HAMILTON, Bermuda--(BUSINESS WIRE)--May 7, 2007--Max Capital Group
Ltd. (NASDAQ: MXGL; BSX: MXGL BH) today reported net income for the
three months ended March 31, 2007, of $80.0 million, or $1.24 per
diluted share, compared to net income of $75.3 million, or $1.19 per
diluted share, for the three months ended March 31, 2006. Net
operating income, which represents net income adjusted for net
realized gains and losses on sales of fixed maturities, for the three
months ended March 31, 2007, was $81.0 million, or $1.26 per diluted
share, compared with net operating income of $76.9 million, or $1.21
per diluted share, for the three months ended March 31, 2006.
W. Marston Becker, Chairman and Chief Executive Officer of Max
Capital, said: "Our solid underwriting results, coupled with strong
investment returns, have provided a great start to 2007. We continue
to emphasize balance and diversification in our underwriting, which we
believe will result in consistent positive returns over time. While
our first quarter 2007 gross premium written is lower than the same
period in 2006, it is in line with our 2007 budgeted production. I am
also pleased to note that subsequent to March 31, 2007, as previously
announced, we completed the establishment of our U.S.-based excess and
surplus lines platform, Max Specialty Insurance Company, and have
commenced underwriting excess and surplus lines business in niche
markets."
Gross premiums written for the three months ended March 31, 2007
were $213.6 million, of which $213.0 million came from property and
casualty underwriting and $0.6 million from life and annuity
underwriting, compared to $255.9 million, of which $255.1 million came
from property and casualty underwriting and $0.8 million from life and
annuity underwriting, for the three months ended March 31, 2006. Gross
premiums written include neither any new life and annuity reinsurance
premiums nor any premiums for our recently established excess and
surplus lines business. Reinsurance and insurance products accounted
for 63.4% and 36.6%, respectively, of property and casualty gross
premiums written in the three months ended March 31, 2007, compared to
72.5% and 27.5%, respectively, of property and casualty gross premiums
written for the three months ended March 31, 2006. Net premiums earned
for the three months ended March 31, 2007 were $139.4 million compared
to $159.8 million for the same period of 2006. The decline in net
premiums earned for the three months ended March 31, 2007, principally
reflects the increase in our use of reinsurance in order to manage our
net exposure retained.
Net investment income for the three months ended March 31, 2007,
increased to $42.8 million from $34.0 million for the same period in
2006. The increase is principally attributable to a year-over-year
increase in cash and fixed maturities balances and higher yields on
fixed-maturity investments. Net gains on alternative investments for
the three months ended March 31, 2007, were $54.1 million, or a 4.8%
rate of return, compared to net gains on alternative investments of
$54.9 million, or a 4.4% rate of return, for the same period of 2006.
Invested assets were $4.8 billion as of March 31, 2007, with an
allocation of 76.7% to cash and fixed maturities and 23.3% to
alternative investments.
Total revenue for the three months ended March 31, 2007, decreased
4.8% to $235.6 million, compared to $247.5 million for the same period
in 2006. The decline in revenue in the three months to March 31, 2007,
is principally attributable to the 12.7% decrease in net premiums
earned over the same period in 2006, partially offset by the increase
in net investment income.
Losses and benefits were $107.0 million for the three months ended
March 31, 2007, compared to $125.6 million for the same period in
2006. The decrease in losses and benefits for the three months ended
March 31, 2007, is principally attributable to the decrease in
premiums earned. There were no significant changes in prior-period
reserves during the three months ended March 31, 2007.
Acquisition costs for the three months ended March 31, 2007, were
$14.9 million compared to $21.5 million for the same period in 2006.
The decrease reflects the lower net premiums earned in 2007 compared
to 2006.
Interest expense for the three months ended March 31, 2007, was
$8.1 million compared to $3.3 million for the same period in 2006,
principally attributable to interest crediting rates on funds withheld
balances, which are based on the total return of two fixed income
indices. The total return was positive in the three months ended March
31, 2007, compared to a negative return for the three months ended
March 31, 2006.
General and administrative expenses for the three months ended
March 31, 2007, were $25.4 million compared to $21.8 million for the
same period in 2006. The increase in general and administrative
expenses for the three months ended March 31, 2007, principally
reflects start-up costs associated with our newly launched U.S.-based
excess and surplus lines operations.
Shareholders' equity was $1,448.1 million at March 31, 2007. Book
value per share at March 31, 2007 was $24.01 per share, compared to
$23.06 at December 31, 2006. Annualized return on average
shareholders' equity for the three months ended March 31, 2007, was
22.5%.
