UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
Current Report
Pursuant To Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) July 24, 2012
ACE LIMITED
(Exact name of registrant as specified in its charter)
Switzerland | 1-11778 | 98-0091805 | ||
(State or other jurisdiction of Incorporation) |
(Commission File Number) |
(I.R.S. Employer Identification No.) |
Baerengasse 32
CH-8001 Zurich, Switzerland
Telephone: +41 (0)43 456 76 00
(Address of principal executive offices)
Not applicable
(Former name or former address, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
¨ | Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) |
¨ | Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) |
¨ | Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-(b)) |
¨ | Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) |
Item 2.02. Results of Operations and Financial Condition
On July 24, 2012, ACE Limited issued a press release reporting its second quarter 2012 results and the availability of its second quarter 2012 Financial Supplement. The Press Release and the Financial Supplement are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and are hereby incorporated herein by reference.
Item 9.01. Financial Statements, Pro Forma Financial Information and Exhibits
(c) | Exhibits |
Exhibit |
Description | |
99.1 | Press Release, Dated July 24, 2012, Reporting Second Quarter 2012 Results | |
99.2 | Second Quarter 2012 Financial Supplement |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
ACE LIMITED | ||
By: | /s/ Philip V. Bancroft | |
Philip V. Bancroft Chief Financial Officer |
DATE: July 24, 2012
EXHIBIT INDEX
Number |
Description |
Method of Filing | ||
99.1 |
Press Release, Dated July 24, 2012, | Furnished herewith | ||
Reporting Second Quarter 2012 Results | ||||
99.2 |
Second Quarter 2012 Financial Supplement | Furnished herewith |
Exhibit 99.1
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ACE Limited Bärengasse 32 CH-8001 Zurich Switzerland |
+41 (0)43 456 76 00 main +41 (0)43 456 76 01 fax www.acegroup.com |
Investor Contact: | Helen M. Wilson | |||||
(441) 299-9283 | ||||||
helen.wilson@acegroup.com | ||||||
Media Contact: | Stephen M. Wasdick | |||||
(212) 827-4444 | ||||||
stephen.wasdick@acegroup.com |
ACE REPORTS SECOND QUARTER OPERATING INCOME OF $743 MILLION AND
COMBINED RATIO OF 88.7% DRIVEN BY STRONG
CURRENT ACCIDENT YEAR UNDERWRITING RESULTS AND LOW
CATASTROPHE LOSSES
| Operating return on equity of 12.6% |
| Total net premiums written up 4.5%; up 6.5% in constant dollars |
| Year-to-date net income and operating income both up over 50% |
| Book value up 1.3% for the quarter, 5.9% for the year |
| Full-year guidance, updated for year-to-date results and crop insurance impact, is now $7.20 - $7.60 per share in after-tax operating income |
ZURICH July 24, 2012 ACE Limited (NYSE: ACE) today reported net income for the quarter ended June 30, 2012, of $0.96 per share, compared with $1.74 per share for the same quarter last year.(1) Income excluding net realized gains (losses) was $2.17 per share, compared with $1.97 per share for the same quarter last year.(2) Book value and tangible book value increased 1.3% and 1.8%, respectively, from March 31, 2012. Book value and tangible book value per share now stand at $75.98 and $61.75, respectively. Annualized operating return on equity for the quarter was 12.6%.(2) The property and casualty (P&C) combined ratio for the quarter was 88.7%.
Second Quarter Summary
(in millions, except per share amounts)
(Unaudited)
(Per Share - Diluted) | ||||||||||||||||||||||||
2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||||||||||
Net income |
$ | 328 | $ | 594 | (45 | )% | $ | 0.96 | $ | 1.74 | (45 | )% | ||||||||||||
Net realized gains (losses), net of tax |
(415 | ) | (79 | ) | NM | (1.21 | ) | (0.23 | ) | NM | ||||||||||||||
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Income excluding net realized gains (losses), net of tax (2) |
$ | 743 | $ | 673 | 10 | % | $ | 2.17 | $ | 1.97 | 10 | % | ||||||||||||
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For the six months ended June 30, 2012, net income was $3.80 per share, compared with $2.48 per share for 2011; income excluding net realized gains (losses) was $4.22 per share, compared with $2.74 per share for 2011. Book value increased $1.4 billion, up 5.9% from December 31, 2011, and tangible book value increased $1.4 billion, up 7.2%. The P&C combined ratio for the six months ended June 30, 2012, was 88.9%.
Six Months Ended Summary
(in millions, except per share amounts)
(Unaudited)
(Per Share - Diluted) | ||||||||||||||||||||||||
2012 | 2011 | Change | 2012 | 2011 | Change | |||||||||||||||||||
Net income |
$ | 1,301 | $ | 844 | 54 | % | $ | 3.80 | $ | 2.48 | 53 | % | ||||||||||||
Net realized gains (losses), net of tax |
(143 | ) | (88 | ) | 63 | % | (0.42 | ) | (0.26 | ) | 62 | % | ||||||||||||
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Income excluding net realized gains (losses), net of tax (2) |
$ | 1,444 | $ | 932 | 55 | % | $ | 4.22 | $ | 2.74 | 54 | % | ||||||||||||
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Evan G. Greenberg, Chairman and Chief Executive Officer of ACE Limited, commented: ACE had a very strong second quarter, with excellent operating results that were ahead of plan despite a challenging and slowing global economy. After-tax operating income was $743 million, up 10% from last year, and our operating ROE was 12.6%. Our underwriting results this quarter were again distinguishing, with a P&C combined ratio of 88.7%. ACEs operating performance has been strong all year with earnings for the first six months exceeding $1.4 billion or $4.22 per share. Book value, which grew 1.3% in the quarter and is up almost 6% for the year, was impacted by the eurozone debt crisis and the consequent flight to safety, which affected foreign exchange, interest rates and equity markets.
Total company net premiums written grew 4.5% in the quarter, or 6.5% adjusting for the impact of foreign exchange. As we said last quarter, our premium growth rate has been accelerating as the year progresses. We are benefiting from strong, broad-based growth, both geographic and product, along with an improving P&C price environment globally. For the first time, pricing in our international P&C operations in aggregate turned positive, whereas for our U.S. business, rates continued to rise, up 4.7% on average for the quarter.
Drought conditions in the U.S. are impacting our crop insurance business and will affect our earnings in the second half of the year as described in our updated guidance. Crop insurance aside, we are optimistic about our revenue and earnings prospects for the balance of the year and we are well positioned to take advantage of the positive trend in P&C prices globally. At the same time, we are mindful of the economic and political headwinds beginning with the eurozone crisis and the U.S. fiscal cliff, which are impacting economic conditions and business confidence in the U.S., China and the balance of the world and the uncertainties these present.
Page 2/9
Operating highlights for the quarter ended June 30, 2012, were as follows: (1)
| Total company net premiums written increased 4.5%. On a constant-dollar basis, total company net premiums written increased 6.5%. |
| P&C net premiums written increased 5.3%. On a constant-dollar basis, P&C net premiums written increased 7.4%. |
| P&C underwriting income was $374 million compared with $239 million in 2011. |
| The P&C combined ratio was 88.7% compared with 92.7% last year. |
| Favorable prior period development pre-tax was $113 million, representing 3.4 percentage points of the combined ratio, compared with $146 million last year. |
| Total pre-tax and after-tax catastrophe losses including reinstatement premiums were $55 million and $41 million, respectively, compared with $134 million and $101 million, respectively, in 2011. |
| The current accident year combined ratio excluding catastrophe losses was 90.4% compared with 93.1% last year. |
| The P&C expense ratio for the quarter was 29.2% compared with 29.6% last year. |
| Operating cash flow was $811 million for the quarter. |
| Net loss reserves increased $66 million in the quarter after adjusting for foreign exchange. |
| Net investment income for the quarter decreased 5.5% to $537 million due to lower new money rates and the negative impact of foreign exchange, partially offset by higher distributions from private equity funds. |
| Net realized losses from derivative accounting related to variable annuity reinsurance were $397 million. Year-to-date, the net loss is $121 million. |
| Foreign exchange had a negative impact in the quarter, reducing net income by $24 million and book value by $103 million. |
| Annualized operating return on equity was 12.6% for the quarter. (2) Annualized return on equity computed using net income was 5.1%. |
| Book value per share (2) increased 1.2% to $75.98 from $75.09 at March 31, 2012, and increased 5.2% from $72.22 at December 31, 2011. The book value amounts reflect the effects of new accounting guidance for deferred acquisition costs that is retroactively applied to periods prior to January 1, 2012. (3) |
| Tangible book value per share (2) increased 1.7% to $61.75 from $60.74 at March 31, 2012, and increased 6.5% from $57.97 at December 31, 2011. |
Details of financial results by business segment are available in the ACE Limited Financial Supplement. Key segment items for the quarter ended June 30, 2012, include:
| Insurance-North American: Net premiums written increased 7.2%. Adjusted for crop insurance, net premiums written increased 10.3%. The combined ratio was 89.2% compared with 95.1%. |
| Insurance-Overseas General: Net premiums written increased 2.2%. On a constant-dollar basis, net premiums written increased 6.7%. The combined ratio was 89.3% compared with 91.6%. |
| Global Reinsurance: Net premiums written increased 9.4%. On a constant-dollar basis, net premiums written increased 9.9%. The combined ratio was 66.1% compared with 67.9%. |
| Life: Operating income was $79 million compared with $88 million. |
Page 3/9
The company is updating guidance for full-year 2012. The range is now $7.20 to $7.60 per share in after-tax operating income for the year. First, the update reflects the positive prior period reserve development and lower-than-planned catastrophe losses in the first half of $0.74 per share. Second, the update includes a reduction of $0.19 per share to reflect a projected third quarter increase in the year-to-date crop insurance loss ratio. Finally, the update includes estimated catastrophe losses of $270 million after tax for the second half of the year. Guidance for the balance of the year is for the current accident year only.
Please refer to the ACE Limited Financial Supplement, dated June 30, 2012, which is posted on the companys website in the Investor Information section, and access Financial Reports for more detailed information on individual segment performance, together with additional disclosure on reinsurance recoverable, loss reserves, investment portfolio and capital structure.
ACE will host its second quarter earnings conference call and webcast on Wednesday, July 25, 2012, beginning at 8:30 a.m. Eastern. The earnings conference call will be available via live and archived webcast at www.acegroup.com or by dialing 888-516-2435 (within the United States) or 719-325-2339 (international); passcode 3462560. Please refer to the ACE Group website in the Investor Information section under Calendar of Events for details. A replay of the call will be available until Wednesday, August 8, 2012 and the archived webcast will be available for approximately one month. To listen to the replay, please dial 888-203-1112 (in the United States) or 719-457-0820 (international); passcode 3462560.
The ACE Group is one of the worlds largest multiline property and casualty insurers. With operations in 53 countries, ACE provides commercial and personal property and casualty insurance, personal accident and supplemental health insurance, reinsurance and life insurance to a diverse group of clients. ACE Limited, the parent company of the ACE Group, is listed on the New York Stock Exchange (NYSE: ACE) and is a component of the S&P 500 index. Additional information can be found at: www.acegroup.com.
Page 4/9
(1) | All comparisons are with the same period last year unless specifically stated. |
(2) | Non-GAAP Financial Measures: |
Operating income or income excluding net realized gains (losses), net of tax is a common performance measurement for insurance companies. We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business. We exclude net realized gains (losses) and net realized gains (losses) included in other income (expense) related to partially-owned entities because the amount of these gains (losses) is heavily influenced by, and fluctuates in part according to, the availability of market opportunities.
Underwriting income is calculated by subtracting losses and loss expenses, policy benefits, policy acquisition costs and administrative expenses from net premiums earned. We use underwriting income and operating ratios to monitor the results of our operations without the impact of certain factors, including net investment income, other income (expense), interest and income tax expense and net realized gains (losses). Life underwriting income includes net investment income and gains (losses) from fair value changes in separate account assets that do not qualify for separate account reporting under generally accepted accounting principles (GAAP). P&C underwriting income and consolidated underwriting income are non-GAAP financial measures. We believe the use of these measures enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business.
Annualized operating return on equity (ROE) or annualized ROE calculated using income excluding net realized gains (losses) is a non-GAAP financial measure. The ROE numerator includes income adjusted to exclude net realized gains (losses), net of tax. The ROE denominator includes the average shareholders equity for the period adjusted to exclude unrealized gains (losses) on investments, net of tax. To annualize a quarterly rate, multiply by four. Annualized ROE calculated using income excluding realized gains (losses) is a useful measure as it enhances the understanding of the return on shareholders equity by highlighting the underlying profitability relative to shareholders equity excluding the effect of unrealized gains and losses on our investments.
Book value per common share is shareholders equity divided by the shares outstanding.
Tangible book value per common share is shareholders equity less goodwill and other intangible assets divided by the shares outstanding.
See reconciliation of Non-GAAP Financial Measures on pages 21-22 in the Financial Supplement. These measures should not be viewed as a substitute for net income, return on equity, or effective tax rate determined in accordance with GAAP.
