Swiss reinsurer Converium announced that it will restate its financial accounts as soon as it has completed “an extensive internal review of certain reinsurance transactions and engaged outside counsel to assist the Company.” The bulletin also noted that third quarter financial results, due to be released Nov. 8, will therefore be delayed. The company hopes to complete the review and post third quarter results by mid-December.
The bulletin notes that “investigations of the insurance and reinsurance industry and non-traditional insurance and reinsurance products are being conducted by regulators and governmental authorities in both the United States and Europe.” This apparently caused the company to initiate its review of those accounts. It did not state the time period involved, but indicated that it has made “substantial progress in this internal review.” Information determined by the review triggered the decision to restate its accounts. “The primary driver of the restatement is to correct the accounting treatment of certain transactions, primarily ceded reinsurance, replacing reinsurance accounting by deposit accounting,” said the bulletin.
Converium stressed that “based on the findings of the review to date, the Company estimates that the cumulative impact of the restatement should not reduce unaudited shareholders’ equity of US$ 1.65 billion reported for June 30, 2005. This estimate represents Converium’s current assessment of the cumulative impact of the restatement.”
The bulletin also noted that the “effects of the proposed adjustments on Converium’s operations for particular prior periods will be reflected in the restated results. Until the restated accounts are released, previously published financial statements should no longer be relied on.”
Converium noted the following “positive and encouraging” developments in the third quarter:
— For the fourth consecutive quarter, Converium’s aggregate prior year loss reserve levels have remained stable.
— Based on information received to date, Converium incurred estimated net losses from hurricanes Katrina, Rita, Dennis and Emily of approximately US$ 50 million. This is modest compared to industry losses and reflects the Company’s reduced exposure in North America, following the decision taken in September 2004 to place Converium Reinsurance (North America) Inc. (CRNA) into run-off. The net impact from the August floods in Continental Europe was approximately US$ 24 million.
— Converium commuted net liabilities of CRNA of close to US$ 250 million, with a positive contribution to net income of approximately US$ 39 million.
— Converium made significant progress in reducing administrative expenses which came down to around US$ 40 million, as compared with US$ 50 million in the second quarter of 2005.
— Total investment results amounted to approximately US$ 70 million.
Converium reiterated that its two major financial targets for the year 2005 remain unchanged: “first, to achieve total gross premiums written of about US$ 2 billion and, second, to commute or otherwise settle CRNA net liabilities of approximately US$ 500 million.”
The company will hold a conference call for the investment community , which will be webcast live on the Internet at http://www.converium.com. Please dial in 10 to 15 minutes before and ensure that you have Real Media PlayerTM or Windows Media PlayerTM.
Further details were given as follows:
The conference call will be held on Friday, November 4, 2005 at
11:00 a.m. Central European Time (CET)
10:00 a.m. Greenwich Mean Time (GMT)
05:00 a.m. Eastern Standard Time (EST)
02:00 a.m. Pacific Standard Time (PST)
+41 (0) 91 610 5600 Europe
+44 (0) 207 107 0611 UK
+1 (1) 866 291 4166 Toll Free USA only
+1 866 519 5086 Toll Free Canada
+1 866 519 5087 Toll Free Mexico
and quote “Converium”
For those of you unable to participate actively in this conference call, an audio recording will be available for 24 hours one hour after the event. The number to dial and the access code are as follows:
+44 (0) 207 108 6233 from UK
+41 (0) 91 612 4330 from Europe
+1 (0) 866 416 2558 from North America
followed by the access code 722 #
A few hours after the event the full webcast will be available for a period of one month on http://www.converium.com.
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