Converium Holding Ltd, Zug Announces Third Quarter Results.Business Editors ZUG Zug (ts  k), canton (1993 pop. 87,100), 93 sq mi (241 sq km), N central Switzerland. , Switzerland--(BUSINESS WIRE)--Oct. 28, 2002Converium Group, one of the world's leading reinsurers, today reports on its financial results for the third quarter 2002 as well as for the first nine months of 2002. Converium has been listed on the SWX Swiss Exchange SWX Swiss Exchange An all-electronic securities exchange formed from the 1995 merger of exchanges in Geneva, Basel, and Zurich. The exchange offers trading in equity securities, investment funds, exchange-traded funds, bonds, Eurobonds, and options. (SWX SWX Swiss Exchange (trademark of SWX Swiss Exchange) SWX SolidWorks (3D solid modeling CAD software) SWX Splitter / Wave Division Multiplexer : CHRN CHRN Certified Hyperbaric Registered Nurse CHRN Canadian Harm Reduction Network (Toronto, Ontario, Canada) CHRN Commonwealth Human Rights Network CHRN Child Health Research Network CHRN Citizens for a Healthy Rural Neighborhood ) and New York Stock Exchange New York Stock Exchange (NYSE) World's largest marketplace for securities. The exchange began as an informal meeting of 24 men in 1792 on what is now Wall Street in New York City. (NYSE NYSE See: New York Stock Exchange : CHR CHR canine hypoxic rhabdomyolysis. ) since December December: see month. 2001. Year-to-date Year-to-date (YTD) The period beginning at the start of the calendar year up to the current date. pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta operating income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. of US$ 32.5 million Year-to-date after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. net income of US$ 26.0 million Year-to-date cash flow from operating activities of US$ 612.3 million Shareholders equity of US$ 1,659.5 million (plus 88.7 compared to year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. 2001) Converium Group reported pre-tax operating income of US$ 32.5 million for the nine months ended September September: see month. 30, 2002. (The pre-tax operating result is defined as pre-tax income or loss excluding pre-tax net realized capital gains or losses capital gains or losses n. particularly when calculating the tax liability of an individual or business, this is the difference between the original cost plus the cost of capital improvements, excluding maintenance, called "basis" and the sales price. , amortization of goodwill and restructuring restructuring - The transformation from one representation form to another at the same relative abstraction level, while preserving the subject system's external behaviour (functionality and semantics). costs). This represents an increase of US$ 403.3 million compared to the pre-tax operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of US$ 370.8 million for the same period of 2001. After-tax net income increased by US$ 385.9 million to US$ 26.0 million for the 9 months ended September 30, 2002, compared to a net loss of US$ 359.9 million for the nine months ended September 30, 2001. Converium Group reported a cash flow from operating activities of US$ 612.3 million for the nine months ended September 30, 2002 compared to US$ 396.7 million for the nine months ended September 30, 2001. Converium Group reported shareholders equity of US$ 1,659.5 million as per September 30, 2002 compared to US$ 1,570.8 million as per December 31, 2001. For the three months ended September 30, 2002, Converium Group reported a pre-tax operating loss of US$ 71.2 million, compared to a pre-tax operating loss of US$ 344.7 million for the same period in 2001. For the third quarter of 2002, the after-tax net loss of US$ 5.6 million compares to a net loss of US$ 299.4 million for the third quarter of 2001. Converium Group reported cash flow from operating activities of US$ 323.2 million for the three months ended September 30, 2002 compared to US$ 175.8 million for the third quarter 2001. Both operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before and net income for the third quarter of 2002 were driven by six factors: (1) strong performance in non-life In the physical sciences, non-life is an umbrella term set to distinguish or characterize those inanimate chemical precursors found in the primeval soup of the early years of planetary evolution from which life, theoretically, evolved or came into existence. underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. , (2) the floods in Eastern Europe Eastern Europe The countries of eastern Europe, especially those that were allied with the USSR in the Warsaw Pact, which was established in 1955 and dissolved in 1991. and Germany Germany (jûr`mənē), Ger. Deutschland, officially Federal Republic of Germany, republic (2005 est. pop. 82,431,000), 137,699 sq mi (356,733 sq km). in August, (3) ongoing turmoil in the capital markets and the restructuring of our investment portfolios, (4) continued impressive performance of Converium Zurich, (5) the recognition of reserve developments of prior years recorded by Converium North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. and Converium Cologne Cologne (kəlōn`), Ger. Köln, city (1994 pop. 962,500), North Rhine–Westphalia, W Germany, on the Rhine River. It is a commercial, financial, and industrial center, a rail and road junction, and a river port. , and (6) our life operations. (1) Strong Performance in Non-life Underwriting The re-underwriting of the non-life book and the restructuring of the underwriting process resulted in a continued strong improvement of the underlying performance. Net premiums written of our non-life operations grew by 27.8% to US$ 2,270.2 million in the first three quarters of 2002. The non-life combined ratio excluding prior years' developments and September 11 but including the European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. floods