Background
      Max Re Capital was established as Maximus Capital Holdings in July 1999. Part of its mission was to pursue a new insurance investment model. The company’s initial strategy included investing in a combination of traditional fixed income securities and a portfolio of alternative investments managed by Moore Diversified Strategies (MDS), a newly-formed private investment fund.
      The company’s reinsurance products were designed with global appeal for insurance companies and major corporations. Operating activity was focused on finite and specialty risk reinsurance of long-tailed liabilities that carry relatively predictable payout patterns, such as annuities, structured settlements, life insurance, disability income, workers’ compensation and medical malpractice insurance.
      In August 1999 and March 2000, Maximus raised a total of $509 million in two private placements. Maximus had two primary founding investors: Moore Holdings and Capital Z Partners and a number of other strategic investors. In January 2000, Max Re began writing business as a Class 4 Insurer in Bermuda. Max Re Europe was formed in April 2000 to write European business and opened an office in Dublin.
      Early in 2001, in partnership with Bayerische Hypo- und Vereinsbank, Max Re Capital formed Grand Central Re, a Class 4 Bermuda insurance company with initial shareholders’ equity of $200 million. HypoVereinsbank invested $185 million and Max Re Capital invested $15 million for the 7.5 percent of the ordinary shares.
In August 2001, Max Re Capital sold 12 million of its shares at $16 per share through an IPO, producing net proceeds of $179.5 million.
      In January 2002, Max joined RenaissanceRe Holdings, State Farm Mutual Automobile Insurance and others in funding DaVinci Re Holdings Ltd., and its operating subsidiary DaVinci Reinsurance, a global reinsurance company focused primarily on property catastrophe.
In September 2004, Max Re formed a dedicated property division, which provides insurance and reinsurance solutions for large multi-national clients on a worldwide basis, focusing on commercial, industrial, and technical risks.
      Five years after Max Re Capital was formed, the company had total assets of $4.367 billion and shareholders’ equity of $937 million.

Spotlight – Flexibility
       In the fall of 2002, it had become apparent to Max Re Capital’s management that stock markets were not performing as had been hoped when the alternative investment strategy was initiated. The timing of the markets led management to augment its strategy. It was decided to write a greater volume of traditional reinsurance and insurance.
      The change was also prompted by the improvement of insurance rates for traditional business in the aftermath of the events of September 11, 2001. From the beginning, the company had been structured to be flexible, and was in a position to readily adapt to take advantage of market opportunities.
      The move, which came partially in response to client demand, allowed Max Re to focus its efforts on three key areas: structured business, comprising financial reinsurance products, the primary goal of which is to maximise spread through asset management; alternative risk transfer products; and traditional risk transfer, which principally produces returns through the adequate pricing of insurance risk.

Analysis
      Gross premiums written for the six months ended June 30, 2005 were $700.8 million compared to $623.2 million for the first six months of 2004. Property and casualty reinsurance, property and casualty insurance, and life and annuity reinsurance accounted for 49.7 percent, 25.0 percent and 25.3 percent, respectively, of gross premiums written for the first six months of 2005. The 2:1:1 ratio provides a nice balance.
      Net premiums earned for the first six months of 2005 increased by 34.9 percent year-on-year, the increase principally relating to increased life and annuity business written and earned partially offset by lower property and casualty reinsurance premiums earned.
      Net investment income for the six months ended June 30, 2005 increased by $10.1 million, to $48.6 million, compared to $38.5 million for the same period in 2004. For the six months ended June 30, 2005, alternative investments returned 1.46 percent, compared to 4.17 percent for the same period in 2004. The alternative investment strategy that Max Re continues to pursue produces greater volatility in investment earnings.
Invested assets were $3.7 billion as of June 30, 2005, with an allocation of approximately 68.3 percent to cash and fixed maturities and 31.7 percent to alternative investments.
      Losses, benefits and experience refunds for the six months ended June 30, 2005 were $424.8 million, compared to $301.7 million for the same period in 2004.  The increase for the six months ended June 30, 2005 was also principally attributable to the increase in premiums earned.

Senior management
Chairman, president and CEO: Robert Cooney
CFO: Keith Hynes

Financial data
(half-year to June 30, 2005)
Gross premiums written: $701 million, up 13 percent
Net premiums earned: $500 million, up 35 percent
Net income: $59.1 million, up 6 percent
Shareholders’ equity: $1.025 billion, up24 percent

Website
www.maxre.bm