ACE Ups Guidance As Net Income Climbs

In spite of incurring $88 million in pre-tax catastrophe losses, Bermuda-based ACE Limited reported a 13 percent increase in second-quarter net income yesterday with a 21 percent jump in investment income boosting the bottom-line result.

Net income was $649 million, or $1.93 per share, compared with $573 million, or $1.72 per share in last year's second quarter.

For the first six months, net income was $1.35 billion, or $4.02 per share.

In conjunction with the earnings announcement, the company revised its guidance on earnings, indicating that it expects full-year earnings to fall in the range of $7.15 to $7.50 per share. Late last year, the company issued guidance of $6.65 to $7.15 per share.

ACE also expects net earned premiums to growth in the 2-to-4 percent range, down from prior guidance of 3-to-5 percent.

The Bermuda-based company reported that property-casualty net premiums written were flat over the prior-year quarter, with insurance premiums rising 3 percent to $2.7 billion while reinsurance premiums fell 20 percent to $332 million.

Life premiums jumped 32 percent to $87 million in the quarter.

On the p-c side, the combined ratio went to 87.6 for the second quarter compared with 88.2 for the prior-year quarter.

In dollars, p-c underwriting income was $362 million for second-quarter 2007, compared with $337 million in second-quarter 2006. Favorable prior-period development contributed $40 million to underwriting income in this year's second quarter on a pre-tax basis, compared with $14 million in second-quarter 2006.

During a conference call this morning, ACE Chairman and Chief Executive Officer Evan Greenberg highlighted several new product initiatives that he termed the “lifeblood of a company like ACE,” including the creation of an international energy and technical risks division, which was announced Monday.

This unit will take advantage of the growing demand for energy in all regions of the world, Mr. Greenberg said, noting that while ACE is not new to this business, the new unit puts dedicated marketing and underwriting capabilities on the ground in Europe, the Middle East, Asia and Latin America.

In addition, he said ACE will soon announce the launch of a global construction group to focus the company's resources on growing commercial construction and infrastructure development taking place throughout the world.

In response to a question about conditions in the U.S. excess and surplus lines and specialty markets, Mr. Greenberg said ACE shrank its E&S general casualty business significantly–by “real double digits.”

Brian Dowd, CEO of the North American insurance operating division, said fierce price competition in the primary general casualty and umbrella E&S lines means new business there is particularly hard to come by. “We often miss by 20, 30 [price] points on new business. We've written virtually no new business in casualty on the E&S side,” he said.