peer review
Focus on business that is not correlated with other Max platforms
Budget / Plan
Target GPW of approximately $90 million
Target net loss ratio of 46%
Target net combined ratio (ex G&A) of 58%
Premiums, Attachment, and Limits Profile
Average premium of approximately $45,000
48% of limits $5 million or less
75% of limits $10 million or less
72% of policies attach > 5,000,000
Limit Profile (% of Premium)
$0M to $1M $1M to $5M $5M to $10M
$10M to $15M
$15M to $20M
> $20M
2.2%
45.7% 27.3% 12.1%
7.6%
5.1%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
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Brokerage Division (cont’d)
Largest Occupancy Types
Apartment bldgs, office bldgs, mixed use, hotels, shopping centers and schools
Largest State Exposures
Florida, California, Texas, South Carolina and Louisiana
Top Producers
AmWINS, CRC, Swett & Crawford, Risk Placement Services and Westrope
Market Conditions
Market pricing and capacity allocation remains inconsistent
Loss effected layers, Florida and GOM tier 1 seeing:
- Capacity reductions
- Price increases and tighter terms
Zone A and B, California earthquake pricing has seen moderate price increases ~10%
Non-catastrophe exposed account pricing remains soft
Seeing some accounts reduce limits purchased
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Contract Binding Division
Capacity – $6.0M casualty / $2.5M property
Property non-catastrophe exposed
Casualty Inland marine
Umbrella and X/S liability Specialty homeowners
Underwriting Strategy
Acceptable risks are traditional E&S classes with limited exposures, typically smaller limits
Agents underwrite business according Max Specialty’s published rules, rates, and guidelines; their authority is granted/upheld by written contract
“Trust but Verify”
Budget / Plan
Target GPW of approximately $86 million
Target net loss ratio of 63%
Target net combined ratio (ex G&A) of 82%
Premiums and Limits Profile
Average premium of approximately $2,000
90% of limits $1 million or less
100% of limits $5 million or less
Limit Profile (% of Premium)
$0M to $1M
$1M to $5M
$5M to $10M
$10M to $15M
$15M to $20M
> $20M
89.6%
10.4%
0.0% 0.0% 0.0% 0.0%
0.0% 25.0% 50.0% 75.0% 100.0%
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Contract Binding Division (cont’d)
Largest Occupancy Types
Casualty – contractors, habitational, service, retail and lessors risk
Property – habitational, lessors risk, retail, service and institutional
Largest State Exposures
Casualty—Florida, New York, New Jersey, Texas and Massachusetts
Property – New York, Massachusetts, Texas, Pennsylvania and New Jersey
Top Producers
Jimcor, Quaker, TAPCO, Bliss & Glennon and CT Underwriters
Market Conditions
Property rates flat to down 5%
Casualty rates flat on smaller risks, but down approximately 5% on larger risks
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Marine Division
Capacity—$25 million per risk
Inland marine
Ocean marine
Non-admitted and admitted paper
Underwriting Strategy
Majority of the division’s production will be inland marine and developed from targeted industries such as construction, transportation (storage/warehouse), communication, dealers, and specialty classes
Increase the GPW of the ocean marine products to 15% of the division’s overall production for 2009
Use of Max America paper will provide a broader geographic client base and provide access to more historically profitable traditional inland marine classes
Budget / Plan
Target GPW of approximately $52 million
Target net loss ratio of 60%
Target net combined ratio (ex G&A) of 74%
Premiums and Limits Profile
Average premium of approximately $30,000
57% of limits $5 million or less
89% of limits $10 million or less
Limit Profile (% of Premium)
$0M to $1M $1M to $5M $5M to $10M $10M to $15M $15M to $20M
> $20M
28.4% 28.7% 31.5%
11.3%
0.0%
0.0%
0.0% 10.0% 20.0% 30.0% 40.0%
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Marine Division (cont’d)
Leading Classes of Business
Contractors equipment, builders risk, motor truck cargo, dealers, transportation, inland marine related property, ocean cargo
Max America Insurance Company Utilization
Admitted product promotes diversification with growth in non-catastrophe states, including: New York, Washington, Arizona, Pennsylvania and New Jersey
Having admitted capabilities for the Inland Marine product allows for a broader product offering that assists in accessing historically profitable classes
Admitted paper is essential in developing the Ocean Marine product. Focus within this line is to develop: ocean cargo, hull and excess liability business; will not be writing offshore energy or blue water business
Top Producers
CRC, AmWINS, Swett & Crawford, Maximum, Marsh, Aon and Willis
Market Conditions
Overall rates are flat
Rate increases on loss effected accounts and risk with “CAT” exposure
Rate reductions are still occurring on accounts with profitable loss records driven by producer competition
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Significant Growth Opportunities for Max Specialty
Increase penetration in existing markets
Writes E&S premium of $250 million in a $37 billion market
Expanding the underwriting platform
Continue strategy of hiring small underwriting teams that have proven track records and specialty expertise that is complementary to existing business
Existing platform supports extra $100 million GPW without significant new infrastructure
Expanding distribution
Our distribution system will remain somewhat selective to maintain an added value concept for a Max Specialty appointment
Opportunistic geographic expansion of broker relationships
Every broker is carefully screened for ability to meet financial strength guidelines as well as premium and profitability targets
Renewal business provides additional underwriting opportunities
To date most written premium has come from new business
Retention percentages of approximately 40% provides a base for future growth
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Max Specialty:
A Diversified Growth Opportunity For Max Capital Group
Specialty expertise that is complementary to Max Capital throughout market cycle On target to write $250 million of GWP in 2009 Experienced management team with a strong track record and deep relationships
Disciplined underwriting strategy has led to loss ratios consistent with our goal of an 85%—90% combined ratio
E&S companies trade at a premium valuation
Average Price / Book Value Multiple 3-Year 2007 2008 Current
Specialty (1) 1.54x 1.75x 1.21x 1.06x Reinsurers (2) 1.14x 1.26x 0.97x 0.88x
Max Specialty contributes to Max Capital’s diversified niche orientation by adding profitable business in both property and casualty throughout the market cycle
(1) |
| Includes HCC, RLI, AGII, JRVR, and PHLY. |
(2) |
| Includes MXGL, IPCR, VR, TRH, AWH, PTP, MRH, RE, PRE, ACGL, AHL, RNR, ENH, AXS, and ORH. |
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