(3) | Refer to the Financial Supplement page 1 for further detail. |
NM not meaningful comparison
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Cautionary Statement Regarding Forward-Looking Statements:
Forward-looking statements made in this press release, such as those related to company performance and guidance, economic outlook and insurance market conditions, reflect our current views with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that could cause actual results to differ materially, including without limitation, the following: competition, pricing and policy term trends, the levels of new and renewal business achieved, the frequency of unpredictable catastrophic events, actual loss experience, uncertainties in the reserving or settlement process, integration activities and performance of acquired companies, new theories of liability, judicial, legislative, regulatory and other governmental developments, litigation tactics and developments, investigation developments and actual settlement terms, the amount and timing of reinsurance recoverable, credit developments among reinsurers, rating agency action, possible terrorism or the outbreak and effects of war, and economic, political, regulatory, insurance and reinsurance business conditions, as well as managements response to these factors, and other factors identified in our filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
(tables to follow)
Page 6/9
ACE Limited
Summary Consolidated Balance Sheets
(in millions of U.S. dollars, except per share data)
(Unaudited)
June 30 2012 |
December 31 2011 |
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Assets |
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Investments |
$ | 57,681 | $ | 55,676 | ||||
Cash |
617 | 614 | ||||||
Insurance and reinsurance balances receivable |
4,985 | 4,387 | ||||||
Reinsurance recoverable on losses and loss expenses |
11,752 | 12,389 | ||||||
Other assets |
15,666 | 14,255 | ||||||
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Total assets |
$ | 90,701 | $ | 87,321 | ||||
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Liabilities |
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Unpaid losses and loss expenses |
$ | 36,850 | $ | 37,477 | ||||
Unearned premiums |
7,044 | 6,334 | ||||||
Other liabilities |
21,045 | 19,178 | ||||||
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Total liabilities |
64,939 | 62,989 | ||||||
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Shareholders equity |
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Total shareholders equity |
25,762 | 24,332 | ||||||
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Total liabilities and shareholders equity |
$ | 90,701 | $ | 87,321 | ||||
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Book value per common share (2) |
$ | 75.98 | $ | 72.22 |
Page 7/9
ACE Limited
Summary Consolidated Financial Data
(in millions of U.S. dollars, except share, per share data, and ratios)
(Unaudited)
Three Months Ended June 30 |
Six Months Ended June 30 |
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2012 | 2011 | 2012 | 2011 | |||||||||||||
Gross premiums written |
$ | 5,653 | $ | 5,423 | $ | 10,440 | $ | 10,067 | ||||||||
Net premiums written |
4,130 | 3,953 | 7,702 | 7,399 | ||||||||||||
Net premiums earned |
3,783 | 3,757 | 7,164 | 7,066 | ||||||||||||
Losses and loss expenses |
2,119 | 2,226 | 3,923 | 4,489 | ||||||||||||
Policy benefits |
102 | 108 | 249 | 199 | ||||||||||||
Policy acquisition costs |
619 | 612 | 1,201 | 1,171 | ||||||||||||
Administrative expenses |
514 | 518 | 1,024 | 1,017 | ||||||||||||
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Underwriting income (2) |
429 | 293 | 767 | 190 | ||||||||||||
Net investment income |
537 | 569 | 1,081 | 1,113 | ||||||||||||
Net realized gains (losses) |
(394 | ) | (73 | ) | (134 | ) | (118 | ) | ||||||||
Interest expense |
62 | 62 | 124 | 125 | ||||||||||||
Other income (expense): |
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Gains (losses) from separate account assets (2) |
(14 | ) | | 4 | | |||||||||||
Other |
(20 | ) | (12 | ) | (35 | ) | 1 | |||||||||
Income tax expense |
148 | 121 | 258 | 217 | ||||||||||||
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Net income |
$ | 328 | $ | 594 | $ | 1,301 | $ | 844 | ||||||||
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Diluted earnings per share: |
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Income excluding net realized gains (losses) (2) |
$ | 2.17 | $ | 1.97 | $ | 4.22 | $ | 2.74 | ||||||||
Net income |
$ | 0.96 | $ | 1.74 | $ | 3.80 | $ | 2.48 | ||||||||
Weighted average diluted shares outstanding |
342.7 | 341.7 | 342.2 | 340.6 | ||||||||||||
Loss and loss expense ratio |
59.5 | % | 63.1 | % | 58.3 | % | 68.1 | % | ||||||||
Policy acquisition cost ratio |
16.1 | % | 16.1 | % | 16.7 | % | 16.3 | % | ||||||||
Administrative expense ratio |
13.1 | % | 13.5 | % | 13.9 | % | 14.1 | % | ||||||||
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Combined ratio |
88.7 | % | 92.7 | % | 88.9 | % | 98.5 | % | ||||||||
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ACE Limited
Consolidated Supplemental Segment Information
(in millions of U.S. dollars)
(Unaudited)
Three Months Ended June 30 |
Six Months Ended June 30 |
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2012 | 2011 | 2012 | 2011 | |||||||||||||
Gross Premiums Written |
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Insurance - North American |
$ | 2,856 | $ | 2,714 | $ | 4,868 | $ | 4,672 | ||||||||
Insurance - Overseas General |
1,952 | 1,898 | 3,936 | 3,806 | ||||||||||||
Global Reinsurance |
332 | 298 | 611 | 628 | ||||||||||||
Life |
513 | 513 | 1,025 | 961 | ||||||||||||
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Total |
$ | 5,653 | $ | 5,423 | $ | 10,440 | $ | 10,067 | ||||||||
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Net Premiums Written |
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Insurance - North American |
$ | 1,860 | $ | 1,735 | $ | 3,153 | $ | 3,020 | ||||||||
Insurance - Overseas General |
1,475 | 1,443 | 3,003 | 2,853 | ||||||||||||
Global Reinsurance |
309 | 282 | 572 | 597 | ||||||||||||
Life |
486 | 493 | 974 | 929 | ||||||||||||
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Total |
$ | 4,130 | $ | 3,953 | $ | 7,702 | $ | 7,399 | ||||||||
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Net Premiums Earned |
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Insurance - North American |
$ | 1,652 | $ | 1,604 | $ | 2,939 | $ | 2,950 | ||||||||
Insurance - Overseas General |
1,420 | 1,415 | 2,811 | 2,693 | ||||||||||||
Global Reinsurance |
237 | 254 | 467 | 514 | ||||||||||||
Life |
474 | 484 | 947 | 909 | ||||||||||||
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Total |
$ | 3,783 | $ | 3,757 | $ | 7,164 | $ | 7,066 | ||||||||
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Income Excluding Net Realized Gains (Losses) (2) |
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Insurance - North American |
$ | 335 | $ | 282 | $ | 669 | $ | 545 | ||||||||
Insurance - Overseas General |
232 | 221 | 446 | 230 | ||||||||||||
Global Reinsurance |
149 | 144 | 286 | 131 | ||||||||||||
Life |
79 | 88 | 163 | 156 | ||||||||||||
Corporate |
(52 | ) | (62 | ) | (120 | ) | (130 | ) | ||||||||
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Total |
$ | 743 | $ | 673 | $ | 1,444 | $ | 932 | ||||||||
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Exhibit 99.2
Investor Contact | This report is for informational purposes only. It should be read in conjunction with documents filed by ACE Limited with the Securities and Exchange Commission, including the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q. | |
Helen M. Wilson | ||
Phone: (441) 299-9283 | ||
Fax: (441) 292-8675 email: investorrelations@acegroup.com | Cautionary Statement Regarding Forward-Looking Statements: | |
Any forward-looking statements made in this financial supplement reflect ACEs current views with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties which may cause actual results to differ materially from those set forth in these statements. For example, our forward-looking statements, such as statements concerning exposures, reserves and recoverables, could be affected by the frequency of unpredictable catastrophic events, actual loss experience, uncertainties in the reserving or settlement process, new theories of liability, judicial, legislative, regulatory and other governmental developments, litigation tactics and developments, investigation developments and actual settlement terms, the amount and timing of reinsurance receivable and credit developments among reinsurers. | ||
Our forward-looking statements could also be affected by competition, pricing and policy term trends, market acceptance, changes in demand, actual market developments, rating agency action, possible terrorism or the outbreak and effects of war. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. |
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ACE Limited
Financial Supplement Table of Contents |
Page | ||||||
I. | Financial Highlights |
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- Consolidated Financial Highlights |
1 | |||||
II. | Consolidated Results |
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- Consolidated Results - Consecutive Quarters |
2 | |||||
- Summary Consolidated Balance Sheets |
3 | |||||
- Consolidated Premiums and Income Excluding Net Realized Gains (Losses) by Line of Business |
4 - 5 | |||||
III. | Segment Results |
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- Insurance - North American |
6 | |||||
- Insurance - Overseas General |
7 | |||||
- Global Reinsurance |
8 | |||||
- Life |
9 | |||||
IV. | Balance Sheet Details |
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- Loss Reserve Rollforward |
10 | |||||
- Reinsurance Recoverable Analysis |
11 | |||||
- Investment Portfolio |
12 - 17 | |||||
- Net Realized and Unrealized Gains (Losses) |
18 | |||||
- Capital Structure |
19 | |||||
- Computation of Basic and Diluted Earnings Per Share |
20 | |||||
V. | Other Disclosures |
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- Non-GAAP Financial Measures |
21 - 22 | |||||
- Book Value and Book Value per Common Share |
23 | |||||
- Glossary |
24 |
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ACE Limited Consolidated Financial Highlights (in millions of U.S. dollars, except share, per share data, and ratios) (Unaudited) |
Note: All dollar amounts in the Financial Supplement are rounded. However, percent changes and ratios are calculated using whole dollars. Accordingly, calculations using rounded dollars may differ.
Three months ended June 30 | % Change 2Q-12 vs. |
Constant $ | % Change 2Q-12 vs. |
Six months ended June 30 | % Change YTD-12 vs. |
Constant $ | % Change YTD-12 vs. |
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2012 | 2011 | 2Q-11 | 2011 (2) | 2Q-11 (2) | 2012 | 2011 | YTD-11 | 2011 (2) | YTD-11 (2) | |||||||||||||||||||||||||||||||
Gross premiums written |
$ | 5,653 | $ | 5,423 | 4.2 | % | $ | 5,336 | 5.9 | % | $ | 10,440 | $ | 10,067 | 3.7 | % | $ | 9,955 | 4.9 | % | ||||||||||||||||||||
Net premiums written |
$ | 4,130 | $ | 3,953 | 4.5 | % | $ | 3,879 | 6.5 | % | $ | 7,702 | $ | 7,399 | 4.1 | % | $ | 7,300 | 5.5 | % | ||||||||||||||||||||
Net premiums earned |
$ | 3,783 | $ | 3,757 | 0.7 | % | $ | 3,675 | 2.9 | % | $ | 7,164 | $ | 7,066 | 1.4 | % | $ | 6,962 | 2.9 | % | ||||||||||||||||||||
Net investment income |
$ | 537 | $ | 569 | -5.5 | % | $ | 1,081 | $ | 1,113 | -2.8 | % | ||||||||||||||||||||||||||||
Net income |
$ | 328 | $ | 594 | -44.7 | % | $ | 1,301 | $ | 844 | 54.0 | % | ||||||||||||||||||||||||||||
Income excluding net realized gains (losses) (1) |
$ | 743 | $ | 673 | 10.3 | % | $ | 1,444 | $ | 932 | 54.7 | % | ||||||||||||||||||||||||||||
Comprehensive income |
$ | 457 | $ | 801 | -42.9 | % | $ | 1,728 | $ | 1,239 | 39.5 | % | ||||||||||||||||||||||||||||
Operating cash flow |
$ | 811 | $ | 1,060 | $ | 1,383 | $ | 2,063 | ||||||||||||||||||||||||||||||||
P&C combined ratio |
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Loss and loss expense ratio |
59.5 | % | 63.1 | % | 58.3 | % | 68.1 | % | ||||||||||||||||||||||||||||||||
Underwriting and administrative expense ratio |
29.2 | % | 29.6 | % | 30.6 | % | 30.4 | % | ||||||||||||||||||||||||||||||||
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Combined ratio |
88.7 | % | 92.7 | % | 88.9 | % | 98.5 | % | ||||||||||||||||||||||||||||||||
Annualized return on equity (ROE) calculated using income excluding net realized gains (losses) (1) |
12.6 | % | 12.2 | % | 12.5 | % | 8.5 | % | ||||||||||||||||||||||||||||||||
Annualized ROE calculated using net income |
5.1 | % | 10.1 | % | 10.4 | % | 7.2 | % | ||||||||||||||||||||||||||||||||
Effective tax rate on income excluding net realized gains (losses) (1) |
14.6 | % | 14.4 | % | 13.8 | % | 18.4 | % | ||||||||||||||||||||||||||||||||
Effective tax rate |
31.0 | % | 16.9 | % | 16.6 | % | 20.4 | % | ||||||||||||||||||||||||||||||||
Diluted earnings per share |
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Income excluding net realized gains (losses) (1) |
$ | 2.17 | $ | 1.97 | 10.2 | % | $ | 4.22 | $ | 2.74 | 54.0 | % | ||||||||||||||||||||||||||||
Net income |
$ | 0.96 | $ | 1.74 | -44.8 | % | $ | 3.80 | $ | 2.48 | 53.2 | % | ||||||||||||||||||||||||||||
Book value per common share (1) |
$ | 75.98 | $ | 70.88 | 7.2 | % | ||||||||||||||||||||||||||||||||||
Tangible book value per common share (1) |
$ | 61.75 | $ | 56.60 | 9.1 | % | ||||||||||||||||||||||||||||||||||
Weighted average basic common shares outstanding |
339.8 | 338.9 | 339.2 | 338.0 | ||||||||||||||||||||||||||||||||||||
Weighted average diluted common shares outstanding |
342.7 | 341.7 | 342.2 | 340.6 | ||||||||||||||||||||||||||||||||||||
Debt/total capitalization |
15.4 | % | 16.4 | % |
(1) | See Non-GAAP Financial Measures. |
(2) | Prior periods on a constant dollar basis. |
Adoption of New Accounting Pronouncement:
Shareholders equity and book value per common share at December 31, 2011 and June 30, 2011 and annualized ROE percentages for the three and six months ended June 30, 2011 have been retrospectively adjusted to reflect the adoption of new guidance issued by the Financial Accounting Standards Board related to the accounting for costs associated with acquiring or renewing insurance contracts. The adoption of this guidance decreased shareholders equity by $181 million as of December 31, 2011. The effect of the adoption of the new guidance on net income for the three and six months ended June 30, 2011 was a decrease of $12 million and $22 million, respectively.
