ACE Posts Record Q3 Operating Income of $857 Million; $916 Million Net

ACE Limited reported net income for the quarter ended September 30, 2013, of $916 million, $2.66 per share, compared with $640 million, $1.86 per share, for the same quarter last year. Operating income was $857 million, $2.49 per share, compared with 688 million, $2.01 per share, for the same quarter last year. Net investment gain/loss was $59 million, compared to a $48 million loss in Q3 2012.

ACE said: “Book value and tangible book value per share increased 3.4 percent and 3.9 percent, respectively, from June 30, 2013. Book value and tangible book value per share now stand at $82.98 and $66.91, respectively. Operating return on equity for the quarter was 13.0 percent. The property and casualty (P&C) combined ratio for the quarter was 86.5 percent.

For the nine months ended September 30, 2013, net income was $2.760 billion, $8.02 per share, compared with $1.941 billion, $5.67 per share, for 2012. Operating income was $2.293 billion, $6.95 per share, compared with $2.132 billion, $6.23 per share, for 2012. Book value increased $687 million, up 2.5 percent from December 31, 2012, and tangible book value increased $197 million, up 0.9 percent. Operating return on equity was 12.3 percent year to date. The P&C combined ratio for the nine months ended September 30, 2013, was 87.5 percent.

Chairman and CEO Evan G. Greenberg commented: “ACE had another record quarter driven by exceptionally strong underwriting results and double-digit constant-dollar global P&C premium revenue growth. We produced $857 million in after-tax operating income and our operating ROE was 13 percent. Per share book value increased 3.4 percent and is now up 2.6 percent for the year.

“We achieved a P&C combined ratio of 86.5 percent. While we benefited from a relatively benign quarter for catastrophes, more fundamentally, we experienced margin improvement in both North America, as a result of better pricing and mix of business, and internationally, as a result of product and geographic mix. We also continued to benefit from our portfolio management capabilities, which are an essential component of good underwriting management, combined with our broad product offering, physical geographic presence and culture of execution discipline.

“Global P&C net premiums written, which exclude agriculture, grew 9 percent in the quarter and over 10.5 percent on a constant-dollar basis. We experienced revenue growth in all of our insurance businesses – commercial P&C, accident and health, personal lines and life – and in all territories – North America, Europe, Asia and Latin America. We are firing on all cylinders and continuing to achieve strong, broad-based growth despite the economic and political headwinds we are confronting in all regions of the world.”

The report also listed the following “operating highlights” for the quarter:

– Total company net premiums written and P&C net premiums written both decreased 2.0 percent, or 0.9 percent on a constant-dollar basis, primarily as a result of lower agriculture premiums. Global P&C net premiums written increased 8.9 percent, or 10.6 percent on a constant-dollar basis.
– P&C underwriting income was $558 million compared with $335 million in 2012. Global P&C underwriting income was $493 million compared with $473 million in 2012.
– P&C current accident year underwriting income excluding catastrophe losses increased 179.8 percent to $426 million.
– Global P&C current accident year underwriting income excluding catastrophe losses increased 27.8 percent to $369 million.
– The P&C combined ratio was 86.5 percent compared with 92.0 percent last year.
– The global P&C combined ratio was 85.0 percent compared with 84.4 percent last year.
– The P&C current accident year combined ratio excluding catastrophe losses was 89.8 percent compared with 96.5 percent last year.
– The global P&C current accident year combined ratio excluding catastrophe losses was 88.9 percent compared with 90.5 percent last year.
– The P&C expense ratio was 25.8 percent compared with 23.1 percent last year primarily due to lower agriculture premiums, which carry a lower expense ratio.
– The global P&C expense ratio was 31.3 percent compared with 31.6 percent last year.
– Total pre-tax and after-tax catastrophe losses including reinstatement premiums were $78 million (1.8 percentage points of the combined ratio) and $70 million, respectively, compared with $53 million and $41 million, respectively, in 2012.
– Favorable prior period development pre-tax was $210 million, representing 5.1 percentage points of the combined ratio, compared with $236 million last year.
– Operating cash flow was $928 million.
– Net loss reserves increased $504 million in the quarter.
– Net investment income was $522 million compared to $533 million last year due to lower reinvestment rates, lower private equity distributions, and the negative impact of foreign exchange.
– Net realized and unrealized gains pre-tax totaled approximately $55 million.
– Operating return on equity was 13.0 percent for the quarter and 12.3 percent year to date. Return on equity computed using net income was 13.2 percent for both the quarter and year to date.
– Book value per share increased 3.4 percent to $82.98 compared with $80.26 at June 30, 2013, and increased 2.6 percent from $80.90 at December 31, 2012.
– Tangible book value per share increased 3.9 percent to $66.91 from $64.40 at June 30, 2013, and increased 1.0 percent from $66.28 at December 31, 2012.
– Tangible book value was negatively affected by goodwill and intangibles relating to the acquisitions of Fianzas Monterrey and ABA Seguros. Excluding the impact of the acquisitions, tangible book value per share increased 3.6 percent from December 31, 2012.

Source: ACE Limited