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Ace's Greenberg: Fourth-Quarter Rate Increases Are Best in Years

Source: BestWire

Posted on 31 Jan 2013 by Neilson

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Ace USAProperty/casualty pricing is improving in North America, and was up almost 4% in the fourth quarter, the top officer at Ace Ltd. said.

"We've had rate-on-rate increases for the second quarter in a row, and firmly expect this to continue," said Evan G. Greenberg, chairman and chief executive officer, during a conference call.

"From what I see today, I am more bullish about the pricing environment in the U.S. than I have been in some time. In fact, property aside, the level of rate increases we received in the fourth quarter, which has continued to the first quarter, is the best we have seen in a number of years," Greenberg said.

He said property rates rose by about 6% and directors and officers insurance was up 7% in the quarter.

Ace posted fourth-quarter net income of $765 million, up 4% over the same quarter a year ago.

For the year, net income rose 76% to $2.7 billion. This included $1.2 billion in underwriting income, up 11% over 2011.

"This is an excellent underwriting result, particularly given the worst drought conditions in the U.S. in 25 years as well as losses from Sandy," Greenberg said.

After-tax catastrophe losses for the fourth quarter were $400 million, net of reinsurance and including reinstatement premiums. That includes Hurricane Sandy losses of $502 million pre-tax.

The property/casualty combined ratio for the quarter rose to 105.5, which includes Sandy losses and a reserve strengthening of $140 million ($90 million after-tax) for asbestos and environmental and other run-off business. The combined ratio for the prior year's quarter was 93.

Operating income included a $121 million tax benefit from the prior resolution of prior years' tax matters.

Net premiums written for North America decreased 6.5% primarily due to increased crop insurance cessions to the U.S. government resulting from the government's profit and loss calculation formula, Ace said.

Greenberg said the company spent $1.25 billion on acquisitions in growth regions of the world, and was on target to close on two acquisitions in Mexico between the first and second quarters.

In October, Ace Ltd. said it would acquire ABA Seguros in Mexico from Ally Financial Inc. for about $865 million in cash. Established in 1958, ABA Seguros is Mexico's sixth-largest property/casualty insurer providing automobile, homeowners and small business coverages, Ace said.



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