ACE Posts $755 Million Q1 Net; Operating Income of $579 Million

April 30, 2010

ACE Limited reported from its headquarters in Zurich that net income for the quarter ended March 31, 2010, totaled $755 Million, compared to $567 million in Q1, 2009. Net income was $2.22 per share, compared with $1.69 per share for the same quarter last year.

Operating income, which excludes capital gains/losses, was $579 million, or $1.70 per share, compared with $669 million, or $1.99 per share for the same quarter of 2009.

Even though it suffered, along with other P/C insurers, from the first quarter’s natural catastrophes, ACE was not too badly affected. “Net after-tax catastrophe losses in the first quarter of 2010 were $149 million, including reinstatement premiums, compared with $34 million for the first quarter of 2009,” the bulletin explained. “The total catastrophe losses are an increase from the $125 million in after-tax losses reported on March 18, entirely due to the addition of late-quarter storms in Perth, Australia, and the northeastern United States.”

The Group’s book value increased by $969 million during the quarter, up 5 percent from December 31, 2009. Book value per share now stands at $60.94, an increase of 4 percent. Annualized operating return on average equity for the quarter was 12.0 percent. The property and casualty (P&C) combined ratio for the quarter was 92.8 percent.

Chairman and CEO Evan G. Greenberg commented: “ACE had a good first quarter and start to 2010. We produced strong operating results and grew book value per share by 4 percent. Our operating ROE was 12.0 percent.

“While the quarter was marked by an unusually large number of natural catastrophes globally, we recorded an excellent combined ratio of 92.8 percent, with catastrophe losses representing about six points on the combined ratio and less than 1 percent of book value. I believe this demonstrates ACE’s underwriting discipline, risk management, and broad product and geographic diversification.

“We face the challenging effects of a slow economic recovery as well as a competitive insurance market. The fundamentals of our company, however, are good and we are well positioned. We had a current accident year combined ratio excluding catastrophes of 90.2 percent and grew net premiums written 4 percent, aided by a steady customer renewal retention rate of 88 percent and a positive foreign exchange impact. In spite of the challenging economic and market conditions, we see meaningful opportunity in many places around the world where we have both capability and presence.”

Additional operating highlights for the first quarter were stated as follows:
Net premiums written and earned increased 4 percent and 3 percent, respectively. Excluding the impact of foreign exchange, net premiums written increased 1 percent while net premiums earned decreased 1 percent.
— The P&C combined ratio was 92.8 percent compared with 87.5 percent last year. The accident year combined ratio excluding catastrophe losses was 90.2 percent for 2010 and 88.6 percent in 2009.
Total catastrophe losses were $173 million including reinstatement premiums. Net after-tax catastrophe losses were $149 million compared with $34 million for the first quarter of 2009. Losses from late-quarter storms in Perth, Australia, and the northeastern United States were $32 million after-tax.
— Favorable prior period development pre-tax was $96 million, including $41 million of 2009 crop insurance favorable development, compared with $68 million in 2009.
— The expense ratio excluding the impact of the annual crop insurance profit-sharing commission, catastrophe-related reinstatement premiums, and adjusted for foreign exchange, was 29.1 percent compared with 28.4 percent last year.
— Pre-tax underwriting income excluding Life was $209 million compared with $357 million in 2009.
— Operating cash flow was $823 million.
— Net loss reserves increased $28 million. Excluding foreign exchange valuation, net loss reserves increased $228 million.
— Net investment income remained flat at $504 million.
— Annualized operating return on average equity was 12.0 percent.(3)
Book value per share increased 4 percent from $58.44 at December 31, 2009, to $60.94.
Tangible book value per share increased 6 percent from $46.76 at December 31, 2009, to $49.48.
Net realized and unrealized gains after tax from our investment portfolio totaled approximately $467 million.

The full report and additional information may be obtained in the investor information section of the Group’s web site, as well as details on accessing the replay of the earnings conference call, held Thursday April 29, at:

Source: ACE Limited

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