cease many of its past underwriting areas, Bermuda-based reinsurer ESG Re suffered a $34.3 million loss in its third quarter earnings.

The "disappointing'' results were released yesterday and showed a loss per share of $2.90.

"We continue to be exposed to past decisions for some period of time until such time when the new business underwritten in 2000 within strict underwriting guidelines and strong terms of trade begins earning through,'' the release said.

"Initially, as the company had relatively limited specific historical experience on a significant number of its programmes on which to base its estimate of losses incurred but not reported, its reliance on ceding company expectations and industry experience was necessarily increased, which increased the uncertainty involved in the loss estimation process.

"In this quarter, which tends to be the most important from an analysis standpoint, the company had reviewed every contract with internal and external resources for adequacy of reserving and the related profitability.

"This has resulted in not only having to reverse previously reported profits (1998 was initially recorded at an 89 percent combined loss ratio and is now 109 percent) but also in further strengthening of loss reserves.

"We now believe that the 1998 and 1999 underwriting years have been prudently reserved.'' ESG Re has developed an action plan to turn business around. Their new tactic is to concentrate in three main areas: centralising underwriting in Dublin, writing only proven profitable business and emphasising profit not premium volume.

In addition, the company plan to write at a conservative ratio of 2:1 net written premium to capital.

For the three months ended September 30, 2000, the company had a net loss of $35.0 million from continuing operations, compared to a net loss of $14.2 million for the third quarter of 1999.

The net loss per share from continuing operations for the three months ended September 30, 2000 was $ 2.97 compared to a net loss of $1.03 for the third quarter of 1999. The net operating loss for the third quarter, which excludes realised investment gains, was $2.94 per share. Discontinued operations, being the company's Health Care Division and subsidiary in Indonesia, had net income of $750 thousand, or $0.07 per share.

For the nine months ended September 30, 2000, the Company had a net loss of $48.7 million from continuing operations, compared to a net loss of $ 7.0 million for the nine months ended September 30, 1999. The net loss per share from continuing operations for the nine months ended September 30, 2000 was $4.14 compared to a net loss of $.50 for the nine months ended September 30, 1999.

The net operating loss for the nine months, which excludes realised investment gains, was $4.53 per share. Discontinued operations, being the Company's Health Care Division and subsidiary in Indonesia, had a net loss of $5.2 million, or $.44 per share.

In line with the company's expectations, gross managed premium decreased by $29.7 million, or 47.1 percent, for the three months ended September 30, 2000, compared to the corresponding prior year period. Gross managed premium decreased by $66.8 million or 25.1 percent for the nine months ended September 30, 2000, compared to the corresponding prior year period.

For the three months ended September 30, 2000, the Company wrote $16.0 million of gross written premiums, compared to $59.7 million for the three months ended September 30, 1999. For the nine months ended September 30, 2000, the Company wrote $165.2 million of gross written premiums, compared to $243.6 million for the nine months ended September 30, 1999.

Consistent with changes in the market place, the company has scaled down the managed premium targets across the major lines of business with an enhanced focus on writing selective risks that are fully aligned with the company's revised terms of trade.

Total revenues for the three months ended September 30, 2000 were $44.1 million, consisting of net premiums earned of $39.7 million, net investment income of $3.6 million, realised investment gain of $.5 million, gain on equity investments of $.02 million and management fee revenue of $.2 million.

Total revenues for the three months ended September 30, 1999 were $69.8 million, consisting of net premiums earned of $67.5 million, net investment income of $3.5 million, realised investment losses of $.9 million, and management fee revenue of $(.3) million.

For the nine months ended September 30, 2000, total revenues were $184.6 million, consisting of net premiums earned of $174.0 million, net investment income of $9.7 million, realised investment losses of $0.6 million, gain on equity investments of $0.3 million and management fee revenue of $1.2 million.

Total revenues for the nine months ended September 30, 1999 were $203.9 million, consisting of net premiums earned of $193.1 million, net investment income of $10.5 million, realised investment losses of $1.1 million and management fee revenue of $1.4 million.

For the three months ended September 30, 2000, ESG's expenses totalled $79.1 million, consisting of $44.5 million of losses and loss expenses, $18.3 million of acquisition costs, and $16.4 million of reinsurance operating expenses.

Total expenses for the three months ended September 30, 1999 were $84.0 million, consisting of $56.6 million of losses and loss expenses, $19.8 million of acquisition costs, and $7.6 million of other operating expenses.

For the nine months ended September 30, 2000, ESG's expenses totaled $233.3 million, consisting of $144.4 million of losses and loss expenses, $56.4 million of acquisition costs, and $32.5 million of other operating expenses.

Total expenses for the nine months ended September 30, 1999 were $210.5 million, consisting of $140.3 million of losses and loss expenses, $52.7 million of acquisition costs, and $17.6 million of other operating expenses.

At September 30, 2000 total assets were $568.6 million and shareholders' equity was $117.1 million. Book value per share at September 30, 2000 was $9.94 per share.