Form 6-K

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

CONVERIUM HOLDING AG

Baarerstrasse 8
CH-6300 Zug
Switzerland
(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover Form 20-F or Form 40-F.

Form 20-F  o     Form 40-F  o

Indicate by check mark whether the registrant by furnishing the information contained in this Form is also thereby furnishing the information to the Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.

Yes  o     No  o

If “Yes” is marked, indicate the file number assigned to the registrant in connection with Rule 12g3-2(b): 82-Not Applicable

 

 

Half Year Report 2005

Investor information

Transfer Agent & Registrar

For American Depository Shares (ADS) traded on the New York Stock Exchange:

The Bank of New York
Corporate Trust Office
101 Barclay Street
New York, NY 10286
USA
Telephone +1 646 885 3300

Auditors

PricewaterhouseCoopers Ltd
Stampfenbachstrasse 73
P.O. Box 634
8035 Zurich
Switzerland
Telephone +41 44 630 1111
Fax +41 44 630 1115

Stock Trading

Converium Holding AG common shares are traded on the SWX Swiss Exchange under the trading symbol CHRN and as ADS (0.5 of a common share) on the New York Stock Exchange under the trading symbol CHR.

First half year of 2005

SWX Swiss Exchange (CHF)

High

12.50

Low

9.00

New York Stock Exchange (USD)

High

5.20

Low

3.59

First quarter of 2005

SWX Swiss Exchange (CHF)

High

12.20

Low

10.05

New York Stock Exchange (USD)

High

5.18

Low

4.44

Second quarter of 2005

SWX Swiss Exchange (CHF)

High

12.50

Low

9.00

New York Stock Exchange (USD)

High

5.20

Low

3.59

First listed

December 11, 2001 SWX Swiss Exchange and New York Stock Exchange.

Investor Relations Contact

Zuzana Drozd
Head of Investor Relations
Phone +41 44 639 9120
E-mail zuzana.drozd@converium.com

Contents

3		Financial highlights
4		Letter from the Chief Executive Officer
6		The Converium share
8		Management’s discussion and analysis of financial condition and results of operations
14		Business development
23		Cautionary note regarding forward-looking statements
24		Statements of income (loss)
25		Balance sheets
26		Statements of cash flows
27		Statement of changes in shareholders’ equity
28		Schedule of segment data
32		Notes to the financial statements

 2

 3

Financial highlights

		Three months ended June 30								Six months ended June 30
(US$ million, except per share information)		2005				2004				2005				2004
Gross premiums written			362.0				1,027.6				1,079.5				2,411.2
Net premiums written			330.9				948.8				1,035.8				2,247.4
Net premiums earned			612.8				1,009.9				1,301.6				2,002.9
Total investment results			86.8				89.2				168.3				171.0
Income (loss) before taxes			49.2				-381.9				-16.4				-295.5
Net income (loss)			70.8				-660.0				9.0				-594.3
Basic earnings (loss) per share1			0.48				-8.32				0.06				-7.49
Annualized return on shareholders’ equity2			17.9	%			-120.9	%			1.1	%			-57.1	%
Ongoing non-life loss ratio3			73.4	%			82.3	%			80.6	%			75.9	%
Ongoing non-life underwriting expense ratio3			20.2	%			21.8	%			21.1	%			21.2	%
Ongoing non-life administration expense ratio3			8.8	%			4.6	%			7.2	%			3.6	%
Ongoing non-life combined ratio3			102.4	%			108.7	%			108.9	%			100.7	%

		June 30				Dec. 31
		2005				2004
Total shareholders’ equity			1,648.2				1,720.2
Total underwriting reserves, net of reinsurance			8,751.0				9,983.1
Total invested assets			7,685.4				7,788.4
Book value per share			11.26				11.76

 4

Letter from the Chief Executive Officer

Dear shareholders,

I am pleased to report that your reinsurer has returned to a path of stability and profitability following last year’s developments.

The Converium brand remains recognized and respected in key markets around the world. Our ambitions have proved resilient, our talents tenacious, and our resolve sufficient to see Converium survive and, ultimately, prosper.

This testifies to our strong business relationships and the market’s demand for a mid-sized reinsurer. The vast majority of Converium’s historic customers from outside North America are still our clients. Some have reduced the extent of their transactions with us, but, crucially, the relationships themselves remain intact.

I am convinced that Converium is well positioned to regain its market position. However, we are not waiting passively for this to occur. Customers’ confidence in the Company is evident, and increases with every passing day. It builds as our Client Relationship Managers explain the whole story: Converium’s solvency levels are reaching new highs. The Company has made progress towards stabilization and reports profits again. We continue to strive to earn the rating agencies’ recognition of our inherent financial strength, another critical ingredient of recovery.

The path ahead

Upon my appointment as Chief Executive Officer of Converium, I set out a roadmap to recovery. During the first six months of 2005 we have made significant progress in our journey down that road, backed by the decision of the Board of Directors to reaffirm Converium’s intention to continue as a stand-alone entity operating as an international, multi-line reinsurer.

During this period we have matched the size of the organization to our current portfolio and prospects, with relevant cost savings on the horizon. We have examined and fine-tuned the types of business we underwrite going forward. However, we have resolved to stick to our existing business strategy, which has proved effective in our target markets of Europe, Asia and Latin America. Meanwhile, we continue to manage the run-off of our North American operations to the benefit of all stakeholders.

Equally important, your management is nurturing an internal culture where participation in decision-making is embedded throughout Converium. Continued retention of key staff is a high priority.

The severe winter storm Erwin, which swept across northern Europe from January 7 to 9, had a negative impact on the first quarter result. Losses related to the storm added 6.1 percentage points to the ongoing non-life combined ratio for the first quarter, although the event fell well within modeled loss scenarios, and serves to remind us that Converium is in the risk business.

The financial benefits of expense reduction initiatives embarked upon in March are not yet apparent. However, almost all of the cost savings achieved should crystallize by year end. We continue to monitor our administration expense ratio for ongoing operations and into 2006.

The first quarter result was a disappointment, although Converium’s underlying technical performance was sound. The bottom line, in addition to Erwin and administrative expenses, was marred by the US GAAP accounting impact arising from the commutation of a major retrocession agreement. However, the transaction was economically neutral, and has not affected Converium’s actual long-term financial performance.

Renewed success

Against these developments, Converium’s success during the major renewal periods in the first half of the year was certainly encouraging. Outside the US, almost 90% of treaty direct client relationships were maintained during the January 1 renewal, as were 56% of treaty broker relationships. This performance played out marginally better than expected, illustrating just how well Converium’s Client Relationship Managers know their clients.

Equally satisfying was Converium’s renewal performance in Asia at April 1. Clients proved loyal, especially in Japan, where Converium’s market share remains relatively high. Technically adequate rates were achieved despite rising competition from

 5

new entrants. Rating-sensitive Australia was the only Asia-Pacific market where more than half our client relationships fell away. However, we remain confident that these relationships can be rebuilt once a satisfactory rating level has been earned. In the recent renewals, Converium’s stringent pricing and underwriting standards were not compromised in order to achieve successful renewals. The July renewals further confirm the established trend of the previous renewals this year and Converium’s franchise proves resilient and robust.

The overall outcome of the renewals in the first half of 2005 shows clearly that despite Converium’s letter-rating, our business partners understand that the Company is fiscally robust. They realize that Converium is not destined to become another reinsurance casualty. On the contrary, your reinsurer returned to stability and profitability in the second quarter of 2005.

Our experience during that period marks a third consecutive quarter of relative reserve stability. In addition, no major catastrophes occurred in the second quarter of 2005, and the underwriting result is positive.

Our financial expectations have been met through careful and responsible underwriting, despite slight market price deterioration in certain lines of business. Our positive technical performance has been bolstered by satisfactory returns from a strong investment base. I am confident that diligent pursuit of the roadmap to recovery promises a medium-term resumption of the creation of attractive shareholder returns by Converium.

Rejuvenation

I welcome to the Board of Directors Dr Markus Dennler, former member of the Executive Board of Credit Suisse Financial Services and Chief Executive Officer responsible for the global operational Life & Pensions business, and Rudolf Kellenberger, former Deputy Chief Executive Officer of Swiss Re. Elected at the Annual General Meeting on April 12, 2005, their experience, input and fresh insights have already been invaluable over the recent months.

I applaud the faith, loyalty and effort of Converium’s hard-working staff, who have weathered what has certainly been a difficult period for our Company. Finally, I thank our valued clients and broker partners for their understanding and support during this time. Theirs is the final, essential component of our renewed success.

Yours sincerely,

Terry G. Clarke
Chief Executive Officer

 6

The Converium share

The Converium share and ADS

In the first half of 2005 Converium shares and ADSs under-performed both the European and the US Insurance Index. Converium’s shareholder split remained well diversified geographically; UK, US and Swiss institutional investors each held nearly 30% of Converium’s shares.

See note 1

See note 1

Converium Ordinary Shares*			-87.3	%
Bloomberg European Insurance Index*			-36.3	%
Swiss Market Index*			-1.2	%
Converium ADSs**			-83.6	%
Bloomberg US Insurance Index**			7.6	%
Dow Jones Industrial Index**			3.9	%

Converium Ordinary Shares*			2.0	%
Bloomberg European Insurance Index*			4.4	%
Swiss Market Index*			8.4	%
Converium ADSs**			-9.8	%
Bloomberg US Insurance Index**			0.0	%
Dow Jones Industrial Index**			-4.2	%

1)

A different scale is used for the 2005 performance reflecting the relatively minor movements of the Converium share and ADS.

