Background
     Bermuda’s largest company celebrates its 20th anniversary this year. In that time the ACE Group of Companies has become one of the world's leading global commercial property and casualty insurance companies. With more than 9,000 employees worldwide, the company has offices in 53 countries and correspondents in another 92.
     Gross premiums written in 2004 were $16 billion, an enormous number, equal to $44 million a day. ACE is now a component of the S&P 500 stock index.
     ACE Bermuda wrote its first policy in 1985 after the company and its Bermuda insurance subsidiary were incorporated in the Cayman Islands and established headquarters in Hamilton.
     The company opened its first office in Bermuda in 1986, with six employees. ACE was formed in response to a severe shortage of capacity in the excess liability market. In common with XL Capital (q.v.) ACE was formed, initially, to write such business for its six dozen shareholders, all large American industrial and financial concerns with global interests.
     In 1993, the company successfully completed its initial public offering and was authorised for listing and trading on the New York Stock Exchange. A year later, Bermudian Brian Duperreault was named chairman, president and chief executive officer. He was to steer the company through a series of acquisitions, in Bermuda, in London and the US.
     In 1997, ACE formed a European platform with the opening of ACE European Markets in Ireland. A year later, ACE acquired US-based Westchester Fire Insurance Company, and ACE USA was formed, providing a North American platform.
     1999 was pivotal: ACE acquired the global property and casualty business of CIGNA Corporation for $3.45 billion, making ACE one of only a handful of truly international property and casualty insurance companies.
     The last five years have seen continued growth as ACE has matured into a giant international organisation.

Spotlight Underwriting discipline
     ACE has grown so large that almost any aspect of its operations is enormous. The company total assets at June 30, 2005 of $58 billion, and earned more than $1 billion in investment income in 2004.
     One fact, however, sums up the company’s 20-year history: ACE has now earned a cumulative underwriting profit since its inception 20 years ago. That means that if the 20 years were considered as a single period, the company’s combined ratio — its losses and expenses, expressed as a percentage of premiums earned — for that period would be less than 100.
     Generally speaking, most companies in insurance and reinsurance would argue that they aim to make an underwriting profit, but that is not as easy as it sounds. To consistently achieve such a margin means resisting the urge, in soft markets, to write business that is not profitable in order to maintain market share.

Analysis
     ACE is a global commercial property and casualty insurance and reinsurance company serving local market clients as well as large multinationals. With a strong underwriting culture and a broad range of products, ACE embraces the challenge of helping clients mitigate and manage the risks inherent in their pursuit of progress around the world.
     Diversification of ACE’s business by geography and product provides the company with a stable earnings stream and growth opportunities. About half its revenue and earnings are derived from outside the US.
     Building on its established franchise in property and other short-tail business, casualty-related products have steadily grown and now represent more than half of ACE’s total writings. The company’s personal accident business exceeds $1 billion annually in premiums and is expanding.
     In 2004, ACE’s actuarial organisation set new standards of transparency for the industry with the publishing of its global loss triangles, which provide in-depth information on loss reserves. Thanks to ACE’s expanded geographic presence and diversified product offerings, its submission activity has increased dramatically, affording it greater opportunities to underwrite. This is demonstrated by continued double-digit growth in property and casualty net premiums written, up by 21 percent in 2004.
     The success of the ACE Group is based on its fundamental financial strength, which includes a strong balance sheet; a unique global organisation that places professionals close to customers; product flexibility, creating innovative solutions to address current complex risks; dedicated employees and the special culture that challenges and rewards them; and the company’s positive involvement in the communities where it conducts business — now in places as far away from Bermuda as Vietnam, Australia, Russia and China.
     ACE has a physical presence in more than 50 countries, and conducts business in more than 140 countries, and the list is expanding.

Financial Data
(half-year to June 30, 2005)
Gross premiums written: $8.756 billion, up 4 percent
Net premiums earned: $5.798 billion, up 8 percent
Net income: $882 million, up 3 percent
Shareholders’ equity: $10.496 billion, up 14 percent