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Form 6-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Report of Foreign Private Issuer
Pursuant to Rule 13a-16 or 15d-16
of the Securities Exchange Act of 1934
For the month of February, 2004
CONVERIUM HOLDING AG
------------------------------------------
(Translation of registrant's name into English)
Baarerstrasse 8
CH-6300 Zug
Switzerland
-------------------------------------------------------
(Address of principal executive offices)
Indicate by check mark whether the registrant files or will file annual reports
under cover Form 20-F or Form 40-F.
Form 20-F X Form 40-F
------- -------
Indicate by check mark whether the registrant by furnishing the information
contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.
Yes No X
------- -------
If "Yes" is marked, indicate the file number assigned to the registrant in
connection with Rule 12g3-2(b): 82- Not Applicable
Converium Holding Ltd, Zug
Zug, Switzerland - February 17, 2004 - Converium today reports on
its financial results for the fourth quarter 2003 as well as for the
full year 2003.
Full Year 2003 Highlights:
-- Pre-tax operating income tripled to US$ 206.0 million
-- Net income after tax grew to US$ 185.1 million (+73.3%)
-- Return on equity(1) improved to 10.7% (+3.9 pts or +57.4%)
-- Gross premiums written exceeded US$ 4.2 billion (+19.5%)
-- Non-life combined ratio(2) improved by 5.8 pts to 97.9%
-- Total investment return(3) increased to 5.7% (+3.5 pts)
-- Shareholders' equity grew to US$ 2.1 billion (+19.9%)
-- Operating cash flows increased to US$ 1.3 billion (+72.5%)
-- Proposed cash dividend of CHF 1.50 (+50.0%)
Fourth Quarter 2003 Highlights:
-- Pre-tax operating income increased to US$ 61.3 million (74.1%)
-- Net income after tax of US$ 56.2 million
-- Return on equity(1) of 11.6%
-- Gross premiums written stable at US$ 1.0 billion
-- Non-life combined ratio(2) improved by 4.1 pts to 98.4%
despite higher catastrophe losses
-- Total investment return(3) increased to 5.6% (+4.8 pts)
-- Shareholders' equity grew by US$ 143.3 million over September
30, 2003 (+7.4%)
-- Operating cash flows increased to US$ 361.3 million (+62.9%)
Dirk Lohmann, Converium's Chief Executive Officer, stated: "The
substantial improvement in the full year 2003 operating income, absent
the influence of tax and capital market fluctuations (e.g. impairment
charges), is clear evidence of the good performance of our core
activities which reflects our stringent underwriting discipline and
the current favorable market environment. In addition to the positive
financial results for 2003, the cash flows generated through the
continuing growth in longer-tail lines and lower paid loss ratios
increased total invested assets plus cash and cash equivalents by US$
1.3 billion to US$ 7.8 billion. Although our non-life combined ratio
has improved by 5.8 percentage points to 97.9% it is not fully
reflective of the expected profit to be generated by the underwriting
activities of the 2003 calendar year because a substantial part of the
expected longer-tail business' profitability should emerge as
investment income in future periods. This is why the growth in
operating cash flows is such an important performance metric."
Dirk Lohmann further commented: "Converium walks the talk: The
strict underwriting discipline and cycle management have been further
enhanced by the appointment of the Chief Risk Officer and the Chief
Technical Officer to the Global Executive Committee. The 2004 renewals
so far reflect Converium's prudent underwriting: We did not relax our
pricing targets or underwriting standards. This resulted in a moderate
rate of growth in gross premiums written but should, absent any
extraordinary shock losses, have a positive influence on the
development of Converium's operating performance."
Martin Kauer, Chief Financial Officer, said: "Converium's strong
underwriting performance coupled with a favorable total return on
investments of 5.7% contributed to an increase in book value per share
of 20.3% to US$ 52.38. Overall, our capital adequacy remains strong
and total claims supporting capital is now at US$ 2.5 billion. The
increase in shareholders' equity by almost US$ 350 million to US$ 2.1
billion means that Converium's scope for further issuance of
non-dilutive hybrid debt instruments is enhanced. Our listing on both
the NYSE and the SWX Swiss Exchange gives Converium the desired
financial flexibility to access all major capital markets should the
need arise."
1
Martin Kauer added: "Our strategy of using our consolidated
balance sheet to economically hedge currency and duration exposures
means that Converium does not carry any material economic risk
vis-a-vis shifts in the yield curves or in exchange rates."
Renewals 2004 so far: Fundamentals remain favorable for reinsurers
- cycle management in place
Overall terms and conditions remain favorable for reinsurers -
however, stringent underwriting discipline and appropriate cycle
management are crucial. Increasing competition for adequately priced
business is apparent, particularly for the short-tail low
frequency/high severity - i.e. catastrophe - lines of business that
immediately generate calendar year GAAP net income in years of low
loss activity.
