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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-Q



(Mark One)

|x | QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
|- | ------------------------------------------------------------

| | EXCHANGE ACT OF 1934
| | --------------------



For the quarterly period ended March 31, 2004



OR



| ̈ | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
|- | -------------------------------------------------------------------

| | EXCHANGE ACT OF 1934
| | --------------------



For the transition period from  to



Commission file number 000-33047



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MAX RE CAPITAL LTD.

(Exact name of registrant as specified in its charter)



|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|BERMUDA                                                        |  | Not Applicable                   
|(State or other jurisdiction of incorporation or organization) |  | (IRS Employer Identification No.)



Max Re House

2 Front Street

Hamilton, HM 11

Bermuda

(Address of principal executive offices)

(Zip Code)



(441) 296-8800

(Registrants telephone number, including area code)



---





Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    
No ̈



Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange
Act).    Yes  x    No ̈



The number of the Registrants common shares (par value $1.00 per share)
outstanding as of April 30, 2004 was 45,725,811.



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##### Table of Contents

MAX RE CAPITAL LTD.



INDEX



|                                                                                                                          |  |     
|------------------------------------------------------------------------------------------------------------------------- |  | ----
|                                                                                                                          |  | PAGE
|                                                                                                                          | 
|PART IFINANCIAL INFORMATION                                                                                              |  |     
|                                                                                                                          | 
|ITEM 1.
Financial Statements                                                                                              |  | 1   
|                                                                                                                          | 
|Consolidated Balance Sheets as of March 31, 2004 (unaudited) and December 31, 2003                                        |  | 1   
|                                                                                                                          | 
|Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2004 and 2003 (unaudited) |  | 2   
|                                                                                                                          | 
|Consolidated Statements of Changes in Shareholders Equity for the Three Months Ended March 31, 2004 and 2003 (unaudited) |  | 3   
|                                                                                                                          | 
|Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2004 and 2003 (unaudited)                      |  | 4   
|                                                                                                                          | 
|Notes to the Interim Consolidated Financial Statements (unaudited)                                                        |  | 5   
|                                                                                                                          | 
|ITEM 2.
Managements Discussion and Analysis of Financial Condition and Results of Operations                             |  | 13  
|                                                                                                                          | 
|ITEM 3.
Quantitative and Qualitative Disclosure About Market Risk                                                         |  | 21  
|                                                                                                                          | 
|ITEM 4.
Controls and Procedures                                                                                           |  | 22  
|                                                                                                                          | 
|PART IIOTHER INFORMATION                                                                                                 |  |     
|                                                                                                                          | 
|ITEM 1.
Legal Proceedings                                                                                                 |  | 24  
|                                                                                                                          | 
|ITEM 2.
Changes in Securities                                                                                             |  | 24  
|                                                                                                                          | 
|ITEM 3.
Defaults Upon Senior Securities                                                                                   |  | 24  
|                                                                                                                          | 
|ITEM 4.
Submission of Matters to a Vote of Security Holders                                                               |  | 24  
|                                                                                                                          | 
|ITEM 5.
Other Information                                                                                                 |  | 24  
|                                                                                                                          | 
|ITEM 6.
Exhibits and Reports on Form 8-K                                                                                  |  | 24  
|                                                                                                                          | 
|SIGNATURES                                                                                                                |  | S-1 



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##### Table of Contents

PART I. FINANCIAL INFORMATION



ITEM 1. Financial Statements



MAX RE CAPITAL
LTD.



CONSOLIDATED BALANCE SHEETS



(Expressed in
thousands of United States Dollars, except share amounts)



|                                                                                                                        |  |                |           |   |                   |   |           |  
|----------------------------------------------------------------------------------------------------------------------- |  | -------------- | --------- | - | ----------------- | - | --------- | -
|                                                                                                                        |  | March 31, 2004 |           |   | December 31, 2003 |  
|                                                                                                                        |  | (Unaudited)    |           |   |                   |  
|ASSETS                                                                                                                  |  |                |           |   |                   |   |           |  
|Cash and cash equivalents                                                                                               |  | $              | 171,467   |   |                   | $ | 201,515   |  
|Fixed maturities, available for sale at fair value                                                                      |  |                | 1,666,500 |   |                   |   | 1,604,430 |  
|Alternative investments, at fair value                                                                                  |  |                | 988,077   |   |                   |   | 831,359   |  
|Accrued interest income                                                                                                 |  |                | 15,840    |   |                   |   | 14,608    |  
|Premiums receivable                                                                                                     |  |                | 454,391   |   |                   |   | 389,393   |  
|Losses recoverable from reinsurers                                                                                      |  |                | 305,522   |   |                   |   | 273,711   |  
|Funds withheld                                                                                                          |  |                | 19,216    |   |                   |   | 56        |  
|Deferred acquisition costs                                                                                              |  |                | 129,901   |   |                   |   | 87,116    |  
|Deferred charges                                                                                                        |  |                | 9,774     |   |                   |   | 5,259     |  
|Prepaid reinsurance premiums                                                                                            |  |                | 75,248    |   |                   |   | 67,343    |  
|Other assets                                                                                                            |  |                | 28,418    |   |                   |   | 20,769    |  
|                                                                                                                        |  |                |           |   |                   |   |           |  
|Total assets                                                                                                            |  | $              | 3,864,354 |   |                   | $ | 3,495,559 |  
|                                                                                                                        |  |                |           |   |                   |   |           |  
|LIABILITIES                                                                                                             |  |                |           |   |                   |   |           |  
|Property and casualty losses and experience refunds                                                                     |  | $              | 1,137,861 |   |                   | $ | 991,687   |  
|Life and annuity benefits and experience refunds                                                                        |  |                | 474,025   |   |                   |   | 480,099   |  
|Deposit liabilities                                                                                                     |  |                | 242,774   |   |                   |   | 267,350   |  
|Funds withheld from reinsurers                                                                                          |  |                | 238,702   |   |                   |   | 213,483   |  
|Unearned property and casualty premiums                                                                                 |  |                | 678,194   |   |                   |   | 471,625   |  
|Reinsurance balances payable                                                                                            |  |                | 54,233    |   |                   |   | 74,693    |  
|Accounts payable and accrued expenses                                                                                   |  |                | 21,666    |   |                   |   | 41,392    |  
|Bank loan                                                                                                               |  |                | 150,000   |   |                   |   | 150,000   |  
|                                                                                                                        |  |                |           |   |                   |   |           |  
|Total liabilities                                                                                                       |  |                | 2,997,455 |   |                   |   | 2,690,329 |  
|                                                                                                                        |  |                |           |   |                   |   |           |  
|SHAREHOLDERS EQUITY                                                                                                    |  |                |           |   |                   |   |           |  
|Preferred shares par value $1; 20,000,000 shares authorized; no shares issued or outstanding                            |  |                |          |   |                   |   |          |  
|Common shares par value $1; 200,000,000 shares authorized; 45,725,811 shares issued and outstanding (2003  45,184,611) |  |                | 45,726    |   |                   |   | 45,185    |  
|Additional paid-in capital                                                                                              |  |                | 650,354   |   |                   |   | 637,772   |  
|Loans receivable from common share sales                                                                                |  |                | (11,965   | ) |                   |   | (11,965   | )
|Unearned stock grant compensation                                                                                       |  |                | (15,694   | ) |                   |   | (4,032    | )
|Accumulated other comprehensive income                                                                                  |  |                | 44,380    |   |                   |   | 25,790    |  
|Retained earnings                                                                                                       |  |                | 154,098   |   |                   |   | 112,480   |  
|                                                                                                                        |  |                |           |   |                   |   |           |  
|Total shareholders equity                                                                                              |  |                | 866,899   |   |                   |   | 805,230   |  
|                                                                                                                        |  |                |           |   |                   |   |           |  
|Total liabilities and shareholders equity                                                                              |  | $              | 3,864,354 |   |                   | $ | 3,495,559 |  
|                                                                                                                        |  |                |           |   |                   |   |           |  



See accompanying notes
to unaudited interim consolidated financial statements.



1



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##### Table of Contents

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)



(Expressed in thousands of United States Dollars, except shares and per share amounts)