decreased by 4.3 percentage points to 100.9% for the nine months ended September 30, 2002 compared to 105.2% for the nine months ended September 30, 2001. (2) Floods in Germany and Eastern Europe in August In line with its original announcement on September 7, 2002, Converium Group estimates its gross incurred loss from the European Floods to be at US$ 50.0 million. The losses stem primarily from Germany and Eastern Europe. (3) Ongoing Turmoil in the Capital Markets and Restructuring of our Investment Portfolio The transition from an active to a passive asset management-approach led to a restructuring of our investment portfolios. The restructuring of our fixed income portfolios resulted in net realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. of US$ 56.2 million for the nine months ended September 2002 (third quarter 2002: US$ 52.9 million), the restructuring of our equities portfolios resulted in net realized capital losses of US$ 42.7 million for the nine months ended September 30, 2002 (third quarter 2002: US$ 10.0 million). Converium Group reported US$ 30.7 million of impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. charges for the nine months ended September 30, 2002 compared to US$ 71.3 million for the nine months ended September 30, 2001 and, US$ 15.2 million of impairment charges in the third quarter 2002 compared to US$ 11.5 million for the third quarter 2001. Our impairment policy requires us to record as realized capital losses, declines in value that exceed 20% over a period of six months, or in excess of 50.0% regardless of the period of the decline. At management's judgment, we impair im·pair tr.v. im·paired, im·pair·ing, im·pairs To cause to diminish, as in strength, value, or quality: an injury that impaired my hearing; a severe storm impairing communications. additional securities based on prevailing market conditions. Converium Group reported net realized capital losses for the nine months ended September 30, 2002 of US$ 31.4 million, and net realized capital gains of US$ 29.9 million for the third quarter 2002. Converium Group reported total investment results of US$ 160.5 million and an average annualized annualized Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. total investment yield (pre-tax) of 4.1% for the nine months ended September 30, 2002, respectively US$ 88.8 million and 6.7% for the third quarter 2002. (4) Continued Strong Performance of Converium Zurich Converium Zurich continued to strongly perform: net premiums written grew by 30.0% to US$ 1,105.1 million and the non-life combined ratio improved by 9.5 percentage points to 95.1% for the nine months ended September 30, 2002 compared to 104.6% for the first three quarters of 2001 excluding September 11. Converium Zurich's non-life combined ratio improved by 21.3 percentage points to 91.6% for the three months ended September 30, 2001 compared to 112.9% for the third quarter 2001 excluding September 11. (5) Recognition of Reserve Development of Prior Years Recorded by Converium North America and Converium Cologne During the third quarter, recognition of net reserve developments has led to prior year reserve strengthening of US$ 59.6 million, including US$ 47.0 million recorded by Converium North America and US$ 12.6 million recorded by Converium Cologne. During the first nine months of 2002, Converium Group has recorded a total US$ 84.0 million provision for net reserve development on prior years' business, representing a movement of 2.0% of the net non-life reserves at December 31, 2001. After years of reporting significant net reserve releases, many primary US insurance companies are now confronted with reserve insufficiencies relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the soft market period of 1997-2000. In recent quarters, the recognition of prior year reserve development on the side of primary insurance companies has put pressure on the reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. industry. During the third quarter of 2002, Converium North America noted the continued emergence of increased loss experience related to prior years, leading to the reserve increase mentioned above. The emergence was concentrated in the casualty lines, especially in miscellaneous professional liability (nursing homes), automobile automobile, self-propelled vehicle used for travel on land. The term is commonly applied to a four-wheeled vehicle designed to carry two to six passengers and a limited amount of cargo, as contrasted with a truck, which is designed primarily for the transportation of excess, medical excess, umbrella umbrella, a small canopy used as a protection against the sun in China, Egypt, and elsewhere in remote antiquity. It was often an emblem of rank. During the Middle Ages the umbrella became almost extinct in Europe; its usefulness was not rediscovered until the late and miscellaneous casualty. The majority of the affected contracts were already non-renewed in the years 2000 and 2001, as part of a major re-underwriting process. Based on the latest loss information reported by its ceding cede tr.v. ced·ed, ced·ing, cedes 1. To surrender possession of, especially by treaty. See Synonyms at relinquish. 2. companies, Converium Group is currently conducting further actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin studies. Preliminary findings suggest that additional reserve actions of up to US$ 75.0 million will be required for the 4th quarter 2002. Converium Group will report on this in detail during the fourth quarter, as soon as the mentioned actuarial studies are complete. (6) Life Operations During the course of 2002 Converium re-evaluated its existing life activities and instituted changes in order to ensure a closer alignment Alignment is the adjustment of an object in relation with other objects, or a static orientation of some object or set of objects in relation to others.
Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. strategic objective of building a leading life reinsurance business. This resulted in changes in management, hiring of additional staff and the deployment of system enhancements to better track the performance of the underlying business. As a consequence of these changes, certain portfolios were non-renewed and reserves were increased on certain blocks of annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. , disability and group life business to more properly reflect expected morbidity and mortality Morbidity and Mortality can refer to:
September 30, 2002 Financial Result
Three months Nine months
ended September 30 ended September 30
(US$ million, except (US$ million, except
ratios) ratios)
----------------------------------------------------------------------
2002 2001 2002 2001
----------------------------------------------------------------------
Gross premiums written 745.0 804.4 2,518.7 2,230.0
- growth (%) -7.4% 12.9%
----------------------------------------------------------------------
Net premiums written 697.3 643.9 2,388.8 1,911.5
- growth (%) 8.3% 25.0%
----------------------------------------------------------------------
Net premiums earned 754.8 655.7 2,271.9 1,708.7
- growth (%) 15.1% 33.0%
----------------------------------------------------------------------
----------------------------------------------------------------------
Operating income (loss)(a) -71.2 -344.7 32.5 -370.8
----------------------------------------------------------------------
Net income (loss) -5.6 -299.4 26.0 -359.9
----------------------------------------------------------------------
----------------------------------------------------------------------
Income (loss) per share
(US$) -0.14 -7.49 0.65 -9.00
----------------------------------------------------------------------
----------------------------------------------------------------------
Loss ratio non-life 89.4% 134.1% 78.2% 104.0%
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Underwriting expense ratio
non-life 16.7% 22.9% 21.1% 21.3%
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Administration expense
ratio non-life 6.6% 5.6% 5.5% 5.7%
----------------------------------------------------------------------
Combined ratio non-life 112.7% 162.6% 104.8% 131.0%
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----------------------------------------------------------------------
Sept. 30, Dec. 31,
2002 2001
----------------------------------------------------------------------
Total assets 10,842.8 9,706.5
----------------------------------------------------------------------
Shareholders' equity 1,659.5 1,570.8
----------------------------------------------------------------------
Book value per share (US$) 41.72 39.27
----------------------------------------------------------------------
(a) Operating income is defined as pre-tax income (loss) excluding pre-tax net realized capital gains or losses, amortization of goodwill and restructuring costs. Highlights -- Strong growth of the non-life business Today, Converium Group is established as an independent leading global reinsurer re·in·sure tr.v. re·in·sured, re·in·sur·ing, re·in·sures To insure again, especially by transferring all or part of the risk in a contract to a new contract with another insurance company. . Gross premiums written When a non-life insurance company closes a contract to provide insurance against loss, the revenues (premiums) expected to be received over the life of the contract are called gross premiums written. grew by 14.9% to US$ 2,383.6 million, net premiums written grew by 27.8% to US$ 2,270.2 million, net premiums earned grew by 34.5% to US$ 2,158.4 million for the nine months ended September 30, 2002. -- Strong performance in non-life underwriting The re-underwriting and the restructuring of the underwriting process pay off. The non-life combined ratio was 100.9% (excluding prior years' developments) for the nine months ended, and 104.8% (including prior years' developments) for the nine months ended September 30, 2002. -- Continued impressive performance of Converium Zurich Converium Zurich increased its net premiums written by 30.0% to US$ 1,105.1 million for the first nine months of 2002 and reported a non-life combined ratio of 95.1% for the first three quarters, respectively 91.6% for the third quarter 2002. -- Flood losses in Eastern Europe stable Gross incurred loss from the European floods is estimated to be US$ 50.0 million. Compared to peers, Converium's European flood losses are relatively small. Due to insufficient pricing, we decided during the 2001-renewals to exit the property cat-business in Germany to a large extent. So far, the losses from natural catastrophes are within the expectations for 2002. The flood losses added 2.3 percentage points to the non-life combined ratio for the first nine months of 2002. -- Reserve development of prior years In the third quarter 2002 Converium recorded net developments of US$ 59.6 million related to Converium North America and Converium Cologne. Based on the latest loss information reported by its ceding companies, Converium Group is currently conducting further actuarial studies. Preliminary findings suggest that additional reserve actions of up to US$ 75.0 million will be required for the 4th quarter 2002. -- Life