MXRE Max RE Capital Ltd. (MM)

HAMILTON, Bermuda, May 31 /PRNewswire-FirstCall/ -- Max Re Capital Ltd. (NASDAQ:MXRE) today reported net income for the three months ended March 31, 2006 of $72.9 million, or net income of $1.15 per diluted share, compared to net income of $37.7 million, or net income of $0.75 per diluted share, for the three months ended March 31, 2005. 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, 2006 was $74.5 million, or net operating income of $1.17 per diluted share, compared with net operating income of $37.3 million, or net operating income of $0.75 per diluted share, for the three months ended March 31, 2005. (Logo: http://www.newscom.com/cgi-bin/prnh/20010918/MXRELOGO-b ) Robert J. Cooney, Chairman, President and Chief Executive Officer, commented, "Our first quarter results reflect solid underwriting performance coupled with strong investment returns. Gross premiums written declined in the first quarter largely attributable to reduced volume in our life and annuity business. Our property and casualty reinsurance premium volume declined in line with our expectations as we reduced our participation on certain casualty and specialty reinsurance renewals. We continue our efforts to diversify our business through such smaller participations and increased the number of transactions bound in the quarter." Gross premiums written for the three months ended March 31, 2006 were $255.9 million, of which $255.1 million came from property and casualty underwriting and $0.8 million from life and annuity underwriting, compared to $455.7 million, of which $312.5 million came from property and casualty underwriting and $143.2 million from life and annuity underwriting, for the three months ended March 31, 2005. Reinsurance and insurance products account for 72.5% and 27.5%, respectively, of property and casualty gross premiums written in the three months ended March 31, 2006, compared to 79.4% and 20.6%, respectively, of property and casualty gross premiums written for the three months ended March 31, 2005. The decline in property and casualty premiums written is principally due to reduced participation on certain reinsurance contracts renewed in 2006 as compared to 2005. Net premiums earned for the three months ended March 31, 2006 were $159.8 million compared to $308.3 million for the same period of 2005. The decrease is principally due to $0.8 million of life and annuity written and earned premium during the first three months of 2006 compared to $143.2 million of life and annuity written and earned premium during the first three months of 2005. Net investment income for the three months ended March 31, 2006 increased to $34.0 million, from $23.7 million for the same period in 2005 and is principally attributable to a year over year increase in cash and fixed maturities balances. Net gains on alternative investments for the three months ended March 31, 2006 were $54.9 million, or a 4.4% rate of return, compared to net gains on alternative investments of $14.4 million, or a 1.2% rate of return, for the same period of 2005. Invested assets were $4.3 billion as of March 31, 2006, with an allocation of approximately 70.5% to cash and fixed maturities and 29.5% to alternative investments. Total revenue for the three months ended March 31, 2006 decreased 28.9% to $247.5 million, compared to $348.1 million for the same period in 2005. The decline in revenue in the three months to March 31, 2006 is principally attributable to the 48% decrease in net premiums earned over the same period in 2005, partially offset by the increase in net investment income and net gains on alternative investments. Losses and benefits were $125.0 million for the three months ended March 31, 2006 compared to $267.4 million for the same period in 2005. The decrease in losses and benefits for the three months ended March 31, 2006 is principally attributable to the decrease in premiums earned. Acquisition costs for the three months ended March 31, 2006 remained unchanged at $21.5 million compared to the three months ended March 31, 2005, despite lower net premiums earned in 2006. Acquisition costs are principally related to our property and casualty reinsurance and insurance products. Acquisition costs increased marginally in our property and casualty reinsurance segment. Interest expense for the three months ended March 31, 2006 was $6.3 million compared to $6.2 million for the same period in 2005, principally attributable to similar interest crediting rates on funds withheld balances and balances with reinsurers in the three months ended March 31, 2006 compared to the three months ended March 31, 2005. General and administrative expenses for the three months ended March 31, 2006 were $21.8 million compared to $15.3 million for the same period in 2005. General and administrative expenses for the three months ended March 31, 2006 increased principally due to increased personnel costs and fees for professional services related to an internal investigation of finite risk retrocessional contracts written in 2001 and 2003. Shareholders' equity was $1,223.8 million at March 31, 2006. Book value per