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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549



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FORM 10-Q



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(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, 2006

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)



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|                                                               |  |                                  
|-------------------------------------------------------------- |  | ---------------------------------
|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)



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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 ̈No  x

Indicate by check mark whether the registrant is a
large accelerated filer, an accelerated filer or a non-accelerated filer. (See definition of accelerated filer and large accelerated filer in Rule 12b-2 of the Exchange Act).



|                            |  |                    |  |                       
|--------------------------- |  | ------------------ |  | ----------------------
|Large Accelerated Filer   x |  | Accelerated Filer ̈ |  | Non-Accelerated Filer ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the
Exchange Act.):    Yes ̈No  x

The number of the Registrants common shares (par value $1.00 per share) outstanding as of May 31, 2006 was 59,402,678.



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##### Table of Contents

MAX RE CAPITAL LTD.

INDEX



|                             |  |                                                                                                                           |  |   
|---------------------------- |  | ------------------------------------------------------------------------------------------------------------------------- |  | --
|                             |  | PAGE                                                                                                                     
|PART IFINANCIAL INFORMATION |  | 3                                                                                                                        
|                             |  |                                                                                                                          
|ITEM 1.                      |  | Financial Statements                                                                                                      |  | 3 
|                             |  |                                                                                                                          
|                             |  | Consolidated Balance Sheets as of March 31, 2006 (unaudited) and December 31, 2005                                        |  | 3 
|                             |  |                                                                                                                          
|                             |  | Consolidated Statements of Income and Comprehensive Income for the Three Months Ended March 31, 2006 and 2005 (unaudited) |  | 4 
|                             |  |                                                                                                                          
|                             |  | Consolidated Statements of Changes in Shareholders Equity for the Three Months Ended March 31, 2006 and 2005 (unaudited) |  | 5 
|                             |  |                                                                                                                          
|                             |  | Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2006 and 2005 (unaudited)                      |  | 6 
|                             |  |                                                                                                                          
|                             |  | Notes to the Interim Consolidated Financial Statements (unaudited)                                                        |  | 7 
|                             |  |                                                                                                                          
|ITEM 2.                      |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                                     |  | 13
|                             |  |                                                                                                                          
|ITEM 3.                      |  | Quantitative and Qualitative Disclosure About Market Risk                                                                 |  | 25
|                             |  |                                                                                                                          
|ITEM 4.                      |  | Controls and Procedures                                                                                                   |  | 25
|                             | 
|PART IIOTHER INFORMATION    |  | 27                                                                                                                       
|                             |  |                                                                                                                          
|ITEM 1.                      |  | Legal Proceedings                                                                                                         |  | 27
|                             |  |                                                                                                                          
|ITEM 2.                      |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                               |  | 27
|                             |  |                                                                                                                          
|ITEM 3.                      |  | Defaults Upon Senior Securities                                                                                           |  | 28
|                             |  |                                                                                                                          
|ITEM 4.                      |  | Submission of Matters to a Vote of Security Holders                                                                       |  | 28
|                             |  |                                                                                                                          
|ITEM 5.                      |  | Other Information                                                                                                         |  | 28
|                             |  |                                                                                                                          
|ITEM 6.                      |  | Exhibits                                                                                                                  |  | 28
|                             | 
|SIGNATURES                   |  | 29                                                                                                                       



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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, 2006 |           |   | December 31, 2005 |  
|                                                                                                                         |  | (Unaudited)    |           |   | (Restated)        |  
|ASSETS                                                                                                                   |  |                |           |   |                   |   |           |  
|Cash and cash equivalents                                                                                                |  | $              | 336,786   |   |                   | $ | 314,031   |  
|Fixed maturities, available for sale at fair value                                                                       |  |                | 2,695,709 |   |                   |   | 2,682,864 |  
|Alternative investments, at fair value                                                                                   |  |                | 1,271,090 |   |                   |   | 1,230,889 |  
|Accrued interest income                                                                                                  |  |                | 31,560    |   |                   |   | 32,632    |  
|Premiums receivable                                                                                                      |  |                | 417,214   |   |                   |   | 398,666   |  
|Losses and benefits recoverable from reinsurers                                                                          |  |                | 652,151   |   |                   |   | 646,669   |  
|Funds withheld                                                                                                           |  |                | 16,638    |   |                   |   | 16,932    |  
|Deferred acquisition costs                                                                                               |  |                | 76,711    |   |                   |   | 69,015    |  
|Prepaid reinsurance premiums                                                                                             |  |                | 95,162    |   |                   |   | 83,493    |  
|Other assets                                                                                                             |  |                | 25,563    |   |                   |   | 23,001    |  
|                                                                                                                         |  |                |           |   |                   |   |           |  
|Total assets                                                                                                             |  | $              | 5,618,584 |   |                   | $ | 5,498,192 |  
|                                                                                                                         |  |                |           |   |                   |   |           |  
|LIABILITIES                                                                                                              |  |                |           |   |                   |   |           |  
|Property and casualty losses                                                                                             |  | $              | 2,087,065 |   |                   | $ | 2,006,032 |  
|Life and annuity benefits                                                                                                |  |                | 853,642   |   |                   |   | 854,224   |  
|Deposit liabilities                                                                                                      |  |                | 200,831   |   |                   |   | 225,328   |  
|Funds withheld from reinsurers                                                                                           |  |                | 415,394   |   |                   |   | 435,942   |  
|Unearned property and casualty premiums                                                                                  |  |                | 493,696   |   |                   |   | 442,976   |  
|Reinsurance balances payable                                                                                             |  |                | 85,600    |   |                   |   | 90,781    |  
|Accounts payable and accrued expenses                                                                                    |  |                | 108,550   |   |                   |   | 94,043    |  
|Bank loan                                                                                                                |  |                | 150,000   |   |                   |   | 150,000   |  
|                                                                                                                         |  |                |           |   |                   |   |           |  
|Total liabilities                                                                                                        |  |                | 4,394,778 |   |                   |   | 4,299,326 |  
|                                                                                                                         |  |                |           |   |                   |   |           |  
|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; 59,372,778 shares issued and outstanding (2005  58,829,354) |  |                | 59,373    |   |                   |   | 58,829    |  
|Additional paid-in capital                                                                                               |  |                | 939,194   |   |                   |   | 926,386   |  
|Loans receivable from common share sales                                                                                 |  |                | (300      | ) |                   |   | (465      | )
|Unearned stock grant compensation                                                                                        |  |                | (24,074   | ) |                   |   | (14,574   | )
|Accumulated other comprehensive income (loss)                                                                            |  |                | (43,990   | ) |                   |   | 4,981     |  
|Retained earnings                                                                                                        |  |                | 293,603   |   |                   |   | 223,709   |  
|                                                                                                                         |  |                |           |   |                   |   |           |  
|Total shareholders equity                                                                                               |  |                | 1,223,806 |   |                   |   | 1,198,866 |  
|                                                                                                                         |  |                |           |   |                   |   |           |  
|Total liabilities and shareholders equity                                                                               |  | $              | 5,618,584 |   |                   | $ | 5,498,192 |  
|                                                                                                                         |  |                |           |   |                   |   |           |  

See accompanying notes to unaudited interim consolidated financial statements.



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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 |           
|                                                          |  | 2006                        |            |   | 2005       |  
|                                                          |  |                             |            |   | (Restated) |  
|REVENUES                                                  |  |                             |            |   |            |   |            |  
|Gross premiums written                                    |  | $                           | 255,924    |   |            | $ | 455,689    |  
|Reinsurance premiums ceded                                |  |                             | (57,762    | ) |            |   | (44,019    | )
|                                                          |  |                             |            |   |            |   |            |  
|Net premiums written                                      |  | $                           | 198,162    |   |            | $ | 411,670    |  
|                                                          |  |                             |            |   |            |   |            |  
|Earned premiums                                           |  | $                           | 206,126    |   |            | $ | 350,328    |  
|Earned premiums ceded                                     |  |                             | (46,369    | ) |            |   | (42,004    | )
|                                                          |  |                             |            |   |            |   |            |  
|Net premiums earned                                       |  |                             | 159,757    |   |            |   | 308,324    |  
|                                                          |  |                            
|Net investment income                                     |  |                             | 34,029     |   |            |   | 23,689     |  
|Net gains on alternative investments                      |  |                             | 54,859     |   |            |   | 14,377     |  
|Net realized (losses) gains on sales of fixed maturities  |  |                             | (1,676     | ) |            |   | 390        |  
|Other income                                              |  |                             | 500        |   |            |   | 1,318      |  
|                                                          |  |                             |            |   |            |   |            |  
|Total revenues                                            |  |                             | 247,469    |   |            |   | 348,098    |  
|                                                          |  |                             |            |   |            |   |            |  
|LOSSES AND EXPENSES                                       |  |                             |            |   |            |   |            |  
|Losses and benefits                                       |  |                             | 124,959    |   |            |   | 267,425    |  
|Acquisition costs                                         |  |                             | 21,543     |   |            |   | 21,502     |  
|Interest expense                                          |  |                             | 6,345      |   |            |   | 6,232      |  
|General and administrative expenses                       |  |                             | 21,759     |   |            |   | 15,257     |  
|                                                          |  |                             |            |   |            |   |            |  
|Total losses and expenses                                 |  |                             | 174,606    |   |            |   | 310,416    |  
|                                                          |  |                             |            |   |            |   |            |  
|NET INCOME                                                |  |                             | 72,863     |   |            |   | 37,682     |  
|                                                          |  |                            
|Change in net unrealized appreciation of fixed maturities |  |                             | (50,069    | ) |            |   | (21,515    | )
|Foreign currency translation adjustment                   |  |                             | 1,098      |   |            |   | (609       | )
|                                                          |  |                             |            |   |            |   |            |  
|COMPREHENSIVE INCOME                                      |  | $                           | 23,892     |   |            | $ | 15,558     |  
|                                                          |  |                             |            |   |            |   |            |  
|Basic earnings per share                                  |  | $                           | 1.23       |   |            | $ | 0.82       |  
|                                                          |  |                             |            |   |            |   |            |  
|Diluted earnings per share                                |  | $                           | 1.15       |   |            | $ | 0.75       |  
|                                                          |  |                             |            |   |            |   |            |  
|Weighted average common shares outstandingbasic          |  |                             | 59,104,352 |   |            |   | 46,166,537 |  
|                                                          |  |                             |            |   |            |   |            |  
|Weighted average common shares outstandingdiluted        |  |                             | 63,516,268 |   |            |   | 49,914,515 |  
|                                                          |  |                             |            |   |            |   |            |  

See accompanying notes to unaudited interim consolidated financial statements.



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CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (Unaudited)

(Expressed in thousands of United States Dollars)



