ACE Limited announced fourth quarter losses yesterday but posted profits of $77 million for the full year 2002.

One of the insurers significantly affected by September 11, (ACE bore losses of $559 million after tax relating to the tragedy), the company has come out of recovery mode and saw good growth in its fourth quarter ending December 31 2002.

Brian Duperreault, chairman and chief executive officer of ACE Limited told the Royal Gazette: "Almost everything we needed to do to put ourselves in the position to have a good year for 2003 has been done. All of our businesses are in profit making mode and all are in high demand by the market place."

The picture for the full year 2002 compares well to the losses of $146 million for 2001. Net operating income has rebounded to $511 million for the full year compared with a loss of $69 million for 2001.

However in the fourth quarter of 2002 ACE had to face potential problems thrown up by asbestos related claims. This has resulted in a net operating loss of $99 million for the fourth quarter ended December 31, 2002.

ACE took strong measures to deal with potential claims and boosted reserves by $2 billion. The associated costs to the company were a heavy $354 million but Wall Street analysts believe that ACE has now reserved conservatively enough to allow for whatever further asbestos losses may come out of the woodwork.

However analysts' fears were again raised this week when AIG made an announcement that it will take a $1.8 billion charge to pay for heavier- than- expected workers compensation and executives' liability claims.

The announcement led to a sharp fall in ACE's share price on Wednesday.

Asked yesterday whether ACE's reserves would be adequate for non-asbestos lines, Mr. Duperreault said that the company was "confident on the adequacy of of our reserves."

Apparently ACE made a decision in the 1990s to reduce its business in the type of excess casualty lines that had caused problems for AIG and others.

This quarter's results show good growth - net premiums written increased 7 percent ($131 million) from the fourth quarter levels a year ago.

Property and casualty net premiums written (exclusive of Life Reinsurance and Financial Services) increased by 54 percent compared with the fourth quarter of 2001. However Life Reinsurance and the Financial Services segments declined 86 percent and 43 percent, respectively.

Mr. Duperreault said that ACE's Life Reinsurance sector will continue to diminish to the point where it may not even be worth keeping a separate section for it.

Net premiums written for the year ended December 31, 2002, increased by 27 percent compared with 2001. Property and casualty net premiums written (excluding the Financial Services segment and the Life Reinsurance division) increased 43 percent over prior year levels.

Mr. Duperreault commented: "The charge for prior years' asbestos exposure overshadowed what was actually a very good year for ACE. Our core property and casualty business grew rapidly, generating significant cash flow and very satisfactory underwriting profitability. As planned, Life Reinsurance declined significantly and Financial Services, which we have always said is erratic, declined moderately."

He added: "If you take asbestos out of ongoing operations, the combined ratio for the year falls from 101.7% to 94%. On an ongoing business we had a very good year on an underwriting basis."

Net operating earnings per share for 2002 were $1.80 compared with a net operating loss per share of $0.40 per share for 2001. Earnings per share were $0.19 for the current year compared with a loss per share of $0.74 last year.

Net loss for the quarter was $168 million ($0.67 per share) compared with net income of $46 million ($0.15 per share) for the same quarter in 2001.

Net operating loss for the quarter of $99 million ( or -$0.41 per share) compared with net operating income of $42 million (or $0.14 per share) for the same quarter in 2001.

Investment income rose to $202 million for the quarter ($802 million for the year.) However there were net realised losses of $69 million for the quarter, $417 million for the year. Asked about the realised losses, Mr. Duperreault said that a large part relates to impaired investments, that is, those investments which have decreased in value and may be written off. In the fourth quarter ACE took the decision to transfer $148 million worth of impaired investments into the realised losses column. But if the investment portfolio was viewed without those impairments, it showed unrealised gains of $88 million.