During the three months ended March 31, 2007, Max Capital
repurchased 795,100 common shares at an average price per share of
$24.69 under the board-approved share repurchase plan. On May 4, 2007,
Max Capital's Board of Directors approved an increase in the share
repurchase plan, increasing the dollar value of shares that may be
repurchased to $50.0 million from the $16.4 million remaining under
the previous share repurchase authorization.
Certain non-GAAP financial measures that are included in this
press release are defined in the Company's Annual Report on Form 10-K
for the year ended December 31, 2006.
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 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, including the risk that the SEC's view of the conclusions
reached by the Audit and Risk Management Committee of the Company's
Board of Directors in connection with the internal review of three
finite risk retrocessional contracts written in 2001 and 2003, which
caused the Company to restate its audited financial statements for the
years ended December 31, 2005, 2004, 2003, 2002 and 2001 and unaudited
financial statements for the periods ended March 31, 2006, and June
30, 2006, may differ, perhaps materially, and result in material
changes to information contained in the Company's past SEC filings,
including financial statements and financial information. For further
information regarding cautionary statements and factors affecting
future results, please refer to the Company's Annual Report on Form
10-K for the year ended December 31, 2006, and other documents filed
by the Company with the SEC. The Company undertakes no obligation to
publicly update or revise any forward-looking statement whether as a
result of new information, future developments or otherwise.
MAX CAPITAL GROUP LTD.
----------------------------------------------------------------------
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States Dollars, except per share and
share amounts)
March 31, 2007 December 31, 2006
---------------- ------------------
(Unaudited)
ASSETS
Cash and cash equivalents $ 358,037 $ 441,895
Fixed maturities, available for
sale at fair value 3,285,414 3,028,108
Alternative investments, at fair
value 1,107,890 1,065,874
Accrued interest income 38,142 38,922
Premiums receivable 417,295 390,889
Losses and benefits recoverable
from reinsurers 569,682 538,009
Funds withheld 14,498 15,385
Deferred acquisition costs 51,742 49,064
Prepaid reinsurance premiums 118,533 104,443
Receivable for securities
redeemed 17,798 136,563
Other assets 42,938 39,832
---------------- ------------------
Total assets $ 6,021,969 $ 5,848,984
================ ==================
LIABILITIES
Property and casualty losses $ 2,421,616 $ 2,335,109
Life and annuity benefits 882,830 895,560
Deposit liabilities 204,618 204,389
Funds withheld from reinsurers 254,880 254,723
Unearned property and casualty
premiums 448,293 436,476
Reinsurance balances payable 86,230 79,506
Accounts payable and accrued
expenses 40,389 103,160
Bank loan 235,000 150,000
---------------- ------------------
Total liabilities 4,573,856 4,458,923
---------------- ------------------
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;
60,305,517 (2006 - 60,276,560)
shares issued and outstanding 60,306 60,277
Additional paid-in capital 949,257 950,862
Unearned stock grant compensation (29,303) (17,570)
Accumulated other comprehensive
loss (26,044) (21,688)
Retained earnings 493,897 418,180
---------------- ------------------
Total shareholders' equity 1,448,113 1,390,061
---------------- ------------------
Total liabilities and
shareholders' equity $ 6,021,969 $ 5,848,984
================ ==================
Book Value Per Share $ 24.01 $ 23.06
================ ==================
MAX CAPITAL GROUP LTD.
----------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
(Expressed in thousands of United States Dollars, except shares and
per share amounts)
Three Months Ended March 31
2007 2006
------------ ------------
REVENUES
Gross premiums written $ 213,598 $ 255,924
Reinsurance premiums ceded (76,208) (57,762)
------------- --------------
Net premiums written $ 137,390 $ 198,162
============= ==============
Earned premiums $ 201,492 $ 206,126
Earned premiums ceded (62,070) (46,369)
------------- --------------
Net premiums earned 139,422 159,757
Net investment income 42,817 34,029
Net gains on alternative investments 54,112 54,859
Net realized losses on sale of fixed
maturities (1,043) (1,676)
Other income 174 500
------------- --------------
Total revenues 235,482 247,469
------------- --------------
LOSSES AND EXPENSES
Losses and benefits 107,015 125,599
Acquisition costs 14,926 21,543
Interest expense 8,107 3,295
General and administrative expenses 25,441 21,759
------------- --------------
Total losses and expenses 155,489 172,196
------------- --------------
NET INCOME 79,993 75,273
Change in net unrealized appreciation of
fixed maturities (4,740) (50,069)
Foreign currency translation adjustment 384 1,098
------------- --------------
COMPREHENSIVE INCOME $ 75,637 $ 26,302
============= ==============
Basic earnings per share $ 1.32 $ 1.27
============= ==============
Diluted earnings per share $ 1.24 $ 1.19
============= ==============
Diluted net operating earnings per share $ 1.26 $ 1.21
============= ==============
Weighted average shares outstanding -
basic 60,799,481 59,104,352
============= ==============
Weighted average shares outstanding -
diluted 64,491,168 63,516,268
============= ==============
MAX CAPITAL GROUP LTD.
