ZUG, Switzerland, Aug. 8, 2006 (PRIMEZONE) -- In the second quarter of 2006 Converium produced net income of US$ 62.5 million. The quarterly highlights included:
-- Shareholders' equity of US$ 1,796.1 million as of June 30, 2006,
up US$ 142.7 million or 8.6% compared with December 31, 2005;
-- Return on shareholders' equity of 14.6%, up from 11.4% in the
second quarter of 2005;
-- A solid underwriting performance, with a non-life combined ratio
of 99.8% and segment income of ongoing operations of US$ 69.0
million;
-- Favorable prior accident years' developments, for the fifth
consecutive quarter, resulting in a net positive impact on the
technical result of US$ 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 US$ 185.6
million to US$ 1,012.2 million, and a benefit to the technical
result from commutations of US$ 30.7 million;
-- Net investment income of US$ 84.7 million or an average annualized
net investment income yield of 4.7%;
-- Strong July 1 non-life treaty renewals, with renewed business
growing by 41.3%.
Inga Beale, Chief Executive Officer, 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."
Inga Beale added: "Converium continues to regain strength and stability, as recognized by Standard & Poor's in their recent assignment of a positive outlook on our ratings. 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."
Key metrics (US$, unless noted)
Three months ended Six months ended
June 30, 2006 June 30, 2006
Gross premiums written 474.7 million 1,130.0 million
Income before taxes 71.4 million 139.9 million
Pre-tax operating income(A) 84.0 million 156.7 million
Ongoing total segment income(B) 69.0 million 140.1 million
Net income 62.5 million 124.1 million
Ongoing non-life combined ratio(C) 99.8% 97.0%
Average annualized net investment
income yield (pre-tax) 4.7% 4.4%
Shareholders' equity 1,796.1 million
Return on shareholders' equity
(annualized) 14.6% 15.0%
Basic earnings per share 0.43 0.85
Diluted earnings per share 0.42 0.84
Weighted average shares outstanding,
basic (number of shares) 146.3 million
Weighted average shares outstanding,
diluted (number of shares) 148.4 million
Overview of second quarter and first half of 2006 financial performance
Strong set of significantly improved financial results
For the second quarter of 2006, Converium reported pre-tax operating income of US$ 84.0 million and net income of US$ 62.5 million, compared with US$ 57.1 million and US$ 46.9 million, respectively, for the same period of 2005. For the first half of 2006, this translates into pre-tax operating income of US$ 156.7 million, compared with the previous period's US$ 75.9 million. Net income increased to US$ 124.1 million, from US$ 41.4 million in the first half of 2005.
The table below shows the reconciliation of pre-tax operating income to income before taxes for the three and six months ended June 30, 2006 and 2005:
Three months ended Six months ended
June 30 June 30
2006 2005 2006 2005
Pre-tax operating income 84.0 57.1 156.7 75.9
Net realized capital
(losses) gains -12.6 -1.0 -17.0 -1.7
Amortization of intangible
assets -- -6.8 -- -13.8
Restructuring costs -- -3.5 0.2 -13.6
Income before taxes 71.4 45.8 139.9 46.8
Net income 62.5 46.9 124.1 41.4
Stable business volume despite continuing ratings disadvantage
Gross premiums written in the second quarter of 2006 came in at US$ 474.7 million, plus 25.5% compared with the second quarter of 2005. Net premiums written increased by 28.4% to US$ 414.0 million. Net premiums earned fell by 21.3% to US$ 475.7 million, compared with the same period of 2005, reflecting the completion of premium earnings from prior underwriting years.
For the first half of 2006, gross premiums written, net premiums written and net premiums earned were US$ 1,130.0 million, US$ 1,066.2 million and US$ 911.0 million, respectively, decreasing by 0.6%, 0.2% and 31.8%, respectively, compared with the first half of 2005. Gross and net premiums written for the first half of 2006 remained largely flat, demonstrating the resilience of Converium's franchise despite the continuing disadvantage of the Company's financial strength ratings.
Solid underwriting performance of ongoing business segments
The second quarter's ongoing non-life combined ratio was 99.8%, including an administration expense ratio of 6.8%, compared with 102.8% and 8.9%, respectively, for the same period of 2005. The second quarter of 2006 was favorably impacted by a positive net impact of prior accident years on the technical result of US$ 19.4 million, partially offset by some minor catastrophic losses totaling US$ 10.5 million as well as higher than expected loss activity in the Property line of business of US$ 8.0 million. Converium's underlying underwriting performance remained solid.
For the first half of 2006, Converium recorded an ongoing non-life combined ratio of 97.0%, including an administration expense ratio of 4.6%, compared with 103.8% and 6.9%, respectively, for the same period of 2005. The improved underwriting performance in 2006 reflects the absence of any major catastrophic events as well as a positive net impact of prior accident years on the technical result of US$ 31.7 million.
