Exhibit 99.1
MAX CAPITAL GROUP REPORTS FIRST QUARTER 2010 RESULTS
Book Value per Diluted Share Increased by 1.8% to $27.86
Net Operating Income of $0.71 per Diluted Share
HAMILTON, BERMUDA, May 3, 2010—Max Capital Group Ltd. (NASDAQ: MXGL; BSX: MXGL.BH) (“Max”) today reported net income of $36.4 million, or $0.63 per diluted share, for the quarter ended March 31, 2010, compared to net income of $44.5 million, or $0.78 per diluted share, for the quarter ended March 31, 2009.
Net operating income for the first quarter of 2010 was $40.7 million, or $0.71 per diluted share, compared to net operating income of $46.9 million, or $0.82 per diluted share, last year. Annualized net operating return on average shareholders’ equity for the first quarter of 2010 was 10.2%.
W. Marston (Marty) Becker, Chairman and Chief Executive Officer of Max, said: “The continuation of Max’s very solid financial results this quarter reflects the balance, diversification and flexibility that are the cornerstones of our business model. Where market conditions continue to provide attractive returns, we are well positioned to expand our presence, while scaling back in areas with softer pricing. As a result, our combined ratios have been maintained at strong levels even as we have decreased gross premiums written.
“Another key factor in the quarter was our relatively low property catastrophe losses. Considering the size of the industry losses for the headline cat events during the first quarter, we believe our estimated losses of approximately $10.0 million illustrate our conservative underwriting strategy, which is designed to limit our exposure to property cat events.
“Looking forward, our new Latin America team is firmly establishing itself in the market, and we expect it to make a meaningful contribution to group results before the end of this year.
“Most importantly, our ability to write a broad mix of short- and long-tail product lines from multiple jurisdictions should be further enhanced as a result of our pending merger with Harbor Point, which was approved by Max’s and Harbor Point’s respective shareholders on April 29. Once the closing occurs, the combined entity, which will be branded as Alterra Capital Holdings Limited, will bring together the first-class reinsurance group at Harbor Point with Max’s broad base of established underwriting platforms in major insurance markets worldwide. We are excited by the many opportunities that the enhanced capital base and scale of Alterra will bring to all of our underwriting platforms,” Becker added.
First quarter 2010 results for Max include:
• | Property and casualty gross premiums written of $370.3 million, representing a decrease of $63.4 million, or (14.6)%; net premiums written of $217.2 million, representing a decrease of $52.2 million, or (19.4)%; and net premiums earned of $193.5 million, representing an increase of $3.7 million, or 1.9%; each as compared to the same quarter in 2009; |
• | Property and casualty combined ratio of 90.5%, compared to 89.7% in the same quarter in 2009; |
• | Property catastrophe event losses of $9.6 million compared to $3.4 million in the same quarter in 2009; |
• | Net favorable development on prior years’ loss reserves of $17.1 million, or 8.8 combined ratio points, compared to $12.3 million, or 6.5 combined ratio points in the same quarter in 2009; |
• | Net investment income of $48.4 million compared to $40.5 million in the same quarter in 2009, an increase of 19.5%; |
• | Net operating income of $40.7 million, or $0.71 per diluted share, representing an annualized net operating return on average shareholders’ equity of 10.2%; and |
• | Book value per diluted share of $27.86 at March 31, 2010, representing an increase of 1.8% from December 31, 2009. |
Gross premiums written from property and casualty underwriting for the quarter ended March 31, 2010 were $370.3 million, generated by the segments as follows: insurance $66.4 million; reinsurance $154.9 million; U.S. specialty $76.9 million; and Max at Lloyd’s $72.1 million.
Segment combined ratios for the first quarter of 2010 were 86.1% for insurance, 92.7% for reinsurance, 98.8% for U.S. specialty and 82.5% for Max at Lloyd’s.
Gross premiums written decreased by $21.3 million or (24.3)% for insurance and by $78.1 million or (33.5)% for reinsurance. Gross premiums written increased by $8.1 million, or 11.8% for U.S. specialty and by $27.9 million, or 63.1%, for Max at Lloyd’s compared with the quarter ended March 31, 2009. There were no new contracts written within the life and annuity segment during the first quarter of 2010.
Balance Sheet
Total invested assets, including cash and cash equivalents, were $5.3 billion at March 31, 2010, an increase of $85.4 million from December 31, 2009. The credit quality of Max’s fixed maturities investment portfolio remains high. At March 31, 2010, 95.9% of the fixed maturities portfolio (by carrying value) was investment-grade, compared to 96.7% at December 31, 2009. Max recognized other-than-temporary impairment losses through earnings of $0.4 million for the first quarter of 2010, compared to no impairment losses during the same period in 2009.
Net investment income for the first quarter of 2010 increased to $48.4 million from $40.5 million for the same period in 2009. The increase in net investment income reflects a reduction in cash balances and increased allocation to higher-yielding fixed maturity securities.
During the first quarter of 2010, under the Board-approved share repurchase authorization, Max repurchased 516,957 of its common shares at an average price of $23.00 per share for a total amount of $11.9 million. There were no repurchases of common shares in the first quarter of 2009.
