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ACE Limited (ACE)

Q2 2012 Earnings Call

July 25, 2012 08:30 AM ET


Helen Wilson - IR

Evan Greenberg - Chairman, President & CEO

Phil Bancroft - CFO

Brian Dowd - Chairman, Insurance – North America & Vice Chairman, ACE

John Keogh - Vice Chairman & COO

Sean Ringsted - Chief Risk Officer & Chief Actuary


Amit Kumar - Macquarie

Matt Heimermann - JPMorgan

Michael Nannizzi - Goldman Sachs

Greg Locraft - Morgan Stanley

Mike Zaremski - Credit Suisse

Vinay Misquith - Evercore Partners

Larry Greenberg - Langen McAlenney

Jay Cohen - Bank of America/Merrill Lynch

Joshua Stirling - Sanford Bernstein

Brian Meredith - UBS

Thomas Mitchell - Miller Tabak

Paul Newsome - Sandler O'Neill

Josh Shanker - Deutsche Bank

Meyer Shields - Stifel Nicolaus

Ian Gutterman - Adage Capital



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Good day and welcome to the ACE Limited Second Quarter 2012 Earnings Conference Call. (Operator Instructions). For opening remarks and introductions, I would like to turn the call over to Helen Wilson, Investor Relations. Please go ahead.

Helen Wilson - IR

Thank you and welcome to the ACE Limited June 30, 2012, second quarter earnings conference call. Our report today will contain forward-looking statements. These include statements relating to Company performance, guidance, premium growth, ACE's business mix and acquisition, impact of catastrophes and droughts and pricing and insurance market conditions, all of which are subject to risks and uncertainties. Actual results may differ materially.

Please refer to our most recent SEC filings as well as our earnings press release and financial supplement, which are available on our website, for more information on factors that could affect these matters. This call is being webcast live and the webcast replay will be available for one month. All remarks made during the call are current at the time of the call and will not be updated to reflect subsequent material developments.

Now, I'd like to introduce our speakers. First, we have Evan Greenberg, Chairman and Chief Executive Officer, followed by Phil Bancroft, our Chief Financial Officer. Then, we'll take your questions. Also, with us to assist with your questions are several members of our management team.

Now, it's my pleasure to turn the call over to Evan.

Evan Greenberg

Good morning. ACE had a very good second quarter marked by excellent operating earnings, strong broad-based premium revenue growth and an improving P&C pricing environment in a number of areas of the world. Book value growth was up modestly in the quarter, as we were impacted by the euro debt crisis and the consequence like to safety which affected foreign exchange and interest rates and equity markets. After-tax operating income for the quarter was 743 million were 2.17 per share, our operating ROE was over 12.5%, for the first six months we have produced almost a 1.5 billion in operating income and an ROE again of 12.5%.

All the visions of the company made a positive contribution to the quarter’s results, our underwriting results this quarter were again outstanding as illustrated by a P&C combined ratio of 88.7. The strong calendar year results benefited from both favorable current accident year experienced and positive prior period reserve development.

The current accident year results were excellent both with and without the impact of cat losses which were relatively light this quarter at 55 million pretax. ACE’s underwriting performance has been consistently strong over the year with over 890 million in underwriting income and a combined ratio of about 89% for the first six months.

Investment income held up pretty well in the quarter, it was down only modestly despite the historic low interest rate environment. The strong operating fundamentals contributed to book value growth of 1.3% in the quarter that was impacted by mark to market losses and for financial markets and foreign exchange movements.

Book value was up almost 6% year-to-date, Bill will have more to say about the markets impact on our investment portfolio, the VA mark and foreign exchange. We announced a small but important acquisition last month Asuransi Jaya Proteksi, one of Indonesia’s top general insurers and a leader in personal lines. The company which has an extensive branch network and distribution system will complement our existing business and diversify our presence in Indonesia with a well-established personal lines franchise.

The transaction is expected to close later this year, ACE’s total company net premiums in the quarter grew 4.5%, or 6.5% adjusting for the impact of foreign exchange. Our growth in the quarter came primarily from three regions of the world, North America, Asia, and Latin America.

North America grew over 7% in the quarter or approximately 10% excluding crop insurance. We had excellent growth in commercial P&C both retail and wholesale as well as personal lines. In Asia, and Latin America we were up 16% and 23% respectively, with strong contributions from P&C, A&H and personal lines which all grew at double digit rates in original currency. Growth in Europe in the UK on the other hand was flat due to both market and economic conditions.

In North America some of the product lines where we saw our best growth were in primary risk management business which was up 9%, retail, general and specialty causality lines of business and aggregate which were up 11% and property which was up 27%. Our U.S. E&S wholesale business was up 24% led by property which was up 37%, our high net worth personal lines business in the U.S. was up 15 points.

In our international business, property was up double digit in Latin America and Asia as was marine while energy related classes in aggregate were up double digit globally. A&H growth globally picked up in the quarter as expected and this trend should continue for the balance of the year. A&H premiums excluding combined were up about 9% globally in constant dollars.

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