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While Zurich-based insurance group ACE (NYSE: ACE) saw a drop in 1Q09 recurring net income from its overseas general insurance operations, the Latin American region increased such profits by 40%, the CEO of ACE Latin America, Jorge Luis Cazar, told BNamericas.
ACE's overseas general division, which includes the group's retail insurance business outside North America and ACE Global Markets, saw recurring net income in the first quarter of US$209mn. This was a decline of 18.4% from 1Q08, while gross written premiums fell 4.78% to US$1.69bn.
Despite the international downturn for ACE, the Latin America region also managed an increase in gross written premiums of 11% in the first quarter, according to Cazar, who said underwriting discipline on the group's short-tail lines was a major factor in the difference between profit and premium growth.
The company's quarterly growth in Latin America was modest compared to its regional growth under normal economic conditions, he said.
COUNTRY BY COUNTRY
As for the outlook for different countries in the region where ACE operates, Cazar said Mexico was among the mostly likely to be impacted.
"We're still in a growth mode there, with double-digit numbers, but we don't see that [level of growth] being maintained over the course of the year," he said.
"The good thing is that even though customers have shown less ability to buy P&C coverage, our base of customers is the largest commercial and industrial companies there, so they still have to buy," the executive added.
In Brazil, he expects 12-13% premium growth, with the rest of the region coming in close to this range.
"Casualty and financial lines are doing fine, but property is more of a challenge," Cazar said.
"The most troubled market for us this year is going to be Puerto Rico, and that's a reflection of what's going on in the US," he said, noting that the unit should see its premiums stay flat in 2009.
OVERALL GROWTH STRATEGY
Asked about how ACE will continue to increase its business, Cazar said it views M&A as just another tool, highlighting Peru, where ACE decided to acquire life insurer Altas Cumbres from Chilean financial group Grupo Altas Cumbres for US$24.3mn in January 2007. In Panama, on the other hand, ACE went greenfield in September last year.
ACE is also using its Mexican and Panamanian operations to look at Central America, Cazar said.
"We're not interested in getting into M&A position just because it's cheap, it has to have a purpose," the CEO said, emphasizing that the value of capital right now is an important constraint that makes analyzing opportunities more important than ever.
On the distribution side, Cazar said the region's operations would continue sticking to ACE's global model on P&C and affinity.
In the region, ACE goes after a variety of partners including wholesale, retailers, telemarketing, internet and TV advertising to build its footprint, while relying on centralized customer service, he said.
ACE had net income of US$557mn in the first quarter of 2009, up 50.4% over 1Q08, but recurring net income was US$669mn, down 8%. ACE Latin America, which operates in P&C, accident and health insurance in Argentina, Brazil, Chile, Colombia, Ecuador, Mexico, Panama, Peru and Puerto Rico, was ACE's fastest growing region in 2008.