Trenwick Group Inc. reported its net income has fallen by nearly 80 percent, blaming competitive pricing for the fall in profits for the second quarter of 2000.

The company, which is merging with Bermuda-based reinsurer LaSalle Re in the next few months, reported net income of $2.1 million or $.13 per diluted share for the second quarter of 2000, compared to $5.7 million or $.53 per diluted share for the second quarter of 1999.

Net income in the second quarter of 2000 included after-tax realised investment gains and foreign exchange gains of $388,000 or $.02 per share, compared to $349,000 or $.03 per share last year.

James Billett, Jr., Chairman, President and Chief Executive Officer, said: "Trenwick's second quarter results reflect the effects of the prolonged competitive pricing environment that has plagued the insurance and reinsurance markets for the past several years, as well as restructuring costs associated with both our acquisition of Chartwell Re in the fourth quarter of 1999 and the pending merger with LaSalle Re, which is now expected to close in the third quarter of 2000.

"That having been said, we are now seeing more pervasive signs of positive change in the markets in which we operate than at any point in recent memory.'' Operating income for the second quarter of 2000 was $1.7 million or $.11 per share compared to operating income of $5.3 million or $.50 per share for the second quarter of 1999. Trenwick defines operating income as net income excluding after-tax realised investment gains/losses, foreign exchange gains/losses and extraordinary items.

Mr Billet added that prospects for the company were improving. He said: "All of our business units are pointing to empirical evidence that rates and terms at both the primary and reinsurance level are improving and that the momentum of change is accelerating.'' Operating income for the second quarter of 2000 also included after-tax reorganisation expenses of $1.2 million, or $.08 per share. Operating income before amortisation of goodwill and other intangibles was $3.8 million, or $.24 per share for the second quarter of 2000.

For the first half of 2000, consolidated income before extraordinary item was $3.7 million or $.23 per share, compared to $13.8 million or $1.28 per share for the first half of 1999. In the first half of 2000, Trenwick recorded an extraordinary after-tax loss of $0.8 million associated with the first quarter redemption of $40.1 million principal amount of its 10-1/4 percent Senior Notes.

Mr. Billett added: "These positive market changes are coincident with our successful transformation from a mid-sized U.S. broker market reinsurer to an international underwriter of property and casualty insurance and reinsurance risks with operations in the three most important insurance jurisdictions -- the U.S., London and, upon the closing of the LaSalle Re transaction, Bermuda.

"Our goals for the balance of 2000 are to complete our merger with LaSalle Re, effect the transition of our holding company to Bermuda, continue to realise the expense synergies resulting from the integration of the operations of Trenwick, Chartwell Re and LaSalle Re, and assess the means by which we can take further advantage of our more prominent position in the market.''