Bermuda insurance giant ACE Limited this week posted record results with all-time highs in a number of areas including its highest-ever earnings - a net income of $1.4 billion in 2003.

The record results for 2003 are in marked contrast to the year before when ACE posted only $77 million in net income after a $354 million charge in the fourth quarter, made to boost reserves for asbestos claims inherited in its 1999 acquisition of Cigna's P&C business.

ACE also announced fourth quarter earnings for 2003 of $421 million, or $1.45 per share, compared with a loss of $168 million, or 67 cents per share, a year prior.

The strong results meant the company beat analysts estimates and investors reacted favourably pushing shares $1.59 higher yesterday to $45.05. Reuters Research reported the average of analysts' expectation on earnings excluding changes in the value of investments had been $1.08 per share, four cents under what ACE actually posted at $1.12 per share.

Yesterday CEO Brian Duperreault not only heralded the company's results but said ACE - which will next year celebrate 20 years in business - also saw positive possibilities for 2004.

“I know I am stating the obvious when I say it was an outstanding year for ACE. We achieved financial highs in every category, in book value and net income,” he said, adding that the net income posted last year matched the company's total revenue of five years ago.

“Moreover I am confident that we will continue to grow at double-digit rates throughout 2004. ACE has achieved a pre-eminent position in the global property and casualty marketplace,” he said, adding that ACE's global network included an expanding presence in the United States “where we have spent some time branching out regionally and that is now starting to bear fruit”.

Despite property rates coming down “in the single digits” and casualty rates having “not quite levelled off but the rate of change is down”, Mr. Duperreault said signs were good for the year ahead. “What does that mean for 2004? The 2004 rate levels are good. They are not good for every risk, but our business activity - the requests for insurance - are up. “

Terms and conditions remained solid, rates were adequate and business was being written “at acceptable margins”, he said.

“We were pleased by what we saw; we had a good start to 2004 with an increase in submissions across all business segments. Consequently while we are seeing a softening of property prices and moderation of casualty rates on a worldwide basis, we are nevertheless recording sustained growth in gross and net premiums written for the January 1, 2004 period,” he said, referring to the pivotal January renewal period - a strong indicator of what one may expect for the rest of the year.

ACE has estimated that investment income alone for 2004 will be between $920 million and $940 million, and said it expected operating cash flow to hit the $4.5 billion mark. Guidance on net income for the year was not given.

Yesterday Mr. Duperreault told The Royal Gazette the company's record results for 2003 were a sign of the company's strength despite the industry having had its share of woes in recent years.

“I have to say we have had very good results, and out of a tragedy. The September 11, 2001 terrorist attacks were a terrible tragedy and we have had all of these other issues - Legion, Enron, WorldCom and other problems as well as (increases) of asbestos and other reserves. It has been a very difficult period of time and we have emerged from it.

“We emerged much, much stronger. These have been defining moments for a lot of companies and people and it certainly was for us. When you look at us today we are so much stronger and better for it.”

He said the industry has been forced to learn some lessons, including the need for greater underwriting discipline in the face of a challenged investment environment. Although Mr. Duperreault said ACE has always had strict underwriting controls, improved business practices across the sector created a better environment for everybody.

“The industry certainly rediscovered underwriting. We don't think we did; we have always prided ourselves on being good underwriters.

“But it means that as others recognise the need for better underwriting, the dynamics of the marketplace change. Prices go up, terms and conditions get better, there is more discipline, more business can be written but we also do not have the problems that mavericks in the industry create.

“There is more uniformity and efficiency that occurs because people have improved what they do; that makes it better for everybody.”

Investment firm Morgan Stanley yesterday raised its rating on ACE to “equal-weight” from “underweight”.