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ACE Limited Reports Record Second Quarter Net Income of $467 Million; Income Excluding Net Realized Gains (Losses) Increases 13% to $443 Million; Net Investment Income Increases 26% to $305 Million
Jul 26, 2005
HAMILTON, Bermuda--(BUSINESS WIRE)--July 25, 2005--ACE Limited (NYSE:ACE) today reported net income for the second quarter ended June 30, 2005 of $467 million or $1.58 per ordinary share after payment of preferred dividends, compared with net income of $423 million or $1.44 per share for the same quarter last year. Income excluding net realized gains (losses) after tax for the second quarter was $443 million, or $1.50 per share, compared with $391 million or $1.33 per share for the same quarter a year ago.(1)
                         Second Quarter Summary                (in millions, except per share amounts)                                                (Per Share - Diluted)                       2005    2004    Change   2005    2004    Change                       ----------------------   ----------------------                             Restated                 Restated  Net income            $467    $423      10%    $1.58   $1.44    10%  Net realized gains,   net of tax             24      32       -      0.08    0.11     -  Income excluding net   realized gains,   net of tax (1)       $443    $391      13%    $1.50   $1.33    13% 
 

Net income for the first six months of 2005 was $904 million or $3.06 per share, compared with $877 million or $3.00 per share for the first six months of 2004. For the first six months of 2005, income excluding net realized gains (losses) after tax was $898 million or $3.04 per share, compared with $809 million or $2.76 per share for the same period of 2004.(1)

                                Six Months                (in millions, except per share amounts)                                                (Per Share - Diluted)                       2005    2004    Change   2005    2004    Change                       ----------------------   ----------------------                             Restated                 Restated  Net income            $904    $877      3%     $3.06   $3.00     2%  Net realized gains,   net of tax              6      68      -       0.02    0.24     -  Income excluding net   realized gains,   net of tax (1)       $898    $809     11%     $3.04   $2.76    10% 

 

Evan Greenberg, President and Chief Executive Officer of ACE Limited, commented: "This was an excellent quarter for ACE, highlighted by record net income and strong operating income. Shareholders' equity exceeded $10 billion - a milestone - and reflects our continued and growing balance sheet strength. The quality of our earnings was excellent, with P&C underwriting income and investment income each contributing approximately 50 percent to our operating income for the quarter. Revenue growth slowed in line with market conditions. We are maintaining discipline, and our growth reflects that."

Second quarter operating highlights were as follows:

-- P&C net premiums earned increased 7% over the prior year's quarter

-- The P&C combined ratio was 90.4% for the quarter compared with 89.1% a year ago

-- Operating cash flow amounted to $1.1 billion for the quarter

-- Invested assets increased by $1.1 billion from March 31, 2005

-- Net investment income increased 26% to $305 million compared to prior year's quarter

-- Shareholders' equity increased 5% to $10.5 billion from March 31, 2005

-- Tangible equity rose to $7.8 billion, a gain of 7% from March 31, 2005

-- Debt to total capital ratio improved to 15.5% from 16.1% at March 31, 2005

-- Return on equity for the quarter was 17.9%; excluding FAS 115 it was 18.7% (2)

-- Diluted book value per share as of June 30, 2005 was $34.28 (3)

Financial results for the quarter by business segment compared with prior year's results follow. Further details are available in the financial supplement. Key items include:

-- Insurance-North American: Net premiums written increased 6% for the quarter and the combined ratio was 90.1%.

-- Insurance-Overseas General: Net premiums written declined 3% for the quarter and the combined ratio was 89.7%.

-- Global Reinsurance: Net premiums written were flat for the quarter. This segment had a combined ratio of 80.2%.

-- Financial Services: Income excluding net realized gains (losses) was $49 million for the quarter.

All amounts included herein for prior periods have been adjusted to reflect the previously reported restatements.

Please refer to the ACE Financial Supplement June 30, 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, investment portfolio and capital structure. ACE's website reference (url) ishttp://media.corporate-ir.net/media_files/nys/ace/reports/fin_supp_jun e_30_2005.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 second quarter 2005 earnings conference call and webcast on Tuesday, July 26, 2005 beginning at 8:30 a.m. EDT. The earnings conference call will be available via live and archived webcast athttp://www.acelimited.com or by dialing 888-889-5602 (within the United States) or 973-582-2734 (international). 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 Tuesday, July 26, 2005 until Friday, August 26, 2005. To listen to the replay dial 877-519-4471 (in the United States) or 973-341-3080 (international); passcode 6211276.

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 in more than 50 countries. Additional information can be found at: http://www.acelimited.com.

(1) Non-GAAP Financial Measures:

Operating Income or Income excluding net realized gains (losses) and the tax effect of net realized gains (losses) 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, the availability of market opportunities. 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 shareholder's equity is shareholders' equity less goodwill. See reconciliation of Non-GAAP Financial Measure on page 27 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) Calculated using income excluding net realized gains (losses).

(3) Diluted book value per ordinary share is ordinary shareholders' equity and net proceeds from assumed conversions of outstanding in-the-money options divided by the sum of shares outstanding and the number of options assumed issued.

Cautionary Statement Regarding Forward-Looking Statements:

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 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, such as its statements regarding growth, 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, internal investigation developments, 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.

