ACE Reports Fourth Quarter Operating Income of $492 Million after Superstorm Sandy Losses of $393 Million After-Tax; Book Value up 2.1% in Quarter with Operating ROE of 8%

Tue Jan 29, 2013 4:05pm EST

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* Book value and tangible book value up 13.1% and 15.5% for the year
* Full-year net income up over 75% and operating income up over 12%
* Full-year combined ratio was 93.9%; operating ROE was 11.0%
* Total net premiums written up 6.0% for the year in constant dollars and 9.1%
excluding crop insurance
* Full-year underwriting income was $1.2 billion, up over 11%
* Full-year investment income was $2.2 billion, down 2.8%
* Operating cash flow was $4 billion for the year

ZURICH--(Business Wire)--
ACE Limited (NYSE: ACE) today reported net income for the quarter ended December
31, 2012, of $2.22 per share, compared with $2.15 per share for the same quarter
last year.(1) Income excluding net realized gains (losses) was $1.43 per share,
compared with $1.90 per share for the same quarter last year.(2) After-tax
catastrophe losses for the fourth quarter 2012 were $400 million, net of
reinsurance and including reinstatement premiums, or $1.16 per share, compared
with $137 million, or $0.40 per share, for the same quarter last year. Book
value and tangible book value increased 2.1% and 2.7%, respectively, from
September 30, 2012. Book value and tangible book value per share now stand at
$80.90 and $66.28, respectively. Operating return on equity (ROE) for the
quarter was 8.0%.(2) The property and casualty (P&C) combined ratio for the
quarter was 105.5%, which includes net pre-tax losses from Superstorm Sandy of
$502 million ($393 million after-tax) and a pre-tax charge for asbestos and
environmental and other run-off business of $140 million ($90 million
after-tax). Operating income includes a tax benefit of $121 million from the
favorable resolution of prior years` tax matters.

 Fourth Quarter Summary                                                                                                                            
 (in millions, except per share amounts)                                                                                                           
 (Unaudited)                                                                                                                                       
                                                                                                                                                   
                                                                                             (Per Share - Diluted)                                 
                                                 2012           2011           Change        2012                 2011                 Change      
                                                                                                                                                   
 Net income                                      $   765        $   735        4     %       $    2.22            $    2.15            3     %     
 Net realized gains (losses), net of tax         273            87             214   %       0.79                 0.25                 216   %     
 Income excluding net realized gains             $   492        $   648        (24   )%      $    1.43            $    1.90            (25   )%    
 (losses), net of tax (2)                                                                                                                          
                                                                                                                                                   


For the year ended December 31, 2012, net income was $7.89 per share, compared
with $4.52 per share for 2011. Income excluding net realized gains (losses) was
$7.65 per share, compared with $6.84 per share for 2011. Book value increased
$3.2 billion, up 13.1% from December 31, 2011, and tangible book value increased
$3.0 billion, up 15.5%. The P&C combined ratio for the year was 93.9%.

 Full Year Summary                                                                                                                                          
 (in millions, except per share amounts)                                                                                                                    
 (Unaudited)                                                                                                                                                
                                                                                                                                                            
                                                                                                      (Per Share - Diluted)                                 
                                                     2012             2011              Change        2012                 2011                 Change      
                                                                                                                                                            
 Net income                                          $   2,706        $    1,540        76    %       $    7.89            $    4.52            75    %     
 Net realized gains (losses), net of tax             82               (791        )     NM            0.24                 (2.32      )         NM          
 Income excluding net realized gains                                                                                                                        
                       (losses), net of tax (2)      $   2,624        $    2,331        13    %       $    7.65            $    6.84            12    %     
                                                                                                                                                            


Evan G. Greenberg, Chairman and Chief Executive Officer of ACE Limited,
commented: "ACE had a good fourth quarter, which contributed to an excellent
year. Even with the impact of Superstorm Sandy, we produced over $490 million of
operating income and increased book value per share 2%. These results continue
to demonstrate the strength of our underwriting culture and balance sheet, and
the benefits of our globally diversified business. 