The increasing concerns of many cedents with respect to the credit
risks embedded in the reinsurance recoverables on their balance sheets
resulted in promising opportunities for Converium. For many cedents
wishing to diversify their credit risks, Converium with its strong
balance sheet was often the reinsurer of choice. This resulted in an
overall non-life premium growth of 2.4%(4) of renewable premiums based
on constant exchange rates (or plus 6.4% based on actual exchange
rates).
At January 1, 2004, Converium's Standard Property & Casualty
Reinsurance segment was able to successfully leverage its marketing
and distribution platform with over 20 offices worldwide, particularly
in those markets and lines where business is placed on a direct basis.
Approximately 74% of the Standard Property & Casualty Reinsurance
segment's premiums were up for renewal at January 1, 2004. The
aggregate impact of improved rates, increased shares and new business,
offset by cancellations, resulted in premium growth of 9.7%(4) on
renewable premiums based on constant exchange rates (or plus 15.4%
based on actual exchange rates). These increases came predominantly
from the general liability line of business, where rates continued to
improve.
Converium's Specialty Lines segment was also able to capitalize on
its strong market position and technical expertise in less
commoditized specialty and longer-tail lines while maintaining strict
underwriting discipline. At January 1, 2004 approximately 68% of the
Specialty Lines segment's premiums were up for renewal. Due to
weakened prices, terms and conditions, Converium chose to withdraw
some of its capacity from the Airline, Workers' Compensation and
Marine & Energy markets, thus providing evidence that proper cycle
management is in place. This resulted in an aggregate reduction in
premiums for Aviation & Space, Marine & Energy and Workers'
Compensation business of 13.8%(4) based on constant exchange rates (or
minus 13.3% based on actual exchange rates). For all other specialty
lines, market conditions remained favorable and in some cases even
tightened further. For these remaining specialty lines (including
Credit & Surety and Agribusiness) Converium achieved an aggregate
premium growth of 7.1%(4) on renewable premiums based on constant
exchange rates (or plus 11.9% based on actual exchange rates). For
Specialty Lines overall, the aggregate impact of improved rates,
increased shares and new business, offset by cancellations, resulted
in a premium decrease of 4.4%(4) on renewable premiums for the
Specialty Lines segment based on constant exchange rates (or minus
1.8% based on actual exchange rates).
2
Financial highlights Three months ended Change Year ended Change
December 31, December 31,
In US$ million, unless noted 2003 2002 (%) 2003 2002 (%)
---------------------------------------------------------------------------------------------
Gross premiums written 1,001.8 1,017.1 -1.5 4,223.9 3,535.8 +19.5
---------------------------------------------------------------------------------------------
Net premiums written 855.7 933.4 -8.3 3,827.0 3,322.2 +15.2
---------------------------------------------------------------------------------------------
Net premiums earned 961.1 893.6 +7.6 3,676.5 3,165.5 +16.1
---------------------------------------------------------------------------------------------
Non-life combined ratio(2) (%) 98.4 102.5 -4.1pts 97.9 103.7 -5.8pts
---------------------------------------------------------------------------------------------
Total investment results 68.0 81.0 -16.0 251.4 241.5 +4.1
---------------------------------------------------------------------------------------------
Total investment income yield(5) -1.9pts -0.6pts
(%) 3.6 5.5 3.5 4.1
---------------------------------------------------------------------------------------------
Total investment return(3) (%) 5.6 0.8 +4.8pts 5.7 2.2 +3.5pts
---------------------------------------------------------------------------------------------
Operating income(6) 61.3 35.2 +74.1 206.0 67.7 +204.3
---------------------------------------------------------------------------------------------
Net income 56.2 80.8 -30.4 185.1 106.8 +73.3
---------------------------------------------------------------------------------------------
Earnings per share (US$) 1.41 2.03 -0.62 4.65 2.68 +1.97
---------------------------------------------------------------------------------------------
Return on equity(1) (%) 11.6 19.5 -7.9pts 10.7 6.8 +3.9pts
---------------------------------------------------------------------------------------------
Cash flows(7) 361.3 221.8 +62.9 1,265.3 733.7 +72.5
---------------------------------------------------------------------------------------------
Total invested assets plus cash 7,809.5 6,478.8 +20.5 7,809.5 6,478.8 +20.5
---------------------------------------------------------------------------------------------
Shareholders' equity 2,083.3 1,738.0 +19.9 2,083.3 1,738.0 +19.9
---------------------------------------------------------------------------------------------
Book value per share (US$) 52.38 43.55 +20.3 52.38 43.55 +20.3
---------------------------------------------------------------------------------------------
Continuing strong performance of Converium's non-life business
For the three months ended December 31, 2003, Converium reported
an operating income of US$ 61.3 million, an increase of 74.1% over the
prior year's period. The net income (after-tax) in the fourth quarter
of 2003 was US$ 56.2 million and earnings per share were US$ 1.41,
