Bermuda-based Mutual Risk Management (MRM) on Wednesday announced that it currently expects to report an after tax net loss of $6.3 million to $8.4 million, or 15 to 20 cents per diluted share, for the fourth quarter of 2001.

The company, which trades on the New York Stock Exchange, was reported on Wednesday to be the exchange's biggest percentage loser, by CBS MarketWatch. Its shares lost 29 percent of their value in the wake of the announcement, closing down $2.69 to $6.50. In early trading today, the shares were up 8.4 percent or 46 cents at $5.96.

The company said its losses result from the decision by the MRM's US insurance subsidiaries; the Legion Companies, to add up to $30 million, on an after tax basis, to their net loss reserves in the fourth quarter.

MRM also announced that AM Best had advised it that the A- (Excellent) financial strength rating of the Legion Companies is being placed under review with negative implications.

The Company intends to file a universal shelf registration statement with the Securities and Exchange Commission prior to the end of the year.

Mutual Risk will seek to raise additional capital to allow it to take advantage of the increased business opportunities presented by the current hard market for commercial insurance and to retain the Legion Companies current rating from A.M. Best Company.

-- A.M. Best Co. has placed the financial strength rating of A- (Excellent) for the three members of the Legion Insurance Group - Legion Insurance Co., Legion Indemnity Co. and Villanova Insurance Co., under review with negative implications.

The Legion Insurance Group is a core subsidiary of Mutual Risk Management Ltd., Bermuda. This rating action reflects A.M. Best's belief that there is a need for additional capital to support Legion's leveraged balance sheet and A.M. Best's standards for an A- rating. In early 2001, MRM successfully raised $112 million of debt, the proceeds of which were partially used to increase Legion's surplus by $80 million, a level which sufficiently supported the rating. The additional funds were needed to support significant levels of reinsurance recoverables.

The recoverables have continued to increase due, in part, to exposure to the WTC tragedy and the American Airlines crash in Queens, New York. At the end of third quarter 2001, reinsurance recoverables were approximately $2.55 billion, up approximately 10 percent from year-end 2000. Particularly, overdue paid recoverables at September 30, 2001 have increased higher than historical levels, affecting not only required capital but also raising concerns regarding operating cash flow. However, management predicts that year-end over 90-day recoverables will be at a level comparable to year-end 2000. In order to reduce reliance on reinsurance and benefit from improved market conditions, Legion will be retaining higher levels of its Specialty Insurance business, exceeding A.M. Best's expectations. In conjunction with higher anticipated net premium, management has contracted for a greater use of an outside consultant to review reserve adequacy. Higher levels of net premium and reserves, coupled with higher recoverables, has caused surplus to fall below the level needed to support the company's current rating.

A.M. Best has been encouraged by steps management has taken over the past several months, but progress has been hampered by the Reliance liquidation and the WTC attacks.

Outstanding reinsurance disputes have been reduced and an experienced programme underwriter has been hired to improve the quality of the company's Specialty Insurance operations. MRM's Corporate business segment and its fee based businesses are benefiting from improved pricing and market conditions. Fee based business alone is sufficient to support the interest payments on outstanding debt; however, financial leverage remains a concern.

Affirmation of Legion's rating is dependent upon management's successful near-term capital raising efforts.