----------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
(Expressed in thousands of United States Dollars)
Three Months Ended March 31,
2007 2006
----------- -----------
Preferred shares
Balance, beginning of period $ - $ -
------------- -------------
Balance, end of period - -
------------- -------------
Common shares
Balance, beginning of period 60,277 58,829
Issue of shares 824 544
Repurchase of shares (795) -
------------- -------------
Balance, end of period 60,306 59,373
------------- -------------
Additional paid-in capital
Balance, beginning of period 950,862 921,384
Issue of common shares 16,544 12,529
Stock option expense 689 278
Repurchase of shares (18,838) -
------------- -------------
Balance, end of period 949,257 934,191
------------- -------------
Loans receivable from common share sales
Balance, beginning of period - (465)
Loans repaid - 165
------------- -------------
Balance, end of period - (300)
------------- -------------
Unearned stock grant compensation
Balance, beginning of period (17,570) (14,574)
Stock grants awarded (15,734) (12,596)
Amortization 4,001 3,096
------------- -------------
Balance, end of period (29,303) (24,074)
------------- -------------
Accumulated other comprehensive income
(loss)
Balance, beginning of period (21,688) 4,981
Holding losses on fixed maturities
arising in period (5,783) (51,745)
Net realized losses included in net
income 1,043 1,676
Currency translation adjustments 384 1,098
------------- -------------
Balance, end of period (26,044) (43,990)
------------- -------------
Retained earnings
Balance, beginning of period 418,180 215,565
Net income 79,993 75,273
Dividends paid (4,276) (2,969)
------------- -------------
Balance, end of period 493,897 287,869
------------- -------------
Total shareholders' equity $ 1,448,113 $ 1,213,069
============= =============
MAX CAPITAL GROUP LTD.
----------------------------------------------------------------------
CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Expressed in thousands of United States Dollars)
Three Months Ended March 31
2007 2006
---------- -----------
OPERATING ACTIVITIES
Net income $ 79,993 $ 75,273
Adjustments to reconcile net income to net
cash from operating activities:
Stock based compensation 4,691 3,374
Amortization of premium on fixed
maturities 1,298 1,864
Accretion of deposit liabilities 1,584 1,013
Net realized losses on sale of fixed
maturities 1,043 1,676
Alternative investments (42,053) (40,091)
Accrued interest income 780 1,072
Premiums receivable (26,406) (18,548)
Losses and benefits recoverable from
reinsurers (31,673) (13,676)
Funds withheld 887 294
Deferred acquisition costs (2,678) (7,696)
Prepaid reinsurance premiums (14,090) (11,669)
Receivable for securities redeemed 118,765 4,534
Other assets (3,106) (2,562)
Property and casualty losses 86,507 81,033
Life and annuity benefits (12,730) (582)
Funds withheld from reinsurers 157 (15,404)
Unearned property and casualty
premiums 11,817 50,720
Reinsurance balances payable 6,724 (5,181)
Accounts payable and accrued expenses (62,771) 10,614
------------ --------------
Cash provided by operating activities 118,739 116,058
------------ --------------
INVESTING ACTIVITIES
Purchases of fixed maturities (469,761) (211,424)
Sales of fixed maturities 81,531 113,290
Redemptions of fixed maturities 123,880 31,570
------------ --------------
Cash used in investing activities (264,350) (66,564)
------------ --------------
FINANCING ACTIVITIES
Net proceeds from issuance of common
shares 1,633 477
Repurchase of common shares (19,633) -
Proceeds from bank loan 85,000 -
Dividends (4,276) (2,969)
Additions to deposit liabilities 239 4,524
Payment of deposit liabilities (1,594) (30,034)
Notes and loans repaid - 165
------------ --------------
Cash provided by (used in) financing
activities 61,369 (27,837)
------------ --------------
Effect of exchange rate on cash 384 1,098
Net (decrease) increase in cash and cash
equivalents (83,858) 22,755
Cash and cash equivalents, beginning of
period 441,895 314,031
------------ --------------
CASH AND CASH EQUIVALENTS, END OF PERIOD $ 358,037 $ 336,786
============ ==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Interest paid totaled $3,411 and $2,716 for the three months ended
March 31, 2007 and 2006, respectively.