7

Key share data for 2005
Shares registered as at June 30, 2005			146,689,462
SWX Swiss Exchange
Share price as at June 30, 2005 in CHF			10.40
Year High in CHF			12.50
Year Low in CHF			9.00
Average daily trading volume in 2005			1,618,303
Market capitalization as at June 30, 2005 in CHF			1,525,570,405
Book value per share as at June 30, 2005 in CHF			14.43
New York Stock Exchange
ADS price as at June 30, 2005 in US$			4.03
Year High in US$			5.20
Year Low in US$			3.59

Major shareholders

In accordance with the notification requirements as set by the SWX Swiss Exchange, the following significant share holdings were notified to Converium Holding AG as of June 30, 2005:

•

Odey Asset Management LLP, London, United Kingdom: 11.2% (date of notification: March 4, 2005)

•

Dodge & Cox, San Francisco, United States: 5.04% (date of notification: June 22, 2005)

 8

Management’s discussion and analysis
of financial condition and results of operations

Overview

Converium Holding AG and subsidiaries (“Converium”) is an international reinsurer whose business operations are recognized for innovation, professionalism and service. We believe we are accepted as a professional reinsurer for all major lines of non-life and life reinsurance in Europe, Asia-Pacific and Latin America. We actively seek to develop efficient and effective reinsurance solutions to complement our target clients’ business plans and needs. We focus on core underwriting skills and on developing close client relationships while honoring our and our clients’ relationships with intermediaries.

We offer a broad range of mostly traditional non-life and life reinsurance products to help our target clients efficiently and effectively manage capital and risks. In non-life reinsurance, our lines of business are General Third Party Liability, Motor, Personal Accident (assumed from non-life insurers), Property, Agribusiness, Aviation & Space, Credit & Surety, Engineering, Marine & Energy, Professional Liability and other Special Liability and Workers’ Compensation. In Life & Health Reinsurance, our lines of business are Life and Disability reinsurance, including quota share, surplus coverage and financing contracts, and Accident and Health.

In 2004, we placed Converium Reinsurance (North America) Inc. (“CRNA”) into orderly run-off, which resulted in the discontinuation of writing reinsurance from offices located in North America. We continue to service remaining contracts issued by CRNA until they expire or are terminated. We are actively commuting CRNA’s liabilities wherever appropriate. We still offer reinsurance for attractive US-originated business, which is underwritten and managed through Converium AG, Zurich.

In the first quarter of 2005, Converium formally adopted a change to the reporting line of the management of its North American operations. This change was introduced to reflect the placement of CRNA into orderly run-off and management’s desire to monitor this business on a stand-alone basis. Therefore, Converium’s business is now organized around three ongoing operating segments: Standard Property & Casualty Reinsurance, Specialty Lines and Life & Health Reinsurance, which are based principally on global lines of business, in addition to a Run-Off segment. The Run-Off segment includes all business; both life and non-life, originating from CRNA and Converium Insurance (North America) Inc. (“CINA”), excluding the US originated aviation business. In addition to the four segments’ financial results, the Corporate Center carries certain administration expenses, such as costs of the Board of Directors, the Global Executive Committee, and other corporate functions as well as other expenses not allocated to the operating segments. As well as reporting individual segment results, management also presents the aggregation of Standard Property & Casualty Reinsurance and Specialty Lines, referred to later in this discussion as ongoing non-life business, as these are both non-life segments, the aggregation of which management considers meaningful in understanding the performance of Converium. This measure excludes the non-life business contained within the Run-Off segment in line with management’s desire to monitor this segment on a stand-alone basis. The aggregation of the Life & Health Reinsurance segment with the ongoing non-life business is referred to as total ongoing business.

Results of operations

		Three months ended June 30								Six months ended June 30
(US$ million)		2005				2004				2005				2004
Income (loss) before taxes			49.2				-381.9				-16.4				-295.5
Net realized capital (losses) gains			-1.0				12.5				-1.7				21.7
Impairment of goodwill			—				-94.0				—				-94.0
Amortization of intangible assets			-7.0				-0.8				-14.0				-1.5
Restructuring costs			-3.5				—				-13.6				—
Pre-tax operating income (loss)1			60.7				-299.6				12.9				-221.7
Net income (loss)			70.8				-660.0				9.0				-594.3

We reported net income for the three and six months ended June 30, 2005 as compared to net loss for the same periods in 2004. The second quarter of 2005 exhibited solid underwriting results for our ongoing business, supported by net positive development of prior years’ loss reserves in the amount of US$ 6.7 million, the absence of major catastrophic events and a strong investment result. For the six months ended June 30, 2005, our result includes the recognition of a net loss of US$ 32.5 million from winter storm Erwin, the commutation of certain retrocession contracts which had a negative effect of US$ 40.0 million, net strengthening of prior years’ loss reserves of US$ 3.7 million and costs of US$ 13.6 million associated with our

 9

Management’s discussion and analysis
of financial condition and results of operations (continued)

organizational and operational restructuring. The 2004 results were primarily driven by net reserve strengthening of prior years’ loss reserves and a related increase in income tax expense due to the establishment of a full valuation allowance against the net deferred tax assets from our North American operations and the impairment of goodwill. Our resulting ongoing non-life combined ratio was 102.4% and 108.9% for the three and six months ended June 30, 2005, compared to 108.7% and 100.7% for the same periods of 2004.

We reported pre-tax operating income (defined as income (loss) before taxes, net realized capital (losses) gains, impairment of goodwill, amortization of intangible assets and restructuring costs) for the three and six months ended June 30, 2005 as compared to a pre-tax operating loss for the same periods in 2004. We use pre-tax operating results to measure the performance of our underlying reinsurance operations without the influence of realized gains and losses from the sale of investments, or other non-operating items such as goodwill, impairment and restructuring costs.

For the three months ended June 30, 2005, gross premiums written decreased 64.8%, net premiums written decreased 65.1% and net premiums earned decreased 39.3% compared to the same period in 2004. For the six months ended June 30, 2005, gross premiums written decreased 55.2%, net premiums written decreased 53.9% and net premiums earned decreased 35.0% compared to the same period in 2004. The decrease in gross and net premiums written was caused by the placement of CRNA into orderly run-off and the ratings downgrades, both of which occurred in 2004, resulting in clients canceling their business or reducing their shares with us. In addition, due to the seasonality involved with the renewal of our business in different markets, we generally record the largest share of our premium volume in the first quarter of a given year and approximately half of our annual premium volume is recorded by the end of the second quarter of a given year. Despite the decrease in overall premium volume, for the three months ended June 30, 2005, there was still growth in the Agribusiness, Aviation and Accident and Health lines of business. For the six months ended June 30, 2005, the Agribusiness line of business experienced growth in premium volume. The growth over the three and six months ended June 30, 2005 resulted from increased shares in existing business and new client relationships.

We had net realized capital losses of US$ 1.0 million for the three months ended June 30, 2005 versus net realized capital gains of US$ 12.5 million for the same period in 2004. For the six months ended June 30, 2005 we had net realized capital losses of US$ 1.7 million as compared to net realized capital gains of US$ 21.7 million for the same period in 2004. During the second quarter of 2004, we realized approximately US$ 16.0 million of realized capital gains on the sale of certain equity investments to adjust our asset allocation to reduce investment risks.

Other loss for the three and six months ended June 30, 2005 was US$ 1.5 million and US$ 9.3 million, respectively, as compared to other income of US$ 5.4 and US$ 8.1 million for the same periods of 2004.

The components of net income (loss) are described below.

Reinsurance results

										% change												% change
		Three months ended June 30								2005 over				Six months ended June 30								2005 over
(US$ million)		2005				2004				2004				2005				2004				2004
Gross premiums written			362.0				1,027.6				-64.8				1,079.5				2,411.2				-55.2
Net premiums written			330.9				948.8				-65.1				1,035.8				2,247.4				-53.9
Net premiums earned			612.8				1,009.9				-39.3				1,301.6				2,002.9				-35.0

Gross and net premiums written decreased for the three and six months ended June 30, 2005 over the same periods in 2004 largely due to the reduction in business volume caused by the placement of CRNA into orderly run-off and the ratings downgrades, both of which occurred in 2004, resulting in clients canceling their business or reducing their shares with us. In addition, due to the seasonality involved with the renewal of our business in different markets, we generally record the largest share of our premium volume in the first quarter of a given year and approximately half of our annual premium volume is recorded by the end of the second quarter of a given year.

For the three months ended June 30, 2005, net premiums written in Standard Property & Casualty Reinsurance decreased by US$ 212.4 million, or 83.1%, Specialty Lines decreased by US$ 117.7 million, or 33.9% and net premiums written in the Life & Health Reinsurance segment decreased by US$ 1.5 million, or 2.6%. For the six months ended June 30, 2005, net premiums written in Standard Property & Casualty Reinsurance decreased by US$ 408.9 million, or 47.8% and Specialty Lines decreased by US$ 285.7 million, or 42.6%, while net premiums written in the Life & Health Reinsurance segment grew by US$ 1.1 million, or 0.7%. Although the Specialty Lines segment experienced a decrease in net premiums written, we successfully renewed the significant business with our strategic partner, Medical Defence Union (“MDU”). On a consolidated basis we ceded 8.6% and 7.7% of our gross premiums written for the three months ended June 30, 2005 and 2004, respectively and 4.0% and 6.8% for the six months ended June 30, 2005 and 2004, respectively.

