Bermuda-based Paris Re is reportedly interested in buying Swiss rival Converium.

Paris Re, which was created in late 2006 after France-based insurer AXA Group sold its reinsurance unit to private equity investors surrounding Stone Point Capital, last week said it was on the lookout for acquisitions and said Converium looked like a potential target, declining to specify whether it would consider a bid.

"The company is theoretically interesting for us because it would improved our portfolio mix," chief executive officer Hans-Peter Gerhardt told German daily Boersenzeitung.

Converium underwent financial difficulties in 2004 and almost collapsed after discovering a $500 million hole in claims reserves.

But yesterday the Zurich-based reinsurer expressed confidence in the future in a statement at an investor conference.

"Converium saw strong support from existing clients during the important January 1, 2007 renewals," the company said.

"The company expects to improve its combined ratio due to a shift of business mix towards non-proportional business and the strong impact of the attractive US property catastrophe market. Overall the premium volume is expected to be at least stable for the year 2007," the company said.

The company also said it had freed up $561 million worth of assets in the fourth quarter, boding well for future investment income. "(Converium) increased its equity investments by approximately $240 million and alternative investments by $50 million in the respective period."

"The new asset allocation is expected to generate an improved return on investment", said chief financial officer Paolo de Martin. "We consider this approach a catalyst for future value growth."

Analysts welcomed the balance sheet improvement and the trading update and said the company is likely to receive the much-coveted single-A credit rating by Standard & Poor's later this year.