Shareholders’ equity was $1,613.1 million at March 31, 2010, an increase of 3.1% over December 31, 2009. Book value per share at March 31, 2010 was $28.31 compared to $28.01 at December 31, 2009, an increase of 1.1%. Book value per diluted share at March 31, 2010 was $27.86 compared to $27.36 at December 31, 2009, an increase of 1.8%.
Amalgamation with Harbor Point Limited
Actions required to consummate the amalgamation with Harbor Point Limited (“Harbor Point”) were approved by the shareholders of both Max and Harbor Point on April 29, 2010, and closing is expected to occur in the second quarter of 2010.
First quarter 2010 results for Harbor Point include:
• | Net income of $33.5 million compared to $41.5 million in the same quarter in 2009; |
• | Gross premiums written of $306.6 million compared to $228.5 million in the same quarter in 2009, an increase of 34.2%; |
• | Net premiums earned of $144.1 million compared to $127.3 million in the same quarter in 2009, an increase of 13.2%; |
• | Combined ratio of 94.3% compared to 82.0% in the same quarter in 2009; |
• | Property catastrophe event losses of $35.0 million compared to $3.3 million in the same quarter in 2009; |
• | Net favorable development on prior years’ loss reserves of $9.6 million, or 6.6 combined ratio points, compared to $0.3 million, or 0.2 combined ratio points, in the same quarter in 2009; |
• | Net investment income of $16.5 million compared to $18.7 million in the same quarter in 2009; and |
• | Shareholders’ equity of $1,926.1 million at March 31, 2010, representing an increase of 1.9% from December 31, 2009. |
A copy of Max’s financial supplement for the first quarter will be available on Max’s website atwww.maxcapgroup.com shortly after the release of earnings.
Max will host a conference call on Tuesday, May 4, 2010 at 10:00am (EDT) to discuss this release with interested investors and shareholders. The conference call can be accessed via telephone by dialing 1-888-679-8018 (toll-free U.S.) or 1-617-213-4845 (international) and using access code 79071725. Live broadcast of the conference call will also be available through Max’s website atwww.maxcapgroup.com.
Max Capital Group Ltd. is a global enterprise dedicated to providing diversified specialty insurance and reinsurance products to corporations, public entities, property and casualty insurers, and life and health insurers in major markets worldwide. Harbor Point Limited is a Bermuda-based holding company with property and casualty reinsurance operations in Bermuda, the USA and the UK.
Non-GAAP Financial Measures
In presenting Max’s results, management has included and discussed net operating income per diluted share, net operating return on average shareholders’ equity, book value per share and diluted book value per share. 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 Max’s business. These measures, however, should not be viewed as a substitute for those determined in accordance with U.S. GAAP. The reconciliation of such measures to their respective most directly comparable U.S. GAAP financial measures is presented in the attached financial information in accordance with Regulation G.
Cautionary Note Regarding Forward-Looking Statements
This press release may include forward-looking statements, both with respect to Max and its industry, that reflect its current views with respect to future events and financial performance. Statements that include the words “expect,” “intend,” “plan,” “believe,” “project,” “anticipate,” “will,” “may” and similar statements of a future or forward-looking nature identify forward-looking statements. All forward-looking statements address matters that involve risks and uncertainties. Accordingly, there are or will be important factors that could cause actual results to differ materially from those indicated in such statements and you should not place undue reliance on any such statements.
Max believes that these factors include, but are not limited to, the following: (1) the adequacy of loss reserves and the need to adjust such reserves as claims develop over time; (2) the failure of any of the loss limitation methods employed; (3) the effects of emerging claims and coverage issues; (4) changes in general economic conditions, including changes in capital and credit markets; (5) the effect of competition and cyclical trends, including with respect to demand and pricing in the insurance and reinsurance markets; (6) any lowering or loss of financial ratings; (7) the occurrence of natural or man-made catastrophic events with a frequency or severity exceeding expectations; (8) the loss of business provided to Max or Harbor Point by their major brokers; (9) the effect on each of Max’s and Harbor Point’s investment portfolio of changing financial market conditions including inflation, interest rates, liquidity and other factors; (10) tax and regulatory changes and conditions; (11) the integration of Max and Harbor Point or new business ventures Max may enter into; and (12) retention of key personnel, as well as management’s response to any of the aforementioned factors.
The foregoing review of important factors should not be construed as exhaustive and should be read in conjunction with the other cautionary statements that are included herein and elsewhere, including the Risk Factors included in Max’s most recent report on Form 10-K and other documents on file with the Securities and Exchange Commission. Any forward-looking statements made in this press release are qualified by these cautionary statements, and there can be no assurance that the actual results or developments anticipated by Max will be realized or, even if substantially realized, that they will have the expected consequences to, or effects on, Max or its business or operations. Max undertakes no obligation to update publicly or revise any forward-looking statement, whether as a result of new information, future developments or otherwise.
Contacts Susan Spivak Bernstein Senior Vice President susan.spivak@maxcapservices.com 1-212-898-6640 | Roanne Kulakoff Kekst and Company roanne-kulakoff@kekst.com 1-212-521-4837 |
MAX CAPITAL GROUP LTD.
