Local writer of alternative risk transfer business, Sphere Drake Underwriting Management (Bermuda) Ltd., (SDUMBL) has increased net premiums written by nearly 56 percent to $11,575,000 for the third quarter to September 30.

But for the nine month period to the end of the third quarter, the Bermuda office has net premiums written of $34,237,000, a more than 16 percent drop from the comparative period in 1995.

That represented 11.8 percent of the net premiums written for SDUMBL's Bermuda-registered parent, Sphere Drake Holdings Ltd.

Net premiums earned for the Bermuda programme dropped from $10,784,000 in the third quarter last year to $9,890,000 in this year's third quarter.

But for the three quarter period, net premiums earned increased slightly from $39,727,000 in 1995 to $40,216,000 this year. The latter represented 12.2 percent of net premiums earned for the parent company.

Sphere Drake has undergone some changes over the last year after running into financial problems in 1995.

In announcing Sphere Drake's total results yesterday, president and CEO, Michael Watson said: "I am pleased to announce our third profitable quarter of 1996 and that we have achieved our goal of more stable and predictable earnings while adhering to strict underwriting standards.'' Sphere Drake had net income of $6,881,000 (37 cents a share) for the quarter on revenues of $125,080,000, operating income of $6.1 million, excluding realised investment gains/losses, and net premiums written of $95.6 million.

That compared with last year's third quarter of net income of $5,365,000 (29 cents a share) on revenues of $155,529,000, an operating loss of $2.3 million, excluding realised investment gains/losses and net premiums written of $123.3 million.

The drop in premium resulted from a conscious decision by Sphere Drake to forego premiums rather than relax underwriting standards in the face of deteriorating market conditions.

Mr. Watson said: "The reduction in gross premiums has improved our ratio of capital to premium and lessened our risk profile. This is consistent with our goal of maintaining a more disciplined balance sheet.'' The GAAP combined ratio for the third quarter improved to 104.7 percent, compared with 113.8 percent a year ago. Last year's third quarter results included $15 million reserve strengthening for the Protection & Indemnity account, which added 11.3 percent to the loss ratio.

Mr. Watson noted: "We are now nearing completion of our strategic review and expect to make announcements about a more focused Sphere Drake in the near future. Consistent with that view of the future we have withdrawn from the financial institutions and professional indemnity business during the quarter and reorganised our US excess and surplus lines businesses.'' , Michael Watson, who took over Sphere Drake after the controversial departure of then president and CEO Ian H. Dean in December, is being credited with turning the insurer around. A.M. Best in April said: "The group's books of business that were aggressively underwritten and inadequately reserved during the late 1980s and early 1990s have been brought under control by Michael Watson.''