CB DBA Chubb Limited

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 8-K

 

 

Current Report

Pursuant To Section 13 or 15 (d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported) – April 21, 2015

 

 

ACE LIMITED

(Exact name of registrant as specified in its charter)

 

 

 

Switzerland		1-11778		98-0091805
(State or other jurisdiction of Incorporation)		(Commission File Number)		(I.R.S. Employer Identification No.)

Baerengasse 32

CH-8001 Zurich, Switzerland

Telephone: +41 (0)43 456 76 00

(Address of principal executive offices)

Not applicable

(Former name or former address, if changed since last report)

 

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

 

¨

Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

 

¨

Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

 

¨

Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-(b))

 

¨

Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

 

 

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Item 2.02. Results of Operations and Financial Condition

On April 21, 2015, ACE Limited issued a Press Release reporting its first quarter 2015 results and the availability of its first quarter 2015 Financial Supplement. The Press Release and the Financial Supplement are attached hereto as Exhibit 99.1 and Exhibit 99.2, respectively, and are hereby incorporated herein by reference.

Item 9.01. Financial Statements, Pro Forma Financial Information and Exhibits

 

(d)

Exhibits

 

Exhibit Number		Description
99.1		Press Release, Dated April 21, 2015, Reporting First Quarter 2015 Results
99.2		First Quarter 2015 Financial Supplement

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

DATE: April 21, 2015

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EXHIBIT INDEX

 

Number		Description		Method of Filing
99.1		Press Release, Dated April 21, 2015, Reporting First Quarter 2015 Results			Furnished herewith
99.2		First Quarter 2015 Financial Supplement			Furnished herewith

Exhibit 99.1

 

		ACE Limited         Bärengasse 32         CH-8001 Zurich         Switzerland		acegroup.com @ACEGroup

 

 

NEWS RELEASE

 

ACE Reports First Quarter Operating Income of $745 Million or

$2.25 per Share, P&C Combined Ratio of 88.4% and Operating

Return on Equity of 10.8%

 

•

Global P&C net premiums written, which exclude Agriculture, up 5% in constant dollars

 

•

P&C underwriting income of $402 million, up 7.8% in constant dollars

 

•

Net investment income of $551 million

 

•

Operating cash flow of $1.1 billion

 

•

Unfavorable foreign currency movement negatively impacted operating income by $20 million, or $0.06 per share, compared with the prior year, reduced Global P&C net premiums written growth by five percentage points and reduced book value by $441 million in the quarter

Zurich — April 21, 2015 — ACE Limited (NYSE: ACE) today reported net income for the quarter ended March 31, 2015, of $2.05 per share, compared with $2.14 per share for the same quarter last year.⁽¹⁾ Operating income was $2.25 per share, compared with $2.27 per share for the same quarter last year. Operating return on equity for the quarter was 10.8%. The property and casualty (P&C) combined ratio for the quarter was 88.4%. Book value and tangible book value per share increased 0.9% and 1.8%, respectively, from December 31, 2014. Book value and tangible book value per share now stand at $90.81 and $73.94, respectively. Excluding unfavorable foreign currency movement, book value per share and tangible book value per share increased 2.4% and 3.0%, respectively.

Year-over-year results were adversely impacted by foreign exchange in the period, as noted above, and a number of favorable items from the prior year that did not repeat. In the prior year, North American P&C underwriting income was favorably impacted by $25 million of premium-related items. Life underwriting income was favorably impacted in the prior year due to a non-recurring $6 million reserve adjustment. In addition, 2014 benefited from lower taxes of $16 million related to prior period development emerging in lower tax jurisdictions. These items and foreign exchange had a negative impact of $0.18 per share on operating income.

 

ACE®, ACE logo®, and ACE insured® are trademarks of ACE Limited.		1

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ACE LIMITED NEWS RELEASE

 

 

First Quarter Summary

(in millions, except per share amounts)

(Unaudited)

 

														(Per Share - Diluted)
		2015				2014				Change				2015				2014				Change
Operating income, net of tax		$	745			$	777				(4.2)%			$	2.25			$	2.27				(0.9)%
Adjusted net realized losses, net of tax			(64)				(43)				46.6%				(0.20)				(0.13)				53.8%
Net income		$	681			$	734				(7.2)%			$	2.05			$	2.14				(4.2)%

Evan G. Greenberg, Chairman and Chief Executive Officer of ACE Limited, commented: “ACE’s first quarter earnings per share were essentially flat with prior year – a good result for a global, dollar-based insurer. We overcame unfavorable foreign exchange movement and a number of favorable items from prior year to produce after-tax operating income of $745 million, or $2.25 per share. Our earnings benefited from excellent underwriting and investment income results, highlighted by a P&C combined ratio of 88.4% and investment income that was flat with prior year. We generated an operating ROE of nearly 11% while per share book and tangible book value grew 2.4% and 3%, respectively, in constant dollars. Foreign exchange negatively impacted per share book value by 1.5 points.

“Global P&C net premiums written grew 5% on a constant-dollar basis with the strong dollar taking about five percentage points off our company’s premium growth. We obviously have the headwinds of foreign exchange, an underwriting environment that continues to grow more competitive for our commercial P&C businesses, as well as low interest rates. Given our excellent diversification by product, geography and consumer segment, many areas of our business present attractive growth prospects, particularly in the U.S., Latin America and Asia, and as a result we expect our premium revenue growth for the balance of the year to be in the mid-single digits on a published basis.”

 

		ACE®, ACE logo®, and ACE insured® are trademarks of ACE Limited.		2

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ACE LIMITED NEWS RELEASE

 

 

Operating highlights for the quarter ended March 31, 2015, were as follows:

 

(in millions of U.S. dollars except for percentages)		1Q 2015				1Q 2014				Change
P&C
Net premiums written		$	3,585			$	3,691				(2.9)%
Net premiums written constant-dollar						$	3,524				1.7%
Underwriting income		$	402			$	390				3.2%
Combined ratio			88.4%				88.8%
Current accident year underwriting income excluding catastrophe losses		$	370			$	381				(2.8)%
Current accident year combined ratio excluding catastrophe losses			89.3%				88.9%
Global P&C (excludes Agriculture)
Net premiums written		$	3,497			$	3,497				0.0%
Net premiums written constant-dollar						$	3,330				5.0%
Underwriting income		$	355			$	421				(15.7)%
Combined ratio			89.5%				87.6%
Current accident year underwriting income excluding catastrophe losses		$	355			$	373				(5.1)%
Current accident year combined ratio excluding catastrophe losses			89.5%				89.0%
Agriculture
Net premiums written		$	88			$	194				(54.6)%
Underwriting income (loss)		$	47			$	(31)				NM
Combined ratio			26.4%				130.3%
Current accident year underwriting income excluding catastrophe losses		$	15			$	8				107.6%
Current accident year combined ratio excluding catastrophe losses			76.7%				88.9%

 

•

P&C net premiums earned increased 3.5% and Global P&C net premiums earned increased 4.8% in constant dollars.

•

The P&C expense ratio was 31.3%, compared with 31.1% last year. The Global P&C expense ratio, which excludes Agriculture, was 32.0% compared with 31.9% last year. The Agriculture expense ratio was (6.9)% compared with 5.7% last year.

 

		ACE®, ACE logo®, and ACE insured® are trademarks of ACE Limited.		3

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ACE LIMITED NEWS RELEASE

 

 

•

Total pre-tax and after-tax catastrophe losses including reinstatement premiums were $51 million (1.5 percentage points of the combined ratio) and $40 million, respectively, compared with $53 million (1.5 percentage points of the combined ratio) and $43 million, respectively, last year.

•

Favorable prior period development pre-tax and after-tax were $83 million (2.4 percentage points of the combined ratio) and $67 million, respectively, compared with $62 million (1.6 percentage points of the combined ratio) and $63 million, respectively, last year.

•

Operating cash flow was $1.1 billion.

•

Net loss reserves decreased $112 million in the quarter after adjusting for foreign exchange.

•

Net investment income was $551 million compared with $553 million last year. This quarter was negatively impacted by foreign currency movement of $7 million.

•

Net realized and unrealized losses pre-tax totaled $27 million. Net realized losses of $63 million included a loss of $57 million from derivative accounting related to variable annuity reinsurance. Net unrealized gains of $36 million included an unrealized gain of $444 million in the investment portfolio, partially offset by an unrealized foreign exchange loss of $421 million.

•

Operating return on equity was 10.8%. Return on equity computed using net income was 9.2%.

•

Share repurchases totaled $340 million, or approximately 3.0 million shares, during the quarter. The company has repurchased approximately 650,000 shares for $73 million through April 20, 2015.

•

Book value per share increased 0.9% to $90.81 from $90.02 at December 31, 2014. Excluding unfavorable foreign currency movement, book value per share increased 2.4%.

•

Tangible book value per share increased 1.8% to $73.94 from $72.61 at December 31, 2014. Excluding unfavorable foreign currency movement, tangible book value per share increased 3.0%.

Details of financial results by business segment are available in the ACE Limited Financial Supplement. Key segment items for the quarter ended March 31, 2015, include:

 

•

Insurance – North American P&C: Net premiums written increased 0.8%. The combined ratio was 89.6% compared with 84.7%. The current accident year combined ratio excluding catastrophe losses was 87.9% compared with 87.1%. The prior year underwriting income was favorably impacted by two items that did not repeat totaling $25 million ($18 million after-tax), which includes $16 million ($12 million after-tax) due to lower excess of loss premiums ceded under the company’s 2014 catastrophe reinsurance program and a $9 million ($6 million after-tax) favorable settlement related to prior year state premium assessments. Excluding the impact of these items, the current accident year combined ratio excluding catastrophe losses was 87.9% compared with 88.5%.

•

Insurance – North American Agriculture: Net premiums written decreased 54.6% due to lower premium retention as a result of a timing difference in premium recognition between the fourth quarter of 2013 and the first quarter of 2014. Additionally, the premium-sharing formulas with the U.S. government resulted in a large positive true-up in 2014 due to the 2013 crop year loss estimates. The combined ratio was 26.4% compared with 130.3%. The current period included $33 million of favorable prior period development, compared with $38 million of unfavorable prior period development in the prior year. The current accident year combined ratio excluding catastrophe losses was 76.7% compared with 88.9% principally due to more favorable expense adjustments in the current period related to the 2014 crop year true-up with the government.

•

Insurance – Overseas General: Net premiums written increased 1.3%, or 11.0% on a constant-dollar basis. The combined ratio was 89.1% compared with 90.1%. The current accident year combined ratio excluding catastrophe losses was 90.3% compared with 90.5%.

•

Global Reinsurance: Net premiums written decreased 11.4%, or 9.1% on a constant-dollar basis. The combined ratio was 73.2% compared with 72.9%. The current accident year combined ratio excluding catastrophe losses was 75.5% compared with 75.1%.

 

		ACE®, ACE logo®, and ACE insured® are trademarks of ACE Limited.		4

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ACE LIMITED NEWS RELEASE

 

 

•

Life segment: Operating income was $66 million compared with $77 million. The decrease was primarily related to the runoff of the company’s life reinsurance business and a one-time prior year benefit in the company’s international life insurance business of $6 million (pre-tax and after-tax). International life insurance net premiums written and deposits collected increased 18.4% on a constant-dollar basis.

Please refer to the ACE Limited Financial Supplement, dated March 31, 2015, which is posted on the company’s website in the Investor Information section, and access Financial Reports for more detailed information on individual segment performance, together with additional disclosure on reinsurance recoverable, loss reserves, investment portfolio and capital structure.

