reinsurance subsidiary on the Island with capitalisation of $50 million.

PXRE Corp unveiled its proposed reorganisation which will see it become a Bermuda-based company -- using proceeds from a securities offering.

The company provides reinsurance products and services in the US and internationally, with principal emphasis on commercial and personal property and casualty risks.

PXRE is set to create the new Bermuda-based holding company PXRE Group Ltd. so PXRE Group becomes the parent holding company of PXRE Corp. and will carry on its current holding company functions.

The company's board has approved the reorganisation in response to competitive stances taken by Bermudian companies in the US market.

Tax advantages are key to the move, chief financial officer Jim Dore said in an interview on Friday.

But the move would also allow the company to become more creative and innovative and further focus on alternative risk transfer products which have mushroomed on the Island.

And it made little sense to be headquartered in the US when around 80 percent of its premiums already came from offshore and 30 percent of its current property business was ceded to Bermuda, he explained.

"First of all the regulatory, tax and financing environment is much better in Bermuda than in the US. Secondly, with a lot of Bermudian companies making acquisitions and moving into the US, it is making an uneven playing field.

"Bermuda is an important reinsurance market and we believe we will see increased deal flow by putting people on the ground there.

"We are looking to grow both our domestic and international businesses.'' The board of directors said Bermuda had become an important reinsurance market, which attracted "a significant amount of reinsurance business not readily available outside that market''.

"The Board also believes that the establishment of Bermuda operations will, over a period of time, reduce corporate income taxes.

"Unlike the US tax system, which imposes corporate income tax on the worldwide income of US corporations, Bermuda generally imposes no corporate income taxes on foreign income.

"Income taxes will therefore be reduced to the extent operations are conducted after the reorganisation outside of the US and outside of other countries with significant corporate taxes.'' The Board believed the establishment of a Bermuda presence may have a "favourable effect on PXRE's ability to raise additional capital in the future from non-US investors and to write additional lines or reinsurance.'' It would also provide a structure that would assist in the expansion of PXRE's current business and future acquisitions and diversification opportunities but there were no such plans right now.

PXRE chairman, president and CEO Gerald Radke said the reorganisation was intended to allow PXRE to compete worldwide with products and services in a "tax efficient environment''.

"To do so, however, we need to establish a significant operating presence in Bermuda.

"We intend to capitalise our new Bermuda reinsurance company with an initial capital of approximately $50 million, utilising the proceeds from an anticipated offering of securities.

"At the same time in order to build our capital in support of our ambitious ongoing diversification strategies, we expect that PXRE will pay a quarterly dividend of six cents a share beginning in 1999's third quarter.

"This represents a reduction from the 26 cent quarterly rate previously paid,'' he admitted.

The new structure will be achieved through the merger of Delaware corporation PXRE Merger Corp. and a newly formed, indirect wholly owned subsidiary of PXRE Group, into PXRE Corp.

PXRE plans Bermuda move Mr. Dore said the new structure would not affect the group's US reinsurance operations which would continue to operate from their current New Jersey base.

In order to boost capital for growth strategies, PXRE revealed it expected to cut its dividend beginning in the third quarter to six cents per share from 26 cents per share.

Holders of PXRE Corp. common stock will automatically become holders of the same number of PXRE Group common shares.

These shares are expected to trade on the New York Stock Exchange under the same symbol PXT.

And the company said a gain would be recognised by stockholders for federal income tax purposes on the conversion of PXRE Corp. common stock into PXRE Group common shares.

But the restructuring is still subject to stockholder approval to be voted on at a special meeting in October.

PXRE shares rose on the New York Stock Exchange straight after the announcement.

After the restructuring is complete, PXRE Reinsurance Ltd., the Bermuda reinsurance subsidiary will begin underwriting. The company expects annual operating costs of the Bermuda operation to be $1.5 million.