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Table of Contents
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
 
 
FORM 10-Q
 
(Mark One)
[X]    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the quarterly period ended June 30, 2002
 
OR
 
[   ]    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 
For the transition period from                                     to                                 
 
Commission file number 000-33047
 
 
MAX RE CAPITAL LTD.
 
 
(Exact name of registrant as specified in its charter)
 
 
Bermuda
  
Not Applicable
(State or other jurisdiction of incorporation
or organization)
  
(IRS Employer
Identification No.)
 
Ascot House
28 Queen Street
Hamilton, HM 11
Bermuda
(Address of principal executive offices)
(Zip Code)
 
(441) 296-8800
(Registrant’s telephone number, including area code)
 
 
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
 
Yes     x        No    ¨
 
The number of the Registrant’s Common Shares (par value $1.00 per share) outstanding as of June 30, 2002 was 39,597,879.
 
 

Table of Contents
 
MAX RE CAPITAL LTD.
 
INDEX
 
         
PAGE
PART I —FINANCIAL INFORMATION
 
ITEM 1.
   
Financial Statements
   
1
    
Consolidated Balance Sheets as of June 30, 2002 (unaudited) and December 31, 2001
   
1
    
Consolidated Statements of Income and Comprehensive Income for the Three and Six Months Ended June 30, 2002 and 2001 (unaudited)
   
2
    
Consolidated Statements of Changes in Shareholders’ Equity for the Six Months Ended June 30, 2002 and 2001 (unaudited)
   
3
    
Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2002 and 2001 (unaudited)
   
4
       
5
ITEM 2.
      
11
ITEM 3.
      
18
           
PART II—OTHER INFORMATION
   
19
      
ITEM 1.
      
19
ITEM 2.
      
19
ITEM 3.
      
19
ITEM 4.
      
19
ITEM 5.
      
20
ITEM 6.
      
20
           
  
S-1
 

Table of Contents
 
PART I.   FINANCIAL INFORMATION
 
ITEM 1.   Financial Statements
 
MAX RE CAPITAL LTD.
 
CONSOLIDATED BALANCE SHEETS
 
(Expressed in thousands of United States Dollars, except share amounts)
 
    
June 30, 2002
     
December 31, 2001
  
    
(Unaudited)
  
ASSETS
                  
Cash and cash equivalents
   
$
260,539
 
   
$
98,322
 
Fixed maturities, available for sale at fair value
   
 
947,978
 
   
 
884,069
 
Alternative investments, at fair value
   
 
641,228
 
   
 
627,793
 
Accrued interest income
   
 
10,147
 
   
 
10,896
 
Premiums receivable
   
 
250,072
 
   
 
89,607
 
Losses recoverable from reinsurers
   
 
191,537
 
   
 
173,663
 
Funds withheld
   
 
50,945
 
   
 
55,480
 
Deferred acquisition costs
   
 
96,071
 
   
 
39,835
 
Deferred charges
   
 
39,536
 
   
 
44,437
 
Prepaid reinsurance premiums
   
 
46,964
 
   
 
17,373
 
Other assets
   
 
8,421
 
   
 
7,075
 
    
  
Total assets
   
$
2,543,438
 
   
$
2,048,550
 
    
  
LIABILITIES
                  
Life and annuity benefits
   
$
409,536
 
   
$
423,767
 
Property and casualty losses
   
 
640,436
 
   
 
573,421
 
Experience refunds
   
 
3,045
 
   
 
22,956
 
Reinsurance balances payable
   
 
163,114
 
   
 
129,655
 
Deposit liabilities
   
 
116,489
 
   
 
79,389
 
Unearned property and casualty premiums
   
 
404,435
 
   
 
110,963
 
Accounts payable and accrued expenses
   
 
13,520
 
   
 
8,736
 
Bank loan
   
 
100,000
 
   
 
—  
 
    
  
Total liabilities
   
 
1,850,575
 
   
 
1,348,887
 
    
  
Minority interest
   
 
111,149
 
   
 
115,593
 
    
  
SHAREHOLDERS’ EQUITY
                  
Preferred shares
par value $1; 20,000,000 shares authorized no shares issued or outstanding
   
 
—  
 
   
 
—  
 
Common shares
par value $1; 200,000,000 shares authorized 39,597,879 shares issued and outstanding (2001 – 39,582,379)
   
 
39,598
 
   
 
39,582
 
Additional paid-in capital
   
 
543,904
 
   
 
543,438
 
Loans receivable from officers for common share sales
   
 
(12,575
)
   
 
(12,575
)
Unearned stock grant compensation
   
 
(3,278
)
   
 
(2,894
)
Accumulated other comprehensive income
   
 
15,011
 
   
 
13,475
 
Retained earnings (deficit)
   
 
(946
)
   
 
3,044
 
    
  
Total shareholders’ equity
   
 
581,714
 
   
 
584,070
 
    
  
Total liabilities, minority interest and shareholders’ equity
   
$
2,543,438
 
   
$
2,048,550
 
    
  
 
See accompanying notes to unaudited interim consolidated financial statements.