resulting in a return on equity of 11.6%. Converium's net income in
the fourth quarter of 2002 contained a tax benefit of US$ 21.3
million, primarily resulting from operating losses in the United
States following increases in reserves for prior years' losses. The
slight reduction in gross premiums written in the fourth quarter of
2003 reflects offsetting developments in Standard Property & Casualty
Reinsurance and in Specialty Lines. Gross premiums written in
Specialty Lines were reduced by US$ 39.0 million, primarily due to
reduced facultative acceptances in the weakening airline business and
to true ups of expected ultimate premiums of certain Lloyd's
professional liability treaties. This was partially offset by the
Standard Property & Casualty Reinsurance segment where gross premiums
written increased by US$ 23.2 million. Net premiums written were
reduced by a greater amount due to increased reinsurance purchases
effected to reduce peak exposures associated with Converium's
increased share in the Global Aerospace pools. The non-life combined
ratio improved by 4.1 percentage points to 98.4% in spite of a modest
increase in catastrophe losses. Due to Converium's passive asset
management approach, the investment results were in line with the
respective benchmarks. The strong performance of capital markets led
to an increase in unrealized gains of more than US$ 50 million net of
taxes. Cash flows increased by 62.9% to US$ 361.3 million, reflecting
Converium's strategy to grow in less commoditized longer-tail lines; a
substantial part of the expected longer-tail business' profitability
should emerge as investment income in future periods. Based on stable
exchange rates, gross premiums written decreased by 6.7%, net premiums
written by 13.8% while net premiums earned increased by 1.3%. The
non-life combined ratio was 99.3%.
For the year ended December 31, 2003, Converium reported an
operating income of US$ 206.0 million, an increase of 204.3% over
2002. The net income (after-tax) for the full year 2003 was US$ 185.1
million and earnings per share were US$ 4.65, resulting in a return on
equity of 10.7%. The 20% growth of gross premiums written to more than
US$ 4.2 billion reflects Converium's strong franchise as a leading
global multi-line reinsurer with the necessary distribution and
expertise required to access profitable growth opportunities. The
improved non-life combined ratio of 97.9% is reflective of the
profitability of Converium's non-life book although a substantial part
of the expected longer-tail business profitability should emerge as
investment income in future periods. Converium reported an aggregate
net operating income benefit of US$ 31.3 million arising out of
reserve releases for prior years' incurred losses. The total
investment return of 5.7% for 2003 mirrors the development of the
capital markets in 2003, increasing yield curves and the stock
markets' positive performance. Total shareholders' equity increased
US$ 345.3 million or nearly 20% to US$ 2.1 billion. The book value per
3
share grew by 20.3% to US$ 52.38. Converium's strategy to grow in
longer-tail specialty lines resulted in an increase of cash flows by
72.5% to US$ 1.3 billion, respectively of total invested assets plus
cash by 20.5% to US$ 7.8 billion, setting the foundation for future
growth in net investment income. Based on stable exchange rates, gross
premiums written increased by 14.1%, net premiums written by 9.8% and
net premiums earned by 10.6%. The non-life combined ratio was 98.0%.
Increased dividend proposed
Based on Converium's solid capitalization and strong performance
in 2003, the Board of Directors proposes an increase in the gross cash
dividend by 50% to CHF 1.50 per ordinary share to the Annual General
Meeting.
Business Development
The following are comments on the development of Converium's three
main business segments and the Corporate Center. Reference is made to
the tables attached to this press release.
Standard Property & Casualty Reinsurance represented approximately
43% of total net premiums written in 2003. For the full year 2003 the
Standard Property & Casualty Reinsurance segment of Converium reported
a segment income of US$ 183.7 million, an increase of 229.2% (2002:
US$ 55.8 million). For the fourth quarter of 2003 Converium reported a
segment income of US$ 23.1 million, an increase of 724.3% (4Q2002: US$
minus 3.7 million). In 2003, gross premiums written in the Standard
Property & Casualty Reinsurance segment increased by 16.4% to US$ 1.8
billion and net premiums written by 13.3% to US$ 1.6 billion. This
growth mainly reflected the break-through Converium achieved as an
independent company in Continental European markets such as Germany,
Italy, France, Austria and Switzerland. The strongest growth was in
property lines where net premiums written increased by approximately
26% to US$ 787.0 million.
In the fourth quarter of 2003 gross premiums written increased by
6.0% to US$ 411.1 million and net premiums written by 9.5% to US$
366.0 million. The Standard Property & Casualty Reinsurance segment's
non-life combined ratio was 94.9% for 2003, respectively 101.9% for
the fourth quarter of 2003, reflecting the underlying profitability of
these short- and mid-tail lines as well as property cat losses in the
fourth quarter of 2003 that were roughly US$ 25.0 million higher than
the average of the first three quarters. Overall, the results of
catastrophe business were well within the model-based expectations.