                              ACE Limited                  Summary Consolidated Balance Sheets          (in millions of U.S. dollars, except per share data)                              (Unaudited)  ----------------------------------------------------------------------                                                             Restated                                                 June 30    December 31                                                   2005        2004                                               -----------  -----------  Assets Total investments                               $28,897       $27,048 Cash                                                651           507 Insurance and reinsurance balances receivable     3,728         3,255 Reinsurance recoverable                          14,432        14,887 Other assets                                     10,412        10,556                                               -----------  -----------    Total assets                                 $58,120       $56,253                                               ===========  ===========  Liabilities Unpaid losses and loss expenses                 $32,101       $31,483 Unearned premiums                                 6,457         5,983 Other liabilities                                 9,066         8,944                                               -----------  -----------    Total liabilities                            $47,624       $46,410                                               -----------  -----------  Shareholders' equity    Total shareholders' equity                   $10,496       $ 9,843                                               -----------  -----------    Total liabilities and shareholders' equity   $58,120       $56,253                                               ===========  ===========  Diluted book value per ordinary share (3)       $ 34.28       $ 32.50   ----------------------------------------------------------------------                                ACE Limited                  Summary Consolidated Financial Data     (in millions of U.S. dollars, except share, per share data, and                                 ratios)                               (Unaudited)  ----------------------------------------------------------------------                          Three Months Ended        Six Months Ended                               June 30                   June 30                         ---------------------      ------------------                                     Restated                  Restated                                     --------                  --------                          2005         2004         2005         2004                          ----         ----         ----         ----  Gross premiums written $ 4,213      $ 4,042      $ 8,756      $ 8,460 Net premiums written     2,909        2,861        6,275        6,081 Net premiums earned      2,921        2,782        5,798        5,370  Losses and loss   expenses                1,844        1,726        3,633        3,255 Life and annuity   benefits                   37           44           72           86 Policy acquisition costs   429          396          817          761 Administrative expenses    316          304          652          622                        --------     --------     --------     -------- Underwriting income(1)     295          312          624          646  Net investment income      305          243          590          491 Net realized gains  (losses)                   32           42           18           99 Interest expense            43           46           85           90 Other (income) expense      (6)          (1)         (11)          16 Income tax expense         128          129          254          253                        --------     --------     --------     -------- Net income                 467          423          904          877 Preference shares  dividend                  (11)         (11)         (22)         (22)                        --------     --------     --------     -------- Net income available   to holders of  ordinary shares       $   456      $   412      $   882      $   855                        ========     ========     ========     ========  Diluted earnings per share: Income excluding  net realized  gains (losses) (1)      $1.50        $1.33        $3.04        $2.76 Net income               $1.58        $1.44        $3.06        $3.00  Weighted average  diluted shares  outstanding       288,451,164  285,371,164  288,172,519  285,037,944  Loss and loss  expense ratio            64.4%        63.2%        63.9%        61.8% Policy acquisition  cost ratio               14.8%        14.3%        14.2%        14.2% Administrative  expense ratio            11.0%        11.2%        11.4%        11.8% Combined ratio            90.2%        88.7%        89.5%        87.8%  ---------------------------------------------------------------------- Ratios exclude life reinsurance business                                  ACE Limited             Consolidated Supplemental Segment Information                     (in millions of U.S. dollars)                              (Unaudited)  ----------------------------------------------------------------------                              Three Months Ended      Six Months Ended                                     June 30                June 30                              ------------------      -----------------                                        Restated               Restated                                        --------               --------                                2005      2004        2005       2004                                ----      ----        ----       ----  Gross Premiums Written ----------------------  Insurance - North American   $ 2,344   $ 2,102     $ 4,494    $ 4,007 Insurance - Overseas General   1,428     1,501       3,064      3,174 Global Reinsurance(a)            426       424       1,020      1,052 Financial Services                15        15         178        223                              -------   -------     -------    ------- Total                        $ 4,213   $ 4,042     $ 8,756    $ 8,460                              -------   -------     -------    -------   Net Premiums Written --------------------  Insurance - North American   $ 1,412   $ 1,330     $ 2,837    $ 2,541 Insurance - Overseas General   1,062     1,098       2,257      2,276 Global Reinsurance(a)            420       420       1,005      1,043 Financial Services                15        13         176        221                              -------   -------     -------    ------- Total                        $ 2,909   $ 2,861     $ 6,275    $ 6,081                              -------   -------     -------    -------   Net Premiums Earned -------------------  Insurance - North American   $ 1,319   $ 1,178     $ 2,604    $ 2,185 Insurance - Overseas General   1,081     1,069       2,169      2,088 Global Reinsurance(a)            429       401         843        784 Financial Services                92       134         182        313                              -------   -------     -------    ------- Total                        $ 2,921   $ 2,782     $ 5,798    $ 5,370                              -------   -------     -------    -------   Income (Loss) Excluding Net Realized  Gains (Losses)(1) ------------------------------------  Insurance - North American   $   187   $   159     $   395    $   311 Insurance - Overseas General     146       103         305        216 Global Reinsurance(a)            128       123         245        248 Financial Services                49        58          90        143 Corporate                        (67)      (52)       (137)      (109)                              -------   -------     -------    -------  Total                        $   443   $   391     $   898    $   809                              -------   -------     -------    -------  ---------------------------------------------------------------------- (a) Includes both property and casualty reinsurance and life reinsurance 

Contact:

ACE Limited, Hamilton
Investor Contact:
Helen M. Wilson, 441-299-9283
helen.wilson@ace.bm
or
Media Contact:
Robert T. Grieves, 212-621-8684
robert.grieves@ace-ina.com


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