record levels of operating and financial performance for the year to December 31, 1996, together with a net income contributed by insurance operations of $39.7 million.

Fuelled by a recent low loss experience, OIL's capital and surplus increased to a record level of $1,729,100,000 by the end of the financial year, with total assets arriving at a record $2,275,200,000.

OIL's diversified investment activities are housed in several wholly-owned subsidiaries which, in strong worldwide financial markets, contributed $213.7 million to the growth in the overall capital and surplus of the company.

Net premiums written and earned were $101.7 million, down $43.4 million from $145.1 million a year before.

Jon R. King, president and CEO, said, "The company's rating and premium plan is designed to recover losses on a rolling five-year basis. Therefore, the annual level of written and earned premium is a function of the company's loss experience over the prior five years.

"With the declining level of losses recorded in recent years, the level of written and earned premium has been decreasing accordingly.

"For example, in 1996, OIL shareholders reported only two loss occurrences which resulted in the establishment of loss reserves of $5.5 million.'' As a catastrophe insurer, OIL's results are not surprising in the short term, with both loss frequency and severity subject to volatility.

Even in the 1995 year, shareholders only reported two loss occurrences which resulted in the establishment of a combined reserve of $10 million. But based on the company's 26 year history, it is unlikely to be a continuing trend.

Mr. King, himself, cautioned that given the nature of the operations of its shareholders, 45 of the world's petroleum companies, OIL's future operating and financial results will be subject to considerable volatility as shareholders experience uneven patterns of loss frequency and severity.

OIL does not purchase reinsurance and its strong capital base allows the company to write a large limit.

Mr. King said, "As best we can tell, OIL's maximum per occurrence limit of $225 million is one of the largest, if not the largest, net limit offered by any insurance company in the world.'' OIL Insurance reflects on a prosperous year From Page 33 company, specifically how it differs from traditional commercial market providers of catastrophe insurance, in that its sole business purpose is to serve the insurance needs of the shareholders. The benefits of ownership accrue to the policyholders, rather than to third party investors.

"OIL's rating and premium plan,'' he added, "is specifically designed to allow the company to operate at a 100 percent combined ratio. In other words, over the long-term, premiums collected from our members will equal the sum of losses paid to our members and the company's operating expenses.

"OIL's historical expense ratio is approximately two percent and is unmatched by any other insurance carrier. For our members, the company's unparalleled operating efficiency translates into a highly competitive insurance facility.'' Ownership involves 30 US oil companies, seven European, six Canadian and two Australian oil firms. And for many of them, the coverages and limits provided by OIL are the cornerstone of their insurance programmes.

Members not only have available limits of up to $225 million per occurrence, but $450 million in the annual aggregate. Principal risks covered by the company on a worldwide basis are losses and costs arising from physical damage to onshore and offshore property, well control costs and third party pollution liability.

Managed by Oil Management Services Ltd.'s 30 staff at the ACE Building in Hamilton, OIL has evolved into a world leader in the provision of petroleum industry insurance coverages, providing a cost effective risk management tool to the petroleum industry, and contributing a stabilising influence to the industry's coverages.

JON KING -- Oil Inusurance president and CEO