ZUG, Switzerland, Oct. 26, 2004 (PRIMEZONE) -- Converium reports a third quarter 2004 loss of US$ 116.3 million. This result reflects the continuing satisfactory underlying performance of its in-force book and a number of previously announced extraordinary charges. The main items are an additional reserve strengthening of US$ 96.4 million net based on an in-depth analysis of Tillinghast's actuarial review, losses of US$ 95.8 million from an unusual cumulation of hurricanes and typhoons and a US$ 20.0 million expense for a retrospective stop-loss retrocession cover purchased from National Indemnity Company. Adjusted for the reserve action and natural catastrophes, Converium recorded a third quarter non-life combined ratio of 96.0%, which testifies to the favorable performance of the Company's more recent underwriting years. In addition, investment activities continued to exhibit very satisfactory results, with total investment income yield improving further to 4.9%.Third quarter 2004 highlights
-- Operating loss: US$ -125.0 million
-- Impact from reserve strengthening and US$ -192.2 million
hurricanes/typhoons:
-- Net loss: US$ -116.3 million
-- Gross premiums written: US$ 1,033.3 million
-- Non-life combined ratio: 117.3%
-- Impact from reserve strengthening and 21.3% hurricanes/typhoons:
-- Adjusted non-life combined ratio: 96.0%
-- Total investment income yield: 4.9%
-- Shareholders' equity: US$ 1,275.1 million
-- Cash flows: US$ 21.1 million
Overview of third quarter performance and short-term outlook
The following developments had measurable effects on Converium's third quarter 2004 financial results:
-- The business written by Converium in the underwriting years 2002,
2003, and 2004 continued to show a satisfactory performance, both
for the non-life segments as well as for the Life & Health
Reinsurance segment. Excluding prior years' reserves, the non-
life combined ratio was 106.6% (including a 10.6% impact by
hurricanes and typhoons) for the third quarter 2004,
respectively 98.3% for the first nine months of 2004.
-- Following a detailed analysis of the specific conclusions in
Tillinghast's actuarial study, Converium has -- as anticipated
on August 31, 2004 -- made additional adjustments to carried
reserves aggregating to a net increase of US$ 96.4 million net
in the third quarter of 2004. This amount equals 1.3% of
Converium's non-life net reserves as of September 30, 2004.
The reserve strengthening primarily arose from prior years'
North American professional liability, umbrella, excess &
surplus, workers' compensation, and non-US motor liability
business. It added 10.7 percentage points to the quarter's
non-life combined ratio.
-- Since June 30, 2004, Converium has commuted approximately US$
265.0 million in loss reserves related to prior years' business
assumed by the Company's North American operation, Converium
Reinsurance (North America) Inc. ("CRNA"), with a corresponding
reduction in cash and invested assets. Currently, CRNA is in
negotiations with several clients for additional offers of
commutation, and is pursuing these diligently. The third quarter
reserve adjustment of US$ 96.4 million net takes into account
recent commutations. In general, commutations can accelerate the
realization of profit inherent in long-tail reserves by
crystallizing outstanding claims reserves into payments, which
are discounted to reflect the time value of money. Since
commutation payments essentially reflect a discounted present
value of future cash flows, future investment income earned will
decline as the assets backing those reserves are liquidated to
make payments.
-- As announced on August 31, 2004, Converium has acquired a
retrospective stop-loss retrocession cover from National
Indemnity Company, a Standard & Poor's AAA-rated member of the
Berkshire Hathaway group of insurance companies. The cost of
this cover represents a one-off charge to the third quarter of
2004 of US$ 20.0 million.
-- Net losses from Hurricanes Charley, Frances, Ivan and Jeanne
and typhoons in Japan amounted to US$ 95.8 million and added 10.6
percentage points to the quarter's non-life combined ratio.
-- In the third quarter of 2004 Converium has incurred restructuring
charges of US$ 3.4 million related to severance payments and the
discontinuation of the Company's North American operations.
Against this backdrop there is a marked difference between Converium's reported results and its performance adjusted for the various extraordinary items. For the third quarter 2004 Converium reported an operating loss of US$ 125.0 million and a net loss of US$ 116.3 million that reflect total charges of US$ 215.6 million due to an additional strengthening of reserves, losses from hurricanes and typhoons, the cost of a retrospective stop-loss cover and restructuring charges.
