Zurich -(BUSINESS WIRE)- ACE Limited (NYSE: ACE) today reported net income for the quarter ended March 31, 2012, of $2.84 per share, compared with $0.73 per share for the same quarter last year.(1) Income excluding net realized gains (losses) was $2.05 per share, compared with $0.76 per share for the same quarter last year.(2) Book value and tangible book value increased 4.5% and 5.3%, respectively, from December 31, 2011. Book value and tangible book value per share now stand at $75.09 and $60.74, respectively. Annualized operating return on equity for the quarter was 12.2%.(2) The property and casualty (P&C) combined ratio for the quarter was 89.2%.
Evan G. Greenberg, Chairman and Chief Executive Officer of ACE Limited, commented: “ACE had a good first quarter and strong start to the year. After-tax operating income topped $700 million and our operating ROE surpassed 12%. Book value grew 4.5% in the quarter. Our balance sheet is in excellent shape – capital now exceeds $30 billion and shareholders’ equity exceeds $25 billion.
“Our underwriting results were simply excellent as demonstrated by a P&C combined ratio of 89.2%. We and much of the industry benefited from relatively light catastrophe losses in the quarter, particularly compared to prior year. It’s noteworthy that our operating income excluding catastrophes was up 2% over the first quarter last year. As for revenue, total company net premiums written grew 3.7% in the quarter, right in line with our plans. We expect our company’s premium growth rate to accelerate as the year progresses.
“Insurance rates were in line with or marginally better than our expectations. In fact, this was the strongest quarter yet for rate increases, which were more broad-based. Rates on our U.S. business were up 3.6% on average. We benefited from improved pricing in many of our property-related classes and modestly improved pricing in certain casualty classes. As a result, our customer retention rates improved globally and we incrementally increased our new business writings. At the same time, we continued to shed lines of business, particularly U.S. general market workers’ compensation, where pricing for some time has not met our standards for earning an underwriting profit.”
Operating highlights for the quarter ended March 31, 2012, were as follows: (1)
- Total company net premiums written and earned increased 3.7% and 2.2%, respectively. On a constant-dollar basis, total company net premiums written and earned increased 4.4% and 2.9%, respectively.
- P&C net premiums written and earned increased 2.5% and 0.8%, respectively. On a constant-dollar basis, P&C net premiums written and earned increased 3.2% and 1.5%, respectively.
- P&C underwriting income was $314 million compared with an underwriting loss of $149 million in 2011.
- Variable annuity reinsurance derivative net realized gains, including foreign exchange, were $230 million (pre-tax and after-tax), consisting of $460 million of gains from the mark-to-market accounting treatment offset by the change in the value of equity hedges of $230 million.
- The P&C combined ratio was 89.2% compared with 105.2% last year.
- Favorable prior period development pre-tax was $93 million, representing 3.2 percentage points of the combined ratio, compared with $93 million last year.
- Total pre-tax catastrophe losses including reinstatement premiums were $19 million, compared with $489 million in 2011.
- The current accident year combined ratio excluding catastrophe losses was 91.7% compared with 91.8% last year.
- The P&C expense ratio for the quarter was 32.3% compared with 31.5% last year, due to a higher percentage of premiums earned in the Insurance – Overseas General segment, which has a higher expense ratio.
- Operating cash flow was $572 million for the quarter.
- Net loss reserves increased $102 million in the quarter.
- Net investment income for the quarter was $544 million, unchanged versus last year.
- The operating effective tax rate(2) was 13.0% compared with 27.3% in 2011. The 2011 operating effective tax rate included significant catastrophe losses generated in lower tax-paying jurisdictions.
- Annualized operating return on equity was 12.2% for the quarter.(2) Annualized return on equity computed using net income was 15.6%.
- Book value per share(2) increased 4.0% to $75.09 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 prior periods.(3)
- Tangible book value per share(2) increased 4.8% to $60.74 from $57.97 at December 31, 2011.
Details of our financial results for our business segments are available in the ACE Limited Financial Supplement. Key segment items for the quarter ended March 31, 2012, include:
- Insurance-North American: Net premiums written increased 0.6%. Normalized for the impact of the company’s planned reduction in general market risk transfer workers’ compensation business, net premiums written increased 2.6%. The combined ratio was 87.3% compared with 95.0%.
- Insurance-Overseas General: Net premiums written increased 8.4%. On a constant-dollar basis, net premiums written increased 9.8%. The combined ratio was 91.2% compared with 107.6%.
- Global Reinsurance: Net premiums written decreased 16.5%. On a constant-dollar basis, net premiums written decreased 15.7%. The combined ratio was 68.3% compared with 129.7%.
- Life: Revenues increased 11.3%. On a constant-dollar basis, revenues increased 11.9%. Operating income was $84 million compared with $68 million.
The company is issuing updated guidance for full-year 2012 to account for the positive first quarter prior period reserve development and the lower-than-planned catastrophe losses realized in the first quarter. The range is $7.03 to $7.43 per share in after-tax operating income for the year. This includes estimated catastrophe losses of $325 million after tax for the second through fourth quarters.
Please refer to the ACE Limited Financial Supplement, dated March 31, 2012, which is posted on our 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.
ACE will host its first quarter earnings conference call and webcast on Wednesday, April 25, 2012, beginning at 8:30 a.m. Eastern. The earnings conference call will be available via live and archived webcast at www.acegroup.com or by dialing 888-300-2343 (within the United States) or 719-325-2204 (international); passcode 4955002. Please refer to the ACE Limited website in the Investor Information section under Calendar of Events for details. A replay of the call will be available until May 9, 2012. To listen to the replay, dial: 888-203-1112 (in the United States) or 719-457-0820 (international); passcode 4955002.
(1) All comparisons are with the same period last year unless specifically stated.
(2) Non-GAAP Financial Measures
(3) Refer to the Financial Supplement page 1 for further detail.
The complete earnings release is available here: ACE First Quarter 2012 Results