ACE Limited : Ace's 2nd Quarter Sank 45% on Realized Losses; Raises Outlook
07/24/2012| 04:45pm US/Eastern
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By Kristin Jones
Ace Ltd.'s (ACE) second-quarter profit sank 45% as the insurer booked heavy realized losses, masking a rise in premiums written.
The company raised its outlook for operating income to a range of $7.20 to $7.60 a share, up from its April view of $7.03 to $7.43, reflecting reserve development and lower-than-planned catastrophe losses. This includes the negative impacts of droughts across the U.S., which are expected to impact its crop insurance business.
Like other global insurers, Ace faced heavy catastrophe losses in 2011, due to devastating natural disasters in Japan and New Zealand, and a tough storm season in the U.S. Earlier this year, it saw earnings improve on fewer catastrophe losses.
The company last month agreed to acquire Jakarta-based general insurer PT Asuransi Jaya Proteksi in a $130 million deal intended to help Ace expand its business in Indonesia.
Ace posted a second-quarter profit of $328 million, or 96 cents a share, down from $594 million, or $1.74 a share, a year earlier. Operating income, which excludes investment gains and losses, rose to $2.17 a share from $1.97 a year earlier. Analysts polled by Thomson Reuters predicted a per-share profit of $1.91.
The insurer reported net realized losses of $143 million, compared with net realized losses of $88 million booked a year earlier.
Net realized losses from derivative accounting related to annuity reinsurance were $397 million.
Net premiums written rose 4.5%, or 6.5% on a constant-dollar basis. Investment income decreased 5.5%, due to the negative impact of currency exchanges and lower new money rates.
The property-and-casualty combined ratio -- the percentage of each dollar in premiums paid out on losses and expenses -- dropped to 88.7% from 92.7% a year ago.
Shares rose fractionally to $69.26 in after-hours trading. Through the close, the stock was down 1.4% so far this year.
Write to Kristin Jones at kristin.jones@dowjones.com
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