Most Bermuda insurance companies benefited in the second quarter from higher premium rates in the wake of the September 11 terrorist attacks, a Royal Gazette survey shows.

But the two major Bermuda insurers, ACE Ltd. and XL Capital, both experienced drops in net income.

XL experienced the deepest change, reporting a loss of $91.7 million compared to net income of $128.6 million a year ago after a reserve increase of $200 million for further claims from the World Trade Center attacks.

XL also reported $110 million investment losses $92.5 million in WorldCom and other telecommunications companies.

The company also wrote down $20 million on an investment with local insurance company Mutual Risk Management.

ACE saw net income fall 20.6 percent to $104 million but net operating income jumped 105.2 percent to a record $236 million.

Despite the losses posted and reserve increase, XL's CEO Brian O'Hara said the company's underlying business was strong: "I am pleased to note that our underlying net operating income in the second quarter, excluding the WTC reserve charge, was slightly above expectations.

"Now we look forward to capitalising on the improving property and casualty market through long overdue price increases and improvements in terms currently being achieved in virtually all lines of business."

And ACE CEO Brian Duperreault tied the company's results during the quarter to business growth in the current hard market where insurance and reinsurance is in short supply and high demand.

"Evidence of a strong upturn in our business and a more durable hard market continues to mount.

"We enjoyed significant growth in our property and casualty business, recorded our highest quarterly operating income ever, produced a gain in book value per share against the backdrop of falling equity markets and achieved a 14.6 percent annualised return on average equity for the period," he said.

Specialty insurers such as Partner Re, PXRE and Renaissance Re all enjoyed strong improvements as a result of the hardening insurance market.

And the Island's newest insurance companies, formed after September 11 in anticipation of a rise in demand for insurance, seem to have got off to strong starts.

Axis Specialty reported net income of $30 million on gross premiums written of $260.7 million, Arch Capital reported net income of $19.2 million compared to $8.4 million in 2001 and Endurance Specialty reported net income of $31.3 million and gross premiums written of $264.3 million.

Almost all Bermuda insurers enjoyed small increases in investment income for the period.

While stock markets struggled through the period, insurers are traditionally conservative investors and the small gains may reflect their heavy weightings in bonds and similar securities.

Almost all companies reported strong growth in gross premiums written as a result of rates continuing to harden.

XL Capital, in spite of its loss, saw gross premiums jump 50 percent to $1.5 billion, while ACE's rose 20.8 percent to $2.9 billion.

Renaissance Re (122 percent), Partner Re (34.7 percent), Everest Re (30 percent) and Trenwick (30 percent), also recorded increases in gross written premiums.

Both Max Re and PXRE saw gross written premiums decline. In the case of Max Re business written fell off by just over 20 percent as it saw no activity in life lines. But CEO Robert Cooney reported strong growth along other lines: "Our property and casualty underwriting continues to be strong, with an increase in gross premiums written and deposits of 56 percent year-to-date compared to the same period in 2001."

And PX Re, which saw a 14 percent decline in gross premiums written, attributed this to its decision to focus on fewer lines of business, a decision which was reflected in its strong net income.

Notably absent from the line-up of second quarter results were the earnings of Annuity and Life Re.

The company was to have reported its second quarter earnings report on July 29 but that was delayed and no new reporting date had been announced.

The company has reported however that it would post a $24 million charge in the second quarter, and that would adversely affect its second quarter earnings.

Annuity and Life Re (ANR), which was the first life reinsurer to hang out its shingle in Bermuda in 1998, announced the charge was related to its Transamerica Re annuity reinsurance contract.

ANR also reported it would restate its last five quarters' results. With the news, the company saw a plunge in the value of its share price bringing ANR to a new 52-week low of $5.75, a marked contrast to its 52-week high of $37.19.

The quarter brought new reporting requirements for many Bermuda insurers with implementation last week of new legislation - the Sarbanes-Oxley Act 2002 - which put certain companies under stricter reporting regulations.

The new legislation applies to all publicly quoted companies on US exchanges, and has been hailed, by securities experts, as the most significant overhaul of federal securities legislation, since the Securities Exchange Act was put in place in 1934.

The Act tightens corporate governance requirements - an area of regulation that has historically been the domain of state law. It also puts greater reporting requirements on all CEOs and CFOs of companies listed on US exchanges and could potentially expose management to greater liabilities. The Act requires companies to provide a written statement from the CEO and CFO certifying that the report fully complies with the applicable sections of the Securities Exchange Act.

The statement must also certify that the results reported fairly present, in all material respects, the financial condition and results of the operation.

And there are stiff penalties for those corporate bosses who break the new law including fines up to $5 million and imprisonment for up to 20 years.

This new Act is above and beyond SEC requirements binding nearly 1,000 public companies.