Max Capital Group Ltd. Reports Third-Quarter 2009 Earnings

Business Wire

posted: 25 DAYS 2 HOURS AGO

Max Capital Group Ltd. (NASDAQ: MXGL; BSX: MXGL BH) today reported net income of $95.3 million, or $1.64 per diluted share for the quarter ended September 30, 2009, compared to a net loss of $163.2 million, or $2.89 per diluted share for the quarter ended September 30, 2008.

Net operating income for the quarter ended September 30, 2009 was $53.7 million, or $0.92 per diluted share, compared to a net operating loss of $144.7 million, or $2.57 per diluted share for the quarter ended September 30, 2008. Annualized net operating return on average shareholders’ equity for the quarter ended September 30, 2009 was 14.8%.

W. Marston (Marty) Becker, Chairman and Chief Executive Officer of Max Capital Group Ltd., said: “Our strong third quarter results reflect positive underwriting performance from all segments and a significant increase in book value per share. Max’s underwriting results have benefited from the continued build out of our global platforms in both the U.S. and at Lloyd’s, and a benign Atlantic hurricane season. An improvement in the investment market has lifted the fair value of our investment portfolio, contributing to the substantial book value increase for the quarter.”

Highlights for the Quarter Ended September 30, 2009 include:

Gross premiums written increased by $59.6 million (or 28.9%) to $265.9 million, net premiums written increased $72.4 million (or 65.7%) to $182.6 million and net premiums earned increased $66.4 million (or 46.9%) to $208.0 million compared to 2008
Property & casualty combined ratio improved 8.1 percentage points to 90.9% compared to 2008
Net favorable development on prior year loss reserves of $15.2 million
Net gains on other investments of $23.3 million compared to a net loss of $158.8 million in 2008
Net operating income of $53.7 million or $0.92 per diluted share, representing an annualized net operating return on average shareholders’ equity of 14.8%
Book value per diluted share increased by 12.8% during the quarter to $26.54 at September 30, 2009

Gross premiums written from property and casualty underwriting for the quarter ended September 30, 2009 were $265.8 million, generated by the segments as follows: Bermuda/Dublin insurance $81.1 million; Bermuda/Dublin reinsurance $94.1 million; U.S. specialty $69.4 million; and Max at Lloyd’s $21.1 million.

Segment combined ratios were 80.2% for Bermuda/Dublin insurance, 94.9% for Bermuda/Dublin reinsurance, 99.7% for U.S. specialty and 84.2% for Max at Lloyd’s for the quarter ended September 30, 2009.

Gross premiums written increased by $0.2 million (or 0.2%) for Bermuda/Dublin insurance, $21.6 million (or 29.8%) for Bermuda/Dublin reinsurance and $16.5 million (or 31.2%) for U.S. specialty compared with the quarter ended September 30, 2008. There were no new contracts written within the life and annuity segment during the quarters ended September 30, 2009 and 2008.

Highlights for the Nine Months Ended September 30, 2009 include:

Gross premiums written increased $214.5 million (or 24.3%) to $1,096.7 million, net premiums written increased $137.0 million (or 23.5%) to $719.3 million and net premiums earned increased $115.1 million (or 22.5%) to $627.1 million compared to 2008
Property & casualty combined ratio rose 1.4 percentage points to 90.5% compared to 2008
Net favorable development on prior year loss reserves of $47.5 million
Net gains on other investments of $62.7 million compared to a net loss of $145.0 million in 2008
Net operating income of $148.4 million or $2.57 per diluted share, representing an annualized net operating return on average shareholders’ equity of 14.0%
Book value per diluted share increased by 18.2% to $26.54 at September 30, 2009

Gross premiums written from property and casualty underwriting for the nine months ended September 30, 2009 were $1,054.9 million, generated by the segments as follows: Bermuda/Dublin insurance $302.7 million; Bermuda/Dublin reinsurance $422.3 million; U.S. specialty $219.3 million; and Max at Lloyd’s $110.6 million.

Segment combined ratios were 81.6% for Bermuda/Dublin insurance, 93.0% for Bermuda/Dublin reinsurance, 99.5% for U.S. specialty and 89.9% for Max at Lloyd’s for the nine months ended September 30, 2009.

Gross premiums written increased $26.4 million (or 9.6%) for Bermuda/Dublin insurance, $44.8 million (or 11.9%) for Bermuda/Dublin reinsurance and $85.1 million (or 63.4%) for U.S. specialty compared with the nine months ended September 30, 2008. Gross premiums written for the life and annuity segment were $41.7 million for the nine months ended September 30, 2009, a decrease of $52.6 million compared with the nine months ended September 30, 2008.

