Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-Q

		
x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	

For the Quarterly Period Ended September 30, 2013

OR

		
¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934	

For the Transition Period from             to             
Commission File No. 1-11778

ACE LIMITED
(Exact name of registrant as specified in its charter)

	
		
Switzerland	98-0091805	
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)	

Baerengasse 32
Zurich, Switzerland CH-8001
(Address of principal executive offices) (Zip Code)
+41 (0)43 456 76 00
(Registrant’s telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
YES   x                                                  NO   ¨
Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
YES   x                                                  NO   ¨
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

							
Large accelerated filer   x	 	 	 	 	 	Accelerated filer ¨	
Non-accelerated filer   ¨	(Do not check if a smaller reporting company)	 	Smaller reporting company  ¨  	

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
YES   ¨                                                  NO   x
The number of registrant’s Common Shares (CHF 27.49 par value) outstanding as of October 16, 2013 was 340,065,071 .

Table of Contents

ACE LIMITED
INDEX TO FORM 10-Q

	
				
 	 	 	Page	
Part I.	FINANCIAL INFORMATION	 	
Item 1.	Financial Statements:	 	
 	Consolidated Balance Sheets (Unaudited)
September 30, 2013 and December 31, 201 2	3	
 	Consolidated Statements of Operations and Comprehensive Income (Unaudited)
Three and Nine Months Ended September 30, 2013 and 201 2	4	
 	Consolidated Statements of Shareholders’ Equity (Unaudited)
Nine Months Ended September 30, 2013 and 201 2	5	
 	Consolidated Statements of Cash Flows (Unaudited)
Nine Months Ended September 30, 2013 and 201 2	6	
 	Notes to Consolidated Financial Statements (Unaudited)	 	
 	Note 1.	General	7	
 	Note 2.	Acquisitions	7	
 	Note 3.	Investments	8	
 	Note 4.	Fair value measurements	13	
 	Note 5.	Assumed life reinsurance programs involving minimum benefit guarantees under annuity contracts	22	
 	Note 6.	Debt	24	
 	Note 7.	Commitments, contingencies, and guarantees	24	
 	Note 8.	Shareholders’ equity	28	
 	Note 9.	Share-based compensation	29	
 	Note 10.	Segment information	29	
 	Note 11.	Earnings per share	33	
 	Note 12.	Information provided in connection with outstanding debt of subsidiaries	33	
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	43	
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	81	
Item 4.	Controls and Procedures	85	
 	 	 	
Part II.	OTHER INFORMATION	 	
Item 1.	Legal Proceedings	85	
Item 1A.	Risk Factors	85	
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Repurchases of Equity Securities	85	
Item 6.	Exhibits	85	

2

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PART I FINANCIAL INFORMATION

ITEM 1. Financial Statements

CONSOLIDATED BALANCE SHEETS (Unaudited)
ACE Limited and Subsidiaries

								
 	September 30		 	December 31		
(in millions of U.S. dollars, except share and per share data)	2013		 	2012		
Assets	 	 	 	
Investments	 	 	 	
Fixed maturities available for sale, at fair value (amortized cost – $47,481 and $44,666)	$	48,529		 	$	47,306		
    (includes hybrid financial instruments of $291 and $309)								
Fixed maturities held to maturity, at amortized cost (fair value – $6,493 and $7,633)	6,306		 	7,270		
Equity securities, at fair value (cost – $835 and $707)	831		 	744		
Short-term investments, at fair value and amortized cost	1,774		 	2,228		
Other investments (cost – $2,616 and $2,465)	2,902		 	2,716		
Total investments	60,342		 	60,264		
Cash	768		 	615		
Securities lending collateral	1,517		 	1,791		
Accrued investment income	563		 	552		
Insurance and reinsurance balances receivable	5,089		 	4,147		
Reinsurance recoverable on losses and loss expenses	11,477		 	12,078		
Reinsurance recoverable on policy benefits	237		 	241		
Deferred policy acquisition costs	2,224		 	1,873		
Value of business acquired	554		 	614		
Goodwill and other intangible assets	5,465		 	4,975		
Prepaid reinsurance premiums	1,724		 	1,617		
Deferred tax assets	584		 	453		
Investments in partially-owned insurance companies (cost – $465 and $451)	468		 	454		
Other assets	3,572		 	2,871		
Total assets	$	94,584		 	$	92,545		
Liabilities	 	 	 	
Unpaid losses and loss expenses	$	37,882		 	$	37,946		
Unearned premiums	7,794		 	6,864		
Future policy benefits	4,596		 	4,470		
Insurance and reinsurance balances payable	3,627		 	3,472		
Securities lending payable	1,520		 	1,795		
Accounts payable, accrued expenses, and other liabilities	4,917		 	5,377		
Income taxes payable	12		 	20		
Short-term debt	1,902		 	1,401		
Long-term debt	3,807		 	3,360		
Trust preferred securities	309		 	309		
Total liabilities	66,366		 	65,014		
Commitments and contingencies		 		
Shareholders’ equity	 	 	 	
Common Shares (CHF 27.49 and CHF 28.89 par value; 342,832,412 shares issued; 340,069,972 and 340,321,534 shares outstanding)	9,073		 	9,591		
Common Shares in treasury (2,762,440 and 2,510,878 shares)	(222	)	 	(159	)	
Additional paid-in capital	5,200		 	5,179		
Retained earnings	12,793		 	10,033		
Accumulated other comprehensive income (AOCI)	1,374		 	2,887		
Total shareholders’ equity	28,218		 	27,531		
Total liabilities and shareholders’ equity	$	94,584		 	$	92,545		
See accompanying notes to the consolidated financial statements

3 

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CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (Unaudited)
ACE Limited and Subsidiaries

	
																
 	Three Months Ended	 	 	Nine Months Ended	 	
 	September 30	 	 	September 30	 	
(in millions of U.S. dollars, except per share data)	2013		 	2012		 	2013		 	2012		
Revenues	 	 	 	 	 	 	 	
Net premiums written	$	4,620		 	$	4,716		 	$	12,809		 	$	12,418		
Change in unearned premiums	(10	)	 	(51	)	 	(559	)	 	(589	)	
Net premiums earned	4,610		 	4,665		 	12,250		 	11,829		
Net investment income	522		 	533		 	1,587		 	1,614		
Net realized gains (losses):	 	 	 	 		 	 	
Other-than-temporary impairment (OTTI) losses gross	(4	)	 	(10	)	 	(14	)	 	(30	)	
Portion of OTTI losses recognized in other comprehensive income (OCI)	—		 	—		 	—		 	—		
Net OTTI losses recognized in income	(4	)	 	(10	)	 	(14	)	 	(30	)	
Net realized gains (losses) excluding OTTI losses	44		 	(50	)	 	364		 	(164	)	
Total net realized gains (losses) (includes $24 and $97 of net unrealized gains reclassified from AOCI in the three and nine months ended September 30, 2013, respectively)	40		 	(60	)	 	350		 	(194	)	
Total revenues	5,172		 	5,138		 	14,187		 	13,249		
Expenses	 	 	 	 	 	 	 	
Losses and loss expenses	2,655		 	3,047		 	6,831		 	6,970		
Policy benefits	138		 	130		 	379		 	379		
Policy acquisition costs	678		 	609		 	1,957		 	1,810		
Administrative expenses	563		 	519		 	1,641		 	1,543		
Interest expense	72		 	63		 	205		 	187		
Other (income) expense	(5	)	 	(17	)	 	22		 	14		
Total expenses	4,101		 	4,351		 	11,035		 	10,903		
Income before income tax	1,071		 	787		 	3,152		 	2,346		
Income tax expense (includes $4 and $16 Income tax expense from reclassification of unrealized gains in the three and nine months ended September 30, 2013, respectively)	155		 	147		 	392		 	405		
Net income	$	916		 	$	640		 	$	2,760		 	$	1,941		
Other comprehensive income (loss)	 	 	 	 	 	 	 	
Unrealized appreciation (depreciation)	$	16		 	$	731		 	$	(1,570	)	 	$	1,369		
Reclassification adjustment for net realized gains included in net income	(24	)	 	(56	)	 	(97	)	 	(147	)	
 	(8	)	 	675		 	(1,667	)	 	1,222		
Change in:	 	 	 	 	 	 	 	
Cumulative translation adjustment	149		 	190		 	(237	)	 	162		
Pension liability	(2	)	 	(4	)	 	17		 	(5	)	
Other comprehensive income (loss), before income tax	139		 	861		 	(1,887	)	 	1,379		
Income tax (expense) benefit related to OCI items	(25	)	 	(185	)	 	374		 	(276	)	
Other comprehensive income (loss)	114		 	676		 	(1,513	)	 	1,103		
Comprehensive income	$	1,030		 	$	1,316		 	$	1,247		 	$	3,044		
Earnings per share	 	 	 	 	 	 	 	
Basic earnings per share	$	2.68		 	$	1.88		 	$	8.09		 	$	5.71		
Diluted earnings per share	$	2.66		 	$	1.86		 	$	8.02		 	$	5.67		
See accompanying notes to the consolidated financial statements

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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY (Unaudited)
ACE Limited and Subsidiaries

	
								
 	Nine Months Ended	 	
 	September 30	 	
(in millions of U.S. dollars)	2013		 	2012		
Common Shares	 	 	 	
Balance – beginning of period	$	9,591		 	$	10,095		
Dividends declared on Common Shares-par value reduction	(518	)	 	(336	)	
Balance – end of period	9,073		 	9,759		
Common Shares in treasury	 	 	 	
Balance – beginning of period	(159	)	 	(327	)	
Common Shares repurchased	(233	)	 	(7	)	
Net shares redeemed under employee share-based compensation plans	170		 	147		
Balance – end of period	(222	)	 	(187	)	
Additional paid-in capital	 	 	 	
Balance – beginning of period	5,179		 	5,326		
Net shares redeemed under employee share-based compensation plans	(129	)	 	(102	)	
Exercise of stock options	(34	)	 	(8	)	
Share-based compensation expense and other	184		 	93		
Funding of dividends declared to Retained earnings	—		 	(200	)	
Balance – end of period	5,200		 	5,109		
Retained earnings	 	 	 	
Balance – beginning of period	10,033		 	7,327		
Net income	2,760		 	1,941		
Funding of dividends declared from Additional paid-in capital	—		 	200		
Dividends declared on Common Shares	—		 	(200	)	
Balance – end of period	12,793		 	9,268		
Accumulated other comprehensive income	 	 	 	
Net unrealized appreciation on investments	 	 	 	
Balance – beginning of period	2,633		 	1,715		
Change in period, before reclassification from AOCI, net of income tax benefit of $337	(1,233	)	 	 	
Amounts reclassified from AOCI, net of income tax benefit of $16	(81	)	 	 	
Change in period, net of income tax benefit (expense) of $353 and $(234)	(1,314	)	 	988		
Balance – end of period	1,319		 	2,703		
Cumulative translation adjustment	 	 	 	
Balance – beginning of period	339		 	258		
Change in period, net of income tax benefit (expense) of $27 and $(44)	(210	)	 	118		
Balance – end of period	129		 	376		
Pension liability adjustment	 	 	 	
Balance – beginning of period	(85	)	 	(62	)	
Change in period, net of income tax benefit (expense) of $(6) and $2	11		 	(3	)	
Balance – end of period	(74	)	 	(65	)	
Accumulated other comprehensive income	1,374		 	3,014		
Total shareholders’ equity	$	28,218		 	$	26,963		
See accompanying notes to the consolidated financial statements

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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
ACE Limited and Subsidiaries

	
								
 	Nine Months Ended	 	
 	September 30	 	
(in millions of U.S. dollars)	2013		 	2012		
Cash flows from operating activities	 	 	 	
Net income	$	2,760		 	$	1,941		
Adjustments to reconcile net income to net cash flows from operating activities		 		
Net realized (gains) losses	(350	)	 	194		
Amortization of premiums/discounts on fixed maturities	207		 	161		
Deferred income taxes	169		 	46		
Unpaid losses and loss expenses	33		 	430		
Unearned premiums	603		 	708		
Future policy benefits	149		 	109		
Insurance and reinsurance balances payable	163		 	(174	)	
Accounts payable, accrued expenses, and other liabilities	(176	)	 	252		
Income taxes payable	2		 	44		
Insurance and reinsurance balances receivable	(657	)	 	(828	)	
Reinsurance recoverable on losses and loss expenses	550		 	606		
Reinsurance recoverable on policy benefits	6		 	47		
Deferred policy acquisition costs	(391	)	 	(260	)	
Prepaid reinsurance premiums	(69	)	 	(115	)	
Other	(263	)	 	(136	)	
Net cash flows from operating activities	2,736		 	3,025		
Cash flows from investing activities	 	 	 	
Purchases of fixed maturities available for sale	(15,835	)	 	(17,348	)	
Purchases of to be announced mortgage-backed securities	(54	)	 	(308	)	
Purchases of fixed maturities held to maturity	(374	)	 	(217	)	
Purchases of equity securities	(217	)	 	(114	)	
Sales of fixed maturities available for sale	7,982		 	11,058		
Sales of to be announced mortgage-backed securities	30		 	297		
Sales of equity securities	99		 	57		
Maturities and redemptions of fixed maturities available for sale	5,538		 	3,596		
Maturities and redemptions of fixed maturities held to maturity	1,233		 	1,092		
Net derivative instruments settlements	(376	)	 	(358	)	
Acquisition of subsidiaries (net of cash acquired of $38 and $8)	(977	)	 	(98	)	
Other	(188	)	 	(339	)	
Net cash flows used for investing activities	(3,139	)	 	(2,682	)	
Cash flows from financing activities	 	 	 	
Dividends paid on Common Shares	(343	)	 	(484	)	
Common Shares repurchased	(233	)	 	(11	)	
Proceeds from issuance of long-term debt	947		 	—		
Proceeds from issuance of short-term debt	1,721		 	2,083		
Repayment of short-term debt	(1,720	)	 	(1,932	)	
Proceeds from share-based compensation plans, including windfall tax benefits	112		 	73		
Other	68		 	—		
Net cash flows from (used for) financing activities	552		 	(271	)	
Effect of foreign currency rate changes on cash and cash equivalents	4		 	4		
Net increase in cash	153		 	76		
Cash – beginning of period	615		 	614		
Cash – end of period	$	768		 	$	690		
Supplemental cash flow information	 	 	 	
Taxes paid	$	150		 	$	323		
Interest paid	$	169		 	$	156		
See accompanying notes to the consolidated financial statements

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited)
ACE Limited and Subsidiaries

1 . General

Basis of presentation
ACE Limited is a holding company incorporated in Zurich, Switzerland. ACE Limited, through its various subsidiaries, provides a broad range of insurance and reinsurance products to insureds worldwide. ACE operates through the following business segments: Insurance – North American P&C, Insurance – North American Agriculture, Insurance – Overseas General, Global Reinsurance, and Life. Refer to Note 10 for additional information.

The interim unaudited consolidated financial statements, which include the accounts of ACE Limited and its subsidiaries (collectively, ACE, we, us, or our), have been prepared in accordance with accounting principles generally accepted in the United States of America (GAAP) and, in the opinion of management, reflect all adjustments (consisting of normally recurring accruals) necessary for a fair statement of the results and financial position for such periods. All significant intercompany accounts and transactions have been eliminated.

The results of operations and cash flows for any interim period are not necessarily indicative of the results for the full year. These consolidated financial statements should be read in conjunction with the consolidated financial statements and related notes included in our 2012 Form 10-K.

2 . Acquisitions

PT Asuransi Jaya Proteksi
We acquired 80 percent of PT Asuransi Jaya Proteksi (JaPro) on September 18, 2012 and our local partner acquired the remaining 20 percent on January 3, 2013. JaPro is one of Indonesia's leading general insurers. The total purchase price for 100 percent of the company was approximately $ 107 million in cash. JaPro operates in our Insurance – Overseas General segment.

Fianzas Monterrey
On April 1, 2013, we acquired Fianzas Monterrey, a leading surety lines company in Mexico offering administrative performance bonds primarily to clients in the construction and industrial sectors, for approximately $293 million in cash. This acquisition expands our global franchise in the surety business and enhances our existing commercial lines and personal accident insurance business in Mexico.

The acquisition generated $135 million of goodwill, attributable to expected growth and profitability, none of which is expected to be deductible for income tax purposes, and other intangible assets of $73 million , based on ACE's preliminary purchase price allocation. The other intangible assets primarily relate to customer lists. Amortization of other intangible assets is included in Other (income) expense in the consolidated statements of operations. Goodwill and other intangible assets arising from this acquisition are included in the Insurance – Overseas General segment.

ABA Seguros
On May 2, 2013, we acquired ABA Seguros, a property and casualty insurer in Mexico that provides automobile, homeowners, and small business coverages for approximately $690 million in cash.

The acquisition generate d $283 million of goodwill, attributable to expected growth and profitability, none of which is expected to be deductible for income tax purposes, and other intangible assets of $140 million based on ACE’s preliminary purchase price allocation. The other intangible assets primarily relate to distribution channels. Amortization of other intangible assets is included in Other (income) expense in the consolidated statements of operations. Goodwill and other intangible assets arising from this acquisition are included in the Insurance – Overseas General segment.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited)
ACE Limited and Subsidiaries

3 . Investments

a) Fixed maturities
The following tables present the amortized cost and fair value of fixed maturities and related OTTI recognized in AOCI:

	
																				
September 30, 2013	Amortized
Cost		 	Gross
Unrealized
Appreciation		 	Gross
Unrealized
Depreciation		 	Fair
Value		 	OTTI Recognized
in AOCI		
(in millions of U.S. dollars)			 			 			 			 			
Available for sale	 	 	 	 	 	 	 	 	 	
U.S. Treasury and agency	$	2,934		 	$	81		 	$	(36	)	 	$	2,979		 	$	—		
Foreign	14,294		 	405		 	(98	)	 	14,601		 	—		
Corporate securities	16,664		 	753		 	(151	)	 	17,266		 	(6	)	
Mortgage-backed securities	10,294		 	234		 	(149	)	 	10,379		 	(36	)	
States, municipalities, and political subdivisions	3,295		 	72		 	(63	)	 	3,304		 	—		
 	$	47,481		 	$	1,545		 	$	(497	)	 	$	48,529		 	$	(42	)	
Held to maturity	 	 	 	 	 	 	 	 	 	
U.S. Treasury and agency	$	842		 	$	20		 	$	(3	)	 	$	859		 	$	—		
Foreign	876		 	36		 	—		 	912		 	—		
Corporate securities	1,960		 	87		 	—		 	2,047		 	—		
Mortgage-backed securities	1,440		 	43		 	—		 	1,483		 	—		
States, municipalities, and political subdivisions	1,188		 	19		 	(15	)	 	1,192		 	—		
 	$	6,306		 	$	205		 	$	(18	)	 	$	6,493		 	$	—		

	
																				
December 31, 2012	Amortized
Cost		 	Gross
Unrealized
Appreciation		 	Gross
Unrealized
Depreciation		 	Fair
Value		 	OTTI Recognized
in AOCI		
(in millions of U.S. dollars)			 			 			 			 			
Available for sale	 	 	 	 	 	 	 	 	 	
U.S. Treasury and agency	$	3,553		 	$	183		 	$	(1	)	 	$	3,735		 	$	—		
Foreign	13,016		 	711		 	(14	)	 	13,713		 	—		
Corporate securities	15,529		 	1,210		 	(31	)	 	16,708		 	(7	)	
Mortgage-backed securities	10,051		 	458		 	(36	)	 	10,473		 	(84	)	
States, municipalities, and political subdivisions	2,517		 	163		 	(3	)	 	2,677		 	—		
 	$	44,666		 	$	2,725		 	$	(85	)	 	$	47,306		 	$	(91	)	
Held to maturity	 	 	 	 	 	 	 	 	 	
U.S. Treasury and agency	$	1,044		 	$	39		 	$	—		 	$	1,083		 	$	—		
Foreign	910		 	54		 	—		 	964		 	—		
Corporate securities	2,133		 	142		 	—		 	2,275		 	—		
Mortgage-backed securities	2,028		 	88		 	—		 	2,116		 	—		
States, municipalities, and political subdivisions	1,155		 	44		 	(4	)	 	1,195		 	—		
 	$	7,270		 	$	367		 	$	(4	)	 	$	7,633		 	$	—		

As discussed in Note 3 c ), if a credit loss is indicated on an impaired fixed maturity, an OTTI is considered to have occurred and the portion of the impairment not related to credit losses (non-credit OTTI) is recognized in OCI. Included in the “OTTI Recognized in AOCI” columns above are the cumulative amounts of non-credit OTTI recognized in OCI adjusted for subsequent sales, maturities, and redemptions. OTTI recognized in AOCI does not include the impact of subsequent changes in fair value of the related securities. In periods subsequent to a recognition of OTTI in OCI, changes in the fair value of the related fixed maturities are reflected in Unrealized appreciation (depreciation) in the consolidated statement of shareholders’ equity. For the three and nine months ended September 30, 2013 , $1 million of net unrealized depreciation and $24 million of net unrealized appreciation related to such securities is included in OCI. For the three and nine months ended September 30, 2012 , $46

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited)
ACE Limited and Subsidiaries

million and $130 million of net unrealized appreciation related to such securities is included in OCI. At September 30, 2013 and December 31, 2012 , AOCI includes net unrealized depreciation of $4 million and $25 million, respectively, related to securities remaining in the investment portfolio at those dates for which ACE has recognized a non-credit OTTI.

Mortgage-backed securities (MBS) issued by U.S. government agencies are combined with all other to be announced mortgage derivatives held (refer to Note 7 a) (iv)) and are included in the category, “Mortgage-backed securities”. Approximately 84 percent and 85 percent , of the total mortgage-backed securities at September 30, 2013 and December 31, 2012 , respectively are represented by investments in U.S. government agency bonds. The remainder of the mortgage exposure consists of collateralized mortgage obligations and non-government mortgage-backed securities, the majority of which provide a planned structure for principal and interest payments and carry a rating of AAA by the major credit rating agencies.

The following table presents fixed maturities by contractual maturity:

																
 	 	 	September 30		 	 	 	December 31		
 	 	 	2013		 	 	 	2012		
(in millions of U.S. dollars)	Amortized Cost		 	Fair Value		 	Amortized Cost		 	Fair Value		
Available for sale	 	 	 	 	 	 	 	
Due in 1 year or less	$	2,317		 	$	2,345		 	$	1,887		 	$	1,906		
Due after 1 year through 5 years	13,978		 	14,450		 	13,411		 	14,010		
Due after 5 years through 10 years	16,291		 	16,650		 	15,032		 	16,153		
Due after 10 years	4,601		 	4,705		 	4,285		 	4,764		
 	37,187		 	38,150		 	34,615		 	36,833		
Mortgage-backed securities	10,294		 	10,379		 	10,051		 	10,473		
 	$	47,481		 	$	48,529		 	$	44,666		 	$	47,306		
Held to maturity	 	 	 	 	 	 	 	
Due in 1 year or less	$	398		 	$	401		 	$	656		 	$	659		
Due after 1 year through 5 years	2,335		 	2,417		 	1,870		 	1,950		
Due after 5 years through 10 years	1,707		 	1,756		 	2,119		 	2,267		
Due after 10 years	426		 	436		 	597		 	641		
 	4,866		 	5,010		 	5,242		 	5,517		
Mortgage-backed securities	1,440		 	1,483		 	2,028		 	2,116		
 	$	6,306		 	$	6,493		 	$	7,270		 	$	7,633		

Expected maturities could differ from contractual maturities because borrowers may have the right to call or prepay obligations, with or without call or prepayment penalties. 

b) Equity securities
The following table presents the cost and fair value of equity securities: 

								
 	September 30			December 31		
(in millions of U.S. dollars)	2013			2012		
Cost	$	835		 	$	707		
Gross unrealized appreciation	53		 	41		
Gross unrealized depreciation	(57	)	 	(4	)	
Fair value	$	831		 	$	744		

c ) Net realized gains (losses)
In accordance with guidance related to the recognition and presentation of OTTI, when an impairment related to a fixed maturity has occurred, OTTI is required to be recorded in Net income if management has the intent to sell the security or it is more likely than not that we will be required to sell the security before the recovery of its amortized cost. Further, in cases where we do not intend to sell the security and it is more likely than not that we will not be required to sell the security, ACE must evaluate the

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ACE Limited and Subsidiaries

security to determine the portion of the impairment, if any, related to credit losses. If a credit loss is indicated, an OTTI is considered to have occurred and any portion of the OTTI related to credit losses must be reflected in Net income while the portion of OTTI related to all other factors is recognized in OCI. For fixed maturities held to maturity, OTTI recognized in OCI is accreted from AOCI to the amortized cost of the fixed maturity prospectively over the remaining term of the securities.

Each quarter, securities in an unrealized loss position (impaired securities), including fixed maturities, securities lending collateral, equity securities, and other investments, are reviewed to identify impaired securities to be specifically evaluated for a potential OTTI.

For all non-fixed maturities, OTTI is evaluated based on the following:

•	the amount of time a security has been in a loss position and the magnitude of the loss position;	

•	the period in which cost is expected to be recovered, if at all, based on various criteria including economic conditions and other issuer-specific developments; and	

•	ACE’s ability and intent to hold the security to the expected recovery period.	

As a general rule, we also consider that equity securities in an unrealized loss position for twelve consecutive months are other than temporarily impaired.

We review each fixed maturity in an unrealized loss position to assess whether the security is a candidate for credit loss. Specifically, we consider credit rating, market price, and issuer-specific financial information, among other factors, to assess the likelihood of collection of all principal and interest as contractually due. Securities for which we determine that credit loss is likely are subjected to further analysis to estimate the credit loss recognized in Net income, if any. In general, credit loss recognized in Net income equals the difference between the security’s amortized cost and the net present value of its projected future cash flows discounted at the effective interest rate implicit in the debt security. All significant assumptions used in determining credit losses are subject to change as market conditions evolve.

Projected cash flows for corporate securities (principally senior unsecured bonds) are driven primarily by assumptions regarding probability of default and also the timing and amount of recoveries associated with defaults. We develop these estimates using information based on market observable data, issuer-specific information, and credit ratings. ACE developed its default assumption by using historical default data by Moody’s Investors Service (Moody’s) rating category to calculate a 1-in-100 year probability of default, which results in a default assumption in excess of the historical mean default rate. We believe that use of a default assumption in excess of the historical mean is reasonable in light of current market conditions.

For the three and nine months ended September 30, 2013 , credit losses recognized in Net income for corporate securities were $1 million and $8 million , respectively. For the three and nine months ended September 30, 2012 , credit losses recognized in Net income for corporate securities were $5 million and $9 million , respectively.

For mortgage-backed securities, credit impairment is assessed using a cash flow model that estimates the cash flows on the underlying mortgages, using the security-specific collateral and transaction structure. The model estimates cash flows from the underlying mortgage loans and distributes those cash flows to various tranches of securities, considering the transaction structure and any subordination and credit enhancements that exist in that structure. The cash flow model incorporates actual cash flows on the mortgage-backed securities through the current period and then projects the remaining cash flows using a number of assumptions, including default rates, prepayment rates, and loss severity rates (the par value of a defaulted security that will not be recovered) on foreclosed properties.

For the three and nine months ended September 30, 2013 , there were no credit losses recognized in Net income for mortgage-backed securities. For the three and nine months ended September 30, 2012 , credit losses recognized in Net income for mortgage-backed securities were $2 million and $5 million , respectively.

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ACE Limited and Subsidiaries

The following table presents the Net realized gains (losses) and the losses included in Net realized gains (losses) and OCI as a result of conditions which caused us to conclude the decline in fair value of certain investments was “other-than-temporary”: 

																
 	Three Months Ended	 	 	Nine Months Ended	 	
 	September 30	 	 	September 30	 	
(in millions of U.S. dollars)	2013		 	2012		 	2013		 	2012		
Fixed maturities:	 	 	 	 	 	 	 	
OTTI on fixed maturities, gross	$	(4	)	 	$	(10	)	 	$	(11	)	 	$	(18	)	
OTTI on fixed maturities recognized in OCI (pre-tax)	—		 	—		 	—		 	—		
OTTI on fixed maturities, net	(4	)	 	(10	)	 	(11	)	 	(18	)	
Gross realized gains excluding OTTI	37		 	71		 	163		 	287		
Gross realized losses excluding OTTI	(16	)	 	(14	)	 	(68	)	 	(120	)	
Total fixed maturities	17		 	47		 	84		 	149		
Equity securities:	 	 	 	 	 	 	 	
OTTI on equity securities	—		 	—		 	(1	)	 	(5	)	
Gross realized gains excluding OTTI	8		 	3		 	18		 	5		
Gross realized losses excluding OTTI	(1	)	 	(1	)	 	(4	)	 	(2	)	
Total equity securities	7		 	2		 	13		 	(2	)	
OTTI on other investments	—		 	—		 	(2	)	 	(7	)	
Foreign exchange gains (losses)	(26	)	 	(50	)	 	45		 	(64	)	
Investment and embedded derivative instruments	4		 	4		 	62		 	(3	)	
Fair value adjustments on insurance derivative	134		 	83		 	563		 	44		
S&P put options and futures	(95	)	 	(147	)	 	(413	)	 	(308	)	
Other derivative instruments	(1	)	 	—		 	(2	)	 	(4	)	
Other	—		 	1		 	—		 	1		
Net realized gains (losses)	$	40		 	$	(60	)	 	$	350		 	$	(194	)	
 
The following table presents a roll-forward of pre-tax credit losses related to fixed maturities for which a portion of OTTI was recognized in OCI:  

																
 	Three Months Ended	 	 	Nine Months Ended	 	
 	September 30	 	 	September 30	 	
(in millions of U.S. dollars)	2013		 	2012		 	2013		 	2012		
Balance of credit losses related to securities still held – beginning of period	$	40		 	$	47		 	$	43		 	$	74		
Additions where no OTTI was previously recorded	1		 	1		 	5		 	3		
Additions where an OTTI was previously recorded	—		 	6		 	3		 	11		
Reductions for securities sold during the period	(3	)	 	(4	)	 	(13	)	 	(38	)	
Balance of credit losses related to securities still held – end of period	$	38		 	$	50		 	$	38		 	$	50		

d) Gross unrealized loss
At September 30, 2013 , there were 6,038 fixed maturities out of a total of 24,746 fixed maturities in an unrealized loss position. The largest single unrealized loss in the fixed maturities was $3 million. There were 66 equity securities out of a total of 183 equity securities in an unrealized loss position. The largest single unrealized loss in the equity securities was $48 million. Fixed maturities in an unrealized loss position at September 30, 2013 comprised both investment grade and below investment grade securities for which fair value declined primarily due to widening credit spreads since the date of purchase. Equity securities in an unrealized loss position at September 30, 2013 included foreign fixed income securities held in a commingled fund structure for which fair value declined primarily due to widening credit spreads since the date of purchase.

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ACE Limited and Subsidiaries

The following tables present, for all securities in an unrealized loss position (including securities on loan), the aggregate fair value and gross unrealized loss by length of time the security has continuously been in an unrealized loss position:

																								
 	0 – 12 Months	 	 	Over 12 Months	 	 	Total	 	
September 30, 2013	Fair Value		 	Gross
Unrealized
Loss		 	Fair Value		 	Gross
Unrealized
Loss		 	Fair Value		 	Gross
Unrealized
Loss		
(in millions of U.S. dollars)			 			 			 			 			 			
U.S. Treasury and agency	$	1,436		 	$	(39	)	 	$	—		 	$	—		 	$	1,436		 	$	(39	)	
Foreign	4,034		 	(93	)	 	112		 	(5	)	 	4,146		 	(98	)	
Corporate securities	4,696		 	(142	)	 	67		 	(9	)	 	4,763		 	(151	)	
Mortgage-backed securities	3,751		 	(139	)	 	132		 	(10	)	 	3,883		 	(149	)	
States, municipalities, and political subdivisions	2,076		 	(77	)	 	3		 	(1	)	 	2,079		 	(78	)	
Total fixed maturities	15,993		 	(490	)	 	314		 	(25	)	 	16,307		 	(515	)	
Equity securities	500		 	(57	)	 	—		 	—		 	500		 	(57	)	
Other investments	40		 	(9	)	 	—		 	—		 	40		 	(9	)	
Total	$	16,533		 	$	(556	)	 	$	314		 	$	(25	)	 	$	16,847		 	$	(581	)	

	
																								
 	0 – 12 Months	 	 	Over 12 Months	 	 	Total	 	
December 31, 2012	Fair Value		 	Gross
Unrealized
Loss		 	Fair Value		 	Gross
Unrealized
Loss		 	Fair Value		 	Gross
Unrealized
Loss		
(in millions of U.S. dollars)			 			 			 			 			 			
U.S. Treasury and agency	$	440		 	$	(1	)	 	$	—		 	$	—		 	$	440		 	$	(1	)	
Foreign	1,234		 	(8	)	 	88		 	(6	)	 	1,322		 	(14	)	
Corporate securities	1,026		 	(23	)	 	85		 	(8	)	 	1,111		 	(31	)	
Mortgage-backed securities	855		 	(4	)	 	356		 	(32	)	 	1,211		 	(36	)	
States, municipalities, and political subdivisions	316		 	(3	)	 	48		 	(4	)	 	364		 	(7	)	
Total fixed maturities	3,871		 	(39	)	 	577		 	(50	)	 	4,448		 	(89	)	
Equity securities	29		 	(4	)	 	—		 	—		 	29		 	(4	)	
Other investments	68		 	(5	)	 	—		 	—		 	68		 	(5	)	
Total	$	3,968		 	$	(48	)	 	$	577		 	$	(50	)	 	$	4,545		 	$	(98	)	

e) Restricted assets
ACE is required to maintain assets on deposit with various regulatory authorities to support its insurance and reinsurance operations. These requirements are generally promulgated in the statutory regulations of the individual jurisdictions. The assets on deposit are available to settle insurance and reinsurance liabilities. ACE is also required to restrict assets pledged under repurchase agreements. We also use trust funds in certain large reinsurance transactions where the trust funds are set up for the benefit of the ceding companies and generally take the place of letter of credit (LOC) requirements. We also have investments in segregated portfolios primarily to provide collateral or guarantees for LOCs and derivative transactions. Included in restricted assets at September 30, 2013 and December 31, 2012 , are fixed maturities and short-term investments totaling $16.3 billion and $16.6 billion, respectively, and cash of $129 million and $139 million, respectively.

The following table presents the components of restricted assets:

								
 	September 30		 	December 31		
(in millions of U.S. dollars)	2013		 	2012		
Trust funds	$	11,269		 	$	11,389		
Deposits with non-U.S. regulatory authorities	1,999		 	2,133		
Assets pledged under repurchase agreements	1,405		 	1,401		
Deposits with U.S. regulatory authorities	1,333		 	1,338		
Other pledged assets	394		 	456		
 	$	16,400		 	$	16,717		

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ACE Limited and Subsidiaries

4 . Fair value measurements

a ) Fair value hierarchy
Fair value of financial assets and financial liabilities is estimated based on the framework established in the fair value accounting guidance. The guidance defines fair value as the price to sell an asset or transfer a liability in an orderly transaction between market participants and establishes a three-level valuation hierarchy in which inputs into valuation techniques used to measure fair value are classified. The fair value hierarchy gives the highest priority to quoted prices in active markets and the lowest priority to unobservable data.
 
The three levels of the hierarchy are as follows:

•	Level 1 – Unadjusted quoted prices for identical assets or liabilities in active markets;	

•	Level 2 – Includes, among other items, inputs other than quoted prices that are observable for the asset or liability such as interest rates and yield curves, quoted prices for similar assets and liabilities in active markets, and quoted prices for identical or similar assets and liabilities in markets that are not active; and	

•	Level 3 – Inputs that are unobservable and reflect management’s judgments about assumptions that market participants would use in pricing an asset or liability.	

We categorize financial instruments within the valuation hierarchy at the balance sheet date based upon the lowest level of inputs that are significant to the fair value measurement. Accordingly, transfers between levels within the valuation hierarchy occur when there are significant changes to the inputs, such as increases or decreases in market activity, changes to the availability of current prices, changes to the transparency to underlying inputs, and whether there are significant variances in quoted prices. Transfers in and/or out of any level are assumed to occur at the end of the period.

We use one or more pricing services to obtain fair value measurements for the majority of the investment securities we hold. Based on management’s understanding of the methodologies used, these pricing services only produce an estimate of fair value if there is observable market information that would allow them to make a fair value estimate. Based on our understanding of the market inputs used by the pricing services, all applicable investments have been valued in accordance with GAAP. We do not typically adjust prices obtained from pricing services. The following is a description of the valuation techniques and inputs used to determine fair values for financial instruments carried at fair value, as well as the general classification of such financial instruments pursuant to the valuation hierarchy.

Fixed maturities
We use pricing services to estimate fair value measurements for the majority of our fixed maturities. The pricing services use market quotations for fixed maturities that have quoted prices in active markets; such securities are classified within Level 1. For fixed maturities other than U.S. Treasury securities that generally do not trade on a daily basis, the pricing services prepare estimates of fair value measurements using their pricing applications, which include available relevant market information, benchmark curves, benchmarking of like securities, sector groupings, and matrix pricing. Additional valuation factors that can be taken into account are nominal spreads, dollar basis, and liquidity adjustments. The pricing services evaluate each asset class based on relevant market and credit information, perceived market movements, and sector news. The market inputs used in the pricing evaluation, listed in the approximate order of priority include: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers, reference data, and industry and economic events. The extent of the use of each input is dependent on the asset class and the market conditions. Given the asset class, the priority of the use of inputs may change or some market inputs may not be relevant. Additionally, the valuation of fixed maturities is more subjective when markets are less liquid due to the lack of market based inputs (i.e., stale pricing), which may increase the potential that the estimated fair value of an investment is not reflective of the price at which an actual transaction would occur. The overwhelming majority of fixed maturities are classified within Level 2 because the most significant inputs used in the pricing techniques are observable. For a small number of fixed maturities, we obtain a quote from a broker (typically a market maker). Due to the disclaimers on the quotes that indicate that the price is indicative only, we include these fair value estimates in Level 3. 

Equity securities
Equity securities with active markets are classified within Level 1 as fair values are based on quoted market prices. For equity securities in markets which are less active, fair values are based on market valuations and are classified within Level 2. Equity securities for which pricing is unobservable are classified within Level 3.

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Short-term investments
Short-term investments, which comprise securities due to mature within one year of the date of purchase that are traded in active markets, are classified within Level 1 as fair values are based on quoted market prices. Securities such as commercial paper and discount notes are classified within Level 2 because these securities are typically not actively traded due to their approaching maturity and, as such, their cost approximates fair value. Short-term investments for which pricing is unobservable are classified within Level 3.

Other investments
Fair values for the majority of Other investments including investments in partially-owned investment companies, investment funds, and limited partnerships are based on their respective net asset values or equivalent (NAV). The majority of these investments, for which NAV was used as a practical expedient to measure fair value, are classified within Level 3 because either ACE will never have the contractual option to redeem the investments or will not have the contractual option to redeem the investments in the near term. The remainder of such investments is classified within Level 2. Certain of our long duration contracts are supported by assets that do not qualify for separate account reporting under GAAP. These assets comprise mutual funds classified within Level 1 in the valuation hierarchy on the same basis as other equity securities traded in active markets. Other investments also includes equity securities and fixed maturities held in rabbi trusts maintained by ACE for deferred compensation plans, which are classified within the valuation hierarchy on the same basis as other equity securities and fixed maturities.

Securities lending collateral
The underlying assets included in Securities lending collateral in the consolidated balance sheets are fixed maturities which are classified in the valuation hierarchy on the same basis as other fixed maturities. Excluded from the valuation hierarchy is the corresponding liability related to ACE’s obligation to return the collateral plus interest as it is reported at contract value and not fair value in the consolidated balance sheets.

Investment derivative instruments
Actively traded investment derivative instruments, including futures, options, and exchange-traded forward contracts are classified within Level 1 as fair values are based on quoted market prices. The fair value of cross-currency swaps are based on market valuations and are classified within Level 2. Investment derivative instruments are recorded in Accounts payable, accrued expenses, and other liabilities in the consolidated balance sheets.

Other derivative instruments
We maintain positions in other derivative instruments including exchange-traded equity futures contracts and option contracts designed to limit exposure to a severe equity market decline, which would cause an increase in expected claims and, therefore, reserves for our guaranteed minimum death benefits (GMDB) and guaranteed living benefits (GLB) reinsurance business. Our position in exchange-traded equity futures contracts is classified within Level 1. The fair value of the majority of the remaining positions in other derivative instruments is based on significant observable inputs including equity security and interest rate indices. Accordingly, these are classified within Level 2. Our position in credit default swaps is typically included within Level 3. Other derivative instruments are recorded in Accounts payable, accrued expenses, and other liabilities in the consolidated balance sheets.

Separate account assets
Separate account assets represent segregated funds where investment risks are borne by the customers, except to the extent of certain guarantees made by ACE. Separate account assets comprise mutual funds classified in the valuation hierarchy on the same basis as other equity securities traded in active markets and are classified within Level 1. Separate account assets also include fixed maturities classified within Level 2 because the most significant inputs used in the pricing techniques are observable. Excluded from the valuation hierarchy are the corresponding liabilities as they are reported at contract value and not fair value in the consolidated balance sheets. Separate account assets are recorded in Other assets in the consolidated balance sheets.

Guaranteed living benefits
The GLB arises from life reinsurance programs covering living benefit guarantees whereby we assume the risk of guaranteed minimum income benefits (GMIB) and guaranteed minimum accumulation benefits (GMAB) associated with variable annuity contracts. GLB’s are recorded in Accounts payable, accrued expenses, and other liabilities and Future policy benefits in the consolidated balance sheets. For GLB reinsurance, ACE estimates fair value using an internal valuation model which includes current market information and estimates of policyholder behavior. All of the treaties contain claim limits, which are factored

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ACE Limited and Subsidiaries

into the valuation model. The fair value depends on a number of inputs, including changes in interest rates, changes in equity markets, credit risk, current account value, changes in market volatility, expected annuitization rates, changes in policyholder behavior, and changes in policyholder mortality.

The most significant policyholder behavior assumptions include lapse rates and the GMIB annuitization rates. Assumptions regarding lapse rates and GMIB annuitization rates differ by treaty but the underlying methodologies to determine rates applied to each treaty are comparable. The assumptions regarding lapse and GMIB annuitization rates determined for each treaty are based on a dynamic calculation that uses several underlying factors.

A lapse rate is the percentage of in-force policies surrendered in a given calendar year. All else equal, as lapse rates increase, ultimate claim payments will decrease. In general, the base lapse function assumes low lapse rates (ranging from about 1 percent to 6 percent per annum) during the surrender charge period of the GMIB contract, followed by a “spike” lapse rate (ranging from about 10 percent to 30 percent per annum) in the year immediately following the surrender charge period, and then reverting to an ultimate lapse rate (generally around 10 percent per annum), typically over a 2 -year period. This base rate is adjusted downward for policies with more valuable guarantees (policies with guaranteed values far in excess of their account values) by multiplying the base lapse rate by a factor ranging from 15 percent to 75 percent . Additional lapses due to partial withdrawals and older policyholders with tax-qualified contracts (due to required minimum distributions) are also included.

The GMIB annuitization rate is the percentage of policies for which the policyholder will elect to annuitize using the guaranteed benefit provided under the GMIB. All else equal, as GMIB annuitization rates increase, ultimate claim payments will increase, subject to treaty claim limits. In general ACE assumes that GMIB annuitization rates will be higher for policies with more valuable guarantees (policies with guaranteed values far in excess of their account values). In addition, we also assume that GMIB annuitization rates are higher in the first year immediately following the waiting period (the first year the policies are eligible to annuitize using the GMIB) in comparison to all subsequent years. We do not yet have a robust set of annuitization experience because most of our clients’ policyholders are not yet eligible to annuitize using the GMIB. However, for certain clients representing approximately 37 percent of the total GMIB guaranteed value there are several years of annuitization experience. For these clients the annuitization function reflects the actual experience and has a maximum annuitization rate per annum of 8 percent (a higher maximum applies in the first year a policy is eligible to annuitize using the GMIB—it is over 13 percent ). For most clients, there is not a credible amount of observable relevant behavior data and so we use a weighted-average (with a heavier weighting on the observed experience noted previously) of three different annuitization functions with maximum annuitization rates per annum of 8 percent , 12 percent , and 30 percent , respectively (with significantly higher rates in the first year a policy is eligible to annuitize using the GMIB). The GMIB reinsurance treaties include claim limits to protect ACE in the event that actual annuitization behavior is significantly higher than expected.

The effect of changes in key market factors on assumed lapse and annuitization rates reflect emerging trends using data available from cedants. For treaties with limited experience, rates are established in line with data received from other ceding companies adjusted, as appropriate, with industry estimates. The model and related assumptions are continuously re-evaluated by management and enhanced, as appropriate, based upon additional experience obtained related to policyholder behavior and availability of more information, such as market conditions, market participant assumptions, and demographics of in-force annuities. During the three and nine months ended September 30, 2013 , no material changes were made to actuarial or behavioral assumptions.

We view the variable annuity reinsurance business as having a similar risk profile to that of catastrophe reinsurance, with the probability of a cumulative long-term economic net loss relatively small at the time of pricing. However, adverse changes in market factors and policyholder behavior will have an adverse impact on net income, which may be material. Because of the significant use of unobservable inputs including policyholder behavior, GLB reinsurance is classified within Level 3.

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ACE Limited and Subsidiaries

The following tables present, by valuation hierarchy, the financial instruments measured at fair value on a recurring basis: 

																
September 30, 2013	Level 1		 	Level 2		 	Level 3		 	Total		
(in millions of U.S. dollars)			 			 			 			
Assets:	 	 	 	 	 	 	 	
Fixed maturities available for sale	 	 	 	 	 	 	 	
U.S. Treasury and agency	$	1,615		 	$	1,364		 	$	—		 	$	2,979		
Foreign	235		 	14,324		 	42		 	14,601		
Corporate securities	1		 	17,144		 	121		 	17,266		
Mortgage-backed securities	—		 	10,370		 	9		 	10,379		
States, municipalities, and political subdivisions	—		 	3,304		 	—		 	3,304		
 	1,851		 	46,506		 	172		 	48,529		
Equity securities	375		 	452		 	4		 	831		
Short-term investments	1,061		 	705		 	8		 	1,774		
Other investments	292		 	221		 	2,389		 	2,902		
Securities lending collateral	—		 	1,517		 	—		 	1,517		
Investment derivative instruments	(18	)	 	—		 	—		 	(18	)	
Other derivative instruments	7		 	8		 	—		 	15		
Separate account assets	1,074		 	78		 	—		 	1,152		
Total assets measured at fair value	$	4,642		 	$	49,487		 	$	2,573		 	$	56,702		
Liabilities:	 	 	 	 	 	 	 	
GLB (1)	$	—		 	$	—		 	$	514		 	$	514		
		
(1)  	Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. Refer to Note 5 for additional information.	

	
																
December 31, 2012	Level 1		 	Level 2		 	Level 3		 	Total		
(in millions of U.S. dollars)			 			 			 			
Assets:	 	 	 	 	 	 	 	
Fixed maturities available for sale	 	 	 	 	 	 	 	
U.S. Treasury and agency	$	2,050		 	$	1,685		 	$	—		 	$	3,735		
Foreign	222		 	13,431		 	60		 	13,713		
Corporate securities	20		 	16,586		 	102		 	16,708		
Mortgage-backed securities	—		 	10,460		 	13		 	10,473		
States, municipalities, and political subdivisions	—		 	2,677		 	—		 	2,677		
 	2,292		 	44,839		 	175		 	47,306		
Equity securities	253		 	488		 	3		 	744		
Short-term investments	1,503		 	725		 	—		 	2,228		
Other investments	268		 	196		 	2,252		 	2,716		
Securities lending collateral	—		 	1,791		 	—		 	1,791		
Investment derivative instruments	11		 	—		 	—		 	11		
Other derivative instruments	(6	)	 	30		 	—		 	24		
Separate account assets	872		 	71		 	—		 	943		
Total assets measured at fair value	$	5,193		 	$	48,140		 	$	2,430		 	$	55,763		
Liabilities:	 	 	 	 	 	 	 	
GLB (1)	$	—		 	$	—		 	$	1,119		 	$	1,119		
		
(1)  	Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. Refer to Note 5 for additional information.	

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ACE Limited and Subsidiaries

There were no transfers from Level 1 to Level 2 during the the three months ended September 30, 2013. The transfers from Level 1 to Level 2 during the nine months ended September 30, 2013 were $19 million . The transfers from Level 1 to Level 2 were $34 million and $40 million during the three and nine months ended September 30, 2012 , respectively. There were no transfers from Level 2 to Level 1 during the three and nine months ended September 30, 2013 . The transfers from Level 2 to Level 1 during the three and nine months ended September 30, 2012 were $15 million.

Fair value of alternative investments
Included in Other investments in the fair value hierarchy at September 30, 2013 and December 31, 2012 are investment funds, limited partnerships, and partially-owned investment companies measured at fair value using NAV as a practical expedient. At September 30, 2013 and December 31, 2012 , there were no probable or pending sales related to any of the investments measured at fair value using NAV. 

The following table presents, by investment category, the expected liquidation period, fair value, and maximum future funding commitments of alternative investments:

																		
 	 	 	 	 	September 30		 	 	 	December 31		
 	Expected
Liquidation
Period	 	 	 	2013		 	 	 	2012		
(in millions of U.S. dollars)			Fair
Value		 	Maximum
Future Funding
Commitments		 	Fair
Value		 	Maximum
Future Funding
Commitments		
Financial	5 to 9 Years	 	$	249		 	$	83		 	$	225		 	$	111		
Real estate	3 to 9 Years	 	342		 	78		 	292		 	62		
Distressed	6 to 9 Years	 	168		 	122		 	192		 	152		
Mezzanine	6 to 9 Years	 	243		 	285		 	284		 	279		
Traditional	3 to 8 Years	 	811		 	505		 	711		 	587		
Vintage	1 to 3 Years	 	12		 	—		 	14		 	—		
Investment funds	Not Applicable	 	415		 	—		 	395		 	—		
 	 	 	$	2,240		 	$	1,073		 	$	2,113		 	$	1,191		

Included in all categories in the above table except for Investment funds are investments for which ACE will never have the contractual option to redeem but receives distributions based on the liquidation of the underlying assets. Included in the “Expected Liquidation Period” column above is the range in years over which ACE expects the majority of underlying assets in the respective categories to be liquidated. Further, for all categories except for Investment funds, ACE does not have the ability to sell or transfer the investments without the consent from the general partner of individual funds.

Financial
Financial consists of investments in private equity funds targeting financial services companies such as financial institutions and insurance services around the world.

Real estate
Real estate consists of investments in private equity funds targeting global distress opportunities, value added U.S. properties, and global mezzanine debt securities in the commercial real estate market.

Distressed
Distressed consists of investments in private equity funds targeting distressed debt/credit and equity opportunities in the U.S.

Mezzanine
Mezzanine consists of investments in private equity funds targeting private mezzanine debt of large-cap and mid-cap companies in the U.S. and worldwide.

Traditional
Traditional consists of investments in private equity funds employing traditional private equity investment strategies such as buyout and venture with different geographical focuses including Brazil, Asia, Europe, and the U.S.

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ACE Limited and Subsidiaries

Vintage
Vintage consists of investments in private equity funds made before 2002 and where the funds’ commitment periods had already expired.

Investment funds
ACE’s investment funds employ various investment strategies such as long/short equity and arbitrage/distressed. Included in this category are investments for which ACE has the option to redeem at agreed upon value as described in each investment fund’s subscription agreement. Depending on the terms of the various subscription agreements, investment fund investments may be redeemed monthly, quarterly, semi-annually, or annually. If ACE wishes to redeem an investment fund investment, it must first determine if the investment fund is still in a lock-up period (a time when ACE cannot redeem its investment so that the investment fund manager has time to build the portfolio). If the investment fund is no longer in its lock-up period, ACE must then notify the investment fund manager of its intention to redeem by the notification date prescribed by the subscription agreement. Subsequent to notification, the investment fund can redeem ACE’s investment within several months of the notification. Notice periods for redemption of the investment funds range between 5 and 120 days. ACE can redeem its investment funds without consent from the investment fund managers.

Level 3 financial instruments
The fair value of assets and liabilities measured at fair value using significant unobservable inputs (Level 3) consist of various inputs and assumptions that management makes when determining fair value. Management analyzes changes in fair value measurements classified within Level 3 by comparing pricing and returns of our investments to benchmarks, including month-over-month movements, investment credit spreads, interest rate movements, and credit quality of securities.

The following table presents the significant unobservable inputs used in the Level 3 liability valuations. Excluded from the table below are inputs used to fair value Level 3 assets which are based on single broker quotes or net asset value and contain no quantitative unobservable inputs developed by management. 

														
(in millions of U.S. dollars, except for percentages)	Fair Value at
September 30, 2013		 	Fair Value at
December 31, 2012		 	Valuation
Technique	 	Significant
Unobservable Inputs	 	Ranges	
GLB (1)	$	514		 	$	1,119		 	Actuarial model	 	Lapse rate	 	1% – 30%	
 	 	 	 	 	 	 	Annuitization rate	 	0% – 50%	
		
(1)  	Discussion of the most significant inputs used in the fair value measurement of GLB and the sensitivity of those assumptions is included within Note 4 a) Guaranteed living benefits.	
The following tables present a reconciliation of the beginning and ending balances of financial instruments measured at fair value using significant unobservable inputs (Level 3): 

																												
 	Assets	 	 	Liabilities		
Three Months Ended	Available-for-Sale Debt Securities	Equity
securities		 	Short-term investments		 	Other
investments		 	GLB (1)		
September 30, 2013	Foreign		 	Corporate
securities		 	MBS		 									 			
(in millions of U.S. dollars)			 			 			 									 			
Balance–Beginning of Period	$	48		 	$	114		 	$	9		 	$	4		 	$	9		 	$	2,349		 	$	652		
Transfers into Level 3	1		 	12		 	—		 	—		 	1		 	—		 	—		
Transfers out of Level 3	(8	)	 	(1	)	 	—		 	—		 	(2	)	 	—		 	—		
Change in Net Unrealized Gains (Losses) included in OCI	2		 	(1	)	 	—		 	—		 	—		 	(1	)	 	—		
Net Realized Gains/Losses	—		 	(1	)	 	—		 	—		 	—		 	—		 	(138	)	
Purchases	12		 	6		 	—		 	—		 	—		 	138		 	—		
Sales	(13	)	 	(4	)	 	—		 	—		 	—		 	(1	)	 	—		
Settlements	—		 	(4	)	 	—		 	—		 	—		 	(96	)	 	—		
Balance–End of Period	$	42		 	$	121		 	$	9		 	$	4		 	$	8		 	$	2,389		 	$	514		
Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet Date	$	—		 	$	—		 	$	—		 	$	—		 	$	—		 	$	—		 	$	(138	)	
		
(1)  	Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. Refer to Note 5 for additional information.	

