Form 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of March, 2006
CONVERIUM HOLDING AG
---------------------------------------------
(Translation of registrant's name into English)
Baarerstrasse 8
CH-6300 Zug
Switzerland
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(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 X Form 40-F
------- -------
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 No X
------- -------
If "Yes" is marked, indicate the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82- Not Applicable
1
Converium Holding Ltd, Zug
Zug, Switzerland - March 15, 2006 - Converium reports net income of US$ 68.7
million for the full year 2005.
In the financial year 2005 Converium has produced net income of US$ 68.7
million. This result primarily reflects:
o a satisfactory underwriting performance of Converium's ongoing
operations, which produced total segments' income of US$ 173.8
million;
o a net pre-tax impact of US$ 164.8 million from the following major
natural catastrophes: winter storm Erwin, the Continental European
floods and hurricanes Katrina, Rita and Wilma;
o a net positive impact of prior accident years on the technical result
of US$ 12.1 million, mainly due to the continuing stabilization of
Converium's prior accident years' loss reserves;
o the successful progression of the Converium Reinsurance (North
America) Inc. (CRNA) run-off and commutation strategy, which resulted
in a total reduction of net liabilities of US$ 653.1 million to
approximately US$ 1.1 billion, and a net income benefit from
commutations of US$ 60.5 million.
o total operating and administration expenses of US$ 210.8 million, a
decline of 4.1% compared with 2004, despite significant additional
expenses arising from the internal review and restatement, as well as
Converium's operational restructuring; and
o a total investment result of US$ 350.4 million, or an average total
investment income yield of 4.4%, which is equal to 2004.
For the fourth quarter of 2005 Converium reports net income of US$ 34.2 million,
largely driven by:
o a satisfactory underwriting performance of Converium's ongoing
operations, which produced total segments' income of US$ 63.2 million;
o hurricane Wilma, which caused net pre-tax losses for the entire
Company of approximately US$ 46.5 million;
o operating and administration expenses of US$ 63.2 million,
representing an increase of US$ 22.9 million compared with the third
quarter of 2005, primarily due to expenses associated with the
internal review and the restatement;
o successful commutations of CRNA liabilities resulting in a net income
benefit of US$ 22.0 million; and
o a total investment result of US$ 111.6 million or an average
annualized total investment income yield of 6.0%, including net
realized capital gains of US$ 33.6 million, primarily from the sale of
equity securities.
Based on Converium's financial performance in 2005 and the Company's strong
capitalization, the Board of Directors proposes a gross cash dividend of CHF
0.10 per share to the Annual General Meeting of April 11, 2006.
Inga Beale, Chief Executive Officer, commented: "The unprecedented string of
natural catastrophes experienced in 2005 has served as a reminder that we are in
the business of risk. Nevertheless I am encouraged by Converium's financial
results for 2005. Based on the underlying quality of our ongoing business, the
stability of prior accident years' loss reserves and the progress in running-off
and commuting CRNA liabilities, we have been able to absorb significant
catastrophe losses and to generate net income of close to US$ 70 million."
Inga Beale continued: "After my first six weeks at the helm of Converium I am
convinced that our franchise is stable, our business strategy appropriate and
our underwriting expertise top class. I therefore strongly believe that 2006
will see further progress towards Converium's sustainable recovery."
2
Financial results of the fourth quarter and the full year 2005
Key metrics (in US$, unless noted)
Three months ended Full year 2005
December 31, 2005
o Gross premiums written 375.4 million 1,994.3 million
o Income before tax 38.8 million 84.3 million
o Pre-tax operating income 2.8 million U100.8 million
o Ongoing total segment income(1) 63.2 million 173.8 million
o Impact from winter storm Erwin, Continental European floods 60.4 million 164.8 million
and hurricanes Katrina, Rita and Wilma
o Net income 34.2 million 68.7 million
o Ongoing non-life combined ratio(2) 110.8% 107.2%
o Impact on combined ratio from winter storm Erwin, European 14.9 pts 7.7 pts
floods and hurricanes Katrina, Rita and Wilma
o Adjusted ongoing non-life combined ratio (excluding Erwin, 95.9% 99.5%
floods and hurricanes)
o Average annualized total investment income yield (pre-tax) 6.0% 4.4%
o Shareholders' equity 1,653.4 million
For the full year 2005, Converium reported pre-tax operating income of US$ 100.8
million and net income of US$ 68.7 million. This result reflects a negative
impact of US$ 164.8 million from the following major natural catastrophes:
winter storm Erwin, the Continental European floods and the hurricanes Katrina,
Rita and Wilma. However, the financial performance benefited from a net positive
impact of prior accident years on the technical result of US$ 12.1 million
resulting from net positive development of prior accident years' loss reserves
of US$ 75.5 million, offset by reductions in premiums, related losses and
acquisition costs of net US$ 63.4 million. Additional positive effects were
recorded due to the successful progression of the CRNA run-off and the effective
execution of its commutation strategy. Converium also reported a satisfactory
underwriting performance of its ongoing operations, which produced total segment
income of US$ 173.8 million. The ongoing non-life combined ratio was 107.2%.
