Converium Holding Ltd, the Swiss-based reinsurer, formed by the spin-off of Zurich Financial’s reinsurance operations, reported a net after tax loss of $367.4 million for the year 2001, due in large part to the effects of the Sept. 11 attacks and the Enron bankruptcy.
Although net premiums written increased from $1.8615 billion in 2000 to $2.2952 billion last year, and the company was earning a profit before Sept. 11, it took a series of losses following the attacks – $28.5 million on “imputed premiums for capped liability;” $289.2 million on “incurred losses; $67 million on Enron; $82.5 million on “Impairment losses on equity portfolio;” $112 million in “Loss reserves reserve strengthening to get to Tillinghast’s best estimates (1st half 2001);” $11.6 million in “reserve strengthening (2nd half 2001);” $65.4 million in “reserve strengthening (2000),” and finally $50 million in “Restructuring costs.” All of which resulted in a net pre-tax loss of $537.3 million.
The company, nevertheless remains optimistic about is prospects in 2002 after a successful renewal season. “We renewed 73% of our premium volume that was renewable at January 1, 2002 and experienced combined increases in rates and shares of around 25%,” said the announcement.
Converium is tightening up underwriting standards, as are most reinsurers, following Sept. 11. In meeting its performance targets the company canceled 27% of its renewable premium volume “because the underlying business did not meet our increased performance standards.” It added that the “non-renewed premium volume was mostly offset by new business, ” and concluded that.”The aggregate impact of improved rates, increased shares and new business, offset by cancellations, resulted in premium growth of 19% on renewable premiums.”
Converium also noted that, “The impact of the new capacity in Bermuda was limited as insurers tended to seek capacity from their existing relationships,” and that, “Terrorism was widely excluded across lines of business and geography; where blanket exclusions were not implemented, sub-limits for limited coverage were introduced.”
CEO Dirk Lohmann commented that, “Converium entered 2002 as an established and integrated leading global reinsurer with a strong client focus and determination to deliver shareholder value. We were well received as an independent company during the recent January 1, 2002 renewal season by both clients and brokers. Terms and conditions have improved substantially on a global scale and we have further enhanced the quality of our portfolio. 2001 was a year of transition for Converium, as we carved out three distinct businesses from our former parent company, Zurich Financial Services, and spun off Converium through an Initial Public Offering on December 11, 2001.”
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