Form 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of May, 2005
CONVERIUM HOLDING AG
(Translation of registrant's name into English)
Baarerstrasse 8
CH-6300 Zug
Switzerland
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F_X_ Form 40-F___
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes___ No_X_
If "Yes" is marked, indicate the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82- Not Applicable
1
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONVERIUM HOLDING AG
By: /s/ Terry Clarke
Name: Terry Clarke
Title: CEO
By: /s/ Christian Felderer
Name: Christian Felderer
Title: General Legal Counsel
Date: May 11, 2005
2
Converium Holding Ltd, Zug
Zug, Switzerland - May 10, 2005 - Converium today reports on its financial
results for the first quarter of 2005.
o For the first quarter of 2005 Converium reports a net loss of US$ 61.8
million and a pre-tax operating loss(1) of US$ 47.8 million. For the
Company's ongoing operations, i.e. excluding US run-off, the segment
loss(2) amounts to US$ 21.0 million and the non-life combined ratio to
115.7 %.
o This result reflects (1) losses from winter storm Erwin (US$ 32.5 million
adding 6.1 percentage points to the ongoing non-life combined ratio), (2) a
negative impact on the technical result from the commutation of
retrocession agreements (US$ 38.7 million or 7.2 percentage points), (3)
net strengthening of prior years' loss reserves (US$ 10.4 million,
including late developments of US$ 10.9 million relating to 2004
hurricanes) and (4) costs associated with Converium's restructuring (US$
10.1 million).
o The overall result is also attributable to an operating expense base, which
is not yet fully reflective of the cost reduction measures initiated in
March 2005. Converium reiterates its commitment to target an administration
expense ratio for its ongoing operations of a maximum of 6.5% of net
premiums written in 2006.
o Converium reports satisfactory results for its Life & Health Reinsurance
segment with a segment income of US$ 6.2 million.
o Investment activities continued to exhibit satisfactory results, with the
total investment income yield amounting to 3.9%.
o The April 1 renewals, primarily in Japan, were in line with expectations.
Converium continued to pursue a disciplined underwriting approach and
consequently declined any business which did not meet the Company's
profitability targets.
o Converium continues to be confident about the profitability of its
underlying ongoing business. This portfolio comprises a significant portion
of longer-tail business, which can be profitably priced at combined ratios
exceeding 100%.
Terry Clarke, CEO, said: "Converium's financial results for the first quarter
are disappointing. They are driven by losses arising from natural catastrophes
and commutations of various retrocession contracts. The commutations reflect my
unconditional commitment to operational prudence and strict risk management
standards. Acts of God, however, are a constant phenomenon in the risk business
and should, therefore, be assumed to occur from time to time producing
volatility in results."
Terry Clarke added: "All in all, I feel encouraged by the continuing
profitability of our underlying ongoing business, particularly as the current,
non-sustainable administrative expense base will come down significantly in the
wake of the cost cutting measures initiated in March. I am also pleased about
our reserve situation, which continues to be stable."
3
First quarter 2005 highlights
o Gross premiums written: US$ 717.5 million
o Net loss: US$ -61.8 million
o Pre-tax operating loss: US$ -47.8 million
o Segment loss of ongoing operations: US$ -21.0 million
o Segment loss of run-off operation: US$ -4.6 million
o Ongoing non-life combined ratio: 115.7%
o Impact from winter storm Erwin: 6.1%
o Impact from the commutation of retrocession contracts: 7.2%
o Impact from late developments relating to 2004 hurricanes: 2.0%
o Adjusted ongoing non-life combined ratio: 100.4%
o Total investment income yield: 3.9%
o Shareholders' equity: US$ 1,580.8 million
Overview of first quarter performance and short-term outlook
For the first quarter 2005 Converium reported a consolidated net loss of US$
61.8 million and a pre-tax operating loss of US$ 47.8 million as compared to a
net profit of US$ 65.7 million and a pre-tax operating income of US$ 77.9
million in the same period of 2004.
The following developments had measurable effects on the first quarter 2005
financial results:
o The decrease in gross premiums written, net premiums written, and net
premiums earned in the first quarter of 2005 (by 48.1%, 45.7% and 30.6%,
respectively) is reflective of the reduction in business volume caused by
the placement of the Company's North American reinsurance entity into
orderly run-off in 2004 and the impact of the ratings downgrades which
prompted clients to cancel their business or reduce their shares with
Converium. Despite the decrease in premiums, there was still some growth in
Property, Agribusiness and in the Life & Health Reinsurance segment
resulting from increased shares in existing business and new client
relationships.
o Winter storm Erwin, which swept across Northern Europe in January 2005,
caused pre-tax net losses in the amount of US$ 32.5 million.
o As part of its risk management process Converium regularly evaluates the
quality of its reinsurance assets taking into account all public domain
information including the current rating and claims payment ability of
Converium's retrocessionaires. Based on this process, the Company decided
in the first quarter of 2005 to commute certain retrocessional reinsurance
contracts with reinsurance recoverables in the amount of US$ 100.1 million
(the full nominal value of future claims recoveries) for a commutation
settlement of US$ 60.1 million (reflecting the discounted value of the
commuted reserves). This commutation generated a negative impact of US$
38.7 million on the technical result in the first quarter of 2005. This
results from the long-tail nature of the expected future claims payment
patterns of the underlying business.
o In the first quarter of 2005 Converium recorded a net strengthening of
prior years' loss reserves of US$ 10.4 million (including US$ 10.9 million
related to the 2004 hurricanes). This compares with net reserve additions
of US$ 43.0 million in the same period of 2004.
o For the fifth consecutive quarter Converium's Life & Health Reinsurance
segment produced a positive segment income which amounted to US$ 6.2
million in the first quarter of 2005. The Company reiterates that it
considers the Life & Health Reinsurance operations a core element of its
business.
