percent as the company was faced with increased competition for premium rates in its key markets.

For the three months ended June 30, the company, whose Bermuda and London subsidiaries underwrite specialty lines of property and casualty insurance and reinsurance, said that net income was $11.4 million, or 62 cents per share, compared to $17.1 million, or 93 cents per share.

The second quarter also marked the company's withdrawal from oil and energy insurance due to falling premium rates.

"We have maintained our underwriting standards in the face of deteriorating market conditions and declined business that we considered to be inadequately priced,'' Sphere Drake president and CEO Michael Watson said.

"This led us to withdraw from oil and energy insurance at the end of the quarter because we considered rates to be unrealistically low and saw no prospect of recovery in the foreseeable future.'' Due to a prospective reinsurance contract, purchased to stabilise earnings, net premiums written dropped 51 percent to $61.1 million from $124.7 million.

"The remainder of the reduction reflects competitive market conditions especially in the ART (alternative risk transfer) and property/casualty reinsurance accounts,'' the company said.

Net premiums earned were $106.6 million compared to $128 million, a decline of 17 percent.

Sphere Drake also said that total revenues declined 18 percent to $122.7 million from $149.8 million. Operating income rose to $11 million from $10.4 million.

Investment income increased to $15.5 million from $13.1 million earlier. Yield slipped from 7.3 percent to seven percent.

Unpaid losses and loss adjustment expenses were $74.7 million, down from $88.4 million.

Total expenses were $111.8 million compared to $131.6 million.

Book value per share rose to $13.37 at June 30 from $13.05 at March 31 while the company's assets at second quarter end were unchanged at $2.1 billion.