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 April, 2007
CONVERIUM HOLDING AG
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(Translation of registrant's name into English)
Dammstrasse 19
CH-6301 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
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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
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If "Yes" is marked, indicate the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82- Not Applicable
News release
Converium Holding Ltd, Zug
Zug, Switzerland - April 19, 2007 - Converium triples income from continuing
operations in the first quarter of 2007 and reports significant progress in
pursuing its strategic roadmap.
o Income from continuing operations of USD 150.9 million, up from USD 49.9
million in the first quarter of 2006, despite an adverse impact of USD 44.6
million from winter storm Kyrill;
o Release of a tax valuation allowance of USD 85.2 million, reflective of
Converium's future earnings capacity;
o Strong underwriting performance, with a non-life combined ratio of 104.6%,
on normalized basis of 97.8%;
o Continuing reserve adequacy, supported by an independent actuarial study;
o Shareholders' equity of USD 2,002.8 million as of March 31, 2007, up USD
156.8 million or 8.5% compared with December 31, 2006;
o Total investment result of USD 92.1 million including realized gains of USD
30.3 million or average total investment income yield of 5.7% and
Inga Beale, CEO: "In the first quarter we have produced an excellent set of
financial results. This clearly demonstrates that our turnaround is sustainable.
We will now focus on vigorously completing our road map for future value
creation. Some of the first major steps have been taken, such as the strong
profitable growth of our April renewals book of business and the recently
announced capital management measures."
Inga Beale continued: "We believe that our financial performance and the
demonstrable progress in pursuing our road map add further substance to our
claim that SCOR's hostile offer undervalues Converium and its medium-term
prospects. We are convinced that Converium's standalone prospects are more
promising than with SCOR. In the interest of our shareholders, we will continue
to oppose SCOR's unfriendly approach should it remain unchanged."
Excellent 1Q 2007 results
For the first quarter of 2007, Converium reported income from continuing
operations of USD 150.9 million, compared with USD 49.9 million for the same
period of 2006. The results were driven by a robust underlying underwriting
performance as well as positive effects from the release of a tax valuation
allowance (USD 85 million) and the realization of capital gains (USD 30.3
million), partially offset by losses from winter storm Kyrill (USD 44.6
million).
Gross premiums written in the first quarter of 2007 came in at USD 711.8
million, an increase of 10.0% compared with the first quarter of 2006. Net
premiums written grew by 5.5% to USD 679.1 million. Net premiums earned expanded
by 8.5% to USD 460.0 million. These numbers have been favorably influenced by
foreign exchange effects and do not yet include any positive impact from the
financial strength ratings upgrade by Standard & Poor's to A- on February 28,
2007.
Strong underwriting performance
The first quarter's non-life combined ratio was 104.3%, including an
administration expense ratio of 5.0%, compared with 96.5% and 4.9%,
respectively, for the same period of 2006. Winter storm Kyrill added 11.8
percentage points to the combined ratio of the first quarter of 2007. The
normalized combined ratio came in strong at 97.8%, calculated as non-life
combined ratio adjusted for major catastrophe losses (1 Q 2007 cat loss Kyrill
of USD 44.6 million), adding the average expected catastrophe losses (for 1Q
2007 USD 15 million) and deducting prior accident years impact (1Q 2007
favorable USD 5 million).
In the largest business segment, Standard Property & Casualty Reinsurance,
performance was adversely affected by winter storm Kyrill, causing losses to the
segment of USD 44.6 million. This major catastrophe loss is reflected in the
segment's combined ratio in the first quarter of 104.6%, compared with 86.9% in
the same period of 2006. In the first three months of 2007, gross premiums
written, net premiums written and net premiums earned increased by 24.9%, 17.7%
and 33.5%, respectively to USD 425.8 million, USD 406.8 million and USD 203.0
million, respectively. The increase in business was primarily attributable to
additional property business written in the European markets as well as in the
Middle East.
In Specialty Lines, in the first three months of 2007, gross premiums written,
net premiums written and net premiums earned decreased by 22.7%, 26.9% and 8.9%,
respectively to USD 154.4 million, USD 141.7 million and USD 174.6 million,
respectively. This decline partially reflects a reduction in aviation business
as pricing in this line of business became increasingly unattractive. The Life &
Health Reinsurance segment posted a technical result of USD 8.2 million in the
first three months of 2007, as compared with USD 6.2 million a year earlier.
