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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 PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ---------------------------------------------------------------------------------------



For the quarterly period ended September 30, 2005



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 x   No ̈



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



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



The number of the Registrants common shares (par value $1.00 per share) outstanding as of October 28, 2005 was 57,112,212.



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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 September 30, 2005 (unaudited) and December 31, 2004                                                 |  | 3   
|                             |  |                                                                                                                                       
|                             |  | Consolidated Statements of Income and Comprehensive Income for the Three and Nine Months Ended September 30, 2005 and 2004 (unaudited) |  | 4   
|                             |  |                                                                                                                                       
|                             |  | Consolidated Statements of Changes in Shareholders Equity for the Nine Months Ended September 30, 2005 and 2004 (unaudited)           |  | 5   
|                             |  |                                                                                                                                       
|                             |  | Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2005 and 2004 (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                                                  |  | 12  
|                             |  |                                                                                                                                       
|ITEM 3.                      |  | Quantitative and Qualitative Disclosure About Market Risk                                                                              |  | 27  
|                             |  |                                                                                                                                       
|ITEM 4.                      |  | Controls and Procedures                                                                                                                |  | 28  
|                             | 
|PART IIOTHER INFORMATION    |  | 28                                                                                                                                    
|                             |  |                                                                                                                                       
|ITEM 1.                      |  | Legal Proceedings                                                                                                                      |  | 28  
|                             |  |                                                                                                                                       
|ITEM 2.                      |  | Unregistered Sales of Equity Securities and Use of Proceeds                                                                            |  | 29  
|                             |  |                                                                                                                                       
|ITEM 3.                      |  | Defaults Upon Senior Securities                                                                                                        |  | 29  
|                             |  |                                                                                                                                       
|ITEM 4.                      |  | Submission of Matters to a Vote of Security Holders                                                                                    |  | 29  
|                             |  |                                                                                                                                       
|ITEM 5.                      |  | Other Information                                                                                                                      |  | 29  
|                             |  |                                                                                                                                       
|ITEM 6.                      |  | Exhibits                                                                                                                               |  | 29  
|                             | 
|SIGNATURES                   |  | S-1                                                                                                                                   



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##### Table of Contents

PART I. FINANCIAL INFORMATION



|ITEM 1. | Financial Statements
|------- | --------------------



MAX RE CAPITAL LTD.



CONSOLIDATED
BALANCE SHEETS



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



|                                                                                                                        |  |                    |           |   |                   |   |           |  
|----------------------------------------------------------------------------------------------------------------------- |  | ------------------ | --------- | - | ----------------- | - | --------- | -
|                                                                                                                        |  | September 30, 2005 |           |   | December 31, 2004 |  
|                                                                                                                        |  | (Unaudited)        |           |   |                   |  
|ASSETS                                                                                                                  |  |                    |           |   |                   |   |           |  
|Cash and cash equivalents                                                                                               |  | $                  | 227,396   |   |                   | $ | 239,188   |  
|Fixed maturities, available for sale at fair value                                                                      |  |                    | 2,463,439 |   |                   |   | 2,156,011 |  
|Alternative investments, at fair value                                                                                  |  |                    | 1,207,519 |   |                   |   | 1,119,028 |  
|Accrued interest income                                                                                                 |  |                    | 29,816    |   |                   |   | 24,257    |  
|Premiums receivable                                                                                                     |  |                    | 301,689   |   |                   |   | 262,714   |  
|Losses and benefits recoverable from reinsurers                                                                         |  |                    | 464,528   |   |                   |   | 388,067   |  
|Funds withheld                                                                                                          |  |                    | 16,875    |   |                   |   | 17,599    |  
|Deferred acquisition costs                                                                                              |  |                    | 85,741    |   |                   |   | 54,770    |  
|Prepaid reinsurance premiums                                                                                            |  |                    | 76,376    |   |                   |   | 79,337    |  
|Other assets                                                                                                            |  |                    | 24,434    |   |                   |   | 26,384    |  
|                                                                                                                        |  |                    |           |   |                   |   |           |  
|Total assets                                                                                                            |  | $                  | 4,897,813 |   |                   | $ | 4,367,355 |  
|                                                                                                                        |  |                    |           |   |                   |   |           |  
|LIABILITIES                                                                                                             |  |                    |           |   |                   |   |           |  
|Property and casualty losses                                                                                            |  | $                  | 1,764,003 |   |                   | $ | 1,455,099 |  
|Life and annuity benefits                                                                                               |  |                    | 864,112   |   |                   |   | 666,101   |  
|Deposit liabilities                                                                                                     |  |                    | 224,854   |   |                   |   | 266,479   |  
|Funds withheld from reinsurers                                                                                          |  |                    | 315,232   |   |                   |   | 301,100   |  
|Unearned property and casualty premiums                                                                                 |  |                    | 502,980   |   |                   |   | 447,633   |  
|Reinsurance balances payable                                                                                            |  |                    | 47,690    |   |                   |   | 50,258    |  
|Accounts payable and accrued expenses                                                                                   |  |                    | 74,689    |   |                   |   | 93,694    |  
|Bank loan                                                                                                               |  |                    | 150,000   |   |                   |   | 150,000   |  
|                                                                                                                        |  |                    |           |   |                   |   |           |  
|Total liabilities                                                                                                       |  |                    | 3,943,560 |   |                   |   | 3,430,364 |  
|                                                                                                                        |  |                    |           |   |                   |   |           |  
|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; 46,112,212 shares issued and outstanding (2004  45,825,880) |  |                    | 46,112    |   |                   |   | 45,826    |  
|Additional paid-in capital                                                                                              |  |                    | 657,251   |   |                   |   | 652,029   |  
|Loans receivable from common share sales                                                                                |  |                    | (465      | ) |                   |   | (10,515   | )
|Unearned stock grant compensation                                                                                       |  |                    | (16,725   | ) |                   |   | (13,294   | )
|Accumulated other comprehensive income                                                                                  |  |                    | 15,253    |   |                   |   | 22,227    |  
|Retained earnings                                                                                                       |  |                    | 252,827   |   |                   |   | 240,718   |  
|                                                                                                                        |  |                    |           |   |                   |   |           |  
|Total shareholders equity                                                                                              |  |                    | 954,253   |   |                   |   | 936,991   |  
|                                                                                                                        |  |                    |           |   |                   |   |           |  
|Total liabilities and shareholders equity                                                                              |  | $                  | 4,897,813 |   |                   | $ | 4,367,355 |  
|                                                                                                                        |  |                    |           |   |                   |   |           |  



See accompanying notes
to unaudited interim consolidated financial statements.



3



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##### Table of Contents

CONSOLIDATED STATEMENTS OF INCOME AND COMPREHENSIVE INCOME (Unaudited)



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



|                                                          |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|--------------------------------------------------------- |  | ------------------------------ | ---------- | - | ----------------------------- | - | ---------- | ---- |  | - | ---------- | - |  | - | ---------- | -
|                                                          |  | Three Months EndedSeptember 30 |            |   | Nine Months EndedSeptember 30 |  
|                                                          |  | 2005                           |            |   | 2004                          |   |            | 2005 |  |   | 2004       |  
|REVENUES                                                  |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Gross premiums written                                    |  | $                              | 288,047    |   |                               | $ | 280,848    |      |  | $ | 988,843    |   |  | $ | 904,033    |  
|Reinsurance premiums ceded                                |  |                                | (47,805    | ) |                               |   | (29,777    | )    |  |   | (144,722   | ) |  |   | (120,130   | )
|                                                          |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Net premiums written                                      |  | $                              | 240,242    |   |                               | $ | 251,071    |      |  | $ | 844,121    |   |  | $ | 783,903    |  
|                                                          |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Earned premiums                                           |  | $                              | 343,437    |   |                               | $ | 369,455    |      |  | $ | 929,364    |   |  | $ | 809,302    |  
|Earned premiums ceded                                     |  |                                | (60,985    | ) |                               |   | (38,384    | )    |  |   | (146,700   | ) |  |   | (107,514   | )
|                                                          |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Net premiums earned                                       |  |                                | 282,452    |   |                               |   | 331,071    |      |  |   | 782,664    |   |  |   | 701,788    |  
|Net investment income                                     |  |                                | 27,002     |   |                               |   | 20,106     |      |  |   | 75,654     |   |  |   | 58,648     |  
|Net gains (losses) on alternative investments             |  |                                | 35,642     |   |                               |   | (14,624    | )    |  |   | 53,617     |   |  |   | 24,891     |  
|Net realized gains on sales of fixed maturities           |  |                                | 1,624      |   |                               |   | 916        |      |  |   | 2,827      |   |  |   | 4,121      |  
|Other income                                              |  |                                | 1,088      |   |                               |   | 1,285      |      |  |   | 3,588      |   |  |   | 3,663      |  
|                                                          |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Total revenues                                            |  |                                | 347,808    |   |                               |   | 338,754    |      |  |   | 918,350    |   |  |   | 793,111    |  
|                                                          |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|LOSSES AND EXPENSES                                       |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Losses and benefits                                       |  |                                | 347,086    |   |                               |   | 299,216    |      |  |   | 771,908    |   |  |   | 600,906    |  
|Acquisition costs                                         |  |                                | 20,492     |   |                               |   | 26,032     |      |  |   | 59,914     |   |  |   | 87,015     |  
|Interest expense                                          |  |                                | 6,748      |   |                               |   | 11,979     |      |  |   | 26,352     |   |  |   | 23,916     |  
|General and administrative expenses                       |  |                                | 14,484     |   |                               |   | 10,549     |      |  |   | 42,052     |   |  |   | 34,664     |  
|                                                          |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Total losses and expenses                                 |  |                                | 388,810    |   |                               |   | 347,776    |      |  |   | 900,226    |   |  |   | 746,501    |  
|                                                          |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|NET INCOME (LOSS)                                         |  |                                | (41,002    | ) |                               |   | (9,022     | )    |  |   | 18,124     |   |  |   | 46,610     |  
|Change in net unrealized appreciation of fixed maturities |  |                                | (31,393    | ) |                               |   | 33,355     |      |  |   | (3,660     | ) |  |   | (3,605     | )
|Foreign currency translation adjustment                   |  |                                | 1,011      |   |                               |   | (257       | )    |  |   | (3,314     | ) |  |   | 176        |  
|                                                          |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|COMPREHENSIVE INCOME (LOSS)                               |  | $                              | (71,384    | ) |                               | $ | 24,076     |      |  | $ | 11,150     |   |  | $ | 43,181     |  
|                                                          |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Basic earnings (loss) per common share                    |  | $                              | (0.89      | ) |                               | $ | (0.20      | )    |  | $ | 0.39       |   |  | $ | 1.02       |  
|                                                          |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Diluted earnings (loss) per common share                  |  | $                              | (0.89      | ) |                               | $ | (0.20      | )    |  | $ | 0.36       |   |  | $ | 0.96       |  
|                                                          |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Weighted average common shares outstandingbasic          |  |                                | 46,104,424 |   |                               |   | 45,785,731 |      |  |   | 46,160,067 |   |  |   | 45,686,675 |  
|                                                          |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  
|Weighted average common shares outstandingdiluted        |  |                                | 49,939,135 |   |                               |   | 47,904,970 |      |  |   | 49,850,390 |   |  |   | 48,697,018 |  
|                                                          |  |                                |            |   |                               |   |            |      |  |   |            |   |  |   |            |  



See accompanying notes
to unaudited interim consolidated financial statements.



