Max Re Capital Ltd. reported second-quarter net income declined by nearly a third due in part to poor investment results.
The Bermuda-based carrier reported net income of $17.3 million, compared with $23.3 million for the same period last year.
Morgan Stanley analyst William Wilt said that while earnings per share came in at about half what his bank expected, "the vast majority of the miss was due to weak alternative asset performance this quarter."
"Although we had previously lowered estimates in anticipation of investment weakness, we failed to fully account for the lackluster results and the miss is not as significant as the headlines suggest," he wrote.
But Max Re still remains more significantly influenced by investment performance than its peers despite its gradual move to a more traditional asset allocation, Mr. Wilt wrote.
Max Re Chairman Robert J. Cooney said the results reflected a difficult environment for investment returns.
Gross premiums written for the quarter at $284 million increased 16 percent over the same period in 2005 principally due to additional property business written in 2006.
Net premiums earned for the quarter were $199.2 million compared with $192.1 million for the same period of 2005.
Mr. Wilt noted that all net premium written growth was attributed to the reinsurance segment, which grew 11 percent, while the insurance segment shrunk 2 percent. "The shift seemed logical given the pricing of reinsurance," Mr. Wilt wrote.
The company said net investment income for the period increased to $36.5 million from $25 million for the same period in 2005, and is attributable to a year-over-year increase in cash and fixed maturities balances and higher yields on fixed maturities investments.
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