Gross premiums written, net premiums written and net premiums earned increased
by 23.6%, 25.2% and 2.5%, respectively to USD 131.6 million, USD 130.6 million
and USD 82.4 million, respectively. The positive development of both the
segment's bottom and top line is attributable to gaining new clients and
additional business from existing clients.
Reserve adequacy confirmed
In the first quarter of 2007, Converium recorded a net positive impact of prior
accident years on the technical result of USD 5.0 million. For two years now
Converium has reported positive net developments quarter after quarter. This
demonstrates the adequacy of the Company's prior-year loss reserves and quality
of earnings.
Converium recently commissioned a reserve study by a major independent actuarial
firm to analyze December 31, 2006 non-life loss and allocated adjustment expense
reserves in depth, and the conclusions of this reserve study support the total
level of corresponding booked gross and net reserves.
Release of tax valuation allowance
Based on Converium's ratings upgrade and other positive factors in the first
quarter, as well as the strong future earnings power, the Company was able to
release a tax valuation allowance resulting in an increase of shareholders'
equity of USD 85.2 million, equaling roughly CHF 0.70 per share.
Further significant improvement of capital strength
In the first quarter of 2007 Converium's shareholders' equity increased by 8.5%
to USD 2,002.8 million. This increase was driven by net income, with other minor
effects generally offsetting each other. Accordingly, book value per share
increased by CHF 1.31 to CHF 16.70.
First steps towards higher investment yield
In the first quarter of 2007, Converium reported net investment income of USD
61.8 million, compared with USD 60.3 million for the same period of 2006.
Taking into account net realized capital gains of USD 30.3 million, primarily
from divesting equity securities, the total investment result was USD 92.1
million which compares with USD 59.3 million for the same period of 2006. Total
investment income yield was 5.7%, compared with 4.0% in the same period of 2006.
Converium and a consortium of seven major banks have agreed in a club style on
the terms and conditions for an unsecured USD 1.5 billion Letter of Credit
facility, replacing the previous USD 1.6 billion secured facility. A mandate
letter has been signed with final closing of the transaction expected to take
place around the beginning of May. The Facility will have a tenor of three years
and will be used by Converium AG and certain subsidiaries to issue letters of
credit to support reinsurance business. By redeploying previously pledged assets
Converium expects to improve investment yield, making a first step towards
completing the asset management section of the Company's road map.
Optimization of capital structure to maximise shareholder value
As announced, following the ratings upgrade by Standard & Poor's, Converium has
initiated measures to optimize its capital structure. The Company is preparing
to issue approximately USD 500 million in new hybrid debt, appropriately
leveraging its balance sheet. This step will provide the financing of the
proposed par value reduction from CHF 5 to CHF 2.50 per share, resulting in the
remittance of approximately USD 300 million to Converium's shareholders.
Assuming shareholder approval at the Annual General Meeting on May 10, 2007 the
respective pay-out to shareholders would be expected by mid-July 2007.
Operational excellence initiatives on track
In the first quarter of 2007, administration expenses have developed in line
with management's objectives. Corporate Center costs, adjusted for non-recurring
expenses of USD 7.2 million related to defending against SCOR's hostile bid,
came in at USD 12.0 million, against a full-year target of USD 48 million. The
first quarter non-life administration expense ratio was 5.0%, slightly better
than the full-year target of 5.2%.
Converium expects a positive effect from the recently initiated global SAP
project. This is scheduled to go live in early 2009 and is expected to
streamline operations, improve data quality and promote a customer service
culture.
Outlook for 2007
Based on Converium's excellent first quarter financial performance and
significant progress in completing its strategic road map the Company gives a
positive outlook for 2007. Converium expects gross premiums written to reach at
least USD 2.2 billion, at a non-life combined ratio of 98.5%. The return on
equity (excluding the impact of the tax valuation allowance) is projected at
around 11% for the full year 2007, with a potential upside. Invested assets are
expected at around USD 6.0 to 6.2 billion, also offering some upside. Corporate
Center expenses, excluding non-recurring defence costs, are projected at USD 48
million. Finally, for the remaining quarters of 2007, Converium expects a tax
rate of 14-16%.
