Efforts by the Financial Accounting Standards Board to change accounting for insurance contracts deviate from an established, well-tested and reasonable norm, and essentially amount to a solution in search of a problem, according to comments by ACE Chairman and CEO Evan Greenberg.

Speaking to analysts during ACE's third-quarter conference call, Greenberg, in response to a question on his thoughts regarding FASB's accounting-standards proposal, said, “[W]hen I look at the changes that FASB is suggesting right now, I get the theoretical, but that is divorced from practical reality and what investors really use to judge, and what management really uses to judge, one company to another or the health of a company.”

He added, “The insurance accounting as it stands today has been around a long time, and it's been tested through all types of environments, and it's reasonable. And I don't know what kind of problem we're trying to chase here by making changes.”

Greenberg acknowledged the effort by FASB to achieve convergence with the International Accounting Standards Board, but he said, “IASB has no insurance-accounting standard right now. So I would suggest to them that they adopt what has been tried and tested, and that is U.S. insurance accounting.”

Greenberg concluded, “Finally, what I'd say is the notion of fair valuing all, and that that somehow is the best indicator of value, particularly for a buy and hold company, and also the notion of introducing more volatility because you're going to try and predict long-term cash flows on businesses that are currently not stable, in my mind, is imprudent, and I don't know whose benefit you're ultimately serving, except a bunch of academics.”

For the third quarter, ACE reports net income of $916 million, a 43.1 percent increase over the same period a year ago. Operating income grew to $857 million, up from $688 million in 2012's third quarter. Underwriting income was $576 million, up from $360 million a year ago for the same period.

In a statement, Greenberg says, “ACE had another record quarter driven by exceptionally strong underwriting results and double-digit constant-dollar global P&C premium-revenue growth.”

ACE's combined ratio was 86.5, an improvement from 92 in 2012's third quarter.

In the conference call, Greenberg said ACE benefitted from lower-than-expected catastrophes, but stressed that the company does not rely on low catastrophes for good results. “Our current accident-year underwriting was a substantial contributor to our overall results in the quarter,” he said.

Asked if Berkshire Hathaway taking on a bigger role in primary specialty would affect the market in the next three-to-five years, Greenberg said, “I don't expect one carrier—to what is already a dynamic and large marketplace—to have a disproportionate impact on the business. It takes a long time to build an insurance company that can compete on a national basis, that can write the lead primary layers,” and that can manage all kinds of customers of different sizes and locations.

“Your best day is the day you opened,” Greenberg said. “After that, it is a grind it out, day-in and day-out. And anyone entering this business, whoever you are, I wish you luck.”

Special Reports /

Evan Greenberg Sounds Off on FASB Accounting Proposal; ACE Enjoys Solid Q3

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