Shareholders at the beleaguered reinsurer Converium approved its $420m emergency rights issue yesterday.
A relieved Dirk Lohmann, its chief executive, thanked the shareholders for their support at the crisis meeting held in Zurich.
The backing came after management and the board said recapitalisation was the best option, rather than selling to a trade or financial buyer or putting the group into run-off.
The group, which is to put its US activities into run-off, will concentrate on Europe, Asia and Latin America.
The new look Converium will cut its 850 staff by a third and will see its premium income fall to about $2bn in 2005 from an expected $4bn this year. Lohmann refused to give any earnings outlook, but said the group hoped to regain profitability in 2006.
Before then Converium will face significant additional charges. Restructuring costs are estimated to run to $20m in the second half of this year.
Analysts questioned the need for the full $420m recapitalisation in view of the sharp reduction in the group's volume of business.
In a conference call, Lohmann said the figure was “the bottom line” for rating agencies to consider reassessing the group. This week, Standard & Poor's said it would raise Converium's rating to BBB+ from BBB if the recapitalisation were approved.
“It was a price – $420m is the ticket. Clients are looking to see if we get the support of our shareholders. If we get it, the franchise holds,” Lohmann told journalists yesterday.
He also told the press that he would stay to correct "the setbacks the company has suffered".
