Converium Holding Ltd, Zug Year End 2002 Results.Business Editors ZUG Zug (ts  k), canton (1993 pop. 87,100), 93 sq mi (241 sq km), N central Switzerland. ,Switzerland--(BUSINESSWIRE)--Feb. 11, 2003Converium Group, one of the world's leading reinsurers, today reports on its successful 2003 renewal and on its financial results for the fourth quarter 2002 as well as for the full year 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. Successful 2003 renewals in a hard 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. market Substantial improvement of underlying performance continues Net premiums written 2002: US$ 3,322 million (plus 33.8%) 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. combined ratio 2002: 104.2% (2001: 129.0%) Adjusted non-life combined ratio 2002(1): 99.3% (2001: 108.8%) 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. 2002: US$ 67.7 million Net income 2002: US$ 106.8 million Cash flow from operating activities 2002: US$ 870.4 million (plus 179%) 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. as per December 31, 2002: US$ 1,738 million (plus 10.6%) Book value per share as per December 31, 2002: US$ 43.55 (plus 10.9%) Proposed dividend for 2002: 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. 1.00 per share Successful 2003 renewals in a hard reinsurance market Converium continues to strengthen its position as a global leading professional 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. , particularly in specialty A contract under seal. A specialty is a written document that has been sealed and delivered and is given as security for the payment of a specifically indicated debt. lines. At January January: see month. 1, 2003, approximately ap·prox·i·mate adj. 1. Almost exact or correct: the approximate time of the accident. 2. two thirds of our non-life premium was up for renewal, the remaining third will be renewed re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. later in the year. We renewed almost 70%(2) of our non-life premium volume that was renewable at January 1, 2003 and experienced combined increases in rates and shares of almost 30%(3) on the renewed business. We chose to non-renew about 30% (2) of the renewable premium volume because the underlying business did not meet our stringent performance standards or because the treaties were restructured from a proportional proportional values expressed as a proportion of the total number of values in a series. proportional dwarf the patient is a miniature without disproportionate reductions or enlargements of body parts. to a non-proportional basis. However, the non-renewed premium volume was more than offset by new business. The aggregate impact of improved rates, increased shares and new business, offset by cancellations, resulted in premium growth of more than 20% (2) on renewable premiums. Converium emerging as a winner in the reshuffling re·shuf·fle tr.v. re·shuf·fled, re·shuf·fling, re·shuf·fles 1. To shuffle again: reshuffle cards. 2. of the reinsurance market Market unrest Unrest is a sociological phenomenon, for instance:
The withdrawal or reorganization The process of carrying out, through agreements and legal proceedings, a business plan for winding up the affairs of, or foreclosing a mortgage upon, the property of a corporation that has become insolvent. of several reinsurers has led to a significant reduction in reinsurance supply. The addition of new capacity, mainly through new Bermuda Bermuda (bûrmy `də), British dependency (2005 est. pop. 65,400), 21 sq mi (53 sq km), comprising some 150 coral rocks, islets, and islands (of which some 20 are inhabited), in the formations brought some relief to
some markets, most particularly in the international catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). arena
and markets such as the US and the UK. This was due to the fact that
many of the start-ups were still establishing their infrastructure,
their distribution channels, and recruiting specialists required to
properly manage a reinsurance company. As a consequence, their focus was
on broker distribution and traditionally intermediated reinsurance such
