Swiss reinsurance company Converium has emphatically called on its shareholders to reject a hostile takeover bid from French rival Scor.
Converium warned in no uncertain terms on Friday that the $2.5 billion (SFr3 billion) offer would entail "considerable risk" if accepted.
In a statement, Converium said that Scor's approach was "unprecedented in the reinsurance arena".
It entailed significant business and integration risks in terms of staff and customer retention which could mean a loss of up to $800 million in premium income.
The board of directors of the Swiss company believed the bid fundamentally undervalued the company's franchise and growth prospects.
The hostile nature of the bid threatened to destroy value for Converium's stakeholders and undermine the stability of Scor's shares, the bulk of its acquisition currency, it argued.
Board chairman Markus Dennler urged shareholders to place their confidence in the management's "credible plan" for sustainable future value creation.
"Our standalone forecast for shareholder returns outstrip Scor's for the combined business, reflecting our operational strength in the recent rating upgrade from [rating agency] Standard and Poor's.
"To put it simply, our shareholders stand to score more by sticking with Converium," he commented.
Converium, which has its registered office in Zug, said Scor's offer did not fully reflect the long-term value of its strategic road map announced at the end of February.
It added that Scor's offer carried significant integration risks. Its "hostility" might trigger an exodus at every level of senior management, underwriters and other specialists.
Converium has said it is looking for a rival or white knight - friendly - bidder to contest Scor's offer but it has so far failed to come up with a name.
Both groups have had to raise cash and sell their United States businesses in recent years after discovering gaps in claims provisions.
swisssinfo with agencies
Scor has built up a 32.9 per cent stake in Converium and is offering half a share plus SFr4 for each remaining Converium share.
This values the Swiss company at about SFr3.1 billion.
Scor holds an extraordinary shareholders' meeting on April 26 to approve a capital increase that it says will raise about €1.4 billion ($1.87 billion) to finance the takeover.
In 2004, Converium - the former reinsurance business of Zurich Financial Services - was hit for six with problems at its United States subsidiary and had to raise capital to plug a hole in its reserves and stay afloat.
The company made a net profit of $68.7 million in 2005 after a loss of $582.5 million the previous year. Net profit in 2006 dropped to $57.1 million after it was hit by a heavy charge for the sale of its US business.
The rating agency Standard and Poor's raised Converium's long-term financial rating to "A-" on March 1. This was seen as a key to capture further growth opportunities
Converium employs about 500 people in 15 offices worldwide and is organised into three business segments: Standard Property and Casualty Reinsurance, Specialty Lines, and Life and Health Reinsurance.
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