|                                                          |  |                             |            |   |      |   |            |  
|--------------------------------------------------------- |  | --------------------------- | ---------- | - | ---- | - | ---------- | -
|                                                          |  | Three Months Ended March 31 |           
|                                                          |  | 2004                        |            |   | 2003 |  
|REVENUE                                                   |  |                             |            |   |      |   |            |  
|Gross premiums written                                    |  | $                           | 439,531    |   |      | $ | 430,545    |  
|Reinsurance premiums ceded                                |  |                             | (42,787    | ) |      |   | (31,852    | )
|                                                          |  |                             |            |   |      |   |            |  
|Net premiums written                                      |  | $                           | 396,744    |   |      | $ | 398,693    |  
|                                                          |  |                             |            |   |      |   |            |  
|Earned premiums                                           |  | $                           | 233,290    |   |      | $ | 158,065    |  
|Earned premiums ceded                                     |  |                             | (34,392    | ) |      |   | (14,337    | )
|                                                          |  |                             |            |   |      |   |            |  
|Net premiums earned                                       |  |                             | 198,898    |   |      |   | 143,728    |  
|Net investment income                                     |  |                             | 18,846     |   |      |   | 14,507     |  
|Net gains on alternative investments                      |  |                             | 38,476     |   |      |   | 21,802     |  
|Net realized gains on sales of fixed maturities           |  |                             | 5,781      |   |      |   | 2,490      |  
|Other income                                              |  |                             | 1,168      |   |      |   | 2,002      |  
|                                                          |  |                             |            |   |      |   |            |  
|Total revenue                                             |  |                             | 263,169    |   |      |   | 184,529    |  
|                                                          |  |                             |            |   |      |   |            |  
|LOSSES AND EXPENSES                                       |  |                             |            |   |      |   |            |  
|Losses, benefits and experience refunds                   |  |                             | 166,385    |   |      |   | 114,463    |  
|Acquisition costs                                         |  |                             | 31,783     |   |      |   | 38,737     |  
|Interest expense                                          |  |                             | 11,843     |   |      |   | 5,981      |  
|General and administrative expenses                       |  |                             | 10,169     |   |      |   | 8,196      |  
|                                                          |  |                             |            |   |      |   |            |  
|Total losses and expenses                                 |  |                             | 220,180    |   |      |   | 167,377    |  
|                                                          |  |                             |            |   |      |   |            |  
|INCOME BEFORE MINORITY INTEREST                           |  |                             | 42,989     |   |      |   | 17,152     |  
|Minority interest                                         |  |                             |           |   |      |   | (2,590     | )
|                                                          |  |                             |            |   |      |   |            |  
|NET INCOME                                                |  |                             | 42,989     |   |      |   | 14,562     |  
|Change in net unrealized appreciation of fixed maturities |  |                             | 18,729     |   |      |   | (728       | )
|Foreign currency translation adjustment                   |  |                             | (139       | ) |      |   |           |  
|                                                          |  |                             |            |   |      |   |            |  
|COMPREHENSIVE INCOME                                      |  | $                           | 61,579     |   |      | $ | 13,834     |  
|                                                          |  |                             |            |   |      |   |            |  
|Basic earnings per share                                  |  | $                           | 0.94       |   |      | $ | 0.38       |  
|                                                          |  |                             |            |   |      |   |            |  
|Diluted earnings per share                                |  | $                           | 0.87       |   |      | $ | 0.38       |  
|                                                          |  |                             |            |   |      |   |            |  
|Weighted average shares outstandingbasic                 |  |                             | 45,547,393 |   |      |   | 38,172,645 |  
|                                                          |  |                             |            |   |      |   |            |  
|Weighted average shares outstandingdiluted               |  |                             | 49,332,004 |   |      |   | 45,293,477 |  
|                                                          |  |                             |            |   |      |   |            |  



See accompanying notes
to unaudited interim consolidated financial statements.



2



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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (Unaudited)



(Expressed in thousands of United States Dollars)



|                                                    |  |                            |         |   |      |   |         |  
|--------------------------------------------------- |  | -------------------------- | ------- | - | ---- | - | ------- | -
|                                                    |  | Three Months EndedMarch 31 |        
|                                                    |  | 2004                       |         |   | 2003 |  
|Preferred Shares                                    |  |                            |         |   |      |   |         |  
|Balance, beginning and end of period                |  | $                          |        |   |      | $ |        |  
|                                                    |  |                            |         |   |      |   |         |  
|Common shares                                       |  |                            |         |   |      |   |         |  
|Balance, beginning of period                        |  |                            | 45,185  |   |      |   | 37,999  |  
|Issuance of shares                                  |  |                            | 541     |   |      |   | 335     |  
|Repurchase of shares                                |  |                            |        |   |      |   | (202    | )
|                                                    |  |                            |         |   |      |   |         |  
|Balance, end of period                              |  |                            | 45,726  |   |      |   | 38,132  |  
|                                                    |  |                            |         |   |      |   |         |  
|Additional paid-in capital                          |  |                            |         |   |      |   |         |  
|Balance, beginning of period                        |  |                            | 637,772 |   |      |   | 526,582 |  
|Issuance of shares                                  |  |                            | 12,453  |   |      |   | 3,633   |  
|Stock option expense                                |  |                            | 129     |   |      |   |        |  
|Repurchase of shares                                |  |                            |        |   |      |   | (2,140  | )
|                                                    |  |                            |         |   |      |   |         |  
|Balance, end of period                              |  |                            | 650,354 |   |      |   | 528,075 |  
|                                                    |  |                            |         |   |      |   |         |  
|Loans receivable from common share sales            |  |                            |         |   |      |   |         |  
|Balance, beginning of period                        |  |                            | (11,965 | ) |      |   | (12,575 | )
|Loans repaid                                        |  |                            |        |   |      |   | 610     |  
|                                                    |  |                            |         |   |      |   |         |  
|Balance, end of period                              |  |                            | (11,965 | ) |      |   | (11,965 | )
|                                                    |  |                            |         |   |      |   |         |  
|Unearned stock grant compensation                   |  |                            |         |   |      |   |         |  
|Balance, beginning of period                        |  |                            | (4,032  | ) |      |   | (2,656  | )
|Stock grants awarded                                |  |                            | (12,994 | ) |      |   | (3,741  | )
|Amortization                                        |  |                            | 1,332   |   |      |   | 518     |  
|                                                    |  |                            |         |   |      |   |         |  
|Balance, end of period                              |  |                            | (15,694 | ) |      |   | (5,879  | )
|                                                    |  |                            |         |   |      |   |         |  
|Accumulated other comprehensive income              |  |                            |         |   |      |   |         |  
|Balance, beginning of period                        |  |                            | 25,790  |   |      |   | 49,108  |  
|Holding gains on fixed maturities arising in period |  |                            | 24,510  |   |      |   | 1,594   |  
|Net realized gains included in net income           |  |                            | (5,781  | ) |      |   | (2,490  | )
|Currency translation adjustments                    |  |                            | (139    | ) |      |   |        |  
|Reallocation to minority interest                   |  |                            |        |   |      |   | 168     |  
|                                                    |  |                            |         |   |      |   |         |  
|Balance, end of period                              |  |                            | 44,380  |   |      |   | 48,380  |  
|                                                    |  |                            |         |   |      |   |         |  
|Retained earnings (deficit)                         |  |                            |         |   |      |   |         |  
|Balance, beginning of period                        |  |                            | 112,480 |   |      |   | (4,299  | )
|Net income                                          |  |                            | 42,989  |   |      |   | 14,562  |  
|Dividends paid                                      |  |                            | (1,371  | ) |      |   | (766    | )
|                                                    |  |                            |         |   |      |   |         |  
|Balance, end of period                              |  |                            | 154,098 |   |      |   | 9,497   |  
|                                                    |  |                            |         |   |      |   |         |  
|Total shareholders equity                          |  | $                          | 866,899 |   |      | $ | 606,240 |  
|                                                    |  |                            |         |   |      |   |         |  



See accompanying notes
to unaudited interim consolidated financial statements.



3



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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



(Expressed in thousands of United States Dollars)



|                                                                           |  |                            |          |   |      |   |          |  
|-------------------------------------------------------------------------- |  | -------------------------- | -------- | - | ---- | - | -------- | -
|                                                                           |  | Three Months EndedMarch 31 |         
|                                                                           |  | 2004                       |          |   | 2003 |  
|OPERATING ACTIVITIES                                                       |  |                            |          |   |      |   |          |  
|Net income                                                                 |  | $                          | 42,989   |   |      | $ | 14,562   |  
|Adjustments to reconcile net income to net cash from operating activities: |  |                            |          |   |      |   |          |  
|Minority share of income                                                   |  |                            |         |   |      |   | 2,590    |  
|Amortization of unearned stock based compensation                          |  |                            | 1,461    |   |      |   | 518      |  
|Amortization of discount on fixed maturities                               |  |                            | 2,046    |   |      |   | 1,111    |  
|Net realized gains on sale of fixed maturities                             |  |                            | (5,781   | ) |      |   | (2,490   | )
|Net gains on alternative investments                                       |  |                            | (38,476  | ) |      |   | (21,802  | )
|Accrued interest income                                                    |  |                            | (1,232   | ) |      |   | (1,403   | )
|Premiums receivable                                                        |  |                            | (64,998  | ) |      |   | (185,815 | )
|Losses recoverable from reinsurers                                         |  |                            | (31,811  | ) |      |   | (11,298  | )
|Funds withheld                                                             |  |                            | (19,160  | ) |      |   | (15,691  | )
|Deferred acquisition costs                                                 |  |                            | (42,785  | ) |      |   | (71,088  | )
|Deferred charges                                                           |  |                            | (4,515   | ) |      |   | 1,168    |  
|Prepaid reinsurance premiums                                               |  |                            | (7,905   | ) |      |   | (17,517  | )
|Other assets                                                               |  |                            | (7,649   | ) |      |   | (2,325   | )
|Property and casualty losses and experience refunds                        |  |                            | 146,174  |   |      |   | 98,928   |  
|Life and annuity benefits and experience refunds                           |  |                            | (6,074   | ) |      |   | (9,037   | )
|Funds withheld from reinsurers                                             |  |                            | 25,219   |   |      |   | 12,909   |  
|Unearned property and casualty premiums                                    |  |                            | 206,569  |   |      |   | 272,501  |  
|Reinsurance balances payable                                               |  |                            | (20,460  | ) |      |   | 4,208    |  
|Accounts payable and accrued expenses                                      |  |                            | (19,726  | ) |      |   | (3,125   | )
|                                                                           |  |                            |          |   |      |   |          |  
|Cash from operating activities                                             |  |                            | 153,886  |   |      |   | 66,904   |  
|                                                                           |  |                            |          |   |      |   |          |  
|INVESTING ACTIVITIES                                                       |  |                            |          |   |      |   |          |  
|Purchases of fixed maturities                                              |  |                            | (374,228 | ) |      |   | (164,953 | )
|Sales (purchases) of alternative investments                               |  |                            | (118,570 | ) |      |   | (60,713  | )
|Sales of fixed maturities                                                  |  |                            | 322,061  |   |      |   | 103,323  |  
|Redemptions of fixed maturities                                            |  |                            | 12,889   |   |      |   | 26,500   |  
|                                                                           |  |                            |          |   |      |   |          |  
|Cash used in investing activities                                          |  |                            | (157,848 | ) |      |   | (95,843  | )
|                                                                           |  |                            |          |   |      |   |          |  
|FINANCING ACTIVITIES                                                       |  |                            |          |   |      |   |          |  
|Net proceeds from issuance of common shares                                |  |                            |         |   |      |   | 227      |  
|Repurchases of common shares                                               |  |                            |         |   |      |   | (2,343   | )
|Proceeds from bank loan                                                    |  |                            |         |   |      |   | 50,000   |  
|Dividends paid                                                             |  |                            | (1,371   | ) |      |   | (766     | )
|Distributions to minority shareholders                                     |  |                            |         |   |      |   | (142     | )
|Deposit liabilities                                                        |  |                            | (24,576  | ) |      |   | (902     | )
|Note and loans repaid                                                      |  |                            |         |   |      |   | 610      |  
|                                                                           |  |                            |          |   |      |   |          |  
|Cash from (used in) financing activities                                   |  |                            | (25,947  | ) |      |   | 46,684   |  
|                                                                           |  |                            |          |   |      |   |          |  
|Effect of exchange rate on cash                                            |  |                            | (139     | ) |      |   |         |  
|Changes in cash and cash equivalents                                       |  |                            | (30,048  | ) |      |   | 17,745   |  
|Cash and cash equivalents, beginning of period                             |  |                            | 201,515  |   |      |   | 92,103   |  
|                                                                           |  |                            |          |   |      |   |          |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                   |  | $                          | 171,467  |   |      | $ | 109,848  |  
|                                                                           |  |                            |          |   |      |   |          |  



SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION:



Interest paid totaled $1,152 and $708 for the three
months ended March 31, 2004 and 2003, respectively.



See
accompanying notes to unaudited interim consolidated financial statements.



4



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##### Table of Contents

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



1. GENERAL



The interim consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America
(GAAP) for interim financial information and in accordance with Regulation S-X and include the accounts of Max Re Capital Ltd. (Max Re Capital), Max Re Ltd. (Max Re), Max Re Managers Ltd. (Max Re
Managers), Max Europe Holdings Limited and its subsidiary companies (Max Europe) and Max Re Diversified Strategies Ltd. (Max Re Diversified and, collectively with Max Re Capital, Max Re, Max Re Managers and Max Europe,
the Company). In the opinion of management, these financial statements reflect all the normal recurring adjustments necessary for a fair presentation of the Companys financial position and results of operations as of the dates and
for the periods presented. The results of operations and cash flows for any interim period are not necessarily indicative of results for the full year. These consolidated financial statements should be read in conjunction with the Companys
audited consolidated financial statements for the year ended December 31, 2003.



Max Re Capital was incorporated on July 8, 1999 under the laws of Bermuda. The Companys principal operating subsidiary is Max Re, a Bermuda long-term and Class 4 insurer. The Company European activities
are conducted from Dublin, Ireland through Max Europe Holdings Limited and its two wholly owned operating subsidiaries, Max Re Europe Limited (Max Re Europe) and Max Insurance Europe Limited (Max Insurance Europe).



2. EARNINGS PER SHARE



Basic earnings per share is based on weighted average common shares
outstanding and excludes any dilutive effect of warrants, options and convertible securities. Diluted earnings per share assumes the conversion of dilutive convertible securities and the exercise of all dilutive stock warrants and options.



3. BANK LOAN



In March 2002, the Company completed a $100.0 million sale of shares of Max
Re Diversified to a third party financial institution. Simultaneous with the sale, the Company entered into a total return swap with the purchaser of these shares whereby the Company received the return earned on the Max Re Diversified shares in
exchange for a variable rate of interest based on LIBOR plus a spread. Under GAAP, these transactions were viewed on a combined basis and accounted for as a financing transaction, which resulted in the recording of a $100.0 million bank loan.



On February 18, 2003, the Company and the third party
financial institution mutually terminated the swap transaction described above and, immediately following the termination, the Company completed a $150.0 million sale of shares of Max Re Diversified to the same third party financial institution and
entered into a total return swap with the purchaser on similar terms as the terminated transaction. Max Re Diversified shares owned by Max Re with a fair value of $90.1 million at March 31, 2004 were pledged as collateral to which the Company is
exposed to credit risk. Under GAAP, these transactions are viewed on a combined basis and accounted for as a financing transaction, which resulted in the recording of a $150.0 million bank loan. The swap termination date is February 2005, with
provisions for earlier termination at the Companys



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option or in the event that the Company fails to comply with certain covenants, including maintaining a minimum financial
strength rating and a minimum Max Re Diversified net asset value. At termination, the purchaser has the option to sell the Max Re Diversified shares to the Company at a price equal to the fair value of the Max Re Diversified shares on the date of
repurchase.



4. SEGMENT INFORMATION



The Company operates in the reinsurance and insurance business
serving two segments: the property and casualty segment and the life and annuity segment, which includes disability products. Within the property and casualty segment, the Company offers three products: traditional risk transfer reinsurance,
alternative risk transfer reinsurance and insurance and traditional risk transfer insurance. As of January 1, 2004, the Company no longer distinguishes between structured risk transfer reinsurance and alternative risk transfer reinsurance products
as they are managed by the same team of underwriters and because of the similarity of the products. Accordingly, the Company has combined these products within the segment disclosure as alternative risk transfer reinsurance products. The Company
differentiates its property and casualty reinsurance products in several ways, including by the amount of aggregate loss cap and/or occurrence limits incorporated into the underlying contracts, with its alternative risk transfer products having
lower aggregate loss cap and occurrence limits, relative to premium received, compared to its traditional risk transfer products. Within the life and annuity segment, the Company currently offers reinsurance products focusing on existing blocks of
business, which take the form of co-insurance transactions. In co-insurance transactions, risks are reinsured on the same basis as the original policies. The Company also has a corporate segment that includes its investment and financing functions.
The Company does not allocate assets by segment.



6



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A summary of operations by segment for the three months ended March 31, 2004 and 2003 is as follows:



(Expressed in thousands of United States Dollars)



|                                                |  |                                   |         |   |                  |   |         |                       |  |              |         |   |  |   |         |   |  |   |        |   |  |   |        |  |   |         |  
|----------------------------------------------- |  | --------------------------------- | ------- | - | ---------------- | - | ------- | --------------------- |  | ------------ | ------- | - |  | - | ------- | - |  | - | ------ | - |  | - | ------ |  | - | ------- | -
|                                                |  | Three Months Ended March 31, 2004 |        
|                                                |  | Property & Casualty               |         |   | Life & Annuity   |   |         | Corporate             |  | Consolidated |        
|                                                |  | Traditional Reinsurance           |         |   | Alternative Risk |   |         | Traditional Insurance |  |              | Total   |   |  |   |         |   |  |   |        |  
|Gross premiums written                          |  | $                                 | 216,016 |   |                  | $ | 181,725 |                       |  | $            | 41,790  |   |  | $ | 439,531 |   |  | $ |       |   |  | $ |       |  | $ | 439,531 |  
|Reinsurance premiums ceded                      |  |                                   | (11,714 | ) |                  |   | (8,425  | )                     |  |              | (22,648 | ) |  |   | (42,787 | ) |  |   |       |   |  |   |       |  |   | (42,787 | )
|                                                |  |                                   |         |   |                  |   |         |                       |  |              |         |   |  |   |         |   |  |   |        |   |  |   |        |  |   |         |  
|Net premiums written                            |  | $                                 | 204,302 |   |                  | $ | 173,300 |                       |  | $            | 19,142  |   |  | $ | 396,744 |   |  | $ |       |   |  | $ |       |  | $ | 396,744 |  
|                                                |  |                                   |         |   |                  |   |         |                       |  |              |         |   |  |   |         |   |  |   |        |   |  |   |        |  |   |         |  
|Earned premiums                                 |  | $                                 | 73,550  |   |                  | $ | 112,029 |                       |  | $            | 47,711  |   |  | $ | 233,290 |   |  | $ |       |   |  | $ |       |  | $ | 233,290 |  
|Earned premiums ceded                           |  |                                   | (5,225  | ) |                  |   | (11,012 | )                     |  |              | (18,155 | ) |  |   | (34,392 | ) |  |   |       |   |  |   |       |  |   | (34,392 | )
|                                                |  |                                   |         |   |                  |   |         |                       |  |              |         |   |  |   |         |   |  |   |        |   |  |   |        |  |   |         |  
|Net premiums earned                             |  |                                   | 68,325  |   |                  |   | 101,017 |                       |  |              | 29,556  |   |  |   | 198,898 |   |  |   |       |   |  |   |       |  |   | 198,898 |  
|Net investment income                           |  |                                   |        |   |                  |   |        |                       |  |              |        |   |  |   |        |   |  |   |       |   |  |   | 18,846 |  |   | 18,846  |  
|Net gains on sales of alternative investments   |  |                                   |        |   |                  |   |        |                       |  |              |        |   |  |   |        |   |  |   |       |   |  |   | 38,476 |  |   | 38,476  |  
|Net realized gains on sales of fixed maturities |  |                                   |        |   |                  |   |        |                       |  |              |        |   |  |   |        |   |  |   |       |   |  |   | 5,781  |  |   | 5,781   |  
|Other income                                    |  |                                   |        |   |                  |   |        |                       |  |              |        |   |  |   |        |   |  |   |       |   |  |   | 1,168  |  |   | 1,168   |  
|                                                |  |                                   |         |   |                  |   |         |                       |  |              |         |   |  |   |         |   |  |   |        |   |  |   |        |  |   |         |  
|Total revenues                                  |  |                                   | 68,325  |   |                  |   | 101,017 |                       |  |              | 29,556  |   |  |   | 198,898 |   |  |   |       |   |  |   | 64,271 |  |   | 263,169 |  
|                                                |  |                                   |         |   |                  |   |         |                       |  |              |         |   |  |   |         |   |  |   |        |   |  |   |        |  |   |         |  
|Losses, benefits and experience refunds         |  |                                   | 48,760  |   |                  |   | 87,677  |                       |  |              | 22,228  |   |  |   | 158,665 |   |  |   | 7,720  |   |  |   |       |  |   | 166,385 |  
|Acquisition costs                               |  |                                   | 12,317  |   |                  |   | 18,090  |                       |  |              | 1,160   |   |  |   | 31,567  |   |  |   | 216    |   |  |   |       |  |   | 31,783  |  
|Interest expense                                |  |                                   |        |   |                  |   |        |                       |  |              |        |   |  |   |        |   |  |   |       |   |  |   | 11,843 |  |   | 11,843  |  
|General and administrative expenses             |  |                                   | 984     |   |                  |   | 1,154   |                       |  |              | 161     |   |  |   | 2,299   |   |  |   | 871    |   |  |   | 6,999  |  |   | 10,169  |  
|                                                |  |                                   |         |   |                  |   |         |                       |  |              |         |   |  |   |         |   |  |   |        |   |  |   |        |  |   |         |  
|Total losses and expenses                       |  |                                   | 62,061  |   |                  |   | 106,921 |                       |  |              | 23,549  |   |  |   | 192,531 |   |  |   | 8,807  |   |  |   | 18,842 |  |   | 220,180 |  
|                                                |  |                                   |         |   |                  |   |         |                       |  |              |         |   |  |   |         |   |  |   |        |   |  |   |        |  |   |         |  
|Net income (loss) before minority interest      |  | $                                 | 6,264   |   |                  | $ | (5,904  | )                     |  | $            | 6,007   |   |  | $ | 6,367   |   |  | $ | (8,807 | ) |  | $ | 45,429 |  | $ | 42,989  |  
|                                                |  |                                   |         |   |                  |   |         |                       |  |              |         |   |  |   |         |   |  |   |        |   |  |   |        |  |   |         |  
|Loss Ratio                                      |  |                                   | 71.4    | % |                  |   | 86.8    | %                     |  |              | 75.2    | % |  |   | 79.8    | % |  |   |        |   |  |   |        |  |   |         |  
|Combined Ratio                                  |  |                                   | 90.8    | % |                  |   | 105.8   | %                     |  |              | 79.7    | % |  |   | 96.8    | % |  |   |        |   |  |   |        |  |   |         |  