No corporate taxes were paid during the three months ended March 31,
2007 and 2006.
MAX CAPITAL GROUP LTD.
----------------------------------------------------------------------
SCHEDULE OF SUPPLEMENTAL DATA - THREE MONTHS TO MARCH 31, 2007
(Unaudited)
Quarter Segment Information: Property & Casualty
-----------------------------------
(in 000's US$) Reinsurance Insurance Total
-----------------------------------
Gross premiums written $ 135,014 $ 78,034 $ 213,048
Reinsurance premiums ceded (23,549) (52,549) (76,098)
----------------------------------
Net premiums written $ 111,465 $ 25,485 $ 136,950
===================================
Earned premiums $ 98,896 $ 102,046 $ 200,942
Earned premiums ceded (10,476) (51,484) (61,960)
-----------------------------------
Net premiums earned 88,420 50,562 138,982
Net investment income 10,735 3,944 14,679
Net gains on alternative
investments 16,422 4,375 20,797
Net realized losses on sales
of fixed maturities - - -
Other income - - -
-----------------------------------
Total revenues 115,577 58,881 174,458
Losses and benefits 59,764 36,834 96,598
Acquisition costs 15,256 (591) 14,665
Interest expense 3,031 - 3,031
General and administrative
expenses 7,270 4,384 11,654
-----------------------------------
Total losses and expenses 85,321 40,627 125,948
-----------------------------------
Net income $ 30,256 $ 18,254 $ 48,510
===================================
Loss Ratio (a) 67.6% 72.8% 69.5%
Combined Ratio (b) 93.1% 80.4% 88.4%
Quarter Segment Information: Life & Annuity Corporate Consolidated
----------------------------------------
(in 000's US$) Reinsurance
--------------
Gross premiums written $ 550 $ - $ 213,598
Reinsurance premiums ceded (110) - (76,208)
----------------------------------------
Net premiums written $ 440 $ - $ 137,390
========================================
Earned premiums $ 550 $ - $ 201,492
Earned premiums ceded (110) - (62,070)
----------------------------------------
Net premiums earned 440 - 139,422
Net investment income 7,356 20,782 42,817
Net gains on alternative
investments 17,496 15,819 54,112
Net realized losses on sales
of fixed maturities - (1,043) (1,043)
Other income - 174 174
----------------------------------------
Total revenues 25,292 35,732 235,482
Losses and benefits 10,417 - 107,015
Acquisition costs 261 - 14,926
Interest expense 1,664 3,412 8,107
General and administrative
expenses 711 13,076 25,441
----------------------------------------
Total losses and expenses 13,053 16,488 155,489
----------------------------------------
Net income $ 12,239 $ 19,244 $ 79,993
========================================
Loss Ratio (a)
Combined Ratio (b)
SCHEDULE OF SUPPLEMENTAL DATA - THREE MONTHS TO MARCH 31, 2006
(Unaudited)
Quarter Segment Information: Property & Casualty
-----------------------------------
(in 000's US$) Reinsurance Insurance Total
-----------------------------------
Gross premiums written $ 184,983 $ 70,166 $ 255,149
Reinsurance premiums ceded (16,059) (41,548) (57,607)
-----------------------------------
Net premiums written $ 168,924 $ 28,618 $ 197,542
===================================
Earned premiums $ 117,034 $ 88,317 $ 205,351
Earned premiums ceded (7,916) (38,298) (46,214)
-----------------------------------
Net premiums earned 109,118 50,019 159,137
Net investment income 8,452 3,365 11,817
Net gains on alternative
investments 13,059 3,923 16,982
Net realized gains on sales of
fixed maturities - - -
Other income - - -
-----------------------------------
Total revenues 130,629 57,307 187,936
Losses and benefits 77,447 37,109 114,556
Acquisition costs 20,831 453 21,284
Interest expense (540) - (540)
General and administrative
expenses 5,761 3,690 9,451
-----------------------------------
Total losses and expenses 103,499 41,252 144,751
-----------------------------------
Net income $ 27,130 $ 16,055 $ 43,185
===================================
Loss Ratio (a) 71.0% 74.2% 72.0%
Combined Ratio (b) 95.3% 82.5% 91.3%
Quarter Segment Information: Life & Annuity Corporate Consolidated