as the low frequency/high severity catastrophe covers.Nevertheless, the influence of these new markets in traditionally direct markets (such as Continental Europe Continental Europe, also referred to as mainland Europe or simply the Continent, is the continent of Europe, explicitly excluding European islands and, at times, peninsulas. ) and in the specialty lines of business has been very limited. Converium Group has emerged as one of the few players with the required local presence, intimate market and specialty knowledge to address the needs in these market segments. Substantial improvement of underlying performance continues For the year ended December 31, 2002, Converium Group reported pre-tax pre-tax adj → anterior al impuesto pre-tax adj → avant impôt(s) pre-tax adj → al lordo d'imposta operating income (4) of US$ 67.7 million. This represents an increase of US$ 528.8 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. (4) of US$ 461.1 million for the year 2001. Net income (after tax) increased US$ 474.2 million to US$ 106.8 million for the year ended December 31, 2002, compared to a net loss of US$ 367.4 million for the year ended December 31, 2001. For the three months ended December 31, 2002, Converium Group reported a pre-tax operating income (4) of US$ 35.1 million, compared to a pre-tax operating loss (4) of US$ 90.3 million for the same period in 2001. For the fourth quarter of 2002, the net income (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. ) of US$ 80.8 million compares to a net loss of US$ 7.5 for the fourth quarter of 2001, an increase of US$ 88.3 million. Converium's financial results for calendar year 2002 were driven by (1) the very strong performance in non-life 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. , and by (2) the recognition of reserve developments of prior years. (1) Very Strong Performance in Non-life Underwriting The re-underwriting of the non-life book and the 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). of the underwriting process resulted in a continued substantial improvement of the underlying performance. Net premiums written by our non-life operations grew 34.7% to US$ 3,154.2 million for the full year 2002. The non-life combined ratio excluding prior years' developments and September September: see month. 11, 2001, but including Enron-related losses and the European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. floods decreased 9.5 percentage points to 99.3% for the year ended December 31, 2002 compared to 108.8% for the year ended December 31, 2001. (1) Excluding prior years' developments and September 11, 2001, but including Enron Enron A U.S. energy-trading and utilities company that housed one of the biggest accounting frauds in history. Enron's executives employed accounting practices that falsely inflated the company's revenues, which, at the height of the scandal, made the firm become the seventh and European floods. (2) Based on 100% that reflects the total non-life premium that was up for renewal on January 1, 2003. (3) Based on 100% that reflects the total non-life premium we renewed on January 1, 2003. (4) The pre-tax operating income (loss) 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 costs. Table: Substantial improvement of underlying performance continues Year ended Converium Converium Converium Converium December 31 Zurich North America Cologne Non-life (in US$ million, except ratios) 2002 2001 2002 2001 2002 2001 2002 2001 ---------------------------------------------------------------------- Net premiums written 1,670.5 1,185.0 1,193.9 898.4 289.8 257.8 3,154.2 2,341.2 ---------------------------------------------------------------------- Non-life loss ratio 69.9% 101.4% 84.0% 94.9% 96.2% 108.8% 77.8% 99.7% ---------------------------------------------------------------------- Adjusted non- life loss ratio (5) 71.2% 88.4% 72.0% 67.4% 85.3% 90.5% 72.9% 80.0% ---------------------------------------------------------------------- Non-life underwriting expense ratio 17.9% 20.0% 25.0% 28.5% 22.5% 17.8% 21.1% 23.2% ---------------------------------------------------------------------- Non-life administration expense ratio 4.8% 4.6% 5.9% 8.0% 5.3% 5.9% 5.3% 6.1% ---------------------------------------------------------------------- Non-life combined ratio 92.6% 126.0% 114.9% 131.4% 124.0% 132.5% 104.2% 129.0% ---------------------------------------------------------------------- Adjusted non- life combined ratio (5) 93.9% 113.0% 102.9% 102.7% 113.1% 114.2% 99.3% 108.8% ---------------------------------------------------------------------- The performance of our non-life book substantially improved throughout the year 2002 since an increasing portion of the net premiums earned related to business written in underwriting year 2002. In addition to that, the ratios were positively impacted by the technical result (6) of our aviation and space line of business recorded in the fourth quarter of 2002.
Table: Substantial improvement of our non-life book throughout 2002
(in US$ million, except ratios) Converium Non-life
three months ended March June Sept. Dec.