The loss ratio is calculated by
dividing losses, benefits and experience refunds by net premiums earned. The combined ratio is calculated by dividing total losses and expenses by net premiums earned. A loss or combined ratio is not provided for life and annuity products as these
ratios are not normally considered appropriate measures for life and annuity underwriting.



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(Expressed in thousands of United States Dollars)



|                                                |  |                                   |         |   |                 |   |         |                      |  |   |        |   |  |               |         |   |           |   |              |   |  |   |        |  |   |         |  
|----------------------------------------------- |  | --------------------------------- | ------- | - | --------------- | - | ------- | -------------------- |  | - | ------ | - |  | ------------- | ------- | - | --------- | - | ------------ | - |  | - | ------ |  | - | ------- | -
|                                                |  | Three Months Ended March 31, 2003 |        
|                                                |  | Property & Casualty               |         |   |                 |   |         |                      |  |   |       
|                                                |  | TraditionalReinsurance            |         |   | AlternativeRisk |   |         | TraditionalInsurance |  |   | Total  |   |  | Life &Annuity |         |   | Corporate |   | Consolidated |  
|Gross premiums written                          |  | $                                 | 114,104 |   |                 | $ | 307,467 |                      |  | $ | 8,974  |   |  | $             | 430,545 |   |           | $ |             |   |  | $ |       |  | $ | 430,545 |  
|Reinsurance premiums ceded                      |  |                                   |        |   |                 |   | (31,852 | )                    |  |   |       |   |  |               | (31,852 | ) |           |   |             |   |  |   |       |  |   | (31,852 | )
|                                                |  |                                   |         |   |                 |   |         |                      |  |   |        |   |  |               |         |   |           |   |              |   |  |   |        |  |   |         |  
|Net premiums written                            |  | $                                 | 114,104 |   |                 | $ | 275,615 |                      |  | $ | 8,974  |   |  | $             | 398,693 |   |           | $ |             |   |  | $ |       |  | $ | 398,693 |  
|                                                |  |                                   |         |   |                 |   |         |                      |  |   |        |   |  |               |         |   |           |   |              |   |  |   |        |  |   |         |  
|Earned premiums                                 |  | $                                 | 38,221  |   |                 | $ | 118,606 |                      |  | $ | 1,238  |   |  | $             | 158,065 |   |           | $ |             |   |  | $ |       |  | $ | 158,065 |  
|Earned premiums ceded                           |  |                                   |        |   |                 |   | (14,337 | )                    |  |   |       |   |  |               | (14,337 | ) |           |   |             |   |  |   |       |  |   | (14,337 | )
|                                                |  |                                   |         |   |                 |   |         |                      |  |   |        |   |  |               |         |   |           |   |              |   |  |   |        |  |   |         |  
|Net premiums earned                             |  |                                   | 38,221  |   |                 |   | 104,269 |                      |  |   | 1,238  |   |  |               | 143,728 |   |           |   |             |   |  |   |       |  |   | 143,728 |  
|Net investment income                           |  |                                   |        |   |                 |   |        |                      |  |   |       |   |  |               |        |   |           |   |             |   |  |   | 14,507 |  |   | 14,507  |  
|Net gains on sales of alternative investments   |  |                                   |        |   |                 |   |        |                      |  |   |       |   |  |               |        |   |           |   |             |   |  |   | 21,802 |  |   | 21,802  |  
|Net realized gains on sales of fixed maturities |  |                                   |        |   |                 |   |        |                      |  |   |       |   |  |               |        |   |           |   |             |   |  |   | 2,490  |  |   | 2,490   |  
|Other income                                    |  |                                   |        |   |                 |   | 952     |                      |  |   |       |   |  |               | 952     |   |           |   |             |   |  |   | 1,050  |  |   | 2,002   |  
|                                                |  |                                   |         |   |                 |   |         |                      |  |   |        |   |  |               |         |   |           |   |              |   |  |   |        |  |   |         |  
|Total revenues                                  |  |                                   | 38,221  |   |                 |   | 105,221 |                      |  |   | 1,238  |   |  |               | 144,680 |   |           |   |             |   |  |   | 39,849 |  |   | 184,529 |  
|                                                |  |                                   |         |   |                 |   |         |                      |  |   |        |   |  |               |         |   |           |   |              |   |  |   |        |  |   |         |  
|Losses, benefits and experience refunds         |  |                                   | 23,522  |   |                 |   | 82,160  |                      |  |   | 990    |   |  |               | 106,672 |   |           |   | 7,791        |   |  |   |       |  |   | 114,463 |  
|Acquisition costs                               |  |                                   | 8,202   |   |                 |   | 30,246  |                      |  |   | 30     |   |  |               | 38,478  |   |           |   | 259          |   |  |   |       |  |   | 38,737  |  
|Interest expense                                |  |                                   |        |   |                 |   |        |                      |  |   |       |   |  |               |        |   |           |   |             |   |  |   | 5,981  |  |   | 5,981   |  
|General and administrative expenses             |  |                                   | 443     |   |                 |   | 1,193   |                      |  |   | 1,498  |   |  |               | 3,134   |   |           |   | 1,262        |   |  |   | 3,800  |  |   | 8,196   |  
|                                                |  |                                   |         |   |                 |   |         |                      |  |   |        |   |  |               |         |   |           |   |              |   |  |   |        |  |   |         |  
|Total losses and expenses                       |  |                                   | 32,167  |   |                 |   | 113,599 |                      |  |   | 2,518  |   |  |               | 148,284 |   |           |   | 9,312        |   |  |   | 9,781  |  |   | 167,377 |  
|                                                |  |                                   |         |   |                 |   |         |                      |  |   |        |   |  |               |         |   |           |   |              |   |  |   |        |  |   |         |  
|Net income (loss) before minority interest      |  | $                                 | 6,054   |   |                 | $ | (8,378  | )                    |  | $ | (1,280 | ) |  | $             | (3,604  | ) |           | $ | (9,312       | ) |  | $ | 30,068 |  | $ | 17,152  |  
|                                                |  |                                   |         |   |                 |   |         |                      |  |   |        |   |  |               |         |   |           |   |              |   |  |   |        |  |   |         |  
|Loss Ratio                                      |  |                                   | 61.5    | % |                 |   | 78.8    | %                    |  |   | 80.0   | % |  |               | 74.2    | % |           |   |              |   |  |   |        |  |   |         |  
|Combined Ratio                                  |  |                                   | 84.2    | % |                 |   | 109.0   | %                    |  |   | 203.4  | % |  |               | 103.2   | % |           |   |              |   |  |   |        |  |   |         |  



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The Company currently operates in two geographic regions: North America and Europe.



Financial information relating to gross premiums written and reinsurance
premiums ceded by geographic region for the three months ended March 31, 2004 and 2003 were as follows:



|                                |  |                                                  |         |   |      |   |         |  
|------------------------------- |  | ------------------------------------------------ | ------- | - | ---- | - | ------- | -
|                                |  | Three Months EndedMarch 31,                      |        
|                                |  | 2004                                             |         |   | 2003 |  
|                                |  | (Expressed in thousands ofUnited States Dollars) |        
|North America                   |  | $                                                | 295,426 |   |      | $ | 187,143 |  
|Europe                          |  |                                                  | 144,105 |   |      |   | 243,402 |  
|Reinsurance CededNorth America |  |                                                  | (28,615 | ) |      |   | (6,812  | )
|Reinsurance CededEurope        |  |                                                  | (14,172 | ) |      |   | (25,040 | )
|                                |  |                                                  |         |   |      |   |         |  
|                                |  | $                                                | 396,744 |   |      | $ | 398,693 |  
|                                |  |                                                  |         |   |      |   |         |  



Three customers
accounted for 31.6%, 12.0% and 9.1%, respectively, of the Companys gross premiums written during the three months ended March 31, 2004. Three customers accounted for 33.9%, 28.9% and 12.8%, respectively, of the Companys gross premiums
written during the three months ended March 31, 2003.



|5. | EQUITY CAPITAL
|-- | --------------



Max Re Capitals Board of Directors declared a dividend of $0.03 per share on January 30, 2004 payable to shareholders of record on February 13,
2004.



