The head of a Bermuda life reinsurance company is predicting a dazzling future for the organisation.

In an interview published in The Wall Street Transcript yesterday, Lawrence Doyle, president and chief executive officer of Annuity & Life Re (Holdings) in Bermuda, said: "We expect to be one of the top ten life reinsurers in North America in three years.'' Mr. Doyle said he expects the life reinsurance sector to have a much higher growth rate than other insurance sectors over the next few years as a result of changing demographics.

"Since we couple our cost advantage with value-added solutions for the customer, we are in a better position to enable the client to achieve its objectives. Therefore we should have a much higher growth rate than our competitors," he said.

Annuity was established in 1997 by XL Capital and was the first reinsurer in Bermuda specialising in annuity and life reinsurance. It assists companies with life business for the duration of the underlying business so average premiums it receives may continue for up to 50 years.

It reinsures five million people with 40 major companies in North America and at year-end 2000 had $2.2 billion assets and $441 million capital. Operating income last year was $45 million and during the year Annuity wrote $160 million of annualised premium. The stock price initially was $15 but had risen to $32 by the end of 2000.

As the company grows Mr. Doyle feels it needs to build its staff. To retain a low expense structure the company hires additional staff three to four months in advance of anticipated growth. Beginning with seven staff at formation of the company in 1997, it now employs 20.

"We also need to further develop our product offerings. The role of the reinsurer is changing from that of the traditional risk manager to a `strategic financial partner' role. Although we have all the tools to provide a substitute for equity, we have to overcome the historical bias of the customer,'' he added.

In response to a question about what he views as the major concerns or risks facing the company he replied that the biggest concern is pricing competition from reinsurers with lower return on equity targets or those that just take business to achieve growth.

Mr. Doyle said the advantage of being domiciled in Bermuda, combined with a very low expense structure produces a significant pricing advantage over US competitors.

"In spite of that advantage, we were usually only successful in writing about one third of the business than we actually underwrite. We maintain strict underwriting standards, which should produce superior results in the long term.'' Annuity's secure ownership with 21 percent in the hands of three major companies, XL Capital, Overseas Partners and Prudential Insurance, ten percent in the hands of insiders and the rest in the hands of around 3,000 shareholders gives the company a competitive edge, he feels. "Many of our competitors are owned by large primary life companies that could potentially have a conflict with some of their client base.'' Over the next several years Mr. Doyle anticipates changing demographics will lead to a restructuring of many business models in the industry and a greater emphasis on meeting retirement needs. He also feels there are too many primary life companies in the business and this will result in industry consolidation and demutualisation.

He expects life reinsurance to be a high growth business. "Reinsurance is a very valuable tool because it is actually used as a substitute for equity.

When you reinsure business it is removed from your books. This frees up capital and usually the company is able to secure a tax advantage as well. The capital that is freed can now be redeployed into more profitable business.''