Finally, the full year performance benefited from a decline in total operating
and administration expenses by 4.1% to US$ 210.8 million in 2005 - despite
significant additional legal, audit and consulting expenses, mainly arising from
the internal review and restatement of prior years' financial information as
well as the Company's operational restructuring.
In 2005, gross premiums written decreased by 49.9%, net premiums written by
51.3% and net premiums earned by 38.6%. This decline in gross and net premiums
written reflects the reduction in overall business volume due to the ratings
downgrades in 2004 and the placement of CRNA into orderly run-off. Overall,
full-year gross premiums written are closely in line with the previously stated
volume expectation of approximately US$ 2 billion.
-------------------------------------
(1) Total segment income (loss) is defined as net premiums earned plus total
investment results minus losses, loss expenses and life benefits,
acquisition costs and other operating and administration expenses.
(2) Ongoing non-life combined ratio is defined as non-life loss ratio (to
premiums earned) plus non-life acqusition costs ratio (to premiums earned)
plus non-life administration expense ratio (to premiums written).
3
Based on the developments of 2004, Converium placed its North American
reinsurance operations into run-off and started to implement and execute a
vigorous commutation strategy. In 2005, CRNA commuted net liabilities of US$
372.9 million. As a result, total net liabilities of CRNA decreased by 36.9% to
approximately US$ 1.1 billion. Based on the commutations a net income benefit of
US$ 60.5 million was recorded.
Converium reported an ongoing non-life combined ratio of 107.2% for the full
year 2005, as compared with 106.1% for 2004. Adjusted for the losses from winter
storm Erwin, the Continental European floods as well as hurricanes Katrina, Rita
and Wilma, the ongoing non-life combined ratio was 99.5%, which reflects a
satisfactory underlying underwriting performance.
The Life & Health Reinsurance segment reported segment income of US$ 17.6
million for the year ended December 31, 2005, as compared with US$ 16.7 million
for the previous year.
Converium reported net investment income for 2005 of US$ 324.9 million and an
average net investment income yield of 4.1%, an increase as compared with 2004.
This improvement was achieved despite a lower asset base and largely resulted
from a higher allocation to fixed maturities securities. The Company's average
total investment income yield for the year ended December 31, 2005 remained
unchanged at 4.4% compared with 2004 and reflects net realized capital gains of
US$ 25.5 million, which occurred primarily in the fourth quarter of 2005.
For the fourth quarter of 2005, Converium reported pre-tax operating income of
US$ 2.8 million and a net income of US$ 34.2 million. The quarterly result was
largely driven by a total impact from natural catastrophes of US$ 60.4 million.
Hurricane Wilma accounted for US$ 46.5 million, with the residual impact being
attributable to further developments for hurricanes Katrina and Rita, offset by
loss reserve reductions relating to the 2004 Asian tsunami. The financial
performance of the fourth quarter of 2005 was also impacted by operating and
administration expenses of US$ 63.2 million, representing an increase of US$
22.9 million compared with the third quarter of 2005. This development is
reflective of extraordinary legal, audit and consulting fees of approximately
US$ 15 million mainly associated with the internal review and the restatement of
prior years' financial accounts.
The negative effects from natural catastrophes and increasing operating and
administration expenses were partially offset by a net positive impact of prior
accident years on the technical result of US$ 6.8 million resulting from net
positive development of prior accident years' loss reserves of US$ 31.9 million,
and premiums, related losses and acquisition costs of net US$ 25.1 million. In
addition, a net income benefit of US$ 22.0 million was recorded as a result of
the successful commutation of CRNA liabilities. The performance of Converium's
ongoing operations is reflected in total segment income of US$ 63.2 million.
Gross premiums written in the fourth quarter of 2005 decreased by 13.6% to US$
375.4 million, net premiums written by 15.2% to US$ 314.5 million and net
premiums earned by 35.5% to US$ 441.5 million, as compared with the same period
in 2004. These decreases in premiums are largely due to the rating downgrades in
2004 and the placement of CRNA into orderly run-off.
For the fourth quarter of 2005, Converium reported net investment income of US$
78.0 million and an average annualized net investment income yield of 4.2%, a
slight increase as compared with 2004. The Company's average annualized total
investment income yield was 6.0%, as compared to 4.3% in the fourth quarter of
2004. This is a result of net realized capital gains of US$ 33.6 million.
Outlook
The continuing resilience of Converium's franchise as evidenced in the January
renewals as well as the improving financial performance demonstrates that the
Company's current business strategy is a promising basis for a sustainable
recovery.
Based on the successful January renewals and barring any exceptional catastrophe
losses, adverse financial markets developments or other unexpected adverse
developments, Converium expects a further improvement of its financial results
in 2006.
4
Business Development
The following are comments on the development of Converium's three ongoing
business segments, the Run-Off segment and the Corporate Center. Reference is
made to the tables attached to this press release.
Standard Property & Casualty Reinsurance represented approximately 40.7% of
total net premiums written in 2005. For the full year 2005 and the fourth
quarter the Standard Property & Casualty Reinsurance segment of Converium
reported segment income of US$ 46.7 million and US$ 24.0 million, respectively.
For the same periods of 2004 the segment reported income of US$ 91.5 million and
a loss of US$ 29.4, respectively.