Financial Highlights | Page 1 |
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ACE Limited Consolidated Results - Consecutive Quarters (in millions of U.S. dollars, except ratios) (Unaudited) |
ACE Limited Consolidated |
2Q-12 | 1Q-12 | 4Q-11 | 3Q-11 | 2Q-11 | YTD 2012 |
YTD 2011 |
Full Year 2011 |
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Consolidated Results Excluding Life Segment |
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Gross premiums written |
$ | 5,140 | $ | 4,275 | $ | 4,344 | $ | 5,391 | $ | 4,910 | $ | 9,415 | $ | 9,106 | $ | 18,841 | ||||||||||||||||
Net premiums written |
3,644 | 3,084 | 3,134 | 3,855 | 3,460 | 6,728 | 6,470 | 13,459 | ||||||||||||||||||||||||
Net premiums earned |
3,309 | 2,908 | 3,361 | 4,010 | 3,273 | 6,217 | 6,157 | 13,528 | ||||||||||||||||||||||||
Losses and loss expenses |
1,968 | 1,656 | 2,132 | 2,603 | 2,067 | 3,624 | 4,192 | 8,927 | ||||||||||||||||||||||||
Policy acquisition costs |
531 | 506 | 546 | 577 | 527 | 1,037 | 1,010 | 2,133 | ||||||||||||||||||||||||
Administrative expenses |
436 | 432 | 447 | 439 | 440 | 868 | 865 | 1,751 | ||||||||||||||||||||||||
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Underwriting income excluding Life segment (1) |
374 | 314 | 236 | 391 | 239 | 688 | 90 | 717 | ||||||||||||||||||||||||
Life underwriting income excluding investment income and gains (losses) from fair value changes in separate account assets (2) |
55 | 24 | 27 | 82 | 54 | 79 | 100 | 209 | ||||||||||||||||||||||||
Net investment income |
537 | 544 | 565 | 564 | 569 | 1,081 | 1,113 | 2,242 | ||||||||||||||||||||||||
Net realized gains (losses) |
(394 | ) | 260 | 83 | (760 | ) | (73 | ) | (134 | ) | (118 | ) | (795 | ) | ||||||||||||||||||
Interest expense |
62 | 62 | 63 | 62 | 62 | 124 | 125 | 250 | ||||||||||||||||||||||||
Other income (expense): (2) |
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Gains (losses) from fair value changes in separate account assets |
(14 | ) | 18 | 3 | (39 | ) | | 4 | | (36 | ) | |||||||||||||||||||||
Other |
(20 | ) | (15 | ) | 4 | (50 | ) | (12 | ) | (35 | ) | 1 | (45 | ) | ||||||||||||||||||
Income tax expense |
148 | 110 | 120 | 165 | 121 | 258 | 217 | 502 | ||||||||||||||||||||||||
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Net income (loss) |
328 | 973 | 735 | (39 | ) | 594 | 1,301 | 844 | 1,540 | |||||||||||||||||||||||
Net realized gains (losses) |
(394 | ) | 260 | 83 | (760 | ) | (73 | ) | (134 | ) | (118 | ) | (795 | ) | ||||||||||||||||||
Net realized gains (losses) in other income (expense) (3) |
1 | 18 | 16 | (28 | ) | 2 | 19 | 36 | 24 | |||||||||||||||||||||||
Tax expense on net realized gains (losses) |
22 | 6 | 12 | 2 | 8 | 28 | 6 | 20 | ||||||||||||||||||||||||
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Income excluding net realized gains (losses) (1) |
$ | 743 | $ | 701 | $ | 648 | $ | 751 | $ | 673 | $ | 1,444 | $ | 932 | $ | 2,331 | ||||||||||||||||
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% Change versus prior year period (4) |
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Net premiums written as reported |
5.3 | % | 2.5 | % | 4.9 | % | 33.0 | % | 15.0 | % | 4.0 | % | 4.8 | % | 11.6 | % | ||||||||||||||||
Net premiums earned as reported |
1.1 | % | 0.8 | % | 6.4 | % | 33.1 | % | 15.9 | % | 1.0 | % | 8.0 | % | 13.9 | % | ||||||||||||||||
Net premiums written constant $ |
7.4 | % | 5.4 | % | ||||||||||||||||||||||||||||
Net premiums earned constant $ |
3.4 | % | 2.5 | % | ||||||||||||||||||||||||||||
Other ratios |
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Net premiums written/gross premiums written |
71 | % | 72 | % | 72 | % | 72 | % | 70 | % | 71 | % | 71 | % | 71 | % | ||||||||||||||||
Effective tax rate on income excluding net realized gains (losses) (1) |
14.6 | % | 13.0 | % | 14.4 | % | 17.7 | % | 14.4 | % | 13.8 | % | 18.4 | % | 17.1 | % | ||||||||||||||||
P&C combined ratio (4) |
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Loss and loss expense ratio |
59.5 | % | 56.9 | % | 63.4 | % | 64.9 | % | 63.1 | % | 58.3 | % | 68.1 | % | 66.0 | % | ||||||||||||||||
Policy acquisition cost ratio |
16.1 | % | 17.4 | % | 16.3 | % | 14.4 | % | 16.1 | % | 16.7 | % | 16.3 | % | 15.8 | % | ||||||||||||||||
Administrative expense ratio |
13.1 | % | 14.9 | % | 13.3 | % | 10.9 | % | 13.5 | % | 13.9 | % | 14.1 | % | 12.9 | % | ||||||||||||||||
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Combined ratio |
88.7 | % | 89.2 | % | 93.0 | % | 90.2 | % | 92.7 | % | 88.9 | % | 98.5 | % | 94.7 | % | ||||||||||||||||
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P&C expense ratio |
29.2 | % | 32.3 | % | 29.6 | % | 25.3 | % | 29.6 | % | 30.6 | % | 30.4 | % | 28.7 | % | ||||||||||||||||
P&C expense ratio excluding A&H |
25.3 | % | 28.4 | % | 25.5 | % | 21.0 | % | 25.1 | % | 26.8 | % | 26.2 | % | 24.7 | % | ||||||||||||||||
Large losses and other items (before tax) (4) |
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Reinstatement premiums (expensed) collected |
$ | | $ | | $ | | $ | 26 | $ | 8 | $ | | $ | (66 | ) | $ | (40 | ) | ||||||||||||||
Catastrophe losses |
$ | 55 | $ | 19 | $ | 155 | $ | 147 | $ | 142 | $ | 74 | $ | 557 | $ | 859 | ||||||||||||||||
Prior period development (PPD) - unfavorable (favorable) (5) |
$ | (113 | ) | $ | (93 | ) | $ | (123 | ) | $ | (194 | ) | $ | (146 | ) | $ | (206 | ) | $ | (239 | ) | $ | (556 | ) | ||||||||
Loss and loss expense ratio excluding catastrophe losses and PPD (1) (5) |
61.2 | % | 59.5 | % | 62.5 | % | 66.7 | % | 63.4 | % | 60.4 | % | 62.3 | % | 63.6 | % |
(1) | See Non-GAAP Financial Measures. |
(2) | Gains (losses) from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP are reclassified from Other income (expense) for purposes of presenting Life underwriting income. |
(3) | Net realized investment and derivative losses related to unconsolidated entities. |
(4) | Presented excluding the Life segment. This is a non-GAAP measure. |
(5) | For Q3 2011, favorable prior period development is net of $26 million of net earned premium adjustments on loss sensitive policies. |
Consolidated Results | Page 2 |
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ACE Limited Summary Consolidated Balance Sheets (in millions of U.S. dollars, except per share data) (Unaudited) |
June 30 2012 |
March 31 2012 |
December 31 2011 |
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Assets |
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Fixed maturities available for sale, at fair value |
$ | 44,386 | $ | 43,468 | $ | 41,967 | ||||||
Fixed maturities held to maturity, at amortized cost |
7,782 | 8,117 | 8,447 | |||||||||
Equity securities, at fair value |
729 | 679 | 647 | |||||||||
Short-term investments, at fair value |
2,260 | 2,099 | 2,301 | |||||||||
Other investments |
2,524 | 2,429 | 2,314 | |||||||||
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Total investments |
57,681 | 56,792 | 55,676 | |||||||||
Cash |
617 | 715 | 614 | |||||||||
Securities lending collateral |
2,247 | 2,204 | 1,375 | |||||||||
Insurance and reinsurance balances receivable |
4,985 | 4,487 | 4,387 | |||||||||
Reinsurance recoverable on losses and loss expenses |
11,752 | 12,057 | 12,389 | |||||||||
Deferred policy acquisition costs |
1,710 | 1,649 | 1,548 | |||||||||
Value of business acquired |
637 | 669 | 676 | |||||||||
Prepaid reinsurance premiums |
1,775 | 1,643 | 1,541 | |||||||||
Goodwill and other intangible assets |
4,826 | 4,860 | 4,799 | |||||||||
Deferred tax assets |
557 | 568 | 673 | |||||||||
Investments in partially-owned insurance companies |
339 | 346 | 352 | |||||||||
Other assets |
3,575 | 3,759 | 3,291 | |||||||||
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Total assets |
$ | 90,701 | $ | 89,749 | $ | 87,321 | ||||||
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Liabilities |
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Unpaid losses and loss expenses |
$ | 36,850 | $ | 37,247 | $ | 37,477 | ||||||
Unearned premiums |
7,044 | 6,664 | 6,334 | |||||||||
Future policy benefits |
4,436 | 4,358 | 4,274 | |||||||||
Insurance and reinsurance balances payable |
3,490 | 3,454 | 3,542 | |||||||||
Securities lending payable |
2,253 | 2,211 | 1,385 | |||||||||
Payable for securities purchased |
692 | 569 | 287 | |||||||||
Accounts payable, accrued expenses, and other liabilities |
5,104 | 4,615 | 4,770 | |||||||||
Short-term debt |
1,401 | 1,531 | 1,251 | |||||||||
Long-term debt |
3,360 | 3,360 | 3,360 | |||||||||
Trust preferred securities |
309 | 309 | 309 | |||||||||
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Total liabilities |
64,939 | 64,318 | 62,989 | |||||||||
Shareholders equity |
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Total shareholders equity, excl. AOCI |
23,424 | 23,222 | 22,421 | |||||||||
Accumulated other comprehensive income (AOCI) |
2,338 | 2,209 | 1,911 | |||||||||
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Total shareholders equity |
25,762 | 25,431 | 24,332 | |||||||||
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Total liabilities and shareholders equity |
$ | 90,701 | $ | 89,749 | $ | 87,321 | ||||||
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Book value per common share (1) |
$ | 75.98 | $ | 75.09 | $ | 72.22 | ||||||
% change over prior quarter |
1.2 | % | 4.0 | % | 3.0 | % | ||||||
Tangible book value per common share (1) |
$ | 61.75 | $ | 60.74 | $ | 57.97 | ||||||
% change over prior quarter |
1.7 | % | 4.8 | % | 3.7 | % |
(1) | See Non-GAAP Financial Measures. |
Consol Bal Sheet | Page 3 |
![]() |
ACE Limited Consolidated Premiums and Income Excluding Net Realized Gains (Losses) by Line of Business (in millions of U.S. dollars) (Unaudited) |
ACE Limited Consolidated
2Q-12 | %
of Total Consolidated |
2Q-11 | %
of Total Consolidated |
% Change 2Q-12 vs. 2Q-11 |
YTD 2012 |
%
of Total Consolidated |
YTD 2011 |
%
of Total Consolidated |
% Change YTD-12 vs. YTD-11 |
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Net premiums written |
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Property and all other |
$ | 1,227 | 30 | % | $ | 1,092 | 28 | % | 12.4 | % | $ | 2,339 | 30 | % | $ | 2,053 | 28 | % | 13.9 | % | ||||||||||||||||||||
Agriculture |
492 | 12 | % | 495 | 13 | % | -0.5 | % | 611 | 8 | % | 613 | 8 | % | -0.2 | % | ||||||||||||||||||||||||
Casualty |
1,286 | 31 | % | 1,240 | 31 | % | 3.7 | % | 2,500 | 33 | % | 2,547 | 34 | % | -1.8 | % | ||||||||||||||||||||||||
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Subtotal |
3,005 | 73 | % | 2,827 | 72 | % | 6.3 | % | 5,450 | 71 | % | 5,213 | 70 | % | 4.5 | % | ||||||||||||||||||||||||
Personal accident (A&H) (1) |
883 | 21 | % | 882 | 22 | % | 0.1 | % | 1,765 | 23 | % | 1,754 | 24 | % | 0.6 | % | ||||||||||||||||||||||||
Life |
242 | 6 | % | 244 | 6 | % | -0.8 | % | 487 | 6 | % | 432 | 6 | % | 12.7 | % | ||||||||||||||||||||||||
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Total consolidated |
$ | 4,130 | 100 | % | $ | 3,953 | 100 | % | 4.5 | % | $ | 7,702 | 100 | % | $ | 7,399 | 100 | % | 4.1 | % | ||||||||||||||||||||
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Net premiums earned |
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Property and all other |
$ | 1,013 | 27 | % | $ | 940 | 25 | % | 7.8 | % | $ | 1,983 | 28 | % | $ | 1,775 | 25 | % | 11.7 | % | ||||||||||||||||||||
Agriculture |
384 | 10 | % | 356 | 10 | % | 7.8 | % | 443 | 6 | % | 434 | 6 | % | 2.1 | % | ||||||||||||||||||||||||
Casualty |
1,289 | 34 | % | 1,352 | 36 | % | -4.7 | % | 2,559 | 36 | % | 2,732 | 39 | % | -6.3 | % | ||||||||||||||||||||||||
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Subtotal |
2,686 | 71 | % | 2,648 | 71 | % | 1.4 | % | 4,985 | 70 | % | 4,941 | 70 | % | 0.5 | % | ||||||||||||||||||||||||
Personal accident (A&H) (1) |
871 | 23 | % | 878 | 23 | % | -0.8 | % | 1,723 | 24 | % | 1,715 | 24 | % | 0.5 | % | ||||||||||||||||||||||||
Life |
226 | 6 | % | 231 | 6 | % | -2.2 | % | 456 | 6 | % | 410 | 6 | % | 11.2 | % | ||||||||||||||||||||||||
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Total consolidated |
$ | 3,783 | 100 | % | $ | 3,757 | 100 | % | 0.7 | % | $ | 7,164 | 100 | % | $ | 7,066 | 100 | % | 1.4 | % | ||||||||||||||||||||
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Income excluding net realized gains (losses) |
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Property, casualty, and all other |
$ | 555 | 75 | % | $ | 498 | 74 | % | 11.4 | % | $ | 1,071 | 74 | % | $ | 606 | 65 | % | 76.7 | % | ||||||||||||||||||||
Agriculture |
30 | 4 | % | 14 | 2 | % | 116.9 | % | 55 | 4 | % | 25 | 3 | % | 120.0 | % | ||||||||||||||||||||||||
Personal accident (A&H) (1) |
121 | 16 | % | 119 | 18 | % | 3.0 | % | 240 | 17 | % | 227 | 24 | % | 6.4 | % | ||||||||||||||||||||||||
Life |
37 | 5 | % | 42 | 6 | % | -11.9 | % | 78 | 5 | % | 74 | 8 | % | 5.4 | % | ||||||||||||||||||||||||
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Total consolidated |
$ | 743 | 100 | % | $ | 673 | 100 | % | 10.2 | % | $ | 1,444 | 100 | % | $ | 932 | 100 | % | 54.7 | % | ||||||||||||||||||||
