European reinsurer Converium has confounded the market by revealing that its finances were in the red for the first quarter of the year due to the impact of winter storm Erin and reorganization costs.
While industry analysts were expecting the Switzerland-based reinsurer to post profits of around $20 million, it actually reported making a loss of $61.8 million. The company recorded a profit of $65.7 million in the opening quarter of 2004.
First quarter results were adversely affected by the reinsurer’s non-life combined ratio for the quarter, which deteriorated to an ugly 115.7% from 93% last year due to the punishing impact of winter storm Erin, which cost the company $32.5 million.
Furthermore, results were negatively affected by the twin expenses of roughly $10 million to shore up reserves and another $10 million in restructuring costs. On top of this, exceptional factors cost the company $38.7 million.
In ongoing business, gross premiums fell from $1.384 billion to $718 million; however the insurer said that renewals, its Life & Health Reinsurance division and investments were satisfactory.
Terry Clarke, CEO, said: Converium’s financial results for the first quarter are disappointing. They are driven by losses arising from natural catastrophes and commutations of various retrocession contracts.
Clarke added: All in all, I feel encouraged by the continuing profitability of our underlying ongoing business, particularly as the current, non-sustainable administrative expense base will come down significantly in the wake of the cost-cutting measures initiated in March. I am also pleased about our reserve situation, which continues to be stable.