ACE Limited Annual Report 2011

Financial Summary

(in millions of U.S. dollars
except per share data and ratios)
Years Ended Percentage
Change
December 31, 2011 December 31, 2010
Gross premiums written $20,831 $19,511 7%
Net premiums written 15,372 13,708 12%
Net premiums earned 15,387 13,504 14%
Income excluding net realized gains (losses)1 2,376 2,657 -11%
Net income 1,585 3,108 -49%
Diluted earnings per share 4.65 9.11 -49%
Diluted earnings per share excluding net realized gains (losses)1 6.97 7.79 -11%
Combined ratio2 94.6% 90.2% NM
Total assets 87,505 83,355 5%
Shareholders’ equity 24,516 22,974 7%
Book value per share 72.76 68.59 6%
Tangible book value per share 58.43 54.66 7%
Return on equity3 10.7% 13.1% NM

Five-Year Financial Performance

Compound annual growth rates and averages, 2007-2011
Shareholders’ equity 11.4%
Tangible book value per share 11.7%
Book value per share 11.6%
Average return on equity3 14.9%
Average combined ratio2 90.3%
(1) Income excluding net realized gains (losses) and the related income tax is a non-GAAP measure. We have chosen to make this disclosure because it enhances the understanding of our results from operations by highlighting the underlying profitability of our insurance business. We exclude net realized gains (losses) because the amount of these gains (losses) is heavily influenced by, and fluctuates in part according to, the availability of market opportunities.
(2) The combined ratio is the sum of the loss and loss expense ratio, policy acquisition cost ratio, and administrative expense ratio.
(3) Calculated using income excluding net realized gains (losses) after tax divided by average shareholders? equity for the period excluding unrealized gains (losses) on investments after tax.
NM – not meaningful

To My Fellow ACE Shareholders

Accompanying Charts

Evan G. Greenberg
Chairman and
Chief Executive Officer
“Our tremendous
product and geographic
diversification is a
key strategy of the
company that provides
balance to current
revenue and income as
well as better future
opportunity and
predictability of results.”
“For ACE, given our
product and risk
selection capability,
this improvement in the
pricing environment
does present a relatively
modest but real
growth opportunity.”

ACE performed well in 2011 with financial results that again distinguished our company in the costliest year on record for natural catastrophes globally. With a diversified spread of business by both product and geography, a conservative approach to risk management and underwriting, and a consistent focus on execution, we outperformed the property and casualty industry as measured by operating income, book value and premium revenue growth, and ROE. Our financial results were the product of a clear long-term strategy that we have patiently pursued over the years, and this should continue to benefit us well into the future. The remarkable growth and transformation of our company continued in 2011, and at year-end ACE was the fifth-largest global P&C insurer in the world by market cap – up from #11 just five years ago and #14 a decade ago.

From Japan’s powerful earthquake and devastating tsunami to earthquakes in New Zealand, floods in Australia and Thailand and severe tornadoes in the United States, 2011 was a year-long newsreel of natural disasters that impacted the industry’s balance sheet with estimated losses in excess of $105 billion, well more than double the $48 billion from 2010 and setting a new record for the industry globally. In addition to the catastrophes, overall business conditions remained quite challenging throughout the year with sluggish economic growth in developed economies, financial market volatility fed by the Euro crisis, and soft pricing in insurance markets globally, not to mention extraordinary geopolitical events such as the Arab Spring. In the context of this environment, ACE produced after-tax operating income of nearly $2.4 billion, down 11% from 2010 – a good result relative to the industry, with most companies down on average 20%-50% or more. Our earnings included about $860 million in pre-tax catastrophe losses or twice as much as we incurred in 2010. Excluding the impact of catastrophes from both years, ACE’s operating income increased 5% over 2010.

Our strong operating results benefited from both organic growth, particularly in Asia and Latin America, as well as our late-2010 and early-2011 acquisitions – Rain and Hail in the U.S., Jerneh Insurance in Malaysia and New York Life’s operations in Korea and Hong Kong. We expect these three acquisitions to continue delivering the benefits we envisioned at the time we acquired them – namely, their revenue and earnings potential as well as their long-term strategic value – enabling us to take advantage of powerful socioeconomic trends such as America’s growing food exports to the rest of the world and the rising middle class in fast-growing developing markets. These new businesses also provide us with enhanced diversification and sources of revenue not tied to the commercial P&C pricing cycle. In November, we acquired U.S. agribusiness insurer Penn Millers to enhance our capabilities in the agriculture market, and in December, we acquired Rio Guayas Compañia de Seguros y Reaseguros, the fourth-largest non-life insurer in Ecuador, which will double our premium volume and broaden our distribution in that country – one of nine markets in Latin America in which we are active. Whether organically or through acquisitions to complement our organic activity, we will continue on the path toward greater diversification, increasing our presence where we see opportunity, and this translates over time into future top-line growth, more stable earnings power and superior returns to shareholders.

The single best measure of long-term shareholder wealth creation is book value growth, and in 2011 our book value per share grew 6% while tangible book value per share grew 7% – not exactly in line with our long-term objective or recent past but quite good considering the catastrophe losses and 2%-3% investment yields. Over the last five years, these two measures have grown at a compound annual rate of about 12%. Share price is ultimately a function of earnings and book value growth. Our shareholders benefited last year from a 14% return on ACE’s common stock, which compares favorably with a 2% return for the S&P 500 and zero growth for the S&P Property & Casualty Insurance Index. ACE’s five-year total return to shareholders – a measure that captures the combination of share price appreciation and dividends – is 28%, one of the best performances of any insurance or financial services company in the world.

Product and geographic diversification

ACE is predominantly a global commercial and specialty P&C insurance company, but we are patiently and successfully increasing the balance between products exposed to the commercial P&C pricing cycle and those that are not. This has been part of our long-term strategy. Our P&C product line covers traditional industrial commercial risks such as property insurance, workers’ compensation and general liability plans for large corporations and medium-size companies as well as specialty coverages ranging from environmental and professional liability to airport liability and oil rigs. We have two market-leading franchises, ACE USA and ACE International, which market both industrial commercial and specialty products primarily through retail insurance brokers globally. We also have three well-respected franchises that focus on specialty and harder-to-place risks, or excess and surplus lines products, distributed through wholesale brokers – ACE Westchester in the U.S., ACE Global Markets in the London market and our original company, ACE Bermuda. We also are a major writer of personal accident and supplemental health insurance globally and have a fast-growing, highly targeted personal lines business with presence in both the United States and many international markets. Complementing our P&C and A&H businesses is a relatively small but growing international life insurance business focused primarily in emerging markets. Lastly, we have a well-established P&C reinsurance business with operations globally. Products such as accident and health, life insurance, personal lines and crop insurance are far less impacted by the P&C pricing cycle, and in 2011, as the chart nearby illustrates, approximately 50% of our net premiums came from these lines.

In addition to product diversification, our broad geographic presence is a unique strength and places us in a very select group of global insurers. One-half of our business is in the U.S. with the balance conducted locally in 52 other countries, and this is illustrated in the nearby chart. Some of our fastest growth is occurring in the developing markets of Asia Pacific and Latin America – two regions that produced double-digit premium growth in 2011 and have doubled in size over the last five years.

This combination of product breadth and geographic presence enables us to reach a wide variety of customers through many different distribution channels. For example, we serve businesses of all sizes – from large multinational companies to small and medium-size local businesses through global and regional brokers and agents all over the world. We also serve companies and affinity groups looking to provide or offer supplemental health, accident and life insurance programs to their employees, customers or members through ACE’s telemarketing centers and bancassurance partners. And we serve individuals and their families purchasing personal accident, supplemental health, homeowners, automobile, life and other specialty coverage primarily through agents, travel agencies and the Internet.

