ACE Limited Reports Third Quarter Operating Income of $504 Million, or $1.51 Per Share; Net Income of $54 Million, or $0.16 Per Share.ZURICH, Switzerland -- ACE Limited (NYSE NYSE See: New York Stock Exchange :ACE) today reported net income for the third quarter ended September 30, 2008, of $0.16 per share, compared with $1.95 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 third quarter was $1.51 per share, compared with $2.06 per share for the same quarter of last year.(1) The quarter was marked by financial market volatility in both the credit and equity markets, which impacted net income and book value. The net realized and unrealized loss 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. after tax was $1.3 billion during the quarter. Book value decreased $971 million for the quarter and the annualized annualized 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 was 12.7%.(2) The combined ratio was 97.9%. [TABLE OMITTED] Net income for the first nine months of 2008 was $3.46 per share, compared with $5.98 per share for the first nine months of 2007. For the first nine months of 2008, income excluding net realized gains (losses) was $5.84 per share, compared with $6.02 per share for the same period of 2007.(1) Book value decreased $764 million during the first nine months excluding the redemption of preferred shares Preferred shares Preferred shares give investors a fixed dividend from the company's earnings and entitle them to be paid before common shareholders. See: Preferred stock. . The results for the first nine months of 2008 reflect the acquisition of Combined Insurance effective April 1, 2008. [TABLE OMITTED] "ACE performed relatively well in a period marked by extraordinary financial market conditions and significant natural catastrophes. Our financial results demonstrated balance sheet stability and earnings strength," said Evan G. Greenberg Evan Greenberg is President and CEO of ACE Limited.
"For the quarter, we recorded 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 $504 million, generated a return on equity of 12.7%, and our combined ratio was 97.9%. Our book value in the quarter was impacted by the extreme movement in financial asset prices and declined 6%, while in the last 12 months, our book value has remained stable, down less than 1%. "In my judgment, given both the rapid destruction and increased cost of capital, combined with the damage inflicted on a number of companies in our industry, the soft market for P&C insurance is essentially over, and rates will begin to firm. These challenging times will create opportunities for those companies with the financial wherewithal where·with·al n. The necessary means, especially financial means: didn't have the wherewithal to survive an economic downturn. conj. Wherewith. pron. Wherewith. and franchise power to take advantage, and I'm confident ACE will be one of them." Other operating highlights were as follows: * Net premiums written and earned increased 17% and 15%, respectively, over the prior year quarter (4% and 3%, respectively, excluding Combined Insurance). * The combined ratio for the quarter was 97.9% compared with 88.5% for the prior year quarter; year-to-date, the combined ratio was 90.4% compared with 87.8% for the prior year period. * The combined ratio for the quarter excluding catastrophe losses was 85.2% compared with 87.8% for the prior year quarter; year-to-date, the combined ratio excluding catastrophe losses was 84.9% compared with 86.1% for the prior year period. * Pre-tax underwriting income Underwriting income For an insurance company, the difference between the premiums earned and the costs of settling claims. excluding the life segment decreased 81% over the prior year quarter to $66 million pre-tax due to catastrophe losses of $418 million offset by positive prior period development of $277 million compared to $70 million for the same quarter last year. * The expense ratio reported in the quarter increased by 2.4 percentage points from last year's third quarter. The addition of Combined Insurance contributed approximately 0.7 percent to this increase, while 0.4 percent was related to the change in our business mix to reflect growth in A&H and international P&C, which have higher expense ratios. * Operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. was $1 billion for the quarter. * 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. recoverables increased $386 million for the quarter due to catastrophe losses; year-to-date, reinsurance recoverables decreased $129 million. * Net loss reserves increased $291 million during the quarter; year-to-date, net loss reserves increased $1.4 billion. * Net investment income increased 6% over the prior year quarter to $520 million. * Return on average equity for the third quarter was 12.7% and for the nine months of 2008 was 16.5%. * Book value decreased $764 million from December 31, 2007, excluding the redemption of the preferred shares while book value per share(3) decreased from $48.89 at December 31, 2007, to $46.06. * Net realized and unrealized losses after tax from our investment portfolio totaled $1.1 billion. This includes $854 million of unrealized losses and $281 million of 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. . Net realized losses from derivatives related to the guaranteed minimum income Guaranteed minimum income is a proposed system of income redistribution that would provide eligible citizens with a certain sum of money (independent of whether they work or not), also known as "Basic Income Guarantee (BIG)", "universal basic income", "citizen's income scheme", benefit (GMIB GMIB Guaranteed Minimum Income Benefit (Insurance) ) liabilities of our life reinsurance business were approximately $161 million. Net realized and unrealized losses from the company's share of partially-owned insurance companies were approximately $43 million. Details of our financial results for our business segments are available in the ACE Limited Financial