ACE Limited (NYSE: ACE) today reported net operating income of $236 million for the quarter ended June 30, 2002 compared with $115 million for the same quarter in 2001. Net operating earnings per share, after deducting preferred dividends, was $0.85 for the current quarter compared with $0.45 for the same quarter last year. The second quarter of 2001 included catastrophe losses of $0.23 per share and goodwill amortization of $0.08 per share. Net income for the quarter ended June 30, 2002 was $104 million compared with $131 million for the same quarter last year, reflecting net realized losses of $125 million and debt prepayment expense of $7 million in the current quarter, compared with net realized gains of $20 million and a non-recurring expense of $4 million, in the same quarter in 2001. Earnings per share, after deducting preferred dividends, was $0.36 for the current quarter compared with $0.52 for the same quarter last year. The fully diluted book value per share of the company at June 30, 2002 was $24.21 compared with $23.59 at December 31, 2001.
Brian Duperreault, Chairman and Chief Executive Officer of ACE Limited, commented: "Evidence of a strong upturn in our business and a more durable hard market continues to mount. We enjoyed significant growth in our property and casualty business, recorded our highest quarterly operating income ever, produced a gain in book value per share against the backdrop of falling equity markets and achieved a 14.6 percent annualized return on average equity for the period."
Gross premiums written during the June 30, 2002 quarter increased by 22 percent to $2.9 billion, compared with $2.4 billion for the comparable quarter in 2001. By segment, gross premiums increased 81 percent in Global Reinsurance, 25 percent in Insurance - North American, 21 percent in Financial Products and 9 percent in Insurance - Overseas General.
Net premiums written during the second quarter of 2002 increased by 28 percent to $1.9 billion compared with $1.5 billion for the same quarter in 2001. Net premiums written increased 95 percent in Global Reinsurance, 37 percent in Insurance - North American, 20 percent in Financial Products and 9 percent in Insurance - Overseas General.
Net premiums earned during the second quarter 2002 increased by 14 percent to $1.6 billion compared with $1.4 billion for the same quarter in 2001. Net premiums earned increased 52 percent in Global Reinsurance, 26 percent in Insurance - North American, 15 percent in Insurance - Overseas General and declined 23 percent in the Financial Products segment.
Underwriting results improved in the current quarter with a consolidated combined ratio of 91.5 percent versus 99.1 percent in the prior year quarter.
Net investment income was $201 million for fiscal 2002 second quarter compared with $196 million for fiscal 2001 second quarter. It was an active quarter for investment markets. Interest rates dropped by 100 basis points in the quarter and credit concerns and problems with individual issuers caused sectors of the fixed income markets, particularly high yield, to lose value. Equity markets faced large declines, with the Standard & Poor's (S&P) 500 Index dropping nearly 15 percent while international equity markets also declined. As a result, ACE incurred net realized losses on investments of $125 million, but had an increase in net unrealized appreciation of $107 million.
Net realized losses for the quarter included $50 million of equity losses, principally from a decrease in the value of synthetic S&P indexed derivatives. ACE also recognized a $30 million loss on the interest rate swaps that are used to manage the duration of the fixed income portfolio. These losses were due to the drop in rates that caused significant unrealized gains in our fixed income portfolio. As a result of corporate credit events during the quarter, ACE recognized $26 million of impairments on corporate bonds, essentially reclassifying previously reported unrealized losses to a realized loss. Net realized losses also include the decline in the market value of credit default swaps, which are reported as realized losses in connection with FAS 133.
ACE has introduced a new financial supplement this quarter that includes more detailed information on individual segment performance, along with additional disclosures on reinsurance recoverables, asbestos reserves, and invested assets. This supplement has been posted
here.
ACE Limited (NYSE: ACE) will host a live webcast of its second quarter earnings conference call on Tuesday, July 30, 2002, beginning at 8:30 a.m. EDT. The public may access the webcast, available on a listen-only basis, and the new financial supplement at www.acelimited.com. Please refer to our website under "Investor Info, Notices and Events", one half hour before, for further log-in details. Individuals who access the webcast will be asked to identify themselves and their affiliation. A replay of the webcast will be available following the live webcast on Tuesday, July 30, 2002 until Tuesday, August 13, 2002, 11:30 p.m. EDT.
The ACE Group of Companies provides insurance and reinsurance for a diverse group of clients. The ACE Group conducts its business on a global basis with operating subsidiaries in nearly 50 countries. Additional information can be found at: www.acelimited.com.
Application of the Safe Harbor of the Private Securities Litigation Reform Act of 1995:
Any forward-looking statements made in this press release reflect the Company's 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, the Company's forward-looking statements concerning business prospects and market conditions could be affected by competition, the levels of new and renewal business achieved, market acceptance, the frequency of unpredictable catastrophic events, actual loss experience, the amount and timing of reinsurance recoverables, actual market developments and economic, political, legislative, regulatory, insurance and reinsurance business conditions, as well as management's response to these factors, and other factors identified in the Company's 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. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
