This orientation towards the higherquality assets has served the Company well

As we near Maxs 10th Anniversary, Max is today recognized as a skilledunderwriter of specialty insurance and reinsurance risks, operating globallythrough four distinctive underwriting platforms. The Company currently hasunderwriting facilities in Bermuda, Dublin, at Lloyds and in six major UScities, with over 300 employees in all. The transformation of our underwriting enterprise has accelerated greatly inrecent years. Simultaneously, there has been continuous reassessment of theCompanys investment approach and a determination to effect certain reductionsin the holdings of alternative investments relative to total invested assets andshareholders equity. Suchresults exhort the further significant reduction in alternative investments thatis planned and underway. Max is committed to limiting its exposure to investmentrisk to a level that is no longer a material outlier relative to the investmentallocations of its peer group.

The Company expects to be able to deploy more ofits capital in profitable underwriting activities, as opportunities arise. During 2009, Maxs strategy in relation to its investment grade fixed incomeportfolio is expected to remain unchanged. This orientation towards the higherquality assets has served the Company well. The type of assets varies between lowerquality bonds, high yield, convertible bonds, private equities, long equitiesand hedge funds. Mark-to-market changes in respect of all of these assetclasses, except for private equities and hedge funds, are often recorded as adirect adjustment to book value, and also carry a lower capital charge from therating agencies.

These peerfirms are also typically writing at a higher ratio of GPW to surplus than Maxhas done historically. On an actualbook value basis, Max has weathered this period remarkably well, given its assetmix and intentional strategy of greater invested assets/equity than most peercompanies. Max intends to continue tohave a relatively higher level of invested assets to surplus than its peers.This typically is a rewarding strategy and is reflective of the Companysunderwriting business mix. These adjustments will likely take most of the 2009 calendar year to complete.The timing, however, is opportune as the underwriting markets in 2009 look to bebetter than in 2008, and the changes are expected to increase the Companysability to write premium on existing surplus by as much as $250 million. Our view of 2009Most every recent article about our industry has highlighted the likelihood ofan improved underwriting environment in 2009, and we agree with this outlook.The current financial crisis has affected the insurance industry in a number ofways. Investment losses by many insurance companies have been so severe thatoverall capacity was significantly curtailed in 2008, a year that also saw highcatastrophe losses and the downfall of some major insurance franchises.

Thiscombination of factors, as well as the extraordinary tightening of creditmarkets that is likely to limit capital investment in 2009, points to thedevelopment of an improved pricing environment for insurance companies. Our viewis that the pricing improvements will occur first in the shorter tail lines(property, aviation, etc.), and then, as the year progresses, migrate to some ofthe longer-tail casualty lines of business. Maxs renewals at January 1, 2009would support this view, as property rates on line were up - particularly inreinsurance - and casualty pricing was no longer down, but was relatively flat.With this pricing improvement and with Maxs expansion of underwriting platformsand capabilities, GPW in 2009 is projected to grow by approximately 21 toapproximately $1,230 million in the Companys specialty property and casualtybusiness. Max has a proven record of attracting strong underwriting teams to itsorganization.