4
o In the first quarter of 2005, the administration expense ratio for the
ongoing non-life business was 6.4% as compared to 2.8% in the same period
of 2004. Total operating and administration expenses for the Company were
US$ 56.9 million, an increase of US$ 5.9 million compared with the same
period of 2004. This included retention plan costs of US$ 6.6 million. It
will take until early 2006 before the cost management measures initiated in
March 2005 take full effect. Converium's current cost base, therefore, is
not yet in line with the reduced premium volume.
o For the first quarter of 2005, Converium's Run-Off segment reported a
segment loss of US$ 4.6 million. Even though no material commutations took
place during this period of time Converium reaffirms its commitment to
commute North American liabilities. The operating and administration
expenses incurred by the Run-Off segment amounted to US$ 10.0 million in
the first quarter of 2005, as compared to US$ 12.3 million in the same
period of 2004.
The non-life combined ratio for Converium's ongoing operations was 115.7% for
the first quarter of 2005 compared to 93.0% in the same period of 2004. Adjusted
for winter storm Erwin and late loss development on the 2004 hurricanes (8.1
percentage points) as well as the negative impact from the commutation of
retrocession contracts (7.2 percentage points), the adjusted non-life combined
ratio for the ongoing operations was 100.4%. Given the mix of Converium's
portfolio and the relatively large proportion of medium- to long-tail business,
as well as considering the Company's extraordinary expense load this combined
ratio indicates a continuing satisfactory performance of recent underwriting
years, particularly as the administration expense ratio is expected to come down
to a more sustainable level in light of Converium's cost reduction measures
launched in March 2005.
For the first quarter 2005, Converium's Standard Property & Casualty Reinsurance
and Life & Health Reinsurance segments reported a segment income of US$ 2.4
million and US$ 6.2 million, respectively. This compares with a segment income
of US$ 48.2 million and US$ 1.7 million for the same period of 2004. The
positive performance of Converium's Life & Health Reinsurance business is
reflective of the growth in premium income and the expansion of existing
reinsurance transactions in Continental Europe. The Specialty Lines segment
reported a segment loss of US$ 29.6 million compared with a segment income of
US$ 49.3 million for the same period of 2004.
The April 1 renewals have again proven the resilience of Converium's franchise.
The Company retained 75.4% of the renewable business. In Japan, almost 70% of
the business was successfully renewed. Converium maintained its very strong
position with the largest clients. In South Korea the Company retained about
three-quarters of the renewable business but withdrew from larger catastrophe
programmes only broker business, due to inadequate rates. The India renewals
were less successful with a retention ratio of 45% which is also reflective of
softening market conditions. Converium is also satisfied with the renewal of its
Medical Defence Union (MDU) book of business which grew by 9.5%. Considering
these results, Converium reiterates the expectation to generate gross premiums
written for the 2005 calendar year of in excess of US$ 2 billion.
The Company's net investment income continued to improve to US$ 82.2 million in
the first quarter of 2005, an increase of 13.2% as compared to the same period
of 2004. This increase largely resulted from growth in invested assets over
2004, as well as an allocation shift from equity securities to fixed income
securities in mid-2004. In the first quarter of 2005, net realized capital
losses amounted to US$ 0.7 million as compared to net realized capital gains of
US$ 9.2 million in the same period of 2004. The total investment income yield
for the first quarter of 2005 was 3.9% as compared to 4.1% in the first quarter
of 2004 which benefited from net realized capital gains.
Looking ahead, Converium will focus its efforts on the systematic implementation
of its six-point road map to recovery:
o Continue to operate as a stand-alone entity: The encouraging results of the
January and April treaty renewals clearly testify to the resilience and
viability of Converium's franchise.
o Right-size the organization: In order to remain competitive Converium is
currently adjusting its cost base to the reduced volume of business it has
today. The Company reiterates its commitment to target administration
expenses for its ongoing operations at a ratio of 6.5% of net premiums
written in 2006.
5
o Achieve a better financial strength rating: Converium's management is in
regular contact with the rating agencies. Restoring their confidence based
on a stable financial performance remains a key corporate objective.
o Implement future business strategies: Based on its earnings record outside
North America, Converium continues to feel very confident about its current
business model and will continue - with a clear geographical focus - to
write all major lines of business and offer value-adding services to its
clients.
o Successfully manage the run-off of Converium's North American entity: One
of Converium's corporate priorities is to reduce legacy exposure from the
US business in a way which meets the interests of shareholders. Converium
will continue to diligently pursue commutations, look into the option of
selling Converium Reinsurance (North America) Inc. as well as constantly
evaluate any other options for extracting maximum value for shareholders
from the US business.
o Enhance Converium's corporate culture: As well as restoring financial
strength and management credibility, Converium promotes a corporate culture
that appropriately balances the objectives of delegating authority to
employees with ensuring a maximum level of accountability.
