The Bermuda-based reinsurer at the heart of this week's caustic United Postal Service tax ruling posted robust second quarter results yesterday.

Overseas Partners Ltd. recorded net income for the quarter ended June 30 of $173 million or $1.37 per share -- up more than 2.5 times on the $61.4 million or 49 cents per share for the same period in 1998.

Directors yesterday declared a cash dividend of $1.20 per share payable on August 27 to share owners of record on August 10 -- an increase of 15 percent over last year.

The statement of results made only passing mention of the UPS ties on which the reinsurer was founded, and no mention at all of the scathing 114-page ruling against UPS which was handed down on Monday.

UPS chiefs are considering appealing the ruling which could see the Atlanta-based package carrier hand over hundreds of millions of dollars in back taxes, penalties and interest. The IRS issued a notice of tax deficiency for 1983 and 1984 which totals $67 million plus penalties and interest, but UPS has continued the practice, which the judge said was purely to avoid tax, and could owe millions more.

When UPS created the Bermuda subsidiary which later became known as OPL in 1983 its purpose was to provide reinsurance for UPS packages insured for more than $100.

Prior to this UPS handled the insurance itself and reported the revenue it created as income for US tax purposes. But after OPL was formed, the profit from the insurance -- which the judge found was over-priced and a "sham transaction'' -- was funnelled to OPL and so not liable for US income tax.

Yesterday OPL's results did reveal that on top of any reinsurance arrangements, during the first half of the year OPL was paid more than $10 million for "operating leases with UPS''.

And at the close of the quarter it listed its "operating leases with UPS'' as assets worth more than $100 million.

It said OPL's "reinsurance began with shipper's risk, which is the reinsuring of insured packages carried by subsidiaries of UPS of America Inc.

"OPL has since expanded into related businesses -- including property, workers' compensation, aviation, marine, accident and health, automobile and other specialty reinsurance products that ... enhance its growth potential.'' It has also diversified into the ownership of real estate through subsidiary Overseas partners Capital Corp. which owns and manages a convention hotel and five major office buildings in Atlanta, Boston and Chicago.

"Since its inception in 1983 OPL has grown into a financially strong entity with total 1998 annual revenues exceeding $1.2 billion, total assets of $4.4 billion and 1998 net income of $488.3 million.'' It also said OPL was now "one of the world's largest reinsurance companies'' and at the close of the quarter total assets were $5 billion and members' equity was $2.8 billion.

OPL president and CEO Scott Davis said the results were strengthened on previous years by the company's strong investment portfolio performance.

"In particular our S&P 500 and emerging market equity portfolios provided excellent returns in the second quarter of 1999,'' he said.

He blamed a slight decline in underwriting income on the "continued downwards pressure on premium rates in several lines'' of business.

"Despite the decline we are pleased to report that our combined ratio year to date is still a very respectable 74 percent. We attribute this to our continued focus on underwriting profitability as opposed to premium growth.'' The privately held company -- originally set up by UPS in 1983 as a captive -- has more than 91,000 shareholders. When it was set up every UPS shareholder was given one OPL share for each UPS share they had, as a dividend.

Since then some share buying and selling has seen a bit of divergence from this common ownership of both companies, which is why OPL and UPS say they are legally independent, although they retain ties.

OPL's share price is determined by the net book value of common stock as reported in its most recent audited annual financial statements which on January 8 was $19.84 per share.

Premiums written for the second quarter were $48.5 million higher than those reported for the same period in 1998, mainly due to hikes in renewed policies, the results said.

BUSINESS BUC