|                                                     |  |                            |           |   |            |   |         |  
|---------------------------------------------------- |  | -------------------------- | --------- | - | ---------- | - | ------- | -
|                                                     |  | Three Months EndedMarch 31 |          
|                                                     |  | 2006                       |           |   | 2005       |  
|                                                     |  |                            |           |   | (Restated) |  
|Preferred Shares                                     |  |                            |           |   |            |   |         |  
|Balance, beginning and end of period                 |  | $                          |          |   |            | $ |        |  
|                                                     |  |                            |           |   |            |   |         |  
|Common shares                                        |  |                            |           |   |            |   |         |  
|Balance, beginning of period                         |  |                            | 58,829    |   |            |   | 45,826  |  
|Issuance of common shares                            |  |                            | 544       |   |            |   | 592     |  
|                                                     |  |                            |           |   |            |   |         |  
|Balance, end of period                               |  |                            | 59,373    |   |            |   | 46,418  |  
|                                                     |  |                            |           |   |            |   |         |  
|Additional paid-in capital                           |  |                            |           |   |            |   |         |  
|Balance, beginning of period                         |  |                            | 926,386   |   |            |   | 648,446 |  
|Issuance of common shares                            |  |                            | 12,529    |   |            |   | 11,131  |  
|Stock option expense                                 |  |                            | 279       |   |            |   | 251     |  
|                                                     |  |                            |           |   |            |   |         |  
|Balance, end of period                               |  |                            | 939,194   |   |            |   | 659,828 |  
|                                                     |  |                            |           |   |            |   |         |  
|Loans receivable from common share sales             |  |                            |           |   |            |   |         |  
|Balance, beginning of period                         |  |                            | (465      | ) |            |   | (10,515 | )
|Loans repaid                                         |  |                            | 165       |   |            |   | 10,050  |  
|                                                     |  |                            |           |   |            |   |         |  
|Balance, end of period                               |  |                            | (300      | ) |            |   | (465    | )
|                                                     |  |                            |           |   |            |   |         |  
|Unearned stock grant compensation                    |  |                            |           |   |            |   |         |  
|Balance, beginning of period                         |  |                            | (14,574   | ) |            |   | (13,294 | )
|Stock grants awarded                                 |  |                            | (12,596   | ) |            |   | (10,463 | )
|Amortization                                         |  |                            | 3,096     |   |            |   | 2,244   |  
|                                                     |  |                            |           |   |            |   |         |  
|Balance, end of period                               |  |                            | (24,074   | ) |            |   | (21,513 | )
|                                                     |  |                            |           |   |            |   |         |  
|Accumulated other comprehensive income (loss)        |  |                            |           |   |            |   |         |  
|Balance, beginning of period                         |  |                            | 4,981     |   |            |   | 22,227  |  
|Holding losses on fixed maturities arising in period |  |                            | (51,745   | ) |            |   | (21,125 | )
|Net realized losses (gains) included in net income   |  |                            | 1,676     |   |            |   | (390    | )
|Currency translation adjustments                     |  |                            | 1,098     |   |            |   | (609    | )
|                                                     |  |                            |           |   |            |   |         |  
|Balance, end of period                               |  |                            | (43,990   | ) |            |   | 103     |  
|                                                     |  |                            |           |   |            |   |         |  
|Retained earnings                                    |  |                            |           |   |            |   |         |  
|Balance, beginning of period                         |  |                            | 223,709   |   |            |   | 226,337 |  
|Net income                                           |  |                            | 72,863    |   |            |   | 37,682  |  
|Dividends paid                                       |  |                            | (2,969    | ) |            |   | (1,392  | )
|                                                     |  |                            |           |   |            |   |         |  
|Balance, end of period                               |  |                            | 293,603   |   |            |   | 262,627 |  
|                                                     |  |                            |           |   |            |   |         |  
|Total shareholders equity                           |  | $                          | 1,223,806 |   |            | $ | 946,998 |  
|                                                     |  |                            |           |   |            |   |         |  

See accompanying notes to unaudited interim consolidated financial statements.



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##### Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)

(Expressed in thousands of United States Dollars)



|                                                                           |  |                            |          |   |            |   |          |  
|-------------------------------------------------------------------------- |  | -------------------------- | -------- | - | ---------- | - | -------- | -
|                                                                           |  | Three Months EndedMarch 31 |         
|                                                                           |  | 2006                       |          |   | 2005       |  
|                                                                           |  |                            |          |   | (Restated) |  
|OPERATING ACTIVITIES                                                       |  |                            |          |   |            |   |          |  
|Net income                                                                 |  | $                          | 72,863   |   |            | $ | 37,682   |  
|Adjustments to reconcile net income to net cash from operating activities: |  |                            |          |   |            |   |          |  
|Amortization of unearned stock based compensation                          |  |                            | 3,375    |   |            |   | 2,495    |  
|Amortization of premium on fixed maturities                                |  |                            | 1,864    |   |            |   | 2,413    |  
|Net realized losses (gains) on sale of fixed maturities                    |  |                            | 1,676    |   |            |   | (390     | )
|Alternative investments                                                    |  |                            | (40,091  | ) |            |   | (51,418  | )
|Accrued interest income                                                    |  |                            | 1,072    |   |            |   | (1,933   | )
|Premiums receivable                                                        |  |                            | (18,548  | ) |            |   | (59,954  | )
|Losses recoverable from reinsurers                                         |  |                            | (5,482   | ) |            |   | (12,706  | )
|Funds withheld                                                             |  |                            | 294      |   |            |   |         |  
|Deferred acquisition costs                                                 |  |                            | (7,696   | ) |            |   | (36,027  | )
|Prepaid reinsurance premiums                                               |  |                            | (11,669  | ) |            |   | (1,641   | )
|Other assets                                                               |  |                            | (2,562   | ) |            |   | (2,676   | )
|Property and casualty losses                                               |  |                            | 81,033   |   |            |   | 107,170  |  
|Life and annuity benefits                                                  |  |                            | (582     | ) |            |   | 124,406  |  
|Funds withheld from reinsurers                                             |  |                            | (20,548  | ) |            |   | 844      |  
|Unearned property and casualty premiums                                    |  |                            | 50,720   |   |            |   | 103,880  |  
|Reinsurance balances payable                                               |  |                            | (5,181   | ) |            |   | (5,511   | )
|Accounts payable and accrued expenses                                      |  |                            | 14,507   |   |            |   | (40,084  | )
|                                                                           |  |                            |          |   |            |   |          |  
|Cash from operating activities                                             |  |                            | 115,045  |   |            |   | 166,550  |  
|                                                                           |  |                            |          |   |            |   |          |  
|INVESTING ACTIVITIES                                                       |  |                            |          |   |            |   |          |  
|Purchases of fixed maturities                                              |  |                            | (211,424 | ) |            |   | (589,498 | )
|Sales of fixed maturities                                                  |  |                            | 113,290  |   |            |   | 464,420  |  
|Redemptions of fixed maturities                                            |  |                            | 31,570   |   |            |   | 12,420   |  
|                                                                           |  |                            |          |   |            |   |          |  
|Cash used in investing activities                                          |  |                            | (66,564  | ) |            |   | (112,658 | )
|                                                                           |  |                            |          |   |            |   |          |  
|FINANCING ACTIVITIES                                                       |  |                            |          |   |            |   |          |  
|Net proceeds from issuance of common shares                                |  |                            | 477      |   |            |   | 1,260    |  
|Dividends paid                                                             |  |                            | (2,969   | ) |            |   | (1,392   | )
|Additions to deposit liabilities                                           |  |                            | 7,515    |   |            |   | 13,916   |  
|Payments of deposit liabilities                                            |  |                            | (32,012  | ) |            |   | (53,566  | )
|Loans repaid                                                               |  |                            | 165      |   |            |   | 10,050   |  
|                                                                           |  |                            |          |   |            |   |          |  
|Cash used in financing activities                                          |  |                            | (26,824  | ) |            |   | (29,732  | )
|                                                                           |  |                            |          |   |            |   |          |  
|Effect of exchange rate on cash                                            |  |                            | 1,098    |   |            |   | (609     | )
|Changes in cash and cash equivalents                                       |  |                            | 22,755   |   |            |   | 23,551   |  
|Cash and cash equivalents, beginning of period                             |  |                            | 314,031  |   |            |   | 239,188  |  
|                                                                           |  |                            |          |   |            |   |          |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                   |  | $                          | 336,786  |   |            | $ | 262,739  |  
|                                                                           |  |                            |          |   |            |   |          |  

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

Interest paid totaled $2,716 and $1,589 for the three months ended March 31, 2006 and 2005, respectively.

See accompanying notes to unaudited interim consolidated financial statements.



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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 (collectively, 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, 2005.

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s 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).

As discussed more fully in our Form 10K/A, filed June 7, 2006, we restated our consolidated financial statements for the years 2005, 2004, 2003, 2002 and
2001. The restatement resulted from the re-evaluation of accounting aspects relating to three retrocessional reinsurance contracts purchased in 2001 and 2003. The effects of this restatement are reflected in the comparative amounts included in this
Form 10-Q.

2. SIGNIFICANT ACCOUNTING POLICIES

Adoption of
New Accounting Standards

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial
Accounting Standards No. 123 (revised 2004), Share-Based Payment (SFAS 123R), which replaced SFAS No. 123, Accounting for Stock-Based Compensation (SFAS 123) and superceded Accounting
Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees. SFAS 123R requires all companies to recognize compensation costs for share-based payments to employees based on the grant-date fair value
of the award. In January 2003, the Company began expensing all stock-based compensation awards granted after January 1, 2003 under the fair value recognition provisions of SFAS 123 and, therefore, the adoption of SFAS 123R did not have a
material effect on the Companys financial position or results of operations and is not expected to have a material effect on future operating results.

The Company adopted SFAS 123R effective January 1, 2006 using the modified prospective method to account for share based payments made to employees. The modified prospective method is similar to the modified
prospective method described in SFAS 148. Under this method, compensation cost is recognized beginning with the effective date (a) based on the requirements of SFAS 123R for all share based payments granted after the effective date and
(b) based on the requirements of SFAS 123R for all awards granted to employees prior to the effective date of SFAS 123R that remain unvested on the effective date.

SFAS 123R requires consideration of expected forfeitures in determining share-based employee compensation expenses as well as the immediate expensing of share-based awards granted to retirement-eligible employees. The
Company has considered expected forfeitures and awards granted to retirement-eligible employees in the determination of stock-based compensation expense and they did not have a material effect.



7



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##### Table of Contents

The pro forma net income and earnings per share of recognizing stock-based compensation expense over the
relevant service period under the fair-value method of FAS No. 123 with respect to all stock options granted by the Company for the three months ended March 31, 2005 is as follows:



|                                 |  |                                         |        |           |   |       
|-------------------------------- |  | --------------------------------------- | ------ | --------- | - | ------
|                                 |  | Three Months Ended March 31, 2005      
|                                 |  | As Reported                             |        | Pro Forma
|                                 |  | (in thousands, except per share amount)
|Net income                       |  | $                                       | 37,682 |           | $ | 37,310
|Stock-based compensation expense |  | $                                       | 251    |           | $ | 623   
|Basis earnings per share         |  | $                                       | 0.82   |           | $ | 0.81  
|Diluted earnings per share       |  | $                                       | 0.75   |           | $ | 0.75  

In the first quarter of 2006, the Company incurred $0.02 million in additional stock-based
compensation due to the adoption of FAS No. 123(R) related to the vesting in 2006 of options granted prior to January 1, 2003.

3. 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.

4. BANK LOAN

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. Max Re Diversified shares owned by Max Re with a fair value of $104.9 million at March 31, 2006 were pledged as collateral to which the Company is exposed to credit risk. Under generally accepted
accounting principles, 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. In February 2005, the parties amended the swap transaction
principally to extend the swap termination date to February 2007, with provisions for earlier termination 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 Max Re at a price equal to the fair value of the Max Re Diversified shares on the date of repurchase.

5. SEGMENT INFORMATION

The Company operates in three
segments: property and casualty reinsurance, property and casualty insurance and life and annuity reinsurance. Within the property and casualty reinsurance segment, the Company generally offers quota share and excess of loss capacity providing
coverage for a portfolio of underlying risks written by our clients. In the property and casualty insurance segment, the Company generally offers excess of loss capacity on specific risks related to one insured. Within the life and annuity
reinsurance segment, the Company generally 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 function that includes its investments and financing activities. The Company does not allocate assets by segment.



8



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##### Table of Contents

A summary of operations by segment for the three months ended March 31, 2006 and 2005 is as follows:

(Expressed in thousands of United States Dollars)



