ERROR RG P4 2.6.1999 CORRECTION In a report on Bermuda's insurance industry yesterday the decimal points in the financial results of market leaders XL Capital Ltd. and ACE Limited were incorrectly placed.

The two companies were still positioned correctly in relation to each other at the forefront of the Bermuda top ten.

ACE's capital and surplus for 1998 was $3.71 billion rather than $3.71 million. Its total assets were $8.79 billion and net income was $560 million while the company topped the Island's charts with its premiums earned of $894 million.

Meanwhile XL Capital topped the capital and surplus, total assets and net income categories with respective results of $4.82 billion, $10.11 billion and $588 million. XL's premiums earned for the year were $685 million.

The Bermuda insurance market will live through the turbulent soft market but some of the new start-ups "may not survive'', experts have tipped.

And the analysts say although the industry's major merger and acquisition craze might grab plenty of headlines, several of the high-profile marriages will fail to live up to the honeymoon hype.

The predictions were made in the recently released fifth annual Bermuda Insurance Survey containing analysis by rating agency Standard & Poor's and published by Deloitte & Touche in conjunction with Bermudian Business.

It said in 1998 Bermuda's insurance market was given a "dose of earnings reality'' after loss-event frequency and severity, coupled with the Asian collapse reminded the industry big earnings should not be taken for granted.

"Expectations are that not all the current merger and acquisition activity over the last three years will live up to the market's hype, and that some new start-ups may not survive,'' the report said.

"However, the Bermudian insurance sector is a resilient one.'' The survey praised the "creativity of the Island'' which had "remained intact'' and allowed the industry to reinvent itself in hard times.

"Standard & Poor's remains cautiously optimistic that the industry will be able to get through the current turbulence as well,'' it said.

The overall picture was soured by nose-diving rates and some lousy investment results, the survey found.

For finite reinsurers the past few years brought an average rate decline of 20 percent or more, due to pricing, policy terms and increased competition from traditional reinsurers.

And now new Bermuda start-ups trying to capitalise on the convergence of the capital and reinsurance markets could also "pose a threat''.

While 1998's gross finite premium writings grew by 43 percent to $1.5 billion, investment income had been hampered by the financial market's third quarter woes and declined about 21 percent compared to 1997 results. The most notable were Stockton Reinsurance's investment income results which fell 30 percent to $96.6 million from $150 million in 1997.

Overall finite reinsurer's net earnings fell 14 percent to $337 million but capital and surplus remained strong, growing 11 percent to $2.6 billion.

And there was also bad news for the property catastrophe market with rates in this line experiencing a cumulative reduction of 50 percent since 1994.

This year rates were expected to decline even more, around ten to 15 percent -- although the Caribbean damage from last year's Hurricane Georges should see pricing in the retrocessional market harden, the survey predicted.

The survey identified insurance giants XL Capital Ltd. and ACE Limited as market leaders as they each work toward becoming the sector's heavyweight "1,000-pound gorilla''.

The two companies wrestled for the pinnacle spot on the survey's Bermuda Top Ten charts with XL taking the prize in three sections and ACE winning only the premiums-earned category with its $894,000 compared to XL's $747,000.

XL's capital and surplus of $4.82 million, total assets of $10.11 million and net income of $588,000 beat ACE's of $3.71 million, $8.79 million and $560,000 respectively.

ACE and XL's mega mergers were part of the Island's transformation as most of Bermuda's insurers and reinsurers expanded their risk profiles into multi-line structures -- making the market here a virtual "global supermarket''.