The increase in gross premiums written, net premiums written, and net premiums earned in the third quarter of 2004 (by 2.3%, 5.2% and 10.4%, respectively) reflects market conditions, new client relationships in certain key markets and the weakening of the US$ compared to other major currencies; special terminations did not materially impact the quarter's top line.
Converium reports a non-life combined ratio of 117.3% for the third quarter of 2004. Adjusted for the additional strengthening of reserves by US$ 96.4 million net and the losses from hurricanes and typhoons of US$ 95.8 million, the non-life combined ratio was 96.0%, which is indicative of a continuing favorable performance of recent underwriting years.
Converium's Life & Health Reinsurance segment reported a segment income of US$ 5.7 million, an improvement of US$ 20.5 million compared to the same period of the previous year, when Converium recorded an adverse development of its Guaranteed Minimum Death Benefits (GMDB) book. No further reserving actions were required for GMDB in 2004.
Converium's investment results continued to improve markedly. The Company's net investment income increased for the three and nine months ended September 30, 2004 as compared to the same periods of 2003. This increase largely resulted from growth in invested assets over 2003, particularly in Converium's fixed-maturities portfolio, as well as income received from the transition of a fixed-income bond to a direct fixed-income investment portfolio.
The Company's average annualized net investment income yield (pre-tax) was 3.9% and 3.8% for the three and nine months ended September 30, 2004, respectively, as compared to 3.0% and 3.4% for the same periods of 2003, reflecting increasing interest rates in 2004.
Converium's average annualized total investment income yield (pre-tax) was 4.9% and 4.5% for the three and nine months ended September 30, 2004, respectively, as compared to 2.9% and 3.5% for the same periods of 2003. During the third quarter 2004, the total investment income yields were positively impacted by the increase in realized gains as well as the decline in impairment charges compared to 2003 resulting from the sale of equity securities to adjust our asset allocation to reduce investment portfolio risks.
Converium has reached an agreement in principle on the main terms of a new US$ 1.6 billion credit facility, comprising a US$ 1.5 billion tranche for letter-of-credit issuance and a US$ 0.1 billion stand-by revolving credit tranche with its principal international relationship banks. The parties intend to finalize the transaction by mid-November 2004. This facility will replace the existing syndicated credit line of US$ 0.9 billion that was signed in July 2003.
The Company believes that its "BBB+" rating from Standard & Poor's and the availability of adequate letter-of-credit facilities will support Converium's efforts to maintain its franchise in its European, Asian and Latin American target markets and to retain relationships with key clients and intermediaries in the upcoming January 2005 renewals.
Financial highlights: Three months ended Nine months Year
Income statement, September 30 ended ended
return on equity September 30 Dec. 31
In US$ million, unless
noted 2004 2003 2004 2003 2003
Gross premiums written 1,033.3 1,009.6 3,444.5 3,222.1 4,223.9
- growth (%) +2.3% +6.9%
Net premiums written 933.8 887.4 3,181.2 2,971.3 3,827.0
- growth (%) +5.2% +7.1%
Net premiums earned 1,013.9 918.6 3,016.8 2,715.4 3,676.5
- growth (%) +10.4% +11.1%
Non-life loss ratio 91.9% 69.2% 92.7% 72.1% 71.5%
- change in percentage +22.7pts +20.6pts
points 10.6% 3.6%
- impact of 10.7% 19.6%
hurricanes/typhoons
- impact of reserve
strengthening
Non-life underwriting 20.9% 22.5% 21.2% 21.6% 22.0%
expense ratio -1.6pts -0.4pts
- change in percentage
points
Non-life administration 4.5% 4.0% 4.0% 4.0% 4.4%
expense ratio +0.5pts -
- change in percentage
points
Non-life combined ratio 117.3% 95.7% 117.9% 97.7% 97.9%
- change in percentage +21.6pts +20.2pts
points 10.6% 3.6%
- impact of 10.7% 19.6%
hurricanes/typhoons
- impact of reserve
strengthening
Non-life combined ratio 96.0% 94.7%
excluding
hurricanes/typhoons and
reserve strengthening
Life & Health technical 5.2 -12.6 13.8 -11.1 -8.0
result n.m. n.m.