The Company did not repurchase any common shares during
the three months ended March 31, 2004. As of March 31, 2004, the remaining authorization under the Companys share repurchase program was approximately $23.2 million.



On July 30, 2003, the holders of non-voting common shares of Max Re and warrants to acquire non-voting common shares of Max
Re exchanged such shares and warrants for common shares of the Company and warrants to acquire common shares of the Company. The effect of this exchange results in the elimination of minority interest and an increase in shareholders equity of
equal amounts as of the date of the exchange. This exchange did not have a dilutive effect on equity.



|6. | RELATED PARTIES
|-- | ---------------



Grand Central Re Limited



Pursuant to an insurance management agreement, Max Re Managers provides insurance management services to Grand Central Re Limited, a Bermuda domiciled
reinsurance company in which Max Re has a 7.5% equity investment (Grand Central Re).



Pursuant to Max Res quota share reinsurance agreement with Grand Central Re, each of Max Re and Grand Central Re are required to retrocede a portion
of their respective gross premiums written from certain transactions to the other party on a quota share basis. Under an aggregate



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stop loss contract, Grand Central Re also provides aggregate reinsurance protection to Max Re on one of its underlying
reinsurance contracts.



The accompanying consolidated balance
sheets and statements of income and comprehensive income include, or are net of, the following amounts related to the quota share retrocession and aggregate stop loss agreements with Grand Central Re. Although the variable quota share agreement with
Max Re remains in force, the parties have agreed that Max Re will not cede any new business to Grand Central Re for the 2004 year while Grand Central Re reviews its long term strategic direction.



|                                        |  |                                                  |         |      |   |        
|--------------------------------------- |  | ------------------------------------------------ | ------- | ---- | - | -------
|                                        |  | March 31,                                       
|                                        |  | 2004                                             |         | 2003
|                                        |  | (Expressed in thousandsof United States Dollars)
|Losses recoverable from reinsurers      |  | $                                                | 178,916 |      | $ | 115,395
|Prepaid reinsurance premiums            |  |                                                  | 17,034  |      |   | 37,936 
|Deposit liability                       |  |                                                  | 42,886  |      |   | 49,223 
|Funds withheld from reinsurers          |  |                                                  | 185,973 |      |   | 119,255
|Reinsurance balances payable            |  |                                                  | 8,885   |      |   | 18,650 
|Reinsurance premiums ceded              |  |                                                  | 8,373   |      |   | 31,852 
|Earned premiums ceded                   |  |                                                  | 8,935   |      |   | 13,917 
|Other income                            |  |                                                  | 1,168   |      |   | 1,051  
|Losses, benefits and experience refunds |  |                                                  | 12,337  |      |   | 12,136 
|Interest expense                        |  |                                                  | 4,886   |      |   | 1,331  



The Company believes
that the terms of the insurance management, quota share retrocession and aggregate stop loss agreements are comparable to the terms that the Company would expect to negotiate in similar transactions with unrelated parties.



Alternative Investment Managers



Moore Capital Management, LLC, which is affiliated with certain shareholders
and a director of Max Re Capital, served as fund of funds advisor for Max Re Diversified until April 1, 2004, when such management obligations were assigned, with the consent of the Company, to its subsidiary Alstra Capital Management, LLC (Moore
Capital Management, LLC hereinafter referred to collectively with Alstra Capital Management, LLC and its other affiliates as Moore Capital).



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For the three months ended March 31, 2004 and 2003, Moore Capital received aggregate management and
incentive fees of $1,143 and $868, respectively, in respect of Max Re Diversifieds assets invested in underlying funds managed by Moore Capital. In addition, as the fund of funds advisor for Max Re Diversified, Moore Capital received $1,406
and $1,024 in fees for the three months ended March 31, 2004 and 2003, respectively.



All investment fees incurred on the Companys alternative investments are included in net gains on alternative investments in the consolidated statements of income and comprehensive income.



7. COMMITMENTS



Letter of Credit Facilities



The Company has three letter of credit facilities as of March 31, 2004. The Companys primary letter of credit facility provides $270.0 million of
capacity and is with a syndicate of commercial banks, one of which is affiliated with a director of Max Re Capital. In accordance with the facility agreement, the syndicate will issue letters of credit that may total up to $243.0 million secured by
fixed maturities and up to $27.0 million secured by alternative investments. The Company believes that the terms of this letter of credit facility are comparable to the terms that the Company would expect to negotiate with an unrelated party. At
March 31, 2004 and December 31, 2003, letters of credit totaling $267.6 million and $249.9 million, respectively, were issued and outstanding under this facility. Fixed maturities and cash equivalents with a fair value of $261.8 million and Max Re
Diversified shares with a fair value of $77.6 million at March 31, 2004 were pledged as collateral for these letters of credit.



The Company also has a $50.0 million letter of credit facility with the New York branch of Bayerische Hypo- und Vereinsbank AG (HVB), a
shareholder of the Company and an affiliate of a former director. HVB is the majority shareholder of Grand Central Re, which is managed by Max Re Managers and in which the Company has 7.5% equity interest. The Company believes that the terms of this
letter of credit facility are comparable to the terms that the Company would expect to negotiate at arms length with an unrelated party. At each of March 31, 2004 and December 31, 2003, letters of credit totaling $21.1 million were issued by
HVB under this facility. All letters of credit issued under this facility are collateralized by a portion of the Companys invested assets. Fixed maturities and cash equivalents with a fair value of $21.5 million and Max Re Diversified shares
with a fair value of $84.6 million at March 31, 2004 were pledged as collateral for these letters of credit.



In September 2003, the Company entered into a $100.0 million letter of credit facility with Fleet National Bank. At March 31, 2004, letters of credit
totaling $0.6 million were issued under this facility. All letters of credit issued under this facility are collateralized by a portion of the Companys invested assets. Fixed maturities and cash equivalents with a fair value of $15.3 million
at March 31, 2004 were pledged as collateral for these letters of credit.



Each of the letter of credit facilities requires that the Company and/or certain of its subsidiaries comply with certain covenants, including maintaining a minimum consolidated tangible net worth, and places
restrictions on the payment of dividends. The Company was in compliance with all the covenants of each of its letter of credit facilities at March 31, 2004.



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8.STOCK-BASED COMPENSATION



The Company accounts for stock-based employee compensation in accordance with the fair-value method prescribed by FAS No.
123Accounting for Stock-Based Compensation (FAS No. 123), as amended by FAS No. 148Accounting for Stock-Based Compensation - Transition and Disclosure, using the prospective adoption method. Under the prospective adoption
method, compensation expense is recognized over the relevant service period based on the fair value of stock options granted after January 1, 2003.



If the Company were to recognize compensation expense over the relevant service period under the fair-value method of FAS No. 123 with respect to stock
options granted for the year ended December 31, 2002 and all prior years, net income would have decreased in each period from the amount reported, resulting in pro forma net income and earnings per share as follows:



|                                                                                                    |  |                                        |        |   |      |   |        |  
|--------------------------------------------------------------------------------------------------- |  | -------------------------------------- | ------ | - | ---- | - | ------ | -
|                                                                                                    |  | Three Months Ended March 31,           |       
|                                                                                                    |  | 2004                                   |        |   | 2003 |  
|                                                                                                    |  | (in thousands, exceptper share amount) |       
|Net income, as reported                                                                             |  | $                                      | 42,989 |   |      | $ | 14,562 |  
|Add: Stock-based employee compensation expense included in reported net income                      |  |                                        | 129    |   |      |   | 33     |  
|Deduct: Stock-based employee compensation expense determined under fair-value method for all awards |  |                                        | (729   | ) |      |   | (539   | )
|                                                                                                    |  |                                        |        |   |      |   |        |  
|Pro forma net income                                                                                |  | $                                      | 42,389 |   |      | $ | 14,056 |  
|                                                                                                    |  |                                        |        |   |      |   |        |  
|Earnings per share, as reported                                                                     |  |                                        |        |   |      |   |        |  
|Basic                                                                                               |  | $                                      | 0.94   |   |      | $ | 0.38   |  
|Diluted                                                                                             |  |                                        | 0.87   |   |      |   | 0.38   |  
|Earnings per share, pro forma                                                                       |  |                                        |        |   |      |   |        |  
|Basic                                                                                               |  | $                                      | 0.93   |   |      | $ | 0.37   |  
|Diluted                                                                                             |  |                                        | 0.86   |   |      |   | 0.37   |  



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|ITEM 2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------- | -------------------------------------------------------------------------------------



Unless otherwise indicated or unless the context otherwise requires, all references in this Quarterly Report on Form 10-Q to
we, us, our and similar expressions are references to Max Re Capital and its consolidated subsidiaries.



The following is a discussion and analysis of our results of operations for the three months ended March 31, 2004 compared to the three months ended March
31, 2003 and our financial condition as of March 31, 2004. This discussion and analysis should be read in conjunction with the attached unaudited interim consolidated financial statements and related notes and the audited consolidated financial
statements and related notes contained in our Annual Report on Form 10-K for the year ended December 31, 2003.



This Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities
Exchange Act of 1934. We intend that the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 apply to these forward-looking statements. Forward-looking statements are not statements of historical fact but
rather reflect our current expectations, estimates and predictions about future results and events. These statements may use words such as anticipate, believe, estimate, expect, intend,
predict, project and similar expressions as they relate to us or our management. When we make forward-looking statements, we are basing them on managements beliefs and assumptions, using information currently available
to it. These forward-looking statements are subject to risks, uncertainties and assumptions. Factors that could cause such forward-looking statements not to be realized (which are described in more detail included or incorporated by reference herein
and in documents filed by us with the Securities and Exchange Commission) include, without limitation, acceptance in the market of our products, general economic conditions and conditions specific to the reinsurance and insurance markets in which we
operate, pricing competition, the amount of underwriting capacity from time to time in the market, material fluctuations in interest rate levels, tax and regulatory changes and conditions, rating agency policies and practices, claims development and
loss of key executives. Other factors such as changes in U.S. and global financial and equity markets resulting from general economic conditions, market disruptions and significant interest rate fluctuations may adversely impact our investment or
impede our access to, or increase the cost of, financing our operations. We caution that the foregoing list of important factors is not intended to be, and is not, exhaustive. We undertake no obligation to update publicly or revise any
forward-looking statements, whether as a result of new information, future events or otherwise. If one or more risks or uncertainties materialize, or if our underlying assumptions prove to be incorrect, actual results may vary materially from what
we projected. Any forward-looking statements in this Form 10-Q reflect our current view with respect to future events and are subject to these and other risks, uncertainties and assumptions relating to our operations, results of operations, growth
strategy and liquidity. All subsequent written and oral forward-looking statements attributable to us or individuals acting on our behalf are expressly qualified in their entirety by this paragraph.



Overview



We are a Bermuda-based provider of reinsurance and insurance products for both the property and casualty and the life and
annuity markets. In the past two years, the property and casualty market has presented more opportunities to us than the life and annuity market due to a shortage of reinsurance capacity in the property and casualty market, resulting in improvement
in



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premium rates, terms and conditions. Further, a weak global economy and corrections in the global capital markets over
the last several years have resulted in a pricing gap between buyers and sellers of the type of life and annuity reinsurance products that we offer. We anticipate continuing greater demand for our property and casualty products than for our life and
annuity products during 2004.



To manage reinsurance and
insurance liability exposure, make investment decisions and assess overall enterprise risk, we model our underwriting and investing activities on an integrated basis. Our integrated risk management, as well as features of our products, provides
flexibility in making decisions regarding investments. Our investments are currently comprised of a high grade fixed maturities portfolio and an alternative investment portfolio that currently employs 12 strategies invested in approximately 50
underlying trading entities and two strategic reinsurance private equity investments, designed to provide diversification and to generate positive returns while attempting to reduce the frequency and severity of loss outcomes. Based on fair value at
March 31, 2004, the allocation of invested assets was approximately 65.0% in cash and fixed maturities and 35.0% in alternative investments.



Our principal operating subsidiary is Max Re. At March 31, 2004, Max Re had $853 million of shareholders equity. We conduct our European activities
through Max Europe Holdings and its operating subsidiaries, Max Re Europe and Max Insurance Europe. We also provide reinsurance underwriting and administrative services on a fee basis through Max Re Managers. We hold all of our alternative
investments in Max Re Diversified, other than reinsurance private equity investments that are held by Max Re.



Executive Summary



We
continued to develop our property and casualty traditional reinsurance and insurance opportunities during the three months ended March 31, 2004. The strategy resulted in improved underwriting performance, which, coupled with strong investment
performance, enabled us to generate increased net income. During the three months ended March 31, 2004, we produced a 2.1% increase in gross premiums written compared to the three months ended March 31, 2003. Gross premiums written in our
alternative risk transfer product line declined 40.9%, principally due to the non-renewal of one large alternative risk transfer contract that accounted for $110.0 million in gross premiums written in the three months ended March 31, 2003. Gross
premiums written for the traditional reinsurance and insurance product lines increased by 109.5% to $257.8 million for the three months ended March 31, 2004 compared to $123.1 million for the three months ended March 31, 2003.



We intend to continue to increase the diversification of our property and
casualty underwriting business. Our efforts to shift our underwriting focus and hire additional traditional reinsurance underwriting professionals, coupled with the introduction of insurance operations, has enabled us to increase our professional
liability, general liability and aviation underwriting capability and premium volume. Consequently, we believe our underwriting portfolio is, and will be for the foreseeable future, more balanced and diversified than in previous years.



There is a potential for increased volatility in our loss ratio arising
from the diversification in product mix to include traditional reinsurance and insurance business. We plan to manage this risk by selecting appropriate line sizes, diversifying our underlying exposures, establishing contractual caps on our contracts
and continue purchasing reinsurance and retrocessional reinsurance protection.



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Our diversification in property and casualty product mix has resulted in improved underwriting
performance in the first three months of 2004. Our combined ratio (total losses and expenses as a percentage of net premiums earned) has improved to 96.8% in the three months ended March 31, 2004, compared to 103.2% in the three months ended March
31, 2003. We believe that our traditional reinsurance and insurance products will generate lower combined ratios than alternative risk transfer products.



Losses, benefits and experience refunds represent our largest expense and account for more than 50% of total liabilities at March 31, 2004. We establish
loss expenses and reserves using a combination of loss reserving techniques and actuarial methods. Loss expenses and reserves are reviewed regularly to reflect new information that we receive. The results of our regular internal review of reserves
determined that there were no significant adjustments to reserves during the three months ended March 31, 2004. In addition, the adequacy of our reserves is reviewed annually, in the fourth quarter of the year, by outside actuaries to support
managements estimates.



Our investments during the three
months ended March 31, 2004 produced a total return of 2.98% compared to 1.83% for the three months ended March 31, 2003. The principal contributor to the investment performance during the three months ended March 31, 2004 was the 4.07% rate of
return generated on our alternative investments compared to a 3.10% rate of return for the same period in 2003. We currently invest in 12 strategies within our alternative investment portfolio. All strategies had positive rates of return during the
three months ended March 31, 2004.



We continually assess our
liquidity needs by monitoring new business prospects and the development of our existing operations. During the three months ended March 31, 2004, we generated $153.9 million of cash from operations and invested $157.8 million in fixed maturities
and alternative investments. We expect to continue to generate operating cash inflow during the remainder of 2004 through profitable new business and investment returns, which will be offset partially by paid losses on existing reinsurance and
insurance obligations, as well as operating expenses.



Drivers of
Profitability



Revenues



We derive revenues from two principal sources, premiums from reinsurance and
insurance business and income from our investment portfolio.



Reinsurance and insurance premiums are a function of the amount and type of contracts written as well as prevailing market prices. Premiums are earned over the coverage period of the underlying contracts. Each of our reinsurance contracts
contains unique pricing, terms and conditions and expected profit margins. Therefore, the amount of premiums is not necessarily an accurate indicator of our anticipated profitability.



Our net investment income is a function of the average invested assets and the average yield that we earn on those invested
assets. The investment yield on our fixed maturities investments is a function of market interest rates as well as the credit quality and maturity of our fixed maturities portfolio. We recognize the realized capital gains or losses on our fixed
maturities investments at the time of sale. The realized capital gains or losses reflect the results of changing market conditions, including, but not limited to, changes in market interest rates and changes in the



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markets perception of the credit quality of our fixed maturities holdings. Our net gains on alternative investments
is a function of the success of the funds in which we are invested, which depends on, among other things, the underlying strategies of the funds, the ability of the fund managers to execute the fund strategies and general economic and investment
market conditions, and the underlying operating results of the private equity reinsurance investments.



Expenses



Our principal
expenses are losses, benefits and experience refunds, acquisition costs, interest expense and general and administrative expenses. Losses, benefits and experience refunds are based on the amount and type of reinsurance and insurance contracts
written by us during the current reporting period and information received during the current reporting period from ceding clients pertaining to contracts written in prior years. We record losses, benefits and experience refunds based on an
actuarial estimate of the expected losses, benefits and experience refunds to be incurred on each contract written. The ultimate losses, benefits and experience refunds depend on the actual costs to settle these liabilities. We increase or decrease
losses, benefits and experience refunds estimates as actual claim reports are received. Our ability to estimate losses, benefits and experience refunds accurately at the time of pricing our contracts is a critical factor in determining
profitability.



Acquisition costs consist principally of ceding
commissions paid to ceding clients and brokerage expenses, and typically represent a negotiated percentage of the premiums on reinsurance and insurance contracts written. We generally defer and amortize these costs over the period in which the
related premiums are earned.



Interest expense principally
reflects the interest charged on funds withheld from reinsurers under reinsurance and retrocessional contracts. Interest is charged on the funds withheld balances at various contractual and negotiated rates and the expense may vary from period to
period. In addition, interest expense also includes interest on the bank loan at a rate based on LIBOR plus a spread.



General and administrative expenses are principally employee salaries and related personnel costs, rent and other operating costs. These costs are
primarily fixed in nature and do not correlate with the amount of premiums written.



Critical Accounting Policies



Our consolidated
financial statements are prepared in accordance with GAAP, which require management to make estimates and assumptions. We have performed a current assessment of our critical accounting policies in connection with preparing our interim unaudited
consolidated financial statements as of and for the three months ended March 31, 2004. We believe that the critical accounting policies set forth in our Form 10-K, filed on February 27, 2004, continue to describe the more significant judgments and
estimates used in the preparation of our consolidated financial statements. These accounting policies pertain to revenue recognition, loss and loss adjustment expenses and investment valuation. If actual events differ significantly from the
underlying judgments or estimates used by management in the application of these accounting policies, there could be a material adverse effect on our results of operations and financial condition.



