ACE Limited said it anticipates improvement in its property-casualty business and investment portfolio but declines in financial services income during 2006.
The Hamilton, Bermuda-based company's guidance was provided for the ACE Group of Companies.
It said that p-c net earned premium growth is expected to average 6 to 8 percent for the full year. Earned premium growth is expected to be slower in early quarters and accelerate as the year progresses.
The p-c combined ratio, ACE said, is expected to range between 88 and 90 percent and includes $400 million for catastrophe-related losses for both insurance and reinsurance exposures.
Financial services operating income is expected to decline by approximately 15 percent, the company said.
Total investment income, said ACE, is expected to range between $1.45 billion and $1.5 billion. ACE said its expectation is based upon estimated positive operating cash flow of approximately $4 billion and an expected increase in average portfolio yield to 5 percent over the course of the year.
The company said interest expense and preferred dividends are expected to be approximately $210 million.
ACE said its effective tax rate is expected to be between 22 and 24 percent.
ACE also announced that it will be filing a shelf registration in the near future. The shelf replaces the previous capacity used in connection with the October common stock offering. It said that it has no plans for utilization of the new shelf at this time.
In response to the guidance, Bear Stearn's David Small and Brandon Young issued a report saying that investors may be disappointed with the report.
"Premium growth expectations looked light although profitability is somewhat better than expected," the report said, expecting premium growth of 11 percent.
"It appears that similar to others we met with in Bermuda earlier this week, ACE is taking a more cautious view of the property market even as rates rise," said Bear Stearn's
Bear Stearn's dropped its earnings per share estimate for 2006 from $6.15 to $6.05 per share. Bank of America, on the other hand, is keeping its estimate of $6.35 a share.
Brian Meredith, an analyst with Bank of America, said while the premium growth was less than expected, its return on equity is expected to 15 percent.
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