Special Items

Presented separately from general and administrative expenses is the net benefit associated with the Company’s merger and acquisition activities, which resulted in a gain of $41.4 million and $0.5 million for the three months ended September 30, 2009 and 2008, respectively. On July 9, 2009, the Company received a $50.0 million termination fee in accordance with the terms of the amalgamation agreement with IPC Holdings, Ltd. The net gain of $41.4 million, after deducting $8.6 million of expenses, is included in the Company’s results for the three months ended September 30, 2009.

Investments and Balance Sheet

Cash and fixed maturity investments were $5.0 billion as of September 30, 2009, an increase of $425.5 million from December 31, 2008. Other investments were $389.5 million as of September 30, 2009 representing 7.2% of invested assets, a decrease from 14.1% of invested assets as at December 31, 2008. The Company’s liquidity position at September 30, 2009 is strong, with 70.2% or $3.5 billion of the Company’s $5.0 billion cash and fixed maturities portfolio held in cash, government and government agency-backed securities, or AAA-rated securities. The Company recognized other-than-temporary impairment losses through earnings of $0.1 million for the three months ended September 30, 2009, compared to impairment losses totaling $13.8 million during the same period in 2008. The decline in net investment income from a year ago reflects lower yields on the higher than normal cash and cash equivalents balance held by the Company as it rebalances its asset allocations and positions its portfolios for the changing fixed income markets.

During the quarter ended September 30, 2009, the Company committed to holding certain invested assets to maturity. The resulting ‘held to maturity’ portfolio is recorded at amortized cost, rather than at fair value. The fair value of those securities reclassified as held to maturity was $952.7 million on the date of reclassification, and this became the new cost base. The Company believes this strategy will reduce the volatility to shareholders’ equity caused by the recording of fair value movements within shareholders’ equity. The portfolio’s subsequent unrealized gain in fair value not reflected in the Company’s financial statements was $43.0 million at September 30, 2009, representing an increase to book value of 2.8% at September 30, 2009.

During the three and nine months ended September 30, 2009 the Company has significantly reduced its external borrowings. Total debt has been reduced by $375.0 million from $466.4 million at December 31, 2008 to $91.4 million at September 30, 2009.

Shareholders’ equity was $1,546.7 million at September 30, 2009. Book value per share at September 30, 2009 was $27.13, compared to $24.09 at June 30, 2009, an increase of 12.6%. Diluted book value per share at September 30, 2009 was $26.54 compared to $23.53 at June 30, 2009, an increase of 12.8%.

A copy of the Company’s financial supplement for the third quarter will be available on the Company’s website at www.maxcapgroup.com shortly after the release of earnings.

The Company will host a conference call on Wednesday, November 4, 2009 at 10:00am (ET) to discuss this release with interested investors and shareholders. The conference call can be accessed via telephone by dialing 1-888-679-8035 (toll-free U.S.) or 1-617-213-4848 (international) and using access code 98165506. Live broadcast of the conference call will also be available through the Company’s website at www.maxcapgroup.com.

Operating from offices in Bermuda, Ireland, the USA and at Lloyd's, 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 presenting the Company’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 the Company’s business. These measures, however, should not be viewed as a substitute for those determined in accordance with GAAP. The reconciliation of such measures to their respective most directly comparable GAAP financial measures is presented in the attached financial information in accordance with Regulation G.

This release includes statements about future economic performance, finances, expectations, plans and prospects of Max Capital Group Ltd. 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. For further information regarding cautionary statements and factors affecting future results, please refer to the Company’s most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q filed subsequent to the Annual Report and other documents filed by the Company with the SEC. The Company undertakes no obligation to update or revise publicly 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)

	September 30, 2009		December 31, 2008
	(Unaudited)
ASSETS
Cash and cash equivalents	$	1,056,011	$	949,404
Fixed maturities, trading at fair value		74,337		61,820
Fixed maturities, available for sale at fair value		2,872,146		3,592,039
Fixed maturities, held to maturity at amortized cost (fair value $1,069,245)		1,026,244		-
Other investments, at fair value		389,515		753,658
Accrued interest income		52,145		52,882
Premiums receivable		546,195		554,845
Losses and benefits recoverable from reinsurers		985,614		846,622
Deferred acquisition costs		66,451		51,337
Prepaid reinsurance premiums		206,924		192,889
Trades pending settlement		38,217		85,727
Other assets		114,947		110,772

Total assets	$	7,428,746	$	7,251,995


LIABILITIES
Property and casualty losses	$	3,159,156	$	2,938,171
Life and annuity benefits		1,415,836		1,366,976
Deposit liabilities		152,638		219,260
Funds withheld from reinsurers		142,384		164,157
Unearned property and casualty premiums		676,342		574,134
Reinsurance balances payable		151,615		160,686
Accounts payable and accrued expenses		92,722		81,916
Bank loans		-		375,000
Senior notes		91,379		91,364

