28 January 2015 Insurance

Variable annuity reinsurance hits profits at Ace

Ace’s profits fell by nearly a quarter in 2014. Solid growth in both underwriting and investment income was offset by mark-to-market accounting associated with the company’s variable annuity reinsurance business.

The insurer’s net income fell to $2.9 billion in 2014, compared with $3.8 billion in the prior year. It said the difference was primarily due to interest rates, which fell during 2014 after rising during 2013.

However, the Zurich-based insurer saw its operating income rise to $3.3 billion in 2014, an increase of 3.2 percent compared with $3.2 billion in 2013.

Ace’s combined ratio improved minimally to 87.7 percent for 2014, compared with 88 percent for the previous year. In its property and casualty division, full-year underwriting income grew 7 percent, driven by a strong current accident year performance.

Evan Greenberg, chairman and chief executive officer of Ace, said: “Ace had excellent operating results for the fourth quarter which contributed to another record year. Quarterly and annual results were driven by growth in both underwriting and investment income.

“Net investment income was a record $577 million in the quarter and $2.3 billion for the year, up more than 5 percent. We benefited from strong operating cash flow and achieved an exceptional result given the historically low interest rate environment.

“In the quarter, we closed our acquisition of the large corporate P&C business of Brazil’s Itaú Seguros and announced our intention to purchase the US high net worth personal lines business of Fireman’s Fund.

“These are just two of many investments we made last year in the future of our company that will strengthen our presence and capabilities and increase our ability to produce sustainable outperformance. We are off to a good start in January and we remain confident in our strategy and are relentless in our drive to execute with excellence.”

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