Converium Seeks Support to Duck Takeover
Swiss reinsurer Converium Holding sought shareholder support Wednesday to fend off a takeover bid by French competitor Scor, promising higher future profits and a share buyback should the company remain independent.
Converium said 2006 net profit fell to $57.1 million (43.16 million euros) from $68.7 million a year earlier, mainly because of a $157.9 million charge linked to the sale of its North American operations.
Excluding the charges, net profit from continuing operations jumped to $215 million (162.51 million euros) from $34.1 million in 2005.
The company said it posted a net loss of $121.3 million (91.69 million euros) in the fourth quarter of 2006. That compared with a $34.2 million profit in the same period of 2005. The return on equity from continuing operations was 14.9%, compared with 4.2% for the fourth quarter of 2005.
Gross premiums written over the quarter were $428.1 million (323.58 million euros), an increase of 10.7% on the year-earlier quarter.
Converium, whose board has twice rejected Scor's 3.1 billion Swiss franc ($2.51 billion; 1.9 billion euros) hostile bid as too low and has rejected talks with the Paris-based company, said it plans to return around $300 million (225 million euros) to shareholders this year that would come after an expected ratings upgrade.
The share buyback, which would be funded through the use of hybrid capital such as a convertible bond that could be changed into shares, should also improve capital and help boost return on equity to 14% by 2009 from a current 3%, bringing Converium's profitability in line with industry peers, it said.
Scor has acquired a 32.9% stake in the Swiss company and is confident it can secure at least 50.1% to push through the merger and create the world's fifth-largest reinsurer behind Swiss Reinsurance and Munich Re and other companies. The voluntary offer period will start April 2 and last until June 1, with the possibility of a two- or three-week extension.
"Converium's targets are ambitious but reasonable," said Stefan Schuermann, insurance analyst at Cheuvreux, who rates the stock at outperform. "However, it may not be enough for Converium to fend off the bid, as it may be already too late."
Converium's shares dropped 1.2% to 20.65 francs ($16.85; 12.74 euros) on the Zurich exchange.