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, 2004
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 Exchange Act).
Yes x No ¨
The number of the Registrant’s common shares (par value $1.00 per share) outstanding as of July 15, 2004 was 45,737,611.
MAX RE CAPITAL LTD.
| PAGE | ||||
| PART I—FINANCIAL INFORMATION |
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| ITEM 1. |
1 | |||
| Consolidated Balance Sheets as of June 30, 2004 (unaudited) and December 31, 2003 |
1 | |||
| 2 | ||||
| 3 | ||||
| Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2004 and 2003 (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 |
10 | ||
| ITEM 3. |
16 | |||
| ITEM 4. |
17 | |||
| 18 | ||||
| ITEM 1. |
18 | |||
| ITEM 2. |
Changes in Securities, Use of Proceeds and Issuer Purchase of Equity Securities |
18 | ||
| ITEM 3. |
18 | |||
| ITEM 4. |
18 | |||
| ITEM 5. |
19 | |||
| ITEM 6. |
19 | |||
| S-1 | ||||
PART I. FINANCIAL INFORMATION
| ITEM 1. | Financial Statements |
MAX RE CAPITAL LTD.
(Expressed in thousands of United States Dollars, except share amounts)
| June 30, 2004 |
December 31, 2003 |
|||||||
| (Unaudited) | ||||||||
| ASSETS |
||||||||
| Cash and cash equivalents |
$ | 243,294 | $ | 201,515 | ||||
| Fixed maturities, available for sale at fair value |
1,682,150 | 1,604,430 | ||||||
| Alternative investments, at fair value |
1,016,221 | 831,359 | ||||||
| Accrued interest income |
16,569 | 14,608 | ||||||
| Premiums receivable |
388,951 | 389,393 | ||||||
| Losses recoverable from reinsurers |
330,214 | 273,711 | ||||||
| Funds withheld |
18,070 | 56 | ||||||
| Deferred acquisition costs |
111,134 | 87,116 | ||||||
| Deferred charges |
8,827 | 5,259 | ||||||
| Prepaid reinsurance premiums |
87,899 | 67,343 | ||||||
| Other assets |
27,715 | 20,769 | ||||||
| Total assets |
$ | 3,931,044 | $ | 3,495,559 | ||||
| LIABILITIES |
||||||||
| Property and casualty losses and experience refunds |
$ | 1,260,923 | $ | 991,687 | ||||
| Life and annuity benefits and experience refunds |
464,486 | 480,099 | ||||||
| Deposit liabilities |
242,505 | 267,350 | ||||||
| Funds withheld from reinsurers |
258,740 | 213,483 | ||||||
| Unearned property and casualty premiums |
654,150 | 471,625 | ||||||
| Reinsurance balances payable |
50,471 | 74,693 | ||||||
| Accounts payable and accrued expenses |
23,648 | 41,392 | ||||||
| Bank loan |
150,000 | 150,000 | ||||||
| Total liabilities |
3,104,923 | 2,690,329 | ||||||
| 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; 45,737,611 shares issued and outstanding (2003 – 45,184,611) |
45,738 | 45,185 | ||||||
| Additional paid-in capital |
650,715 | 637,772 | ||||||
| Loans receivable from common share sales |
(10,965 | ) | (11,965 | ) | ||||
| Unearned stock grant compensation |
(14,000 | ) | (4,032 | ) | ||||
| Accumulated other comprehensive income (loss) |
(10,737 | ) | 25,790 | |||||
| Retained earnings |
165,370 | 112,480 | ||||||
| Total shareholders’ equity |
826,121 | 805,230 | ||||||
| Total liabilities and shareholders’ equity |
$ | 3,931,044 | $ | 3,495,559 | ||||
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 |
|||||||||||||||
| 2004 |
2003 |