For 2003, the Standard Property & Casualty Reinsurance segment
reported a net positive development of US$ 49.4 million for prior
years' reserves (1.5% of the Standard Property & Casualty Reinsurance
segment's gross reserves as per December 31, 2003).
Frank Schaar, Executive Vice President, Standard Property &
Casualty Reinsurance, commented: "Converium's underwriting performance
and premium growth are reflective of our strategy to improve the
regional diversification and product mix of our Standard Property &
Casualty Reinsurance segment. Converium clearly benefited from its
strong franchise in the Continental European markets where proximity
to customers and local market expertise are crucial to ensuring that
one sees all the business that is available - both through brokers and
on a direct basis."
Specialty Lines represented approximately 47% of total net
premiums written in 2003. For the full year 2003 the Specialty Lines
segment of Converium reported a segment income of US$ 115.2 million,
an increase of 105.7% (2002: US$ 56.0 million). For the fourth quarter
of 2003 Converium reported a segment income of US$ 58.9 million, an
increase of 2.3% (4Q2002: US$ 57.6 million). In 2003 gross premiums
written in the Specialty Lines segment increased by 22.5% to US$ 2.0
billion and net premiums written by 16.5% to US$ 1.8 billion. The
growth in net premiums written was driven by Agribusiness (plus 309.1%
to US$ 90.0 million), Credit & Surety (plus 17.9% to US$ 236.0
million), Engineering (plus 20.5% to US$ 139.9 million), Professional
Liability and Other Special Liability (plus 11.4% to US$ 598.0
million), and Workers' Compensation (plus 40.9% to US$ 310.9 million).
In the fourth quarter of 2003 the stringent underwriting
discipline applied by Converium resulted in a reduction of gross
premiums written, reflecting the weakening of rates in the airline
business and the true up of expected ultimate premiums of certain
Lloyds' professional liability treaties. Moreover, Converium purchased
additional reinsurance on its peak exposures in aviation following its
increase in the Global Aerospace pools from 9.0% to 25.0% in 2003. The
impact of this additional reinsurance is most strongly felt following
the renewals of the peak exposures, 70% of which fall into the fourth
quarter of 2003. The overall impact of the reduced writings and
increased retrocession resulted in a decline in net premiums written
of 20.5% to US$ 406.3 million for the fourth quarter of 2003. The
Specialty Lines segment's non-life combined ratio was 100.6% for 2003,
respectively 95.0% for the fourth quarter of 2003, reflecting the mid-
to long-tail characteristics of most specialty lines as well as the
technical result of Aviation & Space of US$ 63.7 million (4Q2002: US$
49.4 million) recorded in the fourth quarter.
4
For 2003 the Specialty Lines segment reported a net adverse
development of US$ 18.1 million for prior years' reserves (0.4% of the
Specialty Lines segment's gross reserves as per December 31, 2003).
Benjamin Gentsch, Executive Vice President, Specialty Lines, said:
"Stringent underwriting discipline and cycle management are key in
today's reinsurance markets. Converium's willingness to reduce premium
in the airline business during the fourth quarter is clear evidence
that profitability comes before top line growth." Benjamin Gentsch
added: "A substantial part of our Specialty Lines business is written
in longer-tail lines at a combined ratio of about 100%; hence, a
substantial part of the expected profitability of the longer-tail
business which is already in Converium's book should emerge as
investment income in future periods."
Life & Health Reinsurance represented approximately 10% of total
net premiums written in 2003. For the full year 2003 the Life & Health
Reinsurance segment of Converium reported a segment loss of US$ 11.9
million for 2003 (2002: loss of US$ 6.5 million). For the fourth
quarter of 2003 Converium reported a segment income of US$ 1.5
million, an increase of US$ 5.1 million (4Q2002: loss of US$ 3.6
million). In 2003 gross premiums written increased by 18.4% to US$
406.5 million and net premiums written by 17.4% to US$ 369.5 million.
This growth was primarily driven by Accident & Health lines in North
America and by Life & Disability lines in Continental Europe (net
premiums written 2003: plus 29.6% to US$ 207.4 million). The Life &
Health Reinsurance segment reported a technical result(8) for the full
year 2003 of minus US$ 8.0 million (2002: minus US$ 6.5 million).
In the fourth quarter of 2003 the technical result (including
technical interest) was US$ 0.8 million (4Q2002: minus US$ 7.0
million).
The results of the Life & Health Reinsurance segment were
significantly impacted by a closed book of Guaranteed Minimum Death
Benefit (GMDB) annuity business. Excluding the impact of the GMDB
business, the technical result of the segment for the full year would
have been US$ 26.3 million. As a result of the strong performance of
the US stock markets, the net amount at risk for GMDB business further
decreased by more than a third or US$ 433.3 million to US$ 809.7
million as per December 31, 2003. Although Converium feels that the
currently carried reserves for its GMDB exposure are adequate, the
company has exercised the previously disclosed call option and availed
itself of the additional reinsurance protection of up to US$ 75.0
million for the GMDB exposures. This decision was made in light of the
current volatility and valuation of the equity markets in the United
States. The respective annual expenses are expected to be below US$
0.5 million.
