News Release

ACE Reports Record Fourth Quarter 2009 Net Income of $953 Million
Operating Income of $683 Million, up 9% in the Quarter, Contributes to Record Annual Operating Income of $2.8 Billion; Book Value up 36% for the Year, Tangible Book Value up 47%; 2009 Operating Return on Equity of 16.2%
Feb 3, 2010

ZURICH, Switzerland--(BUSINESS WIRE)--ACE Limited (NYSE:ACE) today reported net income for the quarter ended December 31, 2009, of $2.81 per share, compared with $0.06 per share for the same quarter last year.(1)Income excluding net realized gains (losses) was $2.01 per share, compared with $1.86 per share for the same quarter last year.(2) Book value increased $934 million during the quarter, up 5% from September 30, 2009. Book value per share now stands at $58.44. Annualized return on average equity for the quarter was 14.2%.(3)The property and casualty (P&C) combined ratio for the quarter was 89.6%.

Fourth Quarter Summary
(in millions, except per share amounts)
(Unaudited)
                         
                (Per Share - Diluted)
    2009   2008   Change   2009   2008   Change
                         
Net income   $ 953   $ 20     NM     $ 2.81   $ 0.06     NM  
Net realized gains (losses), net of tax     270     (604 )   NM       0.80     (1.80 )   NM  

Income excluding net realized gains (losses), net of tax (2)

  $ 683   $ 624     9 %   $ 2.01   $ 1.86     8 %
                                         

Net income for the year ended December 31, 2009, was $7.55 per share, compared with $3.50 per share for 2008. Income excluding net realized gains (losses) was $8.17 per share, compared with $7.67 per share for 2008. Full year return on average equity was 16.2%. Book value increased $5.2 billion, up 36% for the year. The P&C combined ratio was 88.3% for the year.

Full Year Summary
(in millions, except per share amounts)
(Unaudited)
                         
                (Per Share - Diluted)
    2009  

2008

  Change   2009  

2008

  Change
                         
Net income   $ 2,549     $ 1,197     113 %   $ 7.55     $ 3.50     116 %
Net realized gains (losses), net of tax     (210 )     (1,394 )   NM       (0.62 )     (4.17 )   NM  

Income excluding net realized gains (losses), net of tax (2)

  $ 2,759     $ 2,591     6 %   $ 8.17     $ 7.67     7 %
                         

Evan G. Greenberg, Chairman and Chief Executive Officer of ACE Limited, commented: “ACE had very strong fourth quarter income. Operating income was up 9% over prior year, contributing to record income for the year, and net income exceeded $900 million for the quarter. Our book value grew 36% in the year while tangible book grew 47%; both are now at all-time highs. In fact, over the last five years, we have grown our book and tangible book value at a compound annual rate of 15% and 17%, respectively.

“Our P&C combined ratio for 2009 was 88.3% – a world-class result – and in terms of capital efficiency, we achieved an operating return on equity for the year of more than 16%. We are confident we can continue to produce superior ROEs barring unforeseen events.

“P&C net written premiums were up about 9% in the quarter – a very solid performance that reflects the benefit of foreign exchange. While premium revenue growth will continue to be impacted by recessionary and competitive insurance market conditions, we are seeing more opportunities for profitable growth as a result of our increased geographic and product presence.

“In spite of the year’s challenging economic, financial and insurance market conditions, we continued to invest in our company and benefit from our local presence in over 50 countries, from customer and producer flight to quality and capability, and from our diversified mix of P&C, A&H and Life businesses. We fully expect to continue delivering superior results.”