share at March 31, 2006 was $20.61 per share, compared to $20.38 at December 31, 2005. Annualized return on average shareholders' equity for the three months ended March 31, 2006 was 24.1%. Max Re Capital Ltd., through its principal operating subsidiaries, Max Re Ltd., Max Insurance Europe Limited and Max Re Europe Limited, offers customized insurance and reinsurance solutions to property and casualty insurers, life and health insurers and large corporations. The above remarks about future expectations, plans and prospects from the Company are forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such 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 our 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 conclude that a restatement of the Company's audited financial statements for the years ended December 31, 2005, 2004, 2003, 2002 and 2001 is warranted, may differ, perhaps materially. For further information regarding cautionary statements and factors affecting future results, please refer to documents filed by the Company with the Securities and Exchange Commission. 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. Contact Information: Keith S. Hynes Executive Vice President and CFO 441-296-8800 N. James Tees Senior Vice President and Treasurer 441-296-8800 MAX RE CAPITAL LTD. CONSOLIDATED BALANCE SHEETS (Expressed in thousands of United States Dollars, except per share and share amounts) March 31, December 31, 2006 2005 (Unaudited) (Restated) ASSETS Cash and cash equivalents $336,786 $314,031 Fixed maturities, available for sale at fair value 2,695,709 2,682,864 Alternative investments, at fair value 1,271,090 1,230,889 Accrued interest income 31,560 32,632 Premiums receivable 417,214 398,666 Losses and benefits recoverable from reinsurers 652,151 646,669 Funds withheld 16,638 16,932 Deferred acquisition costs 76,711 69,015 Prepaid reinsurance premiums 95,162 83,493 Other assets 25,563 23,001 Total assets $5,618,584 $5,498,192 LIABILITIES Property and casualty losses $2,087,065 $2,006,032 Life and annuity benefits 853,642 854,224 Deposit liabilities 200,831 225,328 Funds withheld from reinsurers 415,394 435,942 Unearned property and casualty premiums 493,696 442,976 Reinsurance balances payable 85,600 90,781 Accounts payable and accrued expenses 108,550 94,043 Bank loan 150,000 150,000 Total liabilities 4,394,778 4,299,326 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; 59,372,778 (2005 - 58,829,354) shares issued and outstanding 59,373 58,829 Additional paid-in capital 939,194 926,386 Loans receivable from common share sales (300) (465) Unearned stock grant compensation (24,074) (14,574) Accumulated other comprehensive income (loss) (43,990) 4,981 Retained earnings 293,603 223,709 Total shareholders' equity 1,223,806 1,198,866 Total liabilities and shareholders' equity $5,618,584 $5,498,192 Book Value Per Share $20.61 $20.38 MAX RE CAPITAL 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 2006 2005 (Restated) REVENUES Gross premiums written $255,924 $455,689 Reinsurance premiums ceded (57,762) (44,019) Net premiums written $198,162 $411,670 Earned premiums $206,126 $350,328 Earned premiums ceded (46,369) (42,004) Net premiums earned 159,757 308,324 Net investment income 34,029 23,689 Net gains on alternative investments 54,859 14,377 Net realized (losses) gains on sale of fixed maturities (1,676) 390 Other income 500 1,318 Total revenues 247,469 348,098 LOSSES AND EXPENSES Losses and benefits 124,959 267,425 Acquisition costs 21,543 21,502 Interest expense 6,345 6,232 General and administrative expenses 21,759 15,257 Total losses and expenses 174,606 310,416 NET INCOME 72,863 37,682 Change in net unrealized appreciation of fixed maturities (50,069) (21,515) Foreign currency translation adjustment 1,098 (609) COMPREHENSIVE INCOME $23,892 $15,558 Basic earnings per share $1.23 $0.82 Diluted earnings per share $1.15 $0.75 Diluted net operating earnings per share $1.17 $0.75 Weighted average shares outstanding - basic 59,104,352 46,166,537 Weighted average shares outstanding - diluted 63,516,268 49,914,515 MAX RE CAPITAL LTD. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (Expressed in thousands of United States Dollars) Three Months Ended March 31, 2006 2005 (Restated) Preferred shares Balance, beginning of period $-- $-- Balance, end of period -- -- Common shares Balance, beginning of period 58,829 45,826 Issue of shares 544 592 Repurchase of shares -- -- Balance, end of period 59,373 46,418 Additional paid-in capital Balance, beginning of period 926,386 648,446 Issue of common shares 12,529 11,131 Direct equity offering expenses -- -- Stock option expense 279 251 Repurchase of shares -- -- Balance, end of period 939,194 659,828 Loans receivable from common share sales Balance, beginning of period (465) (10,515) Loans repaid 165 10,050 Balance, end of period (300) (465) Unearned stock grant compensation Balance, beginning of period (14,574) (13,294) Stock grants awarded (12,596) (10,463) Amortization 3,096 2,244 Balance, end of period (24,074) (21,513) Accumulated other comprehensive income (loss) Balance, beginning of period 4,981 22,227 Holding