- Global P&C net premiums written,
which exclude Agriculture, up 5% in constant dollars
- P&C underwriting income of $402
million, up 7.8% in constant dollars
- Net investment income of $551
million
- Operating cash flow of $1.1
billion
- Unfavorable foreign currency movement
negatively impacted operating income by $20 million, or $0.06 per
share, compared with the prior year, reduced Global P&C net
premiums written growth by five percentage points and reduced book
value by $441 million in the quarter
ACE Limited (NYSE: ACE) today reported net income for the
quarter ended March 31, 2015, of $2.05 per share, compared with
$2.14 per share for the same quarter last year.(1) Operating income
was $2.25 per share, compared with $2.27 per share for the same
quarter last year. Operating return on equity for the quarter was
10.8%. The property and casualty (P&C) combined ratio for the
quarter was 88.4%. Book value and tangible book value per share
increased 0.9% and 1.8%, respectively, from December 31, 2014. Book
value and tangible book value per share now stand at $90.81 and
$73.94, respectively. Excluding unfavorable foreign currency
movement, book value per share and tangible book value per share
increased 2.4% and 3.0%, respectively.
Year-over-year results were adversely impacted by foreign
exchange in the period, as noted above, and a number of favorable
items from the prior year that did not repeat. In the prior year,
North American P&C underwriting income was favorably impacted
by $25 million of premium-related items. Life underwriting income
was favorably impacted in the prior year due to a non-recurring $6
million reserve adjustment. In addition, 2014 benefited from lower
taxes of $16 million related to prior period development emerging
in lower tax jurisdictions. These items and foreign exchange had a
negative impact of $0.18 per share on operating income.
First Quarter Summary (in millions, except per
share amounts) (Unaudited)
(Per Share - Diluted)
2015 2014 Change 2015
2014 Change Operating income,
net of tax $ 745 $ 777 (4.2)% $ 2.25 $ 2.27 (0.9)% Adjusted net
realized losses, net of tax (64
)
(43 ) 46.6% (0.20 ) (0.13 ) 53.8% Net
income $ 681 $ 734 (7.2)% $ 2.05
$ 2.14 (4.2)%
Evan G. Greenberg, Chairman and Chief Executive Officer of ACE
Limited, commented: “ACE’s first quarter earnings per share were
essentially flat with prior year – a good result for a global,
dollar-based insurer. We overcame unfavorable foreign exchange
movement and a number of favorable items from prior year to produce
after-tax operating income of $745 million, or $2.25 per share. Our
earnings benefited from excellent underwriting and investment
income results, highlighted by a P&C combined ratio of 88.4%
and investment income that was flat with prior year. We generated
an operating ROE of nearly 11% while per share book and tangible
book value grew 2.4% and 3%, respectively, in constant dollars.
Foreign exchange negatively impacted per share book value by 1.5
points.
“Global P&C net premiums written grew 5% on a
constant-dollar basis with the strong dollar taking about five
percentage points off our company’s premium growth. We obviously
have the headwinds of foreign exchange, an underwriting environment
that continues to grow more competitive for our commercial P&C
businesses, as well as low interest rates. Given our excellent
diversification by product, geography and consumer segment, many
areas of our business present attractive growth prospects,
particularly in the U.S., Latin America and Asia, and as a result
we expect our premium revenue growth for the balance of the year to
be in the mid-single digits on a published basis.”
Operating highlights for the quarter ended March 31, 2015, were
as follows:
(in millions of U.S. dollars except for percentages)
1Q
2015
1Q
2014
Change
P&C
Net premiums written $ 3,585 $ 3,691 (2.9)% Net premiums written
constant-dollar $ 3,524 1.7% Underwriting income $ 402 $ 390 3.2%
Combined ratio 88.4% 88.8% Current accident year underwriting
income excluding catastrophe losses $ 370 $ 381 (2.8)% Current
accident year combined ratio excluding catastrophe losses 89.3%
88.9%
Global P&C
(excludes Agriculture)
Net premiums written $ 3,497 $ 3,497 0.0% Net premiums written
constant-dollar $ 3,330 5.0% Underwriting income $ 355 $ 421
(15.7)% Combined ratio 89.5% 87.6% Current accident year
underwriting income excluding catastrophe losses $ 355 $ 373 (5.1)%
Current accident year combined ratio excluding catastrophe losses
89.5% 89.0%
Agriculture
Net premiums written $ 88 $ 194 (54.6)% Underwriting income (loss)
$ 47 $ (31) NM Combined ratio 26.4% 130.3% Current accident year
underwriting income excluding catastrophe losses $ 15 $ 8 107.6%
Current accident year combined ratio excluding catastrophe losses
76.7% 88.9%
- P&C net premiums earned increased
3.5% and Global P&C net premiums earned increased 4.8% in
constant dollars.