Christoph Ludemann, Executive Vice President, Life & Health
Reinsurance, commented: "The successes achieved so far in Accident &
Health lines in North America and Life & Disability lines in
Continental Europe are clear evidence that we are able to build a Life
& Health business that contributes positively to Converium's overall
performance - by adding earnings and by improving Converium's overall
risk/return characteristics."
The Corporate Center carries certain administration expenses such
as the costs of the Board of Directors, the Global Executive
Committee, and other global functions. In the fourth quarter of 2003
other operating and administration expenses were US$ 10.0 million
(plus 29.9%), respectively US$ 34.3 million for the full year 2003
(plus 13.2%). This increase in the fourth quarter was primarily driven
by the new appointments to the Global Executive Committee and the
weakening of the US dollar against the Swiss franc.
* * * * * * *
5
(1)Return on equity is defined as net income (after-tax) divided
by shareholders' equity at the beginning of the period, annualized.
(2)Non-life combined ratio is defined as non-life loss ratio plus
non-life underwriting expense ratio plus non-life administration
expense ratio.
(3)Total investment return is defined as net investment income
plus net realized capital gains (losses) plus change in unrealized
gains (losses) divided by average total invested assets (including
cash and cash equivalents), pre-tax and annualized.
(4)Based on 100% of the total non-life premium that was up for
renewal on January 1, 2004.
(5)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.
(6)Operating income is defined as pre-tax income or loss excluding
pre-tax net realized capital gains or losses.
(7)Excluding US$ 136.7 million received reimbursement of
reinsurance recoverables in dispute in the second quarter of 2002.
(8)Technical result is defined as net premiums earned minus
losses, loss adjustment expenses & life benefits and minus
underwriting acquisition costs plus technical interests.
The company has made it a policy not to provide any quarterly or
annual earnings guidance and it will not update any past outlook for
full year earnings. It will however provide investors with
perspectives on its value drivers, its strategic initiatives and those
factors critical to understanding its business and operating
environment.
Michael Schiendorfer Zuzana Drozd
Media Relations Manager Head of Investor Relations
michael.schiendorfer@converium.com zuzana.drozd@converium.com
Phone: +41 (0) 1 639 96 57 Phone: +41 (0) 1 639 91 20
Fax: +41 (0) 1 639 76 57 Fax: +41 (0) 1 639 71 20
About Converium
Converium is an independent leading global multi-line reinsurer
known for its innovation, professionalism and service. Today Converium
ranks among the top ten professional reinsurers and employs more than
800 people in 22 offices around the globe. Converium is organized into
three business segments: Standard Property & Casualty Reinsurance,
Specialty Lines and Life & Health Reinsurance. Converium's net losses
for the September 11, 2001 terrorist attacks in the United States are
capped at US$ 289.2 million by its former parent, Zurich Financial
Services. Converium has minimal A&E exposures. Converium has an "A"
rating (stable outlook) both from Standard & Poor's and 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 'expects', 'should continue', 'believes', 'anticipates',
'estimates' and 'intends'. The specific forward-looking statements
cover, among other matters, the improving reinsurance market, the
expected losses related to the September 11, 2001 attack on the United
States, the outcome of insurance regulatory reviews, the Company's
operating results, the rating environment and the prospect for
improving results. Such statements are inherently subject to certain
risks and uncertainties. Actual future results and trends could differ
materially from those set forth in such statements due to various
factors. Such factors include general economic conditions, including
in particular economic conditions; the frequency, severity and
development of insured loss events arising out of catastrophes, as
well as man-made disasters such as the September 11, 2001 attack in
the United States; the ability to exclude and to reinsure the risk of
loss from terrorism; fluctuations in interest rates; returns on and
fluctuations in the value of fixed income investments, equity
investments and properties; fluctuations in foreign currency exchange
rates; rating agency actions; changes in laws and regulations and
general competitive factors, 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
6
Consolidated statements of Three months ended Change Year ended Change
income December 31, December 31,
In US$ million, unless noted 2003 2002 (%) 2003 2002 (%)
----------------------------------------------------------------------------------------------
Revenues
----------------------------------------------------------------------------------------------
Gross premiums written 1,001.8 1,017.1 -1.5 4,223.9 3,535.8 +19.5
----------------------------------------------------------------------------------------------
Less ceded premiums written -146.1 -83.7 +74.6 -396.9 -213.6 +85.8
----------------------------------------------------------------------------------------------
Net premiums written 855.7 933.4 -8.3 3,827.0 3,322.2 +15.2
----------------------------------------------------------------------------------------------
Net change in unearned premiums 105.4 -39.8 -364.8 -150.5 -156.7 -4.0
----------------------------------------------------------------------------------------------
Net premiums earned 961.1 893.6 +7.6 3,676.5 3,165.5 +16.1
----------------------------------------------------------------------------------------------
Net investment income 55.8 59.9 -6.8 233.0 251.8 -7.5
----------------------------------------------------------------------------------------------
Net realized capital gains n.m.