31, 30, 30, 31,
2002 2002 2002 2002
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Net premiums earned 670.5 761.5 726.4 842.7
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Non-life loss ratio 75.9% 69.7% 89.4% 76.8%
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Adjusted non-life loss ratio(5) 75.9% 66.5% 81.2% 69.1%
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Non-life underwriting expense ratio 21.6% 25.0% 16.7% 20.9%
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Non-life administration expense ratio 4.9% 5.2% 6.6% 4.6%
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Non-life combined ratio 102.4% 99.9% 112.7% 102.3%
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Adjusted non-life combined ratio(5) 102.4% 96.7% 104.5% 94.6%
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Ratio-impact of European floods - - 6.9% 0.5%
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Adjusted non-life combined ratio (5) excluding
European floods 102.4% 96.7% 97.6% 94.1%
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Due to the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. developments in the terms of trade Terms of trade The weighted average of a nation's export prices relative to its import prices. of the aviation and space reinsurance markets, and the absence of major airline losses in accident year 2002, Converium Group reported net premiums written of US$ 370.2 million for 2002 (2001: US$ 181.0 million) and a technical result (7) for its aviation and space line of business of US$ 64.3 million for 2002 (2001: negative US$ 167.9 million), respectively US$ 56.0 million for the fourth quarter 2002 (fourth quarter 2001: negative US$ 1.3 million). A substantial portion of our property catastrophe business is written on an excess of loss basis. Related to this business, in 2002, 2001 and 2000 we respectively wrote 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. of US$ 172.9 million (net premiums written 2002: US$ 137.9 million), US$ 148.1 million, and US$ 100.6 million, and a net technical result(7) of US $ 60.4 million, US$ 29.8 million, and US$ minus 46.6 million. Included in the net technical result (7) are the following large natural catastrophe losses, defined as those in excess of US$ 10.0 million or more of net incurred losses to us: the European floods in 2002 (US$ 51.1 million), the El Salvador El Salvador (ĕl sälväthōr`), officially Republic of El Salvador, republic (2005 est. pop. 6,705,000), 8,260 sq mi (21,393 sq km), Central America. earthquake earthquake, trembling or shaking movement of the earth's surface. Most earthquakes are minor tremors. Larger earthquakes usually begin with slight tremors but rapidly take the form of one or more violent shocks, and end in vibrations of gradually diminishing force in 2001 (US$ 14.2 million) and development from the 1999 European storms booked in 2000 (US$ 19.6 million). (2) Recognition of reserve developments of prior years 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 to 2000. In recent quarters, the recognition of prior years' reserve development on the side of primary insurance companies has put pressure on the reinsurance industry. During the fourth quarter 2002, the recognition of net reserve developments of US$ 70.3 million has led to prior years' reserve strengthening of total US$ 148.5 million net for our non-life business in 2002, of which US$ 137.2 million was 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. , US$ 31.1 million by 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. , partially offset by positive reserve development of US$ 19.8 million recorded by Converium Zurich.
Table: Reserve developments 2000-2002
Year ended December 31 2000 2001 2002 Total
(in US$ million) 2000-2002
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Converium Zurich -41.0 -81.7 -19.8 -142.5
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Converium North America 81.0 164.0 137.2 382.2
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Converium Cologne 25.4 41.3 31.1 97.8
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Total Converium Non-life 65.4 123.6 148.5 337.5
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Converium Group reported a reserve increase on a closed block of long-term Long-term 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. variable annuity Variable Annuity An insurance contract in which, at the end of the accumulation stage, the insurance company guarantees a minimum payment. The remaining income payments can vary depending on the performance of the managed portfolio. business. The variable annuity losses arise from guaranteed minimum death benefit contracts, whereby the minimum benefit is determined by the development of investment results from the capital markets. Following the ongoing downturn Downturn The transition point between a rising, expanding economy to a falling, contracting one. downturn A decline in security prices or economic activity following a period of rising or stable prices or activity. of the international equity markets, reserve strengthening of US$ 15.6 million, of which US$ 14.4 million was recorded in the fourth quarter, was required in order to align align (  līn),v to move the teeth into their proper positions to conform to the line of occlusion. the reserves to the expected future benefits. In addition to that, claims in the amount of US$ 12.5 million (2001: US$ 3.3 million) were paid in the year 2002 against net premiums earned of US$ 8.1 million (2001: US$ 4.5 million) regarding this closed block of long-term variable annuity business. (5) Excluding prior years' developments and September 11, 2001, but including Enron and European floods. (6) Technical result is defined as net premiums earned minus losses and loss adjustment expenses and minus underwriting acquisition costs. (7) Technical result is defined as net premiums earned minus losses and loss adjustment expenses and minus underwriting acquisition costs. Substantial cash flow from operating activities drives 24%-growth of invested assets Converium Group reported a cash flow from operating activities of US$ 870.4 million for the year ended December 31, 2002 compared to US$ 311.5 million for the year ended December 31, 2001 (plus 179.4%). This substantial growth in the cash flow from operating activities contributed to a significant increase of our invested assets by 24.4% to US$ 6,117.3 million as of December 31, 2002, 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. Positive investment result despite turmoil in capital markets Despite turmoil in capital markets Converium Group was able to achieve a favorable total investment result of US$ 241.5 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 year ended December 31, 2002, respectively US$ 81.0 million and 5.4% for the fourth quarter 2002. Early in the year Converium Group adopted a passive asset-management approach, leading to a restructuring of its investment portfolios. The restructuring of the 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$ 62.9 million for the year ended December 31, 2002 (fourth quarter 2002: US$ 10.0 million), the restructuring of the equities portfolios resulted in net realized capital losses of US$ 48.2 million for the year ended December 31, 2002 (fourth quarter 2002: US$ 15.5 million). Converium Group reported US$ 48.3 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 year ended December 31, 2002 compared to US$ 82.5 million for the year ended December 31, 2001 and, US$ 17.6 million of impairment charges in the fourth quarter 2002 compared to US$ 11.2 million for the fourth quarter 2001. Our strict 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. In total, Converium Group reported net realized capital losses for the year ended December 31, 2002 of US$ 10.3 million, and net realized capital gains of US$ 21.2 million for the fourth quarter 2002. Converium Group's shareholders' equity increased by 10.6% to US$ 1,738.0 million as per December 31, 2002 compared to year-end 2001; the book value per share increased by 10.9% to US$ 43.55 as per December 31, 2002 compared to US$ 39.27 as per year-end 2001.