business Business realigned to more properly reflect group strategy culminating with the appointment of a new Chief Underwriter underwriter n. a company or person which/who underwrites an insurance policy, issue of corporate securities, business, or project. (See: underwrite) UNDERWRITER, insurances. One who signs a policy of insurance, by which he becomes an insurer. Life on September 1, 2002. -- Investment result: US$ 160.5 million (plus 9.7%) Net investment result was impacted by the ongoing turmoil in the capital markets and the restructuring of our investment portfolios. Total investment results including impairments of US$ 30.7 million were US$ 160.5 million for the nine months ended September 30, 2002. The average annualized total investment yield (pre-tax) was 4.1% for the first three quarters of 2002. Converium's impairment policy is fully compliant
-- Cost of options fully charged Converium continued to fully charge the costs of options to operating expense Operating Expense The essential things that a company must purchase in order to maintain business. Notes: For example, the payment of employees wages are an operating expense. Also known as OPEX. (SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 123) and recorded US$ 4.0 million in the first three quarters of 2002. -- Pre-tax operating income: US$ 32.5 million Converium reported a pre-tax operating income of US$ 32.5 million for the first three quarters of 2002, and a pre-tax operating loss of US$ 71.2 million for the third quarter 2002 as result of the development of prior years' reserves. -- Net income: US$ 26.0 million Converium reported a net income of US$ 26.0 million for the first nine months of 2002, and a net loss of US$ 5.6 million for the third quarter of 2002. -- Cash flow: US$ 612.3 million (plus 54.3%) Driven by the improved operating performance, Converium increased the cash flow from operating activities by 54.3% to US$ 612.3 million for the first nine months of 2002, respectively by 83.8% to US$ 323.2 million for the third quarter of 2002. -- Shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. increased by 5.6% Since year-end 2001, the shareholders' equity increased by 5.6% to US$ 1,659.5 million as per September 30, 2002. -- Book value per share: plus 6.2% Book value per share increased by 6.2% to US$ 41.72 as per September 30, 2002 compared to US$ 39.27 as per year-end. Dirk Lohmann, CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Converium said: "The reserve actions undertaken in the second half of 2002 represent a challenge that I would rather not have to face, but it is one that I believe the management and staff of Converium will master. Our situation is not much different from that of the rest of the market and many of our competitors COMPETITORS, French law. Persons who compete or aspire to the same office, rank or employment. As an English word in common use, it has a much wider application. Ferriere, Dict. de Dr. h.t. face the same issues. The question is how long they can avoid or hide the truth. I firmly believe that this step will prove to be the precursor precursor /pre·cur·sor/ (pre´kur-ser) something that precedes. In biological processes, a substance from which another, usually more active or mature, substance is formed. In clinical medicine, a sign or symptom that heralds another. of further adjustments within the industry. Converium is facing pressure from prior years and contracts that from an underwriting standpoint The Standpoint is a newspaper published in the British Virgin Islands. It was originally published under the name Pennysaver, largely as a shopping-coupon promotional newspaper, but since emerged as one of the most influential sources of journalism in the we left long behind us. However, it is the nature of our business that problems surface with a significant time lag. We are proactively addressing the issues, and taking the pertinent PERTINENT, evidence. Those facts which tend to prove the allegations of the party offering them, are called pertinent; those which have no such tendency are called impertinent, 8 Toull. n. 22. By pertinent is also meant that which belongs. Willes, 319. measures to solve them. Our current business, particularly our specialty lines such as aviation, accident & health, agribusiness agribusiness Agriculture operated by business; specifically, that part of a modern national economy devoted to the production, processing, and distribution of food and fibre products and byproducts. and professional indemnity Recompense for loss, damage, or injuries; restitution or reimbursement. An indemnity contract arises when one individual takes on the obligation to pay for any loss or damage that has been or might be incurred by another individual. , is performing excellently. In addition, the outlook for the reinsurance industry in 2003 continues to look good with a continued hardening hardening, in metallurgy, treatment of metals to increase their resistance to penetration. A metal is harder when it has small grains, which result when the metal is cooled rapidly. of markets, increasing demand and increasing prices. Converium is making excellent progress in positioning the group within various markets in which it operates. Converium is being well received and sought out by existing and new clients." Martin Kauer, CFO See Chief Financial