PXT Pxre Grp. Ltd

HAMILTON, Bermuda, Aug. 7 /PRNewswire-FirstCall/ -- PXRE Group Ltd. (NYSE:PXT) today announced results for the second quarter ended June 30, 2006. Notable items for the quarter included: - On a fully diluted basis, book value per share was $6.51 at June 30, 2006 - Net income before convertible preferred share dividends was $2.1 million compared to $43.5 million in the second quarter of 2005 Jeffrey L. Radke, President & Chief Executive Officer of PXRE Group, commented, "Our Board of Directors remains focused on finding a strategic alternative that would maximize value for shareholders." Mr. Radke continued, "PXRE's catastrophe exposure is declining as a result of the cancellations and non-renewals in our reinsurance portfolio. As of August 1, 2006, approximately 82% of our in-force business that was in effect on January 1, 2006 has either been cancelled or non-renewed, and it is anticipated that this percentage will increase as additional contracts are non-renewed on a going forward basis. Despite these cancellations and non-renewals, we will continue to have significant catastrophe exposures for the balance of 2006." Mr. Radke continued, "We have also seen continued evidence that our loss reserves for Hurricanes Katrina, Rita and Wilma are adequate. For the second consecutive quarter, we did not experience any material development on our reserves for the 2005 hurricanes. Additionally, we engaged a nationally recognized actuarial firm to review our groupwide loss reserves as of June 30, 2006 and their loss estimates for the 2005 hurricanes, as well as for the remainder of our reserves, were consistent with the level of our carried reserves. Property loss reserves for hurricane events tend to mature more quickly than most other types of property and casualty loss reserves. While the unique causation issues surrounding Hurricane Katrina introduce more uncertainty than is usually the case for hurricane events, our industry has historically seen little change in property loss reserves associated with hurricanes after one year or more has passed since the event occurred." Mr. Radke continued, "We are hopeful that the Company will be able to achieve a strategic alternative that is attractive to our shareholders. If our Board of Directors concludes that no other alternative would be in the best interests of our shareholders, it may determine that the best option is to place PXRE's reinsurance business into runoff and eventually commence an orderly winding up of PXRE's operations over some period of time that is not currently determinable. We have therefore begun to take various steps to facilitate such a runoff, including the negotiation of commutations. During the second quarter, our exited lines reserves decreased by approximately 46%, primarily due to commutations. We have also begun discussions with a number of our largest cedents to negotiate commutations of our 2005 hurricane reserves." For the quarter ended June 30, 2006, net income before convertible preferred share dividends was $2.1 million compared to $43.5 million in the second quarter of 2005. The decrease in net income is primarily attributable to a decrease in net premiums earned due to the cancellation or non-renewal of many of our assumed reinsurance contracts following our ratings downgrade in February 2006, offset by the absence of any significant loss events in the quarter. Net premiums earned for the quarter decreased 82%, or $68.1 million, to $15.3 million from $83.4 million for the year-earlier period. This decrease in net premiums earned can be attributed to the cancellations or non-renewal of the majority of our reinsurance portfolio following our ratings downgrades by the major rating agencies in February 2006. The decrease in net premiums earned also reflected an increase in ceded premiums earned of $10.2 million associated with increased excess of loss retrocessional catastrophe coverage during 2006, including a collateralized catastrophe facility entered into during the fourth quarter of 2005 to protect the Company against a severe catastrophe event. Revenues and Net Premiums Earned Three Months Ended Six Months Ended ($000's) June 30, June 30, Change Change 2006 2005 % 2006 2005 % Revenues $25,206 $90,082 (72) $115,737 $180,062 (36) Net Premiums Earned: Cat & Risk Excess $15,442 $83,371 (81) $ 92,438 $163,512 (43) Exited (133) 49 (371) (42) (658) (94) $15,309 $83,420 (82) $ 92,396 $162,854 (43) Net premiums written in the second quarter of 2006 decreased by $91.4 million, to negative $27.9 million from $63.5 million for the same period