|                                                 |  |                                   |         |   |                           |   |         |           |  |   |              |   |  |   |         |   |  |   |        |   |  |   |         |  
|------------------------------------------------ |  | --------------------------------- | ------- | - | ------------------------- | - | ------- | --------- |  | - | ------------ | - |  | - | ------- | - |  | - | ------ | - |  | - | ------- | -
|                                                 |  | Three Months Ended March 31, 2006 |        
|                                                 |  | Property & Casualty               |         |   | Life & AnnuityReinsurance |   |         | Corporate |  |   | Consolidated |  
|                                                 |  | Reinsurance                       |         |   | Insurance                 |   |         | Total     |  |   |              |  
|Gross premiums written                           |  | $                                 | 184,983 |   |                           | $ | 70,166  |           |  | $ | 255,149      |   |  | $ | 775     |   |  | $ |       |   |  | $ | 255,924 |  
|Reinsurance premiums ceded                       |  |                                   | (16,059 | ) |                           |   | (41,548 | )         |  |   | (57,607      | ) |  |   | (155    | ) |  |   |       |   |  |   | (57,762 | )
|                                                 |  |                                   |         |   |                           |   |         |           |  |   |              |   |  |   |         |   |  |   |        |   |  |   |         |  
|Net premiums written                             |  | $                                 | 168,924 |   |                           | $ | 28,618  |           |  | $ | 197,542      |   |  | $ | 620     |   |  | $ |       |   |  | $ | 198,162 |  
|                                                 |  |                                   |         |   |                           |   |         |           |  |   |              |   |  |   |         |   |  |   |        |   |  |   |         |  
|Earned premiums                                  |  | $                                 | 117,034 |   |                           | $ | 88,317  |           |  | $ | 205,351      |   |  | $ | 775     |   |  | $ |       |   |  | $ | 206,126 |  
|Earned premiums ceded                            |  |                                   | (7,916  | ) |                           |   | (38,298 | )         |  |   | (46,214      | ) |  |   | (155    | ) |  |   |       |   |  |   | (46,369 | )
|                                                 |  |                                   |         |   |                           |   |         |           |  |   |              |   |  |   |         |   |  |   |        |   |  |   |         |  
|Net premiums earned                              |  |                                   | 109,118 |   |                           |   | 50,019  |           |  |   | 159,137      |   |  |   | 620     |   |  |   |       |   |  |   | 159,757 |  
|Net investment income                            |  |                                   |        |   |                           |   |        |           |  |   |             |   |  |   |        |   |  |   | 34,029 |   |  |   | 34,029  |  
|Net gains on sales of alternative investments    |  |                                   |        |   |                           |   |        |           |  |   |             |   |  |   |        |   |  |   | 54,859 |   |  |   | 54,859  |  
|Net realized losses on sales of fixed maturities |  |                                   |        |   |                           |   |        |           |  |   |             |   |  |   |        |   |  |   | (1,676 | ) |  |   | (1,676  | )
|Other income                                     |  |                                   |        |   |                           |   |        |           |  |   |             |   |  |   |        |   |  |   | 500    |   |  |   | 500     |  
|                                                 |  |                                   |         |   |                           |   |         |           |  |   |              |   |  |   |         |   |  |   |        |   |  |   |         |  
|Total revenues                                   |  |                                   | 109,118 |   |                           |   | 50,019  |           |  |   | 159,137      |   |  |   | 620     |   |  |   | 87,712 |   |  |   | 247,469 |  
|                                                 |  |                                   |         |   |                           |   |         |           |  |   |              |   |  |   |         |   |  |   |        |   |  |   |         |  
|Losses and benefits                              |  |                                   | 76,807  |   |                           |   | 37,109  |           |  |   | 113,916      |   |  |   | 11,043  |   |  |   |       |   |  |   | 124,959 |  
|Acquisition costs                                |  |                                   | 20,831  |   |                           |   | 453     |           |  |   | 21,284       |   |  |   | 259     |   |  |   |       |   |  |   | 21,543  |  
|Interest expense                                 |  |                                   |        |   |                           |   |        |           |  |   |             |   |  |   |        |   |  |   | 6,345  |   |  |   | 6,345   |  
|General and administrative expenses              |  |                                   | 5,761   |   |                           |   | 3,690   |           |  |   | 9,451        |   |  |   | 644     |   |  |   | 11,664 |   |  |   | 21,759  |  
|                                                 |  |                                   |         |   |                           |   |         |           |  |   |              |   |  |   |         |   |  |   |        |   |  |   |         |  
|Total losses and expenses                        |  |                                   | 103,399 |   |                           |   | 41,252  |           |  |   | 144,651      |   |  |   | 11,946  |   |  |   | 18,009 |   |  |   | 174,606 |  
|                                                 |  |                                   |         |   |                           |   |         |           |  |   |              |   |  |   |         |   |  |   |        |   |  |   |         |  
|Net income (loss)                                |  | $                                 | 5,719   |   |                           | $ | 8,767   |           |  | $ | 14,486       |   |  | $ | (11,326 | ) |  | $ | 69,703 |   |  | $ | 72,863  |  
|                                                 |  |                                   |         |   |                           |   |         |           |  |   |              |   |  |   |         |   |  |   |        |   |  |   |         |  
|Loss ratio                                       |  |                                   | 70.4    | % |                           |   | 74.2    | %         |  |   | 71.6         | % |  |   |         |   |  |   |        |   |  |   |         |  
|Combined ratio                                   |  |                                   | 94.8    | % |                           |   | 82.5    | %         |  |   | 90.9         | % |  |   |         |   |  |   |        |   |  |   |         |  

---

|* | Loss Ratio is calculated by dividing losses and benefits by net premiums earned.
|- | --------------------------------------------------------------------------------

|** | Combined Ratio is calculated by dividing total losses and expenses by net premiums earned.
|-- | ------------------------------------------------------------------------------------------

|*** | Loss Ratio and Combined Ratio are not provided for life and annuity products as we believe these ratios are not appropriate measures for life and annuity underwriting.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

(Expressed in thousands of United States Dollars)



|                                                |  |                                   |         |   |                          |   |         |            |  |              |         |   |  |   |         |            |  |   |        |  |   |         |  
|----------------------------------------------- |  | --------------------------------- | ------- | - | ------------------------ | - | ------- | ---------- |  | ------------ | ------- | - |  | - | ------- | ---------- |  | - | ------ |  | - | ------- | -
|                                                |  | Three Months Ended March 31, 2005 |        
|                                                |  | Property & Casualty               |         |   | Life &AnnuityReinsurance |   |         | Corporate  |  | Consolidated |        
|                                                |  | Reinsurance                       |         |   | Insurance                |   |         | Total      |  |              |         |  
|                                                |  | (Restated)                        |         |   |                          |   |         | (Restated) |  |              |         |   |  |   |         | (Restated) | 
|Gross premiums written                          |  | $                                 | 248,210 |   |                          | $ | 64,255  |            |  | $            | 312,465 |   |  | $ | 143,224 |            |  | $ |       |  | $ | 455,689 |  
|Reinsurance premiums ceded                      |  |                                   | (15,978 | ) |                          |   | (28,000 | )          |  |              | (43,978 | ) |  |   | (41     | )          |  |   |       |  |   | (44,019 | )
|                                                |  |                                   |         |   |                          |   |         |            |  |              |         |   |  |   |         |            |  |   |        |  |   |         |  
|Net premiums written                            |  | $                                 | 232,232 |   |                          | $ | 36,255  |            |  | $            | 268,487 |   |  | $ | 143,183 |            |  | $ |       |  | $ | 411,670 |  
|                                                |  |                                   |         |   |                          |   |         |            |  |              |         |   |  |   |         |            |  |   |        |  |   |         |  
|Earned premiums                                 |  | $                                 | 139,318 |   |                          | $ | 67,786  |            |  | $            | 207,104 |   |  | $ | 143,224 |            |  | $ |       |  | $ | 350,328 |  
|Earned premiums ceded                           |  |                                   | (12,566 | ) |                          |   | (29,397 | )          |  |              | (41,963 | ) |  |   | (41     | )          |  |   |       |  |   | (42,004 | )
|                                                |  |                                   |         |   |                          |   |         |            |  |              |         |   |  |   |         |            |  |   |        |  |   |         |  
|Net premiums earned                             |  |                                   | 126,752 |   |                          |   | 38,389  |            |  |              | 165,141 |   |  |   | 143,183 |            |  |   |       |  |   | 308,324 |  
|Net investment income                           |  |                                   |        |   |                          |   |        |            |  |              |        |   |  |   |        |            |  |   | 23,689 |  |   | 23,689  |  
|Net gains on sales of alternative investments   |  |                                   |        |   |                          |   |        |            |  |              |        |   |  |   |        |            |  |   | 14,377 |  |   | 14,377  |  
|Net realized gains on sales of fixed maturities |  |                                   |        |   |                          |   |        |            |  |              |        |   |  |   |        |            |  |   | 390    |  |   | 390     |  
|Other income                                    |  |                                   |        |   |                          |   |        |            |  |              |        |   |  |   |        |            |  |   | 1,318  |  |   | 1,318   |  
|                                                |  |                                   |         |   |                          |   |         |            |  |              |         |   |  |   |         |            |  |   |        |  |   |         |  
|Total revenues                                  |  |                                   | 126,752 |   |                          |   | 38,389  |            |  |              | 165,141 |   |  |   | 143,183 |            |  |   | 39,774 |  |   | 348,098 |  
|                                                |  |                                   |         |   |                          |   |         |            |  |              |         |   |  |   |         |            |  |   |        |  |   |         |  
|Losses and benefits                             |  |                                   | 88,849  |   |                          |   | 27,561  |            |  |              | 116,410 |   |  |   | 151,015 |            |  |   |       |  |   | 267,425 |  
|Acquisition costs                               |  |                                   | 20,857  |   |                          |   | 424     |            |  |              | 21,281  |   |  |   | 221     |            |  |   |       |  |   | 21,502  |  
|Interest expense                                |  |                                   |        |   |                          |   |        |            |  |              |        |   |  |   |        |            |  |   | 6,232  |  |   | 6,232   |  
|General and administrative expenses             |  |                                   | 3,644   |   |                          |   | 2,529   |            |  |              | 6,173   |   |  |   | 1,039   |            |  |   | 8,045  |  |   | 15,257  |  
|                                                |  |                                   |         |   |                          |   |         |            |  |              |         |   |  |   |         |            |  |   |        |  |   |         |  
|Total losses and expenses                       |  |                                   | 113,350 |   |                          |   | 30,514  |            |  |              | 143,864 |   |  |   | 152,275 |            |  |   | 14,277 |  |   | 310,416 |  
|                                                |  |                                   |         |   |                          |   |         |            |  |              |         |   |  |   |         |            |  |   |        |  |   |         |  
|Net income (loss)                               |  | $                                 | 13,402  |   |                          | $ | 7,875   |            |  | $            | 21,277  |   |  | $ | (9,092  | )          |  | $ | 25,497 |  | $ | 37,682  |  
|                                                |  |                                   |         |   |                          |   |         |            |  |              |         |   |  |   |         |            |  |   |        |  |   |         |  
|Loss ratio                                      |  |                                   | 70.1    | % |                          |   | 71.8    | %          |  |              | 70.5    | % |  |   |         |            |  |   |        |  |   |         |  
|Combined ratio                                  |  |                                   | 89.4    | % |                          |   | 79.5    | %          |  |              | 87.1    | % |  |   |         |            |  |   |        |  |   |         |  



9



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##### Table of Contents

The Companys clients are principally located 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, 2006 and 2005 were as follows:



|                                |  |                                                   |         |   |      |   |         |  
|------------------------------- |  | ------------------------------------------------- | ------- | - | ---- | - | ------- | -
|                                |  | Three Months Ended March 31,                      |        
|                                |  | 2006                                              |         |   | 2005 |  
|                                |  | (Expressed in thousands of United States Dollars) |        
|North America                   |  | $                                                 | 163,406 |   |      | $ | 185,857 |  
|Europe                          |  |                                                   | 92,518  |   |      |   | 269,832 |  
|Reinsurance CededNorth America |  |                                                   | (46,938 | ) |      |   | (26,556 | )
|Reinsurance CededEurope        |  |                                                   | (10,824 | ) |      |   | (17,463 | )
|                                |  |                                                   |         |   |      |   |         |  
|                                |  | $                                                 | 198,162 |   |      | $ | 411,670 |  
|                                |  |                                                   |         |   |      |   |         |  

Three customers accounted for 9.9%, 6.9% and 4.2%, respectively, of the Companys gross
premiums written during the three months ended March 31, 2006. Three customers accounted for 31.4%, 12.1% and 8.1%, respectively, of the Companys gross premiums written during the three months ended March 31, 2005.

6. EQUITY CAPITAL

Max Re Capitals Board of Directors
declared dividends of $0.05 per share on each of February 10, 2006 and April 28, 2006, payable to shareholders of record on February 24, 2006 and May 12, 2006, respectively.

The Company did not repurchase any common shares during the three months ended March 31, 2006. As of March 31, 2006, the remaining
authorization under the Companys share repurchase program was approximately $36.0 million.

7. RELATED PARTIES

Grand Central Re Limited

The
accompanying consolidated balance sheets and statements of income and comprehensive income include, or are net of, the following amounts related to a variable quota share retrocession agreement and an aggregate stop loss agreement with Grand Central
Re Limited (Grand Central Re), a Bermuda domiciled reinsurance company managed by Max Re Managers, in which Max Re has a 7.5% equity investment. Although the variable quota share retrocession agreement with Grand Central Re remains in
force, the parties have agreed that Max Re will not cede any new business to Grand Central Re with effect from January 1, 2004.



|                                   |  |                                                  |         |   |            |   |         |  
|---------------------------------- |  | ------------------------------------------------ | ------- | - | ---------- | - | ------- | -
|                                   |  | March 31,                                        |        
|                                   |  | 2006                                             |         |   | 2005       |  
|                                   |  | (Expressed in thousands ofUnited States Dollars) |        
|                                   |  |                                                  |         |   | (Restated) |  
|Losses recoverable from reinsurers |  | $                                                | 231,967 |   |            | $ | 234,293 |  
|Prepaid reinsurance premiums       |  |                                                  |        |   |            |   | 3,750   |  
|Deposit liabilities                |  |                                                  | 32,321  |   |            |   | 36,492  |  
|Funds withheld from reinsurers     |  |                                                  | 224,221 |   |            |   | 251,627 |  
|Reinsurance balances payable       |  |                                                  | 26,782  |   |            |   | 5,775   |  
|Reinsurance premiums ceded         |  |                                                  | 1,487   |   |            |   | 1,649   |  
|Earned premiums ceded              |  |                                                  | 1,487   |   |            |   | 4,649   |  
|Other income                       |  |                                                  | 230     |   |            |   | 1,224   |  
|Losses and benefits                |  |                                                  | 710     |   |            |   | 3,293   |  
|Interest expense                   |  |                                                  | (317    | ) |            |   | (515    | )



10



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##### Table of Contents

The variable quota share retrocession agreement with Grand Central Re is principally collateralized on a
funds withheld basis. The rate of return on funds withheld is based on the average of two total return fixed maturity indices. The interest expense recognized by the Company will vary from period to period due to changes in the indices. The Company
records the change in interest expense through the statement of income and comprehensive income on a monthly basis.

