Fourth Quarter Summary (in millions, except share and per share amounts) (Per Share - Diluted) 2005 2004 Change 2005 2004 Change ----- ----- ------ ------ ------ ------ (Restated) (Restated) Net income $237 $278 (15%) $0.70 $0.93 (25%) Net realized gains (losses), net of tax (8) 118 - (0.02) 0.41 - Income excluding net realized gains, net of tax (1) 245 160 53% 0.72 0.52 38% Asbestos, environmental and other run-off (A&E) charge, net of tax - 302 - - 1.06 - Catastrophe losses, net of tax 304 31 - 0.94 0.11 - Income excluding net realized gains (losses), catastrophe losses and A&E charge, net of tax (1) $549 $493 11% $1.66 $1.69 (2%) Combined ratio, excluding A&E charge and catastrophe losses 89.9% 87.1% Average shares outstanding 323.4 286.0
Net income for the year decreased 11% to $1,029 million or $3.31 per share, compared with $1,153 million or $3.88 per share in 2004. For 2005, income excluding net realized gains (losses) decreased 4% to $956 million or $3.06 per share, compared with $1 billion or $3.34 per share in 2004. Record industry catastrophe losses resulted in a net after-tax charge of $1,049 million or $3.53 per share, compared with $437 million or $1.53 per share in 2004. The P&C combined ratio for the year was 99.3%.
Years Ended (in millions, except share and per share amounts) (Per Share - Diluted) 2005 2004 Change 2005 2004 Change ------- ------- ------ ------ ------ ------ (Restated) (Restated) Net income $1,029 $1,153 (11%) $3.31 $3.88 (15%) Net realized gains, net of tax 73 153 - 0.25 0.54 - Income excluding net realized gains (losses), net of tax (1) 956 1,000 (4%) 3.06 3.34 (8%) A&E charge, net of tax - 302 - - 1.06 - Catastrophe losses, net of tax 1,049 437 - 3.53 1.53 - Income excluding net realized gains (losses), A&E charge and catastrophe losses, net of tax (1) $2,005 $1,739 15% $6.59 $5.93 11% Combined ratio, excluding A&E charge and catastrophe losses 88.5% 87.5% Average shares outstanding 297.3 285.5
Evan Greenberg, President and Chief Executive Officer of ACE Limited, commented: "This past year was the worst in history for insured catastrophe losses, yet ACE finished the year with a combined ratio under 100%, an ROE of approximately 9%, and book value growth of 7%. While failing to meet our standards, these results are a testament to the underwriting discipline of our organization. Looking ahead, ACE is well-positioned both operationally and financially to capitalize on a dynamic market and the opportunities it presents."
Other 2005 operating highlights were as follows: -- P&C net premiums written increased 2% for the year -- The P&C combined ratio was 99.3% for the year compared with 96.9% a year ago -- Operating cash flow amounted to $4.3 billion for the year -- Cash and invested assets increased by $5 billion in 2005 to $32.4 billion -- Net paid and unpaid losses and loss expenses increased $3 billion to $19.6 billion -- Net investment income increased 25% for the year to $1.26 billion -- Shareholders' equity increased 20% for the year to $11.8 billion -- Tangible equity rose to $9.1 billion, a gain of 27% from year-end 2004 -- Debt to total capital ratio improved to 14.8% from 16.3% at year-end 2004 -- Return on equity for 2005 was 8.9%(2); excluding FAS 115, it was 9.3% -- Book value per share as of December 31, 2005 increased 7% in 2005 to $34.78(3)
On October 4, 2005, the Company issued common stock of approximately $1.5 billion.
Details of our financial results, excluding the impact of catastrophe losses and related premiums for the year, for our P&C business segments are available in the financial supplement. Key items include:
-- Insurance-North American: Net premiums written increased 7% for the year. The combined ratio was 95.2%. Adjusted for catastrophe losses the combined ratio was 87.9%.(1)
-- Insurance-Overseas General: Net premiums written decreased 3% for the year. The segment's combined ratio was 94.0%. Adjusted for catastrophe losses the combined ratio was 88.5%.(1)
-- Global Reinsurance: Net premiums written were up 2% for the year. This segment had a combined ratio of 115.6%. Adjusted for catastrophe losses the combined ratio was 78.6%.(1)
-- Financial Services: Income excluding net realized gains (losses) decreased 35% to $137 million for the year. Adjusted for catastrophe losses and the sale of Assured Guaranty Ltd. in 2004, income excluding net realized gains (losses) increased 19% to $229 million.
All amounts included herein for prior periods have been adjusted to reflect the previously reported restatements.
Please refer to the ACE Financial Supplement December 31, 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, catastrophe loss charges by segment, investment portfolio and capital structure. ACE's website reference (url) is http://media.corporate-ir.net/media_files/nys/ace/reports/fin_supp_december_31_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 fourth quarter 2005, year-end earnings conference call and webcast on Wednesday, February 1, 2006 beginning at 8:30 a.m. EST. The earnings conference call will be available via live and archived webcast at http://www.acelimited.com or by dialing 888-889-5602 (within the United States) or 973-582-2734 (international); conference ID 6828632. 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. EST on Wednesday, February 1, 2006 until Wednesday, March 1, 2006. To listen to the replay, dial: 1-877-519-4471 (in the United States) or 1-973-341-3080 (international); passcode 6828632 (#).
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), net of tax 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.
Income excluding net realized gains (losses), A&E charges and catastrophe losses, net of tax is a non-GAAP measure. We present income excluding net realized gains (losses), A&E charges and catastrophe losses, net of tax because those losses are deemed to be significant to the quarter and the year. 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, 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 32 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) Book value per ordinary share is ordinary shareholders' equity divided by the shares outstanding.