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ACE Limited and Subsidiaries

	
																																				
  	Assets	 	 	Liabilities		
 	Available-for-Sale Debt Securities	 	 	Equity
securities		 	Other
investments		 	Other
derivative
instruments		 	GLB (1)		
Three Months Ended	U.S.
Treasury
and
Agency		 	Foreign		 	Corporate
securities		 	MBS		 	States,
municipalities,
and political
subdivisions		 			 			 			 			
September 30, 2012			 			 			 			 			 			 			 			 			
(in millions of U.S. dollars)			 			 			 			 			 			 			 			 			
Balance–Beginning of Period	$	4		 	$	20		 	$	137		 	$	27		 	$	1		 	$	12		 	$	2,047		 	$	1		 	$	1,354		
Transfers into Level 3	—		 	5		 	5		 	10		 	—		 	2		 	53		 	—		 	—		
Transfers out of Level 3	(4	)	 	(6	)	 	(26	)	 	—		 	—		 	(10	)	 	—		 	—		 	—		
Change in Net Unrealized Gains (Losses) included in OCI	—		 	—		 	3		 	—		 	—		 	(1	)	 	13		 	—		 	—		
Net Realized Gains/Losses	—		 	—		 	—		 	—		 	—		 	—		 	—		 	—		 	(75	)	
Purchases	—		 	6		 	11		 	—		 	—		 	1		 	121		 	—		 	—		
Sales	—		 	—		 	—		 	(7	)	 	—		 	—		 	(5	)	 	—		 	—		
Settlements	—		 	—		 	—		 	(1	)	 	—		 	—		 	(51	)	 	(1	)	 	—		
Balance–End of Period	$	—		 	$	25		 	$	130		 	$	29		 	$	1		 	$	4		 	$	2,178		 	$	—		 	$	1,279		
Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet Date	$	—		 	$	—		 	$	—		 	$	—		 	$	—		 	$	—		 	$	—		 	$	—		 	$	(75	)	
		
(1)  	Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. The liability for GLB reinsurance was $1.5 billion at September 30, 2012 , and $1.6 billion at June 30, 2012, which includes a fair value derivative adjustment of $1.3 billion and $1.4 billion, respectively.	

	
																												
 	Assets	Liabilities		
Nine Months Ended	Available-for-Sale Debt Securities	Equity
securities		 	Short-term investments		 	Other
investments		 	GLB (1)		
 	Foreign		 	Corporate
securities		 	MBS		 			 						 			
September 30, 2013			 			 			 			 						 			
(in millions of U.S. dollars)			 			 			 			 						 			
Balance–Beginning of Period	$	60		 	$	102		 	$	13		 	$	3		 	$	—		 	$	2,252		 	$	1,119		
Transfers into Level 3	33		 	29		 	—		 	7		 	8		 	—		 	—		
Transfers out of Level 3	(49	)	 	(30	)	 	—		 	(1	)	 	(2	)	 	—		 	—		
Change in Net Unrealized Gains (Losses) included in OCI	(2	)	 	(1	)	 	—		 	(5	)	 	—		 	34		 	—		
Net Realized Gains/Losses	1		 	(2	)	 	—		 	4		 	—		 	(2	)	 	(605	)	
Purchases	15		 	39		 	—		 	1		 	2		 	387		 	—		
Sales	(15	)	 	(4	)	 	(3	)	 	(5	)	 	—		 	(10	)	 	—		
Settlements	(1	)	 	(12	)	 	(1	)	 	—		 	—		 	(272	)	 	—		
Balance–End of Period	$	42		 	$	121		 	$	9		 	$	4		 	$	8		 	$	2,389		 	$	514		
Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet Date	$	—		 	$	—		 	$	—		 	$	—		 	$	—		 	$	(2	)	 	$	(605	)	
		
(1)  	Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. Refer to Note 5 for additional information.	

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ACE Limited and Subsidiaries

	
																																				
  	Assets	 	 	Liabilities		
 	Available-for-Sale Debt Securities	 	 	Equity
securities		 	Other
investments		 	Other
derivative
instruments		 	GLB (1)		
Nine Months Ended	U.S.
Treasury
and
Agency		 	Foreign		 	Corporate
securities		 	MBS		 	States,
municipalities,
and political
subdivisions		 			 			 			 			
September 30, 2012			 			 			 			 			 			 			 			 			
(in millions of U.S. dollars)			 			 			 			 			 			 			 			 			
Balance–Beginning of Period	$	5		 	$	33		 	$	134		 	$	28		 	$	1		 	$	13		 	$	1,877		 	$	3		 	$	1,319		
Transfers into Level 3	—		 	6		 	33		 	22		 	1		 	2		 	53		 	—		 	—		
Transfers out of Level 3	(4	)	 	(7	)	 	(35	)	 	(15	)	 	—		 	(10	)	 	—		 	—		 	—		
Change in Net Unrealized Gains (Losses) included in OCI	—		 	—		 	6		 	—		 	—		 	—		 	37		 	—		 	—		
Net Realized Gains/Losses	—		 	—		 	(1	)	 	—		 	—		 	—		 	(7	)	 	(4	)	 	(40	)	
Purchases	—		 	46		 	19		 	4		 	—		 	4		 	366		 	3		 	—		
Sales	—		 	(52	)	 	(15	)	 	(7	)	 	—		 	(5	)	 	(6	)	 	—		 	—		
Settlements	(1	)	 	(1	)	 	(11	)	 	(3	)	 	(1	)	 	—		 	(142	)	 	(2	)	 	—		
Balance–End of Period	$	—		 	$	25		 	$	130		 	$	29		 	$	1		 	$	4		 	$	2,178		 	$	—		 	$	1,279		
Net Realized Gains/Losses Attributable to Changes in Fair Value at the Balance Sheet Date	$	—		 	$	—		 	$	—		 	$	—		 	$	—		 	$	—		 	$	(7	)	 	$	—		 	$	(40	)	
		
(1)  	Our GLB reinsurance product meets the definition of a derivative instrument for accounting purposes and is accordingly carried at fair value. Excluded from the table above is the portion of the GLB derivative liability classified as Future policy benefits in the consolidated balance sheets. The liability for GLB reinsurance was $1.5 billion at September 30, 2012 and December 31, 2011 , which includes a fair value derivative adjustment of $1.3 billion .	

b) Financial instruments disclosed, but not measured, at fair value
ACE uses various financial instruments in the normal course of its business. Our insurance contracts are excluded from fair value of financial instruments accounting guidance, and therefore, are not included in the amounts discussed below.

The carrying values of cash, other assets, other liabilities, and other financial instruments not included below approximated their fair values.

Investments in partially-owned insurance companies
Fair values for investments in partially-owned insurance companies are based on ACE’s share of the net assets based on the financial statements provided by those companies.

Short- and long-term debt and trust preferred securities
Where practical, fair values for short-term debt, long-term debt, and trust preferred securities are estimated using discounted cash flow calculations based principally on observable inputs including incremental borrowing rates, which reflect ACE’s credit rating, for similar types of borrowings with maturities consistent with those remaining for the debt being valued.

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ACE Limited and Subsidiaries

The following tables present fair value, by valuation hierarchy, and carrying value of the financial instruments not measured at fair value: 

																				
September 30, 2013	Fair Value	 	 	Carrying Value		
(in millions of U.S. dollars)	Level 1		 	Level 2		 	Level 3		 	Total		 			
Assets:	 	 	 	 	 	 	 	 	 	
Fixed maturities held to maturity	 	 	 	 	 	 	 	 	 	
U.S. Treasury and agency	$	615		 	$	244		 	$	—		 	$	859		 	$	842		
Foreign	—		 	912		 	—		 	912		 	876		
Corporate securities	—		 	2,031		 	16		 	2,047		 	1,960		
Mortgage-backed securities	—		 	1,483		 	—		 	1,483		 	1,440		
States, municipalities, and political subdivisions	—		 	1,192		 	—		 	1,192		 	1,188		
 	615		 	5,862		 	16		 	6,493		 	6,306		
Partially-owned insurance companies	—		 	—		 	468		 	468		 	468		
Total assets	$	615		 	$	5,862		 	$	484		 	$	6,961		 	$	6,774		
Liabilities:	 	 	 	 	 	 	 	 	 	
Short-term debt	$	—		 	$	1,920		 	$	—		 	$	1,920		 	$	1,902		
Long-term debt	—		 	4,146		 	—		 	4,146		 	3,807		
Trust preferred securities	—		 	441		 	—		 	441		 	309		
Total liabilities	$	—		 	$	6,507		 	$	—		 	$	6,507		 	$	6,018		

	
																				
December 31, 2012	Fair Value	 	 	Carrying Value		
(in millions of U.S. dollars)	Level 1		 	Level 2		 	Level 3		 	Total		 			
Assets:	 	 	 	 	 	 	 	 	 	
Fixed maturities held to maturity	 	 	 	 	 	 	 	 	 	
U.S. Treasury and agency	$	619		 	$	464		 	$	—		 	$	1,083		 	$	1,044		
Foreign	—		 	964		 	—		 	964		 	910		
Corporate securities	—		 	2,257		 	18		 	2,275		 	2,133		
Mortgage-backed securities	—		 	2,116		 	—		 	2,116		 	2,028		
States, municipalities, and political subdivisions	—		 	1,195		 	—		 	1,195		 	1,155		
 	619		 	6,996		 	18		 	7,633		 	7,270		
Partially-owned insurance companies	—		 	—		 	454		 	454		 	454		
Total assets	$	619		 	$	6,996		 	$	472		 	$	8,087		 	$	7,724		
Liabilities:	 	 	 	 	 	 	 	 	 	
Short-term debt	$	—		 	$	1,401		 	$	—		 	$	1,401		 	$	1,401		
Long-term debt	—		 	3,916		 	—		 	3,916		 	3,360		
Trust preferred securities	—		 	446		 	—		 	446		 	309		
Total liabilities	$	—		 	$	5,763		 	$	—		 	$	5,763		 	$	5,070		

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ACE Limited and Subsidiaries

5 . Assumed life reinsurance programs involving minimum benefit guarantees under annuity contracts

The following table presents income and expenses relating to GMDB and GLB reinsurance. GLBs include GMIBs as well as some GMABs originating in Japan.

																
 	Three Months Ended	 	 	Nine Months Ended	 	
 	September 30	 	 	September 30	 	
(in millions of U.S. dollars)	2013		 	2012		 	2013		 	2012		
GMDB	 	 	 	 	 	 	 	
Net premiums earned	$	19		 	$	20		 	$	59		 	$	64		
Policy benefits and other reserve adjustments	$	14		 	$	22		 	$	58		 	$	61		
GLB	 	 	 	 	 	 	 	
Net premiums earned	$	36		 	$	40		 	$	112		 	$	121		
Policy benefits and other reserve adjustments	9		 	7		 	20		 	30		
Net realized gains (losses)	138		 	75		 	608		 	41		
Gain recognized in income	$	165		 	$	108		 	$	700		 	$	132		
Net cash received	$	31		 	$	35		 	$	94		 	$	114		
Net decrease in liability	$	134		 	$	73		 	$	606		 	$	18		

At September 30, 2013 , reported liabilities for GMDB and GLB reinsurance were $95 million and $746 million, respectively, compared with $90 million and $1.4 billion, respectively, at December 31, 2012 . The reported liability of $746 million for GLB reinsurance at September 30, 2013 and $1.4 billion at December 31, 2012 includes a fair value derivative adjustment of $ 514 million and $1.1 billion, respectively. Included in Net realized gains (losses) in the table above are gains (losses) related to foreign exchange and other fair value derivative adjustments. Reported liabilities for both GMDB and GLB reinsurance are determined using internal valuation models. Such valuations require considerable judgment and are subject to significant uncertainty. The valuation of these products is subject to fluctuations arising from, among other factors, changes in interest rates, changes in equity markets, changes in credit markets, changes in the allocation of the investments underlying annuitants’ account values, and assumptions regarding future policyholder behavior. These models and the related assumptions are continually reviewed by management and enhanced, as appropriate, based upon improvements in modeling assumptions and availability of more information, such as market conditions and demographics of in-force annuities.

Variable Annuity Net Amount at Risk
(i) Reinsurance covering the GMDB risk only
At September 30, 2013 and December 31, 2012 , the net amount at risk from reinsurance programs covering the GMDB risk only was $751 million and $1.3 billion, respectively.

For reinsurance programs covering the GMDB risk only, the net amount at risk is defined as the present value of future claim payments under the following assumptions:

•	policy account values and guaranteed values are fixed at the valuation date ( September 30, 2013 and December 31, 2012 , respectively);	

•	there are no lapses or withdrawals;	

•	mortality according to 100 percent of the Annuity 2000 mortality table;	

•	future claims are discounted in line with the discounting assumption used in the calculation of the benefit reserve averaging between 1.5 percent and 2.5 percent ; and	

•	reinsurance coverage ends at the earlier of the maturity of the underlying variable annuity policy or the reinsurance treaty.	

The total claim amount payable on reinsurance programs covering the GMDB risk only, if all the cedants’ policyholders were to die immediately at September 30, 2013 was approximately $618 million. This takes into account all applicable reinsurance treaty claim limits.

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ACE Limited and Subsidiaries

(ii) Reinsurance covering the GLB risk only
At September 30, 2013 and December 31, 2012 , the net amount at risk from reinsurance programs covering the GLB risk only was $220 million and $445 million, respectively.

For reinsurance programs covering the GLB risk only, the net amount at risk is defined as the present value of future claim payments under the following assumptions:

•	policy account values and guaranteed values are fixed at the valuation date ( September 30, 2013 and December 31, 2012 , respectively);	

•	there are no deaths, lapses, or withdrawals;	

•	policyholders annuitize at a frequency most disadvantageous to ACE (in other words, annuitization at a level that maximizes claims taking into account the treaty limits) under the terms of the reinsurance contracts;	

•	for annuitizing policyholders, the GMIB claim is calculated using interest rates in line with those used in calculating the reserve;	

•	future claims are discounted in line with the discounting assumption used in the calculation of the benefit reserve averaging between 3.5 percent and 4.5 percent; and	

•	reinsurance coverage ends at the earlier of the maturity of the underlying variable annuity policy or the reinsurance treaty. 	

(iii) Reinsurance covering both the GMDB and GLB risks on the same underlying policyholders
At September 30, 2013 and December 31, 2012 , the GMDB net amount at risk from reinsurance programs covering both the GMDB and GLB risks on the same underlying policyholders was $85 million and $116 million, respectively.

At September 30, 2013 and December 31, 2012 , the GLB net amount at risk from reinsurance programs covering both the GMDB and GLB risks on the same underlying policyholders was $241 million and $655 million, respectively.

These net amounts at risk reflect the interaction between the two types of benefits on any single policyholder (eliminating double-counting), and therefore the net amounts at risk should be considered additive.

For reinsurance programs covering both the GMDB and GLB risks on the same underlying policyholders, the net amount at risk is defined as the present value of future claim payments under the following assumptions:

•	policy account values and guaranteed values are fixed at the valuation date ( September 30, 2013 and December 31, 2012 , respectively);	

•	there are no lapses, or withdrawals;	

•	mortality according to 100 percent of the Annuity 2000 mortality table;	

•	policyholders annuitize at a frequency most disadvantageous to ACE (in other words, annuitization at a level that maximizes claims taking into account the treaty limits) under the terms of the reinsurance contracts;	

•	for annuitizing policyholders, the GMIB claim is calculated using interest rates in line with those used in calculating the reserve;	

•	future claims are discounted in line with the discounting assumption used in the calculation of the benefit reserve averaging between 2.5 percent and 3.5 percent; and	

•	reinsurance coverage ends at the earlier of the maturity of the underlying variable annuity policy or the reinsurance treaty.	

The total claim amount payable on reinsurance programs covering both the GMDB and GLB risks on the same underlying policyholders, if all of the cedants’ policyholders were to die immediately at September 30, 2013 was approximately $ 199

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ACE Limited and Subsidiaries

million million. This takes into account all applicable reinsurance treaty claim limits. Although there would be an increase in death claims resulting from 100 percent immediate mortality of all policyholders, the GLB claims would be zero.

The average attained age of all policyholders under sections i), ii), and iii) above, weighted by the guaranteed value of each reinsured policy, is approximately 68 years.

6 . Debt

In March 2013, ACE INA Holdings, Inc. issued $ 475 million of 2.70 percent senior notes due March 2023 and $ 475 million of 4.15 percent senior notes due March 2043.  The 2.70 percent senior notes and 4.15 percent senior notes are redeemable at any time at ACE INA Holdings, Inc.'s option subject to a “make-whole” premium (the present value of the remaining principal and interest discounted at the applicable U.S. Treasury rate plus 0.10 percent and 0.15 percent , respectively). The notes are also redeemable at par plus accrued and unpaid interest in the event of certain changes in tax law. These notes do not have the benefit of any sinking fund.  These senior unsecured notes are guaranteed on a senior basis by ACE Limited and they rank equally with all of ACE's other senior obligations.  They also contain customary limitations on lien provisions as well as customary events of default provisions which, if breached, could result in the accelerated maturity of such senior debt.

In June 2013, we reclassified $500 million of 5.875 percent senior notes, due to mature on June 15, 2014, from Long-term debt to Short-term debt in the consolidated balance sheet.

7 . Commitments, contingencies, and guarantees

a) Derivative instruments
Derivative instruments employed
ACE maintains positions in derivative instruments such as futures, options, swaps, and foreign currency forward contracts for which the primary purposes are to manage duration and foreign currency exposure, yield enhancement, or to obtain an exposure to a particular financial market. Along with convertible bonds and to be announced mortgage-backed securities (TBA), discussed below, these are the most numerous and frequent derivative transactions.

ACE maintains positions in convertible bond investments that contain embedded derivatives. In addition, ACE, from time to time, purchases TBAs as part of its investing activities. These securities are included within the fixed maturities available for sale (FM AFS) portfolio.

Under reinsurance programs covering GLBs, ACE assumes the risk of GLBs, including GMIB and GMAB, associated with variable annuity contracts. The GMIB risk is triggered if, at the time the contract holder elects to convert the accumulated account value to a periodic payment stream (annuitize), the accumulated account value is not sufficient to provide a guaranteed minimum level of monthly income. The GMAB risk is triggered if, at contract maturity, the contract holder’s account value is less than a guaranteed minimum value. The GLB reinsurance product meets the definition of a derivative instrument. Benefit reserves in respect of GLBs are classified as Future policy benefits (FPB) while the fair value derivative adjustment is classified within Accounts payable, accrued expenses, and other liabilities (AP). ACE also maintains positions in exchange-traded equity futures contracts and options on equity market indices to limit equity exposure in the GMDB and GLB blocks of business.

In relation to certain debt issuances, ACE, from time to time, enters into interest rate swap transactions for the purpose of either fixing or reducing borrowing costs. Although the use of these interest rate swaps has the economic effect of fixing or reducing borrowing costs on a net basis, gross interest expense on the related debt issuances is included in Interest expense while the settlements related to the interest rate swaps are reflected in Net realized gains (losses) in the consolidated statements of operations. At September 30, 2013 , ACE had no in-force interest rate swaps.

ACE, from time to time, buys credit default swaps to mitigate global credit risk exposure, primarily related to reinsurance recoverables. At September 30, 2013 , ACE had no in-force credit default swaps.

All derivative instruments are carried at fair value with changes in fair value recorded in Net realized gains (losses) in the consolidated statements of operations. None of the derivative instruments are designated as hedges for accounting purposes.

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ACE Limited and Subsidiaries

The following table presents the balance sheet locations, fair values in an asset or (liability) position, and notional values/payment provisions of our derivative instruments:

																		
 	 	 	September 30	 	 	December 31	 	
 	 	 	2013	 	 	2012	 	
(in millions of U.S. dollars)	Consolidated
Balance Sheet
Location	 	Fair
Value		 	Notional
Value/
Payment
Provision		 	Fair
Value		 	Notional
Value/
Payment
Provision		
Investment and embedded derivative instruments	 	 	 	 	 	 	 	 	 	
Foreign currency forward contracts	AP	 	$	(7	)	 	$	1,205		 	$	—		 	$	620		
Cross-currency swaps	AP	 	—		 	50		 	—		 	50		
Futures contracts on money market instruments	AP	 	2		 	3,910		 	1		 	2,710		
Futures contracts on notes and bonds	AP	 	(13	)	 	1,022		 	10		 	915		
Convertible bonds	FM AFS	 	291		 	242		 	309		 	279		
TBAs	FM AFS	 	25		 	24		 	—		 	—		
 	 	 	$	298		 	$	6,453		 	$	320		 	$	4,574		
Other derivative instruments	 	 	 	 	 	 	 	 	 	
Futures contracts on equities (1)	AP	 	$	7		 	$	1,585		 	$	(6	)	 	$	2,308		
Options on equity market indices (1)	AP	 	10		 	250		 	30		 	250		
Other	AP	 	(2	)	 	13		 	—		 	—		
 	 	 	$	15		 	$	1,848		 	$	24		 	$	2,558		
GLB (2)	AP/FPB	 	$	(746	)	 	$	461		 	$	(1,352	)	 	$	1,100		
		
(1)  	Related to GMDB and GLB blocks of business.	
		
(2)  	Includes both future policy benefits reserves and fair value derivative adjustment. Refer to Note 5 for additional information. Note that the payment provision related to GLB is the net amount at risk. The concept of a notional value does not apply to the GLB reinsurance contracts.	

On January 1, 2013, we adopted new guidance that requires disclosure of financial instruments subject to a master netting agreement.  At September 30, 2013 and December 31, 2012, derivative liabilities of $1 million and derivative assets of $35 million , respectively, included in the table above were subject to a master netting agreement.  The remaining derivatives included in the table above were not subject to a master netting agreement. 

At September 30, 2013 and December 31, 2012, our repurchase obligations of $1,402 million and $1,401 million , respectively, were fully collateralized.  At September 30, 2013 and December 31, 2012, our securities lending payable was $1,520 million and $1,795 million, respectively, and our securities lending collateral was $1,517 million and $1,791 million, respectively.  The securities lending collateral can only be accessed in the event that the institution borrowing the securities is in default under the lending agreement.  An indemnification agreement with the lending agent protects us in the event a borrower becomes insolvent or fails to return any of the securities on loan.  In contrast to securities lending programs, the use of cash received is not restricted for the repurchase obligations.

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The following table presents Net realized gains (losses) related to derivative instrument activity in the consolidated statements of operations:

																
 	Three Months Ended	 	 	Nine Months Ended	 	
 	September 30	 	 	September 30	 	
(in millions of U.S. dollars)	2013		 	2012		 	2013		 	2012		
Investment and embedded derivative instruments	 	 	 	 	 	 	 	
Foreign currency forward contracts	$	(9	)	 	$	(9	)	 	$	8		 	$	(8	)	
All other futures contracts and options	6		 	—		 	46		 	(20	)	
Convertible bonds	6		 	12		 	7		 	24		
TBAs	1		 	1		 	1		 	1		
Total investment and embedded derivative instruments	$	4		 	$	4		 	$	62		 	$	(3	)	
GLB and other derivative instruments	 	 	 	 	 	 	 	
GLB (1)	$	134		 	$	83		 	$	563		 	$	44		
Futures contracts on equities (2)	(90	)	 	(138	)	 	(393	)	 	(286	)	
Options on equity market indices (2)	(5	)	 	(9	)	 	(20	)	 	(22	)	
Other	(1	)	 	—		 	(2	)	 	(4	)	
Total GLB and other derivative instruments	$	38		 	$	(64	)	 	$	148		 	$	(268	)	
 	$	42		 	$	(60	)	 	$	210		 	$	(271	)	
		
(1)  	Excludes foreign exchange gains (losses) related to GLB.	
		
(2)  	Related to GMDB and GLB blocks of business. 	

Derivative instrument objectives

(i) Foreign currency exposure management
A foreign currency forward contract (forward) is an agreement between participants to exchange specific foreign currencies at a future date. ACE uses forwards to minimize the effect of fluctuating foreign currencies.

(ii) Duration management and market exposure
Futures
Futures contracts give the holder the right and obligation to participate in market movements, determined by the index or underlying security on which the futures contract is based. Settlement is made daily in cash by an amount equal to the change in value of the futures contract times a multiplier that scales the size of the contract. Exchange-traded futures contracts on money market instruments, notes and bonds are used in fixed maturity portfolios to more efficiently manage duration, as substitutes for ownership of the money market instruments, bonds and notes without significantly increasing the risk in the portfolio. Investments in futures contracts may be made only to the extent that there are assets under management not otherwise committed.

Exchange-traded equity futures contracts are used to limit exposure to a severe equity market decline, which would cause an increase in expected claims and therefore, reserves for GMDB and GLB reinsurance business.

Options
An option contract conveys to the holder the right, but not the obligation, to purchase or sell a specified amount or value of an underlying security at a fixed price. Option contracts are used in the investment portfolio as protection against unexpected shifts in interest rates, which would affect the duration of the fixed maturity portfolio. By using options in the portfolio, the overall interest rate sensitivity of the portfolio can be reduced. Option contracts may also be used as an alternative to futures contracts in the synthetic strategy as described above.

Another use for option contracts is to limit exposure to a severe equity market decline, which would cause an increase in expected claims and therefore, reserves for GMDB and GLB reinsurance business.

The price of an option is influenced by the underlying security, expected volatility, time to expiration, and supply and demand.

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ACE Limited and Subsidiaries

The credit risk associated with the above derivative financial instruments relates to the potential for non-performance by counterparties. Although non-performance is not anticipated, in order to minimize the risk of loss, management monitors the creditworthiness of its counterparties and obtains collateral. The performance of exchange-traded instruments is guaranteed by the exchange on which they trade. For non-exchange-traded instruments, the counterparties are principally banks which must meet certain criteria according to our investment guidelines.

Cross-currency swaps
Cross-currency swaps are agreements under which two counterparties exchange interest payments and principal denominated in different currencies at a future date.  We use cross-currency swaps to reduce the foreign currency and interest rate risk by converting cash flows back into local currency.  We invest in foreign currency denominated investments to improve credit diversification and also to obtain better duration matching to our liabilities that is limited in the local currency market.

Other
Included within Other are derivatives intended to reduce potential losses which may arise from certain exposures in our insurance business.  The economic benefit provided by these derivatives is similar to purchased reinsurance.  For example, from time to time, ACE may enter into derivative contracts to protect underwriting results in the event of a significant decline in commodity prices.  Also included within Other are credit default swaps purchased and certain life insurance products that meet the definition of a derivative instrument for accounting purposes. 

(iii) Convertible security investments
A convertible bond is a debt instrument that can be converted into a predetermined amount of the issuer’s equity at certain times prior to the bond’s maturity. The convertible option is an embedded derivative within the fixed maturity host instruments which are classified in the investment portfolio as available for sale. ACE purchases convertible bonds for their total return and not specifically for the conversion feature.

(iv) TBA
By acquiring TBAs, we make a commitment to purchase a future issuance of mortgage-backed securities. For the period between purchase of the TBAs and issuance of the underlying security, we account for our position as a derivative in the consolidated financial statements. ACE purchases TBAs both for their total return and for the flexibility they provide related to our mortgage-backed security strategy.

(v) GLB
Under the GLB program, as the assuming entity, ACE is obligated to provide coverage until the expiration or maturity of the underlying deferred annuity contracts or the expiry of the reinsurance treaty. Premiums received under the reinsurance treaties are classified as premium. Expected losses allocated to premiums received are classified as Future policy benefits and valued similar to GMDB reinsurance. Other changes in fair value, principally arising from changes in expected losses allocated to expected future premiums, are classified as Net realized gains (losses). Fair value represents management’s estimate of exit price and thus, includes a risk margin. We may recognize a realized loss for other changes in fair value due to adverse changes in the capital markets (e.g., declining interest rates and/or declining equity markets) and changes in actual or estimated future policyholder behavior (e.g., increased annuitization or decreased lapse rates) although we expect the business to be profitable. We believe this presentation provides the most meaningful disclosure of changes in the underlying risk within the GLB reinsurance programs for a given reporting period.

b) Other investments
At September 30, 2013 , included in Other investments in the consolidated balance sheet are investments in limited partnerships and partially-owned investment companies with a carrying value of $1,825 million. In connection with these investments, we have commitments that may require funding of up to $1,073 million over the next several years. 

c) Taxation
In April 2012, ACE reached final settlement with the Internal Revenue Service (IRS) Appeals Division regarding several issues raised by the IRS Examination Division in its federal tax returns for 2005, 2006 and 2007. The settlement of these issues had no net impact on our results of operations. In addition, the IRS completed its field examination of ACE’s federal tax returns for 2008 and 2009 during June 2012. No material adjustments resulted from this examination. During the nine months ended September 30, 2013 , ACE reduced the amount of unrecognized tax benefits by $5 million resulting from the closing of applicable statutes of limitations. As of September 30, 2013 , $24 million of unrecognized tax benefits remains outstanding. It is reasonably possible that over the next twelve months, the amount of unrecognized tax benefits may change resulting from the

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ACE Limited and Subsidiaries

re-evaluation of unrecognized tax benefits arising from examinations of taxing authorities. With few exceptions, ACE is no longer subject to state and local or non-U.S. income tax examinations for years before 2005.

d) Legal proceedings
Claims and other litigation
Our insurance subsidiaries are subject to claims litigation involving disputed interpretations of policy coverages and, in some jurisdictions, direct actions by allegedly-injured persons seeking damages from policyholders. These lawsuits, involving claims on policies issued by our subsidiaries which are typical to the insurance industry in general and in the normal course of business, are considered in our loss and loss expense reserves. In addition to claims litigation, we are subject to lawsuits and regulatory actions in the normal course of business that do not arise from or directly relate to claims on insurance policies. This category of business litigation typically involves, among other things, allegations of underwriting errors or misconduct, employment claims, regulatory activity, or disputes arising from our business ventures. In the opinion of management, our ultimate liability for these matters could be, but we believe is not likely to be, material to our consolidated financial condition and results of operations.

8 . Shareholders’ equity

All of ACE’s Common Shares are authorized under Swiss corporate law. Though the par value of Common Shares is stated in Swiss francs, ACE continues to use U.S. dollars as its reporting currency for preparing the consolidated financial statements. Under Swiss corporate law, dividends, including distributions through a reduction in par value (par value reduction) or from legal reserves, must be stated in Swiss francs though dividend payments are made by ACE in U.S. dollars. At our May 2011 annual general meeting, our shareholders approved a dividend for the following year, payable in four quarterly installments after the May 2011 annual general meeting from our capital contribution reserves (Additional paid-in capital), a subaccount of legal reserves. At our May 2012 and May 2013 annual general meetings, our shareholders approved a dividend for the following year, respectively, payable in four quarterly installments after the annual general meetings in the form of a distribution by way of a par value reduction. We have determined this procedure is more appropriate for us at this time due to current Swiss law. For the three and nine months ended September 30, 2013 , dividends per Common Share amounted to CHF 0.46 ($ 0.51 ) and CHF 1.40 ($ 1.51 ), respectively. Par value reductions have been reflected as such through Common Shares in the consolidated statements of shareholders' equity and had the effect of reducing par value per Common Share to CHF 27.49 at September 30, 2013 .

For the three and nine months ended September 30, 2012 , dividends per Common Share amounted to CHF 0.45 ($ 0.49 ) and CHF 1.46 ($ 1.57 ), respectively, which included a $0.12 per Common Share increase (approved by our shareholders at the January 9, 2012 extraordinary general meeting) to the third and fourth installments of the dividend approved at the May 2011 annual general meeting. For the nine months ended September 30, 2012 , dividends per Common Share included a par value reduction of CHF 0.93 per Common Share.

Common Shares in treasury are used principally for issuance upon the exercise of employee stock options, grants of restricted stock, and purchases under the Employee Stock Purchase Plan (ESPP). At September 30, 2013 , 2,762,440 Common Shares remain in treasury after net shares redeemed under employee share-based compensation plans.

ACE Limited securities repurchase authorization
In August 2011, the Board of Directors (Board) authorized the repurchase of up to $ 303 million of ACE’s Common Shares through December 31, 2012. The amount authorized in August 2011 was in addition to the $ 197 million balance remaining under a $ 600 million share repurchase program approved in November 2010. In November 2012, the Board authorized an extension of our then-remaining repurchase capacity through December 31, 2013. These authorizations were granted to allow ACE to repurchase Common Shares to partially offset potential dilution from the exercise of stock options and the granting of restricted stock under share-based compensation plans. Such repurchases may be made in the open market, in privately negotiated transactions, block trades, accelerated repurchases and/or through option or other forward transactions. For the three and nine months ended September 30, 2013 , ACE repurchased 238,544 Common Shares for a cost of $ 21 million and 2,701,620 Common Shares for a cost of $233 million , respectively, in a series of open market transactions. At September 30, 2013 , $228 million in share repurchase authorization remained through December 31, 2013 pursuant to the November 2010, August 2011, and November 2012 Board authorizations.

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ACE Limited and Subsidiaries

9 . Share-based compensation

The ACE Limited 2004 Long-Term Incentive Plan (the 2004 LTIP) provides for grants of both incentive and non-qualified stock options principally at an option price per share equal to the fair value of ACE’s Common Shares on the date of grant. Stock options are generally granted with a 3-year vesting period and a 10-year term. The stock options vest in equal annual installments over the respective vesting period, which is also the requisite service period. On February 28, 2013 , ACE granted 1,815,896 stock options with a weighted-average grant date fair value of $17.29 each. The fair value of the options issued is estimated on the date of grant using the Black-Scholes option pricing model.

The 2004 LTIP also provides for grants of restricted stock and restricted stock units. ACE generally grants restricted stock and restricted stock units with a 4-year vesting period, based on a graded vesting schedule. The restricted stock is granted at market close price on the day of grant. On February 28, 2013 , ACE granted 1,345,850 restricted stock awards and 266,065 restricted stock units to employees and officers of ACE and its subsidiaries with a grant date fair value of $85.39 each. Each restricted stock unit represents our obligation to deliver to the holder one Common Share upon vesting.

In May 2013, our shareholders approved an increase of 8 million shares authorized to be issued under the 2004 LTIP, bringing the total shares authorized to 38,600,000 common shares. At September 30, 2013 , a total of 11,165,235 shares remain available for future issuance under the 2004 LTIP.

10 . Segment information

ACE operates through the following business segments: Insurance – North American P&C, Insurance – North American Agriculture, Insurance – Overseas General, Global Reinsurance, and Life. These segments distribute their products through various forms of brokers, agencies, and direct marketing programs. All business segments have established relationships with reinsurance intermediaries.

Effective first quarter 2013, the Insurance – North American segment is presented in two distinct reportable segments: Insurance – North American P&C and Insurance – North American Agriculture. Prior year amounts contained in this report have been adjusted to conform to the new segment presentation.

For segment reporting purposes, certain items have been presented in a different manner than in the consolidated financial statements below. Management uses underwriting income as the main measure of segment performance. ACE calculates underwriting income by subtracting Losses and loss expenses, Policy benefits, Policy acquisition costs, and Administrative expenses from Net premiums earned. For the Insurance – North American Agriculture segment, management includes gains and losses from fair value changes on crop derivatives as a component of underwriting income. For the three and nine months ended September 30, 2013, underwriting income in our Insurance - North American Agriculture segment was $65 million and $111 million , respectively. These amounts include $1 million of realized losses related to crop derivatives which are included in Net realized gains (losses) below. For the Life segment, management 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 as components of underwriting income. For example, for the three months ended September 30, 2013 , Life underwriting income of $ 92 million includes Net investment income of $ 61 million and gains from fair value changes in separate account assets of $ 14 million.

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ACE Limited and Subsidiaries

The following tables present the operations by segment:

Statement of Operations by Segment 

																												
For the Three Months Ended September 30, 2013	Insurance – North American P&C		 	Insurance – North American Agriculture		 	Insurance –
Overseas
General		 	Global
Reinsurance		 	Life		 	Corporate
and Other		 	ACE
Consolidated		
(in millions of U.S. dollars)						 			 			 			 			 			
Net premiums written	$	1,500		 	$	805		 	$	1,571		 	$	265		 	$	479		 	$	—		 	$	4,620		
Net premiums earned	1,444		 	849		 	1,611		 	239		 	467		 	—		 	4,610		
Losses and loss expenses	963		 	746		 	712		 	93		 	141		 	—		 	2,655		
Policy benefits	—		 	—		 	—		 	—		 	138		 	—		 	138		
Policy acquisition costs	159		 	32		 	349		 	52		 	86		 	—		 	678		
Administrative expenses	153		 	5		 	263		 	12		 	85		 	45		 	563		
Underwriting income (loss)	169		 	66		 	287		 	82		 	17		 	(45	)	 	576		
Net investment income	254		 	6		 	128		 	66		 	61		 	7		 	522		
Net realized gains (losses) including OTTI	9		 	—		 	(8	)	 	(5	)	 	43		 	1		 	40		
Interest expense	3		 	—		 	1		 	2		 	4		 	62		 	72		
Other (income) expense:	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Gains) losses from fair value changes in separate account assets	—		 	—		 	—		 	—		 	(14	)	 	—		 	(14	)	
Other	(13	)	 	8		 	14		 	(7	)	 	4		 	3		 	9		
Income tax expense (benefit)	79		 	14		 	78		 	16		 	10		 	(42	)	 	155		
Net income (loss)	$	363		 	$	50		 	$	314		 	$	132		 	$	117		 	$	(60	)	 	$	916		

Statement of Operations by Segment

																												
For the Three Months Ended September 30, 2012	Insurance – North American P&C		 	Insurance – North American Agriculture		 	Insurance –
Overseas
General		 	Global
Reinsurance		 	Life		 	Corporate
and Other		 	ACE
Consolidated		
(in millions of U.S. dollars)			 			 			 			 			 			 			
Net premiums written	$	1,373		 	$	1,164		 	$	1,384		 	$	307		 	$	488		 	$	—		 	$	4,716		
Net premiums earned	1,306		 	1,166		 	1,432		 	281		 	480		 	—		 	4,665		
Losses and loss expenses	819		 	1,291		 	622		 	151		 	164		 	—		 	3,047		
Policy benefits	—		 	—		 	—		 	—		 	130		 	—		 	130		
Policy acquisition costs	147		 	13		 	329		 	40		 	80		 	—		 	609		
Administrative expenses	148		 	—		 	234		 	13		 	81		 	43		 	519		
Underwriting income (loss)	192		 	(138	)	 	247		 	77		 	25		 	(43	)	 	360		
Net investment income	257		 	6		 	127		 	72		 	63		 	8		 	533		
Net realized gains (losses) including OTTI	(2	)	 	1		 	13		 	(2	)	 	(71	)	 	1		 	(60	)	
Interest expense	3		 	—		 	2		 	1		 	3		 	54		 	63		
Other (income) expense:	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Gains) losses from fair value changes in separate account assets	—		 	—		 	—		 	—		 	(14	)	 	—		 	(14	)	
Other	(13	)	 	8		 	(3	)	 	(5	)	 	—		 	10		 	(3	)	
Income tax expense (benefit)	129		 	(48	)	 	77		 	11		 	14		 	(36	)	 	147		
Net income (loss)	$	328		 	$	(91	)	 	$	311		 	$	140		 	$	14		 	$	(62	)	 	$	640		

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Statement of Operations by Segment

																												
For the Nine Months Ended September 30, 2013	Insurance – North American P&C		 	Insurance – North American Agriculture		 	Insurance –
Overseas
General		 	Global
Reinsurance		 	Life		 	Corporate
and Other		 	ACE
Consolidated		
(in millions of U.S. dollars)			 			 			 			 			 			 			
Net premiums written	$	4,313		 	$	1,371		 	$	4,821		 	$	836		 	$	1,468		 	$	—		 	$	12,809		
Net premiums earned	4,210		 	1,252		 	4,633		 	731		 	1,424		 	—		 	12,250		
Losses and loss expenses	2,791		 	1,071		 	2,227		 	292		 	443		 	7		 	6,831		
Policy benefits	—		 	—		 	—		 	—		 	379		 	—		 	379		
Policy acquisition costs	444		 	56		 	1,048		 	148		 	261		 	—		 	1,957		
Administrative expenses	437		 	13		 	750		 	36		 	256		 	149		 	1,641		
Underwriting income (loss)	538		 	112		 	608		 	255		 	85		 	(156	)	 	1,442		
Net investment income	755		 	19		 	396		 	209		 	187		 	21		 	1,587		
Net realized gains (losses) including OTTI	63		 	1		 	34		 	46		 	206		 	—		 	350		
Interest expense	4		 	—		 	4		 	4		 	12		 	181		 	205		
Other (income) expense:			 			 			 			 			 			 	 	
(Gains) losses from fair value changes in separate account assets	—		 	—		 	—		 	—		 	(7	)	 	—		 	(7	)	
Other	(38	)	 	24		 	30		 	(13	)	 	7		 	19		 	29		
Income tax expense (benefit)	264		 	24		 	174		 	31		 	33		 	(134	)	 	392		
Net income (loss)	$	1,126		 	$	84		 	$	830		 	$	488		 	$	433		 	$	(201	)	 	$	2,760		

Statement of Operations by Segment

																												
For the Nine Months Ended September 30, 2012	Insurance – North American P&C		 	Insurance – North American Agriculture		 	Insurance –
Overseas
General		 	Global
Reinsurance		 	Life		 	Corporate
and Other		 	ACE
Consolidated		
(in millions of U.S. dollars)			 			 			 			 			 			 			
Net premiums written	$	3,915		 	$	1,775		 	$	4,387		 	$	879		 	$	1,462		 	$	—		 	$	12,418		
Net premiums earned	3,802		 	1,609		 	4,243		 	748		 	1,427		 	—		 	11,829		
Losses and loss expenses	2,474		 	1,648		 	2,030		 	355		 	463		 	—		 	6,970		
Policy benefits	—		 	—		 	—		 	—		 	379		 	—		 	379		
Policy acquisition costs	419		 	25		 	996		 	125		 	244		 	1		 	1,810		
Administrative expenses	451		 	(3	)	 	696		 	38		 	237		 	124		 	1,543		
Underwriting income (loss)	458		 	(61	)	 	521		 	230		 	104		 	(125	)	 	1,127		
Net investment income	789		 	19		 	386		 	213		 	186		 	21		 	1,614		
Net realized gains (losses) including OTTI	15		 	1		 	59		 	(6	)	 	(261	)	 	(2	)	 	(194	)	
Interest expense	9		 	—		 	4		 	3		 	9		 	162		 	187		
Other (income) expense:	 	 	 	 	 	 	 	 	 	 	 	 	 	
(Gains) losses from fair value changes in separate account assets	—		 	—		 	—		 	—		 	(18	)	 	—		 	(18	)	
Other	(20	)	 	24		 	3		 	(7	)	 	14		 	18		 	32		
Income tax expense (benefit)	308		 	(29	)	 	166		 	17		 	44		 	(101	)	 	405		
Net income (loss)	$	965		 	$	(36	)	 	$	793		 	$	424		 	$	(20	)	 	$	(185	)	 	$	1,941		

Underwriting assets are reviewed in total by management for purposes of decision-making. Other than goodwill and other intangible assets, ACE does not allocate assets to its segments.

31 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited)
ACE Limited and Subsidiaries

The following table presents net premiums earned for each segment by product:

																
For the Three Months Ended September 30, 2013	Property &
All Other		 	Casualty		 	Life,
Accident &
Health		 	ACE
Consolidated		
(in millions of U.S. dollars)			 			 			 			
Insurance – North American P&C	$	388		 	$	957		 	$	99		 	$	1,444		
Insurance – North American Agriculture	849		 	—		 	—		 	849		
Insurance – Overseas General	689		 	375		 	547		 	1,611		
Global Reinsurance	141		 	98		 	—		 	239		
Life	—		 	—		 	467		 	467		
 	$	2,067		 	$	1,430		 	$	1,113		 	$	4,610		

	
																
For the Three Months Ended September 30, 2012	Property &
All Other		 	Casualty		 	Life,
Accident &
Health		 	ACE
Consolidated		
(in millions of U.S. dollars)			 			 			 			
Insurance – North American P&C	$	353		 	$	860		 	$	93		 	$	1,306		
Insurance – North American Agriculture	1,166		 	—		 	—		 	1,166		
Insurance – Overseas General	547		 	356		 	529		 	1,432		
Global Reinsurance	131		 	150		 	—		 	281		
Life	—		 	—		 	480		 	480		
 	$	2,197		 	$	1,366		 	$	1,102		 	$	4,665		

	
																
For the Nine Months Ended September 30, 2013	Property &
All Other		 	Casualty		 	Life,
Accident &
Health		 	ACE
Consolidated		
(in millions of U.S. dollars)			 			 			 			
Insurance – North American P&C	$	1,103		 	$	2,826		 	$	281		 	$	4,210		
Insurance – North American Agriculture	1,252		 	—		 	—		 	1,252		
Insurance – Overseas General	1,932		 	1,088		 	1,613		 	4,633		
Global Reinsurance	408		 	323		 	—		 	731		
Life	—		 	—		 	1,424		 	1,424		
 	$	4,695		 	$	4,237		 	$	3,318		 	$	12,250		

	
																
For the Nine Months Ended September 30, 2012	Property &
All Other		 	Casualty		 	Life,
Accident &
Health		 	ACE
Consolidated		
(in millions of U.S. dollars)			 			 			 			
Insurance – North American P&C	$	1,022		 	$	2,505		 	$	275		 	$	3,802		
Insurance – North American Agriculture	1,609		 	—		 	—		 	1,609		
Insurance – Overseas General	1,637		 	1,027		 	1,579		 	4,243		
Global Reinsurance	355		 	393		 	—		 	748		
Life	—		 	—		 	1,427		 	1,427		
 	$	4,623		 	$	3,925		 	$	3,281		 	$	11,829		

32

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited)
ACE Limited and Subsidiaries

11 . Earnings per share

The following table presents the computation of basic and diluted earnings per share:  

																
 	Three Months Ended	 	 	Nine Months Ended	 	
 	September 30	 	 	September 30	 	
(in millions of U.S. dollars, except share and per share data)	2013		 	2012		 	2013		 	2012		
Numerator:	 	 	 	 	 	 	 	
Net income	$	916		 	$	640		 	$	2,760		 	$	1,941		
Denominator:	 	 	 	 	 	 	 	
Denominator for basic earnings per share:	 	 	 	 	 	 	 	
Weighted-average shares outstanding	340,888,648		 	340,207,037		 	340,905,322		 	339,523,388		
Denominator for diluted earnings per share:	 	 	 	 		 		
Share-based compensation plans	2,929,089		 	2,665,676		 	3,146,728		 	2,831,798		
Weighted-average shares outstanding and assumed conversions	343,817,737		 	342,872,713		 	344,052,050		 	342,355,186		
Basic earnings per share	$	2.68		 	$	1.88		 	$	8.09		 	$	5.71		
Diluted earnings per share	$	2.66		 	$	1.86		 	$	8.02		 	$	5.67		
 	 	 	 	 	 	 	 	
Potential anti-dilutive share conversions	1,215,884		 	1,449,610		 	1,429,514		 	1,193,839		

Excluded from weighted-average shares outstanding and assumed conversions is the impact of securities that would have been anti-dilutive during the respective periods.

12 . Information provided in connection with outstanding debt of subsidiaries

The following tables present condensed consolidating financial information at September 30, 2013 and December 31, 2012, and for the three and nine months ended September 30, 2013 and 2012, for ACE Limited (Parent Guarantor) and ACE INA Holdings Inc. (Subsidiary Issuer). The Subsidiary Issuer is an indirect 100 percent-owned subsidiary of the Parent Guarantor. The Parent Guarantor fully and unconditionally guarantees certain of the debt of the Subsidiary Issuer.
 
During the third quarter of 2013, we determined that the Subsidiary Issuer columns presented in the previously issued condensed consolidating financial information should be presented on the equity method of accounting rather than on a consolidated basis. Accordingly, we have revised the disclosure to correct the Condensed Consolidating Balance Sheet as of December 31, 2012, the Condensed Consolidating Statements of Operations and Comprehensive Income (Loss) for the three and nine months ended September 30, 2012, and the Condensed Consolidating Statement of Cash Flows for the nine months ended September 30, 2012. As a result of this revision to the Subsidiary Issuer condensed consolidating financial information, the assets and liabilities, revenues and expenses, and cash flows of the subsidiaries of ACE INA Holdings, Inc. (Subsidiary Issuer) are now presented in the Other ACE Limited Subsidiaries column on a combined basis. In addition, we revised the Consolidating Adjustments and Eliminations column to correctly include all intercompany eliminations. Previously, this column reflected only ACE Limited parent company intercompany eliminations. We also revised the Condensed Consolidating Balance Sheet as of December 31, 2012 and Condensed Consolidating Statement of Cash Flows for the nine months ended September 30, 2012 to correct the presentation of negative cash associated with our affiliated notional cash pooling programs (Pools). In addition, certain items in the Condensed Consolidating Statement of Cash Flows for the nine months ended September 30, 2012 have been reclassified to conform to current period presentation. Also, the operating cash flows have been corrected to properly reflect certain intercompany transactions previously recorded in financing cash flows for the nine months ended September 30, 2012.

Total shareholders' equity and net income of the Subsidiary Issuer and Parent Guarantor were not impacted as a result of these revisions. The impact of the revisions was not material to the prior period consolidated financial statements taken as a whole. There was no impact on the consolidated amounts previously reported. The prior period condensed consolidating financial statements will be similarly revised as the information is presented in the 2013 Form 10-K and the first and second quarter Form 10-Q filings for 2014.

33 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited)
ACE Limited and Subsidiaries

For reference only, included in the following pages are the previously reported condensed consolidating information at December 31, 2012 and for the three and nine months ended September 30, 2012.

Condensed Consolidating Balance Sheet at September 30, 2013 

																				
(in millions of U.S. dollars)	ACE
Limited
(Parent
Guarantor)		 	ACE INA
Holdings Inc.
(Subsidiary
Issuer)		 	Other ACE
Limited
Subsidiaries		 	Consolidating
Adjustments and Eliminations		 	ACE Limited
Consolidated		
Assets	 	 	 	 	 	 	 	 	 	
Investments	$	29		 	$	10		 	$	60,303		 	$	—		 	$	60,342		
Cash (1)	11		 	165		 	1,464		 	(872	)	 	768		
Insurance and reinsurance balances receivable	—		 	—		 	6,225		 	(1,136	)	 	5,089		
Reinsurance recoverable on losses and loss expenses	—		 	—		 	20,279		 	(8,802	)	 	11,477		
Reinsurance recoverable on policy benefits	—		 	—		 	1,246		 	(1,009	)	 	237		
Value of business acquired	—		 	—		 	554		 	—		 	554		
Goodwill and other intangible assets	—		 	—		 	5,465		 	—		 	5,465		
Investments in subsidiaries	28,457		 	17,979		 	—		 	(46,436	)	 	—		
Due from subsidiaries and affiliates, net	813		 	—		 	—		 	(813	)	 	—		
Other assets	5		 	219		 	12,679		 	(2,251	)	 	10,652		
Total assets	$	29,315		 	$	18,373		 	$	108,215		 	$	(61,319	)	 	$	94,584		
Liabilities	 	 	 	 	 	 	 	 	 	
Unpaid losses and loss expenses	$	—		 	$	—		 	$	46,215		 	$	(8,333	)	 	$	37,882		
Unearned premiums	—		 	—		 	9,523		 	(1,729	)	 	7,794		
Future policy benefits	—		 	—		 	5,605		 	(1,009	)	 	4,596		
Due to (from) subsidiaries and affiliates, net	—		 	661		 	152		 	(813	)	 	—		
Affiliated notional cash pooling programs (1)	872		 	—		 	—		 	(872	)	 	—		
Short-term debt	—		 	500		 	1,402		 	—		 	1,902		
Long-term debt	—		 	3,795		 	12		 	—		 	3,807		
Trust preferred securities	—		 	309		 	—		 	—		 	309		
Other liabilities	225		 	1,342		 	10,636		 	(2,127	)	 	10,076		
Total liabilities	1,097		 	6,607		 	73,545		 	(14,883	)	 	66,366		
Total shareholders’ equity	28,218		 	11,766		 	34,670		 	(46,436	)	 	28,218		
Total liabilities and shareholders’ equity	$	29,315		 	$	18,373		 	$	108,215		 	$	(61,319	)	 	$	94,584		
		
(1)  	ACE maintains two notional multicurrency cash pools (Pools) with a third-party bank. Various ACE entities participate in one or the other of the Pools, pursuant to which credit and debit balances in individual ACE accounts are translated daily into a single currency and pooled on a notional basis. Individual ACE entities are permitted to overdraw on their individual accounts provided the overall Pool balances do not fall below zero. At September 30, 2013 , the cash balance of one or more entities was negative; however, the overall Pool balances were positive.	