4



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##### Table of Contents

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS EQUITY (Unaudited)



(Expressed in thousands of United States Dollars)



|                                                             |  |                               |         |   |      |   |         |  
|------------------------------------------------------------ |  | ----------------------------- | ------- | - | ---- | - | ------- | -
|                                                             |  | Nine Months EndedSeptember 30 |        
|                                                             |  | 2005                          |         |   | 2004 |  
|Preferred Shares                                             |  |                               |         |   |      |   |         |  
|Balance, beginning and end of period                         |  | $                             |        |   |      | $ |        |  
|                                                             |  |                               |         |   |      |   |         |  
|Common shares                                                |  |                               |         |   |      |   |         |  
|Balance, beginning of period                                 |  |                               | 45,826  |   |      |   | 45,185  |  
|Issuance of common shares                                    |  |                               | 621     |   |      |   | 719     |  
|Repurchase of common shares                                  |  |                               | (335    | ) |      |   | (172    | )
|                                                             |  |                               |         |   |      |   |         |  
|Balance, end of period                                       |  |                               | 46,112  |   |      |   | 45,732  |  
|                                                             |  |                               |         |   |      |   |         |  
|Additional paid-in capital                                   |  |                               |         |   |      |   |         |  
|Balance, beginning of period                                 |  |                               | 652,029 |   |      |   | 637,772 |  
|Issuance of common shares                                    |  |                               | 11,673  |   |      |   | 15,500  |  
|Stock option expense                                         |  |                               | 574     |   |      |   | 417     |  
|Repurchase of common shares                                  |  |                               | (7,025  | ) |      |   | (2,896  | )
|                                                             |  |                               |         |   |      |   |         |  
|Balance, end of period                                       |  |                               | 657,251 |   |      |   | 650,793 |  
|                                                             |  |                               |         |   |      |   |         |  
|Loans receivable from common share sales                     |  |                               |         |   |      |   |         |  
|Balance, beginning of period                                 |  |                               | (10,515 | ) |      |   | (11,965 | )
|Loans repaid                                                 |  |                               | 10,050  |   |      |   | 1,000   |  
|                                                             |  |                               |         |   |      |   |         |  
|Balance, end of period                                       |  |                               | (465    | ) |      |   | (10,965 | )
|                                                             |  |                               |         |   |      |   |         |  
|Unearned stock grant compensation                            |  |                               |         |   |      |   |         |  
|Balance, beginning of period                                 |  |                               | (13,294 | ) |      |   | (4,032  | )
|Stock grants awarded                                         |  |                               | (10,847 | ) |      |   | (15,906 | )
|Amortization                                                 |  |                               | 7,416   |   |      |   | 4,829   |  
|                                                             |  |                               |         |   |      |   |         |  
|Balance, end of period                                       |  |                               | (16,725 | ) |      |   | (15,109 | )
|                                                             |  |                               |         |   |      |   |         |  
|Accumulated other comprehensive income (loss)                |  |                               |         |   |      |   |         |  
|Balance, beginning of period                                 |  |                               | 22,227  |   |      |   | 25,790  |  
|Holding gains (losses) on fixed maturities arising in period |  |                               | (833    | ) |      |   | 516     |  
|Net realized gains included in net income                    |  |                               | (2,827  | ) |      |   | (4,121  | )
|Currency translation adjustments                             |  |                               | (3,314  | ) |      |   | 176     |  
|                                                             |  |                               |         |   |      |   |         |  
|Balance, end of period                                       |  |                               | 15,253  |   |      |   | 22,361  |  
|                                                             |  |                               |         |   |      |   |         |  
|Retained earnings                                            |  |                               |         |   |      |   |         |  
|Balance, beginning of period                                 |  |                               | 240,718 |   |      |   | 112,480 |  
|Net income                                                   |  |                               | 18,124  |   |      |   | 46,610  |  
|Dividends paid                                               |  |                               | (6,015  | ) |      |   | (4,117  | )
|                                                             |  |                               |         |   |      |   |         |  
|Balance, end of period                                       |  |                               | 252,827 |   |      |   | 154,973 |  
|                                                             |  |                               |         |   |      |   |         |  
|Total shareholders equity                                   |  | $                             | 954,253 |   |      | $ | 847,785 |  
|                                                             |  |                               |         |   |      |   |         |  



See accompanying notes
to unaudited interim consolidated financial statements.



5



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##### Table of Contents

CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)



(Expressed in thousands of United States Dollars)



|                                                                           |  |                                |            |   |      |   |            |  
|-------------------------------------------------------------------------- |  | ------------------------------ | ---------- | - | ---- | - | ---------- | -
|                                                                           |  | Nine Months Ended September 30 |           
|                                                                           |  | 2005                           |            |   | 2004 |  
|OPERATING ACTIVITIES                                                       |  |                                |            |   |      |   |            |  
|Net income                                                                 |  | $                              | 18,124     |   |      | $ | 46,610     |  
|Adjustments to reconcile net income to net cash from operating activities: |  |                                |            |   |      |   |            |  
|Amortization of unearned stock based compensation                          |  |                                | 7,990      |   |      |   | 5,246      |  
|Amortization of premium on fixed maturities                                |  |                                | 7,071      |   |      |   | 6,690      |  
|Net realized gains on sale of fixed maturities                             |  |                                | (2,827     | ) |      |   | (4,121     | )
|Alternative investments                                                    |  |                                | (88,928    | ) |      |   | (156,169   | )
|Accrued interest income                                                    |  |                                | (5,559     | ) |      |   | (4,831     | )
|Premiums receivable                                                        |  |                                | (38,975    | ) |      |   | 91,725     |  
|Losses and benefits recoverable from reinsurers                            |  |                                | (76,461    | ) |      |   | (85,045    | )
|Funds withheld                                                             |  |                                | 724        |   |      |   | (17,543    | )
|Deferred acquisition costs                                                 |  |                                | (30,971    | ) |      |   | (3,301     | )
|Prepaid reinsurance premiums                                               |  |                                | 2,961      |   |      |   | (11,942    | )
|Other assets                                                               |  |                                | 1,950      |   |      |   | (11,761    | )
|Property and casualty losses                                               |  |                                | 308,904    |   |      |   | 391,064    |  
|Life and annuity benefits                                                  |  |                                | 198,011    |   |      |   | 144,536    |  
|Funds withheld from reinsurers                                             |  |                                | 14,132     |   |      |   | 61,427     |  
|Unearned property and casualty premiums                                    |  |                                | 55,347     |   |      |   | 93,790     |  
|Reinsurance balances payable                                               |  |                                | (2,568     | ) |      |   | (28,703    | )
|Accounts payable and accrued expenses                                      |  |                                | (19,005    | ) |      |   | (10,918    | )
|                                                                           |  |                                |            |   |      |   |            |  
|Cash from operating activities                                             |  |                                | 349,920    |   |      |   | 506,754    |  
|                                                                           |  |                                |            |   |      |   |            |  
|INVESTING ACTIVITIES                                                       |  |                                |            |   |      |   |            |  
|Purchases of fixed maturities                                              |  |                                | (1,257,224 | ) |      |   | (1,071,594 | )
|Sales of fixed maturities                                                  |  |                                | 918,799    |   |      |   | 743,874    |  
|Redemptions of fixed maturities                                            |  |                                | 23,530     |   |      |   | 23,489     |  
|                                                                           |  |                                |            |   |      |   |            |  
|Cash used in investing activities                                          |  |                                | (314,895   | ) |      |   | (304,231   | )
|                                                                           |  |                                |            |   |      |   |            |  
|FINANCING ACTIVITIES                                                       |  |                                |            |   |      |   |            |  
|Net proceeds from issuance of common shares                                |  |                                | 1,447      |   |      |   | 313        |  
|Repurchases of common shares                                               |  |                                | (7,360     | ) |      |   | (3,068     | )
|Dividends paid                                                             |  |                                | (6,015     | ) |      |   | (4,117     | )
|Additions to deposit liabilities                                           |  |                                | 17,623     |   |      |   | 37,079     |  
|Payments of deposit liabilities                                            |  |                                | (59,248    | ) |      |   | (59,964    | )
|Loans repaid                                                               |  |                                | 10,050     |   |      |   | 1,000      |  
|                                                                           |  |                                |            |   |      |   |            |  
|Cash used in financing activities                                          |  |                                | (43,503    | ) |      |   | (28,757    | )
|                                                                           |  |                                |            |   |      |   |            |  
|Effect of exchange rate on cash                                            |  |                                | (3,314     | ) |      |   | 176        |  
|                                                                           |  |                                |            |   |      |   |            |  
|Changes in cash and cash equivalents                                       |  |                                | (11,792    | ) |      |   | 173,942    |  
|Cash and cash equivalents, beginning of period                             |  |                                | 239,188    |   |      |   | 201,515    |  
|                                                                           |  |                                |            |   |      |   |            |  
|CASH AND CASH EQUIVALENTS, END OF PERIOD                                   |  | $                              | 227,396    |   |      | $ | 375,457    |  
|                                                                           |  |                                |            |   |      |   |            |  



SUPPLEMENTAL DISCLOSURE OF CASH
FLOW INFORMATION



Interest paid totaled $5,580 and $2,976 for the nine
months ended September 30, 2005 and 2004, respectively.



See accompanying notes to unaudited interim consolidated financial statements.



6



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##### Table of Contents

NOTES TO THE INTERIM CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)



1. GENERAL



The interim
consolidated financial statements have been prepared on the basis of accounting principles generally accepted in the United States of America (GAAP) for interim financial information and in accordance with Regulation S-X and include the
accounts of Max Re Capital Ltd. (Max Re Capital), Max Re Ltd. (Max Re), Max Re Managers Ltd. (Max Re Managers), Max Europe Holdings Limited and its subsidiary companies (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, 2004.



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).



Certain reclassifications have been made to the prior year reported amounts to conform to the current year presentation.



2. EARNINGS PER SHARE



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



3. 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 $99.9 million at September 30, 2005 were pledged as collateral to which the Company is 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 the Company fails to comply with certain covenants, including maintaining a minimum financial strength rating and a minimum Max Re Diversified net asset value. At termination, the purchaser has
the option to sell the Max Re Diversified shares to the Company at a price equal to the fair value of the Max Re Diversified shares on the date of repurchase.



4. SEGMENT INFORMATION



The Company operates in three segments: property and casualty reinsurance, property and casualty insurance and life and annuity reinsurance. The Company
considers the property and casualty reinsurance and the property and casualty insurance segments separately, following organizational changes that were made in the three months ended June 30, 2005. Previously, the Company viewed reinsurance and
insurance as being two products within the property and casualty segment. Within the property and casualty reinsurance segment, the Company 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 currently offers reinsurance
products focusing on existing blocks of business, which take the form of co-insurance transactions. In co-insurance transactions, risks are reinsured on the same basis as the original policies. The Company also has a corporate function that includes
its investments and financing activities. The Company does not allocate assets by segment.



7



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##### Table of Contents

A summary of operations by segment for the nine months ended September 30, 2005 and 2004 is as
follows:



(Expressed in thousands of United States Dollars)