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Results of Operations  Three months ended March 31, 2004 compared to the three months ended March 31, 2003



Gross premiums written. Gross premiums written for
the three months ended March 31, 2004 were $439.5 million compared to $430.5 million for the three months ended March 31, 2003, an increase of 2.1%. Gross premiums written for each of the three month periods came entirely from property and casualty
underwriting. Gross premiums written for property and casualty increased principally due to increased production of traditional reinsurance and insurance business offset by the non-renewal of one large alternative reinsurance contract in the three
months ended March 31, 2003, which accounted for $110.0 million of premium.



Reinsurance premiums ceded. Premiums ceded for the three months ended March 31, 2004 were $42.8 million compared to $31.9 million for the three months ended March 31, 2003, an increase of 34.2%. Reinsurance
premiums ceded during the three months ended March 31, 2004 were principally related to our quota-share reinsurance of our traditional insurance business. In addition, we purchased specific reinsurance and retrocessional reinsurance to manage the
risks on a line of business basis and to manage the exposure retained by us on a transaction basis. As our traditional reinsurance and insurance business grows, we are purchasing, and expect to continue to purchase, additional reinsurance and
retrocessional reinsurance coverage consistent with our risk management objectives.



Net premiums earned. Net premiums earned, entirely related to property and casualty products, were $198.9 million, after the deduction of $34.4 million of earned premiums ceded, for the three months ended March
31, 2004 compared to $143.7 million, after the deduction of $14.3 million of earned premiums ceded, for the three months ended March 31, 2003, an increase of 38.4%. The increase reflects the earning of increased gross premiums written over the past
eighteen months.



Net investment income. Net investment
income was $18.8 million for the three months ended March 31, 2004 compared to $14.5 million for the three months ended March 31, 2003, an increase of 29.7%. The increase was principally attributable to the increase in the amount of cash and fixed
maturities investments held from $1,425.0 million at March 31, 2003 to $1,838.0 million at March 31, 2004, resulting principally from cash received from the collection of premiums written since March 31, 2003. The average annualized investment yield
on cash and fixed maturities investments for the three months ended March 31, 2004 was 4.14% compared to an average yield of 4.15% for the three months ended March 31, 2003.



Net gains on alternative investments. Net gains on the alternative investment portfolio were $38.5 million, including
$1.7 million from our private equity reinsurance investments, for the three months ended March 31, 2004 compared to $21.8 million, including $3.9 million from the our private equity reinsurance investments, for the three months ended March 31, 2003,
an increase of 76.6%. The increase was attributable to both a 4.07% return on alternative investments for the three months ended March 31, 2004 compared to a 3.10% return for the three months ended March 31, 2003 and an increase in the size of the
alternative investment portfolio resulting from approximately $371.6 million of additional investments in the alternative investment portfolio during the twelve months ended March 31, 2004. Every alternative investment strategy that we employed was
profitable during the three months ended March 31, 2004. Alternative investment strategies principally contributing to the gains in the current period were the commodity trading, distressed securities investing, event driven arbitrage, long/short
equities and opportunistic investing.



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Losses, benefits and experience refunds. Losses, benefits and experience refunds were $166.4
million for the three months ended March 31, 2004 compared to $114.5 million for the three months ended March 31, 2003, an increase of 45.3%. Property and casualty losses were $158.7 million for the three months ended March 31, 2004 compared to
$106.7 million for the three months ended March 31, 2003. The increase in property and casualty losses was related to the increase in property and casualty premiums earned during the three months ended March 31, 2004 compared to the same period in
2003. The loss ratio for property and casualty business for the three months ended March 31, 2004 was 79.8% compared to 74.2% for the three months ended March 31, 2003. The increase in loss ratio principally reflects the reduction in aviation
premiums earned and increased casualty premiums earned in the three months ended March 31, 2004 compared to the three months ended March 31, 2003. Loss and loss adjustment expenses incurred for the aviation premium earned in the three months ended
March 31, 2003 were lower than the loss costs for the casualty premiums earned in 2004.



Life and annuity benefits were $7.7 million for the three months ended March 31, 2004, which principally related to the accretion of liability for future benefits on contracts written in prior years, compared to $7.8
million for the three months ended March 31, 2003.



There were
no significant adjustments to expected reserves during the three months ended March 31, 2004.



Acquisition costs. Acquisition costs were $31.8 million for the three months ended March 31, 2004 compared to $38.7 million for the three months ended March 31, 2003, a decrease of 17.8%. The decrease in
acquisition costs results from a change in property and casualty product mix away from alternative risk products, which typically have higher acquisition costs. Additionally, our increased use of the reinsurance market on the traditional reinsurance
and insurance contracts has enabled us to recover acquisition costs associated with those contracts from reinsurers and retrocessionaires.



Interest expense. Interest expense was $11.8 million for the three months ended March 31, 2004 compared to $6.0 million for the three months ended
March 31, 2003, an increase of 96.7%. The increase resulted principally from interest expense on additional funds withheld from our reinsurers and on increased deposit liabilities for the three months ended March 31, 2004 compared to the same period
in 2003. Additionally, the rate of interest charged on the funds withheld was higher for the three months ended March 31, 2004 compared to the three months ended March 31, 2003 as a result of increased total returns on the bond indices upon which
the interest is based.



General and administrative
expenses. General and administrative expenses were $10.2 million for the three months ended March 31, 2004 compared to $8.2 million for the three months ended March 31, 2003, an increase of 24.4%. The increase resulted principally from
additional costs associated with our traditional insurance and reinsurance teams that were not fully established in the three months ended March 31, 2003. For the three months ended March 31, 2004 the ratio of general and administrative expenses to
net premiums earned was 5.1% compared to 5.7% for the three months ended March 31, 2003.



Net income. Net income for the three months ended March 31, 2004 was $43.0 million compared to net income of $14.6 million for the three months ended March 31, 2003, an increase of 194.5%. The results for the
three months ended March 31, 2004 are principally attributable to



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underwriting profits our traditional risk transfer reinsurance and insurance products and an improved rate of return on
our alternative investments compared to the same period in 2003.



Financial
Condition



Cash and invested assets. Aggregate
invested assets, comprising cash and cash equivalents, fixed maturities and alternative investments were $2,826.0 million at March 31, 2004 compared to $2,637.3 million at December 31, 2003, an increase of 7.2%. The increase in cash and invested
assets resulted principally from $153.9 million in cash flows from operations generated in the first three months of 2004 and the appreciation of the alternative investment portfolio of $38.5 million.



Property and casualty losses and experience refunds. Property and
casualty losses and experience refunds totaled $1,137.9 million at March 31, 2004 compared to $991.7 million at December 31, 2003, an increase of 14.7%. The increase in property and casualty losses and experience refunds was principally attributable
to increased premiums earned during the three months ended March 31, 2004, partially offset by losses paid.



Life and annuity benefits and experience refunds. Life and annuity benefits and experience refunds totaled $474.0 million at March 31, 2004
compared to $480.1 million at December 31, 2003. The decrease in the three months ended March 31, 2004 was principally attributable to benefit payments on existing contracts in force.



Losses recoverable from reinsurers. Losses recoverable from reinsurers totaled $305.5 million at March 31, 2004
compared to $273.7 million at December 31, 2003, an increase of 11.6%, principally reflecting losses ceded under our reinsurance and retrocessional agreements. At March 31, 2004, two retrocessionaires account for 58.6% and 27.4% of our losses
recoverable from reinsurers, respectively. The retrocessionaires have a financial strength rating of A- and A, respectively, by A.M. Best Company. We retain funds from these two retrocessionaires to secure principally all of
their obligations.



Bank loans. In February 2003, Max Re
completed a $150.0 million sale of shares of Max Re Diversified to a third party financial institution. Simultaneous with the sale, Max Re entered into a total return swap with the purchaser of these shares whereby Max Re received the return earned
on the Max Re Diversified shares in exchange for a variable rate of interest based on LIBOR plus a spread. Under GAAP, these transactions were viewed on a combined basis and accounted for as a financing transaction, which resulted in the recording
of a $150.0 million bank loan.



Shareholders
equity. Our shareholders equity increased to $866.9 million at March 31, 2004 from $805.2 million at December 31, 2003, an increase of 7.7%, principally reflecting income of $43.0 million for the three months ended March 31, 2004 and
unrealized holding gains on fixed maturities arising during the period of $18.7 million, partially offset by a dividend paid in the amount of $1.4 million.



Liquidity and capital resources. We generated $153.9 million from operations during the three months ended March 31, 2004 compared to $66.9 million
for the three months ended March 31, 2003, an increase of 130.0%, principally reflecting the diversification in product mix, which generated increased gross premiums written during the period. We used $25.9 million for financing activities
principally for the payment of deposit liabilities relating to one large contract. The net cash generated from operating and financing activities was applied to our investing



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activities through the net purchase of $39.3 million in fixed maturities and $118.6 million in alternative investments.



As a holding company, Max Re Capitals principal assets
are its investments in the common shares of its principal subsidiary, Max Re, and its other subsidiaries. Max Re Capitals principal source of funds is from interest income on cash balances and cash dividends from its subsidiaries, including
Max Re. The payment of dividends is limited under Bermuda insurance laws. In particular, Max Re may not declare or pay any dividends if it is in breach of its minimum solvency or liquidity levels under Bermuda law or if the declaration or payment of
the dividends would cause it to fail to meet the minimum solvency or liquidity levels under Bermuda law. At March 31, 2004, Max Re, which is required to have $198.6 million in statutory capital and surplus in order to pay dividends, had $714.8
million in statutory capital and surplus.



Capital
resources. At March 31, 2004, our capital structure consisted of equity. Total capitalization after deducting loans to employees and including retained earnings and accumulated other comprehensive income amounted to $866.9 million as compared to
$805.2 million at December 31, 2003, an increase of 7.7%. We have flexibility with respect to capitalization as a result of our access to the debt and equity markets and evaluate various capital alternatives from time to time. We regularly review
our capital adequacy and believe our current level of capital is sufficient to support our current reinsurance and insurance operations.



