ACE Limited Reports Record Second Quarter Operating Earnings.Business Editors 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--(BUSINESS WIRE)--July 29, 2002 ACE Limited (NYSE NYSE See: New York Stock Exchange :ACE) today reported net 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. of $236 million for the quarter ended June June: see month. 30, 2002 compared with $115 million for the same quarter in 2001. Net operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before per share, after deducting preferred dividends preferred dividend n. a payment of a corporation's profits to holders of preferred shares of stock. (See: preferred stock) , was $0.85 for the current quarter compared with $0.45 for the same quarter last year. The second quarter of 2001 included catastrophe Catastrophe, from the Greek Καταστροφή (katastrephein), literally means "to turn" (strephein) "downwards" (kata-). losses of $0.23 per share and goodwill amortization of $0.08 per share. Net income for the quarter ended June 30, 2002 was $104 million compared with $131 million for fiscal 2001 reflecting net realized losses Realized Loss A loss recognized when assets are sold for a price lower than the original purchase price. Notes: A portion of the realized loss may be applied against a capital gain or realized profit to reduce taxes. of $125 million and debt prepayment Prepayment 1. The payment of a debt obligation prior to its due date. 2. The excess payment over a scheduled debt repayment amount. Notes: 1. Examples include deferred expenses such as rent and early loan repayments. 2. expense of $7 million in the current quarter, compared with 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. of $20 million and a non-recurring expense of $4 million, in the same quarter in 2001. Earnings per share, after deducting preferred dividends, was $0.36 for the current quarter compared with $0.52 for the same quarter last year. The fully diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. book value per share of the company at June 30, 2002 was $24.21 compared with $23.59 at December December: see month. 31, 2001. Brian The name Brian (sometimes spelled Bryan) comes from an Irish backround. It is of Celtic origin and its meaning may be "hill" or "strong, noble, and high"[1]. Duperreault, Chairman and Chief Executive Officer of ACE Limited, commented: "Evidence of a strong upturn in our business and a more durable hard market continues to mount. We enjoyed significant growth in our property and casualty business, recorded our highest quarterly operating income ever, produced a gain in book value per share against the backdrop Backdrop may refer to:
Of or relating to a variable that has been mathematically converted to a yearly rate. Inflation and interest rates are generally annualized since it is on this basis that these two variables are ordinarily stated and compared. return on average equity for the period." Gross premiums written When a non-life insurance company closes a contract to provide insurance against loss, the revenues (premiums) expected to be received over the life of the contract are called gross premiums written. during the June 30, 2002 quarter increased by 22 percent to $2.9 billion, compared with $2.4 billion for the comparable quarter in 2001. By segment, gross premiums increased 81 percent in 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. , 25 percent in Insurance - North American North American named after North America. North American blastomycosis see North American blastomycosis. North American cattle tick see boophilusannulatus. , 21 percent in Financial Products and 9 percent in Insurance - Overseas General. Net premiums written during the second quarter of 2002 increased by 28 percent to $1.9 billion compared with $1.5 billion for the same quarter in 2001. Net premiums written increased 95 percent in Global Reinsurance, 37 percent in Insurance - North American, 20 percent in Financial Products and 9 percent in Insurance - Overseas General. Net premiums earned during the second quarter 2002 increased by 14 percent to $1.6 billion compared with $1.4 billion for the same quarter in 2001. Net premiums earned increased 52 percent in Global Reinsurance, 26 percent in Insurance - North American, 15 percent in Insurance - Overseas General and declined 23 percent in the Financial Products segment. 