The positive segment result in 2005 was achieved despite a string of severe
natural catastrophe losses, reflecting the quality of the segment's underlying
book of business. The combined ratio for the full year 2005 was 109.5%, as
compared with 101.6% in 2004. The headline losses in 2005 added 15.4 percentage
points to the segment's combined ratio: winter storm Erwin (US$ 32.5 million or
3.7 percentage points), the Continental European floods (US$ 24.8 million or 2.8
percentage points), hurricane Katrina (US$ 25.6 million or 2.9 percentage
points), hurricane Rita (US$ 11.2 million or 1.3 percentage points) and
hurricane Wilma (US$ 41.6 million or 4.7 percentage points). In addition, the
segment's combined ratio reflects an increased administration expense ratio due
to the reduced premium volume in 2005. For the fourth quarter of 2005, the
Standard Property & Casualty Reinsurance segment reported a combined ratio of
116.4%, which includes an impact of 25.8 percentage points due to hurricane
Wilma and 3.4 percentage points relating to additional claims for hurricane
Katrina. The combined ratio for the fourth quarter of 2005 compares with 124.4%
for the same period of 2004.
The segment's 2005 result benefited from a net positive impact of prior accident
years on the technical result of US$ 19.7 million resulting from net positive
development of prior accident years' loss reserves of US$ 30.7 million, offset
by reductions in premiums, related losses and acquisition costs of net US$ 11.0
million. The largest developments in prior accident years' loss reserves relate
to property (net positive development of US$ 73.3 million), motor (net adverse
development of US$ 25.0 million) and general third party liability (net adverse
development of US$ 23.4 million). For the fourth quarter of 2005, the Standard
Property & Casualty Reinsurance segment recorded a net positive impact of prior
accident years on the technical result of US$ 8.1 million resulting from net
positive development of prior accident years' loss reserves of US$ 21.0 million,
offset by reductions in premiums, related losses and acquisition costs of net
US$ 12.9 million.
For the year ended December 31, 2005, gross premiums written decreased by 46.8%
to US$ 803.1 million, net premiums written by 46.4% to US$ 739.0 million and net
premiums earned by 36.7% to US$ 880.8 million. In general, premium volume was
impacted by the ratings downgrades in 2004, the placement of CRNA into orderly
run-off as well as by the decision to reduce writings for profitability reasons.
More specifically, for the full year 2005 the reduction in net premiums written
in the Standard Property & Casualty Reinsurance segment by line of business
included:
o Motor, which decreased by 56.9% to US$ 188.4 million;
o Property, which declined by 25.8% to US$ 390.6 million;
o General third party liability, which went down 61.3% to US$ 146.7
million; and
o Personal accident (assumed from non-life insurers), which decreased by
61.4% to US$ 13.3 million.
For the fourth quarter of 2005, gross premiums written decreased by 58.7% to US$
92.1 million, net premiums written by 53.3% to US$ 77.8 million and net premiums
earned by 39.8% to US$ 161.4 million.
Specialty Lines represented approximately 40.6% of total net premiums written in
2005. For the full year 2005 and the fourth quarter, the Specialty Lines segment
of Converium reported segment income of US$ 109.5 million and US$ 32.6 million,
respectively. This performance compares with segment losses of US$ 7.3 million
and US$ 41.8 million for the respective periods of 2004.
The segment's combined ratio for the full year 2005 was 105.4%, as compared with
110.6% in 2004. In 2005, the segment's performance was negatively affected by a
total net pre-tax impact of US$ 13.5 million of losses from hurricanes Katrina,
Wilma and Rita. For the fourth quarter of 2005, the segment reported a combined
ratio of 108.4%, as compared with 118.3% for the same period of 2004. This
positive trend was offset by an increased administration expense ratio due to
the reduced premium volume in 2005 as well as the fronting commission for the
business written through Global Aerospace Underwriting Managers Ltd. (GAUM).
5
The segment's result in 2005 benefited from a net positive impact of prior
accident years on the technical result of US$ 23.1 million resulting from net
positive development of prior accident years' loss reserves of US$ 55.3 million,
offset by reductions in premiums, related losses and acquisition costs of net
US$ 32.2 million. The largest developments in prior accident years' loss
reserves related to aviation & space (US$ 41.6 million). They were partially
offset by smaller net adverse developments in the workers' compensation,
engineering and marine & energy lines of business. For the fourth quarter of
2005, the Specialty Lines segment recorded a net positive impact of prior
accident years on the technical result of US$ 3.7 million resulting from net
positive development of prior accident years' loss reserves of US$ 7.7 million,
offset by premiums, related losses and acquisition costs of net US$ 4.0 million.
For the year ended December 31, 2005, gross premiums written in the Specialty
Lines segment decreased by 49.7% to US$ 833.1 million, net premiums written
declined by 52.9% to US$ 737.7 million and net premiums earned declined by 23.7%
to US$ 1,059.2 million. This development is due to the lowering of Converium's
financial strength ratings in 2004 and the placement of CRNA into orderly
run-off. More specifically, it reflects:
o Aviation & space, which decreased by 40.2% to US$ 241.8 million; o
Credit & surety, which fell by 71.4% to US$ 58.4 million;
o Professional liability and other special liability, which declined by
35.2% to US$ 282.8 million;
o Engineering, which decreased by 41.6% to US$ 65.5 million; and
o Marine & energy, which declined by 22.4% to US$ 64.0 million.
