Max Capital Group Ltd. Reports First-Quarter 2009 Earnings

May 5, 2009

HAMILTON, Bermuda--(BUSINESS WIRE)--May. 5, 2009-- Max Capital Group Ltd. (NASDAQ: MXGL; BSX: MXGL BH) today reported net income for the three months ended March 31, 2009 of $44.5 million, or $0.78 per diluted share, compared to net income of $7.7 million, or $0.13 per diluted share, for the three months ended March 31, 2008. Net operating income, which represents net income excluding after-tax net realized gains and losses on fixed maturities and foreign exchange, for the three months ended March 31, 2009, was $41.7 million, or $0.73 per diluted share, compared to net operating income of $6.3 million, or $0.11 per diluted share, for the three months ended March 31, 2008.

W. Marston (Marty) Becker, Chairman and Chief Executive Officer of Max Capital Group Ltd., said: “We are very pleased to report a strong first quarter profit, with each of Max Capital's underwriting platforms in Bermuda, Dublin, the U.S. and Lloyd's producing very favorable results across virtually every product area. Strong growth in gross premiums written was primarily driven by the expansion of Max’s global reach in the U.S. and at Lloyd’s. Loss ratios continue in line with plan, highlighting the benefits of Max’s diversified underwriting philosophy. We expect this trend to continue throughout 2009 as we see modest rate/exposure improvements in many classes of business relative to 2008. Likewise, the continued reduction of our alternative investments as a percentage of our total invested assets is progressing on plan and will continue throughout 2009.

“Our pending merger with IPC is progressing well. Many regulatory approvals have already been received and we are on track for shareholder meetings and an expected closing in June 2009. The new combined organization will be strongly positioned as a global underwriter of specialty insurance and reinsurance, which in turn, will drive enhanced returns and value for our shareholders. With rates across many lines beginning to move positively, the marketplace timing for this transaction is very good,” said Mr. Becker.

Solid Gross Premium Written Growth

Gross premiums written from property and casualty underwriting for the three months ended March 31, 2009 were $433.7 million compared to $306.0 million for the three months ended March 31, 2008, an increase of 41.7%, with corresponding increase of 33.7% in net premiums written between the same periods. The increase in gross premiums written reflects the addition of the Company’s Max at Lloyd’s segment, the continued build-out of the U.S. specialty platform, and modest organic growth in each of the Company’s other property and casualty segments. Net premiums earned from property and casualty underwriting for the three months ended March 31, 2009 were $189.8 million compared to $135.3 million for the same period of 2008, an increase of 40.3%.

Net investment income for the three months ended March 31, 2009 decreased to $40.5 million from $49.6 million for the same period in 2008. The decline from a year ago reflects lower yields on the higher cash and cash equivalents balance held by the Company. A decrease in the fair value of the Company’s fixed maturities portfolio, principally on holdings with durations over ten years, resulted in a $66.1 million reduction to shareholders’ equity for unrealized holding losses, which are recorded through other comprehensive income for the three months ended March 31, 2009. Net gains on alternative investments for the three months ended March 31, 2009 were $18.0 million, for a 2.06% rate of return, compared to net losses of $25.7 million and a negative 2.11% rate of return for the same period in 2008. In accordance with the Company’s accounting policy, the unrealized mark-to-market gains and losses from the alternative investment portfolio are recorded through net income rather than as an adjustment to book value through other comprehensive income. Invested assets were $5.0 billion as of March 31, 2009, with an allocation of 88.1% to cash and fixed maturities and 11.9% to alternative investments. The Company’s liquidity position at March 31, 2009 is strong, with 72.5% or $3.2 billion, of the $4.4 billion cash and fixed maturities portfolio held in cash, government and government agency-backed securities, or AAA-rated securities.