Total liabilities		5,882,072		5,971,664


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;
57,013,063 (2008 - 55,805,790) shares issued and outstanding		57,013		55,806
Additional paid-in capital		773,923		763,391
Accumulated other comprehensive income (loss)		41,602		(45,399	)
Retained earnings		674,136		506,533

Total shareholders' equity		1,546,674		1,280,331

Total liabilities and shareholders' equity	$	7,428,746	$	7,251,995

Book Value Per Share	$	27.13	$	22.94

Diluted Book Value Per Share	$	26.54	$	22.46

Diluted Shares Outstanding		58,272,865		57,017,157

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 September 30						Nine Months Ended September 30
		2009			2008			2009			2008
REVENUES
Gross premiums written	$	265,886		$	206,260		$	1,096,668		$	882,186
Reinsurance premiums ceded		(83,290	)		(96,061	)		(377,338	)		(299,851	)
Net premiums written	$	182,596		$	110,199		$	719,330		$	582,335

Earned premiums	$	329,869		$	238,378		$	993,871		$	760,676
Earned premiums ceded		(121,853	)		(96,789	)		(366,788	)		(248,665	)
Net premiums earned		208,016			141,589			627,083			512,011

Net investment income		42,830			45,265			125,073			137,398
Net gains (losses) on other investments		23,275			(158,756	)		62,693			(144,990	)
Net realized gains (losses) on fixed maturities		1,253			(3,793	)		1,747			(1,024	)

Total other-than-temporary impairment losses		-			(13,757	)		(5,190	)		(16,887	)
Portion of loss recognized in other comprehensive income (loss), before taxes		(139	)		-			3,037			-
Net impairment losses recognized in earnings		(139	)		(13,757	)		(2,153	)		(16,887	)

Other income		819			(423	)		3,099			1,001

Total revenues		276,054			10,125			817,542			487,509

LOSSES AND EXPENSES
Net losses and loss expenses		131,778			106,834			378,729			278,585
Claims and policy benefits		14,378			14,000			84,117			137,175
Acquisition costs		27,997			13,896			73,686			35,743
Interest expense		5,971			4,501			14,654			20,547
Net foreign exchange losses (gains)		406			1,971			(6,474	)		1,984
Merger and acquisition expenses		(41,350	)		(500	)		(31,342	)		3,488
General and administrative expenses		40,372			31,837			115,537			90,048

Total losses and expenses		179,552			172,539			628,907			567,570

INCOME (LOSS) BEFORE TAXES		96,502			(162,414	)		188,635			(80,061	)

Income tax expense		1,176			773			5,012			1,174

NET INCOME (LOSS)		95,326			(163,187	)		183,623			(81,235	)

Change in net unrealized gains and losses on fixed maturities, net of tax		95,794			(40,127	)		66,629			(108,939	)
Foreign currency translation adjustment		(4,462	)		(9,116	)		20,372			(17,469	)

COMPREHENSIVE INCOME (LOSS)	$	186,658		$	(212,430	)	$	270,624		$	(207,643	)

Net income per share - basic	$	1.67		$	(2.89	)	$	3.22		$	(1.43	)
Net income per diluted share (1)	$	1.64		$	(2.89	)	$	3.18		$	(1.43	)
Net operating income per diluted share	$	0.92		$	(2.57	)	$	2.57		$	(1.03	)

Weighted average shares outstanding - basic		57,233,115			56,385,134			56,978,901			56,660,457
Weighted average shares outstanding - diluted (1)		58,210,501			56,385,134			57,677,996			56,660,457


(1) In accordance with U.S. generally accepted accounting principles, diluted earnings per share calculations use weighted average common
shares outstanding - basic, for periods with a net loss

MAX CAPITAL GROUP LTD.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited)
(Expressed in thousands of United States Dollars)

		Nine Months Ended September 30
			2009			2008
Common shares
	Balance, beginning of period	$	55,806		$	57,515
	Issuance of common shares, net		1,529			2,315
	Repurchase of shares		(322	)		(3,860	)
	Balance, end of period		57,013			55,970

Additional paid-in capital
	Balance, beginning of period		763,391			844,455
	Issuance of common shares, net		457			2,677
	Stock based compensation expense		16,124			14,726
	Repurchase of shares		(6,049	)		(102,380	)
	Balance, end of period		773,923			759,478

Accumulated other comprehensive income (loss)
	Balance, beginning of period		(45,399	)		(20,341	)
	Holding gains (losses) on available for sale securities arising in period, net of tax		66,650			(122,677	)
	Net realized losses on available for sale securities included in net income, net of tax		3,016			13,738
	Portion of other-than-temporary impairment losses recognised in other comprehensive income, net of tax		(3,037	)		-
	Foreign currency translation adjustment		20,372			(17,469	)
	Balance, end of period		41,602			(146,749	)

Retained earnings
	Balance, beginning of period		506,533			702,265
	Net income (loss)		183,623			(81,235	)
	Dividends paid		(16,020	)		(15,247	)
	Balance, end of period		674,136			605,783

Total shareholders' equity		$	1,546,674		$	1,274,482

MAX CAPITAL GROUP LTD.

