Bermuda-based captive reinsurer, Harrington International Insurance, Ltd., has declared net earnings of $2,502,507 ($3.58 per share) for its first full year to December 31.

Owned by Swiss Re and "Winterthur'' Swiss Insurance Co., the company wrote nearly $44.6 million in business for the year, a reduction from the near $58.6 million the company wrote in their initial eight months of business after being incorporated in April 1995.

Chairman John O. Austin reported: "The consolidation within the industry to which I referred last year has continued in all sectors, including retail broking and will no doubt lead to further concentration of per risk and natural catastrophe exposure.'' During the year, the company achieved a more balanced portfolio in terms of corporate diversification and geography and continues to seek more progress in this area in the future.

Mr. Austin said, "We are somewhat disappointed that there has been a loss of business due primarily to the weak market conditions that have prevailed during the year and which at this stage show no sign of abating.

"We do not believe that we should follow market pricing which bears little relation to the exposure at risk. Our future success and that of our clients and reinsurers is ultimately dependent upon the mutual acceptance of sound underwriting practices and quality management control.'' President and CEO, Hans W. Hefti, said, "Harrington is an answer to long-term structural changes in a highly competitive industrial property insurance market. I am therefore pleased to report a profit which includes the amortization of $2.3 million of organisation costs in this, Harrington's first full year of operation.

"The need to refocus the industrial property underwriting process is apparent in this market segment. Certain established markets now have to reevaluate their existing risk portfolios and qualitative risk standards, which confirms Harrington's defined strategy.'' Harrington's strategic plan is to control its aggregate exposures in the various segments and product categories. It is determined to focus on excess property insurance. More than 50 percent of their client base is written on a limited basis, reflecting a very different risk than the premium-rich blanket limit policies.

Mr. Hefti said, "Harrington's aspiration to develop a balanced risk portfolio of the largest global corporations has only been partly achieved. The decrease in premiums written in 1996 is due to selective underwriting in a competitive market with declining premium rates for all worldwide property business.

"The replacing of low deductible blanket limit participations by medium or high excess business further reduced the premium volume.

"We decided not to pursue premium growth at this stage, but to remain focused on excess business, adequate risk pricing and financial discipline.'' Sixteen property losses occurred during the year, the largest of which was an explosion within an electric arc furnace at a nickel production plant in Indonesia for about $14 million.

Harrington's net share was $1.4 million after the application of reinsurance.

The largest marine loss was the break up and sinking of a barge tow on the Ohio River for $2.2 million. Harrington's net share was $110,000.

The net loss ratio was 71.5 percent. Net losses and loss expenses incurred were $4.2 million.

Total investment income was $3.9 million. Unrealised appreciation on investments as of December 31, amounted to $5.3 million and is a significant contributor to the company's capital base.

Harrington acts as a reinsurer of captives and similar types of "rent-a-captive'' arrangements. The property business underwritten includes fire and business interruption risks and machinery breakdown.

The marine business includes all classes of hull and cargo for blue water, coastal and river risks. The company sold its marine portfolio as of June 30, 1996 and ceased writing that line of business. Policies in force until June 30, 1996 are being run off. The company has quota share and excess of loss retrocession arrangements in place to limit its liability on both a per risk and per event basis.