Bermuda reinsurer Max Re Capital yesterday saw its share value fall to a level near its 52-week low after it announced an internal investigation that may require an earnings restatement.

The reinsurer saw its shares fall as low as $21.35 after markets opened. The company?s shares have traded in a range between $21 and $27 in the last year. Max Re shares closed at $23.29, down 60 cents or 2.5 percent on the Nasdaq Stock Exchange.

The reinsurer said late on Friday that its audit and risk management committee were, with the help of outside advisors, investigating whether three finite risk contracts sold in 2001 and 2003 had been properly accounted for.

Finite risk is a type of insurance contract that has courted controversy since high-profile probes launched last year. At issue is whether insurers and their clients have used the policies to mask losses. Max Re said it initiated the probe, and had notified regulators at the US Securities and Exchange Commission.

Clifford Gallant, an analyst with investment firm Keefe, Bruyette and Woods, said the internal investigation could draw Max Re into an SEC investigation.

RenaissanceRe, another Bermuda reinsurer that initiated a review of a finite risk contract it purchased in years past, later came under investigation by regulatory authorities. Its former chief executive, James Stanard, was forced out as a result of the probe, which is ongoing and could lead to legal action against the company and former management.

Mr. Gallant raised concerns that similarly, Max Re could lose senior executives if a regulatory investigation ensued. He lowered his price target for the shares to $21, from a previous $29 target. And downgraded the shares to ?Market Perform? from ?Outperform?.

Insurers conducting investigations into the use of finite risk contracts are generally looking at whether the policies were accounted for properly. Accounting rules dictate that an insurance contract must meet risk transfer tests to be counted as insurance. Otherwise, deposit accounting rules must be applied.

RenaissanceRe restated several years? results because of its discovery that a finite risk contract didn?t pass muster under risk transfer rules. And Ace Limited, another Bermuda insurer, restated several years? results for similar reasons.

Max Re, in its Friday evening announcement, said it wasn?t clear how a restatement would affect prior-year earnings but estimated there would be a $50 million reduction in earnings from 2001 through 2005, or roughly four percent of shareholders? equity at the end of 2005.