Zurich – ACE Limited (NYSE: ACE) recently reported net income for the quarter ended June 30, 2013, of $2.59 per share, compared with $0.96 per share for the same quarter last year. Operating income was $2.29 per share, compared with $2.17 per share for the same quarter last year. Book value per share declined 2.3% from March 31, 2013, to $80.26 due to rising interest rates. Tangible book value per share decreased 4.9% to $64.40, primarily due to rising interest rates and the impact of goodwill and intangibles relating to acquisitions closed during the quarter. Operating return on equity for the quarter was 12.3%. The property and casualty (P&C) combined ratio for the quarter was 87.9%.
For the six months ended June 30, 2013, net income was $5.36 per share, compared with $3.80 per share for 2012. Operating income was $4.46 per share, compared with $4.22 per share for 2012. Book value decreased $236 million, down 0.9% from December 31, 2012, and tangible book value decreased $656 million, down 2.9%. The P&C combined ratio for the six months ended June 30, 2013, was 88.1%.
Evan G. Greenberg, Chairman and Chief Executive Officer of ACE Limited, commented: “ACE had record earnings in the quarter that were driven, in particular, by excellent current accident year underwriting results and strong investment income. We produced $790 million in after-tax operating income and our operating ROE was 12.3%. Book value declined 2.3% due to the rise in interest rates, which reduced unrealized gains in our investment portfolio. However, future investment income will benefit over time from the rise in interest rates.
“Our underwriting performance in the quarter, illustrated by a P&C combined ratio of 87.9%, benefited from margin improvement and premium growth globally. Total P&C net premiums were up over 8.5% on a constant dollar basis – with solid revenue growth in commercial P&C, accident and health, and personal lines. Growth was particularly strong from North America, Asia and Latin America, where our new acquisitions in Mexico are already contributing and added to the region’s strong results.
“The primary commercial P&C pricing environment in the U.S. remains favorable and, in fact, we experienced our strongest quarter yet for casualty-related rate increases in our retail business. At the same time, property rate increases are moderating. While economic conditions remain a mixed bag around the globe, we are firing on all cylinders and, as things stand now, expect continued strong results for the balance of the year.”
Operating highlights for the quarter ended June 30, 2013, were as follows: (1)
- Total company net premiums written increased 6.3%, or 7.6% on a constant-dollar basis.
- P&C net premiums written increased 7.1%, or 8.6% on a constant-dollar basis.
- Total pre-tax and after-tax catastrophe losses including reinstatement premiums were $81 million (2.3 percentage points of the combined ratio) and $66 million, respectively, compared with $55 million and $41 million, respectively, in 2012.
- P&C underwriting income was $434 million compared with $374 million in 2012.
- P&C current accident year underwriting income excluding catastrophe losses increased 21.3% to $386 million.
- The P&C combined ratio was 87.9% compared with 88.7% last year.
- Favorable prior period development pre-tax was $128 million, representing 3.6 percentage points of the combined ratio, compared with $113 million last year.
- The current accident year combined ratio excluding catastrophe losses was 89.2% compared with 90.4% last year.
- The P&C expense ratio was 29.2%, unchanged from last year.
- Operating cash flow was $895 million.
- Net loss reserves increased $349 million in the quarter.
- Net investment income was $534 million compared to $537 million last year as lower reinvestment rates were offset by higher private equity and other distributions.
- Net realized and unrealized losses pre-tax totaled approximately $1.4 billion.
- Operating return on equity was 12.3% for the quarter and 12.1% year-to-date. Return on equity computed using net income was 12.9% for the quarter and 13.5% year-to-date.
- Acquisitions closed in the quarter include Fianzas Monterrey on April 1, 2013, for $293 million in cash and ABA Seguros on May 2, 2013, for $690 million in cash.
- Book value per share decreased 2.3% to $80.26 compared with $82.17 at March 31, 2013, and decreased 0.8% from $80.90 at December 31, 2012.
- Tangible book value per share decreased 4.9% to $64.40 from $67.74 at March 31, 2013, and decreased 2.8% from $66.28 at December 31, 2012, primarily due to rising interest rates and the impact of goodwill and intangibles relating to the acquisitions of Fianzas Monterrey and ABA Seguros. Excluding the impact of the acquisitions, the tangible book value per share decreased 2.7% for the quarter and 0.5% for the year.
Details of financial results by business segment are available in the ACE Limited Financial Supplement. Key segment items for the quarter ended June 30, 2013, include:
- Insurance – North American P&C: Net premiums written increased 11.8%. The combined ratio was 87.6% compared with 89.3%.
- Insurance – North American Agriculture: Net premiums written decreased 8.0% due to an increase in proportional reinsurance purchased. The combined ratio was 89.9% compared with 88.7%.
- Insurance – Overseas General: Net premiums written increased 10.5%, or 13.7% on a constant-dollar basis. The combined ratio was 88.2% compared with 89.3%.
- Global Reinsurance: Net premiums written decreased 5.3%, or 4.2% on a constant-dollar basis. The combined ratio was 62.2% compared with 66.1%.
- Life: Operating income was $76 million compared with $79 million. Net premiums written and deposits collected, excluding life reinsurance, increased 17.7% on a constant-dollar basis.
The company is issuing updated guidance for full-year 2013 to account for the first half positive prior period reserve development, lower-than-planned catastrophe losses realized in the first half, better first half current accident year results excluding catastrophe losses, and higher net investment income in the second quarter and expected for the second half of the year. The range is $7.65 to $8.05 per share in after-tax operating income for the year. This includes estimated catastrophe losses of $260 million after tax for the second half of the year. Guidance for the balance of the year is for the current accident year only.
The complete earnings release is available here: ACE Reports Q2 2013 Results
Source: ACE Ltd