Greenberg added that should the current drought conditions worsen and continue until harvest time, “our modeled worst-case loss, based on what we know, would be an additional $200 million, after tax.”

He emphasized that the company “is not predicting this outcome. We are simply letting you know the outer bounds of reasonable, worst case.”

Greenberg noted that overall, the Crop Insurance business has been a very good one, “but it is a cat business” and subject to occasional losses.

As for Ace’s second-quarter performance, the company reports net income was off 45 percent, or $266 million, to $328 million for the quarter. Second-quarter net premiums written increased 4.5 percent, or $177 million, to $5.65 billion.

The drop in net income was due to the combination of mark-to-market losses on investments and the negative impact of foreign exchange.

For the first six months of the year, net income was up 54 percent, or $457 million, to $1.3 billion. Net premiums written rose 4 percent, or $303 million, to $10.44 billion.

The company reports its combined ratio for the second quarter improved four points to 88.7. For the first six months of the year the combined ratio improved 9.6 points to 88.9.

Greenberg cautioned that the economic crisis in Europe and political uncertainties over the fiscal future of the U.S. are challenges to be faced, but otherwise, earnings look good “except for the notable exception of Crop Insurance.”

“I don’t view this as a hard market,” he added. “I view this as a pricing correction. We are hardly in a hard market.”