- The P&C expense ratio was 31.3%,
compared with 31.1% last year. The Global P&C expense ratio,
which excludes Agriculture, was 32.0% compared with 31.9% last
year. The Agriculture expense ratio was (6.9)% compared with 5.7%
last year.
- Total pre-tax and after-tax catastrophe
losses including reinstatement premiums were $51 million (1.5
percentage points of the combined ratio) and $40 million,
respectively, compared with $53 million (1.5 percentage points of
the combined ratio) and $43 million, respectively, last year.
- Favorable prior period development
pre-tax and after-tax were $83 million (2.4 percentage points of
the combined ratio) and $67 million, respectively, compared with
$62 million (1.6 percentage points of the combined ratio) and $63
million, respectively, last year.
- Operating cash flow was $1.1
billion.
- Net loss reserves decreased $112
million in the quarter after adjusting for foreign exchange.
- Net investment income was $551 million
compared with $553 million last year. This quarter was negatively
impacted by foreign currency movement of $7 million.
- Net realized and unrealized losses
pre-tax totaled $27 million. Net realized losses of $63 million
included a loss of $57 million from derivative accounting related
to variable annuity reinsurance. Net unrealized gains of $36
million included an unrealized gain of $444 million in the
investment portfolio, partially offset by an unrealized foreign
exchange loss of $421 million.
- Operating return on equity was 10.8%.
Return on equity computed using net income was 9.2%.
- Share repurchases totaled $340 million,
or approximately 3.0 million shares, during the quarter. The
company has repurchased approximately 650,000 shares for $73
million through April 20, 2015.
- Book value per share increased 0.9% to
$90.81 from $90.02 at December 31, 2014. Excluding unfavorable
foreign currency movement, book value per share increased
2.4%.
- Tangible book value per share increased
1.8% to $73.94 from $72.61 at December 31, 2014. Excluding
unfavorable foreign currency movement, tangible book value per
share increased 3.0%.
Details of financial results by business segment are available
in the ACE Limited Financial Supplement. Key segment items for the
quarter ended March 31, 2015, include:
- Insurance – North American P&C: Net
premiums written increased 0.8%. The combined ratio was 89.6%
compared with 84.7%. The current accident year combined ratio
excluding catastrophe losses was 87.9% compared with 87.1%. The
prior year underwriting income was favorably impacted by two items
that did not repeat totaling $25 million ($18 million after-tax),
which includes $16 million ($12 million after-tax) due to lower
excess of loss premiums ceded under the company’s 2014 catastrophe
reinsurance program and a $9 million ($6 million after-tax)
favorable settlement related to prior year state premium
assessments. Excluding the impact of these items, the current
accident year combined ratio excluding catastrophe losses was 87.9%
compared with 88.5%.
- Insurance – North American Agriculture:
Net premiums written decreased 54.6% due to lower premium retention
as a result of a timing difference in premium recognition between
the fourth quarter of 2013 and the first quarter of 2014.
Additionally, the premium-sharing formulas with the U.S. government
resulted in a large positive true-up in 2014 due to the 2013 crop
year loss estimates. The combined ratio was 26.4% compared with
130.3%. The current period included $33 million of favorable prior
period development, compared with $38 million of unfavorable prior
period development in the prior year. The current accident year
combined ratio excluding catastrophe losses was 76.7% compared with
88.9% principally due to more favorable expense adjustments in the
current period related to the 2014 crop year true-up with the
government.
- Insurance – Overseas General: Net
premiums written increased 1.3%, or 11.0% on a constant-dollar
basis. The combined ratio was 89.1% compared with 90.1%. The
current accident year combined ratio excluding catastrophe losses
was 90.3% compared with 90.5%.
- Global Reinsurance: Net premiums
written decreased 11.4%, or 9.1% on a constant-dollar basis. The
combined ratio was 73.2% compared with 72.9%. The current accident
year combined ratio excluding catastrophe losses was 75.5% compared
with 75.1%.
- Life segment: Operating income was $66
million compared with $77 million. The decrease was primarily
related to the runoff of the company’s life reinsurance business
and a one-time prior year benefit in the company’s international
life insurance business of $6 million (pre-tax and after-tax).
