Max Re Capital Ltd. founder and chief executive officer Robert J. Cooney has resigned from the company after it announced it will revise its numbers from two quarters this year because of accounting errors.

Max Re has already restated five years of earnings following a company probe into finite reinsurance contracts.

But the company's audit and risk management committee said it had re-opened the investigation after receiving new information about two contracts which suggested there was an oral agreement that would "negate risk transfer".

More than a dozen insurers and reinsurers have received subpoenas amid probes of non-traditional, or finite insurance, which regulators say can be used to smooth earnings.

Regulators are investigating whether finite reinsurance contracts concern a genuine transfer of risk, or if they are being used to smooth earnings by delaying losses or profits to subsequent financial quarters. Under accounting rules, contracts that do not contain risk transfer should be booked as loans.

The problems are linked to the so-called risk-transfer of two contracts signed in 2001 and will reduce earnings by about $10 million, Max Re said in a statement sent by PR Newswire yesterday. It will revise earnings for the periods between 2001 and 2005, as well as the first two quarters of fiscal 2006.

In May, Max Re said it would restate 2001-2005 earnings because of errors in accounting for the two so-called finite-risk contracts and another one. The company said today it is reopening an internal probe into the two contracts and has informed the US Securities and Exchange Commission about the investigation.

Max Re has obtained additional information about the two contracts, according to the statement. There is evidence pointing to an oral agreement that would negate risk transfer. Reinsurers have to prove that they absorbed some risk from the reinsured. A call to the office of chief financial officer Keith S. Hynes wasn't immediately returned.

The statement from Max Re said: "The additional information raised the possibility of the existence of an oral agreement that would negate risk transfer.

"The available evidence does not allow for a definitive conclusion as to the existence of such an oral agreement. However, because some of the evidence suggests such an agreement, the company believes there is an insufficient basis to conclude that there was risk transfer with respect to these two contracts and accordingly, the company has determined that it is appropriate to restate its financial statements for the years ending December 31, 2001 through 2005 and each of the periods ended March 31, 2006 and June 30, 2006 to reflect the risk transfer for these two contracts."

In July, the SEC requested information about Max Re's plan to revise earnings.

Cooney will be succeeded by W. Marston Becker as chairman and acting CEO, according to Max Re's statement.

"After founding and leading Max Re for seven years, I have submitted my resignation because I believe it is in the best interests of the company to do so," Mr. Cooney said in the statement. "I am confident that Max Re will continue to succeed and grow under the new management team put in place."

Chief risk officer Peter Minton has assumed the additional role of chief operating officer and executive vice president Angelo Guagliano has assumed the role of chief underwriting officer.

Max Re also said its auditors, KPMG, had not yet completed their audit for the three and nine month periods ending September 30 but said it expected the reinsurer would have net income of $25 million and $120 million respectively.

"With the last internal audit of these very same transactions concluded six months ago only to be reopened again, the financial reporting at Max Re will continue to be a disappointment to investors," Joshua Shanker, an analyst at Citigroup, said.

Max Re shares fell 2.4 percent to close at $22.97 yesterday. The stock is down roughly 12 percent so far this year.