Supplement. Key segment items include: * Insurance-North American: Net premiums written increased 1% over the prior year quarter. The combined ratio was 104.1% compared with 88.8% for the same quarter last year. The combined ratio excluding catastrophe losses was 86.9% compared with 88.8% for the same quarter last year. * Insurance-Overseas General: Net premiums written increased 24% over the prior year quarter, 18% on a currency-adjusted basis. The combined ratio was 89.9% compared with 89.5% for the same quarter last year. * Global Reinsurance: Net premiums written decreased 19% over the prior year quarter. The combined ratio was 91.5% compared with 73.6% for the same quarter last year. The combined ratio excluding catastrophe losses was 53.7% compared with 69.5% for the same quarter last year. * Life Insurance and Reinsurance: Net premiums written increased 266% over the prior year quarter; excluding the results of Combined Insurance, net premiums written increased 8%. Income excluding net realized gains (losses) increased 40% to $66 million over the prior year quarter; excluding the results of Combined Insurance, operating income decreased 36% to $30 million. Please refer to the ACE Limited Financial Supplement dated September 30, 2008, 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 URL URL in full Uniform Resource Locator Address of a resource on the Internet. The resource can be any type of file stored on a server, such as a Web page, a text file, a graphics file, or an application program. reference is: http://media.corporate-ir.net/media_files/irol/10/100907/fin_supp_sept ember_30_2008.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 into your Internet browser's URL address field.) ACE will host its third quarter earnings conference call and webcast on Wednesday, October 29, 2008, beginning at 8:30 a.m. ET. The earnings conference call will be available via live and archived webcast at www.acelimited.com or by dialing 888-296-4305 (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 719-457-2654 (international); passcode 8076874. 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 for approximately one month. To listen to the replay, dial: 888-203-1112 (in the United States) or 719-457-0820 (international); passcode 8076874. The ACE Group of Companies is a global leader in insurance and reinsurance serving a diverse group of clients. Headed by ACE Limited, the ACE Group of Companies conducts its business on a worldwide basis with operating subsidiaries in more than 50 countries. Additional information can be found at: www.acelimited.com. (1) Non-GAAP Financial Measures: Operating Income or Income excluding net realized gains (losses), net of tax is a common performance measurement for insurance companies. 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) and net realized gains (losses) included in Other (income) expense related to partially-owned insurance companies 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), catastrophe losses and prior period development, net of tax is a non-GAAP measure. We present income excluding net realized gains (losses), catastrophe losses and prior period development, net of tax because those events are deemed to be significant for the third quarter of 2008. We believe this separate presentation is meaningful and useful for users of our financial information. Underwriting income is calculated by subtracting losses and loss expenses, future policy 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 and other intangible assets Intangible Asset An asset that is not physical in nature. Notes: Examples are things like copyrights, patents, intellectual property, and goodwill. These are the opposite of tangible assets. . See reconciliation of Non-GAAP Financial Measures on page 29 in the financial supplement. These measures should not be viewed as a substitute for net income determined in accordance 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) less perpetual preferred securities divided by average common shareholders' equity for the period. To annualize Annualize 1. To convert a rate of any length into a rate that reflects the rate on an annual (yearly) basis. This is most often done on rates of less than one year, and usually does not take into account the effects of compounding. a quarterly rate, multiply by four. (3) Book value per common share Book Value Per Common Share A measure used by owners of common shares in a firm to determine the level of safety associated with each individual share after all debts are paid accordingly. Formula: is common shareholders' equity divided by the shares outstanding. Tangible book value per common share is common shareholders' equity less goodwill and other intangible assets divided by the shares outstanding. Cautionary Statement Regarding Forward-Looking Statements: Forward-looking statements made in this press release, such as those related to the P&C insurance market and ACE's performance therein, as well as economic conditions, company performance, reserves and valuations, 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 described above could be affected by continued adverse economic and insurance industry developments such as those of recent weeks, as well as 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, investment portfolio performance, integration activities and unexpected financial or operational performance with respect to acquired companies, unexpected effects or difficulties relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the Company's recent re-domestication to Switzerland, new theories of liability, judicial, legislative, regulatory 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 and actual settlement terms, the amount and timing of reinsurance recoverable, credit developments among reinsurers, actual market developments, rating agency action, possible terrorism or the outbreak 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. 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