Bermuda insurer Max Re Capital Ltd. said last week that it expects to report a loss when it comes out with its third quarter results early next month.

In a statement to the Bermuda Stock Exchange, the company said the anticipated operating loss would stem principally from the continued low return from its alternative investment portfolio.

The statement added: "While the company's alternative investment portfolio produced a small positive return in the third quarter, it continues to fall short of the level needed to generate net income."

CEO Robert Cooney added: "While we are disappointed in the absolute return of our alternative investment portfolio this quarter, it is reassuring that in the continuing, challenging investment climate, our risk management disciplines result in our alternative investment portfolio producing positive quarterly returns.

"I'm pleased that appreciation of our fixed maturities portfolio and the impact of our share repurchase programme will result in an increase in book value per share as of September 30, 2002, compared to June 30, 2002."

The news follows the company posting a loss last quarter as well although Max Re reported healthy income during the previous two quarters.

For the quarter ended June 30, the company recorded an operating loss of $8.4 million compared with a net operating loss of $5.5 million for the same period the year before.

Losses last quarter were also attributed by Mr. Cooney to poor investment returns.

At the time, he said: "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. "Although our alternative investment portfolio has achieved a positive return in each quarter of this year's challenging investment environment, the absolute return on our alternative investment portfolio this year has been disappointing and below expectation." The downturn in investment returns is something the company seems to have addressed however with the company, in recent months, shifting its business model to more traditional insurance products. Max Re's original business model targeted high investment returns.

But last month Mr. Cooney told The Royal Gazette the company had seen "great opportunity" in, for the time being, a focus on traditional insurance.

He added that the move away from the company's original model could be attributed to the challenging climate of the markets right now, and that was likely to continue for some time. But Mr. Cooney did not rule out Max Re returning to its original model if and when markets bounced back. In a recent issue of Business Insurance, Mr. Cooney was also quoted as saying: "We're counting on making an underwriting profit, not counting on strong investment gains."