ACE Limited Reports Fourth Quarter 2005 Net Income of $237 Million, Full Year 2005 Net Income of $1,029 Million; Full Year P&C Combined Ratio Was 99.3% Following After-Tax Catastrophe Losses of $1,049 Million.HAMILTON Hamilton, city, Bermuda Hamilton, city (1990 est. pop. 3,100), capital of Bermuda, on Bermuda Island. It is a port at the head of Great Sound, a huge lagoon and deepwater harbor protected by coral reefs. , Bermuda Bermuda (bûrmy  `də), British dependency (2005 est. pop. 65,400), 21 sq mi (53 sq km), comprising some 150 coral rocks, islets, and islands (of which some 20 are inhabited), in the -- ACE Limited (NYSE NYSESee: New York Stock Exchange :ACE) today reported net income for the fourth quarter ended December December: see month. 31, 2005 of $237 million or $0.70 per common share after payment of preferred dividends preferred dividend n. a payment of a corporation's profits to holders of preferred shares of stock. (See: preferred stock) , compared with net income of $278 million or $0.93 per share for the same quarter last year. Income excluding net realized gains Realized Gain A gain resulting from selling an asset at a price higher than the original purchase price. Notes: There may be tax consequences for a realized profit. (losses) for the fourth quarter was $245 million, or $0.72 per share, compared with $160 million or $0.52 per share for the same quarter of last year.(1) The losses from hurricane Wilma Hurricane Wilma was the most intense hurricane ever recorded in the Atlantic basin. Exceeding the 21 storms of the 1933 season, Wilma was the twenty-second storm (including the subtropical storm discovered in reanalysis), thirteenth hurricane, sixth major hurricane, and fourth , $251 million, and development primarily related to hurricanes Katrina KATRINA Keeping All the Resources in New Orleans Alive KATRINA Krewe Aiding Trash Removal In the New Orleans Area , Rita and Dennis Dennis is a male first name derived from the Greco-Roman name Dionysius meaning "servant of Dionysus", the Thracian god of wine, which is ultimately derived from the Greek Dios (Διος, "of Zeus") combined with Nysos or Nysa (Νυσα), where the , $53 million, together resulted in an after-tax af·ter-tax also af·ter·tax adj. Relating to or being that which remains after payment, especially of income taxes: after-tax profits. charge for the quarter of $0.94 per share.
Fourth Quarter Summary
(in millions, except share and per share amounts)
(Per Share - Diluted)
2005 2004 Change 2005 2004 Change
----- ----- ------ ------ ------ ------
(Restated) (Restated)
Net income $237 $278 (15%) $0.70 $0.93 (25%)
Net realized gains
(losses), net of tax (8) 118 - (0.02) 0.41 -
Income excluding net
realized gains, net
of tax (1) 245 160 53% 0.72 0.52 38%
Asbestos, environmental
and other run-off (A&E)
charge, net of tax - 302 - - 1.06 -
Catastrophe losses,
net of tax 304 31 - 0.94 0.11 -
Income excluding net
realized gains (losses),
catastrophe losses and A&E
charge, net of tax (1) $549 $493 11% $1.66 $1.69 (2%)
Combined ratio, excluding
A&E charge and
catastrophe losses 89.9% 87.1%
Average shares outstanding 323.4 286.0
Net income for the year decreased 11% to $1,029 million or $3.31 per share, compared with $1,153 million or $3.88 per share in 2004. For 2005, income excluding net realized gains (losses) decreased 4% to $956 million or $3.06 per share, compared with $1 billion or $3.34 per share in 2004. Record industry catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). losses resulted in a net after-tax charge of $1,049 million or $3.53 per share, compared with $437 million or $1.53 per share in 2004. The P&C combined ratio for the year was 99.3%.
Years Ended
(in millions, except share and per share amounts)
(Per Share - Diluted)
2005 2004 Change 2005 2004 Change
------- ------- ------ ------ ------ ------
(Restated) (Restated)
Net income $1,029 $1,153 (11%) $3.31 $3.88 (15%)
Net realized gains,
net of tax 73 153 - 0.25 0.54 -
Income excluding
net realized gains
(losses), net of
tax (1) 956 1,000 (4%) 3.06 3.34 (8%)
A&E charge, net of tax - 302 - - 1.06 -
Catastrophe losses,
net of tax 1,049 437 - 3.53 1.53 -
Income excluding net
realized gains
(losses), A&E charge
and catastrophe
losses, net of
tax (1) $2,005 $1,739 15% $6.59 $5.93 11%
Combined ratio,
excluding A&E
charge and
catastrophe
losses 88.5% 87.5%
Average shares
outstanding 297.3 285.5
Evan Greenberg Green·berg , Joseph Harold Born 1915. American linguist. His influential works include Languages of Africa (1966) and Language Universals (1966). Noun 1. , President and Chief Executive Officer of ACE Limited, commented: "This past year was the worst in history for insured catastrophe losses, yet ACE finished the year with a combined ratio under 100%, an ROE A fictitious surname used for an unknown or anonymous person or for a hypothetical person in an illustration. A lawsuit is generally named for the persons who are parties to it. of approximately 9%, and book value growth of 7%. While failing to meet our standards, these results are a testament to the underwriting Underwriting 1. The process by which investment bankers raise investment capital from investors on behalf of corporations and governments that are issuing securities (both equity and debt). 2. The process of issuing insurance policies. discipline of our organization. Looking ahead, ACE is well-positioned both operationally and financially to capitalize on Cap´i`tal`ize on` v. t. 1. To turn (an opportunity) to one's advantage; to take advantage of (a situation); to profit from; as, to capitalize on an opponent's mistakes s>. a dynamic market and the opportunities it presents."
