) reported first-quarter 2013 operating income of $2.17 per
share, up 24 cents from the Zacks Consensus Estimate. Results
improved 5.8% from $2.05 earned in the year-ago quarter.
Operating income was $746 million, up 7% from $701 million in the
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Solid underwriting performances aided the better-than-expected
results. Both the U.S. and international business operations
experienced growth and better margins. ACE Limited also benefited
from improved commercial property & casualty (P&C)
Including net realized gains, net of tax, of $207 million or 60
cents per share, ACE Limited reported net income of $953 million
or $2.77 per share in the reported quarter, which compared
unfavorably with $973 million or $2.84 per share in the
prior-year quarter. ACE Limited registered net realized gains,
net of tax, of $272 million or 79 cents per share in the first
quarter of 2012.
Gross premiums written by ACE Limited in the first quarter were
$4.96 billion, up 3.7% year over year.
Net premiums earned improved 5.7% year over year to $3.57 billion
in the quarter.
Net investment income in the quarter totaled $531 million, down
2.4% year over year largely due to lower reinvestment rates.
Underwriting income at ACE Limited was $388 million in first
quarter 2013, up 14.8% year over year.
P&C combined ratio improved 100 basis points (bps) year over
year to 88.2% in the quarter. Total after-tax catastrophe losses
including reinstatement premiums were $28 million, compared with
$14 million in the year-ago quarter.
Effective from the first quarter of 2013, the North American
segment of ACE Limited was split into two separate reporting
segments: Insurance - North American P&C and Insurance -
North American Agriculture.
Insurance-North American P&C
: The segment recorded an 8.9% year-over-year improvement in net
earned premium in the quarter.
Operating income increased 16.8% year over year to $361 million
in the quarter under review.
Combined ratio improved by 370 basis points to 85.7% in the
Insurance-North American Agriculture
: Net earned premium in the quarter declined 5% year over year.
Operating income was $7 million, plunged 72% from $25 million in
the year-ago period.
Combined ratio deteriorated 3650 basis points to 79.3% in the
: Net premiums earned in the quarter improved 6% year over year.
Operating income was $239 million in the quarter, up 11.7% from
the year-ago quarter.
Combined ratio was 90.6%, up 60 bps from the prior-year quarter.
: Net premiums earned increased 7.4% year over year in the
quarter under review.
Operating income was $144 million, up 5.1% from $137 million in
the year-ago period.
Combined ratio improved 100 basis points to 67.3% in the quarter.
: Net premiums earned during the reported quarter inched up 0.8%
year over year.
Operating income decreased 16.7% year over year to $70 million.
ACE Limited exited the quarter with cash of $855 million, up 39%
from the 2012-end level.
Book value per share, as of Mar 31, 2013, was $82.17, up 1.6%
from $80.90 as of Dec 31, 2012.
Operating cash flow was $913 million for the first quarter of
Return on equity was 11.9% in the reported quarter.
Share Repurchase Update
ACE Limited spent $154 million to buy back 1.8 million shares in
the reported quarter.
2013 Guidance Updated
ACE Limited guided operating earnings to a band of $7.10-$7.50
per share, up from $6.60-$7.00 guided earlier. The revision came
on the heels of a positive first-quarter prior period reserve
development, lower-than-planned catastrophe losses realized in
the first quarter and better-than-expected current accident year
results excluding catastrophe losses. The guidance includes
catastrophe loss of $330 million for the remainder of the year.
Other Property and Casualty Insurers
) reported first-quarter 2013 operating earnings of $1.04 per
share. The result lagged the Zacks Consensus Estimate of $1.06 by
1.89% but surpassed the year-ago level of 96 cents by 8.3%.
The year-over-year improvement came on the back of better
underwriting results at Casualty and Surety.
Revenues in the quarter under review totaled $160.7 million,
declining 2% from $164.0 million in the prior-year quarter,
attributable to lower Investment income and decline in net
realized investment gains. Revenues fell short of the Zacks
Consensus Estimate by 4.7%.
ACE Limited has successfully maintained the trend of delivering
positive earnings surprise. The reported quarter marked the third
consecutive quarter of positive surprises.
The company continues to benefit from better commercial P&C
pricing environment in the U.S. It is also leveraging its solid
footprint in Asia and Latin America to capitalize on the
ACE Limited continues to expand its international footprint with
acquisitions in Mexico. It expects to close the ABA Seguros from
Ally Financial Inc. shortly. ABA Seguros, the sixth-largest
P&C insurer in Mexico, will likely strengthen its personal
lines and agency businesses. ACE closed the acquisition of
Fianzas Monterrey, thereby expanding its surety business in
Mexico. ACE Limited expects the acquisitions to meet or exceed
its long-term return on equity (ROE) goal of 15% within 2-3
It also launched a $95 million special purpose vehicle- Altair
Re, to strengthen its global reinsurance business. Further, ACE
USA introduced a Foreign Casualty Pollution Liability coverage
endorsement. ACE came up with this coverage option to provide
insurance and risk management solutions to the globally operating
mid-sized and large-scale multinational companies located in the
All these efforts strengthen ACE Limited's position going
ACE Limited remains focused on enhancing its earnings, ROE and
book value per share. The board of directors will propose a
4% increase in the quarterly dividend at the extraordinary
general meeting scheduled on May 16, 2013.
ACE Limited currently carries a Zacks Rank #2 (Buy). Among other
property & casualty insurers
Montpelier Re Holdings Ltd.
) carrying a favorable Zacks Rank #1 (Strong Buy) and
W.R. Berkley Corporation
) carrying a Zacks Rank #2 will report their results shortly.