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

Alstra Capital Management, LLC (Alstra), an affiliate of one of our directors, has served as fund of funds advisor for Max Re Diversified since April 1, 2004. Prior to October 1, 2005, Alstra was a subsidiary of Moore
Capital Management, LLC (Moore Capital), an affiliate of one of our significant shareholders. As of October 1, 2005, the senior management team of Alstra became the majority shareholders of Alstra.

For the three months ended March 31, 2006 and 2005, Alstra received $2.2 million and $1.9 million in fees, respectively, as the fund of funds
advisor for Max Re Diversified. In addition, Moore Capital received aggregate management and incentive fees of $1.0 million and $3.1 million, respectively, in respect of Max Re Diversifieds assets invested in underlying funds managed by Moore
Capital for the three months ended March 31, 2006 and 2005.

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.

8. COMMITMENTS

Credit Facilities

The
Company has three credit facilities as of March 31, 2006. The Companys primary credit facility, entered into in June 2005, provides $450.0 million of credit capacity and is with a syndicate of commercial banks, one of which, Citibank,
N.A., is affiliated with a director of Max Re Capital. The Company replaced its then existing credit facility with this new facility principally to increase credit capacity from $300.0 million to $450.0 million, to provide that a portion of the
facility be available for loans to Max Re or Max Re Capital as well as letters of credit for Max Re and to permit that a portion of the facility be unsecured. In accordance with this credit facility agreement, the syndicate will issue letters of
credit on behalf of Max Re that may total up to $350.0 million secured by fixed maturities and will issue additional unsecured letters of credit on behalf of Max Re or make unsecured loans to Max Re or Max Re Capital up to an aggregate of $100.0
million, with a maximum of $50.0 million to Max Re Capital. The Company believes that the terms of this credit facility are comparable to the terms that the Company would expect to negotiate with an unrelated party. At March 31, 2006 and
December 31, 2005, letters of credit totaling $331.8 million and $320.9 million, respectively, were issued and outstanding under this facility. As of March 31, 2006 and December 31, 2005, there were no unsecured loans issued under
this facility. Fixed maturities and cash equivalents with a fair value of $362.2 million and $351.5 million at March 31, 2006 and December 31, 2005, respectively, 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). 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 March 31, 2006 and December 31, 2005, letters of credit totaling $49.5 million and $49.7 million, respectively, 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 $54.5 million and $54.2 million at March 31, 2006 and December 31, 2005,
respectively, were pledged as collateral for these letters of credit.

In November 2004, the Company entered into a $20.0 million letter of
credit facility with ING Bank N.V., London Branch (ING). At March 31, 2006 and December 31, 2005 letters of credit totaling $20.0 million were issued by ING under



11



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##### Table of Contents

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 $22.5 million and $22.6 million at March 31, 2006 and December 31, 2005, respectively, were pledged as collateral for these letters of credit.

Each of the credit facilities requires that the Company and/or certain of its subsidiaries comply with certain covenants, including a minimum
consolidated tangible net worth and restrictions on the payment of dividends. The Company was in compliance with all the covenants of each of its credit facilities at March 31, 2006.

9. STOCK INCENTIVE PLAN

In June 2000, the shareholders of the Company
approved the adoption of a Stock Incentive Plan (the Plan) under which it may award subject to certain restrictions, Incentive Stock Options (ISOs), Non-Qualified Stock Options (NQSOs), restricted
stock, share awards or other awards. In May 2002 and April 2005, the shareholders of Company approved the adoption of amendments to the Plan, increasing the maximum aggregate number of common shares available for awards under the Plan to 8,000,000.
Only eligible employees of the Company are entitled to ISOs, while NQSOs may be awarded to eligible employees, non-employee Directors and consultants. The Plan is administered by the Compensation Committee of the Board of Directors (the
Committee).

Stock Option Awards

All
options that have been granted under the Plan have an exercise price equal to the market price of the Companys common stock on the date of grant, and a maximum ten year term. The fair value of awards granted under the Plan are measured as of
the grant date and expensed ratably over the vesting period of the award, which is generally three years. All awards provide for accelerated vesting upon a change in control of the Company. Shares issued under the Plan are made available from
authorized but unissued shares.

The fair value of options granted during the three months ended March 31, 2006 and 2005 was estimated on the date of
grant using the Black-Scholes option pricing method with the following weighted average assumptions:



|                              |  |         |   |  |         |  
|----------------------------- |  | ------- | - |  | ------- | -
|                              |  | 2006    |   |  | 2005    |  
|Option valuation assumptions: |  |         |   |  |         |  
|Expected option life          |  | 7 years |   |  | 7 years |  
|Expected dividend yield       |  | 0.89    | % |  | 0.55    | %
|Expected volatility           |  | 17.12   | % |  | 21.63   | %
|Risk-free interest rate       |  | 4.70    | % |  | 4.68    | %

The Company recognized $0.3 million of stock-based compensation expense related to stock option awards for each of
the three months ended March 31, 2006 and March 31, 2005. The Company did not capitalize any cost of stock-based compensation. As of March 31, 2006, the total compensation cost related to non-vested stock option awards not yet
recognized was $0.5 million, which is expected to be recognized over a weighted average period of 1.4 years.

Total intrinsic value of stock options
exercised during the three month periods ended March 31, 2006 and 2005 was $0.4 million and $0.7 million, respectively.

A summary of the
Companys options outstanding as of March 31, 2006 and changes during the three months ended March 31, 2006 follows:



|                                    |  |                     |   |  |                                 |       |                                 |   |                                         |  |                           |  |                          |            |  |   |             
|----------------------------------- |  | ------------------- | - |  | ------------------------------- | ----- | ------------------------------- | - | --------------------------------------- |  | ------------------------- |  | ------------------------ | ---------- |  | - | ------------
|                                    |  | Options Outstanding |   |  | Weighted Average Exercise Price |       | Grant DateFair Value of Options |   | WeightedAverageRemainingContractualTerm |  | Aggregate Intrinsic Value |  | Range of Exercise Prices
|Balance, December 31, 2005          |  | 2,066,869           |   |  | $                               | 15.54 |                                 | $ | 5.15                                    |  | 6.0 years                 |  | $                        | 24,685,066 |  | $ | 10.26-$22.74
|Options granted                     |  | 17,754              |   |  | $                               | 24.70 |                                 | $ | 7.02                                    |  |                           |  |                          |            |  | $ | 23.08-$26.70
|Options exercised                   |  | (36,100             | ) |  | $                               | 13.22 |                                 |   |                                         |  |                           |  |                          |            |  | $ | 11.50-$15.66
|Balance, March 31, 2006             |  | 2,048,523           |   |  | $                               | 15.66 |                                 | $ | 5.21                                    |  | 5.8 years                 |  | $                        | 19,968,427 |  | $ | 10.26-$26.70
|                                    |  |                     |   |  |                                 |       |                                 |   |                                         |  |                           |  |                          |            |  |   |             
|Options exercisable, March 31, 2006 |  | 1,752,624           |   |  | $                               | 15.63 |                                 | $ | 5.17                                    |  | 5.6 years                 |  | $                        | 14,415,451 |  | $ | 10.26-$26.70
|                                    |  |                     |   |  |                                 |       |                                 |   |                                         |  |                           |  |                          |            |  |   |             



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Restricted Stock Awards

Restricted stock issued under the Plan has terms set by the Committee. These shares contain certain restrictions relating to, among other things, vesting, forfeiture in the event of termination of employment and transferability. Restricted
stock awards are valued equal to the market price of the Companys common stock on the date of grant. At the time of grant, the fair value of the shares awarded is recorded as unearned stock grant compensation and is presented as a separate
component of shareholders equity. The unearned compensation is charged to income over the vesting period. Generally, restricted stock awards vest after three or four years. Total compensation cost recognized in income for restricted stock
awards was $3.1 million for the three months ended March 31, 2006 compared to $2.3 million for the three months ended March 31, 2005.

A summary
of the Companys non-vested restricted stock awards as of March 31, 2006, and changes during the three months ended March 31, 2006, follows:



|                           |  |                           |   |  |                                          |      
|-------------------------- |  | ------------------------- | - |  | ---------------------------------------- | -----
|                           |  | NonvestedRestricted Stock |   |  | Weighted - AverageGrant  Date FairValue
|Balance, December 31, 2005 |  | 1,534,427                 |   |  | $                                        | 20.04
|Restricted Stock Granted   |  | 497,578                   |   |  | $                                        | 25.31
|Restricted Stock Vested    |  | (310,063                  | ) |  | $                                        | 11.40
|Restricted Stock Forfeited |  |                          |   |  | $                                        |     
|                           |  |                           |   |  |                                          |      
|Balance, March 31, 2006    |  | 1,721,942                 |   |  | $                                        | 23.11
|                           |  |                           |   |  |                                          |      

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, 2006
compared to the three months ended March 31, 2005 and our financial condition as of March 31, 2006. 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/A for the year ended December 31, 2005 filed with the Securities and Exchange Commission on June 7, 2006.

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 us. 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 SEC) include, without limitation:



| |  |  | the risk that the SECs view of the accounting treatment for three finite retrocessional contracts purchased in 2001 and 2003 may differ materially from that adopted by us
following an internal review by the Audit and Risk Management Committee (ARMC), which has resulted in a restatement of our financial statements for the years ended December 31, 2005, 2004, 2003, 2002 and 2001, as described in our
Annual Report on Form 10-K/A for the period ended December 31, 2005;
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  |  | the risk that the Nasdaq National Market may determine to delist our common shares as a result of our inability to file by the prescribed date this quarterly report on Form 10-Q for
the three months ended March 31, 2006, which filing was late due to the fact that the internal review had not been completed prior to the prescribed filing date;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | 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 rates;
| | - |  | ----------------------------------------



| |  |  | 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 and changes in credit spreads may adversely impact our investments 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. The property and casualty market currently provides more opportunities to us than the life and annuity market due to a shortage of reinsurance capacity in the property and casualty market. However, prior to the severe
hurricane activity in 2005, we observed a decrease in attractive property and casualty opportunities as competition increased in most property and casualty lines of business that we write. We believe that the substantial industry losses resulting
from recent hurricanes and additional focus by buyers of reinsurance on catastrophe exposure management will continue to result in improved premium rates, terms and conditions in the property and property catastrophe reinsurance and insurance
markets despite additional capital entering the market. As a result, we are growing our short-tail property and property catastrophe reinsurance and insurance premium volume.

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 terms and conditions 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 11 strategies invested in approximately 50 underlying trading entities and two strategic reinsurance private equity investments. Our investment portfolio is
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, 2006, the allocation of invested assets was approximately 71% in cash
and fixed maturities and 29% in alternative investments.



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##### Table of Contents

Our principal operating subsidiary is Max Re. At March 31, 2006, Max Re had $1,171.6 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 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.

On March 24, 2006, subsequent to the filing on February 15, 2006 of the Companys Annual Report on Form 10-K for the year ended December 31, 2005, the ARMC announced that it had initiated a review
of three finite risk retrocessional contracts purchased in 2001 and 2003. The review was to consider whether these contracts were properly accounted for by the Company, principally with respect to whether they contain sufficient risk transfer to
meet the requirements of Financial Accounting Standard No. 113. The ARMC engaged an independent law firm and accounting consultants to assist in the internal review. In connection with the internal review, the ARMC voluntarily contacted the
SEC.

The internal review, affirmed our original belief that the three contracts in question contained sufficient risk transfer to meet the
requirements of Financial Accounting Standard No. 113. However, as part of the review we re-evaluated the accounting methodology used for these contracts. This re-evaluation led to the restatement of our audited financial statements for the
years ended December 31, 2005, 2004, 2003, 2002 and 2001 in order to reflect the substance of these transactions more accurately. The restated amounts for the period ended March 31, 2005 are reflected throughout this report.