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(1) | For purposes of this schedule only, A&H results from our Combined North American and International businesses, normally included in the Life and Insurance-Overseas General segments, respectively, are included in the Personal Accident (A&H) line items above. |
Line of Business | Page 4 |
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ACE Limited Consolidated Premiums and Income Excluding Net Realized Gains (Losses) by Line of Business, Adjusted for Foreign Exchange (in millions of U.S. dollars) (Unaudited) |
ACE Limited Consolidated Constant Dollar
2Q-12 | Constant $ 2Q-11 (2) |
Constant $ % Change 2Q-12 vs. 2Q-11 (2) |
YTD 2012 |
Constant $ YTD 2011 (2) |
Constant $ % Change YTD-12 vs. YTD-11 (2) |
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Net premiums written |
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Property, casualty, agriculture, and all other |
$ | 3,005 | $ | 2,788 | 7.8 | % | $ | 5,450 | $ | 5,159 | 5.6 | % | ||||||||||||
Personal accident (A&H) (1) |
883 | 854 | 3.5 | % | 1,765 | 1,718 | 2.7 | % | ||||||||||||||||
Life |
242 | 237 | 2.1 | % | 487 | 423 | 15.1 | % | ||||||||||||||||
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Total consolidated |
$ | 4,130 | $ | 3,879 | 6.5 | % | $ | 7,702 | $ | 7,300 | 5.5 | % | ||||||||||||
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Net premiums earned |
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Property, casualty, agriculture, and all other |
$ | 2,686 | $ | 2,602 | 3.2 | % | $ | 4,985 | $ | 4,883 | 2.1 | % | ||||||||||||
Personal accident (A&H) (1) |
871 | 848 | 2.7 | % | 1,723 | 1,677 | 2.7 | % | ||||||||||||||||
Life |
226 | 226 | 0.0 | % | 456 | 402 | 13.4 | % | ||||||||||||||||
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Total consolidated |
$ | 3,783 | $ | 3,676 | 2.9 | % | $ | 7,164 | $ | 6,962 | 2.9 | % | ||||||||||||
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Income excluding net realized gains (losses) |
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Property, casualty, agriculture, and all other |
$ | 585 | $ | 508 | 15.2 | % | $ | 1,126 | $ | 614 | 83.4 | % | ||||||||||||
Personal accident (A&H) (1) |
121 | 113 | 6.6 | % | 240 | 221 | 8.3 | % | ||||||||||||||||
Life |
37 | 43 | -14.0 | % | 78 | 74 | 5.4 | % | ||||||||||||||||
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Total consolidated |
$ | 743 | $ | 664 | 12.0 | % | $ | 1,444 | $ | 909 | 58.8 | % | ||||||||||||
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(1) | For purposes of this schedule only, A&H results from our Combined North American and International businesses, normally included in the Life and Insurance-Overseas General segments, respectively, are included in the Personal Accident (A&H) line items above. |
(2) | Prior periods on a constant dollar basis. |
Line of Business 2 | Page 5 |
![]() |
ACE Limited Segment Results - Consecutive Quarters (in millions of U.S. dollars, except ratios) (Unaudited) |
Insurance - North American
2Q-12 | 1Q-12 | 4Q-11 | 3Q-11 | 2Q-11 | YTD 2012 |
YTD 2011 |
Full Year 2011 |
|||||||||||||||||||||||||
Gross premiums written |
$ | 2,856 | $ | 2,012 | $ | 2,394 | $ | 3,294 | $ | 2,714 | $ | 4,868 | $ | 4,672 | $ | 10,360 | ||||||||||||||||
Net premiums written |
1,860 | 1,293 | 1,624 | 2,207 | 1,735 | 3,153 | 3,020 | 6,851 | ||||||||||||||||||||||||
Net premiums earned |
1,652 | 1,287 | 1,662 | 2,299 | 1,604 | 2,939 | 2,950 | 6,911 | ||||||||||||||||||||||||
Losses and loss expenses |
1,163 | 849 | 1,211 | 1,838 | 1,233 | 2,012 | 2,227 | 5,276 | ||||||||||||||||||||||||
Policy acquisition costs |
157 | 127 | 157 | 174 | 145 | 284 | 281 | 612 | ||||||||||||||||||||||||
Administrative expenses |
153 | 147 | 144 | 153 | 147 | 300 | 295 | 592 | ||||||||||||||||||||||||
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Underwriting income |
179 | 164 | 150 | 134 | 79 | 343 | 147 | 431 | ||||||||||||||||||||||||
Net investment income |
271 | 274 | 284 | 291 | 300 | 545 | 595 | 1,170 | ||||||||||||||||||||||||
Net realized gains (losses) |
18 | (1 | ) | 26 | (2 | ) | 21 | 17 | 10 | 34 | ||||||||||||||||||||||
Interest expense |
3 | 3 | 4 | 4 | 3 | 6 | 7 | 15 | ||||||||||||||||||||||||
Other income (expense) |
(10 | ) | 1 | 3 | (21 | ) | (3 | ) | (9 | ) | 13 | (5 | ) | |||||||||||||||||||
Income tax expense |
107 | 91 | 91 | 120 | 95 | 198 | 184 | 395 | ||||||||||||||||||||||||
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Net income |
348 | 344 | 368 | 278 | 299 | 692 | 574 | 1,220 | ||||||||||||||||||||||||
Net realized gains (losses) |
18 | (1 | ) | 26 | (2 | ) | 21 | 17 | 10 | 34 | ||||||||||||||||||||||
Net realized gains (losses) in other income (expense) |
5 | 15 | 10 | (9 | ) | 3 | 20 | 27 | 28 | |||||||||||||||||||||||
Tax expense on net realized gains (losses) |
10 | 4 | 10 | 1 | 7 | 14 | 8 | 19 | ||||||||||||||||||||||||
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Income excluding net realized gains (losses) (1) |
$ | 335 | $ | 334 | $ | 342 | $ | 290 | $ | 282 | $ | 669 | $ | 545 | $ | 1,177 | ||||||||||||||||
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Combined ratio |
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Loss and loss expense ratio |
70.4 | % | 66.0 | % | 72.8 | % | 80.0 | % | 76.9 | % | 68.5 | % | 75.5 | % | 76.3 | % | ||||||||||||||||
Policy acquisition cost ratio |
9.5 | % | 9.9 | % | 9.5 | % | 7.6 | % | 9.0 | % | 9.7 | % | 9.5 | % | 8.9 | % | ||||||||||||||||
Administrative expense ratio |
9.3 | % | 11.4 | % | 8.7 | % | 6.6 | % | 9.2 | % | 10.1 | % | 10.0 | % | 8.6 | % | ||||||||||||||||
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Combined ratio |
89.2 | % | 87.3 | % | 91.0 | % | 94.2 | % | 95.1 | % | 88.3 | % | 95.0 | % | 93.8 | % | ||||||||||||||||
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Large losses and other items (before tax) |
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Reinstatement premiums (expensed) collected |
$ | | $ | | $ | | $ | 7 | $ | | $ | | $ | (12 | ) | $ | (5 | ) | ||||||||||||||
Catastrophe losses |
$ | 49 | $ | 16 | $ | 42 | $ | 119 | $ | 110 | $ | 65 | $ | 186 | $ | 347 | ||||||||||||||||
Prior period development (PPD) - unfavorable (favorable) (2) |
$ | (59 | ) | $ | (60 | ) | $ | (31 | ) | $ | (58 | ) | $ | (71 | ) | $ | (119 | ) | $ | (106 | ) | $ | (195 | ) | ||||||||
Loss and loss expense ratio excluding catastrophe losses and PPD (1) (2) |
71.1 | % | 69.3 | % | 72.2 | % | 77.6 | % | 74.4 | % | 70.3 | % | 72.5 | % | 74.1 | % | ||||||||||||||||
% Change versus prior year period |
||||||||||||||||||||||||||||||||
Net premiums written |
7.2 | % | 0.6 | % | 6.9 | % | 52.7 | % | 20.7 | % | 4.4 | % | 6.6 | % | 18.2 | % | ||||||||||||||||
Net premiums earned |
3.0 | % | -4.4 | % | 10.0 | % | 59.2 | % | 21.0 | % | -0.4 | % | 9.4 | % | 22.3 | % | ||||||||||||||||
Other ratios |
||||||||||||||||||||||||||||||||
Net premiums written/gross premiums written |
65 | % | 64 | % | 68 | % | 67 | % | 64 | % | 65 | % | 65 | % | 66 | % |
(1) | See Non-GAAP Financial Measures. |
(2) | For Q3 2011, favorable prior period development is net of $13 million of net earned premium adjustments on loss sensitive policies. |
Insurance-North American | Page 6 |
![]() |
ACE Limited Segment Results - Consecutive Quarters (in millions of U.S. dollars, except ratios) (Unaudited) |
Insurance - Overseas General
2Q-12 | 1Q-12 | 4Q-11 | 3Q-11 | 2Q-11 | YTD 2012 |
YTD 2011 |
Full Year 2011 |
|||||||||||||||||||||||||
Gross premiums written |
$ | 1,952 | $ | 1,984 | $ | 1,818 | $ | 1,843 | $ | 1,898 | $ | 3,936 | $ | 3,806 | $ | 7,467 | ||||||||||||||||
Net premiums written |
1,475 | 1,528 | 1,378 | 1,398 | 1,443 | 3,003 | 2,853 | 5,629 | ||||||||||||||||||||||||
Net premiums earned |
1,420 | 1,391 | 1,450 | 1,471 | 1,415 | 2,811 | 2,693 | 5,614 | ||||||||||||||||||||||||
Losses and loss expenses |
703 | 705 | 785 | 671 | 721 | 1,408 | 1,573 | 3,029 | ||||||||||||||||||||||||
Policy acquisition costs |
332 | 335 | 346 | 353 | 335 | 667 | 636 | 1,335 | ||||||||||||||||||||||||
Administrative expenses |
233 | 229 | 241 | 236 | 239 | 462 | 462 | 939 | ||||||||||||||||||||||||
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Underwriting income |
152 | 122 | 78 | 211 | 120 | 274 | 22 | 311 | ||||||||||||||||||||||||
Net investment income |
128 | 131 | 140 | 138 | 137 | 259 | 268 | 546 | ||||||||||||||||||||||||
Net realized gains (losses) |
26 | 20 | 51 | 1 | (10 | ) | 46 | (19 | ) | 33 | ||||||||||||||||||||||
Interest expense |
1 | 1 | 1 | 2 | 1 | 2 | 2 | 5 | ||||||||||||||||||||||||
Other income (expense) |
(6 | ) | | 3 | (10 | ) | 5 | (6 | ) | 7 | | |||||||||||||||||||||
Income tax expense |
51 | 38 | 52 | 56 | 39 | 89 | 56 | 164 | ||||||||||||||||||||||||
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Net income |
248 | 234 | 219 | 282 | 212 | 482 | 220 | 721 | ||||||||||||||||||||||||
Net realized gains (losses) |
26 | 20 | 51 | 1 | (10 | ) | 46 | (19 | ) | 33 | ||||||||||||||||||||||
Net realized gains (losses) in other income (expense) |
(3 | ) | 3 | 2 | (10 | ) | 1 | | 6 | (2 | ) | |||||||||||||||||||||
Tax expense (benefit) on net realized gains (losses) |
7 | 3 | 3 | 1 | | 10 | (3 | ) | 1 | |||||||||||||||||||||||
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Income excluding net realized gains (losses) (1) |
$ | 232 | $ | 214 | $ | 169 | $ | 292 | $ | 221 | $ | 446 | $ | 230 | $ | 691 | ||||||||||||||||
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Combined ratio |
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Loss and loss expense ratio |
49.6 | % | 50.7 | % | 54.1 | % | 45.6 | % | 51.0 | % | 50.1 | % | 58.4 | % | 54.0 | % | ||||||||||||||||
Policy acquisition cost ratio |
23.4 | % | 24.1 | % | 23.8 | % | 24.1 | % | 23.6 | % | 23.7 | % | 23.6 | % | 23.8 | % | ||||||||||||||||
Administrative expense ratio |
16.3 | % | 16.4 | % | 16.6 | % | 15.9 | % | 17.0 | % | 16.5 | % | 17.2 | % | 16.7 | % | ||||||||||||||||
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Combined ratio |
89.3 | % | 91.2 | % | 94.5 | % | 85.6 | % | 91.6 | % | 90.3 | % | 99.2 | % | 94.5 | % | ||||||||||||||||
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Large losses and other items (before tax) |
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Reinstatement premiums (expensed) collected |
$ | | $ | | $ | 1 | $ | 17 | $ | 3 | $ | | $ | (60 | ) | $ | (42 | ) | ||||||||||||||
Catastrophe losses |
$ | 5 | $ | 2 | $ | 98 | $ | 34 | $ | 10 | $ | 7 | $ | 197 | $ | 329 | ||||||||||||||||
Prior period development (PPD) - unfavorable (favorable) |
$ | (39 | ) | $ | (22 | ) | $ | (80 | ) | $ | (126 | ) | $ | (40 | ) | $ | (61 | ) | $ | (84 | ) | $ | (290 | ) | ||||||||
Loss and loss expense ratio excluding catastrophe losses and PPD (1) |
51.9 | % | 52.1 | % | 53.0 | % | 52.5 | % | 53.2 | % | 52.0 | % | 53.1 | % | 52.9 | % | ||||||||||||||||
% Change versus prior year period |
||||||||||||||||||||||||||||||||
Net premiums written as reported |
2.2 | % | 8.4 | % | 3.9 | % | 18.3 | % | 12.6 | % | 5.2 | % | 6.4 | % | 8.5 | % | ||||||||||||||||
Net premiums earned as reported |
0.3 | % | 8.8 | % | 5.1 | % | 13.3 | % | 13.9 | % | 4.4 | % | 8.8 | % | 9.0 | % | ||||||||||||||||
Net premiums written constant $ |
6.7 | % | 8.3 | % | ||||||||||||||||||||||||||||
Net premiums earned constant $ |
5.5 | % | 7.9 | % | ||||||||||||||||||||||||||||
Other ratios |
||||||||||||||||||||||||||||||||
Net premiums written/gross premiums written |
76 | % | 77 | % | 76 | % | 76 | % | 76 | % | 76 | % | 75 | % | 75 | % |
(1) | See Non-GAAP Financial Measures. |
Insurance-Overseas General | Page 7 |
![]() |
ACE Limited Segment Results - Consecutive Quarters (in millions of U.S. dollars, except ratios) (Unaudited) |
Global Reinsurance
2Q-12 | 1Q-12 | 4Q-11 | 3Q-11 | 2Q-11 | YTD 2012 |
YTD 2011 |
Full Year 2011 |
|||||||||||||||||||||||||
Gross premiums written |
$ | 332 | $ | 279 | $ | 132 | $ | 254 | $ | 298 | $ | 611 | $ | 628 | $ | 1,014 | ||||||||||||||||
Net premiums written |
309 | 263 | 132 | 250 | 282 | 572 | 597 | 979 | ||||||||||||||||||||||||
Net premiums earned |
237 | 230 | 249 | 240 | 254 | 467 | 514 | 1,003 | ||||||||||||||||||||||||
Losses and loss expenses |
102 | 102 | 136 | 94 | 112 | 204 | 391 | 621 | ||||||||||||||||||||||||
Policy acquisition costs |
42 | 43 | 42 | 50 | 47 | 85 | 93 | 185 | ||||||||||||||||||||||||
Administrative expenses |
13 | 12 | 14 | 12 | 14 | 25 | 26 | 52 | ||||||||||||||||||||||||
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Underwriting income |
80 | 73 | 57 | 84 | 81 | 153 | 4 | 145 | ||||||||||||||||||||||||
Net investment income |
70 | 71 | 74 | 70 | 71 | 141 | 143 | 287 | ||||||||||||||||||||||||
Net realized gains (losses) |
(17 | ) | 13 | 6 | (29 | ) | (14 | ) | (4 | ) | (27 | ) | (50 | ) | ||||||||||||||||||
Interest expense |
1 | 1 | 1 | | 1 | 2 | 1 | 2 | ||||||||||||||||||||||||
Other income (expense) |
(3 | ) | 5 | 3 | (7 | ) | (1 | ) | 2 | 5 | 1 | |||||||||||||||||||||
Income tax expense |
| 6 | 5 | 7 | 8 | 6 | 18 | 30 | ||||||||||||||||||||||||
