Bermuda insurance giant ACE Limited has reported earnings last year of $1.1 billion ? a 20 percent drop on its record profit of $1.4 billion in 2003.

For the fourth quarter, the company said net income fell 37 percent to $282 million after taking an after tax-charge of $302 million to shore up asbestos reserves.

This compared to net income of $444 million ($1.53 per share) for the same period last year.

In the quarter, income broke down to 93 cents per share ? ahead of investment analysts expectations of 28 cents per share in profit.

Last night CEO Evan Greenberg said ACE ? which celebrates 20 years in business this year ? was in a position to prosper and grow this year in 2005.

?The strength of our organisation was demonstrated in 2004. Despite record natural catastrophes around the world, and a fourth quarter reserve charge to our run-off operations, we produced a combined ratio of 96.6 percent. Our property and casualty (P&C) premium growth exceeded 20 percent, and our investment income and book value grew to record levels while we substantially added to our loss reserve position.

?We are entering 2005 with a strong balance sheet, and we are well positioned throughout the world to continue our growth in earnings and book value.?

In addition to taking the multi-million dollar charge related to asbestos liabilities inherited in its 1999 acquisition of Cigna?s P&C business, ACE also was hit in the third quarter by significant claims from the run of hurricanes in the Atlantic.

For the third quarter the company posted a $3 million loss. Year to year, ACE sustained catastrophic losses (net of tax) of $437 million in 2004 in marked contrast to $105 million a year prior.

Meanwhile, the net effect of taking the charge to boost asbestos reserves was a cut to income of $1.06 per share.

ACE management will discuss year-end and quarter results tomorrow morning on an investment conference call at 9.30 Bermuda time.

The call can be accessed through the ACE website, www.acelimited.com.