Business development
This section comments on the development of Converium's business segments and
the Corporate Center. In the first quarter of 2005, Converium implemented a new
segment structure to reflect the placement of Converium Reinsurance (North
America) Inc. into orderly run-off. Going forward, Converium's business will be
organized around four operating segments: Standard Property & Casualty
Reinsurance, Specialty Lines and Life & Health Reinsurance, which are based
principally on ongoing global lines of business, as well as the Run-Off segment,
which primarily comprises the business from Converium Reinsurance (North
America) Inc., excluding the US originated Aviation business portfolio.
Standard Property & Casualty Reinsurance represented approximately 57.2% of
total net premiums written in the first quarter of 2005. During this period of
time, the segment reported a segment income of US$ 2.4 million as compared to a
segment income of US$ 48.2 million for the same period in 2004. The segment's
non-life combined ratio was 107.0% for the first quarter of 2005. The segment
result was primarily attributable to the following factors:
o Winter storm Erwin resulted in pre-tax net losses in the amount of US$ 32.5
million during the first quarter of 2005. This compares with the absence of
any major natural catastrophes in the first quarter of 2004.
o The hurricanes which occurred in 2004 resulted in late loss developments of
US$ 7.4 million for the segment.
The segment income was favorably impacted by positive development on prior
years' loss reserves of US$ 10.2 million. This positive reserve development
primarily consisted of US$ 7.5 million in Property (net of US$ 7.4 million for
the 2004 hurricanes).
In the first quarter of 2005, gross premiums written decreased by 34.9% to US$
412.5 million, net premiums written dropped by 32.8% to US$ 402.9 million and
net premiums earned decreased by 35.0% to US$ 242.0 million.
The reduction in net premiums written was driven by the ratings downgrades of
2004, which resulted in the cancellation of business and reduced shares in
current business. More specifically, developments by line of business included:
o Motor, which decreased by 53.7% or US$ 138.9 million to US$ 119.6 million
as a result of reduced writings in the United Kingdom and France due to
profitability considerations;
o General Third Party Liability, which declined by 45.3% or US$ 50.6 million
to US$ 61.0 million, resulting from the cancellation of business and
reduced shares in current business; and
6
o Personal Accident (assumed from non-life insurers), which decreased by
43.4% or US$ 9.6 million to US$ 12.5 million as a result of the
cancellation or non-renewal of business and reduced shares in current
business.
These decreases were partially offset by an increase in net premiums written
within the Property line of business, which grew by 3.9% or US$ 7.8 million to
US$ 209.8 million reflecting new business written and an increase in shares of
current business.
Specialty Lines represented approximately 22.0% of total net premiums written in
the first quarter of 2005. During this period of time, the Specialty Lines
segment reported a segment loss of US$ 29.6 million, as compared to a segment
income of US$ 49.3 million for the same period in 2004. The segment's non-life
combined ratio was 125.7% for the first quarter of 2005. The segment result
primarily reflects the following factors:
o As a result of its retrocessional risk management process, Converium
decided in the first quarter of 2005 to commute certain retrocessional
reinsurance contracts with nominal reinsurance recoverables in the amount
of US$ 100.1 million for a commutation settlement of US$ 60.1 million,
which generated a negative impact on the technical result of US$ 38.7
million. This impact reflects the long-tail nature of the expected future
claims payment patterns of the underlying business. As part of its risk
management process Converium regularly evaluates the quality of its
reinsurance assets taking into account all public domain information
including the current rating of its retrocessionaires. If there are genuine
concerns about retrocessionaires' future prospects and their ability to pay
future claims Converium considers commuting the retrocessionaires'
obligations in respect of future claims. In this type of transaction the
reinsurance recoverables which are included in claims reserves on
Converium's balance sheet and reflect the full nominal value of expected
future claims recoveries are reduced to zero. In exchange, Converium
receives commutation considerations, which reflect the time value of money
on the commuted reserves in question. Due to the value of the discount in
respect of future expected cash flows, Converium expects a negative
accounting impact on the technical result when such a commutation takes
place, but avoids future concerns about the recoverability of the Company's
reinsurance assets including potential bad debt provisions. Additionally,
Converium will economically benefit in future quarters from additional
investment income on cash received and/or reduced interest expenses related
to any funds held balance.
o The Specialty Lines segment recorded a net strengthening of prior years'
reserves of US$ 4.2 million, including late loss developments of US$ 3.5
million relating to the hurricanes which occurred in 2004.
In the first quarter 2005, gross premiums written decreased by 55.6% to US$
154.5 million, net premiums written declined by 51.9% to US$ 155.4 million and
net premiums earned increased by 3.7% to US$ 292.4 million.