Nine Months Ended September 30, 2005



|                                                |  |                     |         |   |                            |   |         |           |  |              |          |   |  |   |         |   |  |   |         |  |   |          |  
|----------------------------------------------- |  | ------------------- | ------- | - | -------------------------- | - | ------- | --------- |  | ------------ | -------- | - |  | - | ------- | - |  | - | ------- |  | - | -------- | -
|                                                |  | Property & Casualty |         |   | Life & Annuity Reinsurance |   |         | Corporate |  | Consolidated |         
|                                                |  | Reinsurance         |         |   | Insurance                  |   |         | Total     |  |              |          |  
|Gross premiums written                          |  | $                   | 474,440 |   |                            | $ | 245,330 |           |  | $            | 719,770  |   |  | $ | 269,073 |   |  | $ |        |  | $ | 988,843  |  
|Reinsurance premiums ceded                      |  |                     | (47,746 | ) |                            |   | (96,579 | )         |  |              | (144,325 | ) |  |   | (397    | ) |  |   |        |  |   | (144,722 | )
|                                                |  |                     |         |   |                            |   |         |           |  |              |          |   |  |   |         |   |  |   |         |  |   |          |  
|Net premiums written                            |  | $                   | 426,694 |   |                            | $ | 148,751 |           |  | $            | 575,445  |   |  | $ | 268,676 |   |  | $ |        |  | $ | 844,121  |  
|                                                |  |                     |         |   |                            |   |         |           |  |              |          |   |  |   |         |   |  |   |         |  |   |          |  
|Earned premiums                                 |  | $                   | 440,187 |   |                            | $ | 220,104 |           |  | $            | 660,291  |   |  | $ | 269,073 |   |  | $ |        |  | $ | 929,364  |  
|Earned premiums ceded                           |  |                     | (52,038 | ) |                            |   | (94,265 | )         |  |              | (146,303 | ) |  |   | (397    | ) |  |   |        |  |   | (146,700 | )
|                                                |  |                     |         |   |                            |   |         |           |  |              |          |   |  |   |         |   |  |   |         |  |   |          |  
|Net premiums earned                             |  |                     | 388,149 |   |                            |   | 125,839 |           |  |              | 513,988  |   |  |   | 268,676 |   |  |   |        |  |   | 782,664  |  
|Net investment income                           |  |                     |        |   |                            |   |        |           |  |              |         |   |  |   |        |   |  |   | 75,654  |  |   | 75,654   |  
|Net gains on sales of alternative investments   |  |                     |        |   |                            |   |        |           |  |              |         |   |  |   |        |   |  |   | 53,617  |  |   | 53,617   |  
|Net realized gains on sales of fixed maturities |  |                     |        |   |                            |   |        |           |  |              |         |   |  |   |        |   |  |   | 2,827   |  |   | 2,827    |  
|Other income                                    |  |                     |        |   |                            |   |        |           |  |              |         |   |  |   |        |   |  |   | 3,588   |  |   | 3,588    |  
|                                                |  |                     |         |   |                            |   |         |           |  |              |          |   |  |   |         |   |  |   |         |  |   |          |  
|Total revenues                                  |  |                     | 388,149 |   |                            |   | 125,839 |           |  |              | 513,988  |   |  |   | 268,676 |   |  |   | 135,686 |  |   | 918,350  |  
|                                                |  |                     |         |   |                            |   |         |           |  |              |          |   |  |   |         |   |  |   |         |  |   |          |  
|Losses and benefits                             |  |                     | 347,358 |   |                            |   | 131,405 |           |  |              | 478,763  |   |  |   | 293,145 |   |  |   |        |  |   | 771,908  |  
|Acquisition costs                               |  |                     | 58,787  |   |                            |   | (772    | )         |  |              | 58,015   |   |  |   | 1,899   |   |  |   |        |  |   | 59,914   |  
|Interest expense                                |  |                     |        |   |                            |   |        |           |  |              |         |   |  |   |        |   |  |   | 26,352  |  |   | 26,352   |  
|General and administrative expenses             |  |                     | 11,051  |   |                            |   | 7,576   |           |  |              | 18,627   |   |  |   | 2,775   |   |  |   | 20,650  |  |   | 42,052   |  
|                                                |  |                     |         |   |                            |   |         |           |  |              |          |   |  |   |         |   |  |   |         |  |   |          |  
|Total losses and expenses                       |  |                     | 417,196 |   |                            |   | 138,209 |           |  |              | 555,405  |   |  |   | 297,819 |   |  |   | 47,002  |  |   | 900,226  |  
|                                                |  |                     |         |   |                            |   |         |           |  |              |          |   |  |   |         |   |  |   |         |  |   |          |  
|Net income (loss)                               |  | $                   | (29,047 | ) |                            | $ | (12,370 | )         |  | $            | (41,417  | ) |  | $ | (29,143 | ) |  | $ | 88,684  |  | $ | 18,124   |  
|                                                |  |                     |         |   |                            |   |         |           |  |              |          |   |  |   |         |   |  |   |         |  |   |          |  
|Loss Ratio *                                    |  |                     | 89.5    | % |                            |   | 104.4   | %         |  |              | 93.1     | % |  |   | ***     |   |  |   |         |  |   |          |  
|Combined Ratio **                               |  |                     | 107.5   | % |                            |   | 109.8   | %         |  |              | 108.1    | % |  |   | ***     |   |  |   |         |  |   |          |  



|* | 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.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

(Expressed in thousands of United States Dollars)



Nine Months Ended September 30, 2004



|                                                |  |                     |         |   |                            |   |         |           |  |              |          |   |  |   |         |   |  |   |        |  |   |          |  
|----------------------------------------------- |  | ------------------- | ------- | - | -------------------------- | - | ------- | --------- |  | ------------ | -------- | - |  | - | ------- | - |  | - | ------ |  | - | -------- | -
|                                                |  | Property & Casualty |         |   | Life & Annuity Reinsurance |   |         | Corporate |  | Consolidated |         
|                                                |  | Reinsurance         |         |   | Insurance                  |   |         | Total     |  |              |          |  
|Gross premiums written                          |  | $                   | 558,491 |   |                            | $ | 168,250 |           |  | $            | 726,741  |   |  | $ | 177,292 |   |  | $ |       |  | $ | 904,033  |  
|Reinsurance premiums ceded                      |  |                     | (44,070 | ) |                            |   | (75,399 | )         |  |              | (119,469 | ) |  |   | (661    | ) |  |   |       |  |   | (120,130 | )
|                                                |  |                     |         |   |                            |   |         |           |  |              |          |   |  |   |         |   |  |   |        |  |   |          |  
|Net premiums written                            |  | $                   | 514,421 |   |                            | $ | 92,851  |           |  | $            | 607,272  |   |  | $ | 176,631 |   |  | $ |       |  | $ | 783,903  |  
|                                                |  |                     |         |   |                            |   |         |           |  |              |          |   |  |   |         |   |  |   |        |  |   |          |  
|Earned premiums                                 |  | $                   | 475,541 |   |                            | $ | 156,469 |           |  | $            | 632,010  |   |  | $ | 177,292 |   |  | $ |       |  | $ | 809,302  |  
|Earned premiums ceded                           |  |                     | (41,656 | ) |                            |   | (65,197 | )         |  |              | (106,853 | ) |  |   | (661    | ) |  |   |       |  |   | (107,514 | )
|                                                |  |                     |         |   |                            |   |         |           |  |              |          |   |  |   |         |   |  |   |        |  |   |          |  
|Net premiums earned                             |  |                     | 433,885 |   |                            |   | 91,272  |           |  |              | 525,157  |   |  |   | 176,631 |   |  |   |       |  |   | 701,788  |  
|Net investment income                           |  |                     |        |   |                            |   |        |           |  |              |         |   |  |   |        |   |  |   | 58,648 |  |   | 58,648   |  
|Net gains on sales of alternative investments   |  |                     |        |   |                            |   |        |           |  |              |         |   |  |   |        |   |  |   | 24,891 |  |   | 24,891   |  
|Net realized gains on sales of fixed maturities |  |                     |        |   |                            |   |        |           |  |              |         |   |  |   |        |   |  |   | 4,121  |  |   | 4,121    |  
|Other income                                    |  |                     |        |   |                            |   |        |           |  |              |         |   |  |   |        |   |  |   | 3,663  |  |   | 3,663    |  
|                                                |  |                     |         |   |                            |   |         |           |  |              |          |   |  |   |         |   |  |   |        |  |   |          |  
|Total revenues                                  |  |                     | 433,885 |   |                            |   | 91,272  |           |  |              | 525,157  |   |  |   | 176,631 |   |  |   | 91,323 |  |   | 793,111  |  
|                                                |  |                     |         |   |                            |   |         |           |  |              |          |   |  |   |         |   |  |   |        |  |   |          |  
|Losses and benefits                             |  |                     | 337,914 |   |                            |   | 67,253  |           |  |              | 405,167  |   |  |   | 195,739 |   |  |   |       |  |   | 600,906  |  
|Acquisition costs                               |  |                     | 82,186  |   |                            |   | 2,666   |           |  |              | 84,852   |   |  |   | 2,163   |   |  |   |       |  |   | 87,015   |  
|Interest expense                                |  |                     |        |   |                            |   |        |           |  |              |         |   |  |   |        |   |  |   | 23,916 |  |   | 23,916   |  
|General and administrative expenses             |  |                     | 8,664   |   |                            |   | 4,307   |           |  |              | 12,971   |   |  |   | 3,034   |   |  |   | 18,659 |  |   | 34,664   |  
|                                                |  |                     |         |   |                            |   |         |           |  |              |          |   |  |   |         |   |  |   |        |  |   |          |  
|Total losses and expenses                       |  |                     | 428,764 |   |                            |   | 74,226  |           |  |              | 502,990  |   |  |   | 200,936 |   |  |   | 42,575 |  |   | 746,501  |  
|                                                |  |                     |         |   |                            |   |         |           |  |              |          |   |  |   |         |   |  |   |        |  |   |          |  
|Net income (loss)                               |  | $                   | 5,121   |   |                            | $ | 17,046  |           |  | $            | 22,167   |   |  | $ | (24,305 | ) |  | $ | 48,748 |  | $ | 46,610   |  
|                                                |  |                     |         |   |                            |   |         |           |  |              |          |   |  |   |         |   |  |   |        |  |   |          |  
|Loss Ratio                                      |  |                     | 77.9    | % |                            |   | 73.7    | %         |  |              | 77.2     | % |  |   |         |   |  |   |        |  |   |          |  
|Combined Ratio                                  |  |                     | 98.8    | % |                            |   | 81.3    | %         |  |              | 95.8     | % |  |   |         |   |  |   |        |  |   |          |  



The Company currently
services clients from two geographic regions: North America and Europe.



Financial information relating to gross premiums written and reinsurance premiums ceded by geographic region for the nine months ended September 30, 2005 and 2004 were as follows:



|                                |  |                                                  |          |   |      |   |         |  
|------------------------------- |  | ------------------------------------------------ | -------- | - | ---- | - | ------- | -
|                                |  | Nine Months EndedSeptember 30,                   |         
|                                |  | 2005                                             |          |   | 2004 |  
|                                |  | (Expressed in thousands ofUnited States Dollars) |         
|North America                   |  | $                                                | 556,173  |   |      | $ | 543,040 |  
|Europe                          |  |                                                  | 432,670  |   |      |   | 360,993 |  
|Reinsurance CededNorth America |  |                                                  | (112,095 | ) |      |   | (91,303 | )
|Reinsurance CededEurope        |  |                                                  | (32,627  | ) |      |   | (28,827 | )
|                                |  |                                                  |          |   |      |   |         |  
|                                |  | $                                                | 844,121  |   |      | $ | 783,903 |  
|                                |  |                                                  |          |   |      |   |         |  



Three customers
accounted for 14.5%, 9.3% and 6.6%, respectively, of the Companys gross premiums written during the nine months ended September 30, 2005. Three customers accounted for 19.3%, 17.3% and 12.5%, respectively, of the Companys gross
premiums written during the nine months ended September 30, 2004.



5.
EQUITY CAPITAL



Max Re Capitals Board of Directors
declared a dividend of $0.03 per share on February 4, 2005 and $0.05 per share on each of April 28, 2005 and July 29, 2005, payable to shareholders of record on February 14, 2005, May 13, 2005 and August 12, 2005,
respectively.



The Company repurchased an aggregate of 335,000
common shares at an average cost of $21.97 per share for a total consideration of $7.4 million during the nine months ended September 30, 2005. As of September 30, 2005, the remaining authorization under the Companys share repurchase
program was approximately $36.0 million.



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6. 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 in which Max Re has a 7.5% equity investment. Although the
variable quota share 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.



|                                   |  |                                                  |         |      |   |        
|---------------------------------- |  | ------------------------------------------------ | ------- | ---- | - | -------
|                                   |  | September 30,                                   
|                                   |  | 2005                                             |         | 2004
|                                   |  | (Expressed in thousands ofUnited States Dollars)
|Losses recoverable from reinsurers |  | $                                                | 180,893 |      | $ | 192,650
|Prepaid reinsurance premiums       |  |                                                  | 750     |      |   | 13,178 
|Deposit liabilities                |  |                                                  | 36,295  |      |   | 43,133 
|Funds withheld from reinsurers     |  |                                                  | 193,272 |      |   | 199,266
|Reinsurance balances payable       |  |                                                  | 8,941   |      |   | 7,755  
|Reinsurance premiums ceded         |  |                                                  | 10,872  |      |   | 18,245 
|Earned premiums ceded              |  |                                                  | 16,872  |      |   | 22,662 
|Other income                       |  |                                                  | 3,495   |      |   | 3,552  
|Losses and benefits                |  |                                                  | 16,743  |      |   | 32,445 
|Interest expense                   |  |                                                  | 5,470   |      |   | 6,515  



The variable quota
share retrocession agreement with Grand Central Re is principally collateralized on a funds withheld basis. The rate of return on the funds withheld is based on the average of two total return interest rate indices. The interest expense recognized
by the Company will fluctuate 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, in effect marking to market the funds
withheld balance.



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



Alternative Investment Managers



Moore Capital Management, LLC (together with its affiliates hereinafter
referred to as Moore Capital), which is affiliated with certain shareholders and a director of Max Re Capital, served as fund of funds advisor for Max Re Diversified until April 1, 2004, when such management obligations were
assigned, with the consent of the Company, to Alstra Capital Management, LLC (Alstra), a company which was a subsidiary of Moore Capital at the time of the assignment. In August 2005, Alstras affiliation with Moore Capital changed
from being a subsidiary of Moore Capital to Moore Capital being a minority, non-controlling shareholder of Alstra.



