Despite strong growth in underwriting — with a 28 percent increase in gross premiums written in the third quarter of 2008 — Max Capital Group announced a loss $163.2 million for the quarter yesterday.

The loss is equal to $2.79 per fully diluted share and compared to net income of $66.8 million in the third quarter of 2007, or $1.05 per fully diluted share.

"Max's continued solid underwriting performance has been overshadowed by the impact of an unusually difficult investment environment," said chairman and chief executive officer Marston Becker as the results were announced.

Net operating loss was $146.1 million, or $2.50 per fully diluted share, compared to net operating income of $68.4 million, or $1.08 per fully diluted share, for the three months ended September 30, 2008 and 2007, respectively.

But gross premiums written from property and casualty underwriting for the three months ended September 30, 2008, were $206.3 million compared to $160.8 million for the three months ended September 30, 2007.

The 28 percent increase reflected growth in the company's property and casualty US speciality segment, which only started underwriting activity in the first half of 2007.

"Net premiums earned from property and casualty underwriting for the three months ended September 30, 2008, were $141.6 million compared to $115.5 million for the same period of 2007," Max Capital said in its results. "There were no gross premiums written and net premiums earned from life and annuity underwriting for the three months ended September 30, 2008, compared to $62.2 million and $62.1 million for the same period of 2007."

As announced last month, results suffered from losses on Max's alternative investments portfolio, which amounted to $158.8 million for the three months ended September 30 — a negative 12.99 percent rate of return — compared with $14.5 million in net gains on this portfolio during the same time period in 2007.

Net investment income fell to $45.3 million in the third quarter compared to $49.7 million last year.

Net losses from Hurricane Gustav and Ike accounted for $50 million of Max's $106.8 million property and casualty net losses for the third quarter of 2008 for a loss ratio of 75.5 percent. This compared to $50.8 million in losses in third quarter 2007 and a loss ratio of 44 percent. There were no comparable catastrophe-related losses for the third quarter of 2007, the company noted.

"Max's overall combined ratio remains ahead of plan for the year despite the soft market conditions and the occurrence of multiple cat events, with the improved underwriting performance primarily due to favourable development of prior period reserves," said Mr. Becker.

"As previously announced, our overall investment portfolio return was negative for the quarter but compared favourably to major indices on a year to date basis. We have updated our investment strategy in keeping with Max's growing and changing underwriting platforms which should serve us well in an increasingly attractive underwriting environment for 2009."

The company also noted that a share repurchase authorisation took place in the third quarter of 2008 which saw Max repurchase 109,500 of its common shares at an average share price of $25.63 per share — $2.8 million in total.

As of September 30, $73.4 million remains under the share repurchase authorisation.

Shareholders' equity was $1,274.5 million at the end of the quarter and book value per share $22.77.

Max Capital's board also announced a dividend of $0.09 per share yesterday. The dividend is payable on December 1 to shareholders on record as of November 17.