 10

Management’s discussion and analysis
of financial condition and results of operations (continued)

Net premiums earned for the three and six months ended June 30, 2005 decreased at a slower rate than the corresponding net premiums written as premiums are still being earned from business written in prior underwriting years.

See “Business development” for further information by line of business.

										% change												% change
		Three months ended June 30								2005 over				Six months ended June 30								2005 over
(US$ million)		2005				2004				2004				2005				2004				2004
Losses, loss adjustment expenses and life benefits			-449.3				-1,103.8				-59.3				-1,035.1				-1,824.7				-43.3
Ongoing non-life loss ratio (to net premiums earned)			73.4	%			82.3	%		-8.9		pts			80.6	%			75.9	%		4.7		pts

Our losses, loss adjustment expenses and life benefits incurred decreased for the three months ended June 30, 2005 as compared to the same period of 2004, supported by net positive development of prior years’ loss reserves in the amount of US$ 6.7 million, of which US$ 3.1 million were related to the Run-Off segment, and the absence of major catastrophic events. For the six months ended June 30, 2005, our losses, loss adjustment expenses and life benefits incurred decreased while our ongoing non-life loss ratio increased. The first half of 2005 was impacted by Winter Storm Erwin, which resulted in pre-tax net losses in the amount of US$ 32.5 million, the commutation of certain retrocession contracts with a negative effect on losses of US$ 38.7 million and net strengthening of prior years’ loss reserves in the amount of US$ 3.7 million, of which US$ 13.3 million were related to the Run-Off segment. The results for the three and six months ended June 30, 2004 were driven by the significant adverse development of prior years’ loss reserves that was recorded in the first half of 2004 on our US casualty reinsurance lines in the amount of US$ 430.7 million.

Reserve development

For the three months ended June 30, 2005, we recorded net positive development of prior years’ loss reserves in the amount of US$ 6.7 million, which resulted in an overall net strengthening of prior years’ loss reserves of US$ 3.7 million for the first half of 2005. The development of prior years’ loss reserves for the three months ended June 30, 2005 includes US$ 6.9 million of net strengthening in the Standard Property & Casualty Reinsurance segment and net positive development of US$ 10.5 million and US$ 3.1 million in the Specialty Lines and Run-Off segments, respectively. The development of prior years’ loss reserve for the first half of 2005 consisted of net positive development of US$ 3.3 million in the Standard Property & Casualty Reinsurance segment and US$ 6.3 million in the Specialty Lines segment, offset by net strengthening of prior years’ loss reserves of US$ 13.3 million in the Run-Off segment.

In the first half of 2005, we were also impacted by net strengthening of prior years’ loss reserves of US$ 15.3 million from the US/Caribbean hurricanes that occurred in late 2004, of which US$ 11.8 million impacted the Standard Property & Casualty Reinsurance segment and US$ 3.5 million impacted the Specialty Lines segment. This net strengthening is included in the net strengthening of prior years’ loss reserves shown above.

As a result of the reserve volatility of old underwriting years and the adverse loss-reporting trend that continued throughout the early part of 2004, we recorded net strengthening of prior years’ loss reserves in the amount of US$ 387.7 million for the three months ended June 30, 2004, which resulted in an overall net strengthening of prior years’ loss reserves of US$ 430.7 million for the first half of 2004. The development of prior years’ loss reserves for the three months ended June 30, 2004 includes net strengthening of US$ 5.1 million in the Standard Property & Casualty Reinsurance segment, US$ 51.3 million in the Specialty Lines segment and US$ 331.3 in the Run-Off segment. The development of prior years’ loss reserves for the first half of 2004, consisted of net strengthening of prior years’ loss reserves of US$ 1.1 million in the Standard Property & Casualty Reinsurance segment, US$ 32.2 million in the Specialty Lines segment and US$ 397.4 million in the Run-Off segment.

Our net loss for the September 11th terrorist attacks is capped at US$ 289.2 million by Zurich Financial Services.

Retrocessional risk management

As part of our risk management process we regularly evaluate the recoverability of our reinsurance assets taking into account all public domain information including the current rating of our retrocessionaires. If there are genuine concerns about a retrocessionaire’s ability to pay future claims we may enter into negotiations to commute the retrocessionaire’s obligations in respect of future claims. In this type of transaction the reinsurance recoverables which are included in underwriting reserves on the balance sheet and reflect the full nominal value of expected future claims recoveries are reduced to zero in exchange for commutation payments, which reflect the time value of money on the commuted reserves in question. In such a transaction we suffer an underwriting loss in the quarter that the transaction takes place due to the value of the discount in respect of future expected cash flows, but avoid future concerns about the recoverability of our reinsurance assets including potential bad debt provisions. Additionally, we will benefit from additional investment income on cash received and/or reduced interest expense related to any funds held balance.

11

Management’s discussion and analysis
of financial condition and results of operations (continued)

As a result of this risk management monitoring process, we reached a decision in the first quarter of 2005 to commute the obligations of one of our retrocessionaire’s due to the deterioration of that company’s rating and concerns about its future ownership and prospects. This led to the commutation of certain retrocession contracts with reinsurance recoverables in the amount of US$ 100.1 million for a commutation settlement of US$ 60.1 million, which generated a negative impact of US$ 40.0 million on the net results in the first half of 2005, US$ 38.7 million of which is in losses. In the second quarter of 2005, our risk management monitoring process did not result in any such retrocession commutations.

Commutations

Based on the developments of 2004, we placed CRNA into orderly run-off and started to implement and execute a commutation strategy. Commutations can accelerate the realization of profit inherent in long-tail reserves by crystallizing outstanding claims reserves into payments, which are discounted to reflect the time value of money. Since commutation payments essentially reflect a discounted present value of estimated future cash flows, future investment income earned is expected to decline as the assets backing those reserves are liquidated to make payments. As of June 30, 2005, we have not yet concluded and legally bound further material commutations with our cedents; however we continue to vigorously execute our approved commutation strategy and follow our commutation objectives. Under US GAAP accounting, we are not permitted to recognize benefit from commutations until they are legally bound.

										% change												% change
		Three months ended June 30								2005 over				Six months ended June 30								2005 over
(US$ million)		2005				2004				2004				2005				2004				2004
Underwriting acquisition costs			-130.9				-224.3				-41.6				-291.3				-433.4				-32.8
Operating and administration expenses			-50.2				-54.7				-8.2				-107.1				-107.3				-0.2
Ongoing non-life underwriting expense ratio (to net premiums earned)			20.2	%			21.8	%			-1.6	pts			21.1	%			21.2	%			-0.1	pts
Ongoing non-life administration expense ratio (to net premiums written)			8.8	%			4.6	%			4.2	pts			7.2	%			3.6	%			3.6	pt

Underwriting acquisition costs primarily relate to commissions on treaty and individual risk business. For the three and six months ended June 30, 2005 our underwriting acquisition costs decreased and our ongoing non-life underwriting expense ratio remained relatively stable. Underwriting expenses have decreased as a result of the reduction in overall business volume; however premiums are still being earned from business written in prior underwriting years. Offsetting this decrease is the fact that our mix of business has shifted from non-proportional to proportional, which generally carries higher underwriting expenses.

Operating and administration expenses decreased for the three months ended June 30, 2005 versus the same period in 2004 and remained flat for the six months ended June 30, 2005 as compared to the same period in 2004. Our operating and administration expenses in 2005 are only partially reflective of the cost management measures implemented in the first quarter of 2005 and were primarily offset by the costs resulting from staff retention plans and expenses which we consider necessary to expedite a rapid and effective rebound. The ongoing non-life administration expense ratio increased for the three and six months ended June 30, 2005 as compared to the same periods of 2004 as our cost management measures referred to above are not fully reflected in our cost base and because of the significant reduction in net premiums written.

Management’s discussion and analysis
of financial condition and results of operations (continued)

Investment results

		Three months ended June 30								Six months ended June 30
(US$ million)		2005				2004				2005				2004
Investment income:
Fixed maturities			62.1				47.8				116.0				94.0
Equity securities			2.7				7.1				3.9				9.2
Funds Withheld Asset			16.2				19.0				33.1				39.3
Other, net of expenses			6.8				2.8				17.0				6.8
Net investment income			87.8				76.7				170.0				149.3
Average annualized net investment income yield (pre-tax)			4.4	%			3.8	%			4.1	%			3.8	%
Net realized capital (losses) gains			-1.0				12.5				-1.7				21.7
Total investment results			86.8				89.2				168.3				171.0
Average annualized total investment income yield (pre-tax)			4.3	%			4.5	%			4.1	%			4.3	%
Change in net unrealized gains (losses) (pre-tax)			81.9				-139.2				27.7				-76.9
Total investment return (pre-tax)			168.7				-50.0				196.0				94.1
Average annualized total investment return (pre-tax)			8.4	%			-2.5	%			4.8	%			2.4	%
Average total invested assets (including cash and cash equivalents)			8,070.9				7,964.5				8,218.1				7,868.0

Investment results are an important part of our overall profitability. Our net investment income increased for the three and six months ended June 30, 2005 as compared to the same periods in 2004. The increase largely resulted from moderate growth in total investments over 2004, as well as an allocation shift from equity securities to fixed income securities in mid-2004. In 2005, we have a higher allocation to relatively high-yielding fixed income securities, particularly in the United Kingdom.