Other 2005 operating highlights were as follows:
-- P&C net premiums written increased 2% for the year
-- The P&C combined ratio was 99.3% for the year compared with
96.9% a year ago
-- Operating cash flow amounted to $4.3 billion for the year
-- Cash and invested assets increased by $5 billion in 2005 to
$32.4 billion
-- Net paid and unpaid losses and loss expenses increased $3
billion to $19.6 billion
-- Net investment income increased 25% for the year to $1.26
billion
-- Shareholders' equity increased 20% for the year to $11.8
billion
-- Tangible equity rose to $9.1 billion, a gain of 27% from
year-end 2004
-- Debt to total capital ratio improved to 14.8% from 16.3% at
year-end 2004
-- Return on equity for 2005 was 8.9%(2); excluding FAS 115, it
was 9.3%
-- Book value per share as of December 31, 2005 increased 7% in
2005 to $34.78(3)
On October October: see month. 4, 2005, the Company issued common stock of approximately $1.5 billion. Details of our financial results, excluding the impact of catastrophe losses and related premiums for the year, for our P&C business segments are available in the financial supplement. Key items include: --Insurance-North American American, river, 30 mi (48 km) long, rising in N central Calif. in the Sierra Nevada and flowing SW into the Sacramento River at Sacramento. The discovery of gold at Sutter's Mill (see Sutter, John Augustus) along the river in 1848 led to the California gold rush of : Net premiums written increased 7% for the year. The combined ratio was 95.2%. Adjusted for catastrophe losses the combined ratio was 87.9%.(1) --Insurance-Overseas General: Net premiums written decreased 3% for the year. The segment's combined ratio was 94.0%. Adjusted for catastrophe losses the combined ratio was 88.5%.(1) --Global Reinsurance The contract made between an insurance company and a third party to protect the insurance company from losses. The contract provides for the third party to pay for the loss sustained by the insurance company when the company makes a payment on the original contract. : Net premiums written were up 2% for the year. This segment had a combined ratio of 115.6%. Adjusted for catastrophe losses the combined ratio was 78.6%.(1) --Financial Services: Income excluding net realized gains (losses) decreased 35% to $137 million for the year. Adjusted for catastrophe losses and the sale of Assured Guaranty As a verb, to agree to be responsible for the payment of another's debt or the performance of another's duty, liability, or obligation if that person does not perform as he or she is legally obligated to do; to assume the responsibility of a guarantor; to warrant. Ltd. in 2004, income excluding net realized gains (losses) increased 19% to $229 million. All amounts included herein for prior periods have been adjusted to reflect the previously reported restatements. Please refer to the ACE Financial Supplement December 31, 2005, which is posted on the Company's website, for more detailed information on individual segment performance, together with additional disclosure on reinsurance recoverable, loss reserves, catastrophe loss charges by segment, investment portfolio and capital structure. ACE's website reference (url) is http://media.corporate-ir.net/media_files/nys/ace/reports/fin_supp_dec The trade name for Digital Equipment Corporation's earlier products (DECmate, DECnet, etc.). Many people used to refer to the company as DEC. In 1998, Digital was acquired by Compaq. See Digital Equipment. 1. DEC - Digital Equipment Corporation 2. ember_31_2005.xls. (Due to the length of this URL, it may be necessary to copy and paste To copy files from one location to another or to copy text and images from one document to another. All modern operating systems and applications have a copy and paste capability that is typically selected from an Edit menu. See cut and paste and Win Copy between windows. this hyperlink A predefined linkage between one object and another. See hypertext. hyperlink - anchor into your Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the browser's URL address field.) ACE will host its fourth quarter 2005, year-end year-end also year·end n. The end of a year. adj. Occurring or done at the end of the year: a year-end audit. Noun 1. earnings conference call and webcast on Wednesday Wednesday: see week. , February February: see month. 1, 2006 beginning at 8:30 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . The earnings conference call will be available via live and archived webcast at http://www.acelimited.com or by dialing 888-889-5602 (within the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. ) or 973-582-2734 (international); conference ID 6828632. 