ACE Limited gave additional details Friday on the annual internal and biennial external reviews of the company's Brandywine run-off loss reserves, including asbestos and environmental liabilities.
As a result of the internal review, ACE said it concluded that its net loss reserves for the Brandywine operations were adequate, and therefore no change to the carried net reserve was required, while the gross loss reserves increased by approximately $200 million.
The conclusions of the external review provided estimates of ultimate gross and net Brandywine liabilities that are lower than the same study two years ago. As a result, the difference in net loss reserves between the internal and external studies has narrowed to approximately $100 million after-tax, from $180 million after-tax two years ago, according to ACE.
The company said its best estimate falls comfortably within the range of outcomes produced by the external actuarial firm.
Philip Bancroft, ACE Limited chief financial officer, commented that “the evaluation process for our direct gross and ceded exposures is ground-up, detailed and methodical. The process to model our ceded exposures includes refined estimates of third party reinsurance after allocation of detailed account and policy level information.”
He added that this approach “allows a detailed assessment of the collectibility of our reinsurance recoverable asset. The external actuaries both reviewed our model and subsequently used it when developing their estimate.”
The company conducts an annual internal review of Brandywine loss reserves that includes an extensive ground-up evaluation of direct asbestos and environmental exposures. In addition, a biennial review is conducted by an independent actuarial consulting firm, required by the Pennsylvania Insurance Department as a condition of the 1996 Brandywine restructuring order.
The ACE Group of Companies, headed by ACE Limited, is a component of Standard & Poor's 500 stock index. The ACE Group conducts its business on a worldwide basis with operating subsidiaries in more than 50 countries. Additional information can be found at: www.acelimited.com.
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