These decreases in net premiums written were partially offset by growth in
agribusiness, where net premiums written increased by 221.9% to US$ 36.7
million, reflecting the success of Converium's strategy to expand this line of
business in Europe. In the fourth quarter of 2005 gross premiums written
decreased by 53.7% to US$ 239.5 million, net premiums written by 60.7% to US$
195.7 million and net premiums earned by 47.6% to US$ 215.3 million due to the
ratings downgrades in 2004 and the placement of CRNA into orderly run-off.
Life & Health Reinsurance represented approximately 16.9% of total net premiums
written in 2005. For the full year 2005 and the fourth quarter, the Life &
Health Reinsurance segment of Converium reported segment income of US$ 17.6
million and US$ 6.6 million, respectively, as compared with US$ 16.7 million and
US$ 5.8 million, respectively, in the same periods of 2004. The segment reported
a technical result for the full year 2005 and the fourth quarter of US$ 14.2
million and US$ 1.3 million, respectively, as compared with US$ 16.4 million and
US$ 6.1 million in the previous year. Technical result is defined as net
premiums earned minus losses, loss expenses and life benefits minus acquisition
costs plus other technical income, mainly technical interest.
The decrease in the technical result during 2005 was primarily attributable to
Converium's decision to cancel existing reinsurance transactions in Latin
America and the establishment of an additional provision for the Asian tsunami.
For the year ended December 31, 2005, gross premiums written in the Life &
Health Reinsurance segment decreased by 2.8% to US$ 318.8 million, net premiums
written by 2.2% to US$ 306.4 million and net premiums earned by 1.2% to US$
314.8 million. The reductions occurred mainly in the health line of business
which contracted by 30.8% to US$ 23.1 million, primarily attributable to
Converium's decision to cancel existing business in the Middle East in 2004. In
the fourth quarter of 2005, gross premiums written decreased by 12.7% to US$
55.0 million, net premiums written declined by 27.8% to US$ 53.0 million and net
premiums earned fell by 24.1% to US$ 71.6 million. The reduced premium volumes
were mainly driven by the update of underlying information for the actuarial
calculations of financing treaties.
6
The Run-Off segment reported segment income for the full year 2005 and the
fourth quarter of US$ 47.6 million and US$ 15.0 million, respectively, as
compared with a segment loss of US$ 296.0 million and segment income of US$ 87.8
million for the same periods of 2004.
For the full year 2005, the segment result was negatively affected by hurricanes
Katrina, Rita and Wilma with a total net impact of US$ 15.6 million in losses,
offset by a net income benefit of US$ 60.5 million from commutations. In the
fourth quarter, CRNA commuted net liabilities of US$ 141.4 million, which
resulted in a net income benefit of US$ 22.0 million.
For the full year 2005 the Run-Off segment recorded a net adverse impact of
prior accident years on the technical result of US$ 30.7 million resulting from
net adverse development of prior accident years' loss reserves of US$ 10.5
million and reductions in premiums, related losses and acquisition costs of net
US$ 20.2 million. For the fourth quarter of 2005, the Run-Off segment recorded a
net adverse impact of prior accident years on the technical result of US$ 5.0
million, with no significant underlying movements.
The Corporate Center carries certain administration expenses such as the 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. For
the full year 2005 and the fourth quarter, operating and administration expenses
were US$ 50.1 million and US$ 22.8 million, respectively, as compared with US$
38.2 million and US$ 12.7 million for the same periods of 2004. The increase in
2005 was mainly due to extraordinary legal, audit and consulting fees of
approximately US$ 15 million, mainly related to the internal review and
restatement of prior years' financial accounts in the fourth quarter of 2005.
7
Financial highlights: Income statement, Three months ended Year ended
return on equity December 31, December 31,
2005 2004 2005 2004
In US$ million, unless noted restated restated
---------------------------- -------- -------- -------- --------
Gross premiums written 375.4 434.5 1,994.3 3,978.7
- change (%) -13.6% -49.9%
----------------------------------------------------------------------------------------
Net premiums written 314.5 370.8 1,815.7 3,726.1
- change (%) -15.2% -51.3%
----------------------------------------------------------------------------------------
Net premiums earned 441.5 684.6 2,383.2 3,882.2
- change (%) -35.5% -38.6%
----------------------------------------------------------------------------------------
Ongoing non-life loss ratio(3) 68.8% 83.1% 77.4% 77.6%
- change in percentage points -14.3pts -0.2pts
----------------------------------------------------------------------------------------
Ongoing non-life acquisition costs ratio(4) 33.8% 32.5% 22.9% 24.5%
- change in percentage points +1.3pts -1.6pts
----------------------------------------------------------------------------------------
Ongoing non-life administration expense ratio(5) 8.2% 4.6% 6.9% 4.0%
- change in percentage points +3.6pts +2.9pts
----------------------------------------------------------------------------------------
Ongoing non-life combined ratio(6) 110.8% 120.2% 107.2% 106.1%
- change in percentage points -9.4pts +1.1pts
----------------------------------------------------------------------------------------
Life & Health technical result(7) 1.3 6.1 14.2 16.4
- change (%) -78.7% -13.4%
----------------------------------------------------------------------------------------
Total investment result(8) 111.6 89.1 350.4 359.2
- change (%) +25.3% -2.4%
----------------------------------------------------------------------------------------
Average total investment income yield(9) 6.0% 4.3% 4.4% 4.4%
- change in percentage points +1.7pts -
----------------------------------------------------------------------------------------
Total investment return(10) 54.9 110.0 312.0 334.1
- change (%) -50.1% -6.6%
----------------------------------------------------------------------------------------
Pre-tax operating income (loss)(11) 2.8 -2.0 100.8 -321.1
- change (%) n.m. n.m.
