Best Affirms FSR for Max Re, Max Re Capital; Rates European Operations

July 13, 2005

A.M. Best Co. has affirmed the financial strength rating (FSR) of A- (Excellent) and the issuer credit rating (ICR) of “a-” for Max Re Ltd. (Max Re). A.M. Best has also affirmed the ICR of “bbb-” of Max Re Capital Ltd. (NASDAQ: MXRE) (both of Hamilton, Bermuda).

Concurrently, A.M. Best has assigned an FSR of A- (Excellent) and an ICR of “a-” to Max Re Europe Limited and Max Insurance Europe Limited (both of Dublin, Ireland). All ratings have a stable outlook.

These ratings reflect Max Re’s business profile, which includes capped traditional and finite property/casualty products, improved operating results and experienced management and underwriting teams. The geographically diversified book of business, which predominately contains long-tail casualty lines, is fully supported by the company’s excellent level of risk-based capitalization. Lines of business include professional liability, general liability, aviation and marine, workers’ compensation and medical malpractice lines.

Max Re’s operations include a significant portion of life and annuity business, which focuses on existing blocks of business where risk is generally reinsured on the same basis as the original policy. Life and annuity reinsurance products may include individual and group disability, whole life, universal life, structured settlements and others.

In response to more attractive property/casualty premium rates over the past several years, Max Re’s successful transition to more traditional reinsurance products have produced combined ratios well below 100% for the segment and driven combined ratios below 100% for the entire organization. The improved operating results have been complemented by the performance of Max Re’s alternative investment portfolio, which includes highly diversified and closely managed hedge funds.

Partially offsetting these strengths is Max Re’s finite risk and capped multi-year reinsurance business profile and the heightened level of scrutiny of this market by state and federal regulators. The viability of finite products will remain uncertain until current government scrutiny is completed and any new requirements regarding finite products are established.

Also, the predominately long-tail casualty orientation of Max Re’s property/casualty book of business may not make pricing and reserve adequacy apparent for several years.

Furthermore, A.M. Best believes that the potential variability of Max Re’s alternative investment portfolio introduces an elevated risk factor to the company; however, this elevated risk factor is included in Max Re’s risk-based capital model.

A.M. Best will continue to closely monitor Max Re’s operations and performance, along with developments in the finite insurance market.

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