MXRE Max RE Capital Ltd. (MM)

Attractive Underwriting Opportunities Lead to Reduction in Alternative Investment Allocation HAMILTON, Bermuda, Nov. 13 /PRNewswire-FirstCall/ -- Max Re Capital Ltd. (NASDAQ:MXRE) today reported net income for the three months ended September 30, 2006 of $26.5 million, or net income of $0.42 per diluted share, compared to a net loss of $44.2 million, or a net loss of $0.96 per diluted share, for the three months ended September 30, 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 September 30, 2006 was $26.8 million, or net operating income of $0.42 per diluted share, compared with a net operating loss of $45.9 million, or a net operating loss of $0.99 per diluted share, for the three months ended September 30, 2005. For the nine months ended September 30, 2006, the Company had net income of $121.5 million, or net income of $1.91 per diluted share, compared to $22.1 million, or $0.44 per diluted share, for the nine months ended September 30, 2005. For the nine months ended September 30, 2006, the Company had net operating income of $128.8 million, or net operating income of $2.03 per diluted share, compared to $19.3 million, or $0.39 per diluted share, for the nine months ended September 30, 2005. (Logo: http://www.newscom.com/cgi-bin/prnh/20010918/MXRELOGO-b ) W. Marston Becker, Chairman and Chief Executive Officer, commented, "During the third quarter the Company produced the best property and casualty underwriting results in its history principally due to the favorable maturing of general liability insurance reserves and benign catastrophe activity. Our insurance business continues to be our fastest growing segment. The underwriting results were partially offset by disappointing returns on our alternative investment portfolio. The opportunity to continue to write attractive property and casualty premium volume has led us to establish a reduced target range for alternative investments of 15% to 20% of invested assets." Gross premiums written for the three months ended September 30, 2006 were $177.9 million, of which $177.3 million came from property and casualty underwriting and $0.6 million came from life and annuity underwriting, compared to $288.0 million, of which $196.3 million came from property and casualty underwriting and $91.7 million came from life and annuity underwriting, for the three months ended September 30, 2005. Net premiums earned for the three months ended September 30, 2006 were $147.1 million compared to $295.8 million for the same period of 2005. Gross premiums written for the nine months ended September 30, 2006 were $717.7 million compared to $988.8 million for the first nine months of 2005. Property and casualty reinsurance, property and casualty insurance and life and annuity reinsurance accounted for 55%, 39% and 6%, respectively, of gross premiums written for the first nine months of 2006, compared to 48%, 25% and 27%, respectively, for the same period in 2005. Net premiums earned for the first nine months of 2006 decreased 36.5% to $506.0 million compared to $796.8 million for the same period in 2005. The decline in gross premiums written and net premiums earned for the first nine months of 2006 principally relates to decreased life and annuity business written and earned. Net investment income for the three months ended September 30, 2006 increased to $38.7 million, from $27.0 million for the same period in 2005 and is attributable to a year over year increase in cash and fixed maturities balances and higher yields on fixed maturities investments. Net investment income for the nine months ended September 30, 2006 increased $33.5 million, to $109.2 million, compared to $75.7 million for the same period in 2005. Net losses on alternative investments for the three months ended September 30, 2006 were $31.0 million, or a (2.33)% rate of return, compared to net gains on alternative investments of $35.6 million, or a 3.0% rate of return, for the same period in 2005. For the nine months ended September 30, 2006, alternative investments have returned 1.57%, compared to 4.50% for the same period in 2005. Invested assets were $4.6 billion as of September 30, 2006, with an allocation of approximately 72% to cash and fixed maturities and 28% to alternative investments. Losses and benefits were $89.2 million for the three months ended September 30, 2006 compared to $367.7 million for the same period in 2005. The decrease in 2006 is principally attributable to the lower volume of life and annuity underwriting, a reduction in prior years general liability insurance reserves of $20.5 million and the absence of significant natural catastrophe losses compared to $100.0 million in natural catastrophe losses included in the three months ended September 30, 2005. Losses and benefits for the nine months ended September 30, 2006 were $380.1 million compared to $792.4 million for the same period in 2005. The decrease for the nine months ended September 30, 2006 compared to the same period in 2005 is principally attributable to the decrease in life and annuity underwriting, reduction in prior year general liability insurance reserves and the recording of natural catastrophe losses in the 2005 period. Acquisition costs for the three months ended September 30, 2006 were $19.0 million compared to $20.5 million for the three months ended September 30, 2005, the decrease resulting from lower net premiums earned in 2006. Acquisition costs are principally related to our property and casualty reinsurance and insurance segments. Interest expense for the three months ended September 30, 2006 was ($1.7) million compared to $2.7 million for the same period in 2005, principally attributable to favorable development of $12.0 million on a reinsurance contract that was recorded as a deposit liability. General and administrative expenses for the three months ended September 30, 2006 were $21.6 million compared to $14.5 million for the same period in 2005. General and administrative expenses for the three months ended September 30, 2006 increased principally due to increased personnel costs and additional costs related to the internal investigation. Shareholders' equity was $1,294.5 million at September 30, 2006. Book value per share at September 30, 2006 was $21.74 per share, compared to $20.16 at December 31, 2005. Annualized operating return on average shareholders' equity for the nine months ended September 30, 2006 was 13.8%. 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. This release includes statements about future expectations, plans and prospects of the Company which 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 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 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/A (Amendment no. 2) for the year ended December 31, 2005 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 RE CAPITAL LTD. CONSOLIDATED BALANCE SHEETS (Expressed in thousands of United States Dollars, except per share and share amounts) September 30, December 31, 2006 2005 (Unaudited) (Restated) ASSETS Cash and cash equivalents $327,294 $314,031 Fixed maturities, available for sale at fair value 2,948,285 2,682,864 Alternative investments, at fair value 1,282,710 1,230,889 Accrued interest income 35,597 32,632 Premiums receivable 410,378 398,666 Losses and benefits recoverable from reinsurers 509,421 453,641 Funds withheld 15,570 16,932 Deferred acquisition costs 77,824 69,015 Prepaid reinsurance premiums 102,432 83,493 Other assets 23,754 23,001 Total assets $5,733,265 $5,305,164 LIABILITIES Property and casualty losses $2,238,482 $2,006,032 Life and annuity benefits 886,183 854,224 Deposit liabilities 203,570 225,328 Funds withheld from reinsurers 256,371 271,992 Unearned property and casualty premiums 505,547 442,976 Reinsurance balances payable 83,559 