Converium ready to join SMI ranks

The world's number eight reinsurer, Converium, will have a market capitalisation of SFr 3.28 billion Keystone Archive

The spin-off of Zurich Financial Services' reinsurance group. Converium, has raised $1.1 billion (SFr1.8 billion).

With the group’s American Depository Shares (ADS) priced at $24.59, Converium, the world’s number eight reinsurer, will have a market capitalisation of SFr3.28 billion. That entitles it to a berth among the top Swiss stocks.

The equity is to gain near instant blue chip status as it is expected to join the benchmark SMI index shortly.

However, shares in Zurich Financial dropped on Tuesday as management upheaval at the Swiss insurance group overshadowed the successful bourse debut of its former reinsurance arm.

Zurich late on Monday announced an overhaul among top management which left embattled chairman and chief executive Rolf Hüppi – who has long been criticised by analysts and investors – firmly in control.

Profit warnings

Zurich’s shares have shed over 50 per cent this year after three profit warnings, raising questions about Hüppi’s performance and his powerful dual role at the company.

However, observers said Zurich’s stock had rallied by almost 80 per cent since September 21 largely on hopes of a successful spin-off of Converium.

Analysts say the Converium spin-off is the largest Swiss share placement since the 1998 Initial Public Offering (IPO) of Swisscom, and the second largest share issue on the Swiss market this year after a $6 billion capital increase by rival Swiss Re, the world’s number two reinsurer.

The pricing of the shares, due to start trading on the New York Stock Exchange on Tuesday, was near the middle of a range of SFr72-90 per share and $21.75-27.19 per ADS.

One ADS is the equivalent of half of a share.

Investor demand

The issue comes at a time when investors’ demand for insurance and reinsurance stocks is rising in the wake of the September 11 attacks in the United States.

The deadly assaults have boosted demand for insurance and triggered a global round of steep premium increases in a market where rates were already showing cyclical increases before the attacks.

Converium’s expected inclusion in the SMI is seen as a further factor ensuring good investor interest with fund managers who track indices likely to snap up the stock, analysts said.

Zurich Financial Services said the IPO of Converium raised $1.1 billion net of expenses and Zurich’s capital contribution to Converium.

Gross proceeds were about $2 billion, in line with stated company expectations and contributing about half towards Zurich’s $4 billion divestment drive, which is aimed at raising cash and improving its balance sheet.

swissinfo with agencies