International life insurance net premiums written and deposits
collected increased 18.4% on a constant-dollar basis.
Please refer to the ACE Limited Financial Supplement, dated
March 31, 2015, 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.
ACE will hold its first quarter earnings conference call on
Wednesday, April 22, 2015, beginning at 8:30 a.m. Eastern. The
earnings conference call will be available via live webcast at
www.acegroup.com or by dialing 888-523-1245 (within the United
States) or 719-457-2657 (international), passcode 9701050. 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, May 6, 2015, 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 9701050.
About ACE Group
ACE Group is one of the world’s largest multiline property and
casualty insurers. With operations in 54 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 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.
Regulation G - Non-GAAP Financial Measures
In presenting our results, we included and discussed certain
non-GAAP measures. These non-GAAP measures, which may be defined
differently by other companies, are important for an understanding
of our overall results of operations and financial condition.
However, they should not be viewed as a substitute for measures
determined in accordance with generally accepted accounting
principles (GAAP).
Throughout this document there are various measures presented on
a constant-dollar basis (i.e., excludes the impact of foreign
exchange). We believe it is useful to evaluate the trends in our
results, exclusive of the effect of fluctuations in exchange rates
between the U.S. dollar and the currencies in which our
international business is transacted, as these exchange rates could
fluctuate significantly between periods and distort the analysis of
trends. The impact is determined by assuming constant foreign
exchange rates between periods by translating prior period results
using the same local currency exchange rates as the comparable
current period.
Adjusted net realized gains (losses), net
of tax, includes net realized gains (losses) and net
realized gains (losses) recorded in other income (expense) related
to unconsolidated subsidiaries, and excludes realized gains and
losses on crop derivatives. These derivatives were purchased to
provide economic benefit, in a manner similar to reinsurance
protection, in the event that a significant decline in commodity
pricing impacts underwriting results. We view gains and losses on
these derivatives as part of the results of our underwriting
operations, and therefore realized gains and losses from these
derivatives are reclassified to adjusted losses and loss expenses.
The P&C combined ratio includes adjusted losses and loss
expenses in the ratio numerator.
Underwriting income, P&C underwriting
income, and Global P&C underwriting income are
calculated by subtracting losses and loss expenses, policy
benefits, policy acquisition costs and administrative expenses from
net premiums earned. P&C underwriting income also includes
gains (losses) on crop derivatives. 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
adjusted net realized gains (losses). Current accident year
underwriting income excluding catastrophe losses is underwriting
income adjusted to exclude catastrophe losses and prior period
development (PPD). We believe it is useful to exclude catastrophe
losses, as they are not predictable as to timing and amount, and
PPD as these unexpected loss developments on historical reserves
are not indicative of our current underwriting performance. 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 income or income excluding
adjusted 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 adjusted net realized gains (losses)
because the amount of these gains (losses) is heavily influenced by
the availability of market opportunities. In addition, we disclose
operating income excluding the impact of foreign exchange in order
to adjust for the distortive effects of fluctuations in exchange
rates.
P&C combined ratio excluding
catastrophe losses and PPD and current accident year P&C
combined ratio excluding catastrophe losses exclude impacts
of catastrophe losses and PPD. We believe this measure provides a
better evaluation of our core underwriting performance and enhances
the understanding of the trends in our property and casualty
business that may be obscured by these items.
Global P&C performance metrics
comprise consolidated operating results (including corporate) and
exclude the operating results of the company’s Life and Insurance –
North American Agriculture segments. We believe that these measures
are useful and meaningful to investors as they are used by
management to assess the company’s global P&C operations which
are the most economically similar. We exclude the Insurance – North
American Agriculture and Life segments because the results of these
businesses do not always correlate with the results of our global
P&C operations.
International life net premiums written
and deposits collected, is adjusted to include deposits
collected on universal life and investment contracts (life
deposits). Life deposits are not reflected as revenues in our
consolidated statements of operations in accordance with GAAP.
However, we include life deposits in presenting growth in our life
insurance business because new life deposits are an important
component of production and key to our efforts to grow our
business.
Operating return on equity (ROE) or ROE
calculated using operating income is an annualized financial
measure. The ROE numerator includes income adjusted to exclude
adjusted 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 operating income 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.
Tangible book value per common
share is shareholders' equity less goodwill and other
intangible assets divided by the shares outstanding. We believe
that goodwill and other intangible assets are not indicative of our
underlying insurance results or trends and make book value
comparisons to less acquisitive peer companies less meaningful. In
addition, we disclose per share measures for book value and
tangible book value that exclude the impact of foreign currency
fluctuations during 2015 in order to adjust for the distortive
effects of fluctuations in exchange rates.
