3Q Earnings: ACE Posts Loss, AFG Falls, Arch Gains

NU Online News Service, Oct. 26, 9:49 a.m. EST

ACE Ltd. says financial-market volatility in the credit, equity and foreign exchange markets impact third-quarter net income, as the company reports a $31 million third-quarter loss.

The volatility affected ACE's variable annuity reinsurance business, resulting in a $660 million net loss for that line, the company says.

In a statement, Evan G. Greenberg, chairman and chief executive offer, blames an “historic drop in interest rates—the lowest level in over 100 years,” as well as other factors.

A year ago during the third quarter, ACE reported net income of $675 million. After nine months this year, the Zurich-based insurance and reinsurance company's net income is down 60 percent to $835 million from about $2.11 billion a year ago.

Pre-tax third-quarter catastrophe losses were $121 million, compared to $97 million during the same time in 2010. The property and casualty combined ratio was 90.3, up from 88.4 last year.

Greenberg says third-quarter revenue increased 31 percent and operating income was up 10 percent to $759 million—a record for the company.

American Financial Group Inc. says third-quarter net income was down 27.3 percent to $96 million compared to the same time a year ago.

In a statement, co-CEOs Carl H. Lindner and S. Craig Lindner also cite low interest rates and national and global economic uncertainty, which requires the company to “be more disciplined than ever in their underwriting and product pricing decisions.”

Underwriting profit in the company's specialty operations was down to $56 million compared to $68 million last year during the third quarter, and results include $34 million in favorable reserve development. Gross written premiums increased about 24 percent for the third quarter for the Cincinnati-based insurer.

AFG says its decision to manage wind-exposed business has resulted in some loss of premiums, but it has allowed the company to avoid large catastrophe losses from storms.

Bermuda's Arch Capital Group Ltd. saw a 14.75 percent increase in third quarter net income to $162.5 million, up from $141.6 million last year despite third-quarter catastrophe losses of $59.6 million net of reinsurance and reinstatement premiums.

Net premiums written and net premiums earned for the third quarter were each up about 8.7 percent.

The total included $45.5 million in catastrophe losses during the third quarter from Hurricane Irene and floods in Denmark. The balance was due to increases in loss estimates from the first half of the year, the company says.

After nine months Arch is operating with a combined ratio of 101.1 and an underwriting loss of about $22.4 million.