ACE Reports Q1 2011 Results (Excerpt)

ZURICH, Switzerland – 06 May, 2011 – ACE Limited (NYSE: ACE; BSX: ACE.BH) reported net income for the quarter ended 31 March, 2011, of $0.76 per share, compared with $2.22 per share for the same quarter last year.(1) Income excluding net realized gains (losses) was $0.79 per share, compared with $1.70 per share for the same quarter last year.(2) Net after-tax catastrophe losses for the first quarter of 2011 were $443 million, including reinstatement premiums, or $1.30 per share, compared with $149 million, or $0.44 per share, for the first quarter of 2010. Book value increased $402 million, or 2%, during the quarter. Book value per share of $69.33 and tangible book value per share of $55.31 were up 1% from December 31, 2010. Annualized operating return on average equity for the quarter was 4.9%.(3) The property and casualty (P&C) combined ratio for the quarter was 105.0%.

Evan G. Greenberg, Chairman and Chief Executive Officer of ACE Limited, commented: “ACE had a very good quarter that was overshadowed by significant catastrophe losses. We produced $268 million in operating income and grew book value 2%. Our ROE and combined ratio were 4.9% and 105%, respectively. Excluding the catastrophe loss impact, our book value growth, ROE and current accident year combined ratio were 4%, 13%, and 91.8%, respectively. I believe this speaks to the health of our business, the strength of our risk management and the benefit of our broadly diversified business.

“Our revenue growth was better than we originally anticipated when we planned the year and the renewal persistency of our business was excellent. We also benefited in the quarter from positive client payroll and sales growth due to improved economic conditions. Finally, rates for our renewal business declined at the slowest pace we have experienced in a number of quarters.

“We are more confident today about our prospects for full-year premium growth than we were last quarter and now believe growth will be between upper single-digit and low double-digit. Not included in our projections, if markets firm in any individual geography or class as a result of the catastrophes and reach a point where we find the risk-reward attractive, we are well positioned to take advantage.”

Operating highlights for the quarter ended March 31, 2011, were as follows:

•               P&C net premiums written decreased 5% and net premiums earned were flat. Excluding the impact of one-time transactions from prior year and reinsurance reinstatement premiums paid in this quarter, P&C net premiums written were flat. 

•               Total pre-tax catastrophe losses including reinstatement premiums were $489 million, (approximately $247 million related to the Japan earthquake) compared with $173 million in the first quarter of 2010. The catastrophe losses represent 16.5 percentage points of the combined ratio.

•               The P&C combined ratio was 105.0% compared with 92.8% last year; excluding the impact of catastrophe losses and prior period development, the current accident year P&C combined ratio was 91.8% compared with 90.2%.

•               P&C underwriting loss was $145 million compared with income of $209 million in 2010; excluding the impact of catastrophe losses and prior period development, P&C underwriting income was $251 million compared with $286 million.

•               The expense ratio was 31.6% compared with 30.9% last year. Excluding the impact of reinsurance reinstatement premiums, the expense ratio was 30.8% compared with 30.6%.

•               Favorable prior period development pre-tax was $93 million compared with $96 million in 2010. The first quarter 2010 prior period development is net of $45 million in annual crop insurance profit-sharing commission that is included in the expense ratio.

•               Operating cash flow was $1 billion for the quarter.

•               Net loss reserves increased $574 million.

•               Net investment income increased 8% to $544 million due primarily to the investment of cash flow and benefiting from approximately $10 million in private equity distributions.

•               Annualized operating return on average equity was 4.9% for the quarter.(3) Excluding the impact of catastrophe losses, the annualized operating return on average equity was 12.9% for the quarter.

•               Book value per share(5) increased 1.1% from $68.59 at December 31, 2010, to $69.33.

•               Tangible book value per share(5) increased 1.2% from $54.66 at December 31, 2010, to $55.31.

•               Net realized and unrealized losses after tax from our investment portfolio totaled approximately $18 million.

Details of the financial results for the company’s business segments are available in the ACE Limited Financial Supplement. Key segment items for the quarter ended March 31, 2011, include:

•               Insurance-North American: Net premiums written decreased 8%. Excluding the impact of one-time transactions from prior year, net premiums written decreased 1%. The combined ratio was 95.0% compared with 90.7%. The combined ratio, excluding catastrophe losses and prior period development was 91.2% compared with 89.9%. The first quarter 2010 combined ratio includes a number of one-time transactions that increased the combined ratio by 0.8 percentage points.

•               Insurance-Overseas General: Net premiums written increased 1%. Excluding the impact of reinsurance reinstatement premiums, net premiums written increased 4%. The combined ratio increased to 107.2% compared with 95.0%. The combined ratio, excluding catastrophe losses and prior period development, was 92.1% compared with 91.1%.  

•               Global Reinsurance: Net premiums written decreased 15%. The combined ratio was 129.7% compared with 78.8%. The combined ratio, excluding catastrophe losses and prior period development, was 76.8% compared with 72.8%.

•               Life: Life revenues increased 5%. Operating income was $75 million compared with $72 million.

In light of the level of first quarter catastrophe losses, the company is adjusting guidance for the year. Operating income is now expected to range between $5.40 and $5.70 per share for the full year. This includes $443 million in catastrophe losses for the first quarter, plus $250 million in catastrophe losses for the balance of the year. The guidance also includes $74 million of after-tax positive prior period development reflected in the first quarter as well as an adjustment for the estimated increase to the investment income run rate.

For the full text of this release and the ACE Limited Financial Supplement, dated 31 March, 2011, visit the company’s website, www.acegroup.com , 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.

Celebrating 25 years of insuring progress, the ACE Group is a leader in insurance and reinsurance serving a diverse group of clients. Headed by ACE Limited (NYSE: ACE), a component of the S&P 500 stock index, the ACE Group conducts its business on a worldwide basis with operating subsidiaries in more than 50 countries. Additional information can be found at: www.acegroup.com.

Contacts

ACE Limited

Investor Contact:

Helen M. Wilson,                     Tel: 441-299-9283

                                                E-mail: helen.wilson@acegroup.com

or

Media Contact:

Stephen M. Wasdick,            Tel: 212-827-4444

                                             E-mail: stephen.wasdick@acegroup.com