Other operating highlights for the quarter ended December 31, 2009, were as follows:(1)

  • Net premiums written and earned increased 8% and 5%, respectively. Excluding the impact of foreign exchange, net premiums written and earned increased 4% and 1%, respectively.
  • The P&C combined ratio was 89.6% compared with 86.9% last year. The P&C combined ratio for the year was 88.3% compared with 89.6% last year.
  • Favorable prior period development pre-tax was $147 million compared with $252 million in 2008.
  • P&C pre-tax underwriting income was $313 million compared with $375 million in 2008.
  • Operating cash flow was $1 billion. Operating cash flow for the year was $3.3 billion.
  • Net loss reserves increased $6 million. Excluding foreign exchange valuation, net loss reserves increased $98 million. Net loss reserves increased $929 million for the year. Excluding foreign exchange valuation, net loss reserves increased $526 million for the year.
  • Net investment income decreased 2% to $512 million. For the year, net investment income decreased 2% to $2 billion.
  • Return on average equity was 14.2%.(3) Return on average equity was 16.2% for the year.
  • Book value per share(4) increased 5% from $55.71 at September 30, 2009, to $58.44, and increased 35% from December 31, 2008.
  • Tangible book value per share(4) increased 5% from $44.49 at September 30, 2009, to $46.76, and increased 46% from December 31, 2008.
  • Net realized and unrealized gains after tax from our investment portfolio totaled approximately $170 million. Net realized gains from derivative accounting related to the guaranteed minimum income benefits (GMIBs) of our life reinsurance business, net of associated hedges, were approximately $87 million.

Details of our financial results for our business segments are available in the ACE Limited Financial Supplement. Key segment items for the quarter ended December 31, 2009, include:

  • Insurance-North American: Net premiums written increased 9%. Excluding large single transactions written in the quarter, net premiums written increased 2%. The combined ratio was 89.5% compared with 83.0%.
  • Insurance-Overseas General: Net premiums written increased 8%. Adjusting for the impact of foreign exchange, they remained flat. The combined ratio was 90.3% compared with 90.7%.
  • Global Reinsurance: Net premiums written increased 14%. The combined ratio was 67.1% compared with 72.3%.
  • Life: Net premiums written increased 5%. Life underwriting income increased to $104 million compared with $21 million.

Please refer to the ACE Limited Financial Supplement dated December 31, 2009, 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 reference is: http://media.corporate-ir.net/media_files/irol/10/100907/fin_supp_december_31_2009.xls.

ACE will host its fourth quarter earnings conference call and webcast on Wednesday, February 3, 2010, beginning at 8:30 a.m. ET. The earnings conference call will be available via live and archived webcast atwww.acelimited.com or by dialing 888-389-5997 (within the United States) or 719-457-1529 (international); passcode 4701116. 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 4701116.

Celebrating 25 years of insuring progress, the ACE Group is a global leader in insurance and reinsurance serving a diverse group of clients. Headed by ACE Limited (NYSE:ACE), the ACE Group 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) All comparisons are with the same periods last year unless specifically stated.

(2) 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 entities because the amounts of these gains (losses) do not relate to their respective operations.

Underwriting income is calculated by subtracting losses and loss expenses, policy 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). Life underwriting income includes net investment income. We believe the use of these measures enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business.

See reconciliation of Non-GAAP Financial Measures 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).

(3) Calculated using income excluding net realized gains (losses) less perpetual preferred securities divided by average common shareholders' equity for the period. To annualize a quarterly rate, multiply by four.

(4) Book value per common share 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.

NM – not meaningful comparison

Cautionary Statement Regarding Forward-Looking Statements:

Forward-looking statements made in this press release, such as those related to return on equity, underwriting, rates, economic and insurance market conditions, and company performance 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, integration activities and performance of acquired companies, the company’s re-domestication to Switzerland, new theories of liability, judicial, legislative, regulatory and other governmentaldevelopments, litigation tactics and developments, investigation developments and actual settlement terms, the amount and timing of reinsurance recoverable, credit developments among reinsurers, 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)
 
         
    December 31   December 31
    2009   2008
         
Assets        
Investments   $ 46,515   $ 39,715
Cash     669     867
Insurance and reinsurance balances receivable     3,671     3,453
Reinsurance recoverable on losses and loss expenses     13,595     13,917
Other assets     13,530     14,105
Total assets   $ 77,980   $ 72,057
         
Liabilities        
Unpaid losses and loss expenses   $ 37,783   $ 37,176
Unearned premiums     6,067     5,950
Other liabilities     14,463     14,485
Total liabilities     58,313     57,611
         