As further described in the Companys filing on Form 10K/A, the effect of the restatement is to decrease 2005 net income by $0.4 million; to increase 2004 net
income by $1.6 million; and to decrease 2003 net income by $2.0 million. The cumulative adjustment to shareholders equity and minority interest at January 1, 2003 is a decrease of $17.2 million.

Executive Summary

We believe that we performed well
in the three months ended March 31, 2006, with premiums in line with our expectations and strong investment results. Our property and casualty underwriting activities resulted in a 90.9% combined ratio (total losses and expenses as a percentage
of net premiums earned) for the three months ended March 31, 2006 compared to 87.1% for the three months ended March 31, 2005. The increase in combined ratio is principally attributable to an increased expense rate resulting from increased
staff levels within our property and casualty underwriting departments and modestly higher loss ratios for certain insurance product lines. Our alternative investments produced a 4.40% return during the three months ended March 31, 2006
compared to 1.20% for the three months ended March 31, 2005.

During the three months ended March 31, 2006, our gross premiums
written decreased 43.8% compared to the same period in 2005 due primarily to the decrease in new life and annuity business during the three months ended March 31, 2006, compared to $143.2 million of gross premiums in 2005, and our reduced
participation on certain property and casualty reinsurance renewal business. Our property and casualty insurance business produced an increase of 9.2% in gross premiums written for the three months ended March 31, 2006 compared to the same
period in 2005. Although overall property and casualty gross premiums written decreased, we are pleased with the reduction in certain exposure areas in the period and believe we have reduced our individual account exposure and improved our
diversification and return characteristics of our property and casualty liability portfolio.

Our life and annuity reinsurance premium
volume for the three months ended March 31, 2006 was significantly lower than the same period of 2005, due to the closing of a transaction in 2005 which resulted in gross written premium of $143.2 million with no comparable transaction in 2006.
We recognized $11.0 million in benefit expenses during the three months ended March 31, 2006 compared to $151.0 million for the three months ended March 31, 2005.

Our current emphasis is on writing smaller accounts with a greater number of clients and varying the underlying exposures assumed. We continue to
emphasize casualty lines in our property and casualty reinsurance and insurance segments and have been pleased with the market acceptance of our newly formed property catastrophe reinsurance team and expanded property insurance team. The addition
and expansion of the shorter-tail lines will allow us to continue to diversify our property and casualty underwriting.

We expect
volatility in our underwriting results arising from our reinsurance and insurance business. However, by carefully selecting line sizes of business assumed, diversifying our underlying exposures, establishing contractual liability caps on our
contracts and purchasing reinsurance and retrocessional reinsurance protection, we believe we manage, and will continue to manage, this volatility effectively.

Losses and benefits represented our largest expense and accounted for 66.9% of total liabilities at March 31, 2006. We established loss expenses and reserves using a combination of loss reserving techniques and
actuarial methods. Loss expenses



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and reserves are reviewed regularly to reflect new information that we receive. We conduct regular quarterly internal reviews of reserves and, in addition,
the adequacy of our reserves is reviewed annually, during the fourth quarter of the year, by outside actuaries to corroborate managements estimates.

Net income for the three months ended March 31, 2006 was $72.9 million compared to $37.6 million for the three months ended March 31, 2005. The results for the three months ended March 31, 2005 were
principally attributable to underwriting income generated from our property and casualty business and increased income from our alternative investments compared to the three months ended March 31, 2005.

Our investments during the three months ended March 31, 2006 produced a total return of 0.86% compared to 0.46% for the three months ended
March 31, 2005. The cash and fixed maturities portfolio produced a total return of (0.62%) during the three months ended March 31, 2006 compared to 0.14% for the three months ended March 31, 2005. During the three months ended
March 31, 2006, our alternative investments generated a 4.40% rate of return compared to a 1.20% rate of return for the same period in 2005. Given the negative performance of the major fixed income indices and positive returns on fund of funds
indices over the three months ended March 31, 2006, we believe the performance of our investments was consistent with the broader investment market returns.

We continually assess our liquidity needs by monitoring and evaluating new business prospects and opportunities and the development of our existing operations. During the three months ended March 31, 2006, we
generated $115.0 million of cash from operations, which is net of the change in alternative investments of $40.1 million, and invested $66.6 million in fixed maturities. We expect to generate positive operating cash flow during 2006 through premium
receipts and investment returns, which will be partially offset by paid losses on reinsurance and insurance obligations, as well as operating expenses.

Drivers of Profitability

Revenues

We derive operating revenues from premiums from our reinsurance and insurance businesses. Additionally, we recognize returns 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. Property and casualty
premiums are earned over the terms of the underlying contracts. Life and annuity premiums are generally earned when the premium is due from policyholders. Each of our reinsurance contracts contains pricing, terms and conditions and expected profit
margins. Therefore, the amount of premiums is not necessarily an accurate indicator of our anticipated profitability. Premium estimates are based upon information in underlying contracts, data received from clients and from premium audits. Changes
in premium estimates for our property and casualty reinsurance business are expected and may result in significant adjustments in any period. These estimates change over time as additional information regarding the underlying business volume of our
clients is obtained. There is often a delay in the receipt of updated premium information from clients due to the time lag in preparing and reporting the data to us. After review by our underwriters, we increase or decrease premium estimates as
updated information from our clients is received.

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. Our fixed maturities portfolio
is composed of investment grade fixed maturities that are available for sale and, as a result, we record the investments at fair value on our balance sheet. The unrealized gain or loss associated with the difference between the fair value and the
amortized cost of the investments is recorded in other comprehensive income in the equity section of our balance sheet. We recognize realized capital gains or losses on our fixed maturities investments at the time of sale. Fixed maturities are
subject to fluctuations in fair value due to changes in the interest rates, changes in issuer specific circumstances such as credit rating and changes in industry specific circumstances such as movements in credit spreads based on the markets
perception of industry risks. As a result of these potential fluctuations, it is possible to have significant unrealized gains or losses on a security. Our strategy for our fixed maturities portfolio is to tailor the maturities of the portfolio to
the timing of expected loss and benefit payments. At maturity, a fixed maturitys amortized cost will equal its fair value and no realized gain or loss will be recognized in income. If, due to an unforeseen change in loss payment patterns, we
need to sell investments before maturity, we could realize significant gains or losses in any period, which could result in a meaningful effect on reported net income for such period.

Our net gains on alternative investments are 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, general economic and investment market conditions and the underlying operating results of our private equity reinsurance investments.



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##### Table of Contents

Expenses

Our principal expenses are losses and benefits, acquisition costs, interest expense and general and administrative expenses. Losses and benefits 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 clients pertaining to contracts written in prior years. We record losses and benefits based on actuarial estimates of the expected
losses and benefits to be incurred on each contract written. The ultimate losses and benefits depend on the actual costs to settle these liabilities. We increase or decrease losses and benefits estimates as actual claim reports are received. Our
ability to estimate losses and benefits 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 defer and amortize
these costs over the period in which the related premiums are earned. The acquisition costs are net of ceding commissions associated with premiums ceded on our reinsurance and insurance business. These ceding commissions are designed to compensate
us for the costs of producing the portfolio of risks ceded to our reinsurers.

Interest expense principally reflects the net interest
charge on funds withheld from reinsurers under reinsurance and retrocessional contracts. Interest is recorded on the funds withheld balances based on various contractual and negotiated rates. The interest expense attributable to the funds withheld
under a variable quota share retrocession agreement with Grand Central Re, our largest funds withheld balance, is based on the average of two total return fixed maturity indices. A charge or credit may be recorded in interest expense on this
contract in any given period. As a result, interest expense is expected to vary from period to period with a corresponding entry to funds withheld. Interest expense on the remaining balance of funds withheld from other reinsurers under reinsurance
and retrocessional contracts will vary principally due to changes in the balance of funds withheld. In addition, interest expense also includes interest on deposit contracts and 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, office rent, amortization of leasehold
improvements, professional services and other operating costs. These costs are primarily fixed in nature, although they will vary as our staff expands or if we incur one time charges. They do not vary 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, 2006. We believe that the critical accounting policies set forth in our Form 10-K/A, filed on June 7, 2006, 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 benefit 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.

Results of Operations

We operate in three segments:
property and casualty reinsurance, property and casualty insurance and life and annuity reinsurance. Within the property and casualty reinsurance segment, we offer quota share and excess of loss capacity providing coverage for a portfolio of
underlying risks written by our clients. In the property and casualty insurance segment, we generally offer excess of loss capacity on specific risks related to one insured. Within the life and annuity reinsurance segment, we currently offer
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. We also have a corporate function that
includes our investment and financing activities. We do not allocate assets by segment.



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##### Table of Contents

Results of Underwriting Operations

Property and Casualty Reinsurance Segment



|                                    |  |                                   |        |   |                           |        |   |                                   |   |        |  
|----------------------------------- |  | --------------------------------- | ------ | - | ------------------------- | ------ | - | --------------------------------- | - | ------ | -
|                                    |  | Three Months Ended March 31, 2006 |        |   | % change                  |        |   | Three Months Ended March 31, 2005 |  
|                                    |  |                                   |        |   | In millions of US Dollars |        |   | (Restated)                        |  
|Gross premiums written              |  | $                                 | 185.0  |   |                           | (25.5) | % |                                   | $ | 248.2  |  
|Reinsurance premiums ceded          |  |                                   | (16.1) |   |                           | 0.6    | % |                                   |   | (16.0) |  
|                                    |  |                                   |        |   |                           |        |   |                                   |   |        |  
|Net premiums written                |  |                                   | 168.9  |   |                           | (27.3) | % |                                   |   | 232.2  |  
|                                    |  |                                   |        |   |                           |        |   |                                   |   |        |  
|Net premiums earned(a)              |  |                                   | 109.1  |   |                           | (14.0) | % |                                   |   | 126.8  |  
|                                    |  |                                   |        |   |                           |        |   |                                   |   |        |  
|Losses (b)                          |  |                                   | 76.8   |   |                           | (13.5) | % |                                   |   | 88.8   |  
|Acquisition costs                   |  |                                   | 20.8   |   |                           | (0.5)  | % |                                   |   | 20.9   |  
|General and administrative expenses |  |                                   | 5.8    |   |                           | 61.1   | % |                                   |   | 3.6    |  
|                                    |  |                                   |        |   |                           |        |   |                                   |   |        |  
|Total losses and expenses(c)        |  |                                   | 103.4  |   |                           | (8.7)  | % |                                   |   | 113.3  |  
|                                    |  |                                   |        |   |                           |        |   |                                   |   |        |  
|Net income                          |  |                                   | 5.7    |   |                           |        |   |                                   |   | 13.4   |  
|                                    |  |                                   |        |   |                           |        |   |                                   |   |        |  
|Loss ratio(b)/(a)                   |  |                                   | 70.4   | % |                           |        |   |                                   |   | 70.1   | %
|Combined ratio(c)/(a)               |  |                                   | 94.8   | % |                           |        |   |                                   |   | 89.4   | %

---

Our segment results
do not include investment income or interest expense, which are included in the corporate function.

The loss ratio (loss ratio) is calculated
by dividing losses, benefits and experience refunds (shown as (b)) by net premium earned (shown as (a)).

The combined ratio (combined
ratio) is calculated by dividing total losses and expenses (shown as (c)) by net premiums earned (shown as (a)).

Gross premiums written.Gross premiums written for the property and casualty reinsurance segment for the three months ended March 31, 2006 were $185.0 million compared to $248.2 million for the three months ended March 31,
2005, a decrease of 25.5%. The decrease reflects our decision to reduce our participation percentage on certain renewal business and is partially offset by premiums written of approximately $25.0 million by our recently formed property catastrophe
team. The level of business written in future periods will vary, perhaps materially, based upon market conditions and managements assessment of the adequacy of premium rates relative to the underwriting risk being assumed. There were no
material changes in premium estimates in the three months ended March 31, 2006 and March 31, 2005.

Reinsurance premiums
ceded. Reinsurance premiums ceded for property and casualty reinsurance for the three months ended March 31, 2006 were $16.1 million compared to $16.0 million for the three months ended March 31, 2005, an increase of 0.6%. Reinsurance
premiums ceded were principally related to our purchase of specific reinsurance to manage the risks associated with our reinsurance underwriting and to manage the exposure retained by us on certain transactions, therefore the ratio of gross premiums
written to reinsurance premiums ceded may fluctuate based on our assessment of exposure and the availability of reinsurance capacity at attractive prices.

