Ace in the Hole?

Does the apple fall far from the tree when the orchard is ripe for resignation?

With Marsh & McLennan (NYSE:MMC) CEO Jeffrey Greenberg stepping down over the weekend after New York Attorney General Eliot Spitzer accused the insurance broker of faking bids, will Evan Greenberg be the next Greenberg to go? Evan, Jeffrey's brother, heads up ACE Limited (NYSE:ACE), one of the insurance providers being singled out by Spitzer for supposedly being funneled business inappropriately in exchange for contingent commissions.

Keeping it in the family, another of the companies implicated in the tangled Marsh & McLennan web of accusations is American International (NYSE:AIG) -- run by Evan and Jeffrey's father. Yep, that's going to be one uneasy family reunion.

Each party is jockeying for position as the market begins to tally the potential implications, but it's business as usual as ACE posted disappointing third-quarter results last night. Hurricanes and typhoons cost the company dearly; it posted a loss of $0.05 a share after generating a profit of $1.22 per share a year earlier. While one may be tempted to back out the $1.42-per-share hit that the company is taking to account for the $409 in catastrophe losses, why would you? It's that very perception of risk that keeps the company -- and the industry -- in business.

Insurance companies typically make up for the disasters in time. In fact, even after the soft quarter, ACE is sitting on $2.88 a share in net income through the first nine months of the year. It can also point to other successes during the period that include propping up its book value and a 20% spike in net premiums written.

Naturally, Spitzer's vigilant eye will keep the company in check until matters are resolved. Allegations are just that -- allegations -- and the best and worst case scenarios are so wide in scope that just about the only assurance here is that there will be a bit of volatility in the shares in the near term.

Yet you only need to look as far as Berkshire Hathaway's (NYSE:BRK.A) Warren Buffett to know that the insurance field can be a great industry if you have a financially sturdy company taking all the right risks. If ACE's hands do come up dirty, then all bets are off in the muddy playing field.

Longtime Fool contributor Rick Munarriz thinks that Spitzer's next watchdog assignment may come with good news -- if he switches to GEICO. Rick does not own shares in any of the companies mentioned in this story.