Favorable prior accident years' developments
In the second quarter of 2006, Converium recorded a net positive impact of prior accident years on the technical result of US$ 19.4 million, with the Company's ongoing operations accounting for US$ 28.9 million, partially offset by a negative development in the Run-Off segment. In the same period of 2005, the overall net positive impact of prior accident years on the technical result was US$ 3.9 million.
For the first half of 2006, an overall net positive impact of US$ 31.7 million was recorded, with the ongoing operations accounting for US$ 42.5 million, partially offset by a net negative impact in the Run-Off segment. In the same period of 2005, there was a net negative impact of prior accident years on the technical result of US$ 5.8 million.
Successful progression of North American run-off and commutations
Converium's North American run-off and commutation efforts continue to progress very satisfactorily. The reduction of North American liabilities continues to be ahead of plan. In the second quarter of 2006, the Run-Off segment's net reserves were reduced by US$ 185.6 million to US$ 1,012.2 million. The commutations of the Run-Off segment's net reserves of US$ 144.1 million resulted in a benefit to Converium's technical result of US$ 30.7 million. For the first half of 2006, this translates into an overall reduction of the Run-Off segment's net reserves by US$ 297.5 million. Total commutations were US$ 189.8 million, resulting in a benefit to the technical result of US$ 43.1 million.
Operating and administration expenses under control
In the second quarter of 2006, total administration expenses were US$ 47.9 million, a reduction of 5.0% compared with the same period of 2005. The progress in reducing expenses was slowed by increasing audit fees in the context of Converium's preparation for Sarbanes-Oxley compliance as well as late payments relating to the restatement of prior year accounts. For the first half of 2006, total administration expenses declined by 22.1% to US$ 83.6 million, compared with the same period of 2005. The reduction reflects the effects of the cost management measures taken in 2005 as well as the non-recurrence of the expenses associated with staff retention plans in 2005.
Satisfactory investment result
In the second quarter of 2006, Converium reported net investment income of US$ 84.7 million and an average annualized net investment income yield of 4.7%, which compares with US$ 87.8 million and 4.4%, respectively, for the same period of 2005. The decline in net investment income is a result of Converium's average invested asset base declining by US$ 896.5 million compared with the second quarter of 2005. The increase in the annualized net investment income yield is attributable to higher yields on bonds and short-term investments.
Taking into account the net realized capital losses, primarily from fixed-income securities, the total investment result came in at US$ 72.1 million which compares with US$ 86.8 million for the same period of 2005. Net realized capital losses resulted primarily from the sale of fixed-income securities to fund commutation payments. The average annualized total investment income yield came in at 4.0%, compared with 4.3% in the same period of 2005.
In the second quarter of 2006, Converium recorded a reduction in net unrealized capital gains and losses (pre-tax) of US$ 31.7 million. This development is largely due to increasing yields on fixed-income securities.
Strong July 1 renewals
Converium recorded a very successful July 1 renewal of non-life treaties, achieving an increase of 41.3% to US$ 109.6 million, based on the business which was up for renewal. The July renewals represent approximately 5% of Converium's total estimated non-life premium, and primarily included business written in Latin America and the Caribbean, growing by 28.0%, the Middle-East, increasing by 26.5%, and North America, expanding by 92.0%. The book of US Property business up for renewal grew to US$ 38.9 million on the back of very attractive market conditions. Converium's exposure to a one-in-250-years event remains unchanged, reflecting an improved geographical diversification in the US. The Company's US property business is selectively written out of Zurich, and represents around 4% of Converium's total estimated non-life premium income in 2006. Consistent with its underwriting strategy, the Company did not renew any US Casualty business.
Short- to medium-term outlook
Financial guidance essentially unchanged
Converium reiterates its full-year financial guidance given in March 2006, except for expected Corporate Center costs and run-off liabilities:
-- Gross premiums written for 2006 are projected to come in at US$ 1.8 -
1.9 billion.
-- The priced combined ratio for the ongoing non-life operations is
anticipated at around 102.5%, including an administration expense
ratio of 5.5%, expected losses from natural catastrophes of about US$
80 million, but excluding expected Corporate Center costs of
approximately US$ 45 - 50 million, up from the Company's previous
guidance of US$ 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
US$ 375 million.
-- The corporate tax rate is expected to range between 7 - 12%.
-- Average invested assets including cash and cash equivalents should be
in the magnitude of approximately US$ 7 billion.
Seeking finality on Converium Reinsurance (North America) Inc.
Converium continues to explore a sale of CRNA with high priority. The Company reaffirms that any sale of CRNA must achieve medium- to long-term shareholder value.
Execution of clearly defined medium-term business strategy
Converium's new Board of Directors has affirmed the Company's medium-term business strategy, based on its current, proven business model. Converium aspires to develop into a leading mid-sized multi-line reinsurer with a distinct geographic emphasis on Europe, Asia Pacific and the Middle East, and with a focus on global specialty lines.
In order to achieve this medium-term objective, the Company:
-- pursues a strategy of profitable organic growth, with investments in
specialty lines;
-- maintains and develops multiple distribution channels, including
joint ventures;
-- broadens its client base;
-- expands its knowledge base;
-- enhances its risk management and control culture;
-- advances cost and capital efficiency; and
-- aims at achieving a more balanced portfolio split between proportional
and non-proportional business.