Premium volume was impacted by the ratings downgrades in 2004, which resulted in
the cancellation of business and reduced shares in current business. More
specifically, net premiums written by line of business decreased as follows:
o Aviation & Space by 78.5% or US$ 75.9 million to US$ 20.8 million
o Credit & Surety by 48.7% or US$ 19.0 million to US$ 20.0 million
o Professional Liability and other Special Liability by 41.1% or US$ 42.7
million to US$ 61.1 million
o Engineering by 39.9% or US$ 17.0 million to US$ 25.6 million and
o Marine & Energy by 29.1% or US$ 10.2 million to US$ 24.9 million.
These decreases were partially offset by an increase in net premiums written in
the Agribusiness line of business by US$ 5.8 million to US$ 6.6 million.
7
Life & Health Reinsurance represented approximately 16.1% of total net premiums
written in the first quarter of 2005. In this period of time the Life & Health
Reinsurance segment reported a segment income of US$ 6.2 million as compared to
a segment income of US$ 1.7 million for the same period in 2004. The technical
result for the first quarter of 2005 was US$ 6.0 million compared to US$ 1.3
million for the same period in 2004. Technical result is defined as net premiums
earned minus losses, loss adjustment expenses and life benefits minus
underwriting acquisition costs plus technical interest.
The positive development of the segment's bottom-line was primarily attributable
to growth in premium volume and the expansion of existing reinsurance
transactions in Continental Europe, which was partially offset by a negative
development of US$ 1.5 million related to the tsunami that occurred in late
2004.
In the first quarter of 2005 gross premiums written decreased by 1.8% to US$
117.1 million, net premiums written grew by 2.3% to US$ 113.8 million and net
premiums earned rose by 19.8% to US$ 81.1 million.
Net premiums written growth in the Life & Health Reinsurance segment by line of
business included Life and Disability reinsurance (increased by 16.8% or US$
12.6 million to US$ 87.7 million), which grew due to the expansion of existing
reinsurance transactions as well as new business being written.
This increase was offset by a decrease of 27.7% or US$ 10.0 million in net
premiums written to US$ 26.1 million in the Accident & Health line of business
due to the cancellation of contracts as a result of profitability considerations
as well as the rating actions in 2004.
The newly established Run-Off segment, which represents all business originating
from Converium Reinsurance (North America) Inc. and Converium Insurance (North
America) Inc., excluding the US originated Aviation business portfolio of GAUM,
reported a segment loss of US$ 4.6 million. This result is largely attributable
to a net strengthening of prior years' loss reserves by US$ 16.4 million. The
reserve strengthening primarily occurred within Professional Liability and other
Special Liability and Workers' Compensation.
The Corporate Center carries certain administration expenses, such as costs of
the Board of Directors, the Global Executive Committee, and other corporate
functions. The Corporate Center costs decreased in the first quarter of 2005
primarily due to the reduced size of Converium's Global Executive Committee and
its dedicated functions.
* * * * * * *
8
The company has made it a policy not to provide any quarterly or annual earnings
guidance and it will not update any past outlook for full year earnings. It will
however continue to provide investors with perspectives on its value drivers,
its strategic initiatives and those factors critical to understanding its
business and operating environment.
Enquiries:
Esther Gerster Zuzana Drozd
Head of Public Relations Head of Investor Relations
esther.gerster@converium.com zuzana.drozd@converium.com
Phone: +41 (0) 1 639 90 22 Phone: +41 (0) 1 639 91 20
Fax: +41 (0) 1 639 70 22 Fax: +41 (0) 1 639 71 20
About Converium
Converium is an independent international multi-line reinsurer known for its
innovation, professionalism and service. Today Converium employs about 650
people in 20 offices around the globe and is organized into four business
segments: Standard Property & Casualty Reinsurance, Specialty Lines and Life &
Health Reinsurance, which are based principally on ongoing global lines of
business, as well as the Run-Off segment, which primarily comprises the business
from Converium Reinsurance (North America) Inc., excluding the US originated
Aviation business portfolio. Converium has a "BBB+" rating (outlook stable) from
Standard & Poor's and a "B++" rating (outlook stable) from A.M. Best Company.
Important Disclaimer
This document contains forward-looking statements as defined in the U.S. Private
Securities Litigation Reform Act of 1995. It contains forward-looking statements
and information relating to the Company's financial condition, results of
operations, business, strategy and plans, based on currently available
information. These statements are often, but not always, made through the use of
words or phrases such as ` seek to', `expects', `should continue', `believes',
`anticipates', `estimates' and `intends'. The specific forward-looking
statements cover, among other matters, the reinsurance market, the Company's
operating results, the rating environment and the prospect for improving results
and expense reductions. Such statements are inherently subject to certain risks
and uncertainties. Actual future results and trends could differ materially from
those set forth in such statements due to various factors. Such factors include
general economic conditions, including in particular economic conditions; the
frequency, severity and development of insured loss events arising out of
catastrophes, as well as man-made disasters; the ability to exclude and to
reinsure the risk of loss from terrorism; fluctuations in interest rates;
returns on and fluctuations in the value of fixed-income investments, equity
investments and properties; fluctuations in foreign currency exchange rates;
rating agency actions; changes in laws and regulations and general competitive
factors, the impact of the New York Attorney General and SEC investigation on
the insurance industry, and other risks and uncertainties, including those
detailed in the Company's filings with the U.S. Securities and Exchange
Commission and the SWX Swiss Exchange. The Company does not assume any
obligation to update any forward-looking statements, whether as a result of new
information, future events or otherwise.
