Quanta Capital Holdings, a Bermuda insurer that warned investors a month ago it was delaying its quarterly report to give it more time to assess internal controls, late on Friday delivered a further shock to shareholders: A quarterly loss of $54.7 million, nearly $10 million more than its highest preliminary forecast.

Quanta, which has been battered by higher-than-expected losses from hurricanes over the past two years as well as the high cost of severance packages for a wave of departing executives, said in the delayed regulatory filing that losses for the 2005 year totalled $105.9 million. Quanta in recent weeks said it expected the 2005 loss to be in a range between $94 million and $97 million. The company posted a net loss of $54.6 million in 2004.

The higher loss announcements come on the heels of Quanta last month saying it was exploring "strategic alternatives" including the sale of units, or closing off some units to new business. Investment bank Friedman Billings Ramsey (one of Quanta's largest shareholders) and J.P. Morgan Securities Inc. have been retained to offer the company financial advice. Quanta said it was looking to "preserve shareholder value" and was in a financial position to meet current liabilities.

The company's shares closed on Friday at $3 in Nasdaq composite trading, ahead of the annual report filing being lodged with the US Securities and Exchange Commission. Quanta's shares have traded in a range between $2.20 and $8.50 in the last year.

Quanta said it expects to see its 2006 business dwindle to less than a quarter of last year's sales, when net policy sales totalled $390 million, down from $419.5 million a year earlier.

The company's future business prospects were called into question after ratings firm A.M. Best on March 2 downgraded its financial strength rating to B++, a rating too low to attract business from many insurance buyers.

At the end of March, more than two percent of Quanta's customers had cancelled contracts, and more cancellations are expected, the company said in its Friday filing. And Quanta said its downgrade was also hurting business at its Lloyd's unit, an operation that got off the ground last year and wasn't included as part of the A.M. Best ratings cut.

Amongst the latest blows being dealt Quanta, and detailed in the filing that ran to more than 250 pages in length, the company has been cut from the approved list by leading brokers Aon Corporation and Marsh Inc.

And Quanta said its auditor, PricewaterhouseCoopers, detected several lapses in internal controls at Quanta, that could prevent it from detecting a material accounting error.

These included a lack of sufficient personnel employed in its US office to meet financial reporting requirements. And the staff it did have did not maintain effective controls over the accuracy, completeness of, or access to certain reports that are part of the financial reporting process.

Quanta said some of the deficiencies detected were ones required under corporate governance law Sarbanes-Oxley, which is binding on publicly-listed companies.

The company has formed a Finance Internal Control Committee, amongst other measures, and plans to hire a chief accounting officer to help remedy the lack of controls.

Quanta earlier said it was cutting employee costs, and on Friday said this included the reduction of consulting costs, and downsizing office space and consolidating personnel in its Bermuda office.

The company is also cutting employees as it reduces the types of insurance it sells. Quanta has now bowed out of the technical risk property, certain property reinsurance and surety lines. At the end of March, the company had some 318 full-time employees, and didn't indicate the number of jobs cut or to be cut.

The company didn't give much detail on its earlier pledge to cut infrastructure costs, apart from signing over a Bermuda lease for nearly $200,000 a year to a third party. It continues to let 8,445 square feet of Hamilton office space at a yearly cost of $435,000.

Quanta also leases space for its global operations, including 5,850 square feet of space for $190,000 in London, and prime New York office space in Rockefeller Plaza for an annual cost of $2.3 million.