Soft Market Over, ACE CEO Greenberg Says

In addition, he gave several reasons for his predicted market turn.

First, he noted that the insurance industry, which was overcapitalized at the beginning of the year, has seen capital destroyed by natural catastrophes, financial market losses and soft market pricing. "Additionally, downgrades and government ownership are impairing the ability of a number of companies to operate in the same manner as they have in the past," limiting their abilities to effectively deploy capital.

"I believe the soft market is now over," he said, adding that "this fact will work its way to the trading level in the next few months." He noted that rate declines have "slowed or stopped" in many parts of the world, while they are beginning to rise in poorly performing lines like energy.

At ACE, management has "mandated as a rule flat pricing–no reductions."

Mr. Greenberg's comments echoed statements by AXIS CEO John Charman, who during his company's earnings call yesterday said, "We believe a hard market in 2009 is a near certainty."

Mr. Charman and other executives of companies created in Bermuda are heralding the end of the soft market in both the insurance and reinsurance segments–noting that reinsurance, in particular, is viewed as a capital alternative at a time when the cost of capital is high and insurers are becoming more risk averse. Not only is capital supply strained, but demand is higher, he said.

Both men addressed questions about changes in the market brought on by problems at American International Group–both opportunities coming to other companies and the aggressiveness of competition they're seeing from AIG on individual accounts.

"In my view, AIG is the haystack, not the straw that broke our industry camel's back," Mr. Charman said.

Mr. Greenberg said, "ACE will be one of the companies that strives to take advantage of…opportunities," referring more broadly to opportunities "created by casualties" in the insurance world. "The exact size, shape and timing are unclear, as events are unfolding rapidly," he said, stating that ACE expects to "emerge bigger and stronger."

Mr. Greenberg addressed a specific question about business coming to market and seeking an alternative to AIG by citing the surge in submission flow for ACE–noting that ACE's submissions in October so far have surpassed submissions last year for the entire fourth quarter.

Tracking activity by month, he said, submissions jumped 12 percent in August and September over last year, 31 percent in early October, and 50 percent in all of October. Large account submissions are up 80 percent, he said, attributing all the activity to "weakness at other insurers."

Not all those submissions can yet be converted to quotes, however, he noted. "When it comes to the one large player who is under stress, they are an outlier right now in the pricing environment. They are aggressively cutting pricing in an irresponsible way, and it's worrisome."

ACE, which also reported nine-month net income of $1.2 billion, will not be providing earnings guidance in the mid-December timeframe as is usually the case, Mr. Greenberg announced.

"Our business mix may very well change," he said, noting that there is too much uncertainty with respect to the economic slowdown and stress in the financial markets to predict exactly how the mix will change at this point.

Guidance may be delayed to as late as early 2009, he said.

By midday Wednesday, ACE's stock was up nearly 5.5 points, or 11 percent, to nearly $55 per share.