Our tremendous product and geographic diversification, as I said earlier, is a key strategy of the company that provides balance to current revenue and income as well as better future opportunity and predictability of results. The strategy has served us well given the unpredictable nature and volatility of risk, the P&C industry pricing cycle and the notable differences in economic conditions between the developed and developing worlds.

Underwriting discipline – an ACE hallmark

All of our businesses share a common trait – we are underwriters, we take risk for a living. Underwriting is embedded in our ethos and one of the defining characteristics of our culture, and so we insist on always making a profit in our basic business of taking risk. As an underwriting company, we are dedicated to continuously improving and refining our underwriting capabilities, particularly through data analytics, portfolio management and the overall use of data-driven decision making. We are good, but there is much scope to improve and refine our process so that we might push the envelope of what it means to have superior risk selection given the tools available.

In 2011, we produced $731 million in P&C underwriting income while our P&C combined ratio, which measures our underwriting profit margin, was 94.6%. This is an excellent result that demonstrates ACE’s commitment to underwriting discipline and extends our track record of producing a cumulative underwriting profit since we were founded in 1985. The chart nearby illustrates our underwriting performance versus the industry and our peers over the last 10 years and what it means at ACE to be an underwriting company.

In the third quarter, our net income and book value were impacted by Euro crisis-related financial market volatility in interest rates, which fell to their lowest level in a century, as well as a plunging equity market. This resulted in a negative $706 million realized fair value-related mark associated with our variable annuity reinsurance business. As we have explained before, we are required to mark to market these long-term liabilities using derivative accounting even though we believe the mark is not a good representation of those liabilities. For operating income purposes, we use traditional life insurance GAAP accounting, which in our judgment is more representative of our ultimate liabilities since this is a traditional buy-and-hold long-term insurance portfolio and not a trading business. We believe while interest rates will remain low over the short and medium term, particularly given all of the liquidity that’s been injected into the global economy, rates will recover over time and a good portion of the mark will prove transient, though obviously there can be no guarantee.

Investment portfolio, balance sheet strength and capital

In addition to underwriting, investment income is our other primary source of operating income. We take a conservative approach to our investment activities because we are fiduciaries of these assets, which comprise the capital of our company and the loss reserves we hold to pay future policyholder claims. The prolonged low interest rate environment in 2011 continued to pressure investment yields and income from our predominantly investment-grade fixed income portfolio. Yet, our portfolio book yield remained essentially flat and net investment income increased 8% for the year to $2.2 billion, benefiting from both strong positive cash flow from operations and the addition of assets from companies we acquired. ACE’s invested assets increased by $4 billion during the year to $56 billion.

Next to our people, our most important asset is our balance sheet, which grew stronger in the year with total capital increasing 5% to $29.4 billion at December 31. Tangible capital stands at $24.6 billion, an increase of 6% from year-end 2010. In November, ACE announced a 34% increase in the common stock dividend, signaling our confidence in ACE’s strong balance sheet and future earnings generation power. The measure was approved by shareholders in January and became effective with the first dividend payment of the 2012 calendar year. This substantial increase did not compromise or change our view of strategy in any way, and the company retains considerable capital flexibility and firepower for both risk and growth opportunities.

The most important component of an insurer’s balance sheet is on the liability side or the loss reserves, which back our promise to pay claims. We treat our loss reserves prudently and don’t just rely on ourselves in assessing their adequacy – we’re a leader in industry best practice by having outside actuaries review our reserves in detail every year. ACE’s net loss reserves grew 2% during the year and stood at $25 billion at year-end, even with $556 million in prior period reserve releases from older years.

As I have said before, capital is a measure of an insurer’s wherewithal to take risk and an efficient return on that capital over any extended period of time is one of our priorities. ACE’s operating return on equity for 2011 was 11% – an excellent return both relative to the industry, which generated an estimated average ROE of approximately 4%, and in absolute terms given the catastrophes and current environment. Over the last five years, our operating ROE has averaged 15%, which, as the nearby chart illustrates, exceeds that of most of our North American and global peers.

A changing market

Whether it was the tsunami that followed the Japanese earthquake, the floods in Australia and Thailand or the spring tornadoes in the U.S., most of the year’s record natural catastrophe losses were what we call non-modeled events. The mathematical risk and pricing models the industry uses to project losses from natural catastrophes didn’t include these events, and there is now an overall rise in the industry’s perception of risk. In my judgment, these non-modeled losses remind us how imprecise the science of catastrophe underwriting is, and this lesson applies to many other product areas where we use past experience to project the future. Unfortunately, the past is not necessarily representative of the future, as is often the case. Many casualty lines come to mind.

Despite the losses, the industry remains well capitalized and many competitors continue their pursuit of market share at the expense of an adequate underwriting profit or risk-adjusted return on capital. Their balance sheets and reserves overall might be OK, although that varies by company, but their ROEs and income statements are not. And the external environment remains troubled – slow economic growth, interest rates at historic lows, high catastrophe losses and prices that in most lines of business aren’t keeping up with loss cost trend. All this adds pressure to the rates insurers charge.

In the U.S., as the year progressed, a floor developed under pricing in most classes, rate decreases slowed and many classes began to achieve flat or modestly positive rate. This changing market continued to accelerate into the fourth quarter and beginning of ’012 with greater rate increases taking hold where the pain from losses in any given line – property or workers’ comp are good examples – becomes so acute that more substantial rate increases follow. For the balance of most classes, again, rates have flattened broadly or are rising modest single digit. Catastrophe-exposed property rates continue to rise more substantially while casualty prices are flat to up but generally not yet at a pace that exceeds loss costs. Outside the U.S., the market remains soft except in catastrophe-prone areas. In my judgment, this is not a balance sheet-driven hard market but rather an income statement-driven price correction and rate increases, therefore, will be more modest and take longer to materialize. We project industry combined ratios excluding catastrophes will continue to climb but at a slower rate. Nonetheless, these price increases are a good development and we are encouraged by the trend.

However, from what we observe today, with industry capital redundant, loss reserves reasonably adequate and operating cash flow positive, it will likely take some combination of external events such as catastrophes both natural and manmade, or a pick-up in inflation, together with continued underpricing, before we see a meaningful impact to the industry balance sheet and rates overall move with conviction to a level that produces a reasonable risk-adjusted ROE. For now, the industry is transitioning toward managing mediocrity with greater excellence. For ACE, given our product and risk selection capability, this improvement in the pricing environment does present a relatively modest but real growth opportunity.

Premium growth from acquisitions and organic activity

During the year, we continued to balance underwriting discipline with opportunities to grow. Total company net written premiums in 2011 were $15.4 billion, up 12% compared with 2010. While we are primarily builders and focused first on organic growth, a substantial portion of last year’s increase was attributed to recent acquisitions, the largest being our expanded agriculture business in North America through Rain and Hail, the #2 crop insurer in the U.S. Growth also benefited broadly from contributions across our range of businesses, particularly our overseas P&C operations and our global A&H business, demonstrating once again the benefits of our diversification by product and geography and growing balance between cyclical and non-cyclical business.

