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 April, 2007
CONVERIUM HOLDING AG
(Translation of registrant's name into English)
Dammstrasse 19
CH-6301 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
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News release
Converium Holding Ltd, Zug
Zug, Switzerland - April 13, 2007 - Converium urges shareholders to reject SCOR
offer - hostile approach could result in loss of business of up to USD 800
million
Converium today, after close of trading, will issue its official Board report in
accordance with article 29 (1) of the Federal Act on Stock Exchanges and
Securities Trading to the tender offer published last week by its competitor
SCOR S.A. for the registered shares in Converium held by the public. Tomorrow,
such official Board report will be published in Neue Zurcher Zeitung and Le
Temps.
Converium's Board of Directors urges its shareholders to reject SCOR's offer,
believing it to fundamentally undervalue the Company's franchise and growth
prospects. In addition, the Board of Directors anticipates significant business,
integration and execution risks arising from the hostility of SCOR's offer. The
hostile nature of the bid threatens to destroy value for Converium's
stakeholders and to undermine the stability of SCOR's shares, the bulk of its
acquisition currency.
Markus Dennler, Chairman of Converium's Board of Directors, comments: "After
careful consideration of SCOR's offer, we urge our shareholders to place their
confidence in our management's detailed and credible plan for sustainable future
value creation." Mr. Dennler continued: "Our standalone forecasts for
shareholder returns outstrip SCOR's for the combined business, reflecting our
operational strength and potential for profitable growth in the wake of our
recent rating upgrade from Standard & Poor's. SCOR wants to deliver that
potential to its own shareholders, offering in exchange a volatile share
currency which could see further devaluation from the risks inherent in the
transaction. To put it simply, our shareholders stand to score more by sticking
with Converium."
The following summarizes the main reasons for the Board's recommendation.
Further details are provided in the Board report to be published in Neue Zurcher
Zeitung and Le Temps tomorrow and, after close of trading, available on
www.converium.com.
The offer undervalues Converium
SCOR's offer does not fully reflect the long-term value of Converium's strategic
road map announced on February 28, 2007. The Board of Directors and senior
management of Converium believe that execution of the Company's road map to
generate a sustainable return on equity of 14% by 2009 will create long-term
shareholder value in excess of SCOR's offer price. The recent Standard & Poor's
upgrade of the Company's long-term financial strength rating to "A-" confirms
the low execution risks relating to Converium's standalone strategy.
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SCOR's offer price represents only a 12.3% premium compared with the closing
stock market price of Converium's shares on February 16, 2007, the day preceding
the announcement by SCOR of its acquisition of 32.9% of Converium's outstanding
shares.
Reflecting the value-sensitive information publicly disclosed by Converium since
then, the current value of the offer represents a 0.4% discount to the closing
stock market price of Converium's shares on April 12, 2007.
Using the average market price for the one-month period preceding an
announcement, the average premium observed in the most significant unsolicited
public offers completed in Switzerland since 2005 is more than 50%, whereas
SCOR's offer only represents a 16.0% premium.
Hostile offer carries significant business, integration and execution risks
SCOR's hostile approach is unprecedented in the reinsurance arena. It entails
significant business and integration risks in terms of staff and customer
retention which could mean a loss of up to USD 800 million in premium income:
o Most reinsurance contracts contain change in control provisions that
might successfully be enforced upon the consummation of the offer. A
key example of this are the major strategic alliances with Global
Aerospace Underwriting Managers Ltd. (GAUM) and the Medical Defence
Union (MDU) alone account for more than USD 361 million of premium
income.
GAUM's CEO, Tony Medniuk, comments: "Converium has been an important
and highly valued partner for GAUM since 2001. Should this unsolicited
offer be successful the other co-owners of the agency and members of
the pool would have to seriously reassess Converium's future
participation in the pool. SCOR should not consider any part of GAUM's
business as automatically vesting to them."
This view is echoed by Mike Saunders, CEO of MDU: "Since 2000 the MDU
and its members have benefited significantly from a mutually
successful joint venture with Converium due in no small part to the
strong personal relationships developed between the companies. If SCOR
is successful in its hostile offer for Converium, the MDU will review
the relationship in the light of its right to terminate the joint
venture following a change of control."
o The hostility of the offer carries significant business risks: a
hostile takeover could increase attrition risk, triggering customers
who want to diversify their reinsurance policies to defect. Converium
estimates that this could drive a potential premium loss of USD 330
million.
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o In addition, SCOR's approach carries significant integration risks:
its hostility may trigger an exodus at every level of senior
management, underwriters and other valuable specialists which will
amount in an additional potential premium loss of USD 110 million.
Finally, the hostility of the offer presents major execution risks as it is
unlikely to foster a smooth and proper integration of both companies.
SCOR's shares weak acquisition currency
The offer consideration to be received by Converium shareholders is uncertain
and will depend on the value of SCOR's shares at the time of the consummation of
the offer. SCOR's shares are a weak acquisition currency, as evidenced by their
high volatility. As the offer consideration consists of 80% in SCOR shares and
20% in cash, Converium shareholders will be subject to the risk of further
volatility of SCOR's shares. A significant valuation downside is presented by
the major business, integration and execution risks of the transaction.
