Max Re shares jumped almost ten percent yesterday as investors greeted the news that a restatement of five years of earnings will reduce income by $14.8 million, far less than the $50 million cut initially projected.

Bermuda-based Max Re, a reinsurer that delayed filing its first quarter earnings pending the outcome of an internal investigation, said its restatement corrects the accounting on three finite risk contracts. A number of other insurers and reinsurers, over the last year, have also restated income to correct their misaccounting of finite risk contracts.

Under US accounting rules, a policy can only be accounted for as reinsurance if there is sufficient risk transfer. Otherwise the policy must be recorded under the less favourable deposit accounting rules.

Max Re said its review concluded that there was sufficient risk transfer in its three contracts but its audit and risk management committee determined there were other accounting aspects to be fixed.

Investors welcomed the company putting the matter behind it, pushing the shares up $2.02 or 9 percent to close at $24.05.

Max Re led all Bermuda-based insurers and reinsurers traded on public exchanges, followed by Partner Re's shares jumping $1.52 to $61.14, and Everest Re was up $1.06 to $89.01.

Max Re's income in 2005 will be reduced by $400,000, 2004 income will increase by $1.6 million, 2003 profits will be cut by $2 million, 2002 income will remain unchanged and 2001 income will be reduced by $14 million. Shareholders' equity will fall by $18.3 million, Max Re said in a statement. The company reported $1.22 billion in shareholders' equity at the end of last year.

The company was due to report first quarter earnings last night. And it said it will file an amended filing with the US Securities and Exchange Commission for 2005 and make its filing for the first quarter within 15 days.

Citigroup investment analyst Joshua Shanker said, in an investor note: "The upcoming earnings announcement and the release of the (quarterly report) remove uncertainty from the Max Re story."

The company had faced a delisting from the Nasdaq because of its delayed first quarter filing but said it expects that determination to be "rendered moot" once its filings are made.