34

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited)
ACE Limited and Subsidiaries

Condensed Consolidating Balance Sheet at December 31, 2012 (Revised)

																				
(in millions of U.S. dollars)	ACE
Limited
(Parent
Guarantor)		 	ACE INA
Holdings Inc.
(Subsidiary
Issuer)		 	Other ACE
Limited
Subsidiaries		 	Consolidating
Adjustments and Eliminations		 	ACE Limited
Consolidated		
Assets	 	 	 	 	 	 	 	 	 	
Investments	$	31		 	$	14		 	$	60,219		 	$	—		 	$	60,264		
Cash (1)	103		 	2		 	859		 	(349	)	 	615		
Insurance and reinsurance balances receivable	—		 	—		 	4,742		 	(595	)	 	4,147		
Reinsurance recoverable on losses and loss expenses	—		 	—		 	20,935		 	(8,857	)	 	12,078		
Reinsurance recoverable on policy benefits	—		 	—		 	1,229		 	(988	)	 	241		
Value of business acquired	—		 	—		 	614		 	—		 	614		
Goodwill and other intangible assets	—		 	—		 	4,975		 	—		 	4,975		
Investments in subsidiaries	27,251		 	17,016		 	—		 	(44,267	)	 	—		
Due from subsidiaries and affiliates, net	204		 	—		 	—		 	(204	)	 	—		
Other assets	13		 	210		 	11,304		 	(1,916	)	 	9,611		
Total assets	$	27,602		 	$	17,242		 	$	104,877		 	$	(57,176	)	 	$	92,545		
Liabilities	 	 	 	 	 	 	 	 	 	
Unpaid losses and loss expenses	$	—		 	$	—		 	$	46,109		 	$	(8,163	)	 	$	37,946		
Unearned premiums	—		 	—		 	8,248		 	(1,384	)	 	6,864		
Future policy benefits	—		 	—		 	5,458		 	(988	)	 	4,470		
Due to (from) subsidiaries and affiliates, net	—		 	68		 	136		 	(204	)	 	—		
Affiliated notional cash pooling programs (1)	—		 	349		 	—		 	(349	)	 	—		
Short-term debt	—		 	—		 	1,401		 	—		 	1,401		
Long-term debt	—		 	3,347		 	13		 	—		 	3,360		
Trust preferred securities	—		 	309		 	—		 	—		 	309		
Other liabilities	71		 	1,195		 	11,219		 	(1,821	)	 	10,664		
Total liabilities	71		 	5,268		 	72,584		 	(12,909	)	 	65,014		
Total shareholders’ equity	27,531		 	11,974		 	32,293		 	(44,267	)	 	27,531		
Total liabilities and shareholders’ equity	$	27,602		 	$	17,242		 	$	104,877		 	$	(57,176	)	 	$	92,545		
		
(1)  	ACE maintains two notional multicurrency cash pools (Pools) with a third-party bank. Various ACE entities participate in one or the other of the Pools, pursuant to which credit and debit balances in individual ACE accounts are translated daily into a single currency and pooled on a notional basis. Individual ACE entities are permitted to overdraw on their individual accounts provided the overall Pool balances do not fall below zero. At December 31, 2012 , the cash balance of one or more entities was negative; however, the overall Pool balances were positive.	

35 

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited)
ACE Limited and Subsidiaries

Condensed Consolidating Balance Sheet at December 31, 2012 (As previously reported)

																				
(in millions of U.S. dollars)	ACE
Limited
(Parent
Guarantor)		 	ACE INA
Holdings Inc.
(Subsidiary
Issuer)		 	Other ACE
Limited
Subsidiaries and
Eliminations (1)		 	Consolidating
Adjustments (2)		 	ACE Limited
Consolidated		
Assets	 	 	 	 	 	 	 	 	 	
Investments	$	31		 	$	31,074		 	$	29,159		 	$	—		 	$	60,264		
Cash (3)	103		 	515		 	(3	)	 	—		 	615		
Insurance and reinsurance balances receivable	—		 	3,654		 	493		 	—		 	4,147		
Reinsurance recoverable on losses and loss expenses	—		 	17,232		 	(5,154	)	 	—		 	12,078		
Reinsurance recoverable on policy benefits	—		 	1,187		 	(946	)	 	—		 	241		
Value of business acquired	—		 	610		 	4		 	—		 	614		
Goodwill and other intangible assets	—		 	4,419		 	556		 	—		 	4,975		
Investments in subsidiaries	27,251		 	—		 	—		 	(27,251	)	 	—		
Due from subsidiaries and affiliates, net	204		 	—		 	—		 	(204	)	 	—		
Other assets	13		 	7,563		 	2,035		 	—		 	9,611		
Total assets	$	27,602		 	$	66,254		 	$	26,144		 	$	(27,455	)	 	$	92,545		
Liabilities	 	 	 	 	 	 	 	 	 	
Unpaid losses and loss expenses	$	—		 	$	31,356		 	$	6,590		 	$	—		 	$	37,946		
Unearned premiums	—		 	5,872		 	992		 	—		 	6,864		
Future policy benefits	—		 	3,876		 	594		 	—		 	4,470		
Due to (from) subsidiaries and affiliates, net	—		 	384		 	(180	)	 	(204	)	 	—		
Short-term debt	—		 	851		 	550		 	—		 	1,401		
Long-term debt	—		 	3,360		 	—		 	—		 	3,360		
Trust preferred securities	—		 	309		 	—		 	—		 	309		
Other liabilities	71		 	8,272		 	2,321		 	—		 	10,664		
Total liabilities	71		 	54,280		 	10,867		 	(204	)	 	65,014		
Total shareholders’ equity	27,531		 	11,974		 	15,277		 	(27,251	)	 	27,531		
Total liabilities and shareholders’ equity	$	27,602		 	$	66,254		 	$	26,144		 	$	(27,455	)	 	$	92,545		
		
(1)	Includes all other subsidiaries of ACE Limited and intercompany eliminations, primarily intercompany reinsurance transactions.	
		
(2)	Includes ACE Limited parent company eliminations.	
		
(3)	ACE maintains two notional multicurrency cash pools (Pools) with a third-party bank. Various ACE entities participate in one or the other of the Pools, pursuant to which credit and debit balances in individual ACE accounts are translated daily into a single currency and pooled on a notional basis. Individual ACE entities are permitted to overdraw on their individual accounts provided the overall Pool balances do not fall below zero. At December 31, 2012 , the cash balance of one or more entities was negative; however, the overall Pool balances were positive.	

36

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited)
ACE Limited and Subsidiaries

Condensed Consolidating Statements of Operations and Comprehensive Income

																				
For the Three Months Ended September 30, 2013	ACE
Limited
(Parent
Guarantor)		 	ACE INA
Holdings Inc.
(Subsidiary
Issuer)		 	Other ACE
Limited
Subsidiaries		 	Consolidating
Adjustments and Eliminations		 	ACE
Limited
Consolidated		
(in millions of U.S. dollars)			 			 			 			 			
Net premiums written	$	—		 	$	—		 	$	4,620		 	$	—		 	$	4,620		
Net premiums earned	—		 	—		 	4,610		 	—		 	4,610		
Net investment income	1		 	—		 	521		 	—		 	522		
Equity in earnings of subsidiaries	863		 	322		 	—		 	(1,185	)	 	—		
Net realized gains (losses) including OTTI	—		 	(2	)	 	42		 	—		 	40		
Losses and loss expenses	—		 	—		 	2,655		 	—		 	2,655		
Policy benefits	—		 	—		 	138		 	—		 	138		
Policy acquisition costs and administrative expenses	13		 	4		 	1,224		 	—		 	1,241		
Interest (income) expense	(8	)	 	69		 	11		 	—		 	72		
Other (income) expense	(62	)	 	6		 	51		 	—		 	(5	)	
Income tax expense (benefit)	5		 	(14	)	 	164		 	—		 	155		
Net income	$	916		 	$	255		 	$	930		 	$	(1,185	)	 	$	916		
Comprehensive income	$	1,030		 	$	339		 	$	1,043		 	$	(1,382	)	 	$	1,030		

Condensed Consolidating Statements of Operations and Comprehensive Income (Revised)

																				
For the Three Months Ended September 30, 2012	ACE
Limited
(Parent
Guarantor)		 	ACE INA
Holdings Inc.
(Subsidiary
Issuer)		 	Other ACE
Limited
Subsidiaries		 	Consolidating
Adjustments and Eliminations		 	ACE
Limited
Consolidated		
(in millions of U.S. dollars)			 			 			 			 			
Net premiums written	$	—		 	$	—		 	$	4,716		 	$	—		 	$	4,716		
Net premiums earned	—		 	—		 	4,665		 	—		 	4,665		
Net investment income	—		 	1		 	532		 	—		 	533		
Equity in earnings of subsidiaries	616		 	285		 	—		 	(901	)	 	—		
Net realized gains (losses) including OTTI	(4	)	 	—		 	(56	)	 	—		 	(60	)	
Losses and loss expenses	—		 	—		 	3,047		 	—		 	3,047		
Policy benefits	—		 	—		 	130		 	—		 	130		
Policy acquisition costs and administrative expenses	16		 	6		 	1,106		 	—		 	1,128		
Interest (income) expense	(8	)	 	60		 	11		 	—		 	63		
Other (income) expense	(39	)	 	7		 	15		 	—		 	(17	)	
Income tax expense (benefit)	3		 	(24	)	 	168		 	—		 	147		
Net income	$	640		 	$	237		 	$	664		 	$	(901	)	 	$	640		
Comprehensive income	$	1,316		 	$	593		 	$	1,339		 	$	(1,932	)	 	$	1,316		

37 

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited)
ACE Limited and Subsidiaries

Condensed Consolidating Statements of Operations and Comprehensive Income (As previously reported)

																				
For the Three Months Ended September 30, 2012	ACE
Limited
(Parent
Guarantor)		 	ACE INA
Holdings Inc.
(Subsidiary
Issuer)		 	Other ACE
Limited
Subsidiaries and
Eliminations (1)		 	Consolidating
Adjustments (2)		 	ACE
Limited
Consolidated		
(in millions of U.S. dollars)			 			 			 			 			
Net premiums written	$	—		 	$	2,868		 	$	1,848		 	$	—		 	$	4,716		
Net premiums earned	—		 	2,819		 	1,846		 	—		 	4,665		
Net investment income	—		 	255		 	278		 	—		 	533		
Equity in earnings of subsidiaries	616		 	—		 	—		 	(616	)	 	—		
Net realized gains (losses) including OTTI	(4	)	 	11		 	(67	)	 	—		 	(60	)	
Losses and loss expenses	—		 	1,977		 	1,070		 	—		 	3,047		
Policy benefits	—		 	77		 	53		 	—		 	130		
Policy acquisition costs and administrative expenses	16		 	587		 	525		 	—		 	1,128		
Interest (income) expense	(8	)	 	67		 	4		 	—		 	63		
Other (income) expense	(39	)	 	17		 	5		 	—		 	(17	)	
Income tax expense	3		 	123		 	21		 	—		 	147		
Net income	$	640		 	$	237		 	$	379		 	$	(616	)	 	$	640		
Comprehensive income	$	1,316		 	$	593		 	$	23		 	$	(616	)	 	$	1,316		
		
(1)	Includes all other subsidiaries of ACE Limited and intercompany eliminations.	
		
(2)	Includes ACE Limited parent company eliminations.	

Condensed Consolidating Statements of Operations and Comprehensive Income (Loss)

																				
For the Nine Months Ended September 30, 2013	ACE
Limited
(Parent
Guarantor)		 	ACE INA
Holdings Inc.
(Subsidiary
Issuer)		 	Other ACE
Limited
Subsidiaries		 	Consolidating
Adjustments and Eliminations		 	ACE
Limited
Consolidated		
(in millions of U.S. dollars)			 			 			 			 			
Net premiums written	$	—		 	$	—		 	$	12,809		 	$	—		 	$	12,809		
Net premiums earned	—		 	—		 	12,250		 	—		 	12,250		
Net investment income	2		 	2		 	1,583		 	—		 	1,587		
Equity in earnings of subsidiaries	2,619		 	767		 	—		 	(3,386	)	 	—		
Net realized gains (losses) including OTTI	12		 	(2	)	 	340		 	—		 	350		
Losses and loss expenses	—		 	—		 	6,831		 	—		 	6,831		
Policy benefits	—		 	—		 	379		 	—		 	379		
Policy acquisition costs and administrative expenses	40		 	13		 	3,545		 	—		 	3,598		
Interest (income) expense	(23	)	 	200		 	28		 	—		 	205		
Other (income) expense	(157	)	 	21		 	158		 	—		 	22		
Income tax expense (benefit)	13		 	(80	)	 	459		 	—		 	392		
Net income	$	2,760		 	$	613		 	$	2,773		 	$	(3,386	)	 	$	2,760		
Comprehensive income (loss)	$	1,247		 	$	(195	)	 	$	1,259		 	$	(1,064	)	 	$	1,247		

38

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited)
ACE Limited and Subsidiaries

Condensed Consolidating Statements of Operations and Comprehensive Income (Revised)

																				
For the Nine Months Ended September 30, 2012	ACE
Limited
(Parent
Guarantor)		 	ACE INA
Holdings Inc.
(Subsidiary
Issuer)		 	Other ACE
Limited
Subsidiaries		 	Consolidating
Adjustments and Eliminations		 	ACE
Limited
Consolidated		
(in millions of U.S. dollars)			 			 			 			 			
Net premiums written	$	—		 	$	—		 	$	12,418		 	$	—		 	$	12,418		
Net premiums earned	—		 	—		 	11,829		 	—		 	11,829		
Net investment income	1		 	2		 	1,611		 	—		 	1,614		
Equity in earnings of subsidiaries	1,845		 	775		 	—		 	(2,620	)	 	—		
Net realized gains (losses) including OTTI	18		 	—		 	(212	)	 	—		 	(194	)	
Losses and loss expenses	—		 	—		 	6,970		 	—		 	6,970		
Policy benefits	—		 	—		 	379		 	—		 	379		
Policy acquisition costs and administrative expenses	42		 	20		 	3,291		 	—		 	3,353		
Interest (income) expense	(25	)	 	175		 	37		 	—		 	187		
Other (income) expense	(102	)	 	(8	)	 	124		 	—		 	14		
Income tax expense (benefit)	8		 	(72	)	 	469		 	—		 	405		
Net income	$	1,941		 	$	662		 	$	1,958		 	$	(2,620	)	 	$	1,941		
Comprehensive income	$	3,044		 	$	1,203		 	$	3,060		 	$	(4,263	)	 	$	3,044		

Condensed Consolidating Statements of Operations and Comprehensive Income (As previously reported)

																				
For the Nine Months Ended September 30, 2012	ACE
Limited
(Parent
Guarantor)		 	ACE INA
Holdings Inc.
(Subsidiary
Issuer)		 	Other ACE
Limited
Subsidiaries and
Eliminations (1)		 	Consolidating
Adjustments (2)		 	ACE
Limited
Consolidated		
(in millions of U.S. dollars)			 			 			 			 			
Net premiums written	$	—		 	$	7,293		 	$	5,125		 	$	—		 	$	12,418		
Net premiums earned	—		 	6,967		 	4,862		 	—		 	11,829		
Net investment income	1		 	777		 	836		 	—		 	1,614		
Equity in earnings of subsidiaries	1,845		 	—		 	—		 	(1,845	)	 	—		
Net realized gains (losses) including OTTI	18		 	71		 	(283	)	 	—		 	(194	)	
Losses and loss expenses	—		 	4,484		 	2,486		 	—		 	6,970		
Policy benefits	—		 	217		 	162		 	—		 	379		
Policy acquisition costs and administrative expenses	42		 	1,883		 	1,428		 	—		 	3,353		
Interest (income) expense	(25	)	 	191		 	21		 	—		 	187		
Other (income) expense	(102	)	 	51		 	65		 	—		 	14		
Income tax expense	8		 	327		 	70		 	—		 	405		
Net income	$	1,941		 	$	662		 	$	1,183		 	$	(1,845	)	 	$	1,941		
Comprehensive income	$	3,044		 	$	1,203		 	$	642		 	$	(1,845	)	 	$	3,044		
		
(1)	Includes all other subsidiaries of ACE Limited and intercompany eliminations.	
		
(2)	Includes ACE Limited parent company eliminations.	

39 

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited)
ACE Limited and Subsidiaries

Condensed Consolidating Statement of Cash Flows

																				
For the Nine Months Ended September 30, 2013	ACE
Limited
(Parent
Guarantor)		 	ACE INA
Holdings Inc.
(Subsidiary
Issuer)		 	Other ACE
Limited
Subsidiaries		 	Consolidating
Adjustments and Eliminations		 	ACE
Limited
Consolidated		
(in millions of U.S. dollars)			 			 			 			 			
Net cash flows from (used for) operating activities	$	80		 	$	2		 	$	2,654		 	$	—		 	$	2,736		
Cash flows from investing activities	 	 	 	 	 	 	 	 	 	
Purchases of fixed maturities available for sale and net change in short-term investments	—		 	4		 	(15,996	)	 	103		 	(15,889	)	
Purchases of fixed maturities held to maturity	—		 	—		 	(374	)	 	—		 	(374	)	
Purchases of equity securities	—		 	—		 	(217	)	 	—		 	(217	)	
Sales of fixed maturities available for
sale	—		 	—		 	8,115		 	(103	)	 	8,012		
Sales of equity securities	—		 	—		 	99		 	—		 	99		
Maturities and redemptions of fixed maturities available for sale	—		 	—		 	5,538		 	—		 	5,538		
Maturities and redemptions of fixed maturities held to maturity	—		 	—		 	1,233		 	—		 	1,233		
Net derivative instruments settlements	—		 	(1	)	 	(375	)	 	—		 	(376	)	
Acquisition of subsidiaries (net of cash acquired of $38)	—		 	—		 	(977	)	 	—		 	(977	)	
Capital contribution	(133	)	 	(1,010	)	 	—		 	1,143		 	—		
Other	—		 	(5	)	 	(183	)	 	—		 	(188	)	
Net cash flows used for investing activities	(133	)	 	(1,012	)	 	(3,137	)	 	1,143		 	(3,139	)	
Cash flows from financing activities	 	 	 	 	 	 	 	 	 	
Dividends paid on Common Shares	(343	)	 	—		 	—		 	—		 	(343	)	
Common Shares repurchased	—		 	—		 	(233	)	 	—		 	(233	)	
Proceeds from issuance of long-term debt	—		 	947		 	—		 	—		 	947		
Net proceeds from issuance of short-term debt	—		 	—		 	1		 	—		 	1		
Proceeds from share-based compensation plans, including windfall tax benefits	7		 	—		 	105		 	—		 	112		
Advances (to) from affiliates	(575	)	 	575		 	—		 	—		 	—		
Capital contribution	—		 	—		 	1,143		 	(1,143	)	 	—		
Net proceeds from (payments to) affiliated notional cash pooling programs (1)	872		 	(349	)	 	—		 	(523	)	 	—		
Other	—		 	—		 	68		 	—		 	68		
Net cash flows from (used for) financing activities	(39	)	 	1,173		 	1,084		 	(1,666	)	 	552		
Effect of foreign currency rate changes on cash and cash equivalents	—		 	—		 	4		 	—		 	4		
Net (decrease) increase in cash	(92	)	 	163		 	605		 	(523	)	 	153		
Cash – beginning of period (1)	103		 	2		 	859		 	(349	)	 	615		
Cash – end of period (1)	$	11		 	$	165		 	$	1,464		 	$	(872	)	 	$	768		
		
(1)  	ACE maintains two notional multicurrency cash pools (Pools) with a third-party bank. Various ACE entities participate in one or the other of the Pools, pursuant to which credit and debit balances in individual ACE accounts are translated daily into a single currency and pooled on a notional basis. Individual ACE entities are permitted to overdraw on their individual accounts provided the overall Pool balances do not fall below zero. At September 30, 2013 and December 31, 2012, the cash balance of one or more entities was negative; however, the overall Pool balances were positive.	

40

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited)
ACE Limited and Subsidiaries

Condensed Consolidating Statement of Cash Flows (Revised)

																				
For the Nine Months Ended September 30, 2012	ACE
Limited
(Parent
Guarantor)		 	ACE INA
Holdings Inc.
(Subsidiary
Issuer)		 	Other ACE
Limited
Subsidiaries		 	Consolidating
Adjustments and Eliminations		 	ACE
Limited
Consolidated		
(in millions of U.S. dollars)			 			 			 			 			
Net cash flows from operating activities	$	136		 	$	127		 	$	2,882		 	$	(120	)	 	$	3,025		
Cash flows from investing activities	 	 	 	 	 	 	 	 	 	
Purchases of fixed maturities available for sale and net change in short-term investments	—		 	—		 	(17,803	)	 	147		 	(17,656	)	
Purchases of fixed maturities held to maturity	—		 	—		 	(217	)	 	—		 	(217	)	
Purchases of equity securities	—		 	—		 	(114	)	 	—		 	(114	)	
Sales of fixed maturities available for sale	—		 	—		 	11,502		 	(147	)	 	11,355		
Sales of equity securities	—		 	—		 	57		 	—		 	57		
Maturities and redemptions of fixed maturities available for sale	—		 	—		 	3,596		 	—		 	3,596		
Maturities and redemptions of fixed maturities held to maturity	—		 	—		 	1,092		 	—		 	1,092		
Net derivative instruments settlements	(1	)	 	—		 	(357	)	 	—		 	(358	)	
Acquisition of subsidiaries (net of cash acquired of $8)	—		 	—		 	(98	)	 	—		 	(98	)	
Capital contribution	—		 	(89	)	 	(90	)	 	179		 	—		
Other	—		 	(2	)	 	(337	)	 	—		 	(339	)	
Net cash flows used for investing activities	(1	)	 	(91	)	 	(2,769	)	 	179		 	(2,682	)	
Cash flows from financing activities	 	 	 	 	 	 	 	 	 	
Dividends paid on Common Shares	(484	)	 	—		 	—		 	—		 	(484	)	
Common Shares repurchased	—		 	—		 	(11	)	 	—		 	(11	)	
Net proceeds from issuance of short-term debt	—		 	—		 	151		 	—		 	151		
Proceeds from share-based compensation plans	17		 	—		 	56		 	—		 	73		
Advances (to) from affiliates	110		 	(106	)	 	(4	)	 	—		 	—		
Dividends to parent company	—		 	—		 	(120	)	 	120		 	—		
Capital contribution	—		 	90		 	89		 	(179	)	 	—		
Net proceeds from (payments to) affiliated notional cash pooling programs (1)	116		 	7		 	—		 	(123	)	 	—		
Net cash flows from (used for) financing activities	(241	)	 	(9	)	 	161		 	(182	)	 	(271	)	
Effect of foreign currency rate changes on cash and cash equivalents	—		 	—		 	4		 	—		 	4		
Net increase (decrease) in cash	(106	)	 	27		 	278		 	(123	)	 	76		
Cash – beginning of period (1)	106		 	5		 	651		 	(148	)	 	614		
Cash – end of period (1)	$	—		 	$	32		 	$	929		 	$	(271	)	 	$	690		
		
(1)  	ACE maintains two notional multicurrency cash pools (Pools) with a third-party bank. Various ACE entities participate in one or the other of the Pools, pursuant to which credit and debit balances in individual ACE accounts are translated daily into a single currency and pooled on a notional basis. Individual ACE entities are permitted to overdraw on their individual accounts provided the overall Pool balances do not fall below zero. At September 30, 2012 and December 31, 2011, the cash balance of one or more entities was negative; however, the overall Pool balances were positive.	

41 

Table of Contents

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS – continued (Unaudited)
ACE Limited and Subsidiaries

Condensed Consolidating Statement of Cash Flows (As previously reported)

																				
For the Nine Months Ended September 30, 2012	ACE
Limited
(Parent
Guarantor)		 	ACE INA
Holdings Inc.
(Subsidiary
Issuer)		 	Other ACE
Limited
Subsidiaries and
Eliminations (1)		 	Consolidating
Adjustments (2)		 	ACE
Limited
Consolidated		
(in millions of U.S. dollars)			 			 			 			 			
Net cash flows from operating activities	$	210		 	$	1,553		 	$	1,262		 	$	—		 	$	3,025		
Cash flows from investing activities	 	 	 	 	 	 	 	 	 	
Purchases of fixed maturities available for sale	—		 	(8,553	)	 	(9,103	)	 	—		 	(17,656	)	
Purchases of fixed maturities held to maturity	—		 	(215	)	 	(2	)	 	—		 	(217	)	
Purchases of equity securities	—		 	(65	)	 	(49	)	 	—		 	(114	)	
Sales of fixed maturities available for sale	—		 	5,154		 	6,201		 	—		 	11,355		
Sales of equity securities	—		 	48		 	9		 	—		 	57		
Maturities and redemptions of fixed maturities available for sale	—		 	1,757		 	1,839		 	—		 	3,596		
Maturities and redemptions of fixed maturities held to maturity	—		 	798		 	294		 	—		 	1,092		
Net derivative instruments settlements	(1	)	 	(10	)	 	(347	)	 	—		 	(358	)	
Advances from affiliates	36		 	—		 	—		 	(36	)	 	—		
Acquisition of subsidiaries (net of cash acquired of $8)	—		 	(98	)	 	—		 	—		 	(98	)	
Capital contribution	—		 	—		 	(90	)	 	90		 	—		
Other	—		 	(279	)	 	(60	)	 	—		 	(339	)	
Net cash flows from (used for) investing activities	35		 	(1,463	)	 	(1,308	)	 	54		 	(2,682	)	
Cash flows from financing activities	 	 	 	 	 	 	 	 	 	
Dividends paid on Common Shares	(484	)	 	—		 	—		 	—		 	(484	)	
Common Shares repurchased	—		 	—		 	(11	)	 	—		 	(11	)	
Net proceeds from issuance of short-term debt	—		 	1		 	150		 	—		 	151		
Proceeds from share-based compensation plans	17		 	—		 	56		 	—		 	73		
Advances to affiliates	—		 	(10	)	 	(26	)	 	36		 	—		
Capital contribution	—		 	90		 	—		 	(90	)	 	—		
Net cash flows from (used for) financing activities	(467	)	 	81		 	169		 	(54	)	 	(271	)	
Effect of foreign currency rate changes on cash and cash equivalents	—		 	(3	)	 	7		 	—		 	4		
Net increase (decrease) in cash	(222	)	 	168		 	130		 	—		 	76		
Cash – beginning of period	106		 	382		 	126		 	—		 	614		
Cash – end of period (3)	$	(116	)	 	$	550		 	$	256		 	$	—		 	$	690		
		
(1)	Includes all other subsidiaries of ACE Limited and intercompany eliminations.	
		
(2)	Includes ACE Limited parent company eliminations and certain consolidating adjustments.	
		
(3)	ACE maintains two notional multicurrency cash pools (Pools) with a third-party bank. Various ACE entities participate in one or the other of the Pools, pursuant to which credit and debit balances in individual ACE accounts are translated daily into a single currency and pooled on a notional basis. Individual ACE entities are permitted to overdraw on their individual accounts provided the overall Pool balances do not fall below zero. At September 30, 2012 and December 31, 2011, the cash balance of one or more entities was negative; however, the overall Pool balances were positive.	

42

Table of Contents

ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

The following is a discussion of our results of operations, financial condition, and liquidity and capital resources as of and for the three and nine months ended September 30, 2013 .

All comparisons in this discussion are to the corresponding prior year periods unless otherwise indicated.

Our results of operations and cash flows for any interim period are not necessarily indicative of our results for the full year. This discussion should be read in conjunction with our consolidated financial statements and related notes and our Management’s Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K for the year ended December 31, 2012 ( 2012 Form 10-K).

Effective first quarter 2013, the Insurance – North American segment is presented in two distinct reportable segments: Insurance – North American P&C and Insurance – North American Agriculture. Prior year amounts contained in this report have been adjusted to conform to the new segment presentation.

Other Information
We routinely post important information for investors on our website (www.acegroup.com) under the Investor Information section. We use this website as a means of disclosing material, non-public information and for complying with our disclosure obligations under Securities and Exchange Commission (SEC) Regulation FD (Fair Disclosure). Accordingly, investors should monitor the Investor Information portion of our website, in addition to following our press releases, SEC filings, public conference calls, and webcasts. The information contained on, or that may be accessed through, our website is not incorporated by reference into, and is not a part of, this report.

		
MD&A Index	Page	
Forward-Looking Statements	44	
Overview	46	
Financial Highlights	47	
Consolidated Operating Results	47	
Prior Period Development	50	
Segment Operating Results	56	
Other (Income) and Expense Items	65	
Net Investment Income	66	
Net Realized and Unrealized Gains (Losses)	66	
Investments	68	
Critical Accounting Estimates	72	
Reinsurance Recoverable on Ceded Reinsurance	72	
Unpaid Losses and Loss Expenses	72	
Asbestos and Environmental (A&E) and Other Run-off Liabilities	73	
Fair Value Measurements	73	
Guaranteed Living Benefits (GLB) Derivatives	74	
Catastrophe Management	77	
Natural Catastrophe Property Reinsurance Program	77	
Crop Insurance	78	
Liquidity	78	
Capital Resources	80	

43 

Table of Contents

______________________________________________________________________________________________________________________
Forward-Looking Statements
The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements. Any written or oral statements made by us or on our behalf may include forward-looking statements that reflect our current views with respect to future events and financial performance. These forward-looking statements are subject to certain risks, uncertainties, and other factors that could, should potential events occur, cause actual results to differ materially from such statements. These risks, uncertainties, and other factors, which are described in more detail elsewhere herein and in other documents we file with the U.S. Securities and Exchange Commission (SEC), include but are not limited to:
		
•	developments in global financial markets, including changes in interest rates, stock markets, and other financial markets, increased government involvement or intervention in the financial services industry, the cost and availability of financing, and foreign currency exchange rate fluctuations (which we refer to in this report as foreign exchange and foreign currency exchange), which could affect our statement of operations, investment portfolio, financial condition, and financing plans;	
		
•	general economic and business conditions resulting from volatility in the stock and credit markets and the depth and duration of potential recession;	
		
•	losses arising out of natural or man-made catastrophes such as hurricanes, typhoons, earthquakes, floods, climate change (including effects on weather patterns; greenhouse gases; sea; land and air temperatures; sea levels; and rain and snow), nuclear accidents, or terrorism which could be affected by:	
		
•	the number of insureds and ceding companies affected;	
		
•	the amount and timing of losses actually incurred and reported by insureds;	
		
•	the impact of these losses on our reinsurers and the amount and timing of reinsurance recoverable actually received;	
		
•	the cost of building materials and labor to reconstruct properties or to perform environmental remediation following a catastrophic event; and	
		
•	complex coverage and regulatory issues such as whether losses occurred from storm surge or flooding and related lawsuits;	
		
•	actions that rating agencies may take from time to time, such as financial strength or credit ratings downgrades or placing these ratings on credit watch negative or the equivalent;	
		
•	global political conditions, the occurrence of any terrorist attacks, including any nuclear, radiological, biological, or chemical events, or the outbreak and effects of war, and possible business disruption or economic contraction that may result from such events;	
		
•	the ability to collect reinsurance recoverable, credit developments of reinsurers, and any delays with respect thereto and changes in the cost, quality, or availability of reinsurance;	
		
•	actual loss experience from insured or reinsured events and the timing of claim payments;	
		
•	the uncertainties of the loss-reserving and claims-settlement processes, including the difficulties associated with assessing environmental damage and asbestos-related latent injuries, the impact of aggregate-policy-coverage limits, the impact of bankruptcy protection sought by various asbestos producers and other related businesses, and the timing of loss payments;	
		
•	changes to our assessment as to whether it is more likely than not that we will be required to sell, or have the intent to sell, available for sale fixed maturity investments before their anticipated recovery;	
		
•	infection rates and severity of pandemics and their effects on our business operations and claims activity;	
		
•	judicial decisions and rulings, new theories of liability, legal tactics, and settlement terms;	
		
•	the effects of public company bankruptcies and/or accounting restatements, as well as disclosures by and investigations of public companies relating to possible accounting irregularities, and other corporate governance issues, including the effects of such events on:	
		
•	the capital markets;	
		
•	the markets for directors and officers (D&O) and errors and omissions (E&O) insurance; and	
		
•	claims and litigation arising out of such disclosures or practices by other companies;	

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Table of Contents

		
•	uncertainties relating to governmental, legislative and regulatory policies, developments, actions, investigations, and treaties, which, among other things, could subject us to insurance regulation or taxation in additional jurisdictions or affect our current operations;	
		
•	the actual amount of new and renewal business, market acceptance of our products, and risks associated with the introduction of new products and services and entering new markets, including regulatory constraints on exit strategies;	
		
•	the competitive environment in which we operate, including trends in pricing or in policy terms and conditions, which may differ from our projections and changes in market conditions that could render our business strategies ineffective or obsolete;	
		
•	acquisitions made by us performing differently than expected, our failure to realize anticipated expense-related efficiencies or growth from acquisitions, the impact of acquisitions on our pre-existing organization, or announced acquisitions not closing;	
		
•	risks associated with being a Swiss corporation, including reduced flexibility with respect to certain aspects of capital management and the potential for additional regulatory burdens;	
		
•	the potential impact from government-mandated insurance coverage for acts of terrorism;	
		
•	the availability of borrowings and letters of credit under our credit facilities;	
		
•	the adequacy of collateral supporting funded high deductible programs;	
		
•	changes in the distribution or placement of risks due to increased consolidation of insurance and reinsurance brokers;	
		
•	material differences between actual and expected assessments for guaranty funds and mandatory pooling arrangements;	
		
•	the effects of investigations into market practices in the property and casualty (P&C) industry;	
		
•	changing rates of inflation and other economic conditions, for example, recession;	
		
•	the amount of dividends received from subsidiaries;	
		
•	loss of the services of any of our executive officers without suitable replacements being recruited in a reasonable time frame;	
		
•	the ability of our technology resources to perform as anticipated; and	
		
•	management’s response to these factors and actual events (including, but not limited to, those described above).	
The words “believe,” “anticipate,” “estimate,” “project,” “should,” “plan,” “expect,” “intend,” “hope,” “feel,” “foresee,” “will likely result,” or “will continue,” and variations thereof and similar expressions, identify forward-looking statements. You are cautioned not to place undue reliance on these forward-looking statements, which speak only as of their dates. We undertake no obligation to publicly update or review any forward-looking statements, whether as a result of new information, future events or otherwise.

45 

Table of Contents

______________________________________________________________________________________________________________________
Overview
ACE Limited is the Swiss-incorporated holding company of the ACE Group of Companies. ACE opened its business office in Bermuda in 1985 and continues to maintain operations in Bermuda. ACE, which is headquartered in Zurich, Switzerland, and its direct and indirect subsidiaries, are a global insurance and reinsurance organization, serving the needs of a diverse group of clients around the world. We are predominantly a global P&C insurance company with both a commercial and specialty product orientation. We offer commercial insurance, specialty products and accident and health (A&H) solutions and are expanding our personal lines and international life insurance businesses. As we have grown, we have developed products and diversified our offerings to meet the needs of our customers. At September 30, 2013 , we had total assets of $95 billion and shareholders’ equity of $28 billion.

We operate through the following business segments: Insurance – North American P&C, Insurance – North American Agriculture, Insurance – Overseas General, Global Reinsurance, and Life.

The Insurance – North American P&C segment includes retail divisions: ACE USA (including ACE Canada), ACE Commercial Risk Services, and ACE Private Risk Services; our wholesale and specialty divisions of ACE Westchester and ACE Bermuda; and various run-off operations, including Brandywine Holdings Corporation (Brandywine). Our retail products range from commercial lines with service offerings such as risk management, loss control and engineering programs, specialty commercial P&C, and A&H coverages to personal lines homeowners, automobile, liability, valuables, and marine coverages. Our wholesale and specialty products include excess and surplus property, D&O, professional liability, inland marine, specialty casualty, environmental, and political risk.

The Insurance – North American Agriculture segment provides coverage for agriculture business, writing a variety of commercial coverages including comprehensive Multiple Peril Crop Insurance (MPCI), crop-hail, and farm P&C insurance protection to customers in the U.S. and Canada through Rain and Hail Insurance Service, Inc. (Rain and Hail) as well as specialty P&C insurance coverages offered by ACE Agribusiness to companies that manufacture, process, and distribute agriculture products. The MPCI program is offered in conjunction with the U.S. Department of Agriculture (USDA). The USDA's Risk Management Agency (RMA) sets the policy terms and conditions, rates and forms, and is also responsible for setting compliance standards. As a participating company, we report all details of policies underwritten to the RMA and are party to a Standard Reinsurance Agreement (SRA). The SRA sets out the relationship between private insurance companies and the Federal Crop Insurance Corporation (FCIC) concerning the terms and conditions regarding the risks each will bear including the pro-rata and state stop-loss provisions which allow companies to limit the exposure of any one state or group of states on their underwriting results. In addition to the pro-rata and excess of loss reinsurance protections inherent in the SRA, we also purchase third party proportional and stop-loss reinsurance for our MPCI business to reduce our exposure.

The Insurance – Overseas General segment comprises ACE International, our retail business serving territories outside the U.S., Bermuda, and Canada; the international A&H business of Combined Insurance (Combined); and the wholesale insurance business of ACE Global Markets (AGM). ACE International has a presence in major developed markets and growing economies serving multinational clients and local customers. A significant amount of our global business is with local companies, offering traditional and specialty P&C products including D&O, professional liability, specialty personal lines, and energy products. ACE International expanded its global business through the acquisitions of ABA Seguros on May 2, 2013 and Fianzas Monterrey on April 1, 2013. Refer to Note 2 to the Consolidated Financial Statements for additional information on these acquisitions. The consolidated financial statements include the results of the acquired businesses from the acquisition dates. Our international A&H business primarily focuses on personal accident and supplemental medical. AGM offers specialty products including aviation, marine, financial lines, energy, and political risk.

The Global Reinsurance segment represents our reinsurance operations comprising ACE Tempest Re Bermuda, ACE Tempest Re USA, ACE Tempest Re International, ACE Tempest Re Canada, and the reinsurance operations of AGM. Global Reinsurance provides solutions for customers ranging from small commercial insureds to multinational ceding companies. Global Reinsurance offers products such as property and workers' compensation catastrophe, D&O, professional liability, specialty casualty, and specialty property.

The Life segment includes our international life operations (ACE Life), ACE Tempest Life Re (ACE Life Re), and the North American supplemental A&H and life business of Combined Insurance.

For more information on our segments refer to “Segment Information” in our 2012 Form 10-K.

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______________________________________________________________________________________________________________________
Financial Highlights for the Three Months Ended September 30, 2013

•	Net income was $916 million compared with $640 million in the prior year period.	
		
•	Total company net premiums written decreased 2.0 percent. On a constant-dollar basis total company net premiums written decreased 0.9 percent.  The constant dollar decrease in net premiums written was primarily due to a $359 million decrease in our Insurance - North American Agriculture segment and a $41 million decrease in our Global Reinsurance segment substantially offset by strong growth in net premiums written in our Insurance - Overseas General and Insurance - North American P&C segments of $233 million (17.4 percent increase) and $129 million (9.4 percent increase), respectively.	
		
•	Total pre-tax and after-tax catastrophe losses including reinstatement premiums were $78 million (1.8 percentage points of the combined ratio) and $70 million, respectively, compared with $53 million and $41 million, respectively, in the prior year period.	
		
•	Favorable prior period development pre-tax was $210 million, representing 5.1 percentage points of the combined ratio, compared with $236 million in the prior year period.	
		
•	The P&C combined ratio was 86.5 percent compared with 92.0 percent in the prior year period.	
		
•	The current accident year P&C combined ratio excluding catastrophe losses was 89.8 percent compared with 96.5 percent in the prior year period.	
		
•	The P&C expense ratio was 25.8 percent compared with 23.1 percent in the prior year period primarily due to lower agriculture premiums, which carry a lower expense ratio.	
		
•	Operating cash flow was $928 million.	
		
•	Net investment income was $522 million compared to $533 million in the prior year period due to lower reinvestment rates, lower private equity distributions, and the negative impact of foreign exchange.	

__________________________________________________________________________________________________________
Consolidated Operating Results – Three and Nine Months Ended September 30, 2013 and 2012

																						
 	Three Months Ended	 	 	 	 	Nine Months Ended	 	 	 	
 	September 30	 	 	% Change		 	September 30	 	 	% Change		
(in millions of U.S. dollars, except for percentages)	2013		 	2012		 	Q-13 vs.
Q-12		 	2013		 	2012		 	YTD-13 vs.
YTD-12		
Net premiums written	$	4,620		 	$	4,716		 	(2.0	)%	 	$	12,809		 	$	12,418		 	3.2	 %	
Net premiums earned	4,610		 	4,665		 	(1.2	)%	 	12,250		 	11,829		 	3.6	 %	
Net investment income	522		 	533		 	(2.0	)%	 	1,587		 	1,614		 	(1.7	)%	
Net realized gains (losses)	40		 	(60	)	 	NM		 	350		 	(194	)	 	NM		
Total revenues	5,172		 	5,138		 	0.7	 %	 	14,187		 	13,249		 	7.1	 %	
Losses and loss expenses	2,655		 	3,047		 	(12.9	)%	 	6,831		 	6,970		 	(2.0	)%	
Policy benefits	138		 	130		 	6.2	 %	 	379		 	379		 	—		
Policy acquisition costs	678		 	609		 	11.3	 %	 	1,957		 	1,810		 	8.1	 %	
Administrative expenses	563		 	519		 	8.5	 %	 	1,641		 	1,543		 	6.4	 %	
Interest expense	72		 	63		 	14.3	 %	 	205		 	187		 	9.6	 %	
Other (income) expense	(5	)	 	(17	)	 	(70.6	)%	 	22		 	14		 	57.1	 %	
Total expenses	4,101		 	4,351		 	(5.7	)%	 	11,035		 	10,903		 	1.2	 %	
Income before income tax	1,071		 	787		 	36.1	 %	 	3,152		 	2,346		 	34.4	 %	
Income tax expense	155		 	147		 	5.4	 %	 	392		 	405		 	(3.2	)%	
Net income	$	916		 	$	640		 	43.1	 %	 	$	2,760		 	$	1,941		 	42.2	 %	
NM – not meaningful	 	 	 	 	 	 	 	 	 	 	 	

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The following table presents the approximate effect of changes in foreign currency exchange rates on the growth of net premiums written and earned for the periods indicated:

						
 	Three Months Ended		 	Nine Months Ended		
 	September 30, 2013		 	September 30, 2013		
Net premiums written:	 	 	 	
Growth in original currency	(0.9	)%	 	4.0	 %	
Foreign exchange effect	(1.1	)%	 	(0.8	)%	
Growth as reported in U.S. dollars	(2.0	)%	 	3.2	 %	
Net premiums earned:	 	 	 	
Growth in original currency	(0.3	)%	 	4.3	 %	
Foreign exchange effect	(0.9	)%	 	(0.7	)%	
Growth as reported in U.S. dollars	(1.2	)%	 	3.6	 %	

Net premiums written reflect the premiums we retain after purchasing reinsurance protection. Net premiums written decreased for the three months ended September 30, 2013 and increased for the nine months ended September 30, 2013. The decrease in net premiums written for the three months ended September 30, 2013 is primarily due to lower premium retention in our Insurance – North American Agriculture segment’s MPCI program. Retention for the current year was lower due to the purchase of proportional reinsurance on the MPCI business for the 2013 crop year, which is in addition to the excess of loss reinsurance coverage historically purchased. In addition, the prior year retention was significantly impacted by the drought conditions in the U.S. that required MPCI insurers to retain a greater percentage of premium. Our Global Reinsurance segment also reported a decrease in net premiums written for the three months ended September 30, 2013 due to a non-recurring loss portfolio transfer (LPT) treaty written in the prior year. These decreases were partially offset by higher net premiums written in our Insurance – Overseas General segment driven by strong performance in our retail operations in all of our product lines - P&C, A&H, and personal lines. The acquisitions of ABA Seguros in May 2013 and Fianzas Monterrey in April 2013 (Mexican Acquisitions), and Jaya Proteksi in September 2012 also added to premium growth. Our Insurance – North American P&C segment also reported increases in net premiums written in our retail division from growth across a broad range of our product portfolio including risk management business, specialty casualty, A&H, and professional lines of business reflecting rate increases, exposure changes, strong renewal retention, and new business.

For the nine m onths ended September 30, 2013, net premiums written increased primarily in our Insurance – Overseas General and Insurance – North American P&C segments due to the factors described above, as well as from higher production in personal lines and property business. This increase was partially offset by lower net premiums written in our Insurance – North American Agriculture segment and, to a lesser extent, our Global Reinsurance segment due to the factors described above. Net premiums written also decreased in the Global Reinsurance segment due to increased property catastrophe cessions to a reinsurance sidecar that more than offset strong renewal retention and new business written.

Net premiums earned for short-duration contracts, typically P&C contracts, generally reflect the portion of net premiums written that were recorded as revenues for the period as the exposure periods expire.  Net premiums earned for long-duration contracts, typically traditional life contracts, generally are recognized as earned when due from policyholders. Net premiums earned decreased for the three months ended September 30, 2013 and increased for the nine months ended September 30, 2013. The decrease in net premiums earned for the three months ended September 30, 2013 is primarily due to our Insurance – North American Agriculture segment from lower written premiums as described above. Our Global Reinsurance segment added to the decline primarily due to a non-recurring LPT treaty written in the prior year period, which was fully earned when written. These decreases were offset by increases in net premiums earned in our Insurance – Overseas General segment driven by strong performance in all product lines and from the acquisitions described above. Our Insurance – North American P&C segment also reported increases in net premiums earned from higher net premiums written as described above. For the nine months ended September 30, 2013, net premiums earned increased primarily in our Insurance – North American P&C and Insurance – Overseas General segments as described above. This increase was partially offset by lower net premiums earned in our Insurance – North American Agriculture and Global Reinsurance segments as described above.

In evaluating our segments excluding Life, we use the combined ratio, the loss and loss expense ratio, the policy acquisition cost ratio, and the administrative expense ratio. We calculate these ratios by dividing the respective expense amounts by net premiums earned. We do not calculate these ratios for the Life segment as we do not use these measures to monitor or manage that segment. The combined ratio is determined by adding the loss and loss expense ratio, the policy acquisition cost ratio, and

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the administrative expense ratio. A combined ratio under 100 percent indicates underwriting income, and a combined ratio exceeding 100 percent indicates underwriting loss.

The following table presents our consolidated loss and loss expense ratio, policy acquisition cost ratio, administrative expense ratio, and combined ratio for the periods indicated: 

												
 	Three Months Ended	 	 	Nine Months Ended	 	
 	September 30	 	 	September 30	 	
 	2013		 	2012		 	2013		 	2012		
Loss and loss expense ratio	60.7	%	 	68.9	%	 	59.0	%	 	62.6	%	
Policy acquisition cost ratio	14.3	%	 	12.7	%	 	15.7	%	 	15.0	%	
Administrative expense ratio	11.5	%	 	10.4	%	 	12.8	%	 	12.6	%	
Combined ratio	86.5	%	 	92.0	%	 	87.5	%	 	90.2	%	

The following table presents the impact of catastrophe losses and related reinstatement premiums and the impact of prior period reserve development on our consolidated loss and loss expense ratio for the periods indicated: 

												
 	Three Months Ended	 	 	Nine Months Ended	 	
 	September 30	 	 	September 30	 	
 	2013		 	2012		 	2013		 	2012		
Loss and loss expense ratio, as reported	60.7	 %	 	68.9	 %	 	59.0	 %	 	62.6	 %	
Catastrophe losses and related reinstatement premiums	(1.9	)%	 	(1.3	)%	 	(1.8	)%	 	(1.2	)%	
Prior period development	5.3	 %	 	5.8	 %	 	3.9	 %	 	4.3	 %	
Loss and loss expense ratio, adjusted	64.1	 %	 	73.4	 %	 	61.1	 %	 	65.7	 %	
Total net pre-tax catastrophe losses, excluding related reinstatement premiums, were $ 80 million and $ 193 million for the three and nine months ended September 30, 2013 , compared with $55 million and $129 million in the prior year periods, respectively. Catastrophe losses through September 30, 2013 were primarily related to flooding in Canada and Australia and severe weather-related events in the U.S. Catastrophe losses in the prior year periods were primarily related to Hurricane Isaac, flooding in the U.K. and other severe weather-related events in North America. The adjusted loss and loss expense ratio decreased for the three and nine months ended September 30, 2013 primarily due to the U.S. drought conditions in the prior year which unfavorably impacted the prior year ratio.
Prior period development arises from changes to loss estimates recognized in the current year that relate to loss reserves first reported in previous calendar years and excludes the effect of losses from the development of earned premium from previous accident years. We experienced net favorable prior period development of $ 210 million and $ 408 million for the three and nine months ended September 30, 2013 , respectively. This compares with net favorable prior period development of $236 million and $442 million in the prior year periods, respectively. Refer to “Prior Period Development” for additional information.

Net investment income for the three and nine months ended September 30, 2013 was $522 million and $1.6 billion compared with $533 million and $1.6 billion for the prior year periods, respectively. Refer to “Net Investment Income” and “Investments” for additional information.

Policy acquisition costs consist of commissions, premium taxes, and certain underwriting costs related directly to the successful acquisition of a new or renewal insurance contract. Our policy acquisition cost ratio increased for the three and nine months ended September 30, 2013 primarily due to a decrease in net premiums earned and higher agent commissions in our Insurance – North American Agriculture segment's MPCI business. The prior year ratio was favorably impacted by the drought conditions in the U.S. which resulted in higher premium retention and lower agent commissions. This increase was partially offset by a lower policy acquisition cost ratio in our Insurance – Overseas General segment primarily due to the Mexican Acquisitions.

Our administrative expense ratio increased for the three and nine months ended September 30, 2013 primarily due to a decrease in our Insurance – North American Agriculture segment's net premiums earned as well as the impact of lower Administrative and Operating expense (A&O) reimbursements in our MPCI business.

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Our effective inc ome tax rate, which we calculate as income tax expense divided by income before income tax, 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 income tax rate. Our effective income tax rate was 14.4 percent and 12.4 percent for the three and nine months ended September 30, 2013 , respectively. Our effective income tax rate was 18.7 percent and 17.3 percent for the three and nine months ended September 30, 2012 , respectively. T he effective tax rate was lower due to both net realized gains on derivatives and a higher percentage of earnings being generated in lower tax paying jurisdictions during the current year.

Prior Period Development
The following tables summarize (favorable) and adverse prior period development (PPD) by segment. In the sections following the tables below, significant prior period movements within each reporting segment, principally driven by reserve reviews completed during each respective quarter and year to date periods, are discussed in more detail. Long-tail lines include lines such as workers' compensation, general liability, and professional liability; while short-tail lines include lines such as most property lines, energy, personal accident, aviation, marine (including associated liability-related exposures) and agriculture.

	
															
Three Months Ended September 30	Long-tail    		 	Short-tail		 	Total		 	% of net
unpaid
reserves (1)		
(in millions of U.S. dollars, except for percentages)			 			 			 			
2013	 	 	 	 	 	 	 	
Insurance – North American P&C	$	(21	)	 	$	2		 	$	(19	)	 	0.1	%	
Insurance – North American Agriculture	—		 	(10	)	 	(10	)	 	2.6	%	
Insurance – Overseas General	(121	)	 	(28	)	 	(149	)	 	1.9	%	
Global Reinsurance	(28	)	 	(4	)	 	(32	)	 	1.4	%	
Total	$	(170	)	 	$	(40	)	 	$	(210	)	 	0.8	%	
2012	 	 	 	 	 	 	 	
Insurance – North American P&C	$	(76	)	 	$	(4	)	 	$	(80	)	 	0.5	%	
Insurance – North American Agriculture	—		 	—		 	—		 	—		
Insurance – Overseas General	(110	)	 	(25	)	 	(135	)	 	1.8	%	
Global Reinsurance	(17	)	 	(4	)	 	(21	)	 	1.0	%	
Total	$	(203	)	 	$	(33	)	 	$	(236	)	 	0.9	%	
 	 	 	 	 	 	 	 	
(1)  Calculated based on the segment's total beginning of period net unpaid loss and loss expenses reserves.	

															
Nine Months Ended September 30	Long-tail    		 	Short-tail		 	Total		 	% of net
unpaid
reserves (1)		
(in millions of U.S. dollars, except for percentages)			 			 			 			
2013	 	 	 	 	 	 	 	
Insurance – North American P&C	$	(69	)	 	$	(37	)	 	$	(106	)	 	0.7	%	
Insurance – North American Agriculture	—		 	(13	)	 	(13	)	 	4.0	%	
Insurance – Overseas General	(120	)	 	(103	)	 	(223	)	 	2.8	%	
Global Reinsurance	(57	)	 	(9	)	 	(66	)	 	2.9	%	
Total	$	(246	)	 	$	(162	)	 	$	(408	)	 	1.5	%	
2012	 	 	 	 	 	 	 	
Insurance – North American P&C	$	(150	)	 	$	(38	)	 	$	(188	)	 	1.2	%	
Insurance – North American Agriculture	—		 	(11	)	 	(11	)	 	2.4	%	
Insurance – Overseas General	(110	)	 	(86	)	 	(196	)	 	2.7	%	
Global Reinsurance	(33	)	 	(14	)	 	(47	)	 	2.1	%	
Total	$	(293	)	 	$	(149	)	 	$	(442	)	 	1.7	%	
 	 	 	 	 	 	 	 	
(1)  Calculated based on the segment's total beginning of period net unpaid loss and loss expenses reserves.	

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Insurance – North American P&C
2013
For the three months ended September 30, 2013 , net favorable PPD was $19 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal changes:

•	Net favorable development of $21 million on long-tail business, including:	

•	Favorable development of $61 million in our medical risk operations, primarily impacting the 2007 to 2009 accident years. Paid and reported loss activity for this business in these accident years continue to be lower than expected and we have increased our weighting applied to experience-based methods;	

•	Favorable development of $25 million in our foreign casualty Controlled Master Program and Cash Flow portfolios affecting the 2009 and prior accident years. Paid and reported loss activity for this business in these accident years continue to be lower than expected and we have increased our weighting applied to experience-based methods; and	

•	Adverse development of $59 million on our Brandywine environmental liabilities and adverse $2 million for other exposures including unallocated loss adjustment expenses for the runoff operations, impacting accident years 1995 and prior. The increase was due to a number of factors including adverse court rulings, higher future cost estimates, and higher than expected payment activity.	