For the nine months ended September 30, 2005 and 2004, Moore Capital earned aggregate management and incentive fees of $5.5 million and $1.6 million,
respectively, in respect of Max Re Diversifieds assets invested in underlying funds managed by Moore Capital. In addition, as the fund of funds advisor for Max Re Diversified, Alstra received $5.8 million and $4.7 million in fees for the nine
months ended September 30, 2005 and 2004, respectively.



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



7. COMMITMENTS



Credit Facilities



The Company has three credit facilities as of September 30, 2005. The Companys primary credit facility, entered into in June 2005, provides
$450.0 million of letter 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



10



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##### Table of Contents

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 portion of the facility to 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 September 30, 2005 and December 31, 2004, letters of credit totaling $248.8 million and $225.0 million, respectively, were issued and outstanding under these
facilities. Fixed maturities and cash equivalents with a fair value of $275.7 million at September 30, 2005 were pledged as collateral for these letters of credit. As of September 30, 2005, there were no unsecured loans issued under the
existing facility.



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 September 30, 2005 and December 31, 2004, letters of
credit totaling $44.3 million and $40.1 million, respectively, were issued by HVB under this facility. Fixed maturities and cash equivalents with a fair value of $53.7 million at September 30, 2005 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 September 30, 2005 letters of credit totaling $20.0 million were issued by ING under this facility. Fixed maturities and cash equivalents with a fair
value of $22.5 million at September 30, 2005 were pledged as collateral for these letters of credit.



Each of the letter of credit facilities requires that the Company and/or certain of its subsidiaries comply with certain substantially similar covenants,
including a minimum consolidated tangible net worth, a minimum insurer financial strength rating and restrictions on the payment of dividends. The Company was in compliance with all the covenants of each of its letter of credit facilities at
September 30, 2005.



8. STOCK-BASED COMPENSATION



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



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



|                                                                                                    |  |                                                                            |         |   |                                |   |        |      |  |   |        |   |  |   |        |  
|--------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------- | ------- | - | ------------------------------ | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                                                                                    |  | Three Months EndedSeptember 30,                                            |         |   | Nine Months EndedSeptember 30, |  
|                                                                                                    |  | 2005                                                                       |         |   | 2004                           |   |        | 2005 |  |   | 2004   |  
|                                                                                                    |  | (Expressed in thousands of United Statesdollars, except per share amounts) |        
|Net income (loss), as reported                                                                      |  | $                                                                          | (41,002 | ) |                                | $ | (9,022 | )    |  | $ | 18,124 |   |  | $ | 46,610 |  
|Add: Stock-based employee compensation expense included in reported net income (loss)               |  |                                                                            | 162     |   |                                |   | 145    |      |  |   | 574    |   |  |   | 417    |  
|Deduct: Stock-based employee compensation expense determined under fair-value method for all awards |  |                                                                            | (454    | ) |                                |   | (684   | )    |  |   | (1,577 | ) |  |   | (2,154 | )
|                                                                                                    |  |                                                                            |         |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Pro forma net income (loss)                                                                         |  | $                                                                          | (41,294 | ) |                                | $ | (9,561 | )    |  | $ | 17,121 |   |  | $ | 44,873 |  
|                                                                                                    |  |                                                                            |         |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Earnings (loss) per common share, as reported                                                       |  |                                                                            |         |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Basic                                                                                               |  | $                                                                          | (0.89   | ) |                                | $ | (0.20  | )    |  | $ | 0.39   |   |  | $ | 1.02   |  
|Diluted                                                                                             |  |                                                                            | (0.89   | ) |                                |   | (0.20  | )    |  |   | 0.36   |   |  |   | 0.96   |  
|Earnings (loss) per common share, pro forma                                                         |  |                                                                            |         |   |                                |   |        |      |  |   |        |   |  |   |        |  
|Basic                                                                                               |  | $                                                                          | (0.90   | ) |                                | $ | (0.21  | )    |  | $ | 0.37   |   |  | $ | 0.98   |  
|Diluted                                                                                             |  |                                                                            | (0.90   | ) |                                |   | (0.21  | )    |  |   | 0.34   |   |  |   | 0.92   |  



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9. SUBSEQUENT EVENT



The Company filed an unallocated universal shelf registration statement with the Securities and Exchange Commission (the SEC) on
September 26, 2005, which the SEC declared effective on October 4, 2005. The securities registered under the shelf registration statement for possible future sales include up to $635.9 million of common shares, preferred shares and various
types of debt securities. The shelf registration statement also includes common shares held by Captial Z Investments, L.P. (Cap Z) and common shares issuable upon warrants owned by Cap Z. The common shares held by and issuable upon
exercise of warrants by Cap Z account for $135.9 million of the $635.9 million of securities registered under the shelf registration statement, with the remaining $500.0 million available for securities offerings by the Company. To effect any such
sales from time to time, Max Re Capital will file one or more supplements to the registration statement, which will provide details of any proposed offering or sale.



On October 11, 2005, the Company filed a supplement to the registration statement and, on October 17, 2005, sold
11.0 million common shares at $23.50 per share in an underwritten public offering. The Company received net proceeds of approximately $246.0 million.



|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 and nine month periods ended September 30, 2005 compared to the
three and nine month periods ended September 30, 2004 and our financial condition as of September 30, 2005. 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 Exhibit 99.1 to this Form 10-Q.



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 management. These forward-looking statements are subject to risks, uncertainties and assumptions. Factors that could cause such forward-looking statements not to be realized (which are described in more detail included or
incorporated by reference herein and in documents filed by us with the Securities and Exchange Commission) include, without limitation, acceptance in the market of our products, general economic conditions and conditions specific to the reinsurance
and insurance markets in which we operate, pricing competition, the amount of underwriting capacity from time to time in the market, material fluctuations in interest 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. Since 2001, the property and casualty market has presented more opportunities to us than the life and annuity market due to a shortage of reinsurance capacity in the property and
casualty market, resulting in improvement in premium rates, terms and conditions. However, in the first nine months of 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.



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We anticipate that hurricanes Katrina and Rita will result in improved premium rates, terms and conditions in the property and property catastrophe
reinsurance and insurance markets. As a result we are planning to grow our short-tail property and property catastrophe reinsurance and insurance premium volume, including through an expansion of the underwriting of property and property catastrophe
reinsurance. With respect to the types of life and annuity contracts we offer, we have seen more opportunities in the market and have increased production in 2005 compared to 2004. We remain cautious about whether these opportunities will continue
to result in additional business for us in the near term.



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 12
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 September 30, 2005, the allocation of invested assets was approximately 69.0% in cash and fixed maturities and 31.0% in alternative investments.



Our principal operating subsidiary is Max Re. At September 30, 2005, Max
Re had $918.6 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.



Executive Summary



Our financial results for nine months ended September 30, 2005 were significantly impacted by Hurricane Katrina and, to a lesser extent, Hurricane
Rita and other natural catastrophes. As a result, our overall property and casualty underwriting results produced a 108.1% combined ratio (total losses and expenses as a percentage of net premiums earned) compared to 95.8% in the nine months ended
September 30, 2004. We recognized approximately $100.0 million in underwriting losses as a result of natural catastrophes and a further $12.0 million in reinsurance private equity investment losses associated with natural catastrophes.
Alternative investments, which produced a 4.50% return for the nine months ended September 30, 2005 compared to 2.73% for the nine months ended September 30, 2004, have partially offset our unfavorable underwriting results in 2005 although
the alternative investment performance was below our expectation for the nine month period.



During the nine months ended September 30, 2005, our total gross premiums written increased 9.4% compared with the nine months ended September 30, 2004. Our property and casualty reinsurance volume declined,
while our property and casualty insurance and life and annuity reinsurance volume showed strong growth.



Gross premiums written for the property and casualty reinsurance segment decreased by 15.1% to $474.4 million for the nine months ended September 30,
2005 compared to $558.5 million for the nine months ended September 30, 2004. The decrease in gross premiums written in this segment is attributable to the non-renewal of four reinsurance contracts with North American based clients with an
aggregate premium of approximately $225.0 million in 2004.



We
expanded our customer base and had success with renewals in the property and casualty insurance segment, resulting in a 45.8% increase in premiums written for the nine months ended September 30, 2005 compared to the nine months ended
September 30, 2004.



Gross premiums written for the life
and annuity reinsurance segment increased to $269.1 million during the nine months ended September 30, 2005 compared to $177.3 million during the same period in 2004, principally due to increased production during the nine months ended
September 30, 2005. We recognized $293.1 million in benefit expenses during the nine months ended September 30, 2005 compared to $195.7 million for the nine months ended September 30, 2004. The increase in benefits is principally due
to the life and annuity transactions written during the nine months ended September 30, 2005.



We continue to emphasize casualty lines in our property and casualty reinsurance and insurance segments, with the largest portion of gross premiums
written coming from professional liability and general liability. We intend to continue to diversify our property and casualty reinsurance and insurance underwriting by writing business with a greater number of clients and by varying the underlying
exposures assumed. We are continually reviewing our business strategy in relation to the underwriting environment and we expect that the recent hurricanes in the Gulf Coast of the United States will result in a more attractive market environment for
short-tail property and property catastrophe reinsurance and insurance. In order to be adequately capitalized to enable us to take advantage of these anticipated opportunities we sold 11.0 million common shares



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on October 17, 2005 at a price of $23.50 per share in an underwritten public offering. This resulted in net proceeds of approximately $246.0 million to
Max Re Capital.



We operate in a business where we expect
volatility in our underwriting results arising from our reinsurance and insurance businesses. 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. During the nine months ended September 30, 2005 the insurance industry experienced
Hurricane Katrina, likely to be the most costly natural disaster ever seen in the property and casualty industry, and Hurricane Rita, which together have resulted in an industry estimated $40.0 billion to $70.0 billion in insured losses. We believe
that events such as these demonstrate that our risk management and diversification strategy is operating effectively, as we recorded $18.1 million in net income for the nine months ended September 30, 2005, despite an aggregate $112.0 million
negative impact to net income from natural catastrophes. The $112.0 million negative impact is composed of $60.0 million in property and casualty reinsurance losses, $40.0 million of property and casualty insurance losses and $12.0 million in
investment losses recorded under the equity method of accounting for our investment in DaVinciRe Holdings Ltd and its operating subsidiary DaVinci Reinsurance Ltd. (DaVinci).



Losses and benefits represented our largest expense and accounted for 66.6% of total liabilities at September 30, 2005.
We establish loss expenses and reserves using a combination of loss reserving techniques and actuarial methods. Loss expenses and reserves are reviewed regularly to reflect new information that we receive. 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 independent actuaries to support managements estimates. As a result of settling certain contracts with clients
and new information received during the nine months ended September 30, 2005, we recognized approximately $24.1 million in adverse development on prior years reinsurance reserves. The adverse development includes $29.6 million in relation to
one contract. The notification of additional losses on this contract triggered additional premiums written and ceded, together with interest on such premiums, in the net amount of $33.0 million.



Net income for the nine months ended September 30, 2005 was $18.1
million compared to $46.6 million for the nine months ended September 30, 2004. The results for the nine months ended September 30, 2005 were principally attributable to the losses associated with Hurricanes Katrina and Rita offset by
higher income from our fixed income and alternative investment portfolios compared to the nine months ended September 30, 2004.



The New York State Attorney General and other regulatory authorities have launched investigations into broker conduct and the accounting of certain types
of finite risk reinsurance transactions. We are not a party to any related litigation and have not received any subpoena or information requests. Moreover, we conducted an internal review of our business arrangements and we have discovered no
evidence that we were involved in the type of conduct that is the subject of the investigations. It is not possible to predict the ultimate effect of the investigations or their impact on the reinsurance industry or our business. During the nine
months ended September 30, 2005 we settled all outstanding balances in relation to Placement Service Agreements (PSAs) with insurance brokers, which we had terminated with effect from September 30, 2004.



Our investments during the nine months ended September 30, 2005 produced
a total return of 3.61% compared to 3.18% for the nine months ended September 30, 2004. The cash and fixed maturities portfolio produced a total return of 3.19% during the nine months September 30, 2005 compared to 3.34% for the nine
months ended September 30, 2004. The decrease in total return was driven by changes in market interest rates that led to a decrease in unrealized holding gains on fixed maturities, which are a component of accumulated other comprehensive
income. During the nine months ended September 30, 2005, our alternative investments generated a 4.50% rate of return compared to a 2.73% rate of return for the same period in 2004. In both nine month periods the return of the alternative
investment portfolio has been negatively impacted by our private equity reinsurance investment in DaVinci, which experienced investment losses of approximately $12.0 million from hurricanes Katrina and other natural catastrophes in 2005 and
approximately $15.0 million from hurricanes Charley, Frances, Ivan and Jeanne in 2004. DaVinci is a property catastrophe reinsurer and, therefore, it is expected that losses will be incurred during periods where there are severe or frequent
catastrophes.



