Swiss-based Converium Holding Ltd. joined other reinsurers in reporting strong 2nd quarter 2006 earnings of $62.5 million, compared to $46.9 million in the same period of 2005, a 33.2 percent rise.
Other highlights for the quarter, given in the Company’s report, include the following:
• Shareholders’ equity of $1.7961 billion as of June 30, 2006, up $142.7 million or 8.6 percent compared with December 31, 2005;
• Return on shareholders’ equity of 14.6 percent, up from 11.4 percent in the second quarter of 2005;
• A solid underwriting performance, with a non-life combined ratio of 99.8 percent and segment income of ongoing operations of $69.0 million;
• Favorable prior accident years’ developments, for the fifth consecutive quarter, resulting in a net positive impact on the technical result of $19.4 million;
• The successful and faster than expected progression of the North American run-off and commutation strategy, leading to a total reduction of net reserves in the Run-Off segment of $185.6 million to $1.0122 billion, and a benefit to the technical result from commutations of $30.7 million;
• Net investment income of $84.7 million or an average annualized net investment income yield of 4.7 percent;
• Strong July 1 non-life treaty renewals, with renewed business growing by 41.3 percent.
CEO Inga Beale commented: “I am very pleased with another quarter of strong financial performance by Converium. The results reflect the profitable execution of our North American run-off and commutation strategy, favorable prior-year developments and a solid underlying underwriting performance.”
“Converium continues to regain strength and stability, as recognized by Standard & Poor’s in their recent assignment of a positive outlook on our ratings,” she added. “This is a major step forward for us and augurs well for the future. We will continue to work diligently towards meeting Standard & Poor’s requirements for an upgrade at the earliest possible date.”
That’s certainly welcome news to the Company’s shareholders. Converium, which was established in September 2001 to take over Zurich Financial Services’ reinsurance operations, ran into trouble in 2004, when it discovered its reserves were woefully inadequate. As a result its ratings were downgraded below “A” and it lost almost two-thirds of its business. Regaining the coveted “A” rating has been a primary goal ever since. For a complete discussion See IJ Website Sept. 20, 2004.
Converium reiterated its full-year financial guidance given in March 2006, except for expected Corporate Center costs and run-off liabilities, as follows:
• Gross premiums written for 2006 are projected to come in at $1.8 – $1.9 billion.
• The priced combined ratio for the ongoing non-life operations is anticipated at around 102.5 percent, including an administration expense ratio of 5.5 percent, expected losses from natural catastrophes of about $80 million, but excluding expected Corporate Center costs of approximately $45 – 50 million, up from the Company’s previous guidance of $40 million.
• For the full year 2006, the reduction of net liabilities in the Run-Off segment is likely to exceed the Company’s previous guidance of $375 million.
• The corporate tax rate is expected to range between 7 – 12 percent.
• Average invested assets including cash and cash equivalents should be in the magnitude of approximately $ 7 billion.
Converium also reconfirmed that it continues to explore a sale of its North American subsidiaries, the CRNA Group, “with high priority.” It said, however that “any sale of CRNA must achieve medium to long-term shareholder value.”
For the full results and further comments consult the Company’s Website at: http://www.converium.com.
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