www.converium.com
9
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Financial highlights: Income statement, Three months ended Year ended
return on equity March 31 Dec. 31
In US$ million, unless noted 2005 2004 2004
--------------------------------------------------------------------------------
Gross premiums written 717.5 1,383.6 3,840.9
- change (%) -48.1%
--------------------------------------------------------------------------------
Net premiums written 704.9 1,298.6 3,553.0
- change (%) -45.7%
--------------------------------------------------------------------------------
Net premiums earned 688.8 993.0 3,685.1
- change (%) -30.6%
--------------------------------------------------------------------------------
Ongoing non-life loss ratio(3) 87.4% 69.7% 78.7%
- change in percentage points +17.7pts
--------------------------------------------------------------------------------
Ongoing non-life underwriting expense 21.9% 20.5% 23.1%
ratio(4)
- change in percentage points +1.4pts
--------------------------------------------------------------------------------
Ongoing non-life administration expense 6.4% 2.8% 4.0%
ratio(5)
- change in percentage points +3.6pts
--------------------------------------------------------------------------------
Ongoing non-life combined ratio(6) 115.7% 93.0% 105.8%
- change in percentage points +22.7pts
--------------------------------------------------------------------------------
Life & Health technical result(7) 6.0 1.3 14.7
- change (%) n.m.
--------------------------------------------------------------------------------
Life & Health segment income 6.2 1.7
- change (%) n.m.
--------------------------------------------------------------------------------
Segment (loss) income of run-off operation -4.6 5.4
- change (%) n.m.
--------------------------------------------------------------------------------
Total investment results(8) 81.5 81.8 358.1
- change (%) -0.4%
--------------------------------------------------------------------------------
Total investment income yield(9) 3.9% 4.1% 4.4%
- change in percentage points -0.2pts
--------------------------------------------------------------------------------
Total investment return(10) 1.3% 7.3% 4.1%
- change (%) -6.0pts
--------------------------------------------------------------------------------
Pre-tax operating (loss) income(11) -47.8 77.9 -362.5
- change (%) n.m.
--------------------------------------------------------------------------------
Net (loss) income -61.8 65.7 -760.8
- change (%) n.m.
--------------------------------------------------------------------------------
(Loss) earnings per share (US$) -0.42 0.83 (rest.) -12.00
- change (%) n.m.
--------------------------------------------------------------------------------
Return on equity(12) -14.4% 12.6% -20.3%
- change in percentage points n.m.
--------------------------------------------------------------------------------
10
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Financial highlights: Balance sheet March 31 December 31
In US$ million, unless noted 2005 2004
--------------------------------------------------------------------------------
Total invested assets plus cash 8,175.0 8,469.3
- change (%) -3.5%
--------------------------------------------------------------------------------
Claims supporting capital(13) 1,972.0 2,111.1
- change (%) -6.6%
--------------------------------------------------------------------------------
Shareholders' equity 1,580.8 1,720.2
- change (%) -8.1%
--------------------------------------------------------------------------------
Book value per share (US$) 10.80 11.76
- change (%) -8.2%
--------------------------------------------------------------------------------
Book value per share (CHF) 12.87 13.37
- change (%) -3.7%
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial highlights: Investment results Three months ended Year ended
March 31 Dec. 31
in US$ million, unless noted 2005 2004 2004
--------------------------------------------------------------------------------
Investment income - Fixed maturities 53.9 46.2 201.3
--------------------------------------------------------------------------------
Investment income - Equity securities 1.2 2.1 11.5
--------------------------------------------------------------------------------
Investment income - Funds Withheld Asset 16.9 20.3 75.1
--------------------------------------------------------------------------------
Other investment income, net 10.2 4.0 23.7
--------------------------------------------------------------------------------
Net investment income 82.2 72.6 311.6
--------------------------------------------------------------------------------
Average annualized net investment income 3.9% 3.7% 3.8%
yield (pre-tax)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net realized capital (losses) gains -0.7 9.2 46.5
--------------------------------------------------------------------------------
Total investment results 81.5 81.8 358.1
--------------------------------------------------------------------------------
Average annualized total investment income 3.9% 4.1% 4.4%
yield (pre-tax)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Change in net unrealized gains (losses) -54.2 62.3 -25.1
(pre-tax)
--------------------------------------------------------------------------------
Total investment return (pre-tax) 27.3 144.1 333.0
--------------------------------------------------------------------------------
Average annualized total investment return 1.3% 7.3% 4.1%
(pre-tax)
--------------------------------------------------------------------------------
Average total invested assets (including cash 8,322.2 7,906.1 8,139.4
and cash equivalents)
--------------------------------------------------------------------------------
11
--------------------------------------------------------------------------------
Consolidated statements of income Three months ended Change
(Unaudited) March 31
In US$ million, except share information 2005 2004 (%)
--------------------------------------------------------------------------------
Revenues
--------------------------------------------------------------------------------
Gross premiums written 717.5 1,383.6 -48.1%
--------------------------------------------------------------------------------
Less ceded premiums written -12.6 -85.0 -85.2%
--------------------------------------------------------------------------------
Net premiums written 704.9 1,298.6 -45.7%
--------------------------------------------------------------------------------
Net change in unearned premiums -16.1 -305.6 -94.7%
--------------------------------------------------------------------------------
Net premiums earned 688.8 993.0 -30.6%
--------------------------------------------------------------------------------
Net investment income 82.2 72.6 +13.2%
--------------------------------------------------------------------------------
Net realized capital (losses) gains -0.7 9.2 n.m.