  • In commercial and specialty P&C insurance, our largest and most predominant business representing about 60% of the company’s total net premiums, net written premiums for the year were $9 billion, up 13%. Excluding agriculture, our renewable commercial and specialty P&C insurance business globally declined 3%. We experienced double-digit growth in Asia and Latin America, where economies experienced more robust economic conditions, while the U.S. and Europe declined modestly due to a competitive environment and weak economies.
  • Our personal accident and supplemental health insurance business is one of the most distinctive in the industry, representing about 25% of the company’s net premiums. Total net A&H premiums were up 8% for the year, with international up over 16%, led by Asia and Latin America, our U.S. broker-based business up 9% and our Combined Insurance franchise down 4%. Sales in the United States and Western Europe for our Combined Insurance unit remain under pressure given the sluggish state of those economies and their impact on lower- and middle-income individuals as well as regulatory issues in the U.K. and Ireland. Profitability in all of our A&H businesses was very good.
  • Net premiums declined about 9% in 2011 in our global reinsurance business, which faced continued competitive market conditions despite improved pricing in certain property catastrophe-exposed lines. Competitors were willing to write at an underwriting loss; we were not. As a result, our reinsurance business, which represents approximately 6% of ACE’s net premiums, had another excellent year with a combined ratio of 85.6%.
  • Our global personal lines business is young and fast-growing with operations in both the developed and developing worlds. In the United States, for example, we underwrite and market insurance coverage to affluent and high net worth customers for their homes, autos, boats and valuables, while overseas we sell a diverse range of products – from traditional homeowners and auto insurance plans to unique mobile technology insurance products for cell phones and laptops that cover the cost of replacing or repairing these devices against damage, loss or theft. Although these are still early days and we are planting the seeds for the future by making prudent investments in people, infrastructure and systems, this business surpassed $1.1 billion in net premiums in 2011 and now represents about 7% of the company’s net written premiums.
  • Lastly, ACE’s international life insurance business, which represents about 3% of the company’s net premiums, focuses almost entirely on developing markets where a rising middle class needs the traditional savings and protection plans we sell. During the year, we successfully integrated our two recent acquisitions in Korea and Hong Kong. Today, in Asia, our largest region by premium and agency force, ACE Life has more than 15,000 exclusive agents while Huatai Life, our 36%-owned joint venture in China and the third-largest foreign invested life insurer, has more than 25,000. Overall, our life insurance business achieved break-even in 2011 and we expect it will make a positive contribution to earnings in ’012.

Regulatory assault in the U.S. and Europe

In the U.S. and much of Europe, we face an unrelenting assault on business by government. Rather than creating an environment of certainty where business thrives, government is discouraging risk-taking and investment through increased regulation and a misguided view that prosperity is created by government rather than the private sector. There is also a notion prevalent among some regulators and political leaders that somehow the primary job of government is to protect its citizens from the evils of business. By contrast, the political and government leadership of the major developing nations of the world is focused on wealth creation and what it takes to build a superior capability to win.

In the short-to-medium term, we can expect continued slow growth in developed economies, which will impact growth in developing nations. It is a globalized world. In addition, high unemployment will continue to plague the developed world while emerging countries need to create large amounts of employment. Add to this the dynamic of the Euro crisis, an election year in the U.S. and a once-in-a-decade leadership change in China. Taken together, these economic and political conditions are breeding more protectionism, which manifests itself in the form of predatory trade and regulation. There has been little effective global leadership on the issue and the natural instinct for all countries to act in their own interests is powerful. Politics is always local.

In the medium-to-longer term, the global economy is in the process of rebalancing, with the center of gravity shifting to Asia, led by China and, to a lesser degree, India, as well as Latin America – regions where major wealth creation will take place for decades to come. The shift is and will be a source of great tension, and add to that the stress created by different economic models: state capitalism and market-based capitalism, with the former practiced by the largest developing countries as exemplified by China and the latter practiced by the largest developed countries as led by the U.S. With considerable geopolitical and socioeconomic implications, these profound changes represent opportunities as well as risks to global companies like ACE. We are acutely aware of both and will need to remain nimble and knowledgeable to succeed given the uncertainties these forces represent.

Concerning financial services and insurance regulation, there is a strong effort underway among numerous regulators, particularly European, pursuing the idea that there should be one prescriptive and universal protocol for insurance regulation, and that it should apply to all countries, addressing capital, governance and risk management standards. In my judgment, this is simply wrong-headed and ignores the cultural, social and economic realities of different countries. When it comes to regulation, one size does not fit all.

Rather than absolute uniformity and an overly prescriptive, process-oriented approach, a framework of minimum standards of regulation that results in similar desired outcomes is far more practical and effective. For example, while it certainly has its weaknesses, the U.S. system of regulation has proven its ability over the years to reasonably regulate our industry’s solvency. The fundamental philosophy of the U.S. system is solvency to protect policyholders, and in the event of insurer failure, enough capital in the company and a solvency fund to ensure policyholders are made whole. Under the U.S. system, insurers have a reasonable level of freedom to succeed or fail.

By contrast, Solvency II, the new European system of insurance regulation, though perhaps not its intention, is designed to essentially prevent any insurer failure and to protect all constituents – policyholders, bondholders, shareholders and employees. It is overly bureaucratic, process-oriented, costly, and, by the way, untested. Yet, this is the system European regulators envision for the world and believe should be used as the measure to judge the equivalency of all others for purposes of reciprocity. Our industry fared well during the financial crisis, so I am not sure what problem we are trying to solve by pressing to adopt a Solvency II-like system as our global standard of regulation. In fact, I believe such an approach would do great harm. If we aren’t careful, we will turn our industry into a utility.

I am all for modernizing our regulatory structures to take advantage of advances in risk management, technology and finance that have occurred over the past 20 years. Frankly, there are parts of Solvency II that have merit. But let’s be thoughtful and clear about our objectives. To begin with, the U.S., led by the new Federal Insurance Office with the support and knowledge of the NAIC and state regulators, can together bring a powerful voice and an alternative approach to this debate.

The ACE culture: optimism

During the year we had a number of changes to our senior management team. John Keogh was appointed chief operating officer of the company, with responsibility for P&C insurance operations globally, in addition to his duties as chairman of the Overseas General business segment. John Lupica was named chairman of the company’s North American insurance operations, succeeding Brian Dowd in this role. After 17 years with ACE, Brian retired from full-time employment but remains an active and vital member of our Office of the Chairman working with me and other members of the management team focused on underwriting strategy and other related matters. He has much to contribute and we will continue to benefit from his knowledge of this business. John Keogh and John Lupica are two experienced and impressive leaders with over 25 years each in our industry. The depth, breadth and continuity of our management team globally are truly a source of strength for our company.

And so, to my fellow employees, my senior management team colleagues and our outstanding board of directors, I thank you all for your contributions to a very good year at ACE. I also wish to thank, in particular, Bruce Crockett and John Krol, two long-serving directors who have announced they are retiring. Bruce has served on the board since 1995 and John since 2001; I am grateful to both for their wisdom and counsel over many years.

We live in very difficult and complex times that will likely persist, and we strive to recognize that in our planning because we are realists. But at ACE we are also optimists – we have a quiet confidence and a culture of optimism for good reason: We believe in the opportunity that surrounds us and we are committed as a team to working hard to take advantage of it. The professional women and men of ACE around the globe distinguish our company every day by their expertise, discipline, youthful energy and passion. I am very proud to be but one member of this tremendous family.

Sincerely, Evan G. Greenberg
Chairman and Chief Executive Officer

Accompanying Charts to Letter to Shareholders

Return to Letter

Product, Distribution and Geographic Diversification

ACE’s broad portfolio of insurance products – commercial and specialty P&C, A&H, personal lines, reinsurance and life – combined with its local presence in more than 50 countries around the world, enables it to serve customers ranging from large multinational companies to small and mid-size businesses to local consumers.

The company’s diverse distribution channels, including brokers, captive and independent agents, telemarketing, bancassurance and affinity partnerships, and the Internet, offer the possibility of extending relationships with existing customers and distribution partners while reaching new ones in locations around the globe.

The following stories illustrate ACE’s product, distribution and geographic diversification and highlight how the company is effectively meeting customers’ wide-ranging insurance and risk management needs.

Click on the client story links above.