- growth (%)
Total investment 97.3 52.9 266.8 183.4 251.4
results +83.9% +45.5%
- growth (%)
Total investment income 4.9% 2.9% 4.5% 3.5% 3.5%
yield +2.0 pts +1.0pt
- change in percentage
points
Total investment return 6.4% 3.5% 3.7% 5.7% 5.7%
- growth (%) +2.9pts -2.0pts
Operating income -125.0 56.4 -348.2 144.7 206.0
- change (%) n.m. n.m.
Net (loss) income -116.3 44.3 -710.6 128.9 185.1
- change (%) n.m. n.m.
Financial Three months ended Nine months Year
highlights: September 30 ended ended
Income statement, September 30 Dec 31
return on equity
in US$ million,
unless noted 2004 2003 2004 2003 2003
(Loss) earnings -2.91 1.12 -17.83 3.24 4.65
per share (US$) n.m. n.m.
- growth (%)
Adjusted (loss) -0.79 -4.84
earnings per
share (US$)
Return on equity -22.3% 10.2% -45.5% 9.9% 10.7%
- change in -32.5pts -55.4pts
percentage points
Financial highlights: September 30, June 30, December 31,
Balance sheet 2004 2004 2003
In US$ million, unless
noted
Total invested assets 7,965.1 7,926.4 7,809.5
plus cash -0.5% +1.5%
- growth (%)
Claims supporting 1,665.9 1,739.9 2,473.9
capital -4.3% -29.7%
- growth (%)
Shareholders' equity 1,275.1 1,349.2 2,083.3
- growth (%) -5.5% -35.2%
Total tangible equity 1,250.7 1,322.8 1,732.2
- growth (%) -5.5% -23.6%
Book value per share 31.99 33.90 52.38
(US$) -5.6% -35.3%
- growth (%)
Book value per share 39.95 42.45 65.21
(CHF) -5.9% -34.9%
- growth (%)
Adjusted book value per 11.52
share (US$)
Adjusted book value per 14.39
share (CHF)
Financial highlights: Three months ended Nine months ended
Investment results September 30 September 30
in US$ million, unless
noted 2004 2003 2004 2003
Investment income - 52.3 26.3 146.3 92.2
Fixed maturities
Investment income - 1.0 1.7 10.2 9.5
Equity securities
Investment income - 18.2 20.5 57.5 64.3
Funds Withheld Asset
Other investment income, 5.5 5.7 10.8 11.2
net
Net investment income 77.0 54.2 224.8 177.2
Average annualized net 3.9% 3.0% 3.8% 3.4%
investment income yield
(pre-tax)
Net realized capital 20.3 -1.3 42.0 6.2
gains (losses)
Total investment results 97.3 52.9 266.8 183.4
Average annualized total 4.9% 2.9% 4.5% 3.5%
investment income yield
(pre-tax)
Change in net unrealized 30.9 10.9 -46.0 115.9
gains (pre-tax)
Total investment return 128.2 63.8 220.8 299.3
(pre-tax)
Average annualized total 6.4% 3.5% 3.7% 5.7%
investment return
(pre-tax)
Average total invested 7,945.8 7,245.4 7,887.3 6,938.1
assets (including cash
and cash equivalents)
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 38.7% of total net premiums written in the third quarter of 2004. For this period of time Converium's Standard Property & Casualty Reinsurance segment reported a segment income of US$ 18.9 million, a decline of US$ 31.9 million compared to the same period of the previous year.
In the third quarter of 2004 gross premiums written increased by 6.3% to US$ 407.4 million, net premiums written increased by 6.6% to US$ 361.2 million, and net premiums earned decreased by 0.2% to US$ 422.1 million. The Standard Property & Casualty Reinsurance segment's non-life combined ratio was 105.0% for the third quarter of 2004 (compared to 93.7% for the third quarter of 2003). The results were substantially influenced by hurricanes Charley, Frances, Ivan and Jeanne and Japanese typhoons which generated losses of US$ 95.8 million and added 22.7 percentage points to the segment's third quarter loss ratio.
For the third quarter of 2004, the Standard Property & Casualty Reinsurance segment recorded a positive reserve development of US$ 31.8 million. This favorable development primarily related to property (US$ 31.5 million) and general third party liability (US$ 45.6 million) and was partially offset by reserve strengthening, mainly for motor outside the United States (US$ 45.8 million).
For the nine months ended September 30, 2004, gross premiums written increased 7.2% to US$ 1,483.5 million, net premiums written increased 5.5% to US$ 1,349.7 million and net premiums earned increased 6.0% to US$ 1,282.3 million.
