1141719--2/19/2009--MAX_CAPITAL_GROUP

related topics

{loan, real, estate}

{regulation, change, law}

{tax, income, asset}

{capital, credit, financial}

{condition, economic, financial}

{loss, insurance, financial}

{debt, indebtedness, cash}

{interest, director, officer}

{acquisition, growth, future}

{operation, natural, condition}

{provision, law, control}

{investment, property, distribution}

{financial, litigation, operation}

{regulation, government, change}

{stock, price, share}

{stock, price, operating}

{product, market, service}

{product, liability, claim}

{operation, international, foreign}

{personnel, key, retain}

{system, service, information}

{competitive, industry, competition}

Risks Related to Our Business Our losses and benefits may exceed our loss and benefit reserves, which could significantly increase our liabilities and reduce our net income. Our ability to write reinsurance and insurance in the property and casualty market may be affected by cyclical trends and in the life and annuity market by global economic conditions and fluctuations in interest rates. Competitors may make it difficult for us to market our products effectively and offer our products at a profit. There can be no assurance as to the effect that governmental actions for the purpose of stabilizing the financial markets will have on such markets generally or on us in particular. The property, property catastrophe, aviation and marine insurance and reinsurance that we offer may make us vulnerable to losses from catastrophes and may cause our results of operations to vary significantly from period to period. A downgrade or withdrawal of any of our ratings may significantly and negatively affect our ability to implement our business strategy successfully. A limited number of reinsurance and insurance brokers and broker transactions account for a large portion of our revenues, and a loss of all or a substantial portion of this brokered business could have a significant and negative effect on our business and results of operations. The involvement of reinsurance brokers subjects us to their credit risk. Current investigations and proceedings by government agencies relating to insurance practices could adversely affect the industry in which we operate. The failure of any of the loss limitation methods we employ could have a significant and negative effect on our financial condition and results of operations. Operational risks, including human or systems failures are inherent in our business. We may require additional capital in the future, which may not be available to us on satisfactory terms, if at all. A recession and other adverse consequences of the recent U.S. and global economic and financial industry downturns could harm our business, our liquidity and financial condition, and our stock price. We could incur substantial losses and reduced liquidity if one of the financial institutions we use in our operations, including those institutions that participate in our credit facilities, fails. If we lose or are unable to retain our senior management and other key personnel, or if we are unable to renew the Bermudian work permits of any members of our senior management or other key personnel, our ability to implement our business strategy could be delayed or hindered, which, in turn, could significantly and negatively affect our business. Currency fluctuations could result in exchange losses and our failure to manage our multiple currency liabilities effectively could significantly and negatively impact our business. Our failure to maintain sufficient letter of credit facilities or to increase our letter of credit capacity on commercially acceptable terms as we grow could significantly and negatively affect our ability to implement our business strategy. A significant decrease in our capital or surplus could enable certain clients to terminate reinsurance agreements or to require additional collateral. Our results of operations may fluctuate significantly from period to period and may not be indicative of our long-term prospects. Our financial condition and results of operations could be negatively affected to the extent that we sustain losses from our reinsurance and insurance of terrorist attacks and similar risks. We are a holding company that depends on the ability of our subsidiaries to pay dividends. If we do not generate positive cash flows, we may be unable to service our indebtedness. Our failure to comply with restrictive covenants contained in the indenture governing the senior notes or our current or future credit facilities could trigger prepayment obligations, which could adversely affect our business, financial condition and results of operations. Consolidation in the insurance industry could adversely impact us. The integration of new insurance and reinsurance initiatives into our existing operations may present significant challenges. Risks Related to Our Investment Strategy If our calculations with respect to our liabilities are incorrect, or if we do not appropriately structure our investments in relation to our anticipated liabilities, we could be forced to liquidate investments at a significant loss. Changes in market interest rates could have a significant and negative effect on our investment portfolio, investment income and results of operations. Unexpected volatility or illiquidity associated with our fixed maturities investment portfolio or in the financial markets could significantly and negatively affect our ability to conduct business. The determination of the impairments taken on our investments is highly subjective and could materially impact our financial position or results of operations. Our valuation of fixed maturity securities and alternative investments may include methodologies, estimations and assumptions which are subject to differing interpretations and could result in changes to investment valuations that may materially adversely affect our results of operations or financial condition. Unexpected volatility or illiquidity associated with our alternative investment portfolio or in the financial markets could significantly and negatively affect our ability to conduct business. Deterioration in the public debt and equity markets could lead to additional investment losses. Losses due to defaults by others, including issuers of investment securities (which include structured securities such as commercial mortgage-backed securities and residential mortgage backed securities or other high yielding bonds) or reinsurance counterparties, could adversely affect the value of our investments, results of operations, financial condition or cash flows. The failure of our investment managers to perform their services in a manner consistent with our expectations and investment objectives, or the termination of our agreements with one or more of these investment managers, could significantly and negatively affect our ability to conduct business. Our investment portfolios are managed by outside managers, therefore we do not directly control individual trading activity. Our investment portfolio may be subject to political risk. Members of our board of directors may have conflicts of interests. Risks Related to Regulation of Our Company The regulatory systems under which we operate, and potential changes thereto, could have a significant and negative effect on our business. Certain of our subsidiaries are subject to minimum capital and surplus requirements, and our failure to meet these requirements could subject us to regulatory action. Political, regulatory and industry initiatives could adversely affect our business. Changes in current accounting practices and future pronouncements may materially impact our reported financial results. The reinsurance to close of an underwriting year at Lloyd s does not discharge the liability of the members of the reinsured syndicate. Continued or increased levies by Lloyd s for the Lloyd s Central Fund and cash calls for trust fund deposits would materially and adversely affect us. The failure of Lloyd s to satisfy the FSA s solvency requirements could result in limitations on our ability to underwrite business. An increase in the charges paid by Max at Lloyd s and the Max Corporate Capital Vehicles to participate in the Lloyd s market could adversely affect their financial and operating results. Risks Related to Our Common Shares Our common shares are subject to limitations on ownership and voting rights. U.S. persons who own our common shares may have more difficulty in protecting their interests than U.S. persons who are shareholders of a U.S. corporation. There are anti-takeover provisions contained in our bye-laws that could impede an attempt to replace or remove our management or delay or prevent the sale of our company, which could diminish the value of our common shares. A shareholder may be required to sell its shares of Max Capital. You may have difficulty effecting service of process on us or enforcing judgments against us in the United States. Max Capital and its non-U.S. subsidiaries may be subject to U.S. federal income taxation. Changes in U.S. federal income tax law could materially adversely affect an investment in our common shares. Shareholders who are U.S. persons may recognize income for U.S. federal income tax purposes on our undistributed earnings. U.S. tax-exempt organizations who own our common shares may recognize unrelated business taxable income. Changes in U.S. tax laws may be retroactive and could subject us and/or U.S. persons who own our common shares to U.S. income taxation on our undistributed earnings. We may become subject to taxes in Bermuda after March 28, 2016, which would have a significant and negative effect on our business and results of operations. The impact of Bermuda s commitment to the Organization for Economic Cooperation and Development to eliminate harmful tax practices is uncertain and could adversely affect our tax status in Bermuda. U.S. legislative action or other changes in U.S. tax law might adversely affect us.

Full 10-K form ▸

1141719--2/19/2009--MAX_CAPITAL_GROUP_LTD.