Net premiums earned.Net premiums earned for property and casualty reinsurance decreased by 14.0% to $109.1 million for the three months ended March 31, 2006. The decrease is principally attributed to a
reduction in gross premiums written.

Losses.Losses relating to property and casualty reinsurance were $76.8 million for the three
months ended March 31, 2006 compared to $88.8 million for the three months ended March 31, 2005, a decrease of 13.5%, and is consistent with the decrease in our net premiums earned for this segment. The loss ratio for our property and
casualty reinsurance segment for the three months ended March 31, 2006 was 70.4% compared to 70.1% for the three months ended March 31, 2005. There was no significant development of prior year reinsurance reserves during the three months
ended March 31, 2006.

Acquisition costs.Acquisition costs were $20.8 million for the three months ended March 31, 2006
compared to $20.9 million for the three months ended March 31, 2005, a decrease of 0.5%. The decrease in acquisition costs is less than the 14.0% decrease in net premiums earned for the three months ended March 31, 2006 due to higher
average acquisition costs on premiums earned. Acquisition costs vary from contract to contract depending on characteristics such as the type of business, the clients cost to administer the underlying contracts and the involvement of a broker.
These factors may result in differences in the ratio of acquisition costs to net premiums earned from period to period.

General and
administrative expenses.General and administrative expenses were $5.8 million for the three months ended March 31, 2006 compared to $3.6 million for the three months ended March 31, 2005, an increase of 61.1%. The



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increase resulted principally from ongoing personnel and infrastructure costs associated with our reinsurance staff including additional property catastrophe
underwriters hired in the fourth quarter of 2005. The general and administrative expense to net premiums earned ratio was 5.3% for the three months ended March 31, 2006 compared to 2.8% for the three months ended March 31, 2005 and
reflects the additional expenses and lower net premiums earned.

Net income.Net income attributable to property and casualty
reinsurance for the three months ended March 31, 2006 was $5.7 million compared to $13.4 million for the three months ended March 31, 2005. The results for the three months ended March 31, 2006 were principally attributable to lower
net premiums earned, higher average acquisition costs and additional staff.

Property and Casualty Insurance Segment



|                                    |  |                                   |       |   |          |       |    |                                   |   |       |  
|----------------------------------- |  | --------------------------------- | ----- | - | -------- | ----- | -- | --------------------------------- | - | ----- | -
|                                    |  | Three Months Ended March 31, 2006 |       |   | % change |       |    | Three Months Ended March 31, 2005 |  
|                                    |  | In millions of US Dollars         |      
|Gross premiums written              |  | $                                 | 70.2  |   |          | 9.2   | %  |                                   | $ | 64.3  |  
|Reinsurance premiums ceded          |  |                                   | (41.6 | ) |          | 48.6  | %  |                                   |   | (28.0 | )
|                                    |  |                                   |       |   |          |       |    |                                   |   |       |  
|Net premiums written                |  |                                   | 28.6  |   |          | (21.2 | )% |                                   |   | 36.3  |  
|                                    |  |                                   |       |   |          |       |    |                                   |   |       |  
|Net premiums earned(a)              |  |                                   | 50.0  |   |          | 30.2  | %  |                                   |   | 38.4  |  
|                                    |  |                                   |       |   |          |       |    |                                   |   |       |  
|Losses(b)                           |  |                                   | 37.1  |   |          | 34.4  | %  |                                   |   | 27.6  |  
|Acquisition costs                   |  |                                   | 0.4   |   |          |      |    |                                   |   | 0.4   |  
|General and administrative expenses |  |                                   | 3.7   |   |          | 48.0  | %  |                                   |   | 2.5   |  
|                                    |  |                                   |       |   |          |       |    |                                   |   |       |  
|Total losses and expenses(c)        |  |                                   | 41.2  |   |          | 35.1  | %  |                                   |   | 30.5  |  
|                                    |  |                                   |       |   |          |       |    |                                   |   |       |  
|Net income                          |  |                                   | 8.8   |   |          |       |    |                                   |   | 7.9   |  
|                                    |  |                                   |       |   |          |       |    |                                   |   |       |  
|Loss ratio(b)/(a)                   |  |                                   | 74.2  | % |          |       |    |                                   |   | 71.8  | %
|Combined ratio(c)/(a)               |  |                                   | 82.5  | % |          |       |    |                                   |   | 79.5  | %

---

Our segment results
do not include investment income or interest expense, which are included in the corporate function.

The loss ratio is
calculated by dividing losses (shown as (b)) by net premium earned (shown as (a)).

The combined ratio is calculated by dividing total losses
and expenses (shown as (c)) by net premiums earned (shown as (a)).

Gross premiums written.Gross premiums
written for the property and casualty insurance segment for the three months ended March 31, 2006 were $70.2 million compared to $64.3 million for the three months ended March 31, 2005, an increase of 9.2%. The increase is principally the
result of the continued expansion of business written by our property underwriting team. Typically, insurance business is written on an individual risk excess of loss basis with contractually defined premiums rather than estimates, which results in
no material premium adjustments.

Reinsurance premiums ceded. Reinsurance premiums ceded for insurance for the three months ended
March 31, 2006 were $41.6 million compared to $28.0 million for the three months ended March 31, 2005, an increase of 48.6%. Reinsurance premiums ceded were principally related to our quota share treaties that are utilized to manage our
retained exposure and, therefore, will tend to increase when gross premiums written increase. In addition, we purchased catastrophe reinsurance protection for certain property exposures. The ratio of reinsurance premiums ceded to gross premiums
written for the three months ended March 31, 2006 was 59.2% compared to 43.5% for the three months ended March 31, 2005. Not all of the contracts we write qualify for inclusion in our quota share treaties and, accordingly, there may be
differences in the ratio of gross premiums written to reinsurance premiums ceded from period to period.

Net premiums earned.Net
premiums earned on insurance increased by 30.2% to $50.0 million for the three months ended March 31, 2006. The increase is attributed to increased volume in existing products and expansion of our insurance products offered over the past two
years and reflects the earning pattern of an increasingly mature portfolio of insurance contracts.

Losses.Losses relating to
insurance were $37.1 million for the three months ended March 31, 2006 compared to $27.6 million for the three months ended March 31, 2005, an increase of 34.4%. The increase is principally attributable to the growth in our net premiums
earned for this segment and an increased loss ratio for our professional liability business due to a declining price environment and underlying loss trend. The loss ratio for our insurance segment for the three months ended March 31, 2006 was
74.2% compared to 71.8% for the same period in 2005. During the three months ended March 31, 2006, there were no significant adjustments in loss reserves relating to prior year contracts.



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Acquisition costs.Acquisition costs were $0.4 million for each of the three months ended
March 31, 2006 and March 31, 2005. The acquisition costs are net of ceding commissions associated with premiums ceded to our quota share partners. These ceding commissions are designed to compensate us for the costs of producing the
portfolio of risks ceded to our reinsurers. Acquisition costs during each of the three months ended March 31, 2006 and 2005 consisted primarily of amortization of deferred policy acquisition costs incurred in connection with writing property
and casualty insurance business.

General and administrative expenses.General and administrative expenses were $3.7 million for the
three months ended March 31, 2006 compared to $2.5 million for the three months ended March 31, 2005, an increase of 48.0%. The increase resulted principally from expenses associated with additional staff and infrastructure costs,
including an expanded property underwriting team. The general and administrative expense to net premiums earned ratio was 7.4% for the three months ended March 31, 2006 compared to 6.5% for the three months ended March 31, 2005 and
reflects the increased administrative costs associated with expanding our insurance team.

Net income.Net income attributable to
the property and casualty insurance segment for the three months ended March 31, 2006 was $8.8 million compared to $7.9 million for the three months ended March 31, 2005. The results for the three months ended March 31, 2006 were
principally attributable to increased net premium earned partially offset by an increased combined ratio.

Life and Annuity
Reinsurance Segment



|                                    |  |                                   |       |   |          |       |    |                                   |   |       |  
|----------------------------------- |  | --------------------------------- | ----- | - | -------- | ----- | -- | --------------------------------- | - | ----- | -
|                                    |  | Three Months Ended March 31, 2006 |       |   | % change |       |    | Three Months Ended March 31, 2005 |  
|                                    |  | In millions of US Dollars         |      
|Gross premiums written              |  | $                                 | 0.8   |   |          | N/A   |    |                                   | $ | 143.2 |  
|Reinsurance premiums ceded          |  |                                   | (0.2  | ) |          | N/A   |    |                                   |   |      |  
|                                    |  |                                   |       |   |          |       |    |                                   |   |       |  
|Net premiums written                |  |                                   | 0.6   |   |          | N/A   |    |                                   |   | 143.2 |  
|                                    |  |                                   |       |   |          |       |    |                                   |   |       |  
|Net premiums earned                 |  |                                   | 0.6   |   |          | N/A   |    |                                   |   | 143.2 |  
|                                    |  |                                   |       |   |          |       |    |                                   |   |       |  
|Benefits                            |  |                                   | 11.0  |   |          | N/A   |    |                                   |   | 151.0 |  
|Acquisition costs                   |  |                                   | 0.3   |   |          | 50.0  | %  |                                   |   | 0.2   |  
|General and administrative expenses |  |                                   | 0.6   |   |          | (40.0 | )% |                                   |   | 1.0   |  
|                                    |  |                                   |       |   |          |       |    |                                   |   |       |  
|Total benefits and expenses         |  |                                   | 11.9  |   |          | N/A   |    |                                   |   | 152.3 |  
|                                    |  |                                   |       |   |          |       |    |                                   |   |       |  
|Net loss                            |  |                                   | (11.3 | ) |          |       |    |                                   |   | (9.1  | )
|                                    |  |                                   |       |   |          |       |    |                                   |   |       |  

---

Our segment results do not include
investment income or interest expense, which are included in the corporate function.

The nature of life and annuity reinsurance
transactions that we consider results in a limited number of transactions actually bound with potentially large variations in quarterly and annual premium volume. Consequently, components of our underwriting results, such as premiums written,
premiums earned and benefits can be volatile and, accordingly, period to period comparisons are not representative of future trends.

Gross premiums written. Gross premiums written for the life and annuity reinsurance segment for the three months ended March 31, 2006 were $0.8 million compared to $143.2 million for the three months ended March 31, 2005.
Gross premium written during the three months to March 31, 2006 relate to premium received on prior period contracts. We wrote one annuity contract in the three months ended March 31, 2005. The level of business written in future periods
will vary, perhaps materially, based upon market conditions and the opportunities presented to us.

Reinsurance premiums ceded.
Gross reinsurance premiums ceded for the life and annuity reinsurance segment were $0.2 million for the three months ended March 31, 2006 and relate to premium adjustments on prior period contracts. There were no reinsurance premiums ceded for
the life and annuity reinsurance segment for the three month period ended March 31, 2005.

Net premiums earned.Life and
annuity reinsurance business written during a three month period is fully earned in that period.



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Benefits.Benefits relating to the life and annuity reinsurance segment were $11.0 million for the
three months ended March 31, 2006 compared to $151.0 million for the three months ended March 31, 2005. Benefits include regular accretion of existing liabilities together with benefits incurred on transactions written during the period.
The decrease was principally due to the recognition of losses associated with the premiums written and earned in the three months ended March 31, 2005.

Acquisition costs.Acquisition costs were $0.3 million for the three months ended March 31, 2006 compared to $0.2 million for the three months ended March 31, 2005 and relate to the regular
amortization of deferred acquisition costs. The acquisition costs on the life and annuity reinsurance transactions that we bind will vary from period to period depending on brokerage rates.

General and administrative expenses.General and administrative expenses were $0.6 million for the three months ended March 31, 2006 compared
to $1.0 million for the three months ended March 31, 2005.

Net loss.Although we expect to incur underwriting losses in
connection with our life and annuity reinsurance contracts, we seek to achieve sufficient investment income from premiums received to fund benefit payments as they occur and provide for a profit margin. Net loss attributable to the life and annuity
reinsurance segment for the three months ended March 31, 2006 was $11.3 million compared to $9.1 million for the three months ended March 31, 2005. The results are driven by the accretion of the life and annuity reinsurance benefits over
time.