"For the year, after-tax operating income was $2.6 billion, up 13% from 2011. We
produced $1.2 billion in underwriting income - an increase of 11% over prior
year - and a combined ratio of 93.9%. This is an excellent underwriting result,
particularly given the worst drought conditions in the U.S. in 25 years as well
as the losses from Sandy. We also produced strong investment results, with
investment income down less than 3% - a good performance considering record low
interest rates. Our operating ROE was 11% and per share book value grew 12% for
the year, bringing three-year and five-year compounded annual book value per
share growth to 11.4% and 10.7%, respectively. 

"Net premiums globally grew 6% for the year and in constant dollars - 9%
excluding our crop insurance business. Our premium revenue growth is benefitting
from an improved price environment in the U.S., our large and growing business
presence around the world in Asia, Latin America and Europe, and our unique and
balanced portfolio of insurance products including commercial, specialty and
personal P&C, personal accident and life. Insurance pricing in the U.S.
continues to improve and price increases are spreading to more product classes -
a trend that has continued into the first quarter. With low interest rates
pressuring industry returns, we expect this orderly and rational trend of price
increases to continue. For our company, a continued focus on underwriting
discipline, enhanced through the use of portfolio management and data analytics,
is contributing significantly to both our premium growth and underwriting
profitability, and we expect this discipline will continue to make a notable
difference in our results going forward." 

Operating highlights for the quarter and full year ended December 31, 2012, were
as follows: (1)

* For the quarter, P&C net premiums written increased 0.3%, and 0.7% on a
constant-dollar basis. Excluding the company`s crop insurance business, P&C net
premiums written increased 7.2%, and 7.8% on a constant-dollar basis. For the
year, P&C net premiums written increased 4.7%, and 6.3% on a constant-dollar
basis. Excluding the crop insurance business, P&C net premiums written for the
year increased 8.0%, and 9.9% on a constant-dollar basis. 
* Total pre-tax and after-tax catastrophe losses including reinstatement
premiums for the quarter were $511 million, and $400 million, respectively,
which included Superstorm Sandy losses of $502 million and $393 million pre-tax
and after-tax, respectively. Total pre-tax and after-tax catastrophe losses for
the same quarter in 2011 were $155 million and $137 million, respectively. 
* The P&C combined ratio for the quarter was 105.5%, which includes losses from
Superstorm Sandy and a pre-tax charge for asbestos and environmental and other
run-off business reserve strengthening of $140 million ($90 million after-tax). 
* The P&C current accident year combined ratio for the quarter excluding
catastrophe losses improved to 91.4% compared with 92.0% last year. Excluding
crop insurance and catastrophe losses, the P&C current accident year combined
ratio for the quarter was 90.9% compared with 92.9% last year. 
* Favorable prior period development pre-tax for the quarter, including the
charge for asbestos and environmental, was $37 million, representing 1.1
percentage points of the combined ratio. The quarter included a reserve charge
for asbestos and environmental and other run-off business of $140 million of
which $118 million was a pre-tax addition to our asbestos and environmental
reserves. 
* The P&C expense ratio for the quarter was 30.0% compared with 29.6% last year.
For the year, the P&C expense ratio was 28.2% compared with 28.7% in 2011. 
* Operating cash flow was $970 million for the quarter and $4.0 billion for the
year. 
* Net loss reserves increased $780 million for the year. 
* The underwriting loss (2) for the quarter was $90 million. Underwriting income
(2) for the year was up 11.2% to $1.24 billion compared with $1.12 billion in
2011. 
* Net investment income for the quarter was $567 million compared with $565
million in 2011. The quarterly amount included $42 million of greater than
expected private equity and other distributions and the income benefit of an
insurance contract classified as a deposit. Net investment income for the year
was $2.2 billion, down 2.8% compared to last year. 
* The operating effective tax rate (2) for the quarter and year included a tax
benefit of $121 million from the favorable resolution of prior years` tax
matters. 
* Net realized and unrealized gains pre-tax for the quarter totaled $189
million, which included net realized gains from derivative accounting related to
variable annuity reinsurance of $173 million, including the effect of foreign
exchange. 
* Operating return on equity (2) was 8.0% for the quarter and 11.0% for the
year. Return on equity computed using net income was 11.2% and 10.4% for the
year. 
* Book value per share (2) increased 1.9% to $80.90 from $79.36 at September 30,
2012, and increased 12.0% from $72.22 at December 31, 2011.(3)
* Tangible book value per share (2) increased 2.5% to $66.28 from $64.67 at
September 30, 2012, and increased 14.3% from $57.97 at December 31, 2011.

