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 LLOYD’S A World Class Specialty Insurer and Reinsurer Investor Presentation September Conferences 2009 Exhibit 99.1 |
2 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 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. |
3 Global underwriter of specialty insurance and reinsurance Multiple operating platforms - Bermuda, Dublin, United States, and Lloyd’s Diversified business profile across specialty classes of business Highly experienced management with proven track record Opportunistic and disciplined underwriting strategy Analytical and quantitative underwriting orientation 5 year average combined ratio, with cats, of 93% Strong, liquid balance sheet with conservative reserving track record Prudent capital management - $305 million in dividends/repurchases over last 5 years Significant expansion of underwriting platforms with minimal goodwill Gross premiums written (2008) of $1.3 billion and 6/30/09 equity of $1.4 billion High quality investment portfolio repositioned to reflect traditional underwriting base Hedge funds are now a much smaller part of Max’s asset base at 8.5% and are to be reduced to 5% to 7% by year end 2009 Max has evolved and repositioned itself since its formation in 1999 Business built by recruiting experienced specialty teams Max Capital – Who We Are Short-Tail Long-Tail 62% 38% Insurance Reinsurance 53% 47% |
4 $1.65 $1.45 1H-2008 1H-2009 (1) $789.2 $581.7 1H-2008 1H-2009 Strong First Half 2009 Results Reflects continued build-out of our global platform Max Specialty - $150 million GPW Reflects full year of Max at Lloyd’s - $90 million GPW Combined ratio reflects higher casualty mix Market conditions are improving / stabilizing Rate increases on short-tail lines Casualty rates have stabilized Annualized investment yield of 3.2% YTD 2009 reflects $1.0 billion in cash and equivalents (20% of portfolio) Yield to expand as cash is redeployed Hedge funds reduced to 8.5% of invested assets Down from 14.1% at 12/31/08 Book value per share increased 5% YTD 2009 to $24.09 Profitable Growth in Gross Premiums Written… …With Strong Operating EPS growth P&C GPW (36% increase) Operating EPS (14% increase) ROE (annualized) 11.2% 14.3% Combined ratio 84.0% 90.3% ____________________ (1) Excludes $0.17 per share in expenses associated with the IPC transaction. |
5 Opportunistic Expansion Across our Business Opportunistic approach to growing our business Underserved market niches which allow for technical underwriting orientation Expansion in selected market segments International casualty reinsurance team at Max at Lloyd’s Personal accident and financial institution team at Max at Lloyd’s Professional liability team at Max Specialty U.S. Insurance platform has full ability to write admitted and E&S business The addition of California gives Max a 50 state franchise for admitted Marine products on both inland and ocean Recently approved in Puerto Rico, Max Specialty can now write non-admitted E&S business throughout the U.S. and Puerto Rico |
6 Global Reach Through Established Platforms Bermuda / Dublin Reinsurance Bermuda / Dublin Insurance Lloyd’s U.S Specialty Insurance Major Classes Agriculture Aviation Excess liability Medical malpractice Professional liability Property Marine and energy Whole account Workers’ comp Life and annuity Aviation Excess liability Professional liability Property Personal accident Financial institutions Professional liability Property International casualty treaty reinsurance General liability Marine Property Miscellaneous professional liability Operating Regions United States Latin America Canada European Union Japan Australia New Zealand United States European Union United Kingdom Japan Denmark United States Offices Bermuda Dublin Bermuda Dublin Hamburg London Leeds Tokyo Copenhagen New York Philadelphia Richmond Atlanta Dallas San Francisco |