Converium Group: Financial Results as per December 31, 2002
Three months Year ended
ended December 31
December, 31 (US$ million,
(US$ million, except ratios)
except ratios)
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2002 2001 2002 2001
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Gross premiums written 1,017.1 3,535.8
- growth (%) 56.2% 651.2 22.7% 2,881.2
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Net premiums written 933.3 3,322.2
- growth (%) 63.4% 571.1 33.8% 2,482.6
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Net premiums earned 893.5 3,165.5
- growth (%) 52.3% 586.5 37.9% 2,295.2
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Operating income (loss)(8) 35.1 -90.3 67.7 -461.1
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Net income (loss) 80.8 -7.5 106.8 -367.4
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Income (loss) per share (US$) 2.03 -0.18 2.68 -9.18
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Non-life loss ratio 76.8% 87.4% 77.8% 99.7%
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Adjusted non-life loss ratio(9) 69.1% 85.4% 72.9% 80.0%
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Non-life underwriting expense ratio 20.9% 28.5% 21.1% 23.2%
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Non-life administration expense
ratio 4.6% 7.3% 5.3% 6.1%
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Non-life combined ratio 102.3% 123.2% 104.2% 129.0%
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Adjusted non-life combined ratio(9) 94.6% 121.2% 99.3% 108.8%
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Total assets 12,051.0 9,706.5 12,051.0 9,706.5
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Shareholders' equity 1,738.0 1,570.8 1,738.0 1,570.8
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Book value per share (US$) 43.55 39.27 43.55 39.27
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(8) The pre-tax operating income (loss) is defined as pre-tax income (loss) excluding pre-tax net realized capital gains or losses, amortization of goodwill and restructuring costs. (9) Excluding prior years' developments and September 11, 2001, but including Enron and European floods. Highlights of Converium Group's financial results 2002 -- Far East/Pacific Rim and North America (net premiums written in 2002 increased 25.1% to US$ 67.3 million), -- Europe (net premiums written in 2002 increased more than 50.0% up to US$ 45.6 million), -- Milan branch office (net premiums written in 2002 increased 33.5% to US$ 24.7 million), and -- Paris branch office (net premiums written in 2002 more than doubled to US$ 16.9 million). 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: "Our industry has seen considerable turmoil during 2002 with several involuntary involuntary adj. or adv. without intent, will, or choice. Participation in a crime is involuntary if forced by immediate threat to life or health of oneself or one's loved ones, and will result in dismissal or acquittal. INVOLUNTARY. exits and restructurings of major players in our industry having been announced. Our expectation is that this trend will continue on into 2003. Converium, with its strong balance sheet and clear positioning as a leading independent reinsurer, is emerging as a winner from this industry shakeout Shakeout A situation in which many investors exit their positions, often at a loss, because of uncertainty or recent bad news circulating around a particular security or industry. Notes: During the dotcom boom and bust, numerous shakeouts occurred. ." "In an industry where people matter, Converium's focus on enhancing its skill base with underwriting specialists and strong analytical analytical, analytic pertaining to or emanating from analysis. analytical control control of confounding by analysis of the results of a trial or test. capabilities paid dividends in 2002. This can be witnessed in our strong growth and the improved core profitability of our underlying business. It can also be seen in our successful penetration The successful unauthorized breach of a security perimeter. See penetration test. of several Continental European markets in 2003 where relationships and own distribution capabilities matter." January's renewals continued to benefit from a robust pricing environment for reinsurers. Terms and conditions, particularly commissions for pro rata [Latin, Proportionately.] A phrase that describes a division made according to a certain rate, percentage, or share. In a Bankruptcy case, when the debtor is insolvent, creditors generally agree to accept a pro rata share of what is owed to them. business, continued to improve in reinsurers' favor. The strong growth experienced by Converium on January 1 should, in the absence of major catastrophes, bode bode 1 v. bod·ed, bod·ing, bodes v.tr. 1. To be an omen of: heavy seas that boded trouble for small craft. 