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ACE Limited (ACE)

F1Q09 Earnings Call Transcript

April 29, 2009 at 8:30 am ET


Helen M. Wilson - Director, Investor Relations

Evan G. Greenberg - Chairman, Chief Executive Officer

Philip Bancroft - Chief Financial Officer

Brian Dowd - Chairman, ACE USA

John Keogh - Chief Executive Officer, Overseas General

Timothy Boroughs - Chief Investment Officer


Jay Gelb - Barclays Capital

Mark Lane with William Blair & Company

Matthew Heimermann - J.P. Morgan

Thomas Mitchell - Miller Tabak & Co., LLC

Newsome - Sandler O'Neal and Partners

Paul Newsome - Sandler O’Neill

Vinay Misquith - Credit Suisse

Brian Meredith - UBS

Ian Gutterman - Adage Capital

Matthew Heimermann - JPMorgan

Everett Gong - Riversource Investments

Thomas Mitchell - Miller Tabak & Co., LLC



Good day and welcome to ACE Limited first quarter 2009 earnings conference call. Today’s call is being recorded.(Operator Instructions)

For opening remarks and introductions, I would like to turn the call over to Helen Wilson, Investor Relations. Please go ahead, ma'am.

Helen M. Wilson

Thank you and welcome to the ACE Limited March 31, 2009 first quarter earnings conference call.

Our report today will contain forward-looking statements. These include statements relating to our financial outlook and guidance, business strategies and processes, competition, growth prospects, investment and use of capital, general economic and insurance industry conditions, a stock price in the capital market, pricing and exposures, losses and reserves, all of which are subject to risks and uncertainty. Actual results may defer maturely. Please refer to our most SEC filing as well as or earnings press release and financial supplement which are available on our website for more information on classes that could affect these matters. This call is being webcast live and will be available for replay for one month. Over March, May during the call are current at the time of the call and will not be updated to reflect subsequent material developments.

So I would like to introduce our speakers. First, we have Evan G. Greenberg, Chairman and Chief Executive Officer; Philip Bancroft, Chief Financial Officer; and Tim Boroughs, our Chief Investment Officer. They will take your questions. Also with us to assist with your questions are several members of our management team.

Now it is my pleasure to turn the call over to Evan.

Evan G. Greenberg

Good morning. ACE had a very good first quarter, strong start to 2009. Overall, our company is in good shape and our performance was steady. We are, of course, operating in a deep global recession and the financial markets remained difficult. That means a challenging environment for all business including insurers. There was some improvement in both debt and equity market conditions in the latter part of the quarter, and time will tell if this improvement, particular in equity markets is transient.

That depends on the future state of the US and global economy which in my judgment is in turn dependent to a large degree on the health of bank balance sheets and financial markets particularly in the US and Europe.

Ace’s financial results in the quarter both in operating and net income basis were quite good, with all the visions of the company making a positive contribution to results. After tax operating income in the quarter, $669 million or about $99 a share while net income in the period was $567 million.

Book value grew in the quarter, up about 2%. We continued to be impacted but to a much lesser degree by credit spreads and equity prices. Our PNC combined ratio for the quarter was 87.5%, simply an excellent result. We benefited modestly from prior period development, short-tailed related and this includes a prior year crop insurance adjustment that was positive but much less so than ‘08s first quarter. While there were a number of natural catastrophes in the first quarter around the globe, our CAT losses were within expectations at approximately $36 million after tax. That investment income was up modesty over prior year but below 4th quarter. Investment income was impacted by both a more defensive investment posture adopted in the 4th quarter and foreign exchange. So when Tim Boroughs, our Chief Investment Officer will speak more about that. But let me simply said it, we’re adjusting the tactics around our investment strategy again having gained a bit more visibility and will be putting to work in the 2nd quarter, much of the cash built up by our portfolio managers.

Our balance sheet is in good shape and in my judgment, our capital position is strong. Our return-on-equity was about 18.4%.

I want to make a few comments about the growth pricing and the market environment. Total (??) net written premiums were up 9% and adjusting to the negative impact of foreign exchange were up approximately 15%, a pretty good performance given global recession and pricing conditions. Keep in mind we continue to benefit from the combined insurance acquisition which again improved our growth rate this quarter.

Our PNC businesses, both insurance and re-insurance grew in the period. This was the first time our global PNC re-insurance business has grown since 2006. The net premium is up 4% over prior year. In fact, on a 3-year basis, our re-insurance premiums were up 23% year to date through April and this will show up in future quarter growth rates. For re-insurance, growth was due to a combination for firming prices, particularly in the North America and Bermuda markets, as well as companies purchasing additional re-insurance due to capital management requirements. In the US, we saw rates for most lines in particular risk property move up about 5% to 10%. In Bermuda, we also saw prices improved with CAT-related lines up 7.5% to 15% for US business and flat up to 7.5% for international business.

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