ACE 2Q13 Earnings Call Notes

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This post is part of a series of posts called “Company Notes.” These posts contain quotes and exhibits from earnings calls, conference presentations, analyst days and SEC filings. The quotes are generally pieces of information that I find interesting or helpful to understanding the company, industry or economy and are not meant to provide summaries of the full content of the call. Other posts in this series can be found by clicking here. Full transcripts can be found at Seeking Alpha.

“ACE produced record quarterly earnings that were driven by excellent underwriting and investment results.”

“Book value in the quarter declined 2.3% due to rise in interest rates…Given we are fundamentally buy-and-hold fixed-income investors, this is, in essence, an accelerated recognition of a loss that would have amortized in overtime anyway, as our bonds mature.”

“The flip side, of course, is that our reinvestment rate has improved by about 60 basis points for a portfolio of similar distribution, and this will benefit our income over years to come.”

“Overall, North American pricing was up about 4%, while the rate of increase for property-related pricing is moderating. Casualty-related pricing, in fact, accelerated modestly the quarter, with many lines experiencing their strongest level of rate increase yet.”

“Internationally, the retail commercial P&C rate environment remains competitive but stable, with rate growth flat in the quarter overall.”

“in the quarter, we completed our acquisition of ABA Seguros, Mexico’s fourth largest personal lines company. And as we announced on last quarter’s call, we also completed Mexican surety company, Fianzas Monterrey.”

“our book yield still is above our market yield. So as the portfolio turns over into the whole yielding market rates, if market rates were to stay where they are, we think investment income would stay flat on that basis. Because new money would offset the decline in investment income that would result as the portfolio moves into the lower rate. I was just going to say, we are predicting or at least internally, that interest rates will rise.”

“there’s more capital chasing, to some degree, less business on the reinsurance side, and it always comes back in any market economy and with any industry. It’s that old supply-demand thing, and that’s what you got going on. And so you see particularly with a lot of visibility to investors is the CAT Re side. Though remember, over the overall reinsurance market, it’s a small thing that casts a big shadow. And there, you see alternate capital coming in capital markets, in addition to traditional players. And so — and you don’t see exposures growing that much, and so you got that pond with more drinking out of it on the CAT.”

“the large players. And they’re much better data over the years in the last cycle. And because of math and computer power, and technology has changed it that way, and given their insight, they’re making different kinds of decisions about how to hold retentions, how to think about exposure. And they retain much more, many do than they did in the past.”

“I remind you that CPI is not the indicator of insurance-related inflation. Medical inflation, while it’s down, still runs around 4%. You have legal inflation that continues. And by the way, on the short-tail side, you have more inflation around construction materials, and you get some hourly rate and all of that, particularly as housing starts, et cetera, pick up. ”

“anyone who’s has been in the casualty business for any reasonable length of time, it’s not a business for optimists, and you understand that the good news comes early and the bad news comes late, and so we continue to play it conservatively that way because you don’t know 2 or 3 years out.”