Max Re Capital Ltd. yesterday reported second quarter net income of $30.8 million compared to a net loss of $5 million during the same period last year.

The vastly improved results follow the Bermuda-based company's decision last year to move away from its original business model with a focus on alternative investments and structured reinsurance products to writing more traditional property and casualty insurance and reinsurance.

Max Re CEO Robert Cooney told The Royal Gazette yesterday that he was delighted with the company's results during the quarter, both in terms of business the company wrote and its return on investments.

He said: “Our second quarter results are indicative of an attractive underwriting period and a recovering investment environment. The company's shift to increased risk underwriting and steadfast commitment to a diversified investment strategy that includes fixed income securities and alternative assets was rewarded this quarter. Our alternative investment portfolio has achieved record results during the last six-month period and, coupled with increasing profits from property and casualty alternative risk and traditional reinsurance underwriting, has resulted in the company producing record net operating income ($36 million) for the first six months of 2003.”

Mr. Cooney and chief financial officer Keith Hynes told The Royal Gazette that the shift had paid off with all of its business during the quarter- the company's gross written premiums total stood at $165.8 million - coming from the property and casualty (P&C) insurance and reinsurance it wrote during the period. In line with its change in business models, Max Re - already established as a reinsurance player - this year moved into the direct market with its January launch of insurance operations in Bermuda and into the European market with its opening of an insurance office in Dublin during recent months.

Breaking down the company's earnings so far this year, investment income has accounted for a healthy proportion of the total pot with just $14 million of the $45.4 million in net income earned to date coming from underwriting profit and the balance of its earnings being a return on investments.

On the underwriting side, the company bosses said the company had focused on writing casualty reinsurance and insurance. The company also has a small amount of property exposure through its investment, with Renaissance Re, in the post-September 11 start-up Da Vinci Re.

The company's gross written premiums of nearly $166 million compared to $121.5 million during the same quarter a year prior. Of the business written, Max Re ceded $39.1 million of that total to reinsurers for a net written premiums total of $126.6 million compared to $106.7 million in the same quarter of 2002.

The company's second quarter business topped off a very healthy first quarter and brought the company's total business written for the first six months of 2003 to just under $600 million. Mr. Hynes said the first quarter was typically the most active period for the company - especially on the reinsurance side - and that expectations for the third and fourth quarter would be in line with business levels during the second quarter.

Year to date, the company's reinsurance P&C operations have proved the most profitable with that sector posting a combined ratio - a percentage that shows how much a company actually made on each dollar of business it underwrote - of 87.1 percent. That number puts Max Re ahead of an industry average of 96 percent.

The (re)insurance industry tracks combined ratio (which is equal to a company's expenses and claims paid divided by the premiums received) as a percentage to show how much of each premium dollar a property/casualty insurer spent on claims and expenses. A ratio over 100 indicates an underwriting loss.

On the flip side, Max Re's newly established P&C insurance operations haven't yet proved to be an earner with a combined ratio of 135.6 percent - or a loss of nearly 36 cents on each dollar. But both Mr. Cooney and Mr. Hynes said the company expected that ratio to drop to about 90 percent by next year.

Mr. Cooney said Max Re's insurance operations were an “emerging story” and attributed the high combined ratio to the newness of the operations.

With only a few months of business under its belt, Mr. Hynes said the company's insurance business was still in the start-up phase with expenses outweighing income earned. He reiterated that should change in coming quarters to a point where the operations were expected to post a profitable combined ratio.

Backing up that expectation, Mr. Cooney pointed to the “dramatic growth” already seen from the insurance side of Max Re's business with the $10 million written in the first quarter jumping to $40 million in the second quarter.

Max Re - a public company listed on the Nasdaq - also posted a dividend of two cents per common share to be paid out on August 18 to shareholders of record on August 8, 2003.