--------------------------------------------------------------------------------
Other loss -7.8 -0.1 n.m.
--------------------------------------------------------------------------------
Total revenues 762.5 1,074.7 -29.0%
--------------------------------------------------------------------------------
Benefits, losses and expenses
--------------------------------------------------------------------------------
Losses, loss adjustment expenses and life -585.8 -720.9 -18.7%
benefits
--------------------------------------------------------------------------------
Underwriting acquisition costs -160.4 -207.9 -22.8%
--------------------------------------------------------------------------------
Other operating and administration expenses -56.9 -51.0 +11.6%
--------------------------------------------------------------------------------
Interest expense -7.9 -7.8 +1.3%
--------------------------------------------------------------------------------
Amortization of intangible assets -7.0 -0.7 n.m.
--------------------------------------------------------------------------------
Restructuring costs -10.1 - n.m.
--------------------------------------------------------------------------------
Total benefits, losses and expenses -828.1 -988.3 -16.2%
--------------------------------------------------------------------------------
(Loss) income before taxes -65.6 86.4 n.m.
--------------------------------------------------------------------------------
Income tax benefit (expense) 3.8 -20.7 n.m.
--------------------------------------------------------------------------------
Net (loss) income -61.8 65.7 n.m.
--------------------------------------------------------------------------------
Basic (loss) earnings per share (US$) -0.42 0.83 (rest.) n.m.
--------------------------------------------------------------------------------
Diluted (loss) earnings per share (US$) -0.42 0.82 (rest.) n.m.
--------------------------------------------------------------------------------
12
--------------------------------------------------------------------------------
Consolidated balance sheets March 31 Dec. 31
2005 2004
In US$ million (unaudited)
--------------------------------------------------------------------------------
Invested assets
--------------------------------------------------------------------------------
Held-to-maturity securities:
Fixed maturities 838.8 850.4
--------------------------------------------------------------------------------
Available-for-sale securities:
Fixed maturities 4,906.8 4,834.8
Equity securities 434.0 408.5
--------------------------------------------------------------------------------
Other investments 232.3 272.3
--------------------------------------------------------------------------------
Short-term investments 154.2 133.3
--------------------------------------------------------------------------------
Total investments 6,566.1 6,499.3
--------------------------------------------------------------------------------
Funds Withheld Asset 1,239.3 1,305.1
--------------------------------------------------------------------------------
Total invested assets 7,805.4 7,804.4
--------------------------------------------------------------------------------
Other assets
--------------------------------------------------------------------------------
Cash and cash equivalents 369.6 664.9
--------------------------------------------------------------------------------
Premiums receivables:
Current 208.6 318.5
Accrued 1,693.1 1,859.5
--------------------------------------------------------------------------------
Reinsurance assets:
Underwriting reserves 1,147.1 1,337.8
Insurance balances receivable, net 235.1 233.5
--------------------------------------------------------------------------------
Funds held by reinsureds 1,751.6 1,721.3
--------------------------------------------------------------------------------
Deferred policy acquisition costs 440.0 484.7
--------------------------------------------------------------------------------
Deferred income taxes 73.8 78.3
--------------------------------------------------------------------------------
Other assets 470.5 439.7
--------------------------------------------------------------------------------
Total assets 14,194.8 14,942.6
--------------------------------------------------------------------------------
Losses and loss adjustment expenses, gross 8,737.2 8,915.6
--------------------------------------------------------------------------------
Unearned premiums, gross 1,299.4 1,312.3
--------------------------------------------------------------------------------
Future life benefits, gross 406.6 407.1
--------------------------------------------------------------------------------
Other reinsurance liabilities 1,154.0 1,375.3
--------------------------------------------------------------------------------
Funds held under reinsurance contracts 243.6 379.3
--------------------------------------------------------------------------------
Deferred income taxes 142.1 157.2
--------------------------------------------------------------------------------
Accrued expenses and other liabilities 239.9 284.7
--------------------------------------------------------------------------------
Debt 391.2 390.9
--------------------------------------------------------------------------------
Total liabilities 12,614.0 13,222.4
--------------------------------------------------------------------------------
Common stock 554.9 554.9
--------------------------------------------------------------------------------
Additional paid-in capital 1,424.2 1,430.6
--------------------------------------------------------------------------------
Treasury stock -2.8 -7.7
--------------------------------------------------------------------------------
Unearned stock compensation -6.0 -7.5