Other income (expense) – operating
excludes from consolidated Other income (expense) the portion of
net realized gains and losses related to unconsolidated entities
and gains and losses from fair value changes in separate account
assets that do not qualify for separate account reporting under
GAAP. Net realized gains (losses) related to unconsolidated
entities is excluded from operating income in order to enhance the
understanding of our core results of operations as they are heavily
influenced by, and fluctuate in part according to market
conditions.
See reconciliation of Non-GAAP Financial Measures on pages 22-24
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.
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 including 2015 performance and
growth opportunities, 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, economic, political, regulatory,
insurance and reinsurance business conditions, potential strategic
opportunities including acquisitions and our ability to achieve and
integrate them, 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.
ACE Limited Summary Consolidated Balance
Sheets (in millions of U.S. dollars, except per share
data) (Unaudited)
March 31
December 31
2015
2014
Assets Investments $ 63,894
$
62,904
Cash 948
655
Insurance and reinsurance balances receivable 5,026
5,426
Reinsurance recoverable on losses and loss expenses 11,588
11,992
Other assets 16,942
17,271
Total assets $ 98,398
$
98,248
Liabilities Unpaid losses and loss expenses $
37,326
$
38,315
Unearned premiums 8,182
8,222
Other liabilities 23,188
22,124
Total liabilities 68,696
68,661
Shareholders' equity Total shareholders'
equity 29,702
29,587
Total liabilities and shareholders' equity $ 98,398
$
98,248
Book value per common share $ 90.81
$
90.02
ACE Limited
Summary Consolidated Financial Data (in millions of U.S.
dollars, except share, per share data, and ratios)
(Unaudited)
Three Months Ended March 31 2015
2014
Gross premiums written $ 5,322
$
5,374
Net premiums written 4,076
4,185
Net premiums earned 3,927
3,970
Losses and loss expenses 2,122
2,161
Policy benefits 142
114
Policy acquisition costs 707
728
Administrative expenses 554
535
Net investment income 551
553
Net realized gains (losses) (89 )
(104
)
Interest expense 68
71
Other income (expense): Gains (losses) from separate account assets
11
(6
)
Other (6 )
23
Income tax expense 120
93
Net income $ 681
$
734
Diluted earnings per share: Operating income $
2.25
$
2.27
Net income $ 2.05
$
2.14
Weighted average diluted shares outstanding 331.7
342.0
P&C combined
ratio
Loss and loss expense ratio 57.1 %
57.7
%
Policy acquisition cost ratio 17.4 %
17.7
%
Administrative expense ratio 13.9 %
13.4
%
P&C combined ratio 88.4 %
88.8
%
P&C underwriting income $ 402
$
390
Other income (expense) - operating $ (32 )
$
(28
)
ACE Limited Consolidated
Supplemental Segment Information (in millions of U.S.
dollars) (Unaudited)
Three Months Ended March 31 2015
2014
Gross Premiums
Written
Insurance – North American P&C $ 2,125 $ 2,024 Insurance
– North American Agriculture 128 234 Insurance – Overseas General
2,255 2,261 Global Reinsurance 292 333 Life 522
522 Total $ 5,322 $ 5,374
Net Premiums
Written
Insurance – North American P&C $ 1,430 $ 1,418 Insurance
– North American Agriculture 88 194 Insurance – Overseas General
1,794 1,771 Global Reinsurance 273 308 Life 491
494 Total $ 4,076 $ 4,185
Net Premiums
Earned
Insurance – North American P&C $ 1,526 $ 1,487 Insurance
– North American Agriculture 64 103 Insurance – Overseas General
1,637 1,612 Global Reinsurance 226 284 Life 474
484 Total $ 3,927 $ 3,970
Operating Income
(loss)
Insurance – North American P&C $ 345 $ 411 Insurance –
North American Agriculture 35 (25 ) Insurance – Overseas General
241 239 Global Reinsurance 128 144 Life 66 77 Corporate (70
) (69 ) Total $ 745 $ 777
ACE®, ACE logo®, and ACE insured® are trademarks of ACE
Limited.
ACE LimitedInvestor ContactHelen Wilson,
441-299-9283helen.wilson@acegroup.comorMedia ContactJeffrey
Zack, 212-827-4444jeffrey.zack@acegroup.com
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