ACE Limited Reports Third Quarter Results.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)--Oct. 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 $158 million for the quarter ended September September: see month. 30, 2002 compared with a net operating loss operating loss The excess of operating expenses over revenue. As with operating income, operating losses exclude revenues and expenses from operations that are not considered a regular part of the business. Also called deficit. Compare operating income. of $390 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 $0.57 for the current quarter compared with a net operating loss per share of $1.72 for the same quarter last year. Including after tax 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 $205 million, ACE reported a net loss for the quarter of $57 million compared with a net loss of $442 million for the comparable period a year ago. The loss per share, after deducting preferred dividends, was $0.24 for the quarter compared with a loss of $1.95 for the same quarter last year. The book value per share of the company at September 30, 2002 was $24.37 compared with $23.59 at December December: see month. 31, 2001. "This quarter and our year to date have been characterized char·ac·ter·ize tr.v. character·ized, character·iz·ing, character·iz·es 1. To describe the qualities or peculiarities of: characterized the warden as ruthless. 2. by exceptional premium growth. This has helped produce positive cash flow in excess of $1 billion for the quarter," said 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. "Operating earnings and 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. from our fixed income portfolio more than offset realized losses this quarter, resulting in an increase in book value per share." 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 September 30, 2002 quarter increased by 41 percent to $3.5 billion, compared with $2.5 billion for the comparable quarter in 2001. Net premiums written increased by 70 percent to $2.2 billion and net premiums earned increased by 37 percent to $1.9 billion. 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 97.7 percent compared with 142.5 percent in the prior year quarter. The current quarter includes $90 million after tax losses related to the European European emanating from or pertaining to Europe. European bat lyssavirus see lyssavirus. European beech tree fagussylvaticus. European blastomycosis see cryptococcosis. floods as previously announced. Net investment income was $199 million for fiscal 2002 third quarter compared with $192 million for fiscal 2001 third quarter. The average market yield on ACE's portfolio declined to 4.7 percent as compared with 5.2 percent at 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. . Volatile securities markets produced realized losses in our equity and 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. portfolios but produced offsetting unrealized gains in our fixed income portfolio. Total shareholder's equity rose to $6.4 billion, an increase of 5.5 percent over December 31, 2001. The financial supplement this quarter includes additional information on the Company's financial 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. business, 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, 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. , 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 third quarter earnings conference call on Wednesday Wednesday: see week. , October October: see month. 30, 2002, beginning at 8:30 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . The public may access the webcast, available on a listen-only basis, and the new financial supplement at http://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 Wednesday, October 30, 2002 until Wednesday, November November: see month. 13, 2002, 11:30 p.m. EST P.M. also p.m. or p.m. abbr. post meridiem Usage Note: By definition, 12 a.m. . 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: http://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 market fundamentals could be affected by changes in demand, pricing and policy term trends and competition. The Company's forward-looking statements could also be affected by the levels of new and renewal business achieved, market acceptance, the frequency of unpredictable catastrophic events, actual loss experience, uncertainties in the reserving and settlement processes, the amount and timing of reinsurance recoverables, investment market developments and economic, political, legislative, judicial, 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)
