Ace Ltd.'s fourth quarter 2014 net income dropped 44.4% from the same period a year earlier to $555.0 million as earnings were hit by, among other factors, accounting charges related to the company's variable annuity reinsurance business that also hit yearly profits, the company said Tuesday.
Fourth quarter net premiums written were $4.32 billion, up 2.4% from the same period in 2013, while net investment income rose 3.5% from the year-ago period to $577.0 million.
The company's fourth quarter combined ratio improved to 88.5% from 89.3% in the fourth quarter 2013.
“Net income in 2014 was negatively impacted relative to 2013 for both the quarter and year as a result of the mark-to-market accounting associated with the company's variable annuity reinsurance business,” Ace said in a statement accompanying its earnings release. “The relative difference is primarily due to interest rates, which fell during 2014 after rising during 2013.”
Net realized and unrealized losses pre-tax totaled $61 million for the quarter, which included net realized losses of $161 million and net unrealized gains of $100 million. Net realized losses included a loss of $153 million from derivative accounting related to variable annuity reinsurance, Ace added.
For the year, Ace had net income of $2.85 billion, off 24.1% from 2013.
Net premiums written totaled $17.79 billion, up 4.5% from the year-ago period. Net investment income fell 5.0% to $2.25 billion.
For the year, the company's combined ratio improved to 87.7% from 88.0% in 2013.
“Quarterly and annual results were driven by growth in both underwriting and investment income,” Ace Chairman and CEO Evan Greenberg said in the statement.
Fitch Ratings has downgraded Moscow-based Ace Insurance Co. CJSC's insurer financial strength rating to “BBB” from “BBB+” with a negative outlook, London-based Fitch Ratings Ltd. said Monday.