Our average annualized net investment income yield (pre-tax) was 4.4% and 4.1% for the three and six months ended June 30, 2005, as compared to 3.8% for both of the same periods of 2004. Yields are calculated based on the average of beginning and ending investment balances (including cash and cash equivalents).

An increasing component of net investment income arises from income received on business written on a funds withheld basis such as certain Lloyd’s transactions. As these assets are reported under funds held by reinsureds and do not form part of the average total invested assets, there is a consequent increase in the reported average annualized net investment income yield (pre-tax). If this component is excluded from net investment income, the average annualized net investment income yield (pre-tax) would be 4.2% and 3.9% for the three and six months ended June 30 2005, as compared to 3.8% and 3.7% for the same periods of 2004.

We had net realized capital losses of US$ 1.0 million for the three months ended June 30, 2005 versus net realized capital gains of US$ 12.5 million for the same period in 2004. For the six months ended June 30, 2005 we had net realized capital losses of US$ 1.7 million as compared to net realized capital gains of US$ 21.7 million for the same period in 2004. Our second quarter and half year 2004 results were driven by the realization of approximately US$ 16.0 million of realized capital gain on the sale of certain equity investments to adjust our asset allocation to reduce investment risks.

Our average annualized total investment income yield (pre-tax) was 4.3% and 4.1% for the three and six months ended June 30, 2005, versus 4.5% and 4.3% for the same periods of 2004, as we realized US$ 21.7 million of net realized capital gains for the first half of 2004.

Our average annualized total investment return (pre-tax) was 8.4% and 4.8% for the three and six months ended June 30, 2005 as compared to -2.5% and 2.4% for the same periods of 2004. The total return for the quarter was positively impacted by declining long-term yields and strong European stock markets, which triggered positive changes in the unrealized capital gain and loss positions.

We recorded US$ 4.9 million and US$ 2.6 million of impairment charges for the six months ended June 30, 2005 and 2004, respectively.

Management’s discussion and analysis
of financial condition and results of operations (continued)

Other

		Three months ended June 30								Six months ended June 30
(US$ million)		2005				2004				2005				2004
Other (loss) income			-1.5				5.4				-9.3				8.1
Interest expense			-8.0				-8.8				-15.9				-16.6
Impairment of goodwill			—				-94.0				—				-94.0
Amortization of intangible assets			-7.0				-0.8				-14.0				-1.5
Restructuring costs			-3.5				—				-13.6				—
Income tax benefit (expense)			21.6				-278.1				25.4				-298.8

Other (loss) income: Other loss for the three months ended June 30, 2005 was US$ 1.5 million as compared to other income of US$ 5.4 million for the same period of 2004. For the six months ended June 30, 2005, other loss was US$ 9.3 million as com-pared to other income of US$ 8.1 million for the same period of 2004. The increase in other loss for the first half of 2005 is primarily driven by US$ 3.0 million of amortization related to our Helix 04 catastrophe cover, a charge of US$ 2.4 million related to the impairment of our usufruct agreements with the co-owners of SATEC and US$ 1.3 million related to the commutation of certain retrocession contracts. The 2004 other income reflects a benefit of approximately US$ 10.0 million related to the release of a reserve for uncollectible reinsurance recoverables.

Interest expense: Interest expense remained relatively stable for the three and six months ended June 30, 2005 as compared to the same periods in 2004. This expense includes the April 2005 interest payment on CRNA’s 7 1/8% senior debt note. Prior to this interest payment, Converium Holdings (North America) Inc. received a capital contribution from Converium AG. In addition, the interest expense includes the interest payment for the Guaranteed Subordinated Notes.

Impairment of goodwill: Impairment of goodwill was nil for the three and six months ended June 30, 2005 as compared to US$ 94.0 million for the same periods in 2004.

SFAS No. 142, “Goodwill and Other Intangible Assets”, requires impairment testing of goodwill annually or more regularly if any event or change in business circumstances occurs which would indicate that the carrying value of goodwill may be impaired. Due to the reserving actions taken in the second quarter of 2004 in respect of prior year development in business written in North America, and a subsequent decision to take a full valuation allowance against the net deferred tax asset at CRNA, a goodwill impairment test was conducted to assess the fair value of the reporting units at that date. As a result of this assessment, an impairment charge of US$ 94.0 million was recorded in the second quarter of 2004.

Amortization of intangible assets: Amortization of intangible assets was US$ 7.0 million and US$ 14.0 million for the three and six months ended June 30, 2005 as compared to US$ 0.8 million and US$ 1.5 million for the same periods in 2004. This amortization relates to the intangible asset for Global Aerospace Underwriting Managers Limited (“GAUM”).

Restructuring costs: The reduction of premium volume required an adjustment of our cost base globally going forward. Consequently, we notified certain of our employees that their employment would be terminated. We recorded restructuring costs of US$ 3.5 million and US$ 13.6 million for the three and six months ended June 30, 2005, respectively, related to these global cost management measures.

In addition, as a result of the global restructuring, a decision was made in January 2005 to vacate our primary office space in New York, New York and consolidate in our Stamford, Connecticut office space. We expect the transfer to be effective within the third quarter of 2005, resulting in additional restructuring costs. Office space in Zurich is also under review, which could result in additional restructuring costs in future quarters.

Income tax benefit (expense): We recorded an income tax benefit of US$ 21.6 million and US$ 25.4 million for the three and six months ended June 30, 2005, respectively. Over the past year, we have established a full valuation allowance against existing tax losses carried forward in our primary locations, resulting in minimal current income tax expense relating to pre-tax income. Therefore tax benefits and expenses are primarily driven by the development of existing deferred tax assets and liabilities, which are established to reflect differences in the tax accounting rules of local jurisdictions and US GAAP accounting.

In the second quarter of 2005, our income tax benefit resulted from the reduction of deferred acquisition costs (“DAC”), caused by the decline in our overall non-life premium volume, and certain timing differences related to the recognition of investment gains and losses.

Management’s discussion and analysis
of financial condition and results of operations (continued)

In the first half of 2005, our income tax benefit resulted from the positive effect of a reduction of DAC, the effect of certain timing differences related to the recognition of investment gains and losses, and certain other deferred tax liability reductions, offset by a reduction in the profit allocated to the Bermuda branch and an increase of the valuation allowance on existing losses carried forward.

Our consolidated income tax expense for the three and six months ended June 30, 2004 reflected an additional expense of US$ 269.8 million, related to the establishment of a full valuation allowance against the net deferred income tax balances previously carried at CRNA.

Business development

Converium’s business is organized around three ongoing operating segments: Standard Property & Casualty Reinsurance, Specialty Lines and Life & Health Reinsurance, which are based principally on global lines of business, in addition to a Run-Off segment. The Run-Off segment includes all business originating from CRNA and CINA, excluding the US originated aviation business. In addition to the four segments’ financial results, the Corporate Center carries certain administration expenses, such as costs of the Board of Directors, the Global Executive Committee, and other corporate functions as well as other expenses not allocated to the operating segments. Prior year figures have been restated to reflect the new segment reporting structure.

The following table compares Converium’s segment results for the three and six months ended June 30, 2005 and 2004 and reconciles segment results to income (loss) before taxes:

		Three months ended June 30								Six months ended June 30
(US$ million)		2005				2004				2005				2004
Segment income (loss):
Standard Property & Casualty Reinsurance			32.5				22.0				34.9				69.0
Specialty Lines			41.3				-10.6				11.7				37.4
Life & Health Reinsurance			0.3				1.9				6.5				3.4
Run-Off			6.9				-289.6				2.3				-284.2
Corporate Center			-11.8				-7.4				-19.0				-17.1
Total segment income (loss)			69.2				-283.7				36.4				-191.5
Other (loss) income			-1.5				5.4				-9.3				8.1
Interest expense			-8.0				-8.8				-15.9				-16.6
Impairment of goodwill			—				-94.0				—				-94.0
Amortization of intangible assets			-7.0				-0.8				-14.0				-1.5
Restructuring costs			-3.5				—				-13.6				—
Net income (loss) before taxes			49.2				-381.9				-16.4				-295.5

Standard Property & Casualty Reinsurance

										% change												% change
		Three months ended June 30								2005 over				Six months ended June 30								2005 over
(US$ million)		2005				2004				2004				2005				2004				2004
Gross premiums written			47.9				284.5				-83.2				460.4				918.4				-49.9
Net premiums written			43.3				255.7				-83.1				446.2				855.1				-47.8
Net premiums earned			178.9				334.5				-46.5				420.9				706.5				-40.4
Total investment results			30.8				28.8								57.8				55.2
Segment income			32.5				22.0								34.9				69.0
Loss ratio			74.8	%			74.2	%							78.0	%			71.7	%
Underwriting expense ratio			17.3	%			22.8	%							20.0	%			21.2	%
Administration expense ratio			28.6	%			6.6	%							7.0	%			4.2	%
Combined ratio			120.7	%			103.6	%							105.0	%			97.1	%
Retention ratio (net premiums written divided by gross premiums written)			90.4	%			89.9	%							96.9	%			93.1	%

Management’s discussion and analysis
of financial condition and results of operations (continued)

Standard Property & Casualty Reinsurance reported segment income for the three and six months ended June 30, 2005 and 2004. These results were primarily attributable to the following:

•		A solid underwriting performance supported by net positive development of prior years’ loss reserves of US$ 3.3 million in the first half of 2005 and the absence of major catastrophic events in the second quarter of 2005. For the second quarter of 2005, the Standard Property & Casualty Reinsurance segment recorded net strengthening of prior years’ loss reserves of US$ 6.9 million primarily related to strengthening within the Motor line of business (US$ 17.9 million), which was partially offset by positive development within the Property line of business (US$ 17.6 million). Included within the US$ 17.6 million positive development for the Property line of business was a strengthening of US$ 4.4 million (US$ 11.8 million year-to-date) related to the US/Caribbean hurricanes that occurred in late 2004. For the three and six months ended June 30, 2004, US$ 5.1 million and US$ 1.1 million, respectively of net reserve strengthening was recorded.
		For the three months ended June 30, 2005, the loss ratio remained relatively flat as compared to the same period of 2004. The impact of winter storm Erwin, which resulted in net pre-tax losses in the amount of US$ 32.5 million, net of US$ 3.0 million in reinstatement premium, during the first quarter of 2005, added 7.7 percentage points to the loss ratio for the six months ended June 30, 2005.
•		Strong investment results for the three and six months ended June 30, 2005 as compared to the same periods of 2004.