Shareholders' equity        
Total shareholders' equity     19,667     14,446

Total liabilities and shareholders' equity

  $ 77,980   $ 72,057
         
Book value per common share (4)   $ 58.44   $ 43.30
         
 
ACE Limited
Summary Consolidated Financial Data
(in millions of U.S. dollars, except share, per share data, and ratios)
(Unaudited)
                 
                 
    Three Months Ended   Year Ended
    December 31   December 31
    2009   2008   2009   2008
                 
Gross premiums written   $ 4,507     $ 4,320     $ 19,164     $ 19,242  
Net premiums written     3,305       3,052       13,299       13,080  
Net premiums earned     3,387       3,226       13,240       13,203  
                 
Losses and loss expenses     1,900       1,760       7,422       7,603  
Policy benefits     69       156       325       399  
Policy acquisition costs     559       517       2,130       2,135  
Administrative expenses     486       444       1,811       1,737  
Underwriting income (2)     373       349       1,552       1,329  
                 
Net investment income     512       521       2,031       2,062  
Net realized gains (losses)     373       (644 )     (196 )     (1,633 )
Interest expense     56       54       225       230  
Other income (expense)     (41 )     (65 )     (85 )     39  
Income tax expense     208       87       528       370  
Net income     953       20       2,549       1,197  
Preference share dividend     -       -       -       (24 )
Net income available to holders of common shares   $ 953     $ 20     $ 2,549     $ 1,173  
                 
Diluted earnings per share:                
Income excluding net realized gains (losses) (2)   $ 2.01     $ 1.86     $ 8.17     $ 7.67  
Net income   $ 2.81     $ 0.06     $ 7.55     $ 3.50  
                 
Weighted average diluted shares outstanding     339.0       335.3       337.5       334.6  
                 
Loss and loss expense ratio     59.1 %     57.8 %     58.8 %     60.6 %
Policy acquisition cost ratio     16.7 %     15.6 %     16.2 %     16.2 %
Administrative expense ratio     13.8 %     13.5 %     13.3 %     12.8 %
Combined ratio     89.6 %     86.9 %     88.3 %     89.6 %
                                 
 
ACE Limited
Consolidated Supplemental Segment Information
(in millions of U.S. dollars)
(Unaudited)
             
                 
    Three Months Ended   Year Ended
    December 31   December 31
    2009   2008   2009   2008
                 

Gross Premiums Written

               
                 
Insurance - North American   $ 2,196     $ 2,167     $ 9,668     $ 10,053  
Insurance - Overseas General     1,752       1,609       6,832       6,941  
Global Reinsurance     162       130       1,115       921  
Life     397       414       1,549       1,327  
Total   $ 4,507     $ 4,320     $ 19,164     $ 19,242  
                 

Net Premiums Written

               
                 
Insurance - North American   $ 1,421     $ 1,304     $ 5,641     $ 5,636  
Insurance - Overseas General     1,350       1,251       5,145       5,332  
Global Reinsurance     144       126       1,038       914  
Life     390       371       1,475       1,198  
Total   $ 3,305     $ 3,052     $ 13,299     $ 13,080  
                 

Net Premiums Earned

               
                 
Insurance - North American   $ 1,365     $ 1,377     $ 5,684     $ 5,679  
Insurance - Overseas General     1,400       1,250       5,147       5,337  
Global Reinsurance     253       240       979       1,017  
Life     369       359       1,430       1,170  
Total   $ 3,387     $ 3,226     $ 13,240     $ 13,203  
                 

Income Excluding Net Realized Gains (Losses) (2)

               
                 
Insurance - North American   $ 318     $ 333     $ 1,245     $ 1,122  
Insurance - Overseas General     207       225       839       1,012  
Global Reinsurance     146       133       633       518  
Life     90       4       283       168  
Corporate     (78 )     (71 )     (241 )     (229 )
Total   $ 683     $ 624     $ 2,759     $ 2,591  
                                 
 

 

Contact:

ACE Limited
Investor Contact: Helen M. Wilson, 441-299-9283
helen.wilson@acegroup.com
or
Media Contact: Stephen M. Wasdick, 212-827-4444
stephen.wasdick@acegroup.com