Via Facsimile and U.S. Mail
Mail Stop 6010
September 16, 2005
Mr. Andreas Zdrenyk
Chief Financial Officer and
Chief Information Officer
Converium Holding AG
General Guisan-Quai 26
8022 Zurich
Switzerland
Re: Coverium Holding AG
Form 20-F for Fiscal Year Ended December 31, 2004
Filed June 30, 2005
File No. 333-14106
Dear Mr. Zdrenyk:
We have limited our review of your filing to those issues we
have addressed in our comments. Where indicated, we think you
should
revise your document in response to these comments. If you
disagree,
we will consider your explanation as to why our comments are
inapplicable or a revision is unnecessary. Please be as detailed
as
necessary in your explanation. In some of our comments, we may
ask
you to provide us with information so we may better understand
your
disclosure. After reviewing this information, we may or may not
raise additional comments.
Please understand that the purpose of our review process is
to
assist you in your compliance with the applicable disclosure
requirements and to enhance the overall disclosure in your filing.
We look forward to working with you in these respects. We welcome
any questions you may have about our comments or on any other
aspect
of our review. Feel free to call us at the telephone numbers
listed
at the end of this letter.
Form 20-F for Year Ended December 31, 2004
Item 4. Information on the Company
B. Business Overview
Our Business
Structured/finite, page 23
1. We note from your disclosures that all of your operating
segments
offer structured/finite solutions. It is unclear from your filing
what types of "solutions" you offer. As such please tell us
supplementally the types of reinsurance protection offered (i.e.
excess of loss or finite reinsurance), whether the protection is
prospective or retrospective, how losses attach to your contracts
and/or treaties and any other provisions in the contracts and/or
treaties that are not usually included in a standard reinsurance
contract. In addition please tell us the economic benefit that
you
are attempting to provide to the reinsurer. The intent of the
comment is to first understand your business and then provide
suggested disclosures that help provide greater transparency into
your business.
Non-Life Operations
Structured Property & Casualty Reinsurance, page 25
2. We note that your Structured/Finite line of business has loss
ratios of 162.7%, 188.2% and 228.4% for the years ended December
31,
2004, 2003 and 2002, respectively. Due to the fact that the loss
ratios for this line of business are significantly higher than
your
other lines of business, please disclose the reasons for the high
loss ratios and any related know trends and/or uncertainties.
Item 5. Operating and Financial Review and Prospects
A. Operating Results
Critical Accounting Estimates
Non-life and loss adjustment reserves, page 56
3. We believe your disclosure in Management`s Discussion and
Analysis
regarding the reserve for loss and loss adjustment expenses could
be
improved to better explain the judgments and uncertainties
surrounding this estimate and the potential impact on your
financial
statements. We believe that disclosures explaining the likelihood
that materially different amounts would be reported under
different
conditions or using different assumptions is consistent with the
objective of Management`s Discussion and Analysis. Accordingly,
please revise MD&A to include the following information for each
of
your lines of business.
a. Please disclose the range of loss reserve estimates as
determined
by your actuaries. Discuss the key assumptions used to arrive at
management`s best estimate of loss reserves within that range and
what specific factors led management to believe this amount rather
than any other amount within the range represented the best
estimate
of incurred losses. In addition include quantified and narrative
disclosure of the impact that reasonably likely changes in one or
more of the variables (i.e. actuarially method and/or assumptions
used) would have on reported results, financial position and
liquidity.
b. If you do not calculate a range around your loss reserve, but
instead use point estimates please include the following
disclosures:
* Disclose the various methods considered and the method that was
selected to calculate the reserves. If multiple point estimates
are
generated, include the range of these point estimates. Include a
discussion of why the method selected was more appropriate over
the
other methods.
* Discuss how management determined the most appropriate point
estimate and why the other point estimates were not chosen. Also
clarify whether the company actually records to the point estimate
or
if not, how that estimate is used.
* Include quantified and narrative disclosure of the impact that
reasonably likely changes in one or more of the variables (i.e.
actuarially method and/or assumptions used) would have on reported
results, financial position and liquidity.
c. Because IBNR reserve estimates are more imprecise, please
disclose
the amount of IBNR separately from case reserves for all lines of
business.
4. We note that you set your claim reserves for assumed
reinsurance
operations based upon information received from the cedant. As
this
appears to pose a potential for a higher degree of uncertainty in
establishing the estimate of assumed loss reserves as compared to
direct loss reserves, please expand the disclosure in the critical
accounting estimates section of MD&A related to this uncertainty.
Also in this disclosure, please consider disclosing the following:
a. Include in this disclosure the risks associated with making
this
estimate and the effects and expected effects this uncertainty has
or
will have on management`s judgments and assumptions in
establishing
the assumed loss reserve.
b. The nature and extent of the information received from the
cedants
related to policies, claims, unearned premiums and loss reserves;
c. The time lag from when claims are reported to the cedant to
when
the cedant reports them to the company and whether, how, and to
what
extent this time lag effects the loss reserve estimate;
d. How management uses the information received from the cedants
in
its determination of its assumed loss reserves, whether
reinsurance
intermediaries are used to transact and service reinsurance
policies,
and how that impacts the loss reserving methodology;
e. The amount of any backlog related to the processing of assumed
reinsurance information, whether the backlog has been reserved for
in
the financial statements and, if applicable, when the backlog will
be
resolved;
f. What process management performs to determine the accuracy and
completeness of the information received from the cedants;
g. How management resolves disputes with cedants, how often
disputes
occur, and the magnitude of any current, material disputes; and
h. Whether management uses historical loss information to validate
its existing reserves and/or as a means of noticing unusual trends
in
the information received from the cedants.
