Despite an $80 million charge settling bid-rigging allegations with three attorneys general and the New York state insurance department, Bermuda-based ACE Limited reported a 12 percent increase in first-quarter net income late yesterday.

But the final resolution of investigations into questionable accounting of finite reinsurance deals by ACE remains unclear, according to ACE's chief executive officer, Evan Greenberg. He noted that the Securities and Exchange Commission has yet to weigh in with any fines or penalties.

“My crystal ball is just not that good,” Mr. Greenberg said on a conference call this morning, when asked if he could predict when the SEC might invoke penalties related to the accounting for the finite reinsurance deals.

New York officials in announcing that settlement said the agreement in addition to bid-rigging settled charges arising from an investigation of ACE finite reinsurance transactions.

But, “the SEC is on a different track and has its own timeline. I just can't predict,” said Mr. Greenberg.

After taxes, the $80 million pretax charge took a $66 million bite out of ACE's first-quarter bottom line, which came in at $489 million, or $1.46 per common share, compared with $437 million, or $1.48 per share, for the same quarter last year.

Mr. Greenberg said: “All divisions of ACE performed well. Both operating and net income achieved record highs even after charges related to an investigation settlement.

“We anticipate revenue growth picking up in the second quarter,” he continued, noting that growth in the first quarter was held down by foreign exchange adjustments and a prior-year premium adjustment on ACE's crop insurance portfolio.

While ACE reported that net property-casualty written premiums rose only 2 percent to $3.4 billion in the quarter, the first-quarter combined ratio came in 10 points under break-even, at 90.2. Excluding the investigation-related settlement charge, the p-c combined ratio was 87.2 for the quarter compared with 88.5 in first-quarter 2005.

Breaking down premium growth by segment, ACE said that insurance premiums in North America rose only 2 percent, while global reinsurance showed the biggest jump in premiums at 14 percent.

Overseas premiums for the insurance segment declined 4 percent.

Commenting on market conditions for direct insurance, Mr. Greenberg said, “It is a hard market for large-account property business” in the United States and London, where rates continue to rise month-by-month and terms continue to tighten.

On the other hand, he said ACE was forced to shed volume for small and midsized U.S. noncatastrophe property business, where the market is softening.

He also said rates for U.S. casualty insurance for most classes are stable to slightly down.

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ACE Income Up Amid SEC Concerns

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