Converium believes that, based on this strategy, it can profitably grow its business by regaining shares with existing clients and establishing new client relationships.
Business development per segment
Standard Property & Casualty Reinsurance reported segment income of US$ 44.7 million for the second quarter and US$ 88.8 million for the first half of 2006, compared with US$ 35.4 million and US$ 49.7 million, respectively, for the same periods of 2005. The segment's combined ratio improved in both the second quarter and first half of 2006 to 92.2% and 87.5%, respectively, compared with 103.8% and 101.4% in the same periods of 2005.
The segment results in the second quarter and first half of 2006 reflect a solid underwriting performance, a net positive impact of prior accident years on the technical result, the absence of any major catastrophic events and a reduced administration expense ratio resulting from the impact of cost management measures taken in 2005. The second quarter results were partially offset by some minor catastrophic losses totaling US$ 10.5 million as well as higher than expected loss activity in the Property line of business of US$ 8.0 million.
For the second quarter of 2006, the segment recorded a net positive impact of prior accident years on the technical result of US$ 26.4 million, resulting from a net positive development of prior accident years' loss reserves of US$ 44.9 million, offset by the net effect of reductions of premiums and other expenses of US$ 18.5 million. The net positive development was partially attributable to an update to case reserves across all lines of business. Overall, the net positive impact on the technical result was most pronounced in the Property and General Third Party Liability lines of business, with benefitted of US$ 13.4 million and US$ 7.8 million, respectively.
For the first half of 2006, the Standard Property & Casualty Reinsurance segment experienced a net positive impact of prior accident years on the technical result in the amount of US$ 36.6 million. The General Third Party Liability and Property lines of business accounted for the biggest positive effects, with US$ 24.7 million and US$ 18.1 million, re spectively.
In the second quarter of 2006, gross and net premiums written increased by 117.9% and 89.3% to US$ 218.1 million and US$ 167.5 million, respectively. Net premiums earned decreased by 6.4% to US$ 209.8 million, compared with the same period of 2005. The sharp increases in gross and net premiums written are primarily a result of the low premiums in the second quarter of 2005 due to the adjustment of premium estimates and related corrections of accrued premiums in the Liability line of business. The decrease of net premiums earned reflects the impact of the ratings downgrade in 2004 with significantly lower earned premiums from prior underwriting years.
In the first half of 2006, gross premiums written increased by 4.0% to US$ 558.9 million, net premiums written decreased by 1.6% to US$ 513.2 million and net premiums earned declined by 27.3% to US$ 361.9 million, compared with the same period of 2005.
In the first half of 2006, the reduction in net premiums written by line of business included:
-- Motor, which decreased by 38.7% to US$ 101.9 million, reflecting this
year's closing of the 2003 Lloyd's underwriting year;
-- Property, which declined by 4.0% to US$ 258.7 million.
These decreases were largely offset by an increase in the General Third Party Liability line of business, which increased 101.1% to US$ 145.3 million, reflecting additional Lloyd's business.
Specialty Lines reported segment income of US$ 15.4 million for the second quarter 2006 and US$ 35.3 million for the first half of 2006, compared with US$ 37.0 million and US$ 48.4 million for the same periods of 2005, respectively. The segment's combined ratio in the second quarter was 108.6%, compared with 102.3% in the same period of 2005. For the first half of 2006, the segment's combined ratio improved slightly from 106.9% to 106.3%.
For the second quarter of 2006, the Specialty Lines segment recorded a net positive impact of prior accident years on the technical result of US$ 2.5 million, resulting from a net positive development of prior accident years' loss reserves of US$ 15.8 million, offset by the net effect of reductions of premiums and other expenses of US$ 13.3 million. The net positive development was partially attributable to an update to case reserves across all lines of business. Overall, the net positive impact of prior accident years on the technical result was most pronounced in the Aviation & Space line of business, recording a positive net impact of US$ 10.2 million and the Professional Liability and other Special Liability line of business with a negative net impact of US$ 17.5 million.
For the first half of 2006, the Specialty Lines segment experienced a net positive impact of prior accident years on the technical result in the amount of US$ 5.9 million. The Aviation & Space and Professional Liability & other Special Liability lines of business accounted for the biggest effects, with a positive US$ 16.2 million and a negative US$ 21.5 million, respectively.
In the second quarter of 2006, gross and net premiums written decreased by 14.0% and 0.3% to US$ 183.3 million and US$ 176.2 million, respectively. Net premiums earned fell by 34.1% to US$ 180.9 million, compared with the same period of 2005. The decrease of net premiums earned reflects the impact of the ratings downgrade in 2004 with significantly lower earned premiums from prior underwriting years.
