) reported third-quarter 2013 operating net income of $2.49 per
share, beating the Zacks Consensus Estimate of $2.21 by 12.7%.
Results also improved 23.9% from $2.01 earned per share in the
year-ago quarter. Operating income was $857 million, up 24.6%
year over year.
Solid underwriting performances aided the better-than-expected
results. Absence of any significant cat activities aided the
upside. Both the North American and international business
operations experienced growth and better margins. While North
America benefited from better pricing and mix of business,
international business improved on the back of better product and
geographic mix. ACE Limited also gained on account of improved
commercial property & casualty (P&C) pricing environment.
Including net realized gains, net of tax, of $59 million or 17
cents per share, ACE Limited reported net income of $916 million
or $2.66 per share, which compared favorably with $640 million or
$1.86 cents per share in the prior-year quarter. ACE Limited had
registered net realized loss, net of tax, of $48 million or 15
cents per share in the third quarter of 2012.
Gross premiums written by ACE Limited in the second quarter were
$6.37 billion, up 6.1% year over year.
Net premiums earned declined 1.2% year over year to $4.62 billion
in the quarter.
Net investment income in the quarter totaled $522 million, down
2.1% year over year, largely due to lower reinvestment rates,
lower private equity distributions, and the adverse impact of
Underwriting income at ACE Limited was $576 million, surging 60%
year over year.
P&C combined ratio improved 550 basis points (bps) year over
year to 86.5%. Total after-tax catastrophe losses including
reinstatement premiums were $70 million, compared with $10
million in the year-ago quarter.
Insurance-North American P&C:
The segment recorded 10.6% year-over-year growth in net earned
premium in the quarter.
Operating income increased 8.6% from the year-ago quarter to $342
Combined ratio deteriorated 300 basis points to 88.3% in the
quarter under review.
Insurance-North American Agriculture
: Net earned premium declined 27.2% year over year.
Operating income was $50 million, rebounding from a loss of $92
million incurred in the year-ago period.
Combined ratio improved 1950 bps to 89.9% in the quarter.
: Net premiums earned in the quarter improved 12.5% year over
Operating income was $320 million, up nearly 6% from the year-ago
Combined ratio was 88.2%, improving 50 bps year over year.
: Net premiums earned increased 14.9% year over year to $239
Operating income was $131 million, up 5.8% year over year.
Combined ratio improved 690 bps to 65.8% in the quarter.
: Net premiums earned increased 2.7% from the year-ago quarter to
Operating income decreased 13.8% year over year to $76 million.
ACE Limited exited the quarter with cash of $768 million, up
24.9% from the 2012-end level.
Book value per share, as of Sep 30, 2013, was $82.98, up 2.6%
from $80.90 as of Dec 31, 2012.
Operating cash flow was $928 million in the third quarter of
Return on equity was 13% in the reported quarter.
2013 Guidance Raised
ACE Limited guided operating earnings at a band of $8.65-$8.90
per share, up from $7.65-$8.05 guided earlier. The revision came
on the heels of a positive prior-period reserve development,
lower-than-expected catastrophe losses, and better current
accident year results excluding cat losses in the third quarter.
The guidance includes estimated catastrophe loss of $95 million
for the fourth quarter.
Performance of other Property and Casualty
) reported third-quarter 2013 operating earnings of $1.40 per
share. The result surpassed both the Zacks Consensus Estimate of
95 cents by 47% as well as the year-ago figure of $1.02 by 37.2%.
The year-over-year improvement came on the back of better
underwriting results in the Property and Casualty segments.
W.R. Berkley Corp.
) reported third-quarter core operating earnings of 77 cents per
share, 5 cents ahead of the Zacks Consensus Estimate. Earnings
were also up 26.2% year over year. W.R. Berkley's earnings beat
came on the back of higher premium written, pricing gains and a
lower share count.
The Travelers Companies Inc
) reported operating net earnings of $2.35 per share in the third
quarter of 2013, surpassing the Zacks Consensus Estimate of $1.99
per share. Moreover, results improved 5.9% from $2.22 per share
in the year-ago quarter. The outperformance was driven by
improvement in underlying underwriting gains and lower share
ACE Limited has successfully maintained the trend of delivering
positive earnings surprises. The reported quarter marked the
fifth consecutive one rendering a positive surprise.
ACE Limited continues to benefit from better commercial P&C
pricing environment in the U.S., enjoying another quarter of rate
increase. Its inorganic story seems impressive with suitable
acquisitions in its pipeline. ACE Limited expects the
acquisitions to meet or exceed its long-term return on equity
(ROE) goal of 15% within 2-3 years.
It also remains committed to return value to its shareholders.
ACE Limited also remains focused on launching products to
strengthen its portfolio. We are optimistic that all these
efforts will strengthen ACE Limited's position going forward.
ACE Limited currently carries a Zacks Rank #1 (Strong Buy).
ACE LIMITED (ACE): Free Stock Analysis Report
RLI CORP (RLI): Free Stock Analysis Report
TRAVELERS COS (TRV): Free Stock Analysis
BERKLEY (WR) CP (WRB): Free Stock Analysis
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