2004 |
2003 |
|||||||||||||
| REVENUES |
||||||||||||||||
| Gross premiums written |
$ | 183,654 | $ | 165,767 | $ | 623,185 | $ | 596,313 | ||||||||
| Reinsurance premiums ceded |
(47,567 | ) | (39,186 | ) | (90,353 | ) | (71,039 | ) | ||||||||
| Net premiums written |
$ | 136,087 | $ | 126,581 | $ | 532,832 | $ | 525,274 | ||||||||
| Earned premiums |
$ | 206,557 | $ | 161,377 | $ | 439,847 | $ | 319,441 | ||||||||
| Earned premiums ceded |
(34,739 | ) | (18,072 | ) | (69,130 | ) | (32,408 | ) | ||||||||
| Net premiums earned |
171,818 | 143,305 | 370,717 | 287,033 | ||||||||||||
| Net investment income |
19,696 | 15,061 | 38,542 | 29,568 | ||||||||||||
| Net gains on alternative investments |
1,038 | 45,212 | 39,514 | 67,014 | ||||||||||||
| Net realized gains (losses) on sales of fixed maturities |
(2,575 | ) | 509 | 3,205 | 2,999 | |||||||||||
| Other income |
1,211 | 2,212 | 2,379 | 4,215 | ||||||||||||
| Total revenues |
191,188 | 206,299 | 454,357 | 390,829 | ||||||||||||
| LOSSES AND EXPENSES |
||||||||||||||||
| Losses, benefits and experience refunds |
135,305 | 114,371 | 301,690 | 228,834 | ||||||||||||
| Acquisition costs |
29,199 | 35,690 | 60,982 | 74,427 | ||||||||||||
| Interest expense |
95 | 8,953 | 11,937 | 14,934 | ||||||||||||
| General and administrative expenses |
13,945 | 10,785 | 24,115 | 18,981 | ||||||||||||
| Total losses and expenses |
178,544 | 169,799 | 398,724 | 337,176 | ||||||||||||
| INCOME BEFORE MINORITY INTEREST |
12,644 | 36,500 | 55,633 | 53,653 | ||||||||||||
| Minority interest |
— | (5,651 | ) | — | (8,241 | ) | ||||||||||
| NET INCOME |
12,644 | 30,849 | 55,633 | 45,412 | ||||||||||||
| Change in net unrealized appreciation (depreciation) of fixed maturities |
(55,689 | ) | 13,360 | (36,960 | ) | 12,632 | ||||||||||
| Foreign currency translation adjustment |
572 | — | 433 | — | ||||||||||||
| COMPREHENSIVE INCOME (LOSS) |
$ | (42,473 | ) | $ | 44,209 | $ | 19,106 | $ | 58,044 | |||||||
| Basic earnings per share |
$ | 0.28 | $ | 0.81 | $ | 1.22 | $ | 1.19 | ||||||||
| Diluted earnings per share |
$ | 0.26 | $ | 0.81 | $ | 1.13 | $ | 1.19 | ||||||||
| Weighted average shares outstanding—basic |
45,725,811 | 38,129,213 | 45,636,602 | 38,118,783 | ||||||||||||
| Weighted average shares outstanding—diluted |
48,852,992 | 45,302,798 | 49,092,498 | 45,252,263 | ||||||||||||
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 |
||||||||
| 2004 |
2003 |
|||||||
| Preferred Shares |
||||||||
| Balance, beginning and end of period |
$ | — | $ | — | ||||
| Common shares |
||||||||
| Balance, beginning of period |
45,185 | 37,999 | ||||||
| Issuance of shares |
553 | 363 | ||||||
| Repurchase of shares |
— | (275 | ) | |||||
| Balance, end of period |
45,738 | 38,087 | ||||||
| Additional paid-in capital |
||||||||
| Balance, beginning of period |
637,772 | 526,582 | ||||||
| Issuance of shares |
12,671 | 4,004 | ||||||
| Stock option expense |
272 | 127 | ||||||
| Repurchase of shares |
— | (3,146 | ) | |||||
| Balance, end of period |
650,715 | 527,567 | ||||||
| Loans receivable from common share sales |
||||||||
| Balance, beginning of period |
(11,965 | ) | (12,575 | ) | ||||