ACE Limited reported net income for the quarter ended March 31, 2013 of $2.77 per share – $953 million – compared with $2.84 per share -$973 million- for the same quarter last year. Operating income was $2.17 per share – $746 million – compared with $2.05 per share – $701 million – for the same quarter last year.
Book value and tangible book value per share increased 1.6 percent and 2.2 percent, respectively, from December 31, 2012. Book value and tangible book value per share now stand at $82.17 and $67.74, respectively. Operating return on equity for the quarter was 11.9 percent. The property and casualty (P&C) combined ratio for the quarter was 88.2 percent.
Chairman and CEO Evan G. Greenberg commented: “ACE had an excellent first quarter and strong start to the year. We produced $746 million in after-tax operating income and our operating ROE was 12 percent, driven by strong underwriting results. We had a P&C combined ratio of 88.2 percent that benefited from excellent current accident year underwriting income as a result of both improved margin and growth in our U.S. and international businesses.
“Premium revenue growth across the company was very good, with total net premiums up over 6 percent. We are taking full advantage of the improved commercial P&C pricing environment in the U.S. and our strong presence in areas of the world where economic fundamentals are superior, such as Asia and Latin America. We completed our acquisition of Mexican surety company Fianzas Monterrey and anticipate closing our acquisition of ABA Seguros, Mexico’s fourth-largest personal lines company, over the next few weeks. We are optimistic about our growth prospects for the balance of the year.”
Operating highlights for the quarter ended March 31, 2013, were listed as follows: • Total company net premiums written increased 6.3 percent. • P&C net premiums written increased 6.9 percent. • Total pre-tax and after-tax catastrophe losses including reinstatement premiums for the quarter were $32 million (one percentage point of the combined ratio) and $28 million, respectively, compared with $19 million and $14 million, respectively, in 2012. • P&C underwriting income was $364 million compared with $314 million in 2012. • The P&C combined ratio was 88.2 percent compared with 89.2 percent last year. • P&C current accident year underwriting income excluding catastrophe losses increased 36.9 percent to $328 million. Results included a net favorable benefit of $14 million, which comprised two one-time items: a $29 million legal settlement benefit partially offset by a $15 million expense adjustment. • Favorable prior period development pre-tax was $70 million, representing 2.2 percentage points of the combined ratio, compared with $93 million last year. • The P&C current accident year combined ratio excluding catastrophe losses improved to 89.4 percent compared with 91.7 percent last year. • The P&C expense ratio for the quarter improved to 31.1 percent compared with 32.3 percent last year, and benefited by 0.6 percentage point related to the one-time items noted above. • Operating cash flow was $913 million for the quarter. • Net loss reserves decreased $60 million in the quarter after adjusting for foreign exchange due to payments related to Superstorm Sandy and prior year crop insurance losses. • Net investment income for the quarter decreased 2.4 percent to $531 million due primarily to lower reinvestment rates offset by higher distributions from private equity funds. • Net realized and unrealized gains pre-tax totaled approximately $88 million, which included net realized gains from derivative accounting related to variable annuity reinsurance of $119 million, including the effect of foreign exchange. • Operating return on equity was 11.9 percent for the quarter. Return on equity computed using net income was 13.7 percent. • Share repurchases totaled $154 million, or approximately 1.8 million shares, during the quarter. • Book value per share increased 1.6 percent to $82.17 from $80.90 at December 31, 2012. • Tangible book value per share increased 2.2 percent to $67.74 from $66.28 at December 31, 2012. • Debt plus trust preferred securities to tangible capital ratio was 20.7 percent compared to 18.4 percent at December 31, 2012, primarily due to new debt issuances totaling $950 million during the quarter. • Effective with the first quarter of 2013, the company’s North American segment is split and presented in two distinct reporting segments: Insurance – North American P&C and Insurance – North American Agriculture. Prior year amounts have been adjusted to conform to the new segment presentation.
Details of financial results by business segment are available in the ACE Limited Financial Supplement. Key segment items for the quarter ended March 31, 2013, include: • Insurance – North American P&C: Net premiums written increased 9.3 percent. The combined ratio was 85.7 percent compared with 89.4 percent. • Insurance – North American Agriculture: Net premiums written decreased 5.1 percent, or $6 million. The combined ratio was 79.3 percent compared with 42.8 percent. • Insurance – Overseas General: Net premiums written increased 6.0 percent. On a constant-dollar basis, net premiums written increased 6.3 percent. The combined ratio was 90.6 percent compared with 91.2 percent. • Global Reinsurance: Net premiums written increased 6.1 percent. The combined ratio was 67.3 percent compared with 68.3 percent. • Life: Operating income was $70 million compared with $84 million. On a constant-dollar basis, Life net premiums written and deposits collected, excluding life reinsurance run-off products increased 17.8 percent.
ACE said it is “issuing updated guidance for full-year 2013 to account for the positive first quarter prior period reserve development, lower-than-planned catastrophe losses realized in the first quarter and better-than-expected current accident year results excluding catastrophe losses.
“The range is $7.10 to $7.50 per share in after-tax operating income for the year. This includes estimated catastrophe losses of $330 million after tax for the second through fourth quarters. Guidance for the balance of the year is for the current accident year only.”
Source: ACE Limited