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States Dollars, except per share and share amounts)
March 31, 2010 | December 31, 2009 | |||||
(unaudited) | ||||||
ASSETS | ||||||
Cash and cash equivalents | $ | 690,246 | $ | 702,278 | ||
Fixed maturities, trading at fair value | 219,332 | 228,696 | ||||
Fixed maturities, available for sale at fair value | 3,158,131 | 3,007,356 | ||||
Fixed maturities, held to maturity at amortized cost (fair value $1,013,315) | 954,696 | 1,005,947 | ||||
Other investments, at fair value | 322,160 | 314,849 | ||||
Accrued interest income | 51,906 | 57,215 | ||||
Premiums receivable | 617,560 | 567,301 | ||||
Losses and benefits recoverable from reinsurers | 1,023,224 | 1,001,373 | ||||
Deferred acquisition costs | 72,195 | 65,648 | ||||
Prepaid reinsurance premiums | 232,947 | 190,613 | ||||
Trades pending settlement | — | 76,031 | ||||
Other assets | 131,809 | 122,439 | ||||
Total assets | $ | 7,474,206 | $ | 7,339,746 | ||
LIABILITIES | ||||||
Property and casualty losses | $ | 3,220,357 | $ | 3,178,094 | ||
Life and annuity benefits | 1,306,916 | 1,372,513 | ||||
Deposit liabilities | 149,028 | 152,629 | ||||
Funds withheld from reinsurers | 138,984 | 140,079 | ||||
Unearned property and casualty premiums | 690,013 | 628,161 | ||||
Reinsurance balances payable | 168,329 | 146,085 | ||||
Accounts payable and accrued expenses | 61,955 | 67,088 | ||||
Trades pending settlement | 35,033 | — | ||||
Senior notes | 90,475 | 90,464 | ||||
Total liabilities | 5,861,090 | 5,775,113 | ||||
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; 56,979,568 (2009 - 55,867,125) shares issued and outstanding | 56,980 | 55,867 | ||||
Additional paid-in capital | 744,466 | 752,309 | ||||
Accumulated other comprehensive income | 49,822 | 25,431 | ||||
Retained earnings | 761,848 | 731,026 | ||||
Total shareholders’ equity | 1,613,116 | 1,564,633 | ||||
Total liabilities and shareholders’ equity | $ | 7,474,206 | $ | 7,339,746 | ||
Book value per share | $ | 28.31 | $ | 28.01 | ||
Diluted book value per share | $ | 27.86 | $ | 27.36 | ||
Diluted tangible book value per share | $ | 27.02 | $ | 26.51 | ||
Diluted shares outstanding | 57,890,681 | 57,178,458 |
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 | ||||||||
2010 | 2009 | |||||||
REVENUES | ||||||||
Gross premiums written | $ | 371,139 | $ | 434,273 | ||||
Reinsurance premiums ceded | (153,220 | ) | (164,379 | ) | ||||
Net premiums written | $ | 217,919 | $ | 269,894 | ||||
Earned premiums | $ | 304,997 | $ | 309,382 | ||||
Earned premiums ceded | (110,757 | ) | (119,100 | ) | ||||
Net premiums earned | 194,240 | 190,282 | ||||||
Net investment income | 48,390 | 40,488 | ||||||
Net realized and unrealized gains on investments | 6,422 | 18,441 | ||||||
Total other-than-temporary impairment losses | (698 | ) | — | |||||
Portion of loss recognized in other comprehensive income (loss), before taxes | 278 | — | ||||||
Net impairment losses recognized in earnings | (420 | ) | — | |||||
Other income | 344 | 1,306 | ||||||
Total revenues | 248,976 | 250,517 | ||||||
LOSSES AND EXPENSES | ||||||||
Net losses and loss expenses | 124,965 | 124,723 | ||||||
Claims and policy benefits | 17,659 | 14,332 | ||||||
Acquisition costs | 24,244 | 20,630 | ||||||
Interest expense | 4,942 | 3,939 | ||||||
Net foreign exchange gains | (2,452 | ) | (3,476 | ) | ||||
Merger and acquisition expenses | 4,744 | 5,223 | ||||||
General and administrative expenses | 36,528 | 39,060 | ||||||
Total losses and expenses | 210,630 | 204,431 | ||||||
INCOME BEFORE TAXES | 38,346 | 46,086 | ||||||
Income tax expense | 1,965 | 1,547 | ||||||
NET INCOME | 36,381 | 44,539 | ||||||
Change in net unrealized gains and losses on fixed maturities, net of tax | 34,131 | (66,098 | ) | |||||
Foreign currency translation adjustment | (9,740 | ) | 3,909 | |||||
COMPREHENSIVE INCOME (LOSS) | $ | 60,772 | $ | (17,650 | ) | |||
Basic earnings per share | $ | 0.64 | $ | 0.79 | ||||
Diluted earnings per share | $ | 0.63 | $ | 0.78 | ||||
Net operating income per diluted share | $ | 0.71 | $ | 0.82 | ||||
Weighted average shares outstanding - basic | 56,516,593 | 56,637,291 | ||||||
Weighted average shares outstanding - diluted | 57,383,748 | 57,183,826 | ||||||
MAX CAPITAL GROUP LTD.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(Expressed in thousands of United States Dollars)
Three Months Ended March 31 | ||||||||||
2010 | 2009 | |||||||||
Common shares | ||||||||||
Balance, beginning of period | $ | 55,867 | $ | 55,806 | ||||||
Issuance of common shares, net | 1,630 | 77 | ||||||||