2. well for a continuation continuation - continuation passing style of the profitability trend observed in late 2002." Martin Kauer, CFO See Chief Financial Officer. Converium said: "Our NYSE-listing enabled us to issue US$ 200 million Guaranteed Subordinated Subordinated A claim ranked lower in priority than other claims. Common stock claims are always subordinated to debt. Notes in the domestic US fixed income market in mid-December Noun 1. mid-December - the middle part of December period, period of time, time period - an amount of time; "a time period of 30 years"; "hastened the period of time of his recovery"; "Picasso's blue period" Dec, December - the last (12th) month of the year 2002. We entered the 2003-renewals with claims supporting capital that exceeds US$ 2.1 billion." "It is our clear strategy to focus on business where our underwriting skills matter and where our expertise is a competitive advantage in the reinsurance market. This strategy continues to pay off: specialty lines, such as aviation and space, professional liability, accident and health and engineering, drove the profitable growth we experienced in 2002. The substantial enhancement of the core profitability of our non-life book as a result of our re-underwriting effort is fully reflected in the strong improvement of the adjusted non-life combined ratio down to 99.3%, less than 100%, for 2002." "Our balance sheet is set up to weather the adverse investment climate. We substantially reduced our exposure to the global equity markets, we enhanced the quality of our fixed maturity portfolio - currently more than 80% of our bond are AAA-rated - and reduced its duration." "The strong improvement of the underlying profitability and the positive investment result led to a return on equity of 6.8% despite the turmoil in the capital market and the reserve developments of US$ 148.5 million net." "We are driven by best practice and best of breed; therefore we substantially enhanced the information disclosed dis·close tr.v. dis·closed, dis·clos·ing, dis·clos·es 1. To expose to view, as by removing a cover; uncover. 2. To make known (something heretofore kept secret). in our annual report 2002. Among many other items, we improved the investment section and provide currency splits of our income statement and our balance sheet." The company has made it a policy not to provide any quarterly or annual earnings guidance and it will not update any past outlook for full year earnings. It will however provide investors with perspective on its value drivers, its strategic initiatives and those factors critical to understanding its business and operating environment In computing, an operating environment is the environment in which users run programs, whether in a command line interface, such as in MS-DOS or the Unix shell, or in a graphical user interface, such as in the Macintosh operating system. . (10) Technical result is defined as net premiums earned minus losses and loss adjustment expenses minus underwriting acquisition costs. (11) The pre-tax operating income (loss) is defined as pre-tax income (loss) excluding pre-tax net realized capital gains or losses, amortization of goodwill and restructuring costs. Overview Business Segments Business Development Converium's financial results reflect the continued improvement of non-life underwriting as well as the reserve development of prior years. The 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 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 an adjusted non-life combined ratio of 99.3%. 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.
Converium Zurich
(US$ millions)
Year ended December 31 2002 2001 2000
------------------------
Gross premiums written 1,802.2 1,440.3 1,020.0
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Net premiums written 1,670.5 1,185.0 818.3
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Net premiums earned 1,571.3 1,012.4 715.9
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Segment income (loss) 225.9 -178.7 10.8
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Non-life loss ratio 69.9% 101.4% 79.5%
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Adjusted non-life loss ratio(12) 71.2% 88.4% 85.2%
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Non-life underwriting expense ratio 17.9% 20.0% 21.0%
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Non-life administration expense ratio 4.8% 4.6% 5.5%
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Non-life combined ratio 92.6% 126.0% 106.0%
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Adjusted non-life combined ratio(12) 93.9% 113.0% 111.7%
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Retention rate(13) 92.7% 82.3% 80.2%
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Converium Zurich reported a segment income of US$ 225.9 million in 2002 compared to a segment loss of US$ 178.7 million in 2001, and segment income of US$ 10.8 million in 2000. The improvement of US$ 404.6 million in 2002 was primarily attributable attributable emanating from or pertaining to attribute. attributable proportion see attributable risk (below). attributable risk to a large increase in net premiums earned, and a reduction of the loss ratio from 101.4% in 2001 to 69.9% in 2002. Losses in 2001 were primarily attributable to the September 11, 2001, terrorist attacks that contributed US$ 210.0 million of losses as well as US$ 27.7 million related to the Enron reorganization, offset by positive reserve development of US$ 81.7 million. In 2002, gross premiums written increased US$ 361.9 million, or 25.1%, net premiums written increased US$ 485.5 million, or 41.0%, and net premiums earned increased US$ 558.9 million, or 55.2%. The growth was spread across most lines of business and regions and primarily resulted from increased rates and increasing our share of clients' business upon renewing re·new v. re·newed, re·new·ing, re·news v.tr. 1. To make new or as if new again; restore: renewed the antique chair. 