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 from approximately 11:30 a.m. EST on Wednesday, February 1, 2006 until Wednesday, March 1, 2006. To listen to the replay, dial: 1-877-519-4471 (in the United States) or 1-973-341-3080 (international); passcode 6828632 (#). The ACE Group of Companies is a global leader in insurance and reinsurance serving a diverse group of clients. Headed by ACE Limited, a component of the Standard & Poor's 500 stock index, The ACE Group conducts its business on a worldwide basis with operating subsidiaries An operating subsidiary is a business term frequently used within the United States railroad industry. In the case of a railroad, it refers to a company that is a subsidiary but operates with its own identity and rolling stock. in more than 50 countries. Additional information can be found at: http://www.acelimited.com. (1) Non-GAAP Financial Measures: Operating Income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. or Income excluding net realized gains (losses), net of tax is a common performance measurement. We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business. We exclude net realized gains (losses) because the amount of these gains (losses) is heavily influenced by, and fluctuates in part according to according to prep. 1. As stated or indicated by; on the authority of: according to historians. 2. In keeping with: according to instructions. 3. , the availability of market opportunities. Income excluding net realized gains (losses), A&E charges and catastrophe losses, net of tax is a non-GAAP measure. We present income excluding net realized gains (losses), A&E charges and catastrophe losses, net of tax because those losses are deemed to be significant to the quarter and the year. We believe this separate presentation is meaningful and useful for users of our financial information. Underwriting income Underwriting income For an insurance company, the difference between the premiums earned and the costs of settling claims. is calculated by subtracting losses and loss expenses, life and annuity annuity: see insurance. annuity Payment made at a fixed interval. A common example is the payment received by retirees from their pension plan. There are two main classes of annuities: annuities certain and contingent annuities. benefits, policy acquisition costs and administrative expenses from net premiums earned. We use underwriting income and operating ratios Operating Ratio A ratio that shows the efficiency of management by comparing operating expense to net sales: to monitor the results of our operations without the impact of certain factors, including net investment income, other (income) expense, interest and income tax expense and net realized gains (losses). We believe the use of these measures enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business. Tangible shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. is shareholders' equity less goodwill. See reconciliation of Non-GAAP Financial Measures on page 32 in the financial supplement. These measures should not be viewed as a substitute for net income determined in accordance Accordance is Bible Study Software for Macintosh developed by OakTree Software, Inc.[] As well as a standalone program, it is the base software packaged by Zondervan in their Bible Study suites for Macintosh. with generally accepted accounting principles The standard accounting rules, regulations, and procedures used by companies in maintaining their financial records. Generally accepted accounting principles (GAAP) provide companies and accountants with a consistent set of guidelines that cover both broad accounting (GAAP GAAP See: Generally Accepted Accounting Principles GAAP See generally accepted accounting principles (GAAP). ). (2) Calculated using income excluding net realized gains (losses). (3) Book value per ordinary share is ordinary shareholders' equity divided by the shares outstanding. Cautionary Statement Regarding Forward-Looking Statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. : Any forward-looking statements made in this press release reflect the Company's current views with respect to future events and financial performance and are made pursuant to the safe harbor Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. provisions of the Private Securities Litigation Reform Act The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Such statements involve risks and uncertainties, which may cause actual results to differ materially from those set forth in these statements. For example, the Company's forward-looking statements could be affected by competition, pricing and policy term trends, the levels of new and renewal business achieved, market acceptance, changes in demand, the frequency of unpredictable catastrophic events, actual loss experience, uncertainties in the reserving or settlement process, new theories of liability, judicial, legislative, regulatory reg·u·late tr.v. reg·u·lat·ed, reg·u·lat·ing, reg·u·lates 1. To control or direct according to rule, principle, or law. 2. and other governmental developments, litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. tactics and developments, investigation developments, the amount and timing of reinsurance recoverable, credit developments among reinsurers, actual market developments, rating agency action, possible terrorism or the outbreak outbreak see epidemic. and effects of war and economic, political, regulatory, insurance and reinsurance business conditions, as well as management's response to these factors, and other factors identified in the Company's filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