ACE will hold its first quarter earnings conference call on Wednesday, April 22, 2015, beginning at 8:30 a.m. Eastern. The earnings conference call will be available via live webcast at www.acegroup.com or by dialing 888-523-1245 (within the United States) or 719-457-2657 (international), passcode 9701050. Please refer to the ACE Group website in the Investor Information section under Calendar of Events for details. A replay of the call will be available until Wednesday, May 6, 2015, and the archived webcast will be available for approximately one month. To listen to the replay, please dial 888-203-1112 (in the United States) or 719-457-0820 (international), passcode 9701050.

About ACE Group

ACE Group is one of the world’s largest multiline property and casualty insurers. With operations in 54 countries, ACE provides commercial and personal property and casualty insurance, personal accident and supplemental health insurance, reinsurance and life insurance to a diverse group of clients. ACE Limited, the parent company of ACE Group, is listed on the New York Stock Exchange (NYSE: ACE) and is a component of the S&P 500 index. Additional information can be found at: www.acegroup.com.

Investor Contact

Helen Wilson: (441) 299 9283; helen.wilson@acegroup.com

Media Contact

Jeffrey Zack: (212) 827 4444; jeffrey.zack@acegroup.com

 

		ACE®, ACE logo®, and ACE insured® are trademarks of ACE Limited.		5

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ACE LIMITED NEWS RELEASE

 

 

(1)	All comparisons are with the same period last year unless specifically stated.

Regulation G - Non-GAAP Financial Measures

In presenting our results, we included and discussed certain non-GAAP measures. These non-GAAP measures, which may be defined differently by other companies, are important for an understanding of our overall results of operations and financial condition. However, they should not be viewed as a substitute for measures determined in accordance with generally accepted accounting principles (GAAP).

Throughout this document there are various measures presented on a constant-dollar basis (i.e., excludes the impact of foreign exchange). We believe it is useful to evaluate the trends in our results, exclusive of the effect of fluctuations in exchange rates between the U.S. dollar and the currencies in which our international business is transacted, as these exchange rates could fluctuate significantly between periods and distort the analysis of trends. The impact is determined by assuming constant foreign exchange rates between periods by translating prior period results using the same local currency exchange rates as the comparable current period.

Adjusted net realized gains (losses), net of tax, includes net realized gains (losses) and net realized gains (losses) recorded in other income (expense) related to unconsolidated subsidiaries, and excludes realized gains and losses on crop derivatives. These derivatives were purchased to provide economic benefit, in a manner similar to reinsurance protection, in the event that a significant decline in commodity pricing impacts underwriting results. We view gains and losses on these derivatives as part of the results of our underwriting operations, and therefore realized gains and losses from these derivatives are reclassified to adjusted losses and loss expenses. The P&C combined ratio includes adjusted losses and loss expenses in the ratio numerator.

Underwriting income, P&C underwriting income, and Global P&C underwriting income are calculated by subtracting losses and loss expenses, policy benefits, policy acquisition costs and administrative expenses from net premiums earned. P&C underwriting income also includes gains (losses) on crop derivatives. We use underwriting income and operating ratios to monitor the results of our operations without the impact of certain factors, including net investment income, other income (expense), interest and income tax expense and adjusted net realized gains (losses). Current accident year underwriting income excluding catastrophe losses is underwriting income adjusted to exclude catastrophe losses and prior period development (PPD). We believe it is useful to exclude catastrophe losses, as they are not predictable as to timing and amount, and PPD as these unexpected loss developments on historical reserves are not indicative of our current underwriting performance. We believe the use of these measures enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business.

Operating income or income excluding adjusted net realized gains (losses), net of tax is a common performance measurement for insurance companies. We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business. We exclude adjusted net realized gains (losses) because the amount of these gains (losses) is heavily influenced by the availability of market opportunities. In addition, we disclose operating income excluding the impact of foreign exchange in order to adjust for the distortive effects of fluctuations in exchange rates.

P&C combined ratio excluding catastrophe losses and PPD and current accident year P&C combined ratio excluding catastrophe losses exclude impacts of catastrophe losses and PPD. We believe this measure provides a better evaluation of our core underwriting performance and enhances the understanding of the trends in our property and casualty business that may be obscured by these items.

 

		ACE®, ACE logo®, and ACE insured® are trademarks of ACE Limited.		6

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ACE LIMITED NEWS RELEASE

 

 

Global P&C performance metrics comprise consolidated operating results (including corporate) and exclude the operating results of the company’s Life and Insurance – North American Agriculture segments. We believe that these measures are useful and meaningful to investors as they are used by management to assess the company’s global P&C operations which are the most economically similar. We exclude the Insurance – North American Agriculture and Life segments because the results of these businesses do not always correlate with the results of our global P&C operations.

International life net premiums written and deposits collected, is adjusted to include deposits collected on universal life and investment contracts (life deposits). Life deposits are not reflected as revenues in our consolidated statements of operations in accordance with GAAP. However, we include life deposits in presenting growth in our life insurance business because new life deposits are an important component of production and key to our efforts to grow our business.

Operating return on equity (ROE) or ROE calculated using operating income is an annualized financial measure. The ROE numerator includes income adjusted to exclude adjusted net realized gains (losses), net of tax. The ROE denominator includes the average shareholders’ equity for the period adjusted to exclude unrealized gains (losses) on investments, net of tax. To annualize a quarterly rate, multiply by four. Annualized ROE calculated using operating income is a useful measure as it enhances the understanding of the return on shareholders’ equity by highlighting the underlying profitability relative to shareholders’ equity excluding the effect of unrealized gains and losses on our investments.

Tangible book value per common share is shareholders’ equity less goodwill and other intangible assets divided by the shares outstanding. We believe that goodwill and other intangible assets are not indicative of our underlying insurance results or trends and make book value comparisons to less acquisitive peer companies less meaningful. In addition, we disclose per share measures for book value and tangible book value that exclude the impact of foreign currency fluctuations during 2015 in order to adjust for the distortive effects of fluctuations in exchange rates.

Other income (expense) – operating excludes from consolidated Other income (expense) the portion of net realized gains and losses related to unconsolidated entities and gains and losses from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP. Net realized gains (losses) related to unconsolidated entities is excluded from operating income in order to enhance the understanding of our core results of operations as they are heavily influenced by, and fluctuate in part according to market conditions.

See reconciliation of Non-GAAP Financial Measures on pages 22-24 in the Financial Supplement. These measures should not be viewed as a substitute for net income, return on equity, or effective tax rate determined in accordance with GAAP.

NM - not meaningful comparison

 

		ACE®, ACE logo®, and ACE insured® are trademarks of ACE Limited.		7

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ACE LIMITED NEWS RELEASE

 

 

Cautionary Statement Regarding Forward-Looking Statements:

Forward-looking statements made in this press release, such as those related to company performance including 2015 performance and growth opportunities, reflect our current views with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties that could cause actual results to differ materially, including without limitation, the following: competition, pricing and policy term trends, the levels of new and renewal business achieved, the frequency of unpredictable catastrophic events, actual loss experience, uncertainties in the reserving or settlement process, integration activities and performance of acquired companies, new theories of liability, judicial, legislative, regulatory and other governmental developments, litigation tactics and developments, investigation developments and actual settlement terms, the amount and timing of reinsurance recoverable, credit developments among reinsurers, rating agency action, possible terrorism or the outbreak and effects of war, economic, political, regulatory, insurance and reinsurance business conditions, potential strategic opportunities including acquisitions and our ability to achieve and integrate them, as well as management’s response to these factors, and other factors identified in our filings with the Securities and Exchange Commission. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

(tables to follow)

 

		ACE®, ACE logo®, and ACE insured® are trademarks of ACE Limited.		8

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ACE LIMITED NEWS RELEASE

 

 

ACE Limited

Summary Consolidated Balance Sheets

(in millions of U.S. dollars, except per share data)

(Unaudited)

 

		March 31				December 31
		2015				2014
Assets
Investments		$	63,894			$	62,904
Cash			948				655
Insurance and reinsurance balances receivable			5,026				5,426
Reinsurance recoverable on losses and loss expenses			11,588				11,992
Other assets			16,942				17,271
Total assets		$	98,398			$	98,248
Liabilities
Unpaid losses and loss expenses		$	37,326			$	38,315
Unearned premiums			8,182				8,222
Other liabilities			23,188				22,124
Total liabilities			68,696				68,661
Shareholders’ equity
Total shareholders’ equity			29,702				29,587
Total liabilities and shareholders’ equity		$	98,398			$	98,248
Book value per common share		$	90.81			$	90.02

 

		ACE®, ACE logo®, and ACE insured® are trademarks of ACE Limited.		9

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ACE LIMITED NEWS RELEASE

 

 

ACE Limited

Summary Consolidated Financial Data

(in millions of U.S. dollars, except share, per share data, and ratios)

(Unaudited)

 

 

 

		Three Months Ended
		March 31
		2015				2014
Gross premiums written		$	5,322			$	5,374
Net premiums written			4,076				4,185
Net premiums earned			3,927				3,970
Losses and loss expenses			2,122				2,161
Policy benefits			142				114
Policy acquisition costs			707				728
Administrative expenses			554				535
Net investment income			551				553
Net realized gains (losses)			(89)				(104)
Interest expense			68				71
Other income (expense):
Gains (losses) from separate account assets			11				(6)
Other			(6)				23
Income tax expense			120				93
Net income		$	681			$	734
Diluted earnings per share:
Operating income		$	2.25			$	2.27
Net income		$	2.05			$	2.14
Weighted average diluted shares outstanding			331.7				342.0
P&C combined ratio
Loss and loss expense ratio			57.1%				57.7%
Policy acquisition cost ratio			17.4%				17.7%
Administrative expense ratio			13.9%				13.4%
P&C combined ratio			88.4%				88.8%
P&C underwriting income		$	402			$	390
Other income (expense) - operating		$	(32)			$	(28)

 

		ACE®, ACE logo®, and ACE insured® are trademarks of ACE Limited.		10

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ACE LIMITED NEWS RELEASE

 

 

ACE Limited

Consolidated Supplemental Segment Information

(in millions of U.S. dollars)

(Unaudited)

 

 

 

		Three Months Ended
		March 31
		2015				2014
Gross Premiums Written
Insurance – North American P&C		$	2,125			$	2,024
Insurance – North American Agriculture			128				234
Insurance – Overseas General			2,255				2,261
Global Reinsurance			292				333
Life			522				522
Total		$	5,322			$	5,374
Net Premiums Written
Insurance – North American P&C		$	1,430			$	1,418
Insurance – North American Agriculture			88				194
Insurance – Overseas General			1,794				1,771
Global Reinsurance			273				308
Life			491				494
Total		$	4,076			$	4,185
Net Premiums Earned
Insurance – North American P&C		$	1,526			$	1,487
Insurance – North American Agriculture			64				103
Insurance – Overseas General			1,637				1,612
Global Reinsurance			226				284
Life			474				484
Total		$	3,927			$	3,970
Operating Income (loss)
Insurance – North American P&C		$	345			$	411
Insurance – North American Agriculture			35				(25)
Insurance – Overseas General			241				239
Global Reinsurance			128				144
Life			66				77
Corporate			(70)				(69)
Total		$	745			$	777

 

 

 

		ACE®, ACE logo®, and ACE insured® are trademarks of ACE Limited.		11

Exhibit 99.2

 

 

     

 

 