of 2005. This decrease in net premiums written is due to the high level of return premiums attributable to the cancellation of many of our reinsurance contracts following our ratings downgrades by the major rating agencies in February 2006. In addition, one large North America pro rata contract was terminated on a cut-off basis during the quarter, which resulted in a reduction of written premium of $18.1 million compared to the same period of 2005. The decrease in net premiums written was also due to an increase in ceded premiums written of $2.4 million associated with excess of loss retrocessional catastrophe coverage during 2006, including a collateralized catastrophe facility entered into during the fourth quarter of 2005 to protect the Company against a severe catastrophe event. Net Premiums Written Three Months Ended Six Months Ended ($000's) June 30, June 30, Change Change 2006 2005 % 2006 2005 % Net Premiums Written: Cat & Risk Excess (27,772) $63,411 (144) $51,034 $177,721 (71) Exited (134) 43 (412) (47) (661) (93) ($27,906) $63,454 (144) $50,987 $177,060 (71) Net investment income for the second quarter of 2006 increased 98%, or $6.6 million, to $13.2 million from $6.7 million for the corresponding period of 2005 primarily as a result of a $7.0 million increase in income from our fixed maturity and short-term investment portfolio, offset, in part, by a $0.6 million decrease in income from our hedge funds. The increase in income from our fixed income and short-term investment portfolio was due to a net return on the fixed maturity and short-term investment portfolios of 5.1% for the quarter, on an annualized basis, compared to 3.6% during the comparable prior year period and an increase in invested assets attributable to cash flow principally from the proceeds of capital raising activities in the fourth quarter of 2005. The decrease in income from our hedge fund portfolio was the result of a return of negative 1.4 % on the hedge funds for the quarter compared to positive 0.1% for the second quarter of 2005. As previously communicated, PXRE submitted redemption notices for its entire hedge fund portfolio in February 2006, and as a result income from hedge funds is expected to significantly decrease in future quarters as we receive the proceeds from our various hedge fund investments. As of June 30, 2006 we have received the redemption proceeds from 79% of the hedge fund assets held on our December 31, 2005 balance sheet. Net realized investment losses for the second quarter of 2006 were $3.4 million compared to $0.2 million in the second quarter of 2005, primarily due to $3.3 million in other than temporary impairment charges. PXRE's GAAP loss ratio for the second quarter of 2006 was 5.6% compared to 30.1% for the second quarter of 2005. Losses and loss expenses incurred in the second quarter of 2006 were $0.9 million. While there were no significant property catastrophe losses during the second quarter of both 2006 and 2005, we had overall favorable loss reserve development of $7.5 million on prior year reserves during the quarter ended June 30, 2006. We did not experience material development on our reserves for the 2005 hurricanes during the quarter. The expense ratio was 104.5% for the second quarter of 2006 compared to 24.0% in the year-earlier quarter due to the decrease in net premiums earned and an increase in operating expenses of $0.9 million in 2006 related to additional fees to attorneys and financial advisors which have been incurred as a result of our ratings downgrades, the Board of Directors' decision to explore strategic alternatives for the Company and the class action securities lawsuits filed against the Company during the quarter. GAAP Ratios Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 Loss Ratio, All Lines 5.6% 30.1% 20.2% 42.7% Expense Ratio 104.5% 24.0% 41.8% 23.6% Combined Ratio 110.1% 54.1% 62.0% 66.3% Loss Ratio, Cat & Risk Excess 10.7% 28.5% 19.0% 41.9% In the fourth quarter of 2005, PXRE sponsored a catastrophe bond transaction which was determined to be a derivative and recorded at fair value on the Company's balance sheet. The increase of $2.3 million in other reinsurance related expense was due to the change in fair value of this derivative during the quarter ended June 30, 2006. Operating results reflect a tax benefit of $1.0 million for the second quarter of 2005. No tax benefit was recognized during the second quarter of 2006. On a fully diluted basis, book value per share increased to $6.51 at June 30, 2006 from $6.50 per share at March 31, 2006. During the second quarter of 