Converium Holding AG: Strong Financial Performance in the Second Quarter of 2006

Zug, SWITZERLAND


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.


        

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