Investor Contact   Helen M. Wilson   Phone: (441) 299-9283   email: investorrelations@acegroup.com		This report is for informational purposes only. It should be read in conjunction with documents filed by ACE Limited with the Securities and Exchange Commission, including the most recent Annual Report on Form 10-K and Quarterly Reports on Form 10-Q.
		Cautionary Statement Regarding Forward-Looking Statements:
		Any forward-looking statements made in this financial supplement reflect ACE’s current views with respect to future events and financial performance and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements involve risks and uncertainties which may cause actual results to differ materially from as indicated by such statements. For example, forward-looking statements related to financial performance including exposures, reserves and recoverables could be affected by the frequency of unpredictable catastrophic events, actual loss experience, uncertainties in the reserving or settlement process, currency exchange fluctuations, new theories of liability, judicial, legislative, regulatory and other governmental developments, litigation tactics and developments, investigation developments and actual settlement terms, the amount and timing of reinsurance receivable and credit developments among reinsurers.
		Our forward-looking statements could also be affected by competition, pricing and policy term trends, market acceptance, changes in demand, actual market developments, rating agency action, possible terrorism or the outbreak and effects of war. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the dates on which they are made. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

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		ACE Limited   Financial Supplement Table of Contents

 

				Page
I.		Financial Highlights
		- Consolidated Financial Highlights			1
II.		Consolidated Results
		- Consolidated Results - Consecutive Quarters			2
		- Summary Consolidated Balance Sheets			3
		- Consolidated Premiums and Operating Income by Line of Business			4
III.		Global P&C Results
		- Global P&C Results - Consecutive Quarters			5
IV.		Segment Results
		- Insurance – North American - For Reference Only			6
		- Insurance – North American P&C			7
		- Insurance – North American Agriculture			8
		- Insurance – Overseas General			9
		- Global Reinsurance			10
		- Life			11
V.		Balance Sheet Details
		- Loss Reserve Rollforward			12
		- Reinsurance Recoverable Analysis			13
		- Investment Portfolio			14 - 17
		- Net Realized and Unrealized Gains (Losses)			18
		- Capital Structure			19
		- Computation of Basic and Diluted Earnings Per Share			20
		- Book Value and Book Value per Common Share			21
VI.		Other Disclosures
		- Non-GAAP Financial Measures			22 - 24
		- Glossary			25

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		ACE Limited Consolidated Financial Highlights (in millions of U.S. dollars, except share, per share data, and ratios) (Unaudited)

Note: All dollar amounts in the Financial Supplement are rounded. However, percent changes and ratios are calculated using whole dollars. Accordingly, calculations using rounded dollars may differ.

 

																		Constant $
										% Change								% Change
		Three months ended March 31								1Q-15 vs.				Constant $				1Q-15 vs.
		2015				2014				1Q-14				2014 (1)				1Q-14 (1)
Gross premiums written		$	5,322			$	5,374				-1.0	%		$	5,155				3.2	%
Net premiums written		$	4,076			$	4,185				-2.6	%		$	4,004				1.8	%
P&C net premiums written (2)		$	3,585			$	3,691				-2.9	%		$	3,524				1.7	%
Global P&C net premiums written (2)		$	3,497			$	3,497				0.0	%		$	3,330				5.0	%
Net premiums earned		$	3,927			$	3,970				-1.1	%		$	3,804				3.2	%
Net investment income		$	551			$	553				-0.4	%
Operating income		$	745			$	777				-4.2	%
Net income		$	681			$	734				-7.2	%
Comprehensive income		$	642			$	1,108				-41.9	%
Operating cash flow		$	1,075			$	1,250
P&C combined ratio (2)
Loss and loss expense ratio			57.1	%			57.7	%
Underwriting and administrative expense ratio			31.3	%			31.1	%
Combined ratio			88.4	%			88.8	%
Operating return on equity (ROE)			10.8	%			11.2	%
ROE			9.2	%			10.1	%
Operating effective tax rate (3)			13.7	%			11.5	%
Effective tax rate			15.0	%			11.3	%
Diluted earnings per share
Operating income		$	2.25			$	2.27				-0.9	%
Net income		$	2.05			$	2.14				-4.2	%
														December 31 2014				% Change 1Q-15 vs. 4Q-14
Book value per common share		$	90.81			$	86.90				4.5	%		$	90.02				0.9	%
Book value per common share excluding foreign currency (4)		$	92.16			$	86.90				6.1	%		$	90.02				2.4	%
Tangible book value per common share		$	73.94			$	70.97				4.2	%		$	72.61				1.8	%
Tangible book value per common share excluding foreign currency (4)		$	74.76			$	70.97				5.3	%		$	72.61				3.0	%
Tangible book value per common share excluding 2014 acquisitions (5)		$	75.52			$	70.97				6.4	%
Tangible book value per common share excluding 2014 acquisitions and foreign currency (4) (5)		$	76.34			$	70.97				7.6	%
Weighted average basic common shares outstanding			328.2				338.9
Weighted average diluted common shares outstanding			331.7				342.0
Debt plus trust preferred securities/ tangible capital			22.5	%			20.1	%							20.7	%

 

(1)	Prior periods on a constant dollar basis.

(2)	See non-GAAP financial measures.

(3)

Operating effective tax rate is dependent upon the mix of earnings from different jurisdictions with various tax rates. A change in the geographic mix of earnings would change the effective tax rate. The increase in the operating effective tax rate for the quarter was primarily due to a lower percentage of operating earnings being generated in lower tax paying jurisdictions.

(4)	For 2015, book value per common share and tangible book value per common share exclude the impact of foreign currency movement during Q1 2015.

(5)

For 2015, tangible book value per common share excludes the impact from goodwill and intangibles relating to the acquisitions of the large corporate P&C insurance business of Itaú Seguros, S.A. (Q4 2014) and The Siam Commercial Samaggi Insurance PCL (Q2 2014) of $391 million and $126 million, respectively.

 

Financial Highlights		Page 1

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		ACE Limited Consolidated Results - Consecutive Quarters (in millions of U.S. dollars, except ratios) (Unaudited)

ACE Limited Consolidated

 

		1Q-15				4Q-14				3Q-14				2Q-14				1Q-14				Full Year 2014
Consolidated Results (Including Corporate) Excluding Life Segment (1)
Gross premiums written		$	4,800			$	5,193			$	5,736			$	5,480			$	4,852			$	21,261
Net premiums written			3,585				3,803				4,232				4,061				3,691				15,787
Net premiums earned			3,453				3,871				4,265				3,842				3,486				15,464
Adjusted losses and loss expenses (1)			1,970				2,269				2,494				2,234				2,012				9,009
Policy acquisition costs			600				641				702				637				617				2,597
Administrative expenses			481				517				483				493				467				1,960
Underwriting income			402				444				586				478				390				1,898
Net investment income			485				508				497				490				489				1,984
Interest expense			67				66				66				69				68				269
Other income (expense) - operating (2)			(30	)			(25	)			(29	)			(26	)			(23	)			(103	)
Income tax expense			111				110				169				120				88				487
Operating income (including Corporate) excluding Life segment			679				751				819				753				700				3,023
Life segment operating income			66				76				72				72				77				297
Consolidated operating income			745				827				891				825				777				3,320
Adjusted net realized gains (losses) (1)			(89	)			(210	)			(165	)			(81	)			(102	)			(558	)
Net realized gains (losses) related to unconsolidated entities			26				49				55				36				51				191
Income tax expense (benefit) on adjusted net realized gains (losses)			1				111				(4	)			1				(8	)			100
Consolidated net income		$	681			$	555			$	785			$	779			$	734			$	2,853
% Change versus prior year period (1)
Net premiums written as reported			-2.9	%			2.4	%			2.2	%			4.0	%			12.0	%			4.9	%
Net premiums earned as reported			-1.0	%			-0.3	%			2.9	%			7.1	%			12.6	%			5.1	%
Net premiums written constant $			1.7	%			5.0	%			1.7	%			4.5	%			13.7	%			5.9	%
Net premiums earned constant $			3.5	%			2.1	%			2.5	%			7.4	%			14.8	%			6.2	%
Other ratios
Net premiums written/gross premiums written (1)			75	%			73	%			74	%			74	%			76	%			74	%
Operating effective tax rate			13.7	%			12.7	%			16.9	%			13.7	%			11.5	%			13.9	%
P&C combined ratio (1)
Loss and loss expense ratio			57.1	%			58.6	%			58.5	%			58.2	%			57.7	%			58.3	%
Policy acquisition cost ratio			17.4	%			16.6	%			16.5	%			16.6	%			17.7	%			16.8	%
Administrative expense ratio			13.9	%			13.3	%			11.3	%			12.7	%			13.4	%			12.6	%
Combined ratio			88.4	%			88.5	%			86.3	%			87.5	%			88.8	%			87.7	%
Combined ratio excluding catastrophe losses and PPD			89.3	%			89.5	%			89.8	%			88.7	%			88.9	%			89.3	%
P&C expense ratio			31.3	%			29.9	%			27.8	%			29.3	%			31.1	%			29.4	%
P&C expense ratio excluding A&H			27.9	%			26.7	%			24.3	%			26.0	%			27.5	%			26.0	%
Catastrophe reinstatement premiums collected - pre-tax		$	—			$	2			$	1			$	—			$	—			$	3
Catastrophe losses - pre-tax		$	51			$	71			$	87			$	80			$	53			$	291
Favorable prior period development (PPD) - pre-tax (3)		$	(83	)		$	(107	)		$	(232	)		$	(126	)		$	(62	)		$	(527	)
Loss and loss expense ratio excluding catastrophe losses and PPD			58.1	%			59.6	%			62.2	%			59.4	%			57.5	%			59.8	%

 

(1)	See non-GAAP financial measures.

(2)	Excludes portion of net realized investment gains and losses related to unconsolidated entities.

(3)	For Q1 2015, favorable prior period development is net of $3 million of unfavorable net earned premium adjustments and $2 million of unfavorable profit-sharing commissions that are included in the expense ratio.

 

Consolidated Results		Page 2

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		ACE Limited
		Summary Consolidated Balance Sheets
		(in millions of U.S. dollars, except per share data)
		(Unaudited)

 

		March 31 2015				December 31 2014
Assets
Fixed maturities available for sale, at fair value		$	50,410			$	49,395
Fixed maturities held to maturity, at amortized cost			6,982				7,331
Equity securities, at fair value			536				510
Short-term investments, at fair value			2,536				2,322
Other investments			3,430				3,346
Total investments			63,894				62,904
Cash			948				655
Securities lending collateral			1,033				1,330
Insurance and reinsurance balances receivable			5,026				5,426
Reinsurance recoverable on losses and loss expenses			11,588				11,992
Deferred policy acquisition costs			2,683				2,601
Value of business acquired			440				466
Prepaid reinsurance premiums			1,981				2,026
Goodwill and other intangible assets			5,516				5,724
Deferred tax assets			224				295
Investments in partially-owned insurance companies			590				504
Other assets			4,475				4,325
Total assets		$	98,398			$	98,248
Liabilities
Unpaid losses and loss expenses		$	37,326			$	38,315
Unearned premiums			8,182				8,222
Future policy benefits			4,744				4,754
Insurance and reinsurance balances payable			4,198				4,095
Securities lending payable			1,034				1,331
Accounts payable, accrued expenses, and other liabilities			6,194				5,726
Short-term debt			2,552				2,552
Long-term debt			4,157				3,357
Trust preferred securities			309				309
Total liabilities			68,696				68,661
Shareholders’ equity
Total shareholders’ equity, excl. AOCI			28,550				28,396
Accumulated other comprehensive income (AOCI)			1,152				1,191
Total shareholders’ equity			29,702				29,587
Total liabilities and shareholders’ equity		$	98,398			$	98,248
Book value per common share		$	90.81			$	90.02
% change over prior quarter			0.9	%			-0.4	%
Tangible book value per common share		$	73.94			$	72.61
% change over prior quarter			1.8	%			-1.9	%

 