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
(Expressed in thousands of United States Dollars)

		Nine Months Ended September 30
			2009			2008
OPERATING ACTIVITIES
Net income (loss)		$	183,623		$	(81,235	)
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
	Stock based compensation		16,124			14,726
	Amortization of premium on fixed maturities		2,503			3,771
	Accretion of deposit liabilities		2,078			3,649
	Net (gains) losses on other investments		(62,693	)		144,990
	Net realized (gains) losses on fixed maturities		(1,747	)		1,024
	Net impairment losses recognized in earnings		2,153			16,887
Changes in:
	Accrued interest income		820			1,461
	Premiums receivable		12,894			(72,295	)
	Losses and benefits recoverable from reinsurers		(130,985	)		(140,869	)
	Deferred acquisition costs		(13,645	)		(7,381	)
	Prepaid reinsurance premiums		(11,907	)		(51,004	)
	Other assets		(2,624	)		17,135
	Property and casualty losses		183,163			247,334
	Life and annuity benefits		508			55,057
	Funds withheld from reinsurers		(21,773	)		(10,306	)
	Unearned property and casualty premiums		92,046			121,510
	Reinsurance balances payable		(10,515	)		48,358
	Accounts payable and accrued expenses		9,828			36,821

Cash provided by operating activities			249,851			349,633

INVESTING ACTIVITIES
	Purchases of available for sale securities		(783,451	)		(630,760	)
	Sales of available for sale securities		175,465			261,290
	Redemptions of available for sale securities		479,310			441,634
	Purchases of trading securities		(40,691	)		-
	Sales of trading securities		28,887			-
	Redemptions of trading securities		5,094			-
	Purchases of held to maturity securities		(33,647	)		-
	Net sales of other investments		462,501			28,251
	Acquisition of subsidiary, net of cash acquired		-			(29,941	)

Cash provided by investing activities			293,468			70,474

FINANCING ACTIVITIES
	Net proceeds from issuance of common shares		1,986			4,992
	Repurchase of common shares		(6,371	)		(106,240	)
	Net repayments of bank loans		(375,000	)		(35,000	)
	Dividends paid		(16,020	)		(15,247	)
	Additions to deposit liabilities		12,422			15,762
	Payment of deposit liabilities		(80,748	)		(21,011	)

Cash used in financing activities			(463,731	)		(156,744	)

Effect of exchange rate on cash			27,019			(8,090	)

Net increase in cash and cash equivalents			106,607			255,273

Cash and cash equivalents, beginning of period			949,404			397,656

CASH AND CASH EQUIVALENTS, END OF PERIOD		$	1,056,011		$	652,929

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Interest paid totaled $4,943 and $14,892 for the nine months ended September 30, 2009 and 2008, respectively.
Corporate taxes paid totaled $310 and $185 for the nine months ended September 30, 2009 and 2008, respectively.

MAX CAPITAL GROUP LTD.

SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–NINE MONTHS ENDED SEPTEMBER 30, 2009 (Unaudited)
(Expressed in thousands of United States Dollars)

Year to Date Segment Information:	Property & Casualty															Life & Annuity			Corporate			Consolidated
	Bermuda/Dublin
	Insurance			Reinsurance			U.S. Specialty			Max at Lloyd's			Total			Reinsurance

Gross premiums written	$	302,727		$	422,296		$	219,268		$	110,629		$	1,054,920		$	41,748		$	-		$	1,096,668
Reinsurance premiums ceded		(146,076	)		(80,574	)		(118,579	)		(31,963	)		(377,192	)		(146	)		-			(377,338	)
Net premiums written	$	156,651		$	341,722		$	100,689		$	78,666		$	677,728		$	41,602		$	-		$	719,330

Earned premiums	$	307,709		$	364,994		$	185,609		$	93,811		$	952,123		$	41,748		$	-		$	993,871
Earned premiums ceded		(157,710	)		(74,711	)		(111,682	)		(22,539	)		(366,642	)		(146	)		-			(366,788	)
Net premiums earned		149,999			290,283			73,927			71,272			585,481			41,602			-			627,083

Net investment income		16,861			29,607			4,549			3,216			54,233			37,626			33,214			125,073
Net gains on other investments		3,537			8,467			-			-			12,004			29,146			21,543			62,693
Net realized gains (losses) on fixed maturities		-			-			148			2,587			2,735			-			(988	)		1,747
Net impairment losses recognized in earnings		-			-			-			-			-			-			(2,153	)		(2,153	)
Other income		1,238			12			272			475			1,997			-			1,102			3,099

Total revenues		171,635			328,369			78,896			77,550			656,450			108,374			52,718			817,542