2006, PXRE recorded a change in net after-tax unrealized depreciation in investments of $0.7 million in other comprehensive income, which resulted in a $0.01 decrease in fully diluted book value per share. The cause of this decrease in value was primarily an increase in interest rates during the quarter. PXRE - with operations in Bermuda, Europe and the United States - provides reinsurance products and services to a worldwide marketplace. The Company's primary focus is providing property catastrophe reinsurance and retrocessional coverage. The Company also provides marine, aviation and aerospace products and services. The Company's shares trade on the New York Stock Exchange under the symbol "PXT." PXRE Group Ltd. is scheduled to hold a conference call with respect to its second quarter financial results on Tuesday, August 8, 2006 at 10:00 a.m. Eastern Time. A live webcast of the conference call will be available online at http://www.pxre.com/. The dial-in numbers are (800) 479-1628 for U.S. and Canadian callers and (719) 457-2729 for international callers. Following the conclusion of the presentation, the webcast will remain available online through September 8, 2006 at http://www.pxre.com/. In addition, a replay of the call will be available from August 8, 2006 - August 15, 2006 by dialing (888) 203-1112. Callers dialing from outside the U.S. and Canada can access the replay by dialing (719) 457-0820. Please enter 6634737 as the conference ID. Quarterly financial statements are expected to be available on the Company's website under the press release section of News and Events after market close on August 7, 2006. To request other printed investor material from PXRE or additional copies of this news release, please call (441) 296-5858, send e-mail to , or visit http://www.pxre.com/. Statements in this release that are not strictly historical are forward-looking and are based upon current expectations and assumptions of management. Statements included herein, as well as statements made by or on behalf of PXRE in its communications and discussions with investors and analysts in the normal course of business through meetings, phone calls and conference calls, which are not historical in nature are intended to be, and are hereby identified as, "forward-looking statements" for purposes of the safe harbor provided by Section 21E of the Securities Exchange Act of 1934 as amended. These forward-looking statements, identified by words such as "intend," "believe," "anticipate," or "expects" or variations of such words or similar expressions are based on current expectations, speak only as of the date thereof, and are subject to risk and uncertainties. In light of the risks and uncertainties inherent in all future projections, the forward-looking statements in this report should not be considered as a representation by us or any other person that the Company's objectives or plans will be achieved. The Company cautions investors and analysts that actual results or events could differ materially from those set forth or implied by the forward-looking statements and related assumptions, depending on the outcome of certain important factors including, but not limited to, the following: (i) we are exploring strategic alternatives and the implementation of any of these alternatives could involve substantial uncertainties and risks, including, among other things, the risk of failure in the implementation thereof and significant restructuring costs; (ii) as a result of the recent decline in our ratings and decline in capital, more than 75% of our clients as of January 1, 2006, measured by premium volume, may have the right to cancel their reinsurance contracts, which could result in a substantial loss in premium volume in 2006 and subsequent periods; (iii) the downgrade in, and withdrawal of, the ratings of our reinsurance subsidiaries by rating agencies will materially and negatively impact our business and results of operations; (iv) the decline in, and withdrawal of, our ratings and reduction in our surplus will allow clients to terminate their contracts with us and, with respect to ceded reinsurance, may require us to transfer premiums retained by us into a beneficiary trust; (v) we may not be able to identify or implement strategic alternatives for PXRE; (vi) if our Board of Directors concludes that no feasible strategic alternative would be in the best interests of our shareholders, it may determine that the best course of action is to place the reinsurance operations of PXRE into runoff and eventually commence an orderly winding up and