Consol Bal Sheet		Page 3

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		ACE Limited
		Consolidated Premiums and Operating Income by Line of Business
		(in millions of U.S. dollars)
		(Unaudited)

ACE Limited Consolidated

 

		1Q-15				1Q-14				% Change 1Q-15 vs. 1Q-14				Constant $ 1Q-14 (2)				Constant $ % Change 1Q-15 vs. 1Q-14 (2)
Net premiums written
Property and all other		$	1,380			$	1,372				0.6	%
Casualty			1,479				1,455				1.6	%
Subtotal			2,859				2,827				1.1	%		$	2,715				5.3	%
Agriculture			88				194				-54.6	%			194				-54.6	%
Personal accident (A&H) (1)			890				917				-3.0	%			858				3.7	%
Life			239				247				-3.1	%			237				0.6	%
Total consolidated		$	4,076			$	4,185				-2.6	%		$	4,004				1.8	%
% of Total Consolidated
Property and all other			34	%			33	%
Casualty			36	%			35	%
Subtotal			70	%			68	%
Agriculture			2	%			4	%
Personal accident (A&H) (1)			22	%			22	%
Life			6	%			6	%
Total consolidated			100	%			100	%
Net premiums earned
Property and all other		$	1,255			$	1,252				0.1	%
Casualty			1,506				1,480				1.7	%
Subtotal			2,761				2,732				1.0	%		$	2,634				4.8	%
Agriculture			64				103				-37.2	%			103				-37.2	%
Personal accident (A&H) (1)			879				894				-1.6	%			835				5.2	%
Life			223				241				-7.5	%			232				-4.1	%
Total consolidated		$	3,927			$	3,970				-1.1	%		$	3,804				3.2	%
% of Total Consolidated
Property and all other			32	%			31	%
Casualty			38	%			37	%
Subtotal			70	%			68	%
Agriculture			2	%			3	%
Personal accident (A&H) (1)			22	%			23	%
Life			6	%			6	%
Total consolidated			100	%			100	%
Operating income (loss), after-tax
Property, casualty, and all other		$	561			$	645				-13.0	%		$	633				-11.5	%
Agriculture			35				(25	)			NM				(25	)			NM
Personal accident (A&H) (1)			113				114				-1.6	%			106				6.0	%
Life			36				43				-16.3	%			43				-16.3	%
Total consolidated		$	745			$	777				-4.2	%		$	757				-1.7	%
% of Total Consolidated
Property, casualty, and all other			75	%			82	%
Agriculture			5	%			-3	%
Personal accident (A&H) (1)			15	%			15	%
Life			5	%			6	%
Total consolidated			100	%			100	%

 

(1)	For purposes of this schedule only, A&H results from our Combined North American and International businesses, normally included in the Life and Insurance – Overseas General segments, respectively, are included in the Personal Accident (A&H) line items above.

(2)	Prior periods on a constant-dollar basis.

 

Line of Business		Page 4

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		ACE Limited
		Global P&C Results - Consecutive Quarters
		(in millions of U.S. dollars, except ratios)
		(Unaudited)

Global P&C includes the company’s Insurance – North American P&C segment (refer to page 7), Insurance – Overseas General segment (refer to page 9), Global Reinsurance segment (refer to page 10), and Corporate (not separately disclosed in the Financial Supplement). Global P&C excludes the Insurance – North American Agriculture segment.

Global P&C (Including Corporate)

 

																						Full Year
		1Q-15				4Q-14				3Q-14				2Q-14				1Q-14				2014
Gross premiums written		$	4,672			$	4,891			$	4,495			$	4,879			$	4,618			$	18,883
Net premiums written			3,497				3,559				3,468				3,673				3,497				14,197
Net premiums earned			3,389				3,544				3,499				3,512				3,383				13,938
Losses and loss expenses			1,948				2,017				1,853				1,955				1,884				7,709
Policy acquisition costs			604				629				661				614				612				2,516
Administrative expenses			482				513				480				492				466				1,951
Underwriting income			355				385				505				451				421				1,762
Net investment income			479				501				491				484				482				1,958
Interest expense			67				66				66				69				68				269
Other income (expense) - operating (1)			(22	)			(16	)			(22	)			(17	)			(15	)			(70	)
Income tax expense			101				98				146				115				95				454
Global P&C operating income			644				706				762				734				725				2,927
Net realized gains (losses)			(30	)			(67	)			(76	)			(9	)			(26	)			(178	)
Net realized gains (losses) related to unconsolidated entities			12				43				51				38				53				185
Income tax expense (benefit) on net realized gains (losses)			—				110				(5	)			1				(5	)			101
Global P&C net income		$	626			$	572			$	742			$	762			$	757			$	2,833
% Change versus prior year period
Net premiums written as reported			0.0	%			3.0	%			4.0	%			6.4	%			9.9	%			5.7	%
Net premiums earned as reported			0.1	%			2.6	%			6.2	%			8.5	%			11.2	%			7.0	%
Net premiums written constant $			5.0	%			5.8	%			3.4	%			7.0	%			11.6	%			6.9	%
Net premiums earned constant $			4.8	%			5.4	%			5.7	%			8.8	%			13.4	%			8.2	%
Other ratios
Net premiums written/gross premiums written			75	%			73	%			77	%			75	%			76	%			75	%
Combined ratio
Loss and loss expense ratio			57.5	%			56.9	%			52.9	%			55.7	%			55.7	%			55.3	%
Policy acquisition cost ratio			17.8	%			17.8	%			18.9	%			17.5	%			18.1	%			18.0	%
Administrative expense ratio			14.2	%			14.4	%			13.8	%			13.9	%			13.8	%			14.1	%
Combined ratio			89.5	%			89.1	%			85.6	%			87.1	%			87.6	%			87.4	%
Combined ratio excluding catastrophe losses and PPD			89.5	%			90.2	%			89.8	%			88.7	%			89.0	%			89.4	%
Expense ratio			32.0	%			32.2	%			32.7	%			31.4	%			31.9	%			32.1	%
Expense ratio excluding A&H			28.7	%			29.2	%			29.3	%			28.2	%			28.4	%			28.8	%
Catastrophe reinstatement premiums collected - pre-tax		$	—			$	2			$	1			$	—			$	—			$	3
Catastrophe losses - pre-tax		$	50			$	70			$	85			$	71			$	52			$	278
Favorable prior period development (PPD) - pre-tax (2) (3)		$	(50	)		$	(106	)		$	(229	)		$	(126	)		$	(100	)		$	(561	)
Loss and loss expense ratio excluding catastrophe losses and PPD			57.6	%			57.9	%			57.5	%			57.3	%			57.1	%			57.5	%

 

(1)	Excludes portion of net realized investment gains and losses related to unconsolidated entities.

(2)	For Q1 2015, favorable prior period development is net of $2 million of unfavorable profit-sharing commissions that are included in the expense ratio.

(3)	For Q1 2014, favorable prior period development includes $42 million related to the favorable resolution of a disputed matter on an individual claim.

 

Global P&C		Page 5

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		ACE Limited
		Insurance - North American
		(in millions of U.S. dollars, except ratios)
		(Unaudited)

The table below combines the company’s Insurance – North American P&C segment (refer to page 7) and Insurance – North American Agriculture segment (refer to page 8) into total Insurance – North American business presentation for reference purposes only.

Insurance - North American

 

																						Full Year
		1Q-15				4Q-14				3Q-14				2Q-14				1Q-14				2014
Gross premiums written		$	2,253			$	2,841			$	3,367			$	2,948			$	2,258			$	11,414
Net premiums written			1,518				1,913				2,305				2,023				1,612				7,853
Net premiums earned			1,590				1,887				2,284				1,872				1,590				7,633
Losses and loss expenses (1)			1,057				1,329				1,694				1,295				1,068				5,386
Policy acquisition costs			157				166				210				175				164				715
Administrative expenses			170				181				168				176				162				687
Underwriting income			206				211				212				226				196				845
Net investment income			269				280				283				271				277				1,111
Interest expense			2				2				2				2				3				9
Other income (expense) - operating			(5	)			(2	)			(8	)			(4	)			(8	)			(22	)
Income tax expense			88				70				91				94				76				331
Operating income			380				417				394				397				386				1,594
Net realized gains (losses) (1)			(6	)			(39	)			(5	)			(11	)			(9	)			(64	)
Net realized gains (losses) related to unconsolidated entities			4				19				32				19				20				90
Income tax expense on net realized gains (losses)			2				1				5				2				—				8
Net income		$	376			$	396			$	416			$	403			$	397			$	1,612
Combined ratio
Loss and loss expense ratio			66.5	%			70.4	%			74.1	%			69.2	%			67.2	%			70.6	%
Policy acquisition cost ratio			9.8	%			8.8	%			9.2	%			9.3	%			10.3	%			9.4	%
Administrative expense ratio			10.7	%			9.6	%			7.4	%			9.4	%			10.2	%			8.9	%
Combined ratio			87.0	%			88.8	%			90.7	%			87.9	%			87.7	%			88.9	%
Combined ratio excluding catastrophe losses and PPD			87.4	%			87.9	%			88.9	%			87.6	%			87.2	%			88.0	%
Catastrophe reinstatement premiums expensed - pre-tax		$	—			$	—			$	—			$	—			$	—			$	—
Catastrophe losses - pre-tax		$	46			$	30			$	37			$	45			$	33			$	145
Unfavorable (favorable) prior period development (PPD) - pre-tax		$	(54	)		$	(12	)		$	8			$	(39	)		$	(30	)		$	(73	)
Loss and loss expense ratio excluding catastrophe losses and PPD			67.1	%			69.6	%			72.5	%			68.9	%			66.2	%			69.6	%
% Change versus prior year period
Net premiums written			-5.9	%			3.0	%			-0.1	%			2.1	%			15.5	%			4.1	%
Net premiums earned			0.0	%			-2.6	%			-0.4	%			5.2	%			14.4	%			3.2	%
Other ratios
Net premiums written/gross premiums written			67	%			67	%			68	%			69	%			71	%			69	%

 

(1)	See non-GAAP financial measures.

 

Insurance - North American		Page 6

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		ACE Limited
		Segment Results - Consecutive Quarters
		(in millions of U.S. dollars, except ratios)
		(Unaudited)

Insurance – North American P&C

 

																						Full Year
		1Q-15				4Q-14				3Q-14				2Q-14				1Q-14				2014
Gross premiums written		$	2,125			$	2,539			$	2,126			$	2,347			$	2,024			$	9,036
Net premiums written			1,430				1,669				1,541				1,635				1,418				6,263
Net premiums earned			1,526				1,560				1,518				1,542				1,487				6,107
Losses and loss expenses			1,035				1,077				1,053				1,016				940				4,086
Policy acquisition costs			161				154				169				152				159				634
Administrative expenses			171				177				165				175				161				678
Underwriting income			159				152				131				199				227				709
Net investment income			263				273				277				265				270				1,085
Interest expense			2				2				2				2				3				9
Other income (expense) - operating			3				7				(1	)			5				—				11
Income tax expense			78				58				68				89				83				298
Operating income			345				372				337				378				411				1,498
Net realized gains (losses)			(6	)			(42	)			(5	)			(11	)			(9	)			(67	)
Net realized gains (losses) related to unconsolidated entities			4				19				32				19				20				90
Income tax expense on net realized gains (losses)			2				1				5				2				—				8
Net income		$	341			$	348			$	359			$	384			$	422			$	1,513
Combined ratio
Loss and loss expense ratio			67.9	%			69.0	%			69.3	%			66.0	%			63.2	%			66.9	%
Policy acquisition cost ratio			10.5	%			9.9	%			11.1	%			9.8	%			10.7	%			10.4	%
Administrative expense ratio			11.2	%			11.3	%			11.0	%			11.3	%			10.8	%			11.1	%
Combined ratio			89.6	%			90.2	%			91.4	%			87.1	%			84.7	%			88.4	%
Combined ratio excluding catastrophe losses and PPD			87.9	%			89.1	%			88.5	%			87.3	%			87.1	%			88.0	%
Catastrophe reinstatement premiums expensed - pre-tax		$	—			$	—			$	—			$	—			$	—			$	—
Catastrophe losses - pre-tax		$	45			$	29			$	35			$	36			$	32			$	132
Unfavorable (favorable) prior period development (PPD) - pre-tax (1) (2)		$	(21	)		$	(11	)		$	11			$	(39	)		$	(68	)		$	(107	)
Loss and loss expense ratio excluding catastrophe losses and PPD			66.3	%			67.8	%			66.9	%			66.2	%			65.7	%			66.6	%
% Change versus prior year period
Net premiums written			0.8	%			4.2	%			2.7	%			6.9	%			10.5	%			5.9	%
Net premiums earned			2.5	%			3.3	%			5.1	%			7.9	%			11.2	%			6.8	%
Other ratios
Net premiums written/gross premiums written			67	%			66	%			72	%			70	%			70	%			69	%

 

(1)	For Q1 2015, favorable prior period development is net of $2 million of unfavorable profit-sharing commissions that are included in the expense ratio.