For the three months ended June 30, 2005, gross premiums written decreased 83.2% to US$ 47.9 million, net premiums written decreased 83.1% to US$ 43.3 million and net premiums earned decreased 46.5% to US$ 178.9 million. For the six months ended June 30, 2005, gross premiums written decreased 49.9% to US$ 460.4 million, net premiums written decreased 47.8% to US$ 446.2 million and net premiums earned decreased 40.4% to US$ 420.9 million. Premium volume for the three and six months ended June 30, 2005 was impacted by the ratings downgrades that occurred in 2004, which resulted in clients canceling their business or reducing their shares with us. In addition, due to the seasonality involved with the renewal of our business in different markets, we generally record the largest share of our premium volume in the first quarter of a given year and approximately half of our annual premium volume is recorded by the end of the second quarter of a given year. For the six months ended June 30, 2005, the reduction in net premiums written in the Standard Property & Casualty Reinsurance segment by line of business included:

•		Motor (decreased by 60.7% or US$ 195.1 million to US$ 126.5 million), largely reflecting reduced writings in the France and United Kingdom books of business due to profitability considerations as well as cancellation of business due to ratings down- grades in 2004;
•		Property (decreased by 16.9% or US$ 53.3 million to US$ 262.0 million), largely reflecting reduced writings due to the ratings downgrades in 2004;
•		General Third Party Liability (decreased by 76.1% or US$ 146.4 million to US$ 46.0 million), which decreased due to revisions to premium estimates on our London Market North America and United Kingdom book of business; and
•		Personal accident (assumed from non-life insurers) (decreased by 54.7% or US$ 14.1 million to US$ 11.7 million), which decreased as a result of the cancellation or non-renewal of business and reduced shares in current business due to the ratings downgrades in 2004.

Our underwriting expense ratio decreased for the second quarter of 2005 due to our Lloyd’s participations, which form an increasing share of the Standard Property & Casualty Reinsurance segment. Due to the way the Lloyd’s business is reported to us, this premium is accounted for net of acquisition costs so that as the proportion of business from this source rises we see a corresponding fall in the acquisition cost ratio.

Our administration expense ratio increased significantly for the second quarter of 2005, as our cost management measures are not fully reflected in our cost base and because of the significant reduction in net premiums written.

Management’s discussion and analysis
of financial condition and results of operations (continued)

Specialty Lines

										% change												% change
		Three months ended June 30								2005 over				Six months ended June 30								2005 over
(US$ million)		2005				2004				2004				2005				2004				2004
Gross premiums written			247.3				375.2				-34.1				401.8				723.0				-44.4
Net premiums written			229.5				347.2				-33.9				384.9				670.6				-42.6
Net premiums earned			327.3				300.3				9.0				619.7				582.3				6.4
Total investment results			34.9				36.3								65.9				69.6
Segment income (loss)			41.3				-10.6								11.7				37.4
Loss ratio			72.7	%			91.4	%							82.4	%			81.0	%
Underwriting expense ratio			21.8	%			20.6	%							21.8	%			21.2	%
Administration expense ratio			5.1	%			3.1	%							7.4	%			2.9	%
Combined ratio			99.6	%			115.1	%							111.6	%			105.1	%
Retention ratio (net premiums written divided by gross premiums written)			92.8	%			92.5	%							95.8	%			92.8	%

Specialty Lines reported segment income for the three and six months ended June 30, 2005 as compared to a segment loss for the three months ended June 30, 2004 and a segment income for the six months ended June 30, 2004. These results were primarily attributable to the following:

•		A solid underwriting performance supported by US$ 10.5 million of net positive development of prior years’ loss reserves in the second quarter of 2005, which was primarily driven by positive development within the Aviation line of business (US$ 19.5 million) and was partially offset by net strengthening within additional lines of business within the segment. The net positive development for the quarter resulted in the Specialty Lines segment recording net positive development of US$ 6.3 million for the first half of 2005. In the second quarter of 2004, US$ 51.3 million of net strengthening of prior years’ loss reserves was recorded, which resulted in 2004 year-to-date net strengthening of prior years’ loss reserves in the amount of US$ 32.2 million.
•		The commutation of certain retrocession contracts which had a negative effect on losses of US$ 38.7 million during the first quarter of 2005.
•		Strong investment results for the three and six months ended June 30, 2005 as compared to the same periods of 2004.

For the three months ended June 30, 2005, gross premiums written decreased 34.1% to US$ 247.3 million, net premiums written decreased 33.9% to US$ 229.5 million and net premiums earned increased 9.0% to US$ 327.3 million. For the six months ended June 30, 2005, gross premiums written decreased 44.4% to US$ 401.8 million, net premiums written decreased 42.6% to US$ 384.9 million and net premiums earned increased 6.4% to US$ 619.7 million. Premium volume for the three and six months ended June 30, 2005 was impacted by the ratings downgrades that occurred in 2004, which resulted in clients canceling their business or reducing their shares with us. For the six months ended June 30, 2005, the reduction in net premiums written in the Specialty Line segment by line of business included:

•

Aviation & Space (decreased by 31.5% or US$ 59.8 million to US$ 129.9 million);

•

Credit & Surety (decreased by 69.2% or US$ 69.4 million to US$ 30.9 million);

•

Professional Liability and other Special Liability (decreased by 45.5% or US$ 97.6 million to US$ 116.8 million);

•

Engineering (decreased by 39.6% or US$ 29.6 million to US$ 45.2 million);

•

Marine & Energy (decreased by 25.8% or US$13.9 million to US$ 40.0 million); and

•

Workers’ Compensation (decreased by 97.3% or US$ 32.3 million to US$ 0.9 million), which in addition to the affects of the ratings downgrades that occurred in 2004, decreased due to the non-renewal of two large contracts.

These decreases were offset by an increase in net premiums written in the Agribusiness line of business, which increased by US$ 17.0 million to US$ 21.2 million. Additionally, in Specialty Lines, we successfully renewed the significant business with our strategic partner, MDU.

Management’s discussion and analysis
of financial condition and results of operations (continued)

Our underwriting expense ratio increased for the six months ended June 30, 2005 from 21.2% to 21.8% due to the change in the business mix, which has shifted from non-proportional to proportional, and the additional fronting commission of the GAUM business due to the ratings downgrades in 2004.

Our administration expense ratio increased for the six months ended June 30, 2005 from 2.7% to 7.4%, as our cost management measures are not fully reflected in our cost base and because of the significant reduction in net premiums written.

Life & Health Reinsurance

										% change												% change
		Three months ended June 30								2005 over				Six months ended June 30								2005 over
(US$ million)		2005				2004				2004				2005				2004				2004
Gross premiums written			59.3				70.6				-16.0				176.4				189.8				-7.1
Net premiums written			55.7				57.2				-2.6				169.5				168.4				0.7
Net premiums earned			74.1				83.6				-11.4				155.2				151.3				2.6
Total investment results			6.5				5.2								12.5				9.9
Segment income			0.3				1.9								6.5				3.4
Underwriting expense ratio			25.4	%			25.5	%							29.6	%			22.0	%
Administration expense ratio			7.4	%			7.7	%							4.8	%			4.4	%
Retention ratio (net premiums written divided by gross premiums written)			93.9	%			81.0	%							96.1	%			88.7	%

Life & Health Reinsurance reported segment income for the three months and six months ended June 30, 2005 and 2004. The segment income in 2005 was primarily attributable to the expansion of existing reinsurance transactions in Continental Europe, which was partially offset by negative development of US$ 1.5 million in the first quarter of 2005 related to the tsunami that occurred in late 2004.

Technical result for the three months ended June 30, 2005 was US$ 1.5 million compared to US$ 4.1 million for the same period in 2004. The technical result for the six months ended June 30, 2005 was US$ 8.1 million compared to US$ 5.4 million for the same period in 2004. Technical result is defined as net premiums earned minus losses, loss adjustment expenses and life benefits minus underwriting acquistiion costs plus technical interest.

The decrease in segment income and technical result for the second quarter of 2005 was primarily driven by our decision to non-renew two large contracts as well as updated cedent information pertaining to our European and Latin American markets.

For the three months ended June 30, 2005, gross premiums written decreased 16.0% to US$ 59.3 million, net premiums written decreased 2.6% to US$ 55.7 million and net premiums earned decreased 11.4% to US$ 74.1 million. For the six months ended June 30, 2005, gross premiums written decreased 7.1% to US$ 176.4 million, net premiums written increased 0.7% to US$ 169.5 million and net premiums earned increased 2.6% to US$ 155.2 million.