Net losses and loss expenses		106,029			192,756			46,500			33,444			378,729			-			-			378,729
Claims and policy benefits		-			-			-			-			-			84,117			-			84,117
Acquisition costs		(1,503	)		53,496			5,873			14,797			72,663			1,023			-			73,686
Interest expense		-			2,400			-			-			2,400			2,803			9,451			14,654
Net foreign exchange gains		-			-			-			(5,124	)		(5,124	)		-			(1,350	)		(6,474	)
Merger and acquisition expenses		-			-			-			-			-			-			(31,342	)		(31,342	)
General and administrative expenses		17,825			23,604			21,195			15,856			78,480			2,180			34,877			115,537
Total losses and expenses		122,351			272,256			73,568			58,973			527,148			90,123			11,636			628,907

Income before taxes	$	49,284		$	56,113		$	5,328		$	18,577		$	129,302		$	18,251		$	41,082		$	188,635

Loss Ratio (a)		70.7	%		66.4	%		62.9	%		46.9	%		64.7	%
Combined Ratio (b)		81.6	%		93.0	%		99.5	%		89.9	%		90.5	%

SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–THREE MONTHS ENDED SEPTEMBER 30, 2009 (Unaudited)
(Expressed in thousands of United States Dollars)

Quarter Segment Information:	Property & Casualty															Life & Annuity			Corporate			Consolidated
	Bermuda/Dublin
	Insurance			Reinsurance			U.S. Specialty			Max at Lloyd's			Total			Reinsurance

Gross premiums written	$	81,134		$	94,118		$	69,419		$	21,087		$	265,758		$	128		$	-		$	265,886
Reinsurance premiums ceded		(41,884	)		(11,106	)		(26,259	)		(4,015	)		(83,264	)		(26	)		-			(83,290	)
Net premiums written	$	39,250		$	83,012		$	43,160		$	17,072		$	182,494		$	102		$	-		$	182,596

Earned premiums	$	103,961		$	128,458		$	68,175		$	29,147		$	329,741		$	128		$	-		$	329,869
Earned premiums ceded		(54,814	)		(25,367	)		(37,074	)		(4,572	)		(121,827	)		(26	)		-			(121,853	)
Net premiums earned		49,147			103,091			31,101			24,575			207,914			102			-			208,016

Net investment income		5,898			10,404			1,461			1,749			19,512			13,143			10,175			42,830
Net gains on other investments		1,298			3,040			-			-			4,338			11,932			7,005			23,275
Net realized gains (losses) on fixed maturities		-			-			-			1,400			1,400			-			(147	)		1,253
Net impairment losses recognized in earnings		-			-			-			-			-			-			(139	)		(139	)
Other income		91			-			52			(33	)		110			-			709			819

Total revenues		56,434			116,535			32,614			27,691			233,274			25,177			17,603			276,054

Net losses and loss expenses		31,756			68,728			21,266			10,028			131,778			-			-			131,778
Claims and policy benefits		-			-			-			-			-			14,378			-			14,378
Acquisition costs		369			20,299			1,926			5,250			27,844			153			-			27,997
Interest expense		-			1,706			-			-			1,706			2,349			1,916			5,971
Net foreign exchange losses		-			-			-			42			42			-			364			406
Merger and acquisition expenses		-			-			-			-			-			-			(41,350	)		(41,350	)
General and administrative expenses		7,281			8,857			7,804			5,423			29,365			829			10,178			40,372
Total losses and expenses		39,406			99,590			30,996			20,743			190,735			17,709			(28,892	)		179,552

Income before taxes	$	17,028		$	16,945		$	1,618		$	6,948		$	42,539		$	7,468		$	46,495		$	96,502

Loss Ratio (a)		64.6	%		66.7	%		68.4	%		40.8	%		63.4	%
Combined Ratio (b)		80.2	%		94.9	%		99.7	%		84.2	%		90.9	%

(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 UNDERWRITING DATA–NINE MONTHS ENDED SEPTEMBER 30, 2008 (Unaudited)
(Expressed in thousands of United States Dollars)

Year to Date Segment Information:	Property & Casualty														Life & Annuity			Corporate			Consolidated
	Bermuda/Dublin
	Insurance			Reinsurance			U.S. Specialty			Max at Lloyd's (c)		Total			Reinsurance

Gross premiums written	$	276,288		$	377,485		$	134,162		$	-	$	787,935		$	94,251		$	-		$	882,186
Reinsurance premiums ceded		(133,099	)		(85,133	)		(81,334	)		-		(299,566	)		(285	)		-			(299,851	)
Net premiums written	$	143,189		$	292,352		$	52,828		$	-	$	488,369		$	93,966		$	-		$	582,335