Premiums, page 56
5. We believe your disclosure in Management`s Discussion and
Analysis
regarding the estimate of assumed premium on your reinsurance
business could be improved to better explain the judgments and
uncertainties surrounding this estimate and the potential impact
on
your financial statements. Accordingly, please revise MD&A to
include the following information.
a. Please disclose the assumed premium estimate for each line of
business, including the amount of any estimate for commissions and
related expenses and the amount included in premium receivable
related to the estimate.
b. Discuss the key assumptions used to arrive at management`s best
estimate of the assumed premium estimate and what specific factors
led management to believe this amount reflects management`s best
estimate of assumed premiums. In addition include quantified and
narrative disclosure of the impact that reasonably likely changes
in
one or more of the variables (i.e. actuarially method and/or
assumptions used) would have on reported results, financial
position
and liquidity.
c. Disclose if any provision for doubtful accounts is recorded
related to the assumed premium estimate, and if not, why
management
believes all amounts recorded will be collectible.
Results of Operations
Year Ended December 31, 2004 Compared to Year Ended December 31,
2003
Converium Consolidated Losses, Loss Adjustment Expenses and Life
Benefits, page 62
6. It appears that you have significantly revised your estimate of
loss reserves recorded in prior years in your Specialty Lines.
Please revise Management`s Discussion and Analysis to explain the
reason for your change in estimate. Please include the following
disclosures:
a. Identify the years to which the change in estimate relates and
disclose the amount of the related loss reserve as of the
beginning
of the year that was re-estimated. Discuss and quantify
offsetting
changes in estimates that increase and decrease the loss reserve.
b. Identify the changes in the key assumptions you made to
estimate
the reserve since the last reporting date.
c. Identify the nature and timing of the change in estimate,
explicitly identifying and describing in reasonable specificity
the
new events that occurred or additional information acquired since
the
last reporting date that led to the change in estimate. In your
disclosure clarify what specific events in 2004 caused the
significant reserve strengthening that was not known when you
recorded similar reserve strengthenings in 2000, 2001, 2002 and
2003.
d. Ensure your disclosure clearly explains why recognition
occurred
in the periods that it did and why recognition was not required in
earlier periods.
e. Disclose any trends such as, the number of claims incurred,
average settlement amounts, number of claims outstanding at period
ends along with average per claim outstanding, and any other
trends,
necessary to understand the change in estimate. Please explain the
rationale for a change in estimate that does not correlate with
trends.
B. Liquidity and Capital Resources, page 78
7. Please include in MD&A a more robust discussion of the
reasonably
likely impact the payment of claims will have on known trends and
uncertainties, in particular cash outflows from operations. In
the
disclosure please include a discussion of your asset/liability
management process and whether there are any significant
variations
between the maturity of your investments and the expected payment
of
your loss reserves. Include a discussion of the impact of selling
securities before anticipated or the use of credit facilities to
pay
for policy liabilities will have on your future liquidity and
results
of operations.
Consolidated Financial Statements
Notes to the Consolidated Financial Statements
2. Summary of Significant Accounting Policies
(c) Non-life Reinsurance
Premiums, page F-10
8. We refer to your disclosure regarding the change in how you
determine your premium estimate. Please tell us in greater detail
how management determines the premium estimate, and why you
believe
this is a change in estimate under APB 20. In your response
please
also tell us how management previously determined the premium
estimate.
* * * *
As appropriate, please amend your filing and respond to
these
comments within 10 business days or tell us when you will provide
us
with a response. You may wish to provide us with marked copies of
the amendment to expedite our review. Please furnish a cover
letter
with your amendment that keys your responses to our comments and
provides any requested information. Detailed cover letters
greatly
facilitate our review. Please file your letter on EDGAR under the
form type label CORRSEP. Please understand that we may have
additional comments after reviewing your amendment and responses
to
our comments.
We urge all persons who are responsible for the accuracy and
adequacy of the disclosure in the filing to be certain that the
filing includes all information required under the Securities
Exchange Act of 1934 and that they have provided all information
investors require for an informed investment decision. Since the
company and its management are in possession of all facts relating
to
a company`s disclosure, they are responsible for the accuracy and
adequacy of the disclosures they have made.
In connection with responding to our comments, please
provide,
in your letter, a statement from the company acknowledging that:
* the company is responsible for the adequacy and accuracy of the
disclosure in the filing;
* staff comments or changes to disclosure in response to staff
comments do not foreclose the Commission from taking any action
with
respect to the filing; and
* the company may not assert staff comments as a defense in any
proceeding initiated by the Commission or any person under the
federal securities laws of the United States.
In addition, please be advised that the Division of Enforcement
has access to all information you provide to the staff of the
Division of Corporation Finance in our review of your filing or in
response to our comments on your filing.
You may contact Joseph Roesler, Staff Accountant, at (202)
551-
3628 or Joel Parker, Accounting Branch Chief, at (202) 551-3651 if
you have questions regarding the comments. In this regard, do not
hesitate to contact me, at (202) 551-3679.
Sincerely,
Jim B. Rosenberg
Senior Assistant Chief
Accountant
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Mr. Andreas Zdrenyk
Converium Holding AG
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