FORM 10-Q
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
(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, 2003
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.) |
Max Re House
2 Front 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 ¨
Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Act). Yes x No ¨
The number of the Registrant’s common shares (par value $1.00 per share) outstanding as of July 15, 2003 was 38,087,279.
MAX RE CAPITAL LTD.
INDEX
| PAGE | ||||
| PART I—FINANCIAL INFORMATION |
||||
| ITEM 1. |
1 | |||
| Consolidated Balance Sheets as of June 30, 2003 (unaudited) and December 31, 2002 |
1 | |||
| 2 | ||||
| 3 | ||||
| Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002 (unaudited) |
4 | |||
| Notes to the Interim Consolidated Financial Statements (unaudited) |
5 | |||
| ITEM 2. |
Management’s Discussion and Analysis of Financial Condition and Results of Operations |
11 | ||
| ITEM 3. |
18 | |||
| ITEM 4. |
19 | |||
| PART II—OTHER INFORMATION |
20 | |||
| ITEM 1. |
20 | |||
| ITEM 2. |
20 | |||
| ITEM 3. |
20 | |||
| ITEM 4. |
20 | |||
| ITEM 5. |
21 | |||
| ITEM 6. |
21 | |||
| SIGNATURES | S-1 | |||
PART I. FINANCIAL INFORMATION
CONSOLIDATED BALANCE SHEETS
(Expressed in thousands of United States Dollars, except share amounts)
| June 30, 2003 |
December 31, 2002 |
|||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Cash and cash equivalents |
$ | 106,851 | $ | 92,103 | ||||
| Fixed maturities, available for sale at fair value |
1,389,463 | 1,279,564 | ||||||
| Alternative investments, at fair value |
818,030 | 653,165 | ||||||
| Accrued interest income |
12,748 | 12,304 | ||||||
| Premiums receivable |
388,779 | 190,214 | ||||||
| Losses recoverable from reinsurers |
215,719 | 212,241 | ||||||
| Funds withheld |
64,170 | 55,276 | ||||||
| Deferred acquisition costs |
129,175 | 79,447 | ||||||
| Deferred charges |
10,312 | 32,086 | ||||||
| Prepaid reinsurance premiums |
59,529 | 25,408 | ||||||
| Other assets |
17,998 | 11,633 | ||||||
| Total assets |
$ | 3,212,774 | $ | 2,643,441 | ||||
| LIABILITIES |
||||||||
| Property and casualty losses and experience refunds |
$ | 807,281 | $ | 778,069 | ||||
| Life and annuity benefits and experience refunds |
391,691 | 405,008 | ||||||
| Reinsurance balances payable |
253,197 | 194,436 | ||||||
| Deposit liabilities |
237,967 | 115,513 | ||||||
| Unearned property and casualty premiums |
573,601 | 323,672 | ||||||
| Accounts payable and accrued expenses |
22,417 | 16,019 | ||||||
| Bank loan |
150,000 | 100,000 | ||||||
| Total liabilities |
2,436,154 | 1,932,717 | ||||||
| Minority interest |
126,861 | 116,565 | ||||||
| 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 38,087,279 shares issued and outstanding (2002 – 37,998,779) |
38,087 | 37,999 | ||||||
| Additional paid-in capital |
527,567 | 526,582 | ||||||
| Loans receivable from common share sales |
(11,965 | ) | (12,575 | ) | ||||
| Unearned stock grant compensation |
(5,254 | ) | (2,656 | ) | ||||
| Accumulated other comprehensive income |
61,740 | 49,108 | ||||||
| Retained earnings (deficit) |
39,584 | (4,299 | ) | |||||
| Total shareholders’ equity |
649,759 | 594,159 | ||||||
| Total liabilities, minority interest and shareholders’ equity |
$ | 3,212,774 | $ | 2,643,441 | ||||
See accompanying notes to unaudited interim consolidated financial statements.
