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Exchange rates, investments bog Ace's third-quarter earnings


Ace Ltd.'s net income for the third quarter dropped 32.7% from that of the same period in 2014 to $528 million, primarily because of foreign exchange and investment-related issues, the insurer reported.

The decrease reflected unfavorable foreign exchange movement and realized and unrealized losses in the company's investments and variable annuity reinsurance portfolio, Ace said in a Tuesday earnings release.

For the quarter, Ace posted net written premiums of $4.22 billion, a less than half-percent decrease from that of the same period a year earlier. The company's combined ratio improved to 85.9% for the quarter from 86.3% during the same period in 2014.

For the first three quarters of the year, Ace's net income dropped 6.4% to $2.15 billion from that of the same period a year earlier. Net written premiums increased less than a percent to $13.57 billion while the combined ratio for the nine months ending Sept. 30 improved to 87.2% from 87.5% during the same nine months in 2014.

During a conference call Wednesday morning, Ace Chairman and CEO Evan Greenberg expressed satisfaction with the results, saying “underwriting results were simply excellent.” He also mentioned positive reserve development and relatively low catastrophe losses as affecting the insurer's performance. He pointed out, though that “foreign exchange continued to cast a shadow on the quarter”

He said that Ace is “on track” to get all necessary approvals to complete its acquisition of Chubb Corp. by early next year. “Very good progress” has been made in integrating the planning process of the two insurers, and Ace is “establishing teams to work on future growth initiatives,” he said.

Analysts liked what they saw, too. “Despite concerns regarding the Tianjin (China port explosion) loss, foreign exchange exposure and possible asbestos reserve additions, Ace reported a strong 3Q15,” Cliff Gallant, a San Francisco-based analyst at Nomura Securities International Inc., said in research note.

He reiterated his belief that the new Ace-Chubb combination, which will do business as Chubb, “will have industry-leading growth rates, a strong financial position and double-digit ROEs which we expect will warrant a premium valuation to peers.”

Meyer Shields, managing director at Keefe, Bruyette & Woods Inc. in Baltimore, cited “very strong core underwriting results for both Ace and Chubb.

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