We continually assess our liquidity needs by
monitoring and evaluating new business prospects and opportunities and the development of our existing operations. During the nine months ended September 30, 2005, we generated $349.9 million of cash from operations and invested $314.9 million
in fixed maturities. We expect to continue to generate positive operating cash flow through premium receipts and investment returns, which will be partially offset by paid losses on reinsurance and insurance obligations, as well as operating
expenses. Further, we have raised approximately $246.0 million of additional capital in October 2005 in connection with a public offering of our common shares which we intend to use to increase the capital and surplus of our operating subsidiaries
to support expanded underwriting capacity, particularly in property and property catastrophe reinsurance and insurance lines, in 2006 and for general corporate purposes.



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Drivers of Profitability



Revenues



We derive operating revenues from premiums from our reinsurance and insurance business. 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 unique 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 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. We recognize realized capital gains or losses on our fixed maturities investments at the time of
sale. The realized capital gains or losses reflect the results of changing market conditions, including changes in market interest rates and changes in the markets perception of the credit quality of our fixed maturities holdings. 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.



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. The acquisition costs are net of ceding commissions associated with premiums ceded to our quota share
partners 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. We defer and amortize these costs over the period in which the
related premiums are earned.



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 and other operating costs. These costs are primarily fixed in nature and do not vary with the amount of premiums written.



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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 and nine months ended September 30, 2005. We
believe that the critical accounting policies set forth in our Form 10-K, filed on February 17, 2005, 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. We consider the property and casualty reinsurance and the property and casualty insurance segments
separately, following organizational changes that were made in the second quarter of 2005. Previously, we viewed reinsurance and insurance as being two products within the property and casualty segment. 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.



Three months ended September 30, 2005 compared to the three months ended September 30, 2004



Results of Underwriting Operations



Property and Casualty Reinsurance Segment



|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|----------------------------------- |  | ------------------------------------ | ----- | - | -------- | ----- | -- | ------------------------------------ | - | ----- | -
|                                    |  | Three Months EndedSeptember 30, 2005 |       |   | % change |       |    | Three Months EndedSeptember 30, 2004 |  
|                                    |  | In millions of US Dollars            |      
|Gross premiums written              |  | $                                    | 126.1 |   |          | 155.3 | %  |                                      | $ | 49.4  |  
|Reinsurance premiums ceded          |  |                                      | (23.6 | ) |          | 306.9 | %  |                                      |   | (5.8  | )
|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|Net premiums written                |  | $                                    | 102.5 |   |          | 135.1 | %  |                                      | $ | 43.6  |  
|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|Net premiums earned(a)              |  | $                                    | 144.9 |   |          | 15.5  | %  |                                      | $ | 125.5 |  
|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|Losses(b)                           |  |                                      | 173.2 |   |          | 76.7  | %  |                                      |   | 98.0  |  
|Acquisition costs                   |  |                                      | 19.7  |   |          | (20.2 | )% |                                      |   | 24.7  |  
|General and administrative expenses |  |                                      | 3.5   |   |          | 25.0  | %  |                                      |   | 2.8   |  
|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|Total losses and expenses(c)        |  | $                                    | 196.4 |   |          | 56.5  | %  |                                      | $ | 125.5 |  
|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|Net underwriting income (loss)      |  | $                                    | (51.5 | ) |          | n/a   |    |                                      | $ | 0.0   |  
|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|Loss ratio(b)/(a)                   |  |                                      | 119.6 | % |          |       |    |                                      |   | 78.1  | %
|Combined ratio(c)/(a)               |  |                                      | 135.5 | % |          |       |    |                                      |   | 100.0 | %



The
loss ratio (loss ratio) is calculated by dividing losses (shown as (b)) by net premiums 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 September 30, 2005 were $126.1 million compared to $49.4 million for the three months ended September 30, 2004, an increase of 155.3%. This increase included additional
premiums of $54.5 million in relation to one contract written in a prior year and is recorded in the period that additional losses were notified to us. 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.



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Reinsurance premiums ceded. Reinsurance premiums ceded for property and casualty reinsurance for
the three months ended September 30, 2005 were $23.6 million compared to $5.8 million for the three months ended September 30, 2004, an increase of 306.9%. The increase included $21.5 million of reinsurance premiums ceded, which were
directly related to the $54.5 million of additional premiums written on one contract written in a prior year, as described above. Reinsurance premiums ceded were principally related to our purchase of specific reinsurance to manage the risks
associated with our traditional 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 increased by 15.5% to $144.9 million for the three months ended September 30, 2005. The increase is principally attributed to $33.0 million of
additional net premiums written and earned on one contract written in a prior year.



Losses.Losses relating to property and casualty reinsurance were $173.2 million for the three months ended September 30, 2005 compared to $98.0 million for the three months ended September 30, 2004,
an increase of 76.7%, which is greater than the increase in our premiums earned for this segment. The losses for the three months ended September 30, 2005 include $60.0 million of losses stemming from the hurricanes in the Gulf Coast of the
United States and $29.6 million of net losses in relation to additional losses notified on one contract written in a prior year. The loss ratio for our reinsurance segment for the three months ended September 30, 2005 was 119.6% compared to
78.1% for the three months ended September 30, 2004.



Acquisition costs.Acquisition costs were $19.7 million for the three months ended September 30, 2005 compared to $24.7 million for the three months ended September 30, 2004, a decrease of 20.2%. The decrease in acquisition
costs for the three months ended September 30, 2005 is due to lower average acquisition costs on premiums earned and by the $33.0 million of additional net premiums written and earned on one contract written in a prior year which did not
attract any further acquisition costs. 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 $3.5 million for the three months ended September 30, 2005
compared to $2.8 million for the three months ended September 30, 2004, an increase of 25.0%. The increase resulted principally from ongoing personnel costs associated with our reinsurance staff. The general and administrative expense to net
premiums earned ratio was 2.4% for the three months ended September 30, 2005 compared to 2.2% for the three months ended September 30, 2004.



Net underwriting income (loss).Net underwriting loss attributable to the property and casualty reinsurance segment for the three months ended
September 30, 2005 was $(51.5) million compared to $0.0 million of income for the three months ended September 30, 2004. The results for the three months ended September 30, 2005 were principally attributable to the $60.0 million of
net losses stemming from the hurricanes in the Gulf Coast of the United States.



Property and Casualty Insurance Segment



|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|----------------------------------- |  | ------------------------------------ | ----- | - | -------- | ----- | -- | ------------------------------------ | - | ----- | -
|                                    |  | Three Months EndedSeptember 30, 2005 |       |   | % change |       |    | Three Months EndedSeptember 30, 2004 |  
|                                    |  | In millions of US Dollars            |      
|Gross premiums written              |  | $                                    | 70.2  |   |          | 24.5  | %  |                                      | $ | 56.4  |  
|Reinsurance premiums ceded          |  |                                      | (24.2 | ) |          | 1.7   | %  |                                      |   | (23.8 | )
|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|Net premiums written                |  | $                                    | 46.0  |   |          | 41.1  | %  |                                      | $ | 32.6  |  
|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|Net premiums earned(a)              |  | $                                    | 45.8  |   |          | 49.2  | %  |                                      | $ | 30.7  |  
|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|Losses(b)                           |  |                                      | 73.6  |   |          | 230.0 | %  |                                      |   | 22.3  |  
|Acquisition costs                   |  |                                      | 0.1   |   |          | (83.3 | )% |                                      |   | 0.6   |  
|General and administrative expenses |  |                                      | 2.3   |   |          | 76.9  | %  |                                      |   | 1.3   |  
|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|Total losses and expenses(c)        |  | $                                    | 76.0  |   |          | 214.1 | %  |                                      | $ | 24.2  |  
|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|Net underwriting income (loss)      |  | $                                    | (30.2 | ) |          | n/a   |    |                                      | $ | 6.5   |  
|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|Loss ratio(b)/(a)                   |  |                                      | 160.7 | % |          |       |    |                                      |   | 72.6  | %
|Combined ratio(c)/(a)               |  |                                      | 165.9 | % |          |       |    |                                      |   | 78.8  | %



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Gross premiums written.Gross premiums written for the property and casualty insurance segment for
the three months ended September 30, 2005 were $70.2 million compared to $56.4 million for the three months ended September 30, 2004, an increase of 24.5%. The increase is the result of the continued expansion of this segment, including
new business coming from the addition of our property underwriting team. Typically, our insurance business is written on an individual risk excess of loss basis with contractually defined premiums rather than estimates, which results in less
material premium adjustments than our property and casualty reinsurance business.



Reinsurance premiums ceded. Reinsurance premiums ceded for insurance for the three months ended September 30, 2005 were $24.2 million compared to $23.8 million for the three months ended September 30,
2004, an increase of 1.7%. 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. 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
49.2% to $45.8 million for the three months ended September 30, 2005. The increase is attributable to our expansion of insurance over the past three years and reflects the earning pattern of a larger and increasingly mature portfolio of
insurance contracts.



Losses.Losses relating to
insurance were $73.6 million, including $40.0 million in relation to the hurricanes in the Gulf Coast of the United States, for the three months ended September 30, 2005 compared to $22.3 million for the three months ended September 30,
2004, an increase of 230.0%. The loss ratio for insurance for the three months ended September 30, 2005 was 160.7% compared to 72.6% for the same period in 2004. As our portfolio of insurance contracts matures and we receive more reports and
updates of losses, we intend to continue to refine our estimated reserves. Our present estimate of reserves are based on client specific historic loss data, supplemented with industry loss data and reported losses.



Acquisition costs.Acquisition costs were $0.1 million for the three
months ended September 30, 2005 compared to $0.6 million for the three months ended September 30, 2004. 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 September 30, 2005 and 2004 consisted principally 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 $2.3 million for the three months ended September 30, 2005
compared to $1.3 million for the three months ended September 30, 2004, an increase of 76.9%. The increase resulted principally from expenses associated with additional staff, including a new and expanding property underwriting team. The
general and administrative expense to net premiums earned ratio was 5.0% for the three months ended September 30, 2005 compared to 4.2% for the three months ended September 30, 2004.



Net underwriting income (loss).Net underwriting loss attributable to
the property and casualty insurance segment for the three months ended September 30, 2005 was $(30.2) million compared to $6.5 million of income for the three months ended September 30, 2004. The net loss for the three months ended
September 30, 2005 was principally attributable to the $40.0 million of losses recorded in relation to hurricanes Katrina and Rita.



Life and Annuity Reinsurance Segment



|                                    |  |                                       |       |   |          |      |   |                                       |   |       |  
|----------------------------------- |  | ------------------------------------- | ----- | - | -------- | ---- | - | ------------------------------------- | - | ----- | -
|                                    |  | Three Months Ended September 30, 2005 |       |   | % change |      |   | Three Months Ended September 30, 2004 |  
|                                    |  | In millions of US Dollars             |      
|Gross premiums written              |  | $                                     | 91.8  |   |          |      |   |                                       | $ | 175.0 |  
|Reinsurance premiums ceded          |  |                                       | (    | ) |          |      |   |                                       |   | (0.2  | )
|                                    |  |                                       |       |   |          |      |   |                                       |   |       |  
|Net premiums written                |  | $                                     | 91.8  |   |          |      |   |                                       | $ | 174.8 |  
|                                    |  |                                       |       |   |          |      |   |                                       |   |       |  
|Net premiums earned                 |  | $                                     | 91.8  |   |          |      |   |                                       | $ | 174.8 |  
|                                    |  |                                       |       |   |          |      |   |                                       |   |       |  
|Benefits                            |  |                                       | 100.2 |   |          |      |   |                                       |   | 178.9 |  
|Acquisition costs                   |  |                                       | 0.8   |   |          | 33.3 | % |                                       |   | 0.6   |  
|General and administrative expenses |  |                                       | 0.9   |   |          | 12.5 | % |                                       |   | 0.8   |  
|                                    |  |                                       |       |   |          |      |   |                                       |   |       |  
|Total benefits and expenses         |  | $                                     | 101.9 |   |          |      |   |                                       | $ | 180.3 |  
|                                    |  |                                       |       |   |          |      |   |                                       |   |       |  
|Net underwriting loss               |  | $                                     | (10.1 | ) |          | 83.6 | % |                                       | $ | (5.5  | )
|                                    |  |                                       |       |   |          |      |   |                                       |   |       |  



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##### Table of Contents

The nature of life and annuity 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 necessarily representative of future trends.



