ACE Limited reported fourth-quarter net income dropped 14 percent on losses from market re-evaluations in its life business and investment in a bond insurer.
The Hamilton, Bermuda-based company reported net income dropped by $93 million to $572 million for the fourth quarter compared to 2006. Net income per share fell 30 cents in the period to $1.69. Gross written premiums increased during the period by $134 million to $4.14 billion.
For the year, net income increased 12 percent from 2006, or $273 million, to $2.58 billion. Net income per share increased 75 cents for the year to $7.66 a share. Gross written premiums increased $339 million to $17.74 billion.
David Small, an analyst with Bear Stearns, said in a note that the company beat expectations driven primarily by lower than expected catastrophe losses and greater than expected favorable loss developments.
"Overall, this was a solid quarter for ACE," said Mr. Small. "We believe ACE is in a better position entering 2008 than many others as it has a more diverse business mix with a larger percentage generated from A&H [accident and health], which in not prone to the same cyclicality as the [property-casualty] cycle."
The company said it took a $108 million loss on re-evaluation of guaranteed minimum income benefit liabilities on the life insurance side of the business and $73 million in re-evaluation loss for its investment in Assured Guaranty Ltd.
During an analyst's conference call discussing the company's fourth-quarter results, Evan Greenberg, chairman and chief executive officer of ACE, said the company has little subprime exposure related to professional liability coverage. "We will have subprime losses, but our exposure is relatively modest and would not be a major event for ACE."
While not giving any numbers, he said the company has received some notices of subprime-related directors and officers liability and errors and ommissions claims, but those notices of claim are Side-A coverage (covering individual directors of a corporation). The policies are primarily excess policies with high attachments.
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