For the six months ended June 30, 2005, net premiums written growth in the Life & Health Reinsurance segment was primarily within the Life and Disability reinsurance line of business which increased by 8.5% or US$ 10.3 million to US$ 132.2 million primarily due to the expansion of existing reinsurance transactions as well new business being written. This increase was offset by a decrease of 20.0% or US$ 9.3 million in net premiums written to US$ 37.3 million in the Accident and Health line of business due to the cancellation of contracts where the overall performance was not in-line with our profitability targets as well as the impact of the ratings downgrades that occurred in 2004.

Run-Off

										% change												% change
		Three months ended June 30								2005 over				Six months ended June 30								2005 over
(US$ million)		2005				2004				2004				2005				2004				2004
Gross premiums written			7.5				297.3				-97.5				40.9				580.0				-92.9
Net premiums written			2.4				288.7				-99.2				35.2				553.3				-93.6
Net premiums earned			32.5				291.5				-88.9				105.8				562.8				-81.2
Total investment results			14.6				18.9								32.1				36.3
Segment income (loss)			6.9				-289.6								2.3				-284.2

18

Management’s discussion and analysis
of financial condition and results of operations (continued)

The Run-Off segment reported segment income of US$ 6.9 million and US$ 2.3 million for the three and six months ended June 30, 2005, respectively, versus a segment loss for the same periods of 2004. In the second quarter of 2005, the Run-Off segment recorded US$ 3.1 million of net positive development of prior years’ loss reserves, which resulted in net strengthening of prior years’ loss reserves of US$ 13.3 million in the first half of 2005. In the second quarter of 2004 the Run-Off segment strengthened prior years’ loss reserves by US$ 331.3 million, primarily within the Professional Liability and other Special Liability and General Third Party Liability lines of business, which resulted in US$ 397.4 million of net reserve strengthening of prior years’ loss reserves in the first half of 2004.

Corporate Center

										% change												% change
		Three months ended June 30								2005 over				Six months ended June 30								2005 over
(US$ million)		2005				2004				2004				2005				2004				2004
Operating and administration expenses			-11.8				-7.4				59.5				-19.0				-17.1				11.1

The Corporate Center carries certain administration expenses, such as costs of the Board of Directors, the Global Executive Committee, and other corporate functions as well as other expenses not allocated to the operating segments. The Corporate Center costs increased for the three and six months ended June 30, 2005 as compared to the comparable periods of 2004 due to increased legal, audit and consulting fees related to our organizational and operational restructuring.

Financial Condition and Liquidity

Invested assets

As of June 30, 2005 and December 31, 2004, total invested assets (excluding cash and cash equivalents) were US$ 7.7 billion and US$ 7.8 billion respectively.

As of June 30, 2005, Converium reported total investments including cash and cash equivalents and excluding the Funds Withheld Asset of US$ 6,807.6 million. Of this total, certain amounts were pledged as follows: (i) US$ 1,098.5 million were pledged as collateral relating to outstanding letters of credit of US$ 989.6 million (these outstanding letters of credit are related to the US$ 1.6 billion Syndicated Letter of Credit Facility), (ii) US$ 959.8 million were pledged as collateral relating to other irrevocable letters of credit, (iii) US$ 231.5 million were pledged primarily as deposits with cedents, (iv) US$ 282.3 million were deposited in trust or with regulatory authorities or states, and (v) US$ 554.6 million were pledged to support Converium internal reinsurance transactions.

In order to better match cash flow profiles and liquidity constraints for potential commutations, during the first half of 2005, we aligned the investment portfolio in our North American operations to reflect the run-off situation. We lowered our exposure to mortgage-backed securities and replaced them with asset-backed securities and commercial mortgage-backed securities, which have less interest rate sensitivity than current investments but still offer attractive yields.

Our asset mix, including cash and cash equivalents, consisted of the following at June 30, 2005 and December 31, 2004:

Asset class

		As of June 30, 2005				As of Dec. 31, 2004
Fixed maturity securities (including the Funds Withheld Asset)			87.0	%			82.5	%
Equity securities 1			4.0	%			3.6	%
Cash and short-term investments			4.6	%			9.4	%
Real estate and other1, 2			4.4	%			4.5	%
Total			100.0	%			100.0	%

 19

Management’s discussion and analysis
of financial condition and results of operations (continued)

Fixed maturities

As of June 30, 2005, our fixed maturities portfolio, excluding the Funds Withheld Asset (described more fully below), had a carrying value of US$ 5.8 billion and represented 72.4% of our total investment portfolio including cash and cash equivalents (87.0% including the Funds Withheld Asset). This represents an increase in carrying value of US$ 85.8 million, or 1.5%, from December 31, 2004. This increase is driven by the purchase of additional investments, as well as by a decrease in unrealized losses caused by interest rate decreases that occurred in the second quarter of 2005.

We invest in government, agency and corporate fixed income securities of issuers from around the world that meet our liquidity and credit standards. We place an emphasis on investing in listed fixed income securities that we believe to be liquid.

The table below presents the composition of our fixed income securities portfolio, excluding short-term investments, based on carrying value by scheduled maturity.

(US$ million)		Estimated fair value				% of total				Carrying value				% of total
As of June 30, 2005		Available-for-sale (AFS)				AFS				Held-to-maturity (HTM)				HTM
Less than one year			225.1				4.6				30.5				3.7
One year through five years			2,911.5				58.8				489.2				59.7
Five years through ten years			1,009.9				20.4				278.9				34.0
Over ten years			86.2				1.7				21.3				2.6
Subtotal			4,232.7				85.5				819.9				100.0
Mortgage and asset-backed securities			555.7				11.2				—				—
Unit trust bonds			162.7				3.3				—				—
Total as of June 30, 2005			4,951.1				100.0				819.9				100.0

Most of our fixed income securities are rated by Standard & Poor’s, Moody’s or similar rating agencies. As of June 30, 2005, approximately 96.4% of our fixed income securities portfolio was invested in securities rated A or better by these agencies and approximately 83.0% was invested in AAA/Aaa rated securities.

The table below presents the composition of our fixed income securities portfolio by rating, using the lower of these ratings for any security where there is a split rating.

(US$ million)		Estimated fair value				% of total				Carrying value				% of total
As of June 30, 2005		Available-for-sale (AFS)				AFS				Held-to-maturity (HTM)				HTM
AAA/Aaa			3,994.4				80.7				794.9				97.0
AA/Aa2			442.3				8.9				14.3				1.7
A/A2			308.7				6.2				10.7				1.3
BBB/Baa2			92.2				1.9				—				—
BB			7.5				0.2				—				—
Not rated*			106.0				2.1				—				—
Total as of June 30, 2005			4,951.1				100.0				819.9				100.0

20

Management’s discussion and analysis
of financial condition and results of operations (continued)

Equity securities

As of June 30, 2005, our equity securities portfolio had a carrying value of US$ 419.4 million (including PSP Swiss Property AG). This represents an increase in carrying value of US$ 20.0 million, or 5.0%, from December 31, 2004, which was mainly driven by purchases of equity securities in the first quarter of 2005. Equity securities were approximately 4.0% and 3.5% of our total investment portfolio as of June 30, 2005 and December 31, 2004, respectively, including cash and cash equivalents and excluding PSP Swiss Property AG.

Substantially our entire equity portfolio consists of listed securities held directly or through funds. All the equity portfolios are in developed markets. As experienced in recent years, the equity markets around the world can produce highly volatile and significantly varied results due to local and worldwide economic and political conditions.

Funds Withheld Asset

The transfer of certain historical reinsurance business to Converium was affected as of July 1, 2001 by means of the Quota Share Retrocession Agreement with Zurich Financial Services. In addition, on that date, the Funds Withheld Asset was established. Its initial balance was set to match the net balance of the liabilities, less the premium receivables (including outstanding collectible balances and reinsurance deposits) on the business to which the Quota Share Retrocession Agreement applies. As of June 30, 2005, the Funds Withheld Asset was US$ 1,159.2 million. The decrease of US$ 145.9 million over December 31, 2004 was substantially due to paid claims.

The table below shows the distribution of the Funds Withheld Asset by currency as of June 30, 2005 and December 31, 2004.

		As of June 30, 2005				As of December 31, 2004
US dollar			43	%			41	%
UK pound			28	%			29	%
Euro			24	%			25	%
Swiss franc			3	%			2	%
Japanese yen			2	%			3	%
Total			100	%			100	%
Weighted average interest rate			5.4	%			5.4	%

In general, the Funds Withheld Asset is reduced by paid claims, profit commissions, amounts paid to maintain the retrocession agreements and other amounts paid on the business subject to the Quota Share Retrocession Agreement, and is increased by premiums (less premium refunds), salvage and subrogation, recoveries under retrocession agreements, profit commissions and other amounts received for the business subject to the Quota Share Retrocession Agreement. The balance of the Funds Withheld Asset will decrease over time. However, business historically written on the Zurich Insurance Company (“ZIC”) and Zurich International (Bermuda) Ltd (“ZIB”) balance sheets was written on the Converium balance sheet and continued to be renewed, where it met Converium’s profitability targets. As a result, we will generate operating cash flow from the new and renewal business written by Converium, which we expect to at least partially offset reductions of the balance of the Funds Withheld Asset.

