The property and casualty (P&C) combined ratio was 88.1%.

Net realized and unrealized gains after tax were $1.4 billion for the quarter. Book value increased $2.2 billion during the quarter, up 13% from June 30, 2009. Book value per share now stands at $55.71. Annualized return on average equity was 15.9%.⁽³⁾ The property and casualty (P&C) combined ratio was 88.1%.

Net income for the nine months ended September 30, 2009, was $4.73 per share, compared with $3.45 per share for 2008. For the nine months ended September 30, 2009, income excluding net realized gains (losses) was $6.16 per share, compared with $5.81 per share for 2008. The P&C combined ratio for the nine months ended September 30, 2009, was 87.8%. Book value increased $4.3 billion, up 30% during the nine months ended September 30, 2009.

Evan G. Greenberg, Chairman and Chief Executive Officer of ACE Limited, commented: “ACE had an excellent third quarter with all divisions of the company performing well and contributing to results. Our book value grew 13% in the quarter, 30% for the year, and stands at an all-time high. After-tax operating income increased 39% from the same period last year, and our return on equity was 16%.

“Our P&C combined ratio was 88.1% and benefited from positive prior period reserve development and light catastrophe losses in the period. Excluding those items, our current accident year combined ratio for the quarter and the year was 93.3% and 91.4%, respectively – again, an excellent result. In addition, as a result of our underwriting discipline, while we sacrificed some growth, we achieved positive rate change in the quarter of about 2%.

“Premium revenue growth was impacted in the quarter by recessionary conditions, a strong U.S. dollar and a competitive insurance market. Growth in the period benefited, however, from customers seeking ACE’s strong balance sheet as well as our broad product portfolio and global presence. By the nature of some of our businesses, growth can be volatile quarter to quarter, but more stable when viewed over a longer period of time. In fact, we expect meaningfully stronger revenue growth in the fourth quarter regardless of foreign exchange.”

Other operating highlights for the quarter ended September 30, 2009, were as follows: ⁽¹⁾

• Net premiums written and earned decreased 4% and 6%, respectively. Excluding the impact of foreign exchange, net premiums written and earned were flat and decreased 3%, respectively.
• The P&C combined ratio was 88.1% compared with 97.9%. The P&C combined ratio year to date was 87.8% compared with 90.4%.
• Favorable prior period development pre-tax was $203 million compared with $277 million in 2008.
• P&C pre-tax underwriting income increased to $359 million compared with $66 million.
• Catastrophe losses were $45 million compared with $411 million.
• Operating cash flow was $1 billion.
• Net loss reserves increased $344 million. Excluding foreign exchange valuation, net loss reserves increased $135 million. Year-to-date net loss reserves increased $923 million. Excluding foreign exchange valuation, net loss reserves increased $429 million.
• Net investment income decreased 2% to $511 million. Invested assets increased 7% to $46.7 billion.
• Return on average equity was 15.9%.⁽³⁾ Year-to-date return on average equity was 16.7%.
• Book value per share⁽⁴⁾ increased 13% from $49.27 at June 30, 2009, to $55.71, while it increased 29% from December 31, 2008.
• Tangible book value per share⁽⁴⁾ increased 17% from $38.10 at June 30, 2009, to $44.49, while it increased 39% from December 31, 2008.
• Net realized and unrealized gains after tax from our investment portfolio totaled approximately $1.7 billion. Net realized losses from derivative accounting related to the guaranteed minimum income benefits (GMIBs) of our life reinsurance business, net of associated hedges, were approximately $209 million. As the company’s credit spreads improved, derivative accounting required an increase in our fair value liability due to our increased ability to pay. There was also an impact due to lower interest rates.

Details of our financial results for our business segments are available in the ACE Limited Financial Supplement. Key segment items for the quarter ended September 30, 2009, include:

• Insurance-North American: Net premiums written decreased 6%. Excluding the impact of prior year crop insurance, net premiums written were flat. The combined ratio was 91.3% compared with 104.1%.
• Insurance-Overseas General: Net premiums written decreased 7%. Adjusting for the impact of foreign exchange, they increased 2%. The combined ratio was 87.4% compared with 89.9%.
• Global Reinsurance: Net premiums written increased 18%. The combined ratio was 58.5% compared with 91.5%.
• Life: Net premiums written increased 7%. Life underwriting income increased 12% to $95 million.