(2)	For Q1 2014, favorable prior period development includes $42 million related to the favorable resolution of a disputed matter on an individual claim.

 

Insurance - North American P&C		Page 7

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		ACE Limited
		Segment Results - Consecutive Quarters
		(in millions of U.S. dollars, except ratios)
		(Unaudited)

Insurance – North American Agriculture

 

																						Full Year
		1Q-15				4Q-14				3Q-14				2Q-14				1Q-14				2014
Gross premiums written		$	128			$	302			$	1,241			$	601			$	234			$	2,378
Net premiums written			88				244				764				388				194				1,590
Net premiums earned			64				327				766				330				103				1,526
Losses and loss expenses (1)			22				252				641				279				128				1,300
Policy acquisition costs			(4	)			12				41				23				5				81
Administrative expenses			(1	)			4				3				1				1				9
Underwriting income (loss) (2)			47				59				81				27				(31	)			136
Net investment income			6				7				6				6				7				26
Interest expense			—				—				—				—				—				—
Other income (expense) - operating			(8	)			(9	)			(7	)			(9	)			(8	)			(33	)
Income tax expense (benefit)			10				12				23				5				(7	)			33
Operating income (loss)			35				45				57				19				(25	)			96
Net realized gains (losses) excluding gains (losses) on crop derivatives (1)			—				3				—				—				—				3
Net realized gains (losses) related to unconsolidated entities			—				—				—				—				—				—
Income tax expense on net realized gains (losses)			—				—				—				—				—				—
Net income (loss)		$	35			$	48			$	57			$	19			$	(25	)		$	99
Combined ratio
Loss and loss expense ratio			33.3	%			77.2	%			83.7	%			84.4	%			124.6	%			85.2	%
Policy acquisition cost ratio			-6.0	%			3.6	%			5.4	%			7.0	%			4.5	%			5.3	%
Administrative expense ratio			-0.9	%			1.0	%			0.4	%			0.4	%			1.2	%			0.6	%
Combined ratio			26.4	%			81.8	%			89.5	%			91.8	%			130.3	%			91.1	%
Combined ratio excluding catastrophe losses and PPD			76.7	%			82.4	%			89.6	%			89.1	%			88.9	%			87.8	%
Catastrophe reinstatement premiums - pre-tax		$	—			$	—			$	—			$	—			$	—			$	—
Catastrophe losses - pre-tax		$	1			$	1			$	2			$	9			$	1			$	13
Unfavorable (favorable) prior period development (PPD) - pre-tax (3)		$	(33	)		$	(1	)		$	(3	)		$	—			$	38			$	34
Loss and loss expense ratio excluding catastrophe losses and PPD			83.2	%			77.9	%			83.8	%			81.8	%			78.3	%			81.8	%
% Change versus prior year period
Net premiums written			-54.6	%			-5.0	%			-5.2	%			-14.2	%			72.1	%			-2.3	%
Net premiums earned			-37.2	%			-23.4	%			-9.8	%			-5.7	%			96.8	%			-9.1	%
Other ratios
Net premiums written/gross premiums written			69	%			81	%			62	%			65	%			83	%			67	%

 

(1)	(Gains) losses on crop derivatives are reclassified from Net realized gains (losses) for this presentation.

(2)	We assess the performance of our Insurance – North American Agriculture segment based on underwriting income which includes (gains) losses on crop derivatives.

(3)	For Q1 2015, favorable prior period development is net of $3 million of unfavorable net earned premium adjustments.

 

Insurance - North American Agriculture		Page 8

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		ACE Limited
		Segment Results - Consecutive Quarters
		(in millions of U.S. dollars, except ratios)
		(Unaudited)

Insurance – Overseas General

 

																						Full Year
		1Q-15				4Q-14				3Q-14				2Q-14				1Q-14				2014
Gross premiums written		$	2,255			$	2,212			$	2,156			$	2,224			$	2,261			$	8,853
Net premiums written			1,794				1,749				1,719				1,760				1,771				6,999
Net premiums earned			1,637				1,758				1,726				1,709				1,612				6,805
Losses and loss expenses			814				835				707				830				817				3,189
Policy acquisition costs			389				419				418				402				386				1,625
Administrative expenses			256				262				258				256				250				1,026
Underwriting income			178				242				343				221				159				965
Net investment income			138				147				130				136				132				545
Interest expense			1				2				2				1				1				6
Other income (expense) - operating			(21	)			(15	)			(15	)			(17	)			(9	)			(56	)
Income tax expense			53				78				108				57				42				285
Operating income			241				294				348				282				239				1,163
Net realized gains (losses)			(10	)			(7	)			(75	)			14				(10	)			(78	)
Net realized gains (losses) related to unconsolidated entities			4				12				9				9				15				45
Income tax expense (benefit) on net realized gains (losses)			(1	)			111				(11	)			(2	)			(5	)			93
Net income		$	236			$	188			$	293			$	307			$	249			$	1,037
Combined ratio
Loss and loss expense ratio			49.7	%			47.5	%			40.9	%			48.6	%			50.7	%			46.9	%
Policy acquisition cost ratio			23.8	%			23.8	%			24.3	%			23.5	%			23.9	%			23.9	%
Administrative expense ratio			15.6	%			15.0	%			14.9	%			15.0	%			15.5	%			15.0	%
Combined ratio			89.1	%			86.3	%			80.1	%			87.1	%			90.1	%			85.8	%
Combined ratio excluding catastrophe losses and PPD			90.3	%			89.4	%			90.5	%			89.3	%			90.5	%			89.9	%
Catastrophe reinstatement premiums - pre-tax		$	—			$	—			$	—			$	—			$	—			$	—
Catastrophe losses - pre-tax		$	5			$	30			$	39			$	26			$	17			$	112
Favorable prior period development (PPD) - pre-tax		$	(24	)		$	(86	)		$	(219	)		$	(63	)		$	(23	)		$	(391	)
Loss and loss expense ratio excluding catastrophe losses and PPD			50.9	%			50.7	%			51.3	%			50.8	%			51.1	%			51.0	%
% Change versus prior year period
Net premiums written as reported			1.3	%			3.0	%			9.4	%			8.0	%			9.3	%			7.4	%
Net premiums earned as reported			1.6	%			3.4	%			7.2	%			9.4	%			10.4	%			7.5	%
Net premiums written constant $			11.0	%			8.4	%			8.1	%			8.8	%			12.3	%			9.4	%
Net premiums earned constant $			11.2	%			8.8	%			6.0	%			9.8	%			14.6	%			9.6	%
Other ratios
Net premiums written/gross premiums written			80	%			79	%			80	%			79	%			78	%			79	%

 

Insurance - Overseas General		Page 9

---

		ACE Limited
		Segment Results - Consecutive Quarters
		(in millions of U.S. dollars, except ratios)
		(Unaudited)

Global Reinsurance

 

		1Q-15				4Q-14				3Q-14				2Q-14				1Q-14				Full Year 2014
Gross premiums written		$	292			$	140			$	213			$	308			$	333			$	994
Net premiums written			273				141				208				278				308				935
Net premiums earned			226				226				255				261				284				1,026
Losses and loss expenses			99				104				92				109				126				431
Policy acquisition costs			54				56				74				60				67				257
Administrative expenses			12				13				13				14				14				54
Underwriting income			61				53				76				78				77				284
Net investment income			75				78				81				80				77				316
Interest expense			1				—				1				2				1				4
Other income (expense) - operating			1				3				—				—				1				4
Income tax expense			8				7				11				10				10				38
Operating income			128				127				145				146				144				562
Net realized gains (losses)			(11	)			(12	)			6				(15	)			(8	)			(29	)
Net realized gains (losses) related to unconsolidated entities			4				12				10				10				18				50
Income tax expense on net realized gains (losses)			—				—				—				—				—				—
Net income		$	121			$	127			$	161			$	141			$	154			$	583
Combined ratio
Loss and loss expense ratio			43.6	%			45.8	%			36.2	%			41.7	%			44.4	%			42.0	%
Policy acquisition cost ratio			24.0	%			25.0	%			28.8	%			23.1	%			23.5	%			25.0	%
Administrative expense ratio			5.6	%			5.7	%			5.2	%			5.1	%			5.0	%			5.3	%
Combined ratio			73.2	%			76.5	%			70.2	%			69.9	%			72.9	%			72.3	%
Combined ratio excluding catastrophe losses and PPD			75.5	%			76.2	%			75.7	%			75.4	%			75.1	%			75.6	%
Catastrophe reinstatement premiums collected - pre-tax		$	—			$	2			$	1			$	—			$	—			$	3
Catastrophe losses - pre-tax		$	—			$	11			$	11			$	9			$	3			$	34
Favorable prior period development (PPD) - pre-tax		$	(5	)		$	(9	)		$	(21	)		$	(24	)		$	(9	)		$	(63	)
Loss and loss expense ratio excluding catastrophe losses and PPD			46.0	%			45.4	%			42.8	%			47.2	%			46.5	%			45.5	%
% Change versus prior year period
Net premiums written as reported			-11.4	%			-9.4	%			-21.2	%			-4.9	%			10.3	%			-5.7	%
Net premiums earned as reported			-20.6	%			-7.7	%			6.3	%			6.1	%			15.5	%			5.1	%
Net premiums written constant $			-9.1	%			-8.8	%			-21.8	%			-5.0	%			10.5	%			-5.8	%
Net premiums earned constant $			-19.0	%			-7.1	%			5.7	%			5.5	%			15.4	%			4.9	%
Other ratios
Net premiums written/gross premiums written			93	%			100	%			98	%			90	%			92	%			94	%

 

Global Reinsurance		Page 10

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		ACE Limited Segment Results - Consecutive Quarters (in millions of U.S. dollars) (Unaudited)

Life

 

		1Q-15				4Q-14				3Q-14				2Q-14				1Q-14				Full Year 2014
Gross premiums written		$	522			$	553			$	528			$	526			$	522			$	2,129
Net premiums written			491				523				497				498				494				2,012
Net premiums earned			474				499				489				490				484				1,962
Losses and loss expenses			152				147				145				146				151				589
Policy benefits (1)			142				134				125				144				114				517
(Gains) losses from fair value changes in separate account assets (1)			(11	)			3				6				(17	)			6				(2	)
Policy acquisition costs			107				123				123				121				111				478
Administrative expenses			73				73				71				73				68				285
Net investment income			66				69				69				66				64				268
Life underwriting income (2)			77				88				88				89				98				363
Interest expense			1				1				4				3				3				11
Other income (expense) - operating (1)			(2	)			—				(1	)			(2	)			(5	)			(8	)
Income tax expense			8				11				11				12				13				47
Operating income			66				76				72				72				77				297
Net realized gains (losses):
Mark-to-market on guaranteed living benefits derivative (net of related hedges)			(57	)			(153	)			(95	)			(70	)			(67	)			(385	)
Foreign exchange gains (losses) and all other			(2	)			7				6				(2	)			(9	)			2
Net realized gains (losses) related to unconsolidated entities			14				6				4				(2	)			(2	)			6
Income tax expense (benefit) on net realized gains (losses)			1				1				1				—				(3	)			(1	)
Net income (loss)		$	20			$	(65	)		$	(14	)		$	(2	)		$	2			$	(79	)
% Change versus prior year period
Net premiums written as reported			-0.6	%			4.0	%			3.8	%			2.2	%			-1.6	%			2.0	%
Net premiums earned as reported			-1.9	%			3.6	%			4.8	%			2.2	%			1.3	%			3.0	%
Net premiums written constant $ (3)			2.4	%			6.2	%			4.4	%			4.4	%			1.1	%			4.0	%
Net premiums earned constant $			0.9	%			5.9	%			5.4	%			4.2	%			4.0	%			4.9	%

 

(1)

(Gains) losses from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP are reclassified from Other income (expense) for purposes of presenting Life underwriting income. The offsetting movement in the separate account liabilities is included in Policy benefits.