In the ordinary course of business, we are required to provide letters of credit or other regulatory approved security to certain of our clients to meet
contractual and regulatory requirements.



We have three letter
of credit facilities as of March 31, 2004 providing $420.0 million of aggregate letter of credit capacity. Each of our letter of credit facilities requires that we comply with certain covenants, including a minimum consolidated tangible net worth
and restrictions on the payment of dividends. We were in compliance with all the covenants of each of its letter of credit facilities at March 31, 2004.



On January 30, 2004, Max Re Capitals Board of Directors declared a quarterly shareholder dividend of $0.03 per share payable to shareholders of
record on February 13, 2004. Continuation of cash dividends in the future will be at the discretion of the Board of Directors and will be dependent upon our results of operations and cash flows, and our financial position and capital requirements,
general business conditions, legal, tax, regulatory and any contractual restrictions on the payment of dividends and other factors the Board of Directors deems relevant. On April 30, 2004, the Board of Directors declared a dividend of $0.03 per
share to be paid on May 31, 2003 to shareholders of record on May 14, 2004.



We have been assigned an insurer financial strength rating of A- (Excellent) by A.M. Best Company, Inc. and an insurer financial strength rating of A (Strong) by Fitch, Inc. These ratings
reflect each rating agencys opinion of our financial strength, operating performance and ability to meet obligations. If an independent rating agency downgrades or withdraws any of our ratings, we could be severely limited or prevented from
writing any new reinsurance contracts, which would significantly and negatively affect our business. To date, our ratings have been affirmed by A.M. Best and Fitch on each rating review. Ratings are based upon factors relevant to policyholders and
are not directed toward the protection of investors.



No
off-balance sheet arrangements. We do not participate in transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred



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to as structured finance or variable interest entities (VIEs), which would have been established for the
purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. As of March 31, 2004, we were not aware of any unconsolidated VIE transactions.



Contractual Obligations



|                                                                                |  |                                              |         |                 |   |          |  |          |       |                  |   |       |  |   |      
|------------------------------------------------------------------------------- |  | -------------------------------------------- | ------- | --------------- | - | -------- |  | -------- | ----- | ---------------- | - | ----- |  | - | -----
|                                                                                |  | Payment due by period (thousands of dollars)
|Contractual Obligations                                                         |  | Total                                        |         | Less than1 year |   | 1-3years |  | 3-5years |       | More than5 years
|Long-term debt obligations                                                      |  | $                                            | 150,000 |                 | $ | 150,000  |  | $        |      |                  | $ |      |  | $ |     
|Capital lease obligations                                                       |  |                                              |        |                 |   |         |  |          |      |                  |   |      |  |   |     
|Operating lease obligations                                                     |  |                                              | 10,434  |                 |   | 1,113    |  |          | 2,226 |                  |   | 2,400 |  |   | 4,695
|Purchase obligations                                                            |  |                                              |        |                 |   |         |  |          |      |                  |   |      |  |   |     
|Other long-term liabilities reflected on the Companys balance sheet under GAAP |  |                                              |        |                 |   |         |  |          |      |                  |   |      |  |   |     
|                                                                                |  |                                              |         |                 |   |          |  |          |       |                  |   |       |  |   |      
|Total                                                                           |  | $                                            | 160,434 |                 | $ | 151,113  |  | $        | 2,226 |                  | $ | 2,400 |  | $ | 4,695
|                                                                                |  |                                              |         |                 |   |          |  |          |       |                  |   |       |  |   |      



|ITEM 3. | Quantitative and Qualitative Disclosures About Market Risk
|------- | ----------------------------------------------------------



We engage in an investment strategy that combines a fixed maturities investment portfolio and an alternative investment portfolio that employ strategies
to manage investment risk. We attempt to maintain adequate liquidity in our fixed maturities investment portfolio to fund operations, pay reinsurance and insurance liabilities and claims and provide funding for unexpected events. We seek to manage
our credit risk through industry and issuer diversification, and interest rate risk by monitoring the duration and structure of our investment portfolio relative to the duration and structure of our liability portfolio. We are exposed to potential
loss from various market risks, primarily changes in interest rates and equity prices. Accordingly, earnings would be affected by these changes. We manage our market risk based on Board-approved investment policies. With respect to our fixed
maturities investment portfolio, our risk management strategy and investment policy is to invest in debt instruments of high credit quality issuers and to limit the amount of credit exposure with respect to particular ratings categories and any one
issuer. We select investments with characteristics such as duration, yield, currency and liquidity that are tailored to the cash flow characteristics of our property and casualty and life and annuity liabilities.



As of March 31, 2004, we did not hold any high-yield investments in our fixed
maturities investment portfolio. Our current policy is not to hold securities rated lower than BBB-/BAA- in our fixed maturities investment portfolio. At March 31, 2004, the impact on the fixed maturities investment portfolio from an immediate 100
basis point increase in market interest rates would have resulted in an estimated decrease in market value of 3.8%, or approximately $70.1 million, and the impact on the fixed maturities investment portfolio from an immediate 100 basis point



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decrease in market interest rates would have resulted in an estimated increase in market value of 3.9%, or approximately
$71.9 million.



With respect to our alternative investment
portfolio, although our fund of funds advisor is contractually obligated to abide by our investment guidelines, we do not directly control the allocation of our assets to strategies or underlying funds, nor do we control the manner in which they are
invested by the our fund managers. However, we consistently and systematically monitor the strategies and funds in which we are invested, and we believe our overall risk is limited as a result of our selected strategies low volatility and low
correlation to the bond market, the stock market and each other. At March 31, 2004, the estimated impact on the alternative investment portfolio from an immediate 100 basis point increase in market interest rates would have resulted in an estimated
decrease in market value of 1.9%, or approximately $18.9 million, and the impact on the alternative investment portfolio from an immediate 100 basis point decrease in market interest rates would have resulted in an estimated increase in market value
of 1.9%, or approximately $18.9 million.



|ITEM 4. | Controls and Procedures
|------- | -----------------------



Disclosure Controls and Internal Controls. Our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act
of 1934, the Exchange Act), which we refer to as disclosure controls are controls, and procedures that are designed with the objective of ensuring that information required to be disclosed in our reports filed under the Exchange Act,
such as this quarterly report, is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commissions rules and forms. Disclosure controls are also designed with the objective of ensuring
that such information is accumulated and communicated to our management, including the Chief Executive Officer and the Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure. Internal control over financial
reporting, which we refer to as internal controls, is a process designed by, or under the supervision of, the Chief Executive Officer and Chief Financial Officer, and effected by the board of directors, management and other personnel, with the
objective of providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Internal controls also
include policies and procedures that:



(1) pertain to the
maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of our company;



(2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and directors of our company; and



(3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of
our assets that could have a material effect on the financial statements.



Limitations on the effectiveness of controls. Although the management of our company, including the Chief Executive Officer and the Chief Financial Officer, believes that our disclosure controls and internal
controls currently provide reasonable assurance that our desired control objectives have been met, management does not expect that our disclosure controls or internal



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controls will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide
only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected. These inherent
limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of
two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in
achieving its stated goals under all potential future conditions.



Quarterly evaluation of the Companys Disclosure Controls. As of March 31, 2004, an evaluation was carried out under the supervision and with the participation of our companys management, including the Chief Executive
Officer and Chief Financial Officer, of the effectiveness of the design and operation of disclosure controls. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded, subject to the limitations noted above, that
the design and operation of these disclosure controls were effective to ensure that material information relating to our company is made known to management, including the Chief Executive Officer and Chief Financial Officer, particularly during the
period when our periodic reports are being prepared.



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PART II OTHER INFORMATION



|ITEM 1. | Legal Proceedings
|------- | -----------------



At March 31, 2004, we were not a party to any material litigation or arbitration We anticipate that we will be subject to litigation and arbitration from
time to time in the ordinary course of business.



|ITEM 2. | Changes in Securities
|------- | ---------------------



Not applicable.



|ITEM 3. | Defaults Upon Senior Securities, Use of Proceeds and Issuer Purchase of Equity Securities
|------- | -----------------------------------------------------------------------------------------



Not applicable.



|ITEM 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------



Not applicable.



|ITEM 5. | Other Information
|------- | -----------------



Not applicable.



|ITEM 6. | Exhibits and Reports on Form 8-K
|------- | --------------------------------



(a) Exhibits



|        |  |                                                                                                                           
|------- |  | --------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                               
|        | 
|31.1    |  | Certification of the Chief Executive Officer filed herewith pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.    
|        | 
|31.2    |  | Certification of the Chief Financial Officer filed herewith pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.    
|        | 
|32.1    |  | Certification of the Chief Executive Officer furnished herewith pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|        | 
|32.2    |  | Certification of the Chief Financial Officer furnished herewith pursuant to Section 906 of the Sarbanes-Oxley             



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|     |  |                                                                                                                                                                                                                                                
|---- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     | 
|     |  | Act of 2002.                                                                                                                                                                                                                                   
|     | 
|99.1 |  | Factors Affecting Future Financial Results (incorporated by reference to Exhibit 99.1 of the Companys Annual Report on Form 10-K for the year ended December 31, 2003 filed with the
Securities and Exchange Commission on February 27, 2004).



|(b) | Reports on Form 8-K
|--- | -------------------



On February 2, 2004, Max Re Capital filed a Current Report on Form 8-K reporting its earnings for its fourth quarter ended December 31, 2003, the
declaration on January 30, 2004 of a dividend payable to shareholders of record on February 13, 2004 and its announcement of the resignation of a director.





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SIGNATURES



Pursuant to the
requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



Max Re Capital Ltd./s/    Robert J. CooneyName: Robert J. Cooney Title: President and Chief Executive Officer


Date: May 3, 2004



/s/    Keith S. HynesName: Keith S. Hynes Title:    Executive Vice President and Chief Financial Officer


Date: May 3, 2004



S-1