Honeywell

Photos, left to right:
(left) ESIS Industrial Hygiene Practice Leader Tim Frazer (I), conducts training at a Honeywell facility in Nanjing, China.
(center) Lois Fuchs, Vice President, Risk Management, Honeywell, with John Alfieri, New York Regional Executive Officer, ACE USA, and President, Global Client Executive Practice, at Honeywell’s headquarters in Morris Township, N.J.
(right) Mark Kealy (l), Vice President, Casualty, ACE Bermuda International, with Paul Piazza, Director, Risk Management, Honeywell, in Dublin, Ireland.

As global corporations expand their operations around the world, ACE is on the ground in every major market to provide much needed risk management services and risk transfer solutions. The long relationship between ACE and Honeywell exemplifies how ACE’s geographic breadth, global resources and expertise support the complex needs of sophisticated clients.

Honeywell is a Fortune 100 diversified technology and manufacturing leader, serving customers worldwide with aerospace products and services, commercial and residential control technologies, automotive products, turbochargers and performance materials. The company was one of ACE’s early policyholders 25 years ago.

Today, ACE provides 20 different specialty products and services covering Honeywell’s operations in more than 100 countries globally. These run the gamut from accident and health, excess casualty and aviation coverages for multiple countries, to working with Honeywell’s insurance subsidiaries for U.S. workers’ compensation, commercial automobile and international liability risks. ACE is also key in Honeywell’s Defense Base Act coverage for its U.S. government contracts and environmental liability coverage, among other programs.

“Wherever we are in the world, ACE is there to work with us to reach a solution,” says Lois Fuchs, Vice President, Risk Management, at Honeywell.

Honeywell’s emphasis on safety and security is supported in nearly 40 countries by ESIS – ACE’s risk management services unit. Each year, ESIS risk engineering experts make approximately 300 site visits to Honeywell facilities to evaluate occupational safety and health risks and provide related improvement recommendations and training. For Honeywell’s newly acquired companies, ESIS conducts baseline assessments of industrial hygiene, workstation ergonomics and machine guarding equipment and works with Honeywell to bring them up to Honeywell’s high standards.

Always at the forefront of risk management, Honeywell recently was among the first companies to take advantage of ACE’s new services for global companies, including the global client executive program and ACE’s Worldview℠ information portal, that help manage the growing touchpoints between Honeywell and ACE across the globe.

ACE provides large multinational companies with a wide range of industrial commercial and specialty coverages

  • Aviation
  • Casualty (foreign, excess, general, umbrella)
  • Contract liability
  • Construction/wrap-ups
  • Defense Base Act
  • Directors and officers/professional lines
  • Energy and power generation
  • Environmental risks
  • Errors and omissions
  • Events liability
  • Group accident and health
  • Manufacturing risks
  • Marine – inland/ocean
  • Medical risk
  • Mergers and acquisitions
  • Political risk/trade credit
  • Product liability
  • Property
  • Risk/claims management
  • Surety
  • Privacy/network security
  • Workers’ compensation (excess)
Honeywell purchases ACE’s commercial P&C insurance and related services for multinational companies through large global insurance brokers. ACE distributes industrial commercial and specialty P&C insurance to large and mid-size companies primarily through retail insurance brokers and excess and surplus lines products through wholesale insurance brokers.

Telefónica

Photos, left to right:
(left) Augusto Perez (l), Director of Insurance, Telefónica Group, with Chris Eappariello, ACE’s Sr. Vice President, Specialty Personal Lines, in Telefónica’s flagship retail store in Madrid, Spain.
(right) In Brazil, individual consumers can purchase basic insurance coverages backed by ACE as part of their phone service through a unit of Telefónica.

In both developed and developing markets around the world, ACE offers consumers basic protection, such as personal accident and supplemental health insurance, as well as novel lifestyle-oriented coverage like mobile phone insurance. To reach large numbers of potential customers efficiently, ACE often partners with major consumer companies, such as Spain’s telecommunications giant Telefónica, to sponsor insurance programs.

When Telefónica acquired O2, the United Kingdom’s leading mobile operator, in 2006, it discovered ACE’s mobile phone program for retail customers, which it had provided for O2 for several years. The program, offered to customers with long-term contracts, quickly provided a replacement mobile phone in the event of accidental damage, theft or loss. Thanks to the mobile program’s success, Telefónica Insurance, the company’s insurance subsidiary, engaged ACE to jointly sponsor similar coverage in other European and South American markets, primarily through Telefónica’s O2 and Movistar retail locations.

Business flourished, and Telefónica Insurance and ACE also recognized another opportunity – offering A&H insurance, such as personal accident and hospital cash coverages, through face-to-face and telemarketing sales to phone customers in South America.

More recently, ACE has developed a way for Telefónica customers in Brazil to purchase very basic insurance coverages through their phone service.

The underwriting and program management services ACE provides in cooperation with Telefónica Insurance have also become more complex with the addition of new products and varying distribution channels across a broad range of markets.

“The partnership that we’ve developed with ACE not only provides valuable coverages and expands our relationship with our customers, but also produces revenue and financial management benefits to our company,” says Augusto Perez, Director of Insurance, Telefónica Group.

ACE and Telefónica Insurance hope to continue to partner in developing new ways to meet the needs of local consumers, manage risk and grow their businesses together.

ACE offers a range of personal insurance products to individuals and families

Accident & Health

  • Personal accident
  • Supplemental health and disability
  • Travel insurance (leisure, business and student)
  • Payment protection (life, disability, unemployment)

Personal Lines

  • Auto
  • Homeowners/renters
  • Recreational marine
  • Valuables
  • Mobile technology
  • Umbrella liability
Telefónica’s customers purchase ACE’s mobile device replacement coverage and personal accident insurance in three ways: 1) face to face in Telefónica’s retail stores, 2) via ACE’s telemarketing centers, and 3) through their phone service. ACE distributes personal lines insurance to individual consumers and their families through multiple channels. ACE also distributes specialty personal lines coverage, personal accident and supplemental health insurance through companies and affinity groups looking to provide or offer insurance to their employees or members.

Curio Pack

Ngiam Chong Lee (c), owner of Curio Pack, with Fion Foong (l), Kuala Lumpur Agency Executive, ACE Jerneh, and Thomas Hoong, Managing Director of Expertway Agencies, at Curio Pack’s warehouse in Subang, Malaysia.

Having a local presence globally is a key differentiator for ACE, one that the company continues to enlarge through acquisitions and joint ventures. In Malaysia, for example, ACE’s late-2010 acquisition of Jerneh Insurance, one of the country’s leading general insurers, greatly expanded ACE’s access to the small and medium-size enterprise (SME) market through independent agencies.

Curio Pack is a mid-size freight forwarder that transports by air or sea a bewildering array of cargo, from personal effects to Rolls Royce automobiles and satellites, and enjoys a niche in serving aerospace exhibitions. A one-stop specialized logistics solutions provider affiliated with Yamato Transport of Japan, Curio Pack serves customers throughout Southeast Asia.

Owners and managers of SME businesses in Malaysia regard trust as a paramount consideration in their dealings with agencies and insurers and often remain loyal to those who earn it with repeat business over many years. For nearly a decade, Jerneh has provided a variety of insurance policies to Curio Pack, including marine cargo, marine liability, warehouse, commercial automobile, fire, burglary and public liability coverages through Expertway Agencies.

“ACE Jerneh and Expertway are a team of professionals who really understand our business and our risks,” says Ngiam Chong Lee, Curio Pack’s owner. “They always provide us with sound advice working toward practical insurance solutions.”

Today, ACE Jerneh’s 1,800 independent agency relationships provide the critical link to the SME market segment in Malaysia. For example, Expertway Agencies, one of ACE Jerneh’s top-producing distributors, enjoys a strong clientele of more than 1,000 of these companies.