Property and casualty net losses and loss expenses were $124.7 million with a loss ratio of 65.7% and a combined ratio of 89.7% for the three months ended March 31, 2009, compared to $93.6 million with a loss ratio of 69.2% and a combined ratio of 88.8% for the same period in 2008. Net losses recognized in the three months ended March 31, 2009 related to property catastrophe losses were $3.4 million, with no corresponding losses in the first-quarter of 2008. Results for the three months ended March 31, 2009 include net favorable development on prior period reserves of $12.3 million, which reduced the loss ratio by 6.5 percentage points. Favorable development reflects lower than expected claims emergence on prior year contracts. Net favorable development on prior period reserves in the three months ended March 31, 2008 were $7.8 million.

Claims and policy benefits for life and annuity reinsurance for the three months ended March 31, 2009 were $14.3 million, compared to $15.0 million for the three months ended March 31, 2008. No material reserve changes were recognized and no new life and annuity reinsurance transactions were written during the three months ended March 31, 2009 and 2008, respectively.

Acquisition costs for the three months ended March 31, 2009 were $20.6 million compared to $9.6 million for the three months ended March 31, 2008. The increase over the comparable period is principally attributable to changes in the mix of business written with higher contributions from Max at Lloyd’s and Max Specialty. The 2008 period benefited from lower acquisition costs on certain quota share contracts.

Interest expense for the three months ended March 31, 2009 was $3.9 million, compared to $12.0 million for the same period in 2008. The decrease is principally due to lower interest crediting rates on funds held for retrocessionaires, together with a reduction in interest expense on bank loans due to the decrease in LIBOR compared to the same period in 2008.

General and administrative expenses for the three months ended March 31, 2009, were $44.3 million compared to $24.7 million for the same period in 2008. The largest contributors to the increase were the addition of Max at Lloyd’s, and $5.2 million of professional fees related to the amalgamation with IPC Holdings, Ltd., of which the latter is expected to be only a temporary drag on earnings.

Shareholders’ equity was $1,262.9 million at March 31, 2009. Book value per share at March 31, 2009 was $22.60, compared to $22.94 at December 31, 2008, a decrease of 1.5%. Diluted book value per share at March 31, 2009, was $21.88 compared to $22.46 at December 31, 2008, a decrease of 2.6%. Excluding the increase in net unrealized losses within accumulated other comprehensive income, diluted book value per share increased 2.5% from December 31, 2008 to March 31, 2009. Net operating return on average shareholders’ equity for the three months ended March 31, 2009, was 13.1%, compared to 1.6% for the same period in 2008.

Operating from offices in Bermuda, Ireland, the USA and at Lloyd's, Max Capital Group Ltd. is a global enterprise dedicated to providing diversified specialty insurance and reinsurance products to corporations, public entities, property and casualty insurers, and life and health insurers.

In presenting the Company’s results, management has included and discussed net operating income or loss per diluted share, net operating return on average shareholders’ equity, book value per share and diluted book value per share. Such measures are “non-GAAP financial measures” as defined in Regulation G. Management believes that these non-GAAP financial measures, which may be defined differently by other companies, allow for a more complete understanding of the Company’s business. These measures, however, should not be viewed as a substitute for those determined in accordance with GAAP. The reconciliation of such measures to their respective most directly comparable GAAP financial measures is presented in the attached financial information in accordance with Regulation G.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION

This press release includes statements about future economic performance, finances, expectations, plans and prospects of both IPC Holdings, Ltd. (“IPC”) and Max Capital Group Ltd. (“Max”) that constitute forward-looking statements for purposes of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to certain risks and uncertainties, including the risks described in the preliminary joint proxy statement/prospectus of IPC and Max that has been filed with the Securities and Exchange Commission (“SEC”) under “Risk Factors,” many of which are difficult to predict and generally beyond the control of IPC and Max, that could cause actual results to differ materially from those expressed in or suggested by such statements. For further information regarding cautionary statements and factors affecting future results, please also refer to the most recent Annual Report on Form 10-K, Quarterly Reports on Form 10-Q filed subsequent to the Annual Report and other documents filed by each of IPC or Max, as the case may be, with the SEC. Neither IPC nor Max undertakes any obligation to update or revise publicly any forward-looking statement whether as a result of new information, future developments or otherwise.