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. results improved in the current quarter with a consolidated combined ratio of 91.5 percent versus 99.1 percent in the prior year quarter. Net investment income was $201 million for fiscal 2002 second quarter compared with $196 million for fiscal 2001 second quarter. It was an active quarter for investment markets. Interest rates dropped by 100 basis points in the quarter and credit concerns and problems with individual issuers caused sectors of the fixed income markets, particularly high yield, to lose value. Equity markets faced large declines, with the Standard & Poor's (S&P) 500 Index dropping nearly 15 percent while international equity markets also declined. As a result, ACE incurred net realized losses on investments of $125 million, but had an increase in net unrealized appreciation of $107 million. Net realized losses for the quarter included $50 million of equity losses, principally from a decrease in the value of synthetic S&P indexed derivatives derivatives In finance, contracts whose value is derived from another asset, which can include stocks, bonds, currencies, interest rates, commodities, and related indexes. Purchasers of derivatives are essentially wagering on the future performance of that asset. . ACE also recognized a $30 million loss on the interest rate swaps Interest Rate Swap A deal between banks or companies where borrowers switch floating-rate loans for fixed rate loans in another country. These can be either the same or different currencies. that are used to manage the duration of the fixed income portfolio. These losses were due to the drop in rates that caused significant unrealized gains Unrealized Gain A profit that results from holding on to an asset rather than cashing it in and using the funds. Notes: Let's say you own a stock that has doubled, but you haven't sold it yet. This is said to be an unrealized gain. in our fixed income portfolio. As a result of corporate credit events during the quarter, ACE recognized $26 million of impairments on corporate bonds, essentially reclassifying previously reported unrealized losses Unrealized Loss A loss that results from holding onto an asset rather than cashing it in and officially taking the loss. Notes: Let's say you own a stock that is down 50%, but you haven't sold it to realize the loss yet. This is said to be an unrealized loss. to a realized loss. Net realized losses also include the decline in the market value of credit default swaps Credit Default Swap A swap designed to transfer the credit exposure of fixed income products between parties. Notes: The buyer of a credit swap receives credit protection, whereas the seller of the swap guarantees the credit worthiness of the product. , which are reported as realized losses in connection with FAS 133. ACE has introduced a new financial supplement this quarter that includes more detailed information on individual segment performance, along with additional disclosures on reinsurance recoverables, asbestos asbestos, mineral asbestos, common name for any of a variety of silicate minerals within the amphibole and serpentine groups that are fibrous in structure and more or less resistant to acid and fire. reserves, and invested assets. This supplement has been posted to our website at www.acelimited.com/quarterly.html. ACE Limited (NYSE:ACE) will host a live webcast of its second quarter earnings conference call on Tuesday Tuesday: see week. , July July: see month. 30, 2002, beginning at 8:30 a.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . The public may access the webcast, available on a listen-only basis, and the new financial supplement at www.acelimited.com. Please refer to our website under "Investor Info, Notices and Events," one half hour before, for further log-in Verb 1. log-in - enter a computer; "Have you logged in lately?" log in, log on access - obtain or retrieve from a storage device; as of information on a computer details. Individuals who access the webcast will be asked to identify themselves and their affiliation. A replay of the webcast will be available following the live webcast on Tuesday, July 30, 2002 until Tuesday, August 13, 2002, 11:30 p.m. EDT. The ACE Group of Companies provides insurance and reinsurance for a diverse group of clients. The ACE Group conducts its business on a global 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 nearly 50 countries. Additional information can be found at: www.acelimited.com. Application of 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. 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: Any 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. 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 provisions of the Private Securities Litigation Reform Act 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 concerning business prospects and market conditions could be affected by competition, the levels of new and renewal business achieved, market acceptance, the frequency of unpredictable catastrophic events, actual loss experience, the amount and timing of reinsurance recoverables, actual market developments and economic, political, 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. , 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)