For the nine months ended September 30, 2013 , net favorable PPD was $106 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal changes:

•	Net favorable development of $69 million on long-tail business, including:	

•	Favorable development of $61 million in our medical risk operations, primarily impacting the 2007 to 2009 accident years due to the same factors experienced for the three months ended September 30, 2013 as described above;	

•	Favorable development of $50 million on our U.S. excess casualty and umbrella businesses primarily affecting the 2007 and prior accident years. Reported activity on loss and allocated loss expenses was lower than expected based on estimates from our prior review. In addition, increased weighting was applied to experience-based methods in the current review for these accident periods;	

•	Net favorable development of $28 million on our national accounts portfolios which consist of commercial auto, general liability and workers' compensation lines of business. This favorable movement was the net impact of favorable and adverse movements, including:	

•	Favorable development of $40 million related to our annual assessment of multi-claimant events including industrial accidents, impacting the 2012 accident year. Consistent with prior years, we reviewed these potential exposures after the close of the accident year to allow for late reporting or identification of significant losses;	

•	Adverse development of $40 million predominantly in workers' compensation, primarily impacting the 2006 and prior accident years. The development was a function of higher than expected reported loss activity, higher allocated loss adjustment expenses, as well as an increase in weighting applied to experience-based methods; and	

•	Net favorable development of $28 million across a number of lines and accident years, none of which was significant individually or in the aggregate.	

•	Favorable development of $25 million in our foreign casualty Controlled Master Program and Cash Flow portfolios affecting the 2009 and prior accident years due to the same factors experienced for the three months ended September 30, 2013 as described above;	

•	Favorable development of $22 million on our surety business primarily affecting the 2011 accident year.  Reported claims to date on the 2011 accident year are lower than historical averages which in turn has generated lower than expected reported loss activity since our prior review;	

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•	Adverse development of $23 million on our construction business affecting the 2012 and prior accident years.  The adverse development was realized in both our workers' compensation and general liability product lines where loss activity was higher than expected since our prior review; and	

•	Net adverse development of $92 million on our Brandywine environmental and run-off portfolios of general liability and workers' compensation, including unallocated loss adjustment expenses, impacting the 1995 and prior accident years. Environmental increased due to a number of factors including adverse court rulings, higher future cost estimates and higher than expected payment activity. Adverse case incurred emergence drove the increase in general liability and workers' compensation.	

•	Net favorable development of $37 million on short-tail business primarily in our U.S. retail and wholesale property and inland marine portfolios. Retail property improved across all accident years, primarily in 2010 and 2011, mainly due to favorable case incurred emergence and favorable settlements of several large claims. Wholesale estimates for prior year improved, primarily in the 2011 and 2012 accident years as paid and reported loss activity were lower than expected.	

2012
For the three months ended September 30, 2012 , net favorable PPD was $80 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal changes:

•	Net favorable development of $76 million on long-tail business, principally from:	

•	Favorable development of $56 million in our medical risk operations, primarily in the 2007 and prior accident years. Reported and paid loss activity for these accident years was lower than expected based on our prior review and our original pricing assumptions.	

For the nine months ended September 30, 2012 , net favorable PPD was $188 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal changes:

•	Net favorable development of $150 million on long-tail business, including:	

•	Favorable development of $69 million on a collection of portfolios of umbrella and excess casualty business, affecting the 2006 and prior accident years. The favorable development was the function of both the continuation of the lower than expected reported loss activity in the period since our prior review and an increase in weighting applied to experience-based methods, particularly for the 2006 accident year, as these accident periods continued to mature;	

•	Favorable development of $56 million in our medical risk operations, primarily in the 2007 and prior accident years due to the same factors experienced for the three months ended September 30, 2012 as described above; and	

•	Net favorable development of $39 million on our national accounts portfolios which consists of commercial auto liability, general liability, and workers' compensation lines of business. This favorable development was the net impact of favorable and adverse movements, including:	

•	Favorable development of $41 million on the 2011 accident year related to our annual assessment of multi-claimant events including industrial accidents. Consistent with prior years, we reviewed these potential exposures after the close of the accident year to allow for late reporting or identification of significant losses;	

•	Favorable development of $34 million in the 2007 accident year, primarily in workers' compensation. The favorable development was the combined effect of lower than expected incurred loss activity and an increase in weighting applied to experience-based methods; and	

•	Adverse development of $36 million affecting the 2006 and prior accident years largely in workers' compensation. The causes for this adverse movement were various and included adverse development on several specific large claims, higher than expected loss activity on certain accident years, an increase in weighting applied to experience-based methods, and a refinement of our treatment of ceded reinsurance recoveries on a few select treaties due to information which became known since our prior review.	

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•	Favorable development of $38 million on short-tail business, primarily from:	

•	Favorable development of $23 million in our general aviation product lines (both hull and liability) affecting the 2009 and prior accident years. Actual paid and incurred loss activity continued to be lower than expected based on long term historical averages leading to a reduction in our estimate of ultimate losses.	

Insurance – North American Agriculture
For the three and nine months ended September 30, 2013 , favorable PPD was $10 million and $13 million, respectively, compared with favorable PPD of nil and $11 million for the prior year periods, respectively, on short-tail business across a number of accident years, none of which was significant individually or in the aggregate.

Insurance – Overseas General
2013
For the three months ended September 30, 2013 , net favorable PPD was $149 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal changes:

•	Net favorable development of $121 million on long-tail business, including:	

•	Favorable development of $86 million in casualty (primary and excess). Actuarial reviews indicated favorable claim activity of $118 million in accident years 2009 and prior. These reviews reflected an increase in weighting applied to experience-based methods as these accident years continued to mature. Adverse development of $32 million in accident years 2010 to 2012 was primarily due to development on specific individual large claims and also on several accounts now exposed on an excess basis following adverse loss development of the underlying aggregate retention layer; and	

•	Favorable development of $35 million in financial lines. Actuarial reviews indicated favorable claim activity of $63 million in accident years 2009 and prior. These reviews reflected an increase in weighting applied to experience-based methods as these accident years continued to mature. Adverse development of $28 million in accident year 2012 was incurred due to notifications on specific large claims.	

•	Net favorable development of $28 million on short-tail business primarily in aviation lines, mainly in accident years 2009 and prior. Case specific claim reductions since the last actuarial review was the predominant reason for the releases.	
  
For the nine months ended September 30, 2013 , net favorable PPD was $223 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal changes:

•	Net favorable development of $120 million on long-tail business due to the same factors experienced for the three months ended September 30, 2013 as described above.	

•	Net favorable development of $103 million on short-tail business, including:	

•	Net favorable development of $47 million in property and marine lines. Favorable development of $34 million was in accident years 2009 to 2012 and was spread across most of the individual property and marine lines. There was no predominant source of this emergence which reflects general favorable experience. Favorable development of $13 million on accident years 2007 and prior was due to developments on specific litigated claims;	

•	Net favorable development of $34 million across all other short-tail lines. The favorable development was predominantly for A&H and personal lines businesses in accident years 2010 to 2012. Favorable case developments led to lower experience-based indications in these lines and accident years; and	

•	Net favorable development of $22 million in aviation lines, mainly in accident years 2009 and prior. Case specific claim reductions since the last actuarial review was the predominant reason for the releases.	

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2012
For the three months ended September 30, 2012 , net favorable PPD was $135 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal changes:

•	Net favorable development of $110 million on long-tail business, including:	

•	Favorable development of $146 million in casualty (primary and excess) and financial lines in the 2008 and prior accident years. Actuarial reviews indicated favorable claim activity and reflected an increase in weighting applied to experience-based methods as these accident years continued to mature; and	

•	Adverse development of $36 million in casualty (mainly primary) and financial lines in the 2009 to 2011 accident years. An actuarial review indicated increased frequency trends in accident year 2011 primary casualty as well as individual large losses in excess of expectations.	

•	Net favorable development of $25 million on short-tail business, including:	

•	Net favorable development of $13 million in aviation, which is the net result of a $21 million reduction in the 2005 to 2010 accident years, partially offset by increases of $8 million in the 2004 and prior accident years. A claims review provided information on a number of significant claims, which was the predominant source of the changes across all the years; and	

•	Favorable development of $13 million in Political Risk business, mainly in the 2008 to 2010 accident years. A review indicated favorable loss activity on smaller claims as well as a reduction in the estimate of a large claim.	

For the nine months ended September 30, 2012 , net favorable PPD was $196 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal changes:

•	Net favorable development of $110 million on long-tail business due to the same factors experienced for the three months ended September 30, 2012 as described above.	

•	Net favorable development of $86 million on short-tail business, including:	

•	Favorable development of $37 million on marine business. Favorable loss emergence across accident years 2008 to 2011 led to lower experience-based indications during actuarial reviews. In addition, case reductions on specific claims in older accident years drove reserve releases;	

•	Net favorable development of $25 million in aviation and political lines business, which mainly reflect favorable experience-based indications for the 2005 to 2010 accident years. A claims review provided information on a number of significant claims, which was the predominant source of the changes across all the years; and	

•	Net favorable development of $24 million on short-tail property and technical lines, which was the net result of favorable and unfavorable development across a number of accident years. The most significant favorable loss emergence was in the boiler and machinery (B&M) business, driven by better than expected loss activity on large accounts, primarily in accident years 2010 and 2011. Across the fire and energy businesses, adverse movement in accident year 2011 driven by large losses was largely offset by favorable loss emergence in accident years 2008 to 2010.	

Global Reinsurance
2013
For the three months ended September 30, 2013 , net favorable PPD was $32 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal change:

•	Net favorable development of $28 million on long-tail business primarily on medical malpractice business principally in treaty years 2005 to 2010. Following reserve studies, we reflected an increase in weighting applied to experience-based methods. Since experience has tended to be generally favorable, compared with assumptions, the changes resulted in favorable development.	

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For the nine months ended September 30, 2013 , net favorable PPD was $66 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal changes:

•	Net favorable development of $57 million on long-tail business, including:	

•	Favorable development of $20 million on medical malpractice business principally in treaty years 2005 to 2010 due to the same factors experienced for the three months ended September 30, 2013 as described above; and	

•	Favorable development of $43 million comprised of $18 million in the casualty line of business principally in treaty years 2007 and prior, and $25 million in the professional liability/D&O line of business principally in treaty years 2008 and prior. Following reserve studies, we reflected an increase in weighting applied to experience-based methods. Since experience has tended to be generally favorable compared with assumptions, the changes resulted in the favorable development referenced above.	

2012
For the three months ended September 30, 2012 , net favorable PPD was $21 million, which was the net result of several underlying favorable and adverse movements, driven by the following principal changes:

•	Net favorable development of $17 million on long-tail business, primarily from:	

•	Favorable development of $18 million on medical malpractice business principally in treaty years 2005 to 2009. Following reserve studies, we reflected an increase in weighting applied to experience-based methods. Since experience has tended to be generally favorable, compared with assumptions, the changes resulted in favorable development.	

For the nine months ended September 30, 2012 , net favorable PPD was $47 million, which was the net result of several underlying favorable and adverse movements, driven principally by favorable development of $36 million on long-tail business in the casualty line of business principally in treaty years 2007 and prior. Following reserve studies, we reflected an increase in weighting applied to experience-based methods. Since experience had tended to be generally favorable compared with assumptions, the changes resulted in the favorable development referenced above.

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__________________________________________________________________________________________________________
Segment Operating Results – Three and Nine Months Ended September 30, 2013 and 2012
The discussions that follow include tables that show our segment operating results for the three and nine months ended September 30, 2013 and 2012 .
We operate through the following business segments: Insurance – North American P&C, Insurance – North American Agriculture, Insurance – Overseas General, Global Reinsurance, and Life. For additional information on our segments refer to “Segment Information” in our 2012 Form 10-K under Item 1.

Insurance – North American

Insurance – North American P&C
The Insurance – North American P&C segment comprises our operations in the U.S., Canada, and Bermuda. This segment includes our retail divisions: ACE USA (including ACE Canada), ACE Commercial Risk Services, and ACE Private Risk Services; our wholesale and specialty divisions of ACE Westchester and ACE Bermuda; and various run-off operations, including Brandywine Holdings Corporation (Brandywine). 

																						
 	Three Months Ended	 	 	 	 	Nine Months Ended	 	 	 	
 	September 30	 	 	% Change		 	September 30	 	 	% Change		
(in millions of U.S. dollars, except for percentages)	2013		 	2012		 	Q-13 vs.
Q-12		 	2013		 	2012		 	YTD-13 vs.
YTD-12		
Net premiums written	$	1,500		 	$	1,373		 	9.3	 %	 	$	4,313		 	$	3,915		 	10.2	 %	
Net premiums earned	1,444		 	1,306		 	10.6	 %	 	4,210		 	3,802		 	10.7	 %	
Losses and loss expenses	963		 	819		 	17.6	 %	 	2,791		 	2,474		 	12.8	 %	
Policy acquisition costs	159		 	147		 	8.2	 %	 	444		 	419		 	6.0	 %	
Administrative expenses	153		 	148		 	3.4	 %	 	437		 	451		 	(3.1	)%	
Underwriting income	169		 	192		 	(12.0	)%	 	538		 	458		 	17.5	 %	
Net investment income	254		 	257		 	(1.2	)%	 	755		 	789		 	(4.3	)%	
Net realized gains (losses)	9		 	(2	)	 	NM		 	63		 	15		 	320.0	 %	
Interest expense	3		 	3		 	—		 	4		 	9		 	(55.6	)%	
Other (income) expense	(13	)	 	(13	)	 	—		 	(38	)	 	(20	)	 	90.0	 %	
Income tax expense	79		 	129		 	(38.8	)%	 	264		 	308		 	(14.3	)%	
Net income	$	363		 	$	328		 	10.7	 %	 	$	1,126		 	$	965		 	16.7	 %	
Loss and loss expense ratio	66.7	%	 	62.7	%	 	 	 	66.3	%	 	65.1	%	 	 	
Policy acquisition cost ratio	11.1	%	 	11.3	%	 	 	 	10.6	%	 	11.0	%	 	 	
Administrative expense ratio	10.5	%	 	11.4	%	 	 	 	10.3	%	 	11.9	%	 	 	
Combined ratio	88.3	%	 	85.3	%	 	 	 	87.2	%	 	88.0	%	 	 	

Net premiums written increased for the three and nine months ended September 30, 2013 in our retail division from growth across a broad range of our product portfolio including our risk management business, specialty casualty, A&H, and professional lines of business reflecting rate increases, exposure changes, strong renewal retention, and new business. Growth in net premiums written for the nine months ended September 30, 2013 also reflected higher property production. In addition, we generated higher personal lines production including growth in the homeowners, automobile, and umbrella business offered through ACE Private Risk Services. Our wholesale and specialty division contributed to the increase in net premiums written for the three and nine months ended September 30, 2013 due to higher production from our property, casualty, and professional lines of business.
Net premiums earned increased for the three and nine months ended September 30, 2013 primarily due to the increase in net premiums written as described above. For the nine month period, growth in net premiums earned for the retail division was partially offset by lower earned premiums from our program business.

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The following tables present a line of business breakdown of Insurance – North American P&C net premiums earned for the periods indicated:

																						
 	Three Months Ended	 	 	 	 	Nine Months Ended	 	 	 	
 	September 30	 	 	% Change		 	September 30	 	 	% Change		
(in millions of U.S. dollars, except for percentages)	2013		 	2012		 	Q-13 vs.
Q-12		 	2013		 	2012		 	YTD-13 vs.
YTD-12		
Property and all other	$	388		 	$	353		 	9.9	%	 	$	1,103		 	$	1,022		 	7.9	%	
Casualty	957		 	860		 	11.3	%	 	2,826		 	2,505		 	12.8	%	
Personal accident (A&H)	99		 	93		 	6.5	%	 	281		 	275		 	2.2	%	
Net premiums earned	$	1,444		 	$	1,306		 	10.6	%	 	$	4,210		 	$	3,802		 	10.7	%	
 	 	 	 	 	 	 	 	 	 	 	 	
 	2013
% of Total		 	2012
% of Total		 	 		 	2013
% of Total		 	2012
% of Total		 	 		
Property and all other	27	%	 	27	%	 	 	 	26	%	 	27	%	 	 	
Casualty	66	%	 	66	%	 	 	 	67	%	 	66	%	 	 	
Personal accident (A&H)	7	%	 	7	%	 	 	 	7	%	 	7	%	 	 	
Net premiums earned	100	%	 	100	%	 	 	 	100	%	 	100	%	 	 	
The following table presents the impact of catastrophe losses and related reinstatement premiums and prior period reserve development on our loss and loss expense ratio for the periods indicated:

												
 	Three Months Ended	 	 	Nine Months Ended	 	
 	September 30	 	 	September 30	 	
 	2013		 	2012		 	2013		 	2012		
Loss and loss expense ratio, as reported	66.7	 %	 	62.7	 %	 	66.3	 %	 	65.1	 %	
Catastrophe losses and related reinstatement premiums	(1.5	)%	 	(2.8	)%	 	(2.0	)%	 	(2.6	)%	
Prior period development	1.7	 %	 	6.8	 %	 	2.7	 %	 	5.2	 %	
Loss and loss expense ratio, adjusted	66.9	 %	 	66.7	 %	 	67.0	 %	 	67.7	 %	
Net pre-tax catastrophe losses, excluding reinstatement premiums, were $21 million and $82 million for the three and nine months ended September 30, 2013 , compared with $37 million and $96 million for the prior year periods, respectively. Catastrophe losses through September 30, 2013 and 2012 were primarily from flooding in Canada and severe weather-related events in the U.S. Net favorable prior period development was $ 19 million and $ 106 million for the three and nine months ended September 30, 2013 , compared with $ 80 million and $188 million in the prior year periods, respectively. Net favorable prior period development decreased for the three and nine months ended September 30, 2013 primarily due to adverse development on legacy environmental claims. Refer to the “Prior Period Development” section for additional information. For the three and nine months ended September 30, 2013, the adjusted loss and loss expense ratio benefited from lower loss ratios in several of our professional, persona l, and property lines where execution of detailed portfolio management plans has resulted in improved current accident year loss ratio performance. Higher assumed loss portfolio business, which is written at a higher loss ratio than our other types of business, more than offset the bene fit of improved accident year loss ratio performance for the three months and only partially offset the benefit for the nine month period.
The policy acquisition cost ratio decreased for the three and nine months ended September 30, 2013 primarily due to growth in certain businesses, primarily risk management, which incur lower acquisition expenses.

The administrative expense ratio decreased for the three and nine months ended September 30, 2013 primarily due to growth in net premiums earned that outpaced the growth in administrative expenses. In addition, the nine months benefited from the favorable impact of a $29 million legal settlement in the current year.

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Insurance – North American Agriculture
The Insurance – North American Agriculture segment comprises our North American based businesses that provide a variety of coverages in the U.S. and Canada including crop insurance, primarily MPCI and crop-hail through Rain and Hail as well as farm and ranch and specialty P&C commercial insurance products and services through our newly formed ACE Agribusiness unit.

	
																						
 	Three Months Ended	 	 	 	 	Nine Months Ended	 	 	 	
 	September 30	 	 	% Change		 	September 30	 	 	% Change		
(in millions of U.S. dollars, except for percentages)	2013		 	2012		 	Q-13 vs.
Q-12		 	2013		 	2012		 	YTD-13 vs.
YTD-12		
Net premiums written	$	805		 	$	1,164		 	(30.8	)%	 	$	1,371		 	$	1,775		 	(22.8	)%	
Net premiums earned	849		 	1,166		 	(27.2	)%	 	1,252		 	1,609		 	(22.2	)%	
Losses and loss expenses (1)	747		 	1,291		 	(42.1	)%	 	1,072		 	1,648		 	(35.0	)%	
Policy acquisition costs	32		 	13		 	146.2	 %	 	56		 	25		 	124.0	 %	
Administrative expenses	5		 	—		 	NM		 	13		 	(3	)	 	NM		
Underwriting income (loss)	65		 	(138	)	 	NM		 	111		 	(61	)	 	NM		
Net investment income	6		 	6		 	—		 	19		 	19		 	—		
Net realized gains (losses) (1)	1		 	1		 	—		 	2		 	1		 	100.0	 %	
Other (income) expense	8		 	8		 	—		 	24		 	24		 	—		
Income tax expense (benefit)	14		 	(48	)	 	NM		 	24		 	(29	)	 	NM		
Net income (loss)	$	50		 	$	(91	)	 	NM		 	$	84		 	$	(36	)	 	NM		
Loss and loss expense ratio	88.0	%	 	110.7	%	 	 	 	85.6	%	 	102.4	 %	 	 	
Policy acquisition cost ratio	3.8	%	 	1.1	%	 	 	 	4.4	%	 	1.6	 %	 	 	
Administrative expense ratio	0.5	%	 	—		 	 	 	1.1	%	 	(0.2	)%	 	 	
Combined ratio	92.3	%	 	111.8	%	 	 	 	91.1	%	 	103.8	 %	 	 	
		
(1)	Losses from fair value changes on crop derivatives are reclassified from Net realized gains (losses) to Losses and loss expenses for purposes of presenting Insurance - North American Agriculture underwriting income. Refer to Note 7 to the consolidated financial statements for more information on these derivatives.	
Net premiums written decreased for the three and nine months ended September 30, 2013 primarily due to lower premium retention in our MPCI program. Retention for the current year was lower due to the purchase of proportional reinsurance on the MPCI business for the 2013 crop year, which is in addition to the excess of loss reinsurance coverage historically purchased. In addition, the prior year retention was significantly impacted by the drought conditions in the U.S. that required MPCI insurers to retain a greater percentage of premium. The decrease in net premiums written also reflects lower production in our MPCI and crop hail business.
Net premiums earned decreased for the three and nine months ended September 30, 2013 primarily due to lower written premiums as described above.

The following table presents the impact of catastrophe losses and related reinstatement premiums and prior period reserve development on our loss and loss expense ratio for the periods indicated:

												
 	Three Months Ended	 	 	Nine Months Ended	 	
 	September 30	 	 	September 30	 	
 	2013		 	2012		 	2013		 	2012		
Loss and loss expense ratio, as reported	88.0	 %	 	110.7	 %	 	85.6	 %	 	102.4	 %	
Catastrophe losses and related reinstatement premiums	(0.3	)%	 	(0.1	)%	 	(0.4	)%	 	(0.4	)%	
Prior period development	1.2	 %	 	—		 	1.1	 %	 	0.6	 %	
Loss and loss expense ratio, adjusted	88.9	 %	 	110.6	 %	 	86.3	 %	 	102.6	 %	
Net pre-tax catastrophe losses, excluding reinstatement premiums, were $ 2 million and $5 million for the three and nine months ended September 30, 2013 , compared with $ 1 million and $7 million for the prior year periods, respectively. Net favorable prior period development was $10 million and $13 million for the three and nine months ended September 30,

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2013 , compared with nil and $11 million in the prior year periods, respectively. The adjusted loss and loss expense ratio was lower for the three and nine months ended September 30, 2013 due to the impact of the U.S. drought on our MPCI business in th e prior year period.

The polic y acquisition cost ratio increased for the three and nine months ended September 30, 2013 primarily due to lower agent commission accruals in the prior year. The U.S. drought significantly impacted the profitability of the MPCI business in 2012. In years when the MPCI program is in an unprofitable position as defined in the SRA, agent profit share commissions are not paid. The increase for the nine months ended September 30, 2013 also reflects a $14 million benefit in the prior year period related to a revision in estimated agent profit share commissions for the MPCI business. 

The administrative expense ratio increased for the three and nine months ended September 30, 2013 primarily reflecting higher Administrative and Operating expense (A&O) reimbursements on the MPCI business in the prior year mainly due to additional reimbursements earned for high loss ratio states and underserved states.

Insurance – Overseas General
The Insurance – Overseas General segment comprises ACE International, our retail commercial P&C, A&H, and personal lines businesses serving territories outside the U.S., Bermuda, and Canada; the international supplemental A&H business of Combined Insurance; and the wholesale insurance business of AGM, our London-based excess and surplus lines business that includes Lloyd’s of London Syndicate 2488. The reinsurance operation of AGM is included in the Global Reinsurance segment.

																						
 	Three Months Ended	 	 	 	 	Nine Months Ended	 	 	 	
 	September 30	 	 	% Change		 	September 30	 	 	% Change		
(in millions of U.S. dollars, except for percentages)	2013		 	2012		 	Q-13 vs.
Q-12		 	2013		 	2012		 	YTD-13 vs.
YTD-12		
Net premiums written	$	1,571		 	$	1,384		 	13.5	 %	 	$	4,821		 	$	4,387		 	9.9	 %	
Net premiums earned	1,611		 	1,432		 	12.5	 %	 	4,633		 	4,243		 	9.2	 %	
Losses and loss expenses	712		 	622		 	14.5	 %	 	2,227		 	2,030		 	9.7	 %	
Policy acquisition costs	349		 	329		 	6.1	 %	 	1,048		 	996		 	5.2	 %	
Administrative expenses	263		 	234		 	12.4	 %	 	750		 	696		 	7.8	 %	
Underwriting income	287		 	247		 	16.2	 %	 	608		 	521		 	16.7	 %	
Net investment income	128		 	127		 	0.8	 %	 	396		 	386		 	2.6	 %	
Net realized gains (losses)	(8	)	 	13		 	NM		 	34		 	59		 	(42.4	)%	
Interest expense	1		 	2		 	(50.0	)%	 	4		 	4		 	—		
Other (income) expense	14		 	(3	)	 	NM		 	30		 	3		 	NM		
Income tax expense	78		 	77		 	1.3	 %	 	174		 	166		 	4.8	 %	
Net income	$	314		 	$	311		 	1.0	 %	 	$	830		 	$	793		 	4.7	 %	
Loss and loss expense ratio	44.2	%	 	43.4	%	 	 	 	48.1	%	 	47.8	%	 	 	
Policy acquisition cost ratio	21.6	%	 	23.1	%	 	 	 	22.6	%	 	23.5	%	 	 	
Administrative expense ratio	16.4	%	 	16.2	%	 	 	 	16.2	%	 	16.4	%	 	 	
Combined ratio	82.2	%	 	82.7	%	 	 	 	86.9	%	 	87.7	%	 	 	

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Insurance – Overseas General conducts business internationally and in most major foreign currencies.
The following table summarizes by major product line the approximate effect of changes in foreign currency exchange rates on the growth of net premiums written and earned for the periods indicated: 

																		
 	Three Months Ended	 	 	Nine Months Ended	 	
 	September 30, 2013	 	 	September 30, 2013	 	
 	P&C		 	A&H		 	Total		 	P&C		 	A&H		 	Total		
Net premiums written:	 	 	 	 	 	 	 	 	 	 	 	
Growth in original currency	23.2	 %	 	7.5	 %	 	17.4	 %	 	16.0	 %	 	5.7	 %	 	12.2	 %	
Foreign exchange effect	(4.6	)%	 	(2.8	)%	 	(3.9	)%	 	(2.9	)%	 	(1.4	)%	 	(2.3	)%	
Growth as reported in U.S. dollars	18.6	 %	 	4.7	 %	 	13.5	 %	 	13.1	 %	 	4.3	 %	 	9.9	 %	
Net premiums earned:	 	 	 	 	 	 	 	 	 	 	 	
Growth in original currency	20.9	 %	 	6.0	 %	 	15.4	 %	 	16.1	 %	 	3.4	 %	 	11.4	 %	
Foreign exchange effect	(3.2	)%	 	(2.5	)%	 	(2.9	)%	 	(2.8	)%	 	(1.2	)%	 	(2.2	)%	
Growth as reported in U.S. dollars	17.7	 %	 	3.5	 %	 	12.5	 %	 	13.3	 %	 	2.2	 %	 	9.2	 %	

Net premiums written increased for the three and nine months ended September 30, 2013 driven by strong performance in our retail operations and from acquisitions. Growth was reported in our retail operations in all of our product lines – P&C, A&H, and personal lines. P&C growth was reported across all regions of our retail operations driven by strong renewal retention and improved new business writings. A&H growth was primarily driven by strong results in Latin America, Asia, and Europe. Personal lines growth reflected new business opportunities in Europe, Latin America, and Asia. In addition, the acquisitions of ABA Seguros in May 2013 and Fianzas Monterrey in April 2013, and Jaya Proteksi in September 2012 added to premium growth. The unfavorable impact of foreign exchange partially offset this growth.
Net premiums earned increased for the three and nine months ended September 30, 2013 driven by strong performance in all product lines and from the acquisitions described above. Regionally, the increase was in our European, Latin American, and Asian operations. This growth was partially offset by the unfavorable impact of foreign exchange.
The following tables present a line of business breakdown of Insurance – Overseas General net premiums earned for the periods indicated:

																						
 	Three Months Ended	 	 	 	 	Nine Months Ended	 	 	 	
 	September 30	 	 	% Change		 	September 30	 	 	% Change		
(in millions of U.S. dollars, except for percentages)	2013		 	2012		 	Q-13 vs.
Q-12		 	2013		 	2012		 	YTD-13 vs.
YTD-12		
Property and all other	$	689		 	$	547		 	26.0	%	 	$	1,932		 	$	1,637		 	18.0	%	
Casualty	375		 	356		 	5.3	%	 	1,088		 	1,027		 	5.9	%	
Personal accident (A&H)	547		 	529		 	3.4	%	 	1,613		 	1,579		 	2.2	%	
Net premiums earned	$	1,611		 	$	1,432		 	12.5	%	 	$	4,633		 	$	4,243		 	9.2	%	
 	 	 	 	 	 	 	 	 	 	 	 	
 	2013
% of Total		 	2012
% of Total		 	 		 	2013
% of Total		 	2012
% of Total		 	 		
Property and all other	43	%	 	38	%	 	 	 	42	%	 	39	%	 	 	
Casualty	23	%	 	25	%	 	 	 	23	%	 	24	%	 	 	
Personal accident (A&H)	34	%	 	37	%	 	 	 	35	%	 	37	%	 	 	
Net premiums earned	100	%	 	100	%	 	 	 	100	%	 	100	%	 	 	

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The following table presents the impact of catastrophe losses and related reinstatement premiums and prior period reserve development on our loss and loss expense ratio for the periods indicated: 

												
 	Three Months Ended	 	 	Nine Months Ended	 	
 	September 30	 	 	September 30	 	
 	2013		 	2012		 	2013		 	2012		
Loss and loss expense ratio, as reported	44.2	 %	 	43.4	 %	 	48.1	 %	 	47.8	 %	
Catastrophe losses and related reinstatement premiums	(2.0	)%	 	(0.3	)%	 	(1.6	)%	 	(0.3	)%	
Prior period development	9.2	 %	 	9.5	 %	 	4.8	 %	 	4.7	 %	
Loss and loss expense ratio, adjusted	51.4	 %	 	52.6	 %	 	51.3	 %	 	52.2	 %	

Net pre-tax catastrophe losses, excluding reinstatement premiums, were $33 million and $71 million for the three and nine months ended September 30, 2013 , compared with $4 million and $11 million in the prior year periods, respectively. Catastrophe losses through September 30, 2013 were primarily related to flooding in Australia, Europe, and Canada; hurricanes in Latin America; and the earthquake in New Zealand. Catastrophe losses through September 30, 2012 were primarily related to Hurricane Isaac and flooding in the U.K. Net favorable prior period development was $149 million and $223 million for the three and nine months ended September 30, 2013 , compared with $135 million and $196 million in the prior year periods, respectively. Refer to the “Prior Period Development” section for additional information. The adjusted loss and loss expense ratio decreased for the three and nine months ended September 30, 2013 due primarily to the reduction in the current accident year loss ratio in A&H a nd Personal lines, a favorable change in the mix of business, and large property losses in the prior year which unfavorably impacted the prior year ratio.

The policy acquisition cost ratio decreased for the three and nine months ended September 30, 2013 primarily due to the Mexican Acquisitions. As a result of purchase accounting requirements, the unearned premiums at the date of purchase related to the Mexican Acquisitions are recognized over the remaining coverage period with no expense for the associated historical acquisition costs that were incurred to underwrite those policies.
The administrative expense ratio increased slightly for the three months ended September 30, 2013 due to increased spending to support business growth. This increased spending was more than offset for the nine months ended September 30, 2013 due to the acquisitions described above, which generate lower expenses than our other businesses, and A&H regulatory fees paid in Europe in the prior year period.

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Global Reinsurance

The Global Reinsurance segment represents our reinsurance operations comprising ACE Tempest Re Bermuda, ACE Tempest Re USA, ACE Tempest Re International, and ACE Tempest Re Canada. Global Reinsurance markets its reinsurance products worldwide under the ACE Tempest Re brand name and provides a broad range of coverage to a diverse array of primary P&C companies.

																						
 	Three Months Ended	 	 	 	 	Nine Months Ended	 	 	 	
 	September 30	 	 	% Change		 	September 30	 	 	% Change		
(in millions of U.S. dollars, except for percentages)	2013		 	2012		 	Q-13 vs.
Q-12		 	2013		 	2012		 	YTD-13 vs.
YTD-12		
Net premiums written	$	265		 	$	307		 	(13.6	)%	 	$	836		 	$	879		 	(4.8	)%	
Net premiums earned	239		 	281		 	(15.0	)%	 	731		 	748		 	(2.3	)%	
Losses and loss expenses	93		 	151		 	(38.4	)%	 	292		 	355		 	(17.7	)%	
Policy acquisition costs	52		 	40		 	30.0	 %	 	148		 	125		 	18.4	 %	
Administrative expenses	12		 	13		 	(7.7	)%	 	36		 	38		 	(5.3	)%	
Underwriting income	82		 	77		 	6.5	 %	 	255		 	230		 	10.9	 %	
Net investment income	66		 	72		 	(8.3	)%	 	209		 	213		 	(1.9	)%	
Net realized gains (losses)	(5	)	 	(2	)	 	150.0	 %	 	46		 	(6	)	 	NM		
Interest expense	2		 	1		 	100.0	 %	 	4		 	3		 	33.3	 %	
Other (income) expense	(7	)	 	(5	)	 	40.0	 %	 	(13	)	 	(7	)	 	85.7	 %	
Income tax expense	16		 	11		 	45.5	 %	 	31		 	17		 	82.4	 %	
Net income	$	132		 	$	140		 	(5.7	)%	 	$	488		 	$	424		 	15.1	 %	
Loss and loss expense ratio	38.9	%	 	53.9	%	 	 	 	39.9	%	 	47.4	%	 	 	
Policy acquisition cost ratio	21.7	%	 	14.1	%	 	 	 	20.2	%	 	16.7	%	 	 	
Administrative expense ratio	5.2	%	 	4.7	%	 	 	 	5.0	%	 	5.1	%	 	 	
Combined ratio	65.8	%	 	72.7	%	 	 	 	65.1	%	 	69.2	%	 	 	

Net premiums written decreased for the three and nine months ended September 30, 2013 due to a non-recurring LPT treaty written in the prior year period. In addition, for the nine months ended September 30, 2013 , net premiums written decreased due to increased property catastrophe cessions to a newly formed sidecar, Altair Re, that more than offset strong renewal retention and new business written, primarily in our U.S. property and U.S. automobile lines of business.

Net premiums earned decreased for the three and nine months ended September 30, 2013 due to a non-recurring LPT treaty written in the prior year period, which was fully earned when written and, to a lesser extent, the higher property catastrophe cessions noted above. This decrease was partially offset for the nine months ended September 30, 2013 , by higher net premiums earned in our U.S. property lines due to higher premiums written in the current and prior years.

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The following tables present a line of business breakdown of Global Reinsurance net premiums earned for the periods indicated:

	
																						
 	Three Months Ended	 	 	 	 	Nine Months Ended	 	 	 	
 	September 30	 	 	% Change		 	September 30	 	 	% Change		
(in millions of U.S. dollars, except for percentages)	2013		 	2012		 	Q-13 vs.
Q-12		 	2013		 	2012		 	YTD -13 vs.
YTD -12		
Property and all other	$	66		 	$	54		 	22.2	 %	 	$	185		 	$	138		 	34.1	 %	
Casualty	98		 	150		 	(34.7	)%	 	323		 	393		 	(17.8	)%	
Property catastrophe	75		 	77		 	(2.6	)%	 	223		 	217		 	2.8	 %	
Net premiums earned	$	239		 	$	281		 	(15.0	)%	 	$	731		 	$	748		 	(2.3	)%	
 	 	 	 	 	 	 	 	 	 	 	 	
 	2013
% of Total		 	2012
% of Total		 	 		 	2013
% of Total		 	2012
% of Total		 	 		
Property and all other	28	%	 	19	%	 	 	 	25	%	 	18	%	 	 	
Casualty	41	%	 	53	%	 	 	 	44	%	 	53	%	 	 	
Property catastrophe	31	%	 	28	%	 	 	 	31	%	 	29	%	 	 	
Net premiums earned	100	%	 	100	%	 	 	 	100	%	 	100	%	 	 	

The following table presents the impact of catastrophe losses and related reinstatement premiums and prior period reserve development on our loss and loss expense ratio for the periods indicated:

												
 	Three Months Ended	 	 	Nine Months Ended	 	
 	September 30	 	 	September 30	 	
 	2013		 	2012		 	2013		 	2012		
Loss and loss expense ratio, as reported	38.9	 %	 	53.9	 %	 	39.9	 %	 	47.4	 %	
Catastrophe losses and related reinstatement premiums	(9.3	)%	 	(4.3	)%	 	(4.5	)%	 	(1.9	)%	
Prior period development	15.0	 %	 	8.1	 %	 	9.5	 %	 	6.5	 %	
Loss and loss expense ratio, adjusted	44.6	 %	 	57.7	 %	 	44.9	 %	 	52.0	 %	
Net pre-tax catastrophe losses were $24 million and $35 million for the three and nine months ended September 30, 2013 , respectively, compared with $13 million and $15 million in the prior year periods, respectively. Catastrophe losses through September 30, 2013 were primarily related to flooding in Canada and Europe. Catastrophe losses through September 30, 2012 were primarily from Hurricane Isaac and other North American weather-related events. Net favorable prior period development was $32 million and $66 million for the three and nine months ended September 30, 2013 , respectively (both of which are net of $8 million of unfavorable premium adjustments to loss sensitive treaties). This compares with $21 million and $47 million in the prior year periods, respectively (both of which are net of $4 million of unfavorable premium adjustments to loss sensitive treaties). Refer to the “Prior Period Development” section for additional information. The adjusted loss and loss expense ratio decreased for the three and nine months ended September 30, 2013 primarily due to the prior year LPT treaty which unfavorably impacted the prior year ratio. In addition, the adjusted loss and loss expense ratio decreased due to a change in the mix of business towards lower loss ratio products and favorable current accident year loss experience.

The policy acquisition cost ratio increased for the three and nine months ended September 30, 2013 due to a change in the mix of business towards products that have a higher acquisition cost ratio as well as the LPT treaty written in the prior year, which did not generate acquisition costs.

The administrative expense ratio increased for the three months ended September 30, 2013 primarily as a result of the decrease in net premiums earned. The administrative expense ratio was relatively flat for the nine months ended September 30, 2013.

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Life
The Life segment includes our international life operations (ACE Life), ACE Tempest Life Re (ACE Life Re), and the North American supplemental A&H and life business of Combined Insurance. 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 that do not qualify for separate account reporting under GAAP.

																						
 	Three Months Ended	 	 	 	 	Nine Months Ended	 	 	 	
 	September 30	 	 	% Change		 	September 30	 	 	% Change		
(in millions of U.S. dollars, except for percentages)	2013		 	2012		 	Q-13 vs.
Q-12		 	2013		 	2012		 	YTD-13 vs.
YTD-12		
Net premiums written	$	479		 	$	488		 	(1.9	)%	 	$	1,468		 	$	1,462		 	0.4	 %	
Net premiums earned	467		 	480		 	(2.7	)%	 	1,424		 	1,427		 	(0.2	)%	
Losses and loss expenses	141		 	164		 	(14.0	)%	 	443		 	463		 	(4.3	)%	
Policy benefits	138		 	130		 	6.2	 %	 	379		 	379		 	—		
(Gains) losses from fair value changes in separate account assets (1)	(14	)	 	(14	)	 	—		 	(7	)	 	(18	)	 	(61.1	)%	
Policy acquisition costs	86		 	80		 	7.5	 %	 	261		 	244		 	7.0	 %	
Administrative expenses	85		 	81		 	4.9	 %	 	256		 	237		 	8.0	 %	
Net investment income	61		 	63		 	(3.2	)%	 	187		 	186		 	0.5	 %	
Life underwriting income	92		 	102		 	(9.8	)%	 	279		 	308		 	(9.4	)%	
Net realized gains (losses)	43		 	(71	)	 	NM		 	206		 	(261	)	 	NM		
Interest expense	4		 	3		 	33.3	 %	 	12		 	9		 	33.3	 %	
Other (income) expense (1)	4		 	—		 	NM		 	7		 	14		 	(50.0	)%	
Income tax expense	10		 	14		 	(28.6	)%	 	33		 	44		 	(25.0	)%	
Net income (loss)	$	117		 	$	14		 	NM		 	$	433		 	$	(20	)	 	NM		
		
(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 following table presents a line of business breakdown of Life net premiums written and deposits collected on universal life and investment contracts for the periods indicated: 

																						
 	Three Months Ended	 	 	 	 	Nine Months Ended	 	 	 	
 	September 30	 	 	% Change		 	September 30	 	 	% Change		
(in millions of U.S. dollars, except for percentages)	2013		 	2012		 	Q-13 vs.
Q-12		 	2013		 	2012		 	YTD-13 vs.
YTD-12		
A&H	$	246		 	$	255		 	(3.5	)%	 	$	759		 	$	742		 	2.3	 %	
Life insurance	163		 	156		 	4.5	 %	 	493		 	482		 	2.3	 %	
Life reinsurance	70		 	77		 	(9.1	)%	 	216		 	238		 	(9.2	)%	
Net premiums written (excludes deposits below)	$	479		 	$	488		 	(1.9	)%	 	$	1,468		 	$	1,462		 	0.4	 %	
 	 	 	 	 	 	 	 	 	 	 	 	
Deposits collected on universal life and investment contracts	$	183		 	$	151		 	21.2	 %	 	$	607		 	$	412		 	47.3	 %	

A&H net premiums written decreased for the three months ended September 30, 2013 due primarily to a catch-up in premium registrations in the prior year period. A&H net premiums written increased for the nine months ended September 30, 2013 due to growth in certain program business and improved new business production. Life insurance net premiums written increased for the three and nine months ended September 30, 2013 primarily due to growth in our Asian markets. Life reinsurance net premiums written decreased for the three and nine months ended September 30, 2013 because no new life reinsurance business is currently being written.

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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. New life deposits are an important component of production and key to our efforts to grow our business. Although life deposits do not significantly affect current period income from operations, they are an important indicator of future profitability. The increase in life deposits collected for the three and nine months ended September 30, 2013 is primarily due to growth in our Asian markets.

Net realized gains (losses), which are excluded from Life underwriting income, relate primarily to the change in the net fair value of reported GLB reinsurance liabilities and changes in the fair value of derivatives used to partially offset the risk in the variable annuity guarantee portfolio. During the three and nine months ended September 30, 2013 , realized gains of $138 million and $608 million, respectively, were associated with net decreases in the value of GLB liabilities; these decreases were primarily due to rising equity levels, higher interest rates, and a weakening yen, partially offset by an increased value of GLB liabilities due to the unfavorable impact of discounting future claims for one and three fewer quarters, respectively. In addition, we experienced realized losses of $95 million and $413 million for the three and nine months ended September 30, 2013 , respectively, due to a decrease in the value of the derivative instruments, which decrease in value when the S&P 500 index increases.

______________________________________________________________________________________________________________________
Other (Income) and Expense Items

																
 	Three Months Ended	 	 	Nine Months Ended	 	
 	September 30	 	 	September 30	 	
(in millions of U. S. dollars)	2013		 	2012		 	2013		 	2012		
Amortization of intangible assets	$	30		 	$	12		 	$	68		 	$	36		
Equity in net (income) loss of partially-owned entities	(32	)	 	(33	)	 	(81	)	 	(47	)	
(Gains) losses from fair value changes in separate account assets	(14	)	 	(14	)	 	(7	)	 	(18	)	
Federal excise and capital taxes	7		 	7		 	18		 	16		
Acquisition-related costs	1		 	8		 	3		 	11		
Other	3		 	3		 	21		 	16		
Other (income) expense	$	(5	)	 	$	(17	)	 	$	22		 	$	14		

Other (income) expense includes Amortization of intangible assets, which is higher in 2013 due primarily to the acquisitions of Fianzas Monterrey (completed April 1, 2013) and ABA Seguros (completed May 2, 2013). Equity in net (income) loss of partially-owned entities includes our share of net (income) loss related to investment funds, limited partnerships, partially-owned investment companies, and partially-owned insurance companies. Also included in Other (income) expense are (Gains) losses from fair value changes in separate account assets that do not qualify for separate account reporting under GAAP. The offsetting movement in the separate account liabilities is included in Policy benefits in the consolidated statements of operations. Certain federal excise and capital taxes incurred as a result of capital management initiatives are included in Other (income) expense as these are considered capital transactions and are excluded from underwriting results.

The following table presents, as of September 30, 2013 , the estimated pre-tax amortization expense related to intangible assets for the fourth quarter of 2013 and the next five years:

				
For the Year Ending December 31	Amortization of intangible assets		
(in millions of U.S. dollars)			
Fourth quarter of 2013	$	27		
2014	83		
2015	65		
2016	55		
2017	49		
2018	44		
Total	$	323		

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______________________________________________________________________________________________________________________
Net Investment Income

																
 	Three Months Ended	 	 	Nine Months Ended	 	
 	September 30	 	 	September 30	 	
(in millions of U.S. dollars)	2013		 	2012		 	2013		 	2012		
Fixed maturities	$	516		 	$	534		 	$	1,550		 	$	1,605		
Short-term investments	7		 	2		 	20		 	20		
Equity securities	9		 	8		 	29		 	25		
Other investments	19		 	19		 	76		 	47		
Gross investment income	551		 	563		 	1,675		 	1,697		
Investment expenses	(29	)	 	(30	)	 	(88	)	 	(83	)	
Net investment income	$	522		 	$	533		 	$	1,587		 	$	1,614		

Net investment income is influenced by a number of factors including the amounts and timing of inward and outward cash flows, the level of interest rates, and changes in overall asset allocation. Net investment income decreased two percent for both the three and nine months ended September 30, 2013 , compared with the prior year periods. The decline in net investment income for the three months ended September 30, 2013 was primarily due to lower reinvestment rates, lower private equity distributions, and the negative impact of foreign exchange, partially offset by a higher overall invested asset base. The decline in net investment income for the nine months ended September 30, 2013 was primarily due to lower reinvestment rates partially offset by a higher overall invested asset base and to a lesser extent, higher private equity and other distributions.

The investment portfolio’s average market yield on fixed maturities was 2.9 percent and 2.2 percent at September 30, 2013 and 2012 , respectively. Average market yield on fixed maturities represents the weighted average yield to maturity of our fixed income portfolio based on the market prices of the holdings at that date.

The 1.3 percent and 1.2 percent yields on short-term investments for the three and nine months ended September 30, 2013 , respectively, reflect the global nature of our insurance operations. For example, yields on short-term investments in Malaysia, Mexico, and Indonesia range from 3.0 percent to 6.0 percent .

The yield on our equity securities portfolio is high relative to the yield on the S&P 500 Index because of dividends on preferred equity securities and because we classify our strategic emerging debt portfolio, which is a mutual fund, as equity. The preferred equity securities and strategic emerging debt portfolio represent approximately 56 percent of our equity securities portfolio.

______________________________________________________________________________________________________________________
Net Realized and Unrealized Gains (Losses)

We take a long-term view with our investment strategy, and our investment managers manage our investment portfolio to maximize total return within certain specific guidelines designed to minimize risk. The majority of our investment portfolio is available for sale and reported at fair value. Our held to maturity investment portfolio is reported at amortized cost.

The effect of market movements on our available for sale investment portfolio impacts Net income (through Net realized gains (losses)) when securities are sold or when we record an Other-than-temporary impairment (OTTI) charge in net income. For a discussion related to how we assess OTTI for all of our investments, including credit-related OTTI, and the related impact on Net income, refer to Note 3 c) to the consolidated financial statements. Additionally, Net income is impacted through the reporting of changes in the fair value of derivatives, including financial futures, options, swaps, and GLB reinsurance. Changes in unrealized appreciation and depreciation on available for sale securities, which result from the revaluation of securities held, are reported as a separate component of Accumulated other comprehensive income in Shareholders’ equity in the consolidated balance sheets.

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The following tables present our pre-tax net realized and unrealized gains (losses) on investments for the periods indicated:

																								
 	Three Months Ended September 30, 2013	 	 	Three Months Ended September 30, 2012	 	
(in millions of U.S. dollars)	Net
Realized
Gains
(Losses)  (1)		 	Net
Unrealized
Gains
(Losses)		 	Net
Impact		 	Net
Realized
Gains
(Losses) (1)		 	Net
Unrealized
Gains
(Losses)		 	Net
Impact		
Fixed maturities	$	17		 	$	(4	)	 	$	13		 	$	47		 	$	642		 	$	689		
Fixed income derivatives	4		 	—		 	4		 	4		 	—		 	4		
Total fixed maturities	21		 	(4	)	 	17		 	51		 	642		 	693		
Public equity	7		 	2		 	9		 	2		 	23		 	25		
Private equity	—		 	(6	)	 	(6	)	 	—		 	10		 	10		
Other	—		 	—		 	—		 	1		 	4		 	5		
Subtotal	28		 	(8	)	 	20		 	54		 	679		 	733		
Derivatives	 	 	 	 	 	 	 	 	 	 	 	
Fair value adjustment on insurance derivatives	134		 	—		 	134		 	83		 	—		 	83		
S&P put option and futures	(95	)	 	—		 	(95	)	 	(147	)	 	—		 	(147	)	
Fair value adjustment on other derivatives	(1	)	 	—		 	(1	)	 	—		 	—		 	—		
Subtotal derivatives	38		 	—		 	38		 	(64	)	 	—		 	(64	)	
Foreign exchange losses	(26	)	 	—		 	(26	)	 	(50	)	 	—		 	(50	)	
Total gains (losses)	$	40		 	$	(8	)	 	$	32		 	$	(60	)	 	$	679		 	$	619		
		
(1)  	For the three months ended September 30, 2013 and 2012 other-than-temporary impairments include $4 million and $10 million, respectively, for fixed maturities.	

																								
 	Nine Months Ended September 30, 2013	 	 	Nine Months Ended September 30, 2012	 	
(in millions of U.S. dollars)	Net
Realized
Gains
(Losses) (1)		 	Net
Unrealized
Gains
(Losses)		 	Net
Impact		 	Net
Realized
Gains
(Losses)  (1)		 	Net
Unrealized
Gains
(Losses)		 	Net
Impact		
Fixed maturities	$	84		 	$	(1,661	)	 	$	(1,577	)	 	$	149		 	$	1,136		 	$	1,285		
Fixed income derivatives	62		 	—		 	62		 	(3	)	 	—		 	(3	)	
Total fixed maturities	146		 	(1,661	)	 	(1,515	)	 	146		 	1,136		 	1,282		
Public equity	13		 	(41	)	 	(28	)	 	(2	)	 	52		 	50		
Private equity	(2	)	 	34		 	32		 	(7	)	 	33		 	26		
Other	—		 	1		 	1		 	1		 	5		 	6		
Subtotal	157		 	(1,667	)	 	(1,510	)	 	138		 	1,226		 	1,364		
Derivatives	 	 	 	 	 	 	 	 	 	 	 	
Fair value adjustment on insurance derivatives	563		 	—		 	563		 	44		 	—		 	44		
S&P put option and futures	(413	)	 	—		 	(413	)	 	(308	)	 	—		 	(308	)	
Fair value adjustment on other derivatives	(2	)	 	—		 	(2	)	 	(4	)	 	—		 	(4	)	
Subtotal derivatives	148		 	—		 	148		 	(268	)	 	—		 	(268	)	
Foreign exchange gains (losses)	45		 	—		 	45		 	(64	)	 	—		 	(64	)	
Total gains (losses)	$	350		 	$	(1,667	)	 	$	(1,317	)	 	$	(194	)	 	$	1,226		 	$	1,032		
		
(1)  	For the nine months ended September 30, 2013 other-than-temporary impairments includes $11 million for fixed maturities, $2 million for private equity, and $1 million for public equity. For the nine months ended September 30, 2012 other-than-temporary impairments includes $18 million for fixed maturities, $7 million for private equity, and $5 million for public equity.	

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At September 30, 2013 , our investment portfolios held by U.S. legal entities included approximately $188 million of gross unrealized losses on fixed income investments. Our tax planning strategy related to these losses is based on our view that we will hold these fixed income investments until they recover their cost. As such, we have recognized a deferred tax asset of approximately $66 million related to these fixed income investments. This strategy allows us to recognize the associated deferred tax asset related to these fixed income investments as we do not believe these losses will ever be realized.

We engage in a securities lending program which involves lending investments to other institutions for short periods of time. ACE invests the collateral received in securities of high credit quality and liquidity, with the objective of maintaining a stable principal balance. Certain investments purchased with the securities lending collateral declined in value resulting in an unrealized loss of $3 million at September 30, 2013 . The unrealized loss is attributable to fluctuations in market values of the underlying performing debt instruments held by the respective mutual funds, rather than default of a debt issuer. It is our view that the decline in value is temporary.