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Net income |
129 | 155 | 134 | 111 | 128 | 284 | 106 | 351 | ||||||||||||||||||||||||
Net realized gains (losses) |
(17 | ) | 13 | 6 | (29 | ) | (14 | ) | (4 | ) | (27 | ) | (50 | ) | ||||||||||||||||||
Net realized gains (losses) in other income (expense) |
(3 | ) | 5 | 3 | (6 | ) | (2 | ) | 2 | 2 | (1 | ) | ||||||||||||||||||||
Tax expense (benefit) on net realized gains (losses) |
| | | (1 | ) | | | | (1 | ) | ||||||||||||||||||||||
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Income excluding net realized gains (losses) (1) |
$ | 149 | $ | 137 | $ | 125 | $ | 145 | $ | 144 | $ | 286 | $ | 131 | $ | 401 | ||||||||||||||||
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Combined ratio |
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Loss and loss expense ratio |
42.5 | % | 44.4 | % | 54.8 | % | 39.2 | % | 44.1 | % | 43.5 | % | 76.1 | % | 62.0 | % | ||||||||||||||||
Policy acquisition cost ratio |
17.8 | % | 18.7 | % | 17.0 | % | 20.6 | % | 18.5 | % | 18.3 | % | 18.1 | % | 18.4 | % | ||||||||||||||||
Administrative expense ratio |
5.8 | % | 5.2 | % | 5.3 | % | 5.6 | % | 5.3 | % | 5.3 | % | 4.9 | % | 5.2 | % | ||||||||||||||||
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Combined ratio |
66.1 | % | 68.3 | % | 77.1 | % | 65.4 | % | 67.9 | % | 67.1 | % | 99.1 | % | 85.6 | % | ||||||||||||||||
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Large losses and other items (before tax) |
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Reinstatement premiums (expensed) collected |
$ | | $ | | $ | (1 | ) | $ | 2 | $ | 5 | $ | | $ | 6 | $ | 7 | |||||||||||||||
Catastrophe losses |
$ | 1 | $ | 1 | $ | 15 | $ | (6 | ) | $ | 22 | $ | 2 | $ | 174 | $ | 183 | |||||||||||||||
Prior period development (PPD) - unfavorable (favorable) (2) |
$ | (15 | ) | $ | (11 | ) | $ | (12 | ) | $ | (10 | ) | $ | (35 | ) | $ | (26 | ) | $ | (49 | ) | $ | (71 | ) | ||||||||
Loss and loss expense ratio excluding catastrophe losses and PPD (1) (2) |
48.3 | % | 48.7 | % | 53.2 | % | 49.1 | % | 50.1 | % | 48.5 | % | 52.2 | % | 51.7 | % | ||||||||||||||||
% Change versus prior year period |
||||||||||||||||||||||||||||||||
Net premiums written as reported |
9.4 | % | -16.5 | % | -7.7 | % | -8.1 | % | -2.4 | % | -4.2 | % | -9.5 | % | -8.9 | % | ||||||||||||||||
Net premiums earned as reported |
-6.5 | % | -11.5 | % | -7.1 | % | -11.4 | % | -0.8 | % | -9.0 | % | -3.4 | % | -6.3 | % | ||||||||||||||||
Net premiums written constant $ |
9.9 | % | -3.6 | % | ||||||||||||||||||||||||||||
Net premiums earned constant $ |
-5.9 | % | -8.6 | % | ||||||||||||||||||||||||||||
Other ratios |
||||||||||||||||||||||||||||||||
Net premiums written/gross premiums written |
93 | % | 94 | % | 100 | % | 99 | % | 95 | % | 93 | % | 95 | % | 97 | % |
(1) | See Non-GAAP Financial Measures. |
(2) | For Q3 2011, favorable prior period development is net of $13 million of net earned premium adjustments on loss sensitive policies. |
Global Reinsurance | Page 8 |
![]() |
ACE Limited Segment Results - Consecutive Quarters (in millions of U.S. dollars) (Unaudited) |
Life
2Q-12 | 1Q-12 | 4Q-11 | 3Q-11 | 2Q-11 | YTD 2012 |
YTD 2011 |
Full Year 2011 |
|||||||||||||||||||||||||
Gross premiums written |
$ | 513 | $ | 512 | $ | 520 | $ | 509 | $ | 513 | $ | 1,025 | $ | 961 | $ | 1,990 | ||||||||||||||||
Net premiums written |
486 | 488 | 496 | 488 | 493 | 974 | 929 | 1,913 | ||||||||||||||||||||||||
Net premiums earned |
474 | 473 | 470 | 480 | 484 | 947 | 909 | 1,859 | ||||||||||||||||||||||||
Losses and loss expenses |
151 | 148 | 154 | 142 | 159 | 299 | 297 | 593 | ||||||||||||||||||||||||
Policy benefits (1) |
102 | 147 | 119 | 83 | 108 | 249 | 199 | 401 | ||||||||||||||||||||||||
(Gains) losses from fair value changes in separate account assets (1) |
14 | (18 | ) | (3 | ) | 39 | | (4 | ) | | 36 | |||||||||||||||||||||
Policy acquisition costs |
88 | 76 | 86 | 92 | 85 | 164 | 161 | 339 | ||||||||||||||||||||||||
Administrative expenses |
78 | 78 | 84 | 81 | 78 | 156 | 152 | 317 | ||||||||||||||||||||||||
Net investment income |
62 | 61 | 60 | 60 | 60 | 123 | 106 | 226 | ||||||||||||||||||||||||
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Life underwriting income (2) |
103 | 103 | 90 | 103 | 114 | 206 | 206 | 399 | ||||||||||||||||||||||||
Net realized gains (losses): |
||||||||||||||||||||||||||||||||
Mark-to-market on guaranteed living benefits derivative (net of related hedges) |
(397 | ) | 197 | (10 | ) | (706 | ) | (67 | ) | (200 | ) | (67 | ) | (783 | ) | |||||||||||||||||
Foreign exchange gains (losses) and all other |
(24 | ) | 34 | 17 | (26 | ) | (1 | ) | 10 | (14 | ) | (23 | ) | |||||||||||||||||||
Interest expense |
3 | 3 | 2 | 3 | 3 | 6 | 6 | 11 | ||||||||||||||||||||||||
Other income (expense) (1) |
(5 | ) | (9 | ) | 1 | (10 | ) | (11 | ) | (14 | ) | (17 | ) | (26 | ) | |||||||||||||||||
Income tax expense |
19 | 11 | 9 | 13 | 14 | 30 | 28 | 50 | ||||||||||||||||||||||||
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Net income (loss) |
(345 | ) | 311 | 87 | (655 | ) | 18 | (34 | ) | 74 | (494 | ) | ||||||||||||||||||||
Net realized gains (losses) |
(421 | ) | 231 | 7 | (732 | ) | (68 | ) | (190 | ) | (81 | ) | (806 | ) | ||||||||||||||||||
Net realized gains (losses) in other income (expense) |
2 | (5 | ) | 1 | (2 | ) | (1 | ) | (3 | ) | | (1 | ) | |||||||||||||||||||
Tax expense (benefit) on net realized gains (losses) |
5 | (1 | ) | | 1 | 1 | 4 | 1 | 2 | |||||||||||||||||||||||
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Income excluding net realized gains (losses) (3) |
$ | 79 | $ | 84 | $ | 79 | $ | 80 | $ | 88 | $ | 163 | $ | 156 | $ | 315 | ||||||||||||||||
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% Change versus prior year period |
||||||||||||||||||||||||||||||||
Net premiums written as reported |
-1.2 | % | 11.9 | % | 14.5 | % | 23.1 | % | 19.7 | % | 4.8 | % | 13.8 | % | 16.2 | % | ||||||||||||||||
Net premiums earned as reported |
-1.9 | % | 11.3 | % | 13.7 | % | 17.5 | % | 18.5 | % | 4.2 | % | 12.5 | % | 14.1 | % | ||||||||||||||||
Net premiums written constant $ |
0.5 | % | 6.1 | % | ||||||||||||||||||||||||||||
Net premiums earned constant $ |
-0.3 | % | 5.4 | % |
(1) | (Gains) losses from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP are reclassified from Other income (expense) for purposes of presenting Life underwriting income. The offsetting movement in the separate account liabilities is included in Policy benefits. |
(2) | We assess the performance of our Life business based on Life underwriting income which includes Net investment income and (Gains) losses from fair value changes in separate account assets. |
(3) | See Non-GAAP Financial Measures. |
Life | Page 9 |
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ACE Limited Loss Reserve Rollforward (in millions of U.S. dollars, except ratios) (Unaudited) |
Unpaid Losses | Net Paid to | |||||||||||||||
Gross | Ceded | Net | Incurred Ratio | |||||||||||||
Balance at December 31, 2010 |
$ | 37,391 | $ | 12,149 | $ | 25,242 | ||||||||||
Losses and loss expenses incurred |
3,820 | 1,557 | 2,263 | |||||||||||||
Losses and loss expenses paid |
(2,847 | ) | (884 | ) | (1,963 | ) | 87 | % | ||||||||
Other (incl. foreign exch. revaluation) |
479 | 161 | 318 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Balance at March 31, 2011 |
$ | 38,843 | $ | 12,983 | $ | 25,860 | ||||||||||
Losses and loss expenses incurred |
2,752 | 526 | 2,226 | |||||||||||||
Losses and loss expenses paid |
(2,730 | ) | (872 | ) | (1,858 | ) | 83 | % | ||||||||
Other (incl. foreign exch. revaluation) |
86 | 30 | 56 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Balance at June 30, 2011 |
$ | 38,951 | $ | 12,667 | $ | 26,284 | ||||||||||
Losses and loss expenses incurred |
3,207 | 462 | 2,745 | |||||||||||||
Losses and loss expenses paid |
(3,366 | ) | (992 | ) | (2,374 | ) | 86 | % | ||||||||
Other (incl. foreign exch. revaluation) |
(316 | ) | (95 | ) | (221 | ) | ||||||||||
|
|
|
|
|
|
|||||||||||
Balance at September 30, 2011 |
$ | 38,476 | $ | 12,042 | $ | 26,434 | ||||||||||
Losses and loss expenses incurred |
3,066 | 780 | 2,286 | |||||||||||||
Losses and loss expenses paid |
(3,837 | ) | (1,166 | ) | (2,671 | ) | 117 | % | ||||||||
Other (incl. foreign exch. revaluation) |
(228 | ) | (54 | ) | (174 | ) | ||||||||||
|
|
|
|
|
|
|||||||||||
Balance at December 31, 2011 |
$ | 37,477 | $ | 11,602 | $ | 25,875 | ||||||||||
Losses and loss expenses incurred |
2,361 | 557 | 1,804 | |||||||||||||
Losses and loss expenses paid |
(2,876 | ) | (931 | ) | (1,945 | ) | 108 | % | ||||||||
Other (incl. foreign exch. revaluation) |
285 | 90 | 195 | |||||||||||||
|
|
|
|
|
|
|||||||||||
Balance at March 31, 2012 |
$ | 37,247 | $ | 11,318 | $ | 25,929 | ||||||||||
Losses and loss expenses incurred |
2,851 | 732 | 2,119 | |||||||||||||
Losses and loss expenses paid |
(2,916 | ) | (893 | ) | (2,023 | ) | 95 | % | ||||||||
Other (incl. foreign exch. revaluation) |
(332 | ) | (171 | ) | (161 | ) | ||||||||||
|
|
|
|
|
|
|||||||||||
Balance at June 30, 2012 |
$ | 36,850 | $ | 10,986 | $ | 25,864 | ||||||||||
|
|
|
|
|
|
|||||||||||
Add net recoverable on paid losses |
| 766 | (766 | ) | ||||||||||||
|
|
|
|
|
|
|||||||||||
Balance including net recoverable on paid losses |
$ | 36,850 | $ | 11,752 | $ | 25,098 | ||||||||||
|
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|
|
|
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Loss Reserve Rollforward | Page 10 |
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ACE Limited Reinsurance Recoverable Analysis (in millions of U.S. dollars) (Unaudited) |
Net Reinsurance Recoverable by Division
June 30 | March 31 | December 31 | ||||||||||
2012 | 2012 | 2011 | ||||||||||
Reinsurance recoverable on paid losses and loss expenses |
||||||||||||
Active operations |
$ | 584 | $ | 573 | $ | 629 | ||||||
Brandywine |
248 | 234 | 232 | |||||||||
Other Run-off |
38 | 42 | 41 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 870 | $ | 849 | $ | 902 | ||||||
|
|
|
|
|
|
|||||||
Reinsurance recoverable on unpaid losses and loss expenses |
||||||||||||
Active operations |
$ | 9,500 | $ | 9,605 | $ | 9,805 | ||||||
Brandywine |
1,510 | 1,721 | 1,775 | |||||||||
Other Run-off |
343 | 362 | 386 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 11,353 | $ | 11,688 | $ | 11,966 | ||||||
|
|
|
|
|
|
|||||||
Gross reinsurance recoverable |
||||||||||||
Active operations |
$ | 10,084 | $ | 10,178 | $ | 10,434 | ||||||
Brandywine |
1,758 | 1,955 | 2,007 | |||||||||
Other Run-off |
381 | 404 | 427 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 12,223 | $ | 12,537 | $ | 12,868 | ||||||
|
|
|
|
|
|
|||||||
Provision for uncollectible reinsurance (1) |
||||||||||||
Active operations |
$ | (294 | ) | $ | (300 | ) | $ | (299 | ) | |||
Brandywine |
(158 | ) | (161 | ) | (160 | ) | ||||||
Other Run-off |
(19 | ) | (19 | ) | (20 | ) | ||||||
|
|
|
|
|
|
|||||||
Total |
$ | (471 | ) | $ | (480 | ) | $ | (479 | ) | |||
|
|
|
|
|
|
|||||||
Net reinsurance recoverable |
||||||||||||
Active operations |
$ | 9,790 | $ | 9,878 | $ | 10,135 | ||||||
Brandywine |
1,600 | 1,794 | 1,847 | |||||||||
Other Run-off |
362 | 385 | 407 | |||||||||
|
|
|
|
|
|
|||||||
Total |
$ | 11,752 | $ | 12,057 | $ | 12,389 | ||||||
|
|
|
|
|
|
(1) | The provision for uncollectible reinsurance is based on a default analysis applied to gross reinsurance recoverables, net of approximately $2.8 billion of collateral. |
Reinsurance Recoverable | Page 11 |
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ACE Limited Investment Portfolio (in millions of U.S. dollars) (Unaudited) |
June 30 | March 31 | December 31 | ||||||||||||||||||||||
2012 | 2012 | 2011 | ||||||||||||||||||||||
Market Value |
||||||||||||||||||||||||
Fixed maturities available for sale |
$ | 44,386 | $ | 43,468 | $ | 41,967 | ||||||||||||||||||
Fixed maturities held to maturity |
8,062 | 8,348 | 8,605 | |||||||||||||||||||||
Short-term investments |
2,260 | 2,099 | 2,301 | |||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Total |
$ | 54,708 | $ | 53,915 | $ | 52,873 | ||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Asset Allocation by Market Value |
||||||||||||||||||||||||
Treasury |
$ | 2,614 | 5 | % | $ | 2,451 | 5 | % | $ | 2,361 | 5 | % | ||||||||||||
Agency |
1,816 | 3 | % | 1,811 | 3 | % | 1,725 | 3 | % | |||||||||||||||
Corporate and asset-backed |
17,581 | 32 | % | 17,618 | 33 | % | 17,030 | 32 | % | |||||||||||||||
Mortgage-backed |
12,725 | 23 | % | 12,800 | 24 | % | 13,237 | 25 | % | |||||||||||||||
Municipal (1) |
3,495 | 7 | % | 3,295 | 6 | % | 2,888 | 6 | % | |||||||||||||||
Non-U.S. |
14,217 | 26 | % | 13,841 | 26 | % | 13,331 | 25 | % | |||||||||||||||
Short-term investments |
2,260 | 4 | % | 2,099 | 3 | % | 2,301 | 4 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 54,708 | 100 | % | $ | 53,915 | 100 | % | $ | 52,873 | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Note: Insured municipal bonds represent $691 million, or 20% of our municipal bond holdings.