---------------------------------------
(in 000's US$) Reinsurance
--------------
Gross premiums written $ 775 $ - $ 255,924
Reinsurance premiums ceded (155) - (57,762)
---------------------------------------
Net premiums written $ 620 $ - $ 198,162
=======================================
Earned premiums $ 775 $ - $ 206,126
Earned premiums ceded (155) - (46,369)
---------------------------------------
Net premiums earned 620 - 159,757
Net investment income 7,497 14,715 34,029
Net gains on alternative
investments 15,657 22,220 54,859
Net realized gains on sales of
fixed maturities - (1,676) (1,676)
Other income - 500 500
---------------------------------------
Total revenues 23,774 35,759 247,469
Losses and benefits 11,043 - 125,599
Acquisition costs 259 - 21,543
Interest expense 1,075 2,760 3,295
General and administrative
expenses 644 11,664 21,759
---------------------------------------
Total losses and expenses 13,021 14,424 172,196
---------------------------------------
Net income $ 10,753 $ 21,335 $ 75,273
=======================================
Loss Ratio (a)
Combined Ratio (b)
(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 DATA - THREE MONTHS TO MARCH 31, 2007
(Unaudited)
Gross Premiums Written by Three months to Three months to
Type of Risk: March 31, 2007 March 31, 2006
-------------------- --------------------
Percentage Percentage
Gross of Total Gross of Total
Premiums Premiums Premiums Premiums
Written* Written Written* Written
Property and Casualty
Reinsurance:
Accident & Health $ - 0.0% $ 6,333 2.5%
Aviation 8,131 3.8% 13,415 5.2%
Excess Liability 6,330 3.0% 30,255 11.8%
Medical Malpractice 21,286 9.9% 23,834 9.3%
Other 390 0.2% 3,413 1.4%
Professional Liability 9,340 4.4% 14,868 5.8%
Property, Marine & Energy 65,528 30.7% 40,486 15.8%
Whole Account 5,880 2.7% 30,175 11.8%
Workers' Compensation 18,129 8.5% 22,204 8.7%
--------- ---------- --------- ----------
135,014 63.2% 184,983 72.3%
Property and Casualty
Insurance:
Aviation 4,048 1.9% 1,932 0.8%
Excess Liability 38,199 17.9% 36,494 14.2%
Professional Liability 25,359 11.8% 22,834 8.9%
Property 10,428 4.9% 8,906 3.5%
--------- ---------- --------- ----------
78,034 36.5% 70,166 27.4%
--------- ---------- --------- ----------
Aggregate Property and
Casualty $213,048 99.7% $255,149 99.7%
--------- ---------- --------- ----------
Life & Annuity:
Annuity $ - 0.0% $ - 0.0%
Health - 0.0% - 0.0%
Life 550 0.3% 775 0.3%
--------- ---------- --------- ----------
Aggregate Life & Annuity 550 0.3% 775 0.3%
--------- ---------- --------- ----------
Aggregate P&C and Life &
Annuity $213,598 100.0% $255,924 100.0%
========= ========== ========= ==========
Periodic Rate of Return
Fair Investment Last Year Last
Selected Investment Value* %'s 3 Months to Date 60
Return Data: months**
----------- ---------- -------- ------- ---------
Cash and Fixed
Maturities $3,643,451 76.7% 1.18% 1.18% 5.00%
=========== ==========
Commodity Trading
Advisers $ 27,580 0.6% -0.64% -0.64% 5.69%
Distressed
Securities 216,658 4.5% 5.05% 5.05% 19.43%
Diversified
Arbitrage 173,802 3.7% 4.56% 4.56% 7.17%
Emerging Markets 113,166 2.4% 4.65% 4.65% 15.81%
Event-Driven
Arbitrage 169,005 3.5% 9.55% 9.55% 13.20%
Fixed Income
Arbitrage 26,674 0.6% 3.97% 3.97% 7.18%
Global Macro 62,093 1.3% 2.73% 2.73% 9.73%
Long / Short Credit 83,908 1.8% 3.94% 3.94% 12.71%
Long / Short Equity 201,106 4.2% 5.16% 5.16% 7.17%
Opportunistic 31,254 0.6% 6.27% 6.27% 17.32%
----------- ----------
MDS 1,105,246 23.2% 4.75% 4.75% 9.44%
Reinsurance Private
Equity 2,644 0.1% 6.05% 6.05% -1.68%
----------- ----------
Alternative
Investments $1,107,890 23.3% 4.75% 4.75% 8.89%
=========== ==========
Total Investments $4,751,341 100.0% 2.07% 2.07% 6.27%
=========== ==========
* Expressed in thousands of United States Dollars
**Annualized
CONTACT: Max Capital Group Ltd.
N. James Tees, 1-441-296-8800
Executive Vice President
jim.tees@maxcapgroup.com
or
Kekst and Company
Roy Winnick, 1-212-521-4842
roy-winnick@kekst.com
SOURCE: Max Capital Group Ltd.