Corporate Function



|                                                                    |  |                                   |       |   |          |       |    |                                   |   |      |  
|------------------------------------------------------------------- |  | --------------------------------- | ----- | - | -------- | ----- | -- | --------------------------------- | - | ---- | -
|                                                                    |  | Three Months Ended March 31, 2006 |       |   | % change |       |    | Three Months Ended March 31, 2005 |  
|                                                                    |  | In millions of US Dollars         |      
|Net investment income                                               |  | $                                 | 34.0  |   |          | 43.5  | %  |                                   | $ | 23.7 |  
|                                                                    |  |                                   |       |   |          |       |    |                                   |   |      |  
|Net gains on alternative assets                                     |  |                                   | 54.9  |   |          | 281.3 | %  |                                   |   | 14.4 |  
|                                                                    |  |                                   |       |   |          |       |    |                                   |   |      |  
|Net realized gains (losses) on sale of fixed maturities             |  |                                   | (1.7  | ) |          | N/A   |    |                                   |   | 0.4  |  
|                                                                    |  |                                   |       |   |          |       |    |                                   |   |      |  
|Other income                                                        |  |                                   | 0.5   |   |          | (61.5 | )% |                                   |   | 1.3  |  
|                                                                    |  |                                   |       |   |          |       |    |                                   |   |      |  
|Interest expense                                                    |  |                                   | (6.3  | ) |          | 1.6   | %  |                                   |   | (6.2 | )
|                                                                    |  |                                   |       |   |          |       |    |                                   |   |      |  
|General and administrative expenses not included in segment results |  |                                   | (11.7 | ) |          | 46.3  | %  |                                   |   | (8.0 | )
|                                                                    |  |                                   |       |   |          |       |    |                                   |   |      |  
|Net income excluding segment results                                |  |                                   | 69.7  |   |          |       |    |                                   |   | 25.5 |  
|                                                                    |  |                                   |       |   |          |       |    |                                   |   |      |  

Net investment income.Net investment income, excluding realized and unrealized gains and
losses, for the three months ended March 31, 2006 increased $10.3 million to $34.0 million compared to $23.7 million for the three months ended March 31, 2005, an increase of 43.5%. The increase was principally attributable to the growth
in the cash and fixed maturities portfolio from $2,508.1 million at March 31, 2005 to $3,032.5 million at March 31, 2006, resulting from cash flow from operations since March 31, 2005 and the additional capital we raised in October
and November 2005 in connection with a public offering of our common shares. The average annualized investment yield on the cash, fixed maturities investments and funds withheld by clients for the three months ended March 31, 2006 was 4.52%
compared to 3.98% for the three months ended March 31, 2005, reflecting the increase in interest rates over the past year.

Net
gains on alternative investments.Net gains on the alternative investment portfolio were $54.9 million, or 4.40%, for the three months ended March 31, 2006 compared to $14.4 million, or 1.20%, for the three months ended March 31, 2005.
The return when compared to the same period in the prior year is consistent with returns achieved in the broader fund of fund markets in each period.

Net realized gains (losses) on sale of fixed maturities. Our fixed maturities investment strategy is not intended to generate realized gains and losses as more fully discussed below. The realized gains (losses)
in the three months ended March 31, 2006 and March 31, 2005 of $(1.7) million and $0.4 million, respectively, are the result of the sale of fixed maturities in connection with portfolio rebalancing transactions.

Interest expense. Interest expense was $6.3 million for the three months ended March 31, 2006 compared to $6.2 million for the three months
ended March 31, 2005. Interest expense includes $(0.3) million of interest expense pertaining to the funds withheld on the variable quota share retrocession agreement with Grand Central Re for the three months ended March 31, 2006 compared
to $(0.5) million for the three months ended March 31, 2005. The interest expense on the Grand Central Re funds withheld is based on the average of two total return fixed maturity indices that had a similar total return for the three months
ended March 31, 2006 compared to the three months ended March 31,2005.



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General and administrative costs.General and administrative expenses were $11.7 million for the
three months ended March 31, 2006 compared to $8.0 million for the three months ended March 31, 2005, an increase of 46.3%. The increase in general and administrative costs results principally from increased fees for professional services
related to the ARMCs internal review announced on March 24, 2006 and previously discussed above.

Financial Condition

Cash and invested assets. Aggregate invested assets, comprising cash and cash equivalents, fixed maturities and alternative investments, were
$4,303.6 million at March 31, 2006 compared to $4,227.8 million at December 31, 2005, an increase of 1.8%. The increase in cash and invested assets resulted principally from $115.0 million in cash flows from operations generated in the
three months ended March 31, 2006, which is net of the change in alternative investments of $40.1 million. These increases were partially offset by a decrease in accumulated other comprehensive income of $49.0 million, net payments of deposit
liabilities of $24.5 million and dividends paid of $3.0 million. The decline in unrealized appreciation on our fixed income portfolio, principally relates to increases in interest rates and our portfolio has not suffered any credit events during the
period to March 31, 2006.

Liabilities for Property and casualty losses. Property and casualty losses totaled $2,087.1 million
at March 31, 2006 compared to $2,006.0 million at December 31, 2005, an increase of 4.0%. The increase in property and casualty losses was principally attributable to estimated losses associated with premiums earned during the three months
ended March 31, 2006, partially offset by losses paid on property and casualty losses. There was no significant development on prior period reserves during the three months ended March 31, 2006.

Liabilities for Life and annuity benefits. Life and annuity benefits totaled $853.6 million at March 31, 2006 compared to $854.2 million at
December 31, 2005. The decrease in the three months ended March 31, 2006 was principally attributable to benefit payments on existing contracts in force during the three months ended March 31, 2006, partially offset by accretion of,
and foreign exchange movements on, liabilities.

Losses and benefits recoverable from reinsurers. Losses and benefits recoverable
from reinsurers totaled $652.2million at March 31, 2006 compared to $646.7 million at December 31, 2005, an increase of 0.8%, principally reflecting losses ceded under our reinsurance and retrocessional agreements. Grand Central Re, our
largest retrocessionaire, accounted for 35.6% of our losses and benefits recoverable at March 31, 2006. In September 2004, Grand Central Re requested that A.M. Best Company withdraw its financial strength rating. Consequently, A.M. Best Company
has assigned a financial strength rating of NR-4 to Grand Central Re. We retain funds from Grand Central Re amounting to approximately 91.1% of its loss recoverable obligations.

In addition, at March 31, 2006, one other retrocessionaire accounted for 28.3% of our losses recoverable from reinsurers. This retrocessionaire has
a financial strength rating of A by A.M. Best Company. We retain funds amounting to approximately 84.3% of its loss recoverable obligations. The principal component of the remainder of losses recoverable relates to amounts due from
reinsurers of our property and casualty insurance risks. The loss recoverable from these reinsurers represent 30.2% of losses recoverable at March 31, 2006 and all but one of these reinsurers are presently rated A- or above by A.M.
Best Company.

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 receives the return earned on the Max Re Diversified shares in exchange for a variable rate of interest
based on LIBOR plus a spread. Max Re Diversified shares owned by Max Re with a fair value of $104.9 million at March 31, 2006 were pledged as collateral to which we are exposed to credit risk. Under GAAP, these transactions are viewed on a
combined basis and are accounted for as a financing transaction, which results in the recording of a $150.0 million bank loan. In February 2005, the parties amended the swap transaction principally to extend the swap termination date to February
2007, with provisions for earlier termination in the event that we fail to comply with certain covenants. We were in compliance with all covenants of our bank loan at March 31, 2006.

Shareholders equity. Our shareholders equity increased to $1,223.8 million at March 31, 2006 from $1,198.9 million at
December 31, 2005, an increase of 2.1%, principally reflecting income of $72.9 million partially offset by a decrease in accumulated other comprehensive income of $49.0 million during the three months ended March 31, 2006.

Liquidity. We generated $115.0 million of cash from operations during the three months ended March 31, 2006 compared to $166.6 million for
the three months ended March 31, 2005. The two principal factors impacting our operating



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cash flow are premium collections and timing of loss and benefit payments. We principally write casualty business in the property and casualty reinsurance
segment and the property and casualty insurance segment. The casualty business we generally write has a long claim-tail and it is expected that we will generate significant operating cash flow as we build loss and benefit reserves on our balance
sheet. As we continue to diversify into property and property catastrophe business, which generally has a short claim-tail, and as losses are incurred, we expect to see changes in our operating cash flow levels. We believe that our loss and benefit
reserves currently have an average duration of approximately five years and we expect to see increases in the amount of expected loss payments in future periods with a resulting decrease in operating cash flow. We do not expect loss payments to
exceed the premiums generated and therefore expect to have continued positive cash flow. However, actual premiums written and collected and losses and benefits paid in any period could vary from our expectations and could have a meaningful effect on
operating cash flow.

While we tailor our fixed maturities portfolio to expected loss and benefit payments, increased loss amounts or
settlement of losses and benefits earlier than anticipated can result in greater cash needs. We maintain a meaningful working cash balance (typically greater than $100.0 million), have generated positive cash flow from operations in each of our six
years of operating history and can access our credit facility described in Note 7 of our unaudited interim consolidated financial statements. We believe that we currently maintain sufficient liquidity to cover existing requirements and provide for
contingent liquidity. Nonetheless, it is possible that significant deviations in expected loss and benefit payments can occur, potentially requiring us to liquidate a portion of our fixed maturities portfolio at a gain or loss.

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, 2006, Max Re, which is required to have approximately $225.0 million in statutory capital and surplus in order to pay dividends, had approximately $1,085.0 million in statutory capital and surplus.

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 credit facilities as of March 31, 2006 providing an aggregate of $520.0 million of letter of credit capacity. Each of our credit facilities requires that we comply with certain
substantially similar covenants, including a minimum consolidated tangible net worth, a minimum insurer financial strength rating and restrictions on the payment of dividends. We were in compliance with all the covenants of each of our credit
facilities at March 31, 2006.

Capital resources. At March 31, 2006, our capital structure consisted of common equity.
Total capitalization amounted to $1,223.8 million as compared to $1,198.9 million at December 31, 2005, an increase of 2.1%. Our unallocated universal shelf registration filed on Form S-3 with the SEC on September 26, 2005 is no longer
effective due to our failure to file our Form 10-K/A by the prescribed due date. However, we continue to believe we have flexibility with respect to capitalization as a result of our access to the debt and equity markets.

On October 11, 2005 we sold 11.0 million common shares at $23.50 per share in an underwritten public common share offering which resulted in
net proceeds to Max Re Capital of approximately $246.0 million. As part of the offering, Max Re Capital granted the underwriters a 30 day option to purchase up to 1.65 million additional common shares. On November 4, 2005, the underwriters
exercised their option in full, resulting in additional net proceeds to Max Re Capital of approximately $38.1 million. Substantially all of the net proceeds were contributed to our reinsurance operating subsidiaries to support expanded underwriting
capacity, particularly in property insurance and property catastrophe reinsurance lines and for general corporate purposes.

On
February 10, 2006, Max Re Capitals board of directors declared a shareholder dividend of $0.05 per share payable to shareholders of record on February 24, 2006. 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 28, 2006, Max Re Capitals board of directors declared a dividend of $0.05 per share to be paid on May 26, 2006 to shareholders of record on May 12,
2006.

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 insurance or reinsurance



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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. Insurer financial strength 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 to as structured
finance or variable interest entities, that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

Contractual Obligations



|                             |  |                                              |           |                  |   |           |  |           |           |                   |   |         |  |   |          
|---------------------------- |  | -------------------------------------------- | --------- | ---------------- | - | --------- |  | --------- | --------- | ----------------- | - | ------- |  | - | ---------
|                             |  | Payment due by period (thousands of dollars)
|Contractual Obligations      |  | Total                                        |           | Less than 1 year |   | 1-3 years |  | 3-5 years |           | More than 5 years
|Bank loan obligations        |  | $                                            | 150,000   |                  | $ | 150,000   |  | $         |          |                   | $ |        |  | $ |         
|Operating lease obligations  |  |                                              | 12,514    |                  |   | 1,722     |  |           | 3,665     |                   |   | 3,681   |  |   | 3,446    
|Property and casualty losses |  |                                              | 2,087,065 |                  |   | 561,491   |  |           | 820,088   |                   |   | 355,414 |  |   | 350,072  
|Life and annuity benefits    |  |                                              | 1,358,614 |                  |   | 81,906    |  |           | 150,294   |                   |   | 132,804 |  |   | 993,610  
|Deposit liabilities          |  |                                              | 271,488   |                  |   | 46,390    |  |           | 36,965    |                   |   | 65,942  |  |   | 122,191  
|                             |  |                                              |           |                  |   |           |  |           |           |                   |   |         |  |   |          
|Total                        |  | $                                            | 3,879,681 |                  | $ | 841,509   |  | $         | 1,011,012 |                   | $ | 557,841 |  | $ | 1,469,319
|                             |  |                                              |           |                  |   |           |  |           |           |                   |   |         |  |   |          

The reserves for losses and benefits together with deposit liabilities represent managements
estimate of the ultimate cost of settling losses, benefits and deposit liabilities. As more fully discussed in our Critical Accounting PoliciesLosses and benefits in our Annual Report on Form 10-K/A for the year ended
December 31, 2005, the estimation of losses and benefits is based on various complex and subjective judgments. Actual losses and benefits paid may differ, perhaps significantly, from the reserve estimates reflected in our financial statements.
Similarly, the timing of payment of our estimated losses and benefits is not fixed and there may be significant changes in actual payment activity. The assumptions used in estimating the likely payments due by period are based on our historical
claims payment experience and industry payment patterns, but due to the inherent uncertainty in the process of estimating the timing of such payments, there is a risk that the amounts paid in any such period can be significantly different than the
amounts disclosed above.