Repurchase of shares | (517 | ) | — | |||||||
Balance, end of period | 56,980 | 55,883 | ||||||||
Additional paid-in capital | ||||||||||
Balance, beginning of period | 752,309 | 763,391 | ||||||||
Issuance of common shares, net | (1,619 | ) | 318 | |||||||
Stock based compensation expense | 5,147 | 4,876 | ||||||||
Repurchase of shares | (11,371 | ) | — | |||||||
Balance, end of period | 744,466 | 768,585 | ||||||||
Accumulated other comprehensive income (loss) | ||||||||||
Balance, beginning of period | 25,431 | (45,399 | ) | |||||||
Holding gains (losses) on available for sale securities arising in period (1) | 35,244 | (66,146 | ) | |||||||
Net realized (gains) losses on available for sale securities included in net income (1) | (835 | ) | 48 | |||||||
Portion of other-than-temporary impairment losses recognised in other comprehensive income (1) | (278 | ) | — | |||||||
Foreign currency translation adjustment | (9,740 | ) | 3,909 | |||||||
Balance, end of period | 49,822 | (107,588 | ) | |||||||
Retained earnings | ||||||||||
Balance, beginning of period | 731,026 | 506,533 | ||||||||
Net income | 36,381 | 44,539 | ||||||||
Dividends paid | (5,559 | ) | (5,090 | ) | ||||||
Balance, end of period | 761,848 | 545,982 | ||||||||
Total shareholders’ equity | $ | 1,613,116 | $ | 1,262,862 | ||||||
(1) | Net of tax |
MAX CAPITAL GROUP LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Expressed in thousands of United States Dollars)
Three Months Ended March 31 | ||||||||||
2010 | 2009 | |||||||||
OPERATING ACTIVITIES | ||||||||||
Net income | $ | 36,381 | $ | 44,539 | ||||||
Adjustments to reconcile net income to net cash provided by operating activities: | ||||||||||
Stock based compensation | 5,147 | 4,876 | ||||||||
Amortization of premium on fixed maturities | 696 | 1,176 | ||||||||
Accretion of deposit liabilities | 1,582 | 565 | ||||||||
Net realized and unrealized gains on investments | (6,422 | ) | (18,441 | ) | ||||||
Net impairment losses recognized in earnings | 420 | — | ||||||||
Changes in: | ||||||||||
Accrued interest income | 5,164 | 7,058 | ||||||||
Premiums receivable | (53,109 | ) | (119,802 | ) | ||||||
Losses and benefits recoverable from reinsurers | (28,814 | ) | (35,247 | ) | ||||||
Deferred acquisition costs | (7,534 | ) | (12,912 | ) | ||||||
Prepaid reinsurance premiums | (43,777 | ) | (45,927 | ) | ||||||
Other assets | (11,814 | ) | 2,244 | |||||||
Property and casualty losses | 72,320 | 74,576 | ||||||||
Life and annuity benefits | (9,700 | ) | (10,045 | ) | ||||||
Funds withheld from reinsurers | (1,094 | ) | (15,215 | ) | ||||||
Unearned property and casualty premiums | 68,789 | 117,718 | ||||||||
Reinsurance balances payable | 22,578 | 4,520 | ||||||||
Accounts payable and accrued expenses | (4,013 | ) | (27,511 | ) | ||||||
Cash provided by (used in) operating activities | 46,800 | (27,828 | ) | |||||||
INVESTING ACTIVITIES | ||||||||||
Purchases of available for sale securities | (422,965 | ) | (154,597 | ) | ||||||
Sales of available for sale securities | 132,632 | 60,785 | ||||||||
Redemptions of available for sale securities | 196,732 | 134,133 | ||||||||
Purchases of trading securities | (7,058 | ) | (26,073 | ) | ||||||
Sales of trading securities | — | 28,539 | ||||||||
Redemptions of trading securities | 6,312 | 2,164 | ||||||||
Purchases of held to maturity securities | (10,243 | ) | — | |||||||
Redemptions of held to maturity securities | 10,311 | — | ||||||||
Net sales of other investments | 70,976 | 140,837 | ||||||||
Cash (used in) provided by investing activities | (23,303 | ) | 185,788 | |||||||
FINANCING ACTIVITIES | ||||||||||
Net proceeds from issuance of common shares | 11 | 395 | ||||||||
Repurchase of common shares | (11,888 | ) | — | |||||||
Net repayments of bank loans | — | (75,000 | ) | |||||||
Dividends paid | (5,559 | ) | (5,090 | ) | ||||||
Additions to deposit liabilities | 2,006 | 11,649 | ||||||||
Payment of deposit liabilities | (7,378 | ) | (77,143 | ) | ||||||
Cash used in financing activities | (22,808 | ) | (145,189 | ) | ||||||
Effect of exchange rate changes on foreign currency cash | (12,721 | ) | (6,598 | ) | ||||||
Net (decrease) increase in cash and cash equivalents | (12,032 | ) | 6,173 | |||||||
Cash and cash equivalents, beginning of period | 702,278 | 949,404 | ||||||||
CASH AND CASH EQUIVALENTS, END OF PERIOD | $ | 690,246 | $ | 955,577 | ||||||
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid totaled $nil and $3,568 for the three months ended March 31, 2010 and 2009, respectively.