2. existing business or writing new business. (12) Excluding prior years' developments and September 11, 2001, but including Enron and European floods. (13) Retention rate is defined as net premiums written divided by gross premiums written. During 2002, Converium Zurich's largest growth regions included: -- Far East/Pacific Rim and North America (net premiums written in 2002 increased 25.1% to US$ 67.3 million), -- Europe (net premiums written in 2002 increased more than 50.0% up to US$ 45.6 million), -- Milan branch office (net premiums written in 2002 increased 33.5% to US$ 24.7 million), and -- Paris branch office (net premiums written in 2002 more than doubled to US$ 16.9 million). The largest growth lines included such specialty lines as: -- liability (net premiums written in 2002 increased 68.3% to US$ 381.4 million), -- aviation and space (net premiums written in 2002 increased 104.5% to US$ 370.2 million), and -- 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. (net premiums written in 2002 increased 27.8% to US$ 145.8 million). Converium Zurich's combined ratio was 92.6% in 2002, 126.0% in 2001, and 106.0% in 2000. The 2001 combined ratio reflected significant loss events described above. The adjusted combined ratio was 93.9% in 2002, 113.0% in 2001, and 111.7% in 2000. The decrease in the combined ratio is due to increased premiums in the aviation and space and property catastrophe lines, which were written at more favorable terms during the 2002 renewal cycle, and where no major loss events were experienced, and to the substantial improvement of the profitability of Converium Zurich's in-force book as a result of the re-underwriting efforts and the restructuring of the underwriting process. Converium North America
(US$ millions)
Year ended December 31 2002 2001 2000
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Gross premiums written 1,243.5 1,150.9 1,295.5
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Net premiums written 1,193.9 898.4 844.7
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Net premiums earned 1,145.0 882.4 815.4
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Segment loss -57.0 -197.9 -28.7
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Non-life loss ratio 84.0% 94.9% 88.7%
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Adjusted non-life loss ratio(14) 72.0% 67.4% 78.8%
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Non-life underwriting expense ratio 25.0% 28.5% 25.5%
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Non-life administration expense ratio 5.9% 8.0% 7.7%
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Non-life combined ratio 114.9% 131.4% 121.9%
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Adjusted non-life combined ratio(14) 102.9% 102.7% 111.9%
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Retention rate(15) 96.0% 78.1% 65.2%
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Converium North America reported a segment loss of US$ 57.0 million in 2002, compared to a segment loss of US$ 197.9 million in 2001, an improvement of US$ 140.9 million. (14) Excluding prior years' developments and September 11, 2001, but including Enron and European floods. (15) Retention rate is defined as net premiums written divided by gross premiums written. This improvement was due to several factors including: -- Far East/Pacific Rim and North America (net premiums written in 2002 increased 25.1% to US$ 67.3 million), -- Europe (net premiums written in 2002 increased more than 50.0% up to US$ 45.6 million), -- Milan branch office (net premiums written in 2002 increased 33.5% to US$ 24.7 million), and -- Paris branch office (net premiums written in 2002 more than doubled to US$ 16.9 million). During 2002, Converium North America engaged in an in-depth in-depth adj. Detailed; thorough: an in-depth study. in-depth Adjective detailed or thorough: an in-depth analysis actuarial ac·tu·ar·y n. pl. ac·tu·ar·ies A statistician who computes insurance risks and premiums. [Latin reserve analysis, which resulted in the recording of additional provisions for losses in the amount of US$ 137.2 million. These provisions primarily relate to underwriting years 1997 to 2000 on its commercial 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 , miscellaneous casualty, medical errors and omissions errors and omissions n. short-hand for malpractice insurance which gives physicians, attorneys, architects, accountants and other professionals coverage for claims by patients and clients for alleged professional errors and omissions which amount to negligence. liability, motor liability, and workers' compensation workers' compensation, payment by employers for some part of the cost of injuries, or in some cases of occupational diseases, received by employees in the course of their work. lines of business. This compares to US$ 164.0 million of additional reserves recorded in 2001 relating to underwriting years 2000 and prior. In 2002, gross premiums written increased US$ 92.6 million, or 8.0%, net premiums written increased US$ 295.5 million, or 32.9%, and net premiums earned increased US$ 262.6 million, or 29.8%. In 2002, Converium North America's net