|
| |||||||||||||||||||||||
Credit Quality by Market Value |
||||||||||||||||||||||||
AAA |
$ | 9,132 | 17 | % | $ | 9,115 | 17 | % | $ | 9,284 | 18 | % | ||||||||||||
AA |
20,931 | 38 | % | 20,665 | 38 | % | 20,562 | 39 | % | |||||||||||||||
A |
10,400 | 19 | % | 10,523 | 20 | % | 10,106 | 19 | % | |||||||||||||||
BBB |
6,243 | 11 | % | 6,244 | 12 | % | 6,152 | 12 | % | |||||||||||||||
BB |
4,298 | 8 | % | 4,009 | 7 | % | 3,755 | 7 | % | |||||||||||||||
B |
3,217 | 6 | % | 2,828 | 5 | % | 2,428 | 4 | % | |||||||||||||||
Other |
487 | 1 | % | 531 | 1 | % | 586 | 1 | % | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total |
$ | 54,708 | 100 | % | $ | 53,915 | 100 | % | $ | 52,873 | 100 | % | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Cost/Amortized Cost |
||||||||||||||||||||||||
Fixed maturities available for sale |
$ | 42,316 | $ | 41,661 | $ | 40,450 | ||||||||||||||||||
Fixed maturities held to maturity |
7,782 | 8,117 | 8,447 | |||||||||||||||||||||
Short-term investments |
2,260 | 2,099 | 2,301 | |||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Subtotal |
52,358 | 51,877 | 51,198 | |||||||||||||||||||||
Equity securities |
724 | 662 | 671 | |||||||||||||||||||||
Other investments |
2,297 | 2,221 | 2,112 | |||||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Total |
$ | 55,379 | $ | 54,760 | $ | 53,981 | ||||||||||||||||||
|
|
|
|
|
|
|||||||||||||||||||
Avg. duration of fixed maturities |
3.8 years | 3.9 years | 3.7 years | |||||||||||||||||||||
Avg. market yield of fixed maturities (2) |
2.8 | % | 3.0 | % | 3.1 | % | ||||||||||||||||||
Avg. credit quality (3) |
A/Aa | A/Aa | A/Aa | |||||||||||||||||||||
Avg. yield on invested assets (4) |
3.9 | % | 4.0 | % | 4.2 | % |
(1) | The rating of the municipal portfolio is AA with 12% of our holdings pre-funded with AA/Aaa Federal securities. The portfolio is highly diversified predominantly in State general obligation bonds and essential service revenue bonds, including education and utilities (water, power, and sewers). |
(2) | Weighted average yield to maturity of our fixed income portfolio based on the market prices of the holdings as of that date. |
(3) | We use a split rating due to S&P's downgrade of U.S. Treasury and Agency securities. |
(4) | Net investment income divided by average cost of fixed maturities and other investments, and average market value of equity securities. |
Investments | Page 12 |
![]() |
ACE Limited Investment Portfolio - 2 (in millions of U.S. dollars) (Unaudited) |
Mortgage-backed Fixed Income Portfolio
Mortgage-backed securities
S&P Credit Rating | ||||||||||||||||||||||||
AAA | AA | A | BBB | BB and below | Total | |||||||||||||||||||
Market Value at June 30, 2012 |
||||||||||||||||||||||||
Agency residential mortgage-backed (RMBS) |
$ | | $ | 10,942 | $ | | $ | | $ | | $ | 10,942 | ||||||||||||
Non-agency RMBS |
145 | 6 | 24 | 10 | 399 | 584 | ||||||||||||||||||
Commercial mortgage-backed |
1,164 | 18 | 10 | 7 | | 1,199 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total mortgage-backed securities at market value |
$ | 1,309 | $ | 10,966 | $ | 34 | $ | 17 | $ | 399 | $ | 12,725 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
S&P Credit Rating | ||||||||||||||||||||||||
AAA | AA | A | BBB | BB and below | Total | |||||||||||||||||||
Amortized Cost at June 30, 2012 |
||||||||||||||||||||||||
Agency RMBS |
$ | | $ | 10,480 | $ | | $ | | $ | | $ | 10,480 | ||||||||||||
Non-agency RMBS |
145 | 6 | 24 | 11 | 476 | 662 | ||||||||||||||||||
Commercial mortgage-backed |
1,090 | 16 | 9 | 6 | | 1,121 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total mortgage-backed securities at amortized cost |
$ | 1,235 | $ | 10,502 | $ | 33 | $ | 17 | $ | 476 | $ | 12,263 | ||||||||||||
|
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|
|
|
|
|
|
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|
|
Mortgage-backed securities total $12.7 billion, are rated predominantly AA and comprise 23% of the fixed income portfolio. This compares to a 32% mortgage-backed weighting in representative indices of the U.S. fixed income market. The minimum rating for initial purchases of mortgage-backed securities is AA for agency mortgages and AAA for non-agency mortgages.
Securities issued by Federal agencies with implied or explicit government guarantees total $10.9 billion and represent 95% of the residential mortgage-backed portfolio.
Non-agency residential mortgage-backed securities are backed by prime collateral, and broadly diversified in over 47,000 loans. The portfolios original loan-to-value ratio is approximately 67% with an average FICO score of 730. With this conservative loan-to-value ratio and subordinated collateral of 5%, the cumulative 5-year foreclosure rate would have to rise to 15% before principal is significantly impaired. The foreclosure rate of ACE's non-agency RMBS portfolio at June 30, 2012 was 8%.
Commercial mortgage-backed securities of $1.2 billion are rated predominantly AAA, broadly diversified with over 13,000 loans and seasoned with 47% of the portfolio issued before 2006 and 38% of the portfolio issued after 2009. The average loan-to-value ratio is approximately 64% with a debt service coverage ratio in excess of 1.9 and weighted average subordinated collateral of 30%. The cumulative foreclosure rate would have to rise to 42% before principal is impaired. The foreclosure rate of ACE's commercial mortgage-backed securities portfolio at June 30, 2012 was about 2.3%.
Investments 2 | Page 13 |
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ACE Limited Investment Portfolio - 3 (in millions of U.S. dollars) (Unaudited) |
U.S. Corporate and Asset-backed Fixed Income Portfolios
Market Value at June 30, 2012
S&P Credit Rating | ||||||||||||||||||||
Investment Grade | ||||||||||||||||||||
AAA | AA | A | BBB | Total | ||||||||||||||||
Asset-backed |
$ | 231 | $ | 86 | $ | 1 | $ | | $ | 318 | ||||||||||
Banks |
| 21 | 2,142 | 355 | 2,518 | |||||||||||||||
Basic Materials |
| | 105 | 224 | 329 | |||||||||||||||
Communications |
| | 600 | 740 | 1,340 | |||||||||||||||
Consumer, Cyclical |
| 91 | 273 | 234 | 598 | |||||||||||||||
Consumer, Non-Cyclical |
59 | 495 | 798 | 540 | 1,892 | |||||||||||||||
Diversified Financial Services |
| 68 | 229 | 118 | 415 | |||||||||||||||
Energy |
79 | 14 | 208 | 602 | 903 | |||||||||||||||
Industrial |
| 400 | 323 | 138 | 861 | |||||||||||||||
Utilities |
| 14 | 488 | 526 | 1,028 | |||||||||||||||
All Others |
47 | 195 | 365 | 483 | 1,090 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 416 | $ | 1,384 | $ | 5,532 | $ | 3,960 | $ | 11,292 | ||||||||||
|
|
|
|
|
|
|
|
|
|
U.S. Investment Grade Corporate Fixed Income Portfolio
The average credit quality of ACE's US investment grade bond portfolio is high at A.
ACE prohibits investments in complex structured securities (e.g., CDOs, CLOs) and over-the-counter derivatives and does not permit the use of portfolio leverage.
Corporate bond holdings are highly diversified across industries and geographies. Issuer limits are based on credit rating (AA 2%, A 1%, BBB 0.5% of total portfolio) and are monitored on a daily basis by ACE via an internal compliance system.
Market Value at June 30, 2012
S&P Credit Rating | ||||||||||||||||
Below Investment Grade | ||||||||||||||||
BB | B | CCC | Total | |||||||||||||
Asset-backed |
$ | 4 | $ | 5 | $ | 4 | $ | 13 | ||||||||
Banks |
1 | 9 | | 10 | ||||||||||||
Basic Materials |
213 | 126 | 4 | 343 | ||||||||||||
Communications |
435 | 522 | 9 | 966 | ||||||||||||
Consumer, Cyclical |
439 | 448 | 25 | 912 | ||||||||||||
Consumer, Non-Cyclical |
729 | 617 | 7 | 1,353 | ||||||||||||
Diversified Financial Services |
54 | 81 | 6 | 141 | ||||||||||||
Energy |
738 | 326 | 15 | 1,079 | ||||||||||||
Industrial |
378 | 316 | 8 | 702 | ||||||||||||
Utilities |
272 | 51 | 10 | 333 | ||||||||||||
All Others |
197 | 236 | 4 | 437 | ||||||||||||
|
|
|
|
|
|
|
|
|||||||||
Total |
$ | 3,460 | $ | 2,737 | $ | 92 | $ | 6,289 | ||||||||
|
|
|
|
|
|
|
|
U.S. Below Investment Grade Corporate Fixed Income Portfolio
ACE manages high yield bonds as a distinct and separate asset class from investment grade bonds. ACEs allocation to high yield bonds is explicitly set by internal management and is targeted to securities in the upper tier of credit quality (BB/B). Our minimum rating for initial purchase is BB/B.
Six external investment managers are responsible for high yield security selection and portfolio construction.
ACEs high yield managers have a conservative approach to credit selection and very low historical default experience.
Securities holdings are highly diversified across industries and are subject to a 1.5% issuer limit as a percentage of high yield allocation. The portfolio comprises over 750 issuers with our largest current issuer exposure at $95 million. ACE monitors position limits on a daily basis through an internal compliance system.
Derivative and structured securities (e.g., credit default swaps, CLOs) are not permitted in high yield portfolios.
Investments 3 | Page 14 |
![]() |
ACE Limited Investment Portfolio - 4 (in millions of U.S. dollars) (Unaudited) |
Non-U.S. Fixed Income Portfolio
June 30, 2012
Market Value by S&P Credit Rating | Amortized Cost |
|||||||||||||||||||||||||||
AAA | AA | A | BBB | BB and below | Total | |||||||||||||||||||||||
United Kingdom |
$ | 1,191 | $ | | $ | | $ | | $ | | $ | 1,191 | $ | 1,152 | ||||||||||||||
Canada |
939 | | | | | 939 | 906 | |||||||||||||||||||||
Republic of Korea |
| | 488 | | | 488 | 456 | |||||||||||||||||||||
Germany |
409 | | | | | 409 | 401 | |||||||||||||||||||||
Japan |
| 378 | | | | 378 | 376 | |||||||||||||||||||||
Province of Ontario |
| 230 | | | | 230 | 219 | |||||||||||||||||||||
Federative Republic of Brazil |
| | | 201 | | 201 | 196 | |||||||||||||||||||||
Kingdom of Thailand |
| | 140 | 20 | | 160 | 156 | |||||||||||||||||||||
Province of Quebec |
| | 157 | | | 157 | 146 | |||||||||||||||||||||
Commonwealth of Australia |
149 | 1 | | | | 150 | 134 | |||||||||||||||||||||
France |
| 134 | | | | 134 | 130 | |||||||||||||||||||||
State of Queensland |
75 | 57 | | | | 132 | 123 | |||||||||||||||||||||
Swiss Confederation |
128 | | | | | 128 | 121 | |||||||||||||||||||||
Peoples Republic of China |
70 | 50 | | | | 120 | 117 | |||||||||||||||||||||
Federation of Malaysia |
| | 117 | | | 117 | 116 | |||||||||||||||||||||
United Mexican States |
| | 35 | 70 | | 105 | 98 | |||||||||||||||||||||
State of New South Wales |
77 | | | | | 77 | 72 | |||||||||||||||||||||
Taiwan |
| 76 | | | | 76 | 75 | |||||||||||||||||||||
State of Victoria |
60 | | | | | 60 | 56 | |||||||||||||||||||||
Socialist Republic of Vietnam |
| | | | 54 | 54 | 50 | |||||||||||||||||||||
Republic of Indonesia |
| | | | 50 | 50 | 49 | |||||||||||||||||||||
Russian Federation |
| | | 47 | | 47 | 47 | |||||||||||||||||||||
Republic of Colombia |
| | | 40 | | 40 | 39 | |||||||||||||||||||||
Republic of Austria |
| 40 | | | | 40 | 39 | |||||||||||||||||||||
Dominion of New Zealand |
| 39 | | | | 39 | 38 | |||||||||||||||||||||
Other Non-U.S. Government |
241 | 211 | 96 | 60 | 126 | 734 | 707 | |||||||||||||||||||||
|
|
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|
|
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|
|
|
|
|
|
|
|||||||||||||||
Non-U.S. Government Securities |
$ | 3,339 | $ | 1,216 | $ | 1,033 | $ | 438 | $ | 230 | $ | 6,256 | $ | 6,019 | ||||||||||||||
Eurozone Non-U.S. Corporate (1) |
640 | 334 | 507 | 477 | 411 | 2,369 | 2,304 | |||||||||||||||||||||
Other Non-U.S. Corporate |
767 | 591 | 2,339 | 1,284 | 611 | 5,592 | 5,344 | |||||||||||||||||||||
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|
|
|||||||||||||||
$ | 4,746 | $ | 2,141 | $ | 3,879 | $ | 2,199 | $ | 1,252 | $ | 14,217 | $ | 13,667 | |||||||||||||||
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|
|
(1) | Excludes United Kingdom |
Non-U.S. Fixed Income Portfolio
ACEs non-U.S. investment grade fixed income portfolios are currency-matched with the insurance liabilities of ACEs non-U.S. operations.
