PXRE has taken steps to facilitate a runoff after more than 80 percent of its 2006 business cancelled or did not renew as a result of ratings downgrades related to PXRE?s losses from last year?s hurricanes.

As of August 1, 2006, approximately 82 percent of PXRE?s in-force business that was in effect on January 1, 2006 either been cancelled or non-renewed, said Jeffrey L. Radke, president & chief executive officer of PXRE Group in the company?s earnings statement on Monday. He expects this percentage to increase as additional contracts are non-renewed.

While PXRE?s board continues to look for a strategic alternative that would maximise value for shareholders, Mr. Radke said if no alternative is in shareholder?s best interests, the board may place PXRE?s reinsurance business into runoff and eventually commence an orderly winding up of PXRE?s operations.

As such, the company has begun to take steps to facilitate such a runoff, including the negotiation of commutations. Mr. Radke said that during the second quarter, PXRE?s exited lines reserves decreased by approximately 46 percent, primarily due to commutations.

?We have also begun discussions with a number of our largest cedents to negotiate commutations of our 2005 hurricane reserves,? he said.

Late Monday evening PXRE Group Ltd. posted income before convertible preferred share dividends of $2.1 million in the second quarter 2006 compared to $43.5 million in the second quarter of 2005.

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 as a result of the cancellation of contracts.

There were no significant property catastrophe losses during the second quarter of both 2006 and 2005 and PXRE had overall favourable loss reserve development of $7.5 million on prior year reserves during the quarter ended June 30, 2006.

PXRE continues to have significant catastrophe exposures for the balance of 2006, however Mr. Radke said that loss reserves were adequate with no material development on reserves for Hurricanes Katrina, Rita and Wilma in the second quarter 2006.

Net investment income for the second quarter of 2006 increased 98 percent, or $6.6 million, to $13.2 million from $6.7 million for the corresponding period of 2005.

PXRE?s expense ratio rose to 104.5 percent for the second quarter of 2006 compared to 24 percent in the year-earlier quarter due to the decrease in net premiums earned and a $900,000 increase in operating expenses. The company said this increase was a result of additional fees paid to attorneys and financial advisors as a result of the ratings downgrades, the company?s decision to explore strategic alternatives and class action securities lawsuits filed against PXRE during the quarter.

PXRE shares closed at $3.95, down 8 cents on a volume of 194,500 shares on the New York Stock Exchange.