______________________________________________________________________________________________________________________
Investments
Our investment portfolio is invested primarily in publicly traded, investment grade, fixed income securities with an average credit quality of A/Aa as rated by the independent investment rating services Standard and Poor’s (S&P)/ Moody’s Investors Service (Moody’s). The portfolio is externally managed by independent, professional investment managers and is broadly diversified across geographies, sectors, and issuers. Other investments principally comprise direct investments, investment funds, and limited partnerships. We hold no collateralized debt obligations or collateralized loan obligations in our investment portfolio, and we provide no credit default protection. We have long-standing global credit limits for our entire portfolio across the organization. Exposures are aggregated, monitored, and actively managed by our Global Credit Committee, comprising senior executives, including our Chief Financial Officer, our Chief Risk Officer, our Chief Investment Officer, and our Treasurer. We also have well-established, strict contractual investment rules requiring managers to maintain highly diversified exposures to individual issuers and closely monitor investment manager compliance with portfolio guidelines.

The average duration of our fixed income securities, including the effect of options and swaps, was 4.0 years and 3.9 years at September 30, 2013 and December 31, 2012 , respectively. We estimate that a 100 basis point (bps) increase in interest rates would reduce the valuation of our fixed income portfolio by approximately $2.3 billion at September 30, 2013 .

The following table shows the fair value and cost/amortized cost of our invested assets:

																
 	September 30, 2013	 	 	December 31, 2012	 	
(in millions of U.S. dollars)	Fair
Value		 	Cost/
Amortized
Cost		 	Fair
Value		 	Cost/
Amortized
Cost		
Fixed maturities available for sale	$	48,529		 	$	47,481		 	$	47,306		 	$	44,666		
Fixed maturities held to maturity	6,493		 	6,306		 	7,633		 	7,270		
Short-term investments	1,774		 	1,774		 	2,228		 	2,228		
 	56,796		 	55,561		 	57,167		 	54,164		
Equity securities	831		 	835		 	744		 	707		
Other investments	2,902		 	2,616		 	2,716		 	2,465		
Total investments	$	60,529		 	$	59,012		 	$	60,627		 	$	57,336		

The fair value of our total investments decreased $98 million during the nine months ended September 30, 2013 , primarily due to the negative impact of rising interest rates on the valuation of our portfolio and unfavorable foreign exchange, partially offset by the investing of operating cash flows.

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The following tables show the market value of our fixed maturities and short-term investments at September 30, 2013 and December 31, 2012 . The first table lists investments according to type and the second according to S&P credit rating: 

														
 	September 30, 2013	 	 	December 31, 2012	 	
(in millions of U.S. dollars, except for percentages)	Market
Value		 	Percentage
of Total		 	Market
Value		 	Percentage
of Total		
Treasury	$	2,367		 	4	%	 	$	2,794		 	5	%	
Agency	1,471		 	3	%	 	2,024		 	4	%	
Corporate and asset-backed securities	19,313		 	34	%	 	18,983		 	33	%	
Mortgage-backed securities	11,862		 	21	%	 	12,589		 	22	%	
Municipal	4,496		 	8	%	 	3,872		 	7	%	
Non-U.S.	15,513		 	27	%	 	14,677		 	25	%	
Short-term investments	1,774		 	3	%	 	2,228		 	4	%	
Total	$	56,796		 	100	%	 	$	57,167		 	100	%	
AAA	$	9,089		 	16	%	 	$	9,285		 	16	%	
AA	20,716		 	36	%	 	22,014		 	39	%	
A	11,267		 	20	%	 	10,760		 	19	%	
BBB	7,147		 	13	%	 	6,591		 	12	%	
BB	4,120		 	7	%	 	4,146		 	7	%	
B	4,088		 	7	%	 	3,846		 	6	%	
Other	369		 	1	%	 	525		 	1	%	
Total	$	56,796		 	100	%	 	$	57,167		 	100	%	

Corporate and asset-backed securities
The table below summarizes our ten largest global exposures to corporate bonds by market value at September 30, 2013 :  

				
(in millions of U.S. dollars)	Market Value		
JP Morgan Chase & Co	$	490		
Goldman Sachs Group Inc	432		
General Electric Co	390		
Verizon Communications Inc	287		
Citigroup Inc	279		
Morgan Stanley	274		
Bank of America Corp	259		
Wells Fargo & Co	237		
HSBC Holdings Plc	222		
AT&T INC	211		
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Mortgage-backed securities
Additional details on the mortgage-backed component of our investment portfolio at September 30, 2013 , are provided below:

																												
 	S&P Credit Rating	 	 	 	 	 	
 	Market Value	 	 	Amortized Cost		
(in millions of U.S. dollars)	AAA		 	AA		 	A		 	BBB		 	BB and
below		 	Total		 	Total		
 	 	 	 	 	 	 	 	 	 	 	 	 	 	
Agency residential mortgage-backed (RMBS)	$	—		 	$	9,965		 	$	—		 	$	—		 	$	—		 	$	9,965		 	$	9,853		
Non-agency RMBS	60		 	9		 	28		 	20		 	191		 	308		 	315		
Commercial mortgage-backed	1,557		 	15		 	10		 	7		 	—		 	1,589		 	1,567		
Total mortgage-backed securities	$	1,617		 	$	9,989		 	$	38		 	$	27		 	$	191		 	$	11,862		 	$	11,735		

Municipal
As part of our overall investment strategy, we may invest in states, municipalities, and other political subdivisions fixed maturity securities (Municipal). We apply the same investment selection process described previously to our Municipal investments. The portfolio is highly diversified primarily in state general obligation bonds and essential service revenue bonds including education and utilities (water, power, and sewers).

Non-U.S.
Our exposure to the Euro results primarily from ACE European Group which is headquartered in London and offers a broad range of coverages throughout the European Union, Central, and Eastern Europe. Our gross and net Eurozone non-U.S. securities exposure is the same. ACE primarily invests in Euro denominated investments to support its local currency insurance obligations and required capital levels. ACE’s local currency investment portfolios have strict contractual investment guidelines requiring managers to maintain a high quality and diversified portfolio to both sector and individual issuers. Investment portfolios are monitored daily to ensure investment manager compliance with portfolio guidelines.

Our non-U.S. investment grade fixed income portfolios are currency-matched with the insurance liabilities of our non-U.S. operations. The average credit quality of our non-U.S. fixed income securities is A and 54 percent of our holdings are rated AAA or guaranteed by governments or quasi-government agencies. Within the context of these investment portfolios, our government and corporate bond holdings are highly diversified across industries and geographies. Issuer limits are based on credit rating (AA— two percent, A— one percent, BBB— 0.5 percent of the total portfolio) and are monitored daily via an internal compliance system. Because of this investment approach we do not have a direct exposure to troubled sovereign borrowers in Europe. We manage our indirect exposure using the same credit rating based investment approach. Accordingly, we do not believe our indirect exposure is material.

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The table below summarizes the market value and amortized cost of our non-U.S. fixed income portfolio by country/sovereign for non-U.S. government securities at September 30, 2013 : 

								
(in millions of U.S. dollars)	Market Value		 	Amortized Cost		
United Kingdom	$	1,192		 	$	1,192		
Republic of Korea	647		 	617		
Canada	580		 	574		
United Mexican States	489		 	489		
Germany	452		 	450		
Province of Ontario	336		 	330		
Japan	302		 	302		
Federative Republic of Brazil	273		 	275		
Province of Quebec	271		 	267		
Kingdom of Thailand	246		 	248		
Other Non-U.S. Government (1)	2,484		 	2,451		
Total	$	7,272		 	$	7,195		
		
(1)  	There are no investments in Portugal, Ireland, Italy, Greece or Spain.	

The table below summarizes the market value and amortized cost of our non-U.S. fixed income portfolio by country/sovereign for non-U.S. corporate securities at September 30, 2013 : 

								
(in millions of U.S. dollars)	Market Value		 	Amortized Cost		
United Kingdom	$	1,454		 	$	1,384		
Canada	1,073		 	1,028		
Australia	690		 	673		
United States	564		 	541		
France	537		 	518		
Netherlands	512		 	495		
Germany	472		 	453		
Supranational	266		 	257		
Switzerland	216		 	205		
Sweden	214		 	207		
Other Non-U.S. Corporates	2,243		 	2,214		
Total	$	8,241		 	$	7,975		

The countries that are listed in the non-U.S. corporate fixed income portfolio above represent the ultimate parent company's country of risk. Non-U.S. corporate securities could be issued by foreign subsidiaries of U.S. corporations.

Below-investment grade corporate fixed income portfolio
Below-investment grade securities have different characteristics than investment grade corporate debt securities. Risk of loss from default by the borrower is greater with below-investment grade securities. Below-investment grade securities are generally unsecured and are often subordinated to other creditors of the issuer. Also, issuers of below-investment grade securities usually have higher levels of debt and are more sensitive to adverse economic conditions, such as recession or increasing interest rates, than are investment grade issuers. At September 30, 2013 , our corporate fixed income investment portfolio included below-investment grade and non-rated securities which, in total, comprised approximately 14 percent of our fixed income portfolio. Our below-investment grade and non-rated portfolio includes approximately 1,100 issuers, with the greatest single exposure being $97 million.

We manage high-yield bonds as a distinct and separate asset class from investment grade bonds. The allocation to high-yield bonds is explicitly set by internal management and is targeted to securities in the upper tier of credit quality (BB/B). Our

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minimum rating for initial purchase is BB/B. Six external investment managers are responsible for high-yield security selection and portfolio construction. Our high-yield managers have a conservative approach to credit selection and very low historical default experience. Holdings are highly diversified across industries and subject to a 1.5 percent issuer limit as a percentage of high-yield allocation. We monitor position limits daily through an internal compliance system. Derivative and structured securities (e.g., credit default swaps and collateralized loan obligations) are not permitted in the high-yield portfolio.

____________________________________________________________________________________________________________
Critical Accounting Estimates
As of September 30, 2013 , there were no material changes to our critical accounting estimates. For full discussion of our critical accounting estimates, refer to Item 7 in our 2012 Form 10-K.

Reinsurance recoverable on ceded reinsurance
The following table presents a composition of our reinsurance recoverable for the periods indicated: 

								
 	September 30		 	December 31		
(in millions of U.S. dollars)	2013		 	2012		
Reinsurance recoverable on unpaid losses and loss expenses (1)	$	10,819		 	$	11,399		
Reinsurance recoverable on paid losses and loss expenses  (1)	658		 	679		
Net reinsurance recoverable on losses and loss expenses	$	11,477		 	$	12,078		
Reinsurance recoverable on policy benefits	$	237		 	$	241		
		
(1)  	Net of provision for uncollectible reinsurance	

We evaluate the financial condition of our reinsurers and potential reinsurers on a regular basis and also monitor concentrations of credit risk with reinsurers.  The provision for uncollectible reinsurance is required principally due to the potential failure of reinsurers to indemnify us, primarily because of disputes under reinsurance contracts and insolvencies. The provision for uncollectible reinsurance is based on a default analysis applied to gross reinsurance recoverables, net of approximately $ 2.5 billion of collateral at both September 30, 2013 and December 31, 2012 . The decrease in net reinsurance recoverable on losses and loss expenses was primarily due to lower MPCI losses, collections relating to run-off operations, favorable PPD, and lower natural catastrophe losses.

Unpaid losses and loss expenses
As an insurance and reinsurance company, we are required by applicable laws and regulations and GAAP to establish loss and loss expense reserves for the estimated unpaid portion of the ultimate liability for losses and loss expenses under the terms of our policies and agreements with our insured and reinsured customers. The estimate of the liabilities includes provisions for claims that have been reported but are unpaid at the balance sheet date (case reserves) and for obligations on claims that have been incurred but not reported (IBNR) at the balance sheet date. IBNR may also include provisions to account for the possibility that reported claims may settle for amounts that differ from the established reserves. Loss reserves also include an estimate of expenses associated with processing and settling unpaid claims (loss expenses). At September 30, 2013 , our gross unpaid loss and loss expense reserves were $37.9 billion and our net unpaid loss and loss expense reserves were $27.1 billion. With the exception of certain structured settlements, for which the timing and amount of future claim payments are reliably determinable, and certain reserves for unsettled claims that are discounted in statutory filings, our loss reserves are not discounted for the time value of money.

The following table presents a roll-forward of our unpaid losses and loss expenses: 

												
(in millions of U.S. dollars)	Gross
Losses		 	Reinsurance
Recoverable (1)		 	Net
Losses		
Balance at December 31, 2012	$	37,946		 	$	11,399		 	$	26,547		
Losses and loss expenses incurred	9,107		 	2,276		 	6,831		
Losses and loss expenses paid	(9,069	)	 	(2,815	)	 	(6,254	)	
Other (including foreign exchange translation)	(102	)	 	(41	)	 	(61	)	
Balance at September 30, 2013	$	37,882		 	$	10,819		 	$	27,063		
		
(1)  	Net of provision for uncollectible reinsurance	

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The process of establishing loss reserves for property and casualty claims can be complex and is subject to considerable uncertainty as it requires the use of informed estimates and judgments based on circumstances known at the date of accrual.

The following table presents our total reserves segregated between case reserves (including loss expense reserves) and IBNR reserves: 

																								
 	September 30, 2013	 	 	December 31, 2012	 	
(in millions of U.S. dollars)	Gross		 	Ceded		 	Net		 	Gross		 	Ceded		 	Net		
Case reserves	$	16,592		 	$	4,830		 	$	11,762		 	$	16,804		 	$	5,406		 	$	11,398		
IBNR reserves	21,290		 	5,989		 	15,301		 	21,142		 	5,993		 	15,149		
Total	$	37,882		 	$	10,819		 	$	27,063		 	$	37,946		 	$	11,399		 	$	26,547		

Asbestos and Environmental (A&E) and Other Run-off Liabilities
During the three months ended September 30, 2013, an internal review was conducted to evaluate the adequacy of environmental liabilities. As a result of the internal review, we increased environmental gross reserves for Brandywine operations by $102 million while the net loss reserves increased by $59 million. Refer to our 2012 Form 10-K for additional information on A&E and Other Run-off Liabilities.

Fair value measurements
The accounting guidance on fair value measurements defines fair value as the price to sell an asset or transfer a liability in an orderly transaction between market participants and establishes a three-level valuation hierarchy in which inputs into valuation techniques used to measure fair value are classified.

The fair value hierarchy gives the highest priority to quoted prices in active markets (Level 1 inputs) and the lowest priority to unobservable data (Level 3 inputs). Inputs in Level 1 are unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 includes inputs other than quoted prices included within Level 1 that are observable for assets or liabilities either directly or indirectly. Level 2 inputs include, among other items, quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, and inputs other than quoted prices that are observable for the asset or liability such as interest rates and yield curves. Level 3 inputs are unobservable and reflect our judgments about assumptions that market participants would use in pricing an asset or liability.

We categorize financial instruments within the valuation hierarchy at the balance sheet date based upon the lowest level of inputs that are significant to the fair value measurement. Accordingly, transfers between levels within the valuation hierarchy occur when there are significant changes to the inputs, such as increases or decreases in market activity, changes to the availability of current prices, changes to the transparency to underlying inputs, and whether there are significant variances in quoted prices. Transfers in and/or out of any level are assumed to occur at the end of the period.

While we obtain values for the majority of the investment securities we hold from one or more pricing services, it is ultimately management’s responsibility to determine whether the values obtained and recorded in the financial statements are representative of fair value. We periodically update our understanding of the methodologies used by our pricing services in order to validate that the prices obtained from those services are consistent with the GAAP definition of fair value as an exit price. Based on our understanding of the methodologies, our pricing services only produce an estimate of fair value if there is observable market information that would allow them to make a fair value estimate. Based on our understanding of the market inputs used by our pricing services, all applicable investments have been valued in accordance with GAAP valuation principles. We have controls to review significant price changes and stale pricing, and to ensure that prices received from pricing services have been accurately reflected in the consolidated financial statements. We do not typically adjust prices obtained from pricing services.

Additionally, the valuation of fixed maturities is more subjective when markets are less liquid due to the lack of market based inputs (i.e., stale pricing), which may increase the potential that the estimated fair value of an investment is not reflective of the price at which an actual transaction would occur. For a small number of fixed maturities, we obtain a quote from a broker (typically a market maker). Due to the disclaimers on the quotes that indicate that the price is indicative only, we include these fair value estimates in Level 3.

At September 30, 2013 , Level 3 a ssets represented five percent of assets that are measured at fair value and three percent of total assets. At September 30, 2013 , Level 3 liabilities represented 100 percent of liabilities that are measured at fair value

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and one percent of our total liabilities. During the three and nine months ended September 30, 2013 , we transferred assets of $ 14 million and $77 million, respectively, into our Level 3 assets from other levels of the valuation hierarchy. During the three and nine months ended September 30, 2013 , we transferred assets of $ 11 million and $82 million, respectively, out of our Level 3 assets to other levels of the valuation hierarchy. Refer to Note 4 to the consolidated financial state ments for a description of the valuation techniques and inputs used to determine fair values for our financial instruments measured or disclosed at fair value by valuation hierarchy (Levels 1, 2, and 3) as well as a roll-forward of Level 3 financial instruments measured at fair value for the three and nine months ended September 30, 2013 and 2012 .

Guaranteed living benefits (GLB) derivatives
Under life reinsurance programs covering living benefit guarantees, we assumed the risk of GLBs associated with variable annuity (VA) contracts. We ceased writing this business in 2007. Our GLB reinsurance product meets the definition of a derivative for accounting purposes and is therefore carried at fair value. We believe that the most meaningful presentation of these derivatives is to reflect cash inflows or revenue as net premiums earned, and to record estimates of the average modeled value of future cash outflows as incurred losses. Accordingly, we recognize benefit reserves consistent with the accounting guidance related to accounting and reporting by insurance enterprises for certain non-traditional long-duration contracts and for separate accounts. Changes in the benefit reserves are reflected as Policy benefits expense, which is included in life underwriting income. The incremental difference between fair value and benefit reserves is reflected in Accounts payable, accrued expenses, and other liabilities in the consolidated balance sheets and related changes in fair value are reflected in Net realized gains (losses) in the consolidated statement of operations. We intend to hold these derivative contracts to maturity (i.e., the expiration of the underlying liabilities through lapse, annuitization, death, or expiration of the reinsurance contract). To partially offset the risk in the VA guarantee reinsurance portfolio, we invest in derivative hedge instruments. At maturity, the cumulative gains and losses will net to zero (excluding cumulative hedge gains or losses) because, over time, the insurance liability will be increased or decreased to equal our obligation. For a sensitivity discussion of the effect of changes in interest rates, equity indices, and other assumptions on the fair value of GLBs, and the resulting impact on our net income, refer to Item 3.

The fair value of GLB reinsurance is estimated using an internal valuation model, which includes current market information and estimates of policyholder behavior from the perspective of a theoretical market participant that would assume these liabilities. All of our treaties contain claim limits, which are factored into the valuation model. The fair value depends on a number of factors, including interest rates, current account value, market volatility, expected annuitization rates and other policyholder behavior, and changes in policyholder mortality. The model and related assumptions are continuously re-evaluated by management and enhanced, as appropriate, based upon additional experience obtained related to policyholder behavior and availability of more timely market information, such as market conditions and demographics of in-force annuities. Due to the inherent uncertainties of the assumptions used in the valuation models to determine the fair value of these derivative products, actual experience may differ from the estimates reflected in our consolidated financial statements, and the differences may be material. For further information on the estimates and assumptions used in determining the fair value of GLB reinsurance, refer to Note 4 to the consolidated financial statements.

During the nine months ended September 30, 2013 , no material changes were made to actuarial or behavioral assumptions.

During the three and nine months ended September 30, 2013 , realized gains of $138 million and $608 million, respectively, were associated with a decreased value of GLB liabilities primarily due to rising equity levels and the favorable impact of foreign exchange and interest rate movements partially offset by the impact of discounting future claims for one and three fewer quarters, respectively. This excludes realized losses of $ 95 million and $413 million during the three and nine months ended September 30, 2013 , respectively, on derivative hedge instruments held to partially offset the risk in the VA guarantee reinsurance portfolio. These derivatives do not receive hedge accounting treatment. Refer to the “Net Realized and Unrealized Gains (Losses)” section for a breakdown of the realized gains (losses) on GLB reinsurance and derivatives for the three and nine months ended September 30, 2013 and 2012 .

ACE Tempest Life Re employs a strategy to manage the financial market and policyholder behavior risks embedded in the reinsurance of VA guarantees. Risk management begins with underwriting a prospective client and guarantee design, with particular focus on protecting our position from policyholder options that, because of anti-selective behavior, could adversely impact our obligation.

A second layer of risk management is the structure of the reinsurance contracts. All VA guarantee reinsurance contracts include some form of annual or aggregate claim limit(s). The different categories of claim limits are described below:

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•	Reinsurance programs covering guaranteed minimum death benefits (GMDB) with an annual claim limit of two percent of account value. This category accounts for approximately 60 percent of the total reinsured GMDB guaranteed value. Approximately two percent of the guaranteed value in this category has additional reinsurance coverage for GLB.	

•	Reinsurance programs covering GMDB with claim limit(s) that are a function of the underlying guaranteed value. This category accounts for approximately 25 percent of the total reinsured GMDB guaranteed value. The annual claim limit expressed as a percentage of guaranteed value ranges from 0.4 percent to 2 percent. Approximately 65 percent of guaranteed value in this category is also subject to annual claim deductibles that range from 0.1 percent to 0.2 percent of guaranteed value (i.e., our reinsurance coverage would only pay total annual claims in excess of 0.1 percent to 0.2 percent of the total guaranteed value). Approximately 45 percent of guaranteed value in this category is also subject to an aggregate claim limit which was approximately $ 383 million as of September 30, 2013 . Approximately 75 percent of guaranteed value in this category has additional reinsurance coverage for GLB.	

•	Reinsurance programs covering GMDB and guaranteed minimum accumulation benefits (GMAB). This category accounts for approximately 15 percent of the total reinsured GLB guaranteed value and 15 percent of the total reinsured GMDB guaranteed value. These reinsurance programs are quota-share agreements with the quota-share decreasing as the ratio of account value to guaranteed value decreases. The quota-share is 100 percent for ratios between 100 percent and 75 percent, 60 percent for additional losses on ratios between 75 percent and 45 percent, and 30 percent for further losses on ratios below 45 percent. Approximately 35 percent of guaranteed value in this category is also subject to a claim deductible of 8.8 percent of guaranteed value (i.e., our reinsurance coverage would only pay when the ratio of account value to guaranteed value is below 91.2 percent).	

•	Reinsurance programs covering GMIB with an annual claim limit. This category accounts for approximately 55 percent of the total reinsured GLB guaranteed value. The annual claim limit is 10 percent of guaranteed value on over 95 percent of the guaranteed value in this category. Additionally, reinsurance programs in this category have an annual annuitization limit that ranges between 17.5 percent and 30 percent with approximately 45 percent of guaranteed value subject to an annuitization limit of 20 percent or under, and the remaining 55 percent subject to an annuitization limit of 30 percent. Approximately 40 percent of guaranteed value in this category is also subject to minimum annuity conversion factors that limit the exposure to low interest rates. Approximately 45 percent of guaranteed value in this category has additional reinsurance coverage for GMDB.	

•	Reinsurance programs covering GMIB with aggregate claim limit. This category accounts for approximately 30 percent of the total reinsured GLB guaranteed value. The aggregate claim limit for reinsurance programs in this category is approximately $ 1.9 billion. Additionally, reinsurance programs in this category have an annual annuitization limit of 20 percent and approximately 60 percent of guaranteed value in this category is also subject to minimum annuity conversion factors that limit the exposure to low interest rates. Approximately 40 percent of guaranteed value in this category has additional reinsurance coverage for GMDB.	

A third layer of risk management is the hedging strategy which looks to mitigate both long-term economic loss over time as well as dampen income statement volatility. ACE Tempest Life Re owned financial market instruments as part of the hedging strategy with a fair value asset of $ 17 million and $24 million at September 30, 2013 and December 31, 2012 , respectively. The instruments are substantially collateralized by our counterparties, on a daily basis.

We also limit the aggregate amount of variable annuity reinsurance guarantee risk we are willing to assume. The last substantive U.S. transaction was quoted in mid-2007 and the last transaction in Japan was quoted in late 2007. The aggregate number of policyholders is currently decreasing through policyholder withdrawals, annuitizations, and deaths at a rate of 5 percent – 10 percent annually.

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Note that GLB claims cannot occur for any reinsured policy until it has reached the end of its “waiting period”. The vast majority of policies we reinsure reach the end of their “waiting periods” in 2013 or later, as shown in the table below.

		
Year of first payment eligibility	Percent of living benefit
account values	
September 30, 2013 and prior	25%	
Remainder of 2013	5%	
2014	18%	
2015	6%	
2016	6%	
2017	19%	
2018	15%	
2019	5%	
2020 and after	1%	
Total	100%	

The following table presents the historical cash flows under these policies for the periods indicated. The amounts represent accrued past premium received and claims paid, split by benefit type.

																
 	Three Months Ended	 	 	Nine Months Ended	 	
 	September 30	 	 	September 30	 	
(in millions of U.S. dollars)	2013		 	2012		 	2013		 	2012		
Death Benefits (GMDB)	 	 	 	 	 	 	 	
Premium	$	19		 	$	21		 	$	59		 	$	64		
Less paid claims	11		 	24		 	53		 	76		
Net	$	8		 	$	(3	)	 	$	6		 	$	(12	)	
Living Benefits (Includes GMIB and GMAB)	 	 	 	 	 	 	 	
Premium	$	37		 	$	40		 	$	113		 	$	120		
Less paid claims	6		 	4		 	19		 	6		
Net	$	31		 	$	36		 	$	94		 	$	114		
Total VA Guaranteed Benefits	 	 	 	 	 	 	 	
Premium	$	56		 	$	61		 	$	172		 	$	184		
Less paid claims	17		 	28		 	72		 	82		
Net	$	39		 	$	33		 	$	100		 	$	102		

Death Benefits (GMDB)
For premiums and claims from VA contracts reinsuring GMDBs, at current market levels, we expect approximately $ 49 million of claims and $ 70 million of premium on death benefits over the next 12 months.

GLB (includes GMIB and GMAB)
Our GLBs predominantly include premiums and claims from VA contracts reinsuring GMIB and GMAB. Approximately 75 percent of our living benefit reinsurance clients’ policyholders are currently ineligible to trigger a claim payment. The vast majority of these policyholders become eligible between years 2013 and 2018. At current market levels, we expect approximately $8 million of claims and $138 million of premium on living benefits over the next 12 months.

Collateral
ACE Tempest Life Re holds collateral on behalf of most of its clients in the form of qualified assets in trust or letters of credit, typically in an amount sufficient for the client to obtain statutory reserve credit for the reinsurance. The timing of the calculation and amount of the collateral varies by client according to the particulars of the reinsurance treaty and the statutory reserve guidelines of the client’s domicile.

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Catastrophe management
We actively monitor our catastrophe risk accumulation around the world. The following modeled loss information reflects our in-force portfolio and reinsurance program at July 1, 2013.

The table below presents our modeled annual aggregate pre-tax probable maximum loss (PML), net of reinsurance, for 100-year and 250-year return periods for U.S. hurricanes and California earthquakes at September 30, 2013 and 2012 . The table also presents ACE’s corresponding share of pre-tax industry losses for each of the return periods for U.S. hurricanes and California earthquakes at September 30, 2013 and 2012. For example, according to the model, for the 1-in-100 return period scenario, there is a one percent chance that our losses incurred in any year from U.S. hurricanes could be in excess of $1,693 million (or 6.0 percent of our total shareholders’ equity at September 30, 2013 ). We estimate that at such hypothetical loss levels, ACE’s share of aggregate industry losses would be approximately one percent.

																													
 	 	U.S. Hurricanes	 	California Earthquakes	
 	 	September 30	 	September 30	 	September 30	 	September 30	
 	 	2013	 	2012	 	2013	 	2012	
Modeled Annual Aggregate Net PML	 	ACE	 	% of Total
Shareholders’
Equity	 	% of
Industry	 	ACE	 	ACE	 	% of Total
Shareholders’
Equity	 	% of
Industry	 	ACE	
(in millions of U.S. dollars, except for percentages)	 	 	 	 	 	 	 	 	 	 	 	 	
1-in-100	 	$	1,693		 	6.0	%	 	1.0	%	 	$	1,743		 	$	771		 	2.7	%	 	1.9	%	 	$	820		
1-in-250	 	$	2,268		 	8.0	%	 	1.0	%	 	$	2,325		 	$	1,015		 	3.6	%	 	1.6	%	 	$	1,094		

The modeling estimates of both ACE and industry loss levels are inherently uncertain owing to key assumptions. First, while the use of third-party catastrophe modeling packages to simulate potential hurricane and earthquake losses is prevalent within the insurance industry, the models are reliant upon significant meteorology, seismology, and engineering assumptions to estimate hurricane and earthquake losses. In particular, modeled hurricane and earthquake events are not always a representation of actual events and ensuing additional loss potential. Second, there is no universal standard in the preparation of insured data for use in the models and the running of the modeling software. Third, we are reliant upon third-party estimates of industry insured exposures and there is significant variation possible around the relationship between our loss and that of the industry following an event. Fourth, we assume that our reinsurance recoveries following an event are fully collectible. These loss estimates do not represent our potential maximum exposures and it is highly likely that our actual incurred losses would vary materially from the modeled estimates.

____________________________________________________________________________________________________________
Natural catastrophe property reinsurance program
ACE’s core property catastrophe reinsurance program provides protection against natural catastrophes impacting its primary property operations (i.e., excluding our Global Reinsurance and Life segments) and consists of two separate towers.

We regularly review our reinsurance protection and corresponding property catastrophe exposures. This may or may not lead to the purchase of additional reinsurance prior to a program’s renewal date. In addition, prior to each renewal date, we consider how much, if any, coverage we intend to buy and we may make material changes to the current structure in light of various factors, including modeled PML assessment at various return periods, reinsurance pricing, our risk tolerance and exposures, and various other structuring considerations.

There were no significant changes to ACE's coverage under its North American Core Property Catastrophe Program during the third quarter.  However, with respect to our International Property Catastrophe Program, we renewed the layers of reinsurance protection in excess of $150 million on our Core Program for the period from July 1, 2013 through June 30, 2014. We expanded our all perils coverage from $250 million to $350 million (by expanding perils covered in what was historically the $300 million to $450 million layer) and eliminated the $500 million to $550 million layer of coverage. There is an additional $75 million global top layer that continues to sit above the International Property Catastrophe Program and the North American Core Program that expires at January 1st and now attaches at $500 million on our International Program. There were no other significant changes in coverage from the expiring program. Refer to our 2012 Form 10-K for additional information.

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Crop Insurance
We are, and have been since the 1980s, one of the leading writers of crop insurance in the U.S. and have conducted that business through a managing general agent subsidiary of Rain and Hail. We provide protection throughout the U.S. on a variety of crops and are therefore geographically diversified, which reduces the risk of exposure to a single event or a heavy accumulation of losses in any one region. Our crop insurance business comprises two components - Multiple Peril Crop Insurance (MPCI) and crop-hail insurance.

The MPCI program is offered in conjunction with the U.S. Department of Agriculture (USDA). The policies cover revenue shortfalls or production losses due to natural causes such as drought, excessive moisture, hail, wind, frost, insects, and disease. Generally, policies have deductibles ranging from 10 percent to 50 percent of the insured's risk. The USDA's Risk Management Agency (RMA) sets the policy terms and conditions, rates and forms, and is also responsible for setting compliance standards. As a participating company, we report all details of policies underwritten to the RMA and are party to a Standard Reinsurance Agreement (SRA). The SRA sets out the relationship between private insurance companies and the Federal Crop Insurance Corporation (FCIC) concerning the terms and conditions regarding the risks each will bear including the pro-rata and state stop-loss provisions which allows companies to limit the exposure of any one state or group of states on their underwriting results. In addition to the pro-rata and excess of loss reinsurance protections inherent in the SRA, we also purchase third party proportional and stop-loss reinsurance for our MPCI business to reduce our exposure.

Each year the RMA issues a final SRA for the subsequent reinsurance year. In June 2013, the RMA released the 2014 SRA which establishes the terms and conditions for the 2014 reinsurance year (i.e., July 1, 2013 through June 30, 2014) that replaced the 2013 SRA.  There were no significant changes in the terms and conditions.

On the MPCI business, we recognize net premiums written as soon as estimable, which is generally when we receive acreage reports from the policyholders on the various crops throughout the U.S. This allows us to best determine the premium associated with the liability that is being planted. The MPCI program has specific timeframes as to when producers must report acreage to us and in certain cases, the reporting occurs after the close of the respective reinsurance year. Once the net premium written has been recorded, the premium is then earned over the growing season for the crops. A majority of the crops that are covered in the program are typically subject to the SRA in effect at the beginning of the year. Given the major crops covered in the program, we typically see a substantial written and earned premium impact in the second and third quarters.

The pricing of MPCI premium is determined using a number of factors including commodity prices and related volatility. For instance, in most states the pricing for the MPCI Revenue Product for corn includes a factor that is based on the average price in February of the Chicago Board of Trade December corn futures. To the extent that the corn commodity prices are higher in February than they were in the previous February, and all other factors are the same, the increase in corn prices will increase the corn premium year over year.

Our crop-hail program is a private offering. Premium is earned on the crop-hail program over the coverage period of the policy. Given the very short nature of the growing season, most crop-hail business is typically written in the second and third quarters with the earned premium also more heavily occurring during this time frame. We use industry data to develop our own rates and forms for the coverage offered. The policy primarily protects farmers against yield reduction caused by hail and/or fire, and related costs such as transit to storage. We offer various deductibles to allow the grower to partially self-insure for a reduced premium cost. We limit our crop-hail exposures through the use of township liability limits and third party proportional and stop-loss reinsurance on our net retained hail business.

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Liquidity
We anticipate that positive cash flows from operations (underwriting activities and investment income) should be sufficient to cover cash outflows under most loss scenarios for the near term. In addition to cash from operations, routine sales of investments, and financing arrangements, we have agreements with a third-party bank provider which implemented two international multi-currency notional cash pooling programs to enhance cash management efficiency during periods of short-term timing mismatches between expected inflows and outflows of cash by currency. The programs allow us to optimize investment income by avoiding portfolio disruption. Should the need arise, we generally have access to capital markets and available credit facilities. At September 30, 2013 , our available credit lines totaled $1.9 billion and usage to support issued letters of credit was $1.3 billion. Our access to funds under existing credit facilities is dependent on the ability of the banks that are parties to the facilities to meet their funding commitments. Our existing credit facilities have remaining terms expiring between 2014 and 2017 and require that we maintain certain financial covenants, all of which we met at September 30,

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2013 . Should any of our existing credit providers experience financial difficulty, we may be required to replace credit sources, possibly in a difficult market. If we cannot obtain adequate capital or sources of credit on favorable terms, on a timely basis, or at all, our business, operating results, and financial condition could be adversely affected. To date, we have not experienced difficulty accessing any of our credit facilities . Refer to “Credit Facilities” in our 2012 Form 10-K for additional information.

The payment of dividends or other statutorily permissible distributions from our operating companies are subject to the laws and regulations applicable to each jurisdiction as well as the need to maintain capital levels adequate to support the insurance and reinsurance operations, including financial strength ratings issued by independent rating agencies. During the nine months ended September 30, 2013 , we were able to meet all of our obligations, including the payments of dividends on our Common Shares, with our net cash flows.

We assess which subsidiaries to draw dividends from based on a number of factors. Considerations such as regulatory and legal restrictions as well as the subsidiary’s financial condition are paramount to the dividend decision. ACE Limited did not receive any dividends from its Bermuda subsidiaries during the nine months ended September 30, 2013 and 2012 .

The payment of any dividends from AGM or its subsidiaries is subject to applicable U.K. insurance laws and regulations. In addition, the release of funds by Syndicate 2488 to subsidiaries of AGM is subject to regulations promulgated by the Society of Lloyd’s. The U.S. insurance subsidiaries of ACE INA may pay dividends, without prior regulatory approval, subject to restrictions set out in state law of the subsidiary’s domicile (or, if applicable, commercial domicile). ACE INA’s international subsidiaries are also subject to insurance laws and regulations particular to the countries in which the subsidiaries operate. These laws and regulations sometimes include restrictions that limit the amount of dividends payable without prior approval of regulatory insurance authorities. ACE Limited did not receive any dividends from AGM or ACE INA during the nine months ended September 30, 2013 and 2012 . Debt issued by ACE INA is serviced by statutorily permissible distributions by ACE INA’s insurance subsidiaries to ACE INA as well as other group resources.

Cash Flows
Sources of liquidity include cash from operations, routine sales of investments, and financing arrangements. The following is a discussion of our cash flows for the nine months ended September 30, 2013 and 2012 .

Our consolidated net cash flows from operating activities were $2.7 billion in the nine months ended September 30, 2013 , compared with $3.0 billion in the prior year period. The decrease in operating cash flows was primarily due to $539 million of higher premiums remitted to the federal government under the MPCI program in 2013 relative to the prior year period. Prior year remittances were primarily paid in the fourth quarter 2012. The decrease was partially offset by lower income taxes paid of $173 million.

Our consolidated net cash flows used for investing activities were $3.1 billion in the nine months ended September 30, 2013 , compared with $2.7 billion in the prior year period. The increase in cash flows used for investing activities was primarily due to the acquisitions of ABA Seguros and Fianzas Monterrey in the second quarter 2013.

Our consolidated net cash flows from financing activities were $552 million in the nine months ended September 30, 2013 , compared with net cash flows used for financing activities of $271 million in the prior year period. Financing cash flows for the nine months ended September 30, 2013 included $947 million of proceeds from the issuance of long-term debt. Refer to Note 6 to the Consolidated Financial Statements for additional information on the long-term debt issuance. The prior year period financing cash flows included $151 million of proceeds from the issuance of short-term debt, net of repayments. Share repurchases and dividends paid on Common Shares were $233 million and $343 million , respectively, in the nine months ended September 30, 2013 , compared with $11 million and $484 million , respectively, in the nine months ended September 30, 2012. Dividends paid on Common Shares decreased due to the accelerated payment of the fourth quarter 2012 dividend in December 2012, which would normally have been paid during the first quarter 2013.

Both internal and external forces influence our financial condition, results of operations, and cash flows. Claim settlements, premium levels, and investment returns may be impacted by changing rates of inflation and other economic conditions. In many cases, significant periods of time, ranging up to several years or more, may lapse between the occurrence of an insured loss, the reporting of the loss to us, and the settlement of the liability for that loss.

In the current low interest rate environment, we utilize repurchase agreements as a low-cost alternative for short-term funding needs and to address short-term cash timing differences without disrupting our investment portfolio holdings. At September 30, 2013 , there were $1.4 billion in repurchase agreements outstanding.

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Capital Resources
Capital resources consist of funds deployed or available to be deployed to support our business operations. The following table summarizes the components of our capital resources:

								
 	September 30		 	December 31		
(in millions of U.S. dollars, except for percentages)	2013		 	2012		
Short-term debt	$	1,902		 	$	1,401		
Long-term debt	3,807		 	3,360		
Total debt	5,709		 	4,761		
Trust preferred securities	309		 	309		
Total shareholders’ equity	28,218		 	27,531		
Total capitalization	$	34,236		 	$	32,601		
Ratio of debt to total capitalization	16.7	%	 	14.6	%	
Ratio of debt plus trust preferred securities to total capitalization	17.6	%	 	15.6	%	

In June 2013, we reclassified $500 million of 5.875 percent senior notes, due to mature on June 15, 2014, from Long-term debt to Short-term debt in the consolidated balance sheet.

Our ratios of debt to total capitalization and debt plus trust preferred securities to total capitalization increased primarily due to the issuance of $ 475 million of 2.7 percent senior notes due March 2023 and $ 475 million of 4.15 percent senior notes due March 2043 during the nine months ended September 30, 2013 . The proceeds from the debt issuance are expected to be used to repay at maturity the $500 million 5.875 percent senior notes due June 2014 and the $450 million 5.6 percent senior notes due May 2015.

The following table reports the significant movements in our shareholders’ equity:  

				
 	Nine Months Ended		
(in millions of U.S. dollars)	September 30, 2013		
Balance – beginning of period	$	27,531		
Net income	2,760		
Change in net unrealized depreciation on investments, net of tax	(1,314	)	
Dividends on Common Shares	(518	)	
Change in net cumulative translation, net of tax	(210	)	
Repurchase of shares	(233	)	
Share-based compensation expense	138		
Exercise of stock options	65		
Other movements, net of tax	(1	)	
Balance – end of period	$	28,218		

During the nine months ended September 30, 2013 , we repurchased $233 million of Common Shares in a series of open market transactions under the November 2012, August 2011 and November 2010 Board of Directors authorizations, primarily to offset dilution from our incentive compensation plans. At September 30, 2013 , $228 million in share repurchase authorizations remained through December 31, 2013. At September 30, 2013 there were 2,762,440 Common Shares in treasury with a weighted average cost of $80.27 per share.

We generally maintain the ability to issue certain classes of debt and equity securities via an unlimited Securities and Exchange Commission (SEC) shelf registration which is renewed every three years. This allows us capital market access for refinancing as well as for unforeseen or opportunistic capital needs. Our current shelf registration on file with the SEC expires in December 2014.

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Dividends
We have paid dividends each quarter since we became a public company in 1993. Under Swiss law, dividends must be stated in Swiss francs though dividend payments are made by ACE in U.S. dollars. Following ACE’s redomestication to Switzerland in July 2008 through March 2011, dividends were distributed by way of a par value reduction. At our May 2011 annual general meeting, our shareholders approved dividend distributions from capital contribution reserves (Additional paid-in capital) through the transfer of dividends from Additional paid-in capital to Retained earnings. At our May 2012 annual general meeting, our shareholders approved an annual dividend distribution for the following year by way of a par value reduction equal to $1.96 per share, or CHF 1.80 per share, calculated using the USD/CHF exchange rate as published in the Wall Street Journal on May 10, 2012. At our May 2013 annual general meeting, our shareholders approved an annual dividend distribution for the following year by way of a par value reduction equal to $2.04 per share, or CHF 1.92 per share, calculated using the USD/CHF exchange rate as published in the Wall Street Journal on May 10, 2013.

The annual dividend approved in May 2013 is payable in four quarterly installments, with each installment equaling $ 0.51 per share, provided that the Swiss franc equivalent of that amount per share (based on the then-current USD/CHF exchange rate), taken together with the Swiss franc equivalents of all other installments of this annual dividend, will not exceed 150 percent of CHF 1.92 (the aggregate distribution cap). If the Swiss franc equivalent of an upcoming dividend installment would cause the aggregate distribution cap to be exceeded, then that dividend installment will be reduced to equal the Swiss franc amount remaining available under the aggregate distribution cap, and the U.S. dollar amount distributed for that installment will be the then-applicable U.S. dollar equivalent of the remaining Swiss franc amount.

The following table represents dividends paid per Common Share to shareholders of record on each of the following dates:  

					
Shareholders of record as of:	  	Dividends paid as of:	  	 	
March 28, 2013	  	April 12, 2013	  	$0.49 (CHF 0.46)	
July 23, 2013	  	August 13, 2013	  	$0.51 (CHF 0.48)	
September 30, 2013	 	October 21, 2013	 	$0.51 (CHF 0.46)	

ITEM 3. Quantitative and Qualitative Disclosures about Market Risk
Refer to Item 7A included in our 2012 Form 10-K.

Reinsurance of GMDB and GLB guarantees
Our net income is directly impacted by changes in the benefit reserves calculated in connection with the reinsurance of variable annuity guarantees, primarily GMDB and GLB. The benefit reserves are calculated in accordance with the guidance related to accounting and reporting by insurance enterprises for certain non-traditional long-duration contracts and for separate accounts. Changes in the benefit reserves are reflected as policy benefits expense, which is included in life underwriting income. In addition, our net income is directly impacted by the change in the fair value of the GLB liability (FVL), which is classified as a derivative for accounting purposes. The FVL established for a GLB reinsurance contract represents the difference between the fair value of the contract and the benefit reserves. Changes in the FVL, net of associated changes in the calculated benefit reserves, are reflected as realized gains or losses.

ACE views its variable annuity reinsurance business as having a similar risk profile to that of catastrophe reinsurance with the probability of long-term economic loss relatively small, at the time of pricing. Adverse changes in market factors and policyholder behavior will have an impact on both life underwriting income and net income. When evaluating these risks, we expect to be compensated for taking both the risk of a cumulative long-term economic net loss, as well as the short-term accounting variations caused by these market movements. Therefore, we evaluate this business in terms of its long-term economic risk and reward.

At September 30, 2013 , management established benefit reserves based on the benefit ratio calculated using assumptions reflecting management’s best estimate of the future performance of the variable annuity line of business. Management exercises judgment in determining the extent to which short-term market movements impact the benefit reserves. The benefit reserves are based on the calculation of a long-term benefit ratio (or loss ratio) for the variable annuity guarantee reinsurance. Despite the long-term nature of the risk, the benefit ratio calculation is impacted by short-term market movements that may be judged by management to be temporary or transient. Management’s best estimate reflected a judgment that the equity markets will exhibit growth somewhat lower than historical average levels. Management regularly examines both quantitative and qualitative analysis and for the quarter ended September 30, 2013 , determined that no change to the benefit ratio was warranted. The

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benefit ratio used to establish the benefit reserves at September 30, 2013 , has averaged less than 1/4 standard deviation from the calculated benefit ratios, averaging the periodic results from a 2 -year rolling period ending September 30, 2013 .

The guidance requires us to “regularly evaluate estimates used and adjust the liability balance... if actual experience or other evidence suggests that earlier assumptions should be revised.” ACE evaluates its estimates regularly and management uses judgment to determine the extent to which the assumptions underlying the benefit ratio calculation used to establish benefit reserves should be adjusted. The benefit ratio will be calculated based on management’s expectation for the short-term and long-term performance of the variable annuity guarantee liability. Management’s quantitative analysis includes a review of the differential between the benefit ratio used at the most recent valuation date and the benefit ratio calculated on subsequent dates. The differential is measured in terms of the standard deviation of the distribution of benefit ratios (reflecting 1,000 stochastic scenarios) calculated on subsequent dates.

The benefit reserves and FVL calculations are directly affected by market factors, including equity levels, interest rate levels, credit risk, and implied volatilities, as well as policyholder behaviors, such as annuitization and lapse rates. The tables below assume no changes to the benefit ratio used to establish the benefit reserves at September 30, 2013 and show the sensitivity, at September 30, 2013 , of the FVL associated with the variable annuity guarantee reinsurance portfolio. In addition, the tables below present the sensitivity of the fair value of specific derivative instruments held (hedge value) to partially offset the risk in the variable annuity guarantee reinsurance portfolio. The tables below are estimates of the sensitivities to instantaneous changes in economic inputs or actuarial assumptions.

The tables below do not reflect the expected quarterly run rate of net income generated by the variable annuity guarantee reinsurance portfolio if markets remain unchanged during the period. All else equal, if markets remain unchanged during the period, the Gross FVL will increase, resulting in a realized loss. The realized loss occurs primarily because, during the period, we will collect premium while paying little or no claims on our GLB reinsurance (since most policies are not eligible to annuitize until after September 30, 2013 ). This increases the Gross FVL because future premiums are lower by the amount collected in the quarter, and also because future claims are discounted for a shorter period. We refer to this increase in Gross FVL as “timing effect”. The unfavorable impact of timing effect on our Gross FVL in a quarter is not reflected in the sensitivity tables below. For this reason, when using the tables below to estimate the sensitivity of Gross FVL in the fourth quarter to various changes, it is necessary to assume an additional $25 million to $55 million increase in Gross FVL and realized losses. However, the impact to Net income is substantially mitigated because the majority of this realized loss is offset by the positive quarterly run rate of life underwriting income generated by the variable annuity guarantee reinsurance portfolio if markets remain unchanged during the period. Note that both the timing effect and the quarterly run rate of life underwriting income change over time as the book ages.

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Interest Rate Shock	Worldwide Equity Shock	
(in millions of U.S. dollars)	+10%	 	Flat	 	-10%	 	-20%	 	-30%	 	-40%	
+100 bps	(Increase)/decrease in Gross FVL	$	396		 	$	211		 	$	(36	)	 	$	(343	)	 	$	(722	)	 	$	(1,170	)	
 	Increase/(decrease) in hedge value	(163	)	 	(1	)	 	163		 	331		 	503		 	681		
 	Increase/(decrease) in net income	$	233		 	$	210		 	$	127		 	$	(12	)	 	$	(219	)	 	$	(489	)	
Flat	(Increase)/decrease in Gross FVL	$	236		 	$	—		 	$	(298	)	 	$	(671	)	 	$	(1,116	)	 	$	(1,625	)	
 	Increase/(decrease) in hedge value	(162	)	 	—		 	165		 	333		 	506		 	685		
 	Increase/(decrease) in net income	$	74		 	$	—		 	$	(133	)	 	$	(338	)	 	$	(610	)	 	$	(940	)	
-100 bps	(Increase)/decrease in Gross FVL	$	(22	)	 	$	(313	)	 	$	(683	)	 	$	(1,132	)	 	$	(1,648	)	 	$	(2,218	)	
 	Increase/(decrease) in hedge value	(162	)	 	1		 	167		 	336		 	510		 	689		
 	Increase/(decrease) in net income	$	(184	)	 	$	(312	)	 	$	(516	)	 	$	(796	)	 	$	(1,138	)	 	$	(1,529	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
Sensitivities to Other Economic Variables	AA-rated Credit Spreads	 	 Interest Rate Volatility	 	 Equity Volatility	
(in millions of U.S. dollars)	+100	 	-100	 	+2%	 	-2%	 	+2%	 	-2%	
(Increase)/decrease in Gross FVL	$	94		 	$	(107	)	 	$	(2	)	 	$	1		 	$	(21	)	 	$	19		
Increase/(decrease) in hedge value	—		 	—		 	—		 	—		 	2		 	(2	)	
Increase/(decrease) in net income	$	94		 	$	(107	)	 	$	(2	)	 	$	1		 	$	(19	)	 	$	17		
 	 	 	 	 	 	 	 	 	 	 	 	
Sensitivities to Actuarial Assumptions	 	 	 	 	Mortality	
(in millions of U.S. dollars)	 	 	 	 	+20%	 	+10%	 	-10%	 	-20%	
(Increase)/decrease in Gross FVL	 	 	 	 	$	24		 	$	12		 	$	(12	)	 	$	(25	)	
Increase/(decrease) in hedge value	 	 	 	 	—		 	—		 	—		 	—		
Increase/(decrease) in net income	 	 	 	 	$	24		 	$	12		 	$	(12	)	 	$	(25	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Lapses	
(in millions of U.S. dollars)	 	 	 	 	+50%	 	+25%	 	-25%	 	-50%	
(Increase)/decrease in Gross FVL	 	 	 	 	$	258		 	$	144		 	$	(181	)	 	$	(411	)	
Increase/(decrease) in hedge value	 	 	 	 	—		 	—		 	—		 	—		
Increase/(decrease) in net income	 	 	 	 	$	258		 	$	144		 	$	(181	)	 	$	(411	)	
 	 	 	 	 	 	 	 	 	 	 	 	 	
 	 	 	 	 	 	Annuitization	
(in millions of U.S. dollars)	 	 	 	 	+50%	 	+25%	 	-25%	 	-50%	
(Increase)/decrease in Gross FVL	 	 	 	 	$	(244	)	 	$	(139	)	 	$	176		 	$	351		
Increase/(decrease) in hedge value	 	 	 	 	—		 	—		 	—		 	—		
Increase/(decrease) in net income	 	 	 	 	$	(244	)	 	$	(139	)	 	$	176		 	$	351		

The above tables assume equity shocks impact all global equity markets equally and that the interest rate shock is a parallel shift in the U.S. yield curve. Our liabilities are sensitive to global equity markets in the following proportions: 70 percent— 80 percent U.S. equity, 10 percent— 20 percent international equity ex-Japan, 5 percent— 15 percent Japan equity. Our current hedge portfolio is sensitive to global equity markets in the following proportions: 100 percent U.S. equity. We would suggest using the S&P 500 index as a proxy for U.S. equity, the MSCI EAFE index as a proxy for international equity, and the TOPIX as a proxy for Japan equity.

Our liabilities are also sensitive to global interest rates at various points on the yield curve, mainly the U.S. Treasury curve in the following proportions: 5 percent— 15 percent short-term rates (maturing in less than 5 years), 20 percent— 30 percent medium-term rates (maturing between 5 years and 10 years, inclusive), and 60 percent— 70 percent long-term rates (maturing beyond 10 years). A change in AA-rated credit spreads (AA-rated credit spreads are a proxy for both our own credit spreads and

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the credit spreads of the ceding insurers) impacts the rate used to discount cash flows in the fair value model. The hedge sensitivity is from September 30, 2013 market levels.

The above sensitivities are not directly additive because changes in one factor will affect the sensitivity to changes in other factors. Also, the sensitivities do not scale linearly and may be proportionally greater for larger movements in the market factors. Sensitivities may also vary due to foreign exchange rate fluctuations. The calculation of the FVL is based on internal models that include assumptions regarding future policyholder behavior, including lapse, annuitization, and asset allocation. These assumptions impact both the absolute level of the FVL as well as the sensitivities to changes in market factors shown above. Additionally, actual sensitivity of our net income may differ from those disclosed in the tables above due to differences between short-term market movements and management judgment regarding the long-term assumptions implicit in our benefit ratios. Furthermore, the sensitivities above could vary by multiples of the sensitivities in the tables above.

