Ace’s Greenberg: U.S. Safe Destination for Many Investors for Now

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Ace Ltd. Chief Executive Officer Evan Greenberg, whose insurer last week posted a decline in fourth-quarter profit as currency fluctuations pressured results, predicted that recent gains in the dollar will be temporary.

“The U.S. right now is the preferred destination for many investors seeking safety,” Greenberg said in a conference call last Wednesday. “We’re the prettiest house in a pretty shabby neighborhood. Over time, I imagine the dollar’s strength against many currencies will go the other way.”

Greenberg has for years targeted acquisitions in Latin America and Asia, and lamented in 2012 that regulators in the U.S. and Europe were stymieing growth with what he called an “assault.” The expansion helped fuel annual gains of at least 10 percent in Ace’s stock for five straight years through 2010.

Shareholders “will, over any reasonable period of time, continue to benefit from our global presence and diversification and our ability to take advantage of opportunity all over the world,” Greenberg said.

The U.S. Dollar Index rose to the highest since September 2003 last week. The gain can limit revenue in other countries for Ace, which operates in more than 50 nations.

Fourth-quarter net income fell 44 percent to $555 million as the company had an investment loss tied to variable-annuity reinsurance, Zurich-based Ace said. Operating profit, which excludes some investment results, was $2.47 a share, beating the $2.32 average of 23 analysts surveyed by Bloomberg. Full-year operating income increased 4.7 percent to $9.79 a share.

‘Investor Flight’

Currency fluctuations contributed to a fourth-quarter decline in book value, a measure of assets minus liabilities. Ace joins Procter & Gamble Co., Pfizer Inc. and DuPont Co. in a group of companies where results were hurt because so much revenue is generated beyond the U.S.

Greenberg said tensions in the Middle East, terrorism and the conflict in Ukraine have combined with declines in commodity prices to weaken other currencies against the U.S. greenback.

“There’s been a remarkably rapid investor flight to the dollar in search of safety as a result of several factors including the decline in the price of oil,” Greenberg said. He also cited “declining economic growth in major economies of the world including China, Japan and the euro zone, which is in crisis, and the follow-on impact in natural-resource based economies in Latin America, Asia and Africa.”

Reinsurance Deals

In the earnings call in October, Greenberg said he expected more consolidation among reinsurers and specialty carriers after a decline in the cost of commercial coverage. That prediction turned true as Axis Capital Holdings Ltd. said this week that it agreed to buy PartnerRe Ltd. XL Group Plc this month announced a deal to acquire Catlin Group Ltd.

Greenberg said that in a market with fewer competitors, it is less likely that companies will charge too little for taking on risk.

“In the short term, mergers and acquisitions of size relative to your own size can be distracting, and you’ve got to look a little more inward,” he said.