ACE reports fourth quarter fall

Insurer ACE has reported a fourth quarter profits fall that saw net income per share of $0.06 (£0.04) compared with $1.69 (£1.18) for the same quarter last year.

Income excluding net realised gains (losses) for the fourth quarter was $1.87 per share, compared with $2.05 per share for the same quarter of last year.

The company blamed financial market volatility in both the credit and equity markets, which impacted net income and book value.

The net realised and unrealised loss after tax was $1.2bn for the quarter.

Book value decreased $910m for the quarter including a net foreign currency translation loss of $310m. Annualised return on average equity was 16.7%. The property and casualty (P&C) combined ratio was 86.9%.

For the full year net income more than halved to $1,197m from $2,578m last year. But the results were at the top end of market expectations.

Evan G. Greenberg, chairman and chief executive officer of ACE Limited, stated: “ACE produced strong operating results in one of the most difficult quarters in modern history for financial services companies. Our core property and casualty and accident and health businesses performed extremely well with total operating income in the quarter of $624m. The P&C combined ratio was 86.9%.

“ACE experienced in this quarter the volatility that can accompany the business activity of a global risk-taking organisation. Global presence and risk-taking discipline are our sources of strength, and we are using them to our advantage. In the quarter, we began to improve our price-to-exposure from firming insurance prices and gain market share in certain classes from weakened competitors. While the recessionary conditions are formidable, we are encouraged by government efforts to stimulate the economy.”

Other operating highlights were::

• Net premiums written and earned in the quarter were up 8% and 6%, respectively, over the prior year quarter. Excluding the impact of foreign exchange, net premiums written and earned increased 13% and 10%, respectively, over the prior year quarter.
• Net P&C premiums written and earned, which include international accident and health (A&H), decreased 1% and 3%, respectively, over the prior year quarter. Excluding the impact of foreign exchange, net P&C premiums written and earned increased 3% and 1%, respectively, over the prior year quarter.
• The P&C combined ratio for the quarter was 86.9% compared with 88.1% for the prior year quarter; for the year, the P&C combined ratio was 89.6% compared with 87.9% for 2007.
• Positive net prior period development in the quarter of $252m pre-tax included a $68m take-down of a reserve on a single, large structured transaction that settled in the quarter. The company also incurred a pre-tax charge of $51m for asbestos, environmental and other run-off (A&E) losses as a result of both internal and external actuarial reviews.
• Pre-tax underwriting income excluding the life insurance and reinsurance segment increased 7% over the prior year quarter to $375m compared with $351m for the same quarter last year.
• The P&C expense ratio reported in the quarter increased by 1.4 percentage points from the prior year quarter. Excluding A&H, the expense ratio was flat compared with the prior year quarter.
• Operating cash flow was $960m for the quarter. For the year, operating cash flow was $4.1bn.
• Reinsurance recoverables decreased $308m for the quarter largely due to foreign exchange; year-to-date, reinsurance recoverables decreased $437m.
• Net loss reserves decreased $889 million during the quarter primarily due to the impact of foreign exchange revaluation of approximately $700m; year-to-date, net loss reserves increased $501m, and $1.4bn excluding the impact of foreign exchange.
• Net investment income increased 3% over the prior year quarter to $521m.
• Return on average equity for the fourth quarter was 16.7% and for the year was 16.8%.
• Book value decreased $1.7bn or 10% from December 31, 2007 excluding the redemption of the preferred shares while book value per share decreased from $48.89 at December 31, 2007 to $43.30.
• Net realised and unrealised losses after tax from the investment portfolio totalled approximately $1bn for the quarter. This includes $608m of unrealized losses and $404m of realised losses. Net realised losses from derivative accounting related to the guaranteed minimum income benefits (GMIBs) of the life reinsurance business were approximately $207m.
• Insurance-North American: Net premiums written decreased 5% over the prior year quarter. The combined ratio was 83.0% compared with 89.1% for the same quarter last year.
• Insurance-Overseas General: Net premiums written increased 7% over the prior year quarter, 19% on a constant-dollar basis. Excluding the results of Combined Insurance, net premiums written decreased 2%. The combined ratio was 90.7% compared with 87.5% for the same quarter last year.
• Global Reinsurance: Net premiums written decreased 28% over the prior year quarter. The combined ratio was 72.3% compared with 73.6% for the same quarter last year.
• Life Insurance and Reinsurance: Net premiums written increased $260 million over the prior year quarter; excluding the results of Combined Insurance, net premiums written increased 7%. Income excluding net realised gains (losses) decreased to $4m in the quarter.