(losses) 12.2 21.1 -42.2 18.4 -10.3
----------------------------------------------------------------------------------------------
Other income (loss) 7.1 18.7 -62.0 2.7 -1.2 n.m.
----------------------------------------------------------------------------------------------
Total revenues 1,036.2 993.3 +4.3 3,930.6 3,405.8 +15.4
----------------------------------------------------------------------------------------------
Benefits, losses and expenses
----------------------------------------------------------------------------------------------
Losses, loss adjustment expenses
and life benefits -679.3 -703.0 -3.4 -2,674.2 -2,492.0 +7.3
----------------------------------------------------------------------------------------------
Underwriting acquisition costs -220.9 -188.0 +17.5 -803.2 -666.7 +20.5
----------------------------------------------------------------------------------------------
Other operating and
administration expenses -55.4 -41.0 +35.1 -197.8 -173.3 +14.1
----------------------------------------------------------------------------------------------
Interest expense -7.1 -5.0 +42.0 -31.0 -16.4 +89.0
----------------------------------------------------------------------------------------------
Total benefits, losses and
expenses -962.7 -937.0 +2.7 -3,706.2 -3,348.4 +10.7
----------------------------------------------------------------------------------------------
Income (loss) before taxes 73.5 56.3 +30.6 224.4 57.4 +290.9
----------------------------------------------------------------------------------------------
Income tax (expense) benefit -17.3 24.5 n.m. -39.3 49.4 n.m.
----------------------------------------------------------------------------------------------
Net income (loss) 56.2 80.8 -30.4 185.1 106.8 +73.3
----------------------------------------------------------------------------------------------
Basic earnings (loss) per share
(US$) 1.41 2.03 -0.62 4.65 2.68 +1.97
----------------------------------------------------------------------------------------------
Diluted earnings (loss) per
share (US$) 1.39 2.01 -0.62 4.59 2.64 +1.95
----------------------------------------------------------------------------------------------
7
Consolidated balance sheets December 31,
In US$ million, unless noted 2003 2002
----------------------------------------------------------------------------------------------
Invested assets
----------------------------------------------------------------------------------------------
Held-to-maturity securities:
Fixed maturities 500.4 -
----------------------------------------------------------------------------------------------
Available-for-sale securities:
Fixed maturities 4,428.2 3,443.1
Equity securities 840.2 530.8
----------------------------------------------------------------------------------------------
Other investments 173.5 177.3
----------------------------------------------------------------------------------------------
Short-term investments 55.8 318.0
----------------------------------------------------------------------------------------------
Total investments 5,998.1 4,469.2
----------------------------------------------------------------------------------------------
Funds Withheld Asset 1,530.6 1,648.1
----------------------------------------------------------------------------------------------
Total invested assets 7,528.7 6,117.3
----------------------------------------------------------------------------------------------
Other assets
----------------------------------------------------------------------------------------------
Cash and cash equivalents 280.8 361.5
----------------------------------------------------------------------------------------------
Premiums receivables:
Current 182.8 131.9
Accrued 1,825.5 1,589.4
----------------------------------------------------------------------------------------------
Reinsurance assets:
Underwriting reserves 1,718.6 1,627.7
Insurance balances receivable, net 224.0 239.9
----------------------------------------------------------------------------------------------
Funds held by reinsureds 1,374.0 935.9
----------------------------------------------------------------------------------------------
Deferred policy acquisition costs 380.1 264.9
----------------------------------------------------------------------------------------------
Deferred income taxes 345.1 391.8
----------------------------------------------------------------------------------------------
Other assets 495.0 390.7
----------------------------------------------------------------------------------------------
Total assets 14,354.6 12,051.0
----------------------------------------------------------------------------------------------
Liabilities
----------------------------------------------------------------------------------------------
Losses and loss adjustment expenses, gross 7,842.8 6,821.3
----------------------------------------------------------------------------------------------
Unearned premiums, gross 1,467.4 1,170.7
----------------------------------------------------------------------------------------------
Future life benefits, gross 483.5 371.7
----------------------------------------------------------------------------------------------
Other reinsurance liabilities 1,087.3 661.6
----------------------------------------------------------------------------------------------
Funds held under reinsurance contracts 529.8 429.5
----------------------------------------------------------------------------------------------
Deferred income taxes 158.3 133.9
----------------------------------------------------------------------------------------------
Accrued expenses and other liabilities 311.6 333.9
----------------------------------------------------------------------------------------------
Debt 390.6 390.4