Details of financial results by business segment are available in the ACE
Limited Financial Supplement. Key segment items for the quarter and full year
ended December 31, 2012, include:

* Insurance-North American: Net premiums written decreased 6.5% for the quarter
primarily due to increased crop insurance premium cessions to the U.S.
government as a result of the government`s crop insurance profit and loss
calculation formula. Excluding the crop insurance business, net premiums written
increased 6.9%. For the quarter, the combined ratio was 111.9% compared with
91.0%. For the quarter, the current accident year combined ratio excluding
catastrophe losses was 90.0% compared with 90.3% last year, and excluding the
crop insurance business it was 88.5%. For the year, the combined ratio was 97.1%
compared with 93.8% last year. For the year, the current accident year combined
ratio excluding catastrophe losses was 93.4% compared with 91.5% last year, and
excluding the crop insurance business it was 90.1%. 
* Insurance-Overseas General: Net premiums written increased 7.1% for the
quarter, and 8.5% on a constant-dollar basis. The combined ratio was 95.4%
compared with 94.5%. The current accident year combined ratio excluding
catastrophe losses was 92.5% compared with 93.4% last year. For the year, the
combined ratio was 89.7% compared with 94.5% last year. For the year, the
current accident year combined ratio excluding catastrophe losses was 92.2%
compared with 93.1% last year. 
* Global Reinsurance: Net premiums written increased 12.0% for the quarter. The
combined ratio was 101.7% compared with 77.1%. The current accident year
combined ratio excluding catastrophe losses was 69.9% compared with 75.3% last
year. For the year, the combined ratio was 77.5% compared with 85.6% last year.
For the year, the current accident year combined ratio excluding catastrophe
losses was 72.8% compared with 75.2% last year. 
* Life: Operating income for the quarter was $74 million compared with $79
million last year. Excluding the life reinsurance business, operating income was
up $5 million.

Please refer to the ACE Limited Financial Supplement, dated December 31, 2012,
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 company also issued 2013 guidance. Operating income is expected to range
between $6.60 and $7.00 per share. Catastrophe losses included in the estimate
are $475 million pre-tax ($395 million after-tax), which are in line with last
year`s catastrophe loss guidance. The operating income projections included in
this guidance are for current accident year results only and by definition do
not include any estimate for prior period reserve development. 

ACE will host its fourth quarter earnings conference call and webcast on
Wednesday, January 30, 2013, beginning at 8:30 a.m. Eastern. The earnings
conference call will be available via live and archived webcast at
www.acegroup.com or by dialing 877-681-3375 (within the United States) or
719-325-4880 (international); passcode 3252473. Please refer to the ACE Group
website in the Investor Information section under Calendar of Events for
details. A replay of the call will be available until Wednesday, February 13,
2013 and the archived webcast will be available for approximately one month. To
listen to the replay, please dial 888-203-1112 (in the United States) or
719-457-0820 (international); passcode 3252473. 

The ACE Group is one of the world's largest multiline property and casualty
insurers. With operations in 53 countries, ACE provides commercial and personal
property and casualty insurance, personal accident and supplemental health
insurance, reinsurance and life insurance to a diverse group of clients. ACE
Limited, the parent company of the ACE Group, is listed on the New York Stock
Exchange (NYSE: ACE) and is a component of the S&P 500 index. Additional
information can be found at: www.acegroup.com. 

(1) All comparisons are with the same period 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 amount of these
gains (losses) is heavily influenced by, and fluctuates in part according to,
the availability of market opportunities. 