Prospects of a combined entity are questionable
SCOR anticipates growing the combined entity's book of business at a lower
growth rate than that of Converium on a standalone basis: SCOR anticipates that
the combined entity will grow at a rate of 7% per year while Converium believes
that it would grow as a standalone entity at a rate of 17% per year over the
next two years based on regaining share of wallet of pre-downgrade business and
acquiring new business.
SCOR anticipates a return on tangible equity (includes a deduction for sizeable
intangibles, such as goodwill, post transaction) of 13% comparing it with
Converium's return of equity target of 14% to be reached by 2009 through organic
growth. Converium estimates SCOR's pro forma ROE calculated on a comparable
basis to that of Converium at around 11%.
Based on public information, SCOR estimates that the combined entity will barely
meet the capital adequacy ratio for a Standard & Poor's "A-" rated company at
the end of 2007. This implies that the occurrence of severe natural catastrophes
in the second half of 2007 would jeopardize the rating of the combined entity,
whereas Converium currently possesses material excess capital as a standalone
entity.
Concluding recommendation
Converium's Board of Directors therefore urges its shareholders to reject SCOR's
offer and place their faith in future value creation from a team which has
proven its ability to drive the business forward. It is a choice which favours
certainty over considerable business, execution and integration risks and
preserves value rather than throwing it away. Those who want to score more
should allow Converium's management team to pursue its plan for value creation
to its exciting conclusion.
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First quarter results to be released on April 19, 2007
Converium will release its first quarter 2007 financial results before the
markets open in Europe on Thursday, April 19, 2007. The release date has been
brought forward from May 8, 2007.
A webcast for the investment community and media will be held on the same day at
9.30 am Central European Time (CET).
The webcast can be accessed via the company's website www.converium.com. It will
be archived on our website at about noon time that day. The telephone replay of
the conference call will also be available one hour after the call for 24 hours
by dialing +41 91 612 4330 (Europe), +1 (1) 866 416 2558 (USA) or +44 (0) 207
108 6233 (UK) with access code: 336#.
Enquiries
Beat W. Werder Marco Circelli
Head of Public Relations Head of Investor Relations
beat.werder@converium.com marco.circelli@converium.com
Phone: +41 44 639 90 22 Phone: +41 44 639 91 31
Fax: +41 44 639 70 22 Fax: +41 44 639 71 31
Dr. Kai-Uwe Schanz Inken Ehrich
Chief Communication & Corporate Development Investor Relations Specialist
Officer
kai-uwe.schanz@converium.com inken.ehrich@converium.com
Phone: +41 44 639 90 35 Phone: +41 44 639 90 94
Fax: +41 44 639 70 35 Fax: +41 44 639 70 94
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About Converium
Converium is an independent international multi-line reinsurer known for its
innovation, professionalism and service. Today Converium employs about 500
people in 15 offices around the globe and is organized into three business
segments: Standard Property & Casualty Reinsurance, Specialty Lines and Life &
Health Reinsurance. Converium has an "A-" ("strong") financial strength rating
(outlook stable) from Standard & Poor's and a "B++" financial strength rating
(outlook positive) from A.M. Best Company.
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Important Disclaimers
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 `seek to', `expects', `aims' `should continue',
`believes', `anticipates', `estimates' and `intends'. The specific
forward-looking statements cover, among other matters, our combined ratio,
return on equity and premium volume and expense reduction targets, our plans to
use capital more efficiently and to return capital to shareholders, the
reinsurance market, the Company's operating results, the Company's dividend
policy, the prospects for improving our results, investment yield and market
share. 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
our ability to refinance our outstanding indebtedness and increase our use of
hybrid capital; uncertainties of assumptions used in our reserving process; risk
associated with implementing our business strategies and our capital improvement
measures; cyclicality of the reinsurance industry; the occurrence of natural and
man-made catastrophic events with a frequency or severity exceeding our
estimates; acts of terrorism and acts of war; changes in economic conditions,
including interest and currency rate conditions that could affect our investment
portfolio; actions of competitors, including industry consolidation and
development of competing financial products; a decrease in the level of demand
for our reinsurance or increased competition in our industries or markets; our
ability to expand into emerging markets; our ability to enter into strategic
investment partnerships; a loss of our key employees or executive officers
without suitable replacements being recruited within a suitable period of time;
our ability to address material weaknesses we have identified in our internal
control environment; political risks in the countries in which we operate or in
which we reinsure risks; the passage of additional legislation or the
promulgation of new regulation in a jurisdiction in which we or our clients
operate or where our subsidiaries are organized; the effect on us and the
insurance industry as a result of the investigations being carried out by the US
Securities and Exchange Commission, New York's Attorney General and other
governmental authorities; our ability to regain past customers following any
rating upgrades and the resolution of the investigations being carried out by
the US Securities and Exchange Commission, New York's Attorney General and other
governmental authorities; changes in our investment results due to the changed
composition of our invested assets or changes in our investment policy; failure
of our retrocessional reinsurers to honor their obligations or changes in the
credit worthiness of our reinsurers; our failure to prevail in any current or
future arbitration or litigation; and extraordinary events affecting our
clients, such as bankruptcies and liquidations, and other risks and
uncertainties, including those detailed in the Company's filings with the U.S.
Securities and Exchange Commission (including, but not limited to, our Annual
Report on Form 20-F filed 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.
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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/ Inga Beale
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Name: Inga Beale
Title: CEO
By: /s/ Christian Felderer
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Name: Christian Felderer
Title: General Legal Counsel
Date: April 18, 2007
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