78% of ACEs non-U.S. fixed income portfolios are denominated in G7 currencies.
Average credit quality of non-U.S. fixed income securities is very high at A and 54% of holdings are rated AAA or guaranteed by governments or quasi-government agencies.
Corporate bond holdings are highly diversified across industries and geographies. Issuer limits are based on credit rating (AA 2%, A 1%, BBB 0.5% of total portfolio) and are monitored on a daily basis by ACE via an internal compliance system.
Investments 4 | Page 15 |
![]() |
ACE Limited Investment Portfolio - 5 (in millions of U.S. dollars) (Unaudited) |
Eurozone Non-U.S. Fixed Income Portfolio (Excluding United Kingdom)
June 30, 2012
Market Value by Industry | Amortized Cost |
|||||||||||||||||||||||
Bank | Financial | Industrial | Utility | Total | ||||||||||||||||||||
Netherlands |
$ | 225 | $ | 133 | $ | 320 | $ | 124 | $ | 802 | $ | 770 | ||||||||||||
France |
98 | 37 | 115 | 146 | 396 | 392 | ||||||||||||||||||
Germany |
284 | 2 | 76 | 7 | 369 | 356 | ||||||||||||||||||
Luxembourg |
11 | 2 | 243 | 95 | 351 | 347 | ||||||||||||||||||
Euro Supranational |
197 | | | | 197 | 189 | ||||||||||||||||||
Ireland |
12 | 1 | 87 | 17 | 117 | 110 | ||||||||||||||||||
Spain |
10 | 4 | 18 | 5 | 37 | 42 | ||||||||||||||||||
Italy |
25 | | 6 | 3 | 34 | 32 | ||||||||||||||||||
Austria |
20 | | 7 | 1 | 28 | 27 | ||||||||||||||||||
Finland |
13 | 1 | 8 | 2 | 24 | 26 | ||||||||||||||||||
Belgium |
| | 12 | 1 | 13 | 12 | ||||||||||||||||||
Portugal |
| | 1 | | 1 | 1 | ||||||||||||||||||
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|
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Eurozone Non-U.S. Corporate Securities |
$ | 895 | $ | 180 | $ | 893 | $ | 401 | $ | 2,369 | $ | 2,304 | ||||||||||||
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Note: ACE has no investments in Greece
Top 10 Exposures - Eurozone Banks (Excluding United Kingdom)
June 30, 2012 |
Market Value | Amortized Cost | Rating | |||||||
European Investment Bank |
$ | 166 | $ | 160 | AAA | |||||
KFW |
156 | 150 | AAA | |||||||
Rabobank Nederland NV |
109 | 104 | AA | |||||||
Deutsche Bank AG |
46 | 45 | A+ | |||||||
Bank Nederlandse Gemeenten |
41 | 40 | AAA | |||||||
ABN AMRO Group NV |
32 | 30 | A+ | |||||||
Nederlandse Waterschapsbank NV |
28 | 27 | AAA | |||||||
Credit Agricole Groupe |
27 | 27 | A | |||||||
BNP Paribas SA |
25 | 24 | AA- | |||||||
Erste Abwicklungsanstalt |
23 | 23 | AA- |
Top 10 Exposures - Eurozone Corporate (Excluding United Kingdom)
June 30, 2012 |
Market Value |
Amortized Cost |
Rating | |||||||
EDF SA |
$ | 79 | $ | 79 | A+ | |||||
ING Groep NV |
77 | 78 | A | |||||||
Intelsat SA |
73 | 71 | B | |||||||
Deutsche Telekom AG |
69 | 63 | BBB+ | |||||||
Royal Dutch Shell PLC |
64 | 59 | AA | |||||||
LyondellBasell Industries NV |
55 | 51 | BB+ | |||||||
France Telecom SA |
41 | 39 | A- | |||||||
Gazprom OAO |
40 | 38 | BBB | |||||||
General Electric Co |
38 | 35 | AA+ | |||||||
Liberty Global Inc |
38 | 35 | B+ |
Investments 5 | Page 16 |
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ACE Limited Investment Portfolio - 6 (in millions of U.S. dollars) (Unaudited) |
Investment portfolio
Top 25 Exposures - Fixed Maturity Investments
June 30, 2012 |
Market Value | Rating | ||||
1 General Electric Co |
$ | 430 | AA+ | |||
2 JP Morgan Chase & Co |
426 | A | ||||
3 Citigroup Inc |
350 | A- | ||||
4 Bank of America Corp |
314 | A- | ||||
5 The Goldman Sachs Group Inc |
307 | A- | ||||
6 Verizon Communications Inc |
278 | A- | ||||
7 Morgan Stanley |
267 | A- | ||||
8 AT&T INC |
223 | A- | ||||
9 Wells Fargo & Co |
203 | A+ | ||||
10 HSBC Holdings Plc |
197 | A+ | ||||
11 Comcast Corp |
164 | BBB+ | ||||
12 Kraft Foods Inc |
164 | BBB | ||||
13 Lloyds Banking Group Plc |
162 | A- | ||||
14 Royal Bank of Scotland Group Plc |
156 | A- | ||||
15 Time Warner Cable Inc |
138 | BBB | ||||
16 Barclays Plc |
136 | A | ||||
17 ConocoPhillips |
127 | A | ||||
18 BP Plc |
123 | A | ||||
19 Pfizer Inc |
121 | AA | ||||
20 UBS AG |
121 | A | ||||
21 American Express Co |
120 | BBB+ | ||||
22 Credit Suisse Group |
116 | A | ||||
23 Anheuser-Busch InBev NV |
111 | A | ||||
24 Rabobank Nederland NV |
109 | AA | ||||
25 Enterprise Products Partners LP |
105 | BBB |
Investments 6 | Page 17 |
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ACE Limited Net Realized and Unrealized Gains (Losses) (in millions of U.S. dollars) (Unaudited) |
Three months ended June 30, 2012 | Six months ended June 30, 2012 | |||||||||||||||||||||||
Net Realized Gains (Losses) (1) |
Net Unrealized Gains (Losses) |
Net Impact |
Net Realized Gains (Losses) (1) |
Net Unrealized Gains (Losses) |
Net Impact |
|||||||||||||||||||
Fixed maturities |
$ | 68 | $ | 251 | $ | 319 | $ | 102 | $ | 494 | $ | 596 | ||||||||||||
Fixed income derivatives |
(49 | ) | | (49 | ) | (7 | ) | | (7 | ) | ||||||||||||||
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|
|||||||||||||
Total fixed maturities |
19 | 251 | 270 | 95 | 494 | 589 | ||||||||||||||||||
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Public equity |
(5 | ) | (9 | ) | (14 | ) | (4 | ) | 29 | 25 | ||||||||||||||
Private equity |
(6 | ) | 16 | 10 | 17 | 23 | 40 | |||||||||||||||||
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|
|||||||||||||
Total equity |
(11 | ) | 7 | (4 | ) | 13 | 52 | 65 | ||||||||||||||||
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|
|
|
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|
|||||||||||||
Mark-to-market gains (losses) from derivative transactions (2) |
(396 | ) | | (396 | ) | (204 | ) | | (204 | ) | ||||||||||||||
Foreign exchange gains (losses) (2) |
(9 | ) | | (9 | ) | (14 | ) | | (14 | ) | ||||||||||||||
Other |
3 | (3 | ) | | 1 | 1 | 2 | |||||||||||||||||
Partially-owned entities (3) |
1 | | 1 | (6 | ) | | (6 | ) | ||||||||||||||||
Income tax expense |
22 | 47 | 69 | 28 | 96 | 124 | ||||||||||||||||||
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|||||||||||||
Net gains |
$ | (415 | ) | $ | 208 | $ | (207 | ) | $ | (143 | ) | $ | 451 | $ | 308 | |||||||||
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(1) | Other-than-temporary impairments for the quarter includes $1 million for fixed maturities, $5 million for private equity, and $4 million for public equity. Year to date other-than-temporary impairments includes $8 million for fixed maturities, $7 million for private equity, and $5 million for public equity. |
(2) | Includes $397 million of realized losses from variable annuity reinsurance for the quarter which includes $467 million in mark-to-market losses from derivative transactions, net of $70 million of gains on applicable hedges. The variable annuity reinsurance foreign exchange losses for the quarter were $29 million. For the year, the $200 million of realized losses from variable annuity reinsurance includes $39 million in mark-to-market losses from derivative transactions and $161 million of losses on applicable hedges. The variable annuity reinsurance foreign exchange gains for the year were $6 million. |
(3) | Partially-owned entities are investments where we hold more than an insignificant percentage of the investee's shares. The net income or loss is included in other income (expense). |
Three months ended June 30, 2011 | Six months ended June 30, 2011 | |||||||||||||||||||||||
Net Realized Gains (Losses) (4) |
Net Unrealized Gains (Losses) |
Net Impact |
Net Realized Gains (Losses) (4) |
Net Unrealized Gains (Losses) |
Net Impact |
|||||||||||||||||||
Fixed maturities |
$ | 74 | $ | 202 | $ | 276 | $ | 123 | $ | 163 | $ | 286 | ||||||||||||
Fixed income derivatives |
(48 | ) | | (48 | ) | (68 | ) | | (68 | ) | ||||||||||||||
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|
|||||||||||||
Total fixed maturities |
26 | 202 | 228 | 55 | 163 | 218 | ||||||||||||||||||
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|||||||||||||
Public Equity |
4 | 6 | 10 | 11 | 8 | 19 | ||||||||||||||||||
Private equity |
(3 | ) | 12 | 9 | 30 | 56 | 86 | |||||||||||||||||
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|
|
|
|||||||||||||
Total equity |
1 | 18 | 19 | 41 | 64 | 105 | ||||||||||||||||||
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|
|
|
|
|
|
|
|||||||||||||
Mark-to-market gains (losses) from derivative transactions (5) |
(69 | ) | | (69 | ) | (70 | ) | | (70 | ) | ||||||||||||||
Foreign exchange gains (losses) (5) |
(30 | ) | | (30 | ) | (109 | ) | | (109 | ) | ||||||||||||||
Other |
(1 | ) | 3 | 2 | (2 | ) | 6 | 4 | ||||||||||||||||
Partially-owned entities (6) |
2 | 2 | 4 | 3 | 2 | 5 | ||||||||||||||||||
Income tax expense |
8 | 74 | 82 | 6 | 60 | 66 | ||||||||||||||||||
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|
|||||||||||||
Net gains (losses) |
$ | (79 | ) | $ | 151 | $ | 72 | $ | (88 | ) | $ | 175 | $ | 87 | ||||||||||
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(4) | Other-than-temporary impairments for the quarter of $8 million include $5 million for fixed maturities and $3 million for other investments. Year to date other-than-temporary impairments of $12 million include $9 million for fixed maturities, and $3 million for private equity. |
(5) | Includes $67 million of realized losses from variable annuity reinsurance for the quarter which includes $70 million in mark-to-market losses from derivative transactions, net of $3 million of gains on applicable hedges. The variable annuity reinsurance foreign exchange losses for the quarter were $5 million. For the year, the $67 million of realized losses from variable annuity reinsurance includes $1 million in mark-to-market gains from derivative transactions and $68 million of losses on applicable hedges. The variable annuity reinsurance foreign exchange losses for the year were $18 million. |
(6) | Partially-owned entities are investments where we hold more than an insignificant percentage of the investee's shares. The net income or loss is included in other income (expense). |
Investment Gains (Losses) | Page 18 |
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ACE Limited Capital Structure (in millions of U.S. dollars, except ratios) (Unaudited) |
June 30 | March 31 | December 31 | December 31 | |||||||||||||
2012 | 2012 | 2011 | 2010 | |||||||||||||
Total short-term debt (1) |
$ | 1,401 | $ | 1,531 | $ | 1,251 | $ | 1,300 | ||||||||
Total long-term debt |
3,360 | 3,360 | 3,360 | 3,358 | ||||||||||||
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|
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Total debt |
$ | 4,761 | $ | 4,891 | $ | 4,611 | $ | 4,658 | ||||||||
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|
|||||||||
Total trust preferred securities |
$ | 309 | $ | 309 | $ | 309 | $ | 309 | ||||||||
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|
|||||||||
Total shareholders' equity |
$ | 25,762 | $ | 25,431 | $ | 24,332 | $ | 22,835 | ||||||||
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|
|||||||||
Total capitalization |
$ | 30,832 | $ | 30,631 | $ | 29,252 | $ | 27,802 | ||||||||
Tangible capital (2) |
$ | 26,006 | $ | 25,771 | $ | 24,453 | $ | 23,138 | ||||||||
Leverage ratios |
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Debt/ total capitalization |
15.4 | % | 16.0 | % | 15.8 | % | 16.8 | % | ||||||||
Debt plus trust preferred securities/ total capitalization |
16.4 | % | 17.0 | % | 16.8 | % | 17.9 | % | ||||||||
Debt/ tangible capital |
18.3 | % | 19.0 | % | 18.9 | % | 20.1 | % | ||||||||
Debt plus trust preferred securities/ tangible capital |
19.5 | % | 20.2 | % | 20.1 | % | 21.5 | % |
Note: As of June 30, 2012, there was $1.5 billion usage of credit facilities on a total commitment of $2.4 billion.