For the nine months ended September 30, 2004, net premiums written growth in the Standard Property & Casualty Reinsurance segment by lines of business included:
-- Motor (increased by 17.1% or US$ 66.3 million to US$ 454.0
million), which grew as a result of the expansion of motor
business in Western Europe;
-- Personal accident non-life (increased by 15.5% or US$ 4.1 million
to US$ 30.7 million), which expanded on the back of new or
extended relationships with cedents in Italy and a number of
other European countries; and
-- General third party liability (increased by 18.1% or US$ 48.8
million to US$ 317.9 million), which grew mainly due to
continuing rate increases and new business.
These increases were partially offset by a decrease in net premiums written within the property line of business. Property contracted by 8.3% or US$ 49.3 million to US$ 547.1 million, which was primarily driven by the softening of property rates and a consequent non-renewal of several large contracts in North America, and by reduced premium writings with cedents in Asia and Latin America.
Specialty Lines represented approximately 49.1% of total net premiums written in the third quarter of 2004. For this period of time Converium's Specialty Lines segment reported a segment loss of US$ 81.2 million. In the third quarter of 2004, gross premiums written decreased by 6.7% to US$ 506.9 million, and net premiums written decreased by 3.5% to US$ 458.3 million; net premiums earned increased by 17.2% to US$ 478.3 million. These developments reflect the strict underwriting discipline and cycle management applied by Converium. The Specialty Lines segment's non-life combined ratio was 128.2% for the third quarter of 2004.
Specialty Lines reported a segment loss which was primarily attributable to reserve additions. In the third quarter of 2004, US$ 128.2 million of reserve strengthening were recorded, which added 26.8 percentage points to the segment's loss ratio. The strengthening arose mainly from workers' compensation (US$ 26.9 million) and from the professional liability & other special liability lines, in particular umbrella, professional liability and excess & surplus lines of business in the United States (US$ 101.9 million).
For the nine months ended September 30, 2004, gross premiums written increased 2.9% to US$ 1,577.3 million, net premiums written increased 4.9% to US$ 1,473.9 million and net premiums earned increased 13.3% to US$ 1,395.2 million.
For the nine months ended September 30, 2004, the Specialty Lines segment exhibited the following growth dynamics:
-- Professional liability and other special liability (increased by
7.0% or US$ 34.4 million to US$ 528.6 million), which grew as a
result of new business written and an increase in premium volume
for Converium's Medical Defence Union (MDU) business;
-- Agribusiness (increased by 34.2% or US$ 22.4 million to US$
88.0 million), which expanded as new business was written as
well as return premium received on a specific contract due to
favorable technical results; and
-- Aviation & space (increased by 8.6% or US$ 23.0 million to US$
289.7 million), which grew as a result of an increased net
retention in the business underwritten by Global Aerospace
Underwriting Managers Ltd.
Life & Health Reinsurance represented approximately 12.2% of total net premiums written in the third quarter of 2004. For this period of time Converium's Life & Health Reinsurance segment reported a segment income of US$ 5.7 million, an increase of US$ 20.5 million compared to the same period of the previous year.
In the third quarter of 2004 gross premiums written increased by 43.9% to US$ 119.0 million, net premiums written increased by 54.9% to US$ 114.3 million, and net premiums earned increased by 29.7% to US$ 113.5 million.
Life & Health Reinsurance reported a segment income for the nine months ended September 30, 2004 as compared to a segment loss for the same period in 2003. The technical result increased from minus US$ 12.6 million to US$ 5.2 million for the same period. The increases in 2004 were primarily attributable to:
-- Strong growth in premium volume driven by the expansion of
existing financing reinsurance transactions in Continental
Europe and increased shares of current business; and
-- The development of Converium's GMDB book during the first nine
months of 2004 as compared to 2003. Whereas in the first nine
months of 2003 reserves were strengthened by US$ 22.6 million, no
actions were required in 2004.
For the nine months ended September 30, 2004, gross premiums written increased 25.6% to US$ 383.7 million, net premiums written increased 25.0% to US$ 357.6 million and net premiums earned increased 24.0% to US$ 339.3 million. Converium continues to build its Life & Health Reinsurance operations in order to further reduce the volatility of the Company's net income, because life and health reinsurance has a low correlation to property and casualty risk and can therefore improve risk diversification.