In the first half of 2006, gross premiums written remained almost flat at US$ 383.0 million, net premiums written increased by 7.6% to US$ 370.1 million and net premiums earned declined by 35.7% to US$ 372.5 million, compared with the same period of 2005. In the first half of 2006, the increase in net premiums written was driven by the Aviation & Space and Professional Liability & other Special Liability lines of business, which grew by 6.3% to US$ 138.0 million and 76.1% to US$ 133.7 million, respectively. These increases were offset by the following lines of business:
-- Agribusiness, which decreased by 26.4% to US$ 15.6 million; -- Credit & Surety, which declined by 61.6% to US$ 11.9 million; -- Engineering, which fell by 29.6% to US$ 31.8 million; and -- Marine & Energy, which decreased by 21.9% to UDS 31.2 million.
Life & Health Reinsurance reported segment income of US$ 8.9 million for the second quarter and US$ 16.0 million for the first half of 2006, compared with US$ 0.1 million and US$ 6.1 million for the same periods of 2005, respectively. The technical result(D) was US$ 7.6 million for the second quarter of 2006 and US$ 13.8 million for the first half of 2006, compared with US$ 1.4 million and US$ 8.1 million for the same periods in 2005, respectively. The segment's strong performance was primarily attributable to new, and the expansion of existing reinsurance transactions, especially within Continental Europe, as well as updated actuarial models based on new cedent information within Converium's German and Dutch books of business.
In the second quarter of 2006, compared with the same period of the previous year, gross premiums written, net premiums written and net premiums earned increased by 11.5%, 13.3% and 5.0% to US$ 66.1 million, US$ 63.1 million and US$ 77.8 million, respectively. These increases were primarily attributable to Converium's German book of business.
For the first half of 2006, gross premiums written and net premiums written in the Life & Health Reinsurance segment fell slightly by 2.2% and 1.2% to US$ 172.6 million and US$ 167.4 million, respectively. Net premiums earned, however, grew by 1.9% to US$ 158.2 million. The stagnant premium development mainly reflects Converium's continuing ratings disadvantage.
Run-Off reported segment income of US$ 19.9 million for the second quarter and US$ 37.6 million for the first half of 2006, compared with a segment loss of US$ 5.5 million and segment income of US$ 10.5 million for the same periods of 2005. The significantly improved performance of the segment primarily reflects the favorable impact of commutations on the technical result.
In the second quarter of 2006, net reserves in the Run-Off segment decreased by US$ 185.6 million to US$ 1,012.2 million. For the first half of 2006, this translates into a reduction of net reserves of US$ 297.5 million. In the second quarter and the first half of 2006, commutations contributed US$ 144.1 million and US$ 189.8 million, respectively, to the reduction of net reserves in the segment and generated a benefit on the technical result of US$ 30.7 million and US$ 43.1 million, respectively. From a statutory view, net reserves declined by US$ 165.0 million to US$ 858.5 million in the second quarter of 2006, which resulted in a reduction of US$ 258.5 million in the first half of 2006.
In the second quarter of 2006, the Run-Off segment recorded a net adverse impact of prior accident years on the technical result of US$ 9.6 million, resulting from net adverse development of prior accident years' loss reserves of US$ 4.2 million and the net negative effect of reductions of related premiums and underwriting acquisition costs of US$ 5.4 million. The net adverse development of prior years' loss reserves in the amount of US$ 4.2 million primarily related to the Professional Liability and other Special Liability line of business in the amount of US$ 22.2 million. Partially offsetting the adverse development was a net favorable development of prior years' loss reserves of US$ 10.0 million related to the Motor line of business.
For the first half of 2006, the Run-Off segment experienced a net adverse impact of prior accident years on the technical result in the amount of US$ 10.8 million, due to net adverse development of prior years' loss reserves of US$ 6.3 million and the net effect of reductions in premiums and other expenses of US$ 4.5 million. The net adverse development of prior years' loss reserves amounted to US$ 6.3 million, primarily due to the adverse development of US$ 22.9 million in the Professional Liability and other Special Liability line of business. Partially offsetting this development was a net favorable development of US$ 10.8 million related to the Motor line of business.
The Corporate Center carries certain administration expenses such as costs of the Board of Directors, the Global Executive Committee and other corporate functions as well as other expenses not allocated to the operating segments. The Corporate Center reported costs of US$ 14.1 million for the second quarter and US$ 24.7 million for the first half of 2006, compared with US$ 12.0 million and US$ 19.2 million for the same periods of 2005, respectively. The increase in the first half of 2006 as compared with the same period of 2005 reflects higher audit fees in the context of Converium's preparation for Sarbanes-Oxley compliance as well as late fees related to the restatement of prior year financial accounts.
Converium has made it a policy not to provide any quarterly or annual earnings guidance and it will not update any past outlooks for full-year earnings. It will, however, continue to provide investors with perspectives on its value drivers, certain financial guidance for the full year, its strategic initiatives and those factors critical to understanding its business and operating environment.