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 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, 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) ---------------------------------------------------------------------- December 31 December 31 2005 2004 ----------- ------------ (Unaudited) Assets Total investments $ 31,922 $ 26,925 Cash 512 498 Insurance and reinsurance balances receivable 3,355 3,255 Reinsurance recoverable 15,519 14,882 Other assets 11,211 10,623 ----------- ------------ Total assets $ 62,519 $ 56,183 =========== ============ Liabilities Unpaid losses and loss expenses $ 35,090 $ 31,483 Unearned premiums 5,884 5,983 Other liabilities 9,743 8,872 ----------- ------------ Total liabilities $ 50,717 $ 46,338 ----------- ------------ Shareholders' equity Total shareholders' equity $ 11,802 $ 9,845 ----------- ------------ Total liabilities and shareholders' equity $ 62,519 $ 56,183 =========== ============ Book value per ordinary share (3) $ 34.78 $ 32.65
ACE Limited Summary Consolidated Financial Data (in millions of U.S. dollars, except share, per share data, and ratios) (Unaudited) ---------------------------------------------------------------------- Three Months Ended Years Ended December 31 December 31 --------------------------- -------------------------- Restated Restated 2005 2004 2005 2004 ------------ -------------- ------------ ------------- Gross premiums written $ 3,797 $ 3,646 $ 16,814 $ 16,094 Net premiums written 2,632 2,641 11,796 11,496 Net premiums earned 2,863 2,881 11,752 11,110 Losses and loss expenses 2,124 2,216 8,560 7,690 Life and annuity benefits 35 39 143 175 Policy acquisition costs 427 411 1,670 1,565 Administrative expenses 327 337 1,287 1,265 ------------ -------------- ------------ ------------- Underwriting income (loss) (1) (50) (122) 92 415 Net investment income 354 282 1,264 1,013 Net realized gains (losses) (25) 130 76 197 Interest expense 46 43 174 183 Other expense (4) 1 (40) 3 Income tax expense (benefit) - (32) 269 286 ------------ -------------- ------------ ------------- Net income 237 278 1,029 1,153 Preference shares dividend (12) (12) (45) (45) ------------ -------------- ------------ ------------- Net income available to holders of ordinary shares $ 225 $ 266 $ 984 $ 1,108 ============ ============== ============ ============= Diluted earnings per share: Income excluding net realized gains (losses) (1) $0.72 $0.52 $3.06 $3.34 Net income $0.70 $0.93 $3.31 $3.88 Weighted average basic shares outstanding 317,061,215 281,308,706 292,401,343 280,271,225 Weighted average diluted shares outstanding 323,357,508 286,048,064 297,299,883 285,485,472 Loss and loss expense ratio 76.0% 78.5% 74.4% 70.7% Policy acquisition cost ratio 15.0% 14.3% 14.3% 14.2% Administrative expense ratio 11.4% 11.8% 11.0% 11.5% Combined ratio 102.4% 104.6% 99.7% 96.4% Ratios exclude life insurance and reinsurance business
ACE Limited Consolidated Supplemental Segment Information (in millions of U.S. dollars) (Unaudited) ---------------------------------------------------------------------- Three Months Ended Years Ended December 31 December 31 ------------------- ----------------- Restated Restated 2005 2004 2005 2004 -------- --------- ------- -------- Gross Premiums Written ---------------------- Insurance - North American $ 2,090 $ 1,885 $ 8,834 $ 8,126 Insurance - Overseas General 1,388 1,389 5,775 5,851 Global Reinsurance 283 286 1,599 1,567 Financial Services (31) 29 358 320 Life Insurance and Reinsurance 67 57 248 230 -------- --------- ------- -------- Total $ 3,797 $ 3,646 $16,814 $ 16,094 -------- --------- ------- -------- Net Premiums Written -------------------- Insurance - North American $ 1,310 $ 1,194 $ 5,454 $ 5,101 Insurance - Overseas General 1,014 1,083 4,195 4,335 Global Reinsurance 276 280 1,546 1,518 Financial Services (35) 27 353 316 Life Insurance and Reinsurance 67 57 248 226 -------- --------- ------- -------- Total $ 2,632 $ 2,641 $11,796 $ 11,496 -------- --------- ------- -------- Net Premiums Earned ------------------- Insurance - North American $ 1,347 $ 1,243 $ 5,289 $ 4,679 Insurance - Overseas General 1,048 1,126 4,239 4,296 Global Reinsurance 395 359 1,531 1,389 Financial Services 6 96 445 520 Life Insurance and Reinsurance 67 57 248 226 -------- --------- ------- -------- Total $ 2,863 $ 2,881 $11,752 $ 11,110 -------- --------- ------- -------- Income (Loss) Excluding Net Realized Gains (Losses)(1) --------------------------- Insurance - North American $ 125 $ (135) $ 581 $ 266 Insurance - Overseas General 104 194 463 510 Global Reinsurance (10) 100 (83) 193 Financial Services 50 40 137 210 Life Insurance and Reinsurance 24 18 100 51 Corporate (48) (57) (242) (230) -------- --------- ------- -------- Total $ 245 $ 160 $ 956 $ 1,000 -------- --------- ------- --------
Contact:
ACE Limited, Hamilton
Investor Contact:
Helen M. Wilson, 441-299-9283
helen.wilson@ace.bm
or
Media Contact:
Robert T. Grieves, 212-827-4444
robert.grieves@ace-ina.com