ACE Says Results Improving

The second quarter of 2001 included catastrophe losses of 23 cents per share and goodwill amortization of eight cents per share.

The fully diluted book value per share of the company on June 30 was $24.21, compared with $23.59 at Dec. 31, 2001.

Brian Duperreault, chairman and chief executive officer of ACE Ltd., told National Underwriter that in the coming quarters he foresees pricing remaining solid, and that the company is planning to focus on increasing the number of its insureds and its products. "Organic growth–that's our prime focus," he said.

How long the hard market will last, he said, is difficult to predict, but "it looks to have legs" and the could continue "a couple of years?[or it] could be longer."

In a statement he released, he said the company saw "significant growth in our property and casualty business," recorded its highest quarterly operating income ever, produced a gain in per-share book value, and achieved a 14.6 percent annualized return on average equity "against the backdrop of falling equity markets."

The company said net income declined $27 million for the quarter. Net income for the period ending June 30 was $104 million, compared with $131 million for fiscal 2001.

The company said the figures reflected net realized losses of $125 million and debt prepayment expense of $7 million in the current quarter, compared with net realized gains of $20 million and a non-recurring expense of $4 million in the same quarter in 2001.

Earnings per share, after deducting preferred dividends, was 36 cents for the current quarter, compared with 52 cents for the same quarter last year.

ACE said it incurred net realized losses on investments of $125 million, but had an increase in net unrealized appreciation of $107 million.

Net realized losses for the quarter included $50 million of equity losses, principally from a decrease in the value of synthetic S&P indexed derivatives. ACE also recognized a $30 million loss on the interest rate swaps that are used to manage the duration of its fixed income portfolio. These losses were due to the drop in rates that caused significant unrealized gains in ACE's fixed income portfolio, the carrier said.

As a result of corporate credit events during the quarter, ACE recognized $26 million of impairments on corporate bonds, essentially reclassifying previously reported unrealized losses to a realized loss.

ACE said that net realized losses also include the decline in the market value of credit default swaps, which are reported as realized losses.

Gross premiums written during the quarter increased by 22 percent to $2.9 billion, compared with $2.4 billion for the comparable quarter in 2001. By segment, gross premiums increased 81 percent in Global Reinsurance, 25 percent in Insurance–North American, 21 percent in Financial Products, and 9 percent in Insurance–Overseas General.

Second quarter net premiums written increased by 28 percent to $1.9 billion compared with $1.5 billion for the same period in 2001.

Net premiums written increased 95 percent in Global Reinsurance, 37 percent in Insurance–North American, 20 percent in Financial Products, and 9 percent in Insurance–Overseas General.

During the second quarter, net premiums earned increased by 14 percent to $1.6 billion, compared with $1.4 billion for the same quarter last year. Net premiums earned increased 52 percent in Global Reinsurance, 26 percent in Insurance–North American, 15 percent in Insurance–Overseas General, and declined 23 percent in the Financial Products segment.

The company said underwriting results improved in the latest quarter, with a consolidated combined ratio of 91.5 versus 99.1 in the prior year's quarter.

Second quarter net investment income was $201 million, compared with $196 million for the fiscal 2001 second quarter, ACE noted.

ACE said it has introduced a new financial supplement this quarter that includes more detailed information on individual segment performance, with additional disclosures on reinsurance recoverables, asbestos reserves, and invested assets.

This supplement is posted on its Web site, www.acelimited.com/quarterly.html.