About Converium
Converium is an independent international multi-line reinsurer known for its innovation, professionalism and service. Today Converium employs about 600 people in 18 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+" financial strength rating (outlook positive) from Standard & Poor's and a "B++" financial strength 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 Company's internal review and related restatement, the reinsurance market, the Company's operating results, certain financial guidance, e.g. related to the tax rate of the Company, the reduction of North American net reserves, the acquisition costs ratio and the costs of the Corporate Center, 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 the impact of our ratings downgrade or a further lowering or loss of one of our financial strength ratings; the impact of the restatement on our ratings and client relationships; uncertainties of assumptions used in our reserving process; risk associated with implementing our business strategies and our capital improvement measures and the run-off of our North American business; cyclicality of the reinsurance industry; the occurrence of natural and man-made catastrophic events with a frequency or severity exceeding our estimates; acts of terrorism and acts of war; changes in economic conditions, including interest and currency rate conditions that could affect our investment portfolio; actions of competitors, including industry consolidation and development of competing financial products; a decrease in the level of demand for our reinsurance or increased competition in our industries or markets; a loss of our key employees or executive officers without suitable replacements being recruited within a suitable period of time; our ability to address material weaknesses we have identified in our internal control environment; political risks in the countries in which we operate or in which we reinsure risks; the passage of additional legislation or the promulgation of new regulation in a jurisdiction in which we or our clients operate or where our subsidiaries are organized; the effect on us and the insurance industry as a result of the investigations being carried out by the US Securities and Exchange Commission, New York's Attorney General and other governmental authorities; changes in our investment results due to the changed composition of our invested assets or changes in our investment policy; failure of our retrocessional reinsurers to honor their obligations or changes in the credit worthiness of our reinsurers; our failure to prevail in any current or future arbitration or litigation; and extraordinary events affecting our clients, such as bankruptcies and liquidations, 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
Financial highlights: Three months ended Six months ended Year ended
Income statement June 30, June 30, Dec. 31,
(Unaudited)
In US$ million, unless 2005
noted 2006 2005 2006 2005 (audited)
Gross premiums written 474.7 378.1 1,130.0 1,136.3 994.3
- change (%) +25.5% -0.6%
Net premiums written 414.0 322.4 1,066.2 1,068.8 815.7
- change (%) +28.4% -0.2%
Net premiums earned 475.7 604.1 911.0 1,336.5 383.2
- change (%) -21.3% -31.8%
Ongoing non-life loss
ratio(E) 64.6% 83.5% 66.9% 75.2% 77.4%
- change in percentage
points -18.9pts -8.3pts
Ongoing non-life
acquisition costs
ratio(F) 28.4% 10.4% 25.5% 21.7% 22.9%
- change in percentage
points +18.0pts +3.8pts
Ongoing non-life
administration expense
ratio(G) 6.8% 8.9% 4.6% 6.9% 6.9%
- change in percentage
points -2.1pts -2.3pts
Ongoing non-life
combined ratio(H) 99.8% 102.8% 97.0% 103.8% 107.2%
- change in percentage
points -3.0pts -6.8pts
Life & Health
technical result(I) 7.6 1.4 13.8 8.1 14.2
- change (%) n.m. +70.4%
Total investment
results(J) 72.1 86.8 142.3 168.3 350.4
- change (%) -16.9% -15.4%
Total investment
income yield(K) 4.0% 4.3% 3.9% 4.1% 4.4%
- change in percentage
points -0.3pts -0.2pts
Total investment
return(L) 40.3 168.7 94.9 196.0 312.1
- change (%) -76.1% -51.6%
Pre-tax operating
income(M) 84.0 57.1 156.7 75.9 100.8
- change (%) +47.1% +106.5%
Net income 62.5 46.9 124.1 41.4 68.7
- change (%) +33.3% +199.8%
Basic earnings per
share (US$) 0.43 0.32 0.85 0.28 0.47
- change (%) +34.4% +203.6%
Diluted earnings per
share (US$) 0.42 0.32 0.84 0.28 0.46
- change (%) +31.3% +200.0%
Return on
shareholders'