Earned premiums	$	278,092		$	310,663		$	77,670		$	-	$	666,425		$	94,251		$	-		$	760,676
Earned premiums ceded		(140,991	)		(57,817	)		(49,571	)		-		(248,379	)		(286	)		-			(248,665	)
Net premiums earned		137,101			252,846			28,099			-		418,046			93,965			-			512,011

Net investment income		13,313			27,797			5,563			-		46,673			29,932			60,793			137,398
Net losses on other investments		(13,576	)		(29,638	)		-			-		(43,214	)		(58,751	)		(43,025	)		(144,990	)
Net realized losses on fixed maturities		-			-			(523	)		-		(523	)		-			(501	)		(1,024	)
Net impairment losses recognized in earnings		-			-			-			-		-			-			(16,887	)		(16,887	)
Other income		1,112			-			140			-		1,252			-			(251	)		1,001

Total revenues		137,950			251,005			33,279			-		422,234			65,146			129			487,509

Net losses and loss expenses		108,819			150,326			19,440			-		278,585			-			-			278,585
Claims and policy benefits		-			-			-			-		-			137,175			-			137,175
Acquisition costs		(1,945	)		35,174			2,058			-		35,287			456			-			35,743
Interest expense		-			2,382			-			-		2,382			2,096			16,069			20,547
Net foreign exchange losses		-			-			-			-		-			-			1,984			1,984
Merger and acquisition expenses		-			-			-			-		-			-			3,488			3,488
General and administrative expenses		16,052			21,981			20,599			-		58,632			2,273			29,143			90,048
Total losses and expenses		122,926			209,863			42,097			-		374,886			142,000			50,684			567,570

Income (loss) before taxes	$	15,024		$	41,142		$	(8,818	)	$	-	$	47,348		$	(76,854	)	$	(50,555	)	$	(80,061	)

Loss Ratio (a)		79.4	%		59.5	%		69.2	%				66.6	%
Combined Ratio (b)		89.7	%		82.1	%		149.8	%				89.1	%

SCHEDULE OF SUPPLEMENTAL UNDERWRITING DATA–THREE MONTHS ENDED SEPTEMBER 30, 2008 (Unaudited)
(Expressed in thousands of United States Dollars)

Quarter Segment Information:	Property & Casualty														Life & Annuity			Corporate			Consolidated
	Bermuda/Dublin
	Insurance			Reinsurance			U.S. Specialty			Max at Lloyd's (c)		Total			Reinsurance

Gross premiums written	$	80,908		$	72,458		$	52,894		$	-	$	206,260		$	-		$	-		$	206,260
Reinsurance premiums ceded		(38,316	)		(27,210	)		(30,535	)		-		(96,061	)		-			-			(96,061	)
Net premiums written	$	42,592		$	45,248		$	22,359		$	-	$	110,199		$	-		$	-		$	110,199

Earned premiums	$	93,264		$	110,132		$	34,982		$	-	$	238,378		$	-		$	-		$	238,378
Earned premiums ceded		(47,013	)		(28,054	)		(21,722	)		-		(96,789	)		-			-			(96,789	)
Net premiums earned		46,251			82,078			13,260			-		141,589			-			-			141,589

Net investment income		4,933			8,360			1,753			-		15,046			9,347			20,872			45,265
Net losses on other investments		(14,937	)		(32,637	)		-			-		(47,574	)		(65,286	)		(45,896	)		(158,756	)
Net realized losses on fixed maturities		-			-			(523	)		-		(523	)		-			(3,270	)		(3,793	)
Net impairment losses recognized in earnings		-			-			-			-		-			-			(13,757	)		(13,757	)
Other income		-			-			140			-		140			-			(563	)		(423	)

Total revenues		36,247			57,801			14,630			-		108,678			(55,939	)		(42,614	)		10,125

Net losses and loss expenses		39,014			58,990			8,830			-		106,834			-			-			106,834
Claims and policy benefits		-			-			-			-		-			14,000			-			14,000
Acquisition costs		(743	)		12,668			1,773			-		13,698			198			-			13,896
Interest expense		-			(63	)		-			-		(63	)		(148	)		4,712			4,501
Net foreign exchange losses		-			-			-			-		-			-			1,971			1,971
Merger and acquisition expenses		-			-			-			-		-			-			(500	)		(500	)
General and administrative expenses		5,200			6,186			8,323			-		19,709			782			11,346			31,837
Total losses and expenses		43,471			77,781			18,926			-		140,178			14,832			17,529			172,539

Loss before taxes	$	(7,224	)	$	(19,980	)	$	(4,296	)	$	-	$	(31,500	)	$	(70,771	)	$	(60,143	)	$	(162,414	)

Loss Ratio (a)		84.4	%		71.9	%		66.6	%				75.5	%
Combined Ratio (b)		94.0	%		94.8	%		142.7	%				99.0	%

(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.
(c)		The results of operations for the Max at Lloyd's segment are consolidated only from the November 6, 2008 date of acquisition.

