France’s SCOR Group restated its case for its proposed merger with Swiss-based Converium in an investors’ presentation.
SCOR stressed that, if the two companies were to combine their activities, it would assure a well-balanced book of business between life and non-life reinsurance. It would also rank as the world’s fifth largest reinsurer behind Swiss Re, Munich Re, Berkshire Hathaway and Hannover Re, but ahead of XL Re and Everest Re (excluding Lloyd’s and specialized life re companies).
The presentation also pointed out that the share offer – 0.5 SCOR newly issued share plus CHF4 cash ($3.27) for every 1 Converium share, – represents an equivalent of CHF 21.1 ($17.25) per share, a “27 percent premium on last unaffected share price (4 January 2007).” The offer values Converium at approximately CHF3.1 billion (€1.9bn – $2.54 billion).
Among other considerations, SCOR listed cost savings, potentially improved ratings, larger capitalization, additional reserve security, a bigger network of global offices and greater capacity as positive factors and good reasons to combine the two organizations.
Both Companies have gone through some difficult times. Zurich Financial Services formed Converium in September 2001 when it spun off its reinsurance operations into the new company. However, in 2004 the skeleton popped out of the closet, as inadequate loss reserves required a significant strengthening, and the Company lost its “A” rating. SCOR nearly came to grief in 2002 when it to had to increase reserves largely due to rising U.S. claims. It also lost its “A” rating.
Although both companies have recovered substantially from those difficulties – regaining their “A” ratings in the process – their gross premiums written are still below their former figures.
SCOR also explained that the success of the offer hinges on it “obtaining at least 50.01 percent of Converium’s share capital on a fully diluted basis.” It also needs to receive regulatory approvals for the new share issue as well as related regulatory and anti-trust approvals.
The official offering Prospectus is currently expected to be published around April 2, 2007, and the offer is expected to expire around the first of June.
Converium has so far rejected the offer.