With expanded access to local customer segments and distribution capabilities, ACE is poised for growth in this fast-growing economy.

ACE provides a range of commercial insurance coverages for small and mid-size businesses

  • Disaster protection
  • Casualty, including international casualty
  • Environmental
  • Inland marine
  • Professional risk
  • Medical risk
  • Package policies (property and general liability)
  • Claims and risk management services
Curio Pack purchases ACE’s commercial P&C insurance through an independent agency. ACE distributes commercial insurance for small and mid-size companies primarily through independent agencies and regional brokerage firms.

The Lie Family

Rudy Lie and his family (all seated) – wife, Sui Sing, with daughter, Raflynn, and son, Raffles – with ACE Life agent Sisilia Yong Natsir at the family’s home in North Jakarta, Indonesia.

In emerging economies in Asia and Latin America, where strong economic growth has created rising middle-class populations with significant assets and lifestyles to safeguard, ACE offers life insurance products to meet the needs of individual clients like Rudy Lie in Indonesia. The managing director at a large travel agency in Indonesia, Mr. Lie lives in North Jakarta with his wife and two children, a five-year-old son and a daughter nearing her first birthday.

Wanting to assure financial stability for his young family, Mr. Lie purchased comprehensive life insurance coverage through ACE Life in Indonesia. Marketed as ACE Flexi Link, this popular unit-linked product provides Mr. Lie with both insurance and long-term savings components, which he supplements with a variety of riders covering hospitalization and surgical expenses, hospital cash and waiver of premium in the event of disability.

“ACE Life Indonesia offers me the most comprehensive life insurance coverage that satisfies my family’s needs,” says Mr. Lie.

Sisilia Yong Natsir, who became ACE’s top-selling agent in Indonesia in 2011 only a year after joining the company, advised Mr. Lie on his insurance purchase, initially making contact last year while traveling on an ACE sales incentive trip.

The company’s primary distribution channel, a sales force of 3,600 highly trained captive agents with a focus on ethical sales practices, has helped propel its rapid growth in a market that holds significant potential – a high percentage of Indonesia’s population of more than 250 million remains uninsured.

Since establishing operations in 2009, the company has opened 10 offices in cities across Indonesia and introduced a variety of protection and savings-oriented products for the individual and group markets. To date, more than 25,000 people have purchased individual life products, while 274,000 policyholders are insured through groups.

As new markets with similar economic and demographic trends develop in Asia, Latin America and the Middle East, ACE Life will seek to replicate the success it has achieved in Indonesia.

ACE offers a variety of life insurance products to individuals or groups

Protection products

  • Term life
  • Whole life
  • Credit/mortgage life

Savings-oriented products

  • Universal life
  • Variable/unit-linked
  • Endowments
  • Annuities

Riders

  • Personal accident
  • Disability
  • In-hospital and surgical cash
  • Critical illness/cancer
  • Waiver of premium
The Lie family purchases life insurance coverage through ACE’s captive agents. ACE distributes life insurance for individuals, families and groups through a number of channels including its own agents, banks, brokers and affinity groups.

A Local Presence Globally

ACE has offices in the countries and territories listed below
and serves the needs of clients in more than 170 countries.

Argentina
Australia
Austria
Bahrain
Belgium
Bermuda
Brazil
Canada
Chile
China
Colombia
Czech Republic
Denmark
Ecuador
Egypt
Finland
France
Germany
Gibraltar
Hong Kong
Hungary
Indonesia
Ireland
Italy
Japan
Korea
Macao
Malaysia
Mexico
Netherlands
New Zealand
Norway
Pakistan
Panama
Peru
Philippines
Poland
Portugal
Puerto Rico
Russia
Saudi Arabia
Singapore
South Africa
Spain
Sweden
Switzerland
Taiwan
Thailand
Turkey
United Arab Emirates
United Kingdom
United States
Vietnam

Business Segments

The ACE Group is one of the world’s leading providers of commercial property and casualty (P&C) insurance and reinsurance. The company also has a major presence in the accident and health (A&H) business as well as a young and growing life insurance operation and specialty personal lines business. ACE is represented around the world by a collection of market-leading franchises within four business segments. Click on the business segments below for more information.

Insurance – Overseas General comprises ACE International, the company’s retail broker-distributed business outside of North America, and ACE Global Markets, a London-based excess and surplus lines business that includes a syndicate on the Lloyd’s trading floor. These businesses write a variety of coverage, including property, casualty, professional lines, marine, energy, aviation, political risk, construction risk, A&H and specialty consumer-oriented products. ACE’s A&H business is mainly personal accident, with some supplemental medical coverage. Insurance – Overseas General also includes the international operations of Combined Insurance, which provides specialty accident and supplemental health insurance products to middle-income consumers in Europe, Latin America and Asia Pacific.

Insurance – North American: The five operating businesses of the Insurance – North American segment serve clients ranging from the largest multinationals to mid-size and small businesses to high net worth individuals. ACE USA, which distributes coverage through retail brokers, provides a broad array of specialty property, casualty, and A&H insurance products and risk management services to corporate clients across the United States and Canada. ACE Westchester specializes in excess and surplus lines specialty products, including crop insurance and specialty agribusiness coverages distributed through independent agents, as well as property, inland marine, casualty, professional lines, and environmental liability products distributed through wholesale brokers. ACE Bermuda, the original insurance company of the ACE Group, writes high-level excess liability, property, political risk and directors and officers insurance worldwide. ACE Private Risk Services provides high net worth individuals and families with homeowners, automobile, valuables, umbrella and recreational marine insurance. ACE Commercial Risk Services offers specialty insurance products and solutions for small businesses through several distribution channels.

Global Reinsurance: Marketing its coverage worldwide under the ACE Tempest Re brand, the businesses of the Global Reinsurance segment provide a broad range of property and casualty reinsurance products to a diverse array of primary insurers. Business units include ACE Tempest Re Bermuda, ACE Tempest Re USA, ACE Tempest Re Canada, and ACE Tempest Re International, which encompasses P&C reinsurance operations based in London, São Paulo and Zurich. ACE Tempest Re also has operations in China and Brazil through Lloyd’s.

Life: ACE Life provides traditional life insurance protection and savings products to meet the needs of individuals and groups in a growing number of countries throughout Asia, Latin America and the Middle East. The North American A&H and life businesses of Combined Insurance are also included in this segment’s results. Combined Insurance distributes specialty individual accident and supplemental health and life insurance products targeted to middle-income consumers in the U.S. and Canada. ACE Tempest Life Re provides specialty life reinsurance products to life insurers.

Insurance – Overseas General

John Keogh
Vice Chairman and
Chief Operating Officer,
ACE Limited
Chairman,
Insurance –
Overseas General

Results for the Insurance – Overseas General business segment in 2011 demonstrated the benefits of having diversified capabilities – across product lines and geographies – during extraordinarily challenging times.

While economic weakness in Europe and natural disasters in New Zealand, Australia, Thailand and Japan impacted results, strong demand for A&H products around the globe and a healthy economic environment in Latin America and Asia provided effective counterweights. In 2011, despite the catastrophe losses, the businesses of the Insurance – Overseas General segment produced operating income of $703 million and a combined ratio of 94.3%.

Latin America’s economic buoyancy continued to offer opportunities for ACE’s P&C and A&H businesses. Brazil led the way for the company as ACE continued to expand well beyond São Paulo into the country’s faster-growing northern states. The introduction of new or enhanced products such as environmental liability, medical malpractice, surety and export products liability also contributed to ACE’s strong sales in Brazil. Throughout the region, the continued economic expansion has increased import and export traffic, driving up demand for ACE’s marine insurance and multinational capabilities. Major infrastructure projects in the Pacific-side economies of Colombia, Peru, Ecuador and Chile allowed ACE to demonstrate its flexibility in providing large clients with such coverages as construction and marine cargo, while also supporting smaller local companies and suppliers that serve those projects.