MAX CAPITAL GROUP LTD.

SCHEDULE OF SUPPLEMENTAL PREMIUM DATA–NINE MONTHS ENDED SEPTEMBER 30, 2009 (Unaudited)
(Expressed in thousands of United States Dollars)

	Gross Premiums Written by Type of Risk:			Nine Months Ended September 30, 2009						Nine Months Ended September 30, 2008
				Gross Premiums Written		Percentage of Total Gross Premiums Written		Movement on Prior Year Period		Gross Premiums Written		Percentage of Total Gross Premiums Written
	Property & Casualty:
		Bermuda/Dublin Insurance:
			Aviation	$	30,314	2.8	%	38.6	%	$	21,870	2.5	%
			Excess Liability		87,084	7.9	%	(9.8	%)		96,557	10.9	%
			Professional Liability		134,845	12.3	%	15.7	%		116,565	13.2	%
			Property		50,484	4.6	%	22.2	%		41,296	4.7	%
					302,727	27.6	%	9.6	%		276,288	31.3	%
		Bermuda/Dublin Reinsurance:
			Agriculture		87,338	8.0	%	8.9	%		80,220	9.1	%
			Aviation		25,335	2.3	%	(8.7	%)		27,746	3.1	%
			General Casualty		23,404	2.1	%	184.1	%		8,239	1.0	%
			Marine & Energy		14,722	1.3	%	86.5	%		7,892	0.9	%
			Medical Malpractice		56,397	5.1	%	(12.6	%)		64,555	7.3	%
			Other		2,268	0.2	%	(20.4	%)		2,849	0.3	%
			Professional Liability		45,922	4.2	%	56.7	%		29,306	3.3	%
			Property		89,414	8.2	%	(8.6	%)		97,774	11.1	%
			Whole Account		8,509	0.8	%	(18.8	%)		10,481	1.2	%
			Workers' Compensation		68,987	6.3	%	42.5	%		48,423	5.5	%
					422,296	38.5	%	11.9	%		377,485	42.8	%
		U.S. Specialty:
			General Casualty		69,026	6.3	%	61.1	%		42,849	4.9	%
			Marine		45,917	4.2	%	78.5	%		25,723	2.9	%
			Property		104,325	9.5	%	59.1	%		65,590	7.4	%
					219,268	20.0	%	63.4	%		134,162	15.2	%
		Max at Lloyd's (a):
			Accident & Health		21,357	2.0	%	n/a			-	-
			Financial Institutions		18,376	1.7	%	n/a			-	-
			Professional Liability		14,599	1.3	%	n/a			-	-
			Property		56,297	5.1	%	n/a			-	-
					110,629	10.1	%	n/a			-	-

	Aggregate Property & Casualty			$	1,054,920	96.2	%	33.9	%	$	787,935	89.3	%

	Life & Annuity:
			Annuity	$	-	-		n/a		$	92,821	10.5	%
			Life		41,748	3.8	%	n/a			1,430	0.2	%

	Aggregate Life & Annuity			$	41,748	3.8	%	(55.7	%)	$	94,251	10.7	%

	Aggregate P&C and Life & Annuity			$	1,096,668	100.0	%	24.3	%	$	882,186	100.0	%

(a)		The results of operations for the Max at Lloyd's segment are consolidated only from November 6, 2008,
		the date Max at Lloyd's was acquired

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 September 30							Nine Months Ended September 30
			2009			2008			2009			2008

Net income (loss)		$	95,326		$	(163,187	)	$	183,623		$	(81,235	)
	Net realized (gains) losses on fixed maturities, net of tax		(711	)		17,065			1,166			17,532
	Foreign exchange losses (gains), net of tax		395			1,971			(5,043	)		1,984
	Merger and acquisition expenses, net of tax		(41,350	)		(500	)		(31,342	)		3,488
Net operating income (loss)		$	53,660		$	(144,651	)	$	148,404		$	(58,231	)

Net income (loss) per diluted share		$	1.64		$	(2.89	)	$	3.18		$	(1.43	)
	Net realized (gains) losses on fixed maturities, net of tax		(0.01	)		0.30			0.02			0.31
	Foreign exchange losses (gains), net of tax		0.01			0.03			(0.09	)		0.03
	Merger and acquisition expenses, net of tax		(0.72	)		(0.01	)		(0.54	)		0.06
Net operating income (loss) per diluted share		$	0.92		$	(2.57	)	$	2.57		$	(1.03	)

Weighted average shares outstanding - basic			57,233,115			56,385,134			56,978,901			56,660,457
Weighted average shares outstanding - diluted (1)			58,210,501			56,385,134			57,677,996			56,660,457

(1) In accordance with U.S. generally accepted accounting principles, diluted earnings per share calculations use weighted average common shares outstanding - basic, for periods with a net loss