90,781 Accounts payable and accrued expenses 115,007 78,111 Bank loan 150,000 150,000 Total liabilities 4,438,719 4,119,444 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; 59,549,893 (2005 - 58,829,354) shares issued and outstanding 59,550 58,829 Additional paid-in capital 937,089 921,384 Loans receivable from common share sales -- (465) Unearned stock grant compensation (17,832) (14,574) Accumulated other comprehensive income (loss) (11,230) 4,981 Retained earnings 326,969 215,565 Total shareholders' equity 1,294,546 1,185,720 Total liabilities and shareholders' equity $5,733,265 $5,305,164 Book Value Per Share $21.74 $20.16 MAX RE CAPITAL 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 September 30 2006 2005 (Restated) REVENUES Gross premiums written $177,854 $288,047 Reinsurance premiums ceded (39,005) (34,481) Net premiums written $138,849 $253,566 Earned premiums $202,831 $343,437 Earned premiums ceded (55,750) (47,660) Net premiums earned 147,081 295,777 Net investment income 38,668 27,002 Net gains (losses) on alternative investments (31,004) 35,642 Net realized gains (losses) on sale of fixed maturities (288) 1,624 Other income 167 1,088 Total revenues 154,624 361,133 LOSSES AND EXPENSES Losses and benefits 89,186 367,681 Acquisition costs 18,979 20,492 Interest expense (1,650) 2,720 General and administrative expenses 21,612 14,484 Total losses and expenses 128,127 405,377 NET INCOME 26,497 (44,244) Change in net unrealized appreciation of fixed maturities 61,110 (31,393) Foreign currency translation adjustment 2,371 1,011 COMPREHENSIVE INCOME (LOSS) $89,978 $(74,626) Basic earnings (loss) per share $0.45 $(0.96) Diluted earnings (loss) per share $0.42 $(0.96) Diluted net operating earnings (loss) per share $0.42 $(0.99) Weighted average shares outstanding - basic 59,447,853 46,104,424 Weighted average shares outstanding - diluted 63,249,815 46,104,424 Nine Months Ended September 30 2006 2005 (Restated) REVENUES Gross premiums written $717,745 $988,843 Reinsurance premiums ceded (170,406) (130,628) Net premiums written $547,339 $858,215 Earned premiums $658,240 $929,364 Earned premiums ceded (152,213) (132,606) Net premiums earned 506,027 796,758 Net investment income 109,195 75,654 Net gains (losses) on alternative investments 18,219 53,617 Net realized gains (losses) on sale of fixed maturities (7,249) 2,827 Other income 831 3,588 Total revenues 627,023 932,444 LOSSES AND EXPENSES Losses and benefits 380,110 792,436 Acquisition costs 59,369 59,914 Interest expense 6,317 15,916 General and administrative expenses 59,725 42,052 Total losses and expenses 505,521 910,318 NET INCOME 121,502 22,126 Change in net unrealized appreciation of fixed maturities (20,064) (3,660) Foreign currency translation adjustment 3,853 (3,314) COMPREHENSIVE INCOME (LOSS) $105,291 $15,152 Basic earnings (loss) per share $2.05 $0.48 Diluted earnings (loss) per share $1.91 $0.44 Diluted net operating earnings (loss) per share $2.03 $0.39 Weighted average shares outstanding - basic 59,373,409 46,160,067 Weighted average shares outstanding - diluted 63,511,226 49,850,390 MAX RE CAPITAL LTD. CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) (Expressed in thousands of United States Dollars) Nine Months Ended September 30, 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 722 621 Repurchase of shares (1) (335) Balance, end of period 59,550 46,112 Additional paid-in capital Balance, beginning of period 921,384 643,444 Issue of common shares 15,106 11,673 Stock option expense 616 574 Repurchase of shares (17) (7,025) Balance, end of period 937,089 648,666 Loans receivable from common share sales Balance, beginning of period (465) (10,515) Loans repaid 465 10,050 Balance, end of period -- (465) Unearned stock grant compensation Balance, beginning of period (14,574) (13,294) Stock grants awarded (13,052) (10,847) Amortization 9,794 7,416 Balance, end of period (17,832) (16,725) Accumulated other comprehensive income (loss) Balance, beginning of period 4,981 22,227 Holding losses on fixed maturities arising in period (27,313) (833) Net realized losses (gains) included in net income 7,249 (2,827) Currency translation adjustments 3,853 (3,314) Balance, end of period (11,230) 15,253 Retained earnings Balance, beginning of period 215,565 215,015 Net income 121,502 22,126 Dividends paid (10,098) (6,015) Balance, end of period 326,969 231,126 Total shareholders' equity $1,294,546 $923,967 MAX RE CAPITAL LTD. CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) (Expressed in thousands of United States Dollars) Nine Months Ended September 30 2006 2005 (Restated) OPERATING ACTIVITIES Net income $121,502 $22,126 Adjustments to reconcile net income to net cash from operating activities: Amortization of unearned stock based compensation 10,410 7,990 Amortization of premium on fixed maturities 5,053 7,071 Accretion of deposit liabilities (10,474) 2,516 Net realized (gains) losses on sale of fixed maturities 7,249 (2,827) Alternative investments (51,552) (88,928) Accrued interest income (2,965) (5,559) Premiums receivable (11,712) (38,975) Losses and benefits recoverable from reinsurers (55,780) (55,932) Funds withheld 1,362 724 Deferred acquisition costs (8,809) (30,971) Prepaid reinsurance premiums (18,939) 2,961 Other assets (753) 1,950 Property and casualty losses 232,450 308,904 Life and annuity benefits 31,959 198,011 Funds withheld from reinsurers (15,621) (10,399) Unearned property and casualty premiums 62,571 55,347 Reinsurance balances payable (7,222) (2,568) Accounts payable and accrued expenses 36,896 (19,005) Cash from operating activities 325,625 352,436 INVESTING ACTIVITIES Purchase of fixed maturities (852,365) (1,257,224) Sales of fixed maturities 425,485 918,799 Redemptions of fixed maturities 128,824 23,530 Cash used in investing activities (298,056) (314,895) FINANCING ACTIVITIES Net proceeds from issuance of common shares 2,776 1,447 Repurchase of common shares (18) (7,360) Dividends (10,098) (6,015) Additions to deposit liabilities 25,297 9,128 Payment of deposit liabilities (36,581) (53,269) Notes and loans repaid 465 10,050 Cash used in financing activities (18,159) (46,019) Effect of exchange rate on cash 3,853 (3,314) Net increase in cash and cash equivalents 13,263 (11,792) Cash and cash equivalents, beginning of period 314,031 239,188 CASH AND CASH EQUIVALENTS, END OF PERIOD $327,294 $227,396 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Interest paid totaled $9,096 and $5,580 for the nine months ended September 30, 2006 and 2005, respectively. MAX RE CAPITAL LTD. SCHEDULE OF SUPPLEMENTAL DATA - NINE MONTHS TO SEPTEMBER 30, 2006 (Unaudited) Year to Date Segment Information: Property & Casualty (in 000's US$) Reinsurance Insurance Total Gross premiums written $397,481 $276,078 $673,559 Reinsurance premiums ceded (33,653) (136,196) (169,849) Net premiums written $363,828 $139,882 $503,710 Earned premiums $339,880 $274,174 $614,054 Earned premiums ceded (24,471) (127,185) (151,656) Net premiums earned 315,409 146,989 462,398 Net investment income -- -- -- Net gains on alternative investments -- -- -- Net realized losses on sales of fixed maturities -- -- -- Other income -- -- -- Total revenues 315,409 146,989 462,398 Losses and benefits 224,960 83,315 308,275 Acquisition costs 57,360 554 57,914 Interest expense -- -- -- General and administrative expenses 16,957 10,767 27,724 Total losses and expenses 299,277 94,636 393,913 Net income (loss) $16,132 $52,353 $68,485 Loss Ratio (a) 71.3% 56.7% 66.7% Combined Ratio (b) 94.9% 64.4% 85.2% Year to Date Segment Information: Life & Annuity Corporate Consolidated (in 000's US$) Reinsurance Gross premiums written $44,186 $-- $717,745 Reinsurance premiums ceded (557) -- (170,406) Net premiums written $43,629 $-- $547,339 Earned premiums $44,186 $-- $658,240 Earned