written premium growth was driven by specialty lines, including: -- structured/finite (net premiums written in 2002 increased 20.1% to US$ 373.9 million), -- professional liability (net premiums written in 2002 increased 71.7% to US$ 214.7 million), and -- accident & health business (net premiums written in 2002 increased 121.1% to US$ 84.6 million). This premium growth was partially offset by the non-renewal of a workers' compensation program, which reduced premiums by US$ 39.6 million compared to 2001. Net premiums written grew more substantially than gross premiums written due to retrocessional premium charges of US$123.0 million in 2001 for an aggregate excess treaty and Zurich Stop Loss coverages that were not incurred in 2002. Converium North America's combined ratio was 114.9% in 2002, 131.4% in 2001 and 121.9% in 2000. The combined ratio in 2002 included US$ 137.2 million in adverse loss development. The combined ratio in 2001 was primarily driven by reserve development related to prior accident years, the Years, The the seven decades of Eleanor Pargiter’s life. [Br. Lit.: Benét, 1109] See : Time September 11, 2001 terrorist attacks and the Enron reorganization. The substantial improvement of the adjusted combined ratio(16) since 2000 is due to the re-underwriting and the restructuring of the underwriting process. (16) Excluding prior years' developments and September 11, 2001, but including Enron and European floods. Converium Cologne
(US$ millions)
Year ended December 31 2002 2001 2000
-------------------
Gross premiums written 303.4 299.9 241.3
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Net premiums written 289.8 257.8 218.6
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Net premiums earned 284.8 275.3 224.2
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Segment loss -64.4 -71.6 -16.8
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Non-life loss ratio 96.2% 108.8%101.4%
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Adjusted non-life loss ratio(17) 85.3% 90.5% 90.1%
- impact of European floods 17.4% - -
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Non-life underwriting expense ratio 22.5% 17.8% 27.8%
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Non-life administration expense ratio 5.3% 5.9% 5.1%
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Non-life combined ratio 124.0% 132.5% 134.3%
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Adjusted non-life combined ratio(17) 113.1% 114.2% 122.9%
- impact of European floods 17.4% - -
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Retention rate(18) 95.5% 86.0% 90.6%
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Converium Cologne reported a segment loss of US$ 64.4 million in 2002 compared to a segment loss of US$ 71.6 million in 2001 and a segment loss of US$ 16.8 million in 2000. In 2002, Converium Cologne had losses of US$ 49.5 million related to the European floods and approximately US$ 31.1 million in net adverse loss reserve development. In addition, investment results declined US$ 9.8 million. In 2001, Converium Cologne recognized US$ 9.0 million in net losses arising from the September 11, 2001 terrorist attacks, US$ 32.6 million from other large losses and US$ 41.3 million in net adverse loss reserve development. In addition, Converium Cologne had a significant decrease in 2001 of US$ 42.4 million in investment results, primarily due to lower realized capital gains and impairment losses on its equity portfolio. In 2002, gross premiums written increased US$ 3.5 million, or 1.2%, net premiums written increased US$ 32.0 million, or 12.4%, and net premiums earned increased US$ 9.5 million, or 3.5%. During 2002, Converium Cologne's largest growth regions in terms of premium volume were: -- Far East/Pacific Rim and North America (net premiums written in 2002 increased 25.1% to US$ 67.3 million), -- Europe (net premiums written in 2002 increased more than 50.0% up to US$ 45.6 million), -- Milan branch office (net premiums written in 2002 increased 33.5% to US$ 24.7 million), and -- Paris branch office (net premiums written in 2002 more than doubled to US$ 16.9 million). Net premiums earned in 2002 increased at a lower rate than net premiums written due to a high amount of earned premium Earned premium is the portion of an insurance written premium which is considered "earned" by the insurer, based on the part of the policy period that the insurance has been in effect, and during which the insurer has been exposed to loss. in 2001 from 2000 contracts which were not renewed. Converium Cologne's combined ratio was 124.0% in 2002, 132.5% in 2001 and 134.3% in 2000. In 2002, Converium Cologne booked US$ 49.5 million in losses for the European floods and US$ 31.1 million in loss development on prior years' business. In 2001, the increase in the loss ratio was due to the recognition of US$ 9.0 million in net losses arising from the September 11, 2001 terrorist attacks, US$ 32.6 million from other large losses and US$ 41.3 million in net adverse loss reserve development. The decrease in the underwriting expense ratio in 2001 was due to both, the non-renewal of proportional contracts with high ceding cede tr.v. ced·ed, ced·ing, cedes 1. To surrender possession of, especially by treaty. See Synonyms at relinquish. 2. commissions as well as generally lower commission rates due to the hardening reinsurance market conditions. The adjusted combined ratio(17) was 113.1% in 2002, 114.2% in 2001, and 122.9% in 2000. The significant enhancement of the underlying profitability was disturbed Disturbed is a rock band from Chicago, Illinois. The group was formed in 1996 when musicians Dan Donegan, Steve "Fuzz" Kmak, and Mike Wengren hired singer David Draiman in Chicago, Illinois. by the impact of the European floods, that added 17.4 percentage points to both, the combined ratio and the adjusted combined ratio(19). Converium Life
