ACE Q2 Op. Net up 11% to $738 Million

July 30, 2008

ACE Limited reported after tax operating net income for the second quarter ended June 30, 2008, of $738 million, an 11 percent gain. Net income per common share was $2.20 after payment of preferred dividends, compared with $1.93 per share for the same quarter last year. Income excluding net realized gains (losses) for the second quarter was $2.18 per share, compared with $1.98 per share for the same quarter of last year.

ACE’s bulletin noted: “The quarter was marked by financial market volatility in both the credit and equity markets, which impacted net income and book value. The net realized and unrealized loss after tax was $524 million for the quarter. This loss is the result of market pricing changes only. Actual credit-related impairments included in this number were insignificant, at approximately $28 million.

“Book value increased $149 million for the quarter excluding the redemption of preferred shares, and the annualized return on average equity was 17.8 percent. The results for the quarter reflect the acquisition of Combined Insurance Company of America and certain of its subsidiaries (Combined Insurance) effective April 1, 2008. ”

Commenting on the results, Chairman and CEO Evan Greenberg noted, “all divisions of the company performed well and contributed to a return on equity of almost 18 percent. Additionally, our revenue and earnings benefited from the consolidation of Combined Insurance. Global insurance market conditions are soft and will remain so for the foreseeable future, as will the difficult financial and economic conditions. Nonetheless, I remain confident in our ability to produce superior results. We are well positioned for the future.”

Other operating highlights were given as follows:
— Net premiums written and earned increased 17 percent and 14 percent, respectively, over the prior year quarter (4 percent and 1 percent, respectively, excluding Combined Insurance).
— The combined ratio for the quarter was 87.8 percent compared with 87.6 percent for the prior year quarter.
— Underwriting income excluding life segment increased 3 percent over the prior year quarter to $373 million and benefited from positive prior period development of $104 million compared to $40 million pre-tax for the same quarter last year. This was approximately two-thirds short-tail-related.
— The expense ratio reported in the quarter increased by 3.1 percentage points from last year’s second quarter. The addition of Combined Insurance contributed approximately one percentage point to this increase, while one percentage point was related to the change in our business mix to Accident & Health (A&H) and international Property & Casualty (P&C), which have higher expense ratios.
— Operating cash flow was $1.067 billion for the quarter.
— Invested assets increased by $684 million or 1.5 percent during the second quarter and $4.4 billion or 11 percent over the prior year quarter.
— Reinsurance recoverables decreased $132 million for the quarter excluding Combined Insurance.
— Net P&C loss reserves increased $644 million during the quarter; excluding Combined Insurance, net P&C loss reserves increased $293 million.
— Net investment income increased 13 percent over the prior year quarter to $532 million.
— Return on average equity for the second quarter was 17.8 percent
— Book value increased $207 million from December 31, 2007 excluding the redemption of the preferred shares while book value per share increased from $48.89 at December 31, 2007 to $48.99.
— The net realized and unrealized loss after tax was $524 million. This includes a $697 million loss on the investment portfolio offset by gains of approximately $60 million from derivatives, principally related to the guaranteed minimum income benefit (GMIB) liabilities of our life reinsurance business, and gains of $113 million from our share of partially-owned insurance companies. Again, the loss was the result of market pricing changes only. Actual credit-related impairments were $28 million.

The full report, additional information, as well as a replay of the earnings conference call may be obtained on the Company’s web site at: www.acelimited.com.

Source: ACE Limited

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