ACE Grows As Competition Heats Up

Mr. Greenberg attributed the company's good results to previous investments to grow both product capabilities and the company's physical presence across the globe.

ACE's premium growth overall was 19 percent, jumping to $2.9 billion. Property-casualty insurance premiums grew 29 percent to $2.4 billion, while global reinsurance premiums grew around 8 percent to $419 million in the quarter. In the insurance area, North American premiums jumped 37 percent, while overseas insurance premiums grew 21 percent in the quarter.

Overall, ACE's p-c operations posted a combined ratio of 89.

Commenting on the market, Mr. Greenberg said the overall underwriting environment remains favorable, with rates adequate in most classes of short- and long-tailed business despite continued rate reductions.

But "in some classes, particularly in the excess layers, the competition at times defies logic," he said, adding that this is becoming a more "frequent and regular occurrence."

Noting that competition has definitely increased since the first quarter, and that ACE is feeling rate pressure in most classes, he said that the competition is not only coming from new players, but certain large, established companies, also.

"If rates and terms don't meet our underwriting standards?and that means an absolute underwriting profit?we will walk away even if it means shrinking the top line," he asserted, citing several areas of flat or declining premiums in ACE's book as evidence of this discipline.

The areas where ACE's premium declined include catastrophe reinsurance and aviation reinsurance business, as well as high excess casualty and directors and officers, he said, noting that ACE global markets and the global energy operations were not growing.

Outside of these areas, he said ACE is growing and that submissions jumped 32 percent in ACE USA and Westchester Specialty as a result of ACE's efforts to increase its presence and grow the number of relationships it has with retail and wholesale brokers in the United States.

Rates are adequate and although "there is some giveback" of rates in the form of price cuts, "we are disciplined to measure that," he said.

In the reinsurance area, Mr. Greenberg noted that growth shrank while the business remained profitable (at a 76 combined ratio). In areas such as aviation and catastrophe reinsurance, he said, the declining volume was a result of ACE's unwillingness to follow inadequate rates and terms, adding that there are also "fewer opportunities to write new business in casualty-related reinsurance areas."

During a conference call this morning, Mr. Greenberg attempted to put to rest some market chatter fingering ACE as a company that's creating a softening directors and officers liability insurance market. He also responded to analysts seeking comfort about the potential outcome of a year-end asbestos reserving study, commenting that losses are emerging in line with expectations.

With respect to the D&O question, he reiterated his comments about the two-year effort to build ACE's physical presence and product capabilities. He then presented details about submission activity and bound business in primary and excess D&O layers to demonstrate "competitor talk" is unfounded. For example, he said that though primary submissions were up 100 percent over last year, while ACE wrote 40 percent of submitted business last year, this year the percent is only 18 percent.

On the asbestos reserving front, Mr. Greenberg was repeatedly pressed by analysts to guarantee that there is no "outsized" reserve or reinsurance recoverable charge coming. (The analysts were borrowing a term used by St. Paul Travelers CEO Jay Fishman last week when referring to the potential for an "outsized" charge.)

"I can only speak to the facts as I know them," Mr. Greenberg said. "We continue to monitor and review our asbestos exposures and development. And our development?both frequency and severity?the actual [emergence] is in line with what is expected" as the result of studies in past years. "We don't have any signals that tell us that we're not adequately reserved in the [asbestos] area."

Mr. Greenberg also responded to a questioner asking him to better identify whether "established players" who are now competing aggressively are working in primary or excess layers.

In the primary areas?the first $50 million of cover?he said there are "large incumbent underwriters" that have "a voracious appetite. They are using their balance sheets as a weapon," and in many cases are "offering twice the limit for the same price."

On excess business above the $50 million, he said, competition is occurring more with newer players who don't have local a presence. "They're simply competing using capacity and price," he said.