liquidation of PXRE operations over some period of time that is not currently determinable; (vii) if the Board of Directors elects to pursue a strategic alternative that does not involve the continuation of meaningful property catastrophe reinsurance business, there is a risk that the Company could incur material charges or termination fees in connection with our collateralized catastrophe facilities and certain multiyear ceded reinsurance agreements; (viii) our ability to continue to operate our business and to identify, evaluate and complete any strategic alternative are dependent on our ability to retain our management and other key employees, and we may not be able to do so; (ix) the market price of our common stock has declined and may decline further as a result of our announcements of increased loss estimates for losses due to Hurricanes Katrina, Rita and Wilma and the ratings downgrades we have experienced; (x) the Company faces significant litigation related to alleged securities law violations; (xi) recent adverse events have affected the market price of our common shares, which may lead to further securities litigation, administrative proceedings or both being brought against us; (xii) reserving for losses includes significant estimates which are also subject to inherent uncertainties; (xiii) because of exposure to catastrophes, our financial results may vary significantly from period to period; (xiv) we may be overexposed to losses in certain geographic areas for certain types of catastrophe events; (xv) we may be overexposed to smaller catastrophe losses and for certain geographic areas and perils due to the cancellations of a substantial portion of our assumed reinsurance contracts following our recent ratings downgrade; (xvi) we operate in a highly competitive environment and no assurance can be given that we will be able to compete effectively in this environment; (xvii) reinsurance prices may decline, which could affect our profitability; (xviii) we may require additional capital in the future; (xix) our investment portfolio is subject to significant market and credit risks which could result in an adverse impact on our financial position or results; (xx) because we depend on a few reinsurance brokers for a large portion of revenue, loss of business provided by any one or more of them could adversely affect us; (xxi) the impact of investigations of broker fee and placement arrangements could adversely impact our ability to write more business; (xxii) we have exited the finite reinsurance business, but claims in respect of finite reinsurance could have an adverse effect on our results of operations; (xxiii) our reliance on reinsurance brokers exposes us to their credit risk; (xxiv) we may be adversely affected by foreign currency fluctuations; (xxv) retrocessional reinsurance subjects us to credit risk and may become unavailable on acceptable terms; (xxvi) we have exhausted our retrocessional coverage with respect to Hurricane Katrina, leaving us exposed to further losses; (xxvii) recoveries under portions of our collateralized facilities are triggered by modeled loss to a notional portfolio, rather than our actual losses arising from a catastrophe event, which creates a potential mismatch between the risks assumed through our inwards reinsurance business and the protection afforded by these facilities; (xxviii) our inability to provide the necessary collateral to cedents could affect its ability to offer reinsurance in certain markets; (xxix) the insurance and reinsurance business is historically cyclical, and we may experience periods with excess underwriting capacity and unfavorable premium rates; conversely, we may have a shortage of underwriting capacity when premium rates are strong; (xxx) regulatory constraints may restrict our ability to operate our business; (xxxi) any determination by the United States Internal Revenue Service ("IRS") that we or our offshore subsidiaries are subject to U.S. taxation could result in a material adverse impact on the our financial position or results; and (xxxii) any changes in tax laws, tax treaties, tax rules and interpretations could result in a material adverse impact on our financial position or results. In addition to the factors outlined above that are directly related to PXRE's business, PXRE is also subject to general business risks, including, but not limited to, adverse state, federal or foreign legislation and regulation, adverse publicity or news coverage, changes in general economic factors, the loss of key employees and other factors set forth in PXRE's SEC