A small net gain of $82,171 in the fourth quarter of 2006 by Bermuda-based Annuity and Life Re was not enough to move the company out of the red for the full 2006 financial year, which show a $1,129,030 net loss.

However, both figures are improvements from the corresponding results of 12 months ago when the company showed a net loss of $14.6 million for the final quarter of 2005 and a full year loss of $18.6 million.

An ongoing dispute over possible multi-million dollar liabilities for Annuity and Life Re clouds the immediate future picture for the company, which has also reported it is in discussions about the possible sale of its US domiciled insurance company.

Annuity and Life Re’s year-end result is equivalent to a net loss of five cents per fully diluted share.

In a statement the company referred to the ongoing matter with Transamerica, stating: “The dispute with Transamerica concerning an agreement to novate certain reinsurance contracts to Transamerica effective December 31, 2004 remains unresolved.

“However, the arbitration hearing has now been taken off the calendar pending negotiations and submission of one aspect of the dispute for resolution by an independent actuary. The company continues to believe that Transamerica’s position is without merit, but cannot predict either the outcome of the dispute, or the impact it may have on the company’s financial position.”

The dispute is linked to reinsurance agreements it had with Scottish Re which were novated to Transamerica and a belief that Scottish Re made incorrect reinsurance settlements in 2004 and 2005 that now have to be put right.

Annuity’s net realised investment losses for the final three months of 2006 were $52,460, compared to losses of $69,162 for the last three months of 2005.

Its net realised investment losses for the whole of 2006 were $1,184,307, as compared with net realised investment gains of $431,459 for 2005.

Gross unrealised losses on the company’s investments were $188,372 as of the end of 2006, as compared to losses of $837,723 at the end of 2005.

The company’s investment portfolio currently maintains an average credit quality of AA.

In 2005 the company used $51.2 million for its 2005 operations and $38.3 million for its 2006 operations, which included money associated with the Transamerica novation.