Corporate taxes paid totaled $nil and $nil for the three months ended March 31, 2010 and 2009, respectively.
MAX CAPITAL GROUP LTD.
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–THREE MONTHS ENDED MARCH 31, 2010 (Unaudited)
(Expressed in thousands of United States Dollars)
Property & Casualty | Life & Annuity | |||||||||||||||||||||||||||||||
Year to Date Segment Information: | Insurance | Reinsurance | U.S. Specialty | Max at Lloyd’s | Total | Reinsurance | Corporate | Consolidated | ||||||||||||||||||||||||
Gross premiums written | $ | 66,421 | $ | 154,851 | $ | 76,887 | $ | 72,117 | $ | 370,276 | $ | 863 | $ | — | $ | 371,139 | ||||||||||||||||
Reinsurance premiums ceded | (38,576 | ) | (45,351 | ) | (49,227 | ) | (19,959 | ) | (153,113 | ) | (107 | ) | — | (153,220 | ) | |||||||||||||||||
Net premiums written | $ | 27,845 | $ | 109,500 | $ | 27,660 | $ | 52,158 | $ | 217,163 | $ | 756 | $ | — | $ | 217,919 | ||||||||||||||||
Earned premiums | $ | 97,041 | $ | 95,743 | $ | 73,890 | $ | 37,460 | $ | 304,134 | $ | 863 | $ | — | $ | 304,997 | ||||||||||||||||
Earned premiums ceded | (47,246 | ) | (15,958 | ) | (39,977 | ) | (7,469 | ) | (110,650 | ) | (107 | ) | — | (110,757 | ) | |||||||||||||||||
Net premiums earned | 49,795 | 79,785 | 33,913 | 29,991 | 193,484 | 756 | — | 194,240 | ||||||||||||||||||||||||
Net investment income | 6,169 | 10,904 | 1,341 | 2,017 | 20,431 | 13,099 | 14,860 | 48,390 | ||||||||||||||||||||||||
Net realized and unrealized gains (losses) on investments | 306 | 318 | — | (182 | ) | 442 | 5,916 | 64 | 6,422 | |||||||||||||||||||||||
Net impairment losses recognized in earnings | — | — | — | — | — | — | (420 | ) | (420 | ) | ||||||||||||||||||||||
Other income | (11 | ) | — | 5 | 178 | 172 | (28 | ) | 200 | 344 | ||||||||||||||||||||||
Total revenues | 56,259 | 91,007 | 35,259 | 32,004 | 214,529 | 19,743 | 14,704 | 248,976 | ||||||||||||||||||||||||
Net losses and loss expenses | 37,279 | 50,065 | 21,363 | 16,258 | 124,965 | — | — | 124,965 | ||||||||||||||||||||||||
Claims and policy benefits | — | — | — | — | — | 17,659 | — | 17,659 | ||||||||||||||||||||||||
Acquisition costs | (309 | ) | 14,966 | 3,674 | 5,767 | 24,098 | 146 | — | 24,244 | |||||||||||||||||||||||
Interest expense | 234 | 1,701 | — | — | 1,935 | 1,363 | 1,644 | 4,942 | ||||||||||||||||||||||||
Net foreign exchange (gains) losses | — | — | — | (2,709 | ) | (2,709 | ) | — | 257 | (2,452 | ) | |||||||||||||||||||||
Merger and acquisition expenses | — | — | — | — | — | — | 4,744 | 4,744 | ||||||||||||||||||||||||
General and administrative expenses | 5,897 | 8,959 | 8,472 | 2,713 | 26,041 | 657 | 9,830 | 36,528 | ||||||||||||||||||||||||
Total losses and expenses | 43,101 | 75,691 | 33,509 | 22,029 | 174,330 | 19,825 | 16,475 | 210,630 | ||||||||||||||||||||||||
Income (loss) before taxes | $ | 13,158 | $ | 15,316 | $ | 1,750 | $ | 9,975 | $ | 40,199 | $ | (82 | ) | $ | (1,771 | ) | $ | 38,346 | ||||||||||||||
Loss Ratio (a) | 74.9 | % | 62.7 | % | 63.0 | % | 54.2 | % | 64.6 | % | ||||||||||||||||||||||
Combined Ratio (b) | 86.1 | % | 92.7 | % | 98.8 | % | 82.5 | % | 90.5 | % |
SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–THREE MONTHS ENDED MARCH 31, 2009 (Unaudited)
(Expressed in thousands of United States Dollars)
Property & Casualty | Life & Annuity | |||||||||||||||||||||||||||||||
Year to Date Segment Information: | Insurance | Reinsurance | U.S. Specialty | Max at Lloyd’s | Total | Reinsurance | Corporate | Consolidated | ||||||||||||||||||||||||
Gross premiums written | $ | 87,682 | $ | 232,982 | $ | 68,833 | $ | 44,179 | $ | 433,676 | $ | 597 | $ | — | $ | 434,273 | ||||||||||||||||
Reinsurance premiums ceded | (54,941 | ) | (51,383 | ) | (40,661 | ) | (17,301 | ) | (164,286 | ) | (93 | ) | — | (164,379 | ) | |||||||||||||||||
Net premiums written | $ | 32,741 | $ | 181,599 | $ | 28,172 | $ | 26,878 | $ | 269,390 | $ | 504 | $ | — | $ | 269,894 | ||||||||||||||||
Earned premiums | $ | 102,197 | $ | 123,986 | $ | 54,356 | $ | 28,246 | $ | 308,785 | $ | 597 | $ | — | $ | 309,382 | ||||||||||||||||
