Max Capital Group Reports First Quarter 2010 Results

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 at www.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 at www.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.

MAX CAPITAL GROUP LTD.

CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States Dollars, except per share and share amounts)
March 31, 2010December 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)
Year to Date Segment Information:Property & CasualtyLife & AnnuityCorporateConsolidated
InsuranceReinsuranceU.S. SpecialtyMax at Lloyd'sTotalReinsurance
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)
Year to Date Segment Information:Property & CasualtyLife & AnnuityCorporateConsolidated
InsuranceReinsuranceU.S. SpecialtyMax at Lloyd'sTotalReinsurance
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)
Gross Premiums Written by Type of Risk:

Three Months Ended March 31, 2010

Three Months Ended March 31, 2009

Gross Premiums WrittenPercentage of Total Gross Premiums Written

Movement on Prior Year Period

Gross Premiums WrittenPercentage 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 InvestmentAs at March 31, 2010Investment DistributionAs at December 31, 2009Investment 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 RatingAs at March 31, 2010Ratings DistributionAs at December 31, 2009Ratings 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 ) $ -


Contacts:

Max Capital Group Ltd.
Susan Spivak Bernstein, Senior Vice President, 1-212-898-6640
susan.spivak@maxcapservices.com
or
Kekst and Company
Roanne Kulakoff, 1-212-521-4837
roanne-kulakoff@kekst.com
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