News Releases

ACE Limited Reports First Quarter 2007 Net Income of $701 Million and Operating Income of $663 Million
Apr 24, 2007

HAMILTON, Bermuda--(BUSINESS WIRE)--ACE Limited (NYSE:ACE) today reported net income for the first quarter ended March 31, 2007 of $701 million or $2.10 per ordinary share after payment of preferred dividends, compared with net income of $489 million or $1.46 per share for the same quarter last year. Income excluding net realized gains (losses) was $663 million, or $1.98 per share, compared with $477 million or $1.43 per share for the same quarter of last year.(1) The first quarter 2006 results included an $80 million pre-tax charge pertaining to the settlement with certain governmental agencies of their investigations of various insurance industry business practices. The combined ratio for the first quarter was 87.1%. Annualized return on average equity based on the first quarter was 18.5%.(3)

First Quarter Summary  
(in millions, except per share amounts)  
                (Per Share - Diluted)  
    2007    2006    Change       2007    2006    Change  
Net income   $ 701    $ 489    43%       $ 2.10    $ 1.46    44%  

Net realized gains (losses), net of tax








Cumulative effect, net of tax(2)               0.01     

Income excluding net realized gains (losses) and cumulative effect, net of tax (1)













Investigation-related settlement charge, net of tax     66            0.20     
Income excluding net realized gains (losses), investigation-related settlement charge and cumulative effect (1)   $663    $ 543    22%       $ 1.98    $ 1.63    21%  
Average shares outstanding                   328.9    325.7       

Evan Greenberg, President and Chief Executive Officer of ACE Limited, commented: ACE had a very strong start to the year. We produced record net and operating income for the first quarter, and our tangible book value per share grew at a 22% annual pace. The quality of earnings was excellent, with strong contributions from both underwriting and investment income. Net written premium growth was in line with market conditions. Globally, we are maintaining underwriting discipline and avoiding business where prices and terms dont meet our standards while driving for growth in those areas where we see opportunity.

Other first quarter operating highlights were as follows:

  • P&C net premiums written decreased 2% over the prior year quarter. Insurance net premiums written increased 2% and reinsurance net premiums written decreased 21%.
  • P&C net premiums earned increased 9% over the prior year quarter. Insurance net premiums earned increased 12% and reinsurance net premiums earned decreased 8%.
  • The combined ratio was 87.1% for the first quarter compared with 90.6% for the prior year quarter which included an $80 million investigation settlement charge.
  • P&C underwriting income was $384 million for the first quarter.
  • Operating cash flow amounted to $1.2 billion for the first quarter.
  • Invested assets increased by $1.8 billion or 5% during the first quarter to $38.9 billion.
  • Net investment income in the first quarter increased 22% over the prior year quarter, to $451 million.
  • Shareholders equity at March 31, 2007 increased 5% from year-end 2006, to $14.9 billion.
  • Tangible equity (1) at March 31, 2007 rose to $12.2 billion, a gain of 6% from year-end 2006.
  • Return on average equity for the first quarter was 18.5%; excluding FAS 115, it was 19.4%(3).
  • Book value per share as of March 31, 2007 increased $1.84 from December 31, 2006 to $43.87(4).
  • Tangible book value per share as of March, 31, 2007 increased 6% from December 31, 2006 to $35.55.(1)

Details of our first quarter 2007 financial results for our business segments are available in the financial supplement. Key segment items include:

  • Insurance-North American: Net premiums written increased 1% over the prior year quarter. The combined ratio was 88.4%.
  • Insurance-Overseas General: Net premiums written increased 4% over the prior year quarter. The combined ratio was 85.4%.
  • Global Reinsurance: Net premiums written decreased 21% over the prior year quarter. The combined ratio was 78.0%.
  • Life Insurance and Reinsurance: Net premiums written increased 44% over the prior year quarter. Income excluding net realized gains (losses) increased 39% to $43 million over the prior year quarter.(1)

Please refer to the ACE Limited Financial Supplement dated March 31, 2007, 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 recoverables, loss reserves, investment portfolio and capital structure. The URL reference is: ch_31_2007.xls. (Due to the length of this URL, it may be necessary to copy and paste this hyperlink into your Internet browser's URL address field.)

ACE will host its first quarter earnings conference call and webcast on Wednesday, April 25, 2007 beginning at 8:30 a.m. ET. The earnings conference call will be available via live and archived webcast or by dialing 800-819-9193 (within the United States) or 913-981-4911 (international); passcode 1477658. 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. ET on Wednesday, April 25, 2007 until Friday, May 25, 2007. To listen to the replay, dial: 888-203-1112 (in the United States) or 719-457-0820 (international); passcode 1477658.