filings. The factors listed above should not be construed as exhaustive. Therefore, actual results or outcomes may differ materially from what is expressed or forecasted in such forward-looking statements. PXRE undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events (including catastrophe events), or otherwise. PXRE Group Ltd. Unaudited Financial Highlights (Dollars in thousands except per share amounts) Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 Gross premiums written ($22,098) $66,863 $ 99,287 $191,563 Net premiums written ($27,906) $63,454 $ 50,987 $177,060 Revenues $25,206 $90,082 $115,737 $180,062 Losses and expenses (23,066) (47,583) (71,985) (114,884) Income before income taxes and convertible preferred share dividends 2,140 42,499 43,752 65,178 Income tax benefit - (1,008) - (1,072) Net income before convertible preferred share dividends $ 2,140 $43,507 $ 43,752 $ 66,250 Net income per diluted common share $ 0.03 $ 1.30 $ 0.57 $ 2.00 Average diluted shares outstanding (000's) 77,090 33,359 77,025 33,186 Financial Position: June 30, Dec. 31, 2006 2005 Cash and investments $1,360,560 $1,660,996 Total assets 1,629,893 2,116,047 Reserve for losses and loss expenses 841,908 1,320,126 Shareholders' equity 504,538 465,318 Book value per common share (1) 6.51 6.01 Statutory surplus: PXRE Reinsurance Ltd. 555,900(2) 530,775(3) PXRE Reinsurance Company 133,500(4) 126,991 Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 GAAP Ratios: Loss ratio 5.6% 30.1% 20.2% 42.7% Expense ratio 104.5% 24.0% 41.8% 23.6% Combined ratio 110.1% 54.1% 62.0% 66.3% Losses Incurred by Segment: Cat & Risk Excess $1,654 $23,739 $17,533 $68,505 Exited (804) 1,386 1,117 1,058 $ 850 $25,125 $18,650 $69,563 Commission and Brokerage, Net of Fee Income by Segment: Cat & Risk Excess $4,336 $ 9,546 $16,078 $18,802 Exited 267 37 229 (152) $4,603 $ 9,583 $16,307 $18,650 Underwriting Income (Loss) by Segment: (5) Cat & Risk Excess $9,452 $50,086 $58,827 $76,205 Exited 404 (1,374) (1,388) (1,564) $9,856 $48,712 $57,439 $74,641 Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 Underwriting Income Reconciled to Income Before Income Taxes and Convertible Preferred Share Dividends: Underwriting income (5) $9,856 $48,712 $57,439 $74,641 Net investment income 13,249 6,681 31,161 17,123 Net realized investment losses (3,379) (225) (8,038) (332) Other reinsurance related expense (2,255) - (5,976) - Operating expenses (11,392) (10,471) (22,357) (19,848) Foreign exchange (losses) gains (338) 1,414 (1,265) 816 Interest expense (3,601) (3,612) (7,212) (7,222) Income before income taxes and convertible preferred share dividends $2,140 $42,499 $43,752 $65,178 (1) After considering convertible preferred shares. (2) Estimated and before inter-company eliminations. (3) Before inter-company eliminations. (4) Estimated. (5) Underwriting Income (Loss) by Segment (a GAAP financial measure): The Company's reported underwriting results are its best measure of profitability for its individual underwriting segments and accordingly are disclosed in the footnotes to the Company's financial statements required by SFAS 131, Disclosures about Segments of an Enterprise and Related Information. Underwriting Income by Segment is calculated by subtracting losses and loss expenses incurred and commission and brokerage, net of fee income from net earned premiums. PXRE does not allocate net investment income, net realized investment gains (losses), other reinsurance related expense, operating expenses, foreign exchange gains or losses, or interest expense to its respective underwriting segments. These preliminary financial statements are unaudited and do not include footnotes that customarily accompany a complete set of financial statements; these footnotes will be furnished when the Company makes its filing on Form 10-Q for the quarter ended June 30, 2006. PXRE Consolidated Balance Sheets Group Ltd. (Dollars in thousands, except par value per share) June 30, December 31, 2006 2005 (Unaudited) Assets Investments: Fixed maturities, at fair value: Available-for-sale (amortized cost $667,891 and $1,212,299, respectively) $ 658,712 $1,208,248 Trading (cost $35,359 and $28,225, respectively) 37,176 25,796 Short-term investments, at fair value 603,410 261,076 Hedge funds, at fair value (cost $35,451 and $132,690, respectively) 40,260 148,230 Other invested assets, at fair value (cost $2,071 and $2,806, respectively) 2,651 3,142 Total investments 1,342,209 1,646,492 Cash 18,351 14,504 Accrued investment income 5,380 10,809 Premiums receivable, net 124,017 217,446 Other receivables 8,268 