Variable Annuity Net Amount at Risk
The tables below present the net amount at risk at September 30, 2013 following an immediate change in equity market levels, assuming all global equity markets are impacted equally. For further information on the net amount at risk, refer to Note 5 to the consolidated financial statements.

a) Reinsurance covering the GMDB risk only

																								
 	Equity Shock	
(in millions of U.S. dollars, except percentages)	+20%	 	Flat	 	-20%	 	-40%	 	-60%	 	-80%	
GMDB net amount at risk	$	502		 	$	751		 	$	1,292		 	$	1,892		 	$	1,911		 	$	1,628		
Claims at 100% immediate mortality	790		 	618		 	361		 	296		 	265		 	239		

The treaty claim limits function as a ceiling on the net amount at risk as equity markets fall. In addition, the claims payable if all of the policyholders were to die immediately declines as equity markets fall due to the specific nature of these claim limits, many of which are annual claim limits calculated as a percentage of the reinsured account value. There is also some impact due to a small portion of the GMDB reinsurance under which claims are positively correlated to equity markets (claims decrease as equity markets fall).

b) Reinsurance covering the GLB risk only

																								
 	Equity Shock	
(in millions of U.S. dollars, except percentages)	+20%	 	Flat	 	-20%	 	-40%	 	-60%	 	-80%	
GLB net amount at risk	$	67		 	$	220		 	$	800		 	$	1,701		 	$	2,491		 	$	2,749		

The treaty claim limits cause the net amount at risk to increase at a declining rate as equity markets fall.

c) Reinsurance covering both the GMDB and GLB risks on the same underlying policyholders

																								
 	Equity Shock	
(in millions of U.S. dollars, except percentages)	+20%	 	Flat	 	-20%	 	-40%	 	-60%	 	-80%	
GMDB net amount at risk	$	55		 	$	85		 	$	125		 	$	165		 	$	200		 	$	232		
GLB net amount at risk	78		 	241		 	694		 	1,336		 	1,959		 	2,388		
Claims at 100% immediate mortality	37		 	199		 	552		 	792		 	1,006		 	1,186		

The treaty limits control the increase in the GMDB net amount at risk as equity markets fall. The GMDB net amount at risk continues to grow as equity markets fall because most of these reinsurance treaties do not have annual claim limits calculated as a percentage of the underlying account value.

The treaty limits cause the GLB net amount at risk to increase at a declining rate as equity markets fall.

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ITEM 4. Controls and Procedures
ACE’s management, with the participation of ACE’s Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of ACE’s disclosure controls and procedures as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Securities Exchange Act of 1934 as of September 30, 2013 . Based upon that evaluation, ACE’s Chief Executive Officer and Chief Financial Officer concluded that ACE’s disclosure controls and procedures are effective in allowing information required to be disclosed in reports filed under the Securities and Exchange Act of 1934 to be recorded, processed, summarized and reported within time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to ACE’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding required disclosure.

There has been no change in ACE’s internal controls over financial reporting during the three months ended September 30, 2013 that has materially affected, or is reasonably likely to materially affect, ACE’s internal controls over financial reporting.

PART II OTHER INFORMATION

ITEM 1. Legal Proceedings
The information required with respect to this item is included in Note 7 d) to the Consolidated Financial Statements which is hereby incorporated by reference.

ITEM 1A. Risk Factors
Refer to “Risk Factors” under Item 1A of Part I of our 2012 Form 10-K. There have been no material changes to the risk factors disclosed in Item 1A of Part I of our 2012 Form 10-K.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds and Issuer Repurchases of Equity Securities

Issuer’s Repurchases of Equity Securities
The following table provides information with respect to purchases by ACE of its Common Shares during the three months ended September 30, 2013 :

														
Period	Total
Number of
Shares
Purchased (1)		 	Average Price Paid per Share		 	 Total Number of Shares Purchased as Part of Publicly Announced Plan (2)		 	Approximate Dollar
Value of Shares that
May Yet be
Purchased Under the Plan (3)		
July 1 through July 31	2,347		 	$	89.41		 	—		 	$	249	 million	
August 1 through August 31	188,734		 	$	89.64		 	188,544		 	$	232	 million	
September 1 through September 30	51,067		 	$	87.93		 	50,000		 	$	228	 million	
Total	242,148		 	 	 	238,544		 	 	
 
(1) This column primarily represents open market share repurchases. Other activity during the three months ended September 30, 2013 is related to the surrender to ACE of Common Shares to satisfy tax withholding obligations in connection with the vesting of restricted stock issued to employees and the exercising of options by employees.
(2) The aggregate value of shares purchased in the three months ended September 30, 2013 as part of the publicly announced plan was $21 million.
(3) Refer to Note 8 to the Consolidated Financial Statements for more information on the ACE Limited securities repurchase authorization. The $ 228 million of remaining authorizations as of September 30, 2013 expire on December 31, 2013.

ITEM 6. Exhibits
Refer to the Exhibit Index.

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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.

		
 	ACE LIMITED	
 	(Registrant)	
 	 	
October 30, 2013	/s/ Evan G. Greenberg	
 	Evan G. Greenberg	
 	Chairman, President and Chief Executive Officer	
 	 	
October 30, 2013	/s/ Philip V. Bancroft	
 	Philip V. Bancroft	
 	Chief Financial Officer	

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 	 	 	 	Incorporated by Reference	 	 	
Exhibit
Number	 	Exhibit Description	 	Form	 	Original
Number	 	Date Filed	 	Filed
Herewith	
3.1	 	Articles of Association of the Company, as amended and restated	 	8-K	 	3	 	October 1, 2013	 	 	
 	 	 	 	 	 	 	 	 	 	 	
3.2	 	Organizational Regulations of the Company, as amended and restated	 	8-K	 	3	 	August 16, 2013	 	 	
 	 	 	 	 	 	 	 	 	 	 	
4.1	 	Articles of Association of the Company, as amended and restated	 	8-K	 	4	 	October 1, 2013	 	 	
 	 	 	 	 	 	 	 	 	 	 	
4.2	 	Organizational Regulations of the Company, as amended and restated	 	8-K	 	4	 	August 16, 2013	 	 	
 	 	 	 	 	 	 	 	 	 	 	
4.3	 	Form of 2.70 percent Senior Notes due 2023	 	8-K	 	4.1	 	March 13, 2013	 	 	
 	 	 	 	 	 	 	 	 	 	 	
4.4	 	Form of 4.15 percent Senior Notes due 2043	 	8-K	 	4.2	 	March 13, 2013	 	 	
 	 	 	 	 	 	 	 	 	 	 	
4.5	 	First Supplemental Indenture dated as of March 13, 2013 to the Indenture dated as of August 1, 1999 among ACE INA Holdings, Inc., as Issuer, ACE Limited, as Guarantor, and The Bank of New York Mellon Trust Company, N.A., as Successor Trustee	 	8-K	 	4.3	 	March 13, 2013	 	 	
 	 	 	 	 	 	 	 	 	 	 	
10.1*	 	Description of Directors Compensation	 	 	 	 	 	 	 	X	
 	 	 	 	 	 	 	 	 	 	 	
10.2*	 	Form of Restricted Stock Unit Award Terms under the ACE Limited 2004 Long-Term Incentive Plan
	 	 	 	 	 	 	 	X	
 	 	 	 	 	 	 	 	 	 	 	
10.3*	 	Form of Incentive Stock Option Terms under the ACE Limited 2004 Long-Term Incentive Plan
	 	 	 	 	 	 	 	X	
 	 	 	 	 	 	 	 	 	 	 	
10.4*	 	Form of Non-Qualified Stock Option Terms under the ACE Limited 2004 Long-Term Incentive Plan
	 	 	 	 	 	 	 	X	
 	 	 	 	 	 	 	 	 	 	 	
10.5*	 	ACE Limited Elective Deferred Compensation Plan (as amended and restated effective January 1, 2011)
	 	 	 	 	 	 	 	X	
 	 	 	 	 	 	 	 	 	 	 	
10.6*	 	ACE Limited Supplemental Retirement Plan (as amended and restated effective January 1, 2011)
	 	 	 	 	 	 	 	X	
 	 	 	 	 	 	 	 	 	 	 	
10.7*	 	ACE USA Officer Deferred Compensation Plan (as amended and restated effective January 1, 2011)
	 	 	 	 	 	 	 	X	
 	 	 	 	 	 	 	 	 	 	 	
10.8*	 	Separation and Release Agreement between the Company and Robert Cusumano, dated July 24, 2013	 	 	 	 	 	 	 	X	
 	 	 	 	 	 	 	 	 	 	 	
31.1	 	Certification Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002	 	 	 	 	 	 	 	X	
 	 	 	 	 	 	 	 	 	 	 	
31.2	 	Certification Pursuant to Section 302 of The Sarbanes-Oxley Act of 2002	 	 	 	 	 	 	 	X	
 	 	 	 	 	 	 	 	 	 	 	
32.1	 	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002	 	 	 	 	 	 	 	X	
 	 	 	 	 	 	 	 	 	 	 	
32.2	 	Certification Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of The Sarbanes-Oxley Act of 2002	 	 	 	 	 	 	 	X	

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101.1	 	The following financial information from ACE Limited’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 formatted in XBRL: (i) Consolidated Balance Sheets at September 30, 2013, and December 31, 2012; (ii) Consolidated Statements of Operations and Comprehensive Income for the three and nine months ended September 30, 2013 and 2012; (iii) Consolidated Statements of Shareholders’ Equity for the nine months ended September 30, 2013 and 2012; (iv) Consolidated Statements of Cash Flows for the nine months ended September 30, 2013 and 2012; and (v) Notes to Consolidated Financial Statements	 	 	 	 	 	 	 	X	
* Management Contract or Compensation Plan

88

Exhibit 10.1
ACE Limited
Outside Directors Compensation Parameters
August 2013

•	Annual Retainer Fee of $260,000. Paid $160,000 in restricted stock and $100,000 cash or, at the election of the director, $260,000 in restricted stock. Includes expectation of service on up to two committees (not counting service on Executive Committee). No fees are payable for regular board or committee meetings.	

•	Annual premiums for committee chairs and lead director:	

—     Audit–$25,000        
—     Compensation–$20,000    
—     Risk & Finance–$15,000
—     Nominating & Governance–$12,000        
—     Lead director–$50,000

•	Annual premiums for selected committee service (non-chair): None.	

•	Committee chair and lead director service premiums are payable in cash quarterly or, at the election of the director, in restricted stock annually.	

•	Meeting fees for “special” meetings (required to consider transactions or other special circumstances, as determined jointly by the Lead Director and Chairman): $2,000 per telephone meeting, $3,000 for ‘in person’ meetings. Payable in cash quarterly.	

•	Restricted stock will be awarded at beginning of the plan year (i.e. the date of the Annual General Meeting) and become non-forfeitable at end of the plan year, provided that the grantee has remained an ACE director continuously during that plan year. Increases shall be paid on a pro-rated basis, based on date of award.	

•	Equity ownership maintenance for outside directors:	

•	Minimum equity ownership: $400,000.	

•	Each Outside Director has until the fifth anniversary of his or her initial election to the Board of Directors to achieve this minimum.	

•	Previously granted restricted stock units (whether or not vested) and restricted stock (whether or not vested) shall be counted toward achieving this minimum.	

•	Stock options shall not be counted toward achieving this minimum.	

•	Once a given Outside Director has achieved the $400,000 minimum equity ownership, such requirement shall remain satisfied going forward as long as he or she retains the number of shares valued at $400,000 based on the NYSE closing price for the Company’s Common Shares as of the date such minimum threshold is initially met.	

•	Any vested shares held by an Outside Director in excess of the minimum share equivalent specified above may be sold at such Outside Director’s discretion.	

•	Shares may be sold after consultation with General Counsel.    	

Exhibit 10.2
Restricted Stock Unit Award Terms
under the
ACE Limited 2004 Long-Term Incentive Plan
The Participant has been granted a Restricted Stock Unit Award by ACE Limited (the "Company") under the ACE Limited 2004 Long-Term Incentive Plan (the "Plan"). The Restricted Stock Unit Award shall be subject to the following Restricted Stock Unit Award Terms:
1. Terms of Award . Subject to the following Restricted Stock Unit Award Terms, the Participant has been granted the right to receive shares of Stock of the Company (“Units”) as of the Delivery Date. Each “Unit” represents the right to receive one share of Stock. The following words and phrases used in these Restricted Stock Unit Award Terms shall have the meanings set forth in this paragraph 1:

(a) The "Participant" is the individual recipient of the Restricted Stock Unit Award on the specified Grant Date.

(b) The "Grant Date" is [Insert the date] .

(c) The number of "Units" shall be that number of Units awarded to the Participant on the Grant Date as reflected in the corporate records and shown in the Record-Keeping System in the Participant’s individual account records.

(d) The “Delivery Date” shall be end of the Restricted Period with respect to the applicable Units. However, notwithstanding the preceding sentence, if the Participant would be eligible to retire in accordance with paragraph 2(d) (determined without regard to clauses 9(f)(i) and (ii)) on or at any time after the Grant Date and prior to the last day of the Restricted Period with respect to any Installment of Units as determined in accordance with the Vesting Schedule set forth in paragraph 2:

(i) The occurrence of a Change in Control shall be disregarded for purposes of determining the Delivery Date of such Installments unless the Change in Control satisfies the requirements of Treas. Reg. §1.409A-3(i)(5), or distribution is otherwise permitted under Code §409A upon such Change in Control; provided that this sentence shall not affect the vesting of the Units upon a Change in Control in accordance with subparagraph 2(c).

(ii) The occurrence of a Long-Term Disability shall be disregarded for purposes of determining the Delivery Date of such Units; provided that this sentence shall not affect the vesting of the Units upon the occurrence of a Long-Term Disability in accordance with subparagraph 2(b).

(e) Other words and phrases used in these Restricted Stock Unit Award Terms are defined pursuant to paragraph 9 or elsewhere in these Restricted Stock Unit Award Terms.

2. Restricted Period . Subject to the limitations of these Restricted Stock Unit Award Terms, the "Restricted Period" for each Installment of Units shall begin on the Grant Date and end as described in the following schedule (the “Vesting Schedule”) (but only if the Date of Termination has not occurred before end of the Restricted Period):

		
VESTING SCHEDULE	
INSTALLMENT	RESTRICTED
PERIOD WILL
END ON:	
¼ of Restricted Stock Units	One year anniversary of the Grant Date	
¼ of Restricted Stock Units	Two year anniversary of the Grant Date	
¼ of Restricted Stock Units	Three year anniversary of the Grant Date	
¼ of Restricted Stock Units	Four year anniversary of the Grant Date	

The Restricted Period shall end prior to the date specified in the foregoing Vesting Schedule to the extent set forth below, with the exception of subparagraph (d):
(a) For Installments as to which the Restricted Period has not ended prior to the Date of Termination, the Restricted Period for such Installments shall end upon the Participant’s Date of Termination, if the Date of Termination occurs by reason of the Participant’s death.

(b) For Installments as to which the Restricted Period has not ended prior to the Date of Termination, the Restricted Period for such Installments shall end upon the Participant’s Date of Termination, if the Date of Termination occurs by reason of the Participant’s Long-Term Disability.

(c) For Installments as to which the Restricted Period has not ended prior to the date of a Change in Control, the Restricted Period for such Installments shall end upon a Change in Control, provided that such Change in Control occurs on or before the Date of Termination (determined without regard to the provisions of subparagraph (d) below).

(d)    For Installments as to which the Restricted Period has not ended prior to the Date of Termination, if the Date of Termination occurs by reason of the Participant’s Retirement, vesting shall continue pursuant to the Vesting Schedule following the Date of Termination as though the Participant continued to be employed through the end of the longest Restricted Period. Following the Date of Termination by reason of Retirement, the end of the Restricted Period for any Installment shall be determined in accordance with the Vesting Schedule.
3. Transfer and Forfeiture of Shares. Except as otherwise determined by the Committee in its sole discretion, and subject to subparagraph 2(d), the Participant shall forfeit the Units as of the Participant's Date of Termination, if such Date of Termination occurs prior to the end of the Restricted Period which applies to those Installments. If the Participant's Date of Termination has not occurred prior to the last day of the Restricted Period with respect to any Installment of the Units, then that Installment of Units shall be delivered to the Participant in the form of Stock free of all restrictions at or within 30 days after the Delivery Date; provided, however, if such delivery is contingent on the Participant's execution of a release in accordance with Section 9(f) and the applicable 30-day period begins in one taxable year and ends in a second taxable year, that Installment of Units shall be delivered in the second taxable year. After delivery of a share of Stock for a Unit, the Unit shall have no further force or effect.

4. Withholding . All deliveries and distributions under these Restricted Stock Unit Award Terms are subject to withholding of all applicable taxes. At the election of the Participant, and subject to such rules and limitations as may be established by the Committee from time to time, such withholding obligations may be satisfied through the surrender of shares of Stock which the Participant already owns, or to which the Participant is otherwise entitled under the Plan. Notwithstanding the foregoing, the Committee has the authority to make the necessary elections to ensure appropriate taxes are withheld.
5. Transferability . Except as otherwise provided by the Committee, the Restricted Stock Unit Award may not be sold, assigned, transferred, pledge or otherwise encumbered during the Restricted Period.

6. Dividends . The Participant shall be permitted to receive cash payments equal to the dividends and distributions paid on shares of Stock to the same extent as if each Unit was a share of Stock, and those shares were not subject to the restrictions imposed by these Restricted Stock Unit Award Terms and the Plan; provided, however, that no dividends or distributions shall be payable to or for the benefit of the Participant with respect to record dates for such dividends or distributions occurring on or after the date, if any, on which the Participant has received a share of Stock in exchange for a Unit or has forfeited the Units. Dividend payments made under this paragraph 6 with respect to any record date will be paid as soon as practicable after dividends with respect to that record date are paid on outstanding shares but in all events within the calendar year in which such dividends are paid to the holders of Stock.

7. Voting . The Participant shall not be a shareholder of record with respect to the Units and shall have no voting rights with respect to the Units during the Restricted Period.

8. Participant’s Rights to Shares . Prior to the delivery of shares of Stock which are to be delivered pursuant to these Restricted Stock Unit Award Terms,(a) the Participant shall not be treated as owner of the shares, shall not have any rights as a shareholder as to those shares, and shall have only a contractual right to receive them, unsecured by any assets of the Company or its subsidiaries; and (b) the Participant’s right to receive such shares will be subject to the adjustment provisions relating to mergers, reorganizations, and similar events set forth in the Plan.

2

9. Definitions . For purposes of these Restricted Stock Unit Award Terms, words and phrases shall be defined as follows:
(a) Change in Control . The term "Change in Control" shall be defined as set forth in the Plan.
(b) Date of Termination . A Participant's "Date of Termination" means, with respect to an employee, the date on which the Participant's employment with the Company and Related Companies terminates for any reason, and with respect to a Director, the date immediately following the last day on which the Participant serves as a Director; provided that a Date of Termination shall not be deemed to occur by reason of a Participant's transfer of employment between the Company and a Related Company or between two Related Companies; further provided that a Date of Termination shall not be deemed to occur by reason of a Participant's cessation of service as a Director if immediately following such cessation of service the Participant becomes or continues to be employed by the Company or a Related Company, nor by reason of a Participant's termination of employment with the Company or a Related Company if immediately following such termination of employment the Participant becomes or continues to be a Director; and further provided that a Participant's employment shall not be considered terminated while the Participant is on a leave of absence from the Company or a Related Company approved by the Participant's employer.

(c) Director . The term "Director" means a member of the Board, who may or may not be an employee of the Company or a Related Company.

(d) Long-Term Disability . A Participant shall be considered to have a “Long-Term Disability” if the Participant is determined to be eligible for long-term disability benefits under the long-term disability plan in which the Participant participates and which is sponsored by the Company or a Related Company; or if the Participant does not participate in a long-term disability plan sponsored by the Company or a Related Company, then the Participant shall be considered to have a “Long-Term Disability” if the Committee determines, under standards comparable to those of the Company’s long-term disability plan, that the Participant would be eligible for long-term disability benefits if he or she participated in such plan.

(e) Record-Keeping System . The term “Record-Keeping System” means the record-keeping system developed and maintained by third parties contracted by the Company to keep records and facilitate Participant interfaces with respect to the Plan and awards granted thereunder.

(f)     Retirement . The term “Retirement” means the Participant’s Date of Termination that occurs on or after the Participant has both completed at least ten years of service with the Company or a Related Company and attained at least age 62; provided, however, that a Date of Termination will not be treated as a Retirement unless the Participant (i) has terminated employment in good standing with the Company or a Related Company, and (ii) executes an agreement and release as required by the Company which will include, without limitation, a general release, and non-competition and non-solicitation provisions. A Participant shall be deemed to have executed a release as described in clause (ii) above only if such release is returned by such time as is established by the Company; provided that to the extent benefits provided pursuant to the Plan would be considered to be provided under a nonqualified deferred compensation plan as that term is defined in Treas. Reg. §1.409A-1, such benefits shall be paid to the Participant only if the release is returned in time to permit the distribution of the benefits to satisfy the requirements of Code section 409A with respect to the time of payment.
10. Plan Definitions . Except where the context clearly implies or indicates the contrary, a word, term, or phrase used in the Plan is similarly used in these Restricted Stock Unit Award Terms.

11. Heirs and Successors . The Restricted Stock Unit Award Terms shall be binding upon, and inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company's assets and business. If any benefits deliverable to the Participant under these Restricted Stock Unit Award Terms have not been delivered at the time of the Participant's death, such benefits shall be delivered to the Designated Beneficiary, in accordance with the provisions of these Restricted Stock Unit Award Terms and the Plan. The "Designated Beneficiary" shall be the beneficiary or beneficiaries designated by the Participant in a writing filed with the Committee in such form and at such time as the Committee shall require. If a deceased Participant fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Participant, any rights that would have been exercisable by the Participant and any benefits distributable to the Participant shall be distributed to the legal representative of the estate of the Participant. If a deceased Participant designates a beneficiary and the Designated Beneficiary survives the Participant but dies before the complete distribution of benefits to the Designated Beneficiary under these Restricted Stock Unit Award Terms, then any benefits distributable to the Designated Beneficiary shall be distributed to the legal representative of the estate of the Designated Beneficiary.

3

12. Administration . The authority to manage and control the operation and administration of these Restricted Stock Unit Award Terms shall be vested in the Committee, and the Committee shall have all powers with respect to these Restricted Stock Unit Award Terms as it has with respect to the Plan. Any interpretation of these Restricted Stock Unit Award Terms by the Committee and any decision made by it with respect to these Restricted Stock Unit Award Terms are final and binding on all persons.

13. Plan and Corporate Records Govern . Notwithstanding anything in these Restricted Stock Unit Award Terms to the contrary, these Restricted Stock Unit Award Terms shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the office of the Secretary of the Company; and these Restricted Stock Unit Award Terms are subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time pursuant to the Plan. Notwithstanding anything in the Restricted Stock Unit Award Terms to the contrary, in the event of any discrepancies between the corporate records regarding this award and the Record-Keeping System, the corporate records shall control.

14. Not An Employment Contract . The Restricted Stock Unit Award will not confer on the Participant any right with respect to continuance of employment or other service with the Company or any Related Company, nor will it interfere in any way with any right the Company or any Related Company would otherwise have to terminate or modify the terms of such Participant's employment or other service at any time.

15. Notices . Any written notices provided for in these Restricted Stock Unit Award Terms or the Plan shall be in writing and shall be deemed sufficiently given if either hand delivered or if sent by fax or overnight courier, or by postage paid first class mail. Notices sent by mail shall be deemed received three business days after mailing but in no event later than the date of actual receipt. Notices shall be directed, if to the Participant, at the Participant's address indicated by the Company's records, or if to the Company, at the Company's principal executive office.

16. Fractional Shares . In lieu of issuing a fraction of a share, resulting from an adjustment of the Restricted Stock Unit Award pursuant to paragraph 5.2(f) of the Plan or otherwise, the Company will be entitled to pay to the Participant an amount equal to the fair market value of such fractional share.

17. Amendment . The Restricted Stock Unit Award Terms may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written agreement of the Participant and the Company without the consent of any other person.

18.     409A Compliance . These Restricted Stock Unit Award Terms are intended to be interpreted, operated, and administered in a manner so as not to subject the Participant to the assessment of additional taxes or interest under Code section 409A, and these Restricted Stock Unit Award Terms may be amended as the Company, in its sole discretion, determines is necessary and appropriate to avoid the application of any such taxes or interest.
IN WITNESS WHEREOF, the Company has caused these presents to be executed in its name and on its behalf, all as of the Grant Date.

ACE LIMITED

By:     ______________________________________
Its:     ______________________________________

4

Exhibit 10.3
Incentive Stock Option Terms
under the
ACE Limited 2004 Long-Term Incentive Plan

The Participant has been granted an Option by ACE Limited (the "Company") under the ACE Limited 2004 Long-Term Incentive Plan (the "Plan"). The Option shall be subject to the following Incentive Stock Option Terms (sometimes referred to as the "Option Terms"):
1. Terms of Award . The following words and phrases used in these Option Terms shall have the meanings set forth in this paragraph 1:
(a)    The "Participant" is the individual recipient of the Incentive Stock Option Award on the specified Grant Date.
(b)    The "Grant Date" is [Insert Date].
(c)    The number of "Covered Shares" shall be that number of shares of Stock awarded to the Participant on the Grant Date as reflected in the corporate records and shown in the Record-Keeping System in the Participant’s individual account records.
(d)    The "Exercise Price" is $ [Insert Price] per share.
Other words and phrases used in these Option Terms are defined pursuant to paragraph 8 or elsewhere in these Option Terms.
2. Incentive Stock Option . The Option is intended to constitute an "incentive stock option" as that term is used in Code section 422. To the extent that the aggregate fair market value (determined at the time of grant) of Shares with respect to which incentive stock options are exercisable for the first time by the Participant during any calendar year under all plans of the Company and its Subsidiaries exceeds $100,000, the options or portions thereof which exceed such limit (according to the order in which they were granted) shall be treated as nonstatutory stock options. It should be understood that there is no assurance that the Option will, in fact, be treated as an incentive stock option.
3. Date of Exercise . Subject to the limitations of these Option Terms, each Installment of Covered Shares of the Option shall be exercisable on and after the Vesting Date for such Installment as described in the following schedule (but only if the Date of Termination has not occurred before the Vesting Date):

		
INSTALLMENT	VESTING DATE
APPLICABLE TO
INSTALLMENT	
1/3 of Covered Shares	One year anniversary of the Grant Date	
1/3 of Covered Shares	Two year anniversary of the Grant Date	
1/3 of Covered Shares	Three year anniversary of the Grant Date	

Notwithstanding the foregoing provisions of this paragraph 3, the Option shall become fully vested and exercisable as follows, with the exception of paragraph (c):

(a)	The Option shall become fully exercisable upon the Date of Termination, if the Date of Termination occurs by reason of the Participant’s death or Long-Term Disability.	

(b)	The Option shall become fully exercisable upon a Change in Control that occurs on or before the Date of Termination.	

(c)	For Installments as to which the Restricted Period has not ended prior to the Date of Termination, if the Date of Termination occurs by reason of the Participant’s Retirement, vesting shall continue pursuant to the foregoing schedule following the Date of Termination. Following the Date of Termination the Restricted Period shall end in accordance with the above schedule.	

Except as specified in (c), the Option may be exercised on or after the Date of Termination only as to that portion of the Covered Shares for which it was exercisable (or became exercisable) immediately prior to the Date of Termination.
4. Expiration . The Option shall not be exercisable after the Company’s close of business on the last business day that occurs prior to the Expiration Date. The "Expiration Date" shall be the earliest to occur of:

(a)	the ten year anniversary of the Grant Date;	

(b)	if the Participant's Date of Termination occurs by reason of death or Long-Term Disability, the one-year anniversary of such Date of Termination;	

(c)	if the Participant's Date of Termination occurs by reason of Retirement, the date on which the Expiration Date would occur if the Participant's Date of Termination occurred on the ten-year anniversary of the Grant Date, or if earlier, the date of the Participant's death; or	

(d)	if the Participant's Date of Termination occurs for any reason other than those listed in subparagraph (b) or (c) of this paragraph 4, the three-month anniversary of such Date of Termination.	
5. Method of Option Exercise . Subject to these Option Terms and the Plan, the Option may be exercised in whole or in part by filing a written notice (or by such other method as may be provided by the Committee, including but not limited to processes provided in electronic record-keeping systems utilized for management of the Plan) with the Secretary of the Company at its corporate headquarters prior to the Company’s close of business on the last business day that occurs prior to the Expiration Date. Such notice shall specify the number of shares of Stock which the Participant elects to purchase, and shall be accompanied by payment of the Exercise Price for such shares of Stock indicated by the Participant’s election. Payment shall be by cash or by check payable to the Company. Except as otherwise provided by the Committee before the Option is exercised: (i) all or a portion of the Exercise Price may be paid by the Participant by delivery of shares of Stock owned by the Participant and acceptable to the Committee having an aggregate Fair Market Value (valued as of the date of exercise) that is equal to the amount of cash that would otherwise be required; and (ii) the Participant may pay the Exercise Price by authorizing a third party to sell shares of Stock (or a sufficient portion of the shares) acquired upon exercise of the Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such exercise. The Option shall not be exercisable if and to the extent the Company determines that such exercise would violate applicable state or Federal securities laws or the rules and regulations of any securities exchange on which the Stock is traded. If the Company makes such a determination, it shall use all reasonable efforts to obtain compliance with such laws, rules and regulations. In making any determination hereunder, the Company may rely on the opinion of counsel for the Company.
6. Withholding . All deliveries and distributions under these Option Terms are subject to withholding of all applicable taxes. At the election of the Participant, and subject to such rules and limitations as may be established by the Committee from time to time, such withholding obligations may be satisfied through the surrender of shares of Stock which the Participant already owns, or to which the Participant is otherwise entitled under the Plan; provided, however, that such shares may be used to satisfy not more than the Company’s minimum statutory withholding obligation (based on minimum statutory withholding rates for Federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income).
7. Transferability . Except as otherwise provided by the Committee, the Option is not transferable other than as designated by the Participant by will or by the laws of descent and distribution, and during the Participant’s life, may be exercised only by the Participant.
8. Definitions . For purposes of these Option Terms, words and phrases shall be defined as follows:

(a)	Change in Control . The term "Change in Control" shall be defined as set forth in the Plan.	

(b)	Date of Termination . A Participant's "Date of Termination" means, with respect to an employee, the date on which the Participant's employment with the Company and Subsidiaries terminates for any reason, and with respect to a Director, the date immediately following the last day on which the Participant serves as a Director; provided that a Date of Termination shall not be deemed to occur by reason of a Participant's transfer of employment between the Company and a Subsidiary or between two Subsidiaries; further provided that a Date of Termination shall not be deemed to occur by reason of a Participant's cessation of service as a Director if immediately following such	

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cessation of service the Participant becomes or continues to be employed by the Company or a Subsidiary, nor by reason of a Participant's termination of employment with the Company or a Subsidiary if immediately following such termination of employment the Participant becomes or continues to be a Director; and further provided that a Participant's employment shall not be considered terminated while the Participant is on a leave of absence from the Company or a Subsidiary approved by the Participant's employer.
(c)     Director . The term "Director" means a member of the Board, who may or may not be an employee of the Company or a Subsidiary.
(d)     Long-Term Disability . A Participant shall be considered to have a “Long-Term Disability” if the Participant is determined to be eligible for long-term disability benefits under the long-term disability plan in which the Participant participates and which is sponsored by the Company or a Related Company; or if the Participant does not participate in a long-term disability plan sponsored by the Company or a Related Company, then the Participant shall be considered to have a “Long-Term Disability” if the Committee determines, under standards comparable to those of the Company’s long-term disability plan, that the Participant would be eligible for long-term disability benefits if he or she participated in such plan.
(e)     Retirement . The term “Retirement” means an employee who’s Date of Termination occurs after satisfying all of the following: (i) the employee has provided at least ten years of service with the Company or a Related Company; (ii) the employee has attained at least age 62; and (iii) the employee terminates employment in good standing with the Company or a Related Company, and (iv) the employee executes an agreement and release as required by the Company which will include, without limitation, a general release, and non-competition and non-solicitation provisions. However, with respect to exercising vested options pursuant to 4(c), above, “Retirement” shall mean the occurrence of a Participant's Date of Termination with the consent of the Participant's employer after the Participant is eligible for early retirement or normal retirement under a retirement plan maintained by the Company or the Subsidiaries.
(f)     Plan Definitions . Except where the context clearly implies or indicates the contrary, a word, term, or phrase used in the Plan is similarly used in these Option Terms.
9. Heirs and Successors . The Option Terms shall be binding upon, and inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company’s assets and business. If any rights exercisable by the Participant or benefits deliverable to the Participant under these Option Terms have not been exercised or delivered, respectively, at the time of the Participant’s death, such rights shall be exercisable by the Designated Beneficiary, and such benefits shall be delivered to the Designated Beneficiary, in accordance with the provisions of these Option Terms and the Plan. The "Designated Beneficiary" shall be the beneficiary or beneficiaries designated by the Participant in a writing filed with the Committee in such form and at such time as the Committee shall require. If a deceased Participant fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Participant, any rights that would have been exercisable by the Participant and any benefits distributable to the Participant shall be exercised by or distributed to the legal representative of the estate of the Participant. If a deceased Participant designates a beneficiary and the Designated Beneficiary survives the Participant but dies before the Designated Beneficiary’s exercise of all rights under these Option Terms or before the complete distribution of benefits to the Designated Beneficiary under these Option Terms, then any rights that would have been exercisable by the Designated Beneficiary shall be exercised by the legal representative of the estate of the Designated Beneficiary, and any benefits distributable to the Designated Beneficiary shall be distributed to the legal representative of the estate of the Designated Beneficiary.
10. Administration . The authority to manage and control the operation and administration of these Option Terms shall be vested in the Committee, and the Committee shall have all powers with respect to these Option Terms as it has with respect to the Plan. Any interpretation of the Agreement by the Committee and any decision made by it with respect to the Agreement is final and binding on all persons.
11. Plan and Corporate Records Govern . Notwithstanding anything in these Option Terms to the contrary, these Option Terms shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the office of the Secretary of the Company; and these Option Terms are subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time pursuant to the Plan. Notwithstanding anything in the Option Terms to the contrary, in the event of any discrepancies between the corporate records regarding this award and the Record-Keeping System, the corporate records shall control.
12. Not An Employment Contract . The Option will not confer on the Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor will it interfere in any way with any

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right the Company or any Subsidiary would otherwise have to terminate or modify the terms of such Participant’s employment or other service at any time.
13. Notices . Any written notices provided for in these Option Terms or the Plan shall be in writing and shall be deemed sufficiently given if either hand delivered or if sent by fax or overnight courier, or by postage paid first class mail. Notices sent by mail shall be deemed received three business days after mailing but in no event later than the date of actual receipt. Notices shall be directed, if to the Participant, at the Participant’s address indicated by the Company’s records, or if to the Company, at the Company’s principal executive office.
14. Fractional Shares . In lieu of issuing a fraction of a share upon any exercise of the Option, resulting from an adjustment of the Option pursuant to paragraph 5.2(f) of the Plan or otherwise, the Company will be entitled to pay to the Participant an amount equal to the fair market value of such fractional share.
15. No Rights As Shareholder . The Participant shall not have any rights of a shareholder with respect to the shares subject to the Option, until a stock certificate has been duly issued following exercise of the Option as provided herein.
16. Amendment . The Option Terms may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written agreement of the Participant and the Company without the consent of any other person.
IN WITNESS WHEREOF, the Company has caused these presents to be executed in its name and on its behalf, all as of the Grant Date.

ACE Limited

By:     ______________________________________
Its:     ______________________________________

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Exhibit 10.4

Non-Qualified Stock Option Terms
under the
ACE Limited 2004 Long-Term Incentive Plan

The Participant has been granted an Option by ACE Limited (the "Company") under the ACE Limited 2004 Long-Term Incentive Plan (the "Plan"). The Option shall be subject to the following Non-Qualified Stock Option Terms (sometimes referred to as the "Option Terms"):
1. Terms of Award . The following words and phrases used in these Option Terms shall have the meanings set forth in this paragraph 1:
(a)    The "Participant" is the individual recipient of the Non-Qualified Stock Option Award on the specified Grant Date.
(b)    The "Grant Date" is [Insert Date].
(c)    The number of "Covered Shares" shall be that number of shares of Stock awarded to the Participant on the Grant Date as reflected in the corporate records and shown in the Record-Keeping System in the Participant’s individual account records.
(d)    The "Exercise Price" is $ [Insert Price] per share.
Other words and phrases used in these Option Terms are defined pursuant to paragraph 8 or elsewhere in these Option Terms.
2. Non-Qualified Stock Option . The Option is not intended to constitute an "incentive stock option" as that term is used in Code section 422.
3. Date of Exercise . Subject to the limitations of these Option Terms, each Installment of Covered Shares of the Option shall be exercisable on and after the Vesting Date for such Installment as described in the following schedule (but only if the Date of Termination has not occurred before the Vesting Date):

		
INSTALLMENT	VESTING DATE
APPLICABLE TO
INSTALLMENT	
1/3 of Covered Shares	One year anniversary of the Grant Date	
1/3 of Covered Shares	Two year anniversary of the Grant Date	
1/3 of Covered Shares	Three year anniversary of the Grant Date	

Notwithstanding the foregoing provisions of this paragraph 3, the Option shall become fully vested and exercisable as follows, with the exception of paragraph (c):

(a)	The Option shall become fully exercisable upon the Date of Termination, if the Date of Termination occurs by reason of the Participant’s death or Long-Term Disability.	

(b)	The Option shall become fully exercisable upon a Change in Control that occurs on or before the Date of Termination.	

(c)	For Installments as to which the Restricted Period has not ended prior to the Date of Termination, if the Date of Termination occurs by reason of the Participant’s Retirement, vesting shall continue pursuant to the foregoing schedule following the Date of Termination. Following the Date of Termination the Restricted Period shall end in accordance with the above schedule.	

Except as specified in (c), the Option may be exercised on or after the Date of Termination only as to that portion of the Covered Shares for which it was exercisable (or became exercisable) immediately prior to the Date of Termination.
4. Expiration . The Option shall not be exercisable after the Company’s close of business on the last business day that occurs prior to the Expiration Date. The "Expiration Date" shall be the earliest to occur of:

(a)	the ten year anniversary of the Grant Date;	

(b)	if the Participant's Date of Termination occurs by reason of death or Long-Term Disability, the one-year anniversary of such Date of Termination;	

(c)	if the Participant's Date of Termination occurs by reason of Retirement, the date on which the Expiration Date would occur if the Participant's Date of Termination occurred on the ten-year anniversary of the Grant Date, or if earlier, the date of the Participant's death; or	

(d)	if the Participant's Date of Termination occurs for any reason other than those listed in subparagraph (b) or (c) of this paragraph 4, the three-month anniversary of such Date of Termination.	
5. Method of Option Exercise . Subject to these Option Terms and the Plan, the Option may be exercised in whole or in part by filing a written notice (or by such other method as may be provided by the Committee, including but not limited to processes provided in electronic record-keeping systems utilized for management of the Plan) with the Secretary of the Company at its corporate headquarters prior to the Company’s close of business on the last business day that occurs prior to the Expiration Date. Such notice shall specify the number of shares of Stock which the Participant elects to purchase, and shall be accompanied by payment of the Exercise Price for such shares of Stock indicated by the Participant’s election. Payment shall be by cash or by check payable to the Company. Except as otherwise provided by the Committee before the Option is exercised: (i) all or a portion of the Exercise Price may be paid by the Participant by delivery of shares of Stock owned by the Participant and acceptable to the Committee having an aggregate Fair Market Value (valued as of the date of exercise) that is equal to the amount of cash that would otherwise be required; and (ii) the Participant may pay the Exercise Price by authorizing a third party to sell shares of Stock (or a sufficient portion of the shares) acquired upon exercise of the Option and remit to the Company a sufficient portion of the sale proceeds to pay the entire Exercise Price and any tax withholding resulting from such exercise. The Option shall not be exercisable if and to the extent the Company determines that such exercise would violate applicable state or Federal securities laws or the rules and regulations of any securities exchange on which the Stock is traded. If the Company makes such a determination, it shall use all reasonable efforts to obtain compliance with such laws, rules and regulations. In making any determination hereunder, the Company may rely on the opinion of counsel for the Company.
6. Withholding . All deliveries and distributions under these Option Terms are subject to withholding of all applicable taxes. At the election of the Participant, and subject to such rules and limitations as may be established by the Committee from time to time, such withholding obligations may be satisfied through the surrender of shares of Stock which the Participant already owns, or to which the Participant is otherwise entitled under the Plan; provided, however, that such shares may be used to satisfy not more than the Company’s minimum statutory withholding obligation (based on minimum statutory withholding rates for Federal and state tax purposes, including payroll taxes, that are applicable to such supplemental taxable income).
7. Transferability . Except as otherwise provided by the Committee, the Option is not transferable other than as designated by the Participant by will or by the laws of descent and distribution, and during the Participant’s life, may be exercised only by the Participant.
8. Definitions . For purposes of these Option Terms, words and phrases shall be defined as follows:

(a)	Change in Control . The term "Change in Control" shall be defined as set forth in the Plan.	

(b)	Date of Termination . A Participant's "Date of Termination" means, with respect to an employee, the date on which the Participant's employment with the Company and Subsidiaries terminates for any reason, and with respect to a Director, the date immediately following the last day on which the Participant serves as a Director; provided that a Date of Termination shall not be deemed to occur by reason of a Participant's transfer of employment between the Company and a Subsidiary or between two Subsidiaries; further provided that a Date of Termination shall not be deemed to occur by reason of a Participant's cessation of service as a Director if immediately following such cessation of service the Participant becomes or continues to be employed by the Company or a Subsidiary, nor by reason of a Participant's termination of employment with the Company or a Subsidiary if immediately following	

2

such termination of employment the Participant becomes or continues to be a Director; and further provided that a Participant's employment shall not be considered terminated while the Participant is on a leave of absence from the Company or a Subsidiary approved by the Participant's employer.

(c)	Director . The term "Director" means a member of the Board, who may or may not be an employee of the Company or a Subsidiary.	

(d)	Long-Term Disability . A Participant shall be considered to have a “Long-Term Disability” if the Participant is determined to be eligible for long-term disability benefits under the long-term disability plan in which the Participant participates and which is sponsored by the Company or a Related Company; or if the Participant does not participate in a long-term disability plan sponsored by the Company or a Related Company, then the Participant shall be considered to have a “Long-Term Disability” if the Committee determines, under standards comparable to those of the Company’s long-term disability plan, that the Participant would be eligible for long-term disability benefits if he or she participated in such plan.	

(e)	Retirement . The term “Retirement” means an employee who’s Date of Termination occurs after satisfying all of the following: (i) the employee has provided at least ten years of service with the Company or a Related Company; (ii) the employee has attained at least age 62; and (iii) the employee terminates employment in good standing with the Company or a Related Company, and (iv) the employee executes an agreement and release as required by the Company which will include, without limitation, a general release, and non-competition and non-solicitation provisions. However, with respect to exercising vested options pursuant to 4(c), above, “Retirement” shall mean the occurrence of a Participant's Date of Termination with the consent of the Participant's employer after the Participant is eligible for early retirement or normal retirement under a retirement plan maintained by the Company or the Subsidiaries.	

(f)	Plan Definitions . Except where the context clearly implies or indicates the contrary, a word, term, or phrase used in the Plan is similarly used in these Option Terms.	
9. Heirs and Successors . The Option Terms shall be binding upon, and inure to the benefit of, the Company and its successors and assigns, and upon any person acquiring, whether by merger, consolidation, purchase of assets or otherwise, all or substantially all of the Company’s assets and business. If any rights exercisable by the Participant or benefits deliverable to the Participant under these Option Terms have not been exercised or delivered, respectively, at the time of the Participant’s death, such rights shall be exercisable by the Designated Beneficiary, and such benefits shall be delivered to the Designated Beneficiary, in accordance with the provisions of these Option Terms and the Plan. The "Designated Beneficiary" shall be the beneficiary or beneficiaries designated by the Participant in a writing filed with the Committee in such form and at such time as the Committee shall require. If a deceased Participant fails to designate a beneficiary, or if the Designated Beneficiary does not survive the Participant, any rights that would have been exercisable by the Participant and any benefits distributable to the Participant shall be exercised by or distributed to the legal representative of the estate of the Participant. If a deceased Participant designates a beneficiary and the Designated Beneficiary survives the Participant but dies before the Designated Beneficiary’s exercise of all rights under these Option Terms or before the complete distribution of benefits to the Designated Beneficiary under these Option Terms, then any rights that would have been exercisable by the Designated Beneficiary shall be exercised by the legal representative of the estate of the Designated Beneficiary, and any benefits distributable to the Designated Beneficiary shall be distributed to the legal representative of the estate of the Designated Beneficiary.
10. Administration . The authority to manage and control the operation and administration of these Option Terms shall be vested in the Committee, and the Committee shall have all powers with respect to these Option Terms as it has with respect to the Plan. Any interpretation of the Agreement by the Committee and any decision made by it with respect to the Agreement is final and binding on all persons.
11. Plan and Corporate Records Govern . Notwithstanding anything in these Option Terms to the contrary, these Option Terms shall be subject to the terms of the Plan, a copy of which may be obtained by the Participant from the office of the Secretary of the Company; and these Option Terms are subject to all interpretations, amendments, rules and regulations promulgated by the Committee from time to time pursuant to the Plan. Notwithstanding anything in the Option Terms to the contrary, in the event of any discrepancies between the corporate records regarding this award and the Record-Keeping System, the corporate records shall control.
12. Not An Employment Contract . The Option will not confer on the Participant any right with respect to continuance of employment or other service with the Company or any Subsidiary, nor will it interfere in any way with any

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right the Company or any Subsidiary would otherwise have to terminate or modify the terms of such Participant’s employment or other service at any time.
13. Notices . Any written notices provided for in these Option Terms or the Plan shall be in writing and shall be deemed sufficiently given if either hand delivered or if sent by fax or overnight courier, or by postage paid first class mail. Notices sent by mail shall be deemed received three business days after mailing but in no event later than the date of actual receipt. Notices shall be directed, if to the Participant, at the Participant’s address indicated by the Company’s records, or if to the Company, at the Company’s principal executive office.
14. Fractional Shares . In lieu of issuing a fraction of a share upon any exercise of the Option, resulting from an adjustment of the Option pursuant to paragraph 5.2(f) of the Plan or otherwise, the Company will be entitled to pay to the Participant an amount equal to the fair market value of such fractional share.
15. No Rights As Shareholder . The Participant shall not have any rights of a shareholder with respect to the shares subject to the Option, until a stock certificate has been duly issued following exercise of the Option as provided herein.
16. Amendment . The Option Terms may be amended in accordance with the provisions of the Plan, and may otherwise be amended by written agreement of the Participant and the Company without the consent of any other person.
IN WITNESS WHEREOF, the Company has caused these presents to be executed in its name and on its behalf, all as of the Grant Date.

ACE Limited

By:     ______________________________________
Its:     ______________________________________

4

Exhibit 10.5

ACE LIMITED
ELECTIVE DEFERRED COMPENSATION PLAN
(Amended and Restated January 1, 2011)

The ACE Limited Elective Deferred Compensation Plan was adopted effective January 1, 2005 by ACE Limited to permit Eligible Employees to defer receipt of certain compensation pursuant to the terms and provisions set forth below. Effective January 1, 2009, participation in the Plan was discontinued to the extent amounts deferred and credited are not subject to Code section 457A. The current document is effective January 1, 2011.

The Plan is intended (1) to comply with Code section 409A and official guidance issued thereunder for credited amounts earned and vested after December 31, 2004, while credited amounts earned and vested prior to January 1, 2005 (and applicable earnings credited on these amounts) are not intended to be subject to the provisions of Code section 409A, to the full extent permitted under by Code section 409A and official guidance, and (2) to be “a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. Notwithstanding any other provision of this Plan, this Plan shall be interpreted, operated and administered in a manner consistent with these intentions. The Plan document and Plan procedures in effect on December 31, 2004 will remain in full force and effect for the Grandfathered Amounts and is labeled Attachment A.

ARTICLE I

DEFINITIONS

Wherever used herein the following terms shall have the meanings hereinafter set forth:

“ Account ” means a bookkeeping account established by the Company for each Participant electing to defer Eligible Income under the Plan.

“ Affiliate ” means any corporation or other entity that is treated as a single employer with the Company under section 414 of the Code.

" Base Salary " means the regular base salary paid to an Eligible Employee by the Company or an Affiliate.

" Code " means the Internal Revenue Code of 1986, as amended.

“ Committee ” means the Pension Committee of ACE Limited.
 
“ Company ” means ACE Limited or any successor corporation or other entity.

“ Deferral Form ” means a written form provided by the Committee pursuant to which an Eligible Employee may elect to defer amounts under the Plan.

“ Disabled ” means a Participant (1) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (2) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Participant's employer.

“ Eligible Employee ” means an Employee who is designated by the Committee as belonging to a “select group of management or highly compensated employees,” as such phrase is defined under ERISA, and eligible to participate in the Plan. Any determination of the Committee regarding whether an Employee is an Eligible Employee shall be final and binding for all Plan purposes.

“ Eligible Income ” means Base Salary and Incentive Awards. Eligible Income does not include irregular, non-recurring types of compensation.

“ Employee ” means an individual who is a regular employee on the U.S. payroll of the Company or its Affiliates. The term “Employee” shall not include a person hired as an independent contractor, leased employee, consultant, or a person otherwise designated by the Company or an Affiliate as not eligible to participate in the Plan, even if such person is determined to be an “employee” of the Company or an Affiliate by any governmental or judicial authority.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ Incentive Award ” means an amount payable to an Eligible Employee under an annual bonus or incentive compensation plan of the Company or an Affiliate.

“ Investment Options ” means the investment options, as determined from time to time by the Committee, used to credit earnings, gains and losses on Account balances.

" Key Employee " means an Employee treated as a "specified employee" under Code section 409A(a)(2)(B)(i), i.e. , a key employee (as defined in Code section 416(i) without regard to paragraph (5) thereof) of the Company if the Company’s stock is publicly traded on an established securities market or otherwise. Key Employees shall be determined in accordance with Code section 409A using a [December 31] identification date.

“ Participant ” means an Eligible Employee who elects to defer amounts under the Plan.

" Payment Date " means the first business day of the year following an event triggering a payment or a date, provided the date is specified.

“ Plan ” means the ACE Limited Elective Deferred Compensation Plan, as set forth herein and as amended from time to time.

“ Plan Year ” means January 1 through December 31.

" Separation from Service " or " Separate from Service " means means a "separation from service" within the meaning of Code section 409A.

ARTICLE II

PARTICIPATION

Participation in the Plan shall be limited to Eligible Employees. The Committee shall notify any Employee of his status as an Eligible Employee at such time and in such manner as the Committee shall determine. An Eligible Employee shall become a Participant by making a deferral election under Article III.

ARTICLE III

PARTICIPANT ACCOUNTS

3.1 Deferral Elections . Deferrals may be made by a Participant with respect to the following types of Eligible Income, as permitted by the Committee:

(a) Base Salary . An Eligible Employee may elect to defer any portion of his Base Salary, as specified on election forms provided to Eligible Employees.

(b) Incentive Awards . An Eligible Employee may elect to defer any portion of an Incentive Award up to 100%.

(c)    Other amounts designated by the Committee as Eligible Income.

In order to elect to defer Eligible Income earned during a Plan Year, an Eligible Employee shall file an irrevocable Deferral Form with the Committee before the beginning of such Plan Year. Notwithstanding the foregoing, (1) if the

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Committee determines that an Incentive Award qualifies as "performance-based compensation" under Code section 409A, an Eligible Employee may elect to defer a portion of the Incentive Award by filing a Deferral Form at such later time as permitted by the Committee, and (2) in the first year in which an Employee becomes eligible to participate in the Plan, a deferral election may be made with respect to services to be performed subsequent to the election within 30 days after the date the Employee becomes eligible to participate in the Plan.

3.2 Crediting of Deferrals . Eligible Income deferred by a Participant under the Plan shall be credited to the Participant’s Account as soon as practicable after the amounts would have otherwise been paid to the Participant.

3.3 Vesting . A Participant shall at all times be 100% vested in any amounts credited to his Account.

3.4 Earnings . The Company shall periodically credit gains, losses and earnings to a Participant’s Account, until the full balance of the Account has been distributed. Amounts shall be credited to a Participant’s Account under this Section based on the results that would have been achieved had amounts credited to the Account been invested as soon as practicable after crediting into the Investment Options selected by the Participant. The Committee shall specify procedures to allow Participants to make elections as to the deemed investment of amounts newly credited to their Accounts, as well as the deemed investment of amounts previously credited to their Accounts. Nothing in this Section or otherwise in the Plan, however, will require the Company to actually invest any amounts in such Investment Options or otherwise.

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ARTICLE IV

DISTRIBUTION OF ACCOUNT BALANCE

The provisions of this Article IV shall apply only to amounts subject to Code section 409A. Distribution rules applicable to amounts credited and vested before January 1, 2005 (and the earnings credited on those amounts) are set forth in Schedule

4.1. Distribution Upon Separation . A Participant’s Account balance shall normally be distributed to him in a lump sum payment on the Payment Date following the Participant’s Separation from Service. A Participant may elect on a Deferral Form delivered to the Committee prior to the beginning of a Plan Year to have the portion of his Account related to amounts deferred during the Plan Year (and earnings thereon) distributed in annual installments over a period of up to 10 years with payments commencing on the Payment Date following the Participant’s Separation from Service. Notwithstanding any elections by a Participant, if the Participant’s Account balance is $10,000 or less at the time the Participant Separates from Service, the full Account balance shall be distributed in a lump sum payment at such time.

Notwithstanding the foregoing, distributions may not be made to a Key Employee upon a Separation from Service before the date which is six months after the date of the Key Employee's Separation from Service (or, if earlier, the date of death of the Key Employee).

4.2. Distribution as of Specified Date . A Participant may elect on a Deferral Form delivered to the Committee prior to the beginning of a Plan Year to have the portion of his Account related to amounts deferred during the Plan Year (and earnings thereon) paid to the Participant as of a specified date. If expressly elected by a Participant in writing, the Payment Date may be the later or earlier of a specified date or Separation from Service.

4.3. Distribution Upon Disability . If a Participant becomes Disabled, his Account balance will be distributed in a lump sum payment on the Payment Date following the date the Participant becomes Disabled.

4.4. Distributions Upon Death . If a Participant dies before full distribution of his Account balance, any remaining balance shall be distributed in a lump sum payment on the Payment Date following the Participant's death to the Participant's beneficiary. A Participant shall designate his beneficiary in a writing delivered to the Committee prior to death in accordance with procedures established by the Committee. If a Participant has not properly designated a beneficiary or if no designated beneficiary is living on the date of distribution, such amount shall be distributed to the Participant’s estate.