Earned premiums ceded | (52,153 | ) | (26,519 | ) | (32,951 | ) | (7,384 | ) | (119,007 | ) | (93 | ) | — | (119,100 | ) | |||||||||||||||||
Net premiums earned | 50,044 | 97,467 | 21,405 | 20,862 | 189,778 | 504 | — | 190,282 | ||||||||||||||||||||||||
Net investment income | 5,241 | 9,228 | 1,593 | 822 | 16,884 | 11,566 | 12,038 | 40,488 | ||||||||||||||||||||||||
Net realized and unrealized gains on investments | 1,236 | 3,042 | 148 | 467 | 4,893 | 7,868 | 5,680 | 18,441 | ||||||||||||||||||||||||
Net impairment losses recognized in earnings | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Other income | 1,147 | — | (152 | ) | 72 | 1,067 | — | 239 | 1,306 | |||||||||||||||||||||||
Total revenues | 57,668 | 109,737 | 22,994 | 22,223 | 212,622 | 19,938 | 17,957 | 250,517 | ||||||||||||||||||||||||
Net losses and loss expenses | 36,464 | 66,215 | 12,085 | 9,959 | 124,723 | — | — | 124,723 | ||||||||||||||||||||||||
Claims and policy benefits | — | — | — | — | — | 14,332 | — | 14,332 | ||||||||||||||||||||||||
Acquisition costs | (1,402 | ) | 17,463 | 1,224 | 3,152 | 20,437 | 193 | — | 20,630 | |||||||||||||||||||||||
Interest expense | — | (497 | ) | — | — | (497 | ) | (383 | ) | 4,819 | 3,939 | |||||||||||||||||||||
Net foreign exchange (gains) losses | — | — | — | (3,510 | ) | (3,510 | ) | — | 34 | (3,476 | ) | |||||||||||||||||||||
Merger and acquisition expenses | — | — | — | — | — | — | 5,223 | 5,223 | ||||||||||||||||||||||||
General and administrative expenses | 5,129 | 7,524 | 7,756 | 4,721 | 25,130 | 694 | 13,236 | 39,060 | ||||||||||||||||||||||||
Total losses and expenses | 40,191 | 90,705 | 21,065 | 14,322 | 166,283 | 14,836 | 23,312 | 204,431 | ||||||||||||||||||||||||
Income (loss) before taxes | $ | 17,477 | $ | 19,032 | $ | 1,929 | $ | 7,901 | $ | 46,339 | $ | 5,102 | $ | (5,355 | ) | $ | 46,086 | |||||||||||||||
Loss Ratio (a) | 72.9 | % | 67.9 | % | 56.5 | % | 47.7 | % | 65.7 | % | ||||||||||||||||||||||
Combined Ratio (b) | 80.3 | % | 93.6 | % | 98.4 | % | 85.5 | % | 89.7 | % |
(a) | The loss ratio is calculated by dividing net losses and loss expenses by net premiums earned. |
(b) | The combined ratio is calculated by dividing the sum of net losses and loss expenses, 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, 2010(Unaudited)
(Expressed in thousands of United States Dollars)
Three Months Ended March 31, 2010 | Three Months Ended March 31, 2009 | ||||||||||||||||
Gross Premiums Written by type of Risk: | Gross Premiums Written | Percentage of Total Gross Premiums Written | Movement on Prior Year Period | Gross Premiums Written | Percentage of Total Gross Premiums Written | ||||||||||||
Property & Casualty: | |||||||||||||||||
Insurance: | |||||||||||||||||
Aviation | S | $ | 2,349 | 0.6 | % | (62.0 | )% | $ | 6,185 | 1.4 | % | ||||||
Excess Liability | L | 23,648 | 6.4 | % | (31.7 | )% | 34,648 | 8.0 | % | ||||||||
Professional Liability | L | 27,573 | 7.4 | % | (15.0 | )% | 32,441 | 7.5 | % | ||||||||
Property | S | 12,851 | 3.5 | % | (10.8 | )% | 14,408 | 3.3 | % | ||||||||
66,421 | 17.9 | % | (24.2 | )% | 87,682 | 20.2 | % | ||||||||||
Reinsurance: | |||||||||||||||||
Agriculture | S | 35,806 | 9.6 | % | (59.2 | )% | 87,666 | 20.2 | % | ||||||||
Aviation | S | 4,822 | 1.3 | % | 15.9 | % | 4,159 | 0.9 | % | ||||||||
General Casualty | L | 13,051 | 3.5 | % | (28.1 | )% | 18,141 | 4.2 | % | ||||||||
Marine & Energy | S | 4,100 | 1.1 | % | (54.8 | )% | 9,078 | 2.1 | % | ||||||||
Medical Malpractice | L | 27,155 | 7.3 | % | (25.4 | )% | 36,393 | 8.4 | % | ||||||||
Other | S | 989 | 0.3 | % | (47.0 | )% | 1,866 | 0.4 | % | ||||||||
Professional Liability | L | 11,919 | 3.2 | % | 22.7 | % | 9,711 | 2.2 | % | ||||||||
Property | S | 45,933 | 12.4 | % | 8.9 | % | 42,181 | 9.7 | % | ||||||||
Whole Account | L | 2,573 | 0.7 | % | (41.2 | )% | 4,375 | 1.0 | % | ||||||||
Workers’ Compensation | L | 8,503 | 2.3 | % | (56.2 | )% | 19,412 | 4.5 | % | ||||||||
154,851 | 41.7 | % | (33.5 | )% | 232,982 | 53.6 | % | ||||||||||
U.S. Specialty: | |||||||||||||||||
General Liability | L | 23,014 | 6.2 | % | 21.5 | % | 18,943 | 4.4 | % | ||||||||