Gross premiums written. Gross premiums written for the life and annuity reinsurance segment for the three months ended September 30, 2005 were $91.8 million compared to $175.0 million for the three months ended
September 30, 2004. The gross premiums written during the three months ended September 30, 2005 was entirely from a European based client. 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 segment for each of the three months ended September 30, 2005 and 2004 were $Nil and $0.2 million, respectively. The life and annuity premiums
ceded relates to the quota share agreement with Grand Central Re. Effective January 2004, Grand Central Re ceased accepting new business and the premiums ceded for the three months ended September 30, 2004 relate to adjustments to premiums
ceded on contracts written in prior years.



Net premiums
earned.Life and annuity business written during each of the three month periods ended September 30 was fully earned.



Benefits.Benefits relating to life and annuity reinsurance were $100.2 million for the three months ended September 30, 2005 compared to
$178.9 million for the three months ended September 30, 2004. The decrease was principally due to the recognition of losses associated with the premiums written and earned in the respective periods.



Acquisition costs.Acquisition costs were $0.8 million for the three
months ended September 30, 2005 compared to $0.6 million for the three months ended September 30, 2004. The type of life and annuity transactions that we bind typically have low acquisition costs.



General and administrative expenses.General and administrative
expenses were $0.9 million for the three months ended September 30, 2005 compared to $0.8 million for the three months ended September 30, 2004.



Net underwriting loss.Net underwriting loss attributable to the life and annuity segment for the three months ended September 30, 2005 was
$10.1 million compared to $5.5 million for the three months ended September 30, 2004. The results are driven by the accretion of the life and annuity benefits over time. Although we expect to incur underwriting losses in connection with our
life and annuity contracts, we seek to achieve sufficient investment income from premiums received to fund benefit payments as they occur and provide for a profit margin.



Corporate Function



|                                               |  |                                       |      |   |          |       |    |                                       |   |       |  
|---------------------------------------------- |  | ------------------------------------- | ---- | - | -------- | ----- | -- | ------------------------------------- | - | ----- | -
|                                               |  | Three Months Ended September 30, 2005 |      |   | % change |       |    | Three Months Ended September 30, 2004 |  
|                                               |  | In millions of US Dollars             |     
|Net investment income                          |  | $                                     | 27.0 |   |          | 34.3  | %  |                                       | $ | 20.1  |  
|Net gains (losses) on alternative investments  |  |                                       | 35.6 |   |          | n/a   |    |                                       |   | (14.6 | )
|Net realized gains on sale of fixed maturities |  |                                       | 1.6  |   |          | 77.8  | %  |                                       |   | 0.9   |  
|Other income                                   |  |                                       | 1.1  |   |          | (15.4 | )% |                                       |   | 1.3   |  
|Interest expense                               |  |                                       | (6.7 | ) |          | (44.2 | )% |                                       |   | (12.0 | )
|General and administrative expenses            |  |                                       | (7.8 | ) |          | 36.8  | %  |                                       |   | (5.7  | )
|                                               |  |                                       |      |   |          |       |    |                                       |   |       |  
|Net income (loss)                              |  | $                                     | 50.8 |   |          | n/a   |    |                                       | $ | (10.0 | )
|                                               |  |                                       |      |   |          |       |    |                                       |   |       |  



Net investment
income.Net investment income, excluding realized and unrealized gains and losses, for the three months ended September 30, 2005 increased $6.9 million to $27.0 million compared to $20.1 million for the three months ended September 30,
2004, an increase of 34.3%. The increase was principally attributable to the growth in the fixed maturities portfolio from $1,902.7 million at September 30, 2004 to $2,463.4 million at September 30, 2005, resulting from cash flow from
operations since September 30, 2004. The average annualized investment yield on the cash, fixed maturities and funds withheld by clients for the three months ended September 30, 2005 was 4.15% compared to 3.99% for the three months ended
September 30, 2004.



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##### Table of Contents

Net gains (losses) on alternative investments.Net gains on the alternative investment portfolio
were $35.6 million, or 3.00%, including a loss of $11.9 million from our private equity reinsurance investments, for the three months ended September 30, 2005 compared to $(14.6) million, or (1.39)%, including a loss of $15.2 million from our
private equity reinsurance investments, for the three months ended September 30, 2004. The Max Re Diversified portfolio produced a 4.22% return for the three months ended September 30, 2005 with all of the investment strategies producing
positive returns. Our investment in DaVinci has been impacted by losses from Hurricanes Katrina and Rita in the three months ended September 30, 2005 and by losses from Hurricanes Charley, Frances, Ivan and Jeanne in the three months ended
September 30, 2004. DaVinci is a property catastrophe reinsurer and therefore, it is expected that losses will be incurred during periods where there are severe or a large number of catastrophes.



Net realized gains on sale of fixed maturities. Our fixed maturities
investment strategy is not intended to generate realized gains and losses as more fully discussed in the comparison of the nine month results. The realized gains in the three months ended September 30, 2005 and September 30, 2004 of $1.6
million and $0.9 million, respectively, are the result of the sale of fixed maturities in connection with normal portfolio rebalancing transactions.



Interest expense. Interest expense was $6.7 million for the three months ended September 30, 2005 compared to $12.0 million for the three
months ended September 30, 2004. Interest expense includes $0.6 million of interest income in relation to the Grand Central Re quota share funds withheld balances for the three months ended September 30, 2005, compared to interest expense
of $5.9 million for the three months ended September 30, 2004. The interest expense on the Grand Central Re funds withheld is based on the average of two total return fixed maturity indices, which had a negative total return for the three
months ended September 30, 2005, compared to a positive return for the three months ended September 30, 2004.



General and administrative expenses.General and administrative expenses were $7.8 million for the three months ended September 30, 2005
compared to $5.7 million for the three months ended September 30, 2004. The increase in general and administrative costs results principally from increased personnel and related costs. Our total general and administrative expenses to net
premiums earned ratio was 5.1% for the three months ended September 30, 2005 compared to 3.2% for the three months ended September 30, 2004.



Nine months ended September 30, 2005 compared to nine months ended September 30, 2004



Results of Underwriting Operations



Property and Casualty Reinsurance Segment



|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|----------------------------------- |  | ------------------------------------ | ----- | - | -------- | ----- | -- | ------------------------------------ | - | ----- | -
|                                    |  | Nine Months Ended September 30, 2005 |       |   | % change |       |    | Nine Months Ended September 30, 2004 |  
|                                    |  | In millions of US Dollars            |      
|Gross premiums written              |  | $                                    | 474.4 |   |          | (15.1 | )% |                                      | $ | 558.5 |  
|Reinsurance premiums ceded          |  |                                      | (47.7 | ) |          | 8.2   | %  |                                      |   | (44.1 | )
|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|Net premiums written                |  | $                                    | 426.7 |   |          | (17.0 | )% |                                      | $ | 514.4 |  
|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|Net premiums earned(a)              |  | $                                    | 388.1 |   |          | (10.6 | )% |                                      | $ | 433.9 |  
|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|Losses(b)                           |  |                                      | 347.4 |   |          | 2.8   | %  |                                      |   | 337.9 |  
|Acquisition costs                   |  |                                      | 58.8  |   |          | (28.5 | )% |                                      |   | 82.2  |  
|General and administrative expenses |  |                                      | 11.0  |   |          | 26.4  | %  |                                      |   | 8.7   |  
|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|Total losses and expenses(c)        |  | $                                    | 417.2 |   |          | (2.7  | )% |                                      | $ | 428.8 |  
|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|Net underwriting income (loss)      |  | $                                    | (29.0 | ) |          | n/a   |    |                                      | $ | 5.1   |  
|                                    |  |                                      |       |   |          |       |    |                                      |   |       |  
|Loss ratio(b)/(a)                   |  |                                      | 89.5  | % |          |       |    |                                      |   | 77.9  | %
|Combined ratio(c)/(a)               |  |                                      | 107.5 | % |          |       |    |                                      |   | 98.8  | %



Gross premiums
written.Gross premiums written for the property and casualty reinsurance segment for the nine months ended September 30, 2005 were $474.4 million compared to $558.5 million for the nine months ended September 30, 2004, a decrease of
15.1%. This decrease included the non-renewal of four reinsurance contracts that accounted for approximately $225.0 million of premium in the nine months ended September 30, 2004. We chose not to renew these contracts as the renewal terms and
conditions did not meet our current underwriting criteria. The decrease was partially offset by additional premiums of $54.5 million arising from the notification of additional losses on one contract written in a prior year.



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##### Table of Contents

Reinsurance premiums ceded. Reinsurance premiums ceded for property and casualty reinsurance for
the nine months ended September 30, 2005 were $47.7 million compared to $44.1 million for the nine months ended September 30, 2004, an increase of 8.2%. The increase included $21.5 million of reinsurance premiums ceded which were directly
related to the $54.5 million of additional premiums written on one contract written in a prior year, as described above. Reinsurance premiums ceded were principally related to our purchase of specific reinsurance to manage the risks associated with
our traditional 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 10.6% to $388.1 million for the nine months ended September 30, 2005. The decrease is principally attributed to the non-renewal of four
reinsurance contracts that accounted for approximately $136.5 million of net premiums earned in the nine month period ended September 30, 2004. The decrease was partially offset by $33.0 million of additional net premiums earned on one contract
written in a prior year.



Losses.Losses relating to
property and casualty reinsurance were $347.4 million for the nine months ended September 30, 2005 compared to $337.9 million for the nine months ended September 30, 2004, an increase of 2.8%. The losses for the nine months ended
September 30, 2005 include $60.0 million of losses attributable to the hurricanes in the Gulf Coast of the United States and $29.6 million of net losses in relation to additional losses notified on one contract written in a prior year . The
loss ratio for our property and casualty reinsurance segment for the nine months ended September 30, 2005 was 89.5% compared to 77.9% for the nine months ended September 30, 2004.



Acquisition costs.Acquisition costs were $58.8 million for the nine
months ended September 30, 2005 compared to $82.2 million for the nine months ended September 30, 2004, a decrease of 28.5%. The decrease in acquisition costs is more than the 10.6% decrease in premiums earned for the nine months ended
September 30, 2005 due to lower average acquisition costs on premiums earned and by the $33.0 million of additional net premiums written and earned on one contract written in a prior year which did not attract any further acquisition costs.
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 $11.0 million for the nine months ended September 30, 2005 compared to $8.7 million for the nine months ended
September 30, 2004, an increase of 26.4%. The increase resulted principally from ongoing personnel costs associated with our reinsurance staff. The general and administrative expense to net premiums earned ratio was 2.9% for the nine months
ended September 30, 2005 compared to 2.0% for the nine months ended September 30, 2004.



Net underwriting income (loss).Net underwriting loss attributable to property and casualty reinsurance for the nine months ended
September 30, 2005 was $(29.0) million compared to $5.1 million of income for the nine months ended September 30, 2004. The net loss for the nine months ended September 30, 2005 were principally attributable to $60.0 million of losses
recognized due to hurricanes Katrina and Rita.



