Max Cap Details Gustav, Ike Losses; Interim Investment Results

September 23, 2008

The Bermuda-based Max Capital Group Ltd. announced preliminary estimates of claims for Hurricanes Gustav and Ike that range from approximately $35 million to $50 million, net of reinstatement provisions. Max Cap said the “loss estimates are based on its proprietary modeling analysis, the assessment of individual treaties and data from clients and brokers,” and will be revised, “as actual information is received.”

On the investment front Max Cap said that its return on its alternative investments for the two months ended August 31, 2008 “is expected to be negative 6.26 percent, reflecting monthly results of negative 4.12 percent in July and negative 2.14 percent in August. This negative performance for the two months to August coupled with the positive performance in the first half of 2008 result in a year to date return of negative 5.14 percent.”

The announcement noted that the Company records “unrealized mark to market gains and losses emanating from its alternative investment portfolio” through net income rather than as an adjustment to book value through other comprehensive income.”

In addition Max Cap explained that its “alternative investments represented approximately 20 percent of the Company’s total invested assets of approximately $5.2 billion as of June 30, 2008. The Company’s alternative investment performance for July and August compares to negative 4.09 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 August the return of Max Capital’s alternative investments is negative 4.97 percent compared to negative 6.35 percent for the HFRI Fund of Funds Index.”

The bulletin indicated that the Company has “modest exposure to several specific situations that are concerning the market.” It exposure to losses from the Lehman Brothers’ bankruptcy is around $15 million, and around $13 million from the government bailout of AIG. Max Cap added that it “does not hold any FNMA or FHLMC preferred or common shares,” and has no reinsurance recoverables from AIG.

W. Marston (Marty) Becker, Chairman and Chief Executive Officer of Max Capital, commented: “Our projected claims from Hurricanes Gustav and Ike are within our expectations for hurricane related activity.

“In terms of our alternative asset portfolio, although we are disappointed by the portfolios absolute returns, we are pleased that Max Capital’s performance was comparable to the indices and stayed within acceptable bounds given the unprecedented volatility and credit deterioration that occurred in the financial markets. Max’s overall investment performance during these volatile times has once again been helped by the high quality nature of our fixed income portfolio which has very little exposure to recent names in news. Recent events give diversified companies like ours more reason for underwriting optimism in the coming months.”

Source: Max Capital Group –

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