Bermuda-based Annuity & Life Re yesterday posted nearly $20 million in losses for the third quarter and its restatement of losses for past quarters could be followed by further restatements.

The company posted a net loss of $19.15 million in comparison to a restated net loss of $42.7 million for the same period last year. Annuity restated its results after it was put under review by the United States Securities and Exchange Commission (SEC) earlier in the year, for its accounting practices.

The company, which is currently in a management transition, also learned recently that it had lost an arbitration hearing on its claim for breach of contract against Transamerica Re.

In the decision, the panel upheld Transamerica's position that the treaty between Annuity Re and Transamerica constituted a valid and enforceable contract.

The decision has led to Annuity having to write down $24.8 million in Transamerica contract costs this year alone, and as much as $34.5 million last year. There was however no Transamerica related write down in the third quarter.

Annuity chairman Frederick S. Hammer said yesterday in a Press statement that the company still faces significant issues: "We continue to face significant challenges in a difficult economic environment, and we are proceeding deliberately in the transition to new management.

"We experienced adverse mortality in the third quarter across several of our contracts, recaptured the Lincoln National contract that was producing losses, and are experiencing losses on one of our guaranteed minimum death benefit contracts.

"These items along with the embedded derivative losses resulting from the implementation of FAS 133 produced losses for us in the three and nine month periods ending September 30, 2002. Understandably, we have also experienced a slow down of new business submissions."

But looking on the bright side, Mr. Hammer said: "We saw improvement in our investment portfolio.

"We realised over $9 million of capital gains and improved our unrealised gain position to approximately $16 million, our experience with the Transamerica contract was in line with our expectations so no additional write down of deferred acquisition costs was needed, and as a result of recapturing the Lincoln National contract we removed that drain on future earnings."

He concluded: "The company continues to face a number of important issues.

"These include the company's need to post up to approximately $210 million of additional collateral under its reinsurance agreements by December 31, 2002.

"The company will seek to meet or reduce these additional collateral requirements by negotiating the recapture, retrocession, or sale of certain of its reinsurance agreements, by accessing its collateral funding facility and/or by raising capital.

"In addition, we must complete the SEC accounting review and we are moving forward with selecting a chief executive officer."