Short-term investments

Our short-term investment portfolio includes investments in fixed-term deposits and fiduciary investments. These investments generally have maturities of between three months and one year. As of June 30, 2005, we had short-term investments with a carrying value of US$ 81.5 million, representing 1.0% of our total investment portfolio, including cash and cash equivalents. Short-term investments at December 31, 2004 were US$ 117.3 million or 1.4% of our total investment portfolio, including cash and cash equivalents.

Real estate and other investments

At June 30, 2005, we had real estate held for investment of US$ 152.0 million, consisting primarily of investments in residential and commercial rental properties located in Switzerland and indirect real estate in the Eurozone. Our real estate portfolio represented 1.9% of our total investment portfolio, including cash and cash equivalents. At December 31, 2004, we had real estate held for investment of US$ 147.9 million, which represented 1.7% of our total investment portfolio, including cash and cash equivalents.

In addition to these properties, Converium owns a 4.9% participation in PSP Swiss Property AG (an indirect real estate investment, included in equity securities) with a market value of US$ 98.8 million as of June 30, 2005 and US$ 98.9 million as of December 31, 2004.

As of June 30, 2005 and December 31, 2004, we had US$ 103.3 million and US$ 102.5 million, respectively in funds of hedge funds. These investments are included under the caption “Other investments” in the balance sheet.

21

Management’s discussion and analysis
of financial condition and results of operations (continued)

Premiums receivable

We had premiums receivable of US$ 1,610.9 million at June 30, 2005 compared to US$ 2,145.5 million at December 31, 2004, a decrease of US$ 534.6 million, or 24.9%. This decrease is primarily due to the reduction in business volume. Premiums receivable include those currently due, as well as deferred premiums receivable, which is comprised primarily of accruals on premium balances which have not yet been reported and which are not contractually due to be paid until some time in the future. Current premiums receivable represented 20.6% and 19.4% of total premiums receivable at June 30, 2005 and December 31, 2004, respectively, and accrued premiums receivable represented 79.4% and 80.6%, respectively. Allowances of US$ 32.9 million have been recorded for estimated uncollectible receivables and reinsurance recoverables at June 30, 2005, compared to US$ 40.6 million at December 31, 2004. See Footnote 7 for additional information regarding retrocessional risk management.

Reinsurance assets

Retrocessional reinsurance arrangements generally do not relieve Converium from its direct obligations to its reinsureds. Thus, a credit exposure exists with respect to reinsurance ceded to the extent that any retrocessionaire is unable or unwilling to meet the obligations assumed under the retrocessional agreements. Converium held US$ 708.8 million in collateral as security under related retrocessional agreements in the form of deposits, securities and/or letters of credit at June 30, 2005.

As of June 30, 2005, we had reinsurance recoverables from retrocessionaires of approximately US$ 1,415.3 million on paid and unpaid losses and loss adjustment expenses, unearned premium reserves and future life benefits balances, compared to US$ 1,571.3 million at December 31, 2004.

Gross loss and loss adjustment expense reserves and future life benefits

We had gross loss and loss adjustment expense reserves of US$ 8,266.8 million at June 30, 2005, compared to US$ 7,503.7 million at December 31, 2004. Gross reserves for future life benefits were US$ 398.9 million at June 30, 2005, compared to US$ 407.1 million at December 31, 2004.

22

Management’s discussion and analysis
of financial condition and results of operations (continued)

Shareholders’ equity

As of June 30, 2005, we had total shareholders’ equity of US$ 1,648.2 million (US$ 11.26 per share) compared to US$ 1,720.2 million (US$ 11.76 per share) as of December 31, 2004, a decrease of US$ 72.0 million (US$ 0.50 per share). This decrease is mainly comprised of a reduction in the net balances of unrealized gains and losses on investments, net of taxes, of US$ 15.6 million due to the developments in the financial markets in the first half of 2005 and a reduction in cumulative translation adjustments of US$ 67.8 million due to the strengthening of the US dollar against our other major currencies such as the British pound, Swiss franc and Euro. Book value is calculated using shares outstanding at the end of the period.

Cash flows and liquidity sources

(US$ million)

			Six months ended June 30
		2005				2004
Cash (used in) provided by operating activities			-37.6				442.5

Cash and cash equivalents decreased by US$ 399.5 million to US$ 281.4 million as of June 30, 2005 from US$ 680.9 million as of December 31, 2004. Our cash position decreased due the deployment of operating cash into fixed maturity securities.

Our cash flows from operating activities result principally from premiums, collections on losses recoverable and investment income, net of paid losses, acquisition costs and underwriting expenses. Our cash used in operating activities was US$ 37.6 million for the six months ended June 30, 2005 as compared to cash provided by US$ 442.5 million for the six months ended June 30, 2004, a decrease of US$ 480.1 million, or 108.5%. This decrease was due to a reduction in overall business volume.

Critical accounting policies

Our consolidated financial statements include amounts that, either by their nature or due to requirements of accounting principles generally accepted in the United States (US GAAP), are determined using best estimates and assumptions. While we believe that the amounts included in our consolidated financial statements reflect our best judgment, actual amounts could ultimately differ materially from those currently presented in our consolidated financial statements. We believe the items that require the most subjective and complex estimates are:

•		Unpaid loss and loss adjustment expense reserves;
•		Collectibility of reinsurance recoverables, including bad debt provisions;
•		Impairments to the carrying value of individual investments within our investment portfolio;
•		The valuation allowances against our net deferred tax assets;
•		Impairments of goodwill and other intangible assets; and
•		Assessment of risk transfer for certain structured reinsurance contracts.

More information regarding the estimates and assumptions required to arrive at the amounts recorded is included in the section entitled “Critical Accounting Policies” in our Management’s Discussion and Analysis of Financial Condition and Results of Operations in our 2004 Annual Report.

23

Management’s discussion and analysis
of financial condition and results of operations (continued)

Cautionary note regarding forward-looking statements

This “Management’s discussion and analysis of financial condition and results of operations” contains certain forward-looking statements. Forward-looking statements are necessarily based on estimates and assumptions that are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which, with respect to future business decisions, are subject to change. These uncertainties and contingencies can affect actual results and could cause actual results to differ materially from those expressed in any forward-looking statements.

In particular, statements using words such as “expect, “anticipate,” “intend,” “believe” or words of similar import generally involve forward-looking statements. In light of the risks and uncertainties inherent in all future projections, the inclusion of forward-looking statements should not be considered a representation by us that our objectives or plans will be achieved. Numerous factors could cause our actual results to differ materially from those in any forward-looking statements, including the following:

•

The impact of the ratings changes and a further lowering or loss of one of our financial strength ratings;

•

Uncertainties of assumptions used in our reserving process;

•

Risks associated with implementing our business strategies and our capital improvement measures and the run off our North American business;

•

Cyclicality of the reinsurance industry;

•

The occurrence of natural and man-made catastrophic events with a frequency or severity exceeding our estimates;

•

Acts of terrorism and acts of war;

•

Changes in economic conditions, including interest and currency rate conditions that could affect our investment portfolio;

•

Actions of competitors, including industry consolidation and development of competing financial products;

•

A decrease in the level of demand for our reinsurance or increased competition in our industries or markets;

•

A loss of our key employees or executive officers;

•

Political risks in the countries in which we operate or in which we reinsure risks;

•

The passage of additional legislation or the promulgation of new regulation in a jurisdiction in which we or our clients operate or where our subsidiaries are organized;

•

The impact of the SEC and New York Attorney General’s investigations of the insurance industry;

•

Changes in our investment results due to the changed composition of our invested assets or changes in our investment policy;

•

Failure of our retrocessional reinsurers to honor their obligations;

•

Failure to prevail in any current or future arbitration or litigation; and

•

Extraordinary events affecting our clients, such as bankruptcies and liquidations.

The factors listed above should not be construed as exhaustive. We cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those described in any forward-looking statements. Except as otherwise required by law, we undertake no obligation to publicly release any future revisions we may make to forward-looking statements to reflect subsequent events or circumstances or to reflect the occurrence of unanticipated events.

The Company has made it a policy not to provide any quarterly or annual earnings guidance and it will not update any past outlook for full year earnings. It will, however, provide investors with a perspective on its value drivers, its strategic initiatives and those factors critical to understanding its business and operating environment.

Converium Holding AG and Subsidiaries

Interim statements of income (loss) (unaudited)

(US$ million, except per share information)		Three months ended June 30								Six months ended June 30
		2005				2004				2005				2004
Revenues
Gross premiums written			362.0				1,027.6				1,079.5				2,411.2
Less ceded premiums written			-31.1				-78.8				-43.7				-163.8
Net premiums written			330.9				948.8				1,035.8				2,247.4
Net change in unearned premiums			281.9				61.1				265.8				-244.5
Net premiums earned			612.8				1,009.9				1,301.6				2,002.9
Net investment income			87.8				76.7				170.0				149.3
Net realized capital (losses) gains			-1.0				12.5				-1.7				21.7
Other (loss) income			-1.5				5.4				-9.3				8.1
Total revenues			698.1				1,104.5				1,460.6				2,182.0
Benefits, losses and expenses
Losses, loss adjustment expenses and life benefits			-449.3				-1,103.8				-1,035.1				-1,824.7
Underwriting acquisition costs			-130.9				-224.3				-291.3				-433.4
Other operating and administration expenses			-50.2				-54.7				-107.1				-107.3
Interest expense			-8.0				-8.8				-15.9				-16.6
Impairment of goodwill			—				-94.0				—				-94.0
Amortization of intangible assets			-7.0				-0.8				-14.0				-1.5
Restructuring costs			-3.5				—				-13.6				—
Total benefits, losses and expenses			-648.9				-1,486.4				-1,477.0				-2,477.5
Income (loss) before taxes			49.2				-381.9				-16.4				-295.5
Income tax benefit (expense)			-21.6				-278.1				25.4				-298.8
Net income (loss)			70.8				-660.0				9.0				-594.3
Basic earnings (loss) per share			0.48				-8.32				0.06				-7.49
Diluted earnings (loss) per share			0.48				-8.32				0.06				-7.49

The notes to the interim financial statements are an integral part of these financial statements.