Officer. Converium said: "The financial results reflect the continued improvement of our non-life underwriting as a clear evidence of our re-underwriting efforts and the restructuring of our underwriting process as well as the reserve development of prior years. The impressive growth of our cash flow, an increase of 54.3% to US$ 612.3 million for the first nine months of this year, is the result of the continued improvement of the underlying performance of our book and also generates additional investment income. Absent any major catastrophes, we expect a substantial improvement of our full year's net income compared to the first nine months. We are convinced that the additional reserve actions shall be more than offset by the results of our aviation book, which we expect to emerge in the forth quarter. Our shareholders' equity and our book value per share increased since year-end 2001 by 5.6% to US$ 1.7 billion, respectively by 6.2% to US$ 41.72 per share. As a result of the strong growth of our non-life business, particularly in specialty lines, our solvency ratio Solvency Ratio One of many ratios used to gauge a company's ability to meet long-term obligations. Notes: Derived by taking a company's net worth and dividing by total assets. See also: Asset, Asset Valuation, Balance Sheet, Fundamental Analysis, Income Statement was slightly reduced. However, due to integrity of our balance sheet and the conservative gearing we are well positioned to further harvest (tool, networking) Harvest - A highly scalable, customisable system for discovering resources on the Internet. Version: 1.3. http://tardis.ed.ac.uk/harvest/. in the hard markets." IPO (Initial Public Offering) The first time a company offers shares of stock to the public. While not a computer term per se, many founders, employees and insiders of computer companies have found this acronym more exciting than any tech term they ever heard. , Ranking and Organization Converium is an independent top ten reinsurance group. The company was listed on the SWX Swiss Exchange and the New York Stock Exchange on December 11, 2001. The IPO involved the placing of 40 million registered shares priced at CHF CHF In currencies, this is the abbreviation for the Swiss Franc. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. 82 per share or US$ 24.59 per American Depositary Share American Depositary Share (ADS) Foreign stock issued in the US and registered in the ADR system. (ADS) with investors worldwide. Converium's 100% flotation flotation or froth flotation Most widely used process for extracting many minerals from their ores. The method separates and concentrates ores by altering their surfaces so that they are either repelled or attracted by water. was earmarked as the largest reinsurance IPO ever worldwide and the largest corporate IPO in Switzerland Switzerland (swĭt`sərlənd), Fr. Suisse, Ger. Schweiz, Ital. Svizzera, officially Swiss Confederation, federal republic (2005 est. pop. 7,489,000), 15,941 sq mi (41,287 sq km), central Europe. since 1998. The shares were allocated across the globe: 32% to institutional investors Institutional Investor A non-bank person or organization that trades securities in large enough share quantities or dollar amounts that they qualify for preferential treatment and lower commissions. in the US, 24% to institutionals in the UK, 15% to institutionals in Switzerland and 19% to institutional investors in the rest of the world. The remaining 10% was allocated to retail shareholders in Europe Europe (y  r`əp), 6th largest continent, c.4,000,000 sq mi (10,360,000 sq km) including adjacent islands (1992 est. pop. 512,000,000). and the US.Today the company ranks 9th among the top ten professional reinsurers and employs close to 750 people in 24 offices around the globe. Converium has a strong balance sheet with an "A+" (strong) rating from Standard & Poor's and "A" (excellent) rating by AM Best Company. Converium's September 11 net losses are capped at US$ 289.2 million by its former parent, Zurich Financial Services Zurich Financial Services Group is a major financial services group based in Zurich, Switzerland. Global operations North America The US consumer market is served primarily by Farmers Insurance Group the third largest personal lines property & casualty insurance . Converium has minimal A&E exposures. Converium is organized around four business segments consisting of our three non-life operations, Converium Zurich, Converium North America and Converium Cologne, as well as Converium Life. Important Disclaimer (networking) disclaimer - Statement ritually appended to many Usenet postings (sometimes automatically, by the posting software) reiterating the fact (which should be obvious, but is easily forgotten) that the article reflects its author's opinions and not necessarily those of the This document contains forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. as defined in the U.S. Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and 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 'expects', 'should continue', 'believes', 'anticipates', 'estimates' and 'intends'. The specific forward-looking statements cover, among other matters, the improving reinsurance market, the expected losses related to the September 11 attack on the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. , the outcome of insurance regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. reviews, the Company's operating results, the rating environment and the prospect for improving results. 