Bermuda-based Max Re Capital Ltd. announced that its Audit and Risk Management Committee has concluded its internal investigation into whether three finite risk retrocessional contracts were properly accounted for by the Company.
The investigation has prevented the Company from filing its 2005 and first quarter 2006 earnings reports, which in turn prompted a delisting notice from NASDAQ (See IJ Website May 22, May 2, March 27).
The investigation centered on whether the transactions “contain sufficient risk transfer to meet the requirements of Financial Accounting Standard No. 113,” Max Re explained.
It then noted that in fact, “the internal review supported the Company’s original determination that the three contracts in question contained sufficient risk transfer to meet the requirements of Financial Accounting Standard No. 113 to be accounted for as reinsurance.”
“However,” the bulletin continued, “the review caused the Company to re-evaluate other accounting aspects relating to these three contracts. This re-evaluation led the Company to conclude that a restatement of the Company’s audited financial statements for the years ended December 31, 2005, 2004, 2003, 2002 and 2001 is warranted. The Company’s previously issued financial statements for these periods should no longer be relied upon. Management is currently evaluating the impact of the restatement on its report on internal controls over financial reporting as at December 31, 2005.”
As a result of this further investigation Max Re said it has determined the following effects on earnings:
– A decrease in 2005 net income by US$0.4 million,
– An increase in 2004 net income by US$1.6 million,
– A decrease in 2003 net income by US$2.0 million,
– 2002 net income remains unchanged,
– 2001 net income is decreased by US$14.0 million.
“This restatement has the cumulative effect of reducing shareholders’ equity at December 31, 2005 by US$18.3 million,” said the announcement.
“The Company intends to file a Form 10-K/A for the year ended December 31, 2005 restating its results and its Form 10-Q for the period ended March 31, 2006 with the Securities and Exchange Commission within fifteen business days,” it continued.
Concerning the NASDAQ Staff Notice Max Re received on May 16, indicating that, due to the failure to file the Company’s Form 10-Q, it could be delisted, Max Re said: “Although no assurance can be made, we believe that, upon filing of the 10-K/A and Form 10-Q, the NASDAQ Staff Determination will be rendered moot and the threat of the delisting of our common shares will be alleviated.”
The Company will release its financial results for the first three months of 2006 after NASDAQ closes today, May 31, 2006.
CEO Robert J. Cooney and CFO Keith S. Hynes will host a conference call at 10:00 a.m. EDT tomorrow June 1, 2006 with interested investors and shareholders to discuss the Company’s first quarter financial results and the restatement.
Details of the call are as follows:
Date: June 1, 2006
Time: 10:00 a.m. EDT
Dial in #: U.S.: +1-866-356-4441
Dial in# International: +1-617-597-5396
Access Code: 58592868
Please dial in ten minutes prior to the start of the call.
Replay details:
Available from 12:00 p.m. June 1, 2006 – July 1, 2006
Dial in #: U.S.: +1-888-286-8010
Dial in# International: +1-617-801-6888
Access Code: 59722863
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