) beat the Zacks Consensus Estimate of earnings in the second
quarter as expected, and maintained the positive surprise streak.
The property & casualty (P&C) insurer delivered operating
earnings of $2.42 per share, outperforming the expectation by 8%
and improving 5.7% year over year.
Including net realized losses, net of tax, of 14 cents per share,
ACE Limited reported net income of $2.28 per share, down 12% year¬
Solid underwriting performances coupled with improved investment
results aided the better-than-expected results. Premium revenue
witnessed global improvement.
Gross premiums written by ACE Limited in the second quarter were $6
billion, down 0.4% year over year. Net premiums earned improved
6.5% year over year to $4.3 billion.
Net investment income totaled $556 million, up 4.2% year over year
driven by sturdy growth in invested assets.
Underwriting income at ACE Limited was $478 million, up 10% year
over year on the back of solid current accident year underwriting
income coupled with margin expansion in international business.
Combined ratio improved 20 basis points (bps) year over year to
Insurance-North American P&C
: The segment recorded 8% year-over-year growth in net earned
premium in the quarter. Operating income rose 10.9% to $378
Combined ratio improved 50 bps to 87.1%.
Insurance-North American Agriculture
: Net earned premium declined 6% to $330 million. Operating income
declined 27% to $19 million.
Combined ratio deteriorated 190 bps to 91.8%.
: Net premiums earned in the quarter improved 9.3% year over year.
Operating income was $282 million, up 10% year over year.
Combined ratio was 87.1%, reflecting an improvement of 110 bps year
: Net premiums increased nearly 6.5% year over year. Operating
income of $146 million declined 6% on a yearly basis.
Combined ratio deteriorated 770 bps to 69.9%.
: Net premiums earned increased 2.1% from the year-ago quarter.
Operating income declined 5.3% year over year to $72 million.
ACE Limited exited the quarter with cash of $594 million, up 2.6%
from the 2013-end level.
Book value per share, as of Jun 30, 2014, was $90.19, up 6.3% from
$84.43 as of Dec 31, 2013.
Operating cash flow was $846 million in the reported quarter.
Operating return on equity was 11.8%.
Share Repurchase Update
ACE Limited spent $237 million to buy back 2.3 million shares in
the quarter. The company has spent about $699 million to repurchase
7.1 million shares since the inception of the share repurchase
authorization in Nov 2013 through Jul 21, 2014.
ACE Limited has consistently impressed with its bottom-line
The company continues to benefit from an improving commercial
P&C pricing environment in the U.S., enjoying another quarter
of rate increase.
Its inorganic story also looks good with continued acquisitions.
With majority stake in The Siam Commercial Samaggi Insurance PCL, a
general insurance company in Thailand, it is now the largest
foreign-owned P&C insurer there. It is also expanding in Brazil
with the buyout of Itau Seguros SA, the P&C insurance unit of
Itaú Unibanco S.A
) one of the largest private banks in Brazil.
In addition, the company remains committed toward returning value
to its shareholders. Aside from increasing its quarterly dividend
by 3%, ACE Limited continues to buy back shares.
The company also scores strongly with the credit rating agencies.
ACE Limited currently carries a Zacks Rank #2 (Buy).
Performance by other P&Cs Insurers
) posted operating earnings of 66 cents per share in the second
quarter, in line with the Zacks Consensus Estimate. Earnings
improved 4.8% year over year. The improvement came on the
back of top-line growth driven by higher premiums and investment
Higher-than-expected catastrophe losses affected
The Travelers Companies Inc.'
) operating earnings of $1.93 per share, which missed the
Zacks Consensus Estimate by 13 cents and declined 9.4% year over
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