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 general economic conditions, including in particular economic conditions; the frequency, severity and development of insured loss events arising out of catastrophes, as well as man made disasters such as the September 11 attack on the United States; the ability to exclude and to reinsure re·in·sure tr.v. re·in·sured, re·in·sur·ing, re·in·sures To insure again, especially by transferring all or part of the risk in a contract to a new contract with another insurance company. the risk of loss from terrorism; fluctuations in interest rates; returns on and fluctuations in the value of fixed income investments, equity investments and properties; fluctuations in foreign currency exchange rates; rating agency actions; changes in laws and regulations and general competitive factors, and other risks and uncertainties, including those detailed in the Company's filings with the U.S. Securities and Exchange Commission and the Swiss Exchange Swiss Exchange The major securities market of Switzerland. . 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 Overview Business Segments Business Development Converium's financial results reflect the continued improvement of the non-life underwriting as well as the reserve development of prior years. The hardening of the markets, a consistent implementation of our business strategy and new opportunities from independence all led to a profitable growth of our non-life operations and a non-life combined ratio of 100.9% excluding prior years' developments. Converium re-evaluated its existing life activities and instituted changes in order to ensure a closer alignment with the long-term strategic objective of building a leading life reinsurance business. Converium Zurich
Three months Nine months
ended September 30 ended September 30
(US$ million, except (US$ million, except
ratios) ratios)
------------------------------------------------- --------------------
2002 2001 2002 2001
------------------------------------------------- --------------------
Gross premiums written 385.6 411.1 1,190.6 1,015.0
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Net premiums written 355.8 324.6 1,105.1 850.2
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Net premiums earned 370.4 309.9 1,073.4 741.1
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Segment income (loss) 35.8 -238.0 110.3 -194.8
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Loss ratio non-life 74.8% 160.3% 71.1% 113.3%
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Underwriting expense ratio
non-life 10.1% 20.1% 18.4% 16.9%
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Administration expense ratio
non-life 6.7% 3.4% 5.6% 4.1%
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Combined ratio non-life 91.6% 183.8% 95.1% 134.3%
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------------------------------------------------- --------------------
Retention rate (=net premiums
written divided by gross
premiums written) 92.3% 79.0% 92.8% 83.8%
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Converium Zurich's combined ratio decreased to 91.6% for the three months ended September 30, 2002 from 183.8% for the three months ended September 30, 2001, mainly due to a decrease of 85.5 percentage points in the loss ratio. The loss ratio decrease reflected the fact that Converium Zurich recorded US$ 220.0 million in losses in 2001 related to the September 11th terrorist attacks. Converium Zurich's combined ratio decreased to 95.1% for the nine months ended September 30, 2002 from 134.3% for the nine months ended September 30, 2001, mainly due to a decrease of 42.2 percentage points in the loss ratio. Net premiums written of US$ 1,105.1 million for the nine months ended September 30, 2002 were higher by US$ 254.9 million, or 30.0%, compared to US$ 850.2 million for the nine months ended September 30, 2001. During the first nine months of 2002, Converium Zurich's largest growth regions included the UK, North America, the Far East/Pacific Rim (Research In Motion Limited, Waterloo, Ontario, www.rim.com) The company that makes the popular BlackBerry device. It was established in 1984. See BlackBerry. See also RDRAM. , as well as Latin America Latin America, the Spanish-speaking, Portuguese-speaking, and French-speaking countries (except Canada) of North America, South America, Central America, and the West Indies. . The largest growth lines included such specialty lines as aviation and space, professional liability, as well as credit and surety An individual who undertakes an obligation to pay a sum of money or to perform some duty or promise for another in the event that person fails to act. surety n. . Converium North America
Three months Nine months
ended September 30 ended September 30
(US$ million, except (US$ million, except
ratios) ratios)
------------------------------------------------- --------------------
2002 2001 2002 2001
------------------------------------------------- --------------------
Gross premiums written 293.2 288.8 935.7 828.8
------------------------------------------------- --------------------
Net premiums written 279.5 232.4 912.5 682.3