equity(N) 14.6% 11.4% 15.0% 4.8% 4.0%
- change in percentage
points +3.2pts +10.2pts
Financial highlights: Balance sheet June 30, Dec. 31,
2006 2005
In US$ million, unless noted (unaudited) (audited)
Total invested assets plus cash and
cash equivalents 7,177.3 7,281.6
- change (%) -1.4%
Claims supporting capital(O) 2,187.5 2,044.6
- change (%) +7.0%
Shareholders' equity 1,796.1 1,653.4
- change (%) +8.6%
Book value per share (US$) 12.28 11.29
- change (%) +8.8%
Book value per share (CHF) 15.83 14.88
- change (%) +6.4%
Financial highlights:
Investment results
(Unaudited) Three months ended Six months ended
June 30, June 30,
In US$ million, unless
noted 2006 2005 2006 2005
Investment income -
Fixed maturities 57.1 62.1 106.9 116.0
Investment income -
Equity securities 2.9 2.7 3.4 3.9
Investment income -
Funds Withheld Asset 13.2 16.2 26.6 33.1
Other investment income,
net 11.5 6.8 22.4 17.0
Net investment income 84.7 87.8 159.3 170.0
Average annualized net
investment income yield
(pre-tax) 4.7% 4.4% 4.4% 4.1%
Net realized capital
(losses) gains -12.6 -1.0 -17.0 -1.7
Total investment results 72.1 86.8 142.3 168.3
Average annualized total
investment income yield
(pre-tax) 4.0% 4.3% 3.9% 4.1%
Change in net unrealized
(losses) gains (pre-tax) -31.7 81.9 -47.4 27.7
Total investment return
(pre-tax) 40.4 168.7 94.9 196.0
Average annualized total
investment return
(pre-tax) 2.3% 8.4% 2.6% 4.8%
Average total invested
assets (including cash
and cash equivalents) 7,172.4 8,068.9 7,229.5 8,216.0
Interim
consolidated
statements of
income
(Unaudited)
Three months Six months ended Year ended
In US$ ended June 30, Dec. 31
million, June 30, 2005
unless noted 2006 2005 2006 2005 (audited)
Revenues
Gross premiums
written 474.7 378.1 1,130.0 1,136.3 1,994.3
- change (%) +25.5% -0.6%
Less ceded
premiums
written -60.7 -55.7 -63.8 -67.5 -178.6
- change (%) +9.0% -5.5%
Net premiums
written 414.0 322.4 1,066.2 1,068.8 1,815.7
- change (%) +28.4% -0.2%
Net change in
unearned
premiums 61.7 281.7 -155.2 267.7 567.5
- change (%) -78.1% -158.0%
Net premiums
earned 475.7 604.1 911.0 1,336.5 2,383.2
- change (%) -21.3% -31.8%
Net investment
income 84.6 87.8 159.3 170.0 324.9
- change (%) -3.6% -6.3%
Net realized
capital
(losses) gains -12.6 -1.0 -17.0 -1.7 25.5
- change (%) n.m. n.m.
Other income
(loss) 4.5 9.1 2.4 -5.4 -13.4
- change (%) -50.5% n.m.
Total revenues 552.2 700.0 1,055.7 1,499.4 2,720.2
- change (%) -21.1% -29.6%
Benefits,
losses and
expenses
Losses, loss
expenses and
life benefits -285.0 -505.3 -571.6 -996.5 -1,775.9
- change (%) -43.6% -42.6%
Acquisition
costs -140.0 -80.2 -245.1 -305.5 -575.6
- change (%) +74.6% -19.8%
Other
operating and
administration
expenses -47.9 -50.4 -83.6 -107.3 -210.8
- change (%) -5.0% -22.1%
Interest
expense -7.9 -8.0 -15.7 -15.9 -31.6
- change (%) -1.3% -1.3%
Amortization
of intangible
assets -- -6.8 -- -13.8 -21.5
- change (%) n.m. n.m.
Restructuring
costs -- -3.5 0.2 -13.6 -20.5
- change (%) n.m. -101.5%
Total
benefits,
losses and
expenses -480.8 -654.2 -915.8 -1,452.6 -2,635.9
- change (%) -26.5% -37.0%
Income before
taxes 71.4 45.8 139.9 46.8 84.3
Income tax
(expense)
benefit -8.9 1.1 -15.8 -5.4 -15.6
- change (%) n.m. +192.6%
Net income 62.5 46.9 124.1 41.4 68.7
Basic earnings
per share
(US$) 0.43 0.32 0.85 0.28 0.47
- change (%) +34.4% +203.6%
Diluted
earnings per
share (US$) 0.42 0.32 0.84 0.28 0.46
- change (%) +31.3% +200.0%
Interim consolidated balance sheets June 30, Dec. 31,
2006 2005
In US$ million (unaudited) (audited)
Assets
Invested assets
Held-to-maturity securities:
Fixed maturities 791.8 793.6
Available-for-sale securities:
Fixed maturities 4,041.3 4,169.8
Equity securities 353.6 362.6
Other investments 264.1 253.1
Short-term investments 57.2 35.1
Total investments 5,508.0 5,614.2
Funds Withheld Asset 986.4 1,020.1
Total invested assets 6,494.4 6,634.3
Other assets
Cash and cash equivalents 682.9 647.3
Premiums receivable:
Current 171.9 193.7
Accrued 827.0 865.6
Reserves for unearned premiums, retro 35.3 37.8
Reinsurance assets:
Underwriting reserves 732.5 805.1
Insurance and reinsurance balances receivable 57.5 37.6
Funds held by reinsureds 1,943.3 1,817.4
Deposit assets 185.8 183.4
Deferred policy acquisition costs 382.6 304.3
Deferred income taxes 3.1 1.0
Other assets 308.9 298.4
Total assets 11,825.2 11,825.9
Liabilities
Reinsurance liabilities:
Unpaid losses and loss expenses 7,279.0 7,568.9