ACE Limited
Summary Consolidated Balance Sheets
(in millions of U.S. dollars, except per share data)
----------------------------------------------------------------------
December 31 December 31
2005 2004
----------- ------------
(Unaudited)
Assets
Total investments $ 31,922 $ 26,925
Cash 512 498
Insurance and reinsurance balances receivable 3,355 3,255
Reinsurance recoverable 15,519 14,882
Other assets 11,211 10,623
----------- ------------
Total assets $ 62,519 $ 56,183
=========== ============
Liabilities
Unpaid losses and loss expenses $ 35,090 $ 31,483
Unearned premiums 5,884 5,983
Other liabilities 9,743 8,872
----------- ------------
Total liabilities $ 50,717 $ 46,338
----------- ------------
Shareholders' equity
Total shareholders' equity $ 11,802 $ 9,845
----------- ------------
Total liabilities and shareholders'
equity $ 62,519 $ 56,183
=========== ============
Book value per ordinary share (3) $ 34.78 $ 32.65
ACE Limited
Summary Consolidated Financial Data
(in millions of U.S. dollars, except share,
per share data, and ratios)
(Unaudited)
----------------------------------------------------------------------
Three Months Ended Years Ended
December 31 December 31
--------------------------- --------------------------
Restated Restated
2005 2004 2005 2004
------------ -------------- ------------ -------------
Gross premiums
written $ 3,797 $ 3,646 $ 16,814 $ 16,094
Net premiums
written 2,632 2,641 11,796 11,496
Net premiums
earned 2,863 2,881 11,752 11,110
Losses and loss
expenses 2,124 2,216 8,560 7,690
Life and
annuity
benefits 35 39 143 175
Policy
acquisition
costs 427 411 1,670 1,565
Administrative
expenses 327 337 1,287 1,265
------------ -------------- ------------ -------------
Underwriting
income (loss)
(1) (50) (122) 92 415
Net investment
income 354 282 1,264 1,013
Net realized
gains (losses) (25) 130 76 197
Interest
expense 46 43 174 183
Other expense (4) 1 (40) 3
Income tax
expense
(benefit) - (32) 269 286
------------ -------------- ------------ -------------
Net income 237 278 1,029 1,153
Preference
shares
dividend (12) (12) (45) (45)
------------ -------------- ------------ -------------
Net income
available to
holders of
ordinary
shares $ 225 $ 266 $ 984 $ 1,108
============ ============== ============ =============
Diluted
earnings per
share:
Income
excluding net
realized gains
(losses) (1) $0.72 $0.52 $3.06 $3.34
Net income $0.70 $0.93 $3.31 $3.88
Weighted
average basic
shares
outstanding 317,061,215 281,308,706 292,401,343 280,271,225
Weighted
average
diluted shares
outstanding 323,357,508 286,048,064 297,299,883 285,485,472
Loss and loss
expense ratio 76.0% 78.5% 74.4% 70.7%
Policy
acquisition
cost ratio 15.0% 14.3% 14.3% 14.2%
Administrative
expense ratio 11.4% 11.8% 11.0% 11.5%
Combined ratio 102.4% 104.6% 99.7% 96.4%
Ratios exclude life insurance and reinsurance business
ACE Limited
Consolidated Supplemental Segment Information
(in millions of U.S. dollars)
(Unaudited)
----------------------------------------------------------------------
Three Months Ended Years Ended
December 31 December 31
------------------- -----------------
Restated Restated
2005 2004 2005 2004
-------- --------- ------- --------
Gross Premiums Written
----------------------
Insurance - North American $ 2,090 $ 1,885 $ 8,834 $ 8,126
Insurance - Overseas General 1,388 1,389 5,775 5,851
Global Reinsurance 283 286 1,599 1,567
Financial Services (31) 29 358 320
Life Insurance and Reinsurance 67 57 248 230
-------- --------- ------- --------
Total $ 3,797 $ 3,646 $16,814 $ 16,094
-------- --------- ------- --------
Net Premiums Written
--------------------
Insurance - North American $ 1,310 $ 1,194 $ 5,454 $ 5,101
Insurance - Overseas General 1,014 1,083 4,195 4,335
Global Reinsurance 276 280 1,546 1,518
Financial Services (35) 27 353 316
Life Insurance and Reinsurance 67 57 248 226
-------- --------- ------- --------
Total $ 2,632 $ 2,641 $11,796 $ 11,496
-------- --------- ------- --------
Net Premiums Earned
-------------------
Insurance - North American $ 1,347 $ 1,243 $ 5,289 $ 4,679
Insurance - Overseas General 1,048 1,126 4,239 4,296
Global Reinsurance 395 359 1,531 1,389
Financial Services 6 96 445 520
Life Insurance and Reinsurance 67 57 248 226
-------- --------- ------- --------
Total $ 2,863 $ 2,881 $11,752 $ 11,110
-------- --------- ------- --------
Income (Loss) Excluding Net
Realized Gains (Losses)(1)
---------------------------
Insurance - North American $ 125 $ (135) $ 581 $ 266
Insurance - Overseas General 104 194 463 510
Global Reinsurance (10) 100 (83) 193
Financial Services 50 40 137 210
Life Insurance and Reinsurance 24 18 100 51
Corporate (48) (57) (242) (230)
-------- --------- ------- --------
Total $ 245 $ 160 $ 956 $ 1,000
-------- --------- ------- --------
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