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 third quarter of 2004 other operating and administration expenses were US$ 8.2 million (an increase of 1.2% as compared to the same period in 2003).
Rights Offering
In October 2004, Converium's share capital was increased by CHF 533,416,225 by issuing 106,683,245 shares at CHF 5.00 each. The capital increase (and reduction of the nominal value) was recorded, in the Commercial Register of the Canton of Zug (Switzerland) on October 12, 2004. After the registration of the share capital increase in the Commercial Register of the Canton of Zug, Converium's issued outstanding share capital is now CHF 733,447,310, divided into 146,689,462 shares with a nominal value of CHF 5.00. The capital increase brings Converium's total tangible capital close to the level of December 31, 2003.
After the reduction of the nominal value from CHF 10 to CHF 5 for each of Converium's shares, its conditional capital is now CHF 20,000,000 pursuant to which up to 4,000,000 shares can be issued upon exercise of conversion or option rights allotted in connection with bonds and other financial market instruments. Similarly, Converium's authorized capital is now CHF 20,000,000 pursuant to which the Board is authorized to issue up to 4,000,000 shares.
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.
Enquiries:
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 international multi-line reinsurer known for its innovation, professionalism and service. Today Converium employs more than 800 people in 20 offices around the globe and is organized into three business segments: Standard Property & Casualty Reinsurance, Specialty Lines and Life & Health Reinsurance. Converium Ltd, Converium Ruckversicherung (Deutschland) AG and Converium Insurance (UK) Ltd. have a "BBB+" rating (outlook stable) from Standard & Poor's. Converium Ltd. has a "B++" (outlook stable) rating 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 "expects," "should continue," "believes," "anticipates," "estimates" and "intends". The specific forward-looking statements cover, among other matters, the reinsurance market, the outcome of insurance regulatory reviews, the Company's operating results, the rating environment and the prospect for improving results, the amount of capital required and impact of its capital improvement measures, including the restructuring of our U.S. business and its reserve position. 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; the outcome of our regular quarterly reserve review, our ability to raise capital and the success of our capital improvement measures, the ability to obtain applicable regulatory approval for our capital improvement measures, 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.
This document does not constitute or form part of an offer or solicitation of an offer, an invitation to subscribe for or purchase any securities. In addition, the securities of the company to be issued in any share offering have not and will not be registered under the United States securities laws and may not be offered, sold or delivered within the United States or to US persons absent registration under or an exemption from the registration requirements of the United States securities laws.
In the United Kingdom this announcement is directed only at persons who have professional experience in matters relating to investments or are high net worth companies, unincorporated associations etc, for the purposes of Article 49 of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2001 (all such persons together being referred to as "relevant persons"). This announcement must not be acted upon or relied on by persons who are not relevant persons. Any investment or investment activity to which this announcement relates is available only to relevant persons and will be engaged in only with relevant persons. www.converium.com
Consolidated Three months ended Change Nine months ended Change
statements of September 30, September 30,
income
(Unaudited)
In US$ million,
unless noted 2004 2003 (%) 2004 2003 (%)
Revenues
Gross premiums 1,033.3 1,009.6 +2.3% 3,444.5 3,222.1 +6.9%
written
Less ceded -99.5 -122.2 -18.6% -263.3 -250.8 +5.0%
premiums written
Net premiums 933.8 887.4 +5.2% 3,181.2 2,971.3 +7.1%
written
Net change in
unearned 80.1 31.2 n.m. -164.4 -255.9 -35.8%
premiums
Net premiums 1,013.9 918.6 +10.4% 3,016.8 2,715.4 +11.1%
earned
Net investment 77.0 54.2 +42.1% 224.8 177.2 +26.9%
income
Net realized
capital gains 20.3 -1.3 n.m. 42.0 6.2 n.m.
(losses)
Other (loss) -31.7 - n.m. -28.8 -4.4 n.m.
income
Total revenues 1,079.5 971.5 +11.1% 3,254.8 2,894.4 n.m.