(2)	We assess the performance of our Life business based on Life underwriting income which includes Net investment income and (Gains) losses from fair value changes in separate account assets.

(3)	International life insurance net premiums written and deposits breakdown (excludes Combined North American and Life reinsurance businesses):

 

		1Q-15				Constant $ 1Q-14				Constant $ % Change 1Q-15 vs. 1Q-14
International life insurance net premiums written		$	178			$	171				4.4	%
International life insurance deposits (4)			209				157				33.7	%
Total international life insurance net premiums written and deposits		$	387			$	328				18.4	%

 

(4)	Includes deposits collected on universal life and investment contracts. Consistent with GAAP, premiums collected on universal life and investment contracts are considered deposits and excluded from revenues.

 

Life		Page 11

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		ACE Limited Loss Reserve Rollforward (in millions of U.S. dollars, except ratios) (Unaudited)

 

		Unpaid Losses												Net Paid to Incurred Ratio
		Gross				Ceded				Net
Balance at December 31, 2013		$	37,443			$	10,612			$	26,831
Losses and loss expenses incurred			2,462				301				2,161
Losses and loss expenses paid			(3,059	)			(762	)			(2,297	)			106	%
Other (incl. foreign exch. revaluation)			20				16				4
Balance at March 31, 2014		$	36,866			$	10,167			$	26,699
Losses and loss expenses incurred			3,004				616				2,388
Losses and loss expenses paid			(2,878	)			(729	)			(2,149	)			90	%
Other (incl. foreign exch. revaluation)			185				56				129
Balance at June 30, 2014		$	37,177			$	10,110			$	27,067
Losses and loss expenses incurred			3,840				1,156				2,684
Losses and loss expenses paid			(3,165	)			(810	)			(2,355	)			88	%
Other (incl. foreign exch. revaluation)			(405	)			(120	)			(285	)
Balance at September 30, 2014		$	37,447			$	10,336			$	27,111
Losses and loss expenses incurred			3,442				1,026				2,416
Losses and loss expenses paid			(3,307	)			(873	)			(2,434	)			101	%
Other (incl. foreign exch. revaluation)			733				818				(85	)
Balance at December 31, 2014		$	38,315			$	11,307			$	27,008
Losses and loss expenses incurred			2,743				621				2,122
Losses and loss expenses paid			(3,062	)			(744	)			(2,318	)			109	%
Other (incl. foreign exch. revaluation)			(670	)			(197	)			(473	)
Balance at March 31, 2015		$	37,326			$	10,987			$	26,339
Add net recoverable on paid losses			—				601				(601	)
Balance including net recoverable on paid losses		$	37,326			$	11,588			$	25,738

 

Loss Reserve Rollforward		Page 12

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		ACE Limited Reinsurance Recoverable Analysis (in millions of U.S. dollars) (Unaudited)

Net Reinsurance Recoverable by Division

 

		March 31 2015				December 31 2014
Reinsurance recoverable on paid losses and loss expenses
Active operations		$	413			$	478
Brandywine and Other Run-off			292				313
Total		$	705			$	791
Reinsurance recoverable on unpaid losses and loss expenses
Active operations		$	10,052			$	10,348
Brandywine and Other Run-off			1,184				1,210
Total		$	11,236			$	11,558
Gross reinsurance recoverable
Active operations		$	10,465			$	10,826
Brandywine and Other Run-off			1,476				1,523
Total		$	11,941			$	12,349
Provision for uncollectible reinsurance (1)
Active operations		$	(213	)		$	(217	)
Brandywine and Other Run-off			(140	)			(140	)
Total		$	(353	)		$	(357	)
Net reinsurance recoverable
Active operations		$	10,252			$	10,609
Brandywine and Other Run-off			1,336				1,383
Total		$	11,588			$	11,992

 

(1)	The provision for uncollectible reinsurance is based on a default analysis applied to gross reinsurance, net of usable collateral of approximately $2.4 billion.

 

Reinsurance Recoverable		Page 13

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		ACE Limited Investment Portfolio (in millions of U.S. dollars) (Unaudited)

 

		March 31 2015								December 31 2014
Market Value
Fixed maturities available for sale		$	50,410							$	49,395
Fixed maturities held to maturity			7,307								7,589
Short-term investments			2,536								2,322
Total fixed maturities		$	60,253							$	59,306
Asset Allocation by Market Value
Treasury		$	2,448				4	%		$	2,448				4	%
Agency			1,221				2	%			1,222				2	%
Corporate and asset-backed			20,370				34	%			19,854				34	%
Mortgage-backed			12,791				21	%			12,325				21	%
Municipal			5,067				9	%			4,930				8	%
Non-U.S.			15,820				26	%			16,205				27	%
Short-term investments			2,536				4	%			2,322				4	%
Total fixed maturities		$	60,253				100	%		$	59,306				100	%
Credit Quality by Market Value
AAA		$	9,386				16	%		$	8,943				15	%
AA			21,760				36	%			21,589				36	%
A			11,712				19	%			11,625				20	%
BBB			8,789				15	%			8,690				15	%
BB			4,377				7	%			4,372				7	%
B			4,054				7	%			3,916				7	%
Other			175				0	%			171				0	%
Total fixed maturities		$	60,253				100	%		$	59,306				100	%
Cost/Amortized Cost
Fixed maturities available for sale		$	48,384							$	47,826
Fixed maturities held to maturity			6,982								7,331
Short-term investments			2,536								2,322
Subtotal fixed maturities			57,902								57,479
Equity securities			447								440
Other investments			3,096								2,999
Total investment portfolio		$	61,445							$	60,918
Avg. duration of fixed maturities			3.9 years								4.0 years
Avg. market yield of fixed maturities			2.6	%							2.8	%
Avg. credit quality			A/Aa								A/Aa
Avg. yield on invested assets			3.6	%							3.8	%

 

Investments		Page 14

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		ACE Limited Investment Portfolio - 2 (in millions of U.S. dollars) (Unaudited)

Mortgage-backed Fixed Income Portfolio

Mortgage-backed securities

 

		S&P Credit Rating
		AAA				AA				A				BBB				BB and below				Total
Market Value at March 31, 2015
Agency residential mortgage-backed (RMBS)		$	—			$	10,524			$	—			$	—			$	—			$	10,524
Non-agency RMBS			30				5				16				11				14				76
Commercial mortgage-backed			2,163				14				11				3				—				2,191
Total mortgage-backed securities at market value		$	2,193			$	10,543			$	27			$	14			$	14			$	12,791

U.S. Corporate and Asset-backed Fixed Income Portfolios

 

Market Value at March 31, 2015		S&P Credit Rating
		Investment Grade
		AAA				AA				A				BBB				Total
Asset-backed		$	752			$	66			$	—			$	—			$	818
Banks			—				18				2,177				296				2,491
Basic Materials			—				3				95				335				433
Communications			—				47				272				1,010				1,329
Consumer, Cyclical			—				128				408				502				1,038
Consumer, Non-Cyclical			60				458				1,152				777				2,447
Diversified Financial Services			—				44				308				108				460
Energy			31				35				177				789				1,032
Industrial			—				361				438				379				1,178
Utilities			—				10				652				428				1,090
All Others			75				142				542				607				1,366
Total		$	918			$	1,312			$	6,221			$	5,231			$	13,682

 

Market Value at March 31, 2015		S&P Credit Rating
		Below Investment Grade
		BB				B				CCC				Total
Asset-backed		$	—			$	3			$	11			$	14
Banks			1				6				—				7
Basic Materials			127				127				3				257
Communications			582				583				6				1,171
Consumer, Cyclical			464				635				24				1,123
Consumer, Non-Cyclical			508				897				34				1,439
Diversified Financial Services			142				59				3				204
Energy			561				195				15				771
Industrial			357				355				7				719
Utilities			228				66				—				294
All Others			329				347				13				689
Total		$	3,299			$	3,273			$	116			$	6,688

 

Investments 2		Page 15

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		ACE Limited Investment Portfolio - 3 (in millions of U.S. dollars) (Unaudited)

Non-U.S. Fixed Income Portfolio

March 31, 2015

 

Non-U.S. Government Securities		Market Value by S&P Credit Rating
		AAA				AA				A				BBB				BB and below				Total
United Kingdom		$	1,063			$	—			$	—			$	—			$	—			$	1,063
Republic of Korea			—				767				55				—				—				822
Federative Republic of Brazil			—				—				—				556				—				556
United Mexican States			—				—				374				126				—				500
Canada			455				—				—				—				—				455
Kingdom of Thailand			—				—				435				—				—				435
Province of Ontario			—				362				—				—				—				362
Japan			—				257				—				—				—				257
Province of Quebec			—				—				257				—				—				257
Australia			183				—				—				—				—				183
Other Non-U.S. Government Securities			573				879				312				408				493				2,665
Total		$	2,274			$	2,265			$	1,433			$	1,090			$	493			$	7,555
Non-U.S. Corporate Securities		Market Value by S&P Credit Rating
		AAA				AA				A				BBB				BB and below				Total
United Kingdom		$	114			$	53			$	665			$	494			$	219			$	1,545
Canada			128				117				255				370				164				1,034
United States (1)			2				81				90				251				196				620
Australia			79				90				249				87				42				547
Netherlands			24				144				177				139				42				526
France			35				70				208				155				49				517
Germany			88				23				127				102				33				373
Switzerland			45				16				86				94				65				306
China			—				152				72				26				11				261
Euro Supranational			208				43				—				—				—				251
Other Non-U.S. Corporate Securities			85				232				900				578				490				2,285
Total		$	808			$	1,021			$	2,829			$	2,296			$	1,311			$	8,265

 

(1)	Countries represent the ultimate parent company’s country of risk. Non-U.S. corporate securities could be issued by foreign subsidiaries of U.S. corporations.