(1) | Repurchase agreements in the amount of $850 million matured during the quarter, and there were new repurchase agreements in the amount of $850 million. |
(2) | Tangible capital is equal to total capitalization less goodwill and other intangible assets. |
Capital Structure | Page 19 |
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Computation of Basic and Diluted Earnings Per Share (in millions of U.S. dollars, except share and per share data) (Unaudited) |
Three months ended June 30 | Six months ended June 30 | |||||||||||||||
2012 | 2011 | 2012 | 2011 | |||||||||||||
Numerator |
||||||||||||||||
Income to common shares, excl. net realized gains (losses) (1) |
$ | 743 | $ | 673 | $ | 1,444 | $ | 932 | ||||||||
Net realized gains (losses), net of income tax |
(415 | ) | (79 | ) | (143 | ) | (88 | ) | ||||||||
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|
|||||||||
Net income |
$ | 328 | $ | 594 | $ | 1,301 | $ | 844 | ||||||||
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|||||||||
Rollforward of Common Shares Outstanding |
||||||||||||||||
Shares - beginning of period |
338,653,382 | 337,173,864 | 336,927,276 | 334,942,852 | ||||||||||||
Repurchase of shares |
| | (100,000 | ) | | |||||||||||
Shares issued, excluding option exercises |
87,454 | 39,662 | 1,124,163 | 1,396,408 | ||||||||||||
Issued for option exercises |
320,049 | 698,798 | 1,109,446 | 1,573,064 | ||||||||||||
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Shares - end of period |
339,060,885 | 337,912,324 | 339,060,885 | 337,912,324 | ||||||||||||
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Denominator |
||||||||||||||||
Weighted average shares outstanding |
339,766,067 | 338,920,580 | 339,164,449 | 338,021,487 | ||||||||||||
Effect of other dilutive securities |
2,907,971 | 2,768,388 | 3,006,950 | 2,596,909 | ||||||||||||
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Adj. wtd. avg. shares outstanding and assumed conversions |
342,674,038 | 341,688,968 | 342,171,399 | 340,618,396 | ||||||||||||
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Basic earnings per share |
||||||||||||||||
Income excluding net realized gains (losses) (1) |
$ | 2.18 | $ | 1.98 | $ | 4.25 | $ | 2.76 | ||||||||
Net realized gains (losses), net of income tax |
(1.22 | ) | (0.23 | ) | (0.42 | ) | (0.26 | ) | ||||||||
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|||||||||
Net income |
$ | 0.96 | $ | 1.75 | $ | 3.83 | $ | 2.50 | ||||||||
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Diluted earnings per share |
||||||||||||||||
Income excluding net realized gains (losses) (1) |
$ | 2.17 | $ | 1.97 | $ | 4.22 | $ | 2.74 | ||||||||
Net realized gains (losses), net of income tax |
(1.21 | ) | (0.23 | ) | (0.42 | ) | (0.26 | ) | ||||||||
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|
|||||||||
Net income |
$ | 0.96 | $ | 1.74 | $ | 3.80 | $ | 2.48 | ||||||||
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(1) | See Non-GAAP Financial Measures. |
Earnings per share | Page 20 |
![]() |
ACE Limited Non-GAAP Financial Measures (in millions of U.S. dollars) (Unaudited) |
Regulation G - Non-GAAP Financial Measures
In presenting our results, we have included and discussed certain non-GAAP measures. These non-GAAP measures, which may be defined differently by other companies, are important for an understanding of our overall results of operations. However, they should not be viewed as a substitute for measures determined in accordance with generally accepted accounting principles (GAAP). A reconciliation of book value per common share is provided on page 23.
In presenting our segment operating results, we have shown our performance with reference to underwriting results. Underwriting results are calculated by subtracting losses and loss expenses, policy benefits, policy acquisition costs, and administrative expenses from net premiums earned. We use underwriting results and operating ratios to monitor the results of our operations without the impact of certain factors, including investment income, other income and expenses, interest and income tax expense, and net realized gains (losses). Life underwriting income includes net investment income and gains (losses) from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP.
Loss and loss expense ratio excluding the impact of catastrophe losses and prior period development (PPD) is a non-GAAP financial measure. The loss ratio numerator includes Losses and loss expenses adjusted to exclude catastrophe losses and PPD. The loss ratio denominator includes Net premiums earned adjusted to exclude the amount of reinstatement premiums (expensed) collected. In periods where there are adjustments on loss sensitive policies, these adjustments are excluded from PPD and net earned premiums when calculating this ratio. We believe that excluding the impact of catastrophe losses and PPD provides a better evaluation of our core underwriting performance and enhances the understanding of the trends in our property & casualty business that may be obscured by these items.
Annualized ROE calculated using income excluding net realized gains (losses) is a non-GAAP financial measure. The ROE numerator includes income adjusted to exclude net realized gains (losses), net of tax. The ROE denominator includes the average shareholders equity for the period adjusted to exclude unrealized gains (losses) on investments, net of tax. To annualize a quarterly rate, multiply by four. Annualized ROE calculated using income excluding realized gains (losses), net of tax, is a useful measure as it enhances the understanding of the return on shareholders' equity by highlighting the underlying profitability relative to shareholders' equity excluding the effect of unrealized gains and losses on our investments.
Income excluding net realized gains (losses), net of tax, is a common performance measurement for insurance companies and non-GAAP measure. We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business. We exclude net realized gains (losses) and net realized gains (losses) included in other income (expense) related to partially owned entities because the amount of these gains (losses) is heavily influenced by, and fluctuates in part according to, the availability of market opportunities. Income excluding net realized gains (losses) should not be viewed as a substitute for net income determined in accordance with GAAP.
The following table presents the reconciliation of Net income to Income excluding net realized gains (losses):
YTD | YTD | Full Year | ||||||||||||||||||||||||||||||
2Q-12 | 1Q-12 | 4Q-11 | 3Q-11 | 2Q-11 | 2012 | 2011 | 2011 | |||||||||||||||||||||||||
Net income (loss), as reported |
$ | 328 | $ | 973 | $ | 735 | $ | (39 | ) | $ | 594 | $ | 1,301 | $ | 844 | $ | 1,540 | |||||||||||||||
Net realized gains (losses) |
(394 | ) | 260 | 83 | (760 | ) | (73 | ) | (134 | ) | (118 | ) | (795 | ) | ||||||||||||||||||
Net realized gains (losses) in other income (expense) (1) |
1 | 18 | 16 | (28 | ) | 2 | 19 | 36 | 24 | |||||||||||||||||||||||
Income tax expense on net realized gains (losses) |
22 | 6 | 12 | 2 | 8 | 28 | 6 | 20 | ||||||||||||||||||||||||
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Income excluding net realized gains (losses) |
$ | 743 | $ | 701 | $ | 648 | $ | 751 | $ | 673 | $ | 1,444 | $ | 932 | $ | 2,331 | ||||||||||||||||
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(1) | Realized gains (losses) on partially-owned entities, which are investments where we hold more than an insignificant percentage of the investee's shares. The net income or loss is included in other income (expense). |
Reconciliation Non-GAAP | Page 21 |
![]() |
ACE Limited Non-GAAP Financial Measures - 2 (in millions of U.S. dollars, except ratios) (Unaudited) |
Regulation G - Non-GAAP Financial Measures (continued)
The following table presents the reconciliation of effective tax rate to the effective tax rate on income excluding net realized gains (losses):
YTD | YTD | Full Year | ||||||||||||||||||||||||||||||
2Q-12 | 1Q-12 | 4Q-11 | 3Q-11 | 2Q-11 | 2012 | 2011 | 2011 | |||||||||||||||||||||||||
Tax expense, as reported |
$ | 148 | $ | 110 | $ | 120 | $ | 165 | $ | 121 | $ | 258 | $ | 217 | $ | 502 | ||||||||||||||||
Tax expense on net realized gains (losses) |
22 | 6 | 12 | 2 | 8 | 28 | 6 | 20 | ||||||||||||||||||||||||
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Tax expense, adjusted |
$ | 126 | $ | 104 | $ | 108 | $ | 163 | $ | 113 | $ | 230 | $ | 211 | $ | 482 | ||||||||||||||||
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Income before tax, as reported |
$ | 476 | $ | 1,083 | $ | 855 | $ | 126 | $ | 715 | $ | 1,559 | $ | 1,061 | $ | 2,042 | ||||||||||||||||
Less: realized gains (losses) |
(394 | ) | 260 | 83 | (760 | ) | (73 | ) | (134 | ) | (118 | ) | (795 | ) | ||||||||||||||||||
Less: realized gains (losses) in other income (expense) |
1 | 18 | 16 | (28 | ) | 2 | 19 | 36 | 24 | |||||||||||||||||||||||
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Income excluding net realized gains (losses) before tax |
$ | 869 | $ | 805 | $ | 756 | $ | 914 | $ | 786 | $ | 1,674 | $ | 1,143 | $ | 2,813 | ||||||||||||||||
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Effective tax rate |
31.0 | % | 10.2 | % | 14.1 | % | 131.9 | % | 16.9 | % | 16.6 | % | 20.4 | % | 24.6 | % | ||||||||||||||||
Adjustment for tax impact of net realized gains (losses) |
-16.4 | % | 2.8 | % | 0.3 | % | -114.2 | % | -2.5 | % | -2.8 | % | -2.0 | % | -7.5 | % | ||||||||||||||||
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Effective tax rate on income excluding net realized gains (losses) |
14.6 | % | 13.0 | % | 14.4 | % | 17.7 | % | 14.4 | % | 13.8 | % | 18.4 | % | 17.1 | % | ||||||||||||||||
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The following table presents the reconciliation of annualized ROE calculated using net income to annualized ROE calculated using income excluding net realized gains (losses):
YTD | YTD | Full Year | ||||||||||||||||||
2Q-12 | 2Q-11 | 2012 | 2011 | 2011 | ||||||||||||||||
Net income |
$ | 328 | $ | 594 | $ | 1,301 | $ | 844 | $ | 1,540 | ||||||||||
Income excluding net realized gains (losses) |
$ | 743 | $ | 673 | $ | 1,444 | $ | 932 | $ | 2,331 | ||||||||||
Equity - beginning of period, as reported |
$ | 25,431 | $ | 23,228 | $ | 24,332 | $ | 22,835 | $ | 22,835 | ||||||||||
Less: unrealized gains (losses) on investments, net of deferred tax |
1,958 | 1,423 | 1,715 | 1,399 | 1,399 | |||||||||||||||
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Equity - beginning of period, as adjusted |
$ | 23,473 | $ | 21,805 | $ | 22,617 | $ | 21,436 | $ | 21,436 | ||||||||||
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Equity - end of period, as reported |
$ | 25,762 | $ | 23,952 | $ | 25,762 | $ | 23,952 | $ | 24,332 | ||||||||||
Less: unrealized gains (losses) on investments, net of deferred tax |
2,166 | 1,574 | 2,166 | $ | 1,574 | 1,715 | ||||||||||||||
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Equity - end of period, as adjusted |
$ | 23,596 | $ | 22,378 | $ | 23,596 | $ | 22,378 | $ | 22,617 | ||||||||||
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Average equity, as reported |
$ | 25,597 | $ | 23,590 | $ | 25,047 | $ | 23,394 | $ | 23,584 | ||||||||||
Average equity, as adjusted |
$ | 23,535 | $ | 22,092 | $ | 23,107 | $ | 21,907 | $ | 22,027 | ||||||||||
Annualized ROE calculated using income excluding net realized gains (losses) |
12.6 | % | 12.2 | % | 12.5 | % | 8.5 | % | 10.6 | % | ||||||||||
Annualized ROE calculated using net income |
5.1 | % | 10.1 | % | 10.4 | % | 7.2 | % | 6.5 | % |
Reconciliation Non-GAAP 2 | Page 22 |
![]() |
ACE Limited Book Value and Book Value per Common Share (in millions of U.S. dollars, except share and per share data) (Unaudited) |
Reconciliation of Book Value per Common Share
June 30 | March 31 | December 31 | June 30 | |||||||||||||
2012 | 2012 | 2011 | 2011 | |||||||||||||
Shareholders equity |
$ | 25,762 | $ | 25,431 | $ | 24,332 | $ | 23,952 | ||||||||
Less: goodwill and other intangible assets |
4,826 | 4,860 | 4,799 | 4,826 | ||||||||||||
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Numerator for tangible book value per share |
$ | 20,936 | $ | 20,571 | $ | 19,533 | $ | 19,126 | ||||||||
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Book value - % change over prior quarter (1) |
1.3 | % | 4.5 | % | 3.2 | % | 3.1 | % | ||||||||
Tangible book value - % change over prior quarter (1) |
1.8 | % | 5.3 | % | 3.9 | % | 3.2 | % | ||||||||
Denominator |
339,060,885 | 338,653,382 | 336,927,276 | 337,912,324 | ||||||||||||
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Book value per common share |
$ | 75.98 | $ | 75.09 | $ | 72.22 | $ | 70.88 | ||||||||
Tangible book value per common share |
$ | 61.75 | $ | 60.74 | $ | 57.97 | $ | 56.60 | ||||||||
Reconciliation of Book Value |
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Shareholders equity, beginning of quarter |
$ | 25,431 | $ | 24,332 | $ | 23,581 | $ | 23,228 | ||||||||
Income excluding net realized gains (losses) |
743 | 701 | 648 | 673 | ||||||||||||
Net realized gains (losses), net of tax |
(415 | ) | 272 | 87 | (79 | ) | ||||||||||
Net unrealized gains (losses), net of tax |
208 | 243 | 189 | 151 | ||||||||||||
Repurchase of shares |
| (7 | ) | (32 | ) | | ||||||||||
Dividend declared on common shares |
(168 | ) | (200 | ) | (118 | ) | (119 | ) | ||||||||
Cumulative translation, net of tax |
(79 | ) | 56 | (123 | ) | 56 | ||||||||||
Pension liability |
| (1 | ) | 6 | | |||||||||||
Other (2) |
42 | 35 | 94 | 42 | ||||||||||||
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$ | 25,762 | $ | 25,431 | $ | 24,332 | $ | 23,952 | |||||||||
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(1) | At June 30, 2012, book value increased 5.9% and tangible book value increased 7.2% from December 31, 2011. |
(2) | Other primarily includes proceeds from exercise of stock options and stock compensation. |
Reconciliation Book Value | Page 23 |
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ACE Limited Glossary |
ACE Limited Consolidated comprises all segments including Corporate and Other.
Annualized return on equity calculated using income excluding net realized gains (losses): Income excluding net realized gains (losses), net of tax, divided by average shareholders equity for the period excluding unrealized gains (losses) on investments, net of tax. To annualize a quarterly rate multiply by four.
Book value per common share: Shareholders equity divided by the shares outstanding.
Combined Insurance: Combined Insurance Company of America, acquired April 1, 2008.
Combined ratio: The sum of the loss and loss expense ratio, acquisition cost ratio and the administrative expense ratio excluding life business. Calculated on a GAAP basis.
Effective tax rate on income excluding net realized gains (losses): Income tax expense excluding tax expense (benefit) on net realized gains (losses) divided by income excluding net realized gains (losses) before tax.
G7: A group of seven industrialized nations including Canada, France, Germany, Italy, Japan, United Kingdom, and the United States.
Life underwriting income: Net premiums earned and net investment income less policy benefits, acquisition costs, and administrative expenses. In addition, Life underwriting income includes gains/losses from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP.
NM: Not meaningful.
Tangible book value per common share: Shareholders equity less goodwill and other intangible assets divided by the shares outstanding.
Tangible capital: Total capitalization less goodwill and other intangible assets.
Total capitalization: Short-term debt, long-term debt, trust preferreds, and shareholders equity.
Glossary | Page 24 |
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