Ace profits defy drought
Insurer boosted prices to cover payouts
Ace profits defy drought
Joseph N. DiStefano
Ace Ltd., the big insurer nominally based in Switzerland but largely run through the former Insurance Co. of North America in Philadelphia and executive offices in New York, now says it expects crop-insurance losses from the drought of 2012 will cost the company $195 million, after tax, less than its previous estimate of up to $268 million, after late rains helped salvage Midwestern grain crops.
Ace shares slipped less than 1 percent, to below $80, today despite higher-than-expected profits thanks to rising insurance prices in the U.S. market.
Will this year's drought lead to higher crop insurance charges and fears global warming has made U.S. farming a lot more risky? Not according to Ace boss Evan Grenberg: He told investors the reinsurers who help finance crop loss payouts "have made good money in tha tbusines in the U.S." by pricing losses over 10-year periods. Failed 2012 crops will be "rolled forward" and won't spike prices unless the drought keeps repeating.
Separately, Greenberg voiced confidence in the futures of Indonesia and Mexico, two countries with large, youthful, growing populations where Ace has lately invested more than $1 billion in cash to acquire local insurers. Asked if he was worried about political instability, he noted both countries are democracies. Asked if Ace is planning bigger deals, Greenberg said he wasn't willing to overpay.