----------------------------------------------------------------------------------------
Net income (loss) 34.2 10.9 68.7 -582.5
- change (%) +213.8% n.m.
----------------------------------------------------------------------------------------
Basic earnings (loss) per share (US$) 0.23 0.08 0.47 -9.19
- change (%) +187.5% n.m.
----------------------------------------------------------------------------------------
Return on equity(12) 8.1% 3.5% 4.0% -30.2%
- change in percentage points +4.6pts n.m.
----------------------------------------------------------------------------------------
-------------------------------------
(3) Ongoing non-life loss ratio is defined as losses and loss expenses divided
by net premiums earned.
(4) Ongoing non-life acquisition costs ratio is defined as acquisition costs
divided by net premiums earned.
(5) Ongoing non-life administration expense ratio is defined as other operating
and administration expenses divided by net premiums written, excluding
Corporate Center segment expenses.
(6) Ongoing non-life combined ratio is defined as non-life loss ratio (to
premiums earned) plus non-life acquisition costs ratio (to premiums earned)
plus non-life administration expense ratio (to premiums written).
(7) Life & Health technical result is defined as net premiums earned minus
losses, loss expenses and life benefits minus acquisition costs plus other
technical income, mainly technical interest.
(8) Total investment result is defined as net investment income plus net
realized capital gains (losses).
(9) Average total investment income yield is defined as net investment income
plus net realized capital gains (losses) divided by average total invested
assets (including cash and cash equivalents), pre-tax and annualized for
quarterly yield.
(10) Total investment return is defined as net investment income plus net
realized capital gains (losses) plus change in net unrealized capital gains
(losses) divided by average total invested assets (including cash and cash
equivalents), pre-tax and annualized for the quarterly yield.
(11) Pre-tax operating income (loss) is defined as pre-tax (loss) income
excluding pre-tax net realized capital gains (losses), impairment of
goodwill, amortization of intangible assets and restructuring costs.
(12) Return on equity is defined as net (loss) income (after-tax) divided by
shareholders' equity at the beginning of the period, annualized for the
quarterly return on equity.
8
Financial highlights: Balance sheet Dec. 31, Dec. 31,
2005 2004
In US$ million, unless noted restated
---------------------------------------------------------------------------
Total invested assets plus cash 7,281.6 8,467.1
- change (%) -14.0%
---------------------------------------------------------------------------
Claims supporting capital(13) 2,044.6 2,125.9
- change (%) -3.8%
---------------------------------------------------------------------------
Shareholders' equity 1,653.4 1,734.8
- change (%) -4.7%
---------------------------------------------------------------------------
Book value per share (US$)(14) 11.29 11.86
- change (%) -4.8%
---------------------------------------------------------------------------
Book value per share (CHF)(14) 14.88 13.49
- change (%) +10.3%
---------------------------------------------------------------------------
Financial highlights: Investment results Three months ended Year ended
December 31, December 31,
2005 2004 2005 2004
In US$ million, unless noted restated restated
---------------------------- -------- -------- -------- --------
Investment income - Fixed maturities 51.3 54.9 221.3 198.3
----------------------------------------------------------------------------------------
Investment income - Equity securities 1.1 1.6 5.9 14.8
----------------------------------------------------------------------------------------
Investment income - Funds Withheld Asset 14.3 17.6 62.6 75.1
----------------------------------------------------------------------------------------
Other investment income, net 11.3 10.5 35.1 24.5
----------------------------------------------------------------------------------------
Net investment income 78.0 84.6 324.9 312.7
----------------------------------------------------------------------------------------
Average net investment income yield (pre-tax) 4.2%* 4.1%* 4.1% 3.8%
----------------------------------------------------------------------------------------
Net realized capital gains (losses) 33.6 4.5 25.5 46.5
----------------------------------------------------------------------------------------
Total investment result 111.6 89.1 350.4 359.2
----------------------------------------------------------------------------------------
Average total investment income yield (pre-tax) 6.0%* 4.3%* 4.4% 4.4%
----------------------------------------------------------------------------------------
Change in net unrealized (losses) gains (pre-tax) -56.7 20.9 -38.4 -25.1
----------------------------------------------------------------------------------------
Total investment return (pre-tax) 54.9 110.0 312.0 334.1
----------------------------------------------------------------------------------------
Average total investment return (pre-tax) 4.0% 4.1%
----------------------------------------------------------------------------------------
Average total invested assets (including cash 7,443.8 8,215.1 7,874.4 8,125.0
and cash equivalents)
----------------------------------------------------------------------------------------
* These figures are presented on an annualized basis
-------------------------------------
(13) Claims supporting capital is defined as total equity plus debt.