Annualized Return and Annualized Net Operating Return on Average Shareholders' Equity
(Expressed in thousands of United States Dollars)
		Three Months Ended September 30						Nine Months Ended September 30
			2009			2008			2009			2008

Net income (loss)		$	95,326		$	(163,187	)	$	183,623		$	(81,235	)
Annualized net income (loss)			381,304			(652,748	)		244,831			(108,313	)

Net operating income (loss)		$	53,660		$	(144,651	)	$	148,404		$	(58,231	)
Annualized net operating income (loss)			214,640			(578,604	)		197,872			(77,641	)

Beginning shareholders' equity		$	1,363,469		$	1,489,556		$	1,280,331		$	1,583,894
Ending shareholders' equity			1,546,674			1,274,482			1,546,674			1,274,482
Average shareholders' equity			1,455,072			1,382,019			1,413,503			1,429,188

Annualized return on average shareholders' equity			26.2	%		(47.2	%)		17.3	%		(7.6	%)
Annualized net operating return on average shareholders' equity			14.8	%		(41.9	%)		14.0	%		(5.4	%)

MAX CAPITAL GROUP LTD.

SCHEDULE OF SUPPLEMENTAL INVESTMENT DATA–NINE MONTHS ENDED SEPTEMBER 30, 2009 (Unaudited)

Selected Investment Return Data:
			Investment		Credit						As at September 30, 2009			Ratings
Expressed in thousands of United States Dollars	As at September 30, 2009		Distribution		Rating									Distribution

Cash and Cash Equivalents	$	1,056,011	19.5	%	U.S. Government and Agencies (1)						$	1,047,968		26.4	%
					AAA							677,434		17.1	%
U.S. Government and Agencies		437,967	8.1	%	AA							305,040		7.7	%
Non-U.S. Government		100,363	1.9	%	A							650,756		16.4	%
Corporate Securities		1,210,951	22.3	%	BBB							143,337		3.6	%
Municipal Securities		68,630	1.3	%	BB							32,607		0.8	%
Asset-Backed Securities		151,299	2.8	%	B or lower							89,341		2.2	%
Residential Mortgage-Backed Securities		689,497	12.7	%	Fixed Maturities at fair value						$	2,946,483		74.2	%
Commercial Mortgage-Backed Securities		287,776	5.3	%
					U.S. Government and Agencies						$	14,041		0.3	%
Fixed Maturities at fair value	$	2,946,483	54.4	%	AAA							733,276		18.5	%
					AA							106,383		2.7	%
					A							158,387		4.0	%
U.S. Government and Agencies	$	14,041	0.2	%	BBB							12,685		0.3	%
Non-U.S. Government		585,906	10.8	%	BB							-		0.0	%
Corporate Securities		426,297	7.9	%	B or lower							1,472		0.0	%
					Fixed Maturities at amortised cost						$	1,026,244		25.8	%
Fixed Maturities at amortised cost	$	1,026,244	18.9	%
					Total Fixed Maturities						$	3,972,727

					Periodic Rate of Return
					Last		Year		Last		Last
					3 Months		to Date		12 months		60 months*

Cash and Fixed Maturities	$	5,028,738	92.8	%	4.31	%	5.46	%	9.63	%		4.62	%

Convertible Arbitrage	$	-	0.0	%	0.00	%	16.99	%	19.28	%		(0.41	%)
Distressed Securities		75,003	1.4	%	8.90	%	13.74	%	2.09	%		8.53	%
Diversified Arbitrage		35,289	0.7	%	4.42	%	7.85	%	(12.54	%)		(2.39	%)
Emerging Markets		29,174	0.5	%	10.09	%	32.09	%	3.64	%		8.33	%
Event-Driven Arbitrage		56,110	1.0	%	4.30	%	16.46	%	(4.57	%)		7.02	%
Fixed Income Arbitrage		17,029	0.3	%	3.62	%	16.30	%	22.64	%		12.70	%
Global Macro		43,634	0.8	%	1.86	%	8.50	%	8.46	%		6.50	%
Long / Short Credit		11,083	0.2	%	6.47	%	17.40	%	7.03	%		6.65	%
Long / Short Equity		116,893	2.2	%	4.67	%	10.52	%	9.02	%		5.48	%
Opportunistic		2,772	0.1	%	(5.31	%)	(32.64	%)	(49.74	%)		(3.58	%)

Hedge Funds **		386,987	7.2	%	3.94	%	9.36	%	0.27	%		4.08	%

Reinsurance Private Equity		2,528	0.0	%	3.05	%	10.88	%	9.16	%		14.15	%

Other Investments	$	389,515	7.2	%	3.94	%	9.38	%	0.32	%		3.76	%

Total Investments	$	5,418,253	100.0	%	4.26	%	6.04	%	7.66	%		4.79	%