Key financial metrics (USD, unless noted)
Three months ended Three months ended
March 31, 2007 March 31, 2006
o Gross premiums written 711.8 million 647.0 million
o Income from continuing operations before taxes 67.9 million 56.3 million
o Net income 150.9 million 61.6 million
o Non-life combined ratio (4) 104.3% 96.5%
o Average total investment income yield (pre-tax) (7) 5.7% 4.0%
o Shareholders' equity 2,002.8 million 1,709.7 million
o Return on shareholders' equity from continuing
operations (annualized); excl. release of tax
valuation allowance of
USD 85.2 million in Q1 2007(9) 14.2% 12.1%
o Book value per share CHF 16.70 CHF 15.39
o Basic earnings per share 1.03 0.42
o Diluted earnings per share 1.02 0.42
Legal Update
In addition to the detailed legal disclosure as per Converium 2006 Annual Report
(pages 104-106) the following should be noted: On 9 April 2007, the Court in the
Class Action issued an Opinion and Order regarding Plaintiffs' motion to
reconsider the Court's order of 28 December 2006 granting, in part, Defendants'
motion to dismiss. The motion to reconsider has been granted in part and denied
in part.
The Court granted the motion for reconsideration with respect to the Exchange
Act Section 10(b) claims against Converium and the Officer Defendants relating
to the IPO. In granting the motion on this point the Court added the Director
Defendants back into the action as controlling persons, save for Terry Clarke,
who was not formally a director at the time of the IPO in 2001. The Court will
be issuing a separate opinion addressing certain of Defendants' arguments why
the Exchange Act claims relating to the IPO should be dismissed that the Opinion
and Order of 28 December 2006 did not address. These arguments include, inter
alia, that the Court lacks personal jurisdiction over Director Defendants Peter
Colombo, Georg Mehl, Jurgen Forterer, and Anton Schnyder. In granting the motion
on this point the Court's decision implicitly brings the Director Defendants
back into the action on the basis of allegations that they are 'controlling
persons' under the Exchange Act, save for Terry Clarke, who was not a director
at the time of the IPO in 2001.
Finally, the Court did not grant Plaintiffs leave to amend their complaint to
add claims relating to Converium's 2006 Restatement.
Enquiries
Beat W. Werder Marco Circelli
Head of Public Relations Head of Investor Relations
beat.werder@converium.com marco.circelli@converium.com
Phone: +41 44 639 90 22 Phone: +41 44 639 91 31
Fax: +41 44 639 70 22 Fax: +41 44 639 71 31
Dr. Kai-Uwe Schanz Inken Ehrich
Chief Communication & Investor Relations Specialist
Corporate Development Officer inken.ehrich@converium.com
kai-uwe.schanz@converium.com Phone: +41 44 639 90 94
Phone: +41 44 639 90 35 Fax: +41 44 639 70 94
Fax: +41 44 639 70 35
About Converium
Converium is an independent international multi-line reinsurer known for its
innovation, professionalism and service. Today Converium employs about 500
people in 15 offices around the globe and is organized into three business
segments: Standard Property & Casualty Reinsurance, Specialty Lines and Life &
Health Reinsurance. Converium has an "A-" ("strong") financial strength rating
(outlook stable) from Standard & Poor's and a "B++" financial strength rating
(outlook positive) from A.M. Best Company.
Important Disclaimer
This document contains forward-looking statements as defined in the U.S. 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', `aims' `should continue',
`believes', `anticipates', `estimates' and `intends'. The specific
forward-looking statements cover, among other matters, our combined ratio,
return on equity and premium volume and expense reduction targets, our plans to
use capital more efficiently and to return capital to shareholders, the
Company's strategy and management objectives, the reinsurance market, the
Company's operating results, the Company's dividend policy, our ability to
obtain an upgrade of our financial strength rating and the consequences of such
an upgrade, the prospects for improving our results, investment yield and market
share, certain financial guidance, e.g. related to the tax rate of the Company,
SCOR's hostile tender offer, the acquisition costs ratio and the costs of the
Corporate Center, the rating environment, new credit facilities and other
Company debt, 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 whether we are able to secure an upgrade of our financial
strength ratings; our ability to refinance our outstanding indebtedness and
increase our use of hybrid capital; uncertainties of assumptions used in our
reserving process; risk associated with implementing our business strategies and
our capital improvement measures; 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; our ability to expand into emerging markets; our ability to enter
into strategic investment partnerships; 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; our ability to regain past customers following any
rating upgrades and the resolution 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 U.S.
