Fitch Sees No Rating Affect from Max Re’s Internal Investigation

May 29, 2006

Fitch Ratings commented that it does not anticipate that the ratings of Max Re Capital Ltd. and its insurance subsidiaries will be affected by the recent events related to the company’s ongoing internal investigation. Fitch issued the comment following Max Re’s receipt of a notice from NASDAQ that its shares could be delisted (See IJ Website May 22).

NASDAQ issued the notice as Max Re has yet to file restated earnings reports (See IJ Website May 2). The delay in the filing is due to the company’s audit and risk management committee not having yet completed its internal investigation (See IJ Website March 27). As Fitch states the Company is reviewing “three finite risk retrocessional contracts written in 2001 and 2003 to determine if they were properly accounted for under the risk transfer accounting standards.

“As a result, the company may be required to restate its financial results for the years 2001 through 2005. However, management does not expect the cumulative effect of any such restatement on retained earnings at Dec. 31, 2005 to be more than $25 million (favorably reduced from $50 million announced initially), or approximately 2 percent of shareholders’ equity.”

Fitch said it “does not consider these events thus far to be material to Max Re’s ratings. It is important to note that the company initiated the investigation internally and voluntarily contacted the Securities and Exchange Commission (SEC). Furthermore, Max Re has not to date received any subpoenas or information requests related to finite risk reinsurance. Fitch will review the company’s 10Q when filed, which is expected to be in June. To the extent that any required restatements are material or there are further developments related to these events, Fitch will revisit the ratings.”

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