--------------------------------------------------------------------------------
Accumulated other comprehensive income:
Net unrealized gains on investments, net of taxes 59.0 116.7
--------------------------------------------------------------------------------
Cumulative translation adjustments 167.5 187.4
--------------------------------------------------------------------------------
Total accumulated other comprehensive income 226.5 304.1
--------------------------------------------------------------------------------
Retained deficit -616.0 -554.2
--------------------------------------------------------------------------------
Total equity 1,580.8 1,720.2
--------------------------------------------------------------------------------
Total liabilities and equity 14,194.8 14,942.6
--------------------------------------------------------------------------------
13
--------------------------------------------------------------------------------
Consolidated statements of cash flows March 31
(Unaudited)
In US$ million 2005 2004
--------------------------------------------------------------------------------
Net (loss) income -61.8 65.7
--------------------------------------------------------------------------------
Net realized capital (losses) gains on investments 0.7 -9.2
Amortization of premium/discount 13.8 14.1
Depreciation and amortization 14.3 5.2
--------------------------------------------------------------------------------
Total adjustments 28.8 10.1
--------------------------------------------------------------------------------
Deferred policy acquisition costs 32.0 -40.5
Reinsurance assets 181.4 12.0
Funds held by reinsureds -72.2 -333.0
Funds Withheld Asset 42.6 77.7
Premiums receivable 279.4 -314.7
Unearned premiums, gross 2.7 278.4
Losses and loss adjustment expenses, gross -66.7 307.5
Future life benefits, gross -4.9 12.9
Funds held under reinsurance contracts -113.7 -1.3
Other reinsurance liabilities -220.1 165.4
Income taxes, net 13.6 21.0
Net change in all other operational assets and liabilities -28.0 -32.6
--------------------------------------------------------------------------------
Total changes in operational assets and liabilities 46.1 152.8
--------------------------------------------------------------------------------
Cash provided by operating activities 13.1 228.6
--------------------------------------------------------------------------------
Purchases of fixed maturities held-to-maturity - -39.6
Proceeds from sales and maturities of fixed maturities 516.8 736.1
available-for-sale
Purchases of fixed maturities available-for-sale -783.5 -838.3
--------------------------------------------------------------------------------
Cash flows from investing activities (fixed maturities) -266.7 -141.8
--------------------------------------------------------------------------------
Proceeds from sales of equity securities -2.0 116.4
Purchases of equity securities -42.2 -156.5
--------------------------------------------------------------------------------
Cash flows from investing activities (equity securities) -44.2 -40.1
--------------------------------------------------------------------------------
Net increase in short-term investments -22.6 -10.5
Proceeds from sales of other assets 29.2 -
Purchases of other assets 0.8 -9.3
Purchase of real estate held for investments -5.2 -
--------------------------------------------------------------------------------
Cash flows from investing activities (other) 2.2 -19.8
--------------------------------------------------------------------------------
Net cash used in investing activities -308.7 -201.7
--------------------------------------------------------------------------------
Net purchases of common shares - -2.5
--------------------------------------------------------------------------------
Net cash used in financing activities - -2.5
--------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents 0.3 9.3
--------------------------------------------------------------------------------
Change in cash and cash equivalents -295.3 33.7
--------------------------------------------------------------------------------
Cash and cash equivalents as of January 1 664.9 280.8
--------------------------------------------------------------------------------
Cash and cash equivalents as of March 31 369.6 314.5
--------------------------------------------------------------------------------
14
--------------------------------------------------------------------------------
Segments Three months ended Change
(Unaudited) March 31
In US$ million 2005 2004 (%)
--------------------------------------------------------------------------------
Standard Property & Casualty Reinsurance
--------------------------------------------------------------------------------
Gross premiums written 412.5 633.9 -34.9%
--------------------------------------------------------------------------------
Net premiums written 402.9 599.4 -32.8%
--------------------------------------------------------------------------------
Net premiums earned 242.0 372.0 -35.0%
--------------------------------------------------------------------------------
Ongoing non-life loss ratio(14) 80.3% 69.6% +10.7pts
--------------------------------------------------------------------------------
Ongoing non-life underwriting expense ratio(15) 22.0% 19.7% +2.3pts
--------------------------------------------------------------------------------
Ongoing non-life administration expense ratio(16) 4.7% 3.0% +1.7pts
--------------------------------------------------------------------------------
Ongoing non-life combined ratio(17) 107.0% 92.3% +14.7pts
--------------------------------------------------------------------------------
Total investment results(18) 27.0 26.4 +2.3%
--------------------------------------------------------------------------------
Segment income 2.4 48.2 n.m.
