Max Capital Issues Investment Update

The Bermuda-based Max Capital Group announced that the estimated total return on its overall investment portfolio including investment income for the two months ended November 30, 2008 is a negative 0.3 percent and for the year through November 30, 2008 is a negative 2.47 percent.

“The estimated total principal decline on its overall investment portfolio for the two months ended November 30, 2008, including unrealized gains and losses but excluding investment income, was $45 million, representing $0.81 per share,” said the bulletin. “The Company’s book value per share as of September 30, 2008 was $22.77.

“Max Capital’s portfolio of cash and fixed maturities, which represented 81.4 percent of the Company’s total invested assets of approximately $5.0 billion as of September 30, 2008, has increased approximately $25 million for the two months ended November 30, 2008. We believe this increase is attributable to the composition of the portfolio, which is well diversified, of high quality and highly liquid. Approximately 70 percent of the portfolio is rated Aaa or above, including 50 percent that is invested in cash, governments, agencies and agency mortgage backed securities.

“Max Capital’s portfolio of alternative investments represented 18.6 percent of the Company’s total invested assets as of September 30, 2008. The Company estimates the return on its alternative investments for the two months ended November 30, 2008 to be negative 6.8 percent or, a reduction in value of approximately $70 million. In accordance with the Company’s accounting policy, the unrealized mark-to-market gains and losses emanating from its alternative investment portfolio are recorded through net income rather than as an adjustment to book value through other comprehensive income.

“The Company’s alternative investment performance for October and November compares to negative 11.7 percent over the same period for the HFRI Fund of Funds Index, which the Company believes is the most comparable benchmark for this asset class. On a year to date basis through November the return on Max Capital’s alternative investments is estimated to be negative 18.4 percent compared to negative 23.5 percent for the HFRI Fund of Funds Index.”

Chairman and CEO W. Marston (Marty) Becker commented: “In this period of unprecedented market events and volatility, we believe interim investor communication is desirable. The high quality of Max’s fixed income portfolio has kept our investment mark-to-market performance within very manageable levels. We are making good progress with our plans to reduce our allocation to alternative investments to approximately 15 percent, while increasing the diversity of those investments; both with a view to mitigating future volatility. This strategy should enable us to have more capital available for our global underwriting activities. With mature and diverse underwriting operations in Bermuda, Ireland, the U.S. and, now, at Lloyd’s, we believe we are well-positioned to execute our 2009 business plan and to take advantage of the market hardening that is becoming apparent, particularly in reinsurance lines.”

Source: Max Capital – www.maxcapgroup.com