(Unaudited)
June 30 December 31
2002 2001
---------- ----------
Assets
Total investments
and cash $ 16,987 $ 15,936
Insurance and reinsurance
balances receivable 3,181 2,522
Reinsurance recoverable 11,637 11,398
Other assets 7,518 7,331
---------- ----------
Total assets $ 39,323 $ 37,187
========== ==========
Liabilities
Unpaid losses and loss
expenses $ 20,661 $ 20,728
Future policy benefits
for life and annuity
contracts 393 383
Unearned premiums 4,937 3,853
Other liabilities 6,637 5,805
---------- ----------
Total liabilities $ 32,628 $ 30,769
---------- ----------
Commitments and contingencies
Mezzanine equity $ 311 $ 311
---------- ----------
Shareholders' equity
Total shareholders'
equity $ 6,384 $ 6,107
---------- ----------
Total liabilities,
mezzanine equity and
shareholders' equity $ 39,323 $ 37,187
========== ==========
Book value per share $ 24.21 $ 23.59
ACE Limited
Summary Consolidated Statements of Operations
(in millions of U.S. dollars, except share and per share data)
(Unaudited)
Three Months Six Months
Ended Ended
June 30 June 30
----------------- -----------------
2002 2001 2002 2001
----- ----- ----- -----
Gross premiums written $ 2,929 $ 2,403 $ 6,047 $ 4,964
Net premiums written 1,875 1,470 3,861 3,205
Net premiums earned 1,576 1,385 2,936 2,754
Losses and loss expenses 961 955 1,814 1,906
Life and annuity benefits 23 28 46 29
Policy acquisition costs 234 187 432 354
Administrative expenses 231 202 428 397
----- ----- ----- -----
Underwriting income 127 13 216 68
Net investment income 201 196 401 401
Other income (expense) (1) 1 4 3
Interest expense 52 50 98 104
Income tax expense 39 25 71 49
Amortization of goodwill - 20 - 40
----- ----- ----- -----
Net operating income(1) $ 236 $ 115 $ 452 $ 279
Debt prepayment expense(2) (7) - (7) -
Non-recurring expenses(2) - (4) - (4)
Net realized
gains (losses)(2) (125) 20 (143) (2)
Cumulative effect of adopting
a new accounting
standard(2) - - - (23)
----- ----- ----- -----
Net income $ 104 $ 131 $ 302 $ 250
===== ===== ===== =====
Diluted earnings per share:
Net operating earnings per
share $0.85 $ 0.45 $ 1.62 $ 1.10
Debt prepayment expense ($0.03) - ($0.03) -
Non-recurring expenses - ($0.02) - ($0.02)
Net realized gains (losses) ($0.46) $0.09 ($0.53) ($0.01)
Cumulative effect of
adopting a new accounting
standard - - - ($0.09)
Earnings per share $0.36 $ 0.52 $ 1.06 $ 0.98
Weighted average shares
outstanding 271,181,229 241,127,812 271,249,367 241,902,283
Loss and loss expense
ratio(3) 62.0% 70.5% 63.0% 70.0%
Expense ratio(3) 29.5% 28.6% 29.2% 27.5%
Combined ratio(3) 91.5% 99.1% 92.2% 97.5%
(1) Operating income is comprised of income excluding net realized
gains (losses), debt prepayment expense, non-recurring expenses and
cumulative effect of adopting a new accounting standard.
(2) Shown net of income tax
(3) Ratios exclude life reinsurance business
ACE Limited
Consolidated Supplemental Segment Information
(in millions of U.S. dollars)
(Unaudited)
Three Months Six Months
Ended Ended
June 30 June 30
------------------ -------------------
2002 2001 2002 2001
-------- -------- -------- ---------
Gross Premiums Written
----------------------
Insurance - North American $ 1,428 $ 1,143 $ 2,693 $ 2,106
Insurance - Overseas
General 941 862 1,903 1,688
Global Reinsurance(1) 242 134 645 364
Financial Products 318 264 806 806
-------- -------- -------- ---------
Total $ 2,929 $ 2,403 $ 6,047 $ 4,964
-------- -------- -------- ---------
Net Premiums Written
--------------------
Insurance - North
American $ 718 $ 525 $ 1,231 $ 967
Insurance - Overseas
General 616 566 1,230 1,110
Global Reinsurance(1) 224 115 607 331
Financial Products 317 264 793 797
-------- -------- -------- ---------
Total $ 1,875 $ 1,470 $ 3,861 $ 3,205
-------- -------- -------- ---------
Net Premiums Earned
-------------------
Insurance - North
American $ 606 $ 481 $ 1,079 $ 882
Insurance - Overseas
General 566 493 1,075 985
Global Reinsurance(1) 176 115 320 194
Financial Products 228 296 462 693
-------- -------- -------- ---------
Total $ 1,576 $ 1,385 $ 2,936 $ 2,754
-------- -------- -------- ---------
Operating Income
----------------
Insurance - North
American $ 126 $ 72 $ 220 $ 170
Insurance - Overseas
General 26 27 60 58
Global Reinsurance(1) 78 24 158 70
Financial Products 57 48 104 89
Corporate (51) (56) (90) (108)
-------- -------- -------- ---------
Total $ 236 $ 115 $ 452 $ 279
-------- -------- -------- ---------
(1) Includes both property and casualty reinsurance and life
reinsurance business
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