ACE Q3 2015 Net Income Down 32.7% at $528 Million; Operating Income Up

October 22, 2015

ACE Group reported net income for the quarter ended September 30, 2015, of $1.62 per share, compared with $2.32 per share for the Q3 2014, an overall decline of 32.7 percent from $785 million in Q3 2014 to $528 million. Operating income was $2.74 per share, compared with $2.64 per share for the same quarter last year.

The property and casualty (P&C) combined ratio for the quarter was 85.9 percent. Book value and tangible book value per share declined 1.5 percent and 0.8 percent, respectively, from June 30, 2015, reflecting unfavorable foreign currency movement of $548 million, after-tax, and realized and unrealized losses in the company’s investment and variable annuity reinsurance portfolios of $622 million, after-tax, as a result of global equity and interest rate movements. Book value and tangible book value per share now stand at $89.88 and $72.25, respectively.

For the nine months ended September 30, 2015, net income was $6.53 per share, compared with $6.75 per share for 2014. Operating income was $7.38 per share, compared with $7.32 per share for 2014. The P&C combined ratio for the nine months ended September 30, 2015, was 87.2 percent versus 87.5 percent prior year.

Book value and tangible book value per share declined 0.2 percent and 0.5 percent, respectively, from December 31, 2014. Book value and tangible book value per share were negatively impacted by unfavorable foreign currency movement of $885 million, after-tax, net realized and unrealized losses in the investment portfolio of $542 million, after-tax, and realized losses of $268 million, after-tax, in the company’s variable annuity reinsurance portfolio during the year.

The report also said that “tangible book value per share was also negatively impacted by the addition of $474 million of goodwill and other intangibles related to the Fireman’s Fund acquisition that closed during the year.”

Chairman and CEO Evan G. Greenberg commented: “ACE had a great quarter. Volatility in the credit, equity and foreign exchange markets impacted our results but did not prevent us from producing record earnings, record underwriting results and good revenue growth in constant dollars. After-tax operating income was $897 million, or $2.74 per share, leading to an operating ROE of about 13 percent.

“Our earnings growth was driven by a world-class underwriting performance, highlighted by record underwriting income and a P&C combined ratio of 85.9 percent. We benefited from very strong current underwriting year results, positive development in our reserves and relatively low catastrophe losses. Year to date, even with foreign exchange headwinds, we’ve produced over $2.4 billion in operating income, which is essentially flat with prior year.

“Book value declined 1.5 percent due to the impact of foreign exchange and financial market volatility in our investment and variable annuity reinsurance portfolios. Foreign exchange also continued to impact our premium revenue. Global P&C net premiums, which exclude Agriculture, were flat in the quarter but grew nearly 8 percent in constant currency, with double-digit contributions from our U.S. and Latin American operations. For the year, Global P&C premiums have grown about 2.5 percent, or nearly 9 percent in constant dollars.

“We are on track to close our acquisition of Chubb in the first quarter of 2016 and expect a very positive response from both companies’ shareholders at Thursday’s shareholder meetings. We are making good progress with integration planning and will be ready to hit the ground running when we close.”

Source: ACE Group

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