The region’s rising middle-class population, along with new product and distribution variations, enabled ACE to expand A&H sales through its various sponsors, including banks, retailers and telecommunications companies. Increasing its presence in the mobile market during the year offered a dual opportunity – providing replacement coverage for devices and offering A&H coverages through direct marketing. At the end of the year, ACE purchased Rio Guayas, a leading general insurer in Ecuador, to complement its existing business in the country in terms of geographic presence, distribution and products, including personal and small commercial lines.

Fabiola Franco (c), Vice President, Accident & Health, Latin America, with team members Sara Assef, Regional Underwriter, and Diego Sosa, Vice President, Regional Finance & Business Controls, near ACE’s regional offices in Santiago, Chile.

In the Asia Pacific region, A&H was an area of particular strength as economic headwinds that had hampered sales in recent years diminished in 2011. ACE foresaw that travel would rebound strongly once economies recovered, and invested heavily to build its travel insurance team and technology. As a result, the company’s new online system for airlines, travel agents and e-commerce sites propelled sales of ACE’s travel insurance in Southeast Asia and Australia. A&H direct marketing results in the region also improved through the launch of a telemarketing unit, brief “infomercials” on cable TV and dental insurance products in South Korea, while the use of predictive modeling and enhanced marketing to existing clients increased premium growth and margins in Southeast Asian markets.

On the P&C side, business growth was primarily driven through the signing of many new Asia-based multinational clients who recognized the advantages of ACE’s global network and ACE Worldview℠ information portal. Another major contributor to the region’s strong results was the addition of Jerneh Insurance in Malaysia, which ACE purchased in late 2010 and integrated with its existing operations, to yield one of the nation’s top general insurers with a local presence and a solid book of commercial middle-market business.

Growth was more elusive in Europe, where insurance markets were highly competitive and demand was pressured by economic and financial market conditions. One area where the company continued to distinguish itself was in its ability to serve European-based multinationals with local expertise as they expand their operations outside of their home markets. ACE established a new multinational unit in Continental Europe and extended to those markets the servicing capability it developed in the U.K. and Ireland. As in other parts of the world, gains in the A&H business served to buoy the region’s overall results.

ACE Global Markets, which faced further softening in wholesale pricing, once again reduced exposures in highly competitive coverage areas, such as aviation and financial lines, but found pricing strength later in the year in catastrophe-exposed property lines. In the Middle East and Africa, while business was disrupted by civil disturbances across the region associated with the Arab Spring, ACE still managed strong growth for the year. Looking to the future, ACE opened a representative office in the Ukraine early in 2012 to help coordinate service for foreign multinationals and establish communications for potential future P&C activities.

Combined Insurance, which operates in eight countries outside North America, experienced lower premium revenue but maintained its earnings in 2011, despite Europe’s weaker economic conditions and a number of regulatory actions in the U.K. and Ireland.

With its array of P&C and A&H products and services and local presence and expertise in 50 countries around the world, the businesses of the Insurance – Overseas General segment continue to develop opportunities to meet client needs and achieve profitable growth – even in uncertain market conditions – while investing in capabilities to sustain results for the longer term.

Insurance – North American

John Lupica
Chairman,
Insurance – North America

After two relatively benign years for weather-related events in the U.S., insurers had to contend with the dual challenges of severe natural catastrophes and continued weak market conditions throughout most of 2011.

The unusual number and severity of catastrophes around the globe and in North America, including Hurricane Irene and a severe snowstorm in the Northeast, tornadoes in the Midwest and Southeast, flooding in many areas of the U.S., wildfires in the Southwest, and an earthquake in Virginia, clearly put pressure on underwriting results. Yet, key strategies executed over the last several years and continuing through the year helped limit the damage to financial results for the Insurance – North American segment, which posted 2011 operating earnings of $1.18 billion and a combined ratio of 93.8%.

The most significant contributor to the year’s performance was the addition of Rain and Hail Insurance Service, which ACE acquired at the end of 2010. Through Rain and Hail, ACE now insures all important crops in all major U.S. farming regions, and it has the data analytics and expertise to select farms that produce superior results. With this advantage, although widespread flooding in the U.S. reduced yields for farmers and led to a subpar year for multi-peril crop insurers, ACE’s earnings from crop insurance held firm. To further advance its agricultural market capabilities, ACE acquired Penn Millers Insurance Company, a 125-year-old specialty agribusiness insurer operating in 34 states, which will enable Rain and Hail agents to offer a more robust range of commercial agriculture products.

Another key contributor to results was the progress made in implementing an underwriting portfolio management strategy that was launched in 2010. This initiative takes a step beyond underwriting discipline to identify product and industry groups where ACE has the best opportunity to maximize its underwriting margin.

ACE USA’s Lee Farrow (l), Senior Vice President, Life Sciences, and Caroline Clouser, Executive Vice President, Medical Risk, outside ACE’s offices in Jersey City, N.J.

In the retail market, ACE USA saw growth in specialty lines such as surety, cyber liability and private company/not-for-profit management liability coverages. Following the global property market losses and the spate of severe storms in the spring, ACE USA proved its ability to respond swiftly to the shift to gradually firming prices in the property market. In addition, the company continued to build on efforts it launched in 2010 to enhance service to multinational clients by assigning additional accounts to its global client executive program, which provides these clients with a single senior strategic partner for coordinating all of ACE’s global resources and expertise. This program is helping to assure high levels of client service and satisfaction, a strong record of client retention as well as entrée to new business opportunities. During the year, ACE also introduced version 2.0 of ACE Worldview,℠ its unique Web-based portal that now allows nearly 1,000 risk managers and brokers to manage key aspects of their ACE insurance programs online. Worldview earned awards for innovation from Business Insurance and Risk & Insurance magazines in 2011.

In ACE Westchester, an excess and surplus lines company, improving premium rates for property catastrophe coverage contributed to solid underwriting results in 2011, while in the casualty business, where rates remained soft, ACE Westchester continued to manage its risk selection very carefully. ACE Bermuda delivered excellent performance in a highly competitive marketplace. In the aftermath of the Gulf of Mexico’s Deepwater Horizon disaster in 2010, premium rates for energy excess catastrophe coverage improved substantially, offsetting softer pricing in other lines, such as management liability.

ACE Private Risk Services, which offers specialty personal lines coverages to high net worth individuals and families, continued to build out its brand and operations while launching a new claims system and integrating predictive modeling into its underwriting process. Its highly personalized response to the year’s catastrophes, including Hurricane Irene and a severe October snowstorm in the Northeast, earned high marks from clients.

ACE Commercial Risk Services, a recently established operation dedicated to providing specialty insurance solutions to small businesses with local, regional, national or global exposures, made good progress in establishing its infrastructure. This unit offers its products, such as environmental liability and privacy protection and network security coverages, through multiple distribution channels, including retail agents and brokers, wholesale brokers and wholesale producers, program agents and other alternative channels.

Through a balanced set of product lines coupled with advanced underwriting portfolio analysis and management techniques, the businesses of the Insurance – North American segment continued to deliver underwriting profits through a prolonged soft market. With its full capabilities – financial strength, risk capacity and underwriting expertise in numerous coverage areas – firmly in place, ACE is well prepared to respond to market opportunities in the region as insurance market conditions continue to improve.

Global Reinsurance

Jacques Bonneau
Chairman,
ACE Tempest
Re Group

In a year when insured losses from natural catastrophes worldwide reached record levels and struck particularly heavy blows in the Asia Pacific and North America regions, many reinsurers reported their worst underwriting results in a number of years.

