Bloomberg News

Ace Has Third-Quarter Loss of $31 Million on Annuity Charge

October 25, 2011

(Updates with forecast starting in first paragraph, book value and disaster costs in eighth.)

Oct. 25 (Bloomberg) -- Ace Ltd., the Swiss insurer operating in more than 50 countries, had a third-quarter loss of $31 million on a charge tied to variable-annuity reinsurance. Ace increased its forecast for full-year operating profit.

The net loss was 9 cents a share compared with profit of $675 million, or $1.97, a year earlier, the Zurich-based company said today in a statement. Operating profit, which excludes some investment results, was $2.22 a share, beating the $1.78 average estimate of 20 analysts surveyed by Bloomberg.

The variable-annuity business net loss was $660 million, Ace said. Chairman and Chief Executive Officer Evan Greenberg has been diversifying risk by expanding through acquisitions in countries including Malaysia and South Korea and adding business lines such as crop insurance.

“As a result of an historic drop in interest rates -- the lowest level in over 100 years -- and an equity market correction driven by Federal Reserve action and a flight to safety by investors, we incurred a substantial charge,” Greenberg said in the statement.

Ace declined $1.57, or 2.2 percent, to $69 in regular trading today on the New York Stock Exchange. It has gained about 11 percent this year, compared with the 8 percent decline in the Bloomberg World Insurance Index.

Ace Boosts Forecast

The insurer raised its forecast for 2011 operating profit to a range of $6.55 to $6.75 from $6 to $6.20 given in July. Book value, a measure of assets minus liabilities, declined to $70.60 a share from $71.36 as of June 30.

Ace had its first unprofitable period since posting a net loss of $112 million for the third quarter of 2005 when Hurricanes Katrina and Rita slammed the U.S. Gulf Coast.

Ace earned 9.7 cents for every dollar of premium from property and casualty customers in the quarter, down from 11.6 cents a year earlier. The pretax cost from natural disasters rose 25 percent to $121 million from $97 million in last year’s third quarter.

Chubb Corp. and Travelers Cos., which rely more on U.S. property and casualty coverage, reported profit declines on losses from Hurricane Irene, which lashed states from North Carolina to Vermont. Chubb’s net income plunged 48 percent and Travelers had a 67 percent decline in third-quarter profit.

--Editors: Dan Kraut, Dan Reichl

To contact the reporter on this story: Maryellen Tighe in New York at mtighe6@bloomberg.net

To contact the editor responsible for this story: Dan Kraut at dkraut2@bloomberg.net


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