17,000 Reinsurance recoverable on paid losses 7,813 4,223 Reinsurance recoverable on unpaid losses 44,941 107,655 Ceded unearned premiums 13,877 1,379 Deferred acquisition costs 381 5,487 Income tax recoverable 6,204 6,295 Other assets 58,452 84,757 Total assets $1,629,893 $2,116,047 Liabilities Losses and loss expenses $ 841,908 $1,320,126 Unearned premiums 3,602 32,512 Subordinated debt 167,085 167,081 Reinsurance balances payable 22,328 30,244 Deposit liabilities 56,458 68,270 Other liabilities 33,974 32,496 Total liabilities 1,125,355 1,650,729 Shareholders' Equity Serial convertible preferred shares, $1.00 par value, $10,000 stated value -- 30 million shares authorized, 0.01 million and 0.01 million shares issued and outstanding, respectively 58,132 58,132 Common shares, $1.00 par value -- 350 million shares authorized, 72.4 million and 72.3 million shares issued and outstanding, respectively 72,408 72,281 Additional paid-in capital 874,648 875,224 Accumulated other comprehensive loss (9,027) (5,468) Accumulated deficit (486,135) (527,349) Restricted shares at cost (0.4 million and 0.5 million shares, respectively) (5,488) (7,502) Total shareholders' equity 504,538 465,318 Total liabilities and shareholders' equity $1,629,893 $2,116,047 PXRE Consolidated Statements of Income and Comprehensive Income Group Ltd. (Dollars in thousands, except per share amounts) Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 (Unaudited) (Unaudited) Revenues Net premiums earned $15,309 $83,420 $92,396 $162,854 Net investment income 13,249 6,681 31,161 17,123 Net realized investment losses (3,379) (225) (8,038) (332) Fee income 27 206 218 417 25,206 90,082 115,737 180,062 Losses and Expenses Losses and loss expenses incurred 850 25,125 18,650 69,563 Commission and brokerage 4,630 9,789 16,525 19,067 Other reinsurance related expense 2,255 - 5,976 - Operating expenses 11,392 10,471 22,357 19,848 Foreign exchange losses (gains) 338 (1,414) 1,265 (816) Interest expense 3,601 3,612 7,212 7,222 23,066 47,583 71,985 114,884 Income before income taxes and convertible preferred share dividends 2,140 42,499 43,752 65,178 Income tax benefit - (1,008) - (1,072) Net income before convertible preferred share dividends $ 2,140 $43,507 $43,752 $ 66,250 Convertible preferred share dividends 1,375 1,268 2,538 4,637 Net income to common shareholders $ 765 $42,239 $41,214 $ 61,613 Comprehensive Income, Net of Tax Net income before convertible preferred share dividends $ 2,140 $43,507 $43,752 $ 66,250 Net change in unrealized (depreciation) appreciation on investments (4,087) 5,783 (11,715) (1,564) Reclassification adjustments for losses included in net income 3,374 161 8,033 217 Minimum additional pension liability - - 123 - Comprehensive income $ 1,427 $49,451 $40,193 $ 64,903 Per Share Basic: Income before convertible preferred share dividends $ 0.03 $ 1.54 $ 0.61 $ 2.73 Convertible preferred share dividends (0.02) (0.04) (0.04) (0.19) Net income to common shareholders $ 0.01 $ 1.50 $ 0.57 $ 2.54 Average shares outstanding (000's) 71,986 28,179 71,927 24,236 Diluted: Net income $ 0.03 $ 1.30 $ 0.57 $ 2.00 Average shares outstanding (000's) 77,090 33,359 77,025 33,186 PXRE Consolidated Statements of Shareholders' Equity Group Ltd. (Dollars in thousands) Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 (Unaudited) (Unaudited) Convertible Preferred Shares Balance at beginning of period $ 58,132 $ 63,371 $ 58,132 $163,871 Conversion of convertible preferred shares - - - (103,869) Dividends to convertible preferred shareholders - - - 3,369 Balance at end of period $ 58,132 $ 63,371 $ 58,132 $ 63,371 Common Shares Balance at beginning of period $ 72,410 $ 28,646 $ 72,281 $ 20,469 (Cancellation) issuance of common shares, net (2) 167 127 8,344 Balance at end of period $ 72,408 $ 28,813 $ 72,408 $ 28,813 Additional Paid-in Capital Balance at beginning of period $875,228 $433,811 $875,224 $329,730 (Cancellation) issuance of common shares, net (580) 3,137 (576) 106,850 Tax effect of stock options exercised - 250 - 618 Balance at end of period $874,648 $437,198 $874,648 $437,198 Accumulated Other Comprehensive Income Balance at beginning of period $ (8,314) $(12,146) $ (5,468) $ (4,855) Change in unrealized (losses) gains on investments (713) 5,944 (3,682) (1,347) Change in minimum additional pension liability - - 123 - Balance at end of period $ (9,027) $ (6,202) $ (9,027) $ (6,202) (Accumulated Deficit)/ Retained Earnings Balance at beginning of period $(486,900) $212,221 $(527,349) $194,081 Net income before convertible preferred share dividends 2,140 43,507 43,752 