Property
and Casualty Insurance Segment



|                                    |  |                                      |       |   |          |      |   |                                      |   |       |  
|----------------------------------- |  | ------------------------------------ | ----- | - | -------- | ---- | - | ------------------------------------ | - | ----- | -
|                                    |  | Nine Months Ended September 30, 2005 |       |   | % change |      |   | Nine Months Ended September 30, 2004 |  
|                                    |  | In millions of US Dollars            |      
|Gross premiums written              |  | $                                    | 245.3 |   |          | 45.8 | % |                                      | $ | 168.3 |  
|Reinsurance premiums ceded          |  |                                      | (96.6 | ) |          | 28.1 | % |                                      |   | (75.4 | )
|                                    |  |                                      |       |   |          |      |   |                                      |   |       |  
|Net premiums written                |  | $                                    | 148.7 |   |          | 60.1 | % |                                      | $ | 92.9  |  
|                                    |  |                                      |       |   |          |      |   |                                      |   |       |  
|Net premiums earned(a)              |  | $                                    | 125.8 |   |          | 37.8 | % |                                      | $ | 91.3  |  
|                                    |  |                                      |       |   |          |      |   |                                      |   |       |  
|Losses(b)                           |  |                                      | 131.4 |   |          | 95.2 | % |                                      |   | 67.3  |  
|Acquisition costs                   |  |                                      | (0.8  | ) |          | n/a  |   |                                      |   | 2.7   |  
|General and administrative expenses |  |                                      | 7.6   |   |          | 76.7 | % |                                      |   | 4.3   |  
|                                    |  |                                      |       |   |          |      |   |                                      |   |       |  
|Total losses and expenses(c)        |  | $                                    | 138.2 |   |          | 86.0 | % |                                      | $ | 74.3  |  
|                                    |  |                                      |       |   |          |      |   |                                      |   |       |  
|Net underwriting income (loss)      |  | $                                    | (12.4 | ) |          | n/a  |   |                                      | $ | 17.0  |  
|                                    |  |                                      |       |   |          |      |   |                                      |   |       |  
|Loss ratio(b)/(a)                   |  |                                      | 104.4 | % |          |      |   |                                      |   | 73.7  | %
|Combined ratio(c)/(a)               |  |                                      | 109.8 | % |          |      |   |                                      |   | 81.3  | %



21



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##### Table of Contents

Gross premiums written.Gross premiums written for the property and casualty insurance segment for
the nine months ended September 30, 2005 were $245.3 million compared to $168.3 million for the nine months ended September 30, 2004, an increase of 45.8%. The increase is the result of the continued expansion of this segment, including
new business coming from the addition of our property underwriting team.



Reinsurance premiums ceded. Reinsurance premiums ceded for insurance for the nine months ended September 30, 2005 were $96.6 million compared to $75.4 million for the nine months ended September 30,
2004, an increase of 28.1%. 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. 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
37.8% to $125.8 million for the nine months ended September 30, 2005. The increase is attributable to our expansion of the insurance product line over the past three years and reflects the earning pattern of a larger and increasingly mature
portfolio of insurance contracts.



Losses.Losses
relating to insurance were $131.4 million for the nine months ended September 30, 2005 compared to $67.3 million for the nine months ended September 30, 2004, an increase of 95.2%, and includes $40.0 million in losses stemming from the
hurricanes in the Gulf Coast of the United States. The loss ratio for our insurance segment for the nine months ended September 30, 2005 was 104.4% compared to 73.7% for the same period in 2004. As our portfolio of insurance contracts matures
and we receive more reports and updates of losses, we intend to continue to refine our estimated reserves. Our present estimate of reserves are based on client specific historic loss data, supplemented with industry loss data and reported losses.



Acquisition costs.Acquisition costs were $(0.8)
million for the nine months ended September 30, 2005 compared to $2.7 million for the nine months ended September 30, 2004. The decline in acquisition costs principally results from the current year settlement of our 2004 PSA obligations
to brokers at $1.5 million less than our accrued liability. 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.



General and administrative expenses.General and administrative expenses were $7.6 million for the nine months ended September 30, 2005 compared to $4.3 million for the nine months ended September 30, 2004, an increase of
76.7%. The increase resulted principally from expenses associated with additional staff, including a new and expanding property underwriting team. The general and administrative expense to net premiums earned ratio was 6.0% for the nine months ended
September 30, 2005 compared to 4.7% for the nine months ended September 30, 2004.



Net underwriting income (loss).Net underwriting loss attributable to the property and casualty insurance segment for the nine months ended September 30, 2005 was $(12.4) million compared to $17.0 million
of income for the nine months ended September 30, 2004. The net loss for the nine months ended September 30, 2005 relates principally to the $40.0 million in losses from hurricanes Katrina and Rita.



Life and Annuity Reinsurance Segment



|                                    |  |                                     |       |   |          |       |    |                                     |   |       |  
|----------------------------------- |  | ----------------------------------- | ----- | - | -------- | ----- | -- | ----------------------------------- | - | ----- | -
|                                    |  | Nine Months EndedSeptember 30, 2005 |       |   | % change |       |    | Nine Months EndedSeptember 30, 2004 |  
|                                    |  | In millions of US Dollars           |      
|Gross premiums written              |  | $                                   | 269.1 |   |          | 51.8  | %  |                                     | $ | 177.3 |  
|Reinsurance premiums ceded          |  |                                     | (0.4  | ) |          | (42.9 | )% |                                     |   | (0.7  | )
|                                    |  |                                     |       |   |          |       |    |                                     |   |       |  
|Net premiums written                |  | $                                   | 268.7 |   |          | 52.2  | %  |                                     | $ | 176.6 |  
|                                    |  |                                     |       |   |          |       |    |                                     |   |       |  
|Net premiums earned                 |  | $                                   | 268.7 |   |          | 52.2  | %  |                                     | $ | 176.6 |  
|                                    |  |                                     |       |   |          |       |    |                                     |   |       |  
|Benefits                            |  |                                     | 293.1 |   |          | 49.8  | %  |                                     |   | 195.7 |  
|Acquisition costs                   |  |                                     | 1.9   |   |          | (13.6 | )% |                                     |   | 2.2   |  
|General and administrative expenses |  |                                     | 2.8   |   |          | (6.7  | )% |                                     |   | 3.0   |  
|                                    |  |                                     |       |   |          |       |    |                                     |   |       |  
|Total benefits and expenses         |  | $                                   | 297.8 |   |          | 48.2  | %  |                                     | $ | 200.9 |  
|                                    |  |                                     |       |   |          |       |    |                                     |   |       |  
|Net underwriting loss               |  | $                                   | (29.1 | ) |          | 19.8  | %  |                                     | $ | (24.3 | )
|                                    |  |                                     |       |   |          |       |    |                                     |   |       |  



The nature of life and
annuity 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



22



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##### Table of Contents

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 segment for the nine months ended September 30, 2005 were $269.1 million compared to $177.3 million for the nine months ended September 30, 2004, an increase of 51.8%. We wrote two contracts with European
based clients for premium of $234.7 million and one contract with a North American based client for premium of $32.5 million during the nine months ended September 30, 2005.



Reinsurance premiums ceded. Gross reinsurance premiums ceded for the life and annuity segment were $0.4 million for
the nine months ended September 30, 2005 and $0.7 million for the nine months ended September 30, 2004, a decrease of 42.9%. The life and annuity premiums ceded relates to the quota share agreement with Grand Central Re.



Net premiums earned.Life and annuity business written during each of
the nine month periods was fully earned in those periods.



Benefits.Benefits relating to the life and annuity segment were $293.1 million for the nine months ended September 30, 2005 compared to $195.7 million for the nine months ended September 30, 2004, an increase of 49.8%. The
increase was principally due to the recognition of losses associated with the premiums written and earned in the current period.



Acquisition costs.Acquisition costs were $1.9 million for the nine months ended September 30, 2005 compared to $2.2 million for the nine
months ended September 30, 2004. The life and annuity transactions that we bind typically have low acquisition costs.



General and administrative expenses.General and administrative expenses were $2.8 million for the nine months ended September 30, 2005
compared to $3.0 million for the nine months ended September 30, 2004. General and administrative expenses have decreased as a result of a reduction in staffing levels.



Net underwriting loss.Net underwriting loss attributable to the life and annuity segment for the nine months ended
September 30, 2005 was $29.1 million compared to $24.3 million for the nine months ended September 30, 2004. The results are driven by the accretion of life and annuity benefits over time. Although we expect to incur underwriting losses in
connection with our life and annuity contracts, we seek to achieve sufficient investment income from premiums received to fund benefit payments as they occur and provide for a profit margin.



Corporate Function



|                                               |  |                                      |       |   |          |       |    |                                      |   |       |  
|---------------------------------------------- |  | ------------------------------------ | ----- | - | -------- | ----- | -- | ------------------------------------ | - | ----- | -
|                                               |  | Nine Months Ended September 30, 2005 |       |   | % change |       |    | Nine Months Ended September 30, 2004 |  
|                                               |  | In millions of US Dollars            |      
|Net investment income                          |  | $                                    | 75.7  |   |          | 29.2  | %  |                                      | $ | 58.6  |  
|Net gains on alternative assets                |  |                                      | 53.6  |   |          | 115.3 | %  |                                      |   | 24.9  |  
|Net realized gains on sale of fixed maturities |  |                                      | 2.8   |   |          | (31.7 | )% |                                      |   | 4.1   |  
|Other income                                   |  |                                      | 3.6   |   |          | (2.7  | )% |                                      |   | 3.7   |  
|Interest expense                               |  |                                      | (26.4 | ) |          | 10.5  | %  |                                      |   | (23.9 | )
|General and administrative expenses            |  |                                      | (20.7 | ) |          | 10.7  | %  |                                      |   | (18.7 | )
|                                               |  |                                      |       |   |          |       |    |                                      |   |       |  
|Net income                                     |  | $                                    | 88.6  |   |          | 81.9  | %  |                                      | $ | 48.7  |  
|                                               |  |                                      |       |   |          |       |    |                                      |   |       |  



Net investment
income.Net investment income, excluding realized and unrealized gains and losses, for the nine months ended September 30, 2005 increased $17.1 million to $75.7 million compared to $58.6 million for the nine months ended September 30,
2004, an increase of 29.2%. The increase was principally attributable to the growth in the fixed maturities portfolio from $1,902.7 million at September 30, 2004 to $2,463.4 million at September 30, 2005, resulting from cash flow from
operations since September 30, 2004. The average annualized investment yield on the cash, fixed maturities investments and funds withheld by clients for the nine months ended September 30, 2005 was 4.07% compared to 4.11% for the nine
months ended September 30, 2004.



Net gains on
alternative investments.Net gains on the alternative investment portfolio were $53.6 million, or 4.50%, including a loss of $6.1 million from our private equity reinsurance investments, for the nine months ended September 30, 2005 compared
to $24.9 million, or 2.73%, including a loss of $11.1 million from our private equity reinsurance investments, for the nine months ended September 30, 2004. Our investment in DaVinci has been impacted by losses from hurricanes Katrina and Rita
in the nine months ended September 30, 2005 and by losses from hurricanes Charley, Frances, Ivan and Jeanne in the nine months ended September 30, 2004. DaVinci is a property catastrophe reinsurer and therefore, it is expected that losses
will be incurred during periods where there are severe or frequent catastrophes.



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Net realized gains 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 for the nine months ended September 30, 2005 and September 30, 2004 of $2.8 million and $4.1 million respectively, are the result of the sale
of fixed maturities in connection with normal portfolio rebalancing transactions.



We own a portfolio 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. 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 markets 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.



Interest expense. Interest expense was $26.4 million for the nine months ended September 30, 2005 compared to $23.9 million for the nine
months ended September 30, 2004, an increase of 10.5%. Interest expense includes $5.5 million of interest expense pertaining to the Grand Central Re quota share funds withheld for the nine months ended September 30, 2005 compared to $6.5
million for the nine months ended September 30, 2004. The interest expense on the Grand Central Re funds withheld is based on the average of two total return fixed maturity indices which had a lower total return for the nine months ended
September 30, 2005 compared to the same period in 2004.



General and administrative costs.General and administrative expenses were $20.7 million for the nine months ended September 30, 2005 compared to $18.7 million for the nine months ended September 30, 2004. Our total general
and administrative expenses to net premiums earned ratio was 5.4% for the nine months ended September 30, 2005 compared to 4.9% for the nine months ended September 30, 2004.



Financial Condition



Cash and invested assets. Aggregate invested assets, comprising cash and cash equivalents, fixed maturities and alternative investments, were
$3,898.4 million at September 30, 2005 compared to $3,514.2 million at December 31, 2004, an increase of 10.9%. The increase in cash and invested assets resulted principally from $349.9 million in cash flows from operations generated in
the nine months ended September 30, 2005, which is net of $35.3 million of additional investments in alternative assets and the appreciation of the alternative investment portfolio of $53.6 million. These increases were partially offset by a
decrease in accumulated other comprehensive income of $7.0 million, net payments of deposit liabilities of $41.6 million, common share repurchases of $7.4 million and dividends paid of $6.0 million.



Property and casualty losses. Property and casualty losses totaled
$1,764.0 million at September 30, 2005 compared to $1,455.1 million at December 31, 2004, an increase of 21.2%. The increase in property and casualty losses was principally attributable to estimated losses associated with premiums earned
during the nine months ended September 30, 2005 and $100.0 million in losses related to hurricanes Katrina and Rita, partially offset by losses paid and changes in reserve estimates on carried property and casualty losses.