To make matters worse, most of the year’s major catastrophes had not been modeled for the losses that they ultimately produced and occurred in areas where reinsurance tends to be written at lower attachment levels. Yet, ACE Tempest Re stood out from its peers, delivering excellent financial results by continuing to diversify its book of business and managing its exposure levels around the world. As a result, the Global Reinsurance segment generated an underwriting profit even after adjusting for the impact of positive prior period development, and produced after-tax operating income of $401 million and a combined ratio of 85.6%, while the average combined ratio of its global competitor group was well over 100%.

With the year’s unusual catastrophe activity exposing the risk management weaknesses of some competitors, ACE’s overall financial strength continued to serve as a differentiator for ACE Tempest Re, enabling it to attract clients who required stability in their reinsurance partners and offer them the capacity and flexibility to meet their needs.

As a result of the healthy capital cushion that the industry had accumulated in recent years, the reinsurance market remained competitive throughout 2011 despite the heavy catastrophe losses, and so ACE Tempest Re selected its risks carefully and reduced gross premiums written by more than 10% from the previous year. In response to market conditions, it shifted the composition of its portfolio, rotating out of lines where margins were compressed due to a risk-return mismatch and moving more toward shorter-tail property-oriented risks.

From left, ACE Tempest Re Canada’s Tino Petalas, Division President, and Celine Marcotte, Vice President, Underwriting, with RSA Canada’s Mike Wallace, Senior Vice President, Personal Specialty Insurance & Reinsurance, and Tom Scholcz, Director, Reinsurance, at RSA’s offices in Toronto.

In the continuing competitive environment of recent years, ACE Tempest Re has taken a number of steps to forge stronger relationships with clients and to deliver innovative solutions and enhanced service. For example, due to the catastrophe losses in the U.S. last year that fell within clients’ risk retentions but below their property catastrophe reinsurance programs, ACE Tempest Re started providing traditional aggregate protections for their retentions in combination with structured solutions for their losses above those levels. ACE Tempest Re also began marketing property catastrophe retrocessional coverage to other reinsurers for the January 2012 renewal season. In addition, it continued its initiative to provide reinsurance for alternative risk vehicles, such as captives and risk retention groups, while expanding its writings of loss portfolio transfers.

ACE Tempest Re continues to place emphasis on providing transparency and consistency in its pricing, showing clients how it assesses their risks and looking to better understand client information in order to more accurately estimate their loss costs. As a result, ACE Tempest Re’s pricing is driven by loss experience and exposure assessment rather than simply going along with market pricing.

To further enhance service to clients, ACE Tempest Re broadened its global client manager initiative in which it designates a single, senior point of contact to multinational insurer clients with the goal of delivering integrated solutions by coordinating the resources of its offices around the world. Initiatives designed to reach a new base of clients in selected markets continued to gain traction during the year, including a program to establish relationships with targeted specialty brokers as well as a country manager initiative that seeks to make ACE Tempest Re more relevant in targeted countries.

With the soft pricing environment that has characterized the global reinsurance market of recent years, ACE Tempest Re has differentiated itself by choosing a path of effective risk selection and pricing discipline that has led to greater financial strength and stability rather than top-line growth. As a result, its strong balance sheet offers clients the security and capacity they seek for when market conditions become more difficult, while its expertise and service capabilities provide novel solutions for managing clients’ risks around the world.

Life

Ed Clancy (I)
Chairman, Life
Executive Vice President
Global Accident & Health
and Life


Russell Bundschuh
President
ACE Life

The Life segment comprises three distinct businesses – ACE Life, the North American operations of Combined Insurance, and ACE Tempest Life Re. ACE Life provides traditional life insurance protection and savings products to individuals and groups in Asia, Latin America and the Middle East. In the U.S. and Canada, Combined Insurance offers individual accident and supplemental health and life insurance products to middle-income consumers. ACE Tempest Life Re provides solutions to the complex risk and capital management challenges facing life insurers around the globe.

In 2011, the businesses of the Life segment generated operating income of $348 million, a 16% gain from $300 million in 2010.

While economic growth remained sluggish in developed markets in 2011, ACE Life continued to expand its presence in Asian and Latin American markets where growing economies, young and rising middle-class populations and low insurance penetration rates combine to create opportunities for strong business growth.

Although the business is still relatively young, ACE Life now operates in 30 markets around the world and has a sales force of more than 42,000 agents. In Asia, ACE Life provides a full spectrum of savings, protection and investment-oriented products, distributed primarily through agency and bancassurance channels. Huatai Life Insurance Co., ACE’s 36%-owned joint venture with Huatai Insurance Group, employs both channels as one of the leading foreign joint-venture life companies in China based on total premiums. The company now has a captive force of 26,000 agents in 270 sales locations across 12 provinces. Agency sales continued to grow briskly in 2011, but a slowdown in economic growth, coupled with new legislation affecting banks, created some headwinds for sales through Huatai Life’s bancassurance partnerships.

The acquisition of New York Life’s operations in Hong Kong and South Korea added substantially to ACE Life’s agency force, revenues and assets in Asia and contributed strongly to its bottom line results in 2011. Integration of these units proceeded according to plan in 2011, including robust campaigns to raise ACE’s profile in these markets. Initially, both units were exclusively agency based, but during the year distribution was broadened through the introduction of a bancassurance channel in Korea.

ACE Life Korea’s Joo Min Park (l), Chief Operating Officer, and Joon Choi, Chief Agency Officer, at the company’s offices in Seoul, South Korea.

Elsewhere in Asia, ACE Life’s subsidiary in Vietnam now has over 8,000 agents and was profitable for the second year in a row. In Indonesia, where ACE Life launched its subsidiary just two years ago, premiums grew rapidly and the agency force expanded to 3,600. In Thailand, ACE Life maintained its profitability, even while the nation’s widespread flooding catastrophe impeded business growth.

Latin America is another strategically important region for ACE Life. In contrast to Asia, where the focus has been on direct sales to individuals, ACE Life has emphasized credit life and other forms of group business in Latin America, leveraging the sponsor distribution network built by ACE’s international A&H business. Sales growth for these products continued to be strong for ACE Life in Brazil, Mexico, Colombia and Chile.

In the Middle East, ACE Life provides individual life products through agents, brokers and telemarketing, and group life and medical insurance primarily through brokers. In Europe, ACE Life markets life products as a supplement to ACE’s group A&H offerings distributed through sponsors and brokers in several countries.

The North American operation of Combined Insurance met its earnings target despite challenging economic conditions including high unemployment rates in rural areas. Combined has launched a number of initiatives to help build its agency force, including a recruitment program directed at returning military veterans that has yielded promising early results.

Due to financial market volatility in the third quarter, ACE incurred a substantial charge to book value from a negative mark to market in its variable annuity reinsurance business. The company believes the negative mark did not reflect its liabilities and that it would accrete back to book value over time, an effect that was partially realized as equity markets rebounded later in the year.

With its operations now established in many of the highest opportunity markets around the world, ACE Life began to take important steps in 2011 to strengthen systems, enhance agency training and productivity, expand support teams, upgrade reporting processes, and gain efficiencies through economies of scale. These initiatives are designed to help ACE Life achieve sustainable, profitable growth in the years ahead.

