Zurich-based Converium announced the completion of an extensive review and a restatement of prior year financial statements ahead of its 2005 earnings release scheduled for March 15. It also released final figures for the third quarter and first 9 months of 2005, which had been provisionally reported on Dec. 19, 2005, somewhat delayed, due to the restatement review.
The restatement provides “financial information for the periods from 1998 through 2004, as well as for each of the quarters from March 31, 2003 through June 30, 2005,” said the bulletin. It also added that the Company “expects to file shortly an amended Form 20-F/A reflecting the restatement adjustments and their impact on previous disclosures and financial statements.”
The restatement follows an extensive outside and internal review of the earnings period, following questions from U.S. regulators concerning finite reinsurance transactions. On December 19, 2005, Converium reported on the status of the internal review, restatement of accounts and third quarter results (See IJ Website Dec.20, 2005). “At that time, Converium provided unaudited restated financial information for its December 31, 2004 and June 30, 2005 balance sheets,” the bulletin noted. The current release largely confirms those figures.
Standard & Poor’s considered the December announcement as sufficient reason to remove Converium’s ratings from its CreditWatch list and to affirm its “BBB+” ratings (See IJ Website Dec. 22, 2005). S&P said the figures contained in the results have confirmed its “view on prospective strong group capitalization—there being an increase in unaudited shareholders’ equity reported for June 30, 2005—and good operating performance.”
In its explanation of the reasons for the restatement Converium noted that it in April 2005 it “received subpoenas from the U.S. Securities and Exchange Commission and the Office of the New York Attorney General seeking documents related to certain transactions between CRNA and MBIA. Converium has also received additional inquiries from the Securities and Exchange Commission and other governmental authorities in Europe regarding non-traditional insurance and reinsurance products and/or the restatement of its financial statements. The inquiries are ongoing and Converium is fully cooperating with the governmental authorities.”
In the third quarter statement Converium reported a loss before taxes of $1.3 million, pre-tax operating income of $22.1 million and a net loss of $6.9 million as compared with a loss before taxes of $104.8 million, a pre-tax operating loss of $120.9 million and a net loss of US$ 88.2 million in the same period of 2004.
The bulletin noted that the third quarter of 2005 “was primarily impacted by the US hurricanes and European floods in the amount of $74.2 million as well as costs of $9.5 million associated with our organizational and operational restructuring. Offsetting this was the positive impact of $39.0 million due to the commutations primarily carried out in North America in the third quarter of 2005 as well as net positive development of prior years’ loss reserves as discussed below.
“In addition, the quarter was positively impacted by the reduction of administration expenses due to the realization of cost management measures adopted early in 2005 as well as by solid investment results. By comparison, the results for the three months ended September 30, 2004 included net strengthening of prior years’ loss reserves as discussed below, which was partially offset by a strong investment result, including net realized capital gains of $20.3 million.”
For the nine months ended September 30, 2005, Converium achieved income before taxes of $45.5 million, pre-tax operating income of $98 million and net income of $34.5 million, as compared with a loss before taxes of $376.8 million, a pre-tax operating loss of $319.1 million and a net loss of $593.4 million for the same period of 2004.”
The full report may be obtained on the company’s Website at: http://www.converium.com.
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