Marine | S | 16,063 | 4.3 | % | 8.7 | % | 14,781 | 3.4 | % | ||||||||
Professional Liability | L | 2,246 | 0.6 | % | n/a | — | — | ||||||||||
Property | S | 35,564 | 9.6 | % | 1.3 | % | 35,109 | 8.1 | % | ||||||||
76,887 | 20.7 | % | 11.7 | % | 68,833 | 15.9 | % | ||||||||||
Max at Lloyd’s: | |||||||||||||||||
Accident & Health | S | 13,410 | 3.6 | % | 8.1 | % | 12,410 | 2.9 | % | ||||||||
Aviation | S | 4,403 | 1.2 | % | n/a | — | — | ||||||||||
Financial Institutions | L | 6,088 | 1.6 | % | 59.2 | % | 3,824 | 0.9 | % | ||||||||
International Casualty | L | 13,684 | 3.7 | % | n/a | — | — | ||||||||||
Professional Liability | L | 6,896 | 1.9 | % | 147.6 | % | 2,785 | 0.6 | % | ||||||||
Property | S | 27,636 | 7.4 | % | 9.8 | % | 25,160 | 5.8 | % | ||||||||
72,117 | 19.4 | % | 63.2 | % | 44,179 | 10.2 | % | ||||||||||
Aggregate Property & Casualty | $ | 370,276 | 99.7 | % | (14.6 | )% | $ | 433,676 | 99.9 | % | |||||||
Life & Annuity: | |||||||||||||||||
Annuity | $ | — | — | n/a | $ | — | — | ||||||||||
Life | 863 | 0.3 | % | 44.6 | % | 597 | 0.1 | % | |||||||||
Aggregate Life & Annuity | $ | 863 | 0.3 | % | 44.6 | % | $ | 597 | 0.1 | % | |||||||
Aggregate P&C and Life & Annuity | $ | 371,139 | 100.0 | % | (14.5 | )% | $ | 434,273 | 100.0 | % | |||||||
| |||||||||||||||||
S = Short tail lines | $ | 203,926 | 55.1 | % | $ | 253,003 | 58.3 | % | |||||||||
L = Long tail lines | 166,350 | 44.9 | % | 180,673 | 41.7 | % | |||||||||||
Aggregate Property & Casualty | $ | 370,276 | $ | 433,676 | |||||||||||||
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 | ||||||||
2010 | 2009 | |||||||
Net income | $ | 36,381 | $ | 44,539 | ||||
Net realized and unrealized losses (gains) on fixed maturities, net of tax (1) | 1,236 | (285 | ) | |||||
Foreign exchange losses gains, net of tax | (1,680 | ) | (2,544 | ) | ||||
Merger and acquisition expenses, net of tax | 4,744 | 5,223 | ||||||
Net operating income | $ | 40,681 | $ | 46,933 | ||||
Net income per diluted share | $ | 0.63 | $ | 0.78 | ||||
Net realized and unrealized losses (gains) on fixed maturities, net of tax (1) | 0.02 | (0.01 | ) | |||||
Foreign exchange losses gains, net of tax | (0.03 | ) | (0.04 | ) | ||||
Merger and acquisition expenses, net of tax | 0.09 | 0.09 | ||||||
Net operating income per diluted share | $ | 0.71 | $ | 0.82 | ||||
Weighted average shares outstanding - basic | 56,516,593 | 56,637,291 | ||||||
Weighted average shares outstanding - diluted | 57,383,748 | 57,183,826 | ||||||
(1) | Net realized and unrealized losses (gains) on fixed maturities includes realized and unrealized (gains) losses on trading securities, realised (gains) losses on available for sale securities, net impairment losses recognized in earnings, and changes in fair value of investment derivatives. |
Annualized Return and Annualized Net Operating Return on Average Shareholders’ Equity
(Expressed in thousands of United States Dollars)
Three Months Ended March 31 | ||||||||
2010 | 2009 | |||||||
Net income | $ | 36,381 | $ | 44,539 | ||||
Annualized net income | 145,524 | 178,156 | ||||||
Net operating income | $ | 40,681 | $ | 46,933 | ||||
Annualized net operating income | 162,724 | 187,732 | ||||||
Beginning shareholders’ equity | $ | 1,564,633 | $ | 1,280,331 | ||||
Ending shareholders’ equity | 1,613,116 | 1,262,862 | ||||||
Average shareholders’ equity | 1,588,875 | 1,271,597 | ||||||
Annualized return on average shareholders’ equity | 9.2 | % | 14.0 | % | ||||
Annualized net operating return on average shareholders’ equity | 10.2 | % | 14.8 | % |
Diluted Tangible Book Value Per Share
(Expressed in thousands of United States Dollars, except per share and share amounts)
March 31, 2010 | December 31, 2009 | |||||||
Shareholders’ equity | $ | 1,613,116 | $ | 1,564,633 | ||||
Goodwill and intangible assets | (48,686 | ) | (48,686 | ) | ||||
Tangible book value | $ | 1,564,430 | $ | 1,515,947 | ||||
Diluted shares outstanding | 57,890,681 | 57,178,458 | ||||||
Diluted tangible book value per share | $ | 27.02 | $ | 26.51 |
MAX CAPITAL GROUP LTD.