(14) Reflects the impacts of the Rights Offering that occurred in October 2004.
9
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 perspectives selected on its value drivers, its
strategic initiatives and those factors critical to understanding its business
and operating environment and certain financial guidance.
Enquiries
Esther Gerster Zuzana Drozd
Head of Public Relations Head of Investor Relations
esther.gerster@converium.com zuzana.drozd@converium.com
Phone: +41 (0) 44 639 90 22 Phone: +41 (0) 44 639 91 20
Fax: +41 (0) 44 639 70 22 Fax: +41 (0) 44 639 71 20
About Converium
Converium is an independent international multi-line reinsurer known for its
innovation, professionalism and service. Today Converium employs about 600
people in 18 offices around the globe and is organized into four business
segments: Standard Property & Casualty Reinsurance, Specialty Lines and Life &
Health Reinsurance, which are based principally on ongoing global lines of
business, as well as the Run-Off segment, which primarily comprises the business
from Converium Reinsurance (North America) Inc., excluding the US originated
aviation business portfolio. Converium has a "BBB+" rating (outlook stable) from
Standard & Poor's and a "B++" rating (outlook stable) from A.M. Best Company.
* * * * * * *
10
Important Disclaimer
This document contains forward-looking statements as defined in the US Private
Securities Litigation Reform Act of 1995. It contains forward-looking statements
and information relating to the Company's financial condition, results of
operations, business, strategy and plans, based on currently available
information. These statements are often, but not always, made through the use of
words or phrases such as `seek to', `expects', `should continue', `believes',
`anticipates', `estimates' and `intends'. The specific forward-looking
statements cover, among other matters, the Company's internal review and related
restatement, the reinsurance market, the Company's operating results, certain
financial guidance such as the corporate tax rate, the reduction of CRNA net
liabilities , administration expense ratio and Corporate Center costs, the
rating environment, the prospect for improving results and expense reductions.
Such statements are inherently subject to certain risks and uncertainties.
Actual future results and trends could differ materially from those set forth in
such statements due to various factors. Such factors include the impact of our
ratings downgrade or a further lowering or loss of one of our financial strength
ratings; the impact of the restatement on our ratings and client relationships;
uncertainties of assumptions used in our reserving process; risk associated with
implementing our business strategies and our capital improvement measures and
the run-off of 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 without suitable replacements being recruited within a
suitable period of time; our ability to address material weaknesses we have
identified in our internal control environment; 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 effect on us
and the insurance industry as a result of the investigations being carried out
by the US Securities and Exchange Commission, New York's Attorney General and
other governmental authorities; 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 or changes
in the credit worthiness of our reinsurers; our failure to prevail in any
current or future arbitration or litigation; and extraordinary events affecting
our clients, such as bankruptcies and liquidations, and other risks and
uncertainties, including those detailed in the Company's filings with the US
Securities and Exchange Commission and the SWX Swiss Exchange. The Company does
not assume any obligation to update any forward-looking statements, whether as a
result of new information, future events or otherwise.
www.converium.com
11
Consolidated statements of income Three months ended Change Year ended Change
December 31, December 31,
2004 2004
In US$ million, unless noted 2005 restated (%) 2005 restated (%)
------------------------------------------------------------------------------------------------------
Revenues
------------------------------------------------------------------------------------------------------
Gross premiums written 375.4 434.5 -13.6 1,994.3 3,978.7 -49.9
------------------------------------------------------------------------------------------------------
Less ceded premiums written -60.9 -63.7 -4.4 -178.6 -252.6 -29.3
------------------------------------------------------------------------------------------------------
Net premiums written 314.5 370.8 -15.2 1,815.7 3,726.1 -51.3
------------------------------------------------------------------------------------------------------
Net change in unearned premiums 127.0 313.8 -59.5 567.5 156.1 +263.5
------------------------------------------------------------------------------------------------------
Net premiums earned 441.5 684.6 -35.5 2,383.2 3,882.2 -38.6
------------------------------------------------------------------------------------------------------
Net investment income 78.0 84.6 -7.8 324.9 312.7 +3.9
------------------------------------------------------------------------------------------------------
Net realized capital gains (losses) 33.6 4.5 n.m. 25.5 46.5 -45.2
------------------------------------------------------------------------------------------------------
Other (loss) income -11.0 1.1 n.m. -13.4 -8.2 +63.4
------------------------------------------------------------------------------------------------------
Total revenues 542.1 774.8 -30.0 2,720.2 4,233.2 -35.7
------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------------------
Losses, loss expenses and life benefits -287.3 -491.6 -41.6 -1,775.9 -3,342.5 -46.9
------------------------------------------------------------------------------------------------------
Acquisition costs -147.2 -213.1 -30.9 -575.6 -912.4 -36.9
------------------------------------------------------------------------------------------------------
Other operating and administration expenses -63.2 -59.3 +6.6 -210.8 -219.8 -4.1
------------------------------------------------------------------------------------------------------
Interest expense -8.0 -8.3 -3.6 -31.6 -33.1 -4.5
------------------------------------------------------------------------------------------------------
Impairment of goodwill - - - - -94.0 n.m.