4.5. Withdrawals for Unforeseeable Emergency . A Participant may withdraw all or any portion of his Account balance for an Unforeseeable Emergency. The amounts distributed with respect to an Unforeseeable Emergency may not exceed the amounts necessary to satisfy such Unforeseeable Emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship) or by cessation of deferrals under the Plan. “Unforeseeable Emergency” means for this purpose a severe financial hardship to a Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code section 152(a)) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

A Participant's deferral election for the Plan Year in which he obtains a distribution under this section shall be cancelled.

4.6. Change in Control . For amounts credited and vested after December 31, 2004, notwithstanding any provision in the Plan to the contrary, a Participant's Account balance under the Plan shall be distributed in an immediate lump sum payment on the Payment Date following the occurrence of a "Change in Control Event."

A "Change in Control Event" means an event described in IRS regulations or other guidance under Code section 409A(a)(2)(A)(v).

Generally, to constitute a Change in Control Event as to a Participant, the Change in Control Event must relate to (i) the corporation for whom the Participant is performing services at the time of the Change in Control Event, (ii) the corporation that is liable for the payment of Plan benefits to the Participant (or all corporations liable for the payment if

4

more than one corporation is liable), or (iii) a corporation that is a majority shareholder of a corporation identified in (i) or (ii), or any corporation in a chain of corporations in which each corporation is a majority shareholder of another corporation in the chain, ending in a corporation identified in (i) or (ii). The ultimate parent corporation in such a chain shall be referred to as the "Parent."

Generally, a Change in Control Event occurs on the date that:

(a)	any one person, or more than one person acting as a group, acquires ownership of stock of the corporation that, together with stock held by such person or group, constitutes more than 50 percent of the total fair market value or total voting power of the stock of such corporation;	

(b)	any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) ownership of stock of the corporation possessing 35 percent or more of the total voting power of the stock of such corporation;	

(c)	a majority of members of the corporation’s board of directors is replaced during any 12-month period by directors whose appointment or election is not endorsed by a majority of the members of the corporation’s board of directors prior to the date of the appointment or election, provided that for purposes of this paragraph (c) the term "corporation" refers solely to the Parent; or	

(d)	any one person, or more than one person acting as a group, acquires (or has acquired during the 12-month period ending on the date of the most recent acquisition by such person or persons) assets from the corporation that have a total gross fair market value equal to or more than 40 percent of the total gross fair market value of all of the assets of the corporation immediately prior to such acquisition or acquisitions. For this purpose, "gross fair market value" means the value of the assets of the corporation, or the value of the assets being disposed of, determined without regard to any liabilities associated with such assets.	

4.7     Changes in Time or Form of Distribution . A Participant may make an election to change the time or form of a distribution, but only if the following conditions are satisfied:

(a)	The election may not take effect until at least twelve (12) months after the date on which the election is made;	

(b)	In the case of an election to change the time and form of a distribution under Sections 4.1, 4.2, or 4.6, a distribution may not be made earlier than at least five (5) years from the date the distribution would have otherwise been made;	

(c)	In the case of an election to change the time and form of a distribution under Section 4.2, the election must be made at least twelve (12) months before the date of the first scheduled distribution; and	

(d)	The election may not result in an impermissible acceleration of payment prohibited under Code section 409A.	

4.8     Effect of Taxation . If a portion of the Participant's Account balance is includible in income under Code section 409A, such portion shall be distributed immediately to the Participant.

4.9     Permitted Delays . Notwithstanding the foregoing, any payment to a Participant under the Plan shall be delayed upon the Committee's reasonable anticipation of one or more of the following events:

(a)	The Company's deduction with respect to such payment otherwise would be limited or eliminated by application of Code section 162(m); or	

(b)	The making of the payment would violate Federal securities laws or other applicable law;	

provided, that any payment subject to this Section 4.9 shall be paid in accordance with Code section 409A.

4.10    Compliance with 457A .  Notwithstanding any provision in the Plan to the contrary, to the extent a Participant's Account balance (including any "grandfathered amounts" earned and vested prior to January 1, 2005) is

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attributable to services performed before January 1, 2009, is not otherwise included in gross income before 2018, and is required by Pub. L. No. 110-343 § 801(d)(2) to be included in income in 2017, such portion of the Account balance shall be distributed to the Participant in a lump sum payment in 2017 in accordance with I.R.S. Notice 2009-8.

ARTICLE V

ADMINISTRATION

5.1. General Administration . The Committee shall be responsible for the operation and administration of the Plan and for carrying out the provisions hereof. The Committee shall have the full authority and discretion to make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and decide or resolve any and all questions, including interpretations of this Plan, as may arise in connection with this Plan. Any such action taken by the Committee shall be final and conclusive on any party. To the extent the Committee has been granted discretionary authority under the Plan, the Committee’s prior exercise of such authority shall not obligate it to exercise its authority in a like fashion thereafter. The Committee shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by the Company with respect to the Plan. The Committee may, from time to time, employ agents and delegate to such agents, including employees of the Company, such administrative or other duties as it sees fit.

5.2. Claims for Benefits .

(a)     Filing a Claim . A Participant or his authorized representative may file a claim for benefits under the Plan. Any claim must be in writing and submitted to the Committee at such address as may be specified from time to time. Claimants will be notified in writing of approved claims, which will be processed as claimed. A claim is considered approved only if its approval is communicated in writing to a claimant.
(b)     Denial of Claim . In the case of the denial of a claim respecting benefits paid or payable with respect to a Participant, a written notice will be furnished to the claimant within 90 days of the date on which the claim is received by the Committee. If special circumstances (such as for a hearing) require a longer period, the claimant will be notified in writing, prior to the expiration of the 90-day period, of the reasons for an extension of time; provided, however, that no extensions will be permitted beyond 90 days after the expiration of the initial 90-day period.
(c)     Reasons for Denial . A denial or partial denial of a claim will be dated and signed by the Committee and will clearly set forth:

(i)	the specific reason or reasons for the denial;	

(ii)	specific reference to pertinent Plan provisions on which the denial is based;	

(iii)	a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and	

(iv)	an explanation of the procedure for review of the denied or partially denied claim set forth below, including the claimant’s right to bring a civil action under ERISA section 502(a) following an adverse benefit determination on review.	

(d)     Review of Denial . Upon denial of a claim, in whole or in part, a claimant or his duly authorized representative will have the right to submit a written request to the Committee for a full and fair review of the denied claim by filing a written notice of appeal with the Committee within 60 days of the receipt by the claimant of written notice of the denial of the claim. A claimant or the claimant’s authorized representative will have, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits and may submit issues and comments in writing. The review will take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.
If the claimant fails to file a request for review within 60 days of the denial notification, the claim will be deemed abandoned and the claimant precluded from reasserting it. If the claimant does file a request for review, his request must

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include a description of the issues and evidence he deems relevant. Failure to raise issues or present evidence on review will preclude those issues or evidence from being presented in any subsequent proceeding or judicial review of the claim.

(e)     Decision Upon Review . The Committee will provide a prompt written decision on review. If the claim is denied on review, the decision shall set forth:

(i)	the specific reason or reasons for the adverse determination;	

(ii)	specific reference to pertinent Plan provisions on which the adverse determination is based;	

(iii)	a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits; and	

(iv)	a statement describing any voluntary appeal procedures offered by the Plan and the claimant’s right to obtain the information about such procedures, as well as a statement of the claimant’s right to bring an action under ERISA section 502(a).	
A decision will be rendered no more than 60 days after the Committee’s receipt of the request for review, except that such period may be extended for an additional 60 days if the Committee determines that special circumstances (such as for a hearing) require such extension. If an extension of time is required, written notice of the extension will be furnished to the claimant before the end of the initial 60-day period.

(f)     Finality of Determinations; Exhaustion of Remedies .8.9    Finality of Determinations; Exhaustion of Remedies. To the extent permitted by law, decisions reached under the claims procedures set forth in this Section shall be final and binding on all parties. No legal action for benefits under the Plan shall be brought unless and until the claimant has exhausted his remedies under this Section. In any such legal action, the claimant may only present evidence and theories which the claimant presented during the claims procedure. Any claims which the claimant does not in good faith pursue through the review stage of the procedure shall be treated as having been irrevocably waived. Judicial review of a claimant’s denied claim shall be limited to a determination of whether the denial was an abuse of discretion based on the evidence and theories the claimant presented during the claims procedure.
(g)     Limitations Period . Any suit or legal action initiated by a claimant under the Plan must be brought by the claimant no later than one year following a final decision on the claim for benefits by the Committee. The one-year limitation on suits for benefits will apply in any forum where a claimant initiates such suit or legal action.

(h)     Disability Claims . Claims for disability benefits shall be determined in accordance with the terms of the ACE Limited disability plan, provided the provisions of that plan comply with the proposed regulations promulgated under Code section 409A.

5.3. Indemnification . To the extent not covered by insurance, the Company shall indemnify the Committee, each employee, officer, director, and agent of the Company, and all persons formerly serving in such capacities, against any and all liabilities or expenses, including all legal fees relating thereto, arising in connection with the exercise of their duties and responsibilities with respect to the Plan, provided however that the Company shall not indemnify any person for liabilities or expenses due to that person’s own gross negligence or willful misconduct.

ARTICLE VI

AMENDMENT AND TERMINATION

6.1 Amendment or Termination . The Company, through its Board of Directors or through the Compensation Committee of the Board of Directors, reserves the right to amend or terminate the Plan in the sole discretion of the Company. In addition, the Committee has been granted the power to amend the Plan with certain limitations placed on this power by the Compensation Committee.

6.2 Effect of Amendment or Termination . No amendment or termination of the Plan shall adversely affect the rights of any Participant to amounts credited to his Account as of the effective date of such amendment or termination. Upon termination of the Plan, distribution of balances in Accounts shall be made to Participants

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and beneficiaries in the manner and at the time described in Article IV , unless the Company determines in its sole discretion that all such amounts shall be distributed upon termination in accordance with the requirements under Code section 409A. Upon termination of the Plan, no further deferrals of Eligible Income shall be permitted; however, earnings, gains and losses shall continue to be credited to Account balances in accordance with Article III until the Account balances are fully distributed.

ARTICLE VII

GENERAL PROVISIONS

7.1 Rights Unsecured . The right of a Participant or his beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Company, and neither the Participant nor his beneficiary shall have any rights in or against any amount credited to any Account or any other assets of the Company. The Plan at all times shall be considered entirely unfunded for tax purposes. Any funds set aside by the Company for the purpose of meetings its obligations under the Plan, including any amounts held by a trustee, shall continue for all purposes to be part of the general assets of the Company and shall be available to its general creditors in the event of the Company’s bankruptcy or insolvency. The Company’s obligation under this Plan shall be that of an unfunded and unsecured promise to pay money in the future.

7.2 No Guarantee of Benefits . Nothing contained in the Plan shall constitute a guarantee by the Company or any other person or entity that the assets of the Company will be sufficient to pay any benefits hereunder.

7.3 No Enlargement of Rights . No Participant or beneficiary shall have any right to receive a distribution under the Plan except in accordance with the terms of the Plan. Establishment of the Plan shall not be construed to give any Participant the right to continue to be employed by or provide services to the Company.

7.4 Spendthrift Provision . No interest of any person in, or right to receive a distribution under, the Plan shall be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind; nor may such interest or right to receive a distribution be taken, either voluntarily or involuntarily for the satisfaction of the debts of, or other obligations or claims against, such person.

7.5 Applicable Law . To the extent not preempted by federal law, the Plan shall be governed by the laws of Bermuda.

7.6 Incapacity of Recipient . If any person entitled to a distribution under the Plan is deemed by the Committee to be incapable of personally receiving and giving a valid receipt for such payment, then, unless and until a claim for such payment shall have been made by a duly appointed guardian or other legal representative of such person, the Committee may provide for such payment or any part thereof to be made to any other person or institution then contributing toward or providing for the care and maintenance of such person. Any such payment shall be a payment for the account of such person and a complete discharge of any liability of the Company and the Plan with respect to the payment.

7.7 Taxes . The Company or other payor may withhold from a benefit payment under the Plan or a Participant's wages, or the Company may reduce a Participant’s Account balance, in order to meet any federal, state, or local tax withholding obligations with respect to Plan benefits. The Company or other payor shall report Plan payments and other Plan-related information to the appropriate governmental agencies as required under applicable laws.

7.8 Corporate Successors . The Plan and the obligations of the Company under the Plan shall become the responsibility of any successor to the Company by reason of a transfer or sale of substantially all of the assets of the Company or by the merger or consolidation of the Company into or with any other corporation or other entity.

7.9 Unclaimed Benefits . Each Participant shall keep the Committee informed of his current address and the current address of his designated beneficiary. The Committee shall not be obligated to search for the whereabouts of any person if the location of a person is not made known to the Committee.

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7.10 Severability . In the event any provision of the Plan shall be held invalid or illegal for any reason, any illegality or invalidity shall not affect the remaining parts of the Plan, but the Plan shall be construed and enforced as if the illegal or invalid provision had never been inserted.

7.11 Words and Headings . Words in the masculine gender shall include the feminine and the singular shall include the plural, and vice versa, unless qualified by the context. Any headings used herein are included for ease of reference only, and are not to be construed so as to alter the terms hereof.

IN WITNESS WHEREOF, ACE LIMITED has caused this ACE Limited Elective Deferred Compensation Plan to be executed by its duly authorized officer on this ____ day of December, 2011.

ACE LIMITED

By: ________________________

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ATTACHMENT A

ACE Limited Elective Deferred Compensation Plan as in effect December 31, 2004

ACE LIMITED
ELECTIVE DEFERRED COMPENSATION PLAN

(as amended through the First Amendment thereof)

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ACE LIMITED
ELECTIVE DEFERRED COMPENSATION PLAN
SECTION 1 

General
1.1. Purpose . The ACE Limited Elective Deferred Compensation Plan (the “Plan”) has been established by ACE Limited (the “Company”) so that it, and each of the Related Companies which, with the consent of the Company, adopts the Plan may provide its eligible employees with an opportunity to build additional financial security, thereby aiding such companies in attracting and retaining employees of exceptional ability.

1.2. Effective Date . The “Effective Date” of the Plan is January 1, 1998.

1.3. Related Companies and Employers . For purposes of the Plan, the term “Related Company” means any company during any period in which it is a “subsidiary corporation,” as that term in defined in section 424(f) of the United States Internal Revenue Code of 1986, as amended (the “Code”) with respect to the Company. The Company and each Related Company which adopts the Plan for the benefit of its eligible employees are referred to below collectively as the “Employers” and individually as an “Employer.” A Related Company may adopt the Plan by action of its Board of Directors; provided that a Related Company will be considered to have adopted the Plan for its Eligible Employees (without the need for action by its Board of Directors) if an executive officer of the Related Company announces such adoption to the Eligible Employees.

1.4. Operation and Administration . The authority to control and manage the operation and administration of the Plan shall be vested in the Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board”). In controlling and managing the operation and administration of the Plan, the Committee shall have the rights, powers and duties set forth in Section 6. Capitalized terms in the Plan shall be defined as set forth in the Plan.

1.5. Plan Year . The term “Plan Year” means the fiscal year of the Company.

1.6. Gender and Number . Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular.

1.7. Notices . Any notice or document required to be filed with the Plan Administrator or the Committee under the Plan will be properly filed if delivered or mailed to the Plan Administrator, in care of the Company, at its principal executive offices. The Plan Administrator may, by advance written notice to affected persons, revise such notice procedure from time to time. Any notice required under the Plan may be waived by the person entitled to notice.

1.8. Form and Time of Elections . Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification or revocation thereof, shall be in writing filed at such times, in such form, and subject to such restrictions and limitations as the Plan Administrator shall require. In addition to any other deferral elections made under this Plan, an election to defer the receipt of an award under the ACE Limited Annual Performance Incentive Plan will be made under this Plan.

1.9. Other Costs and Benefits . The Plan is intended to defer, but not to eliminate, payment of compensation to a Participant. Accordingly, if any compensation or benefits that would otherwise be provided to a Participant in the absence of the Plan are reduced or eliminated by reason of deferral under the Plan, the Company shall equitably compensate the Participant for such reduction or elimination. However, no reimbursement will be made for increased taxes resulting from benefits under the Plan (whether resulting from a change in individual income tax rates or otherwise).

1.10. Evidence . Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.

1.11. Action by Employers . Any action required or permitted to be taken by any Employer shall be by resolution of its board of directors, or by a duly authorized officer of the Employer.

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SECTION 2

Participation
2.1. Participant . Subject to the terms of the Plan, an individual shall be eligible to make deferrals under the Plan during any period he or she is an Eligible Employee. For purposes of the Plan, the term “Eligible Employee” for any period shall mean any individual during any period he or she is a Bermuda-based employee of an Employer; provided that the Committee may designate any other employee of an Employer or member of a group of employees of an Employer as an Eligible Employee. Notwithstanding any other provision of the Plan to the contrary, the Committee may designate as an “Eligible Employee” any individual who has provided services to an Employer (including those individuals who are not and/or have not been employees). In applying the terms of the Plan to any such individual, (i) references in the Plan to an employee of an Employer shall be deemed to also refer to an individual who is a non-employee service provider to an Employer who is designated as an Eligible Employee in accordance with the preceding sentence, (ii) references in the Plan to employment by an Employer shall be deemed to also refer to the provision of services to an Employer by an individual who is designated as an Eligible Employee in accordance with the preceding sentence; and (iii) references to compensation paid to an Eligible Employee shall be deemed to also refer to amounts paid for services rendered to an Employer by an individual who is designated as an Eligible Employee in accordance with the preceding sentence.

2.2. Deferral Election . An Eligible Employee shall participate in the Plan by electing to defer payment of all or a portion of his or her Eligible Compensation pursuant to the terms of a “Deferral Election.” An individual’s Deferral Election shall be filed with the Plan Administrator prior to the period to which it relates. Except as otherwise provided by the Committee, a Participant may not revoke any Deferral Elections. The Committee may revoke a Participant’s Deferral Election as of the date on which the Participant ceases to be an Eligible Employee (provided that this sentence shall not be construed to permit the Committee to revoke a Distribution Election by reason of the Participant ceasing to be an Eligible Employee).

2.3. Eligible Compensation . For purposes of the Plan, a Participant’s “Eligible Compensation” from any Employer for any Plan Year means (i) salary otherwise payable to him by the Employer, (ii) amounts payable under the ACE Limited Annual Performance Incentive Plan and (iii) amounts which are designated by the Committee as compensation eligible for deferral in accordance with the Plan.

2.4. Plan Not Contract of Employment . The Plan does not constitute a contract of employment, and participation in the Plan will not give any employee the right to be retained in the employ of any Employer nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan.

SECTION 3

Plan Accounting
3.1. Accounts . The Plan Administrator shall establish an Account for each Participant who has filed a Deferral Election. If a Participant’s Eligible Compensation subject to a Deferral Election would otherwise be payable from more than one Employer, a separate Account shall be established for the Participant with respect to the Eligible Compensation from each such Employer. The amount held in an Account established on behalf of a Participant will be expressed in United States dollars.

3.2. Adjustment of Accounts . Each Account shall be adjusted in accordance with this Section 3 in a uniform manner as of such periodic “Accounting Dates” as may be determined by the Committee from time to time. As of each Accounting Date, the balance of each Account shall be adjusted as follows:

(a)	first , charge to the Account balance the amount of any distributions under the Plan with respect to that Account that have not previously been charged;	

(b)	then , adjust the Account balance for the applicable Investment Return Rate(s); and	

(c)	then , credit to the Account balance the amount to be credited to that Account in accordance with subsection 3.3 that have not previously been credited.	

3.3. Crediting Under Deferral Election . The balance of a Participant’s Account for any period shall be credited, in accordance with the provisions of paragraph 3.2(c), with the amount by which his or her Eligible Compensation for that period is reduced pursuant to a Deferral Election. Such crediting shall occur as of the date on which such Eligible Compensation would otherwise have been paid to the Participant by the Employer were it not for the reduction made

12

pursuant to the Deferral Election or, if such date is not an Accounting Date, as of the first Accounting Date occurring thereafter.

3.4. Investment Return Rates . The “Investment Return Rate(s)” with respect to the Account(s), or portions of the Account(s), of any Participant for any period shall be the Investment Return Rate(s) elected by the individual in accordance with subsection 3.5 from among such investment alternatives (if any) for that period which, in the discretion of the Committee, are offered from time to time under this paragraph 3.4.

3.5. Participant Selection of Investment Return Rate . The Investment Return Rate alternatives under the Plan, and a Participant’s ability to choose among Investment Return Rate alternatives, shall be determined in accordance with rules established by the Committee from time; provided, however, that the Company may not modify the Investment Return Rate with respect to periods prior to the adoption of such modification.

3.6. Statement of Accounts . As soon as practicable after the end of each Plan Year, and at such other times as determined by the Committee or the Chief Executive Officer of the Company, the Company shall provide each Participant having one or more Accounts under the Plan with a statement of the transactions in his or her Accounts during that year and his or her Account balances as of the end of the year.

SECTION 4

Distributions
4.1. General . Subject to this Section 4, the balance of a Participant’s Account(s) with respect to any year shall be distributed in accordance with the Participant’s Distribution Election. In no event shall the amount distributed with respect to any Participant’s Account as of any date exceed the amount of the Account balance as of that date.

4.2. Distribution Election . A Participant’s Distribution Election shall specify the manner (including the time and form of distribution) in which the Participant’s Account(s) shall be distributed, subject to such restrictions and limitations as may be imposed by the Committee.

4.3. Beneficiary . Subject to the terms of the Plan, any benefits payable to a Participant under the Plan that have not been paid at the time of the Participant’s death shall be paid at the time and in the form determined in accordance with the foregoing provisions of the Plan, to the beneficiary designated by the Participant in writing filed with the Plan Administrator in such form and at such time as the Plan Administrator shall require. A beneficiary designation form will be effective only when the signed form is filed with the Plan Administrator while the Participant is alive and will cancel all beneficiary designation forms filed earlier. If a deceased Participant failed to designate a beneficiary, or if the designated beneficiary of a deceased Participant dies before him or before complete payment of the Participant’s benefits, the amounts shall be paid to the legal representative or representatives of the estate of the last to die of the Participant and his or her designated beneficiary.

4.4. Distributions to Disabled Persons . Notwithstanding the provisions of this Section 4, if, in the Plan Administrator’s opinion, a Participant or beneficiary is under a legal disability or is in any way incapacitated so as to be unable to manage his or her financial affairs, the Plan Administrator may direct that payment be made to a relative or friend of such person for his or her benefit until claim is made by a conservator or other person legally charged with the care of his or her person or his or her estate, and such payment shall be in lieu of any such payment to such Participant or beneficiary. Thereafter, any benefits under the Plan to which such Participant or beneficiary is entitled shall be paid to such conservator or other person legally charged with the care of his or her person or his or her estate.

4.5. Benefits May Not be Assigned . Neither the Participant nor any other person shall have any voluntary or involuntary right to commute, sell, assign, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt of the amounts, if any, payable hereunder, or any part hereof, which are expressly declared to be unassignable and non-transferable. No part of the amounts payable shall be, prior to actual payment, subject to seizure or sequestration for payment of any debts, judgements, alimony or separate maintenance owed by the Participant or any other person, or be transferred by operation of law in the event of the Participant’s or any other person’s bankruptcy or insolvency.

4.6. Offset . Notwithstanding the provisions of subsection 4.5, if, at the time payments are to be made under the Plan, the Participant or beneficiary or both are indebted or obligated to any Employer or Related Company, then the payments remaining to be made to the Participant or the beneficiary or both may, at the discretion of the Plan Administrator, be reduced by the amount of such indebtedness, or obligation, provided, however, that an election by the

13

Plan Administrator not to reduce any such payment shall not constitute a waiver of the claim for such indebtedness or obligation.

4.7. Unforeseeable Emergency . Prior to the date otherwise scheduled for distribution of his or her benefits under the Plan, upon a showing of an unforeseeable emergency, a Participant may elect to accelerate payment of an amount not exceeding the lesser of (a) the amount necessary to meet the emergency or (b) the sum of his or her Account balance(s) under the Plan. For purposes of the Plan, the term “unforeseeable emergency” shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant (or the control of the beneficiary, if the amount is payable to a beneficiary) and that would result in severe financial hardship to the individual if early withdrawal were not permitted. The determination of “unforeseeable emergency” shall be made by the Plan Administrator, based on such information as the Plan Administrator shall deem to be necessary.

SECTION 5

Source of Benefit Payments

5.1. Liability for Benefit Payments . Subject to the provisions of this Section 5, an Employer shall be liable for payment of benefits under the Plan with respect to any Participant to the extent that such benefits are attributable to the deferral of compensation otherwise payable by that Employer to the Participant. Any disputes relating to liability of Employers for benefit payments shall be resolved by the Committee.

5.2. No Guarantee . Neither a Participant nor any other person shall, by reason of the Plan, acquire any right in or title to any assets, funds or property of the Employers whatsoever, including, without limitation, any specific funds, assets, or other property which the Employers, in their sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the amounts, if any, payable under the Plan, unsecured by any assets of the Employers. Nothing contained in the Plan shall constitute a guarantee by any of the Employers that the assets of the Employers shall be sufficient to pay any benefits to any person.

SECTION 6

Committee

6.1. Powers of Committee . Responsibility for the day-to-day administration of the Plan shall be vested in the Plan Administrator, which shall be the Committee. The authority to control and manage all other aspects of the operation and administration of the Plan shall also be vested in the Committee. The Committee is authorized to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any agreements made pursuant to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan. Except as otherwise specifically provided by the Plan, any determinations to be made by the Committee under the Plan shall be decided by the Committee in its sole discretion. Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons.

6.2. Delegation by Committee . The Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time. Until the Committee takes action to the contrary:

a.	The Chief Executive Officer of the Company shall be delegated the power and responsibility to take all actions assigned to or permitted to be taken by the Committee under Section 2, Section 3, and Section 4 (other than the powers and responsibility of the Plan Administrator).	
		
b.	The powers and responsibilities of the Plan Administrator shall be delegated to the Chief Administration Officer (or his or her delegate) of the Company, subject to such direction as may be provided to the Chief Administration Officer or his or her delegate from time to time by the Committee and the Chief Executive Officer of the Company.	

6.3. Information to be Furnished to Committee . The Employers and Related Companies shall furnish the Committee with such data and information as may be required for it to discharge its duties. The records of the Employers and Related Companies as to an employee’s or Participant’s employment, termination of employment, leave of absence, reemployment and Eligible Compensation shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the Plan.

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6.4. Liability and Indemnification of Committee . No member or authorized delegate of the Committee shall be liable to any person for any action taken or omitted in connection with the administration of the Plan unless attributable to his or her own fraud or willful misconduct; nor shall the Employers be liable to any person for any such action unless attributable to fraud or willful misconduct on the part of a director or employee of the Employers. The Committee, the individual members thereof, and persons acting as the authorized delegates of the Committee under the Plan, shall be indemnified by the Employers against any and all liabilities, losses, costs and expenses (including legal fees and expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or its members or authorized delegates by reason of the performance of a Committee function if the Committee or its members or authorized delegates did not act dishonestly or in willful violation of the law or regulation under which such liability, loss, cost or expense arises. This indemnification shall not duplicate but may supplement any coverage available under any applicable insurance.

SECTION 7

Amendment and Termination
The Committee may, at any time, amend or terminate the Plan (including the rules for administration of the Plan), subject to the following:

(a)	Subject to the following provisions of this Section 7, no amendment or termination may materially adversely affect the rights of any Participant or beneficiary under the Plan.	

(b)	The Committee may revoke the right to defer Eligible Compensation under the Plan.	

(c)	The Plan may not be amended to delay the date on which benefits are otherwise payable under the Plan without the consent of each affected Participant. The Committee may amend the Plan to accelerate the date on which Plan benefits are otherwise payable under the Plan and eliminate all future deferrals under the Plan, thereby terminating the Plan.	

(d)	The Committee may amend the Plan to modify or eliminate any Investment Return Rate alternative, except that any such amendment may not modify the Investment Return Rate with respect to periods prior to the adoption of the amendment.	

(e)	Notwithstanding any other provision of the Plan to the contrary, neither the Committee nor the Board may delegate its rights and responsibilities under this Section 7; provided, however, that, the Board of Directors may, from time to time, substitute itself, or another committee of the Board, for the Compensation Committee under this Section 7.	

IN WITNESS WHEREOF, ACE Limited has caused this Plan to be executed by its duly authorized officer this ______, day of _________, 1997.
ACE Limited
By:__________________________

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Exhibit 10.6
ACE LIMITED
SUPPLEMENTAL RETIREMENT PLAN
(as amended and restated effective as of January 1, 2011)

ACE LIMITED SUPPLEMENTAL RETIREMENT PLAN
General
The ACE Limited Supplemental Retirement Plan was adopted effective January 1, 2009 by ACE Limited to provide supplemental retirement benefits to Eligible Employees pursuant to the terms and provisions set forth below. From January 1, 2005 through December 31, 2008, the Plan has operated in good faith compliance with Code section 409A and the transitional guidelines set forth in official IRS guidance. Effective January 1, 2009, participation in the Plan was discontinued to the extent amounts deferred and credited are not subject to Code section 457A. The current document is effective January 1, 2011.

The Plan is intended (1) to comply with Code section 409A, the final regulations and official guidance issued thereunder for credited amounts earned and vested after December 31, 2004, while credited amounts earned and vested prior to January 1, 2005 (and applicable earnings credited on these amounts) are not intended to be subject to the provisions of Code section 409A (the “Grandfathered Amounts”), to the fullest extent permitted by Code section 409A, the final regulations and official guidance, and (2) to be “a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. Notwithstanding any other provision of this Plan, this Plan shall be interpreted, operated and administered in a manner consistent with these intentions. The Plan document and Plan procedures in effect on December 31, 2004 will remain in full force and effect for the Grandfathered Amounts and is labeled Attachment A.

SECTION 1

DEFINITIONS

Wherever used herein the following terms shall have the meanings hereinafter set forth:

“ Affiliate ” means any corporation or other entity that is treated as a single employer with the Company under section 414 of the Code.
“ Code ” means the Internal Revenue Code of 1986, as amended.
“ Committee ” means the Pension Committee of the Company or such other committee as may be appointed by the Compensation Committee of the Board of Directors from time to time.

“ Company ” means ACE Limited or any successor corporation or other entity.

“ Eligible Employee ” means an Employee who is designated by the Committee as belonging to a “select group of management or highly compensated employees,” as such phrase is defined under ERISA, and eligible to participate in the Plan. Any determination of the Committee regarding whether an Employee is an Eligible Employee shall be final and binding for all Plan purposes.

“ Employee ” means an individual who is a regular employee on the U.S. payroll of the Company or its Affiliates. The term “Employee” shall not include a person hired as an independent contractor, leased employee, consultant, or a person otherwise designated by the Company or an Affiliate as not eligible to participate in the Plan, even if such person is determined to be an “employee” of the Company or an Affiliate by any governmental or judicial authority.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ Key Employee ” means an Employee treated as a “specified employee” as of his Separation from Service under Code section 409A(a)(2)(B)(i) of the Company or its Affiliates if the Company’s stock is publicly traded on an established securities market or otherwise ( i.e. , a key employee (as defined in Code section 416(i) without regard to paragraph (5) thereof)). Key Employees shall be determined in accordance with Code section 409A using a December 31 identification date.

“ Participant ” means an Eligible Employee with an accrued benefit under the Plan.
“ Plan ” means the ACE Limited Supplemental Retirement Plan, as set forth herein and as amended from time to time.

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“ Separation from Service ” or “ Separates from Service ” means a “separation from service” within the meaning of Code section 409A.

SECTION 2

Amount and Payment of Plan Benefit

2.1. Accounts . The Committee shall maintain “Supplemental Accounts” in the name of each Participant under the Plan which will reflect the amount, expressed in United States dollars, to which the Participant may become entitled under the Plan. A Participant’s Supplemental Accounts shall be credited in each Plan Year as follows:

(a) For any Plan Year, in the event the Participant's before-tax elective contributions to the Retirement Plan are limited by the provisions of sections 401(a)(17), 401(k)(3), 402(g) or 415 of the Code, as applicable, his compensation for the Plan Year will continue to be reduced by, and the Participant’s Supplemental Before-Tax Account credited with, an amount equal to the amount of before-tax elective contributions that would have been made under the Retirement Plan had the provisions of sections 401(a)(17), 401(k)(3), 402(g) or 415 of the Code, as applicable, not applied to him. Credits to the Participant's Supplemental Before-Tax Account pursuant to this subsection 2.1(a) shall be made at the same time that before-tax elective contributions would otherwise have been credited to his accounts under the Retirement Plan. A Participant shall make an election to participate in the Plan and such election shall remain in effect until modified or revoked by the individual in accordance with the terms of the Plan. Notwithstanding the foregoing provisions of this subsection 2.1(a), salary reductions shall continue and an amount shall be credited to the Participant’s Supplemental Before-Tax Account in accordance with this subsection 2.1 (a)(and Supplemental Matching Contributions and Supplemental Discretionary Matching Contributions, if any, shall be credited to the Participant’s applicable accounts in accordance with subsections 2.1(b) and 2.1(c)) for a Plan Year only if the Participant’s before-tax elective contributions to the Retirement Plan have reached the maximum amount permitted under section 402(g) of the Code or the maximum elective contributions permitted under the Plan and the Committee shall require that the Participant elect (and not reduce) in the Plan Year the maximum deferral percentage permitted under the Retirement Savings Plan in order to receive a Supplemental Before-Tax Contribution for the Plan Year under this Plan, and shall establish such other administrative procedures as are necessary to comply with such regulations.

(b) Subject to the requirements of subsection 2.1(a), for any Plan Year, a Participant's Supplemental Matching Account shall be credited with an amount equal to the difference, if any, between (a) the matching contributions that would have been contributed on behalf of the Participant to the Retirement Plan for that Plan Year, in accordance with the terms thereof and based on his before-tax elective contributions under the Retirement Plan, determined without regard to the limitations of sections 401(a)(17), 401(k)(3), 401(m), 402(g) or 415 of the Code, and (b) the amount of matching contributions actually made to the Retirement Plan on behalf of the Participant. Credits to the Participant's Supplemental Matching Account pursuant to this subsection 2.1(b) shall be made at the same time that matching contributions would otherwise have been credited to his accounts under the Retirement Plan.

(c) Subject to the requirements of subsection 2.1(a), for any Plan Year, a Participant's Supplemental Discretionary Matching Account shall be credited with an amount equal to the difference, if any, between (a) the discretionary matching contributions that would have been contributed on behalf of the Participant to the Retirement Plan for that Plan Year, in accordance with the terms thereof and based on his before-tax salary deferral election under the Retirement Plan, determined without regard to the limitations of sections 401(a)(17), 401(k)(3), 401(m), 402(g) or 415 of the Code, and (b) the amount of discretionary matching contributions actually made to the Retirement Plan on behalf of the Participant. Credits to the Participant's Supplemental Discretionary Matching Account pursuant to this subsection 2.1(c) shall be made at the same time that discretionary matching contributions would otherwise have been credited to his accounts under the Retirement Plan.

(d) For any Plan Year, a Participant’s a Participant's Supplemental Core Account shall be credited with an amount equal to the difference, if any, between (a) the Employer Core Contribution that would have been contributed on behalf of the Participant to the Retirement Plan for that Plan Year, in accordance with the terms thereof determined without regard to the limitations of sections 401(a)(17) or 415 of the Code and (b) the amount of the Employer Core Contributions actually made to the Retirement Plan on behalf of the Participant. Credits to the Participant's Supplemental Core Account pursuant to this subsection 2.1(d) shall be made at the same time that Employer Core Contributions would otherwise have been credited to his accounts under the Retirement Plan.
2.2. Adjustment of Accounts . Each Participant’s Accounts shall be adjusted in accordance with this Section 2 in a uniform manner as of each Valuation Date, as follows:

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(a)	first , charge to the Account balance the amount of any distributions under the Plan with respect to that Account that have not previously been charged;	

(b)	then , adjust the Account balance for the applicable Investment Return Rate(s); and	

(c)	then , credit to the Account balance the amount to be credited to that Account in accordance with subsections 2.1 that have not previously been credited.	

Except as otherwise designated by the Committee, the term “Valuation Date” means the last day of each month.
2.3. Investment Return Rates . The “Investment Return Rate(s)” with respect to the Account(s), or portions of the Supplemental Account(s), of any Participant for any period shall be the Investment Return Rate(s) elected by the individual in accordance with subsection 2.4 from among such investment alternatives (if any) for that period which, in the discretion of the Committee, are offered from time to time under this paragraph 2.3.

2.4. Participant Selection of Investment Return Rate . The Investment Return Rate alternatives under the Plan, and a Participant’s ability to choose among Investment Return Rate alternatives, shall be determined in accordance with rules established by the Committee from time to time; provided, however, that the Company may not modify the Investment Return Rate with respect to periods prior to the adoption of such modification.

2.5. Statement of Accounts . As soon as practicable after the last day of each Plan Year, the Committee will cause to be delivered to each Participant a statement of the balance of his Supplemental Account as of that day.

2.6     Distribution . Subject to the following provisions of this subsection 2.6 and subsection 2.8, a Participant’s Supplemental Account balance shall be payable to the Participant in a single sum during first calendar quarter of the year following the year the Participant Separates from Service. Subject to any applicable currency exchange laws, payments shall be made in such currency as the Committee shall elect, based on the currency exchange rate of the Trustee of the Retirement Plan as of the date of payment. In the event of a Participant’s death, the amount which would otherwise be payable to the Participant shall be paid to one or more beneficiaries designated by the Participant for purposes of the Plan in a writing filed with the Committee prior to the date of death. Any such designation shall cancel any previous designation by the Participant. If no such designation is on file on the date of the Participant’s death, or if the designated beneficiary predeceases the Participant, the Participant’s Supplemental Account balance shall be paid to the Participant’s estate.

Notwithstanding the foregoing, distributions may not be made to a Key Employee upon a Separation from Service before the date which is six months after the date of the Key Employee’s Separation from Service (or, if earlier, the date of death of the Key Employee). If applicable, any amounts payable to the Participant during such six (6) month period shall be accumulated and paid on the first day of the seventh month following the Participant’s Separation from Service.
2.7     Distributions to Persons Under Disability . In the event a Participant or his beneficiary is declared incompetent and an conservator or other person legally charged with the care of his person or of his estate is appointed, any benefit to which such Participant or beneficiary is entitled under the Plan shall be paid to such conservator or other person legally charged with the care of his person or of his estate.
2.8     Forfeiture of Certain Accounts . Notwithstanding any provision of the Plan to the contrary, in no event shall any amount attributable to the Participant’s Supplemental Account be payable to or on account of a Participant whose Separation from ServiceDate occurs prior to the Participant’s completion of twelve consecutive months of employment with an Employer for any reason other than the death of the Participant. Effect of Early Taxation . If the Participant’s benefits under the Plan are includible in income pursuant to Code section 409A, such benefits shall be distributed immediately to the Participant.
2.9     Permitted Delays . Notwithstanding the foregoing, any payment to a Participant under the Plan shall be delayed upon the Committee's reasonable anticipation of one or more of the following events:

(a)	The Company's deduction with respect to such payment would be eliminated by application of Code section 162(m); or	

(b)	The making of the payment would violate Federal securities laws or other applicable law;	

provided, that any payment delayed pursuant to this Section 4.11 shall be paid in accordance with Code section 409A.

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2.10     Transitional Distributions for Separations from Service during 2005 and 2006 . For Participants who Separated from Service in 2005 or 2006 (for amounts credited during 2005 or 2006) distributions begin the later of the first quarter of the year following the year the Participant Separates from Service or by the end of the year in which the Participant attains age 55.

2.11     Changes in Time or Form of Distribution . Participants who Separated from Service in 2005 and 2006, may make an election to change the time or form of a distribution, but only if the following conditions are satisfied:

(a)	The election may not take effect until at least twelve (12) months after the date on which the election is made; and	

(b)	In the case of an election to change the time or form of a distribution under Sections 4.1, 4.2, or 4.5, a distribution may not be made earlier than at least five (5) years from the date the distribution would have otherwise been made; and	

(c)	In the case of an election to change the time or form of a distribution under Section 4.2, the election must be made at least twelve (12) months before the date of the first scheduled distribution.	

(d)	All changes to the time or form of any distribution are subject to approval by the Committee and only permitted to the extent allowed by Code section 409A.	

SECTION 3

Source of Benefit Payments

3.1. Liability for Benefit Payments . The amount of any benefit payable under the Plan shall be paid from the general revenues of the Employer of the Participant with respect to whom the benefit is payable; provided, however, that if a Participant has been employed by more than one Employer, the portion of his Plan benefits payable by any such Employer shall be that portion accrued while the Participant was employed by that Employer, and earnings on such portion. An Employer’s obligation under the Plan shall be reduced to the extent that any amounts due under the Plan are paid from one or more trusts, the assets of which are subject to the claims of general creditors of the Employer or any affiliate thereof; provided, however, that nothing in the Plan shall require the Company or any Employer to establish any trust to provide benefits under the Plan.

3.2. No Guarantee . Neither a Participant nor any other person shall, by reason of the Plan, acquire any right in or title to any assets, funds or property of the Employers whatsoever, including, without limitation, any specific funds, assets, or other property which the Employers, in their sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the amounts, if any, payable under the Plan, unsecured by any assets of the Employers. Nothing contained in the Plan shall constitute a guarantee by any of the Employers that the assets of the Employers shall be sufficient to pay any benefits to any person.

3.3. Successors . The obligations of the Company and each Employer under the Plan shall be binding on any assignee or successor in interest thereto. Prior to any merger, consolidation or sale of assets, the Company, or if applicable, the Employer, shall require any such successor to expressly assume all of the Company’s, or if applicable, all of the Employer’s, obligations under the Plan.

3.4. Effect of Early Taxation . If the Participant’s benefits under the Plan are includible in income pursuant to Code section 409A, such benefits shall be distributed immediately to the Participant.

3.5. Permitted Delays . Notwithstanding the foregoing, any payment to a Participant under the Plan shall be delayed upon the Committee's reasonable anticipation of one or more of the following events:

(c)	The Company's deduction with respect to such payment would be eliminated by application of Code section 162(m); or	

(d)	The making of the payment would violate Federal securities laws or other applicable law;	

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provided, that any payment delayed pursuant to this Section 4.11 shall be paid in accordance with Code section 409A.

3.6. Taxes . The Company or other payor may withhold from a benefit payment under the Plan or a Participant’s wages in order to meet any federal, state, or local tax withholding obligations with respect to Plan benefits.  The Company or other payor may also accelerate and pay a portion of a Participant's benefits in a lump sum equal to the Federal Insurance Contributions Act ("FICA") tax imposed and the income tax withholding related to such FICA amounts.  The Company or other payor shall report Plan payments and other Plan-related information to the appropriate governmental agencies as required under applicable laws.

3.7     Compliance with 457A .  Notwithstanding any provision in the Plan to the contrary, to the extent a Participant's Account balance (including any "grandfathered amounts" earned and vested prior to January 1, 2005) is attributable to services performed before January 1, 2009, is not otherwise included in gross income before 2018, and is required by Pub. L. No. 110-343 § 801(d)(2) to be included in income in 2017, such portion of the Account balance shall be distributed to the Participant in a lump sum payment in 2017 in accordance with I.R.S. Notice 2009-8.

SECTION 4

Amendment and Termination

4.1     Amendment and Termination . The Company may, at any time, amend or terminate the Plan; provided, however, that subject to the provisions of the following sentence, neither an amendment nor a termination shall adversely affect the rights of any Participant under the Plan without the consent of the Participant. The Company, by Plan amendment or termination, may prospectively eliminate the right to have amounts credited to any Supplemental Account pursuant to the provisions of Section 2 or reduce the amount which is required to be credited to any such account pursuant to those provisions.
4.2     Effect of Amendment or Termination . No amendment or termination of the Plan shall adversely affect the rights of any Participant to amounts credited to his Account as of the effective date of such amendment or termination; provided however, an amendment may freeze or limit future accruals of benefits under the Plan on and after the date of such amendment. Upon termination of the Plan, distribution of balances in Accounts shall be made to Participants and beneficiaries in the manner and at the time described in Section 2, unless the Company determines in its sole discretion that all such amounts shall be distributed upon termination in accordance with the requirements under Code section 409A. Upon termination of the Plan, no further deferrals of Eligible Income shall be permitted; however, earnings, gains and losses shall continue to be credited to Account balances in accordance with Section 2 until the Account balances are fully distributed.

4.3     No Material Modification . Notwithstanding the foregoing, no amendment of the Plan shall apply to the Grandfathered Amounts, unless the amendment specifically provides that it applies to such amounts. The purposes of this restriction is to prevent a Plan amendment from resulting in an inadvertent “material modification” to amount that are “grandfathered” and exempt from the requirements of Code section 409A.

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IN WITNESS WHEREOF, ACE LIMITED has caused this ACE Limited Elective Deferred Compensation Plan to be executed by its duly authorized officer on this ____ day of December, 2011.

ACE LIMITED

By: ________________________

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ATTACHMENT A

The ACE Limited Supplemental Retirement Plan as in effect December 31, 2004.

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ACE LIMITED
SUPPLEMENTAL RETIREMENT PLAN
(as amended and restated effective as of July 1, 2001)

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ACE LIMITED SUPPLEMENTAL RETIREMENT PLAN

CERTIFICATE

I, Keith P.White, Chief Administration Officer ACE Limited, hereby certify that the attached document is a full, true and complete copy of ACE LIMITED SUPPLEMENTAL RETIREMENT PLAN as in effect on July 1, 2001.
Dated this ___ day of July, 2001.

	
 	
Chief Administration Officer as Aforesaid	
(Seal)	

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ACE LIMITED SUPPLEMENTAL RETIREMENT PLAN
SECTION 1

General

1.1. P urpose and Effective Date . ACE Limited (the “Company”) has previously established the ACE Limited Employee Retirement Plan (the “Retirement Plan”) to provide its eligible employees with retirement income. Contrary to the desire of the Company, the amount of contributions which may be made to the retirement plan for the benefit of an employee may be limited by reason of the application of certain provisions of the Internal Revenue Code of 1986 of the United States of America, as amended (the “Code”). The Company has established the ACE Limited Supplemental Retirement Plan (the ‘Plan’), effective as of October 1, 1987, to reward past service with the Company and to assure that affected individuals will receive benefits in amounts comparable to the amounts that they would have received under the Retirement Plan if such limitations of the Code did not apply to the Retirement Plan. The Plan has been amended from time to time, and is now amended, restated and continued effective July 1, 2001 (the “Effective Date”).

1.2. Employers and Related Companies . The term “Related Company” means any corporation or trade or business during any period during which it is, along with the Company, a member of a controlled group of corporations or a controlled group of trades or businesses, as described in sections 414(b) and 414(c), respectively, of the Code. The Company and each Related Company, which, with the Company’s consent, adopts the Plan are referred to below collectively as the “Employers” and individually as an “Employer”.

1.3. Definitions, References . Unless the context clearly requires otherwise, any word, term or phrase used in the Plan shall have the same meaning as is assigned to it under the terms of the Retirement Plan. Any reference in the Plan to a provision of the Retirement Plan shall be deemed to include reference to any comparable provision of any amendment of that Plan.

1.4. Plan Administration . The authority to control and manage the operation and administration of the Plan shall be vested in the Committee appointed by the Board of Directors of the Company to act under the Retirement Plan; provided, however, that payment of any benefits to, or on behalf of Participants pursuant to Section 3 may be made at the direction of any two of the following officers of the Company: (a) Chief Executive Officer, (b) Executive Vice President, Underwriting, (c) Senior Vice President, Finance, or (d) Senior Vice President, Administration. In controlling and managing the operation and administration of the Plan, the Committee shall have the same rights, powers and duties as those delegated to it under the Retirement Plan, which includes full and discretionary power and authority to interpret and construe the provisions of the Plan and to determine the amount of benefits and the rights or eligibility of employees or Participants (as defined in subsection 2.1) under the Plan, and such other power and authority as may be necessary to discharge its duties hereunder. Any interpretation of the Plan and any decision made by the Committee on any matter within the discretion of the Committee shall be binding on all persons. A misstatement or other mistake of fact shall be corrected when it becomes known, and the Committee shall make such adjustment on account thereof as it considers equitable and practicable. The Committee may delegate such of its ministerial or discretionary duties and functions as it may deem appropriate to any employee or group of employees of any Employer.

1.5. Applicable Laws . The Plan shall be construed and administered in accordance with the laws of Bermuda.

1.6. Gender and Number . Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular.

1.7. Plan Year . The “Plan Year” shall be the twelve-consecutive month period beginning on each January 1.

1.8. Notices . Any notice or document required to be filed with the Committee under the Plan will be properly filed if delivered or mailed by registered mail, postage prepaid, to the Committee, in care of the Company, at its principal executive offices. Any notice required under the Plan may be waived by the person entitled to notice.

1.9. Form and Time of Elections . Unless otherwise specified herein, any election or consent permitted or required to be made or given by any Participant or other person entitled to benefits under the Plan, and any permitted modification or revocation thereof, shall be made in writing or shall be given by means of such interactive telephone system as the Committee may designate from time to time as the sole vehicle for executing regular transactions under the Plan (referred to generally herein as the “Phone System”). Each Participant shall have a personal identification number or “PIN” for purposes of executing transactions through the Phone System, and entry by a Participant or his PIN shall constitute his valid signature for purposes of any transaction the Committee determines may or should be executed by means of the

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Phone System. Any election made through the Phone System shall be considered submitted to the Committee on the date it is electronically transmitted.

1.10. Evidence . Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.

1.11. Action by Employers . Any action required or permitted to be taken under the Plan by any Employer which is a corporation shall be by resolution of its Board of Directors, or by a person or persons authorized by its Board of Directors. Any action required or permitted to be taken by any Employer which is a partnership shall be by a general partner of such partnership or by a duly authorized officer thereof.

1.12. Limitations on Provisions . The provisions of the Plan and any benefits payable hereunder shall be limited as described herein. Any benefit payable under the Retirement Plans shall be paid solely in accordance with the terms and conditions of the applicable Retirement Plan and nothing in this Plan shall operate or be construed in any way to modify, amend, or affect the terms and provisions of the Retirement Plans.

1.13. Assignment and Alienation; Forfeitures . The benefits payable to any Participant or Beneficiary under the Plan may not be voluntarily or involuntarily pledged, assigned, alienated, transferred or otherwise anticipated. In the event a Participant or Beneficiary attempts to do so, any amount that is subject to the purported pledge, assignment, alienation, transfer or other anticipation shall be immediately forfeited and neither the Participant nor his Beneficiary shall have any further rights to such benefits.

SECTION 2

Participation

2.1. Participation . Each employee of an Employer who participated in the Plan prior to the Effective Date shall continue to be a “Participant” on the Effective Date. Each other employee of an Employer shall become a “Participant” as of any date thereafter on which his Eligible Compensation for Retirement Plan purposes exceeds the limit established by section 401(a)(17) in any Plan Year and his benefits under either the Retirement Plan are limited by any or all of sections 415, 401(a)(17), 402(g), 401(k) or 401(m) of the Code. Once an eligible employee becomes a Participant in the Plan, as long as he continues to have an Account balance under the Plan he will remain a Participant for all purposes under the Plan, except for purposes of the contribution provisions of Section 3.

2.2. Plan Not Contract of Employment . The Plan does not constitute a contract of employment, and participation in the Plan will not give any employee the right to be retained in the employ of the Company nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan.

SECTION 3

Amount and Payment of Plan Benefit

3.1. Accounts . The Committee shall maintain “Supplemental Accounts” in the name of each Participant under the Plan which will reflect the amount, expressed in United States dollars, to which the Participant may become entitled under the Plan. A Participant’s Supplemental Accounts shall be credited in each Plan Year as follows:

a.	For any Plan Year, in the event the Participant's before-tax elective contributions to the Retirement Plan are limited by the provisions of sections 401(a)(17), 401(k)(3), 402(g) or 415 of the Code, as applicable, his compensation for the Plan Year will continue to be reduced by, and the Participant’s Supplemental Before-Tax Account credited with, an amount equal to the amount of before-tax elective contributions that would have been made under the Retirement Plan had the provisions of sections 401(a)(17), 401(k)(3), 402(g) or 415 of the Code, as applicable, not applied to him. Credits to the Participant's Supplemental Before-Tax Account pursuant to this subsection 3.1(a) shall be made at the same time that before-tax elective contributions would otherwise have been credited to his accounts under the Retirement Plan. A Participant’s election to make before-tax contributions under the Retirement Plan shall be deemed to be an election to make elective salary deferral contributions under the Plan, and such election shall remain in effect until modified or revoked by the individual in accordance with the terms of the Plan. Notwithstanding the foregoing provisions of this subsection 3.1(a), salary reductions shall continue and	

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an amount shall be credited to the Participant’s Supplemental Before-Tax Account in accordance with this subsection 3.1 (a)(and Supplemental Matching Contributions and Supplemental Discretionary Matching Contributions, if any, shall be credited to the Participant’s applicable accounts in accordance with subsections 3.1(b) and 3.1(c)) for a Plan Year only if the Participant’s before-tax elective contributions to the Retirement Plan have reached the maximum amount permitted under section 402(g) of the Code or the maximum elective contributions permitted under the Plan, in accordance with Treas. Reg. section 1.401(k)(1)(e)(6)(iv); and the Committee shall require that the Participant elect (and not reduce) in the Plan Year the maximum deferral percentage permitted under the Retirement Savings Plan in order to receive a Supplemental Before-Tax Contribution for the Plan Year under this Plan, and shall establish such other administrative procedures as are necessary to comply with such regulations.

b.	Subject to the requirements of subsection 3.1(a), for any Plan Year, a Participant's Supplemental Matching Account shall be credited with an amount equal to the difference, if any, between (a) the matching contributions that would have been contributed on behalf of the Participant to the Retirement Plan for that Plan Year, in accordance with the terms thereof and based on his before-tax elective contributions under the Retirement Plan, determined without regard to the limitations of sections 401(a)(17), 401(k)(3), 401(m), 402(g) or 415 of the Code, and (b) the amount of matching contributions actually made to the Retirement Plan on behalf of the Participant. Credits to the Participant's Supplemental Matching Account pursuant to this subsection 3.1(b) shall be made at the same time that matching contributions would otherwise have been credited to his accounts under the Retirement Plan.	

c.	Subject to the requirements of subsection 3.1(a), for any Plan Year, a Participant's Supplemental Discretionary Matching Account shall be credited with an amount equal to the difference, if any, between (a) the discretionary matching contributions that would have been contributed on behalf of the Participant to the Retirement Plan for that Plan Year, in accordance with the terms thereof and based on his before-tax salary deferral election under the Retirement Plan, determined without regard to the limitations of sections 401(a)(17), 401(k)(3), 401(m), 402(g) or 415 of the Code, and (b) the amount of discretionary matching contributions actually made to the Retirement Plan on behalf of the Participant. Credits to the Participant's Supplemental Discretionary Matching Account pursuant to this subsection 3.1(c) shall be made at the same time that discretionary matching contributions would otherwise have been credited to his accounts under the Retirement Plan.	

d.	For any Plan Year, a Participant’s a Participant's Supplemental Core Account shall be credited with an amount equal to the difference, if any, between (a) the Employer Core Contribution that would have been contributed on behalf of the Participant to the Retirement Plan for that Plan Year, in accordance with the terms thereof determined without regard to the limitations of sections 401(a)(17) or 415 of the Code and (b) the amount of the Employer Core Contributions actually made to the Retirement Plan on behalf of the Participant. Credits to the Participant's Supplemental Core Account pursuant to this subsection 3.1(d) shall be made at the same time that Employer Core Contributions would otherwise have been credited to his accounts under the Retirement Plan.	

