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In a bad year for property/casualty insurers, ACE Ltd.'s performance last year caught the eyes of industry analysts.
Zurich-based ACE was cited more than any other insurer as having outperformed its peers in an informal poll of analysts.
“They had reasonably strong results for the year,” said Alan Murray, vp and senior credit officer at Moody's Investors Service Inc. in New York.
He noted that, like many of its peers, ACE suffered from significant catastrophe losses with about $860 million in catastrophe losses last year.
Mark Dwelle, an insurance analyst at RBC Capital Markets, a unit of RBC Dominion Securities Inc. in Richmond, Va., said ACE “managed its catastrophe exposures better than most. It did a good job integrating its various small acquisitions and managed to achieve good organic growth on a global basis.”
“ACE had very good fourth-quarter and full-year results, particularly considering the environment, euro crisis, slow economic growth in developed markets, challenging insurance market conditions and, of course, the costliest natural catastrophe on record for the industry,” said ACE Chairman and CEO Evan G. Greenberg during a results conference call in February.
ACE's 2011 net income fell 49% to $1.59 billion from that of 2010, the insurer announced last month. Gross written premiums for the year grew 6.8% to $20.83 billion. Its combined ratio for 2011 stood at 94.6%, a deterioration from 2010's 90.2%.
During the conference call, Mr. Greenberg noted that while ACE's full-year operating income dropped 11% to nearly $2.4 billion in 2011 compared with that of 2010, if the impact of the unusual level of cat losses was excluded, “operating income was actually up 5% compared with 2010.
“Both years included roughly the same amount of prior-period reserve development, so that underlying growth in income came from current accident-year results,” predominantly from acquisitions, as well as ACE's accident and health business and improved property/casualty portfolio management in the United States, Mr. Greenberg said.
Moody's Mr. Murray also noted ACE's favorable reserve development.
“They also did have favorable reserve development of business written in prior years,” he said. “In general, these have been in casualty lines and, with a favorable claim trend and tort liability environment in recent years, we've seen continued favorable reserve development.” But he also noted that ACE posted “significant realized investment losses.”
Nonetheless, “ACE benefits from the fact that it does not own any meaningful levels of debt from countries that are under sovereign stress,” said Mr. Murray. At year-end, ACE held no sovereign debt of Greece, Ireland or Portugal, he said.
“That has helped them have a strong capital base,” he said.
He also noted that while other insurers have chosen to buy back their shares “to a greater extent than investing in growth in the underlying business. ACE has generally held the line and been spare in buying back its shares, instead deploying meaningful capital to acquisitions, particularly in Asia and the U.S. crop insurance sector.”