Benefits, losses and expenses
Losses, loss
adjustment -914.2 -662.2 +38.1% -2,738.9 -1,994.9 +37.3%
expenses and
life benefits
Underwriting
acquisition -211.2 -201.8 +4.7% -642.4 -582.3 +10.3%
costs
Other operating
and -50.6 -45.5 +11.2% -154.9 -142.4 +8.8%
administration
expenses
Interest expense -8.2 -6.9 +18.8% -24.8 -23.9 +3.8%
Impairment of - - n.m. -94.0 - n.m.
goodwill
Restructuring -3.4 - n.m. -3.4 - n.m.
costs
Total benefits,
losses and -1,187.6 -916.4 +29.6% -3,658.4 -2,743.5 33.3%
expenses
(Loss) Income -108.1 55.1 n.m. -403.6 150.9 n.m.
before taxes
(Loss) income -8.2 -10.8 -24.1% -307.0 -22.0 n.m.
tax (expense)
Net (loss) -116.3 44.3 n.m. -710.6 128.9 n.m.
income
Basic (loss)
earnings per -2.91 1.12 n.m. -17.83 3.24 n.m.
share (US$)
Diluted (loss)
earnings per -2.87 1.10 n.m. -17.56 3.20 n.m.
share (US$)
Consolidated balance sheets September 30, December 31,
In US$ million, unless noted 2004 2003
(unaudited)
-------------------------------------------------------------------
Invested assets
-------------------------------------------------------------------
Held-to-maturity securities:
Fixed maturities 851.8 500.4
Available-for-sale securities:
Fixed maturities 4,724.6 4,428.2
Equity securities 372.2 840.2
Other investments 259.4 173.5
Short-term investments 144.0 55.8
Total investments 6,352.0 5,998.1
Funds Withheld Asset 1,314.5 1,530.6
Total invested assets 7,666.5 7,528.7
-------------------------------------------------------------------
Other assets
-------------------------------------------------------------------
Cash and cash equivalents 298.6 280.8
Premiums receivables:
Current 221.7 182.8
Accrued 1,989.9 1,825.5
Reinsurance assets:
Underwriting reserves 1,593.1 1,718.6
Insurance balances receivable, net 232.8 224.0
Funds held by reinsureds 1,608.2 1,374.0
Deferred policy acquisition costs 415.1 380.1
Deferred income taxes 90.9 345.1
Other assets 460.6 495.0
Total assets 14,577.4 14,354.6
-------------------------------------------------------------------
Liabilities
-------------------------------------------------------------------
Losses and loss adjustment 8,809.0 7,842.8
expenses, gross
Unearned premiums, gross 1,594.8 1,467.4
Future life benefits, gross 518.8 483.5
Other reinsurance liabilities 1,154.2 1,087.3
Funds held under reinsurance 459.6 529.8
contracts
Deferred income taxes 137.8 158.3
Accrued expenses and other 237.3 311.6
liabilities
Debt 390.8 390.6
Total liabilities 13,302.3 12,271.3
-------------------------------------------------------------------
Equity
-------------------------------------------------------------------
Common stock 253.0 253.0
Additional paid-in capital 1,330.8 1,326.7
Treasury stock -6.5 -10.0
Unearned stock compensation -6.6 -6.1
Accumulated other comprehensive
income:
Net unrealized gains on 94.3 145.3
investments, net of taxes
Cumulative translation adjustments 114.1 116.1
Total accumulated other 208.4 261.4
comprehensive income
Retained (deficit) earnings -504.0 258.3
Total equity 1,275.1 2,083.3
Total liabilities and equity 14,577.4 14,354.6
Consolidated statements of cash flows Nine months ended
(Unaudited) September 30,
In US$ million, unless noted 2004 2003
Net income -710.6 128.9
Net realized capital gains on investments -42.0 -6.2
Amortization of premium/discount 43.5 32.2
Depreciation and amortization 18.7 22.5
Impairment of goodwill and deferred tax 363.8 -
assets
Total adjustments 384.0 48.5
Deferred policy acquisition costs -36.0 -87.6
Reinsurance assets 117.8 -11.7
Funds held by reinsureds -238.1 -162.9
Funds Withheld Asset 218.4 116.6
Premiums receivables -195.2 -446.3
Unearned premiums, gross 127.9 267.4
Losses and loss adjustment expenses, gross 958.5 502.4
Future life benefits, gross 36.4 95.1
Funds held under reinsurance contracts -71.9 68.1
Other reinsurance liabilities 71.7 316.8