----------------------------------------------------------------------------------------------
Total liabilities 12,271.3 10,313.0
----------------------------------------------------------------------------------------------
Equity
----------------------------------------------------------------------------------------------
Common stock 253.0 253.0
----------------------------------------------------------------------------------------------
Additional paid-in capital 1,326.7 1,330.9
----------------------------------------------------------------------------------------------
Treasury stock -10.0 -3.3
----------------------------------------------------------------------------------------------
Unearned stock compensation -6.1 -10.0
----------------------------------------------------------------------------------------------
Accumulated other comprehensive income (loss):
Net unrealized gains (losses) on investments, net of taxes 145.3 -53.3
----------------------------------------------------------------------------------------------
Cumulative translation adjustments 116.1 113.9
----------------------------------------------------------------------------------------------
Total accumulated other comprehensive income 261.4 60.6
----------------------------------------------------------------------------------------------
Retained earnings 258.3 106.8
----------------------------------------------------------------------------------------------
Total equity 2,083.3 1,738.0
----------------------------------------------------------------------------------------------
Total liabilities and equity 14,354.6 12,051.0
----------------------------------------------------------------------------------------------
8
Consolidated statements of cash flows Year ended
December 31,
In US$ million, unless noted 2003 2002
----------------------------------------------------------------------------------------------
Net income 185.1 106.8
----------------------------------------------------------------------------------------------
Net realized capital (gains) losses on investments -18.4 10.3
Amortization of premium/discount 43.9 20.6
Depreciation and amortization 30.5 38.2
----------------------------------------------------------------------------------------------
Total adjustments 56.0 69.1
----------------------------------------------------------------------------------------------
Deferred policy acquisition costs -90.5 -47.0
Reinsurance assets 13.6 331.1
Funds held by reinsureds -307.8 -311.2
Funds Withheld Asset 230.6 100.0
Premiums receivable -162.2 -565.1
Unearned premiums, gross 204.2 139.0
Losses and loss adjustment expenses, gross 603.7 744.5
Future life benefits, gross 85.0 119.7
Funds held under reinsurance contracts 72.7 -38.2
Other reinsurance liabilities 329.0 280.2
Income taxes, net 40.3 -32.8
Net change in all other operational assets and liabilities 5.6 -25.7
----------------------------------------------------------------------------------------------
Total changes in operational assets and liabilities 1,024.2 694.5
----------------------------------------------------------------------------------------------
Cash provided by operating activities(9) 1,265.3 870.4
----------------------------------------------------------------------------------------------
Purchases of fixed maturities held-to-maturity -192.4 -
Proceeds from sales and maturities of fixed maturities available-
for-sale 3,813.4 4,573.3
Purchases of fixed maturities available-for-sale -5,054.0 -5,375.3
----------------------------------------------------------------------------------------------
Cash flows from investing activities (fixed maturities) -1,433.0 -802.0
----------------------------------------------------------------------------------------------
Proceeds from sales of equity securities 94.3 599.2
Purchases of equity securities -244.2 -651.1
----------------------------------------------------------------------------------------------
Cash flows from investing activities (equity securities) -149.9 -51.9
----------------------------------------------------------------------------------------------
Net decrease (increase) in short-term investments 277.1 -228.5
Proceeds from sales of other assets 47.4 33.0
Purchases of other assets -69.4 -43.9
----------------------------------------------------------------------------------------------
Cash flows from investing activities (other) 255.1 -239.4
----------------------------------------------------------------------------------------------
Net cash used in investing activities -1,327.8 -1,093.3
----------------------------------------------------------------------------------------------
Issuance of guaranteed subordinated notes - 193.7
Net purchases of common shares -17.3 -14.7
Dividends to shareholders -29.9 -
----------------------------------------------------------------------------------------------
Net cash (used in) provided by financing activities -47.2 179.0
----------------------------------------------------------------------------------------------
Effect of exchange rate changes on cash and cash equivalents 29.0 -15.1
----------------------------------------------------------------------------------------------
Change in cash and cash equivalents -80.7 -59.0
----------------------------------------------------------------------------------------------
Cash and cash equivalents as of January 1 361.5 420.5
----------------------------------------------------------------------------------------------
Cash and cash equivalents as of December 31 280.8 361.5
----------------------------------------------------------------------------------------------
(9)Including US$ 136.7 million received reimbursement of
reinsurance recoverables in dispute in the second quarter of 2002.