losses on fixed maturities arising in period (51,745) (21,125) Net realized losses (gains) included in net income 1,676 (390) Currency translation adjustments 1,098 (609) Balance, end of period (43,990) 103 Retained earnings Balance, beginning of period 223,709 226,337 Net income 72,863 37,682 Dividends paid (2,969) (1,392) Balance, end of period 293,603 262,627 Total shareholders' equity $1,223,806 $946,998 MAX RE CAPITAL LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Expressed in thousands of United States Dollars) Three Months Ended March 31 2006 2005 (Restated) OPERATING ACTIVITIES Net income $72,863 $37,682 Adjustments to reconcile net income to net cash from operating activities: Amortization of unearned stock based compensation 3,375 2,495 Amortization of premium on fixed maturities 1,864 2,413 Net realized (gains) losses on sale of fixed maturities 1,676 (390) Alternative investments (40,091) (51,418) Accrued interest income 1,072 (1,933) Premiums receivable (18,548) (59,954) Losses and benefits recoverable from reinsurers (5,482) (12,706) Funds withheld 294 -- Deferred acquisition costs (7,696) (36,027) Prepaid reinsurance premiums (11,669) (1,641) Other assets (2,562) (2,676) Property and casualty losses 81,033 107,170 Life and annuity benefits (582) 124,406 Funds withheld from reinsurers (20,548) 844 Unearned property and casualty premiums 50,720 103,880 Reinsurance balances payable (5,181) (5,511) Accounts payable and accrued expenses 14,507 (40,084) Cash from operating activities 115,045 166,550 INVESTING ACTIVITIES Purchase of fixed maturities (211,424) (589,498) Sales of fixed maturities 113,290 464,420 Redemptions of fixed maturities 31,570 12,420 Cash used in investing activities (66,564) (112,658) FINANCING ACTIVITIES Net proceeds from issuance of common shares 477 1,260 Repurchase of common shares -- -- Dividends (2,969) (1,392) Additions to deposit liabilities 7,515 13,916 Payment of deposit liabilities (32,012) (53,566) Notes and loans repaid 165 10,050 Cash used in financing activities (26,824) (29,732) Effect of exchange rate on cash 1,098 (609) Net increase in cash and cash equivalents 22,755 23,551 Cash and cash equivalents, beginning of period 314,031 239,188 CASH AND CASH EQUIVALENTS, END OF PERIOD $336,786 $262,739 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid totaled $2,716 and $1,589 for the three months ended March 31, 2006 and 2005, respectively. MAX RE CAPITAL LTD. SCHEDULE OF SUPPLEMENTAL DATA - MARCH 31, 2006 Year to Date Segment Information: Property & Casualty (in 000's US$) 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 -- -- -- Net gains on alternative investments -- -- -- Net realized losses on sales of fixed maturities -- -- -- Other income -- -- -- Total revenues 109,118 50,019 159,137 Losses and benefits 76,807 37,109 113,916 Acquisition costs 20,831 453 21,284 Interest expense -- -- -- General and administrative expenses 5,761 3,690 9,451 Total losses and expenses 103,399 41,252 144,651 Net income (loss) $5,719 $8,767 $14,486 Loss Ratio (a) 70.4% 74.2% 71.6% Combined Ratio (b) 94.8% 82.5% 90.9% Year to Date Segment Information: Life & Annuity Corporate Consolidated (in 000's US$) 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 -- 34,029 34,029 Net gains on alternative investments -- 54,859 54,859 Net realized losses on sales of fixed maturities -- (1,676) (1,676) Other income -- 500 500 Total revenues 620 87,712 247,469 Losses and benefits 11,043 -- 124,959 Acquisition costs 259 -- 21,543 Interest expense -- 6,345 6,345 General and administrative expenses 644 11,664 21,759 Total losses and expenses 11,946 18,009 174,606 Net income (loss) $(11,326) $69,703 $72,863 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 total losses and expenses by net premiums earned. Periodic Rate of Return Fair Investment Last Last Last Selected Investment Return Value* %'s 3 12 60 months months months** Cash and Fixed Maturities $3,032,495 70.5% -0.62% 3.05% 4.90% Global Macro $119,376 2.8% 1.39% 6.24% 9.26% Long / Short Equity 189,612 4.4% 2.17% 2.04% 4.48% Convertible Arbitrage 4,132 0.1% -0.91% -2.53% 4.67% Diversified Arbitrage 199,892 4.6% 6.87% 16.75% 9.73% Distressed Securities 206,250 4.8% 6.27% 14.39% 18.20% Opportunistic 26,147 0.6% 10.36% 27.68% 14.16% Emerging Markets 85,940 2.0% 5.88% 15.20% 17.70% Fixed Income Arbitrage 25,188 0.6% 10.05% 1.74% 6.46% Event-Driven Arbitrage 198,201 4.6% 5.81% 10.49% 11.91% Commodity Trading Advisers 68,868 1.6% -0.01% 11.23% 5.16% Credit Long / Short 112,653 2.6% 4.87% 11.42% 9.40% MDS 1,236,259 28.7% 4.41% 9.21% 8.72% Reinsurance Private Equity 34,832 0.8% 4.30% -40.96% -7.28% Alternative Investments $1,271,090 29.5% 4.40% 6.62% 8.07% Total Investments $4,303,585 100.0% 0.86% 4.07% 5.92% * Expressed in thousands of United States Dollars ** Annualized http://www.newscom.com/cgi-bin/prnh/20010918/MXRELOGO-b http://photoarchive.ap.org/ DATASOURCE: Max Re Capital Ltd. CONTACT: Keith S. Hynes, Executive Vice President and CFO, , or N. James Tees, Senior Vice President and Treasurer, , both of Max Re Capital Ltd., +1-441-296-8800

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