ACE Limited reported net income for the quarter ended June 30, of $0.96 per share, compared with $1.74 per share for the same quarter last year.
In a release on July 24, the company noted that Income excluding net realized gains (losses) was $2.17 per share, compared with $1.97 per share for the same quarter last year.(2) Book value and tangible book value increased 1.3 percent and 1.8 percent, respectively, from March 31. Book value and tangible book value per share now stand at $75.98 and $61.75, respectively. Annualized operating return on equity for the quarter was 12.6 percent.(2) The property and casualty (P&C) combined ratio for the quarter was 88.7 percent.
Evan G. Greenberg, Chairman and Chief Executive Officer of ACE Limited, commented: "ACE had a very strong second quarter, with excellent operating results that were ahead of plan despite a challenging and slowing global economy. After-tax operating income was $743 million, up 10 percent from last year, and our operating ROE was 12.6 percent. Our underwriting results this quarter were again distinguishing, with a P&C combined ratio of 88.7 percent. ACE's operating performance has been strong all year with earnings for the first six months exceeding $1.4 billion or $4.22 per share. Book value, which grew 1.3 percent in the quarter and is up almost 6 percent for the year, was impacted by the eurozone debt crisis and the consequent flight to safety, which affected foreign exchange, interest rates and equity markets.
"Total company net premiums written grew 4.5 percent in the quarter, or 6.5 percent adjusting for the impact of foreign exchange. As we said last quarter, our premium growth rate has been accelerating as the year progresses. We are benefiting from strong, broad-based growth, both geographic and product, along with an improving P&C price environment globally. For the first time, pricing in our international P&C operations in aggregate turned positive, whereas for our U.S. business, rates continued to rise, up 4.7 percent on average for the quarter.
"Drought conditions in the U.S. are impacting our crop insurance business and will affect our earnings in the second half of the year as described in our updated guidance. Crop insurance aside, we are optimistic about our revenue and earnings prospects for the balance of the year and we are well positioned to take advantage of the positive trend in P&C prices globally. At the same time, we are mindful of the economic and political headwinds - beginning with the eurozone crisis and the U.S. fiscal cliff, which are impacting economic conditions and business confidence in the U.S., China and the balance of the world - and the uncertainties these present."
Operating highlights for the quarter ended June 30, were as follows:
-Total company net premiums written increased 4.5 percent. On a constant-dollar basis, total company net premiums written increased 6.5 percent.
-P&C net premiums written increased 5.3 percent. On a constant- dollar basis, P&C net premiums written increased 7.4 percent.
-P&C underwriting income was $374 million compared with $239 million in 2011.
-The P&C combined ratio was 88.7 percent compared with 92.7 percent last year.
-Favorable prior period development pre-tax was $113 million, representing 3.4 percentage points of the combined ratio, compared with $146 million last year.
-Total pre-tax and after-tax catastrophe losses including reinstatement premiums were $55 million and $41 million, respectively, compared with $134 million and $101 million, respectively, in 2011.
-The current accident year combined ratio excluding catastrophe losses was 90.4 percent compared with 93.1 percent last year.
-The P&C expense ratio for the quarter was 29.2 percent compared with 29.6 percent last year.
-Operating cash flow was $811 million for the quarter.
-Net loss reserves increased $66 million in the quarter after adjusting for foreign exchange.
-Net investment income for the quarter decreased 5.5 percent to $537 million due to lower new money rates and the negative impact of foreign exchange, partially offset by higher distributions from private equity funds.
-Net realized losses from derivative accounting related to variable annuity reinsurance were $397 million. Year to date, the net loss is $121 million.
-Foreign exchange had a negative impact in the quarter, reducing net income by $24 million and book value by $103 million.
-Annualized operating return on equity was 12.6 percent for the quarter.(2) Annualized return on equity computed using net income was 5.1 percent.
-Book value per share(2) increased 1.2 percent to $75.98 from $75.09 at March 31, and increased 5.2 percent from $72.22 at December 31, 2011. The book value amounts reflect the effects of new accounting guidance for deferred acquisition costs that is retroactively applied to periods prior to January 1.(3)
-Tangible book value per share(2) increased 1.7 percent to $61.75 from $60.74 at March 31, and increased 6.5 percent from $57.97 at December 31, 2011.
Details of financial results by business segment are available in the ACE Limited Financial Supplement. Key segment items for the quarter ended June 30, include:
-Insurance-North American: Net premiums written increased 7.2 percent. Adjusted for crop insurance, net premiums written increased 10.3 percent. The combined ratio was 89.2 percent compared with 95.1 percent.
-Insurance-Overseas General: Net premiums written increased 2.2 percent. On a constant-dollar basis, net premiums written increased 6.7 percent. The combined ratio was 89.3 percent compared with 91.6 percent.
-Global Reinsurance: Net premiums written increased 9.4 percent. On a constant-dollar basis, net premiums written increased 9.9 percent. The combined ratio was 66.1 percent compared with 67.9 percent.
-Life: Operating income was $79 million compared with $88 million.
The company is updating guidance for full-year 2012. The range is now $7.20 to $7.60 per share in after-tax operating income for the year. First, the update reflects the positive prior period reserve development and lower-than-planned catastrophe losses in the first half of $0.74 per share. Second, the update includes a reduction of $0.19 per share to reflect a projected third quarter increase in the year-to-date crop insurance loss ratio. Finally, the update includes estimated catastrophe losses of $270 million after tax for the second half of the year. Guidance for the balance of the year is for the current accident year only.
Please refer to the ACE Limited Financial Supplement, dated June 30, which is posted on the company's website in the Investor Information section, and access Financial Reports for more detailed information on individual segment performance, together with additional disclosure on reinsurance recoverable, loss reserves, investment portfolio and capital structure.
The ACE Group is a multiline property and casualty insurer.
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