Hamilton , Bermuda-based insurer ACE Limited reported first-quarter net income fell 46 percent primarily on investment losses, but the company beat analyst’s earning estimates by 24 cents a share on net realized gains.
For the first quarter of this year, ACE reported net income was down $324 million to $377 million, or a $1 a share drop of net income to $1.10 a share.
However, income excluding net realized gains, which the company said reflects the true nature of the performance of its insurance business, rose 18 cents to $2.16 a share. Net premiums written were off 4 percent, or $116 million, to $3.15 billion.
The company’s positive performance in insurance was also reflected in its combined ratio that improved 2.5 points to 84.6 in the quarter compared to the same period last year.
David Small, an analyst for Bear Stearns, said in a note the loss ratio is better than expected, unlike other companies, and this is a testament to the company’s diversification by geography and line of business.
During an analyst’s conference call today, Evan Greenberg, chairman and chief executive officer of ACE, said the first-quarter results “were quite strong given the volatility of financial market conditions.”
Phillip V. Bancroft, ACE chief financial officer, said the $650 million net realized and unrealized loss after taxes was the result of “unprecedented financial market volatility in the credit and equity markets.”
The insurance marketplace rates continue falling, said Mr. Greenberg, with first-quarter results seeing more accelerated rate declines than in January. Declines in the United States averaged in the single percentage digits on retail business and low teens on the wholesale business, he said.
He said while the industry will see an impact to earnings from rate declines, increased risk exposure and market volatility, a greater concern is inflation.
“The continued and involving impact of the financial markets turmoil will be with us for some time, and will continue to be a drag on the global economy,” Mr. Greenberg said. “In my judgment, though, inflation is the more long-term and insidious risk that faces our industry. We have been in a benign inflationary period and I believe this is likely coming to an end.”
He said despite these threats, rates continue to drop because of capital investment. ACE will continue its strategy of holding onto renewals and writing less new business, Mr. Greenberg added. The company will seek growth where it sees adequate return and curtail or eliminate business in other areas.
“I hear many of our competitors make similar comments, but time will tell who is and who is not practicing what they preach,” Mr. Greenberg remarked.
ACE International business reflected growth, while domestic business in the United Kingdom and Australia were down, he said.
Internationally, property-casualty and accident and health grew, but international wholesale “shrank modestly,” he continued. Premium in North America was down primarily in workers’ compensation exposures and professional lines. Specialty and general p-c lines saw growth, particularly in middle market areas, he added.
The company also announced it plans to change its domicile from the Cayman Islands to Zurich, Switzerland, and said it has completed its acquisition of Combined Insurance Company from Aon and the Atlantic Companies’ personal lines business.