zurich (Bloomberg) — Ace Ltd., the Zurich-based insurer with operations in more than 50 countries including Bermuda, posted a record profit of $953 million in the fourth quarter on improved investment results and higher premium revenue.

Net income climbed to $2.81 a share, from $20 million, or six cents, in the year-earlier period, the insurer said yesterday in a statement. Operating income, which excludes some investment results, was $2.01 a share, beating by seven cents the average estimate of 18 analysts surveyed by Bloomberg.

Chief executive officer Evan Greenberg has led Ace through the financial crisis without posting losses, as competitors including American International Group Inc. and XL Capital Ltd. have lost money from holdings tied to sub-prime mortgages. Ace's investments gained value as equity and credit markets improved. "This is a company that has been generating enormous cash flow," said Michael Paisan, an analyst at Stifel Nicolaus & Co., in an interview before results were released.

Ace posted a $270 million investment gain in the fourth quarter, compared with a $604 million investment loss in the last three months of 2008. Premium revenue increased five percent to $3.39 billion. Excluding the effect of currency fluctuations, premium revenue rose one percent, the company said.

Ace said full-year operating income was $2.76 billion, or $8.17 a share. The insurer had forecast in December 2008 that operating earnings for 2009 would be between $7.25 a share and $8.25 a share.

The insurer invests primarily in fixed-income assets, including corporate debt and mortgage-backed securities guaranteed by companies such as Fannie Mae and Freddie Mac. Corporate bonds returned 2.2 percent in the fourth quarter, compared with negative 2.4 percent in the last three months of 2008, according to data compiled by Bank of America Corp.'s Merrill Lynch & Co.

So-called agency mortgage bonds returned 4.8 percentage points more than Treasuries in 2009, their best performance in at least 20 years, according to Barclays Capital index data. In 2008, the debt returned 2.15 percentage points less than government notes.

Ace rose 55 cents, or 1.1 percent, to $49.57 in New York Stock Exchange composite trading and has climbed 15 percent in the past year. This compares with the 51 percent advance in the 99-company MSCI USA Financials Index.

The insurer is competing for customers as industry rates decline amid the recession. Corporations have cut jobs and worksites, reducing their need for coverage. US commercial rates fell 5.6 percent in the fourth quarter and have dropped in every quarter since 2004, according to the Council of Insurance Agents and Brokers.

Ace had previously reported that policy sales, excluding the impact of foreign exchange, increased in the first and second quarters of 2009 and didn't change in the third quarter.

"The fact they are going to have roughly flat premium growth means they are at least gaining some new business if pricing is down," Paisan said.

Greenberg said last year the company would seek to "grow share". Standard & Poor's said in December 2008 Ace was in a "solid position to take advantage of current market dislocation".

The insurer forecast operating profit for 2010 of $6.25 to $6.75 a share, excluding changes in the estimated cost of claims it incurred in past quarters. Analysts surveyed by Bloomberg, who may include some of the so-called prior-period reserve development, estimate $7.48 on average.