million compared to the previous year. Operating earnings were $230.3 million, down 7.9 percent compared to the previous year.

The company's net income in the fourth quarter ended December 31 was $63.4 million, down 19.9 percent from the same period in 1997. Net premiums earned fell to $214.5 million from $252.8 million. Losses and loss expenses fell to $105 million from $111.7 million.

PartnerRe president and chief executive officer Herbert Haag said the company's results were affected by increased loss activity. Many insurers and reinsurers were hit hard by what turned out to be the third worst year for insured US catastrophe losses due to Hurricane Georges and storms in the mid-west.

"Challenging market conditions persist,'' Mr. Haag said. "The fourth quarter 1998 was marked by significantly increased loss activity in the insurance and reinsurance industry, and we too witnessed an increase in our basic loss burden.'' For the 1998 year PartnerRe had net premiums earned of $685.6 million, a gain of 43.9 percent over the previous year. Net investment income was $169.4 million a 40 percent gain. Net realised investment gains was $23.7 million.

For they year PartnerRe had $396.9 million in losses and loss expenses, a 91 percent gain.

Mr. Haag expressed confidence in PartnerRe's strong presence in the market and the increased scale and capital base with the purchase of the reinsurance operations of Winterthur Group.

PartnerRe Ltd. bought the active reinsurance arm of Winterthur Insurance Co.

for $750 million in cash from the Credit Suisse Group (CS) last year. In connection with the acquisition, PartnerRe accepted from Winterthur earned premiums of $280.2 million, with incurred losses of $229.4 million and acquisition costs of $50.8 million, resulting in a break even technical result for 25 percent of the 1998 and prior underwriting year.

The deal gave PartnerRe a US presence with the Winterthur Reinsurance Corp. of America in New York and Winterthur Re Life Insurance Co. in Dallas. Winterthur Re's other operations are based in Switzerland, Canada and Singapore.

Winterthur also writes business in specialised areas such as agricultural risks, credit and surety, engineering, and aviation and marine. Mr. Haag said the company had done well during the January renewal season and forecast written premiums in 1999 will be in excess of $1 billion. The $5.4 billion asset base of the combined companies will help the PartnerRe ride through the low premium rate environment.

"The combined reinsurance portfolio of PartnerRe Group and Winterthur Re has enabled us to selectively renew our business and deliver growth to our shareholders without compromising our underwriting standard and profitability,'' he said. "`We are fortunate to be in this position at this particular time in the cycle, as the market again refused to address the rapid deterioration of results, which is becoming evident in most lines of business.

Insurers and reinsurers have been competing heavily for business driving rates down over the past two to three years. Mr. Haag criticised other companies for driving rates below profitable levels.

"I am convinced that this shortsighted behaviour at the January renewals cannot continue any longer and expect that the true market leaders, among which I include PartnerRe, will take action in 1999 and 2000 to return to more reasonable pricing.'' At December 31, PartnerRe had total assets of $7.8 billion, up from $3.6 billion a year earlier. Shareholders' equity was $2.1 billion. Diluted book value per common share increased to $33.53 from $29.57 a year earlier.

Herbert Haag