Despite two catastrophes hitting its bottom line Bermuda-based LaSalle Re Holdings managed to make an underwriting profit in the third quarter ended June 30.

The company yesterday reported third quarter income to June 30 of $5.5 million including net realised gains and losses on investments compared with $18.2 million in the same period last year.

However the profit didn't pull the company into the black for the nine months.

The company registered a loss before minority interest of $1.4 million compared to a profit of $69.9 million for the same period 1998.

For the quarter to June 30 the company had gross premiums written of $20.8 million compared with $26.8 million in third quarter 1998. Net premiums earned for the quarter were $32.1 million compared to $42.1 million. Net investment income was $8.5 million compared with $8.7 million.

The company had losses and loss expenses of $24.8 million, net of reinsurance recoveries, compared with $23.6 million during the same period 1998.

LaSalle president and chief executive officer Guy Hengesbaugh said the company had incurred two large losses in the quarter from hail storms in Sydney, Australia, on April 14, and from tornado damage in the mid-western US between May 3 and 7.

Of the $24.8 million in losses for the quarter, $12 million related to the Australian hailstorm and Oklahoma tornadoes. The remaining $12.8 million were set aside as reserves for incurred but not reported losses.

Mr. Hengesbaugh said the third quarter reinsurance rates for US business fell about five percent while international rates were down between ten to 15 percent. The third quarter included April 1 renewals that account for about 15 percent of the company's total written premium.

He said the April renewals point to a levelling of the falling rates that the industry had been experiencing.

"A sure sign of market rate change is in the retrocessional sector where we are beginning to see rate increases,'' he said. "We believe this trend will continue, which ultimately will pressure those companies and syndicates that are retro dependent to raise their original rates.'' Mr. Hengesbaugh took over the helm of LaSalle on July 1 from Victor Blake. He was previously the chief operating officer of the company. "The organisational change has coincided with what we believe to be the beginning of a real change in the rating environment in our core property catastrophe line of business,'' he said. "Four consecutive quarters of higher losses from catastrophes, combined with depressed rates, are beginning to have an effect in the market.'' He said LaSalle had also benefited from the consolidation in the industry towards large generalist reinsurers.

"This narrows the scope of alternatives for our clients and brokers, giving LaSalle a higher profile in the market,'' he told analysts yesterday.

The company has pulled back from countries or lines of business where the pricing didn't meet return targets.

"This strategy can produce uneven quarterly results, but a company such as ours should be judged over the longer term,'' Mr. Hengesbaugh said. "This year's expected return may be lower than prior years but we anticipate it will be part of a longer term return on equity in the range of 20 percent.''