Securities and Exchange Commission (including, but not limited to, our Annual
Report on Form 20-F filed with the U.S. 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.
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Financial highlights: Three months ended
March 31
2007 2006
In USD million, unless noted (unaudited) (unaudited)
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Gross premiums written 711.8 647.0
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Net premiums written 679.1 643.9
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Net premiums earned 460.0 424.1
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Non-life loss ratio(1) 75.3% 69.5%
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Non-life acquisition costs ratio(2) 24.0% 22.1%
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Non-life administration expense ratio(3) 5.0% 4.9%
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Non-life combined ratio(4) 104.3% 96.5%
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Life & Health technical result(5) 8.2 6.2
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Total investment results(6) 92.1 59.3
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Average total investment income yield (pre-tax)(7) 5.7% 4.0%
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Total investment return (pre-tax)(8) 82.2 68.4
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Average total invested assets from continuing
operations (including cash and cash equivalents) 6,410.8 5,877.2
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Income from continuing operations 150.9 49.9
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Net income 150.9 61.6
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Basic earnings per share from continuing
operations (USD) 1.03 0.34
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Diluted earnings per share from continuing
operations (USD) 1.02 0.34
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Annualized return on shareholders' equity from
continuing operations(9) 14.2% 12.1%
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Financial highlights: Balance sheet March 31 December 31
2007 2006
In USD million, unless noted (unaudited) (unaudited)
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Total invested assets plus cash and cash equivalents 6,423.1 6,398.4
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Claims supporting capital(10) 2,196.9 2,040.1
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Shareholders' equity 2,002.8 1,846.0
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Book value per share (USD) 13.68 12.63
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Book value per share (CHF) 16.70 15.39
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Consolidated statements of income Three months ended
March 31
2007 2006
In USD million, unless noted (unaudited) (unaudited)
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Total revenues 567.0 481.5
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Total benefits, losses and expenses -499.1 425.2
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Income from continuing operations before taxes 67.9 56.3
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Income tax benefit (expense) 83.0 -6.4
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Income from continuing operations 150.9 49.9
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Income from discontinued operations - 11.7
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Net Income 150.9 61.6
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Basic earnings per share from continuing operations (USD) 1.03 0.34
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Basic earnings per share from discontinued operations (USD) - 0.08
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Total basic earnings per share (USD) 1.03 0.42
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Diluted earnings per share from continuing operations (USD) 1.02 0.34
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Diluted earnings per share from discontinued operations (USD) - 0.08
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Total diluted earnings per share (USD) 1.02 0.42
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Consolidated balance sheets March 31, Dec. 31,
2007 2006
(unaudited) (unaudited)
In USD million, unless noted
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Invested assets
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Held-to-maturity securities:
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Fixed maturities 716.9 718.3
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Available-for-sale securities:
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Fixed maturities 3,059.3 3,122.5
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Equity securities 756.1 734.7
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Short-term and other investments 262.7 249.1
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Total investments 4,795.0 4,824.6
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Funds Withheld Asset 928.3 940.7
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Total invested assets 5,723.3 5,765.3
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Other assets
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Cash and cash equivalents 699.8 633.1
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Premiums receivables 1,053.4 880.9
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Reserves for unearned premiums, retro 30.9 31.1
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Reinsurance assets 651.6 681.3
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Funds held by reinsureds 2,010.6 1,940.1
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Other assets 725.9 591.2
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Total assets 10,895.5 10,523.0
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Liabilities
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Reinsurance liabilities 7,108.0 7,036.9
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Reserves for unearned premiums, gross 905.7 682.3
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Other reinsurance liabilities 105.8 103.7
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Funds held under reinsurance contracts 102.4 167.3
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Deposit liabilities 252.3 250.2
