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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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Schedule 14D-9
SOLICITATION/RECOMMENDATION STATEMENT UNDER
SECTION 14(d)(4) OF THE SECURITIES EXCHANGE ACT OF 1934
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CONVERIUM HOLDING AG
(Name of Subject Company)
CONVERIUM HOLDING AG
(Name of Person Filing Statement)
Registered Shares, Nominal Value CHF 5 Per Share
American Depositary Shares, each representing one half of one Registered Share
(Title of Class of Securities)
Registered Shares*
American Depository Shares (CUSIP: 21248N107)
(CUSIP Number of Class of Securities)
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Christian Felderer
Converium Holding AG
Dammstrasse 19
CH-6301 Zug
Switzerland
+41 44 639 9335
(Name, Address and Telephone Number of Person Authorized to Receive Notice and
Communications on Behalf of the Person Filing Statement)
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With copies to:
Gregory B. Astrachan, Esq.
Willkie Farr & Gallagher LLP
1 Angel Court
London EC2R 7HJ
England
+44 207 696 5454
*There is no CUSIP Number assigned to the Registered Shares.
[X] Check the box if the filing relates solely to preliminary communications
made before the commencement of a tender offer.
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Converium Holding AG released the following financial highlights on February 28,
2007.
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Financial highlights: Three months ended Twelve months ended
December 31 December 31
2006 2005 2006 2005
In USD million, unless noted
(unaudited) (unaudited) (unaudited) (unaudited)
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Gross premiums written 428.1 386.7 1'980.9 1'955.0
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Net premiums written 390.5 326.5 1'852.0 1'783.1
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Net premiums earned 468.7 448.4 1'811.7 2'254.8
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Non-life loss ratio(1) 57.8% 68.8% 65.1% 77.4%
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Non-life acquisition costs ratio(2) 28.9% 33.9% 25.9% 22.9%
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Non-life administration expense ratio(3) 6.8% 8.0% 5.3% 6.7%
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Non-life combined ratio(4) 93.5% 110.7% 96.3% 107.0%
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Life & Health technical result(5) 0.8 1.3 16.3 14.2
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Total investment results(6) 83.6 99.5 279.3 289.1
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Total investment income yield(7) 5.4% 6.6% 4.5% 4.7%
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Total investment return (pre-tax)(8) 104.7 47.1 304.4 273.9
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Average total invested assets (including cash and cash equivalents) 6'246.8 5'985.8 6'147.4 6'139.1
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Income from continuing operations 70.6 18.0 215.0 34.1
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(Loss) income from discontinued operations -191.9 16.2 -157.9 34.6
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Net (loss) income -121.3 34.2 57.1 68.7
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Basic earnings per share from continuing operations (USD) 0.48 0.12 1.47 0.23
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Diluted earnings per share from continuing operations (USD) 0.48 0.12 1.45 0.23
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Basic (loss) earnings per share from net income (USD) -0.83 0.23 0.39 0.47
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Diluted (loss) earnings per share from net income (USD) -0.81 0.23 0.39 0.46
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Return on shareholders' equity from continuing operations(9) 14.9% 4.2% 13.0% 2.0%
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Financial highlights: Balance sheet December 31 December 31
2006 2005
In USD million, unless noted
(unaudited) (unaudited)
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Total invested assets plus cash and cash equivalents 6'398.4 7'281.6
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Claims supporting capital(10) 2'040.1 2'044.6
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Shareholders' equity 1'846.0 1'653.4
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Book value per share (USD) 12.63 11.29
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Book value per share (CHF) 15.39 14.88
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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 written.
4 Non-life combined ratio is defined as ongoing non-life loss ratio (to
net premiums earned) plus ongoing non-life acquisition costs ratio (to
net premiums earned) plus ongoing non-life administration expense
ratio (to net premiums written).
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 (including cash and cash equivalents), pre-tax and annualized.
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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 net income or loss
(after-tax) divided by shareholders' equity at the beginning of the
period, annualized.
10 Claims supporting capital is defined as total shareholders' equity
plus debt.
