PXRE Group Ltd. yesterday said its net income before paying convertible preferred share dividends was $4.5 million in the third quarter of 2006 compared to a net loss of $317.3 million in the same period in 2005.

PXRE, which ran into financial difficulties last year after the record hurricane season and is now exploring strategic alternatives, said net premiums earned for the quarter decreased 92 percent, or $63.2 million, to $5.6 million from $68.8 million for the year-earlier period.

"This decrease in net premiums earned can be attributed to the cancellations and non-renewal of the majority of our reinsurance portfolio following our ratings downgrades by the major rating agencies in February 2006," the company said.

PXRE chief executive officer Jeffrey L. Radke said: "Our board of directors is continuing to explore various strategic alternatives that would maximise value for shareholders and we remain optimistic that we will find a solution other than runoff.

"As discussed in the past, however, if our board of directors concludes that no other alternative would be in the best interests of our shareholders, it may determine that the best option is to place PXRE's reinsurance business into runoff and eventually commence an orderly winding up of PXRE's operations over some period of time that is not currently determinable."

PXRE said the increas in net income in the third quarter was primarily due to the absence of any significant loss events in the quarter as well as favourable development on its loss reserves, offset by a decrease in net premiums earned due to the cancellation and non-renewal of the majority of our reinsurance portfolio following our ratings downgrades in February 2006.