ACE Quarterly Profit Down 36%, Hurt By Charges
NU Online News Service, Feb. 1, 3:47 p.m. EST?ACE Ltd. reported fourth-quarter net profit dropped 36 percent to $282 million after a charge to strengthen its asbestos, environmental and other runoff reserves.[@@]
The figure compares with $444 million reported for the 2003 fourth quarter.
ACE's asbestos, environmental and other runoff charges, which were announced earlier this year by management, resulted in an after-tax charge of $302 million for the fourth quarter.
The charge is divided across two ACE units–Brandywine Holdings and ACE Westchester Specialty.
The charge relating to Brandywine, which houses the majority of ACE's asbestos and environmental claim runoff exposures, amounts to $279 million. It will result in a reserve boost of $788 million gross, or $339 million net of reinsurance and before tax.
The charge for ACE Westchester Specialty amounts to $19 million, while the reserve boost is $200 million gross and $25 million net of reinsurance and before tax. ACE picked up old asbestos liabilities in 1999 with its $3.45 billion acquisition of Cigna Corp.'s global property-casualty insurance business.
Net income for calendar-year 2004 also fell on a year-over-year comparison, down 20 percent to $1.1 billion compared with $1.4 billion in 2003.
For the fourth quarter, the combined ratio was 104, but excluding asbestos and environmental losses, the combined ratio would have been 87.7 percent, a 4.2 point improvement over 91.9 for the comparable quarter in 2003, the company noted.
For the full year, the combined ratio was 96.6, deteriorating from 91.5 for 2003.
Net premiums written for the fourth quarter increased to $2.66 billion, up from $2.57 billion one year ago, ACE said.
The company posted an overall net underwriting loss of $105 million for the fourth quarter, in contrast to an underwriting gain of $222 million during the year-ago quarter.
For the full year, net premiums written came in at $11.52 billion, up from $10.22 billion one year ago. Underwriting income for 2004 was $404 million, down from $786 million in 2003.
The company's net investment income improved for the quarter, coming in at $275 million, up from $228 million one year ago.
The Hamilton, Bermuda-based ACE's chief executive officer, Evan Greenberg, said that his company, despite reserve charges, demonstrated the strength of its organization in 2004.
"Our p-c premium growth exceeded 20 percent, and our investment income and book value grew to record levels while we substantially added to our loss reserve position. We are entering 2005 with a strong balance sheet," Mr. Greenberg said.
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