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Consolidated statements of income Three months ended Twelve months ended
December 31 December 31
2006 2005 2006 2005
In USD million, unless noted
(unaudited (unaudited) (unaudited) (unaudited)
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Total revenues from continuing operations 547.8 533.7 2'090.5 2'522.0
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Total benefits, losses and expenses from continuing operations -461.4 -511.0 -1'835.0 -2'471.8
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Income before taxes from continuing operations 86.4 22.7 255.5 50.2
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Income tax expense -15.8 -4.7 -40.5 -16.1
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Income from continuing operations 70.6 18.0 215.0 34.1
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(Loss) Income from discontinued operations, net of tax -191.9 16.2 -157.9 34.6
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Net (loss) income -121.3 34.2 57.1 68.7
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Basic earnings per share from continuing operations (USD) 0.48 0.12 1.47 0.23
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Basic (loss) earnings per share from discontinued operations (USD) -1.31 0.11 -1.08 0.24
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Diluted earnings per share from continuing operations (USD) 0.48 0.12 1.45 0.23
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Diluted (loss) earnings per share from discontinued operations (USD) -1.29 0.11 -1.06 0.23
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Consolidated balance sheets Dec. 31, Dec. 31,
2005
2006
In USD million, unless noted unaudited
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Invested assets
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Held-to-maturity securities:
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Fixed maturities 718.3 793.6
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Available-for-sale securities:
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Fixed maturities 3'122.5 4'169.8
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Equity securities 734.7 362.6
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Short-term and other investments 249.1 288.2
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Total investments 4'824.6 5'614.2
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Funds Withheld Asset 940.7 1'020.1
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Total invested assets 5'765.3 6'634.3
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Other assets
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Cash and cash equivalents 633.1 647.3
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Premiums receivables: 880.9 1'059.3
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Reserves for unearned premiums, retro 31.1 37.8
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Reinsurance assets: 681.3 842.7
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Funds held by reinsureds 1'940.1 1'817.4
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Other assets 591.1 787.1
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Total assets 10'523.0 11'825.9
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Liabilities
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Reinsurance liabilities 7'036.9 8'200.8
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Reserves for unearned premiums, gross 682.3 610.8
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Other reinsurance liabilities 103.7 127.8
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Funds held under reinsurance contracts 167.3 332.9
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Deposit liabilities 250.2 300.6
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Deferred income taxes 46.5 8.1
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Accrued expenses and other liabilities 196.0 200.3
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Debt 194.1 391.2
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Total liabilities 8'677.0 10'172.5
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Total shareholders' equity 1'846.0 1'653.4
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Total liabilities and shareholders' equity 10'523.0 11'825.9
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Consolidated statements of cash flows Year ended Year ended
Dec 31 Dec 31
2006 2005
In USD million, unless noted
(unaudited) (unaudited)
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Net income 57.1 68.7
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Total adjustments 284.3 47.7
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Total changes in operational assets and liabilities -218.4 -516.3
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Cash provided by (used in) operating activities 123.0 -399.9
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Cash flows from investing activities (fixed maturities) 259.3 233.1
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Cash flows from investing activities (equity securities) -285.5 60.9
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Proceeds from disposal of investments in subsidiaries -295.0 -
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Cash flows from investing activities (other) 234.6 69.8
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Net cash (used in) provided by investing activities -86.6 363.8
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Net cash used in financing activities -91.6 -36.8
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Effect of exchange rate changes on cash and cash equivalents 41.0 39.3
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Change in cash and cash equivalents -14.2 -33.6
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Cash and cash equivalents as of January 1 647.3 680.9
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Cash and cash equivalents as of December 31 633.1 647.3
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Basis of preparation
The unaudited 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. 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.
This financial information should be read in conjunction with the audited
consolidated financial statements of Converium for the year ended December 31,
2005.
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Segments Three months ended Twelve months ended
December 31 December 31
2006 2005 2006 2005
In USD million, unless noted (unaudited) (unaudited) (unaudited) (unaudited)
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Standard Property & Casualty Reinsurance
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Gross premiums written 164.3 92.2 890.6 803.1
Net premiums written 149.0 77.8 816.9 739.0
Net premiums earned 210.0 161.5 775.6 880.8
Loss ratio(11) 46.4% 67.8% 56.9% 82.8%
Acquisition costs ratio(12) 26.1% 35.5% 25.2% 20.6%
Administration expense ratio(13) 8.5% 12.9% 5.4% 5.9%
Combined ratio(14) 81.0% 116.2% 87.5% 109.3%
Total investment results(15) 31.3 39.2 109.6 119.9
Segment income (loss) 76.3 23.8 204.6 45.9
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Specialty Lines
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Gross premiums written 198.5 239.5 777.0 833.1
Net premiums written 178.1 195.7 729.4 737.7
Net premiums earned 183.9 215.3 723.7 1'059.2
Loss ratio(11) 70.9% 69.5% 73.8% 72.9%
Acquisition costs ratio(12) 32.1% 32.6% 26.6% 24.9%
Administration expense ratio(13) 5.3% 6.0% 5.3% 7.4%
Combined ratio(14) 108.3% 108.1% 105.7% 105.2%
Total investment results(15) 43.6 49.2 140.5 140.5
Segment income 28.8 32.8 98.9 108.9
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Life & Health Reinsurance
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Gross premiums written 65.3 55.0 313.3 318.8
Net premiums written 63.4 53.0 305.7 306.4
Net premiums earned 74.8 71.6 312.4 314.8
Acquisition costs ratio(12) 28.9% 27.4% 30.1% 29.3%
Administration expense ratio(13) 6.9% 7.7% 3.8% 5.1%
Total investment results(15) 8.7 11.1 29.2 28.7
Segment income 2.6 6.7 23.5 17.6
Technical result 0.8 1.3 16.3 14.2
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Corporate Center
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Operating and administration expenses -12.5 -22.6 -54.5 -49.5
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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 written.
14 Combined ratio is defined as loss ratio (to net premiums earned) plus
acquisition costs ratio (to net premiums earned) plus administration
expense ratio (to net premiums written).
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15 Total investment results are defined as net investment income plus net
realized capital gains (losses).
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Important Disclaimers
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
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. 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.
Additional information and where to find it:
In connection with the offer by SCOR, Converium expects to file a
solicitation/recommendation statement with the Securities and Exchange
Commission (the "SEC"). Investors and security holders are strongly advised to
read these documents when they become available because they will contain
important information about the tender offer and the proposed merger. Copies of
the solicitation/recommendation statement will be available free of charge at
the SEC's web site at www.sec.gov, or at Converium's website at
www.converium.com.
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