premiums ceded (557) -- (152,213) Net premiums earned 43,629 -- 506,027 Net investment income -- 109,195 109,195 Net gains on alternative investments -- 18,219 18,219 Net realized losses on sales of fixed maturities -- (7,249) (7,249) Other income -- 831 831 Total revenues 43,629 120,996 627,023 Losses and benefits 71,835 -- 380,110 Acquisition costs 1,455 -- 59,369 Interest expense -- 6,317 6,317 General and administrative expenses 2,169 29,832 59,725 Total losses and expenses 75,459 36,149 505,521 Net income (loss) $(31,830) $84,847 $121,502 Loss Ratio (a) Combined Ratio (b) SCHEDULE OF SUPPLEMENTAL DATA - THREE MONTHS TO SEPTEMBER 30, 2006 (Unaudited) Quarter Segment Information: Property & Casualty (in 000's US$) Reinsurance Insurance Total Gross premiums written $98,708 $78,531 $177,239 Reinsurance premiums ceded (6,130) (32,579) (38,709) Net premiums written $92,578 $45,952 $138,530 Earned premiums $107,209 $95,007 $202,216 Earned premiums ceded (9,164) (46,290) (55,454) Net premiums earned 98,045 48,717 146,762 Net investment income -- -- -- Net losses on alternative investments -- -- -- Net realized losses on sales of fixed maturities -- -- -- Other income -- -- -- Total revenues 98,045 48,717 146,762 Losses and benefits 71,735 8,483 80,218 Acquisition costs 17,957 111 18,068 Interest expense -- -- -- General and administrative expenses 5,985 3,894 9,879 Total losses and expenses 95,677 12,488 108,165 Net income (loss) $2,368 $36,229 $38,597 Loss Ratio (a) 73.2% 17.4% 54.7% Combined Ratio (b) 97.6% 25.6% 73.7% Quarter Segment Information: Life & Annuity Corporate Consolidated (in 000's US$) Reinsurance Gross premiums written $615 $-- $177,854 Reinsurance premiums ceded (296) -- (39,005) Net premiums written $319 $-- $138,849 Earned premiums $615 $-- $202,831 Earned premiums ceded (296) -- (55,750) Net premiums earned 319 -- 147,081 Net investment income -- 38,668 38,668 Net losses on alternative investments -- (31,004) (31,004) Net realized losses on sales of fixed maturities -- (288) (288) Other income -- 167 167 Total revenues 319 7,543 154,624 Losses and benefits 8,968 -- 89,186 Acquisition costs 911 -- 18,979 Interest expense -- (1,650) (1,650) General and administrative expenses 853 10,880 21,612 Total losses and expenses 10,732 9,230 128,127 Net income (loss) $(10,413) $(1,687) $26,497 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. MAX RE CAPITAL LTD. SCHEDULE OF SUPPLEMENTAL DATA - SEPTEMBER 30, 2006 (Unaudited) Periodic Rate of Return Last Last Selected Investment Fair Investment Last Year to 12 60 Return Data: Value* %'s 3 Months Date months months** Cash and Fixed Maturities $3,275,579 71.9% 3.28% 2.79% 3.41% 4.58% Global Macro $85,202 1.9% 1.20% 1.15% 3.13% 9.58% Long / Short Equity 203,189 4.5% -1.17% -2.53% -5.65% 5.02% Diversified Arbitrage 211,268 4.6% -13.61% -6.89% -3.67% 6.22% Distressed Securities 213,576 4.7% 0.82% 9.32% 10.43% 17.55% Opportunistic 28,430 0.6% 2.73% 19.06% 25.63% 14.57% Emerging Markets 134,840 3.0% -0.34% 5.33% 5.79% 15.41% Fixed Income Arbitrage 25,575 0.6% -0.18% 10.87% 8.81% 5.95% Event-Driven Arbitrage 172,317 3.8% -1.16% 2.70% 2.62% 10.05% Commodity Trading Advisers 50,805 1.1% -2.02% -2.70% -2.20% 3.84% Credit Long / Short 116,728 2.6% 1.67% 7.81% 9.42% 8.81% MDS 1,241,929 27.2% -2.72% 1.02% 1.53% 7.93% Reinsurance Private Equity 40,781 0.9% 11.20% 22.11% -22.31% -4.17% Alternative Investments $1,282,710 28.1% -2.33% 1.57% 0.45% 7.39% Total Investments $4,558,289 100.0% 1.64% 2.52% 2.57% 5.64% * Expressed in thousands of United States Dollars **Annualized Contact Information: Keith S. Hynes Executive Vice President & CFO 441-296-8800 N. James Tees Senior Vice President & Treasurer 441-296-8800 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 & CFO, , or N. James Tees, Senior Vice President & Treasurer, , both of Max Re Capital, +1-441-296-8800

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