SCHEDULE OF SUPPLEMENTAL INVESTMENT DATA– MARCH 31, 2010 (Unaudited)
(Expressed in thousands of United States Dollars)
Type of Investment | As at March 31, 2010 | Investment Distribution | As at December 31, 2009 | Investment Distribution | ||||||||
Cash and cash equivalents | $ | 690,246 | 12.9 | % | $ | 702,278 | 13.4 | % | ||||
U.S. government and agencies | 635,025 | 11.9 | % | 525,427 | 10.0 | % | ||||||
Non-U.S. government | 71,899 | 1.4 | % | 82,027 | 1.5 | % | ||||||
Corporate securities | 1,406,131 | 26.3 | % | 1,375,999 | 26.2 | % | ||||||
Municipal securities | 105,722 | 2.0 | % | 83,658 | 1.6 | % | ||||||
Asset-backed securities | 80,816 | 1.5 | % | 102,006 | 1.9 | % | ||||||
Residential mortgage-backed securities | 787,997 | 14.7 | % | 763,974 | 14.5 | % | ||||||
Commercial mortgage-backed securities | 289,873 | 5.4 | % | 302,961 | 5.8 | % | ||||||
Fixed maturities at fair value | $ | 3,377,463 | 63.2 | % | $ | 3,236,052 | 61.5 | % | ||||
U.S. government and agencies | $ | 20,550 | 0.4 | % | $ | 14,050 | 0.3 | % | ||||
Non-U.S. government | 544,527 | 10.2 | % | 573,250 | 10.9 | % | ||||||
Corporate securities | 389,619 | 7.3 | % | 418,647 | 7.9 | % | ||||||
Fixed maturities at amortized cost | $ | 954,696 | 17.9 | % | $ | 1,005,947 | 19.1 | % | ||||
Other investments | $ | 322,160 | 6.0 | % | $ | 314,849 | 6.0 | % | ||||
Total invested assets | $ | 5,344,565 | 100.0 | % | $ | 5,259,126 | 100.0 | % | ||||
Credit Rating | As at March 31, 2010 | Ratings Distribution | As at December 31, 2009 | Ratings Distribution | ||||||||
U.S. government and agencies (1) | $ | 1,355,551 | 31.3 | % | $ | 1,214,895 | 28.6 | % | ||||
AAA | 701,036 | 16.2 | % | 720,364 | 17.0 | % | ||||||
AA | 326,142 | 7.5 | % | 325,997 | 7.7 | % | ||||||
A | 732,917 | 16.9 | % | 731,723 | 17.3 | % | ||||||
BBB | 86,925 | 2.0 | % | 100,841 | 2.4 | % | ||||||
BB | 23,884 | 0.6 | % | 34,781 | 0.8 | % | ||||||
B or lower | 151,008 | 3.5 | % | 107,451 | 2.5 | % | ||||||
Fixed Maturities at fair value | $ | 3,377,463 | 78.0 | % | $ | 3,236,052 | 76.3 | % | ||||
U.S. government and agencies | $ | 20,550 | 0.5 | % | $ | 14,050 | 0.3 | % | ||||
AAA | 675,447 | 15.6 | % | 717,954 | 16.9 | % | ||||||
AA | 94,101 | 2.2 | % | 101,675 | 2.4 | % | ||||||
A | 150,602 | 3.5 | % | 158,141 | 3.7 | % | ||||||
BBB | 12,609 | 0.2 | % | 12,672 | 0.3 | % | ||||||
BB | — | — | — | — | ||||||||
B or lower | 1,387 | 0.0 | % | 1,455 | 0.1 | % | ||||||
Fixed Maturities at amortized cost | $ | 954,696 | 22.0 | % | $ | 1,005,947 | 23.7 | % | ||||
Total fixed maturities | $ | 4,332,159 | 100.0 | % | $ | 4,241,999 | 100.0 | % | ||||
(1) | Included within U.S. Government and Agencies are Agency-issued Residential Mortgage-Backed Securities with a fair value of $720,526 (December 31, 2009; $689,468) |
Three Months Ended March 31 | ||||||||
2010 | 2009 | |||||||
Net investment income | $ | 48,390 | $ | 40,488 | ||||
Change in fair value of other investments | 7,288 | 18,013 | ||||||
Realized and unrealized (losses) gains on trading fixed maturities | (182 | ) | 467 | |||||
Net realized gains (losses) on available for sale fixed maturities | 838 | (39 | ) | |||||
Change in fair value of derivatives | (1,522 | ) | — | |||||
Net realized and unrealized gains on investments | $ | 6,422 | $ | 18,441 | ||||
Net impairment losses recognized in earnings | $ | (420 | ) | $ | — | |||