Income taxes, net 26.0 24.9
Net change in all other operational assets -267.5 43.8
and liabilities
Total changes in operational assets and 748.0 726.6
liabilities
Cash provided by operating activities 421.4 904.0
Purchases of fixed maturities -212.1 -108.9
held-to-maturity
Proceeds from sales and maturities of fixed 2,679.5 2,786.1
maturities available-for-sale
Purchases of fixed maturities -3,106.8 -3,553.3
available-for-sale
Cash flows from investing activities (fixed -639.4 -876.1
maturities)
Proceeds from sales of equity securities 958.8 41.0
Purchases of equity securities -537.5 -182.0
Cash flows from investing activities 421.3 -141.0
(equity securities)
Net (increase) decrease in short-term -88.2 108.3
investments
Proceeds from sales of other assets 65.1 25.1
Purchases of other assets -100.4 -62.7
Cash flows from investing activities -123.5 70.7
(other)
Net cash used in investing activities -341.6 -946.4
Net purchases of common shares -4.9 -5.4
Dividends to shareholders -47.9 -29.2
Net cash used in financing activities -52.8 -34.6
Effect of exchange rate changes on cash and -9.2 9.8
cash equivalents
Change in cash and cash equivalents 17.8 -67.2
Cash and cash equivalents as of January 1 280.8 361.5
Cash and cash equivalents as of September 298.6 294.3
30
Three months
Segments ended Nine months ended
(Unaudited) September 30, Change September 30, Change
In US$ million, 2004 2003 (%) 2004 2003 (%)
unless noted
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Standard Property & Casualty Reinsurance
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Gross premiums 407.4 383.4 +6.3% 1,483.5 1,384.3 +7.2%
written
Net premiums 361.2 338.9 +6.6% 1,349.7 1,279.6 +5.5%
written
Net premiums 422.1 422.9 -0.2% 1,282.3 1,210.1 +6.0%
earned
Non-life loss 76.5% 66.2% +10.3pts 78.6% 66.0% +12.6pts
ratio
Non-life 23.2% 23.5% -0.3pts 22.6% -
underwriting 22.6%
expense ratio
Non-life 5.3% 4.0% +1.3pts 4.5% +0.5pts
administration 4.0%
expense ratio
Non-life combined 105.0% 93.7% +11.3pts 105.7% 92.6% +13.1pts
ratio
Total investment 37.0 20.9 +77.0% 104.2 73.1 +42.5%
results
Segment income 18.9 50.8 -62.8% 27.8 160.6 -82.7%
Retention ratio 88.7% 88.4% +0.3pts 91.0% 92.4% -1.4pts
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Specialty Lines
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Gross premiums 506.9 543.5 -6.7% 1,577.3 1,532.3 +2.9%
written
Net premiums 458.3 474.7 -3.5% 1,473.9 1,405.6 +4.9%
written
Net premiums 478.3 408.2 +17.2% 1,395.2 1,231.7 +13.3%
earned
Non-life loss 105.4% 72.3% +33.1pts 105.7% 78.0% +27.7pts
ratio
Non-life
underwriting 18.9% 21.5% -2.6pts 20.0% 20.7% -0.7pts
expense ratio
Non-life
administration 3.9% 4.0% -0.1pts 3.5% 4.0% -0.5pts
expense ratio
Non-life combined 128.2% 97.8% +30.4pts 129.2% 102.7% +26.5pts
ratio
Total investment 52.7 28.0 +88.2% 142.8 96.5 +48.0%
results
Segment (loss) -81.2 34.1 n.m. -266.9 56.3 n.m.
income
Retention ratio 90.4% 87.3% +3.1pts 93.4% 91.7% +1.7pts
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Life & Health Reinsurance
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Gross premiums 119.0 82.7 +43.9% 383.7 305.5 +25.6%
written
Net premiums 114.3 73.8 +54.9% 357.6 286.1 +25.0%
written
Net premiums 113.5 87.5 +29.7% 339.3 273.6 +24.0%
earned
Underwriting
expense ratio 20.1% 16.8% +3.3pts 21.9% 19.9% +2.0pts
Life & Health
Administration 4.9% 6.4% -1.5pts 4.6% 3.9% +0.7pts
expense ratio
Life & Health
Total investment 7.6 4.0 +90.0% 19.8 13.8 +43.5%
results
Segment income 5.7 -14.8 n.m. 11.6 -13.4 n.m.
(loss)
Retention ratio 96.1% 89.2% +6.9pts 93.2% 93.6% -0.4pts
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Corporate Center
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Operating and
administration -8.2 -8.1 +1.2% -25.1 -24.3 +3.3%
expenses