(US$ millions)
Year ended December 31 2002 2001 2000
------------------
Gross premiums written 199.0 164.8 120.5
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Net premiums written 168.0 141.4 114.4
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Net premiums earned 164.4 125.1 106.0
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Segment loss -19.4 -7.1 10.3
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Underwriting expense ratio life 21.0% 4.5% 32.5%
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Administration expense ratio life 4.2% 3.7% 3.5%
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Retention rate(20) 84.4% 85.8% 94.9%
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Converium Life reported a segment loss of US$ 19.4 million in 2002, compared to a segment loss of US$ 7.1 million in 2001 and segment income of US$ 10.3 million in 2000. The segment losses in 2002 and 2001 are primarily driven by net incurred losses of US$ 20.1 million in 2002 and US$ 12.4 million in 2001 on a closed block of long-term variable annuity business. The variable annuity losses arise from guaranteed minimum death benefit contracts, whereby the minimum benefit is determined by the development of investment results from the capital markets. Following the ongoing downturn of the international equity markets, reserve strengthening of US$ 15.6 million for the year ended December 31, 2002 (2001: US$ 13.4 million) was required in order to align the reserves to the expected future benefits. In addition to that, claims in the amount of US$ 12.5 million (2001: US$ 3.3 million) were paid in the year 2002 against net premiums earned of US$ 8.1 million (2001: US$ 4.5 million) regarding this closed block of long-term variable annuity business. In 2002, gross premiums written increased US$ 34.2 million, or 20.8%, net premiums written increased US$ 26.6 million, or 18.8%, and net premiums earned increased US$ 39.3 million, or 31.4%. The increase in premiums written in 2002 is mainly driven by growth in: -- Far East/Pacific Rim and North America (net premiums written in 2002 increased 25.1% to US$ 67.3 million), -- Europe (net premiums written in 2002 increased more than 50.0% up to US$ 45.6 million), -- Milan branch office (net premiums written in 2002 increased 33.5% to US$ 24.7 million), and -- Paris branch office (net premiums written in 2002 more than doubled to US$ 16.9 million). This was offset by the strong decline of business written in 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. (net premiums written in 2002 declined 64.5% to US$ 5.9 million), 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 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. . The increase in net premiums earned in 2002 relative to net premiums written was the result of the strong premium growth experienced in late 2001, now being earned in 2002. The underwriting expense ratio was 21.0% in 2002, 4.5% in 2001 and 32.5% in 2000. In 2001, US$ 10.6 million in commission benefits were recorded from the commutation of a large contract and a refunding Reimbursing funds in restitution or repayment. The process of refinancing or borrowing money, ordinarily through the sale of bonds, to pay off an existing debt with the proceeds derived therefrom. of commissions from our strategic retrocessions, reducing the underwriting expense ratio by 8.5%. The administration expense ratio was 4.2% in 2002, 3.7% in 2001 and 3.5% in 2000. (17) Excluding prior years' developments and September 11, 2001, but including Enron and European floods. (18) Retention rate is defined as net premiums written divided by gross premiums written. (19) Excluding prior years' development and September 11, 2001, but including Enron and European floods. (20) Retention rate is defined as net premiums written divided by gross premiums written. 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. 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. Today the company ranks among the top ten professional reinsurers and employs close to 800 people in 24 offices around the globe. Converium has a strong balance sheet with an "A" (strong) rating from Standard & Poor's and an "A" (excellent) rating by AM Best Company. Converium's September 11, 2001 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, 2001 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, 2001 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 terrorism, the threat or use of violence, often against the civilian population, to achieve political or social ends, to intimidate opponents, or to publicize grievances. ; 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 SWX Swiss Exchange. The Company does not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. www.converium.com |
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