Future life benefits, gross 476.0 405.6
Insurance and reinsurance balances payable 204.4 226.3
Reserves for unearned premiums, gross 792.5 610.8
Other reinsurance liabilities 102.1 127.8
Funds held under reinsurance contracts 338.5 332.9
Deposit liabilities 268.3 300.6
Deferred income taxes 8.8 8.1
Accrued expenses and other liabilities 168.1 200.3
Debt 391.4 391.2
Total liabilities 10,029.1 10,172.5
Shareholders' equity
Common stock 554.9 554.9
Additional paid-in capital 1,357.1 1,354.2
Treasury stock -4.8 -1.5
Unearned stock compensation -1.3 -3.5
Accumulated other comprehensive income:
Minimum pension liabilities, net of taxes -6.1 -4.9
Net unrealized gains on investments, net of
taxes 2.8 42.7
Cumulative translation adjustments, net of
taxes 166.5 96.9
Total accumulated other comprehensive income 163.2 134.7
Retained deficit -273.0 -385.4
Total shareholders' equity 1,796.1 1,653.4
Total liabilities and shareholders' equity 11,825.2 11,825.9
Interim consolidated statements of cash flows Six months ended
(Unaudited) June 30,
In US$ million 2006 2005
Net income 124.1 41.4
Net realized and unrealized capital (gains) losses
and impairment on investments 17.0 1.7
Amortization of premium/discount 20.5 27.4
Depreciation and amortization 5.6 22.6
Restructuring costs -0.2 3.1
Deferred income taxes 10.4 0.9
Net of interests / amortization on non-cash deposits 0.8 -2.2
Total adjustments 54.1 53.5
Premiums receivable 102.0 163.3
Reserves for unearned premiums, retro 4.7 9.3
Reinsurance assets 71.1 -198.4
Funds held by reinsureds -59.9 1.9
Funds Withheld Asset 79.8 80.4
Deferred policy acquisition costs -57.7 115.7
Unpaid losses and loss expenses -558.9 -165.8
Future life benefits, gross 47.7 19.2
Insurance and reinsurance balances payable -22.9 -143.5
Reserves for unearned premiums, gross 146.9 -269.1
Other reinsurance liabilities -33.7 319.9
Funds held under reinsurance contracts -12.9 23.0
Net changes in all other operational assets and
liabilities -39.0 1.5
Total changes in operational assets and liabilities -332.8 -42.6
Cash (used in) provided by operating activities -154.6 52.3
Proceeds from sales and maturities of fixed
maturities held-to-maturity 14.0 --
Proceeds from sales and maturities of fixed
maturities available-for-sale 768.1 1,859.1
Purchases of fixed maturities available-for-sale -613.2 -2,280.9
Cash flows from investing activities (fixed
maturities) 168.9 -421.8
Proceeds from sales of equity securities 109.6 26.6
Purchases of equity securities -57.1 -50.6
Cash flows from investing activities (equity
securities) 52.5 -24.0
Net (increase) decrease in short-term investments -19.2 59.4
Proceeds from sales of other assets 0.5 9.4
Purchases of other assets -7.7 -28.9
Cash flows from investing activities (other) -26.4 39.9
Net cash provided by (used in) investing activities 195.0 -405.9
Net purchase of common shares -0.4 -1.6
Dividends to shareholders -11.7 -
Net (decrease) increase in deposit liabilities -16.9 -2.0
Net cash used in financing activities -29.0 -3.6
Effect of exchange rate changes on cash and cash
equivalents 24.2 -42.3
Change in cash and cash equivalents 35.6 -399.5
Cash and cash equivalents as of January 1 647.3 680.9
Cash and cash equivalents as of June 30 682.9 281.4
Segments Three months Six months
(Unaudited) ended Change ended Change
June 30, June 30,
In US$ million, unless 2006 2005 (%) 2006 2005 (%)
noted
Standard Property & Casualty Reinsurance
Gross premiums written 218.1 100.1 +117.9 558.9 537.6 +4.0
Net premiums written 167.5 88.5 +89.3 513.2 521.4 -1.6
Net premiums earned 209.8 224.2 -6.4 361.9 498.1 -27.3
Loss ratio(P) 54.1% 87.9% -33.8 55.3% 78.7% -23.4
pts pts
Acquisition costs 31.2% 6.2% +25.0 28.0% 17.7% +10.3
ratio(Q) pts pts
Administration expense 6.9% 9.7% -2.8 4.2% 5.0% -0.8
ratio(R) pts pts
Combined ratio(S) 92.2% 103.8% -11.6 87.5% 101.4% -13.9
pts pts
Total investment
results(T) 25.4 30.8 -17.5 49.7 57.8 -14.0
Segment income 44.7 35.4 +26.3 88.8 49.7 +78.7
Retention ratio(U) 76.8% 88.4% -11.6 91.8% 97.0% -5.2
pts pts
Specialty Lines
Gross premiums written 183.3 213.1 -14.0 383.0 383.3 -0.1
Net premiums written 176.2 176.7 -0.3 370.1 344.1 +7.6
Net premiums earned 180.9 274.4 -34.1 372.5 579.2 -35.7
Loss ratio(P) 76.8% 80.0% -3.2 78.1% 72.2% +5.9
pts pts
Acquisition costs ratio(Q) 25.2% 13.8% +11.4 23.0% 25.1% -2.1
pts pts
Administration expense
ratio(R) 6.6% 8.5% -1.9 5.2% 9.6% -4.4