9
Segments Three months ended Change Year ended Change
December 31 December 31
In US$ million, unless noted 2003 2002 (%) 2003 2002 (%)
---------------------------------------------------------------------------------------------
Standard Property & Casualty
Reinsurance
---------------------------------------------------------------------------------------------
Gross premiums written 411.1 387.9 +6.0 1,795.4 1,542.3 +16.4
---------------------------------------------------------------------------------------------
Net premiums written 366.0 334.2 +9.5 1,645.6 1,452.2 +13.3
---------------------------------------------------------------------------------------------
Net premiums earned 419.8 357.1 +17.6 1,629.9 1,396.7 +16.7
---------------------------------------------------------------------------------------------
Non-life loss ratio(10) 75.0% 85.4%-10.4pts 68.3% 76.3% -8.0pts
---------------------------------------------------------------------------------------------
Non-life underwriting expense +0.2pts +0.1pts
ratio(11) 21.4% 21.2% 22.3% 22.2%
---------------------------------------------------------------------------------------------
Non-life administration expense
ratio +1.6pts -0.1pts
(12) 5.5% 3.9% 4.3% 4.4%
---------------------------------------------------------------------------------------------
Non-life combined ratio(2) 101.9% 110.5% -8.6pts 94.9% 102.9% -8.0pts
---------------------------------------------------------------------------------------------
Total investment results(13) 28.4 32.7 -13.1 101.5 98.1 +3.5
---------------------------------------------------------------------------------------------
Segment income (loss) 23.1 -3.7 n.m. 183.7 55.8 +229.2
---------------------------------------------------------------------------------------------
Retention ratio(14) 89.0% 86.2% +2.8pts 91.7% 94.2% -2.5pts
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Specialty Lines
---------------------------------------------------------------------------------------------
Gross premiums written 489.7 528.7 -7.4 2,022.0 1,650.3 +22.5
---------------------------------------------------------------------------------------------
Net premiums written 406.3 510.9 -20.5 1,811.9 1,555.3 +16.5
---------------------------------------------------------------------------------------------
Net premiums earned 431.9 448.3 -3.7 1,663.6 1,458.0 +14.1
---------------------------------------------------------------------------------------------
Non-life loss ratio(10) 64.8% 71.5% -6.7pts 74.6% 80.0% -5.4pts
---------------------------------------------------------------------------------------------
Non-life underwriting expense +3.5pts +1.6pts
ratio(11) 24.4% 20.9% 21.6% 20.0%
---------------------------------------------------------------------------------------------
Non-life administration expense +2.1pts
ratio(12) 5.8% 3.7% 4.4% 4.4% -
---------------------------------------------------------------------------------------------
Non-life combined ratio(2) 95.0% 96.1% -1.1pts 100.6% 104.4% -3.8pts
---------------------------------------------------------------------------------------------
Total investment results(13) 35.9 42.2 -14.9 132.4 125.3 +5.7
---------------------------------------------------------------------------------------------
Segment income (loss) 58.9 57.6 +2.3 115.2 56.0 +105.7
---------------------------------------------------------------------------------------------
Retention ratio(14) 83.0% 96.6%-13.6pts 89.6% 94.2% -4.6pts
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Life & Health Reinsurance
---------------------------------------------------------------------------------------------
Gross premiums written 101.0 100.5 +0.5 406.5 343.2 +18.4
---------------------------------------------------------------------------------------------
Net premiums written 83.4 88.3 -5.5 369.5 314.7 +17.4
---------------------------------------------------------------------------------------------
Net premiums earned 109.4 88.2 +24.0 383.0 310.8 +23.2
---------------------------------------------------------------------------------------------
Underwriting expense ratio Life & +2.0pts +0.3pts
Health(15) 23.3% 21.3% 20.9% 20.6%
---------------------------------------------------------------------------------------------
Administration expense ratio Life +0.1pts -0.1pts
& Health(16) 1.9% 1.8% 3.5% 3.6%
---------------------------------------------------------------------------------------------
Total investment results(13) 3.7 6.1 -39.3 17.5 18.1 -3.3
---------------------------------------------------------------------------------------------
Segment income (loss) 1.5 -3.6 n.m. -11.9 -6.5 -83.1
---------------------------------------------------------------------------------------------
Retention ratio(14) 82.6% 87.9% -5.3pts 90.9% 91.7% -0.8pts
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
Corporate Center
---------------------------------------------------------------------------------------------
Operating and administration
expenses -10.0 -7.7 +29.9 -34.3 -30.3 +13.2
---------------------------------------------------------------------------------------------
(10)Non-life loss ratio is defined as losses and loss adjustment
expenses divided by net premiums earned.
(11)Non-life underwriting expense ratio is defined as underwriting
acquisition costs divided by net premiums earned.
(12)Non-life administration expense ratio is defined as other
operating and administration expenses divided by net premiums written.
(13)Total investment results are defined as net investment income
plus net realized capital gains (losses).
(14)Retention ratio is defined as net premiums written divided by
gross premiums written.
(15)Underwriting expense ratio Life & Health is defined as
underwriting expenses divided by net premiums earned.
(16)Administration expense ratio Life & Health is defined as other
operating and administration expenses divided by net premiums written.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONVERIUM HOLDING AG
By: /s/ Dirk Lohmann
Name: Dirk Lohmann
Title: CEO
By: /s/ Christian Felderer
Name: Christian Felderer
Title: General Legal Counsel
Date: February 20, 2004