7 140% 33% 50% 56% 49% 66% 252% 60% 73% 92% 79% 110% 0% 25% 50% 75% 100% 125% 150% 300% 2005 2006 2007 2008 1H'09 Average 82% 79% 84% 75% 77% 96% 104% 97% 101% 96% 96% 124% 0% 25% 50% 75% 100% 125% 150% 300% Average 2005 2006 2007 2008 1H'09 Median 201% 55% 61% 89% 68% 95% Median 115% 85% 84% 95% 88% 93% Max 106% 86% 88% 92% 90% 93% ____________________ Source: Company filings. Diversified reinsurers include RE, AXS, ACGL, TRH, PRE, ORH, AWH, ENH, AHL, PTP, AGII and MXGL. Property focused reinsurers include RNR, IPC, VR, MRH and FSR. Diversified Platforms Generate More Consistent Margins Diversified Reinsurers Property Focused Reinsurers Max has performed well within its diversified peer group with less volatility than property focused reinsurers |
8 3.4% 12.4% 11.0% 10.1% 8.9% 8.4% 8.1% 8.1% 7.8% 7.0% 6.7% 6.3% 6.0% 5.0% 4.8% 4.6% 0.0% 2.0% 4.0% 6.0% 8.0% 10.0% 12.0% 14.0% VR FSR RNR MR PTP ACGL AXS PRE AHL IPCR ENH OR TRH AW RE MXGL ____________________ Source: Company filings, as of 12/31/08. Losses are generally disclosed net of reinstatement premiums. (1) Results reflect Ike only. (2) Equity includes preferred, which subsequently converted to common. (3) TRH does not disclose specific losses but did lose “$169.7 million principally relating to Hurricane Ike” or 5.0% of 6/30/08 common equity. (1) Max is less exposed to swings in the cat market than peers (2) (2) Max had the lowest losses from Ike/Gustav as a % of equity Ike/Gustav Ultimate Net Losses as a % of 6/30/08 Common Equity ($ in millions) (% of capital) 1:100 yr 1:250 yr Target 8%-12% 15% - 20% 6/30/09E 11% 20% PMLs (3) Losses $256 $140 $276 $140 $165 $287 $384 $305 $171 $135 $148 $155 $113 $257 $50 $170 |
9 Diversified Premium Mix: A Key Differentiator Property Casualty Insurance Incumbent (Re) Insurers Class of 2001 Class of 2005 ____________________ Source: Company filings. Note: Based on full year 2008 property and casualty gross premiums written. Certain allocations have been estimated. Reinsurance RE TRH PRE ORH AXS ACGL ENH AHL RNR AWH PTP MRH VR IPCR FSR |
10 Max Has a Strong Market Position in Specialty Classes … Working layer excess business Focus on Fortune 1000 customers 2008 combined ratio = 88% 2008 GPW - $389 million 2008 GPW - $420 million Bermuda / Dublin Insurance Bermuda / Dublin Reinsurance Working layer excess / quota share business Cross class capability 2008 combined ratio = 87% Excess Liability Professional Liability Aviation Property 14% 14% 41% 32% Other General Liability Marine & Energy Whole Account Aviation Prof. Liabliity Workers Comp Med. Mal. Agriculture Property 25% 19% 18% 13% 9% 8% 3% 3% |
11 … With an Attractive Position in the U.S. Market and Lloyd’s Launched in 2007 Nationwide niche E&S underwriter Growing into expense base – target combined ratio of 85% to 90% Expected GPW of $275 million in 2009 2008 GPW - $194 million 2008 GPW - £65 million (1) U.S. Insurance Max at Lloyd’s Acquired in November 2008 Direct and reinsurance Expected GPW of $150 million in 2009 ____________________ (1) GPW reflects full year of business, which includes periods prior to the acquisition by Max. Marine General Casualty Property 20% 31% 49% Accident & Health Fin. Institutions Prof. Indemnity / Med. Mal. Employers' Public Liability Property Treaty 45% 1% 19% 18% 17% |
12 Overview of Life Reinsurance Spread management business, comparable to basic full Loss Portfolio Transfer Purchase blocks of existing policy or claim reserves (reserve buy outs) All originated transactions – winner takes all Known data files – no unreported exposures, minimal IBNR Access to historic experience data Only products with highly predictable and non-volatile cash flows Full asset transfer – the economic value of the liabilities It is NOT … Risk premium reinsurance (mainstream life reinsurance) Automatic reinsurance of new business (treaty business) Mega-sized transactions Variable or deferred annuities, XXX, term insurance, life settlements, COLI/BOLI U.S. Specialty 15% Max at Lloyd's (1) 1% Bermuda/Dublin Insurance 31% Life & Annuity Reinsurance 19% Bermuda/Dublin Reinsurance 34% ____________________ (1) Max at Lloyd’s acquired in November 2008 and includes partial year GPW. 2008 GPW |
