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ACE reports record income despite $80mn settlement charge

Bermudian reinsurance ACE Ltd has announced a record net income of $489mn for the first quarter of 2006 despite an $80mn charge to cover an imminent settlement with regulators.

Post-tax the charge wiped $66mn from ACE's net income, which rose 12 percent from the $437mn it reported for the first quarter of last year.

After being named in New York attorney general Eliot Spitzer's original complaint against Marsh in 2004, the Bermudian insurance giant initiated an internal investigation into its practices and parted company with a number of executives, included the former head of its US arm Susan Rivera.

Subsequently ACE turned over the details of over 100 "non-traditional" contracts to regulators and restated financial results for the last five years after the investigation discovered that eight finite risk contracts were accounted for incorrectly.

"The settlement that will be announced shortly will be a major step in achieving closure and finality to what has been a difficult two years for our company and the industry," commented Evan Greenberg, president and CEO of ACE.

The record income was achieved on the back of a 29 percent rise in net investment income to $369mn from $285mn for the prior year period.

Underwriting income fell 15.5 percent from $329mn to $278mn. Gross and net written premiums both fell, to $4.51bn and $3.31bn, while net premiums earned fell from $2.87bn last year to $2.8bn for the quarter.

The property and casualty combined ratio was 90.2 percent for the quarter, but excluding the investigation-related settlement charge it was 87.2 percent compared with 88.5 percent a year ago.

The (re)insurer's return on equity was 16.7 percent for the quarter while its debt capital ratio improved to 14.5 percent from 14.8 at the end of 2005.

Greenberg added: "We had an excellent quarter. All divisions of ACE performed well. Both operating and net income achieved record highs even after charges related to an investigation settlement. We anticipate revenue growth picking up in the second quarter. We are well-diversified, and while certain of our businesses are under growth pressure, we have growth opportunity in other areas of our business."

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