3.2. Adjustment of Accounts . Each Participant’s Accounts shall be adjusted in accordance with this Section 3 in a uniform manner as of each Valuation Date, as follows:

a.	first , charge to the Account balance the amount of any distributions under the Plan with respect to that Account that have not previously been charged;	

b.	then , adjust the Account balance for the applicable Investment Return Rate(s); and	

c.	then , credit to the Account balance the amount to be credited to that Account in accordance with subsections 3.1 that have not previously been credited.	

Except as otherwise designated by the Committee, the term “Valuation Date” means the last day of each calendar quarter.
3.3. Investment Return Rates . The “Investment Return Rate(s)” with respect to the Account(s), or portions of the Supplemental Account(s), of any Participant for any period shall be the Investment Return Rate(s) elected by the individual in accordance with subsection 3.4 from among such investment alternatives (if any) for that period which, in the discretion of the Committee, are offered from time to time under this paragraph 3.3.

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3.4. Participant Selection of Investment Return Rate . The Investment Return Rate alternatives under the Plan, and a Participant’s ability to choose among Investment Return Rate alternatives, shall be determined in accordance with rules established by the Committee from time to time; provided, however, that the Company may not modify the Investment Return Rate with respect to periods prior to the adoption of such modification.

3.5. Statement of Accounts . As soon as practicable after the last day of each Plan Year, the Committee will cause to be delivered to each Participant a statement of the balance of his Supplemental Account as of that day.

3.6. Distribution . Subject to the following provisions of this subsection 3.6 and subsection 3.8, a Participant’s Supplemental Account balance shall be payable to the Participant in accordance with rules and regulations established from time to time by the Committee, which rules and regulations as in effect on the Effective Date are attached to the Plan as Exhibit A, and in accordance with such other restrictions and limitations imposed by the Committee. Subject to any applicable currency exchange laws, payments shall be made in such currency as the Committee shall elect, based on the currency exchange rate of the Trustee of the Retirement Plan as of the date of payment. In the event of a Participant’s death, the amount which would otherwise be payable to the Participant shall be paid to one or more beneficiaries designated by the Participant for purposes of the Plan in a writing filed with the Committee prior to the date of death. Any such designation shall cancel any previous designation by the Participant. If no such designation is on file on the date of the Participant’s death, or if the designated beneficiary predeceases the Participant, the Participant’s Supplemental Account balance shall be paid to the Participant’s estate.

3.7. Distributions to Persons Under Disability . In the event a Participant or his beneficiary is declared incompetent and an conservator or other person legally charged with the care of his person or of his estate is appointed, any benefit to which such Participant or beneficiary is entitled under the Plan shall be paid to such conservator or other person legally charged with the care of his person or of his estate.

3.8. Forfeiture of Certain Accounts . Notwithstanding any provision of the Plan to the contrary, in no event shall any amount attributable to the Participant’s Supplemental Account be payable to or on account of a Participant whose Termination Date occurs prior to the Participant’s completion of twelve consecutive months of employment with an Employer for any reason other than the death of the Participant.

SECTION 4

Source of Benefit Payments

4.1. Liability for Benefit Payments . The amount of any benefit payable under the Plan shall be paid from the general revenues of the Employer of the Participant with respect to whom the benefit is payable; provided, however, that if a Participant has been employed by more than one Employer, the portion of his Plan benefits payable by any such Employer shall be that portion accrued while the Participant was employed by that Employer, and earnings on such portion. An Employer’s obligation under the Plan shall be reduced to the extent that any amounts due under the Plan are paid from one or more trusts, the assets of which are subject to the claims of general creditors of the Employer or any affiliate thereof; provided, however, that nothing in the Plan shall require the Company or any Employer to establish any trust to provide benefits under the Plan.

4.2. No Guarantee . Neither a Participant nor any other person shall, by reason of the Plan, acquire any right in or title to any assets, funds or property of the Employers whatsoever, including, without limitation, any specific funds, assets, or other property which the Employers, in their sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the amounts, if any, payable under the Plan, unsecured by any assets of the Employers. Nothing contained in the Plan shall constitute a guarantee by any of the Employers that the assets of the Employers shall be sufficient to pay any benefits to any person.

4.3. Successors . The obligations of the Company and each Employer under the Plan shall be binding on any assignee or successor in interest thereto. Prior to any merger, consolidation or sale of assets, the Company, or if applicable, the Employer, shall require any such successor to expressly assume all of the Company’s, or if applicable, all of the Employer’s, obligations under the Plan.

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SECTION 5

Amendment and Termination

The Company may, at any time, amend or terminate the Plan; provided, however, that subject to the provisions of the following sentence, neither an amendment nor a termination shall adversely affect the rights of any Participant under the Plan without the consent of the Participant. The Company, by Plan amendment or termination, may prospectively eliminate the right to have amounts credited to any Supplemental Account pursuant to the provisions of subsection 3.1 or subsection 3.3, or reduce the amount which is required to be credited to any such account pursuant to those provisions.  

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Exhibit 10.7

ACE USA
OFFICER DEFERRED COMPENSATION PLAN
(Amended and Restated Effective January 1, 2011)

The ACE USA Officer Deferred Compensation Plan (the “Plan”) was amended and restated effective January 1, 2009 by ACE INA Holdings, Inc. to permit Eligible Employees to defer receipt of certain compensation pursuant to the terms and provisions set forth below. From January 1, 2005 through December 31, 2008, the Plan has operated in good faith compliance with Code section 409A and the transitional guidelines set forth in official IRS guidance.  The current document is effective January 1, 2011.

The Plan is intended (1) to comply with Code section 409A, the final regulations and official guidance issued thereunder for credited amounts earned and vested after December 31, 2004, while credited amounts earned and vested prior to January 1, 2005 (and applicable earnings credited on these amounts) are not intended to be subject to the provisions of Code section 409A (the “Grandfathered Amounts”), to the fullest extent permitted by Code section 409A and official guidance, and (2) to be “a plan which is unfunded and is maintained by an employer primarily for the purpose of providing deferred compensation for a select group of management or highly compensated employees” within the meaning of sections 201(2), 301(a)(3) and 401(a)(1) of ERISA. Notwithstanding any other provision of this Plan, this Plan shall be interpreted, operated and administered in a manner consistent with these intentions. The Plan document and Plan procedures in effect on December 31, 2004 remain in full force and effect for the Grandfathered Amounts.

SECTION 1

DEFINITIONS

Wherever used herein the following terms shall have the meanings hereinafter set forth:

“ Account ” means a bookkeeping account established by the Company for each Participant electing to defer Eligible Income under the Plan.

“ Affiliate ” means any corporation or other entity that is treated as a single employer with the Company under section 414 of the Code.

“ Base Salary ” means the regular base salary paid to an Eligible Employee by the Company or an Affiliate.

“ Code ” means the Internal Revenue Code of 1986, as amended.

“ Committee ” means the Retirement Committee of ACE INA Holdings, Inc.
 
“ Company ” means ACE INA Holdings, Inc. or any successor corporation or other entity.

“ Deferral Form ” means a written form provided by the Committee pursuant to which an Eligible Employee may elect to defer amounts under the Plan.

“ Disabled ” means a Participant (1) is unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, or (2) is, by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than 12 months, receiving income replacement benefits for a period of not less than three months under an accident and health plan covering employees of the Participant ' ’ s employer.

“ Eligible Employee ” means an Employee who is designated by the Committee as belonging to a “select group of management or highly compensated employees,” as such phrase is defined under ERISA, and eligible to participate in the Plan. Any determination of the Committee regarding whether an Employee is an Eligible Employee shall be final and binding for all Plan purposes.

“ Eligible Income ” means Base Salary, Incentive Awards and other amounts designated by the Committee. Eligible Income does not include irregular, non-recurring types of compensation.

“ Employee ” means an individual who is a regular employee on the payroll of the Company or its Affiliates. The term “Employee” shall not include a person hired as an independent contractor, leased employee, consultant, or a person otherwise designated by the Company or an Affiliate as not eligible to participate in the Plan, even if such person is determined to be an “employee” of the Company or an Affiliate by any governmental or judicial authority.

“ ERISA ” means the Employee Retirement Income Security Act of 1974, as amended.

“ Grandfathered Amounts ” means amounts that were deferred under the Plan and earned and vested as of December 31, 2004. Grandfathered Amounts are subject to the distribution rules in effect prior to this amendment and restatement.

“ Incentive Award ” means an amount payable to an Eligible Employee under an annual bonus or incentive compensation plan of the Company or an Affiliate.

“ Investment Options ” means the investment options, as determined from time to time by the Committee, used to credit earnings, gains and losses on Account balances.

“ Key Employee ” means an Employee treated as a “specified employee” under Code section 409A(a)(2)(B)(i) ( i.e. , a key employee (as defined in Code section 416(i) without regard to paragraph (5) thereof)) of the Company. Key Employees shall be determined by the Committee in accordance with Code section 409A using a December 31 identification date. A listing of Key Employees as of an identification date shall be effective for the 12-month period beginning on the January 15 following the identification date.

“ Participant ” means an Eligible Employee who elects to defer amounts under the Plan.

“ Payment Date ” means the first business day of the year following an event triggering a payment.

“ Plan ” means the ACE USA Officer Deferred Compensation Plan, as set forth herein and as amended from time to time.

“ Plan Year ” means January 1 through December 31.

“ Separation from Service ” or “ Separate from Service ” means means a “separation from service” within the meaning of Code section 409A.

“ Qualified Plan ” means one or more of the ACE USA Basic Employee Retirement Savings Plan, ACE USA Basic Puerto Rico Employee Retirement Savings Plan, the ACE USA Employee Retirement Savings Plan or the ACE USA Puerto Rico Employee Retirement Savings Plan. Any reference to a Qualified Plan only refers to the plan in which an Eligible Employee is a participant.

SECTION 2

PARTICIPATION

Participation in the Plan shall be limited to Eligible Employees. The Committee shall notify any Employee of his status as an Eligible Employee at such time and in such manner as the Committee shall determine. An Eligible Employee shall become a Participant by making a deferral election under Section 3.

SECTION 3

PARTICIPANT ACCOUNTS

3.1 Deferral Elections . Deferrals may be made by a Participant with respect to the following types of Eligible Income, as permitted by the Committee:

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(a) Base Salary . An Eligible Employee may elect to defer any portion of his Base Salary, as specified on election forms provided to Eligible Employees.

(b) Incentive Awards . An Eligible Employee may elect to defer any portion of an Incentive Award up to 100%.

(c)    Other amounts designated by the Committee as Eligible Income.

In order to elect to defer Eligible Income earned during a Plan Year, an Eligible Employee shall file an irrevocable Deferral Form with the Committee before the beginning of such Plan Year. Notwithstanding the foregoing, (1) if the Plan Administrator Committee determines that an Incentive Award qualifies as “performance-based compensation” under Code section 409A, an Eligible Employee may elect to defer a portion of the Incentive Award by filing a Deferral Form at such later time as permitted by the Committee, and (2) in the first year in which an Employee becomes eligible to participate in the Plan, a deferral election may be made with respect to services to be performed subsequent to the election within 30 days after the date the Employee becomes eligible to participate in the Plan to the extent permitted under Code section 409A.

3.2 Crediting of Deferrals . Eligible Income deferred by a Participant under the Plan shall be credited to the Participant’s Account as soon as practicable after the amounts would have otherwise been paid to the Participant.

3.3 Crediting of Other Contributions . To the extent the crediting of deferrals of eligible income by a Participant under the Plan reduces contributions under a Qualified Plan or reduces the crediting of contributions under a nonqualified plan of the Company or an Affiliate, such amounts will be credited under the Plan in the same amount and at the same time as they would have been contributed to a Qualified Plan or credited to a nonqualified plan.

3.4 Vesting . Amounts credited to the Accounts shall be vested at the same time in the same amount as contributions under any applicable Qualified Plan.

3.5 Earnings . The Company shall periodically credit gains, losses and earnings to a Participant’s Account, until the full balance of the Account has been distributed. Amounts shall be credited to a Participant’s Account under this Section based on the results that would have been achieved had amounts credited to the Account been invested as soon as practicable after crediting into the Investment Options selected by the Participant. The Committee shall specify procedures to allow Participants to make elections as to the deemed investment of amounts newly credited to their Accounts, as well as the deemed investment of amounts previously credited to their Accounts. Nothing in this Section or otherwise in the Plan, however, will require the Company to actually invest any amounts in such Investment Options or otherwise.

SECTION 4

DISTRIBUTION OF ACCOUNT BALANCE

The provisions of this Section 4 shall apply only to amounts subject to Code section 409A. Distribution rules applicable to the Grandfathered Amounts (and the earnings credited on those amounts) are set forth in Attachment A.

4.1. Distribution Upon Separation . A Participant’s Account balance shall normally be distributed to him in a lump sum payment on the Payment Date following the Participant’s Separation from Service. A Participant may elect on a Deferral Form to have the portion of his Account related to amounts deferred under the Deferral Form (and earnings thereon) distributed in annual installments over a period of up to 15 years with payments commencing on the Payment Date following the Participant’s Separation from Service.

Notwithstanding the foregoing, distributions may not be made to a Key Employee upon a Separation from Service before the date which is six months after the date of the Key Employee’s Separation from Service (or, if earlier, the date of death of the Key Employee). If applicable, any amounts payable to the Participant during such six (6) month period shall be accumulated and paid on the first day of the seventh month following the Participant’s Separation from Service.

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4.2. Distribution as of Specified Date . A Participant may elect on a Deferral Form to have the portion of his Account related to amounts deferred under the Deferral Form (and earnings thereon) paid to the Participant in the form elected as of a specified date; provided however, if no form is elected payment shall be made in a lump sum. If expressly elected by a Participant on a Deferral Form, payment with respect to the portion of his Account related to Amounts deferred under the Deferral Form may be made on the later or earlier of: (1) a specified date or (2) the Payment Date following Separation from Service.

4.3. Distribution Upon Disability . Notwithstanding any provision in the Plan to the contrary, if a Participant becomes Disabled, his Account balance will be distributed in a lump sum payment on the Payment Date following the date the Participant becomes Disabled.

4.4. Distributions Upon Death . Notwithstanding any provision in the Plan to the contrary, if a Participant dies before full distribution of his Account balance, any remaining balance shall be distributed in a lump sum payment on the Payment Date following the Participant’s death to the Participant’s beneficiary. A Participant shall designate his beneficiary in a writing delivered to the Committee prior to death in accordance with procedures established by the Committee. If a Participant has not properly designated a beneficiary or if no designated beneficiary is living on the date of distribution, such amount shall be distributed to the Participant’s estate.

4.5. Withdrawals for Unforeseeable Emergency . A Participant may withdraw all or any portion of his Account balance for an Unforeseeable Emergency. The amounts distributed with respect to an Unforeseeable Emergency may not exceed the amounts necessary to satisfy such Unforeseeable Emergency plus amounts necessary to pay taxes reasonably anticipated as a result of the distribution, after taking into account the extent to which such hardship is or may be relieved through reimbursement or compensation by insurance or otherwise or by liquidation of the Participant’s assets (to the extent the liquidation of such assets would not itself cause severe financial hardship) or by cessation of deferrals under the Plan. “Unforeseeable Emergency” means for this purpose a severe financial hardship to a Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Code section 152(a)) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary and unforeseeable circumstances arising as a result of events beyond the control of the Participant.

A Participant’s deferral election for the Plan Year in which he obtains a distribution under this section shall be cancelled.

4.6     Changes in Time or Form of Distribution . A Participant may make an election to change the time or form of a distribution, but only if the following conditions are satisfied:

(a)	The election may not take effect until at least twelve (12) months after the date on which the election is made; and	

(b)	In the case of an election to change the time or form of a distribution under Sections 4.1, 4.2, or 4.5, a distribution may not be made earlier than at least five (5) years from the date the distribution would have otherwise been made; and	

(c)	In the case of an election to change the time or form of a distribution under Section 4.2, the election must be made at least twelve (12) months before the date of the first scheduled distribution.	

4.7     Effect of Taxation . If a portion of the Participant’s Account balance is includible in income under Code section 409A, such portion shall be distributed immediately to the Participant.

4.8     Permitted Delays . Notwithstanding the foregoing, any payment to a Participant under the Plan shall be delayed upon the Committee’s reasonable anticipation of one or more of the following events:

(a)	The Company’s deduction with respect to such payment otherwise would be limited or eliminated by application of Code section 162(m);	

(b)	The making of the payment would violate Federal securities laws or other applicable law;	

provided, that any payment subject to this Section 4.9 shall be paid in accordance with Code section 409A.

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SECTION 5

ADMINISTRATION

5.1. General Administration . The Committee shall be responsible for the operation and administration of the Plan and for carrying out the provisions hereof. The Committee shall have the full authority and discretion to make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan and decide or resolve any and all questions, including interpretations of this Plan, as may arise in connection with this Plan. Any such action taken by the Committee shall be final and conclusive on any party. To the extent the Committee has been granted discretionary authority under the Plan, the Committee’s prior exercise of such authority shall not obligate it to exercise its authority in a like fashion thereafter. The Committee shall be entitled to rely conclusively upon all tables, valuations, certificates, opinions and reports furnished by any actuary, accountant, controller, counsel or other person employed or engaged by the Company with respect to the Plan. The Committee may, from time to time, employ agents and delegate to such agents, including employees of the Company, such administrative or other duties as it sees fit.

5.2. Claims for Benefits .

(a)     Filing a Claim . A Participant or his authorized representative may file a claim for benefits under the Plan. Any claim must be in writing and submitted to the Committee at such address as may be specified from time to time. Claimants will be notified in writing of approved claims, which will be processed as claimed. A claim is considered approved only if its approval is communicated in writing to a claimant.
(b)     Denial of Claim . In the case of the denial of a claim respecting benefits paid or payable with respect to a Participant, a written notice will be furnished to the claimant within 90 days of the date on which the claim is received by the Committee. If special circumstances (such as for a hearing) require a longer period, the claimant will be notified in writing, prior to the expiration of the 90-day period, of the reasons for an extension of time; provided, however, that no extensions will be permitted beyond 90 days after the expiration of the initial 90-day period.
(c)     Reasons for Denial . A denial or partial denial of a claim will be dated and signed by the Committee and will clearly set forth:

(i)	the specific reason or reasons for the denial;	

(ii)	specific reference to pertinent Plan provisions on which the denial is based;	

(iii)	a description of any additional material or information necessary for the claimant to perfect the claim and an explanation of why such material or information is necessary; and	

(iv)	an explanation of the procedure for review of the denied or partially denied claim set forth below, including the claimant’s right to bring a civil action under ERISA section 502(a) following an adverse benefit determination on review.	

(d)     Review of Denial . Upon denial of a claim, in whole or in part, a claimant or his duly authorized representative will have the right to submit a written request to the Committee for a full and fair review of the denied claim by filing a written notice of appeal with the Committee within 60 days of the receipt by the claimant of written notice of the denial of the claim. A claimant or the claimant’s authorized representative will have, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits and may submit issues and comments in writing. The review will take into account all comments, documents, records, and other information submitted by the claimant relating to the claim, without regard to whether such information was submitted or considered in the initial benefit determination.
If the claimant fails to file a request for review within 60 days of the denial notification, the claim will be deemed abandoned and the claimant precluded from reasserting it. If the claimant does file a request for review, his request must include a description of the issues and evidence he deems relevant. Failure to raise issues or present evidence on review will preclude those issues or evidence from being presented in any subsequent proceeding or judicial review of the claim.

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(e)     Decision Upon Review . The Committee will provide a prompt written decision on review. If the claim is denied on review, the decision shall set forth:

(i)	the specific reason or reasons for the adverse determination;	

(ii)	specific reference to pertinent Plan provisions on which the adverse determination is based;	

(iii)	a statement that the claimant is entitled to receive, upon request and free of charge, reasonable access to, and copies of, all documents, records, and other information relevant to the claimant’s claim for benefits; and	

(iv)	a statement describing any voluntary appeal procedures offered by the Plan and the claimant’s right to obtain the information about such procedures, as well as a statement of the claimant’s right to bring an action under ERISA section 502(a).	
A decision will be rendered no more than 60 days after the Committee’s receipt of the request for review, except that such period may be extended for an additional 60 days if the Committee determines that special circumstances (such as for a hearing) require such extension. If an extension of time is required, written notice of the extension will be furnished to the claimant before the end of the initial 60-day period.

(f)     Finality of Determinations; Exhaustion of Remedies .8.9    Finality of Determinations; Exhaustion of Remedies. To the extent permitted by law, decisions reached under the claims procedures set forth in this Section shall be final and binding on all parties. No legal action for benefits under the Plan shall be brought unless and until the claimant has exhausted his remedies under this Section. In any such legal action, the claimant may only present evidence and theories which the claimant presented during the claims procedure. Any claims which the claimant does not in good faith pursue through the review stage of the procedure shall be treated as having been irrevocably waived. Judicial review of a claimant’s denied claim shall be limited to a determination of whether the denial was an abuse of discretion based on the evidence and theories the claimant presented during the claims procedure.

(g)     Limitations Period . Any suit or legal action initiated by a claimant under the Plan must be brought by the claimant no later than one year following a final decision on the claim for benefits by the Committee. The one-year limitation on suits for benefits will apply in any forum where a claimant initiates such suit or legal action.

(h)     Disability Claims . Claims for disability benefits shall be determined in accordance with the terms of the ACE Limited disability plan, provided the provisions of that plan comply with the minimum standards set forth in DOL Regulaton section 2560.503-1. Otherwise, claims for disability benefits shall be determined in accordance with DOL Regulation section 2560.503-1 which is hereby incorporated by reference.

5.3. Indemnification . To the extent not covered by insurance, the Company shall indemnify the Committee, each employee, officer, director, and agent of the Company, and all persons formerly serving in such capacities, against any and all liabilities or expenses, including all legal fees relating thereto, arising in connection with the exercise of their duties and responsibilities with respect to the Plan, provided however that the Company shall not indemnify any person for liabilities or expenses due to that person’s own gross negligence or willful misconduct.

SECTION 6

AMENDMENT AND TERMINATION

The provisions of this Section 6 shall apply only to amounts subject to Code section 409A. Amendment and termination provisions applicable to the Grandfathered Amounts (and the earnings credited on those amounts) are set forth in Attachment A.

6.1 Amendment or Termination . The Company, through its Board of Directors, reserves the right to amend or terminate the Plan in the sole discretion of the Company.

6.2 Effect of Amendment or Termination . No amendment or termination of the Plan shall adversely affect the rights of any Participant to amounts credited to his Account as of the effective date of such amendment

6

or termination; provided however, an amendment may freeze or limit future accruals of benefits under the Plan on and after the date of such amendment. Upon termination of the Plan, distribution of balances in Accounts shall be made to Participants and beneficiaries in the manner and at the time described in Section 4, unless the Company determines in its sole discretion that all such amounts shall be distributed upon termination in accordance with the requirements under Code section 409A. Upon termination of the Plan, no further deferrals of Eligible Income shall be permitted; however, earnings, gains and losses shall continue to be credited to Account balances in accordance with Section 3 until the Account balances are fully distributed.

6.3 No Material Modification . Notwithstanding the foregoing, no amendment of the Plan shall apply to the Grandfathered Amounts, unless the amendment specifically provides that it applies to such amounts. The purposes of this restriction is to prevent a Plan amendment from resulting in an inadvertent “material modification” to amount that are “grandfathered” and exempt from the requirements of Code section 409A.

SECTION 7

GENERAL PROVISIONS

7.1 Rights Unsecured . The right of a Participant or his beneficiary to receive a distribution hereunder shall be an unsecured claim against the general assets of the Company, and neither the Participant nor his beneficiary shall have any rights in or against any amount credited to any Account or any other assets of the Company. The Plan at all times shall be considered entirely unfunded for tax purposes. Any funds set aside by the Company for the purpose of meetings its obligations under the Plan, including any amounts held by a trustee, shall continue for all purposes to be part of the general assets of the Company and shall be available to its general creditors in the event of the Company’s bankruptcy or insolvency. The Company’s obligation under this Plan shall be that of an unfunded and unsecured promise to pay money in the future.

7.2 No Guarantee of Benefits . Nothing contained in the Plan shall constitute a guarantee by the Company or any other person or entity that the assets of the Company will be sufficient to pay any benefits hereunder.

7.3 No Enlargement of Rights . No Participant or beneficiary shall have any right to receive a distribution under the Plan except in accordance with the terms of the Plan. Establishment of the Plan shall not be construed to give any Participant the right to continue to be employed by or provide services to the Company.

7.4 Spendthrift Provision . No interest of any person in, or right to receive a distribution under, the Plan shall be subject in any manner to sale, transfer, assignment, pledge, attachment, garnishment, or other alienation or encumbrance of any kind; nor may such interest or right to receive a distribution be taken, either voluntarily or involuntarily for the satisfaction of the debts of, or other obligations or claims against, such person.

7.5 Applicable Law . To the extent not preempted by federal law, the Plan shall be governed by the laws of Pennsylvania.

7.6 Incapacity of Recipient . If any person entitled to a distribution under the Plan is deemed by the Committee to be incapable of personally receiving and giving a valid receipt for such payment, then, unless and until a claim for such payment shall have been made by a duly appointed guardian or other legal representative of such person, the Committee may provide for such payment or any part thereof to be made to any other person or institution then contributing toward or providing for the care and maintenance of such person. Any such payment shall be a payment for the account of such person and a complete discharge of any liability of the Company and the Plan with respect to the payment.

7.7 Taxes . The Company or other payor may withhold from a benefit payment under the Plan or a Participant’s wages, or the Company may reduce a Participant’s Account balance, in order to meet any federal, state, or local tax withholding obligations with respect to Plan benefits. The Company or other payor shall report Plan payments and other Plan-related information to the appropriate governmental agencies as required under applicable laws.

7.8 Corporate Successors . The Plan and the obligations of the Company under the Plan shall become the responsibility of any successor to the Company by reason of a transfer or sale of substantially all of the assets of the Company or by the merger or consolidation of the Company into or with any other corporation or

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other entity.

7.9 Unclaimed Benefits . Each Participant shall keep the Committee informed of his current address and the current address of his designated beneficiary. The Committee shall not be obligated to search for the whereabouts of any person if the location of a person is not made known to the Committee.

7.10 Severability . In the event any provision of the Plan shall be held invalid or illegal for any reason, any illegality or invalidity shall not affect the remaining parts of the Plan, but the Plan shall be construed and enforced as if the illegal or invalid provision had never been inserted.

7.11 Words and Headings . Words in the masculine gender shall include the feminine and the singular shall include the plural, and vice versa, unless qualified by the context. Any headings used herein are included for ease of reference only, and are not to be construed so as to alter the terms hereof.

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Attachment A

ACE USA
OFFICER DEFERRED COMPENSATION PLAN
(as amended through the Second Amendment thereof January 1, 2001)

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ACE USA
OFFICER DEFERRED COMPENSATION PLAN
SECTION 1 

General

1.1. Purpose . The ACE USA Officer Deferred Compensation Plan (the “Plan”) (known as the ACE USA Elective Deferred Compensation Plan prior to January 1, 2000) has been established by ACE USA Holdings, Inc. (the “Company”) so that it, and each of the Related Companies which, with the consent of the Company, adopts the Plan may provide its eligible key management employees with an opportunity to build additional financial security, thereby aiding such companies in attracting and retaining employees of exceptional ability.

1.2. Effective Date . The “Effective Date” of the Plan is October 1, 1998. No deferrals of Compensation shall be permitted under the Plan for any Plan Year with respect to Compensation otherwise payable by any Employer during that year unless the Employer has specifically adopted the Plan with respect to such year.

1.3. Related Companies and Employers . For purposes of the Plan, the term “Related Company” means any company during any period in which it owns at least fifty percent of the voting power of all classes of stock of the Company entitled to vote, and any company during any period in which at least fifty percent of the voting power of all classes entitled to vote is owned, directly or indirectly, by the Company or by any other company that is a Related Company by reason of its ownership of stock of the Company. The Company and each Related Company which adopts the Plan for the benefit of its eligible employees are referred to below collectively as the “Employers” and individually as an “Employer.” A Related Company may adopt the Plan by action of its Board of Directors; provided that a Related Company will be considered to have adopted the Plan for its Eligible Employees (without the need for action by its Board of Directors) if an executive officer of the Related Company announces such adoption to the Eligible Employees.

1.4. Operation and Administration . The authority to control and manage the operation and administration of the Plan shall be vested in the Compensation Committee (the “Committee”) of the Board of Directors of the Company (the “Board”). In controlling and managing the operation and administration of the Plan, the Committee shall have the rights, powers and duties set forth in Section 6. Capitalized terms in the Plan shall be defined as set forth in the Plan.

1.5. Plan Year . The term “Plan Year” means the calendar year; provided that the first Plan Year shall be the period beginning on the Effective Date and ending on December 31, 1998.

1.6. Applicable Laws . The Plan shall be construed and administered in accordance with the laws of the State of Georgia to the extent that such laws are not preempted by the laws of the United States of America.

1.7. Gender and Number . Where the context admits, words in any gender shall include any other gender, words in the singular shall include the plural and the plural shall include the singular.

1.8. Notices . Any notice or document required to be filed with the Plan Administrator or the Committee under the Plan will be properly filed if delivered or mailed to the Plan Administrator, in care of the Company, at its principal executive offices. The Plan Administrator may, by advance written notice to affected persons, revise such notice procedure from time to time. Any notice required under the Plan may be waived by the person entitled to notice.

1.9. Form and Time of Elections . Unless otherwise specified herein, each election required or permitted to be made by any Participant or other person entitled to benefits under the Plan, and any permitted modification or revocation thereof, shall be in writing filed at such times, in such form, and subject to such restrictions and limitations as the Plan Administrator shall require. In addition to any other deferral elections made under this Plan, an election to defer the receipt of an award under the ACE USA Annual Incentive Plan will be made under this Plan.
1.10. Other Costs and Benefits . The Plan is intended to defer, but not to eliminate, payment of compensation to a Participant. Accordingly, if any compensation or benefits that would otherwise be provided to a Participant in the absence of the Plan are reduced or eliminated by reason of deferral under the Plan, the Company shall equitably compensate the Participant for such reduction or elimination. However, no reimbursement will be made for increased taxes resulting from benefits under the Plan (whether resulting from a change in individual income tax rates or otherwise).

1.11. Evidence . Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties.

10

1.12. Action by Employers . Any action required or permitted to be taken by any Employer shall be by resolution of its board of directors, or by a duly authorized officer of the Employer.

SECTION 2

Participation

2.1. Participant . Subject to the terms of the Plan, an individual shall be eligible to make deferrals under the Plan during any period he or she is an Eligible Employee. For purposes of the Plan, the term “Eligible Employee” for any period shall be those individuals designated as Eligible Employees, either by individual designation by the Committee or by being a member of a group designated by the Committee.

2.2. Deferral Election . An Eligible Employee shall participate in the Plan by electing to defer payment of all or a portion of his or her Eligible Compensation pursuant to the terms of a “Deferral Election.” An individual’s Deferral Election shall be filed with the Plan Administrator prior to the period to which it relates. Except as otherwise provided by the Committee, a Participant may not revoke any Deferral Elections. The Committee may revoke a Participant’s Deferral Election as of the date on which the Participant ceases to be an Eligible Employee (provided that this sentence shall not be construed to permit the Committee to revoke a Distribution Election by reason of the Participant ceasing to be an Eligible Employee).

2.3. Eligible Compensation . For purposes of the Plan, a Participant’s “Eligible Compensation” from any Employer for any Plan Year means (i) salary otherwise payable to him by the Employer, (ii) amounts payable under the ACE USA Annual Incentive Plan and (iii) amounts which are designated by the Committee as compensation eligible for deferral in accordance with the Plan.

2.4. Plan Not Contract of Employment . The Plan does not constitute a contract of employment, and participation in the Plan will not give any employee the right to be retained in the employ of any Employer nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan.

2.5. Restricted Participation . Notwithstanding any other provision of the Plan to the contrary, if the Committee determines that participation by one or more Participants (or payment of benefits to any beneficiary) shall cause the Plan as applied to any Employer to be subject to Part 2, 3 or 4 of Title I of the Employee Retirement Income Security Act of 1974, as amended, the entire Supplemental Account of such Participant under the Plan shall be, in the discretion of the Committee, immediately paid to such Participant (or beneficiary, if applicable), or shall otherwise be segregated from the Plan, and such Participant (or beneficiary) shall cease to have any interest under the Plan.

SECTION 3

Plan Accounting

3.1. Accounts . The Plan Administrator shall establish an Account for each Participant who has filed a Deferral Election. If a Participant’s Eligible Compensation subject to a Deferral Election would otherwise be payable from more than one Employer, a separate Account shall be established for the Participant with respect to the Eligible Compensation from each such Employer.

3.2. Adjustment of Accounts . Each Account shall be adjusted in accordance with this Section 3 in a uniform manner as of such periodic “Accounting Dates” as may be determined by the Committee from time to time. As of each Accounting Date, the balance of each Account shall be adjusted as follows:
		
(a)	first , charge to the Account balance the amount of any distributions under the Plan with respect to that Account that have not previously been charged;	

(b)	then , adjust the Account balance for the applicable Investment Return Rate(s); and	

(c)	then , credit to the Account balance the amount to be credited to that Account in accordance with subsection 3.3 that have not previously been credited.	

3.3. Crediting Under Deferral Election . The balance of a Participant’s Account for any period shall be credited, in accordance with the provisions of paragraph 3.2(c), with the amount by which his or her Eligible Compensation for that

11

period is reduced pursuant to a Deferral Election. Such crediting shall occur as of the date on which such Eligible Compensation would otherwise have been paid to the Participant by the Employer were it not for the reduction made pursuant to the Deferral Election or, if such date is not an Accounting Date, as of the first Accounting Date occurring thereafter.

3.4. Investment Return Rates . The “Investment Return Rate(s)” with respect to the Account(s), or portions of the Account(s), of any Participant for any period shall be the Investment Return Rate(s) elected by the individual in accordance with subsection 3.5 from among such investment alternatives (if any) for that period which, in the discretion of the Committee, are offered from time to time under this paragraph 3.4.

3.5. Participant Selection of Investment Return Rate . The Investment Return Rate alternatives under the Plan, and a Participant’s ability to choose among Investment Return Rate alternatives, shall be determined in accordance with rules established by the Committee from time; provided, however, that the Company may not modify the Investment Return Rate with respect to periods prior to the adoption of such modification.

3.6. Statement of Accounts . As soon as practicable after the end of each Plan Year, and at such other times as determined by the Committee or the Chief Executive Officer of the Company, the Company shall provide each Participant having one or more Accounts under the Plan with a statement of the transactions in his or her Accounts during that year and his or her Account balances as of the end of the year.

SECTION 4

Distributions

4.1. General . Subject to this Section 4, the balance of a Participant’s Account(s) with respect to any year shall be distributed in accordance with the Participant’s Distribution Election. In no event shall the amount distributed with respect to any Participant’s Account as of any date exceed the amount of the Account balance as of that date.

4.2. Distribution Election . A Participant’s Distribution Election shall specify the manner (including the time and form of distribution) in which the Participant’s Account(s) shall be distributed, subject to such restrictions and limitations as may be imposed by the Committee.

4.3. Beneficiary . Subject to the terms of the Plan, any benefits payable to a Participant under the Plan that have not been paid at the time of the Participant’s death shall be paid at the time and in the form determined in accordance with the foregoing provisions of the Plan, to the beneficiary designated by the Participant in writing filed with the Plan Administrator in such form and at such time as the Plan Administrator shall require. A beneficiary designation form will be effective only when the signed form is filed with the Plan Administrator while the Participant is alive and will cancel all beneficiary designation forms filed earlier. If a deceased Participant failed to designate a beneficiary, or if the designated beneficiary of a deceased Participant dies before him or before complete payment of the Participant’s benefits, the amounts shall be paid to the legal representative or representatives of the estate of the last to die of the Participant and his or her designated beneficiary.

4.4. Distributions to Disabled Persons . Notwithstanding the provisions of this Section 4, if, in the Plan Administrator’s opinion, a Participant or beneficiary is under a legal disability or is in any way incapacitated so as to be unable to manage his or her financial affairs, the Plan Administrator may direct that payment be made to a relative or friend of such person for his or her benefit until claim is made by a conservator or other person legally charged with the care of his or her person or his or her estate, and such payment shall be in lieu of any such payment to such Participant or beneficiary. Thereafter, any benefits under the Plan to which such Participant or beneficiary is entitled shall be paid to such conservator or other person legally charged with the care of his or her person or his or her estate.
4.5. Benefits May Not be Assigned . Neither the Participant nor any other person shall have any voluntary or involuntary right to commute, sell, assign, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey in advance of actual receipt of the amounts, if any, payable hereunder, or any part hereof, which are expressly declared to be unassignable and non-transferable. No part of the amounts payable shall be, prior to actual payment, subject to seizure or sequestration for payment of any debts, judgements, alimony or separate maintenance owed by the Participant or any other person, or be transferred by operation of law in the event of the Participant’s or any other person’s bankruptcy or insolvency.

4.6. Offset . Notwithstanding the provisions of subsection 4.5, if, at the time payments are to be made under the Plan, the Participant or beneficiary or both are indebted or obligated to any Employer or Related Company, then the

12

payments remaining to be made to the Participant or the beneficiary or both may, at the discretion of the Plan Administrator, be reduced by the amount of such indebtedness, or obligation, provided, however, that an election by the Plan Administrator not to reduce any such payment shall not constitute a waiver of the claim for such indebtedness or obligation.

4.7. Unforeseeable Emergency . Prior to the date otherwise scheduled for distribution of his or her benefits under the Plan, upon a showing of an unforeseeable emergency, a Participant may elect to accelerate payment of an amount not exceeding the lesser of (a) the amount necessary to meet the emergency or (b) the sum of his or her Account balance(s) under the Plan (the “Unforeseeable Emergency Amount”). For purposes of the Plan, the term “unforeseeable emergency” shall mean an unanticipated emergency that is caused by an event beyond the control of the Participant (or the control of the beneficiary, if the amount is payable to a beneficiary) and that would result in severe financial hardship to the individual if early withdrawal were not permitted. The determination of “unforeseeable emergency” shall be made by the Plan Administrator, based on such information as the Plan Administrator shall deem to be necessary. Once the Unforeseeable Emergency Amount is paid, the Participant shall not be eligible to make any further Deferral Elections under the Plan until the next Plan Year commencing at least twelve months after the date on which the Unforeseeable Emergency Amount is paid.

4.8. Cash-Out Election . A Participant may make a one-time election (a “Cash-Out Election”) to have his entire Account balance distributed, in a single lump sum payment, in cash, within 30 days following the date that such election is filed with the Employer, subject to the following:

(a)	The amount actually distributed to an electing Participant under this subsection 4.8 shall be equal to the Participant ’s entire Account balance, reduced by an amount equal to 10 percent of such balance. The portion of the Participant’s Account balance that is not distributed to the Participant’s pursuant to this paragraph (a) shall be forfeited as a penalty.	

(b)	Notwithstanding the provisions of Section 2, for the remainder of the Plan Year in which the Cash-out Election is effective and for the next following Plan Year, no Deferral Election by the Participant under subsection 2.2 shall be given effect.	

Notwithstanding the foregoing provisions of this subsection 4.8, and without limiting the amending authority reserved to the Committee by the provisions of Section 7 of the Plan, the Committee may amend this subsection 4.8 at any time and in any respect, including as to amounts previously credited to a Participant’s Account, to the extent that the Committee determines that such amendment is necessary or desirable by reason of any change in tax laws or regulations or interpretations thereof; provided, however, that no such amendment shall apply with respect to amounts actually distributed under this subsection 4.8 before the later of the date on which the amendment is adopted or effective.

SECTION 5
Source of Benefit Payments
5.1. Liability for Benefit Payments . Subject to the provisions of this Section 5, an Employer shall be liable for payment of benefits under the Plan with respect to any Participant to the extent that such benefits are attributable to the deferral of compensation otherwise payable by that Employer to the Participant. Any disputes relating to liability of Employers for benefit payments shall be resolved by the Committee.

5.2. No Guarantee . Neither a Participant nor any other person shall, by reason of the Plan, acquire any right in or title to any assets, funds or property of the Employers whatsoever, including, without limitation, any specific funds, assets, or other property which the Employers, in their sole discretion, may set aside in anticipation of a liability under the Plan. A Participant shall have only a contractual right to the amounts, if any, payable under the Plan, unsecured by any assets of the Employers. Nothing contained in the Plan shall constitute a guarantee by any of the Employers that the assets of the Employers shall be sufficient to pay any benefits to any person.

SECTION 6

Committee

6.1. Powers of Committee . Responsibility for the day-to-day administration of the Plan shall be vested in the Plan Administrator, which shall be the Committee. The authority to control and manage all other aspects of the operation and administration of the Plan shall also be vested in the Committee. The Committee is authorized to interpret the Plan, to establish, amend, and rescind any rules and regulations relating to the Plan, to determine the terms and provisions of any

13

agreements made pursuant to the Plan, and to make all other determinations that may be necessary or advisable for the administration of the Plan. Except as otherwise specifically provided by the Plan, any determinations to be made by the Committee under the Plan shall be decided by the Committee in its sole discretion. Any interpretation of the Plan by the Committee and any decision made by it under the Plan is final and binding on all persons.

6.2. Delegation by Committee . The Committee may allocate all or any portion of its responsibilities and powers to any one or more of its members and may delegate all or any part of its responsibilities and powers to any person or persons selected by it. Any such allocation or delegation may be revoked by the Committee at any time. Until the Committee takes action to the contrary:

(a)	The Chief Executive Officer of the Company shall be delegated the power and responsibility to take all actions assigned to or permitted to be taken by the Committee under Section 2, Section 3, and Section 4 (other than the powers and responsibility of the Plan Administrator).	

(b)	The powers and responsibilities of the Plan Administrator shall be delegated to the Vice President of Human Resources (or his or her delegate) of the Company, subject to such direction as may be provided to the Director of Human Resources or his or her delegate from time to time by the Committee and the Chief Executive Officer of the Company.	

6.3. Information to be Furnished to Committee . The Employers and Related Companies shall furnish the Committee with such data and information as may be required for it to discharge its duties. The records of the Employers and Related Companies as to an employee’s or Participant’s employment, termination of employment, leave of absence, reemployment and Eligible Compensation shall be conclusive on all persons unless determined to be incorrect. Participants and other persons entitled to benefits under the Plan must furnish the Committee such evidence, data or information as the Committee considers desirable to carry out the Plan.

6.4. Liability and Indemnification of Committee . No member or authorized delegate of the Committee shall be liable to any person for any action taken or omitted in connection with the administration of the Plan unless attributable to his or her own fraud or willful misconduct; nor shall the Employers be liable to any person for any such action unless attributable to fraud or willful misconduct on the part of a director or employee of the Employers. The Committee, the individual members thereof, and persons acting as the authorized delegates of the Committee under the Plan, shall be indemnified by the Employers against any and all liabilities, losses, costs and expenses (including legal fees and expenses) of whatsoever kind and nature which may be imposed on, incurred by or asserted against the Committee or its members or authorized delegates by reason of the performance of a Committee function if the Committee or its members or authorized delegates did not act dishonestly or in willful violation of the law or regulation under which such liability, loss, cost or expense arises. This indemnification shall not duplicate but may supplement any coverage available under any applicable insurance.

SECTION 7

Amendment and Termination
The Committee may, at any time, amend or terminate the Plan (including the rules for administration of the Plan), subject to the following:

(a)	Subject to the following provisions of this Section 7, no amendment or termination may materially adversely affect the rights of any Participant or beneficiary under the Plan.	

(b)	The Committee may revoke the right to defer Eligible Compensation under the Plan.	
		
(c)	The Plan may not be amended to delay the date on which benefits are otherwise payable under the Plan without the consent of each affected Participant. The Committee may amend the Plan to accelerate the date on which Plan benefits are otherwise payable under the Plan and eliminate all future deferrals under the Plan, thereby terminating the Plan.	

(d)	The Committee may amend the Plan to modify or eliminate any Investment Return Rate alternative, except that any such amendment may not modify the Investment Return Rate with respect to periods prior to the adoption of the amendment.	

(e)	Notwithstanding any other provision of the Plan to the contrary, neither the Committee nor the Board may delegate its rights and responsibilities under this Section 7; provided, however, that, the Board of Directors may, from time	

14

to time, substitute itself, or another committee of the Board, for the Compensation Committee under this Section 7.

IN WITNESS WHEREOF, ACE USA Holdings, Inc. has caused this Plan to be executed by its duly authorized officer this ______, day of _________, 1998.
ACE USA Holdings, Inc.

By:__________________________

15

Attachment B

Certain employees of the Combined Insurance Company of America (“CICA”) participated in the Aon deferred compensation plan as of the acquisition date of April 1, 2008. These CICA employees continued their participation for the remainder of the year in the ACE USA Officer Deferred Compensation Plan (“Plan”).

The distribution elections chosen by these CICA participants under the Aon deferred compensation plan shall apply to the amounts credited provided the distributions otherwise comply with Code section 409A.

16

Exhibit 10.8
RELEASE
This RELEASE (“Release”) dated as of this 24 day of July, 2013 between ACE Limited, a Swiss company (the “Company”), and Robert F. Cusumano (the “Employee”).
WHEREAS, the Employee is a participant in the Company’s Executive Severance Plan (the “Plan”) As Amended and Restated Effective as of January 1, 2009 and As Further Amended Effective as of May 18, 2011 which is attached hereto as an addendum; and
WHEREAS, the Employee’s employment with the Company will be terminated effective July 31, 2013 (“Separation Date”), unless Employee and Company mutually agree that Employee will continue employment beyond that date to achieve a smooth transition of leadership for the Company’s Legal Department; and
WHEREAS, pursuant to Section 9 of the Plan because Employee’s employment is a Separation Without Cause as that term is defined in the Plan, the Employee is entitled to certain compensation and benefits upon such termination under Schedule A of the Plan, contingent upon the execution of this Release;
NOW, THEREFORE, in consideration of the premises and mutual agreements contained herein and in the Plan, the Company and the Employee agree as follows:
1.    The Employee, on his own behalf and on behalf of his heirs, estate and beneficiaries, does hereby release the Company, and any of its Subsidiaries or affiliates, and each past or present officer, director, agent, employee, shareholder, and insurer of any such entities, from any and all claims made, to be made, or which might have been made of whatever nature, whether known or unknown, from the beginning of time, including those that arose as a consequence of his employment with the Company, or arising out of the severance of such employment relationship, or arising out of any act committed or omitted during or after the existence of such employment relationship, all up through and including the date on which this Release is executed, including, but not limited to, those which were, could have been or could be the subject of an administrative or judicial proceeding filed by the Employee or on his behalf under federal, state or local law, whether by statute, regulation, in contract or tort, and including, but not limited to, every claim for front pay, back pay, wages, bonus, fringe benefit, any form of discrimination (including but not limited to, every claim of race, color, sex, religion, national origin, disability or age discrimination), wrongful termination, emotional distress, pain and suffering, breach of contract, compensatory or punitive damages, interest, attorneys’ fees, reinstatement or reemployment. If any court rules that such waiver of rights to file, or have filed on his behalf, any administrative or judicial charges or complaints is ineffective, the Employee agrees not to seek or accept any money damages or any other relief upon the filing of any such administrative or judicial charges or complaints. The Employee relinquishes any right to future employment with the Company and the Company shall have the right to refuse to re-employ the Employee without liability. The Employee acknowledges and agrees that even though claims and facts in addition to those now known or believed by him to exist may subsequently be discovered, it is his intention to fully settle and release all claims he may have against the Company and the persons and entities described above, whether known, unknown or suspected. This Agreement and Release includes but is not limited to claims under the Age Discrimination in Employment Act of 1967, as amended ("ADEA"). This Release shall not, however, preclude Employee's right to pursue any claims arising under this Agreement and Release.

2.    The Employee acknowledges that he has been provided at least 21 days to review the Release and has been advised to review it with an attorney of his choice. In the event the Employee elects to sign this Release prior to the end of this 21-day period, he agrees that it is a knowing and voluntary waiver of his right to wait the full 21 days. The Employee further understands that he has 7 days after the signing hereof to revoke it by so notifying the Company in writing, such notice to be received by Phillip Cole at 1133 Avenue of the Americas New York, New York 10136 within the 7-day period. The Employee further acknowledges that he has carefully read this Release, and knows and understands its contents and its binding legal effect. The Employee acknowledges that by signing this Release, he does so of his own free will and act and that it is his intention that he be legally bound by its terms.
3.     Employee will receive the following compensation and benefits pursuant to Section 9 of the Plan:
a) Within 30 days after the Separation Date, a lump sum payment equal to $1,804,500 (less applicable withholding), which represents (i) one year of base salary; (ii) an annual cash bonus for 2014 and (iii) a prorated cash bonus for 2013.

b) Notwithstanding anything contained in any written plan, program, agreement or arrangement between the Company and Employee:
(i) any and all unvested shares of restricted shares of ACE Limited stock or ACE Limited restricted stock units (whether time-based or performance-based) held by Employee on the Separation Date shall continue to vest from the Separation Date until July 31, 2014 (“the Standard Vesting Continuation Period”), and
(ii) any and all unvested stock options (whether incentive stock options or nonqualified stock options, whether time-based or performance-based) shall continue to vest/become exercisable over the Standard Vesting Continuation Period, and any and all stock options held by the Employee on the Separation Date (including those stock options that vest/become exercisable under Section 9.4 of the Plan) shall remain exercisable until the earlier of (i) the 3rd anniversary of the Separation Date or (ii) the stock option’s originally scheduled expiration date.
c) Employee’s medical benefits may continue after the Separation Date, provided Employee makes an election under the provisions of federal law (COBRA) to continue group health care coverage beyond the Separation Date.  Once elected, for the one year period following the Separation Date, Employee will receive COBRA benefits at the Employer subsidized rates. 
4.    The Company and Employee agree that Sections 11.2 through 11.10, 12.0 through 12.4, 13.0 through 13.4, 14.4, and 15.0 through 15.10 of the Plan are incorporated herein by reference as if fully set forth, including the Plan definitions of the defined terms contained in those Sections. For purposes of interpreting and applying the Plan, the Company and Employee agree that Employee’s employment is a “Separation Without Cause” as that term is defined in the Plan and that the “Separated Participant” is Employee. The foregoing references to the Plan sections are not intended to limit application of any other terms of the Plan to this Agreement.

IN WITNESS WHEREOF, the parties have executed this Release on the date first above written.

ACE LIMITED

By:______________________________________    
Name: Phillip B. Cole
Title: Global Human Resources Officer

    
_________________________________________
Robert F. Cusumano

2

Exhibit 31.1
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Evan G. Greenberg, certify that:

1)	I have reviewed this quarterly report on Form 10-Q of ACE Limited;	

2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5)	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):	
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: October 30, 2013

	
/s/ Evan G. Greenberg	
Evan G. Greenberg	
Chairman, President and Chief
Executive Officer	

Exhibit 31.2
CERTIFICATION PURSUANT TO
SECTION 302 OF
THE SARBANES-OXLEY ACT OF 2002
I, Philip V. Bancroft, certify that:

1)	I have reviewed this quarterly report on Form 10-Q of ACE Limited;	

2)	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;	

3)	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;	

4)	The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:	
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5)	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s Board of Directors (or persons performing the equivalent functions):	
(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
Date: October 30, 2013

	
/s/ Philip V. Bancroft	
Philip V. Bancroft	
Chief Financial Officer	

Exhibit 32.1
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned officer of ACE Limited (the Corporation) hereby certifies that the Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 , fully complies with the applicable reporting requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a)) and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

		
Dated: October 30, 2013	/s/ Evan G. Greenberg	
 	Evan G. Greenberg
Chairman, President and Chief
Executive Officer	

Exhibit 32.2
CERTIFICATIONS PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
The undersigned officer of ACE Limited (the Corporation) hereby certifies that the Corporation’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2013 , fully complies with the applicable reporting requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m(a)) and that the information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Corporation.

		
Dated: October 30, 2013	/s/ Philip V. Bancroft	
 	Philip V. Bancroft	
 	Chief Financial Officer