--------------------------------------------------------------------------------
Retention ratio(19) 97.7% 94.6% +3.1pts
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Specialty Lines
--------------------------------------------------------------------------------
Gross premiums written 154.5 347.8 -55.6%
--------------------------------------------------------------------------------
Net premiums written 155.4 323.4 -51.9%
--------------------------------------------------------------------------------
Net premiums earned 292.4 282.0 +3.7%
--------------------------------------------------------------------------------
Ongoing non-life loss ratio(14) 93.2% 69.9% +23.3pts
--------------------------------------------------------------------------------
Ongoing non-life underwriting expense ratio(15) 21.8% 21.6% +0.2pts
--------------------------------------------------------------------------------
Ongoing non-life administration expense ratio(16) 10.7% 2.5% +8.2pts
--------------------------------------------------------------------------------
Ongoing non-life combined ratio(17) 125.7% 94.0% +31.7pts
--------------------------------------------------------------------------------
Total investment results(18) 31.0 33.3 -6.9%
--------------------------------------------------------------------------------
Segment (loss) income -29.6 49.3 n.m.
--------------------------------------------------------------------------------
Retention ratio(19) n.m. 93.0 n.m.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Life & Health Reinsurance
--------------------------------------------------------------------------------
Gross premiums written 117.1 119.2 -1.8%
--------------------------------------------------------------------------------
Net premiums written 113.8 111.2 +2.3%
--------------------------------------------------------------------------------
Net premiums earned 81.1 67.7 +19.8%
--------------------------------------------------------------------------------
Underwriting expense ratio Life & Health(20) 33.4% 17.4% +16.0pts
--------------------------------------------------------------------------------
Administration expense ratio Life & Health(21) 3.5% 2.7% +0.8pts
--------------------------------------------------------------------------------
Total investment results(18) 6.0 4.7 +27.7%
--------------------------------------------------------------------------------
Segment income 6.2 1.7 n.m.
--------------------------------------------------------------------------------
Retention ratio(19) 97.2% 93.3% +3.9pts
--------------------------------------------------------------------------------
15
--------------------------------------------------------------------------------
Segments Three months ended Change
(Unaudited) March 31
In US$ million 2005 2004 (%)
--------------------------------------------------------------------------------
Run-Off
--------------------------------------------------------------------------------
Gross premiums written 33.4 282.7 -88.2%
--------------------------------------------------------------------------------
Net premiums written 32.8 264.6 -87.6%
--------------------------------------------------------------------------------
Net premiums earned 73.3 271.3 -73.0%
--------------------------------------------------------------------------------
Total investment results(18) 17.5 17.4 +0.6%
--------------------------------------------------------------------------------
Segment (loss) income -4.6 5.4 n.m.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Corporate Center
--------------------------------------------------------------------------------
Operating and administration expenses -7.2 -9.6 -25.0%
--------------------------------------------------------------------------------
16
(1) Pre-tax operating (loss) income is defined as pre-tax (loss) income
excluding pre-tax net realized capital gains or losses, amortization of
intangible assets and restructuring costs.
(2) Segment (loss) income of ongoing operations is defined as net premiums
earned plus total investment result minus losses and loss adjustment
expenses minus underwriting and acquisition costs minus operating and
administration expenses.
(3) Ongoing non-life loss ratio is defined as losses and loss adjustment
expenses divided by net premiums earned.
(4) Ongoing non-life underwriting expense ratio is defined as underwriting
acquisition costs divided by net premiums earned.
(5) Ongoing non-life administration expense ratio is defined as other operating
and administration expenses divided by net premiums written.
(6) Ongoing non-life combined ratio is defined as ongoing non-life loss ratio
(to premiums earned) plus ongoing non-life underwriting expense ratio (to
premiums earned) plus ongoing non-life administration expense ratio (to
premiums written).
(7) Life & Health technical result is defined as net premiums earned minus
losses, loss adjustment expenses and life benefits minus underwriting
acquisition costs plus technical interests.
(8) Total investment results are defined as net investment income plus net
realized capital gains (losses).
(9) Total investment income yield is defined as net investment income plus net
realized capital gains (losses) divided by average total invested assets
(including cash and cash equivalents), pre-tax and annualized.
(10) Total investment return is defined as net investment income plus net
realized capital gains (losses) plus change in net unrealized capital gains
(losses) divided by average total invested assets (including cash and cash
equivalents), pre-tax and annualized.
(11) Pre-tax operating (loss) income is defined as pre-tax (loss) income
excluding pre-tax net realized capital gains (losses), amortization of
intangible assets and restructuring costs.
(12) Return on equity is defined as net income or loss (after-tax) divided by
shareholders' equity at the beginning of the period, annualized.
(13) Claims supporting capital is defined as total equity plus debt.
(14) Ongoing non-life loss ratio is defined as losses and loss adjustment
expenses divided by net premiums earned.
(15) Ongoing non-life underwriting expense ratio is defined as underwriting
acquisition costs divided by net premiums earned.
(16) Ongoing non-life administration expense ratio is defined as other operating
and administration expenses divided by net premiums written.
(17) Ongoing non-life combined ratio is defined as ongoing non-life loss ratio
(to premiums earned) plus ongoing non-life underwriting expense ratio (to
premiums earned) plus ongoing non-life administration expense ratio (to
premiums written).
(18) Total investment results are defined as net investment income plus net
realized capital gains (losses).
(19) Retention ratio is defined as net premiums written divided by gross
premiums written.
(20) Life & Health underwriting expense ratio is defined as underwriting
expenses divided by net premiums earned.
(21) Life & Health administration expense ratio is defined as other operating
and administration expenses divided by net premiums written.
17