----------------------------------------------------------------------
September 30 December 31
2002 2001
------------ -----------
(Unaudited)
Assets
Total investments and cash $ 17,737 $ 15,936
Insurance and reinsurance
balances receivable 3,208 2,522
Reinsurance recoverable 11,889 11,398
Other assets 7,996 7,331
------------ -----------
Total assets $ 40,830 $ 37,187
============ ===========
Liabilities
Unpaid losses and loss expenses $ 21,641 $ 20,728
Future policy benefits for life
and annuity contracts 419 383
Unearned premiums 5,526 3,853
Other liabilities 6,485 5,805
------------ -----------
Total liabilities $ 34,071 $ 30,769
------------ -----------
Mezzanine equity $ 311 $ 311
------------ -----------
Shareholders' equity
Total shareholders' equity $ 6,448 $ 6,107
------------ -----------
Total liabilities, mezzanine
equity and shareholders' equity $ 40,830 $ 37,187
============ ===========
Book value per share $ 24.37 $ 23.59
ACE Limited
Summary Consolidated Statements of Operations
(in millions of U.S. dollars, except per share data)
(Unaudited)
----------------------------------------------------------------------
Three Months Ended September 30 Nine Months
Ended
Excluding September 30
WTC
---------------------------------------------------
2002 2001 2001 2002 2001
------- ------- ------- ------- ------
Gross premiums
written $ 3,528 $ 2,502 $ 2,380 $ 9,575 $ 7,466
Net premiums
written 2,223 1,305 1,254 6,084 4,510
Net premiums earned 1,925 1,399 1,385 4,861 4,153
Losses and loss
expenses 1,328 1,542 892 3,142 3,448
Life and annuity
benefits 60 29 29 106 58
Policy acquisition
costs 253 205 204 685 559
Administrative
expenses 250 205 205 678 602
------- ------- ------- ------- ------
Underwriting income
(loss) 34 (582) 55 250 (514)
Net investment income 199 192 192 600 593
Other income (expense) - (2) (2) 4 1
Interest expense 48 49 49 146 153
Income tax expense
(benefit) 27 (70) 8 98 (21)
Amortization of
goodwill - 19 19 - 59
------- ------- ------- ------- ------
Net operating income
(loss)(1) $ 158 $ (390) $ 169 $ 610 $ (111)
Debt prepayment
expense(2) (10) - - (17) -
Non-recurring
expenses(2) - - - - (4)
Net realized gains
(losses)(2) (205) (52) (52) (348) (54)
Cumulative effect of
adopting a new
accounting
standard(2) - - - - (23)
------- ------- ------- ------- ------
Net income (loss) $ (57) $ (442) $ 117 $ 245 $ (192)
======= ======= ======= ======= ======
Earnings (loss) per share:
Net operating earnings
(loss) per share $ 0.57 ($1.72) $ 0.68 $ 2.19 ($0.56)
Debt prepayment
expense ($0.04) - - ($0.06) -
Net realized gains
(losses) ($0.77) ($0.23) ($0.22) ($1.29) ($0.24)
Non-recurring
expenses - - - - ($0.02)
Cumulative effect of
adopting a new
accounting standard - - - - ($0.10)
Earnings (loss) per
share ($0.24) ($1.95) $0.46 $0.84 ($0.92)
Loss and loss expense
ratio(3) 71.0% 112.7% 65.9% 66.1% 84.3%
Expense ratio(3) 26.7% 29.8% 30.1% 28.3% 28.3%
Combined ratio(3) 97.7% 142.5% 96.0% 94.4% 112.6%
(1) Net operating income comprises income excluding net realized
gains (losses), debt prepayment expense, non-recurring expenses and
the 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 Nine Months
Ended Ended
September 30 September 30
2002 2001 2002 2001
------ ------ ----- ------
Gross Premiums Written
----------------------
Insurance - North American $1,783 $1,318 $4,476 $3,424
Insurance - Overseas General 1,008 673 2,911 2,361
Global Reinsurance(1) 244 126 889 490
Financial Services 493 385 1,299 1,191
------ ------ ------ ------
Total $3,528 $2,502 $9,575 $7,466
------ ------ ------ ------
Net Premiums Written
--------------------
Insurance - North American $ 869 $ 551 $2,100 $1,518
Insurance - Overseas General 690 423 1,920 1,533
Global Reinsurance(1) 188 68 795 399
Financial Services 476 263 1,269 1,060
------ ------ ------ ------
Total $2,223 $1,305 $6,084 $4,510
------ ------ ------ ------
Net Premiums Earned
-------------------
Insurance - North American $ 654 $ 478 $1,733 $1,360
Insurance - Overseas General 647 445 1,722 1,430
Global Reinsurance(1) 251 102 571 296
Financial Services 373 374 835 1,067
------ ------ ------ ------
Total $1,925 $1,399 $4,861 $4,153
------ ------ ------ ------
Net Operating Income (Loss)
---------------------------
Insurance - North American $ 113 $ (40) $ 333 $ 130
Insurance - Overseas General (16) (69) 44 (11)
Global Reinsurance(1) 66 (142) 224 (72)
Financial Services 48 (88) 152 1
Corporate (53) (51) (143) (159)
------ ------ ------ ------
Total $ 158 $ (390) $ 610 $ (111)
------ ------ ------ ------
(1) Includes both property and casualty reinsurance and life
reinsurance business
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