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Deferred income taxes 51.0 46.5
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Accrued expenses and other liabilities 173.4 196.0
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Debt 194.1 194.1
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Total liabilities 8,892.7 8,677.0
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Total shareholders' equity 2,002.8 1,846.0
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Total liabilities and shareholders' equity 10,895.5 10,523.0
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Segments Three months ended
March 31
2007 2006
In USD million, unless noted (unaudited) (unaudited)
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Standard Property & Casualty Reinsurance
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Gross premiums written 425.8 340.8
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Net premiums written 406.8 345.7
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Net premiums earned 203.0 152.1
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Loss ratio(11) 74.4% 57.0%
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Acquisition costs ratio(12) 24.7% 23.5%
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Administration expense ratio(13) 5.5% 6.4%
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Combined ratio(14) 104.6% 86.9%
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Total investment results(15) 34.1 24.7
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Segment income 24.7 44.7
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Specialty Lines
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Gross premiums written 154.4 199.7
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Net premiums written 141.7 193.9
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Net premiums earned 174.6 191.6
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Loss ratio(11) 76.3% 79.3%
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Acquisition costs ratio(12) 23.2% 21.0%
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Administration expense ratio(13) 4.3% 3.8%
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Combined ratio(14) 103.8% 104.1%
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Total investment results(15) 48.6 28.7
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Segment income 41.9 20.8
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Life & Health Reinsurance
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Gross premiums written 131.6 106.5
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Net premiums written 130.6 104.3
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Net premiums earned 82.4 80.4
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Acquisition costs ratio(12) 26.7% 33.6%
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Administration expense ratio(13) 4.6% 2.6%
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Total investment results(15) 9.4 5.9
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Segment income 9.8 7.1
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Technical result 8.2 6.2
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Corporate Center
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Operating and administration expenses -19.0 -10.4
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Basis of preparation
The unaudited interim financial information for Converium Holding AG and
subsidiaries ("Converium" or "the Company") has been prepared on the basis of
the United States generally accepted accounting principles of interim financial
information. Accordingly, such financial information does not reflect all the
information required by generally accepted accounting principles for complete
financial statements. In the opinion of management, all adjustments considered
necessary for a fair presentation have been included. The results of operations
for the interim period are not necessarily indicative of the results that may be
expected for the year ended December 31, 2007, as interim results may be
affected by several factors including, but not limited to, changes in the
economic environment and catastrophic losses. This interim financial information
should be read in conjunction with the audited consolidated financial statements
of Converium for the year ended December 31, 2006.
---------------------------------------
(1) Non-life loss ratio is defined as losses and loss expenses divided by net
premiums earned.
(2) Non-life acquisition costs ratio is defined as acquisition costs divided by
net premiums earned.
(3) Non-life administration expense ratio is defined as other operating and
administration expenses divided by net premiums earned.
(4) Non-life combined ratio is defined as the non-life loss ratio plus the
non-life acquisition costs ratio plus the non-life administration expense
ratio.
(5) 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 interest on deposits.
(6) Total investment results are defined as net investment income plus net
realized capital gains (losses).
(7) Total investment income yield is defined as net investment income plus net
realized capital gains (losses) divided by average total invested assets
from continuing operations (including cash and cash equivalents), pre-tax
and annualized.
(8) Total investment return is defined as net investment income plus net
realized capital gains (losses) plus change in net unrealized capital gains
(losses).
(9) Return on shareholders' equity is defined as income from continuing
operations divided by shareholders' equity at the beginning of the period,
annualized, excluding release of tax valuation allowance of USD 85.2
million in Q1 2007.
(10) Claims supporting capital is defined as total shareholders' equity plus
debt.
(11) Loss ratio is defined as losses and loss expenses divided by net premiums
earned.
(12) Acquisition costs ratio is defined as acquisition costs divided by net
premiums earned.
(13) Administration expense ratio is defined as other operating and
administration expenses divided by net premiums earned.
(14) Combined ratio is defined as loss ratio plus acquisition costs ratio plus
administration expense ratio.
(15) Total investment results are defined as net investment income plus net
realized capital gains (losses).
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: April 25, 2007