13 Max Investment Portfolio Highlights High quality, defensively postured portfolio Low OTTI during volatile periods in 2008-09 73% of fixed income portfolio rated Aa or better; diversification by sector and issuer Less than 7% rated Baa or below 71% of the cash and fixed maturities portfolio is held in cash, government / agency-backed securities, or AAA securities No CDO’s, CLO’s, SIV’s or other highly structured securities Hedge funds reduced from 21% at 12/31/07 with a 5-7% target Larger than normal cash position provides incremental investment income as cash is redeployed Cash balance of $1.0 billion or 20% of portfolio Hedge funds 8.5% Cash 19.7% Fixed income 71.8% Target Allocation Cash 5% Hedge funds 5%-7% Fixed income 87%-90% As of June 30, 2009 |
14 Max Bermuda and Dublin (Insurance/Reinsurance) Rates rising in short-tail property cat and energy Long-tail lines have stabilized and stopped declining Max at Lloyd’s Provides access to global specialty business, high credit ratings, worldwide licenses Experienced team underwriting a seasoned book of business Building out the platform recruiting new teams with recent additions International casualty reinsurance Marine and personal accident insurance Max Specialty Strong distribution relationships continue to generate a high flow of business Market dislocations provide the opportunity to add teams and new products Benefiting from improving property rates Profitability improving as the business matures into its expense base Life Reinsurance Only writes “closed” blocks of business with no variable annuity exposure Provides capital relief which will be in high demand as many life insurers are capital constrained Max is Strongly Positioned in 2009 2009E GPW Life Reinsurance Max Specialty Max at Lloyd's Bermuda / Dublin Insurance / Reinsurance 63% 11% 20% 6% |
15 Max’s Diversification and Growth are Attractive ____________________ Source: Company filings. (1) Based on full year 2008 property and casualty gross premiums written. Certain allocations have been estimated. (2) Market data as of 8/31/09. (3) Max premium growth and combined ratios exclude Life segment. June 30, 2009 YTD 2008 2008 2008 GPW Distribution (1) GPW % Combined Combined Price / GPW Reinsurance Insurance Property Casualty Change Ratio Ratio Tang. BV (2) Diversified Transatlantic $4,423.2 100% 0% 30% 70% 0.2% 94.3% 98.5% 0.91x PartnerRe 4,028.2 100% 0% 61% 39% (9.2%) 85.3% 94.1% 1.10x Everest Re 3,678.1 79% 21% 59% 41% 10.6% 88.8% 95.6% 0.93x Arch Capital 3,669.1 41% 59% 37% 63% (0.2%) 87.0% 95.0% 1.07x AXIS 3,390.4 46% 54% 54% 46% 4.7% 83.4% 89.8% 0.97x OdysseyRe 2,294.5 65% 35% 45% 55% (6.8%) 96.5% 101.2% 0.99x Endurance 2,246.4 37% 63% 65% 35% (3.2%) 90.8% 93.5% 1.01x Aspen 2,001.7 50% 50% 58% 42% 4.1% 86.0% 95.6% 0.81x Argo Group 1,601.5 8% 92% 30% 70% 43.5% 96.0% 100.5% 0.90x Allied World 1,445.6 30% 70% 34% 66% 15.3% 79.3% 84.2% 0.95x Platinum Re 1,066.6 100% 0% 58% 42% (13.2%) 78.5% 91.9% 0.92x Mean 60% 40% 48% 52% 4.2% 87.8% 94.5% 0.96x Max Capital (3) $1,254.3 42% 58% 48% 52% 35.7% 90.3% 91.9% 0.88x Property Focused RenaissanceRe $1,736.0 66% 34% 87% 13% 8.9% 49.4% 79.0% 1.27x Validus 1,362.5 57% 43% 94% 6% 72.2% 73.5% 92.2% 0.97x FlagstoneRe 781.9 90% 10% 90% 10% 34.4% 74.3% 89.4% 0.89x Montpelier Re 614.5 99% 1% 91% 9% (2.1%) 67.6% 91.0% 0.87x IPC Holdings 403.4 100% 0% 100% 0% 19.5% 49.2% 56.4% 0.90x Mean 82% 18% 92% 8% 26.6% 62.8% 81.6% 0.98x |