1

Table of Contents
 
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME
(Unaudited)
 
(Expressed in thousands of United States Dollars, except share amounts)
 
    
Three Months Ended
June 30
     
Six Months Ended
June 30
  
    
2002
     
2001
     
2002
     
2001
  
REVENUES
                                    
Gross premiums written
   
$
121,538
 
   
$
152,508
 
   
$
465,432
 
   
$
428,708
 
Reinsurance premiums ceded
   
 
(14,879
)
   
 
(64,698
)
   
 
(50,778
)
   
 
(72,898
)
    
  
  
  
Net premiums written
   
$
106,659
 
   
$
87,810
 
   
$
414,654
 
   
$
355,810
 
    
  
  
  
Earned premiums
   
$
76,186
 
   
$
185,033
 
   
$
171,960
 
   
$
242,314
 
Earned premiums ceded
   
 
(10,887
)
   
 
(38,512
)
   
 
(21,188
)
   
 
(40,562
)
    
  
  
  
Net premiums earned
   
 
65,299
 
   
 
146,521
 
   
 
150,772
 
   
 
201,752
 
Net investment income
   
 
13,389
 
   
 
9,981
 
   
 
25,804
 
   
 
18,754
 
Net gains on alternative investments
   
 
2,905
 
   
 
5,326
 
   
 
5,570
 
   
 
20,117
 
Net realized gains on fixed maturities
   
 
2,439
 
   
 
19
 
   
 
2,588
 
   
 
787
 
Other income
   
 
2,144
 
   
 
1,397
 
   
 
4,040
 
   
 
1,440
 
    
  
  
  
Total revenues
   
 
86,176
 
   
 
163,244
 
   
 
188,774
 
   
 
242,850
 
    
  
  
  
LOSSES AND EXPENSES
                                    
Losses, benefits and experience refunds
   
 
71,717
 
   
 
158,915
 
   
 
141,349
 
   
 
219,582
 
Acquisition costs
   
 
14,818
 
   
 
5,257
 
   
 
39,010
 
   
 
12,450
 
Interest expense
   
 
911
 
   
 
—  
 
   
 
763
 
   
 
—  
 
General and administrative expenses
   
 
4,723
 
   
 
4,537
 
   
 
10,598
 
   
 
9,610
 
    
  
  
  
Total losses and expenses
   
 
92,169
 
   
 
168,709
 
   
 
191,720
 
   
 
241,642
 
    
  
  
  
INCOME (LOSS) BEFORE MINORITY INTEREST
   
 
(5,993
)
   
 
(5,465
)
   
 
(2,946
)
   
 
1,208
 
Minority interest
   
 
990
 
   
 
1,346
 
   
 
545
 
   
 
(134
)
    
  
  
  
NET INCOME (LOSS)
   
 
(5,003
)
   
 
(4,119
)
   
 
(2,401
)
   
 
1,074
 
Change in net unrealized appreciation of fixed maturities
   
 
14,010
 
   
 
(3,349
)
   
 
1,536
 
   
 
841
 
    
  
  
  
COMPREHENSIVE INCOME (LOSS)
   
$
9,007
 
   
$
(7,468
)
   
$
(865
)
   
$
1,915
 
    
  
  
  
Basic earnings (loss) per share
   
$
(0.13
)
   
$
(0.15
)
   
$
(0.06
)
   
$
0.04
 
    
  
  
  
Diluted earnings (loss) per share
   
$
(0.13
)
   
$
(0.15
)
   
$
(0.06
)
   
$
0.04
 
    
  
  
  
Weighted average shares outstanding – basic
   
 
39,799,258
 
   
 
28,273,444
 
   
 
39,661,853
 
   
 
28,049,920
 
    
  
  
  
Weighted average shares outstanding – diluted
   
 
46,955,512
 
   
 
36,819,309
 
   
 
46,917,333
 
   
 
36,049,544