Converium Holding AG and Subsidiaries

Interim balance sheets

(US$ million, except share information)		June 30, 2005				Dec. 31, 2004
		(unaudited)
Assets
Invested assets
Held-to-maturity securities:
Fixed maturities			819.9				850.4
Available-for-sale securities:
Fixed maturities			4,951.1				4,834.8
Equity securities			419.4				399.4
Other investments			254.3				281.4
Short-term investments			81.5				117.3
Total investments			6,526.2				6,483.3
Funds Withheld Asset			1,159.2				1,305.1
Total invested assets			7,685.4				7,788.4
Other assets
Cash and cash equivalents			281.4				680.9
Premiums receivable:
Current			331.9				416.5
Accrued			1,279.0				1,729.0
Reserves for unearned premiums, retro			83.6				111.6
Reinsurance assets:
Underwriting reserves			940.8				1,226.2
Insurance balances receivable			390.9				233.5
Funds held by reinsureds			1,609.4				1,721.3
Non-risk transfer reinsurance assets			139.1				137.0
Deferred policy acquisition costs			334.7				484.7
Deferred income taxes			70.2				78.3
Other assets			346.3				335.4
Total assets			13,492.7				14,942.8
Liabilities and shareholders’ equity
Liabilities
Reinsurance liabilities
Loss and loss adjustment expenses, gross			8,266.8				8,915.6
Future life benefits, gross			398.9				407.1
Reinsurance balances payable			528.8				919.4
Reserves for unearned premiums, gross			971.8				1,312.3
Other reinsurance liabilities			173.2				110.4
Funds held under reinsurance contracts			445.8				379.3
Deferred income taxes			311.3				348.5
Non risk transfer reinsurance liabilities			145.0				157.2
Accrued expenses and other liabilities			211.7				281.7
Debt			391.2				391.1
Total liabilities			11,844.5				13,222.6
Shareholders’ equity
Common stock CHF 5 nominal value, 146,689,462 and 146,689,462 shares issued, respectively (146,330,942 and 146,272,886 shares outstanding, respectively)			554.9				554.9
Additional paid-in capital			1,423.1				1,430.6
Treasury stock (358,520 and 416,576 shares, respectively)			-2.0				-7.7
Unearned stock compensation			-4.4				-7.5
Total accumulated other comprehensive income:
Accumulated other comprehensive income			-5.6				-6.7
Net unrealized gains on investments, net of taxes			101.1				116.7
Cumulative translation adjustments			126.3				194.1
Total accumulated other comprehensive income			221.8				304.1
Retained deficit			-545.2				-554.2
Total shareholders’ equity			1,648.2				1,720.2
Total liabilities and equity			13,492.7				14,942.8

The notes to the interim financial statements are an integral part of these financial statements.

Converium Holding AG and Subsidiaries

Interim statements of cash flows (unaudited)

(US$ million)		Six months ended June 30
		2005				2004
Cash flows from operating activities
Net income (loss)			9.0				-594.3
Adjustments for
Net realized capital losses (gains) on investments			1.7				-21.7
Amortization of premium/discount			27.4				28.7
Depreciation and amortization			21.8				12.2
Deferred income tax (benefit) expense			-8.5				—
Impairment of goodwill and deferred tax assets			—				363.8
Total adjustments			42.4				383.0
Changes in operational assets and liabilities
Deferred policy acquisition costs			117.0				-43.9
Reinsurance assets			115.8				102.6
Reserves for unearned premium, retro			26.2				28.0
Funds held by reinsureds			-8.0				-204.6
Funds Withheld Asset			80.4				157.0
Premiums receivable			321.7				-272.7
Non-risk transfer reinsurance assets			-2.1				—
Unearned premiums, gross			-284.1				219.5
Losses and loss adjustment expenses, gross			-322.4				707.8
Future life benefits, gross			19.2				21.1
Reinsurance balances payable			-225.7				187.8
Funds held under reinsurance contracts			90.5				-41.0
Other reinsurance liabilities			70.5				-90.7
Non-risk transfer reinsurance liabilities			-2.2				-9.7
Income taxes, net			—				-10.2
Net changes in all other operational assets and liabilities			-85.8				-97.2
Total changes in operational assets and liabilities			-89.0				653.8
Cash (used in) provided by operating activities			-37.6				442.5
Cash flows from investing activities
Purchases of fixed maturities held-to-maturity			—				-92.7
Proceeds from sales and maturities of fixed maturities available-for-sale			1,859.1				1,629.2
Purchases of fixed maturities available-for-sale			-2,280.9				-1,994.8
Cash flows from investing activities (fixed maturities)			-421.8				-458.3
Proceeds from sales of equity securities			26.6				449.2
Purchases of equity securities			-50.6				-520.9
Cash flows from investing activities (equity securities)			-24.0				-71.7
Net increase in short-term investments			59.4				-9.1
Proceeds from sales of other assets			9.4				23.1
Purchases of other assets			-28.9				-51.6
Cash flows from investing activities (other)			39.9				-37.6
Net cash used in investing activities			-405.9				-567.6
Cash flows from financing activities
Purchases of common shares			-1.5				-4.9
Dividends to shareholders			—				-47.9
Net cash used in financing activities			-1.5				-52.8
Effect of exchange rate changes on cash and cash equivalents			45.5				2.6
Change in cash and cash equivalents			-399.5				-175.3
Cash and cash equivalents as of January 1			680.9				255.5
Cash and cash equivalents as of June 30			281.4				80.2

The notes to the interim financial statements are an integral part of these financial statements.

Converium Holding AG and Subsidiaries

Consolidated statements of changes in shareholders’ equity (unaudited)

(US$ million)

														Unearned				Accumulated
						Additional								stock				other
		Common				paid-in				Treasury				compen-				comprehensive				Retained				Total
		stock				capital				stock				sation				income				deficit				equity
Balance, December 31, 2004			554.9				1,430.6				-7.7				-7.5				304.1				-554.2				1,720.2
Net income			—				—				—				—				—				9.0				9.0
Change in net unrealized gains (losses) on investments, net of taxes			—				—				—				—				-15.6				—				-15.6
Translation adjustments			—				-0.9				—				—				-66.7				—				-67.6
Total comprehensive loss																											-74.2
Purchases of common shares			—				—				-1.5				—				—				—				-1.5
Releases of common shares from treasury			—				-7.2				7.2				—				—				—				—
Net amortization of stock compensation			—				0.6				—				3.1				—				—				3.7
Balance, June 30, 2005			554.9				1,423.1				-2.0				-4.4				221.8				-545.2				1,648.2

The notes to the interim financial statements are an integral part of these financial statements.

28

Converium Holding AG and Subsidiaries

Notes to the interim financial statements (unaudited)

Schedule of segment data
(US$ million)

		Standard Property &																Total
		Casualty Reinsurance								Specialty Lines								Non-life consolidated
		2005				2004				2005				2004				2005				2004
Three months ended June 30
Gross premiums written			47.9				284.5				247.3				375.2				295.2				659.7
Less ceded premiums written			-4.6				-28.8				-17.8				-28.0				-22.4				-56.8
Net premiums written			43.3				255.7				229.5				347.2				272.8				602.9
Net change in unearned premiums			135.6				78.8				97.8				-46.9				233.4				31.9
Net premiums earned			178.9				334.5				327.3				300.3				506.2				634.8
Total investment results			30.8				28.8				34.9				36.3				65.7				65.1
Revenues			209.7				363.3				362.2				336.6				571.9				699.9
Losses, loss adjustment expenses and life benefits			-133.8				-248.1				-238.0				-274.4				-371.8				-522.5
Underwriting acquisition costs			-31.0				-76.3				-71.3				-62.0				-102.3				-138.3
Other operating and administration expenses			-12.4				-16.9				-11.6				-10.8				-24.0				-27.7
Benefits, losses and expenses			-177.2				-341.3				-320.9				-347.2				-498.1				-688.5
Segment income (loss)			32.5				22.0				41.3				-10.6				73.8				11.4
Other (loss) income
Interest expense
Impairment of goodwill
Amortization of intangible assets
Restructuring costs
Income (loss) before taxes
Income tax benefit (expense)
Net income (loss)
Ratios
Loss ratio (Losses divided by net premiums earned)			74.8	%			74.2	%			72.7	%			91.4	%			73.4	%			82.3	%
Underwriting expense ratio (Underwriting acquisition costs divided by net premiums earned)			17.3	%			22.8	%			21.8	%			20.6	%			20.2	%			21.8	%
Administration expense ratio (Other operating and administration expenses divided by net premiums written)			28.6	%			6.6	%			5.1	%			3.1	%			8.8	%			4.6	%
Combined ratio (Sum of the loss, underwriting expense and administration expense ratios)			120.7	%			103.6	%			99.6	%			115.1	%			102.4	%			108.7	%