Bermuda insurance companies IPC Holdings Ltd. and Max Capital Group Ltd. are to combine to create Bermuda's sixth largest global underwriter.

The new, Bermuda-based holding company will be called Max Capital Group and its president and chief executive officer will be Marston Becker, Max's current CEO.

IPC CEO Jim Bryce, who is to retire at the end of June, said yesterday: "We hope this will be a case of one plus one equals more than two."

Under the terms of the deal, IPC is effectively acquiring Max in a stock-based deal with the aim of creating a bigger and more diversified insurance company.

Holders of Max common stock will receive 0.6429 of an IPC share for every Max share they own, which values Max at around $912 million, or $16.34, according to Bloomberg figures. Max's closing share price on Friday was $16.50.

Mr. Becker said Max shareholders had effectively paid one percent in market value to have a balance sheet two-and-a-half times as large.

IPC shareholders will own 58 percent of the new company, which will have shareholders' equity of $3 billion and total assets of around $10 billion.

The transaction is expected to close in the third quarter of this year.

Mr. Becker told The Royal Gazette yesterday that no Bermuda jobs would go as a result of the merger. IPC employs 32 staff and Max has 110 employees on the Island.

"This is not an expense-saving transaction," Mr. Becker said. "Overlapping activities are few and far between. This is good news for everybody and good news for Bermuda jobs."

Mr. Becker said the merger had been in the works for the last three to four months, from Max's viewpoint, and that the two firms were a good fit.

"IPC has been a very well managed company," he said. "Its business mix has been concentrated in one line of business. And so the combination of the two firms resulted in fewer integration issues than might usually be the case in a merger."

Max had repositioned itself in the market over the past two years by adding to its Bermuda and Dublin underwriting platforms, Mr. Becker added. In 2007, it established Max Specialty, which operates in six US cities, and in 2008 it moved into the London market through Max at Lloyd's.

The merger would further increase its underwriting reach and its capital base.

"Capital is king," Mr. Becker said. "People looking for insurance and reinsurance are looking for security. Being a larger and better capitalised company will make us more appealing."

After his retirement as IPC CEO, Mr. Bryce will stay on in a non-executive role as chairman of the newly formed company's reinsurance arm, which will be named Max IPC Re. Mr. Bryce, who has 35 years' experience in the property-casualty underwriting business, will be active in client relations and marketing.

"I had been considering retiring in 2009, so my retirement announcement has nothing to do with this transaction," Mr. Bryce said in a conference call with analysts. "Indeed I intend to continue to be an advisor for a minimum of six months to a year, or longer, if circumstances dictate."

Mr. Bryce said IPC had decided some years ago to seek a merger partner to enable it to diversify its property-catastrophe reinsurance dominated business.

After the record catastrophe losses of 2005, when hurricanes Katrina, Rita and Wilma ravaged the southern US, "it became apparent to us that having a monoline business model, it would be difficult for us to build and sustain value for shareholders in the long term", Mr. Bryce said.

IPC sought a partner that would enable it to diversify by geography and business line, to increase in size and to add strength and depth to management.

"Early on, it became clear to us that Max could be that partner," Mr. Bryce said, adding that he expected the deal would fulfil IPC's objectives.

"Moreover, as we seek to satisfy rising market demands in a challenging environment, we believe the timing of this transaction will prove to be both opportune and attractive for our respective shareholders," Mr. Bryce added.