Converium Reports Record $65.7 Million Q1 Net

April 30, 2004

Swiss-based Converium reported its “best quarter operating income so far,” with $77.2 million, up 192.4 percent, and net earnings of $65.7 million, up 157.6 percent.

Other highlights cited by the world’s 10th largest reinsurer included the following:
— Return on equity of 12.6 percent (plus 6.7 percentage points)
— Gross premiums written: US$ 1.4 billion (plus 9.5 percent)
— Non-life combined ratio: 96.4 percent (improved by 1.7 percentage points)
— Total investment income yield: 4.1 percent (improved by 1.2 percentage points)
— Shareholders’ equity: US$ 2.2 billion (plus 4.8 percent)
— Cash flows: US$ 228.6 million (plus 9.7 percent)

CEO Dirk Lohmann commented: “The first quarter operating income is the best Converium has thus far reported in its history. I am encouraged by the continuing improvement in the combined ratio as well as the growth in our investment results, which are developing as we had anticipated.”

He also indicated that the company was “carefully observing the consolidation process unfolding in the reinsurance industry. Depending on opportunity, Converium is ready to play an active role in this process – in a way that is accretive to our shareholders and without assuming material legacy issues.” Translation: We want to buy somebody, provided they don’t have a lot of long-tail liabilities.

CFO Martin Kauer commented “Converium’s financial flexibility is intact. Quarter after quarter, we keep strengthening Converium’s shareholders’ equity and claims supporting capital. The recent approval by our shareholders at our Annual General Meeting of April 27, 2004 to create an authorized capital and a conditional share capital serves to further enhance Converium’s financial flexibility, which will allow us to capitalize on opportunities as they arise.” Translation: And we’ve got the money to do it.

In Converium’s P/C reinsurance lines, which represented approximately 52 percent of total net premiums written, the company reported first quarter net income of $ 60.4 million, an increase of 23.0 percent from $49.1 million in the first quarter of 2003. Gross premiums written increased by 24.2 percent to $ 723.2 million, while net premiums written increased by 24.5 percent to $ 671.6 million, and net premiums earned increased by 14.8 percent to $443.4 million.

“This growth was driven by the Motor lines of business (net premiums written: plus 38.4 percent to US$ 279.5 million) and General Third Party Liability (net premiums written: plus 46.5 percent to US$ 128.5 million),” said the announcement. The gains were “partially offset by the Property line (net premiums written: minus 1.2 percent to US$ 241.5 million).”

The bulletin noted that “This growth reflects the fact that Converium’s distribution platform provides access to profitable business and that strict underwriting discipline and cycle management were applied. The Standard Property & Casualty Reinsurance segment’s non-life combined ratio was 92.1 percent for the first quarter of 2004 (compared to 90.9 percent for the first quarter of 2003) reflecting the strong underlying profitability of this segment’s book of business, particularly of the most recent underwriting years. Overall, the results of Converium’s catastrophe business were well within the model-based expectations.”

Executive VP Standard P/C Reinsurance, Frank Schaar commented: “Converium’s strong global distribution platform provides access to the business in the quantity and the quality we want to see. Our transparent pricing approach allows us to be selective in the business we accept while maintaining strong client relationships.”

He added that the “April 1, 2004 renewal season that is driven by the Far East confirmed our expectations regarding the development of terms and conditions. While we experienced strong competition in the Property line of business, we continued to strictly apply Converium’s profitability standards.”

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