Bermuda-based Sphere Drake Holdings Ltd. has reported a loss for the third quarter to September 30.

But the company remained upbeat about the future, particularly with significantly increased business and favourable market reaction to their recent acquisition by Canadian-based Fairfax Financial Holdings Ltd.

Sphere Drake suffered a net loss of $9.6 million for the three months, compared to the $6.9 million they recorded in net income for the same period last year.

Net premiums written for continuing operations swelled to $83.4 million for the quarter under review, compared to $68.1 million reported in the 1996 third quarter.

President and CEO, Michael Watson, commented: "Current operations have benefited significantly from the announcement of the acquisition of Sphere Drake by Fairfax.

"A favourable showing of quality business following the announcement enabled us to write 22 percent more net premiums than in the same quarter last year.

"Our results also benefited from the continuing absence of major natural catastrophes, but the need for additional prior year reserve strengthening caused a loss for the period. Further strengthening is likely if recent trends continue.

"The shareholders' meeting to approve and close the Fairfax transaction is expected to be held on December 3, 1997.'' Net investment income decreased to $11.8 million in the third quarter of 1997, compared with $13.6 million in the three month period during 1996.

The GAAP combined ratio for continuing operations in the third quarter was 130.5 percent, compared with 106.9 percent in the 1996 third quarter.

Prior year reserve strengthening of $18 million, a substantial part of which was attributable to the company's US excess and surplus lines business, accounted for 26.3 percent of the quarter's combined ratio.

The board of directors declared a regular quarterly cash dividend of four cents a share, to be paid November 19 to shareholders of record at the close of business November 5.