------------------------------------------------- --------------------
Net premiums earned 279.3 241.6 870.2 636.3
------------------------------------------------- --------------------
------------------------------------------------- --------------------
Segment income (loss) 8.4 -57.4 -9.9 -138.4
------------------------------------------------- --------------------
------------------------------------------------- --------------------
Loss ratio non-life 93.4% 97.4% 81.2% 94.3%
------------------------------------------------- --------------------
Underwriting expense ratio
non-life 24.2% 29.1% 24.5% 27.3%
------------------------------------------------- --------------------
Administration expense ratio
non-life 6.5% 7.8% 6.1% 7.9%
------------------------------------------------- --------------------
Combined ratio non-life 124.1% 134.3% 111.8 % 129.5%
------------------------------------------------- --------------------
------------------------------------------------- --------------------
Retention rate (=net premiums
written divided by gross
premiums written) 95.3% 80.5% 97.5% 82.3%
------------------------------------------------- --------------------
Converium North America's combined ratio decreased to 124.1% for the three months ended September 30, 2002 from 134.3% for the three months ended September 30, 2001, mainly due to a decrease of 4.0 percentage points in the loss ratio and 4.9 percentage points in the underwriting expense ratio. During the third quarter of 2002, Converium North America noted the continued emergence of increased loss experience related to prior years. As a result of actuarial work performed through the third quarter, management concluded that ultimate losses will most likely be higher in the range of possible outcomes than previously estimated. In the three months ended September 30, 2002, Converium North America increased loss and loss adjustment reserves approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. US$ 47.0 million, primarily related to accident years 1997 to 2000. Approximately US$ 17.0 million was recorded relating to professional liability product lines (nursing homes) with the remainder primarily in the automobile excess, medical excess, umbrella and miscellaneous casualty lines. The loss ratio in the third quarter of 2001 reflects US$ 58.2 million in losses related to the September 11th terrorist attacks. Converium North America's combined ratio decreased to 111.8% for the nine months ended September 30, 2002 from 129.5% for the nine months ended September 30, 2001, mainly due to a decrease of 13.1 percentage points in the loss ratio. The loss ratio in 2001 reflects US$ 58.2 million in losses related to the September 11th terrorist attacks and US$ 143.5 million in loss reserve development. The loss ratio in 2002 reflects US$ 66.9 million in loss reserve development. Net premiums written for the nine months ended September 30, 2002 were US$ 912.5 million as compared to US$ 682.3 million for the nine months ended September 30, 2001, representing an increase of US$ 230.2 million, or 33.7%. The business segment's generation of new premium income during the first nine months of 2002 was the result of growth in almost all lines and an increase in the retention rate. Significant growth was experienced in specialty lines including increases in professional liability (US$ 50.0 million), accident and health (US$ 37.0 million) as well as structured/finite (US$ 33.0 million). Converium Cologne
Three months Nine months
ended September 30 ended September 30
(US$ million, except (US$ million, except
ratios) ratios)
------------------------------------------------- --------------------
2002 2001 2002 2001
------------------------------------------------- --------------------
Gross premiums written 35.7 63.1 262.3 280.4
------------------------------------------------- --------------------
Net premiums written 38.0 32.3 252.6 243.2
------------------------------------------------- --------------------
Net premiums earned 76.5 65.7 214.8 226.9
------------------------------------------------- --------------------
------------------------------------------------- --------------------
Segment income (loss) -66.1 -44.3 -69.5 -47.4
------------------------------------------------- --------------------
------------------------------------------------- --------------------
Loss ratio non-life 145.1% 145.8% 101.9% 101.3%
------------------------------------------------- --------------------
Underwriting expense ratio
non-life 21.0% 12.9% 20.8% 18.5%
------------------------------------------------- --------------------
Administration expense ratio
non-life 6.3% 11.5% 3.3% 4.9%
------------------------------------------------- --------------------
Combined ratio non-life 172.4% 170.2% 126.0% 124.7%
------------------------------------------------- --------------------
------------------------------------------------- --------------------
Retention rate (=net premiums
written divided by gross
premiums written) 106.4% 51.2% 96.3% 86.7%
------------------------------------------------- --------------------