Life and annuity benefits. Life and annuity benefits totaled $864.1
million at September 30, 2005 compared to $666.1 million at December 31, 2004. The increase in the nine months ended September 30, 2005 was principally attributable to reinsurance transactions written and earned during the nine months
ended September 30, 2005, partially offset by benefit payments on existing contracts in force.



Losses and benefits recoverable from reinsurers. Losses recoverable from reinsurers totaled $464.5 million at September 30, 2005 compared to
$388.1 million at December 31, 2004, an increase of 19.7%, principally reflecting losses ceded under our reinsurance and retrocessional agreements. Grand Central Re, our largest retrocessionaire, accounted for 38.9% of our losses recoverable at
September 30, 2005. 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 98.2% of its loss recoverable obligations. In addition, at September 30, 2005, one other retrocessionaire accounted for 22.4% of our losses recoverable from reinsurers. This
retrocessionaire has a financial strength rating of A by A.M. Best Company. We retain



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funds amounting to approximately 73.2% of its loss recoverable obligations. All remaining loss recoverables are from organizations rated A-
(Excellent) or higher 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 $99.9 million at September 30,
2005 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.



Shareholders equity. Our shareholders equity increased to
$954.3 million at September 30, 2005 from $937.0 million at December 31, 2004, an increase of 1.8%, principally reflecting net income of $18.1 million partially offset by a decrease in accumulated other comprehensive income of $7.0 million
for the nine months ended September 30, 2005. Additionally, $10.1 million of loans receivable from common share sales were repaid during the nine months ended September 30, 2005.



Liquidity. We generated $349.9 million of cash from operations during
the nine months ended September 30, 2005 compared to $506.8 million for the nine months ended September 30, 2004. The decrease in operating cash flow principally reflects the commutation of a large reinsurance contract. Two principal
factors impacting our operating cash flow are premium collections and timing of loss and benefit payments. We write casualty business, which generally has a long claim-tail and it is expected that we will generate significant operating cash flow
while we build a portfolio of loss and benefit reserves on our balance sheet. We believe that our 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
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 payments, increased loss amounts or settlement of losses 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 5 years of operating history and can access our bank 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 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 September 30, 2005, Max Re, which is required to have approximately $290.0 million in statutory capital and surplus in order to pay dividends, had approximately $825.5 million in statutory capital and surplus.



We filed an unallocated universal shelf registration statement with the
SEC on September 26, 2005, which the SEC declared effective on October 4, 2005. The securities registered under the shelf registration statement for possible future sales include up to $635.9 million of common shares, preferred shares and
various types of debt securities. The shelf registration statement also includes common shares held by Cap Z and common shares issuable upon warrants owned by Cap Z. The common shares held by and issuable upon exercise of warrants by Cap Z account
for $135.9 million of the $635.9 million of securities registered under the shelf registration statement, with the remaining $500.0 million available for securities offerings by us. To effect any such sales from time to time, we will file one or
more supplements to the registration statement, which will provide details of any proposed offering or sale.



On October 11, 2005, we filed a supplement to the registration statement and, on October 17, 2005, sold 11.0 million common shares at
$23.50 per share in an underwritten public offering. We received net proceeds of approximately $246.0 million.



Capital resources. At September 30, 2005, our capital structure consisted of common equity. Total capitalization amounted to $954.3 million as
compared to $937.0 million at December 31, 2004, an increase of 1.8%. We have flexibility



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with respect to capitalization as a result of our access to the debt and equity markets. On September 26, 2005 we filed a shelf registration statement
with the U.S. Securities and Exchange Commission indicating that we may periodically issue up to $500.0 million in debt securities, common, preferred and depositary shares and warrants. 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 we granted the underwriters a 30 day option to purchase up to
1.65 million additional common shares. If the underwriters exercise in full their option we expect to receive additional net proceeds of approximately $37.1 million. We intend to use the net proceeds from this offering to increase the capital
and surplus of our reinsurance operating subsidiaries to support expanded underwriting capacity, particularly in property insurance and property catastrophe reinsurance lines, in 2006 and for general corporate purposes.



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 September 30, 2005 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 September 30, 2005.



Max Re Capitals Board of Directors declared a dividend of $0.03 per share on February 4, 2005 and $0.05 per share on each of April 28,
2005 and July 29, 2005, payable to shareholders of record on February 14, 2005, May 13, 2005 and August 12, 2005, respectively. 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 October 27, 2005, Max Re Capitals board of directors declared a dividend of $0.05 per share to be paid on November 30, 2005 to shareholders of record on November 11, 2005.



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 contracts, which would significantly and negatively
affect our business. To date, our ratings have been affirmed by A.M. Best and Fitch on each rating review. Ratings are based upon factors relevant to policyholders and are not directed toward the protection of investors.



No off-balance sheet arrangements. We do not participate in
transactions that generate relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or variable interest entities, which 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 obligation         |  | $                                            | 150,000   |                  | $ |          |  | $         | 150,000   |                   | $ |        |  | $ |         
|Operating lease obligations  |  |                                              | 11,553    |                  |   | 1,392     |  |           | 2,888     |                   |   | 3,062   |  |   | 4,211    
|Property and casualty losses |  |                                              | 1,764,003 |                  |   | 451,281   |  |           | 703,510   |                   |   | 312,788 |  |   | 296,424  
|Life and annuity benefits    |  |                                              | 1,389,505 |                  |   | 84,205    |  |           | 152,919   |                   |   | 136,559 |  |   | 1,015,822
|Deposit liabilities          |  |                                              | 294,386   |                  |   | 56,080    |  |           | 45,861    |                   |   | 66,949  |  |   | 125,496  
|                             |  |                                              |           |                  |   |           |  |           |           |                   |   |         |  |   |          
|Total                        |  | $                                            | 3,609,447 |                  | $ | 592,958   |  | $         | 1,055,178 |                   | $ | 519,358 |  | $ | 1,441,953
|                             |  |                                              |           |                  |   |           |  |           |           |                   |   |         |  |   |          



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 Critical Accounting PoliciesLosses and
benefits in our Annual Report on Form 10-K for the year ended December 31, 2004, 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



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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 September 30, 2005 and do not
include any allowance for claims for future events within the time period specified. As such, 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 September 30, 2005 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.



New Accounting Pronouncements



Financial Accounting Standard No. 123 (revised
2004)Share-Based Payment



In December 2004, the
Financial Accounting Standards Board (FASB) issued SFAS 123(R)Share-Based Payment(SFAS 123(R)), a revision of SFAS No. 123Accounting for Stock-Based Compensation(SFAS 123). Both statements supersede APB Opinion
No. 25, Accounting for Stock Issued to Employees. SFAS 123(R) requires companies to recognize the cost of employee services received in share-based payment transactions, thereby reflecting the economic effect of those transactions in the
financial statements. SFAS 123(R) also eliminates alternative methods of accounting for stock-based compensation in order to allow for greater comparability between companies. We are required to adopt the new standard using a modified prospective
method and may elect to restate prior periods using the modified retrospective method. Under the modified prospective method, we are required to record compensation costs for new and modified awards over the related vesting period of such awards
prospectively and record compensation cost prospectively for the unvested portion, at the date of adoption, of previously issued and outstanding awards over the remaining vesting period of such awards. On January 1, 2003 we adopted the expense
recognition provision of SFAS 123 for all stock options granted on or after January 1, 2003. The calculation of fair value is similar under SFAS 123 and SFAS 123(R), but the revised statement requires, among other things, estimates of the
number of awards that are expected to vest, no decrease in recognition of compensation cost if vested awards expire without being exercised and the adjustment of future expense based on revisions to fair value due to award modifications after grant
date. The effective date for SFAS 123(R) has been deferred from periods beginning after June 15, 2005 to fiscal years beginning after June 15, 2005. We believe that the amount of additional share-based compensation expense to be recognized
by us under the provisions of SFAS 123(R) will not be material.



In June 2005, FASB finalized FSP EITF Issue 03-1-a and issued re-titled FSP FAS 115-1  The Meaning of Other-Than-Temporary Impairment and its Application to Certain Investments. The FSP provides guidance on the recognition of
impairments deemed other-than-temporary. FSP 115-1 is effective for other-than-temporary impairment analysis conducted in periods beginning after September 15, 2005. We believe that our current policy on other-than-temporary impairments
complies with FSP 115-1. Accordingly, 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 September 30, 2005, 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 September 30, 2005, 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 4.68%, or approximately $115.3 million, and



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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 5.39%, or approximately $132.8 million.



With respect to our alternative investment portfolio, although our fund of funds advisor is contractually obligated to abide by our investment guidelines, we do not directly control the allocation of our assets to
strategies or underlying funds, nor do we control the manner in which they are invested by the 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 September 30, 2005, 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 1.73%, or approximately $20.9 million, and the impact on the alternative investment portfolio from an immediate 100 basis point
decrease in market interest rates would have resulted in an estimated increase in market value of 1.73%, or approximately $20.9 million.



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



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 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
September 30, 2005, an evaluation was carried out under the supervision and with the participation of our companys management, including the Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and
operation of disclosure controls. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the design and operation of these disclosure controls were effective to ensure that material information relating to
our company is made known to management, including the Chief Executive Officer and Chief Financial Officer, particularly during the period when our periodic reports are being prepared.



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 GAAP. 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.



Management evaluated whether there was a change in our companys internal control over financial reporting during the three months ended
September 30, 2005 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 September 30, 2005.



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. While any proceeding contains an element of uncertainty, we believe that we are not presently a party to any litigation or arbitration that is likely to have a material
adverse effect on our business or operations, and we are unaware of any contemplated governmental inquiries concerning us.



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|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 September 30, 2005.



|                                              |  |                               |  |                           |  |                                                                              |  |                                                                               |             
|--------------------------------------------- |  | ----------------------------- |  | ------------------------- |  | ---------------------------------------------------------------------------- |  | ----------------------------------------------------------------------------- | ------------
|Period                                        |  | TotalNumberof SharesPurchased |  | AveragePricePaidper Share |  | Total Numberof SharesPurchased asPart ofPubliclyAnnouncedPlans orPrograms(2) |  | MaximumDollar Valueof Shares thatMay Yet BePurchasedUnder thePlans orPrograms
|(July 1, 2005 to July 27, 2005)(1)            |  |                              |  |                          |  |                                                                             |  | $                                                                             | 11.0 million
|(July 28, 2005 to July 31, 2005)(1)           |  |                               |  |                           |  |                                                                              |  | $                                                                             | 36.0 million
|(August 1, 2005 to August 31, 2005)           |  |                              |  |                          |  |                                                                             |  | $                                                                             | 36.0 million
|(September 1, 2005 to September 30, 2005)     |  |                              |  |                          |  |                                                                             |  | $                                                                             | 36.0 million
|                                              |  |                               |  |                           |  |                                                                              |  |                                                                               |             
|Total (July 1, 2005 to September 30, 2005)(1) |  |                              |  |                          |  |                                                                             |  | $                                                                             | 36.0 million

---

|(1) | As a matter of policy, we do not repurchase our common shares during a self-imposed quarterly
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 $100.0 million of common shares by resolutions of our board of directors adopted on
September 27, 2001, July 26, 2002 and July 28, 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 November 1, 2005. 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
|------- | -----------------



Not applicable.



|ITEM 6. | Exhibits
|------- | --------



|        |  |                                                                                                                                                                                                                                                                                          
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                                                                                              
|10.1    |  | Underwriting Agreement dated October 11, 2005 by and among the Company, Banc of America Securities LLC and Citigroup Global Markets Inc. (the Underwriting Agreement) (incorporated
by reference to Exhibit 1.1 of the Companys Current Report on Form 8-K filed on October 12, 2005).
|        | 
|10.2    |  | Amendment No. 1 to Underwriting Agreement dated October 14, 2005                                                                                                                                                                                                                         
|        | 
|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                                                                                                                                                                                                                                               



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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. COONEY                                               
| |  |  |  | Name: Robert J. Cooney Title: President and Chief
Executive Officer



Date: October 31, 2005



| |  |  |  |                                                                                 
| |  |  |  | --------------------------------------------------------------------------------
| |  |  |  | /s/ KEITH S. HYNES                                                              
| |  |  |  | Name: Keith S. Hynes Title: Executive Vice President
and Chief Financial Officer



Date: October 31, 2005



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