pts pts
Combined ratio(S) 108.6% 102.3% +6.3 106.3% 106.9% -0.6
pts pts
Total investment
results(T) 30.7 34.9 -12.0 58.7 65.9 -10.9
Segment income (loss) 15.4 37.0 -58.4 35.3 48.4 -27.1
Retention ratio(U) 96.1% 82.9% +13.2 96.6% 89.8% +6.8
pts pts
Life & Health Reinsurance
Gross premiums written 66.1 59.3 +11.5 172.6 176.4 -2.2
Net premiums written 63.1 55.7 +13.3 167.4 169.5 -1.2
Net premiums earned 77.8 74.1 +5.0 158.2 155.2 +1.9
Acquisition costs ratio(Q) 30.5% 25.1% +5.4 32.0% 29.6% +2.4
pts pts
Administration expense
ratio(R) 4.1% 8.1% -4.0 2.8% 5.0% -2.2
pts pts
Total investment
results(T) 6.7 6.5 +3.1 12.5 12.5 --
Segment income 8.9 0.1 n.m. 16.0 6.1 +162.3
Technical result 7.6 1.4 n.m. 13.8 8.1 +70.4
Retention ratio(U) 95.5% 93.9% +1.6 97.0% 96.1% +0.9
pts pts
Three months Six months
Segments ended Change ended Change
(Unaudited) June 30, June 30,
In US$ million, unless noted 2006 2005 (%) 2006 2005 (%)
Run-Off
Gross premiums written 7.2 5.6 +28.6 15.5 39.0 -60.3
Net premiums written 7.2 1.5 n.m. 15.5 33.8 -54.1
Net premiums earned 7.2 31.4 -77.1 18.4 104.0 -82.3
Total investment results(T) 9.2 14.6 -37.0 21.4 32.1 -33.3
Segment income (loss) 19.9 -5.5 n.m. 37.6 10.5 n.m.
Corporate Center
Other operating and
administration expenses -14.1 -12.0 +17.5 -24.7 -19.2 +28.6
(A) Pre-tax operating income is defined as income before taxes excluding
pre-tax net realized capital gains (losses), amortization of
intangible assets and restructuring costs.
(B) Ongoing total segment income is defined as net premiums earned plus
total investment results minus losses, loss expenses and life
benefits, acquisition costs and other operating and administration
expenses, excluding Corporate Center.
(C) Ongoing non-life combined ratio is defined as ongoing non-life loss
ratio (to net premiums earned) plus ongoing non-life acquisition
costs ratio (to net premiums earned) plus ongoing non-life
administration expense ratio (to net premiums written).
(D) Life & Health technical result is defined as net premiums earned
minus losses, loss expenses and life benefits minus acquisition costs
plus other technical income, mainly interest on deposits.
(E) Ongoing non-life loss ratio is defined as losses and loss expenses
divided by net premiums earned.
(F) Ongoing non-life acquisition costs ratio is defined as acquisition
costs divided by net premiums earned.
(G) Ongoing non-life administration expense ratio is defined as other
operating and administration expenses divided by net premiums
written.
(H) Ongoing non-life combined ratio is defined as ongoing non-life loss
ratio (to net premiums earned) plus ongoing non-life acquisition
costs ratio (to net premiums earned) plus ongoing non-life
administration expense ratio (to net premiums written).
(I) Life & Health technical result is defined as net premiums earned
minus losses, loss expenses and life benefits minus acquisition costs
plus other technical income, mainly interest on deposits.
(J) Total investment results are defined as net investment income plus
net realized capital gains (losses).
(K) 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.
(L) Total investment return is defined as net investment income plus net
realized capital gains (losses) plus change in net unrealized capital
gains (losses).
(M) Pre-tax operating income is defined as income before taxes excluding
pre-tax net realized capital gains (losses), amortization of
intangible assets and restructuring costs.
(N) Return on shareholders' equity is defined as net income or loss
(after-tax) divided by shareholders' equity at the beginning of the
period, annualized.
(O) Claims supporting capital is defined as total shareholders' equity
plus debt.
(P) Loss ratio is defined as losses and loss expenses divided by net
premiums earned.
(Q) Acquisition costs ratio is defined as acquisition costs divided by
net premiums earned.
(R) Administration expense ratio is defined as other operating and
administration expenses divided by net premiums written.
(S) Combined ratio is defined as loss ratio (to net premiums earned)
plus acquisition costs ratio (to net premiums earned) plus
administration expense ratio (to net premiums written).
(T) Total investment results are defined as net investment income plus
net realized capital gains (losses).
(U) Retention ratio is defined as net premiums written divided by gross
premiums written.