The price of Bermuda-based Mutual Risk Management's shares fell by more than 25 percent after the company announced it had taken a $46.1 million charge in the fourth quarter, wiping out its profits and plunging the company into net loss.

The charge is for reinsurance that is due, but unlikely to be collected in legal disputes.

The price of the company's shares dropped by 25.6 percent to $12.10 at one point yesterday after the charge was announced to cover settlement disputes.

Stock closed down 23.8 percent or $3.87 at $12.40.

The announcement had a knock-on effect of some of the company's financial rating being down graded yesterday.

Mutual Risk also said it was now going to `aggressively' try to settle disputes which have plagued the company in the past few years.

As a result of the reserve money, the company reported a net operating loss of $32.9 million for the last quarter, compared to a profit of $10.2 million in the same period in 1999.

Mutual Risk's shares fell to a 52-week low of $12 on the New York Stock Exchange before recovering slightly in late afternoon.

The company's shares have fallen 72 percent from around $43 two years ago as it has been plagued with problems of recovering payments from its reinsurers which have agreed to cover a portion of its losses.

The company said the one-off charge is related to the reserve of receivables and is in connection with outstanding disputed claims which have dogged the company in past years.

As of December 31, 2000, the company was involved in five separate reinsurance disputes involving around $56 million of unreimbursed losses.

In February the company was paid $12.3 million from reinsurers, reducing the amount owed. In the last quarter of 2000, two further disputes were settled for $300,000, the company said.

Mutual Risk Management said that it was now aggressively trying to settle these claims, and the money, which has just been put in the reserve, would be used for this purpose.

In a joint statement, Robert A. Mulderig, chairman and chief executive officer and John Kessock, president, said: "The charge we announce today was taken after a comprehensive review of our reinsurance receivables and the small number of disputed claims that have occurred.

"Although we continue to believe that we would prevail in the ultimate resolution of each outstanding reinsurance dispute, we will now aggressively attempt to resolve them on acceptable terms.

"As we settle the disputes through arbitration or other means, any charges incurred in future periods will be offset against the reserve established through this charge. We expect that the reserve will be adequate to put these issues behind us.'' If Mutual Risk had not had the charge, the company would have reported operating income of $13.2 million, or 32 cents per common share for the fourth quarter, and would have been a 29 percent increase over the comparable period in 1999, and $50.4 million, or $1.20 per diluted share for the year ended December 31, 2000, versus $55.6 million, or $1.24 per diluted share in 1999.

The rise money brought in by the Bermuda-based provider of insurance risk management services has been attributed to the improvements in the reinsurance market.

The joint statement added: "The improvement in property casualty pricing, which occurred during 2000, has positively affected new unit sales and fee income in our corporate risk management business segment. This should have a positive impact on our mix of business and therefore our performance as we move into the new year.

"Corporate risk management sales for the fourth quarter of 2000 produced a record 16 new accounts compared to 5 in the 1999 fourth quarter. Corporate risk management fees increased by 10 percent in the quarter and financial services fees continued their solid growth in the quarter at 48 percent.'' The company said it had strengthened its programme operations department and imposed stricter underwriting and operating standards on new and renewal programmes.

And the company said it expected these actions, combined with the changing market conditions, to slow the growth of their programme business segment.

Mutual Risk also offered a forecast for 2001, saying it expects operating earnings of $1.25 to $1.40 a share for the year, which assumes continued amortisation of goodwill of about 9 cents a share annually.