Fox reports Bermuda-based oil mutual, Oil Insurance Ltd. (OIL) has declared net earnings of $165 million for the year to December 31, down from $238 million in 1996.

The decreased bottom line came as losses and loss expenses jumped year-over-year from $52 million in 1996 to $247 million in 1997.

The company declared an extraordinary dividend of $200 million payable this year, and authorised a $15 million premium credit, representing an overall reduction of about 30 percent in each policyholder's 1998 minimum premium.

OIL's policy is that to the extent capital resources exceed pre-determined target levels, any excess financial resources are deployed for the benefit of all shareholders.

Record levels of performance pushed the company's end of year shareholders' equity and total assets to $1.915 billion and $2.884 billion, respectively.

The year to year financial results of OIL are impacted by volatility brought about by uneven patterns of loss frequency and severity experienced by the petroleum company insureds, who are also the shareholders.

OIL president and CEO, Jon R. King, said "OIL's investment subsidiaries continued to benefit from the strong performances of various financial markets and contributed $295 million to OIL's net income in 1997.'' Mr. King recently provided to shareholders at an annual general meeting here in Bermuda, the results of a lengthy study by the OIL board of directors relating to capital management.

The results, he said, have confirmed target levels of capital necessary to support the exposures underwritten by the company.

He said, "As a catastrophe insurer, OIL's long-term goal in managing its financial resources is to ensure that the company has sufficient funds available to meet potential obligations to its policyholders.

"Within the framework of capital management, the directors are always cognisant of the fact that OIL underwrites high-valued, complex petroleum industry risks that can make the company's year to year financial results subject to considerable volatility.'' Mr. King stated: "OIL has a tradition of open communications and mutual governance which gives all members a strong voice in the affairs of their most important insurance provider.

"Business decisions at OIL are not driven by short term profit considerations. Rather, the board of directors and shareholders can make strategic business decisions with a view to enhancing long-term values to the company's owners -- who also just happen to be its customers.'' OIL is managed by Oil Management Services Ltd., with a professional staff of 30.

The mutual insurer has become a world leader in the provision of petroleum industry insurance coverages, since it commenced operations in Bermuda in 1971.

It was formed, and designed to service the needs of the petroleum industry, at a time when the commercial markets had ceased to provide petroleum companies with adequate insurance coverage limits, particularly in the area of pollution liability.

It began with 16 oil companies and its membership now comprises 45 firms from the US, Europe, Canada and Australia, providing shareholders with a cost effective risk management tool, while contributing a stabilising influence to the coverages available for the entire petroleum industry.

OIL's net earnings have dipped, but the company's investment subsidiaries continued to benefit from the strong performances of various financial markets, says president and CEO Jon. R. King.