66,250 Dividends to convertible preferred shareholders (1,375) (1,268) (2,538) (4,637) Dividends to common shareholders - (3,446) - (4,680) Balance at end of period $(486,135) $251,014 $(486,135) $251,014 Restricted Shares Balance at beginning of period $ (6,846) $(11,304) $ (7,502) $ (6,741) Cancellation (issuance) of restricted shares, net 743 (617) 603 (6,069) Amortization of restricted shares 615 1,194 1,411 2,083 Balance at end of period $ (5,488) $(10,727) $ (5,488) $(10,727) Total Shareholders' Equity Balance at beginning of period $503,710 $714,599 $465,318 $696,555 Conversion of convertible preferred shares - - - (103,869) (Cancellation) issuance of common shares, net (582) 3,304 (449) 115,194 Restricted shares, net 1,358 577 2,014 (3,986) Unrealized (depreciation) appreciation on investments (713) 5,944 (3,682) (1,347) Minimum additional pension liability - - 123 - Net income before convertible preferred share dividends 2,140 43,507 43,752 66,250 Dividends to convertible preferred shareholders (1,375) (1,268) (2,538) (1,268) Dividends to common shareholders - (3,446) - (4,680) Tax effect of stock options exercised - 250 - 618 Balance at end of period $504,538 $763,467 $504,538 $763,467 PXRE Consolidated Statements of Cash Flows Group Ltd. (Dollars in thousands) Three Months Ended Six Months Ended June 30, June 30, 2006 2005 2006 2005 (Unaudited) (Unaudited) Cash Flows from Operating Activities Premiums collected, net of reinsurance $(6,157) $71,568 $136,501 $181,459 Loss and loss adjustment expenses paid, net of reinsurance (139,269) (58,164) (402,590) (104,500) Commission and brokerage received (paid), net of fee income 4,179 4,241 (4,816) (14,463) Operating expenses paid (14,560) (6,593) (27,701) (17,538) Net investment income received 9,472 9,929 27,400 17,232 Interest paid (1,360) (1,371) (7,154) (7,165) Income taxes (paid) recovered (123) 11,283 91 18,469 Trading portfolio purchased (52,175) (13) (101,714) (14,409) Trading portfolio disposed 52,445 - 92,566 - Deposit (paid) received (8,275) 3,983 (11,812) 931 Other (726) (927) (3,607) (984) Net cash (used) provided by operating activities (156,549) 33,936 (302,836) 59,032 Cash Flows from Investing Activities Fixed maturities available for sale purchased (47) (107,034) (67,038) (295,024) Fixed maturities available for sale disposed or matured 34,304 59,108 603,837 115,654 Hedge funds purchased - (9,536) (4,000) (114,888) Hedge funds disposed 104,248 9,698 117,364 108,503 Other invested assets purchased (35) - (35) - Other invested assets disposed 598 25 1,171 1,392 Net change in short-term investments 19,704 15,061 (342,334) 125,542 Receivable for securities - 11,516 - (344) Payable for securities 100 (20,389) 100 1,527 Net cash provided (used) by investing activities 158,872 (41,551) 309,065 (57,638) Cash Flows from Financing Activities Proceeds from issuance of common shares 162 2,693 419 5,822 Cash dividends paid to common shareholders - (3,446) - (4,680) Cash dividends paid to preferred shareholders (1,375) (1,268) (2,538) (1,268) Cost of shares repurchased - (6) (263) (567) Net cash used by financing activities (1,213) (2,027) (2,382) (693) Net change in cash 1,110 (9,642) 3,847 701 Cash, beginning of period 17,241 26,011 14,504 15,668 Cash, end of period $ 18,351 $ 16,369 $ 18,351 $ 16,369 Reconciliation of net income to net cash (used) provided by operating activities: Net income before convertible preferred share dividends $ 2,140 $ 43,507 $ 43,752 $ 66,250 Adjustments to reconcile net income to net cash (used) provided by operating activities: Losses and loss expenses (168,131) (41,809) (478,217) (41,328) Unearned premiums (43,215) (19,967) (41,408) 14,205 Deferred acquisition costs 9,825 1,567 5,106 (3,485) Receivables 24,902 20,922 102,161 8,286 Reinsurance balances payable (2,365) (1,755) (7,916) 2,210 Reinsurance recoverable 29,711 8,770 59,125 6,391 Income taxes (123) 10,549 91 17,670 Equity in earnings of limited partnerships (167) (135) (6,039) (4,538) Trading portfolio purchased (52,175) (13) (101,714) (14,409) Trading portfolio disposed 52,445 - 92,566 - Deposit liability (8,275) 3,983 (11,812) 931 Receivable on commutation - - 35,154 - Other (1,121) 8,317 6,315 6,849 Net cash (used) provided by operating activities $(156,549) $ 33,936 $(302,836) $ 59,032 DATASOURCE: PXRE Group Ltd. CONTACT: Robert P. Myron, Chief Financial Officer, PXRE Group Ltd., +1-441-296-5858, ; Investors - Jamie Tully, or Lesley Bogdanow, both of Citigate Sard Verbinnen, +1-212-687-8080, Web site: http://www.pxre.com/

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