Bermuda’s ESG Re Limited has released the anticipated restatement of its 2001 results and its third quarter results in 2002. The company also posted its full year 2002 results. A dispute with its former auditors over the treatment of a co-insurance contract with ACE Limited and the proper accounting for currency conversions had delayed the release of the figures.
ESG Re reported that net premiums earned in 2001 were $156.897 million, instead of $153.220 million as previously stated. The restated accounts also showed that the company’s net loss for the year decreased from $20.435 million to $15.873 million.
The company also restated its foreign currency translation adjustments showing a net increase of $3.992 million. The confusion was “due to the internal system that consolidates the financial results of our subsidiaries,” said the announcement, and noted that the restatement had been made in a 10-K filing last August.
The company also explained that it had “signed a co-reinsurance contract with ACE in November 2001 that became effective retroactively as of January 1, 2001. Under SFAS 113, the premiums written during the retroactive period were deemed to be written on our own account with the co-reinsurance to ACE treated as a retroactive retrocession arrangement. However, we did not show premiums earned, losses and loss adjustment expenses and acquisition costs in our reported revenues and expenses, in respect of the retroactive period, in the third and fourth quarters of 2001 and the first and second quarters of 2002. During the quarter ended September 30, 2002 we restated our figures for the correct accounting treatment of this contract. In accordance with SFAS 113, we did not recognize any of the profits of the ACE share of the reinsurance contract in our statement of operations and hence, there was no impact on our reported net income or net loss in any affected period.”
In assessing 2002, CEO Alasdair Davis stated: “We have now completed the implementation and where necessary the reimplementation of the infrastructure systems and processes to support the Company. Working through the legacy issues has taken one year longer than we originally anticipated. We are at a point where the open treaties for the early underwriting years are less than two dozen. We now feel we are at a point where the remaining legacy liabilities are known and quantified. Treaty matters in litigation and/or arbitration are significantly fewer in number than this time one year ago.”
Further details concerning the company’s financial condition and the restatement of its earnings and quarterly reports can be obtained by consulting OTC stock market reports under the company’s symbol “ESREF.PK.”
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