------------------------------------------------------------------------------------------------------
Amortization of intangible assets -0.2 -7.6 n.m. -21.5 -9.9 +117.2
------------------------------------------------------------------------------------------------------
Restructuring costs +2.6 0.7 n.m. -20.5 -2.7 n.m.
------------------------------------------------------------------------------------------------------
Total benefits, losses and expenses -503.3 -779.2 -35.4 -2,635.9 -4,614.4 -42.9
------------------------------------------------------------------------------------------------------
Income (loss) before taxes 38.8 -4.4 n.m. 84.3 -381.2 n.m.
------------------------------------------------------------------------------------------------------
Income tax expense -4.6 15.3 n.m. -15.6 -201.3 -92.3
------------------------------------------------------------------------------------------------------
Net income (loss) 34.2 10.9 213.8 68.7 -582.5 -111.8
------------------------------------------------------------------------------------------------------
Basic earnings (loss) per share (US$) 0.23 0.08 n.m. 0.47 -9.19 n.m.
------------------------------------------------------------------------------------------------------
Diluted earnings (loss) per share (US$) 0.23 0.08 n.m. 0.47 -9.19 n.m.
------------------------------------------------------------------------------------------------------
12
Consolidated balance sheets Dec. 31, Dec. 31,
2004
In US$ million, unless noted 2005 restated
----------------------------------------------------------------------
Invested assets
----------------------------------------------------------------------
Held-to-maturity securities:
Fixed maturities 793.6 850.4
----------------------------------------------------------------------
Available-for-sale securities:
Fixed maturities 4,169.8 4,834.8
Equity securities 362.6 399.4
----------------------------------------------------------------------
Other investments 253.1 279.2
----------------------------------------------------------------------
Short-term investments 35.1 117.3
----------------------------------------------------------------------
Total investments 5,614.2 6,481.1
----------------------------------------------------------------------
Funds Withheld Asset 1,020.1 1,305.1
----------------------------------------------------------------------
Total invested assets 6,634.3 7,786.2
----------------------------------------------------------------------
Other assets
----------------------------------------------------------------------
Cash and cash equivalents 647.3 680.9
----------------------------------------------------------------------
Premiums receivables 1,059.3 1,832.2
----------------------------------------------------------------------
Reserves for unearned premiums, retro 37.8 55.2
----------------------------------------------------------------------
Reinsurance assets:
Underwriting reserves 805.1 937.9
Insurance and reinsurance balances
receivable 37.6 139.3
----------------------------------------------------------------------
Funds held by reinsureds 1,817.4 1,737.7
----------------------------------------------------------------------
Deposit assets 183.4 170.4
----------------------------------------------------------------------
Deferred policy acquisition costs 304.3 482.7
----------------------------------------------------------------------
Deferred income taxes 1.0 6.2
----------------------------------------------------------------------
Other assets 298.4 358.6
----------------------------------------------------------------------
Total assets 11,825.9 14,187.3
----------------------------------------------------------------------
Liabilities
----------------------------------------------------------------------
Reinsurance liabilities:
----------------------------------------------------------------------
Unpaid losses and loss expenses 7,568.9 8,908.3
----------------------------------------------------------------------
Future life benefits, gross 405.6 407.1
----------------------------------------------------------------------
Insurance and reinsurance balances
payable 226.3 583.5
----------------------------------------------------------------------
Reserves for unearned premium, gross 610.8 1,247.7
----------------------------------------------------------------------
Other reinsurance liabilities 127.8 70.8
----------------------------------------------------------------------
Funds held under reinsurance contracts 332.9 194.8
----------------------------------------------------------------------
Deposit liabilities 300.6 356.5
----------------------------------------------------------------------
Deferred income taxes 8.1 8.2
----------------------------------------------------------------------
Accrued expenses and other liabilities 200.3 284.5
----------------------------------------------------------------------
Debt 391.2 391.1
----------------------------------------------------------------------
Total liabilities 10,172.5 12.452.5
----------------------------------------------------------------------
Shareholders' equity
----------------------------------------------------------------------
Common stock 554.9 554.9
----------------------------------------------------------------------
Additional paid-in capital 1,354.2 1,360.5
----------------------------------------------------------------------
Treasury stock -1.5 -7.7
----------------------------------------------------------------------
Unearned stock compensation -3.5 -7.5
----------------------------------------------------------------------
Total accumulated other comprehensive
income
Accumulated other comprehensive income -4.9 -7.7
