Converium Posts $61.6 Million Q1 Net

Swiss-based reinsurer Converium bounced back from a first quarter loss in 2005 to post net income of $61.6 million in the first quarter of 2006. The Company’s pre tax operating income, which excludes capital gains/losses, for the period was $72.7 million, up 286.7 percent over the $18.8 million it earned in Q1 2005.

Other earnings highlights given in the report were as follows:
— a strong underwriting performance of ongoing operations, with a related non-life combined ratio of 94.8 percent and segment income of $71.1 million;
— a net positive impact of prior accident years on the technical result of $ 12.4 million, reflecting the continuing stabilization of Converium’s prior accident years’ developments;
— the successful progression of the North American run-off and commutation strategy, which led to a total reduction of net reserves in the Run-Off segment of $ 111.9 million to approximately $1.2 billion, and a benefit on the technical result from commutations of $ 12.4 million;
— total operating and administration expenses of $ 35.7 million, a decline of 37.3 percent compared with the first quarter of 2005; and
— a total investment result of $ 70.3 million or an average annualized total investment income yield of 3.9 percent, which is at the same level as in the first quarter of 2005.
— shareholders’ equity as of March 31, 2006 amounted to $ 1,709.7 million, an increase of $ 56.3 million or 3.4 percent compared with December 31, 2005.
— return on shareholders’ equity (annualized) was 14.9 percent
versus -1.3 percent in the first quarter of 2005.

As previously reported (See IJ Website May 9), Converium said it has “recorded successful April non-life treaty renewals, binding 99.5 percent of business up for renewal. Including the January 1, 2006 treaty renewals, Converium has already bound approximately 93 percent of the non-life premium volume targeted for 2006. The Company, therefore, remains confident that it will achieve total gross premiums written of $ 1.8-1.9 billion for the full year.”

CEO Inga Beale commented: “I am very pleased with our first quarter financial performance. Converium’s net result certainly benefited from only light catastrophic losses over the three months. More importantly, however, we are proud to report further progress in areas under our direct influence: first, administration expenses have come down significantly, returning our cost base to a more competitive level; second, our prior-year loss reserve position continues to be stable; third, the run-off of Converium’s North American liabilities is progressing according to plan and making a positive contribution to our bottom-line.”

She also noted: “The entire Converium team is really encouraged by the further progress we have made in our turnaround, which is the result of many months of hard work. The improving financial performance and continuing stabilization of Converium give us great confidence as we look towards the future.”

Converium still faces some problems. Gross premiums written in the first quarter of 2006 decreased by 13.6 percent to $655.3 million, while net premiums written were down by 12.6 percent to $652.2 million and net premiums earned by 40.6 percent to $435.3 million, as compared with the same period of 2005. “These decreases in premiums are largely due to the continuing ratings disadvantage Converium faces,” said the bulletin. “The top-line development also reflects Converium’s continued profitability-focused underwriting approach.”

Converium’s relative health marks a return from the abyss for the embattled reinsurer, which was spun off by Zurich in September 2001. It had to increase reserves substantially in 2004 (See IJ Website Sept. 2004), and lost its “A” ratings. Now a smaller leaner company, it appears to be on the road to recovery.

For the full earnings details and a replay of the earnings conference presentation go to the Company’s Website at: http://www.converium.com.

Topics Profit Loss