This press release contains certain forward-looking statements within the meaning of the U.S. federal securities laws. Statements that are not historical facts, including statements about our beliefs, plans or expectations, are forward-looking statements. These statements are based on our current plans, estimates and expectations. Some forward-looking statements may be identified by our use of terms such as “believes,” “anticipates,” “intends,” “expects” and similar statements of a future or forward looking nature. In light of the inherent risks and uncertainties in all forward-looking statements, the inclusion of such statements in this press release should not be considered as a representation by us or any other person that our objectives or plans will be achieved. A non-exclusive list of important factors that could cause actual results to differ materially from those in such forward-looking statements includes the following: (a) the occurrence of natural or man-made catastrophic events with a frequency or severity exceeding our expectations; (b) the adequacy of our loss reserves and the need to adjust such reserves as claims develop over time; (c) any lowering or loss of financial ratings of any wholly-owned operating subsidiary; (d) the effect of competition on market trends and pricing; (e) changes in general economic conditions, including changes in interest rates and/or equity values in the United States of America and elsewhere and continued instability in global credit markets; and (f) other factors set forth in the preliminary joint proxy statement/prospectus of IPC and Max, the most recent reports on Form 10-K, Form 10-Q and other documents of IPC or Max, as the case may be, on file with the SEC. Risks and uncertainties relating to the proposed transaction include the risks that: the parties will not obtain the requisite shareholder or regulatory approvals for the transaction; the anticipated benefits of the transaction will not be realized; and/or the proposed transactions will not be consummated. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We do not intend, and are under no obligation, to update any forward looking statement contained in this press release.

ADDITIONAL INFORMATION ABOUT THE PROPOSED BUSINESS COMBINATION AND WHERE TO FIND IT:

This press release relates to a proposed business combination between IPC and Max. On May 4, 2009, IPC filed with the SEC an amended registration statement on Form S-4, which included a preliminary joint proxy statement/prospectus of IPC and Max. This press release is not a substitute for the preliminary joint proxy statement/prospectus that IPC has filed with the SEC or any other document that IPC or Max may file with the SEC or send to their respective shareholders in connection with the proposed transaction. INVESTORS AND SECURITY HOLDERS ARE URGED TO READ THE PRELIMINARY JOINT PROXY STATEMENT/PROSPECTUS AND ALL OTHER RELEVANT DOCUMENTS FILED OR THAT WILL BE FILED WITH THE SEC, INCLUDING THE DEFINITIVE JOINT PROXY STATEMENT/PROSPECTUS THAT WILL BE PART OF THE DEFINITIVE REGISTRATION STATEMENT ON FORM S-4, AS THEY BECOME AVAILABLE BECAUSE THEY CONTAIN OR WILL CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED BUSINESS COMBINATION. All such documents, if filed, would be available free of charge at the SEC’s website (www.sec.gov) or by directing a request to IPC, at Jim Bryce, President and Chief Executive Officer, or John Weale, Executive Vice President and Chief Financial Officer, at 441-298-5100, in the case of IPC’s filings, or Max, at Joe Roberts, Chief Financial Officer, or Susan Spivak Bernstein, Senior Vice President, Investor Relations at 441-295-8800, in the case of Max’s filings.

PARTICIPANTS IN THE SOLICITATION:

IPC and Max and their directors, executive officers and other employees may be deemed to be participants in any solicitation of IPC and Max shareholders, respectively, in connection with the proposed business combination.

Information about IPC’s directors and executive officers is available in the preliminary joint proxy statement/prospectus filed with the SEC on May 4, 2009, relating to IPC’s 2009 annual meeting of shareholders; information about Max’s directors and executive officers is available in the amendment to its annual report on Form-10K, filed with the SEC on April 1, 2009.

Source: Max Capital Group Ltd.

Max Capital Group Ltd.
Susan Spivak Bernstein, 1-441-293-8800
Senior Vice President
susan.spivak@maxcapservices.com
or
Kekst and Company
Roanne Kulakoff, 1-212-521-4837
roanne-kulakoff@kekst.com