----------------------------------------------------------------------
Net unrealized gains on investments,
net of taxes 42.7 105.2
----------------------------------------------------------------------
Cumulative translation adjustments 96.9 191.2
----------------------------------------------------------------------
Total accumulated other comprehensive
income 134.7 288.7
----------------------------------------------------------------------
Retained deficit -385.4 -454.1
----------------------------------------------------------------------
Total shareholders' equity 1,653.4 1,734.8
----------------------------------------------------------------------
Total liabilities and shareholders' equity 11,825.9 14,187.3
----------------------------------------------------------------------
13
Segments Three months ended Change Year ended Change
December 31, December 31,
2004 2004
In US$ million, unless noted 2005 restated (%) 2005 restated (%)
-------------------------------- ---- -------- ------ ----- -------- -------
Standard Property & Casualty Reinsurance
---------------------------------------------------------------------------------------------
Gross premiums written 92.1 222.9 -58.7 803.1 1,509.1 -46.8
Net premiums written 77.8 166.7 -53.3 739.0 1,377.5 -46.4
Net premiums earned 161.4 268.1 -39.8 880.8 1,392.3 -36.7
Loss ratio(15) 67.8% 81.2% -13.4pts 82.8% 72.0% +10.8pts
Acquisition costs ratio(16) 35.5% 35.8% -0.3pts 20.6% 25.4% -4.8pts
Administration expense ratio(17) 13.1% 7.4% +5.7pts 6.1% 4.2% +1.9pts
Combined ratio(18) 116.4% 124.4% -8.0pts 109.5% 101.6% +7.9pts
Total investment result(19) 39.5 28.4 +39.1 122.0 113.9 +7.1
Segment income (loss) 24.0 -29.4 n.m. 46.7 91.5 -49.0
Retention ratio(20) 84.5% 74.8% -9.7pts 92.0% 91.3% +0.7pts
---------------------------------------------------------------------------------------------
Specialty Lines
---------------------------------------------------------------------------------------------
Gross premiums written 239.5 516.8 -53.7 833.1 1,655.3 -49.7
Net premiums written 195.7 498.3 -60.7 737.7 1,565.3 -52.9
Net premiums earned 215.3 410.8 -47.6 1,059.2 1,387.6 -23.7
Loss ratio(15) 69.5% 84.3% -14.8pts 72.9% 83.2% -10.3pts
Acquisition costs ratio(16) 32.6% 30.4% +2.2pts 24.9% 23.6% +1.3pts
Administration expense ratio(17) 6.3% 3.6% +2.7pts 7.6% 3.8% +3.8pts
Combined ratio(18) 108.4% 118.3% -9.9pts 105.4% 110.6% -5.2pts
Total investment result(19) 49.5 36.5 +35.6 142.9 147.5 -3.1
Segment income (loss) 32.6 -41.8 n.m. 109.5 -7.3 n.m.
Retention ratio (20) 81.7% 96.4% -14.7pts 88.5% 94.6% -6.1pts
---------------------------------------------------------------------------------------------
Life & Health Reinsurance
---------------------------------------------------------------------------------------------
Gross premiums written 55.0 63.0 -12.7 318.8 327.9 -2.8
Net premiums written 53.0 73.4 -27.8 306.4 313.2 -2.2
Net premiums earned 71.6 94.3 -24.1 314.8 318.7 -1.2
Acquisitions costs ratio(16) 27.4% 26.5% +0.9pts 29.3% 22.7% +6.6pts
Administration expense ratio(17) 8.1% 5.2% +2.9pts 5.3% 4.2% +1.1pts
Total investment result(19) 11.2 5.2 +115.4 29.2 20.9 +39.7
Segment income 6.6 5.8 +13.8 17.6 16.7 +5.4
Retention ratio(20) 96.4% 116.5% -20.1pts 96.1% 95.5% +0.6pts
---------------------------------------------------------------------------------------------
-------------------------------------
(15) Loss ratio is defined as losses and loss adjustment expenses divided by net
premiums earned.
(16) Acquisition costs ratio is defined as acquisition costs divided by net
premiums earned.
(17) Administration expense ratio is defined as other operating and
administration expenses divided by net premiums written, excluding
Corporate Center segment expenses.
(18) Combined ratio is defined as non-life loss ratio (to premiums earned) plus
non-life acquisition costs ratio (to premiums earned) plus non-life
administration expense ratio (to premiums written).
(19) Total investment result is defined as net investment income plus net
realized capital gains (losses).
(20) Retention ratio is defined as net premiums written divided by gross
premiums written.
14
Segments Three months ended Change Year ended Change
December 31, December 31,
2004 2004
In US$ million, unless noted 2005 restated (%) 2005 restated (%)
--------------------------------------------------------------------------------------------
Run-Off Segment
--------------------------------------------------------------------------------------------
Gross premiums written -11.2 -368.2 -97.0 39.3 486.4 -91.9
--------------------------------------------------------------------------------------------
Net premiums written -12.0 -367.6 -96.7 32.6 470.1 -93.1
--------------------------------------------------------------------------------------------
Net premiums earned -6.8 -88.6 -92.3 128.4 783.6 -83.6
--------------------------------------------------------------------------------------------
Total investment result(19) 11.4 19.0 -40.0 56.3 76.9 -26.8
--------------------------------------------------------------------------------------------
Segment income (loss) 15.0 87.8 -82.9 47.6 -296.0 n.m.
--------------------------------------------------------------------------------------------
Corporate Center
--------------------------------------------------------------------------------------------
Other operating and
administration expenses -22.8 -12.7 79.5 -50.1 -38.2 +31.2
--------------------------------------------------------------------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONVERIUM HOLDING AG
By: /s/ Inga Beale
Name: Inga Beale
Title: CEO
By: /s/ Christian Felderer
Name: Christian Felderer
Title: General Legal Counsel
Date: March 17, 2006
15