1
CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)
(Expressed in thousands of United States Dollars, except shares and per share amounts)
| Three Months Ended June 30 |
Six Months Ended June 30 |
|||||||||||||||
| 2003 |
2002 |
2003 |
2002 |
|||||||||||||
| REVENUES |
||||||||||||||||
| Gross premiums written |
$ | 165,767 | $ | 121,538 | $ | 596,313 | $ | 465,432 | ||||||||
| Reinsurance premiums ceded |
(39,186 | ) | (14,879 | ) | (71,039 | ) | (50,778 | ) | ||||||||
| Net premiums written |
$ | 126,581 | $ | 106,659 | $ | 525,274 | $ | 414,654 | ||||||||
| Earned premiums |
$ | 161,377 | $ | 76,186 | $ | 319,441 | $ | 171,960 | ||||||||
| Earned premiums ceded |
(18,072 | ) | (10,887 | ) | (32,408 | ) | (21,188 | ) | ||||||||
| Net premiums earned |
143,305 | 65,299 | 287,033 | 150,772 | ||||||||||||
| Net investment income |
15,061 | 13,389 | 29,568 | 25,804 | ||||||||||||
| Net gains on alternative investments |
45,212 | 2,905 | 67,014 | 5,570 | ||||||||||||
| Net realized gains on sales of fixed maturities |
509 | 2,439 | 2,999 | 2,588 | ||||||||||||
| Other income |
2,212 | 2,144 | 4,215 | 4,040 | ||||||||||||
| Total revenues |
206,299 | 86,176 | 390,829 | 188,774 | ||||||||||||
| LOSSES AND EXPENSES |
||||||||||||||||
| Losses, benefits and experience refunds |
114,371 | 66,875 | 228,834 | 134,388 | ||||||||||||
| Acquisition costs |
35,690 | 14,818 | 74,427 | 39,010 | ||||||||||||
| Interest expense |
8,953 | 5,753 | 14,934 | 7,724 | ||||||||||||
| General and administrative expenses |
10,785 | 4,723 | 18,981 | 10,598 | ||||||||||||
| Total losses and expenses |
169,799 | 92,169 | 337,176 | 191,720 | ||||||||||||
| INCOME (LOSS) BEFORE MINORITY INTEREST |
36,500 | (5,993 | ) | 53,653 | (2,946 | ) | ||||||||||
| Minority interest |
(5,651 | ) | 990 | (8,241 | ) | 545 | ||||||||||
| NET INCOME (LOSS) |
30,849 | (5,003 | ) | 45,412 | (2,401 | ) | ||||||||||
| Change in net unrealized appreciation of fixed maturities |
13,360 | 14,010 | 12,632 | 1,536 | ||||||||||||
| COMPREHENSIVE INCOME (LOSS) |
$ | 44,209 | $ | 9,007 | $ | 58,044 | $ | (865 | ) | |||||||
| Basic earnings (loss) per share |
$ | 0.81 | $ | (0.13 | ) | $ | 1.19 | $ | (0.06 | ) | ||||||
| Diluted earnings (loss) per share |
$ | 0.81 | $ | (0.13 | ) | $ | 1.19 | $ | (0.06 | ) | ||||||
| Weighted average shares outstanding—basic |
38,129,213 | 39,799,258 | 38,118,783 | 39,661,853 | ||||||||||||
| Weighted average shares outstanding—diluted |
45,302,798 | 46,955,512 | 45,252,263 | 46,917,333 | ||||||||||||
See accompanying notes to unaudited interim consolidated financial statements.
2
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (Unaudited)
(Expressed in thousands of United States Dollars)
| Six Months Ended June 30 |
||||||||
| 2003 |
2002 |
|||||||
| Preferred Shares |
||||||||
| Balance, beginning and end of period |
$ | — | $ | — | ||||
| Common shares |
||||||||
| Balance, beginning of period |
37,999 | 39,582 | ||||||
| Issuance of shares |
363 | 262 | ||||||
| Rep | ||||||||