Underwriting income (loss) 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 and gains (losses) from fair value changes in separate account
assets that do not qualify for separate account reporting under generally
accepted accounting principles (GAAP). P&C underwriting income and consolidated
underwriting income are non-GAAP financial measures. We believe the use of these
measures enhances the understanding of our results of operations by highlighting
the underlying profitability of our insurance business. 

Operating effective tax rate is a non-GAAP financial measure. The numerator
excludes tax on net realized gains (losses). The denominator excludes net
realized gains (losses), before tax. 

Operating return on equity (ROE) or ROE calculated using income excluding net
realized gains (losses) is an annualized non-GAAP financial measure. The ROE
numerator includes income adjusted to exclude net realized gains (losses), net
of tax. The ROE denominator includes the average shareholders' equity for the
period adjusted to exclude unrealized gains (losses) on investments, net of tax.
To annualize a quarterly rate, multiply by four. Annualized ROE calculated using
income excluding realized gains (losses) is a useful measure as it enhances the
understanding of the return on shareholders' equity by highlighting the
underlying profitability relative to shareholders' equity excluding the effect
of unrealized gains and losses on our investments. 

Book value per common share is shareholders' equity divided by the shares
outstanding. 

Tangible book value per common share is shareholders' equity less goodwill and
other intangible assets divided by the shares outstanding. 

See reconciliation of Non-GAAP Financial Measures on pages 21-22 in the
Financial Supplement. These measures should not be viewed as a substitute for
net income, return on equity, or effective tax rate determined in accordance
with GAAP. 

(3) The book value amounts reflect the effects of new accounting guidance for
deferred acquisition costs that is retrospectively applied to periods prior to
January 1, 2012. Refer to the Financial Supplement page 1 for further detail. 

NM - not meaningful comparison 

Cautionary Statement Regarding Forward-Looking Statements:

Forward-looking statements made in this press release, such as those related to
company performance and guidance, pricing and product mix, economic outlook and
insurance market conditions, reflect our 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 that could cause actual results to
differ materially, including without limitation, the following: competition,
pricing and policy term trends, the levels of new and renewal business achieved,
the frequency of unpredictable catastrophic events, actual loss experience,
uncertainties in the reserving or settlement process, integration activities and
performance of acquired companies, 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, 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 our 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.We undertake no
obligation to publicly update or revise any forward-looking statements, whether
as a result of new information, future events or otherwise.

(tables to follow)

 ACE Limited                                                                                                       
 Summary Consolidated Balance Sheets                                                                               
 (in millions of U.S. dollars, except per share data)                                                              
 (Unaudited)                                                                                                       
                                                                                                                   
                                                                                                                   
                                                                            December 31            December 31     
                                                                            2012                   2011            
                                                                                                                   
 Assets                                                                                                            
 Investments                                                                $       60,264         $       55,676  
 Cash                                                                       615                    614             
 Insurance and reinsurance balances receivable                              4,147                  4,387           
 Reinsurance recoverable on losses and loss expenses                        12,078                 12,389          
 Other assets                                                               15,441                 14,255          
                             Total assets                                   $       92,545         $       87,321  
                                                                                                                   
 Liabilities                                                                                                       
 Unpaid losses and loss expenses                                            $       37,946         $       37,477  
 Unearned premiums                                                          6,864                  6,334           
 Other liabilities                                                          20,204                 19,178          
                             Total liabilities                              65,014                 62,989          
                                                                                                                   
 Shareholders' equity                                                                                              
                             Total shareholders' equity                     27,531                 24,332          
                             Total liabilities and shareholders' equity     $       92,545         $       87,321  
                                                                                                                   
 Book value per common share (2)                                            $       80.90          $       72.22   
                                                                                                                   


 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                             
                                                                              2012                  2011                 2012                  2011              
                                                                                                                                                                 
