Ace chairman and CEO Evan Greenberg said an influx of Wall Street capital into the reinsurance industry is pressuring rates and that he is prepared to cut sales of backstop coverage.This as the re/insurer posted a record profit for the second quarter that soared from last year, reflecting net realised gains and higher premiums with improved combined ratio. Ace also raised its earnings outlook for the full-year 2013."Ace had record earnings in the quarter that were driven, in particular, by excellent current accident year underwriting results and strong investment income,” Mr Greenberg said.“We produced $790 million in after-tax operating income and our operating ROE was 12.3 percent.”Net realised gains for the quarter was $104 million, compared to net realised losses of $394 million last year. Excluding realised gains and losses, operating income for the quarter was a record $790 million or $2.29 per share, compared to $743 million or $2.17 per share in the year-ago quarter.Net premiums written for the quarter rose to $4.39 billion from $4.13 billion last year, and net premiums earned grew to $4.07 billion from last year's $3.78 billion. Net investment income edged down to $534 million from $537 million a year ago.Ace said its property and casualty, or P & C, combined ratio for the quarter improved to 87.9 percent from 88.7 percent last year, benefiting from margin improvement and premium growth globally. (A ratio above 100 percent indicates that the company is paying out more money in claims than it is receiving from premiums.)Prices for catastrophe reinsurance have declined about five percent internationally and as much as 15 percent in the US, Mr Greenberg during a conference call to discuss second-quarter results at the Zurich-based company, with offices in Bermuda.“You see alternate capital coming in, capital markets in addition to traditional players,” Mr Greenberg said. “So you’ve got that pond, with more drinking out of it.”Bloomberg reported that pension funds and other institutional investors have been pouring money into reinsurance to boost yields on portfolios as central banks hold interest rates low to stimulate the economy.The use of catastrophe bonds has also increased as more fixed-income investors accept the risk of natural disasters wiping out their principal in exchange for above-market yields.Ace’s net policy sales of reinsurance fell 5.5 percent to $292 million in the quarter from $309 million a year earlier.“If we like the trade we’ll write it,” Greenberg said of his company’s reinsurance strategy. “If not, you’ve seen what our track record is. We will shrink businesses and have no problem doing it.”“The competition is continuing to increase in the reinsurance space,” Charles Sebaski, an analyst at BMO Capital Markets who has an outperform rating on Ace, said an interview with Bloomberg. “Greenberg and his team may face pressure generating premium revenue “if the economics of the business do not meet their guideposts.”The firm’s biggest segments, North American property-casualty and overseas general insurance, both reported increases in policy sales. Mr Greenberg said Ace can be selective because it sells so many types of insurance, including crop protection and accident-and-health coverage, and has an advantage over competitors that specialise in reinsurance.“There is plenty of capital in reinsurance because the results have been good, so their balance sheets have grown and reinsurers are hungry,” Mr Greenberg said. “Many will profess undivided discipline, but they chase market share. For many of them, their standards are not the same as ours. And for many it’s all they do for a living so they feel compelled.”Mr Greenberg joins Franklin “Tad” Montross, CEO of the General Re unit at Warren Buffett’s Berkshire Hathaway Inc., in highlighting the potential risks tied to new money in reinsurance.Mr Montross said last month that demand for catastrophe bonds makes sense because investors want yield. Sales of dollar-denominated cat bonds have climbed to $4.97 billion this year from $3.98 billion in the same period in 2012. Still, cat bond investors may be more fickle than reinsurers, he said.“What happens after the $150 billion earthquake, when Nevada is basically coastline to the Pacific?” Montross asked the audience at a June 6 conference hosted by Standard & Poor’s, Bloomberg reported.Swiss Re Ltd., the world’s second-largest reinsurer, has said that April renewal prices were down about 3 percent.“Without further significant catastrophe losses in the remainder of 2013, we expect that this downward pricing trend will likely continue through the remainder of the year,” David Flandro, global head of business intelligence at Marsh & McLennan Cos.’ Guy Carpenter reinsurance broker, said in a July 9 statement.