The Swiss-based Converium Group, a leading global reinsurer, reported a very successful 2002, with pre-tax operating income of $67.7 million, an increase of $528.8 million compared to a pre-tax operating loss of $ 461.1 million for the year 2001, and net after tax income of $106.8 million, an increase of $474.2 million over 2001’s net loss of $367.4 million.
Despite the depressed values in the global equity markets and the omnipresent need to strengthen reserves, Converium, the reinsurance operations of Zurich Financial Services, which was spun off in 2001, reported excellent results, exceeding analysts’ expectations. Some other highlights it reported were as follows:
— Net premiums written 2002: US$ 3,322 million (plus 33.8%)
— Non-life combined ratio 2002: 104.2% (2001: 129.0%)
— Adjusted non-life combined ratio 2002(1): 99.3% (2001: 108.8%)
— Cash flow from operating activities 2002: US$ 870.4 million (plus179%)
— Successful 2003 renewals in a hard reinsurance market
— Shareholders’ equity 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 1.00 per share
[the numbers in parentheses refer to statement details]
“Converium continues to strengthen its position as a global leading professional reinsurer, particularly in specialty lines,” said the announcement. “At January 1, 2003, approximately two thirds of our non-life premium was up for renewal, the remaining third will be renewed 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.”
The company went on to state that it had chosen not to renew around 30 percent of its policies as “the underlying business did not meet our stringent performance standards or because the treaties were restructured from a proportional to a non-proportional basis.” The non renewals were “more than offset by new business,” resulting in “premium growth of more than 20% (2) on renewable premiums.”
CEO Dirk Lohmann made the following comments on Converium’s performance and the state of the reinsurance industry in a written statement:
“Our industry has seen considerable turmoil during 2002 with several 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.”
“In an industry where people matter, Converium’s focus on enhancing its skill base with underwriting specialists and strong analytical 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 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 business, continued to improve in reinsurers’ favor. The strong growth experienced by Converium on January 1 should, in the absence of major catastrophes, bode well for a continuation of the profitability trend observed in late 2002.”
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