ACE results show how diversity helps navigation of a soft market

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ACE Limited, a global multi-line property casualty insurance and reinsurance groups, reduced its reinsurance premiums written over the last year, but the group’s strong results announced yesterday demonstrate the benefits of scale and diversity.

ACE is a good example of a broadly diversified, insurance and reinsurance specialist, with global operations and reach. As a result the price declines witnessed across the reinsurance market can be more effectively navigated by a firm which can divert its capacity to other lines of business and specialties.

Evan Greenberg, CEO of ACE Limited, said a year ago that the firm was prepared to shed more reinsurance business in order to maintain profit in the softening market environment. True to his word, in the results reported yesterday ACE revealed a 9% drop in global reinsurance net premiums written in Q4 2014, and a reduction in net premiums written of 6% for the full-year 2014.

Despite the clear pulling back across its reinsurance portfolio, ACE has reported very strong results, in fact a record fourth quarter. This was helped by strong growth in P&C underwriting income, which was up 7.1% for the quarter and 7.2% for the year. This was largely driven by strong current accident year underwriting income, excluding catastrophe losses, up 23.3% for the quarter and 13% for the year.

Investment income also helped ACE in 2014, with a reported record net investment income of $577m for the quarter and net investment income of $2.3 billion, up 5.1%, for the full-year.

This is a great demonstration of where some reinsurers would like to move their strategies towards, a business that is diversified across primary and reinsurance lines, with a strong asset portfolio and a global reach. Firms such as ACE are some of the best positioned to navigate the challenging market environment, even as the softness seen in reinsurance lines creeps outwards to impact some P&C insurance lines as well.

CEO Greenberg explained; “ACE is a truly global multinational insurer, and we are dollar-based. Our diversified presence, product and customer capabilities, and distribution focus in 54 countries are a unique source of earnings strength that enables us to take advantage of so many opportunities around the globe over time. 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.”

Full results can be found on ACE’s website here.

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