Converium Holdings ready to rock?

lots of good things seem to be happening here of late. .

probably a mid year catalyst coming up. but mostly a 2007 and 2008 story..

next stop, S&P ratings review..

gotta have a better financial strength rating..

balance sheet looks rich though. so why should they not get this rating.

beauty is also that this reinsurance company has exited the US market almost.
so some legacy exposure to the US, but for folks who do not like the US insurance market, this company might be a very healthy antidote..

think about teh next time that some storms hit the reinsurance market.

converium sure will not be affected by it all.. i tend to like that as a macro theme. at least they are not exposed to that hot potatoe.

of course we can also live with no storms hitting the US shores, but I guess it is kind of a fact that the frequency of these tropical storms in the US has been on the rise, and a problem for insurers and reinsurers.

flipside of this all. i guess because of decreased exposure to the US, they also dont get to jack up the insurance on US based customers. at least not the the same degree as other insurers.

but how much can go wrong here at 1x book value for converium and a forward earnigns multiple of 7 to 9 x 2006 results.

I think if these guys continue their turn around over the next 2 to 4 years, we gonna see a double.

this is all i am hoping for from any boring swiss investment. double my money in 4 years..

better then the 0.,5% that the venerable UBS bank is paying per year on a savings account.

show me the money, converium.

dont expect much of an operative change here until 2007, but the 2006 results should be very much better than 2005 and even prior years.

i think people have a wait and see attitude here, cause these guys had really a history of up and down results prior and after their spinoff from the Zurich Financial Group..

now as a standalone, and after financial disaster of 2003, and 2004.. it looks like they can write an entirely fresh chapter in their corproate history..

Unlike the biggies in teh reiinsurance sector, this one counts as a small cap..

thus, i am looking for small capish type of returns... nothign i might be getting with the Swiss Re, Muenchner RE, or Berkshire Hathaway (General Re) of this world.. these guys are just too big for anythign to be meaningfully undiscovered by analysts.

but then again insurers generally are said not to be too expensive.

teh hope with Converium is that it has tons of operating leverage in it, and right now it has adverse financial leverage depressing earnings..

so.., if you look toward taht ratigns news beign anticipated, some of the financial cloud will go away.. and with a nicer rating, they should be getting a whole lot more business.. financial strenght rating after all matters to the takers of insurance policies. particularly in teh reinsurance sector..

so with more business generation.. the extra gross profits and favorable combined ration that will show up in results will flow through to the bottom line.. can one say pure profit.. or profit on steroids????

I wouldnt be surprised if within a 3 year time frame, converium boosts net income from an anticipated 200 million in 2006, to some 400 million.. assuming they get to write a whole lot more insurance policies.. .. they should gain a bit more market share, after their market share dropped by 50 to 60% in the crisis years 2003 to 2005.. business now has stabilized, but what we really want is an increase in gross premium volume in 2007.. and simply more new contracts signed.

the financial strength rating will affect the 2007 contract renewals and from there also any new biz generated. the ratings change could also be favorabel for any 2H 2006 business generation..

it certainly will not affect Q2 2006 results..

but the stock price could make a jump or a few percentages on the confirmation of the ratings improvement.

worst thing to happen is no rating change, in which case the stock might linger for another year. and the time horizon of teh turnaround might be lengthened. with no ratings change, maybe, teh gross volume of premium even drops from an anticipated 1.8 to 1.9 billion for 2006, to maybe just 1.7 to 1,8 billion in 2007..

So the market reaction to a ratings improvement should nto be super huge.. on the other hand negative news could be interpreted wiht a 10, 20% drop in teh value of the shares.

i think by now, everyones anticipating that news will be good. so limiting the upside from the ultimate news announcement.

i do expecct in this sense some sell on the news going on, as we have seen some buy on the rumour in the pasts months and quarters.

since this is however a medium to long term story.. i guess the buy on the dips policy sticks well with this investment. at least over then next 6 to 12 months, where signs of turnaround might still be subject to interpretation.