The amounts in this table represent our gross estimates of known liabilities as of March 31, 2006 and do not
include any allowance for claims for future events within the time period specified. Accordingly, it is highly likely that the total amounts paid out in the time periods shown will be greater than that indicated in the table.

Furthermore, life and annuity benefits recorded in the financial statements at March 31, 2006 are computed on a discounted basis, whereas the
expected payments by period in the table above are the estimated payments at a future time and do not reflect a discount of the amount payable.



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New Accounting Pronouncements

Financial Accounting Standard No. 155  Accounting for Certain Hybrid Financial Instruments(SFAS 155)  an amendment of FASB Statements No. 133 and 140

In February 2006, the Financial Accounting Standards Board (FASB) issued SFAS 155  Accounting for Certain Hybrid Financial Instruments. This statement amends FASB Statements No. 133,
Accounting for Derivative Instruments and Hedging Activities,and No. 140  Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities. This Statement permits fair value remeasurement for any
hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of Statement 133 and amends Statement 140
to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. The Statement is effective for all
financial instruments acquired or issued after the beginning of the entitys first fiscal year that begins after September 15, 2006. Early adoption is permitted in specific circumstances for hybrid financial instruments that had been
bifurcated under paragraph 12 of Statement 133. We believe that the adoption of this standard will not have a material effect on the consolidated financial statements.

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 cash and 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, credit spreads 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 investment grade 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, 2006, all
securities held in our fixed maturities portfolio were rated BBB-/Baa3 or above. Our current policy is not to hold securities rated lower than BBB-/Baa3 in our fixed maturities investment portfolio. At March 31, 2006, 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 4.05%, or approximately $109.2 million, and the impact on the fixed maturities
investment portfolio from an immediate 100 basis point decrease in market interest rates would have resulted in an estimated increase in market value of 4.45%, or approximately $120.0 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 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, 2006, 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 1.75%, or approximately $22.2 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 1.75%, or approximately $22.2 million.

ITEM 4. Controls and Procedures

Part A -Evaluation of Disclosure Controls and Procedures.

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



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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. There are inherent limitations to the effectiveness of any control system. A control system, no matter how well conceived and operated, can provide only reasonable assurance that its objectives are met. No
evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

As of March 31, 2006, 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, and solely because of the material weakness described in Part B below, the Chief Executive Officer and Chief Financial Officer concluded that the design
and operation of these disclosure controls were not effective at March 31, 2006, and such disclosure controls did not ensure that material information relating to our company was made known to management, including the Chief Executive Officer
and Chief Financial Officer, particularly during the period when our periodic reports are being prepared.

Part B - Internal Control
Over Financial Reporting

Management is responsible for establishing and maintaining effective internal control over financial reporting
(as defined in Rule 13a-15(f) under the Exchange Act). Our companys internal control system was designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles. There are inherent limitations to the effectiveness of any control system. A control system, no matter how well conceived and operated, can provide only reasonable assurance that
its objectives are met. No evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within our company have been detected.

On May 30, 2006, we determined that we needed to restate our previously issued financial statements for the years ended December 31, 2005
through 2001. As a result of such financial statement restatement, management reassessed our internal control over financial reporting using the Committee of Sponsoring Organizations of the Treadway Commission Internal Control-Integrated Framework
criteria and identified the following control deficiencies:



| |  |  | We did not maintain effective controls to bifurcate retroactive and prospective elements of coverage within reinsurance contracts purchased, in accordance with SFAS 113, where the
dates of agreement in principle of substantial terms and coverage inception differed.
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | We did not maintain effective controls over the appropriate accounting for the specific contractual feature contained within the three complex retrocessional contracts purchased.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

These control deficiencies resulted in the restatement of our financial statements for the years ended December 31,
2005 through 2001. In connection with managements reassessment of internal control over financial reporting, as of December 31, 2005 management determined that these control deficiencies constitute a material weakness within the meaning of
Auditing Standards No. 2 of the Public Company Accounting Oversight Board (PCAOB). As a result, we concluded that our internal control over financial reporting was not effective as at December 31, 2005.

Management evaluated whether there was a change in our companys internal control over financial reporting during the three months ended
March 31, 2006 that has materially affected, or is reasonably likely to materially affect, the companys internal control over financial reporting. Based on our evaluation we believe that there was no such change during the three months
ended March 31, 2006. However, as described in our filing on Form 10-K/A filed on June 7, 2006, since March 31, 2006 we have implemented controls to remediate the deficiencies identified above. Specifically we have:



| |  |  | Instituted a review process to be performed by our finance department to compare the inception dates of reinsurance purchased against documentation providing evidence of agreement
in principle of substantial terms and bifurcate retroactive versus prospective elements of coverage in accordance with SFAS 113;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Established underwriting guidelines that preclude us from purchasing reinsurance containing the specific contractual feature.
| | - |  | -----------------------------------------------------------------------------------------------------------------------------

We believe that, as of the date of this filing, we have taken steps that remediate the controls deficiencies in our disclosure controls and our internal
controls over financial reporting.



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PART II. OTHER INFORMATION

ITEM 1. Legal Proceedings

We are, from time to time, a party to litigation and/or arbitration that arises
in the normal course of our business operations. We are also subject to other potential litigation, disputes, and regulatory or governmental inquiry.

Possible SEC Inquiry.As previously announced, in connection with an internal review of three finite property and casualty retrocessional contracts, the ARMC voluntarily contacted the SEC. Although as of
June 8, 2006 we had not received any formal indication from the SEC staff as to whether the staff will conduct its own review of the contracts in question or of our restatement of the financial statements for the years ended December 31,
2005, 2004, 2003, 2002 and 2001, it is possible that the SEC staff will commence its own inquiry relating to these subjects. We intend to cooperate fully with the SEC but can provide no assurances as to whether an SEC inquiry, if any, will result in
the same conclusions as those reached following the internal review by the ARMC. Further, if the SEC staff does commence an investigation, it could result in the SEC seeking various penalties and relief, including without limitation injunctive
relief and/or civil monetary penalties. The nature of the relief or remedies the SEC may seek cannot be predicted at this time. If an enforcement action is brought by the SEC, it could have a material adverse effect on us.

Nasdaq Staff Determination.We Received a Nasdaq Staff Determination on May 16, 2006 indicating that, due to our failure to file this Form
10-Q for the period ended March 31, 2006 on a timely basis, we failed to comply with the filing requirements for continued listing set forth in Marketplace Rule 4320 (e)(12), and our common shares are, therefore, subject to delisting from the
Nasdaq National Market. On May 22, 2006, we made a timely request for a hearing with the Nasdaq Listing Qualifications Panel to review the Nasdaq staffs determination, which stayed the delisting pending the hearing. Although no assurance
can be made, we believe that upon filing of our 10-K/A and this Form 10-Q, the hearing will be cancelled, the notification letter will be rendered moot and the threat of the delisting of our common shares will be alleviated.

Other Actions.On April 4, 2006 a complaint was filed in the U.S. District Court for the Northern District of Georgia on behalf of New
Cingular Wireless Headquarters LLC and 16 other corporations against approximately 100 insurance entity defendants, including insurance brokers Marsh Inc. and Aon, and including Max Re. The complaint alleges that the defendant insurance companies
and insurance brokers conspired to manipulate bidding practices for insurance policies in certain insurance lines and failed to disclose certain commission arrangements. The named plaintiffs have asserted statutory claims under the Sherman Act, the
Racketeer Influenced and Corrupt Organizations Act, as well as common law claims alleging breach of fiduciary duty, inducement to breach fiduciary duty, unjust enrichment and fraud. We intend to defend ourselves vigorously in this suit but cannot at
this time predict the outcome of the matters described above or estimate the potential costs related to defending the action. No liability has been established in our unaudited consolidated financial statements for the period ended March 31,
2006.

While any proceeding contains an element of uncertainty, we currently do not believe that the ultimate outcome of all outstanding
litigation, arbitrations and inquires will have a material adverse effect on our consolidated financial condition, future operating results and/or liquidity, although an adverse response from the SEC or adverse resolution of a number of these items
could have a material adverse effect on our results of operations in a particular fiscal quarter or year.

ITEM 1A. Risk Factors

Incorporated by reference to Exhibit 99.1 of the Companys Current Report on Form 10-K/A filed on June 7, 2006

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Purchase of Equity Securities

The table below sets forth the information with respect to purchases made by or on behalf of Max Re Capital or any affiliated purchase (as defined in Rule 10b-18(a)(3) under the Exchange Act), of our common shares during the
three months ended March 31, 2006.



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|                                         |  |                                  |  |                              |  |                                                                                     |  |                                                                                      |             
|---------------------------------------- |  | -------------------------------- |  | ---------------------------- |  | ----------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------------ | ------------
|Period                                   |  | Total Number of Shares Purchased |  | Average Price Paid per Share |  | Total Number of Shares Purchased as
Part of Publicly Announced Plans or Programs(2) |  | Maximum Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs
|(January 1, 2006 to January 31, 2006)(1) |  |                                 |  |                             |  |                                                                                    |  | $                                                                                    | 36.0 million
|(February 1, 2006 to February 28, 2006)  |  |                                 |  |                             |  |                                                                                    |  | $                                                                                    | 36.0 million
|(March 1, 2006 to March 31, 2006)        |  |                                 |  |                             |  |                                                                                    |  | $                                                                                    | 36.0 million
|                                         |  |                                  |  |                              |  |                                                                                     |  |                                                                                      |             
|Total                                    |  |                                 |  |                             |  |                                                                                    |  | $                                                                                    | 36.0 million

---

|(1) | As a matter of policy, we do not repurchase our common shares during a self-imposed
black-out period extending from the last business day of the quarter to three business days following the earnings release for such quarter.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | On September 17, 2001, we announced that our board of directors had approved a share
repurchase program, pursuant to which up to $15.0 million of our common shares may be repurchased. This repurchase program was increased by an aggregate of $75.0 million of common shares by resolutions of our board of directors adopted on
September 27, 2001, July 26, 2002 and July 29, 2005. The repurchase program is being effected from time to time, depending on market conditions and other factors, through open market purchases and privately negotiated
transactions. The total remaining authorization under the repurchase program was $36.0 million of common shares as of May 31, 2006. The repurchase program has no set expiration or termination date.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

ITEM 3. Defaults Upon Senior Securities

Not applicable.

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

Not applicable.

ITEM 5. Other Information

We are holding our 2006 Annual Meeting of Shareholders on September 18,
2006 (the 2006 Annual Meeting). In 2005, the annual meeting of shareholders was held on April 28, 2005. As the date of the 2006 Annual Meeting has been delayed by more than 30 days from the date of our previous annual meeting,
in accordance with the applicable rules of the Securities and Exchange Commission, we are hereby notifying our shareholders of the new meeting date for the 2006 Annual Meeting. We will be mailing the proxy statement and related materials in
connection with the 2006 Annual Meeting on or about August 1, 2006. In light of this anticipated mailing schedule, we are hereby notifying our shareholders that June 18, 2006 will be the new date for submitting shareholder proposals for
inclusion in our proxy statement for the 2006 Annual Meeting. We believe that such a deadline provides a reasonable time before we begin the mailing of our proxy materials for the 2006 Annual Meeting. Shareholder proposals received by us
after June 18, 2006 will be considered untimely and will not be included in our proxy statement for the 2006 Annual Meeting. The record date for the 2006 Annual Meeting is June 30, 2006.

ITEM 6. 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 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/A for the year ended December 31, 2005 filed with the
Securities and Exchange Commission on June 7, 2006).



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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. CooneyTitle:

President and Chief Executive OfficerDate:

June 8, 2006/s/ Keith S. HynesName:

Keith S. HynesTitle:

Executive Vice President and Chief Financial OfficerDate:

June 8, 2006




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