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 & Poors 500 stock index, the ACE Group conducts its business on a worldwide basis with operating subsidiaries in more than 50 countries. Additional information can be found at:

Cautionary Statement Regarding Forward-Looking Statements:

Any forward-looking statements made in this press release reflect the Companys 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 Companys 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 and other governmental developments, 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 managements response to these factors, and other factors identified in the Companys 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.

1 Non-GAAP Financial Measures:

Operating Income or Income excluding net realized gains (losses) and cumulative effect, 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) because the amount of these gains (losses) is heavily influenced by, and fluctuates in part according to, the availability of market opportunities. We exclude the cumulative effect of a change in accounting principle net of tax because this amount resulted in a one-time adjustment to income.

Underwriting income is calculated by subtracting losses and loss expenses, life and annuity benefits, policy acquisition costs and administrative expenses from net premiums earned. We use underwriting income and operating ratios 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 is shareholders' equity less goodwill. See reconciliation of Non-GAAP Financial Measures on page 20 in the financial supplement.

These measures should not be viewed as a substitute for net income determined in accordance with generally accepted accounting principles (GAAP).

2 The cumulative effect is a benefit resulting from the inclusion of a forfeiture rate on restricted stock in our stock compensation expense calculations, as required under Financial Accounting Standard (FAS) 123R.

3 Calculated using income excluding net realized gains (losses).

4 Book value per ordinary share is ordinary shareholders equity divided by the shares outstanding.

ACE Limited

Summary Consolidated Balance Sheets

(in millions of U.S. dollars, except per share data)

        March 31       December 31  
        2007        2006   
Total investments   $   38,320    $   36,601   
Cash       639        565   
Insurance and reinsurance balances receivable       3,689        3,580   
Reinsurance recoverable       14,374        14,580   
Other assets       12,752        11,809   
Total assets   $   69,774    $   67,135   
Unpaid losses and loss expenses   $   35,813    $   35,517   
Unearned premiums       6,670        6,437   
Other liabilities       12,332        10,903   
Total liabilities   $   54,815    $   52,857   
Shareholders equity                  
Total shareholders equity   $   14,959    $   14,278   

Total liabilities and shareholders equity

  $   69,774    $   67,135   

Book value per ordinary share(4)

  $   43.87    $   42.03   



ACE Limited

Summary Consolidated Financial Data

(in millions of U.S. dollars, except share, per share data, and ratios)


  Three Months Ended

March 31

    2007      2006 
Gross premiums written $ 4,496    $ 4,511 
Net premiums written   3,270      3,310 
Net premiums earned   3,082      2,805 
Losses and loss expenses   1,860      1,680 
Life and annuity benefits


36      28 
Policy acquisition costs   417      418 
Administrative expenses   356      398 
Underwriting income(1)   413      281 
Net investment income   451      369 
Net realized gains (losses)   16     
Interest expense   46      43 
Other (income) expense       (5)
Income tax expense (benefit)   129      134 
Cumulative effect, net of tax      
Net income   701      489 
Preference shares dividend   (11)     (11)
Net income available to holders of ordinary shares $ 690    $ 478 
Diluted earnings per share:          
Income excluding net realized gains (losses) and cumulative effect (1)  




Net income   $2.10      $1.46 
Weighted average diluted shares outstanding   328.9      325.7 
Loss and loss expense ratio   62.1%     61.2%
Policy acquisition cost ratio   13.5%     15.1%
Administrative expense ratio   11.5%     14.3%
Combined ratio   87.1%     90.6%

Ratios exclude life insurance and reinsurance business



ACE Limited

Consolidated Supplemental Segment Information

(in millions of U.S. dollars)


  Three Months Ended

March 31

      2007      2006 
Gross Premiums Written            
Insurance - North American   $ 2,269    $ 2,262 
Insurance - Overseas General     1,659      1,584 
Global Reinsurance     478      604 
Life Insurance and Reinsurance     90      61 
Total   $ 4,496    $ 4,511 
Net Premiums Written            
Insurance - North American   $ 1,514    $ 1,503 
Insurance - Overseas General     1,192      1,146 
Global Reinsurance     476      600 
Life Insurance and Reinsurance     88      61 
Total   $ 3,270    $ 3,310 
Net Premiums Earned            
Insurance - North American   $ 1,539    $ 1,334 
Insurance - Overseas General     1,112      1,039 
Global Reinsurance     343      371 
Life Insurance and Reinsurance     88      61 
Total   $ 3,082    $ 2,805 

Income Excluding Net Realized Gains (Losses) and Cumulative Effect(1)

Insurance - North American   $ 298    $ 266 
Insurance - Overseas General     215      159 
Global Reinsurance     132      119 
Life Insurance and Reinsurance     43      31 
Corporate     (25)     (98)
Total   $ 663    $ 477 



ACE Limited, Hamilton
Investor Contact:
Helen M. Wilson, 441-299-9283
Media Contact:
Robert T. Grieves, 212- 827-4444