Converium Cologne's combined ratio increased to 172.4% for the three months ended September 30, 2002 from 170.2% for the three months ended September 30, 2001. The loss ratio, driven by the European floods and the loss reserve development for prior years was nearly unchanged compared to 2001, which included September 11th related losses and a couple of other large losses including Baycol Baycol® Cerivastatin Vascular disease A cholesterol-lowering, HMG-CoA reductase inhibitor–statin–for managing hypercholesterolemia and mixed dyslipidemia–it ↑ HDL-C by 4% and ↓ LDL-C by 36%. . Underwriting expense ratio increased to 21.0% in the third quarter 2002 compared to 12.9% in the third quarter 2001. The increase was driven by a credit in profit participation in the third quarter 2001, which would have increased the underwriting expense ratio to 22.8% on an adjusted basis. Due to a new cost allocation The apportionment or designation of an item for a specific purpose or to a particular place. In the law of trusts, the allocation of cash dividends earned by a stock that makes up the principal of a trust for a beneficiary usually means that the dividends will be treated as system between the non-life and the life segment of Converium Germany the administration expense ratio went down to 6.3% for the three months ended September 30, 2002 from 11.5% for the three months ended September 30, 2001. Converium Cologne's combined ratio of 126.0% for the nine months ended September 30, 2002 was higher by 1.3 percentage points compared to the combined ratio of 124.7% for the nine months ended September 30, 2001. In the first nine months of 2002, Converium Cologne recorded US$ 31.1 million in loss development on prior years' business and losses from the Central European floods. The loss ratio excluding the Central European flood losses and the reserve loss development from prior years would have been 69.3%. Underwriting expense ratio was 20.8% for the nine months ended September 30, 2002 compared to 18.5% for the nine months ended September 30, 2001. Net premiums written for the nine months ended September 30, 2002 were US$ 252.6 million as compared to US$ 243.2 million for the nine months ended September 30, 2001, representing an increase of US$ 9.4 million, or 3.9%. During the first nine months of 2002, the Middle East and North Africa, as well as the home market of Germany, were Converium Cologne's largest growth regions in terms of premium volume. This was offset by declines in premium volume in the rest of Europe. Converium Life
Three months Nine months
ended September 30 ended September 30
(US$ million, except (US$ million, except
ratios) ratios)
------------------------------------------------- --------------------
2002 2001 2002 2001
------------------------------------------------- --------------------
Gross premiums written 34.0 67.6 135.1 155.8
------------------------------------------------- --------------------
Net premiums written 24.0 54.6 118.6 135.8
------------------------------------------------- --------------------
Net premiums earned 28.6 38.5 113.5 104.4
------------------------------------------------- --------------------
------------------------------------------------- --------------------
Segment income (loss) -12.7 0.5 -7.8 2.7
------------------------------------------------- --------------------
------------------------------------------------- --------------------
Underwriting expense ratio
life 35.7% -10.6% 20.2% -6.9%
------------------------------------------------- --------------------
Administration expense ratio
life 14.6% 2.4% 6.0% 2.4%
------------------------------------------------- --------------------
------------------------------------------------- --------------------
Retention rate (=net premiums
written divided by gross
premiums written) 70.6% 80.8% 87.8% 87.2%
------------------------------------------------- --------------------
Converium Life reported a segment loss of US$ 12.7 million for the three months and US$ 7.8 million for the nine months ended September 30, 2002, compared to a segment income of US$ 0.5 million for the three months and US$ 2.7 million for the nine months ended September 30, 2001. This development was driven by Converium re-evaluating its existing life activities and instituting changes in order to ensure a closer alignment with the long-term strategic objective of building a leading life reinsurance business. Net premiums written by our Converium Life operations for the nine months ended September 30, 2002 were US$ 118.6 million compared to US$ 135.8 million for the nine months ended September 30, 2001, representing a decrease of US$ 17.2 million, or 12.7%. This premium decline is mainly driven by the strong decline of business written in Latin America. We wrote US$ 4.8 million net premiums in Latin America for the nine months ended September 30, 2002, compared to US$ 30.8 million in 2001, including US$ 25.8 million in Argentina Argentina (ärjəntē`nə, Span. ärhāntē`nä), officially Argentine Republic, republic (2005 est. pop. 39,538,000), 1,072,157 sq mi (2,776,889 sq km), S South America. . Due to the weak economic situation in South America South America, fourth largest continent (1991 est. pop. 299,150,000), c.6,880,000 sq mi (17,819,000 sq km), the southern of the two continents of the Western Hemisphere. and to a change in governmental regulation concerning the pension system in Argentina, premium income was strongly reduced. The decline in Latin America was somewhat offset by growth in Europe. |
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