News analysis - Consolidation is back as the market's gone soft.

(From Reinsurance)

So SCOR has snuck up behind Converium and spirited away almost a third of its equity from underneath the noses of its board.

The French reinsurance champion said it had irrevocably secured a 32.9% stake in its target: 8.3% through direct-market purchases, and 24.6% through share-purchase agreements. SCOR said it paid for the block acquisitions only 20% in cash and 80% in newly issued shares, which, using the company's closing share price on Friday, 16 February 2007, was equivalent to a bid of CHF 21 per Converium share, valuing the Swiss company at about CHF 3bn, or $2.5bn.

Converium immediately rejected the advances and, in a vigorous move, brought forward its 2006 annual results by three weeks to expound its defence, which will centre around hitting a sustainable return-on-equity target of 14% by 2009.

SCOR's bid announcement said "it strongly believes that the combination of Converium and SCOR is a unique, strategic opportunity to create a top-five global multi-line reinsurer in this time of market consolidation."

A key phrase there is "in this time of market consolidation". Okay, in the last couple of years we've had the Revios, GEIS and Equitas deals, and a couple of Lloyd's moves as well, but this could hardly be described as market consolidation on a grand scale, and certainly nothing like that.

Witness the last time Swiss Re, Munich Re and Berkshire Hathaway went on an aggressive land grab in the mid-to-late 1990s, when M&G, Employers Re, American Re, Cologne and General Re all got taken out of the game. I think that SCOR has committed a revealing Freudian slip, and what it really meant to say was is "the coming wave of consolidation".