ACE Limited Board of Directors

Evan G. Greenberg
Chairman and
Chief Executive Officer
ACE Limited
Robert M. Hernandez
Lead Director
ACE Limited
Chairman
RTI International
Metals, Inc.
Robert Ripp
Chairman
Lightpath
Technologies Inc.
Michael G. Atieh
Retired Executive
Chairman
Eyetech, Inc.
John A. Krol
Non-Executive Chairman
Delphi Automotive, LLP
Eugene B. Shanks, Jr.
Director
Federal Home Loan
Mortgage Corporation
Mary A. Cirillo
Advisor
Hudson Venture
Partners L.P.
Peter Menikoff
Private Investor
Theodore E. Shasta
Retired Partner
Wellington Management
Company
Michael P. Connors
Chairman and
Chief Executive Officer
Information Services
Group, Inc.
Leo F. Mullin
Senior Advisor
Goldman Sachs Capital
Partners
Olivier Steimer
Chairman of the Board
Banque Cantonale
Vaudoise
Bruce L. Crockett
Chairman
Crockett Technologies
Associates (CTA)
Thomas J. Neff
Chairman
Spencer Stuart, U.S.

Board Committees

Audit Committee

Robert Ripp, Chairman
Michael G. Atieh
Peter Menikoff
Theodore E. Shasta

Compensation Committee

John A. Krol, Chairman
Mary A. Cirillo
Michael P. Connors
Robert M. Hernandez
Thomas J. Neff

Nominating &
Governance Committee

Thomas J. Neff, Chairman
Mary A. Cirillo
Robert M. Hernandez
John A. Krol

Risk & Finance Committee

Olivier Steimer, Chairman
Bruce L. Crockett
Leo F. Mullin
Eugene B. Shanks, Jr.

Executive Committee

Evan G. Greenberg, Chairman
Robert M. Hernandez
John A. Krol
Thomas J. Neff
Robert Ripp
Olivier Steimer

Officers and Executives

ACE Limited Executive Officers*

Evan G. Greenberg

Chairman and Chief Executive Officer

John Keogh

Vice Chairman and Chief Operating Officer; Chairman, Insurance – Overseas General

Philip V. Bancroft

Chief Financial Officer

Robert Cusumano

General Counsel

John Lupica

Chairman, Insurance – North America;
President, ACE USA
*Executive Officers for SEC reporting purposes

ACE Group Executives

Juan Andrade

Division President, Global Personal Lines and Small Commercial Insurance

Jacques Q. Bonneau

Chairman, ACE Tempest Re Group

Timothy Boroughs

Chief Investment Officer, ACE Group

Charles Brooks

Global Operations Officer, ACE Group

Russell G. Bundschuh

President, ACE Life

Jorge Luis Cazar

Regional President, ACE Latin America

Joseph S. Clabby

Regional President, ACE Continental Europe

Edward Clancy

Chairman, Life; Executive Vice President, Global Accident & Health and Life

Phillip B. Cole

Global Human Resources Officer, ACE Group

Robert Courtemanche

Division President, ACE Private Risk Services

Brian E. Dowd

Office of the Chairman

Rees Fletcher

Division President, ACE Bermuda

Samantha Froud

Chief Administration Officer, Bermuda Operations

David Furby

Division President, Commercial Property & Casualty, ACE Overseas General

Jeffery Hager

Regional President, ACE Far East

Andrew Kendrick

Chairman, ACE European Group

Bruce Kessler

Division President, ACE Westchester

Rainer Kirchgaessner

Global Corporate Development Officer, ACE Group

Ken Koreyva

Treasurer, ACE Group

Frank Lattal

Chief Claims Officer, ACE Group

Edward Levin

Division President, Accident & Health, ACE Overseas General

David Lupica

Division President, ACE Commercial Risk Services

Christopher Maleno

Chief Operating Officer, ACE USA

Timothy Mardon

Division President, ACE Tempest Re Bermuda

Patrick McGovern

Chief Communications Officer, ACE Group

Paul Medini

Chief Accounting Officer, ACE Group

Ashley Mullins

Global Compliance and Business Ethics Officer, ACE Group

William O’Farrell

Chief Reinsurance Officer, ACE Group

Constantin Petalas

Division President, ACE Tempest Re Canada

Richard Pryce

Regional President, ACE UK

Sean Ringsted

Chief Risk Officer and Chief Actuary, ACE Group

Steve Roberts

Managing Director, ACE Tempest Re International

Julie Schaekel

Chief Auditor, ACE Group

Matthew Shaw

Division President, ACE Global Markets

Kevin Shearan

Chief Information Officer, ACE Group

Damien Sullivan

Regional President, ACE Asia Pacific

Saloon Tham

Regional President, Asia Pacific, ACE Life

James E. Wixtead

Division President, ACE Tempest Re USA

Shareholder Information

Visit the Investor Information section of acegroup.com, write to the Investor Relations Department at ACE Limited or e-mail investorrelations@acegroup.com for copies of the company’s reports to the Securities and Exchange Commission on Form 10-K, Form 10-Q or Form 8-K, all of which are available without charge.

Address Investor Relations Inquiries to:

Investor Relations
ACE Limited
17 Woodbourne Avenue
Hamilton HM 08
Bermuda
Tel: 441 299 9283
Fax: 441 292 8675
E-mail: investorrelations@acegroup.com

Transfer Agent & Registrar:

Computershare Shareowner Services LLC 480 Washington Boulevard
Jersey City, NJ 07310-2053 USA
Tel: 201 680 4637

Address Shareholder Inquiries to:

Computershare Shareowner Services LLC
P.O. Box 358016
Pittsburgh, PA
15252-8016 USA
Website: www.computershare.com
(select Equity Access & More)

Send Certificates for Transfer and
Address Changes to:

Computershare Shareowner Services LLC
Stock Transfer Department
P.O. Box 358010
Pittsburgh, PA 15252-8010 USA

Independent Auditors:

PricewaterhouseCoopers AG
Birchstrasse 160
8050 Zurich
Switzerland
Tel: 41 58 792 44 00

PricewaterhouseCoopers LLP
Two Commerce Square, Suite 1700
Philadelphia, PA 19103 USA
Tel: 267 330 3000

New York Stock Exchange Symbol:

ACE

ACE Common Shares Cusip Number:

H0023R-10-5

CEO and CFO Certifications

In 2011, ACE Limited’s Chief Executive Officer (CEO) provided to the New York Stock Exchange the annual CEO certification regarding ACE Limited’s compliance with the New York Stock Exchange’s corporate governance listing standards. In addition, in 2011, ACE Limited filed with the U.S. Securities and Exchange Commission all certifications of its CEO and Chief Financial Officer required by the Sarbanes-Oxley Act of 2002.

Price Range of Common Shares and Dividends

As of February 10, 2012, the company had 337,153,475 Common Shares outstanding with 4,095 registered holders of Common Shares. The accompanying table sets forth the cash dividends and the high and low closing sales prices of our Common Shares, as reported on the NYSE Composite Tape for the periods indicated. From July 2008 through March 31, 2011, ACE Limited paid dividends by way of par value reduction. Subsequent 2011 dividends were distributed from capital contribution reserves (additional paid-in capital) through the transfer of dividends from additional paid-in capital to retained earnings under the method approved by our shareholders at the May 2011 annual general meeting.
2011   2010
Dividends Dividends
Quarter Ending High Low USD CHF   High Low USD CHF
March 31 $65.74 $60.15 $0.33 0.30   $52.88 $47.50 $0.31 0.33
June 30 $69.35 $63.95 $0.35 0.29   $53.89 $48.43 $0.33 0.34
September 30 $68.38 $58.98 $0.35 0.31   $58.80 $50.83 $0.33 0.32
December 31 $73.33 $59.11 $0.35(1) 0.32   $62.37 $58.10 $0.33 0.32
(1) On January 9, 2012, ACE?s shareholders approved a dividend resolution recommended by the Board of Directors that increased the quarterly dividend from $0.35 per share to $0.47 per share for the payment made on January 31, 2012 and the payment to be made by the end of April 2012.

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