 Gross premiums written                                                       $    5,146            $    4,864           $     21,593          $     20,831      
 Net premiums written                                                         3,657                 3,630                16,075                15,372            
 Net premiums earned                                                          3,848                 3,831                15,677                15,387            
 Losses and loss expenses                                                     2,683                 2,286                9,653                 9,520             
 Policy benefits                                                              142                   119                  521                   401               
 Policy acquisition costs                                                     636                   632                  2,446                 2,472             
 Administrative expenses                                                      553                   531                  2,096                 2,068             
 Underwriting income (loss) (2)                                               (166        )         263                  961                   926               
                                                                                                                                                                 
 Net investment income                                                        567                   565                  2,181                 2,242             
 Net realized gains (losses)                                                  272                   83                   78                    (795          )   
 Interest expense                                                             63                    63                   250                   250               
 Other income (expense):                                                                                                                                         
                            Gains (losses) from separate account assets(2)    11                    3                    29                    (36           )   
                            Other                                             9                     4                    (23           )       (45           )   
 Income tax expense (benefit)                                                 (135        )         120                  270                   502               
 Net income                                                                   $    765              $    735             $     2,706           $     1,540       
                                                                                                                                                                 
 Diluted earnings per share:                                                                                                                                     
 Income excluding net realized gains (losses) (2)                             $    1.43             $    1.90            $     7.65            $     6.84        
 Net income                                                                   $    2.22             $    2.15            $     7.89            $     4.52        
                                                                                                                                                                 
 Weighted average diluted shares outstanding                                  343.7                 341.0                342.7                 340.8             
                                                                                                                                                                 
 Loss and loss expense ratio                                                  75.5        %         63.4        %        65.7          %       66.0          %   
 Policy acquisition cost ratio                                                16.2        %         16.3        %        15.3          %       15.8          %   
 Administrative expense ratio                                                 13.8        %         13.3        %        12.9          %       12.9          %   
 Combined ratio                                                               105.5       %         93.0        %        93.9          %       94.7          %   
                                                                                                                                                                 


 ACE Limited                                                                                                                          
 Consolidated Supplemental Segment Information                                                                                        
 (in millions of U.S. dollars)                                                                                                        
 (Unaudited)                                                                                                                          
                                                                                                                                      
                                                                                                                                      
                                                     Three Months Ended                         Year Ended                            
                                                     December 31                                December 31                           
                                                     2012                  2011                 2012                 2011             
                                                                                                                                      
 Gross Premiums Written                                                                                                               
                                                                                                                                      
 Insurance - North American                          $    2,528            $    2,394           $    10,741          $    10,360      
 Insurance - Overseas General                        1,925                 1,818                7,702                7,467            
 Global Reinsurance                                  149                   132                  1,070                1,014            
 Life                                                544                   520                  2,080                1,990            
 Total                                               $    5,146            $    4,864           $    21,593          $    20,831      
                                                                                                                                      
 Net Premiums Written                                                                                                                 
                                                                                                                                      
 Insurance - North American                          $    1,518            $    1,624           $    7,208           $    6,851       
 Insurance - Overseas General                        1,476                 1,378                5,863                5,629            
 Global Reinsurance                                  146                   132                  1,025                979              
 Life                                                517                   496                  1,979                1,913            
 Total                                               $    3,657            $    3,630           $    16,075          $    15,372      
                                                                                                                                      
 Net Premiums Earned                                                                                                                  
                                                                                                                                      
 Insurance - North American                          $    1,608            $    1,662           $    7,019           $    6,911       
 Insurance - Overseas General                        1,497                 1,450                5,740                5,614            
 Global Reinsurance                                  254                   249                  1,002                1,003            
 Life                                                489                   470                  1,916                1,859            
 Total                                               $    3,848            $    3,831           $    15,677          $    15,387      
                                                                                                                                      
 Income Excluding Net Realized Gains (Losses) (2)                                                                                     
                                                                                                                                      
 Insurance - North American                          $    170              $    342             $    1,062           $    1,177       
 Insurance - Overseas General                        246                   169                  994                  691              
 Global Reinsurance                                  74                    125                  499                  401              
 Life                                                74                    79                   324                  315              
 Corporate                                           (72         )         (67         )        (255         )       (253         )   
 Total                                               $    492              $    648             $    2,624           $    2,331       


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

Copyright Business Wire 2013

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