Max Re Capital Reports Record Net Income for 2006

Business Wire, Feb 10, 2007

HAMILTON, Bermuda -- Max Re Capital Ltd. (NASDAQ: MXRE; BSX: MXRE BH) today reported net income for the three months ended December 31, 2006, of $95.4 million, or $1.51 per fully diluted share, versus a net loss of $12.6 million, or $0.22 per fully diluted share, for the three months ended December 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 December 31, 2006, was $93.9 million, or $1.49 per fully diluted share, versus a net operating loss of $9.0 million, or $0.16 per fully diluted share, for the three months ended December 31, 2005. For the year ended December 31, 2006, the Company had net income of $216.9 million, or $3.43 per fully diluted share, compared to $9.5 million, or $0.18 per fully diluted share, for the year ended December 31, 2005. For the year ended December 31, 2006, the Company had net operating income of $222.7 million, or $3.52 per fully diluted share, compared to $10.2 million, or $0.19 per fully diluted share, for the year ended December 31, 2005.

W. Marston Becker, Chairman and Chief Executive Officer of Max Re Capital, said: "Our success in 2006 is largely attributable to our employees' combined energies and discipline, which produced strong underwriting performance across all of our business units. Our balanced specialty insurance and reinsurance focus together with good investment returns produced a year of record earnings and our fourth consecutive year of net profits. With the pending establishment of our U.S. platform, we will be well-positioned to continue our success in 2007."

Gross premiums written for the three months ended December 31, 2006, were $147.5 million, of which $146.6 million came from property and casualty underwriting and $0.9 million from life and annuity underwriting, compared to $257.2 million, of which $251.3 million came from property and casualty underwriting and $5.9 million came from life and annuity underwriting, for the three months ended December 31, 2005. Net premiums earned for the three months ended December 31, 2006, were $159.0 million versus $256.7 million for the same period of 2005. Gross premiums written for the year ended December 31, 2006, were $865.2 million versus $1,246.0 million for the year ended December 31, 2005. Property and casualty reinsurance, property and casualty insurance and life and annuity reinsurance accounted for 49 percent, 46 percent and 5 percent, respectively, of gross premiums written for the year ended December 31, 2006, versus 49 percent, 29 percent and 22 percent, respectively, for the same period in 2005. Net premiums earned in the year ended December 31, 2006, decreased 36.9 percent to $665.0 million, versus $1,053.5 million for the same period in 2005. The decline in gross premiums written and net premiums earned for the year ended December 31, 2006, principally relates to decreased life and annuity business written and earned and lower additional premiums recorded on prior-year contracts in 2006 compared to 2005.

Net investment income for the three months ended December 31, 2006, increased to $40.8 million from $31.2 million for the same period in 2005 and is attributable to a year-over-year increase in cash and fixed-maturity balances and higher yields on fixed-maturity investments. Net investment income for the year ended December 31, 2006, increased $43.2 million, to $150.0 million, versus $106.8 million for the same period in 2005. Net gains on alternative investments for the three months ended December 31, 2006, were $66.5 million, or a 5.31 percent rate of return, versus net losses on alternative investments of $13.7 million, or a negative 1.11 percent rate of return, for the same period in 2005. For the year ended December 31, 2006, alternative investments have returned 6.96 percent, versus 3.34 percent for the same period in 2005. Invested assets were $4.5 billion as of December 31, 2006, with an allocation of approximately 77 percent to cash and fixed maturities and 23 percent to alternative investments.

Losses and benefits were $117.9 million for the three months ended December 31, 2006, versus $247.0 million for the same period in 2005. The decrease in 2006 is principally attributable to lower losses associated with lower premiums earned and the absence of natural catastrophe losses of $23.4 million included in the three months ended December 31, 2005. Losses and benefits for the year ended December 31, 2006, were $498.0 million versus $1,039.5 million for the same period in 2005. The decrease for the year ended December 31, 2006, is principally attributable to the decrease in life and annuity underwriting, favorable development on prior-year general liability insurance reserves in 2006 compared to adverse development on prior-year casualty reinsurance reserves in 2005, and the absence of significant natural catastrophe losses in 2006.

Acquisition costs for the three months ended December 31, 2006, were $19.6 million compared to $16.3 million for the three months ended December 31, 2005. The increase reflects the higher net premiums earned in 2006 compared to 2005 after adjusting net premiums earned in 2005 for additional premiums recorded on prior-year contracts.