Two Bermuda reinsurers expect to write down their fourth-quarter results by a combined quarter of a billion dollars, after they announced last night that their stakes in a bond reinsurer had become worthless.

RenaissanceRe will take a $181.7 million charge, while PartnerRe will write down $74 million in their fourth-quarter and full-year 2007 results, to be announced in two-and-a-half weeks.

Both companies own substantial stakes in ChannelRe, a company set up solely to provide reinsurance for MBIA, the world's biggest bond insurer, which has already been forced to write down billions because of its heavy exposure to sub-prime-mortgage related investment products.

ChannelRe has indicated to its stakeholders that fourth-quarter losses relating to its financial guaranty contracts with MBIA will be greater than than its entire shareholder value.

At September 30, 2007, RenRe valued its 32.7 percent stake in ChannelRe at $126.7 million, while PartnerRe's 20 percent stake was worth $74 million. Both companies have accepted that those stakes are now worthless and those amounts will be deducted from their fourth-quarter net income.

RenRe announced it would also take an additional $55 million charge to increase its incurred but not reported (IBNR) reserves in its reinsurance segment "to reflect estimated losses associated with exposure to sub-prime casualty losses".

In a statement released on BusinessWire last night, RenRe stated: "The company accounts for its 32.7 percent interest in ChannelRe under the equity method of accounting, and its share of these charges results in a reduction in its carried value of ChannelRe to $nil.

"RenaissanceRe's charge, which represents the company's full economic exposure to ChannelRe, will be reflected in the company's net income and book value per share, but will not be reflected in operating income."

Despite the write-downs, RenRe said it expected to announce a profit for the fourth quarter on February 5.

MBIA yesterday had its AAA guaranty ranking affirmed by Fitch Ratings after the company raised $1 billion in a debt sale, but the US company expects to write down more than $3 billion in its fourth-quarter results, largely as a result of its exposure to sub-prime-mortgage-related investments.

A statement, published on behalf of PartnerRe yesterday, read: "Based on discussions with ChannelRe, PartnerRe expects that the most recent announcement made by MBIA that it will record a fourth-quarter 2007 mark-to-market charge of $3.3 billion, including approximately $200 million in credit impairments, will lead to mark-to-market write-downs at ChannelRe in excess of its GAAP shareholders' equity.

"As a result of this development, PartnerRe will write down its total investment in ChannelRe. This write-down will have no impact on operating income, but will impact net income and GAAP book value.

"The fourth-quarter 2007 impact to GAAP book value will be $1.31 per diluted share. Notwithstanding this, PartnerRe management expects to report year-end 2007 GAAP book value of approximately $68.00 per diluted share, representing in excess of 20 percent growth year over year."

PartnerRe's fourth-quarter and full year 2007 results are scheduled to be released after the market close on February 4.

Last year, RenRe announced third-quarter profits of $143.9 million, while PartnerRe's net income for the same three-month period was $262.9 million.