The announcements from Converium have featured a lot of three’s lately. The Swiss reinsurer’s latest bulletin notes that it “triples income from continuing operations in the first quarter of 2007.” Converium posted a figure of $150.9 million, compared to $49.9 million in the first quarter of 2006. Its net income for the quarter was also $150.9 million, but the Q1 2006 net was slightly higher at $61.6 million.
The earnings report follows Converium’s statement to its shareholders urging them to reject the takeover offer of France’s SCOR Group (See IJ web site April16), the announcement of a lawsuit against SCOR in the U.S. (See IJ web site April 17), and the announcement that April renewals rose 35 percent (See IJ web site April 18). The higher earnings may also affect the SCOR bid by raising Converium’s value.
Other earnings highlights cited by the Company included the following:
– Release of a tax valuation allowance of $85.2 million, reflective of Converium’s future earnings capacity;
– Strong underwriting performance, with a non-life combined ratio of 104.6 percent, on normalized basis of 97.8 percent;
– Continuing reserve adequacy, supported by an independent actuarial study;
– Shareholders’ equity of $2.0028 billion as of March 31, 2007, up $156.8 million or 8.5 percent compared with December 31, 2006;
– Total investment result of $92.1 million including realized gains of $30.3 million or average total investment income yield of 5.7 percent.
– Gross premiums written of $711.8 million, an increase of 10.0 percent compared with the first quarter of 2006;
– Net premiums written grew by 5.5% to USD 679.1 million.
– Net premiums earned expanded by 8.5% to USD 460.0 million.
CEO Inga Beale commented: “In the first quarter we have produced an excellent set of financial results. This clearly demonstrates that our turnaround is sustainable. We will now focus on vigorously completing our road map for future value creation. Some of the first major steps have been taken, such as the strong profitable growth of our April renewals book of business and the recently announced capital management measures.
“We believe that our financial performance and the demonstrable progress in pursuing our road map add further substance to our claim that SCOR’s hostile offer undervalues Converium and its medium-term prospects. We are convinced that Converium’s standalone prospects are more promising than with SCOR. In the interest of our shareholders, we will continue to oppose SCOR’s unfriendly approach should it remain unchanged.”
Converium’s bulletin said that based on the “excellent first quarter financial performance and significant progress in completing its strategic road map the Company gives a positive outlook for 2007. Converium expects gross premiums written to reach at least $2.2 billion, at a non-life combined ratio of 98.5 percent. The return on equity (excluding the impact of the tax valuation allowance) is projected at around 11 percent for the full year 2007, with a potential upside. Invested assets are expected at around $6.0 to 6.2 billion, also offering some upside. Corporate Center expenses, excluding non-recurring defense costs, are projected at $48 million. Finally, for the remaining quarters of 2007, Converium expects a tax rate of 14-16 percent.”
The full report and additional comments, including a web cast of the earnings conference call may be obtained on the Company’s web site at: http://www.converium.com.