16 Drivers of Our Earnings Outlook Investments / Equity Max Full Year P&C GPW ____________________ (1) Source: Company filings. Includes ACGL, AGII, AHL, AWH, AXS, ENH, FSR, IPCR, MRH, ORH, PRE, PTP, RE, RNR, TRH and VR. 2.2x 3.8x Max Peers (1) 2008 2009E $1,012 $1,275 26% Growth Selected growth in premiums Opportunistic expansion in specialty areas Full year impact of Lloyd’s platform Generate combined ratios of 90% +/- Diversified portfolio will result in less volatility Max Specialty is growing into its expense base Expense ratio expected to normalize into 2010 Strong invested asset leverage Invested assets of $5.1 billion are 3.8x equity Reduced impact from hedge funds as our exposure is reduced Redeploy significant cash balances over time Approximately $1.0 billion in cash and equivalents at June 30, 2009 Prudent and cautious approach to capital management 1H 2009 |
17 Well established operating platforms provide full access to business Diversified portfolio of business across casualty and property lines Specialty orientation with a balance of insurance vs. reinsurance Opportunistic approach – nimble and responsive to market trends Defensive, high quality investment portfolio Invested asset leverage will drive more consistent returns Balance sheet strength with low leverage / financial flexibility Max Offers a Compelling Story We believe we can generate an average ROE of 13% to 16% across the cycle Attractive entry point – current price / book value of 0.88x ____________________ Note: Price / book multiple as of 8/31/09. |
18 APPENDIX |
19 P&C Combined Ratio Operating ROE Gross Premiums Written Operating Earnings Per Share (Diluted) Life, $212 Life, $275 Life, $45 Life, $302 Life, $242 $1,254 $1,078 $865 $1,246 $1,044 $0 $250 $500 $750 $1,000 $1,250 $1,500 2004 2005 2006 2007 2008 $2.70 $3.52 $4.81 $0.19 ($2.59) ($3) $0 $3 $6 2004 2005 2006 2007 2008 15.8% 1.0% 17.3% 20.7% (10.2%) (10%) (5%) 0% 5% 10% 15% 20% 25% 2004 2005 2006 2007 2008 Profitable Underwriting Trends 94% 106% 86% 88% 92% 75% 100% 125% 2004 2005 2006 2007 2008 ($ in millions) |
20 Invested Assets (Ratio to Shareholders’ Equity) Shareholders’ Equity (Book Value Per Share) Dividends Operating Cash Flow $3,515 $4,223 $4,536 $5,123 $5,357 $0 $1,000 $2,000 $3,000 $4,000 $5,000 $6,000 2004 2005 2006 2007 2008 $799 $447 $273 $252 $508 $0 $300 $600 $900 2004 2005 2006 2007 2008 $903 $1,186 $1,390 $1,584 $1,280 $0 $300 $600 $900 $1,200 $1,500 $1,800 2004 2005 2006 2007 2008 $0.12 $0.18 $0.24 $0.32 $0.36 $0.00 $0.10 $0.20 $0.30 $0.40 2004 2005 2006 2007 2008 (3.9:1) (3.6:1) (3.3:1) (3.2:1) (3.9:1) ($19.70) ($20.16) ($23.06) ($27.54) ($22.77) ($ in millions) A Growing, Global Insurance / Reinsurance Company |
21 Reinsurance / Bermuda – Investment Portfolio Peer Review ____________________ Source: Company filings. (1) Includes cash and short-term investments. As of June 30, 2009 % of Total Cash & Investments Equity / Other Cash & Cash Fixed Income Equity / Other Total Cash & Investment as a % of Equivalents (1) Securities Securities Investments Leverage Equity Everest Re 11.1% 83.4% 5.5% $14,207.3 2.6x 14.0% Arch Capital 9.1% 81.4% 9.5% 10,983.6 2.7x 25.9% AXIS 14.0% 80.3% 5.8% 11,055.3 2.3x 13.0% PartnerRe 5.6% 89.1% 5.2% 12,070.2 2.5x 13.3% Transatlantic 5.9% 87.4% 6.7% 11,298.5 3.2x 21.4% RenaissanceRe 20.1% 66.2% 13.6% 6,385.9 1.9x 25.6% OdysseyRe 17.5% 55.0% 27.5% 8,090.1 2.6x 70.8% Aspen 17.2% 82.4% 0.4% 6,002.6 2.0x 0.8% Endurance 23.4% 70.8% 5.8% 5,733.8 2.3x 13.5% Validus 20.2% 79.8% 0.0% 3,530.6 1.6x 0.0% Allied World 7.4% 90.7% 1.8% 7,187.6 2.6x 4.8% Platinum Re 8.0% 92.0% 0.1% 4,399.3 2.3x 0.2% IPC Holdings 11.8% 73.9% 14.3% 2,308.5 1.1x 16.4% Montpelier Re 10.0% 80.3% 9.7% 2,597.6 1.6x 15.8% FlagstoneRe 37.7% 59.1% 3.1% 1,822.0 1.4x 4.4% Argo Group 16.8% 75.3% 7.9% 4,103.8 2.8x 22.1% Mean 14.7% 78.0% 7.3% 2.2x 16.4% Max Capital 19.7% 71.8% 8.5% $5,124.0 3.8x 32.0% |