 

Investments 3		Page 16

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		ACE Limited Investment Portfolio - 4 (in millions of U.S. dollars) (Unaudited)

Fixed Maturity Investment Portfolio

Top 10 Global Corporate Exposures

 

		March 31, 2015		Market Value				Rating
1		JP Morgan Chase & Co		$	492			A
2		General Electric Co			443			AA+
3		Goldman Sachs Group Inc			344			A-
4		Wells Fargo & Co			266			A+
5		HSBC Holdings Plc			252			A
6		Bank of America Corp			246			A-
7		Verizon Communications Inc			237			BBB+
8		Morgan Stanley			234			A-
9		AT&T Inc			215			BBB+
10		Citigroup Inc			215			A-

 

Investments 4		Page 17

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		ACE Limited Net Realized and Unrealized Gains (Losses) (in millions of U.S. dollars) (Unaudited)

 

		Three months ended March 31, 2015
		Net Realized Gains (Losses) (1)				Net Unrealized Gains (Losses)				Net Impact
Fixed maturities		$	(4	)		$	438			$	434
Fixed income derivatives			1				—				1
Public equity			1				18				19
Private equity			13				(12	)			1
Total investment portfolio			11				444				455
Mark-to-market from variable annuity reinsurance derivative transactions, net of applicable hedges (2)			(57	)			—				(57	)
Foreign exchange (3)			(31	)			(421	)			(452	)
Partially-owned entities (4)			13				—				13
Other			1				13				14
Net gains (losses) before tax			(63	)			36				(27	)
Income tax expense			1				75				76
Net gains (losses)		$	(64	)		$	(39	)		$	(103	)

 

(1)	Other-than-temporary impairments for the quarter includes $13 million for fixed maturities.

(2)	Includes $12 million of losses on applicable hedges.

(3)	Unrealized foreign exchange loss, after-tax, for the quarter is $410 million.

(4)	Partially-owned entities are investments where we hold more than an insignificant percentage of the investee’s shares. The net income or loss is included in other income (expense).

 

		Three months ended March 31, 2014
		Net Realized Gains (Losses) (5)				Net Unrealized Gains (Losses)				Net Impact
Fixed maturities		$	11			$	461			$	472
Fixed income derivatives			(25	)			—				(25	)
Public equity			(5	)			10				5
Private equity			56				42				98
Total investment portfolio			37				513				550
Mark-to-market from variable annuity reinsurance derivative transactions, net of applicable hedges (6)			(67	)			—				(67	)
Foreign exchange (7)			(9	)			(33	)			(42	)
Partially-owned entities (8)			(5	)			—				(5	)
Other			(7	)			(8	)			(15	)
Net gains (losses) before tax			(51	)			472				421
Income tax expense (benefit)			(8	)			98				90
Net gains (losses)		$	(43	)		$	374			$	331

 

(5)	Other-than-temporary impairments for the quarter includes $5 million for fixed maturities and $6 million for public equity.

(6)	Includes $19 million of losses on applicable hedges.

(7)	Unrealized foreign exchange loss, after-tax, for the quarter is $41 million.

(8)	Partially-owned entities are investments where we hold more than an insignificant percentage of the investee’s shares. The net income or loss is included in other income (expense).

 

Net Gains (Losses)		Page 18

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		ACE Limited Capital Structure (in millions of U.S. dollars, except ratios) (Unaudited)

 

		March 31 2015				December 31 2014				December 31 2013
Total short-term debt (1)		$	2,552			$	2,552			$	1,901
Total long-term debt (2)			4,157				3,357				3,807
Total debt		$	6,709			$	5,909			$	5,708
Total trust preferred securities		$	309			$	309			$	309
Total shareholders’ equity		$	29,702			$	29,587			$	28,825
Total capitalization		$	36,720			$	35,805			$	34,842
Tangible capital (3)		$	31,204			$	30,081			$	29,438
Leverage ratios
Debt/ total capitalization			18.3	%			16.5	%			16.4	%
Debt plus trust preferred securities/ total capitalization			19.1	%			17.4	%			17.3	%
Debt/ tangible capital			21.5	%			19.6	%			19.4	%
Debt plus trust preferred securities/ tangible capital			22.5	%			20.7	%			20.4	%

Note: As of March 31, 2015, there was $0.5 billion usage of credit facilities on a total commitment of $1.0 billion.

 

(1)	Repurchase agreements in the amount of $477 million matured during the quarter, and there were new repurchase agreements in the amount of $477 million.

(2)	During Q1 2015, we issued $800 million par value of 3.15 percent senior notes due March 2025.

(3)	Tangible capital is equal to total capitalization less goodwill and other intangible assets.

 

Capital Structure		Page 19

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		ACE Limited Computation of Basic and Diluted Earnings Per Share (in millions of U.S. dollars, except share and per share data) (Unaudited)

 

		Three months ended March 31
		2015				2014
Numerator
Operating income to common shares		$	745			$	777
Adjusted net realized gains (losses), net of income tax			(64	)			(43	)
Net income		$	681			$	734
Rollforward of Common Shares Outstanding
Shares - beginning of period			328,659,686				339,793,935
Repurchase of shares (1)			(3,027,463	)			(3,487,882	)
Shares issued, excluding option exercises			1,011,030				1,176,596
Issued for option exercises			441,509				491,995
Shares - end of period			327,084,762				337,974,644
Denominator
Weighted average shares outstanding			328,212,376				338,869,562
Effect of other dilutive securities			3,480,344				3,171,174
Adj. wtd. avg. shares outstanding and assumed conversions			331,692,720				342,040,736
Basic earnings per share
Operating income		$	2.27			$	2.29
Adjusted net realized gains (losses), net of income tax			(0.19	)			(0.13	)
Net income		$	2.08			$	2.16
Diluted earnings per share
Operating income		$	2.25			$	2.27
Adjusted net realized gains (losses), net of income tax			(0.20	)			(0.13	)
Net income		$	2.05			$	2.14

 

(1)	For the period April 1, 2015 through April 20, 2015 we repurchased 650 thousand shares totaling $73 million, pursuant to a plan adopted under SEC Rule 10b5-1 and in accordance with the provisions of SEC Rule 10b-18.

 

Earnings per share		Page 20

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		ACE Limited Book Value and Book Value per Common Share (in millions of U.S. dollars, except share and per share data) (Unaudited)

Reconciliation of Book Value per Common Share

 

		March 31 2015				December 31 2014				March 31 2014
Shareholders’ equity		$	29,702			$	29,587			$	29,369
Less: goodwill and other intangible assets			5,516				5,724				5,382
Numerator for tangible book value per share		$	24,186			$	23,863			$	23,987
Book value - % change over prior quarter			0.4	%			-1.4	%			1.9	%
Tangible book value - % change over prior quarter			1.4	%			-3.0	%			2.4	%
Denominator			327,084,762				328,659,686				337,974,644
Book value per common share		$	90.81			$	90.02			$	86.90
Tangible book value per common share		$	73.94			$	72.61			$	70.97
Reconciliation of Book Value
Shareholders’ equity, beginning of quarter		$	29,587			$	30,017			$	28,825
Operating income			745				827				777
Adjusted net realized gains (losses), net of tax			(64	)			(272	)			(43	)
Net unrealized gains (losses), net of tax			361				94				420
Repurchase of shares			(340	)			(430	)			(332	)
Dividend declared on common shares (2)			(222	)			(223	)			(256	)
Cumulative translation, net of tax			(410	)			(520	)			(41	)
Pension liability			10				9				(5	)
Other (1)			35				85				24
		$	29,702			$	29,587			$	29,369

 

(1)	Other primarily includes proceeds from exercise of stock options and stock compensation.

(2)	The March 31, 2014 amount includes a $0.12 per share increase related to the Q4 2013 dividend installment approved by our shareholders on January 10, 2014.

 

Reconciliation Book Value		Page 21

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		ACE Limited Non-GAAP Financial Measures (in millions of U.S. dollars) (Unaudited)

Regulation G - Non-GAAP Financial Measures

In presenting our results, we included and discussed certain non-GAAP measures. These non-GAAP measures, which may be defined differently by other companies, are important for an understanding of our overall results of operations and financial condition. However, they should not be viewed as a substitute for measures determined in accordance with generally accepted accounting principles (GAAP).

We provide financial measures such as gross premiums written, net premiums written, net premiums earned, and operating income on a constant-dollar basis. We believe it is useful to evaluate the trends in these measures exclusive of the effect of fluctuations in exchange rates between the U.S. dollar and the currencies in which our international business is transacted, as these exchange rates could fluctuate significantly between periods and distort the analysis of trends. The impact is determined by assuming constant foreign exchange rates between periods by translating prior period results using the same local currency exchange rates as the comparable current period.

Adjusted net realized gains (losses) is a non-GAAP financial measure that excludes realized gains and losses on crop derivatives. These derivatives were purchased to provide economic benefit, in a manner similar to reinsurance protection, in the event that a significant decline in commodity pricing will impact underwriting results. We view gains and losses on these derivatives as part of the results of our underwriting operations and therefore realized gains and losses from these derivatives are reclassified to Adjusted losses and loss expenses (a non-GAAP financial measure). Adjusted losses and loss expenses include gains and losses on crop derivatives. P&C loss and loss expense ratio and P&C combined ratio (both non-GAAP financial measures) include adjusted losses and loss expenses in the ratio numerator. A reconciliation of GAAP combined ratio to P&C combined ratio is provided on page 24.

In presenting our segment operating results, we have shown our performance with reference to underwriting results. Underwriting results are calculated by subtracting losses and loss expenses, policy benefits, policy acquisition costs, and administrative expenses from net premiums earned. We use underwriting results and operating ratios to monitor the results of our operations without the impact of certain factors, including investment income, other income and expenses, interest and income tax expense, and net realized gains (losses). P&C underwriting income is a non-GAAP financial measure which includes Adjusted losses and loss expenses. Insurance – North American Agriculture underwriting income includes gains (losses) on crop derivatives. Life underwriting income includes net investment income and gains (losses) from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP.

Operating income or income excluding adjusted net realized gains (losses), net of tax, is a common performance measurement for insurance companies and non-GAAP financial measure. We believe this presentation enhances the understanding of our results of operations by highlighting the underlying profitability of our insurance business. We exclude adjusted net realized gains (losses) and net realized gains (losses) included in other income (expense) related to partially owned entities because the amount of these gains (losses) is heavily influenced by, and fluctuates in part according to, the availability of market opportunities. Operating income or income excluding adjusted net realized gains (losses) should not be viewed as a substitute for net income determined in accordance with GAAP.

Other income (expense) – operating is a non-GAAP financial measure and excludes the portion of net realized gains and losses related to unconsolidated entities from other income (expense). These gains and losses are reported as Net realized gains (losses) and represent the non-operating activities of entities where we hold more than an insignificant percentage of the investee’s shares. We exclude these gains and losses from other income (expense) to enhance the understanding of our core results of operations as they are heavily influenced by, and fluctuate in part according to market conditions. A reconciliation of Consolidated Other income (expense) on a GAAP basis to Consolidated Other income (expense) - operating is provided on page 24.

P&C combined ratio excluding catastrophe losses and prior period development (PPD) is a non-GAAP financial measure. The ratio numerator includes adjusted losses and loss expenses, policy acquisition costs, and administrative expenses adjusted to exclude catastrophe losses and PPD. The ratio denominator includes net premiums earned adjusted to exclude the amount of reinstatement premiums (expensed) collected and net earned premium adjustments on loss sensitive policies. We believe that excluding the impact of catastrophe losses and PPD provides a better evaluation of our core underwriting performance and enhances the understanding of the trends in our property & casualty business that may be obscured by these items.

