After a relatively profitable last few years, the rates for property catastrophe reinsurance, much like other lines of business, have continued to soften.

It is a time that the market looks for underwriting skills to come to the fore. Another counter balance has been the buyers', or insurance companies', need for quality reinsurance, and increasing amounts of protection.

The success evident in the just-released financial highlights of Bermuda-based Mid Ocean Re's 1995 year, underscores how the top flight reinsurer has become a magnet in the flight to quality.

Their client base has been built on longer term buyers, who are buying for quality, not just for price. And in a sense, Mid Ocean Re, then is protected from the soft market.

Yet, even in a downward moving market, the company believes it can retain relationships with a very high quality client base.

"When people have problems they think of coming to us because of the strength of our capital and the quality of our sponsorship, etc.,'' said president and CEO, Mr. Michael A. Butt.

"We get opportunities then which are difficult to predict, but which feed the growth. If you'd asked me a year ago what I expected Mid Ocean would do in 1995, I'd have said maybe 380, 400 million. We've written 445.'' Their book has gone from more than 60 percent of property catastrophe business to less than 45 percent, while still maintaining market share. They are not alone in the changing Bermuda marketplace, where as expected, the big companies are looking increasingly toward developing other lines.

The company doubled their net profit for the year up to $182.9 million. But it was one of the remarkable facets of the end of year figures that the company had $445,819,000 in gross premiums written, a 24 percent increase over the year before.

Said Mr. Butt, "That is the magnet effect. It attracts opportunities in a very dynamic, challenged, changing marketplace around the world.'' Added vice president and treasurer Mr. John Wadson, "It also speaks to the stature of our underwriters, who are well known in the marketplace and enthusiastic.'' Mr. Butt continued, "Our writings have increased significantly, and, within the balance of our book. And I believe that through the balance of our book, we create a stability in our earnings flow which is one of the areas we are seeking to strengthen in a volatile business. That is part of our strategy.'' With work the company began in the UK on November 1 with their London underwriting team, Mid Ocean Re is a leading reinsurer, providing not just property catastrophe, but property risk excess of loss, property pro rata, marine, energy, aviation, satellite and other reinsurance.

And while Mid Ocean Re expects to expand within their new lines of business over the year ahead, Mr. Butt said that the company would not stop there.

"We have plenty more to do in the lines of business we are currently writing.

But do I expect even more diversification? Yes, given that we can find the right opportunities with the right risk reward ratios. But broadly, yes.'' The company posted a 56.5 percent loss ratio for the fourth quarter ended October 31, compared to 52.1 percent for the same period in 1994, and, a 52.4 percent loss ratio for the year, compared to 65.5 percent for 1994.

Back in 1992, when the company was being formed, the projections were for an average loss ratio throughout a cycle of several years to be 60 percent. They are taking the good years now, fully expecting to see a year when the loss ratio is much worse.

The combined ratio was 78.9 percent for the quarter, compared with 66.7 percent for the same period a year ago, and, 71.6 percent for the year, compared with 80.8 percent a year ago.

"But,'' cautioned Mr. Butt, "we are going to have a year, some year, when it will be way above that. In a volatile business you have to take the return smoothed over a period.

"Without a doubt, this last year was a good year, in fact, an excellent year in terms of return, but over the period of a full cycle we will have years when our loss ratios are much higher than that.

"We just haven't had the bigger hits, although Northridge (LA earthquake) was a very large hit which we digested and still made a profit for the year. As a matter of fact, our loss ratio was higher as a result.

"What we are trying to prove over time is that we can manage the volatility of those big ones and still make a profit.'' But the company is still sitting on a lot of capital.

Said Mr. Butt, "We've bought back this year. So we've shown that we are willing to manage our capital. We have a board meeting at the end of February, when we would review our capital requirements.

"Because the January renewal season would then be behind us, we could tell roughly what 60 percent of the business, and therefore the capital demands, are going to be for the year. So we review our capital structure, our dividend policy at the time of our AGM February 29.''