P&C loss and loss expense ratio excluding the impact of catastrophe losses and PPD is a non-GAAP financial measure. The loss ratio numerator includes adjusted losses and loss expenses adjusted to exclude catastrophe losses and PPD. The loss ratio denominator includes Net premiums earned adjusted to exclude the amount of reinstatement premiums (expensed) collected. In periods where there are adjustments on loss sensitive policies, these adjustments are excluded from PPD and net earned premiums when calculating this ratio. We believe that excluding the impact of catastrophe losses and PPD provides a better evaluation of our core underwriting performance and enhances the understanding of the trends in our property & casualty business that may be obscured by these items.

P&C expense ratio excluding accident and health (A&H) is a non-GAAP financial measure and excludes the impact of our A&H business from our consolidated expense ratio. The expense ratio for the A&H business is typically higher than our traditional P&C business, and we believe that this measure provides better comparison to our peer companies that may not have a significant A&H block of business.

Global P&C performance metrics are non-GAAP financial measures and comprise consolidated operating results (including corporate) and exclude the operating results of the company’s Life and Insurance – North American Agriculture segments. We believe that these measures are useful and meaningful to investors as they are used by management to assess the company’s global P&C operations which are the most economically similar. We exclude the Insurance – North American Agriculture and Life segments because the results of these businesses do not always correlate with the results of our global P&C operations.

International life insurance net premiums written and deposits collected, is a non-GAAP financial measure. Deposits collected on universal life and investment contracts (life deposits) are not reflected as revenues in our consolidated statements of operations in accordance with GAAP. However, we include life deposits in presenting growth in our life insurance business because new life deposits are an important component of production and key to our efforts to grow our business.

Operating return on equity (ROE) or ROE calculated using operating income is an annualized non-GAAP financial measure and is calculated as operating income divided by average shareholders’ equity, as adjusted, for the period. To annualize a quarterly rate, multiply by four. Operating ROE is a useful measure as it enhances the understanding of the return on shareholders’ equity by highlighting the underlying profitability relative to shareholders’ equity excluding the effect of unrealized gains and losses on our investments.

Operating effective tax rate is a non-GAAP financial measure. The numerator excludes tax on adjusted net realized gains (losses). The denominator excludes adjusted net realized gains (losses), before tax. We exclude adjusted net realized gains (losses) and the related tax impact because these amounts are heavily influenced by, and fluctuate in part according to, the availability of market opportunities. Operating effective tax rate should not be viewed as a substitute for effective tax rate determined in accordance with GAAP.

Tangible book value per common share is a non-GAAP financial measure and is shareholders’ equity less goodwill and other intangible assets divided by the shares outstanding. We believe that goodwill and other intangible assets are not indicative of our underlying insurance results or trends and make book value comparisons to less acquisitive peer companies less meaningful. A reconciliation of tangible book value per share is provided on page 21. Tangible book value per common share excluding 2014 acquisitions is shareholders’ equity less goodwill and other intangible assets divided by the shares outstanding. The numerator adds back the goodwill and other intangible assets related to the 2014 acquisitions of the large corporate P&C business of Itaú Seguros, S.A. and The Siam Commercial Samaggi Insurance PCL in order to adjust for the distortive effect of acquisitions. In addition, we disclose per share measures that exclude the impact of foreign currency fluctuations during 2015 in order to adjust for the distortive effects of fluctuations in exchange rates.

 

Reconciliation Non-GAAP		Page 22

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		ACE Limited Non-GAAP Financial Measures - 2 (in millions of U.S. dollars, except ratios) (Unaudited

Regulation G - Non-GAAP Financial Measures (continued)

 

Operating income

Operating income is a common performance measure for insurance companies and is presented throughout this report.

The following table presents the reconciliation of Net income to Operating income:

 

		1Q-15				4Q-14				3Q-14				2Q-14				1Q-14				Full Year 2014
Net income, as reported		$	681			$	555			$	785			$	779			$	734			$	2,853
Adjusted net realized gains (losses)			(89	)			(210	)			(165	)			(81	)			(102	)			(558	)
Net realized gains (losses) related to unconsolidated entities (1)			26				49				55				36				51				191
Income tax expense (benefit) on adjusted net realized gains (losses)			1				111				(4	)			1				(8	)			100
Operating income		$	745			$	827			$	891			$	825			$	777			$	3,320

 

(1)	Realized gains (losses) on partially-owned entities, which are investments where we hold more than an insignificant percentage of the investee’s shares. The net income or loss is included in other income (expense).

The following table presents the Operating income (loss) of each segment and Corporate:

 

		1Q-15				4Q-14				3Q-14				2Q-14				1Q-14				Full Year 2014
Insurance – North American P&C		$	345			$	372			$	337			$	378			$	411			$	1,498
Insurance – Overseas General			241				294				348				282				239				1,163
Global Reinsurance			128				127				145				146				144				562
Corporate			(70	)			(87	)			(68	)			(72	)			(69	)			(296	)
Global P&C (including Corporate)			644				706				762				734				725				2,927
Insurance – North American Agriculture			35				45				57				19				(25	)			96
Consolidated Results (including Corporate) Excluding Life Segment			679				751				819				753				700				3,023
Life			66				76				72				72				77				297
Consolidated operating income		$	745			$	827			$	891			$	825			$	777			$	3,320

Operating ROE

The following table presents the reconciliation of ROE to Operating ROE:

 

		1Q-15				1Q-14				Full Year 2014
Net income		$	681			$	734			$	2,853
Operating income		$	745			$	777			$	3,320
Equity - beginning of period, as reported		$	29,587			$	28,825			$	28,825
Less: unrealized gains (losses) on investments, net of deferred tax			1,851				1,174				1,174
Equity - beginning of period, as adjusted		$	27,736			$	27,651			$	27,651
Equity - end of period, as reported		$	29,702			$	29,369			$	29,587
Less: unrealized gains (losses) on investments, net of deferred tax			2,212				1,594				1,851
Equity - end of period, as adjusted		$	27,490			$	27,775			$	27,736
Average equity, as reported		$	29,645			$	29,097			$	29,206
Average equity, as adjusted		$	27,613			$	27,713			$	27,694
Operating ROE			10.8	%			11.2	%			12.0	%
ROE			9.2	%			10.1	%			9.8	%

 

Reconciliation Non-GAAP 2		Page 23

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		ACE Limited Non-GAAP Financial Measures - 3 (in millions of U.S. dollars, except ratios) (Unaudited)

Regulation G - Non-GAAP Financial Measures (continued)

 

Operating effective tax rate

The following table presents the reconciliation of effective tax rate to the operating effective tax rate:

 

		1Q-15				4Q-14				3Q-14				2Q-14				1Q-14				Full Year 2014
Tax expense, as reported		$	120			$	232			$	176			$	133			$	93			$	634
Tax expense (benefit) on adjusted net realized gains (losses)			1				111				(4	)			1				(8	)			100
Tax expense, adjusted		$	119			$	121			$	180			$	132			$	101			$	534
Income before tax, as reported		$	801			$	787			$	961			$	912			$	827			$	3,487
Less: adjusted realized gains (losses)			(89	)			(210	)			(165	)			(81	)			(102	)			(558	)
Less: realized gains (losses) related to unconsolidated entities			26				49				55				36				51				191
Operating income before tax		$	864			$	948			$	1,071			$	957			$	878			$	3,854
Effective tax rate			15.0	%			29.5	%			18.3	%			14.6	%			11.3	%			18.2	%
Adjustment for tax impact of adjusted net realized gains (losses)			-1.3	%			-16.8	%			-1.4	%			-0.9	%			0.2	%			-4.3	%
Operating effective tax rate			13.7	%			12.7	%			16.9	%			13.7	%			11.5	%			13.9	%

Other income (expense) - operating

The following table presents the reconciliation of Consolidated Other income (expense) on a GAAP basis to Consolidated Other income (expense) - operating. Other income (expense) – operating is a non-GAAP financial measure which excludes gains (losses) from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP and the portion of net realized gains and losses related to unconsolidated entities. Gains (losses) from fair value changes in separate account assets are reclassified from Other income (expense) for purposes of presenting Life underwriting income, as the offsetting movement in the separate account liabilities is included in Policy benefits. Net realized gains (losses) related to unconsolidated entities is excluded from operating income in order to enhance the understanding of our core results of operations as they are heavily influenced by, and fluctuate in part according to market conditions.

 

		1Q-15				4Q-14				3Q-14				2Q-14				1Q-14				Full Year 2014
Consolidated GAAP Other income (expense):
Consolidated excluding Life segment		$	(18	)		$	18			$	22			$	12			$	30			$	82
Life segment			23				3				(3	)			13				(13	)			—
Consolidated			5				21				19				25				17				82
Less: Gains (losses) from fair value changes in separate account assets
Consolidated excluding Life segment			—				—				—				—				—				—
Life segment			11				(3	)			(6	)			17				(6	)			2
Consolidated			11				(3	)			(6	)			17				(6	)			2
Less: Net realized gains (losses) related to unconsolidated entities
Consolidated excluding Life segment			12				43				51				38				53				185
Life segment			14				6				4				(2	)			(2	)			6
Consolidated			26				49				55				36				51				191
Consolidated Other income (expense) - operating:
Consolidated excluding Life segment			(30	)			(25	)			(29	)			(26	)			(23	)			(103	)
Life segment			(2	)			—				(1	)			(2	)			(5	)			(8	)
Consolidated		$	(32	)		$	(25	)		$	(30	)		$	(28	)		$	(28	)		$	(111	)

P&C combined ratio

The following table presents the reconciliation of GAAP combined ratio to P&C combined ratio. The P&C combined ratio includes the impact of realized gains and losses on crop derivatives. These derivatives were purchased to provide economic benefit, in a manner similar to reinsurance protection, in the event that a significant decline in commodity pricing will impact underwriting results. We view gains and losses on these derivatives as part of the results of our underwriting operations.

 

		1Q-15				4Q-14				3Q-14				2Q-14				1Q-14				Full Year 2014
GAAP combined ratio			88.4	%			88.5	%			87.3	%			87.7	%			88.8	%			88.1	%
Impact of gains and losses on crop derivatives			0.0	%			0.0	%			-1.0	%			-0.2	%			0.0	%			-0.4	%
P&C combined ratio			88.4	%			88.5	%			86.3	%			87.5	%			88.8	%			87.7	%

 

Reconciliation Non-GAAP 3		Page 24

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		ACE Limited Glossary

ACE Limited Consolidated comprises all segments including Corporate.

Operating return on equity (ROE) or ROE calculated using income excluding adjusted net realized gains (losses): Operating income or income excluding adjusted net realized gains (losses), net of tax, divided by average shareholders’ equity for the period excluding unrealized gains (losses) on investments, net of tax. To annualize a quarterly rate multiply by four.

Book value per common share: Shareholders’ equity divided by the shares outstanding.

Combined ratio: The sum of the loss and loss expense ratio, acquisition cost ratio and the administrative expense ratio excluding life business.

Operating effective tax rate: Income tax expense excluding tax expense (benefit) on adjusted net realized gains (losses) divided by income excluding adjusted net realized gains (losses) before tax.

Life underwriting income: Net premiums earned and net investment income less losses and loss expenses, policy benefits, acquisition costs, and administrative expenses. In addition, Life underwriting income includes gains/losses from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP.

Tangible book value per common share: Shareholders’ equity less goodwill and other intangible assets divided by the shares outstanding.

Average market yield of fixed maturities: Weighted average yield to maturity of our fixed income portfolio based on the market prices of the holdings as of that date.

Average yield on invested assets: Net investment income divided by average cost of fixed maturities and other investments, and average market value of equity securities.

Tangible capital: Total capitalization less goodwill and other intangible assets.

Total capitalization: Short-term debt, long-term debt, trust preferreds, and shareholders’ equity.

NM: Not meaningful.

 

Glossary		Page 25